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RUBRIC

ACC306: Financial Statement Analysis


EVALUATION FAILS TO MEET MEETS EXCEEDS SCOR
CRITERIA EXPECTATIONS EXPECTATIONS EXPECTATIO E
N
1. Company Profile (5 (0-1Marks) (2-3 Marks) (4-5 Marks)
Marks) All the required Some of the All the required
• Vision of the information not required information
Company. presented. information presented in a
• Mission of the presented Or well-organized
Company The presented manner along
• Business of the information is not with proper
Company well organized and formatting.
(Products). formatted.
• Management of the
Company (BOD).
• Competitors.
2. Profitability Analysis (0-3 marks) (4-7 marks) (8-10 marks)
of the company for Incorrect or Correct data used Correct data used
three years (ROE, inappropriate data with minimal errors without any errors
ROA, EPS, Dividend, used. and some analysis. and proper
Payout Ratio etc.)
analysis is done.
10 marks

3. Competitor Analysis (0-1Marks) (2-3 marks) (4-5 marks)


of two competitor Incorrect or Correct data used Correct data used
(ROI, ROE and PE inappropriate data with minimal errors without any errors
ratio) used and some analysis and the analysis is
5 marks
done
4. Leverage Analysis – (0-3 marks) (4-7 marks) (8-10 marks)
10 marks Student is not able to Student is partially Student can
(Degree of Financial analyse and interpret able to analyse and analyse and
Leverage and Leverage the position of interpret the interpret the
Ratio) of the company
company, including position of position of
position through leverage
analysis for past three indications where the company, including company,
years. company is lacking. indications where including
the company is indications where
lacking. the company is
lacking.

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Index

• Company Profile
• Profitability Analysis
• Competitor Analysis of two competitor
• Leverage Analysis

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Company Profile

Mission Of the Company:- Transforming urban landscapes by creating sustainable


communities.

Vision of the Company:- They are committed to following the triple bottom line
philosophy of ‘People, Planet and Profit’, with a commitment to providing more modern homes,
workplaces and social infrastructure to the nation.

Business of the Company:- Mahindra Lifespace Developers Limited is a real estate


development company. The Company, along with its subsidiary companies, is engaged in the
development of residential projects and large format developments, such as integrated cities and
industrial clusters. The Company is engaged in construction of buildings. Its segments include
Projects, Project Management and Development activities, and Operating of commercial
complexes. It serves both consumer households and businesses. Its projects in Chennai include
Aqualily, Iris Court and Nova. Its projects in Mumbai include Vivante, The Serenes and
Happinest. The Company's projects in Pune include L'Artista and Antheia. The Company's
projects in Gurgaon include Aura and Luminare. The Company's projects in Hyderabad include
Ashvita. Its projects in Bangalore include Windchimes. Its projects in Nagpur include
Bloomdale. The Company's subsidiaries include Mahindra Infrastructure Developers Limited
and Mahindra World City Developers Limited.

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Management of the Company:- Their Board of Directors are,

Name Designation
Arun Nanda Chairman
Bharat Shah Director
Ameet Hariani Director
Sangeeta Prasad Managing Director & CEO
Anish Shah Director
Amrita Chowdhury Ind. Non-Executive Director

Competitors of Mahindra Lifespace Developers Ltd:- Their competitors are,

❖ 3P Land Holdings Ltd.


❖ AGI Infra Ltd.
❖ Ajmera Realty & Infra India Ltd.
❖ Alchemist Realty Ltd.
❖ Alpine Housing Development Corporation Ltd.
❖ AMJ Land Holdings Ltd.
❖ DLF Ltd.
❖ Ansal Housing Ltd.
❖ Ansal Properties & Infrastructure Ltd.
❖ Arihant Foundations & Housing Ltd.
❖ Arihant Superstructures Ltd.
❖ Art Nirman Ltd.
❖ Arvind SmartSpaces Ltd.

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Profitability Analysis

Return on Equity:- The Return On Equity ratio essentially measures the rate of return that the
owners of common stock of a company receive on their shareholdings. Return on equity signifies
how good the company is in generating returns on the investment it received from its
shareholders.
Formula:- Profit/Loss after Tax ÷ Shareholder’s Fund*100
Calculation:- All figures are in crores
FY 2019 2018 2017
Profit/Loss After Tax 58.59 53.12 48.94
Shareholder’s Fund 1751.31 1805.64 1492.80
ROE 3.34 2.94 3.27

Interpretation:- From the year 2017 the ROE(Return on Equity) decreased upto the next
financial year 2018, ie, from 3.27 & to 2.94 % this significant decrease indicates that the
company is unable to make the profit, it also indicates that the company have not allocates its
shareholder fund properly.
From financial year 2018 to 2019 we can see a slight improvement which indicates that the
company management have made good decisions in investing on productive asset and here the
shareholders.

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Earning Per Share:- Earnings per share or EPS is an important financial measure, which
indicates the profitability of a company. It is calculated by dividing the company’s net income
with its total number of outstanding shares. It is a tool that market participants use frequently to
gauge the profitability of a company before buying its shares.
Formula:- Net Profit After Tax – Preference Dividend ÷ Number of Equity Share
Calculation:- All figures are in crores
FY 2019 2018 2017
Net Profit After Tax 58.59 53.12 48.94
Preference Dividend
0.00 0.00 0.00

Number of Equity
5.135 5.133 4.105
Share
EPS 11.40 10.34 11.92

Interpretation:- EPS Shows how much money a company makes for each share of its stock. A
company with high earning per share ratio is capable of generating a significant dividend for
investor. In this company we can see that from financial year 2017 the EPS decreased up to the
next financial year 2018 from 11.92 % to !0.34 %.We know that higher EPS indicates more
value because investor will pay more for a company with higher profits. But here its decreasing.
A negative EPS tells that exactly that much money the company lost per share outstanding stock.
In case of financial year 2018 to 2019 this EPS increasing from 10.34 % to 11.40 % that means
they are generating good amount of profit and it’s a good sign for investor when choosing to
invest in that company.

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Return on Asset:- Return on assets (ROA) is an indicator of how profitable a company is
relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company's management is at using its assets to generate earnings. Return on assets is displayed
as a percentage.
Formula:- Net Income ÷ Total Assets*100
Calculation:- All figures are in crores
FY 2019 2018 2017
Net Income 58.59 53.12 48.94
Total Asset 1870.86 1973.68 1881.59
ROA 1.04 2.69 2.60

Interpretation:- The return on assets (ROA) shows the percentage of how profitable a
company's assets are in generating revenue.ROA over 5% are generally considered good. In this
case FY 2017 the ROA increased up to the next FY 2018 from 2.60 % to 2.69 % .Its means the
business gains more money than it brings in and experiences a net gain. This is usually a very
good sign for investors. From FY 2018 to FY 2019 we can see a that it decrease slightly from
2.69 % to 1.04 %. Its indicates that currently the company is not making enough income from the
use of its assets.The machinery may not be increasing production efficiency or lowering overall
production costs enough to positively impact the company's profit margin.

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Dividend Payout Ratio:- The dividend payout ratio is the ratio of the total amount of dividends
paid out to shareholders relative to the net income of the company. It is the percentage of
earnings paid to shareholders in dividends. The amount that is not paid to shareholders is
retained by the company to pay off debt or to reinvest in core operations. It is sometimes simply
referred to as the 'payout ratio.
Formula:- Dividend Per Share ÷ Earning Per Share
Calculation:- All figures are in crores
FY 2019 2018 2017
Dividend Per Share 6.00 6.00 6.00
Earning Per Share 11.41 10.35 11.92
Dividend Payout 0.52 0.57 0.50
Ratio

Interpretation:- A range of 35% to 55% is considered healthy and appropriate from a dividend
investor’s point of view. A company that is likely to distribute roughly half of its earnings as
dividends means that the company is well established and a leader in its industry. But is case of
Supreme Infrastructure we see that the financial year 2017 to 2019 .The whole 3 years there
Dividend Payout Ratio is 0.50, 0.57,0.52%. Its means the company is suspendingits dividend,
When its suspend its dividend then dividend payout ratio automatically become 0%. That's
because the payout depends on a security's price and dividend. If the company suspends its
dividend, it essentially becomes a non-dividend-paying stock.

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Return on Investment:- Return on Investment (ROI) is a performance measure used to evaluate
the efficiency of an investment or compare the efficiency of a number of different investments.
ROI tries to directly measure the amount of return on a particular investment, relative to the
investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the
cost of the investment. The result is expressed as a percentage or a ratio.
Formula:- Profit Before Interest and Tax ÷ Capital Employed*100
Calculation:- All figures are in crores
FY 2019 2018 2017
Profit Before Interest
and Tax 89.28 114.19 103.2

Capital Employed 3673.51 3830.66 3415.42


ROI 2.43 2.98 3.02

Interpretation:- ROI of this company has declined from the FY 2017 to FY 2019 was 3.02 % to
2.98, 2.43 %. This indicates that the company is performing poor in generating profits form its
investment. The ratios are continually in low figures which indicates that in the companies
investments are producing losses as total cost has exceeded total returns and which returns will
fail to attract investors for investments as a investors will avoid a company with negative ROI.

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Price Earning Ratio:- The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company
that measures its current share price relative to its per-share earnings (EPS). The price-to-
earnings ratio is also sometimes known as the price multiple or the earnings multiple.
Formula:- Market Price per Equity Share ÷ Earning Per Share
Calculation:- All figures are in crores
FY 2019 2018 2017
Market Price per 10.00 10.00 10.00
Equity Share
Earning Per Share 11.41 10.35 11.92
P/E Ratio 0.87 0.96 0.83

Interpretation:-

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Competitor Analysis of two competitor
Mahindra Life vs Sanghi Ind

➢ Return on Investment

Mahindra Life
FY 2019 2018 2017
Profit Before 89.28 114.19 103.2
Interest and Tax
Capital Employed 3673.51 3830.66 3415.42
ROI 2.43 2.98 3.02
Sanghi Ind
FY 2019 2018 2017
Profit Before 109.81 165.48 62.97
Interest and Tax
Capital Employed 4307.66 4160.59 2034.77
ROI 2.54 3.97 3.09

Interpretation:- ROI of Mahindra Life has declined from the FY 2017 to FY 2019 was
3.02 % to 2.43 %. This indicates that the company is performing poor in generating
profits form its investment .Where in Sanghi ind the ROI has decreased and from the
FY 2018 to FY 2019 was 3.97 % to 2.54 % . For the Mahindra Life FY 2017 to FY 2018
was 3.02% to 2.98 %. That can be said same for both year. Means their generating
profits to investment is same as financial year 2017-18.Where as Sanghi Ind there ROI in
the FY 2017 to 2018 was 3.09% to 2.54%. we can see that sanghi ind is performing better
than Mahindra life

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➢ Return on Equity

Mahindra Life
FY 2019 2018 2017
Profit/Loss After Tax 58.59 53.12 48.94
Shareholder’s Fund 1,751.31 1,805.64 1,492.80
ROE 3.34 2.94 3.27

Sanghi Ind
FY 2019 2018 2017
Profit/Loss After
52.60 93.31 63.14
Tax
Shareholder’s Fund 1,650.36 1,597.88 1,113.98
ROE 3.18 5.83 5.66

Interpretation:- ROE of Mahindra Life has decreased from the FY 2017 to FY 2018 like
3.27% to 2.94 % .But the FY 2019 the figures are become positive 3.34 % .Where as in case of
Sanghi Ind after the FY 2017 to FY 2018 the ROE has slightly increased and in the FY 2019 the
company’s ROE was again declined 3.18%. This indicates that Supreme Mahindra Life is
performing better when it comes to allocation of its shareholders fund even though it is declining
but when compared to Sanghi Ind which have its ROE is less then Mahindra LIfe .Which
indicates that Sanghi Ind is generating less profits and the shareholders are not satisfy and
eventually will take their money out of the company Mahindra is performing better

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➢ P/E Ratio

Mahindra Life
FY 2019 2018 2017
Market Price per 10.00 10.00 10.00
Equity Share
Earning Per Share 11.41 10.35 11.92
P/E Ratio 0.87 0.96 0.83

Sanghi Ind
FY 2019 2018 2017
Market Price per
10.00 10.00 10.00
Equity Share
Earning Per Share 2.10 3.72 2.87
P/E Ratio 4.76 2.68 3.48

Interpretation:- P/E ratio of Sanghi was in FY 2017 to FY 2019 respectively 3.48,2.68,and


4.76times. Which indicates that the price of its stocks are very positive.Which is a as the prices
of stocks have increased and it will attract more investors where as in mahindra for all the P/E
ratio has increased which signifies that the prices of stocks decreased from 0.83 times to 0.96
times in current scenario.It is not a positive sign for a company where in case of Mahindra FY
2017 to FY 2019 the P/E ratio was respectively 0.83,0.96 and 0.87 times which all are and very
low. Which indicates that the investors can expect good earning as the prices of stock are low.
The Mahindra from FY 2018 to FY 2019 the P/E ratio decreased from -0.05 in negative
sign.Which is a very negative sign for a company as its stock prices decreased and the investors
also can be defined as value stock as it will attract more investors as now the earnings are more
as compared to the prices of the stocks. As the prices of its stocks are steady ,lower or with a
very little fluctuations but in mahindra it shows large fluctuations and the prices of stocks are
even greater than Sanghi

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Leverage Analysis

Financial Leverage:- Financial leverage which is also known as leverage or trading on equity,
refers to the use of debt to acquire additional assets.The use of financial leverage to control a
greater amount of assets (by borrowing money) will cause the returns on the owner's cash
investment to be amplified.

Formula:- Debt Equity Ratio ÷ Networth*100

Calculation:- All figures are in crores


FY 2019 2018 2017
Debt Equity Ratio 0.07 0.09 0.26
Networth 1751.31 1805.64 1492.80
Financial Leverage 0.003 0.0004 0.017

Interpretation:- A figure of 0.5 or less is Ideal.No more than half of the company’s assets
should be financed by debt.From the FY 2017 to FY 2018 the companies financial leverage
decreased from 0.017 to 0.0004 .Which indicates that the company is using lower debts to
finance its assets and operations still it is generating enough revenue to grow its assets from
profit. From FY 2018 to FY 2019 the financial leverage decreased up to from 0.0004 to 0.003
.Which indicates that the company is in a very good position where it is using lesser debts and
generating enough revenue for its operations and assets from it.This ratio here indicates that the
company is in very good position and have achieved the capability to expand its fixed assets
from revenues it is generating even if it is using debt.

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Degree of Financial Levarage:- A degree of financial leverage (DFL) is a leverage ratio that
measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating
income, as a result of changes in its capital structure. The degree of financial leverage (DFL)
measures the percentage change in EPS for a unit change in operating income, also known as
earnings before interest and taxes (EBIT).
Formula:- EBIT ÷ EBIT- Interest
Calculation:- All figures are in crores
FY 2019 2018 2017
EBIT 3.83 5.76 3.96
Interest 5.48 35.41 31.97
DFL -0.43 -5.14 0.03

Interpretation:- From FY 2017 to 2018 the DFL or Degree of financial leverage has decreased
from 0.03 to -5.14 .This decrease in figures indicates that the profitability of company is more
stable and less sensitive . Which means even small change in the leverage will directly effect the
profitability of the company.The sensitivity of the net income to the fluctuations in the operating
income is low which signifies that the company is less vulnerable. From FY 2018 to 2019 the
DFL has increased from -5.14 to -0.43 this increase in DFL indicates that the company now is
very volatile and fluctuating. Lower DFL is a positive sign for the company as there will be less
debt in the company’s capital structure.

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