Financial Statement Analysis

Session 5 & 6

Amerbran Company (B)

Case: 13-2
Page: 392

Amerbran Company
Income Statement for the Year Ended
Dec 31, 2000 (In Thousands)

Sales revenue, net

Cost of sales
Excise taxes on goods sold
Gross margin
Selling, general, and administrative expenses
Income before income taxes
Provision for income taxes
Net income

2000
$6,577,480
$2,573,350
$2,354,350
$1,649,780
$974,121
$675,659
$296,877
$378,782

2001
$7,622,677
$2,803,623
$2,887,616
$1,931,438
$1,328,107
$603,331
$274,558
$328,773

Amerbran Company Balance Sheet as of Dec 31

2000
2001
Assets
Cash
Accounts receivable
Inventories
Prepaid expenses
Total current assets
Investments
Property, plant, and equipment, at cost
Less: Accumulated depreciation
Net property, plant, and equipment, at cost
Goodwill
Other assets
Total assets
Liabilities and Shareholders' Equity
Accounts payable
Short-term debt
Accrued expenses payable
Total current liabilities
Long-term liabilities
Total liabilities
Convertible preferred stock
Common stock, at par
Additional paid-in capital
Treasury stock, at cost
Reatined earnings
Total shareholders' equity
Total liabilities and shareholders' equity

$23,952
$687,325
$1,225,402
$77,167
$2,013,846
$1,058,637
$1,366,719
-$645,734
$720,985
$577,606
$62,374
$4,433,448

$28,912
$756,152
$1,244,912
$76,140
$2,106,116
$1,116,534
$1,566,268
-$723,442
$842,826
$645,210
$115,826
$4,826,512

$238,377
$351,112
$728,262
$1,317,751
$932,828
$2,250,579
$42,611
$161,417
$57,072
-$102,705
$2,024,474
$2,182,869
$4,433,448

$271,452
$430,776
$922,990
$1,625,218
$880,674
$2,505,892
$33,828
$322,834
$53,641
-$110,948
$2,021,265
$2,320,620
$4,826,512

Other Details

Interest expense..,

Year 2000: $105,165

Year 2001: $102,791

Financial Ratios

Return on assets
Return on equity
Gross margin percentage
Return on sales
Asset turnover
Days cash (2001 only)
Days receivables
Days inventories
Inventory turnover
Current ratio
Acid-test ratio
Debt / Capitalization ratio
Times interest earned

Discussion Question

Comment on Amerbrans treatment of

excise taxes as part of the calculation of
gross margin

Discussion Question

As an outside analyst, what questions

would you want to ask Amerbans
management based on the ratios you
have calculated?

Return on Assets

Return on Equity
Gross Margin Percentage
Return on Sales
Asset Turnover
Days cash

Days receivables
Days inventories
Inventory turnover
Current ratio
Acid-Test Ratio

Debt/Capitalization

Definition
[Net Income +
Interest
*(1-Tax Rate)]
Total Assets
Net Income
Shareholders Equity
Gross Margin
Net Sales Revenue
Net Income
Net Sales Revenue
Sales Revenue
Total Assets
Cash
Cash Expenses / 365
Accounts Receivable
Sales / 365
Inventory
Cost of sales / 365
Cost of Sales
Inventory
Current Assets
Current Liabilities
Monetary Current
Assets
Current Liabilities
Noncurrent Liabilities
(Noncurrent Liabilities

Times Interest Earned

+ Shareholders
Equity)
Pretax Operating
Profit
+ Interest
Interest

2000
[$378,782 +
$105,165
*(1-.4394)]
$4,433,448
$378,782
$2,182,869
$1,649,780
$6,577,480
$378,782
$6,577,480
$6,577,480
$4,433,448
$23,952
($6,198,698 $101,198)/365
$687,325
$6,577,480/365
$1,225,402
$2,573,350/365
$2,573,350
$1,225,402
$2,013,846
$1,317,751
$711,277
$1,317,751
$932,828

0.54

2001
[$328,773 +
$102,791
*(1-.455l)]
$4,826,512
$328,773
$2,320,620
$1,931,438
$7,622,677
$328,773
$7,622,677
$7,622,677
$4,826,512
$28,912
($7,293,904 $115,974/365
$756,152
$7,622,677/365
$1,244,912
$2,803,623/365
$2,803,623
$1,244,912
$2,106,116
$1,625,218
$785,064

0.2994

$1,625,218
$880,674

0.0987

0.1735
0.2508
0.0576
1.48 times
1.43 days

38.1 days
173.8 days
2.1 times
1.53

$932,828 +
$2,182,869

$675,659 +
$105,165
$105,165

0.0797

0.142
0.2534
0.0431
1.58 times
1.47 days

36.2 days
162.1 days
2.25 times
1.3
0.48

0.2751

$880,674 +
$2,320,620

7.42 times

$603,331 +
$102,791

6.87 times

$102,791

Ratio Analysis
Liquidity Ratios
Measures of short-term
ability of the enterprise to pay
its maturing obligations and
to meet unexpected needs for
cash
Profitability Ratios
Revenues

Expenses

Net
Income

Measures of the income or

operating success of an
enterprise for a given period
of time
Solvency Ratios

XYZ
Co.

Measures of the ability of the

enterprise to survive over a
long period of time

Liquidity Ratios

Measures Enterprises

Short-term ability to pay its maturing

obligations
Ability to meet unexpected needs for cash

Users

Bankers
Suppliers
Other short-term creditors

Liquidity Ratios
Ratios

Formula

Usage

Standard

Means of
Expressio
n

Current ratio

CA CL

Wide

Industry
specific

Proportion

Acid-test ratio

LA CL1

Wide

Industry
specific

Proportion

Current cash debt

coverage ratio

NCPOA Avg. CL2

Realistic

Industry
specific

Proportion

Wide

Coll. Period
< Cr. period

Rate
(times)

Wide

Industry
specific

Rate
(times)

Receivables turnover NCS ANR3

Inventory turnover

CGS Avg. Inv.4

1LA

= CA Inventory Prepaid expenses

= Net Cash Provided by Operating Activities
3NCSANR = Net Credit Sales Average Net Receivables
4CGS Avg. Inv. = Cost of Goods Sold Average Inventory
2NCPOA

Profitability Ratios

Affects the companys

ability to obtain debt and equity financing

liquidity position
ability to grow

Ultimate test of managements

operating effectiveness

Profitability Ratios
Ratios

Formula

Usage

Standard

Means of
Expression

Profit Margin

NI NS

Wide

Industry
specific

Percentage

Cash Return on Sales

NCPOA NS1

Realistic

Compare with
profit margin

Percentage

Asset Turnover

NS Avg. Assets

Wide

Industry
specific

Rate (times)

Return on Assets

NI Avg. Assets

Wide

Industry
specific

Percentage

Return on Common
Stockholders Equity

(NI PD) ACSE2

Wide

DOF

Percentage

1NCPOA

= Net Cash Provided by Operating Activities

ACSE = (Net Income-Preferred Dividend) Average common
stockholders equity
2(NI-PD)

Profitability Ratios
Ratios

Formula

Usage

Standard

Means of
Expressio
n

Earnings Per Share

NI WACSO1

Wide

Intra
comparison

Amount

Price-Earnings Ratio

Price EPS

wide

Compare
Peer &
Industry

Proportion

Payout Ratio

DPS/EPS

Wide

1NI

Percentage

WACSO = Net Income Weighted Average Common Shares Outstanding

Solvency Ratios

Affects the companys

Ability of the company to survive over a long

period of time
Ability to repay the face value of debt at
maturity

Solvency Ratios
Ratios

Formula

Usage

Standard

Means of
Expression

Debt to Total
Assets Ratio

TD TA

Wide

Industry
specific

Percentage

Times Interest
Earned

IBIT Interest
Expenses

Wide

Industry
specific

Rate (times)

Cash Debt
Coverage Ratio

NCPOA ATL1

Wide

Industry
specific

Rate (times)

1NCPOA

ATL = Net Cash Provided by Operating Activities Average

Total Liabilities

Financial Statement
Analysis of MMFSL

Financial Statement Analysis

Evaluating
Liquidity
Short-term
creditor

Evaluating
Evaluating
Profitability
Solvency
Long-term
Long-term
creditor
creditor
Stockholders Stockholders

Tools of Financial Statement

Analysis
Intra company basis

Industry
Average
basis

Horizontal analysis /
Trend analysis
Vertical analysis /
Common size analysis
Ratio analysis

Ratio
analysis

Inter company
basis

Vertical analysis /
Common size
analysis
Ratio analysis

10

Rs. Crore (Non-Annualised)

Total income
Income from financial services
Interest
Dividends
Treasury operations
Other income
Prior period income &
extra-ordinary income
Total expenses
Power, fuel & water charges
Compensation to employees
Indirect taxes
Lease rent & other rents
Repairs & maintenance
Insurance premium paid
Outsourced professional jobs
Director's fees
Selling & distribution expenses
Miscellaneous expenses
Lease equalisation adjustment
Fee-based financial service expenses
Total provisions
Write-offs
Prior period & extra-ordinary expenses
Interest paid
Depreciation
Amortisation
Provision for direct taxes
PAT
PBDITA
PBDTA
PBT

Total income
Income from financial services
Interest
Dividends
Treasury operations
Other income
Prior period income &
extra-ordinary income
Total expenses
Power, fuel & water charges
Compensation to employees
Indirect taxes
Lease rent & other rents
Repairs & maintenance
Insurance premium paid
Outsourced professional jobs
Director's fees
Selling & distribution expenses
Miscellaneous expenses
Lease equalisation adjustment
Fee-based financial service expens
Total provisions
Write-offs
Prior period & extra-ordinary exp
Interest paid
Depreciation
Amortisation
Provision for direct taxes
PAT
PBDITA
PBDTA
PBT

Income and Expenditures

Mar 2002
Mar 2003
Mar 2004
Mar 2005
Mar 2006
Mar 2007
Mar 2008
199.88
257.83
310.61
418.76
596.43
844.62
1226.8
190.84
246.46
300.5
415.5
593.1
840.18
1214.72
3.67
90.59
211.4
347.69
519.61
770.88
1109.18
0.51
0
0.29
1.44
7.61
5.38
2.18
0.54
1.38
0.85
0.04
0.05
0.01
0.02
0.24
2.78
0.47
0.37
0.77
1.67
5.17
8.8
170.75
0.17
9.07
1.31
1.33
0.08
0.23
0.94
0.01
0
6.29
6.2
13.84
21.85
8.06
0.13
72.56
5.67
0.32
22.69
29.13
130.37
57.81
51.82

8.59
213.48
0.26
12.62
3.25
1.64
0.09
0.66
1.33
0.01
10.33
9.66
4.08
2.6
23.71
19.88
0.07
83.25
4.38
0.33
35.33
44.35
167.64
84.39
79.68

9.64
242.99
0.49
18.27
2.9
2.69
1.05
0.85
1.89
0.01
13.95
14.2
1.26
3.94
10.11
31.38
0.15
92.93
5
0
41.92
67.62
207.47
114.54
109.54

2.89
336.47
0.94
27.46
2.31
3.1
0.4
0.83
2.21
0.02
18.28
23.24
0.25
4.65
27.6
41.96
0.45
128.38
3.85
0
50.54
82.29
265.06
136.68
132.83

2.56
488.16
1.59
40.96
2.3
4.72
1.91
1.13
14.55
0.02
23.26
37.52
0.01
5.8
25.19
56.42
0.09
213.64
5.17
0
53.88
108.27
380.96
167.32
162.15

Income and Expenditures (Horizontal Common Size)

Mar 2002
Mar 2003
Mar 2004
Mar 2005
Mar 2006
100
129
155
210
298
100
129
157
218
311
100
2468
5760
9474
14158
100
0
57
282
1492
100
256
157
7
9
100
1158
196
154
321

2.77
711.74
2.4
65.13
5.52
6.46
0.57
1.68
34.36
0.03
29.19
42.53
0
6.97
57.1
65.17
0.19
317.16
7.43
0
69.85
132.88
527.32
210.16
202.73

6.91
1049.78
3.12
96.3
3.33
8.93
2.37
3.1
29.63
0.35
30.23
66.44
0
9.18
120.25
126.04
0
446.81
8.73
0
94.97
177.02
727.53
280.72
271.99

Mar 2007
423
440
21005
1055
2
696

Mar 2008
614
637
30223
427
4
2154

100
100
100
100
100
100
100
100
100
100

98
125
153
139
248
123
113
287
141
100

110
142
288
201
221
202
1313
370
201
100

33
197
553
303
176
233
500
361
235
200

29
286
935
452
176
355
2388
491
1548
200

31
417
1412
718
421
486
713
730
3655
300

79
615
1835
1062
254
671
2963
1348
3152
3500

100
100
100
100
100
100
100
100
100
100
100
100
100
100

154
66
19
109
247
54
115
77
103
156
152
129
146
154

226
20
28
46
389
115
128
88
0
185
232
159
198
211

369
4
34
126
521
346
177
68
0
223
282
203
236
256

597
0
42
115
700
69
294
91
0
237
372
292
289
313

676
0
50
261
809
146
437
131
0
308
456
404
364
391

1056
0
66
550
1564
0
616
154
0
419
608
558
486
525

11

Total income
Income from financial services
Interest
Dividends
Treasury operations
Other income
Prior period income &
extra-ordinary income
Total expenses
Power, fuel & water charges
Compensation to employees
Indirect taxes
Lease rent & other rents
Repairs & maintenance
Insurance premium paid
Outsourced professional jobs
Director's fees
Selling & distribution expenses
Miscellaneous expenses
Lease equalisation adjustment
Fee-based financial service expenses
Total provisions
Write-offs
Prior period & extra-ordinary expenses
Interest paid
Depreciation
Amortisation
Provision for direct taxes
PAT
PBDITA
PBDTA
PBT

Income and Expenditures (Vertical Common Size)

Mar 2002
Mar 2003
Mar 2004 Mar 2005
Mar 2006 Mar 2007
Mar 2008
100
100
100
100
100
100
100
95
96
97
99
99
99
99
2
35
68
83
87
91
90
0
0
0
0
1
1
0
0
1
0
0
0
0
0
0
1
0
0
0
0
0
4
85
0
5
1
1
0
0
0
0
0
3
3
7
11
4
0
36
3
0
11
15
65
29
26

3
83
0
5
1
1
0
0
1
0
4
4
2
1
9
8
0
32
2
0
14
17
65
33
31

3
78
0
6
1
1
0
0
1
0
4
5
0
1
3
10
0
30
2
0
13
22
67
37
35

1
80
0
7
1
1
0
0
1
0
4
6
0
1
7
10
0
31
1
0
12
20
63
33
32

0
82
0
7
0
1
0
0
2
0
4
6
0
1
4
9
0
36
1
0
9
18
64
28
27

0
84
0
8
1
1
0
0
4
0
3
5
0
1
7
8
0
38
1
0
8
16
62
25
24

1
86
0
8
0
1
0
0
2
0
2
5
0
1
10
10
0
36
1
0
8
14
59
23
22

Compounded Average Growth Rate (Percenatge)

Over 10 yr Over 7 yr Over 5 yr Over 3 yr Over 1 yr
Total income
33
36
37
43
45
Income from financial services
32
36
38
43
46
Interest
123
168
65
47
43
Dividends
-1
11
15
-59
Treasury operations
-4
-57
-21
100
Other income
67
13
141
210
Prior period income & extra-ordinary income
50
-4
34
-30
Total expenses
31
35
38
46
47
Power, fuel & water charges
64
49
30
Compensation to employees
53
47
50
52
48
Indirect taxes
129
0
13
-40
Lease rent & other rents
8
38
40
42
38
Repairs & maintenance
44
62
92
81
316
Insurance premium paid
66
41
36
55
85
Outsourced professional jobs
56
86
138
-14
Director's fees
104
160
30
Selling & distribution expenses
25
34
24
18
4
Miscellaneous expenses
38
42
47
42
56
Fee-based financial service expenses
40
27
29
25
32
Total provisions
58
60
38
63
111
Write-offs
61
45
44
93
Interest paid
28
32
40
52
41
Depreciation
-4
-10
15
31
18
PBT
39
45
28
27
34
Provision for direct taxes
34
36
22
23
36
PAT
44
52
32
29
33

12

Business Growth

Gaining market share

Rising rural auto finance demand

Aggressive branch expansion policy
Unique business proposition
Consistent growth in recent years

PBT
Provision for direct tax
Corporate tax
Deferred tax
Less: Deferred tax assets / credit
Other direct taxes
Fringe benefits tax
PAT
Prior period and extra-ordinary income
Prior period and extra-ordinary expenses
Net prior period and extra-ordinary items
PBPDTA net of P&E
PBPT net of P&E
PBT net of P&E
PAT net of P&E
Distribution of profits
PBPDTA
Provision
Depreciation & Amortisation
Tax
PAT

Distribution of Profits
Mar 2003
Mar 2004
Mar 2005
Mar 2006
Mar 2007
Mar 2008
79.68
109.54
132.83
162.15
202.73
271.99
35.33
41.92
50.54
53.88
69.85
94.97
35.32
41.9
55.83
62.97
94.2
143.24
0
0
0
0
0
0
0
0
5.3
10.39
25.83
50.97
0.01
0.02
0.01
1.3
1.48
2.7
0
0
0
1.29
1.46
2.68
44.35
67.62
82.29
108.27
132.88
177.02
8.59
9.64
2.89
2.56
9.87
6.91
0.07
0.15
0.45
0.09
0.19
0
-8.52
-9.49
-2.44
-2.47
-9.68
-6.91
99.58
115.16
161.84
190.04
257.58
394.06
94.87
110.16
157.99
184.87
250.15
385.33
71.16
100.05
130.39
159.68
193.05
265.08
35.83
58.13
79.85
105.8
123.2
170.11
100
21.93
4.36
32.68
41.03

100
8.11
4.01
33.63
54.25

100
16.8
2.34
30.76
50.09

100
13.09
2.69
27.99
56.24

100
21.36
2.78
26.14
49.72

100
29.99
2.18
23.69
44.15

13

Profit/loss after tax

Dividend paid
Equity dividend
Preference dividend
Dividend tax
Retained profits
Transfer from reserves
Balance brought forward
Transfer to reserves
Profit ratios
Equity dividend / Profit after tax
Pref. dividend / Profit after tax
Dividend tax / Profit after tax
Retained profit / Profit after tax

Profit Appropriation (Vertical Common Size)

Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008
100
100
100
100
100
100
29
28
32
32
31
29
27
25
26
25
26
25
0
0
2
3
1
0
2
3
4
4
4
4
71
72
68
68
69
71
0
0
0
0
0
0
52
62
85
94
107
110
28
30
30
30
30
30
27%
0%
2%
71%

25%
0%
3%
72%

26%
2%
4%
68%

25%
3%
4%
68%

26%
1%
4%
69%

25%
0%
4%
71%

Profitability Ratios (Percenatge)

Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008
PBDITA/Total Income
65
67
63
64
62
59
PBDTA/Total Income
33
37
33
28
25
23
PBIT/Total Income
63
65
62
63
62
59
PBT/Total Income
31
35
32
27
24
22
PAT/Total Income
17
22
20
18
16
14
Cash profit/Total Income
24
31
29
27
20
21
PBDITA Net of P&E/Total Income Net of P&E
64
66
63
64
62
59
PBDTA Net of P&E/Total Income Net of P&E
30
35
32
28
24
22
PBIT Net of P&E/Total Income Net of P&E
62
64
62
63
61
58
PBT Net of P&E/Total Income Net of P&E
29
33
31
27
23
22
PAT Net of P&E/Total Income Net of P&E
14
19
19
18
15
14
Cash profit Net of P&E/Total Income Net of P&E
24
31
29
26
20
21

14

Return Ratios (Percentage)

Mar 2003 Mar 2004 Mar 2005
On Networth
PBIT Net of P&E/Avg Networth
PAT Net of P&E/Avg Networth
PAT/Avg Networth
Cash profit/Avg Networth
On Capital Employed
PBIT Net of P&E/Avg Capital Employed
PBIT/Avg Capital Employed
PAT Net of P&E/Avg Capital Employed
PAT/Avg Capital Employed
On Total Assets
PBIT Net of P&E/Avg Total Assets
PBIT/Avg Total Assets
PAT Net of P&E/Avg Total Assets
PAT/Avg Total Assets
On GFA
PBIT Net of P&E/Avg GFA (excl. reval. & WIP)
PBIT/Avg GFA (excl. reval. & WIP)
PAT Net of P&E/Avg GFA (excl. reval. & WIP)
PAT/Avg GFA (excl. reval. & WIP)

Mar 2006

Mar 2007

Mar 2008

82.34
19.11
23.65
32.53

84.83
25.55
29.72
42.34

78.74
24.3
25.04
37.36

65.59
18.59
19.02
28.02

67.53
16.31
17.59
22.84

68.04
16.26
16.92
24.28

17.11
18.06
3.97
4.92

13.82
14.5
4.16
4.84

11.66
11.77
3.6
3.71

10.56
10.63
2.99
3.06

10.63
10.83
2.57
2.77

12.56
12.69
3
3.12

10.98
11.59
2.55
3.15

10.76
11.29
3.24
3.77

10
10.1
3.09
3.18

9.16
9.22
2.6
2.66

9.01
9.18
2.18
2.35

10.69
10.79
2.55
2.66

447.31
471.99
103.79
128.48

757.68
794.94
228.23
265.49

1022.81
1032.45
315.61
325.26

1154.18
1161.82
327.1
334.73

1189.58
1212.15
287.25
309.82

1325.56
1338.42
316.75
329.62

ROE Driven Business

MMFSL

ROE

FY03: 23.2%
FY07: 18.2%
FY08: 16.9%

ROA

FY03: 3.5%
FY07: 2.4%
FY08: 2.7%

15

Compounded Average Growth Rate of Assets and Liabilities (Percentage)

Over 10 yr Over 7 yr Over 5 yr Over 3 yr Over 1 yr
Assets
Gross fixed assets
Less: Cumulative depreciation
Net fixed assets
Investments
Market value of quoted investments
Deferred tax assets
Current assets
Loans & advances
Total assets
Liabilities
Net Worth
Authorised capital
Issued equity capital
Paid up equity capital (net of forfeited capital)
Reserves & surplus
Total borrowings
Secured borrowings
Unsecured borrowings
Current liabilities & provisions
Sundry creditors
Interest accrued
Other current liabilities
Provisions
Total liabilities

-5
4
-9
-19

0
19
-4
-15

32

-13
216
30

17
28
17
-36
-38
38
-8
51
36

31
42
23
-56
-74
51
13
34
31

23
33
15
-89
-61
68
-11
15
12

38
16
17
17
48
35
45
12
19
61
31
7
29
32

38
6
7
7
48
33
38
11
12
23
36
-5
21
30

45
8
10
9
54
35
46
2
24
24
45
3
72
36

48
14
11
11
62
27
28
22
37
47
41
15
47
31

69
22
13
13
76
3
1
26
13
-18
44
2
73
12

Distribution of Liabilities (Vertical Common Size)

Mar 2003
Mar 2004
Mar 2005
Mar 2006
Mar 2007
Mar 2008
Net Worth
13
12
13
15
12
19
Authorised capital
5
4
2
2
1
2
Issued equity capital
4
3
2
2
1
1
Paid up equity capital (net of forfeited capital)
4
3
2
2
1
1
Reserves & surplus
9
9
9
12
11
17
Free Reserves
8
8
8
10
9
15
Security premium reserves (Net of deductions)
4
3
3
7
6
11
Other free reserves
4
4
4
4
3
4
Specific reserves
1
2
2
1
2
3
Total borrowings
72
77
79
77
79
72
Bank borrowings
21
16
14
16
24
17
Short term bank borrowings
10
5
3
4
7
4
Long term bank borrowings
12
11
11
12
16
13
Financial institutional borrowings
3
2
1
0
0
0
Debentures / bonds
20
46
54
52
49
48
Non-convertible
20
46
54
52
49
48
Fixed deposits
3
2
1
0
0
0
Foreign borrowings
0
0
2
2
1
0
Borrowings from corporate bodies
2
0
0
0
0
0
Group / associate cos.
0
0
0
0
0
0
Commercial paper
5
0
2
2
0
0
Other borrowings
18
10
5
6
6
6
Secured borrowings
45
64
71
70
73
66
Unsecured borrowings
27
12
8
8
6
6
Current portion of long term debt
30
18
3
7
32
37
Current liabilities & provisions
14
11
8
8
9
9
Sundry creditors
4
4
2
3
4
3
Acceptances
0
0
0
0
0
0
Deposits & advances from customers and employees
1
0
0
0
0
0
Interest accrued
2
2
2
2
2
2
Other current liabilities
7
3
2
2
2
2
Provisions
1
2
2
1
1
2
Deferred tax liability
0
0
0
0
0
0
Total liabilities
100
100
100
100
100
100

16

Asset Utilization Ratios

Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008
Total Income / Avg. total assets
18%
17%
16%
15%
15%
18%
Total Income / Compensation to employees
20.43
17 15.25 14.56 13.02 12.74

Securitization

Effectively used to manage..,

Impact..,

Funds requirements
Funding costs
ALM structure
18% of total fund
Follows securitization by assignments (bilateral sale, not
tradable)

Contributor to interest income

Contributed interest income: 6.5%

Margin term: 1%
Key instruments in maintaining high margins

17

FY08 Cost/ Income: 32.7%

Asset Quality
Gross
Net
Gross
Net
NPAs
NPAs
NPAs
NPAs
(Rs. Mn) (Rs. Mn) Ratio (%) Ratio (%)
FY03

1,090

412

8.8

3.5

FY04

1,556

743

8.7

4.3

FY05

1,992

947

7.0

3.4

FY06

2,472

1,133

5.7

2.7

FY07

3,582

1,548

6.1

2.7

FY08

5,572

2,053

7.6

2.9

18

Provisioning Norms
Duration
(Months)
> 5 & <= 18

RBI
Norms (%)
10

Duration
(Months)
> 5 & <= 12

MMFSL
(%)
10

> 18 & <= 30

20 > 12 & <= 24

50

> 30 & <= 48

30

> 48

50

> 24

100

19

Shareholding Pattern (%)

Promoters: 62%
FIIs: 24%
Public and others: 13%

Risk Factors

Economic slowdowns
Policy risk
Over-dependence on M&M vehicles
Competition from banks and NBFCs
Interest rates risk
Asset quality risk

Rural lending
Rising interest rate increase by 150bps

20

Major Sources of Funds

No financial aid or subvention from parents

Most funds sourced from..,

Instruments raised..,

Mutual funds: 41%

Banks: 52%
Bonds: 60%
Bank borrowings: 21%
Securitization: 18%
Commercial paper: 1%

Healthy credit rating as linked to parent

company

Performance Ratios
FY06
Yield on assets

FY07

FY08

14.8% 15.1% 18.6%

Cost of funds

6.3%

6.6%

8.6%

Interest spread

8.5%

8.4%

7.2%

Net income margins

9.2%

9.2% 10.4%

ROA

2.7%

2.4%

2.7%

ROE

20.9% 18.2% 16.9%

Equity / TA

13.6% 12.4%

Loans / Assets

83.8% 89.8%

Cost / Income

35.3% 37.6% 32.7%

Cost / Assets

3.3%

3.5%

Net Interest Margin: 11.3%

21

Margins Supported by
Higher Yields

10.4% is higher compared to banks

Price-maker in rural market
Portfolio yield in FY07: 18.6%
Increasing funding costs: 6.6% to 8.6%
Benefits..,

Priority sector lending

Selling portfolio by assignment to other banks
Deposit-taking NBFC
High credit rating

Peer Comparison
STFC
Shares (Mn)

Sf

MMFSL

BAF

184.2

27.8

84

35.4

Mkt. Cap (Mn)

33,889

13,196

19,320

13,080

Avg. Assets (Rs. Mn)

84,523

65,593

56,505

29,007

Avg. Networth (Rs. Mn)

9,409

8,444

7,305

7,393

PAT (Rs. Mn)

1,916

1,045

1,329

472

ROE (%)

20.4

12.4

18.2

6.4

ROA (%)

2.3

1.6

2.4

1.6

EPS (Rs.)

10.4

37.6

15.7

13.4

BVPS (Rs.)

57.9

316

91.1

281.7

PER (x)

17.7

12.6

14.6

27.7

3.2

1.5

2.5

1.3

PBV (x)
Sept 2007

BAF and Sf have undergone significant equity dilution in past two years

22

Peer Comparison
Sundaram
Shriram
Finance
Transport
Bajaj Auto
Ltd
Finance Co. Ltd Finance Ltd
MMFSL
2006 2007 2008 2006 2007 2008 2006 2007 2008 2006 2007 2008
Growth (%)
Total Income
Total expenses
PBDTA
PBT
PAT
Net Worth
Total assets
Profitability ratios (%)
PAT/Avg Networth
PAT/Avg Total Assets
Efficiency ratios
Total Income / Avg. total assets
Total Income / Compensation to employees

17
-1
45
71
124
19
17
23
3

9 50 163
28 40 159
-28 98 173
-31 111 178
-41 112 187
8 19 269
23 11 202

57 75
61 71
34 113
34 109
34 105
32 66
79 69

12
2

20
2

22
3

27
4

27
3

42 66
94 60
-41 86
-42 87
-62 126
75 106
56 59
6
1

6
2

25
36
-53
-58
-57
7
9

42
45
22
22
32
81
61

42
46
26
25
23
6
25

45
47
34
34
33
69
12

2
1

19
3

18
2

17
3

0.12 0.11 0.14 0.23 0.17 0.17 0.13 0.14 0.14 0.15 0.15 0.18
12 11 12 19 20 20 12 12 10 15 13 13

MMFSL in the Group

FY06 FY07 Weight Growth (%)
39.04%
Net external revenues (Rs. Mn) 131,578 182,949 100%
Automotive
53,441 64,904
35%
21.45%
Farm equipment
34,711 43,602
24%
25.61%
IT services
14,067 31,426
17%
123.40%
Financial services (MMFL) 5,890 8,467
5%
43.75%
Steel processing & trading
7,265
7,877
4%
8.42%
Infrastructure
1,798 1,338
1%
-25.58%
Hospitality
1,527 2,347
1%
53.70%
Systech
6,126 16,991
9%
177.36%
Others
6,753 5,997
3%
-11.20%

23

MMFSL in the Group

FY06 FY07 Weight Growth (%)
15,945 23,730
100%
48.82%
PBIT (Rs. Mn)
Automotive
5,410 6,560
28%
21.26%
Farm equipment
3,140 5,031
21%
60.22%
IT services
2,617 6,862
29%
162.21%
Financial services (MMFL) 1,642 2,076
9%
26.43%
Steel processing & trading
480
493
2%
2.71%
Infrastructure
187
96
0%
-48.66%
Hospitality
320
639
3%
99.69%
Systech
988 1,667
7%
68.72%
Others
1,161
306
1%
-73.64%

MMFSL in the Group

PBIT margin
Automotive
Farm equipment
IT services
Financial services (MMFL)
Steel processing & trading
Infrastructure
Hospitality
Systech
Others

FY06 FY07 Growth (%)

12%
13%
7.04%
10%
10%
-0.16%
9%
12%
27.55%
19%
22%
17.37%
28% 25%
-12.05%
7%
6%
-5.27%
10%
7%
-31.01%
21%
27%
29.92%
16%
10%
-39.17%
17%
5%
-70.32%

24

Looking Beyond the Numbers

Are the companys revenues tied to one key

customer?
To what extent are the companys revenues tied to
one key product?
To what extent does the company rely on a single
supplier?
What percentage of the companys business is
generated overseas?
What is the competition?
Does the company invest heavily in R&D?
What is the legal and regulatory environment in
which it operates?

ROI

Net Income as
% of Sales

Net Income

Sales

Investment
Turnover

Sales

Investment

Shareowners
Equity

Borrowings

Total liabilities

Non borrowed
liabilities

25

Dupont Analysis
ROE =

Investment
Total Assets
Sales
Net Income

Shareholders's Equity
Investments
Total Assets
Sales

Turnover

Leverage

Net
Income

Return on
Total Assets

Net Profit as
% of Sales

Net Profit

Sales

Sales

COGS,
Other taxes,
and Expenses

Turnover

Sales

Total Assets

Long-term
Assets

Current Assets

Inventory

Accounts
Receivable

Cash and
Market
Securities

26

Oracle

Dupont Analysis

ROE =

Total Assets
Sales
Net Income

Shareholders's Equity
Total Assets
Sales

ROE = 1.934 0.4954 0.2351

27