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Sintex financial

  1. 1. PREFACEAs a part of the course curriculum, the first year M.B.A. students are required toprepare a financial project report. The objective behind preparing this project report isto relate the management subjects taught in the classroom to their practicalapplication.The preparation of this project report is based on financial analysis of annual reportsof 5 consecutive years for a public limited company using Ratio Analysis, CommonSize Statements and other financial tools.The scope of the project report is limited to the study of the financial position of thecompany on the basis of the published data available.Our work in this project is, therefore, a humble attempt toward this end.In spite of our best efforts there may be errors of omissions and commissions, whichmay please be excused. 1 S .V. INSTITUTE OF MANAGEMENT
  2. 2. ACKNOWLEDGEMENTThrough this Acknowledgement we express our sincere gratitude towards all thosepeople who have helped us in the preparation of the project, which has been a learningexperience.We would like to thank the Director, Prof. Bhavin Pandya, the faculty, the computerlab instructor and the librarian of S. V. Institute of Management for their support.Finally, we express our sincere to Prof. Nikunj Patel and Prof. Kalpesh Prajapati whoguided us throughout the project and gave us valuable suggestions andencouragement.“A success is sustained by the hands of more than one person directly or indirectly.”We are grateful to our parent‟s & friends for their love and moral support.At last but not the least, we are grateful to the almightily God, who has created thisbeautiful World. Purvi Rathi Anushree Karani (MBA - 1) 2 S .V. INSTITUTE OF MANAGEMENT
  3. 3. EXECUTIVE SUMMARY Executive Summery is an important part of the project in which have we included all the information of my project in a short manner. My project is on the titled financial analysis of SINTEX INDUSTRIES LTD. About Company Sintex Industries Limited was earlier known as The Bharat Vijay Mills Ltd. It is an Indian-based Company which operates in two business divisions – textiles and plastics. In the area of textiles, they had been pioneers in high value fabrics. Its Plastics Division started in the year 1975 and today they have most diversified manufacturing capabilities in plastic processing in the world, with 10 plants spread across the country, more than twelve manufacturing processes under one roof, having more than 500,000 Sq. meter area and a more than 1000 strong work force. The plastic division has a huge range of products with numerous applications. The products manufactured by the Company in plastic segment include prefabs, monoliths, storage tanks, containers, doors, windows and many more. In the textiles segment the Company manufactures men‟s structured shirting fabrics, yarn-dyed corduroy and cotton yarn-based corduroy, and fabric for ladies wear also. About Analysis Objectives To find out various critical aspects of the financial statements. To analyze and interpret the financial strength of the company. To know about trends of profit, sales expenditure, net worth, fixed assets and various other trends of the profit & loss and balance sheet statements. And the last and foremost thing is to fulfil the requirement of the course. Analysis:- We have calculated various ratios such as liquidity ratios, profitability ratios, solvency ratios, turnover ratios to find out the financial performance and soundness of the company. We have also compared the balance sheet and profit & loss account of the company for last 5 years. 3 S .V. INSTITUTE OF MANAGEMENT
  4. 4. CONTENTChapter Page Particulars No. No.  Preface 1  Acknowledgment 2  Executive summary 3 1 Chapter – 1 Brief overview of the industry 6 Introduction Of The Company 7 History Of The Company 7 Founder & Leaders 9 Objectives, vision & mission 10 Organizational Design 11 Production 15 Marketing 21 Personnel 26 2 Chapter – 2 Comparative Balance Sheet And Analysis Of Balance 29 Sheet 3 Chapter – 3 Comparative Profit & Loss Account And Analysis Of 32 Profit & Loss Account 4 Chapter – 4 Common Size Statements and its Analysis 35 5 Chapter – 5 Trend Analysis (Index Analysis) 41 6 Chapter – 6 Analysis of Cash flow Statement 46 7 Chapter – 7 Ratio Analysis 49 8 Chapter – 8 Finding and Suggestions 78 9 Chapter – 9 Other Topics 80  Annexure 90  Biblliography 95 4 S .V. INSTITUTE OF MANAGEMENT
  6. 6. A.BRIEF OVERVIEW OF THE INDUSTRY:Plastics, is one of the fastest growing industries in India. Plastics have a vital role toplay. Indian Plastics Industry is expanding at a phenomenal pace. The plasticindustry of India has a big market potentiality and is gradually prospering. Thispotentiality of the market will surely actuate the entrepreneurs to invest in thisindustry. Entrepreneurs are trying to provide high quality plastic products, so that itbecomes a booming industry. Many companies from various sectors such as automobiles, electronics,telecommunications, food processing, packing, healthcare etc. have set-up largemanufacturing bases in India. Therefore, demand for plastics is rapidly increasing andsoon India will emerge as one of the fastest growing markets in the world.SOME ASSOCIATED INDUSTRIES:The potentiality of plastic industry India propels other associated industries to growside by side. One of such growing industry is petrochemical industry. Both theseindustries are reciprocal to each other. The petrochemical industry facilitates theplastic industry to produce plastic products that will meet the domestic demand aswell as that of the overseas market.FINISHED PRODUCTS OF PLASTIC INDUSTRY INDIA:The plastic processing industry consist of over 30,000 units which are producing awide range of plastic products through the process of injection moulding, then blowmoulding, extrusion, and finally calendaring.End user markets: These are the plastic products basically used for domesticpurposes. Some of the end user plastic products are plastic balls, plastic bags,polypropylene bags, polyethylene bags, plastic barrels, plastic caps, plastic bottles,plastic baskets, plastic basins, plastic basins, plastic bowls.Appliances: These are basically the plastic mechanical components like plasticbearings, plastic bellows, plastic belting etc. Some other industries, where plasticmaterials are used are automotive, building & construction, electrical and electronics,industrial, medical, .packaging, transportation etc.STRATEGIES OF PLASTIC INDUSTRY INDIA:The government of India is trying to set up the economic reforms to elevate and boostthe plastic industry by joint venturing, foreign investments.PROSPECT OF PLASTIC INDUSTRY INDIA:Plastic industry India is symbolizing a promising industry and at the same timecreating new employment opportunities for the people of India. The per capitaconsumption of plastic products in India is growing and is moving towards 8% GDPgrowth. 6 S .V. INSTITUTE OF MANAGEMENT
  7. 7. B. HISTORY OF THE COMPANY:Sintex Industries Limited was earlier known as The Bharat Vijay Mills Ltd. It is anIndian-based Company which operates in two business divisions – textiles andplastics. In the area of textiles, they had been pioneers in high value fabrics. ItsPlastics Division started in the year 1975 and today they have most diversifiedmanufacturing capabilities in plastic processing in the world, with 10 plants spreadacross the country, more than twelve manufacturing processes under one roof, havingmore than 500,000 Sq. meter area and a more than 1000 strong work force.The plastic division has a huge range of products with numerous applications. Theproducts manufactured by the Company in plastic segment include prefabs,monoliths, storage tanks, containers, doors, windows and many more. In the textilessegment the Company manufactures men‟s structured shirting fabrics, yarn-dyedcorduroy and cotton yarn-based corduroy, and fabric for ladies wear also.They have also created extensive finishing, assembling, metal fabrication andconcrete products facilities. Combination of such varied capabilities along with theirstate-of-the-art design and tool room facilities enables them to give vast array ofproducts and solutions.Established in India in 1931, Sintex has a proven track record of pioneeringinnovative concepts in plastics and textile sectors in India and an uninterrupted 77years of dividend payment to its shareholders. They strive to develop products that noone else had made before.Pioneers in the development of innovation in building products, custom moulding andtextiles, the Sintex group creates best in class products that deliver better utility andvalue to its customers.It is Sintex‟s quest to deliver quality products at affordable prices. Recently, they haveeven expanded their global footprints by acquisitions to offer total solutions to theircustomers.Their application driven Research & Development team is constantly on the look-out tocome up with products that can be made by integrating different materials with CustomMoulded solutions. 7 S .V. INSTITUTE OF MANAGEMENT
  8. 8. HISTORY OF SINTEX INDUSTRY LIMITED:1931-74• Incorporated as The Bharat Vijay Mills Limited in June 1931• Established composite textile mill in Kalol, Gujarat1975-90• Commenced manufacturing of plastic moulded polyethylene liquid storage tanks including water tanks.• Introduced new plastic products like doors, window frames and pallets• Plastic Sections for Conversion into Partitions, False Ceilings, Wall panelling, Cabins, Cabinets, Furniture etc.1995• Renamed to Sintex Industries Limited• Commenced manufacturing of SMC moulded products, pultruded products, resin transfer moulded products and injection moulded products• Modernization and expansion of the textile unit• Commenced structured yarn dyed business2000-Till date• Alliance with European design houses and a UK based textile marketing company• Commenced production of pre-fabricated structures for classrooms, booths kiosks and office rooms• Acquisition of 74% stake in Indian subsidiary of Zeppelin Mobile systems Ltd.,Germany• Entered the housing sector with monolithic construction• First international acquisition by acquiring 81% stake in Wausaukee Composites Inc.,USA.• Acquired 100% stake in Nief Plastic SA, a French company• Acquired automotive business division of Bright Brothers Limited• Wausaukee acquired 100% stake of its competitor, Nero Plastics Inc., USA• Zeppelin acquired Digvijay Communications and Network Pvt. Ltd., Indore and became the total solution provider for telecom sector 8 S .V. INSTITUTE OF MANAGEMENT
  9. 9. C. INTRODUCTION TO THE FOUNDING MEMBERS: Sintex Industry Ltd. which was earlier known as Bharat Vijay Mills was established in 1931. Its plastic division was established in 1975. The chairman of the industry is Mr Dinesh P Patel who started the industry. The vice chairman of the industry is Mr Arun P Patel. They are the owners of the industry. Sintex has a proven track record of pioneering innovative concepts in plastics and textile sectors in India. They are the oldest in manufacturing plastic products and are also the pioneer of the industry, so they have the brand image and Sintex is their brand name. About Mr. Dinesh Patel: He is the Chairman of Sintex Industry Limited. He has done his B.Sc from Bombay University. He has more than 5 decades of work experience. About Mr. Arun Patel: He is the Vice-Chairman of Sintex Industry Limited. He has also done his B.Sc from Bombay University. He has more than 5 decades of work experience. 9 S .V. INSTITUTE OF MANAGEMENT
  10. 10. D. PHILOSOPHY/MOTTO/OBJECTIVES OF THE COMPANY:Objectives are goals or aims which the management wishes the organisation toachieve. Any industry first has to decide objectives. Objectives are helpful to achievetarget and with the help of them company can decide right direction.There are two types of objectives i.e. primary objective and secondary objective. It isgenerally believed that business activity is carried out only for profit. To a certainextent it has been found that successful business cannot afford to keep profit as itssole objective. So they have other objectives which are secondary objective which areequally important.OBJECTIVE OF SINTEX INDUSTRIES LIMITED:Sintex Industries Limited is a multi-faceted activity industry. They are doing flexiblethinking and actively thinking.They constantly want to reach out for new height of excellence.Their aim is to expand the business by establishing a presence in global markets whileat the same time consolidating in the Indian market too.They are happily accepting every challenge that comes in their ways.They are constantly involved in achieving consumer satisfaction through total qualityexcellence and by providing competitive value to their customers.MOTTO OF SINTEX INDUSTRIES LIMITED:“The Way We Are Of Sintex; By Sintex, From Sintex”“Active Thinking”VISION OF SINTEX INDUSTRIES LIMITED:“To achieve global presence in textile business through continuous product andtechnical innovation, customer orientation and a focus on cost effectiveness,quality and services”. 10 S .V. INSTITUTE OF MANAGEMENT
  12. 12. I.) TOP MANAGEMENT: The top level management is known as the upper level of organisation. Top managers are responsible for making organisation-wide decisions and establishing the plans and goals for the organisation. Top management consists of Chief Executive Officer, Board of Directors, President, Executive Vice President, Managing Director, Chair person, Chief Operating Officer. Top Management Of Sintex Industries Limited is..... Chairman : Dinesh Patel from Bombay University More than 5 decades of work experience Vice-chairman : Arun P Patel from Bombay University More than 5 decades of work experience Managing directors : Rahul A Patel Bachelors degree in Communications MBA from USA More than 24 years experience in textile and plastic Amit D Patel Bachelors degree in Commerce MT from USA 18 years of experience in textile, chemical and plastic S B Dangayach B.Sc (Hons) P.G.D.B.A. from IIM, Ahmedabad 3 decades of experience in plastics Sintex Group Of Companies Is Managed By Independent Professionals Are: President CEO : David Lisle Gilles Nief Indru G Advani CEO : Sandeep Harsh Neelesh Jain 12 S .V. INSTITUTE OF MANAGEMENT
  13. 13. II.) HIERARCHY: Dinesh Patel Higher level (Chairman) S B Dangayach Arun Patej (Vice- Middle level Chairman) (Managing Director) Building related SBU 1- Mr. Sanjiv products and SBU 2- Mr. S Lower level Roy industries and Venktachalam electric relatedIII.) ORGANISATIONAL STRUCTURE AND CHART: 13 S .V. INSTITUTE OF MANAGEMENT
  14. 14. IV.) DEPARTMENTALIZATION AND ITS BASIS: PRODUCT DEPARTMENTALISATION: In Sintex Industry Ltd. there is departmentalisation on the basis of product as they have a huge range of products. They are manufacturing more than 50 types of products. CUSTOMER DEPARTMENTALIZATION: Sintex has customer departmentalization as it manufactures the products according to the customers need because main aim of the industry is to provide quality products at affordable prices. GEOGRAPHICAL DEPARTMENTALIZATION: The plant of Sintex is located in Kalol near Gandhinagar in Gujarat. As Kalol is a village and it is not highly developed so it is beneficial for the industry. PROCESS DEPARTMENTALIZATION: Sintex Industry Ltd. also has departmentalization on the basis of process into various departments like..... Production unit Packaging department Quality control unit Personnel department In addition to this Sintex Industry Ltd. also has departmentalisation on the basis of time, in which working hours for workers are fixed for specific period. In Sintex they have two shifts for workers i.e. morning- 7 a.m. to 4 p.m. and evening- 4 p.m. to 11 p.m. 14 S .V. INSTITUTE OF MANAGEMENT
  17. 17. FACTORS AFFECTING PLANT LOCATION:There are so many factors affecting plant location. Factors are categorized into twoparts i.e. primary data and secondary data.Primary Factors includes-RAW-MATERIAL: The basic raw material used by Sintex Industry Ltd. is powderwhich is in granule form. The major suppliers of raw material for Sintex areReliance, Haldia and IPCL.MARKET: Sintex is located in Kalol near Gandhinagar which is a good place formanufacturing products. Sintex is a national player so it has a network in internal aswell as global market.TRANSPORT: As Sintex is located in Kalol, it has cheap transportation cost.LABOUR: The location of Sintex is in Kalol which is not highly developed as it is avillage. So the unskilled labourers are easily available over there which is beneficialfor the industry as they are employed at very low wages.There are Secondary Factors that may affect the industry which are.....LandClimatePolitical and strategically considerations 17 S .V. INSTITUTE OF MANAGEMENT
  18. 18. II.) PRODUCT PORTFOLIO:Sintex leads in meaningful innovations and solutions. With their multifariouscapabilities in the field of plastics, metals, concrete etc. they have created many pathbreaking products. They have an excellent design, engineering, marketing andmanufacturing set up to offer many standard and custom products and solutions forsatisfying needs anywhere in the world.Sintex produces a wide range of products. It produces 50 types of plastic products.The product portfolio of Sintex Industry Ltd. is as under.Sintex product range comprises the following:Product Category Products NamePrefabs Industrial 1. Prefabs For Schools 2. BTS Shelters / Instrument Enclosures 3. Prefabs For Housing 4. Prefabs For Site Offices 5. Bunk Houses 6. Prefabs Toilets / Bathrooms 7. Compound Wall (Prefabricated, Relocatable)Industrial Product 1. Pallet Containers (Returnable Reusable Containers) 2. FRP Underground Petroleum Storage Tanks 3. Chemical Tanks 4. Uno Pallets 5. Intermediate Bulk Containers (IBC) 6. Supertuff Crates 7. Processing Trolleys 8. Mixing Tanks 9. Pallets 10. Racking Systems 11. Insulated Boxes 12. Open Mouth Packaging DrumsElectrical Product 1. SMC Meter Boxes 2. SMC Distribution Pillar Boxes 3. SMC Distribution Boxes 4. SMC Distribution Boards (DBS) 5. SMC Pole Mounted Junction Boxes (Street Light Boxes) 6. FRP Straight Cross Arms (REC Design) 7. FRP V type Cross Arms (REC Design) 8. FRP Cable Trays 9. SMC Trench Covers 10. SMC Danger Notice PlatesConsumer 1. Multi Bins 18 S .V. INSTITUTE OF MANAGEMENT
  22. 22. 4 P’s OF MARKETING.Marketing is a completely separate function that helps position products and servicescorrectly so that sales can be made more effective. At the core of Marketing are the“four P‟s” – Price, Product, Promotion, and Place. Marketers adjust each of thesecomponents to arrive at a mix that the customer will prefer over competitorsDiagram showing 4 P‟s of management:PRODUCT:The product is the full bundle of goods and services offered to the customer. Thisincludes the appearance, functionality, and support or non-tangibles the customer willreceive.The plastic segment of Sintex Industry Ltd. produces a wide range of plastic productsthat are used in every field i.e. in household, electrical industry, construction,consumer, etc. They produce more than 50 types of products. Some of the productsthat Sintex produces are as under:SMC Panel TanksPrefabs for AnganwadisWall paneling and false ceilingSeptic TanksPrimary and integrated waste collectionFRP Underground Water Storage TanksHome and office furnitureThe above mentioned is a list of some products manufactured by the Sintex Industryand products are already shown in the portion of product portfolio. 22 S .V. INSTITUTE OF MANAGEMENT
  23. 23. PRICE:The price is the amount a customer pays for a product.The price of the products manufactured by Sintex Industry Ltd. is fixed according tomarket situation and the prices are fixed at a reasonable price so that everyone canafford it to buy.PLACE:This is where and how your product is distributed and sold. Will you sell it yourself,through a broker, or a distributor? If a service, do you deliver in person or through theinternet or telephone? These all questions involves “place”. Place means distributionnetwork of company.As Sintex Industry Ltd. is a national player, so it has a wide distribution network.Sintex has a strong presence in the European, American, African, and Asian marketsincluding countries like France, Germany and USA.PROMOTION:Promotions are activities such as advertising, personal selling, and sales promotionwhich communicate the merits of the product and persuade target customers to buy it.Sintex Industry Ltd. carries out promotional activities like campus recruitments,seminars, conferences, advertisement on various websites or through some sources. 23 S .V. INSTITUTE OF MANAGEMENT
  24. 24. II.) TARGET CUSTOMERSCustomer is the king of the market. Today customers are harder to please, they aresmarter, more price conscious, more demanding, etc. Company has to spendconsiderable time and resources searching for new customers. For these companycreates ads and places them in media, sends direct mail, etc. Market is morecustomers oriented. Market is operated according to customer‟s tastes andpreferences. Target customers are those customers who actually buy the products.Engineered structural plastic products supplied to Global OEM‟s, etc.Mainly Sintex deals with Government and Semi-government sectors, construction &building companies, households, agriculture, etc. So they all are the target customersof Sintex.The major clients of Sintex Industry Ltd. are ABB, Siemens, Eicher, Reliance energy,Reliance Infocomm, Larsen & Tourbo, UNICEF, WHO, CARE, Torrent Pharma,Cipla, Ranbaxy, GE Motors.Sintex‟s target customers are their competitors who are as under:- Grasim- Voltas- Century- Nava Bharat Ven- Prakash Ind- 3M India- Bombay Dyeing- Kesoram- Orient PaperIII.) PLACE: DISTRIBUTION NETWORK:A set of interdependent organisations involved in the process of making a product orservice available for consumption on consumer is known as Distribution Network.Sintex Industry Ltd. has large distribution network in India and also outside India.The main office of the company is located at Kalol in Gujarat. They also work withWestern and Southern part of the country. They have their presence in 9 countriesacross 4 continents. Sintex has a strong presence in the European, American, African,and Asian markets including countries like France, Germany and USA.IV.) PRICE:Price is the amount a customer pays for the product. The business increases ordecreases their prices if other stores having the same product.Sintex is the pioneer for manufacturing of plastic products. They are producing highquality products at affordable price so that the consumers are happy with the products. 24 S .V. INSTITUTE OF MANAGEMENT
  25. 25. V.) PROMOTIONAL AND ADVERTISING CAMPAIGN:Advertising and promotions is bringing a service to the attention of potential andcurrent customers. Advertising and promotions are best carried out by implementingadvertising and promotions plan. The goals of the plan should depend very much onthe overall goals and strategies of the organization.Sintex is promoting cost savings, new products and new ideas. Sintex promotesthrough various advertisements, news papers, various websites, campus recruitment,etc.VI.) COMPETITORS:Competitors are the other business entities that compete for resources as well asmarket. They offer substitute which attract our present customers. Competition maybe direct and indirect. Competition shapes business. A study of the competitivescenario is essential for the marketer, particularly threats from competition.Competitors of SINTEX INDUSTRY LIMITED are as follows:- Grasim- Voltas- Century- Nava Bharat Ven- Prakash Ind- 3M India- Bombay Dyeing- Kesoram- Orient PaperVII.) EXPORTS:Sintex is an international player. They have their presence in 9 countries across 4continents. Sintex has a strong presence in the European, American, African, andAsian markets including countries like France, Germany and USA. 25 S .V. INSTITUTE OF MANAGEMENT
  27. 27. I.) STRENGTH OF PERSONNEL DEPARTMENT: Personnel management is that phase of management, which deals with effective control, use of man power or human resources. Labour is the main factor of production. Sintex has almost more than 2500 employees. It is very important to have strength of employees for Sintex. Following are some of the strengths of Sintex Industry Ltd. They have internal audits. Management is most important for the industry, so they also have management meetings. As they are the leading company, it is important for them to have contract procedures. As they are selling high quality products, they also have product quality review. II.) RECRUITMENT POLICY: Recruitment is the process of locating, identifying and attracting capable applicants to an organisation. As such Sintex has no specific recruitment policy, they generally have several sources of recruitment policy, which are as under: Internet Employee referrals Company website College recruiting Professional recruiting organizations III.) TRAINING & DEVELOPMENT: The training is an act of increasing the knowledge and skill of a worker for doing a certain job. A skill thus acquired by the employee through training is thus an asset to the organisation and the employer. Sintex has a training institute i.e. ITI in Kubernagar. Generally they give training to the freshers and unskilled labourers so that the production process doesn‟t have any breakdown. IV.) REWARD SYSTEM: Many organisations provide rewards to their employees for their precious work contribution. The rewards may be in the form of incentives, gifts articles, and appretiational items like award for best employee, etc. These rewards may be given to employees at the end of the year in their annual meeting. By giving rewards to employees they feel that they are an important part of organisation and thereby they are motivated to work more efficiently. Sintex also gives rewards to their employees so that they are motivated. 27 S .V. INSTITUTE OF MANAGEMENT
  29. 29. COMPARATIVE BALANCE SHEETPARTICALAR 2006 2007 2008 2009 2010 (RS IN CRORES)SOURCES OF FUNDS:Share Capital 19.73 22.19 27.10 27.10 27.10Share Warrants & Outstandings 5.41 0.00 50.53 12.00 22.27Total Reserves 429.73 628.68 1434.02 1588.63 1832.75Shareholders Funds 454.87 650.87 1511.65 1627.73 1882.12Secured Loans 359.53 506.00 636.15 791.99 1058.72Unsecured Loans 223.13 172.26 900.78 1146.37 1115.65Total Debts 582.66 678.26 1536.93 1938.36 2174.37Total Liabilities 1037.53 1329.13 3048.58 3566.09 4056.49APPLICATION OF FUNDS :Gross Block 674.96 881.85 1079.02 1575.11 1773.64Less: Accumulated Depreciation 205.43 246.42 295.06 353.82 437.05Net Block 469.53 635.43 783.96 1221.29 1336.59Capital Work in Progress 19.02 38.79 242.68 197.38 136.75Investments 156.83 206.54 429.77 637.89 807.94Current Assets, Loans & AdvancesInventories 86.28 145.54 162.93 181.15 168.70Sundry Debtors 150.67 213.04 476.70 495.80 677.06Cash and Bank 355.35 385.30 1325.87 1099.47 815.04Other Current Assets 0.00 0.00 0.00Loans and Advances 36.99 66.83 327.14 444.73 789.26Total Current Assets 629.29 810.71 2292.64 2221.15 2450.06Less: Current Liabilities and ProvisionsCurrent Liabilities 163.98 254.79 312.43 289.79 228.63Provisions 15.73 37.30 289.74 291.31 294.07Total Current Liabilities 179.71 292.09 602.17 581.10 522.70Net Current Assets 449.59 518.62 1690.47 1640.05 1927.36Miscellaneous Expenses not written off 4.52 2.12 1.15 0.17Deferred Tax Assets / Liabilities -61.95 -72.37 -99.45 -130.69 -152.15Total Assets 1037.53 1329.13 3048.58 3566.09 4056.49Contingent Liabilities 26.65 304.10 317.82 247.31Book Value 45.10 58.47 107.75 119.23 137.26Adjusted Book Value 22.55 29.24 53.87 59.61 68.63 29 S .V. INSTITUTE OF MANAGEMENT
  30. 30. ANALYSIS The share capital of the company has remained constant from 2007 to 2010. This means that the company has not issued any equity shares after 2006. Company‟s total reserves is showing increasing trend which is a good indicator of its performance. Total reserves consist of retained earnings and net profit. Total debts of the company shows an increasing trend which means that the interest burden on the company has been increasing which is not a good sign. Total debt consists of secured loans and unsecured loans. Till 2007 secured loans were than unsecured loans but after 2007 unsecured loans were more than secured loans. Company has been acquiring new assets every year which means that their production capacity is increasing. Companies investments are also showing an increasing trend which means that they are investing their money in the market. Inventories are showing increasing trend till 2009 but in 2010 it reduces by 7%. Since the company‟s debtors are increasing year by year, it means that either the company‟s collection mechanism is not sound or it allows high credit period o its debtors. Although company‟s debtors are increasing, its cash balance is also shoeing an increasing trend which means that the company is earning profit from other sources as well. Current liabilities of the company are not consistent in last five years and there are lot many fluctuations. 30 S .V. INSTITUTE OF MANAGEMENT
  32. 32. COMPARATIVE PROFIT & LOSS ACCOUNTPARTICULAR 2006 2007 2008 2009 2010 (RS IN CRORES)INCOME :Gross Sales 913.98 1212.80 1790.29 1982.04 2103.56Less: Sales ReturnsLess: Excise Duty 60.56 95.04 134.59 98.63 93.01Net Sales 853.42 1117.76 1655.70 1883.41 2010.55EXPENDITURE :Increase/Decrease in Stock 6.89 -37.47 -20.76 -20.91 14.01Raw Material Consumed 510.54 695.40 1025.08 1159.22 1272.89Power & Fuel Cost 34.47 46.63 58.79 70.80 59.86Employee Cost 32.70 43.17 57.69 70.82 77.44Other Manufacturing Expenses 58.70 75.56 94.15 93.75 104.17General and Administration Expenses 41.88 55.60 71.78 72.63 68.43Selling and Distribution Expenses 20.80 20.25 24.01 30.72 32.98Miscellaneous Expenses 3.17 1.33 1.04 33.08 0.85Less: Expenses CapitalisedTotal Expenditure 709.14 900.47 1311.78 1510.11 1630.63Operating Profit (Excl OI) 144.29 217.29 343.92 373.30 379.92Other Income 29.79 26.70 44.56 94.73 96.91Operating Profit 174.08 243.99 388.48 468.03 476.83Interest 29.09 40.99 56.25 63.97 51.32PBDT 144.99 203.00 332.23 404.06 425.51Depreciation 30.68 41.47 51.70 62.40 84.03Profit Before Taxation & Exceptional Items 114.30 161.53 280.53 341.66 341.48Profit Before Tax 114.30 161.53 280.53 341.66 341.48Provision for Tax 22.29 30.95 64.20 74.95 67.78Profit After Tax 92.02 130.58 216.33 266.71 273.70Adjustments to PATProfit Balance B/F 110.88 177.80 280.80 456.16 674.17Appropriations 202.90 308.38 497.13 722.87 947.87Equity Dividend % 44.00 48.00 50.00 55.00 60.00Earnings Per Share 9.33 11.77 15.97 19.68 20.20Adjusted EPS 4.66 5.88 7.98 9.84 10.10 32 S .V. INSTITUTE OF MANAGEMENT
  33. 33. ANALYSIS Net sales of the company are increasing since last five years which is a very good indicator for the company. Power and fuel cost of the company is almost constant and does not show any major fluctuations. Employee cost is also increasing each year which increases company‟s total manufacturing expenses. Company‟s administrative expenses have shown increase of 63% from 2006 to 2010. Company‟s selling and distribution expense have increased about 58% which are less than the administrative expenses. Company is able to control its miscellaneous expenses as it is showing decreasing trend. Company‟s interest income is also showing increasing trend. As assets of the company are increasing it directly affect the depreciation and depreciation of the company also increases year by year. Company‟s equity dividend percentage from Rs 44% to 60% that is almost 150%. Company‟s earnings per share is also increasing which means it leads to wealth maximization of shareholders. 33 S .V. INSTITUTE OF MANAGEMENT
  35. 35. COMMON SIZE STATEMENT OF BALANCE SHEETPARTICULARS 2006 2007 2008 2009 2010 (RS IN CRORES)SOURCES OF FUNDS:Share Capital 1.90 1.67 0.89 0.76 0.67Share Warrants & Outstandings 0.52 0.00 1.66 0.34 0.55Total Reserves 41.42 47.30 47.04 44.55 45.18Shareholders Funds 43.84 48.97 49.59 45.64 46.40Secured Loans 34.65 38.07 20.87 22.21 26.10Unsecured Loans 21.51 12.96 29.55 32.15 27.50Total Debts 56.16 51.03 50.41 54.36 53.60Total Liabilities 100 100 100 100 100APPLICATION OF FUNDS :Gross Block 65.05 66.35 35.39 44.17 43.72Less: Accumulated Depreciation 19.80 18.54 9.68 9.92 10.77Less: Impairment of Assets 0.00 0.00 0.00 0.00 0.00Net Block 45.25 47.81 25.72 34.25 32.95Lease Adjustment A/c 0.00 0.00 0.00 0.00 0.00Capital Work in Progress 1.83 2.92 7.96 5.53 3.37 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Investments 15.12 15.54 14.10 17.89 19.92Current Assets, Loans & Advances 0.00 0.00 0.00 0.00 0.00Inventories 8.32 10.95 5.34 5.08 4.16Sundry Debtors 14.52 16.03 15.64 13.90 16.69Cash and Bank 34.25 28.99 43.49 30.83 20.09Other Current Assets 0.00 0.00 0.00 0.00 0.00Loans and Advances 3.57 5.03 10.73 12.47 19.46Total Current Assets 60.65 61.00 75.20 62.29 60.40Less: Current Liabilities andProvisions 0.00 0.00 0.00 0.00 0.00Current Liabilities 15.80 19.17 10.25 8.13 5.64Provisions 1.52 2.81 9.50 8.17 7.25Total Current Liabilities 17.32 21.98 19.75 16.30 12.89Net Current Assets 43.33 39.02 55.45 45.99 47.51Miscellaneous Expenses not writtenoff 0.44 0.16 0.04 0.00 0.00Deferred Tax Assets / Liabilities -5.97 -5.44 -3.26 -3.66 -3.75Total Assets 100 100 100 100 100 35 S .V. INSTITUTE OF MANAGEMENT
  36. 36. Application of Funds 36 S .V. INSTITUTE OF MANAGEMENT
  37. 37. ANALYSIS:- Contribution of total current assets in the total assets is 42% in 2006, which slightly decreased in 2007 which was 40%. It increased in 2008 up to 55% and again it decreased in 2010 by 47%. Current assets includes debtors, inventories, cash etc. Contribution of total current liabilities in the total liabilities is 12% in 2006, which slightly increased in 2007 which was 14%. Then slightly changes were there. Contribution of net block in the total assets is 11% in 2006 and 10% in 2007. It significantly decreased in 2008 up to 19% and again it increased in 2009 by 26% and 25% in 2010. In last two years company has acquired assets and expand its production capacity. Contribution of investments in the total assets is 11% in 2006, and 10% in 2007 & 2008.then it increased in 2009 & 2010 by 13% & 15% respectively. 37 S .V. INSTITUTE OF MANAGEMENT
  38. 38. COMMON SIZE STATEMENT OF PROFIT AND LOSS ACCOUNTPARTICULARS 2006 2007 2008 2009 2010 (RS IN CRORES)INCOME :Gross Sales 104.63 105.24 108.13 108.50 107.10Less: Inter divisional transfers 0.00 0.00 0.00 0.00 0.00Less: Sales Returns 0.00 0.00 0.00 0.00 0.00Less: Excise Duty 4.63 5.24 8.13 8.50 7.10Net Sales 100.00 100 100 100 100EXPENDITURE :Increase/Decrease in Stock 0.70 -0.06 -1.25 -3.35 0.81Raw Material Consumed 63.31 3.22 61.91 62.21 59.82Power & Fuel Cost 2.98 0.20 3.55 4.17 4.04Employee Cost 3.85 0.20 3.48 3.86 3.83Other Manufacturing Expenses 5.18 0.26 5.69 6.76 6.88General and Administration Expenses 3.40 0.20 4.34 4.97 4.91Selling and Distribution Expenses 1.64 0.09 1.45 1.81 2.44Miscellaneous Expenses 0.04 0.09 0.06 0.12 0.37Less: Expenses Capitalised 0.00 0.00 0.00 0.00 0.00Total Expenditure 81.10 4.20 79.23 80.56 83.09Operating Profit (Excl OI) 18.90 1.04 20.77 19.44 16.91Other Income 4.82 0.26 2.69 2.39 3.49Operating Profit 23.72 1.30 23.46 21.83 20.40Interest 2.55 0.18 3.40 3.67 3.41PBDT 21.16 1.12 20.07 18.16 16.99Depreciation 4.18 0.17 3.12 3.71 3.60Profit Before Taxation & Exceptional Items 16.98 0.95 16.94 14.45 13.39Exceptional Income / Expenses 0.00 0.00 0.00 0.00 0.00Profit Before Tax 16.98 0.95 16.94 14.45 13.39Provision for Tax 3.37 0.21 3.88 2.77 2.61Profit After Tax 13.61 0.74 13.07 11.68 10.78 38 S .V. INSTITUTE OF MANAGEMENT
  39. 39. ANALYSIS OF COMMON SIZE STATEMENT The contribution of gross sales to net sales was nearly same in all the year it was near about 107 to 104% over 5 years and excise duty has increased 2006 to 2008 and for last two years it has decreased which is good for the company. Contribution of total expenditure to net sales is around 80% to 83% over 5 years. Which simply means that company is able to generate profit by 20% to 17% in last 5 years and because of this it can able to expand its operations. Major portion increase in total expenditure was raw material consumed. Contribution of depreciation to net sales was 4.18% in 2006 and it significantly decreased in 2007 and it was 0.17% only. After that it increased due to acquisition of assets by the company. Profit before tax is around 17% in 2006 and it highly decreased in 2007 and it was only 0.95% and it again increased in 2008 and then it was decreasing in 2009 and 2010. Thus we can say that here 2007 was not a good financial year for the company because profit and sales of the company has significantly decreased. 39 S .V. INSTITUTE OF MANAGEMENT
  41. 41. TREND ANALYSIS OF BALANCE SHEETPARTICALAR 2006 2007 2008 2009 2010 (RS IN CRORES)SOURCES OF FUNDS:Share Capital 100.00 112.46 137.34 137.34 137.34Share Warrants & Outstandings 100.00 0.00 934.72 221.98 411.96Total Reserves 100.00 146.30 333.70 369.68 426.48Shareholders Funds 100.00 143.09 332.32 357.84 413.77Secured Loans 100.00 140.74 176.94 220.29 294.48Unsecured Loans 100.00 77.20 403.70 513.77 500.00Total Debts 100.00 116.41 263.78 332.68 373.18Total Liabilities 100.00 128.11 293.83 343.71 390.98APPLICATION OF FUNDS :Gross Block 100.00 130.65 159.86 233.36 262.78Less: Accumulated Depreciation 100.00 119.95 143.63 172.23 212.75Net Block 100.00 135.33 166.97 260.11 284.67Capital Work in Progress 100.00 203.91 1275.72 1037.59 718.87Investments 100.00 131.70 274.04 406.75 515.18Current Assets, Loans & AdvancesInventories 100.00 168.68 188.83 209.95 195.52Sundry Debtors 100.00 141.39 316.38 329.06 449.36Cash and Bank 100.00 108.43 373.12 309.41 229.37Other Current AssetsLoans and Advances 100.00 180.65 884.32 1202.19 2133.53Total Current Assets 100.00 128.83 364.32 352.96 389.33Less: Current Liabilities andProvisionsCurrent Liabilities 100.00 155.38 190.53 176.73 139.43Provisions 100.00 237.08 1841.62 1851.60 1869.14Total Current Liabilities 100.00 162.54 335.08 323.36 290.86Net Current Assets 100.00 115.36 376.01 364.79 428.70Miscellaneous Expenses not writtenoff 100.00 46.95 25.47 3.76 0.00Deferred Tax Assets / Liabilities 100.00 116.82 160.53 210.96 245.60Total Assets 100.00 128.11 293.83 343.71 390.98Contingent Liabilities 100.00Book Value 100.00 129.65 238.91 264.37 304.34Adjusted Book Value 100.00 129.65 238.91 264.37 304.34 41 S .V. INSTITUTE OF MANAGEMENT
  42. 42. 1400 1200 1000 Total Current Liabilities 800 Total Current Assets 600 Investments 400 Share Capital 200 0 2006 2007 2008 2009 2010 YEARS ANALYSIS Above graph shows the trend analysis of share capital, investments, total current assets, and total current liabilities over 5 years. Share capital has remained constant since last 3 years, it has increased 37% from 2006 to 2010. Investments has increased about 31%, 174%, 306%, and 415% in years 06-07, 07-08, 08-09, 09-10 respectively. Total current assets has increased about 28%, 264%, 253%, and 289% in years 06-07, 07-08, 08-09, 09-10 respectively. Though current assets are increasing we cannot say that the company is performing well because debtors are increasing at a higher rate than the cash. Total current liabilities has increased about 62%, 235%, 223%, and 190% in years 06- 07, 07-08, 08-09, 09-10 respectively. Total current liabilities include provisions which are increasing at a alarming rate. 42 S .V. INSTITUTE OF MANAGEMENT
  43. 43. TREND ANALYSIS OF PROFIT &LOSS ACCOUNTPARTICULAR 2006 2007 2008 2009 2010 (((RS IN CRORES)(RS)IN CRORESINCOME :Gross Sales 100 132.69 195.88 216.86 230.15Less: Sales Returns 100Less: Excise Duty 100 156.94 222.24 162.86 153.58Net Sales 100 130.97 194.01 220.69 235.59EXPENDITURE :Increase/Decrease in Stock 100 -543.99 -301.39 -303.57 203.40Raw Material Consumed 100 136.21 200.78 227.06 249.32Power & Fuel Cost 100 135.28 170.56 205.41 173.67Employee Cost 100 132.01 176.41 216.57 236.81Other Manufacturing Expenses 100 128.72 160.39 159.71 177.46General and Administration Expenses 100 132.76 171.40 173.43 163.40Selling and Distribution Expenses 100 97.38 115.46 147.72 158.59Miscellaneous Expenses 100 42.00 32.84 1044.69 26.84Total Expenditure 100 126.98 184.98 212.95 229.95Operating Profit (Excl OI) 100 150.59 238.35 258.72 263.30Other Income 100 89.63 149.58 318.00 325.32Operating Profit 100 140.16 223.16 268.86 273.92Interest 100 140.89 193.35 219.88 176.40PBDT 100 140.01 229.15 278.69 293.48Depreciation 100 135.15 168.49 203.36 273.85Profit Before Taxation & Exceptional Items 100 141.32 245.43 298.91 298.75PBDT 100 140.01 229.15 278.69 293.48Provision for Tax 100 138.88 288.09 336.32 304.15Profit After Tax 100 141.91 235.10 289.85 297.45Adjustments to PATProfit Balance B/F 100 160.35 253.24 411.40 608.01Appropriations 100 151.99 245.02 356.27 467.17Equity Dividend % 100 109.09 113.64 125.00 136.36Earnings Per Share 100 126.19 171.18 211.04 216.57Adjusted EPS 100 126.19 171.18 211.04 216.57 43 S .V. INSTITUTE OF MANAGEMENT
  44. 44. 1200 1000 Profit After Tax 800 600 PBDT 400 Total Expenditure 200 Net Sales 0 2006 2007 2008 2009 2010 YEARS ANALYSIS Above graph shows the trend analysis of Profit after tax, Profit before depreciation and tax, Total expenditure and Net sales over 5 years. Net sales has increased about 31%, 94%, 120%, and 135% in years 06-07, 07-08, 08- 09, 09-10 respectively. Net sales of the company is increasing which is a good sign for the company. Total expenditure has increased about 27%, 85%, 113%, and 130% in years 06-07, 07-08, 08-09, 09-10 respectively. Total expenditure includes raw material consumed, employee cost, selling & distribution expenses and administrative expenses. As production increased, the raw material consumed cost increased and overall expenses of the company increased. Profit before depreciation & tax has increased about 40%, 129%, 178%, and 193% in years 06-07, 07-08, 08-09, 09-10 respectively. Here, since other income is also included so we can say that there the entire profit is not from the core business of the company. 44 S .V. INSTITUTE OF MANAGEMENT
  45. 45.  Profit after tax has increased about 41%, 135%, 190%, and 197% in years 06-07, 07- 08, 08-09, 09-10 respectively. Net profit has continuously increased so for investors it is a good opportunity to invest in the company. CHAPTER 6: ANALYSIS OF CASH FLOW STATEMENT 45 S .V. INSTITUTE OF MANAGEMENT
  46. 46. CASH FLOW STATEMENTPARTICULARS Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 (RS IN CRORES)Profit Before Tax 341.48 341.66 280.53 161.53 114.30Adjustment 54.26 89.84 93.43 66.36 38.96 Depreciation 84.03 62.40 51.70 41.47 30.68 Impairment 29.09 Interest Expenses 51.32 63.97 56.25 40.99 Profit/Loss on sale of Fixed Assets -8.67 -19.63 -13.18 -1.47 -15.80 Dividend Received -0.22 -2.02 Interest Income -33.00 -65.70 -13.47 -10.58 -6.85 Effect of Exchange Rate Change -49.64 51.96 8.55 -5.33 -0.70 Provision for doubtful debts &advances 0.25 -0.12 0.10 Misc. Expenses written off 0.17 0.98 0.97 1.28 2.43 Other Adjustments 10.27 -2.37 2.73Changes In working Capital -610.01 -148.00 -298.04 -55.96 40.04 Trade & Other receivables -563.54 -156.06 -337.99 -90.47 1.98 Inventories 12.45 -18.38 -17.40 -59.25 20.56 Trade & Other payables -58.92 26.44 57.35 93.76 17.50Cash Flow after changes in WorkingCapital -214.27 283.50 75.92 171.93 193.31 Interest Paid -28.73 Tax Paid -66.64 -63.19 -35.48 -21.90 -12.09Cash From Operating Activities -280.91 220.31 40.44 150.03 152.48Cash Flow from Investing Activities -112.76 -891.02 -638.34 -230.22 -131.26 Purchase of Fixed Assets -94.25 -434.62 -380.02 -221.50 -161.44 Sale of Fixed Assets 1.06 1.12 0.74 0.43 0.17 Sale of Investments 24.01 Investment in Subsidiaries -71.88 -420.74 -127.91 -18.00 Dividend Income 0.22 2.02 Interest received 29.63 65.70 13.47 10.58 6.85 Loans & advances given to subsidiaries /partnership firms etc. 32.99 26.23 -144.62 -1.73 Other Investment Activities -10.53 -130.73 -0.85Cash from Financing Activities 253.86 59.70 1681.46 143.56 254.87 Increase / (Decrease) in Loan Funds 27.64 -201.01 129.84 148.65 20.74 Proceeds from Long Term Borrowings 339.10 354.91 Proceeds from Debenture / Bonds 885.21 215.91 Proceeds from Issue of Equity ShareCapital 759.53 50.62 26.64 Equity Dividend Paid -17.51 -15.94 -12.56 -10.09 -8.42 Interest Paid -95.37 -78.26 -80.56 -45.62Net Cash Inflow / Outflow -139.81 -611.01 1083.56 63.37 276.09Opening Cash & Cash Equivalents 1046.50 1657.51 573.95 510.58 234.49Closing Cash & Cash Equivalent 906.69 1046.50 1657.51 573.95 510.58 46 S .V. INSTITUTE OF MANAGEMENT
  47. 47. ANALYSIS The profit and loss account reports only the effects of the current operation of the enterprise on its financial position. The balance sheet shows the financial position of the enterprise at the end of the year. Neither of these statements describes the investments in assets during and how those investments are financed. The statement of cash flows is a relatively new financial statement that reflects the major sources of cash receipts and cash payments of an enterprise. It reports the cash effects during a period of not only the enterprise‟s operations but also its investing and financing activities. In the above statement, it can be observed that the cash flow from operating activities is showing negative balance in 2006 and then in 2007 it is showing positive balance. In 2008 the cash flow again decreased and then it is increasing. Negative cash flow clearly indicates that its manufacturing expenses were greater than the income from the sales of goods. Cash flow from investing activities is negative in all the 5 years. This is only due to purchase of more fixed assets and unrecovered of loans. Cash flow from financing activities was highest in 2007-08 and in remaining years it had small fluctuations. 47 S .V. INSTITUTE OF MANAGEMENT
  49. 49. Meaning : A ratio is a statistical yardstick that provides a measure of relationship between two figures. Ratio analysis of financial statements stands for the process of determining and presenting the relationship of items in the statement. There are several ratios which an analyst can employ, but the type of ratio he would precisely use depends on the purpose for which analysis is made. So, investers will be interested in such ratios as earning per share, dividend per share. Ratios are expressed in various formsa) Pure ratio which are arrived at by the simple division of one number by another, e.g., current ratio to current liability ratio 2:1b) Rate at which is ratio between two numerical facts, usually over a period of time, e.g., stock turnover ratio is 3 times a year.c) Percentage which is a special type of rate expressing the relation in hundredth, gross profit ratio is 25% on sales. Uses of Ratio Analysis 1) It facilitates the comprehension of financial statement and evaluation of several aspects such as financial health, profitability and operational efficiency of undertaking. 2) It provides inter-firm comparison to measure efficiency and helps the management to take remedial measures. 3) It is also helpful in forewarning corporate sickness and helps the management to take corrective actions. 4) It helps in investment decisions in the case of investors and lending decisions in the case of bankers and financial institutions. 49 S .V. INSTITUTE OF MANAGEMENT
  50. 50. A) LIQUIDITY RATIO Liquidity is defined as the ability to realize value in money e most liquid of assets.The liquidity ratio measure the liquidity of the firm and its ability to meet its maturingshort- term obligations. It refers to the ability to pay in cash, the obligations that aredue.The corporate liquidity has two dimensions that are quantitative and qualitativeconcepts. The quantitative aspects includes the quantum, structure and utilization ofliquid assets and in the qualitative aspect, it is the ability to meet all present andpotential demands on cash from any source in a manner that minimizes cost andmaximizes the value of the firm.Excess liquidity results into:1) lower profitability2) Deterioration in managerial efficiency3) Ideal cash fund giving lower returns4) Too liberal credit and dividend policiesToo little liquidity result into:1) Reduce rate of return2) Missing of profitable business opportunitiesThe important ratio measuring short-term solvency are :1) Current ratio2) Quick ratio 50 S .V. INSTITUTE OF MANAGEMENT
  51. 51. 1)CURRENT RATIO1.1) Meaning:Current ratio measures relationship between current assets and current liabilities. Thisratio measures the solvency of the company in the short-term. Current assets are thosewhich can be converted into cash within a year. Current liabilities and provisions arethose liabilities that are payable within a year.1.2) Formula:Current ratio =Current Assets Current LiabilitiesWhere current assets include inventories, sundry debtors, cash & bank balancesetc. and current liability includes creditors, bank overdraft.1.3) Particular 2006 2007 2008 2009 2010 Current Assets(RS IN CRORES) 629.99 810.71 2292.64 2221.15 2450.06 Current Liabilities(RS IN CRORES) 179.71 292.09 602.17 581.1 522.7 Current Ratio 3.51:1 2.78:1 3.81:1 3.82:1 4.69:11.4) Analysis:The ideal current ratio is 2:1. When current ratio is double than current liabilities thefirm has no difficulties in paying short term obligations on time. From the abovetable, the current ratio is increasing. This may be bcause the inventory of the companyahs increased due t low sales. Due to high proportion of obsolete, slow moving stock,the current ratio may be high but its capacity to meet its current liabilities is definitelyweak 51 S .V. INSTITUTE OF MANAGEMENT
  52. 52. 2) QUICK RATIO2.1) Meaning:Quick ratio is used as a measure of the company‟s ability to meet its currentobligations. The quick ratio establishes a relationship between quick assets andcurrent liabilities. Here inventory is deducted because rupee of cash is more readilyavailable to meet current obligations than a rupee of inventory.2.2) Formula:Quick ratio = Current Assets - Inventory Current Liabilities2.3) Particular 2006 2007 2008 2009 2010 Current Assets(RS IN CRORES) 629.99 810.71 2292.64 2221.15 2450.06 Inventories(RS IN CRORES) 86.28 145.54 162.93 181.15 168.7 Current Liabilities(RS IN CRORES) 179.71 292.09 602.17 581.1 522.7 Quick Ratio 3.03:1 2.28:1 3.54:1 3.51:1 4.36:12.4) Analysis:The ideal quick ratio is 1:1. From the table it is clear that quick ratio for all the 5 yearsis more than the ideal ratio. This indicates that the company‟s liquidity position isgood and it has enough cash resources on hand to meet its urgent cash requirements 52 S .V. INSTITUTE OF MANAGEMENT
  53. 53. B) LEVERAGE RATIO The leverage ratio may be defined as financial ratios which throw light on the longterm solvency of a firm as reflected in its ability to assure the long term lenders.There are two aspect of long term solvency1) Ability to repay the principal when due,2) Regular payment of interest The long term financial stability of the firm may be considered as depedent upon itsability to meet all its liabilities, including those not currently payable. Thus long termsolvency of the firm can be examined by using the leverage ratios.There are three type of leverage ratios :1) Debt – Equity ratio2) Capital Employed to Net Worth ratio3) Fixed Interest Coverage ratio 53 S .V. INSTITUTE OF MANAGEMENT
  54. 54. 1) DEBT-EQUITY RATIO1.1) Meaning :This ratio indicates the relationship between total debt and net worth of the company.The relationship between borrwed funds and owner‟s capital is a popular measure ofthe long term financial solvency of a firm. This relationship is shown by the debtequity ratio.1.2) Formula :Debt – Equity Ratio = Total Debt Net Worth(excl. pref. share cap.)Where, total debt = secured loans + unsecured loans.Net worth = share capital+ reserves & surplus - fictitious assets.1.3) Particular 2006 2007 2008 2009 2010 Total Debt(RS IN CRORES) 582.66 678.26 1536.93 1938.36 2174.37 Net Worth(RS IN CRORES) 444.94 648.75 1459.97 1615.56 1859.85 Debt-Equity Ratio 1.31 1.05 1.05 1.20 1.171.4) Analysis :This ratio indicates the relationship between total debt and net worth of the company.If debt equity ratio is low the company is said to be low geared company and it is nottaking advantage of trading on equity. Debt equity ratio of 2:1 is accepted norm forfinancial institutions for giving loans for projects. In this company debt equity ratio isvery low than required once. In 05-06 it was 1.31, in 09-10 it was 1.17. The mainreason behind this is that therre are no preference shares and debentures.Capital structure of the company does not include debentures and pref. shares socompany loses advantage. Ultimately ratio is very low so company is low geared one. 54 S .V. INSTITUTE OF MANAGEMENT
  55. 55. 2) CAPITAL EMPLOYED TO NET WORTH RATIO2.1) Meaning:This ratio establishes a relationship between how much capital employed in thecompany and the net worth. This ratio is found out to know how much capital isemployed to net worth.Capital employed including share capital, reserves and surplus and long term loansand net worth includes share capital and reserves and surplus.2.2) Formula:CE to NW Ratio = Capital Employed Net Worth inclu. Pref. share capitalCapital Employed = share capital + reserves & surplus + secured Loans –fictitious AssetsNet worth = share capital+ reserves & surplus - fictitious assets.2.3) Particular 2006 2007 2008 2009 2010 Capital Employed(RS IN CRORES) 804.47 1154.75 2096.12 2407.55 2918.57 Net Worth(RS IN CRORES) 444.94 648.75 1459.97 1615.56 1859.85 Capital Employed to Net Worth Ratio 1.81 1.78 1.44 1.49 1.572.4) Analysis:This ratio is found out to know how much capital is employed to net worth. In thiscompany in 05-06 capital employed ratio was 1.81 that means company‟s totalcapital is 1.81 times more than net worth of the company. While in 06-07 it was 1.78,it decreases and in 07-08 it slightly decreased and it was 1.44.and in last 2 years it was1.49 & 1.57 respectively. Long term loans are not much employed so this ratio is nearto one and it remains same for last three years. 55 S .V. INSTITUTE OF MANAGEMENT
  56. 56. 3) FIXED INTEREST COVERAGE RATIO3.1) Meaning:This ratio measures the debt serving capacity of a firm insofar as fixed interest onlong term loan is concerned. This ratio can be determined by dividing the operatingprofits by the fixed interest charges on loan.3.2) Formula:Fixed Interest Coverage Ratio = Earning Before Interest And Taxes Interest3.3) Particular 2006 2007 2008 2009 2010 EBIT(RS IN CRORES) 174.08 243.99 388.48 468.03 476.83 Interest(RS IN CRORES) 29.09 40.99 56.25 63.97 51.32 Fixed Interest Coverage Ratio 5.98 5.95 6.91 7.32 9.293.4) Analysis:This ratio measures the debt serving capacity of a firm insofar as fixed interest onlong term loan is concerned. From the table, it is clear that this ratio shows increasingtrend. It means that the financial strength of the company is sound because it hasgreater ability to handle fixed charge liabilities. 56 S .V. INSTITUTE OF MANAGEMENT
  57. 57. C) PROFITABILITY RATIOThe purpose of study and analysis of profitability ratios are to help assessing theadequacy of profits earned by the company and also to discover whether profitabilityis increasing or declining. The profitability of the firm is the net result of a largenumber of policies and decisions. The profitability ratios show the combined effectsof liquidity, asset management, and debt management on operating results.Profitability ratios are measured with reference to sales, capital employed,shareholders funds etc.The major profitability ratios are as follows :1) Gross Profit Ratio2) Net Profit Ratio3) Operating Profit Ratio4) Operating Ratio5) Expenses Ratio6) Return On Shareholder’s Fund7) Return On Total Assets8) Return On Capital Employed 57 S .V. INSTITUTE OF MANAGEMENT
  58. 58. 1) GROSS PROFIT RATIO1.1) Meaning:The ratio measures the gross profit margin on the total net sales made by thecompany. The gross profit represents the excess of sales proceeds during the periodunder observation over their cost, before taking into account administration, selling &distribution and financial charges.1.2) Formula:Gross Profit Ratio = (Sales – Cost Of Goods Sold) *100 Net Sales1.3) Particular 2006 2007 2008 2009 2010 Gross Profit(RS IN CRORES) 145.43 203 322.23 404.06 425.51 Net Sales(RS IN CRORES) 853.42 1117.76 1655.7 1883.41 2010.55 Gross Profit Ratio(%) 17.04 18.16 19.46 21.45 21.16Cost Of Goods Sold = Opening Stock+ direct exp. – closing stockNet sales = sales – other income1.4) Analysis:The ratio measures the gross profit margin on the total net sales made by thecompany. In 05-06 this ratio was 17.04% which is low because near to 30% is goodfor the company. From 06-07 to 09-10 it shows increasing trend. 58 S .V. INSTITUTE OF MANAGEMENT
  59. 59. 2) NET PROFIT RATIO2.1) Meaning:This ratio establishes relationship between net profit and sales of firm. The ratio isdesigned to focus attention on the net profit margin arising from the businessoperations business after operating expenses, interest & tax is deducted.2.2) Formula:Net Profit Ratio = Profit After Tax *100 Net Sales2.3) Particular 2006 2007 2008 2009 2010 PAT(RS IN CRORES) 92.02 130.58 216.33 366.71 273.7 Net Sales(RS IN CRORES) 853.42 1117.76 1655.7 1883.41 2010.55 Net Profit Ratio(%) 10.78 11.68 13.07 19.47 13.612.4) Analysis:This ratio establishes relationship between net profit and sales of firm. In 05-06 theratio was 10.78% which is not good for the company. In 06-07 it slightly increasedand it was 11.68%. As compare to both years in 07-08 it further increased and it was13.07%. The ratio was highest in 08-09 which was 19.47% 59 S .V. INSTITUTE OF MANAGEMENT
  60. 60. 3) OPERATING PROFIT RATIO3.1) Meaning:This ratio measures a relationship between operating profit and net sales of thecompany. It is focus on profit arising from business operations before interest & tax isdeducted and after the deduction of other incomes.3.2) Formula:Operating Profit Ratio = (Earning Before Interest & Tax – Other Income) Net sales3.3) Particular 2006 2007 2008 2009 2010 EBIT(RS IN CRORES) 174.08 243.99 388.48 468.03 476.83 Other Income(RS IN CRORES) 29.79 26.7 44.56 94.73 96.91 Net Sales(RS IN CRORES) 853.42 1117.76 1655.7 1883.41 2010.55 Operating Profit Ratio 0.17 0.19 0.21 0.20 0.193.4) Analysis:This ratio measures a relationship between operating profit and net sales of thecompany. In 05-06 Operating Profit Ratio was 0.17 which was very low. As compareto previous year in 06-07 it was 0.19 and it was same in 2010 which is slightlyincreasing. Though sales were showing increasing trend but operating profit wasfluctuating. 60 S .V. INSTITUTE OF MANAGEMENT
  61. 61. 4) OPERATING RATIO4.1) Meaning:The ratios of all operating expenses that means material used, labour, administration& selling expenses etc. to sales is the operating ratio.4.2) Formula:Operating Ratio = 1 – Operating Profit Ratio4.3) Particular 2006 2007 2008 2009 2010 Operating Profit Ratio 0.17 0.19 0.21 0.20 0.19 Operating Ratio 0.83 0.81 0.79 0.8 0.814.4) Analysis:The ratios of all operating expenses that means material used, labour, administration& selling expenses etc. to sales is the operating ratio. From the above table we can saythat operating ratio is almost constant in last 5 years and it is high. This is lessfavourable because it would have small margin to cover interest, income tax,dividends and reserves. 61 S .V. INSTITUTE OF MANAGEMENT
  62. 62. 5) EXPENSE RATIO5.1) Meaning:This ratio measures a relationship between total expense incurred by the company andnet sales. It shows that how much company is expending for selling its product.5.2) Formula:Expense Ratio = Total Expenses *100 Net Sales5.3)Particular 2006 2007 2008 2009 2010Total Expenses(RS IN CRORES) 709.14 900.47 1311.78 1510.11 1630.63Net Sales(RS IN CRORES) 853.42 1117.76 1655.7 1883.41 2010.55Expenses Ratio(%) 83.09 80.56 79.23 80.18 81.105.4) Analysis:This ratio measures a relationship between total expense incurred by the company andnet sales. Total expenditure shows small fluctuations since last 5 years. Totalexpenditure includes raw material consumed, employee cost, selling & distributionexpenses and administrative expenses. As production increased, the raw materialconsumed cost increased and overall expenses of the company increased. 62 S .V. INSTITUTE OF MANAGEMENT
  63. 63. 6) RETURN ON SHAREHOLDER’S FUND6.1) Meaning:This ratio express the profit after tax in terms of the equity shareholder‟s funds. Thisratio is an important yardstick of performance for equity shareholder since itsindicates the return on the funds employed by them.6.2) Formula:Return On Shareholder’s Fund = Profit After Tax *100 Shareholder’s FundShareholder’s Fund = equity sh. Capital + reserves & surplus – fictitious assets6.3) Particular 2006 2007 2008 2009 2010 PAT(RS IN CRORES) 92.02 130.58 216.33 366.71 273.7 Shareholder‟s Fund(RS IN CRORES) 444.94 648.75 1459.97 1615.56 1859.85 Return On Shareholder‟s Fund(%) 20.68 20.13 14.82 22.70 14.726.4) Analysis:This ratio expresses the profit after tax in terms of the equity shareholder‟s funds. In05-06 the ratio was 20.68%. In 07-08 it decreased up to 14.82%. And in 09-10 itfurther decreased to 14.72%. Decreasing trend shows that this is not a good option forinvesting. Funds employed by the shareholder are not giving them sufficient return. 63 S .V. INSTITUTE OF MANAGEMENT
  64. 64. 7) RETURN ON TOTAL ASSETS7.1) Meaning:This ratio indicates relationship between profit after tax and total assets employed.Theprofitability of the firm is measured by establishing relation of net profit with the totalassets of the organization. This ratio indicates the efficiency of utilization of assets ingenerating revenue.7.2) Formula:Return On Total Assets = Profit After Tax *100 (Fixed assets+Inbvestments+Current assets)7.3) Particular 2006 2007 2008 2009 2010 PAT(RS IN CRORES) 92.02 130.58 216.33 366.71 273.7 Total Assets(RS IN CRORES) 1255.65 1652.68 3506.37 4080.33 4594.59 Return On Total Assets(%) 7.33 7.90 6.17 8.99 5.967.4) Analysis:This ratio indicates relationship between profit after tax and total assets employed.From 2006 to 2010 the ratio shows many fluctuations because total assets of thecompany was increasing but profits was not constant in last five years. 64 S .V. INSTITUTE OF MANAGEMENT
  65. 65. 8) RETURN ON CAPITAL EMPLOYED8.1) Meaning:This ratio shows relationship between profit after tax and total capital employed. Itindicates how effectively the operating assets are used in earning return.8.2) Formula:Return On Capital Employed = Profit After Tax *100 Total Capital EmployedTotal Capital Employed = share capital + reserves & surplus + secured loan8.3)Particular 2006 2007 2008 2009 2010PAT(RS IN CRORES) 92.02 130.58 216.33 366.71 273.7Total Capital Employed(RS INCRORES) 808.99 1156.87 2097.27 2407.72 2918.57Return On Total capitalEmployed(%) 11.37 11.29 10.31 15.23 9.388.4) Analysis:This ratio shows relationship between profit after tax and total capital employed. Inthis company, the return was highest in 2009 which indicates the company is able toearn good profits on its capital employed. The ratio in the year 2010 is bit low whichis not satisfactorily. 65 S .V. INSTITUTE OF MANAGEMENT
  66. 66. D) TURNOVER RATIOTurnover ratio involved a relationship between sales and assets. Turnover ratios arealso called activity ratios because they indicate the spend with which assets are beingconverted into sales. This ratio measures how effectively the firm employes itsresources. This ratio involves comparison between the level of sales and investment invarious accounts – inventories, debtors, fixed assets etc.In turnover ratio, following ratios are to be computed :1) Inventory Turnover Ratio2) Fixed Assets Turnover Ratio3) Working Capital Turnover Ratio4) Total Assets Turnover Ratio5) Net Worth Turnover Ratio6) Debtors Turnover Ratio 66 S .V. INSTITUTE OF MANAGEMENT
  67. 67. 1) INVENTORY TURNOVER RATIO1.1) Meaning:The inventory turnover ratio measures how many times a company‟s inventory hasbeen sold during the year. The higher the stock turnover rate or the lower the stockturnover period the better.1.2) Formula:Inventory Turnover Ratio = Cost Of Goods Sold Average InventoryAverage Inventory = opening stock + closing stock 21.3)Particular 2006 2007 2008 2009 2010COGS(Sales - GP) (RS IN CRORES) 707.99 914.76 1333.47 1479.35 1585.04Average Inventory(RS IN CRORES) 86.28 115.91 154.24 172.04 174.93Inventory Turnover Ratio(Times) 8.21 7.89 8.65 8.60 9.061.4) Analysis:The inventory turnover ratio measures how many times a company‟s inventory hasbeen sold during the year. In 05-06 inventory turnover ratio was 8.21 times that means8.21 times inventory was sold during the year that is good for the company. In 06-07this ratio slightly decreased from the previous year and that is 7.89 times theirinventory was decreasing. In 07-08 it was further increased up to 8.65 times and alsocost of goods sold increased in 07-08 is higher than previous year. It was highedt in2009-10 which means that the company is able to secure more sales. 67 S .V. INSTITUTE OF MANAGEMENT
  68. 68. 2)FIXED ASSETS TURNOVER RATIO2.1) Meaning:The relationship between net sales and fixed assets is known as fixed assets turnoverratio. The assets are used to generate sales. Hence, the company should utilize itsassets efficiency to maximize the amount of sales.2.2) Formula:Fixed Assets Turnover Ratio = Net Sales Net Fixed Assets2.3) Particular 2006 2007 2008 2009 2010 Net Sales(RS IN CRORES) 853.42 1117.76 1655.7 1883.41 2010.55 Net Fixed Assets(RS IN CRORES) 469.53 635.43 783.96 1221.29 1336.59 Fixed Assets Turnover Ratio(Times) 1.82 1.76 2.11 1.54 1.502.4) Analysis:The relationship between net sales and fixed assets is known as fixed assets turnoverratio. In 05-06 ratio was 1.82 times and in 2009-10 it was 1.50.Net sales wasincreasing in last five years. Net assets were also increased up to considerable extent.The management purchased new fixed assets because they had expanded theiroperation. In 06-07 assets were not effectively used so it results into slight decreasedin this ratio. 68 S .V. INSTITUTE OF MANAGEMENT