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FM PROJECT

ON

“FINANCIAL STATEMENT ANALYSIS


OF
ASIAN PAINTS”

SUBMITTED BY:

ASHWINI 09BSHYD0191
AVNISH 09BSHYD0202
NEETISH 09BSHYD0491
SWATI 09BSHYD0906
RHEA 09BSHYD0656
Section-A

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ICFAI BUSINESS SCHOOL (IBS HYDERABAD)

AUTHORIZATION

This report is submitted as a part of Financial Management (Semester II) of MBA program at
ICFAI Business School, Hyderabad.

Date: December 25, 2009

Authors

ASHWINI
AVNISH
NEETISH
SWATI
RHEA

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Contents
COMMON SIZE ANALYSIS:..........................................................................................4
Q.1 What is my inference from Common size analysis of Asian paints and
Berger paints?.....................................................................................................4
INFERENCE FROM FUND FLOW STATEMENT:..............................................................4
Schedule of changes in working capital:..........................................................4
Funds Flow Statement of ASIAN paints:...........................................................4
Q.2: What is my inference from the fund flow statement?..................................4
RATIO ANALYSIS:........................................................................................................4
Q.3 What is the liquidity position of the company?.............................................4
Q.4 What is the inference on the capital structure of the firm?...........................4
Q.5 What is the inference from the profitability ratios of the firm?.....................4
BALANCE SHEET (Asian Paints)..................................................................................4
PROFIT and LOSS Statement (Asian paints)...............................................................4
BALANCE SHEET (Berger Paints)................................................................................4
PROFIT and LOSS Statement (Berger paints).............................................................4
REFERENCES..............................................................................................................4

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COMMON SIZE ANALYSIS:
Common Size Analysis of the Financials of Asian Paints
& Berger Paints India
As of March 2009
Asian Berger Paints
Paints India
Liabilities:
8.2706766
Equity Capital 92 12.67314533
Share Application Money 0 1.967447684
Preference Capital 0 0
86.099710
Reserves 28 69.62976212
Revaluation Reserves 0 0.216617977
94.37038
Shareholder's Funds 698 84.27035513
2.1202662
Secured loans 62 15.50110296
3.5093467
Unsecured loans 61 0.011923925
5.629613
Total Debt 023 15.51302689
Total funds employed 100 100

Assets:
96.306994
Gross Block 55 64.12559618
42.596744
Accumulated Depreciation 15 31.8700318
53.71025
Net block 04 32.25556439
14.196040
CWIP 56 3.740063593
20.242981
Investments 31 5.86645469
47.139925
Inventory(Total) 5 52.9272655
26.817617
Sundry Debtors 44 35.84658188
11.041077
Cash & Bank Balance 46 4.761526232
16.069704
Loans & advances 08 12.24165342

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0.0181071
Deposits 95 1.571939587
101.0864
Total current assets 317 107.3489666
73.211698
Current Liabilities 97 43.69833068
16.024004
Provisions 97 5.512718601
Total current liabilities & 89.23570
Provisions 394 49.21104928
Net current assets/Working 11.85072
Capital 774 58.13791733
Misc. Expenses not w/o 0 0
Total assets 100 100

Q.1 What is my inference from Common size analysis of Asian paints and
Berger paints?
ANS:

1. Long term debt is higher for Berger paints.


2. Current liabilities and provisions is higher in case of Asian paints.
3. We can also observe that Asian paints is on a investment spree which
is indicated by the fact that its investment and capital work in
progress is at the higher end.
4. Berger paints has a higher working capital as compared to Asian
paints because its current liabilities are less as compared to Asian
paints.

INFERENCE FROM FUND FLOW STATEMENT:

Schedule of changes in working capital:


Effect on working
2008 2009 capital
Increas Decreas
Current Assets e e
Inventories 538.97 546.71 7.74
Sundry Debtors 251.9 311.02 59.12
Cash and cash balance 41.33 128.05 86.72
Loans and advances 203 186.37 16.63
Fixed deposits 0.02 0.21 0.19

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Total(A) 1035.22 1172.36
Current Liabilities
Liabilities 850.79 849.08 1.71
Provisions 166.49 185.84 19.35
Total(B) 1017.28 1034.92
Decrease in working
capital(A-B) 17.94 137.44
Increase in working Capital 119.5 119.5
137.44 137.44 155.48 155.48

Funds Flow Statement of ASIAN paints:


Sources Amount Uses Amount
Fund from
operation+Depricia
tion 419.51 Dividend 196.39
Investment 188.11 secured loans 12.11
Assets purchase 179.04
CWIP 28.39
Misc 72.19
Increase in NWC 119.5
607.62 607.62

Q.2: What is my inference from the fund flow statement?


Ans: The firm has raised no fresh capital from equity or debt for financing its
working capital requirements. It has solely utilized its internal sources being
that of profits from operations and investments and also managed to give
away dividends worth 196.39 cr. to its equity shareholders. This is
representative of the fact that it is self sufficient in terms of capital
requirements.

RATIO ANALYSIS:

Q.3 What is the liquidity position of the company?


Ans: Liquidity position of the company can be deciphered using the currenty
ratio,quick ratio and inventory turnover ratio.
Asian
paints Berger Paints
Current Ratio 1.13 2.18

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Quick ratio 0.6 1.05
Inventory
Turnover Ratio 7.3 5.3

• The current ratio and quick ratio of Asian paints is not very healthy in
comparison with Berger paints.
• However this could be negligible in assessing the actual liquidity of the
firm because it has a leadership position in the industry.
• Asian paints also has a higher inventory turnover ratio which indicates
that its inventory is moving faster compared to Berger paints. This
requires an efficient sales and distribution network. This is supported
by the fact that the income statement shows that the firm has very
high sales and administration expenses.

Q.4 What is the inference on the capital structure of the firm?


Ans:

Asian
paints Berger Paints
D/E 0.68 1.22
D/A 0.05 0.14
Interest
Coverage Ratio 35.23 8.65

Asian paints has a very little debt component in its capital structure as compared to
berger paints, this means that it has lower fixed liabilities and also high cost of
capital. In order to reduce the overall cost of capital Asian paints can deploy more
leverage in its capital structure because it also has a high turnover year on year
and there is a bleak chance of business risk.

Interest Coverage ratio in case of Asian paints is far greater than Berger Paints, this
indicates that its ability to handle financial burdens in terms of interest payments
better than Berger paints.

Q.5 What is the inference from the profitability ratios of the firm?
Ans.

Asian
paints Berger Paints
Gross profit
Margin Ratio 0.136 0.1012
Net profit Margin 0.08 0.05

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Ratio
Return On Equity 0.33 0.21
Earning Power 0.4782 0.2455
Asset Turnover
Ratio 4.3 3.12

• Gross profit margin shows the efficiency of the production operation, The
efficiency of asian paints is higher because of their large scale production
and continous improvement due to large scale investment in R&D and
manpower training.
• Net Profit margin shows the earnings left for shareholders as a percentage of
net sales.
• ROE measures the profitability of equity funds invested in the firm. ROE is
higher is case of Asian paints, from a stockholders perspective it is returns
are higher on investing in Asian paints. In spite of being low on debt, their
return on equity is higher because net profit is much greater.
• Earning power is a measure of operating business performance irrespective
of interest and tax payments. Earning power is also higher for Asian Paints.
• Asset turnover indicates the amount of asset that the firm uses to generate
sales. This means that Asian Paints’ ability to generate sales through its
assets is greater than Berger paints

BALANCE SHEET (Asian Paints)


Balance Sheet of ------------------- in Rs. Cr.
Asian Paints -------------------
Mar Mar Mar Mar Mar

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'05 '06 '07 '08 '09

Sources Of Funds
Total Share Capital 95.92 95.92 95.92 95.92 95.92
Equity Share Capital 95.92 95.92 95.92 95.92 95.92
Share Application Money 0 0 0 0 0
Preference Share Capital 0 0 0 0 0
526.3 648.1 832.5 998.5
Reserves 476.3 6 6 8 5
Revaluation Reserves 0 0 0 0 0
572.2 622.2 744.0 1094.
Networth 2 8 8 928.5 47
Secured Loans 28.37 31.88 66.9 36.7 24.59
Unsecured Loans 36.68 40.7 40.7 40.7 40.7
Total Debt 65.05 72.58 107.6 77.4 65.29
637.2 694.8 851.6 1005. 1159.
Total Liabilities 7 6 8 9 76
Application Of Funds
736.1 937.8 1116.
Gross Block 712.7 4 806.2 9 93
401.4 435.7 471.2 509.0 494.0
Less: Accum. Depreciation 7 1 9 6 2
311.2 300.4 334.9 428.8 622.9
Net Block 3 3 1 3 1
136.2 164.6
Capital Work in Progress 12.53 5.87 16.31 5 4
258.4 274.5 334.3 422.8 234.7
Investments 3 5 9 8 7
330.7 348.7 434.0 538.9 546.7
Inventories 9 9 7 7 1
148.9 185.1 235.9 311.0
Sundry Debtors 6 1 6 251.9 2
128.0
Cash and Bank Balance 20.78 28.17 42.47 41.33 5
500.5 562.0 985.7
Total Current Assets 3 7 712.5 832.2 8
123.8 156.6 186.3
Loans and Advances 96.67 7 9 203 7
Fixed Deposits 0.26 0.21 0.02 0.02 0.21
597.4 686.1 869.2 1035. 1172.
Total CA, Loans & Advances 6 5 1 22 36
Deffered Credit 0 0 0 0 0
430.6 489.1 850.7 849.0
Current Liabilities 8 1 649 9 8
107.2 166.4 185.8
Provisions 111.7 9 54.15 9 4

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542.3 703.1 1017. 1034.
Total CL & Provisions 8 596.4 5 28 92
166.0 137.4
Net Current Assets 55.08 89.75 6 17.94 4
Miscellaneous Expenses 0 24.26 0 0 0
637.2 694.8 851.6 1005. 1159.
Total Assets 7 6 7 9 76

PROFIT and LOSS Statement (Asian paints)


-------------
------ in
Rs. Cr.
Profit & Loss account of -------------
Asian Paints ------
Mar Mar Mar Mar
Mar '05 '06 '07 '08 '09
Income
2,807. 3,389. 4,092. 5,042.
Sales Turnover 2,366.15 06 79 36 40
359.2 436.4 496.8 532.2
Excise Duty 313.87 8 2 3 8
2,447. 2,953. 3,595. 4,510.
Net Sales 2,052.28 78 37 53 12
Other Income 22.54 -9.4 34.38 52.29 23.86
Stock Adjustments 74.92 -1.48 71.5 33.9 0.61
2,436. 3,059. 3,681. 4,534.
Total Income 2,149.74 90 25 72 59
Expenditure
1,363. 1,733. 2,003. 2,641.
Raw Materials 1,200.33 82 28 37 09
Power & Fuel Cost 25.44 27.3 33.3 35.86 45.78
129.4 195.5 239.7
Employee Cost 118.35 3 155.6 4 7
Other Manufacturing
Expenses 23.9 25.75 31.53 39.26 40.45
Selling and Admin 518.7 620.7 771.6 939.1
Expenses 438.36 2 7 6 6
Miscellaneous Expenses 16.09 15.25 14.11 14.25 10.55
Preoperative Exp
Capitalised 0 0 0 0 0
2,080. 2,588. 3,059. 3,916.
Total Expenses 1,822.47 27 59 94 80

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366.0 436.2 569.4 593.9
Operating Profit 304.73 3 8 9 3
356.6 470.6 621.7 617.7
PBDIT 327.27 3 6 8 9
Interest 6.58 8.16 15.34 13.46 15.91
348.4 455.3 608.3 601.8
PBDT 320.69 7 2 2 8
Depreciation 47.61 45.53 45.42 43.77 57.15
Other Written Off 2.29 0 0 0 0
302.9 564.5 544.7
Profit Before Tax 270.79 4 409.9 5 3
Extra-ordinary items -0.33 0.91 2.12 -2.69 3.6
303.8 412.0 561.8 548.3
PBT (Post Extra-ord Items) 270.46 5 2 6 3
117.0 139.9 186.6 185.9
Tax 96.98 8 9 6 7
187.8 272.0 362.3
Reported Net Profit 173.48 1 5 375.2 6
716.4 855.3 1,056. 1,275.
Total Value Addition 622.14 3 1 57 71
Preference Dividend 0 0 0 0 0
163.0 167.8
Equity Dividend 91.13 119.9 124.7 6 6
Corporate Dividend Tax 12.54 16.82 17.77 27.72 28.53
Per share data
(annualised)
Shares in issue (lakhs) 959.2 959.2 959.2 959.2 959.2
Earning Per Share (Rs) 18.09 19.58 28.36 39.12 37.78
Equity Dividend (%) 95 125 130 170 175
Book Value (Rs) 59.66 64.88 77.57 96.8 114.1

BALANCE SHEET (Berger Paints)


Balance Sheet of Berger ------------------- in Rs. Cr.
Paints India -------------------
Mar Mar Mar Mar Mar
'05 '06 '07 '08 '09

Sources Of Funds
Total Share Capital 39.86 39.86 63.77 63.77 63.77
Equity Share Capital 39.86 39.86 63.77 63.77 63.77
Share Application Money 0 0 0 0 9.9
Preference Share Capital 0 0 0 0 0

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163.4 188.2 210.6 350.3
Reserves 4 7 9 284 7
Revaluation Reserves 1.66 1.52 1.38 1.24 1.09
204.9 229.6 275.8 349.0 425.1
Networth 6 5 4 1 3
Secured Loans 6.68 7.62 86.03 99.84 78
Unsecured Loans 57.73 35.15 29.28 21.08 0.06
115.3 120.9
Total Debt 64.41 42.77 1 2 78.06
269.3 272.4 391.1 469.9 503.1
Total Liabilities 7 2 5 3 9
Application Of Funds
226.2 244.9 275.2 322.6
Gross Block 188.9 6 4 2 8
108.9 124.1 141.5 160.3
Less: Accum. Depreciation 92.47 6 4 1 7
133.7 162.3
Net Block 96.43 117.3 120.8 1 1
Capital Work in Progress 11.57 11.05 13.71 24.71 18.82
Investments 10.91 12.82 12.82 21.85 29.52
166.8 199.5 252.0 266.3
Inventories 4 8 7 269.1 3
109.5 143.5 158.4 180.3
Sundry Debtors 84.65 1 2 4 8
Cash and Bank Balance 21.76 25.14 21.5 39.51 23.96
273.2 334.2 417.0 467.0 470.6
Total Current Assets 5 3 9 5 7
Loans and Advances 26.77 52.37 48.02 61.24 61.6
Fixed Deposits 0.21 0.19 0.24 0.39 7.91
300.2 386.7 465.3 528.6 540.1
Total CA, Loans & Advances 3 9 5 8 8
Deffered Credit 0 0 0 0 0
134.1 209.1 206.4 220.1 219.8
Current Liabilities 8 8 8 8 9
Provisions 15.91 46.53 15.12 18.82 27.74
150.0 255.7 247.6
Total CL & Provisions 9 1 221.6 239 3
150.1 131.0 243.7 289.6 292.5
Net Current Assets 4 8 5 8 5
Miscellaneous Expenses 0.33 0.18 0.08 0 0
269.3 272.4 391.1 469.9
Total Assets 8 3 6 5 503.2

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PROFIT and LOSS Statement (Berger paints)
-------------
------ in
Rs. Cr.
Profit & Loss account of -------------
Berger Paints India ------
Mar Mar Mar Mar
Mar '05 '06 '07 '08 '09
Income
1,117. 1,322. 1,521. 1,688.
Sales Turnover 948.17 63 18 80 66
137.6
Excise Duty 122.99 6 162.3 182.4 177.7
979.9 1,159. 1,339. 1,510.
Net Sales 825.18 7 88 40 96
Other Income 6.39 14.17 14.49 15.22 25.64
Stock Adjustments 24.63 13.86 33.36 12.81 14.16
1,008. 1,207. 1,367. 1,550.
Total Income 856.2 00 73 43 76
Expenditure
643.4 791.5 886.6 1,027.
Raw Materials 556.69 4 1 5 64
Power & Fuel Cost 10.1 12.32 13.2 15.05 17.18
Employee Cost 46.61 49.23 58.06 68.19 77.21
Other Manufacturing Expenses 16.1 15.8 17.02 19.81 20.5
152.4 173.7 200.0 224.8
Selling and Admin Expenses 123.62 7 6 2 4
Miscellaneous Expenses 16.81 18.99 23.92 27.44 30.33
892.2 1,077. 1,217. 1,397.
Total Expenses 769.93 5 47 16 70
101.5 115.7 135.0 127.4
Operating Profit 79.88 8 7 5 2
115.7 130.2 150.2 153.0
PBDIT 86.27 5 6 7 6
Interest 4.01 6.57 10.11 12.78 15.33
109.1 120.1 137.4 137.7
PBDT 82.26 8 5 9 3
Depreciation 15.69 17.39 17.8 18.65 20.4
Other Written Off 0.29 0.15 0.11 0.08 0
102.2 118.7 117.3
Profit Before Tax 66.28 91.64 4 6 3
Extra-ordinary items 0.4 0 0 0 5.42
102.2 118.7 122.7
PBT (Post Extra-ord Items) 66.68 91.64 4 6 5
Tax 14.56 21.35 19.17 26.7 34

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Reported Net Profit 52.12 70.29 83.07 92.08 88.76
248.7 285.9 330.5 370.0
Total Value Addition 213.23 9 6 1 6
Equity Dividend 27.9 39.86 31.89 15.94 19.13
Corporate Dividend Tax 3.81 5.59 4.85 2.71 3.25
1,992. 3,188. 3,188. 3,188.
Shares in issue (lakhs) 1,992.94 90 72 72 72
Earning Per Share (Rs) 2.62 3.53 2.61 2.89 2.78
Equity Dividend (%) 70 100 50 25 30
Book Value (Rs) 10.2 11.45 8.61 10.91 12.99

REFERENCES

Books:
IM PANDEY

R.P Rustagi

Sites:
www.bseindia.com

www.moneycontrol.com

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