Saturday, June 30, 2012

Notes From Bajaj Auto Annual Report 2011-12

Financial's at a Glance
- Net sales and other operating income grew by over 19% to 19,804 crore

- Company sold 4.35 million units — consisting of over 3.83 million motorcycles and more than 515,000 three-wheelers. Market share of 32.1% in motorcycles (Not exactly in domestic market as it includes export numbers) ( Current capacity - 4.5 million motor cycles, 6 lac 3 wheelers.)
Exports rose by 31% over last year to 1.58 million units. It grew even faster in revenue terms — by 45% to 6,604 crore. And accounted for 35% of your Company’s net sales.
Bajaj Auto’s operating EBITDA crossed the 4,000 crore mark — increasing by over 18% to 4,001 crore. The operating EBITDA margin was 20.2% of net sales and other operating income.
Profit before taxes (PBT) grew by 15% to 4,160 crore.
Profit after tax (PAT) but before exceptional items grew by 18% to 3,095 crore (exceptional item of 724 crore in FY11 vs -ve 134 in FY 12.
- PAT at 3004 Vs 3339 crore in FY 11 a decline of 10% considering exceptional item.
Surplus cash and cash equivalents, as on 31 March 2012, stood at 5,451 crore as against 4,239 crore as on 31 March 2011. 
- tax rate roughly 25% (because of exports?)
- Bajaj auto is now world's 3rd largest motorcycle manufacturer.
Bajaj Auto operates on a very lean cost structure. Currently, fixed cost including employee cost, form just 6% of operating income.
Return on capital employed (operating) stood at a healthy 253%.
The Board of Directors of Bajaj Auto has proposed a dividend of 45 per equity share

(450 per cent) for the financial year 2011-12
books of the Company will remain closed from Saturday, 07 July 2012 to Wednesday, 18 July 2012, both days inclusive. will be credited/dispatched between 23 July 2012 to 25 July 2012.
- Price level for the year 1260 to 1839.

- Use of Earning - 1,513 crore out of 3095 crore being paid out divided.
- R & D spend as %tage of sales 0.83%
- Long term Debt - 414 crore
- Cost of raw materials at 67.8% of sales Vs 67.2% in FY11.

Cash Flow
- Net Cash from operating activities - 2959.91 crores. 98.5% of reported PAT.

Management Discussion and Analysis

After growing at over 39.6% in FY2010 and 35.5% in FY2011, our domestic motorcycle sales in FY2012 grew by 6.3%. The reasons may be many. Yet, the fact remains that the market grew faster, at over 11.9%. It is imperative that Bajaj Auto increases its domestic motorcycle sales and market share in the years ahead.
It is also due to an excellent export performance where 31% growth in volume — itself very creditable on a relatively high base — was bettered by 45% growth in value. (Effect of currency ?) 
After clocking 26% growth in FY2010 followed by 23% growth in FY2011, the number of motorcycles sold in India increased by 11.9% in FY2012 — growth slowing down to 9% in Q3 FY2012, followed by 6% in Q4 FY2012. Despite this, Bajaj Auto has posted excellent results. In such an environment, the Company focused on driving the sales of more profitable products in its portfolio, coupled with strong improvement initiatives on the input side. In a nutshell, FY2012 was a year of consolidation, with slower growth than the past two years, but with high profitability
Both urban and rural markets were affected by high consumer interest rates, increasing petrol prices and overall inflation. Even the 11.9% growth was severely skewed across quarters as well as segments. Sales of models belonging to the upper end Performance segment remained flat year-on-year. With a substantial proportion of Bajaj Auto’s business coming from the Performance segment, the Company’s sales growth by volume was more muted at 6%.
The good news is that Bajaj Auto continues to dominate the performance segment. It sold 716,267 motorcycles in this segment in FY2012, with a market share of 44%. This, despite the segment being most hotly contested by every major two-wheeler company with a large number of models fighting for market share.
Bajaj Auto unveiled the next generation Pulsar 200 NS in January 2012.
To dominate the high end, Bajaj Auto launched the KTM Duke 200 in January 2012.
Domestic sales for three-wheelers across the industry in FY2012 declined by 2.4% to 513,251 units.

- Bajaj Auto, too, saw a marginal fall in sales — by 1.3% to 202,979 vehicles. However, with a fall lower than the industry, the Company’s market share increased by 40 basis points from 39.1% in FY2011 to 39.5% in FY2012.
Growth in exports for the Company for the financial year 2012-13 in both motorcycles and three wheeler segments is facing some headwinds due to international events such as substantial rise in import duty in Srilanka, trade restrictions imposed in Argentina, Dollar trade embargo in Iran.

Company has not granted any shares by way of stock option to any of the employees so far.


- Bajaj Auto International Holdings BV is a 100% Netherlands based subsidiary has invested € 189.9 million for a 47.18% ownership KTM Power Sports AG of Austria.
In calendar year 2011, KTM strongly rode out of the downturn selling 81,200 motorcycles, achieving a turnover of € 526.8 million and a profit of €20.8 million. (Bajaj's share in profit roughly 70 crore ?)

Thursday, June 28, 2012

Notes From ITC Annual Report 2011-12

Disclaimer and some blabber: The entire content below is copy-paste from the AR. You may rightfully think, what kind of shameless plagiarism is this. But as you can see, although the content here is not original but the effort is spent in collating a 202 page AR document into 1-2 page of content which gives me an eagle eye view of the company as an investor. To me this effort is very similar to note taking exercise i did in school and colleges. Invariably i did better in subject's in which i was diligent in taking notes. So, this is just an application of the same mental model. As you can guess i hold this company it in my portfolio and this annual exercise is to measure how the company (in which am a part owner) is doing. Over the next few month's i intend to do this exercise for around 50 different companies (of which few i hold and few for evaluation)

Management Discussion and Analysis
1. As per the RBI’s Monetary Policy Statement 2012/13 released in April 2012, the Indian economy is projected to grow by 7.3% in 2012/13 assuming normal monsoons. Significant downside risks to this baseline forecast include the outlook for global commodity prices - especially of crude oil, slippages on the fiscal front which could stoke inflation and lead to a crowding out of private investment and the unsustainable current account deficit levels.

Current year financials at a glance 
- Gross Revenue for the year grew by 14.2% to 34871.86 crores. 
- Net Revenue at 24798.43 crores grew by 17.2% primarily driven by a 23.6% growth in the non-cigarette FMCG businesses, 20.0% growth in Agri business and 16.6% growth in the Cigarettes segment. 
- Profit before tax increased by 22.4% to 8897.53 crores while 
- Net Profits at 6162.37 crores registered a growth of 23.6%.
- Earnings Per Share for the year stands at 7.93 (previous year 6.49). 
- Cash flows from Operations aggregated 8334 crores compared to 7528 crores in the previous year.

Financial History (Last 16 years)
 - Over the last sixteen years, your Company’s Gross Revenues and Net Profits
recorded an impressive compounded growth of 12.7% and 21.8% per annum respectively.

 - During this period, Return on Capital Employed improved substantially from 28.4% to 45.4% while Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends, grew at a compounded annual growth rate of 25.7% during this period.

Where does profit go ?
5. For Dividends (4.5/- per share) - Total cash outflow in this regard will be 4089.04 crores (66% payout ratio)

6. Your Board further recommends a transfer to General Reserve of  650.00 crores (previous year 498.76 crores). Consequently, your Board recommends leaving a surplus in Statement of Profit and Loss of 1972.59 crores (previous year 548.67 crores).

7.During the financial year 2011/12, your Company and its subsidiaries earned 3072 crores in foreign exchange. (roughly 9%)

Business Environment
- FMCG – Cigarettes The steep increase in the tax rates on cigarettes, both at the Central and at the State level, has led to the undesirable consequence of shifting consumption to lightly taxed or tax evaded tobacco products like Bidi, Khaini, Chewing Tobacco and Gutkha which are the most dominant forms of tobacco consumption in India and constitute as much as 85% of total usage.  

- A plethora of 29 different tax rates are currently applicable on cigarettes across States in India which has forced manufacturers 
to adopt State specific pricing. 

The findings reported in the Global Adult Tobacco Survey (GATS) India, 2009-10 study, conducted under the aegis of the Ministry of Health & Family Welfare, shows that whilst the consumer base of tobacco in India stands at 34.6% of all adults, the cigarette share is only 5.7%.
The domestic legal cigarette industry is faced with the growing menace of illegal cigarettes. Independent research indicates that, in India, whilst there is a fall in volumes of ‘duty paid’ cigarettes by 4.4% during the period 2005 to 2010, the ‘duty-not-paid’ volumes grew by 49.3% during the same period. India has now been recognised as one of the leading destinations for illegal cigarettes.
Attractive tax arbitrage opportunities, as a result of high level of taxes on the legal domestic cigarette industry in India, incentivises illegal flow of cigarettes into the country.
 - FMCG - Others
The Indian FMCG industry is estimated to be over 160000 crores in size and accounts for nearly 2.2% of
the GDP of the country. The industry has tripled in size over the last 10 years and has grown at  approximately 17% CAGR in the last 5 years
These growth drivers are expected to continue to favourably impact the industry which is estimated to reach ` 400000 crores by 2020 (Source: CII, FMCG Roadmap to 2020). According to a recent study by the consultancy firm Boston Consultancy Group, the Indian consumer market is poised to grow at a compounded annual growth rate of 15% between 2010 and 2020, faster than most other emerging markets.
Given these positive fundamentals, your Company has been rapidly scaling up its new FMCG businesses
comprising Branded Packaged Foods, Personal Care Products, Education and Stationery Products, Lifestyle Retailing, Incense Sticks (Agarbattis) and Safety Matches with Segment Revenues growing at an impressive compound annual growth rate of nearly 40% since 2005-06. 2012 Sales 5545 crores.
Segment Results reflect the gestation costs of these businesses largely comprising costs associated with brand building, product development, R&D and infrastructure creation. The year under review saw a 24% growth in Segment Revenues and a significant improvement in Segment Results.
Branded Packaged Foods
During the year, the business witnessed inflationary pressures on input costs. Supply side constraints coupled with growing demand caused prices of edible oil, packaging material and industrial fuel to remain at inflated levels. These cost pressures were mitigated through a combination of improvements in product and process efficiencies, smart sourcing and supply
chain initiatives.
Your Company ventured into the Instant Noodles category towards the end of 2010. The product has been well received by consumers and is already the second largest Instant Noodle brand in the country.
The accelerated growth of the Branded Packaged Foods business will be sustained in the years ahead and be driven by focus on product quality, innovative product development, multi-point contact with consumers and high quality of service to all segments of trade.
Education & Stationery Products
Your Company is the leading and fastest growing player in the Indian stationery market. The Classmate range of products is sourced from small scale manufacturers, who have over the years
continuously improved their delivery and quality capabilities. A majority of them, with your Company’s assistance, are ISO 9001:2008 certified. Paper and recycled board are sourced from your Company’s mills.

8,02,80,020 Ordinary Shares of 1/- each, were issued and allotted during the year upon exercise

of 80,28,002 Options. the Issued and Subscribed Share Capital of your Company as at 31st March, 2012 stands increased to 781,84,24,300/- divided into 781,84,24,300 Ordinary Shares of  1/- each.
(Increase of 1% over last year)
10. The total number of employees as on 31st March, 2012 stood at 25,165.