31 st May, 2016 TABLE 1 - MARKET DATA (STANDALONE) (As on 31 st May, 2016) NSE Code - FARMAXIND NSE Market Price ( ) 0.15 NSE Market Cap. ( Cr.) 7.48 Sector - FMCG Face Value ( ) 1.00 Equity ( Cr.) 53.42 52 week High/Low ( ) 0.60/0.05 Net worth ( Cr.) 0.81 Business Group Indian Private TTM P/E N.A. Traded Volume (Shares) 1,01,867 Year of Incorporation - 1995 TTM P/BV 0.19 Traded Volume (lacs) 0.15 Source - Capitaline Corporate Office: Survey No 658 Bowrampet Villag, Qutubullapur Mandal, Ranga Reddy, 500 043, Telangana Company Website: COMPANY BACKGROUND The company manufactures and distributes high margin FMCG products like toothpaste, hair oil, soaps & detergents, pasta & vermicelli, atta etc. at their GMP facilities located at Bowrampet, Hyderabad. The company has strong presence in the consumer goods sectors. They have their distribution network in nine states with more than 600 distributors and approximately 4,00,000 retail outlets situated in rural and semi urban areas. was incorporated on 8 th November, 1995 with the name Bhagyanagar Castings Ltd. During the year 2007-08, Farmax Health & Food Products Pvt Ltd was amalgamated with the company and the company was renamed as Farmax Retail India Ltd. Also, they acquired business and assets of Obex Hygienic Products, a partnership firm engaged in manufacturing and marketing of toilet soaps and mosquito coils for a total consideration of 3.50 crore. TABLE 2 - PRICE PERFORMANCE 30 th May, 2016 29 th May, 2015 30 th May, 2014 % Change CAGR for 2016 vs 2015 2015 vs 2014 2 years Price ( ) 0.15 0.45 0.50-66.67% -10.00% -45.23% Trading Volume (Shares) (yearly avg.) 11,34,904 3,09,421 58,764 266.78% 426.54% - NSE Market Cap. (in Cr.) 8.01 24.04 20.42-66.68% 17.73% -37.37% Source - Money Control 1 P A G E
TABLE 3 - FINANCIALS ( Cr.) 2015 2014 2013 % Change CAGR for 2 years 2015 vs 2014 2014 vs 2013 Turnover 21.05 17.41 51.92 20.91% -66.47% -36.33% Net Worth 0.81-13.70-4.86 N.A. N.A. N.A. Current Assets 19.28 3.57 3.49 440.06% 2.29% 135.04% Non-Current Assets 25.47 27.38 29.00-6.98% -5.59% -6.28% Total Assets 44.75 30.95 32.49 44.59% -4.74% 17.36% Investments 7.76 4.51 4.54 72.06% -0.66% 30.74% Finance Cost 0.06 6.14 4.73-99.02% 29.81% -88.74% Long Term Liabilities 0.45 0.42 0.44 7.14% -4.55% 1.13% Current Liabilities 43.49 44.23 36.92-1.67% 19.80% 8.53% Profit After Tax (PAT, Cr.) -2.10-8.84-127.32 N.A. N.A. N.A. EPS ( ) -0.04-0.22-3.12 N.A. N.A. N.A. Source - Money Control/Annual Report The Company s net worth eroded in FY 2012-13. Its net worth decreased from 100.86 crores to -4.86 crores. The Company in its Annual report for 2012-13 has disclosed: Sales: During the FY 2012-13, Net Sales stood at 51.92 crores as against 91.42 crores registering a considerable decrease in sales. Net profit/ Loss: During the FY 2012-13 the company has incurred a net loss of 127.31 crores as against a loss of 1.83 crores in the previous FY 2011-12. The financial condition of the Company is not at all good. The present Power situations in the state, economic condition, high inflation, low purchasing power of the consumers, realization of the payments from the debtors and working capital problems are the main reasons behind the deteriorating financial conditions of the Company. The State of Andhra Pradesh is facing lot of power problems. Everyday there is 5-6 hours of power cut. Government has allocated 60% of CMD for Industries out of that also only 3-4 hours of power supply is given. The Chief Minister of the State has also given a statement that the power situations will get even worse in the coming days. Due to this not only the Company s industry but many industries are facing problems. Production has nearly stopped. Life and efficiency of the plant and machineries are also decreasing due to the fluctuations in power. This has resulted in low production thereby making the Company to run at loss. The economic downfall and the present inflationary conditions have also added to the loss of the Company. Many industries have been declared as NPA's and have shut down because of the present market situations. The prices of the raw materials, fuel, manpower, etc. are increasing day by day. This has increased the cost of production of the products while the selling price remains the same. The present economic conditions have also resulted in the low purchasing power of the Consumers. As the prices of each and everything is increasing consumers are also facing lot of problems as their income remains the same while the prices of things of necessity are increasing at a much higher rate. This has resulted in low sales of the products which in turn has made the Company to incur huge losses. The Company is facing problems in realization of debtors timely. The debtors are not making the payments because they want continuous supply of the products and the Company is unable to reach their expectation because of the above constraints. The Company is facing lot of problems in meeting the day to day working capital of the Company. In the economy where prices are increasing day by day, it has become very difficult for running the Company. The Company in its latest Annual report for 2014-15 has disclosed: The Company's performance for the year 2014-15 has to be viewed in the context of the aforesaid economic and market environment. Some highlights are given below: Sales: During the FY 2014-15, Net Sales stood at 21.04 crores as against 17.40 crores registering a considerable increase in 2 P A G E
sales. Net profit/ Loss: During the year under review the company has incurred a net loss of 2.10 crores as against 8.84 crores in the previous financial year 2013-14. Note: As per Bank Statement the bank has not charged any interest on the loans availed. And it is not possible to calculate the exact interest to debit the profit and loss account. Which resulted in decrease in loss. The financial condition of the Company is not at all good. The entire networth of Company was eroded. Subsequently the Company was required to make a reference to the BIFR. Hence, a reference was made dated 1 st August, 2013 to the BIFR and the reference of the Company has been registered vide case No. 91/2013 by BIFR vide their order as mentioned in their letter dated No. 3(F-1)/BC/2013 dated 19 th December, 2013. AUDIT QUALIFICATIONS The Auditors have not raised any qualification in their report for FY 2014-15, however, they have raised qualifications in the Annual Report for FY 2013-14. The Auditors in their report have mentioned: a) The company has not complied with AS-15 "Employee Benefits" with regard to provision for gratuity and disclosure requirements specified in the accounting standard and b) Confirmations for balances outstanding in sundry debtors, advances, trade payables, secured loans and bank balances are not obtained. On the above qualifications, the Company in its Directors; report has mentioned: The Board has duly reviewed the Statutory Auditors' Report on the Accounts. The observations and comments, appearing in the Auditors' Report are self-explanatory and do not call for any further explanation / clarification by the Board of Directors. Response Frequency of Qualifications - 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? Comment The Auditors raised qualification for the first time in Annual Report of FY 2013-14. No - Yes - No - 3 P A G E
TABLE 4: BOARD PROFILE (As on 31 st March, 2015) Regulatory Norms Response % of Independent Directors on the Board 50% 75% % of Promoter Directors on the Board - 25% Number of Women Directors on the Board At least 1 1 Classification of Chairman of the Board - Executive Promoter Director Is the post of Chairman and MD/CEO held by the same person? - Yes Average attendance of Directors in the Board meetings - Not Disclosed 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 an Executive Promoter Director. The Company as on 31 st March, 2015 has 75% of Independent Directors and hence, it meets the regulatory requirements. Board Diversity: The Company has 4 directors out of which 3 are male and 1 is a female. Holding of position of MD/ CEO & Chairman by same person: The Company has appointed Mr. M Srinivas Reddy as the Chairman and Managing Director of the Company. Appointment of a single person as the Chairman and Managing Director of the Company is not a good governance practice as it may lead to concentration of power in a single person. Attendance at Board Meetings: The Company has not disclosed the attendance of the Board of Directors in Board meetings. 4 P A G E
Trading Ratios Solvency Ratios Liquidity Ratios Return Ratios Turnover Ratios STAKEHOLDERS EMPOWERMENT SERVICES TABLE 5 - FINANCIAL RATIOS Ratios 2015 2014 2013 2015 vs 2014 % Change 2014 vs 2013 Inventory Turnover 2.38 5.18 18.35-54.10% -71.76% Debtors Turnover 3.04 102.41 324.50-97.03% -68.44% Fixed asset Turnover 0.83 0.64 1.79 29.97% -64.48% Current Asset Turnover 1.09 4.88 14.88-77.61% -67.22% Operating Profit Margin -9.98% -50.78% -46.22% N.A. N.A. Net Profit Margin -9.98% -50.78% -245.22% N.A. N.A. Return on Assets (ROA) -4.69% -28.56% -391.87% N.A. N.A. Return on Equity (ROE) -259.26% N.A. N.A. N.A. N.A. Return on Capital Employed (ROCE) N.A. N.A. N.A. N.A. N.A. Current Ratio 0.44 0.08 0.09 449.25% -14.61% Quick Ratio 0.24 0.00 0.02 4951.18% -73.44% Cash Ratio 0.08 0.00 0.01 8798.88% -93.32% Working Capital Turnover ratio N.A. N.A. N.A. N.A. N.A. Debt to equity ratio 50.64 N.A. N.A. N.A. N.A. Interest Coverage Ratio N.A. N.A. N.A. N.A. N.A. Market Cap / Sales 0.41 0.49 0.16-17.29% 198.22% Market Cap/ Net Worth 10.56 N.A. N.A. 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) 1,047,381 299,504 62,268 249.70% 380.99% Trading Volume (shares) (high in 1 year) 10,279,105 4,544,488 819,948 126.19% 454.24% Trading Volume (shares) (low in 1 year) 951 750 50 26.80% 1400.00% Ratio - High/low trading volume 10,808.73 6,059.32 16,398.96 78.38% -63.05% Ratio - High/average trading volume 9.81 15.17 13.17-35.32% 15.23% Source - Money Control 5 P A G E
Shareholding STAKEHOLDERS EMPOWERMENT SERVICES TABLE 6 (A): OWNERSHIP & MANAGEMENT RISKS Promoter shareholding Public - Institutional shareholding Public - Others shareholding Non Promoter Non Public Shareholding TABLE 6 (B): OWNERSHIP & MANAGEMENT RISKS Dec' 2015 Dec' 2014 Dec' 2013 Comments 37.89% 0.83% 37.32% 1.14% 32.27% 4.86% During the year from 1 st April, 2014 to 31 st March, 2015, the Company issued 12,58,71,427 Equity shares at issue price of 1.32 to the promoters and other shareholders due to which the shareholding of promoters increased from 37.32% to 37.89%. The 61.28% 38.01% 39.34% shareholding of non-promoter non-public 0.00% 23.53% 23.53% decreased from 23.53% to 0.00 during the above mentioned period due to reclassification of the shareholders as per the SEBI circular. 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 The promoters did not buy/sell any shares in the market during the period 1 st April, 2014 to 31 st March, 2015. The Company issued 5 crores equity shares at issue price of 1.32 to the promoters of the Company during the period from 1 st April, 2014 to 31 st March, 2015. The Company issued 7.58 crores equity shares at issue price of 1.32 to the promoters of the Company during the period from 1 st April, 2014 to 31 st March, 2015. The Company has come out with GDR issue in the year 2010 for an issue size of 51 lakh GDRs at an issue price of 14.1 dollar per GDR which are liable to be converted in to 25 equity shares of 1/- each. It is noted that the Company has not received proceeds of GDR issue and for recovery of the same, FIR was filed with Dundigal police station at Hyderabad vide no.664/2013 on 29.10.2013 and the issue is still pending. More details of the GDR issue can be read on Page 25 of the Annual Report 2014-15. The Company did not issue any shares to the employees under its ESOP Scheme in last three years 6 P A G E
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
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
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
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