GREAVES LIMITED CASE STUDY SOLUTION

 GREAVES LIMITED CASE STUDY SOLUTION

CASE – 2   GREAVES LIMITED

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

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

Exhibit 1

GREAVES LTD.

                                 Profit and Loss Account ending on 31 March          (Rupees in crore)

1990 1991 1992 1993 1994 1995 1996 1997

Sales 

Raw Material and Stores

Wages and Salaries

Power and fuel

Other Mfg. Expenses

Other Expenses

Depreciation 

Marketing and Distribution

Change in stock 214.38

170.67

  13.54

    0.52

    0.61

  11.85

    1.85

    4.86

    1.18 253.10

202.84

  15.60

    0.70

    0.49

  15.48

    1.72

    5.67

    3.10 287.81

230.81

  18.03

    1.11

    0.88

  16.35

    1.52

    5.14

    4.93 311.14

213.79

  37.04

    3.80

    2.37

  25.54

    4.62

    5.17

    0.48 354.25

245.63

  37.96

    4.43

    2.36

  31.60

    5.99

    9.67

 - 1.13 521.56

379.83

  48.24

    6.66

    3.57

  41.40

    8.53

  10.81

    5.63 728.15

543.56

  60.48

    7.70

    4.84

  45.74

    9.30

  12.44

  11.86 801.11

564.35

  69.66

    9.23

    5.49

  48.64

  11.53

  16.98

 - 5.87

Total Op Expenses 202.72 239.40 268.91 291.85 338.77 493.41 672.20 731.75

Operating Profit

Other Income

Non-recurring Income

  11.61

    2.14

    1.30

  13.70

    3.69

    2.28

  18.90

    4.97

    0.10

  19.29

    4.24

  10.98

  15.48

    7.72

  16.44

  28.15

  14.35

    0.46

  55.95

  11.35

    0.52

  69.36

  13.08

    1.75

PBIT   15.10   19.67   23.97   34.51   39.64   42.98   65.67   82.64

Interest     5.56      6.77   11.92   19.62   17.17   21.48   28.25   27.54

PBT     9.54   12.90   12.05   14.89   22.47   21.50   37.42   55.10

Tax

PAT

Dividend

Retained Earnings     3.00

    6.54

    1.80

    4.74     3.60

    9.30

    2.00

    7.30     4.90

    7.15

    2.30

    4.85     0.00

  14.89

    4.06

  10.83     4.00

  18.47

    7.29

  11.18     7.00

  14.50

    8.58

    5.92     8.60

  28.82

  12.85

  15.97   15.80

  39.30

  14.18

  25.12

Exhibit 2

GREAVES LTD.

                                                            Balance Sheet                                (Rupees in crore)

1990 1991 1992 1993 1994 1995 1996 1997

ASSETS

Land and Building

Plant and Machinery

Other Fixed Assets

Capital WIP

Gross Fixed Assets

Less: Accu. Depreciation

Net Tangible Fixed Assets

Intangible Fixed Assets       

    3.88

  11.98

    3.64

    0.09

  19.59

  12.91

    6.68

    0.21        

    4.22

  12.68

    4.14

    0.26

  21.30

  14.56

    6.74

    0.19       

    4.96

  12.98

    4.38

  10.25

  23.57

  15.79

    7.78

    0.05       

  21.70

  33.49

    5.18

  11.27

  71.64

  19.84

  51.80

    4.40        

 30.82

  50.78

    6.95

  34.84

123.39

  25.74

  97.65

  22.03        

  39.71 

  75.34

    8.53

  14.37

137.95

  33.90

104.05 

  22.45       

  42.34

  92.49

    8.87

  13.92

157.62

  42.56

115.06

  20.04       

  43.07

104.45

  10.35

  14.36

172.23

  53.87

118.86

  21.11

Net Fixed Assets     6.89     6.93     7.83   56.20 119.68 126.50 135.10 139.97

Raw Materials

Finished Goods

Inventory 

Accounts Receivable

Other Receivable

Investments 

Cash and Bank Balance

Current Assets

Total Assets

LIABILITIES AND CAPITAL

Equity Capital

Preference Capital

Reserves and Surplus

    5.26

  29.37

  34.63

  38.16

  32.62

    3.55

    8.36

117.32

124.21

    9.86

    0.20

  27.60

    6.91

  33.72

  40.63

  53.24

  40.47

  14.95

    8.91

158.20

165.13

    9.86

    0.20

  32.57

    7.26

  38.65

  45.91

  67.97

  49.19

  15.15

  12.71

190.93

198.76

    9.86

    0.20

  37.42

  21.05

  53.39

  74.44

  93.30

  24.54

  27.58

  13.29

233.15

289.35

  18.84

    0.20

100.35

  28.13

  52.26

  80.39

122.20

  59.12

  73.50

  18.38

353.59

473.27

  29.37

    0.20

171.03

  44.03

  58.09

102.12

133.45

  64.32

  75.01

  30.08

404.98

531.48

  29.44

    0.20

176.88

  53.62

  69.97

123.59

141.82

  76.57

  75.07

  33.46

450.51

585.61

  44.20

    0.20

175.41

  50.94

  64.09

115.03

179.92

107.31

  76.45

  48.18

526.89

666.86

  44.20

    0.20

198.79

Net Worth   37.66   42.63   47.48 119.39 200.60 206.52 219.81 243.19

Bank Borrowings

Institutional Borrowings

Debentures

Fixed Deposits

Commercial Paper

Other Borrowings

Current Portion of LT Debt   14.81

    4.13

    4.77

  12.31

    0.00

    2.33

    0.00   19.45

    3.43

  16.57

  14.45

    0.00

    3.22

    0.00   26.51

    9.17

  19.99

  15.03

    0.00

    3.10

    0.08   24.82

  38.09

    4.56

  14.08

    0.00

    3.18

    0.12   55.12

  38.76

    4.37

  15.57

  15.00

  17.08

  15.08   64.97

  69.69

    4.37

  17.75

    0.00

    1.97

    0.02   70.08

  89.26

    2.92  

  20.81

    0.00

    2.36

    1.49 118.28

  63.60

    1.49

  19.29

    0.00

    2.57

    1.57

Borrowings   38.35   57.12   73.72   84.61 130.82 158.73 183.94 203.66

Sundry Creditors

Other Liabilities

Provision for tax, etc.

Proposed Dividends

Current Portion of LT Dept   37.52

    5.70

    3.18

    1.80

    0.00   49.40

  10.16

    3.82

    2.00

    0.00   59.34

  10.70

    5.14

    2.30

    0.08   77.27

    3.59

    0.31

    4.06

    0.12 113.66

    1.42

    4.40

    7.29

  15.08 148.13

    1.99

    7.70

    8.58

    0.02 153.63

    1.70

  12.19

  12.85

    1.49 179.79

    3.04

  21.43

  14.18

    1.57

Current Liabilities   48.20   65.38   77.56   85.35 141.85 166.42 181.86 220.01

TOTAL LIABILITIES

Additional information:

Share premium reserve

Revaluation reserve

Bonus equity capital 124.21

    8.51 165.13

    8.51 198.76

    8.51 289.35

  47.69

    8.91

    8.51 473.27

107.40

    8.70

    8.51 531.67

107.91

    8.50

    8.51 585.61

  93.35

    8.31

  23.25 666.86

  93.35

    8.15

  23.25

Exhibit 3

GREAVES LTD.

Share Price Data                 

  1990 1991 1992 1993 1994 1995 1996 1997

 Closing share price (Rs)

Yearly high share price (Rs)

Yearly low share price (Rs)

Market capitalization (Rs crore

EPS (Rs)

Book value (Rs)   27.19

  29.25

  26.78

  65.06

    4.79

  35.64 34.74

45.28

21.61

67.77

  6.82

37.22 121.27

121.27

  34.36

236.56

    9.73

  42.54   66.67

126.33

  48.34

274.84

    1.93

  57.75   78.34

  90.00

  42.67

346.35

    2.66

  40.61   71.67

100.01

  68.34

316.87

    7.16

  64.98   47.5 

  90.00

  45.00

210.02

    5.03

  45.35   48.25

  85.00

  43.75

213.34

    9.01

  50.73

Questions

1. How profitable are its operations? What are the trends in it? How has growth affected the profitability of the company?

2. What factors have contributed to the operating performance of Greaves Limited? What is the role of profitability margin, asset utilisation, and non-operating income?

3. How has Greaves performed in terms of return on equity? What is the contribution of return on investment, the way of the business has been financed over the period?