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Answer key — "Unidentified industries" drill

Letter Company Business The two ratios that decide it Why
A InterGlobe Aviation (IndiGo) Airline Debt/equity 11.2×; working-capital days −129; debtor days 3 Aircraft leases sit on the balance sheet as debt (Ind AS 116), and tiny equity after years of losses makes leverage extreme. Passengers pay before they fly, so the float is large and negative. High D&A (12.7%) is depreciation of leased aircraft (right-of-use assets). A net loss in FY2026 fits an airline's cyclicality
B Hindustan Unilever Home & personal-care FMCG ROCE 28%; payable days 169 with negative working capital Pays suppliers slowly and collects quickly from distributors: negative working capital. High margins and returns. Fixed assets are 73% of assets because the GSK Consumer merger brought large intangibles (brands and goodwill). The 23.4% net margin exceeds the operating margin because of a one-off gain in FY2026 (other income 7.6%)
C NTPC Power utility Asset turnover 0.34; investing outflow 20% of revenue with D&A 10.5% Very capital-intensive, heavily indebted (1.3×), regulated returns (ROCE 9%): a cost-plus utility building new capacity. High operating margin because fuel is the main cost and tariffs pass it through
D Avenue Supermarts (DMart) Value supermarket Asset turnover 2.33 with a 7.5% operating margin; payable days 8 The highest asset turnover and the lowest margin: a low-price retailer. Paying suppliers in about a week (in exchange for better prices) is DMart's signature; owned stores make fixed assets 72% of total assets
E HDFC Bank Private-sector bank Interest / revenue 53%; fixed assets 0.3% of assets with debt (deposits) / equity 6.3× A bank's cost of goods sold is interest paid on deposits; its assets are loans and investments, not plant. Asset turnover of 0.07 is typical of a lender. Other income is inflated by the consolidated insurance subsidiary's premiums
F Sun Pharmaceutical Pharma Inventory days 363 (on low material cost) and debtor days 97; operating margin 28% Pharma carries long inventories of APIs and finished goods and sells on credit to distributors (especially in the US). High margins from specialty products; low debt; investments of 23% of assets from years of cash generation
G DLF Real-estate developer Working-capital days 245 and asset turnover 0.11; CFO / operating profit 438% Land and projects under construction are enormous inventories relative to annual revenue; customers' advances on pre-sold homes make operating cash flow far exceed reported profit (revenue is recognised on completion). The net margin (54%) exceeds the operating margin because DLF's share of its rental joint venture's profit is in other income (22%)
H Maruti Suzuki Passenger cars Investments 52% of total assets; working-capital days −29 with debtor days 11 A cash-rich car maker: dealers pay upfront (low debtor days), suppliers are paid on credit, and decades of profits sit in treasury investments. Moderate margin (11.7%), no debt
I TCS IT services ROCE 63%; no inventory with debtor days 93 A people business: almost no fixed assets (19%), no inventory, clients pay on 60–90-day terms, and very high returns on the small capital employed
J Tata Steel Integrated steel Inventory days 184 with fixed assets 70% of assets; debt/equity 0.9× Heavy plant, large raw-material and finished-steel inventories, moderate leverage, thin net margin (4.7%) in a weak steel cycle, with European operations dragging on returns
K Bharti Airtel Telecom Operating margin 55% with D&A 25% of revenue; investing outflow 27% of revenue Telecom networks and spectrum are hugely capital-intensive; operating margins are high but most goes to depreciation, amortisation of spectrum and interest (10%). Customers prepay, so working capital is deeply negative (−222 days)
L UltraTech Cement Cement Fixed assets 76% of assets with inventory days 206 and payable days 217; D&A 5.2% Capital-intensive plants, low asset turnover (0.63), moderate leverage, and 19% operating margins typical of a market leader in cement. The inventory and payable days are high because they are measured on a small material cost (much of cement's cost is power, fuel and freight)

Bonus

  • Highest ROCE: TCS (63%) — a capital-light people business: revenue per rupee of capital is high and it needs almost no plant or inventory. Its returns are structural.
  • Lowest ROCE: IndiGo (5%) among the non-financials — partly structural (airlines are capital-intensive and competitive) and partly cyclical (FY2026 was a loss year). DLF (6%) is also low because its capital is tied up in land and projects whose profits are recognised only on completion.

Common confusions

  • Cement vs steel (L vs J): both capital-intensive; steel carries more debt and much more inventory relative to revenue, and its margin was lower in FY2026.
  • HUL vs TCS (B vs I): both high-return and capital-light; the FMCG company has inventory and negative working capital, the IT company has no inventory and 90+ debtor days.
  • Power utility vs telecom (C vs K): both capital-intensive and indebted; telecom's operating margin and D&A are far higher (spectrum amortisation), and its customers prepay.
  • Airline vs real estate (A vs G): both have large customer advances; the airline's leverage and D&A give it away, the developer's working-capital days and asset turnover give it away.

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