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ACCOUNTANCY TERM PAPER

ON

FINANCIAL ANALYSIS: BRITANNIA INDUSTRIES LIMITED

SUBMITTED TO: MS BHAVNA RANJAN MAM

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TABLE OF CONTENTS

S.NO TOPIC PAGE NO.

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1. COMPANY PROFILE 01

2. COMPANY BACKGROUND 05

3. MARKETTING STRATEGY 07

4. SWOT ANALYSIS 08

5. PORTERS 5 FORCES MODEL 09

6. BCG MATRIX 10

7. BRITANNIA CSR & BISCUIT INDUSTRY 11

8. INDUSTRY ANALYSIS 13

9. FINANCIAL ANALYSIS

- PROFIT & LOSS ACCOUNT 16

- CASH FLOW STATEMENT 18

- RATIO ANALYSIS 20

- CASH FLOW ANALYSIS 37

- COMMON SIZE STATEMENT ANALYSIS 38

- COMMON SIZE BALANCESHEET 41

10. CONCLUSION 52

11. LEARNING FROM THE TERM PAPER 53

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COMPANY PROFILE

Company Name: Britannia Industries Limited

Company Location:

Registered Office

5/1/A Hungerford Street,

Kolkata - 700 017

West Bengal

Company Contact: Ph: 033 - 2287 0505 /

2287 2439 / 2287 2057

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Fax: 033 - 2287 2501

Key Executives:

Chairman- Mr. Nusli Neville Wadia

Managing Director- Ms. Vinita Bali

Directors - Mr. A.K.Hirjee, Dr.AjaiPuri, Mr.Avijit Deb, Mr.Jeh N Wadia,

Mr. KekiDadiseth, Mr. Nasser Munjee, Mr. Ness

NusliWadia,

Mr. Nimesh N Kampani, Mr.PratapKhanna, Mr.S.S.Kellkar,

Dr. Vijay L. Kelkar

VP & Chief Operating Officer:Neeraj Chandra

Background: Britannia Industries Ltd (Britannia) was established in 1892 in Kolkata,

West Bengal as a company which manufactured biscuits.Kerala businessman K.

RajanPillai secured control of thegroup in the late 1980s, becoming known in India as

the 'Biscuit King’. In 1993, the Wadia Group acquired a stake in AssociatedBiscuits

International (ABIL), and became an equal partner withGroupeDanone in Britannia

Industries Limited.Company Description: Britannia Industries Limited is a company

based in India which operates in two business segments which include bakery products

such as biscuits, bread, cakes and ruskand dairy products such as milk, butter, cheese,

ghee and dahi. Britannia manufactures dairy products from its plants locatedin Kolkata,

Delhi, Chennai, Mumbai, and Rudrapur. The company has a total installed capacity of

163,500 MTof biscuits and protein foodstuffs. Key brands include Tiger, Good Day, Milk

Bikis, Treat, and Marie. Britannia exports its products to countries in the MiddleEast

and to USA, Ghana, and Singapore.

Company Analysis:

Present Share Price as on 10th October 2012 :

BSE: 504.40 which decreased by 0.95% to its previous day closing.

NSE: 504.35 which decreased by 1.07% to its previous day closing.

Britannia has an estimated 38% market share

Britannia Industries Ltd : Milestones

Established – 1892 - initial investment Rs 295 – Britannia Biscuit Company

1910 – Mechanised operations

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1975 – Took over the distribution from Parry’s

1978 – Indian Shareholding crossed 60%

1979 – Rechristened Britannia Industries limited.

1983 - Revenues crossed 100 crores

1992 – Wadia group acquired stake and became an equal partner with Grope Danone

1993 – Sales crossed 1,00,000 tonnes of biscuits

1997 - New corporate identity - “ Eat Healthy, Think Better “ - enters Dairy market

2000 - Forbes Global Ranking - Britannia among top 300 small companies

2002 – JV with Fonterra - World’s second largest Dairy company,

Britannia New Zealand Foods Pvt Ltd. is born,

Economic Times - BIL India’s 2nd Most Trusted Brand

Forbes Global Ranking - Britannia among top 200 small companies

2004 – Volumes cross 3,00,000 tonnes of biscuits

2005 – Rebirth of Tiger – “ SwasthKhao Tan Man Jao “

Commissioning of new plant in Uttaranchal – ahead of schedule

2009 to 2012- New and renovated products came up like Nutri Choice Multigrain Thins

and Roasty, Chocolate Ecstasy, Treat Fruit Creams, Marie with Honey and Oats, Good

Day Fresh Bake

Butterscotch, 50-50-Snackuits,.Etc.. And in breads 100% Whole Wheat

Multifiberbreads , Honey-Oats, the Tiger-Zor chocolate. Etc.

In the manufacturing category BIL units of Delhi , Gwalior , Bidadi, Banglore, Khapoli

won the IMC Ramkrishna Bajaj National Quality Award 2011.

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MARKETING STRATEGY

Marketing is one of the ever changing fields in the management arena. The market

faces new challenges every day and companies need to respond to it quickly and

positively. Therefore new marketing ideas and strategies are being discovered

continuously to meet up the challenges.

Following strategies adopted by the organization.

Quality of the product and customer satisfaction:

Customers always want good quality product. Customer satisfaction is very important

thing to fulfill. Britannia has products for each level of the pyramid and has a very wide

range of good quality products to keep its customers happy.

Customer relation and retention:

Customer relation and retention are really important parts of the company’s marketing

strategy. It is important to form a good relationship with the customer while keeping the

old customer and trying to make new ones.

Awareness of competitors’ activity:

Every organization should keep a watch on the competition in the market and take steps

to outdo the competition. Parle and ITC are its main competitors in the biscuit industry,

Nestle and Amul in dairy products and MTR in ready to make foods.

Emphasis on global thinking and local marketing planning:

Companies are expanding by pursuing market beyond their borders. Britannia has a

wide range of products in the Middle-East. Those products are specially made to the

tastes of the people belonging to those regions. When a company enters other

countries it has to follow the tradition of that country and also plan for local market that

which type of product has more demand and how can it run in the market.

Promotional Strategy

Promotion is one of the 4P’s of marketing mix. It is very important in the making of the

any company. Britannia runs a lot of advertisements in print and on television. Its

taglines stay with the people for a very long time. The ‘ting ting ta ting’ music in every

advertisement is now programmed in the heads of the people who have watched the

advertisements.

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SWOT ANALYSIS OF BRITANNIA

Strengths

Widely accepted in all generations.

Easily available in all forms.

Fulfill one of the Basic requirements among Air, Water,Food& Shelter.

Preserves the non-seasonal food and makes it available all throughout the year.

Provide good instant remedy for hunger in the form of readymade food.

Weakness

Increase the cost of food product.

Decrease nutritional value

Industry and technology requires high investment

Regular usage of processed food can cause alteration in health.

Opportunities

Increase economy of India.

Good quality of product.

Generate employment opportunity.

Provide competition for foreign and domestic competitors.

Provide their products at a cheaper rate to the nation.

Threats

Sometimes there is a case of low quality product production in the process to earn more

profits.

Emerging competitors in the market.

Lack of technology.

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Porters 5 Forces Model : Britannia

Threat of New Entrants is Medium

Since there is very high product differentiation and a very powerful distribution network

which makes it very hard for a new entrant to enter the market. The prices can’t be

increased to a great extent i.e. there is not much flexibility in prices, so we can say that

it is an extremely price sensitive. It has a great dependency on the agricultural sector for

wheat which is a main component for most of its products

Rivalry among existing firms is High

The major players in this industry areBritannia, Parle, ITC Ltd., PriyaGold, Bakeman,

Bonn etc.The companies Britannia &Parlehave an almost equal market share as

compared to these ITC ltd holds a lower market share. Since there is a neck to neck

competition the companies keep a close notice of the changing strategies of each other

Bargaining power of suppliersisHigh

The main ingredient required for the manufacturing of biscuits is Wheat. When there is

inflation they have to purchase wheat at the price which the farmers quote since wheat

does not have a close substitute and leaves the companies with no other option.

Threat of Substitute Products is Medium

The substitutes which are consumedinstead of biscuits are namkeens, chips, potato

wafers etc. Even though the biscuits have such substitutes theyhave become a staple

part of people’s everyday life. The biscuits are a low priced commodity, but even if there

is a small increase in the price, it would still be acceptable by people in the urban areas

but in case of rural areas it may cause people to shift to substitutes.

Bargaining power of buyers is High

The consumers have an option of switching from one brand to the other with due

accordance to their liking of price, quality and taste. This is the reason why there is not

much flexibility given to the biscuit manufacturers to increase the prices of their products

or compromise on the quality of their product. The consumers are also going for bulk

purchases at cheaper rates from bakery stores.

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BCG Matrix

STARS:

There is high market growth rate, there is a huge market share, thereis huge cash

generation and consumption. Also there is a huge investment in the growing

market.They become cash cows when market growth rate declines. The Britannia

products which are included in stars are Milk Treat, 50-50, Tiger and Little Hearts.

CASH COWS:

There is low market growth but high market share. They are the leaders in the mature

market. Here we find more of cash generation than consumption. There is low prospect

for future growth so new investments are made in this category. The products which are

included in this category are Marie Gold, Good-Day and Treat.

QUESTION MARKS:

There is high market growth rate but a low market share. There is low cash generation

than cash consumption. The market situation is carefully analysed, investment is done

in high growth potential market. The decision making process becomes very critical for

managers. The products included here are Time Pass and PureMagic.

DOGS:There is a low market growth rate and low market share. There is neither large

cash generation nor consumption. They are also known as Cash Traps. The Dogs

should be old off or liquidated. The products included here are NutriChoice.

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Britannia :CSR

Britannia India Limited is a company which stands at a great position in India. The

children and the adults can associate with the brand as in it brings back fond memories

of theirs. The company has carved a place for itself in the Indian lives and it has also

made tea-time special for generations. This is a fact that is of great consideration to the

Managing Director Vinita Bali and she does not take this lightly.

In 1997 Britannia underwentre-branding and adopted the mantra 'Eat Healthy, Think

Better', and eventually cut out all transfats from the formulation of all its biscuits. It was

the first company in India to do this and became the first to acknowledge the health

problems that were associated with a diet which was high in. They were also the first

ones to reduce sodium and sugar levels in their products. Sustainability and the health

of the public key issues for all CSR activities at Britannia. The Britannia Nutrition

Foundation works towards the control and prevention of malnutrition. The Navjyoti

project was launched to fight iron malnutrition through the supplementation of biscuits

with iron. These biscuits are distributed to many mid-day meal schemes in Andhra

Pradesh that reach underprivileged children. During the recession, the company

adopted various other CSR measures to cut costs and improve productivity. Bali says

that focusing on reducing energy requirements and cutting wastes through better use of

energy was an essential part of revenue management.

SNEAK PEAK INTO INDIA’S BISCUIT INDUSTRY

Indian Biscuit Industry contribute Rs8000 crore to the FMCG industry and provide vast

opportunity for growth. Indian Biscuit Industry can be segregated into 2 sectors:

ORGANIZED AND UNORGANIZED. Market share for organized sector stands at

whopping 70 % and that of Unorganized sector is at 30%. Apart from big 3 companies

(ITC, PARLE, BRITANNIA) there are 150 medium to small biscuit factories operating in

India. The Industry is now facing problem from increase in prices of raw material, also

increased government VAT to 12.5% has increased the woes.

States which have higher intake of biscuits are Uttar Pradesh,

Karnatka,Maharashtra,West Bengal and Andhra Pradesh..The Most industrially

developed states; hold maximum amount of consumption of biscuits.The jaw dropping

fact is that rural India consumes 55% of biscuit produced in india.

The Federation of Biscuit Manufacturers of India have confirmed a bright future of

India’s Biscuit Industry. According to FBMI growth of 10 % will be achieved for next 10

years without comprehensive fluctuations.

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LIST OF PLAYERS IN THE INDUSRTY

PARLE, ITC, SURYA FOODS, CADBURY, SMITH KLIME BEECHAM, UNITED

BISCUITS AND OTHERS

LIST OF REGIONAL BRANDS

HARVEST GOLD, CREMICA, PRIYAGOLD, BONN, MRS BECTOR, SABISCO.

LIST OF FOREIGN PLAYERS

HEINZ, UNITED BISCUITS, NESTLE, McVITTIES.

BRITANNIA VS. PARLE

DESCRIPTION BRITANNIA PARLE

Established 1896 1929

Nature of busness Public limited Family run business

No. of Manufacturing Units 5 own,40 CMU 8 own,60 CMU

Market Share 32.80% 32.94%

Promotion Cricket events and players celebrities

New Scope Environment Health and Wellness

MARKET SHARE – BRAN DWISE

BRITANNIA 32%

PARLE 32%

ITC 11%

PRIYA GOLD 15%

OTHERS 10%

MARKET SHARE – SECTOR WISE

URBAN RURAL

85-75% 65-75%

MARKET SHARE – REGION WISE

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NORTH ZONE 25%

WEST ZONE 23%

EAST ZONE 28%

SOUTH ZONE 24%

CRITICAL SUCCESS FACTORS OF BISCUIT INDUSTRY WITH REFRENCE TO

BRITANNIA

1. India’s lower and middle class segment will continue to hold the key

2. Distribution and Advertising and Launching of new products

3. Britannia to add new variants in its existing basket

4. Focus on urban markets

5. Alliances with suppliers, retailers, distributors, other linkages.

INDUSTRY ANALYSIS

BRITANNIA PARLE ITC MRS. BECTOR BONN Market share: 35% Market share:

31% Market share: 9%

Market share: <5%

Market share: <5%

Tiger: Tiger; Tiger Cream: Orange, Elaichi, Chocolate, Pineapple, Strawberry, Butterscotch; Tiger Banana; Tiger Crunch

Parle G: Rs. 1, 2, 3, 4, 5, 10, 20, 30, 40, 50

Sunfeast Glucose:

Cremica Glucose: Glucose, Cashew, Nice Malt & Milk

Glucobon:

50-50: 50-50: Sweet and Salty; Maska Chaska; Italiano Pizza, Swiss cheese & Chilly and Chinese Hot & Sweet; Snackuits Time Pass: Classic Salted, Nimkee; Baked: Mindless Masala, Loafer Lemon, Tapori Tomato.

Krack Jack: Rs. 5, 7, 10, 15, 20 Nimkin: Rs.: 5, 10 Monaco: Plain; Jeera flavor (Zabardast Jeera) Rs. 5, 7, 10, 20

Sunfeast Snacky: Classic Salted, Chilli Flakes Sunfeast Sweet ‘n Salty:

Cremica Salties: Cremica Party Crackers: Cremica Tik Tok:

Mini Bits: Zeera Cheese, Chilly Tomato, Twin Bite

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Pure Magic: Chocolate, Vanilla, Praline Treat: Jim Jam: Rs. 5, 15, 25; Treat-O: Vanilla, Chocolate: Rs. 5, 10, 20; Treat Fruit Creams: Strawberry, Mango, Pineapple, and Orange: Rs. 5, 12, 25

Kreams: Chocolate: Rs. 2, 5, 10; Orange, Pineapple, Elaichi, Mango: Rs. 5,10; Bourbon: Rs. 10, 18 Festo: Tangy Orange, Creamy Chocolate, Traditional Elaichi, Zingy Pineapple, Sweet Mango Rs. 5, 10

Sunfeast Dream Cream: Dream Cream: Choco-Vanilla, Strawberry-Vanilla; Burbon; Orange Cream; Butterscotch Cream Sunfeast Special: Special Cream: Orange, Chocolate & Elaichi

Cream Collection: Premium: Orange, Elachi, Chocolate, Strawbery, Banana Cream Collection: Regular: Orange, Chocolate, Mixed Fruit, Milk, Elaichi

Burbon: Chocolate, Cappuccino: Rs. 5, 12, 15, 22

Hide & Seek: Rs. 5, 12, 20,30,50 Hide & Seek- Milano: Rs. 15, 30 Hide & Seek- Burbon: Rs. 5, 12, 25 Happy Happy: Rs. 5, 10

Sunfeast Dark Fantasy: Cocoa, Vanilla Sunfeast Dark Fantasy Choco Fills:

Nutri Choice: Hi-Fibre DigestiveNutriBix, 5 Grain NutriBix, NutriChoice Crackers, Nature Spice Crackers, Arrowroot, Multigrain Thins, Multigrain Roasty, NutriBix

Actifit Digestive Marie: Rs. 5, 15, 25

Marie Gold: Marie Gold, Vita Marie Gold, Vita Marie Honey Oats

Marie: Rs. 5, 10, 15, 20, 22

Sunfeast Marie Light: Original Orange Light Oats

MarieBon:

Milk Bikis: Milk Cream Almond Cookies: Rs. 12, 25

Milk Shakti: Rs. 5, 10

Sunfeast Milky Magic:

Cookies: Butter Elaichiz; Fruit Dhamaka

20-20 Cookies: Butter: Rs. 5, 10, 18; Cashew: Rs. 5,

Sunfeast Special: Special Cookies: Cashew & Butter

Mast Makhan: Crac Nut Cookies, Cashew Butter,

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Good Day: Cashew, Butter, Pista Badam, Chocochips, Choconut

10, 20 Top: Rs. 5, 10, 20 Magix: Rs. 6, 10 Coconut Cookies: Rs. 10

Butter Cookies, Coconut Crunchies

Golden Arcs: Orange; Pineapple Rs. 10, 20

Rusks:

Prime Time Rusk: Milk Rusk, Kaju Rusk, Suji Toast

Nice Time: Little Hearts: Plain, Chocolate, Sesame

Sunfeast Nice:

Prime Time Cookies: Butter Cookies, Chocochip Cookies, Choconut Cookies, Masala Cookies, Atta Cookies, Zeera Cookies

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CHAPTER II- Financial Analysis (FINANCIAL REPORTS)

In order to identify the current financial statement of a company, presence of the

financial accounts is mandatory. The financial accounts are mainly categorized into

three ,viz :-

Profit and Loss account

Balance sheet of the company

Cash flow statement of the company

PROFIT & LOSS ACCOUNT

PROFIT AND LOSS A/C : BRITANNIA INDUSTRIES LIMITED

amount in INR ,Crores Mar-12 Mar-11 Mar-10 Mar-09

INCOME :

Sales Turnover 5032.81 4255.79 3426.64 3142.89 Excise Duty 58.62 32.27 23.18 30.68 Net Sales 4974.19 4223.52 3403.46 3112.21 Other Income 58.53 48.92 50.83 84.59 Stock Adjustment 4.79 17.89 21.35 19.61 TOTAL INCOME 5037.51 4290.33 3475.64 3216.41

EXPENDITURE :

Raw Materials 3184.54 2782.23 2184.97 1930 Power & Fuel Cost 38.25 29.55 22.38 21.47 Employee Cost 145.87 119.93 99.94 90.01 Other manufacturing expenses 450.01 359.94 313.76 289.32 Selling & Administration expenses 725 614.6 558.28 464.16 Miscellaneous Expenses 156.08 103.68 129.9 139.58

less : Pre operative expenses capitalised 0 0 0 0

TOTAL EXPENDITURE 4699.75 4009.93 3309.23 2934.54

OPERATING PROFIT 337.76 280.4 166.41 281.87 Interest 38.07 37.75 8.21 16.01 GROSS PROFIT 299.69 242.65 158.2 265.86

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Depriciation 47.32 44.59 37.54 33.46 PROFIT BEFORE TAX 252.37 198.06 120.66 232.4

Tax 63.71 39.95 20.67 34.38 Fringe Benefit Tax 0 0 0 5.3 Deffered Tax 1.92 12.82 -16.52 12.32 REPORTED NET PROFIT 186.74 145.29 116.51 180.4

Extraordinary Items 18.87 15.57 -28.15 -10.44 NET PROFIT: 167.87 129.72 144.66 190.84

BALANCE SHEET

BALANCE SHEET : BRITANNIA INDUSTRIES LIMITED

amount in INR ,Crores

Mar-12

Mar-11

Mar-10

Mar-09

SOURCES OF FUNDS:

Share Capital 23.89 23.89 23.89 23.89

Reserves 496.15 427.41 372.36 800.65

TOTAL SHAREHOLDERS FUND 520.04 451.3 396.25 824.54

Secured Loans 406.92 407.76 408.1 2.2

Unsecured Loans 27.57 23.68 21.51 22.97

TOTAL DEBT 434.49 431.44 429.61 25.17

TOTAL LIABILITIES 954.53 882.74 825.86 849.71

APPLICATION OF FUNDS :

Gross Block 677.36 593.56 547.83 511.5

less :Accumulated Depriciation 298.27 289.86 266.33 233.66

NET BLOCK 379.09 303.7 281.5 277.84

Capital Work In Progress 79.73 11.7 9.97 6.02

Investments 428.94 545 490.64 423.1

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CURRENT ASSET,LOANS & ADVANCES

Inventories 382.28 311.2 268.34 253.63

Debtors 52.14 57.26 39.49 49.61

Cash & Bank 30.94 28.75 23.36 40.8

Loans & Advances 182.08 70.63 207.7 195.3

TOTAL CURRENT ASSETS 647.44 467.84 538.89 539.34

CURRENT LIABILITIES & PROVISIONS

Current Liabilities 448.11 358.19 310.89 265.8

Provisions 124.8 96.65 190.83 147.48 TOTAL CURRENT LIABILITIES & PROVISIONS 572.91 454.84 501.72 413.28

NET CURRENT ASSETS 74.53 13 37.17 126.06

Miscellaneous exp. Not written off 0 0 0 26.64

Deffered Tax Assets 23.68 22.87 31.18 14.31

Deffered Tax Liability 31.84 29.11 24.6 24.26

NET DEFFERED TAX -8.16 -6.24 6.58 -9.95

TOTAL ASSETS 954.13 867.16 825.86 849.71

CASH FLOW STATEMENT

CASH FLOW STATEMENTS : BRITANNIA INDUSTRIES LIMITED

amount in INR ,Crores

Mar-12 Mar-11

CASH FLOWS FROM OPERATI NG ACTIVITIES

Profit before Tax 252.37 198.06 adjustments for:

Depriciation & Amortisation 47.32 44.59 Profit on sale of investments -9.1 -8.66 Profit on sale of Fixed Assets -16.4 -12.8 Dividend Income -0.19 -0.28 Interest Income -32.12 -24.84 Interest Expense 38.07 37.75

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Provision for doubtful debts Provision for reduction in value of an asset 2.35 -1.78

Compensation of VRS Reversal of previous year provisions Unrealised foreign exchange

Operating profit before working capital changes 282.30 232.04

Inventories -71.08 -42.86 Trade receivables 5.12 -17.77 Loans and advances -62.7 72.55 Bank balance -0.88 3.13 Provisions 107.54 31.71 cash from operations 260.30 278.80 taxes paid -49.64 -32.48 NET CASH FROM OPERATING ACTIVITIES (I ) 210.66 246.32

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed asset -191.2 -82.35 Proceeds from sale of fixed asset 20.14 14.64 Sale of Investments 122.82 -43.91 Inter corporate deposits 0 -50 Loans given to subsidaries -37.96 -27.64 Loans repaid by subsidaries 2.27 10.23 Interest Received 32.18 22.33 Dividend Received 0.19 0.28

NET CASH FLOWS FROM INVESTING ACTIVITIES (II) -51.56 -156.42

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of secured loans -0.83 -0.34 Interest Paid -37.66 -37.5 Dividend paid ,inclusive of tax -90.06 -69.55

NET CASH FLOWS FROM FINANCING ACTIVITIES (III) -128.55 -107.39

Net increase in cash and its equivalents (I + II + III ) 30.55 -17.49 Opening cash balance -4.36 13.13

Closing cash balance 26.19 -4.36

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One of the primary techniques of assessing the current financial position of the

companyis:Rationanalysis.

RATIO ANALYSIS

It can be defined as the method of defining relationships among various financial

statement items. It helps to identify trends over time for one company or to compare two

or more companies at one point in time.

The historical trends of these ratios can be used to infer a company’s financial condition

and its attractiveness for potential investors.

Ratios are segregated mainly in four types based on the nature of aspect they are to

compute, viz:-

Liquidity Ratios-which give a picture of a company's short term financial

situation or solvency.

Profitability Ratios- which use margin analysis and show the return on

sales and capital employed.

Turnover Ratios- which use turnover measures to show how efficient a

company is in its operations and use of assets.

Leverage Ratios- which show the extent that debt is used in a company's

capital structure.

In accordance with the nature of our industry and operations of Britannia Industries ltd,

we analyzed various elements of the financial statements and their relationship with a

comparative view of data of four years.

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Ratio

Analysis

Liquidity

Profitability

Leverage

Turnover

Current ratio

Liquid ratio

Absolute liquid ratio

Gross Profit ratio

Net profit ratio

Operating ratio

Return on Assets

Return on Equity

Return on capital

employed

Inventory turnover

Ratio

Debtor turnover ratio

Creditors’ turnover

ratio

Working Capital

turnover ratio

Debt Equity ratio

Debt to Asset ratio

Interest coverage

ratio

Debt service

coverage ratio

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I LIQUIDITY RATIOS

Measure the ability of a company to repay its short-term debts and meet unexpected

cash needs.

i) Current Ratio

The Ratio deals with assessing the liquidity of the firm. It finds out the ability of

the company to pay its short term loans.

The bench mark for Current ratio is 2:1 ,i.e, Currents assets should be twice that

of current liabilities.

It is computed by division of current assets by current liabilities. It is denoted by :-

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

Current ratio (A/B) 1.10 1.08 1.17 1.24

Table 1.Fig 1

1

1.05

1.1

1.15

1.2

1.25

1.3

2009 2010 2011 2012

Current Ratio

Current Ratio

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Current ratio reduced to 1.10 in current year because current assets such as inventories

and debtors reduced far more than combined value of entire current liabilities.Inflation

can be cited as one of the reason.

ii) Liquid Ratio

It may be defined as a relationship between quick/ liquid assets and current

liabilities. This ratio measures the capacity of the firm to pay its current liabilities

immediately.

The bench mark Quick ratio is 1:1.

It is computed by Dividing Liquid assets by current liabilities.

It is denoted as follows:-

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

Current ratio (A/B) 0.46 0.34 0.54 0.69

Table2,Fig2

Liquid assets = Current assets – Stock – prepaid expenses

Liquid Ratio = CA-Stock-Prepaid expenses = Liquid assets

Current liabilities Current liabilities

0

0.2

0.4

0.6

0.8

2009 2010 2011 2012

Liquid Ratio

Liquid Ratio

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Liquid ratio showed a marginal rise in year 2012 as compared to 2010 as inventory at

Britannia industries increased comprehensively from 253 crore to 382 crore. Stock piled

up as there was decrease in demand from the market and company was not able to

create a new market for themselves..

iii) Absolute liquid Ratio

It defines the relationship between Absolute liquid assets and current liabilities.

Also, eliminates accounts receivable (sundry debtors and bills receivables).

The bench mark absolute liquid ratio is ).5:1.

It is computed by Dividing Absolute liquid assets by current liabilities.

It is denoted as follows:-

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

ABSOLUTE LIQUID RATIO

0.05 0.06 0.05 0.10

Table3,Fig3

Absolute Liquid assets = Cash + Bank + short term marketable securities.

Absolute Liquid Ratio = Cash + Bank + short term marketable securities

Current liabilities

0

0.02

0.04

0.06

0.08

0.1

0.12

2009 2010 2011 2012

ABSOLUTE LIQUID RATIO

ABSOLUTE LIQUID RATIO

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Absolute liquid ratio includes cash and marketable securities which saw a decline from

41 crore to 31 crore from 2009 – 2012.There was almost a reduction of 9 % in cash

balanace of the firm from 2009-2012.Reduction in cash can be cited due payment of

interest charges of secured loans, meeting the rise in costs and cost of maintaining the

inventory.

II PROFITABILITY RATIOS

Ratios that focus on how well a firm is performing are termed as such. Profit margins

measure performance with relation to sales. These are computed in the form of

percentage.They are of two orientations :-

Related to sales

i) Gross profit ratio

The gross profit margin ratio measures how efficiently a company uses its

resources.

There is no theoretical benchmark for this ratio as the higher it is, the better.

It is expressed as a percentage of gross profit from net sales. Where

It is denoted as follows:-

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

GROSS PROFIT RATIO

6.02 5.75 4.65 8.54

Gross profit Ratio = GP 100

NET SALES

Net sales

Gross profit= Sales- Cost of goods sold

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Table4,Fig4

As from the profit & Loss account it is evident that sales reduced by 1862 crores

in 2012 after paying excise taxes, due to prevailing inflation in the economy gross

profit also reduced by 34 crores which was the main culprit of downward slope in

GP ratio.

ii) Net profit ratio

NP ratio is used to measure the overall profitability of the firm and hence its

computation is relevant to proprietors.

There is no theoretical benchmark for this ratio as the higher it is, the better.

It defines the percentage of net profit(after tax) over sales of a company

It is denoted as follows:-

comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

NET PROFIT RATIO 3.37 3.07 4.25 6.13

0

2

4

6

8

10

2009 2010 2011 2012

GROSS PROFIT RATIO

GROSS PROFIT RATIO

Net Profit Ratio = Net Profit 100

Net Sales

28

Table5, Fig5

Net profit is calculated after deducting taxes from the available gross profit. Profit

& Loss account showed almost 100 % increase in taxes from 34 crores to 64

crores approx., in 4 years tenure also to add to the woes of the company, net

profit increased marginally by 6 crores which caused downward slope in net profit

ratio trend line .

iii) Operating Ratio

It may be defined as a ratio that shows the efficiency of a company's

management.

There is no theoretical benchmark for this ratio. The lower it is, the better.

It expresses company's operating expenses as a percentage of revenue. Where

It is denoted as follows:-

0

1

2

3

4

5

6

7

2009 2010 2011 2012

NET PROFIT RATIO

NET PROFIT RATIO

Operating Ratio = Operating cost 100

Net sales

Operating costs = COGS + Operating expenses

Operating expenses = Administration and office expenses + Selling and distribution expenses

29

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

OPERATING RATIO 1.1 1.08 1.17 1.24

Table6, Fig6

Operating expenses such as Employee cost which increased by 62%,selling and

administration expenses which shooted up by 64% and misc. expenses

increased by 16 crores which were in almost same proportion i.e 63% as

compared to the net sales hence Britannia industries limited recorded next to

linear trend in their operating ratio.

Related on Investment

i) Return on assets ratio

An indicator of how profitable a company is relative to its total assets.

There is no theoretical benchmark to this ratio; it merely helps in comparison in

companies competing in the same industry.

It indicates as to how profitable a company’s assets are in generating revenue. It

is denoted as follows :-

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2009 2010 2011 2012

OPERATING RATIO

Column1 Column2 OPERATING RATIO

Return On assets = Net profit after tax 100

Total assets

30

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

RETURN ON ASSETS 19.75 16.75 14.11 21.23

Table7,Fig7

Total assets of Britannia Industries limited increased merely by 105 crore,,

where in net sales increased more i.e ..1862 crores, hence there is an upward

trend in the ratio.

ii) Return on Equity

Return on equity measures a company's profitability in accordance with the profit

a company generates with the money shareholders have invested.

There is no benchmark for ROE, the higher it is the better because it implies

profit after tax and preference dividend will be more than the equity shareholder’s

funds/ equity share capital respectively.

It is the amount of net income returned as a percentage of shareholders equity,

denoted as follows:-

Or

0

5

10

15

20

25

2009 2010 2011 2012

RETURN ON ASSETS

RETURN ON ASSETS

Return On equity = Profit after tax &preference dividend 100

Equity share capital

Return On equity = Profit after tax & Interest 100

Equity shareholder’s funds

31

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

RETURN O N EQUITY 781.67 608.16 487.69 755.13

Table8,Fig8

Equity ratio showed a steep rise in 2011 and 2012 as compared to 2009 as profit

generated was more over equity share capital. Return on equity shooted up in 2011 and

2012 as company was able to generate considerable amount of profits compared to

past years.

III TURNOVER RATIOS

These ratios quantify the efficiency of business by computing how fast the assets are

churned in a given time period. It is always calculate in “times”.

i) Inventory turnover ratio

It establishes how many times the inventory is churned and converted into sales

during the accounting period

There is no theoretical benchmark as Higher would imply scarcity of stock and

lesser number would imply excess inventory with the company. Thus, it is relative

to the nature of the business.

0

200

400

600

800

1000

2009 2010 2011 2012

RETURN ON EQUITY

RETURN ON EQUITY

32

It is expressed as cost of goods sold over Average inventory, denoted as

follows:-

Where:-

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

INVENTORY TURN OVER TATIO

13.01 13.57 12.68 12.27

Inventory conversion period is the time taken to convert the inventory into sales.

It is expressed in “number of days “. Denoted as follows

The data can be expressed in the form of following chart

Table9.Fig9 10

15

2009 2010 2011 2012

INVENTORY TURN OVER RATIO

INVENTORY TURN OVER RATIO

Inventory Turnover Ratio = Cost of goods sold 100

Average inventory

COGS= Opening stock +Purchases – Closing stock

Average inventory = Opening + closing stock

2

Inventory conversion period = 365 / ITR days

33

as due to recession during 2009 ,the company’s inventory kept on piling up as there

was decrease in demand as a result manufactured product was not sold hence there

was a dip in inventory turnover ratio. Such was the phenomena in entire FMCG sector.

ii) Creditors’ turnover ratio

It defines how many times in an accounting period are we making payments

to our creditors.

There is no theoretical benchmark for CTR. From company’s point of view,

the higher it is the better and from lender’s point of view the lower it is the

better.

It is expressed as Net credit purchases over Average creditors, denoted as

follows:-

Where:-

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

Average payment period

51 47 52 50

Creditors turnover ratio 7.11 7.77 7.03 7.26

Average payment period is the time taken to estimate the time in which the

company will make payment to its creditors’. It is expressed in “number of

days “. Denoted as follows

The data can be expressed in the form of following chart

Creditors Turnover Ratio = Net credit purchases

Average creditors

Average Creditors = Opening creditors + closing creditors / 2

34

Table10,Fig10

Raw material purchased (assumed credit purchases) in Profit & Loss account increased

to 1254 from 2009-2012 and current liabilities inclusive of creditors increased by 183

crores.

iii) Working capital turnover ratio

It that shows the number of times the working capital is converted into

revenue in an accounting period.

There is no theoretical benchmark, the higher it is the better.

It is expressed as cost of sales or merely sales over Average working capital

of a firm in an accounting period. It is denoted as follows:-

Where:-

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

Working capital turnover ratio

67.53 327.37 92.19 24.93

The data can be expressed in the form of following chart

44

46

48

50

52

54

2012 2011 2010 2009

CREDITORS TURN OVER RATIO

CREDITORS TURN OVERRATIO

35

Table11,Fig11

Britannia industries showed a dismal performance in converting their working capital

into revenue due to high pressure to invest more in current assets so as to keep a pace

with day to day operations of the business. There is a comprehensive decrease which is

a area of concern.

IV LEVERAGE RATIOS

These ratios describe the amount of equity in comparison to debt or the amount

of earnings in comparison to debt. They also help in assessing the risk from the

use of debt capital.

Structural ratios

i) Debt equity Ratio

It indicates the relative proportion of shareholders' equity and debt used to

finance a company's assets.

The benchmark for this ratio is 2:1. It is usually lower in the labour intensive

businesses and higher in case of capital intensive businesses.

It is the relationship of Debt over equity shareholders’ funds in a company.

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

Debt equity ratio 0.84 0.96 1.08 0.03

The data can be expressed in the form of following chart

0

50

100

150

200

250

300

350

2012 2011 2010 2009

WORKING CAPITAL TURN OVER RATIO

WORKING CAPITAL TURNOVER RATIO

36

Table12,Fig12

As the industry was clouded with depression, interest rates were surging like hey grey

.the prudent approach by any company would have been to reduce the dependency on

debt so as to cut the cost of interest payment hence capital was raised with the help of

equity which is much more cheap, as a result Britannia industries limited debt equity

ratio declined in 2012 as compared to 2010.

ii) Debt Asset Ratio

It defines as to how many times Assets of the firm were financed through

debt.

It is expresses relationship of Debt over total assets of a firm in an accounting

period. It is denoted as follows:-

A comparative view of ratios since 2009 till 2012 is given as follows:-

Particulars 2012 2011 2010 2009

Debt Asset ratio 0.46 0.50 0.52 0.03

The data can be expressed in the form of following chart

0

0.2

0.4

0.6

0.8

1

1.2

2012 2011 2010 2009

DEBT EQUITY RATIO

DEBT EQUITY RATIO

37

Table13,Fig13

0

0.1

0.2

0.3

0.4

0.5

0.6

2012 2011 2010 2009

DEBT ASSET RATIO

DEBT ASSET RATIO

38

CASH FLOW ANALYSIS

The cash flow statement, also known as the funds flow statement, shows the changes

in the balance sheet & this breaks it down to the operating, investing & financing

activities of the company.

The purpose of the cash flow statement is:-

1. It provides information about the company’s liquidity & solvency.

2. It provides information on the changes in assets, liabilities & equity.

3. It also provides information on the probability of future cash flows

OPERATING ACTIVITIES

In the comparison of last two years we saw that the profit before tax (PBT) rose to Rs.

252.37 crores (in 2011-12) from Rs. 198.06 crores (in 2010-11). Non-cash expenses

have increased and the non-cash incomes have also increased, which have in turn

affected the increase in operating profits before working capital changes from Rs.

232.04 to 282.30 crores.

INVESTING ACTIVITIES

More fixed assets have been purchased; also more loans have been given to

subsidiaries. Sales of fixed assets and investments have increased that is cash inflow

occurred. Thus, cash used in investing has fallen from Rs. 156.42 to Rs.51.56 crores.

FINANCING ACTIVITIES

The company has re-paid the secured loans, interest & the dividend inclusive of tax.

Thus, cash has been used in the financing activities from Rs. 107.39 to Rs. 128.55

crores.

In the end, the net increase in cash & cash equivalents is Rs. 30.55 crores in 2011-12,

as compared to Rs. -17.49 crores in 2010-11. Thus, the opening balance, from Rs. -

4.36 crores, has become Rs. 26.19 crores.

Chapter III

39

“COMMON SIZE FINANCIAL STATEMENT ANALYSIS And

COMPARATIVE FINANCIAL STATEMENT ANALYSIS”

Introduction:-

Common Size Financial Statements

The Common Size Financial Statements are used for reporting the monetary

purposes & also for the decision making process. These are also beneficial for investors

who want to invest & cannot decide between two companies. Due to different sizes of

companies, wrong comparisons can be made by the investors & this is one such

limitation. These statements are used by investors to overcome the limitation in which

comparisons can be made between two unrelated companies. This statement removes

the bias between two companies & the investor can easily decide on where to invest, by

comparing the companies small or large. The statements also allow the company to

compare its statements of different periods, so as to check their performance in the

current accounting-period. In the common size financial statements, the figures used

are in the form of percentage. A base figure is fixed & this determines the figures in the

statement.

The financial statements are divided as:-

1. Common Size Balance Sheet

2. Common Size Income Statement

Comparative Financial Statement

Financial statement is a tool of financial statement analysis that depicts change in each

item of the financial statement in both absolute and percentage term, talking the item in

preceding accounting period as base.

40

Comparative Balance Sheet

A comparative balance sheet of an enterprise presents side-by-side information about

assets, liabilities, and shareholders' equity as of multiple points in time i.e. two or more

dates. It ascertains increase and decrease in items stated in the balance sheet. For

example, a comparative balance sheet could present the balance sheet as of the end of

each year for the past three years.

. Objectives of Comparative Balance Sheet

Comparative Balance Sheet is an important tool of financial analysis. It compares the

financial position of the firm on two different dates and throws light on the changes and

progress made in respect of each item of assets, liabilities and capital.

Its emphasis is on change rather than being on status and thus helps to determine the

future trends of assets, liabilities and capital which helps in the planning process.

Comparative Income Statement

A Comparative Income statement shows the operating results for a number of

accounting periods so that changes in data in terms of money and percentage from one

period to another may be known.

The comparative income statement shows the increase or decrease in cost of goods

sold, gross profit, operating profit, gross sales, net sales, operating expenses, non-

operating expenses etc.

Objectives of Comparative Income Statement

1. To analyze the income and expenditure for two or more years.

2. To analyze the increase or decrease in the income and expenditure in terms of

rupee and also the percentage.

3. To review the business operations of the last year and its future repercussions.

Analysis

The common size financial statement analysis and the comparative financial statements

of Britannia Industries Limited is shown below. The financial analysis of the last four

41

years has been worked upon i.e. year 2008-09, 2009-10, 2010-11 & 2011-12.Through

the following analysis, we can understand the performance of the company in the last

four years. As cited above, these statements help an investor to look into the

performance & then can compare these figures with the competitors of Britannia

Industries, such as ITC, Parle etc. Accordingly, after the comparisons are made, the

investment can be made to the right company.

42

Common Size Financial Statement Analysis

COMMON SIZE BALANCE SHEET

Common Size Balance Sheet Analysis

amount in INR ,Crores

Mar-12 Mar-11 Mar-10 Mar-09

SOURCES OF FUNDS:

Share Capital 2.50% 2.71% 2.89% 2.81%

Reserves 51.98% 48.42% 45.09% 94.23%

TOTAL SHAREHOLDERS FUND 54.48% 51.12% 47.98% 97.04%

Secured Loans 42.63% 46.19% 49.42% 0.26%

Unsecured Loans 2.89% 2.68% 2.60% 2.70%

TOTAL DEBT 45.52% 48.88% 52.02% 2.96%

TOTAL LIABILITIES 100.00%

100.00%

100.00%

100.00%

APPLICATION OF FUNDS :

Gross Block 70.99% 68.45% 66.33% 60.20%

less :Accumulated Depriciation 31.26% 33.43% 32.25% 27.50%

NET BLOCK 39.73% 35.02% 34.09% 32.70%

Capital Work In Progress 8.36% 1.35% 1.21% 0.71%

Investments 44.96% 62.85% 59.41% 49.79%

CURRENT ASSET,LOANS & ADVANCES

Inventories 40.07% 35.89% 32.49% 29.85%

Debtors 5.46% 6.60% 4.78% 5.84%

Cash & Bank 3.24% 3.32% 2.83% 4.80%

Loans & Advances 19.08% 8.14% 25.15% 22.98%

TOTAL CURRENT ASSETS 67.86% 53.95% 65.25% 63.47%

43

CURRENT LIABILITIES & PROVISIONS

Current Liabilities 46.97% 41.31% 37.64% 31.28%

Provisions 13.08% 11.15% 23.11% 17.36% TOTAL CURRENT LIABILITIES & PROVISIONS 60.05% 52.45% 60.75% 48.64%

NET CURRENT ASSETS 7.81% 1.50% 4.50% 14.84%

Miscellaneous exp. Not written off 0.00% 0.00% 0.00% 3.14%

Deffered Tax Assets 2.48% 2.64% 3.78% 1.68%

Deffered Tax Liability 3.34% 3.36% 2.98% 2.86%

NET DEFFERED TAX -0.86% -0.72% 0.80% -1.17%

TOTAL ASSETS 100.00%

100.00%

100.00%

100.00%

Sources of Funds – The sources of funds include:-

1. Share Capital

2. Reserves

3. Secured Loans

4. Unsecured Loans

The Share Capital for the 4 years has been the same at 23.89 crores. But the common

size statement is different for the same span. This is because the base factor has been

fixed as the TOTAL LIABILITIES& these have been varying for the different financial

periods. Thus, the percent of share capital has fallen from 2.81% in 2008-09 to 2.50% in

2011-12.

The Reserves of the company has increased from 51.12%, in 2010-11, to 54.48%, in

2011-12. In the 2008-09 period, the company had huge reserves of 94.23%, but this

decreased to 45.09% due to the investment activities of the company in the period

2009-10.

The Secured Loans in the period 2008-09 were at 0.26%. But this figure rose to

49.42% in the following period as the company secured long term loans by lease. By

repayment, the company’s secured loans have come down to 42.63% in the period

2011-12. The company takes majority of its debts through secure loans such as through

bonds & debentures, long-term maturities of finance lease obligations etc.

44

The Unsecured Loans of the company have increased from 2.68% to 2.89% from the

period of 2010-11 to 2011-12. From the figures, we can see that the company takes

less of the unsecured loans i.e. long term loans from banks.

TOTAL LIABILITIES = SHARE CAPITAL + RESERVES (TOTAL SHAREHOLDERS

FUNDS) + SECURED LOANS + UNSECURED LOANS (TOTAL DEBT)

Application of Funds- The application of funds includes:-

1. Net Block

2. Capital Work in Progress

3. Total Current Assets

4. Total Current Liabilities & Provisions

5. Net Current Assets

6. Net Deferred Tax

The TOTAL ASSETS have been fixed as the base factor.

Net Block–The Net Block includes the Gross Block, less the accumulated depreciation.

Gross Block tells us about the total assets that the company owns.The Gross Block

consists of both the Tangible asset & the Intangible asset. The Accumulated

Depreciation is subtracted from the Gross Block to give the Net Block.

NET BLOCK = GROSS BLOCK – ACCUMULATED DEPRECIATION

The Net Block of the company has increased over the four year period, to 39.73% in the

period 2011-12. This means that the company has acquired some assets in the

accounting period.

Capital Work in Progress – The capital work in progress has increased from 1.35% to

8.36%. This means that the capital employed for material that has entered the

production process has increased. This is not good & companies should keep the

Capital WIP as low as possible.

Investments – The investments have gone down from 62.85% to 44.96%. Thus, the

company has made lesser investments than the earlier period.

Total Current Assets – The Total Current Assets have gone up from 53.95% to

67.86%. This is due to the increase in the Inventory & the Loans & Advances

paid.There is no significant change in the cash at bank, but the debtors have decreased

from 6.60% to 5.46%.

45

Total Current Liabilities & Provisions– The current liabilities & provisions have gone

up from 52.45% to 60.05%. There has been a rise in the current liabilities i.e. from

41.31% to 46.97%. The provisions have also gone up from 11.15% to 13.08%.

Net Current Assets – The net current assets is the difference between the total current

assets & the total current liabilities & provisions.The net current assets have risen

sharply from 1.50% to 7.81% in the period 2011-12.

NET CURRENT ASSETS = TOTAL CURRENT ASSETS – TOTAL CURRENT

LIABILITIES & PROVISIONS

46

COMMON SIZE INCOME STATEMENT

Common Size Income Statement

amount in INR ,Crores

2012 March

2011 March

2010 March

2009 March

INCOME :

Sales Turnover

Excise Duty

Net Sales 100.00% 100.00% 100.00% 100.00%

Other Income 1.18% 1.16% 1.49% 2.72%

Stock Adjustment 0.10% 0.42% 0.63% 0.63%

TOTAL INCOME 101.27% 101.58% 102.12% 103.35%

EXPENDITURE :

Raw Materials 64.02% 65.87% 64.20% 62.01%

Power & Fuel Cost 0.77% 0.70% 0.66% 0.69%

Employee Cost 2.93% 2.84% 2.94% 2.89%

Other manufacturing expenses 9.05% 8.52% 9.22% 9.30%

Selling & Administration expenses 14.58% 14.55% 16.40% 14.91%

Miscellaneous Expenses 3.14% 2.45% 3.82% 4.48%

less : Pre operative expenses capitalised 0.00% 0.00% 0.00% 0.00%

TOTAL EXPENDITURE 94.48% 94.94% 97.23% 94.29%

OPERATING PROFIT 6.79% 6.64% 4.89% 9.06%

Interest 0.77% 0.89% 0.24% 0.51%

GROSS PROFIT 6.02% 5.75% 4.65% 8.54%

Depriciation 0.95% 1.06% 1.10% 1.08%

PROFIT BEFORE TAX 5.07% 4.69% 3.55% 7.47%

Tax 1.28% 0.95% 0.61% 1.10%

Fringe Benefit Tax 0.00% 0.00% 0.00% 0.17%

Deffered Tax 0.04% 0.30% -0.49% 0.40%

47

REPORTED NET PROFIT 3.75% 3.44% 3.42% 5.80%

Extraordinary Items 0.38% 0.37% -0.83% -0.34%

NET PROFIT: 3.37% 3.07% 4.25% 6.13%

The Net Sales has been set as the base figure for the Common Size Income Statement.

Thus, the figures depicted in the common size statement are shown as 100%. But, the

actual amount of the Net Sales has varied throughout the different financial periods.

TOTAL INCOME – The total income includes the Net Sales, the other income& stock

adjustment. The sales turnover, less the excise duty gives us the Net Sales.The total

income has decreased from 101.58% to 101.27%, mainly due to the decrease in the

stock adjustment of period 2011-12.

TOTAL EXPENDITURE–The total expenditure has decreased marginally from 94.94%

to 94.48%. The total expenditure includes the raw materials, power & fuel, employee,

other manufacturing costs, selling & administration expense and miscellaneous

expenses.

Profit Before Tax–The profit before tax has increased from 4.69% to 5.07%. The profit

before tax includes the operating profit less the interest (Gross Profit) & the

depreciation.

Net Profit – The net profit has also increased from 3.07% to 3.37%. The net profit is

calculated by subtracting the PBT with tax, fringe benefit tax, deferred tax &

extraordinary items. Thus the company has had an increase in the NET PROFIT from

the previous year.

Comparative Financial Statement Analysis

Comparative Balance Sheet

A. Sources Of Funds

1. Total Shareholders Fund

The total shareholder fund is the total of Share capital and the reserves.

If we see the last four years annual reports of Britannia Industries Ltd. The

share capital price is constant so there is no change in it.

But when we see the comparative balance sheet , the reserve’s value is

increasing this can be seen. This is because in the column B (comparison of

48

yrs. 2009-10 & 2010-11) the rise in reserves was 14.78% and in column A

(comparison of yrs. 20010-11 & 2011-12) it rose to 16.08% increase in

reserves. This shows each financial year major portions of profits is being

transferred to the general reserves so to have a strengthen funds (those can

be used for the business expansion or any other activity which helps in

growth of business).

Particulars 20010-11 & 2011-12( Column A) % Change

2009-10 & 2010-11 (Column B) % change

Share Capital 0% 0%

Reserves 16.08% 14.78%

Total shareholder Funds 15.23% 13.89%

2. Total Debt

In column B of the comparative balance sheet the change in the total debts is

seen to be 0.43%. During this comparison the unsecured loan from banks is

raised at the increase rate of 10.09% and in column A the increase rate in

unsecured loan is being raised to 16.43%.

And the company is repaying back the secured loans taken by the company.

Particulars 20010-11 & 2011-12( Column A) % Change

2009-10 & 2010-11 (Column B) % change

Secured Loans -0.21% -0.08%

Unsecured loans 16.43% 10.09%

Total Debt 0.71% 0.43%

B. Applications Of Funds

1. Net Block (Gross Block – Accumulated depreciation)

In the column B comparison we can see a positive change of 7.89% in the net

block this is because the company added buildings, leasehold land, plant and

machinery , data processing equipment and furniture & fittings to its net block.

In the very next year when we see column A the rate of increase in net block

is 24.82%. This shows again in the year 2011-12 the company purchased the

fixed assets like buildings , plant and machinery , other fixed assets like motor

vehicle etc.

Particulars 20010-11 & 2011-12( Column A) % Change

2009-10 & 2010-11 (Column B) % change

Gross Block 14.12% 8.35%

less :Accumulated Depriciation 2.90% 8.83%

NET BLOCK 24.82% 7.89%

49

1. Capital Work in Progress & Investments

It is seen that in column B the Capital work I progress Is 17.35%. But it

changed to 581.45% , indicating that lots of capital amount is stuck in the

operations process. So it is advisable for the company to take care of it.

The company invests in it’s subsidiary firms and other companies share. But

the investment shows a decline in each couple of yrs. Column C shows

%change of 15.96 , then column B shows 11.08% change in investments and

then -21.30% change in investments. Indicating that Company has utilized its

investments on the Capital WIP and its not good. It has to raise the money in

investments.

Particulars 20010-11 & 2011-12( Column A) % Change

2009-10 & 2010-11 (Column B) % change

Capital Work In Progress 581.45% 17.35%

Investments -21.30% 11.08%

2. Net Current Assets (Total Current Assets – Total Current liabilities and

provisions)

The column B comparison shows a great fall in % change in the loans and

advances and also the provisions and rise in Debtors , inventories , banks &

cash and also the current liabilities. But the fall of % in loans and advances is

very high making the net current assets a – ve % change figure. But the

company wisely converted the –ve change in % under B to a positive %

change , this is all coz of positive increase in provisions and more over a

positive increase in loans and advances and it was more than the –VE fall

under column B.

Particulars 20010-11 & 2011-12( Column A) % Change

2009-10 & 2010-11 (Column B) % change

CURRENT ASSET,LOANS & ADVANCES

Inventories 22.84% 15.97%

Debtors -8.94% 45.00%

Cash & Bank 7.62% 23.07%

Loans & Advances 157.79%

TOTAL CURRENT ASSETS 38.39% -13.18%

50

CURRENT LIABILITIES & PROVISIONS

Current Liabilities 25.10% 15.21%

Provisions 29.13% -49.35%

TOTAL CURRENT LIABILITIES & PROVISIONS 25.96% -9.34%

NET CURRENT ASSETS 473.31% -65.03%

AT end From column B to Column A we can see the total of both the

Liabilities side and the assets side has shown a increase which shows

company has done a good business in the last 4 yrs.

Particulars 20010-11 & 2011-12( Column A) % Change

2009-10 & 2010-11 (Column B) % change

Total Liabilities 8.13% 6.89%

Total Assets 10.03% 5%

Comparative Income

Statement

A. Total Income

1. Net Sales (sales turnover – excise duty)

The change in net sales from column Q to Column P has declined,

due to the rise in excise duty and also the fall in turnover.

Particulars 20010-11 & 011-12( Column P) % Change

2009-10 & 2010-11 (Column Q) % change

Sales Turnover 18.26% 24.20%

Excise Duty 81.65% 39.21%

Net Sales 17.77% 24.09%

2. Other Income

It has seen a positive change from a negative % change in column Q

but could make much positive impact on total income with the net sales

(23.44% to 17.42%) because of a great negative fall in stock adjustments

from -16.21% to -73.23%.

51

Particulars 20010-11 & 011-12( Column P) % Change

2009-10 & 2010-11 (Column Q) % change

Other Income 19.64% -3.76%

Stock Adjustment -73.23% -16.21%

TOTAL INCOME 17.42% 23.44%

B. Total Expenditure

The company has managed well to sow a fall in the expenditure fares, as column

Q shows 21.17% and column P shows 17.20%change in it. This is coz operating

costs were managed very well by the company & non-operating costs has risen

up but at a very less %change.

Particulars 20010-11 & 011-12( Column P) % Change

2009-10 & 2010-11 (Column Q) % change

Raw Materials 14.46% 27.33%

Power & Fuel Cost 29.44% 32.04%

Employee Cost 21.63% 20.00%

Other manufacturing expenses 25.02% 14.72%

Selling & Administration expenses 17.96% 10.09%

Miscellaneous Expenses 50.54% -20.18%

less : Pre operative expenses capitalised 0% 0%

Total Expenditure 17.20% 21.17%

C. Profit Before Tax

Due to the high positive % change in the payment of interests and depreciation

the operatin profit had an adverse effect in turn showing a fall in profit before tax

over the yrs. of comparison from 64.15% to 27.42%.

Particulars 20010-11 & 011-12( Column P) % Change

2009-10 & 2010-11 (Column Q) % change

OPERATING PROFIT 20.46% 68.50%

Interest 0.85% 359.81%

GROSS PROFIT 23.51% 53.38%

Depriciation 6.12% 18.78%

PROFIT BEFORE TAX 27.42% 64.15%

D. Net Profit [Profit before tax-(tax + fringe benefits + deferred tax + extra ordinary

items)

A geat fall in % change in deferred tax has resulted in a rise In net profit over the

last period (last couple of yrs.) after the periods of fall in the net profits.

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Particulars 20010-11 & 011-12( Column P) % Change

2009-10 & 2010-11 (Column Q) % change

Tax 59.47% 93.28%

Fringe Benefit Tax 0.00% 0.00%

Deffered Tax -85.02% -177.60%

REPORTED NET PROFIT 28.53% 24.70%

Extraordinary Items 21.19% -155.31%

NET PROFIT: 29.41% -10.33%

SHARE HOLDING PATTERN AT BRITTANIA

INDUSTRIES LIMITED - 2012

(Hyper link)

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CHAPTER V-Conclusion

Britannia is one of the leading brands of the country and it has maintained this position

for a very long period of time.

To maintain such efficiency, a company needs strict norms and the focus to achieve

growth despite the various challenges it faces.

Britannia faced various challenges in its rise to the top of the market and to position

itself as the leader in the market. The challenges comprised of rising commodity

inflation, cost challenges and wastages in the supply chain.

The company now has a strategy and it focuses on the 3 thrust areas so as to drive

growth and they are revenue management, cost management and innovation.

Britannia has also maintained adequate stock of the seasonal products and has

provided them at adequate intervals so that there is adequate supply.

The following are some objectives of the company-

Britannia stands committed to the belief that every child has the right to grow &

develop.

Focus of improving technology to counter hunger & malnutrition in India.

Improving the accessibility of products even to people living in remote villages &

slums.

Britannia has initiated a public- private partnership named as GAIN & Naandi

foundation to develop fortified foods.

The company’s biscuit brands outpaced the market growth during the period 2010-2012

which shows the robustness of the brand and its products.

The company has maintained a lead over its competitors which include-

Parle products private ltd.

ITC ltd.

Surya Food & Agro ltd.

Cadbury India ltd.

Bonn Nutrients Private ltd.

Mrs. Bector’s Food Specialties ltd.

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Learning from the term paper

We have studied the financial reports of Britannia industries ltd. & have inferred that the

company is growing in a robust manner every year with the focus on innovation, cost

and revenue management.

This is reflected in the share prices as well as they have shown an upward trend

through the past 2-3 yrs.

Some learnings are-

Practical implementation of theoretical principals of accounting.

Synthesizing complex data into useful information.

Deriving relationship between variables from ratio analysis.

Holistically learnt how to analyze the company reports.

Cohesive Team work was the essence of the assignment.