SECTOR: STEEL REPORTING DATE: 31 ST MAY, 2016

Transcription

1 Zenith Birla (India) Ltd 31 st May, 2016 TABLE 1 - MARKET DATA (STANDALONE) (As on 30 th May, 2016) NSE Code - ZENITHBIR NSE Market Price ( ) 0.75 NSE Market Cap. ( Cr.) 9.85 Sector - Steel Face Value ( ) Equity ( Cr.) week High/Low ( ) 1.00/0.55 Net worth ( Cr.) Business Group - Birla Yash TTM P/E N.A. Traded Volume (Shares) 100 Year of Incorporation TTM P/BV N.A. Traded Volume (lacs) 0.00 Corporate Office: 5th Floor Industry House, 159 Churchgate Reclamation, Mumbai, , Maharashtra Company Website: TABLE 2 - PRICE PERFORMANCE 30 th May, 2016 Source - Capitaline COMPANY BACKGROUND Zenith Birla (India) Ltd is a leading manufacturer of Steel Pipes in India. The company is engaged in manufacturing black welded and galvanized steel pipes and cutting tools. They operate in two divisions, namely pipes division at Khopoli and tools division at Nasik and Aurangabad. The tool division of the company is engaged in manufacturing HSS cutting tools and is focused towards the auto/engineering segment. The company's subsidiaries include Zenith (USA) Inc. and Zenith Middle East FZE. Zenith Birla (India) Ltd was incorporated on 1960 with the name Zenith Steel Pipes Ltd. The company was established with the main object to manufacture black welded and galvanized steel pipes and was promoted by house of Birla. Also, they came out with their first public issue of equity share during the year. 29 th May, th May, 2014 % Change CAGR for 2 years 2016 vs vs 2014 Price ( ) % % % Trading Volume (Shares) (yearly avg.) 23,899 46,655 78, % % - NSE Market Cap. (in Cr.) % % % Source - Money Control 1 P A G E

2 TABLE 3 - FINANCIALS ( Cr.) % Change CAGR for 2 years 2015 vs vs 2013 Net Worth % % N.A. Current Assets % % % Non-Current Assets % % % Total Assets % % % Investments % % % Finance Cost % % % Long Term Liabilities % 3.51% -9.46% Current Liabilities % % % Turnover % % % Profit After Tax (PAT, Cr.) N.A. N.A. N.A. EPS ( ) N.A. N.A. N.A. Source - Money Control/Annual Report Discussion as per Company: During the year FY , the net income of the Company has reduced to crore as compared to Crore of FY due to decline in sales. Loss after Tax for the financial year stood at Crore as against the Loss of Crore of FY Since the net worth of the Company has been fully eroded resulting into negative net worth, the Company has become sick under the provisions of Sick Industrial Companies (Special Provisions) Act, AUDIT QUALIFICATIONS Auditors has given Qualified opinion since last 3 years. The detailed notes to Audit qualifications can be read in the annual Reports for FY , FY , FY Qualification for the year With reference to Note no. 44 regarding the non-provision by the company of the interest amounting to crores on its working capital facilities from banks during the year. Had this amount been provided for, the loss would have been higher by crores and Secured loans would have been higher by an amount of crores. 2. The Company has not complied with the provisions of sections 74 or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules 2014 with regard to non-repayment of deposits and interest on due date, maintenance of liquid assets to the extent required as well as not fully complying with the orders passed by the Company Law Board. 3. With reference to Note no. 42 regarding the company not having the balance confirmations for its party balances and hence our inability to state whether these balances are recoverable / payable to the extent stated. Management Response: Management Response for the year The Company is trying for One Time Settlement (OTS) with the banks. Hence, it is felt prudent for not providing for interest after the accounts became NPA. 2. On account of huge losses and negative net worth, there was financial crunch. Hence, (i) as required u/s section 74 of the Companies Act, 2013, the Company could not pay its outstanding deposits as on , within a period of one year i.e. by (ii) Could not maintain liquid assets 2 P A G E

3 (iii) could not comply fully with the orders passed by the Company Law Board u/s section 58A(9) of the Companies Act, The Company is taking steps to obtain balance confirmation from its parties. However, it will not have any material impact on the state of affairs of the Company. Qualification for the year With reference to Note No. 45 regarding the non-provision by the Company of the interest amounting to ` 2, lacs on its working capital facilities from Banks during the year. Had this amount been provided for, the loss would have been higher by ` 2, lacs and Secured Loans would have been higher by an amount of ` lacs. 2. The Company has not complied with the provisions of sections 58A, 58AA or other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules 1975 with regard to non-repayment of deposits and interest on due date, maintenance of liquid assets to the extent required as well as not intimating the appropriate authorities of such defaults. 3. With reference to Note No. 42-regarding the Company not having the balance confirmations for its party balances and hence our inability to state whether these balances are recoverable/payable to the extent stated. 4. The Company has appointed a firm of Chartered Accountants for carrying out the internal audit functions. The internal audit coverage has been done only at Tarapur unit and not at any of the other locations. In our opinion, the scope and coverage of the audit require enhancement to make it commensurate with the size of the Company and nature of its business. Management Response for the year As the Accounts have been categorised as NPA by the Banks, the bank does not accrue for interest for the period post NPA. Accordingly, the Company has followed the same principle and hence, it has not provided for interest for the period post NPA. However, the interest for the period post NPA has been shown as contingent liability. 2. The Company suffered heavy losses resulting in major financial crunch. Hence, the Company could not meet its commitment on due date. The Company has sought for extension/ re-schedulement of repayments of deposits along with interest. However, the Company is exploring ways and means to comply with the requirements. 3. The Company is taking steps to obtain balance confirmation from its parties. However, it will not have any material impact on the state of affairs of the Company. 4. The Company has appointed the firm in the fag end of the year. Hence, the coverage was for only one location. However, the Company is taking steps to increase the coverage in the forth coming year. Qualification for the year In our opinion and according to the information and explanations given to us, in respect of compliance by the Company with the provisions of Section 58A and 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975, with regard to the deposits accepted from the public, we have to state that these have not been complied with in respect to non-payments of deposits and interest on due date, maintenance of liquid assets to the extent required as per rule 3A of the Companies (Acceptance of Deposit) Rules,1975 accepting fresh deposits after the default, as well as not intimating the appropriate authorities of such defaults. 2. The Company has an in house internal audit system. To make it commensurate with the size and nature of its business, the scope and coverage needs to be strengthened. 3. According to the records of the Company examined by us and the information and explanations given to us, there have been instances of the Company not arranging funds for meeting its commitment to the banks for paying the liability of the Letters of credit on due dates since August 12 resulting in default in payment to the banks from August 2012, and as on the Company s liability to the banks for the Letters of credit which have fallen due is to the tune of ` lacs. However, the Company has operated within the total overall limit sanctioned by the banks taking together the Fund based and Non Fund based limit by interchanging the utilisation of funds with the mutual understanding with the banks. Management Response for the year The Company suffered heavily due to imposition of Anti-Dumping Duty by USA resulting in major financial crunch. Hence, the Company could not meet its commitment on due date. However, the Company is exploring ways and means to comply with 3 P A G E

4 the requirements. 2. The Company had full-fledged Internal Audit Department, but due to sudden demise of Chief Internal Auditor, the internal audit department could not take up the audit in all areas. However, the Company is appointing external agency as Internal Auditor who will cover all areas. 3. The Company suffered heavily due to imposition of Anti-Dumping Duty by USA resulting in major financial crunch. Hence, the Company could not meet its commitment on due date. Even though there has been over drawl in the cash credit account due to non- payment of LCs on due dates but the Company had un-utilized LC limit to the same extent of such over drawn cash credit limit such that the Company s outstanding was within the total sanctioned limit of fund based and non- fund based taken together. Response Comment Frequency of Qualifications - Some qualifications are appearing for the third time Have the auditors made any adverse remark in last 3 years? Are the material accounts audited by the Principal Auditors? Do the financial statements include material unaudited financial statements? TABLE 4: BOARD PROFILE (As on 31 st March, 2015) No - No - Yes The consolidated financial statements contain unaudited accounts of two wholly owned subsidiaries. The unaudited statements are material 39.36% of the assets, 21.97% revenue with respect to the consolidated accounts of the Company. As a material part of the consolidated financial statements of the Company are unaudited, this raises concern regarding the fairness of such financial statements. Regulatory Norms Company % of Independent Directors on the Board 50% 66% % of Promoter Directors on the Board - - Number of Women Directors on the Board Atleast 1 1 Classification of Chairman of the Board - Not Disclosed Is the post of Chairman and MD/CEO held by the same person? - There is no chairman in the board Average attendance of Directors in the Board meetings (%) - 100% Source - Money Control/Annual Report Composition of Board: As per Regulation 17(i)(b) of the Listing Regulations, 2015, the Company should have at least 50% Independent Directors as the Chairman of the Board is a Promoter/Executive Director. The Company as on 31 st March, 2015 has 66% of Independent Directors and hence, it meets the regulatory requirements. Board Diversity: The Company has 6 directors out of which 5 are male and 1 female. 4 P A G E

5 Trading Ratios Solvency Ratios Liquidity Ratios Return Ratios Turnover Ratios STAKEHOLDERS EMPOWERMENT SERVICES TABLE 5 - FINANCIAL RATIOS Ratios % Change 2015 vs vs 2013 Inventory Turnover % % Debtors Turnover % 10.38% Fixed asset Turnover % % Current Asset Turnover % % Operating Profit Margin % % % N.A. N.A. Net Profit Margin % % % N.A. N.A. Return on Assets (ROA) % % -6.04% N.A. N.A. Return on Equity (ROE) N.A. - - N.A. - Return on Capital Employed (ROCE) N.A. N.A. N.A. N.A. N.A. Current Ratio % % Quick Ratio % % Cash Ratio % % Working Capital Turnover ratio N.A. N.A N.A. N.A. Debt to equity ratio N.A N.A % Interest Coverage Ratio N.A. N.A. N.A. N.A. N.A. Market Cap / Sales % 90.02% Market Cap/ Net Worth N.A N.A % Market Cap/PAT N.A. N.A. N.A. N.A. N.A. Market Cap/EBITDA N.A. N.A. N.A. N.A. N.A. Trading Volume (shares) (avg. of 1 year) 29,170 50,297 89, % % Trading Volume (shares) (high in 1 year) 4,34,760 3,59,320 14,82, % % Trading Volume (shares) (low in 1 year) % % Ratio - High/low trading volume 4,34, ,883 84,112.67% % Ratio - High/average trading volume % % Source - Money Control 5 P A G E

6 TABLE 6 (A): OWNERSHIP & MANAGEMENT RISKS Sep' 2015 Sep' 2014 Sep' 2013 Comments Promoter shareholding 9.67% 9.67% 6.49% No new equity shares were issued Public - Institutional during the period from Sep' 2013 due 0.33% 3.47% 2.73% shareholding to Sep' The promoters have Public - Others pledged 32.71% of their shareholding % 86.86% 90.78% shareholding There is no major change in Non Promoter Non Public shareholding of the Company. Shareholding TABLE 6 (B): OWNERSHIP & MANAGEMENT RISKS Market Activity of Promoters Preferential issue to promoters Preferential issue to others GDRs issued by the Company Issue of ESOPs/Issue of shares other than Preferential allotment Source - Annual Report Low No preferential issue of shares was made to the promoters in last three years No preferential issue of shares was made to other shareholders during last three years The Company did not issue GDRs during last three years The Company does not have any ESOP Scheme. 6 P A G E

7 Glossary Equity: The equity shares capital of the Company Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholders funds of the Company Turnover: The revenue earned from the operations of the Company EPS: Earning Per Share is net profit earned by the Company per share EPS = Profit After Tax Number of outstanding shares P/E ratio: It is the ratio of the Company s share price to earnings per share of the Company P/E ratio = Price of each share Earnings per share Current Assets: Cash and other assets that are expected to be converted to cash in one year Fixed Assets: assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment Total Assets: Current Assets + Fixed Assets Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges incurred during the year in relation to borrowed money. Long Term Liabilities: Long-term liabilities are liabilities with a maturity period of over one year. Current Liabilities: A company's debts or obligations that are due within one year. Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. Inventory Turnover ratio = Inventory Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business can turn its accounts receivable into cash during a period Debtors Turnover ratio = Accounts recievables Fixed Asset Turnover: The fixed-asset turnover ratio is a financial ratio of net sales to fixed assets Fixed Asset Turnover ratio = Fixed Assets Current Asset Turnover: The current-asset turnover ratio is a financial ratio of net sales to fixed assets Current Asset Turnover ratio = Current Assets 7 P A G E

8 Operating Profit Margin: Operating margin is a measurement of what proportion of a Company s revenue is left over after paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Company s operating income (also known as operating profit ) during a given period by its sales during the same period. Operating Profit Margin = Operating profit Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales Net Profit Margin = Net profit Return on Assets: ROA tells you what earnings were generated from invested capital (assets) Return on Assets = Net profit Total Assets Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on Equity = Net profit Net worth Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed. Return on Capital Employed = Net profit Total Debt + Equity share capital Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. Current ratio = Current Assets Current Liabilities Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities. Quick ratio = Current Assets Inventories Current Liabilities Cash ratio: The ratio of the liquid assets of a Company to its current liabilities. Quick ratio = Current Assets Inventories Account Recievables Current Liabilities Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates a Company's effectiveness in using its working capital. Working Capital Turnover ratio = Current Assets Current Liabilities Debt to Equity ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Debt to Equity ratio = Short Term Debt + Long Term Debt Net Worth Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a Company can pay interest on outstanding debt. Interest Coverage Ratio = Earning Before Interest and Tax Finance Cost 8 P A G E

9 Market Cap/Sales ratio: Market Cap/sales ratio, Price sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per-share stock price by the per-share revenue. Market Cap Market Cap/Sales ratio = Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Company s market cap to net worth. Market Cap Market Cap/Networth ratio = Networth Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company s market cap to net profit. Market Cap Market Cap/PAT ratio = net profit Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company s market cap to EBITDA. Market Cap/EBITDA ratio = Market Cap EBITDA Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year 9 P A G E

10 DISCLAIMER Sources Only publicly available data has been used while making the factsheet. Our data sources include: BSE, NSE, SEBI, Capitaline, Moneycontrol, Businessweek, Reuters, Annual Reports, IPO Documents and Company Website. Company Information Analyst Certification The analysts involved in development of this factsheet certify that no part of any of the research analyst s compensation was, is, or will be directly or indirectly related to the contents of this factsheet. Disclaimer While SES has made every effort and has exercised due skill, care and diligence in compiling this factsheet based on publicly available information, it neither guarantees its accuracy, completeness or usefulness, nor assumes any liability whatsoever for any consequence from its use. This factsheet does not have any approval, express or implied, from any authority, nor is it required to have such approval. The users are strongly advised to exercise due diligence while using this factsheet. This factsheet in no manner constitutes an offer, solicitation or advice to buy or sell securities, nor solicits votes or proxies on behalf of any party. SES, which is a not-for-profit Initiative or its staff, has no financial interest in the companies covered in this factsheet except what is disclosed on its website. The factsheet is released in India and SES has ensured that it is in accordance with Indian laws. Person resident outside India shall ensure that laws in their country are not violated while using this factsheet; SES shall not be responsible for any such violation. All disputes subject to jurisdiction of High Court of Bombay, Mumbai. SEBI Reg. No. INH This factsheet or any portion hereof may not be reprinted, sold, reproduced or redistributed without the written consent of Stakeholders Empowerment Services Contact Information Stakeholders Empowerment Services A 202, Muktangan, Upper Govind Nagar, Malad East, Mumbai Tel research@sesgovernance.com info@sesgovernance.com Research Analyst: Sudarshan Shetty 10