FINANCIAL STATEMENT ANALYSIS

ATUL LTD

Being a public limited company domiciled in Gujarat, India which commenced its business in
1947, the company focusses on serving wide variety of industries including adhesives,
construction, electrical and electronics, pharmaceuticals, footwear etc. Since its inception, it
has expanded its business in such a way that the company has many branches outside India.
All the consolidated financial statements are in compliance with Indian Accounting
Standards, 2013.
The company has used historical cost convention method for the preparation of consolidated
financial statements. Moreover, the company has got many subsidiary companies so that both
consolidated and standalone financial statements are provided.
The motto of the company is spread across two segments namely life science chemicals and
performance and Other chemicals.
Biological assets (both mature and immature plants) are mentioned under current assets as
well as non-current assets without including them under the category of inventories as there
might be some international conventions to be followed by a chemicals-related company.
It is interesting to note that the cost of materials consumed has reduced drastically in the year
2019-20 as compared to 2018-19. Other particulars are comparable. It can be inferred that the
profit for the year 2019-20 can be attributed to the reduction in cost of materials consumed.
Equity share capital has been the same (Rs: 29.68 cr) for the last two years, signalling that
there were no changes in authorised capital, issued capital and paid-up capital in these years.
Profit for the year has increased from Rs.436.02 cr in the year 2018-19 to Rs. 670.91 cr in
2019-20. The steady increase in profits can be attributed to the decrease in expenses related to
the consumption of cost of materials.
There has been a steady increase in retained earnings from the year 2018 (Rs. 1663.51 cr),
2019 (Rs 2064.79 cr) to the year 2020 (Rs 2576.56 cr). Thus, it can be inferred that the
company is taking in more money in revenue than it pays out in expenses. It can also be
concluded that the company is providing a safety net against unexpected expenses, for
example legal fees. Or it can also be due to the possibility of changing or replacing assets in
near future as the company is an older one.
The securities premium has not been changed for the last 3 years (Rs. 34.66 cr) which means
that the shares were issued at the same rate as compared to the par value/ nominal value of
the shares.
Not much change can be seen in general reserves for the last 3 years from 2018 to 2020,
which implies that the company is in a better position to meet uncertain financial
contingencies in near future.
The company has paid dividends on equity shares to the tune of Rs 150 cr in the year 2019-20
as compared to Rs. 39.54 cr in the year 2018-19. It suggests that the company is performing
good and the financial health is stable.
Non – controlling interests have been increased from Rs 23.80 cr in the year 2019 to Rs.
26.37 cr in 2020 which means that the investment by shareholders who own less than 50 % of
the total outstanding shares have improved indicating that the company is in a stable position.
There has been a steady increase in retained earnings from the year 2018 (Rs. 1663.51 cr),
2019 (Rs 2064.79 cr) to the year 2020 (Rs 2576.56 cr). Thus, it can be inferred that the
company is taking in more money in revenue than it pays out in expenses. It can also be
concluded that the company is providing a safety net against unexpected expenses, for
example legal fees. Or it can also be due to the possibility of changing or replacing assets in
near future as the company is an older one.
Dividend on equity shares including dividend distribution tax in the year 2019-20 is around
Rs. 151.50 crores as compared to Rs. 39.54 crores in the year 2018-19. It can be inferred that
though the company has given dividends of more than Rs 100 crores in the year 2019-20 as
compared to 2018-19, the ‘other equity’ total has increased steadily. It can be attributed to the
increase in total comprehensive income. Moreover, despite a significant decrease in ‘other
comprehensive income’ due to FVOCI equity instruments in the year 2019-20 as compared to
2018-19, there is a remarkable improvement in ‘other equity’ total.
The company has been maintaining stable current ratio which means that the company is in a
position to meet short term liabilities with its short-term assets.
The inventory turnover ratio has not been satisfactory which means that the management is
not maintaining the industry standards of replacing working capital.
The company is almost debt-free since the year 2018. It can be inferred from the fact that
though the company has certain short-term liabilities, long-term term to total capital is
negligible.
The company has been maintaining stable interest coverage ratio which means that the
company is efficient to adjust between costs and revenue to generate sufficient profits.
Operating profit margin has improved slightly. It can be inferred that the operational
efficiency has been improved.
GPM and NPM has also been showing significant improvement. Hence it can be concluded
that the financial health of the company is stable and the company is in well-positioned to
generate enough profit out of sales.
The company has Return on Equity ratio of 22.38% which means that the company can
generate enough profit out of shareholder’s income.
Moreover, net income to total assets has also improved indicating the efficient utilisation of
assets.
Total assets turnover, working capital turnover and operating assets turnover has decreased
from 2019 to 2020 which means that the company is investing in account receivables which
could lead to bad debts.
The company has much got much higher P/E ratio of 32.91 which means that the investors
are willing to pay much reasonable price for a share as compared to previous years.
The dividends per share (DPS) have also improved significantly which suggests that more
and more people are ready to invest in the company.
The financial strength of the company is stable. The same can be inferred from the increase in
GPM & NPM for the last few years. The capex has been found to be greater than depreciation
value, hence the company has the ability to invest more in purchase of current investments.

The company which is one of the oldest as well as one of the best profit-making chemical
companies has been expanding its business in India as well as other parts of the world. The
share value has been around Rs. 6000- 7000 with much less fluctuation. The company could
also pay dividends each and every year depending on the investing and financing activities.