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    Sec B - Group 1

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    swapnil anand
    The document provides an industry overview and financial analysis of Tata Chemicals Ltd. It discusses that India is the 6th largest chemical manufacturer globally. It then analyzes Tata Chemicals' capital structure, cost of equity, cost of debt, leverage, working capital, and cash conversion cycle for 2019-20 and 2020-21. The key inferences are that Tata Chemicals' cost of debt decreased during Covid-19 while its degree of operating and combined leverage are high, indicating EBIT and EPS are highly sensitive to sales changes.

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    Sec B - Group 1

    Uploaded by

    swapnil anand
    37 views13 pages
    The document provides an industry overview and financial analysis of Tata Chemicals Ltd. It discusses that India is the 6th largest chemical manufacturer globally. It then analyzes Tata Chemicals' capital structure, cost of equity, cost of debt, leverage, working capital, and cash conversion cycle for 2019-20 and 2020-21. The key inferences are that Tata Chemicals' cost of debt decreased during Covid-19 while its degree of operating and combined leverage are high, indicating EBIT and EPS are highly sensitive to sales changes.

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    Sec B_Group 1

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    The document provides an industry overview and financial analysis of Tata Chemicals Ltd. It discusses that India is the 6th largest chemical manufacturer globally. It then analyzes Tata Chemicals' capital structure, cost of equity, cost of debt, leverage, working capital, and cash conversion cycle for 2019-20 and 2020-21. The key inferences are that Tata Chemicals' cost of debt decreased during Covid-19 while its degree of operating and combined leverage are high, indicating EBIT and EPS are highly sensitive to sales changes.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    37 views13 pages

    Sec B - Group 1

    Uploaded by

    swapnil anand
    The document provides an industry overview and financial analysis of Tata Chemicals Ltd. It discusses that India is the 6th largest chemical manufacturer globally. It then analyzes Tata Chemicals' capital structure, cost of equity, cost of debt, leverage, working capital, and cash conversion cycle for 2019-20 and 2020-21. The key inferences are that Tata Chemicals' cost of debt decreased during Covid-19 while its degree of operating and combined leverage are high, indicating EBIT and EPS are highly sensitive to sales changes.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    Submitted by:

    Alena Benadict 21066


    Aniruddha R Batni 21067
    Anushree Halyal 21069
    Arundhuti Roy 21070

    Submitted to:
    Dr. M. Sriram & Dr. K. Riyaz Ahmed
    INDUSTRY OVERVIEW
    • India is the world's sixth largest chemical manufacturer, accounting for 3.4 percent of worldwide chemical
    production
    • Due to the capital-intensive nature of its operations, the Chemicals sector in India is heavily reliant on bank
    credit. During FY-20, the chemical sector had a Gross NPA of 6.9% of total advances

    Price to Earnings Ratio Price to Book Ratio


    Current Payout to Shareholders Return On Equity
    Company overview
    • Ownership Structure  Past Earnings Growth Analysis
    EBITDA Margin
    Asia – 17%
    Africa – 15%
    America – 12%
    Europe – 9%
    CAPITAL STRUCTURE OF TATA CHEMICALS LTD.

    Particulars 2019-20 2020-21


    Equity 254.76 254.76
    Other Equity 7708.27 7776.55
    Total Equity 7963.03 8031.31
     
    Borrowings 3501.82 5278.3
    Total Debt 3501.82 5278.3
     
    Total Capital 11464.85 13309.61
    Equity 0.69 0.60
    Debt 0.31 0.40
     
    Shareholders 254756278 254756278
    Cost of Equity Cost of debt
    Beta 1.3087   2019-20 2020-21
    rm-rf 0.0642 YTM 0.073 0.052
    rf 0.068 t 0.25 0.25
       
    COST OF
    CAPITAL ke 0.1521 kd 0.054 0.039

    Particulars Weights Cost of Capital WACC


    Equity 0.6 0.15 0.09
    Debt 0.4 0.04 0.016
          0.106

    WACC: 10.6%
    Inferences:

    Ke= 0.152 implies that Tata Chemicals is required to achieve a return of at least 15.21%
    for its equity investors, which is well above the industrial standard rate of 7.88%

    Kd= 0.054 in 2019-20 and 0.0393 in 2020-21 imply that the cost of debt has reduced from
    5.48% to 3.93% during the Covid period. This can be attributed to the fact that the YTM
    has decreased from 7.3% to 5.24% during the period. Moreover, even after the drop in
    Kd, it is close enough to the industrial standard rate of 3.16%
    LEVERAGE ANALYSIS

    2020-2021

    Degree of Degree of Degree of


    Operating Financial Combined
    Leverage Leverage Leverage
    (DOL) (DFL) (DCL)
    =26.03 =1.73 =45.02
    LEVERAGE ANALYSIS – Cont.
    Particulars 2020 to 2021
    Change in Sales -1.52
    Change in EBIT -39.45
    Change in EPS -68.22

    Particulars 2019-20 2020-21


    EBT 1,248.06 633.99
    Interest 255.78 276.59
    EBIT 1,503.84 910.58
    Sales 10356.75 10199.8
    INTERPRETATIONS:

    Since the DOL shows how sensitive a company’s EBIT is to the change in the
    sales. It can be inferred that for a 1% change in the sales of Tata Chemicals
    Ltd., there will be an approximate 26% change in the EBIT

    Tata Chemicals Ltd. has a DFL of 1.73. This mean that for every 1% change in
    the EBIT of TCL, there will be a 1.73% change in the EPS of the Company.

    Similarly, 45.02 being the DCL implies for every 1% change in the sales at
    TCL, there will be 45.02% of change in the EPS
    Particulars 2020 2021
    Inventories 1869.16 1686.65
         
    Receivables 1579.92 1396.99
    Sales 10356.8 10199.8
    Payables 1623.4 1661.44
         
    Receivables turnover 6.56 7.30
    Working Average collection period
    Inventory Turnover
    54.92
    5.54
    49.31
    6.05

    Capital  
    Interest coverage
     
    5.88
     
    3.29

    structure  
    Current Ratio
    Quick ratio
     
    1.11
    0.84
     
    1.49
    1.11
         
         
    Days Inventories 65.87 60.36
    Days Receivables 55.68 49.99
    Days Payables 57.21 59.45
    Operating cycle 121.55 110.35
    Cash conversion cycle 64.34 50.89
    Thank you

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