FINANCIAL

ANALYSIS OF
VOLTAS AND
BLUESTAR
Financial Accounting Assignment

SAILESH
PIYUSH
MANOJ
SARAH

Group - 9
1610011
1610029
1610022
1610042

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Table of Contents:
S No

Topic

Page No

Introduction Voltas

Company Profile

Analysis of Directors Report

Auditors Report Analysis

Trends for last five years

Horizontal Analysis of Balance Sheet

Vertical Analysis of Balance Sheet

Horizontal Analysis of P&L

Vertical Analysis of P&L

10

10

Detailed Analysis

12

11

Ratio Analysis

13

12

Cash Flow Analysis

19

13

Comparison between Voltas and BlueStar

20

14

Stock Analysis of Voltas and BlueStar

23

15

Conclusion

24

16

Graphs

25

17

References

27

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Note: We will be taking Voltas as Base Company and will have a thorough analysis of it and
compare it with BlueStar finally
Introduction
In this project report we have done an in-depth study of Voltas Limiteds annual report and the
air conditioner industry which is an integral part of residential/commercial electronics industry.
In any organization, the two important financial statements are the Balance Sheet and Profit &
Loss Account of the business in that particular year. When these financial statements of the last
few years of organizations are studied and analyzed, significant conclusions can be derived
regarding the changes in the financial position, the important policies followed and trends in
profit and loss etc. Along with the financial statements analysis this report also suggests the
existing and potential investors whether to buy, hold or sell the shares of Voltas Ltd. We have
also selected Blue Star Ltd as closest competitor for peer to peer analysis.

Company Profile
Voltas is among India's leading air-conditioning, refrigeration and engineering services
companies. Set up in 1954, its core competencies lie in air conditioning and cooling appliances
and services. The company has ISO 9001-2000 certification and has executed projects in the
Middle East, Southeast Asia, Central Asia, Africa and Europe. Company's Unitary Cooling
Products business, through various strategic marketing and sales promotion activities and launch
of new AC models, sustained its leadership position throughout the year with an increased
market share of 21.1% as compared to 20.8% in 2015. Over the span of the year the major points
of concern for the Global economy revolved around a slowdown in the developing markets,
China's economic re-balancing, lower commodity prices and a gradual exit from the
accommodation monetary conditions in the United States. Commodity price risk and foreign
exchange risk are two of the greatest risk faced by the companies. The company has shown
declining trends in FY 13 and FY 14 but in FY15 company operating profit has increased but its
too soon for commenting on the recovery of the company.

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Analysis of Directors Report

The Directors seems happy with the current performance of the company as the company is
improving its financial performance after downfall in FY12 and FY13. From directors view on
the operations we can infer that the market is slowing down in the international market but the
domestic market seems promising. The Companys Unitary Cooling Products business is
performing quite well and is expected to perform in that manner. The directors have shown
concerns about the company performance in the Middle East region due to the liquidity position
because of drop in crude oil prices. The drop of crude oil price is cited as one of the factor
affecting the growth of the industry. The company has incurred Research & Development
expenditure of 440.03 lakhs for technological developments which will help the company to
grow at a faster pace. This is a good news for the stakeholders but they have also shown concerns
about the foreign exchange in the industry.

Auditors Report Analysis

The Company was audited by Deloitte Haskins & Sells LLP. The auditors have verified most
of the claims made by the company in the standalone financial statement and find it in
accordance with the laws. In opinion of the auditors the maintenance of cost records has been
done as specified by the Central Government under Section 148(1) of the Act. The auditors have
reviewed the cost records maintained by the Company and one the face of it looks fine but they
have not made a detailed examination of the cost records with a view to determine whether they
are accurate or complete. The company follows a good corporate governance practices and has
always been regular in paying all the dues to the concerned authorities and disclosing all the facts
as per the company law. Now coming to the consolidated financial statement the auditors have
verified almost all the claims and the also cross verified the provision The Group and its
associate and jointly controlled entities have made, as required under applicable law or
accounting standards for the material foreseeable losses, for long-term contracts including
derivative contracts.

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Trends for the last five years

Sales and services If we look at the trend of sales and services (Graph 1) for the last 5 years
the company has an increasing trend till FY12 but the sales and services declined in the FY13
and FY14 and in FY15 it has shown some improvement so what we can infer that last few years
were really challenging for Voltas. The company is trying hard to improve its performance.
Operating Profit If we look at the trend of operating profit (Graph 2) we will find a very zig
zag curve. The company is a profit making company but the operating profit is not consistent the
profit for FY12 and FY13. The operating profit shown an increasing trend from the FY13. This
variation in the operating profit is mainly because of the variation in the total sales and services.
Net Worth Net worth is the difference between a company's total assets and its total liabilities.
It is also known as shareholder`s equity. The net worth of the company is showing a continuous
growth which is good for the company (Graph 3)
Earnings Per Share The trend in earning per share also follows the same trend as profits the
FY12 FY13 were bad for the company so the share prices were also adversely affected in those
years. (Graph 4) The earning per share is going to follow the same trend as the industry is
showing positive trend with increase in the demands in emerging markets. The share prices of
Voltas are following an increasing curve so the earning per share is expected to increase in next
financial year.
Cash and Bank with Liquid Investments Graph 5 shows the trend of cash and cash
equivalents of the company which shows an increasing trend which is good for the company. The
overall cash position including cash and bank balances and investments in mutual funds / bonds
has reached a new high of 1654 crores as compared to 1281 crores in the last year.
EBITDA, PBT & PAT Graph 6 visually shows how the net profit of the company stand
reduced due to the impact of Interest, Depreciation, and Tax.
Total Asset and Asset Turnover Ratio Total Assets is the sum of all assets, current and fixed.
The asset turnover ratio measures the ability of a company to use its assets to efficiently generate
sales. The higher the ratio indicates that the company is utilizing all its assets efficiently to

Page | 5

generate sales. In Graph 7 we can see the decreasing Asset Turnover Ratio with increasing trend
of total asset for Voltas.
On broadly looking at the trend of the company the company seems to perform well with few
problems but these trends needs to match with the industry trend. We will look into these trends
in detail in this report to get a clear picture of the performance of the company.

Horizontal Analysis of Balance Sheet

I. EQUITY AND LIABILITIES

1. Shareholders funds
(a) Share capital
(b) Reserves and surplus
2. Non-current liabilities
(a) Other long-term liabilities
(b) Long-term provisions
3. Current liabilities
(a) Short-term borrowings
(b) Trade payables
(i) Total outstanding dues of micro
and small enterprises
(ii) Total outstanding dues of

As at

As at

31-3-2016

31-3-2015

HA
Horizontal
Horizontal

in Lakhs

in Lakhs

Analysis

Analysis (%)

3307.52
204566.64
207874.16

3307.48
180644.14
183951.62

0.04
23922.5
23922.54

0.0012%
13.24%
13.00%

2634.63
10313.79
12948.42

1871.45
9341.78
11213.23

763.18
972.01
1735.19

40.78%
10.40%
15.47%

11948.5

5305.83

6642.67

125.20%

4604.58

471.81

4132.77

875.94%

135889.88
47404.56
26268.42
226115.94

145167.47
56450.1
22215.85
229611.06

-9277.59
-9045.54
4052.57
-3495.12

-6.39%
-16.02%
18.24%
-1.52%

446938.52

424775.91

22162.61

5.22%

creditors other than micro and small

enterprises
(c) Other current liabilities
(d) Short-term provisions
TOTAL EQUITY AND
LIABILITIES
II. ASSETS
1. Non-current assets
(a) Fixed assets

Page | 6

(i) Tangible assets

(ii) Intangible assets
(iii) Capital work-in-progress
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long-term loans and advances
(e) Other non-current assets
2. Current assets
(a) Current investments
(b) Inventories
(c) Trade receivables
(d) Cash and cash equivalents
(e) Short-term loans and advances
(f) Other current assets

TOTAL ASSETS

17428.83
776.04
108.77
18313.64
98743.87
5283.6
12002.19
8076.6
142419.9

14743.97
831.88
442.17
16018.02
75701.79
3673.53
13487.23
7474.27
116354.84

2684.86
-55.84
-333.4
2295.62
23042.08
1610.07
-1485.04
602.33
26065.06

18.21%
-6.71%
-75.40%
14.33%
30.44%
43.83%
-11.01%
8.06%
22.40%

66674.07
59443.68
101792.22
13231.44
14267.73
49109.48
304518.62

46698.27
69148.82
114957.64
14839.21
14691.42
48085.71
308421.07

19975.8
-9705.14
-13165.42
-1607.77
-423.69
1023.77
-3902.45

42.78%
-14.04%
-11.45%
-10.83%
-2.88%
2.13%
-1.27%

446938.52

424775.91

22162.61

5.22%

Vertical Analysis of Balance Sheet

As at

As at

31-3-2016

31-3-2015

in Lakhs
I. EQUITY AND LIABILITIES
1. Shareholders funds
(a) Share capital
(b) Reserves and surplus
2. Non-current liabilities
(a) Other long-term liabilities
(b) Long-term provisions
3. Current liabilities
(a) Short-term borrowings

in Lakhs

Vertical

VA
Vertical

Analysis

Analysis

2K16 (%)

2K15 (%)

3307.52
204566.64
207874.16

3307.48
180644.14
183951.62

0.74%
45.77%
46.51%

0.78%
42.53%
43.31%

2634.63
10313.79
12948.42

1871.45
9341.78
11213.23

0.59%
2.31%
2.90%

0.44%
2.20%
2.64%

11948.5

5305.83

2.67%

1.25%

Page | 7

(b) Trade payables

(i) Total outstanding dues of micro
and small enterprises
(ii) Total outstanding dues of

4604.58

471.81

1.03%

0.11%

135889.88
47404.56
26268.42
226115.94

145167.47
56450.1
22215.85
229611.06

30.40%
10.61%
5.88%
50.59%

34.18%
13.29%
5.23%
54.05%

446938.52

424775.91

100.00%

100.00%

17428.83
776.04
108.77
18313.64
98743.87
5283.6
12002.19
8076.6
142419.9

14743.97
831.88
442.17
16018.02
75701.79
3673.53
13487.23
7474.27
116354.84

3.90%
0.17%
0.02%
4.10%
22.09%
1.18%
2.69%
1.81%
31.87%

3.47%
0.20%
0.10%
3.77%
17.82%
0.86%
3.18%
1.76%
27.39%

66674.07
59443.68
101792.22
13231.44
14267.73
49109.48
304518.62

46698.27
69148.82
114957.64
14839.21
14691.42
48085.71
308421.07

14.92%
13.30%
22.78%
2.96%
3.19%
10.99%
68.13%

10.99%
16.28%
27.06%
3.49%
3.46%
11.32%
72.61%

446938.52

424775.91

100.00%

100.00%

creditors other than micro and small

enterprises
(c) Other current liabilities
(d) Short-term provisions
TOTAL EQUITY AND
LIABILITIES
II. ASSETS
1. Non-current assets
(a) Fixed assets
(i) Tangible assets
(ii) Intangible assets
(iii) Capital work-in-progress
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long-term loans and advances
(e) Other non-current assets
2. Current assets
(a) Current investments
(b) Inventories
(c) Trade receivables
(d) Cash and cash equivalents
(e) Short-term loans and advances
(f) Other current assets

TOTAL ASSETS

Horizontal Analysis of P&L Sheet

Year end

Year end

31-3-2015

31-3-2015

HA
Horizontal
Horizontal

in Lakhs

in Lakhs

Analysis

Analysis (%)

Page | 8

I. Revenue from operations (Gross)

Less: Excise duty
Net Revenue from operations
II. Other Income
III. Total Revenue (I + II)

521432.87
2684.78
518748.09
16508.96
535257.05

519065.87
2171.01
516894.86
14911.44
531806.3

2367
513.77
1853.23
1597.52
3450.75

0.46%
23.67%
0.36%
10.71%
0.65%

176178.08
210496.83

161980.81
226011.29

14197.27
-15514.46

8.76%
-6.86%

trade
(d) Employee benefits expense
(e) Finance costs
(f) Depreciation and amortization

9769.88
41461.96
806.46

1481.53
46785.37
1625.22

8288.35
-5323.41
-818.76

559.45%
-11.38%
-50.38%

expenses
(g) Other expenses
Total Expenses (IV)

1913.83
51089.26
491716.3

2245.45
50142.54
490272.21

-331.62
946.72
1444.09

-14.77%
1.89%
0.29%

43540.75

41534.09

2006.66

4.83%

3275.81

1818.33

1457.48

80.15%

46816.56

43352.42

3464.14

7.99%

15157.82

11254.44

3903.38

34.68%

-20.1
-1610.07
13527.65

-20.38
-805.12
10428.94

0.28
-804.95
3098.71

-1.37%
99.98%
29.71%

33288.9

32923.48

365.42

1.11%

10.06

9.95

0.11

1.11%

IV. Expenses
(a) Consumption of raw materials,
cost of jobs and services
(b) Purchase of traded goods
(c) (Increase) / Decrease in niche
goods, work-in-progress a stock-in-

V. Profit before exceptional items

and tax (III - IV)
VI. Exceptional Items
VII. Profit before tax (V + VI)
VIII. Tax Expense
(1) Current tax
(i) Current tax
(ii) Provision for taxation of earlier
years written back
(2) Deferred tax
Total tax expense
IX. Profit after tax (VII - VIII)
X. Earnings per share:
Earnings Per Share (Rs) - Basic and
Diluted (Face value of 1 per share)

Page | 9

Vertical Analysis of P&L Sheet

Year ended

Year ended

31-3-2015

31-3-2015

in Lakhs

in Lakhs

Vertical

VA
Vertical

Analysis

Analysis

2K16 (%)

2K15 (%)

I. Revenue from operations

(Gross)
Less: Excise duty
Net Revenue from operations
II. Other Income
III. Total Revenue (I + II)

521432.87
2684.78
518748.09
16508.96
535257.05

519065.87
2171.01
516894.86
14911.44
531806.3

100.52%
0.52%
100.00%
3.18%

100.42%
0.42%
100.00%
2.88%

176178.08
210496.83

161980.81
226011.29

33.96%
40.58%

31.34%
43.72%

trade
(d) Employee benefits expense
(e) Finance costs
(f) Depreciation and amortization

9769.88
41461.96
806.46

1481.53
46785.37
1625.22

1.88%
7.99%
0.16%

0.29%
9.05%
0.31%

expenses
(g) Other expenses
Total Expenses (IV)

1913.83
51089.26
491716.3

2245.45
50142.54
490272.21

0.37%
9.85%
94.79%

0.43%
9.70%
94.85%

43540.75

41534.09

8.39%

8.04%

3275.81

1818.33

0.63%

0.35%

46816.56

43352.42

9.02%

8.39%

15157.82

11254.44

2.92%

2.18%

-20.1

-20.38

-0.0039%

-0.0039%

IV. Expenses
(a) Consumption of raw materials,
cost of jobs and services
(b) Purchase of traded goods
(c) (Increase) / Decrease in niche
goods, work-in-progress a stock-in-

V. Prot before exceptional items

and tax (III - IV)
VI. Exceptional Items
VII. Prot before tax (V + VI)
VIII. Tax Expense
(1) Current tax
(i) Current tax
(ii) Provision for taxation of earlier
years written back

P a g e | 10

(2) Deferred tax

Total tax expense
IX. Prot after tax (VII - VIII)

-1610.07
13527.65

-805.12
10428.94

-0.31%
2.61%

-0.16%
2.02%

33288.9

32923.48

6.42%

6.37%

10.06

9.95

0.0019%

0.0019%

X. Earnings per share:

Earnings Per Share (Rs) - Basic and
Diluted (Face value of 1 per share)

Horizontal Analysis of Balance Sheet and P&L:

By looking at the horizontal analysis of Balance sheet we can infer that there is not much change
in Share capital (0.00012 %) and Reserves and surplus (13.24%) at the same time if we look at
the Liabilities of the company the Short-term borrowings (125.20%) and Total outstanding dues
of Micro, Small and Medium Enterprises (875.94%) has shown a drastic increase which shows
the debt the company is facing at the same time the asset has shown increase in investments and
fixed asset only rest all under asset has shown a downfall. The company is heavily investing in
the equity of its subsidiary company. On the first look at the horizontal analysis of the profit and
loss statement the net sales, total profit and the earning per shares has shown decent
improvement but as the same time the exceptional item has also shown high percentage increase
so we need to look deeper to get a clear picture of this trend.

Vertical Analysis of Balance Sheet and P&L:

By looking at the vertical analysis of the Balance sheet we cannot infer much about the
Shareholders fund but coming to the liabilities of the company dues of creditors other than
micro and small enterprises holds the highest percentage in the total liability of the company
which has shown a decrease in the horizontal analysis which means the company is trying to pay
off the debt from the creditors but the dues of Micro, Small and Medium Enterprises has shown
increase it can also means that the company is just lending money to pay the debt of other
lenders and this is not a good thing. Company should pay his debt by the profits earned by

P a g e | 11

operations lending money to pay debts can make the go into a vicious debt cycle which will only
harm the company in the long run. Now coming to the vertical analysis of profit and loss
statement the profit has shown a very slight increase at the same time if we look at the expenses
Consumption of raw materials, cost of jobs and services and Purchase of traded goods are two of
the main source of expense for the company this is because of the increase in the Cost of jobs
and services. Exceptional item has shown an increase as compared to last year.

Profitability Ratios
Amounts in Rs. Lakhs
Ratio

Formula

Return on Assets /

2016-2015

2015-2014

Return on Investment

PAT
Total Assets

31146.78
435857.22

Profit Margin /

PAT

31146.78

Sales

518748.09

Net Operating Margin

NOPAT
Sales

20878.60
518748.09

4.02%

22952.97
516894.86

4.44%

Assets Turnover ratio

Sales
Assets

518748.09
435857.22

1.190

516894.86
417869.025

1.237

Return on Equity

PAT
Avg total Equity

31146.78
195912.89

15.90%

31723.20
171873.27

18.46%

Leverage

Avg total Assets

Avg total Equity

435857.22
195912.89

2.225

417869.03
171873.27

2.431

Return on Sales

7.15%

31723.20
417869.025

7.59%

31723.2003
6.00%

7
516894.86

6.14%

Profitability Ratio Analysis:

Profit Margin which is also known as Return of Sales indicates the net profit earned from each
rupee of revenue. But as per the ratio values mentioned above the Profit Margin has decreased in

P a g e | 12

2015-16 which shouldnt be the case. Though it includes the items like Other income and
exceptional items generally Profit Margin has to be high.
Asset Turnover indicates how much the company utilize the assets to generate the sales. This
one has slightly decreased in the recent year which is again not a good sign. The value has to
increase to indicate the companys growth, if the Asset Turnover is low it indicates the higher the
assets than the business needs for its operations.
Return on Assets also known as Return on Investment indicates the measure of Profitability of
the company which has slightly decreased again and this is because the Profit Margin and Asset
Turnover has taken a slight beating in 2015-16 when compared to 2014-15.
Return on Equity is the product of Return of Assets and Leverage as suppose which are on
decreasing trend when compared to 2014-15 so the Return on Equity also decreased which is not
a good trend.

Liquidity Ratios
Amounts in Rs. Lakhs
Ratio
Current Ratio

Formula
Total current assets
Total current liabilities
Current Assets less

Quick Ratio

Receivables turnover
ratio

inventory
Current liabilities
Sales
Average receivables
Total no. of days in a

Receivables collection
period

year
Receivables turnover
ratio

Inventory turnover

COGS

2015-2016
304518.62
226115.94
245074.94

1.347

1.084

226115.94
518748.09
108374.93

2014-2015
308421.07
229611.06
239272.25

1.042

229611.06
4.787

365

516894.86
110431.965

4.681

365
76.248

4.79
486427.32

1.343

77.980
4.681

7.565

485037.86

6.896

P a g e | 13

ratio

Average inventory
Total no. of days in a

Inventory collection

year
Inventory turnover

period

ratio

64296.25

70340.745

365

365
48.249

7.57

52.929
6.896

Receivables collection
Operating cycle

period + Inventory

124.497

130.910

collection period
Liquidity Ratios Analysis:
Ability of the firm to repay its short term obligations is the Current Ratio which is around 1.34
to 1.35 with a slight increase. This indicates that the company maintains the value in past two
years and value above 1 indicates the company is good in paying any short term obligations. (>1
is current assets are greater than current liabilities)
Moreover, if the Quick Ratio is greater than 1, company is good in paying any short term
obligations without relying on Inventory which is even better.
When it comes to Receivable Turnover ratio, its the ability of the company to convert the
receivables to cash (no of times) and it is hovering around 4.7 which is not so great, in turn
Average Collection period which is inverse of Receivable Turnover indicates that the
Receivable collection period is 76 days and is decreasing mode when compared to last year
which is a good sign
For Inventory Turnover ratio which is 7.5 compared to 6.8 of last year indicates that the
Inventory turning to sales is increasing and the reciprocal of it Inventory Collection Period has
decreased to less than 50 which indicates lesser Inventory holding period. Less Inventory period
indicates less cost utilization in holding the inventory
On the similar lines for Operating cycle, the number of days in a cycle has also decreased in
2015-16 when compared to 2014-15 (130 to 124 days) which results in saving in interest, storage
and other expenses

P a g e | 14

Finally, in the Liquidity ratios left one is Payable Turnover ratio which is the ratio of Purchases
and Trade Payables which is 2.75 for 2015-16 and 2.66 in 2014-15 and the inverse of it is
Payable days which are 132 and 137 days respectively. Cash Collection cycle is -8 days
in for 2015-16 and -7 for 2014-15.
Negative Cash cycle indicates that they dont put money, they earn interest from Suppliers.
Solvency Ratios
Amounts in Rs. Lakhs
Ratio
Debt to Equity Ratio
Liabilities to Equity
Ratio
Interest coverage Ratio

Leverage

Formula

2015-2016

2014-2015

Total borrowings
Total equity

25995.00
195912.89

0.133

12167.00
171873.27

0.071

Total liabilities
Total Equity

251025.63
195912.89

1.281

252902.64
171873.27

1.471

PBIT
Interest expense

47623.02
806.46

59.052

44977.64
1625.22

27.675

Total Assets

435857.22

Total liabilities

195912.89

2.225

417869.03
171873.27

2.431

Solvency Ratio Analysis:

Debt to Equity ratio indicates the use of Financial leverage and less ratio for both the years
indicates the Small degree of Leverage. It might also indicate that the company is too
conservative but less value of the ratio is less risky for Creditors.
Liabilities to Equity ratio indicates the company dependence on liabilities which is decreased
from the previous year. It can be worse where the liabilities generally have to be paid are either
of interest free or less interest when compared to Equity.
Next is the Interest Coverage ratio which is 59 in 2015-16 and 28 in 2014-15. Generally
anything greater than 4 is good for the company as it indicates minimal debt for the company

P a g e | 15

Leverage is ratio of Total Assets to Total liabilities which has decreased a bit in last year when
compared to the previous one but still the ratio is greater than 2 which is a positive note

Capital Market Ratios

Amounts in Rs. Lakhs
Ratio
Price Earnings Ratio
Equity per share/
Book value

Formula

2015-2016

2014-2015

Market price
Earnings per share

276.95
10.06

27.530

279.40
9.950

28.080

Total equity
No of shares

195912.89
3307.52

59.233

171873.27
3307.48

51.965

Earnings per share

10.060

9.950

Price to Book ratio

Market price
Book value

276.95
59.23

4.676

279.40
51.965

5.377

Dividend yield ratio

Dividend per share

Market price

2.60
276.95

0.94%

2.25
279.396

0.81%

Capital Market Ratio Analysis:

Price Earnings ratio shows the confidence of the Stock Market in the companys future earnings
growth. As per that Price Earnings ratio has decreased a bit in 2015-16 when compared to 201415 indicating the slight fall in the confidence level.
Equity per Share also known as Book Value indicates the value of Equity for each share taken
which has increased in the recent year
Price to Book ratio has decreased in the recent year when compared to previous year. Decrease
in the ratio indicates the undervaluation of the stock and also as the ratio is greater than 1, on
general norms market expects the company to do better and higher than the required rate

P a g e | 16

Dividend yield ratio indicates the percent of dividend paid per share when compared to the
Market value of the share. In recent year, we see that the ratio has increased even though the
Market price has decreased slightly when compared to the previous year.

NOPAT Ratios
NOPAT
Profit After Tax
Exceptional Items net of tax
Profit adjusted for exceptional items

2015-16
33288.90
2142.12
31146.78

2014-15
32923.48
1200.28
31723.20

Financial cost net of tax

Other income net of tax

527.36
10795.54

1072.81
9843.04

20878.60
Shareholder's funds

22952.97

3307.52
204566.6

3307.48
180644.1

4
207874.1

4
183951.6

NOPAT

(a) Share capital

(b) Reserves and surplus

2013-14

3307.48
156487.44
159794.92

NOPAT is a measure of how well the company's core operations did. It takes into account only
the operating income - the income before taking the interest payments into account.
Voltas operating income decreased from 22952.97 in 2014-15 to 20878.6 in 2015-16. This
happened mainly because of two reasons.
-

Interest expense on borrowings and delayed payment of taxes almost halved when

compared to that of previous year.

Expense on exceptional items nearly doubled compared to the previous year

Cash Flow Analysis of Voltas (In Crores)

P a g e | 17

Net Cash Flow from Operating Activities

307.62

Net Cash Used in Investing Activities

-304.84

Net Cash Used from Financing Activities

-19.69

Net Inc./Dec in Cash and Cash Equivalents

-16.91

Cash and Cash Equivalents Begin of Year

144.25

Cash and Cash Equivalents End of Year

127.34

Net Profit before tax for the year

468.16

Net Profit after tax for the year

332.88

Voltas net cash flow from operations of 307.62 Cr is less than the total profit of 332.88 Cr,
showing that the profit has not been fully realized in cash because of accruals. Thus the
companys earning cannot be said to be of high quality.
Free cash Flow = Cash from operations + Cash for Investing
Free Cash flow = 307.62 + (-304.84) = 2.78 Cr

The free cash flow is positive but the value is very small this means that the net cash generated
from operations is more than what a firm can use in investing in new asset but this value is very
small so its not a good indicator.

Note: Ratios for BlueStar are attached in a separate excel.

Comparison between Voltas and Blue Star

Profitability ratios:
Return on Assets:
Blue Star: 5.17%

Voltas: 7.1%

P a g e | 18

The comparison of ROA shows that Voltas is more effectively managing its resources to
produce greater profits
Profit Margin:
Blue Star: 3.4%
Voltas: 6%
Profit margin of Voltas is almost double when compared to that of Blue Star which indicates
that Voltas can convert sales into net income more effectively when compared to that of Blue
Star. This ratio is very important for the investors since they want to make sure that profits
are high enough to distribute dividends.
Asset turnover ratio:
Blue Star: 1.489
Voltas: 1.19
The ratios indicate that Blue Star uses and manages its sales slightly better when compared to
Voltas to produce products and sales. For every one dollar in assets, Blue Star is producing
1.489 dollars whereas Voltas is producing only 1.19 dollars.
Return on Equity:
Blue Star: 0.182
Voltas: 0.159
This is a profitability ratio from the investors point of view. Shareholders saw a 18% return
on investment this year for Blue Star whereas for Voltas it was just 16%.

Liquidity ratios:
Quick ratio:
Blue Star: 0.733
Voltas: 1.084
Voltas has more quick assets than current liabilities and will be able to pay off its obligations
without having to sell that capital assets or long term assets. Whereas Blue Star wont be able
to convert its assets into cash to pay off the current liabilities
Current ratio:
Blue Star: 1.033
Voltas: 1.347
Voltas will be able to make current debt payments more easily when compared to Voltas,
since Voltas has more current assets than current liabilities when compared to Blue Star

P a g e | 19

Receivables turnover ratio:

Blue Star: 5.2
Voltas: 4.7
Blue Star is more efficient in collecting the credit sales from its customers when compared to
Voltas, which will in turn help Blue Star to pay off its debts and obligations sooner
Inventory turnover ratio:
Blue Star: 6.9
Voltas: 7.5
This measurement shows the investors how liquid the inventory of the company is. So the
comparison of ratios show that Voltas can convert its inventory into cash more effectively
than Blue Star.

Solvency Ratios:
Debt to Equity ratio:
Blue Star: 0
Voltas: 0.133
Blue Star does not have any borrowings where Voltas is using some creditor financing,
though only a small proportion when compared to that of investor financing.
Liabilities to Equity ratio:
Blue Star: 1.28
Voltas: 2.5
Voltas is having 2.5 times liabilities when compared to assets whereas the proportion is less
for Blue Star.
Interest coverage ratio:
Blue Star: 3.31
Voltas: 59.052
Investors uses this ratio to compute the profitability and risk of a company. Voltas is in a
position to pay its interests along with the principal payments when compared to that of Blue
Star. Voltas is making 59 times more earnings when comparing to its current interest
payments.
Leverage:

P a g e | 20

Blue Star: 1.98

Voltas: 2.225
The comparison shows that both Blue Star and Voltas has nearly double number of assets
when compared to that of liabilities, though the ratio is slightly higher for Voltas.

Market Ratios
Price earnings ratio:
Blue Star: 27.27
Voltas: 27.53
This ratio shows the positive future performance and how much investors are willing to pay
for the companys shares. It is seen that investors are willing to pay almost 10 dollars for
every dollar of earnings for both the companies.
Book value:
Blue Star: 7.066
Voltas: 59.233
Book value of Voltas is much higher when compared to that of Blue Star.
Earnings per share:
Blue Star: 12.88
Voltas: 10.06
Blue Star is a more profitable company on a shareholder basis when compared to that of
Voltas.
Price to Book ratio:
Blue Star: 0.919
Voltas: 4.67
Ratios show that Blue Star is undervalued whereas Voltas is overvalued. Investors are willing
to pay almost 4.6 times more for the assets of Voltas than they are worth whereas it is less
than 1 for Blue Star.
Dividend Yield ratio:
Blue Star: 1.85
Voltas: 0.9
Investors use this ratio the return on investment in stocks. Investors are getting highly
compensating for their investments, more than double, by Blue Star when compared to that
of Voltas.

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Stock Analysis

Blue Star and Voltas Ltd. both are public company listed on the Bombay Stock Exchange (BSE)
and National Stock Exchange (NSE) of India. The Voltas Ltd. Shares are priced at 379 after an
increase of 2.39% whereas Blue Star has shown an increase of 0.72%. Both of the companies are
performing quite well in recent times.

Conclusion
We feel both the companies are doing reasonably well in the industry but we believe Blue Star is
a better pick than Voltas. It is the season of smaller companies outperforming larger ones across
sectors. The trend is visible in the air conditioning (AC) space as well. While Voltas (with market
capitalization of ~12,490 crore) has delivered better returns compared to BSE Sensex (17 per
cent versus 10 per cent this year, respectively), Blue Star, with smaller market capitalization of
~5,000 crore has delivered far superior gains (up 33 per cent this year). So we believe
outperformance of Blue Star over Voltas may continue, given the strong fundamentals and
growth rates of BlueStar.

P a g e | 22

On the financial front, with the help of above calculated ratios we expect Blue Star to outperform
Voltas. Blue Star's operating profit margin in room AC segment or unitary products category
stood at 13.8 per cent and analysts expect margin to increase 100-150 basis points in FY17 with
introduction of new models so with profit expected to grow at a fast pace, Blue Star's stock will
be our pick.

Appendix
Graphs
Graph 1 Voltas Sales Trend

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Graph 2 Voltas Operating Profit

Graph 3 Voltas Net Worth

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Graph 4 Voltas Earnings per Share

Graph 5 Voltas Cash and Bank with Liquid Investments

Graph 6 Voltas EBITDA, PBT and PAT

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Graph 7 Voltas Asset Turnover Ratio wrt to Total Assets

References:
All the data and information has been taken from the below mentioned
http://www.voltas.com/ - Voltas Annual Report
https://www.bluestarindia.com/ - BlueStar Annual Report
http://www.indiainfoline.com/ - India Infoline Database
http://www.capitaline.com/ - Capitaline Database