Hindalco: A peep into past-IV - Views on News from Equitymaster

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Hindalco: A peep into past-IV

Aug 5, 2008

In the last article, we saw the performance of balance sheet of Hindalco between the period 1999 and 2002. Now let us track the performance of the same between the period 2003 and 2007. This was the period during which it merged copper business of Indo Gulf with itself and consequently, the business model of company under went a change.Let us have a look at the standalone balance sheet of the company and how has it changed between the period 2003 and 2007.

Considering the assets side first, net fixed assets of the company grew at a CAGR of 15%, which can be attributed to a major capacity expansion drive and the merging of Indo Gulf's copper division. The investments of the company grew at a CAGR of 35%, mainly on account of huge cash generated through operation that was invested in subsidiaries and treasury.

The working capital of the company grew at a CAGR of 18% at the same time when topline of the company grew at a CAGR of 38%. If we exclude cash from it, then it grew at a CAGR of 17% during the period under consideration. The debtor's days were reduced from 37 in FY03 to 28 in FY07. However, days in inventory increased from 67 in FY03 to 79 in FY07.

On the liabilities side, the company's debt increased at a CAGR of 32%. The net worth of the company grew at a CAGR of 19%. Consequently, the debt to equity ratio rose from 0.4 in FY03 to 0.6 in FY07.

To conclude, although Hindalco was able to affect a significant rise in its topline and profits on account of the addition of the copper business, the balance sheet of the company weakened a bit during the period as its debt to equity ratio increased from 0.4 to 0.6.


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