Sector : Storage Battery

Industry
Company : Exide
Industries
Submitted by :
Akash Sarkar(13004)
Surya Narayana Adiga(13048)
Nirupam Mandal(13025)
Pathan Javed(13026)
Ajvad Rehmani(13003)
Shahab Khan(13040)
 Porter’s Five Forces
• SUPPLIER POWER
•
• Raw material substitutes in battery industry is very low as for a Lead
Acid battery lead is the main component.
•
• Because of highly fragmented industry suppliers can switch to other
small battery manufacturers if big players don’t offer them
favorable prices.
•
• Threat of forward integration is low in battery industry because of long
process of approvals from government and environmental
clearances for setting up a plant.
•
• Raw material cost relative to total expenditure in the industry is
relatively high to the tune of 55-70% (varying on type of battery).
As a result if cost of zinc, silver or nickel ore increases the suppliers
are likely to pass on the burden to battery manufacturers.
•
• Big players like EXIDE ,Amara raja and HBL have developed long term
relationships to source their raw material from supplier as they buy
 Po rte r’ s Five Fo rce s
• THREAT OF SUBSTITUTES
•
• There are no switching costs of customers in replacement
segment.
•
• In OEM segment buyer inclination to  substitute is less
because battery manufacturers develop and design
specific models for different auto manufacturers or
telecom service providers or defence.

 Po rte r’ s Five Fo rce s
• DEGREE OF RIVALRY
• Exit barriers in storage battery industry is high for organized
players who are mostly present in OEM segment. This is
because of the huge investments in plant and machinery which
will be lost
• The replacement market is fragmented. The unorganized players
make up about 55% of the market, while the organized players
account for the remaining 45% of the market
• The original equipment market is mostly organized with top 4
players having around 80% market share.
• Industry growth has been high with a growth of 135% in sales
between 2006 and 2010. Net sales of storage batteries industry
to rise by 22.5% in 2010-11. This growth will be driven by
automobile segment, infrastructure, telecom ,power ,IT and
other segments.
• Every player in going into different markets to diversify because
there is a lot of growth.
• Product differentiation is very low and so competitors are trying to
do step up branding and marketing efforts, deliver high quality
 Po rte r’ s Five Fo rce s
•
• BUYER POWER
•
• Big players buy in bulk and have long term relationships
with suppliers. And so they are able to negotiate prices
and enjoy discounts.
•
Threat of backward integration is high as prices of raw
material are increasing and fluctuations. Players are
trying to source through imports by collaborating with
companies abroad. Others are trying to buy stake in
smelting plant for sourcing raw materials.


 Po rte r’ s Five Fo rce s
•
• BARRIERS TO ENTRY
•
Absolute cost advantages in favour of big players like EXIDE
which enjoys economies of scale and it has been expanding its
production capacities .
• Government policy like approvals from environment and pollution
boards take a long time
• Capital requirements for battery industry can be said be at
medium levels. Small players will find it difficult to enter
whereas big groups like TATA have already entered the market
• Brand identity is very important to build. This is necessary to have
a recognition in terms of quality and durability. This way EXIDE
is leading.
• Access to distribution is also a entry barrier because of huge
investments here. EXIDE has 35000 outlets across India
whereas the 2nd biggest player Amara Raja has only 18000
outlets. Having a wide distribution network is very important.
•
• Also established players make products specific to demand of
 Capacity and capacity utilization
for HEL
 Silver Zinc battery production capacity between 2006 and 2010 has
remained at 24,00,00 Ah.
 The % of capacity utilization was 76% in year 2006 which has
decreased over the years.
 The % of capacity utilization was only 30% in year 2010
 Capacity and capacity
utilization for HEL
> N icke l C a d m iu m b a tte rie s p ro d u ctio n ca p a city h a s b e e n
3 , 0 0 , 0 0 0 A h b e tw e e n 2 0 0 6 -2 0 1 0 .
> D u rin g th e ye a rs 2 0 0 7 a n d 2 0 1 0 th e % o f ca p a city u tiliza tio n
w a s m o re th a n 1 0 0 % .
> D u rin g th e ye a rs 2 0 0 6 , 2 0 0 8 a n d 2 0 0 9 th e % o f ca p a city
u tiliza tio n w a s 7 8 , 4 2 a n d 4 6 % re sp e ctive ly
 Capacity and capacity
utilization for HEL
• Lead Acid Battery : During the year 2009 -10 new lead acid
battery plant was installed of capacity 2,00,000 units per
year. However only 3252 no of units were produced , a
utilization percentage of 1.6%.
•
• Capacity utilization percentage has been mostly below 80%
expect for 2007 and 2010 in case of Ni-Cad batteries.
•
• Reason : HEB operates in a niche market and makes products
as per the specifications of the customers who are
generally government of India and other governments.
They have long term contracts with them and therefore as
per their requirements batteries are produced.
 Capacity and capacity
utilization for HBL
For the period ended 2006 2007 2008
March 31,
Capacities      

Lead Acid Batteries (Mil  450 1020 1190

Ah)
NiCad Batteries (Mil Ah) 36 45 70

Production      

Lead Acid Batteries (Mil  348 463 796

Ah)
NiCad Batteries (Mil Ah) 36 38 42

Capacity Utilisation      

Lead Acid Batteries 77.30% 45.38% 66.92%

NiCad Batteries 100.13% 85.48% 59.67%

 Capacity and capacity
utilization for HBL
• HBL has planned a Rs.240 crore
capacity expansion project to be
financed through a debt of Rs.180
crore and the balance through
internal accruals.
• Through these capacity expansions,
HBL would be increasing its lead
acid battery capacity by 750 mn
Ahu and the capacity of NiCad
batteries by 30 mn Ahu.
 Storage batteries
Installed capacity and
production
particulars Avg. installed Actual Capacity
2005-06 capacity
2,600,000 production
2,129,491 utilisation
81.9
2006-07 3,400,000 3,116,954 93.2
(%)
2007-08 4,900,000 4,194,960 85.6
2008-09 6,535,000 5,070,387 77.6
2009-10 8,162,000 6,424,560 78.7
 Storage batteries
Installed capacity and
production
 Capacity expansion and
utilisation
2006-07:


• In 2005-06 the company completed the expansion of its 2V VRLA

annual capacity from 240 million AH to 350 million AH.This
capacity was further augmented to the level of 400 million AH
through productivity improvements. The Company also has
enhanced its automotive (monobloc)battery capacity from 2.4
million units per annum to 3.60 million units per annum.

•
2007-08:


• Invested Rs.650 million to expand the large VRLA battery capacity

from 450 million Ah to 900 million Ah.

•
 Capacity and capacity
utilization for Amara raja
• Current capacity stands at 4.2 million per year.
About 80% of the current capacity is in the
automotive segment
•
• Production is running at 80% of the capacity
•
• The Board approved capacity addition of 800,000
nos in automotive battery unit and 1,800,000
nos in the two wheeler battery unit
•
• The overall capacity of automotive plant will be at
about 6 MM units and two wheeler plant at 5
MM units
Financial Analysis Report
Financial Analysis
Reason For Increase in Profit

T h e re h a s b e e n a n in cre a se o f 8 9 . 0 8 % in 2 0 1 0 in
co m p a riso n to 2 0 0 9 e ve n th o u g h th e sa le s h a ve
in cre a se d b y ju st 1 2 % b u t th e to ta lexp e n d itu re h a s
in cre a se d b y o n ly 1 % .

Expenditure has decreased because the cost of
interest has decreased by 78.5% thus raising the net
profit even after steep rise in lead price from
$1500 a tone in April to around $2500 at present,
this due to the fact the share of lead used from
its captive smelters has increased from 30% to 45%
thus lowering material cost.



Reason For Increase in Profit
Backward integration : The increase was partly due to
availability of lead and alloys, which constitutes a major
raw material for the products from the two captive Lead
Smelters acquired two years ago
§
§Tandon Metals Ltd to access recycled raw materials
and cut dependence on high-cost imported lead

§51 percent stake in a lead smelter company,

Leadage Alloys India Ltd, located Kolar district in
karnatka.This company has achieved a turnover of
546 crores an increase of 23% over the previous
year and profit before tax of Rs 54 crores
representing a growth of 621% over the previous
year.
§It reduces the material costs
Reason For Increase in Profit
Chloride international Limited a 100% subsidiary
of Exide, the sales of this company grew by 224%
in 2009-10 in comparison to previous year.

Favorable Exchange rates

Strict austerity measures and control on costs on

all front contributed to the profitability

Ratios : D/E

The secured loan has

significantly gone down over
the years and there has not
been much increase in
unsecured loan

The main reason for
difference in the year 2009
and 2010 has been the 82.33%
increase in reserve and
surplus due to issue of shares
to QIB and 99% decrease in
the secured loans that the
company has taken in the year
2010.
EPS
 Earnings per Share

There was a huge difference in EPS between 2006 and 2007
as the company went for sub-divisions of shares in 2006-
07 thus the EPS fell to 2.07 in 2007 from 13.45 in 2006

Since then there has been a continuous growth in EPS
from 2007 to 2010

There had been a growth of 78% in EPS in comparison to

the previous year even after the company had issued
equity shares this is because of the very high net profit
margin recorded in 2009-2010.
Current ratio

Current Ratio has been almost

constant for the last three years.

For the 2010 the inventories has

increased by 38.9% whereas cash and
bank balance has decreased by
91.69% in comparison to 2009
Inventory turnover ratio

Inventory turnover ratio

for Exide has been above 6
for the last five years
which indicate that it
didn’t had major
overstocking, obsolescence,
or deficiencies problem for
the last five years.
There has been a fall of
22.8% in 2010 in comparison
to 2009

It has the very good

distribution and after
sales network which keeps
it inventory turnover ratio
above its competitors
Interest Coverage Ratio
 Interest Coverage Ratio
Interest coverage ratio has been stagnant from 2006 to 2009
ranging from 7 to 10 but 2010 has seen a sharp rise

In 2010 it has grown by 8.66 times in comparison to the last

year

The EBIT has increased by 86.2% whereas the interest has

decreased by 78.5% in comparison to 2009,thus increase in
interest coverage ratio

Interest Coverage ratio for Exide is higher than the
competitors
Share price pattern for the last
5 years

Share price of Exide industries has seen a continuous growth

since 2006.It has grown six folds from 2006 to 2010

It did experienced a dip in 2009 due to the recession but

since then it has been no looking back for Exide industries.
Asset Turnover ratio
 Asset turnover (contd.)
There has been a fall of 24.4% in the asset
turnover ratio over the previous year.

This was because of two factors:

§The sales increased by only 7.29% in 2009-
10 in comparison to last year which saw a
growth of 17.38%.
§There has been an increase in investment of
100% with respect to the last year thus
increasing the total asset.It bought shares
in Hathway Cable and Datacom Limited and
increased its investments in mutual fund by
11 times
 Share holding pattern as on :
30/09/2010
Share holding % Holding

Foreign Promoters 45.99

Banks Fin. Inst. and Insurance 10.9

FII's 15.43
Private Corporate Bodies 10.08

NRI's/OCB's/Foreign Others 0.48

Others 0.13
General public 11.34

Foreign promoters have the maximum stake in the company

General public has only 11.34%

 ROI/Profitability

RETURN ON SALES ( EBIT / Sales )

ROI

CAPITAL TURNOVER ( Sales / Invested Capital )

ROI(Return on Investment)
RETURN ON SALES
( EBIT / Sales )

Return on Sales on an average has increased by 5.84%

from 2006 to 2009 but it increased by 76.4% in 2010
It increased because the net profit increased by 89%
over the previous year whereas sales just increased by
7.2%
 ROI(Continued)
CAPITAL TURNOVER (Sales/Invested Capital)

There has been a drop of 27.6% in Capital Turnover over the

previous year
The capital investment has increased by 48.4% but sales has
just increased by 7.2% over last year
It bought shares in Hathway Cable and Datacom Limited and
increased its investments in mutual fund by 11 times
ROI(Continued)
 ROI(Continued)
ROI has increased by only 0.04% from 2008 to 2009 whereas
from 2009 to 2010 it increased by 27.7%

ROI is the product of Return on sales and Capital Turnover

Though there has been a drop of 27.6% in Capital Turnover

over the previous year but the return on sales increased
by 76.4% thus pushing the profitability up by 27.7%

Return on sales has been the main contributor to the

profitability of the company for the 2009-10
Cost Analysis

All are in Rs
crore
 Cost Analysis
• Break up cost for EXIDE
 Cost strategies
• Exide is the market leader in the Industry. It can
leverage upon its Market leadership position
and pricing power, which would enhance the
company’s ability to pass on cost increases to
customers.

•
• Exide has acquired two lead recycling smelters
namely Leadage Alloys (100%) and Chloride
Metals (100%). Due to sourcing of lead from
their own recycling smelters, Exide is able to
buy lead at cheaper costs, i.e. at 8-16%
cheaper than the market rates.

 Cost strategies
• The company has also acquired Pune-based Tandon
Metals to mitigate lead price volatility by recycling
the used batteries and eliminating dependence on
imported lead.
• With these acquisitions the company aims to reduce
its RM costs by upto 5-10% by producing 50% of the
raw material requirement captively over the next 3-
4 years.
• In house sourcing also helps Exide to save import duty
of 5%, transportation costs and cost of making lead
alloys.
• EIL does not have any fixed price contracts with its
customers and hence exposed to the risk of rising
metal prices.
• Due to the volatility in lead prices the company has
refrained from signing any long term fixed price
contracts with its suppliers since; buying lead at
spot rates itself acts as a hedge against any price
 Financial Analysis
•
•
•
 High Energy Batteries
Profitability Analysis
Profitability Analysis
 Profitability Analysis
• Capital turnover over the years have kept on reducing.
Between 2006 and 2010 it reduced by 62%. The reason
behind low capital turnover over the years is because they
have not been able to control their a/c receivable. Between
2006 and 2010 it increased by 49%.
•
• Profit margins between year 2006 and 2009 had an increasing
trend. This was due low cost of raw materials incurred
because f under utilization of installed capacity.
•
• Sudden decrease of profit margins in 2010 by 93% is due to
fixed cost incurred of new Lead acid battery plant and high
prices of raw materials.
•
• HEL has therefore not focused on both these ratios as such. But
for ROI ie profitability they have in recent years tried to
increase marketing and distribution efforts. This way they
were able to book early orders from government during year
2009-10
Net profit margin
• Net profit margin
decreased by more than
70 % between year
2005-06 and year 2007-
08
•
• Net profit margin between
year 2007-08 and 2008-
09 increased again by
162%
•
• Net profit margin for the
year 2009-10 was very
low at -6.09%. The main
reason for decrease in
profit margins was the
increase in raw material
consumption coupled by
• Increase or decrease in Net
Profit Margin explained
 Price of Nickel

of products has Nickel Cadmium batteries as their prime products.

profit margins. As we see between Jan 06 and Jan 08 the prices increased from US $
Margins decreased from 5.24 to 1.46 between year 2005-06 and 2007-08.
008-09 is due to Nickel prices going down in year end of 2008 to 4.58 US $.
 Silver Prices

ncreased year on year from being 8 US$ in year 2005 to about 30 US $ in year 2010
as their primary products, silver forms a major part of the raw material.
reased between 2005 and 2007 the profit margins kept on reducing from 5.24 to 1.46
year 2008-09 rose as the prices of silver had stabilized during years 2008 and 20
margins to negative levels can be explained by the sudden increase in prices to
 Cadmium Prices
• Cadmium is a raw
material in NiCad
batteries.
•
• Cadmium prices over
the past 5 years
have remained
almost constant.
•
• The only year
Cadmium prices
spiraled to 3.5 US
$/lb in 2007 ,the Net
profit margins were
affected and
reduced to 1.46 in
year 2007-08.
Zinc Prices

• The increase in zinc prices

between year 2005 and
2007 from 1200 US
$/MT to 4100 US $/MT
explains why the net
profit margin decreased
from 5.24 in year 2005-
06 to 1.46 in year 2007-
08.
•
• The Net profit margins
increased again year
2008-09 as the prices of
zinc decreased
considerably to 1000 US
$ between 2008-09.
•
New Lead Acid Battery Plant
• HEL completed the new 2,00,000 capacity Lead Acid
Battery production facility.
•
• The capacity utilization was only 1.6% and so not
much revenue was generated. Also the whole fixed
cost of the plant had to incurred.
•
• So the total raw material (includes lead , zinc , nickel ,
cadmium and silver) cost for the year 2010
increased to Rs 15.8 cr as compared to Rs 9.37 cr in
year 2009.
•
• Also Interest paid on long term funds for building the
plant amounted to Rs 93 L as compared to only Rs
2387 in year 2009.
EPS
 EPS analysis
• EPS = Profit after tax /
No. of
equity shares
•
• So the EPS is explained
by two factors : PAT
and no. of shares
•
• No of shares :
Throughout the years
2005-2008 the no of
equity shares issues
were 89,63,840. HEL
during year 2009-
2010 issued
89,63,840 more
shares and the no of
equity shares went
 EPS analysis(Contd.)
• Between 2005 and 2008 , EPS fell by 79% : The no. of
shares remained constant but the PAT fell from Rs 1.47 cr
in 2005-06 to Rs 0.3 cr in 2007-08 by about 80%. This
explains why the EPS fell considerably.
•
• In year 2007-08 the EPS rose by 221% as compared to
2007-08 : The no of shares remained constant as
previous year but the PAT increased by 223% in year
2008-09 as compared to previous year. This why EPS
increased in year 2008-09.
•
• In year 2009-10 the EPS fell considerably to -10.08 a
reduction of 193% as compared to previous year : Due to
increase in cost of raw materials , fixed cost of new lead
acid battery plant the PAT decreased to Rs (1.81) cr a fall
of 286% as compared to previous year. Also the no of
equity shares issued increased 100% to 1,79,27,680. As
a result EPS decreased to negative levels.
Debt Equity Ratio
 Debt Equity Ratio Analysis
• Between 2005 and 2008 : During the duration Mar 2005 to Mar
2009 the equity share capital remained at Rs .9 cr. But over
the years the reserves have kept on increasing from Rs 9.3 cr in
year 2006 to Rs 9.82 crin year 2008,an increase of 5% . So the
denominator has kept increasing.
 But over the years the borrowings have increased more than
equity +reserves from Rs 5.74 cr in year 2005 to Rs 8.10 in year
2008 an increase of 41.1 %. So the debt equity ratio between year
2005 and 2008 increased from .56 to .93, an increase of 72%.
•
• In year 2008-09 : But during the year 2008-09 due to
diversification plan of the Company to manufacture 2,00,000
units of Lead Acid batteries, project loan of Rs.10 Crores was
borrowed from a Consortium bankers. A significant amount of
loan of Rs 12 cr was borrowed to finance the working capital.
The equity remained same as previous year .As a result the
debt equity ratio suddenly increased to 2.71 as compared to .
93 the previous year.
•
• In year 2009-10 : The ratio reduced to 1.45 as equity capital was
raised for financing the Lead Acid battery project.
Interest Coverage Ratio
 Interest Coverage Ratio
Analysis
Year 2006 2007 2008 2009 2010
EBIT 3.38 2.58 3.86 3.5 .29
Interest .89 1.10 1.37 1.91 3.04
Over the years between 2006 and 2009 the sales turnover has


not increased much. Between 2006 and 2009 it rose by only

14%. But the Interest paid has increased throughout all the
years. This is due to the year on year borrowing to finance new
product development and working capital.


In year 2010 the profit levels dried up considerably due raw



material cost and under utilization of newly installed Lead Acid

battery plant. But the interest paid rose by 60 % between year
2009 and 2010. As result the Interest coverage ratio decreased
by 94% between 2009 and 2010.


With the above reasons we see that over the years the ratio has


had decreasing trend.

Current Ratio
 Current Ratio Analysis
• The current ratio over the years 2005-06 and 2009-10 the
trend has been increasing. Between 2006 and 2010 the
current ratio increased from 1.75 to 2.97 an increase of
69 % between a span of 5 years.
• Year 2006 2007 2008 2009 2010
• Inventory 9.09 8.05 11.74 18.96 17.26
• Current Liabilities 8.50 7.84 8.90 11.65 10.27
•
•
•
• If we see in current assets the major part has been
inventory which forms 50-55% of currents over the years
2006-10. The inventory has grown by 90% between
2006-10 which is mainly due to raw material stocks.
• But the current liabilities between 2006-10 has grown by
only 20%.
• Current assets has increased more than current liabilities,
and so the current ratio has increased over the years.
Quick ratio
 Quick Ratio Analysis
• Quick Assets are current liabilities –
inventory
•
• Between 2006 and 2007 the current ratio
increased by 53%. This because the
current liabilities decreased by 7.7% and
quick assets increased by 60%.
•
• But from 2008-10 the ratio has increased
from .98 to 1.37 ie by 32%. This was
mainly contributed by cash and bank
balances portion of quick assets which
increased from Rs 0.1 crto Rs .57 cr.
Inventory Turnover Ratio
 Inventory Turnover Ratio
Analysis
• Between year 2006-09 the inventory turnover
decreased from 3.08 to 1.48 . This was
because the cost of goods sold decreased
between 2006 and 2009 and the average
inventory between year 2006 -08 increased by
100%. This was due inventory of stock of raw
materials and work in progress.
•
• But the ratio increased for the year 2010 by 15.5
% as compared to the previous year. This was
due to reduction in raw material inventory from
Rs 16 cr to Rs 15 cr and increase in COGS by
57% in year 2010 as compared to year 2009.
•
Asset turnover ratio
 Asset turnover ratio
Year 2006 2007 2008 2009 2010
Net Sales 27.77 23.27 20.39 25.09 29.38
Asset 7.42 6.89 6.41 5.88 23.84
• Between 2006 and 2008 the turnover ratio reduced as the
net sales declined by 26%. So the asset utilization was
not efficient.
•
• For the next year as Net sales climbed to Rs 25.09 cr the
turnover ratio improved from 3.18 to 4.26. This was also
due to reduction in net assets. This shows that for the
year 2009 the asset utilization was much higher.
•
• Due to new Lead Acid Battery plant the fixed asset cost of
plant increased. But the capacity utilization was only
1.6%. As a result proportional increase in sales turnover
was not experienced. So the asset turnover for the year
2010 fell sharply to 1.23.
Profit and sales Analysis

A lla re in
R s cro re
 Profit and sales Analysis
• Sales turnover analysis:
• During 2007 ,sales turnover reduced by 16.8% due to
delays in processing of tenders by the customers.
Orders were received only during second and third
quarters of the year.
• During 2008 , ,sales turnover reduced by 12% as The
Company received bulk of the orders only from dec2007
and some of the orders were in the nature of
development cum supply. Hence, qualifications of
prototypes and approval by the concerned agencies
have to be undertaken before supplies could commence.
The Company also lost few orders as the prices quoted
by competing firms were far below the normal cost.
• However during 2009 and 2010 the sales turnover
increased and between 2008 and 2010 it increased by
43%. This was achieved due to orders booked in previous
years.
 Profit and sales Analysis
• Between 2006 and 2008 the Profit margins has been
decreasing because of increase in raw material cost ie
prices of zinc, silver and nickel.
•
• But in year 2010 the margins decreased to negative levels
at Rs (1.81) crores. This decrease of 286% was
unprecedented increase in cost of materials, interest
rates and fixed cost of new lead acid battery plant. The
lead acid battery plant had only 1.6% capacity utilization.
 Cost Analysis

Note: Taken as an average of 5yrs from 2006-10

Cost Analysis(Contd)
 Cost Analysis(Contd)
• Raw material prices between 2006 and 2008 reduced from Rs
13.87 cr to Rs 9.67 cr. This was due to under utilization of
production capacities. For eg silver zinc battery facility had a
54.3 % utilization of capacity. As a result raw material
consumed as a percentage of total expenditure reduced
from 58% in year 2006 to 49% in year 2008.
•
• Between 2009 and 2010 the production capacity utilization
increased and for Ni-Cad battery, capacity utilization in
2009-10 was more than 100%. Also between 2009-10 new
Lead Acid battery plant was installed. As a result lead as a
raw material was consumed which amounted to Rs 42 lakhs.
Silver prices increased from 17 $ to 30 $. As a result raw
material cost increased.
•
• So we see raw material prices is not controllable. It is
dependent on market prices.
•
• Moreover HEL has not entered into long term contracts with
producers or acquire stake in suppliers unlike its peers
 Cost Analysis(Contd)
• HEL has been stepping up its efforts in distribution and
marketing strategies to control cost. With proper
marketing efforts they were able to finalize order in first
and second quarter for 2009-10. This way turnover
increased. Also with start of new Lead Acid battery plant
they have tried to establish distribution networks with
retails outlets. As a result selling and administration cost
came down for year 2009-2010
•
•
•
•
Financial Analysis

 AMCO batteries
Asset Turnover Ratio
 Asset Turnover Ratio
• From 2007 to 2009 the asset turnover
ratio of the company has seen a
steady increase.
• How ever it has seen a fall from 2.02 in
the year 2009 to 1.81 in 2010.
• The revenue of the company increased
by 9.29% where as the assets
increased by 24.72%. This has lead to
an overall decrease in asset turnover
ratio by 10.4%
• A decrease in asset turnover ratio
signifies decrease in the efficiency of
the company in utilizing the assets in
Debtor Turnover Ratio
 Debtor Turnover Ratio
• In the year 2009 debtors decreased by
15.51% when compared to 2008.
Where as during the same time period
the sales increased by 15.59%.
• As a result of these the Debtor turnover
ratio in 2009 has increased by 36.92%
when compared with that of 2008. In
terms of value it increased from 4.55
in 2008 to 6.23.
• An increase in the ratio signifies the
improvement in the efficiency of the
company in managing the debtors.
Current ratio
 Current Ratio
• The current ratio of the company in
the year 2008 fell from 2.62 in the
year 2007 to 2.12.
• There has been a drop of 19%.
• After 2008 this has followed an
upward trend, which signifies the
improvement in the companies
ability to pay its short term
obligations.
Quick ratio
 Quick ratio
• In 2008 the Quick ratio fell from 2.22
during the year 2007 to 1.62. There
was a fall of 27% when compared
with Quick ratio of 2007 .
• After 2008 the ratio has seen a
steady increase. Which signifies an
increase in the ability of company
to meet its short term obligations
with its most liquid assets.

Return on Assets
EPS
 EPS
• The profits have followed an increasing
trend year after year.
• As the EPS is directly dependent on the
profit a company makes, an increase
in the profit results in the increase of
EPS provided the number of shares
remain constant.
• During the year 2009-10 the profit of
the company increased by 2.5 times
when compared with the previous
year. The EPS of the company also
increased by 2.5 times.
Net profit Margin
 Net Profit Margin
• There has been a significant increase
in Net profit margin from 2009 to
2010.
• We can see from the graph that, for
the period 2008-09, the profit
margin was 1.9%. Where as the
same for the period 2009-10 is
6.03%.
• This increase can be mainly
attributed to the tax savings the
Inventory Turnover ratio
 Inventory Turnover Ratio
• From 2007 to 2008 there has been a 78%
increase in inventory where as the sale
has increased only by 45%.
• This has resulted in an effective decrease of
18.8% in Inventory turnover ratio.
• A low ratio indicates a relatively high
inventory which is unhealthy for the
company because they represent an
investment with a rate of return of zero.
• After 2008 company has been reducing the
inventory levels every year to improve the
inventory turnover.
ROI
Capital Turnover
Sales Margin
Profit and sales analysis

A ll fig u re s in cro re
ru p e e s
Profit and sales analysis
• The rise in sales
volume of AMCO
batteries was
contributed by
the increase in
sales volume of
automobile
industry year on
year.
•
• AMCO batteries
source of
revenue is
mainly the
automobile
sector
 Profit and sales analysis
• PBIT increases by 322% from the year 2007 to 2009 which
was a result of regular increase in the sales and increase
in the income from property development.
•
• PBIT in the year 2010 decreases by 25% as income from
property development comes down to zero and the
increase in sales is insignificant.
•
• There is a huge jump in PAT in the year 2010. The 250%
increase is due to the adding back of deferred tax from
the previous year.
•
Cost breakup
Variation of Costs
 Analysis
• There has been a huge increase in sales of AMCO due to
which the material consumptions has increased. This has
led the expenses towards raw materials to shoot up over
the period.
• The expenses have increased also as a result of 63% rise in
the cost of Antimonial Lead or Calcium Alloy.
• All other expenses have also seen a slight increasing
pattern which can be attributed to the increasing sales of
the company.
Financial Analysis
Profit and sales analysis
 Profit and sales analysis
•
• Between FY06 to FY08, HBL’s total income had been
growing consistently registering a CAGR of 63%
driven by higher sales volumes and increase in
realizations. HBL has 70% of its revenue coming
from telecom segment. Telecom sector has grown
tremendously from 150 million by early 2007 to
653.92 million in April 2010.
•
• Sales has declined from 1243.9 crin 2008-09 to
1109.5 cr in 2009-10, but net profit has increased
from 91 cr to 100.4 cr in the same period .Decrease
in sales is on account of reduction in selling price of
lead batteries reinforced by lower demand from
telecom sector.
Cost analysis
 Cost analysis
• Raw material expenses increased between 2006 and 2009
by 277% on account of higher sales volume. But HBL has
been sourcing its raw material supplies from established
players and has long term relationships with them.
•
• Employee cost has increased YoY, between 2006 and 2010.
•
• Selling and administration expenses increased between
2006 and 2009 by 125% on account of higher sales
value. But during 2010 it dropped by Rs 4 cr because of
reduction in sales value.
 ROI/Profitability
RETURN ON SALES ( Net profit / Sales )

There has been steady growth in return on sales from 2007 to

2009 at 8.4% but in 2010 there has been an increase of 23.6% in
the return on sales in comparison to the last year the sale has
fallen by 14.15% in comparison to the last year but there has
been an increase of 10.3% in 2010 over 2009, thus an increase of
23.6% in return on sales
 ROIC(Continued)

C a p ita l tu rn o ve r in 2 0 1 0 h a s fa lle n b y 3 1 . 5 % in co m p a riso n

to p re vio u s ye a r
T h e re h a s b e e n a n in cre a se o f 2 5 . 4 % in to ta l in ve stm e n t
b u t th e sa le s h a s fa lle n b y 1 4 . 5 % th u s th e re h a s b e e n a
d e cre a se o f 3 1 . 5 % in 2 0 1 0 .
 ROI/Profitability

T h e p ro fita b ility d e cre a se s b y1 5 . 4 3 % in 2 0 1 0 w ith re sp e ct to

2 0 0 9 , e ve n th o u g h th e th e re h a s b e e n a n in cre a se o f 2 3 . 6 % in
re tu rn o n sa le s th e ca p ita l tu rn o ve r h a s d e cre a se d b y 3 1 . 5 % .
Net Profit Margin
 Net Profit Margin(contd)
• During FY07-08, HBL spent Rs 150 crore, for
expansion of its manufacturing capacity of
batteries at Vizianagaram in Andhra
Pradesh.
• The production started from December
2007. The capacity at this plant has gone
up to 70-million amperes per month.
• About Rs 25 crore were invested during 07-
08 for infrastructure and equipment at
Hyderabad, Manesar Haryana)and
Haridwar (Uttarakhand). Another Rs 35
crore were planned during 2008-2010 for
completion of buildings, including another
location (at Vashi, Maharashtra).
 Net Profit Margin(contd)
• Net profit of HBL increased from
32.08Cr in 2006-07 to 67.09Cr in
2007-08.
• This huge increase in profit can be
attributed to the increase in sales
which in turn can be related to the
expansion process they had
undergone to increase the capacity.
EPS
 EPS
• There has been an increase in
number of shares from 242.8 lakh
in 2009 to 2530 lakh in 2010.
• HBL in the October 2009 issued
10,20,445 equity shares on
preferential basis to Citibank
Market Mauritius.
• This has increased the total number
of equity shares and hence we can
see a sharp dip in the EPS of the
company for the year 2009-10.
Current Ratio
 Current Ratio
• There value of Current Assets is
Rs.495.90 Cr in 2009-10, which is
25% increase from 2008-09 value of
Rs.394.24 Cr.
• For the same time period the Current
liabilities decreased from Rs.168.45
Cr to Rs.162.64 Cr which is a 3.4%
decrease.
• These changes has resulted in 209%
increase in Current ratio.
• This increase signifies that HBL, in
2010, is in a better position to pay off
its short tem liabilities when
Debt to Equity ratio
 Debt to Equity ratio
• During the year 2007-08 HBL
increased its debt to Rs.3027 Cr
which it used in expansion of its
facility and hence an increase in
capacity.
• They increased their equity capital
during the year 2009-10 HBL by
issuing 2287.2 lakhs hence
Asset turnover ratio
Asset turnover ratio analysis
• Between 2006 and 2010 Asset turnover ratio has been
steadily increasing and it increased by more than 40%.
This was contributed by increase in sales which rose by
234% between the same period. This sales volume was
achieved by growth in telecom and auto segment.
•
• Between 2009 and 2010 the Asset turnover ratio decreased
by 28%. This was due to reduction in sales turnover
Inventory Turnover Ratio
 Inventory Turnover Ratio
Analysis
• Between 2006 and 2009 the inventory increased by 41 %.
This was due to increase in COGS, in which raw material
cost increased by 260%. Inventory during the same
period increased by 167%
•
• But for 2010 Inventory Turnover Ratio decreased to 5.27
because of decrease in raw material component of
COGS. Also inventory increased by 27%.
 Financial Analysis
 Amara Raja
 ROI/Profitability

RETURN ON SALES ( EBIT / Sales )

ROI

CAPITAL TURNOVER ( Sales / Invested Capital )

 AMARA RAJA BATTERIES
LIMITED
Profit Margin
year PBIT Net Sales Profit Margin
2 0 0 5 -0 6 374 3637 0.10
2 0 0 6 -0 7 735 5958 0 .1 2

2 0 0 7 -0 8 1551 10833 0 .1 4

2 0 0 8 -0 9 1711 13132 0 .1 3

2 0 0 9 -1 0 2536 14652 0 .1 7
 Capital Turnover Ratio
year Net Sales Average Capital Capital turnover
2 0 0 5 -0 6 3637
Employed Ratio
1 .8 0
2016
2 0 0 6 -0 7 5958 2889 2 .0 6

2 0 0 7 -0 8 10833 4574 2 .3 7

2 0 0 8 -0 9 13132 5590 2 .3 5

2 0 0 9 -1 0 14652 5709 2 .5 7
 Return On Capital Employed
year PBIT Average Capital ROCE %
2 0 0 5 -0 6 374 Employed
2016 1 8 .5 5
2 0 0 6 -0 7 735 2889 2 5 .4 4
2 0 0 7 -0 8 1551 4574 3 3 .9 1
2 0 0 8 -0 9 1711 5590 3 0 .6 2
2 0 0 9 -1 0 2536 5709 4 4 .5 1
Return On Capital Employed
 ROCE - overview
• 2007-08:
• The capital employed (net of cash) in the business
increased by 65% from Rs. 3,724 million as on March
31,2007 to Rs.6,152 million as on March 31, 2008 largely
due to growing capacities and utilisation in both business
segments and hence the average of capital employed
has gone up from Rs 2889 million to Rs 4574 million.
•
• 2008-09:
• Capital employed in the business, increased marginally by
0.4% from Rs. 5,685 million as on March 31, 2009 to Rs.
5,709 million as on March 31,2010 ,despite increase in
volume of business and relatively higher lead base. As a
result, return on average capital employed increased
from 31% in 2008-09 to 45% in 2009-10.
.

•
 ROCE - overview
• 2009-2010:
• Capital employed in the business, increased marginally by
0.4% from Rs. 5,685 million as on March 31, 2009 to Rs.
5,709 million as on March 31,2010 ,despite increase in
volume of business and relatively higher lead base. As a
result, return on average capital employed increased
from 31% in 2008-09 to 45% in 2009-10.
• In 2009-10, Average interest cost (8.5%) was way below
Return on Capital Employed(ROCE) – every rupee
borrowed realised higher return
 Profitability and profit
margin
2005 - 06

Top line aggregation and the consequent absorption of overheads.

Improved operational efficiency and focused efforts in controlling
costs. The Company’s R&D efforts have added about 2% of the sales
turnover in 2005-06.
PBT as a percentage of sales has increased to 8.4% of sales from 5.1%
in the previous year. This has been owing to the steep growth in top
line which has been resulted in better operating profit margins.

2006 - 07

. The aggregation of higher sales revenue, effective assimilation of
overheads .
 CIP where focus was beyond engineering and operations to reap cost
efficiencies across the enterprise measures has resulted in significant
increase in profitability.

 Profitability and profit
margin


2007-08


In 2007-08, the Company installed the expanded metal technology to



optimise lead use, reducing the production cycle time

significantly.The Company’s profitability strengthened in 2007-08
compared to the previous fiscal due to the following:
1. Increased topline with better price realisation.
2. Enhanced operations driving value from the
economies of scale.
3. Optimised operations enabling cost control.



 Profitabilty and profit
margin
2008-09


• Apt planning increased profitability through an optimal product

mix in the light of medium and large VRLA capacity constraints.
• New planning tools enabled improvements in DOH and savings in
overall inventory handling costs.
• Profitability margins moderated in 2008-09, owing to a foreign
exchange loss of Rs. 322 million due to the rupee’s
depreciation against the USD. The reduction in margin was also
due to a volatility in lead prices, slowdown in the automotive
business and input cost increase due to rupee depreciation.
• Improved operational efficiency through various lean
manufacturing concepts, which reduced non value added tasks.
• Enduring and strategic relationship with equipment vendors
ensured reliable supply, better pricing and improvised features
through constant knowledge sharing.
• The Company continued to emphasise on information technology
for operational gains.


•
 Profitability and profit
margin
• 2009-10
• As the battery industry witnessed significant additions in capacity
by existing suppliers as well as new entrants, supply
outstripped demand requirements,creating unfavourable
pricing trends in the industry. While this put a pressure on
margins, the Company is leveraged on its strong customer
relationships to enhancemarket share and sustain volume
growth.
• No. of reasons contributed to increase in profitabilty like increased
sales realisation, softening lead prices,cost rationalisation and
optimisation measures. Such measures included a control over
material, marketing and distribution costs,besides a concerted
effort on operational efficiencies.
• The increased revenue growth of 12% was achieved due to
channelised market penetration and enhanced sales.
 Conclusion -Profitabilty
• All these reasons contributed to increase in
profitability for the company and was
dominated by the capital turnover ratio for
each year and it was made sure that they could
repeat it every year and the decrease in
profitability can be attributed to volatility in
lead prices and foreign exchange losses even
though the operational efficiency was upto the
mark.
•
PAT-PBIT-SALES
Inventory turnover ratio
 Inventory turnover ratio
analysis
• In 2007-08 there was a Substantial increase in lead price which
pushed up both inventory and receivables holding in addition to
normal increase due to higher volume of operation.


• In 2009-10 ,Inventories increased 35% from Rs. 1,608 million as on

March 31,2009 to Rs. 2,176 million as on March 31, 2010
primarily on account of higher lead cost and this increase was
relatively less compared to the increase in sales and hence the
inventory turnover ratio decreased considerably

•
• In 2008-09 there was a decrease in lead prices and concerted
efforts to reduce receivable and inventory holdings by the
Company yielded higher turnover ratio and there was also a
substantial reduction in net current assets.


• In the case of this company the inventory turnover ratio has

primarily been a function of lead prices and the volume of
operation and the ratio of inventory management has been
good which is a result of improvised ERP systems and efforts in
 EPS

•
•
•
•
•
•
•
• Consequent to the issue and allotment of bonus shares in
 Net working capital
year Gross current Current Net working
2005-06 2assets
,280 1liabilities
,154 and capital
1126
2006-07 3500 provisions
1,312 2188
2007-08 5978 2021 3957
2008-09 5260 1,843 3417
2009-10 6311 3,191 3120

Current
Ratio
year 2005-06 2006-07 2007-08 2008-09 2009-
Current 1.98 2.67 2.96 2.85 10
1.98
ratio
 Working capital
• 2007-08
 The overall working capital requirement has increased
during the year due to increase in volume of operation,
surging lead price and resultant recovery through sale price
increase. Substantial increase in lead price has pushed up
both inventory and receivables holding in addition to
normal increase due to higher volume of operation.
However the overall working capital cycle has shown
improvement during the year.


2008-09


• The overall working capital requirement reduced by Rs 540

million during the year despite an increase in the volume
of operations, owing to a deflation in lead prices.
Decrease in lead prices and concerted efforts to reduce
receivable and inventory holdings by the Company
yielded the desired results with a substantial reduction in
net current assets. The overall working capital cycle
improved during the year.
 Working capital
2009-10


• Working capital declined 9% from Rs. 3,417 million as on

March 31, 2009 to Rs. 3,120 million as on March
31,2010 despite an increase in sales volume and
comparatively higher lead base in Q4 FY 2010.
• Improvement in working capital was on account of
improved realisations of receivables, better credit
terms from vendors and the rationalisation of
inventory holdings across all storage locations.
• The Company’s working capital fund-based limit of Rs.
1,000 million sanctioned by banks remained unutilised
for most part of the year following improved cash
flows.

Working capital
 Debt –Equity Ratio
year D/E Ratio
2005-06 0.20
2006-07 0.58
2007-08 0.95
2008-09 0.70
2009-10 0.17
 Interest coverage ratio
year 2005-06 2006-07 2007-08 2008-09 2009-10
PBIT 374 735 1551 1711 2536
Interest 13 31 129 182 68
PBIT/Inter 28.77 23.7 12.02 9.40 37.29
est
 DEBT-EQUITY AND INTEREST
COVERAGE RATIO ANALYSIS
•
 2007-08


• The increase in debt is to fund automotive

and medium VRLA capacity expansion and
to meet the growing working capital
requirement as a corollary of the
increased scale of operations. As a result,
debt-equity ratio increased from 0.6:1 as
on March 31, 2007 to 0.95:1 as on March
31, 2008.
•
 DEBT-EQUITY AND INTEREST
COVERAGE RATIO ANALYSIS
2008-09


• Maintained an attractive debt-equity ratio of 0.70:1 (March 31,

2009);utilised less than 50% of its sanctioned working
capital limit in 2008-09.
• VRLA project increased the depreciation provision by Rs. 101
million. The interest cost on long term borrowing increased
by Rs. 49 million for the same reason. However, despite an
increase in the volume of operations, the working capital
funding cost did not increase, aided by a deflation in lead
prices and the Company’s concerted effort to reduce
receivables and inventory .
• During the year, the Company borrowed Rs. 400 million (Rupee
term loan) from the Bank of Nova Scotia to part fund the
large VRLA battery capacity expansion project.
• The Company’s loan portfolio decreased 10%, from Rs. 3,163
million as on March 31, 2008 to Rs.2,859 million as on March
31, 2009 and the equity also increased by the issue of
 DEBT-EQUITY AND INTEREST
COVERAGE RATIO ANALYSIS
2009-10


• Interest cost for 2009-10 was down by around 2/3rd

from Rs. 182 million in 2008-09 to Rs. 68 million
in2009-10, supported by improved cash flow
accruing from higher profitability and a better
control on working capital.
• Dependence on borrowed funds declined from Rs.
2,859 million as on March 31, 2009 to Rs. 912
million as on March 31, 2010 due to judicious
deployment of operational earnings towards debt
repayment and prepayment of high-cost debts and
pre closed the term loans availed from Citibank and
Bank of Nova Scotia aided by improved cash flow.
• The Company repaid high-cost debts and hardly
availed fund-based working capital facilities from
banks during the year and hence the debt-equity
ratio was just 0.17. Commendable debt-equity ratio
at 0.17 gives tremendous ability to mobilise funds.
 Conclusion on liquidity
position
• The credit rating of AA/Stable and P1+ for long-term and
short-term loan facilities by CRISIL and a healthy cash
position with a low debt-equity ratio will enables to
leverage the borrowing with a minimum impact on
financial charges.
• The Company continues to enjoy comfortable liquidity and
is confident of meeting the funding requirements for its
expansion plans contemplated for 2010-11.
Comparison of financials
 Comparison between Exide
and Amara Raja- Financial
ratios
Debt - Equity Ratio:
The debt-equity ratio of exide is 4.25 times better than that of Amara
raja.But the ratio is relatively low for both exide and amara raja.

EPS :
The EPS for the last financial year increased by 78% for Exide and is
currently 6.32 and the Amara Raja EPS had increased significantly from
9.42 to 19.56 in 2009-10.

PBIT:
 In 2009-10 the PBIT of Amara Raja grew by 48% from the last
financial year and the Exide has also increased its PBIT by 78.6% and
both are continuing their high growth trajectory.
 Comparison between Exide
and Amara Raja- Financial
ratios
• Current Ratio:
 Amara Raja has decreased its current ratio from nearly 3 to
1.98 in 2009-10 and the current ratio of exide has been around
1.55 for the last 3years.


• Inventory turnover:
 The inventory turnover ratio for Exide is 7.66 for 2009-10 and
for Amara Raja is 6.73. Hence Exide is maintaining lower
inventory in comparison to the net sales and hence has better
inventory management.


• Profitability:
 In 2009-10, the profitability of Amara raja is 44.51% and
has increased by 50% from the last financial year which is
higher than that of Exide whose profitability is 22.93%.

 Exide vs HEL analysis
• Debt equity ratio for HEL increased in recent years
increased because they borrowed loans for expansion of
new plant. For EXIDE ratio reduced over the years. For
EXIDE the main reason for difference in the year 2009
and 2010 has been the 82.33% increase in reserve and
surplus due to issue of shares to QIB and 99% decrease
in the secured loans that the company has taken in the
year 2010.
•
• EPS for HEL over the years 2006 to 2010 has decreased
continuously and went to negative levels in 2010. This
was due to reduction in profit margins over the years.
Moreover in 2010 more equity shares were issued. For
Exide the EPS has increased over the years because their
profit margins have increased.
•
•
 Exide vs HEL analysis
• Current Ratio has been almost constant for the last three
years ie 2008-2010 for EXIDE. But for HEL it has
increased over the years due to rise in inventory.
•
• For EXIDE inventory turnover ra tio fo r E xid e h a s b e e n a b o ve
6 fo r th e la st five ye a rs w h ich in d ica te th a t it d id n ’ t h a d
m a jo r o ve rsto ckin g , o b so le sce n ce , o r d e ficie n cie s
p ro b le m fo r p ro b le m fo r th e la st five ye a rs. B u t fo r H E L it
h a s b e e n lo w , b e lo w 4 b e ca u se stock of raw materials
and work in progress.
•
• For HEL the asset turnover ratio has decreased over the
years because of fall in sales. There was a sudden
decrease in year 2010 due to fixed cost of new Lead Acid
battery plant. But for EXIDE this ratio has over the years
remained constant.
•
•
 Exide vs HEL analysis
• Profitability for EXIDE over the years have increased. This
because of higher return on sales for EXIDE over the
years. This was possible due to backward integration
which brought about reduction in raw material cost.But
for HEL it has reduced over the years because of lower
capital turnover and also decreasing profit margins. This
was due to under utilization of installed capacity.
•
• For EXIDE, the PAT has increased by 89.08% in 2010 in
comparison to 2009, this was due to reduced Lead prices
as 2 smelters were acquired. But for HEL the PAT 2009-
10 was very low at Rs(1.81) cr. The main reason for
decrease in profit margins was the increase in fixed cost
due to new Lead acid battery plant coupled by increase
in raw material prices
•
•
ROCE

R O C E h a s in cre a se d fro m
2 0 0 6 to 2 0 0 8 , it d ro p p e d in
2 0 0 9 b u t in cre a se d in 2 0 1 0

In 2 0 0 9 in ve n to ry le ve l
d e cre a se d b y 3 0 . 1 % in
co m p a riso n to 2 0 0 8 th u s
d e cre a se in cu rre n t a sse t

In 2 0 1 0 th e in ve n to ry le ve l
in cre a se d b y 3 8 % in
co m p a riso n to th e p re vio u s
ye a r , th u s th e in cre a se in
cu rre n t a sse t
 Comparison of Exide with
Amco
• Asset turnover: The asset turnover ratio of
Exide is similar to that of Amco batteries.
•
• Current Ratio: The current ratio of Amco is
better when compared to Exide. This
signifies that Amco is in a better position
to pay off its short term liabilities.
•
• EPS: The EPS of Exide saw a fall in the year
2007 as there was sub division of shares
but after 2007 there has been a constant
growth in the EPS. Where as the number
of shares in Amco where same through
out and hence was dependent only on the
 Comparison of Exide with
Amco
• Net Profit Margin: Exide has a higher net profit margin
when compared to Amco. For the year ended march
2010 the net profit margin of Exide was 96% more
than that of Amco.
•
• Inventory Turnover: Amco has a higher inventory
turnover ratio in comparison with Exide. This
signifies that Amco has been managing inventory
more efficiently.
•
• PAT: Profit after tax of Amco in 2010 increased by
250.8% (3.52Cr – 12.35Cr) from over previous year
where as Exide saw a 89.08% increase. Increase in
profit of Exide has been majorly derived from the
decrease in material cost(lead) they achieved by
acquiring smelters.