3. ❏ ITC is an Indian cigarette company which is headquartered in Kolkata. Its five diversified
businesses are Fast-Moving Consumer Goods, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business and Information Technology.
❏ ITC Limited" was incorporated under the name 'Imperial Tobacco' which was later renamed as
'Imperial Tobacco Company of India Limited', succeeding W.D. & H.O. Wills on 24 August 1910
as a British-owned company registered in Calcutta.
❏ The company was converted into a Public Limited Company on 27 October 1954.
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Balance Sheet Analysis - Conclusion
● From the horizontal and vertical analysis of the balance sheet we can
conclude the following :
○ The proportion of non-current investments has increased steadily
whereas that of other bank balances has decreased.
○ Investments and capital work in progress have majorly increased since
2015
○ The share capital structure of ITC seems to have changed in 2017 which
might have been because of issue of shares.
○ Other financial liabilities have increased almost 5 times since 2015
○ Current borrowing and current tax liabilities(Net) have shown the most
fluctuating pattern to have increase several folds to falling below the
figures of 2015.
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● From the horizontal and vertical analysis of the statement of profit and loss
we can conclude the following :
○ The overall income of ITC has decreased over the years because of fall in the
revenue from operations
○ ITC seems to have increased work in progress but has drastically reduced the
proportion of WIP from profit
○ Overall the company has been able to achieve an increase in net profits over the
years but this increase seems to be from other incomes and cost reductions,
therefore the company requires to regain its share of sales in order to further
push its profits
Statement of P&L Analysis - Conclusion
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Debt-Equity Ratio Total Debt/Shareholder's Equity
2015 2016 2017 2018
Total Debt 7476.98 8374.85 8874.99 10981.24
Shareholder's Equity 37287.83 41656.43 45340.96 51400.07
Debt-Equity Ratio 0.2005 0.2010 0.1957 0.2136
Debt-Equity Ratio
Conclusion - The debt-equity ratio of ITC is low which while representing a strong
solvency position also represents that the company is not able to leverage debt to
increase its earning per share.
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Current Ratio Current Assets/Current Liabilities
2015 2016 2017 2018
Current Assets 22775.12 23233.92 24537.39 24503
Current Liabilities 5653.3 6354.27 6830.07 8856.6
Current Ratio 4.03 3.66 3.59 2.77
Current Ratio
Conclusion - The current ratio is above 2 in all the years, this represents that company holds a
strong liquidity position. The current ratio of 4 for the year 2015 might mean that the company was
inefficient in utilising its current assets.
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Quick Ratio (Current Assets-
Inventories)/Current Liabilities
2015 2016 2017 2018
Current Assets -
Inventories
14938.36 14714.1 16673.4 17265.85
Current Liabilities 5653.3 6354.27 6830.07 8856.6
Quick Ratio 2.64 2.32 2.44 1.95
Quick Ratio
Conclusion - Quick ratio for all the years in above 1, this verifies that the company holds a strong
liquidity position.
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Inventory Turnover
Ratio
COGS/Average Inventory
2016 2017 2018
COGS 11054.75 11765.56 11756.21
Average Inventory 8178.29 8191.905 7550.57
Inventory Turnover Ratio 1.35 1.44 1.56
Inventory Turnover Ratio
Conclusion - The inventory turnover ratio has remained almost similar in all the 3 years indicating
that the company’s efficiency in handling its inventories has remain almost constant.
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Return on Equity Net Income/Shareholder's Equity
2016 2017 2018
Net Income 9328.37 10200.9 11223.25
Shareholder's Equity 41656.43 45340.96 51400.07
Return on Equity 22.39% 22.50% 21.84%
Return On Equity
Conclusion - ITC’s return on equity seems to be good but has declined slightly in the year 2018.
Considering the fact that the company has very low proportion of debt component in its capital
structure an ROE of above 20% can be considered good.
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Return On Assets Net Income/Total Assets
2016 2017 2018
Net Income 9328.37 10200.9 11223.25
Total Assets 50031.28 54215.95 62381.31
Return on Assets 18.65% 18.82% 17.99%
Return On Asset
Conclusion - ROA of ITC appears to be good which might signify efficient use of its assets by the
company.
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Net Profit Margin Net Profit/Net Sales
2016 2017 2018
Net Profit 9328.37 10200.9 11223.25
Net Sales 51944.57 55448.46 44329.77
Net Profit Margin 17.96% 18.40% 25.32%
Net Profit Margin
Conclusion - The net profit margin of ITC has been good over all the years and has been steadily
increasing despite a fall in sales.
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Price-Earnings Ratio Market Price Per Share/Earning Per
Share
2016 2017 2018
Market Price Per Share 218.83 280.3 255.5
Earning Per Share 7.74 8.43 9.22
P/E Ratio 28.27 33.25 27.71
Price Earnings Ratio
Conclusion - ITC’s price-earnings ratio seems to be a little over the current average of 20%-25%
which might indicate that the company’s shares were a bit overvalued.
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Finally we can conclude that ITC is doing fairly well
overall, the only negative aspects that could be found
during our analysis were -
1. Decreasing sales
2. Not leveraging debt to increase the earning per
share
Conclusion
