Financial Statements: Analysis & Interpretation

Submitted By: Akanksha Bhatnagar Roll No. 102/2010 Section- B

CONTENTS
Nestle Contents of the Annual Report 2009 Disclosure techniques used by Nestle Disclosure of Contingent Assets and Contingent Liabilities Major accounting policies followed by Nestle Liquidity Ratio Profitability Ratio Activity Ratio Capital Structure Ratio Earnings per Share Price Earnings Ratio Book Value per share Britannia Contents of the Annual Report 2009 Disclosure techniques used by Nestle Disclosure of Contingent Assets and Contingent Liabilities Major accounting policies followed by Nestle Liquidity Ratio Profitability Ratio Activity Ratio Capital Structure Ratio Earnings per Share Price Earnings Ratio Book Value per share 13 17 18 19 21 21 22 23 23 24 24 2 4 5 6 7 8 9 9 10 10 11

ANNUAL REPORT 2008-2009

CONTENTS OF ANNUAL REPORT

The complete set of annual report of Nestle India Limited has: A report by Board of Directors Financial Results & Operations Exports Dividends Business Development Acquisition of Healthcare Nutrition Business Sales Technology & Quality Environment Capacity Supply Chain Human Resource & trade Relations SWOT analysis for the company Working with communities Contribution to Exchequer Awards & Recognition Directors Responsibility Statement Corporate Governance Cautionary Statement Directors Auditors Information Regarding Conservation of Energy Trade Relations Appreciations Auditors Report to the members of Nestle India Ltd. Balance Sheet of Nestle India Ltd. As on December 31, 2009 Since the company uses vertical form of balance sheet. It provides details under two main headings: (i) Source of Funds a. Share Holders Funds: It includes Share Capital Reserves & Surplus (Schedule A & B). b. Deferred Tax Liabilities (ii) Application of Funds a. Fixed Assets b. Investments c. Current Assets, Loan & Advances Less: Current Liabilities & Provisions d. Notes to the Accounts Profit & Loss Account (i) Incomes (ii) Expenditure

(iii) (iv) (v) (vi) (vii)

Profit before Impairment, Contingencies & Taxation Profit after Taxation Balance available for Appropriation Surplus carried to balance sheet Basic & diluted Earnings per Share

Cash Flow Statement Schedules forming part of BalanceSheet as on December 31, 2009 Segment Reports Based on the guiding principles given in Accounting Standard on Segment Reporting (AS17), the Companys primary business segment is Food. The food business incorporates product groups viz. Milk Products and Nutrition, Beverages, Prepared dishes and cooking aids, Chocolates and Confectionery, which mainly have similar risks and returns. As the Companys business activity falls within a single primary business segment the disclosure requirements of AS -17 in this regard are not applicable.

DISCLOSURE TECHNIQUES
During the year 2009, the Company had no materially significant related party transaction, which is considered to have potential conflict with the interests of the Company at large. Transactions with related parties are disclosed in Note No. 16 of Schedule N to the Annual Accounts. The Company has complied with the requirements of regulatory authorities on capital markets and no pen alties or strictures has been imposed on the Company by Stock Exchange, SEBI or any other statutory authority, on any matter relating to the capital markets, during the last three years. The Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement entered into with the Bombay Stock Exchange Limited, Mumbai. The status of adoption of the non-mandatory requirements of Clause 49 of the Listing Agreement is as under: (a) Maintaining non-executive Chairmans Office: Presently not applicable as the Chairman of the Company is an Executive Director. (b) Tenure of Independent Director: No specific tenure has been prescribed for Independent Directors. (c) Remuneration Committee: No separate Remuneration Committee has been constituted. Please refer to para above on REMUNERATION COMMITTEE. (d) Shareholder Rights: Half-yearly and other quarterly financial statements are published in newspaper and uploaded on Company website (www.nestle.in) and SEBI website (www.sebiedifar.nic.in). Presently, half-yearly financial performance of the Company is not being sent to each household of shareholders. (e) Audit Qualifications: The Company already has a regime of un-qualified financial statements. Auditors have raised no qualification on the financial statements. (f) Training of Board Members: In the course of Board/ Audit Committee Meetings the Directors are where relevant provided information on the business model, the risk profile of the business parameters, their responsibilities as Directors, and best ways to discharge them. (g) Mechanism for evaluating non-executive Board Members: The Company has not adopted any mechanism for evaluation of individual performance of Non-Executive Directors. (h) Whistle Blower Policy: The standard of behaviour of Nestl India is governed by significant documents from Nestl Corporate Business Principles, The Nestl Management and Leadership Principles and Nestl Code of Business Conduct. Employees can report to the Company Secretary on a confidential basis any practices or actions believed to be inappropriate under the Nestl India Code of Business Conduct or believed to be illegal. Further, the Company has appointed ombudsman for Infant Code, under which employees can report suspected Code violations directly to the Ombudsman, with adequate safeguard to protect the employee reporting.

DISCLOSURE OF CONTINGENT ASSETS & CONTINGENT LIABILITIES

Contingent liabilities are disclosed after a careful evaluation of the facts and legal aspects o the f matter involved, in line with the provisions of Accounting Standard (AS) 29. Provisions are recognised when the Company has a legal/constructive obligation and on management judgement as a result of a past event, for which it is probable that a cash outflow may be required and a reliable estimate can be made of the amount of the obligation.

The Company has created a contingency provision of Rs. 457,181 thousands (previous year Rs. 325,882 thousands) for various contingencies resulting mainly from matters, which are under litigation/dispute and other uncertainties requiring management judgment. The Company has also reversed/utilized contingency provision of Rs. 133,980 thousands (previous year Rs. 20,966 thousands) due to the satisfactory settlement of certain disputes for which provision was no longer required. The details of class-wise provisions are given below:

ACCOUNTING POLICIES FOLLOWED BY NESTLE

ACCOUNTING CONVENTION The financial statements are prepared under the historical cost convention, in accordance with applicable mandatory accounting standards prescribed under the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956.

SALES Sale of goods is recognised at the point of despatch to the customer. Sales include excise duty but exclude value added tax/sales tax. In order to comply with Accounting Standards on Revenue Recognition (AS- 9), gross sales (including excise duty) and net sales (excluding excise duty) is disclosed in the profit and loss account. INVENTORIES Stores and spare parts are stated at cost. Stock -in-trade is valued at cost or net realisable value, whichever is lower, as certified by the management. The bases of determining cost for various categories of inventories are as follows: Raw and packing materials : First-in-first out Stores and spare parts : Weighted average Work-in-progress and finished goods : Material cost plus appropriate share of production overheads and excise duty, wherever applicable. DEPRECIATION / AMORTISATION Depreciation is provided as per the straight-line method at rates provided in Schedule XIV to the Companies Act, 1956, except for the following classes of fixed assets, where the useful life has been estimated as under: Information technology equipment: 3 years Furniture and fixtures and Vehicles: 5 years Leasehold land and improvements: Lease period Management information systems (Intangible fixed asset) : 5 years

TAXATION The provision for taxation for the period comprises the residual tax liability for the assessment year 2009-2010 relevant to the period April 1, 2008 to March 31, 2009 and the liability, which has accrued on the profit for the period April 1, 2009 to December 31, 2009, under the provisions of the Indian Income tax Act, 1961. Deferred tax is recognised, subject to the consideration of prudence, on timing difference, being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

FIXED ASSETS Fixed assets are stated at cost (net of CENVAT, wherever applicable) less accumulated depreciation. Cost is inclusive of freight, duties, levies and any directly attributable cost of bringing the assets to their working condition for intended use. An intangible asset is measured at cost and amortised so as to reflect the pattern in which the assets economic benefits are consumed.

LIQUIDITY RATIO
CURRENT RATIO: The ratio gives an idea about the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign.

CURRENT ASSETS Inventories Sundry debtors Cash and bank balances

4,987,379 641,863 1,555,863 7,185,105

CURRENT LIABILITIES Liabilities CR = CA/CL = 1.22

5,875,906

QUICK RATIO: The quick ratio is more conservative than the current ratio, a more well-known liquidity measure, because it excludes inventory from current assets. Inventory is excluded because some companies have difficulty turning their inventory into cash. In the event that short-term obligations need to be paid off immediately, there are situations in which the current ratio would overestimate a company's short-term financial strength.

QUICK ASSETS Sundry debtors Cash and bank balances

641,863 1,555,863 2,197,726

CURRENT LIABILITIES Liabilities QR = QA/CL = 0.37

5,875,906

PROFITABILITY RATIO
NET PROFIT MARGIN: A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales.

PROFIT AFTER TAXATION NET SALES NET PROFIT MARGIN

6,550,028 51,293,767 12.76%

RETURN ON CAPITAL EMPLOYED: A ratio that indicates the efficiency and profitability of a company's capital investments.

ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings. A variation of this ratio is return on average capital employed (ROACE), which takes the average of opening and closing capital employed for the time period. PROFIT BEFORE INTEREST AND TAXATION Add: Interest 9,169,758 13,985 9,183,743

CAPITAL EMPLOYED Fixed Assets Current Assets

8,962,048 7,185,105 16,147,153

ROCE = EBIT/CE = 56.87%

ACTIVITY RATIO
DEBTORS TURNOVER RATIO: This indicates the number of times average debtors have been converted into cash during a year. It is determined by dividing the net credit sales by average debtors. Debtor Turnover Ratio = Net Credit Sales Average Accounts Receivable NET CREDIT SALES AVERAGE TRADE DEBTORS DEBTORS TURNOVER RATIO 51,293,767 641,863 79.91

TOTAL ASSET TURNOVER RATIO: This ratio is useful to determine the amount of sales that are generated from each dollar of assets. As noted above, companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. Total Turnover Ratio = Net Sales Total Assets 51,293,767

NET CREDIT SALES TOTAL ASSETS Fixed Assets Investments Current Assets

9,758,321 2,032,555 8,565,592 20,356,468 2.51

TOTAL TURNOVER RATIO

CAPITAL STRUCTURE RATIO

DEBT EQUITY RATIO: This determines the soundness of the long-term financial policies of the company. It is also known as External-internal Equity Ratio. Debt Equity Ratio = Total Long Term debts Shareholders Funds LOANS SHAREHOLDERS FUNDS Share capital Reserves and surplus DEBT EQUITY RATIO 1,346,788

964,157 4,848,493 5,812,650 0.23

INTEREST COVERAGE RATIO: A ratio used to determine how easily a company can pay interest on outstanding debt.

The lower the ratio, the more the company is burdened by debt expense. PROFIT BEFORE INTEREST AND TAXATION Add: Interest 9,169,758 13,985 9,183,743 13,985 656.68

INTEREST EXPENSE INTEREST COVERAGE RATIO

EARNINGS PER SHARE

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period. Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. NET PROFIT NO. OF EQUITY SHARES EARNINGS PER SHARE 6,550,028,000 96,415,716 67.4

PRICE EARNING RATIO

The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio. The P/E ratio has units of years, which can be interpreted as "number of years of earnings to pay back purchase price". P/E ratio shows current investor demand for a company share. There are various P/E ratios, all defined as:

PRICE PER SHARE EARNINGS PER SHARE P/E RATIO

10 67.4 0.15

BOOK VALUE PER SHARE

Book value per share = stockholders equity- Preffered stock Average Outstanding Shares = 176,922,000,000 1467,298,404 = 121.39

ANNUAL REPORT 2008-2009

CONTENTS OF ANNUAL REPORT

An Annual report is a comprehensive report on a company's activities throughout the preceding year. Annual reports are intended to give shareholders and other interested persons information about the company's activities and financial performance. Most jurisdictions require companies to prepare and disclose annual reports, and many require the annual report to be filed at the company's registry. Companies listed on a stock exchange are also required to report at more frequent intervals (depending upon the rules of the stock exchange involved). The complete set of annual report of Britannia: Financial Highlights Report of the Directors Management Discussion and Analysis Report on Corporate Governance Auditors Report Balance Sheet Profit and Loss Account Cash Flow Statement Schedules to Balance Sheet and Profit and Loss Account Auditors Report on Consolidated Financial Statements Consolidated Balance Sheet Consolidated Profit and Loss Account Consolidated Cash Flow Statement Schedules to Consolidated Balance Sheet and Profit and Loss Account Information on Subsidiary Companies Significant Ratios

Some of the Components are explained as under: Auditors Report: The Auditor's report is a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on a legal entity or subdivision thereof (called an auditee). The report is subsequently provided to a user (such as an individual, a group of persons, a company, a government, or even the general public, among others) as an assurance service in order for the user to make decisions based on the results of the audit. An auditors report is considered an essential tool when reporting financial information to users, particularly in business. Since many third-party users prefer, or even require financial information to be certified by an independent external auditor, many auditees rely on auditor reports to certify their information in order to attract investors, obtain loans, and improve public appearance. Some have even stated that financial information without an auditors report is essentially worthless for investing purposes. Balance Sheet:

In financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a company's financial condition. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time. A company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities. Another way to look at the same equation is that assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing." Records of the values of each account or line in the balance sheet are usually maintained using a system of accounting known as the double-entry bookkeeping system. A balance sheet shows:
y y y y y

fixed assets - long-term possessions investments current assets - short-term possessions, loans and advances current liabilities - what the business owes and must repay in the short term long-term liabilities - including owner's or shareholders' capital

The balance sheet is so-called because there is a debit entry and a credit entry for everything, so the total value of the assets is always the same value as the total of the liabilities. Investments Investments are shown in balance sheet after the fixed assets. these are classified into four categories:a) b) c) d) investment in government and trust securities investment in shares, debentures and bonds of securities investment in shares, debentures and bonds of subsidiary companies investment in fixed assets

Current assets are the assets which are likely to be converted into cash within a year
y y y y y

stock work in progress money owed by customers cash in hand or at the bank short-term investments

pre-payments eg. advance rents

Current liabilities are amounts owing and due within one year. These include:
y y y

money owed to suppliers short-term loans, overdrafts or other finance taxes due within the year - VAT

Long-term liabilities include:

y

creditors due after one year - the amounts due to be repaid in loans or financing after one year, eg bank or directors' loans, finance agreements capital and reserves - share capital and retained profits, after dividends (if your business is a limited company), or proprietors capital invested in business (if you are an unincorporated business)

By law the balance sheet must include the elements shown above in bold. However, what each includes will vary from business to business. The firm's external accountant will usually decide how to present the information, although if you have a qualified accountant on staff, they may make this decision. Income Statement: A financial statement that measures a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year. Also known as the "profit and loss statement" or "statement of revenue and expense". Operating section:
y

Revenue - Cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major operations. Usually presented as sales minus sales discounts, returns, and allowances. Expenses - Cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations. o General and administrative expenses (G & A) - represent expenses to manage the business (officer salaries, legal and professional fees, utilities, insurance, depreciation of office building and equipment, office rents, office supplies) o Selling expenses - represent expenses needed to sell products (e.g., sales salaries, commissions and travel expenses, advertising, freight, shipping, depreciation of sales store buildings and equipment) o R & D expenses - represent expenses included in research and development o Depreciation - is the charge for a specific period (i.e. year, accounting period) with respect to fixed assets. It can be calculated by various methods.

Non-operating section
y

Other revenues or gains - revenues and gains from other than primary business activities (e.g. rent, patents). It also includes unusual gains and losses that are either unusual or infrequent, but not both (e.g. sale of securities or fixed assets) Other expenses or losses - expenses or losses not related to primary business operations.

Cash Flow Statement: In financial accounting, a cash flow statement or statement of cash flows is a financial statement that shows how changes in balance sheet and income accounts affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. Disclosure Techniques Used: To understand the disclosure techniques relating to contingent assets and contingent liabilities, a brief introduction to the two words are required. Contingent Assets: An asset in which the possibility of an economic benefit depends solely upon future events that can't be controlled by the company is a contingent asset. Due to the uncertainty of the future events, these assets are not placed on the balance sheet. However, they can be found in the company's financial statement notes. These assets, which are often simply rights to a future potential claim,are based on past events. An example might be a potential settlement from a lawsuit. The company does not have enough certainty to place the settlement value on the balance sheet, so it can only talk about the potential in the notes. This improves the accuracy of financial statements and removes potential abuses. Contingent Liabilities: Contingent liabilities are those that may or may not be incurred by an entity depending on the outcome of a future event such as a court case. These liabilities are recorded in a company's accounts and shown in the balance sheet when both probable and reasonably estimable. A footnote to the balance sheet describes the nature and extent of the contingent liabilities. The likelihood of loss is described as probable, reasonably possible, or remote. The ability to estimate a loss is described as known, reasonably estimable, or not reasonably estimable not added to the Balance Sheet. The rationale behind showing contingent assets and contingent liabilities is to inform the investor about the future possibilities of the company. This also improves the accuracy of the financial statements.

DISCLOSURE TECHNIQUES
(a) Disclosures of materially significant related party transactions, i.e., transactions of the Company of material nature, with its promoters, the Directors or the Management, their Subsidiaries or relatives etc., that may have potential conflict with the interests of the Company at large: Related party transactions in the ordinary course of business are reported to the Audit Committee. None of them were (i) not in the normal course of business, or (ii) not on arms

length basis, or (iii) in conflict with the interests of the Company at large, including the related party transactions that are disclosed under item 25 of Schedule T to the accounts for the year 2008-09. (b) Details of non-compliance by the Company, penalties, and strictures imposed on the Company by Stock Exchange or Securities and Exchange Board of India or any statutory authority, on any matter related to capital markets, during the last three years: None Risk Management A detailed review of business risks and the Companys plan to mitigate them is presented to the Audit Committee of the Board. The Company has been taking steps to mitigate foreseeable business risks. Business risk evaluation and management is an ongoing and continuous process within the Company and regularly updated to the Audit Committee. Public, Rights and Other Issues During the year 2008-09, the Company did not make any public, rights or any other issue of securities. The financial statements for the year 2008-09 have been prepared in accordance with the applicable accounting standards prescribed by the Institute of Chartered Accountants of India and as required under the Companies (Accounting Standards) Rules, 2006. CEO/ CFO Certification Ms. Vinita Bali, Managing Director and Mr. Raju Thomas, Chief Financial Officer, have certified to the Board in accordance with Clause 49(v) of the Listing Agreement pertaining to CEO/ CFO certification for the financial year ended 31 March 2009. Management Discussion and Analysis Report This has been separately attached to the Directors Report. Compliance Reports The Board has noted and reviewed the compliance reports from all functions pertaining to the respective laws applicable to them, which were placed before the Board at each of its meetings held during the year 2008-09.

(c)

(d)

(e)

(f)

(g)

(h)

DISCLOSURE OF CONTINGENT ASSETS & CONTINGENT LIABILITIES

Contingent liabilities are disclosed after a careful evaluation of the facts and legal aspects of the matter involved, in line with the provisions of Accounting Standard (AS) 29. Provisions are recognised when the Company has a legal/constructive obligation and on management judgement as a result of a past event, for which it is probable that a cash outflow may be required and a reliable estimate can be made of the amount of the obligation.

The Company has created a contingency provision of Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 69,509 (Previous year: Rs. 129,895). Contingent Liabilities for: (1) Bank guarantee and letter of credit for Rs. 43,799 (Previous year: Rs. 169,169). (2) Discounted cheques Rs. 737,696 (Previous year: Rs. 756,175). (3) Claims/demand against the Company not acknowledged as debts including Excise, Income tax, Sales tax and Trade and other demands Rs. 822,401 (Previous year : Rs. 809,469).

ACCOUNTING POLICIES FOLLOWED BY BRITANNIA

ACCOUNTING FOR INTEREST INJOINT VENTURES The proportionate share of the Groups interests in joint ventures is combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra group balances/transactions to the extent it pertains to the Group as per AS 27 Financial Reporting of Interest in Joint Ventures.

INVENTORIES Inventories are valued at the lower of cost or estimated net realisable value, after providing for obsolescence, where appropriate. Raw materials, packing material and stores and spares are valued at cost, computed on a moving weighted average basis. The cost includes purchase price, inward freight and other incidental expenses net of refundable duties, levies and taxes where applicable. Materials in process are valued at input material cost plus conversion cost as applicable. Finished goods are valued at lower of net realisable value and prime cost, excise duty and other overheads incurred in bringing the inventories to their present location and condition.

DEPRECIATION / AMORTISATION Depreciation in respect of all the assets acquired upto 30 June 1984 is provided on written down value method. For additions on or after 1 July 1984, straight line method has been used. Depreciation rates are estimated by the Group and are as specified in the amended Schedule XIV of the Companies Act,1956, except relating to vehicles which are depreciated over a period of five years. Assets costing upto Rs.5 are fully depreciated in the year of addition. Computer software is amortised over a period of six years. Leasehold land is amortised over the period of primary lease. The assets identified and retired based on technical evaluation and held for disposal are stated at estimated net realisable value. In respect of assets held by Al Sallan Food Industries Company SAOG, Strategic Food International Co. LLC and Daily Bread Gourmet Foods (India) Private Limited, the depreciation rates followed (based on estimated useful life of assets) are different from the rates adopted by the Group. (Refer schedule D note (d)). In respect of assets held by J B Mangharam Foods Private Limited and Ganges Vally Foods Private Limited, depreciation is provided at rates calculated to write off the cost, less estimated residual value, of each asset on a written-down-value basis over its expected useful life. The written down value of assets as on 31 March 2009 amounts to Rs.39,731 and Rs.33,772 (Previous year: Rs. 42,318 and 38,397) for J B Mangharam Foods Private Limited and Ganges Vally Foods Private Limited respectively.

TAXATION (i)Current taxation Provision for current tax is made based on the tax liability computed after considering tax allowances and exemptions. Foreign companies recognise tax liabilities and assets in accordance with the applicable local laws of those jurisdictions. (Also refer note 12).

(ii) Fringe benefit tax Fringe benefit tax is determined at current applicable rates on expense falling within the ambit of Fringe benefit, as defined under the Income Tax Act, 1961. (iii) Deferred taxation Deferred income tax is provided on all timing differences at the Balance Sheet date between the tax basis of assets and liabilities and their carrying amount for financial reporting purpose. Deferred tax asset or liability is recognised only for those timing differences that originate during the tax holiday period but reverse after the tax holiday period. Deferred tax assets are recognised only if there is a reasonable or virtual certainty, as may be applicable, that sufficient future taxable income will be available against which they can be realised. The carrying amount of deferred tax assets is reviewed at each Balance Sheet date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax asset to be utilised.

FIXED ASSETS Tangible assets Tangible assets are stated at their original cost less accumulated depreciation. Cost includes inward freight, duties, taxes and expenses incidental to acquisition and installation net of refundable duties, levies and taxes where applicable. Intangible assets i) Intangible assets are stated at cost of acquisition less accumulated amortisation. ii) Goodwill arising on consolidation represents the excess of cost to the Group of its investment in a subsidiary company over the Groups portion of net worth of the subsidiary, and is net of Capital Reserve.

LIQUIDITY R TIO
CURRE T RAT : The rati gi es an i ea about the company's ability to pay backits short term liabilities (debt and payables) with its short term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign.

CR = CA/CL =

UICK RATIO: The quick ratio is more conservative than the current ratio, a more well known liquidity measure, because it excludes inventory from current assets. Inventory is excluded because some companies have difficulty turning their inventory into cash. In the event that short-term obligations need to be paid off immediately, there are situationsin which the current ratio would overestimate a company's short-term financial strength.

QR = QA/CL = 9,929/29,394 =0.337

PROFITABILITY RATIO
NET PROFIT MARGIN: A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales.

PROFIT AFTER TAXATION NET SALES NET PROFIT MAR IN

24,976 2, 89,585 8.62%

RETURN ON CAPITAL EMPLOYE : A ratio that indicates the efficiency and profitability of a company's capital investments.

ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings. A variation of this ratio is return on average capital employed (ROACE), which takes the average of opening and closing capital employed for the time period. PROFIT BEFORE INTEREST AND TAXATION CAPITAL EMPLOYED ROCE = EBIT/CE = 19.46% 24,641 1,26,565

ACTIVITY RATIO
DEBTORS TURNOVER RATIO: This indicates the number of times average debtors have been converted into cash during a year. It is determined by dividing the net credit sales by average debtors. Debtor Turnover Ratio = Net Credit Sales Average Accounts Receivable NET CREDIT SALES AVERAGE TRADE DEBTORS DEBTORS TURNOVER RATIO 2, 89,585 8,738 33.13

TOTAL ASSET TURNOVER RATIO: This ratio is useful to determine the amount of sales that are generated from each dollar of assets. As noted above, companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. Total Turnover Ratio = Net Sales Total Assets 2, 89,585 54,123 5.35

NET CREDIT SALES TOTAL ASSETS TOTAL TURNOVER RATIO

CAPITAL STRUCTURE RATIO

DEBT EQUITY RATIO: This determines the soundness of the long-term financial policies of the company. It is also known as External-internal Equity Ratio.

Debt Equity Ratio = Total Long Term debts Shareholders Funds LOANS SHAREHOLDERS FUNDS DEBT EQUITY RATIO 1,26,565 1,18,351 1.06

INTERE T COVERAGE RATIO: A ratio used to determine how easily a company can pay interest on outstanding debt.

The lower the ratio, the more the company is burdened by debt expense. PROFIT BEFORE INTEREST AND TAXATION INTEREST EXPENSE INTEREST COVERAGE RATIO 24,641 116,963 0.21

EARNINGS PER SHARE

The portion of a company's profit allocated to each outstanding share of common stock.Earnings per share serve as an indicator of a company's profitability. Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period. Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. NET PROFIT NO. OF EQUITY SHARES EARNINGS PER SHARE 1,804,001,000 23,890,163 75.51

PRICE EARNING RATIO

The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio. The P/E ratio has units of years, which can be interpreted as "number of years of earnings to pay back purchase price". P/E ratio shows current investor demand for a company share. There are various P/E ratios, all defined as:

PRICE PER SHARE EARNINGS PER SHARE P/E RATIO

10 75.51 0.13

BOOK VALUE PER SHARE

Book value per share = stockholders equity- Preffered stock Average Outstanding Shares = 334.0