Here is my comparison of Hatsun and Heritage on some specific aspects.
A. Depreciation
| Hatsun | FY16 | FY17 | FY18 | FY19 | |
|---|---|---|---|---|---|
| Net fixed assets | 647 | 991 | 1217 | 1408 | |
| Depreciation | 107 | 143 | 174 | 201 | |
| % of Depreciation | 16.5% | 14.4% | 14.3% | 14.3% | |
| Heritage | FY16 | FY17 | FY18 | FY19 | |
| Net fixed assets | 312 | 296 | 433 | 476 | |
| Depreciation | 35 | 25 | 38 | 47 | |
| % of Depreciation | 11.2% | 8.4% | 8.8% | 9.9% |
Why Hatsun depreciation is 15% while Heritage is less than 10%. What kind of assets depreciate at 15%. Here is what I calculated from annual report of Hatsun.
| land | Building | P&M | Windmill | Compu | Furniture | Office | Vehicle | lease hold | Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| Gross at FY18 | 9165.33 | 25073.51 | 79616.77 | 17471.2 | 1557.75 | 1072.54 | 1718.04 | 449.53 | 6994.29 | 143119 |
| Depreciation till FY18 | 0 | 1917.36 | 16522.46 | 878.38 | 566.54 | 300.86 | 530.83 | 62.39 | 1828 | 22606.82 |
| Net at FY18 | 9165.33 | 23156.15 | 63094.31 | 16592.82 | 991.21 | 771.68 | 1187.21 | 387.14 | 5166.29 | 120512.1 |
| Depreciaiton for FY19 | 0 | 1380.65 | 14459.49 | 792.75 | 480.98 | 186.63 | 422.09 | 83.45 | 2109.8 | 19915.84 |
| Depreciation % | 0.0% | 6.0% | 22.9% | 4.8% | 48.5% | 24.2% | 35.6% | 21.6% | 40.8% | 16.5% |
Some components of assets like Plant & Machinery, Computers, Furniture, Office equp, Vehicles and lead hold are depreciating anywhere between 23% to 48%. which is very high I think.
B. Tax
| Hatsun | FY16 | FY17 | FY18 | FY19 | |
|---|---|---|---|---|---|
| PBT | 134 | 172 | 119 | 161 | |
| Tax | 32.67 | 37.18 | 31.32 | 34.58 | |
| % of Tax | 24.4% | 21.6% | 26.3% | 21.5% | |
| Heritage | FY16 | FY17 | FY18 | FY19 | |
| PBT | 86 | 59 | 90 | 126 | |
| Tax | 29.62 | 29.08 | 28.84 | 44 | |
| % of Tax | 34.4% | 49.3% | 32.0% | 34.9% |
Why Hatsun is paying lower tax at around 20 to 25% while Heritage is paying above 30% taxes?
Is there any Tax benefits to Hatsun?
C. Other important points
1.Heritage haven’t diluted equity in last 10 years, there was a bonus issue in the year 2014. Hatsun has been diluting the equity often. In last 10 year they diluted equity 5 times include the recent rights issue of 527cr.
2. Heritage has been maintaining less debt or we can say reasonable debt. This debt is mostly due to retails business which was loss making. However they have sold the retail business to Future retail so they didn’t lose any money on this venture in fact they made money on this venture. Capital employed in retail business in FY16 was 86.3Cr and they sold business to Future at some 3%+ stock exchange which is now worth at 835cr (At the end of FY19)
Hatsun debt has been increasing continuously since last 12 years. Only last year they have reduced debt with cash not from free cash flow but from rights issue.