Finance Statement Raidco Khaithan

COMMENTARY ON CHAIRMAN’S SPEECH

The company has clear vision and mission for growth and development. The

company wants to achieve expansion through dynamism and technical

expertise and wants to take benefit of globalization. The Indian market is

growing at the rate of 17% in premium segment And 28% in other segment,

so company has prepared its brand portfolio for every segment of society and

it is trying to launch new categories of ready to drink products like freezers

and coolers at the upper end of target segment. The company is also trying to

locate new markets like Jammu and Kashmir, Tamil Nadu and Nepal.

For the first time in liquor industry the company has introduced ENA Deluxe, a

banded extra-neutral alcohol which is comparable with the international

brands and company has completed its, over Rs 200 million investment for

this technology upgradation of Rampur, U.P. It is the first company to procure

technical know how from biogas generation from waste. It is also trying to

reduce the packaging cost and bring down its cost of debt, and it has highest

credit rating from national and international creditors.

Page No. 1 of 41

COMMENTARY ON DIRECTOR’S REPORT

The company has consolidated its position in current year regarding sales &

profit. Sales have increased by 30% and profit after tax (PAT) by 57%. It

shows that the management of the company has taken appropriate steps to

boost the sale. The company has launched special appointment premium

whisky and Old Admiral brandy and these launches were successful, even in

south-Indian states also. Its flagship brand 8 PM has grown by 7% and

contessa by 18% over last year. Contessa is supplied to defence forces also.

The company has acquired Abhishek Cement Ltd through orders by Board for

Industrial and Financial Reconstruction (BIFR).

The company has made joint venture with Whiteball for manufacturing of

branded liquor. The company is making aggressive quality control and

marketing strategy to maintain its present share as well as expansion in new

markets and it has a successful story regarding merger and acquisition. The

liquor industry in INDIA is directly, indirectly controlled through government

agencies, advertisement is also regulated. These are POTA restrictions on

exports. The company has performed satisfactory regarding Operational and

Financial Management.

Page No. 2 of 41

COMMENTARY ON CORPORATE GOVERNANCE

REPORT

Company has issued a report on corporate governance as per SEBI

guidelines. It has made full disclosure regarding. Director’s, shareholders and

Auditor’s. Following are the important points related with corporate

governance.

(i) The Board of Director’s has not attended the board meeting except Mr.

Sanjay Jalan, who is an independent non-executive director.

(ii) Company has made full disclosure regarding salary, commission,

allowances, retirement benefits, stock option and it has taken full detail

regarding the remuneration.

(iii) Company has appointed on Audit Committee to analyze the accouting

system and all the members have attended the meetings.

(iv) Company has established a grievance committee for shareholder’s,

their queries are settled through the committee members and the

c0ompany makes proper commission with the shareholders.

(v) Company has undertaken a humanist approach for the growth and

development of employees. It is trying to make the better relationship

with the workers.

Page No. 3 of 41

COMMENTARY ON AUDITOR’S REPORT

Auditor’s of the company have stated very clearly that company has given full

cooperation and supplied all the documents required by the Auditor’s.

Following are the important points regarding Auditor’s report:

(A) As required by the company law board the Auditor’s have checked all the

informations.

(B) Auditor’s have not made physical verification of the stock and have

trusted on the documents given by the company.

(C) The Auditors have analysed the order of Board for Industrial and Financial

Reconstruction (BIFR) and have merged the assets and liabilities of the

acquired company as per the rules of consolidation.

(D) Company has not made any provision for the loans in the hope that the

company will recover them. It is against the Accounting Standard of

Contingent Liabilities.

(E) Company is providing depreciation or per the company’s Act. Assets

acquired before 1st April, 1974 are depreciated by Written Down Value

Method and others at Straight Line Method. If Company makes revolution

of fixed Assets, and then it makes revolution reserve.

(F) Investments are shown at cost price and no provision is made for

difference between cost price and market price unless there is no

permanent change in value.

(G) In current year company has made provisions for deferred tax liability but

the deferred tax assets are not sufficient to cover the deffered tax liability

which may create problem of cash flow:

Page No. 4 of 41

ANALYSIS OF BALANCE SHEET

1. Shareholder’s Fund

Company has issued share capital and capital base has been increased by

25.3% and the reserves have been increased by 6.8%, which shows lower

rate of capitalisation.

In Mohan Meakins there is no significant change in share capital and reserve

and surplus. So total shareholders fund has been slightly increased by 0.10%.

2. Loan Funds

Company has taken some secured and unsecured loans and increase in loan

fund is 13%. The amount of share capital and loan fund has been utilised to

purchase the fixed assets and capital expenditure incurred on work in

progress.

In Mohan Meakins no fresh loans have been taken and total loan fund has

been reduced slightly by 0.10%.

3. Fixed Assets

Company has acquired fixed assets so there is an increment by 22.7%. Main

expenditure has been incurred on plant and machinery, acquisition of brands

and trademarks and leasehold improvements. It shows that company is trying

to increase its operating Assets base.

In Mohan Meakins there is on increment of around 3% in Fixed Assets, there

is no significant change in capital work in progress. So fixed asset

composition is unchanged.

Page No. 5 of 41

4. Investments

There is no significant increase in investments. The existing investments have

been made in equity shares of whitehall India Ltd. National savings

Certificates, unquoted investments are more than 96% in total portfolio.

In Mohan Meakins no significant investment has been made in outside

companies. The percentage change in investment is only 0.38%.

5. Current Assets, Loans and Advances

Current assets have been increased by 24.86%. It is due to increase in

debtor’s loans and advances given for deposit of excise duty and fixed assets.

Loans and advances have been increased by 54% although company has

effective employed stock control strategy, so investment in stock has been

reduced. In Mohan Meakins the major portion of current assets are

inventories and debtors which constitute more than 60% of total current

assets, there is increment in debtors by around 1.9% and reduction in

inventories by more than 2%.

6. Current Liabilities and Provisions

Creditors have been increased by 23.16% and there are no significant

changes in provisions according to volume of sale and profit. Net current

assets of company have been increased.

In Mohan Meakins, the short-term creditors are in same proportion although

provisions have been increased by 3%, which is not so significant.

Page No. 6 of 41

ANALYSIS OF PROFIT AND LOSS ACCOUNT

1. Total income

It has been increased by 3.89% but other income has been reduced by 26%.

It shows that company is concentrating on its core business.

The sales turnover of Mohan Meakins is increased by 16%, which is

impressive upto some extent but the increment in sale has not been

converted into profit.

2. Expenditure

The raw material has been reduced by 7.7%, company has also controlled the

salary and allowances as well as interest burden by 22.3% but administration

and selling expenses have increased by 2.41% depreciation by 32.4%. It

shows that company is trying to achieve operational efficiency but its should

control uneconomic expenses, so that the savings in cost can be converted to

increase the profitability of the company.

In Mohan Meakins the expenses on raw material has increased by around

7%, manufacturing expenses by 2%, employees cost by 1.21%, selling

expenses by 2.09% and miscellaneous expenses by 3%. It shows that the

cost component is rising which is eating out the profit of the company. Even

interest burden has been increased by 0.40%, so the profitability after tax is

only 0.03%. And overall company has no operational efficiency.

Page No. 7 of 41

RATIO ANALYSIS

Liquid Assets(a) Liquid Ratio = -------------------------------

Current liabilities(Amount in Rs.’000)

Company Year Current AssetsCurrent

LiabilitiesCurrent

Ratio

Radico Khaithan Ltd.2001-02 410521 382223 1.07

2002-03 547824 475299 1.02

Mohan Meakins Ltd.2000-01 427520.103 463449.188 0.92

2001-02 455464.516 492161.823 0.93

ANALYSIS:

Liquid Ratio of the company is 1.02. On the other hand in last year it was

1.07, which shows that company has sufficient liquidity to payoff short term

debts and it will get finance for its working requirement from commercial

banks.

CROSS SECTION ANALYSIS:

In Mohan Meakins this ratio is 0.93 which shows that it cannot pay its short-

term loans on demand and it may face problem of cash flow because no

instant capacity to pay its short term loans.

Page No. 8 of 41

CURRENT RATIO:

Current Assets(b) Current Ratio = -------------------------------

Current Liabilities

(Amount in Rs.’000)

Company YearCurrent Assets

Current Liabilities

Ratio

Radico Khaithan Ltd.2001-02 1009569 382223 2.64

2002-03 1260569 475299 2.65

Mohan Meakins Ltd.2000-01 896283.404 463449.188 1.93

2001-02 1007139.061 492161.823 2.04

ANALYSIS:

In Radico the current ratio for Current Year is 2.65 while last year it was 2.64

which is more or less same. i.e. for 1 unit current liability 2.65 units of current

assets are acquired.


In Mohan Meakins the ratio is 2.04 which is less than radico & not as

satisfactory.

Page No. 9 of 41

INVENTORY TURN OVER RATIO

Net Sales(c) Inventory turnover Ratio = -------------------------------

Inventory(Amount in Rs.’000)

Company Year Net sales Inventory Inventory turnover

ratio

Conversion

period

Radico Khaithan Ltd.2001-02 5160011 217017 23.7 15 days

2002-03 5361163 171604 31.24 12 days

Mohan Meakins Ltd.2000-01 2488191.821 256064.570 9.71 40 days

2001-02 2927089 315103.368 9.3 39 days

ANALYSIS:

Inventory turn over ratio of the company is higher and stock commission

period is 12 days. Company has improved the stock conversion period in

comparison of last year it was 15 days. It shows that company has

successfully adopted material requirement planning and there is neither over

nor under stocking.


In Mohan Meakins the Inventory turn over ratio is lower and stock conversion

period is around 40 days which shows that company has to incur higher

holding cost and there is lost of interest on stock investment. The company

has to adopt proper system of stock flow and just in time system of the stock.

Page No. 10 of 41

DEBTOR’S TURN OVER RATIO

Sales (d) Debtors Turnover over Ratio = -------------------------------

Closing Debtors(Amount in Rs.’000)

Company Year Sales Debtors Ratio Collection

period

Radico Khaithan Ltd.

2001-02 5160011 367014 14 26 days

2002-03 5361163 499969 10.7 34 days

Mohan Meakins Ltd.

2000-01 248819.182 37011.567 6.7 54 days

2001-02 2927089.003 407658.115 7.2 51 days

ANALYSIS:

The collection period of the company is 34 days although in last year it was 26

days, it shows that the collection policy of the company is too lenient.

Company should try to reduce the collection period through discount and

incentives.


In Mohan Meakins the collection period is more than 50 days, which indicates

lack of appropriate credit policy and company may face problem of cash

flows.

Page No. 11 of 41

CREDITORS TURN OVER RATIO:

Purchases (e) Creditors Turnover over Ratio = -------------------------------

Creditors(Amount in Rs.’000)

Company Year Purchases Creditors RatioPayment

period


2001-02 1339273 347250 3.86 95 days

2002-03 1178747 427684 2.8 130 days

Mohan Meakins Ltd.

2000-01 812678.724 406118.275 2 183 days

2001-02 755233.563 445736.535 1.7 214 days

ANALYSIS:

The payment period to creditors is around 130 days, which shows that

collection period is lower than payment period, which is better for the

company, it will reduce the operating cycle.


On the other hand, in Mohan Meakins the payment period is 214 days, which

shows that delay in payment to creditors may increase the price of raw

material because right suppliers will charge right price and will take payment

within appropriate period.

Page No. 12 of 41

FIXED ASSETS TURN OVER RATIO:

Net Sales (f) Fixed Assets Turnover over Ratio = -------------------------------

Net Fixed assets(Amount in Rs.’000)

Company Year Net salesFixed

assetsRatio


2001-02 5160011 658816 7.8

2002-03 5361163 819915 6.54

Mohan Meakins Ltd.

2000-01 248819.182 157795.485 15.7

2001-02 2927089.003 174290.312 16.80

ANALYSIS:

The fixed assets turn over Ratio of the company’s around 7 times which

shows every rupees one invested in fixed assets is generating a sale of Rs. 7.

It shows that business has performing fixed assets and the appropriate

capacity is utilised.


In Mohan Meakins this ratio is around 16 times which is more than the double

of Radico. It shows that fixed asset utilisation in Mohan Meakins is better than

Radico and Mohan meakins is getting economies of scale regarding utilisation

of fixed assets.

Page No. 13 of 41

WORKING CAPITAL TURN OVER RATIO:

Net Sales (g) Working capital Turnover over Ratio = -------------------------------

Net Working capital(Amount in Rs.’000)

Company Year Net SalesWorking

capitalRatio


2001-02 5160011 627346 8.22

2002-03 5361163 785270 6.82

Mohan Meakins Ltd.

2000-01 248819.182 432834.216 5.75

2001-02 2927089.003 514977.238 5.68

ANALYSIS:

This ratio for Radico in last year was 8.22 and in current year it is 6.82 which

shows that the investment in working capital is generating sufficient sale and

working capital utilisation is better.


In Mohan Meakins the ratio is only 5.68 which shows higher investment in

fixed assets, but lower revenue generation capacity.

Page No. 14 of 41

DEBT EQUITY RATIO:

Long Term Debt(h) Debt Equity Ratio = -------------------------------

Equity(Amount in Rs.’000)

Company Year Debt Equity Ratio


2001-02 888569 663751 1.33

2002-03 1004976 736652 1.36

Mohan Meakins Ltd.

2000-01 353424.521 244000.354 1.45

2001-02 405345.435 278607.883 1.45

ANALYSIS

In RADICO, debt component is more than equity shareholder’s find which

shows dependence on borrowed capital and higher interest burden along with

higher beverage, company should bring down its loan by replacing the costly

debt through cheaper loans by taking advantages of lower interest rate regime

of central government.


In Mohan Meakins this ratio is 1.45 which shows higher loan component and

the lower long-term solvency. It may face problem I n arrangement of long

term loans.

Page No. 15 of 41

PROFIT BEFORE INTEREST AND TAX RATIO:

Operating Profit (i) PBIT Ratio = ------------------------------- x 100

Sales(Amount in Rs.’000)

Company YearOperating

ProfitSales Ratio


2001-02 344229 5160011 6.67%

2002-03 383300 5361163 7.14%

Mohan Meakins Ltd.

2000-01 81002.521 2488191.82 3.25%

2001-02 108123.054 2927089.003 3.69%

ANALYSIS:

Operating profit margin of RADICO is 7.14% which shows higher cost of

oprati0ons, which is 92.86% of sale. Company has controlled its raw material

cost; employee’s cost but due to increase in excise duty by 7.16% the

profitability of the company has been adversely affected. The sales has been

increased by 3.89%, the material cost and labour cost has been reduced

by7.7% and 5.5% respectively. It shows that the company has to control the

non-economic expenses like selling and distribution, administration etc.


In Mohan Meakins the situation is worse it is cashing operating profit of only

3.61% which is below the industry standard and it may make default in

payment of Interest.

Page No. 16 of 41

PROFIT BEFORE TAX RATIO:

PBT (i) PBT Ratio = ------------------------------- x 100


Company Year PBT Sales Ratio

Radico Khaitan Ltd.

2001-02 166593 5160011 3.1%

2002-03 234393 5361163 4.27%

Mohan Meakins Ltd.

2000-01 32279.308 248819.182 1.29%

2001-02 62798.259 2927089.003 2.14%

ANALYSIS:

The profitability before tax is 4.27% which is below the expectation and

industry standard, company should try to control the cost related with

operation and finance.


In Mohan Meakins it is only 2.14% which is below the expectation and

shareholders will be dissatisfied because their wealth will decrease due to fall

in share price.

Page No. 17 of 41

PROFIT AFTER TAX RATIO:

PAT (k) PAT Ratio = -------------------------------


Company Year PBT Sales Ratio


2001-02 149093 5160011 2.89

2002-03 185793 5361163 3.46

Mohan Meakins Ltd.

2000-01 779.308 248819.182 0.03

2001-02 40795.030 2927089.003 1.4

ANALYSIS:

This ratio is 3.46%, which is below the industry average. It is even below the

risk free return so shareholders are getting nothing for market risk. Although

company has made some improvement because in last year it was only

2.89%. It shows that despite the increase in sale the overall profit has been

reduced. It is due to financial management and deferred tax provision.


In Mohan Meakins, this ratio is only 1.4%, which indicates that the company is

also under the operational and financial mismanagement. In last year it was

0.03% because company is not making better tax planning and both the

companies require technical upgradation and innovative management

policies.

Page No. 18 of 41

RETURN ON EQUITY / RETURN ON NET WORTH (RONW)

PAT (l) Return on Equity = -------------------------------

Capital Employed (Amount in Rs.’000)

Company Year PATCapital

EmployedRatio


2001-02 149093 663751 22.46

2002-03 185793 736652 25.22

Mohan Meakins Ltd.

2000-01 779308 24400.0354 0.32

2001-02 407950.30 27860.7383 14.64

ANALYSIS:

This ratio is 25.22% in the current year and has been improved from last

year’s 22.46%. It shows that shareholder’s are getting reasonable return.

Large amount has been taken or loan so after tax cost of loan is lower which

is giving benefit to the shareholders.


In Mohan Meakins, in last year it was only 0.32% due to excess provision for

tax. In 2002, it is 14.64% but it is below RADICO Company needs some basis

restructuring regarding operation and finance.

Page No. 19 of 41

RETURN ON CAPITAL EMPLOYED (ROCE)

PBIT (m) Return on capital employed = -------------------------------

Capital Employed (Amount in Rs.’000)

Company Year PBITCapital

employedRatio


2001-02 344229 1552320 22.17

2002-03 383300 1917538 19.98

Mohan Meakins Ltd.

2000-01 81002.521 59742.4875 13.55

2001-02 108123.054 68395.3318 15.8

ANALYSIS:

In RADICO ratio is 19.98 although slightly reduced from previous

year. It shows that there is earning of 19.98 against Rs. 100 invested

as capital, so it will boost the confidence of long term creditors and

shareholder’s because they can get interest as well as dividend.

Company can utilize the amount for retained earnings to increase the

capital base. So the growth rate is possible.


In Mohan Meakins the ratio is 15.8% which shows that capital profitability of

the company is lower and it cannot achieve higher growth rate.

Page No. 20 of 41

INTEREST COVERAGE RATIO:

PBIT (n) Interest coverage Ratio = -------------------------------

Interest(Amount in Rs.’000)

Company Year PBIT Interest Ratio


2001-02 344229 132233 2.6

2002-03 383300 102651 3.73

Mohan Meakins Ltd.

2000-01 81002.521 48723.567 1.66

2001-02 108123.054 45324.795 2.38

ANALYSIS:

The ratio for RADICO is 3.73 although in last year it was only 2.6. It shows

that company is in position to pay the interest. The improvement is due to

reduction in interest burden through redeeming the debt. Company should

increase upto 5 times, so that it can arrange its long-term capital requirement

without any problem. Return on capital employed is more than rate of interest,

so it can increase the leverage, which will increase the shareholders wealth.


In Mohan Meakins the ratio is 2.38 which is not as satisfactory as required

because there may be problem in payment of interest.

Page No. 21 of 41

SIGNIFICANT ACCOUNTING POLICIES

1. Fixed assets

Fixed assets are shown at a cost and interest on borrowed capital taken

for purchase of fixed assets is capitalised. If Company makes revaluation

then the difference is transferred to revaluation reserve, which is as per

accounting standard 9.

2. Depreciation

The cost of leasehold land is written off according to lease. The assets

acquired before 31st March 1974 are charged by written down value

method and acquired after this date straight-line method is used. If assets

are evaluated then straight-line method is used. If the cost of asset is

below 5,000, then depreciation is charged on pro-rata basis. Company is

complying the depreciation rates as specified and companies Act, 1956.

3. Inventories

Finished good & work in progress are valued according to the lower of

cost incurred or net realisable value. Raw material is valued at cost on

weighted average basis, which is in accordance to accounting standard 2.

4. Revenue recognition

Sales are recognised on delivery or at the time of transfer of ownership.

Trade discounts are deducted from sales and export income is recognised

on accrual basis. Similar treatment is given for expenses also.

Page No. 22 of 41

5. Treatment of Employees Benefits

Company makes regular provisions for provident fund, pension fund,

gratuity fund, which are charged to the profit and loss account. The leave

encashment is on actual basis.

6. Foreign Currency Transaction

Fixed assets are converted at historical exchange rate, current assets and

current liabilities at closing exchange rate. If there is any foreign loan

liability taken to acquire fixed assets then exchange difference is

transferred to assets account. The exchange gain or loss in the trial

balance is charged to revenue account.

Page No. 23 of 41

ACCOUNTING POLICIES

1. Changes in accounting policies

(a) IAS GAAP:

Changes in accounting policies are applied retrospectively, unless the amount

of any resulting adjustment that relates to prior periods is not reasonably

determinable. Resulting adjustments are reported as an adjustment to the

opening balance of retained earnings. Comparative information is restarted

unless it is impracticable to do so. However, when the amount of the

adjustment to the opening balance of retained earnings cannot be reasonably

determined then the changes in accounting policy are applied prospectively.

(b) US GAAP:

The effect of changes in accounting policies is separately disclosed in the

profit and loss account. Prior year figures are not restated.

2. Inventory valuation

(a) IAS GAAP:

Inventories are valued at lower of cost and net realisable value. Apart from

FIFO and weighted average, LIFO is also allowed provided there is disclosure

of the lower of -----

(i) net realisable value; and

(ii) FIFO, weighted average or current cost

Page No. 24 of 41

(b)US GAAP:

Inventories should be stated at lower of cost or market except in certain

exceptional cases when it might be stated above cost. In cases such as

precious metals having a fixed monetary value with no substantial cost of

marketing is involved, inventories may be stated at such monetary value. Cost

of inventory may be determined under any of several assumptions as to the

flow of cost factors (e.g. FIFO, LIFO, and average cost).

3. Depreciation

(a) IAS GAAP::

Depreciation rates are based on the useful economic lives of the assets (i.e.,

useful lives are prescribed and depreciation rates are to be derived from

there).

(b) US GAAP:

Similar to IAS requirements

4. Fixed Assets

(a) IAS GAAP:

Carried at historical cost. Capitalisation of exchange differences arising on

repayment of liabilities incurred for the purpose of acquiring fixed assets is not

permitted.

(b) US GAAP:

Carried at historical cost. Exchange differences on repayment of loan for the

purpose of acquiring fixed assets are expensed when incurred.

Page No. 25 of 41

5. Revaluation of fixed assets

(a) IAS GAAP:

Permitted (both upward and downward) by creation of revaluation reserve.

Revaluation reserve not available for distribution as dividend.

(b) US GAAP:

Only downward revaluation is permitted.

6. Revenue recognition

(a) IAS GAAP:

As per AS 9, revenue is to be recognised when significant risks and rewards

of ownership have been transferred and no significant uncertainly exists as to

collection. Accrual basis is followed.

(b) US GAAP:

Revenue recognition requires particular scrutiny when companies prepare

their accounts under US GAAP, as there are numerous rules for specific

situations. Generally accrual basis is followed.

7. EPS

(a) IAS GAAP:

Basic (Undiluted) and diluted EPS to be disclosed on the face of the income

statement with equal prominence. Only preference dividend is to be deducted

from net profit or loss for EPS computations.

Page No. 26 of 41

For determining whether potential equity shares are dilative or not, the

following items are to be excluded from net profit.

Preference dividend

Extraordinary items

Items relating to discontinued operations

Effects of changes in accounting policies and correction of fundamental

errors.

(b) US GAAP:

Presentation of basic EPS is required. For entities with complex capital

structures, diluted EPS is also required to be presented.

8. Investments- debt and equity securities

(a) IAS GAAP:

Current investments are valued at lower of cost and market value. Long term

investments are valued at cost, at revalued amount, or for marketable equity

securities at lower of cost or market on a portfolio basis. Permanent

diminution in value of investment to be measured and recognised on an

individual basis.

(b) US GAAP:

Debt and equity securities are classified as:

(i) trading

(ii) held to maturity

Page No. 27 of 41

(iii) available for sale

Trading securities are held at market value and profits and losses arising from

revaluation are taken to profit and loss account.

Securities held to maturity are states as cost and adjusted for any

amortization of premium or discount and subject to diminution in value.

Available for sale securities is reported at market value. Net realized gains

and losses thereon are excluded from earnings and are reported as a

separate component of shareholder equity.

Page No. 28 of 41

SEGMENT REPORTING

As per AS-17, company has liquor business and there are product groups

like rectified spirit, country liquor, IMFL (Indian made foreign liquor). All

product groups have similar risk and return. It is not practically possible to

calculate the sales, profit, segment assets and segment revenue, so

company has not made full disclosure and combined profit & loss have

been calculated since the company is operating only in the domestic

sector and export sale is less than 10% of total sales. So separate

geographical reporting has not been made.

Page No. 29 of 41

Common size ratio (BALANCE SHEET)

radico khaitan ltd.

200303 200203SOURCES OF FUNDS :

Share Capital 11.08 9.91Reserves & Surplus 31.22 32.84Total Shareholders Funds 42.3 42.76

Secured Loans 38.68 40.32Unsecured Loans 19.02 16.92Total Loan Funds 57.7 57.24

Total Funds Employed 100 100

APPLICATION OF FUNDS :

Gross Block 70.37 64.32Less : Accumulated Depreciation

23.88 22.17

Net Block 46.49 42.14Capital Work in Progress 0.59 0.3Total Fixed Assets 47.07 42.44

Investments 5.11 5.74

Inventories 9.85 13.98Sundry Debtors 28.71 23.64Cash and Bank Balance 2.72 2.78Loans and Advances 31.56 24.63Total Current Assets, Loans & Advances

72.84 65.03

Less :Current Liabilities 35.12 22.37Provisions 2.73 2.25Total Current Liabilities & Provisions

37.85 24.62

Net Current Assets 34.99 40.41

Miscellaneous Exp. not w/off 12.83 11.41

Total Assets 100 100

Page No. 30 of 41

COMMON SIZE RATIO ( BALANCE SHEET)

MOHAN MEAKINS LTD.

200203 200103SOURCES OF FUNDS :

Share Capital 6.21 7.11Reserves & Surplus 34.52 33.73Total Shareholders Funds 40.74 40.84

Secured Loans 40.21 40.07Unsecured Loans 19.05 19.08Total Loan Funds 59.26 59.16

Total Funds Employed 100 100

APPLICATION OF FUNDS :Gross Block 75.42 79.81Less : Accumulated Depreciation 51.92 55.34Net Block 23.5 24.47Capital Work in Progress 1.99 1.94Total Fixed Assets 25.49 26.41

Investments 0.72 1.14

Inventories 58.8 56.14Sundry Debtors 59.61 61.95Cash and Bank Balance 7 9.61Loans and Advances 23.04 22.33Total Current Assets, Loans & Advances

148.46 150.03

Less :Current Liabilities 70.7 70.57Provisions 3.96 7.01Total Current Liabilities & Provisions

74.66 77.59

Net Current Assets 73.8 72.45

Miscellaneous Exp. not w/off 0 0

Total Assets 100 100

Page No. 31 of 41

COMMON SIZE RATIO (PROFIT AND LOSS ACCOUNT) RADICO KHAITAN LTD.

200303 (12) 200203 (12)

INCOME :

Sales Turnover 100 100

Other Income 0.49 0.67

Stock Adjustments -0.19 0.97

Total Income 100.29 101.64

EXPENDITURE :

Raw Materials 10.13 12.61

Excise Duty 49.65 48.09

Power & Fuel Cost 2.65 3

Other Manufacturing Exp. 12.67 13.33

Employee Cost 3.19 3.5

Selling and Administration Exp. 13.13 12.32

Miscellaneous Exp. 2.05 2.3

Less : Preoperative Exp. Capitalised

0 0

PBIDT 6.81 6.49

Interest & Financial Charges 1.58 2.38

PBDT 5.24 4.11

Depreciation 0.86 0.88

PBT 4.37 3.23

Tax 0.91 0.34

PAT 3.47 2.89

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Common size( Profit & loss account)

mohan meakins ;td.

200203 (12) 200103 (12)

INCOME :

Sales Turnover 100 100

Other Income 2.63 3.4

Stock Adjustments 1.69 0.78

Total Income 104.32 104.18

EXPENDITURE :

Raw Materials 25.8 32.66

Excise Duty 31.19 14.6

Power & Fuel Cost 7.09 8.68

Other Manufacturing Exp. 12.87 14.6

Employee Cost 10.07 11.28

Selling and Administration Exp. 8.97 11.06

Miscellaneous Exp. 3.68 6.89

Less : Preoperative Exp. Capitalised

0.1 0.08

PBIDT 4.76 4.49

Interest & Financial Charges 1.65 2.05

PBDT 3.11 2.45

Depreciation 0.96 1.15

PBT 2.15 1.3

Tax 0.75 1.27

PAT 1.39 0.03

Page No. 33 of 41

COMMON SIZE RATIOS (BALANCE SHEET)

1. Capital structure of the company consists of 42.76% of shareholder’s fund

and 57.24% long term loans, which shows that the loan component is

more. 50 company is more dependent on outsiders, which will increase

the interest burden. The share capital is 9.91% and reserve is 32.84%,

which shows satisfactory capitalisation rate. In previous year composition

of capital structure was similar upto some extent and there is no significant

change.

In Mohan Meakins the loan component is 59.16% and shareholder’s fund

is 40.84%. It shows higher dependence on loan fund capital structure is

more or less equal in both the years.

2. Fixed Assets of the company are lower than current assets; net fixed

assets are 42.14%. On the other hand total current assets are 65.03%.

Major current assets are debtors and loan and advances. It shows that

higher amount of working capital is used and company has balanced

asset composition. Current liabilities are 24.62% so net current assets are

40.41%, which shows higher blockage of amount in the form of debtors

and loans & advances. In last year fixed assets were 23.5% and capital

work in progress was 1.99%. There is no significant change in fixed asset

structure.

In Mohan Meakins the net fixed assets are 24.47% but total current assets

are 150.03%. It shows higher amount of involvement in inventories,

debtors and loans & advances. It is a negative sign, because the working

capital structure is imbalanced. Net current assets are 72.45% which

reflects that some part of long term funds have been used to finance the

current assets which is against the business norms. In last year total fixed

assets were 25.49% & current year 26.41%, which is not a significant

change.

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COMMON SIZE RATIO – (PROFIT & LOSS ACCOUNT)

The total income has been distributed in raw material, excise duty, other

manufacturing expenses, selling and administration expenses; major part is

excise duty, which is 49.65% of total income. Although raw material cost is

lower and it is 10.13% No capitalisation of any expenditure is made. The cost

of restructuring has increased the PAT which is 3.47%. Although in last year it

was 2.89%. The cost structure of the company is balanced but ther is some

thing not well with the excise duty because it is only 14.6% in Mohan Meakins.

Company should change the product mix to control the excised duty. Last

year the raw material was 12.61%, excise duty 48.09%, manufacturing

expense 13.33%, selling and distribution 12.32%. All the expenses have been

reduced except excise duty and selling and distribution expenses. Interest

burden has been reduced to 2.38% from 1.58%.

In Mohan Meakins, the cost of raw material is 32.66%, which is higher than

RADICO. It has higher cost of manufacturing, employee, selling and

administration expenses which is too much and the profit after tax is only

0.03% which will demoralize the shareholdr’s as well as long term creditors. It

requires the implementation of cost reduction programmes, otherwise it will be

in red category. The raw material cost has been reduced proportionately but

there is no significant change in other expenses. Interest &financial charges

have been reduced from 2.05% to 1.65%. Since large amount of fixed assets

were not required so the depreciation has been reduced from 1.15% to

0.96%. But overall the situation has been slightly improved but not upto the

desired extent.

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TREND ANALYSIS

Share Capital (Rs. In Million)

Years 1999-00 2000-01 2001-02 2002-03

Radico khaitan ltd. 142.24 142.24 153.93 192.9

Mohan meakins ltd. 42.5 42.5 42.5 42.5

Sales & Other Income

Years 1999-00 2000-01 2001-02 2002-03

Radico khaitan ltd. 1920 2422 4805.39 6208.63


Page No. 36 of 41

Profit After Tax

Years 1999-00 2000-01 2001-02 2002-03



Earnings per share (in Rs.)

Years 1999-00 2000-01 2001-02 2002-03



Page No. 37 of 41

Share holder's fund

Years 1999-00 2000-01 2001-02 2002-03

Radico khaitan ltd. 462 524 535 812


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CASH FLOW STATEMENT

Company has prepared cash flow statement as per accounting standard 3

and has presented the cash flow statement in 3 main categories.

(i) Cash flow from Operating Activities:

The main sources of cash profits are depreciation, and loss on sale of assets.

Interest burden has been reduced by 22.5%. The operating profit has been

increased by 30% when shows company had made no cash from business

operation, the company has purchased more inventories in the current year

as well as paid back its short term loans, so the cash flow from working capital

change is negative. The stock has been increased by 110% total cash

generated by operating activity has been increased by 147% which shows

that company has earned large amount of cash profit. Increase in stock may

increase the carrying cost.

(ii) Cash flow from INVESTING ACTIVITIES:

Company has sold fixed assets and amount has been used for repayment of

long-term loans, no fresh investments have been made. The interest and

dividend income has been reduced by more than 100%, which shows

company has made restructuing of its loan and fixed assets

(iii) Cash flow form FINANCING ACTIVITIES:

Company has issued new shares as well as taken large amount of secured

loan, which has been used to pay off unsecured loans.

The cash out flow in current assets and current liabilities has been

financed through cash profit and some part of fixed assets has

Page No. 39 of 41

been sold in capital restructuring. Cash inflow from financing

activity has been used to pay off the long-term loans, which is

necessary to reduce the interest burden. Overall cash balance has

been reduced from Rs. 11509 thousand to Rs. 4332 thousand. It

shows that the company requires more cash balance to increase

the liquidity.

Page No. 40 of 41

INTEGRATED ANALYSIS

RADICO KHAITAN LTD is the Flagship Company of the KHAITAN

GROUP. It is producing some flagship brands like Contessa Rum, Black

Cat, White field, 8 PM whiskyand Readyto drink products like breezers

and coolers. At the upper end company has made joint ventures and

distributorship of foreign brands. Company has registered a growth of 30%

of sales on Annualised Basis and it has got A1 + rating from ICRA.

Company has spent over Rs. 200 million in technological upgradation. It is

going to launch ENA Deluxe new brand companyhas acquired Abhishek

Cements Ltd in 1997. Directors have declared equity dividend of 18% in

the current year. India is a growing economy and there is scope for Indian

made foreign liquor. There is market of around Rs. 120 billion but future

prospects are bright although there are threats from foreign multinational

companies, but company has strong fundamentals. It is a growing

company and financial performance is satisfactory, but it needs

fundamental restructuring because it can survive only if it cuts the cost.

Company has good relationship with shareholder’s, long term creditor’s

suppliers and business partners.

In partners the competitor Mohan Meakin’s, is not doing well regarding

profitability, working capital management and its shareholders as well as

long term creditor’s both are dissatisfied. The degree of risk in Mohan

Meakin is greater than RADICO. Investors will prefer radico. Similarly, the

credit rating of RADICO is better than Mohan Meakins. The long term

return to shareholders is higher in RADICO, so its share prices will

increase which will increase the wealth of shareholders, because it is

operating at a concept of wealth maximisation.

Page No. 41 of 41

A Project

On

ANALYSIS OF FINANCIAL STATEMENTS OF

RADICO KHAITAN LTD.

Submitted to:Mr. SANJEEV SINGHAL

Submitted by:CHANDAN BALUJAMSC IBM, SECTION-B

ROLL NO.51

FORE SCHOOL OF MANAGEMENTNEW DELHI

Page No. 42 of 41

ACKNOWLEDGEMENT

The successful completion of this project is the result of help

extended by all those people who helped me to gather the relevant

information and data required for the completion of the assigned

project.

I express my sincere gratitude to Mr. Sanjeev Singhal who has

shown me the view and the way to achieve it.

Without thus help and cooperation, I would not have been able to do

my project so successfully.

Page No. 43 of 41

TABLE OF CONTENTS

Commentary on Chairman Review 1

Commentary on Director’s Report 2

Commentary on Corporate Governance 3

Commentary on Auditors Report 4

Analysis of Balance Sheet 5

Analysis Profit and Loss Accounts 7

Ratio Analysis 8

Significant Accounting Policies 22

Accounting Policies in Comparison to IAS and US GAAP 24

Segment Analysis 29

Common size Ratio of Balance Sheet 30

Common Size Ratio of Profit and Loss Account 32

Analysis of Common Size Statement 34

Trend Analysis 36

Analysis of Cash Flow Statement 39

Integrated Analysis 41

Page No. 44 of 41

Page No. 45 of 41

Finance Statement Raidco Khaithan

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