COMMENTARY ON CHAIRMANS SPEECH

The company has clear vision and mission for growth and development. The company wants to achieve expansion through dynamism and technical expertise and wants to take benefit of globalization. The Indian market is growing at the rate of 17% in premium segment And 28% in other segment, so company has prepared its brand portfolio for every segment of society and it is trying to launch new categories of ready to drink products like freezers and coolers at the upper end of target segment. The company is also trying to locate new markets like Jammu and Kashmir, Tamil Nadu and Nepal. For the first time in liquor industry the company has introduced ENA Deluxe, a banded extra-neutral alcohol which is comparable with the international brands and company has completed its, over Rs 200 million investment for this technology upgradation of Rampur, U.P. It is the first company to procure technical know how from biogas generation from waste. It is also trying to reduce the packaging cost and bring down its cost of debt, and it has highest credit rating from national and international creditors.

Page No. 1 of 41

COMMENTARY ON DIRECTORS REPORT

The company has consolidated its position in current year regarding sales & profit. Sales have increased by 30% and profit after tax (PAT) by 57%. It shows that the management of the company has taken appropriate steps to boost the sale. The company has launched special appointment premium whisky and Old Admiral brandy and these launches were successful, even in south-Indian states also. Its flagship brand 8 PM has grown by 7% and contessa by 18% over last year. Contessa is supplied to defence forces also. The company has acquired Abhishek Cement Ltd through orders by Board for Industrial and Financial Reconstruction (BIFR). The company has made joint venture with Whiteball for manufacturing of branded liquor. The company is making aggressive quality control and marketing strategy to maintain its present share as well as expansion in new markets and it has a successful story regarding merger and acquisition. The liquor industry in INDIA is directly, indirectly controlled through government agencies, advertisement is also regulated. These are POTA restrictions on exports. The company has performed satisfactory regarding Operational and Financial Management.

Page No. 2 of 41

COMMENTARY ON CORPORATE GOVERNANCE REPORT

Company has issued a report on corporate governance as per SEBI guidelines. It has made full disclosure regarding. Directors, shareholders and Auditors. Following are the important points related with corporate governance. (i) The Board of Directors has not attended the board meeting except Mr. Sanjay Jalan, who is an independent non-executive director. (ii) Company has made full disclosure regarding salary, commission, allowances, retirement benefits, stock option and it has taken full detail regarding the remuneration. (iii) Company has appointed on Audit Committee to analyze the accouting system and all the members have attended the meetings. (iv) Company has established a grievance committee for shareholders, their queries are settled through the committee members and the c0ompany makes proper commission with the shareholders. (v) Company has undertaken a humanist approach for the growth and development of employees. It is trying to make the better relationship with the workers.

Page No. 3 of 41

COMMENTARY ON AUDITORS REPORT

Auditors of the company have stated very clearly that company has given full cooperation and supplied all the documents required by the Auditors. Following are the important points regarding Auditors report: (A) As required by the company law board the Auditors have checked all the informations. (B) Auditors have not made physical verification of the stock and have trusted on the documents given by the company. (C) The Auditors have analysed the order of Board for Industrial and Financial Reconstruction (BIFR) and have merged the assets and liabilities of the acquired company as per the rules of consolidation. (D) Company has not made any provision for the loans in the hope that the company will recover them. It is against the Accounting Standard of Contingent Liabilities. (E) Company is providing depreciation or per the companys Act. Assets acquired before 1st April, 1974 are depreciated by Written Down Value Method and others at Straight Line Method. If Company makes revolution of fixed Assets, and then it makes revolution reserve. (F) Investments are shown at cost price and no provision is made for difference between cost price and market price unless there is no permanent change in value. (G) In current year company has made provisions for deferred tax liability but the deferred tax assets are not sufficient to cover the deffered tax liability which may create problem of cash flow:

Page No. 4 of 41

ANALYSIS OF BALANCE SHEET

1. Shareholders Fund Company has issued share capital and capital base has been increased by 25.3% and the reserves have been increased by 6.8%, which shows lower rate of capitalisation. In Mohan Meakins there is no significant change in share capital and reserve and surplus. So total shareholders fund has been slightly increased by 0.10%. 2. Loan Funds Company has taken some secured and unsecured loans and increase in loan fund is 13%. The amount of share capital and loan fund has been utilised to purchase the fixed assets and capital expenditure incurred on work in progress. In Mohan Meakins no fresh loans have been taken and total loan fund has been reduced slightly by 0.10%. 3. Fixed Assets Company has acquired fixed assets so there is an increment by 22.7%. Main expenditure has been incurred on plant and machinery, acquisition of brands and trademarks and leasehold improvements. It shows that company is trying to increase its operating Assets base. In Mohan Meakins there is on increment of around 3% in Fixed Assets, there is no significant change in capital work in progress. So fixed asset composition is unchanged.

Page No. 5 of 41

4. Investments There is no significant increase in investments. The existing investments have been made in equity shares of whitehall India Ltd. National savings Certificates, unquoted investments are more than 96% in total portfolio. In Mohan Meakins no significant investment has been made in outside companies. The percentage change in investment is only 0.38%. 5. Current Assets, Loans and Advances Current assets have been increased by 24.86%. It is due to increase in

debtors loans and advances given for deposit of excise duty and fixed assets. Loans and advances have been increased by 54% although company has effective employed stock control strategy, so investment in stock has been reduced. In Mohan Meakins the major portion of current assets are inventories and debtors which constitute more than 60% of total current assets, there is increment in debtors by around 1.9% and reduction in inventories by more than 2%. 6. Current Liabilities and Provisions Creditors have been increased by 23.16% and there are no significant changes in provisions according to volume of sale and profit. Net current assets of company have been increased. In Mohan Meakins, the short-term creditors are in same proportion although provisions have been increased by 3%, which is not so significant.

Page No. 6 of 41

ANALYSIS OF PROFIT AND LOSS ACCOUNT

1. Total income It has been increased by 3.89% but other income has been reduced by 26%. It shows that company is concentrating on its core business. The sales turnover of Mohan Meakins is increased by 16%, which is impressive upto some extent but the increment in sale has not been converted into profit. 2. Expenditure The raw material has been reduced by 7.7%, company has also controlled the salary and allowances as well as interest burden by 22.3% but administration and selling expenses have increased by 2.41% depreciation by 32.4%. It shows that company is trying to achieve operational efficiency but its should control uneconomic expenses, so that the savings in cost can be converted to increase the profitability of the company. In Mohan Meakins the expenses on raw material has increased by around 7%, manufacturing expenses by 2%, employees cost by 1.21%, selling expenses by 2.09% and miscellaneous expenses by 3%. It shows that the cost component is rising which is eating out the profit of the company. Even interest burden has been increased by 0.40%, so the profitability after tax is only 0.03%. And overall company has no operational efficiency.

Page No. 7 of 41

RATIO ANALYSIS
Liquid Assets ------------------------------Current liabilities (Amount in Rs.000)
Company Year 2001-02 Radico Khaithan Ltd. 2002-03 2000-01 Mohan Meakins Ltd. 2001-02 455464.516 492161.823 0.93 547824 427520.103 475299 463449.188 1.02 0.92 Current Assets 410521 Current Liabilities 382223 Current Ratio 1.07

(a) Liquid Ratio

ANALYSIS: Liquid Ratio of the company is 1.02. On the other hand in last year it was 1.07, which shows that company has sufficient liquidity to payoff short term debts and it will get finance for its working requirement from commercial banks. CROSS SECTION ANALYSIS: In Mohan Meakins this ratio is 0.93 which shows that it cannot pay its shortterm loans on demand and it may face problem of cash flow because no instant capacity to pay its short term loans.

Page No. 8 of 41

CURRENT RATIO: (b) Current Ratio = Current Assets ------------------------------Current Liabilities (Amount in Rs.000)
Company Year 2001-02 Radico Khaithan Ltd. 2002-03 2000-01 Mohan Meakins Ltd. 2001-02 1007139.061 492161.823 2.04 1260569 896283.404 475299 463449.188 2.65 1.93 Current Assets 1009569 Current Liabilities 382223 Ratio 2.64

ANALYSIS:

In Radico the current ratio for Current Year is 2.65 while last year it was 2.64 which is more or less same. i.e. for 1 unit current liability 2.65 units of current assets are acquired. CROSS SECTION ANALYSIS:

In Mohan Meakins the ratio is 2.04 which is less than radico & not as satisfactory.

Page No. 9 of 41

INVENTORY TURN OVER RATIO (c) Inventory turnover Ratio = Net Sales ------------------------------Inventory (Amount in Rs.000)
Net sales 5160011 5361163 2488191.821 2927089 Inventory 217017 171604 256064.570 315103.368 Inventory turnover ratio 23.7 31.24 9.71 9.3 Conver sion period 15 days 12 days 40 days 39 days

Company

Year 2001-02

Radico Khaithan Ltd. 2002-03 2000-01 Mohan Meakins Ltd. 2001-02

ANALYSIS: Inventory turn over ratio of the company is higher and stock commission period is 12 days. Company has improved the stock conversion period in comparison of last year it was 15 days. It shows that company has successfully adopted material requirement planning and there is neither over nor under stocking. CROSS SECTION ANALYSIS: In Mohan Meakins the Inventory turn over ratio is lower and stock conversion period is around 40 days which shows that company has to incur higher holding cost and there is lost of interest on stock investment. The company has to adopt proper system of stock flow and just in time system of the stock.

Page No. 10 of 41

DEBTORS TURN OVER RATIO (d) Debtors Turnover over Ratio = Sales ------------------------------Closing Debtors (Amount in Rs.000)
Sales 5160011 5361163 248819.182 2927089.003 Debtors 367014 499969 37011.567 407658.115 Ratio 14 10.7 6.7 7.2 Collection period 26 days 34 days 54 days 51 days

Company

Year 2001-02

Radico Khaithan Ltd. 2002-03 2000-01 Mohan Meakins Ltd. 2001-02

ANALYSIS: The collection period of the company is 34 days although in last year it was 26 days, it shows that the collection policy of the company is too lenient. Company should try to reduce the collection period through discount and incentives. CROSS SECTION ANALYSIS: In Mohan Meakins the collection period is more than 50 days, which indicates lack of appropriate credit policy and company may face problem of cash flows.

Page No. 11 of 41

CREDITORS TURN OVER RATIO: (e) Creditors Turnover over Ratio = Purchases ------------------------------Creditors (Amount in Rs.000)
Creditors 347250 427684 406118.275 445736.535 Ratio 3.86 2.8 2 1.7 Payment period 95 days 130 days 183 days 214 days

Company

Year 2001-02

Purchases 1339273 1178747 812678.724 755233.563

Radico Khaithan Ltd. 2002-03 2000-01 Mohan Meakins Ltd. 2001-02

ANALYSIS: The payment period to creditors is around 130 days, which shows that collection period is lower than payment period, which is better for the company, it will reduce the operating cycle. CROSS SECTION ANALYSIS: On the other hand, in Mohan Meakins the payment period is 214 days, which shows that delay in payment to creditors may increase the price of raw material because right suppliers will charge right price and will take payment within appropriate period.

Page No. 12 of 41

FIXED ASSETS TURN OVER RATIO: (f) Fixed Assets Turnover over Ratio = Net Sales ------------------------------Net Fixed assets (Amount in Rs.000) Fixed assets 658816 819915 157795.485 Ratio 7.8 6.54 15.7 16.80

Company

Year 2001-02 2002-03 2000-01 2001-02

Net sales 5160011 5361163 248819.182

Radico Khaithan Ltd.

Mohan Meakins Ltd.

2927089.003 174290.312

ANALYSIS: The fixed assets turn over Ratio of the companys around 7 times which shows every rupees one invested in fixed assets is generating a sale of Rs. 7. It shows that business has performing fixed assets and the appropriate capacity is utilised. CROSS SECTION ANALYSIS: In Mohan Meakins this ratio is around 16 times which is more than the double of Radico. It shows that fixed asset utilisation in Mohan Meakins is better than Radico and Mohan meakins is getting economies of scale regarding utilisation of fixed assets.

Page No. 13 of 41

WORKING CAPITAL TURN OVER RATIO: (g) Working capital Turnover over Ratio = Net Sales ------------------------------Net Working capital (Amount in Rs.000) Working capital 627346 785270 432834.216 Ratio 8.22 6.82 5.75 5.68

Company

Year 2001-02 2002-03 2000-01 2001-02

Net Sales 5160011 5361163 248819.182

Radico Khaithan Ltd.

Mohan Meakins Ltd.

2927089.003 514977.238

ANALYSIS: This ratio for Radico in last year was 8.22 and in current year it is 6.82 which shows that the investment in working capital is generating sufficient sale and working capital utilisation is better. CROSS SECTION ANALYSIS: In Mohan Meakins the ratio is only 5.68 which shows higher investment in fixed assets, but lower revenue generation capacity.

Page No. 14 of 41

DEBT EQUITY RATIO: (h) Debt Equity Ratio = Long Term Debt ------------------------------Equity (Amount in Rs.000) Company Radico Khaithan Ltd. Year 2001-02 2002-03 2000-01 2001-02 Debt 888569 1004976 353424.521 405345.435 Equity 663751 736652 244000.354 278607.883 Ratio 1.33 1.36 1.45 1.45

Mohan Meakins Ltd.

ANALYSIS In RADICO, debt component is more than equity shareholders find which shows dependence on borrowed capital and higher interest burden along with higher beverage, company should bring down its loan by replacing the costly debt through cheaper loans by taking advantages of lower interest rate regime of central government. CROSS SECTION ANALYSIS: In Mohan Meakins this ratio is 1.45 which shows higher loan component and the lower long-term solvency. It may face problem I n arrangement of long term loans.

Page No. 15 of 41

PROFIT BEFORE INTEREST AND TAX RATIO: (i) PBIT Ratio = Operating Profit ------------------------------- x 100 Sales (Amount in Rs.000) Company Year 2001-02 2002-03 2000-01 2001-02 Operating Profit 344229 383300 81002.521 108123.054 Sales 5160011 5361163 2488191.82 Ratio 6.67% 7.14% 3.25%

Radico Khaithan Ltd.

Mohan Meakins Ltd.

2927089.003 3.69%

ANALYSIS: Operating profit margin of RADICO is 7.14% which shows higher cost of oprati0ons, which is 92.86% of sale. Company has controlled its raw material cost; employees cost but due to increase in excise duty by 7.16% the profitability of the company has been adversely affected. The sales has been increased by 3.89%, the material cost and labour cost has been reduced by7.7% and 5.5% respectively. It shows that the company has to control the non-economic expenses like selling and distribution, administration etc. CROSS SECTION ANALYSIS: In Mohan Meakins the situation is worse it is cashing operating profit of only 3.61% which is below the industry standard and it may make default in payment of Interest.

Page No. 16 of 41

PROFIT BEFORE TAX RATIO: (i) PBT Ratio = PBT ------------------------------- x 100 Sales (Amount in Rs.000) Company Radico Khaitan Ltd. Year 2001-02 2002-03 2000-01 2001-02 PBT 166593 234393 32279.308 62798.259 Sales 5160011 5361163 248819.182 Ratio 3.1% 4.27% 1.29%

Mohan Meakins Ltd.

2927089.003 2.14%

ANALYSIS: The profitability before tax is 4.27% which is below the expectation and industry standard, company should try to control the cost related with operation and finance. CROSS SECTION ANALYSIS: In Mohan Meakins it is only 2.14% which is below the expectation and shareholders will be dissatisfied because their wealth will decrease due to fall in share price.

Page No. 17 of 41

PROFIT AFTER TAX RATIO: (k) PAT Ratio = PAT ------------------------------Sales (Amount in Rs.000) Company Radico Khaithan Ltd. Year 2001-02 2002-03 2000-01 2001-02 PBT 149093 185793 779.308 40795.030 Sales 5160011 5361163 248819.182 2927089.003 Ratio 2.89 3.46 0.03 1.4

Mohan Meakins Ltd.

ANALYSIS: This ratio is 3.46%, which is below the industry average. It is even below the risk free return so shareholders are getting nothing for market risk. Although company has made some improvement because in last year it was only 2.89%. It shows that despite the increase in sale the overall profit has been reduced. It is due to financial management and deferred tax provision. CROSS SECTION ANALYSIS: In Mohan Meakins, this ratio is only 1.4%, which indicates that the company is also under the operational and financial mismanagement. In last year it was 0.03% because company is not making better tax planning and both the companies require technical upgradation and innovative management policies.

Page No. 18 of 41

RETURN ON EQUITY / RETURN ON NET WORTH (RONW) (l) Return on Equity = PAT ------------------------------Capital Employed (Amount in Rs.000) Company Year 2001-02 2002-03 2000-01 2001-02 PAT 149093 185793 779308 407950.30 Capital Employed 663751 736652 24400.0354 27860.7383 Ratio 22.46 25.22 0.32 14.64

Radico Khaithan Ltd.

Mohan Meakins Ltd.

ANALYSIS: This ratio is 25.22% in the current year and has been improved from last years 22.46%. It shows that shareholders are getting reasonable return. Large amount has been taken or loan so after tax cost of loan is lower which is giving benefit to the shareholders. CROSS SECTION ANALYSIS: In Mohan Meakins, in last year it was only 0.32% due to excess provision for tax. In 2002, it is 14.64% but it is below RADICO Company needs some basis restructuring regarding operation and finance.

Page No. 19 of 41

RETURN ON CAPITAL EMPLOYED (ROCE) (m) Return on capital employed = PBIT ------------------------------Capital Employed (Amount in Rs.000) PBIT 344229 383300 81002.521 108123.054 Capital employed 1552320 1917538 59742.4875 68395.3318 Ratio 22.17 19.98 13.55 15.8

Company

Year 2001-02 2002-03 2000-01 2001-02

Radico Khaithan Ltd.

Mohan Meakins Ltd.

ANALYSIS: In RADICO ratio is 19.98 although slightly reduced from previous year. It shows that there is earning of 19.98 against Rs. 100 invested as capital, so it will boost the confidence of long term creditors and shareholders because they can get interest as well as dividend. Company can utilize the amount for retained earnings to increase the capital base. So the growth rate is possible. CROSS SECTION ANALYSIS: In Mohan Meakins the ratio is 15.8% which shows that capital profitability of the company is lower and it cannot achieve higher growth rate.

Page No. 20 of 41

INTEREST COVERAGE RATIO: (n) Interest coverage Ratio = PBIT ------------------------------Interest (Amount in Rs.000) PBIT 344229 383300 81002.521 108123.054 Interest 132233 102651 48723.567 45324.795 Ratio 2.6 3.73 1.66 2.38

Company Radico Khaithan Ltd.

Year 2001-02 2002-03 2000-01 2001-02

Mohan Meakins Ltd.

ANALYSIS: The ratio for RADICO is 3.73 although in last year it was only 2.6. It shows that company is in position to pay the interest. The improvement is due to reduction in interest burden through redeeming the debt. Company should increase upto 5 times, so that it can arrange its long-term capital requirement without any problem. Return on capital employed is more than rate of interest, so it can increase the leverage, which will increase the shareholders wealth. CROSS SECTION ANALYSIS: In Mohan Meakins the ratio is 2.38 which is not as satisfactory as required because there may be problem in payment of interest.

SIGNIFICANT ACCOUNTING POLICIES

Page No. 21 of 41

1. Fixed assets Fixed assets are shown at a cost and interest on borrowed capital taken for purchase of fixed assets is capitalised. If Company makes revaluation then the difference is transferred to revaluation reserve, which is as per accounting standard 9. 2. Depreciation The cost of leasehold land is written off according to lease. The assets acquired before 31st March 1974 are charged by written down value method and acquired after this date straight-line method is used. If assets are evaluated then straight-line method is used. If the cost of asset is below 5,000, then depreciation is charged on pro-rata basis. Company is complying the depreciation rates as specified and companies Act, 1956. 3. Inventories Finished good & work in progress are valued according to the lower of cost incurred or net realisable value. Raw material is valued at cost on weighted average basis, which is in accordance to accounting standard 2. 4. Revenue recognition Sales are recognised on delivery or at the time of transfer of ownership. Trade discounts are deducted from sales and export income is recognised on accrual basis. Similar treatment is given for expenses also.

Page No. 22 of 41

5. Treatment of Employees Benefits Company makes regular provisions for provident fund, pension fund, gratuity fund, which are charged to the profit and loss account. The leave encashment is on actual basis. 6. Foreign Currency Transaction Fixed assets are converted at historical exchange rate, current assets and current liabilities at closing exchange rate. If there is any foreign loan liability taken to acquire fixed assets then exchange difference is transferred to assets account. The exchange gain or loss in the trial balance is charged to revenue account.

Page No. 23 of 41

ACCOUNTING POLICIES
1. Changes in accounting policies (a) IAS GAAP: Changes in accounting policies are applied retrospectively, unless the amount of any resulting adjustment that relates to prior periods is not reasonably determinable. Resulting adjustments are reported as an adjustment to the opening balance of retained earnings. Comparative information is restarted unless it is impracticable to do so. However, when the amount of the adjustment to the opening balance of retained earnings cannot be reasonably determined then the changes in accounting policy are applied prospectively. (b) US GAAP: The effect of changes in accounting policies is separately disclosed in the profit and loss account. Prior year figures are not restated. 2. Inventory valuation (a) IAS GAAP: Inventories are valued at lower of cost and net realisable value. Apart from FIFO and weighted average, LIFO is also allowed provided there is disclosure of the lower of ----(i) (ii) net realisable value; and FIFO, weighted average or current cost

Page No. 24 of 41

(b)US GAAP: Inventories should be stated at lower of cost or market except in certain exceptional cases when it might be stated above cost. In cases such as precious metals having a fixed monetary value with no substantial cost of marketing is involved, inventories may be stated at such monetary value. Cost of inventory may be determined under any of several assumptions as to the flow of cost factors (e.g. FIFO, LIFO, and average cost). 3. Depreciation (a) IAS GAAP:: Depreciation rates are based on the useful economic lives of the assets (i.e., useful lives are prescribed and depreciation rates are to be derived from there). (b) US GAAP: Similar to IAS requirements 4. Fixed Assets (a) IAS GAAP: Carried at historical cost. Capitalisation of exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets is not permitted. (b) US GAAP: Carried at historical cost. Exchange differences on repayment of loan for the purpose of acquiring fixed assets are expensed when incurred.

Page No. 25 of 41

5. Revaluation of fixed assets (a) IAS GAAP: Permitted (both upward and downward) by creation of revaluation reserve. Revaluation reserve not available for distribution as dividend. (b) US GAAP: Only downward revaluation is permitted. 6. Revenue recognition (a) IAS GAAP: As per AS 9, revenue is to be recognised when significant risks and rewards of ownership have been transferred and no significant uncertainly exists as to collection. Accrual basis is followed. (b) US GAAP: Revenue recognition requires particular scrutiny when companies prepare their accounts under US GAAP, as there are numerous rules for specific situations. Generally accrual basis is followed. 7. EPS (a) IAS GAAP: Basic (Undiluted) and diluted EPS to be disclosed on the face of the income statement with equal prominence. Only preference dividend is to be deducted from net profit or loss for EPS computations.

Page No. 26 of 41

For determining whether potential equity shares are dilative or not, the following items are to be excluded from net profit. Preference dividend Extraordinary items Items relating to discontinued operations Effects of changes in accounting policies and correction of fundamental errors. (b) US GAAP: Presentation of basic EPS is required. For entities with complex capital structures, diluted EPS is also required to be presented. 8. Investments- debt and equity securities (a) IAS GAAP: Current investments are valued at lower of cost and market value. Long term investments are valued at cost, at revalued amount, or for marketable equity securities at lower of cost or market on a portfolio basis. Permanent

diminution in value of investment to be measured and recognised on an individual basis. (b) US GAAP: Debt and equity securities are classified as: (i) (ii) trading held to maturity

Page No. 27 of 41

(iii)

available for sale

Trading securities are held at market value and profits and losses arising from revaluation are taken to profit and loss account. Securities held to maturity are states as cost and adjusted for any amortization of premium or discount and subject to diminution in value. Available for sale securities is reported at market value. Net realized gains and losses thereon are excluded from earnings and are reported as a separate component of shareholder equity.

Page No. 28 of 41

SEGMENT REPORTING

As per AS-17, company has liquor business and there are product groups like rectified spirit, country liquor, IMFL (Indian made foreign liquor). All product groups have similar risk and return. It is not practically possible to calculate the sales, profit, segment assets and segment revenue, so company has not made full disclosure and combined profit & loss have been calculated since the company is operating only in the domestic sector and export sale is less than 10% of total sales. So separate geographical reporting has not been made.

Page No. 29 of 41

COMMON SIZE RATIO (BALANCE SHEET) RADICO KHAITAN LTD.

200303 SOURCES OF FUNDS : Share Capital Reserves & Surplus Total Shareholders Funds Secured Loans Unsecured Loans Total Loan Funds Total Funds Employed APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Net Block Capital Work in Progress Total Fixed Assets Investments Inventories Sundry Debtors Cash and Bank Balance Loans and Advances Total Current Assets, Loans & Advances Less : Current Liabilities Provisions Total Current Liabilities & Provisions Net Current Assets Miscellaneous Exp. not w/off Total Assets 70.37 23.88 46.49 0.59 47.07 5.11 9.85 28.71 2.72 31.56 72.84 35.12 2.73 37.85 34.99 12.83 100 64.32 22.17 42.14 0.3 42.44 5.74 13.98 23.64 2.78 24.63 65.03 22.37 2.25 24.62 40.41 11.41 100
Page No. 30 of 41

200203 9.91 32.84 42.76 40.32 16.92 57.24 100

11.08 31.22 42.3 38.68 19.02 57.7 100

COMMON SIZE RATIO( BALANCE SHEET) MOHAN MEAKINS LTD.

200203 SOURCES OF FUNDS : Share Capital Reserves & Surplus Total Shareholders Funds Secured Loans Unsecured Loans Total Loan Funds Total Funds Employed APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Net Block Capital Work in Progress Total Fixed Assets Investments Inventories Sundry Debtors Cash and Bank Balance Loans and Advances Total Current Assets, Loans & Advances Less : Current Liabilities Provisions Total Current Liabilities & Provisions Net Current Assets Miscellaneous Exp. not w/off Total Assets 6.21 34.52 40.74 40.21 19.05 59.26 100 75.42 51.92 23.5 1.99 25.49 0.72 58.8 59.61 7 23.04 148.46 70.7 3.96 74.66 73.8 0 100 7.11 33.73 40.84 40.07 19.08 59.16 100 79.81 55.34 24.47 1.94 26.41 1.14 56.14 61.95 9.61 22.33 150.03 70.57 7.01 77.59 72.45 0 100 200103

Page No. 31 of 41

COMMON SIZE RATIO (PROFIT AND LOSS ACCOUNT) RADICO KHAITAN LTD.
200303 (12) INCOME : Sales Turnover Other Income Stock Adjustments Total Income 100 0.49 -0.19 100.29 100 0.67 0.97 101.64 200203 (12)

EXPENDITURE : Raw Materials Excise Duty Power & Fuel Cost Other Manufacturing Exp. Employee Cost Selling and Administration Exp. Miscellaneous Exp. Less : Preoperative Exp. Capitalised PBIDT Interest & Financial Charges PBDT Depreciation PBT Tax PAT 10.13 49.65 2.65 12.67 3.19 13.13 2.05 0 6.81 1.58 5.24 0.86 4.37 0.91 3.47 12.61 48.09 3 13.33 3.5 12.32 2.3 0 6.49 2.38 4.11 0.88 3.23 0.34 2.89

Page No. 32 of 41

COMMON SIZE( PROFIT & LOSS ACCOUNT) MOHAN MEAKINS ;TD.

200203 (12) INCOME : Sales Turnover Other Income Stock Adjustments Total Income 100 2.63 1.69 104.32 100 3.4 0.78 104.18 200103 (12)

EXPENDITURE : Raw Materials Excise Duty Power & Fuel Cost Other Manufacturing Exp. Employee Cost Selling and Administration Exp. Miscellaneous Exp. Less : Preoperative Exp. Capitalised PBIDT Interest & Financial Charges PBDT Depreciation PBT Tax PAT 25.8 31.19 7.09 12.87 10.07 8.97 3.68 0.1 4.76 1.65 3.11 0.96 2.15 0.75 1.39 32.66 14.6 8.68 14.6 11.28 11.06 6.89 0.08 4.49 2.05 2.45 1.15 1.3 1.27 0.03

Page No. 33 of 41

COMMON SIZE RATIOS (BALANCE SHEET)

1. Capital structure of the company consists of 42.76% of shareholders fund and 57.24% long term loans, which shows that the loan component is more. 50 company is more dependent on outsiders, which will increase the interest burden. The share capital is 9.91% and reserve is 32.84%, which shows satisfactory capitalisation rate. In previous year composition of capital structure was similar upto some extent and there is no significant change. In Mohan Meakins the loan component is 59.16% and shareholders fund is 40.84%. It shows higher dependence on loan fund capital structure is more or less equal in both the years. 2. Fixed Assets of the company are lower than current assets; net fixed assets are 42.14%. On the other hand total current assets are 65.03%. Major current assets are debtors and loan and advances. It shows that higher amount of working capital is used and company has balanced asset composition. Current liabilities are 24.62% so net current assets are 40.41%, which shows higher blockage of amount in the form of debtors and loans & advances. In last year fixed assets were 23.5% and capital work in progress was 1.99%. There is no significant change in fixed asset structure. In Mohan Meakins the net fixed assets are 24.47% but total current assets are 150.03%. It shows higher amount of involvement in inventories, debtors and loans & advances. It is a negative sign, because the working capital structure is imbalanced. Net current assets are 72.45% which reflects that some part of long term funds have been used to finance the current assets which is against the business norms. In last year total fixed assets were 25.49% & current year 26.41%, which is not a significant change.

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COMMON SIZE RATIO (PROFIT & LOSS ACCOUNT)

The total income has been distributed in raw material, excise duty, other manufacturing expenses, selling and administration expenses; major part is excise duty, which is 49.65% of total income. Although raw material cost is lower and it is 10.13% No capitalisation of any expenditure is made. The cost of restructuring has increased the PAT which is 3.47%. Although in last year it was 2.89%. The cost structure of the company is balanced but ther is some thing not well with the excise duty because it is only 14.6% in Mohan Meakins. Company should change the product mix to control the excised duty. Last year the raw material was 12.61%, excise duty 48.09%, manufacturing expense 13.33%, selling and distribution 12.32%. All the expenses have been reduced except excise duty and selling and distribution expenses. Interest burden has been reduced to 2.38% from 1.58%. In Mohan Meakins, the cost of raw material is 32.66%, which is higher than RADICO. It has higher cost of manufacturing, employee, selling and administration expenses which is too much and the profit after tax is only 0.03% which will demoralize the shareholdrs as well as long term creditors. It requires the implementation of cost reduction programmes, otherwise it will be in red category. The raw material cost has been reduced proportionately but there is no significant change in other expenses. Interest &financial charges have been reduced from 2.05% to 1.65%. Since large amount of fixed assets were not required so the depreciation has been reduced from 1.15% to 0.96%. But overall the situation has been slightly improved but not upto the desired extent.

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TREND ANALYSIS
Share 1999-00 2000-01 Capital 142.24 142.24 42.5 42.5 (Rs. In Million) 2002-03 192.9 42.5

Years Radico khaitan ltd. Mohan meakins ltd.

2001-02 153.93 42.5

Trend analysis
Amount (in Rs. million) 300 200 100 0 1999- 2000- 2001- 200200 01 02 03 Years
Sales & Other Income Years Radico khaitan ltd. Mohan meakins ltd. 1999-00 2000-01 1920 2422 2157.2 2153.3 2001-02 4805.39 2248.4 2002-03 6208.63 2090.9

Radico khaitan ltd. Mohan meakins ltd.

Amount (in Rs. million)

Trend analysis
10000 5000 0 19 9900 20 0001 20 0102 20 0203

Radico khaitan ltd. Mohan meakins ltd.

Years
Years Radico khaitan ltd. Mohan meakins ltd. Profit After Tax 1999-00 2000-01 77.74 97.67 14.3 20.3 2001-02 118.29 0.8 2002-03 185.79 40.7
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Trend Analysis
Amount(in Rs. million) 200 150 100 50 0 1999- 2000- 2001- 200200 01 02 03 Years
Earnings per share (in Rs.) 1999-00 2000-01 2001-02 5.46 6.87 7.75 3.02 2.28 0.05

Radico khaitan ltd. Mohan meakins ltd.

Years Radico khaitan ltd. Mohan meakins ltd.

2002-03 10.85 4.8

Trend Analysis
Amount(in Rs. million) 15 10 5 0 1999- 2000- 2001- 200200 01 02 03 Years

Radico khaitan ltd. Mohan meakins ltd.

Amount (in Rs.Million)

Years Radico khaitan ltd. Mohan meakins 1000 ltd.

Share holder's fund Trend Analysis 1999-00 2000-01 2001-02 462 524 535 22.85 24.74 24.4

2002-03 812 27.86

500 0 19 9900 20 0001 20 0102 20 0203

Radico khaitan ltd. Mohan meakins ltd.

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Years

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CASH FLOW STATEMENT

Company has prepared cash flow statement as per accounting standard 3 and has presented the cash flow statement in 3 main categories. (i) Cash flow from Operating Activities: The main sources of cash profits are depreciation, and loss on sale of assets. Interest burden has been reduced by 22.5%. The operating profit has been increased by 30% when shows company had made no cash from business operation, the company has purchased more inventories in the current year as well as paid back its short term loans, so the cash flow from working capital change is negative. The stock has been increased by 110% total cash generated by operating activity has been increased by 147% which shows that company has earned large amount of cash profit. Increase in stock may increase the carrying cost. (ii) Cash flow from INVESTING ACTIVITIES: Company has sold fixed assets and amount has been used for repayment of long-term loans, no fresh investments have been made. The interest and dividend income has been reduced by more than 100%, which shows company has made restructuing of its loan and fixed assets (iii) Cash flow form FINANCING ACTIVITIES: Company has issued new shares as well as taken large amount of secured loan, which has been used to pay off unsecured loans. The cash out flow in current assets and current liabilities has been financed through cash profit and some part of fixed assets has

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been sold in capital restructuring. Cash inflow from financing activity has been used to pay off the long-term loans, which is necessary to reduce the interest burden. Overall cash balance has been reduced from Rs. 11509 thousand to Rs. 4332 thousand. It shows that the company requires more cash balance to increase the liquidity.

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INTEGRATED ANALYSIS
RADICO KHAITAN LTD is the Flagship Company of the KHAITAN GROUP. It is producing some flagship brands like Contessa Rum, Black Cat, White field, 8 PM whiskyand Readyto drink products like breezers and coolers. At the upper end company has made joint ventures and distributorship of foreign brands. Company has registered a growth of 30% of sales on Annualised Basis and it has got A1 + rating from ICRA. Company has spent over Rs. 200 million in technological upgradation. It is going to launch ENA Deluxe new brand companyhas acquired Abhishek Cements Ltd in 1997. Directors have declared equity dividend of 18% in the current year. India is a growing economy and there is scope for Indian made foreign liquor. There is market of around Rs. 120 billion but future prospects are bright although there are threats from foreign multinational companies, but company has strong fundamentals. It is a growing company and financial performance is satisfactory, but it needs fundamental restructuring because it can survive only if it cuts the cost. Company has good relationship with shareholders, long term creditors suppliers and business partners. In partners the competitor Mohan Meakins, is not doing well regarding profitability, working capital management and its shareholders as well as long term creditors both are dissatisfied. The degree of risk in Mohan Meakin is greater than RADICO. Investors will prefer radico. Similarly, the credit rating of RADICO is better than Mohan Meakins. The long term return to shareholders is higher in RADICO, so its share prices will increase which will increase the wealth of shareholders, because it is operating at a concept of wealth maximisation.

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A Project On

ANALYSIS OF FINANCIAL STATEMENTS OF RADICO KHAITAN LTD.

Submitted to:

Mr. SANJEEV SINGHAL

Submitted by:

CHANDAN BALUJA
MSC IBM, SECTION-B ROLL NO.51

FORE SCHOOL OF MANAGEMENT NEW DELHI

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ACKNOWLEDGEMENT
The successful completion of this project is the result of help extended by all those people who helped me to gather the relevant information and data required for the completion of the assigned project. I express my sincere gratitude to Mr. Sanjeev Singhal who has shown me the view and the way to achieve it. Without thus help and cooperation, I would not have been able to do my project so successfully.

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TABLE OF CONTENTS
Commentary on Chairman Review Commentary on Directors Report Commentary on Corporate Governance Commentary on Auditors Report Analysis of Balance Sheet Analysis Profit and Loss Accounts Ratio Analysis Significant Accounting Policies Accounting Policies in Comparison to IAS and US GAAP Segment Analysis Common size Ratio of Balance Sheet Common Size Ratio of Profit and Loss Account Analysis of Common Size Statement Trend Analysis Analysis of Cash Flow Statement Integrated Analysis 1 2 3 4 5 7 8 22 24 29 30 32 34 36 39 41

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