“ACCOUNTING FUNDAMENTALS

(FIN 101)
Term Assignment
ON
RATIO ANALYSIS OF ADANI POWER LTD
POST GRADUATE DIPLOMA IN MANAGEMENT
(Term-I; Batch 2019-21)

Under the Supervision of-

DR. MOID UDDIN AHMAD
Submitted by-(GROUP 3)
VINAY KALRA (PGFC1948)
ANKITA SRIVASTAVA (PGFC1907)
AKANKSHA GUPTA (PGFC1956)
SAMINA AHMAD (PGFC1932)
URMILA GIDWANI (PGFC1945)

JAIPURIA INSTITUTE OF MANAGEMENT

A-32 A, Sector 62, Institutional Area, Noida- 201309 (U.P.)”
AMOUNTS IN CRORES WHICH IS REQUIRED TO CALCUALTE RATIOS
18-19 17-18
GROSS PROFIT 115.15 1876.14
NET REVENUE FROM OPERATIONS 2404.20 8120.87
COST OF REVENUE 2287.93 1283.66
OPERATING EXPENSES 1.12 4961.07
NET REVENUE 2404.20 8120.87
NET PROFIT -225.23 -23.77
EBIT 1013.81 1984.00
CAPITAL EMPLOYED 25502.49 11783.18
SHAREHOLDER'S FUND 17127.83 9539.13
NO. OF EQUITY SHARES 385.69 385.69
MARKET PRICE OF SHARE 53.25 31.60
EPS -1.24 -0.06

AVERAGE INVENTORY 39.39 575.10

NET FIXED ASSETS 602.95 642.43
NET CREDIT SALES 2404.20 8120.87
AVERAGE RECIEVABLES 27.00 893.09
NET CREDIT PURCHASES 2217.59 1352.19
AVERAGE TRADE PAYABLE 194.55 2379.55
CURRENT ASSETS 167.42 3371.85
CURRENT LIABILITIES 3372.06 7866.05
QUICK ASSETS 163.33 3297.16
SHORT TERM BORROWINGS 2364.70 7287.96
TOTAL ASSETS 28928.04 19702.21
AVERAGE TOTAL ASSESTS 24315.13 30725.18
LONG TERM DEBTS 8374.7 2244.05
INTEREST ON LONG TERM DEBTS 1239.04 2008.07
TOTAL DEBTS 10739.36 9532.01
 RATIO ANALYSIS OF ADANI POWER LTD.

INTERPRETATIONS

PROFITABILITY RATIOS
“Profitability ratios help us to measures the operation efficiency of the firm and also the firm’s ability to
earn an adequate return on sales, total assets and equity. Under profitable ratios I evaluate various ratios
which are”
  GROSS PROFIT RATIO

GROSS PROFIT RATIO

25.00
23.10
20.00

15.00 GROSS PROFIT RATIO

10.00

5.00 4.79

0.00
17-18 18-19

Gross profit ratio has reduced by 18.3% from last year which indicates that the company’s ability to control
the production cost to generate gross margin had declined considerably.

 OPERATING RATIO

OPERATING RATIO
100
95.21
90
80 76.9
70
60 OPERATING RATIO
50
40
30
20
10
0
17-18 18-19

Operating ratio shows the positive change by 18.3% which indicates that the company lower the expenses
and trying to recover its costs through the revenue.

 NET PROFIT RATIO

 -0.03
NET PROFIT RATIO
0.00
17-18 18-19
-1.00
-2.00
-3.00
-4.00 NET PROFIT RATIO
-5.00
-6.00
-7.00
-8.00
-9.00
-9.37
-10.00

The company shows the net loss of (.29%) in 2017-18 which increased to (9.37)% in 2018-19 year

Reason of company down side of net profit is

 Decline of revenue :- the revenue of company is just 40% percent from its previous year and that make
company totally in down side
 Rising leverage :- Adani have taken a huge amount of debt and due to its low operation activity from
the previous year the expenses side of the which make the negative impact upon the net profit which
result to negative impact upon the ROI of the company which would worry the investors .

 RETURN ON CAPITAL EMPLOYED/INVESTMENT

RETURN ON CAPITAL EMPLOYED

18
16.84
16
14
12 RETURN ON CAPITAL
10 EMPLOYED
8
6
4 3.98
2
0
17-18 18-19

“ROI has been decreased by 12.86% due to increase in the net loss of the company”

 RETURN ON SHAREHOLDER’S FUND/EQUITY

 RETURN ON SHAREHOLDER'S FUND
0
17-18 18-19
-0.2 -0.24
-0.4 RETURN ON
-0.6 SHAREHOLDER'S FUND

-0.8
-1
-1.2
-1.31
-1.4

This ratio is declined by 1.066% from 2017-18 to 2018-19 which implies that even by increasing the
shareholder’s fund in the company ,the company is still not able to increase its net profits.

 P/E RATIO OR EARNING RATIO

As the company is in constant losses for both the accounting periods, therefore the P/E ratio of the
company is N/A.

 BOOK VALUE PER SHARE

BOOK VALUE PER SHARE

50
45 44.41
40
35
30 BOOK VALUE PER SHARE
25 24.73
20
15
10
5
0
17-18 18-19

AS we can see that the company was in losses but still its share price increases from 24.73 in 2018-19 to
44.41 in 2018-19 this is because the shareholders fund of the company rises(no of equity shares remain
constant) because the company issues Unsecured Perpetual Securities (“Securities”) of ` 8,000.00 crores
(net of redemption of ` 2,900.00 crores) to Adani Group Companies. “These Securities are perpetual in
nature with no maturity or redemption and are callable only at the option of the Company.This is the
reason of the increase in BVPS”
 ACTIVITY RATIOS

 INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO

70
60 58.08
50 INVENTORY
40 TURNOVER RATIO
30
20
10
0 2.23
17-18 18-19

Inventory turnover ratio in 2018-19 is higher which implies that company is good in efficient inventory
management as compared to 2017-18.

 TOTAL ASSETS TURNOVER RATIO

TOTAL ASSETS TURNOVER RATIO

0.3
0.25 0.26
0.2 TOTAL ASSETS
TURNOVER RATIO
0.15
0.1 0.1
0.05
0
17-18 18-19

Total assets turnover ratio is reduced by 0.16 which implies that the company isn’t using its assets
efficiently and most likely have management or production problem.
 FIXED ASSTES TURNOVER RATIO

FIXED ASSETS TURNOVER RATIO

14
12 12.64
10 FIXED ASSETS
8 TURNOVER RATIO
6
4 3.99
2
0
17-18 18-19

Fixed assets turnover ratio is reduced by 8.65 which implies that the company has overinvested in fixed
assets.

 TRADE RECEIVABLES TURNOVER RATIO

TRADE RECIEVABLES TURNOVER RATIO

100
90 89.06
80
70 TRADE RECIEVABLES
60 TURNOVER RATIO
50
40
30
20
10 9.09
0
17-18 18-19

The company has a higher trade receivable ratio which indicates that the company is efficient in turning
accounts receivable into cash during a specific period.

 TRADE PAYABLE RATIO

TRADE PAYABLE TURNOVER RATIO

12 11.4
10 TRADE PAYABLE
8 TURNOVER RATIO
6
4
2
0 0.57
17-18 18-19

The company trade payable ratio is increased from its previous year which implies that the company is
paying of its suppliers at a faster rate from its previous year.
 CURRENT RATIO

CURRENT RATIO
0.5
0.45 0.43
0.4
0.35
0.3 CURRENT RATIO
0.25
0.2
0.15
0.1
0.05 0.05
0
17-18 18-19

The current ratio in 2018-19 has decreased as compared to 2017-18 and also both the years ratios are less
than idle ratio which is 2:1 this means that the company doesn’t have enough assets to meet its current
liabilities and may be in the future the operations of the company may get disrupted in the future if the
company doesn’t improve its current ratio.

 QUICK RATIO

QUICK RATIO
0.45
0.4 0.42
0.35
0.3 QUICK RATIO
0.25
0.2
0.15
0.1
0.05 0.05
0
17-18 18-19

The quick ratio is also decreased which shows that ADANI doesn’t have enough liquid assets to meet its
current obligations and the company doesn’t have good liquidity position
  NET WORKING CAPITAL RATIO

NET WORKING CAPITAL RATIO

0
17-18
-500 18-19
-839.94
-1000
-1500 NET WORKING CAPITAL
-2000 RATIO
-2500
-3000
-3500
-4000
-4494.2
-4500
-5000

The company has a negative net working capital in 2018-19 which means the company doesn’t have the
ability to survive in the financial crisis but the company is improving a lot as compared to previous year.

“LEVERAGE RATIO FORMULA 18-19 17-18 CHANGE

DEBT EQUITY RATIO LONG TERM DEBTS/ SHAREHOLDER'S FUND 0.49 0.24 0.25
DEBT RATIO LONG TERM DEBTS/ CAPITAL EMPLOYED 0.33 0.19 0.14
INTEREST COVERAGE RATIO EBIT/INTEREST ON LONG TERM DEBTS 0.82 0.99 -0.17
DEBT TO TOTAL ASSETS RATIO TOTAL DEBTS/ TOTAL ASSETS 0.37 0.48 -0.11”

 DEBT EQUITY RATIO

DEBT EQUITY RATIO

0.6
0.5 0.49
0.4 DEBT EQUITY RATIO
0.3
0.24
0.2
0.1
0
17-18 18-19

“The debt to equity ratio of the company is increased from 2017-18 to 2018-19 by 0.25 which means that
the company is trying to increase its outside borrowings as compared to the shareholders fund but still
0.49 is a good debt equity ratio”
 DEBT RATIO

DEBT RATIO
0.35
0.33
0.3
0.25
DEBT RATIO
0.2 0.19
0.15
0.1
0.05
0
17-18 18-19

The company has a good debt ratio in both the years it means that the company is more reliable on
shareholder funds as compared to outside liabilities.

 INTEREST COVERAGE RATIO

INTEREST COVERAGE RATIO

1.2
0.99
1
0.82
0.8 INTEREST COVERAGE
RATIO
0.6
0.4
0.2
0
17-18 18-19

The ideal ratio has to be greater than one but the ratio in 2017-18 is 0.99 and decreased to 0.82 in 2018-
19

Which means the company is going to be burdened by more debt expenses and the company has less
earnings available to meet the interest payments.
 DEBT TO TOTAL ASSESTS RATIO

DEBT TO TOTAL ASSETS RATIO

0.6
0.48
0.5
0.4 DEBT TO TOTAL ASSETS
0.37 RATIO
0.3
0.2
0.1
0
17-18 18-19

“The company has good debt to total assets ratio and also this ratio decreases by 0.11 from 2017-18 to
2018-19 .The idle ratio has to be less than 1 and Adani company’s ratio is less than 1 which means the
company has more assets than debts”