Financial Analysis of V-Guard

V-Guard is India’s leading manufacturer of multiple products in various segments including

electronics, electrical, and Consumer Durables. The main products of V-Guard are Stabilizers,
UPS & batteries, Kitchen appliances, Wiring, etc.
Income statement analysis: The electrical products contributed the most to the revenue i.e.,
44.6%, this was followed by electronics which contributed 28.1%, and lastly consumer
durable which contributed 27.3% in FY 21. Despite the pandemic and almost no revenue, and
no operation in the first half of the year, the company reported an 8.7% of YoY growth in
revenue. During the year there was a significant increase in various key raw materials like
copper, aluminium, steel, etc. But despite the increase in raw materials, they were able to
pass on most of the inflated price to the pricing of the product. This indicates a strong brand
image as well as a robust market share. The company’s EBITDA margin and PBT margin (FY21)
increased by 120 basis points YoY & 63 basis points YoY. The net profit margin slightly reduced
by 10 basis points which was due to a higher effective tax rate. The online channel has picked
up the pace in FY 21, introducing new products and robust distribution channels & footprint
across the countries helped V-Guard to pick up the demand in the second half of FY21 and
beat FY20 numbers.
Balance sheet analysis: The cash conversion cycle on the contrary decreased from the
previous year from 86 days to 83 days. This was mainly due to an efficient focus on the
collection and negotiating better credit terms with the supplier. Although while reducing the
cash conversion cycle the current and quick ratio of the company slightly fell from last year.
The debt-to-equity ratio of the company is very negligible. This puts the company in a better
position in the current rising interest rate scenario. The Interest coverage ratio also
decreased from 61 times to 48 times. This is because although the EBIT increased by 16%
from FY 20 to FY 21, the finance cost increased by around 46% for the same year. The lease
liability almost doubled from FY20 which caused the finance cost to increase. The lease
liability increased due to additions of leasehold land, buildings & vehicle of around 70% of
the balance as of March 2020. This is due to investments in building in-house manufacturing
assets. Well even with the fall in interest coverage it does not face any significant risk as the
current asset are sufficient to meet its obligation.
Return Ratio analysis: The ROCE & ROIC reduced slightly mainly due to an increase in lease
liability by almost 50%. The ROE also fell from 19% in FY20 to 17% in FY21. The return on
assets is slightly reduced from 13% to 12% mainly due to an exceptional increase in cash
balances in FY21 compared to FY20 (around a 1000% increase). The main reason for the
exceptional increase in net cash balances is due to the maturity of fixed income deposits and
little to no dividends distributed in FY21. This is unlikely to be sustained in the future.
 Ratio Analysis

FY 21 FY 20

Revenue from OP 2712 Cr. 2501 Cr.

EBITDA Margin 12.1% 11.1%
EBIT Margin 10.7% 10.0%
PBT Margin 10.5% 9.8%
PAT Margin 7.3% 7.4%

Working Cap:
Receivables days 52 47
Payable Days 93 66
Inventory Days 124 105
Cash conversion cycle 83 86
Current Ratio 2.36 2.59
Quick ratio 1.30 1.42

Leverage Ratio:
Total Debt to Equity Ratio 0.06 0.05
Interest Coverage ratio 48.24 60.98

Return Ratio:
ROCE 22.2% 22.5%
ROE 17% 19%
ROA 12% 13%
ROIC 16% 18%