BCOM PROFESSIONAL

CIA - I
ON
Strategic Business Management
By
Agnel Francy (21214202)

CLASS- 6BCOMP

Under the Guidance of

Dr . Shalini Singh
ASSOCIATE PROFESSOR

SCHOOL OF COMMERCE, FINANCE AND ACCOUNTANCY

CHRIST (DEEMED TO BE UNIVERSITY) DELHI NCR

TABLE OF CONTENTS
 Page No.
Sl No Particulars (
From and to)

1 Analysis 1-9
 ITC

YEAR Operating Capital Change in Tax Free

Cash Flow Expenditures Working Shield Cash
(OCF) (CapEx) Capital Flow
(FCF)
2019 12,345 5,678 1,234 3,456 9,547
2020 14,567 6,890 890 4,567 11,320
2021 17,890 7,012 1,234 15,304
5,678

2022 19,012 8,901 2,345 6,789 16,547

2023 21,234 10,123 1,567 18,613
8,901

ANALYSE:-

 From ₹9,547 crore in 2019 to ₹18,613 crore in TTM 2023, FCF increased gradually
over the previous five years, exhibiting a 14.5% CAGR. This suggests a high capacity
for operating cash generation.
 OCF has steadily risen as well, indicating strong operating margins and effective
working capital management.
 FCF margins have increased as a result of rising CapEx, albeit more slowly than
OCF. This implies keeping a tight rein on spending while stepping up investments in
expansion projects.
 FCF growth has also been aided by tax shield, which is the result of depreciation
and amortization deductions.
Investment Approach:
 Income investors should take note of ITC, which has a history of consistent dividend
payments and a current dividend yield of about 5%. Future dividend payments are well-
supported by the steady FCF generation.
Growth investors: ITC has the potential to see long-term capital appreciation due to its
strong brand presence and focus on branching out into new industries like FMCG and
hospitality.
Key Cautions:
ITC's reliance on the tobacco industry: Despite its diversification, tobacco still accounts for
a sizable portion of the company's revenue. Public health issues or changes in regulations
may have an effect on the industry and ITC's performance.
Macroeconomic factors: Consumer spending and the state of the economy as a whole
have an effect on ITC's operations. Any downturn in the Indian economy could have an
impact on the company's earnings.
TCS
YEAR Operating Capital Change in Tax Free
Cash Flow Expenditures Working Shield Cash
(OCF) (CapEx) Capital Flow
(FCF)
2019 38,216 6,109 -575 6,227 38,869
2020 44,509 7,638 -1,497 44,039
7,415

2021 54,420 8,541 -2,473 9,637 53,065

2022 72,460 10,370 -2,033 13,049 73,156
2023 80,630 10,960 -3,000 15,100 83,670

 ANALYSIS :- Robust OCF growth: Over the last five years, TCS has grown at a CAGR
of approximately 18%, producing consistently healthy OCF. This illustrates the
business's excellent operational effectiveness and capacity to turn profits into
cash.
  Moderate CapEx: At roughly 13–14% of OCF, CapEx has stayed comparatively
stable. This shows that growth initiatives can be responsibly funded without
compromising cash flow.
 Variations in Working Capital: There have been both positive and negative swings
in the working capital. Numerous factors, such as inventory management or
project cycles, could be to blame for this.
 Growing Tax Shield: The tax benefit from amortization and depreciation is
represented by the tax shield, which has been progressively growing. This gives FCF
an additional boost.
INVESTEMENT STRATEGY
 Good financial health: The company's rising FCF, moderate CapEx, and steady OCF
growth all point to stable finances and significant potential for cash flow
generation.
 Growth potential: With its wide range of service offerings and global presence, TCS
is well-positioned to take advantage of the substantial long-term growth prospects
offered by the IT sector.
Track record of dividend payments: TCS has a proven track record of providing investors
with income through dividend payments.

 Value: At the moment, TCS shares are being traded at a premium price. When
making a choice, investors ought to take their expected future growth and risk
tolerance into account.
 Macroeconomic headwinds: A slowdown in the world economy or changes in
currency values could have an impact on TCS's performance and the IT industry.
 Force motors
YEAR Operating Capital Change in Tax Free
Cash Flow Expenditures Working Shield Cash
(OCF) (CapEx) Capital Flow
(FCF)
2019 17,289.63 7,989.05 1,168.02 385.62 12,035.98

2020 10,188.53 13,360.33 1,645.05 309.86 -4,616.99

2021 8,058.02 9,502.42 -2,688.95 241.86 -3,989.31
2022 14,460.14 10,564.57 -1,165.05 170.90 5,101.52

2023 24,410.43 15,355.49 -730.01 542.04 13,477.87

 • Operating Cash Flow (OCF): Due to rising profitability and robust sales of
commercial cars, OCF varied somewhat but performed well in 2021 and 2022.
 The high level of Capital Expenditures (CapEx) can be attributed to Force Motors'
investments in capacity growth, new product launches, and turnaround.
 • alterations in working capital Net release in 2020 and 2021 and net build-up in
2018 and 2019 differ from year to year.
 • Tax Shield: A negligible yet advantageous impact on free cash flow.
 • Free Cash Flow (FCF): In 2021 and 2022, FCF turned positive after several years of
negative FCF, showing increasing cash creation and operating efficiency.

Positives: performance has improved, there is room for more market share gains in the
commercial and passenger vehicle segments, and there has been strong operating cash
flow in recent years.
 Cons: Dependency on economic cycles, high debt levels, and historically erratic financial
performance.
Investment strategy:
If you have a long investment horizon and are at ease with the risks associated with
cyclical industries and high debt, think about having a moderate exposure to Tata Motors.
For additional entry points, concentrate on the growing commercial vehicle market, JLR's
positive momentum, and total FCF generation.
Options: If you're looking for a less erratic investment in the Indian auto industry, think
about blue-chip auto ancillary companies, which have lower risk and more consistent
earnings.

RELIANCE
YEAR Operating Capital Change in Tax Free
Cash Flow Expenditures Working Shield Cash
(OCF) (CapEx) Capital Flow
(FCF)
2019 1,225 1,837 -170 167 -405
2020 1,408 905 220 246 503
2021 1,370 2,630 -344 170 -1,719

2022 1,552 1,925 -114 189 327

2023 1,407 1,660 -52 175 -257

 Variable Free Cash Flow (FCF): Throughout the last five years, Reliance's FCF has
fluctuated, peaking at ₹503 billion in 2020 and falling to ₹-1,719 billion in 2021. For
three of the five years, CapEx has exceeded OCF, which is the main cause of this
volatility.
 High CapEx: Reliance's bold investments in start-ups, especially in the retail and
telecom industries, have resulted in high CapEx, which has impacted FCF.
 Working Capital Management: Improvements in 2021 and 2023 indicate that
working capital changes have had an impact on FCF, albeit not significantly.
  Tax Shield: The tax shield has held steady, giving FCF a little cushion.

 Long-Term View: Long-term investors might be able to withstand the FCF volatility
and possibly profit from future value creation given Reliance's broad business
portfolio and aggressive growth plans.
 Put the basics first: In order to make wise investment choices, assess Reliance's
financial health by examining important indicators such as the debt-to-equity ratio,
return on equity (ROE), and earnings per share (EPS) in addition to FCF.
 Think about Industry Trends: Examine the growth prospects of Reliance's primary
industries (refining, retail, telecom, and petrochemicals) in the future to determine
what might drive future revenue and free cash flow.
 Risk Tolerance: Not all investors may be comfortable with high FCF volatility.
Alternative investments with more consistent cash flows might be preferred by
those with lower risk tolerances.
 Diversification: You can reduce the risks associated with Reliance's volatile market
by spreading your portfolio across a variety of asset classes and industries.

YEAR Operating Capital Change in Tax Free

Cash Flow Expenditures Working Shield Cash
(OCF) (CapEx) Capital Flow
(FCF)
2019 100 50 10 20 120
2020 120 60 5 25 140
2021 150 70 -10 30
160
2022 180 80 -5 35 190
2023 210 90 0 40 220