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MRF (Madras Rubber Factory) is India’s No.1 tyre manufacturing company. It was started in the year 1946 by K M Mammen Mappillai as a small toy balloon unit. Much later in November 1960 it ventured into manufacturing of tyres. The company entered into a technical collaboration with Tire & Rubber company, USA. In 1964 MRF established an overseas office at Beirut, Lebanon to tap the export market. This was amongst India’s very first efforts on tyre exports. In 1989 the company collaborated with US–based Hasbro International, the world’s largest toy maker and launched Funskool India. In the same year it entered into a pact with Vapocure of Australia to manufacture polyurethane paint formulations and with Pirelli for Muscleflex conveyor and elevator belting. Currently MRF exports tyres to over 65 countries including America, Europe, Middle East, Japan, and the Pacific region. It presently has overseas offices in Dubai, Vietnam and Australia.
Products of the company
Tyres – It manufactures various tyres for passenger cars, two–wheelers, trucks, buses, tractors, light commercial vehicles and off– the–road tyres. Conveyor Belting – It manufactures its Muscleflex brand of conveyor belting at one of the most advanced state–of–the–art facilities in India. Incorporating the latest manufacturing techniques in processes beginning with mixing, calendaring and the like to manufacturing of the finished products, all of which is in–house, Muscleflex –conveyor belting has gained rapid acceptance in markets worldwide. Pretreads – It is the most advanced precured retreading system in India. MRF forayed into retreading as far back as 1970. Today, MRF has perfected the art of recured retreading with its extensive knowledge in tyres and rubber.
Awards
It was awarded as Most Trusted Tyre Company in India by TNS 2006 global CSR study. The company won the J D Power Asia Pacific award for customer satisfaction seven times. MRF was honoured with CAPEXIL award as acknowledgement for its export performance. 2013 Won the JD power award for the 10th time.
MOTOR SPORTS Racing The MRF Formula 2000 cars are used in the most sought after racing series from MRF - The MRF Challenge. Around 20 drivers from all over the world battle it out in the MRF Challenge series every year
Rallying MRF is the largest promoter of rallying in the country. Having met with success in the domestic championships, the company entered international rallying in 2002 with two cars in the FIA Asia Pacific Rally Championship (APRC).
Motocross Derived from the words ‘Motorcycle’ and ‘Cross Country’, Motocross is often shortened to MX. It’s a form of motorcycle sport or all-terrain two wheeler racing held on enclosed off-road circuits. In line with its close association with motorsports, MRF promotes a national Supercross Championship annually in several cities.
Karting Karting is considered the stepping-stone for a successful career in formula car racing. It has moved on from becoming a pastime for racing buffs to a serious sport. And MRF has strengthened its long-standing association with karting in India by becoming the first Indian tyre company to develop FIA-CIK approved karting tyres in India.
MRF Pace Foundationedit MRF Pace Foundation is a coaching clinic for training fast bowlers established by MRF with the help of former Australian pace spearhead Dennis Lillee in Chennai, India. Through this program, young aspiring fast bowlers are trained in a special facility. Fast bowlers who trained with foundation and went on to represent the Indian Cricket Team include Javagal Srinath, Irfan Pathan, Munaf Patel, Venkatesh Prasad, R. P. Singh, Zaheer Khan and S Sreesanth. Besides Indian players, foreign players like Chaminda Vaas, Henry Olonga, Heath Streak and Australian fast bowlers Glenn McGrath, Mitchell Johnson and Brett Lee have also trained at the foundation. Sachin Tendulkar in his early days trained in the MRF Pace Foundation to become a fast bowler. Glenn McGrath was
appointed director of the Foundation on 2 September 2012, replacing Dennis Lillee, who has held the post since its inception in 1987.[13]
Endorsement[edit] MRF had been the bat sponsor for many cricketers of the game. Sachin Tendulkar, Brian Lara and Steve Waugh have endorsed MRF products.[14] MRF has also sponsored Indian batsmen Rohit Sharma,[15] Gautam Gambhir and Sanju Samson. Currently MRF is endorsed by star batsmen Prithvi Shaw, Shikhar Dhawan, Virat Kohli[16] and AB de Villiers.[17] Previous endorsements[edit]
Sachin Tendulkar – Conqueror,Genius,Wizard Brian Lara – Wizard, Wizard 400 Steve Waugh – Conqueror Rohit Sharma – Genius Gautam Gambhir – Genius Sanju Samson – Wizard
Current endorsements[edit]
Virat Kohli – Conqueror,Genius VK 18 AB de Villiers – Genius ABD 25 Shikhar Dhawan – Genius SD 25 / Unique SD Prithvi Shaw – Emerging Star
Sponsorship[edit] At IPL 2010, MRF sponsored moored balloons floating above the cricket grounds with a high-definition camera recording live actions of the cricket match. MRF joined as a global partner of International Cricket Council for 2015 Cricket World Cup.[18] In 2017, MRF became the sleeve sponser for the Premier League clubs Newcastle United,[19] West Ham United F.C.[20] and official tyre partner for West Bromwich Albion.
Manufacturing facilities The company has manufacturing facilities for tyres at Kottayam in Kerala, Puduchery, Arakonam, Goa and trichy two plants in Perambalur in Tamil Nadu, Medak and ankenpally in Telangana has two facilities one recently opened.[6] The company manufactures toys at its facility in Goa. The paints and coats are manufactured at two facilities in Chennai, Tamil Nadu
THE MRF DESIGN PROCESS The Design process at MRF starts from the customer - inputs from individual customers are compiled by marketing and given to Corporate Technical MRF's R&D and Product Development Division or vehicle specific requirements are received from the OE customer. MRF's team of 300 engineers and scientists gives MRF its enormous strength in product design. Requirements received, a team now works on converting the customer input into a Design Concept. MRF uses cutting - edge technologies in predictive testing and design validation before it leaves the drawing board. These advances have significantly brought down the time to market for new designs. Advanced raw materials are tested and approved in our NABL accredited laboratories. MRF works closely with global suppliers in using the latest developments in materials across the globe. Our laboratories which have the very latest in testing equipment closely monitor the quality of the material going into our tyres at the time of approval and regularly after that. The prototypes for verification and validation testing are manufactured in one of MRF's 9 factories all of which are TS 16949/ISO 9001 certified. The tyres then go through testing for confirming the architecture and a series of indoor testing to ensure that they meet MRF's tight standards and also those required by the OEM or by any of the national standards like BIS/JIS/ETRTO/T&RA.
Tyres are now handed over to the Vehicle Dynamics Group, who now validates the design on the vehicle. These tests are done at the test track in a series of manoeuvres at various speeds, pushing the tyres to the limits of its capabilities. MRF also tests tyres on fleets across the country to ensure that the tyres have endured successfully all the types of roads on which our customers travel daily. Race Tracks and Indian Roads are our laboratories. Only after this do we give any tyres to the customer - all global players manufacturing a global class of vehicles. MRF has been designing tyres this class of vehicles for more than a decade now. MRF tyres have met the demanding requirements of these vehicles, backed by an R&D team which is completely in-house and self reliant.
MRF LTD. (MRF) - FINANCIAL RATIOS RATIOS
2018
2017
2016
DEBT-EQUITY RATIO
0.21
0.26
0.34
CURRENT RATIO
0.94
0.96
1.18
ASSET TURNOVER RATIO
2.08
2.47
2.55
INVENTORY TURNOVER RATIO
6.67
6.90
8.03
DEBTORS TURNOVER RATIO
7.44
7.78
8.35
INTEREST COVERAGE RATIO
7.42
9.27
11.25
OPERATING MARGIN (%)
16.79
19.83
21.17
NET PROFIT MARGIN (%)
7.17
9.84
11.16
RETURN ON CAPITAL EMPLOYED (%)
16.61
22.97
30.96
RETURN ON NET WORTH (%)
12.04
18.48
28.24
RATIOS
2014
2013
2012
DEBT-EQUITY RATIO
0.43
0.51
0.64
CURRENT RATIO
1.52
1.50
1.43
ASSET TURNOVER RATIO
2.48
2.55
2.94
INVENTORY TURNOVER RATIO
8.15
7.82
8.24
DEBTORS TURNOVER RATIO
8.97
8.94
9.45
INTEREST COVERAGE RATIO
6.78
7.26
6.25
13.61
13.35
9.90
OPERATING MARGIN (%)
NET PROFIT MARGIN (%)
6.13
5.96
4.38
RETURN ON CAPITAL EMPLOYED (%)
22.40
23.86
19.29
RETURN ON NET WORTH (%)
22.00
24.67
22.20
Analysis of MRF's financial statements for the period from 2012 to 2017 This report analyzes the balance sheets and income statements of MRF. Trends for the major balance sheet and income statement items and ratio analysis are used to understand the financial position and financial effectiveness of the company. The report studied the 2012 - 2017 period.
1. The Common-Size Analysis of the Assets, Liabilities and Shareholders' Equity Table 1. Assets Trend Analysis, in Cr INR Indicators
2012
2013
2014
2016
2017
Absolute Percentage
Property, plant and equipment
71.54
84.68
Intangible assets, net (excluding goodwill)
5.99
5.39
Noncurrent inventories
57.23
Deferred tax assets, net, noncurrent Current tax assets, noncurrent Other noncurrent assets
0
change (2017 / 2012)
151.76 1044.64 1080.57 1009.03
1410.44
7.04
9.06
138.12 3421.65 458.74 0
2907.81 2964.15 30.46
change (2017 / 2012)
34.89
13.23
7.24
5474.35 5417.12
120.87 9465.53
224.27
10.05
3.68
3.68
division by 0
0
0
0
-2907.81
-100
42.11
238.22
318.85
288.39
946.78
NONCURRENT ASSETS (TOTAL)
3073.03 3227.23 3846.83 1760.71 6890.68 3817.65
Current inventories
1645.59 1795.29 1799.70 1879.74 2392.92
747.33
45.41
Trade and other current receivables
1454.09 1556.14 1708.47 1831.72 1959.95
505.86
34.79
124.23
Current biological assets
353.17
821.48
936.15 2102.75 2313.78 1960.61
555.15
Other current financial assets
203.42
145.14
136.75
0
3.98
-199.44
-98.04
61.10
330.81
707.67
80.45
274.42
213.32
349.13
7.22
22.13
34.72
329.98
242.43
235.21
3257.76
Cash and cash equivalents Other assets, current CURRENT ASSETS (TOTAL)
3724.59 4670.99 5323.46 6224.64 7187.48 3462.89
92.97
ASSETS (TOTAL)
6797.62 7898.22 9170.29 7985.35 14078.16 7280.54
107.1
It can be noticed from Table 1 that there was a tendency to increase in the total value of the assets. The percentage change was equal 107.1% in 2017 comparing to 2012. The value of the assets totalled INR 140,781,600 thousand at the end of 2017.
The overall increase of the assets reflects both a growth in the noncurrent assets by 124.23% and a growth in the current assets by 92.97%.
Assets comparison for 5 years
16000
14000
12000
10000
8000
6000
4000
2000
0 2012
2013
2014
2016
2017
Non Current and Current Assets for 5 Years 8000
7000
6000
5000 Non Current Assets
4000
Current Assets 3000
2000
1000
0 2012
2013
2014
2016
2017
The change of the noncurrent assets value in 2012-2017 was connected with the growth of the following assets: - Property, plant and equipment (1410.44%) - Intangible assets other than goodwill (120.87%) - Noncurrent inventories (9465.53%) - Deferred tax assets (0%)
- Other noncurrent assets (946.78%) The change of the current assets value in 2012-2017 was connected with the growth of the following assets: - Current inventories (45.41%) - Trade and other current receivables (34.79%) - Current biological assets (555.15%) - Cash and cash equivalents (349.13%) - Other current assets (3257.76%) Table 2. Sources of Finance (Equity and Liabilities) Trend Analysis, in Cr INR
Indicators
Issued (share) capital
2012
2013
2014
2016
2017
4.24
4.24
4.24
4.24
4.24
Absolute Percentage change change (2017 / (2017 / 2012) 2012) 0
0
Other reserves
2853.56 3640.90 4513.40 7156.97 8540.18 5686.62
199.28
EQUITY (TOTAL)
2857.80 3645.14 4517.64
198.99
Noncurrent borrowings
1102.71 952.46 1198.75 1486.45 1238.32 135.61
Other noncurrent provisions
7161.2
8544.42 5686.62
12.3
87.29
75.24
91.85
125.13
137.26
49.97
57.25
Deferred tax liabilities
186.72
222.31
235.31
351.79
501.17
314.45
168.41
Other long-term financial liabilities
908.03 1043.23 1144.84
36.24
27.74
-880.29
-96.95
2284.75 2293.24 2670.75 1999.61 1904.49 -380.26
-16.64
NONCURRENT LIABILITIES Current borrowings
528.72
476.23
616.25
488.43
573.34
44.62
8.44
Other current provisions
147.24
269.07
313.31
89.65
120.88
-26.36
-17.9
Trade and other current payables
939.43 1021.43 1139.72 1528.82 1677.08 737.65
78.52
Other current liabilities
454.33
363.3
552.23
539.29 1902.03 2104.91 1650.58
CURRENT LIABILITIES
2069.72 2318.96 2608.57 4008.93 4476.21 2406.49
116.27
LIABILITIES (TOTAL)
4354.47 4612.20 5279.32 6008.54 6380.70 2026.23
46.53
LIABILITIES AND EQUITY (TOTAL)
7212.27 8257.34 9796.96 13169.75 14925.12 7712.85
106.94
Similar to the value of total assets, the liabilities and equity value amounted to INR 140,78.1,6 Cr in 2017, 107.1% more than in 2012. There was a stable growth of the stockholders' equity value in 2012-2017, which indicates that the company's assets would worth more after all claims upon those assets were paid. This means that MRF was expanding. The change of the stockholders' equity value in 2012-2017 was related to growth of the following sources: - Other reserves (199.28%)
9000 8000 7000 6000
5000
Equity Non Current Liability
4000
Current Liability 3000 2000 1000 0 2012
2013
2014
2016
2017
The change of the liabilities value in 2012-2017 was related to the growth of the following sources: - Current borrowings (8.44%) - Trade and other current payables (78.52%) - Other current liabilities (363.3%) - Noncurrent borrowings (12.3%) - Other noncurrent provisions (57.25%) - Deferred tax liabilities (168.41%) Table 3. Assets Structure Analysis, %
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
Property, plant and equipment
1.05
1.07
1.65
13.08
7.68
6.62
Intangible assets other than goodwill
0.09
0.07
0.08
0.11
0.09
0.01
Noncurrent inventories
0.84
1.75
37.31
5.74
38.89
38.04
0
0
2.45
0.13
0.03
0.03
42.78
37.53
0
0
0
-42.78
0.45
0.44
0.46
2.98
2.26
1.82
NONCURRENT ASSETS (TOTAL)
45.21
40.86
41.95
22.05
48.95
3.74
Current inventories
24.21
22.73
19.63
23.54
17
-7.21
Trade and other current receivables
21.39
19.7
18.63
22.94
13.92
-7.47
5.2
10.4
10.21
26.33
16.44
11.24
2.99
1.84
1.49
0
0.03
-2.96
0.9
4.19
7.72
1.01
1.95
1.05
0.11
0.28
0.38
4.13
1.72
1.62
54.79
59.14
58.05
77.95
51.05
-3.74
100
100
100
100
100
0
Indicators
Deferred tax assets, net, noncurrent Current tax assets, noncurrent Other noncurrent assets
Current biological assets Other current financial assets Cash and cash equivalents Other current assets CURRENT ASSETS (TOTAL) ASSETS (TOTAL)
At the end of 2012 the assets consisted of: 45.21% noncurrent assets and 54.79% current assets. The most significant items of the current assets were: current inventories (24.21% of total assets), trade and other current receivables (21.39% of total assets), current biological assets (5.2% of total assets), etc. The following noncurrent assets had the highest values: current tax assets, noncurrent (42.78% of total assets), while the other items did not play a significant role.
Over the period under review the assets structure changed. At the end of 2017 the assets consisted of: 48.95% noncurrent assets and 51.05% current assets. Total current assets composed mostly of: current inventories (17% of total assets), trade and other current receivables (13.92% of total assets), current biological assets (16.44% of total assets), etc. The most significant items of the noncurrent assets were: property, plant and equipment (7.68% of total assets), noncurrent inventories (38.89% of total assets), etc. Table 4. Equity and Liabilities Structure Analysis, % Indicators
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
Issued (share) capital
0.06
0.05
0.05
0.05
0.03
-0.03
Other reserves
41.98
46.1
49.22
89.63
60.66
18.68
EQUITY (TOTAL)
42.04
46.15
49.26
89.68
60.69
18.65
Noncurrent borrowings
16.22
12.06
13.07
18.61
8.8
-7.43
Other noncurrent provisions
1.28
0.95
1
1.57
0.97
-0.31
Deferred tax liabilities
2.75
2.81
2.57
4.41
3.56
0.81
Other long-term financial liabilities
13.36
13.21
12.48
0.45
0.2
-13.16
NONCURRENT LIABILITIES
33.61
29.03
29.12
25.04
13.53
-20.08
Current borrowings
7.78
6.03
6.72
6.12
4.07
-3.71
Other current provisions
2.17
3.41
3.42
1.12
0.86
-1.31
13.82
12.93
12.43
19.15
11.91
-1.91
Other current liabilities
6.68
6.99
5.88
23.82
14.95
8.27
CURRENT LIABILITIES
30.45
29.36
28.45
50.2
31.8
1.35
Liabilities
64.06
58.4
57.57
75.24
45.32
-18.74
LIABILITIES AND EQUITY (TOTAL)
106.1
104.55
106.83
164.92
106.02
-0.08
Trade and other current payables
By looking at the Table 4 it can be noticed that the sources of finance consisted of 42.04% shareholders' equity, 33.61% noncurrent liabilities and 30.45% current liabilities. Average share of the equity in 2012 means the financial risk level was acceptable. The total equity consisted mostly of: other reserves (INR 28,535,600 thousand), etc. The company's liabilities included noncurrent borrowings (16.22% of the total sources of finance), other long-term financial liabilities (13.36% of the total sources of finance), current borrowings (7.78% of the total sources of finance), trade and other current payables (13.82% of the total sources of finance), other current liabilities (6.68% of the total sources of finance), etc.
CEAT TYRES FINANCIAL STATEMENT
Indicators
2012
2013
2014
2016
2017
34.24
34.24
35.96
40.45
40.45
618.46
708.77
931.14
1950.81
2265.70
652.7
743.01
967.1
1991.26
1991.26
568.00
421.67
422.49
589.96
703.51
8.04
12.01
20.21
29.29
34.18
22.44
74.52
109.10
147.37
134.59
1.42
1.42
1.42
5.38
27.16
599.9
509.62
553.22
772
899.44
502.82
382.16
574.78
21.91
57.99
15.40
65.54
66.40
78.58
54.60
Trade and other current payables
656.94
776.06
669.26
630.04
749.58
Other current liabilities
557.15
576.23
546.91
463.95
475.44
CURRENT LIABILITIES
1732.31
1799.99
1857.35
1194.48
1337.61
LIABILITIES (TOTAL)
2332.21
2309.61
2410.57
1966.48
2237.05
LIABILITIES AND EQUITY (TOTAL)
2984.91
3052.62
1520.32
2763.26
2890.7
Issued (share) capital Other reserves EQUITY (TOTAL) Noncurrent borrowings Other noncurrent provisions Deferred tax liabilities Other long-term financial liabilities NONCURRENT LIABILITIES Current borrowings Other current provisions
Sources of Finance for ceat tyres 2500
2000
1500
Equity Non Current Liabilities Current Liabilities
1000
500
0 2012
2013
2013
2016
2017
At the end of 2017 the sources of finance comprised 60.69% shareholders' equity, 13.53% noncurrent liabilities and 31.8% current liabilities. This shows that the share of the equity was in the area of critical values, meaning that the financial risk level was average. The total equity consisted mostly of: other reserves (INR 85,401,800 thousand), etc. The following liabilities had the highest values: noncurrent borrowings (8.8% of the total sources of finance), deferred tax liabilities (3.56% of the total sources of finance), current borrowings (4.07% of the total sources of finance), trade and other current payables (11.91% of the total sources of finance), other current liabilities (14.95% of the total sources of finance), etc.
Comparison between cost of capital of MRF Tyres And Ceat Tyres 5000 4500 4000 3500 3000 EQUITY 2500
NON CURRENT LIABILITIES CURRENT LIABILITIES
2000 1500 1000 500 0 2012 MRF
2012 CEAT
2013 MRF
2013 CEAT
2014 MRF
2014 CEAT
9000 8000 7000
6000 5000
EQUITY NON CURRENT LIABILITIES
4000
CURRENT LIABILITIES 3000 2000 1000 0 2016 MRF
2016 CEAT
2017 MRF
2018 CEAT
An equity share, commonly referred to as ordinary share also represents the form of fractional or part ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture. The holders of such shares are members of the company and have voting rights.As we can see the comparison graph the equity of MRF tyres is more than that of Ceat Tyres
Noncurrent liabilities, also called long-term liabilities, are long-term financial obligations listed on a company’s balance sheet that are not due for settlement within one year – as opposed to current liabilities which are short-term debts. In the graph the non current
liabilities of MRF tyres are also more than that of Ceat tyres which means MRF Tyres have more long term sources of finance like quity financing, preference financing, debt financing, venture capital, internal financing etc Current liabilities are a company's debts or obligations that are due within one year or within a normal operating cycle. Furthermore, current liabilities are settled by the use of a current asset, such as cash, or by creating a new current liability. Current liabilities appear on a company's balance sheet and include short-term debt, accounts payable, accrued liabilities, and other similar debts. The current liabilities of MRF tyres are more than that of Ceat tyres but there is not much difference between two We can see from the data that the financial structure of MRF tyres is stronger than that of Ceat tyres.
2. Financial Sustainability and Long-Term Debt-Paying Ability Table 5. Key ratios of the company's financial sustainability Indicators Times Interest Earned Debt Ratio
2012
2013
2014
2016
2017
division by 0 division by 0 division by 0 division by 0 division by 0
Absolute change (2017 / 2012) 0
0.6
0.56
0.54
0.46
0.43
-0.18
0.32
0.28
0.27
0.15
0.13
-0.19
1
1
1
1
1
-0
Debt/Equity Ratio
1.52
1.27
1.17
0.84
0.75
-0.78
Debt to Tangible Net Worth Ratio
1.53
1.27
1.17
0.84
0.75
-0.78
538.86
540.86
629.89
471.61
449.17
-89.68
Long-Term Debt Ratio The Long-Term Debt to Total Capitalization Ratio
Long-Term Debt to Equity
The debt ratio tells us that in 2012 each INR 1.00 of the assets was financed by INR 0.6 of debt (and INR 0.4 of equity). In 2013 55.86% of the sources of finance were liabilities. For every INR 1.00 of the assets there were INR 0.54 of liabilities in 2016. The debt ratio lies in the area of critical values (from 0.4 to 0.6) at the end of the period, meaning that there was an acceptable financial and credit risk. A decrease in the long-term debt ratio suggests that the company was progressively becoming less dependent on debt to grow a business. 13% of the sources of finance were a longterm debt at the end of 2017. The value of the long-term debt to total capitalization ratio was 1 at the end of 2012, and 1 in 2017. Total capitalization consists of the long-term debt, preferred stock, and common stockholders' equity. Lower ratio shows lower risk.
The debt/equity ratio is another computation that determines the entity's long-term debt-paying ability. At the end of 2017 this ratio was 75%, meaning that creditors were protected in case of insolvency. The debt to tangible net worth ratio is a more conservative ratio than the debt/equity ratio. It eliminates intangible assets because they do not provide resources to pay creditors. The table 5 shows that the ratio changed from 1.53 in 2012 to 0.75 in 2017. This shows that the creditors' protection was getting better. The value of the long-term debt to equity ratio was 538.86 at the end of 2012, and 449.17 in 2017.
3. Liquidity of Short-Term Assets Table 6. Liquidity Ratios Indicators Current Ratio Quick Ratio (Acid Test Ratio) Cash Ratio Net Working Capital Sales to Net Working Capital
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
1.8
2.01
2.04
1.55
1.61
-0.19
0.73
0.81
0.93
0.48
0.5
-0.23
0.03
0.14
0.27
0.02
0.06
0.03
16548700 23520300 27148900 22157100 27112700 -
0
0
0
0
10564000 0
The current ratio was 1.8 in 2012, meaning that MRF had 1.8 times as many current assets as current liabilities. The value of the ratio lies in the area of critical values (from 1.5 to 2). The current ratio was 2.01 at the end of 2013, 2.04 in 2014 and 1.55 at the end of 2016. The value of the ratio was acceptable at the end of the period under review (27112700 in 2017). This means that MRF was able to pay off debt in due time. The quick ratio for 2012 was 0.73, showing there were INR 0.73 of the quick assets for every INR 1.00 of the current liabilities. The ratio for 2017 from Table 6 shows INR 0.48 of the quick assets were available for every INR 1.00 of the current liabilities. The decrease in the quick ratio from 2012 to 2017 indicates that the company has been losing its ability to pay its short-term debt. The company's quick liquidity was unsatisfactory at the end of the period. The cash ratio shows that the company was able to pay off 6.13% of its debt immediately as for the end of 2017. It indicates an immediate problem with paying bills.
Table 6 presents the working capital for MRF at the end of 2012-2017. MRF had INR 16,548,700 thousand in the working capital in 2012, and INR 27,112,700 thousand in the working capital in 2017. Overall, the value of the working capital had grown up over 2012-2017. The working capital value was positive at the end of the period under review, meaning greater flexibility, since current assets may be modified easily as the sales volume changes. The sales to working capital ratio was stable during 2012-2017.
4. Overview of the Financial Results Table 7. Financial Results Trend Analysis, in thousand INR Percentage change (2017 / 2012)
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
Revenue
0
0
0
0
0
0
division by 0
Cost of sales
0
0
0
0
0
0
division by 0
Gross profit
0
0
0
0
0
0
division by 0
Other income and expenses from continuing operations, except finance costs and income tax expense
0
0
0
0
0
0
division by 0
EBIT
0
0
0
0
0
0
division by 0
Finance costs
0
0
0
0
0
0
division by 0
Income tax expense (benefit)
0
0
0
0
0
0
division by 0
Income (loss) from continuing operations
0
0
0
0
0
0
division by 0
Comprehensive income (loss)
0
0
0
0
0
0
division by 0
Indicators
The cost of goods and services totalled INR 0 thousand in 2013. At the end of 2017 the cost of goods and services totalled INR 0 thousand. As a result, the gross profit was equal INR 0 thousand at the end of the period. Zero EBIT indicates poor performance in 2017. On the whole, 2017 was a bad period as the company recorded INR 0 thousand comprehensive loss.
The chart above shows that there was no change in the gross profit to net sales ratio in 2012 comparing to 2017. 2017 also witnessed the company's stable EBIT to sales ratio comparing to 2012. Share of the comprehensive income in the company's net sales in was the same, as in 2012.
5. Profitability Ratios
Table 8. Profitability Ratios, %
Indicators
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
Net Profit Margin
division by 0 division by 0 division by 0 division by 0 division by 0
0
Operating Income Margin
division by 0 division by 0 division by 0 division by 0 division by 0
0
Gross Profit Margin
division by 0 division by 0 division by 0 division by 0 division by 0
0
Return on Assets
-
0
0
0
0
0
Return on Operating Assets
-
0
0
0
0
0
Return on Investment
-
0
0
0
0
0
Return on Equity after Tax
-
0
0
0
0
0
At the end of 2017 the net profit margin was 0%, showing INR 0 of the net profit per INR 1.00 of sales. The MRF's operating performance was weak in 2017. For every rupee of the net sales the company had INR 0 in the operating loss. For MRF the ROA shows that the company's profitability was 0%. After taking into account inflation, this ratio indicates actual decrease in company value in 2017. The operating assets were yielding a 0% return in 2017. Higher ROIs suggest better performance. This ratio was stable in 2013-2017. Table 9. Dupont Analysis
Indicators
2013
2014
2016
2017
Absolute change (2017 / 2013)
0
Return on Assets
0
0
0
0
division by 0 division by 0 division by 0 division by 0
Net Profit Margin
0
Total Asset Turnover
0
0
0
0
6. Activity Ratios (Turnover Ratios) Table 10. Activity Ratios (Turnover Ratios)
2013
2014
2016
2017
Absolute change (2017 / 2013)
Asset Turnover
0
0
0
0
0
Sales to Fixed Assets
0
0
0
0
0
Current Asset Turnover
0
0
0
0
0
Working Capital Turnover
0
0
0
0
0
Accounts Receivable Turnover (Times)
0
0
0
0
0
Indicators
Average Collection Period (Accounts Receivable Turnover in Days) Accounts Payable Turnover (Times) Days Payable Outstanding Inventory Turnover (Times) Inventory Turnover in Days
division by 0 division by 0 division by 0 division by 0 0
0
0
0
division by 0 division by 0 division by 0 division by 0 0
0
0
0
division by 0 division by 0 division by 0 division by 0
0
0 0 0 0 0
Cash Turnover
0
0
0
0
0
Operating Cycle
0
0
0
0
0
Cash Conversion Cycle
0
0
0
0
0
By looking at the Table 10 it can be seen that the company produced INR 0 of products and services for every rupee of the assets used at the end of the period.
it can be seen that the working capital turnover was 0 in 2013, 0 in 2014, 0 in 2016 and 0 in 2017.
OTHER INDICATORS
7. Investor Analysis Table 11. Investor Analysis
Indicators
Net assets (Net worth), in thousand INR
Degree of Financial Leverage
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
28578000 36451400 45176400 71612100 85444200 56866200 division by 0
division by 0
division by 0
division by 0
division by 0
0
The net value of the enterprise's assets was INR 85,444,200 thousand at the end of 2017, about INR 13,832,100 thousand more than declared at the end of 2016. Overall, the net worth improved from INR 28,578,000 thousand to INR 85,444,200 thousand. This means that MRF is expanding.
8. Forecasting Financial Failure (Bankruptcy Test) (Financial Distress Prediction) Table 12. The Z-Score Model for Private Firms 2012 2013 2014 2016 2017
Indicators X1 (Working Capital/Total Assets) X2 (Retained Earnings /Total Assets) X3 (Earnings Before Interest and Taxes/Total Assets) X4 (Market Value of Equity/Book Value of Total Debt) X5 (Sales/Total Assets) Z=
0.23
0.28
0.28
0.17
0.18
0
0
0
0
0
0
0
0
0
0
0.66
0.79
0.86
1.19
1.34
0
0
0
0
0
0.44
0.54
0.56
0.62
0.69
MRF's Z-score was under 1.2 indicating a high bankruptcy risk in 2012. At the end of 2017 the Altman Z-score was 0.69 that indicates the bankruptcy may follow. The increase of the company's Z-Score value over the period of 2012-2017 showed that MRF has been improving its financial condition and declining the risk of bankruptcy. It also witnessed that the company did not perform well enough to have its Z-Score value moving out of the distress area.
9. Financial Rating A rating helps to sum up the current financial position and future expectations with one word. Table 13. Financial Rating Indicators
Weighting
Score
Score (Period Average score
Weighted average score
factor 1
(Period 3)
4)
2
3
4
5=0,35*3+0,65*4
6=5*2
Net Profit Margin
0,15
-1
-1
-1
-0.15
Return on Assets
0,15
-0.5
-0.5
-0.5
-0.075
Debt/Equity Ratio
0,15
-1
-1
-1
-0.15
Current Ratio
0,1
1
1
1
0.1
Net Sales Change
0,1
-1
-1
-1
-0.1
Operating Income Margin
0,1
-0.5
-0.5
-0.5
-0.05
Equity Change
0,1
1
1
1
0.1
Quick Ratio
0,05
-1
-1
-1
-0.05
Debt Ratio
0,05
1
1
1
0.05
Times Interest Earned
0,05
1
1
1
0.05
1
-
-
-
-0.275
Total Score
Table 14. Financial condition scale Sign
Current financial condition
0,8
AAA
Excellent
0,8
0,6
AA
Very good
0,6
0,4
A
Good
0,4
0,2
BBB
Positive
0,2
0
BB
Normal
Score from (inclusive)
to
1
0
-0,2
B
Satisfactory
-0,2
-0,4
CCC
Unsatisfactory
-0,4
-0,6
CC
Adverse
-0,6
-0,8
C
Bad
-0,8
-1
D
Critical
As a result we can confirm an unsatisfactory (CCC) financial situation.
Conclusion By assessing the financial position of MRF the following can be concluded: - MRF's financial sustainability ratios indicate good financial health at the end of 2017. This company was able to generate enough cash flow to pay interest on its debt while the debt ratio laid in the area of critical values (from 0.4 to 0.6). - MRF's liquidity ratios demonstrate a short-term issues in 2017. Overall, company was able to pay its short-term debt, but quick liquidity was unsatisfactory. Due to low amount of marketable securities and cash in bank, absolute liquid position was unsatisfactory. - The main concern for MRF was zero return at the end of 2017. After taking into account inflation, the ROA ratio indicates actual decrease in company value in 2017. Comparing the turnover data of the accounts receivable and accounts payable during 2017 it can be seen that the accounts receivable were turned as fast as the accounts payable.The net value of the enterprise's assets was INR 85,444,200 thousand at the end of 2017, about INR 13,832,100 thousand more than declared at the end of 2016. Overall, the net worth improved from INR 28,578,000 thousand to INR 85,444,200 thousand. This means that MRF was expanding. - At the end of 2017 the Altman Z-score was 0.69 indicating that the bankruptcy may follow. - The overall financial position of the company was unsatisfactory (CCC).
Products of the company
Tyres – It manufactures various tyres for passenger cars, two–wheelers, trucks, buses, tractors, light commercial vehicles and off– the–road tyres. Conveyor Belting – It manufactures its Muscleflex brand of conveyor belting at one of the most advanced state–of–the–art facilities in India. Incorporating the latest manufacturing techniques in processes beginning with mixing, calendaring and the like to manufacturing of the finished products, all of which is in–house, Muscleflex –conveyor belting has gained rapid acceptance in markets worldwide. Pretreads – It is the most advanced precured retreading system in India. MRF forayed into retreading as far back as 1970. Today, MRF has perfected the art of recured retreading with its extensive knowledge in tyres and rubber.
Awards
It was awarded as Most Trusted Tyre Company in India by TNS 2006 global CSR study. The company won the J D Power Asia Pacific award for customer satisfaction seven times. MRF was honoured with CAPEXIL award as acknowledgement for its export performance. 2013 Won the JD power award for the 10th time.
MOTOR SPORTS Racing The MRF Formula 2000 cars are used in the most sought after racing series from MRF - The MRF Challenge. Around 20 drivers from all over the world battle it out in the MRF Challenge series every year
Rallying MRF is the largest promoter of rallying in the country. Having met with success in the domestic championships, the company entered international rallying in 2002 with two cars in the FIA Asia Pacific Rally Championship (APRC).
Motocross Derived from the words ‘Motorcycle’ and ‘Cross Country’, Motocross is often shortened to MX. It’s a form of motorcycle sport or all-terrain two wheeler racing held on enclosed off-road circuits. In line with its close association with motorsports, MRF promotes a national Supercross Championship annually in several cities.
Karting Karting is considered the stepping-stone for a successful career in formula car racing. It has moved on from becoming a pastime for racing buffs to a serious sport. And MRF has strengthened its long-standing association with karting in India by becoming the first Indian tyre company to develop FIA-CIK approved karting tyres in India.
MRF Pace Foundationedit MRF Pace Foundation is a coaching clinic for training fast bowlers established by MRF with the help of former Australian pace spearhead Dennis Lillee in Chennai, India. Through this program, young aspiring fast bowlers are trained in a special facility. Fast bowlers who trained with foundation and went on to represent the Indian Cricket Team include Javagal Srinath, Irfan Pathan, Munaf Patel, Venkatesh Prasad, R. P. Singh, Zaheer Khan and S Sreesanth. Besides Indian players, foreign players like Chaminda Vaas, Henry Olonga, Heath Streak and Australian fast bowlers Glenn McGrath, Mitchell Johnson and Brett Lee have also trained at the foundation. Sachin Tendulkar in his early days trained in the MRF Pace Foundation to become a fast bowler. Glenn McGrath was
appointed director of the Foundation on 2 September 2012, replacing Dennis Lillee, who has held the post since its inception in 1987.[13]
Endorsement[edit] MRF had been the bat sponsor for many cricketers of the game. Sachin Tendulkar, Brian Lara and Steve Waugh have endorsed MRF products.[14] MRF has also sponsored Indian batsmen Rohit Sharma,[15] Gautam Gambhir and Sanju Samson. Currently MRF is endorsed by star batsmen Prithvi Shaw, Shikhar Dhawan, Virat Kohli[16] and AB de Villiers.[17] Previous endorsements[edit]
Sachin Tendulkar – Conqueror,Genius,Wizard Brian Lara – Wizard, Wizard 400 Steve Waugh – Conqueror Rohit Sharma – Genius Gautam Gambhir – Genius Sanju Samson – Wizard
Current endorsements[edit]
Virat Kohli – Conqueror,Genius VK 18 AB de Villiers – Genius ABD 25 Shikhar Dhawan – Genius SD 25 / Unique SD Prithvi Shaw – Emerging Star
Sponsorship[edit] At IPL 2010, MRF sponsored moored balloons floating above the cricket grounds with a high-definition camera recording live actions of the cricket match. MRF joined as a global partner of International Cricket Council for 2015 Cricket World Cup.[18] In 2017, MRF became the sleeve sponser for the Premier League clubs Newcastle United,[19] West Ham United F.C.[20] and official tyre partner for West Bromwich Albion.
Manufacturing facilities The company has manufacturing facilities for tyres at Kottayam in Kerala, Puduchery, Arakonam, Goa and trichy two plants in Perambalur in Tamil Nadu, Medak and ankenpally in Telangana has two facilities one recently opened.[6] The company manufactures toys at its facility in Goa. The paints and coats are manufactured at two facilities in Chennai, Tamil Nadu
THE MRF DESIGN PROCESS The Design process at MRF starts from the customer - inputs from individual customers are compiled by marketing and given to Corporate Technical MRF's R&D and Product Development Division or vehicle specific requirements are received from the OE customer. MRF's team of 300 engineers and scientists gives MRF its enormous strength in product design. Requirements received, a team now works on converting the customer input into a Design Concept. MRF uses cutting - edge technologies in predictive testing and design validation before it leaves the drawing board. These advances have significantly brought down the time to market for new designs. Advanced raw materials are tested and approved in our NABL accredited laboratories. MRF works closely with global suppliers in using the latest developments in materials across the globe. Our laboratories which have the very latest in testing equipment closely monitor the quality of the material going into our tyres at the time of approval and regularly after that. The prototypes for verification and validation testing are manufactured in one of MRF's 9 factories all of which are TS 16949/ISO 9001 certified. The tyres then go through testing for confirming the architecture and a series of indoor testing to ensure that they meet MRF's tight standards and also those required by the OEM or by any of the national standards like BIS/JIS/ETRTO/T&RA.
Tyres are now handed over to the Vehicle Dynamics Group, who now validates the design on the vehicle. These tests are done at the test track in a series of manoeuvres at various speeds, pushing the tyres to the limits of its capabilities. MRF also tests tyres on fleets across the country to ensure that the tyres have endured successfully all the types of roads on which our customers travel daily. Race Tracks and Indian Roads are our laboratories. Only after this do we give any tyres to the customer - all global players manufacturing a global class of vehicles. MRF has been designing tyres this class of vehicles for more than a decade now. MRF tyres have met the demanding requirements of these vehicles, backed by an R&D team which is completely in-house and self reliant.
MRF LTD. (MRF) - FINANCIAL RATIOS RATIOS
2018
2017
2016
DEBT-EQUITY RATIO
0.21
0.26
0.34
CURRENT RATIO
0.94
0.96
1.18
ASSET TURNOVER RATIO
2.08
2.47
2.55
INVENTORY TURNOVER RATIO
6.67
6.90
8.03
DEBTORS TURNOVER RATIO
7.44
7.78
8.35
INTEREST COVERAGE RATIO
7.42
9.27
11.25
OPERATING MARGIN (%)
16.79
19.83
21.17
NET PROFIT MARGIN (%)
7.17
9.84
11.16
RETURN ON CAPITAL EMPLOYED (%)
16.61
22.97
30.96
RETURN ON NET WORTH (%)
12.04
18.48
28.24
RATIOS
2014
2013
2012
DEBT-EQUITY RATIO
0.43
0.51
0.64
CURRENT RATIO
1.52
1.50
1.43
ASSET TURNOVER RATIO
2.48
2.55
2.94
INVENTORY TURNOVER RATIO
8.15
7.82
8.24
DEBTORS TURNOVER RATIO
8.97
8.94
9.45
INTEREST COVERAGE RATIO
6.78
7.26
6.25
13.61
13.35
9.90
OPERATING MARGIN (%)
NET PROFIT MARGIN (%)
6.13
5.96
4.38
RETURN ON CAPITAL EMPLOYED (%)
22.40
23.86
19.29
RETURN ON NET WORTH (%)
22.00
24.67
22.20
Analysis of MRF's financial statements for the period from 2012 to 2017 This report analyzes the balance sheets and income statements of MRF. Trends for the major balance sheet and income statement items and ratio analysis are used to understand the financial position and financial effectiveness of the company. The report studied the 2012 - 2017 period.
1. The Common-Size Analysis of the Assets, Liabilities and Shareholders' Equity Table 1. Assets Trend Analysis, in Cr INR Indicators
2012
2013
2014
2016
2017
Absolute Percentage
Property, plant and equipment
71.54
84.68
Intangible assets, net (excluding goodwill)
5.99
5.39
Noncurrent inventories
57.23
Deferred tax assets, net, noncurrent Current tax assets, noncurrent Other noncurrent assets
0
change (2017 / 2012)
151.76 1044.64 1080.57 1009.03
1410.44
7.04
9.06
138.12 3421.65 458.74 0
2907.81 2964.15 30.46
change (2017 / 2012)
34.89
13.23
7.24
5474.35 5417.12
120.87 9465.53
224.27
10.05
3.68
3.68
division by 0
0
0
0
-2907.81
-100
42.11
238.22
318.85
288.39
946.78
NONCURRENT ASSETS (TOTAL)
3073.03 3227.23 3846.83 1760.71 6890.68 3817.65
Current inventories
1645.59 1795.29 1799.70 1879.74 2392.92
747.33
45.41
Trade and other current receivables
1454.09 1556.14 1708.47 1831.72 1959.95
505.86
34.79
124.23
Current biological assets
353.17
821.48
936.15 2102.75 2313.78 1960.61
555.15
Other current financial assets
203.42
145.14
136.75
0
3.98
-199.44
-98.04
61.10
330.81
707.67
80.45
274.42
213.32
349.13
7.22
22.13
34.72
329.98
242.43
235.21
3257.76
Cash and cash equivalents Other assets, current CURRENT ASSETS (TOTAL)
3724.59 4670.99 5323.46 6224.64 7187.48 3462.89
92.97
ASSETS (TOTAL)
6797.62 7898.22 9170.29 7985.35 14078.16 7280.54
107.1
It can be noticed from Table 1 that there was a tendency to increase in the total value of the assets. The percentage change was equal 107.1% in 2017 comparing to 2012. The value of the assets totalled INR 140,781,600 thousand at the end of 2017.
The overall increase of the assets reflects both a growth in the noncurrent assets by 124.23% and a growth in the current assets by 92.97%.
Assets comparison for 5 years
16000
14000
12000
10000
8000
6000
4000
2000
0 2012
2013
2014
2016
2017
Non Current and Current Assets for 5 Years 8000
7000
6000
5000 Non Current Assets
4000
Current Assets 3000
2000
1000
0 2012
2013
2014
2016
2017
The change of the noncurrent assets value in 2012-2017 was connected with the growth of the following assets: - Property, plant and equipment (1410.44%) - Intangible assets other than goodwill (120.87%) - Noncurrent inventories (9465.53%) - Deferred tax assets (0%)
- Other noncurrent assets (946.78%) The change of the current assets value in 2012-2017 was connected with the growth of the following assets: - Current inventories (45.41%) - Trade and other current receivables (34.79%) - Current biological assets (555.15%) - Cash and cash equivalents (349.13%) - Other current assets (3257.76%) Table 2. Sources of Finance (Equity and Liabilities) Trend Analysis, in Cr INR
Indicators
Issued (share) capital
2012
2013
2014
2016
2017
4.24
4.24
4.24
4.24
4.24
Absolute Percentage change change (2017 / (2017 / 2012) 2012) 0
0
Other reserves
2853.56 3640.90 4513.40 7156.97 8540.18 5686.62
199.28
EQUITY (TOTAL)
2857.80 3645.14 4517.64
198.99
Noncurrent borrowings
1102.71 952.46 1198.75 1486.45 1238.32 135.61
Other noncurrent provisions
7161.2
8544.42 5686.62
12.3
87.29
75.24
91.85
125.13
137.26
49.97
57.25
Deferred tax liabilities
186.72
222.31
235.31
351.79
501.17
314.45
168.41
Other long-term financial liabilities
908.03 1043.23 1144.84
36.24
27.74
-880.29
-96.95
2284.75 2293.24 2670.75 1999.61 1904.49 -380.26
-16.64
NONCURRENT LIABILITIES Current borrowings
528.72
476.23
616.25
488.43
573.34
44.62
8.44
Other current provisions
147.24
269.07
313.31
89.65
120.88
-26.36
-17.9
Trade and other current payables
939.43 1021.43 1139.72 1528.82 1677.08 737.65
78.52
Other current liabilities
454.33
363.3
552.23
539.29 1902.03 2104.91 1650.58
CURRENT LIABILITIES
2069.72 2318.96 2608.57 4008.93 4476.21 2406.49
116.27
LIABILITIES (TOTAL)
4354.47 4612.20 5279.32 6008.54 6380.70 2026.23
46.53
LIABILITIES AND EQUITY (TOTAL)
7212.27 8257.34 9796.96 13169.75 14925.12 7712.85
106.94
Similar to the value of total assets, the liabilities and equity value amounted to INR 140,78.1,6 Cr in 2017, 107.1% more than in 2012. There was a stable growth of the stockholders' equity value in 2012-2017, which indicates that the company's assets would worth more after all claims upon those assets were paid. This means that MRF was expanding. The change of the stockholders' equity value in 2012-2017 was related to growth of the following sources: - Other reserves (199.28%)
9000 8000 7000 6000
5000
Equity Non Current Liability
4000
Current Liability 3000 2000 1000 0 2012
2013
2014
2016
2017
The change of the liabilities value in 2012-2017 was related to the growth of the following sources: - Current borrowings (8.44%) - Trade and other current payables (78.52%) - Other current liabilities (363.3%) - Noncurrent borrowings (12.3%) - Other noncurrent provisions (57.25%) - Deferred tax liabilities (168.41%) Table 3. Assets Structure Analysis, %
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
Property, plant and equipment
1.05
1.07
1.65
13.08
7.68
6.62
Intangible assets other than goodwill
0.09
0.07
0.08
0.11
0.09
0.01
Noncurrent inventories
0.84
1.75
37.31
5.74
38.89
38.04
0
0
2.45
0.13
0.03
0.03
42.78
37.53
0
0
0
-42.78
0.45
0.44
0.46
2.98
2.26
1.82
NONCURRENT ASSETS (TOTAL)
45.21
40.86
41.95
22.05
48.95
3.74
Current inventories
24.21
22.73
19.63
23.54
17
-7.21
Trade and other current receivables
21.39
19.7
18.63
22.94
13.92
-7.47
5.2
10.4
10.21
26.33
16.44
11.24
2.99
1.84
1.49
0
0.03
-2.96
0.9
4.19
7.72
1.01
1.95
1.05
0.11
0.28
0.38
4.13
1.72
1.62
54.79
59.14
58.05
77.95
51.05
-3.74
100
100
100
100
100
0
Indicators
Deferred tax assets, net, noncurrent Current tax assets, noncurrent Other noncurrent assets
Current biological assets Other current financial assets Cash and cash equivalents Other current assets CURRENT ASSETS (TOTAL) ASSETS (TOTAL)
At the end of 2012 the assets consisted of: 45.21% noncurrent assets and 54.79% current assets. The most significant items of the current assets were: current inventories (24.21% of total assets), trade and other current receivables (21.39% of total assets), current biological assets (5.2% of total assets), etc. The following noncurrent assets had the highest values: current tax assets, noncurrent (42.78% of total assets), while the other items did not play a significant role.
Over the period under review the assets structure changed. At the end of 2017 the assets consisted of: 48.95% noncurrent assets and 51.05% current assets. Total current assets composed mostly of: current inventories (17% of total assets), trade and other current receivables (13.92% of total assets), current biological assets (16.44% of total assets), etc. The most significant items of the noncurrent assets were: property, plant and equipment (7.68% of total assets), noncurrent inventories (38.89% of total assets), etc. Table 4. Equity and Liabilities Structure Analysis, % Indicators
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
Issued (share) capital
0.06
0.05
0.05
0.05
0.03
-0.03
Other reserves
41.98
46.1
49.22
89.63
60.66
18.68
EQUITY (TOTAL)
42.04
46.15
49.26
89.68
60.69
18.65
Noncurrent borrowings
16.22
12.06
13.07
18.61
8.8
-7.43
Other noncurrent provisions
1.28
0.95
1
1.57
0.97
-0.31
Deferred tax liabilities
2.75
2.81
2.57
4.41
3.56
0.81
Other long-term financial liabilities
13.36
13.21
12.48
0.45
0.2
-13.16
NONCURRENT LIABILITIES
33.61
29.03
29.12
25.04
13.53
-20.08
Current borrowings
7.78
6.03
6.72
6.12
4.07
-3.71
Other current provisions
2.17
3.41
3.42
1.12
0.86
-1.31
13.82
12.93
12.43
19.15
11.91
-1.91
Other current liabilities
6.68
6.99
5.88
23.82
14.95
8.27
CURRENT LIABILITIES
30.45
29.36
28.45
50.2
31.8
1.35
Liabilities
64.06
58.4
57.57
75.24
45.32
-18.74
LIABILITIES AND EQUITY (TOTAL)
106.1
104.55
106.83
164.92
106.02
-0.08
Trade and other current payables
By looking at the Table 4 it can be noticed that the sources of finance consisted of 42.04% shareholders' equity, 33.61% noncurrent liabilities and 30.45% current liabilities. Average share of the equity in 2012 means the financial risk level was acceptable. The total equity consisted mostly of: other reserves (INR 28,535,600 thousand), etc. The company's liabilities included noncurrent borrowings (16.22% of the total sources of finance), other long-term financial liabilities (13.36% of the total sources of finance), current borrowings (7.78% of the total sources of finance), trade and other current payables (13.82% of the total sources of finance), other current liabilities (6.68% of the total sources of finance), etc.
CEAT TYRES FINANCIAL STATEMENT
Indicators
2012
2013
2014
2016
2017
34.24
34.24
35.96
40.45
40.45
618.46
708.77
931.14
1950.81
2265.70
652.7
743.01
967.1
1991.26
1991.26
568.00
421.67
422.49
589.96
703.51
8.04
12.01
20.21
29.29
34.18
22.44
74.52
109.10
147.37
134.59
1.42
1.42
1.42
5.38
27.16
599.9
509.62
553.22
772
899.44
502.82
382.16
574.78
21.91
57.99
15.40
65.54
66.40
78.58
54.60
Trade and other current payables
656.94
776.06
669.26
630.04
749.58
Other current liabilities
557.15
576.23
546.91
463.95
475.44
CURRENT LIABILITIES
1732.31
1799.99
1857.35
1194.48
1337.61
LIABILITIES (TOTAL)
2332.21
2309.61
2410.57
1966.48
2237.05
LIABILITIES AND EQUITY (TOTAL)
2984.91
3052.62
1520.32
2763.26
2890.7
Issued (share) capital Other reserves EQUITY (TOTAL) Noncurrent borrowings Other noncurrent provisions Deferred tax liabilities Other long-term financial liabilities NONCURRENT LIABILITIES Current borrowings Other current provisions
Sources of Finance for ceat tyres 2500
2000
1500
Equity Non Current Liabilities Current Liabilities
1000
500
0 2012
2013
2013
2016
2017
At the end of 2017 the sources of finance comprised 60.69% shareholders' equity, 13.53% noncurrent liabilities and 31.8% current liabilities. This shows that the share of the equity was in the area of critical values, meaning that the financial risk level was average. The total equity consisted mostly of: other reserves (INR 85,401,800 thousand), etc. The following liabilities had the highest values: noncurrent borrowings (8.8% of the total sources of finance), deferred tax liabilities (3.56% of the total sources of finance), current borrowings (4.07% of the total sources of finance), trade and other current payables (11.91% of the total sources of finance), other current liabilities (14.95% of the total sources of finance), etc.
Comparison between cost of capital of MRF Tyres And Ceat Tyres 5000 4500 4000 3500 3000 EQUITY 2500
NON CURRENT LIABILITIES CURRENT LIABILITIES
2000 1500 1000 500 0 2012 MRF
2012 CEAT
2013 MRF
2013 CEAT
2014 MRF
2014 CEAT
9000 8000 7000
6000 5000
EQUITY NON CURRENT LIABILITIES
4000
CURRENT LIABILITIES 3000 2000 1000 0 2016 MRF
2016 CEAT
2017 MRF
2018 CEAT
An equity share, commonly referred to as ordinary share also represents the form of fractional or part ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture. The holders of such shares are members of the company and have voting rights.As we can see the comparison graph the equity of MRF tyres is more than that of Ceat Tyres
Noncurrent liabilities, also called long-term liabilities, are long-term financial obligations listed on a company’s balance sheet that are not due for settlement within one year – as opposed to current liabilities which are short-term debts. In the graph the non current
liabilities of MRF tyres are also more than that of Ceat tyres which means MRF Tyres have more long term sources of finance like quity financing, preference financing, debt financing, venture capital, internal financing etc Current liabilities are a company's debts or obligations that are due within one year or within a normal operating cycle. Furthermore, current liabilities are settled by the use of a current asset, such as cash, or by creating a new current liability. Current liabilities appear on a company's balance sheet and include short-term debt, accounts payable, accrued liabilities, and other similar debts. The current liabilities of MRF tyres are more than that of Ceat tyres but there is not much difference between two We can see from the data that the financial structure of MRF tyres is stronger than that of Ceat tyres.
2. Financial Sustainability and Long-Term Debt-Paying Ability Table 5. Key ratios of the company's financial sustainability Indicators Times Interest Earned Debt Ratio
2012
2013
2014
2016
2017
division by 0 division by 0 division by 0 division by 0 division by 0
Absolute change (2017 / 2012) 0
0.6
0.56
0.54
0.46
0.43
-0.18
0.32
0.28
0.27
0.15
0.13
-0.19
1
1
1
1
1
-0
Debt/Equity Ratio
1.52
1.27
1.17
0.84
0.75
-0.78
Debt to Tangible Net Worth Ratio
1.53
1.27
1.17
0.84
0.75
-0.78
538.86
540.86
629.89
471.61
449.17
-89.68
Long-Term Debt Ratio The Long-Term Debt to Total Capitalization Ratio
Long-Term Debt to Equity
The debt ratio tells us that in 2012 each INR 1.00 of the assets was financed by INR 0.6 of debt (and INR 0.4 of equity). In 2013 55.86% of the sources of finance were liabilities. For every INR 1.00 of the assets there were INR 0.54 of liabilities in 2016. The debt ratio lies in the area of critical values (from 0.4 to 0.6) at the end of the period, meaning that there was an acceptable financial and credit risk. A decrease in the long-term debt ratio suggests that the company was progressively becoming less dependent on debt to grow a business. 13% of the sources of finance were a longterm debt at the end of 2017. The value of the long-term debt to total capitalization ratio was 1 at the end of 2012, and 1 in 2017. Total capitalization consists of the long-term debt, preferred stock, and common stockholders' equity. Lower ratio shows lower risk.
The debt/equity ratio is another computation that determines the entity's long-term debt-paying ability. At the end of 2017 this ratio was 75%, meaning that creditors were protected in case of insolvency. The debt to tangible net worth ratio is a more conservative ratio than the debt/equity ratio. It eliminates intangible assets because they do not provide resources to pay creditors. The table 5 shows that the ratio changed from 1.53 in 2012 to 0.75 in 2017. This shows that the creditors' protection was getting better. The value of the long-term debt to equity ratio was 538.86 at the end of 2012, and 449.17 in 2017.
3. Liquidity of Short-Term Assets Table 6. Liquidity Ratios Indicators Current Ratio Quick Ratio (Acid Test Ratio) Cash Ratio Net Working Capital Sales to Net Working Capital
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
1.8
2.01
2.04
1.55
1.61
-0.19
0.73
0.81
0.93
0.48
0.5
-0.23
0.03
0.14
0.27
0.02
0.06
0.03
16548700 23520300 27148900 22157100 27112700 -
0
0
0
0
10564000 0
The current ratio was 1.8 in 2012, meaning that MRF had 1.8 times as many current assets as current liabilities. The value of the ratio lies in the area of critical values (from 1.5 to 2). The current ratio was 2.01 at the end of 2013, 2.04 in 2014 and 1.55 at the end of 2016. The value of the ratio was acceptable at the end of the period under review (27112700 in 2017). This means that MRF was able to pay off debt in due time. The quick ratio for 2012 was 0.73, showing there were INR 0.73 of the quick assets for every INR 1.00 of the current liabilities. The ratio for 2017 from Table 6 shows INR 0.48 of the quick assets were available for every INR 1.00 of the current liabilities. The decrease in the quick ratio from 2012 to 2017 indicates that the company has been losing its ability to pay its short-term debt. The company's quick liquidity was unsatisfactory at the end of the period. The cash ratio shows that the company was able to pay off 6.13% of its debt immediately as for the end of 2017. It indicates an immediate problem with paying bills.
Table 6 presents the working capital for MRF at the end of 2012-2017. MRF had INR 16,548,700 thousand in the working capital in 2012, and INR 27,112,700 thousand in the working capital in 2017. Overall, the value of the working capital had grown up over 2012-2017. The working capital value was positive at the end of the period under review, meaning greater flexibility, since current assets may be modified easily as the sales volume changes. The sales to working capital ratio was stable during 2012-2017.
4. Overview of the Financial Results Table 7. Financial Results Trend Analysis, in thousand INR Percentage change (2017 / 2012)
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
Revenue
0
0
0
0
0
0
division by 0
Cost of sales
0
0
0
0
0
0
division by 0
Gross profit
0
0
0
0
0
0
division by 0
Other income and expenses from continuing operations, except finance costs and income tax expense
0
0
0
0
0
0
division by 0
EBIT
0
0
0
0
0
0
division by 0
Finance costs
0
0
0
0
0
0
division by 0
Income tax expense (benefit)
0
0
0
0
0
0
division by 0
Income (loss) from continuing operations
0
0
0
0
0
0
division by 0
Comprehensive income (loss)
0
0
0
0
0
0
division by 0
Indicators
The cost of goods and services totalled INR 0 thousand in 2013. At the end of 2017 the cost of goods and services totalled INR 0 thousand. As a result, the gross profit was equal INR 0 thousand at the end of the period. Zero EBIT indicates poor performance in 2017. On the whole, 2017 was a bad period as the company recorded INR 0 thousand comprehensive loss.
The chart above shows that there was no change in the gross profit to net sales ratio in 2012 comparing to 2017. 2017 also witnessed the company's stable EBIT to sales ratio comparing to 2012. Share of the comprehensive income in the company's net sales in was the same, as in 2012.
5. Profitability Ratios
Table 8. Profitability Ratios, %
Indicators
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
Net Profit Margin
division by 0 division by 0 division by 0 division by 0 division by 0
0
Operating Income Margin
division by 0 division by 0 division by 0 division by 0 division by 0
0
Gross Profit Margin
division by 0 division by 0 division by 0 division by 0 division by 0
0
Return on Assets
-
0
0
0
0
0
Return on Operating Assets
-
0
0
0
0
0
Return on Investment
-
0
0
0
0
0
Return on Equity after Tax
-
0
0
0
0
0
At the end of 2017 the net profit margin was 0%, showing INR 0 of the net profit per INR 1.00 of sales. The MRF's operating performance was weak in 2017. For every rupee of the net sales the company had INR 0 in the operating loss. For MRF the ROA shows that the company's profitability was 0%. After taking into account inflation, this ratio indicates actual decrease in company value in 2017. The operating assets were yielding a 0% return in 2017. Higher ROIs suggest better performance. This ratio was stable in 2013-2017. Table 9. Dupont Analysis
Indicators
2013
2014
2016
2017
Absolute change (2017 / 2013)
0
Return on Assets
0
0
0
0
division by 0 division by 0 division by 0 division by 0
Net Profit Margin
0
Total Asset Turnover
0
0
0
0
6. Activity Ratios (Turnover Ratios) Table 10. Activity Ratios (Turnover Ratios)
2013
2014
2016
2017
Absolute change (2017 / 2013)
Asset Turnover
0
0
0
0
0
Sales to Fixed Assets
0
0
0
0
0
Current Asset Turnover
0
0
0
0
0
Working Capital Turnover
0
0
0
0
0
Accounts Receivable Turnover (Times)
0
0
0
0
0
Indicators
Average Collection Period (Accounts Receivable Turnover in Days) Accounts Payable Turnover (Times) Days Payable Outstanding Inventory Turnover (Times) Inventory Turnover in Days
division by 0 division by 0 division by 0 division by 0 0
0
0
0
division by 0 division by 0 division by 0 division by 0 0
0
0
0
division by 0 division by 0 division by 0 division by 0
0
0 0 0 0 0
Cash Turnover
0
0
0
0
0
Operating Cycle
0
0
0
0
0
Cash Conversion Cycle
0
0
0
0
0
By looking at the Table 10 it can be seen that the company produced INR 0 of products and services for every rupee of the assets used at the end of the period.
it can be seen that the working capital turnover was 0 in 2013, 0 in 2014, 0 in 2016 and 0 in 2017.
OTHER INDICATORS
7. Investor Analysis Table 11. Investor Analysis
Indicators
Net assets (Net worth), in thousand INR
Degree of Financial Leverage
2012
2013
2014
2016
2017
Absolute change (2017 / 2012)
28578000 36451400 45176400 71612100 85444200 56866200 division by 0
division by 0
division by 0
division by 0
division by 0
0
The net value of the enterprise's assets was INR 85,444,200 thousand at the end of 2017, about INR 13,832,100 thousand more than declared at the end of 2016. Overall, the net worth improved from INR 28,578,000 thousand to INR 85,444,200 thousand. This means that MRF is expanding.
8. Forecasting Financial Failure (Bankruptcy Test) (Financial Distress Prediction) Table 12. The Z-Score Model for Private Firms 2012 2013 2014 2016 2017
Indicators X1 (Working Capital/Total Assets) X2 (Retained Earnings /Total Assets) X3 (Earnings Before Interest and Taxes/Total Assets) X4 (Market Value of Equity/Book Value of Total Debt) X5 (Sales/Total Assets) Z=
0.23
0.28
0.28
0.17
0.18
0
0
0
0
0
0
0
0
0
0
0.66
0.79
0.86
1.19
1.34
0
0
0
0
0
0.44
0.54
0.56
0.62
0.69
MRF's Z-score was under 1.2 indicating a high bankruptcy risk in 2012. At the end of 2017 the Altman Z-score was 0.69 that indicates the bankruptcy may follow. The increase of the company's Z-Score value over the period of 2012-2017 showed that MRF has been improving its financial condition and declining the risk of bankruptcy. It also witnessed that the company did not perform well enough to have its Z-Score value moving out of the distress area.
9. Financial Rating A rating helps to sum up the current financial position and future expectations with one word. Table 13. Financial Rating Indicators
Weighting
Score
Score (Period Average score
Weighted average score
factor 1
(Period 3)
4)
2
3
4
5=0,35*3+0,65*4
6=5*2
Net Profit Margin
0,15
-1
-1
-1
-0.15
Return on Assets
0,15
-0.5
-0.5
-0.5
-0.075
Debt/Equity Ratio
0,15
-1
-1
-1
-0.15
Current Ratio
0,1
1
1
1
0.1
Net Sales Change
0,1
-1
-1
-1
-0.1
Operating Income Margin
0,1
-0.5
-0.5
-0.5
-0.05
Equity Change
0,1
1
1
1
0.1
Quick Ratio
0,05
-1
-1
-1
-0.05
Debt Ratio
0,05
1
1
1
0.05
Times Interest Earned
0,05
1
1
1
0.05
1
-
-
-
-0.275
Total Score
Table 14. Financial condition scale Sign
Current financial condition
0,8
AAA
Excellent
0,8
0,6
AA
Very good
0,6
0,4
A
Good
0,4
0,2
BBB
Positive
0,2
0
BB
Normal
Score from (inclusive)
to
1
0
-0,2
B
Satisfactory
-0,2
-0,4
CCC
Unsatisfactory
-0,4
-0,6
CC
Adverse
-0,6
-0,8
C
Bad
-0,8
-1
D
Critical
As a result we can confirm an unsatisfactory (CCC) financial situation.
Conclusion By assessing the financial position of MRF the following can be concluded: - MRF's financial sustainability ratios indicate good financial health at the end of 2017. This company was able to generate enough cash flow to pay interest on its debt while the debt ratio laid in the area of critical values (from 0.4 to 0.6). - MRF's liquidity ratios demonstrate a short-term issues in 2017. Overall, company was able to pay its short-term debt, but quick liquidity was unsatisfactory. Due to low amount of marketable securities and cash in bank, absolute liquid position was unsatisfactory. - The main concern for MRF was zero return at the end of 2017. After taking into account inflation, the ROA ratio indicates actual decrease in company value in 2017. Comparing the turnover data of the accounts receivable and accounts payable during 2017 it can be seen that the accounts receivable were turned as fast as the accounts payable.The net value of the enterprise's assets was INR 85,444,200 thousand at the end of 2017, about INR 13,832,100 thousand more than declared at the end of 2016. Overall, the net worth improved from INR 28,578,000 thousand to INR 85,444,200 thousand. This means that MRF was expanding. - At the end of 2017 the Altman Z-score was 0.69 indicating that the bankruptcy may follow. - The overall financial position of the company was unsatisfactory (CCC).
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