Ratio analysis

Profitability ratio 1) Profit Margin

Profit Margin = Profit after Tax/ Sales

Mar '12
Operating Profit Margin(%) 5.47

Mar '11
5.46

Mar '10
6.09

Profit margin ratio decreased from the year 2010 to 2012 because of following reasons: The unprecedented inflationary pressure on the consumer goods continued, as did commodity inflation for the food industry. Though the sales in the year 2010-2011 have increased by 23.9%, the cost of material has increased by 6mn from 21mn to 27mn in 2010-11 which affected the profit significantly. In 2010-11 the company invests significantly in its R&D program, which includes its capability building and structured innovation process. This increases its expenses in 2010-11, but the new product generated near about 20% revenue in 2011-12 which helped in maintaining the profit margin ratio.

2) Return on equity
Return on equity=net profit after tax/shareholders equity Mar '12
Return On Net Worth(%) 35.9

Mar '11
32.19

Mar '10
29.4

Return on equity is increasing year on year due to following reasons: Due to heavy demand despite of continuing commodity inflation the net profit after tax has increased near about 28%, resulting in increase of the shareholders equity by 15%. Good performance of the new arrivals which generated near about 20% revenue in 2011-12 added to the profit and net worth of the company. Export outside India continues to grow rapidly at over 30%.

Liquidity ratio 1) Current ratio

Current ratio = Current Asset /Current Liabilities Mar '12
Current Ratio 0.7

Mar '11
1.04

Mar '10
1.08

Current ratio is decreasing due to the following reasons: The net current asset has decreased by near about 0.1mn from 2010 to 11 and the current liabilities have increased significantly near about 1mn. Current liabilities have increased due to investments in different new projects for which short term provisions and loans have increased. Although all the current assets are increasing but it is significantly affected by the rise in current liabilities.

2) Quick ratio
Quick ratio = (Current Asset Inventory)/Current Liabilities

Mar '12
Current Ratio 0.7

Mar '11
1.04

Mar '10
1.08

Quick ratio is decreasing due to following reasons: Quick ratio signifies how quickly we can repay our short term debts. It is decreasing year on year due to the increase in current liabilities because of capital expenditure which has increased by 132%. The firms short terms debt paying capacity in deteriorating each passing year whose main cause is increase in liabilities by near about 114% because of huge investment.

Activity ratio 1) Debtor turnover ratio

Debtor turnover ratio = annual net credit sales/trade receivables Mar 2012 Mar 2011
Debtors Turnover Ratio 90.75 87.18

Mar 2010
76.42

Debtor turnover ratio is increasing as Net Sales has increased by higher percentage than Debtors every year.

Sales have increased by 18% and at the same time the debtors have gone down by 8%. This shows that the company is good in collecting the debts.

2) Inventory turnover ratio

Inventory turnover ratio = cost of goods sold /average inventory Mar 2012 Mar 2011 13.15 16.68 Inventory turnover ratio The change in inventory turnover ratio due to the following reasons: Inventory is increasing from 311cr to 382cr which is near about 20% in 201112 which is due to the diversification and the product line. During 2010-11 also there is increase in inventory by 14% approximately but at the same time cost of goods sold have increased tremendously by 8000cr approximately due to which there is an increase in inventory turnover ratio in 2011 . Mar 2010
15.08

3) Asset turnover ratio

Asset Turnover Ratio = Net Sales / Total Assets. Mar 2012 Mar 2011 6.94 7.2 Asset turnover ratio Mar 2010
6.28

There is a change in the Asset turnover ratio due to the following reasons: During the year 2010-11 net sales have increased by 24% but in 2011-12 net sales have increased by 18%, i.e it is increasing in a decreasing rate due to which the asset turnover ratio has decreased from 2011 to 2012. The value of current assets has also increased by 1mn over the years due to the expansion and diversification by launching different new products.

4) Fixed asset turnover ratio

Fixed asset turnover ratio = Net Sales / Total Fixed Assets Mar 2012 Mar 2011 Fixed Asset Turnover Ratio 6.28 6.14 Mar 2010
5.73

The Fixed turnover ratio is increasing year on year due to the following reasons:-

The price of fixed assets has not gone up much as compared to the sales due to which the ratio is increasing every year.

Solvency ratio 1) Debt to Equity ratio

Debt to Equity ratio= (sort term debt + long term debt)/Share holders equity Mar '12 Mar '11 Mar '10
Debt Equity Ratio 0.05 0.96 1.08

Drastic fall in ratio of debt to equity is due to the following reasons: Due to the profit scorching over 30% including the newly launched product the Reserve and Surplus in 2010-11 has increased by 5 lakh approximately and in 201112 it has increased by at the same time the company have reduced the secured loans.

2) Interest coverage ratio

Interest coverage ratio=PBIT/interest expense Mar '12 Mar '11
Interest Cover 7.44 5.63

Mar '10
48.28

Drastic change in the interest coverage ratio is due to fallowing reasons: In 2010-11 there is a huge investment to launch new product due to which the companys loans have increased as a result the interest expense is increase in years 2010-11 by 3 lakh approximately but during the year 2011-12 they have started repaying the loans due to which the ratio is showing some improvement.

3) Earnings Per Share

Earnings Per share = PAT/number of Equity Share Mar '12 Mar '11
Earnings Per Share 15.63 12.16

Mar '10
48.77

Change in earning per share is due to the following reasons: The book value of shares is decreasing year on year by 165 to 37 due to which the earning per share is also decreasing.