afm nroi project ppt

PROJECT ON CALCULATION OF NROI

Submitted By: Group 1Anoop Kr Sharma - P301414CMG420Rahul Gupta - P301414CMG452Apoorva Sharma - P301414CMG422Rushikesh N C - P301414CMG458 Sankalp Sharma - P301413CMG357

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05/01/2023

INDUSTRY: FOOD AND DAIRY PRODUCTS

Contents

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Kwality Limited1

2

3

5

Britannia Industries Ltd

GSK Consumer Health Care

Nestle India Limited

REI Agro Limited

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6 KRBL Limited

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Kwality Limited: Calculation of NROCalculation of Net Return on Investment

Year ROI= Post tax OP/Net Book value

Cost of Capital

NROI= ROI-Cost of Capital

Share price growth

FY2005   14.67%   -1%FY2006 25.53% 44.02% -18.48% 38%FY2007 24.48% 31.86% -7.38% 64%FY2008 22.77% 24.32% -1.54% 35%FY2009 29.42% -25.27% 54.68% 2390%FY2010 24.89% 23.29% 1.60% -13%FY2011 27.99% 10.27% 17.72% -63%FY2012 29.92% 12.97% 16.95% -11%FY2013 20.81% 8.96% 11.85% -15%FY2014 19.30% 13.07% 6.23% 48%

Table No.1

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Relationship of NRO with Share price growth

Statistical Measures for Relationship Between NROI and Share Price Growth

Correlation Value Comment

Between NROI and Share

price growth0.80427694 The NROI and share price change

are high positively correlated.

RegressionRsquare=53%,

Model is insignificant

The R square value is 53% hence the model is robust. Even though

the model is insignificant, the share price growth can be used to predict NROI growth with 61% probability.

Table No.2

Kwality Limited

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FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

Kwality

NROI Share price growth

Chart No.1

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Observations and Analysis of NROI

The post tax cost of debt of the company in the last three financial years has remained within the range of 9%.

The market value of equity fluctuated over the last 10 years and thereby the cost of equity.

The NROI in the last four years has been positive and the correlation between NROI and share price growth is 0.80. This implies positive correlation and since the number of data points is less, the inference can’t be conclusive in nature.(Table no:2)The NROI in the last four years has been positive and the correlation between NROI and share price growth is 0.80. This implies positive correlation and since the number of data points is less, the inference can’t be conclusive in nature.(Table no:2)The regression done on the share price and NROI depicts that the model is insignificant even though the model has very good R square value of 53%. The R square value indicates that the share price growth can predict with 53% of the NROI the company could achieve.

Conclusion

l Based on the observations and analysis of the NROI and its relationship between the share price growth it can be seen that use of NROI as a performance measure of top management can’t be established for Kwality Limited in diary and products industry.

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Britannia Industries Ltd :Calculation of NRO

Calculation of Net Return on Investment

Year

ROI= Post tax OP/Net Book

value Cost of CapitalNROI= ROI-

Cost of CapitalShare Price

GrowthFY2005   14.90%   46.89%FY2006 41.03% 21.99% 19.05% -19.29%FY2007 29.56% 24.10% 5.46% 35.13%FY2008 41.00% -2.31% 43.31% -10.19%FY2009 31.17% 28.02% 3.16% 26.85%FY2010 19.89% 9.69% 10.20% 21.98%FY2011 31.41% -1.80% 33.21% 9.30%FY2012 28.18% 12.56% 15.62% 11.40%FY2013 31.96% 7.36% 24.60% 84.36%FY2014 51.74% 17.79% 33.95% 95.18%

Table No.3

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Relationship of NRO with Share price growth

Statistical Measures for Relationship Between NROI and Share Price Growth

Correlation Value CommentBetween NROI

and Share price growth

0.034 The NROI and share price change are positively correlated.

RegressionRsquare=16%,

Model is insignificant

The R square value is 16% hence the model is not robust.

The correlation between NROI and share price growth is 0.034. This implies positive correlation and since the number of data points is less, the inference can’t be conclusive in nature.( Above Table)

Table No.4

Britannia Industries Ltd

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FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Britannia

Net Return on Investment Share Price Growth

Chart No.2

Observations and Analysis of NROI• The average ROI of the company in the last ten financial

years is 33.99%.• The market value of equity fluctuated over the last 10

years and thereby the cost of equity.• The share price jump is consistent with NROI and it is

positive for the last four years from FY2014.

Conclusion

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Based on the observations and analysis of the NROI and its relationship between the share price growth it can be seen that use of NROI as a performance measure of top management can be established for Britannia Industries Limited in diary and products industry.

Nestle India Limited: Calculation of NRO

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Calculation of Net Return on Investment

YearROI= Post tax OP/Net Book value

Cost of Capital

NROI= ROI-Cost of Capital

Share Price growth

FY2005   16.57%   60.12%FY2006 123.13% 18.48% 104.65% 21.39%FY2007 113.78% 25.19% 88.59% 31.98%FY2008 132.95% -9.40% 142.35% -3.14%FY2009 162.18% 20.42% 141.76% 75.39%FY2010 171.29% 9.65% 161.63% 48.95%FY2011 172.67% -6.13% 178.80% 9.95%FY2012 139.12% 10.26% 128.86% 19.60%FY2013 51.80% 7.36% 44.43% 6.15%FY2014 42.87% 14.16% 28.71% 18.05%

Table No.5

Relationship of NRO with Share price growth

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Statistical Measures for Relationship Between NROI and Share Price Growth

Correlation Value Comment

Between NROI and Share price

growth0.247897901 The NROI and share price change are

positively correlated and there is scope to give incentivizing managers

to undertake more investments.

Regression

Rsquare=6%, Model is

insignificant as significance value

is .5201

The R square value is 6% hence the model is not robust.

Table No.6

Nestle India Limited

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NROI Vs Market Return Comparison

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FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY20140.00%

50.00%

100.00%

150.00%

200.00%

250.00%

Nestle

Net Return on Investment Share Price Growth

Chart No.3

Observations and Analysis of NROI

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1 •The average ROI of the company in the last ten financial years is 113.31%.

2 •The Company has been able to utilize its assets at to full extent, which has resulted in a high NROI. This also signifies that all the 8 plants have crossed their breakeven.

3 •The company has lower debt equity ratio which suggests that company has lesser loan funds.

4 •The share price jump in FY2009 is due to the economic recession. The relation between share price growth and NROI is positive for the last four years from FY2014.

5 •Owing to high NROI the company has chance to grow further by undertaking new investment.

Conclusion

Based on the observations and analysis of the NROI and its relationship between the share price growth it can be seen that use of NROI as a performance measure of top management .Higher ROI of Nestle India Limited gives a fair measure of a company’s profitability and it shows how efficiently the use of funds is taking place.

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GSK: Calculation of NROCalculation of Net Return on Investment

Year ROI= Post tax OP/Net Book value

Cost of Capital

NROI= ROI-Cost of Capital

Share Price Growth

FY2005   25.07%   70.5820%FY2006 54.2458% 20.28% 33.96% -0.4376%FY2007 30.1557% 25.43% 4.73% 31.9788%FY2008 28.8892% -10.89% 39.78% -22.0553%FY2009 28.8404% 25.98% 2.86% 126.7178%FY2010 31.5728% 11.62% 19.95% 77.8923%FY2011 35.8576% -2.88% 38.74% 9.8807%FY2012 34.5726% 11.92% 22.66% 50.5214%FY2014 44.6254% 23.10% 21.52% 27.6010%

Table No.7

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Relationship of NRO with Share price growth

Statistical Measures for Relationship Between NROI and Share Price Growth

Correlation Value Comment

Between NROI and Share

price growth-0.781833175 The NROI and share price change

are negatively correlated.

RegressionRsquare=61%,

Model is insignificant

The R square value is 61%.

The correlation between NROI and share price growth is-0.78. This implies negative correlation (Refer Above Table)

Table No.8

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GSK

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY20140.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

GSK

Net Return on Investment Share Price Growth

Chart No.4

Observations and Analysis of NROI• The average ROI of the company in the last ten financial years is

36.09%.• The market value of equity fluctuated over the last 10 years and

thereby the cost of equity.• The share price jump in FY2009 is due to the economic recession.

The relation between share price growth and NROI is positive for the last four years.

• The accounting period was changed in 2013 and hence, FY2014 has 15 months.

Conclusion

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Based on the observations and analysis of the NROI and its relationship between the share price growth it can be seen that use of NROI as a performance measure of top management can be established for GSK Consumer Healthcare Limited in diary and products industry.

REI AGRO LTD.: Calculation of NRO

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Year

ROI= Post tax OP/Net Book value

Cost of Capital

Net Return on Investment

Share Price Growth

FY2005 7.07% 5.63% 7.07% 35.37%FY2006 8.80% 4.73% 8.80% 14.32%FY2007 5.36% 5.18% 5.36% 293.18%FY2008 3.55% 6.42% 3.55% -15.90%FY2009 1.26% 7.17% 1.26% -29.44%FY2010 2.58% 5.13% 2.58% -14.60%FY2011 2.81% 5.81% 2.81% -39.70%FY2012 0.88% 8.99% 0.88% -34.87%FY2013 0.91% 9.30% 0.91% -38.20%FY2014 -2.41% 11.25% -2.41% -76.97%

Table No.9

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Relationship of NRO with Share price growth

Table No.10

STATISTICAL MEASURES FOR RELATIONSHIP BETWEEN NROI AND SHARE PRICE GROWTH

Sl No Correlation Value Comment

1Between NROI

and Share price growth

49.79% The NROI and share price change are high positively correlated.

2 RegressionRsquare=24.8

%Model is significant.

The R square value is 24.8% . Model is robust

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REI AGRO Limited

NROI Vs Market Return Comparison

Chart No.5

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

-100.00%-50.00%

0.00%50.00%

100.00%150.00%200.00%250.00%300.00%350.00%

REI Agro

NROI Share price growth

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Observations and Analysis of NROI

l The average ROI of the company in the last ten financial years is 10.04%.

l The share price jump in FY2007 is due to the economic recession. The relation between share price growth and NROI is positive for the last four years from FY2008.

l The correlation between NROI and share price growth is 0.4979. As per table No.9; it can be inferred a close correlation between NROI and Share price except FY2007.

References

Capitaline database Annual reports from the respective

company Rbi.org.in nseindia.in

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