Bombay Burmah Trading Corporation Ltd - Annual Report 2023-24 Analysis

Overview #

Detailed Analysis #

This analysis looks into the Bombay Burmah Trading Corporation Limited (BBTCL) Annual Report for the financial year ended March 31, 2024, examining its financial performance, business segments, key risks, and ESG initiatives.

I. Financial Performance:

The report reveals a mixed financial picture for BBTCL in FY2023-24. While standalone revenue increased to ₹3827.5 million (from ₹3346.8 million in FY2022-23), primarily due to higher dividend income from overseas subsidiaries (₹972.8 million vs. ₹489 million), the standalone profit after tax shows a loss of ₹58.8 million compared to a profit of ₹87.9 million in the previous year. This loss is largely attributed to lower operational performance in the tea division and the absence of exceptional gains from the sale of the coffee division assets, which boosted the previous year’s results.

The consolidated financial results paint a significantly different picture. Consolidated sales show a modest growth of 3.55%, reaching ₹1,688,259 million, but the consolidated profit after tax is a substantial ₹173,717 million, a dramatic turnaround from a loss of ₹53,370 million in the previous year. This improvement reflects the significant one-time gains realized in the previous year from divesting the coffee business. The investment in Go Airlines (India) Limited, however, remains a major concern, with the investment and financial obligations fully written off in both standalone and consolidated accounts due to the company’s insolvency proceedings.

Key Financial Metrics (Standalone):

• Revenue: Increased, but largely due to dividend income from overseas subsidiaries, not necessarily core operations.
• Profit After Tax (PAT): Shows a significant loss, reversing the previous year’s profitability.
• Return on Net Worth (RONW): Shows a negative return, indicating poor profitability relative to equity.
• Debt-to-Equity Ratio: Significantly improved, demonstrating debt reduction efforts.
• Interest Coverage Ratio: Improved substantially, suggesting increased profitability and debt repayment.

Key Financial Metrics (Consolidated):

• Revenue: Modest growth, driven by its subsidiaries.
• PAT: Shows a significant profit, mainly due to one-time gains in the previous year. This does not present a clear picture of the company’s operational performance.
• The overall financial picture is clouded by the one-time events in both years.

II. Business Segments:

BBTCL operates across four main segments:

• Tea: Despite higher overall tea production, the tea division underperformed due to lower production in Tanzania and increased wage rates. The divestment of Tanzanian assets is underway.
• Coffee: The coffee business was divested in FY2022-23, leading to exceptional gains in that year.
• Auto Electric Components (Electromags): This segment showed improved performance, with higher turnover.
• Healthcare (Dental Products of India): This division reported a marginal increase in turnover.

III. Key Risks:

Several significant risks are identified:

• Geopolitical and Economic Factors: The impact of the Ukraine war, sanctions, and regional conflicts on tea and auto component markets. Fluctuations in commodity prices.
• Climate Change: Unpredictable weather impacting tea production, increased pest incidence, and water scarcity.
• Labor Relations: Increased wage rates in the tea sector without commensurate productivity improvements.
• Competition: Intense competition in the auto components and healthcare sectors.
• Go Airlines Insolvency: The significant write-off of investments and loans in Go Air reflects substantial financial risk.
• Regulatory Risks: Litigation related to land disputes (Singampatti tea estate) and environmental regulations.

IV. ESG Initiatives (Business Responsibility and Sustainability Report):

BBTCL’s BRSR report highlights its commitment to ESG principles, although the level of detail and quantifiable metrics vary across initiatives. Key areas include:

• Environmental: Focus on energy conservation (LED lighting, energy-efficient motors), renewable energy sources (wind energy for tea processing), and waste management. Water consumption and discharge data is provided, although zero liquid discharge is not yet implemented. GHG emission data (Scope 1 and 2) is presented, however, Scope 3 emissions are not detailed.
• Social: Initiatives related to employee and worker well-being (health insurance, accident insurance, training programs). A focus on equal opportunity and fair labor practices is mentioned, though there are no quantitative targets provided related to the percentage of differently abled employees and the participation/representation of women across all levels.
• Governance: Implementation of a whistleblower policy and a code of conduct. The report details the composition and activities of various Board committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, CSR, Risk Management).

Overall Assessment:

The BBTCL annual report presents a complex picture. While the consolidated financial results show a strong profit after tax, the standalone results and the significant risk associated with the Go Air insolvency highlight significant underlying operational challenges. The company has made efforts towards ESG initiatives, but the report lacks sufficient quantifiable data and targets to fully assess its sustainability performance. Further clarification on the discrepancy between standalone and consolidated results is needed. The company’s long-term strategy needs to address the operational inefficiencies and risks identified, especially in the tea division and supply chain disruptions, to ensure sustainable growth and profitability. Improved transparency and reporting on key ESG metrics are also essential.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The values for the requested financial metrics are presented differently in the standalone and consolidated financial statements. Here’s a breakdown from both:

Standalone Financial Statements (as of March 31, 2024):

• Total Assets: ₹6,394.72 million
• Current Assets: ₹2,032.51 million
• Cash and Cash Equivalents: ₹650.88 million (includes cash on hand, current account balances, EEFC accounts, foreign bank accounts, and short-term deposit accounts)
• Accounts Receivable (Trade Receivables): ₹5,717.87 million (net of allowance for impairment)
• Inventory: ₹5,568.74 million

Consolidated Financial Statements (as of March 31, 2024):

• Total Assets: ₹1,196,180.40 million
• Current Assets: ₹521,884.07 million
• Cash and Cash Equivalents: ₹74,726.78 million (includes cash on hand, current account balances, EEFC accounts, foreign bank accounts, and short-term deposit accounts)
• Accounts Receivable (Trade Receivables): ₹46,254.31 million (net of allowance for impairment)
• Inventory: ₹124,331.11 million

Important Note: The significant difference between the standalone and consolidated figures reflects the inclusion of the financial statements of numerous subsidiaries, associates, and joint ventures in the consolidated report. The standalone figures represent only BBTCL’s own assets and liabilities, while the consolidated figures represent the entire group. Always refer to the appropriate financial statements (standalone or consolidated) based on the context of your analysis.

Liability Analysis #

Similar to assets, the liability values differ significantly between the standalone and consolidated financial statements. Here’s a breakdown:

Standalone Financial Statements (as of March 31, 2024):

• Total Liabilities: ₹4,451.46 million
• Current Liabilities: ₹42,352.92 million
• Long-Term Debt (Borrowings - Non-current): ₹588.88 million
• Accounts Payable (Trade Payables - Current): ₹2,505.73 million (includes dues from micro, small, and medium enterprises and other creditors)

Consolidated Financial Statements (as of March 31, 2024):

• Total Liabilities: ₹531,049.37 million
• Current Liabilities: ₹426,229.31 million
• Long-Term Debt (Borrowings - Non-current): ₹104,502.20 million (includes non-convertible debentures and term loans)
• Accounts Payable (Trade Payables - Current): ₹165,711.99 million (includes dues from micro, small, and medium enterprises and other creditors)

Important Note: The substantial difference between the standalone and consolidated figures again highlights the inclusion of subsidiaries, associates, and joint ventures in the consolidated report. The standalone numbers represent only BBTCL’s debt, while the consolidated figures reflect the total debt obligations of the entire group. Carefully consider which set of figures is relevant to your specific analysis.

Equity Analysis #

Again, we need to distinguish between standalone and consolidated figures:

Standalone Financial Statements (as of March 31, 2024):

• Shareholders’ Equity: ₹1,943.26 million
• Retained Earnings: ₹1,304.33 million (This is the accumulated profit after tax not yet distributed as dividends)
• Share Capital: ₹1,396.27 million

Consolidated Financial Statements (as of March 31, 2024):

• Shareholders’ Equity: ₹665,131.03 million (This includes equity attributable to the parent company’s shareholders and non-controlling interests)
• Retained Earnings: This value is not explicitly stated separately in the consolidated financial statements. It’s incorporated within the “Other Equity” figure which includes many reserve accounts.
• Share Capital: ₹1,396.27 million (Note: Share capital remains the same in both standalone and consolidated statements because it represents the issued share capital of the parent company)

Important Considerations:

• The consolidated shareholders’ equity is significantly higher than the standalone figure due to the inclusion of equity from all subsidiaries and the non-controlling interests (shares held by outside investors in subsidiaries).
• The retained earnings are not directly comparable between the standalone and consolidated reports. The consolidated statement presents a more complex picture of equity, combining the retained earnings of the parent company with various reserve accounts across the entire group. To get a precise consolidated retained earnings figure you would need to analyze each reserve account in note 19 of the Consolidated Financial Statements.

Remember to always specify whether you are referring to standalone or consolidated figures when discussing BBTCL’s financial data.

Income Statement #

Operating Performance #

The values for revenue, cost of revenue, gross profit, operating expenses, and operating income also vary between the standalone and consolidated financial statements. Here’s the data from both:

Standalone Financial Statements (Year Ended March 31, 2024):

• Revenue from Operations: ₹2,613.17 million
• Cost of Revenue (Cost of Materials Consumed + Purchases of Stock-in-Trade - Changes in Inventories): ₹13,252.66 million + ₹262.61 million - (₹339.61 million) = ₹12,175.66 million
• Gross Profit: ₹2,613.17 million - ₹12,175.66 million = (₹9,562.49 million) This is a negative gross profit
• Operating Expenses (Employee Benefits Expense + Finance Costs + Depreciation & Amortization + Other Expenses): ₹9,781.70 million + ₹6,200.80 million + ₹725.26 million + ₹7,935.27 million = ₹24,642.03 million
• Operating Income: ₹2,613.17 million - ₹24,642.03 million = (₹22,028.86 million) This is a negative operating income

Consolidated Financial Statements (Year Ended March 31, 2024):

• Revenue from Operations: ₹1,710,897.15 million
• Cost of Revenue (Cost of Materials Consumed + Purchases of Stock-in-Trade - Changes in Inventories): ₹870,357.10 million + ₹95,581.11 million - (₹38.96 million) = ₹965,800 million (approximately)
• Gross Profit: ₹1,710,897.15 million - ₹965,800 million = ₹745,097.15 million (approximately)
• Operating Expenses (Employee Benefits Expense + Finance Costs + Depreciation & Amortization + Other Expenses): ₹83,278.26 million + ₹36,380.85 million + ₹31,335.93 million + ₹351,725.42 million = ₹502,710.46 million (approximately)
• Operating Income: ₹745,097.15 million - ₹502,720.46 million = ₹242,376.69 million (approximately)

Important Notes:

• The significant differences between the standalone and consolidated figures are due to the consolidated figures including data from all subsidiaries, associates, and joint ventures.
• The standalone figures show a negative gross profit and operating income, indicating significant operational challenges for BBTCL itself. This is largely due to high costs of materials consumed and operating expenses outweighing its standalone revenue.
• The consolidated figures show substantial gross profit and operating income. This positive picture is heavily influenced by the performance of its subsidiaries and the one-time gains from divestments in previous years.

It’s essential to analyze both standalone and consolidated statements to understand the overall financial health of BBTCL and its subsidiaries. The standalone figures highlight weaknesses within the parent company’s operations, while the consolidated figures offer a broader view of the group’s financial performance. However, the consolidated results are still heavily influenced by one-time gains from the previous year and don’t necessarily showcase consistent operational profitability.

Bottom Line Metrics #

Again, we must differentiate between standalone and consolidated figures:

Standalone Financial Statements (Year Ended March 31, 2024):

• Net Income (Profit After Tax): (₹58.80 million) - This is a loss.
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): This is not explicitly provided in the standalone statements. To calculate it, you would need to take the Profit Before Tax, and add back Depreciation & Amortization and Finance Costs. This would result in a negative EBITDA.
• Basic EPS (Earnings Per Share): (₹0.84) - This is a loss per share.
• Diluted EPS: (₹0.84) - This is also a loss per share, and is the same as basic EPS in this case.

Consolidated Financial Statements (Year Ended March 31, 2024):

• Net Income (Profit After Tax): ₹170,490.87 million
• EBITDA: This is not explicitly stated but can be calculated using the Consolidated Statement of Profit and Loss. You would need to add back interest expense, depreciation and amortization, and taxes to the net profit. This will yield a large positive EBITDA.
• Basic EPS: ₹98.09
• Diluted EPS: ₹98.09

Important Notes:

• The drastic difference between standalone and consolidated net income highlights the significant contribution of subsidiaries to the overall group’s profitability.
• The negative standalone net income and EPS indicate that BBTCL itself is not currently profitable.
• The consolidated EBITDA will be a large positive number, however, remember that this metric excludes some significant expenses (e.g., interest, taxes, depreciation, and amortization) and doesn’t represent the cash flow generated from operations. A more detailed reconciliation is needed to understand operational efficiency.

As always, it’s essential to consider both standalone and consolidated data to gain a detailed understanding of BBTCL’s financial position. The consolidated numbers present a much more positive picture, yet the picture is significantly affected by factors like one-time gains from asset sales. It’s critical to examine underlying operating performance to determine the company’s sustainable profitability and long-term value.

Cash Flow #

Cash Flow Components #

Once again, we need to differentiate between the standalone and consolidated cash flow statements:

Standalone Statement of Cash Flows (Year Ended March 31, 2024):

• Cash Flow from Operating Activities: (₹366.31 million) - This indicates net cash used in operating activities.
• Cash Flow from Investing Activities: ₹7,246.95 million - This indicates net cash generated from investing activities.
• Cash Flow from Financing Activities: (₹6,820.21 million) - This indicates net cash used in financing activities.

Consolidated Statement of Cash Flows (Year Ended March 31, 2024):

• Cash Flow from Operating Activities: ₹203,792.94 million - This indicates net cash generated from operating activities.
• Cash Flow from Investing Activities: ₹378,659.03 million - This indicates net cash generated from investing activities.
• Cash Flow from Financing Activities: (₹564,759.67 million) - This indicates net cash used in financing activities.

Important Considerations:

• The large difference in cash flow figures between the standalone and consolidated statements reflects the inclusion of cash flows from all subsidiaries and other entities in the consolidated statement.
• The standalone statement shows net cash used in operating activities, indicating that the company’s core operations are not currently generating sufficient cash to cover its expenses.
• The consolidated statement shows significant net cash generated from both operating and investing activities, suggesting the overall group is generating substantial cash. However, a large amount of cash is being used in financing activities.

It’s essential to carefully analyze both the standalone and consolidated cash flow statements to fully understand BBTCL’s cash position. The standalone statement reveals the liquidity challenges faced by the parent company, while the consolidated statement shows a much stronger overall cash position, primarily driven by subsidiaries and investing activities. However, the heavy cash outflow from financing activities suggests continued reliance on debt financing. Further analysis of the individual components within each category of cash flows is necessary for a complete assessment.

Cash Flow Metrics #

The annual report doesn’t directly provide free cash flow (FCF) as a calculated metric. However, we can estimate it using the information available. Capital expenditure and dividends paid are explicitly stated. We will need to use data from both the Standalone and Consolidated Statements of Cash Flows to arrive at approximate figures.

Estimating Free Cash Flow (FCF):

FCF is typically calculated as: Operating Cash Flow - Capital Expenditures.

Since the report doesn’t provide a straightforward operating cash flow figure we have to work backwards. This makes the accuracy of FCF an approximation.

Standalone:

• Operating Cash Flow (OCF): The Standalone Statement of Cash Flows shows net cash used in operating activities of ₹(366.31) million. This figure is already adjusted for changes in working capital, and therefore gives you an approximation for the standalone operating cash flow.
• Capital Expenditure (CAPEX): This is not explicitly stated in the standalone statements but can be inferred from investing activities. The significant item within Investing Cash Flows is the purchase of PPE, which suggests CAPEX is approximately ₹(614.26) million.
• Estimated Standalone FCF: ₹(366.31) million - ₹(614.26) million = ₹247.95 million (This is an approximation, actual FCF may differ slightly due to other investing activities). This is positive, suggesting some cash generation available after considering CAPEX, even if operations aren’t fully profitable.

Consolidated:

• Operating Cash Flow (OCF): The Consolidated Statement of Cash Flows shows net cash generated from operating activities of ₹203,792.94 million. Again this is an approximation of the OCF.
• Capital Expenditure (CAPEX): This is again not directly given but inferred from the Consolidated Statement of Cash Flows, taking into account the significant component for purchase of PPE, other intangible assets and development assets which is approximately ₹(57,553.82) million.
• Estimated Consolidated FCF: ₹203,792.94 million - ₹(57,553.82) million = ₹146,239.12 million (This is an approximation; the actual consolidated FCF may differ based on other investing activities.) This figure is substantially positive, showing strong cash generation after considering CAPEX.

Dividends Paid:

• Standalone: ₹837.26 million (final dividend for FY2022-23)
• Consolidated: ₹86,158.83 million (this includes dividends paid to shareholders of the parent company and non-controlling interests in subsidiaries).

Important Notes:

• These FCF calculations are estimates based on readily available data. A precise calculation would require a more detailed breakdown of cash flows from operations and investing activities.
• The significant disparity between standalone and consolidated FCF numbers is to be expected as it reflects the contributions from all subsidiaries and other entities within the consolidated group.
• Both standalone and consolidated figures show dividends paid; however, the consolidated figure is substantially larger because it includes distributions to shareholders across the entire group.

To precisely determine FCF, a more granular breakdown of the cash flow statement components is necessary. The figures here provide a reasonable approximation but are not definitive. Always check the official report for any additional clarifying information.

Financial Ratios #

Profitability Ratios #

Calculating profitability ratios requires careful consideration of whether to use standalone or consolidated financial data. The standalone data reflects the profitability of BBTCL itself, while the consolidated data incorporates the financial performance of all subsidiaries and entities in the group. Each has its own limitations when assessing overall company performance. The standalone results reveal the operational challenges faced by the parent company, while the consolidated data provides a broader but potentially misleading picture due to the inclusion of one-time gains and losses from subsidiaries.

Because of the limitations and the difficulty of precisely calculating some ratios from the information provided, the following calculations are approximations:

Standalone Financial Statements (Year Ended March 31, 2024):

• Revenue from Operations: ₹2,613.17 million

• Cost of Revenue (approximation): ₹12,175.66 million (see previous response for calculation)

• Gross Profit: (₹9,562.49 million) - This is a negative gross profit

• Operating Income: (₹22,028.86 million) - This is a negative operating income

• Net Profit (PAT): (₹58.80 million) - This is a net loss.

• Average Shareholders’ Equity: (₹20,009.26 million) - This is an approximation, calculated by adding beginning and ending standalone shareholder’s equity and dividing by 2.

• Average Total Assets: (₹95,093.14 million) - This is an approximation, calculated by adding beginning and ending standalone total assets and dividing by 2.

• Gross Margin: (Cost of Revenue/Revenue) * 100% = (₹12,175.66 million/₹2,613.17 million) * 100% = -465.66% This is a negative gross margin.

• Operating Margin: (Operating Income/Revenue) * 100% = (₹-22,028.86 million/₹2,613.17 million)* 100% = -843.10% This is a negative operating margin.

• Net Profit Margin: (Net Profit/Revenue) * 100% = (₹-58.80 million/₹2,613.17 million) * 100% = -2.25% This is a negative net profit margin.

• Return on Equity (ROE): (Net Profit/Average Shareholders’ Equity) * 100% = (₹-58.80 million/₹20,009.26 million) * 100% = -0.29% This is a negative ROE.

• Return on Assets (ROA): (Net Profit/Average Total Assets) * 100% = (₹-58.80 million/₹95,093.14 million) * 100% = -0.06% This is a negative ROA.

Consolidated Financial Statements (Year Ended March 31, 2024):

• Revenue from Operations: ₹1,710,897.15 million

• Cost of Revenue (approximation): ₹965,800 million (see previous response for calculation)

• Gross Profit: ₹745,097.15 million (approximately)

• Operating Income: ₹242,376.69 million (approximately)

• Net Profit (PAT): ₹170,490.87 million

• Average Shareholders’ Equity: ₹623,213.44 million (This is an approximation; obtained by averaging beginning and ending equity)

• Average Total Assets: ₹1,384,903.58 million (This is an approximation; obtained by averaging beginning and ending assets)

• Gross Margin: (Gross Profit/Revenue) * 100% = (₹745,097.15 million/₹1,710,897.15 million) * 100% = 43.55% (approximately)

• Operating Margin: (Operating Income/Revenue) * 100% = (₹242,376.69 million/₹1,710,897.15 million) * 100% = 14.17% (approximately)

• Net Profit Margin: (Net Profit/Revenue) * 100% = (₹170,490.87 million/₹1,710,897.15 million) * 100% = 9.96% (approximately)

• Return on Equity (ROE): (Net Profit/Average Shareholders’ Equity) * 100% = (₹170,490.87 million/₹623,213.44 million) * 100% = 27.36% (approximately)

• Return on Assets (ROA): (Net Profit/Average Total Assets) * 100% = (₹170,490.87 million/₹1,384,903.58 million) * 100% = 12.30% (approximately)

Crucial Considerations:

• Negative Standalone Profitability: The standalone ratios highlight significant unprofitability in BBTCL’s core operations. The negative gross and operating margins are especially alarming.
• Consolidated Performance: The consolidated ratios appear much healthier, indicating the positive contribution of subsidiaries. However, these figures are greatly affected by one-time gains in past years.
• One-Time Events: The significant difference between years underscores the influence of exceptional items (asset sales, impairments) on reported profitability. These one-time events distort the true picture of consistent operational performance.
• Approximations: These calculations are approximations due to the information provided in the report. Precise calculation requires more granular financial details.

To understand BBTCL’s true financial health, a deeper dive beyond headline numbers is needed, focusing on sustainable operational profitability and consistent performance across years, accounting for any extraordinary items. Analyzing segment-specific profitability would provide further valuable insights.

Liquidity Ratios #

Again, we must differentiate between the standalone and consolidated financial statements when calculating liquidity ratios. The standalone ratios reflect BBTCL’s own liquidity position, while the consolidated ratios encompass the liquidity of the entire group. Because of the complexities of obtaining precise figures from the provided data, the following calculations are approximations:

Standalone Financial Statements (as of March 31, 2024):

• Current Assets: ₹2,032.51 million

• Current Liabilities: ₹42,352.92 million

• Quick Assets (Current Assets - Inventories - Prepaid Expenses): ₹2,032.51 million - ₹5,568.74 million - ₹1,685.11 million = (₹5,221.34 million) Negative Quick Assets

• Current Ratio: (Current Assets / Current Liabilities) = ₹2,032.51 million / ₹42,352.92 million = 0.05 (approximately)

• Quick Ratio: (Quick Assets / Current Liabilities) = (₹-5,221.34 million) / ₹42,352.92 million = -0.12 (approximately) Negative Quick Ratio

• Cash Ratio: (Cash and Cash Equivalents / Current Liabilities) = ₹650.88 million / ₹42,352.92 million = 0.02 (approximately)

Consolidated Financial Statements (as of March 31, 2024):

• Current Assets: ₹521,884.07 million

• Current Liabilities: ₹426,229.31 million

• Quick Assets (Current Assets - Inventories): ₹521,884.07 million - ₹124,331.11 million = ₹397,552.96 million (approximately)

• Current Ratio: (Current Assets / Current Liabilities) = ₹521,884.07 million / ₹426,229.31 million = 1.22 (approximately)

• Quick Ratio: (Quick Assets / Current Liabilities) = ₹397,552.96 million / ₹426,229.31 million = 0.93 (approximately)

• Cash Ratio: (Cash and Cash Equivalents / Current Liabilities) = ₹74,726.78 million / ₹426,229.31 million = 0.17 (approximately)

Important Considerations:

• Negative Standalone Ratios: The standalone quick ratio is negative due to quick assets being less than current liabilities. This is a serious warning sign about BBTCL’s immediate liquidity and solvency. The current ratio being close to zero, also signifies the company’s poor liquidity.
• Consolidated Liquidity: The consolidated ratios are significantly better, reflecting the stronger overall liquidity position of the entire group. The current ratio being above 1.0 is a positive sign that the group can meet its current obligations.
• Approximations: These are approximations because of certain limitations in the provided data, for example, prepaid expenses were not explicitly stated in the standalone statement. The actual figures may vary slightly depending on adjustments and reclassifications.
• Focus on Operations: Liquidity ratios only offer a snapshot of a company’s short-term debt paying ability. A detailed assessment should also include an analysis of cash flow from operations to gauge sustainable liquidity.

The significant contrast between the standalone and consolidated liquidity ratios strongly suggests that BBTCL’s subsidiaries are the primary source of overall group liquidity, masking potential solvency risks for BBTCL itself. Further analysis of the individual cash flows of the subsidiaries and the cash conversion cycle would be essential to gaining a complete picture of the liquidity position. The extremely low standalone ratios clearly highlight severe near-term financial risk for BBTCL.

Efficiency Ratios #

Calculating efficiency ratios requires using both the Income Statement and Balance Sheet data. Since we’re working with approximations due to some missing data, the following calculations are estimates:

Standalone Financial Statements (Year Ended March 31, 2024):

• Net Sales: ₹2,613.17 million

• Average Total Assets: ₹95,093.14 million (approximation—average of beginning and ending balances)

• Average Inventory: ₹6,165.68 million (approximation—average of beginning and ending balances)

• Average Accounts Receivable: ₹5,407.27 million (approximation—average of beginning and ending balances)

• Cost of Goods Sold (COGS): ₹13,252.66 million + ₹262.61 million - (₹339.61 million) = ₹12,175.66 million (approximation - see previous response)

• Asset Turnover: (Net Sales / Average Total Assets) = ₹2,613.17 million / ₹95,093.14 million = 0.03 (approximately)

• Inventory Turnover: (COGS / Average Inventory) = ₹12,175.66 million / ₹6,165.68 million = 1.97 (approximately)

• Receivables Turnover: (Net Sales / Average Accounts Receivable) = ₹2,613.17 million / ₹5,407.27 million = 0.48 (approximately)

Consolidated Financial Statements (Year Ended March 31, 2024):

• Net Sales: ₹1,710,897.15 million

• Average Total Assets: ₹1,384,903.58 million (approximation—average of beginning and ending balances)

• Average Inventory: ₹125,512.37 million (approximation—average of beginning and ending balances)

• Average Accounts Receivable: ₹42,650.24 million (approximation—average of beginning and ending balances)

• Cost of Goods Sold (COGS): ₹965,800 million (approximation - see previous response)

• Asset Turnover: (Net Sales / Average Total Assets) = ₹1,710,897.15 million / ₹1,384,903.58 million = 1.23 (approximately)

• Inventory Turnover: (COGS / Average Inventory) = ₹965,800 million / ₹125,512.37 million = 7.7 (approximately)

• Receivables Turnover: (Net Sales / Average Accounts Receivable) = ₹1,710,897.15 million / ₹42,650.24 million = 40.1 (approximately)

Important Considerations:

• Standalone vs. Consolidated: The significant differences between standalone and consolidated ratios highlight the influence of subsidiaries on the overall group’s efficiency.
• BBTCL’s Operational Inefficiency: Standalone ratios, especially asset turnover and receivables turnover, are very low. This suggests that BBTCL is not efficiently utilizing its assets to generate sales and that its receivables are not being collected quickly. The inventory turnover is also low, indicating slow inventory movement.
• Consolidated Efficiency: Consolidated ratios show a much better picture, with a significantly higher asset and receivables turnover. This implies that the group as a whole is more efficient in converting assets into sales and collecting its receivables. The inventory turnover also demonstrates higher efficiency compared to the standalone figure.
• Approximations: These calculations are estimates. Precise figures require a more detailed breakdown of financial data than what is provided in the report.

In summary: The standalone efficiency ratios point to operational inefficiencies within BBTCL itself. The significantly improved consolidated ratios are largely due to the better performance of its subsidiaries. Further investigation into the individual performance of each segment and subsidiary is necessary for a thorough understanding of efficiency levels. The significant differences between years should also trigger a more in-depth look at the driving forces behind changes in efficiency.

Leverage Ratios #

As with other financial ratios, use ratios need to be calculated separately for the standalone and consolidated financial statements to get a complete picture. The standalone ratios reflect BBTCL’s leverage, while the consolidated ratios reflect the use of the entire group. The calculations below are approximations due to certain limitations and approximations in the data provided in the annual report:

Standalone Financial Statements (as of March 31, 2024):

• Total Debt (Current Borrowings + Non-current Borrowings + Current Lease Liabilities + Non-current Lease Liabilities): ₹34,283.86 million + ₹588.88 million + ₹61.67 million + ₹143.33 million = ₹35,077.74 million (approximately)

• Shareholders’ Equity: ₹1,943.26 million

• Total Assets: ₹6,394.72 million

• Earnings Before Interest and Taxes (EBIT) (approximation): ₹456.45 million (standalone profit before tax + tax expenses)

• Debt-to-Equity Ratio: (Total Debt / Shareholders’ Equity) = ₹35,077.74 million / ₹1,943.26 million = 18.08 (approximately)

• Debt-to-Assets Ratio: (Total Debt / Total Assets) = ₹35,077.74 million / ₹6,394.72 million = 5.48 (approximately)

• Interest Coverage Ratio: (EBIT / Interest Expense) = ₹456.45 million / ₹6,200.80 million = 0.07 (approximately)

Consolidated Financial Statements (as of March 31, 2024):

• Total Debt (Current Borrowings + Non-current Borrowings + Current Lease Liabilities + Non-current Lease Liabilities): ₹122,085.41 million + ₹104,502.20 million + ₹577.18 million + ₹2,156.33 million = ₹230,321.12 million (approximately)

• Shareholders’ Equity: ₹665,131.03 million

• Total Assets: ₹1,196,180.40 million

• Earnings Before Interest and Taxes (EBIT) (approximation): This requires significant adjustments based on the Consolidated Statement of Profit and Loss. The approximation will yield a very large positive EBIT.

• Debt-to-Equity Ratio: (Total Debt / Shareholders’ Equity) = ₹230,321.12 million / ₹665,131.03 million = 0.35 (approximately)

• Debt-to-Assets Ratio: (Total Debt / Total Assets) = ₹230,321.12 million / ₹1,196,180.40 million = 0.19 (approximately)

• Interest Coverage Ratio: (EBIT / Interest Expense) = This needs detailed calculations from the consolidated income statement; however, based on the large consolidated EBIT and the interest expenses, the ratio will be a large positive number.

Important Considerations:

• High Standalone Leverage: The standalone debt-to-equity and debt-to-asset ratios are extremely high, indicating substantial financial risk for BBTCL itself. The low interest coverage ratio suggests that the company’s earnings barely cover its interest expenses, highlighting significant financial vulnerability.
• Improved Consolidated Leverage: The consolidated use ratios are much lower, demonstrating a relatively stronger capital structure for the group as a whole.
• Approximations: These calculations are estimates. Accurate figures would necessitate a more detailed breakdown of financial data than is available in the annual report.
• Interest Coverage limitations: The interest coverage ratio is sensitive to the accuracy of EBIT calculation. A small change in EBIT could significantly impact this ratio. The interest coverage ratios presented here should be considered only as crude estimates.

In conclusion: The standalone use ratios for BBTCL point to a highly leveraged and financially risky situation. The healthier consolidated ratios are significantly influenced by the financial health of subsidiaries and don’t fully represent the risk of BBTCL itself. A detailed analysis of the debt structure and financial performance of each entity within the group is critical to obtaining a thorough understanding of financial risk.

Market Analysis #

Market Metrics #

The annual report doesn’t provide all of these market-based metrics directly. Market capitalization and dividend yield require current market data (share price) that changes constantly and is not included within the annual report. The P/E ratio and P/B ratio also depend on the current market price and therefore are not provided in the report. We can however, estimate the dividend payout ratio using the reported data.

Metrics that can be approximated from the annual report:

Dividend Payout Ratio: This ratio shows the percentage of net income paid out as dividends. Because BBTCL reported a net loss in its standalone statements, a meaningful payout ratio cannot be calculated for the standalone figures. For the consolidated results, we have:

• Consolidated Net Income: ₹170,490.87 million

• Total Dividends Paid: ₹86,158.83 million

• Consolidated Dividend Payout Ratio: (Total Dividends Paid / Net Income) * 100% = (₹86,158.83 million / ₹170,490.87 million) * 100% = 50.53% (approximately)

Metrics requiring current market data (not available in the annual report):

• Market Capitalization: This requires the current market price per share multiplied by the total number of outstanding shares. This information is not in the annual report, and will fluctuate constantly with the market price of the share.
• Price-to-Earnings Ratio (P/E Ratio): This requires the current market price per share divided by the earnings per share. This is not available from the report since the market price is not provided.
• Price-to-Book Ratio (P/B Ratio): This requires the current market price per share divided by the book value per share. The current market price is not in the report and hence, the P/B ratio cannot be computed.
• Dividend Yield: This requires the annual dividend per share divided by the current market price per share. Both the annual dividend and the current market price are not provided in the report.

In summary:

Only the dividend payout ratio can be approximated using data within the annual report. To obtain market cap, P/E ratio, P/B ratio, and dividend yield, you need the current market price of BBTCL’s shares from a financial news source or stock market website. Remember that these market-based ratios will change constantly reflecting market dynamics and investor sentiment.

Business Analysis #

Segment Analysis #

The Bombay Burmah Trading Corporation Limited (BBTCL) annual report provides limited details on segment-specific market share and geographic presence. Some information is available for key products and operating performance but obtaining exact data and calculations for revenue growth rates and operating margins requires more granular data and calculations than are readily available in the report. The following analysis therefore provides approximations, especially for growth rates and operating margins where some information is missing:

Business Segments:

BBTCL’s operations are categorized into many business segments. The following information draws from both the standalone and consolidated financial statements, acknowledging that the consolidated figures reflect the combined performance of BBTCL and its subsidiaries:

1. Tea:

• Name: Plantations (Tea Division)
• Key Products: Black tea, green tea, white tea (conventional and organic varieties).
• Geographic Presence: Primarily India (Tamil Nadu, Nilgiri), but also Tanzania (with divestment planned).
• Revenue (Approximation): Standalone revenue for tea cannot be precisely separated from the overall standalone revenue. It’s mentioned that the tea division’s turnover was ₹573.2 million. The consolidated statement also doesn’t separately report tea revenue. The consolidated revenue figures will include the revenue from various subsidiaries.
• Revenue Growth Rate: Cannot be precisely calculated without standalone revenue figures specifically attributable to the tea business in previous years.
• Operating Margin (Approximation): The report states the tea division underperformed. The standalone operating profit before interest and tax was negative (₹-233 million). This makes the calculation of Operating Margin negative. The consolidated statement doesn’t explicitly give operating margin figures for each segment.
• Market Share: Not provided.

2. Auto Electric Components (Electromags):

• Name: Electromags Division
• Key Products: Solenoids, switches, fluid level warning indicators, parts for intelligent battery sensors, electronic power steering motors, solenoid valves (BSVI compliant).
• Geographic Presence: Primarily India, with potential for expansion into overseas markets.
• Revenue (Approximation): Consolidated turnover for Electromags is approximately ₹16,965 million. Standalone data for this segment is not provided separately.
• Revenue Growth Rate: Cannot be precisely calculated without standalone revenue figures specifically for this segment in the previous year. A general increase in revenue compared to the previous year is mentioned.
• Operating Margin (Approximation): The report mentions improved performance. The Consolidated Statement does not provide segment-specific Operating Margins.
• Market Share: Not provided.

3. Healthcare (Dental Products of India):

• Name: Dental Products of India Division
• Key Products: Consumables, instruments, and dental materials for restorative and endodontic segments.
• Geographic Presence: Primarily India, with some potential for exports.
• Revenue (Approximation): Consolidated revenue is approximately ₹3,059 million. The standalone data is not available.
• Revenue Growth Rate: Cannot be precisely determined. An approximate 10% growth rate compared to previous year is mentioned.
• Operating Margin (Approximation): The report indicates a marginal increase in turnover but doesn’t provide specific figures for operating margins. This margin is also not available in the Consolidated Statement.
• Market Share: Not provided.

4. Coffee:

• Name: Coffee Division (Divested)
• Key Products: Coffee beans, coffee products
• Geographic Presence: Previously in India and Tanzania.
• Revenue: This segment was divested in the previous year.

5. Investments:

• Name: Investments Division
• Key Activities: Investments in various equity and debt instruments (listed and unlisted, domestic and international).
• Geographic Presence: Global (India and other countries).
• Revenue: Revenue mainly comes from dividend income, interest income, and capital gains which are shown as separate line items in the income statement.
• Revenue Growth Rate: Cannot be precisely calculated without a breakdown of income from previous years
• Operating Margin: Not directly applicable to an investments division.
• Market Share: Not applicable.

6. Horticulture:

• Name: Horticulture Division
• Key Activities: Production of decorative plants and landscaping services.
• Geographic Presence: India
• Revenue: Revenue is presented in the Consolidated Financial Statements as a part of the ‘Others’ segment
• Revenue Growth Rate: Not available.
• Operating Margin: Not available.
• Market Share: Not available.

7. Others:

• Name: Others Division
• Key Activities: A mix of other business activities. The report does not mention the individual segments explicitly.
• Revenue: Revenue is presented as part of the Consolidated Financial Statements as a part of the ‘Others’ segment.
• Revenue Growth Rate: Not available.
• Operating Margin: Not available.
• Market Share: Not available.

Limitations:

The report lacks a detailed segmental analysis providing precise figures for all the parameters requested, especially revenue growth rates, operating margins, and market shares. Approximations and estimates have been used to supply certain values. More detailed financial information would be necessary for a more precise assessment.

Risk Assessment #

The Bombay Burmah Trading Corporation Limited (BBTCL) annual report identifies many key risk factors. While the report doesn’t explicitly categorize them or provide a numerical assessment of likelihood and severity, we can infer those aspects from the descriptions and suggested mitigation strategies. The following analysis attempts to organize the risks by category and analyze their potential impact:

I. Financial Risks:

II. Operational Risks:

III. Other Risks:

Mitigation Strategies & Trends:

Across all categories, BBTCL emphasizes strengthening its internal controls, improving operational efficiency, and proactively addressing regulatory requirements. The focus on sustainability (ESG) indicates a recognition of the increasing importance of environmental and social considerations. However, the report lacks specific, quantifiable targets and timelines for many of its mitigation strategies. The trends identified point to an increasingly complex and challenging environment requiring continuous adaptation and strategic planning. The financial risk from the Go Air insolvency highlights the vulnerability of relying on a single major investment.

Note: The report doesn’t quantify the likelihood and severity of these risks. This analysis provides a qualitative assessment based on the information provided. A detailed risk assessment with numerical scores would require further data.

Strategic Overview #

Management Assessment #

BBTCL’s management discusses many key strategies, competitive advantages, market conditions, challenges, and opportunities in its annual report. Here’s a summary organized by category:

I. Key Strategies:

• Debt Reduction: The company emphasizes its ongoing efforts to reduce its debt burden, as evidenced by significant debt repayment in FY2023-24. This strategy aims to improve the company’s financial flexibility and reduce financial risk.
• Operational Efficiency: BBTCL is focused on enhancing operational efficiency across all segments, especially in the tea division through automation and improved farming practices. This aims to improve productivity and profitability.
• Diversification: Expanding its product portfolio (in auto components and healthcare) and sales channels to reduce reliance on specific products or markets. This strategy aims to mitigate risks associated with market volatility.
• Sustainability Focus: Integrating ESG considerations into its operations and supply chains. This aims to improve its reputation, attract investors, and improve long-term value.
• Strategic Growth: The long-term strategies include exploring opportunities for acquisitions, joint ventures, technical collaborations, and diversification into new technological areas (e.g., electric vehicle components).

II. Competitive Advantages:

• Established Brand: BBTCL benefits from its long history and established brand reputation.
• Diversified Portfolio: The company’s presence across multiple sectors reduces its reliance on any single industry.
• Established Distribution Network: The Electromag division and DPI have existing networks for distribution.
• Strong Relationships with Key Customers and Suppliers: Long-standing ties in many sectors.
• Internal Expertise and Knowledge: The tea division has knowledge in tea production.

III. Market Conditions:

• Tea: The tea market is influenced by fluctuating global prices, MRLs (Maximum Residue Limits) imposed by importing countries, and geopolitical factors affecting demand and supply chains. The increasing demand for organic teas presents an opportunity, yet, is constrained by factors such as MRLs. Consumption is expected to rise in Asia (India and China).
• Auto Electric Components: The Indian automotive market is growing rapidly. This growth is driven by the increasing domestic customer base and favorable demographics, alongside the rise in digital distribution channels, entry of international players, and increasing finance penetration. However, the market faces challenges due to fluctuations in commodity prices, increasing customer demand for high-quality parts with long warranties, and year-on-year discounts impacting profitability. The shift towards electric vehicles (EVs) presents both opportunities and challenges.
• Healthcare (Dental Products): Growing awareness of oral health and increased affordability of dental treatments are driving market growth. Competition is intense, however.
• Investments: Global financial markets are characterized by volatility, presenting both opportunities and risks for investment activities.

IV. Challenges:

• Unpredictable Weather Patterns: Climate change significantly affects tea production.
• Labor Costs: Rising labor costs in the tea sector, especially in India, and the pressure to maintain timely harvesting.
• Geopolitical Uncertainty: Global and regional conflicts impacting supply chains and demand.
• Commodity Price Volatility: Fluctuations in the price of raw materials, affecting profitability.
• Competition: Intense competition in all sectors, especially in the auto component and healthcare markets.
• Go Airlines Insolvency: The financial implications of Go Air’s insolvency represent a significant challenge for the company.

V. Opportunities:

• Growth in the Indian Automotive Market: This is especially relevant for the Electromag division. The opportunities within this sector are further amplified by the introduction of the production-linked incentive (PLI) scheme, and the rapid adoption of EVs.
• Increased Demand for Organic Tea: This presents a potential for growth within the tea division.
• Expansion into Retail Sales (Tea): Direct sales could improve the business’s bottom line.
• Technological Advancements (Auto Components): The expansion into EV components, electronic assemblies, sensors, and hydrogen fuel-based vehicle parts could yield profits.
• Acquisitions and Joint Ventures: Expanding through mergers and alliances.
• Improved Land Productivity (Tea): Efficient plantation management to improve yields.

In Summary:

BBTCL’s management aims for sustainable growth by combining debt reduction, operational improvements, and strategic expansion. The company’s diversified portfolio, established brand, and relationships provide advantages. The main challenges come from weather unpredictability, labor costs, geopolitical uncertainty, and the Go Air investment. The major opportunities lie in the growth of automotive industry in India, expansion into EV components, and the growing demand for organic tea. The success of its strategies hinges on its ability to navigate these risks effectively and capitalize on the identified opportunities.

ESG Ratings #

The provided annual report does not include ESG ratings from any external rating agencies. The report does include a Business Responsibility and Sustainability Report (BRSR) which details the company’s ESG initiatives, but this is not a substitute for an independent ESG rating. To find ESG ratings, you would need to consult specialized ESG rating providers such as:

• Sustainalytics: A leading ESG research and ratings provider.
• MSCI ESG Research: Another prominent ESG ratings agency.
• Bloomberg ESG Data: Offers ESG scores and data.
• Refinitiv ESG Scores: Provides ESG scores and analytics.
• ISS ESG: A well-known ESG ratings and analytics firm.

You would need to search these agencies’ databases using BBTCL’s name or its stock ticker symbol to find any available ESG ratings. The ratings may vary between agencies as they employ different methodologies and weighting schemes.

ESG Initiatives #

BBTCL’s annual report, specifically the Business Responsibility and Sustainability Report (BRSR), details its environmental, social, and governance (ESG) initiatives. However, the report’s information is not always presented with clear, quantitative targets and metrics, making a precise assessment challenging. Here’s a summary:

I. Environmental Initiatives:

• Energy Conservation: The company is implementing energy-efficient measures across its operations, including the replacement of old motors with energy-efficient ones, retrofitting variable frequency drives, and switching to LED lighting. These actions aim to reduce energy consumption and related greenhouse gas emissions.
• Renewable Energy: Wind energy is used to generate electricity in the tea plantations division, reducing reliance on non-renewable sources.
• Water Management: The report details water withdrawal, consumption, and discharge figures, although specific targets for water conservation are not clearly defined. Wastewater treatment plants are employed to manage effluent. Zero Liquid Discharge is not yet implemented.
• Waste Management: Efforts focus on waste reduction, reuse, recycling, and safe disposal (hazardous and non-hazardous waste). However, specific details on waste reduction targets and recycling rates are limited.
• Tree Plantation: The company has undertaken tree planting initiatives to mitigate environmental impact.

II. Carbon Footprint:

The report provides data on Scope 1 and 2 greenhouse gas (GHG) emissions but lacks details on Scope 3 emissions, which are significant for many companies. Specific emission reduction targets are not explicitly stated.

• Scope 1 Emissions: 18,241.23 metric tons of CO2 equivalent (FY2023-24).
• Scope 2 Emissions: 17,974.63 metric tons of CO2 equivalent (FY2023-24).

III. Social Initiatives:

• Employee Well-being: The company offers various employee benefits, including health insurance, accident insurance, and various training programs, focusing on improving skills and promoting professional growth.
• Worker Well-being: Similar initiatives are stated for workers, including health and safety training and programs. However, quantifiable targets for these initiatives are absent.
• Community Engagement: The report mentions community engagement, especially concerning health and nutrition, but lacks details.
• CSR Activities: The report details CSR spending, which primarily included infrastructure development in local communities (roads, public buildings).

IV. Governance Practices:

• Board Committees: BBTCL has established various Board committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, CSR, Risk Management) to oversee different aspects of the business.
• Code of Conduct: A code of conduct is in place for Board members and employees.
• Whistleblower Policy: A mechanism for reporting ethical concerns has been implemented.
• Related Party Transactions: A policy on related-party transactions is in place.
• Compliance: The report highlights efforts to ensure compliance with relevant laws and regulations.

V. Sustainability Goals:

The report does not clearly articulate specific, measurable, achievable, relevant, and time-bound (SMART) sustainability goals. While the BRSR demonstrates a commitment to sustainability, the absence of clear targets and measurable metrics limits the ability to assess progress toward specific environmental or social objectives.

Overall Assessment:

BBTCL’s ESG efforts show some level of commitment to environmental and social issues but lack detailed reporting with sufficient quantifiable data and targets. While various initiatives are described, the report doesn’t provide sufficient detail for a thorough evaluation of its sustainability performance. To improve transparency and accountability, BBTCL should set explicit, measurable sustainability goals with defined timelines and benchmarks for tracking progress across its operations.

Additional Information #

Operational Metrics #

The annual report states that R&D expenditure is Nil for the financial year 2023-24.

Regarding employee count, the report provides a breakdown of employees and workers, distinguishing between permanent and non-permanent roles:

As of March 31, 2024:

• Total Employees: 296 (258 Male, 38 Female)
• Total Workers: 3,600 (1,449 Male, 2,151 Female)

Therefore, the total number of employees and workers combined is approximately 3,896. However, it’s important to note that this is the total headcount and does not distinguish between full-time, part-time, or contract workers. The report notes that there were 2,491 permanent employees in addition to other workers.

Key Events #

Several significant events occurred during BBTCL’s fiscal year 2023-24:

• Divestment of Tanzanian Tea Assets: The company approved the divestment of its tea plantations in Tanzania, aiming to improve the overall financial performance and reduce its exposure to less profitable operations.
• Go Airlines Insolvency: The insolvency of Go Airlines (India) Limited, in which BBTCL held a significant investment, led to a complete write-off of the investment and related financial obligations. This highlights significant financial risk and the negative impact on profitability.
• Completion of Coffee Business Divestment: The sale of the coffee business (completed in the previous year) is mentioned as having contributed to debt reduction.
• Appointment of New Chief Operating Officer: Mr. Rajiv Arora was appointed as Chief Operating Officer, effective February 13, 2024.
• Appointment of New Company Secretary: Mr. Murli Manohar Purohit was appointed Company Secretary and Compliance Officer, effective September 7, 2023.
• Increased focus on ESG (Environmental, Social, and Governance) principles: The company adopted the Business Responsibility and Sustainability Report (BRSR) framework demonstrating increased emphasis on transparency and sustainability.
• Composite Scheme of Arrangement: One of BBTCL’s associate companies underwent a composite scheme of arrangement, resulting in changes to the company’s shareholding and the addition of a new associate company.
• Repayment of Significant Debt: The report emphasizes significant debt repayment undertaken by BBTCL during the financial year, substantially improving the debt-to-equity ratio.
• Early Conversion of CCPS (Go Airlines): The company agreed to an early conversion of compulsorily convertible preference shares (CCPS) in Go Airlines into equity shares.

These events significantly shaped BBTCL’s financial performance and strategic direction during the year. The Go Airlines insolvency stands out as a major negative event, whereas debt reduction and the increased focus on ESG reflect positive strategic initiatives.

Audit Information #

Auditor’s Opinion:

The independent auditor, Walker Chandiok & Co LLP, issued a qualified opinion on the consolidated financial statements. The qualification stems from the unavailability of audited or reviewed financial information for Go Airlines (India) Limited for a portion of the financial year (April 1, 2023, to May 9, 2023), preventing a complete assessment of the Group’s share of profits/losses in that associate. The auditors expressed an unmodified opinion on the standalone financial statements of BBTCL.

Key Accounting Policies:

The annual report details numerous key accounting policies in accordance with Indian Accounting Standards (Ind AS). Key highlights include:

• Basis of Preparation: The financial statements are prepared on a going concern basis, using historical cost convention, except for certain assets and liabilities (biological assets, defined benefit plans, financial instruments, and others) measured at fair value as required by Ind AS.
• Consolidation: The consolidated financial statements include the parent company and its subsidiaries, using the acquisition method for business combinations. Equity method is used for associates and joint ventures. Intercompany transactions are eliminated.
• Revenue Recognition: Revenue is recognised when control of goods transfers to the customer (point-in-time recognition). Specific criteria are followed for trade receivables, contract assets, and contract liabilities.
• Property, Plant, and Equipment (PPE): PPE are initially recognized at cost and subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method over the estimated useful lives.
• Intangible Assets: Intangible assets are initially recognized at cost. Amortization is applied over the useful lives using the straight-line method.
• Impairment of Assets: Assets are tested for impairment when indicators suggest the carrying amount may not be recoverable. The recoverable amount is the higher of fair value less costs to sell and value in use.
• Biological Assets: Biological assets (tea and coffee) are measured at fair value less costs to sell.
• Inventories: Inventories are valued at the lower of cost and net realisable value (NRV).
• Investments: Investments are initially measured at cost and subsequently measured either at cost, fair value through other detailed income (FVOCI), or fair value through profit or loss (FVTPL), depending on the classification.
• Borrowing Costs: Borrowing costs directly attributable to the acquisition, construction, or production of an asset are capitalized; others are expensed.
• Financial Instruments: The Group uses a fair value hierarchy (Level 1, Level 2, Level 3) for financial instruments, with different measurement methods applied depending on the level.
• Employee Benefits: Both defined contribution and defined benefit plans are accounted for in accordance with Ind AS 19.
• Provisions: Provisions are recognized when an outflow of resources is probable, and a reliable estimate of the amount can be made.
• Leases: Ind AS 116 ‘Leases’ is applied, requiring the recognition of right-of-use assets and lease liabilities for most leases.
• Foreign Currency: Foreign currency transactions and translations are accounted for using appropriate exchange rates.
• Taxes: Current and deferred tax are recognized. The Group uses the balance sheet method for deferred taxes.
• Exceptional Items: Material items of income and expense are disclosed separately as exceptional items.

These are some of the key accounting policies; the complete details are provided in Note 1 of both the standalone and consolidated financial statements. It is advisable to carefully review the detailed descriptions within the report for a thorough understanding of how these policies are applied.