SUBMITTED BY:

SHIKHAR SRIVASTAVA2015243
ASHISHKUMAR SUNDERLAL DAD-2015204

GODREJ INDUSTRIES
Godrej industries are a member of Godrej groups which laid its foundation stone in the year 1897
and have since grown into a US$1.875 billion conglomerate. Godrej industries is Indias leading
manufacturer of oleo chemicals and makes more than more than a hundred chemicals for use in
over two dozen industries. It also manufactures edible oil, vanaspati, and bakery fats. Earlier the
company was known as Godrej soaps and thereafter, the consumer products got de-merged into
Godrej consumers products, and the residual Godrej soaps became Godrej industries. This led to
the formation of two separate entities: Godrej consumer products and Godrej industries.
Godrej industries limited have built a strong manufacturing base capable of delivering
international quality products at competitive price. It operates two plants, one at Valia in the
Indian state of Gujarat and the other one at Vikhroli in suburban Mumbai. The company is also
involved in exporting products to 40 countries in north and South America, Asia, Europe,
Australia, Africa, and it leads the Indian market in the production of fatty acids and fatty
alcohols.
Godrej industries is now following the policy of Good and Green goals with a vision of
creating a more inclusive and greener India. Their corporate social responsibility (CSR)
initiatives actively work towards the good and green goals and helped them carve out a
reputation for being one of the most socially and environmentally responsible countries in India.
Their corporate social responsibility focuses on other issues also like critical social, environment
and economic needs of the marginalized/underprivileged sections of society. As a practice they
classify only those projects that are over and above their normal course of business as CSR.
By 2020, the group aspires to create a more employable Indian workforce, build a greener India,
and innovate good and green products. The Godrej groups good and green goals for 2020 are:

Train 1 million youth to enhance their earning potential through employability training
program.
Achieve zero waste to landfill, carbon neutrality, a positive water balance, 30% reduction
in specific energy consumption, increase utilization of renewable energy sources through
the Greener India projects
Generate a third of their portfolio revenues from good and/or green products and
services defined as products that are environmentally superior or addresses a critical
social issue (e.g., health, sanitation, disease prevention) for consumers at the bottom of
the income pyramid.

SHIKHAR SRIVASTAVA-2015243
ASHISHKUMAR SUNDERLAL DAD-2015204

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 OBJECTIVE:

To carry out the financial statement analysis of Godrej industries

PERIOD OF STUDY:
2012-2013, 2013-2014, 2014-2015
TYPE OF DATA:
Secondary data

ANALYSIS OF DATA WITH THE HELP OF RATIOS

Financial statements are prepared for disclosure of financial data. They provide vital information
to a variety of stakeholders. However, the information provided by the financial statement cannot
be used to draw meaningful conclusion unless it has been properly analysed and interpreted.
Analysis of financial statements can be carried out by using various techniques. It is necessary to
anaylse financial statements for the purpose of understanding the financial characteristics like
liquidity, profitability, solvency, turnover and cost. The most important technique of financial
statement analysis if financial ratios.
Ratio analysis is a study of relationship among various financial factors in a business or in other
words it can be said that ratio analysis is a form of financial statement analysis that is used to
obtain a quick indication of a firm's financial performance in several key areas.

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Q-3
A. What are the main Revenue Generating Activities (Main Business) of the company?
- The major revenue generating activities are Chemicals which is their main business i.e.
the income generated through it is 75% to 85% in all three years. And next highest is
from finance & investments. These chemicals are majorly items that they make as shop,
cake, oil, etc.
B. What are the areas which are being covered by the Company in its Accounting
Policies? Specify the Accounting Policy being followed for Depreciation, Inventory
Valuation and Basis for Preparation of Accounts.
-

The areas covered by company in its policies are:

1. Accounting Convention
2. Use of Estimates
3. Fixed Assets
4. Asset Impairment
5. Operating Leases
6. Investments
7. Inventories
8. Provisions and Contingent Liabilities
9. Revenue Recognition
10. Research and Development Expenditure
11. Borrowing Costs
12. Foreign Exchange Transactions
13. Hedging
14. Employee Benefits
15. Consolidation of Employee Stock Option Plan Trust
16. Depreciation and Amortization Tangible Assets
17. Taxes on Income
18. Cash and Cash Equivalents
19. Earnings per Share
20. Segment Reporting
-

Depreciation:
Tangible asset:
- Depreciation is provided, pro rata to the period of use, under the Straight
Line Method at the rates specified in Schedule XIV to the Companies Act,
1956 except for computer hardware which is depreciated over its estimated
useful life of 4 years.
- Assets costing less than `5,000 are depreciated at 100% in the year of
acquisition.
- Depreciation on the revalued component is provided on the straight line
method based on the balance useful life of the assets as certified by the

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values. Such depreciation is withdrawn from Revaluation Reserve and

credited to the Statement of Profit and Loss.

Inventory valuation:
Inventories are valued at lower of cost and net realizable value. Cost is
Computed on weighted average basis and is net of cenvat. Finished goods and
work in progress includes cost of conversion and other costs incurred in
bringing the inventories to their present location and condition. Finished
goods valuation also includes excise duty, wherever applicable. Provision is
made for the cost of obsolescence and other anticipated losses, wherever
considered necessary

Basis of preparing policies:

The financial statements are prepared in accordance with generally accepted
accounting principles in India. The Company has prepared these financial statements to
comply in all the material respects with the Accounting Standards notified under the
Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant
provisions of the Companies Act, 1956, read with General Circular 15/2013 dated
September 13, 2013 issued by the Ministry of Corporate Affairs, in respect of section 133
of the Companies Act, 2013 under the historical cost convention on an accrual basis. The
accounting policies have been consistently applied by the Company. For the purpose of
administration of Employee Stock Option Plan of the Company, the Company has
established GPL ESOP Trust. In the current year, in accordance with the opinion issued
by the Expert Advisory Committee (EAC) of the ICAI in 2014 on Consolidation of ESOP
Trust in the standalone financial statements, the Company has included the financial
statements of the ESOP trust for preparation of the standalone financial statements.

C. Cash Flow: Amount in INR corers

Cash flows
Operating
Investing
Financing
-

2014-15
(1049.56)
(458.11)
1409.27

2013-14
(394.04)
(924.37)
1442.95

2012-13
344.15
(774.10)
403.30

As per the above data we can say that cash outflow flow by operating activities is on
increasing. For last two years it is negative which shows more out flow and less inflow.
Hence the company is not getting money which it is invested in inventories and also its
trade receivables are increasing continuously. So the cash flow is not improving rather
degrading. It is concern for company as company is not generating cash from main
activities.
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For investing activities initially for two years the company is investing more but in last
year it has decreased investing. The trend in end shows the cash flow is improving. As
company in these cash will have more in flow if they will invest less.
In financing activities the company is doing well. The trend was good in first two years as
the inflow increased almost thrice. But then decreased in last year. Hence we can say that
cash flow is not improving currently but not bad also.
The company is generating cash mainly due to financing activity and making loss in
operating activities, which is a sign of concern.

Q.4
a) For year 2014-15, find out the percentage of Profit after Tax with that of Net Operating
Revenue and Total Revenue. Repeat this calculation for 2013-14 and 2012-13. Provide
the reasons of change, if any, in these numbers. Explain what information reader is
getting from these numbers.

Year
PAT/ Net opt. Rev.

2014-15
4.11

2013-14
3.7

2012-13
4.11

PAT/ Total Rev.

4.10

3.66

4.09

As per the above data we can see that the ratio is almost same in both given cases for all
the three years. It signifies the revenue generated from other income is not so much that it
affects the ratio. Hence till now the main revenue generating is from operations.
When we compare within years the ratio first decreased and then increased. The PAT as
we saw in annual reports it has increased for initial two years but revenue generated was
very less in 2013-14 so the ratio decreased. While in the year 2014-15 the PAT has
decreased itself. It means their expenses have increased seeing that revenue has increased
prior year.
b) For year 2014-15, find out the percentage of Operating Profit with that of Net Operating
Revenue. Repeat this calculation for 2013-14 and 2012-13. Provide the reasons of
change, if any, in these numbers. Explain what information reader is getting from these
numbers.

Year
2014-15
2013-14
2012-13
Operating
5.60
6.85
5.32
Profit/Net
operating Revenue
The ratio in above table shows both trend first increasing and then decreasing. This is due
to increase in operating profit during year 2013-14, which again decreases in 2014-15.
The net operating revenue is increasing continuously throughout the period which is good
for company. But with it profit should also increase which is occurring during 2013-14
but in next year it is decreasing. So it can be seen that the expenses are more in last year.
The cost of materials consumed is very high in last year but the revenue from it is low
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which makes high trade receivables. For the firm it should have more cash in hand to
grow further. Hence it is a concern when a firm spends more on inventory even if they are
not getting cash.
c) For year 2014-15, find out the percentage of Total Non-Current Liabilities with
that of Shareholders funds. Repeat this calculation for 2013-14 and 2012-13.
Provide the reasons of change, if any, in these numbers. Explain what
information reader is getting from these numbers.
Year
Total Non-Current
Liabilities/
Shareholders funds
-

2014-15
56.32

2013-14
49.47

2012-13
28.73

As we see the ratio is continuously increasing with the year. The main reason is due to
increase in Non- current liability. The company is taking more and more borrowings from
bank. Even though the Shareholders funds are increasing every year the ratio is also
incraesing. This signify that their Non- Current liability is much higher mainly bank loan
which makes company not trushworthy. As they have to pay more interests amd by it
profit will decrease. Company should try to decrease their liability by paying their bank
loans.
d) For year 2014-15, find out the percentage of Total Current Assets with that of Total
Current Liabilities. Repeat this calculation for 2013-14 and 2012-13. Provide the reasons
of change, if any, in these numbers. Explain what information reader is getting from
these numbers:

Year
Total current
assets/total current
liabilities
-

2014-15
117.17

2013-14
35.31

2012-13
90.66

The above value shows a large variation in the ratio. Initially first it decreased and next
year it increased a lot. While increase it is true that current asset will be more than
liabilities and assets are increasing. Company might be having more assets but does it
have more cash in hand. In all cases the other assets are more like trade receivable and
inventories. The company was in bad condition in 2013-14 as percentage was very low
means the current liabilities were much higher. But it has improved vastly in last year due

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to increase in current assets mostly in terms of inventories. But still a big concern in
terms of money.
e) For year 2014-15, find out the percentage of Total Non Current Fixed Tangible Assets
with that of Non Current Liabilities. Repeat this calculation for 2013-14 and 2012-13.
Provide the reasons of change, if any, in these numbers. Explain what information
reader is getting from these numbers.
Year
Total Non-current
fixed tangible asset/
Noncurrent liabilities

2014-15
70.65

2013-14
92.96

2012-13
68.73

As shown in the above data the ratio shows both trend first increasing and decreasing. It
is said that a company having less Non-current liability is good. So by this we can say
that higher the ratio better is the company in position. As per annual reports we can infer
that Non-current Liabilities are continuously increasing but Non-current tangible asset is
not substantially increasing. It has increased for the year 2013-14 so ratio is high which is
good for company.
The money you borrow or take loan from bank is utilized in buying fixed asset mostly or
running business. If ratio is less means the company is investing money more in running
operations due to lack of generation of cash inflows from operating activities. Hence in
last year they have used mostly money in buying inventories. Also increasing liabilities
means you are not able to pay back loans so it is a big concern in end.
f) For year 2014-15, find out the percentage of Total Assets with that of Non Current
Liabilities. Repeat this calculation for 2013-14 and 2012-13. Provide the reasons of
change, if any, in these numbers. Explain what information reader is getting from these
numbers.

Year
Total Asset/NonCurrent Liabilities
-

2014-15
742.86

2013-14
510.86

2012-13
670.81

Here the ratio shows that how much total asset are more than Non- current liabilities. The
more the ratio it is good for the company. The first year shows the decreasing trend due to
increase in liabilities but not so increase in asset especially Tangible asset. As current
asset is also decreasing from 2012-13 to 2013-14 and Non- current fixed asset is
increasing during this year. But their liabilities is increasing much more which shows
they are borrowing more money from market but are not getting more returns as current
assets. In next period the current assets have increased but that also trade receivables are
more so cash in hand is not much. Ratio shows good here but when we see the sheet

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picture says still a lot of money is stuck in market. They should go for more cash so that
liabilities can be decreased.
g) Find out trade receivables turnover ratio and inventory ratio for the year 20142015. Repeat this calculation for 2013-2014, 2012-2013.
Year

2014-2015

2013-2014

2012-2013

Trade
receivables
turnover ratio

6.00

4.75

3.27

Inventory
turnover ratio

0.68

4.23

6.90

The trade receivable turnover ratio is increasing which shows good trend for company. The
companys receivables are getting converted to cash and these cash can be utilized for paying
liabilities. Also high ratio shows that company is not having more bad debts and is improving
from last three years. Though trade receivables are high in last year but they maximum sales also.
The inventory turnover ratio is decreasing that is not good for company. They are not buying
inventory by proper forecasting. Also it has decreased a lot during these three years. Their stock is
holding a lot of money which is not in liquid form so cant be utilized for further operations. Then
company borrows more money to run operating activities.

h) Find out cash flow from operating activities with that of profit after tax for the year
2014-2015. Repeat this calculation for 2013-2014 and 2012-2013.
Year

2014-2015

2013-2014

2012-2013

Cash flow from

operating
activities with
that of profit
after tax

(7.68)

76.99

13.99

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The trend is good in first period as it has increased from 12-13 to 13-14. But then has
gone negative. The firm has to generate cash from its operating activities then only they
are more reliable. The reason for more cash outflow is they are not getting money in
inventories as well as trade receivables are increasing seen from balance sheet. Hence
these are an alarming sign for company. Also they are investing more in finance the liquid
cash they have as they are getting more returns from it. They have to stop investing
inventories and get cash.

i) Find out earning per share for the year 2014-2015. Repeat this calculation for 2013-2014
and 2012-2013.
Year

2014-2015

2013-2014

2012-2013

Earnings per
share (Basic)

12.00

3.569

2.96

Diluted

11.98

3.564

2.95

The best thing the companys progress shows here as the EPS is increasing so largely and
in the end it has increased almost 4 times. But the alarming sign is that they are not
generating money from operating activities. So this might be a short term success for
long term it is uncertain to predict whether t invest money in this company for long time.
The first two years price rise not as high as they were focusing on operations mainly but
in recent year they are turning more on financing activities. Hence company also has a
concern will they be stable in such a way for longer half.

j) Show the share price movement chart of the company during last three years starting
backward from August 01, 2105. Also show dividend/bonus given by the company during
last three years.
-

The below graph shows the last three years share price movement till August. The graph also
shows the dividend given during this period.

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Graph above shows dividend/bonus declared by company thrice during required period.

Dividend Declared

Announcemen
t
Date

Effective
Date

Dividend
Type

Dividend

Remarks

27-05-15

31-07-15

Final

175.00

Rs.1.7500 per share(175%)Final Dividend

28-05-14

31-07-14

Final

175.00

Rs.1.7500 per share(175%)Final Dividend

28-05-13

01-08-13

Final

175.00

Rs.1.7500 per share(175%)Final Dividend

30-05-12

02-08-12

Final

175.00

(%)

5) BIBLIOGRAPHY
The sources used while making this project are:
1) www.godrejindustries.com
2) www.moneycontrol.com
3) Wikipedia

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