How the disclosure requirements of Schedule III is useful for

General Investors

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Flow of Presentation

• Investment

• Investor

• Investment Options

• Fundamental Analysis

• Financial Statements

• Schedule III (The Companies Act, 2013)

• Use of Financial Statements for Decision Making

• A comparative study: Grasim Ind & Century Textiles & Ind

• Conclusion

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What is an Investment?

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Who is an Investor?

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Various Investment Options

LOW RISKLOW RISK

HIGH RISKHIGH RISK

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Fundamental Analysis

You aren't really investing if you aren't performing fundamental analysis

There are an endless number of investment strategies that are very different from each other, yet almost all use the fundamentals

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Fundamental Analysis

• Fundamental analysis is the cornerstone of investing

• Qualitative and Quantitative Analysis

• Involves looking at revenue, expenses, assets, liabilities and

all the other financial aspects of a company

• To gain insight on a company's future performance

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Financial Statements

• Balance Sheet– FS that summarizes a company's assets, liabilities and shareholders'

equity at a specific point in time

• Statement of Profit and Loss– FS that summarizes the revenues, costs and expenses incurred

during a specific period of time - usually a fiscal quarter or year

• Cash Flow Statement– The document provides aggregate data regarding all cash inflows a

company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter

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Schedule IIIThe Companies Act, 2013

• The Companies Act, 2013

• General instruction for preparation of Balance Sheet and

Statement of Profit and Loss of a company

• Structured Presentation

• Increased transparency

• Easy comparison of the figures with other peer companies

internationally

• Qualitative improvement in presentation and disclosure

requirement of the financial statement

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Part – 1 Balance Sheet

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Part – 2 Statement of Profit & Loss

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Use of Financial Statements to review the financial condition of a business

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GRASIM INDUSTRIES

CENTURY TEXTILES AND INDUSTRIES

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Details of the Companies

Grasim Industries

• Face Value: Rs.10/-• BSE: 500300• NSE: GRASIM• ISIN: INE047A01013• Sector: Diversified• CMP: 3422.65• 52 Week High: 3755• 52 Week Low: 2431.70

Century Textiles & Industries

• Face Value: Rs.10/-• BSE: 500040• NSE: CENTURYTEX• ISIN: INE055A01016• Sector: Diversified• CMP: 529.30• 52 Week High: 650.50• 52 Week Low: 246

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EXTRACTS OF BALANCE SHEET

'--in Rs. Cr.--

 CENTURY TEXTILES AND

INDUSTRIES GRASIM INDUSTRIES  Mar 14 Mar 13 Mar 12 Mar 14 Mar 13 Mar 12EQUITY AND LIABILITIES                         Shareholders’ funds 1,747.40 1,804.95 1,898.92 10,827.58 10,121.86 9,099.39              Non-Current Liabilities 3,718.33 3,945.60 2,579.51 1,523.35 1,381.18 857.74              Current Liabilities 3,825.83 2,511.12 2,813.68 1,526.72 1,563.04 1,078.94              Total 9,291.56 8,261.67 7,292.11 13,877.65 13,066.08 11,036.07              ASSETS                         Non Current Assets 7,030.17 6,328.75 5,595.12 10,253.89 9,455.31 7,114.19              Current Assets 2,261.39 1,932.92 1,696.99 3,623.76 3,610.77 3,921.88              Total 9,291.56 8,261.67 7,292.11 13,877.65 13,066.08 11,036.07

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EXTRACTS OF P&L STATEMENT

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Related Party Disclosures (Century Tex)

• RELATED PARTY INFORMATION• Relationships :

– (a) Where significant influence exists :• (i) M/s Pilani Investment and Industries Corporation Limited• (ii) M/s Kesoram Insurance Broking Services Limited• (iii) M/s Vasavadatta Services Limited• (iv) M/s Industry House Limited• (v) M/s Bander Coal Company Private Limited

– (b) Key Management Personnel :• Shri B.L. Jain (Whole-time Director)

– (c) Other Related Parties :• (1) Shri B.K. Birla• (2) M/s Kesoram Industries Limited• (3) M/s Century Enka Limited• (4) M/s Jayshree Tea & Industries Limited

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Related Party Disclosures (Grasim Ind)

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Let’s apply some basic fundamental analysis ratios

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Price-Earnings Ratio - P/E Ratio

• A valuation ratio of a company's current share price

compared to its per-share earnings.

• A high P/E suggests that investors are expecting higher

earnings growth in the future compared to companies with

a lower P/E

• Calculated as:

– Market Value per Share / Earnings per Share (EPS)

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P/E Ratio (contd..)

Grasim Industries

• CMP – 3422.65• EPS (*TTM) – 84.46• P/E Ratio – 3422.65/84.46

P/E Ratio – 40.52

Century Textiles & Industries

• CMP – 529.30• EPS (*TTM) – 3.39• P/E Ratio – 529.30/3.39

P/E Ratio – 156.14

Industry P/E 17.17

*TTM – Trailing Twelve Months

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Profitability Ratios

• A class of financial metrics that are used to assess a

business's ability to generate earnings as compared to its

expenses and other relevant costs incurred during a specific

period of time.

• For most of these ratios, having a higher value relative to a

competitor's ratio or the same ratio from a previous period

is indicative that the company is doing well.

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Profitability Ratios (contd..)

CENTURY TEX GRASIM IND

Profitability Ratios Mar '14 Mar '13 Mar '14 Mar '13

Operating Profit Margin(%) 10.75 9.71 15.37 20.7

Profit Before Interest And Tax Margin(%) 5.41 3.71 10.71 16.32

Gross Profit Margin(%) 5.43 3.72 11.45 17.67

Net Profit Margin(%) 0.04 -0.57 14.96 21.54

Return On Capital Employed(%) 6.28 4.03 8.58 12.07

Return On Net Worth(%) 0.15 -1.91 8.27 12.11

Return on Long Term Funds(%) 8.57 5.02 8.67 12.28

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Liquidity & Solvency Ratio

CENTURY TEX GRASIM IND

Liquidity And Solvency Ratios Mar '14 Mar '13 Mar '14 Mar '13

Current Ratio 0.48

0.55

1.36

1.14

Quick Ratio 0.42

0.50

0.89

0.88

Debt Equity Ratio 2.56

2.42

0.10

0.12

Long Term Debt Equity Ratio 1.61

1.74

0.09

0.10

Solvency refers to an enterprise's capacity to meet its long-term financial commitments. Liquidity refers to an enterprise’s ability to pay short-term obligations

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Conclusion

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