Punj Lloyd Case Analysis

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Punj Lloyd Limited, founded in 1982, is an Indian company that operates in the energy and infrastructure sectors. Within the energy and infrastructure sector Punj Lloyd Limited provides numerous services such as integrated design, procurement, engineering, and construction management as well as project management. Engineering Procurement Construction (EPC) for the Oil & Gas and Thermal Power industries are also provided by Punj Lloyd Limited. However, Punj Lloyd has diversified its services by adding a defense market which includes land systems, aviation, and electronics. In addition to Punj Lloyd’s wide range of services, they are able to reach a wide range of clients based on their numerous regional offices located in the Middle East, Africa, …show more content…
Unfortunately, after world’s economic collapsed in 2008, the company has been facing the downturn of the business, especially in year of 2014 to 2015, the company for the first time, faced net loss in an amount of INR 5,070 millions (or $77 millions). Besides the fact that the world’s economic collapsed causing the downturn of the company, over the last few years the company has been severely affected by a combination of factors including inside India’s macro-economic slowdown, geo-political tensions, among others, and improper financial management inside the company itself. For a company like Punj Lloyd, which was on a high growth trajectory, the adverse business environment has thrown up a new set of business challenges. Below will explain the factors that causing problems, the company’s five years of financial information and the financial advice to solve the …show more content…
Over the past five years, the gross profit rate has stayed relatively stable. Punj Lloyd’s debt to equity ratio has stayed below 2 over the past five years which bodes well for how the company is juggling their finances in these tough economic times but they should keep an eye on the rising debt-equity ratio. The accounts receivable days in aging is over double the amount of what is recommended for the construction industry. Generally it is recommended that companies maintain an accounts receivable days in aging around 45 days or less and Punj Lloyd is averaging about 111 days, and in 2015 it is 146 days which suggest the company has been lazy in collecting it’s receivables. This large amount of days in aging for accounts receivable is withholding cash that the company could use for their operations. The revenues steadily increased from 2011 to 2013, however the revenues sharply decreased from 2013 to 2015 almost cutting the revenues in 2013 in half by the time 2015 was recorded. This drastic decrease in revenues could be due to several factors, including but not limited to, several projects that were stalled or delayed by developers during their execution phase. In addition, Punj Lloyd’s current liabilities have steadily increased from 2011 to 2015, however their non-current liabilities have decreased. The current ratio has stayed fairly stable over the last

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