A PROJECT REPORT

ON

ITC LimitedOne of India’s Most Admired and Valuable

Companies

INTRODUCTION

Itc limited is a public conglomerate company head quartered in Kolkata .The Company is currently headed by Yogesh Chander Deveshwar. 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.

One of the foremost in the private sector in terms of:

–Sustained value creation (BT-Stern Stewart survey)

–Operating profits

–Cash Profits

Itc is the only Indian FMCG Company to feature in Forbes 2000 List, A comprehensive ranking of world’s biggest companies measured by a composite of sales, profits, assets & market value.

ITC’s ranking amongst 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 12-13Net RevenuePBDITPBITPBTPATCapital EmployedROCE %

2,5365845364522611,88628.4

29,60611,56610,77110,6847,41823,56945.7

15.6%19.2%19.3%20.4%21.8%16.0%

Market CapitalizationTotal Shareholder Returns %

5,571 244246 24.9%26.4%

Sensex (CAGR 95-96 to 12-13): 10.7%

Rapid Scale up of FMCG businesses…

ITC’s Vision

Make a significant and growing contribution towards:

Mitigating societal challenges Enhancing shareholder rewards

By:

Creating multiple drivers of growth while sustaining leadership in tobacco and Focusing on triple bottom line performance

Enlarge contribution to the nations

Financial capital Environmental capital Social capital

Creating world-class brands for Indian Consumers

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 Ratio provides information on a company's ability to meet its short−term, immediate obligations.

A Profitability Ratio provides information on the amount of income from each dollar of sales.

An Activity Ratio relates information on a company's ability to manage its resources (that is, its assets) efficiently.

A Financial Leverage Ratio provides information on the degree of a company's fixed financing obligations and its ability to satisfy these financing obligations.

A Market Ratio describes the company's financial condition in terms of amounts per share of stock.

Liquidity Ratio

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

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

PE Ratios 33.2Current Share 311.65

price

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 the business generates. This is expressed as the ratio between the profit before interest 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 getting good 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 (Profit before 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 is doing well.

Comparative Balance Sheet Statement

Particulars MAR'12 MAR'11

(₹ Cr.) (₹ Cr.) Absolute change

%Change

EQUITY AND LIABILITIESShare Capital 781.84 773.81 8.03 1.04%Share Warrants & Outstanding’sTotal 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 LiabilitiesTrade 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%ASSETSNon-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 & AdvancesCurrents 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 Investments

10,080.26 9,054.22 1026.04 11.33%

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: 0.00Increase/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%

Common size Balance Sheet Statement

Particulars Mar'12 Mar'13

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

18.44116 17.96057

Total Current Assets Excluding Current Investments

34.79984 35.59914

Miscellaneous Expenses not written off 0 0Total Assets 100 100

Contingent LiabilitiesTotal DebtBook Value (in ₹)Adjusted Book Value (in ₹)

Common size Income Statement

Particulars Mar'13 Mar'12

Gross Sales 100.00 100.00Less :Inter divisional transfers 0 0Less: Sales Returns 0 0Less: Excise 28.9849 28.60073Net Sales 71.0151 71.39927EXPENDITURE: 0 0Increase/Decrease in Stock -0.58508 -0.18622Raw Materials Consumed 29.24114 27.53201Power & Fuel Cost 1.306504 1.286225Employee Cost 3.294129 3.570665Other Manufacturing Expenses 2.747906 2.991151General and Administration Expenses 2.931659 2.980277Selling and Distribution Expenses 4.959731 5.549604Miscellaneous Expenses 1.900203 2.495451Expenses Capitalised 0 0Total Expenditure 45.79619 46.21916PBIDT (Excl OI) 25.21891 25.18011Other Income 2.296849 2.343325Operating Profit 27.51576 27.52344Interest 0.251535 0.27813PBDT 27.26422 27.24531Depreciation 1.889444 1.983226Profit Before Taxation & Exceptional Items

25.37478 25.26208

Exceptional Income / Expenses 0 0Profit Before Tax 25.37478 25.26208Provision for Tax 7.756206 7.765732PAT 17.61857 17.49635Extraordinary Items 0 0Adj to Profit After Tax 0 0Profit Balance B/F 4.684874 1.557797Appropriations 22.30345 19.05415Equity Dividend (%) 1.246868 1.277651Earnings Per Share (in ₹) 0.022301 0.022373Book Value (in ₹) 0.066832 0.068056

Trend Analysis

From the analysis we can see that co. is growing at steady rate and remarkable points 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.

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 1,067.93 467.62United 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