itc lmd

BY

SAI KUMAR

B8-18

COMPANY REVIEW SEASION

CONTENT OF PRESENTATION

1-ECONOMY

2-INDUSTRY ANALYSIS

3-COMPANY ANALYSIS

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ECONOMY

• The Economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity .

• India's economic growth slowed to 4.7% for the 2013–14 fiscal year.

• GDP- The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis.

• "Growth in 2015-16 is expected to be between 8-8.5 per cent. 

PMI- Purchasing Managers' Indices (PMI) are economic indicators derived from monthly surveys of private sector companies.

The two principal producers of PMIs .

Markit Group, which conducts PMIs for over 30 countries worldwide.

The Institute for Supply Management (ISM), which conducts PMIs for the

US.

EXPORTS AND IMPORTS

India Inflation Rate

• The rate at which the general level of prices for goods and services is rising.

CURRENT ACCOUNT DEFICIT

• A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports.

• The current account also includes net income, such as interest and dividends, as well as transfers .

INDIA GDP PER CAPITAL INCOME

• The Gross Domestic Product per capita in India was last recorded at 5238.02 US dollars in 2014, when adjusted by purchasing power parity (PPP).

INDUSTRY

ANALYSIS

INDUSTRYConglomerate industry :A conglomerate is a combination of two or

more corporations engaged in entirely different businesses that fall under one corporate group, usually involving a parent company and many subsidiaries.

1-A conglomerate is a multi-industry company.

2-Conglomerates are often large and multinational.

3-Conglomerates were popular in the 1960s due to a combination of low

interest rates and a repeating bear/bull market .

ADVANTAGES

• Diversification results in a reduction of investment risk. A downturn suffered by one subsidiary.

• A conglomerate creates an internal capital market if the external one is not developed enough.

• A conglomerate can show earnings growth, by acquiring companies whose shares are more discounted than its own.

• There are very important opportunities that can be exploited, to increase shareholder value.

Disadvantages

• The extra layers of management increase costs.

• Accounting disclosure is less useful information, many numbers are disclosed grouped, rather than separately for each business.

• Culture clashes can destroy value.

• Lack of focus, and inability to manage unrelated businesses equally well.

CONGLOMERATES COMPANIES

VALUE CHAIN

COMPANY ANALYSIS

ITC (Imperial Tobacco Company of India Limited)

• ITC was formed on 24 August 1910 and is headquartered in Kolkata, West Bengal.

• Its diversified business includes five segments:

1- Fast Moving Consumer Goods (FMCG),

2-Hotels,

3- Paperboards

4- Packaging

5-Agri Business & Information Technology.

• Till 1970’s company is dealing with the tobacco products.

• In 1975, the company acquired a hotel in Chennai, which was renamed the 'ITC-Welcomgroup Hotel Chola' (now renamed to My Fortune, Chennai).

• In 2000, ITC launched the Expressions range of greeting cards. Owned information technology subsidiary, ITC InfoTech India Limited.

• ITC entered the Agarbattis (incense sticks) business in 2003.

• ITC diversified into body care products in 2005.

• ITC is today the only company in world to be carbon positive, water positive, and solid waste recycling positive. Almost 40% of the energy consumed in the ITC is from renewable sources.

ITC VISION and mission

• THE ITC VISION »

Sustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Company's stakeholders

• THE ITC MISSION »

To enhance the wealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder value

BOARD OF DIRECTORS(Y C DEVESHWAR) Chairman Executive Directors

NAKUL ANAND

P DHOBALE

KURUSH N GRANT

Achievement's

• The World's Most Reputable Companies by Forbes magazine and as 'India's Most Admired Company' in a survey conducted by Fortune India magazine and Hay Group.

• ITC is rated among the World's Best Big Companies, Asia's 'Fab 50‘.

• It received the National Award for Excellence in Corporate Governance from the Institute of Company Secretaries of India in 2007.

• In 2010, ITC was ranked 6th amongst global consumer goods companies in sustainable value creation during 2005-09.

• In 2013, ITC was ranked the third most admired company in India by Fortune.

SwOT ANALYSIS

Strengths

• ITC has a strong and experienced management

• Strong brand presence, excellent products advertising

• Diversified product and services

• Excellent research and development facilities

Weakness

•  ITC is still dependent on its tobacco revenues and people have cheaper substitutes and other brands

• Hotel industry has not been able to create a huge market share

Weakness

•  ITC is still dependent on its tobacco revenues and people have cheaper substitutes and other brands

• Hotel industry has not been able to create a huge market share

TOP SHAREHOLDERS FOR ITC

No. Name of the Shareholder Total Shares held

Shares as % of Total No. of Shares

1 Tobacco Manufacturers India Ltd 1,985,564,880 25.272 Life Insurance Corporation of India 934,915,387 11.9

3Specified Undertaking Of the Unit Trust Of India 896,722,590 11.41

4 Myddleton Investment Company Ltd 324,207,960 4.135 New India Assurance Company Ltd 162,994,072 2.076 General Insurance Corporation of India 144,502,551 1.847 Oriental Insurance Company Ltd 129,112,513 1.648 National Insurance Company Ltd 123,182,220 1.579 Rothmans International Enterprises Ltd 103,303,260 1.31

10 ICICI Prudential Life Insurance Company Ltd 85,591,413 1.09  Total 4,890,096,846 62.24

ANALYSIS

Liquidity And Solvency Ratios

Current Ratio 1.25 1.22 1.08 1.08 0.92

Quick Ratio 0.68 0.66 0.51 0.50 0.39

Current ratio- Ideal ratio: 2:1 High ratio indicates under trading and over capitalization. Low ratio indicates over trading and under capitalization.

Quick ratio- Ideal ratio: 1:1

Usually, a high acid test ratio is an indication that the firm is liquid and has ability to meet its current or liquid liabilities in time and on the other hand a low quick ratio represents that the firm’s liquidity position is not good.

2014 2013 2012 2011 2010

Inventory Turnover Ratio 4.52 4.53 6.53 6.05 6.04

Debtors Turnover Ratio 19.97 27.82 26.5 23.91 24.31

2014 2013 2012 2011 2010

Stock turnover ratio. It tells us as to how many times stock has turned over (sold) during the period. Indicates operational and marketing efficiency.

Debtors turnover ratio-The purpose of this ratio is to measure the liquidity of the receivables or to find out the period over which receivables remain uncollected.

EXCEL

CAPITAL STRUCTURE

• Capital structure of the company

Equity + Debt = Capital structure

Equity

Common stock,

reserves and surplus

Preference share capital

IN CRORES

Equity Amount Debt Amount

Share capital 795.32 Long term borrowings

76.40

Reserves and surplus

26441.64 Other liabilities 42.74

Total 27236.96 Total 119.14

Financial and operating leverage

• A. Financial leverage - % change in EPS / % change in EBIT

=0.161 / 0.175 =0.92

Measures of financial leverage

i. Debt ratio - Debt / Debt + equity

=119.14/ 27356

= 0.4 %

ii. Debt equity ratio - Total long term debt / equity

=119.14 / 27236

= 0.0043

• B. Operating leverage -% change in EBIT / % change in Sales

=0.175/0.121

=1.44