Ratio Analysis Havells vs Crompton Greaves

By, Anushree Khandalkar SIMSR MMS-25 Sameepya Hora SIMSR MMS-118 Saadat Sheikh SIMSR MMS-55 Aniruddha Bhattacharya SIMSR MMS-106

Electrical Equipment Industry

Rs 21000 Crore Industry Three Major Players :
ABB Crompton Greaves Havells India
Market Share

Others 30%

ACC 29%

Havells 13%

Crompton Greaves 28%

Current Ratio
Havells 1.2 1.29 1.24 CG 1.28 0.99 1.3

Jan/09

Jan/10

Jan/11

Quick Ratio
Havells 1.12 CG 1.12 1.09

0.81

0.5 0.36

Jan/09

Jan/10

Jan/11

Gross Profit Margin

Havells 15.17 12 10.46 8.47 CG 14.84 13.99

Jan/09

Jan/10

Jan/11

Net Profit Margin

Havells CG 11.32 8.4 6.57 9.22 8.02 11.33

Jan/09

Jan/10

Jan/11

Havells

Crompton Greaves

Asset Turnover Ratio

Havells 4.47 4.25 CG

4.66
3.86 3.76 3.93

Jan/09

Jan/10

Jan/11

Inventory Turnover Ratio

Havells 17.88 CG

18.82
16

11.53 7.99 6.98

Jan/09

Jan/10

Jan/11

Return on Capital Employed

HAVELLS 21.67 % CROMPTON GREAVES 38.58%

Efficiency and profitability of companys capital investments ROCE should be greater than rate of borrowing

Accounts Receivable & Accounts Payable

Accounts Receivable in days

HAVELLS 88.1
Accounts Payable in days HAVELLS 193.4

CROMPTON GREAVES 82.8

CROMPTON GREAVES 99.2

Raw Material Inventory In days

HAVELLS 16.84 CROMPTON GREAVES 17.29

Does not impact much, as both almost same

WIP Inventory In days

HAVELLS 5.29 CROMPTON GREAVES 25.8

Higher WIP inventory indicates longer cash cycle. Cash Gap is high Need to decrease WIP inventory in order to improve cash flow High WIP for CG could indicate decrease in Fixed Asset Turnover ratio

WIP Inventory In Days Cont.

Fixed Asset Turnover Ratio
Mar-10 Mar-11 7.43

5.64

4.33

4.3

Havells

CG

Finished Goods Inventory In days

HAVELLS 37.04 CROMPTON GREAVES 4.59

Time taken by company to sell the product it manufactures High FG inventory indicates capital tied up.

Finished Goods Inventory Turnover

HAVELLS 9.85 CROMPTON GREAVES 79.45

Inventory Cost / Sales

HAVELLS 15.43
Raw Material - Havells
Indigenous Imported

CROMPTON GREAVES 11.5

Raw Material - Crompton Greaves
Indigenous Imported

11%

15%

85% 89%

RAW MATERIAL
Ratio RAW MATERIAL CONSUMED / SALES Havells 53.9 % CromptonGreaves 43.19 %

Raw Material Consumed to Sales Ratio is very low for Crompton Greaves which indicates that more raw materials are blocked in Work In Progress. The Ratio for Havells is 54% hence less raw materials are blocked in Work In Progress.

RAW MATERIAL PURCHASED / EXPENDITURE

65.17%

51.30%

Raw Material Purchased to Expenditure indicates how much of the total expenditure is attributed to purchasing raw materials. CromtonGreaves has more efficient processes in comparison to Havells which lowers raw material cost

MAINTENANCE
Ratio MAINTENANCE COST / EXPENDITURE Havells 1.34 % CromptonGreaves 0.59 %

These include parts, supplies, and materials used in or consumed by routine maintenance and repair of operating equipment, or in support of operations. Again this cost is high for Havells indicating the scope for reduction.

MANUFACTURING
Ratio MANUFACTURING COST / TOTAL EXPENDITURE Havells 86.22 % CromptonGreaves 86.37%

SPARES
RATIO STORES & SPARES CONSUMED / SALES Havells 0.0082 % CromptonGreaves 0.0077 %

The Stores & Spares Consumed to Sales ration is approximately same for both the companies

R&D
Ratio R&D EXPENSE / SALES Havells 0.24 % CromptonGreaves 0.95 %

The R&D expense ration is high for Crompton Greaves indicating they put more focus on innovation & new product development as compared to Havells.

SCRAP
Ratio SCRAP SALE / TOTAL SALES Havells 0.62 % CromptonGreaves 0.92 %

Havells has 0.62% of sales attributed to selling of scrap which is better as compared to Crompton Greave as Havells has less scrap which is a undesired result from manufacturing.