Financial analysis of
Timex India Ltd
Team Members
Group 3 Section D
ADIL. HUSSAIN
ARJUN. MEHTA
NALIN. D SOUZA
ARUN PRATAB SINGH
PAVAN. R
COMPANY PROFILE
Timex Group designs, manufactures and markets innovative
timepieces and jewelry globally. Timex, founded in 1854, has expanded
to become Timex Group, a privately-held company, with several
operating units and over 5,000 employees worldwide.
Timex Group India has one of the most powerful portfolios of brands
in the watch industry. With technological innovation and cutting-edge
design, we recognize the tremendous opportunity to leverage the
reach and appeal of each brand‟s individual identity, personality and
customer base. With our global organization and breadth of expertise,
we bring our partners from concept through design, manufacturing to
distribution, to meet and exceed the brands‟ criteria for success.
Bankers: The Hongkong & Shanghai Banking Corporation Limited
HDFC Bank Limited.
Auditors: BSR & Co.-Chartered Accountants
Registered Office: 117 G.F. World Trade Centre,
Babar Road, New Delhi – 110001.
Board of DIRECTORS
Kapil Kapoor Non-Executive Director & –Chairman
V D Wadhwa Managing Director
Frank Sherer Non-Executive Director
Daya Dhaon Non-Executive & Independent Director
Gagan Singh (Ms.) Non-Executive & Independent Director
Pradeep Mukerjee Non-Executive & Independent Director
Directors report
FINANCIAL RESULTS
Rs. in Thousands
Particulars 2010-11 2009-10
Income 1739082 1400709
Expenditure 1563321 1341958
EBIDTA 192734 83311
Interest 47 1679
Depreciation 16926 22881
Profit before TAX 175761 58751
Provision for TAX 35663 12518
Profit after TAX 140098 46233
The economic environment for the domestic business continued to remain
conducive for most part of the year and all major players in the watch industry
witnessed strong growth, which was largely driven by fashion and youth segment
and expansion of the retail footprint.
The high inflation rate and rising cost of commodities prices, if not contained, is
likely to adversely impact the consumer sentiment and the overall economic
growth environment in the year ahead.
The year 2010-11 has been a year of major transformation, during which, your
Company has delivered its highest ever volume, revenue and profitability
performance. Sales Revenue grew by 25% at Rs 174 Crore and Profit before tax
grew by 203% at Rs14 Crore.
The year begun with a leadership change in the management team and the
subsequent finalization of your Company‟s three years strategic plan. Under the
new leadership, several key initiatives were taken to drive efficiencies across the
organization and also align all stakeholders of the Company with the goals to
create a strong sense of vision and focus for the business.
Corporate governance policy
VISION
◦ The Timex Group vision is anchored in our rigorous focus on long lasting
relationships with our customers and our commitment to build the power of our
brands, underpinned by our peoples will to win.
◦ By transforming ourselves into a truly Global Company and intent on globalizing
the mindset of our people, we are building one of the most powerful portfolios of
brands in the watch and jewelry industry.
◦ Our vision for the future goes way beyond timekeeping. We will delight and
surprise our customers through innovation in design, technology and application of
our brands and deliver a superior customer experience.
◦ This will lead to enhanced values for our shareholders and increase returns on
investments and assets.
◦ Deeply committed to our Corporate Social Responsibility and our values, we will
build pride in our people and win the best future talent for our Group.
VALUES
The customer is our most important asset,
Corporate Social Responsibility is our foundation,
Truth, transparency and respect for our differences are our pillars of
strength.
We work together to achieve Group goals,
Our core values encompass integrity, responsibility and courage,
We reward performance and results and we value a culture of discipline,
We are fair and listen to our people and we expect them to always look
for a better way,
We protect our assets,
We want to win.
Management decision and aid
The company has an unique advantage of having several international brands with
domestic manufacturing capabilities. This allows international products to be sold
in India at prices which offer tremendous “Value for Money” to the consumer
In addition, India continues to be a key strategic market for the Timex Group and
therefore enjoys easy access to its global resources across all functional areas,
which should help improve operational efficiencies due to the scale of the Group‟s
global operations.
The Company has been able to manage its cash flow through improved
collections and utilized the surplus cash to reduce the borrowings and accounts
payable, which has resulted in savings in Interest costs despite firming up of
Interest Rates.
The Company does not hold any fixed deposits from the public, shareholders &
employees.There were no overdue /unclaimed deposits as on 31 March 2011.
The Company made payment aggregating to Rs.32.58 Crore by way of Central,
State and local sales taxes and duties as against Rs. 30.06 Crore in the previous
year.
The Company is also paying dividend on its Preference Shares at the agreed
coupon rate.
Schedules
Schedule 1 - Share Capital
Schedule 2 - Reserve And Surplus
Schedule 3 - Fixed asset
Schedule 4 – Inventories
Schedule 5 – Sundry debtors
Schedule 6 – Cash and bank balances
Schedule 7 – Loans & advances
Schedule 8 – Current liabilities & provisions Current liabilities
Schedule 9 – Other income
Schedule10- Materials consumed & movements in finished goods and work-in-
progress
Schedule11 – Personnel cost
Schedules
Schedule 12 – Other expenses
Schedule 13 – Interest
Schedule 14 –SIGNIFICANT ACCOUNTING POLICIES
Schedule 15 –NOTES TO THE ACCOUNTS
GAAP “generally accepted accounting principles”
Historical cost concept
A measure of value used in accounting in which the price of an asset on the
balance sheet is based on its nominal or original cost when acquired by the
company. The historical-cost method is used for assets in the U.S. under generally
accepted accounting principals (GAAP).
Accrual concept
Business transactions are recorded when they occur and not when the
related payments are received or made.
Separate entity concept
The separate entity concept treats a business as distinct and separate
from its owners. The business stands apart from other organizations as a
separate economic unit. It is necessary to record the business's
transactions separately, to distinguish them from the owner's personal
transactions
Going concern concept
This concept simply implies that the business will continue to operate for
the foreseeable future and that it isn't suddenly going to cease trading.
Accounting Period Concept
Accounting Period Concept requires that Income Statement should be
prepared at periodic intervals for purposes such as performance evaluation
and determination of taxes. Conventionally, the time span covered is one
year.
E.g. 1/4/200x to 31/3/200x
Accounting standards
AS1 - Disclosure of Accounting Policies
AS 2 (Revised) - Valuation of Inventories
AS 3 (Revised) -Cash Flow Statements
AS 4 ( Revised) -Contingencies and Events Occuring after Balance Sheet Date
AS 5 (Revised) - Net Profit or Loss for the Period, Prior Period Items
and Changes in Accounting Policies
AS 6 (Revised) - Depreciation Accounting
AS 8 (withdrawn pursuant to AS 26 becoming mandatory) - Accounting for R& D
AS 9 - Revenue Recognition
AS 10 -Accounting for Fixed Assets
AS 11 (Revised) - The Effects of Changes in Foreign Exchange Rates
AS 13 - Accounting for Investments
AS 20 - Earning Per Share
21 - AS 21 - Consolidated Financial Statements
22. - AS 22 - Accounting for Taxes on Income
23 - AS 23 - Accounting for Investments in Associates in Consolidated
Financial Statements
24. - AS 24 -Discontinuing Operations
25 - AS 25 -Interim Financial Reporting
26. - AS 26 -Intangible Assets
27. - AS 27 -Financial Reporting of Interests in Joint Ventures
28. - AS 28 - Impairment of Assets
29. - AS 29 - Provisions, Contingent Liabilities & Contingent Asset
Significant accounting policies
followed by the company
INCORPORATION
◦ Timex Group India Limited (TGIL or the Company), a subsidiary of Timex
Group Luxury Watches B.V. (formerly Timex Watches B.V.), is a limited liability
Company incorporated on 4 October 1988 under the provisions of the
Companies Act,1956. The Company is listed on Bombay Stock Exchange in
India.
◦ The Company‟s business consists of manufacture and trade of watches and
rendering of related after sales service. The Company also provides accounting
and information and technology support to group companies.
Basis of preparation of
financial statements
The financial statements are prepared and presented under the historical cost
convention, on accrual basis of accounting
in accordance with the Generally Accepted Accounting Principles („GAAP‟) in
India and comply with the accounting standards prescribed by the Companies
(Accounting Standards) Rules, 2006 and the presentational requirements of the
Companies Act, 1956, to the extent applicable.
Use of estimates AS-25
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent liabilities on the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period
Fixed assets (AS-10) (AS-26)intangible
Fixed assets are carried at cost of acquisition less accumulated
depreciation/amortization. Cost is inclusive of freight, duties, taxes and any other
directly attributable costs to bring the assets to their working condition for
intended use.
Depreciation on tangible assets other than leasehold land and leasehold
improvements is provided under the straight line method over the useful life
as estimated by the management or the derived useful life as per Schedule XIV of
the Companies Act, 1956, whichever is lower. Depreciation on the following
categories of fixed assets is provided at rates that are higher than the
corresponding rates prescribed in Schedule XIV:
Plant and machinery (including office equipment) at rates ranging from 4.75% per
annum to 100% per annum based on technical evaluation.
Furniture and fixtures at the rate of 20% per annum.
Tools and moulds are fully depreciated in the year of manufacture / purchase.
Depreciation (AS-6)
Depreciation on additions is provided on a pro-rata basis from the date of
acquisition/installation.
Depreciation on sale/deduction from fixed assets is provided for up to the date of
sale/adjustment, as the case may be.
Leasehold land is amortized over the period of lease.
Leasehold improvements are depreciated under the straight line method over the
lowest of the following:
◦ (I) period of the lease
◦ (ii) useful life as estimated by management
◦ (iii) derived useful life as per Schedule XIV.
Intangible assets are amortized over their estimated useful life of 5 years.
Impairment of assets (AS-28)
The carrying amounts of assets are reviewed at each balance sheet date in
accordance with Accounting Standard – 28 on „Impairment of Assets‟ to
determine whether there is any indication of impairment. If any such indication
exists, the recoverable amount of the asset is estimated.
Inventories (AS-2)
Inventories are valued at the lower of cost and net realizable value. Cost of
inventories includes all costs incurred in bringing the inventories to their present
location and condition.
In determining the cost, the weighted average cost method is used. Fixed
production overheads are allocated on the basis of normal capacity of production
facilities.
Finished goods and work-in-progress include appropriate share of allocable
overheads.
Finished goods held for the purpose of demonstration are amortized over a
period of three years after deducting residual value.
Revenue recognition (AS-9)
Revenue from sale of goods is recognized on delivery of goods to the buyer
which coincides with transfer of all significant risks and rewards of ownership. The
amount recognized as sale is inclusive of excise duty and excludes sales tax and
trade and quantity discounts.
Revenue from services is recognized on rendering of services to customers on
accrual basis.
Interest income is recognized on a time proportion basis.
Foreign currency transactions (AS-11)
Foreign exchange transactions are recorded using the exchange rate prevailing on
the date of the transaction. Exchange differences arising on foreign exchange
transactions settled during the year are recognized in the Profit and Loss Account
of the year.
Monetary assets and liabilities denominated in foreign currencies remaining
unsettled as at the balance sheet date are translated at the exchange rates on that
date and the resultant exchange differences are recognized in the Profit and Loss
Account.
Warranties (AS-29)
Warranty costs are estimated by the management on the basis of past experience.
Provision is made for the estimated
liability in respect of warranty costs in the year of sale of goods.
Taxation AS-22
Income tax expense comprises current tax/fringe benefit tax (that is amount of
tax for the year determined in accordance with the Income-tax Act, 1961) and
deferred tax charge or credit (reflecting the tax effects of timing difference
between accounting income and taxable income for the period). The deferred tax
charge or credit and the corresponding deferred tax liability or deferred tax asset
is recognized using the tax rates that have been enacted or substantially enacted
as the balance sheet date. Deferred tax assets are recognized only to the extent
there is reasonable certainty of realization.
Such assets are reviewed at each balance sheet date to reassess realization.
However, where there are carried forward losses or unabsorbed depreciation
under taxation laws, deferred tax assets are recognized only if there is virtual
certainty of realization of such assets.
Other Provisions & Contingent
Liabilities AS-29
A provision arising from claims, litigation, assessment, fines, penalties, etc. is
recognized when the Company has a present obligation as a result of a past event
and it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
These are reviewed at each balance sheet date and adjusted to reflect current
management estimates. Contingent liabilities are disclosed in respect of possible
obligations that have risen from past events and the existence of which will be
confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the enterprise. When there is a
possible obligation or present obligation where the likelihood of an outflow is
remote, no disclosure or provision is made.
Provision for sales returns is recognized to the extent of estimated margin on
expected returns based on past trends.
Earnings per share AS-20
Basic earnings per share are computed using the weighted average number of
equity shares outstanding during the year.
Scenario for WINDOW DRESSING &
changes in ACCOUNTING POLICIES
The Company has maintained proper records showing full particulars, including
quantitative details and situation of fixed assets.
The Company has a regular programmed of physical verification of its fixed assets
by which all fixed assets are verified in a phased manner over a period of two
years.
The procedures for the physical verification of inventories followed by the
management are reasonable and adequate in relation to the size of the Company
and the nature of its business.
On the basis of the examination of the records of inventories, we are of the
opinion that the Company is maintaining proper records of inventories.
The Company has neither granted nor taken any loans , secured or unsecured, to
or from companies, firms or other parties covered in the register maintained
under section 301of the Companies Act, 1956
The Company has not accepted any deposits from public during the year.
As best of our knowledge so far there is no scope for window dressing
Neither any change in accounting policies during the last 2 financial years
No change in tax valuation method.
THANK YOU
