Fund Flow analysis will help us to judge how the funds have been utilized by RMTL over the years. The funds should have been used for core operations of the business or for the benefit of shareholders of the company. Any miss-management or inefficient utilizations of the funds will be recognised using this simple fund flow statement. Hence, let us analyse two simple fund flow statements:

• Fund Flow Statement based on Balance Sheet.

When we compare the change in Assets of the company from 2011 to 2020, Rs. 1549/- Crores have been added. Have a look at what line items contributed these assets rise:

So, few items like Fixed Asset, Inventories, Trade Receivables, Current Investments and Other Current Assets were the major contributors. Barring Current Investments, all the other assets are for the core operations of business. Also, Current Investments are the funds set aside by management for their working capital use arising from plant expansion and its productions, as indicated by management in their Concall. Hence, looking at the above we conclude that all the assets have been efficiently improved by the management only on the areas of core operations.

Similar is the case of Liabilities. More than 80% of increase in liabilities side have come from Equity Capital i.e. accrued profits. The majority of rest part have come from Loans. Again, we see that management have efficiently sourced their funds and there is no vague items that might indicate red flags.

• Fund Flow Statement based on Cash Flow Statements.

Similar to balance sheet fund flow analysis, this part is quite clear. The management have got majority of their inflows from very good source i.e. core business and utilized amounts for expansion, debt repayment and distribution to shareholders. Have a look at the simple Cash inflow and outflow chart:

Out of Rs. 2108/- Crores of cash inflow, 78% have been utilized for expansion and debt repayments. Other 16% have been distributed out to shareholders of the company.

The company have generated Rs. 2,377/- Crores of PBT over the period which have been converted to net cash flows from operating activities at Rs. 1,634/- Crores i.e. about 68%. 22% have gone into depreciations. Hence, 90% of the PBT have been from core business (not counting others).

The above fund flow analysis show the quality of Balance Sheet and Cash Flow Statements. Over the years, the assets and liabilities have been created from very high quality core business line items. Also, the cash generated by the company have been utilized at the best i.e. for core business and shareholders benefit.

The above gives a clear indication of how good the management have been in using its assets and their funds. And from the above analysis, we do not see any red-flags in the company in its fund allocation and utilization.

Disclaimer: Views are personal and presented through independent research. By no means there is any stock advice. Also, presented content is for learning purpose only. I might be wrong in presenting data and inaccurate data, let me know if you find any discrepancies.