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CORPORATE FINANCE

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  • Post Date 2018-11-08T12:48:26+00:00
  • Post Category Research Paper Queries

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CORPORATE FINANCE

Financial Performance of Apollo Tyres in Recent Years

Santanu is looking for a company that has high growth. The revenue growth for the company is considerably high as illustrated in Table 1.0 below. The revenue grew by an average 28.86% over the last five years (from 2008 to 2012). This indicates that the company market size is expanding, which is positive news to the investor.

Table 1.0 Apollo revenue growth

Year 2008 2009 2010 2011 2012
Revenue 46.9 49.8 81.2 88.7 121.5
Revenue Growth   6.18% 63.05% 9.24% 36.98%

The net profit growth has been very volatile caused mainly by the volatility of the costs of goods sold. Given that dividend to shareholders is given from retained earnings (obtained from unappropriated net income), income volatility points out to inconsistent yield. High net income volatility rhymes with high-risk investment strategy. The net income growth for the Apollo Company is illustrated in Table 2.0 below

Table 2.0

Year 2008 2009 2010 2011 2012
Net Profit 2.7 1.4 6.5 4.4 4.1
Growth   -48.15% 364.29% -32.31% -6.82%

Apollo has been relaying highly on debt financing with a debt to equity ratio increasing from 0.6 in 2008 to 1.0 in 2012. This increases the company’s debt payment obligations and finance costs (which lowers the amount available to be appropriated to shareholders). However, higher reliance on debt can be positive news for the shareholders because there is low shareholding dilution. The EPS (Basic) for the company reduced from 3.93 in 2011 to 3.6 in 2012. On the other hand, the liquidity of the company increased over the years as indicated in Table 3.0 below where the current ratio increased from 1.5 to 1.71. This means that the ability of the company to meet its obligations increased over the year.

Table 3.0

Current ratio
Year 2007 2008 2009 2010 2011 2012
Current assets 1647 1484 1423 2439 3155 3663
Current liabilities 1097 806 700 1614 1969 2147
Current ratio 1.50 1.84 2.03 1.51 1.60 1.71

The growth in the company’s profitability and liquidity is a good indicator of the high future performance of the co……………………………


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