How to Read Annual Reports

Hello, I am Umesh Tripathi, and we are learning the concepts of Fundamental Analysis. In this video, we will learn how to read a company’s Annual Report. We will understand what an Annual Report is, where this information can be accessed, what the core parts of the report are that we should focus on, and how to read it with the help of examples. 

An Annual Report is essentially a comprehensive record of what the company has achieved in the past year, along with its plans for the years ahead. Whenever a company publishes an Annual Report, financial statements are always included. In addition, you also get detailed information about strategic plans and projects in the pipeline. The format of Annual Reports may vary slightly depending on the industry and sector the company belongs to. When we go through examples, you will clearly see which important components of Annual Reports must be studied. 

The basic purpose of an Annual Report is to provide transparency and build investor trust. It contains detailed insights into the financial aspects of the company and its future outlook. Publishing an Annual Report is also a regulatory requirement by SEBI — every publicly listed company is required to release it at the end of the financial year. 

Now the question is — where can we find Annual Reports? There are several reliable sources. You can download them directly from the company’s own website, usually under the Investor Relations or Financial Reports section. They are also available on the NSE and BSE websites, as well as on SEBI’s official platforms. Apart from these, many financial platforms also provide access to Annual Reports. 

So, what are the core components of an Annual Report? One of the most important sections is the financial statements. As we discussed in earlier videos, the Balance Sheet, Cash Flow Statement, and Income Statement are all part of the Annual Report. 

Next, we should review the Chairman’s or MD’s Address. This section provides a roadmap for the company’s future, its vision, and projects in the pipeline. It helps us understand the company’s outlook. 

The Management Discussion and Analysis (MD&A) section is also very useful, as it covers the company’s business strategy, industry risks, and industry trends. The Notes to Accounts and the Auditors’ Report are equally important, since they provide clarifications on financials and give us confidence in the accuracy of the overall report. 

Another valuable part is the Shareholding Pattern, which details the promoters, institutional investors, public shareholding, and the distribution of stakes. 

Let’s look at an example. Consider Company XYG, a consumer electronics company headquartered in Bengaluru. 

From its Key Highlights section for FY 2024–25: 

• Revenue: ₹120 crore 

• Net Profit: ₹15 crore 

• EBITDA Margin: 18% 

• Earnings per Share: ₹7.50 

• Dividend: ₹2 per share 

If we move further to the Financial Statement Summary, we get the Profit & Loss Statement, the Balance Sheet, and the Cash Flow Statement. 

In the Profit & Loss Statement, all figures are in crores: 

• Revenue from operations: ₹120 crore in FY 2024–25 (up from ₹100 crore in FY 2023) 

• Total income: ₹122 crore 

• Operating expenses: ~₹98 crore 

• EBITDA: ₹22 crore 

• Depreciation: ₹4 crore 

• Interest: ₹1.5 crore 

• Profit Before Tax: ₹16.5 crore 

• Tax: ₹1.5 crore 

• Net Profit: ₹15 crore 

So, compared to the previous year, revenue has increased and profit has improved by ₹3 crore, showing both growth and stronger profitability. 

Now, the Balance Sheet: 

• Fixed Assets: ₹45 crore 

• Current Assets: ₹35 crore 

• Cash & Balance: ₹10 crore 

• Total Assets: ₹90 crore 

On the liabilities and equity side: 

• Equity Share Capital: ₹20 crore 

• Reserves & Surplus: ₹40 crore 

• Long-term Debt: ₹10 crore 

• Current Liabilities: ₹20 crore 

• Total Liabilities + Equity: ₹90 crore 

This balance shows growth compared to the previous year. 

Next, the Cash Flow Statement: 

• Cash from Operating Activities: ₹18 crore 

• Cash from Investing Activities: negative (as explained earlier, investments often show negative outflow) 

• Cash from Financing Activities: -₹2 crore 

• Net Cash Flow: +₹8 crore 

• Opening Cash Balance: ₹2 crore 

• Closing Cash Balance: ₹10 crore 

This means the company is sitting on a healthy cash surplus at the end of FY 2024–25. 

In the Management Section, the MD & CEO, Mr. Rajesh, highlights the company’s achievements during the year and emphasizes innovation, customer satisfaction, and sustainable growth. From this, it is clear that leadership is focused on building a sustainable business while keeping customers at the center. 

Looking at the Shareholding Pattern: 

• Promoters: 60% 

• FIIs & DIIs: 20% 

• Public & Retail Investors: 20% 

This demonstrates how ownership is structured. 

So, Annual Reports are not just about numbers and fundamentals — they are powerful tools for investors. They provide deeper insights into strategy, risks, and future growth. Importantly, they also allow easy comparisons across peers in the same industry. For instance, if you have Annual Reports of three to four companies in the same sector, you can analyze and compare them effectively. 

That’s all for this video. See you in the next one. 

Investments and securities markets are subject to market risks. Please read all related documents carefully before investing.