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FINANCIAL STATEMENT ANALYSIS
Paper No 203
PROJECT REPORT
On
Analysis of Tea Industry
Submitted to
Dr VKVasal
By
Priyanshi Gupta
Roll No 2303
MFC-Part-1
1
Acknowledgement
I would like to pay my sincere thanks to Dr V K Vasal Faculty University of Delhi South
Campus for endowing me with the precious insights needed for working out this Project He
has been very instrumental in communicating the core of this project study and thus without
his direction the very inception of this work would not have been possible
Priyanshi Gupta
2
Objective
The aim of this work is to analyze the financial statements of the four companies in the Tea
Industry of India through a few introductory techniques and hence arrive at some
interpretations about their financial health
The parameters judged are numerous ranging from a firmrsquos short term health to the overall
long term stability
The analysis has been carried out on the Financial Statements of the respective companies so
as to get appraised of the financial state of the whole group involved in the operations
Due attempts have been made to standardize the terms across all the financial statements so
that the analysis gathers more meaning and yields the best possible results in spirit
With the conclusion I endeavor to arrive at the optimal determination of the relatively best
company for financial investment considerations
3
Contents
Introduction
Recent Developments
Current Scenario of Indian Tea Industry
Joonktollee Tea amp Industries Ltd
Jay Shree Tea amp Indutries Ltd
Rossell Tea Ltd
Financial Statement Analysis
Ratio Analysis
Cross sectional Analysis
Trend Analysis
Segmant Reporting
Road Ahead
References
4
Mcleod Russel India Ltd
Introduction
The tea industry in India is about 172 years old It occupies an important place and plays a
very useful part in the national economy The industry combines both agriculture and
industry
Tea plantations in India are mainly located in rural hills and backward areas of North-eastern
and Southern States Major tea growing areas of the country are concentrated in Assam West
Bengal Tamil Nadu and Kerala The other areas where tea is grown to a small extent are
Karnataka Tripura Himachal Pradesh Uttaranchal Arunachal Pradesh Manipur Sikkim
Nagaland Meghalaya Mizoram and Bihar The competitors to India in tea export are Sri
Lanka Kenya China Indonesia and Vietnam
There are basically two types of tea sales in India - through Auctions and Private Sales also
called as ex- garden sales In Auction sales tea is auctioned at auction centers through
brokers to buyers who either sell it to wholesalers retailers or export to overseas markets
Tea is generally placed in the Restricted category of the EXIM policy Through special
Import License tea can be imported by paying import duty Since August 1998 tea is being
freely imported from the SAARC countries Under the EQU EPZ units tea can be imported
for re exports after value addition
The tea plantation industry is strictly guided by various statutory Orders through the Acts of
Parliament like - Tea Act Essential Commodities Act Plantation Labour Act Factories Act
PFA Act Standards of Weights and Measures act etc
Quality control strictly conforms to IS 9723 and Prevention of Food amp Adulteration Act
(PFA) Disposal of tea waste is done through the tea waste control of 1959 Many gardens
are now taking quality certifications under ISO 9002
Some statistical facts about the Indian Tea Industry
The total turnover of the industry is around Rs 10000 crores
5
Since independence tea production has grown over 2505 while land area has grown
by 40
Total net foreign exchange earned per annum is around Rs1847 crores
Industry is labour intensive and employs over 11 million workers and generates
income for 10 million people indirectly Women constitute 50 of the workforce
802 MKgs or about 82 of total production of 981 MKgs of tea went for domestic
consumption
6
Recent developments
Inspite of its importance tea industry of India is going through a crisis phase since 1990rsquos
The industry has witnessed many structural changes during recent years which include ndash
emergence of small tea growers in place of large plantation and introduction of bought leaf
factories (BLF) The present crisis has led to the closure of many tea estates (eg 20 estates
in Kerala 30 in West Bengal about 70 in Assam have close down since the late 1990rsquos) In
early 2005 the tea industry witnessed major companies withdrawing from production and
concentrating on the packaging retailing sector (eg Tata Tea HLL etc in India)
In the market the rising competition at domestic as well as international front has deepened
the crisis of tea industry of India
Shift in the composition of demand for tea in the importing countries has had unfavorable
effects on export earnings from tea in India The international market price of tea has
declined from US $ 209 to US $ 203 per kg in between 2005 and 2006 Though countries
like Sri Lanka Kenya and Indonesia are growing fast in their export and higher price
realization during the same period Export of tea from India to some of the major importing
countries like Russia UK and USA are showing a sharp decline
Although per capita consumption of tea in India is amongst the lowest (64 grams) but in
volume terms India is the largest consumer Since 1970 India has become the largest
absolute consumer of tea after UK Larger domestic demand has given a new direction to the
tea industry in the recent years
Major causes of the crisis
Despite Indiarsquos historical success with the tea industry in recent years the industry has
faced serious competition in the international and national market which has lead to the
present crisis Tea prices in India are being driven down by many factors
a) Decline in demand for Indian tea in the global market
b) Defects in auction system
c) Poor price realization
d) Defective market structure
e) Increase in cost of production
7
Recommendations for improvement
Despite being the largest producer and consumer of tea the Indian plantation sector
lacks appropriate mapping of production and consumption levels Due to absence of
accurate estimates the formulation of long term industry wide action plans have been
affected
India has concentrated more on building up its large estates and has given less
attention to processing and improving the quality by proper blending and marketingndash
for higher price realization of their products
Unlike its key competitors India does not have any powerful brand to support its
promotion drive in the international market
Study done by the United Nations Food and Agriculture Organization (FAO 2001)
has suggested the need for reducing the unit cost of production through productivity
gains capacity building of small growers streamlining marketing channels
improving infrastructure tailoring marketing activities to individual countryrsquos
demand propagating health benefits of tea and promotion of organic tea using the tea
mark This is exactly what the domestic tea companies should do for their long term
survival
Improvement of supply chain management inside the country and global tea
marketing network
The tea industry in India has a legacy of corporate farming right from the day of
British rule The current situation in the sector has given ample reason for a rethink
on whether corporate farming can really boost agriculture
International brands like Liptons Brooke Bond of HUL and Tetly tea of Tata Tea etc
are the market leaders and have great power in price determination in both domestic
and international market This needs to be stopped and proper investigation is needed
to curb the wrong practices in the tea market by introducing new laws to regulate the
price movements
It has been observed that the actual producer of tea has no direct link with the
ultimate consumer Therefore the producers do not understand the market demand
choice of the customer it is very important in todayrsquos market economy for long term
sustainability of the industry With the withdrawal of sales restriction the growers
can directly go to the market by building their own brand As the margin of profit is
8
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Acknowledgement
I would like to pay my sincere thanks to Dr V K Vasal Faculty University of Delhi South
Campus for endowing me with the precious insights needed for working out this Project He
has been very instrumental in communicating the core of this project study and thus without
his direction the very inception of this work would not have been possible
Priyanshi Gupta
2
Objective
The aim of this work is to analyze the financial statements of the four companies in the Tea
Industry of India through a few introductory techniques and hence arrive at some
interpretations about their financial health
The parameters judged are numerous ranging from a firmrsquos short term health to the overall
long term stability
The analysis has been carried out on the Financial Statements of the respective companies so
as to get appraised of the financial state of the whole group involved in the operations
Due attempts have been made to standardize the terms across all the financial statements so
that the analysis gathers more meaning and yields the best possible results in spirit
With the conclusion I endeavor to arrive at the optimal determination of the relatively best
company for financial investment considerations
3
Contents
Introduction
Recent Developments
Current Scenario of Indian Tea Industry
Joonktollee Tea amp Industries Ltd
Jay Shree Tea amp Indutries Ltd
Rossell Tea Ltd
Financial Statement Analysis
Ratio Analysis
Cross sectional Analysis
Trend Analysis
Segmant Reporting
Road Ahead
References
4
Mcleod Russel India Ltd
Introduction
The tea industry in India is about 172 years old It occupies an important place and plays a
very useful part in the national economy The industry combines both agriculture and
industry
Tea plantations in India are mainly located in rural hills and backward areas of North-eastern
and Southern States Major tea growing areas of the country are concentrated in Assam West
Bengal Tamil Nadu and Kerala The other areas where tea is grown to a small extent are
Karnataka Tripura Himachal Pradesh Uttaranchal Arunachal Pradesh Manipur Sikkim
Nagaland Meghalaya Mizoram and Bihar The competitors to India in tea export are Sri
Lanka Kenya China Indonesia and Vietnam
There are basically two types of tea sales in India - through Auctions and Private Sales also
called as ex- garden sales In Auction sales tea is auctioned at auction centers through
brokers to buyers who either sell it to wholesalers retailers or export to overseas markets
Tea is generally placed in the Restricted category of the EXIM policy Through special
Import License tea can be imported by paying import duty Since August 1998 tea is being
freely imported from the SAARC countries Under the EQU EPZ units tea can be imported
for re exports after value addition
The tea plantation industry is strictly guided by various statutory Orders through the Acts of
Parliament like - Tea Act Essential Commodities Act Plantation Labour Act Factories Act
PFA Act Standards of Weights and Measures act etc
Quality control strictly conforms to IS 9723 and Prevention of Food amp Adulteration Act
(PFA) Disposal of tea waste is done through the tea waste control of 1959 Many gardens
are now taking quality certifications under ISO 9002
Some statistical facts about the Indian Tea Industry
The total turnover of the industry is around Rs 10000 crores
5
Since independence tea production has grown over 2505 while land area has grown
by 40
Total net foreign exchange earned per annum is around Rs1847 crores
Industry is labour intensive and employs over 11 million workers and generates
income for 10 million people indirectly Women constitute 50 of the workforce
802 MKgs or about 82 of total production of 981 MKgs of tea went for domestic
consumption
6
Recent developments
Inspite of its importance tea industry of India is going through a crisis phase since 1990rsquos
The industry has witnessed many structural changes during recent years which include ndash
emergence of small tea growers in place of large plantation and introduction of bought leaf
factories (BLF) The present crisis has led to the closure of many tea estates (eg 20 estates
in Kerala 30 in West Bengal about 70 in Assam have close down since the late 1990rsquos) In
early 2005 the tea industry witnessed major companies withdrawing from production and
concentrating on the packaging retailing sector (eg Tata Tea HLL etc in India)
In the market the rising competition at domestic as well as international front has deepened
the crisis of tea industry of India
Shift in the composition of demand for tea in the importing countries has had unfavorable
effects on export earnings from tea in India The international market price of tea has
declined from US $ 209 to US $ 203 per kg in between 2005 and 2006 Though countries
like Sri Lanka Kenya and Indonesia are growing fast in their export and higher price
realization during the same period Export of tea from India to some of the major importing
countries like Russia UK and USA are showing a sharp decline
Although per capita consumption of tea in India is amongst the lowest (64 grams) but in
volume terms India is the largest consumer Since 1970 India has become the largest
absolute consumer of tea after UK Larger domestic demand has given a new direction to the
tea industry in the recent years
Major causes of the crisis
Despite Indiarsquos historical success with the tea industry in recent years the industry has
faced serious competition in the international and national market which has lead to the
present crisis Tea prices in India are being driven down by many factors
a) Decline in demand for Indian tea in the global market
b) Defects in auction system
c) Poor price realization
d) Defective market structure
e) Increase in cost of production
7
Recommendations for improvement
Despite being the largest producer and consumer of tea the Indian plantation sector
lacks appropriate mapping of production and consumption levels Due to absence of
accurate estimates the formulation of long term industry wide action plans have been
affected
India has concentrated more on building up its large estates and has given less
attention to processing and improving the quality by proper blending and marketingndash
for higher price realization of their products
Unlike its key competitors India does not have any powerful brand to support its
promotion drive in the international market
Study done by the United Nations Food and Agriculture Organization (FAO 2001)
has suggested the need for reducing the unit cost of production through productivity
gains capacity building of small growers streamlining marketing channels
improving infrastructure tailoring marketing activities to individual countryrsquos
demand propagating health benefits of tea and promotion of organic tea using the tea
mark This is exactly what the domestic tea companies should do for their long term
survival
Improvement of supply chain management inside the country and global tea
marketing network
The tea industry in India has a legacy of corporate farming right from the day of
British rule The current situation in the sector has given ample reason for a rethink
on whether corporate farming can really boost agriculture
International brands like Liptons Brooke Bond of HUL and Tetly tea of Tata Tea etc
are the market leaders and have great power in price determination in both domestic
and international market This needs to be stopped and proper investigation is needed
to curb the wrong practices in the tea market by introducing new laws to regulate the
price movements
It has been observed that the actual producer of tea has no direct link with the
ultimate consumer Therefore the producers do not understand the market demand
choice of the customer it is very important in todayrsquos market economy for long term
sustainability of the industry With the withdrawal of sales restriction the growers
can directly go to the market by building their own brand As the margin of profit is
8
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Objective
The aim of this work is to analyze the financial statements of the four companies in the Tea
Industry of India through a few introductory techniques and hence arrive at some
interpretations about their financial health
The parameters judged are numerous ranging from a firmrsquos short term health to the overall
long term stability
The analysis has been carried out on the Financial Statements of the respective companies so
as to get appraised of the financial state of the whole group involved in the operations
Due attempts have been made to standardize the terms across all the financial statements so
that the analysis gathers more meaning and yields the best possible results in spirit
With the conclusion I endeavor to arrive at the optimal determination of the relatively best
company for financial investment considerations
3
Contents
Introduction
Recent Developments
Current Scenario of Indian Tea Industry
Joonktollee Tea amp Industries Ltd
Jay Shree Tea amp Indutries Ltd
Rossell Tea Ltd
Financial Statement Analysis
Ratio Analysis
Cross sectional Analysis
Trend Analysis
Segmant Reporting
Road Ahead
References
4
Mcleod Russel India Ltd
Introduction
The tea industry in India is about 172 years old It occupies an important place and plays a
very useful part in the national economy The industry combines both agriculture and
industry
Tea plantations in India are mainly located in rural hills and backward areas of North-eastern
and Southern States Major tea growing areas of the country are concentrated in Assam West
Bengal Tamil Nadu and Kerala The other areas where tea is grown to a small extent are
Karnataka Tripura Himachal Pradesh Uttaranchal Arunachal Pradesh Manipur Sikkim
Nagaland Meghalaya Mizoram and Bihar The competitors to India in tea export are Sri
Lanka Kenya China Indonesia and Vietnam
There are basically two types of tea sales in India - through Auctions and Private Sales also
called as ex- garden sales In Auction sales tea is auctioned at auction centers through
brokers to buyers who either sell it to wholesalers retailers or export to overseas markets
Tea is generally placed in the Restricted category of the EXIM policy Through special
Import License tea can be imported by paying import duty Since August 1998 tea is being
freely imported from the SAARC countries Under the EQU EPZ units tea can be imported
for re exports after value addition
The tea plantation industry is strictly guided by various statutory Orders through the Acts of
Parliament like - Tea Act Essential Commodities Act Plantation Labour Act Factories Act
PFA Act Standards of Weights and Measures act etc
Quality control strictly conforms to IS 9723 and Prevention of Food amp Adulteration Act
(PFA) Disposal of tea waste is done through the tea waste control of 1959 Many gardens
are now taking quality certifications under ISO 9002
Some statistical facts about the Indian Tea Industry
The total turnover of the industry is around Rs 10000 crores
5
Since independence tea production has grown over 2505 while land area has grown
by 40
Total net foreign exchange earned per annum is around Rs1847 crores
Industry is labour intensive and employs over 11 million workers and generates
income for 10 million people indirectly Women constitute 50 of the workforce
802 MKgs or about 82 of total production of 981 MKgs of tea went for domestic
consumption
6
Recent developments
Inspite of its importance tea industry of India is going through a crisis phase since 1990rsquos
The industry has witnessed many structural changes during recent years which include ndash
emergence of small tea growers in place of large plantation and introduction of bought leaf
factories (BLF) The present crisis has led to the closure of many tea estates (eg 20 estates
in Kerala 30 in West Bengal about 70 in Assam have close down since the late 1990rsquos) In
early 2005 the tea industry witnessed major companies withdrawing from production and
concentrating on the packaging retailing sector (eg Tata Tea HLL etc in India)
In the market the rising competition at domestic as well as international front has deepened
the crisis of tea industry of India
Shift in the composition of demand for tea in the importing countries has had unfavorable
effects on export earnings from tea in India The international market price of tea has
declined from US $ 209 to US $ 203 per kg in between 2005 and 2006 Though countries
like Sri Lanka Kenya and Indonesia are growing fast in their export and higher price
realization during the same period Export of tea from India to some of the major importing
countries like Russia UK and USA are showing a sharp decline
Although per capita consumption of tea in India is amongst the lowest (64 grams) but in
volume terms India is the largest consumer Since 1970 India has become the largest
absolute consumer of tea after UK Larger domestic demand has given a new direction to the
tea industry in the recent years
Major causes of the crisis
Despite Indiarsquos historical success with the tea industry in recent years the industry has
faced serious competition in the international and national market which has lead to the
present crisis Tea prices in India are being driven down by many factors
a) Decline in demand for Indian tea in the global market
b) Defects in auction system
c) Poor price realization
d) Defective market structure
e) Increase in cost of production
7
Recommendations for improvement
Despite being the largest producer and consumer of tea the Indian plantation sector
lacks appropriate mapping of production and consumption levels Due to absence of
accurate estimates the formulation of long term industry wide action plans have been
affected
India has concentrated more on building up its large estates and has given less
attention to processing and improving the quality by proper blending and marketingndash
for higher price realization of their products
Unlike its key competitors India does not have any powerful brand to support its
promotion drive in the international market
Study done by the United Nations Food and Agriculture Organization (FAO 2001)
has suggested the need for reducing the unit cost of production through productivity
gains capacity building of small growers streamlining marketing channels
improving infrastructure tailoring marketing activities to individual countryrsquos
demand propagating health benefits of tea and promotion of organic tea using the tea
mark This is exactly what the domestic tea companies should do for their long term
survival
Improvement of supply chain management inside the country and global tea
marketing network
The tea industry in India has a legacy of corporate farming right from the day of
British rule The current situation in the sector has given ample reason for a rethink
on whether corporate farming can really boost agriculture
International brands like Liptons Brooke Bond of HUL and Tetly tea of Tata Tea etc
are the market leaders and have great power in price determination in both domestic
and international market This needs to be stopped and proper investigation is needed
to curb the wrong practices in the tea market by introducing new laws to regulate the
price movements
It has been observed that the actual producer of tea has no direct link with the
ultimate consumer Therefore the producers do not understand the market demand
choice of the customer it is very important in todayrsquos market economy for long term
sustainability of the industry With the withdrawal of sales restriction the growers
can directly go to the market by building their own brand As the margin of profit is
8
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Contents
Introduction
Recent Developments
Current Scenario of Indian Tea Industry
Joonktollee Tea amp Industries Ltd
Jay Shree Tea amp Indutries Ltd
Rossell Tea Ltd
Financial Statement Analysis
Ratio Analysis
Cross sectional Analysis
Trend Analysis
Segmant Reporting
Road Ahead
References
4
Mcleod Russel India Ltd
Introduction
The tea industry in India is about 172 years old It occupies an important place and plays a
very useful part in the national economy The industry combines both agriculture and
industry
Tea plantations in India are mainly located in rural hills and backward areas of North-eastern
and Southern States Major tea growing areas of the country are concentrated in Assam West
Bengal Tamil Nadu and Kerala The other areas where tea is grown to a small extent are
Karnataka Tripura Himachal Pradesh Uttaranchal Arunachal Pradesh Manipur Sikkim
Nagaland Meghalaya Mizoram and Bihar The competitors to India in tea export are Sri
Lanka Kenya China Indonesia and Vietnam
There are basically two types of tea sales in India - through Auctions and Private Sales also
called as ex- garden sales In Auction sales tea is auctioned at auction centers through
brokers to buyers who either sell it to wholesalers retailers or export to overseas markets
Tea is generally placed in the Restricted category of the EXIM policy Through special
Import License tea can be imported by paying import duty Since August 1998 tea is being
freely imported from the SAARC countries Under the EQU EPZ units tea can be imported
for re exports after value addition
The tea plantation industry is strictly guided by various statutory Orders through the Acts of
Parliament like - Tea Act Essential Commodities Act Plantation Labour Act Factories Act
PFA Act Standards of Weights and Measures act etc
Quality control strictly conforms to IS 9723 and Prevention of Food amp Adulteration Act
(PFA) Disposal of tea waste is done through the tea waste control of 1959 Many gardens
are now taking quality certifications under ISO 9002
Some statistical facts about the Indian Tea Industry
The total turnover of the industry is around Rs 10000 crores
5
Since independence tea production has grown over 2505 while land area has grown
by 40
Total net foreign exchange earned per annum is around Rs1847 crores
Industry is labour intensive and employs over 11 million workers and generates
income for 10 million people indirectly Women constitute 50 of the workforce
802 MKgs or about 82 of total production of 981 MKgs of tea went for domestic
consumption
6
Recent developments
Inspite of its importance tea industry of India is going through a crisis phase since 1990rsquos
The industry has witnessed many structural changes during recent years which include ndash
emergence of small tea growers in place of large plantation and introduction of bought leaf
factories (BLF) The present crisis has led to the closure of many tea estates (eg 20 estates
in Kerala 30 in West Bengal about 70 in Assam have close down since the late 1990rsquos) In
early 2005 the tea industry witnessed major companies withdrawing from production and
concentrating on the packaging retailing sector (eg Tata Tea HLL etc in India)
In the market the rising competition at domestic as well as international front has deepened
the crisis of tea industry of India
Shift in the composition of demand for tea in the importing countries has had unfavorable
effects on export earnings from tea in India The international market price of tea has
declined from US $ 209 to US $ 203 per kg in between 2005 and 2006 Though countries
like Sri Lanka Kenya and Indonesia are growing fast in their export and higher price
realization during the same period Export of tea from India to some of the major importing
countries like Russia UK and USA are showing a sharp decline
Although per capita consumption of tea in India is amongst the lowest (64 grams) but in
volume terms India is the largest consumer Since 1970 India has become the largest
absolute consumer of tea after UK Larger domestic demand has given a new direction to the
tea industry in the recent years
Major causes of the crisis
Despite Indiarsquos historical success with the tea industry in recent years the industry has
faced serious competition in the international and national market which has lead to the
present crisis Tea prices in India are being driven down by many factors
a) Decline in demand for Indian tea in the global market
b) Defects in auction system
c) Poor price realization
d) Defective market structure
e) Increase in cost of production
7
Recommendations for improvement
Despite being the largest producer and consumer of tea the Indian plantation sector
lacks appropriate mapping of production and consumption levels Due to absence of
accurate estimates the formulation of long term industry wide action plans have been
affected
India has concentrated more on building up its large estates and has given less
attention to processing and improving the quality by proper blending and marketingndash
for higher price realization of their products
Unlike its key competitors India does not have any powerful brand to support its
promotion drive in the international market
Study done by the United Nations Food and Agriculture Organization (FAO 2001)
has suggested the need for reducing the unit cost of production through productivity
gains capacity building of small growers streamlining marketing channels
improving infrastructure tailoring marketing activities to individual countryrsquos
demand propagating health benefits of tea and promotion of organic tea using the tea
mark This is exactly what the domestic tea companies should do for their long term
survival
Improvement of supply chain management inside the country and global tea
marketing network
The tea industry in India has a legacy of corporate farming right from the day of
British rule The current situation in the sector has given ample reason for a rethink
on whether corporate farming can really boost agriculture
International brands like Liptons Brooke Bond of HUL and Tetly tea of Tata Tea etc
are the market leaders and have great power in price determination in both domestic
and international market This needs to be stopped and proper investigation is needed
to curb the wrong practices in the tea market by introducing new laws to regulate the
price movements
It has been observed that the actual producer of tea has no direct link with the
ultimate consumer Therefore the producers do not understand the market demand
choice of the customer it is very important in todayrsquos market economy for long term
sustainability of the industry With the withdrawal of sales restriction the growers
can directly go to the market by building their own brand As the margin of profit is
8
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Introduction
The tea industry in India is about 172 years old It occupies an important place and plays a
very useful part in the national economy The industry combines both agriculture and
industry
Tea plantations in India are mainly located in rural hills and backward areas of North-eastern
and Southern States Major tea growing areas of the country are concentrated in Assam West
Bengal Tamil Nadu and Kerala The other areas where tea is grown to a small extent are
Karnataka Tripura Himachal Pradesh Uttaranchal Arunachal Pradesh Manipur Sikkim
Nagaland Meghalaya Mizoram and Bihar The competitors to India in tea export are Sri
Lanka Kenya China Indonesia and Vietnam
There are basically two types of tea sales in India - through Auctions and Private Sales also
called as ex- garden sales In Auction sales tea is auctioned at auction centers through
brokers to buyers who either sell it to wholesalers retailers or export to overseas markets
Tea is generally placed in the Restricted category of the EXIM policy Through special
Import License tea can be imported by paying import duty Since August 1998 tea is being
freely imported from the SAARC countries Under the EQU EPZ units tea can be imported
for re exports after value addition
The tea plantation industry is strictly guided by various statutory Orders through the Acts of
Parliament like - Tea Act Essential Commodities Act Plantation Labour Act Factories Act
PFA Act Standards of Weights and Measures act etc
Quality control strictly conforms to IS 9723 and Prevention of Food amp Adulteration Act
(PFA) Disposal of tea waste is done through the tea waste control of 1959 Many gardens
are now taking quality certifications under ISO 9002
Some statistical facts about the Indian Tea Industry
The total turnover of the industry is around Rs 10000 crores
5
Since independence tea production has grown over 2505 while land area has grown
by 40
Total net foreign exchange earned per annum is around Rs1847 crores
Industry is labour intensive and employs over 11 million workers and generates
income for 10 million people indirectly Women constitute 50 of the workforce
802 MKgs or about 82 of total production of 981 MKgs of tea went for domestic
consumption
6
Recent developments
Inspite of its importance tea industry of India is going through a crisis phase since 1990rsquos
The industry has witnessed many structural changes during recent years which include ndash
emergence of small tea growers in place of large plantation and introduction of bought leaf
factories (BLF) The present crisis has led to the closure of many tea estates (eg 20 estates
in Kerala 30 in West Bengal about 70 in Assam have close down since the late 1990rsquos) In
early 2005 the tea industry witnessed major companies withdrawing from production and
concentrating on the packaging retailing sector (eg Tata Tea HLL etc in India)
In the market the rising competition at domestic as well as international front has deepened
the crisis of tea industry of India
Shift in the composition of demand for tea in the importing countries has had unfavorable
effects on export earnings from tea in India The international market price of tea has
declined from US $ 209 to US $ 203 per kg in between 2005 and 2006 Though countries
like Sri Lanka Kenya and Indonesia are growing fast in their export and higher price
realization during the same period Export of tea from India to some of the major importing
countries like Russia UK and USA are showing a sharp decline
Although per capita consumption of tea in India is amongst the lowest (64 grams) but in
volume terms India is the largest consumer Since 1970 India has become the largest
absolute consumer of tea after UK Larger domestic demand has given a new direction to the
tea industry in the recent years
Major causes of the crisis
Despite Indiarsquos historical success with the tea industry in recent years the industry has
faced serious competition in the international and national market which has lead to the
present crisis Tea prices in India are being driven down by many factors
a) Decline in demand for Indian tea in the global market
b) Defects in auction system
c) Poor price realization
d) Defective market structure
e) Increase in cost of production
7
Recommendations for improvement
Despite being the largest producer and consumer of tea the Indian plantation sector
lacks appropriate mapping of production and consumption levels Due to absence of
accurate estimates the formulation of long term industry wide action plans have been
affected
India has concentrated more on building up its large estates and has given less
attention to processing and improving the quality by proper blending and marketingndash
for higher price realization of their products
Unlike its key competitors India does not have any powerful brand to support its
promotion drive in the international market
Study done by the United Nations Food and Agriculture Organization (FAO 2001)
has suggested the need for reducing the unit cost of production through productivity
gains capacity building of small growers streamlining marketing channels
improving infrastructure tailoring marketing activities to individual countryrsquos
demand propagating health benefits of tea and promotion of organic tea using the tea
mark This is exactly what the domestic tea companies should do for their long term
survival
Improvement of supply chain management inside the country and global tea
marketing network
The tea industry in India has a legacy of corporate farming right from the day of
British rule The current situation in the sector has given ample reason for a rethink
on whether corporate farming can really boost agriculture
International brands like Liptons Brooke Bond of HUL and Tetly tea of Tata Tea etc
are the market leaders and have great power in price determination in both domestic
and international market This needs to be stopped and proper investigation is needed
to curb the wrong practices in the tea market by introducing new laws to regulate the
price movements
It has been observed that the actual producer of tea has no direct link with the
ultimate consumer Therefore the producers do not understand the market demand
choice of the customer it is very important in todayrsquos market economy for long term
sustainability of the industry With the withdrawal of sales restriction the growers
can directly go to the market by building their own brand As the margin of profit is
8
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Since independence tea production has grown over 2505 while land area has grown
by 40
Total net foreign exchange earned per annum is around Rs1847 crores
Industry is labour intensive and employs over 11 million workers and generates
income for 10 million people indirectly Women constitute 50 of the workforce
802 MKgs or about 82 of total production of 981 MKgs of tea went for domestic
consumption
6
Recent developments
Inspite of its importance tea industry of India is going through a crisis phase since 1990rsquos
The industry has witnessed many structural changes during recent years which include ndash
emergence of small tea growers in place of large plantation and introduction of bought leaf
factories (BLF) The present crisis has led to the closure of many tea estates (eg 20 estates
in Kerala 30 in West Bengal about 70 in Assam have close down since the late 1990rsquos) In
early 2005 the tea industry witnessed major companies withdrawing from production and
concentrating on the packaging retailing sector (eg Tata Tea HLL etc in India)
In the market the rising competition at domestic as well as international front has deepened
the crisis of tea industry of India
Shift in the composition of demand for tea in the importing countries has had unfavorable
effects on export earnings from tea in India The international market price of tea has
declined from US $ 209 to US $ 203 per kg in between 2005 and 2006 Though countries
like Sri Lanka Kenya and Indonesia are growing fast in their export and higher price
realization during the same period Export of tea from India to some of the major importing
countries like Russia UK and USA are showing a sharp decline
Although per capita consumption of tea in India is amongst the lowest (64 grams) but in
volume terms India is the largest consumer Since 1970 India has become the largest
absolute consumer of tea after UK Larger domestic demand has given a new direction to the
tea industry in the recent years
Major causes of the crisis
Despite Indiarsquos historical success with the tea industry in recent years the industry has
faced serious competition in the international and national market which has lead to the
present crisis Tea prices in India are being driven down by many factors
a) Decline in demand for Indian tea in the global market
b) Defects in auction system
c) Poor price realization
d) Defective market structure
e) Increase in cost of production
7
Recommendations for improvement
Despite being the largest producer and consumer of tea the Indian plantation sector
lacks appropriate mapping of production and consumption levels Due to absence of
accurate estimates the formulation of long term industry wide action plans have been
affected
India has concentrated more on building up its large estates and has given less
attention to processing and improving the quality by proper blending and marketingndash
for higher price realization of their products
Unlike its key competitors India does not have any powerful brand to support its
promotion drive in the international market
Study done by the United Nations Food and Agriculture Organization (FAO 2001)
has suggested the need for reducing the unit cost of production through productivity
gains capacity building of small growers streamlining marketing channels
improving infrastructure tailoring marketing activities to individual countryrsquos
demand propagating health benefits of tea and promotion of organic tea using the tea
mark This is exactly what the domestic tea companies should do for their long term
survival
Improvement of supply chain management inside the country and global tea
marketing network
The tea industry in India has a legacy of corporate farming right from the day of
British rule The current situation in the sector has given ample reason for a rethink
on whether corporate farming can really boost agriculture
International brands like Liptons Brooke Bond of HUL and Tetly tea of Tata Tea etc
are the market leaders and have great power in price determination in both domestic
and international market This needs to be stopped and proper investigation is needed
to curb the wrong practices in the tea market by introducing new laws to regulate the
price movements
It has been observed that the actual producer of tea has no direct link with the
ultimate consumer Therefore the producers do not understand the market demand
choice of the customer it is very important in todayrsquos market economy for long term
sustainability of the industry With the withdrawal of sales restriction the growers
can directly go to the market by building their own brand As the margin of profit is
8
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Recent developments
Inspite of its importance tea industry of India is going through a crisis phase since 1990rsquos
The industry has witnessed many structural changes during recent years which include ndash
emergence of small tea growers in place of large plantation and introduction of bought leaf
factories (BLF) The present crisis has led to the closure of many tea estates (eg 20 estates
in Kerala 30 in West Bengal about 70 in Assam have close down since the late 1990rsquos) In
early 2005 the tea industry witnessed major companies withdrawing from production and
concentrating on the packaging retailing sector (eg Tata Tea HLL etc in India)
In the market the rising competition at domestic as well as international front has deepened
the crisis of tea industry of India
Shift in the composition of demand for tea in the importing countries has had unfavorable
effects on export earnings from tea in India The international market price of tea has
declined from US $ 209 to US $ 203 per kg in between 2005 and 2006 Though countries
like Sri Lanka Kenya and Indonesia are growing fast in their export and higher price
realization during the same period Export of tea from India to some of the major importing
countries like Russia UK and USA are showing a sharp decline
Although per capita consumption of tea in India is amongst the lowest (64 grams) but in
volume terms India is the largest consumer Since 1970 India has become the largest
absolute consumer of tea after UK Larger domestic demand has given a new direction to the
tea industry in the recent years
Major causes of the crisis
Despite Indiarsquos historical success with the tea industry in recent years the industry has
faced serious competition in the international and national market which has lead to the
present crisis Tea prices in India are being driven down by many factors
a) Decline in demand for Indian tea in the global market
b) Defects in auction system
c) Poor price realization
d) Defective market structure
e) Increase in cost of production
7
Recommendations for improvement
Despite being the largest producer and consumer of tea the Indian plantation sector
lacks appropriate mapping of production and consumption levels Due to absence of
accurate estimates the formulation of long term industry wide action plans have been
affected
India has concentrated more on building up its large estates and has given less
attention to processing and improving the quality by proper blending and marketingndash
for higher price realization of their products
Unlike its key competitors India does not have any powerful brand to support its
promotion drive in the international market
Study done by the United Nations Food and Agriculture Organization (FAO 2001)
has suggested the need for reducing the unit cost of production through productivity
gains capacity building of small growers streamlining marketing channels
improving infrastructure tailoring marketing activities to individual countryrsquos
demand propagating health benefits of tea and promotion of organic tea using the tea
mark This is exactly what the domestic tea companies should do for their long term
survival
Improvement of supply chain management inside the country and global tea
marketing network
The tea industry in India has a legacy of corporate farming right from the day of
British rule The current situation in the sector has given ample reason for a rethink
on whether corporate farming can really boost agriculture
International brands like Liptons Brooke Bond of HUL and Tetly tea of Tata Tea etc
are the market leaders and have great power in price determination in both domestic
and international market This needs to be stopped and proper investigation is needed
to curb the wrong practices in the tea market by introducing new laws to regulate the
price movements
It has been observed that the actual producer of tea has no direct link with the
ultimate consumer Therefore the producers do not understand the market demand
choice of the customer it is very important in todayrsquos market economy for long term
sustainability of the industry With the withdrawal of sales restriction the growers
can directly go to the market by building their own brand As the margin of profit is
8
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Recommendations for improvement
Despite being the largest producer and consumer of tea the Indian plantation sector
lacks appropriate mapping of production and consumption levels Due to absence of
accurate estimates the formulation of long term industry wide action plans have been
affected
India has concentrated more on building up its large estates and has given less
attention to processing and improving the quality by proper blending and marketingndash
for higher price realization of their products
Unlike its key competitors India does not have any powerful brand to support its
promotion drive in the international market
Study done by the United Nations Food and Agriculture Organization (FAO 2001)
has suggested the need for reducing the unit cost of production through productivity
gains capacity building of small growers streamlining marketing channels
improving infrastructure tailoring marketing activities to individual countryrsquos
demand propagating health benefits of tea and promotion of organic tea using the tea
mark This is exactly what the domestic tea companies should do for their long term
survival
Improvement of supply chain management inside the country and global tea
marketing network
The tea industry in India has a legacy of corporate farming right from the day of
British rule The current situation in the sector has given ample reason for a rethink
on whether corporate farming can really boost agriculture
International brands like Liptons Brooke Bond of HUL and Tetly tea of Tata Tea etc
are the market leaders and have great power in price determination in both domestic
and international market This needs to be stopped and proper investigation is needed
to curb the wrong practices in the tea market by introducing new laws to regulate the
price movements
It has been observed that the actual producer of tea has no direct link with the
ultimate consumer Therefore the producers do not understand the market demand
choice of the customer it is very important in todayrsquos market economy for long term
sustainability of the industry With the withdrawal of sales restriction the growers
can directly go to the market by building their own brand As the margin of profit is
8
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
very high at the present domestic retail market Indian tea growers should invest and
take this opportunity for the promotion of their brand at the retail market
Fresh capital inflow is needed right at this moment for the tea industry of India
Investment in new plantations and production machineries must come immediately to
compete in the international market
one of the most important steps from the government part shall be to introduce a
stronger competition law to curb the misuse of corporate buying power and promote
social objectives at the garden level
9
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Current Scenario of the Indian Tea Industry
Tea is normally classified based on the processing leaf size and grade Fermentation is the
major process and creates two major classifications
Price Trend
Recently tea prices showed bouyancy which started from 2006 after depressed prices for
almost a decade since 1999A slump in global output decline in production due to poor
monsoon rains steady increase in domestic demand range-bound export volumes and low
growth in production further drove prices upwards in 2009
However Indiarsquos tea production had picked up in the last quarter of 2009 and initial signs are
pointing to better weather in 2010 signalling a possible change in the price trend Even if
prices do not retrace too much producers may have to live with subdued prices during the
year It does appear that the two-year run of rising tea prices is losing steam
Chart 1 Trend in Domestic Tea Prices (source ICRA Research)
10
Production
(956mkgs)
Green
(106 mkgs)Darjeeling
(117 mkgs)Orthodox
(655 mkgs)
CTC
(8682mkgs)
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Production consumption and Exports
A secular increase in domestic consumption on the one hand and muted increase in
production on the other has been the main factor supporting the increase in tea prices from
2006 onwards According to ICRArsquos estimates while the average growth in production
during the period 2003-07 was just 19 or so domestic consumption would have increased
annually at around 35 during the same period The steady increase in domestic demand
range-bound export volumes and low ICRA Rating Feature Indian Tea Industry Outlook
Positive for the Short to Medium Term ICRA Rating Services Page 3 of 8
growth in production absorbed the pipeline stock over the years and left virtually no carry-
forward stock at the end of the 2007 season
Production and consumption of Tea in India
Particulars 200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
2009
PRODUCTION (million
Kg)
854 838 878 893 946 982 945 981 6967
CONSUMPTION
(million kg)
673 693 714 735 757 771 786 802 828(E
)
production from January to Sepetmber - Estimated figure
Chart 2 Trend in Indiarsquos Production Consumption and Exports of Tea
Source ICRA Research
11
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Exports
Exports play a vital role in maintaining the overall demand-supply balance in the domestic
market Healthy export realisation is also crucial for domestic realisations as un-remunerative
prices in the export market may lead to exporters dumping the produce in the domestic
market which in turn would exert a downward pressure on domestic prices Tea exports
from India have remained range bound over the period 1997-2008 with some year-to-year
fluctuations seen in between
Export of Tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 19905 183098 9199
2006 21873 200653 9173
2007 17875 181011 10126
2008 20312 239291 11781
2009 1312 177704 13542
Export from January to September
Chart 3 Trend in Indiarsquos Tea Exports
Source ICRA Research
Import of Tea from India
The continuous fall in prices of tea coupled with high cost of production has adversely
12
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
affected the economy of the tea plantations resulting in some tea gardens being abandoned or
under lock out in various states The teas being imported are not necessarily inferior teas and
the practice of blending with Indian teas often serves the purpose of providing teas as per
customers choice and making them price-competitive in international markets
Import of tea from India
YEAR QUANTITY (Million Kg) Value (Rs Crores) UNIT PRICE (Rskg)
2005 1676 9851 5879
2006 2381 11941 5015
2007 1599 10460 6543
2008 2028 16197 7990
2009 1582 13209 8350
Export from January to August
Profitability of bulk tea players
An increase of around 28 in tea prices on an average in 2008 has meant considerable
increase in the profitability of bulk tea players in FY2008-09 given that around 65 of their
costs are fixed in nature Chart 6 brings out the positive impact of increasing tea prices on the
aggregate total income and profitability indicators2 of some of the large bulk tea players in
India3 which shows significant improvement over the past few years
Chart 4 Trend in Aggregate Income and Profitability Indicators of Bulk Tea
Companies (Source Bombay Stock Exchange)
13
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Demand-Supply Gap
For the Indian tea industry the main driver of demand is the domestic market with domestic
consumption now growing at an estimated 35 annually as against around 25 a decade
earlier At the current growth rate the domestic market would require an incremental 30 Mkg
or so annually going forward
As against that tea supply has been growing at less than 2 pa because it is difficult to
improve garden yield of tea even during favourable climatic conditions and new plantations
need a long gestation period of at least 4-5 years Therefore the demand-supply gap in India
is likely to persist at least over the medium term
14
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Industry Outlook
The tea industry has every reason to look ahead in 2010 with great deal of optimism and
confidence according to the Tea Market Annual Report published by J Thomas and
Company Private Limited the worlds oldest and largest tea auctioneers
With virtually no carry forward stock and growing domestic demand to act as buffer against
the uncertainties of the global tea trade price levels are expected to remain attractive the
report observes
Early cropping patterns indicate that demand supply equation is likely to be more balance in
2010 Both Kenya and Sri Lanka production is expected to exceed that of 2009 and
indications are that the March crop in North India will be higher than that of the last year
following some much needed rainfall
While the supply situation may be more comfortable than the previous season it is likely to
be absorbed by the domestic market where quality produce will continue to be in great
demand the reports states
Exports
15
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Indian exports at the end of 2009 stood at 1915 million kg compared to 2031 million kg in
2008 a decline of 116 million kgs The strong domestic demand ensured that the exporters
were often out priced particularly in first three quarters
Lower orthodox production in North India was also another factor contributing to the decline
in exports As a result exports out of North India at 988 million kg recorded a decline of
174 million kg while exports out of South India at 927 million kg recorded a rise of 58
million kg The per unit value increased from Rs 11781 in 2008 to Rs 13664 in 2009 a gain
of Rs 1883
Exports to Iraq saw a significant increase during the year with an additional 111 million kgs
over 2008 Shipments to Russia grew by 42 million kg and to Afghanistan by 18 million kg
Exports to Egypt suffered a setback the shortfall being 96 million kg Offtake by Iran UAE
UK and the Continent also declined during the period
Companiesrsquo Overview
1 Joonktollee Tea
Joonktollee Tea Co Ltd Was promoted 134 years back to manage the affairs of a small Tea
Estate in Upper Assam It is today synonymous with premium Black and Green Teas
In the year 1954 the House of Bangurs acquired the managing agency and the Company and
brought them under their fold The name of the Company was changed to ldquoJOONKTOLLEE
TEA amp INDUSTRIES LIMITEDrdquo (JTIL) Since then the company has been under the
management of the Bangurs Over the years the Company has grown in stature and size and is
a leader in producing quality teas and enjoying one of the best Assam CTC Mark in North
IndiaCompanyrsquos Estate now comprises of 186798 acres of land with 120282 acres under
plantation
From a leading mark in the Premium Orthodox teas the Company changing with the times
is now regarded as one of the Best Assam CTC mark and does have an unstinted track record
of the business with the brand Its Green Teas are also one of its kinds
16
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
The performance on the financial front has also been spectacular The Companyrsquos ordinary
capital of Rs80000- has grown to Rs32336 Lacs The Company has an uninterrupted
dividend record for over 50 years
To have a large capital base and net worth two South India based Plantation Companies viz
The Kalasa Tea Produce Company Limited and Cowcoody Estates Limited belonging to the
House of Bangurs stood merged with this Company wef 1st April 2001 The area of
operation of the Company was enlarged and diversified since apart from tea the transferor
Companies also deal in other plantation crops viz coffee pepper cardamom areca vanilla
With a view to consolidate the resources of the Company and to carry out the agro base
activities more conveniently and advantageously with a larger asset base the Company
entered into Scheme of Arrangement wef 1st October 2006 under which a subsidiary and
six other Companies merged with the Company and certain assets were transferred to other
subsidiary Companies The Honrsquoble High Courts of judicature at Kolkata Chennai and
Guwahati sanctioned the Scheme of Arrangement as per the terms consented by the
shareholders and the financial results of 31st March 2008 were prepared after giving effect
of the aforesaid scheme
On BSE as on 22 April 2010
Dividend Yield () 089
Market Cap (Rs Mn) 54277
PE 1284
EPS (Rs) 1307
Face Value (Rs) 10
Volume 23239
17
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Shareholding pattern
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 16
27066
75 837 2693455
Total Promoter 16
27066
75 837 2693455
Non Promoter
Institutions
FIBankInsurance 2
11784
3 364
Other 5 593 002 0
Total Institutions 7
11843
6 366 117843
Non-Institution
Bodies Corporate 82 45592 141 40197
18
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
NRIsOCBs 8 31256 097 926
Others 2391
33168
8 1025 127041
Total Non-
Institution 2481
40853
6 1263 168164
Total Non
Promoter 2488
52697
2 163 286007
Grand Total 2504
32336
47 100 2979462
2 Jayshree Tea amp Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct45 with two tea estates the company changed
its name to Jay Shree Tea and Industries (JSTI) in 1960 It was promoted by B K Birla
Started with an initial paid-up share capital of Rs 786 lac it was raised to Rs 3905 lac in
1947 and thereafter only a rights equity issue was made during 1960 in the ratio 15
The company manages around 12 tea gardens in Assam West Bengal Tamilnadu and
Kerala It has diversified over the years and manufactures plywood in Andamans and
superphosphates and sulphuric acid in West Bengal and has interest in shipping real estate
development tubes and tyres The company is packing its tea from different tea estates in
polypouches and it is sold under brand names -- Sadabahar Shaandar and Sangam
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with 192 acres under tea
plantation to increase its presence in the area
During 1999-2000 the company established a new factory named Aryaman Tea Estate in
Jalpaiguri Dist which has commenced production from Sep 1999 The factory has the
capacity of 7 lac kgs made tea per annum In June 2000 the B K Birla groups shareholding
in Jay Shree Tea amp Industries has gone up to 4461 from 4015 following the completion
of the companys buy back offer for 1230 lakh equity shares
The company bought back 1230 lac equity shares of Rs10- each at a price of Rs120-per
19
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
share in 2001-02 and subsequently the total Share Capital as on March 2002 was Rs1067
crores The tea processing factory which is being set up at LedoAssam has commenced its
commercial production with a annual capacity of around 6 lac kg
As the Supreme Court has banned the falling of trees in Andaman amp Nicobar Islandsthe
companys Plywood Operation is still under suspension The 100 subsidiary company viz
Shivas Group Ltd was amalgamated with the company with the prior approval from the
shareholders wef 25022002
It also proposes to set up an International Outsourced Call centre at Kolkata The company is
proposing to delist its equity shares from Delhi Stock exchange as there is no transactions
On BSE as on 22 April 2010
Dividend Yield
() 101
Market Cap (Rs
Mn) 331263
PE 465
EPS (Rs) 6372
Face Value (Rs) 10
Volume 142257
20
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Shareholding Pattern as in September 2009
21
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
3
Mcleod Russell
McLeod Russel has been growing tea in India since 1869 It is today the largest tea
producing company in the world
It manages 47 tea estates in the Assam Valley and 6 tea estates in the Dooars region of West
Bengal Every year its estates produce over 80 million kilograms of black tea which is
marketed worldwide under the registered Elephant trade mark
The company directly employs around 80000 people a large number of whom a women
Mcleod Russel is the worldrsquos largest tea producer
22
Description ( As On
September 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 14 4498169 4025 3685170
Total Promoter 14 4498169 4025 3685170
Non Promoter
Institutions
Mutual Funds
UTI 12 717585 642 716185
FIBankInsurance 31 381238 341
FII 3 200000 179 200000
Other 0 200000 179 200000
Total Institutions 46 1298823 1162 1271276
Non-Institution
Bodies Corporate 821 1655678 1482 1609689
NRIsOCBs 82 42605 038 40195
Others 9658 3679064 3292 2699777
Total Non-
Institution 10561 5377347 4812 4349661
Total Non
Promoter 10607 6676170 5975 5620937
Grand Total 10621 11174339 100 9306107
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
As the largest Indian tea exporter we maintain strong connections with buyers in Europe the
Middle East and North America We have always enjoyed an excellent reputation for the
quality of our product and the integrity and reliability of our marketing and delivery systems
McLeod Russel has a number of internationally recognised accreditations and certifications
including Fairtrade Rainforest Alliance and HACCP Its modern blending facility provides
the clients with both unique as well as bespoke bulk blended teas
On BSEas on 22 April 2010
Dividend Yield
() 08
Market Cap (Rs
Mn) 2727637
PE 10
EPS (Rs) 2491
Face Value (Rs) 5
Volume 174807
Shareholding Pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolder
s
No of
Shares
of
Share Demat
Promoter
Indian Promoter 24 22583056 2063 22497684
Foreign Promoter 1 27067500 2473 27067500
Total Promoter 25 49650556 4536 49565184
Non Promoter
23
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Institutions
Mutual Funds
UTI 41 8624962 788 8621239
FIBankInsurance 6 4231733 387
Govt 1 112
FII 70 27637288 2525 27637288
Other 97 28011747 2559 27969054
Total Institutions 215 40868554 3734 40820326
Non-Institution
Bodies Corporate 1416 4941880 451 4854379
NRIsOCBs 601 360122 033 226601
Others 58658 13634623 1246 10341710
Total Non-
Institution 60675 18936625 173 15422690
Total Non
Promoter 60890 59805179 5464 56243016
Grand Total 60915 109455735 100 105808200
4 Rossell Tea Ltd
Rossell Tea Ltd (The Company) espouses the cause of long-term success in all areas of its
business and commits itself to achieve this through excellence in productivity quality and
performance The company will continue to evolve learn and adapt for the common good of
its stakeholders The Company is further committed to the well being of all employees in
particular and the society at large in general
24
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
The Company immediately after taking over the management of Dikom Nokhroy and Borahi
TEs took effective steps for upgrading the quality further and at present all the Tea Estates
are well established quality marks in overseas markets The saleable production at the time of
takeover was 27 Million Kgs of Black Tea which after recent corporate restructuring and
three successive acquisitions is around 50 Million Kgs of Black Tea At present the
Company owns Dikom Nokhroy Nagrijuli Bokakhat and Romai TEs all located in
Assam After corporate restructuring Borahi TE was demerged and transferred to another
Company viz Jyoti Holdings Pvt Ltd which Company is no more under the management of
Rossell Tea Limited
The present Share Capital of Rossell Tea Ltd is Rs6314 Million divided into 6314 Million
Equity Shares of Rs10 each Out of 6314 Million Equity Shares 4653 Million Equity
Shares representing 7367 of the Equity Share Capital is held by the Holding Company
BMG Enterprises Ltd Delhi The Equity Shares of the Company are quoted at Calcutta and
Guwahati Stock Exchanges
On BSEas on 22 April 2010
Dividend Yield () 057
Market Cap (Rs Mn) 192767
PE 2769
EPS (Rs) 949
Face Value (Rs) 10
Volume 141
Shareholding pattern as on September 2009
Description ( As On
December 2009 )
No of
ShareHolders
No of
Shares
of
Share Demat
Promoter
Indian Promoter 6 5494245 7486 5494245
Total Promoter 6 5494245 7486
25
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
5494245
Non Promoter
Institutions
Mutual Funds
UTI 2 30002 041 30002
FIBankInsurance 16 48263 065 29651
Govt 1 30 0 0
FII 2 1025000 1397 1025000
Other 1 1135000 1547 1025000
Total Institutions 22 1213295 1653 1084653
Non-Institution
Bodies Corporate 72 25579 035 5918
NRIsOCBs 9 240 0 180
Others 5660 605936 826 125316
Total Non-
Institution 5741 631755 861 131414
Total Non
Promoter 5763 1845050 2514 1216067
Grand Total 5769 7339295 100 6710312
FINANCIAL STATEMENTS ANALYSIS
Financial Statement analysis means analysis and regrouping of data contained in historical
financial statements It serves the essential function of converting accounting data contained
in financial statements in to useful information which is always in scarce supply After
analysis of financial statements interpretation of analyzed information is done by decision
maker to forecast future profitability financial strength and liquidity position of the business
26
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
TYPES OF ANALYSIS
Financial statements are analysed to establish certain crucial relationships which help us to
take sound decisions Accounts for the year 2003-2004 and 2004-2005 have been studied in
this report
Analysis consists of
Financial Ratio Analysis
Common Size Statement
Time Series Analysis
FINANCIAL RATIO ANALYSIS
Ratio analysis is a very popular tool of financial analysis Under this system of analysis
financial statements have been analyzed by computing accounting ratios Ratios indicate how
a business is performing and provide indications of trends and patterns They can be
compared to the same ratios in previous years accounts and the accounts of other businesses
operating in a similar environment The ratios can be looked at from three perspectives
- Creditors
- Investors
- Shareholders
There are various parameters upon which various types of different analysis is done They
include
1 Liquidity Analysis
2 Profitability Analysis
3 Solvency Analysis
4 Efficiency Analysis
LIQUIDITY RATIOS
27
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Liquidity is the ability to convert assets into cash or to obtain cash It is important from the
point of view of meeting the firmrsquos short term obligations
Current Ratio
It is the ratio of the current assets to current liabilities of the company It is calculated to test
the short term solvency of a business and its ability to meet its short term commitments
Besides measuring liquidity it also measures the margin of safety available in case of
uncertainty of flow of funds
It provides a measure of degree to which current assets cover current liabilities The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty in realization of current assets and flow of funds
Quick ratio
An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio the better the position of the company
Quick Ratio= (Cash + Marketable securities + accounts receivable)Current Liabilities
Liquidity Ratios Joonktollee tea
Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09
Mar-
08 Mar-09 Mar-08 Mar-09
Mar-
08
Mar-
09
Mar-
08
Current
AssetsCurrent
Liabilities 182 62 176 361 103 084 044 046
Quick AssetsCurrent
Liabilities 077 488 071 094 048 036 017 017
Analysis
Current Ratio We notice that in case of Current Ratio Joonktollee Tea and Jay Shree Tea
have a high current ratio whereas McLeod Russels and Rossell have a low ratio
High ratio indicates that
28
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
the company may be high amount of receivable and large amount inventory piled up
which is a bad sign
whereas it may also suggest that the company receives its payments well before the
expiry of the credit period as such indicating a strong credit policy of the company
Thus a right proportion of current assets and current liabilities are required and the ideal
ratio is said to be 21
Quick Ratio Sometimes a company could be carrying heavy inventory as part of its current
assets which might be obsolete or slow moving Thus eliminating inventory from current
assets and then doing the liquidity test is measured by this ratio The ratio is regarded as an
acid test of liquidity for a company It expresses the true working capital relationship of its
cash accounts receivables prepaid and notes receivables available to meet the companys
current obligations Again when we look at the acid test ratio it indicates the actual indicator
of the current position Again here we see that in McLeod Russels and Rossell maximum of
cash is held up in inventory
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any analyst They are
able to give a good overall picture of a company with respect to its peers The most important
objectives for the business and arguably therefore the most important ratios are those
concerned with profitability
Net profit margin
Net profit margin divided by net revenues often expressed as a percentage This number is
an indication of how effective a company is at cost control The higher the net profit margin
is the more effective the company is at converting revenue into actual profit The net profit
margin is a good way of comparing companies in the same industry since such companies
are generally subject to similar business conditions However the net profit margins are also
a good way to to compare companies in different industries in order to gauge which
industries are relatively more profitable also called net margin
Net Profit Margin =Net Profit
=Profit before Interest and Taxation
Turnover Turnover
29
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Return on Capital Employed Net After Tax Profit divided by Net Worth this is the final
measure of profitability to evaluate overall return This ratio measures return relative to
investment in the company Put another way Return on Net Worth indicates how well a
company leverages the investment in it May appear higher for startups and sole
proprietorships due to owner compensation draws accounted as net profit
Joonktollee tea Ltd
Jayshree Tea
Limited McLeod russells
Rossels Tea
Company
Mar-09 Mar-08 Mar-09
Mar-
08 Mar-09 Mar-08
Mar-
09
Mar-
08
Return on Total
Capital Employed 001 0006 0055 0014 0056 0013 0055
009
1
Return on Assets
0002 0002 0011 0003 0012 0003 0014
002
8
NP Ratio
0023 0019 0042 0016 0108 0032 0132
020
1
Analysis
Net Profit Margin The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs falling prices or declining sales in the
future The ratio measures the percentage of profits earned per dollar of sales and thus is a
measure of efficiency of the company Thus we see to it that Rossell Tea has been able to
withstand maximum competition and thus its income after tax is on a higher proportion than
any other company
Return on Assets The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good return The ratio
measures the percentage of profits earned per dollar of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets Thus when we compare the
various data we find that the best utilisation of assets is being done by Rossell Tea
ROCE is almost same Jayshree McLeod and Rossels
LEVERAGE RATIOS
30
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
These ratios determine the financial leverage enjoyed by the firm and also look at the short
term solvency of the firm in terms of its interest paying capacity Long Term Debt Equity
ratios provide insight into the extent to which nonequity capital is used to finance the assets
of the firm
Ratio = long term liabilities shareholders equity
The higher is the ratio the higher the proportion of assets financed by non-shareholder
parties Which components to include in the numerator or denominator of the ratios depend
on how one defines liabilities and shareholders equity
Financial Leverage
ratios
Joonktollee
Tea Ltd
Jayshree Tea
Limited
McLeod
russells
Rossels Tea
Company
Mar-
08
Mar-
07
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Total Debts to Assets
0296 0331 0581 0529 0354 0026 0206 0205
Capitalization Ratio 0245 0295 0482 0481 0145 0176 0156 0141
Debt-Equity Ratio 0325 0418 0929 0926 0354 041 0184 0164
Interest Coverage Ratio 1761 2033 2516 2953 2564 242 5996 18178
ANALYSIS
Rossell Tea Company is the least leveraged company with the lowest debt equity ratio while
jay Shree Limited would fall on the higher end
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed
assets (on the balance sheet) It indicates how well the business is using its fixed assets to
generate sales
31
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Generally speaking the higher the ratio the better because a high ratio indicates the business
has less money tied up in fixed assets for each dollar of sales revenue A declining ratio may
indicate that the business is over-invested in plant equipment or other fixed assets
Efficiency Ratio Joonktolle tea Jayshree Tea
Limited
McLeod Russel Rossels Tea
Company
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-
08
Cash Turnover
449
3 208 14348 1049 2698 13608 7281 140
Total Assets Turnover 038 029 098 073 043 035 039 042
Accounts Receivable
Turnover
145
5 1388 609 95 3246 2316 10458 6045
Analysis
Rossell Tea has the highest debtor turnover ratio indicating less chances of bad debt and
more liquid the nature of asset (debtor) This ratio is least in case of Jay Shree Tea which is
also below the industry average this inefficiency increases the chance of default by the
debtors
Inventory turnover ratio of both Biocon amp Cipla are below the industry average This
indicates low inventory liquidity and high inventory carry cost This may also indicate that
the company might have over bought or the value of the stock is overstated
32
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
CROSS SECTIONAL ANALYSIS
In this analysis the different financial variables of different companies have been compared
over a period of time of two years viz 2006-2007 and 2007-2008 As such it helps us to get
some sort of trend of various financial factors in the financial statements of a company
Common Size Profit and Loss Account
Joonktollee Tea
Ltd
Jayshree
Tea Limited
McLeod
russells
Rossels Tea
Company
Year Mar-09 Mar-
08
Mar-
09
Mar-
08
Mar-
09
Mar-08 Mar-
09
Mar
-08
Share Capital 367 345 354 347 345 348 531 536
Reserves amp
Surplus 7178 6706 4829 4845 7039 6742 7914
805
7
Net Worth
7545 7052 5183 5192 7384 709 8445
859
2
Secured Loans 217 209 4119 3963 2427 1955 1194 492
Unsecured Loans 284 858 698 845 189 955 361 915
Total Debt
2455 2948 4817 4808 2616 291 1555
140
8
Total Liabilities 100 100 100 100 100 100 100 100
Gross Block
4169 3893 7649 7269
1147
5 11391 8595 984
Less Accum
Depreciation 1876 1659 2676 2572 2438 2295 779 793
Net Block
2293 2234 4974 4697 9037 9096 7816
904
7
Capital Work in
Progress 101 036 084 064 087 052 036 042
Investments 645 4879 3191 3077 1292 1244 1644 666
Current Assets 0 0
33
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Loans amp
Advances
Inventories 501 461 1609 1217 402 28 155 183
Sundry Debtors 281 222 2159 915 16 18 04 075
Cash and Bank
Balance 091 1481 092 828 193 031 057 032
Loans and
Advances 1028 123 113 884 828 877 872 644
Less Current
Liab amp Prov 0 0
Current Liabilities 48 349 219 82 734 584 502 676
Provisions 259 194 771 701 935 86 132 126
Net Current
Assets 1162 2851 2029 2323 -086 -077 489 131
Miscellaneous
Expenses not wo 0 0 0 0 0 0 0 0
Total Assets 100 100 100 100 100 100 100 100
Analysis
The percentage of debt to total assets for Rossell Tea is lowest (1555) as compared to
other companies On the other hand JayShree Tea has the highest debt percentage in its
capital structure ie4817 as the company is in expansion mode so its been raising debt
from the market
The net current assets for McLeod Russel is the in negative because of which the company
can have problems in meeting its short term obligationsHence this company is not a good a
bet for short term creditors
For Jay Shree Tea the inventory as a percentage of total assets is highest among all the
companies which shows cautious and conservative approach
COMMON SIZE INCOME STATEMENT
34
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Joonktolle Tea
amp Ltd
Jayshree Tea
Limited
McLeod russells Rossels Tea
Company
Year Mar-
09
Mar-
08
Mar-09 Mar-
08
Mar-09 Mar-08 Mar-09 Mar-
08
INCOME
Sales Turnover 100 100 100 100 100 100 100 100
Excise Duty 028 035 167 225 028 035 0 0
Other Income 347 798 395 84 409 937 398 2857
Stock Adjustments -092 -214 38 -067 055 -054 -003 -09
Total Income 10228 10549 10607 10548 10436 10847 10395 12767
EXPENDITURE
Raw Materials 2297 2075 4473 323 524 425 03 147
Power amp Fuel Cost 683 777 579 752 1071 1295 687 788
Other Mfgr Expenses 3102 337 2276 3076 3839 4463 3766 4024
Employee Cost 913 1174 745 928 1041 1285 1636 1143
Selling amp Admn
Expenses 979 114
727 1022 1185 1281 1087 1177
Miscellaneous
Expenses 533 335
841 531 201 182 803 295
PBDIT 172 1678 965 101 2574 1916 2387 5194
Interest amp Financial
Charges 977 825
384 342 1004 792 398 286
Depreciation 458 587 16 253 314 333 238 256
Profit Before Tax 286 266 421 414 1256 791 1751 4652
Tax 033 014 002 022 122 023 322 385
Fringe benefit tax 017 017 0 0 027 019 023 017
Deferred Tax 014 0 09 -026 036 029 196 306
Extra ordinary items -011 048 -083 26 -01 403 -113 1938
Profit after tax 233 186 412 158 1081 317 1323 2006
Analysis
35
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
The selling and administration expenses for McLeod Russel though they are lower than the
previous year
The net profit is the highest for Rossell Ltd as compared to others in the Industry The
depreciation charged is also highest for Joonktolle tea (458) followed by McLeod Russel
(314 of Net Sales) The relative tax expense is highest for Rossell Ltd for the 2008-09 and
lowest for Jay Shree Ltd
Trend Analysis
36
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
This is a time series analysis whereby a study is done in order to interpret what has changed
in the company over a year This can be done by comparing the balancesheet and profit and
loss statement of the company for two years
Balance Sheet
Joonktolle
Tea amp
Ltd
Jayshree
Tea Ltd
McLeod
Russel
Rossell
SOURCES OF FUNDS
Share Capital -0003 0047 0 16323
Reserves Total 0004 0022 5536 15342
Total Shareholders Funds 0003 0024 5264 15404
Secured Loans -0026 0066 25516 184828
Unsecured Loans -0689 -0153 -80 -53711
Total Debt -0219 0028 -9116 29735
Total Liabilities -0062 0026 108 17421
APPLICATION OF FUNDS
Gross Block 0004 0079 1827 2571
Less Accumulated
Depreciation 006 0067
7353
15418
Net Block -0037 0086 0432 1445
Capital Work in Progress 1618 0352 68659 0
Investments 024 0064 4948 189682
Current Assets Loans amp
Advances
Inventories 0021 0356 45268 -0465
Sundry Debtors 0188 1421 -9716 -375
Cash and Bank -0942 -0887 538125 107895
Loans and Advances -0217 0312 -454 59103
Less Current Liabilities and
Provisions
37
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Current Liabilities 0291 174 27042 -12688
Provisions 0253 0128 9978 22819
Net Current Assets -0618 -0104 12676 338961
Miscellaneous Expenses not
written off
Total Assets -0062 0026 108 17421
Income Statement
38
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
39
Diana
Tea
Company
Jayshree
Tea
Limited
McLeod
Russel
Rossell
INCOME
Sales Turnover 24448 54197 2645 812
Excise Duty 0 14797 0866
Other Income -45887 -27502 -44747 -84934
Stock Adjustments -46774 -970652 -227247 -95833
Total Income 20655 55066 21657 -1197
EXPENDITURE
Raw Materials 3777 113514 55994 -78205
Power amp Fuel Cost 9333 18823 4534 -5728
Employee Cost 14549 14123 8775 1168
Other Manufacturing
Expenses -3235 23789
2458 5477
Selling and Administration
Expenses 697 9696
16982 -016
Miscellaneous Expenses 97938 144521 39816 194268
Operating Profit 27572 47447 69894 -50308
Interest 4728 73048 60378 50658
Depreciation -2941 -2453 1934 0735
Profit Before Tax 33766 5684 100675 -59313
Tax 200 -83333 563399 -9756
Fringe Benefit tax 73228 44444
Deferred Tax -626389 58824 -30675
Extraordinary Items -128571 -149157 -103103 -106305
Adjusted Net Profit 55556 301386 331232 -28679
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Segment reporting
The objective of this segment is to establish principles for reporting financial information
about the different types of products and services an enterprise produces and the different
geographical areas in which it operates Such information helps users of financial statements
(a) Better understand the performance of the enterprise
(b) Better assess the risks and returns of the enterprise and
(c) Make more informed judgements about the enterprise as a whole
Many enterprises provide groups of products and services or operate in geographical areas
that are subject to differing rates of profitability opportunities for growth future prospects
and risks Information about different types of products and services of an enterprise and its
operations in different geographical areas - often called segment information - is relevant to
assessing the risks and returns of a diversified or multi-locational enterprise but may not be
determinable from the aggregated data Therefore reporting of segment information is
widely regarded as necessary for meeting the needs of users of financial statements
A JOONKTOLLEE TEA COMPANY LIMITED
No disclosure regarding segment reporting
B JAY SHREE TEA amp INDUSTRIES LIMITED
Based on the guiding principles given in Accounting Standards on ldquoSegment Reportingrdquo
(AS-17) as prescribed by the Companies Accounting Standard Rules 2006 the Companyrsquos
primary business segments are tea chemicals amp fertilisers business
40
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Segment wise Information for the year
ended 31st March 2009
(A) PRIMARY
SEGMENT
(Rs in lsquo000)
1 Segment Revenue (Net
SalesIncome from each
segment)
31032009 31032008
Tea 2811082 2039941
Chemicals amp Fertilisers 1361419 659261
Infotech ndash 10305
Others 28160 24097
Less Inter-segmental Revenue 8695 6446
Total 4191966 2727158
2 Segment Results Profit
(Loss) before Tax amp Interest
a) Tea 423765 57395
b) Chemicals amp
Fertilisers
(31192) 58630
c) Infotech ndash (11109)
d) Others 10096 6081
Total 402669 110997
Less Interest (Net) 103751 75431
Add Unallocable Income net
of unallocable expenditure
(132310) 63887
Total Profit (Loss)
before Tax
166608 99453
3 Segment Assets (Including revaluation reserve)
amp Segment Liabilities
Assets Liabilities Assets Liabilities
a) Tea 1923575 312460 1605759 298639
b) Chemicals amp 677027 496214 335988 95623
41
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
Fertilisers
c) Infotech ndash ndash 48507 4844
d) Others 11939 6169 11112 5735
e) Unallocable 1565935 211987 1601683 118707
Total 4178476 1026830 3603049 523548
4 Capital expenditure including capital work-in-progress and depreciation (excluding on
revaluation reserve) for the year
Capital Exp
Depreciation
Capital Exp
Depreciation
a) Tea 109378 55558 117128 56138
b) Chemicals amp
Fertilisers
4117 5090 4580 4867
c) Infotech ndash ndash 1301 4909
d) Others 535 167 ndash 131
e) Unallocable 28031 7358 13126 6728
Total 142061 68173 136135 72773
(B) Secondary Segment Domestic Export Total
Segment Revenue 3502255 689711 4191966
(2185718) (541440) (2727158)
Segment Assets
4143913 34563 4178476
(3567672) (35377) (3603049)
Capital Expenditure 142061 ndash 142061
Note (136135) (ndash) (136135)
i) The company has disclosed business segment as the Primary Segment
Segment Revenue includes other income pertaining to the relevant
42
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
C MCLEOD RUSSELS
No disclosure regarding segment reporting
D ROSSEL TEA LIMITED
No disclosure regarding segment reporting
Conclusion
Though there has been a recovery in the prices of tea and exports have also started looking
up with the emerging trends in the globalized economy markets can no longer be protected
The high cost of production is still a matter of concern for the Indian tea
industry The Indian tea industry would have to gear itself up to counter the new forces
unleashed by globalization
Budget 2010-11 gave the extension of concessional import duty on imported plantation
machinery like tea bagging machines till March 31 2011 will help the industry in value
adding and hiking exports in the long run The finance minister has also increased weighted
deduction on payments made to national laboratories research associations universities and
other institutions for scientific research from 125 to 175 This will help organisations like
43
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
the Tea Research Association to take up better research and development activities resulting
in production of better quality tea saplings
With cyclical crisis in the Indian tea industry erasing fast the current need was to shift from
a production oriented strategy and subsidy approach to market oriented strategic framework
with market economy outlook There is a need to liberate the mindset of the industry from its
earlier mindset of disposal of tea was changing to a new one --marketing of tea which
implied a shift from subsidy to capacity building approach
Multinational tea companies are increasingly contracting with larger agro-processing
firmswho were able to effectively coordinate deliveries and quality standards from small
farmers through effective supply chain management as in South India and Indonesia
Sharma said
Oversupply of tea and less demand has contributed to market imbalance in India Strategies
have to be devised to improve the demand side as so much effort has been put in improving
supply efficiency in the past
Only financially sound tea producers would perhaps be able to take the risk of delayed
marketing and avail any possible opportunity arising out of future upward price movement in
the marketWhile productivity and quality have received some attention cost reduction
value addition and risk manageent needed a new focus
References
Joonktollee Tea amp Industries Ltd Annual Report 08-09
Mcleod Russel India Ltd Annual Report 08-09
Rossell Tea Ltd Annual Report 08-09
Jay Shree tea amp Industries Ltd Annual Report 08-09
Foster G Financial Statement Analysis Second Edition Prentice Hall NJ 1986
wwwmoneylivemintcom
wwwbseindiacom
wwwmoneycontrolcom
44
wwwcapitalinecom
45
46
wwwcapitalinecom
45
46
46