Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
NALCO: A peep into past IV - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Aug 12, 2008

    NALCO: A peep into past IV

    In the last article, we saw the performance of balance sheet of Nalco between the period 1999 and 2003. Now let us track the performance of the same between the period 2003 and 2007.

    Let us first consider the assets side of the company. Net fixed assets of the company declined at a CAGR of 2.4%. This was due to no major capex taking place and continuous depreciation of assets. The average capex for the period stood at Rs 3.3 bn, lower than the average depreciation for the period, which stood at Rs 3.9 bn. The investments of the company declined from Rs 2 bn m in FY03 to nil in FY05. This was because the company seemed to have sold of its investments and increased its cash balance.

    The working capital of the company increased from negative Rs 5.8 bn in FY03 to Rs 31bn in FY07. But if we were to exclude cash from the working capital, then the company still worked with a negative working capital. The inventory days declined from 62 in FY03 to 35 in FY07 and debtors days from 13 in FY03 to 2 in FY07.

    On the liabilities side, the company showed an excellent performance and made the company debt free by FY05. The company paid back the total debt of Rs 13 bn that resided on its balance sheet as at the end of FY03, within two years. The fact that the company did not have to undertake significant capex and also reduced its working capital needs helped it repay debt in such a quick time.

    The net worth of the company grew at a CAGR of 23%. This can be owed to the huge profits generated by the company during the period under consideration. Since the company entered the period under consideration with a moderate RONW of 16%, the growth in net worth remained lower than the overall PAT growth of 46% despite a drastic reduction in dividend payout. However, it should be noted that by FY07, the company's RONW had improved to a strong 31%.

    Thus, as can be seen from the above paragraphs, the company remained a huge cash-generating machine between FY03 and FY07. It not only managed to grow its profits at a rapid pace, lower working capital and virtually no capex ensured a hefty cash balance at the end of FY07. Just to put things in perspective, the company's cash and equivalents grew an astounding 59 fold between FY03 and FY07! No wonder, the markets rewarded the company handsomely as its stock price gave compounded returns of 26% between 2003 and 2007.



    Equitymaster requests your view! Post a comment on "NALCO: A peep into past IV". Click here!


    More Views on News

    Hindalco Industries: Deleveraging Kicks in, One-Offs Hurt the Bottomline (Quarterly Results Update - Detailed)

    Aug 22, 2017

    Hindalco Industries has reported a healthy growth in the topline on the back of Higher volume and realisation for both Aluminium and Copper segments. However, the bottomline declined marginally primarily on the back a provision of Rs 1.04 billion.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 22, 2017 (Close)



    Detailed Financial Information With Charts