FINANCIAL ACCOUNTING PROJECT REPORT

Financial Analysis of 5 leading companies in the Indian Fashion Retail Industry

This report has been prepared and compiled by Group 8 of Section A of the PGDM 1 batch at
Great Lakes Institute of Management, Gurgaon for the specific purpose of the end term project
report in the Financial Accounting 1 course.

Group 8 comprises of:

Sl. No Name Roll No Company Allotted

1 Anjani Kumar Sharma P181A05 K Raheja Corp (Shoppers Stop)

2 Gaurav Modi P181A17 Trent Ltd (Westside)

3 Mohd. Aquib Ghauri P181A29 Aditya Birla (Pantaloons)

4 Namrata Singh P181A30 Future Group (Lifestyle)

5 Saumya Tiwari P181A45 Raymond’s Ltd

This analysis has been prepared after careful consideration of the official Financial Reports of
every company as mentioned above for 5 financial years from 2013-14 to 2017-18. All of these
companies are listed in the Bombay Stock Exchange.
We thank Dr. Preeti Goyal for her expert guidance and constant motivation in the successful
fulfilment of this project.

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 INDEX

SL NO CONTENTS PAGE NO REMARKS

1 Inter-company analysis 3

2 Intra-company analysis 8

3 Trent Ltd. (Westside) 8

4 Aditya Birla Fashion and retail 10

5 Shoppers Stop 12

6 Future Lifestyle Fashion 15

7 Raymond’s 18

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 INTER-COMPANY ANALYSIS
Horizontal Analysis
1. The EBITDA figures for all company in this sector showed a positive trajectory in 2018 apart
from a few fluctuations over the 5-year period. The most significant jump was observed by
Aditya Birla, who went from being at the lowest amongst the 5, to the market leader.

EBITDA
800

600

400

200

0
2014 2015 2016 2017 2018

TRENT Ltd(Westside) Future Lifestyle Raymonds

Aditya Birla Shoppers Stop

2. Total Assets of all companies except Future Lifestyle has been on a rising trend with Aditya
Birla showing the largest increase in the year 2016 after its acquisition of Pantaloons Ltd
from the Future Group

Total Assets
8000

6000

4000

2000

0
2014 2015 2016 2017 2018

TRENT Ltd(Westside) Future Lifestyle Raymonds

Aditya Birla Shoppers Stop

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 3. Total Liabilities of Shoppers Stop Ltd showed a steep drop in the year 2018 from Rs. 1074
crores to just Rs. 809 crores after maturity of a portion of its borrowings. The other
companies showed a similar growth trend, with Aditya Birla showing the highest increase.

Total Liabilities
5000
4000
3000
2000
1000
0
2014 2015 2016 2017 2018

TRENT Ltd(Westside) Future Lifestyle Raymonds

Aditya Birla Shoppers Stop

4. From the trend shown in the graph, there is a constant growth in the total revenue of all the
industries with the exception shown by Aditya Birla Fashion and retail as it has shown a
rapid increase in the year 2016. This rapid growth is majorly due to the fact that the
company has officially acquired Pantaloons int his year which resulted in the increase in the
sales of finished goods from nearly negligible to 1,50,000/-. Apart from finished goods,
there was also an increase in the sales of traded goods and income from licensee fees and
royalties.

Total Revenue
8000

6000

4000

2000

0
2014 2015 2016 2017 2018

TRENT Ltd(Westside) Future Lifestyle Raymonds

Aditya Birla Shoppers Stop

5. From the trend shown in the graph, it is evident that there is an enormous increase in the
growth of PAT in Aditya Birla from 2015 to 2017 due to increase in the foreign exchange
gain. Along with that this increase in trend is also shown by Future Lifestyle fashion in the
year 2016-17 as it has shown the growth in PAT from 29 Lacks to 111 lacks.

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 PAT
200

100

0
2014 2015 2016 2017 2018
-100

-200

-300

TRENT Ltd(Westside) Future Lifestyle Raymonds

Aditya Birla Shoppers Stop

Vertical Analysis
1. All the concerned companies maintain a similar level of owner’s equity of approximately
1000 crores, with Trent Ltd being the highest at Rs. 1617 crores.
2. ABFRL counts for the largest increase in Total Liabilities at Rs. 4640 crores, whereas Trent
Ltd accounts for the least Total Liabilities at Rs. 697 crores
3. ABFRL at present has the most short-term borrowings at Rs. 410 crores while Shoppers Stop
Ltd holds short term borrowings at only Rs 7 crores.
4. Inventories: Future Lifestyle fashion has shown the maximum value of inventories as a
percentage of total assets I.e. 41.6% proceeded by Aditya Birla Fashions with 29.5%, Raymond’s
with 23.5%, Shoppers Stop with 18% and Trent Westside with 14%.
5. Financial investments: Maximum financial investment was shown by Raymond’s with 8.3% of
the value of total assets followed by almost equal share by Shoppers Stop, Future Lifestyle
Fashions and Trent Westside and the least shown by Aditya Birla Fashions with negligible
financial investment made by it in year 2018.
6. Cash and other bank balances: the maximum value of a cash and other bank balances in
2018 was shown by Raymond’s I.e. 1.67% of the total assets proceeded by Aditya Birla fashions,
Trent Westside, Future Lifestyle Fashions and the least shown by Shoppers stop with 0.33% of
its total assets.

Ratios
1. Cash Debt Coverage Ratio – Shoppers Stop enjoys the highest cash Debt Coverage Ratio at
4.84 while Raymond’s comes in last with a CDC Ratio od just 1.47. Cash Debt Coverage Ratio
measures the ability of the company to pay off its current liabilities from its operations.

2. Debt to Total Asset Ratio - The debt to total assets ratio is an indicator of financial leverage.
It tells you the percentage of total assets that were financed by creditors, liabilities, debt.
ABFRL is most vulnerable at an average DTA Ratio at around 0.8 whereas Trent Ltd id least

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 vulnerablqqqq1e at a ratio of around 0.3. A larger portion of ABFRL’s debt is funded by its
assets.
3. Gross Profit Margin – Raymond’s enjoys the highest Gross Profit rate at 63% while Shoppers
has the lowest at 35%

Gross Profit Ratio

0.8

0.6

0.4

0.2

0
2018 2017 2016 2015 2014

TRENT Ltd(Westside) Future Lifestyle Raymonds Aditya Birla Shoppers Stop

4. Current ratio: It refers to the ability of a company to pay its short-term liabilities when they
become due. The largest current ratio in 2018 was shown by future Lifestyle fashions with
1.30 followed by Trent Westside, Raymond’s, Aditya Birla and Shoppers Stop.

Current Ratio
3
2.5
2
1.5
1
0.5
0
2018 2017 2016 2015 2014

TRENT Ltd(Westside) Future lifestyle Raymonds Aditya Birla Shoppers Stop

5. Inventory turnover ratio: it evaluates the efficiency of the company in handling the goods it
manufactures or buys to resell. Shoppers stop has the highest inventory turnover ratio with 6.50
followed by Trent Westside, Aditya Birla fashions, Future Lifestyle fashions and Raymond’s.

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 Inventory Turnover ratio
8

0
2018 2017 2016 2015 2014

TRENT Ltd(Westside) Future Lifestyle Raymonds Aditya Birla Shoppers Stop

6. Asset turnover ratio: It measures company’s abilities to generate sales from its assets and
thus shows how a company can use assets to generate sales. In 2018, Shoppers Stop has
shown the maximum ratio of 2.20 followed by Future Lifestyle fashions, Aditya Birla fashion,
Raymond’s and the least shown by Trent Westside.

Asset Turnover Ratio

2.5
2
1.5
1
0.5
0
2018 2017 2016 2015 2014

TRENT LTD(Westside) Future Lifestyle Raymonds Aditya Birla Shoppers Stop

7. Earnings per share: It is used to gauge the profitability of the company before buying its
shares. It is shown maximum in the year 2018 by Raymond’s with 15.9 followed by Future
lifestyle with 6.7 and Trent Westside, Aditya Birla fashions and Shoppers Stop.

Earning per Share

40

20

0
2018 2017 2016 2015 2014
-20

-40

TRENT Ltd(Westside) Future Lifestyle Raymonds Aditya Birla Shoppers Stop

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 INTRA – COMPANY ANALYSIS
Trent Ltd (Westside)
Established in 1998 and part of the Tata group, Trent operates Westside, one of India’s largest and
fastest growing retail chains; Star Bazaar, a hypermarket chain and Landmark a family entertainment
format store.

Horizontal Analysis

1. Revenue for Trent Ltd has increased by 61% in 2017-18 from base year 2013-14 with an
increasing rate over the years with a 20% hike in revenue from the previous year (2016-17). This
can be attributed to Trent expanding at an accelerated rate with more than 131 Westside stores
and a new store opening about every week.
2. With the expanding nature of the company, the COGS was bound to increase and it amount to
an eventual increase of 46.04% in the current year as compared to the base year. With new
stores opening every week, the cost acquiring the products increased, that ultimately resulted in
increased revenue.
3. The Gross Profit has increased by 76.98% from the base year, as a result of the increasing
revenue and the COGS increasing as well, but at a smaller rate.
4. The constant growth pattern followed by the company hence resulted in an increased Sales,
General & Administrative Expenses and the Depreciation Cost over the years.
5. With an increase in investment, there was an influx of cash in the business and hence, the
finance costs grew severely, with a 333.33% increase from 2013-14.
6. The company’s Profit After Tax (PAT) grew 115.17% from base year of 2013-14 with a steady
increase over the 5-year period apart from the years of 2015-16 when Westside merged with
Landmark
7. Trent Ltd incurred heavy capital expenditures as their Non-Current Assets increased by 34.48%
but observed a decrease in Current Assets by 4.48% as compared to 2013-14
8. The company issued more shares into the market, increasing its equity share capital by 22.84%
as part of its overall growth strategy
9. Current Liabilities increased by 135.57% whereas Non-Current Liabilities decreased by 66.62% as
part of the company’s plan to increase borrowing to fund the growth.

Vertical Analysis
1. The Non- Current assets are on an average 75% of the total assets, and the major chunk of it is
the Long-Term Financial Investments that the company has made which constitutes around 48%
of the total assets
2. Current Assets saw a decrease over the years and now constitutes around 25% of the Total
Assets as compared to 32% in 2013-14
3. Total Equity and Liabilities of the company increased after issuing of more shares and more
borrowings over the years to fund the expansion plans.

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 GROWTH TREND
150.00 116.73
100.03 106.87
86.55
100.00
54.25
37.55 33.67 30.56
50.00
7.05 7.03
0.00
2014 2015 2016 2017 2018

PAT Finance Cost

Ratio Analysis

1- Current Ratio: Current Ratio of the company remained flexible of the years ranging from 0.82 to
2.50 and it is deemed acceptable by industry standards, and this primarily stems from the fact
that such retailers are able to negotiate long credit periods with suppliers while offering little
credit to customers leading to higher trade payables as compared with trade receivables.
2- Inventory Turnover and days in inventory: The average Inventory Ratio for a retail company is
about 3.91 as per industry standard, and Trent Ltd has gradually increased its ITR from 2.48 to
3.01 over the years. It still has a long way to go to cover the industry standard. The Days in
Inventory has also decreased as a positive sign of quick inventory re-stocking.
3- Debt to Total Assets Ratio: Trent has a low Debt to total assets ratio of around 0.30, which
means that the company has enough assets to pay off their debts and holds a strong equity
position. It does not use much leverage in its financing.
4- Gross Profit rate: The Gross Profit rate for Trent is more than 50% (average), we can say that
the remaining 50% of the net sales constitutes of COGS. So, to increase the GPR the company
should decrease its COGS
5- Profit Margin Ratio: The company enjoys a low return of 6% after tax on their sales
6- Return on Assets Ratio: Return on Asset means that how much the company is earning on the
investment of total assets. Higher the ROA ratio the better it is because the company is able to
utilize the maximum of its assets. Trent has an average Return on Assets Ratio of 0.05
7- Asset Turnover Ratio: Trent has utilized its assets more efficiently over the years because the
current ATR that the company has is .95, which means that for every rupee invested in the
assets the company is able to generate 95 paise in sales, which has increased from 0.65
8- EPS: We see a major dip in the Earnings Per Share of the company from 30.1 in 2015 to 3.51 in
2018 and this is mainly due to the issue of new shares and increase in share capital of the
company.
9- PE Ratio: Price Earnings ratio is generally calculated from an investors’ perspective which means
that the no. of years it would take for the investor to recover his money if he purchased 1 share
of the company today. For Trent Ltd, with a decrease in EPS, the PE Ratio now is around 98
which is a significant increase from just 6 in 2014.

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 Aditya Birla Fashion and Retail Limited (ABFRL)
Aditya Birla Fashion and retail limited formed in may 2015, has over 200 national and international
brands. It has exclusive brand bouquet which includes Rangmanch, Ajile, Honey, chalk etc.

Horizontal Analysis

1- If we look at the Profit and loss statement of ABFRL over the 5 year period then we can say that
the revenue has increased by 332% from 2013-14 to 2017-18, this growth of 332% in the
company is because of the acquisition of Pantaloons by Aditya Birla Group in 2016
2- Apart from the increase in revenue over the years the company has also managed to decrease
its COGS as a percentage of revenue from 57.15% in 2013-14 to 47.05% of the revenue in 2017-
18. So, we can say that the Increase in Gross Profit over the years is because of a twofold effect,
First due to the increase in revenue and secondly due to the decreasing COGS
3- If we look at the trend of Depreciation and Amortization Expense of the company, we can say
that there is an increased in that head by 157.35% from 2013-14 to 2017-18, we can clearly say
that the company could have bought some tangible and intangible assets which could have been
the reason for the increase of Depreciation Expense
4- The Interest expense has increased by 46.35% in 2017-18 as compared to 2013-14, which clearly
shows that the company have taken a loan for the business or against an asset
5- Due to all these factors, the company break even in 2017, as emerged out from a loss-making
venture into a profitable one and increased its PAT tremendously by 162.74% over the years

Vertical Analysis

1- The Non- Current assets are on an average 65.30% of the total assets, and the major chunk
of it is the Intangible Assets like Franchisee, Goodwill, Brand Recognition, Software service
and Intellectual property, such as patents, trademarks and copyrights that the company has
made which constitutes around average 44.81% of the total assets
2- The major chunk of Revenue i.e. almost 90% goes in COG and SGA, which implies that profit
ability margin of the business is low

PAT
15,000 11,779
10,000
5,350
5,000
-
-5,000 2014 2015 2016 2017 2018
-10,000
-10,414
-15,000
-20,000
-18,773
-25,000 -22,814

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Ratio Analysis

1- Current Ratio: The current ratio of the company fluctuated over the years. The ideal current
ratio for a Retail-Apparel company is 2:1, i.e. for every 1/- of current liability the company has
twice the current assets. In case of ABFRL the ratio is nowhere close to the industry standard.
This kind of low maintenance of the working capital could result in a severe cash crunch for the
company
2- Inventory Turnover and days in inventory: Inventory turnover ratio for ABFRL is low as
compared to the industry standard. The low ITR means that the products are sitting at the
warehouse of the company and are unsold for too long, which can turn out to be a costly affair.
If we look at the days in Inventory it is on an average of 134 days, which means that for the
company to sell the product after it is a finished good, it takes about 134 days which for a
garment company is pretty decent.7-
3- Average Collection Period and Receivables Turnover Ratio: The Receivables turnover ratio for
ABFRL is has taken a jump from 195 in 2014 to 14 in 2017, which means that the collection of
funds from the debtors happen 195 times a year that means every 2 days the funds were
realized from the debtors, and then the ACP increased to 25 days, this kind of fluctuation in the
debtors could have been because of acquisition of Pantaloons
4- Debt to Total Assets Ratio: ABFRL has a low Debt to total assets ratio, which means that the
company has enough assets to pay off their debts.
5- Gross Profit rate: The Gross Profit rate for ABFRL is more than 50% (average), we can say that
the remaining 50% of the net sales constitutes of COGS. So, to increase the GPR the company
should decrease its COGS
6- Profit Margin Ratio: Profit margin is as low as 1.63% which is really low as per the industry
standards. The company should increase their revenue and reduce their COGS to increase their
PAT
7- Return on Assets Ratio: Return on Asset means that how much the company is earning on the
investment of total assets. Higher the ROA ratio the better it is because the company is able to
utilize the maximum of its assets
8- Asset Turnover Ratio: ABFRL utilizing its assets efficiently because the average ATR that the
company has is 119.80, which means that for every rupee invested in the assets the company is
able to generate 119.80 rupees in sales
9- EPS: Till 2015 if we bought a share of ABFRL we made significant losses on every share but after
the acquisition of the Pantaloons by Aditya Birla Group in 2016 the market sentiment change
and shareholders started earning profit on every share
10- PE Ratio: Price Earnings ratio is generally calculated from an investors’ perspective which means
that the no. of years it would take for the investor to recover his money if he purchased 1 share
of the company. For the ABFRL, it is doing very well, because now the shareholders can recover
its money in 7 months. So this will attract more funds from shareholders in future.

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 K Raheja Corp (Shoppers Stop)
It is a home to multitude of leading international and national brands for apparels, fragrances,
cosmetics, home décor etc. It is backed up by its own brands such as Back to Earth, LIFE, Haute curry etc.

Horizontal Analysis

If we look at the Profit and loss statement of Shoppers Stop over the 5year period then we can say that
the revenue has increased by 32.30% from 2013-14 to 2017-18, this growth of 32.30% in the retail
sector of Shoppers Stop could be because of various reasons that would be stepping in ecommerce
market in year 2015, investing almost 140 crores for expansion in which investment of Rs. 35 crores
were on development of technology and infrastructure for the omni channel, which is a combination of
physical store and online site.

1- COGS has been constant over the period with very minimal change, this shows that though the
revenue has increased but company is not able to increase its Gross Profit. The company can
reduce its COGS by investing more on online websites and retaining their customer base which
is getting diverged towards online shopping.
2- If we look at the trend of Depreciation and Amortization Expense of the company over the
years, then we see a marginal increasing trend in that head, we can clearly say that the company
could have bought some tangible and intangible assets which could have been the reason for
the increase of Depreciation Expense
3- The Interest expense has increased initially but late down the years it has decreased
comparatively in 2017-18 as compared to 2013-14, which clearly shows that the company has
paid off some loans and debt in previous year
4- Though the revenue of company has increased over the period but the company is still not able
to generate more profit as compared to the base year. This can be an example of improper
management, and expansion of e-commerce retailing.

Vertical Analysis

1- The Non- Current assets are on an average 68% of the total assets, and the major chunk of it
is the Tangible assets that the company has made which constitutes around 33% of the total
assets
2- The Current assets constitute around 32% of the total assets and majority of it is being used
in retaining the inventories, this means the company wants to keep a considerate amount of
variety of brands with them so that there are enormous products for the customer to
choose from.
3- 54% of the total Equity & Liabilities constitutes of Equity Share Capital & Reserves and
Surplus. Reserves and Surplus constitute to a total of 95% of total equity and 43% consists of
Current Liabilities and the major proportion of that is constituted by Trade Payables. The
company has a lot of funds blocked in trade payables.

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 PAT
50
40.74
40 37

30 25.18

20
11.6
10

0
2014 2015 2016 2017 2018
-10

-20
-19.94
-30

Ratio Analysis

1- Current Ratio: The current ratio of the company fluctuated over the years. From 0.54 to 0.73
(lowest to highest). The ideal current ratio for a Retail Industry is 1.68 for Gen. Merchandise,
Company is still behind the Ideal Current ratio so it needs to continue its rising trend in
increasing the current ratio.
2- Inventory Turnover and days in inventory: Inventory turnover ratio for Shoppers Stop is low
as compared to the industry standard. The low ITR means that the products are sitting at the
warehouse of the company and are unsold for too long, which can turn out to be a costly
affair. If we look at the days in Inventory it is fluctuating over alternate years, if we take the
average it comes out to be 80 days which is very high.
3- Debt to Total Assets Ratio: Shoppers Stop has a low Debt to total assets ratio, which means
that the company has enough assets to pay off their debts.
4- Gross Profit rate: The Gross Profit rate for Godrej is less than 40%, we can say that the
remaining 60% of the net sales constitutes of COGS. So, to increase the GPR the company
should decrease its COGS
5- Profit Margin Ratio: The company enjoys a very low return of 0.01% after tax on their sales
which is the reason company faced losses during years.
6- Return on Assets Ratio: Return on Asset means that how much the company is earning on
the investment of total assets. Higher the ROA ratio the better it is because the company is
able to utilize the maximum of its assets, but in case of SHOPPERS STOP it is very low
(almost negligible), this means company is not earning anything from its assets.
7- Asset Turnover Ratio: Shoppers Stop is totally able to utilize its assets more efficiently
because the average ATR that the company has is 1.93, which means that for every rupee
invested in the assets the company is able to generate 193 paise in sales

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 8- EPS: From an Decreasing trend of EPS from 13-14 to 15-16, we can see a dip in the EPS of
the Shoppers Stop in the year 2016-17, this is mainly because of issue of shoppers stop
shutting down due to low sales and their late entry to ecommerce, finally their EPS saw a
rise in year 2017-18.

9- PE Ratio: Price Earnings ratio is generally calculated from an investors’ perspective which
means that the no. of years it would take for the investor to recover his money if he
purchased 1 share of the company today. For Shoppers the PE ratio is around 180 Years. We
can say that Shoppers would surely not be a good company to invest in a long-term basis
because it is at a declining rate.

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 Future Lifestyle Fashion Ltd
It is a flagship fashion business of Future Group which operates in more than 300 stores in 90+ cities. It
owns and market leading brands through its in-house retail chains Central and Brand Factory, exclusive
brand outlets and other multi brand outlets.

Horizontal Analysis of P&L

1- If we look at the Profit and loss statement of Future lifestyle fashion over the 5-year period
then we can say that the revenue has increased by 38.2% from 2013-14 to 2017-18, this
growth of 38.2% could be because of various reasons such as marketing campaigns like Free
jeans day by its brand Jealous21 and its increased in stake in e-commerce fashion retailer
Koovs.
2- Though there is an increase in the revenue over the years the company’s COGS has also
increased as a % of revenue from 55.175% in 2013-14 to 62.34% of the revenue in 2017-18.
So, we can say that the Increase in Gross Profit over the years is mainly because of increase
in revenue
3- If we look at the trend of Depreciation and Amortization Expense of the company over the
years, then we see a decreasing trend in that head till 2017, we can clearly say that the
company could have sold out some of its assets but again increase in depreciation expense
in 2018 states that the company have bought some tangible and intangible assets which
could be the reason for increase in Depreciation expense.
4- The Interest expense has decreased by 41.8% in 2017-18 as compared to 2013-14, which
clearly shows that the company have repaid the loans.
5- Due to all these factors the PAT of the company has increased by 374.6% over the years
6- Total current and non-current assets is more or less the same throughout the years as
though there is an increase in deferred tax assets and other non-current assets but there is
great reduction in other intangible assets and loans.
7- The company issued more shares into the market, increasing its equity share capital by
23.27% as part of its overall growth strategy.
8- Current liabilities increased by 42% whereas Non-current liabilities decreased by 63% as part
of the company’s plan to increase borrowing to fund the growth.

Vertical Analysis

1- The Non- Current assets are on an average 43.34% of the total assets, and the major chunk
of it is the Long-Term Investments that the company has made which constitutes around
25.5% of the total assets
2- The Current assets constitute around 56% of the total assets and majority of it is inventories
which constitutes 41.5% of the total assets, which mean that the company is earning a lot
from their current assets.
3- 43% of the total Equity & Liabilities consists of Current Liabilities and the major proportion
of that is constituted by Trade Payables. The company has a lot of funds blocked in trade
payables.

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 GROWTH TREND
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
2014 2015 2016 2017 2018
PAT 2328 1855 2947 15575 11051
DA 38519 17009 16142 8567 14933

PAT DA

Ratio Analysis

1- Current Ratio: The current ratio of the company fluctuated over the years. From 0.76 to 2.13
(lowest to highest). The ideal current ratio for any company is 2:1, i.e. for every 1/- of
current liability the company has twice the current assets. In case of Future lifestyle fashion,
the ratio was closer to this only in 2014 and from then on it was nowhere closer to this
which shows that company’s dependability on external funds has increased as we can see
that the financial liabilities have increased by an average of 35000
2- Inventory Turnover and days in inventory: Inventory turnover ratio for the company is close
to the industry standard. This indicates that the shelves are stocked with fresh products and
thus keeping the cash flowing. If we look at the days in Inventory it is on an average of 210
days, which means that for the company to sell the product after it is a finished good, it
takes about 210 days
3- Debt to Total Assets Ratio: Since the company has debt to total asset ratio 0.6 and above in
almost all the years, this makes it more difficult to borrow money. Lenders often have
debt ratio limits and do not extend further credit to firms that are over-leveraged.
4- Gross Profit rate: According to the figures, the gross profit rate is quite constant in all the
five years though there is an increase in revenue. But increase in COGS is much more than
the increase in revenue, hence not much improvement is shown by the company in the 5
years.
5- Profit Margin Ratio: It shows what percentage of sales is made up of net income which is
quite low of the company.
6- Return on Assets Ratio: Higher ROA is better as it shows the company is effectively
managing its asset to produce greater amount of net income.

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 7- Asset Turnover Ratio: Company can utilize its assets more efficiently because the average
ATR that the company has is 1.064, which means that for every rupee invested in the assets
the company is able to generate 1Re in sales
8- EPS: There is an increase in the trend of EPS which shows the increase in the profitability as
it results in the growth in the portion of the company’s profit that is allocated to every
individual share of the stock.
9- PE Ratio: it is the ratio of company’s current share price to its earning per share. Since the
company’s average PE is around 60 for the years , this serves as an incentive for the
investors as they have higher expectations for future earnings growth and are willing to pay
for them.

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 RAYMOND’s
It is an Indian brand fabric and fashion retailer, incorporated in 1925. All the brands are retailed through
‘The Raymond Shop’ with a network of over 700 retail shops spread across India and overseas, in over
200 cities.

Horizontal Analysis

P&L:

1- Looking at the profit and loss statement of RAYMOND over the course of 5 years, 2013-14 to
2017-18, we can say that the revenue has seen a consistent increase YoY, with the revenue for
FY 17-18 being 37% higher than the revenue for FY 13-14. This growth in the revenue can be
attributed to the increase in apparel and textile business due to industry trend as well as various
marketing campaigns launched by RAYMOND, like ‘The complete Man’ in 2014-15 and the ‘All
Black Collection’ in 2017-18.
2- The COGS has also increased by 54% as compared to 2013-14 due to increase in Purchases of
stock in trade, which shows that over the years Raymond has focused more on retailing through
acting as an intermediary by purchasing the final product from suppliers and selling it to the end
consumers through its stores. The Gross Profits increased at around 28%, in spite of the increase
in COGS expense.
3- The Selling, General and Administrative expenses have shown a steep incline by around 10%
increase YoY due to increase in Employee Benefit Expenditure, and the current levels being 36%
over the 2013-14 levels. We can say that the reason for this might be hike in wages and salaries
or due to increase in human resources (hiring of new employees).
4- The depreciation and amortization expenses have reduced overall by 16% in 2017-18, with
higher initial decline of 23% in FY 2015-16, we can say that RAYMOND has been buying and
selling off its tangible and intangible assets frequently with higher amounts of sale during FY
2015-16.
5- The finance costs (Interests) have reduced considerably in 2015-16 by 11%, signifying that some
loans and borrowings were paid off, with the current levels in FY 17-18 maintained at around 3%
lower than 2014 levels.
6- The amount of Tax has increased dramatically by around 876 times, as in the initial years the tax
payment has been deferred by depreciation and is being paid in the later year.
7- Although the PAT has increased over 5 years by 11%, the FY 2015-16 & 2016-17 have showed a
net loss of 7% and 61% respectively. This can be due to factors like the increase in the deferred
tax expense as well as increased SGA expenses etc.

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Balance Sheet:

1- The Total Assets have increased by around 32% in Fy 2017-18 as compared to 2013-14, with a
27% increase in NCA and 35% increase in CA
2- The Equity has increased by around 20% in 2017-18, with Owner’s equity remaining unchanged
and the changes being observed in the accumulated profits (Reserves and surplus)
3- The Total Liabilities have increased by 38% in Fy 2017-18, with Non Current liabilities reducing
by 55% due to RAYMOND paying off its Long term borrowings YoY, but the steep incline of 144%
in the current liabilities have made the Total liabilities go up.

Vertical Analysis

1- The Non-Current Assets have been around 46-49% of the Total assets over the course of 5
years, with the majority of it being tangible assets & investments at around 35-38% of the
Total assets.
2- The Current assets constitute around 51-54% of the total assets and majority of it is
concentrated in Inventories & trade receivables at around 35-38% of the total assets, which
means that the company has lot of funds blocked which are still to be paid by debtors
3- 32% of the total Equity and liabilities constitute of Owner’s Equity and reserves and surplus
out of which more than 90% is contributed by reserves and surplus and there has been no
issue of new shares in the past 5 years.
4- 67% of the Total Equity and Liabilities constitute of Non Current and Current liabilities. The
Non Current liabilities have been reducing over the years due to RAYMOND paying off its
long term debits, whereas the Current liabilities have seen an increase due to short term
borrowings, Trade payables and Other Current liabilities.

PAT
12000

10000

8000

6000

4000

2000

0
2014 2015 2016 2017 2018
PAT 8812 10000 8209 3383 9807

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Ratio Analysis

1- Current Ratio: The Current ratio has been on a decreasing trend over the five years with
2014 being the highest at 1.69:1 and 2017 being the lowest at 0.90:1 in 2017. This means
that the company’s short-term assets are little less than enough to pay off its short term
liabilities. The ideal Current ratio is 2:1. This decreasing trend in the current ratio has been
brought by the company accumulating a lot of short term borrowings.
2- Inventory Turnover and days in inventory: Inventory turnover ratio for RAYMOND, i.e. 1.5 to
2 inventory cycles is low as compared to the industry standard which is at 3-4 inventory
cycles. The low ITR means that the finished goods are sitting in the warehouse for a long
time before getting sold. If we look at the days in Inventory it is on an average of 200-250
days, which means that for the company to sell the product after it is a finished good, it
takes about 200 days.
3- Current Cash Debt Coverage Ratio: The Current Cash debit Coverage ratio has a declining
trajectory but is still at 1.5:1. Which is an acceptable ratio as the Cash by Operations is
sufficient to pay off the company’s current liabilities.
4- Debt to Total Assets Ratio: The Debt to total Asset Ratio for Raymond is .65:1. It is a good
thing as the Total Assets of the company are enough to pay off the Total liabilities at any
given time.
5- Gross Profit rate: The Gross Profit Rate for Raymond is good at 65%, which means the COGS
constitutes of 45% of the total Revenue.
6- Profit Margin Ratio: The company needs to work on its profit margin ratio as it is only 3% of
the total sales. It should look to decrease the COGS and SGA expense or increase its
revenue.
7- Return on Assets Ratio: The return on assets for the company is very low at 2%, it should
look to better utilize their assets.
8- Asset Turnover Ratio: The asset turnover ratio for the company is .79:1, which mean for
every earned rupee in revenue, .79 paise are contributed by assets.
9- EPS: The EPS for Raymond has been very fluctuating with for the first year it going up by 2
Rs, then consecutively falling for 2 years to Rs 5.51 from 16.29 and in the FY 2017-18, it has
risen to Rs 15.98 again.
10- PE Ratio: Price Earnings ratio is generally calculated from an investors’ perspective which
means that the no. of years it would take for the investor to recover his money if he
purchased 1 share of the company today. For Raymonds the PE ratio has been increasing
from 21 years in 2014 to 116 years in 2017 and then came down to 45 years in 2018.

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