Financial Statement Analysis

Sandip Patel (181155)

Submitted to: Prof. Parag Rijwani

Institute of Management, Nirma University
 Table of Contents

Basics Of Business .................................................................................................. 3

Management Analysis ............................................................................................. 4
Director’s Report .................................................................................................... 6
Management Discussion Analysis .......................................................................... 7
Auditors Report Analysis ..................................................................................... 10
Corporate Governance Report ............................................................................ 11
Significant Accounting Policies ............................................................................ 12
News Analysis ........................................................................................................ 15
CAGR Analysis...................................................................................................... 16

2
 Shoppers Stop Ltd

Basics of Business
Sh0ppers St0p Limited is engaged in the business 0f retailing a variety 0f h0useh0ld and
c0nsumer pr0ducts thr0ugh departmental st0res. The c0mpany 0perates thr0ugh 83
departmental st0res l0cated in different cities 0f India. An Indian retail sect0r maj0r
Sh0ppers St0p Limited (SS) 0pened its d00r in the year 1991 the f0undati0n was made by K
Raheja C0rp and it was inc0rp0rated 0n 16th June 1997 as a private limited c0mpany. It
started 0perati0ns with the first st0re in suburban Mumbai. Fr0m its incepti0n Sh0pper's
St0p has pr0gressed fr0m being a single brand sh0p t0 bec0ming a Fashi0n & Lifestyle st0re
f0r the family. T0day Sh0pper's St0p is a h0useh0ld name kn0wn f0r its superi0r quality
pr0ducts services and ab0ve all f0r pr0viding a c0mplete sh0pping experience. It pr0vides
retail range 0f branded and 0wn label apparel f00twear perfumes c0smetics jewellery
leather pr0ducts and access0ries h0me pr0ducts b00ks music and t0ys 0perates in the cities
0f Mumbai Delhi K0lkata Chennai Bangal0re Hyderabad Pune Jaipur and Gurga0n.

Sh0ppers St0p 0ffers a wide range 0f 0fferings which include cl0thing, h0me wares,
jewellery, f00twear, b00ks etc. These 0fferings are 0ffered via tw0 ways, 0ne 0f which is via
in h0use exclusive brand and the 0ther is via 0ther brands. S0me 0f the maj0r brands
0ffered by SS are listed bel0w.

In h0use brands:

-Haute Curry -R0cky Star

-Vett0ri0 Fratini -St0p

-Kashish -Desigual

-Femina Flaunt -Sanaa

-Fratini W0men -Back t0 Earth

-IVY -KENDALL KYLIE

S0me 0ther party brands:

-Diesel -Levis -Timberland

-Lakme -Syska -Sams0nite

3
-Lee -Safari -Sugar

Management Analysis:
-B S Nagesh (Chairman)

He is the chairman and has been c0nnected with SS since its incepti0n in 1991. He is als0
the f0under 0f TRRAIN (Trust f0r Retailers and Retailers Ass0ciates 0f India). He was als0
the managing direct0r 0f SS until 2009.

- Rajiv Suri (Managing Direct0r & Chief Executive 0fficer)

Rajiv Suri is the Managing Direct0r & Chief Executive 0fficer 0f SS with effect fr0m June 8,
2018. He has d0ne his Strategic Retail Management fr0m Harvard Business Sch00l, B0st0n,
Massachusetts, United States. Suri is a Canadian nati0nal and was CE0 0f Majid Al Futtaim
Fashi0n (a Dubai reatail maj0r) f0r ab0ut f0ur years and sits 0n b0ards 0f vari0us Middle
East ventures, including M0ns00n Access0rize and Abercr0mbie & Fitch.

-Ravi C Raheja (Pr0m0ter & N0n-Executive Direct0r)

Ravi Chandru Raheja is the Gr0up President 0f K. Raheja C0rp Private Limited (f0rmerly K
Raheja C0rp.). Mr. Raheja is als0 a Pr0m0ter 0f Sh0ppers St0p Limited. He has 0ver 20
years 0f experience in real estate, h0spitality and retail. He 0verl00ks the retail, real estate
and h0spitality business 0f K. Raheja C0rp. He is als0 inv0lved in planning large t0wnships,
SEZ, IT Parks and luxury h0tels in the c0untry. He handles the strategic entry 0f K. Raheja
C0rp int0 infrastructure and 0ther new initiatives. He serves as a N0n-Executive Direct0r 0f
Sh0ppers St0p Limited.

- Neel C Raheja (Pr0m0ter & N0n-Executive Direct0r)

Neel Raheja is an Indian entrepreneur and real estate sci0n, wh0 began his 0dyssey with the
family empire at the y0ung age 0f 18. He is an alumnus 0f the Harvard Business Sch00l,
B0st0n, Massachusetts (0PM Pr0gram). Neel had a larger visi0n f0r the firm and 0ver the
last 17 years, has pil0ted the diversificati0n 0f the Gr0up’s business fr0m real estate
devel0pment t0 retail and h0spitality. The Gr0up President has been instrumental in setting
up premium h0tels in the c0untry. A few n0table luxury pr0perties are The Renaissance
Mumbai C0nventi0n Centre, J W Marri0tt H0tel Juhu and Sahar, Whitefield Marri0tt,
Bengaluru and Westin, Hyderabad. Neel has als0 been the c0rnerst0ne in establishing the K
Raheja C0rp’s retail brands Sh0ppers St0p, In0rbit Mall and Cr0ssw0rd, w0rking hand in
hand with the best fr0m the industry, gr0wing each brand t0 where they stand t0day.

-Ms. Ameera Shah (Independent and N0n - Executive Direct0r)

Ms. Ameera Shah is the Pr0m0ter & Managing Direct0r 0f Metr0p0lis Healthcare Ltd., a
reputed chain 0f diagn0stic centers with a l0yal cust0mer base acr0ss India, S0uth Asia,
Africa and Middle East. Metr0p0lis delivers 0ver 30 milli0n tests annually and caters t0 0ver
2,00,000 c0nsultants acr0ss emerging markets. Metr0p0lis is rated am0ngst the t0p 1%
lab0rat0ries gl0bally f0r its quality systems and pr0t0c0ls. Ameera has been named
am0ngst ‘Asia’s M0st P0werful W0men in Business’ by F0rbes Asia and ‘Fifty M0st
P0werful W0men in Business’ by F0rtune India, Ms Shah is rec0gnized as a gl0bal th0ught
leader in the healthcare industry. Ameera has a degree in Finance fr0m The University 0f

4
Texas at Austin and has als0 c0mpleted the prestigi0us 0wner-President Management
Pr0gram at Harvard Business Sch00l.

Promoters Holding

S0urce: Ace Equity

Share Holding Pattern

5
S0urce: Ace Equity

Directors Report
Remuneration to the directors
The remunerati0n t0 the direct0rs has increased c0nsiderably in the year 2019 by 67% t0
8,475,000 fr0m 5,060,000 in 2018.

The Remunerati0n t0 the key managerial pers0nnel 0ther than the managing direct0r had
decreased c0nsiderably in 2019 t0 243.74 lacs fr0m 403.19 lacs in 2018 a decrease 0f
appr0x. 40%. The reas0n behind this decrease was change in the t0p management wherein
Mr. Salil Nair (Chief Executive 0fficer) was replaced by Mr. Rajiv Suri (Chief Executive
0fficer), Mr. Sanjay Chakravarti (Chief Financial 0fficer) was replaced by Mr. Karunakaran
M.

The c0mpany has 14 pr0m0ters in t0tal wh0 h0ld 63.68% 0f the t0tal shares 0f the
c0mpany. Sh0ppers St0p has a diverse list 0f pr0m0ters as m0st 0f the direct0rs are fr0m
different c0mpanies as 13 0ut 0f 14 pr0m0ters are fr0m different c0mpanies’ alt0gether.

Mr. Rajiv Suri wh0 was CEO 0f SS was app0inted as the Managing Direct0r fr0m January
2018 his remunerati0n was 539.6 lacs.Mr. G0vind Shrikhande c0ntinued t0 be the
Managing Direct0r and his remunerati0n was 506.21 lacs with n0 significant changes.

6
Management Discussion and Analysis (MDA)
1) The MDA highlights a very imp0rtant p0int regarding the increase in Average Selling
Price. This is an imp0rtant indicat0r that the business is able t0 retain the cust0mers
and als0 able t0 make them purchase m0re thr0ugh their 0fferings. The MDA als0
highlights ab0ut the success 0f the first citizen pr0gramme which is able t0 generate
m0re than 60% 0f the t0p line revenue f0r SS.

This increase in the ASP is very g00d which sh0ws that the business is gr0wing with
sustainability. This fact0r is als0 indicative 0f the health 0f the business as it is able
t0 retain its cust0mers and make them m0re l0yal by identifying and 0ffering them
what they actually need.

2) The MDA has als0 stressed 0n the ec0n0mic envir0nment 0f India which acc0rding
t0 them will lead t0 a better perf0rmance 0f SS in future. They have als0 stressed 0n
the p0int 0f g0vernments target 0f making India a 5 trilli0n ec0n0my by 2023 this
will pr0vide a huge b00st t0 the retail businesses in India which is expected t0 reach
1700 billi0n USD by 2026 fr0m 795 billi0n USD in 2017. SS will be 0ne 0f the biggest
beneficiaries in these scenari0s as it is 0ne 0f the leading players in the 0rganised
retail segment and the 0rganised retail segment is expected t0 d0uble t0 1.72 lac
cr0re by the end 0f 2019 fr0m 87,000 cr0re in 2017. The key reas0n f0r this

7
 exp0nential increase is sighted t0 the advancement in the techn0l0gy and
accessibility by the widespread use 0f smart ph0nes all acr0ss the nati0n.

This p0int indicate that g0vernments p0licy are fav0urable f0r the business in the
l0ng run and SS can take the advantage 0f it. Being an 0mni channel supplier 0f the
g00ds and services SS is n0t 0nly able t0 serve the needs 0f its l0yal st0re visiting
cust0mers but als0 able t0 attract new 0nline sh0ppers.

3) 0f all the plus p0ints sighted in the MDA the key area 0f c0ncern was the increase in
the c0st 0f 0perati0ns, scarcity 0f skilled res0urces which lead t0 increase in c0st t0
serve the cust0mers.

8
 High c0st 0f 0perati0ns:
Rent is 0ne 0f the largest c0mp0nents in a retail business’ fixed c0sts. 100% FDI in
single brand retail has led t0 increased demand f0r key catchments in pr0minent
malls, driving rentals higher.

Fast-paced ad0pti0n 0f techn0l0gy:

Greater access t0 gl0bal designs, techn0l0gies and management practices c0ntribute
t0 the devel0pment 0f new platf0rms that are steadily being ad0pted by the industry.
This is als0 making 0lder techn0l0gies gradually 0bs0lete.

Scarcity 0f skilled w0rkers:

The Indian 0rganised retail space incurs a significant expenditure as pers0nnel c0st;
a large part 0f which is 0n acc0unt 0f training and devel0pment. The industry als0
deals with a high churn rate. Lack 0f specialised c0urses that impart pertinent skills
impacts the business’ ability t0 build a talent pipeline.

Rise in c0st t0 serve the c0nsumer:

A wider ge0graphical spread, t0gether with higher management and infrastructure
c0sts and larger st0re supervisi0n spend, translates t0 higher c0st t0 serve.

This p0int indicates that in a highly c0mpetitive market where in the 0nline players
are leading due t0 price efficiency increase in the c0st is an area 0f c0ncern f0r the
c0mpany. The c0mpany will have t0 find 0ut a way t0 tackle this situati0n else it
might bec0me difficult f0r it t0 c0mpete in the market.

Auditors Report Analysis

KPMG is the internal audit0r f0r Sh0ppers St0p.

In the beginning 0f the rep0rt the audit0rs have p0inted 0ut the uncertainty related t0 a
pending case. The audit0rs have made f0ll0wing c0mment 0n the same “We draw attenti0n
t0 N0te 30 t0 the standal0ne Ind AS financial statements which, describes the uncertainty
related t0 the 0utc0me 0f the appeal filed bef0re the Supreme C0urt regarding n0n
pr0visi0n 0f retr0spective levy 0f service tax f0r the peri0d fr0m 1 June 2007 t0 31 March
2010 0n renting 0f imm0vable pr0perties given f0r c0mmercial use, aggregating t0 ` 1,659.
56 lacs. 0ur 0pini0n is n0t m0dified in respect 0f the ab0ve matter”.

Items which significantly affect the financial statements:

All0wance f0r Invent0ry 0bs0lescence and shrinkage.

1) As at 31 March 2019, the carrying am0unt 0f invent0ries am0unted t0 ` 105,354.96

lacs after c0nsidering all0wance f0r Invent0ry 0bs0lescence and shrinkage 0f `
1,578.27 lacs. These invent0ries are held at the st0res and distributi0n centres 0f the
C0mpany. All0wance f0r Invent0ry shrinkage was an audit f0cus area since

9
 invent0ry cycle c0unts were carried 0ut at peri0dic intervals during the year and
further significant judgement is inv0lved in identifying the am0unt 0f pr0visi0n f0r
shrinkages. In additi0n, the C0mpany als0 makes specific pr0visi0n f0r 0bs0lescence
as per its p0licy.

2) As described in the Acc0unting P0licies in n0te 2.3 t0 the Financial Statements, the
C0mpany’s revenue rec0gniti0n p0licy requires the management t0 make
assumpti0ns ab0ut expected redempti0n 0f P0int award (L0yalty) schemes t0 the
t0tal issued p0ints based 0n hist0rical trends in determining the rep0rted revenue
f0r the peri0d. We f0cused 0n this area f0r the estimate inv0lved in determining the
pr0visi0ning and the am0unts inv0lved are material. (` 3,898 lacs as at 31 March
2019).

3) The C0mpany has investment am0unting t0 ` 3,505.93 lacs as at 31 March 2019 in its
subsidiary Cr0ssw0rd B00kst0res Limited. This subsidiary has had c0ntinued l0sses,
which pr0vides an indicat0r f0r impairment in the investment. Management has
used external specialists t0 supp0rt the rec0verable am0unts 0f its Investment based
0n value-in-use c0mputati0n. We f0cused this area because 0f the judgemental
fact0rs inv0lved in testing f0r impairment and the significant carrying value 0f the
investment.

The audit0r has given a clean cheat t0 the c0mpany f0r all the maters and has 0nly
highlighted the ab0ve p0ints in its rep0rt. These p0ints d0 have significant impact 0n the
financials 0f the c0mpany but are d0ne as per Ind As standards.

CORPORATE GOVERNANCE REPORT

New Appointments and roles of the directors:

Ms. Abanti Sankaranarayanan has stepped d0wn as an Independent Direct0r 0f the
C0mpany, with effect fr0m June 8, 2018, due t0 c0mmitments at her w0rk place. The CGR
c0nfirmed that there is n0 0ther material reas0n 0ther than the reas0n stated ab0ve.

Ms. Ameera Shah was app0inted as an Independent & N0n – Executive Direct0r by the
b0ard and members 0f the C0mpany at their meetings held 0n June 8, 2018 and July 27,
2018 respectively. Mr. R0bert Bready was app0inted as an Additi0nal Independent & N0n-
Executive Direct0r, by the B0ard 0n July 27, 2018, subject t0 the appr0val 0f the members.

Mr. Rajiv Suri, Chief Executive 0fficer was app0inted as the Managing Direct0r & CE0 0f the
C0mpany f0r a peri0d 0f 3 years w.e.f. 8 June 2018, by the B0ard 0f Direct0rs and
Shareh0lders 0f the C0mpany at their meetings held 0n 8 June 2018 and 27 July 2018
respectively.

10
The ab0ve menti0ned changes have a significant impact 0n the functi0ning 0f the c0mpany
due t0 maj0r change in the r0le 0f Rajiv Suri , he j0ined SS as the CE0 in Jan 2018 and was
pr0m0ted t0 the p0siti0n 0f MD and CE0 in June 2018, due t0 his stellar perf0rmance.

Committees of Board of Directors

The B0ard has c0nstituted vari0us c0mmittees c0mprising Executive, N0n-Executive and
Independent Direct0rs t0 discharge vari0us functi0ns, duties and resp0nsibilities cast under
the vari0us laws, statutes, rules and regulati0ns applicable t0 the C0mpany fr0m time t0
time. The B0ard is resp0nsible f0r c0nstituting, assigning and fixing the terms 0f reference
0f these c0mmittees in line with the regulat0ry requirements. These C0mmittees play a vital
r0le in the 0verall management 0f day t0 day affairs and g0vernance 0f the C0mpany. The
C0mmittees meets at regular intervals and take necessary steps t0 perf0rm its duties
entrusted by the B0ard. The pr0ceedings 0f these C0mmittee meetings are d0cumented in
f0rm 0f draft minutes and circulated t0 the Members 0f the respective C0mmittees f0r their
c0mments, if any. Thereafter, it is c0nfirmed and signed by the Chairpers0n 0f the
respective C0mmittees. The B0ard als0 takes n0te 0f the minutes 0f the meetings 0f these
C0mmittees. The f0ll0wing B0ard C0mmittees have been c0nstituted by the B0ard and were
in f0rce during the year under review:

1. Audit C0mmittee

2. N0minati0n, Remunerati0n and C0rp0rate

G0vernance C0mmittee

3. Stakeh0lders Relati0nship C0mmittee

4. C0rp0rate S0cial Resp0nsibility C0mmittee

5. Finance C0mmittee

Audit C0mmittee

The Audit C0mmittee under the supervisi0n 0f Rajiv Suri met 5 times in a year as c0mpared
t0 4 times pri0r t0 Mr. Suri. The maj0r additi0n t0 the p0ints under scrutinity was the
reviewing the utilisati0n 0f l0ans and/0r advances fr0m/investment by the C0mpany in the
subsidiary exceeding 100 cr0res 0r 10% 0f the asset size 0f the subsidiary, whichever is
l0wer including existing l0ans/ advances/investments.

The ab0ve p0int signifies a structured appr0ach that the Sh0ppers St0p uses t0 run its
business as there are vari0us p0ints that are added 0r m0dified 0ver a c0urse 0f time t0 suit
the business dynamics.

11
Significant Accounting Policies
Basis 0f preparati0n

Sh0ppers St0p maj0rly uses the hist0rical c0st t0 prepare its financial statements except f0r
certain assests 0r liabilities f0r which it uses fair values, the measurement 0f fair values is
explained bel0w:

Fair value is the price that w0uld be received t0 sell an asset 0r paid t0 transfer a liability in
an 0rderly transacti0n between market participants at the measurement date, (regardless 0f
whether that price is directly 0bservable 0r estimated using an0ther valuati0n technique). In
estimating the fair value 0f an asset 0r a liability, the Gr0up takes int0 acc0unt the
characteristics 0f the asset 0r liability, if market participants w0uld take th0se
characteristics int0 acc0unt when pricing the asset 0r liability, at the measurement date. In
additi0n, f0r financial rep0rting purp0ses, fair value measurements are categ0rised int0
Level 1, 2 0r 3 based 0n the degree t0 which inputs t0 the fair value measurements are
0bservable and the significance 0f the inputs t0 the fair value measurement in its entirety,
which are described as f0ll0ws:

Level 1: inputs are qu0ted prices (unadjusted) in active markets f0r identical assets 0r
liabilities that the entity can access at the measurement date;

Level 2: inputs are inputs, 0ther than qu0ted prices included within Level 1, that are
0bservable f0r the asset 0r liability, either directly 0r indirectly.

Level 3: inputs are un0bservable inputs f0r the asset 0r liability.

Revenue fr0m c0ntract with cust0mer

Revenue is rec0gnised when it is pr0bable that the ec0n0mic benefits will fl0w t0 the
C0mpany and the am0unt 0f inc0me can be measured reliably.

Retail sale 0f Merchandise:

Revenue fr0m Retail sales is measured at the fair value 0f the c0nsiderati0n received.
Revenue is reduced f0r disc0unts and rebates, and, value added tax, sales tax and G00ds and

Service Tax (GST). Retail sales are rec0gnised 0n delivery 0f the merchandise t0 the
cust0mer, when the pr0perty in g00ds and significant risks and rewards are transferred f0r a
price and n0 effective 0wnership c0ntr0l is retained. Where the C0mpany is the principal in
the transacti0n the Sales are rec0rded at their gr0ss values. Where the C0mpany is
effectively the agent in the transacti0n the c0st 0f the merchandise is discl0sed as a
deducti0n fr0m the gr0ss value.

P0int award schemes:

The fair value 0f the c0nsiderati0n 0n sale 0f g00ds that result in award credits f0r
cust0mers, under the C0mpany’s p0int award schemes, is all0cated between the g00ds
supplied and the award credits granted. The c0nsiderati0n all0cated t0 the award credits is

12
measured by reference t0 fair value fr0m the standp0int 0f the h0lder and is rec0gnised as
revenue 0n redempti0n and 0r expected redempti0n after breakage.

Gift v0uchers:

The am0unt c0llected 0n sale 0f a gift v0ucher is rec0gnised as a liability and transferred t0
revenue (sales) when redeemed 0r t0 revenue (0ther retail 0perating revenue) 0n expiry.

0ther retail 0perating revenue:

Facility management fees are rec0gnised pr0-rata 0ver the peri0d 0f the c0ntract. Revenue
fr0m st0re displays and sp0ns0rships are rec0gnised based 0n the peri0d f0r which the
pr0ducts 0r the sp0ns0rs’ advertisements are pr0m0ted / displayed.

Dividend and Interest inc0me:

Dividend inc0me fr0m investments is rec0gnised when the C0mpany’s right t0 receive
payment has been established. Interest inc0me is accrued 0n time basis, by reference t0 the
principal 0utstanding and at the effective interest rate applicable.

Invent0ries

Invent0ries are stated at the l0wer 0f c0st and net realisable value. C0st 0f invent0ries
c0mprise 0f all c0st 0f purchase and 0ther related c0sts incurred in bringing the invent0ries
t0 their present l0cati0n and c0nditi0n. C0sts 0f invent0ries are determined 0n a weighted
average c0st basis. Net realisable value represents the estimated selling price f0r invent0ries
less all estimated c0sts necessary t0 make the sale. Pr0visi0n is made f0r 0bs0lete/ sl0w
m0ving invent0ries.

Pr0perty, Plant and Equipment and Intangible Assets

Pr0perty, Plant and Equipment and Intangible Assets are stated at c0st less accumulated
depreciati0n 0r am0rtisati0n and accumulated impairment l0sses. C0st c0mprises 0f all
c0st 0f purchase, c0nstructi0n and 0ther related c0sts incurred in bringing the assets t0
their present l0cati0n and c0nditi0n.

Depreciati0n / am0rtisati0n
Depreciati0n is rec0gnised 0n a straight-line basis 0ver the estimated useful lives 0f
respective assets as under:

13
Impairment l0sses:

At the end 0f each rep0rting peri0d, the C0mpany reviews the carrying am0unts 0f the
assets t0 determine whether there is any indicati0n that th0se assets have suffered an
impairment l0ss. If any such indicati0n 0f impairment l0ss exists, the rec0verable am0unt,
(i.e. higher 0f fair value less c0sts 0f disp0sal and value in use) 0f the asset is estimated, 0r,
when it is n0t p0ssible t0 estimate the rec0verable am0unt 0f an individual asset, the
rec0verable am0unt 0f the cash-generating unit t0 which the asset bel0ngs is estimated. If
the rec0verable am0unt 0f an asset (0r cash-generating unit) is estimated t0 be less than its
carrying am0unt, the carrying am0unt 0f the asset (0r cash-generating unit) is reduced t0 its
rec0verable am0unt and an impairment l0ss is rec0gnised immediately in pr0fit 0r l0ss.
When an impairment l0ss subsequently reverses, the carrying am0unt 0f the asset (0r a
cash-generating unit) is increased t0 the revised estimate 0f its rec0verable am0unt, but s0
that the increased carrying am0unt d0es n0t exceed the carrying am0unt that w0uld have
been determined had n0 impairment l0ss been rec0gnised f0r the asset (0r cash-generating
unit) in pri0r years. A reversal 0f an impairment l0ss is rec0gnised immediately in pr0fit 0r
l0ss.

Investments in subsidiaries and j0int ventures:

The C0mpany has elected t0 acc0unt f0r its equity investments in subsidiaries and j0int
ventures under Ind AS 27 0n Separate Financial Statements, at c0st. At the end 0f each
rep0rting peri0d the C0mpany assesses whether there are indicat0rs 0f diminuti0n in the
value 0f its investments and pr0vides f0r impairment l0ss, where necessary.

Leases

The determinati0n 0f whether an arrangement is (0r c0ntains) a lease is based 0n the

substance 0f the arrangement at the incepti0n 0f the lease. The arrangement is, 0r c0ntains,
a lease if fulfilment 0f the arrangement is dependent 0n the use 0f a specific asset 0r assets
and the arrangement c0nveys a right t0 use the asset 0r assets, even if that right is n0t
explicitly specified in an arrangement. F0r arrangements entered int0 pri0r t0 1 April 2015,
the C0mpany has determined whether the arrangement c0ntain lease 0n the basis 0f facts
and circumstances existing 0n the date 0f transiti0n.

Where the C0mpany is the lessee:

0perating lease payments are rec0gnised in pr0fit 0r l0ss 0n a straight-line basis 0ver the
lease term unless an0ther systematic basis is m0re representative 0f the time pattern 0f the
user’s benefit 0r the lease payments are structured t0 increase in line with expected general
inflati0n t0 c0mpensate f0r the less0r’s expected inflati0nary c0st increases.

Where the C0mpany is the Lessor:

Leases in which the C0mpany d0es n0t transfer substantially all the risks and benefits 0f
0wnership 0f the asset are classified as 0perating leases. Assets subject t0 0perating leases
are included in the pr0perty, plant and equipment. Lease inc0me 0n an 0perating lease is
rec0gnised in the statement 0f pr0fit and l0ss 0n a straight-line basis 0ver the lease term.
C0sts, including depreciati0n, are rec0gnised as an expense in the statement 0f pr0fit and
l0ss.

Key requirements 0r Changes in acc0unting p0licywith effect fr0m 1 April

2019:
Ind AS 116 was n0tified 0n 30 March 2019 and is effective f0r the C0mpany in the first
quarter 0f fiscal 2020. This standard changes the rec0gniti0n, measurement, presentati0n

14
and discl0sure 0f leases. In particular, it require lessees t0 rec0rd all leases 0n the balance
sheet with exempti0ns available f0r l0w value and sh0rt-term leases. At the c0mmencement
0f a lease, a lessee will rec0gnise lease payments (lease liability) and an asset representing
the right t0 use the asset during the lease term (right 0f use asset). Lessees will subsequently
reduce the lease liability when paid and rec0gnise depreciati0n 0n the right 0f user asset. A
lease liability is remeasured up0n the 0ccurrence 0f certain events such as a change in the
lease term. The standard has n0 impact 0n the actual cash fl0ws 0f a gr0up. H0wever, the
standard requires the capitalisati0n and subsequent depreciati0n 0f c0sts that are currently
expenses as paid which impacts discl0sures 0f cash fl0ws with in the cash fl0w statement.
The am0unts currently expensed as 0perating cash 0utfl0ws, which will instead be
capitalised, are presented as financing cash 0utfl0ws. The C0mpany is in the pr0cess 0f
finalising changes t0 systems and pr0cesses t0 meet the acc0unting and the rep0rting
requirements 0f the standard in c0njuncti0n with review 0f lease agreements.

Pr0visi0ns

Pr0visi0ns are rec0gnised when the C0mpany has a present 0bligati0n (legal 0r
c0nstructive) as a result 0f a past event, it is pr0bable that the C0mpany will be required t0
settle the 0bligati0n, and a reliable estimate can be made 0f the am0unt 0f the 0bligati0n.
The am0unt rec0gnised as a pr0visi0n is the best estimate 0f the c0nsiderati0n required t0
settle the present 0bligati0n at the end 0f the rep0rting peri0d, taking int0 acc0unt the risks
and uncertainties surr0unding the 0bligati0n. When a pr0visi0n is measured using the cash
fl0ws estimated t0 settle the present 0bligati0n, its carrying am0unt is the present value 0f
th0se cash fl0ws.

News Analysis
-Sh0ppers St0p t0 relist 0n Amaz0n (S0urce Ec0n0mic Times 2nd May 2019)
In February, Sh0ppers St0p had delisted itself fr0m the US based 0nline giant, that 0wns 5%
in the department chain t0 c0mply with the amended f0reign 0wnership rules.

-Sh0ppers St0p seeking m0re clarity 0n latest FDI guidelines (S0urce

Ec0n0mic Times 28th Jan 2019)
Seeking m0re clarity 0n whether the g0vernment’s latest f0reign direct investment (FDI)
guidelines c0uld affect its stake sale t0 Amaz0n. Nearly tw0 years ag0, ec0mmerce giant
Amaz0n acquired a 5% stake in Sh0ppers St0p thr0ugh f0reign p0rtf0li0 invest0r (FPI)
r0ute al0ng with a deal t0 use each 0ther’s netw0rk.

-Sh0ppers St0p rallies 4% after Aditya Birla Sun Life MF buys 2 percent stake
(S0urce M0neyc0ntr0l 3rd Jul 2019)

The mutual fund h0use b0ught 2 percent stake thr0ugh 0pen market transacti0n 0n June
28. After this, its stake in the c0mpany increased fr0m 5.01 percent earlier t0 7.01 percent
(representing 61.66 lakh shares) as 0f July 2, 2019.

15
CAGR Analysis
Balance Sheet

FY 19 FY 18 FY 17 FY 16 FY 15 CAGR
Share Capital 44 43.98 41.75 41.73 41.68 1%
Total Reserves 933.45 908.77 716.73 736.62 723.6 7%
Total Non-Current
-32 19.99 205.67 319.26 234.91
Liabilities -167%
Trade Payables 1,254.24 488.61 330.19 370.63 331.35 39%
Total Current Liabilities 1,497.69 769.39 864.97 809 790.1 17%
Total Liabilities 2,443.35 1,742.75 1,831.41 1,906.90 1,790.30 8%
Long Term Loans &
139.95 176.95 284.13 318.68 342.29
Advances -20%

Total Non-Current Assets 1,103.23 1,200.63 1,375.24 1,429.29 1,359.34

-5%
Total Assets 2,443.35 1,742.75 1,831.41 1,906.90 1,790.30 8%

C0mments:

The CAGR analysis 0f balance sheet sh0ws that there is an increase in the T0tal Reserves 0f
the c0mpany during the peri0d under evaluati0n. This will be beneficial f0r the firm in the
l0ng run as it can use these reserves in any crisis situati0n in the future.

There is a c0nsiderable increase in the trade payable but that c0uld be linked t0 the
0perati0ns and the expansi0n pr0cess undertaken by the firm.

The reducti0n in l0ng term l0ans and advances is beneficial f0r the c0mpany as it w0uld
result in the decrease in the interest 0bligati0ns 0f the firm. The gr0wth in t0tal assets
signify the gr0wth in the business 0f the c0mpany.

Profit & Loss

FY 19 FY 18 FY 17 FY 16 FY 15 CAGR
Employee Cost 314.48 301.35 273.5 245.52 227.03 8%
Selling and
484.14 517.24 281.11 273.79 244.86
Distribution Expenses 19%
Total Expenditure 3,610.75 3,773.30 3,620.67 3,306.51 2,998.50
4%
Interest 36.65 62.73 84.03 80.49 74.72 -16%
PBDT 258.76 191.5 163.64 177.72 155.37 14%
Depreciation 135.07 111.93 115.53 97.66 85.81 12%
Pr0fit After Tax 78.75 11.6 -19.94 22.88 40.74 18%

16
-The increase in selling and distributi0n expenses is a result 0f increase in the rent 0f the
sh0ps in which Sh0ppers St0p is 0perating, this c0ncern was even highlighted by the
c0mpany in their financial statement.

- The decrease in the interest payment 0f Sh0ppers St0p is due t0 the decrease in the l0ng
term l0an.

- The CAGR 0f PBT and PAT signify that there is a healthy increase in the b0tt0m line 0f
Sh0ppers St0p, this is very useful f0r the c0mpany as it will help it t0 gr0w sustainably.

Cash Flow
FY 19 FY 18 FY 17 FY 16 FY 15 CAGR
Profit Before Tax 123.69 29.16 0.32 80.06 69.56 15%
Changes In working
-2.36 134.14 -27.22 -13.67 -37.8
Capital -50%
Cash Flow after
changes in Working 266.46 357.49 179.86 206.47 154.25
Capital 12%
Tax Paid -56.48 -35.62 -23.72 -43.71 -24.32 23%
Cash Flow from
-137.97 32.22 -85.37 -164.29 -147.18
Investing Activities -2%
Cash from Financing
-59.06 -270.14 -109.89 1.76 13.31
Activities -235%
Closing Cash & Cash
9.92 -3.03 -86.99 3.35 3.12
Equivalent 34%

-As a result 0f decrease in the bank l0ans taken by the c0mpany there is a c0nsiderable
decrease in the CAGR 0f Cash fl0w fr0m the financing activities.

-The cash and cash equivalents have als0 gr0wn c0nsiderably due t0 increase in the reserves
and decrease in the interest 0bligati0ns.

17
References:

 https://www.bseindia.com/
 https://economictimes.indiatimes.com
 http://moneycontrol.com
 livemint.com
 ACE Equity

18