Financial Analysis of Sesa Goa

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FINANCIAL MANAGEMENT

SAKET LOHIA 10BSPHH010671
1/11/2011

Table of Contents
Objective:3
Introduction:3
Leverage:4
Financial Statement analysis:5
Working Capital Analysis:8
Dividend policy:9
Conclusion:9

Objective:
To study the financial performance of Sesa Goa Pvt. Ltd over a period of five years.

Introduction:
Sesa Goa Limited was incorporated in the year 1965 as a private limited company. Basically the company's business division is alienated into two broad categories, such as the Iron ore division and Metcoke division. Apart from the two main divisions, the shipping also added to the business.    

The company exports approximately 5 million tons of iron ore, fines and lumps to customers in Japan, China and Europe from ports on both the east and west coasts of India. Besides the mining activities in Goa, mining operations in Karnataka and Orissa.       

During the year 2004, compact charging system for coke plant was commissioned and Sesa Kembla Coke Company Limited, a 100% subsidiary of the company was merged with Sesa Goa Limited with effect from 1 April 2004. During the period of 2006, Forbes Asia ranks Sesa Goa as one of Asia's 200 companies with sales greater than 1 billion US $ in its 'Best Under A Billion' study and also the Dun & Bradstreet ranks Sesa Goa as the 4th best in the Indian Mining Sector among India's top 500 companies. In 2007, the Vedanta Resources plc, a diversified metals and mining group, listed on the London Stock Exchange acquires 51% controlling stake in Sesa Goa Limited from Mitsui & Co. Ltd. The Company Will invest Rs3, 000 crore to double ore capacity to 20-25 million tones a year and increase pig iron, coke capacity in the year 2008.    

Leverage:

Operating Leverage affects a firm's operating profit; DOL indicates the fluctuation in EBIT with a unit percentage change in sales. For Mar-10, if sales increase by 1%, the EBIT will change by 0.60 times.

OPERATING LEVERAGE|
Mar-07| 0.80|
Mar-08| 1.90|
Mar-09| 0.43|
Mar-10| 0.60|

Financial leverage affects earning per share of the company. DFL is measured as percentage change in EPS for every unit change in EBIT. The firm leverages upon the debt. The variability of EPS may be caused by change in EBIT and is called financial risk.

FINANCIAL LEVERAGE|
Mar-07| 1.10|
Mar-08| 1.02|
Mar-09| -5.19|
Mar-10| 0.89|

Combined leverage measures the change in EPS with a unit change in Sales. High value of combined leverage indicates high return and at the same time high financial and operating risk.

TOTAL LEVERAGE|
Mar-07| 0.87|
Mar-08| 1.94|
Mar-09| -2.23|
Mar-10| 0.54|

Financial Statement analysis:
Year| 2005-06| 2006-07| 2007-08| 2008-09| 2009-10|
Liquidity Ratios| | | | | |
Current Ratio| 2.136429831| 2.229822565| 2.265734883| 2.891278807| 3.902479446| Quick Ratio| 1.06545566| 1.155055422| 1.490333971| 2.472480795| 3.524118584| Turnover Ratios| | | | | |

Accounts receivables turnover ratio| 9.739281003| 9.10978574| 10.74934722| 14.525493| 19.9227564| Average Collection period| 36.96371426| 39.5179437| 33.49040576| 24.7840125| 18.06978877| Inventory Turnover | 3.617161867| 3.41624413| 5.305768229| 9.713703001| 8.774283216| Profitability Ratios| | | | | |

Gross Profit Margin Ratio| 0.471280132| 0.461170158| 0.633239501| 0.526944576| 0.519422347| Net Profit Margin Ratio| 0.304379237| 0.3005539| 0.414112644| 0.377810395| 0.38604037| Asset Turnover| 1.492098515| 1.2655186| 1.446589602| 1.22322517| 0.692400804| Return on Equity| 0.596437676| 0.46961953| 0.694219184| 0.525443602| 0.35101211| Ownership Ratios| | | | | |

EPS | 131.4299961| 147.7199899| 371.4200061| 24.28999999| 24.94000001| Price-Earning Ratio| 0.007608613| 0.006769565| 0.00269237| 0.041169205| 0.040096231| DPS| 38.37203153| 38.23715194|...
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