Project of Fastener Industry

8/7/2019 Project of Fastener Industry

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Project Title:

Financial Analysis

Of

Simmonds-Marshall

By: Smita Gole (Fin+IT, 2140/09) 20 Nov. 2010.


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TABLE OF CONTENTS

S.NO. CONTENTS

1. EXECUTIVE SUMMARY

2. INTRODUCTION

About us

Production capability

Products

Customers

3. Techniques used

Fundamental analysis

4. Cash flow Analysis

5. Annual result analysis

6. Balance sheet analysis

7. Ratio analysis

8. Conclusion

9. Recommendations

10. Bibliography


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1 .EXECUTIVE SUMMARY


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PROJECT TITLE:

Financial Analysis of SME

NAME OF THE ORGANIZATION:

Simmonds M arshall Limited

Industry:

Fasteners

BSE: 507998

NSE: N.A

ISIN: INE657D01021

The project has done for analyzing the financial statements of the SimmondsMarshall Limited SME Company. The analysis is done to find out the pros and cons

of the company. And conclusion and recommendation are given on the area of improvement.


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2 . Introduction


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SIMMONDS MARSHALL LIMITED was incorporated in 1960 as a Private LimitedCompany in technical and financial collaboration with Firth Cleveland FasteningsLtd., U.K. holding 51% of the equity of the company. This shareholding wasdiluted progressively and the balance of foreign holding was purchased fully bythe promoters in 1987. In 1986, the company went public and is now a quotedcompany on the Stock Exchange. The company manufactures a range of Specialized Nylon Insert Self Locking Nuts and other Special Fasteners.

The company has been augmenting its cold forming capacity and can produceover 500 million nuts per annum in a wide range from M4 to M48 diameter andequivalent imperial sizes. These nuts are manufactured either to American,British, Japanese, ISO or Indian Standards in a variety of thread forms andprotective finishes.The company also has a battery of multi-spindle automatic bar turning centerscapable of producing related automotive components as well.

The company is fully equipped to supply a wide range of Bolts from our associatedcompanies ranging from M5 to M70.

SIMMONDS MARSHALL LIMITED caters to the Automotive and Industrial sectorsand supplies to almost all the major Automobile Manufacturers in India as OESuppliers. Furthermore, General Motors, Fiat, Honda, Caterpillar, Suzuki, Leyland,Dana, New Holland are some of the world's finest companies that source theirrequirements from us.


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Raw materialCold nut forgingSecondary operationsHeat treatment

Automatic plating

Tool roomQuality control


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Products


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Customers:

y Tata Motorsy Ashok Leylandy Bajajy Hero Honda


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3. Techniques used


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Fundamental Analysis:

Fundamental analysis is the cornerstone of investing. In fact,some would say that you aren't really investing if you aren'tperforming fundamental analysis. Because the subject is sobroad; however, it's tough to know where to start. There are anendless number of investment strategies that are very differentfrom each other, yet almost all use the fundamentals.


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4. Cash Flow analysis


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Large cash holdings reduces profitability .Similarly, inadequate cashholdings would have effect on liquidity and therefore on theprofitability. Here we see that net cash from operating activities areincreased, means company s cash receipts (sale of products, futurecontracts) are more than payments. But we see that the investingdecisions of company are not right as it shows negative figure.

Simmonds-Marshall B SE: 507998 NSE: N.A ISIN: INE6 57D01021 Industry : Fasteners

C ash Flow ------------------- in Rs. C r. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '0912 mths 12 mths 12 mths 12 mths 12 mths

Net Profit B efore Tax 1.89 1.94 3.16 4.56 2.60Net Cash From Operating Activities 0 .4 7 0 .6 0 1 .08 1 .05 2 .21 Net Cash (used in)/fromInvesting Activities -

0 .36 - 0 .5 4 - 0 .64 -6. 11 -3. 1 6

Net Cash (used in)/from Financing Activities - 0 .0 6 0 .0 6 - 0 .4 1 5 .72 0 .08 Net (decrease)/increase InC ash and C ash Equivalents 0.05 0.11 0.04 0.65 -0.87

Opening Cash & Cash Equivalents 0 .58 0 .64 0 .75 0 .78 1 .43Closing Cash & Cash Equivalents 0 .64 0 .75 0 .78 1 .43 0 .57

B SE: 507998 NSE: N.A Reuters: SIMR.BO N.A


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5.Annual result analysis


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Simmonds-Marshall B SE: 507998 NSE: N.A ISIN: INE6 57D01021 Industry : Fasteners

Yearly Results ------------------- in Rs. C r. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10Sales Turnover 18.05 23.78 30.10 32.72 48.02Other Income 0 .10 0 .11 0 .11 -- 0 .22 Total Income 18.15 23.88 30.21 32.72 48.24Total Expenses 15.00 19.46 23.88 28.23 37.92Operating Profit 3.05 4.32 6.22 4.49 10.10P rofit On Sale Of Assets -- -- -- -- --P rofit On Sale Of Investments -- -- -- -- --Gain/Loss On Foreign Exchange -- -- -- -- --VRS Adjustment -- -- -- -- --Other Extraordinary Income/Expenses -- -- -- -- --Total Extraordinary Income/Expenses -- -- -- -- - 0 .0 4Tax On Extraordinary Items -- -- -- -- --Net Extra Ordinary Income/Expenses -- -- -- -- --G ross Profit 3.15 4.43 6.33 4.49 10.32Interest 0 .70 0 .8 3 1 .3 9 2 .12 1 .97 P BD T 2 .4 5 3. 58 4. 95 2 .3 8 8 .3 1 D epreciation 0 .3 9 0 .4 5 0 .6 2 0 .80 1 .1 4D epreciation On Revaluation Of Assets -- -- -- -- --P BT 2 .0 6 3. 1 3 4.33 1 .58 7 .17 Tax 0 .63 1 .0 4 1 .44 1 .00 2 .5 3Net Profit 1.43 2.09 2.89 0.58 4.64P rior Years Income/Expenses -- -- -- 0 .4 8 --D epreciation for P revious Years Written Back/ P rovided -- -- -- -- --D ividend -- -- -- -- --D ividend Tax -- -- -- -- --D ividend (%) -- -- -- -- --Earnings Per Share 6.82 9.96 13.74 2.75 4.14Book Value -- -- -- -- --Equity 2 .10 2 .10 2 .10 2 .10 2 .2 4Reserves -- -- -- -- --Face Value 10 .00 10 .00 10 .00 10 .00 2 .00

We see the Sales turnover is continuously increasing which is a verygood sign.

Income is more than expenditure.

Around 55% increase in Gross Profit.

The debt should be repaid (50%).

There is no reserve to the company.

EPS is decreasing.


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6.Balance sheet analysis


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B SE: 507998 NSE: N.A ISIN: INE6 57D01021 Industry : Fasteners

B alance Sheet ------------------- in Rs. C r. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths

12 mths 12 mths 12 mths 12 mths

Sources Of FundsTotal Share Capital 2 .10 2 .10 2 .10 2 .10 2 .2 4Equity Share Capital 2 .10 2 .10 2 .10 2 .10 2 .2 4Share Application Money 0 .00 0 .00 0 .00 0 .00 0 .00 P reference Share Capital 0 .00 0 .00 0 .00 0 .00 0 .00 Reserves 2 .3 9 4. 0 3 6.34 7 .72 1 3. 1 6Revaluation Reserves 0 .00 0 .00 0 .00 0 .00 0 .00 Net worth 4.49 6.13 8.44 9.82 15.40Secured Loans 5 .2 6 6.4 9 11 .7 6 1 4. 27 12 .78 Unsecured Loans 1 .21 1 .01 2 .89 3. 09 0 .9 3Total D ebt 6.47 7.50 14.65 17.36 13.71Total Liabilities 10.96 13.63 23.09 27.18 29.11


12 mths

12 mths 12 mths 12 mths 12 mths

A pplication Of FundsGross Block 7 .3 7 7 .87 1 4. 12 17 .22 19 .09 Less: Accum. D epreciation 4. 72 5 .12 5 .75 6.43 7 .57 Net B lock 2.65 2.75 8.37 10.79 11.52Capital Work in P rogress 0 .00 0 .11 0 .00 0 .00 0 .00 Investments 0.13 0.13 0.13 0.13 0.13Inventories 6. 02 7 .87 10 .0 3 12 .18 12 .1 3Sundry D ebtors 3. 58 4. 98 7 .79 8 .19 12 .22 Cash and Bank Balance 0 .4 7 0 .4 0 0 .4 7 0 .33 1 .3 9 Total Current Assets 10 .07 1 3. 25 18 .29 20 .70 25 .7 4Loans and Advances 1 .6 7 2 .9 6 4.36 4. 5 3 6. 5 3Fixed D eposits 0 .28 0 .3 8 0 .97 0 .2 4 0 .00

Total CA, Loans & Advances12

.02

1

6.59

2

3.62

25

.47

32

.27

D effered Credit 0 .00 0 .00 0 .00 0 .00 0 .00 Current Liabilities 2 .6 7 3. 91 5 .3 5 4.4 7 7 .6 0 P rovisions 1 .15 2 .0 3 3.6 9 4. 7 3 7 .22 Total CL & P rovisions 3. 82 5 .9 4 9 .0 4 9 .20 1 4. 82 Net C urrent A ssets 8.20 10.65 14.58 16.27 17.45Miscellaneous Expenses 0 .00 0 .00 0 .00 0 .00 0 .00 Total A ssets 10.98 13.64 23.08 27.19 29.10Contingent Liabilities 0 .52 1 .4 2 2 .59 0 .3 8 7 .85 Book Value (Rs) 21 .3 9 29 .17 40 .21 46. 7 4 1 3. 75

The capital structure of the company is not good, as company s debt is higherthan the equity capital.

Inventory is increasing. But debtors are also increasing means company is not ableto collect the receivables. Liabilities are also increased. Cash holdings and assetsare increasing.

STO CK ST A TS

Simmonds-Marshall


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Market Cap 51.86 cr

D ividend 12.00%

EP S (TTM) 5.91

P E 7.83

Book Value 21.38

Face Value 10.00

Market Lot 1.00

Market capitalization (no. of outstanding shares X market price) is satisfied.

Price-Earning ratio is not as good (Balanced should be 15).Satisfied Dividend is given to theshare holders .


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7.Ratio Analysis


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K ey Financial Ratios of Simmonds-Marshall ------------------- in Rs. C r. -------------------


Investment Valuation RatiosFace Value 10 .00 10 .00 10 .00 10 .00 2 .00 D ividend P er Share 1 .20 1 .50 2 .00 1 .20 0 .4 0 Operating P rofit P er Share (Rs) 1 4. 27 20 .4 2 30 .3 8 2 4. 52 8 .7 4Net Operating P rofit P er Share (Rs) 8 6. 17 11 3. 5 3 1 43. 02 155 .64 4 2 .9 6Free Reserves P er Share (Rs) 11 .3 9 19 .17 30 .21 36. 7 4 --Bonus in Equity Capital 5 .2 3 5 .2 3 5 .2 3 5 .2 3 4. 91 Profitability Ratios

Operating P rofit Margin(%) 1 6. 5 6 17 .98 21 .2 4 15 .75 20 .33P rofit Before Interest And Tax Margin(%) 1 4. 19 1 6. 0 6 19 .11 1 3.3 5 17 .85 Gross P rofit Margin(%) 1 3. 0 4 1 4. 79 19 .1 6 1 3.3 9 17 .97 Cash P rofit Margin(%) 9 .20 10 .3 8 11 .36 6.6 1 11 .70

Adjusted Cash Margin(%) 9 .19 10 .0 3 11 .36 6.6 1 11 .70 Net P rofit Margin(%) 6. 90 8 .5 3 9 .64 5 .08 9 .34

Adjusted Net P rofit Margin(%) 6. 88 8 .18 9 .64 5 .08 9 .34Return On Capital Employed(%) 2 4. 12 28 .72 25 .2 3 1 6.46 3 0 .75 Return On Net Worth(%) 27 .91 33.3 1 34.4 0 1 6. 97 29 .3 9

Adjusted Return on Net W orth(%) 27 .8 6 3 1 .9 4 33. 1 3 1 4. 21 29 .3 9 Return on Assets Excluding Revaluations 8 .4 8 29 .17 40 .21 46. 7 4 1 3. 75 Return on Assets Including Revaluations 8 .4 8 29 .17 40 .21 46. 7 4 1 3. 75 Return on Long Term Funds(%) 4 2 .7 4 52 .05 43. 21 2 6.3 8 30 .75 Liquidity A nd Solvency RatiosCurrent Ratio 0 .90 0 .91 0 .8 4 0 .8 6 2 .18 Quick Ratio 1 .57 1 .4 7 1 .50 1 .44 1 .36D ebt Equity Ratio 1 .44 1 .2 3 1 .7 3 1 .77 0 .89 Long Term D ebt Equity Ratio 0 .3 8 0 .2 3 0 .6 0 0 .7 3 0 .89 D ebt C overage RatiosInterest Cover 3. 81 4. 7 6 4. 28 2 .12 4. 5 3Total D ebt to Owners Fund 1 .44 1 .2 3 1 .7 3 1 .77 0 .89 Financial Charges Coverage Ratio 4.36 5 .19 4.6 9 2 .4 5 5 .10 Financial Charges Coverage Ratio P ost Tax 3.3 8 3. 9 6 3. 5 6 2 .1 4 3. 8 6

Management Efficiency RatiosInventory Turnover Ratio 3. 02 3. 0 4 4. 82 4.6 1 4. 1 4D ebtors Turnover Ratio 5 .0 3 5 .57 4. 70 4. 09 4. 72 Investments Turnover Ratio 4. 95 4. 81 4. 82 4.6 1 4. 1 4Fixed Assets Turnover Ratio 6. 99 8 .6 5 2 .1 3 1 .90 2 .52 Total Assets Turnover Ratio 1 .6 5 1 .75 1 .3 0 1 .20 1 .6 5

Asset Turnover Ratio 2 .46 3. 0 3 2 .1 3 1 .90 2 .52

Average Raw Material Holding 37 .46 4 2 .90 5 3.3 7 71 .1 3 -- Average Finished Goods Held 25 .5 3 21 .3 9 2 4. 2 6 27 .27 --Number of D ays In Working Capital 1 62 .90 1 60 .71 17 4. 82 179 .12 1 30 .63Profit & Loss A ccount Ratios

Material Cost Composition 5 6.3 5 5 6. 2 6 52 .12 51 .87 45 .7 3Imported Composition of Raw Materials Consumed 71 .89 68 .05 5 4. 8 3 50 .2 4 51 .77 Selling D istribution Cost Composition 2 .3 0 3.3 2 3. 2 4 3. 22 --Expenses as Composition of Total Sales 1 4. 0 6 19 .59 17 .97 15 .4 1 5 .3 8 C ash Flow Indicator RatiosD ividend P ayout Ratio Net P rofit 22 .92 17 .6 0 1 6. 91 17 .6 9 11 .57 D

ividendP

ayout Ratio CashP

rofit17

.18

1

4.45

1

3.91

12

.08

9

.25

Earning Retention Ratio 77 .0 4 81 .6 5 82 .44 78 .88 88 .43Cash Earning Retention Ratio 82 .80 85 .0 4 85 .6 5 8 6.4 1 90 .75

AdjustedCash Flow Times 3.88 3. 1 3 4. 28 8 .01 2 .4 2


Earnings P er Share 5 .97 9 .71 1 3. 8 3 7 .9 3 4. 0 4Book Value 21 .3 9 29 .17 40 .21 46. 7 4 1 3. 75


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Net operating profit per share is decreasing means the position of company in stock market is not good. Gross profit and net profitare increasing but at slow rate. Return on capital employed isincreased by 50% means capital is efficiently used by thecompany. Current ratio is not good as it shows excessive cash inhand. Debt equity ratio is very good as it is less than 1.It meanscompany has paid 50% of its debt. Interest cover is increasing.Inventory turnover ratio is stable it means they are not able to

produce and selling more products. Debtors turnover ratio isincreased means company is able to collect the receivables. Assetsare used efficiently.Investments are not proper. Working capital is decreasing which is

very good that company produces finished products in less time period than the previous years. In comparison with expenses, salesare higher in multiple of three. Dividend percentage is decreasingmeans retained profit is used for repaying the loans and to pay for the dividend. Cash earning retention ratio is increasing.


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Simmonds-Marshall

Raw Materials ------------------- in Rs. C r. ------------------- Mar 2010

Product Name Unit Quantity Value Steel Kgs 2 ,695 ,015 18 .7 4Cage, Clips etc Numbers 17 ,8 69 ,63 0 1 .9 6P lating Materials Kgs 115 ,878 0 .6Nylon Inserts Numbers 5 ,77 6,36 9 0 .05 Moulding P owder (Nylon) Kgs 3, 20 3 0 .05 Total 21.40

Simmonds-Marshall

Finished Products ----------------- in Rs. C r. ----------------- Mar 2010

Product Name Unit InstalledC apacity

ProductionQuantity

SalesQuantity

SalesValue

Nylon Self - Locking Nuts Metric Tonnes 2 ,4 00 175 ,52 6, 5 37 .00 17 6, 082 ,401 .00 47 .98

Hexagonal NA NA 1 ,91 6, 900 .00 0 .1 3

Total 48.11

Here we see that sales value is 50% more than the raw material value.


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8 . Conclusion :


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Overall performance of the company is good. Company is growing.

Company s profit is rising but not hugely.

Company maintains good relationship with big Companies like Honda, FIAT andmore.

The Quality of the products is very good as they have ISO and two other qualitycertificates.

The company has not followed any VRS scheme which means it having cableworking force.

The investing strategy of the company is not followed rightly as it not givessatisfied returns.

Cash flow of the company is escalating means income is more than expenses.

The company doesn t hold any reserve with it, so it is problematical for thecompany that if any crisis or the company wants to invest in new projects.

The company is tackling raw material pressures . So the demand should notbe satisfied .


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9.Recommendations:


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The company has to follow new investing strategy. The company has to expand and try to keep up with huge surge indemand and has plans going forward as well.Company wants large capacity expansion plan in place over the next 9to 12 months which should enable the company to more or less doublethe current capacity. So, there is a lot in the pipeline and machinescoming on a monthly basis. Debt to equity ratio is fairly stable right now and the plans goingforward are to probably use both avenues to fund the expansion.

The margins have been fairly good; it has to be managed to sustain themargins. As to continue to grow at the rate the company is growing, Ihope that the margins will only improve in the time to come. As far as raw material is concerned company has to manage to pass ona fair amount of that to our customers.


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10 .Bibliography


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BOOKS AND JOURNALS:

y Financial ManagementAuthor:- Prof. A.P.Rao

y Project Report WritingAuthor:-M.K.Rampal & S.L.Gupta

W EBSITES:

y http://www.bseindia.com y http://www.simmondsmarshall.com y http://www.moneycontrol.com

Documents

Project of Fastener Industry