Description
Presentation on planning for sustainable growth for TISCO
PLANNING FOR SUSTAINABLE GROWTH OF TISCO
1
To ascertain the growth potential of a company, given its current financial conditions, financial policy goals to be considered are: •Target sales growth •Target ROI •Target dividend payout
•Target D/E
2
Formula
• Sustainable growth = Assets Turnover * Profit Margin * Leverage factor * Retention ratio * Leverage
3
Calculations
Assets Profit Turnover Margin
Sales / Net Assets PBIT / Sales
Leverage Retention Leverage Factor Ratio
PAT / PBIT Retained (1 + D/E) Earnings / PAT
=(1 + 2739.70 / 7059.92)
=16053.48 =5484.08 / =3474.16 / =3272.52 / / 12143.30 16053.4 5484.08 3474.16
= 1.32
= 0.34
= 0.634
4
= 0.94
= 1.39
• Sustainable Growth = 1.32 * 0.34 * 0.634 * 0.94 * 1.39 = 0.3718 or 37.18%
5
Key Financial Ratios
EBITDA Margin
50% 40% 30% 20% 10% 0%
PAT Margin
44% 20%
25% 20% 15% 10% 5% 0% FY'03 FY'04 Apr-Dec FY'05
24%
3%
FY'02 FY'03 FY'04 Apr-Dec FY'05
FY'02
Return on Equity (*)
75% 50% 25%
Return on Invested Capital (*)
61%
40% 30% 20%
35%
6%
0% FY'02 FY'03 FY'04 Apr-Dec FY'05
10% 0%
5%
FY'02 FY'03 FY'04 Apr-Dec FY'05
6
Can TISCO sustain higher growth rate, say 48%? New profit margin to sustain growth rate of 48% = 0.48/(1.32 * 0.634 * 0.94 * 1.39) = 0.44
7
Implications
• Assuming that it cannot earn a profit margin of 44%, but still wants to grow at 48%, then the company will have to revise its financial policies or resort to external equity.
8
Emerging Global Steel Scenario – Demand Shift Developed to Populous Nations
A potential for exponential growth
Peak Point (typically between 500-700 kg/person) Point of Saturation Singapore USA Point of Inflection Trigger Point
Per Capita Steel Consumption
India Singapore Japan EU-15 USA
Kg / Person
India
Australia China
9
0
200
400
600
800
10
doc_523249898.ppt
Presentation on planning for sustainable growth for TISCO
PLANNING FOR SUSTAINABLE GROWTH OF TISCO
1
To ascertain the growth potential of a company, given its current financial conditions, financial policy goals to be considered are: •Target sales growth •Target ROI •Target dividend payout
•Target D/E
2
Formula
• Sustainable growth = Assets Turnover * Profit Margin * Leverage factor * Retention ratio * Leverage
3
Calculations
Assets Profit Turnover Margin
Sales / Net Assets PBIT / Sales
Leverage Retention Leverage Factor Ratio
PAT / PBIT Retained (1 + D/E) Earnings / PAT
=(1 + 2739.70 / 7059.92)
=16053.48 =5484.08 / =3474.16 / =3272.52 / / 12143.30 16053.4 5484.08 3474.16
= 1.32
= 0.34
= 0.634
4
= 0.94
= 1.39
• Sustainable Growth = 1.32 * 0.34 * 0.634 * 0.94 * 1.39 = 0.3718 or 37.18%
5
Key Financial Ratios
EBITDA Margin
50% 40% 30% 20% 10% 0%
PAT Margin
44% 20%
25% 20% 15% 10% 5% 0% FY'03 FY'04 Apr-Dec FY'05
24%
3%
FY'02 FY'03 FY'04 Apr-Dec FY'05
FY'02
Return on Equity (*)
75% 50% 25%
Return on Invested Capital (*)
61%
40% 30% 20%
35%
6%
0% FY'02 FY'03 FY'04 Apr-Dec FY'05
10% 0%
5%
FY'02 FY'03 FY'04 Apr-Dec FY'05
6
Can TISCO sustain higher growth rate, say 48%? New profit margin to sustain growth rate of 48% = 0.48/(1.32 * 0.634 * 0.94 * 1.39) = 0.44
7
Implications
• Assuming that it cannot earn a profit margin of 44%, but still wants to grow at 48%, then the company will have to revise its financial policies or resort to external equity.
8
Emerging Global Steel Scenario – Demand Shift Developed to Populous Nations
A potential for exponential growth
Peak Point (typically between 500-700 kg/person) Point of Saturation Singapore USA Point of Inflection Trigger Point
Per Capita Steel Consumption
India Singapore Japan EU-15 USA
Kg / Person
India
Australia China
9
0
200
400
600
800
10
doc_523249898.ppt