 Namaste. In last few sessions, we are discussing financial statement analysis. So, we discussed about horizontal vertical analysis, then variety of ratios. In the last session, we had seen how to do horizontal analysis wherein we have calculated and prepared a comparative statement. I hope it is clear to all, today we are going to go for a common size statement. I will just show comparative statement once more. So, what we have done was, we have calculated the change and the percentage change for both P and L balance sheet and then for summarized cash flow. This was a common size P and L and common size balance sheet. Now what we will do is, what is known as vertical analysis and for vertical as the name suggests it is vertical because to a common base we compare and calculate the figures and then if we want we can compare the 2 years figures, but first we will compare it within the year. So, a statement which we make is known as common size statement. I had requested to make it, I had requested you to make it on your own. So, this is common size. So, let us make common size statement, please make it along with me, it is very simple. So take the print out of the given sheet that is P and L balance sheet and cash flow which is for 2 years. Now if you take P and L we can compare these 2 values, but instead of comparing actual values we want to first convert them into percentage. For converting into percentage we will take the base as the total revenue or sometimes we take base as revenue from operations. So for any individual figure let us say we want to calculate operating and direct expenses which is 2141. So 2141 divided by revenue from operations. So 62 percent is the operating expenses, so total revenue if is 162 percent is spent on. Now what we can do here is let us make it B dollar 8 so that we can drag it now. So all the figures we have got it as a relationship of the total. You can also do it for the total even for the revenue items got it gross and net revenue is of course 1 and other figures are as a percentage to total. For better understanding if you like you can even convert it into percentage this looks bit better. So operating expenses you can see are now 63 percent of the revenue. Now same thing do it for the so now are you able to see them as a common size statement the total is 100 and every item that is safe operating expense is 63 percent in March 17 whereas it is 57 percent is in March 16. So you can easily see that operating expenses as a percentage have gone up actually if you look at the amount they have not increased much but because of the fall in the revenue they could not reduce their expenses like the fall in the revenue that is why as a percentage they have gone up. So this is one way of interpreting it. Employee benefit as a percentage has slightly gone up depreciation as a percentage has slightly gone up. So various figures now you can get it as a percent. Profit if you want to see profit before tax has gone down from 10 percent to 5 percent. Profit after tax has gone down from 9 percent to 4 percent. In a way we are now calculating variety of ratios you have seen net profit profitability ratios which were profit upon sales you can also calculate various expense ratios like say operating expenses to sales to know the operating expense percent or employee benefit expense percent. So all figures are now represented as a percentage and then we are able to compare them across the years because comparing absolute figures was not that much sensible although since it is for the same company still it was possible but if you want to compare with other companies in the industry it was senseless to compare it but now we can compare it across different companies or with the industry average also to know our expenses versus others. This is known as a common size P&L or a common size statement of revenue. Now let us do it for balance sheet. Now balance sheet also we have got figures for 2 years so I have pasted that formula here but this could be slightly wrong because we have to take total this particular figure that is share capital is taken to the base of what earlier we took it as a base of total revenue because it was in P&L. In balance sheet it will be taken as a base of total of capital and liabilities which is same as total of assets. So you can see here total of capital and liabilities which is 22. So here I have to take base as 22 so it is 3% of the total for both the years are you getting it? It is very simple but it gives you lot of insights if you read carefully. Now you can see that out of 100 of total liabilities only 3 comes from share capital. Is it a good or bad sign? It is good sign because you can see lot of reserves are accumulated over the period. So only 3 is the money put in by the owners on that 44% was generated by way of reserves. So the total shareholders funds were 48% now it is 47% because of reduction in profit there is a slight fall, long term borrowings were 32% and now they have gone down to 21%. Total non-current liabilities have of course fallen in line from 33 to 24 short term borrowings are actually going up which is a matter of concern. From 0 to 7 trade payables increased from 7 to 20% although there was a fall in other current liabilities. So overall total current liabilities which were earlier 20% have now become 28%. If you look at assets, tangible assets are 80% of the total assets. Is it a good sign? Normally yes because it is a shipping company they have to invest huge amounts in purchasing the ships they have their own ships that is why this percentage is very high as much as 80%. Most other figures are very small except that cash equivalents which are around 10% we have to check whether they need that much of cash maybe they have got excess cash also and current assets in general earlier where 17% have become now 19% but which mainly comprise of cash. Other items are very small other items of current assets. So this is a comparative balance sheet now this comparative balance sheet sorry this is a common size balance sheet it can be across the industry compared in coming case we are going to compare with other peers in the industry but right now is this clear to you? This is a comparative balance sheet now let us go to cash flow statement. Now we have got cash flow statement for 2 years now in cash flow the denominator is going to be the total cash generated I think total is not given here. So first we will have to calculate the total this total you can take as a base it does not become that much sensible for cash flow statement but I am just showing how it can be calculated. So because there are only 3 figures so this is a large amount in from operations though it has come down whereas the financing activities it is a negative amount are you getting it? Now let us go to the next calculation now is it visible? So here we have taken a financial statements of 5 leading shipping companies in India we were just talking about comparison across the industry peers. Now this is for shipping corporation of India the company which we were discussing then there is Gujarat Pipalov, G-Shipping, Reliance Neville and Shreyesh Shipping. So now all the figures are given you can see shipping corporation is an industry leader they have much more turnover than other companies other companies are relatively small but we would try to calculate their profitability now as a percentage. If you look at their profits profit after tax you will see that the reported net profit of shipping companies or shipping corporation is only 135 versus relatively much higher profits for G-Shipping whereas Reliance Neville has a huge loss but absolute figures are difficult to compare because the base is different. So what we will do now is we will convert each of these figures into percentage then it will make much better understanding for us. So all the figures we will divide it by the sales turnover and let us convert it into percentages I will also copy the heading and I will hide now the actual figures instead of looking at the actual figures it becomes far better and sensible to compare it as a common size statements. Now let us see one by one. So here we see that the net sales and if you take different items raw material anyway is negligible but you have a high raw material for I think one of the figures is not compared so here now we are taking all the five figures as common size statements and I think they become much better comparable. So let us take raw material, raw material cost is negligible but for Reliance Neville their nature of business is different. So they have got significant raw material cost they also are spending large quantum in other manufacturing expenses whereas for shipping corporation the major amount is in other manufacturing instead of other expenses but there can be slight different way of classifying it. Now if you go to profits you will realize that operating profit is 22 percent for shipping corporation but for other peers like Gujarat Pipalao and for GE shipping it is much higher 61 percent and 43 percent it is only 4 percent for Reliance and 14 percent for Shreya shipping. If we go for PBDIT that is cash profit or profit before depreciation interest and tax again we get a similar figure interest expenses are very high for Reliance 110 percent of their revenue that is why at PBDIT profit before depreciation and tax Reliance becomes minus 97 percent while for others the figures are more or less same then the depreciation is 16 percent but very high for Reliance because they have got very costly ships and interest burden is also very high on them. You can see here Reliance has acquired very high cost ships at paying high level of interest. Now the profit before tax only 5 percent but very good profit both for Gujarat Pipalao and GE shipping and for Reliance Neville it is significant negative of course you should keep in mind that though all five are shipping companies nature of operation slightly differ because some are operating some ports like Gujarat Pipalao so they are making more profits. Now profit before tax these are the figures profit after tax again the two companies Gujarat Pipalao and GE shipping are showing very good profitability and the calculation has been done right up to PE ratio and book value. Is it clear? This is how comparative statement helps us to compare the balance sheets and P&L we will also do it for balance sheet see different companies have different way of financing that can be compared and understood from balance sheet analysis. Now as you know for balance sheet every figure will be compared with the total of assets and liabilities. We have already done for GE shipping sorry for shipping corporation which now we will also do it for all other peers. Let us hide the actual figures I think we will unhide it because for some time also see the actual figure then we will go to the percentages. So you can see the share capital for shares is very small for others is more or less in the range though for GE it is less it is only 150 crore. If you compare reserves shipping corporation has huge reserves as well as GE shipping has large reserves in reliance the reserves are very less company is continuously earning losses. See I am not referring to reliance industries this is reliance Neville this is a Anil Ambani group company. In net worth net worth is very high for shipping corporation pretty high for GE for other companies it is comparatively less secured loans are very high for shipping corporation 0 for I think this is Gujarat Pipala this shows different way of financing it is a equity finance company you can see no debt whereas for GE shipping they have a reasonable quantum of debt for reliance the debt is very high on a capital of something like 1100 of net worth they have 8 times that as a debt and anyway Shreyas is relatively small less debt you can also look at their gross block gross block is very high for shipping corporation because they own lot of ships somewhat less for GE and other companies have lesser. So you can understand that other companies are more efficient in utilizing their asset which is mainly the ship. Now I think we will hide the figures and go for comparison with percentage let us convert it into percentage terms. So now you can see this is a shipping corporation they have only 4% of the total as share capital because they have got substantial reserves Gujarat people have has even higher reserves but they have no debt. So it is mainly financed by share capital plus reserves now their net worth is 100% of the total for shipping corporation it is 63 of net worth versus 33 of secured loans for GE shipping it is 53 versus 43. So if you remember we had discussed about debt equity ratio. Debt equity ratio will be 37 by 63 for Gujarat people of it is 0 for GE shipping it is 43 by 53 for reliance it is 88 by 12 because of huge debt and for the last company it is that is Shreyas it is 39 is to 64. Now if you go to the gross block you will realize that very high gross block 146% for GE shipping but their ships are relatively older that is why they have lot of accumulated depreciation net block is 105. Now if you look at total fixed assets I think it is same amount more or less because only reliance Neville has some capital work in progress total current assets are 20% more or less in the same range current liabilities are very high for shipping corporation maybe because of the loans which they have to repay now and the total the miscellaneous expenses anyway are 0 net current assets are more or less same for all the companies. In case of reliance you can see that because of huge losses continuously their net worth is relatively low. So comparative balance sheet can be compared across industry peer and it helps us for better analysis. So we will continue the analysis of few more companies in coming sessions till now. Namaste. Thank you.