Here is the argument – why I have again turned positive on Abbott
Warren Buffet is his 2007 letter wrote about Great, Good and Gruesome business. We all know the definitions of Great, Good and Gruesome. Let’s see what Abbott and Ajanta has done from 2016 to 2022.
Pre tax earning for Abbott India by the end of 2017 was 436 cr. To generate these earnings, Abbott India’s capital employed was ( Capital Employed = Total Asset – Current Liabilities ) 1434 Cr. By end of 2022, Abbott’s pre tax earning was 1079 Cr and Capital Employed for same was 3021 Cr. That’s 147% earning increase came with corresponding 110% increase in capital employed. What’s extra ordinary is that if I exclude cash from these equations, 2017’s capital employed becomes = 344 Cr ( 1040 Cr Cash ) and 2022’s capital employed becomes 273 Cr ( 2748 Cr cash). That means business operation could increase earning by 2.47 times ( or 147% increase ) with only approx 80% of the capital required in 2016
Same numbers for Ajanta look like below
2017
Pre tax earning – 648 cr
CApital employed ex cash – 1544 Cr
2022
Pre tax earning – 909 Cr
Capital employed ex cash – 3197 Cr
261 Cr increase in pre tax earning came with corresponding 1653 cr increase in capital employed
There are more nuances to these numbers which I will write in next post
| Subscribe To Our Free Newsletter |
