Financial Statement Analysis

Group 6
Anubhav Ranjit, Arjun Khetarpal, Jomba Ete, Priyank Negi, Rachit Agarwal,
Shankar M

History

ITCs Business Portfolio

FMCG
Cigarettes

Lifestyle
Retailing

Food

Education &
Stationary

Personal
Care

Safety matches &

Incense sticks

ITCs Business Portfolio

Hotels

Agri
Business

Paperboard,
Paper &
Packaging

Information
Technology

Contribution of different divisions

Contribution of different divisions

Revenue

Paperboards & Packaging; 12%

FMCG-Cigarettes; 43%
Agri ; 18%

EBIT

Paperboards & Packaging; 7%

Agri ; 7%
Hotels; 0%
FMCG-Others; 1%

Hotels; 3%
FMCG-Others; 24%

FMCG-Cigarettes; 86%

Common Size-Income Statement

Operating Profit and PAT have been consistent(as % of

Gross Sales) through the years
Net Sales derives its consistency from Excise duty
Excise duty is close to 30% of Gross Sales

High Component of Excise Duty

High Taxation on Cigarette

Taxation on cigarettes in India is highest in the world
Increase in excise duty on tobacco products by 10-15
percent in the 2016-17

Impact of Rising Taxes

Tax increase (in past 19 years)
Shortest Non filter 1606 %
Shortest Filter
198 %
Cigarette smokers increase from
25 million 1996 to 46.4 million in
2010
Per Capita annual
consumption has declined
from 101 to 96 in the same
period
Consumption shifting to small
size cigarettes
Sale of shortest cigarette
grew 4 times in 2013
Short cigarettes sticks are
fastest growing
High Tax on longer stick

ITC
Shortening the size of
cigarette sticks
Incentivizing the bidi
smokers to move up
the value chain
Wide portfolio of stick
length
Increase or decrease the
size of cigarette stick
Tiered tax structure
based on stick length
Keep the price under
control by varying the
stick length
Top line and bottom line
consistently rising

Income Statement : Y-o-Y (%)

Decline in net sales due to high Excise Duty

Punitive Taxation could be declining the growth of Gross
Sales
PAT growth is higher than Net Sales

Net Sales, PAT & Raw Material

Consumed

Evidently Net Sales growth is low in FY-16

PAT growth is higher than Net Sales
Raw Material Consumed has declined
Cost Reduction on the supply side has not been passed on
to end consumer

Balance Sheet- Assets

Growth in Total Assets is driven by Total Non-Current

Assets
Growth in Total Non-Current Assets is driven by NonCurrent Investment
Non-Current Investment Investment in Bonds and
Debenture (IDFC, IIFCL etc.)
Investment in subsidiary (Landbase India
Limited)

Balance Sheet- Liability

Total Liability driven by Total Current Liability

Total Current Liability driven by Short Term Provision
Short Term Provision- Provision for proposed dividend

Contingent Liability

Excise, VAT demand and Show cause notice for SNPL

SNPL - SURYA NEPAL PRIVATE LIMITED (GROUP COMPANY)

Ratios- Interest Coverage Ratio

600
500
400
300
200
100
0
40969

41334
ITC

41699

42064

42430

Cigarette Industry

The company has very low debt. High interest coverage

ratio means that the company is not capitalizing on the
relatively cheaper source of finance (i.e. debt)

Ratios- Net Sales Growth (%)

ITC
20
15
10
5
0
40969

41334

41699

42064

42430

ITC
Net Sales Growth of just 0.9 % in FY 16 due to steep hike in
cigarette taxes and prices. Cigarette sales by volume are
estimated to have dropped 13-14% from a year ago

Ratios- PAT Growth (%)

ITC
25
20
15
10
5
0
40969

41334

41699

42064

42430

ITC
Punitive Taxation
Double digit reduction in sales by volume y-o-y
Reduced volumes due to muted rural demand (Monsoons)

Ratios- Inventory Days

ITC
58
57
56
55
54
53
52
51
50
40969

41334

41699

42064

ITC
Double digit reduction in sales by volume y-o-y
Reduced raw material consumption

42430

DuPont Analysis
DESCRIPTIO
N
PATM (%)
Sales / Total
Assets(x)
Assets to
Equity (x)
ROE (%)

Mar-16

Mar-15

Mar-14

Mar-13

Mar-12

18.95

19.07

18.66

17.62

17.50

1.11

1.21

1.29

1.34

1.29

1.47

1.47

1.51

1.54

1.57

30.98

33.77

36.27

36.21

35.58

Company has very high profit margins for achieving the

ROE it has
Its profit margins have increased even though the taxes
on cigarettes have increased
Due to increase in prices and better Product Mix
Asset Turnover ratio is decreasing in current years which
has led to decrease in overall ROE
Lesser utilization of Assets

Quality of Earnings
Analysis
Governance &
Monitoring
Operating
Consideration
s
Financial
Consideration
s

Long Term
Debt
Profit Before
Tax
Profit After
Tax

Adheres to all the regulations of Company Act 2013;

Consistency in accounting policies
Same auditor for the last 5 years Deloitte Haskins
& Sells
Fixed assets have increased due to free hold land
and buildings and plant & machinery
Very low debt; Financial leverage is less

Both PBT and PAT are increasing

Profit is not dependent on tax exemptions

2016

2015

2014

2013

2012

25.83

38.69

51.00

66.40

77.32

14958.39

13997.52

12659.11

10684.18

8897.53

9844.71

9607.73

8785.21

7418.39

6162.37

Analysis Outcome
70 % of cigarettes sales in India are via loose
sticks
Dividend yields have increased over the years
Provision would aid in continuing with dividend
trend

Thank You!