FUND FLOW ANALYSIS OF EVEREST KANTO CYLINDER LIMITED (EKC)

 Overview of Business

Everest Kanto Cylinder Limited (EKC), established in 1978, is a leading global manufacturer of seamless steel gas cylinders with over 20 million industrial gas and CNG cylinders currently in service. 

EKC operates two manufacturing facilities in India located at Tarapur (Maharashtra) and Kandla SEZ (Gujarat) and two international facilities at Jebel Ali Free Zone in Dubai and Pittsburgh (PA), USA, with an aggregate capacity of over 900,000 cylinders annually. 

EKC’s product range of industrial, CNG and jumbo cylinders are used for high-pressure storage of gasses such as oxygen, hydrogen, nitrogen, argon, helium, air, etc and finds applications in a wide variety of industries such as manufacturing, fire equipment/suppression systems, medical establishments, aerospace/defense, and automobiles apart from some specialized usage areas. 

The Company has a ~150-strong client base in these vertical segments including Tata Motors, Bajaj Auto, Hyundai, Toyota, BOC India, Praxair, Mahanagar Gas and Adani Gas. 

I have my own frame of analysis which covers the following important analysis points as mentioned below. 

Financial Analysis 

Operating Efficiency Analysis 

Margin of safety i.e. Self sustainability in the Business 

Business Analysis 

Size of opportunity 

Fund flow analysis 

Management Analysis 

Financial Analysis, Operating Efficiency Analysis, Margin of safety i.e. Self sustainability in the business, Business analysis and Size of opportunity are already discussed in recent post i.e. Everest Kanto Cylinder Limited Fundamental Analysis. 

Here, I am going to analyze the fund flow of Everest Kanto Cylinder Limited for FY2021. 

Fund Flow Analysis 

I have tried to summarize the flow of funds with the help of the following table. Fund coming to the company is indicated here in positive sign and fund going out from the company is indicated here in negative sign. 

I have also given here the color codes for ease in understanding. Fund coming to the company is indicated here in green color and fund going out from the company is indicated here in red color. 

Assumption : Let us focus here the major fund flow 

So, let us see here from where the company is securing or generating the fund in FY2021

1. Company has sold its assets of ₹ 98 Cr. Because, ₹ 17 Cr they are securing by selling its fixed assets and ₹ 81 Cr by selling its assets which were classified as held for sale. 

2. Company has secured ₹ 35 Cr from deferred tax and current tax. 

3. Company has taken ₹ 10 Cr of funds from its bank balance. 

4. Company has secured ₹ 91 Cr of funds from its shareholders. Company has shown in its balance sheet, 31st March 2021, that they have retained ₹ 94.78 Cr of funds. 

I have left the small fund flow here which is less than ₹ 10 Cr for ease in understanding. 

Therefore, company is approximately securing fund of ₹ 234 Cr. 

Now, let us see here how the company is utilizing this fund in FY2021

1. Company has procured some property of ₹ 11 Cr.  During the year ended 31 March 2021, office premises at Mumbai having net carrying amount of 1,116.08 lakhs has been reclassified from Property, plant and equipment to Investment Property, as the office premises is not being used by the Holding Company in the production or supply of goods or services or for administrative purposes and is held to earn rentals and capital appreciation.

2. Fund stuck in trade receivable is of ₹ 54 Cr. 

3. Company has procured some other financial assets of ₹ 14 Cr. Company has informed that they have deposited 4.33 Cr with maturity of more than 12 months and there was a receivable of 9.76 Cr from sale of subsidiary. 

4. Company has given funds to the bank to keep in the company bank account and this fund is of ₹ 42 Cr.  

5. Company has procured some other current assets of ₹ 29 Cr. It consist basically the advance payment to suppliers and Prepaid expenses

6. Company has paid the borrowing of ₹ 70 Cr. 

7. Company has paid to reduce its other financial liabilities of ₹ 19 Cr. 

I have left the small fund flow here which is less than ₹ 10 Cr for ease in understanding. 

Conclusion 

So, now here, i am trying to make some sense that the company is selling its assets, enjoying deferred taxes, using its bank balance and also retaining its earning and using these fund basically to pay the debt, raising the bank balance, giving advance payment to suppliers and some funds stuck with trade receivables. 

I will study about the Management of Everest Kanto Cylinder Limited (EKC) in the next post of Management Analysis.