final ppt of MCC PTA
- 1. MCC PTA India Corp. Private Limited Summer Internship Program 2013 By: Pooja Ghosh Enrollment no.: 12BSPHH010703 IBS HYDERABAD DATE:27TH May, 2013
- 3. About The Company Mitsubishi Chemical Corporation (MCC), a Fortune 500 giant, is Japan’s largest diversified chemical company. It is also the world’s second largest producer of Purified Terephthalic Acid (PTA). In 1997, it decided to enter into a shareholder’s agreement with the West Bengal Government, setting up an affiliate company, MCC PTA India Corp. Private Ltd (MCPI), headquartered in Kolkata.
- 4. Methodology Data collection methods- Secondary data namely Annual reports and internal/sales records. In addition certain theoretical books were referred for the purpose of the analysis and certain valuable information was found from different websites. Primary data includes which was collected by conducting various discussions and interviews with the managers and employees of the company.
- 5. Tools and Techniques Altman’s Z-score Analysis Financial Ratio Analysis. DuPont Analysis Calculate various components of Return on Equity Comparative Financial Statements Trend Analysis (Indexing) Common Size Analysis Regression Analysis Correlation Analysis Moving Averages Cash Conversion Cycle Net Working Capital Software was used for data analysis( Excel)
- 6. Working Capital Management and its Main Components Cash Conversion Cycle Operating Cycle- Net operating cycle Correlation Analysis between the important components of working capital and performance indicators. Discuss the major dimensions of working capital management- accounts receivables, accounts payables, cash and inventory management.
- 7. Working Capital Management and Cash Conversion Cycle 25.32 50.06 91.88 66.5159.2954.01 117.84 159.51 208.22 263.31 136.91 190.72 -83.44 -98.87 -87.85 -173.16 -52.02 -107.31 -200.00 -150.00 -100.00 -50.00 0.00 50.00 100.00 150.00 200.00 250.00 300.00 2006 2007 2008 2009 2010 2011 2012 2013 Days sales outstanding Days inventory outstanding Days payable outstanding Cash Conversion Cycle
- 8. Operating Cycle 82.03 74.96 89.98 52.34 26.15 -99.74 -142.60 -182.65 -118.53 -110.17 -200.00 -150.00 -100.00 -50.00 0.00 50.00 100.00 150.00 Gross Operating Cycle Net Operating Cycle 2008 2009 2010 2011 2012
- 9. Correlation Analysis Correlation analysis is used to quantify the relationship between variables. The value ranges from +1.0 to -1.0. Hypothesis-Working capital management has a relationship with the performance analysis of the company. Result of Analysis- True
- 10. Correlation Analysis between Working Capital Factors & Performance Factors Variables CCC CATA CLTA ROA ROE CCC 1.000 CATA 0.283 1.000 CLTA -0.145 0.791 1.000 ROA 0.505 0.263 -0.289 1.000 ROE 0.533 0.274 -0.275 0.999 1.000
- 11. Working Capital Management-Its major dimensions Important Components of Working Capital management that need to be considered are: I. Receivables Management II. Cash Management III. Payables Management IV. Inventory Management
- 12. Receivables Management The receivables management of the company is very strong and it faces negligent chances of bad debt losses. The company maintains a strict collection policy whereby the customers are suppose to pay their bills either in advance or within a span of maximum 20days. Credit is given only to two big customers- RIL & JBF.
- 13. Receivables Management 8.178414777 12.23996807 24.89733573 24.98330761 27.91377078 14.69910223 0 5 10 15 20 25 30 Average Collection Period 2012 2011 2009 2008 2007 There is a positive relationship between sales and collection which indicates that the receivables management of the company is healthy. According to the company records we have seen that the average collection period is very less compared to the industry average. At present in 2012 it is just 8 days. The company does not face issues with bad debts as most of the customers pay their bills in advance.
- 14. Correlation Analysis betwee Sales and Collections Correlation Analysis between Sales and Collections Variables Sales Collections Sales 1.000 Collections 0.2480 1.000 Thereceivablesmanagementofthecompanyishealthyandtherelationshipbetweenthevariablesisperfect.
- 15. Moving Averages It helps in tracking the trends of sales of a company by smoothing out the fluctuations. Prediction of the future sales of a particular product over a specific time period is based on: A. Past performance B. Inflation rates C. Market trends D. Interest rates. It is the primary tool for predicting the volume of attainable sales.
- 16. 0 500000000 1E+09 1.5E+09 2E+09 2.5E+09 3E+09 3.5E+09 4E+09 4.5E+09 0 5 10 15 20 25 30 Value Data Point 3 Monthly Moving Average Forecast
- 17. Cash Management
- 18. Cash Management The company maintains a good cash balance always as liquidity plays a very important role. There are ways in which the company manages a negative cash balance: I. Extension Payment Period. II. Buyer’s credit/ Short Term Loan. III. Overdraft Facility by SBI. Cash planning plays a very important role. Among its main cash outflows is the purchase of Paraxylene which is the main raw material for producing PTA.
- 19. LIQUIDITY POSITION OF MCC PTA INDIA CORP. PRIVATE LIMITED 0.63 0.84 0.92 0.62 1.20 1.14 0.42 0.53 0.49 0.36 0.77 0.83 0.09 0.22 0.01 0.08 0.260.28 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 Current Ratio Quick Ratio Absolute Quick Ratio 2007 2008 2009 2010 2011 2012
- 20. Payables Management The first objective is paying bills at a later date. The second objective of the payables department is to hold money as long as possible. The third objective of the payables department is to build strong relationships with vendors.
- 21. Payables Management 181.77 217.56 272.63 170.88 136.32 0.00 50.00 100.00 150.00 200.00 250.00 300.00 Average Payment Period Average payment period 2008 2009 2010 2011 2012 In 2012 we see that the average payment period is 136 days. Generally all company wishes to keep their average payment period longer as this facilitates them in maintaining liquidity. We notice an increasing trend from 2008 to 2010 which is a healthy sign in terms of payables management.
- 22. Inventory Management For a manufacturing company like MCC PTA India Corp. Private Ltd inventory is materials needed to produce the final product, work-in-progress and finished goods. For this company inventory is one of the largest asset item in the balance sheet.
- 23. Inventory Planning The company has a system whereby the people, systems and databases all interact with each other. They have an integrated specialized demand and inventory planning software. The top management involves themselves in forecasting sales. They use standardized data definitions.
- 24. Financial Performance Analysis FINANCIAL PERFORMANCE ANALYSIS Ratio Analysis Common Size Financial Analysis Trend Analysis Altman's Z- Score Du Pont Analysis Comparative financial statements Leverage
- 26. Firm-wise Analysis 2.86 1.69 2.21 2.78 1.31 0.96 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Debt-Equity Ratio Series1 2012 2011 2010 2009 2008 2007
- 27. Firm-wise Analysis 8.178414777 12.23996807 24.89733573 24.98330761 27.91377078 14.69910223 0 5 10 15 20 25 30 Average Collection Period
- 28. Firm-wise Analysis -9.24% -4.33% -11.58% -24.55% 0.61% 4.06% -30.00% -25.00% -20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% Net Profit Margin 2007 2008 2009 2010 2011 2012
- 30. Inter-firm Analysis 0.6318 0.8410 0.9250 0.6160 1.1958 1.1163 1.25351.2692 1.1045 1.2979 0.0000 0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 1.4000 1.6000 1.8000 2.0000 Nov/07 Jun/08 Dec/08 Jul/09 Jan/10 Aug/10 Feb/11 Sep/11 Apr/12 Oct/12 Current Ratio(MCC PTA) Current Ratio(RIL) Current Ratio(BASF) Current Ratio(IOCL) Current Ratio(TATA CHEMICALS) INDUSTRY AVERAGE Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
- 31. Inter-firm Analysis 0.4193 0.5302 0.4891 0.3647 0.7653 0.6301 0.6971 0.59580.5852 0.6888 0.0000 0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 Quick Ratio(MCC PTA) Quick Ratio(RIL) Quick Ratio(BASF) Quick Ratio(IOCL) Quick Ratio(TATA CHEMICALS) INDUSRTY AVERAGE Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-10 Mar-11 Mar-12
- 32. Inter-firm Analysis 2.8638 1.6909 2.2087 2.7750 1.3090 0.7747 0.5792 0.8470 1.0794 0.6556 -0.5000 0.0000 0.5000 1.0000 1.5000 2.0000 2.5000 3.0000 3.5000 Debt Equity Ratio(MCC PTA) Debt Equity Ratio(RIL) Debt Equity Ratio(BASF) Debt Equity Ratio(IOCL) Debt Equity Ratio(TATA CHEMICALS) INDUSTRY AVERAGE Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
- 33. Inter-firm Analysis 9.8132 7.0016 4.4613 6.2070 6.5178 8.3867 7.9110 6.6031 8.3812 7.3821 0.0000 2.0000 4.0000 6.0000 8.0000 10.0000 12.0000 Inventory Turnover Ratio(MCC PTA) Inventory Turnover Ratio(RIL) Inventory Turnover Ratio Ratio(BASF) Inventory Turnover Ratio(IOCL) Inventory Turnover Ratio(TATA CHEMICALS) INDUSTRY AVERAGE Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
- 34. Inter-firm Analysis 8.18 12.24 24.9024.98 27.91 24.55 21.15 26.03 23.71 30.42 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 Nov/07 Jun/08 Dec/08 Jul/09 Jan/10 Aug/10 Feb/11 Sep/11 Apr/12 Oct/12 Average Collection Period(MCC PTA) Average Collection Period(RIL) Average Collection Period(BASF) Average Collection Period(IOCL) Average Collection Period(TATA CHEMICALS) INDUSTRY AVERAGE Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
- 35. Inter-firm Analysis -9.24% -4.33% -11.58% -24.55% 0.61% 1.51% 3.36%3.78% -0.26% 8.06% -30.00% -25.00% -20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% Net profit Ratio(MCC PTA) Net profit Ratio(RIL) Net profit Ratio(BASF) Net profit Ratio(IOCL) Net profit Ratio(TATA CHEMICALS) INDUSTRY AVERAGEMar-08 Mar-09 Mar-10 Mar-11 Mar-12
- 36. Inter-firm Analysis -3.71 0.632.46 -4.76 0.76 28.51431.276 36.01437.074 51.146 -20 0 20 40 60 80 100 120 140 160 Earnings per share(MCC PTA) Earnings per share(RIL) Earnings per share(BASF) Earnings per share(IOCL) Earnings per share(TATA CHEMICALS) INDUSTRY AVERAGE Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
- 37. Altman’s Z-Score Analysis The Z-score for predicting bankruptcy was published in 1968 by Edward I. Altman Altman‘s Z-Score analysis is used for knowing the company’s fiscal fitness (a method to predict the bankruptcy prediction for a company) Zones Of Discrimination: Z > 2.99 - “Safe” Zone 1.81 < Z < 2.99 - “Grey” Zone Z < 1.81 - “Distress” Zone
- 38. Z-SCORE FOR IOCL 2.192.16 2.43 2.692.70 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Z-SCORE FOR IOCL Z-SCORE 2008 2009 2010 2011 2012 SAFE ZONE DISTRESS ZONE GREY ZONE
- 39. Z-SCORE FOR RELIANCE INDUSTRIES LIMITED 1.73 1.35 1.27 0.93 1.55 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Z-SCORE FOR RIL Z-SCORE 2008 2009 2010 2011 2012 GREY ZONE DISTRESS ZONE SAFE ZONE
- 40. Z-SCORE FOR TATA CHEMICALS 2.20 2.04 1.92 2.06 1.78 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Z-SCORE FOR TATA CHEMICALS Z-SCORE 2008 2009 2010 2011 2012 DISTRESS ZONE GREY ZONE SAFE ZONE
- 41. Z-SCORE FOR BASF 2.40 2.67 3.04 2.94 3.06 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Z SCORE FOR BASF Z-SCORE SAFE ZONE GREY ZONE DISTRESS ZONE 2008 2009 2010 2011 2012
- 42. Z-SCORE FOR MCC PTA INDIA CORP. PRIVATE LIMITED 0.78 0.93 0.58 -0.25 0.52 -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 2007.5 2008 2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 Z-SCORE FOR MCC PTA INDIA CORP. PRIVATE LIMITED Series1 Series2 Series3 Series4 SAFE ZONE GREY ZONE DISTRESS ZONE
- 43. Trend Analysis 100 139.5888424 862.6740657 -435.682433 -381.2614795 601.073595 -800 -600 -400 -200 0 200 400 600 800 1000 SALES EBIT PAT CURRENT ASSETS CURRENT LIABILTIES GROSS FIXED ASSETS NET ASSETS TOTAL ASSETS NET WORTH DIVIDEND2007 2008 2009 2010 2011 2012
- 44. RETURN ON EQUITY ANALYSIS One of the most important fundamental facts about any business is that the operating performance of the firm shapes its financial structure. One of the most popular measures of financial performance is Return on Equity (ROE). Three Determinants of ROE: Profit Margin= Net Income/ Sales Asset Turnover= Sales/ Assets Financial Leverage= Assets/ Shareholder’s Equity.
- 45. RETURN ON EQUITY ANALYSIS -0.0924-0.0433-0.1158 -0.2455 0.00610.0406 2.1689 1.4488 0.64640.5992 0.6815 1.1306 2.45532.5240 2.7583 2.6808 2.3999 2.1387 -0.5000 0.0000 0.5000 1.0000 1.5000 2.0000 2.5000 3.0000 Profit Margin Asset Turnover Financial Leverage 2007 2008 2009 2010 2011 2012
- 46. ASSET MANAGEMENT RATIOS 44.63 29.82 14.6614.6113.08 24.83 37.19 52.13 81.81 58.80 56.00 28.29 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 Accounts Recievables Turnover Days in Receivables Inventory Turnover Days in Inventory Capital Turnover Fixed Assets Turnover Ratio Total Assets Turnover Ratio2007 2008 2009 2010 2011 2012
- 47. Du Pont Analysis -0.115381208 0.0191084770.068102295 -0.135709581 -0.023945032 -0.5 0 0.5 1 1.5 2 2.5 MCC PTA India Corp. Private limited PAT/EBT* EBT/EBIT* EBIT/SALES* SALES/TOTAL ASSETS* TA/EQUITY ROE Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
- 48. Du Pont Analysis 0.1187084580.127170907 0.178052573 0.118303067 0.23970013 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 Reliance Industries Limited PAT/EBT* EBT/EBIT* EBIT/SALES* SALES/TOTAL ASSETS* TA/EQUITY ROE Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
- 49. Du Pont Analysis 0.068328360.1345593320.202175225 0.067038 0.169462533 0 0.5 1 1.5 2 2.5 3 3.5 4 Indian Oil Corporation Limited PAT/EBT* EBT/EBIT* EBIT/SALES* SALES/TOTAL ASSETS* TA/EQUITY ROE
- 50. Leverage Analysis 186.935 13.680 0.119 5.646 -50.000 0.000 50.000 100.000 150.000 200.000 250.000 300.000 MCC PTA INDIA CORP PRIVATE LTD DOL DFL DTL
- 51. Leverage Analysis -1.4497 -8.3298 -1.0323 -0.6605 1.6453 0.6865 1.1485 2.1827 -10.0000 -8.0000 -6.0000 -4.0000 -2.0000 0.0000 2.0000 4.0000 INDIAN OIL CORP LTD. DOL DFL DTL 2008 2009 2010 2011 2012
- 52. Leverage Analysis -1.7763 1.5680 -0.4476 0.1967 1.0664 -0.4558 1.5428 0.3466 -2.5000 -2.0000 -1.5000 -1.0000 -0.5000 0.0000 0.5000 1.0000 1.5000 2.0000 RELIANCE INDUSTRIES LIMITED DOL DFL DTL
- 53. Findings The Average Collection Period is very low. Transportation costs are extremely high The company has a negative operating cycle There is a credit crunch which leads to shortage of cash balance of the company which leads to a fall in current ratio. The Average Payment Period is very long so reputation of the firm may be hampered. In the Z-score analysis we see that the company lies in the Distress zone.
- 54. Findings The company takes huge amount of short term loan for its day to operations and payment of its creditors. The payables management of the company is not very strong so it looks for buyer’s credit and extension in payment period from its reliable suppliers. The company takes financial help from its parent company, Mitsubishi Chemical Corporation. The sale price of PTA is independent of the raw material cost
- 55. Recommendations The company needs to explore cheaper sources of funds for its operations. The strict credit policy can be liberalized to increase the customer base. The transportation costs can be recovered from the customers to reduce transportation costs. Payment to creditors must be made on time.
- 56. ANNEXURES
- 57. THANK YOU