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The Top Line of the company (Revenue)


You may have heard analysts talk about the top line of a company. When they do so, they are referring to the revenue side of the P&L statement. The revenue side is the first set of numbers the company presents in the P&L.

Before we start understanding the revenue side, let us notice a few things mentioned on the header of the P&L statement:

The header clearly states:

The statement of P&L for the year ending March 31, 2014, hence this is an annual statement and not a quarterly statement. Also, since it is as of March 31st 2014 it is evident that the statement is for the Financial Year 2013 – 2014 or simply it can be referred to as the FY14 numbers
All currency is denominated in Rupee Million. Note – 1 Million Rupees is equal to Ten Lakh Rupees. It is upto the company’s discretion to decide which unit they would prefer to express their numbers in
The particulars show all the main headings of the statement. Any associated note to the particulars is present in the note section (also called the schedule). An associated number is assigned to the note (Note Number)
By default when companies report the numbers in the financial statement they present the current year number on the left most column and the previous year number to the right. In this case the numbers are for FY14 (latest) and FY13 (previous)
The first line item on the revenue side is called the Sale of Products.

Since we know we are dealing with a batteries company, clearly sale of products means the Rupee value of all the battery sales the company has sold during FY14. The sales stand at Rs.38,041,270,000/- or about Rs.3,804 Crore.  The company sold batteries worth Rs.3,294 Cr in the previous financial year i.e FY13.

Please note, I will restate all the numbers in Rupee Crore as I believe this is more intuitive to understand.

The next line item is the excise duty. This is the amount (Rs.400 Crs) the company would pay to the government; hence the revenue has to be adjusted.

The revenue adjusted after the excise duty is the net sales of the company. The net sales of ARBL is Rs.3403 Crs for FY14. The same was Rs.2943 Crs for FY13.

Apart from the sale of products, the company also draws revenue from services. This could probably be in the form of annual battery maintenance. The revenue from sale of services stands at Rs.30.9Crs for FY14.

The company also includes “other operating revenues” at Rs.2.1crs.This could be revenues through the sale of products or services that is incidental to the core operations of the company.

Finally the revenue from Sale of products + Sale of services + Other operating revenues sums up to give the total operating revenue of the company. This is reported at Rs.3436 Crs for FY14 and Rs.2959Crs for FY13. Interesting, there is a note; numbered 17 associated with “Net Revenue from Operations” which will help us inspect this aspect further.

Do recall, in the previous chapter we had discussed about notes and schedules of the financial statement.

The following snapshot gives the details of note 17.

Clearly, the notes give a more detailed analysis of the split up of revenues from operations (does not include other income details). As you can see under the particulars, section ‘a’ talks about the split up under sales of products.

Sale of storage batteries in the form of finished goods for the year FY14 is Rs.3523 Crs versus Rs.3036 Crs in FY13
Sale of Storage batteries (stock in trade) is Rs.208 Crs in FY14 versus 149 Crs. Stock in trade refers to finished goods of previous financial year being sold in this financial year
Sale of home UPS (stock in goods) is at Rs.71 Crs in FY14 versus Rs.109 Crs FY13
Net sales from sales of products adjusted for excise duty amounts to Rs.3403 Crs, which matches with the number reported in the P&L statement
Likewise you can notice the split up for revenue from services. The revenue number of Rs.30.9 tallies with number reported in the P&L statement
In the note, the company says the “Sale of Process Scrap” generated revenue of Rs.2.1 Cr. Note that the sale of process scrap is incidental to the operations of the company, hence reported as ‘Other operating revenue”.
Adding up all the revenue streams of the company i.e Rs.3403 Crs+ Rs.30.9 Crs +Rs.2.1 Crs gets us the Net revenue from operations = Rs.3436 Crs.
You can also find similar split up for FY13
If you notice the P&L statement, apart from net revenue from operations ARBL also reports ‘Other Income’ of Rs.45.5 Crs. Note number 18 reproduced below explains what the other income is all about.








As we can see the other income includes income that is not related to the main business of the company. It includes interest on bank deposits, dividends, insurance claims, royalty income etc. Usually the other income forms (and it should) a small portion of the total income. A large ‘other income’ usually draws a red flag and it would demand a further investigation.

So adding up revenue from operations (Rs.3436 Crs) and other income (Rs.45 Crs), we have the total revenue of for FY14 at Rs.3482Crs.


Key takeaways from this chapter
The financial statement provides information and conveys the financial position of the company
A complete set of financial statements include the Profit & Loss Account, Balance Sheet and Cash Flow Statement
A fundamental Analyst is a user of financial statement, and he just needs to know what the maker of the financial statements states
The profit and loss statement gives the profitability of the company for the year under consideration
The P&L statement is an estimate, as the company can revise the numbers at a later point. Also by default companies publish data for the current year and the previous year, side by side
The revenue side of the P&L is also called the top line of the company
Revenue from operations is the main source of revenue for the company
Other operating income includes revenue incidental to the business
The other income includes revenue from non operating sources
The sum of revenue from operations (net of duty), other operating income, and other incomes gives the ‘Net Revenue from Operations’




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