Examine the company’s balance sheet assets and liabilities.

Does it seem that there is a good match between the duration

of the assets and the duration of the liabilities?

Q1

Apex Frozen Food Ltd has not issued any debt instrument, nor
it has invested in debt instruments of other
company/Government. So we have not calculated the
duration for the Assets and Liabilities of the company.

However, from the Annual report it is clear that Debt-Equity

Ratio of 0.29 and Interest covereage ratio of 15.30 ie.,
Company is generating healthy cash flow to service the
interest expense.

The Return on Net-worth of 17.12% indicate that company is

generating return more than return generated by passive
investments such as Debt instrument(Bond, Bank FD etc.,)
Q2 Annual report of 2018-19 is considered for the purpose of analysis

Look at the statement of cash flows for your company. Check the financing
activities section to see if the company has issued new debt or reduced its
debt outstanding. How much interest did the firm pay during the period?

We have analysed the Balance Sheet, Statement of Cash flow and Notes to
financial statement for analysing the debt instruments associated with the
company. Following observations can be made
1) Company has availed term loan from BOI and HDFC Bank
2) Company has availed Overdraft facility from BOI and HDFC Bank for
meeting working capital requirements
3) During 2017-18, company went for IPO. During this financial year
substantial debt was reduced from the proceeds of IPO.

From "Cash flow from financing activities ( C )" of Statement of Cash flows
(Page 80) it appears that there is no new debt being issued. There is following
cash outflows
1) Proceeds from borrowing (219.19) Lakhs - which was used to reduce term
loan from 309.67 Lakhs to 90.48 Lakhs
2) Repayment of borrowings (11.44) Lakhs
Total (230.63) Lakhs

Apex Frozen Food has availed Overdraft facility with Bank of India and HDFC
bank for working capital requirement. There is increase of Working capital
utilisation from 7224.52 Lakhs to 9577.33 Lakhs.

Finance cost for the year is 654.92 Lakhs.

Interest Expense
1) Term Loans ---------- 18.30
2) Working Capital ----- 469.94
3) Others(Vehicle loan) -- 52.73
4) Bank Charges ----------- 113.96

From the Note#13, we can see a clear increase in vehicle loan from 291.21
Lakhs to 394.30 Lakhs
Share your critical comments based on the above work (within 200 words)

Apex Frozen Food Ltd has both equity and Debt in its capital structure. Debt is
solely Term Loan from Banks. Also Company has availed Bank Overdraft facility
for meeting Working Capital requirements.

After the IPO of the company, debt has been reduced significantly. The cashflow
generated by the business is sufficient to service interest expense and retiring
the debt.

Due to reduction in debt, there is clear reduction in finance cost.

Since this is relatively new company, company capital structure has Equity and
Bank loans. Once it establishes reputation, it can consider about raising money
from Debt market in the form of Debenture. It will help company to further
reduce finance cost.