SUMMER TRAINING PROJECT REPORT

ON

Financial Analysis of Hindalco Industries Limited, Renukoot, (U.P)

Prepared and Presented to

Under the guidance of

Mr. Vimal Raheja

Senior General Manager
HINDALCO
Submitted in partial fulfillment for the
Award of Degree of Master of Business Administration
from Dr.A.P.J. Abdul Kalam Technical University, Lucknow
BY

Ms. Alka Patel

Roll Number:1412470012

INSTITUTE OF CO-OPERATIVE & CORPORATE MANAGEMENT, RESEARCH AND TRAINING

21/467, RING ROAD, INDIRA NAGAR, LUCKNOW-22601

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INTRODUCTION OF FINANCIAL ANALYSIS

The process of evaluating businesses, budgets and other finance-related entities is to

determine their suitability for investment. Typically, financial analysis is used to

analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested

in. When looking at a specific company, the financial analyst will often focus on the

income statement, balance sheet, cash flows statement. In addition, one key area of

financial analysis involves extrapolating the company’s pat performance into an

estimate of the company’s future performance.

FINANCIAL ANALYSIS (also referred to as financial statement analysis or

accounting analysis or Analysis of finance) refer to an assessment of the viability,

stability and profitability of a business, sub-business or project. It is performed by

professionals who prepare reports using ratios that make use of information taken

from financial statements and other reports. These reports are usually presented to top

management as one of the bases in making business decisions.

 Continue or discontinue its main operation or part of its business;

 Make or purchase certain materials in the manufacture of its products;cquire

or rent/lease certain machineries and equipment in the production of its goods;

 Issue stocks or negotiate for bank loan to increase its working capital;

 Make decisions regarding investing or lending capital;

 Other decisions that allow management to make an informed selection on

various alternatives in the conduct of its business.

TO KNOW

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 Liquidity

 Degree of financial leverage or debt

 Profitability

 Efficiency

 Value

Methods

A. Analyzing liquidity

Liquid assets are those that can be converted into cash quickly. The short-term

liquidity ratios show the firm’s ability to meet its short-term obligations. Thus the

higher ratio (1 & 2) would indicate a greater liquidity and lower risk for short-term

lenders. The Rules of Thumb for acceptable values are: Current Ratio (2:1), Quick

Ratio (1:1).

While high liquidity means that the company will not default on its short-term

obligations, one should keep in mind that by retaining assets as cash, valuable

investment opportunities may be lost. Obviously, cash by itself does not generate any

return. Only if it is invested will we get future return.

1. Current Ratio = Total current assets / total current liability.

2. Quick Ratio= (Total current assets - Inventories ) / total current liabilities

In quick ratio, we subtract inventories from current assets, since they are the least

liquid among the current assets.

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B. Analyzing Debt

Debt ratio shows the extent to which a firm is relying on debt to finance its

investments and operations, and how well it can manage the debt obligation, i.e.

repayment of principal and periodic interest. If the company is unable to pay its debt,

it will be forced into bankruptcy. On the positive side, use of debt is beneficial as it

provides tax benefits to the firm, and allows it to exploit business opportunities and

grow.

Note that total debt includes short-term debt (bank advances + the current portion of

long-term debt) and long term debt (debt, leases, and notes payable).

1. Leverage Ratios

i. Debt Equity Ratio = total debt /total equity

This shows the firm’s degree of leverage, or its reliance on external debt for

financing.

ii. Debt Asset Ratio = total debt /total assets

Some analysts prefer to ratio, which also shows the company’s reliance on external

sources for financing its assets. In general, with either of the above ratios, the lower

the ratio, the more, if a company is not using debt; it may be foregoing investment and

growth opportunities. This is a question that con be answered only by further

company and industry research. A frequently cited rule of thumb for manufacturing

and other non-financial industries is that companies not finance more than 50% of

their capital through external debt.

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2. Interest Coverage (or times interest earned) Ratio = earnings before

interest and taxes/ annual interest expense.

This shows the firm’s ability to cover fixed interest charges (on both short term &

long- term debt) with current earning. The margin of safety i.e., acceptable varies

within and across industries, and also depends on the earning history of a firm

(specially the consistency of the earning from period to period and year to year)

3. Cash Flow Coverage= net cash flow /annual interest expense

Net cash flow = net income+/- non-cash items (e.g. –equity income+ minority

interest and earnings of subsidiary + deferred income taxes + depreciation +

depletion + amortization expenses)

Since depreciation is usually the largest non cash item in most companies , analyst

often approximate net cash flow as being equivalent to net income + depreciation.

Cash flow is a ‘critical variable’ in assessing a company. If a company is showing

strong profit but has poor cash flow, you should investigate further before passing a

favourable opinion on the company. Analyst prefer ratio 3:2.

C. Analyzing profitability

Profitability is a relative term. It is hard to say that what percentage of profits

represents a profitable firm, as profits depends on such factor as the position of the

company and its products on the competitive life cycle (for example profits will be

lower in initial years when investment is high), on competitive conditions in the

industry, and on borrowing costs.

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For decision making, we are concerned only with the present value of expected future

profit. Past or current profit are important only as they help us to identify likely future

profit, by identifying historical and forecasted trends of profit and sale.

We want to know whether profit are generally on the rise; whether sales is stable or

rising; how the profit compared to the industry average; whether the market share of

the company is rising, stable or falling; and other things that indicate the likely future

profitability of the firm.

1. Net profit margin = Profit after taxes / sales

2. Return on asset (ROA) = Profit after taxes/ Total assets

3. Return on equity (ROE) = Profit after taxes/ shareholders’ equity(book

value)

4. Earnings per common share (EPS) = (Profit after taxes – preferred

dividend) / (no. Of common share outstanding)

5. Payout ratio = Cash dividend / net income

Note: the term profits, earnings and net income are often used interchangeably in

financial statements. Be sure to review the statements understand their components.

D. Analyzing efficiency

These ratios reflect how well the firm’s assets are being managed.

The inventory ratio shows how fast the inventory is being produced and sold.

1. Inventory turnover = cost of goods sold/ average inventory

This ratio shows how quickly the inventory is being turned over (or sold) to generate

sales. A higher ratio implies the firm is more efficient in managing inventories by

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minimizing the investment in inventories. Thus a ratio of 1:2 would mean that the

inventory turns ½ times, or the average inventory is sold in a month.

2. Total asset turnover ratio= sales/ average total assets

This ratio shows how much sales the firm is generating for every dollar of investment

in assets. The higher the ratio, the better the firm is performing.

3. Accounts receivable turnover= annual credit sales / average receivables

4. Average collection period= average accounts receivables/ (total sales/365)

Ratio #3 and #4 shows the firm’s efficiency in collecting cash from its credit sales.

While a low ratio is good, it could also mean that the firm is being very strict in its

credit policy, which may not attract customers.

5. Days in inventory= Days in a year/ inventory turnover

E. Value ratios

Value ratios show the “embedded value” in stocks, are used by investors as a

screening device before making investments.

For example, a high P/E ratio may be regarded by as some as being a sign of “over

pricing”. When the markets are bullish or if an investor sentiment is optimistic about a

particular stock, the P/E ratio will tend to be high. For example, the late 1990s internet

stocks tended to have extremely high P/E ratios, despite their lack of profits,

reflecting investor’s optimism about the future prospects of these companies. Of

course, the burst of the bubble showed that such confidence was misplaced.

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On the other hand, a low P/E ratio may show that company has a poor track record. O

the other hand it may simply be priced too low based on its potential earnings further

investigation is required to determine whether the company would then provide a

good investment opportunity.

1. Price to earnings ratio(P/E)= current market price per share / after- tax

earnings per share

2. Dividend yield= annual dividends per share / current market price per share

 Uses and limitation of ratio analysis

1. To evaluate performance, compare to previous years and to competitors and

the industry

2. To set benchmarks or standards for performance

3. To highlight area that need to be improved, or areas that offer the most

promising future potential

4. To enable external parties, such as investors or lenders, to assess the credit

worthiness and profitability of the firm

Limitations

1. These are considerable subjectively involved, as there is no “correct” number

for the various ratios. Further, it is hard to reach a definite conclusion when

some of the ratios are favourable and some are unfavourable.

2. Ratios may not be strictly comparable for different firms due to a variety of

factors such as different accounting practices or different fiscal year periods.

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Furthermore, if a firm is engaged in diverse product lines, it may be difficult to

identify the industry category to which the firm belongs. Also, just because a

specific ratio is better than the average does not necessarily mean that the

company is doing well; it is quite possible rest of the industry is doing very

poorly

3. Ratios are based on financial statements that reflect the past and not the future.

Unless the ratios are stable, it may be difficult to make reasonable projections

about future trends. Furthermore, financial statements such as the balance

sheet indicate the picture at “one point” in time, and thus may not be

representative of longer periods.

4. Financial statements provide an assessment of the costs and not value. For

example, fixed assets are usually shown on the balance sheet as the cost of the

assets less their accumulated depreciation, which may not reflect the actual

current market value of those assets.

5. Financial assets do not include all items. For example, it is hard to put a value

on human capital (such as management expertise). And recent accounting

scandals have brought light to the extent of financing that may occur off the

balance sheet.

6. Accounting standards and practices vary among countries, and thus hamper

meaningful global comparisons.

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HINDALCO

HINDALCO INDUSTRIES Ltd. Is an Aluminium manufacturing company and is a

subsidiary of the Aditya Birla Group. Its headquarters is at Mumbai, Maharashtra,

India.

The company has an annual sale of US$15 billion and employs around 20,000 people.

It is listed in Forbes Global 2000 at 895th rank. Hindalco is one of the world’s largest

Aluminium rolling companies and one of the biggest producers of primary

Aluminium in Asia.

An industry leader in Aluminium and copper, Hindalco Industries Limited, the metals

flagship company of the Aditya Birla Group is the world's largest Aluminium rolling

company and one of the biggest producers of primary Aluminium in Asia. Its copper

smelter is amongst the largest single location custom smelter globally.

Established in 1958, we commissioned our Aluminium facility at Renukoot in eastern

Uttar Pradesh, India in 1962. Later, acquisitions and mergers with Indal, Birla Copper

and the Nifty and Mt. Gordon copper mines in Australia, strengthened our position in

value-added alumina, Aluminium and copper products.

The acquisition of Novelis Inc. in 2007 positioned us among the top five Aluminium

majors worldwide and the largest vertically integrated Aluminium Company in India.

Today, we are a metals powerhouse present in two of the fastest growing metal

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segments; Aluminium and copper, with global footprints in 13 countries and with a

consolidated turnover of USD 14.8 billion (Rs. 80,193 crore).

Aluminium

The major Hindalco products include standard and speciality grade aluminas and

hydrates, aluminium ingots, billets, wire rods, flat rolled products, extrusions and foil.

Copper

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Birla Copper upholds its long-standing reputation for quality copper cathodes and

continuous cast copper rods by assuring its management processes meet the highest

standards. Birla Copper also produces precious metals, fertilisers and sulphuric and

phosphoric acid.

Mines

Hindalco acquired two Australian copper mines, Nifty and Mt. Gordon, in 2003. Both

the mines have a long-term life of mine off-take agreement with Hindalco for supply

of copper concentrate to the copper smelter

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HINDALCO RENUKOOT

Hindalco Renukoot plant was commissioned in 1962 with one potline and a smelter

of 20,000 TPA capacities. Over the years the plant has increased its capacity through

various brown field expansions and asset sweating measures.

Today Hindalco, at Renukoot, operates across the Aluminium value chain from

bauxite mining, alumina refining, Aluminium smelting to downstream rolling and

extrusions. The integrated facility houses a 700,000tpa alumina refinery and a

345000tpa Aluminium smelter along with facilities for production of semi fabricated

products namely conductor redraw rods, sheet and extrusions.

In 1967 Hindalco established a captive power plant at Renusagar, the first captive

power plant (CPP) for Aluminium industry in India. This along with co-generation

power unit ensures continuous supply of power for smelter and the other operations.

Renukoot has earned the Integrated Management System (IMS) certification

combining quality, environment and occupational health and safety into one business

excellence model. The unit has been a recipient of several national and international

awards in quality, environment management, and energy conservation, CSR, among

others.

As a responsible corporate citizen Hindalco Renukoot’s community Development

Cell plays a leading and exemplary role in the social projects on health care, women’s

empowerment, education and sustainable livelihood schemes. Hindalco Renukoot’s

CSR Cell has taken up various innovative rural development projects in 385

neighbouring villages in the states of Uttar Pradesh, Jharkhand and Chhattisgarh.

These social projects are carried out under the aegis of the Aditya Birla centre for

Community Initiatives and Rural Development spearheaded by Mrs Rajashree Birla

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OVERVIEW

A US $41 billion (Rs. 2, 50,000 crore) corporation, the Aditya Birla Group is in the

League of Fortune 500. It is anchored by an extraordinary force of over 120,000

employees, belonging to 42 nationalities.

The Aditya Birla Group has been ranked 4th in the world and 1st in Asia Pacific in

the ‘Top Companies for Leaders’ study 2011, conducted by Aon Hewitt, Fortune

Magazine and RBL (a strategic HR and leadership Advisory firm). The Group has

topped the Nielsen's Corporate Image Monitor 2014-15 and emerged as the Number

one corporate, the 'Best in Class', for the 3rd consecutive year.

Over 50 per cent of the Group’s revenues flow from its overseas operations. It

operates in 36 countries.

ADITYA BIRLA GROUP GLOBAL SCENARIO -

Around the world we are known for:

 A metals powerhouse, among the world's most cost-efficient Aluminium and

copper producers. Hindalco-Novelis is the largest Aluminium rolling

company. It is one of the three biggest producers of primary Aluminium in

Asia, with the largest single location copper smelter.

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 No.1 in viscose staple fibre.

 No.1 in carbon black.

 The fourth-largest producer of insulators.

 The fifth-largest producer of acrylic fibre

 Among the top 10 cement producers globally

 Among the best energy-efficient fertiliser plants

 The largest Indian MNC with manufacturing operations in the USA, wherein

95 per cent of the workforce comprises of Americans

ADITYA BIRLA GROUP- INDIAN SCENARIO

In India, here’s what we have accomplished:

 A top fashion (branded apparel) and lifestyle player

 The second-largest player in viscose filament yarn

 The largest producer in the chlor-alkali sector

 Among the top three mobile telephony companies

 A leading player in life insurance and asset management

 Among the top two supermarket chains in the retail business.

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ADITYA BIRLA GROUP-BEYOND BUSINESS

 Reaches out annually to 7 million people in 3,000 villages in India through the

Aditya Birla Centre for Community Initiatives and Rural Development,

spearheaded by Mrs. Rajashree Birla.

 Focuses on: health-care, education, sustainable livelihood, infrastructure and

espousing social reform.

 Runs 42 schools which provide quality education to 45,000 children. Of these

18,000 students belong to the underprivileged segment. Merit Scholarships are

given to an additional 12,000 children from the interiors.

 Its 18 hospitals tend to more than a million villagers.

 Ongoing education, healthcare and sustainable livelihood projects in

Philippines, Thailand, Indonesia, Egypt, Korea and Brazil, lift thousands of

people out of poverty.

 Set up the Aditya Birla India Centre at the London Business School.

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HINDALCO BRANDS

 ETERNIA ALUMINIUM WINDOWS

Eternia Aluminium Windows, the latest product offering from Hindalco, is where

beauty and engineering come together seamlessly.

Strength and durability meet gorgeous Italian design, great finishes and vivid colour

schemes. And world-class quality meets the best-in-class fabricators to give you

windows that are really worth the view.

Made from aluminium - the 100% green and recyclable metal - Eternia is an ideal

choice to adorn your home with. Eternia Windows are fabricated and installed by a

team of experienced Hindalco-licensed fabricators to give your home the perfect look.

Eternia Windows also come in a wide range of colours and finishes to suit your every

need.

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Every Eternia Window is made using precision technology imported from Italy and is

completely customisable to give your home that flawless finish.

 FRESHWRAP SUPERWRAP

Hindalco’s aluminium foil brand, Freshwrapp is considered as one of the leading

brands of packaging foils in the country today. Freshwrapp kitchen foil is available

from 10 micron upwards, while Freshwrapp semi-rigid containers are available in a

wide range of sizes and shapes. The largest supplier of foil and laminates in India,

Hindalco’s foil brands include Freshwrapp and Superwrap.

 Largest supplier of foil and laminates in the country

 Available from 10 microns onwards

 Available in multiple colours.

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 HINDALCO EXTRUSIONS

Hindalco Extrusions is a leading brand for a wide spectrum of industries, including

architectural, electrical, industrial, transport, defence and consumer durables

industries. Our extrusions are manufactured from high-quality billets made out of

virgin in-house metal and offer the widest range of shapes and alloys. A leading

player in the extrusions industry in India, Hindalco offers a wide range of alloys,

including hard alloys and some special alloys for the defence and space sectors.

 Leading player in the extrusions industry in India.

 Exported to US, Canada, Germany, the UK, France, the Netherlands, South

Africa, UAE, Singapore, Malaysia, Sri Lanka and Bangladesh.

 Two extrusions plants: Renukoot and Alupuram.

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 BIRLA BALWAN

Hindalco’s phosphatic fertilisers are marketed under the brand name Birla Balwan.

Birla Balwan commands a strong market position and is very popular among farmers

in the states of Gujarat, Maharashtra, Madhya Pradesh, Rajasthan, Punjab and

Haryana.

Birla Balwan is sold through private trade channels as well as institutions like co-

operatives and Agro Industry Corp.

 Very popular fertiliser

 Strong market position.

 HINDALCO EVERLAST

Hindalco’s Everlast aluminium roofing and structurals are a hallmark of exceptional

quality and reliability. Available in a wide range of colours and profiles like circular

corrugated, industrial trough (trapezoidal) and tiled finish, Everlast is the preferred

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choice for industrial and residential applications for durability and toughness. Everlast

roofing sheets do not rust, have excellent thermal properties, have a high resale value

and are 100 per cent environment friendly.

Everlast aluminium roofing sheets epitomise one of aluminium's outstanding

properties as a building material – its lightness. They are about one third the weight of

corrugated galvanised steel sheets and one seventh that of standard asbestos

corrugated sheets, making it easy to install and ideal for roofing.

 Corrosion resistant and has a long life

 Easy and fast fabrication

 High resale value

 A variety of colours and finishes.

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 HINDALCO MAXLOADER

Hindalco's impressive range of solid and hollow profiles for structurals, beadings,

windows, etc. makes its extrusions a perfect choice for transport. Maxloader™ is an

all-aluminium truck body made of extruded profiles from Hindalco.

Benefits:

Some of the benefits of Maxloader™ aluminium truck bodies are listed below:

1. PAYLOAD ADVANTAGE

The truck with aluminium body has a lighter body weight compared to traditional

containers and can carry more load. Lower weight also translates into additional

savings to the business in terms of increased mileage and less engine and tyre wear.

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2. LONG LIFE

Maxloader™ has proved its worth over the years. Its long life ensures that it outlives

the life of any truck. Since aluminium refrigerated and insulated bodies have high

resistance to corrosion and rusting, they are best suited for frozen food and seafood

transport. Aluminium insulated bodies can easily last for 15 years or more.

3. LOWER FABRICATION TIME

The Maxloader™ kit takes less time to fabricate. It is available in a pre-fabricated

mode that can be fitted on the vehicle within 24 hours. Maxloader™ insulated bodies

take far less time for fabrication than the composite type.

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VISION, MISSION & VALUES

OUR VISION

To be a premium global conglomerate, with a clear focus on each of the businesses.

OUR MISSION

To relentlessly pursue the creation of superior shareholder value; by exceeding

customer expectation profitably, unleashing employee potential, while being a

responsible corporate citizen and adhering to our values.

OUR VALUES

 INTEGRITY

 COMMITMENT

 PASSION

 SEAMLESSNESS

 SPEED

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 Integrity: Acting and taking decisions in a manner that is fair and honest.

Following the highest standards of professionalism and being recognized for doing

so. Integrity for us means not only financial and intellectual integrity, but

encompasses all other forms as are generally understood.

Honesty in every action

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 Commitment: On the foundation of Integrity, doing all that is needed to

deliver value to all stakeholders. In the process, being accountable for our own

actions and decisions, those of our team and those in the part of the

organization for which we are responsible.

On the foundation of integrity, doing what it takes to deliver, as promised

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 Passion: An energetic, intuitive zeal that arises from emotional engagement

with the organization that makes work joyful and inspires each one to give his

or her best. A voluntary, spontaneous and relentless pursuit of goals and

objectives with the highest level of energy and enthusiasm.

Missionary zeal arising out of an emotional engagement with work

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 Seamlessness: Thinking and working together across functional groups,

hierarchies, businesses and geographies. Leveraging diverse competencies and

perspectives to garner the benefits of synergy while promoting organizational

unity through sharing and collaborative efforts.

Thinking and working together across functional silos, hierarchy levels, businesses

and geographies

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 Speed: Responding to internal and external customers with a sense of

urgency. Continuously striving to finish before deadlines and choosing the

best rhythm to optimize organizational efficiencies.

Responding to stakeholders with a sense of urgency

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IMPORTANT MILESTONES

Established in 1857 in the tiny village of Pilani, Rajasthan, the Aditya Birla Group

took shape when Seth Shiv Narayan Birla ventured into cotton trading. Today, with

operations across 36 countries revenues of US$41 billion, the Group is a leading

player in Aluminium, cement manufacturing, viscose staple fibre, chemicals, copper,

insurance services, telecom, branded apparels, fertilisers, software, viscose staple

yarn, carbon black and insulators. We trace the highlights of this remarkable journey,

starting from the present:

2014

 The Board of Directors of UltraTech Cement, the largest cement company in

India, approves the acquisition of cement units of Jaiprakash Associates

Limited in Madhya Pradesh in December. The enterprise value of this

acquisition was agreed at Rs.5, 400 crore.

 Aditya Birla Chemicals (India) Limited (ABCIL) acquires the chlor-alkali

division of Jayshree Chemicals Limited in September.

 Birla Sun Life Asset Management, joint venture between Aditya Birla Group

and Sun Life Financial Inc., acquires Mutual Fund Assets of ING Investment

in May.

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2013

 First metal tapped at Mahan Aluminium.

 Utkal Alumina Refinery goes on stream.

 UltraTech Cement acquires the Gujarat Cement Unit of Jaypee Cement

Corporation.

 Aditya Birla Chemicals (India) Limited acquires the chlor-alkali and

phosphoric acid divisions of Solaris Chemtech Industries through ABCIL for

Rs.153 crore in May.

2012

 Aditya Birla Group [Company name] makes a financial investment of 27.5 per

cent in Living Media India Limited (India Today Group) through a private

investment company in May.

 Aditya Birla Group acquires Terrace Bay Pulp Mill in North Western Ontario

in July 2012. Terrace Bay is considered an anchor mill due to its location and

its significant consumption of residual chips produced by regional sawmills.

 Aditya Birla Nuvo Limited (ABNL), largest manufacturer of linen fabric in

India, acquires Future Group's Pantaloon format, a part of Pantaloon Retail

(India) Limited (PRIL). The acquisition is in line with the Group's strategic

intent to create the largest integrated branded fashion player in the country.

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2011

 Refinance of Novelis debt of US$4 billion to enable strategic flexibility for

growth. This was a landmark innovation in financing - not only did Hindalco

get back 50 per cent of the invested equity within four years, but also opened

up a novel funding avenue between Novelis and Hindalco.

 Achieved financial closure of two projects through debt financing - Utkal

Alumina for Rs.4, 906 crore and Mahan Aluminium for Rs.7,875 crore.

2010

 Expansion of copper rod mill to 160 KTPA.

2009

 QIP: Raised US$600 million for projects, the largest straight QIP in India.

2008

 Alumina expansion at Muri.

 Rights issue: Raised a total of Rs.4, 426 crore for re-financing the bridge loan

taken for the acquisition of Novelis.

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2007

 Successful acquisition of Novelis, making Hindalco the largest in Aluminium

rolling and among the global top five metals majors, with a presence in 12

countries outside India.

 Acquisition of Alcan’s 45 per cent equity stake in the Utkal Alumina project,

thereby making Hindalco the 100 per cent project owner.

2006

 Hindalco announces 10:1 stock split. Each share with face value of Rs.10 per

share split into 10 shares of Rs.1 each.

 Hindalco completes largest rights issue in the history of Indian capital markets

with a total size of Rs.22, 266 million.

 Equity offering and subsequent listing of Aditya Birla Minerals Limited on the

Australian Stock Exchange.

 MoU signed with the government of Madhya Pradesh for a greenfield

Aluminium smelter in the Siddhi district of the state.

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2005

 All businesses of Indal, except for the Kollur foil plant in Andhra Pradesh,

merged with Hindalco Industries Limited.

 MoUs signed with the state governments of Odisha and Jharkhand for setting

up greenfield alumina refining, smelting and power plants.

 Commissioned Copper III expansion, taking total capacity to 500,000 TPA.

2004

 Copper smelter expansion to 250,000 TPA.

2003

 Hindalco acquires Nifty copper mine in March 2003, through Aditya Birla

Minerals Limited (ABML, formerly Birla Minerals Resources Pty. Ltd.).

 ABML acquires Mount Gordon copper mines in November 2003.

 Equity stake in Indal increased to 96.5 per cent through an open offer.

 Brownfield expansion of Aluminium smelter at Renukoot to 345,000 TPA.

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2002

 Amalgamation of Indo Gulf Corporation Limited’s copper business, Birla

Copper, with Hindalco, effective from April 1, 2002.

2000

 Acquisition of controlling stake in Indian Aluminium Company Limited

(Indal) with 74.6 per cent equity holding.

1999

 Aluminium alloy wheels production commenced at Silvassa.

 Brownfield expansion of metal capacity at Renukoot to 242,000 TPA.

1998

 Foil plant at Silvassa goes on stream. Hindalco attains ISO 14001 EMS

certification.

1995

 Mr. Kumar Mangalam Birla takes over as Chairman of the Hindalco Board.

1991

 Beginning of a major expansion programme.

1967

 Commissioning of Renusagar power plant – a strategic and far-sighted move.

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1965

 Downstream capacities commissioned (rolling and extrusion mills) at

Renukoot.

1962

 Commencement of production at Renukoot (Uttar Pradesh) with an initial

capacity of 20,000 MTPA of Aluminium and 40,000 MTPA of alumina.

1958

 Incorporation of Hindalco Industries Limited

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POLICIES AT HINDALCO

QUALITY POLICY

We, at HINDALCO Industries Limited, are committed to pursue and sustain

excellence through continual improvement in all our activities.

To achieve this goal, we shall:

 Meet and exceed the expectation of customers with speed, ensuring reliable

and consistent customer service.

 Associate with suppliers to ensure high quality of inputs through proactive.

 Improve effectiveness of quality management system with emphasis on in-

process control.

 Foster team works, educate, train, and involve employees in achieving the

quality objectives.

 Establish viable modernization of manufacturing facilities and encourage

technological innovations.

 Provide value for money and be globally competitive.

OCCUPATIONAL HEALTH & SAFETY POLICY

We, at HINDALCO Industries Limited, value people as most important resource and

are committed to achieve these goals, we shall:

 Inculcate a sense of responsibility related to occupational health and safety

standards.

Page | - 37 -
 Develop, sustain and continually improve safe work practices and standards to

safeguard employees, contractors, community and assets.

 Comply with all prevalent statutory and regulatory requirements related to

occupational health and safety.

 Promote and enhance safety awareness and consciousness amongst all

employees, through training and development.

 Monitor and review health and safety management systems and working

conditions periodically.

ENVIRONMENTAL AND ENERGY POLICY

 We, at HINDALCO Industries Limited, a premier name in Aluminium and

Copper, operating across the process chain from mining to semi-fabricated

products stand committed to continually strengthen our energy efficiency and

environmental performance in order to achieve Sustainable Development. To

achieve this, we shall.

 Institutionalize an Energy & Environmental Management System across all

production and operations activities, which can be monitored through periodic

audits.

 Comply with all applicable legislations and go beyond wherever techno-

economically viable.

 Enhance material efficiency, achieve high process/equipment productivity and

adopt pollution prevention practices.

Page | - 38 -
 Adopt energy efficient and cleaner technologies, appropriate to the region in

which we operate and in line with our heat recovery and incorporate

technological interventions reduce Green House Gases(GHG) from our

operations.

 Reduce open land storage of wastes and take active measures to promote

industrial recycling and re-use.

 Work in partnership with regulatory authorities, relevant suppliers, contractors

and stakeholders to meet the requirements of this policy.

CORPORATE SOCIAL RESPONSIBILITY POLICY

We, the employees of HINDALCO Industries Limited are committed to realize our

Group’s social vision to actively contribute to the socio-economic development of the

underprivileged communities around us for a better, sustainable way of life and

thereby help raise the country’s Human Development Index. While adopting the

principles of Sustainable Development, we shall fulfil our responsibility as a good

corporate citizen through a comprehensive plan which will focus on:

 Health, Sanitation and Family Welfare.

 Primary & Adult Education.

 Sustainable Livelihood through income generation, agriculture based

programmes including watershed Development.

 Women’s Empowerment through Self Help Groups.

 Infrastructural Development & Support. Espousing Social Causes with the

overall aim of building long term socio-economic.

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SWOT ANALYSIS

STRENGTHS

 An industry leader in aluminium and copper

Hindalco, the metals flagship company of the Aditya Birla Group, is the world's

largest aluminium rolling company and one of the biggest producers of primary

aluminium in Asia. Its copper smelter is the world’s largest custom smelter at a single

location. The company also made investments of strategic importance, which further

scaled its market presence.

 Integrated aluminium operations

The company is the largest vertically integrated aluminium company in India. It

engages in all aspects of the value chain from bauxite mining, alumina refining, and

aluminium smelting to downstream rolling, extrusions, and recycling.

 Extensive product portfolio

Hindalco offers an extensive product portfolio through its two segments, aluminium

and copper. The aluminium segment engages in the production of rolled products,

extrusions, ingots, billets, wire rods, slabs, foil, roofing sheets, and waterproofing

membrane sheeting. The copper segment produces continuous cast copper rods,

copper cathodes, di-ammonium phosphate (dap), phosphor-gypsum, phosphoric acid,

precious metals, and sulphuric acid.

Page | - 40 -
WEAKNESS

 Technology is not upgraded compared to global giants in Aluminium industry.

 Complexity of operation.

 Present production capacity is not adequate to meet the rising high demand.

 High cost of establishment and maintenance of plants.

 Transportation cost for procurement of raw materials is also high.

OPPORTUNTIES

 Growing demand for aluminium

Hindalco, which is engaged in the production of aluminium serving customers in

more than 50 countries, is better positioned to benefit from the positive outlook for

the global aluminium industry.

 Investment to expand aluminium operations

Hindalco has undertaken several projects to expand its aluminium operations. For

instance, the construction of an alumina refinery along with a 90 MW captive co-

generation plant at Orissa (the Utkal Alumina refinery project), the Mahan

Aluminium which is a smelter-power plant complex with a 359,000 tpa aluminium

smelter and a 900 MW captive thermal power plant in Madhya Pradesh. the Aditya

Aluminium project in Orissa, which includes a 359,000 tpa aluminium smelter and a

900 MW captive power plant

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THREATS

 Mining and production risks

Hindalco is subject to operating risks in its mining and production activities. Due to

these risks, the company is liable to incur higher mining, transportation, or production

costs, disrupt or halt operations at its mines and production facilities permanently or

for varying lengths of time, or interrupt the transport of its products to the customers.

 Intense competition

There is substantial competition in the copper and aluminium industries, both in India

and internationally which threatens to erode the market share of the company.

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OBJECTIVES OF STUDY

The objectives to work and prepare the report were:

 To analyse and evaluate the financial performance of Hindalco Industries

Ltd. In terms of Balance Sheet, Income Statement and Ratios Analysis of

financial performance.

 To compare its actual performance to the expected one.

 To make suggestion and recommendation for improving the financial

position.

 To study the policies of the company wrt to the financial management.

 To identify the financial strength, weakness, opportunity and threats that

the firm might have.

 To study company’s functioning in

 To Financial Management

 Allocation of resources.

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RESEARCH METHODOLOGY

SAMPLING PLAN

There is no sampling plan as such as the study involved in understanding the various

processes and analyses of Hindalco Industries Limited.

SOURCES OF DATA

Most of the data’s are collected from secondary sources like

 Internet

 Annuals report of HINDALCO INDUSTRIES ltd.

 Data base

 Books

ANALYSIS OF DATA

Microsoft Excel Sheet is used for the analysis of data. Graphs and tables are made for

the comparison of the data and for making the interpretation easier.

TOOLS USED

The project is descriptive and analytical in Nature

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TOPIC COVERED

 Financial tools

 Financial analysis of Hindalco

 Interpretation of ratios

 Data tabulation

FINANCIAL TOOLS

Comparative statement

It is a statement which compares financial data from different periods of time. The

comparative statement lines up a section of the income statement, balance sheet or

cash flow statement with its corresponding section from a previous period. It can be

used to compare financial data from different companies over time, thus revealing the

trend in the financials.

Trend analysis

An aspect of technical analysis that tries to predict the future movement of a stock

based on past data. Trend analysis is based on the ideas that what happened in the past

gives traders an idea that what has happened in the past gives traders an idea of what

will happen in the future.

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Ratio Analysis

Quantitative analysis of information contained in a company’s financial statements.

Ratio analysis is based on line items in financial statements like the balance sheet,

income statement; the ratios of one item – or a combination of items – to another item

or combination are then calculated. Ratio analysis is used to evaluate various aspects

of company’s operating and financial performance such as its efficiency, liquidity,

profitability and solvency. The trend of these ratios over time is studied to check

whether they are improving or deteriorating. Ratios are also comparative valuations.

Ratio analysis is a cornerstone of fundamental analysis.

Ratio analysis as a tool possesses several important features. The data, which are

provided by financial statement, are readily available. The computation of ratios

facilitates the comparison of the firms which differ in size. Ratios can be used to

compare a firm’s financial performance with industry averages. In addition, ratios can

be used in a form of trend analysis to identify areas where performance has improved

or deteriorated over time.

Because ratio analysis is based upon accounting information, its effectiveness is

limited by the distortions which arise in financial statements due to such things as

historical cost accounting and inflation. Therefore, ratio analysis should only be used

as a first step in financial analysis, to obtain a quick indication of the firm’s

performance and to identify areas which need to be investigated further.

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Financial Cash Flow

Cash flow is the movement of money into or out of a business, project, or financial

product. It is usually measured during a specified, limited, limited period of time.

Measurement of cash flow can be used for calculating other parameters that gives

information on a company’s value and situation. Cash flow can be used, for example,

for calculating parameters: it discloses cash movements over the period.

 To determine a project’s rate of return or value. The time of cash flow into and

out of projects are used as inputs in financial models such as internal rate of

return and net present value.

 To determine problem in business’s liquidity. Being profitable does not

necessarily mean being liquid. A company can fail because of a shortage of

cash even while profitable.

 To evaluate the risks within a financial product, e.g., matching cash

requirement, evaluating default risk, re-investment requirement, etc.

 Cash flow can be used to evaluate the ‘quality’ of income generated by accrual

accounting. When net income is composed of large non-cash items it is

considered low quality.

Cash flow notion is based loosely on cash flow statement accounting standards. It’s

flexible as it can refer to time intervals spanning over past-future. It can refer to the

total of all flows involved or a subset of those flows. Subset terms include net cash

flow, operating cash flow and free cash flow.

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Financial cash flow equation

Operating cash flow = EBIT + Depreciation – Taxes

Capital Spending = Ending Net Fixed Assets

– Beginning Net Fixed Assets +

Depreciation

Addition to NWC = Ending NWC – Beginning NWC

Net Working Capital = current asset – Current Liabilities

Cash Flow from Assets =Operating Cash Flow

– Capital Spending – Additions to NWC

Cash Flow to Debt holders = Interest Expenses

– Ending Long-term Debt

+ Beginning Long-term Debt

Cash Flow to Common Stockholders =dividends paid

– (Ending Common Stock - beginning

common stock)

-(Ending Capital Surplus – Beginning

Capital Surplus)

+ (Ending Treasury Stock – Beginning

Treasure Stock)

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Cash flow to Preferred Stockholders =Preferred dividends paid

- (Ending Preferred Stock - Beginning

Preferred Stock)

Cash Flow to Investors = cash flow to debt holders

+ Cash flow to common stockholder

Operating Cash Flow

Operating cash flow measures the cash flows generated by firm’s main operations. (In

effect, the ability of the firm to sell its products for more than the cost of production).

Operating cash flow can be determined as follows:

Operating cash flow = EBIT + Depreciation – Taxes

The calculation begins with the EBIT (Earnings before Interest and Taxes) because

Interest Expenses is not a cash flow that operations are dependent upon. Interest

Expenses reflects how the firm choose to finance its assets, not its ability to operate

them successfully. Depreciation Expenses (from the Income Statement) is added back

because it is a non-cash expense which was subtracted out in the determination of

EBIT. Finally, the taxes which the firm actually paid in cash during the period are

subtracted.

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Capital Spending

Capital spending reflects the firm’s net investment in fixed assets during the period. It

can be calculated as follows:

Capital spending = Ending Net Fixed Assets – Beginning Net Fixed Assets +

Depreciation

In this calculation, Depreciation Expenses (from the Income Statement) must be

added back because the balance for Ending Net Fixed Assets on the Balance Sheet is

reduced by the Depreciation Expenses which was incurred during the period.

Additions to Net Working Capital

Additions to Net Working Capital measure the firm’s investment in Net Working

Capital during the period. Net Working Capital (NWC) is defined as Current Assets

minus Current Liabilities.

Addition to NWC = Ending NWC – Beginning NWC

Cash Flow from Assets

Once the above items have been determined, the Cash Flow from the Firm’s Assets

can be calculated as follows:

Cash Flow from Assets = Operating cash flow – Capital Spending - Additions to

NWC

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A healthy firm would be expected to generate positive cash flow. However, if the firm

is young and / or is investing heavily to promote growth, then a negative Cash Flow

from the Firm’s Assets may be excused.

Cash Flow to Common Stakeholders

The principal cash from the firm to its Common Stockholders is dividends. Firms also

issue new stock periodically. This represents a cash flow the Common Stockholders

to the firm. (Some firms also repurchase their own stocks, i.e., a cash flow from the

firm to its stockholders). When this occurs the repurchased shares are recorded on the

Balance Sheet as Treasury Stock. The Cash Flow to common stockholders can be

calculated as common dividends paid less net new common equity raised.

Cash Flow to Common Stakeholders = Dividends paid – (Ending common stock

– beginning Common Stock) - (Ending Capital Surplus – Beginning Capital

Surplus) + (Ending Treasury Stock - Beginning Treasure Stock)

Cash Flow to Preferred Stockholders

The Cash Flow to Preferred Stockholders is defined as preferred Dividends Paid less

net new Preferred Equity raised.

Cash Flow to Preferred Stockholders = Preferred Dividends Paid – (Ending

Preferred Stock - Beginning Preferred Stock)

For example, if there is no Preferred Stock. Thus the Cash Flow to Preferred

Stockholders for the firm is 0.

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Cash Flow to Investors (Debt holders and Equity holder)

Once the above items have been determined, the Cash Flow to the Investors in the

Firm can be calculated as follows:

Cash Flow to Invest

ors = Cash Flow to Debt holders + Cash flow to Common Stock holders + cash

Flow to Preferred Stock holders

Cash Flow to Debt holders

The cash flow of debt holders is defined as debt service less new long-term

borrowings. (Debt service represents interest expense and repayment of principal). An

equivalent definition which makes use of values which can readily be obtained from

the Balance Sheet and Income Statement is interest expenses less net new borrowings.

This can be calculated as follows:

Cash Flow to Debt holders = Interest Expense – Ending Long-term Debt +

Beginning Long-term Debt

Interest expenses are the fundamental cash Flow from the firm to its debt holders.

Moreover, if a firm’s long-term Debt increases from 1 year to the next (i.e., more new

debt was issued than was repaired) then the debt holders supplied the firm with

additional cash.

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BALANCE SHEET OF HINDALCO INDUSTRIES LIMITED

A balance sheet, also known as a “statement of financial statement position”, reveals a

company’s assets, liabilities and owner’s equity (net worth).

This analysis is considered generally at set intervals of time, like annually or

quarterly. The process of balance sheet analysis is used for deriving actual figures

about the revenue, assets, and liabilities of the company.

Balance Sheet as on 31st March, 2014 Rs. (crore)

As on 31/03/2014 As on

31/03/2013

EQUITY AND LIABILITIES

Shareholders’ funds

Share capital 206.48 191.48

Reserve and surplus 36525.97 33239.60

Money received against share warrants _ 541.31

36732.45 33972.39

Non-Current Liabilities

Long-Term Borrowings 22108.58 20443.05

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Deferred Tax Liabilities (Net) 1174.31 1191.14

Other Long-Term Liabilities 830.86 074.28

Long-Term Provisions 341.96 300.94

24455.71 22909.41

Current Liabilities

Short-Term Borrowings 4258.37 3701.72

Trade Payables 4383.75 3044.05

Other Current Liabilities 2901.91 1921.09

Short-Term Provisions 1037.76 1066.90

12581.79 9736.76

73769.95 66618.56

ASSETS

Non-Current Assets

Fixed assets:

Tangible assets 18024.98 7071.00

Intangible assets 29.73 26.65

Capital work in progress 17277.13 23605.11

Intangible assets under development 0.10 0.01

35331.94 30702.77

Page | - 54 -
Non-Current Investments 15312.45 14050.17

Long Term Loans and Advances 1161.15 1681.08

Other Non Current Assets 12.52 34.51

51818.06 46468.53

Current Assets

Current Investments 6595.01 6431.96

Inventories 8914.58 7702.61

Trade Receivables 1283.65 1515.04

Cash and Bank balances 1163.17 1497.82

Short term Loans and Advances 3226.40 2261.73

Other Current Assets 769.08 740.87

21951.89 20150.03

73769.95 66618.56

Page | - 55 -
INCOME STATEMENT OF HINDALCO INDUSTRIES LIMITED

Income Statement is a financial statement that summarizes the various transaction of a

business during a specified period, showing the net profit or loss.

Income statement measures the company’s financial performance over a specific

accounting period. It is often referred as a Profit And Loss Statement.

Income statement for the year ending 2013&2014

Rs. (crore)

Year Ended Year

31/03/2014 Ended

31/03 2013

INCOME

Gross Revenue from Operation 30101.34 28069.78

Less: Excise Duty 2250.41 2012.85

Net Revenue from Operations 27850.93 26056.93

Other income 1124.42 983.09

Total income 28975.35 27040.02

EXPENSES

Purchase of Stock in Trade 0.03 0.38

Cost Of Materials Consumed 18804.28 17,136.51

Page | - 56 -
Change in Inventories (676.21) 127.94

Employees Benefits Expenses 1346.10 1200.80

Power and Fuel 3557.61 3073.04

Finance Costs 711.65 435.98

Depreciation and Amortization 823.29 686.95

Impairment Loss/(Reversal) (Net) - 17.25

Other Expenses 2327.24 2314.54

Total Expenses 26893.99 24993.39

Profit Before Exceptional Items and Tax 20381.36 2046.6

Exceptional Items 395.98 -

Profit Before Tax 1685.38 2046.63

Tax expenses:

Current Tax 288.88 381.41

Deferred Tax (16.83) (33.98)

Profit for the year 1413.33 1699.20

Page | - 57 -
CASH FLOW STATEMENT

The statement of cash flows is part of the financial statements issued by a business,

and describes the cash flows into and out of the organization. Its particular focus is on

the types of activities that create and use cash, which are operations, investments, and

financing. Though the statement of cash flows is generally considered less critical

than the income statement and balance sheet, it can be used to discern trends in

business performance that are not readily apparent in the rest of the financial

statements. It is especially useful when there is a divergence between the amount of

profits reported and the amount of net cash flow generated by operations.

There can be significant differences between the results shown in the income

statement and the cash flows in this statement, for the following reasons:

 There are timing differences between the recordation of a transaction and

when the related cash is actually expended or received.

 Management may be using aggressive revenue recognition to report revenue

for which cash receipts are still some time in the future.

 The business may be asset intensive, and so requires large capital investments

that do not appear in the income statement, except on a delayed basis as

depreciation.

Many investors feel that the statement of cash flows is the most transparent of the

financial statements (i.e., most difficult to fudge), and so they tend to rely upon it

more than the other financial statements to discern the true performance of a

business.

Cash flows in the statement are divided into the following three areas

Page | - 58 -
 Operating activities - These constitute the revenue-generating activities of a

business. Examples of operating activities are cash received and disbursed for

product sales, royalties’ commissions, fines, lawsuits, supplier and lender

invoices, and payroll.

 Investing activities - These constitute payments made to acquire long-term

assets, as well as cash received from their sale. Examples of investing

activities are the purchase of fixed assets and the purchase or sale of securities

issued by other entities.

 Financing activities - These constitute activities that will alter the equity or

borrowings of a business. Examples are the sale of company shares, the

repurchase of shares, and dividend payments.

Cash flow statement for the year ending 2013&2014

(Rs.crore)

For the year ended For the year ended

31 March 2014 31 March 2013

A. Cash flow from operating activities

Net profit before tax 1,685.38 2,046.63

Adjustment for: 0.00 0.00

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Finance Costs 711.65 435.98

Depreciation and Amortization 823.29 686.95

Impairment Loss/ (Reversal) (Net) 0.00 17.25

Employee Stock Option Scheme 3.71 0.27

Provisions/ Provisions written-back

(Net) -0.09 14.24

Unrealized Foreign Exchange (Gain)/

Loss (Net) 22.70 6.03

Loss/ (Gain) on Derivative

transactions (Net) -141.45 17.87

Investing Activities (Net) -1,048.55 -935.54

Operating profit before working

capital changes 2,056.64 2,289.68

Changes in working capital:

Inventories -1254.54 40.24

Trade and other Receivables -568.99 -407.48

Page | - 60 -
Trade and other Payables 2035.35 -1638.03

Cash generated from operation 2268.46 284.41

Payment of direct taxes -237.09 -636.75

Net cash generated/(used) -

operating activities 2031.37 -352.34

B. Cash flow from investing activities

Purchase of fixed assets -3,457.58 -5,530.84

Sale of fixed assets 10.24 20.69

Return of Capital from Subsidiary

(Net) -1,242.49 -541.58

Purchase / sale of shares of

subsidiaries (net) -1,242.49 -541.58

Purchase / sale of investments (net) 28.64 -1,454.91

Proceeds/ Repayment of Loans and

Deposits (Net) 577.95 -1,249.09

Interest received 443.15 254.01

Page | - 61 -
Dividend received 237.04 259.65

Net cash generated / (used) -

investing activities -3,403.05 -8,242.07

C. Cash flow from financing activities

Proceeds from issue of shares (net of

expenses) 1623.99 0.4

Capital Subsidy Received 0.5 4.5

Proceeds from Long-term

Borrowings 16786.72 14818.09

Repayment of Long-term Borrowings -369.63 -1.53

Prepayment of Long-term

Borrowings -14513.72 -5142.99

Proceeds/ Repayment of Short-term

Borrowings (Net) 655.85 258.55

Finance Cost Paid -2303.12 -1519.85

-279.4 -331.01
Dividend Paid (including Dividend

Page | - 62 -
Distribution Tax)

Net Cash Generated/ (used) -

Financing Activities 1601.19 8086.16

Net increase / (decrease) in cash

and cash equivalents 229.51 -508.25

Add: opening cash and cash

equivalents 205.38 713.63

Close cash and cash equivalents 434.89 205.38

Notes:

The Cash Flow Statement has been prepared under the indirect method as set out in

Accounting Standard.

(AS) 3:"Cash flow Statement" as specified in the Companies (Accounting Standard)

Rule 2006.

 Figures for the previous period have been regrouped / rearranged wherever

found necessary.

Page | - 63 -
CONCLUSION:

Cash from operation was significantly higher compared to last year due to decrease in

working capital by Rs. 212 crore against an increase of Rs. 2005 crore last year. Net

increase in borrowing of Rs. 2559 crore was mainly to finance the capital expenditure

of Rs. 3447 crore and working capital. Company received Rs. 1624 crore from issue

of equity shares against outstanding preferential warrants.

Page | - 64 -
RATIO ANALYSIS OF HINDALCO INDUSTRIES LIMITED

PROFITABILITY RATIO

A profitability ratio is a measure of profitability, which is a way to measure a

company's performance. Profitability is simply the capacity to make a profit, and a

profit is what is left over from income earned after you have deducted all costs and

expenses related to earning the income. The formulas you are about to learn can be

used to judge a company's performance and to compare its performance against other

similarly-situated companies.

 Return on Total Assets (ROTA)

 Return on Capital Employed(ROCE)

 Return on Total Assets (ROTA): Return on Assets measures how effectively

the company produces income from its assets. You calculate it by dividing net

income (NI) for the current year by the value of all the company's assets (A)

and multiplying the quotient by 100:

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Return on Assets = Net Income / Assets * 100

The ROTA of the Hindalco Industries Limited for the last five year:

RATIO

YEAR 2013-14 2012-13 2011-12 2010-11 2009-10

ROTA 177.92 174.61 164.48 155.12 145.85

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INTERPRETATION

 This shows permanently rise in total asset.

 Positive rise in ratio indicates a positive efficiency of the organization.

 High ROTA indicate that the company is investing wisely and is likely

profitable.

 Low ROTA indicate that the company is not investing wisely.

Return On Capital Employed (ROCE): A ratio that indicates the

efficiency and profitability of a company’s capital investment.

ROCE = Earnings before interest and tax * 10

Capital Employed

RATIO

YEAR 2013-14 2012-13 2011-12 2010-11 2009-10

ROCE 4.30 4.16 6.34 7.03 7.14

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INTERPRETATION

 This ratio shows decrease in return over capital employed.

 Decrease in ratio indicate non favorable for business organization.

 Low ROCE state that a company is making poor use of its capital

resources.

 A high ROCE indicates that a larger of profits can be invested back

into the company for the benefit of shareholders.

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MANAGEMENT EFFICIENCY RATIO

Accounting ratios measure a firm’s ability to convert different accounts within their

balance sheets into cash or sales. These ratios indicate how efficiently the working

capital and stock being used to obtain sales. Higher Activity Ratios indicates the

better use of capital and resources and in turn lead to higher profitability. The Asset

Turnover Ratio and Inventory Turnover Ratio are good example of Activity Ratios.

 Inventory Turnover Ratio (ITR): This ratio indicates the relationship

between the cost of goods sold during the year and average stock kept during

that year. A low turnover implies poor sales and, therefore, excess inventory.

A high ratio implies either strong sales or ineffective buying.

ITR = Cost of goods sold/ Average Inventory

RATIO

YEAR 2013-14 2012-13 2011-12 2010-11 2009-10

ITR 3.12 3.38 3.80 3.43 3.63

Page | - 69 -
INTERPRETATION

 The operational efficiency of the business concern is good.

 Here the ratio stand out to be 3.12 from the last year 3.38, which shows

decrease in ITR.

 A low turnover implies poor sales and excess inventory.

 A high ratio implies strong sales.

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 Debtor Turnover Ratio (DTR): Receivable Turnover Ratio or Debtor's

Turnover Ratio is an accounting measure used to measure how effective a

company is in extending credit as well as collecting debt.

A high turnover ratio indicates a combination of a conservative credit policy and an

aggressive collections department, as well as a number of high-quality customers.

A low turnover ratio represents an opportunity to collect excessively old accounts

receivable that are unnecessarily tying up working capital. Low receivable turnover

may be caused by a loose or nonexistent credit policy, an inadequate collections

function, and/or a large proportion of customers having financial difficulties. It is also

quite likely that a low turnover level indicates an excessive amount of bad debt.

DTR = Net Sales/ Average Debtors

RATIO

YEAR 2013-14 2012-13 2011-12 2010-11 2009-10

DTR 19.90 17.71 19.72 18.41 15.48

Page | - 71 -
INTERPRETATION

 The quality of receivable is good.

 The liquidity position of a concern is adequate.

 A high turnover ratio indicates a combination of a conservative credit policy

and an aggressive collections department, as well as a number of high-quality

customers.

 A low turnover ratio represents an opportunity to collect excessively old

accounts receivable that are unnecessarily tying up working capital.

Page | - 72 -
 Fixed Assets Turnover Ratio (FATR): The fixed-asset turnover ratio measures

a company's ability to generate net sales from fixed-asset investments -

specifically property, plant and equipment (PP&E) - net of depreciation.

The fixed asset turnover ratio compares net sales to net fixed assets.

A high ratio indicates that a business is:

 Doing an effective job of generating sales with a relatively small amount of

fixed assets

 Outsourcing work to avoid investing in fixed assets

 Selling off excess fixed asset capacity

A low ratio indicates that a business:

 Is over invested in fixed assets.

 Needs to issue new products to revive its sales.

 Has made a large investment in fixed assets, with a time delay before the new

assets start generating revenues.

FATR = Net Sales/ Average Fixed assets

RATIO

YEAR 2013-14 2012-13 2011-12 2010-11 2009-10

FATR 1.04 1.74 1.85 1.67 1.42

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INTERPRETATION

 Here the ratio stands to be 1.04 and before it was 1.74 which states that
there is a minor change in ratio.

 A ratio indicate that a business is doing an effective job of generating

sales with relatively small amount of fixed asset.

 A low ratio indicate that a business is over invested in fixed asset.

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LIQUIDITY AND SOLVENCY RATIO

A liquidity ratio is an indicator of whether a company's current assets will be

sufficient to meet the company's obligations when they become due. The liquidity

ratios include the current ratio and the acid test or quick ratio. The current ratio and

quick ratio are also referred to as solvency ratios.

The solvency ratio is only one of the metrics used to determine whether a company

can stay solvent. Other solvency ratios include debt to equity, total debt to total

assets, and interest coverage ratios.

 Debt Equity Ratio: The debt-to-equity ratio (D/E) is a financial ratio

indicating the relative proportion of shareholders' equity and debt used to

finance a company's assets. Closely related to leveraging, the ratio is also

known as Risk, Gearing or Leverage.

A high debt-to-equity ratio indicates that a company may not be able to generate

enough cash to satisfy its debt obligations.

However, a low debt-to-equity ratio may also indicate that a company is not taking

advantage of the increased profits that financial leverage may bring.

DEBT EQUITY RATIO = Long Term Debt/ Net Worth

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RATIO

YEAR 2013-14 2012-13 2011-12 2010-11 2009-10

DER 0.74 0.72 0.45 0.30 0.23

INTERPRETATION

 Debt equity ratio is increasing every year.

 Here the ratio stand out to be 0.74 from the last year ratio 0.72,there is no

major change in the debt equity ratio of the organization.

 A high debt to equity ratio indicates that a company may not be able to

generate enough cash to satisfy its debt obligations.

 A low debt-to-equity ratio may also indicate that a company is not taking

advantage of the increased profits that financial leverage may bring.

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 Current ratio: The current ratio is a financial ratio that measures whether

or not a firm has enough resources to pay its debts over the next 12 months. It

compares a firm's current assets to its current liabilities.

A high current ratio can be a sign of problems in managing working capital.

When a current ratio is low and current liabilities exceed current assets

(the current ratio is below 1), then the company may have problems meeting its

short-term obligations (current liabilities).

Current ratio = current assets/ current liabilities

RATIO

YEAR 2013-14 2012-13 2011-12 2010-11 2009-10

CURRENT 1.11 1.26 1.01 0.96 1.02

RATIO

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INTERPRETATION

 There is no major change in the current ratio of the organisation .

 Higher value of current ratio indicate more liquid of the firm ability to pay

current obligation in time.

 Lower value indicate current liabilities exceed current ratio and may have

problem in meeting current obligations in time.

 The ideal current ratio of 2: 1 is considered to be satisfactory.

 Quick ratio: The quick ratio is a financial ratio used to gauge a company's

liquidity. The quick ratio is also known as the acid test ratio. The quick ratio

differs from the current ratio in that some current assets are excluded from

the quick ratio. The most significant current asset that is excluded is inventory.

Low or decreasing quick ratios generally suggest that a company is over-leveraged,

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struggling to maintain or grow sales, paying bills too quickly or

collecting receivables too slowly.

On the other hand, a high or increasing quick ratio generally indicates that a company

is experiencing solid top-line growth, quickly converting receivables into cash, and easily

able to cover its financial obligations. Such companies often have faster inventory

turnover and cash conversion cycles.

Quick Ratio = Cash in hand + Cash at bank + Marketable securities

Current Liabilities

RATIO

YEAR 2013-14 2012-13 2011-12 2010-11 2009-10

QUICK 0.71 0.91 0.55 0.34 0.39

RATIO

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INTERPRETATION

 Here the ratio 0.71 as before it was 0.91 that proves the organization’s position
is good.

 Low or decreasing quick ratios generally suggest that a company is over-

leveraged, struggling to maintain or grow sales, paying bills too quickly or

collecting receivables too slowly .

 A high or increasing quick ratio generally indicates that a company is

experiencing solid top-line growth converting receivables into cash and easily

able to cover its financial obligations.

 The ideal quick ratio of 1:1 is considered to be satisfactory.

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FINANCIAL ANALYSIS AND REVIEW

Revenue

 Revenue for the year increased 7% to Rs. 27851 crore. Profit before interest

and depreciation was Rs. 3616 crore vs. Rs. 3187 crore in FY13, a jump of

13%.

Other income

 Other income at rs. 1124 crore was higher on account of better yields, higher

treasury corpus and dividend from subsidiaries.

Interest

 Business, finance for went up from Rs. 566 crore to Rs. 712 crore due to

increase in debt level in line withdrawal of new debt and capitalization of new

project.

Depreciation

 Depreciation charges (including impairment) were at Rs. 823 crore FY14

against Rs. 704 crore in FY13.

TAXES

 The provision for tax was Rs. 273 crore in HIL business.

Profit

 Net profit year stood at Rs. 1413 crore vs. Rs. 1699 crore in FY13. Net profit

decline going to higher financing and higher depreciation. Exceptional items

also made a dent in net profit.

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CONCLUSION

 To sum up some of the financial years, the company recorded a commendable

performance in volatile year. Since 2010 sales of Hindalco increased till 2012

but in 2013 it declined by a marginal amount but again it increased by a

substantial amount in 2014.

 The company posted an absolutely remarkable performance- a turnover of

US$ 14.5 billion (Rs. 87,695 crore).

 Standalone revenues increased 7% to Rs.27, 851 crore from Rs. 26,057 crore

in FY13.

 Working in the company, we found that the communication channel of the

company is very good.

 The oracle system used by the employees is very helpful and the employees

are satisfied with the system as it helps to share, store and feed data from

different departments.

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RECOMMENDATIONS

 Company should focus more on production of finished goods instead of semi

finished goods.

 Company should approach Automobile industry for usage of aluminium based

products in most of their parts.

 MANAGEMENT DISCUSSION AND ANALYSIS gives investors a better

understanding of what the company does and usually points out some key

areas where it performed well.

 It should enhance its employee’s efficiency, more training needed to its

employees in order to increase its production capacity and minimize mistake

while performing the task more safety precaution need to implement to the

employees.

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LIMITATION OF STUDY

 The accuracy of the financial information largely dependents on how

accurately financial statements are prepared. If their preparation is wrong, the

information obtained from their analysis will also be wrong which may

mislead the user in making decisions.

 Since financial statements are prepared by using historical financial data

therefore, the information derived from such statements may not be effective

in corporate planning, if the previous situation does not prevail.

 Then financial statement analysis provides only quantitative information about

the company’s financial affairs. However, it fails to provide qualitative

information such as management labour relation, customer’s satisfaction, the

management’s skills and so on which are also equally important for decision

making.

 The skills used in the analysis without adequate knowledge of subject matter
may lead to negative direction. Similarly, biased attitude of the analyst may

also lead to wrong judgment and conclusion.

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BIBLIOGRAPHY

Books referred:

Pandey, I.M., Finanacial Management, Vikas publishing House Private Limited,

Tenth Edition, 2011.

Kothari C.R., Research Methodology, New Age International Publishers, Second

Revised Edition 2004.

Other References:

 http://www.hindalco.com

 http://www.moneycontrol.com

 http://www.adityabirla.com

 Book of Annual Report of Hindalco Industries Limited.

 Journal of Hindalco - “Hindalco Sandesh”.

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ANNEXURES

Balance Sheet as on 31st March, 2014 Rs. (crore)

As on 31/03/2014 As on

31/03/2013

EQUITY AND LIABILITIES

Shareholders’ funds

Share capital 206.48 191.48

Reserve and surplus 36525.97 33239.60

Money received against share warrants _ 541.31

36732.45 33972.39

Non-Current Liabilities

Long-Term Borrowings 22108.58 20443.05

Deferred Tax Liabilities (Net) 1174.31 1191.14

Other Long-Term Liabilities 830.86 074.28

Long-Term Provisions 341.96 300.94

24455.71 22909.41

Current Liabilities

Short-Term Borrowings 4258.37 3701.72

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Trade Payables 4383.75 3044.05

Other Current Liabilities 2901.91 1921.09

Short-Term Provisions 1037.76 1066.90

12581.79 9736.76

73769.95 66618.56

ASSETS

Non-Current Assets

Fixed assets:

Tangible assets 18024.98 7071.00

Intangible assets 29.73 26.65

Capital work in progress 17277.13 23605.11

Intangible assets under development 0.10 0.01

35331.94 30702.77

Non-Current Investments 15312.45 14050.17

Long Term Loans and Advances 1161.15 1681.08

Other Non Current Assets 12.52 34.51

51818.06 46468.53

Current Assets

Current Investments 6595.01 6431.96

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Inventories 8914.58 7702.61

Trade Receivables 1283.65 1515.04

Cash and Bank balances 1163.17 1497.82

Short term Loans and Advances 3226.40 2261.73

Other Current Assets 769.08 740.87

21951.89 20150.03

73769.95 66618.56

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Income statement for the year ending 2013&2014

Rs. (crore)

Year Ended Year Ended

31/03/2014 31/03 2013

INCOME

Gross Revenue from Operation 30101.34 28069.78

Less: Excise Duty 2250.41 2012.85

Net Revenue from Operations 27850.93 26056.93

Other income 1124.42 983.09

Total income 28975.35 27040.02

EXPENSES

Purchase of Stock in Trade 0.03 0.38

Cost Of Materials Consumed 18804.28 17,136.51

Change in Inventories (676.21) 127.94

Employees Benefits Expenses 1346.10 1200.80

Power and Fuel 3557.61 3073.04

Finance Costs 711.65 435.98

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Depreciation and Amortization 823.29 686.95

Impairment Loss/(Reversal) (Net) - 17.25

Other Expenses 2327.24 2314.54

Total Expenses 26893.99 24993.39

Profit Before Exceptional Items and Tax 20381.36 2046.6

Exceptional Items 395.98 -

Profit Before Tax 1685.38 2046.63

Tax expenses:

Current Tax 288.88 381.41

Deferred Tax (16.83) (33.98)

Profit for the year 1413.33 1699.20

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Cash flow statement for the year ending 2013&2014

For the year ended For the year ended 31

31 March 2014 March 2013

A. Cash flow from operating activities (Rs.crore)

Net profit before tax 1,685.38 2,046.63

Adjustment for: 0.00 0.00

Finance Costs 711.65 435.98

Depreciation and Amortization 823.29 686.95

Impairment Loss/ (Reversal) (Net) 0.00 17.25

Employee Stock Option Scheme 3.71 0.27

Provisions/ Provisions written-back

(Net) -0.09 14.24

Unrealized Foreign Exchange (Gain)/

Loss (Net) 22.70 6.03

Loss/ (Gain) on Derivative transactions

(Net) -141.45 17.87

Investing Activities (Net) -1,048.55 -935.54

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Operating profit before working capital

changes 2,056.64 2,289.68

Changes in working capital:

Inventories -1254.54 40.24

Trade and other Receivables -568.99 -407.48

Trade and other Payables 2035.35 -1638.03

Cash generated from operation 2268.46 284.41

Payment of direct taxes -237.09 -636.75

Net cash generated/(used) -

operating activities 2031.37 -352.34

B. Cash flow from investing activities

Purchase of fixed assets -3,457.58 -5,530.84

Sale of fixed assets 10.24 20.69

Return of Capital from Subsidiary

(Net) -1,242.49 -541.58

-1,242.49 -541.58
Purchase / sale of shares of

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subsidiaries (net)

Purchase / sale of investments (net) 28.64 -1,454.91

Proceeds/ Repayment of Loans and

Deposits (Net) 577.95 -1,249.09

Interest received 443.15 254.01

Dividend received 237.04 259.65

Net cash generated / (used) -

investing activities -3,403.05 -8,242.07

C. Cash flow from financing activities

Proceeds from issue of shares (net of

expenses) 1623.99 0.4

Capital Subsidy Received 0.5 4.5

Proceeds from Long-term Borrowings 16786.72 14818.09

Repayment of Long-term Borrowings -369.63 -1.53

Prepayment of Long-term Borrowings -14513.72 -5142.99

655.85 258.55
Proceeds/ Repayment of Short-term

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Borrowings (Net)

Finance Cost Paid -2303.12 -1519.85

Dividend Paid (including Dividend

Distribution Tax) -279.4 -331.01

Net Cash Generated/ (used) -

Financing Activities 1601.19 8086.16

Net increase / (decrease) in cash and

cash equivalents 229.51 -508.25

Add: opening cash and cash

equivalents 205.38 713.63

Close cash and cash equivalents 434.89 205.38

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