Analysis of Ceat Tyre

In: Business and Management

Submitted By prashantdhayal
Words 459
Pages 2
Analysis of CEAT Ltd.
CRISIL RATING:-- A- /STABLE
Profitability of Firm (ROTA) 1) From the analysis of assets and PBIT records we have found that PBIT has decreased from 311 to 133 and as a result of that the Return on assets decreased from 24.26 to 8.00. The reason for declining of ROTA is increase in total assets of the company. ( company took loan and purchased land, building and machinery as fixed assets)

Assets management 1) The company has made investment of Rs 625.14 Crs in purchasing plants, machinery and building in the year 2011, as a result the fixed asset ratio turnover declined from 2.76 to 2.37. 2) The current assets to sales ratio has increased from 2.78 to 3.02 because the net increases in sales were more than of net increase in current assets. Cost management 1) Overall raw material price is increased by 45% to 50% in the year 2010- 2011 as compared to 2009-2010 because at the end of 2010 there was significant shortage in natural rubber, one of the most critical inputs in tyre making. The supply demand mismatch has led to a steep rise in the prices of natural rubber, and because of this there was a decrease in PBIT and in ROTA. 2) The raw material to sales ratio has increased from 65.81 to 74.52 because of steep rise in the price of natural rubber. Leverage management 1) Company has took secure loan (term loan) of Rs 300 Crs from bank in 2011 as result of that the interest liability and interest coverage ratio of company has declined to 1.26 in 2011 which is below to the lower limit of coverage ratio i.e. 1.5. The company can encounter difficulties in payment of interest in near future. 2) Leverage risk of company has increased from 1.04 to 1.57 because company has purchased fixed assets (plant & machinery) by taking secured loan. 3) Debt to total capital ratio has increased from…...

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