Havells India’s (Havells) FY12 annual report analysis highlights robust operating cash flows supported by higher acceptances. Under-funded status of defined benefit plans and actuarial losses may impact cash flows and profitability. During FY12, the company has paid trademark fees/royalty of INR379.2mn, 8% of FY12 PBT (FY11: INR292.8mn) to a promoter group company.
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Higher acceptances bolster surge in cash flow from operations
· Cash flow from operations increased from INR2.5bn in FY11 to INR4.6bn in FY12, primarily due to higher acceptances which more than doubled from INR1.5bn in FY11 to INR3.7bn in FY12 with average payable days at 88 (FY11: 78).
Under-funded status of defined benefit plan
· During CY11, Havells recognised actuarial loss of EUR4.5mn (~INR307mn) as against a gain of EUR5.4mn (~INR340mn) in CY10 in P&L on defined benefit plans (DBP). It has an under-funded status of EUR43.2mn (~INR2.9bn) in CY11 (CY10: EUR38.3mn (~INR2.4bn) on account of its DBP.
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· Post CY11, the defined benefit pension plan in Switzerland was bought out with an insurer hence only the insurance premium is required to be paid. However, the company is required to pay obligations till CY11.
Trademark fees and royalty @8% of FY12 PBT
During FY12, the company paid INR572.6mn (FY11: INR467.0mn) to promoter group companies. Of this, INR379.2mn (8.0% of FY12 PBT) is towards payment of trademark fees/royalty and the balance as rent to QRG Enterprises (a promoter group company).
Securitisation/channel financing leads to lower receivables
· Receivables in FY12 stood at INR8.9bn of which INR1.4bn pertained to domestic markets and balance to overseas markets. Receivable days stood at 15 for domestic market and 89 for overseas market.
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· The lower receivable days in India are due to securitisation of receivables of INR2.4bn (10% recourse) and channel financing facility of INR2.7bn (5-10% recourse) in FY12. The company incurred discounting charges (forming part of EBITDA) of INR189.1mn in FY12.
Other financial highlights
The company has not recognised deferred tax asset (DTA) in respect of carried forward losses of INR16.9bn (FY11: INR12.4bn) due to absence of a reasonable certainty that future taxable income will be available against which DTA can be realised.
Regards,
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