“ECONOMIC VALUE ADDED FOR BALLARPUR INDUSTRIES LTD.”
EXECUTIVE SUMMARY Ballarpur Industries (BILT) is India’s largest exporter of paper with a significant presence in the manufacturing of various types of paper like writing and printing paper, industrial paper and specialty paper. The company is backward integrated and produces most of the raw materials required for manufacturing paper. It is India’s largest paper company, ranks among the top 200 paper companies in the world. The project tries to measure the economic value added at BILT. It also tries to compare the unit’s performance with the group. the comparison helps to ascertain the difference between the performances and gives an insight for the improvements. The project has been divided in to three parts and each part play an important role. The first part e deals with the company profile its potentialities and plans. The second part of the project deals with the calculation of the economic value added for the unit as well as the group. The third and the final phase deals with the comparison of EVA and the findings and suggestions.
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“ECONOMIC VALUE ADDED FOR BALLARPUR INDUSTRIES LTD.� TABLE OF CONTENTS SL NO. 1
PARTICULARS INDUSTRY SCENARIO
PAGE NO. 1
2 3 4 5 6 7
COMPANY PROFILE UNIT BHIGWAN ECONOMIC VALUE ADDED COMPARISON OF EVA INTERPRETATION & FINDINGS SUGGESTIONS
2 11 19 45 47 48
INDUSTRY SCENARIO OF THE YEAR The global paper markets remained stable during the first three quarters of the financial year and in the last quarter, followed the surge in pulp prices to end at a higher level. The major global focus in terms of new capacities has been China, where additional capacities at an average of nearly a million metric tonnes are being created every year. This capacity creation is largely aimed at domestic demand and substitution of current imports into China. The domestic paper & paperboard market was firm and maintained a healthy price level throughout the year as a result of the overall economic growth. The price levels were also helped by only marginal increases in capacities and domestic production. During the first half of the year, the prices remained largely stable, with demand also being stable. The second half registered a significant price increase where the Company took the lead by undertaking two general across the board price increases and a few other selective increases. Indian paper industry is the 15th largest in the world and provides employment to 1.3mn people in the country contributing Rs25bn to the Government. It recorded a volume growth of 6%, in line with the GDP growth. Indian paper industry has a 1:1 correlation with the economy. With the expected GDP growth of 6.9% for FY05 and 7-8% for FY06 as per RBI, the paper sector is expected to record a similar growth rate. The domestic market has been growing at a healthy rate of 6% with the supply side lagging with a growth of 2.5%. This widening gap of demand and supply will turn India into
growing import market.
Looking at this opportunity and in order to leverage its superior marketing and distribution reach, the
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“ECONOMIC VALUE ADDED FOR BALLARPUR INDUSTRIES LTD.” Company has initiated an outsourcing program for strategic tie-ups with overseas manufacturers of paper and boards for sourcing value added products for Indian markets.
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BALLARPUR INDUSTRIES LIMITED (BILT). Ballarpur Industries (BILT), India’s largest paper company, ranks among the top 200 paper companies in the world. It is India’s largest exporter of paper with a significant presence in the manufacturing of various types of paper like writing and printing paper, industrial paper and specialty paper. The company is backward integrated and produces most of the raw materials required for manufacturing paper. In recent years,
BILT has evolved as a more dynamic, knowledge driven organization focused towards
creation of stakeholder value. In the process, it has also transformed the paper industry from its traditional 'commodity market' mindset to a branded one.
The company has 6 manufacturing units across the country. BILT basically has two business segments – paper and chemicals. However, the paper division contributes the major chunk of revenues (over 60%). .
A concerted program of innovation and technological
excellence helps it proactively respond to the needs of each individual segment. Today, BILT not only has the range, but also a well-entrenched distribution network that enables it to reach customers, any time, any place.
BACKGROUND OF BILT It was incorporated in 1945 under the name of Ballarpur Straw Board Mills, which was later changed to Ballarpur Paper & Straw Board Mills. The paper mill was commissioned at Ballarpur(Maharashtra) in 1953. In June 1969, Shree Gopal Paper Mills manufacturing paper, stationery and vanaspati, was merged with it.The caustic soda/chlorine plants went into production at Yamunanagar(1973), Ballarpur(1974) and Karwar(1975) The name was changed to Ballarpur Industries Ltd. in 1975.
STRATEGIC INTENT OF BALLARPUR INDUSTRIES BILT, in the recent years has evolved as a more dynamic, knowledge-driven organization with a singular focus on creating stakeholder value. Aimed at making the organization more market-oriented and customer-centric, the following initiatives are to drive BILT forward in the rapidly changing business environment:
Consolidation
A continuous streamlining of capacities and products in our core business area - Paper. BILT has been coming on the path of strategic movement. Its acquisitions, takeovers & tie ups prove the point. Consolidation has given good fruits to the organization as the statistics show the same. Brand Building
Increasing brand involvement for the products amongst customers to reduce market fragmentation and attain 'generic-brand' status for BILT via strategic branding. It is continiously trying to convert the commodity to the brand. Wider product range Adding high value-added products to BILT's portfolio expanding it to cover the widest range of basic to high-end usage paper products. BILT is coming with a wide range of new products supplies,etc.
like cream vowe, computer peripherals, office
Product-mix rationalization Maintaining an intelligent product-mix based on value and demand curves to maximize returns. Exploring global markets Reaching out to international markets with world-class products while maintaining leadership in India. Operational Improvements & Cost-competitiveness To attain higher efficiency levels and world-class quality in production processes. Increasing capacities Expansion of manufacturing and processing capabilities across product range, in line with market dynamics. Sound Investments Accelerate growth by way of investments into focused, synergetic acquisitions. Captive Market Share Sustaining and strengthening BILT's leadership position in its market segments way ahead of competitors. Extending 'Touch-Points' Building a wider and 'intelligent' distribution network that enables BILT to serve its markets in a customized and localized manner and attain higher penetration, without losing the economies of scale.
WHAT BILT OFFERS BILT services its customers' needs for quality Paper - both in India as well as overseas. Our paper touches our customers' lives everyday. In more ways than they even know. Stationery, playing cards, high quality coated paper for brochures and magazines, currency notes, copier paper… We service these everyday instances across the length and breadth of the nation with our wide product portfolio ranging from basic to high-end specialty paper. Coated Wood Free Paper Uncoated Hi-bright Paper (Maplitho) Business Stationery Copy Paper Speciality & Fine Paper While these indicate our broad product segments, BILT also continuously focuses on serving customers with customised, value-added products to suit specific applications.
CORPORATE
BILT
MILESTONES
has demonstrated a tradition of leadership across six decades and three generations. Over the
years, it has only emerged as a more dynamic, focused corporate leveraging its vast asset and knowledge pool to enhance shareholder value. Its pathway through the history can be summarized as follows:
1945 - Ballarpur Paper and Straw Board Mills Limited incorporated. First brand names 'Three Aces' for paper and 'Wisdom' for stationary 1969 - Shree Gopal Paper Mills Limited merges with Ballarpur Paper and Straw Board Mills Limited. 1975 - Entity name changed to Ballarpur Industries Limited. 1983 - Modernization of Ballarpur and ShreeGopal mills initiated 1988 - Entry into industrial paper segment 1989 - Inception of BILT TreeTech Limited. Reinforcement of commitment to Farm Forestry 1990 - Sewa Paper Mills acquired 1992 - Choudwar unit acquired
1994 - US $ 35 million FCCB Issue launched 2000 - Business portfolio restructuring completed 2001 - Sinar Mas Pulp and Paper (India) Limited acquired and renamed Bilt Graphic Papers Limited (BGPL).
2002 - New Corporate Identity initiative. Genesis of BILT 2003
-
BILT
Graphic
Papers
Limited
merged
with
BILT
BILT’S REACH
With the customer at the center of our business activities, we have pioneered the transition of the traditional 'transaction-based' model to a 'relationship-based model' in the Indian paper industry. This relationship is built by constantly leveraging our physical proximity to the markets, further enhanced by intelligent systems offering a strong emotional proximity to our customers even at a micro-level.
Physical Proximity
Our distribution network and understanding of local requirements is unmatched in the Indian paper industry. Over the decades,
BILT has transitioned from the 'metro' concept to cross country
distribution. While our five manufacturing facilities for paper and pulp are strategically spread across the country, we have assiduously brought our products within physical proximity of the customers. Our network of 126 dealers - the largest within the industry in India - is present across the principal consuming centers of the country and is the key fulcrum to this proximity.
CONCERN TOWARDS SOCIETY
BILT has achieved the honour of getting 2005’s prestigious TERI National Award for Corporate Social Responsibility. Mr Kamal Nath, Hon’ble Union Minister for Commerce and Industry, presented the awards. This year’s awards were in two categories – Environment Excellence and Corporate Social Responsibility and were selected from among 178 entries by an eminent jury chaired by Justice J S Verma, Former Chief Justice of India.
As the industry leader,
BILT is committed to developing its business towards ecological, social and
economic sustainability. Community development and upliftment of the marginalized class have been identified as focus areas. BILT has joined hands with Pratham, an NGO that runs primary education programs all over the country. A key initiative in environmental accountability is the BILT Farm forestry program that has covered more than 7500 farmers since 2001.
BILT’s POSITION The Ballarpur Industries Ltd has significant domestic market position and the positive growth prospects
for
the
domestic
uncoated
writing
and
printing
paper
market.
Ballarpur is a leading player in the Indian writing and printing paper (WPP) segment, with an 18% market share, and the coated paper market, with about 45% market share. BILT’s favorable market position is attributable to its relatively large and integrated production capacities compared with other domestic manufacturers. A wide product mix and well-established distribution
network
reinforce
the
company's
market
position.
BILT is looking for the expansion. The expansion will increase its installed paper manufacturing capacity to 650,000 tons per annum (tpa), from 387,000 tpa currently. The program is essential to sustain its strong market position and to modernize its production facilities. A mixture of debt and internal
cash
generation
will
fund
the
capital
expenditure.
The stable outlook reflects Ballarpur's ability to maintain its leading market position, improving operations, and competitive cost position, which could mitigate potential margin pressures from increasing competition and volatile price cycles.
BILT’s PLANS BILT is planning to expand its branded office product line by targeting a 300 per cent jump in its retail business. At present, the turnover from our retail business is Rs 25 crore. It aims to increase the figure to Rs 100 crore in the next couple of years. The company will add new products in the non-paper category like computer peripherals, office supplies and stationery to strengthen its retail section. It would source the new line of products from a third party and add the BILT branding to it. BILT brand name is important to project themselves from a pure commodity supplier
to
a
trusted
brand
name
in
paper
and
office
products.
The retail business of the company is currently carried out through its 110 exclusive wholesalers, 110 retail distributors and over 10,000 stationers. The company also plans to increase its number of stationers from 10,000 to 25,000 and to make its presence felt in around 3,000 cities across the country
in
the
next
few
years.
Currently the company has three products in the BILT branded category product range, which includes royal executive bond paper and matrix multi-purpose paper. BILT is also looking to enter the high volume segment of “cream wove”, a special kind of paper used by the writing industry. Out of a total paper market size of 2.5 million tonnes, “cream wove” alone accounts for 1.1
million
tonnes,
which
amounts
to
Rs
This is one segment where BILT’s presence is relatively less.
2,600
crore
annually.
BILT’s STRATEGIES BILT has launched a $60-million foreign currency convertible bond offering on 21/06/2005. The bonds will be listed on the Singapore Stock Exchange and bondholders have an option of converting
them
to
equity
shares.
The offering comprises zero coupon premium redemption bonds aggregating to $60 million, convertible at Rs 180 a share, which is 52.47 per cent premium to the stock price of Rs 118.05 on the NSE on June 17. The bonds have a maturity of five years, with a yield to maturity set at 6.3 per
cent.
Proceeds from the issue would be used for capital expenditure and repayment of existing FCCBs. LINKS Registered
Office
&P
O
Ballarpur District
Paper ,
Mills
Factory
Chandrapur
Maharashtra
-
India
Factory/plant
PinCode : Unit Bhigwan, 105 Milestone, Pune - Solapur Highway,
Factory/plant
Pune District , Maharashtra - India Unit Shree Gopal, P O Yamunanagar
Factory/plant
Yamunanagar , Haryana - India Unit Choudwar, P O
Factory/plant
Cuttack District , Orissa - India Unit APR, Kamalapuram,
Corporate Office
Warangal District , Andhra Pradesh – India First India Place, Tower - C, Block - A, Gurgaon PinCode
,
Haryana
Daulatabad Township
-
India :122002
Phone
:2804242/
2804243,,,
Fax :2389495, UNIT BHIGWAN A consolidation in the highly fragmented paper industry, Ballarpur Industries clinched the deal to buy paper major, Sinar Mas Pulp & Paper India for over Rs 500 crore. This news flash has made a great change in paper scenario of the country.This acquisition helped Ballarpur Industries strengthen its position as the largest paper manufacturer in India. Sinar Mas Pulp & Paper (India) Ltd located along the Pune-Solapur highway near village Bhadalwadi of district Pune, Maharashtra, was set up by the Indonesian company. The project plan started in the year 1993. the project was implemented in the year 1995. the production was trailed and started in the year 1997. the company stared the generation of the power through its own thermal plant in the year 1998. As the project was in its inception stage, it didn’t make its profits till the year 2000. In the year 2003
BILT
took
over
the
major
stake
and
became
the
holding
company.
BGPL has a state-of-the-art paper manufacturing plant with a capacity of 115,000 tpa and is the market leader in the high-end coated paper and art board segments in India. Post the acquisition, BILT commands a 50% share of the coated paper market. The unit was started as an export oriented unit. The unit bought the plant and machinery with a nil custom duty on the condition of exporting the finished goods amounting to $ 165 million dollars. The unit is able to export only a half of it.
PRODUCTION CAPACITY - 300 T.P.D. (tonnes per day) TOTAL PLANT AREA
- 750 acres & Colony area 250 acres.
MAJOR SUPPLIERS COAL BHATIA INTERNATIONAL ARIHANT SALES CORPORATION GUPTA ENGINEERING IBS SONOCO MGM Motoro A P Enterprises CENT Co International
PALLETS Sanghvi Pallets & Drums CHEMICALS Taiwan hopex – Indonesia CIBA specialty Chemicals BASF – Indonesia BASF - INDIA IMERY’s NewQuest Pvt Ltd – Thailand IMERY’s Onik – Malaysia
PULP Qumica speciality – Thailand Tapioca development corporation – Indonesia Quality Minerals – Germany J.M. Huber corporation – USA Kolin International – USA Diamond DICEM – INDIA VARALAKSHMI STARCH – INDIA Anil products Ltd. – INDIA DOW chemicals – USA L G Chemicals USA JPN Chemicals
MAJOR CUSTOMERS – INDIA Anil agency Ajanta papers delhi Standard press Chennai Form prints Mumbai Sham traders Shambhu traders
MAJOR CUSTOMERS – ABROAD Dye papers – USA
Dye papers – AUSTRALIA European paper - UK Vital solution pte – SINGAPORE Paper com traders – SRILANKA Oriental press – USA Necron B V – NEWYORK
TYPES OF PRODUCTS Art board Chromo Emperor Print plus DEPARTMENTS 1. ADMIN -HR -administration -PDC 2. COMMERCIAL -purchase -logistics -stores -engineering -chemical -pulp -coal
-pallet -warehouse 3. ACCOUNTS & FINANCE 4. POWER PLANT -turbine / boiler -DM(de-mineral) water plant -EPC(environment pollution control) -WTP(water treatment plant) -ETP(effluent water treatment plant) 5. WORKSHOP -roll grinding -vehicle maintenance wing 6. MECHANICAL 7. ELECTRICAL 8. INSTRUMENTATION 9. DRAWING 10. QUALITY ASSURANCE & QUALITY CONTROL 11. PRODUCTION
PRODUCTION PROCESS
Stock preparation
Paper machine plant
Color kitchen
IMERY’s NEW QUEST
OMC(on machine coating) plant
Rewinder
Sheet cutter
Finishing
Dispatch LANDMARKS Project Conceived in July 1993. Land Acquisition started in 1995.
Construction started in March 1995. Trial production started in Jan 1997. Commercial production started in July 1997. Power Plant started in 1998. Power export started in February 1999. Profit posted in year 2000
BOILER CFBC Boiler Oil Boiler TG Set Self Power cons. Power Export
: 175 TPH : 50 TPH : 30 MW : 17 MW : 10.7 MW
Water Treatment
PLANT LAYOUT Power Plant
Warehouse Stock Prep.
Paper m/c
Color Kitchen Workshop & Engg. Stores
Chemical storage
Off m/c coater C R
Finishing House
Pallet yard
Effluent Treatment
ECONOMIC VALUE ADDED The basic objective of any entity (business) is to maximize shareholders’ wealth or value of the business. There are many traditional measures through which the performances are evaluated, but
they are falling short of achieving the objective of value maximization. Some of the traditional measures to analyze the performances are Net profit margin Operating profit margin Return on investment etc. It is said that shareholders wealth or value increases automatically when the value of the business increases. Economic Value Added is increasingly popular corporate performance measure one that is often used by companies for evaluating the performance Economic Value Added (EVA) The concept of EVA was introduced by a New York based consulting firm STERN STEWART & Co in early eighties. STERN STEWART & Co defines EVA as “Economic Value Added is the financial performance measure that comes closer than any other to capturing the true economic profit of an enterprise. EVA ® also is the performance measure most directly linked to the creation of shareholder wealth over time. Stern Stewart & Co. guides client companies through the implementation of a complete EVA-based financial management and incentive compensation system that gives managers superior information - and superior motivation - to make decisions that will create the greatest shareholder wealth in any publicly owned or private enterprise.”
Stern Stewart developed EVA to help managers incorporate two basic principles of finance into their decision-making. The first is that the primary financial objective of any company should be to maximize the wealth of its shareholders. The second is that the value of a company depends on the extent to which investors expect future profits to exceed or fall short of the cost of capital. By definition, a sustained increase in EVA will bring an increase in the market value of a company. This approach has proved effective in virtually all types of organizations, from emerging growth companies to turnarounds. This is because the level of EVA isn't what really matters. Current performance already is reflected in share prices. It is the continuous improvement in EVA that brings continuous increases in shareholder wealth.
EVA is a corporate surplus, which is shared by the employees, management and the shareholders. Efficiency bonus, profit sharing schemes, managerial remuneration over and above a minimum sustenance salary, issue of onus shares and incentive dividend to equity and preference share holders respectively can be linked to EVA.
EVA Bonus To Employees
Extra Remuneration to Management
Remuneration To management Incentive Remuneration To Preference share holders Bonus Share To Share Holders Remuneration ToEquity management
Remuneration To management
NEED FOR EVA To provide customers with high-quality products and services To provide secure employment for the employees To make its lenders i.e., the banks happy To provide the government with tax revenues
To create value for its share-holders
OLD/
CONVENTIONAL
FINANCIAL
EVA IN FINANCIAL MANAGEMENT
MANAGEMENT SYSTEM Incomplete measurement. No accountability for invested capital.
SYSTEM Measures economic profit Accountability for bothprofit maximization &
No focus on current operations rather than long-term
capital usage. Balanced focus on current operations and
competitiveness. Often inconsistent with the goal to increase share
long-term investments. Consistent with goal to increase shareholder
holder value.
value.
CALCULATION OF EVA EVA is the excess of net operating profit after tax over the capital charge. In other words eva is a company’s net operating profit after tax after deducting th cost of capital employed or total investment in the business. NOPAT Nopat is the profit derived from the company’s operations after taxes but before financing costs and non cash book-keeping entries.
Formula NOPAT= EBIT (1-t) CAPITAL EMPLOYED Invested capital or capital employed refers to total assets in the business (net of revaluation) after deducting non-interest bearing current liabilities. From operating view point, invested capital may be described as Net Fixed Assets, plus investments, plus net investments plus net current assets. WACC
WACC represents overall cost of capital employed in the business (i.e., debt plus equity). The cost of each source of capital is calculated separately and then weights are assigned to each source on the proportion of a particular source in the capital invested.
Operating decisions (profit)
EVA= Profit – (capital * cost of capital)
EVA Investment decisions (capital)
Financing decisions (cost
of
capital)
DRAWBACKS OF EVA Though EVA seems to be a good measurement of the efficiency with which the entire capital is used by an enterprise, it has got some limitations: 1. A flat rate of total cost of capital may not be appropriate, as it does not consider the ‘rate advantage’ enjoyed by an enterprise, by raising cheap funds. 2. EVA does not consider the ‘appreciation in the price of fixed assets’, on account of market variables. 3. EVA does not give a correct, specific computation of the ‘net real growth’ in the owner’s wealth. This is because; ‘total cost of capital at a blanket rate’ also includes ‘cost of owners fund’. 4. Computation of segmental or divisional EVA depends on accurate division of assets among the various segments. Division of ‘common assets’ used for ‘common corporate functions’ is very difficult (rather impossible).
BILT GROUP STATEMENTS
As on (Rs. Million) RS 30-Jun-00 30-Jun-01 30-Jun-02 30-Jun-03 31-Mar-0 I SOURCE OF FUNDS 1. Shareholder's Funds Capital Share Suspense Reserves and Surplus 2. Loan Funds Secured Loans Unsecured Loans def tax liab Total
1,103 130 7,203
1,307 12 7,663
1,274 2,171 6,965
8,516 2,096
8,862 2,784
8,164 2,767
19,048
20,628
21,342
1913293 10800000 10469399 12382692 8960057 2814323 11774380 1214577 25371649 10800000
II APPLICATION OF FUNDS 1. Fixed Assets Gross Block (Adjusted) Less: Depreciation Net Block Capital Work in Progress Advance against Machinery, Land etc 2. Investments 3. Current Assets, Loans and Advances Net Income accrued on Investments and Fixed Deposits Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Less: Current Liabilities and Provisions Liabilities Provisions Net Current Assets Net Deferred tax assets Less: Deferred tax liability p & l account Miscellaneous expenditure not written off or adjusted Total
17,722 5,277 12,446 2,773 997 1,343
17,462 5,659 11,804 3,838 1,138 1,312
19,327 6,464 12,863 3,256 678 3,203
28779677 9674312 19105365 1999129 723917 550533
19416430 4353465 15062965 -
497 1,321 1,166 367 1,334
77 1,665 1,429 603 1,963
19 1,841 1,542 3,720 1,688
15268 2828898 1834886 521916 1950726
2,992 333 1,361
3,068 348 2,321
6,089 507 2,214
4434778 512366 2204550
--
--
1,212
0
129 19,048
215 20,628
339 21,342
3338708 788155 25371649 10800000
9500 1752786 122500 1791742 1470275 12545120 331310 -7739127 127954
PROFIT & LOSS ACCOUNT Gross Sales Less: Excise Duty Net Sales* Other Income
12 Months Ended (Rs. Million) Jun-00 jun--01 jun--02 jun--03 14,464 15,676 15,379 211,583 -1,071 -1,221 -1,115 16,796 13,393 14,455 14,263 194,787 63 127 99 944
jun--04 224,417 18,975 205,442 1,089
Total Income
13,456 14,582 14,362 212,527
225,506
Expenditure (a) Amortisation of Deferred Revenue Expenditure Manufacturing Costs* Raw Material, Purchases, (Increase)/Decrease in Stocks (c) Consumption of Raw Materials Stores & Spare Parts Power & Fuel Costs Other Manufacturing Expenses Personnel Cost Selling & Administration Costs Total EBIDTA Interest (Net) Profit before Depreciation Depreciation Amortisation PBT Provision for Tax Current Tax / MAT Deferred Tax Liability (Net)
916
1,129
-2,934 -2,647 -2,908 18,775 34,985 -2,064 -2,247 -2,127 33,633 -3,814 -3,783 -3,835 41,160 -581 -821 -762 13,546 -1,001 -1,231 -1,165 12,447 -611 -735 -439 -11,005 -11,464 -11,236 172,258
21,675 37,810 34,540 41,777 13,328 12,798
2,451 3,118 3,127 40,269 -1,128 -1,242 -1,198 13,814 26,455 -569 -751 -835 12,665 -61 -37 -47 693 1,088 1,046 13,790 -86 (332)** 1,085 2,876 3,961 693 1,003 714 9,829
43,474 12,633 30,841 13,074
PAT Less : Minority Interest Add : Share of Profits in Associate Net Profit after Taxation,Minority Interest & Share in Associate Extra-Ordinary Expense / Income -12 Paid up Equity Share Capital
--
182,032
17,767 1,375 3,001 4,376 13,391
-14,119
16,245
Reserves as per last Balance Sheet Basic EPS for the Nine Months / Quarter / Year a) Before Deferred Tax b) After Deferred Tax Diluted EPS for the Nine Months / Quarter / Year EPS (Rs.) eq sh cap no of shares
11.61 597
14.01 716
Jun-00 100 -81.8 18.2 -8.4 -4.7 5.1
125,057
8.53 6.49 6.49
9.95 8.11 7.27
9.98 716 81,997,240 102,281,246
12 Months Ended (%) Total Income Operating Expenditure EBIDTA Interest Depreciation / Amortisation PBT
104,694
Jun-01 100 -78.6 21.4 -8.5 -5.4 7.5
Jun-02 100 -78.2 21.8 -8.3 -6.1 7.3
Provision for Tax PAT
-5.1
-0.6 6.9
-2.3 5
Notes: The Auditors' have observed in the audited accounts of the Company for the year ending 30th June,2004 about non-provision of duty , incidental
expenses etc. in respect of Plant &
Machinery lying at Port / Warehouse. The Management is of the opinion that the same is not going to materially affect the Profit & Loss of the Company. The Consolidated Financial Results represent those of the Company , its subsidiaries - Bilt Treetech Ltd and The Paperbase Company Ltd .
The results also include share of profits of
Associate Company - APR Packaging Ltd . The Consolidated Financial Results have been made in accordance with
Accounting Standard 21 "Consolidated Financial Statements " issued by
the Institute of Chartered Accountants of India. Figures of the previous period / year have been recast to make them comparable to the Current period / year. Investor Complaints outstanding at the beginning of the quarter were NIL , No. of Complaints received and resolved during the quarter ended 30th June,2004 were 4.
No. of Complaints
outstanding at the end of the quarter NIL. These results were reviewed by the Audit Committee and approved by the Board of Directors in its meeting held on 25th August,2004. New Delhi25th August, 2004 For and on behalf of Board of DirectorsFor Ballarpur Industries Ltd. GAUTAM THAPAR Vice Chairman & Managing Director
BILT BHIGWAN UNIT STATEMENTS Jun-04
Jun-03
18 months in '000 jan-01 to jun-02 Dec-01 Dec-00
I SOURCES OF FUNDS 1. SHARE HOLDERS FUNDS Share capital / head office
4954600532 3931180680 6476218
6476218 6476218
2. RESERVES & SURPLUS
205179112 128233799 28703
0
3. LOAN FUNDS a. secured loans
69968149
1583254836 1967309
0 1546543
b. unsecured loans
365513420 373431282 427600 435481569 1956686118 2394909
1033443 3008746 2579986
TOTAL
5595261213 6016100597 8899830
9484964 9056204
gross block less: depreciation Net blok
7454779735 7385737300 7366844 2403179968 2027866532 1658215 5051599767 5357870768 5708629
7344847 7307838 1471996 1145753 5872851 6162085
construction & installation in progress including expenditure thereon / capital work in progress.
0
5728
advane against machine, land etc..
0 3275981 0 5051599767 5363057307 5713987
0 0 5878579 6169588
2. INVESTMENTS
0
500000
1000
1000
1000
income accrued on investments & F.D.s
170027
583062
0
0
0
inventory
574920204 951533260 801144
958051 1041018
other current assets
0
1046
sundry debtors
448795818 383565262 367603
469900 693169
cash & bank balance
32684724
14738
50906
laons & advances
104754336 22690990
327267
439096 168700
II APPLICATION OF FUNDS 1. FIXED ASSETS
1910558
5358
7503
3. CURRENT ASSETS LOANS & ADVANCES
0
21972908
358
1069
158517
1161325109 1584345482 1511110
1918999 2062473
less: current liabilities & provisions
680748780 1115620967 1111785
1091428 1841642
Net current assets
480576329 468724515 399325
827571 221371
4. MISC. EXPENSES (to the extent not written off or adjusted)
63085117
183818775 183927
145664 12215
DEBIT BALANCE IN P & L ACCOUNT
0
0
2601591
2632150 2652030
TOTAL
5595261213 6016100597 8899830
9484964 9056204
PROFIT AND LOSS ACCOUNT OVER THE YEARS Jun-04
Jun-03
18 months in '000 jan-01 to jun-02 Dec-01
Dec-00
INCOME gross sales less: Excise
5471993866 4861224148 7940727 632547868 471130202 756930
5176291 0 501377 0
sales Net
4839445998 4390093946 7183797
4674914 4241421
other income
41829082
26570
17582
14550
(increase / decrease) in stocks
-250546530 49324965
0
0
0
TOTAL
4630728550 4476378089 7210367
4692496 4255971
manufacturing & other costs
3296463294 3036253012 6018968
3786669 3500425
purchases of traded goods
0
280413439 0
0
0
personnel costs
141171549 112848192 0
0
0
administration, selling & misc costs
255837879 219802625 0
0
0
inetrest & finance cost
362198894 312923185 563268
494922
345270
depreciation
375659506 373097787 513893
371440
326597
provision for taxation
0
0
103
0
103
msc. Expenses written off
22920370
41508104
0
0
0
P & L bal B/F
0
0
-2652030
-2691495 -2652030
prior period adjustment
0
0
-63696
0
TOTAL
4454251492 4376846344 2601591
SURPLUS TO BALANCE SEET
176477058 99531745
36959178
EXPENSES
-63696
2652030 2632150
WORKING NOTES OF EVA FOR BILT pbdita less : dep pbit 1 - tax rate nopat= pbit * 1- tax
Jun-00 2541 630 1,911 1.00 1911
Jun-01 3,118 788 2,330 0.92 2145.82748
Jun-02 3127 882 2,245 0.68 1532.6615
Jun-03 40,269 12665 27,604 0.71 19676.1312
Jun-04 43,474 13074 30,400 0.75 22915.52
capital eq % of eq deb % of deb intr
19048 8,436 0.442 10,612 0.550 1128
20,628 8,982 0.435 11,646 0.564 1,242
21,341 10,410 0.487 10,931 0.512 1198
24,157,072 12,382,692 0.513 11,774,380 0.487 13814
10800000 10800000
cost of deb eps mkt price ke = eps / mkt price
0.11 8.2 91
0.10 13.3 84.7
0.07 5.5 119.4
0.00084 6.9 149.6
0 8.2 137.9
cos of equity
0.09
0.16
0.05
0.05
0.06
% * cos of eq
0.039828571
0.068305785
0.022432998
0.023638035
0.06
% * cos of deb
0.058462118
0.055394009
0.038308645
0.0004076
0
WACC
9.829068979
12.36997939
6.074164302
2.404563518
0.06
cap * wacc
1872.241059
2551.679349
1296.287404
580872.1402
648000
EVA = NOPAT - C* WACC
38.75894097
-405.8518691
236.3740962
-561196.009
-625084.48
rate of return = nopat / cap
0.100
0.104
0.072
0.001
0.002122
R - C*
0.002
-0.020
0.011
-0.023
-0.058
EVA = CAP(R - C*)
38.75894097
-405.8518691
236.3740962
-561196.009
-625084.48
EVA OF BILT (group)
YEARS
EVA
Jun-00
38.758941
Jun-01
-405.85187
Jun-02
236.374096
Jun-03
-561196.01
Jun-04
-625084.48
ECONOMIC VALUE ADDED OVER THE YEARS 50000
-50000
-150000
EVA
-250000
-350000
-450000
-550000
-650000
-750000
Jun-00
EVA 38.75894097
Jun-01
Jun-02
Jun-03
Jun-04
-405.8518691
236.3740962
-561196.009
-625084.48
YEARS
TRENDS OF THE EVA DETERMINANTS
YEARS
NOPAT
Jun-00
1911
Jun-01
2145.8
Jun-02
1532.7
Jun-03
19676
Jun-04
22916
NOPAT
Jun-04 Jun-03 Jun-02
Series1
Jun-01
Series2
Jun-00 YEARS 0
5000
10000
15000
20000
25000
YEARS
WACC
Jun-00
9.8291
Jun-01
12.37
Jun-02
6.0742
Jun-03
2.4046
Jun-04
0
WACC
2004 2003 2002
WACC
2001 2000 0
5
10
15
YEARS Jun-00 Jun-01 Jun-02 Jun-03 Jun-04
PBDITA 2541 3,118 3127 40,269 43,474
PBDITA 2004 2003 2002
pbdita
2001 2000 0
10000
20000
30000
40000
50000
WORKING NOTES OF EVA FOR BHIGWAN
nopbt less : TAX nopat= pbit * 1- tax
Jun-04 1185838624 415,043,518 770795106
Jun-03 938678479 328,537,468 610141011
18 months jan-01 to jun-02 7681199692 2,688,419,892 4992779800
in '000 Dec-01 7598438154 2659453354 4938984800
Dec-00 7353478538 2573717488 4779761050
capital eq % of eq deb % of deb
5566559159 5,131,077,590 0.921 435,481,569 0.079
5,987,398,543 4,030,712,425 0.673 1,956,686,118 0.327
8,871,127,000 6,476,218,000 0.730 2,394,909,000 0.270
9,056,204,000 6,476,218,000 0.715 2,579,986,000 0.285
9,484,964,000 0 0.682 3,008,746,000 0.318
cost of deb
0.111
0.117
0.120
0.120
0.124
cos of equity
0.09
0.16
0.05
0.05
0.06
% * cos of eq
0.082991209 0.105677686 0.033626466
0.032977941 0.040554025
% * cos of deb
0.0087295
0.038259
0.0324675
0.03427125
0.039273
WACC
0.1376
0.129
0.1492
0.1486
0.1483
cap * wacc
765958540
772374412
1323572148
1345751914
1406620161
EVA = NOPAT - C* WACC 4836566
-162233401
3669207652
3593232886
3373140889
rate of return = nopat / cap
0.138
0.102
0.563
0.545
0.504
R - C*
0.001
-0.027
0.414
0.397
0.356
EVA = CAP(R - C*)
4836565.722 -162233401
3669207652
3593232886
3373140889
EVA OF BILT –UNIT BHIGWAN
YEARS
EVA
Jun-04
4836566
Jun-03
-162233401
Jan- Jun 02
3669207652
Jan - Dec 01
3593232886
Jan - Dec 00
3373140889
EVA 4000000000 3500000000 3000000000
AMOUNT
2500000000 2000000000
1500000000 1000000000 500000000 0 -500000000
Jan - Dec 00
Jan - Dec 01
Jan 01- Jun 02
Jun-03
EVA 337314088 359323288 366920765 -162233401
YEARS
Jun-04 4836566
TRENDS OF THE EVA DETERMINANTS
YEARS
NOPAT
Jun-04
770795106
Jun-03
610141011
Jan- Jun 02
4992779800
Jan - Dec 01
4938984800
Jan - Dec 00
4779761050
NOPAT
Jan - Dec 01 Jan- Jun 02 Jun-03
Jun-04
Jun-03
Jan- Jun 02
Jan - Dec 01
60 00 00 00 00
50 00 00 00 00
40 00 00 00 00
30 00 00 00 00
20 00 00 00 00
10 00 00 00 00
Jun-04 0
YEARS
Jan - Dec 00
Jan - Dec 00
NOPAT 770795106 610141011 499277980 493898480 477976105
AMOUNT
YEARS
WACC
Jun-04
0.1376
Jun-03
0.129
Jan- Jun 02
0.1492
Jan - Dec 01
0.1486
Jan - Dec 00
0.1483
WACC
Jan - Dec 00
YEARS
Jan - Dec 01
Jan- Jun 02
Jun-03
Jun-04
0.115
WACC
0.12
0.125
0.13
Jun-04
Jun-03
0.1376
0.129
0.135
0.14
0.145
0.15
0.155
Jan- Jun 02 Jan - Dec 01 Jan - Dec 00 0.1492
AMOUNT
0.1486
0.1483
COMPARISON OF EVA (BILT GROUP & UNIT BHIGWAN)
YEARS
EVA - UNIT BHIGWAN
EVA - BILT
Jan - Dec 00
3373140889
38.758941
Jan - Dec 01
3593232886
-405.8519
Jan 01- Jun 02
3669207652
236.3741
Jun-03
-162233401
-561196
Jun-04
4836566
22915.52
EVA - BILT GROUP vs UNIT BHIGWAN 4000000000 3500000000 3000000000 2500000000 2000000000 1500000000 1000000000 500000000 0 -500000000 Jan - Dec 00
Jan - Dec 01 Jan 01- Jun 02
Jun-03
Jun-04
YEARS
EVA - BILT EVA - UNIT BHIGWAN
Jan - Dec 00
Jan - Dec 01
Jan 01- Jun 02
Jun-03
Jun-04
38.758941
-405.85187
236.374096
-561196.01
22915.52
3373140889
3593232886
3669207652
-162233401
4836566
EVA - BILT
EVA - UNIT BHIGWAN
INTERPRETATION & FINDINGS EVA OF BILT –UNIT BHIGWAN: The EVA of the unit saw a rising trend in the first three years. It started from 337 crore in 2000, moved to 359 Crores and touched a peak of 366 crores. But suddenly it saw a downfall to a negative of 16 Crores, and again picked the track of a positive of 48 lacs. Possible reasons 1. The profits of the years 2000 & 2001 included the profits of the proceeding years. 2. As per the company’s policy the product development expenses and the deferred financial charges were written off to the head office in the years 2003 & 2004. 3. The unit transferred the loan amounting to Rs 55 crores to the head office in the year 2004. EVA OF BILT The EVA of BILT caught a volatile trend over the years. It started from a positive of Rs 38 in 2000, fell down to a negative of 405 and raised to the positive of 236. But collapsed to a negative of 5 lacks, and continued to 6 lacks. Possible reasons 1. The reasons for the fluctuations of the group company are the fluctuations in the units of the group and the strategic movements of the company. 2. No doubt the sales of the company saw an upward trend, the company has not paid the taxes (current tax and deferred liability) for the years 2000 & 2001. 3. The changes in the reserves and dividend paid out have resulted into the changes in the capital, which in turn has caused the fluctuations in the EVA.
SUGGESTIONS Under the process of the project work, various movements were noticed regarding the inter unit transactions and the transactions with the head office. 1. Decisions taken by the executives are efficient but some times were hampering the positions of the individual units. 2.
The movements like acquisitions, fund transfers and share transfers are important and un avoidable. But care should be taken that it should not affect the unit.
3. During the in-plant training it came to the notice that the company was paying the extra ground rent was paid due to the storage problem. Hence the adequate storage facilities should be accommodated. 4. The movements such as the writing off of the loans to the head office should be done with taking care of the financial positions of the units. 5. The reserves maintained by the group saw an upward trend which is to be made if only it sounds necessary. 6. The dividend paid out saw a reducing trend which in turn has affected EVA.
BIBLIOGRAPHY
1. Strategic financial management – g p jakhotiya. 2. BILT's website - http://www.bilt.com