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FINANCIAL

MANAGEMENT
RELIANCE
INFASTRUCTURE
LIMITED

1
Objective: The objective of our project is to apply the
various tools we have learned in the course of Financial
Management II on the financial reports of Reliance
Infrastructure and analyze the company statistics.

Methodology:
In this project we have tried and used the various tools
learned like Ratio analysis, Fund Flow, Cash flow analysis,
Capital structure and its implication.

Background:
Reliance Infrastructure

Anjana Khanduri
Reliance Infrastructure Ltd is one of the India’s largest private sector enterprises in
power utility. In the power sector it is involved in generation, transmission,
distribution and trading of electricity and constructing power plants as EPC partners.
In the infrastructure space the company is focused on roads, urban infrastructure
which includes MRTS, Sea link and Airports, Specialty Real Estate which includes
business districts, trade towers, convention centre and SEZ which includes IT & ITES
SEZ and non IT SEZ as well as free trade zones.

2
Business Overview

Power Business EPC Business Infrastructure


business

Generation Power sector Roads

Transmission Road sector Metros

Distribution Airport

Trading Real Estate /SEZs

Competitor analysis
Top infrastructure companies of India

1. HCC Infrastructure: HCC Infrastructure Ltd. is a wholly owned subsidiary of


HCC Ltd with infrastructure projects in the transportation (viz, roads, bridges,
ports, airports). Mainly operating through the public-private partnership
route, this player has huge scope. Over US $250 billion needs to be imbibed
through varied investments in the infrastructure sector in the next five years
(Rs in Lakhs)

Quarter ended 30 Sep, Quarter ended 30 Sep,


Particulars
2009 2008
Total Income from
86,220.82 69,771.12
operations
Net Profit 551.49 1994.35

2. Maytas Infra Limited: This leading player in the infrastructure segment has
more than 20 years of experience in infrastructure development, construction
and project management.

(Rs in Crores)

3
Particulars Year ended 31 Mar, 2009 Year ended 31 Mar, 2008
Turnover 1335 1637
Net Profit/Loss (-) 489.79 99.64

3. Patel Engineering: This Indian infrastructure company has handled building


bridges to dams to highways and varied other infrastructure projects.
(Rs in Crores)
Quarter ended 30 June, Quarter ended 30 June,
Particulars
2009 2008
Net Sales/ Income from
643.00 558.39
operations
Net Profit 36.34 29.12

4. Reliance Infrastructure: It is India's largest private sector power utility


enterprise and has been the pioneer in the Indian infrastructure sector.

(Rs in Crores)

Particulars Year ended 31 Mar, 2009 Year ended 31 Mar, 2008


Total operating income 9868.61 6448.42
Profit after tax 1138.88 1084.63

5. Punj Lloyd: This Company is a diversified conglomerate, which has forayed


into aviation, defense, real estate and marine. With integrated design, and
management services for infrastructure projects like roads, highways,
flyovers, bridges, elevated railroads, metro rail, underground tunnels,
seaports and airport terminals, this company has stood up the test of time.

(Rs in Crores)

Quarter ended 30 Sep, Quarter ended 30 Sep,


Particulars
2009 2008
Income from operations 3769.92 3120.11
Profit after tax 110.60 172.15

6. GMR Infrastructure: With interests in the Airports, Energy, Highways and


Urban infrastructure (including SEZ) sector, GMR Group has been the pioneer
in the core infrastructure areas.

(Rs in Lakhs)

Quarter ended 30 June, Quarter ended 30 June,


Particulars
2009 2008
Revenue from operations 1748 5544
356 4189
Net Profit
4
CAPITAL STRUCTURE and DIVIDEND POLICY

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
Equity Share
Capital 185.61 212.36 228.57 235.62 226.07
5,009.0
debt 3,738.67 4,266.93 5,858.32 4 7,332.18
interest paid 134.82 191.88 250.32 308.76 330.5
0.06164
interest rate 0.036060952 0.044969 0.042729 1 0.045075
10,024.
Reserves 4,834.10 6,820.51 8,412.74 16 10,308.14
15,268.
total 8,758.38 11,299.80 14,499.63 82 17,866.39

Data Values
Covariance of BSE and Reliance 0.027066864
variance 0.008824014
Beta of stock 3.067409387
market return monthly 0.015419002
annual return 0.185028029
Risk free return 0.07
require rate of return 0.422838056
weighted cost of capital 0.280176117

As per the above table its clear that if the company would employ equity as
a cost of fund only if it is sure to earn more than 42%.

The cost of debt in case of reliance is only 4.2%.

5
The cost of equity and debt explains two things.

1) CAPITAL STRUCTURE
2) DIVIDEND POLICY

Capital Structure

Figure 1: EQUITY DEBT IN RELIANCE INFRASTRCTURE

Mar '05 Mar Mar Mar Mar


'06 '07 '08 '09
TIME

Equity Share 185.61 212.36 228.57 235.62 226.07


Capital(crore
s)

Total 3,738.67 4,266. 5,858. 5,009. 7,332.


Debt(Crores) 93 32 04 18

Over a period of time the total debt of reliance infrastructure has risen
considerably as compared to equity share capital. The rise in debt in 2009
has been almost 47% as compared to the previous year. The substantial rise
in debt increases the leverage and risk for the company. But the substantial
rise in debt could be attributed to the cost of debt as compared to equity.

The increase in substantial debt over a period of time has also increased the
cost of debt for the company from 4.2% to 6.2 % due to more leverage. This
could be explained by Walter and Gordon model of capital structure model

6
Dividend paid by reliance infrastructure:

Date DIVIDEND Price one day Price after dividend


PAID before announcement

15-Sep- $ 3.20 Cash 190 224


04

5-Sep-05 $ 3.20 Cash 258 386

21-Mar- $ 3.50 Cash 357 378


07

4-Jun-08 $ 3.50 Cash 806 975

13-Aug- $ 3.50 Cash 1101 1024


09

DIVIDEND POLICY :

The dividend pay out by the company is almost on a constant basis and has
increased in the period of 2007 and constant till 2009. The constant
dividends pay out shows that the company does not want to retain equity as
it cost them more than Debt.

The dividend payout on respective days also displays how investors react to
the dividend pay out of a company. As the company has announced the
dividends the day on which dividends were given shows a tremendous price
gain as compared to the prices of the previous day.

In a market investors have there own estimation of the prices and as a


company announces dividend the price of share price get adjusted as per
speculations of investors. A jump in price shows that the dividends
announced were as per investor’s expectation. In most of the cases the
share prices of Reliance Infrastructure has gone up except in the year 2009
were the share prices dropped.

7
Financial ratios

Investment valuation Ratios

Face Value 10 10 10 10 10

Dividend Per Share 4.7 5 5.3 6.3 7

Operating Profit Per Share (Rs) 36.24 35.99 21.75 22.82 19.22

Net Operating Profit Per Share 223.99 186.7 251.72 268.76 426.42
(Rs)

Free Reserves Per Share (Rs) 227.62 292.31 339.74 371.2 396.55

Bonus in Equity Capital 4.35 3.8 3.53 3.43 3.57

Profitability Ratios

Operating Profit Margin(%) 16.18 19.27 8.64 8.49 4.5

Profit Before Interest And Tax 4.32 7.66 3.98 4.45 1.78
Margin(%)

Gross Profit Margin(%) 19.01 25.52 15.18 4.96 1.96

Cash Profit Margin(%) 22.36 23.63 16.15 11.41 8.93

Adjusted Cash Margin(%) 17.9 23.83 12.71 11.41 8.93

Net Profit Margin(%) 11.64 14.39 12.43 15.34 10.73

Adjusted Net Profit Margin(%) 7.18 14.58 8.99 15.34 10.73

Return On Capital 5.41 7.91 6.56 6.56 6.22


Employed(%)

Return On Net Worth(%) 9.31 9.13 9.27 10.57 10.81

Adjusted Return on Net Worth 6.39 9.37 6.71 5.69 6.67

8
(%)

Return on Assets Excluding 4.24 4.45 4.34 5.32 4.55


Revaluations

Return on Assets Including 4.51 4.69 4.51 5.5 4.66


Revaluations

Return on Long Term Funds 5.85 9.04 9.45 9.67 9.66


(%)

Liquidity And Solvency Ratios

Current Ratio 3.58 2.09 1.51 1.06 0.75

Quick Ratio 3.75 4.07 3.82 2.37 1.45

Debt Equity Ratio 0.74 0.61 0.68 0.49 0.7

Long Term Debt Equity Ratio 0.72 0.42 0.16 0.06 0.14

Debt Coverage Ratios

Interest Cover 3.75 5.44 4.47 3.41 3.65

Total Debt to Owners Fund 0.74 0.61 0.68 0.49 0.7

Financial Charges Coverage 7.3 6.88 4.76 4.13 4.25


Ratio

Financial Charges Coverage 8.41 6.57 5.16 5.23 5.19


Ratio Post Tax

Management Efficiency Ratios

Inventory Turnover Ratio 11.48 11.4 18.77 40.26 55.96

Debtors Turnover Ratio 5.95 3.92 5.35 5.26 6.71

Investments Turnover Ratio 31.27 19.6 32.87 40.26 55.96

Fixed Assets Turnover Ratio 1.85 1.86 2.56 0.99 1.4

Total Assets Turnover Ratio 0.45 0.35 0.4 0.4 0.52

Asset Turnover Ratio 0.8 0.73 0.98 0.99 1.4

9
EARNINGS RATIOS

Earnings per share ratio (EPS Ratio)


It is a small variation of return on equity capital ratio and is calculated by
dividing the net profit after taxes and preference dividend by the total
number of equity shares.
Formula of Earnings Per Share Ratio:
[Earnings per share (EPS) Ratio = (Net profit after tax − Preference
dividend) / No. of equity shares (common shares)]
Significance:
The earnings per share is a good measure of profitability and when
compared with EPS of similar companies, it gives a view of the comparative
earnings or earnings power of the firm. EPS ratio calculated for a number of
years indicates whether or not the earning power of the company has
increased.
Analysis:
Going by the EPS ratio of the various companies and comparing it with the
industry average we find that Reliance has been profitable since 2005 and
displays a high earning power as compared to other companies.
Dividends per Share: DPS
The DPS ratio is very similar to the EPS: EPS shows what shareholders earned
by way of profit for a period whereas DPS shows how much the shareholders
were actually paid by way of dividends. The DPS formula is:

Dividends paid to equity shareholders/Average


Dividends per number of issued equity shares
=
share

,Significance : Increase in the dividend are taken to be a sign that the


management is confident that the new level can be maintained or improved
on.

Analysis: As from the DPS of Reliance an increasing trend can be observed


which shows the confidence of the firm in its operations which it believes can
10
be maintained and even improved on. Moreover the value is more than the
other companies in the industry sector which shows its potential to lure more
investors as compared to other companies.

SOLVENCY OR LEVERAGE RATIOS

The solvency or leverage ratios throws light on the long term solvency of a
firm reflecting it’s ability to assure the long term creditors with regard to
periodic payment of interest during the period and loan repayment of
principal on maturity or in predetermined instalments at due dates. There
are thus two aspects of the long-term solvency of a firm.

a. Ability to repay the principal amount when due


b. Regular payment of the interest.

The ratio is based on the relationship between borrowed funds and owner’s
capital it is computed from the balance sheet, the second type are
calculated from the profit and loss a/c.

Cash Debt Coverage Ratio

The cash debt coverage ratio shows the percent of debt that current cash
flow can retire.

Formula to calculate cash debt coverage ratio:


Cash Debt Coverage = (cash flow from operations - dividends) / total
debt.

Significance:

A cash debt coverage ratio of 1:1 (100%) or greater shows that the company
can repay all debt within one year.

Analysis:

Reliance has consistently maintained a cash debt ratio of more than 1 since
2005. Company wise analysis shows that it is less than the industry sector
average.

Fixed-Charge Coverage Ratio

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A ratio that indicates a firm's ability to satisfy fixed financing expenses, such
as interest and leases.

Formula of Fixed-Charge Coverage Ratio

Fixed-Charge Coverage Ratio = EBIT +Fixed charges / Fixed


charges+ Int(tax adjusted)
Significance:

since leases are a fixed charge, the calculation determining a company's


ability leases would be (EBIT + Lease Expenses) / (Lease Expenses +
Interest).

Analysis:

Reliance has maintained a double digit fixed charge ratio which determines
that it has that much times cash to cover its fixed charges. The industry
average has increased because of Reliance’s high ratio which is twice as
much as other companies in the infrastructure sector.

Owners fund as Percentage of total source

The ratio of equity and capital employed represents the amount of equity
funding in the total capit employed.

Formula

Owners fund as Percentage of total source= equity/capital employed

Analysis

Reliance has around 65% of its capital employed through equity.

Fixed assets turnover ratio

IT is the ratio of sales to fixed assets. This ratio indicates the extent that the
investment in total assets results in sales.

Formula

12
Fixed assets turnover = sales/fixed assets

Analysis

• ompanies with low profit margins tend to have high asset turnover,
those with high profit margins have low asset turnover - it indicates
pricing strategy.

• This ratio is more useful for growth companies to check if in fact they
are growing revenue in proportion to sales

We see the result of 1.2 for 2005 this means that turnover is 1.2 times
bigger than total assets. Another way of saying that is that the Reliance
infrastructure was able to generate sales of Rs.1.56 for every Rs.1 of assets it
owned and used for the year ended 31 March 2006. For the year ended 25
March 2006, it was at 0.95 times.Currently it has a ratio of 1.01.
Long term debt Equity ratio

It indicates the proportion of the company’s assets that financed with long-
term debt.

Formula

Long term debt Equity ratio = long term debt / total assets

Analysis

A high Long term debt Equity ratio is unfavourable because it indicates


possible difficulty in meeting long term debt obligations .Reliance
Infrastructure has a current ratio of 0.59 which has increased from 0.36.It is
more than the industry average of 0.5424.

PROFITABILITY RATIOS
They compare components of income with sales. They give us an idea of
what makes up a company’s income and are usually expressed as a portion
of each rupee of sales.

Gross profit Margin

It is the ratio of gross income or profits to sales.This ratio indicates how much
of every rupee of sales is left after costs of goods sold

13
Formula

Gross Profit Margin = (Gross income / Sales) * 100

Analysis

Reliance enjoys a gross profit of 13.35% which means that for every rupee of
sales it earns 13.35 rupees apart from its cost on goods sold. Gross profit is
the profit we earn before we take off any administration costs, selling costs
and so on. So we should have a much higher gross profit margin than net
profit margin.

Operating margin ratio

It is the ratio of operating profit (EBIT,Operating income) to sales.

Formula

Operating margin ratio = EBIT / Sales

Analysis

It indicates how much of each rupee of sales is left over after operating
expenses. Reliance enjoys an operating margin of 17.01.whereas the
industry average is of 31.16.

Net profit margin

It indicates how much of each rupee of sales is left over after all expenses.

Formula

Net Profit before Interest and


Net Profit Profit * Taxation *
= =
Margin Turnov 100 100
Turnover
er

Net Profit = Gross Profit – Expenses

Analysis

The net profit margin ratio tells us the amount of net profit per £1 of turnover
a business has earned. That is, after taking account of the cost of sales, the
administration costs, the selling and distributions costs and all other costs,
14
the net profit is the profit that is left, out of which they will pay interest, tax,
dividends and so on.

Reliance has a net profit margin of 10.65 as compared to 21.78 of industry


average.thus its profitability as compared to other companies is less.

PROFITABILITY IN RELATION TO INVESTMENTS

Return on net worth

Return on Net Worth (RONW) is used in finance as a measure of a


company’s profitability. It reveals how much profit a company generates
with the money that the equity shareholders have invested. Therefore, it
is also called ‘Return on Equity’ (ROE).This ratio is useful for comparing
the profitability of a company to that of other firms in the same industry .

Formula

Net Income

RONW = ------------------------------------------- X 100

Shareholder’s Equity

Analysis

The numerator is equal to a fiscal year’s net income (after payment of


preference share dividends but before payment of equity share
dividends).The denominator excludes preference shares and considers only
the equity shareholding. RONW measures how much return the company
management can generate for its equity shareholders . Reliance has a
RONW of 13.76 which is more than the industry average of 11.29.

Return on capital employed ratio

The Return on Capital Employed ratio (ROCE) tells us how much profit we
earn from the investments the shareholders have made in their company.
Think of it this way: if we had a savings account with a bank and we'd been
paid, say, £25 interest at the end of a year; and we had saved £500, we

15
could work out the rate of interest we had earned:

Formula

Interest
Rate of earned *
=
interest Amount 100
saved

Analysis

This ratio establishes the relationship between net profit and the gross
capital employed. The term gross capital employed refers to the total
investment made in business. The conventional approach is to divide
Earnings After Tax (EAT) by gross capital employed. Reliance Infrastructure
has an ROCE of 11.34 as compared to the industry average of 13.1375.

LIQUIDITY RATIOS
It measures the ability of the firm to meet its short-term obligations, that is
capacity of the firm to pay its current liabilities as and when they fall due.
Thus these ratios reflect the short-term financial solvency of a firm. A firm
should ensure that it does not suffer from lack of liquidity. The failure to
meet obligations on due time may result in bad credit image, loss of creditors
confidence, and even in legal proceedings against the firm on the other hand
very high degree of liquidity is also not desirable since it would imply that
funds are idle and earn nothing. So therefore it is necessary to strike a
proper balance between liquidity and lack of liquidity.

The various ratios that explains about the liquidity of the firm are

1. Current Ratio
2. Acid Test Ratio / quick ratio

CURRENT RATIO
The current ratio measures the short-term solvency of the firm. It establishes
the relationship between current assets and current liabilities. It is calculated
by dividing current assets by current liabilities.

16
Current Ratio = Current Asset

Current Liabilities

Current assets include cash and bank balances, marketable securities,


inventory, and debtors, excluding provisions for bad debts and doubtful
debtors, bills receivables and prepaid expenses. Current liabilities includes
sundry creditors, bills payable, short- term loans, income-tax liability,
accrued expenses and dividends payable.

Analysis

Reliance has a current ratio of 1.23 as compared to the industry average of


29.755.It has 1.23 times assets to cover its liabilities.

ACID TEST RATIO / QUICK RATIO


It has been an important indicator of the firm’s liquidity position and is used
as a complementary ratio to the current ratio. It establishes the relationship
between quick assets and current liabilities. It is calculated by dividing quick
assets by the current liabilities.

Acid Test Ratio = Quick Assets

Current liabilities

Quick assets are those current assets, which can be converted into cash
immediately or within reasonable short time without a loss of value. These
include cash and bank balances, sundry debtors, bill’s receivables and short-
term marketable securities.

Analysis

Reliance has a quick ratio of 0.9 as compared to 29.75 industry average.Thus


comparatively Reliance can not convert its assets into cash immediately in
comparison with the industry companies.

INVENTORY TURNOVER RATIO


This ratio indicates the number of times the inventory has been converted
into sales during the period. Thus it evaluates the efficiency of the firm in
managing its inventory. It is calculated by dividing the cost of goods sold by
average inventory.

17
Inventory Turnover Ratio = Cost of goods sold

Average Inventory

The average inventory is simple average of the opening and closing balances
of inventory. (Opening + Closing balances / 2). In certain circumstances
opening balance of the inventory may not be known then closing balance of
inventory may be considered as average inventory.

Analysis

Reliance has an inventory turnover ratio of 12.92 which is 3 times the


industry average of 4.23.This depicts the efficiency of the firm in managing
its inventory and the speed with which it travels within the company to
produce sales.

INDEX ANALYSIS

Years Mar '05 Mar '05 Mar '07 Mar '08 Mar '09

Total Share Capital 100 114.411 123.145 126.94 121.7984

18
9 3 36

Equity Share Capital 100 114.411 123.145 126.94 121.7984


9 3 36

Share Application Money 100 15.5349 0 137.93 137.936


4 6

Preference Share Capital 0 0 0 0 0

Reserves 100 141.091 174.029 207.36 213.238


6 1 35

Revaluation Reserves 100 100 92.7888 85.577 78.40515


6 73

Networth 100 124.186 147.309 184.34 187.8178


4 2 01

Secured Loans 100 244.561 182.802 143.31 235.4561


8 5 21

Unsecured Loans 100 79.4645 149.756 131.49 185.6622


3 7 88

Total Debt

Total Liabilities 100.00 120.455 150.791 165.65 190.8965


8 86

Gross Block 100.00 105.753 114.022 123.64 133.8243


8 7 54

(-) Accumulated 100.00 114.746 125.669 135.70 146.0554


Depreciation 1 7 17

Net Block 100.00 97.6449 103.520 112.77 122.795


6 1 37

Capital Work in Progress 100.00 113.247 150.106 296.01 293.6781


3 7 96

Investments 100.00 171.316 360.788 1100.8 1744.721


5 3 53

Inventories 100.00 101.847 88.2741 77.167 113.2446


7 4 6

Sundry Debtors 100.00 117.383 113.473 145.16 163.63


1 2 31

19
Cash and Bank Balance 100.00 0.32241 30.4755 2.3476 6.772621
5 8 72

Total Current Assets 100.00 29.9545 50.3836 34.690 44.18249


6 6 75

Loans and Advances 100.00 262.358 711.840 563.01 518.7179


5 7 86

Fixed Deposits 100.00 239.585 44.6425 0.0424 0.044171


8 5 72

Total CA, Loans & 100.00 121.822 148.232 104.68 103.5097


Advances 5 3

Deffered Credit 100.00 0 0 0 0

Current Liabilities 100.00 103.039 141.853 162.15 280.5769


4 1 91

Provisions 100.00 157.010 178.369 190.04 187.0682


3 7 17

Total CL & Provisions 100.00 113.096 148.657 167.35 263.1522


5 7 48

Net Current Assets 100.00 124.787 148.087 83.386 49.27226


1 7 63

Miscellaneous Expenses 0.00 0 0 0 0

Total Assets 100.00 120.455 150.791 165.65 190.8965


8 86

Contingent liabilities 100.00 113.079 341.968 555.65 675.3265


9 6 78

Book Value (Rs) 100.00 122.454 139.789 161.00 172.2625


7 3 18

• The index analysis of the company shows some important results


• Both total assets and liabilities have increased substantially over a period of
five years.
• The increase in capital WIP shows the money which is blocked for the
company and could be related to unsecured loan which might be taken for
managing the working capital.

20
• The total liabilities have increased almost double of 2005 whereas the total
current assets have become less than 50% of the
• The loans and advances in 2009 the company has increased to almost 500%
of the year 2005. On the other hand the companies’ contingent liabilities
have also increased substantially by 600% in 2009 as compared to 100 in
2005.
• The total share capital has seen a minor rise of 21% over 5 years in 2009 to
121 as compared to 100 in 2005
• Companies total assets have decreased almost 50% and bank balance hardly
6% in 2009 as compared to 2009. Over the period of time a fall in the
current asset and specially bank balance shows a a threat of liquidity crunch
in the company.

COMMON SIZE ANALYSIS

Year Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Total Share 1.841632 1.74922 1.50399 1.411236 1.175023


8 1
Capital

Equity Share Capital 1.841632 1.74922 1.5039 1.411236 1.17502


8 91 3

Share Application 5.635825 0.72684 0 4.692681 4.07227


Money 1 4

Preference Share 0 0 0 0 0
Capital

Reserves 47.96419 56.1811 55.3558 60.03929 53.5776


5 6 7

Revaluation Reserves 7.46307 6.19569 4.59238 3.855355 3.06523


2 2 7

Networth 62.90472 64.8529 61.4522 69.99856 61.8902


1 3

Secured Loans 7.788811 15.8136 9.44230 6.738141 9.60689


5 5 5

21
Unsecured Loans 29.30647 19.3334 29.1054 23.2633 28.5029
4 6

Total Debt 37.09528 35.1470 38.5477 30.00144 38.1098


9 7

Total Liabilities 100 100 100 100 100

Gross Block 51.32648 45.0619 38.8112 38.30942 35.9814


1 3 3

(-) Accumulated 24.33731 23.1837 20.2828 19.93627 18.6205


Depreciation 3

Net Block 26.98917 21.8782 18.5284 18.37314 17.3608


3 9

Year Mar 05 Mar 06 Mar 07 Mar 08 Mar 09

Capital Work in Progress 1.906919 1.79280 1.89826 3.407523 2.93363


3 5 4

Investments 6.907931 9.82470 16.5281 45.90537 63.1358


6 8 6

Inventories 3.861067 3.26460 2.26029 1.798575 2.29048


6 7 2

Sundry Debtors 9.237034 9.00140 6.95105 8.094214 7.91767


9 2

Cash and Bank Balance 36.6212 0.09802 7.40132 0.518987 1.29924


1 6

Total Current Assets 49.71931 12.3640 16.6126 10.41178 11.5074


4 7

Loans and Advances 12.92556 28.1524 61.0178 43.92968 35.1222


8 2 6

Fixed Deposits 23.36127 46.4654 6.91624 0.005989 0.00540


2 2 6

Total CA, Loans & 86.00614 86.9819 84.5467 54.34745 46.6350


Advances 4 3 7

Deffered Credit 0 0 0 0 0

22
Current Liabilities 17.74599 15.1801 16.6941 17.37111 26.0827
3 3 9

Provisions 4.064172 5.29752 4.80748 4.662374 3.98266


2 7

Total CL & Provisions 21.81016 20.4776 21.5016 22.03348 30.0654


5 1 6

Net Current Assets 64.19598 66.5042 63.0451 32.31397 16.5696


9 2 1

Miscellaneous Expenses 0 0 0 0 0

Total Assets 100 100 100 100 100

Contingent liabilities 5.781084 5.42708 13.1105 19.39111 20.4515


9 3

Common size analysis: from the above table the company


picture can be presented as followers

• The company has increased its investment over a period of


time in its total assets. The investment has increased from
1.9 in 2005 of total assets to 63 percent of total assets
• The cash in the company in bank has decreased
substantially from 36% of total assets to 1.2 %. The
decrease in cash may give rise to liquidity issues in the
company.
• The total current asset are still important part of total assets
for the company but have decreased from 80% to half in
2009.
• The reserves held by company are almost 50% of the total
liabilities. The investment increase and constant holding of
reserves indicate that the company might be looking
forward to profitable projects in future.
• The next major junk of total liabilities after reserves is taken
by total debt most of which is contributed by unsecured
loans. The unsecured loans means that company would be
23
paying high rate of interest on these loans as they are not
backed by as much securities as bond.

References:

1. Moneycontrol.com data retrieved on 30th December 2009


2. Yahoo finance : data retrieved on 30th December 2009
3. Financial Management : R.P. Rustagi, ratio analysis
4. http://www.rinfra.com/ data retrieved as on 5th Jan 2010

24
ANEXXURE:

Calculation of beta and Returns


month/ye BSE RETURNS ON RELIANCE RETURNS ON
ar BSE INFRASTRCUTURE RELIANCE

12/1/200 9397.93 293.8


5

1/2/2006 9919.89 0.05553989 495.25 0.685670524

2/1/2006 10370.24 0.04539868 437.75 -0.116102978


9

3/1/2006 11279.96 0.08772410 392 -0.104511708


3

4/3/2006 11851.93 0.05070674 557.8 0.422959184

5/2/2006 10398.61 - 662.5 0.187701685


0.12262306
6

6/1/2006 10609.25 0.02025655 484.15 -0.269207547


4

7/3/2006 10743.88 0.01268987 403.9 -0.165754415

8/1/2006 11699.05 0.08890363 461.8 0.143352315


6

9/1/2006 12454.42 0.06456678 522.5 0.131442183


1

10/3/200 12961.9 0.04074698 518.1 -0.008421053


6

11/1/200 13696.31 0.05665913 579.45 0.118413434


6 2

12/1/200 13786.91 0.00661492 528.7 -0.087583053


6

1/2/2007 14090.92 0.02205062 545.4 0.031586911


6

2/1/2007 12938.09 - 448.1 -0.178401173

25
0.08181367
9

3/1/2007 13072.1 0.01035778 394.6 -0.119392993


9

4/2/2007 13872.37 0.06121969 468.6 0.187531678


7

5/3/2007 14544.46 0.04844810 482.25 0.029129321


2

6/1/2007 14650.51 0.00729143 469.7 -0.026023847


6

7/2/2007 15550.99 0.06146407 532.9 0.134553971


2

8/1/2007 15318.6 - 478.6 -0.10189529


0.01494374
3

9/3/2007 17291.1 0.12876503 1394.55 1.913811116


1

10/1/200 19837.99 0.14729485 2910.55 1.087089025


7 1

11/1/200 19363.19 - 1889.3 -0.3508787


7 0.02393387
6

12/3/200 20286.99 0.04770908 2188.75 0.158497856


7 1

1/2/2008 17648.71 - 1644.6 -0.248612222


0.13004787
8

2/1/2008 17578.72 - 1367 -0.168794844


0.00396572
9

3/3/2008 15644.44 - 917 -0.329188003


0.11003531
5

4/1/2008 17287.31 0.10501302 1550.75 0.691112323


7

26
5/2/2008 16415.57 - 1174 -0.242946961
0.05042658
5

6/2/2008 13461.6 -0.17994928 807 -0.312606474

7/1/2008 14355.75 0.06642226 930.3 0.152788104


8

8/1/2008 14564.53 0.01454330 913.45 -0.018112437


1

9/1/2008 12860.43 - 599.8 -0.343368548


0.11700343
2

10/1/200 9788.06 - 334 -0.443147716


8 0.23890103
2

11/3/200 9092.72 - 310.7 -0.069760479


8 0.07103961
4

12/1/200 9647.31 0.06099275 368.75 0.186836176


8

1/2/2009 9424.24 - 312.7 -0.152


0.02312250
8

2/2/2009 8891.61 - 280.55 -0.102814199


0.05651702
4

3/2/2009 9708.5 0.09187200 289.8 0.03297095


1

4/1/2009 11403.25 0.17456352 725.6 1.503795721


7

5/4/2009 14625.25 0.28255102 1119.6 0.542998897


7

6/1/2009 14493.84 - 984.7 -0.120489461


0.00898514
6

27
7/1/2009 15670.31 0.08117034 1022.4 0.038285772
5

8/3/2009 15666.64 - 1107.9 0.083626761


0.00023420
1

9/1/2009 17126.84 0.09320441 1094.15 -0.012410867


4

10/1/200 15896.28 - 859.95 -0.214047434


9 0.07184979
8

11/3/200 16926.22 0.06479125 918 0.067503925


9 9

12/1/200 17198.27 0.01607269 939.95 0.023910675


9 7

debt 3,738. 4,266.9 5,858.3 5,009.0 7,332.


67 3 2 4 18

Interest coverage ratio 3.75 5.44 4.47 3.41 3.65

PBIT 4.32 7.66 3.98 4.45 1.78

Interest expenses in 1.152 1.40808 0.89038 1.30498 0.4876


crores 8 5 71

rate of debt 0.0003 0.00033 0.00015 0.00026 0.0002


08 2 1 43

1.Covariance of BSE and Reliance 0.027067

2.variance 0.008824

3.Beta of stock [beta= covariance/variance](1/2) b 3.067409

4.market return monthly(average return from BSE) Rm 0.015419

5.annual return 0.185028

28
6.Risk free return ( Return from Government securities) 0.07
Rf

7.require rate of return [Ri=Rf+(Rm-Rf)*b] 0.422838

29