GOTTA BE A BETTER WAY - Amara Raja

IN 2010-11, AMARA RAJA
DECLARED A SPECIAL
DIVIDEND OF 100% (`2 FOR
EVERY EQUITY SHARE OF `2
EACH) TO COMMEMORATE
THE SILVER JUBILEE YEAR.
THE BOARD ALSO PROPOSED
130% DIVIDEND FOR 2010-
11 TO BE APPROVED BY THE
SHAREHOLDERS AT THE
ENSUING ANNUAL GENERAL
MEETING.
48
AMARA RAJA BATTERIES LIMITED
ANNUAL REPORT 2010-11
Dividend
Amara Raja maintained a prudent
balance between rewarding shareholders
and retaining operational surpluses for
capitalising on growth initiatives. Since
2009-10, Amara Raja adopted a dividend
policy of distributing upto 15% of net
profit after tax as dividend to
shareholders.
In 2010-11, Amara Raja declared a
special dividend of 100% (`2 for every
equity share of `2 each) to
commemorate the silver jubilee year. The
Board also proposed 130% dividend for
2010-11 to be approved by the
shareholders at the ensuing Annual
General Meeting. If approved, the total
dividend payout, including special
dividend, would be `393 million
for 2010-11 against `248 million for
2009-10 – a 58% increase. The total
dividend payout would be 26.5% of the
profit after tax for 2010-11 as against
14.8% for 2009-10.
Capital employed
Capital employed increased 20% from
`5,709 million as on March 31, 2010 to
`6,833 million as on March 31, 2011
largely owing to investments in capacity
augmentation, facility and equipment
additions and increase in working capital.
The working capital facilities from banks
were completely unutilised during the
entire year under review; the limits were
marginally utilised only towards the end
of the financial year. Return on average
capital employed declined from 44.51%
in 2009-10 to 34.62% in 2010-11,
owing to decline in profits induced by
significant fall in telecom sector demand
and price.
Sources of funds
Networth: Shareholders’ funds increased
19% from `5,436 million as on March
31, 2010 to `6,459 million as on March
31, 2011 owing to a retention of sizeable
profits. Return on average net worth
declined from 35% in 2009-10 to 25% in
2010-11 owing to decline in profits.
Equity capital: The equity capital
comprised 85,406,250 equity shares of
`2 each. The promoter(s) and joint
venture partner held 26% each in the
equity as of March 31, 2011. The share
price as on March 31, 2011 was at `190
as against `164 as on March 31, 2010.
The market capitalisation as of March 31,
2011 was about `16,200 million.
Reserves and surplus: Reserves and
surplus increased 19% from `5,265
million as on March 31, 2010 to `6,288
million as on March 31, 2011 – owing to
a `1,023 million plough back of
operational surplus in 2010-11 as against
`1,380 million in 2009-10. The book
value per share stood at `76 as on March
31, 2011 against `64 as on March 31,
2010.
Borrowings
The interest-bearing debt portfolio stood
at `240 million as on March 31, 2011 as
against `273 million as on March 31,
2010. In 2010-11 Amara Raja repaid USD
4 million out of a USD 6 million
outstanding foreign currency loan, while
the balance USD 2 million will be repaid
in September 2011.
Working capital requirements were
managed completely out of internal
accruals. Amara Raja did not avail fundbased
working capital facilities during the
year except for limited utilisation during
the last week of the financial year. The
debt-equity ratio (without adjusting for
surplus cash) declined to 0.15 as on
March 31, 2011 against 0.17 as on
March 31, 2010.
The interest-free sales tax deferment loan
represents a financial incentive by the
state of Andhra Pradesh for setting up
industry in a backward area. The sales tax
collected by the Company in a particular
year needs to be paid to the government
after 14 years. This balance increased
from `639 million as on March 31, 2010
to `710 million as on March 31, 2011.
Credit rating agency CRISIL reaffirmed
‘AA/Stable’ for fund-based borrowing
and P1+ for non-fund based limits based
on the financial strength and growth
prospects of Amara Raja despite
significant challenges in the telecom
sector.
Interest: Consequent to a huge reduction
in external funding, interest cost declined
78.58% from `68 million in 2009-10 to
`15 million in 2010-11.
Application of funds
Fixed assets
Gross block increased 10% from `4,911
million as on March 31, 2010 to `5,388
million as on March 31, 2011 due to the
following:
a) Capacity augmentation in motor cycle
plant from 1.80 million units per
annum to 3.60 million units per
annum
b) Capitalisation of land purchased at
Uttarakhand
c) Development of various infrastructure
facilities at the plant
d) Capital expenditure to improve
productivity
development.
and new product
Depreciation was provided under the
Straight Line Method (SLM) in
accordance with Schedule XIV of the
Companies Act, 1956. Despite an
increase in the gross block, the provision
for depreciation declined from `429
million in 2009-10 to `417 million in
2010-11 – owing to the ageing of the
plant. Accumulated depreciation as a
percentage of gross block was 41.5% as
on March 31, 2011. Fixed assets turnover
ratio increased from 4.79 times in 2009-
10 to 5.59 times in 2010-11.
Capital work-in-progress: CWIP increased
significantly from `227 million as on
March 31, 2010 to `375 million as on
March 31, 2011. The increase was owing
to the ongoing capacity expansion in the
automotive business (2-wheeler and 4wheeler
battery).
2008-09 2009-10 2010-11
Debt equity ratio 0.70 0.17 0.15
CREDIT RATING AGENCY
CRISIL REAFFIRMED
‘AA/STABLE’ FOR FUND-
BASED BORROWING AND
P1+ FOR NON-FUND BASED
LIMITS BASED ON THE
FINANCIAL STRENGTH AND
GROWTH PROSPECTS OF
AMARA RAJA DESPITE
SIGNIFICANT CHALLENGES IN
THE TELECOM SECTOR.
GOTTA BE A
BETTER WAY 49