Advanced Corporate Finance Project

On
Analysis of White Goods

Submitted to:
Prof Kulbir Singh

Submitted By:
Amar Nath Pandey
Roll No: 201601114
Section: B
 INDUSTRY ANALYSIS
OF

WHITE GOODS
What are white goods?
Heavy buyer durables, for example, aeration and cooling systems, iceboxes, stoves, and so on., which used to be
painted just in white polish wrap up. Regardless of their accessibility in shifted hues now, they are still called
white products. Indian buyer fragment is extensively isolated into urban and rustic markets, and is drawing in
advertisers from over the world. The segment contains a tremendous working class, generally expansive
princely class and a little financially impeded class, with spending foreseen to dramatically increase by 2025.
India stood first among all countries in the worldwide buyer certainty list with a score of 133 focuses for the
quarter finishing September 2016. Encourage, in the optional spending classification, 68 for each penny
respondents from India demonstrated the following 12 months as regarding purchase, along these lines
guaranteeing by and by that India drives the worldwide main 10 nations for this parameter amid the quarter.
Worldwide organizations see India as one of the key markets from where future development is probably going
to rise. The development in India's shopper market would be fundamentally determined by a positive populace
synthesis and expanding expendable livelihoods. A current review by the McKinsey Global Institute (MGI)
proposes that if India keeps on developing at the present pace, normal family unit earnings will triple
throughout the following two decades, making the nation the world's fifth-biggest customer economy by 2025,
up from the current twelfth position.
India's strong monetary development and rising family livelihoods are required to build shopper spending to
US$ 3.6 trillion by 2020#. The most extreme customer spending is probably going to happen in nourishment,
lodging, shopper durables, and transport and correspondence parts. The report additionally expressed that
India's share of worldwide utilization would grow more than twice to 5.8 for every penny by 2020.
The customer durables market is relied upon to achieve US$ 20.6 billion by 2020. Urban markets represent the
significant share (65 for each penny) of aggregate incomes in the buyer durables part in India. There is a great
deal of extension for development from rustic markets with utilization anticipated that would develop in these
territories as entrance of brands increments. Demand for durables like iceboxes and in addition customer
electronic products are probably going to witness developing interest in the coming years in the provincial
markets as the administration arrangements to put essentially in country charge.
Under the forthcoming Budget Scheme 2017-18, the administration is probably going to hold its concentrate on
country economy by proceeding with the master poor and genius rancher plans.

The FMCG part has developed at a yearly normal of around 11 for each penny in the course of the most recent
decade. The general FMCG market is relied upon to increment at (CAGR) of 14.7 for each penny to touch US$
110.4 billion amid 2012-2020, with the rustic FMCG advertise expected to increment at a CAGR of 17.7 for
each penny to achieve US$ 100 billion amid 2012-2025.Food items is the main section, representing 43 for each
penny of the general market. Individual care (22 for each penny) and texture mind (12 for every penny) come
next as far as piece of the pie.
Developing mindfulness, simpler get to, and changing ways of life have been the key development drivers for
the purchaser advertise. The Government of India's arrangements and administrative systems, for example,
unwinding of permit principles and endorsement of 51 for every penny outside direct venture (FDI) in multi-
brand and 100 for every penny in single-brand retail are a portion of the significant development drivers for the
purchaser advertise.

52 wk 52 wk Market Cap
Company Name Last Price % Change
High Low (Rs. cr)

Whirlpool 1,037.40 1.07 1,192.00 646.90 13,161.68

Symphony 1,331.35 2.77 1,465.00 1,180.00 9,313.73
Blue Star 557.40 -1.68 583.95 349.90 5,324.50
Johnson Control 1,495.80 3.25 1,675.00 1,149.45 4,067.21
IFB Industries 595.25 -1.29 660.90 300.00 2,457.19
Lloyd Electric 254.75 3.64 340.40 204.90 1,027.46
Fedders Lloyd 73.80 0.89 87.80 57.20 250.70
Value Ind 12.80 0.00 16.74 10.61 50.16

DEVELOPMENT PROSPECTS

India is probably going to develop as the world's biggest working class buyer showcase with a totaled shopper
spend of almost US$ 13 trillion by 2030, according to a report by Deloitte titled 'India matters: Winning in
development markets'.

Fuelled by rising salaries and developing reasonableness, the purchaser durables market is required to extend at
a compound yearly development rate (CAGR) of 14.8 for each penny to US$ 12.5 billion in FY 2015 from US$
7.3 billion in FY 2012. Urban markets represent the significant share (65 for every penny) of aggregate incomes
in the Indian buyer durables part. In rustic markets, durables, for example, coolers, and buyer electronic
merchandise are probably going to witness developing interest in the coming years. From US$ 2.1 billion in FY
2010, the provincial market is relied upon to develop at a CAGR of 25 for each penny to touch US$ 6.4 billion
in FY 2015.

Domestic Electrical Appliances:

Brown goods or domestic kitchen appliances are indicators of the changing consumer scenario in post-
liberalization economic environment. The major products constituting the brown goods market are mixers,
grinders, irons, microwave ovens, rice cookers, water heaters or geysers, electric fans and exhausts.

The branded brown goods market has expanded at a significant pace and is expected to retain the momentum
into the future as well. The market has been transformed by the entry of over a dozen new brands. Moreover,
competition has intensified. While focus on price competency remains a key priority, players have also started
focusing on other product features such as safety and total cost of ownership of the device.

Goods like the rice cooker have been growing continuously at a slow and steady manner over a significant
period of time while microwave ovens have grown exponentially after the initial period of customization to
local requirements.
The electrical iron market can be divided into two segments: heavy and lightweight. The market is also
segmented into two sub-segments: steam and non-steam irons.

India being a tropical country, electric fans are an essential utility for more than six months of the year in most
parts of the country. The present market size is estimated at around 11.6 million pieces. The market is divided
among ceiling, pedestal, wall and table fans. Industrial and exhaust fans are another important segment.

The electrical appliances industry, which was focusing on the urban market, is now reaching out to semi-urban
and rural markets as well. This is because of the shift in living style of the population, increasing electrification
of villages and relatively higher purchasing power of consumers. As the market penetrates into the core middle-
class segment in both urban and rural areas, it is expected to expand phenomenally, offering large volumes to
the industry.

The consumer durable industry in India is set for sustained growth over the long term, fueled by favorable
consumer demographics, overall growth in services and industrial sectors and infrastructure development in
suburban and rural areas. Several Indian and MNC players are looking to strengthen their presence in India to
leverage this opportunity.

Success in the long-term will require RMS to develop a wide and robust distribution network, differentiate their
products in areas of relevance to the consumer and innovate in the areas of promotion, product financing etc.
The product and approach to market needs to be customized to suit the unique needs of the Indian market.

BAJAJ ELECTRIC
Bajaj Electricals Ltd (BEL) (BSE: 500031) is an Indian customer electrical types of gear assembling organization situated
in Mumbai, Maharashtra.[6] It is a piece of the 380 billion (US$5.6 billion) Bajaj Group. It has broadened with interests
in lighting, illuminating presences, apparatuses, fans, LPG based Generators,[7] designing and undertakings. Its principle
spaces are lighting, customer durables, designing and tasks. Lighting incorporates lights, tubes and luminaires. Buyer
durables incorporate apparatuses and fans. Designing and tasks incorporate transmission line towers, broadcast
communications towers, high mast, posts and extraordinary activities, and others incorporate kick the bucket throwing,
wind vitality and sun oriented energy.[8] Some outstanding undertaking incorporates lighting works at the Commonwealth
Games stadium and the Bandra Worli Sea Link[3]

It has 19 branch workplaces spread in various parts of the nation with a chain of around 1000 wholesalers, 4000 approved
merchants, more than 400,000 retail outlets and more than 282 Customer Care focuses.
NET WORKING CAPITAL

CALCULATION OF NET WORKING CAPITAL

Working Capital= Current Asset-Current Liabilities

Year Current Asset Current Liabilities Working

Capital
2016 201,933.16 197,266.54 4666.62
2015 195,100.24 190,944.37 4155.87
2014 88,252.811 182,455.64 5797.17
2013 155,101.33 136,939.87 18131.46
2012 144,134.77 118,995.87 25138.90

Chart Title
250,000.00

200,000.00

150,000.00

100,000.00

50,000.00

0.00
2012 2013 2014 2015 2016

Current Asset CURRENT LIABILITY WORKING CAPITAL

Inference:
Working capital ratio indicates whether the company has enough short term assets to meet its short
term debt. Anything below 1 indicates negative W/C (working capital). While anything over 2 means
that the company is not investing excess assets. Most believe that a ratio between 1.2 and 2.0 is
sufficient.
It can be seen that working capital has been continuously declined, but showed improvement in year
2016. In the year 2014 current liabilities increased much more than current asset which decrease in
the working capital this means company would not be able to pay its short term debts.
Calculation of Current Ratio
Current ratio = current assets/ current liabilities
Year Current Asset Current Liabilities Current Ratio
2016 201,933.16 197,266.54 1.02
2015 195,100.24 190,944.37 1.02
2014 88,252.811 182,455.64 1.03
2013 155,101.33 136,939.87 1.13
2012 144,134.77 118,995.87 1.21

Current ratio tells about the company ability to meet its short term debt with its assets. It tell investors about the
companys financial health.

CURRENT RATIO
1.25

1.2

1.15

1.1

1.05

0.95

0.9
2012 2013 2014 2015 2016

Inference:
As the year increases, the companys current ratio decreases or remains same which show that the
company would not meet its short term debts or obligations.
Organizations that experience difficulty getting paid on their receivables or have long stock
turnover can keep running into liquidity issues since they can't reduce their commitments.
CALCULATION OF ACCOUNTS RECEIVABLE TURNOVER RATIO
Accounts Receivable ratio = Sales/ Average Inventory

Years 2016 2015 2014 2013 2012

Sales 322906.32 300354.98 385110.76 323938.76 297581.88
Trade 136,206.54 128,955.54 124,265.05 93,792.84 92,201.62
receivable
ARTR 2.43 2.37 3.5 3.48 3.24

An accounting measure used to evaluate an association's viability in broadening credit and in gathering
obligations on that credit. The receivables turnover proportion is an action proportion measuring how
proficiently a firm uses its advantages.

ARTR
4

3.5

2.5

1.5

0.5

0
2012 2013 2014 2015 2016

Inferences:
Accounts receivable ratio is decreasing with increasing year, this shows that the company has bad
collection process and poor credit policy.
A low proportion suggests that the organization ought to reassess its credit arrangements to
guarantee the opportune accumulation of bestowed credit that is not winning enthusiasm for the
firm.
CALCULATION OF ACCOUNTS PAYABLE TURNOVER RATIO
Accounts Payable turnover ratio = Cost of Goods Sold/ Average accounts payable

Year 2016 2015 2014 2013 2012

COGS 314534.67 312298.82 328475.25 274562.64 244534.62
Trade 1,14,524.36 116,742.30 119,968.99 98,232.46 82,220.92
Payable
APTR 2.7 2.6 3.0 3.0 3.0

(COGS= opening inventory+ purchases- closing inventory)

The accounts payable turnover ratio is a transient liquidity measure used to evaluate the rate at which an
organization pays off its providers. Creditor liabilities turnover proportion is figured by taking the aggregate
buys produced using providers, or cost of offers, and separating it by the normal records payable sum amid a
similar period.

APTR
3.1

2.9

2.8

2.7

2.6

2.5

2.4
2012 2013 2014 2015 2016

Inferences:
As seen in the last the form 2015 to 2016 the APTR has increased from 0.1 that means that the
company is taking less time to repay the money to its suppliers.
From 2012 to 2014 the APTR remains same which shows the companys constant growth.
CALCULATION OF LEVEL OF CURRENT ASSESTS
Level of current asset = current asset / fixed asset

Year Current Assets Fixed Assets Level of Current Policy

Assets
2016 201,933.16 29960.18 6.74 Moderate
2015 195,100.24 28084.00 6.94 Moderate
2014 88,252.811 25176.32 3.5 Aggressive
2013 155,101.33 23228.73 6.67 Moderate
2012 144,134.77 18698.39 7.70 Conservative

Level Of Current Assets

9
8
7
6
5
4
3
2
1
0
2012 2013 2014 2015 2016

Inferences:
The company followed different policies in different years.
Aggressive policy is followed when the level of current asset is low in comparison to fixed assets and
in this case the company has higher profitability.
Under conservative policy theres plenty of cash in the bank, inventory and your payables are all up
to date but it affects the long term profitability.
The optimum level of working capital is between aggressive and conservative policy.
CALCULATION OF CASH CYCLE
OPERATING CYCLE = INVENTORY TURNOVER PERIOD + AVERAGE ACCOUNTS REVEIVABLE
PERIOD
YEAR OPERATING ACCOUNTS CASH CYCLE
CYCLE PAYABLE
2016 205.77 135.18 70.59
2015 206.30 140.38 65.92
2014 145.41 121.66 23.75
2013 148.62 121.66 26.96
2012 152.50 121.66 30.84

CASH CYCLE
80

70

60

50

40

30

20

10

0
2012 2013 2014 2015 2016

Inferences:
Cash cycle tells when the accounts payable and accounts receivable are converted into cash.
The longer the cash cycle the short is the repayment period. So from this table we can see that cash
cycle increases over year, this shows the company is able to pay for the inventory in less time.
INVENTORY
Traded finished goods and spares are valued at cost, arrived at "Weighted Average" basis or net
realizable value whichever is lower.
Costs are generally ascertained on the first in first out (FIFO) basis.

Particulars 2016 2015 2014 2013 2012

Raw materials 3,284.34 3182.79 4303.62 4492.55 4030.13
&
Components
Work-in- 505.78 902.85 1083.98 4527.47 2717.47
progress
Finished 2,250.42 1408.83 2793.89 1567.36 1997.14
Goods
Manufactured
Finished 42,247.07 38919.66 34825.59 28666.14 25501.22
Goods Traded
Finished 1,761.92 2352.18 1472.27 2698.29 1121.09
Goods in
Transit
Stores and 573.08 651.11 155.75 136.80 131.94
Spares
Others 45.13 47.37 35.26 35.30 25.06
50667.74 47646.79 44670.32 42123.91 35524.05

Revenue from operations

2016 2015 2014 2013 2012

Lighting 85958.75 76292.09
Manufactured 4270.35 2142.20 1242.43 - -
Traded 101659.96 87839.73 93939.89 - -
Consumer
Durables

Manufactured 7719.41 5270.35 4742.97 3981.98 4244.19

Traded 193430.04 197657.00 187650.11 179690.04 145761.75
Engineering &
Projects

Manufactured 4774.42 4061.74 28898.77 17209.03 23869.92

Traded 11052.14 3824.43 68636.59 37098.96 47413.93
322906.32 300354.98 385110.76 323938.76 297581.88
CALCULATION OF INVENTORY TURNOVER RATIO
Inventory turnover is a proportion tells how often an organization's stock is sold and supplanted over a time
frame. The days in the period can then be partitioned by the stock turnover recipe to ascertain the days it takes
to offer the stock available.

ITR = Cost of goods sold / Average inventory

ITR (2016) = 322906.32/ 49157.26 = 6.568

YEAR ITR
2016 6.568
2015 6.507
2014 8.874
2013 8.343
2012 9.158

INVENTORY TURNOVER RATIO

10
9
8
7
6
5
4
3
2
1
0
2012 2013 2014 2015 2016

Inferences:
 As it can be seen from the table that the inventory turnover ratio is decreasing continuously which
shows that the sale of inventory of Bajaj electric is not good.
Every year its ITR changes showing non stable growth of the company.

CALCULATION OF INVENTORY TURNOVER PERIOD

Inventory Turnover Period = 365/ITR

ITP (2016) = 365/6.568 = 55.572

YEAR ITP (days)

2016 55.572
2015 56.09
2014 41.131
2013 43.74
2012 39.85
Inferences:
ITP shows in how many days raw material will be converted into cash.
As we can see from the table that number of days are in increasing as we go up in the table which
show that company taken more time to convert its raw material into cash.

FINANCIAL DISTRESS

Financial distress is surprisingly hard to define precisely. This is true partly because of the variety of events
befalling firms under financial distress.
A typical case of a cost of budgetary pain are chapter 11 costs. These immediate costs incorporate inspectors'
expenses, legitimate charges, administration expenses and different installments. Cost of money related pain can
happen regardless of the possibility that liquidation is maintained a strategic distance from (aberrant expenses).
Monetary pain in organizations requires administration consideration and might prompt to diminished
consideration on the operations of the organization.
Another wellspring of circuitous expenses of budgetary misery are higher expenses of capital as ordinarily
banks increment the loan costs if a condition of money related trouble happens.

Financial distress is determined on the basis of following factors:

Dividend reduction
Plant closing
Losses
Layoffs
CEO resignations
Plummeting stock prices

Dividend Analysis
Year 2016 2015 2014 2013 2012
Interim 2826.57 - - - -
Dividend
Final 1497.44 1499.71 1997.71 2784.62 2778.71
dividend
Total 4324.01 1499.71 1997.71 2784.62 2778.71

DIVIDEND ANALYSIS
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
2012 2013 2014 2015 2016

Inferences:
Dividend in the year 2012-2015 remained constant due to normal profits but it increased drastically in the
year 2016 due which the company also paid the interim dividend. Since the dividend has increased over the
year so shows that company did not face financial distress.

Profits/ losses for the years

YEAR 2016 2015 2014 2013 2012
PROFIT/ 9560.10 (1395.03) (530.86) 5120.83 11787.84
LOSS

PROFIT/LOSS
14000
12000

10000
8000

6000

4000
2000

0
2012 2013 2014 2015 2016
-2000
-4000

Inferences:
Company has revived from the financial dress as it can be seen that in the last two consecutive years there has
been a loss but the in the current year (2016) company gained huge profits.

MERGER & ACQUISITION

Mergers and acquisitions (M&A) is a general term that alludes to the union of organizations or resources. While
there are a few sorts of exchanges characterized under the idea of M&A, a merger means a mix of two
organizations to frame another organization, while a securing is the buy of one organization by another in which
no new organization is shaped. Bajaj electric does not have merger and acquisition in the last 10 years.

DERIVATIVES
A derivatives is a security with a value that is needy upon or got from at least one hidden resources. The
subsidiary itself is an agreement between at least two gatherings based upon the benefit or resources. Its esteem
is controlled by changes in the hidden resource. The most widely recognized hidden resources incorporate
stocks, securities, wares, monetary forms, loan fees and market records.
Derivatives either be exchanged over-the-counter (OTC) or on a trade. OTC subordinates constitute the more
prominent extent of subsidiaries in presence and are unregulated, though subordinates exchanged on trades are
institutionalized. OTC subsidiaries for the most part host more serious hazard for the counter get-together than
do institutionalized subordinates.
Future contracts are a standout amongst the most widely recognized sorts of subordinates. A prospects contract
(or essentially fates, conversationally) is an understanding between two gatherings for the offer of an advantage
at a settled upon cost. One would for the most part utilize a fates contract to support against hazard amid a
specific timeframe. For instance, assume that on July 31, 2014 Diana claimed ten thousand shares of Wal-Mart
(WMT) stock, which were then esteemed at $73.58 per share. Expecting that the estimation of her shares would
decrease, Diana concluded that she needed to organize a prospects contract to secure the estimation of her stock.
Jerry, a theorist foreseeing an ascent in the estimation of Wal-Mart stock, consents to a fates contract with
Diana, directing that in one year's opportunity Jerry will purchase Diana's ten thousand Wal-Mart offers at their
present estimation of $73.58.

The prospects contract may to a limited extent be thought to be something like a wager between the two
gatherings. On the off chance that the estimation of Diana's stock decays, her speculation is ensured on the
grounds that Jerry has consented to get them at their July 2014 esteem, and if the estimation of the stock builds,
Jerry gains more prominent incentive on the stock, as he is paying July 2014 costs for stock in July 2015. After
a year, July 31 moves around and Wal-Mart is esteemed at $71.98 per share. Diana, then, has profited from the
prospects contract, making $1.60 more per share than she would have in the event that she had basically held up
until July 2015 to offer her stock. While this won't not appear like much, this distinction of $1.60 per share
means a distinction of $16,000 while considering the ten thousand shares that Diana sold. Jerry, then again, has
guessed inadequately and lost a sizeable total.

Forward contracts are another imperative sort of subsidiary like fates gets, the key contrast being that not at all
like fates, forward contracts (or "advances") are not exchanged on trade, but instead are just exchanged over-
the-counter.

Swaps are another normal sort of subsidiary. A swap is frequently an agreement between two gatherings
consenting to exchange advance terms. One may utilize a financing cost swap keeping in mind the end goal to
change from a variable financing cost advance to a settled loan cost advance, or the other way around. On the
off chance that somebody with a variable loan fee advance were attempting to secure extra financing, a bank
may deny him or her a credit on account of the unverifiable future orientation of the variable financing costs
upon the individual's capacity to reimburse obligations, maybe expecting that the individual will default. Hence,
he or she may look to switch their variable financing cost advance with another person, who has a credit with a
settled loan fee that is generally comparable. Despite the fact that the advances will stay in the first holders'
names, the agreement orders that each gathering will make installments toward the other's advance at a
commonly settled upon rate. However, this can be hazardous, on the grounds that on the off chance that one
gathering defaults or goes bankrupt, the other will be constrained again into their unique advance. Swaps can be
made utilizing loan fees, monetary forms or products.