 Namaste. In our last session, we had started a detailed case on Hindalco Ltd. We have already prepared their profit and loss account. And if you remember, in the last session, we had done a discussion on balance sheet and you were to prepare a complete balance sheet and we were to discuss the solution today. Those of you who have missed the session, once again I will request you to download that case, take that problem, try to complete it and then have a look at the solution. Because today we will be discussing the solution of balance sheet. Are you prepared? Let us go there. Okay. So now the marks, items which were marked under NCA or CA, you have to put in a proper format and have a look at the solution. So under assets NCA, non-current assets, first fixed assets are shown. So the, we always follow the order of permanence. So most permanent asset is perhaps property, plant and equipment. And this is the note number. Those of you who really want to know more details, you can go to Hindalco annual report. Check the note number 2 for more details. The total amount is also very big, it is 39,999 crore. Next is capital work in progress, they have not given any note for it. The total amount is also relatively small, it is 736. Financial property, perhaps in our earlier balance sheets, this was not there. That is 9. Then intangible assets, there are also intangible assets under development. So these items together actually form the fixed assets of the company. Then under NCA, the next category is financial assets. So these are long-term financial assets, mainly the investments. So investment in subsidiary, you can see is the biggest amount, 16,000 crores. Investment in associates, other investments, then loans given and other financial asset. This is more refined and more latest terminology used in by the bigger companies. So have a look at this balance sheet carefully. Then non-current tax assets. So these are mainly deferred tax assets for which they have not given any note, but the total amount is given and then other non-current assets which is 861. So at this stage you get the total of total NCA's. Now let us go to current assets, inventory. After inventory, other assets have been nomenclature used for them is financial assets. So you have got other investment short-term, which is also a substantial amount, 3700 crores. Investment receivables, cash and cash equivalent, bank balances other than cash and cash equivalent. See this is also a current asset, this is also a current asset. Then why it is classified separately? It is classified because it will make difference in the cash flow statement. That is why you have to note that all bank balances may not be C and Cs. Normally we say that bank balance is a cash equivalent, which is true. But if there is some exception, it needs to be separately shown. That is how they have shown it. Then loans given short-term, other financial assets. So this is the total of financial assets from this item to this item. Then next you get current tax assets and other current assets. So this is a total of Cs and 82000 crore is a total of both 60 plus 21. That is non-current plus current getting it. So this is the asset side. Now let us go to the liability side. In liability side, the first item written is authorize share capital, although keep in mind that this is not to be taken in the total. It is just written there by way of a note, do not mistake it to take it in the total. It is the breakup of it is given like this, share capital which is paid up 222.89 which should be taken in total and other equity which is 49.227. So you get 49, 450 as the total of equity. So other equity the note is given which mainly consists of reserves and surplus. But they have used a different nomenclature. Then next is liabilities. Within liabilities you have got non-current liabilities in that again financial liabilities. So financial liabilities you can see the liabilities how they are separated here within NCL financial liabilities are given separately and provisions and tax liabilities are given separately. Because they arise from business whereas financial liabilities are in the nature of raising of funds. Now we have learned cash flow statements. So something coming from financial liability will go in the cash flow statement as a which item as not as a operating item it will be treated as a financing item that is how it has been properly classified. For smaller companies often you may not see this classification but since it is a very big company it has used more latest format. So borrowings that is the loans is the biggest amount note number 18a trade payables which is relatively very small that means they do not have much of credit purchases got it because their purchases are big but trade payables are very small. If you go for comparison with assets they have got substantial amount of trade receivables but trade payables are very small are you getting it please note this because these are non-current in nature that is very small regular trade payables are is a very big amount but we will come to it but so this is a non-current trade payables which is a small amount then other financial liabilities then we go to long term provisions deferred tax liabilities and other current other non-current liabilities. So total NCL is 2328 then we will go to current liabilities borrowings current liabilities in that financial liabilities borrowings trade payables and other current financial liabilities. Now provisions and other current liabilities current tax liabilities so total CLs are 12 whereas total NCL was 20 plus equity so both the liabilities taken together first is taken total and then the total is 80 to 728 at this stage they are disclosing the current liabilities a contingent liabilities as well as contingent asset note number one is a note for contingent liabilities are you getting me so this is about the balance sheet it looks very simple here but compare it with the answer which you have made if you are able to solve it correctly that is very good. Now let us go to the third part of the case that is for preparation of cash flow statement. So take your sheet once again and we will go for discussion of cash flow statement. It is a very long statement so be very attentive we know that there are three sections in cash flow what are the three sections first is operating investing and financing in that also operating is complicated because we have to go in a how why because we have to go in which method do we use direct or indirect we use indirect method starting from profit we do adjustments anyway right now the figures are given to you you have to just arrange them properly and there are several items which do not form part of cash flow they also you have to be careful then unrealized loss on derivative transactions where will it go next is unrealized forex loss these are unrealized items so they have no impact so we will not consider them short term liquid investment in mutual fund it is already given that it is cash equivalent so we will mark it as C C is a marking we make here for cash equivalent sale of shares in subsidiaries for this year it is dash but where will it go sale of shares so it is an investment which has been sold so we will write it as I sale of property plant equipment and intangible assets again it is I return of capital from subsidiary it is I its dash but earlier years there was some figure so what is meant by this return of capital we have invested in capital in subsidiary the subsidiary company might have returned the same but it is an investment coming back repayment of non-current borrowings so loans we have taken and we have repaid so it is a F type of transaction repayment of loans and deposits where will it go so perhaps we have taken loans and deposits and we are repaying it so we will treat it as F repayment of financial lease liability financial lease is one of the it is a type of loan it is one of the way of financing the company so it is F realized gain of cash flow on hedges in OCI this is other comprehensive income related item and it is related to cash flow hedges so we will not consider it right now sale of investment others as the name suggests it is related to sale of investment so I you can see here the amount is substantial 5000 crores purchase of property plant equipment and intangible assets is the purchase of investment so it is I profit before tax do we require it yes because in cash flow statement we are going to start with PBT and making the adjustments so we will go it mark it as O payment of current borrowings repayment of current borrowings normally borrowings we treat as F but since these are current borrowings we will treat it as O then proceeds from issue of equity shares it is F type of transaction it is a financing transaction 3 you can just read it full including share application money so share application money received or returned both will be also part of financing transaction pre payment of non current borrowings this is a big amount company had taken some loan but it is non current in nature it has been prepaid that means if the loan is taken for 10 years they have repaid it within 8 years still since it is non current in nature it is for raising of funds so we will mark it as F payment of direct taxes net of refund this is O because taxes is treated as a operating item if you remember the format we will calculate first all items and at the end we write the payment of taxes non other non operating income or expenses where will it go since it is non operating many times we feel that it may not be O but since it is income or expense it should be treated as O right now since it is dash we can ignore it. Novation and restructuring of long term borrowings where will it go what is meant by novation first of all that means existing loans the terms of loan are changed suppose the loan is taken for 5 years maybe it is changed to 8 years some type of obligation or some mortgage under it might have changed the loan terms have changed that is called as novation and restructuring of long term loans where will it be marked as should it be an F item there is neither any repayment nor any new loan taken so this is a non cash item it should not come in the cash flow statement so we will mark it as NC loans and deposits given we have given loans we are not sure whether as investment or as a borrowing but since the word given is used we will treat it as I liabilities no longer required return back that means some liabilities existed those liabilities have exhausted now so we will have to write it back that means they would be taken back to P&L account they are no longer existing as a liability so under which head we will put it as it is a non cash item so we will put it as NC see we have not repaired the loan it is just written back investment in subsidiary it is I interest received is a simple it is when we make in investment we receive income as in so we will put it as I interest income that is also I increase in non financial liabilities this is only increase in liability so should we ignore it or we should take it increase in trade and other payables increase in inventory should we take it we should because it is a part of operating item we know we start with PBT do adjustments for non operating items then do adjustments for working capital items so working capital items like trade daters and creditors they should be considered under O either you mark it as working capital or you can mark it as O right now I am just marking it as O increase in inventory also is O increase in financial liabilities also is O finance cost finance cost is of course F item but this is again tricky you can see finance cost finance cost paid so we will consider basically the finance cost paid not just the finance cost now fair value gain on modification of borrowings so they have obtained some loans those loans have been restructured and there is some fair value go again on it it is a non cash transaction so we will not take it we will just mark it as NC employee share option expenses what is employee share option employees are issued shares either as free or at a discount which they can convert into equity shares this is to incentivize the employees but for us right now it is a finance item or it is a O type of item it can go either way but we will mark it as O dividend received we have received dividend so it is an investment income we will mark it as I dividend paid including dividend distribution taxes this is a F dividend income we have received the dividend so we will mark it as I you can see the amount is coming two times dividend received dividend income so do not take it twice we should only take the amount which is actually received so I will just cut it to avoid the confusion same way here we had interest income and interest received so we should go for interest received so I will just cut it otherwise later on there will be a confusion then dividend income so we have then depreciation and amortization should it be considered yes because it is a non cash expense we add it to PBT so mark it as O deposit with bank with less than 3 months of initial maturity this is a deposit with bank so insignificant risk the maturity is also very small so we can consider it as a cash equivalent so we are marking it as C decrease in trade and other receivables this is a working capital item let us mark it as O decrease in non financial assets again let us mark it as O decrease in financial assets this is also O checks and drafts in hand checks and drafts being a day to day item as a part of bank balance this is a cash and cash equivalent so we will mark it as C cash on hand again it is C balances with current accounts in banks again it is C bad dates and provisions for doubtful dates should we consider it it is a non cash item but it will have impact on P&L so we will mark it as O acquisition of property plant and equipment by means of non cash government grant this is the acquisition of property so it looks like I but since it is by means of non cash government grants we will not consider it as a cash flow item we are marking it as NC acquisition of property by means of financial lease acquisition is being made by lease but still it is a acquisition in cash terms so we will mark it as I loss of PPE PPE refers to property plant and equipment and intangibles sold or discarded that means old fixed assets are being sold or discarded we have received some small amount of cash so it is a I gain on investments measured at FV TPL that is by fair value calculation the investment shows some gain but not a cash transaction because it is not a sale of investment so we will ignore it cash on assets held for sale sorry loss on assets held for sale shall we consider or ignore it we will need to consider it because we are following indirect method so this is a non operating type of losses so we will mark it as O we will add it to PBT now cash and cash equivalents as at the beginning net cash generated or used in operation so you are required to calculate all these figures opening cash the cash generated from operating activities then cash generated from investing activities cash generated from financing activities total decrease of cash operating profit before working capital changes and cash and cash equivalent at the end of the year now how will you do all the things it is possible because cash at the end of the year is you can take it from balance sheet then do all other calculations and by reverse working you can calculate the cash at the beginning of the year so are you ready now to prepare the cash flow statement so you can pause the video here complete the calculation and right away we will discuss talk about the solution okay I hope you are ready with the solution so I will show the solution to you just try to understand each and every term it is a very long cash flow statement so we start with PBT then adjust for lot of items remember we are going to adjust for non cash and non operating both types of items so we are adjusting for finance cost depreciation employee share option expenses mark this is a very peculiar item because it is a share related item but since it is a employee related item we show it under O not under F then bad dates long term provisions no longer required return back see mark the sign also it is a negative because it is a profit to us we are now reducing it then unrealized forex losses unrealized gains these are not directly cash flow items but since they have an impact on P and L we are considering them here then fair value gain on modification of borrowings again it is a non cash item but since that gain was included in P and L we have included it here as a negative item gain or loss on assets held for sale gain or loss on PPE interest income dividend income market the items were given two times earlier there was interest received which will be an investment item but interest income it is a operating item then dividend income non operating income or expenses realized gain on cash flow edges in OCI now this is again not directly impacting our cash but it has a impact on our P and L and it is a gain so right now we are showing it here then loss on investment held at FVTPL that is also in a way a non cash item but has an impact on P and L so we are considering it under O now after all this we get operating profit before working capital changes then we will consider all the working capital changes like increasing inventory trade and other receivable financial assets non financial assets increasing trade and other payables financial liabilities non financial liabilities so we at this stage get cash generation from operations then payment of direct taxes net of refund this is the actual tax paid we get net cash generated or used in operating activities I know it is bit longish but read it 2 3 times so that you understand how it is for a large company if your own company is also large one compare it with the cash flow of your own company next one is very simple now cash flow from investing activities but bit longish purchase of plant sale of plant investment in subsidiary sale of shares in subsidiary return of capital from subsidiary purchase or investments purchase or sale of investment repayment of loan and deposits loan and deposits given interest and received and dividend received mark here the term received here there it was interest income now it is interest actually received so we get net cash generated or used in investing activity next is financing activities proceeds from issue of shares prepayment of non current borrowing this is the biggest amount since company had lot of cash you can see here they had good cash generation they have used it for repaying their loans then repayment of non current borrowings repayment of finance lease proceeds from current borrowings which is also negative because they have repaid it then dividend paid finance cost paid so you get net cash generated or used in financial activities which is a substantial amount it is a negative amount thus company has repaid their old liabilities the net increase in cash and cash equivalent which is 2490 then you get net cash and cash flow as reported which is 1809 there is some supplementary information also regarding non cash transactions so just note it acquisition of property by means of financial lease acquisition of property of by means of non cash government grants novation and restructuring so these three are treated as non cash transactions then you get the reconciliation of cash and cash equivalent which is cash in hand cash and drafts in bank under bank there are two items current account balances and short-term deposits and short-term investments in mutual funds so here you get total so are you getting it it is big longish but the study will be very much useful to you to understand the terminology particularly the cash flow statement so we will stop here namaste then never