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CHAPTER 5DATA AND DATE ANALYSIS

TABLE 5.1AGROCHEMICALS: PROFITABILITY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012AIMCO PESTICIDES LTD. (524288) : GROUP-C

Operating Profit Margin(%) 6.68 7.66 14.78 11.15 10.6 2.3 -19.5 -9.39 1.94 -6.81 -0.97Profit Before Interest And Tax Margin(%) 1.57 2.94 11.22 7.85 7.43 -1.71 -24.91 -14.05 -0.52 -8.13 -1.39

Gross Profit Margin(%) 4.28 -6.06 5.04 -0.08 7.45 -9.53 -25.61 -14.14 -0.53 -8.19 -1.4Net Profit Margin(%) -5.56 -9.76 1.62 -1.64 -5.67 -14.94 -36.92 -24.57 -8.51 -12.24 -4.3

ATUL LTD. (500027) : GROUP-BOperating Profit Margin(%) 12.24 16.29 9.33 8.42 9.06 8.37 7.22 13.16 12 12.16 11.32

Profit Before Interest And Tax Margin(%) 10.33 11.63 4.67 4.44 5.52 4.97 4.27 10.39 8.76 9.57 8.85Gross Profit Margin(%) 8.90 12.09 6.57 6.07 6.6 6.16 4.3 10.48 8.86 9.65 8.89Net Profit Margin(%) 5.45 5.55 0.37 2.31 10.07 2.78 3.4 2.98 4.39 6.21 4.88

BAYER CROPSCIENCE LTD. (506285) : GROUP-AOperating Profit Margin(%) 12.1 15.23 9.22 10.69 12.48 6.79 7.97 11.76 12.88 10.76 11.36

Profit Before Interest And Tax Margin(%) 9.84 11.74 5.62 7.16 9.47 4.56 5.81 10.04 11.28 9.2 9.73Gross Profit Margin(%) 9.73 13.91 8.76 12.31 13.28 11.32 5.85 10.13 11.35 9.24 9.86Net Profit Margin(%) 2.65 4.01 3.58 5.32 7.17 7.00 3.94 6.31 7.33 6.12 6.04

PAUSHAK LTD. (532742) : GROUP-COperating Profit Margin(%) -9.57 -13.01 -19.94 -14.06 30.65 20.18 13.5 22.18 19.25 18.68 14.71

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Profit Before Interest And Tax Margin(%) -10.1 -12.12 -16.54 -16.96 25.00 15.07 7.22 16.83 13.23 12.84 9.47Gross Profit Margin(%) -8.4 -8.62 -4.28 -7.59 32.22 20.5 7.25 17.03 13.52 13.41 9.79Net Profit Margin(%) -10.0 -9.94 1.49 -8.2 22.42 11.37 14.12 12.24 8.27 12.01 9.92

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012PI INDUSTRIES LTD. (523642) : GROUP-B

Operating Profit Margin(%) 7.50 7.94 9.6 8.86 7.56 8.33 7.8 12.26 13.92 14.57 14.77Profit Before Interest And Tax Margin(%) 4.13 4.89 6.92 6.54 5.14 5.87 5.45 10.09 11.75 12.64 12.91

Gross Profit Margin(%) 5.12 4.64 7.1 7.4 5.46 5.55 5.46 10.11 11.77 12.65 12.98Net Profit Margin(%) 0.33 0.24 2.45 3.12 1.29 1.24 1.5 4.46 6.87 8.1 10.47

SOCRUS BIO SCIENCES LTD. (524719) : GROUP-COperating Profit Margin(%) -0.66 -0.70 -0.75 -0.1 -0.60 10.00 10.67 9.87 11.32 18.9 21.44

Profit Before Interest And Tax Margin(%) -1.78 -0.40 -1.59 -0.35 -0.56 4.00 7.56 10.10 13.93 18.49 21.24Gross Profit Margin(%) 2.00 4.35 1.31 0.35 11.46 8.78 9.89 12.50 14.67 18.6 21.27Net Profit Margin(%) 0.45 0.24 -2.94 0.05 -19.4 -16.07 3.82 0.35 2.59 20.8 16.95

UNITED PHOSPHORUS LTD (512070) : GROUP-AOperating Profit Margin(%) 21.34 27.91 23.4 19.54 21.02 15.84 6.85 13.7 12.74 14.3 13.33

Profit Before Interest And Tax Margin(%) 13.78 13.92 17.16 13.69 14.55 8.48 2.27 9.55 8.48 10.12 8.6Gross Profit Margin(%) 13.56 17.2 15.3 14.7 17.46 14.75 2.47 10.09 8.74 10.53 8.92Net Profit Margin(%) 1.53 1.54 6.25 6.18 8.7 7.37 5.54 6 6.51 4.97 6.72

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CHART 5.1

CHART 5.2

158

CHART 5.3

CHART 5.4

159

CHART 5.5

CHART 5.6

CHART 5.7

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5.1 PROFITABILITY ANALYSIS OF AGROCHEMICALINDUSTRY:5.1.1 Operating Profit Margin:The purpose to include this ratio for the study is to examine the debt-contractingcapacity of a company. It is found that in most of the companies, the operating profitmargin ratio is higher when compared with other profitability ratios. This implies thatin the Agrochemical industry, on an average the proportion of a company's revenueleft over after paying for operating costs of production such as wages, raw materials,etc. is high. In Group A, B and C companies the average operating profit ratios are14.14, 10.65 and 6.22(%) respectively and the average Debt-Equity ratios are 0.82,1.09 and 3.14. Group A companies have the highest operating profit margin ratio andboth Group A and Group B companies can increase the amount of debt whereasGroup C companies have the lowest operating profit margin ratio and still havecourted a much greater amount of leverage.

5.1.2 Profit Before Interest and Tax Margin:This ratio is a fundamental base to calculate the interest coverage efficiency of therespective company. Thus this ratio is used in the study. This ratio reflects all profitsbefore taking into account interest payments and income taxes. PBIT margin nulls theeffects of the different capital structures and tax rates used by different companies.The ratio is fairly consistent in Group A Agrochemical companies except for the years2007 and 2008 which show a dip in the ratio. In Group A, B and C companies theaverage Profit before Interest and Tax ratios are 9.77, 7.76 and 2.93 (%) respectivelyand Debt-Equity ratios are 0.82, 1.09 and 3.14. Group A companies have the highestprofit ratio and both Group A and Group B companies have a choice of opting forgreater amount of debt to accelerate their profitability whereas Group C companieshave the lowest profit ratio and in that context it has a higher amount of leverage.

5.1.3 Gross Profit Margin:This ratio is a barometer of how efficiently a business unit carries out itsmanufacturing activities. It was the highest, on an average, in the year 2006 for all theagrochemical companies. But in the recent years it can be seen to be on the lowerside. In Group A, B and C companies the average Gross Profit ratios are 11.32, 8.14and 3.28 (%) respectively and Debt-Equity ratios are 0.82, 1.09 and 3.14. Group A

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companies have the highest profit margin ratio and both Group A and Group Bcompanies have the potential to opt for more leverage and use greater profits toservice greater amount of debt for higher profitability whereas Group C companieshave a much greater amount of leverage even though the profit ratio is low.

5.1.4 Net Profit Margin:This ratio can be considered as one of the parameters to sustain existing investors andto attract potential investors. This ratio is showing net figure of profit available forequity shareholders or for re-investment in business. In Group A, B and C companiesthe average Net Profit ratios are 5.56, 4.13 and -1.23(%) respectively and Debt-Equity ratios are 0.82, 1.09 and 3.14. Group A companies have reported the highestprofit margin ratio and as such Group A and Group B companies can use theaugmented profitability to service greater amount of debt which can lead to greaterprofits, whereas Group C companies have the lowest profit ratio (negative) and stillhave opted for a much greater amount of leverage.

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TABLE 5.2AGROCHEMICALS: LIQUIDITY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012AIMCO PESTICIDES LTD. (524288) : GROUP-C

Current Ratio 1.1 1.13 1.1 1.07 2.09 1.91 4.97 1.37 1.25 2.63 0.89Quick Ratio 3.0 3.15 3.06 2.55 3.82 2.62 3.12 3.05 2.01 1.6 0.6

ATUL LTD. (500027) : GROUP-BCurrent Ratio 1.42 1.10 1.18 1.00 0.97 1.04 1.05 1.49 1.44 1.02 1.83Quick Ratio 1.56 1.42 1.42 1.29 1.27 1.50 1.51 1.44 1.21 1.33 1.19

BAYER CROPSCIENCE LTD. (506285) : GROUP-ACurrent Ratio 0.97 1.45 1.44 1.63 1.6 1.60 1.10 1.34 1.33 1.25 1.5Quick Ratio 0.86 1.28 1.06 1.16 1.33 1.33 0.75 0.7 0.81 0.85 1.01

PAUSHAK LTD. (532742) : GROUP-CCurrent Ratio 6.78 7.33 12.54 1.38 1.73 0.64 0.71 0.75 0.86 1.94 1.23Quick Ratio 6.89 7.33 12.22 3.90 4.40 0.45 0.65 0.58 0.84 1.10 1.15

PI INDUSTRIES LTD. (523642) : GROUP-BCurrent Ratio 0.73 0.74 0.88 0.87 0.73 0.71 0.65 0.68 0.99 0.79 0.98Quick Ratio 0.56 0.59 0.52 0.71 0.78 1.00 1.15 0.98 0.87 1.10 0.98

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SOCRUS BIO SCIENCES LTD. (524719) : GROUP-CCurrent Ratio 17.6 17.73 36.38 7.08 38.17 176.97 2787.71 335.49 618.08 324.31 300.33Quick Ratio 7.66 8.22 20.78 5.15 34.46 158.88 2522.81 105.8 322.56 221.47 188.79

UNITED PHOSPHORUS LTD (512070) : GROUP-ACurrent Ratio 0.8 0.9 1.52 2.03 1.77 2.38 2.59 2.76 3.39 2.32 2.37Quick Ratio 0.24 0.34 1.58 1.77 1.75 2.6 2.46 2.99 3.35 2.95 2.57

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CHART 5.8

CHART 5.9

165

CHART 5.10

CHART 5.11

166

CHART 5.12

CHART 5.13

CHART 5.14

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5.2 LIQUIDITY ANALYSIS OF AGROCHEMICAL INDUSTRY:5.2.1 Current Ratio:It is found that in majority of the companies, the current ratio was at its peak in theyear 2008 and at its lowest in the year 2002. This shows the level of fund sufficiencyor insufficiency in those years. In Group A companies, however, the current ratio hasbeen fairly high to show them up to be properly liquid. In Group A, B and Ccompanies the average Current ratios are 1.77, 1.01 and 156.33 respectively andDebt-Equity ratios are 0.82, 1.09 and 3.14. Group C companies have the highestDebt-Equity ratio and yet their average Current Ratio is the highest. Hence thesecompanies have sufficient liquidity and the debt raised has not adversely affected thecompanies liquidity position. The Group A and B companies have slightly lowerCurrent ratio and also have lower Total Debt to Owners Fund ratios.

5.2.2 Quick Ratio:This ratio is a reflection of how much quick liquidity does a firm enjoy. In Group A, Band C companies the average Current ratios are 1.62, 1.11 and 121.57respectivelyand Debt-Equity ratios are 0.82, 1.09 and 3.14. Group C companies have the highestdebt ratio and yet their average Quick Ratio is the highest. Hence these companieshave sufficient liquidity and it follows that the debt raised has not hampered thecompanies liquidity position. The Group A and B companies have comparativelymuch lower Quick ratio and also have lower Debt-Equity ratio.

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TABLE 5.3AGROCHEMICALS: SOLVENCY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012AIMCO PESTICIDES LTD. (524288) : GROUP-C

Interest Cover 0.35 0.35 1.15 0.73 0.63 -0.09 -0.99 0.84 0.53 0.23 -0.16Financial Charges Coverage Ratio 0.56 0.58 1.26 0.88 0.76 -0.20 -0.72 0.52 0.25 1.01 -0.02

Debt Equity Ratio 1.37 1.26 1.47 1.71 1.33 1.54 2.30 3.30 4.60 5.17 5.17Long Term Debt Equity Ratio 0.47 0.53 0.59 0.69 0.96 1.14 2.30 2.08 2.87 2.73 2.73

ATUL LTD. (500027) : GROUP-BInterest Cover 2.28 2.28 1.4 1.67 1.91 1.92 1.6 3.38 4.75 6.45 3.88

Financial Charges Coverage Ratio 2.91 2.91 2.61 2.81 2.8 2.92 2.48 4.05 6.12 7.78 4.89Debt Equity Ratio 1.26 1 1.08 1.84 1.31 1.26 1.37 1.06 0.79 0.72 0.64

Long Term Debt Equity Ratio 0.59 0.58 0.81 1.30 0.80 0.79 0.85 0.86 0.66 0.41 0.64BAYER CROPSCIENCE LTD. (506285) : GROUP-A

Interest Cover 3.39 6.28 5.43 12.07 12.38 13 13.75 15.19 17.94 26.14 150Financial Charges Coverage Ratio 3.04 4.26 6.56 12.33 13.19 14.08 14.19 14.91 18.07 27.25 170

Debt Equity Ratio 1.67 0.60 0.30 0.41 0.33 0.28 0.19 0.09 0.20 0.16 0.17Long Term Debt Equity Ratio 1.1 0.37 0.16 0.28 0.11 0.22 0.10 0.07 0.07 0.12 0.14

PAUSHAK LTD. (532742) : GROUP-C

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Interest Cover 0.38 -0.30 -0.28 -1.23 13.26 5.39 2.74 6.25 5.69 12.78 14.26Financial Charges Coverage Ratio 0.18 -0.15 -0.32 -0.36 14.15 6.11 4.62 7.65 7.31 16.57 19.56

Debt Equity Ratio 0.28 0.23 0.55 0.87 0.82 0.30 0.27 0.08 0.08 0.08 0.09Long Term Debt Equity Ratio 0.28 0.23 0.55 0.23 0.33 0.08 0.07 0.07 0.08 0.08 0.08

PI INDUSTRIES LTD. (523642) : GROUP-BInterest Cover 1.29 1.31 2.46 3.61 2.07 1.89 1.52 2.79 4.41 6.49 6.42

Financial Charges Coverage Ratio 1.67 1.73 3.03 3.76 2.47 2.29 1.88 2.87 4.58 6.37 7.27Debt Equity Ratio 1.56 1.58 1.02 1.39 1.81 2.51 2.61 2.19 1.26 1.23 0.73

Long Term Debt Equity Ratio 0.78 0.88 0.74 0.88 1.04 1.35 1.28 1 0.92 0.46 0.37SOCRUS BIO SCIENCES LTD. (524719) : GROUP-C

Interest Cover 1.25 1.3 2.57 1.2 1.2 1.2 1.2 1.4 3.27 5.46 3.2Financial Charges Coverage Ratio 2.9 3.04 9.55 1.67 -6.74 1.02 79.34 126.29 - 5.54 3.22

Debt Equity Ratio 0.23 0.01 0.56 0.97 5.15 5.69 5.91 5.91 5.91 5.23 5.43Long Term Debt Equity Ratio 0.23 0.01 0.56 0.97 5.15 5.69 5.73 5.73 5.81 5.11 5.11

UNITED PHOSPHORUS LTD (512070) : GROUP-AInterest Cover 1.34 1.31 2.05 2.47 3.01 2.39 1.65 3.36 2.94 2.57 2.21

Financial Charges Coverage Ratio 1.56 1.75 2.5 2.97 3.82 2.98 2.17 3.7 3.58 3.11 2.86Debt Equity Ratio 1.30 1.30 1.28 0.92 1.12 1.76 0.90 1.12 1.12 1.08 0.41

Long Term Debt Equity Ratio 1.11 1.11 1.05 0.84 1.05 1.67 0.87 1.03 1.08 0.96 0.31

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CHART 5.15

CHART 5.16

171

CHART 5.17

CHART 5.18

172

CHART 5.19

CHART 5.20

CHART 5.21

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5.3 SOLVENCY ANALYSIS OF AGROCHEMICAL INDUSTRY:5.3.1 Interest Cover Ratio:As can be seen from the above diagrams, the interest coverage ratio on an average hasbeen raising over the number of years which is a good indicator of the industrysearning capacity and debt-repayment capacity. The meteoric rise from an average of1.67 to 25.69 substantiates the point. This is prominent only in Group A and Group Bcompanies. The average Interest Cover ratios for Group A,B and C companies are13.29, 3.11 and 4.77 (times) respectively and the Debt-Equity ratios are 0.82, 1.09and 3.14 respectively. Group A companies have employed lower amount of debt andhence its Interest Cover ratio is very high which is also partially due to highprofitability of the group. In spite of high debt in capital structure of Group Ccompanies as compared to Group B companies, the interest cover is healthier thanthat of Group B companies. Group C companies have managed to service debteffectively and have justified the use of debt.

5.3.2 Financial Charges Coverage Ratio:A barometer of how many times a companys Earnings Before Interest and Taxescovers not only interest on debt but also other financial charges such as preferencedividend and even lease rentals etc. . Overall trend in the industry showsimprovement. But only Group A companies have shown consistent and markedimprovement in their debt-servicing capacity. Group B companies have shown mildimprovement over the years. The cover ratios for Group A, B and C companies are14.51, 3.78 and 21.64 (times) respectively and the Debt-Equity ratios are 0.82, 1.09and 3.14respectively.Group A companies have employed lower amount of debt andhence its cover ratio is very high which can be attributed partially to high profitabilityof the group. In spite of high debt in capital structure of Group C companies, thecharges cover ratio is the highest. Group C companies have managed to service debteffectively and have justified the use of debt and there is a possibility that suchcompanies may be able to increase the use of debt.

5.3.3 Debt-Equity Ratio:This ratio is a barometer of how solvent a business unit is and the type of liabilities itcarries. The higher the ratio, the higher is proportion of total borrowings as compared

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to equity funds. The Debt-Equity ratios for Group A, B and C companies are 0.82,1.09 and 3.14 respectively. Group A companies have comparatively lower debt-equityratio and Group C companies have comparatively higher Debt-equity ratio.

5.3.4 Long Term Debt-Equity Ratio:In Group A companies the prominence of Long-term debt comes to the fore. But it isthe Group C companies which are highly levered in terms of long term debt. Thelong-term liabilities normally entail fixed charges which heap a very heavy burden onlow profit earning companies as is evident in Group C companies. Group Acompanies seem to have done away with long-term debt towards the latter yearsrhyming with financial wisdom. For Group A, B and C companies, ratios are 0.81,0.86 and 3.12 respectively.

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TABLE 5.4AGROCHEMICALS: MANAGEMENT EFFICIENCY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012AIMCO PESTICIDES LTD. (524288) : GROUP-C

Inventory Turnover Ratio 1.57 1.78 1.58 1.34 1.46 1.07 0.78 1.22 1.83 3.31 6.26Investments Turnover Ratio 1.39 1.28 1.43 1.07 1.38 1.30 1.75 1.19 1.94 2.14 1.50

Asset Turnover Ratio 1.78 1.23 1.52 1.43 1.45 1.13 0.75 0.35 0.69 3.1 13.44ATUL LTD. (500027) : GROUP-B

Inventory Turnover Ratio 3.22 3.34 3.66 4.1 4.00 5.34 5.98 7.22 6.59 6.99 7.3Investments Turnover Ratio 3.78 3.97 4.47 5.03 4.95 6.52 7.08 7.12 6.10 6.49 6.12

Asset Turnover Ratio 1.01 1.01 0.91 1.04 1.21 1.28 1.17 1.41 1.48 1.83 1.91BAYER CROPSCIENCE LTD. (506285) : GROUP-A

Inventory Turnover Ratio 5.26 7.26 5.5 3.97 4.20 4.20 6.99 5.06 5.35 5.3 4.89Investments Turnover Ratio 5.86 8.55 6.55 4.66 4.80 4.80 5.09 5.19 5.35 4.31 4.79

Asset Turnover Ratio 2.34 3.09 2.61 2.14 2.35 2.35 3.04 3.43 3.69 3.99 2.88PAUSHAK LTD. (532742) : GROUP-C

Inventory Turnover Ratio 6.30 6.3 4.5 6.1 6.83 3.97 5.7 7.35 8.64 6.37 4.69Investments Turnover Ratio 3.78 3.97 4.47 5.03 4.95 6.52 5.98 7.22 6.59 6.99 7.30

Asset Turnover Ratio 6.45 6.87 9.93 1.26 1.5 1.19 0.99 1.16 1.02 1.11 1.03PI INDUSTRIES LTD. (523642) : GROUP-B

Inventory Turnover Ratio 4.50 4.50 6.11 5.42 5.17 5.19 7.67 5.79 6.64 6.38 5.60

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Investments Turnover Ratio 5.60 5.40 7.16 6.93 6.28 6.11 6.67 6.09 6.14 6.08 6.60Asset Turnover Ratio 1.37 1.67 2.05 2.31 1.87 1.83 1.85 1.92 2.03 2.12 1.91

SOCRUS BIO SCIENCES LTD. (524719) : GROUP-CInventory Turnover Ratio 5.84 5.84 1.14 3.44 1.36 1.01 1.06 1.01 7.36 10.49 4.97Investments Turnover Ratio 16.86 16.84 15.12 121.78 23.64 17.57 15.57 16.76 14.00 14.29 14.01

Asset Turnover Ratio 16.65 17.32 5.64 15.65 4.97 3.7 3.27 3.53 3.34 0.93 0.79UNITED PHOSPHORUS LTD (512070) : GROUP-A

Inventory Turnover Ratio 5.45 5.85 8.56 7.16 6.74 5.69 5.98 4.94 10.92 8.59 6.66Investments Turnover Ratio 5.01 5.39 6.19 7.03 7.18 6.10 6.10 6.10 6.34 6.89 6.11

Asset Turnover Ratio 0.19 0.21 1.06 1.25 1.50 1.48 1.47 0.68 0.67 0.69 0.67

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CHART 5.22

CHART 5.23

178

CHART 5.24

CHART 5.25

179

CHART 5.26

CHART 5.27

CHART 5.28

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5.4. EFFICIENCY ANALYSIS OF AGROCHEMICAL INDUSTRY:5.4.1 Inventory Turnover Ratio:A barometer of how efficient a company is in selling its products. In Group Acompanies the Inventory Ratio has been high in the initial years but in the last 3 yearsit shows a decline which is indicative of mild stock glut with the group of companies.These companies could improve their profitability by selling their products moreeffectively thereby reducing the cost of inventory pile-up and minimizing loss inprofit. In Group B companies it is very high all through the years. There is a chancethat the companies in this group could also be facing intermittent stock out situations.As can be expected the ratio is abysmally low all through the years which explainswhy the companies in this group are experiencing dwindling profits and poor liquiditytoo. The average Inventory Turnover ratios for Group A, B and C companies are6.17, 5.65 and 3.88 (times) respectively and the Debt-Equity ratios are 0.82, 1.09 and3.14 respectively. It can be seen that Group A companies have the highest turnoverratio and is least levered. There is a potential for these companies to employ andefficiently service greater amount of debt. The same can be used to invest inproductive assets to further accelerate earnings. Group C companies have the lowestturnover ratio but have a very high Debt-Equity ratio which could be because ofsluggish movement of inventory.

5.4.2 Investments Turnover Ratio:A barometer of how many times the net worth of a company is covered by its netsales. The Group A and Group B companies have enjoyed a very high InvestmentsTurnover Ratio which is par for the course for such companies. But the companies inGroup C have suffered a very low Investments Turnover Ratio. This brings home thepoint that these companies have solvency issues and that their sales are so low ascompared to the amount invested. Such companies with the given track record mayfind it difficult to raise money from the financial markets as prospective investorswould be wary of them. The average Investments Turnover ratios for Group A,B andC companies are 7.21, 6.15 and 16.28 (times) respectively and the Debt-Equity ratiosare 0.82, 1.09 and 3.14 respectively .Group C companies cover their investmentsmany more times than the Group A and B companies despite having a high Total Debt

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to Owners Fund ratio. Group A companies on an average have a greater amount ofowners funds and hence its sales cover the net worth fewer no. of times.

5.4.3 Assets Turnover Ratio:Assets are used to generate sales and this establishes a relationship between sales andassets of a company. On an average the Assets Turnover Ratio of Group A companiesis higher which shows that these companies have utilised their assets very efficientlyto generate high sales volume. The average Assets Turnover ratios for Group A,B andC companies are 1.96, 1.64 and 3.68 (times) respectively and the Debt-Equity ratiosare 0.82, 1.09 and 3.14 respectively .Group C companies cover their assets moretimes than the Group A and B companies despite having a high Debt-Equity ratio.This could be because of high volume of sales and less investment in assets. Group Aand B companies, because of high value of assets acquired, may have posted a lowerturnover ratio. Group C companies have put the debt to judicious and gainful use orhave invested in productive assets to generate a healthy sales volume.

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TABLE 5.5AUTO PARTS &EQUIPMENT: PROFITABILITY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

BOSCH LTD. (500530) : GROUP-A

Operating Profit Margin(%) 16.79 21.29 23.55 18.91 18.72 17.73 16.19 13.52 16.09 17.39 17.12

Profit Before Interest And Tax Margin(%) 9.67 15.52 18.72 11.89 11.87 11.38 9.29 6.94 11.92 13.73 13.76

Gross Profit Margin(%) 18.77 23.4 25.94 12.31 12.25 11.82 9.68 7.23 12.3 14.19 14.27

Net Profit Margin(%) 8.3 11.88 15.34 11.04 13.95 13.66 13.11 11.72 12.4 13.5 13.09

EXIDE INDUSTRIES LTD. (500086) : GROUP-A

Operating Profit Margin(%) 18.78 18.87 18.72 12.57 14.48 14.8 14.89 14.63 21.21 17.38 13.66

Profit Before Interest And Tax Margin(%) 13.00 13.59 13.11 8.41 10.87 12.17 12.84 12.81 19.24 15.42 11.54

Gross Profit Margin(%) 15.56 15.61 17.89 11.78 13.35 13.64 12.86 12.82 19.29 15.74 11.69

Net Profit Margin(%) 5.90 5.93 7.41 5.92 6.49 7.43 7.92 7.55 12.7 12.86 8.89

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JAY USHIN LTD. (513252) : GROUP-C

Operating Profit Margin(%) 10.87 10.87 8.3 7.82 4.98 3.92 5.06 5.52 4.72 5.33 2.82

Profit Before Interest And Tax Margin(%) 7.59 7.07 5.01 4.6 1.93 1.21 2.99 3.04 2.42 3.31 0.64

Gross Profit Margin(%) 6.61 6.62 6.62 7.97 4.71 3.93 3.03 3.09 2.46 3.36 0.65

Net Profit Margin(%) 2.93 2.72 3.05 2.88 1.16 0.42 1.86 0.79 1.66 2.27 0.49

KALYANI FORGE LTD. (513509) : GROUP-C

Operating Profit Margin(%) 18.87 18.1 18.96 15.94 15.08 13.59 14.03 8.1 11.37 11.44 14.36

Profit Before Interest And Tax Margin(%) 11.59 11.83 14.45 12.18 11.19 9.61 9.57 2.5 4.91 6.63 10.04

Gross Profit Margin(%) 15.61 16.91 19.03 15.97 14.74 9.64 9.64 2.53 4.97 6.68 10.08

Net Profit Margin(%) 5.93 6.74 10.01 7.99 6.93 6.03 4.91 0.56 1.99 2.72 4.8

MOTHERSON SUMI SYSTEMS LTD. (517334) : GROUP-A

Operating Profit Margin(%) 19.37 19.53 20.97 19.14 17.07 17.39 15.96 14.67 16.61 15.45 15.99

Profit Before Interest And Tax Margin(%) 13.59 12.37 14.98 14.23 11.85 12.95 12.03 10.36 12.67 12.35 12.41

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Gross Profit Margin(%) 17.71 18.95 20.77 19.52 16.53 16.99 12.15 10.52 12.9 12.52 12.71

Net Profit Margin(%) 7.63 8.5 10.49 11.08 10.66 10.31 9.66 5.21 10.07 10.01 8.67

OMAX AUTOS LTD. (520021) : GROUP-B

Operating Profit Margin(%) 9.87 9.69 9.07 9.4 8.6 9.89 8.18 7.6 7.45 6.82 6.79

Profit Before Interest And Tax Margin(%) 6.59 6.69 6.11 6.09 5.75 6.72 4.34 4.03 4.03 4.25 4.44

Gross Profit Margin(%) 9.61 9.71 9.11 9.24 8.18 6.81 4.44 4.09 4.08 4.29 4.48

Net Profit Margin(%) 3.93 3.86 4.2 3.78 3.23 3.38 2.2 0.82 1.62 1.83 2.16

PRADEEP METALS LTD. (513532) : GROUP-B

Operating Profit Margin(%) 4.87 3.5 5.49 8.08 7.66 7.09 7.80 8.21 10.47 12.6 11.55

Profit Before Interest And Tax Margin(%) 13.59 13.59 12.37 14.98 14.23 13.31 12.95 12.03 7.71 10.73 9.88

Gross Profit Margin(%) 15.61 15.89 15.81 16.77 16.91 11.02 9.81 9.90 10.03 11.77 10.04

Net Profit Margin(%) 5.93 -5.32 0.20 4.08 3.23 4.52 5.28 10.33 0.62 2.46 5.18

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TRITON VALVES LTD. (505978) : GROUP-B

Operating Profit Margin(%) 20.87 25.08 23.63 19.1 10.58 6.98 9.81 11.98 13.44 12.27 9.18

Profit Before Interest And Tax Margin(%) 23.53 22.60 21.20 16.86 8.15 5.19 6.89 8.41 9.75 9.03 5.49

Gross Profit Margin(%) 26.61 24.75 23.96 19.59 11.27 5.22 6.91 8.43 9.77 9.04 5.52

Net Profit Margin(%) 11.08 12.15 12.17 11.32 5.81 3.09 3.21 3.61 5.25 4.83 1.43

186

CHART 5.29

187

CHART 5.30

CHART 5.31

188

CHART 5.32

CHART 5.33

189

CHART 5.34

CHART 5.35

190

5.5 PROFITABILITY ANALYSIS OF AUTO PARTS & EQUIPMENTINDUSTRY:

5.5.1 Operating Profit Margin:It is observed that in the operating profit margin ratio is on the decline as far as GroupA companies are concerned. This implies that in these companies the operatingefficiency has suffered a little which will have an adverse impact on their overallprofitability. In Group C companies it has always been on the decline which is asinister indication of inadequate profitability. In Group A, B and C companies theaverage operating profit ratios are 17.05, 11.50 and 10.02(%) respectively and theaverage Debt-Equity ratios are 0.48, 0.53 and 0.51. Group A companies have thehighest operating profit margin ratio but has the lowest Debt-Equity ratio and bothGroup A and Group B companies can make use of their good operating efficiency toincrease the amount of debt whereas Group C companies have comparatively loweroperating profit margin ratio and yet has the highest Debt-Equity ratio which meansthey have the highest amount of leverage.

5.5.2 Profit Before Interest and Tax Margin:The ratio is fairly consistent in Group A companies but it is steadily declining inGroup B and fluctuating in Group C companies. Group A dominates and comes outon top amongst all the companies which shows that those companies in this group arehighly profitable irrespective of the capital structure related advantages ordisadvantages. In Group A, B and C companies the average Profit before Interest andTax ratios are 12.38,8.63 and 6.26(%) respectively and Debt-Equity ratios are 0.48,0.53 and 0.51. Group A companies have enjoyed much higher profit ratio and theyhave a choice of opting for greater amount of debt to accelerate their profitabilitybecause they are least levered. Group C companies have the lowest profit ratio and inthat context it has a marginally higher amount of leverage when compared withGroup B companies. Group B companies have the highest Debt-Equity ratio and yettheir Profit ratio is higher than that of Group C companies.

5.5.3 Gross Profit Margin:This ratio which is a barometer of how efficiently a business unit carries out itsmanufacturing activities was the highest, on an average, in the year 2004 for all the

191

automobile companies. But in the recent years it can be seen to be slightly on thelower side. Group A companies outperform the rest of Group companies. It has beendeclining in the last few years which shows that supply of raw materials is eithershrinking or cost or raw material is rising or inefficient or underutilization ofproductive resources. In Group A, B and C companies the average Gross Profit ratiosare 15.03, 9.77 and 7.63 (%) respectively and Debt-Equity ratios are 0.48, 0.53 and0.51. Group A companies have the highest profit margin ratio and they are leastlevered. In this context it can be seen that both Group A and Group B companies havethe potential to opt for more leverage and use greater profits to service greateramount of debt which if put to judicious and gainful use can further augmentprofitability of Group A companies. Group C companies have comparatively greateramount of leverage even though the profit ratio is low in comparison with Group Bcompanies.

5.5.4 Net Profit Margin:Group B and Group C companies clearly have dwindling net profit margins whichdoes not augur too well for their financial health. This shows that the companies inthat particular group are precariously poised in the market and Group C companiesare struggling to show noticeable return. Group A companies have fared remarkablywell. In Group A, B and C companies the average Net Profit ratios are 9.94, 4.02 and3.50 (%) respectively and Debt-Equity ratios are 0.48, 0.53 and 0.51. Group Acompanies have the highest profit margin ratio and as such Group A and Group Bcompanies can use the augmented profitability to service greater amount of debtwhich can further lead to greater profits, whereas Group C companies have thelowest profit ratio and still have opted for a much greater amount of leverage. GroupC companies seem to have been impacted by the slightly high use of debt.

TABLE 5.6AUTO PARTS &EQUIPMENT: LIQUIDITY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012BOSCH LTD. (500530) : GROUP-ACurrent 1.5 1.71 1.66 1.64 1.81 1.96 2.44 2.15 2.12 2.09 2.10

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RatioQuick Ratio 1.14 1.23 1.17 1.19 1.28 1.43 1.86 1.67 1.58 1.46 1.67EXIDE INDUSTRIES LTD. (500086) : GROUP-ACurrentRatio

0.94 0.83 0.95 0.82 0.99 0.94 1.14 1.08 1.39 1.53 1.48

Quick Ratio 0.38 0.81 0.56 0.82 0.59 0.38 0.48 0.55 0.46 0.54 0.54JAY USHIN LTD. (513252) : GROUP-CCurrentRatio

0.59 0.65 0.6 0.51 0.6 0.61 0.72 0.61 0.58 0.69 1.15

Quick Ratio 0.43 0.56 0.85 0.74 0.67 0.45 0.55 0.57 0.51 0.61 0.69KALYANI FORGE LTD. (513509) : GROUP-CCurrentRatio

1.04 1.16 1.36 1.38 1.25 1.08 1.11 0.87 0.88 0.73 2.11

Quick Ratio 1.08 1.07 1.09 1.31 1.23 1.32 1.66 1.29 1.27 1.34 1.58MOTHERSON SUMI SYSTEMS LTD. (517334) : GROUP-ACurrentRatio

0.84 0.84 0.84 0.78 1.18 1.08 0.9 0.79 0.82 0.73 0.73

Quick Ratio 0.92 0.92 0.84 0.72 1.37 1.2 1.14 0.75 0.81 0.96 0.9OMAX AUTOS LTD. (520021) : GROUP-BCurrentRatio

0.5 0.6 0.81 0.71 0.6 0.51 0.52 0.62 0.59 0.83 0.8

Quick Ratio 1.67 1 1.48 1.25 1.33 1.62 1.62 1.4 1.6 1.27 0.96PRADEEP METALS LTD. (513532) : GROUP-BCurrentRatio

0.5 0.4 0.41 0.44 0.47 0.55 0.67 0.76 0.74 0.68 0.72

Quick Ratio 0.67 0.92 1.08 1.88 2.5 1.61 1.8 2.08 1.99 1.85 1.57TRITON VALVES LTD. (505978) : GROUP-BCurrentRatio

2.15 3.16 2.59 3.42 1.3 1.19 0.88 0.79 0.79 1.02 1.98

Quick Ratio 1.73 1.97 1.62 2.05 2.34 2.66 2.34 2.52 1.92 1.17 1.15

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CHART 5.36

CHART 5.37

194

CHART 5.38

CHART 5.39

195

CHART 5.40

CHART 5.41

CHART 5.42

196

5.6 LIQUIDITY ANALYSIS OF AUTO PARTS &EQUIPMENTINDUSTRY:

5.6.1 Current Ratio:This shows the level of fund sufficiency or insufficiency of a particular business unit.In Group A companies, however, the current ratio has been satisfactorily high and itreveals a healthy liquidity position enjoyed by them. As can be expected, the Group Ccompanies have been ill-liquid over the years but 2011 afterwards there is a markedimprovement in this regard. Here the Group B companies have a rather low CurrentRatio and it shows early signs of cash crunch. In Group A, B and C companies theaverage Current ratios are 1.30, 0.98 and 0.93 respectively and Debt-Equity ratiosare 0.48, 0.53 and 0.51. Group C companies have comparatively higher Debt-Equityratio and yet their average Current Ratio is the lowest of all. Group A companies alsoenjoy a good working capital position and these companies have sufficient liquidity.So they can use these financial circumstances to opt for greater leverage and the debtso raised will not adversely affect the companies liquidity position. Group B and Ccompanies have lower Current Asset ratios and they have higher Debt-Equity ratios.

5.6.2 Quick Ratio:Even when the quick ratios are considered the story remains largely the same. On theone hand the Group A companies have been adequately liquid and on the other GroupC companies have turned in a rather dismal performance on this count. Suchcompanies cannot and will not contract debt, unless made feasible by change offortune. Group B companies are running neck and neck with Group A companieswhich augurs well for them. In Group A, B and C companies the average Quick ratiosare 0.98, 1.71 and 0.97respectively and Debt-Equity ratios are 0.48, 0.53 and 0.51.Group B companies have the highest debt ratio and yet their average Quick Ratio isthe highest. Hence these companies have sufficient liquidity and it follows that thedebt raised has not hampered the companies liquidity position. The Group A and Ccompanies have comparatively much lower Quick ratio and also have lower Debt-Equity ratio.

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TABLE 5.7AUTO PARTS &EQUIPMENT: SOLVENCY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012BOSCH LTD. (500530) : GROUP-A

Interest Cover 29.4 73.4 127.6 34.99 91.41 178.8 73.58 469.6 264.3 3299 4067Financial Charges Coverage Ratio 45.00 93.8 151 49.6 129.9 246.4 108.2 725.4 328.8 3903 3708

Debt Equity Ratio 0.11 0.11 0.12 0.11 0.10 0.10 0.09 0.08 0.08 0.08 0.13Long Term Debt Equity Ratio 0.06 0.09 0.10 0.10 0.09 0.09 0.08 0.07 0.08 0.08 0.08

EXIDE INDUSTRIES LTD. (500086) : GROUP-AInterest Cover 8.98 3.98 12.2 8.73 7.26 9.08 10.72 14.11 117.1 149.9 125.6

Financial Charges Coverage Ratio 5.18 5.18 15.04 11.67 8.92 10.31 11.6 14.63 91.06 113.6 101.6Debt Equity Ratio 0.52 0.95 0.59 0.68 0.57 0.52 0.35 0.26 0.40 0.36 0.36

Long Term Debt Equity Ratio 0.39 0.59 0.42 0.29 0.46 0.39 0.28 0.20 0.40 0.30 0.30JAY USHIN LTD. (513252) : GROUP-C

Interest Cover 2.18 1.53 2.18 3.75 2 1.94 2.88 1.9 2.21 2.68 1.16Financial Charges Coverage Ratio 1.18 1.89 2.79 4.67 3.54 3.86 4.24 2.81 3.38 3.68 2.17

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Debt Equity Ratio 2.32 2.13 1.33 1.43 1.99 1.64 2.37 2.66 2.13 2.10 2.42Long Term Debt Equity Ratio 1.39 1.62 0.71 0.68 1.24 1.07 1.72 1.56 1.20 1.20 2.42

KALYANI FORGE LTD. (513509) : GROUP-CInterest Cover 5.98 7.67 76.83 64.01 17.15 9.7 5.61 1.13 2.25 2.81 3.10

Financial Charges Coverage Ratio 9.08 11.2 76.87 70.58 22.5 13.6 7.99 2.88 4.22 3.92 4.36Debt Equity Ratio 0.52 0.47 0.34 0.52 0.56 0.66 0.98 0.86 0.8 0.93 0.70

Long Term Debt Equity Ratio 0.29 0.36 0.28 0.41 0.46 0.41 0.59 0.56 0.4 0.28 0.70MOTHERSON SUMI SYSTEMS LTD. (517334) : GROUP-A

Interest Cover 6.75 6.75 18.61 35.6 5.9 6.61 6.52 5.13 9.67 12.33 9.04Financial Charges Coverage Ratio 8.58 8.57 20.62 38.91 7.45 8.34 8.34 6.77 11.91 14.72 9.45

Debt Equity Ratio 0.70 0.65 0.48 0.41 1.69 1.33 1.15 1.30 0.58 0.79 0.68Long Term Debt Equity Ratio 0.37 0.41 0.29 0.20 1.42 1.12 0.81 1.09 0.38 0.39 0.34

OMAX AUTOS LTD. (520021) : GROUP-BInterest Cover 8.58 10.5 8.04 6.23 4.84 3.69 1.94 1.43 1.94 2.06 2.17

Financial Charges Coverage Ratio 6.54 7.5 7.56 6.95 5.23 3.81 2.43 1.94 3.06 2.93 3.11Debt Equity Ratio 1.08 1.02 1.2 1.23 1.52 1.86 1.98 1.92 1.92 1.47 0.75

Long Term Debt Equity Ratio 0.38 0.38 0.67 0.58 0.76 0.52 0.69 1.13 0.9 0.96 0.48

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PRADEEP METALS LTD. (513532) : GROUP-BInterest Cover 1.18 1.53 1.67 1.75 1.01 1.03 1.32 1.9 1.42 2.88 2.67

Financial Charges Coverage Ratio 1.18 1.09 1.98 2.18 1.89 1.93 2.27 2.4 1.69 2.93 3.08Debt Equity Ratio 2.08 2.15 2.67 2.04 2.57 2.57 2.65 2.03 2.07 2.45 1.80

Long Term Debt Equity Ratio 0.92 1.02 1.08 0.32 0.45 0.55 0.72 0.45 0.41 0.43 0.16TRITON VALVES LTD. (505978) : GROUP-B

Interest Cover 42.2 47.2 474.2 172 54.01 5.81 3.86 3.10 4.70 4.79 1.60Financial Charges Coverage Ratio 25.8 31.1 116.1 93.4 37.84 6.27 4.9 3.96 6.08 6.11 2.62

Debt Equity Ratio 0.80 0.10 0.10 0.36 0.48 0.70 0.79 0.64 0.72 1.16 1.36Long Term Debt Equity Ratio 0.17 0.03 0.03 0.36 0.27 0.32 0.26 0.15 0.12 0.62 1.36

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CHART 5.43

CHART 5.44

201

CHART 5.45

CHART 5.46

202

CHART 5.47

CHART 5.48

CHART 5.49

203

5.7 SOLVENCY ANALYSIS OF AUTO PARTS & EQUIPMENTINDUSTRY:

5.7.1 Interest Cover Ratio:As can be seen from the above diagrams that the interest coverage ratio on an averagehas almost remained constant with minor fluctuations over the number of years whichis a good indicator of the industrys earning capacity and debt-repayment capacity.The year 2011 seems to be an aberration for a dramatic jump which could be becauseof exceptionally superlative all round performance. The average Interest Cover ratiosfor Group A,B and C companies are 128.14, 77.12 and 11.64 (times) respectively andthe Debt-Equity ratios are 0.48, 0.53 and 0.51 respectively. Group A companies haveemployed lower amount of debt and hence its Interest Cover ratio is very high whichis also partially due to high profitability of the group. There is high amount of debt incapital structure of Group C companies and as a corollary the interest cover is muchlower. The high cost of servicing the debt coupled with inability to use debt toaugment profitability can turn in these results. Group B companies have managed toservice high amount of when compared with Group B companies yet they have a verygood Interest Cover ratio of 77.12 which justifies the use of debt.

5.7.2 Financial Charges Coverage Ratio:A barometer of how many times a companys Earnings Before Interest and Taxescovers not only interest on debt but also other financial charges such as preferencedividend and even lease rentals etc. But only Group A companies have shownconsistent and marked improvement in their debt-servicing capacity. The cover ratiosfor Group A, B and C companies are 192.45, 16.49 and 12.87 (times) respectively andthe Debt-Equity ratios are 0.48, 0.53 and 0.51 respectively. Group A companies haveopted for a lower amount of debt and that explains very high cover ratio which can bebecause of partially profitability of the group. In spite of high debt in capital structureof Group B and C companies, the charges cover ratio is not really diabolicalalthough much lower in comparison with Group A companies.

5.7.3 Debt-Equity Ratio:This ratio is a barometer of how solvent a business unit is and the type of liabilities itcarries. The higher the ratio, the higher is proportion of total borrowings as compared

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to equity funds. For the Group A ,B and C, the Debt-Equity ratios are 0.48, 0.53 and0.51 respectively .The Group A companies seem to have an aversion for debt as canbe seen in the above diagrams whereas Group B and Group C companies haveemployed debt in their capital structure with both arms. Group C companies withless-than-desirable liquidity position should manage debt very cautiously, to remainnot only afloat but turn profitable in a humongous way in the long run.

5.7.4 Long Term Debt-Equity Ratio:It is the Group C companies which are highly levered in terms of long term debt. Thelong-term liabilities normally entail fixed charges which heap a very heavy burden onlow profit earning companies as is evident in Group C companies. The Long TermDebt-Equity ratios for Group A, B and C companies are 0.33, 0.40 and 0.37. On thisparameter also Group B companies have higher element of debt and Group Acompanies being the least levered.

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TABLE 5.8AUTO PARTS &EQUIPMENT: MANAGEMENT EFFICIENCY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

BOSCH LTD. (500530) : GROUP-A

Inventory Turnover Ratio 10.62 8.94 8.59 9.14 8.97 10.36 9.99 9.55 9.14 7.76 8.07

Investments Turnover Ratio 11.88 9.87 9.46 9.14 8.97 10.31 10.31 9.14 7.94 7.24 8.37

Asset Turnover Ratio 1.10 1.34 1.59 1.65 1.82 1.84 1.70 1.68 2.22 2.35 2.35

EXIDE INDUSTRIES LTD. (500086) : GROUP-A

Inventory Turnover Ratio 4.76 4.89 4.63 5.73 6.42 5.26 6.45 9.93 7.66 6.61 6

Investments Turnover Ratio 6.43 6.53 6.04 6.85 7.63 5.19 6.35 8.93 9.06 6.34 7.14

Asset Turnover Ratio 1.35 1.17 1.21 1.52 1.75 2.2 2.88 2.56 2.17 2.01 1.76

JAY USHIN LTD. (513252) : GROUP-C

Inventory Turnover Ratio 8.67 10.12 23.04 21.69 12.97 9.21 12.12 11.08 13.61 11.27 9.81

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Investments Turnover Ratio 10.76 12.01 27.57 26.24 14.96 11.88 9.87 9.46 9.14 8.97 10.31

Asset Turnover Ratio 1.35 1.93 2.67 2.13 2.08 2.76 3.25 2.73 3.24 3.75 4.39

KALYANI FORGE LTD. (513509) : GROUP-C

Inventory Turnover Ratio 7.76 8.2 7.18 8.09 10.62 11.76 7.76 9.19 7.56 9.5 9.25

Investments Turnover Ratio 9.56 10.6 9.97 10.3 14.03 11.68 10.87 9.56 9.04 8.07 9.31

Asset Turnover Ratio 1.02 1.31 1.74 1.75 1.72 1.63 1.55 1.19 1.05 1.40 1.81

MOTHERSON SUMI SYSTEMS LTD. (517334) : GROUP-A

Inventory Turnover Ratio 10.24 11.06 9.81 8.86 8.19 9.19 10.31 9.14 7.94 7.24 8.37

Investments Turnover Ratio 11.76 12.53 11.21 10.14 9.14 10.31 9.31 8.14 8.64 6.04 7.27

Asset Turnover Ratio 2.35 1.53 1.77 1.76 1.78 1.94 1.93 1.44 1.67 1.93 1.81

OMAX AUTOS LTD. (520021) : GROUP-B

Inventory Turnover Ratio 50.04 59.64 67.78 30.74 28.43 28.6 30.22 27.75 31.66 26.94 31.87

Investments Turnover Ratio 52.5 70.5 79.69 37.56 37.8 38.4 31.02 26.00 30.11 30.04 30.57

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Asset Turnover Ratio 1.91 2.91 2.72 2.36 2.08 1.96 1.85 2.01 1.83 2.54 3.23

PRADEEP METALS LTD. (513532) : GROUP-B

Inventory Turnover Ratio 1.38 1.54 1.46 2.16 2.43 2.41 2.41 2.43 3.43 3.53 3.12

Investments Turnover Ratio 1.47 1.57 2.94 4.12 4.53 4.16 2.91 4.27 3.83 3.80 3.80

Asset Turnover Ratio 0.67 0.75 0.8 1.44 1.78 1.87 2.34 2.68 1.65 2.47 1.69

TRITON VALVES LTD. (505978) : GROUP-B

Inventory Turnover Ratio 4.13 5.18 6.06 5.49 4.64 5.68 6.96 8.52 5.89 5.75 5.39

Investments Turnover Ratio 6.03 7.98 8.83 7.82 6.33 5.03 7.18 7.93 5.03 5.98 8.03

Asset Turnover Ratio 2.00 2.14 2.39 2.52 2.33 2.70 2.04 1.78 1.91 2.04 1.45

208

CHART 5.50

CHART 5.51

209

CHART 5.52

CHART 5.53

210

CHART 5.54

CHART 5.55

CHART 5.56

211

5.8 EFFICIENCY ANALYSIS OF AUTO PARTS AND EQUIPMENTINDUSTRY:

5.8.1 Inventory Turnover Ratio:A barometer of how efficient a company is in selling its products. In Group Acompanies the Inventory Ratio has been high in the initial years but in the last 3 yearsit shows a decline which is indicative of mild stock glut with the group of companies.These companies could improve their profitability by selling their products moreeffectively thereby reducing the cost of inventory pile-up and minimizing loss inprofit. The average Inventory Turnover ratios for Group A, B and C companies are8.40, 5.96 and 18.10(times) respectively and the Debt-Equity ratios are 0.48, 0.53 and0.51 respectively. It can be seen that Group C companies have the highest turnoverratio and have comparatively high amount of leverage too. Such turnover togetherwith profitability can help a company service its debt effectively. These companieshave mitigated the impact of leverage through their selling efficiency also. Group Acompanies have the lowest Debt-Equity ratio and their Inventory Turnover ratio isstill healthy at 8.40.There is a potential for these companies to employ and efficientlyservice greater amount of debt. The same can be used to invest in productive assets tofurther accelerate earnings. Group B companies have the lowest turnover ratio havea very high Debt-Equity ratio which could be because of sluggish movement ofinventory.

5.8.2 Investments Turnover Ratio:A barometer of how many times the net worth of a company is covered by its netsales. The Group A and Group B companies have enjoyed a very high InvestmentsTurnover Ratio which is par for the course for such companies. But the companies inGroup C have suffered a very low Investments Turnover Ratio. This brings home thepoint that these companies have solvency issues and that their sales are so low ascompared to the amount invested. Such companies with the given track record mayfind it difficult to raise money from the financial markets as prospective investorswould be wary of them. The average Investments Turnover ratios for Group A,B andC companies are 14.78, 6.92 and 9.81 (times) respectively and the Debt-Equity ratiosare 0.48, 0.53 and 0.51 respectively. Group A companies cover their investmentsmany more times than the Group B and C companies. Group A companies on an

212

average have a greater amount of owners funds and yet its sales cover the net worthmore no. of times. But Group C companies have a cover ratio of 9.81 despite having ahigh amount of leverage. Group B companies have the highest amount of leverageand still the coverage ratio is lowest of all. Such companies can bank more upon debtfund and also improve their sales turnover to improve performance.

5.8.3 Assets Turnover Ratio:Assets are used to generate sales and this establishes a relationship between sales andassets of a company. On an average the Assets Turnover Ratio of Group C companiesis higher which shows that these companies have utilised their assets very efficientlyto generate high sales volume. In Group B companies the ratio has been low. This isan indication of the fact that these companies have under-utilised their assets. Thepotential for greater profitability and liquidity is not fully utilised. The average AssetsTurnover ratios for Group A,B and C companies are 1.96, 1.94 and 2.05 (times)respectively and the Debt-Equity ratios are 0.48, 0.53 and 0.51 respectively. Group Ccompanies cover their assets many more times than the Group A and B companiesdespite having a high Debt-Equity ratio. This could be because of high volume ofsales and less investment in assets or exploitation of assets to their fullest to generatesuperior sales revenue. Group A and B companies, because of high value of assetsacquired, may have posted a slightly lower turnover ratio. Group C companies haveput the debt to judicious and gainful use or have invested in productive assets togenerate a healthy sales volume.

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TABLE 5.9CEMENT: PROFITABILITY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012ACC LTD (500410) : GROUP-AOperating Profit Margin(%) 11.73 13.25 17.02 18.21 29.17 28.15 24.66 31.95 21.42 18.42 16.02Profit Before Interest And TaxMargin(%)

5.94 7.65 12.09 12.86 24.35 23.24 20.01 27.22 15.86 12.97 12.27

Gross Profit Margin(%) 8.75 12.28 15.54 17.32 28.97 23.72 20.59 27.68 16.29 13.33 11.64Net Profit Margin(%) 3.52 5.93 9.59 16.85 21.16 20.44 16.29 19.69 14.26 13.78 11.01AMBUJA CEMENTS LTD (500425) : GROUP-AOperating Profit Margin(%) 25.34 26.00 26.17 26.94 33.99 35.47 28.79 27.05 24.55 22.88 21.94Profit Before Interest And TaxMargin(%)

17.87 16.88 15.88 17.08 28.51 30.71 24.05 22.3 18.97 17.21 17.88

Gross Profit Margin(%) 18.01 28.11 28.71 28.31 28.84 31.36 24.61 22.85 19.3 17.62 18.31Net Profit Margin(%) 13.07 14.13 14.44 14.71 25.88 31.33 21.82 16.76 16.83 14.12 14.64ANJANI PORTLAND CEMENT LTD. (518091) : GROUP-COperating Profit Margin(%) 18.13 18.53 17.78 16.06 14.43 27.6 31.69 30.36 21.94 19.92 21.05

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Profit Before Interest And TaxMargin(%)

13.25 13.65 11.71 10.25 8.56 24.18 28.64 27.46 18.23 12.26 16.19

Gross Profit Margin(%) 9.29 8.98 8.72 8.66 7.89 23.17 28.36 29.48 20.69 22.62 26.38Net Profit Margin(%) 0.35 0.32 0.13 0.3 0.04 18.53 15.8 12.88 9.27 0.32 5.27CENTURY TEXTILE & INDUSTRIES LTD. (500040) : GROUP-AOperating Profit Margin(%) 9.69 11.79 9.84 10.53 12.08 18.48 20.24 17.08 20.41 14.92 8.32Profit Before Interest And TaxMargin(%)

4.58 5.58 4.15 5.48 6.9 14.07 15.28 11.69 15.05 9.75 2.97

Gross Profit Margin(%) 8.21 9.62 8.06 9.97 11.49 17.57 15.42 11.79 15.2 9.83 2.98Net Profit Margin(%) 3.07 3.68 3.32 4.3 4.07 8.77 8.58 6.75 7.83 5.05 0.45DECCAN CEMENTS LTD. (502137) : GROUP-COperating Profit Margin(%) 11.72 12.99 14.17 12.57 12.22 27.81 36.72 35.58 25.28 19.17 19.75Profit Before Interest And TaxMargin(%)

7.18 7.51 9.69 8 8.08 24.43 33.67 31.73 17.38 11.92 15.44

Gross Profit Margin(%) 8.62 8.51 11.11 11.15 11.61 27.95 32.96 31.83 17.08 12.07 15.53Net Profit Margin(%) 1.68 1.51 5.08 4.75 7.2 16.37 22.67 18.31 1.45 0.58 8.11EVEREST INDUSTRIES LTD. (508906) : GROUP-BOperating Profit Margin(%) 11.01 12.3 13.61 15.75 17.03 9.38 7.8 10.24 10 9.04 10.2

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Profit Before Interest And TaxMargin(%)

8.38 8.77 10.65 13.17 14.05 6.44 4.38 6.97 7.15 6.41 7.88

Gross Profit Margin(%) 11.2 11.7 13.58 16.01 16.65 8.56 4.41 7.00 7.19 6.43 7.93Net Profit Margin(%) 4.81 4.52 29.79 8.36 12.3 3.84 5.00 2.71 4.57 5.61 5.91INDIA CEMENTS LTD. (530005) : GROUP-BOperating Profit Margin(%) 4.79 4.67 11.77 12.24 17.3 33.04 35.88 27.94 20.54 10.26 21.49Profit Before Interest And TaxMargin(%) 3.23

4.84 3.74 5.4 12.13 28.45 31.26 21.16 13.82 3.02 15.44

Gross Profit Margin(%) 2.13 4.03 3.11 2.43 8.52 26.82 31.68 21.89 14.22 3.11 15.51Net Profit Margin(%) -

20.23-

22.52-9.39 0.39 2.92 21.2 20.66 12.44 9.33 1.94 6.93

JK LAKSHMI CEMENT LTD. (500380) : GROUP-BOperating Profit Margin(%) 9.79 9.93 5 14.11 20.81 30.32 31.62 25.34 29.56 13.9 19.08Profit Before Interest And TaxMargin(%)

-4.58 -3.45 -8.16 4.05 11.66 24.82 25.72 19.24 23.64 7.38 11.12

Gross Profit Margin(%) 0.62 0.06 -0.4 13.38 17.45 25.87 26.35 19.71 24.19 7.48 11.53Net Profit Margin(%) -3.68 -5.42 -5.56 5.28 9.43 20.88 19.64 14.22 15.81 4.42 6.1MADRAS CEMENTS LTD. (500260) : GROUP-A

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Operating Profit Margin(%) 21.6 24.54 23.82 20.5 20.75 35.25 37.26 30.75 30.88 24.12 29.52Profit Before Interest And TaxMargin(%)

14.58 14.3 14.69 11.68 14.14 30.4 32.38 25.14 23.81 15.55 21.68

Gross Profit Margin(%) 14.23 14.27 17.01 16.95 18.06 34.35 32.61 25.31 23.9 15.69 21.77Net Profit Margin(%) 2.68 2.05 4.77 7.5 7.79 19.48 20.21 14.27 12.55 7.97 11.71PRISM CEMENT LTD. (500338) : GROUP-BOperating Profit Margin(%) 16.09 16.03 20.49 22.91 26.52 43.17 38.58 27.23 17.78 9.6 6.2Profit Before Interest And TaxMargin(%)

6.08 6.7 12.8 16.1 21.14 38.9 34.4 23.07 14.53 6.19 2.92

Gross Profit Margin(%) 5.12 5.14 15.14 18.64 23.56 42.81 34.94 23.37 14.61 6.24 2.93Net Profit Margin(%) -5.34 -9.58 -1.54 5.84 10.83 25.02 27.09 15.09 8.8 2.82 -0.66SAGAR CEMENTS LTD. (502090) : GROUP-COperating Profit Margin(%) - 0.72 11.1 1.41 5.86 19.08 22.66 19.27 17.3 15.06 20.45Profit Before Interest And TaxMargin(%)

- -5.49 6.71 -2.34 3.58 17.49 20.95 13.12 11.51 9.36 16.16

Gross Profit Margin(%) - -6.31 4.52 -3.15 4.38 18.68 21.03 13.16 11.58 9.39 16.18Net Profit Margin(%) - -11.7 0.76 2.11 2.11 12.23 12.15 5.35 3.93 3.56 7.26SANGHI INDUSTRIES LTD. (526521) : GROUP-B

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Operating Profit Margin(%) 7.96 8.49 20.62 20.88 29.15 37.07 31.73 25.76 26.35 16.56 19.14Profit Before Interest And TaxMargin(%)

3.25 4.25 8 8.58 20.46 27.56 21.86 15.76 14.03 4.58 8.99

Gross Profit Margin(%) 5.90 5.74 5.2 8.66 23.08 28.67 22.26 15.9 14.17 4.62 9.07Net Profit Margin(%) 1.01 1.22 -4.84 1.34 13.76 17.33 12.32 6.37 13.19 -3.25 8.32SHREE DIGVIJAY CEMENT CO. LTD. (502180) : GROUP-COperating Profit Margin(%) -1.79 -2.76 10.55 6.64 19.32 22.73 14.99 15.92 7.44 5.07 5.49Profit Before Interest And TaxMargin(%)

-7.15 -8.62 5.58 2.74 15.81 20.15 12.44 13.49 4.23 2.04 2.25

Gross Profit Margin(%) 20.2 -23.25

0.54 -1.96 18.22 22.75 12.51 13.57 4.26 2.06 2.74

Net Profit Margin(%) -20.31

-23.4 2.47 -11.06

22.42 21.04 -5.47 13.4 0.33 2.79 2.22

ULTRA TECH CEMENT LTD. (532538) : GROUP-AOperating Profit Margin(%) 12.75 12.71 15.14 13.84 17.02 29 31.33 27.29 28.08 19.33 22.47Profit Before Interest And TaxMargin(%)

5.38 4.58 6.27 5.52 10.4 24.1 26.61 21.9 22.24 13.28 17.41

Gross Profit Margin(%) 11.28 11.28 11.37 10.58 14.9 28.07 27.03 22.24 22.56 13.53 17.53Net Profit Margin(%) 0.98 1.78 1.69 0.1 6.91 15.75 17.99 15.06 15.3 10.43 13.3

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CHART 5.57

CHART 5.58

219

CHART 5.59

CHART 5.60

220

CHART 5.61

CHART 5.62

CHART 5.63

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5.9 PROFITABILITY ANALYSIS OF CEMENT INDUSTRY:5.9.1 Operating Profit Margin:It is observed that in the operating profit margin ratio is on the decline as far as GroupA companies are concerned. In the year 2012, Group C companies are witnessingsome improvement in operation efficiency. In Group A, B and C companies theaverage operating profit ratios are 21.35, 19.49 and 17.25 (%) respectively and theaverage Debt-Equity ratios are 1.01, 2.18 and 1.11. On the average Group Acompanies have the highest operating profit margin ratio and are least levered. Assuch both Group A and Group C companies can increase the amount of debt becausetheir operating efficiency will help them service the debt effortlessly and withoutstraining their financial resources. Group B companies have the highest Debt-Equityratio and the Operating Profit ratio is quite close to that of Group A or C companieswhich speaks volumes about Group B companies efficiency and the deft with whichthey have utilised their leverage gainfully.

5.9.2 Profit Before Interest and Tax Margin:The ratio is fairly inconsistent in Group A. Group B and Group C companies have afluctuating ratio too. This may be due to the entire industry facing high costs ofoperations or declining sales or other adverse factors impacting profits and revenue.The industry as whole saw superlative performances in the years 2007 and 2008. Thisis attributed to construction boom in the country. In Group A, B and C companies theaverage Profit before Interest and Tax ratios are 15.33, 12.85 and 12.83 (%)respectively and Debt-Equity ratios are 1.01, 2.18 and 1.11. Group A companies havethe highest profit ratio and have the lowest Debt-Equity ratio. Group A companieshave a choice of opting for greater amount of debt to accelerate their profitabilitywhereas Group C companies have the lowest profit ratio and in that context it has ahigher amount of leverage. Group B companies have the highest level of leverage andstill their Profit Before Interest and Tax is higher than that of Group C companies.

5.9.3 Gross Profit Margin:This ratio is a barometer of how efficiently a business unit carries out itsmanufacturing activities. It was the highest, on an average, in the year 2007 for all thecement companies. But in the recent years it has been sliding consistently which

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shows that supply of raw materials is either shrinking or cost or raw material is risingor inefficient or underutilization of productive resources. Group A companiesoutperform the rest of Group companies although Group B and Group C companieshave a stable Gross Profit ratio in the recent years. In Group A, B and C companiesthe average Gross Profit ratios are 17.24, 13.34 and 12.42 (%) respectively andDebt-Equity ratios are 1.01, 2.18 and 1.11. Group A companies have the highestprofit margin ratio but is least levered. These companies have the profitability to optfor greater leverage. Group B companies have the highest leverage and their GrossProfit ratio is even higher than that of Group C companies. As far as debt isconcerned Group C companies have used less amount of debt and also have a lowaverage Gross Profit ratio.

5.9.4 Net Profit Margin:Group B and Group C companies clearly have lower net profit margins and in caseGroup A companies, it has marginally declined in the year 2012. When flagshipcompanies suffer in the industry it suggests intense rivalry to snare the market thatmay have shrunken slightly. In Group A, B and C companies the average Net Profitratios are 10.66, 7.22 and 5.40 (%) respectively and Debt-Equity ratios are 1.01, 2.18and 1.11. Group A companies have reported the highest profit margin ratio and assuch Group A and Group B companies can use the augmented profitability to servicegreater amount of debt which can lead to greater profits, whereas Group Ccompanies have the lowest profit ratio and even then they have opted for slightlyhigher amount of leverage as compared to Group A companies.

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TABLE 5.10CEMENT: LIQUIDITY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012ACC LTD (500410) : GROUP-A

Current Ratio 0.38 0.43 0.54 0.58 0.77 0.86 0.89 0.67 0.68 0.87 0.89Quick Ratio 0.49 0.49 0.43 0.42 0.61 0.55 0.61 0.42 0.43 0.58 0.57

AMBUJA CEMENTS LTD (500425) : GROUP-ACurrent Ratio 0.87 0.90 0.94 1.02 1.08 1.01 1.26 0.89 1.07 1.14 1.16Quick Ratio 0.41 0.50 0.41 0.61 0.7 0.64 0.74 0.57 0.75 0.87 0.44

ANJANI PORTLAND CEMENT LTD. (518091) : GROUP-CCurrent Ratio 0.68 0.67 0.77 0.75 0.9 0.99 1.11 1.13 0.9 0.87 0.73Quick Ratio 1.34 1.16 1.33 1.16 1.64 1.44 1.2 1.23 1.27 1.18 0.88

CENTURY TEXTILE & INDUSTRIES LTD. (500040) : GROUP-ACurrent Ratio 0.9 0.6 0.58 0.62 0.55 0.85 0.71 0.82 0.65 0.66 0.54Quick Ratio 0.41 0.5 0.54 0.61 0.65 0.74 0.58 0.67 0.61 0.68 0.49

DECCAN CEMENTS LTD. (502137) : GROUP-C

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Current Ratio 1.00 1.08 1.18 1.21 1.61 1.2 1.03 0.8 0.66 0.88 0.85Quick Ratio 1.23 1.29 1.17 0.95 1.4 1.63 1.24 0.92 0.87 0.93 0.91

EVEREST INDUSTRIES LTD. (508906) : GROUP-BCurrent Ratio 0.77 0.92 1.27 1.02 0.96 0.8 0.89 0.9 1.07 1.33 0.86Quick Ratio 0.41 0.41 0.81 0.77 0.8 0.74 0.7 0.67 0.7 0.63 0.66

INDIA CEMENTS LTD. (530005) : GROUP-BCurrent Ratio 0.96 1 1.05 1.1 1.53 2 1.43 1.13 1.46 1.28 0.95Quick Ratio 1.21 1.64 2.53 2.16 2.62 2.97 1.49 1.23 1.54 1.69 1.35

JK LAKSHMI CEMENT LTD. (500380) : GROUP-BCurrent Ratio 0.76 0.74 1.06 1.44 2.01 1.93 2.3 1.76 1.35 1.06 1.02Quick Ratio 0.40 0.70 0.76 0.8 0.98 1.25 1.79 1.45 1.22 0.82 0.85

MADRAS CEMENTS LTD. (500260) : GROUP-ACurrent Ratio 0.36 0.44 0.59 0.44 0.45 0.74 0.56 0.6 0.7 0.69 0.38Quick Ratio 0.51 0.54 0.56 0.51 0.53 0.78 0.70 0.63 0.64 0.60 0.34

PRISM CEMENT LTD. (500338) : GROUP-BCurrent Ratio 0.86 0.92 0.97 0.87 0.94 0.61 0.79 0.8 0.87 0.93 0.77Quick Ratio 0.21 0.31 0.32 0.30 0.32 0.25 0.35 0.42 0.61 0.63 0.54

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SAGAR CEMENTS LTD. (502090) : GROUP-CCurrent Ratio - 0.59 0.67 0.79 0.57 1.00 0.43 0.79 0.56 0.6 0.56Quick Ratio - 0.90 0.97 1.14 0.77 1.30 1.19 1.07 0.79 0.84 0.57

SANGHI INDUSTRIES LTD. (526521) : GROUP-BCurrent Ratio 0.46 0.46 0.42 0.66 2.08 2.72 2.83 1.49 1.32 1.74 1.17Quick Ratio 0.31 0.33 0.36 0.67 2.04 2.21 2.40 1.42 0.99 1.52 0.61

SHREE DIGVIJAY CEMENT CO. LTD. (502180) : GROUP-CCurrent Ratio 0.46 0.36 0.24 0.26 0.3 1.27 0.53 1.27 1.5 1.00 0.86Quick Ratio 0.51 0.17 0.21 0.51 0.63 1.10 0.85 0.54 0.3 0.41 0.41

ULTRA TECH CEMENT LTD. (532538) : GROUP-ACurrent Ratio 9.46 9.43 0.6 0.68 0.67 0.71 0.58 0.59 0.67 0.67 0.67Quick Ratio 9.31 9.43 0.46 0.54 0.34 0.40 0.38 0.34 0.30 0.34 0.36

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CHART 5.64

CHART 5.65

227

CHART 5.66

CHART 5.67

228

CHART 5.68

CHART 5.69

CHART 5.70

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5.10 LIQUIDITY ANALYSIS OF CEMENT INDUSTRY:5.10.1 Current Ratio:It is found that in majority of the companies, the current ratio was at its peak in theyear 2003 and at its lowest in the year 2009. This shows the level of fund sufficiencyor insufficiency in those years. In Group A companies, however, the current ratio hasbeen declining below the ideal bench mark. These companies have growninadequately liquid. Even Group C companies have been inadequately liquid over theyears consistently barring 2007 and 2009. Cash crunch is a direct fall out of highinvestments and low returns scenario and negative market sentiments. Group Bcompanies are faring well on this parameter. In Group A, B and C companies theaverage Current ratios are 0.86, 1.22 and 0.83 respectively and Debt-Equity ratiosare 1.01, 2.18 and 1.11. Group C companies have higher Debt-Equity ratio than thatof Group A companies and yet their average Current Ratio is lower than that ofGroup A companies. Group B companies working capital position is good whichremains unaffected by the slightly higher use of debt. Group B companies have higherCurrent Ratio which shows they have managed debt well and still have an appetite fora higher debt.

5.10.2 Quick Ratio:In Group A, B and C companies the average Quick ratios are 0.74, 1.07 and0.97respectively and Debt-Equity ratios are 1.01, 2.18 and 1.11. Group B companies havethe highest debt ratio and yet their average Quick Ratio is the highest. Hence thesecompanies have sufficient liquidity and it follows that the debt raised has notadversely affected the companies liquidity position. The Group A and B companieshave comparatively lower Quick ratio and also have lower Debt-Equity ratio. Suchcompanies can use debt to to augment profitability which can improve their ability tomeet short-term debt.

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TABLE 5.11CEMENT: SOLVENCY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012ACC LTD (500410) : GROUP-AInterest Cover 1.48 2.85 5.27 6.87 19.97 24.05 42.56 27.96 25.57 15.58 15.12Financial Charges Coverage Ratio 2.86 4.7 7.44 9.45 23.43 28.21 49.92 32.02 32.48 20.49 19.11Debt Equity Ratio 1.30 0.98 0.88 0.50 0.25 0.07 0.10 0.09 0.08 0.07 0.08Long Term Debt Equity Ratio 0.76 0.70 0.70 0.39 0.25 0.07 0.10 0.09 0.08 0.07 0.08AMBUJA CEMENTS LTD (500425) : GROUP-AInterest Cover 3.95 4.05 5.57 10.05 17.21 25.62 51.73 80.08 31.86 32.05 32Financial Charges Coverage Ratio 6.46 6.86 7.88 20.46 19.26 28.14 59.38 93.26 39.82 40.46 38.11Debt Equity Ratio 0.83 0.83 0.83 0.83 0.22 0.07 0.05 0.03 0.01 0.01 0.01Long Term Debt Equity Ratio 0.83 0.83 0.83 0.83 0.22 0.07 0.05 0.03 0.01 0.01 0.01ANJANI PORTLAND CEMENT LTD. (518091) : GROUP-CInterest Cover 1.25 1.16 1.12 1.19 1.27 5.31 5.12 6.45 5.32 1.09 1.59Financial Charges Coverage Ratio 1.58 1.69 1.77 1.89 1.84 5.13 4.99 6.26 5.64 1.54 1.95Debt Equity Ratio 1.63 1.62 1.51 1.31 1.47 1.25 1.1 0.9 3.04 3.77 2.66Long Term Debt Equity Ratio 1.33 1.27 1.19 1.01 1.15 0.96 0.96 0.8 2.75 3.2 2.19CENTURY TEXTILE & INDUSTRIES LTD. (500040) : GROUP-AInterest Cover 1.75 1.69 1.67 3.32 4.36 8.33 6.26 4.74 5.29 3.11 1.25Financial Charges Coverage Ratio 3.01 3.05 3.55 5.91 7.27 9.66 7.99 6.78 6.87 3.69 3.16Debt Equity Ratio 1.83 1.35 1.39 1.18 1.12 1.23 1.1 1.19 1.35 1.55 1.8Long Term Debt Equity Ratio 0.78 0.8 0.62 0.56 0.34 0.92 0.8 0.96 0.78 0.87 1.07DECCAN CEMENTS LTD. (502137) : GROUP-C

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Interest Cover 1.55 1.62 2.93 4.56 8.6 56.36 128.12 13.09 1.55 1.14 2.33Financial Charges Coverage Ratio 2.6 2.7 4.2 6.97 12.77 63.43 138.37 14.62 2.25 1.75 2.94Debt Equity Ratio 0.80 0.70 0.45 0.26 0.27 0.28 1.16 1.9 1.93 1.8 1.17Long Term Debt Equity Ratio 0.71 0.61 0.41 0.26 0.27 0.17 1.08 1.77 1.73 1.67 1.02EVEREST INDUSTRIES LTD. (508906) : GROUP-BInterest Cover 11.75 11.69 44.1 56.11 25.13 6.93 2.97 2.39 5.06 9.06 17.18Financial Charges Coverage Ratio 18.46 19.62 62.71 70.64 31.71 10.55 5.02 3.43 6.91 12.56 21.7Debt Equity Ratio 0.14 0.16 0.02 0.1 0.16 0.51 0.94 1.13 0.69 0.53 0.28Long Term Debt Equity Ratio 0.83 1.73 1.22 0.43 1.73 0.26 0.68 0.77 0.55 0.45 0.45INDIA CEMENTS LTD. (530005) : GROUP-BInterest Cover 0.05 0.19 0.19 0.56 1.34 4.46 9.63 8.03 4.58 1.51 2.34Financial Charges Coverage Ratio 0.16 0.18 0.76 1.16 1.84 5 10.31 9.4 6.06 3.15 3.22Debt Equity Ratio 4.53 4.58 5.88 5.95 1.8 1.48 0.7 0.67 0.6 0.69 0.56Long Term Debt Equity Ratio 3.53 3.57 4.5 4.65 1.46 1.33 0.64 0.59 0.5 0.53 0.37JK LAKSHMI CEMENT LTD. (500380) : GROUP-BInterest Cover 0.12 -0.16 -1.09 -3.26 3.22 5.02 5.94 5.48 7.19 1.94 3.28Financial Charges Coverage Ratio - -0.99 -0.94 -10.1 5.6 6.03 7.02 6.88 8.64 3.36 4.91Debt Equity Ratio 5.24 5.82 7.33 5.46 3.8 1.84 1.09 0.88 0.91 0.97 0.78Long Term Debt Equity Ratio 5.31 5.38 7.01 5.35 3.79 1.82 1.09 0.87 0.9 0.95 0.78MADRAS CEMENTS LTD. (500260) : GROUP-AInterest Cover 1.97 1.39 2.13 2.77 4.43 21.64 12.93 5.97 4.52 3.12 4.58Financial Charges Coverage Ratio 2.18 2.31 3.3 4.35 5.99 22.17 14.52 7.18 5.79 4.69 6.16Debt Equity Ratio 2.51 2.62 2.1 2.06 1.53 1.02 1.71 1.95 1.65 1.61 1.03Long Term Debt Equity Ratio 2.13 2.16 1.95 1.29 1.07 0.76 1.14 1.67 1.47 1.47 0.73PRISM CEMENT LTD. (500338) : GROUP-BInterest Cover 0.90 0.50 2.07 3.54 6.93 74.57 218.05 102.79 8.92 2.35 0.84

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Financial Charges Coverage Ratio 0.98 0.94 1.98 3.28 6.01 50.5 92.03 50.71 9.91 3.32 1.67Debt Equity Ratio 1.73 1.87 1.73 1.22 0.43 1.73 1.22 0.43 0.69 0.97 0.9Long Term Debt Equity Ratio 1.42 1.63 1.56 1.04 0.39 1.73 1.22 0.43 0.63 0.9 0.81SAGAR CEMENTS LTD. (502090) : GROUP-CInterest Cover - 0.69 1.02 0.28 2.09 25.22 15.99 2.59 2.03 1.53 2.89Financial Charges Coverage Ratio - 0.15 1.67 0.42 3.25 27.35 17.21 3.77 2.99 2.42 3.65Debt Equity Ratio - 2.27 2.19 1.34 0.8 0.34 2.08 1.32 1.1 1.15 0.61Long Term Debt Equity Ratio - 1.73 1.69 0.91 0.4 0.21 1.59 1.1 0.78 0.8 0.31SANGHI INDUSTRIES LTD. (526521) : GROUP-BInterest Cover 1.19 1.28 0.54 0.72 3.26 3.18 2.34 1.83 1.28 0.52 3.94Financial Charges Coverage Ratio 1.18 1.72 1.27 1.6 4.38 4.17 3.23 2.82 2.29 1.62 7.88Debt Equity Ratio 6.63 6.68 7.06 6.98 3.29 2.15 1.81 1.63 1.38 1.47 1.07Long Term Debt Equity Ratio 6.23 6.57 6.91 6.84 3.26 2.15 1.81 1.58 1.34 1.47 1.03SHREE DIGVIJAY CEMENT CO. LTD. (502180) : GROUP-CInterest Cover -0.79 -0.23 0.61 0.37 11.15 44.63 44.29 21.3 44.74 34.44 33.79Financial Charges Coverage Ratio -0.18 -0.02 1.03 0.77 12.66 41.96 36.83 22.5 43.39 19.9 19.18Debt Equity Ratio 0.83 0.86 0.86 0.86 0.86 1.7 3.5 1.02 1.02 1.15 1.83Long Term Debt Equity Ratio 0.83 0.86 0.86 0.86 0.86 0.96 0.98 1.01 1.1 1.15 1.83ULTRA TECH CEMENT LTD. (532538) : GROUP-AInterest Cover 1.30 1.39 1.41 1.6 4.11 14.45 20.85 12.75 14.97 7.53 14.85Financial Charges Coverage Ratio 2.08 2.71 2.71 3.07 6.03 15.99 22.15 13.74 16.75 9.75 18.88Debt Equity Ratio 1.31 1.31 1.45 1.44 1.4 0.9 0.65 0.59 0.35 0.39 0.36Long Term Debt Equity Ratio 1.21 1.21 1.34 1.3 1.38 0.88 0.53 0.51 0.34 0.36 0.28

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CHART 5.71

CHART 5.72

234

CHART 5.73

CHART 5.74

235

CHART 5.75

CHART 5.76

CHART 5.77

236

5.11 SOLVENCY ANALYSIS OF CEMENT INDUSTRY:5.11.1 Interest Cover Ratio:The interest coverage ratio for the cement industry has been at its peak in the year2008 and shows a downward slide, on an average. This shows that the earnings on anaverage in the industry cover the fixed charges fewer and fewer times which isbecause of lower profits or higher cost of production and cost of operations. Themeteoric fall is seen in Group A companies as well as all other groups of companies.This has encouraged the companies to lower the debt component vis--vis ownersfund. The average Interest Cover ratios for Group A,B and C companies are 11.08,13.25 and 12.49 (times) respectively and the Debt-Equity ratios are 1.01, 2.18 and1.11 respectively. Group A companies have employed lower amount of debt and havelower Interest Cover ratio. In spite of high debt in capital structure of Group Bcompanies the interest cover is the best among other groups. This shows that thesecompanies have used the debt very gainfully and that has improved their profitabilitysignificantly. They are therefore able to cover the interest on debt many more times.Group C companies have managed to post a good cover ratio and also have a higherDebt-Equity ratio. These companies can absorb more debt because of their goodsolvency position.

5.11.2 Financial Charges Coverage Ratio:Overall trend in the industry shows improvement accompanied by dramaticimprovement in 2008.A barometer of how many times a companys Earnings BeforeInterest and Taxes covers not only interest on debt but also other financial chargessuch as preference dividend and even lease rentals etc.. But only Group A companieshave shown intermittent improvement in their debt-servicing capacity. The coverratios for Group A, B and C companies are 13.52, 11.13 and 13.00(times)respectively and the Debt-Equity ratios are 1.01, 2.18 and 1.11 respectively. Group Acompanies have employed lower amount of debt and its cover ratio is very high whichreveals the additional debt-contracting capacity of these companies. In spite of highdebt in capital structure of Group C companies, the charges cover ratio is higher thanthat of Group B companies. Group B companies have the highest Debt-Equity ratio

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and have the lowest cover ratio. This means generally speaking, if these companiesopt for higher amount of leverage they have to use it very profitably to ensure thattheir solvency is not adversely affected.

5.11.3 Debt-Equity Ratio:This ratio is a barometer of how solvent a business unit is and the type of liabilities itcarries. The higher the ratio, the higher is proportion of total borrowings as comparedto owners funds. The Debt-Equity ratios for Group A, B and C companies are 1.01,2.18 and 1.11 respectively. Group A companies have comparatively lower debt-equityratio and Group B companies have comparatively higher Debt-equity ratio.

5.11.4 Long Term Debt-Equity Ratio:For Group A, B and C companies the Long Term Debt-Equity ratios are 0.74, 2.17and 1.09 respectively. In Group B companies the prominence of Long-term debtcomes to the fore. But it is the Group A companies which have the least amount oflong-term liabilities. The long-term liabilities also normally entail fixed chargeswhich heap a very heavy burden on low profit earning companies and hencecompanies show a certain amount of aversion for it. Group A companies seem to havedone away with long-term debt towards the latter years rhyming with financialwisdom.

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TABLE 5.12CEMENT: MANAGEMENT EFFICIENCY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012ACC LTD (500410) : GROUP-AInventory Turnover Ratio 8.53 8.93 7.27 5.37 9.33 24.85 27.51 25.22 19.04 18.59 17.39Investments Turnover Ratio 17.32 19.41 17.69 12.29 22.4 24.85 25.56 23.02 16.54 17.89 18.02Asset Turnover Ratio 0.80 0.87 0.96 0.69 1.19 1.26 1.25 1.34 1.13 1.27 1.74AMBUJA CEMENTS LTD (500425) : GROUP-AInventory Turnover Ratio 6.80

6.807.31

10.4317.19 11.18 7.59 11.36 9.19 10.38 10.67

Investments Turnover Ratio 6.707.20

7.317.81

15.09 14.08 8.29 9.36 9.36 10.00 10.11Asset Turnover Ratio 0.85 0.88 0.56 0.75 1.40 1.10 1.10 1.15 0.85 0.88 0.67ANJANI PORTLAND CEMENT LTD. (518091) : GROUP-CInventory Turnover Ratio 5.93 6.04 6.37 6.69 6.24 6.47 18.52 40.57 26.18 8.53 21.99Investments Turnover Ratio 7.19 8.09 8.76 10.12 10.13 10.01 10.11 9.17 10.50 10.13 11.09Asset Turnover Ratio 0.59 0.79 0.81 0.86 0.85 1.22 1.41 1.33 0.66 0.61 1.00CENTURY TEXTILE & INDUSTRIES LTD. (500040) : GROUP-AInventory Turnover Ratio 6.04 6.31 4.90 5.76 5.45 6.78 9.12 9.46 7.43 6.02 6.27Investments Turnover Ratio 8.69 9.26 6.96 8.63 8.25 7.06 8.19 8.54 8.02 8.12 8.13Asset Turnover Ratio 0.82 0.77 0.79 0.85 0.86 0.9 0.95 0.85 0.96 0.98 0.94

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DECCAN CEMENTS LTD. (502137) : GROUP-CInventory Turnover Ratio 16.12 17.00 20.23 17.14 23.77 31.12 47.55 13.03 22.06 22.65 13.25Investments Turnover Ratio 30.09 34.17 41.41 41.54 86.9 77.76 77.05 40.0 40.06 44.32 33.05Asset Turnover Ratio 0.70 0.80 1.04 0.98 1.07 1.35 1.53 0.40 0.56 0.63 1.21EVEREST INDUSTRIES LTD. (508906) : GROUP-BInventory Turnover Ratio 4.00 4.29 4.25 4.89 4.85 5.24 4.19 4.54 5.92 5.22 6.25Investments Turnover Ratio 3.23 4.47 4.45 5.19 5.25 6.06 6.11 5.53 5.54 5.52 5.85Asset Turnover Ratio 1.60 1.66 1.70 1.89 1.53 1.70 1.43 1.78 2.13 2.10 2.77INDIA CEMENTS LTD. (530005) : GROUP-BInventory Turnover Ratio 4.29 5.59 6.42 5.83 7.24 9.09 27.47 26.36 25.93 23.24 8.98Investments Turnover Ratio 11.49 13.78 15.85 14.97 24.76 29.09 29.40 27.16 27.97 26.00 20.21Asset Turnover Ratio 0.47 0.50 0.35 0.39 0.51 0.58 0.70 0.62 0.62 0.53 0.65JK LAKSHMI CEMENT LTD. (500380) : GROUP-BInventory Turnover Ratio 6.98 7.14 16.92 15.04 16.04 15.28 64.12 87.02 77.26 24.83 16.00Investments Turnover Ratio 50.03 54.55 67.24 39.96 72.82 45.00 29.12 29.46 37.43 36.02 36.27Asset Turnover Ratio 0.27 0.34 0.51 0.46 0.5 0.63 0.75 0.86 0.87 0.66 0.83MADRAS CEMENTS LTD. (500260) : GROUP-AInventory Turnover Ratio 9.59 9.01 13.27 5.68 10.04 12.33 37.03 23 23.84 18.18 16.82Investments Turnover Ratio 13.78 19.14 28.3 19.95 25.75 47.1 41.16 46.06 40.81 42.95 43.9Asset Turnover Ratio 0.51 0.43 0.48 0.47 0.61 0.87 0.74 0.65 0.58 0.5 0.75PRISM CEMENT LTD. (500338) : GROUP-B

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Inventory Turnover Ratio 6.39 7.79 8.44 7.22 9.28 9.04 31.66 26.28 14.81 12.95 13.9Investments Turnover Ratio 21.78 24.44 22.94 20.31 25.27 23.93 30.16 30.41 34.1 31.11 40.3Asset Turnover Ratio 0.34 0.57 0.66 0.74 0.95 1.19 1.25 0.98 2.15 1.55 1.97SAGAR CEMENTS LTD. (502090) : GROUP-CInventory Turnover Ratio - 8.35 9.14 10.68 20.14 34.07 93.32 11.2 16.45 12.47 7.94Investments Turnover Ratio - 26.37 21.54 25.21 57.14 66.73 60.32 50.4 47.02 51.37 44.11Asset Turnover Ratio - 0.64 0.86 1.19 1.75 2.68 1.79 0.80 1.10 1.04 1.36SANGHI INDUSTRIES LTD. (526521) : GROUP-BInventory Turnover Ratio 1.97 1.54 5.22 12.56 13.41 15.85 26.36 29.85 14.75 9.87 5.45Investments Turnover Ratio 2.38 2.94 8.53 19.58 25.75 47.1 37.03 23.00 23.84 18.18 16.82Asset Turnover Ratio 0.84 0.87 0.16 0.39 0.42 0.53 0.55 0.52 0.42 0.47 0.57SHREE DIGVIJAY CEMENT CO. LTD. (502180) : GROUP-CInventory Turnover Ratio 4.40 5.35 4.9 3.21 13.94 7.61 13.66 12.15 8.7 13.03 13.03Investments Turnover Ratio 15.12 16.72 15.35 9.65 32.62 20.03 20.11 22.17 22.17 23.13 23.03Asset Turnover Ratio 0.79 0.74 0.83 0.49 1.19 1.42 1.40 1.16 1.21 1.38 1.38ULTRA TECH CEMENT LTD. (532538) : GROUP-AInventory Turnover Ratio 9.35 9.03 10.29 9.53 8.75 11.46 31.16 22.89 22.65 17.69 15.73Investments Turnover Ratio 12.22 12.31 12.12 11.04 21.2 34.61 31.16 21.73 23.61 22.00 23.41Asset Turnover Ratio 0.40 0.74 0.55 0.62 0.72 1.03 1.11 1.25 1.18 1.26 1.16

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CHART 5.78

CHART 5.79

242

CHART 5.80

CHART 5.81

243

CHART 5.82

CHART 5.83

CHART 5.84

244

5.12 EFFICIENCY ANALYSIS OF CEMENT INDUSTRY:5.12.1 Inventory Turnover Ratio:A barometer of how efficient a company is in selling its products and how fast thegoods are moving off the shelves. In Group A companies the Inventory Ratio hasbeen high in the initial years but in the last 3 years it shows a decline which isindicative of mild stock glut with the group of companies. These companies couldimprove their profitability by selling their products more effectively thereby reducingthe cost of inventory pile-up and minimizing loss in profit. In Group B and Ccompanies it is very high all through the years. There is a chance that the companiesthat these companies could also be facing intermittent stock out situations. Theaverage Inventory Turnover ratios for Group A,B and C companies are 12.70, 16.37and 17.40 (times) respectively and the Debt-Equity ratios are 1.01, 2.18 and 1.11respectively. As can be seen from the above data and diagrams, Group C companieshave the highest turnover ratio and has lower Debt-Equity ratio. There is a potentialfor these companies to employ and efficiently service greater amount of debt ifgreater sales could translate into enhanced profitability. Group B companies have avery high turnover ratio and also have a very high Debt-Equity ratio which showsthat leverage has had a positive impact on the solvency of these companies and thatsuch companies given the turnover rate can increase the amount of leverage in theircapital structures.

5.12.2 Investments Turnover Ratio:The Group B and Group C companies have enjoyed a very high Investments TurnoverRatio. But the companies in Group A have comparatively a low Investments TurnoverRatio. The average Investments Turnover ratios for Group A,B and C companies are17.26, 24.36 and 26.95 (times) respectively and the Debt-Equity ratios are 1.01, 2.18and 1.11 respectively .Group C companies cover their investments many more timesthan the Group A companies. Group B companies on an average have a greateramount of debt and yet they have posted a very healthy Investments Turnover Ratioand it again points to the fact that these companies can absorb still greater amount ofleverage reducing the portion of owners funds thereby. That will also furtherimprove the ratio. Group A companies have low Debt-Equity ratio and also have acomparatively lower Investments Turnover Ratio.

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5.12.3 Assets Turnover Ratio:On an average the Assets Turnover Ratio of Group B and C companies is higherwhich shows that these companies have utilised their assets very efficiently togenerate high sales volume. Assets are used to generate sales and this establishes arelationship between sales and assets of a company. The average Assets Turnoverratios for Group A,B and C companies are 0.89, 0.95 and 1.08(times) respectivelyand the Debt-Equity ratios are 1.01, 2.18 and 1.11 respectively .Group C companiescover their assets more times than the Group A and B companies despite having ahigh Debt-Equity ratio. This could be because of high volume of sales and lowerinvestment in assets or acquisition of asset at lower rates. Group A companies,because of high value of assets or sagging sales volumes may have posted a lowerturnover ratio. Group C companies have made a judicious and gainful use of debt orhave invested the funds raised in productive assets to generate a healthy sales volume.Group B companies have the highest Debt-Equity ratio and have an Assets TurnoverRatio of 0.95 which is admirable and shows that the debt has been profitably used orinvested in productive assets to garner greater sales revenues.

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TABLE 5.13HEAVY ELECTRICAL EQUIPMENTS: PROFITABILITY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012BGR ENERGY SYSTEMS LTD (532930) : GROUP-B

Operating Profit Margin(%) 10.06 11.00 12.01 11.98 12.24 12.46 11.49 12.61 12.9 12.34 13.53Profit Before Interest And Tax Margin(%) 11.23 11.10 11.05 12.60 11.25 11.13 12.10 12.05 12.46 11.95 12.97

Gross Profit Margin(%) 10.13 10.13 12.87 12.70 12.00 11.83 11.13 12.22 12.57 11.98 13.02Net Profit Margin(%) 5.13 5.62 5.18 6.91 6.81 6.23 5.72 5.89 6.49 6.78 6.47

BHARAT HEAVY ELECTRICALS LTD. (500103) : GROUP-AOperating Profit Margin(%) 12.15 13.65 10.62 13.52 16.54 20.41 19.17 15.71 18.04 20.3 20.53

Profit Before Interest And Tax Margin(%) 10.00 10.64 7.88 10.9 14.36 18.47 16.73 13.93 16.13 18.76 18.37Gross Profit Margin(%) 14.12 15.74 12.9 15.38 18.11 22.41 17.65 14.45 16.66 19.17 18.86Net Profit Margin(%) 6.03 6.14 7.91 9.58 12.19 13.51 13.87 11.36 12.55 13.99 14.36

CROMPTON GREAVES LTD. (500093) : GROUP-AOperating Profit Margin(%) 11.7 11.6 9.19 8.52 9.75 10.07 12.3 16.14 15.9 15.32 10.97

Profit Before Interest And Tax Margin(%) 8.66 8.62 6.55 6.43 7.96 8.86 11.18 15.02 14.79 13.91 9.48Gross Profit Margin(%) 8.70 8.05 7.69 8.14 9.53 9.67 11.27 15.17 14.94 13.99 9.59Net Profit Margin(%) 1.32 1.80 4.09 5.5 6.26 5.62 7.92 8.40 11.32 11.33 7.60

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EMCO LTD. (504008) : GROUP-COperating Profit Margin(%) - 16.01 17.05 14.7 12.67 14.41 15.02 15.94 12.07 0.61 9.81

Profit Before Interest And Tax Margin(%) - 12.21 13.63 12.45 11.25 13.41 13.85 14.22 10.18 -1.16 7.03Gross Profit Margin(%) - 8.31 9.13 8.94 9.76 11.34 13.99 14.30 10.24 -1.16 7.30Net Profit Margin(%) - 1.98 2.6 4.06 4.69 6.14 6.75 5.29 13.59 -4.19 0.99

JYOTI STRUCTURES LIMITED (513250) : GROUP-BOperating Profit Margin(%) 11.28 12.76 12.80 12.19 12.52 14.83 13.80 13.44 11.68 12.87 11.01

Profit Before Interest And Tax Margin(%) 11.82 10.97 10.82 11.70 11.91 11.91 12.06 12.78 12.84 11.97 10.13Gross Profit Margin(%) 12.11 12.90 12.16 12.71 12.73 13.22 13.27 13.90 13.84 10.90 10.16Net Profit Margin(%) 4.19 4.32 4.41 3.61 3.7 5.69 5.41 4.61 3.90 4.14 3.41

KALPATARU POWER TRANSMISSION LTD. (522287) : GROUP-BOperating Profit Margin(%) 10.21 10.04 10.14 10.75 11.73 16.01 15.49 10.86 11.06 11.38 9.44

Profit Before Interest And Tax Margin(%) 18.71 15.70 13.33 12.15 12.28 11.13 10.97 9.02 9.15 9.28 7.53Gross Profit Margin(%) 17.08 16.14 15.18 15.20 15.61 15.88 11.04 9.08 9.2 9.36 7.58Net Profit Margin(%) 10.43 9.93 9.01 4.62 4.55 10.02 6.13 3.39 4.42 4.55 3.53

STERLITE TECHNOLOGIES LTD (532374) : GROUP-BOperating Profit Margin(%) 10.00 11.98 10.02 13.2 11.14 12.14 12.28 10.23 15.66 11.76 7.19

Profit Before Interest And Tax Margin(%) 9.18 9.03 9.9 10.71 9.61 9.91 10.06 8.35 13.6 9.22 4.41Gross Profit Margin(%) 12.65 10.46 10.15 9.31 7.23 9.23 10.08 8.37 13.67 9.28 4.46

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Net Profit Margin(%) 9.06 8.88 5.89 8.12 5.51 7.51 5.96 3.84 10.06 6.21 1.49SUZLON ENERGY LTD. (532667) : GROUP-A

Operating Profit Margin(%) 10.29 16.56 18.48 24.2 24.75 23.14 23.09 11.92 -5.57 6.16 12.55Profit Before Interest And Tax Margin(%) 8.18 14.02 16.98 21.91 23.12 21.44 21.51 10.35 -8.62 2.38 9.41

Gross Profit Margin(%) 12.65 17.03 17.31 23.45 25.00 22.72 21.85 10.55 -9.18 2.56 9.89Net Profit Margin(%) 9.06 12.5 18.14 18.62 21.28 19.41 20.09 -6.34 -37.89 -3.95 -7.00

THERMAX LTD. (500411) : GROUP-AOperating Profit Margin(%) 9.91 10.29 9.99 9.02 13.2 13.63 12.5 15.93 11.12 10.79 10.96

Profit Before Interest And Tax Margin(%) 9.88 8.18 8.03 7.90 12.01 12.41 11.62 14.59 9.47 9.68 9.88Gross Profit Margin(%) 12.95 12.65 14.55 10.31 14.35 15.71 11.81 14.89 9.80 9.88 10.07Net Profit Margin(%) 9.62 9.06 8.88 5.89 8.12 8.80 8.69 9.09 4.46 7.87 7.58

TRANSFORMERS & RECTIFIERS (INDIA) LTD. (532928) : GROUP-BOperating Profit Margin(%) 16.90 16.20 16.70 15.91 15.89 16.84 20.66 17.30 16.31 10.97 4.64

Profit Before Interest And Tax Margin(%) 10.18 10.00 10.87 10.31 12.39 16.04 19.72 16.41 15.24 9.58 3.33Gross Profit Margin(%) 16.75 16.84 16.05 16.01 15.93 16.08 19.95 16.65 15.4 9.82 3.37Net Profit Margin(%) 10.06 10.14 10.01 10.01 10.72 7.95 11.20 10.27 9.80 7.53 1.91

TRIVENI TURBINE LTD. (533655) : GROUP-COperating Profit Margin(%) - - 0.48 3.16 6.99 2.87 10.0 -22.3 -2.5 22.72 24.38

Profit Before Interest And Tax Margin(%) - - -1.75 1.35 6.52 1.35 6.52 -23.37 -7.2 20.88 22.48

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Gross Profit Margin(%) - - -1.75 1.35 6.54 1.35 6.71 -23.42 -10.26 21.02 22.55Net Profit Margin(%) - - -1.47 0.22 2.13 0.22 0.45 -24.77 -3.99 -2.36 14.34

VOLTAMP TRANSFORMERS LTD. (532757) : GROUP-COperating Profit Margin(%) 15.93 9.84 13.98 13.34 13.87 16.01 21.26 23.33 19.52 9.78 7.32

Profit Before Interest And Tax Margin(%) 14.59 8.44 12.66 12.21 12.87 15.29 20.29 21.87 17.66 7.67 5.71Gross Profit Margin(%) 14.89 13.49 15.69 14.44 14.99 16.73 20.69 22.64 18.42 10.14 5.87Net Profit Margin(%) 9.09 7.64 8.80 8.43 9.10 9.63 14.10 17.24 14.6 9.51 5.68

250

CHART 5.85

CHART 5.86

251

CHART 5.87

CHART 5.88

252

CHART 5.89

CHART 5.90

CHART 5.91

253

5.13 PROFITABILITY ANALYSIS OF HEAVY ELECTRICALEQUIPMENTS INDUSTRY:

5.13.1 Operating Profit Margin:It is observed that the operating profit margin ratio is on the rise as far as Group Acompanies are concerned. This implies that in these companies the operatingefficiency has improved a little which will have a positive impact on their overallprofitability. In Group C companies it shows a slight dip in the recent years. In theyear 2010 there has been loss in Group C companies. This implies that in thesecompanies, on an average the proportion of a company's revenue left over after payingfor variable costs of production such as wages, raw materials, etc. is unacceptablylow. Group B companies have shown encouraging Operating Profit ratios. In GroupA, B and C companies the average operating profit ratios are 14.02, 12.55 and 8.82(%) respectively and the average Debt-Equity ratios are 0.63, 0.38 and 0.28. Group Acompanies have the highest operating profit margin ratio and also the highest Debt-Equity ratio. These companies have efficiently used the debt to enhance theirprofitability and can raise even more debt given the fact they have the profits toservice the additional debt. As such Group A and Group B companies can increasethe amount of debt further. Group C companies have the lowest operating profitmargin ratio and also the lowest Debt-Equity ratio.

5.13.2 Profit Before Interest and Tax Margin:The ratio is fairly consistent in Group A companies but it is steadily declining inGroup B and fluctuating in Group C companies. Group A dominates and comes outon top amongst all the companies which shows that those companies in this group arehighly profitable irrespective of the capital structure related advantages ordisadvantages. There is marginal improvement of the ratio in Group C companiesafter a major dip in the year 2010, which means such companies have a potential tocontract debt in the right set of financial circumstances and after a proper financialfeasibility analysis. In Group A, B and C companies the average Profit before Interestand Tax ratios are 12.13, 11.07 and 7.16(%) respectively and Debt-Equity ratios are0.63, 0.38 and 0.28. Group A and B companies have a high profit ratio and thereforeGroup A and Group B companies have a choice of opting for greater amount of debtto accelerate their profitability whereas Group C companies have the lowest profit

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ratio but if additional debt can improve the profitability of the companies , the sameshould be moderately further contracted.

5.13.3 Gross Profit Margin:This ratio is a barometer of how efficiently a business unit carries out itsmanufacturing activities. It was the highest, on an average, in the year 2007 for all thecompanies. But in the recent years it can be seen to be slightly on the lower side.Group A companies outperform the rest of Group companies. It has become steady inthe last few years but in Group C companies it is dwindling which is not a goodcomment on their profitability. In Group A, B and C companies the average GrossProfit ratios are 13.61, 11.14 and 7.11(%) respectively and Debt-Equity ratios are0.63, 0.38 and 0.28. Group A companies have the highest profit margin ratio and alsothe highest Debt-Equity ratio. There is clearly a possibility for both Group A andGroup B companies to opt for more leverage and use greater profits to pay for fixcharges on greater amount of debt for higher profitability. Group C companies havea low profit ratio and are also least levered.

5.13.4 Net Profit Margin:Group A companies clearly have posted positive Net Profit Margin but Group Bcompanies are marginally dwindling on net profit margins which does not augur toowell for their financial health. In Group A, B and C companies the average Net Profitratios are 7.97, 5.38 and 1.20 (%) respectively and Debt-Equity ratios are 0.63, 0.38and 0.28. Group A companies have reported the highest profit margin ratio and alsohave contracted the highest amount of debt. This shows these companies havegainfully used the debt to enhance their profitability and there companies can use theaugmented profitability to service greater amount of debt. Group C companies haveleast debt and yet their profit ratio is also the lowest. Group B companies havemanaged debt ina much more prudent way than the Group C companies.

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TABLE 5.14HEAVY ELECTRICAL EQUIPMENTS: LIQUIDITY RATIOS

RATIOS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012BGR ENERGY SYSTEMS LTD (532930) : GROUP-BCurrent Ratio 0.88 0.98 0.78 0.81 0.89 0.78 0.88 0.98 1.03 0.99 0.93Quick Ratio 1.68 1.34 1.40 1.37 1.71 1.88 2.36 1.83 1.64 1.66 1.84BHARAT HEAVY ELECTRICALS LTD. (500103) : GROUP-ACurrent Ratio 1.80 1.81 1.71 1.63 1.53 1.43 1.38 1.36 1.37 1.32 1.47Quick Ratio 1.21 1.29 1.28 1.22 1.17 1.13 1.09 1.02 1.04 1.03 1.11CROMPTON GREAVES LTD. (500093) : GROUP-ACurrent Ratio 0.70 0.87 0.75 0.97 1.21 1.09 1.18 1.29 1.28 1.3 1.52Quick Ratio 1.17 1.14 1.09 1.22 1.12 1.11 1.02 1.12 1.12 1.09 1.28EMCO LTD. (504008) : GROUP-CCurrent Ratio - 0.90 0.99 1.01 1.2 1.19 1.06 1.04 1.34 1.06 0.97Quick Ratio - 2.11 1.74 1.66 1.41 1.67 2.04 1.88 2.21 1.96 2.03JYOTI STRUCTURES LIMITED (513250) : GROUP-BCurrent Ratio 1.00 1.00 1.15 1.09 1.02 1.15 1.2 1.08 1.13 1.40 1.82Quick Ratio 1.53 1.81 1.62 1.25 1.3 1.97 2.23 1.74 1.61 1.81 1.58KALPATARU POWER TRANSMISSION LTD. (522287) : GROUP-BCurrent Ratio 1.09 1.31 1.14 1.09 1.02 1.04 1.1 1.05 1.08 1.21 1.3Quick Ratio 1.51 1.37 1.96 1.45 1.30 1.65 1.58 1.74 1.47 1.43 1.31

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STERLITE TECHNOLOGIES LTD (532374) : GROUP-BCurrent Ratio 1.00 0.92 0.94 0.93 0.75 1.09 0.70 1.2 1.51 0.9 0.86Quick Ratio 0.78 0.88 0.97 1.25 1.43 1.25 2.02 1.45 1.38 1.43 1.20SUZLON ENERGY LTD. (532667) : GROUP-ACurrent Ratio 1.81 1.74 1.40 1.43 2.47 1.49 1.46 0.82 1.14 1.31 0.87Quick Ratio 1.59 1.87 1.57 1.59 2.05 2.4 2.12 2.19 2.01 1.91 1.07THERMAX LTD. (500411) : GROUP-ACurrent Ratio 1.78 1.25 1.12 0.98 0.87 0.82 0