B.

Cost of Goods Sold (Refer Additional

Info)

C. Gross Profit (A)-(B)

D. All other Operating Expenses (Income)

30% of Employee Benefits
Cost of Property Development
Increase in Inventory of Property under Development
Other Expenses
Share in Loss/(Profit) of JV & Associates

E. Operating Profit

F. Finance Costs

G. Core Profit ( E) - (F)

H. Non-Core Income
Other Income
Exceptional Income

I. Non-Core Expense
Exceptional Expenses

J. Profit Before Tax (G) + (H) - (I)

Income Taxes

Profit After Tax

Less: Non-Controlling Interest in Profit
Consolidated Profit After Tax for the Year

Add: Other Comprehensive Income (Net of Tax & Non-

Controlling Interest)

Net Comprehensive Income After Tax

Raymonds Common Size

C. Gross Profit (A)-(B)

D. All other Operating Expenses (Income)

30% of Employee Benefits
Cost of Property Development
Increase in Inventory of Property under Development
Other Expenses
Share in Loss/(Profit) of JV & Associates

E. Operating Profit

F. Finance Costs

G. Core Profit ( E) - (F)

H. Non-Core Income
Other Income
Exceptional Income

I. Non-Core Expense
Exceptional Expenses

J. Profit Before Tax (G) + (H) - (I)

Income Taxes

Profit After Tax

Less: Non-Controlling Interest in Profit
Consolidated Profit After Tax for the Year

Add: Other Comprehensive Income (Net of Tax & Non-

Controlling Interest)

Net Comprehensive Income After Tax

Raymonds Trend
Statement of Profit & Loss
31/3/2020 31/3/2019 31/3/2018

A. Revenue from Operations 648,237 658,228 590,641

Sale of Products 600,728 628,820 568,572
Revenue from Property Development 17,616 1,999 -
Other Operating Revenue 29,893 27,409 22,069

B. Cost of Goods Sold (Refer Additional Info) 479,646 457,798 415,645

C. Gross Profit (A)-(B) 168,590 200,430 174,995

D. All other Operating Expenses (Income) 135,829 163,202 149,742

30% of Employee Benefits 29,890 28,045 25,060
Other Expenses 121,100 134,358 124,179
Share in Loss/(Profit) of JV & Associates (15,161) 800 503

E. Operating Profit 32,761 37,229 25,253

F. Finance Costs 30,273 23,260 18,380

G. Core Profit ( E) - (F) 2,489 13,969 6,873

H. Net Non-Core Profit 13,403 12,071 13,945

i. Non-Core Income 13,403 12,537 13,945

Other Income 9,593 12,537 11,850
Exceptional Income (Net) 3,810 - 2,095

ii. Non-Core Expense - 466 -

Exceptional Expenses (Net) - 466 -

J. Profit Before Tax (G) + (H) - (I) 15,892 26,039 20,818

Income Taxes (4,284) 8,562 6,663

Profit After Tax 20,176 17,477 14,155

Less: Non-Controlling Interest in Profit 563 679 692
Consolidated Profit After Tax for the Year After
Non-Controlling Interest 19,613 16,798 13,463

Add: Other Comprehensive Income (Net of Tax ) (3,576) (229) 1,352

Net Comprehensive Income After Tax 16,600 17,248 15,507

Average Tax Rate -26.96% 32.88% 32.01%

Raymond
Relevant Information from Cash Flow Statement 31/3/2020 31/3/2019 31/3/2018

Operating Cash Profit before Working Capital Changes 58,573 59,847 45,318

Net Cash Profit Before Tax 41,265 32,140 43,352

Net Cash Profit from Operating Activities after Exceptional
37,294 25,071 39,465
Operating Items (Post-Tax) (CFO After Tax in Cash Flow Stt)
Free Cash Flow to all investors (Net Cash Profit - Depreciation-
3,314 5,421 22,432
Committed CAPEX)

Repayment of Loan Principal 59,565 53,521 39,490

Repayment of Loan Interest 31,028 24,117 18,883

Free Cash Flow to Shareholders (87,279) (72,217) (35,941)

Net Cash Inflow/(Outflow) from Investing Activities (13,690) (12,258) (40,849)

Net Cash Outflow from Financing Activities (12,986) (14,878) 2,962

Information for Market-Price Based Ratios 31/3/2020 31/3/2019 31/3/2018

Basic Earnings Per Share (Rs.) 31 27 22

Diluted Earnings Per Share (Rs.) 31 27 22
Number of Shares outstanding 64,719,132 61,380,854 61,380,854
Dividend Per Share (Rs.) - 3 3
Stock Price on Balance Sheet Date (Rs.) 204 812 898
Book Value Per Share 367 318 295

Raymond-Additional Info
E. Financing/Capital Structure Analysis Ratios

Debt-Equity Ratio 0.50 0.65 0.76 0.42 0.25 0.43

###
Debt-Capital Ratio 0.33 0.38 0.42 0.29 0.20 0.29
###
Total Leverage Ratio (Total L.T. Funds/Sh. Funds) 1.49 1.63 1.73 1.41 1.30 1.47
###
Total Debt Ratio (NCL+FCL)/Total Assets 0.61 0.64 0.70 0.92 1.02 0.94
###
Degree of Financial Leverage (Op. Pft/PAT) 1.82 1.75 1.28 1.62 2.13 1.78
###
Degree of Financial Leverage (Op. Pft/PBT) 1.33 1.91 0.84 2.06 1.43 1.21
###
Debt Service Coverage Ratio 0.74 0.78 0.24 0.04 0.07 0.38
###

Traditional Interest Coverage Ratio (Op. Pft/Finance Cost) 3.81 2.04 -1.41 1.08 1.60 1.37
###
Interest Coverage Ratio (Overall Free Cash Flow/Finance
Cost) 2.21 2.07 1.40 0.11 0.23 1.22
###
Dividend Paying Ability (Shareholder FCF/Overall FCF) -0.35 -0.28 -3.14 -2633.92% -1332.11% -160.23%
###
Retention Ratio (PAT - Dividend)/PAT 96.22% 92.33% 100.00% 100.00% 89.04% 86.32%
###

F. Market Price Based Ratios

Price to Earnings Ratio 15.42 21.71 (8.29) 6.48 29.65 40.94

###
Price to Book Ratio 2.81 2.40 1.17 0.56 2.55 3.04
###
Dividend Yield 0.24% 0.35% 0.00% 0.00% 0.37% 0.33%
###

Summary Du-Pont 31/3/2023 31/3/2022 31/3/2021 31/3/2020 31/3/2019 31/3/2018

I. Return on Equity 17.99% 10.88% -13.93% 8.19% 8.25% 7.13%

Net Profit Margin 6.54% 4.29% -8.81% 3.11% 2.66% 2.40%

Total Asset Turnover Ratio 1.85 1.56 0.91 1.87 2.60 2.22
Total Leverage Ratio 1.49 1.63 1.73 1.41 1.30 1.47

Total Asset Intensity Ratio 53.98% 64.10% 109.42% 53.57% 38.45% 45.11%

II. Return on Equity 17.99% 10.88% -13.93% 8.19% 8.25% 7.13%

Return on Investment (Return on Assets) 22.09% 11.74% -10.34% 9.43% 14.71% 9.48%
Total Leverage Ratio 1.49 1.63 1.73 1.41 1.30 1.47
1/(Degree of Financial Leverage) (Degree of Financial
Leverage = Op. Pft/PAT) 54.82% 57.02% 77.88% 61.58% 45.12% 53.31%

III. Return on Equity 17.99% 10.88% -13.93% 8.19% 8.25% 7.13%

Core Profit Margin 8.79% 3.84% -19.32% 0.38% 2.12% 1.16%
Total Asset Turnover Ratio 1.85 1.56 0.91 1.87 2.60 2.22
Interest Cost Management Ratio (Op. Pft/Core Profit) 135.6% 195.9% 58.5% 1316.4% 266.5% 367.4%
Total Leverage Ratio (Total Assets/Equity or Total L.T.
Funds/Equity) 1.49 1.63 1.73 1.41 1.30 1.47
1/(Degree of Financial Leverage) (Degree of Financial
Leverage = Op. Pft/PAT) 54.82% 57.02% 77.88% 61.58% 45.12% 53.31%

Return on Equity 17.99% 10.88% -13.93% 8.19% 8.25% 7.13%

Operating Profit Margin 11.92% 7.53% -11.31% 5.05% 5.66% 4.28%

Total Asset Turnover Ratio 1.85 1.56 0.91 1.87 2.60 2.22
1/Degree of Financial Leverage (PAT/Op. Profit) 54.82% 57.02% 77.88% 61.58% 45.12% 53.31%
Total Leverage Ratio 1.49 1.63 1.73 1.41 1.30 1.47

IV. Return on Investment 22.09% 11.74% -10.34% 9.43% 14.71% 9.48%

Gross Profit Margin 29.84% 26.06% 13.59% 26.01% 30.45% 29.63%

Overhead Cost Control Ratio (Operating Profit/Gross Profit) 39.96% 28.88% -83.22% 19.43% 18.57% 14.43%
Total Asset Turnover Ratio 1.85 1.56 0.91 1.87 2.60 2.22

Raymond-Ratios
 Scenario 1
Co. 1

Revenue 1,000,000
Operating Profit 250,000

Operating Profit Margin 25.00%

Total Capital 2,000,000

Return on Overall Capital (ROI = Op.
Pft/Total Capital) 12.50%

Total Capital 2,000,000

- Equity 1,500,000
-Debt @ 10% 500,000

Operating Profit 250,000

-Interest 50,000

Profit Before Tax 200,000

-Tax @ 25% 50,000

PAT 150,000

ROE (PAT/Equity) 10.00%

Debt a cheaper funding source relative to

equity

Positive Impact
Impact of Debt Funding (Debt Dependence)
Leverage Effect

Funding Structure Dimen

Dependence on Debt
What proportion of funding
is coming from Debt?

Debt / Total Funding (Eq +

Debt)

Non-Current
Liabilities/(Equity + Non-
Current Liabilities
Debt to Total Capital Ratio
(Debt to Assets Ratio)

Dependence on Debt per

Rupee of Equity

NCL/Equity
Debt to Equity Ratio
 Relative to Expectations about Future
Industry/Economic Growth
Desired Behavior of Dependence on Debt
over time Expecting Future Growth
Increase

At least 2-3 years in advance Favor of Higher Returns

Prioritizing Cash Flows

towards debt repayment
lower cost debt if possible
Surplus Assets - Sell off
Planned Reduction of Debt
Raise Fresh Equity
Improve Operating Margins
Improve Op. W.C. Efficiency
to Release more cash
 Slowdown Growth
Scenario 1 Scenario 2 Scenario 3
Co. 2 Co. 1 Co. 2 Co. 1

1,000,000 500000 500000 1500000

250,000 125000 125000 375000

25.00% 25.00% 25.00% 25.00%

2,000,000 2,000,000 2,000,000 2,000,000

12.50% 6.25% 6.25% 18.75%

2,000,000 2,000,000 2,000,000 2,000,000

500,000 1,500,000 500,000 1,500,000
1,500,000 500,000 1,500,000 500,000

250,000 125,000 125,000 375,000

150,000 50,000 150,000 50,000

100,000 75,000 (25,000) 325,000

25,000 18,750 (6,250) 81,250

75,000 56,250 (18,750) 243,750

15.00% 3.75% -3.75% 16.25%

More of Cheaper Debt Funding relative to equity

Negative Impact
Greater Volatility of ROE Min ROE
Co. 1 3.75%
Co. 2 -3.75%

Higher Volatility of ROE - Higher Bankruptcy Risk

Lenders will charge higher interest rates
Leverage Effect Benefit Reduces

Funding Structure Dimensions

 Ability to Service Funding
Ability to Service Ability to Service Int & Ability to Pay
Interest Expense Principal Dividends

Whether you are

generating sufficient free Ability to generate
Whether you are
cash flows to pay your Funds that are left Over
generating sufficient
interest and principal for Dividends &
operating profit to
obligations (from Cash Funding Growth (What
service interest expense
Flow Stt - Cash Flow part of FCF is left over
from Financing for Dividends &
Activities) Funding Growth)

Operating Profit/Interest
Expense Free Cash Flow / (Int + FCF - Int - Principal
Principal Repayment) Repayment
Interest Coverage Ratio Debt Service Coverage
(Traditional Way) Ratio (FCF-Int-Principal)/FCF
Dividend Paying
Ability Ratio
Higher Interest Coverage
Ratio - Higher Proportion
of Op. Profits left over for Desirable Behavior Desirable Behavior
shareholders (Inverse of
Interest Coverage Ratio)
Desirable Behavior More than 1 Increase over time
Increase over time Increase over time Above Ind. Avg
Above Ind. Avg Above Ind. Avg

Problem - Interest Not

Paid from profits..
Interest paid from Free
cash flows

Also look at FCF relative

to interest expense
Free Cash Flow/Interest
Expense
(Alternative Formula for
Interest Coverage)
 Expectations about Future
Relative to Competition
stry/Economic Growth
Expecting Future Expecting Future Expecting Future
Slowdown Growth Slowdown
Decrease

Same Pool
Favor of Lower Volatility Higher than Ind. Avg Lower than Ind Avg
 Growth
Scenario 3
Co. 2

1500000
375000

25.00%

2,000,000

18.75%

2,000,000
500,000
1,500,000

375,000

150,000
assume no non-core items
225,000

56,250

168,750

33.75%

Max ROE
16.25% Less Volatile ROE
33.75% More Volatile ROE
Interest Coverage
Ratio 5 3

Op. Profit
-Int .2 * Op. Pft 1/3 Op. Pft
=Core Pft
+Non-Core Pft
- Tax

= PAT

Higher the Risk Higher the Return Demanded

Higher Cost of Equity

Underlying Drivers of Free Cash Flow Generation

Operating Profitability
Op. W.Cap Mgmt
Free Cash Flow = Net Cash Profit After Tax - Depreciation

Paying Interest
Paying Principal
Paying Dividends
Funding Growth
Making a Capex Investment of 25% of Existing F.A
Sales Volume Increase by 10%
Price Reduction of 3%
Cost Improvement of 2%

Metrics Affected Existing New F.A. IntensRate of Change

F.A. Intensity 37.66% 0.4399364299 6.34%
New N.P. Mgn
V.A. Mgn to GP Mgn - Final Impact on NP.
Margin 3.11% 2.11%

NP. Mgn TA Turnover RatTotal Leverage

Revised ROE 2.11% 1.67 1.41

Introduction of Early Payment Discount of 2%

Early Payment Payment 15 days

Proportion of Customers Taking up Discount 60%

Metrics Affected
Operating Profit Margin - Final Impact on
NP Margin -1.20%
Revised Op. Pft Margin 3.85%
Revised Net Profit Margin 1.91%

Receivables Intensity Ratio

Existing Revised Receivables
Proportion of Customers Taking up Discount 10.73% 4.11% 69,569
Proportion of Customers Not Taking up
Discount 7.15% 7.15% 46,379

Receivable Intensity Ratio 17.89% 11.26% -6.62%

Total Receivables Intensity = Sum of Receivable Intensity for Both Categories
Existing Revised
Total Asset Intensity Ratio 53.57% 46.94%

Revised ROE 5.74%

Revised NPM 1.91%
Revised Total Asset Turnover Ratio 2.13
Revised Total Leverage Ratio 1.41
 Existing Revised Revised T.A. Turnover Ratio
Total Asset Intensity 53.57% 59.90% 1.67

Revised ROE change in ROE

4.97% 3.22%
Raymond

Growth Target for 2023 15%

2022 Target Max Min

SGR 10.88% 12.29% 12.29% 1.88%

Net Profit Margin 4.29% 4.50% 4.50% 2.00%

Total Asset Turnover Ratio 1.56 1.95 1.95 1.50
Total Leverage Ratio 1.63 1.75 1.75 1.25
Retention Ratio 100% 80.00% 80% 50%

Making a Plan for achieving these targets

Discuss with Teams responsible for executing the underlying busin
Revise if required
Ask what is the best that can be achieved for each metric

Final Business Drivers of NPM

Value Added Margin Procurement
Revenue Mix
Gross Profit Margin Processing Cost Control
Operating Profit Margin Overhead Cost Control
Core Profit Margin Interest Cost Control

Drivers of Total Asset Turnover Ratio

Op. W.Cap Mgmt

F.A. Eff
Fin W.Cap Mgmt

Underlying Risk Driver Analysis - Risk Management Plan

Liquidity Buffers
Residual Risk
More Conversative Growth Target

Bank/NBFC
Constraints
Regulatory Cap Reqd Allocate Capital to each div
Net Int Margin Avg Int Rate Earned on All Assets - Avg Interest Rate Paid on All
ROE Target

Andrea Resti and Andrea Sironi

 Revised Max Original
Values Max

4.50% 5.00% Demand Growth

1.95 2.75 Profit/Return Targets
1.75 1.75
80% 80%

g these targets
sible for executing the underlying business drivers

n be achieved for each metric

Procurement Procurement Manager

Revenue Mix Sales & Mktg Heads
Processing Cost Control Operations Manager
Overhead Cost Control Head of Administration
Interest Cost Control CFO

over Ratio

Op. W.Cap Mgmt Operations, Mktg , Sales

Operations, Mktg , Sales
Fin W.Cap Mgmt CFO

nalysis - Risk Management Plan

apital to each div
Assets - Avg Interest Rate Paid on All Funding