final report
TRANSCRIPT
1 | P a g e
Project Report on
‘’Financial Reengineering to reduce cost
of capital through Competitor Analysis’’
Undertaken at TRIDENT GROUP
Submitted by
Surbhi Jindal
2 | P a g e
Acknowledgement
“It is not possible to prepare a project report without the assistance & encouragement of other
people. This one is certainly no exception.”
On the very outset of this report, I would like to extend my sincere & heartfelt obligation towards all
the personages who have helped me in this endeavor. Without their active guidance, help,
cooperation & encouragement, I would not have made headway in the project.
I am ineffably indebted to Mr Ankit Mahajan for conscientious guidance and encouragement to
accomplish this assignment.
I am extremely thankful and pay my gratitude to Mr Anuj Pareek for his valuable guidance and
support on completion of this project in its presently.
I extend my gratitude to Trident Group for giving me this opportunity.
I also acknowledge with a deep sense of reverence, my gratitude towards team member of Trade
finance who helped me in all the possible ways.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Thanking You
Surbhi Jindal
3 | P a g e
Table of Contents
Introduction and Overview……………………………….………………………………………………4
Competitor Analysis...............................................................................................................…....5
Related Study………………………………………………………………………………………….….6
Terminologies learnt during the project………………………………………………………….……..8
Research Methodology……………………………………………………………………………….....15
Method followed…………………………………………………………………………………….…....16
Trident Business Overview……………………………………………………………………….….....18
Textile Industry Competitor Analysis.....................................................................................…...19
Welspun India Limited……………………………………………………………….………….20
Vardhman Textile………………………………………………………………………….…….23
Nahar Spinning Mills…………………………………………………………………………….26
Alok Industry………………………………………………………………………………….….29
Pulp and Paper Industry Competitor Analysis…………………………………………….………….32
Tamil Nadu Newsprint and Paper Limited………………………………………….…………33
Ballarpur Industries Limited………………………………………………………….…………37
J.K. Paper…………………………………………………………………………….…………..40
Recommendation and Savings………….………………………………………………….………….43
Competitor’s Products and savings ………………………………………………….………..50
Additional Products…………………………………………………………………….………..51
Conclusion……………………………………………………………………………………….……….53
Bibliography……………………………………………………………………………………….……...54
4 | P a g e
Introduction and Overview
In the contemporary world, Globalisation, Technology and many other factors have led to rapid
expansion of almost everything in the business environment. There is a huge market to cater to –
demanding a wide range of products; there are numerous type of materials - to be sourced from a
great number of available suppliers.
This brings in the question of analysing enormous amounts of data, to come up with that perfect
plan and strategy for an organisation, with of aim of bringing the profits also up to the level and scale
of other variables.
One very important aspect of succeeding in today’s dynamic and vast business environment
is, knowing what the others are doing and acting upon it
Competitor Analysis has been the first aspect of this project. Ranging from comparison of Non-
financial variables like Products range, Raw material procurement and Physical Capacities , to the
Financial Comparison of the all the important Ratios and the Capital structure, it provides the
comprehensive view of the current position of the trident limited vis-à-vis it’s key competitors.
Finance is a major component in almost all business activities. It includes the planning of financial
resources, making of an optimum capital structure and efficiently utilizing those financial resources
by deeply analysing the cost of financial resources and the capital budgeting tools.
‘’Poor firms ignore their competitors; average firms copy their competitors;
winning firms lead their competitors’’
- Philip Kotler
5 | P a g e
Competitor Analysis
Competitor analysis is an essential component of corporate strategy. It helps to reveal strategic
weakness, future plans, planned strategies and changes in the environment and this proactive
knowledge will give the firm strategic agility.
Strategic technique is used to evaluate outside competitors. The analysis seeks to identify
weaknesses and strengths that a company's competitors may have, and then use that
information to improve efforts within the company. An effective analysis will first obtain important
information from competitors and then based on this information Trident can be benefitted.
-The two main sources of information about competitor’s strategy is what the competitor says and
what it does. What a competitor is saying about its strategy is revealed in
Annual reports
Interview with analysts
Statement by managers
Press releases
However, this stated strategy often differs from what the competitor actually is doing. What the
competitor is doing is evident in where it cash flow is directed, such as in the following tangible
actions
R&D Projects
Capital Investment
Mergers & Acquisitions
Strategic Partnerships
The analysis has been conducted in two parts:
1. Operational Comparison
Assessment of Operational Comparison of the companies has been analysed at overall level with
Trident Group for the past five years, in respect of:
Raw Material Procurement
Product Range
Physical Capacities
Solid waste management
Key Projects.
2. Financial Comparison
Assessment of financial performance of the companies has been analysed at overall level with
Trident Group for the past 5 years, in respect of:
Finance cost
Financial Ratios.
Loan Portfolio
Stock Price.
Credit Rating
6 | P a g e
Related Study
Corporate Finance is the area of finance dealing with the sources of funding and the capital
structure of corporations. When a company wants to avail the Term Loan or Working Capital Loan,
it has to go through a banking process i.e.
Project Report Proposal Letter Loan Approved Sanction Letter
Bank avails 2 types of Loan to the company:-
1. Term Loan.
2. Working Capital Loan.
.
Consortium/ Multi banking Arrangement (MBA) Financial Arrangement for Working Capital: - Consortium
Financial Arrangement for Term Loan: - MBA/JLA
It is a type of arrangement under which the company avails finance from more than one bank and
amongst the financing banks, one bank acts as Lead Bank. Suppose an organization requirement
for financing its project is of large amount, say about 1000 crores. Then in such a case, a single
bank would not be able to grant the entire loan amount to the organization. Therefore, in such cases
4-5 banks will come together & then they provide the loan to the company, so that the risk of
financing is shared among the banks equally.
For example
A company has availed a 500 Crore loan in which State Bank of India (lead bank) share is 45%,
associate bank’s share is 20% and others bank 35%. So the security is to be divided in their share
ratio.
Term Loan is availed for more than 12
months with a floating rate of interest
(ROI is high as compared to WCL) it is
generally used to finance a new project
or to purchase Fixed Assets.
Term Loan Working Capital Loan
Working Capital Loan is availed for a
period of 12 months it helps to finance
the day to day activities of the business.
(Prepared by the Bank
with the help of Co.)
Fixed assets are charged as Primary
Security
Current assets are charged as Primary
Security
7 | P a g e
Corporate Funding
Process
STEP- 1
Project
Report
STEP- 2
Proposal
Letter
STEP- 4
Sanction
Letter
STEP- 3
Loan
Sanctioned
It is the first
Report which is
sent to bank for
the sanction of
Loan to a
particular Project
and it consists of
details of the
project and
amount of finance
and where it will
be utilised in the
project and period
in which the
finance amount
will be repaid.
After the project
report is accepted
the proposal letter
is letter is prepared
by the bank with the
help of company to
share confidential
information.Consist
of company is
taking which type of
Loan and what is
the type of security
is being mortgaged
and most important
company’s
financial health.
Sanction letter is
prepared by the
bank’s
committee only
after fulfilling all
the detail. Then
company within
3-4 months has
to accept
sanction letter
and send
confirmation to
the bank.
After fulfilling all
the formalities
and details then
bank opens the
account of the
company and
then company
can start
withdrawing the
money
according to the
agreement.
8 | P a g e
Terminologies Learnt during the Project
1. Fund based (FB) and Non Fund Based Limits (NFB) Fund based is a Limit in which company is getting finance in cash form E.g. Cash Credit, Term Loan. Whereas in Non-Fund based Limit, bank does not provide funds at the time of availment, instead a commitment is given by the bank on the behalf of the company. E.g. Bank Guarantee.
2. Cash Credit (CC)
Cash Credit is a short Term Loan i.e. one of the part of the Working Capital Loan provided by the
bank but only after the required security is given to secure the loan (generally current assets are
secured) and then Company receives the loan and can continuously draw from the bank up to a
certain specified amount. The bank charges interest each month for operating the CC
account. Once the CC account is opened, the person can start issuing cheques.
Used for the purpose to finance day to day activities of the company.
Interest is charged only on the amount of loan taken by the customer.
3. Export Packing Credit (EPC)
Export Packing Credit is a borrowing facility provided by an authorized bank. Packing credit is given
by the instruction of Reserve Bank of India to promote exporters to earn foreign currency to
strengthen financial status of the company. Packing Credit is a separate finance given to exporters
not connected with any Limit of other Loans given by the bank
Used only for the purpose of Export Shipments.
To help an exporter to finance the cost of buying with a Low Interest Rate to Boost exports.
4. Credit Rating Agency (CRA)
Credit rating agency is the agency that gives rating to the company on the basis of their Repayment
and interest payment capabilities and is a very important parameter to check before bank issues
Loan because on the basis of Credit rating bank gives Loan. So the company having high rating will
be preferred by the banks E.g. CRISIL, CARE etc. are the credit rating agencies.
Higher the Credit Rating, the Lower will be the interest rate.
Necessary to have Credit Rating before applying for the Loan.
Fund Based Limit: - Cash Credit/Working Capital Demand Loan/BD + Export Packing
Credit + Term Loan.
Non Fund Based Limit: - Bank Guarantee + Letter of Credit + Forward Contracts.
9 | P a g e
5. Parri-Passu Charge
The term Parri-passu refers to loans, bonds or classes of shares that have equal rights of payment,
or equal seniority.
In Case of Term Loan
Fixed assets is given as security to all the lenders and the same is shared among them on pari
passu basis. At the time of liquidation (when company not able to repay) then banks having charge
on the fixed assets will first recover the amount due by sale of assets and share the proceeds among
them in their loan ratio. If the amount is not realised fully then the balance of Current assets is used
to recover the money.
In Case of Working Capital
Current Assets is given as security and at the time of Liquidation the bank will recover its money
from Current Assets and if not able to recover then will go balance of Fixed Assets is used.
In case of Consortium i.e. when security is given against consortium Loan and all the banks have
their ratio in security according to their contributed loan share so when at the time of Liquidation all
the banks have an option to sell :-
1st Security
2nd Security Current Assets
1st Security
Fixed Assets
2nd Security Fixed assets
Current Assets
Fixed Assets Term Loan
Current Assets Working Capital
10 | P a g e
6. Bill Discounting (BD)
A bill discounting is a process that involves effectively selling a bill to a bank inland or Foreign as
the case maybe.
To secure Terms of Payment.
L/C cannot be amended or Cancelled without prior agreement of the beneficiary.
It only deals with Documents not Goods.
Step 1 - Buyer to apply for LC. Step 2 - Seller bank to issue LC. Step 3 - Bank to advise the LC. Step 4 - Seller to dispatch goods to buyer Step 5 - Seller to submit transportation documents to Bank. Step 6 - Bank to submit the documents to seller’s Bank. Step 7 - Seller’s Bank to inform the buyer about the documents
Step 8 - Bill discounted and funds credited when buyer gives it acceptance.
7. Export Bill Rediscounting (EBR)
Export bill rediscounting under this scheme the exporter’s bills are discounted at the post shipment
stage and simultaneously rediscounted abroad by the Bank for raising foreign currency funds.
Both Sight and Usance bills can be discounted under EBR scheme.
Eligibility: All exporter are eligible to discount their bills drawn under LC, non-credit bills under
sanctioned limits.
Currency: USD/GBP/EURO/JPY
Cross currency: If an exporter has bill drawn in any other currency can also avail EBR
Seller Buyer
Advising Bank Issuing Bank
Process of Bill
Discounting
11 | P a g e
8. Export Bill Purchased (EBP)
The Export Bill Purchase is a kind of short-term financing where customers sell the full set of export
documents to Bank and then bank will pay money to the customer and customer will get the money
after deducting interest amount.
Functions
1. Export Bill Purchase helps increasing cash inflows of the current period, and improving customers'
financial standing and financing capability.
2. Customers are able to choose the currency of financing based on the respective interest rates,
minimizing financial cost.
3. Customers are able to sell foreign exchange earlier to mitigate the risk of foreign exchange rate
Source: - http://www.bocusa.com/portal/Info?id=420&lang=1&
9. London interbank offered rate (LIBOR)
LIBOR Rate is the benchmark set in the financial institutions of London for Lending rates. LIBOR is
used as the base rate for a large number of financial products such as futures, options and swaps.
Banks also use the LIBOR interest rates as the base rate when setting the interest rates for loans,
savings and mortgages.
It is a Form of Committee.
It is a Base Rate charged by the foreign banks if any Foreign Loan is taken.
Its rate is always less than 1%.
Exporter Importer
Advising Bank Issuing Bank
2. Bill Purchase
Agreement
4. Submit the
documents.
5. Present the
Documents
3. Advise the
documents
1. Pay at maturity
under L/C.
6. Make the payment
12 | P a g e
10. Financial Market
Marketplace where buyers and sellers participate in the trade of assets such as equities, bonds,
currencies and derivatives. Financial markets are having transparent pricing, basic regulations on
trading, costs and fees, and market forces determining the prices of securities that trade.
Capital Market
Any Company requires capital
(funds) to finance its operations
and to engage in its own long-
term investments. To do this, a
company raises money through
the sale of securities - stocks
and bonds in the company's
name. These are bought and
sold in the capital markets.
Money Market
The money market is used by
participants as a means for
borrowing and lending in the short
term, from several days to just
under a year. Money market
securities
-Treasury bills, -Commercial paper,
-Repurchase agreements
(repos)
Derivative Market
The derivatives market is
the financial
market for derivatives, financial
instruments like futures contracts
or options, which are derived from
other forms of assets. Participants
in a derivative market can be
segregated into four sets based on
their trading motives.
Hedgers
Speculators
Margin Traders
Arbitrageurs
.
Commodity Market
A 'commodity market' is a market
that trades in primary rather than
manufactured products. Soft
commodities are agricultural
products
Wheat, coffee, cocoa and sugar.
Hard commodities are mined, such
as gold, rubber and oil
.
Foreign Exchange Market
The foreign exchange market is a
global decentralized market for the
trading of currencies. In terms of
volume of trading, it is by far the
largest market in the world.[1] The
main participants in this market are
the larger international banks.
.
13 | P a g e
11. Online Payment Methods
Online payments refers to the money exchanged electronically. Typically, this involves use of
computer networks, the internet and digital stored value systems. Most used Methods:-
Real time Gross Settlement.
National Electronic Fund Transfer.
12. Forward Contract (to hedge currency risk)
Forward contract is an agreement to sell or buy an asset on a specified date for a specified price.
For example
Exporter agrees to sell dollar 1 million goods and importer agrees to buy after 6 months @Rs 37/$
Real Time Gross Settlement (RTGS)
Fund Transfer system.
Typically used for high value transactions.
‘’Real time" means payment transaction is not subjected to any
waiting period.
Once processed, payments are final and irrevocable.
Transfers amount more than 2, 00,000.
RTGS systems may be the only way to get same day cleared
funds and so may be used when payments need to be settled
urgently.
National Electronic Fund Transfer (NEFT)
Fund Transfer system.
Transfers all types of payments.
Usually the best method for retail remittances.
Customer initiating the transfer needs to have the IFSC
(Indian Financial System Code) of the bank branch.
Exporter Importer
Forward
Contract
14 | P a g e
13. Income Recognition and asset classification (IRAC)
It is a guideline by an RBI.
To check the status of the company that company is paying timely its interest and repayment.
And if more than 90 days have passed i.e. 3 months the company has not paid the interest to the
bank then account for bank will be classified as NPA (Non-performing Asset) i.e. the asset owned
by the bank is not generating income for the bank.
The IRAC norms serve two primary purposes:-
To depict the true position of a bank's loan portfolio
To help arrest its deterioration.
Banks cannot consider as income interest on loan accounts, classified as Non-Performing Assets
(NPA), unless actually received. Such unrealised interest on NPA taken as income in the earlier
year has to be provided for. In other words, income from NPA is booked as income only when
actually received, and not on accrual basis.
Asset Classification by the banks:-
14. Card Rate (CR)
A rate which is set by the banks to provide particular loan and rate which is standardized for all and
every bank has their own card rates and if the company with good credit rating also gets the
concession from banks on the card rates and also if the company is regular customer or good
relations also benefit in this case.
Standard
Sub-Standard
Doubtful
Loss
(Company is not in any Doubtful
Position.)
15 | P a g e
Research Methodology
Started with the basic Learnings
To reduce finance cost through competitor analysis, knowledge of three financial statement and
their link with each other is very important because this is the only mode available to know about
the borrowing cost of the competitor.
Balance Sheet
Profit and Loss Statement
Cash Flow
Balance sheet
Balance sheet is the statement showing the current financial position of the company at the end of
the current year. A balance sheet is often described as a "snapshot of a company's financial
condition". Of the three basic financial statements, the balance sheet is the only statement which
applies to a single point in time of a business calendar year.
A standard company’s balance sheet has three parts: assets, liabilities, and ownership equity. The
main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed
by the liabilities.
The difference between the assets and the liabilities is known as equity or the net assets or the net
worth or capital of the company and according to the accounting equation, net worth must equal to
assets minus liabilities.
Cash Flow
Cash Flow helps in knowing the Cash used / Generated during the year from 3 different operations
I.e. INFLOW & OUTFLOW of Cash
Liabilities + Equity = Assets
Equity (Net Worth) = Assets - Liabilities
Cash from Operating Activities All the non-cash items are added back to the profit and it includes the cash flow
Current Assets + Current Liabilities
Cash from Investing Activities Consider Fixed Assets
Cash from Financing Activities
Consider Long Term Liabilities
16 | P a g e
Method followed
Finance cost is effected by 3 Parameters:-
The most Important parameter that effects the finance cost is:-
Sources of Finance is from where the company can borrow money to finance the company for
short-Term as well as long term purpose. So, sources of finance in the balance sheet are:-
Issue of Share Capital i.e. (Preference share or Equity shares).
Reserves and Surplus (Transferring profit every year).
Money received against share warrant.
Long Term Borrowings (includes borrowing not only from bank but also from other sources)
Short Term Borrowings (includes borrowing not only from bank but also from other sources).
Borrowing Cost in short it is the Cost of Capital that company spends in the form of Interest to
finance and also includes Bank charges.
Interest Expense on Long Term Borrowing
Interest Expense on Short Term Borrowing
Cash Flow (During the Year) it tells the inflow and outflow of the cash during the year and i.e. where
the money is utilised and cash generated during the year
Purpose of using Cash Flow statement:-
Because Balance sheet only tells the figure at the end of year i.e. Closing Balance of the current
year but cash flow gives more detail view to understand the movement of cash from one activity to
another.
1. Sources of
Finance 2. Borrowing
Cost
Long Term Finance
Short Term Finance
2. Cash Flow
(during the year)
Loan Portfolio
(Products used by the company to finance)
Credit Rating
(On the basis of their repayments & Interest)
17 | P a g e
In Detail Study with an Example:-
Balance sheet Linking: - How one effects the other?
Example-1 ABC Co Ltd issues equity shares of Rs 5000 (500 shares @ 10/share) during the year?
(Solution) Equity shares can be utilised in Non-Current Investment Like:-
Fixed Assets =Rs 3000
Non-Current Investment =Rs 2000
Long Term Loans & Advances =Rs 1000
Rs 5000
Example-2 XYZ Co Ltd Company Reserves & Surplus increased by Rs 10,000 during the year?
(Solution) Reserves & Surplus are increased due to the profit transferred during the year and this
profit can be utilised anywhere Like:-
Current Assets =Rs 7500
(Inventories = Rs 4000, Debtors = Rs 3500)
Non-Current Assets =Rs 2500
Rs 10,000
Example-3 SOP Co Ltd borrowed money Rs 10,000 from ICICI @ 11.50%, Rs 20,000 from Financial
Institution @ 11%, and Rs 20,000 through issue of 9.50% debentures?
(Solution) All these Long Term Borrowing is being utilised in Long Term assets or Finance new
Project Like:-
Tangible Assets =Rs 40,000
(Plant & Machinery = Rs 15,000 + Land & Building = Rs 25,000)
Intangible Assets =Rs 10,000
Rs 50,000
Example- 4 MNO Co Ltd borrowed working capital money Rs 45,000 from SBOP @ 10.91%?
(Solution) Short Term Borrowing is being utilised in Current Assets Like:-
Inventories =Rs 20,000
Other Current Assets =Rs 25,000
Rs 45,000
18 | P a g e
24%
76%
Trident segment wise revenue contribution
Paper and Chemicals
Textiles
Trident Business Overview
Trident limited is the flagship company of the Punjab headquartered conglomerate Trident Group,
having a turnover Rs 37,536 million. Trident manufactures textile products (terry towel, cotton yarn,
blended yarn, among others), paper, chemical and energy. Trident with its planned expansion is
strategically poised to become one of the biggest and most renowned home textiles manufacturers
globally. It has already achieved the milestone of being the largest manufacturer of terry towel in the
world after commissioning of its new plant in Budhni, Madhya Pradesh in 2013-14. Trident has a
customer base spread across the world and derives 48% of its revenues from exports.
The analysis has been conducted in two parts:
Textile Industry
This part involves the comparison of Trident with 4 of its Key competitors in Textile industry
Vardhman Textile Limited.
Welspun India Limited.
Alok Industry.
Nahar Spinning Mills Limited.
Paper Industry
This part involves the comparison of Trident with 3 of its Key competitors in paper industry
Tamil Nadu Newsprint and Paper Limited (TNPL)
Ballarpur Industries Limited (BILT)
J.K. Paper
19 | P a g e
Textile Industry Competitor Analysis
The textile industry or apparel industry is primarily concerned with the design and production
of yarn, cloth, clothing, and their distribution. The raw material may be natural, or synthetic using
products of the industry. India’s textiles sector is one of the mainstays of the national economy. It is
also one of the largest contributing sectors of India’s exports contributing 11 per cent to the country’s
total exports basket. The textiles industry is labour intensive and is one of the largest employers.
The industry realised export earnings worth US$ 41.57 billion in 2013-14.
The textile industry has two broad segments, namely handloom, handicrafts, sericulture, power looms in the unorganised sector and spinning, apparel, garmenting, made ups in the organised sector.
Potential of Textile Industry in 21st Century India The Indian textiles industry, currently estimated at around US $108 billion, is expected to reach US
$ 141 billion by 2021. The industry is the second largest employer after agriculture, providing direct
employment to over 45 million and 60 million people indirectly. The Indian Textile Industry
contributes approximately 5 per cent to GDP, and 14 per cent to overall Index of Industrial
Production (IIP).
The future for the Indian textile industry looks promising, buoyed by both strong domestic
consumption as well as export demand. With consumerism and disposable income on the rise, the
retail sector has experienced a rapid growth in the past decade with the entry of several international
players like Marks & Spencer, Guess and Next into the Indian market. The organised apparel
segment is expected to grow at a compound annual growth rate (CAGR) of more than 13 per cent
over a 10-year period
Textile Competitor’s Performance in Stock Market as on 2015.
Source: - www.moneycontrol.com
The stock market is one of the most important ways for companies to raise money, along with debt
markets which are generally more imposing but do not trade publicly. This allows businesses to be
publicly traded, and raise additional financial capital for expansion by selling shares of ownership of
the company in a public market.
This part involves the comparison of Trident with 4 of its Key competitors in Textile industry
Vardhman Textile Limited.
Welspun India Limited.
Alok Industry.
Nahar Spinning Mills Limited.
Below the comparisons are given with all the key competitors of Trident in Textile Industry.
Stock Price (Rs) Market Cap (Billion)
Trident 24.60 11.98
Vardhman 702.80 44.87
Welspun 709.90 71.07
Nahar 122.50 4.40
Alok 7.15 9.92
20 | P a g e
Welspun India Limited
Welspun Group is a multinational company whose core industries are steel, energy, and textiles.
Welspun is one of India's fastest growing conglomerates, doing business in over 50 countries with
24,000 employees and over 100,000 shareholders. Its product range covers the entire gamut of bed
and bath textiles like bed sheets, pillow cases, comforters, quilts and mattress pads, to bath rugs,
towels, bath robes and area & accent rugs. Its clients include companies operating in the oil and
gas and retail sectors such as Chevron, ExxonMobil, Walmart, and Target.
Credit Rating: -
Short Term Rating – IND A1+ and Long Term Rating – IND AA-
Company in terms of Revenue and Profit (Millions)
Incur losses in 2011 is due to the increase in production capacity of Towels, Bath rugs and
Bed Linen.
Sudden decrease in PBT in 2014 is due to the change in depreciation policy from straight
Line to reducing balance method and has taken additional one time depreciation of Rs 463.1
Crore.
Reason for the improved margins in 2015 is the advantage of cheaper Indian cotton as
china’s cotton price is 40-45% higher than India and Pakistan and also cheap labour in India.
Key Highlights
Welspun Q4 profit doubles, EBITDA jumps by 56%.
Margin will further improved if FTA with Europe because it will attract duty of 8%- 9% in
European countries.
Overall Eye 22% margins, growth in FY 2015-16.
Type Public Company
Founded 1985, Mumbai
Chairman B.K. Goneka
M.D. Mr R.R. Mandawewala
Headquarters Mumbai, Maharashtra
Welspun India Limited, part of US $3.5 Billion Welspun Group
PARTICULARS (31st March 20) 2015 2014 2013 2012 2011
Total Revenue 44075.62 35312.02 30921.18 26285.83 20893.40
EBITDA/PBIDT 11326.75 8,113.39 4900.20 4511.12 1556.46
PBT 6857.48 446.33 2271.64 1885.18 -648.36
21 | P a g e
Welspun Product Portfolio
Bath Robes
Terry Towel
Advanced Textiles
Basic & Decorative
Bedding
Bath Rugs
Bed Sheets & Pillowcases
Terry Towel
• Capacity- 45,000 MT/Year
• Cap Utilisation= 99%
Bed Linen Products-Bed sheets
• Capacity- 55 million MTr/Year
• Cap Utilisation= 89%
Bath Rugs & Carpets
• Capacity- 12,000 MT/Year
• Cap Utilisation= 68%
Major Clients of Welspun in Retail – Chevron, Walmart, Target etc.
Welspun is selling its product through Welspun Global Brands Ltd and Welspun Retail Ltd.
Retail Mantra – ‘’One stop shop’’
70% of their Revenue comes from U.S.A.
Key Markets (where Welspun sell) – U.S.A., Canada, U.K., Europe, Japan.
Stock Market Performance in 2015 i.e. 7 times increase in the share price.
(From Rs 106.3 to Rs 709.9)
Production Capacities
Product Range
Financial Analysis
Stock Price
Stock Price 2015 2014 2013 2012 2011
Stock Price (Rs) 709.90 106.30 73.45 48.50 46.90
In 2015, more than 7 times increase in share price as compared to previous year and it has been
analysed that company is focused towards its performance in the stock market and giving high
returns to the shareholders.
22 | P a g e
4.09
4.07
4.47
5.47
5.11
2015 2014 2013 2012 2011
% Finance Cost to Revenue
Finance Cost
Loan Portfolio
Secured Loan Unsecured Loan
Rupee term Loans from bank Loan from others
Foreign Currency Loans from Bank Loan from Bank
Working Capital loans from bank Working Capital loans from bank
Inter Corporate Loan
Finance Cost
Particulars Welspun (Million)
2015 2014 2013 2012 2011
LTB 14421.63 14989.22 10231.76 12262.88 12574.00
STB 7380.90 8123.70 6700.27 4917.51 4632.18
% Finance Cost to Revenue 4.09 4.07 4.47 5.47 5.11
Gross Debt as on March 31st 2015 stands at Rs 21,802 million at the end of FY 2015 as against Rs
23,112 million at the end FY-14.
Ratio Analysis
Debt Service Coverage Ratio: 2.67 Times
Interest Service Coverage Ratio: 5.36 Times
Debt Equity Ratio: 1.72 Times
Company increased its borrowing from banks with focus to increase its capacity and investing
heavily in Fixed Asset and Technology because in 2014 there is an increase of more than 43% in
Long term borrowings. Company's operating profit margins, which have grown to 26% in FY15 from
18% in FY13. In comparison, its peers had average operating profit margins of close to 15% in
FY15. On the valuation front, considering FY16 earnings, the company is trading at price-to earnings
multiple of 10 times
Analysed other details from website: www.welspunindia.com
0
500
1000
1500
2000
02000400060008000
10000120001400016000
2015 2014 2013 2012 2011
Welspun (Million)
Welspun
LTB STB Finance Cost
23 | P a g e
Vardhman Textile Industry
Vardhman Group is a leading textile conglomerate in India having a turnover of $1.1 bn. Spanning
over 22 manufacturing facilities in five states across India, the Group business portfolio includes
Yarn, Greige and Processed Fabric, Sewing Thread, Acrylic Fibre and Alloy Steel.
Vardhman has evolved through history from a small beginning in 1965 into a modern textile major
under the leadership of its chairman, S.P.Oswal. His vision and insight has given Vardhman a highly
respected position in the textile industry. Under his leadership, Vardhman is efficiently using
resources to innovate, diversify, integrate and build its diverse operations into a modern enterprise.
Credit Rating:
Short Term Rating – CARE A1+ and Long Term Rating – CARE AA-
Company in terms of Revenue and Profit (Millions)
PARTICULARS (31st March) 2015 2014 2013 2012 2011
Total Revenue 58871.00 52253.00 42146.00 39785.00 36500.00
EBITDA/PBIDT 10996.00 13253.00 8830.00 5533.00 9444.00
PBT 4892.00 8793.00 4548.00 1454.00 6086.00
Company’s revenue consistently growing by 9% over the five years, except 2014 and highest profit in 2014. Having recently expanded our spinning, weaving and processing capacities, expect to focus on capacity consolidation in the current year, optimising asset utilisation, quality, efficiencies and relationships.
Key Highlights
Vardhman Group of companies is a major integrated textile producer in India.
Vardhman Group has expanded and is today the largest textile conglomerate in India.
27% Contribution to India’s total foreign exchange earnings with US$ 41.57 billion 2013-14.
49 million Spindles capacity across 1,300 mills.
2nd largest employment generator, providing direct employment to 45 million and 60 million people indirectly.
108 USD billion – current size of Indian Textile Sector.
Type Public Company
Incorporated 1973
M.D./Chairman S.P. Oswal
Headquarters Ludhiana, Punjab
Net income US 1.1 Billion
24 | P a g e
14% Contribution to India’s total industrial production.
Currently Vardhman owns the 2nd largest brand of specialized threads in the country.
Production Capacity
1048160 spindles Yarn
450 Metric tons/ day Yarn & Fabric Dyeing
1300 shutleless Looms
115mm meter pa processed Fabric
34 tonnes/ day sewing thread
20,000 metric tonnes acrylic fabric
120000 tonnes alloy steel
Product Range
Financial Analysis
Stock Price
In 2015, stock price of Vardhman showed an increase of almost double the stock price of previous
year.
Loan Portfolio
Secured Unsecured
Term loan Fixed Deposits
working capital From Banks
Particulars USD Million % share
Yarn 550.3 49.51%
Fabric 322.7 29.04%
Sewing Thread 111.2 10.00%
Steel 75 6.74%
Power plant 0.5 0.05%
Fibre 45.7 4.12%
Garment 6.2 0.56%
Total 1111.4 100%
Stock Price 2015 2014 2013 2012 2011
Stock Price (Rs) 702.80 365.00 286.00 207.75 278.90
25 | P a g e
0
500
1000
1500
2000
0
5000
10000
15000
20000
25000
30000
2015 2014 2013 2012 2011
Vardhman (Million)
Vardhman Textile
LTB STB Finance Cost
2.062.8
4.1 4.3
3
2015 2014 2013 2012 2011
% Finance Cost to Revenue
Finance Cost
Finance Cost
Particulars Vardhman (Million)
2015 2014 2013 2012 2011
LTB 14071.00 23916.00 25491.00 23143.00 21164.00
STB 4685.50 8355.00 7576.50 5115.40 8646.80
% Finance Cost to Revenue 2.06 2.8 4.1 4.3 3
The Company successfully curtailed working capital usage to about 60% of sanctioned limits.
Vardhman % Finance cost to Revenue is Low as compared to other competitors only because of less than 1 debt to equity ratio. Over the five years, Vardhman debt to equity is consistently less than 2 and less than 1 in 2015 i.e. 0.6% means company is financing very less from Debt as in chart there is a sharp decrease in borrowing as compared to previous years.
Company utilises the money from Reserves & Surplus for the Long term financing.
Company issues interoperate loan from subsidiaries for Short term Financing. Gross Debt as on March 31st 2015 stands at Rs 18,756 million at the end of FY 2015 as against Rs
32271 million at the end FY-14.
Short Term Borrowings (2014) From banks interest @ 9.95% to 12.70% p.a. (Previous Year 9.70% to 12.50% p.a) ii) From related parties carries interest @ 9% to 10.25% p.a. (Previous Year 9.50% to 10% p.a.) iii) From others carries interest @ 12.50 % p.a. (Previous Year 10.50% p.a)
The company is expanding its fabric capacity by doing a capex of around Rs 400 Crore in two phases. This capex would enhance its operating margins from 18% in FY15 to 20-22% in the next two years. This growth in margin will be largely driven by fabrics division as demand for processed fabric is rising. In the northern region, Vardhman Textiles is one of the most efficiently managed companies with debt-equity ratio of less than one Considering FY16 earnings, the company is trading at a price-to-earnings multiple of eight times.
Analysed other details from website: www.vardhman.com
26 | P a g e
Nahar Spinning Mills Limited
Spinning Mills Limited started out as worsted Spinning & Hosiery unit in Ludhiana. It was
incorporated as a Private Limited company in December, 1980 and became a Public Limited
Company in 1983. The steady growth in manufacture and Export of woollen/cotton hosiery
knitwear’s and woollen textiles enabled the company to earn the recognition as an “Export House”
followed by a “Recognized Trading House” by the Government of India. An ISO 9002 company, the
Company has 7 multi-location plants, a range of products, over 60% of which is aimed at export
markets – USA, UK, France, Brazil, Bangladesh, Mauritius, Honduras, Argentina, Colombia, Peru,
Chile, Netherlands, Japan, Canada, Korea, Taiwan, Hong Kong, Singapore, Egypt and Russia.
The Company's mantra "World is our markets" is truly reflected in its operations. The Company is
one of the largest integrated textile player in India. The Management vision coupled with company's
inherent strength in terms of cost and quality has enabled the company to become the second
largest Cotton Yarn manufacturer in India.
Credit Rating: CRISIL A+
Company in terms of Revenue and Profit (Millions)
PARTICULARS (31st March) 2015 2014 2013 2012 2011
Total Revenue 21496.09 22041.80 19694.00 17055.00 140621.52
EBITDA/PBIDT 2248.80 3571.30 3243.60 211.00 2963.30
PBT 148.30 2045.00 1340.50 -1734.00 1779.30
In 2012, a worst year for the spinning industry and company's performance was also affected in the year. Though company's operating income increased to Rs.1691.42 crores from Rs.1388.75 crores showing an impressive increase of 17.89% over the previous year but it suffered a heavy loss of Rs.117.20 crores during the year under review. During the cotton season but the cotton prices went up steeply during the season 2010-2011 due to export of huge quantity of cotton during the peak cotton season. Thus the Spinning Mills were forced to buy good quality cotton at abnormally higher prices during the season. However in April, 2011 the sudden crash of raw cotton prices coupled with decline in the prices of finished goods in the domestic as well as overseas markets severely affected the financial performance of the company.
Type Public Company
Founded 1980
M.D. Mr Dinesh Oswal
Headquarters Ludhiana, Punjab
27 | P a g e
Key Highlights
Include the “National Export Trophy” by the Apparel Export Promotion Council.
Latest is the Gold Trophy for highest Exports of Yarn 50s & below in Yarn Category by
TEXPROCIL for the year 2010-2011 and ‘AEPC Export Awards for Highest Exports in Cotton
Garment in the year 2008-09 and 2009-10.
Nahar selling its product through Monte Carlo Brand.
Company is into the Yarn and Garment segment.
Production Capacities
The present spindlage capacity of the company is 5.00 Lacs (approx.) spindles and 1080
Rotors.
As a measure of further value addition in the Company's product the Company has put up a
Mercersing cum dyeing plant with a capacity of 4.5 M.T. per day at Village Lalru, S.A.S.
Nagar, and Punjab.
Product Range
Yarn Knitted Garments
Textile Yarn Woven Fabrics
Financial Analysis
Stock Price
Stock Price 2015 2014 2013 2012 2011
Stock Price (Rs) 122.20 104.00 85.85 88.59 99.70
Loan Portfolio
Secured Loans
Term Loan from banks
Working Capital Loan from banks
Finance Cost
Particulars Nahar (Millions)
2015 2014 2013 2012 2011
LTB 4361.10 4559.00 4271.90 4764.80 4332.40
STB 6230.10 7031.10 7996.80 7319.00 9022.40
% Finance Cost to Revenue 3.6 2.9 5.2 6.4 3.4
28 | P a g e
3.6
2.9
5.2
6.4
3.4
2015 2014 2013 2012 2011
% Finance Cost to Revenue
Finance Cost
Gross Debt as on March 31st 2015 stands at Rs 10591.2 million at the end of FY 2015 as against
Rs 11590.1 million at the end FY-14.
Over the five years company’s average finance cost to revenue is 4.3% but in 2012 finance cost to
revenue is 6.4% because of imbalance in the market conditions, an increase in cotton price leads
to Spinning Mills were forced to buy good quality cotton at abnormally higher prices during the
season.
Ratio Analysis
Company’s Debt to equity is less than 1 but in 2015 is 1.40.
Interest coverage ratio is 5.54.
Current ratio 3.50% and Quick ratio 1.74%.
Nahar Interest on Secured Term Loans from banks in 2014
State Bank of India @11.50% -10.45%
State bank of Patiala @11.25%
Punjab National Bank @10.75%
Oriental Bank of Commerce @11.25%
Canara Bank @11%
IDBI Bank Ltd @11%
Allahabad Bank @11%
Analysed other details from website: www.nahar.com
0
200
400
600
800
1000
1200
0
2000
4000
6000
8000
10000
2015 2014 2013 2012 2011
Nahar (Millions)
Nahar
LTB STB Finance Cost
29 | P a g e
Alok Industries
Alok was established in 1986 as a private limited company, with first polyester texturizing plant being
set up in 1989. Alok became public limited company in 1993. Over the years, Alok has expanded
into weaving, knitting, processing, home textiles and garments. And to ensure quality and cost
efficiencies that integrated backward into cotton spinning and manufacturing partially oriented yarn
through the continuous polymerisation route.
Alok has a strong foothold in the domestic retail segment through a wholly owned subsidiary, Alok
H&A Limited, under the cash & carry model that offer garments and home textiles at attractive price
points. Alok also has an international presence in the retail segment through its associate concern,
Grabal Alok (UK) Limited. This entity owns more than 200 outlets across England, Scotland and
Whales vending value for money ranges for menswear, women’s wear, children wear, footwear,
home ware and accessories.
Alok Industry due to consolidation presented their 2013 and 2015 reports for 18 months.
Credit Rating: CRISIL ‘A-/Stable’
Company in terms of Revenue and Profit (Millions)
PARTICULARS (31st March 20) 2013-15 (18) 2013 (18 ) 2012 2011
Total Revenue 223555.40 202596.60 89664.60 64295.20
EBITDA/PBIDT 52704.10 50213.30 25034.80 18382.50
PBT 5580.40 13999.00 6405.00 5831.90
Product Range
Apparel Fabrics
Woven and knits
Bed Linens and Towels
Garments
Polyester Yarn business
Type Public Company
Founded 1986
Industry Textile, Retail & Real estate.
M.D. Mr Dilip B. Jiwrajka
Headquarters Mumbai, Maharashtra
Net income US $2.1 Billion (2014)
30 | P a g e
Physical Capacities
Spinning 80,000 Tons
Sheeting fabric 150 mm metres
Terry towel 13400 Tons
Woven Fabrics 186 mm metres
Knits 25000 tons
Garments 22 mm pcs
Continuous Polymerisation 520000 Tons
Current Capacity 60,000 tons ring spun yarn
20,000 tons open-ended yarn
Alok is in every stage from Fibre to Garments.
In home textile segment, Alok is mainly present in the export market (99% exports) where it faces competition from Chinese, Pakistani and Turkish manufacturers.
Raw material Procurement Procurement of raw cotton at right price and during harvest remains crucial. Looking at the volatility in the prices of cotton in the recent past, the company tries to maintain an inventory holding to the extent of 3-4 months requirement matching its average sales order book which is also 3-4 months for apparel fabrics, home textiles and garments. Thus, it has in-built risk mitigation for cotton price fluctuation. Further, due to its integrated operations cotton constitutes about 27% – 28% of its fabric selling price and thus has limited impact on the overall operations
Financial Analysis
Stock Price
PARTICULARS (31st March 20) 2013-15 (18) 2013 (18) 2012 2011
Stock Price (Rs) 7.10 8.25 21.90 -
Loan Portfolio
Secured Unsecured
12% - 14.50% Debentures Foreign Currency Loan
Term Loans
Rupee Loan
Foreign Currency Loan
Financial Institution
Vehicle Loans from bank
31 | P a g e
14.5
11
12.8
11.4
2015 2013 2012 2011
% Finance Cost to Revenue
Finance Cost
Finance Cost
Particulars Alok Industries
2015 2013 2012 2011
LTB 20790.80 23841.30 16327.40 9235.80
STB 60440.90 45605.80 41264.20 28461.60
% Finance Cost to Revenue 14.5 11.0 12.8 11.4
Gross Debt as on March 31st 2015 stands at Rs 81231.7 million at the end of FY 2015 as against Rs 69447.1 million at the end FY-14 Alok Industry finance cost is highest among all the competitors of Trident and company is paying high interest and from the above chart it is clear that company is borrowing more for short term.
Debt to Equity for long term loans decreased from 1.61 in the previous year to 1.22 in the current year. Total debt to equity ratio reduced from 2.99 in the previous year to 2.72 in the current year due to reduction in Long term borrowing.
Operating EBIDTA/Interest indicates the Company’s ability to service its debt costs through profits. Operating EBIDTA/Interest decreased from 2.27 in the previous year to 1.62 in the current year
Current ratio was 1.58 in the current year compared to 1.49 in the previous year
Inventory turnover increased from 158 days in the previous year to 205 days in the present year. Debtor turnover increased from 136 days in the previous year to 186 days in the current year.
Alok Rate of interest
Secured Rupee Term Loan from Banks – 11.55% - 15.75% (12% - 15.75%)
Secured Foreign Currency Term Loan from Banks – 1.27% - 7.35% (1.44% - 6.00%)
Secured Rupee Term Loan from Financial Institutions – 9.00% - 15.00% (9.00% - 12.50%)
Secured Foreign Currency Term Loan from Financial Institutions – (2.96% - 5.40%)
Unsecured Foreign Currency Term Loan from Banks – 3.25% - 4.25% (2.88% - 3.50%)
Analysed other details from website: www.alokind.com
0
5000
10000
15000
20000
25000
30000
35000
0
10000
20000
30000
40000
50000
60000
70000
2015 2013 2012 2011
Alok Industry
Alok
LTB STB Finance Cost
32 | P a g e
Pulp and Paper Industry Competitor Analysis
The pulp and paper industry comprises companies that use wood as raw material and
produce pulp, paper, board and other cellulose-based products. The industry is dominated by North
American (United States and Canada), northern European (Finland, Sweden, and North-West
Russia) and East Asian countries (such as East Siberian Russia, China, Japan, and South
Korea). Australasia and Brazil also have significant pulp and paper enterprises. The United States
had been the world's leading producer of paper until it was overtaken by China in 2009.
Potential and Growth of Paper industry in 21st Century The paper industry in India could be classified into three categories according to the raw material
consumed.
Wood based
Waste paper based
Agro based
The Indian paper industry produces 10.11 million tons paper per annum, just 1.6% of the total world
production of 394 million tons, paperboard and newsprint. Needless to say, at present, India lags
far behind compared to international standards. The Scandinavian countries, USA, Russia, China,
Indonesia and Japan are the major players in the field of pulp and paper. These countries have
some of the best available raw material for paper production and state-of-the-art technology
Paper Competitor’s Performance in Stock Market as on 2015.
Source: - www.moneycontrol.com
The stock market is one of the most important way for companies to raise money, along with debt
market which are generally more imposing but do not trade publicly. This allows businesses to be
publicly traded, and raise additional financial capital for expansion by selling shares of ownership of
the company in a public market.
This part involves the comparison of Trident with 3 of its Key competitors in paper industry
Tamil Nadu Newsprint and Paper Limited (TNPL)
Ballarpur Industries Limited (BILT)
J.K. Paper
Below the comparisons are given with all the key competitors of Trident in Paper Industry.
Stock Price (Rs) Market Cap (Billion)
Trident 24.60 11.98
TNLP 156.10 10.90
J.K. Paper 32.35 4.42
BILT 12.55 8.26
33 | P a g e
Tamil Nadu Newsprint and Paper Limited (TNPL)
The Tamil Nadu Newsprint and Papers Limited (TNPL) was established by the Government of Tamil
Nadu to produce newsprint and writing paper using bagasse, a sugarcane residue. The Government
of Tamil Nadu listed the paper mill in April 1979 as one of the most environmentally compliant paper
mills in the world under the provisions of the Companies Act of 1956.
Credit Rating:
Short Term – IND A1 & Long Term – IND A+
Company in terms of Revenue and Profit (Millions)
Production Capacity
PARTICULARS (31st March) 2014 2013 2012 2011
Production Capacity (Tonnes per annum )
400000
Paper Production (Metric tonnes) 387714 371637 343306 265044
Plant Location – Kagithapuram, Karur District, Tamil Nadu.
Exports about 1/5th of its production to more than 50 countries.
Type Government-owned corporation
Industry Bagasse-based paper mill
Founded 1979
M.D. Thiru. C.V. Shankar, IAS
Headquarters Chennai, Tamil Nadu, India
Owner Government of Tamil Nadu
Parent
Department of Industries (Tamil Nadu)
PARTICULARS (31st March) 2015 2014 2013 2012 2011
Total Revenue 21357.00 22852.00 18811.80 15390.00 12250.00
EBITDA/PBIDT 5223.60 5232.00 4220.70 4354.30 3627.40
PBT 2301.30 2026.70 1261.10 1251.10 1951.40
34 | P a g e
40%
30%
30%
TNPL Raw Material Usage
Paper Based Agro Based Recycled Fibre
Separate business unit concept (SBUC) which Trident is also using.
Manufactures Eco- Friendly paper which Trident is also doing by less usage of wood.
Product Range
Surface Sized Varieties Non Surface Sized Varieties
Print vista Cream wove
Pigmented Paper Hi-tech Maplitho
Elegant Printing Radiant Printing
Super print Maplitho Ace Marvel
Offset Printing
Key Projects under implementation
Revamping of steam and power system (RSPS).
De-inking Plant.
On site Precipitated Calcium Carbonate (PCC) Plant.
On site wet Ground Calcium Carbonate (WGCC) Plant.
Lime Sludge and Fly ash Management (600 TPD Cement Plant)
TNPL, being a government owned company, is crystalline and all the information is available
in public domain.
Operational Analysis
Raw material procurement
TNPL uses sugarcane waste as its key procurement i.e. Bagasse (a renewable raw material
consumes less chemical for pulping and bleaching
Sugar Mills TNPL
Barter
System
Supplies (Bagasse)
Supplies (Steam/Fuel)
35 | P a g e
Fly Ash
Lime Sludge
High Grade Cement
(TNPL)
Trident is the world’s largest wheat straw based paper producer (wheat straw is a waste which
comes out of production of wheat) and is the key procurement for the production of paper.
Raw Material Procurement through Schemes of:
Farm Forestry
Captive Plantation
Farm Forestry is about tree plantation in private lands with buy back arrangement. The scheme
has enthused many farmers to grow pulpwood trees in their dry lands.
Captive Plantation cultivates pulpwood in the lands belonging to individuals and institutions on
‘’Lease’’ or ‘’Revenue sharing’’ basis.
Solid Waste Management
Cement produced 113904 Tonnes (2014) which is used for internal purposes.
Financial Analysis
Stock Price
Loan Portfolio
Secured Loans Unsecured Loans
11% Non-Convertible Debentures Pre shipment Credit
8.75% Non-Convertible Debentures Buyers' Credit
FCNR Rupee Loan
Rupee Term Loans Fixed Deposit
Foreign Currency Loans Commercial Paper
Cash Credit
Buyers' Credit
Short Term Loan
Schemes 2014 2013 2012 2011
Farm Forestry (Farmers) 18709 17021 15018 12012
Captive Plantation (Acres) 100185 91711 82025 66599
PARTICULARS (31st March 20) 2015 2014 2013 2012 2011
Stock Price (Rs) 162.25 130.00 101.00 141.75 103.80
36 | P a g e
7.2
5.33
6.43
9.17
3.6
2015 2014 2013 2012 2011
% Finance Cost to Revenue
Finance Cost
Finance Cost
Particulars TNLP (Million)
2015 2014 2013 2012 2011
LTB 14079.42 10247.00 10043.50 11503.60 10817.80
STB 4752.80 4504.00 4958.50 5604.10 4063.10
% Finance Cost to Revenue
7.20 5.33 6.43 9.17 3.60
Gross Debt as on March 31st 2015 stands at Rs 18832.2 million at the end of FY 2015 as against Rs 14751 million at the end FY-14 TNPL’s is focusing on Mill Expansion Plan and Mill Development Plan and to finance these plans,
TNPL is borrowing from different sources.
The expansion schemes are funded through an appropriate mix of internal generation and borrowed funds taking into account the cash generation potential from the existing facilities and expansion schemes. The average cost of
Long term loan availed as on 31.3.2014 is 8.87 %. (31.3.2013: 7.74%)
Working Capital loans 10.19% (31.3.2013: 9.81%).
Overall cost is 9.28 % (31.3.2013: 8.42%).
The increase is due to the increase in base rates by the Banks and repayment of old low cost loans as per amortization schedule. TNPL, has implemented a sound Forex Risk Policy and thereby has minimized the currency risks in forex transactions.
Analysed Other Details from Website: - www.tnpl.com
0
500
1000
1500
2000
0
5000
10000
15000
2015 2014 2013 2012 2011
TNLP (Million)
TNLP
LTB STB Finance Cost
37 | P a g e
Ballarpur Industries Limited (BILT)
Ballarpur Industries Limited (BILT), part of the US$ 3 billion Avantha Group, is India’s largest
manufacturer of writing and printing (W&P) paper. More than 50% of India’s coated wood-free
grades roll out of BILT’s state-of-the-art plants.
The company holds an impressive
85% share of the bond paper market and
45% share of the hi-bright Maplitho market in India.
Credit Rating:
Long Term – IND A+ and Short Term – IND A1+
Company in terms of Revenue and Profit (Millions)
PARTICULARS (31st March) 2015 2014 2013 2012 2011
Total Revenue 4522.60 9548.70 9883.30 10995.00 10650.00
EBITDA/PBIDT 693.00 1356.20 1612.20 1284.30 1719.50
PBT -110.40 101.40 376.90 122.00 504.40
Physical Capacities
PARTICULARS (31st March) 2014 2013 2012 2011
Production Capacity (Tonnes per annum ) ----------------------------Not Given---------------------------
Paper Production (Metric tonnes) -----------Not Given-------- 846230 840429
Focuses on Penetration
Company is investing heavily in the fixed assets through Loans and issuing of shares. Premier Tissues India Limited (PILT) is 100% acquired by BILT because BILT focuses on North India market and PILT focuses on Southern and Western market.
Type Public company
Founded 1945
Founder Lala Karamchand Thapar
Headquarters Gurgaon, India
CEO Gautam Thapar (Chairman)
Revenue US$ 1 Billion
38 | P a g e
Trident Group is more focused towards terry towel and yarn business, are leaders in that segment and also focusing on paper unit by showing a jump of 13.70% in revenue. (2014)
Product Range
Coated Wood Free Uncoated Wood Free Copier
Blade Coated Magna Maplitho Paper
Air Knife Wisdom Print
Cash Coated Sunshine Superior Paper Cream wove
Natural shade deluxe
Operational Analysis Raw Material Procurement -Rayon Grade pulp. -Farm Forestry scheme. BILT is the only Indian Company to have access to its own plantations outside India with SFI’s 288,138 hectares of licensed plantations and forests. It also has access to procuring from farmers in India through its social farm forestry programme, which has been developed over several years. BILT is now fully self-sufficient in hard-wood pulp production with three of the five units having integrated pulp producing facilities. Solid Waste Management Objective-To convert waste into organic manure & promote its use with farmers. Tissue Paper business operated through its subsidiary Premier Tissues Limited. These businesses target the industrial and FMCG markets. Retail Sector BILT continued to focus on its distribution infrastructure to support large scale distribution as well as to improve reach and availability. The products are presently marketed across India through a well-established network of more than 300 distributors, reaching in excess of 40,000 retail outlets. P3 is a unique offering that successfully combines world class stationery merchandise, convenience of buying & price integrity and direct office sales. BILT continues to rapidly scale up this relatively new business line by primarily leveraging its robust product portfolio, strong and efficient delivery capability on a pan-India basis and its own heritage of paper and printing expertise. P3- Paper, Pen and Print. Financial Analysis Stock Price
PARTICULARS (31st March 20) 2015 2014 2013 2012 2011
Stock Price (Rs) 14.10 21.80 16.60 22.75 34.75
39 | P a g e
7.9
5.64.3
2.4
3.5
2015 2014 2013 2012 2011
% Finance Cost to Revenue
Finance Cost
Loan Portfolio
Secured Loans Unsecured Loans
Debentures Fixed Deposits
Financial Institutions Zero Coupon Convertible Bonds
Non-Convertible Debentures
Finance Cost
Gross Debt as on March 31st 2015 stands at Rs 10505.6 million at the end of FY 2015 as against Rs 10018.7 million at the end FY-14 BILT has also evolved appropriate corporate structures to raise capital at optimal cost. The International Finance Corporation (IFC) announced a proposed investment in BILT Paper B.V., the step down international subsidiary of BILT. This comprises a combination of an equity investment of US$ 100 million and long term loans of up to US$ 150 million. The announcement is part of IFC’s standard practice of publicly announcing a proposed investment two months prior to its actual execution. This flow of international capital into BILT’s system will help optimise capital costs and reduce pressure on debt servicing.
The average cost of: Secured Loans
Non-Convertible Debentures is 8.75% to 9.90%
Debentures is 11.75%
External Commercial Borrowings is LIBOR + 3.3% Unsecured Loans
Non-Convertible Debentures is 9.60% & 9.90%
Analysed Other Details from Website: - www.bilt.com
0
100
200
300
400
500
600
0
1000
2000
3000
4000
5000
6000
2015 2014 2013 2012 2011
BILT (Millions)
BILT
LTB STB Finance Cost
Particulars BILT (Millions)
2015 2014 2013 2012 2011
LTB 5371.20 5179.20 4715.00 4150.20 5567.40
STB 5134.40 4839.50 4021.50 3357.30 4261.50
% Finance Cost to Revenue 7.9 5.6 4.3 2.4 3.5
40 | P a g e
J.K. Paper Ltd
JK Organisation is India’s largest producer of Branded Papers and a leading player in Coated Papers and High-end Packaging Boards. The Company began its journey more than half a century ago with 18,000 tons per annum capacity paper plant. It has grown over the years and maintained its quality leadership position. JK Paper has been constantly creating value in a highly capital intensive and cyclical business, where volume is traditionally considered as Key profit driver. Most companies concentrated on increasing capacity, JK Paper responded with a Brand driven strategy, with customer at its heart.
Credit Rating:
Long term – IND BBB+ and Short Term – IND A2+
Company in terms of Revenue and Profit (Millions)
PARTICULARS (31st March) 2015 2014 2013 2012 2011
Total Revenue 21588.00 17378.00 14709.00 13535.00 12455.00
EBITDA/PBIDT 2664.00 1385.00 1444.10 1763.10 2714.40
PBT -510.30 -1229.40 373.40 521.20 1484.50
Physical Capacities
PARTICULARS (31st March) 2014 2013 2012 2011
Production Capacity (Tonnes per annum ) 455000
Paper Production (Metric tonnes) ------------------------------Not Given-------------------------
Few Years back J.K. Paper was into Copier segment and now diversified into Packaging
board and coated paper segment.
Tie-up with HP (Hewlett Packard) to manufacture and sell ‘’Color Lok’’ Paper. (Have License
to produce).
J.k. Paper uses TPM methodology same as Trident.
In 2011, Expansion Project of Rs 1650 Crore to increase the Pulp and copier capacity.
Type Public Company
Founded 1981
Headquarters New Delhi, India
Founder Lala Juggilal Singhania & Lala Kamlapat
41 | P a g e
Product Range
Operational Analysis
Raw Material Procurement
Emphasis on the Farm Forestry Programme this year added an additional 14,877 Ha, which was
almost a third higher than the previous year and our concerted efforts have cumulatively resulted in
plantations of over 1,16,000 Ha since inception of the Farm Forestry Programme.
Solid waste management
Financial Analysis
Stock Price
PARTICULARS (31st March 20) 2015 2014 2013 2012 2011
Stock Price (Rs) 33.30 31.60 31.10 39.80 63.35
Loan Portfolio
Secured Loans Unsecured Loans
11% Debentures Term Loan
8.75% Debentures Rupee Term Loan
Term Loan Pre-Shipment
Cash Credit Buyers' Credit
Buyers' Credit Rupee Loan
Short term Loan Fixed Deposits
Pre shipment Credit
Coated Paper Copier and office paper
Packaging Board Corrugated Board
Bamboo + Hardwood + Pulp + Chemicals
Residue like
Fly Ash Making Products
42 | P a g e
9.4
7
3.39 3.74.12
2015 2014 2013 2012 2011
% Finance Cost to Revenue
Finance Cost
Finance Cost
Particulars J.K. Paper (Millions)
2015 2014 2013 2012 2011
LTB 18797.00 17170.00 17675.00 10803.00 5078.80
STB 2441.90 2190.50 1231.40 1306.30 1387.30
% Finance Cost to Revenue 9.40 7.00 3.39 3.70 4.12
Gross Debt as on March 31st 2015 stands at Rs 21238.9 million at the end of FY 2015 as against Rs 19360.5 million at the end FY-14. Over the 5 years company’s finance cost increased due to credit rating and also from increased long term borrowing. 1.255 Foreign Currency convertible bonds at interest rate of 6 months @ EURIBOR + 4.75% (2011) and in 2012 @ 6.455%.
Analysed Other Details from Website: www.jkpaper.com
0
500
1000
1500
2000
2500
0
5000
10000
15000
20000
2015 2014 2013 2012 2011
J.K. Paper (Millions)
J.K. Paper
LTB STB Finance Cost
43 | P a g e
Recommendations and Savings
Since, Trident is into the expansion stage and is borrowing money from banks to finance the projects
and for this reason company is incurring high finance cost. Trident can go for many alternative
options to reduce its finance cost. After an in-depth study of competitor, following are the products
which are used by the competitors and which leads their competitor to maintain their finance cost.
Currently Trident’s cost of borrowing is between = 9.90% to 11.45% from Banks
The following are the products used by the competitor:
Non-Convertible Debentures
Commercial Paper
Zero Coupon Convertible Bonds
Debentures
Company Fixed Deposits
Foreign Currency Convertible Bonds
Non-Convertible Debenture
1. Meaning
Non-Convertible Debentures (NCDs) will mean secured, negotiable money market instruments with
original maturity of less than one year issued by corporates (including NBFCs) to meet their short
term funding requirements, issued by way of private placement with investors. The guidelines also
cover NCDs with original maturity of more than one year with optionality attached to it which can be
exercised within a year from the date of issue.
2. Eligible Issuers
Any corporate that fulfils the following criteria are eligible to issue the NCDs of less than one year:
Having a tangible net worth as per the latest audited balance sheet, of not less than Rs.4 Crore.
The company has been sanctioned working capital limit by bank/s or all-India financial institution/s.
The borrowal account of the company is classified as a Standard Asset by the financing bank/s/ institution/s.
3. Rating Requirement
An eligible corporate intending to issue NCDs shall obtain credit rating for issuance of the NCDs from one of the rating agencies, viz.,
Credit Rating Information Services of India Ltd. (CRISIL)
Investment Information and Credit Rating Agency of India Ltd. (ICRA)
Credit Analysis and Research Ltd. (CARE)
FITCH Ratings India Pvt. Ltd.
Or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose.
44 | P a g e
The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies. The issuers shall ensure at the time of issuance of NCDs that the rating so obtained is current and has not fallen due for review.
4. Maturity
NCDs shall not be issued for maturities of less than 90 days from the date of issue.
The exercise date of option (put/call), if any, attached to the NCDs shall not fall within 90 days period from the date of issue.
The maturity date of the NCD shall co-terminate with the date up to which the credit rating of
the issuer is valid.
5. Denominations
NCDs may be issued in denominations of Rs.5 lakh or multiples thereof. Amount invested by a
single investor should not be less than Rs.5 lakh (face value).
6. Limits and the Amount of Issue of NCDs
The aggregate amount of the NCDs from an issuer shall be within the limit as approved by
the Board of Directors of the corporate or the quantum indicated by the Credit Rating Agency
for the specified rating, whichever is lower.
The total amount of the NCDs proposed to be issued should be raised within a period of two
weeks from the date on which the issuer opens the issue for subscription.
Pros of NCD investment
Interest Rates offered are attractive.
NCD’s are listed on NSE and BSE can be traded in the secondary market similar to trading
in shares and bonds.
Fairly liquid, as most NCD’s are traded. There is no penalty for liquidation.
With interest rates going down, bond prices goes up and vice versa.
Cons of NCD investment
Low Participation – NCD’s trading market lacks broad participation, leading to illiquidity at
times. Situation gets worse if parent companies’ performance is not good.
Rating Errors and Downgrades – These issues are rated by rating agencies which are
prone to errors. If they fail to rate the issue correctly, there are chances of rating downgrades
in future. Rating downgrades can be detrimental to investors return.
Interest Rate Sensitivity – Changing interest rates affect the price of NCD’s. Price sensitivity
bears an inverse relationship with the direction of interest rate movement. If the interest rates
go up, price of the NCD falls and vice versa. As NCD’s are traded in secondary market, prices
adjust quickly to changing interest rate scenario and adjustment in negative direction means
loss to the investor.
Commercial Paper
1. Meaning
45 | P a g e
Commercial Paper (CP) is an unsecured money market instrument issued in the form of a
promissory note. CP, as a privately placed instrument, was introduced in India in 1990 with a view
to enable highly rated corporate borrowers to diversify their sources of short-term borrowings and
to provide an additional instrument to investors. Subsequently, primary dealers (PDs) and all-India
financial institutions (FIs) were also permitted to issue CP to enable them to meet their short-term
funding requirements. The guidelines for issue of CP, incorporating all the amendments issued till
date, are given below for ready reference.
2. Eligibility for Issue of CP
Companies, PDs and FIs are permitted to raise short term resources through CP. A company would be eligible to issue CP provided
Tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs.4 core.
Company has been sanctioned working capital limit by bank/s or FIs.
Borrowal account of the company is classified as a Standard Asset by the financing bank/institution.
3. Rating Requirement
Eligible participants/issuers shall obtain credit rating for issuance of CP from any one of the SEBI registered CRAs. The minimum credit rating shall be ‘A3’ as per rating symbol and definition prescribed by SEBI. The issuers shall ensure at the time of issuance of the CP that the rating so obtained is current and has not fallen due for review.
4. Tenor
CP shall be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue.
The maturity date of the CP shall not go beyond the date up to which the credit rating of the issuer is valid.
5. Investment / Redemption
The investor in CP (primary subscriber) shall pay the discounted value of the CP to the account of the issuer through the IPA.
The investor holding the CP in physical form shall, on maturity, present the instrument for payment to the issuer through the IPA.
The holder of a CP in dematerialised form shall get the CP redeemed and receive payment through the IPA.
5. Buyback of CP
Issuers may buyback the CP, issued by them to the investors, before maturity.
Buyback of CP shall be through the secondary market and at prevailing market price.
The CP shall not be bought back before a minimum period of 7 days from the date of issue.
Issuer shall intimate the IPA of the buyback undertaken.
Pros of Commercial paper
It is quick and cost effective way of raising working capital.
46 | P a g e
Best way to the company to take the advantage of short term interest fluctuations in the market
It provides the exit option to the investors to quit the investment
They are cheaper than a bank loan.
As commercial papers are required to be rated, good rating reduces the cost of capital for the company.
It is unsecured and thus does not create any liens on assets of the company.
It has a wide range of maturity
It is exempt from federal SEC and State securities registration requirements.
Cons of Commercial paper
It is available only to a few selected blue chip and profitable companies.
By issuing commercial paper, the credit available from the banks may get reduced.
Issue of commercial paper is very closely regulated by the RBI guidelines.
Zero Coupon Convertible Bonds
These are debt convertible into equity shares of the issuer. If investor choose to convert, they forgo
all the accrued and unpaid interest. These convertible are generally issued wit put option to the
investors. The advantage to the issuer is the raising of convertible debt without heavy dilution of
equity. Since the investors give up acquired interest by exercise of conversion option, the conversion
option may not exercise by many investors. The investors gains in the event of appreciation in the
value of the equity shares. Even if the appreciation does not materialize, the investor has the benefit
of a steady stream of implied income. If the instrument is issued with put option, the investor can
resell the securities to the investor.
The zero-coupon and convertible features offset each other in terms of the yield required by investors. Zero-coupon bonds are often the most volatile fixed-income investments because they have no periodic interest payments to mitigate the risk of holding them; as a result, investors demand a slightly higher yield to hold them. On the other hand, convertibles pay a lower yield compared to other bonds of the same maturity and quality because investors are willing to pay a premium for the convertible feature.
Debentures
Meaning
If a company needs funds for extension and development purpose without increasing its share capital, it can borrow from the general public by issuing certificates for a fixed period of time and at a fixed rate of interest. Such a loan certificate is called a debenture. Debentures are offered to the public for subscription in the same way as for issue of equity shares. Debenture is issued under the common seal of the company acknowledging the receipt of money.
Features of Debentures:
Debenture holders are the creditors of the company carrying a fixed rate of interest.
Debenture is redeemed after a fixed period of time.
Debentures may be either secured or unsecured.
47 | P a g e
Interest payable on a debenture is a charge against profit and hence it is a tax deductible expenditure.
Debenture holders do not enjoy any voting right.
Interest on debenture is payable even if there is a loss.
Pros of Debentures
Issue of debenture does not result in dilution of interest of equity shareholders as they do not have right either to vote or take part in the management of the company.
Interest on debenture is a tax deductible expenditure and thus it saves income tax.
Cost of debenture is relatively lower than preference shares and equity shares.
Issue of debentures is advantageous during times of inflation.
Interest on debenture is payable even if there is a loss, so debenture holders bear no risk.
Cons of Debentures
Payment of interest on debenture is obligatory and hence it becomes burden if the company incurs loss.
Debentures are issued to trade on equity but too much dependence on debentures increases the financial risk of the company.
Redemption of debenture involves a larger amount of cash outflow.
During depression, the profit of the company goes on declining and it becomes difficult for the company to pay interest
Company Fixed Deposits
Apart from banks there are companies in India that accept money from general public for a fixed term and pay interest. These companies are authorized by the Reserve Bank of India to perform these tasks under specified regulations of RBI. However RBI does not guarantee on any sort of transactions or trades entered into with these institutions. In other words the institutions are not actually backed by the Reserve bank. There are set of guidelines and instructions from RBI to investors who are willing to invest in NBFCs. These instructions can help protect a person’s interest in investing in these companies. Fixed deposit scheme is one of the schemes that are offered by NBFCs and there are specific permissions required to offer these schemes to public apart from regular authorization.
1. Term The term of company fixed deposits are usually less because when it comes to these deposit schemes the performance of the company and rating may change with time. So as a matter of insecurity shorter terms are preferred. The term as regulated by RBI cannot be less than 12 months or more than 5 years.
2. Types of company FD
There are two types of fixed deposit schemes namely cumulative and non-cumulative fixed deposit
schemes. Non-Cumulative schemes as the name suggests pay off the interest earned on investment
on regular basis (half yearly basis or annual basis) so the interest will not get acquired on principal
to earn higher interest in the years to come. Cumulative fixed deposit scheme on the other hand
48 | P a g e
where the interest accumulates with principal so as to earn higher returns when compared to non-
cumulative plan. This scheme pays interest accrued on deposit schemes on maturity of the deposit.
3. Rating of a company
There are certain institutes (CRISIL, ICRA etc.) that rate a company based on net owned fund (NOF)
of the company. The companies are rated based on certain ceilings and slabs (ex: NOF more than
200 lakhs be rated in certain category) and based on the rating a person may decide whether he
should invest or not in a company.
4. Interest rates
Interest rates on fixed deposit schemes offered by a company are higher than regular banks. This
is one of the major reasons that people are interested in these schemes these days. The interest
rate offered on the FDs is limited to a maximum of 12.5% by the Reserve bank of India and this
figure can vary with time. A person has to stay updated about this information before depositing in
these schemes. The interest rates available today in market range from 9% to about 12.25%.
(Coupon)
5. Pre-mature withdrawals
Premature withdrawals are permitted in these schemes and the lock in period of these schemes will
be 3 months. Interest accrued and penalties are as per the terms and conditions of the company.
Pros of Company fixed deposit:-
There are few benefits of company fixed deposit that makes it preferable over other
counterparts.
Interest rates in general are 2 to 3% higher than bank fixed deposits
On a short term they earn better income with good liquidity
The deposit scheme also has nomination facility
The application process and eligibility clauses are much simpler than those of regular bank
fixed deposit scheme
Foreign Currency Convertible Bonds
FCCB or the Foreign Currency Convertible Bonds is a type of convertible bond issued in a currency
different than the issuer’s domestic currency. It can be regarded as an instrument used to raise
money by the issuing company in the form of a foreign currency. A convertible bond is
a debt instrument with equity flavours in it, as it acts like a bond by making regular coupon and
principal payments, but also gives the bondholder the option to convert the bond into stock.
How does it help companies?
Some companies, banks, governments, and other sovereign entities may decide to issue bonds in
foreign currencies because:
49 | P a g e
It may appear to be more stable and predictable than their domestic currency.
It gives issuers the ability to access investment capital available in foreign markets.
Companies can use the process to break into foreign markets.
The bond acts like both a debt and equity instrument. Like bonds it makes regular coupon
and principal payments, but these bonds also give the bondholder the option to convert the
bond into stock.
It is a low cost debt as the interest rates given to FCC Bonds are normally 30-50 percent
lower than the market rate because of its equity component.
Conversion of bonds into stocks takes place at a premium price to market price. Conversion
price is fixed when the bond is issued. So, lower dilution of the company stocks
Pros of FCCB to the Investor Assured returns in the form of fixed coupon rate payments Lower tax liability due to lower coupon rate Ability to take advantage of price appreciation in the stock by means of warrants attached to the
bond. Cons of FCCB Exchange rate risk due to conversion at a future date When converted into equity, FCCB brings down EPS In a falling stock market there is no demand for conversion to equity.
50 | P a g e
Savings
Savings are shown for every product that is being used by the competitor by taking the base of
borrowings with both long term and short term.
Average Long term Borrowing is 12652 million
Average Short Tem Borrowing is 8097.4 million
*Savings are shown on assumption basis
*Non-convertible Debentures
TNPL is using at 11%, 8.75%
BILT is using at 9.60%
Taken BILT’s interest is because TNPL being a government owned company, pays less interest.
*Debentures
Alok is using at 12% - 14.50%
BILT is using at 11.75%
J.K. paper is using at 11%, 8.75%
Taken least interest rate that J.K. paper is availing.
*Commercial paper
Welspun is using at credit rating of IND A1+
TNPL is using (Gov. owned co)
Rate is 9% - 9.5%
*Fixed deposits
Vardhman, TNPL, BILT, J.K. paper are using.
Rate is 9% - 12.5%
Product Company Rate of Interest
Trident Term Loan /
Working Capital Loan
*Savings on monthly
basis
Short Term Borrowings
Non-Convertible Debentures*
BILT 9.60%
10.05%
30 lac/m
Commercial Paper* Welspun / TNLP 9 % 70 lac/m
Long Term Borrowings
Debentures* J.K. Paper 8.75%
10.95%
2.3 Crore/m
Fixed Deposits* Vardhman/TNLP/BILT/
J.K. Paper 10% 1 Crore/m
51 | P a g e
Additional Products
Some of the new products in the market which Trident can go for:-
1. Capital Indexed Bonds
Capital indexed bonds are inflation protection securities. Such bonds, therefore, provides good
hedge against inflation risk. The benefits do extend beyond hedging. Capital index bond can be
used as a market indicator for inflation expectation. This will help investors take a more intelligent
decision on their current consumption. Finally, the spot yield curve can be better constructed based
on the real yields.
In line with the most popular structure prevalent internationally, the proposed CIB would offer
inflation linked returns on both the coupons and principal repayments at maturity. The basic feature
of bonds would be that the coupon rate for the bonds would be specified in real terms. Such real
coupon rate would be applied to the inflation-adjusted principal to calculate the periodic semi-annual
coupon payments. The principal repayment at maturity would be the inflation-adjusted principal
amount or its original par value, whichever is greater, thus with an in-built insurance that at the time
of redemption the principal value would not fall below par. The inflation protection for the coupons
and the principal repayment on the bond would be provided with respect to the Wholesale Price
Index (WPI) for All Commodities (1993-94=100), the leading measure of inflation in India.
Method of issue
The CIB would be sold through auction under which competitive bidders would be required to bid in
terms of a desired real yield (yield prior to inflation adjustment), expressed as a percentage with
two decimals, e.g., 3.00%. Specific terms and conditions for the auction, including the auction date,
issue date, tenure of the bonds and the notified amount would be announced prior to each auction.
2. Extendable Notes
Extendable notes are issued for 10 years with flexibility to the issuer to review interest rates every
two years. The interest rate is adjusted every two years to reflect then prevailing market conditions
by trying the interest rate to a spread over a bond index such as two years treasury notes. Depending
on the specific terms of the extendable bond, the bond holder and/or issuer may have one or more
opportunities to defer the repayment of the bond’s principal, during which time interest payments
continue to be paid. Additionally bond holder or issuer may have the option to exchange the bond
for one with a longer maturity, at an equal or higher rate.
3. Floating Rate bonds
Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money
market reference rate, like LIBOR or federal funds rate, plus a quoted spread (a.k.a. quoted
margin). The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e.
they pay out interest every three months. At the beginning of each coupon period, the coupon is
calculated by taking the fixing of the reference rate for that day and adding the spread. A typical
coupon would look like 3 months USD LIBOR +0.20%
52 | P a g e
Risk Involved
FRNs carry little interest rate risk. An FRN has a duration close to zero, and its price shows very low
sensitivity to changes in market rates. When market rates rise, the expected coupons of the FRN
increase in line with the increase in forward rates, which means its price remains constant. Thus,
FRNs differ from fixed rate bonds, whose prices decline when market rates rise. As FRNs are almost
immune to interest rate risk, they are considered conservative investments for investors who believe
market rates will increase. The risk that remains is credit risk.
4. Fixed Rate bonds
Fixed rate bond is a type of debt instrument bond with a fixed coupon (interest) rate, as opposed
to a floating rate note. A fixed rate bond is a long term debt paper that carries a predetermined
interest rate. The interest rate is known as coupon rate and interest is payable at specified dates
before bond maturity. Due to the fixed coupon, the market value of a fixed-rate bond is susceptible
to fluctuations in interest rates, and therefore has a significant amount of interest rate risk. That
being said, the fixed-rate bond, although a conservative investment, is highly susceptible to a loss
in value due to inflation. The fixed-rate bond’s long maturity schedule and predetermined coupon
rate offers an investor a solidified return, while leaving the individual exposed to a rise in the
consumer price index and overall decrease in their purchasing power.
The coupon rate attached to the fixed-rate bond is payable at specified dates before the bond
reaches maturity; the coupon rate and the fixed-payments are delivered periodically to the investor
at a percentage rate of the bond’s face value. Due to a fixed-rate bond’s lengthy maturity date, these
payments are typically small and as stated before are not tied into interest rates.
53 | P a g e
Conclusion
The project has been able to cover many of the key focus areas of business finance and competitor
analysis on general.
Through the first part of the project - Competitor analysis with information on the operational
analysis and comparison of the major competitors. Trident Limited is now into its expansion stage
and such information helps in making important strategic decisions while moving forward towards
the path of success and growth.
The company has tremendous scope of cost savings. Which was highlighted through the project
savings. With application of the practically possible recommendations, there is an opportunity to
save as much as Rs Crore, in term Loans and working capital alone.
All effort has been made to make this report as user friendly as possible. It has been stressed
throughout the project that the focus has been on highlighting implementable changes rather than
establishing theoretical excellence.
This piece of document was aimed at being a small contributor to the bigger success story of Trident
Group.
By Surbhi Jindal
54 | P a g e
Bibliography
http://isindexing.com/isi/papers/1415956606.pdf
http://www.welspunindia.com/tale.php
http://www.crisil.com/index.jsp
http://in.reuters.com/article/2015/03/03/india-ratings-idINL4N0W524720150303
http://money.rediff.com/companies/Trident-Ltd/16030094?srchword=Trident+Ltd.&snssrc=sugg
https://rbi.org.in/scripts/FAQView.aspx?Id=25
https://eagletraders.com/neg_financial_instruments/type_of_instruments.php
http://www.fao.org/docrep/w4343e/w4343e08.htm#
http://www.efinancemanagement.com/sources-of-finance/how-is-debenture-different-from-bank-
loans-equity-shares-and-bond
http://www.publishyourarticles.net/knowledge-hub/business-studies/equity-share-finance-and-
debenture-finance/950/
https://www.indiaratings.co.in/
https://rbi.org.in/scripts/FAQView.aspx?Id=79
https://in.finance.yahoo.com/news/crisil-assigns-rating-long-term-090709472.html
http://www.icicibank.com/businessbanking/tradeservice/domestic-inland-bill-discounting.page
http://www.careratings.com/
http://www.sebi.gov.in/sebiweb/home/adsearch.jsp?type=search&websearch=bonds
http://www.investopedia.com/terms/z/zero-couponconvertible.asp
https://books.google.co.in/books?id=tGJqiiH-
cTcC&pg=PA74&lpg=PA74&dq=how+to+issue+zero+coupon+convertible+bonds&source=bl&ots=
VzVdvK2AIM&sig=PCoRnMjPzM0Hpwj5THv2M600Aio&hl=en&sa=X&ei=aYajVfDEOY2iugTczpb
QCg&ved=0CEIQ6AEwBg#v=onepage&q=how%20to%20issue%20zero%20coupon%20convertib
le%20bonds&f=false
https://rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2071
http://www.mondaq.com/india/x/208320/Shareholders/Foreign+Currency+Convertible+Bonds+Issu
ed+By+Indian+Companies
http://retail.economictimes.indiatimes.com/news/apparel-fashion/apparel/5-textile-companies-that-
should-be-in-your-portfolio/47982137
https://en.wikipedia.org/wiki/Fixed_rate_bond