BASICS OF FINANCIAL

MANAGEMENT

ASSIGNMENT - 2

NAME Harsimrat Kaur

DIVISION E
ROLL NO. 19
PRN 20020441094

ADITYA BIRLA FINANCE AND RETAIL LTD.

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 Sr. No. TOPIC Page No.
1 About the company 3

2 Capital structure and stakeholder pattern 5

3 Stock price analysis (last 5 years) 6

4 Financial Analysis using ratios 7

5 Findings 9

6 References 10

7 Annexure 11

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1. ABOUT

Aditya Birla Fashion and Retail Ltd. (ABFRL) emerged after the consolidation of the branded
apparel businesses of Aditya Birla Group comprising ABNL's Madura Fashion division and
ABNL's subsidiaries - Pantaloons Fashion and Retail (PFRL) and Madura Fashion & Lifestyle
(MFL) in May 2015. Post the consolidation, PFRL was renamed Aditya Birla Fashion and
Retail Ltd.
ABFRL is a part of the Aditya Birla Group, a US$ 48.3 billion Indian multinational, in the
league of Fortune 500. Anchored by a force of over 120,000 employees, belonging to 42
nationalities, the Aditya Birla Group operates in 34 countries across the globe.
The International Brands portfolio boasts of - The Collective, India's largest multi-brand
retailer of international brands, Simon Carter and select mono-brands such as American Eagle,
Ralph Lauren, Hackett London, Ted Baker and Fred Perry. Van Heusen Innerwear, Athleisure
and Active wear is establishing itself as India's most innovative and fashionable
brand. Additionally, the company closed two strategic investments in branded ethnic wear
business with Jaypore and Shantanu & Nikhil.

Brands under Aditya Birla Fashion and Retail Ltd.

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 ABFRL boasts of versatility in terms of brands across all segments

Growth History of ABFRL

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2. CAPITAL STRUCTURE AND STAKEHOLDER PATTERN

The Capital Structure of Aditya Birla Fashion and Retail Ltd. presents the Authorized Capital,
Issued Capital, and Paid-Up Equity Capital of the company over the period is as below :-

The Shareholding Pattern of Aditya Birla Fashion and Retail Ltd. presents the Promoter's
holding, FII's holding, DII's Holding, and Shareholding by general public etc. is as below :-

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3. STOCK PRICE ANALYSIS

P/E : P/E is the Price to Earnings Ratio. Aditya Birla Fashion and Retail has a P/E ratio of
60.99 for 2020, compared to 46.94 in 2019. In comparison, the PE of Reliance Retail for
2020 is 39.74. A high P/E implies that buyers are optimistic about the future. Overall, the
company has been doing well and stable in terms of P/E ratio.

EPS : It is a company's net profit divided by the number of common shares it has outstanding.
The cost of material consumed increased significantly from 2019. The employee benefit
expenses also saw a steady growth over the years. Finance costs, and depreciation and
amortization expense also increased significantly in 2020, owing to expenses incurred on
interest expenses on lease liabilities (Rs. 210.42 crores) and depreciation on right of use assets
(Rs. 628.05 crores). Thus, there was an overall loss in 2020.

Graph showing stock prices of ABFRL for the last five years

News Related to company stocks :-

As per the latest news, Flipkart has acquired stock worth Rs. 140 crores in Aditya Birla Fashion
and Retail Ltd., indicating an increase in stock prices of the company. The stock prices have
already recently started going up after the recent Flipkart scenario.

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4. FINANCIAL ANALYSIS USING RATIOS

The financial analysis of a company can be easily done by comparing the company ratios over
the years. These ratios are key indicators in terms of measuring the performance of the company
across various aspects.
Some of the key ratios of Aditya Birla Fashion and Retail Ltd. (ABFRL) and their analysis are
as follows :-

Ratio 2020 2019 2018 2017 2016

Per Share Ratios
PBDIT/Share 16.67 8.00 6.49 6.17 5.32
Earnings per share
-1.88 4.15 1.53 0.69 -1.35
(EPS)
Profitability Ratios
Total Debt/Equity 2.18 0.84 1.61 2.13 1.57
Asset Turnover Ratio 90.23 122.60 125.08 131.11 131.21
Liquidity Ratios
Quick Ratio 0.32 0.35 0.30 0.28 0.21
Current Ratio 0.73 0.81 0.84 0.83 0.69
Valuation Ratios
EV/EBITDA 10.81 29.46 26.55 29.08 30.59
Price/BV 10.92 11.96 10.65 12.40 11.76

Significance and Analysis :-

PBDIT/Share Ratio : It is the Profit before depreciation, interest, and taxes per share ratio. A
high PBDIT/share ratio indicates that its operating expenses are lower in relation to total
revenue. It is seen that this ratio has seen a gradual increase curve from 2016 to 2019, with the
ratio nearly doubling in 2020 (from 8.00 to 16.67). Therefore, the operating expenses are lower
in relation to the total revenue.
Earnings per share (EPS) : It is a company's net profit divided by the number of common
shares it has outstanding. EPS indicates how much money a company makes for each share of
its stock, and is a widely used metric to estimate corporate value. A higher EPS indicates greater
value because investors will pay more for a company's shares if they think the company has

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higher profits relative to its share price. For ABFRL, the cost of material consumed increased
significantly from 2019. The employee benefit expenses also saw a steady growth over the
years. Finance costs, and depreciation and amortization expense also increased significantly in
2020, owing to expenses incurred on interest expenses on lease liabilities (Rs. 210.42 crores)
and depreciation on right of use assets (Rs. 628.05 crores). Thus, there was an overall loss in
2020.
Total Debt/Equity Ratio : It is a measure of the degree to which a company is financing its
operations through debt versus wholly-owned funds. It reflects the ability of
shareholder equity to cover all outstanding debts in the event of a business downturn. The ideal
D/E ratio is 2. It is noticed that the closest to ideal that D/E ratio comes to for ABFRL is in
2020 and 2017. Specifically compared to last year (2019) where the D/E ratio was 0.84, the
company has managed to do more than well in terms of D/E ratio.
Asset Turnover Ratio : The asset turnover ratio can be used as an indicator of the efficiency
with which a company is using its assets to generate revenue. The higher the asset turnover
ratio, the more efficient a company is at generating revenue from its assets. For ABFRL, it is
seen that the Asset turnover ratio has seen a gradual downhill curve from 2016 to 2020, which
indicates poor efficiency over time in terms of company’s use of assets.
Quick Ratio : The quick ratio indicates a company's capacity to pay its current liabilities
without needing to sell its inventory or get additional financing. Ratio of 1:1 is held to be
the ideal quick ratio indicating that the business has in its possession enough assets which may
be immediately liquidated for paying off the current liabilities. It is seen that the quick ratio
rises with a gradual slope from 2016 until 2019, after which it falls by 0.03. Overall the
company’s quick ratio is way below ideal.
Current Ratio : The current ratio is a liquidity ratio that measures a company's ability to pay
short-term obligations or those due within one year. A good current ratio is between 1.2 to 2,
however, a high current ratio is more favourable than a lower current ratio. It is seen that the
current ratio value is rising until 2018, after which it falls in 2019, and further falls in 2020,
indicating poor liquidity ratio.
EV/EBITDA : The enterprise value to earnings before interest, taxes, depreciation, and
amortization ratio (EV/EBITDA) compares the value of a company—debt included—to the
company's cash earnings less non-cash expenses. Generally, an EV/EBITDA value below 10
is commonly interpreted as healthy and above average. Generally, the lower the ratio, the more
appealing it is. The ratio hit almost the ideal spot (10.81) in 2020, the first time in last five
years after an alternate up and down curve over the years.
Price/BV : A price-to-book ratio of one means that the stock price is trading in line with
the book value of the company. A P/B ratio with lower values, particularly those below one,
are a signal to investors that a stock may be undervalued. It is seen that this ratio is way over
the ideal ratio, and is unstable, signifying uneven ups and downs over the last five years.

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5. FINDINGS

Aditya Birla Fashion and Retail Ltd. Is currently faring

better than its competitors.
Overall, the company has a good track record in terms of
profitability and a steady and stable growth curve.
While the company saw some steep changes in 2020 in
certain areas, most were owed to the Covid-19 shift, and
based on the company’s stable numbers, the ratios and
numbers are expected to fit back into the curve with
time.
The one major change noted was in the EPS ratio of the
company, which turned out to be -1.88 in 2020 compared
to 4.15 in 2019. What made it stand out further was that
the company had a gradual upward curve of EPS from
2016 onwards, with the sudden dip in 2020. Upon further
analysis of the company’s financial statements, it was
noticed that this change was due to increase in financial
costs due to expenses incurred on interest expenses on
lease liabilities (Rs. 210.42 crores), and due to increased
depreciation and amortization expenses in terms of
depreciation on right of use assets (Rs. 628.05 crores).
These extra expenses cost the company the dip in EPS
ratio in 2020.
The company also saw a rise in revenue, EBITDA,
EBIT, EBT.
Based on the latest news of the Flipkart buying stocks
worth Rs. 140 crores in ABFRL, the stock prices are predicted to increase over time indicating
profitability, and indicates an upward curve for the company in the coming months to come.

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6. REFERENCES

➢ http://www.abfrl.com/about/
➢ https://www.adityabirla.com/businesses/companies/aditya-birla-fashion-and-
retail-limited
➢ https://www.moneycontrol.com/financials/adityabirlafashion&retail/ratiosVI/PFR
#PFR
➢ https://www.moneycontrol.com/india/stockpricequote/retail/adityabirlafashionreta
il/PFR
➢ https://economictimes.indiatimes.com/aditya-birla-fashion-and-retail-
ltd/capitalstructure/companyid-46091.cms
➢ https://www.valueresearchonline.com/stocks/22048/aditya-birla-fashion-and-
retail-ltd#snapshot
➢ http://www.abfrl.com/docs/investors/annual_reports/Annual_Report_2019-20.pdf

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7. ANNEXURE

Profit and Loss Account :-

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 Balance Sheet :-

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 Cashflow Statement :-

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