Introduction of Sector

Retail is one of the economic pillars of India. India is one of the top-
five retail markets globally, with a market value estimated to be
around $1 trillion. It is also one of the world’s most rapidly growing
retail markets.

Introduction of company
Avenue Supermarts Limited is an India-based company which owns and operates DMart stores.
DMart is a supermarket chain that offers customers a range of home and personal products under
one roof. Each DMart store stock home utility products including food, toiletries, beauty products,
garments, kitchenware, bed and bath linen, home appliances and others. The company offers its
products under various categories, such as bed and bath, dairy and frozen, fruits and vegetables,
crockery, toys and games, kid’s apparel, ladies’ garments, apparel for men, home and personal care,
daily essentials, grocery and staples, and DMart private label brands. DMart has a presence in over
196 locations across India.

Introduction of Peer Company

Future Retail Ltd. (formerly known as Bharti Retail Ltd.) was incorporated in February 07, 2007. It
offers food and grocery categories, fresh fruits and vegetables, meat and poultry, dairy products,
staples, FMCG and processed foods, electronics and appliances, clothing and footwear, furniture and
furnishing, and other household articles.

Current Market Price

Avenue Supermarts Future Retail
4621.05 50.15

52 Week High
Avenue Supermarts Future Retail
5900 88.5

52 Week Low
Avenue Supermarts Future Retail
2,604.80 40.55
Ratio Analysis

 Liquidity Ratio - Liquidity ratio is the use of several ratios to determine the ability of an
organization to pay its bills in a timely manner

 
LIQUIDITY RATIO
1.CURRENT RATIO
2. QUICK RATIO

Interpretation

 We can see that the ratio for Avenue Supermarts is higher than Future Retail in 2021

Avenue Supermarts Future Retail

Improved due to higher cash and reduction in Decline in current Ratio due to an increase in
current liabilities. short-term debt.

 We can see that the ratio for Avenue Supermarts is higher than Future Retail in 2021
 Improved due to higher cash and reduction in current liabilities

 Turn over Ratio

Avenue Supermarts Future Retail

TURNOVER RATIOS Mar-21 Mar-20 Mar-19 Mar-21 Mar-20 Mar-19
1.INVENTORY TURNOVER
RATIOS 10.98 12.92 12.64 1.58 3.88 4.00
2. ASSET TURNOVER RATIOS 174.31 204.19 284.61 33.13 94.40 192.05

Interpretation:

Inventory turnover ratios for Avenue Supermarts has been greater for the past 3 years as compared
to Future Retail but we can see a dip in inventory turnover of both the companies which might be
indicating that sales of both the companies may be decreasing.

Asset turnover ratio of both the companies are decreasing for which one of the reasons might be
they are not using there assets to generate their sales in effective manner.

Effective management of inventory coupled with improved sales

 Profit Margin Rations

 o profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earnings relative to its revenue, operating costs, balance sheet
assets, or shareholders' equity over time, using data from a specific point in time

  Avenue Supermarts Future Retail

PROFITABLITY RATIOS Mar-21 Mar-20 Mar-19 Mar-21 Mar-20 Mar-19
1.       GROSS PROFITS
Margin RATIO 8.03 8.79 8.40 4.19 10.53  5.21
2.       NET PROFIT RATIOS  4.55 5.23 4.51 -50.59 0.07  3.57
3.       OPERATING RATIOS  6.31 7.29 7.34  -26.92 5.13 4.69

Interpretation:

 Avenue Supermarts Net Profit Margin:

Increased primarily on account of increase in net profits mainly
attributable to higher operating profits and higher exceptional
gains as compared to charge in the previous year
 Future Retail Net Profit Margin: Decreased due to the business unit was unprofitable
during the reporting period.

 Leverage Ratios:
o A leverage ratio is any kind of financial ratio that indicates the level of debt incurred
by a business entity against several other accounts in its balance sheet, income
statement, or cash flow statement. These ratios provide an indication of how the
company’s assets and business operations are financed

  Avenue Supermarts Future Retail

LEVERAGE RATIOS Mar-21 Mar-20 Mar-19 Mar-21 Mar-20 Mar-19
1.DEBT TO EQUITY RATIOS 0.00 0.00 0.08 9.90 2.09 0.66
2.INTEREST COVERAGE
RATIOS 36.62 26.24 31.12 -1.15 1.02 4.19
Interpretation:

 Debt to equity ratio

 Future Retail: Increase in equity due to improved profitability and cash and cash
equivalents.
  Avenue Supermarts Debt Equity Ratio and Net Debt Equity Ratio: Decreased primarily on
account of prepayment and repayment of borrowings during the year. Net debt further
decreased due to higher current investments and cash and bank balances.

 Avenue Supermarts- Change in Interest Coverage ratio is due to a decrease in finance

cost.

 Future Retail- Interest coverage ratio is negative which tells that the company's current
earnings being insufficient to service its outstanding debt.

Return Ratios: Return ratios are a subset of financial ratios that measure how effectively an
investment is being managed.

  Avenue Supermarts Future Retail

Return Ratios Mar-21 Mar-20 Mar-19 Mar-21 Mar-20 Mar-19
Return on Equity 9.46 12.12  16.73  -291.61  0.27 18.90
Return on Asset  8.53 11.17   13.38  -16.76  0.05  6.86
Interpretation:

Both the companies ROE is declining on an alarming rate but then also Avenue Supermarts is in
better position than Future Retail as the company is having negative ROE this might be due to the
companies are becoming less efficient at creating profits and increasing shareholder value.

 Valuation Ratios

o Earnings per share (EPS) is calculated as a company's profit divided by the

outstanding shares of its common stock. The resulting number serves as an indicator
of a company's profitability. It is common for a company to report EPS that is
adjusted for extraordinary items and potential share dilution
o The dividend yield, expressed as a percentage, is a financial ratio (dividend/price)
that shows how much a company pays out in dividends each year relative to its stock
price.
o The price-earnings ratio, also known as P/E ratio, P/E, or PER, is the ratio of a
company's share price to the company's earnings per share. The ratio is used for
valuing companies and to find out whether they are overvalued or undervalued

  Avenue Supermarts Future Retail

Valuation Ratio Mar-21 Mar-20 Mar-19 Mar-21 Mar-20 Mar-19
1.       EARNING PER SHARE 16.97 20.71 14.46 -58.86 0.67 14.58
2.       DIVDEND PAY OUT RATIOS 0.00 0.00 0.00 0.00 0.00 0.00
3.       DIVDEND YIELD RATIOS 0.00 0.00 0.00 0.00 0.00 0.00
4.       PRICE EARNING RATIOS 168.48 105.63 101.74 -0.72 340.43 31.36

Interpretation:
  Earning Per Share
o Future Retail has shown serious decline in EPS from a positive figure in 2019 to
negative -58.86 in 2021 which means that the company is losing money, whereas
Avenue Supermarts is showing consistency in its EPS.
 Dividend Pay-out Ratios:
o No dividend has been paid by Avenue Supermarts and Future Retail since the last 3
years.
 Dividend Yield Ratios
o Since Avenue Supermarts and Future Retail had not paid any dividend for last 3
years, so the dividend yield stands at nil.
 PRICE EARNING RATIOS
o Future Retail had a sharp decline in the price earnings ratio and the ratio is negative
whereas Avenue Supermarts comparatively fared better.

Ratios points to be considered of Avenue Supermarts

2021
- Change in Interest Coverage ratio is due to a decrease
in finance cost.
2020
- Interest Coverage Ratio changes due to higher
earning with increase in finance cost.
- Current Ratio has improved due to repayment of
current maturity of long-term borrowings.
- Improvement in Debt Equity Ratio is due to
increase in equity and repayment of debt.

2019
 - Increase in interest coverage ratio is due to
higher earnings with no corresponding increase in
finance cost.
- Current ratio is impacted due to increase in
current maturity of long-term borrowing.
- Increase in debt equity ratio is due to marginal
increase in debt compared to equity.
Market Price News

BENGALURU: Shares of India's Avenue Supermarts slipped 8% on Monday after briefly hitting a record high, as investor
concerns about valuation eclipsed a surge in quarterly profit.

Read more at:

https://economictimes.indiatimes.com/markets/stocks/news/avenue-supermarts-shares-tumbles-on-valuation-
worries/articleshow/87104751.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
DMart spurts 22% in five sessions; hits record high

Conclusion

The financial of Avenue Supermarts is quite comfortable

than Future Retail with a judicious mix of debt and
equity. The overall assessment of financial statement
signifies efficient utilization of the investments, loans
and advances. The profitability of the company appears
to be impressive, as judged by reserve and surplus.
The management discussion and analysis by Director’s
report and opinions expressed by Auditor’s report
through financial statement is true and fair view in
accordance with the provisions of company’s act, and
accounting standards.
The overall financial position of the company appears to
be more than satisfactory.

Is it possible for a company to have a positive

cash flow but still be in serious financial
trouble?
1. A company that is selling off inventory but delaying
payables will show positive cash flow for a while even
though it is in trouble
2. A company has strong revenues for the period, but future
forecasts show that revenues will decline