Sample Due diligence report

(Important Message to Any Person Not Authorized to Have Access to this Report)
Any person who is not an addressee of this report or who has not requested Mangal Advisory Services
for its use is not authorized to have access to this report.
Should any unauthorized person obtain access to and read this report, by reading this report such
person accepts and agrees to the following terms:
1. The reader of this report understands that the work performed by Mangal Advisory Services was
performed in accordance with instructions provided by our addressee client and was performed
exclusively for our addressee client's sole benefit and use.
2. The reader of this report acknowledges that this report was prepared at the direction of our
addressee client and may not include all procedures deemed necessary for the purposes of the
reader.
3. The reader agrees that Mangal Advisory Services, its partners, employees and agents neither owe
nor accept any duty or responsibility to it, whether in contract or in tort (including without limitation,
negligence and breach of statutory duty), and shall not be liable in respect of any loss, damage or
expense of whatsoever nature which is caused by any use the reader may choose to make of this
report, or which is otherwise consequent upon the gaining of access to the report by the reader.
Further, the reader agrees that this report is not to be referred to or quoted, in whole or in part, in any
prospectus, registration statement, offering circular, public filing, loan, other agreement or document
and not to distribute the report without Mangal Advisory Service’s prior written consent.

Delivering Excellence, Partnering Success

XYZ Limited
Due Diligence Report

Table of Contents
Scope and Process Summary

1

I.

3

Background

II. Industry Overview

5

III. Financial Overview

11

IV. Key Issues / Observations

17

V. Other Matters

38

VI. Projected profitability

45

VII. Annexure

Scope and Process
Due Diligence Process

This report is based on significant and material findings of the due diligence review performed on
accounting, financial, and tax information of XYZ Limited, made available by the Management.

Information relied on
the Due diligence
Process

For the purpose of this report, we have placed reliance on:
•
Audited financial statements of XYZ Limited as at and for the year ended 31 Mar 11 and 31 Mar 12
(‘FY11’ and ‘FY12’)
•
Unaudited financial statements of XYZ Limited (without notes to the financial statements) as at and
for the year ended 31 Mar 13 (‘FY13’)
•
Information made available for Q1FY14
•
Agreements, select documents and details provided by the Management
•
Information and explanations provided by the Management.
•
Management information system (MIS) details provided by the Management

Management
Representations

The Management representations stated in this report, have been orally confirmed by them. In addition, in
respect of any factual information given to us by the management of XYZ Limited ,we require from them, written
confirmation that such information was accurate and that no significant information, essential to the due
diligence review, has been withheld from us. Till the date of this report, the Management has not provided us
with written confirmation in this respect. Accordingly, our report is subject to this limitation.

Significant scope
matters

Our period under review was FY11, FY12 and FY13 and Q1FY14. The following was the scope of work:
• . Analyses of the financial statements including profit and loss account and balance sheets
•
Analyses of the MIS presented to us by the Management
•
Calculation of the future projections and assessment of viability of the project

Report structure

This is an exception based report and matters which have come to our knowledge through our interviews
and analyses have been highlighted by us. We make no representation regarding the sufficiency of our
work either for purposes for which this report has been requested or for any other purpose.
.

1

Scope and Process
Limitations

The following information was not available which could have a material bearing on our analyses
•
Area wise (Area 1, Area 2 and Area 3) revenue breakup in units
•
Area wise (Area 1, Area 2 and Area 3) breakup of variety of products sold
•
Details of the age and location of deep freezers
•
Costing of certain products were not made available
•
Further, our work did not constitute an audit conducted in accordance with generally accepted
auditing standards, or an examination of internal controls or other attestation or review services in
accordance with standards established by the Institute of Chartered Accountants of India (ICAI).
Accordingly, this report should not be considered as an expression of opinion or any other form of
assurance on the financial statements of the Company or on its financial or other information, or on
the operating and internal controls of the Company.
•
It may be noted that in our work we have relied on the integrity of the information provided to us
by the Management for the purpose, and, other than reviewing the consistency of such
information, we have not sought to carry out an independent verification, thereof.

2

Background



XYZ Pvt. Ltd. (‘XYZ’) was incorporated on 20th May 1998 and is
engaged in the business of production and distribution of
‘Classified’ brand of Ice Creams. The Company was converted into a
limited company and the name of the Company was changed to
XYZ Limited on 5th Aug 2001. The Management represented that
this was done to raise funds.



The manufacturing unit is located at ABC Industrial Estate, Plot X,–
Area 1, and the registered office is located at PQR City – Area 4



XYZ has a large number of distributors and dealers for the sale of
its product in Area 1 and the neighbouring states of Area 2 and
Area 3. XYZ either provides its own deep freezers to such
distributors / dealers for the exclusive sale of its ice cream or
supplies its product to the distributor / dealer who have their own
deep freezers.



The Classified range of ice creams has 25 different product
categories with over 180 products on offer.



The current Directors of the company are Mr. A, Mr. B, Ms. C, Mrs.
D and Mrs. I

Shareholding Details
Name
Mr. A
Mr. B
Ms. C
Mrs. D
Mr. E
Mrs. F
Ms. G
Mr. H

No. of Shares % holding
80,000
8%
80,000
8%
200,000
20%
100,000
10%
60,000
6%
59,600
6%
82,000
8%
40,000
4%

Mrs. I

298,400

30%

Total

1,000,000

100%

Equity Shares of Rs. 10 each

Proposed Transaction


EFG Limited (‘EFG’) is evaluating a buy out of XYZ Limited. In this
connection, EFG has appointed Mangal Advisory Services (‘MAS’) to carry
out a due diligence review on XYZ.

4

The industry is growing steadily with the western and northern
regions accounting for the largest consumption
Overview
•

•

Size and Growth
– Total Industry valued at over INR 5500
Crore.
– Organised sector worth INR 2500 Cr. in
2012 (45%)
– Growing over 15% p.a. in 2009-2012
– Forecast to grow at a CAGR of 12% p.a.
upto 2016
Characteristics
– Western and Northern regions together
account for 65% of total market
consumption
– 60% of ice cream sales occur during the
summer months of April-June
– Vanilla is the highest selling flavour and
together with strawberry and chocolate
it accounts for 70% of the market

Source: Euromonitor International, Ice cream in India (2012)

Size and Growth
Market Size (INR Crore.)

2500

2800

2012

2013

3136

2014

3512

2015

3934

2016

Geographic Distribution
30%

North,
30%

West,
35%
20%

East,
15%

South,
20%

6

Market Players
Market share
•
•

•

•

•

Fiercely competitive due to attractive
economics.
Organized sector comprises GCMMF’s
Amul, HUL’s Kwality Walls, Mother Diary,
Baskin Robbins and a number of
regional brands
Amul is the market leader and is at the
forefront of targeting the rural market
For most national players viz. GCMMF,
HUL and Mother Diary, revenue from ice
cream accounts for a small portion of
their total revenues
Premium segment:
– Baskin Robbins is the single largest
premium ice cream brand
– New entrants include Amul,
Movenpick, Haagen Dazs and
Snowberry

Unorganized

55%

45%
Organized
37%

Vadilal

GCMMF

Source: Economic Times Cold Wars (2011), FNB News The Ice cream industry (2012)

14%
13%

16%

15%
Others

Mother Diary

5%
HUL
Baskin Robbins

7

Key Trends
Growing per-capita consumption
(from 250 ml in 2010 to 350 ml in
2012)
Increasing manufacturing of “frozen
Desserts” (using cheaper vegetable
fats rather than Dairy Fats)
Targeting specific niche segments
(probiotics, Diet, etc.)

Franchise model and strategic
partnerships to enhance distribution
8

Enhancing network through franchises and strategic
partnerships
Company

Projects
Kiosks - Swirls

GCMMF

Increase Amul Parlours from 1,800 to 3,000 in 2008 and 10,000 by 2009, Cyber stores in
100 cities, Cyber clubs in 125 cities

Hatsun Agro

Premium ice cream outlet – Arun Ice Cream Unlimited

Milkway
Express

1000 outlets in southern and central India by 2009, counters at corporate campuses

Baskin
Robbins

Franchising

HUL

Outlets in malls and multiplexes

Company

Purpose

Indian Oil Corporation (IOC)

Retail stores at petrol stations

Oxicash

Marketing via scratch and win contests

GCMMF

Bharat Petroleum Corporation Ltd (BPCL)

Mobile kiosks at petrol stations

Baskin
Robbins

Lifestyle, Coca-Cola, ICICI credit cards and
Cox & Kings

Exclusive retailing

Milkway
Express

Spencer Retail Ltd and Foodworld

Targeting the southern market

Rhapsody Foods & Beverages

Re-launch brand in Mumbai, Delhi,
Bangalore, Hyderabad, Kolkata and
Chennai

HUL

Partnerships

Affiliation

Movenpick

Source: FnBnews “Coops, the mainstay of India's dairy model”, October 2008; Business Standard “Ice-cream makers add healthy
flavours”, April 2008; FoodIndustryIndia “Gelato ice creams is a hit at AAHAR”, March 2008

9

Product diversification to target specific segments
•

Producers have launched more “Indianised” flavours such as Kulfi, Shahi Tukda

•

Naturally flavoured ice cream i.e. without any artificial or synthetic flavour has
been introduced for the premium segment

•

Players are capitalizing on the market which has become extremely health
conscious
Company

Product

Health Benefits

Hindustan Unilever
(HUL)

Moo

High calcium content, low
calorie and fat

GCMMF

Mother Dairy

Probiotic
range –
Amul Prolife
Diet

Increases immunity, help in
digestion, prevents
diarrhoea and growth of
colon cancer
Low sugar and fat content

Source: Financial Express “Ice cream war begins as HUL, Amul oil plans”, February 2008

10

Overview of Profit & Loss Accounts
Profit & Loss Account of XYZ
INR
Revenue
Sales
Other Income
Difference in WIP and FG
Closing Stock
Total Income
Expenses
Raw Material Consumed
Packaging Material Consumed
Direct Expenses
Employee Benefit Expense
Administrative Overheads
Sales/Distribution Overheads
Total Expenses
EBITDA
Depreciation
EBIT
Interest
EBT

% variance % variance % to total % to total % to total
FY13 over FY12 over
FY13
FY12
FY11
FY12
FY11

FY13

FY12

FY11

57,999,179
48,534

63,902,156
29,029

61,411,260
67,006

-9%
67%

4%
-57%

101%
0%

102%
0%

98%
0%

-535,755

-982,288

1,221,269

-45%

-180%

-1%

-2%

2%

57,511,958

62,948,898

62,699,535

-9%

0%

100%

100%

100%

16,899,036
8,961,886
5,277,346
14,261,028
3,149,865
8,045,023
56,594,183
917,775
4,671,875
-3,754,101
1,261,906
-5,016,006

17,006,415
10,115,923
6,347,909
12,880,628
3,966,525
9,263,617
59,581,017
3,367,881
4,779,593
-1,411,712
1,568,946
-2,980,658

16,182,289
10,067,964
6,112,275
11,335,060
3,970,806
9,018,900
56,687,294
6,012,240
4,695,271
1,316,970
1,489,357
-172,388

-1%
-11%
-17%
11%
-21%
-13%
-5%
-73%
-2%
166%
-20%
68%

5%
0%
4%
14%
0%
3%
5%
-44%
2%
-207%
5%
1629%

29%
16%
9%
25%
5%
14%
98%
2%
8%
-7%
2%
-9%

27%
16%
10%
20%
6%
15%
95%
5%
8%
-2%
2%
-5%

26%
16%
10%
18%
6%
14%
90%
10%
7%
2%
2%
0%

Source: Audited / Unaudited Financial Statements

12

Overview of Profit & Loss Accounts (1/2)


Revenue from sales includes income from sale of Ice creams. Net sales have reduced by 9% in FY13
over FY12. Net sales in FY12 however increased by 4% in FY12 over FY11. The Management represented
that the decline is on account of shortage of funds to deploy additional deep freezers in the market and
for various sales promotion schemes.



Revenue from Other Income includes Credit Balances written off, Interest on Bank deposits and
dividend on Money Bank shares.



Raw Materials consumption includes expenses for the flavors, milk and other ingredients required for
production of Ice Creams. In FY13, raw material consumption has dropped marginally by 1%, in
comparison to a 9% drop in sales.



Packing Materials includes a variety of lids, boxes and spoons used for the packaging of the Ice Cream
produced. Costs associated with it have declined by 11% in FY13, in line with the drop in sales.



Direct Expenses primarily includes costs incurred for the production process like electricity INR 26.7
lakhs, repairs and maintenance of plant and machinery and deep freezers INR 9 lakhs and generator
diesel INR 6 lakhs. In FY13, Direct Expenses have gone down by 17% primarily on account of reduction in
repairs and maintenance cost of Plant and Machinery and Deep freezers. Refer Annexure II for details.



Employee benefit expense comprising of salaries, wages and bonus of INR 1.2 cr along with other staff
costs. These costs has shown a steady increase over the years, forming 25% of total Income in FY13,
which is on the higher side. Refer Annexure II for details.



Administrative overheads primarily comprise of conveyance INR 7.8 lakhs, security charges of INR 5
lakhs and other expenses required for daily administration. These expenses have declined by 21% in
FY13. This is primarily due to no bonus being declared in FY13 while in FY12 bonus of INR 3.8 lakhs was
declared and reduction in rent of Area 6 Depot, which has been discontinued in FY13. Refer Annexure II
for details.

13

Overview of Profit & Loss Accounts (2/2)


Sales/Distribution overheads includes cost incurred in the distribution of Ice creams from the factory to
the distributors/retailers. It primarily comprises of advertising of INR 2.8 lakhs, excise duty of INR 11. 4
lakhs, vehicle maintenance costs INR 30.4 lakhs, repairs and maintenance of vehicles INR 9.3 lakhs.
Sales/Distribution Overheads have declined on account of reduction in Advertisement costs in FY13.
The Management represented that this was on account of fund constraints. Refer Annexure II for
details.



Interest costs primarily comprise interest on term loans, cash credit balance and hire purchase accounts
on vehicles. The interest costs have reduced primarily on account of reduction in term loans and lesser
utilisation of cash credit. The Management represented that over last 6 months the cash credit has
been freezed by the Bank due to non deposit of any cash flows.



The Company has incurred a loss after depreciation of Rs. 50.16 lakhs in FY13, in comparison to a loss of
Rs. 29.8 lakhs in the previous year, primarily on account of drop in sales.

14

Overview of Balance Sheets (1/2)
Balance Sheets of XYZ
INR



I. Equity and Liabilities
Shareholders Funds
Share Capital
Reserves & Surplus
Less: Accumulated losses
Net worth
Non Current Liabilities
Secured Loans
Unsecured Loans
Current Liabilities
Sundry Creditors
Advance form Customers
Outstanding Expenses
Total

10,000,000
2,500,000
21,328,934
(8,828,934)

10,000,000
2,500,000
16,312,927
(3,812,927)

7,635,188
14,378,328

8,627,688
16,648,340

9,321,169
10,852,403
4,624,686
37,982,840



Secured Loans primarily comprise of Term loans availed from
Money Bank of Rs. 14.97 lakhs, cash credit limit with Money
Bank of Rs. 47.14 lakhs, Fund financiers of Rs. 4.4 lakhs, Cash
Bank of Rs. 2.58 lakhs and Business Finance of Rs. 7.23 lakhs.



Unsecured Loans primarily comprise loans given by Mr. A of Rs.
18.05 lakhs, Mr. B of Rs. 11.2 lakhs and Finance Services Pvt Ltd
of Rs. 105 lakhs.



As at 31 March 2013, Sundry Creditors includes payments
outstanding with the suppliers of raw materials and packing
materials. A large amount of the same was found to be
overdue.
Advance from customers comprises of the security deposits
taken against the deep freezers provided to the distributors.
The Management represented that for every deep freezer
provided to the distributors, the Management collects security
deposit ranging from Rs. 10,000-17,000. This is primarily to
secure against any damages to deep freezers or non payment of
dues. The deposit is equally apportioned over 5 years.



Outstanding expenses mainly consists of employees and other
statutory payable. A large portion of such amounts was found
to be overdue.

9,905,765
9,199,674
3,311,424
43,879,965

II. Assets
Non Current Assets
Fixed Assets (Net)
Investments
Current Assets
Cash and Bank Balances
Sundry Debtors
Closing Stock
Advances recievable in cash/kind
for value to be recieved
Deposits and Other advances
Total

Share capital as at 31 March 2013 comprises of 10,00,000
equity shares, of Rs. 10 each, fully paid .



As at 31 March 2013

As at 31
March 2012

26,316,675
100,000

30,221,263
100,000

87,065
1,954,093
8,219,813

319,019
2,597,708
9,389,156

640,994

531,954

664,200
37,982,840

720,865
43,879,964


15

Overview of Balance Sheets (2/2)
Balance Sheets of XYZ
INR

As at 31 March 2013

As at 31
March 2012



I. Equity and Liabilities
Shareholders Funds
Share Capital
Reserves & Surplus
Less: Accumulated losses
Net worth
Non Current Liabilities
Secured Loans
Unsecured Loans
Current Liabilities
Sundry Creditors
Advance form Customers
Outstanding Expenses
Total

10,000,000
2,500,000
21,328,934
(8,828,934)

10,000,000 
2,500,000
16,312,927
(3,812,927) 

7,635,188
14,378,328

8,627,688
16,648,340

9,321,169
10,852,403
4,624,686
37,982,840

9,905,765
9,199,674
3,311,424
43,879,965 

26,316,675
100,000

30,221,263
100,000 

87,065
1,954,093
8,219,813

319,019
2,597,708
9,389,156 



II. Assets
Non Current Assets
Fixed Assets (Net)
Investments
Current Assets
Cash and Bank Balances
Sundry Debtors
Closing Stock
Advances recievable in cash/kind
for value to be recieved
Deposits and Other advances
Total

640,994

531,954

664,200
37,982,840

Fixed assets as at 31 Mar 13 primarily comprise deep
freezers INR 82.8 lakhs, plant and machinery INR 59
lakhs, factory building INR 31.8 lakhs.
Investments include 4000 shares of Money Bank of Rs.
25 each.
As at 31 March 2013, of the total debtors, 10% is
overdue for more than 6 months. Refer Annexure VI for
details.
Closing stock primarily comprise raw material of INR 8
lakhs and packing material of INR 68.2 lakhs in stock as
at 31 Mar 13.
Advances recoverable primarily includes advance to
creditors INR 2.6 lakhs and prepaid expenses INR 2.9
lakhs.
Deposits and other advances primarily includes income
tax for FY09 INR 1.4 lakhs and input credit on VAT INR
1.5 lakhs.
Refer Annexure I for break-up of Fixed Assets, Advances
Receivable and Deposits.

720,865
43,879,964


16

Sales from September 2012 have shown a declining trend
resulting in an overall drop of 10% in sales value in FY13 over
FY12
Monthly Sales Comparison

FY13

FY12

FY11

% Variance FY13 over
FY12

% Variance FY12
over FY11

Apr
1,43,58,261
1,28,80,636
1,35,32,388
11%
May
1,40,30,496
1,44,07,863
1,40,57,690
-3%
Jun
57,80,062
39,18,714
52,99,546
47%
Jul
32,19,998
27,07,042
20,27,525
19%
Aug
32,73,379
30,64,871
23,50,320
7%
Sep
31,74,293
36,51,149
35,57,117
-13%
Oct
53,91,986
66,76,237
52,33,259
-19%
Nov
54,76,046
66,67,120
57,44,543
-18%
Dec
49,11,613
57,94,921
50,18,965
-15%
Jan
43,69,728
51,60,872
43,33,775
-15%
Feb
44,80,951
75,80,055
65,50,994
-41%
Mar
67,38,930
1,12,72,238
1,03,47,812
-40%
Total
7,52,05,743
8,37,81,718
7,80,53,934
-10%
The sales figures above are gross sales including excise
Source: Sales data are as per the Management Information System and are significantly higher than the sales
reported in the financial statements

-5%
2%
-26%
34%
30%
3%
28%
16%
15%
19%
16%
9%
7%

o

Overall Sales have dropped by 10% in FY13, in comparison with FY12. Consistent drop in sales is observed
from Sep 12 till Mar 13. Feb 13 and Mar 13 sales have dropped by over 40% in FY13 over FY12.

o

The Management represented that the drop in sales have been primarily due to:
o

lack of funds to buy new deep freezers to increase market reach through new distributors/retailers

o

increased competitors providing lucrative incentives to XYZ’s distributors also impacted sales. XYZ on account of fund
shortage had to cut down its sales spending.

o

Mining ban in Area 2 and Area 1 further had its impact on sales

18

Q1 FY14 sales have dropped by 46% as compared to Q1 FY13.
Monthly Sales Comparison
2013
Apr
May
Jun
Total

2012

8,454,973
8,560,090
1,604,839
18,619,902

14,358,261
14,030,496
5,780,062
34,168,819

2011
12,880,636
14,407,863
3,918,714
31,207,213

2010
13,532,388
14,057,690
5,299,546
32,889,624

% Variance 2013 % Variance 2012 % Variance 2011
over 12
over 11
over 10
-41%
11%
-5%
-39%
-3%
2%
-72%
47%
-26%
-46%
9%
-5%

o

The Management represented that the sharp drop in sales in the last 3 months has been primarily due to
the news spread in the market about the possible sale of the company, which has been used by the
competitors to their advantage. As a result many of the distributors/retailers, especially the ones using
their own deep freezers have switched to other brands. The Management further represented that the
ban on mining in Area 1 has also had an impact on the sales in Q1FY14.

o

The Management however expressed confidence that fund infusion primarily targeted towards a sales and
incentive strategy could turn around this situation.

Using June month as a base the off season sales in 2013
(June – Sep) may drop by 70%
Seasonal Comparison
2012-13
Peak Season Sales*
Off Season Sales**
Total

48,384,317
4,585,254
52,969,571

2011-12
71,540,200
15,447,732
86,987,932

2010-11
64,517,847
13,341,776
77,859,623

% Variance
2013 over 12
-32%
-70%
-39%

*from Oct to May
**from June to Sept
Off Season Sales for 2013 have been extrapolated based on the June Sales to rest of the off season sales ratios
for the previous years.

% Variance
2012 over 11
11%
16%
12%

19

88% of the revenue is attributed to just 56 out of 179 products
Number of
Products Unit Sales
Fast Moving
Normal Moving
Slow Moving

17
39
123

4,68,186
2,31,444
74,897

Revenue
3,71,24,389
2,04,32,810
79,15,879

%
% Unit Revenue
Sales
Sales
60%
30%
10%

57%
31%
12%

The sales figure from our analysis does not reconcile with total sales figures in the MIS. The unit price
provided to us was the net price obtained from Area 2 which would differ from the net sales obtained
from Area 1 and Area 3 due to the difference in VAT rates



17 out of 179 products currently offered to customers constitute 60% of unit-wise sales and 57% of net
sales in FY13.



39 out of 179 products in the Normal moving category constitute to 31% of net sales in FY13.



The remaining 123 products in the Slow moving category constitute to the remaining 12% of sales.



The Management represented that the non moving products were produced on a ‘made-to-order’ basis
as and when there was a request. Furthermore, the minimum order quantity for such products had to
be 10 units.



It would be more prudent to focus and increase the market for the fast moving variety rather than
waste production space and time for the non moving items.

20

Sales from all three states have dropped in FY13 over FY12.
Area-wise Sales
FY13
Area 1
Area 2
Area 3
Total

22,123,838
18,713,955
34,367,950
75,205,743

FY12
24,743,479
19,683,174
39,355,065
83,781,718

FY11
24,278,616
15,956,648
37,818,670
78,053,934

% Variance % Variance % to Total
FY13 over 12 FY12 over 11 Sales FY13
-11%
-5%
-13%
-10%

2%
23%
4%
7%

% to Total
Sales FY12

29%
25%
46%
100%

30%
23%
47%
100%



XYZ has a distribution network in Area 1, Area 3 and Area 2. The Management represented that at one time
Area 1 and Area 3 were contributing equally to the total sales. However, Area 1 sales have declined over the
period to the current status.



Sales from Area 1, Area 2 and Area 3 contributed 29%, 25% and 46% to the total sales, respectively.



Sales in Area 3 declined the most at 13% followed by Area 1 11% and Area 2 5%.



Sales in all three Areas had increased in FY12 over FY11. However, the main increase was in Area 2 of 23%.
The Management represented that this was on account of opening of new markets in Area 2.



Sales in all three states are primarily categorised as:






Sales through Company deep freezers which exclusively houses Classified brand

Sales through deep freezers belonging to distributors, wherein he could store other brands as well.

The Management however could not provide us the exact break up between own deep freezer and
distributor owned deep freezer sales. We were informed that Area 1 has a large number of distributor owned
deep freezer sales.

21

Area 1 – Sales from 10 out of 13 locations have declined in
sales in FY13, in comparison to FY12 in Area 1 (1/2)


Sales in Area 1 contributed
29% of the total sales in FY13.
Sales in Area 1 have declined
by 11% in FY13 over FY12
while remaining steady in FY12
over FY11.



Except for Market 1, Market 3
and Market 6, sales from the
remaining 10 markets have
declined in FY13 in comparison
with FY12.



Sales from Market 4, Market 7,
Market 10, Market 12, Market
13 and other sales (party
orders, exhibition and staff
sales) have been falling year
on year since 2011.



Only Market 1 has shown
steady growth over the period.



Largest drop in sales of 31%,
amounting to approx. 7 lakhs is
seen from Market 13
distributor in FY13.

Area 1
Distributor
Market 1
Market 2
Market 3
Market 4
Market 5
Market 6
Market 7
Market 8
Market 9
Market 10
Market 11
Market 12
Market 13
Other Sales
Differences in
sales
Total
Total sales

FY13

FY12

FY11

1,964,805
2,540,828
2,634,143
1,703,184
636,065
132,327
2,070,060
2,644,612
818,916
936,155
833,135
1,285,630
1,493,676
1,997,506

1,852,917
2,905,521
2,621,135
2,058,504
784,990
126,795
2,200,978
2,752,985
842,747
1,086,862
1,105,043
1,408,697
2,175,546
2,374,717

1,783,890
2,796,050
2,359,127
2,250,900
648,581
173,609
2,255,509
2,420,792
693,123
1,104,183
1,061,214
1,422,340
2,278,264
2,887,255

432,796

446,042

143,779

22,123,838
75,205,743

24,743,479
83,781,718

24,278,616

% Variance % Variance % tot total in % tot total in
FY13 over 12 FY12 over 11
FY13
FY12
6%
-13%
0%
-17%
-19%
4%
-6%
-4%
-3%
-14%
-25%
-9%
-31%
-16%

4%
4%
11%
-9%
21%
-27%
-2%
14%
22%
-2%
4%
-1%
-5%
-18%

3%
3%
4%
2%
1%
0%
3%
4%
1%
1%
1%
2%
2%
3%

2%
3%
3%
2%
1%
0%
3%
3%
1%
1%
1%
2%
3%
3%

-11%

2%

29%

30%

Source: Management information and MAS analyses

22

Area 1 – Sales from 10 out of 13 locations have declined in
sales in FY13, in comparison to FY12 in Area 1 (2/2)
Area 1
Distributor
Market 1
Market 2
Market 3
Market 4
Market 5
Market 6
Market 7
Market 8
Market 9
Market 10
Market 11
Market 12
Market 13
Other Sales
Differences in
sales
Total
Total sales

FY13

FY12

FY11

1,964,805
2,540,828
2,634,143
1,703,184
636,065
132,327
2,070,060
2,644,612
818,916
936,155
833,135
1,285,630
1,493,676
1,997,506

1,852,917
2,905,521
2,621,135
2,058,504
784,990
126,795
2,200,978
2,752,985
842,747
1,086,862
1,105,043
1,408,697
2,175,546
2,374,717

1,783,890
2,796,050
2,359,127
2,250,900
648,581
173,609
2,255,509
2,420,792
693,123
1,104,183
1,061,214
1,422,340
2,278,264
2,887,255

432,796

446,042

143,779

22,123,838
75,205,743

24,743,479
83,781,718

24,278,616

% Variance % Variance % tot total in % tot total in
FY13
FY12
6%
-13%
0%
-17%
-19%
4%
-6%
-4%
-3%
-14%
-25%
-9%
-31%
-16%

4%
4%
11%
-9%
21%
-27%
-2%
14%
22%
-2%
4%
-1%
-5%
-18%

3%
3%
4%
2%
1%
0%
3%
4%
1%
1%
1%
2%
2%
3%

2%
3%
3%
2%
1%
0%
3%
3%
1%
1%
1%
2%
3%
3%

-11%

2%

29%

30%



The Management represented
that the strategy in Area 1 has
been primarily to target the
low income groups and no
brand awareness especially in
major cities has ever been
created about the product.
Further, on account of working
capital constraints, institutional
sales have not been targeted
due to the requirement of
offering a credit period.



The Management represented
that decline in sales in Area 1 is
due to:


Increased competition
from several brands in
Area 1 providing
various sales incentives
to distributors have
reduced market size
especially among
distributor owned
freezer sales



Ban on mining


23

Q1 FY14 Sales have fallen by 34% in comparison with Q1 FY13 in
Area 1.
Area 1

FY14

FY13

FY12

Quarter 1

Quarter 1

Quarter 1

Market 1
521,185
788,499
594,612
Market 2
703,394
1,043,174
867,135
Market 3
723,923
1,022,116
695,182
Market 4
327,345
722,188
631,559
Market 5
181,226
249,628
215,786
Market 6
31,939
49,735
33,200
Market 7
510,076
701,099
697,659
Market 8
645,123
1,029,147
761,420
Market 9
158,339
268,576
252,118
Market 10
245,906
331,007
337,702
Market 11
169,262
376,856
346,622
Market 12
261,386
484,508
454,888
Market 13
482,189
730,378
770,030
Other Sales
734,193
891,541
952,542
Total
5,695,486
8,688,452 7,610,455

% Variance % Variance
2013 over 12 2012 over 11
-34%
33%
-33%
20%
-29%
47%
-55%
14%
-27%
16%
-36%
50%
-27%
0.5%
-37%
35%
-41%
7%
-26%
-2%
-55%
9%
-46%
7%
-34%
-5%
-18%
-6%
-34%
14%



Sales from all the areas have fallen in
Q1 FY14 as compared to the previous
period.



The Management represented that
the main reason was ban on mining
and the markets news that XYZ was to
be sold. This caused several
distributors to stop ordering Classified
products and switch to competitors.



The Management further represented
that Area 1 dealers get more lucrative
offers (in terms of no or very less
deposit for deep freezers and other
variable incentives) from other
competitor brands , while XYZ has
been unable to do the same due to
shortage of funds.



Further, competitor entry providing
low priced products like Hangyo has
also eaten into Classified’s market.

24

Area 3 sales in FY13 have dropped by 13% over FY12 sales


Sales in Area 3 contributed 46% of the total sales in FY13.
Sales in Area 3 have declined by 13% in FY13 over FY12,
contrary to growing by 4% in FY12 over FY11.



The major reason for this decline has been discontinuance of
Area 6 Depot, which was contributing 16% of the total sales
in FY12. The Area 6 depot which was managed by XYZ was
discontinued in mid FY13.The Management represented that
apart from day to management issues, the cost of running
the depot including rent, salaries of staff, pilferages etc were
found to be very high and hence unprofitable. Thus, the
Management decided to appoint individual distributors in
Area 6. However, it was found that the distributors have not
performed at par with the Depot in FY13 resulting in an
overall drop in sales from Area 6 of 16%.



Market 7 and Market 8, contributing 11% and 7% of total
revenue, dropped in sales by 16% and 19% respectively in
FY13. The Management represented that lack of marketing
efforts in FY13 (holding promotional events and distributing
marketing material / incentives) and increased competition
(distributors stocking low price products of competitors) led
to a decrease in sales from these regions.



Except for Market 23, all old distributors (in operation before
2009) have lagged behind in sales in FY13. Further, 28% of
sales were generated from new distributors.



The Management represented that it was a regular practice
to discontinue with underperforming distributors, who do
not meet the sales target as laid out in the agreement, and
shift to other new distributors to achieve higher sales.

Area 3
Distributor

FY13

FY12

Market 1

6,872,970

13,110,152

Market 2
Market 3
Market 4
Market 5
Market 6
Market 7
Market 8
Market 9
Market 10

2,367,012
1,293,567
427,207
8,449,802
5,609,829
749,743
1,470,260
1,009,078
394,748

10,046,681
6,954,320
2,240,942
2,178,067
1,127,710

11,993,206
-48%
9%
FY11

% total in % total in
FY13
FY12
9%
16%

9,198,648
6,200,641
2,384,008
2,246,008
1,429,750

-16%
-19%
-67%
-54%
-65%

9%
12%
-6%
-3%
-21%

3%
2%
1%
11%
7%
1%
2%
1%
1%

0%
0%
0%
12%
8%
3%
0%
3%
1%

Market 11
1,474,343
Market 12
802,421
1,327,421
Market 13
91,974
14,951
Market 14
429,178
1,028,927
982,976
Market 15
491,562
Market 16
792,633
1,057,842
980,643
Market 17
595,772
Market 18
460,643
300,674
381,629
Market 19
83,017
Market 20
415,355
Market 21
77,949
Market 22
1,434,108
Market 23
563,318
Total
34,367,950 39,355,065 37,818,670
Total sales
75,205,743 83,781,718

-100%
-100%
-58%
-25%
53%
-100%
-13%

-40%
515%
5%
8%
-100%
-21%
-100%

2%
0%
0%
1%
1%
1%
0%
1%
0%
0%
0%
2%
1%
46%

0%
1%
0%
1%
0%
1%
0%
0%
0%
0%
0%
0%
0%
47%

4%

25

Q1 FY14 sales have gone down by 55% in comparison with
Q1 FY13 sales in Area 3.
Area 3
Distributor

FY14
Quarter1

FY13

FY12

Quarter 1

6,459,868
Market 1
Market 2
965,773
Market 3
580,666
Market 4
Market 5
2,877,258
4,240,655
Market 6
1,040,332
3,090,514
Market 7
706,477
Market 8
432,887
Market 9
577,277
Market 10
419,247
Market 11
461,428
Market 12
Market 13
Market 14
429,178
Market 15
419,286
Market 16
144,168
499,537
Market 17
Market 18
112,665
213,778
Market 19
Market 20
Market 21
Market 22
223,053
Market 23
558,195
Total
7,592,658
16,859,584



Quarter 1
5,435,611
-

4,620,523
2,842,456
1,024,943

-

1,037,120
438,584

-

583,108
451,802

-

443,053

-

176,321

-

-

17,053,521

Sales from all the distributors have
dropped in Quarter 1 of FY14, in
comparison with Quarter 1 of FY13.



The distributors in Area 6 have achieved
sales of approx. Rs. 15.4 lakhs, whereas
the Depot had generated sales of Rs. 64.9
lakhs in the same duration in the previous
year.



Sales from major markets like Market 5
and Market 6 have dropped by 32% and
66% respectively in Q1 FY14 in
comparison with the previous year.



Similarly no sales was seen from
promising markets like Market 23, Market
11 etc.



The Management represented that this
decline is largely due a lack of focus on
marketing due to lack of funds and
believe that an inflow of funds is
immediately required to launch an
aggressive marketing strategy and
reposition the brand.

2013 over 12 2012 over 11
-100%
-32%
-66%
-100%
-100%
-100%
-100%
-71%
-47%
-100%
-55%

19%
-8%
9%
-31%
-44%
-4%
0%
-100%
-5%
13%
21%
-1%

26

FY13 sales have dropped by 5% in comparison to a 23%
increase in FY12 over FY11 in Area 2 (1/2)
Area 2



Distributor

FY13

FY12

FY11

Market 1
Market 2
Market 3
Market 4
Market 5
Market 6
Market 7
Market 8
Market 9
Market 10
Market 11
Market 12
Total
Total sales

7,348,459
3,226,326
3,124,188
850,879
1,998,333
293,077
1,347,044
525,649
18,713,955
75,205,743

6,986,310
3,846,841
3,064,337
1,104,271
1,582,871
1,148,735
124,906
20,695
1,453,823
336,489
13,896
19,683,174
83,781,718

4,715,634
4,028,715
3,525,753
2,337,270
1,349,276
15,956,648

% Variance % Variance % total % total in
FY13 over 12 FY12 over 11 in FY13
FY12
5%
48%
10%
8%
-100%
0%
0%
-16%
4%
5%
2%
-13%
4%
4%
-100%
-53%
0%
1%
-46%
17%
1%
2%
74%
3%
1%

135%
0%
0%
-100%
0%
0%
-7%
2%
2%
56%
1%
0%
-100%
0%
0%

-5%
23%
25%
23%




Sales in Area 2 contributed 25% of the
total sales in FY13. Sales in Area 2 have
declined by 5% in FY13 over FY12,
contrary to growing by 23% in FY12
over FY11. Area 2 region has had the
lowest drop in revenue, while it had
the highest increase in revenue in
FY12.
Market 1 is an important territory
contributing 10% of the overall sales
and has been able to generate a 5%
higher sales in FY13.
Market 2, one of the major
contributors to sales in FY11
discontinued operations with XYZ since
FY12. The new distributor in Market 2,
has not generated par sales. The
Management represented that the
new distributor has a wider network
and believes he will generate more
sales in the immediate future.
Several distributors outperformed
their FY12 sales levels including
Market 4, Market 7, Market 8, and
Market 11.

27

FY13 sales have dropped by 5% in comparison to a 23%
increase in FY12 over 11 in Area 2 (2/2)
Area 2
Distributor

FY13

FY12

FY11

Market 1
Market 2
Market 3
Market 4
Market 5
Market 6
Market 7
Market 8
Market 9
Market 10
Market 11
Market 12
Total
Total sales

7,348,459
3,226,326
3,124,188
850,879
1,998,333
293,077
1,347,044
525,649
18,713,955
75,205,743

6,986,310
3,846,841
3,064,337
1,104,271
1,582,871
1,148,735
124,906
20,695
1,453,823
336,489
13,896
19,683,174
83,781,718

4,715,634
4,028,715
3,525,753
2,337,270
1,349,276
15,956,648


% Variance % Variance % total % total in
FY13 over 12 FY12 over 11 in FY13
FY12
5%
48%
10%
8%
-100%
0%
0%
-16%
4%
5%
2%
-13%
4%
4%
-100%
-53%
0%
1%
-46%
17%
1%
2%
74%
3%
1%
135%
0%
0%
-100%
0%
0%
-7%
2%
2% 
56%
1%
0%
-100%
0%
0%
-5%
23%
25%
23%




Amongst the old distributors (in
operation before 2008), Market 8
dropped by 46%. The Management
represented that though the Market 8
distributor had performed well there
were long outstanding dues from him
amounting to Rs. 2 lakhs. Hence, the
Management decided to discontinue
supplies to him till he paid off the old
outstanding.
It was observed that the significant
increase in sales in FY12 over FY11 was
due to new distributors appointed in
FY12. In FY12, 35% of total sales came
from new distributors. It was also
observed that all these new distributors
had better sales in FY13 over FY12.
It was observed that no additions to
distributors was done in FY13. The
Management represented that on
account of lack of funds to buy deep
freezers they could not venture into new
markets.

28

Q1 FY14 sales have dropped by 38% in comparison with Q1
FY13 sales in Area 2.
Area 2



FY14

FY13

FY12

Quarter 1

Quarter 1

Quarter 1

Market 1
Market 2
Market 3
Market 4
Market 5
Market 6
Market 7
Market 8
Market 9

2,180,629
1,144,009
632,833
351,718
609,802
270,634

2,838,469
1,530,780
1,595,037
579,153
871,218
293,077
679,997

2,204,477
1,552,909
1,009,946
1,017,937
757,968
-

-23%
-25%
-60%
-39%
-30%
-100%
-60%

Market 10

142,133

233,052

-

-39%

Total
5,331,758 8,620,783 6,543,237

-38%

2013 over 12 2012 over 11
29%

-1%
58%
-100% 
-24%

32%



Sales from Area 2 had gone up 32% in Q1
FY13 over FY12, but dropped by 38% in Q1
FY14 over FY13.
Sales from all the distributors have dropped
in Q1FY14 over Q1FY13.
The distributors who had outperformed in
FY13 had a drastic decline in sales primarily
Market 4 by 60%, Market 8 by 100%,
Market 11 by 39% and Market 7 by 30%.
The Management represented that they
have stopped offering incentive schemes for
distributors/dealers and organizing events
for publicity due to unavailability of funds.
This has made it easy for low price
competitors like Hangyo and Adityaa Ice
Creams to take over XYZ market share.

Further, market 2 is currently experiencing
strong competition from brands like
Creambell and Vadilal.

29

Raw Material and Packing Materials costs constitute of 51% on
Net sales in FY13.
o

Raw Material/Packing
Material
Net Sales
% to Net Sales

37,429,421
73,454,086
51%

Raw Material and Packing Material form
51% of total sales in FY13.

o

The cost sheets maintained by the
management indicated that these items
would constitute 45% of the total sales,
however upon verification of prices of
raw materials and packing materials
against purchase bills, it was found that
most of the costs taken were
understated by 10-15%.

o

The Management represented that there was an error in the rates taken in their costing
and agreed that the input costs were high.

o

The management further represented that they would be able to achieve a lower cost by
bulk purchases during non-peak season thereby reducing the cost levels to about 42 % of
sales. For this however, they would require some additional working capital infusion.

o

The claims made by the Management would need to be verified by holding dialogues with
some critical suppliers regarding the extent in drop in prices if bulk purchases are made.

30

42 products with gross margins below 20%
Product
Product 1
Product 2
Product 3
Product 4
Product 5
Product 6
Product 7
Product 8
Product 9
Product 10
Product 11
Product 12
Product 13
Product 14
Product 15
Product 16
Product 17
Product 18
Product 19
Product 20
Product 21
Product 22
Product 23
Product 24
Product 25
Product 26
Product 27
Product 28
Product 29
Product 30
Product 31
Product 32
Product 33
Product 34
Product 35
Product 36
Product 37
Product 38
Product 39
Product 40
Product 41
Product 42

Unit Sales
73
360
2527
800
30
8
17
7150
1746
3
4
16587
1
2904
62116
30303
61
573
186
100
217
2671
2093
5479
629
345
446
992
126
9
6
8395
4768
2677
1397
849
1012
2212
5067
2871
315
1083

Gross Margins
Gross Profit
20%
4478
20%
22085
20%
92018
20%
28388
19%
1752
19%
117
19%
993
19%
96147
19%
21478
19%
37
19%
49
19%
204042
19%
12
19%
89110
18%
759387
18%
363705
17%
2825
17%
13939
17%
4525
17%
608
17%
5279
17%
63973
17%
50130
16%
87911
15%
13350
15%
7322
11%
8697
11%
19343
11%
2457
10%
60
10%
40
10%
55593
8%
25970
8%
29008
6%
5197
5%
3615
5%
4309
-5%
-8308
-10%
-32063
-12%
-26327
-22%
-10074
-45%
-40262



These 42 products account for 22% of
total unit sales in FY13.



5 of the products have negative margins
and have accounted for gross loss of INR
1,17,034



Management has represented that they
did not possess the financial expertise to
conduct such an analysis before and
hence these margins had never come to
light.



Management has further represented
that they would take immediate steps to
discontinue products with low/ negative
gross margins

31

60% of the contribution is achieved by 17 products in FY13.
Product

FY13

Product 76
Product 77
Product 78
Product 79
Product 80
Product 81
Product 82
Product 83
Product 84
Product 85
Product 86
Product 87
Product 88
Product 89
Product 90
Product 91
Product 92

46869
22177
63911
23711
25644
62116
20863
8237
27734
11794
30294
8537
19957
17813
7867
13447
4402



Variable Contribution
Cumulative
Contribution
Cost
Margin %
%
65
45%
2,497,811
11%
68
48%
1,404,323
17%
48
29%
1,266,122
23%
59
43%
1,035,961
27%
46
44%
923,078
32%
56
18%
759,387
35%
49
40%
688,631
38%
120
39%
629,398
41%
60
27%
605,733
43%
31
61%
573,166
46%
50
27%
551,996
48%
74
44%
489,522
51%
58
29%
475,182
53%
56
32%
464,429
55%
74
44%
451,104
57%
49
39%
419,619
59%
78
52%
378,692
60%





Product 76 is the highest contributor to net
margin in FY13, amounting to approx. Rs. 25
lacs with 46,869 units sold at 45%
contribution margin .
In spite of low unit sales, the following items
have contributed significantly to profits, due
to higher contribution margins and
moderate to high demand.
 Product 83
 Product 85
 Product 90
 Product 92

Even with a large number of units sold, the following products have not significantly contributed to
profits due to low contribution margins:


Product 91



Product 88



Product 84




Value after
Excise
118
131
68
103
82
68
82
197
82
80
68
131
82
82
131
80
164

Product 81

It is important to note that most of the products with the highest contribution margins do not feature in the top
60% of the gross profit contributors. The Management has to have a relook at the sales strategy.

33

High Margin items account for 7% of total unit sales
Product
Product 43
Product 44
Product 45
Product 46
Product 47
Product 48
Product 49
Product 50
Product 51
Product 52
Product 53
Product 54
Product 55
Product 56
Product 57
Product 58
Product 59
Product 60
Product 61
Product 62
Product 63
Product 64
Product 65
Product 66
Product 67
Product 68
Product 69
Product 70
Product 71
Product 72
Product 73
Product 74
Product 75

Unit Sales Gross Margins
Gross Profit
1214
73%
116794
3180
62%
180818
1729
61%
124751
11794
61%
573166
243
59%
28356
1144
57%
46190
6
57%
485
336
55%
36638
240
55%
26057
1055
55%
114542
419
55%
37475
271
53%
28406
4402
52%
378692
22
52%
1360
2043
52%
126315
15
52%
927
6749
52%
346665
148
51%
8961
2748
51%
166379
312
51%
51586
113
51%
18683
21
51%
3472
5
51%
827
201
51%
33233
62
51%
10251
6
51%
992
29
51%
4795
349
51%
8267
2732
51%
64718
2980
51%
70593
3354
51%
79453
2013
50%
119934
6234
50%
368663



Although these are high margin items,
many of them do not contribute
significantly to overall gross profit.



The gross margins do not show any corelation to the pack size, nor to the
flavour.



This indicates that pricing methodology
has to be revised.



Products in Category X and Category Y
were the highest to be sold, but the same
could not be benefited from due to low
contribution margins from them.

32

Insufficient Control Over Assets with Third Parties
Controls over
deep freezers

•A large portion of the value of fixed assets in the form of deep freezers is with the distributors/ dealers. While the Management
maintained that they are aware of the location of each deep freezers, including the switching between distributors, we were
not provided sufficient data to verify this claim. As at 31 Mar 13 INR 82.8 lakhs of deep freezers, comprises 31.5% of total assets
are lying with such third parties. Appropriate controls and checks and balances need to be put in place to ensure complete
controls on such assets.

Agreements
pertaining to
deep freezers

•Agreements are entered into with distributors at the time of allotting the deep freezers. A deposit is collected from the
distributor against such deep freezers. The agreement states that each year 20% of such deposit would be adjusted. At the
end of the 5th year the asset belongs to the distributor. In other words he is permitted to keep the products of XYZ’s
competitors in the freezer. While on account of no records maintained we were unable to verify such instances, it may result
in the loss of business to XYZ as beyond the 5th year the sales generation may significantly diminish. The Management however
represented that the life of the freezers is on an average 3-5 years and the cost of repairs / maintenance goes up after such
period.
•The agreement also states that if the cumulative sales till 4 th year does not match the targets set, XYZ has the right to take
back such freezers. Considering that the life of the freezer is 3-5 years, it is more prudent to have sales targets set for 1-2 years
to take such decisions. Though the Management represented that there have been instances wherein a distributor has been
discontinued due to non performance within a year, no data was provided for our review.

Liability
pertaining to
deposits
collected from
distributors not
properly
accounted for

•The accounts team correctly accounts for the deposit received from distributors as a liability. However, as per the agreement
each year 20% of the deposit becomes non – refundable. Hence, it amounts to an income to XYZ and ceases to be a liability,
However, we did not come any income accounted for in the period under review. It was also observed that the amount of
liability was increasing year on year. A verification of distributor wise deposit status revealed that such adjustments of deposits
were not carried out. A reconciliation activity would be required to be conducted to estimate the actual amount of liability,
while the balance would need to be accounted for as income. The tax impact on the same would need to be examined in
detail.

34

Revenue per Deep freezer is showing a declining trend since
FY11.
Income per Deep Freezer
Total Sales

FY13
75,205,743

FY12
83,781,718

FY11
78,053,934





Sales from Company
Owned Deep freezers*
No. of company owned
Deep freezers
Average Income per
Deep Freezer

56,404,307

62,836,289

58,540,451

829

745

619

68,039

84,344

94,573



*Sa l es from compa ny owned deep freezers i s taken a s 75% of total s a l es .
a s i nformed by the ma na gement.





The average income per deep freezer has
dropped by Rs.16,000 on an average in
FY13 over 12.
The Management represented that the
agreement with the distributors with
regards the deep freezers has a clause for
re-possession of the deep freezer by XYZ
if a sales target of INR 300 per day is not
met. However we did not come across
any sales target in the agreement.
As per the targets, the sales per deep
freezer should have been INR 1,09,400
against the three year high of 94,573.
In spite of targets not being achieved,
there was no evidence of any freezers
being re-possessed.
The Management represents that lack of
marketing efforts was one of the main
reasons for this drop as earlier they used
to provide advertising material worth Rs.
5,000-6,000 ( for P.O.P displays, Glow
signs etc.) on an average to newly
acquired distributors, which they have
now discontinued, along with the
withdrawal of attractive dealer schemes
(variable incentives).

35

Over due payments requiring immediate clearance
Over due payments as at 30 June 2013
Balance sheet items
Statutory Liabilities
Consultation Charges
Employees Labour Welfare Fund
Employer's Labour Welfare Fund
ESI - Employees Contribution Payable
ESI - Employers Contribution Payable
Group Gratuity Premium with LIC
LIC in lieu of EDLI
PF - Employers PF Payable
PF - Employees PF Payable
PF Admn. Charges
Area 1 VAT for the month of April 13
Area 1 VAT for the month of May 13
Area 1 VAT for the month of June 14
Area 1 Vat for the year 2012-13
Area 2 Vat for the month of May 13
Area 2 Vat for the month of June 13
Area 3 Vat For the month May 13
Area 3 Vat For the month June 13
Electricity Bill for the month of June 2013
Mediclaim of Employee
LIC Group Grauity 2011-12
LIC Group Grauity 2012-13
LIC Group Grauity Previous Years
Bank Guarantee ( Electricity Department )
Statutory dues total
Other Loans
Mr. Y
Classified Agencies, Area 3
Other loans total
Money Bank Term Loan Up to June 2013
Money Bank ( O/D Account ) CC Up to June13
Total loans
Bonus (2011-12)
Overdue Sundry Creditors
Balance sheet payments
Off Balance sheet payments

Other Loans
X Cold Drinks, Area 1
Classified Agencies, Area 3
Cash Bank
Other advances (Oct 12 to June 2013)
Secret Enterprises, Area 3


30-Jun-13
11,000
2,205
6,615
63,314
171,265
505,992
77,602
747,741
164,940
53,625

62,000
66,000
15,000
80,000
218,182
37,630
268,906
45,984
150,000
115,000
242,285
240,000
1,343,109
600,000
5,288,395

The Management represented that the following
payments were over-due and needed to be
cleared off immediately.



However, there could be interest and penalty on
certain statutory liabilities which need to be
examined and quantified.



Further, it would be advised that dialogue be
held with the creditors to be repaid to
understand their present and future
commitment with the Company as several of
them are critical suppliers of raw materials.

500,000
100,000
600,000
1,712,968
4,733,830
6,446,798
948,034
5,837,338
19,120,565

34,006
275,000
65,000
722,000
200,000

36

Adjustments to Current Assets and Liabilities
Particulars

Current Assets
Sundry debtors
Inventory
Loans and advances
Deposits
Total
Current liabilities
Sundry creditors
Advances from customers
Outstanding expenses
Net current assets

As per balance sheet Adjustments
as at 31 Mar 13
11,479,100
1,954,093
8,219,813
640,994
664,200

-6,207,154
-101,015
-6,015,061
-86,423
-4,656

24,798,258
9,321,169
10,852,403
4,624,686

734,448
2,637,501
-2,566,762
663,709

Note

Revised numbers

1
2
3
4



5,271,946
1,853,078 
2,204,752
554,572
659,544


5
6
7

25,532,705
11,958,669
8,285,641
5,288,395
-20,260,759

Source: MAS analyses

Note 1: The Management
represented that certain debtors are
irrecoverable and would need to be
written off.
Note 2: The amount of inventory is
revalued to the cost price / NRV as
at 31 Mar 13, whichever is lower.

Note 3: Certain loans and advances
were found to be irrecoverable and
need to be written off. The
Management represented that an
amount excess paid for construction
in 2011 would be repaid. However,
considering the period lapsed we
have assumed the amount to be
irrecoverable.



Note 4: Comprises FBT payment made which is irrecoverable.



Note 5: Certain sundry creditors and loans off the balance sheet have been added to the amount of sundry
creditors.



Note 6: We have assumed the amount of liability to be equal to the WDV of deep freezers, hence excess
liability is written off. For details refer slide on insufficient control over deep freezers.



Note 7: The Management represented a higher outstanding liability including some off balance sheet items.
Further, there could arise some amount of interest and penalty on the delayed payments of statutory
liabilities. However, it would not be possible to quantify the same.

37

Status of Statutory Dues
Income Tax


The assessment for FY08 and FY09 has been completed. A refund of Rs. 30,184 is due to be received for
FY08. No assessment notice has been received from FY10 onwards, as represented by the Management.
In the absence of such assessment orders we cannot comment on any probable liability.
Sales Tax Assessment



Area 3 – no assessment notice received till date as represented by Management.



Area 2 – Assessments till FY09 is completed. No assessment orders received from FY 10 onwards as
represented by Management.



Area 1 – Assessment completed till FY10. Liability of Rs. 35,634 payable as on date. No assessment orders
received from FY11 onwards as represented by Management.
Excise duty



The Management represented that excise duty became applicable for the Company from March 2011 as
per Amendment to Notification No. 1/2011-C.E.



There was a minor delay in payment of excise duty for the month of December 2012. Interest amounting
to approximately Rs. 71 was found to be payable.
Service Tax



The Management represented that service tax is payable by the Company when their logistics supplier
does not charge service tax in his bill.



There was a minor delay in payment of service tax in FY11. Interest amounting to approximately Rs. 22
was found to be payable, in case a query is raised by the Department.

39

Area 1 VAT


Delays were observed in the payment of whole amount of VAT month on month from FY11. However, it
was also observed that the Management was paying such amounts every quarter together with interest
on such delayed payments. In certain cases however the interest paid was calculated to be less than the
amount found payable. In the absence of the details of month-wise delay in payment of VAT we cannot
calculate such liability.



Further, in FY13 there were delays in payment of VAT on which no interest was paid. The amount
approximately works out to be Rs. 1,020.
Area 3 VAT



In FY11 there were delays observed in payment of VAT. The interest liability could work to approx. Rs,
1,042.



In FY13 there were major delays observed in payment of VAT. There were also some payments made
towards interest on such delayed payments. However the total interest liability net of such payments
could work out to approx. Rs. 76,270.
Area 2 VAT



In FY13 there were significant delays observed in payment of VAT. There were also some payments made
towards interest on such delayed payments. However the total interest liability net of such payments
could work out to appox. Rs. 14,895.

40

Provident Fund


Delays were observed in the payment of Provident Fund (PF) (employer’s and employees contribution) for
the FY11 and FY12 and for employee’s contribution till June 2012. Further, the employer’s contribution
was not paid from July 2012 till June 2013 and employees contribution from April – June 13 together
amounting to Rs.9,66,306. However, interest on all such delayed payments as mentioned above and
admin charges from April – June 2013 have not been considered.



The Management represented that the total amount payable on account of PF was Rs. 9,98,193.
ESIC



There were significant delays observed in payment of ESIC in FY11 and FY12. From Jan 13 to June 13 the
Company has not paid ESIC amounting to Rs. 2,34,579. Further, interest on all such delayed payments as
mentioned above have not been considered.



The Management represented that the total amount payable on account of ESIC was Rs. 2,53,066.

41

Other Observations
Fixed Assets Register


The fixed assets register was not found to be in the preferred format. Details pertaining to the date of
additions to assets, name of supplier, date of purchase, units of purchase, identification codes etc., were
not maintained. Considering a large value of the assets of XYZ are with third parties it is important to have
a proper documentation of such assets.
Physical verification of assets



While we were informed that physical verification of assets was conducted, we were not provided any
records. A large value of assets in the form of deep freezers lie with third parties. A physical verification is
a requisite at least once a year to check if the value of any deep freezer has diminished. Appropriate
action against the distributor could be immediately taken in such cases rather than waiting for the
contract period to end.
Physical verification of inventories



We were informed that physical verification of inventories was conducted and a segregation between fast
moving items and slow moving items was done. However, we were not provided any documents to
support this claim. Our checks however did not reveal any significant mismatches. However, going
forward, we suggest a thorough process of physical verification and segregation of the stock into fast and
slow moving.
As 15 on gratuity and leave encashment not complied with



Accounting Standard 15 of the Institute of Chartered Accountants of India (‘ICAI’) requires the Company
to make a provision in its books for gratuity and leave encashment payable from the 1st day of the
employee joining the organisation. However, in case of XYZ such provisions were done only at times of
payment. Considering the high cost of employees and a large number of employees having served a long
time in the organisation, the liability payable towards gratuity and leave encashment would need to be
calculated and a provision would need to be made into the books.

42

Other Observations
No agreements for unsecured loans


The shareholders of XYZ have provided unsecured loans to the Company to the tune of INR 1.44 cr.
However, there are no agreements in place which define the terms and conditions of such loans. In the
absence of such agreements we suggest the Management of EFG to obtain a written statement from XYZ
that such loans do not bear any interest or any other form of returns.
Finance team requirement



It was observed that while XYZ had a good production and marketing team, it was lacking in the finance
department. This was reflective in the way critical records which could help take important decisions
were maintained. The Management expressed that no support in terms of financial analyses was ever
made available to it. Going forward, we suggest a finance team to be appointed to instill financial
discipline in the company.

HR review


We suggest the Management of EFG to do an HR review to decide the requirement of the staff going
forward. Our analyses shows that the number of staff maintained for administrative / support functions
may be in excess of the requirements.
IDC lease agreement



The IDC agreement was entered into on 29th April 1999 for a lease period of 30 years. The total plot area
was 4,836 sq mts with a permission to built up to 50% of the plot area.



Licence for Foods Safety and Standard Act 2006 has expired on 31 Dec 12 and has been applied for renewal



The annual returns under Payment of Bonus Act Standard of Weight and Measurement Act have not been
filed.

43

Maximum Production (Variable) Cost per day


Maximum Production Costs per day (Peak Season)
Production
Process

Manpower
required

Manpower cost
Day Shift




Manpower will be working for 8
hours at regular wages and 8 hours at
OT wages (double)



All machinery has been assumed to
be used.
Raw material and Packing Material
cost has been taken as the cost of the
most produced ice cream



Manpower cost has been arrived at
assuming that the most labour
intensive ice-cream is being
produced.



The output per day (FG ) is assumed
as 3,000 units as represented by
Management.



The Intermediate mix output per day
has been assumed at maximum
possible in the 16 hours i.e. 2,000
Litres.

Electricity cost

Overtime

3.5
8

5

1,157

2,314

3,120

8

Filling & Storage

16 hour workday has been assumed



No. of Hours
per batch

Preparation of Ageing Mix
Ageing

8

1,851

3,703
9,026

2,975
6,096

Total Production Cost per Day

Cost of Raw material
Cost per batch
Raw Material

Based on Management representation,
following are the assumptions made to
arrive at the cost.

13,613

Maximum No. Raw Material
of Batches
Cost
4
54,451

Cost of Packing Material

Packing Material
Maximum Cost per day

Cost of
Packing
Material per
30

Maximum No.
Packing
of Units
Material Cost
produced
3,000
89,903

159,475

44

Projected Profitability Statement

45

Projected Profitability Statement
Projected Profitability of XYZ Ltd.
INR
Revenue from operations
Total income

April-Dec

Jan - Mar

FY14

FY15

FY16

FY17

FY18

33,249,825.0 20,222,814.9
33,249,825.0 20,222,814.9

53,472,639.9
53,472,639.9

107,520,000.0
107,520,000.0

119,340,000.0
119,340,000.0

133,660,800.0
133,660,800.0

149,700,096.0
149,700,096.0

16,624,912.5 10,111,407.5

26,736,320.0

52,416,000.0

56,723,793.8

61,942,382.8

67,641,082.0

2,992,484.3 1,820,053.3
12,300,136.7 4,510,050.1
2,676,657.5 1,159,666.6
4,453,013.3 1,931,074.5
39,047,204.1 19,532,252.0
-5,797,379.1
690,562.9
-17%
3%
3,503,906.3 1,355,468.8
-9,301,285.4
-664,905.9
983,005.33 566,238.82
-10,284,290.7 -1,231,144.7
-10,284,290.7 -1,231,144.7
-31%
-6%

4,812,537.6
16,810,186.8
3,836,324.0
6,384,087.8
58,579,456.1
-5,106,816.2
-10%
4,859,375.1
-9,966,191.2
1,549,244.15
-11,515,435.4
-11,515,435.4
-22%

9,676,800.0
19,331,714.8
4,603,588.8
8,853,581.5
94,881,685.1
12,638,314.9
12%
5,255,468.8
7,382,846.1
2,253,896.96
5,128,949.2
5,128,949.2
5%

10,740,600.0
22,231,472.0
4,833,768.3
9,982,864.8
104,512,498.8
14,827,501.2
12%
4,729,921.9
10,097,579.2
3,176,040.00
6,921,539.2
6,921,539.2
6%

12,029,472.0
25,566,192.8
5,075,456.7
10,482,008.1
115,095,512.3
18,565,287.7
14%
4,256,929.7
14,308,358.0
3,542,011.20
10,766,346.8
10,766,346.8
8%

13,473,008.6
29,401,121.7
5,329,229.5
11,006,108.5
126,850,550.3
22,849,545.7
15%
3,831,236.7
19,018,308.9
3,967,052.54
15,051,256.4
15,051,256.4
10%

Expenditure

Raw Material and packing
material consumed
Direct Expenses
Sales/Distribution Overheads
EBITDA
EBITDA % to sales
Depreciation
EBIT
Interest cost
PBT
Tax
PAT

46

Inference
• Based on our analysis there would entail a significant amount of initial investment to turn
around XYZ. Considering that the sales in Q1FY14 have dropped drastically due to negative
sentiments in the market, it could well be a challenge to revive the distribution network
which is critical to XYZ.

• The IRR in the first 5 years would be negative and EFG can expect a payback period of not
less than 7-8 years.
• The net asset value as on date is very low which does not give much security to EFG in case
the expected turn around does not happen.
• In addition EFG would also need to pay off past accumulated liabilities and bear losses in
the first year together with repayment of unsecured loan to the existing shareholders.
• Considering the above the following could be the investment envisaged to be done by
EFG:
Investment envisaged by EFG
INR

Investment into the company
Investment to clear old dues
Investment to clear unsecured loan of shareholders
Losses incurred in FY14
Investment to replace old shareholders
Total investment

FY14

5,000,000
15,311,268
14,378,328
6,656,060
5,061,666
46,407,322

FY15

7,500,000
7,500,000

FY16

FY17

-

1,250,000
1,250,000

FY18

-

47

Assumptions for Profitability projections
P&L Head

Assumption

Management
Representation

MAS Take

Sales for FY 14
(April – Dec)

Sales for FY 14 have been
extrapolated based on the sales
achieved upto June and the
average percentage these sales
have formed in the past years of
the total sales.

The Management
feels that the sales
can be improved
with the infusion of
funds to purchase
deep freezers and
invest into
marketing

MAS has considered that
it would take at least six
months for all takeover
formalities to be
completed prior to fresh
investment into deep
freezers/ marketing.

Sales for FY 14
(Jan – Mar)

Sales for the period have been
considered based on the
average sale per deep freezer
achieved in FY 13. A fresh
investment into 200 deep freezers
has been considered for this
period.

- do -

MAS has considered that
investment into deep
freezers would happen in
a phased manner of 200
in the last quarter of FY 14,
200 in the first quarter of
FY15 and 100 in the
Second quarter of FY 15.

Sales FY15

Sales for the period have been
calculated assuming that each
freezer invested into (including
old freezers) will generate sales of
approximately INR 18K in Q1, 20K
in Q2, 22K in Q3 and 22.5K in Q4

Management
represented that
they generally
consider a target
of INR 300 per day
per deep freezer.

The target is a bit
aggressive considering
the past three years’
data, hence the same
has been discounted by
INR 14,000 to INR 90,000
which will be achieved
gradually by Q4

48

P&L Head

Assumption

Management
Representation

MAS Take

Sales FY16 onwards

Sales for FY16 have
been assumed to
meet the target of
INR 90,000 per deep
freezer p.a.,
thereafter increasing
at 12% p.a.

Management was not
able to provide any data
on growth rate

As per research, the ice cream
industry has been growing @
15% per annum for the last 3
years, additionally, Experts
estimate a growth rate of 12%
p.a. for the next 5 years.

Raw Material Cost

For the FY 14, this
cost has been
assumed to be 50%
of the sales.
Subsequently a 1-2%
drop in costs has
been assumed every
year.

Management
represented the cost to
be pegged at 45% of
sales, Management
further represented that
through bulk purchase
and by introducing
“frozen Desserts” the raw
material cost could be
further reduced to about
40% of sales.

Upon analysis and verification
through bills, the actual cost
was found to be 50% of sales.
A drop in prices due to bulk
purchases is possible, however
the extent could not be
verified. MAS has assumed that
the cost could be reduced
from the present level of 50% to
about 45%.

Direct Expenses

This has been
assumed to remain
constant at 9% of
sales.

Management represents
that through the
introduction of newer
machinery, efficiency
would increase and
hence costs would go
down.

Since there was no substantial
evidence provided to the
extent of reduction of costs,
the direct costs have been
assumed as stable.

49

P&L Head

Assumption

Management
Representation

MAS Take

Employee Benefits

Employee Benefits for FY
14 have been
considered the same as
FY 13 levels. There after
an increase of 15% p.a.
has been assumed
considering the
expansion of distribution
network

Management
represented that
employee cost would
be reduced by at
least 20% due to
better machinery
being introduced.

The reduction in employee cost
would be offset by the
expansion of the distribution
network. Considering the
number of additions of deep
freezers, the strength of the
marketing/ distribution team
would need to increase.

Administrative
Expenses

These expenses have
been considered to
remain constant in FY14
and a 15% increase has
been considered
thereafter

N/a

N/a

Sales and Distribution
Expenses

This has been assumed
to be directly
proportional to the
number of deep
freezers. The numbers
have been taken
based on historical
average.

N/a

N/a

50

Appendix I – Balance Sheet Break-up

51

Fixed Assets
GROSS BLOCK
ASSETS

RATE OF

OPENING

ADDI-

DELE-

DEPR

BALANCE

TIONS

TIONS

DEPRECIATION
AS ON 31.03.2013 DEPRECIATION
TOTAL

TILL DATE

NET BLOCK
AS ON

AS ON

31.03.2013

31.3.2012

TANGABLE ASSETS
Lease hold Land

0.00
Air Confitioner
13.91
Factory Building
10.00%
Deep Freezers
13.91%
Effluent Treatment
13.91%
Electrical Installation
13.91%
Furniture & Fixture
18.10%
Generators
13.91%
Handling Equipments
13.91%
Laboratory Equipments 13.91%
Office Equipments
13.91%
Vehicles
30.00%
Plant & Machinery
13.91%
Computers
40.00%
TOTAL

19,99,010
1,10,200
91,63,784
2,18,99,243 14,72,348
57,120
13,81,313
17,35,226
7,56,593
18,36,624
47,26,807
43,996
20,584
4,87,240
1,44,97,451
3,14,142
2,05,91,569
29,307 9,48,229
7,87,336 1,03,810
7,99,92,981 16,49,461 13,19,491

19,99,010
1,10,200
91,63,784
2,33,14,471
13,81,313
17,35,226
7,56,593
18,36,624
47,70,803
20,584
4,87,240
1,41,83,309
1,96,72,647
8,91,146
8,03,22,951

57,885
59,78,202
1,50,28,830
11,05,137
11,56,950
6,25,357
5,81,186
32,80,873
15,271
3,71,407
1,13,69,624
1,37,50,010
7,13,590
5,40,34,322

1,29,845

1,01,799

19,99,010
19,99,010
52,315
60,768
31,85,582
35,39,535
82,85,641
80,93,788
2,76,176
3,20,799
5,78,276
6,71,711
1,31,236
1,60,240
12,55,438
14,58,286
14,89,930
16,85,602
5,313
6,172
1,15,833
1,34,549
28,13,685
41,50,760
59,22,637
77,28,299
1,77,556
1,65,002
2,62,88,629 3,01,74,519

INTANGABLE ASSETS
Microsoft Software
TOTAL
PREVIOUS YEAR

40.00%

1,29,845
8,01,22,826 16,49,461 13,19,491
7,51,13,306 66,80,557 16,71,037

8,04,52,796
8,01,22,826

28,046

46,744

5,41,36,120 2,63,16,675 3,02,21,263
4,99,01,562 3,02,21,263 2,84,79,415

52

Advances Receivable
Advances

Advances to Creditors

INR

Creditor 1
Creditor 2
Creditor 3

867
348
3

Creditor 4
Creditor 5

151,400
25,000

Creditor 6
Creditor 7
Creditor 8
Creditor 9
Creditor 10
Creditor 11
Sub-total
Prepaid Expenses

26
639
15
1,500
84,873
13
264,683

Prepaid Gr. Med. Mktg/Personal
Accidental (Dr. Loader)
Prepaid Group Insurance(in Lieu
Of EDLI Scheme)
Prepaid Insurance (P & M /
Building)
Prepaid Insurance (Vehicles)
Prepaid Rates & Taxes
Prepaid Membership &
Subcription
Advances to Staff
Total

57,996
37,239
90,654
100,124
2,000
88,298
640,994

53

Deposits
Deposits
Income Tax 08-09
Cylinder Deposit
Electricity Deposit
Entry Tax ( recoverable agst VAT)
Excess MAT paid 2007-2008 ( refund)
Fringe Benefit Tax 07-08 ( excess paid)
Fixed Deposit ( APMC Bank Guarantee)
Deposits
Guest House Deposit
Input Vat @ 5% (Capital Goods)
Input Vat @ 12.5% (Capital Goods)
Interest receivable on security deposit
Internet Deposit
Lease Deposit
Mobile Deposit
Area 3 Depot Deposit
Area 3 Guest House Deposit
Money Bank Guarantee
Sales Tax Deposit
Telephone Deposit
Total

INR
1,42,758
52,000
4,400
4,644
30,184
4,656
21,120
10,800
40,500
1,38,211
9,363
32,561
700
25,000
16,017
20,000
5,000
75,000
22,936
8,350
6,64,200

54

Appendix II – Profit and Loss Account Break-up

55

Direct Expenses and Employee Benefit Costs
Direct Expenses
Particulars
Consumable Stores and Spares
Generator Diesel
Electricity Charges
Freight Charges
Insurance (Plant and Machinery)
Laboratory Consumables
Loading and Unloading
Loss on Sale of Asset
Repairs and Maintenance (Plant and
Machinery& Deep Freezer)
Printing & Stationery Manufacturing
Power & Fuel
Total

FY13

FY12

% Variance
% Variance
% to Total % to Total % to Total
FY13 over FY12 FY12 over FY11 FY13
FY12
FY11

FY11

4,25,540

4,87,912

6,32,372

5,99,742
26,79,553
2,30,270
42,227

6,23,210
29,33,506
3,71,883
46,819

4,11,011
29,32,228
4,78,412
44,868

17,563
1,450
1,57,327

54,403
7,040
13,116

18,990
14,888
69,310

9,09,430

15,42,158

13,13,525

2,14,245

2,67,862

1,96,672

52,77,346

63,47,909

61,12,275

-13%
-4%
-9%
-38%

-23%
52%
0%
-22%

1%
1%
5%
0%

1%
1%
5%
1%

1%
1%
5%
1%

-10%
-68%
-79%
1100%

4%
186%
-53%
-81%

0%
0%
0%
0%

0%
0%
0%
0%

0%
0%
0%
0%

-41%
-20%

17%
36%

2%
0%

2%
0%

2%
0%

-17%

4%

0%
9%

0%
10%

0%
10%

Particulars
Salaries, Wages & Bonus
Provident & Family Pension Fund
Employees State Insurance
Gratuity Fund
Employees Group Insurance
Group Medi/Accidental Insurance
L.W.F - Employer's Contribution
Leave Encashment
Staff Welfare Expenses
Total

FY13
1,19,57,402
8,70,440
3,85,754
2,63,707
1,40,960
1,86,923
17,175
15,263
4,23,404
1,42,61,028

FY12
1,07,61,554
7,84,261
3,60,128
2,61,736
54,341
1,87,144
18,990
41,062
4,11,412
1,28,80,628

FY11
95,28,752
6,90,616
3,07,692
2,18,977
66,905
1,94,465
17,460
19,719
2,90,474
1,13,35,060

% Variance
% Variance
FY12
FY11
11%
13%
21%
17%
15%
11%
14%
2%
1%
1%
7%
17%
1%
1%
0%
1%
20%
0%
0%
0%
159%
-19%
0%
0%
0%
0%
-4%
0%
0%
0%
-10%
9%
0%
0%
0%
-63%
108%
0%
0%
0%
3%
42%
1%
1%
0%
11%
14%
25%
20%
18%

56

Other Administrative Overheads
FY11

% Variance
% Variance
FY12
FY11
-100%
28%
0%
0%
0%
-91%
14%
0%
1%
1%
-100%
0%
0%
0%
-100%
0%
0%
0%
0%
11%
39%
1%
0%
0%
8%
24%
1%
1%
1%
-16%
-10%
0%
0%
0%
-100%
171%
0%
0%
0%
-100%
-92%
0%
0%
0%
-72%
-50%
0%
0%
0%
40%
-45%
1%
0%
1%
-67%
-20%
0%
0%
0%
5%
110%
0%
0%
0%
0%
0%
0%
0%
0%
-100%
-18%
3%
0%
1%
1%
-22%
1%
0%
0%
0%
-95%
-20%
0%
0%
0%
11%
-10%
0%
0%
0%
-46%
43%
0%
0%
0%

Particulars

FY13

FY12

Analysis Charges
Bonus
Books and Periodicals
Broker Charges
Consultation Charges
Conveyance Expenses
Entry Tax
Fax Charges
Garden Material & Expenses
General Expenses
Guest House Rent goa / Others
Guest House Maintenance
Hardware Maintenance Charges
Lease Rent
Legal Fees
Mobile Expenses
Office Expenses
Pooja Expenses
Postage and Courier Charges
Printing and Stationery
Professional Charges, Statutory & Tax
Audit Fees
Rates & Taxes
Rent Pune Depot /Godown
Repairs & Maintenance of Land &
Building
Security Service Charges
Service Tax
Software Maintenance Charges
Subscription & Membership A/c.
Telephone Expenses
Total

34,675
3,23,000
7,76,934
1,47,808
22,737
2,99,000
17,690
70,479
36,270

15,222
3,81,188
4,000
2,89,736
7,19,777
1,76,249
1,167
1,685
80,868
2,13,108
53,734
67,234
36,270

2,81,236
1,32,303
270
13,245
1,42,092

3,42,022
1,69,373
5,087
11,880
2,62,723

11912
335387
8375
4000
208500
580609
196780
430
21977
160578
384500
66756
32000
36270
3000
332990
168256
6329
13143
183590

55,944

54,062

82777

3%

-35%

0%

0%

0%

1,22,439
20,800

67,317
2,79,630

102595
204870

82%
-93%

-34%
36%

0%
0%

0%
0%

0%
0%

1,567

2,080

175039

-25%

-99%

0%

0%

0%

5,31,568
5,673
12,300
1,01,835
31,49,865

5,13,852
7,534
70,200
18,350
1,22,177
39,66,525

415863
9354
64200
12350
148376
39,70,806

3%
-25%
-100%
-33%
-17%
-21%

24%
-19%
9%
49%
-18%
0%

1%
0%
0%
0%
0%
5%

1%
0%
0%
0%
0%
6%

1%
0%
0%
0%
0%
6%

57

Sales and Distribution Overheads
Sales & Distribution Overheads
Particulars
Advertisement
Debit Balance Written Off A/c
Discount Paid
Excise Duty
Lodging & Boarding
Insurance of Vehicles
Octroi Charges
Rates and Taxes of Vehicles
Repairs & Maintenance Vehicles/others
Sundry Expenses
Toll Charges
Travelling Expenses
Travelling Expenses (TA/DA)
Value Added Tax
Van Hire Charges
Vehicle Maintenance (Diesel/Petrol)
Total

FY13
2,81,494
40,872
5,15,027
11,38,803
84,307
1,87,776
4,13,066
1,12,964
9,32,141
14,402
91,373
1,73,378
3,40,637
6,12,854
61,350
30,44,578
80,45,023

FY12
12,85,663
84,199
2,38,427
6,21,549
1,14,182
1,47,521
6,86,673
1,13,780
10,84,304
21,546
1,09,615
2,35,020
4,19,484
5,54,321
84,230
34,63,104
92,63,617

FY11
9,18,885
3,105
10,26,596
59,707
84,177
1,49,977
7,30,818
1,33,563
12,58,428
58,432
95,561
1,25,277
3,51,253
7,01,319
48,190
32,73,613
90,18,900

% Variance
% Variance
FY12
FY11
-78%
40%
0%
2%
1%
-51%
2612%
0%
0%
0%
116%
-77%
1%
0%
2%
83%
941%
2%
1%
0%
-26%
36%
0%
0%
0%
27%
-2%
0%
0%
0%
-40%
-6%
1%
1%
1%
-1%
-15%
0%
0%
0%
-14%
-14%
2%
2%
2%
-33%
-63%
0%
0%
0%
-17%
15%
0%
0%
0%
-26%
88%
0%
0%
0%
-19%
19%
1%
1%
1%
11%
-21%
1%
1%
1%
-27%
75%
0%
0%
0%
-12%
6%
5%
6%
5%
-13%
3%
14%
15%
14%

58

Appendix III – Key Employee Details

59

Key Employee Details
Sr. No.
1

EMPLOYEES NAME
MR. K

DOJ

Designation

No of Yrs. of Service Gross
salary
14 years 4 months
59,500

1

MRS. L

Since
inception
9/1/1999

4

MR. M

1/1/2002

Marketing Manager

11Yrs 6 Months

31,000

5

MR. N

3/2/2009

Marketing Manager (Area 2)

4 Yrs 3 Months

29,000

6

MR. O

9/15/2004 Assistant Sales Manager (Area 1)

8 Yrs 9 months

21,000

7

MR. P

6/1/2005

8 Yrs

11,000

8

MRS. Q

13Yrs 6 Months

14,300

9

MR. R

12/1/2011 Production Manager

1 Year 6 Months

22,000

10

MR. S

1/12/2012 Maintenance Manager

25,000

11

MR. T

1 Year 5 Months
8 months

Managing Director
Manager - Accounts

13Yrs 10 Months

30,000

Assistant Sales Manager (Area 1)

12/10/1999 Market Coordinator

10/16/2012 Assistant Sales Manager (Area 1)

15,000

60

Appendix IV – Insurance Cover

61

Insurance Cover
Sr. No. Description of Assets
Sum Insured Policy Premium
1 Building
62,00,000
2 Compund Wall
3,60,000
3 Plant and Machinery
1,73,83,000
4 Boiler
1,68,000
5 Homogenizer
4,80,000
6 Addition to Boiler
66,000
7 Continious Freezer
11,30,000
8 Harding Tunnel
20,00,000
9 Furniture, Fixtures and Fittings
12,00,000
10 Stock of Row Material, Packing Materials,
Finished Goods and Stock in Process
46,00,000
TOTAL
3,35,87,000
40,333

62

Appendix V – Secured Loans Details

63

Appendix VI – Ageing of Debtors

65

Ageing of Debtors

SUNDRY DEBTORS

Debtor 1
Debtor 2
Debtor 3
Debtor 4
Debtor 5
Debtor 6
Debtor 7
Debtor 8
Debtor 9
Debtor 10
Debtor 11
Debtor 12
Debtor 13
Debtor 14
Debtor 15
Debtor 16
Debtor 17
Debtor 18
Debtor 19
Debtor 20
Debtor 21
Debtor 22
Debtor 23
Debtor 24
Debtor 25
Debtor 26
Debtor 27
Debtor 28
Debtor 29
Debtor 30
Debtor 31
Debtor 32
Debtor 33
Debtor 34
Debtor 35
Debtor 36
Debtor 37
Debtor 38
Debtor 39
Debtor 40
Debtor 41
Debtor 42
Debtor 43
Debtor 44
Debtor 45

<6 MONTHS

>6 MONTHS

57,959
14,273
2,553
1,414
22,148
3,026
1,514
970
4,394
1,157
2,661
696
1,459
5,215
1,096
1,876
1,259
798
3,514
4,521
509
566
2,603
3,476
803
1,694
2,072
3,384
4,667
6,206
1,033
562
8,770
6,308
2,231
574
1,767
5,508
202,575
528
244
638
3,755
134,560
1,617

TOTAL

57,959
14,273
2,553
1,414
22,148
3,026
1,514
970
4,394
1,157
2,661
696
1,459
5,215
1,096
1,876
1,259
798
3,514
4,521
509
566
2,603
3,476
803
1,694
2,072
3,384
4,667
6,206
1,033
562
8,770
6,308
2,231
574
1,767
5,508
202,575
528
244
638
3,755
134,560
1,617

SUNDRY DEBTORS

Debtor 46
Debtor 47
Debtor 48
Debtor 49
Debtor 50
Debtor 51
Debtor 52
Debtor 53
Debtor 54
Debtor 55
Debtor 56
Debtor 57
Debtor 58
Debtor 59
Debtor 60
Debtor 61
Debtor 62
Debtor 63
Debtor 64
Debtor 65
Debtor 66
Debtor 67
Debtor 68
Debtor 69
Debtor 70
Debtor 71
Debtor 72
Debtor 73
Debtor 74
Debtor 75
Debtor 76
Debtor 77
Debtor 78
Debtor 79
Debtor 80
Debtor 81
Debtor 82
Debtor 83
Debtor 84
Debtor 85
Debtor 86
Debtor 87
Debtor 88
Debtor 89
Debtor 90
Debtor 91

<6 MONTHS >6 MONTHS

1,700
1,387
595
125,149
6,219
508
1,297
388
4,162
949
72,091
570
552
1,310
200
2,419
481
991
2,313
5,141
484
1,163
2,306
1,620
339
1,032
884
1,471
4,632
884
3,000
3,380
3,149
13,660
1,240
62,039
2
3,672
1,339
3,315
1,390
4,502
1,586
2,272
6,247
2,862

TOTAL

1,700
1,387
595
125,149
6,219
508
1,297
388
4,162
949
72,091
570
552
1,310
200
2,419
481
991
2,313
5,141
484
1,163
2,306
1,620
339
1,032
884
1,471
4,632
884
3,000
3,380
3,149
13,660
1,240
62,039
2
3,672
1,339
3,315
1,390
4,502
1,586
2,272
6,247
2,862

SUNDRY DEBTORS

Debtor 92
Debtor 93
Debtor 94
Debtor 95
Debtor 96
Debtor 97
Debtor 98
Debtor 99
Debtor 100
Debtor 101
Debtor 102
Debtor 103
Debtor 104
Debtor 105
Debtor 106
Debtor 107
Debtor 108
Debtor 109
Debtor 110
Debtor 111
Debtor 112
Debtor 113
Debtor 114
Debtor 115
Debtor 116
Debtor 117
Debtor 118
Debtor 119
Debtor 120
Debtor 121
Debtor 122
Debtor 123
Debtor 124
Debtor 125
Debtor 126
Debtor 127
Debtor 128
Debtor 129
Debtor 130
Debtor 131
Debtor 132
Debtor 133
Debtor 134
Debtor 135
Debtor 136
TOTAL

<6 MONTHS

>6 MONTHS

1,605
1,079
137,334
700
23,150
4,927
1,538
499
1,261
10,734
108,157
398
1,225
1,491
5,220
1,494
1
2,383
795
1
3,557
1,300
1,140
3,181
2,949
259,696
5,408
798
2,566
3,948
4,998
803
10,497
1,888
156,776
3,755
2,167
7,459
12,020
61,187
657
764
3,877
2,863
824
1,781,586

172,507

TOTAL

1,605
1,079
137,334
700
23,150
4,927
1,538
499
1,261
10,734
108,157
398
1,225
1,491
5,220
1,494
1
2,383
795
1
3,557
1,300
1,140
3,181
2,949
259,696
5,408
798
2,566
3,948
4,998
803
10,497
1,888
156,776
3,755
2,167
7,459
12,020
61,187
657
764
3,877
2,863
824
1,954,093

66

Sample Due diligence report

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (20)

Similar a Sample Due diligence report

Similar a Sample Due diligence report (20)

Más de Rohit Pinto

Más de Rohit Pinto (9)

Último

Último (20)

Sample Due diligence report