FY24 may have ended months ago. But most companies conduct their annual general meetings and release their annual reports for the previous fiscal in the June-September period.
Much of the information related to the prospects of most listed companies are made available via investor presentations and regular financial reports every quarter.
However, annual reports go a lot more deeper into operational aspects. With regulatory mandate for greater disclosures, there are several additional details available in these documents.
Thus, investors can gain additional insights on many qualitative and quantitative aspects of the functioning of a company than just merely the financial factors. These insights can help investors assess the finer areas of a company’s functioning such as transparency, sustainability, market buoyancy, apart from the ability to innovate with new technologies, finer product-/service-level insights and so on.
Sustainability and use of renewables
When companies draw considerable quantities of scarce resources, two key questions arise. What do they do to optimise usage of such resources, and how do they replenish the same so that their own business continues to thrive?
The answer is illustrated via the case of Varun Beverages when one goes through the ‘Environment’ part of the business sustainability section of its CY2023 annual report, which talks about conserving water.
As a bottling company for PepsiCo in India and many other countries, Varun Beverages used 1.54 litres of water for per litre of final beverage produced, which is 9 per cent lower than the 1.7 litres used in CY2022. Further, the company has managed to replenish 12.95 billion litres of water in CY2023, up from just 7.22 billion litres in CY2019.
Another key aspect is sourcing of materials. Varun Beverages has an interesting supplier list comprising PepsiCo India (concentrate), Reliance Industries (PET resin), DCM Shriram and Triveni Engineering (sugar), Tetra Pak (packaging material) and Tasa Foods (fruit pulp).
Net-zero carbon emission is a key target for India in the coming decades. There are multiple milestones set for 2030, especially with reduced usage of fossil fuels and greater push to renewables.
Hindustan Unilever, in its FY24 annual report, states that as much as 96 per cent of the energy consumed for its own operations is renewably sourced. The company buys energy from solar power plants and has invested in windmills for the transition from fossil fuels.
Disclosures and operational insights
One key aspect of a company’s financial statements is about which financial instruments it channelises its investments in. The annual report of Infosys offers details for illustration in the notes to financial statements section. How optimal are a company’s treasury operations can also be judged from these disclosures.
By fair value measurements as of March 31, 2024, Infosys holds ₹7,362 crore in government securities, ₹4,179 crore in non-convertible debentures, ₹1,944 crore in tax-free bonds as yields were attractive in these avenues over the past year or so. Usually, liquid funds are the main instruments for corporates, but Infosys held only a relatively lower ₹2,165 crore, as there were better returns from other avenues.
Interestingly, certificates of deposits (CDs) and commercial papers (CPs) offered excellent yields in 2023 and much of 2024. Infosys had ₹4,830 crore in CPs (up from ₹742 crore in March 2023) and ₹3,043 crore in CDs.
Then, there are operational insights to gain from specific trends. Most (urban) customers would agree that banking operations have become highly digitised and that there are very limited reasons for heading to a branch. But is there a figure to this? And where is a bank placed in the digital adoption curve? ICICI Bank annual report’s ‘business at a glance’ offers an insight.
Of all the trade transactions processed by the bank, as much as 70 per cent was done digitally in FY24. ICICI Bank’s iMobile Pay app (₹11 lakh crore worth of transactions done in FY24) for banking applications and payments as well as iLens platform for mortgages and a host of other loans are at the forefront of this digital thrust.
Another key insight is that the bank’s share in person-to-merchant UPI transactions is 19.3 per cent in FY24.
Being in sync with the latest
The pharmaceutical business is quite research intensive. But how much does a company spend on R&D to keep up its edge in an industry? In the sustainability report section, there is a section on ‘our value creation model’ part in Dr Reddy’s Laboratories’ FY24 annual report. The company spent ₹2,290 crore or 8.2 per cent of its sales on R&D in FY24, up from 7.9 per cent in FY23.
Staying with the related healthcare industry, hospital chains now offer robotic surgeries as a part of treating a host of ailments — from cancer, organ replacement, to fractures, cataracts and several other complications. But is there a number to this?
Apollo Hospitals’ annual report states that the company performed over 3,600 robotic surgeries in FY24 in its network.
These additional sections in annual reports offer interesting insights to investors for making broader assessments. Such information must be used along with the mainstay of regular financial statements, schedules and all other quantitative information, along with investor presentations disclosed periodically.
Companies mentioned here are for illustration only and are not stock recommendations – to buy, hold or sell.