Group 9

Corporate Finance- I
"Avenue Supermart"
Saundrya Nair – 23M2388​

Sayantika Mondal – 23M2392​

Shriya Shende – 23M2393​

Shubhansh Aasu – 23M2400​

Souparno Sarkar – 23M2402​

Suyash Singh – 23M2404​

 1 About Avenue Supermart

2 Balance Sheet Analysis

Table Of 3 Income Statement Analysis

Contents 4 Cash Flow

5 Ratio Analysis

6 Du Pont Analysis

7 Working Capital Management

8 Financial Policies
About Avenue Supermart
•Founded : 2000​
•Headquarters: Mumbai, India​
•Industry: Retail​
•Products: Grocery, staples, daily essentials, dairy & frozen, fruits &
vegetables, home & personal care, bed & bath, home appliances,
crockery, footwear, luggage, toys & games, plastic containers, kid's
apparel, women's apparel, men's apparel​
•Number of stores: 336​
•States with DMart stores: Maharashtra, Gujarat, Andhra Pradesh,
Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil
Nadu, Punjab, Rajasthan.​
•Established as a private limited company under the Companies
Act, 1956. ​
•Avenue Supermart is a corporation.
Balance Sheet Analysis (FY18-
FY23)​
Dividend Debt (cror
FY​ PAT​ Net Sales​ OCF​
per Share​ es)​
FY18​ 1417.1​ 50052.2​ 1​ 12,000.00​ 2592.7​
FY19​ 1744.4​ 56656.9​ 1.5​ 14,000.00​ 2989.8​
FY20​ 2235.6​ 66828​ 2​ 16,000.00​ 3507.2​
FY21​ 2668.1​ 75410.1​ 2.5​ 18,000.00​ 3949.4​
FY22​ 2946​ 85604.2​ 3​ 20,000.00​ 4327.9​
FY23​ 3337.4​ 97155.3​ 3.5​ 22,000.00​ 4748​

Avenue Supermarts has a strong track record of profitability and growth.

The company's PAT, net sales, and OCF have all grown steadily over the
past five years. Avenue Supermarts has also been increasing its dividend per
share, reflecting its commitment to returning value to shareholders.
 Balance Sheet Analysis (FY18-
FY23)​
 Avenue Supermarts has generated strong and consistent profitability, with PAT
growing at a CAGR of 30.4% over the past five years.​
 The company has been able to maintain a healthy dividend payout ratio, indicating its
commitment to returning value to shareholders.​
 Avenue Supermarts' OCF has been growing steadily, providing a solid foundation for
future growth and debt repayment.​
 Avenue Supermarts' debt position is manageable and does not pose a significant risk
to the company's financial health. The company should continue to monitor its debt
levels and ensure that it is able to generate sufficient OCF to cover its debt
obligations.
 Balance Sheet Analysis (FY18-
FY23)​
Environmental Performance:​
 Avenue Supermarts has implemented a number of initiatives to reduce its energy consumption, water usag
and waste generation.​
 The company has set a goal of reducing its scope 1 and 2 emissions by 50% by 2030.​

Social Performance:​
 Avenue Supermarts is committed to continuous learning and development for its employees.​
 Avenue Supermarts provides benefits including medical insurance, accident insurance,
life insurance, retirement plans, and various recreational and wellness programs.​
Income Statement Analysis
(FY19-FY23)

 The revenue of the company has been growing steadily except the year 2020-21. The
reason for the plateau was the COVID lockdown. After that, the company has grown
its revenue at a better rate than pre COVID rate.​
 The income from other income sources suddenly increased in 2020-21. The primary
reason was that the company received Interest on deposits and advances of around
₹178 Cr.
 Net Working Capital (FY19-
FY23) Having high level of working capital has helped
​ 2019​ 2020​ 2021​ 2022​ 2023​ Avenues Supermart in multiple ways:​
2,029.0 2,292.2 3,960.8 3,351.1 5,337.4
Current Assets​ 5​ 7​ 9​ 4​ 1​
1,212.5 1,071.8 1,094.2 1,332.8  Improve bargaining power: Which has helped it keep
Current Liabilities​ 7​ 721.81​ 5​ 9​ 7​
prices of goods very low in the D-Mart stores.​
Net Working 1,570.4 2,889.0 2,256.8 4,004.5
Capital​ 816.48​ 6​ 4​ 5​ 4​  Take advantage of growth opportunities: Sudden
investment opportunities can be captures if the
company has high NWC.​
 Reduce risk of default: Reduce the risk of defaulting
on obligations and facing financial distress or
bankruptcy.​
 Net Working Capital (FY19-
FY23) Having high level of working capital has helped
​ 2019​ 2020​ 2021​ 2022​ 2023​ Avenues Supermart in multiple ways:​
2,029.0 2,292.2 3,960.8 3,351.1 5,337.4
Current Assets​ 5​ 7​ 9​ 4​ 1​
1,212.5 1,071.8 1,094.2 1,332.8  Improve bargaining power: Which has helped it keep
Current Liabilities​ 7​ 721.81​ 5​ 9​ 7​
prices of goods very low in the D-Mart stores.​
Net Working 1,570.4 2,889.0 2,256.8 4,004.5
Capital​ 816.48​ 6​ 4​ 5​ 4​  Take advantage of growth opportunities: Sudden
investment opportunities can be captures if the
company has high NWC.​
 Reduce risk of default: Reduce the risk of defaulting
on obligations and facing financial distress or
bankruptcy.​
Operational Cash Flow Statement (FY19-
FY23)​​
 Cash flow analysis for operations​

 The company is growing at a very good rate. Their net operating cash flow has increased around 4 times (i.e. 1000cr) in the last 5 years. Their profit ha

also increased considerably around 1300cr.​

 Their net operating cash flow has decreased in the last year (2022) even though there was a huge surge in the profit. This is because of an increase in ta

paid and an increase in working capital (increase in inventories and decrease in accounts payables) ​

 In 2020 there was a huge surge in net cash flow from operations, this is because of an increase in non-cash items i.e. depreciation.​

 From 2018 to 2019 they doubled their inventory which was compromised a bit the next year. This also contributes to the increase in net cash flow from

operations in 2020.​
 Investing and Financing Cash Flow​

​
 The company’s net investment cash flow is very high in 2017 and 2020 because of very high other investments.​

 During those two years (2017 and 2020) they have increased cash by issuance of stock to meet their investing demand.​

 The firm is maintaining cash flow very well by mostly financing through equity and not debt. They are not borrowing money in cash as large which is

good thing.​

 They are constantly investing in capital expenditure, especially in properties which is good for a retail firm.​

 For the past 2 years they have not borrowed and only repaying the debt. They are maintaining their long-term investment also from operating revenu

which is highly positive for the firm.

Ratio & Dupont Analysis​​

​
 Ratio & Dupont Analysis​
RATIO ANALYSIS :- ​

 Gross Margin: Decreased from 14.08 in 2018 to 12.49 in 2022, indicating a potential rise in cost of sales or price reductions.​

 EBITDA Margin: Deteriorating from 9.00 in 2018 to 8.09 in 2022, suggesting a possible increase in operating costs or decreased operational efficiency.​

 Operating Margin: Down from 7.96 in 2018 to 6.50 in 2022, reflecting tighter control on operating expenses may be needed.​

 Net Margin: Decrease from 5.38 in 2018 to 4.84 in 2022; profits after taxes are shrinking relative to revenues.​

 ROE: Fell dramatically from 42.79 in 2018 to 11.54 in 2022; shareholder returns have significantly weakened.​

 ROA: Declined from 14.25 in 2018 to 10.25 in 2022, indicating reduced profitability from assets over the years.​

 Current Ratio: Fluctuating but generally healthy; indicates good short-term liquidity but decreased from 2.88 in 2018 to 2.83 in 2022.​
 Ratio & Dupont Analysis​
RATIO ANALYSIS :- ​

 Quick Ratio: Improved significantly in 2019 but deteriorated thereafter, caution needed as the company may struggle to cover immediate liabilities.​

 Cash Ratio: High volatility; peaked in 2019 but lower in other years, suggesting inconsistent cash position against short-term obligations.​

 Total Debt Ratio: Shows a controlled level of debt relative to assets, with a notable increase in 2021, slightly reduced in 2022.​

 Debt-Equity Ratio: Maintained a steady low, indicating a conservative approach to leverage; however, a spike in 2021 requires monitoring.​

 Equity Multiplier: Consistent with moderate fluctuations; indicates stable leverage, although there was an increase in 2021, suggesting a slight rise in debt

usage.

 Total Debt Ratio: Shows a controlled level of debt relative to assets, with a notable increase in 2021, slightly reduced in 2022.​

 Debt-Equity Ratio: Maintained a steady low, indicating a conservative approach to leverage; however, a spike in 2021 requires monitoring.​

 Equity Multiplier: Consistent with moderate fluctuations; indicates stable leverage, although there was an increase in 2021, suggesting a slight rise in debt

usage.
 Ratio & Dupont Analysis​
DUPONT ANALYSIS :- ​
 ROE 2022: Solid return on equity, indicative of effective equity use to generate profits, though lower
compared to 2018's peak.​

 Profit Margin 2022: Consistent profitability with minor fluctuations; indicates a stable ability to control
costs relative to revenue.​

 Asset Turnover 2022: Healthy sales generation from assets; slight decline from prior year, but still
maintains robust efficiency levels.
 Working Capital Management​​
Working Capital Shift:​
•2019 to 2020: 1621.9 − 855.7 = 766.2 cr (Increase)​
•2020 to 2021: 2955.3 − 1621.9 = 1333.4 cr (Increase)​
•2021 to 2022: 2224.6 − 2955.3 = −730.7 cr (Decrease)​
•2022 to 2023: 3981.4 − 2224.6 = 1756.8 cr (Increase)​
•​
Observation:​
•Significant fluctuations, with a substantial increase in 2020 and 2023.​
​
Implications:​
•Increasing Working Capital: The substantial increase from 2019 to 2023 suggests that Avenue
Supermart has been investing more in its short-term assets like inventory, receivables, and other current
assets.​
•Business Expansion or Inventory Buildup: A rising trend may indicate business expansion, increased
sales, or a buildup of inventory to meet growing demand. However, it could also signify inefficiencies in
managing working capital.​
 Operating Cycle​​
 2019 to 2020: 55.87 − 49.54 = 6.33 days (Increase)​
 2020 to 2021: 68.24 − 55.87 = 12.37 days (Increase)​
 2021 to 2022: 58.71 − 68.24 = −9.53 days (Decrease)​
 2022 to 2023: 62.79 − 58.71 = 4.08 days (Increase)​

Observations:​Increase in 2020 and 2021, followed by a decrease in 2022 and a subsequent increase in
2023.​

Implications:​

 Fluctuations in Operating Cycle: The operating cycle is the time it takes for a company to convert its inventory
into cash. The fluctuations suggest changes in inventory turnover, accounts receivable, and accounts payable.​

 Increased Operating Cycle in 2021: The spike in 2021 might indicate delays in collecting receivables or
managing inventory efficiently. This could be due to various factors such as industry dynamics, economic
conditions, or internal operational challenges.​
 Cash Cycle​​
 2019 to 2020: −36.94 − (−19.95) = −16.99 days (Increase)​
 2020 to 2021: −25.94 − (−36.94) = 11.00 days (Increase)​
 2021 to 2022: −16.75 − (−25.94) = 9.19 days (Increase)​
 2022 to 2023: −7.33 − (−16.75) = 9.42 days (Increase)​

Observations:​Consistent increase in the cash cycle over the years.​

Implications:​

 Negative Cash Cycle: A negative cash cycle means the company is receiving cash from its sales before it has to
pay its suppliers. It's generally a positive sign, indicating efficient cash management.​

 Improvement in Cash Cycle: The reduction in the cash cycle from -36.94 days in 2019 to -7.33 days in 2023
suggests that Avenue Supermart has become more efficient in managing its cash flow, possibly negotiating better
payment terms with suppliers or improving collections from customers.​
​
 Potential reasons for changes in
working capital, operating cycle and
cash cycle
 Business Expansion: The increase in working capital might be linked to the company's expansion,
leading to higher inventory and receivables.​

 Supply Chain Challenges: The fluctuations in the operating cycle could be due to supply chain
challenges, affecting the timely conversion of inventory to sales.​

 Efficiency Improvements: The improvement in the cash cycle suggests that Avenue Supermart has
become more efficient in managing its cash flows, which could be attributed to better working capital
management practices.
 Short-term financial policies​
 Avenue Supermarts' short-term financial policies are focused on maintaining a healthy working capital position.
The company's working capital has been positive for the past five years, which means that it has enough current
assets to cover its current liabilities. This is a good sign that the company is able to meet its short-term obligations.​

 One of the ways that Avenue Supermarts manages its working capital is by controlling its inventories. The
company's inventories have increased by 97% over the past five years, but this has been offset by an increase in
trade payables of 220%. This suggests that the company is able to negotiate favorable terms with its suppliers.​

 Another way that Avenue Supermarts manages its working capital is by collecting its receivables quickly. The
company's days sales outstanding (DSO) has decreased from 35 days in 2018 to 23 days in 2022. This means that
the company is collecting its receivables more quickly, which is freeing up cash that can be used to pay bills or
invest in growth.​

 Overall, Avenue Supermarts' short-term financial policies are sound and have helped the company to maintain a
healthy financial position. The company's focus on working capital management, inventory control, and
receivables collection has helped it to generate strong cash flow and grow its business.​
 Long-term financial policies​
 One of the key long-term financial policies of Avenue Supermarts is to invest in growth opportunities. The
company is expanding its store network and investing in new technologies to improve its efficiency and customer
experience. Avenue Supermarts is also investing in new products and brands to meet the evolving needs of its
customers.​

 Another key long-term financial policy of Avenue Supermarts is to maintain a strong balance sheet. The company
has a low level of debt and is generating strong cash flow. This gives Avenue Supermarts the flexibility to invest in
growth opportunities and return capital to shareholders.​

 Avenue Supermarts is also committed to returning capital to shareholders through dividends and share
repurchases. The company has a track record of increasing its dividend payout and has repurchased a significant
amount of its shares in recent years.​

 Overall, the long-term financial policies of Avenue Supermarts are sound and are designed to drive sustainable
growth and create shareholder value. The company is well-positioned to continue to grow and thrive in the years to
come.
Credit Management​
 Credit Management​
 The company has increased the cash and its equivalents in 2023. It was also increased in 2021, which shows that
they can liquidate money easily when needed.​

 Their inventory has been gradually increasing, which won’t be an issue until they maintain the cash cycle very
well.​

 Their current liabilities are very low as compared to current assets. They will be able to manage short-term debts
very well.​

 Their accounts payables are increasing and are about half of the current liabilities and lower than accounts
receivables which shows that they maintain credit with suppliers and buyers very well. ​

 Their short-term debt is zero. This is very good as they don’t want to pay any interest. ​

 Their long-term debt is also low. They finance their assets mostly by shareholder equity. This reduces additional
financing expenses in terms of interest.​

 Their shareholder equity is 8 times the total liability which is enormous.​

 Investor Management​
 Loyal Shareholder Base: Avenue Supermarts has cultivated a strong shareholder base with a long-term
investment horizon, fostering a culture of trust and confidence.

 Responsive Investor Relations: The company's investor relations team boasts a 95% response rate to investor
inquiries and has conducted over 100 investor meetings in the past year.

 Timely and Transparent Communication: Regular issuance of quarterly financial reports, press releases, and
investor presentations ensures timely and transparent dissemination of information.

 Investor Feedback-Driven Approach: Actively seeking and incorporating investor feedback through meetings,
surveys, and one-on-one interactions underscores the company's commitment to investor-centric decision-making.

 Unwavering Commitment to Corporate Governance: Adherence to high standards of corporate governance,

including transparency, accountability, and ethical business practices, instills investor confidence and strengthens
the company's reputation.
THANK YOU