1.1Font
§ Times New Roman Size 12.
§ Topic headings may be in Font Size 14, Bold and Underlined
1.2 Alignment
§ The report’s content is to be aligned justified.
§ In case of tables depicting financial/operational information, columns containing figures should be centrally aligned both vertically as well as horizontally.
§ Bulleted text must be in alignment with the content of preceding paragraph. This can be adjusted by the option: Format à Bullets and Numbering à Customise à Bullet Position à Indent at
1.3 Page Margins
§ Ensure adequate margins on all four sides. (Margins in the range of 0.7” to 1“ are suggested)
1.4 Highlighting
§ The theme colour (e.g. Dark Teal) selected for a particular report should be in synchronization with the company’s logo.
§ The company name, e.g. Surya Agro & Foods Limited (Surya), used throughout in the theme colour and formatted bold. Its brands would be in bold & italics and in the theme colour e.g. Priyagold.
§ Competitors’ names are to be in bold without colour e.g. Britannia and their brand names in bold & italics e.g. Tiger.
1.5 Currency for financials
§ Indian companies in Rs. Crores
§ Foreign companies in denomination of millions.
§ If the 5-year financials for an international company (e.g. one reported in Japanese Yen) are to be converted in another currency, (e.g. US$) use exchange rates for each of the year-end dates. Historical conversion rates are available at http://www.x-rates.com/cgi-bin/hlookup.cgi
1.6 Data Source
§ The source from which particular figures (e.g. Market share) are obtained (e.g. websites, annual reports, research reports, investor meet transcripts etc.) should be indicated by means of an endnote/footnote. (Insert à Footnote à Endnote).
§ In case of repeated use of the same source in a particular report, use the superscript option. (Formatà Font à Effects à Superscript).
§ The date of the source should be checked for assessing whether the information is relevant in the current period.
1.7 Data Consistency
§ Flow of data is to streamlined across the Excel worksheet to ensure consistency across the various segments in the report. One may use the V-Lookup function in this regard.
§ With a slight company-specific customisation, it is possible to have a chart showing trends in profitability and cost structure generated automatically, once you enter figures in the “5-year financials” sheet.
§ Avoid multiple data–entry points. For e.g. if you intend to calculate the EV/EBITDA multiple into the “ Key Stock Data” sheet, the V-Lookup function can draw the figures for EBITDA from the “5-year financials” sheet and Secured & Unsecured Loans and Cash from the “Balance Sheet” sheet.
1.8 Google Search
§ Use the Advanced Search à “Date, usage rights, numeric range, and more” option to select the period for which the information is to be obtained (e.g. last 24 hrs, last 1 year etc.).
§ Refine your search to draw specific information regarding your topic from a particular website using the syntax “topic”
1.9 Annual Reports
§ Year-wise arranged according to business segments are available at Startà Runà \\10.10.31à productsà arà business related.
§ Also available at http://itc.cmieonline.com/ in the “Company Report” option.
§ Annual reports and interim results of a listed company are available in the “Investor Relations” section of the company’s website.
§ In case of an unlisted company, a request is to be communicated to the CMIE administrator.
§ In case of company is proposed to be listed, the Draft Red Herring Prospectus may also be accessed from www.sebi.gov.in
1.10 Data Representation via Charts
§ Colours selected should adhere to a synchronization scheme. Their brightness must be moderated via the option: Formatà Cells à Fill Effects option.
§ In case of line graphs, it is not always necessary to fill the columns with colours. Merely coloring the border with the theme colour is sufficient.
§ Use a combination of the primary as well as the secondary axis in certain scenarios while preparing line graph (e.g. to show installed & actual capacities as well as capacity utilization %, the latter can be plotted on a scale of “0 to 100” along the secondary axis
§ It is suggested that pie charts are to have the “data labels” as well as “ data values” along the respective slices; instead of the “data labels” appearing in a separate legend key.
§ Re-use a same chart in another report by simply copying and pasting it in another sheet and changing the source data.
2. ELEMENTS OF THE REPORT
2.1 Logo & Company Name
§ The company’s logo is taken from its website using the Zapgrab tool.
§ Pictures to be pasted in MS-Word using the Edità Paste Special à Picture Enhanced Metafile option.
§ The text wrap feature is activated by right clicking on the picture à Format Picture à Layout à Square. This ensures that the company’s name (in font size 24 to 30) is arranged beside the logo.
§ The Wordart feature in MS-Word could be used for writing the company’s name beside the logo.
2.2 Introduction
To be drafted in a manner so that it gives the following details.
§ Year of incorporation and change in name and form (e.g. from private limited to public limited or the company being formed subsequent to a demerger) over the years
§ Corporate headquarters
§ Promoter group (domestic/international) and changes in ownership structure over the years
§ The corporate structure, in case of a multi-company group, could also be shown in form of a hierarchical chart (Refer Surya Agro / Natra S.A. report) or table (Refer Royal Orchid Hotels report)
§ The company’s product portfolio as well as its geographical footprint and how the same has evolved over the years.
§ Its turnover and net profit for the immediately preceding financial year.
2.3 Product Portfolio
§ Product range as well as the brands are to be mentioned, possibly in form of a table.
§ The brand portfolio could also be depicted pictorially. (Refer reports on Perfetti/Surya Agro/Cavinkare).
§ Recent product launches/ foray into new business lines/ discontinuation of select product categories.
§ Market share in individual product categories (Mention specifically whether the same is in terms of volumes or value) Indicate whether the company has a leadership status in select product ranges/geographic territories
§ Product-mix depicted for a particular financial year could be represented in form of pie charts (For paper companies, the data is available in “Crisinfac” reports at http://10.18.1.12:8080/Crisilfe/control/validatenewaccount. In some companies the data is obtained in the MD&A section of Annual Reports).
§ The business verticals in case of an IT company (e.g. Auto Electronics, Semi-conductor and Manufacturing )
§ The property portfolio in case of a hotel. Mention details like the aggregate number of rooms, their city-wise breakup etc. to highlight concentration risk, if any.
§ The hotel chain could be having a management contract with a property’s owner, wherein it manages the same in exchange of a management fee (generally computed as a percentage of revenue generated). This business model, called “Asset Light Strategy” is followed in companies like Fortune Park Hotels Limited, a subsidiary of ITC.
§ FMCG companies often identify the “Power Brands” within their portfolio (e.g. HUL/Godrej Consumer Products Limited). These are to be highlighted separately. Revenue generated from these brands and value ascribed to them (if a study has been commissioned in the recent past) is also to be mentioned.
2.4 Location & Capacity
§ Location of the manufacturing facilities and year in which set up.
§ Installed Capacity and Actual Production. The same along with capacity utilization percentages could be depicted in form of a chart if the company operates in primarily a single-product category. In case of multi-product categories, the data could be represented in a table.
§ Some companies get a part of their output manufactured on job-work basis. The quantities should be added to the actual production data and the fact indicated by means of a note.
2.5 Operations
§ Raw Material Linkages (e.g. for a paper company, social/farm forestry initiatives for wood, long term purchase agreements for coal, availability of water from the nearby river). Similarly a company may have a captive power plant. These could yield cost advantages, which need to be highlighted.
§ Number of clients (in case of an IT company) and addition thereon in the current period. Client retention strategies adopted (e.g. STAR Model in case of KPIT Cummins).
2.6 Distribution Network
§ The marketing & distribution network (No of consignment agents etc.) are to be indicated in case of a manufacturing/trading concern. These are often available in the company’s annual report/website.
§ An apparels company (e.g. Zodiac Clothing) could be retailing its products through ‘multi-brand outlets’ (MBOs) and / or ‘exclusive brand outlets’ (EBOs). No of such stores and details of the proposed expansion of the chain are to be indicated.
§ Mention details, if any, of its marketing efforts, in the institutional category (e.g. air lines, hotels, railways and organized retail outlets, in companies operating for e.g. in the FMCG- foods space).
§ The company could have exclusive agreements with international retail chains. These are to be highlighted.
2.7 Advertising Strategies
§ The brand positioning (e.g. “World's Finest Shirt Makers” for Zodiac Shirts) the company has adopted for its products.
§ Market segmentation strategies adopted (e.g. “Straddling the Pyramid” model of HUL)
§ Innovative strategies (e.g. introducing shampoos packaged in sachet form by Cavinkare)
§ Some companies prefer the online route as to tailor their communication strategies according to the demographic profile of the target customer base and launch portals. Mention relevant details.
§ Advertisement and sales promotion costs as a percentage of revenues and trends thereon.
2.8 Revenue and Cost Structure
§ Average price realizations are computed from the quantitative details in the “Notes to Accounts” section of the Annual Report. The same could be depicted in form of a chart. One may also compute the Compounded Annual Growth Rate (CAGR) for a five year period using the formula ((Year 5 / Year 1) ^ (1/ 5))–1
§ Use a “stack of colours” to depict the Cost Structure Pattern.
§ Item-wise details of cost per unit can also be worked out. Sometimes a particular quantity of material could be used for inter–division transfer / used in the trial run of a new facility. This fact could be highlighted via a note.
§ In case of hotels, property-wise/city-wise trends in Average Room Revenue (ARR), Occupancy and Revenue per Available Room (RevPar) could be indicated, if data is available.
§ In case of an IT company, operational performance indicators like on-shore: offshore mix of revenue, customer wise revenues (if the company derives a significant portion from selected clients) and business vertical wise revenue could be highlighted. Again state performance metrics like Revenue per Employee, where available in the Annual Report.
v In case of a paper company, cost of electricity and coal consumed per tonne of production can be computed. The data can be obtained in the Annexure to the Directors Report in the Annual Report. It is to be noted the requirement of energy varies widely with the quality of paper being manufactured and would fluctuate annually depending upon the product mix and the raw material mix being utilized for different grades and at different times.
2.9 Recent Developments
§ Proposed capacity expansions and the envisaged costs thereon.
a) Expected benefits are to be highlighted for e.g. development of in-house pulp and electricity generation facilities to yield substantial cost reduction benefits for a paper company or locational-based advantages like excise/income tax holidays (for setting up units in H.P./ Uttaranchal etc.).
b) Details of the funding pattern to be indicated. Use of debt and form thereon (e.g. convertible debentures / ECBs), internal accruals, IPO, rights issue etc.
§ Acquisitions in the recent past:
a) Location of the target
b) Purchase consideration
c) Details of the acquisition price (as a multiple of Revenues or EBITDA)
d) Mode of payment of the same
e) Strategic advantages expected (e.g. expanding the geographical footprint, enabling foray into new product categories and/or acquisition of new clients).
f) Funding pattern for the purchase consideration.
§ Joint Venture Agreements
Joint ventures entered into by the company and details thereon in terms of ownership pattern, funding, proposed geographies/business lines of operation and expected benefits.
§ Exiting particular businesses
Companies often decide to exit from non-core operations or unprofitable businesses. The deal size and rationale to be given.
2.10 International Operations
§ Details of international subsidiaries, marketing offices, branches, development centers (in case of an IT company) and design centers (e.g. in case of a apparel company) to be mentioned along with the attendant advantages.
(For e.g. Positive Packaging set up a UK International Branches set up often facilitate interaction with global consumers of flexible packaging who prefer suppliers with manufacturing facilities in cost-competitive countries along with warehousing and technical support closer to their home base.)
§ Year-wise details of exports (in terms of quantity/value) from India could be depicted in form of a graph.
2.11 Research & Development
§ Location of the company’s R&D Centre, its scope of activities and significant achievements as outlined in the company’s Annual Report (Relevant for companies in the IT, FMCG, Packaging space)
3. FINANCIALS
3.1 Balance Sheet
§ The balance sheet for the last two available years is to be given along with the Goly %. (Growth Over Last Year) column. The same should be in italics and bold if the corresponding financials are also in bold
§ Explanations to items, which merit attention, (e.g. Advance Against Retail Initiative) could be given by way of notes.
§ Ratio analysis of the capital structure as well as the liquidity position could be given (Refer report on Ratio Analysis for significance of each.
3.2 Profit & Loss Account
§ The P&L Accounts for the last five years are to be depicted along with corresponding columns for GOLY %. In case of companies which report their financials in denominations other than in “Rs. Crores”, one may model the Excel sheet so as to select the “Currency Given” and “Currency Required” to generate a conversion factor. Then, enter the figures exactly as reported (e.g. in Rs ‘000) and in the next sheet, with a bit of manual intervention, the same would be converted into the required currency (Rs crores). Alternatively use the option: EditàPaste Special à Divide to perform the above function.
§ State whether the figures are standalone/consolidated.
§ It is to be noted that GOLY % is not computed in case there is a change of sign across two years i.e. a negative figure in year 1 turns positive in year 2. You could use IF-THEN statements in Excel in the following form to take care of the conditionality. =IF (B5=0,"", (IF(C5=0,"",IF((C5/B5)>0,((C5/B5)-1)*100,""))))
§ Goly % is not computed for Increase/(Decrease) in Stock-in-trade.
§ Even if a particular company classifies “Increase/(Decrease) in Stock-in-trade” under the “Income” head; the same is to be taken in the “Expenditure” head with the sign reversed.
§ In ratio analysis, to get “Consumption of Raw materials and Traded Goods” we combine the following figures: Increase/(Decrease) in Stock-in-trade, Raw Materials Consumed and Purchase of Trading Goods The same is then computed as a % of net sales.
§ We also compute expenses and profit at multiple levels as a % of net sales. Ensure accurate linking of the cells (e.g. B24/B$9 if sales features in the 9th row in the worksheet. Even if you drag the cells to the next row, the formula will turn into B25/B$9). Alternatively use the V-Lookup function.
§ We also compute effective tax rates (Provision for taxes/PBT)
§ Grouping of the expenditure line items would vary across companies. While the significant items are to be displayed separately, the remaining should be clubbed under “Other Expenditure”.
§ In case the P & L Account is not available, the same may be constructed upto a certain extent using figures from Directors Report, Balance Sheet and the Cash Flow Statement (Refer Cavinkare report).
§ Explanations to items, which merit attention, (e.g. details of “Other Income”) could be given by way of notes.
§ Capital Employed is taken as sum of Fixed Assets (excl. CWIP), Investments and Current Assets (net of Current Liabilities).
3.3 Interim Results
§ To be indicated where applicable.
3.4 Segment Results
§ Segments Results as per AS-17 to be given, where applicable. Segment PBIT/Segment Revenue and ROCE % (Segment PBIT/ Segment Capital Employed) to be computed.
§ Ensure that the aggregate of segment revenue matches with revenue as per P &L.
§ Segment ROCE to be annualized, in case of interim results using the formula (x*12/n) where “x” represents the result for a particular period of “n” months.
3.5 Chart showing trends in dividend rate %.
§ Data available in Prowess via the option: Select Company by Name à Report à Company Report à Capital History à Dividends.
§ Alternatively sourced from Annual Reports.
4. KEY STOCK DATA
§ “Shareholding Pattern” data available in Prowess via the option: Select Company by Name à Report à Special Report à itc_shpchart.rep
§ “Promoter Group” details data available in Prowess via the option: Select Company by Name à Report à Company Report à Background à Equity Holding details.
§ The “Company Details” segment captures particular information as on a particular date.
a) This is available in Prowess via the option: Select Company by Name à Report à Special Report à master_market.rep. The report available in Prowess does not have the date. This is done by comparing the share price with that obtained from the option: Select Company by Name à Report à Company Report à Share Prices & Indicators.
§ The “Company Details” segment captures particular information as on the year-end date.
a) EPS (on a standalone basis) is obtained from the P & L Account.
b) For P/E computation, the adjusted closing price (available in Prowess) is obtained as on the year-end date.
c) Enterprise Value(EV) is computed as Market Capitalization + Loan Funds – Cash. (Refer the report on Ratio Analysis for significance of the EV/EBITDA ratio)
The market cap is available in Prowess via the option: Select Company by Name à Query by Finance /Stocks à Stock Prices & Indicators à Market Capà Daily Market Cap).
§ Obtain data for the Share Price Movement chart as follows:
a) Select Company by Name à Query by Finance /Stocks à Stock Prices & Indicators à Share Prices in a period à 30 days Adjusted Closing Price
b) Select Company by Name à Query by Finance /Stocks à Stock Prices & Indicators à Share Trading Volumes à 30 days Avg. Traded Quantity.
c) Mention the output date in the last 1-year and frequency as “Monthly”.
5. COMPETITION
§ Peer group companies are selected from the Competition Monitor list and relevant details to be furnished.
