Analysis of Tegel Holding Pty Ltd

Question: Discuss about the Analysis of Tegel Holding Pty Ltd. Answer: Introduction: Analysis of Tegel Holding Pty ltd: This Company engaged in the activities of poultry process in New Zealand. Company is earning well, and able to repay its debt. Financial statements of the company show good amount of profit in the company. Company PL account shows that company earns revenue for 582.4 million in 2016, and balance sheet of the company shows that there is very less amount of borrowing in the company that is 130000,000 in the company. therefore, for the growth of the company, it has following financial options. Following are the pros and cons of various finance options, and characteristics of those options: IPO: Initial Public Offer is the process through which private companies can offer its stock and shares for sale to the public for the first time. In this there can be any new or old company can decide to list on the Australian stock exchange, and offer the public for the sale of its stock. IPO allows the Australian companies to offer their shares to large number of public, and arrange capital for future growth (AIA, n.d.). Private placement: in this company can made offer of sale of its shares and securities not to the public, but through private offering. In this shares are offered to small number of investors chosen by company. In this investors are large banks, mutual funds, insurance companies and pension funds (ASIC, n.d.). Bank loan: it is an arrangement between the corporation and financial institution which was usually created to raise fund for the bigger capital expenditure or to meet the cost related to operational activities which are unable to meet by the company. There are two types of bank loan for the companies one is secured loan and other one is unsecured loan. Plant and Equipment Lease back: it is a financial transaction in which one sells its asset to another, for the long period of time leases back the same asset. Through this arrangement person is able to use the asset for longer period of time but not owns the asset. These arrangements help the company in paying back its debts and improve the position of the balance sheet of the company (AASB, n.d.). After analyzing the position of the company Tegel Holding Pty ltd these two options best for the company: IPO- IPO is the option through which company can offer its securities to the public at large and arrange capital for future growth through public. For Tegel Holding Pty ltd IPO would be the good option because company can offer its shares to the public at large, and access to the capital for its future projects. Comapnny is earning good revenue, and is able to pay dividends to its shareholders and increase the value of shares. In 2016 revenue of the company was 582.4 million which shows that company is working well and able to increase the value of shares (Tegal, 2016). Advantages: Easy access to the capital of the company for the future growth of the company. Introduction of the products of the company to the public who have never heard about that. Companies can arrange funds without paying high rate of interest to the money lenders. Share capital of the company increases without increase in the debt of the company. Disadvantages: There are number of stringent regulations for the IPO which company has to fulfill. Usually the cost of IPO is high for the companies. For new companies rules made by the ASIC are not easy, and stringent to follow.Bank Loan: in my point of view company can also choose to raise funds through bank loan because debt ratio of the company is less, and amount of borrowing by the company is only 130000. Company is earning well and able to pay interest amount to the bank. Company can arrange funds through financial institutions for the expansion of its business. Company can choose any option whether secured loan or unsecured loan (Tegal, 2016). Advantages: Company can arrange funds through financial institutions for meeting the cost of its operational activities and for the future expansion of the company. Easy availability of funds, and easy credibility. There is benefit in tax planning. Disadvantages: Cost for raising bank loan is high. High payment of interest. Stringent rules of bank for obtaining loans. Obtaining loans from bank is challenging because banks need securities. References: AIA. Initial Public Offering ( IPO ). Retrieved on 8th November 2016 from: https://www.investors.asn.au/education/shares/mechanics-of-share-investing/initial-public-offering-ipo/. ASIC. Raising funds in Australia. Retrieved on 8th November 2016 from: https://asic.gov.au/regulatory-resources/fundraising/raising-funds-in-australia/. AASB Standard. Leases. Retrieved on 8th November 2016 from: https://www.aasb.gov.au/admin/file/content105/c9/AASB117_08-15.pdf. Tegal. Annual report 2016. Retrieved on 8th November 2016 from: https://investors.tegel.co.nz/media/1058/tegel-annual-report-2016-dps.pdf. Tegal. Financial report 2016. Retrieved on 8th November 2016 from: https://investors.tegel.co.nz/media/1047/fy2016-financial-statements.pdf.