IPO KPIs: Measuring Company Performance
Key Performance Indicators (KPIs) are valuable instruments for measuring the performance of a company during a defined period. They supply both external and internal stakeholders with important information regarding how effectively a company is performing in attaining its business goals.
Why KPIs Matter
KPIs report on a company's profitability, efficiency, liquidity, and operational performance, and they are frequently employed by companies and investors in making decisions.
For Businesses
- Identify strengths and areas needing improvement
- Enable sound decision making
- Enhance performance
- Link strategies with objectives
For Investors
- Transparent indication of financial health
- Analyze growth prospects
- Assess profitability
- Evaluate investment risk
Important Note: No single KPI can conclusively determine a company's performance. It's necessary to consider a set of KPIs to understand the overall performance.
Common Key Performance Indicators
1. Revenue from Operations
Definition:
Income from a company's main business operations (selling products/services), excluding other sources like investments or interest.
Significance:
- Primary sales performance indicator
- Revenue growth % shows market share gains
- Yearly increase indicates business expansion
| Year | Revenue (Rs. cr) | Growth % |
|---|---|---|
| Mar-23 | 1177 | 52.85% |
| Mar-22 | 770 | 27.48% |
| Mar-21 | 604 | 10.01% |
Points to Note: Increasing growth % - Good sign. Consistent growth % - Caution. Decreasing growth % - Not good.
2. Profit After Tax (PAT)
Definition:
Net profit remaining after all operating costs, interest, tax, and other financial charges.
Why PAT Matters:
- Indicates financial health and cost management
- Positive PAT = profitable company
- Builds investor confidence
| Year | PAT (Rs. cr) |
|---|---|
| Mar-23 | 47.53 |
| Mar-22 | 25.82 |
| Mar-21 | 11.01 |
Points to Note: Increase in PAT – Very Good. Consistent PAT- Good. Decrease in PAT - Caution.
3. PAT Margin
Definition:
Percentage of revenue converted to profit after all expenses and taxes.
| Year | PAT Margin % |
|---|---|
| Mar-23 | 4.04% |
| Mar-22 | 3.35% |
| Mar-21 | 1.82% |
Points to Note: Higher PAT Margin – Very Good. Lower PAT Margin- Good. Negative PAT Margin - Caution.
4. Return on Capital Employed (RoCE)
Definition:
Measures profitability relative to total capital invested (equity + debt).
| Year | RoCE % |
|---|---|
| Mar-23 | 17.62% |
| Mar-22 | 13.86% |
| Mar-21 | 5.86% |
Points to Note: Increasing RoCE – Very Good. Consistent RoCE- Good. Decreasing RoCE - Caution.
KPI Analysis Example: Mukka Proteins
Let's analyze Mukka Proteins' KPIs to understand how to interpret these metrics collectively:
| KPI | Mar-23 | Mar-22 | Mar-21 | Analysis |
|---|---|---|---|---|
| Revenue (Rs. cr) | 1177 | 770 | 604 | Increasing - Good |
| PAT (Rs. cr) | 47.53 | 25.82 | 11.01 | Increasing - Good |
| PAT Margin % | 4.04% | 3.35% | 1.82% | Increasing - Good |
| RoCE % | 17.62% | 13.86% | 5.86% | Increasing - Good |
| Debt Equity Ratio | 1.64 | 1.68 | 2.31 | Decreasing - Good |
| P/BV | 4.78 | - | - | Fairly priced |
Conclusion: According to financial KPI analysis, Mukka Proteins shows positive trends across most metrics. However, investors should also consider company review, sector growth, issue objectives, management quality, and merchant banker reputation before investing.
Key Takeaways
- KPIs help assess a company's performance, profitability, and efficiency
- No single KPI can independently determine company performance
- Analyze all KPIs collectively and observe trends
- Compare with industry peers for better perspective
- Consider both financial KPIs and qualitative factors before investing
- Look for consistent improvement across multiple KPIs
Remember: KPIs are tools for informed decision-making, not absolute indicators. Always conduct comprehensive research before making investment decisions.