You are on page 1of 3

Comparison of Mahalaxmi Finance and NIDC Capital Markets Particulars Tax Incentive(Explicit Cost) Cash Flow Interest Total

Debt/Total Asset Total Debt/Total Equity Equity Multiplier EBIT/Total Asset Revenues/Total Assets Market Price Of Share PE Ratio Net Worth No. Of Shares NPL (Non performing loan) CRR (Cash reserve ratio) Interest Rate Spread Market Equity/Book Liabilities Working Capital/Total Assets Mahalaxmi NIDC capital Remarks Finance Markets 26,798,549.00 27,821,418.00 9,117,452.00 12,501,004.00 Rs.228,154,745 83.04 4.8967 :1 5.89 Times 3.60 12.75 180 11.64% 114.26 4,200,000.00 0.98% 21.83 4.41% 32.13 times 12.43 9,279,303.00 89,587,812.00 Rs 158,131,681 85.23 5.7723 :1 6.77 Times 4.22 10.59 182 6.28% 157.84 2,222,719.00 4.47% 65.78 4.02% 19.98 times 34.03

PE Ratio
14.00% 12.00% 10.00% Axis Title 8.00% 6.00% 4.00% 2.00% 0.00% PE Ratio Mahalaxmi 11.64% NIDC 6.28%

EBIT/Total Asset
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% EBIT/Total Asset

Axis Title

Mahalaxmi 3.60

NIDC 4.22

Taxation By observation we find Mahalaxmi finance is paying low tax and it because lower EBIT/Total asset and also higher interest liability compared to NIDC capital market. Expicit cost Mahalaxmi finance has lower expicit cost than NIDC capital that implies NIDC is running at higher cost. But, higher interest liability to mahalaxmi finance has enabled it to gain leverage than NIDC market. Financial signal Comparatively Mahalaxmi finance has higher revenue and high interest spread. It has also maintain Non-Performing loan below 1 i.e 0.98% (compared NIDC=4.47%, 5% is acceptable in Nepalese Context) and it is successful in utilizing the fund avaiable to it which can be obserbed in its CRR i.e 21.83. In this regard NIDC is far behind, its CRR is 65.78% i.e. utilized funds, which is not able to utilize its fund and which signal NIDCs financial performance is poor. Working Capital In this context NIDC is in good condition with Working Capital/Total Assets of 34.03% that shows it has liquidity and less chance of bank run but keeping high liquidity might be harmful in long run.

Capital Struture Mahalaxmi finance is using higher equity financing (i.e debt equity ratio= 4.8967 :1) than NIDC (i.e debt equity ratio= 5.7723 :1) which has lowered its equity multiplier (5.89 Times) and also the debt asset ratio 83.04 less than NIDC. Mahalaxmi finance is able to maintain higher PE ratio around 11% which is 5% more than NIDC market and it has to maximize its value its shareholder i.e Rs 180 per share keeping in approximate par with NIDC market i.e Rs 182 despite of its lower Networth. This shows current capital struture of Mahalaxmi finance is comparatively good. Risk Analysis Credit risk The possibility that an entity will not be able to meet debt payment obligations on time. Since CRR of NIDC is higher around 65% the credit risk to NIDC is higher. Business risk Fluctuations in earnings and cash flow, due to Changes in the economy, Industry-specific conditions and high degree of leverageleveraged firms have greater exposure to business risk than conservatively structured entities with higher explicit cost and higher NPL, NIDC is in riskier position. Bankruptcy risk Extreme case of credit risk, whereby a firm may be unable to continue as a going concern or Financial distress, or the difficulty in meeting maturing obligations, is the first sign of bankruptcy risk. NIDC with higher cashflow and higher CRR and NPL. This shows that they have hold much cash with them and investment they done is in risky asset. Due to this NIDC has high bankruptcy risk.

You might also like