CASE – 2  

IIBMS – GREAVES LIMITED

IIBMS – GREAVES LIMITED   

Started as trading firm in 1922, Greaves Limited has diversified into manufacturing and marketing of high technology engineering products and systems. The company’s mission is “manufacture and market a wide range of high quality products, services and systems of world class technology to the total satisfaction of customers in domestic and overseas market.”

Over the years Greaves has brought to India state of the art technologies in various engineering fields by setting up manufacturing units and subsidiary and associate companies. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. Profits before interest and tax (PBIT) of the company increased from Rs 15 crore to Rs 83 crore in 1997. The market price of the company’s share has shown ups and downs during 1990 to 1997. How has the company performed? The following question need answer to fully understand the performance of the company:

 

Exhibit 1

 

GREAVES LTD. Profit and Loss Account ending on 31 March          (Rupees in crore)
	1990	1991	1992	1993	1994	1995	1996	1997
Sales Raw Material and Stores Wages and Salaries Power and fuel Other Mfg. Expenses Other Expenses Depreciation Marketing and Distribution Change in stock	214.38 170.67 13.54 0.52 0.61 11.85 1.85 4.86 1.18	253.10 202.84 15.60 0.70 0.49 15.48 1.72 5.67 3.10	287.81 230.81 18.03 1.11 0.88 16.35 1.52 5.14 4.93	311.14 213.79 37.04 3.80 2.37 25.54 4.62 5.17 0.48	354.25 245.63 37.96 4.43 2.36 31.60 5.99 9.67 – 1.13	521.56 379.83 48.24 6.66 3.57 41.40 8.53 10.81 5.63	728.15 543.56 60.48 7.70 4.84 45.74 9.30 12.44 11.86	801.11 564.35 69.66 9.23 5.49 48.64 11.53 16.98 – 5.87
Total Op Expenses	202.72	239.40	268.91	291.85	338.77	493.41	672.20	731.75
Operating Profit Other Income Non-recurring Income	11.61 2.14 1.30	13.70 3.69 2.28	18.90 4.97 0.10	19.29 4.24 10.98	15.48 7.72 16.44	28.15 14.35 0.46	55.95 11.35 0.52	69.36 13.08 1.75
PBIT	15.10	19.67	23.97	34.51	39.64	42.98	65.67	82.64
Interest	5.56	6.77	11.92	19.62	17.17	21.48	28.25	27.54
PBT	9.54	12.90	12.05	14.89	22.47	21.50	37.42	55.10
Tax PAT Dividend Retained Earnings	3.00 6.54 1.80 4.74	3.60 9.30 2.00 7.30	4.90 7.15 2.30 4.85	0.00 14.89 4.06 10.83	4.00 18.47 7.29 11.18	7.00 14.50 8.58 5.92	8.60 28.82 12.85 15.97	15.80 39.30 14.18 25.12

 

Exhibit 2

 

GREAVES LTD. Balance Sheet                                (Rupees in crore)
	1990	1991	1992	1993	1994	1995	1996	1997
ASSETS Land and Building Plant and Machinery Other Fixed Assets Capital WIP Gross Fixed Assets Less: Accu. Depreciation Net Tangible Fixed Assets Intangible Fixed Assets	3.88 11.98 3.64 0.09 19.59 12.91 6.68 0.21	4.22 12.68 4.14 0.26 21.30 14.56 6.74 0.19	4.96 12.98 4.38 10.25 23.57 15.79 7.78 0.05	21.70 33.49 5.18 11.27 71.64 19.84 51.80 4.40	30.82 50.78 6.95 34.84 123.39 25.74 97.65 22.03	39.71 75.34 8.53 14.37 137.95 33.90 104.05 22.45	42.34 92.49 8.87 13.92 157.62 42.56 115.06 20.04	43.07 104.45 10.35 14.36 172.23 53.87 118.86 21.11
Net Fixed Assets	6.89	6.93	7.83	56.20	119.68	126.50	135.10	139.97
Raw Materials Finished Goods Inventory Accounts Receivable Other Receivable Investments Cash and Bank Balance Current Assets Total Assets LIABILITIES AND CAPITAL Equity Capital Preference Capital Reserves and Surplus	5.26 29.37 34.63 38.16 32.62 3.55 8.36 117.32 124.21   9.86 0.20 27.60	6.91 33.72 40.63 53.24 40.47 14.95 8.91 158.20 165.13   9.86 0.20 32.57	7.26 38.65 45.91 67.97 49.19 15.15 12.71 190.93 198.76   9.86 0.20 37.42	21.05 53.39 74.44 93.30 24.54 27.58 13.29 233.15 289.35   18.84 0.20 100.35	28.13 52.26 80.39 122.20 59.12 73.50 18.38 353.59 473.27   29.37 0.20 171.03	44.03 58.09 102.12 133.45 64.32 75.01 30.08 404.98 531.48   29.44 0.20 176.88	53.62 69.97 123.59 141.82 76.57 75.07 33.46 450.51 585.61   44.20 0.20 175.41	50.94 64.09 115.03 179.92 107.31 76.45 48.18 526.89 666.86   44.20 0.20 198.79
Net Worth	37.66	42.63	47.48	119.39	200.60	206.52	219.81	243.19
Bank Borrowings Institutional Borrowings Debentures Fixed Deposits Commercial Paper Other Borrowings Current Portion of LT Debt	14.81 4.13 4.77 12.31 0.00 2.33 0.00	19.45 3.43 16.57 14.45 0.00 3.22 0.00	26.51 9.17 19.99 15.03 0.00 3.10 0.08	24.82 38.09 4.56 14.08 0.00 3.18 0.12	55.12 38.76 4.37 15.57 15.00 17.08 15.08	64.97 69.69 4.37 17.75 0.00 1.97 0.02	70.08 89.26 2.92 20.81 0.00 2.36 1.49	118.28 63.60 1.49 19.29 0.00 2.57 1.57
Borrowings	38.35	57.12	73.72	84.61	130.82	158.73	183.94	203.66
Sundry Creditors Other Liabilities Provision for tax, etc. Proposed Dividends Current Portion of LT Dept	37.52 5.70 3.18 1.80 0.00	49.40 10.16 3.82 2.00 0.00	59.34 10.70 5.14 2.30 0.08	77.27 3.59 0.31 4.06 0.12	113.66 1.42 4.40 7.29 15.08	148.13 1.99 7.70 8.58 0.02	153.63 1.70 12.19 12.85 1.49	179.79 3.04 21.43 14.18 1.57
Current Liabilities	48.20	65.38	77.56	85.35	141.85	166.42	181.86	220.01
TOTAL LIABILITIES Additional information: Share premium reserve Revaluation reserve Bonus equity capital	124.21       8.51	165.13       8.51	198.76       8.51	289.35   47.69 8.91 8.51	473.27   107.40 8.70 8.51	531.67   107.91 8.50 8.51	585.61   93.35 8.31 23.25	666.86   93.35 8.15 23.25

 

Exhibit 3

 

GREAVES LTD. Share Price Data
	1990	1991	1992	1993	1994	1995	1996	1997
Closing share price (Rs) Yearly high share price (Rs) Yearly low share price (Rs) Market capitalization (Rs crore EPS (Rs) Book value (Rs)	27.19 29.25 26.78 65.06 4.79 35.64	34.74 45.28 21.61 67.77 6.82 37.22	121.27 121.27 34.36 236.56 9.73 42.54	66.67 126.33 48.34 274.84 1.93 57.75	78.34 90.00 42.67 346.35 2.66 40.61	71.67 100.01 68.34 316.87 7.16 64.98	47.5 90.00 45.00 210.02 5.03 45.35	48.25 85.00 43.75 213.34 9.01 50.73

 

Questions

1. How profitable are its operations? What are the trends in it? How has growth affected the profitability of the company?
2. What factors have contributed to the operating performance of Greaves Limited? What is the role of profitability margin, asset utilisation, and non-operating income?
3. How has Greaves performed in terms of return on equity? What is the contribution of return on investment the way of the business has been financed over the period?

IIBMS – GREAVES LIMITED

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