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Jul 5 th, 2021
Gross debt as on 31 March 2022 was ₹53,109 crore, a decrease of ₹3,919 crore since 31 March 2021. Higher sales volumes resulted in increase in EBITDA by ₹1,578 crore, driven by higher volumes at Aluminium, Zinc International and Iron ore business. The government is likely to hold discussions with Vedanta informally on a possible stock market listing of Balco before a firm proposal is made to the aluminium company’s board, said people aware of the development. NPS Calculator The National Pension System or NPS is a measure to introduce a degree of financial stability…
The analysis of these metrics evolves at three levels – Acuité first analyses debt protection by taking into account the coverage of interest payments, followed by the principal payment and eventually the entire quantum of debt on books. Acuité considers all on-balance sheet debt to arrive at the gearing. For purposes of gearing ratio, apart from regular debt like bank borrowings and non-convertible debentures, Acuité may also include other debt instruments. These include preference shares/debentures/bonds convertible into equity at the option of the holder and other such hybrid instruments.
As per Cash Flow Statement, depreciation and amortization of the company stood at Rs.43,06,700. The Company has applied active hedging and designation of the bonds against natural hedge from future revenues. Improved realization enabled port revenue increase of 22% to Rs 12,903 Cr.
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Generally speaking, net profit margins tend to be more volatile across time periods as compared to operating margins. A retail company generates Rs.1000 million in revenue and incurs Rs.400 million in production cost and Rs.200 million in operating expenses. Depreciation and amortization expenses total Rs.100 million, yielding an operating profit of Rs.300 million. Interest expense is Rs.50 million, which equals earnings before taxes of Rs.250 million. With a 20% tax rate, net income equals Rs.200 million after Rs.50 million in taxes are subtracted from pre-tax income.
Hence, EBITDA is an efficient way of measuring the core profit trends of a firm as it has extraneous factors. Nonetheless, to arrive at a more comprehensive financial analysis, both investors and firm owners need to use other, more encompassing financial metrics. Due to the fact that debt expenses are excluded from EBITDA, the resulting figure is considered to be misleading.
This was mainly due to Mark to Market movement and change in investment mix. In FY2021, the Aluminium business achieved metal sales of 2.26 million tonnes, up 15% y-o-y. This volume increase had a positive impact on EBITDA of ₹1,138 crore. The profit petroleum outflow to the Government of India , as per the production sharing contract , increased by ₹788 crore. Commodity price fluctuations have a significant impact on the Group’s business. During FY2022, we saw a net positive impact of ₹27,973 crore on EBITDA due to commodity price fluctuations.
It is a rough surrogate for coverage of the debt with net cash accruals from a business. A NCATD of 25% would broadly indicate that the entity would need around four years of net cash accruals to liquidate its current levels of debt. This ratio does not make a distinction between different types of debt- short term or long term.
The operating profit margin represents the core earning capability and is unaffected by leverage or depreciation charges. In case of a company, tangible net worth means the aggregate of paid up Share capital and reserves and surplus, after excluding items such as revaluation reserves, intangibles, unamortized miscellaneous expenditure and accumulated losses. Acuité believes that a higher net worth base provides cushion against losses and contingencies. Net worth is indicative of the shock absorption capacity of an entity and its resilience to external conditions.
In Europe, a majority of survey respondents expect at least €25 billion of issuance. ‘We were able to close the ACC and Ambuja deal of $10.5 billion in a record time of just three months only because of Adani Group’s fundamental financial strengths,’ says world’s third richest person. A rally in the bonds of China’s debt-laden developers — fueled by a series of policy steps to ease strains in the nation’s property sector – is now losing steam amid a persistent housing slump.
To do it, they would look at the EBITDA-to-interest coverage ratio. For example, a company with an EBITDA of Rs 5 lakh can meet its interest charges of Rs 2.5 lakhs for two years. EBITDA is the focus for valuation analysts, investment bankers or private equity investors. That’s because while buying or valuing a business, it is important to know how capable a company is to generate cash flows to sustain itself and if it can provide good returns to its shareholders. Lenders have been traditionally examining trends in current ratio for assessing proposals for working capital financing.
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Falling debt level has also improved overall credit ratio. At 0.67x, the leverage indicator net debt to EBITDA have halved from pre-Covid levels. The last two years of internal cash profits have funded the last two years of $30 billion in investments (ex-spectrum), as per an IANS report quoting Morgan Stanley. Private hospitals are seeing a gradual return of medical tourism — accounted for 10-12% of revenue pre-pandemic — that got affected considerably during pandemic, amid travel restrictions. Lower cost of treatments, modern facilities with well-trained personnel, and increasing air-connectivity are expected to restore revenue from medical tourism to pre-pandemic levels.
The EBITDA Multiple depends on another factor called Enterprise Value which is the sum of market cap, debt on the books, minority stake, and preferred shares, minus cash. Interest is the expenses a business incurs due to changes in interest rates, loan repayments, among others. That said, any resurgence of Covid-19 or intense viral cases that triggers lockdown and restricts travel, or any regulatory intervention that impedes the performance of private hospitals, will bear watching in the road ahead.
If depreciation, amortization, interest, and taxes are added back to net income, EBITDA equals Rs.400 million. EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a financial performance indicator that is used as the pre-tax, pre-interest measure to represent the flow of both equity and debt. EBITDA can be used to analyse and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a measure of a company’s overall financial performance and is used as an alternative to net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment. The bigger worry is that years of rosy earnings projections is masking the amount of leverage on the balance sheets of the lowest-rated companies.
From a lender’s perspective, higher the current ratio (i.e. higher the proportion of long term funds supporting current assets), higher is the protection available to the banker. Acuité believes that in addition to the Current Ratio and its trends, it is also necessary to factor in the quality of current assets. Thus Net debt to EBITDA is a profitability ratio which helps analyse the creditworthiness of a business.
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Hence, its utility to gauge the debt/ebitda servicing ability over a period is limited vis-a-vis the interest coverage ratio or DSCR discussed above. Nevertheless, despite its limitations, Acuité observes that generally speaking, entities with consistently higher NCATD levels have resilient credit profiles than those with lower NCATD. It offers a simple but accurate view of a company’s efficiency in generating an operational profit and managing hefty interest charges in a short duration. But while EBITDA is useful, investors are also warned not to rely heavily on it.
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Healthy cash generation, leading to limited reliance on external borrowing to fund higher capex will in turn help private hospitals maintain adequate debt protection metrics and keep credit risk profiles stable. In Liquidity assessment, Acuité evaluates availability of unencumbered cash/liquid assets with the entity, unutilised bank lines and potential for timely liquidity support from group entities with stronger credit profiles. Acuité may also examine the refinancing ability of the entity while assessing liquidity profile especially in cases where the entity has significant debt repayment obligations. Liquidity refers to an entity’s ability to meet its obligations in a timely manner. A strong liquidity profile implies ready availability of unencumbered cash and liquid assets to meet debt servicing commitments and day-to-day business related expenses as and when they fall due.
While comparison of gearing across peer entities could lead to insights on their relative credit risk, in case of certain categories of entities such as traders, a different approach is warranted. Full year tax rate stood at 21.3 per cent, slightly higher as tax credits reduced, Morgan Stanley said. This was primarily net profit attributable to equity holders earned during the year partially offset by dividend paid during the year. Investment income for FY2022 stood at ₹2,341 crore, 28% lower compared to ₹3,269 crore in FY2021.
Attributable PAT before exceptional items was ₹19,279 crore in FY2022 compared to ₹12,151 in FY2021. This primarily includes the impact of higher capex and opex recovery in the Oil & Gas business, inventory and foreign exchange adjustments during FY2022 partially offset by lower power EBITDA, impacting EBITDA positively by ₹880 crore. Stronger dollar is favourable to the Group’s EBITDA, given the local cost base and predominantly US dollar-linked pricing. The favourable currency movements positively impacted EBITDA by ₹105 crore.
Hence, comparability of net margins across periods from a future projection standpoint may be misleading unless the abnormal influences are evened out. Similarly, the net profit margin of an entity operating in a tax-free geography may not be comparable with an entity paying taxes at the highest marginal rates. Despite its limitations, the Net profit margin reflects a broad metric of the ability of an entity to generate internal accruals and to increase its net worth from internal generation. Other factors remaining constant, higher the net profit margin, better is the ability of the entity to support a high growth trajectory.
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