Itc financial statement analysis

itc financial analysis

1. A PROJECT REPORT
ON

ITC Limited
One of India’s Most Admired and Valuable Companies

2. INTRODUCTION
Itc limited is a public conglomerate company head quartered in Kolkata .The Company is
currently headed by YogeshChanderDeveshwar. It employs over 26,000 people at more
than 60 location.
Rated by BCG amongst Top 10 consumer goods companies in the world in terms of total
shareholder returns (TSR) Suring 2005-2009.
Oneoftheforemostintheprivatesectorintermsof:
–Sustainedvaluecreation(BT-SternStewartsurvey)
–Operatingprofits
–CashProfits
Itc is the o nlyIndianFMCGCompanytofeatureinForbes 2000 List ,
Acomprehensiverankingofworld’sbiggestcompaniesmeasuredbyacompositeofsales,profits,ass
ets&marketvalue.
ITC’s rankingamongst all listed private sector cos.
 PBT: No. 6
 PAT: No. 5
 Market Capitalization: No. 3
ITC Performance Track Record
In Rs crs. 1995-96 2012-13 17-yr Cagr 95-96 to 12-13
Net Revenue
PBDIT
PBIT
PBT
PAT
Capital Employed
ROCE %
2,536
584
536
452
261
1,886
28.4
29,606
11,566
10,771
10,684
7,418
23,569
45.7
15.6%
19.2%
19.3%
20.4%
21.8%
16.0%

Market Capitalization
Total Shareholder Returns %
5,571 244246 24.9%
26.4%
Sensex (CAGR 95-96 to 12-13): 10.7%
Rapid Scale up of FMCG businesses…

3. ITC’s Vision
Makeasignificantandgrowingcontributiontowards:
 Mitigating societal challenges
 Enhancing shareholder rewards
By:
Creating multiple drivers of growth while sustaining leadership in tobacco and
Focusing on triple bottom line performance
Enlargecontributiontothenations
Financial capital
Environmental capital
Social capital
Creating world-class brands for Indian Consumers

4. Financial Statement Analysis

Financial analysis is the process of identifying the financial strengths and weaknesses of the
firm by property establishing relationships between the item of the balance sheet and the
profit and loss account.

Users of Financial Analysis

Trade creditors
Lenders
Investors
Management

Financial Ratio Analysis
A Liquidity Ratioprovides information on a company's ability to meet its short−term,
immediate obligations.
A Profitability Ratioprovides information on the amount of income from each dollar
ofsales.
An Activity Ratiorelates information on a company's ability to manage its resources
(that is, its assets) efficiently.
A Financial Leverage Ratioprovides information on the degree of a company's
fixedfinancing obligations and its ability to satisfy these financing obligations.
A Market Ratio describes the company's financial condition in terms of amounts
pershare of stock.


Liquidity Ratio

5. Itc have high liquidity ratios, the higher the margin of safety that the company possess to
meet its current liabilities. Liquidity ratios greater than 1 indicate that the company is in good
financial health and it is less likely fall into financial difficulties. Seen in all the years above
2013, 2012, 2011.
Current ratio indicates Itc's ability to meet short-term debt obligations. The current ratio
measures whether or not a firm has enough resources to pay its debts over the next 12 month.
Profitability Ratio

An increase in profit margin compared to the previous period's margin signals an
improvement in both operational efficiency and profitability means the company improved its
profits and efficiency. A margin higher than those of other companies or higher than the
industry average means Itc business performed better than those companies during that
period.
Activity Ratio

6. A high debtor turnover ratio implies either that the company operates on a cash basis or that
its extension of credit and collection of accounts receivable are efficient. Also, a high ratio
reflects a short lapse of time between sales and the collection of cash, while a low number
means collection takes longer.
A low inventory turnover ratio can be seen because of rescission but it is very well aligned
with FMCG industry average.
Leverage Ratio

A very high interest cover suggest that the company is not capitalizing on the relatively
cheaper source of finance (i.e. debt) and in such instances an increase in gearing ratio may
actually add value to the enterprise.
Interest coverage is an indication of the margin of safety it does not run the risk of non-
payment of interest cost which could potentially threaten its solvency.

Market Ratio

7. PE Ratios 33.2
Current Share
price
311.65

Generally, stocks that are expected to grow earnings will have a higher P/E, Itc companies
with high growth have a higher ratio. Itc with the higher P/E is said to be overvalued by the
market.
The share price should reflect a firm’s future value creation potential, greater value creation
can indicate greater future dividends from the company. A higher P/E ratio should reflect
greater expected future gains because of perceived growth opportunities and/or some
competitive advantages and/or lesser risk, but at the same time it indicates that the share price
is relatively more expensive.
Du Point Analysis
DuPont analysis tells us that ROE is affected by three things:
Operating efficiency, which is measured by profit margin
Asset use efficiency, which is measured by total asset turnover
Financial leverage, which is measured by the equity multiplier

Mar'13 Mar'12
ROA (%) 23.55 22.65
ROE (%) 36.21 35.58
ROCE (%) 52.45 51.66

The return on capital employed is another measure of the returns that thebusiness generates.
This is expressed as the ratio between the profit beforeinterest and taxes (PBIT) to the Capital
Employed (Loans and Owner’s Fund) in the business. The ROCE is increased to 52.45%
from 51.66% signifies that the company is gettinggood return out of its investment decisions.
The return on Total Assets is yet another method of calculating the return of the company.
This is calculated by taking the ratio between the PBIT (Profitbefore Interest and Taxes) to
the Total Assets of the company.Earning power of the company, i.e. 23.55%is quiet good and
the company isdoing well.








Comparative Balance Sheet Statement

8. Particulars MAR'12 MAR'11
(₹ Cr.) (₹ Cr.) Absolute
change
%Change
EQUITY AND LIABILITIES
Share Capital 781.84 773.81 8.03 1.04%
Share Warrants &Outstanding’s
Total Reserves 18,010.05 15,179.46 2830.59 18.65%
Shareholder's Funds 18,791.89 15,953.27 2838.62 17.79%
Long-Term Borrowings 0 0 0 0.00%
Secured Loans 0 0 0 0.00%
Unsecured Loans 77.32 86.58 -9.26 -10.70%
Deferred Tax Assets / Liabilities 872.72 801.85 70.87 8.84%
Other Long Term Liabilities 15.52 20.82 -5.3 -25.46%
Long Term Trade Payables 0 0 0 0.00%
Long Term Provisions 107.12 93.82 13.3 14.18%
Total Non-Current Liabilities 1,072.68 1,003.07 69.61 6.94%
Current Liabilities
Trade Payables 1,424.84 1,395.31 29.53 2.12%
Other Current Liabilities 3,371.27 3,067.77 303.5 9.89%
Short Term Borrowings 1.77 1.94 -0.17 -8.76%
Short Term Provisions 4,303.95 4,012.46 291.49 7.26%
Total Current Liabilities 9,101.83 8,477.48 624.35 7.36%
Total Liabilities 28,966.40 25,433.82 3532.58 13.89%
ASSETS
Non-Current Assets 0 0 0 0.00%
Gross Block 14,144.35 12,765.86 1378.49 10.80%
Less: Accumulated Depreciation 5,045.16 4,420.75 624.41 14.12%
Less: Impairment of Assets 0 0 0 0.00%
Net Block 9,099.19 8,345.11 754.08 9.04%
Lease Adjustment A/c 0 0 0 0.00%
Capital Work in Progress 2,269.26 1,322.60 946.66 71.58%
Intangible assets under development 7.49 10.8 -3.31 -30.65%
Pre-operative Expenses pending 0 0 0 0.00%
Assets in transit 0 0 0 0.00%
Non-Current Investments 1,953.28 1,563.30 389.98 24.95%
Long Term Loans & Advances 1,193.61 1,146.47 47.14 4.11%
Other Non-Current Assets 0 0 0 0.00%
Total Non-Current Assets 14,522.83 12,388.28 2134.55 17.23%
Current Assets Loans & Advances
Currents Investments 4,363.31 3,991.32 371.99 9.32%
Inventories 5,637.83 5,269.17 368.66 7.00%
Sundry Debtors 986.02 885.1 100.92 11.40%
Cash and Bank 2,818.93 2,243.24 575.69 25.66%
Other Current Assets 136.89 93.26 43.63 46.78%
Short Term Loans and Advances 500.59 563.45 -62.86 -11.16%
Total Current Assets 14,443.57 13,045.54 1398.03 10.72%
Net Current Assets (Including Current
Investments)
5,341.74 4,568.06 773.68 16.94%
Total Current Assets Excluding Current 10,080.26 9,054.22 1026.04 11.33%

9. Investments
Miscellaneous Expenses not written off 0 0 0 0.00%
Total Assets 28,966.40 25,433.82 3532.58 13.89%
Contingent Liabilities 287.08 255.17 31.91 12.51%
Total Debt 89.12 99.2 -10.08 -10.16%
Book Value (in ₹) 23.97 20.55 3.42 16.64%
Adjusted Book Value (in ₹) 23.97 20.55 3.42 16.64%

Comparative Income statement
Parameter MAR'13 MAR'12 Absolute
change
Change
%
(₹ Cr.) (₹ Cr.)
Gross Sales 42,105.51 35,220.89 6,884.62 19.55%
Less :Inter divisional transfers 0 0 0.00 0.00%
Less: Sales Returns 0 0 0.00 0.00%
Less: Excise 12,204.24 10,073.43 2,130.81 21.15%
Net Sales 29,901.27 25,147.46 4,753.81 18.90%
EXPENDITURE: 0.00
Increase/Decrease in Stock -246.35 -65.59 -180.76 -275.59%
Raw Materials Consumed 12,312.13 9,697.02 2,615.11 26.97%
Power & Fuel Cost 550.11 453.02 97.09 21.43%
Employee Cost 1,387.01 1,257.62 129.39 10.29%
Other Manufacturing Expenses 1,157.02 1,053.51 103.51 9.83%
General and Administration Expenses 1,234.39 1,049.68 184.71 17.60%
Selling and Distribution Expenses 2,088.32 1,954.62 133.70 6.84%
Miscellaneous Expenses 800.09 878.92 -78.83 -8.97%
Expenses Capitalised 0 0 0.00 0.00%
Total Expenditure 19,282.72 16,278.80 3,003.92 18.45%
PBIDT (Excl OI) 10,618.55 8,868.66 1,749.89 19.73%
Other Income 967.1 825.34 141.76 17.18%
Operating Profit 11,585.65 9,694.00 1,891.65 19.51%
Interest 105.91 97.96 7.95 8.12%
PBDT 11,479.74 9,596.04 1,883.70 19.63%
Depreciation 795.56 698.51 97.05 13.89%
Profit Before Taxation & Exceptional
Items
10,684.18 8,897.53 1,786.65 20.08%
Exceptional Income / Expenses 0 0 0.00 0.00%
Profit Before Tax 10,684.18 8,897.53 1,786.65 20.08%
Provision for Tax 3,265.79 2,735.16 530.63 19.40%
PAT 7,418.39 6,162.37 1,256.02 20.38%
Extraordinary Items 0 0 0.00 0.00%
Adj to Profit After Tax 0 0 0.00 0.00%
Profit Balance B/F 1,972.59 548.67 1,423.92 259.52%
Appropriations 9,390.98 6,711.04 2,679.94 39.93%
Equity Dividend (%) 525 450 75.00 16.67%
Earnings Per Share (in ₹) 9.39 7.88 1.51 19.11%
Book Value (in ₹) 28.14 23.97 4.17 17.41%

10. Common size Balance Sheet Statement
Particulars Mar'12 Mar'13

EQUITY AND LIABILITIES
Share Capital 2.699127 3.042445
Share Warrants &Outstanding’s 0 0
Total Reserves 62.17566 59.68219
Shareholder's Funds 64.87479 62.72463
Long-Term Borrowings 0 0
Secured Loans 0 0
Unsecured Loans 0.26693 0.340413
Deferred Tax Assets / Liabilities 3.01287 3.152692
Other Long Term Liabilities 0.053579 0.08186
Long Term Trade Payables 0 0
Long Term Provisions 0.369808 0.368879
Total Non-Current Liabilities 3.703187 3.943843
Current Liabilities 0 0
Trade Payables 4.918941 5.486042
Other Current Liabilities 11.63855 12.06177
Short Term Borrowings 0.006111 0.007628
Short Term Provisions 14.85842 15.77608
Total Current Liabilities 31.42203 33.33152
Total Liabilities 100 100
ASSETS
Non-Current Assets 0
Gross Block 48.8302 50.19246
Less: Accumulated Depreciation 17.41728 17.38138
Less: Impairment of Assets 0 0
Net Block 31.41291 32.81108
Lease Adjustment A/c 0 0
Capital Work in Progress 7.834111 5.200163
Intangible assets under development 0.025858 0.042463
Pre-operative Expenses pending 0 0
Assets in transit 0 0
Non-Current Investments 6.743261 6.14654
Long Term Loans & Advances 4.120671 4.507659
Other Non-Current Assets 0 0
Total Non-Current Assets 50.13681 48.7079
Current Assets Loans & Advances 0 0
Currents Investments 15.06335 15.69296
Inventories 19.46334 20.71718
Sundry Debtors 3.404013 3.480012
Cash and Bank 9.731724 8.81991
Other Current Assets 0.366677
Short Term Loans and Advances 1.728175 2.215357
Total Current Assets 49.86319 51.2921
Net Current Assets (Including Current
Investments)
18.44116 17.96057

11. Total Current Assets Excluding
Current Investments
34.79984 35.59914
Miscellaneous Expenses not written off 0 0
Total Assets 100 100
Contingent Liabilities
Total Debt
Book Value (in ₹)
Adjusted Book Value (in ₹)

Common size Income Statement
Particulars Mar'13 Mar'12

Gross Sales 100.00 100.00
Less :Inter divisional transfers 0 0
Less: Sales Returns 0 0
Less: Excise 28.9849 28.60073
Net Sales 71.0151 71.39927
EXPENDITURE: 0 0
Increase/Decrease in Stock -0.58508 -0.18622
Raw Materials Consumed 29.24114 27.53201
Power & Fuel Cost 1.306504 1.286225
Employee Cost 3.294129 3.570665
Other Manufacturing Expenses 2.747906 2.991151
General and Administration Expenses 2.931659 2.980277
Selling and Distribution Expenses 4.959731 5.549604
Miscellaneous Expenses 1.900203 2.495451
Expenses Capitalised 0 0
Total Expenditure 45.79619 46.21916
PBIDT (Excl OI) 25.21891 25.18011
Other Income 2.296849 2.343325
Operating Profit 27.51576 27.52344
Interest 0.251535 0.27813
PBDT 27.26422 27.24531
Depreciation 1.889444 1.983226
Profit Before Taxation & Exceptional
Items
25.37478 25.26208
Exceptional Income / Expenses 0 0
Profit Before Tax 25.37478 25.26208
Provision for Tax 7.756206 7.765732
PAT 17.61857 17.49635
Extraordinary Items 0 0
Adj to Profit After Tax 0 0
Profit Balance B/F 4.684874 1.557797
Appropriations 22.30345 19.05415
Equity Dividend (%) 1.246868 1.277651
Earnings Per Share (in ₹) 0.022301 0.022373
Book Value (in ₹) 0.066832 0.068056

12. Trend Analysis
From the analysis we can see that co. isgrowing at steady rate and remarkablepoints are:
1. We can see below that company’s capital is increased by 105.33%, this is because of
issue of bonus shares in the year 2010-2011. This shows that the company’s owned
fund is increasing. Reserve and Surplus is constantly increasing which shows that the
company’s accumulated
2. Profits is increasing at a growing rate. It shows that company is making more profit.
3. By analysing sources of fund we can state that, company is more dependent on
owners fund rather than borrowed fund.
4. Investment is also growing at increasing rate. In last 4 years it has increased by
89.28%.
5. Current asset is increasing by 45.09%. This is due to increase in cash and bank
balance and other current assets.
6. Net income and expenses are increasing by 51.02% and 47.38% respectively. This
shows that the income of the co. is 3.64% higher than its expenses.

14. Cross – sectional analysis


CAPITAL
EMPLOYED
NET
WORTH
NET
SALES
PBIT PBT PAT DIVIDEND
ITC 21661 22288 29,901.27 11,566.21 10,684.18 7,418.39 4,148.46
Hindustan
Unilever
2,674 2,674 25,810.21 5,219.05 4,957.88 3,796.67 3,999.99
Nestle India 1798 1798 8,326.55 1,856.37 1,552.62 1,067.93 467.62
United Spirits 6391 6391 8,585.10 1,211.99 483.99 320.8 32.7
Godrej
Consumer
Products
2761 2761 3,581.02 680.72 632.96 510.94 170.16