LARSEN AND TOUBRO ANALYSIS L&T as an infrastructure-general company has grown very well over the years. The growth as well as diversification has led to its very well financial performance. It has a healthy debt to equity ratio and can take up more debt to finance the faster growth in current positive economic environment. Furthermore as per the Scenario summary and Monte Carlo simulation result, the probability of loss is lowest and it’s almost 0, so the firm should go for investing in the project as per these two methods. The scenario analysis also shows a positive NPV during good, normal as well as bad scenarios hence the project can be undertaken. NPV is materially sensitive to mainly CAGR and inflation rate. It is evident when the sensitivity analysis is done of CAGR and inflation rate on NPV. It is observed that as inflation is varied from 1% to around 10-11% and CAGR is varied from 2% to 32%, then NPV varies from as low as 12132 to as high as 124569. NPV is thus sensitive to CAGR and inflation rate in above mentioned manner. The cash cycle has been negative for previous years which is excellent, however it has become positive for the projected years still its less than 1 which is a good sign. Shorter the cash cycle, the better it is, as ii shows how much of a company’s cash flow is tied up during each transaction. So, cash cycle does not need any urgent revision. Same is the case with operating cycle which is decreasing considerably for the projected years. The DOL is just below 1 and it needs to be increased for a better operating leverage. The DFL fluctuates around 1 and at least 2 is desirable for a healthy financial leverage. The combined leverage is around 1 which is not a good sign for the company.
L&T as an infrastructure-general company has grown very well
over the years. The growth as well as diversification has led to
its very well financial performance. It has a healthy debt to
equity ratio and can take up more debt to finance the faster growth
in current positive economic environment. Furthermore as per the
Scenario summary and Monte Carlo simulation result, the probability
of loss is lowest and its almost 0, so the firm should go for
investing in the project as per these two methods. The scenario
analysis also shows a positive NPV during good, normal as well as
bad scenarios hence the project can be undertaken. NPV is
materially sensitive to mainly CAGR and inflation rate. It is
evident when the sensitivity analysis is done of CAGR and inflation
rate on NPV. It is observed that as inflation is varied from 1% to
around 10-11% and CAGR is varied from 2% to 32%, then NPV varies
from as low as 12132 to as high as 124569. NPV is thus sensitive to
CAGR and inflation rate in above mentioned manner.
The cash cycle has been negative for previous years which is
excellent, however it has become positive for the projected years
still its less than 1 which is a good sign. Shorter the cash cycle,
the better it is, as ii shows how much of a companys cash flow is
tied up during each transaction. So, cash cycle does not need any
urgent revision. Same is the case with operating cycle which is
decreasing considerably for the projected years.
The DOL is just below 1 and it needs to be increased for a
better operating leverage. TheDFL fluctuates around 1 and at least
2 is desirable for a healthy financial leverage. The combined
leverage is around 1 which is not a good sign for the company.
