Titan Company Ltd.Incorporated in 1998, IGL took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited). The project was started to lay the network for the distribution of natural gas in the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. With the backing of strong promoters GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) IGL plans to provide natural gas in the entire capital region. The two main business objectives of the company are - To provide safe, convenient and reliable natural gas supply to its customers in the domestic and commercial sectors. To provide a cleaner, environment-friendly alternative as auto fuel to Delhis residents. This will considerably bring down the alarmingly high levels of pollution. The transport sector uses natural gas as Compressed Natural Gas (CNG), the domestic and commercial sectors use it as Piped Natural Gas (PNG) and R-LNG is being supplied to industrial establishments.

Input the 5-year annual reports in the formats and attempt the financial projections for the next two years

Draw The Business Model of the company and explain the determinants of the cost sheet using basics defined by Goldratt.Business StructureValue CreationCustomers

Indraprastha Gas Ltd (IGL) is a city gas distribution(CGD) company, operating in the national capital territory (NCT) region of Delhi.Indraprastha Gas Ltd (IGL) is the sole supplier of compressed natural gas (CNG) and piped natural gas (PNG) in the national capital territory (NCT) region of Delhi..markets of Delhi, Greater Noida, Ghaziabad, Sonepat and Panipat

Through Put:YearMar-10Mar-11Mar-12Mar-13

Gross Sales1222.631968.962812.453744.69

Contribution555.85751.21978.491195.67

ThroughPut45.46%38.15%34.79%31.92%

From above it has been seen that throughput kept reducing from 2010 to 2013, this is due to the rise in production cost which has ultimately increased the prices of CNG and as well as PNG. As the CNG and PNG prices are rising there has been a decline trend in the throughput. We will see an upward trend in the coming years.Operating Expense:YearMar-10Mar-11Mar-12Mar-13

Gross Sales1222.631968.962812.453744.69

Fixed Cost37.0131.0946.0155.94

Depreciation77.45102.87143.21186.66

Operating Expense9.36%6.80%6.72%6.47%

Indraprastha Gas Ltd is working well towards bringing it operating expense down. Over the last four years we can see that the operating expense has been dropping every year, from 9.36% in 2010 Indraprastha Gas Ltd has successfully reduced their operating expense to 6.47% by 2013.

Inventory:YearMar-10Mar-11Mar-12Mar-13

Gross Sales1222.631968.962812.453744.69

Inventories29.4135.9037.3839.65

Cash and Bank121.2517.3131.9950.96

Sundry Debtors33.4974.48129.80178.86

Trade Payables121.68142.57179.25211.52

Other Current Liabilities4.5094.92375.87391.63

Inventory10%11%12%14%

Inventory or the money required to keep the business operational has been increasing over the year. This is due to the expansion plan that the company is working on. Every year several new stores are being added to the Indraprastha Gas Ltd.

Define the profit Model to which the business belongs (The Slywotzky framework)Titan Company follows Pyramid Profit of Slywotzky Framework. It has a different brand that caters to different segment i.e. from mass to niche.

The base of the pyramid consists of low-priced high-volume products such as Sonata, Gold Plus, Eye+, while the apex is made up of high-priced low-volume products like Zoya. The bulk of profitability is concentrated at the top of the product pyramid, but the base plays a strategic role -- often through a "firewall" brand -- in protecting the profitability at the top.

Explain the competitive position of the company using Porters model From Porters Five Force model we can seethat Titan has a strong Bargaining PoweroverSuppliers & being a domestic marketleader in watch segment it has also powerover buyers.Titan holds a major share inMid market& Mass market with brandslike Titan, Zoop, Fast track& Sonata whichindicates it has no stiff competition & threatof new entrants in Mid & Mass market.Thus Titan has a Competitive advantageoverothers.Porter Five Force Model

Evaluate the company on the four tenets of Buffett.Business TenetsIs the business simple and understandable?Buffett believes in investing in companies within your circle of competence. When you investoutside this circle, you risk not understanding the business. When you dont understand thebusiness, you cant understand what drives its success and what threatens it with failure.You must be convinced that the business you are buying will perform well over time, and the only way to be convinced of this.Does the business have a consistent operating history?Buffett buys businesses for the long run. Because no one can predict the future, he uses historical performance as a reasonable proxy for the future. If the company has been able to weather storms in the past and perform consistently in different operating environments, then it will likely continue to do so in the future. Stay away from companies that have not been consistent in the past and are in the midst of changing strategic direction, as this removes your ability to be confident in the companys future.Does the business have favourable long-term prospects?Favourable long-term prospects depend on the companys long-term competitive advantage. Buffett calls this the moat which franchise businesses have. You are looking for companies with products or services that (1) are needed or highly desired, (2) have no close substitute and (3) are not regulated. You might also want to consider how the company stacks up to Porters Five Forces, which help determine its level of market power. The bigger the companys moat, the more sustainable its franchise.

Management TenetsManagement TenetsIncorporated in 1998, IGL took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited). The project was started to lay the network for the distribution of natural gas in the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. With the backing of strong promoters GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) IGL plans to provide natural gas in the entire capital region. The two main business objectives of the company are - To provide safe, convenient and reliable natural gas supply to its customers in the domestic and commercial sectors. To provide a cleaner, environment-friendly alternative as auto fuel to Delhis residents. This will considerably bring down the alarmingly high levels of pollution. The transport sector uses natural gas as Compressed Natural Gas (CNG), the domestic and commercial sectors use it as Piped Natural Gas (PNG) and R-LNG is being supplied to industrial establishments.Value TenetsIn 2010-11, sales were 1222.63 crores and net profit after tax was 215.49 crores. The Compound Annual Growth Rate over the last five years is 30% in sales and 18% in net profit after tax. Indraprastha Gas Ltd is the leader in the supply of CNG and PNG in the market for the last 10 years. Business TenetsIndraprastha Gas Limited (IGL) is engaged in retail gas distribution business for supply of compressed natural gas (CNG) to transport sector and piped natural gas (PNG) to domestic, industrial & commercial sectors in Delhi and National Capital Region. It is also engaged in the manufacture CNG. IGL is a joint venture between GAIL (India) Limited and Bharat Petroleum Corporation Limited. IGL had a network of 308 stations for supply of CNG as on March 31, 2012, which included 258 stations in Delhi and 50 stations in National Capital Region. During the fiscal year ended March 31, 2012 (fiscal 2012), the Company sold 937.55 million standard cubic meters of CNG and 282.45 million standard cubic meters of PNG. As of March 31, 2012, the Company was providing CNG to over 5, 50,000 vehicles, PNG to 3,30,000 domestic households and around 860 commercial and industrial customers. In June 2013, Indraprastha Gas Ltd acquired a 50% interest in Central UP Gas Co Ltd.Financial TenetsAnalyzing the company statements led to several interesting discoveries. The companys total debt has increased from 79.80 cr of in 2010 year to 780.27cr in 2013 The Reserves & Surplus has increased 97% from 685.45 crores in 2010 to 1352.99crores in 2013. Sales of the company have been increasing. Net profit has increased 18% from 215.50 crores to 354.13 crores. Net profit margin has decreased from 18% to 9%. The Proposed Dividend forms 24% of Net Profit as compared to 22% for the previous year.

Using Dhandho Investor basics explain the business arbitrage. What is the price at which you would buy this stock? Further, given Rs.1.0 mn, how much money would you put in this stock using Kellys formula for best and worst case returns?Lets assume you were offered the following odds on a $1 bet: 80 percent chance of winning $21.00 10 percent chance of winning $7.50 10 percent chance of losing it all(0.8 $21) + (0.1 $7.50) + (0.1 $1) = $17.45Edge/odds = 17.45/21 = 0.83 = 83%

Use Magic Formula and identify the stock that you would buy from the sector in which the company as assigned to you.1. Establish a minimum market capitalization (usually greater than $50 million).2. Exclude utility and financial stocks3. Exclude foreign companies (American Depositary Receipts)4. Determine companys earnings yield = EBIT / enterprise value.5. Determine companys return on capital = ebit / (net fixed assets + working capital)6. Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital (ranked as percentages).7. Invest in 2030 highest ranked companies, accumulating 23 positions per month over a 12-month period.8. Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.9. Continue over a long-term (35+ year) period.Explain FCFE and FCFF and there linkage using the data of the company! Using the ValuePro valuation framework define the intrinsic value of the stock for the company. Explain the diverse range of value across scenarios. Distinctly assign various components of value? Explain the value assigned to growth?

Explain whether you would invest in this stock based on CANSLIM principles?CANSLIM: A system for selecting stocks created by Investor's Business Daily founder William J. O'Neil. Each letter in the acronym stands for a key factor to look for in a company.The seven-part criteria is as follows:C - Current quarterly earnings per share have increased sharply from the same quarters' earnings reported in the prior year. (Beware of items in financial statements that can cause earnings distortions.)QuarterDec-09Dec-10Dec-11Dec-12Dec-13

EPS0.851.551.852.31.86

CAGR

22%

The CAGR of last 5 years quarter has 22%. This indicates that the company has been growing at the rate of 22% over the last five years.The EPS has dropped in the last quarter due to the changes in the Gold import policies.

A - Annual earnings increase over the last five years.Mar-13Mar-12Mar-11Mar-10Mar-09

8.176.764.852.821.79

CAGR

0.46

N - New products, management, and other new events. In addition, the company's stock has reached new highs.SKINNHelmetEncircle Card

S - Small supply and large demand for a stock creates excess demand, and an environment in which stock prices can soar. A company acquiring their own stock reduces market supply and can indicate their expectation of future profitability. Look for low debt-equity ratios.

L - Choose leaders over laggard stocks within the same industry. Use the relative strength index as a guide.

I - Pick stocks who have institutional sponsorship by a few institutions with recent above average performance. Be cautious of stocks that are over owned by institutions.

M - Determining market direction by reviewing market averages daily.

Compare the performance of the company with any of the competition over the same time period. Which business is better and how much would you pay more for the one that is better?