Submitted by:

Alena Benadict 21066

Aniruddha R Batni 21067
Anushree Halyal 21069
Arundhuti Roy 21070

Submitted to:
Dr. M. Sriram & Dr. K. Riyaz Ahmed
 INDUSTRY OVERVIEW
• India is the world's sixth largest chemical manufacturer, accounting for 3.4 percent of worldwide chemical
production
• Due to the capital-intensive nature of its operations, the Chemicals sector in India is heavily reliant on bank
credit. During FY-20, the chemical sector had a Gross NPA of 6.9% of total advances

Price to Earnings Ratio Price to Book Ratio

Current Payout to Shareholders Return On Equity
Company overview
• Ownership Structure  Past Earnings Growth Analysis
EBITDA Margin
Asia – 17%
Africa – 15%
America – 12%
Europe – 9%
CAPITAL STRUCTURE OF TATA CHEMICALS LTD.

Particulars 2019-20 2020-21

Equity 254.76 254.76
Other Equity 7708.27 7776.55
Total Equity 7963.03 8031.31
 
Borrowings 3501.82 5278.3
Total Debt 3501.82 5278.3
 
Total Capital 11464.85 13309.61
Equity 0.69 0.60
Debt 0.31 0.40
 
Shareholders 254756278 254756278
 Cost of Equity Cost of debt
Beta 1.3087   2019-20 2020-21
rm-rf 0.0642 YTM 0.073 0.052
rf 0.068 t 0.25 0.25
   
COST OF
CAPITAL ke 0.1521 kd 0.054 0.039

Particulars Weights Cost of Capital WACC

Equity 0.6 0.15 0.09
Debt 0.4 0.04 0.016
      0.106

WACC: 10.6%
Inferences:

Ke= 0.152 implies that Tata Chemicals is required to achieve a return of at least 15.21%
for its equity investors, which is well above the industrial standard rate of 7.88%

Kd= 0.054 in 2019-20 and 0.0393 in 2020-21 imply that the cost of debt has reduced from
5.48% to 3.93% during the Covid period. This can be attributed to the fact that the YTM
has decreased from 7.3% to 5.24% during the period. Moreover, even after the drop in
Kd, it is close enough to the industrial standard rate of 3.16%
 LEVERAGE ANALYSIS

2020-2021

Degree of Degree of Degree of

Operating Financial Combined
Leverage Leverage Leverage
(DOL) (DFL) (DCL)
=26.03 =1.73 =45.02
LEVERAGE ANALYSIS – Cont.
Particulars 2020 to 2021
Change in Sales -1.52
Change in EBIT -39.45
Change in EPS -68.22

Particulars 2019-20 2020-21

EBT 1,248.06 633.99
Interest 255.78 276.59
EBIT 1,503.84 910.58
Sales 10356.75 10199.8
INTERPRETATIONS:

Since the DOL shows how sensitive a company’s EBIT is to the change in the
sales. It can be inferred that for a 1% change in the sales of Tata Chemicals
Ltd., there will be an approximate 26% change in the EBIT

Tata Chemicals Ltd. has a DFL of 1.73. This mean that for every 1% change in
the EBIT of TCL, there will be a 1.73% change in the EPS of the Company.

Similarly, 45.02 being the DCL implies for every 1% change in the sales at
TCL, there will be 45.02% of change in the EPS
 Particulars 2020 2021
Inventories 1869.16 1686.65
     
Receivables 1579.92 1396.99
Sales 10356.8 10199.8
Payables 1623.4 1661.44
     
Receivables turnover 6.56 7.30
Working Average collection period
Inventory Turnover
54.92
5.54
49.31
6.05

Capital  
Interest coverage
 
5.88
 
3.29

structure  
Current Ratio
Quick ratio
 
1.11
0.84
 
1.49
1.11
     
     
Days Inventories 65.87 60.36
Days Receivables 55.68 49.99
Days Payables 57.21 59.45
Operating cycle 121.55 110.35
Cash conversion cycle 64.34 50.89
Thank you