1. Analysis of Financial Statements
ITC Ltd.
By:Abhimanyu Singh Yadav
Divya Mahtta
Sec 1, PGP 1

2. Outline



ITC: the company
Segmented sales
Ratio Analysis
 Stock
price comparison
 DU Pont Analysis

Common size statement
 Income
statement
 Balance sheet

Trend Analysis

3. ITC: the company



ITC Ltd is the largest tobacco company in India
with an annual turnover of Rs.19,844 crore
ITC features on the Forbes Global 2000 rankings
for 2007 at position 1256
Mainly into the business of










Cigarettes:
Hotels
Paperboards & Specialty
Agricultural Industry
Packaged Foods & Confectionery
Branded Apparel
Personal Care
Greeting Card
Information Technology
Stationery:

4. .
Segmented Sales pie charts
Sales segment wise
Agri Business
Cigarettes
Hotels
Others
Paperboards, Paper
& Packaging
Segmented PBIT
PBIT / capital employed

5. Asset Structure
Asset Structure 2007
Net fixed assets
Investments
Deferred tax assets
Current assets
Loans & advances
Asset structure 2006
Net fixed assets
Investments
Deferred tax assets
Current assets
Loans & advances

6. Liabilities Structure
Liabilities Structure 2007
Net Worth
Total borrowings
Current liabilities &
provisions
Liability structure 2006
Net Worth
Total borrowings
Current liabilities &
provisions

7. Why Ratios?

Easy comparison as everything’s
brought to same platform

Indicates strengths and weaknesses
of the company

8. Different types: & what they tell?





Liquidity: Can the company make required
payments?
Turnover ratios: right amount of assets
vs. sales?
Solvency Ratios: Right mix of debt and
equity?
Profitability: Do sales prices exceed unit
costs, and are sales high enough as
reflected in PM, ROE, and ROA?
Market value: Do investors like what they
see as reflected in ratios like P/E?

9. Liquidity Ratios
Ratios
Cash to
C.L
Quick
ratio
Current
ratio
Working
Capital
Mar
04
0.010
0.103
0.829
-610
Mar
05
0.017
0.211
1.004
11.51
Mar
06
0.238
0.365
1.320
1148
Mar
07
0.230
0.394
Analysis
Increasing ability
of firm to pay
through cash
Inadequate quick
assets: More
reliance on stock
1.459
Improved
Liquidity
1759
Possible Reasons:
Increase in WC
Requirement

10. Solvency Ratios
Ratio
Mar
04
Mar
05
Mar
06
Debt:
Equity
Debt:
Total fund
Analysis
Low
0.02
Interest
coverage
Mar
07
80.12
0.40
0.03
0.01
56.62 207.7
0.33
0.32
Propriety
Ratio
Debt &More
Reliance on
owners fund
0.02 Ability to pay
interest is good:
453.0 Use more of debt
Can use
leverage
0.31
Possible
0.59
0.67
0.68
reason:
High rate of
0.68 interest on Loan

11. Turnover Ratios
Ratio
Debtors
turnover
Drs T/O Period
(in days)
Creditors
turnover
Crs T/O period
(in days)
Mar
04
Mar
05
Mar
06
46.91
32.58 28.55
7.78
11.20 12.78
1.34
271.1
1.55
2.50
234.3 145.4
Mar
07
Analysis
Fast
31.37 collection of
funds : Less
W. C
11.63
Time Lag in
2.98 Payments:
Decreasing.
 WC needs
122.3 increasing

12. Turnover Ratios
Ratio
Raw material
turnover
Finished
Goods T/O
Fixed Asset
T/O
Capital
Employed T/O
Mar
04
Mar
05
Mar
06
Mar
07
Analysis
Efficiency of
2.41 1.96 1.84 1.83 Inventory
Management : ↓
40.98 28.91 24.48 27.00
3.19
1.13
3.22
1.15
3.62
Stable : Efficient
3.37
utilization
1.24
Adequate
amount of
1.30 capital Used

13. Profitability Ratios
Ratio
Mar
04
Gross
Profit
22.1
0
Operating
Profit
20.1
4
Net Profit
12.9
6
Mar
05
Mar
06
Mar
07
Analysis
23.01 21.74
21.65
Operating
efficiency is good
20.93 19.74
19.84
Less proportion of
indirect expenses
14.56 13.46
Available to
13.48 Owners : Tax
Incidence

14. Profitability Ratios : Trend
Conclusion - High Tax Rates : Exempted Income Reducing the Tax liability

15. Market Value : Owners Point of View
Mar
Ratios 04
ROI
42.0
EPS
4.29
DPS
1.33
Mar
05
Mar
06
Mar
07
Analysis
High Return: Efficient
43.9 38.5 40.5 utilization of funds
4.91 6.08 7.19 Face Value = 1 Re. High
2.07 2.65 3.10 Return.

16. Market Value : Owners Point of View
Ratios
Mar
04
Mar
05
Mar
06
Mar
07
DP Ratio
More
contribution to
31.00 42.16 43.59 43.12 Retained Profit
PE ratio
Higher growth
16.19 18.22 32.06 20.92 prospects
Earning Yield
6.2%
5.5%
3.1%
Dividend Yield
1.9%
2.3%
1.4%
Analysis
4.8% Profitability in
terms of Mkt
Price: Unstable
2.1%

17. 0
a
n
-0
2
M
a
y
-0
2
S
e
p
-0
2
J
a
n
-0
3
M
a
y
-0
3
S
e
p
-0
3
J
a
n
-0
4
M
a
y
-0
4
S
e
p
-0
4
J
a
n
-0
5
M
a
y
-0
5
S
e
p
-0
5
J
a
n
-0
6
M
a
y
-0
6
S
e
p
-0
6
J
a
n
-0
7
M
a
y
-0
7
S
e
p
-0
7
J
a
n
-0
8
J
INR
BSE Stock prices: ITC
Share price of ITC
250
200
150
100
50
TIME

18. DU Pont Analysis

Profitability of Shareholders
Depends on
 Profitability
(PM)
 Asset
of the Organization
utilization Rate (TATO)
 Debt
utilization: Leverage (Eq.
Multiplier.)

Shows how these factors combine
to determine ROE.

19. DU Pont Analysis
ROE = (Profit margin) x (TA turnover) x
(Equity multiplier)
ROE = (PAT/Sales) x (Sales/TA) x
(TA/Equity)
PM
2004
2005
2006
2007
TA TO
EM
ROE
12.96%
14.56%
13.46%
13.48%
1.12
1.15
1.24
1.30
1.67
1.49
1.47
1.46
24.3%
25.06%
24.52%
25.63%

20. Common size statements
Income statement
Year Ending 31st March
2004
%age
2005
%age
2006
%age
2007
GROSS INCOME
12039.92
100.00
13585.39
100.00
16510.51
100.00
19841.54
100.00
Excise Duties etc.
5344.60
44.39
5710.13
42.03
6433.90
38.97
7135.75
35.96
Net Income
6695.32
55.61
7875.26
57.97
10076.61
61.03
12705.79
64.04
Cost of Sales
4109.85
34.14
4846.89
35.68
6463.15
39.15
8412.89
42.40
PBDIT
2585.47
21.47
3028.37
22.29
3613.46
21.89
4292.90
21.64
PBDT
2560.68
21.27
2985.94
21.98
3601.53
21.81
4289.62
21.62
241.62
2.01
312.87
2.30
332.34
2.01
362.92
1.83
PBIT
2343.85
19.47
2715.50
19.99
3281.12
19.87
3929.98
19.81
PROFIT BEFORE TAX
2319.06
19.26
2673.07
19.68
3269.19
19.80
3926.70
19.79
726.21
6.03
836.00
6.15
988.82
5.99
1226.73
6.18
1592.85
13.23
1837.07
13.52
2280.37
13.81
2699.97
13.61
0.00
0.00
354.33
2.61
-45.02
-0.27
0.00
0.00
1592.85
13.23
2191.40
16.13
2235.35
13.54
2699.97
13.61
558.83
4.64
881.70
6.49
1134.70
6.87
1364.50
6.88
1034.02
8.59
1309.70
9.64
1100.65
6.67
1335.47
6.73
Depreciation
Tax
PAT before exeptional items
Exceptional Items
PAT
Dividends
Retained Profits
%age

21. Common size statements: Balance Sheet
Liabilities
Mar 2004
Mar 2004
Mar 2005
Mar 2005
Mar 2006
Mar 2006
Mar 2007
Mar 2007
Rs. Crore (Non-Annualised)
Net worth
Authorised capital
Issued equity capital
Paid up equity capital (net of forfeited capital)
12 mths
%age
12 mths
%age
12 mths
%age
12 mths
%age
Reserves & surplus
Free Reserves
Security premium reserves (Net of deductions)
Other free reserves
Specific Reserves
Revaluation Reserves
Total borrowings
Bank borrowings
Short term bank borrowings
Long term bank borrowings
Deferred credit
Secured borrowings
Unsecured borrowings
Current portion of long term debt
Current liabilities & provisions
Sundry creditors
Acceptances
Deposits & advances from customers & employees
Interest accrued
Other current liabilities
Provisions
Deferred tax liability
Total liabilities
6410.06
300.00
247.68
247.68
59.96
2.81
2.32
2.32
7895.61
300.00
248.22
248.22
67.15
2.55
2.11
2.11
9061.48
500.00
375.52
375.52
68.04
3.75
2.82
2.82
10437.08
500.00
376.22
376.22
10437.08
3.28
2.47
2.47
6162.38
5731.03
295.62
5435.41
370.51
60.84
57.65
53.61
2.77
50.85
3.47
0.57
7646.18
7220.45
382.25
6838.20
365.83
59.90
65.03
61.41
3.25
58.16
3.11
0.51
8685.96
8260.96
447.28
7813.68
365.83
59.17
65.22
62.03
3.36
58.67
2.75
0.44
10060.86
9637.95
488.97
9148.98
365.83
57.08
66.04
63.26
3.21
60.05
2.40
0.37
120.85
55.71
55.71
0.00
65.14
245.36
168.91
168.91
0.00
76.45
25.91
93.82
0.29
0.90
0.25
0.20
0.06
0.65
0.00
0.19
0.70
0.00
200.88
107.07
76.62
30.45
93.81
88.69
156.67
0.00
2.09
1.44
1.44
0.00
0.65
0.00
0.75
1.33
0.00
119.73
33.80
26.04
7.76
85.93
31.56
89.29
0.00
1.13
0.52
0.52
0.00
0.61
0.00
0.30
0.84
0.00
60.78
140.10
1.70
1.32
0.70
0.50
0.20
0.62
0.00
0.40
0.92
0.01
3544.67
2804.31
2.02
40.76
0.79
13.91
682.88
33.16
26.23
0.02
0.38
0.01
0.13
6.39
3043.72
1892.02
3.01
22.97
1.04
16.50
1108.18
25.89
16.09
0.03
0.20
0.01
0.14
9.42
3589.13
2148.42
4.34
26.82
0.54
19.97
1389.04
26.95
16.13
0.03
0.20
0.00
0.15
10.43
3869.01
2343.44
2.69
23.83
0.55
25.66
1472.84
25.40
15.38
0.02
0.16
0.00
0.17
9.67
614.18
5.75
573.46
4.88
547.92
4.11
728.26
4.78
10689.76
100.00
11758.15
100.00
13318.26
100.00
15235.23
100.00

22. Common size statements: Balance Sheet
Assets
Mar 2004
%age
Rs. Crore (Non-Annualised)
12 mths
Gross fixed assets
5210.69
Land & building
1196.80
Plant & machinery
3233.48
Transport & comm. equipment/infrastructure 5.46
2
Furniture,amenities & other fixed assets 185.50
Capital work-in-progress
435.89
Intangible assets
99.70
Less: Cumulative depreciation
Net fixed assets
Market value of quoted investments
Deferred tax assets
Current assets
Cash & bank balance
Inventories
Receivables
Expenses paid in advance
Loans & advances
Total assets
%age
12 mths
Mar 2006
%age
12 mths
Mar 2007
%age
12 mths
48.74
11.20
30.25
0.24
1.74
4.08
0.93
6015.94
1544.96
3809.53
31.41
271.82
269.67
88.55
51.16
13.14
32.40
0.27
2.31
2.29
0.75
6627.14
1624.53
4156.86
43.82
298.10
399.97
103.86
49.76
12.20
31.21
0.33
2.24
3.00
0.78
8264.51
1862.71
4760.66
51.69
319.36
1130.20
139.89
54.25
12.23
31.25
0.34
2.10
7.42
0.92
-1442.63
-13.50
-1795.51
-15.27
-2065.44
-15.51
-2389.54
-15.68
3768.06
35.25
4220.43
35.89
4561.70
34.25
5874.97
38.56
28.57
8.04
0.00
17.76
3.02
-0.25
3874.68
795.96
120.01
2596.70
388.78
-26.77
32.95
6.77
1.02
22.08
3.31
-0.23
3517.01
795.96
120.01
2204.72
423.09
-26.77
26.41
5.98
0.90
16.55
3.18
-0.20
3067.77
847.10
107.14
1720.12
420.18
-26.77
20.14
5.56
0.70
11.29
2.76
-0.18
870.40
2210.33
8.14
20.68
806.43
3095.01
6.86
26.32
807.33
2736.44
6.06
20.55
858.46
2236.07
5.63
14.68
285.22
2.67
8.70
0.07
13.46
0.10
13.30
0.09
526.44
4.92
197.37
1.68
223.16
1.68
255.41
1.68
2949.84
34.04
1534.21
1381.59
0.00
27.60
0.32
14.35
12.92
0.00
3201.17
55.66
2002.99
1142.52
0.00
27.23
0.47
17.03
9.72
0.00
4736.90
855.82
2636.29
1244.79
0.00
35.57
6.43
19.79
9.35
0.00
5721.69
900.16
3354.03
1445.65
21.85
37.56
5.91
22.01
9.49
0.14
391.46
3.66
264.50
2.25
279.49
2.10
315.39
2.07
10689.76
100.00
11758.15
100.00
13318.26
100.00
15235.23
100.00
Investments
3053.96
Equity shares
859.04
Preference shares
0.01
Mutual funds
1898.32
Debt instruments
323.36
Less: Provision for dimunition in value of investments
-26.77
Group companies
Non-group companies
Mar 2005

23. Trend Analysis: Income statement
Year Ending 31st March
2004
2005
2006
2007
SALES
100.00
112.84
137.13
164.80
Excise Duties etc.
100.00
106.84
120.38
133.51
Net Income
100.00
117.62
150.50
189.77
Cost of Sales
100.00
117.93
157.26
204.70
PBDIT
100.00
117.13
139.76
166.04
PBDT
100.00
116.61
140.65
167.52
Depreciation
100.00
129.49
137.55
150.20
PBIT
100.00
115.86
139.99
167.67
PROFIT BEFORE TAX
100.00
115.27
140.97
169.32
Tax
100.00
115.12
136.16
168.92
PAT before exeptional items
100.00
115.33
143.16
169.51
PAT
100.00
137.58
140.34
169.51
Dividends
100.00
157.78
203.05
244.17
Retained Profits
100.00
126.66
106.44
129.15
Exceptional Items *

24. Trend Analysis
Trend analysis
210.00
190.00
170.00
SALES
PBIT
150.00
Tax
PAT
130.00
Cost of sales
110.00
90.00
2004
2005
2006
Years
2007

25. Trend Analysis
Trend analysis
240.00
SALES
220.00
PAT
Dividends
200.00
Retained profits
180.00
160.00
140.00
120.00
100.00
80.00
2004
2005
2006
Years
2007

26. Trend Analysis: Balance sheet
Balance sheet Trend analysis
Rs. Crore
Mar-04
12 mths
Mar-05
12 mths
Mar-06
12 mths
Mar-07
12 mths
Net fixed assets
100
112.01
121.06
155.91
Investments
100
126.87
115.16
100.45
Deferred tax assets
100
37.49
42.39
48.52
Current assets
100
108.52
160.58
193.97
Loans & advances
100
67.57
71.40
80.57
Total assets
100
109.99
124.59
142.52
Net Worth
100
123.41
141.79
163.48
Paid up equity capital (net of forfeited capital)
100
100.22
151.61
151.90
Reserves & surplus
100
124.08
140.95
163.26
100
203.03
99.07
166.22
Secured borrowings
100
281.02
82.10
192.59
Unsecured borrowings
100
175.46
105.07
156.90
100
85.87
101.25
109.15
Sundry creditors
100
67.47
76.61
83.57
Interest accrued
100
131.65
68.35
69.62
Other current liabilities
100
118.62
143.57
184.47
Provisions
100
162.28
203.41
215.68
Total liabilities
100
109.99
124.59
142.52
Total borrowings
Current liabilities & provisions

27. Trend Analysis: Bsh
Trend Analysis (Bsh)
210
Net fixed assets
190
Investments
Current assets
170
150
Net Worth
Total borrowings
Current liabilities & provisions
130
110
90
70
50
1
Mar 04
2
Mar 05
Years
3
Mar 06
4
Mar 07
5

28. Some problems in Ratio analysis




Comparison with industry averages is
difficult for a conglomerate firm like ITC
that operates in many different
divisions.
Since ITC operations are so diversified
competitor comparison was also not
possible.
Seasonal factors can distort ratios.
Some techniques can make statements
and ratios look better.

29. Thank You!