The document discusses the financial analysis methodology and provides an overview of West Coast Paper Mills (WCPM). It identifies issues like high raw material costs, depreciation rates, and foreign currency loans that contributed to WCPM posting a net loss in 2011-12 compared to profit the previous year. Suggestions include increasing current assets to improve liquidity, reducing costs, improving collection of debts, minimizing establishment costs, and acquiring more land for bamboo cultivation to source raw materials.

1. Presented by: Alfred Mascarenhas

2.  The Financial Analysis is the Methodological
Classification of data given in the financial
statements. The financial statements provide
a summarized view of the operation of a firm.
 It helps in obtaining a better understanding
about the financial position and the
performance of the firm.

3. Comparative Financial Statements:
 In these statements, figures of two or more
period are placed side by side to facilitate
comparison, which helps in studying the
trends in an enterprise.
Ratio Analysis
 Ratio analysis is defined as the systematic use
of ratios to interpret the financial statements
so that the strengths and weakness of firm
and the current financial condition can be
determined.

4.  The Company was promoted by Shri. Digvijay
Cement Company Limited Sikka, Gujarat state
in 1955. Originally the plant was designed to
manufacture 18000 MT per year of
writing, printing and packaging paper.
 It is incorporated under the Indian Companies
Act 1956, with its registration office in
Mumbai and later it was shifted to Dandeli.

5.  The Indian paper industry currently has a
turnover of over Rs. 30000 crores and
contributes over Rs. 3000 crores to the national
exchequer. Even more importantly it is providing
employment opportunities to over 1.5 million
people, mostly in rural areas.
 Indian paper industry has continued to upgrade
its capacities and technologies, in spite of huge
challenges like shortage of raw material, highly
capital intensive nature of the industry, threat of
cheaper imports from China, Indonesia etc.

6. Competitors of WCPM are
 Mysore Paper mills ltd, Bhadravati
 Ballarpur Paper mills ltd, Andhra Pradesh
 Seesai Paper mills ltd, Andhra Pradesh

7.  Wood free Writing & Printing Paper
 Wood free Offset Paper
 Security paper
 Accounts Book Paper
 Duplex Board

8.  Indian Aluminum Co. Ltd.
 State Bank of India, Bank of Baroda, Central
Bank of India, Syndicate Bank
 Canara Bank, Corporation Bank, Indian
Bank, Indian Overseas Bank, Standard
Chartered Bank, HSBC, etc.

9. Problem Identification
 The company posted gross profit of Rs.
158.66 Crores as against Rs. 189. 18 Crores
in the previous year – lower by Rs. 30.52
Crores (16%) whereas there was a net loss of
Rs. 33.56 Crores as against profit of Rs.
90.08 Crores in the previous year.

10. The net loss is due to following reasons;
 It is observed that the company has procured
10.31 lakhs MT of wood and bamboo as
against 6.89 lakh MT in the previous year,
 With the Company geared to source more
than 10 lakhs MT of raw material per annum
on sustained basis which is insufficient to
meet the requirements.
 Though there was shortage in the supply of
raw material the establishment cost remained
same.

11.  Increasing rates of wood due to competition
among the paper mills.
 Other reasons are hike in the price of fuel and
transportation cost.
 Change in method of calculation of
depreciation, resulting in higher depreciation
by Rs. 104.42 Crores.

12.  The company has reinstated Foreign Currency
Loans/External Commercial Borrowings of
USD 141.49 Million at the exchange rate
prevailing as on 31st March 2012.
 The “Thane” cyclone which hit coasts of
Tamilnadu and Pondicherry in December
2011 has had its own share of strains on the
supply side.

13.  Paper industry has been removed from Core
Sector for supply of coal by subsidiaries of
Coal India Ltd. This may increase rates of coal
substantially.
 The paper industry is one of the 18 highly
polluting categories of industries

14. CONTROLABLE UNCONTROLABLE
VARIABLES VARIABLES
 Electricity.  Competitors
 Raw material.  Instability of government
 Safety  Lack of adequate fund
 Technology  Inflation(fuel,power,
 Labor efficiency transportation)
 Production volume
 Quality of paper

15. Understanding the Relationship between
Controllable & Uncontrollable variables:-
 ELECTRICITY: Electricity is one of the controllable
variables in the west coast paper mill because
they use to have their own power plant in the
industry now they are taking it from HESCOM
were HESCOM is providing better price for the
industry. Production of Chipping and Pulping it
will take more electricity power so they have to
pay more taxes to Govt. and also the electricity
will be uncontrollable it may cause to short
circuit which might lead to fire.

16.  EMPLOYEES: In production of Chipping,
Pulping, Chemical Recovery, Paper Making it
requires well educated person with required
level of experience there will be a specific
period of training for the employees. The
company is providing more safety measures
for employees to work difficult situation.
Safety means avoiding the future unexpected
happenings. Globalisation will affect
employees because it will leads to job
hopping.

17.  To analyze the financial performance of the
company for the period 2007 to 2012
 To analyze the financial positions, overall
growth & stability of the Company.
 To analyze organization efficiency based on
profitability and liquidity ratios.

18. Secondary data:
 The secondary data has been collected from
the company, they include annual reports and
financial statements, balance sheet provided
by the company for the year 2007 to 2012

19. The study is limited to only five years of financial
statements.
The interpretations made are based on the data
available from the annual reports of the company.
The study assumes that the information gained by
interaction with the company people is true to their
knowledge.
Some of the department heads were not so
cooperative towards the answering of questions

20. Net Profit Ratio
 Formula: -
EAT
Net Profit Ratio = --------------- X 100
Net Sales

21. Particulars 2007-08 2008-09 2009-10 2010-11 2011-12
EAT 8,190.33 9,053.82 5,470.21 9,008.18 (3356.00)
Net Sales 58,322.71 61,975.14 62,390.71 1,06,473.00 1,30,517.00
Net profit 14.04 14.60 8.76 8.46 (2.57)
ratio

22. Net profit ratio
16
14.6
14 14.04
12
10
8.76 8.46
8
Ratio
6
4
2
0
2007-08 2008-09 2009-10 2010-11 2011-12
-2
-2.57
-4
Years

23. Findings
 The company’s liquidity position for the
current year is not healthy.
 Remarkable decline in the quick ratio of the
company for the present year.
 Return on capital employed, Return on
shareholder’s fund, Return on total fixed
assets is very low compare to past 4 years.

24.  The gross profit for the year 2011-12 is
decreased compared to previous year.
 For the present year 2011-12 the company
has posted net loss. The net loss is due to
non availability of sufficient raw
materials, hike in the price of fuel and
transportation cost, high rate of
depreciation, high labor turnover, higher
training cost, High amount of foreign
Currency Loans/External Commercial
Borrowings and the highly polluting nature of
the company.

25. Suggestion
 The company should concentrate on
increasing the current assets in order to have
a healthy liquidity position.
 Company should take right steps in
decreasing the depreciation rate and
maintenance charges.
 The company should take all possible steps
towards the collection of debts.
 It is favorable for the company to minimize
the establishment cost to earn more revenue.

26.  The company should stress to acquire more land in
addition to existing land for the plantation of
bamboos which is the main source of raw material
for production
 Right the company is in a position to get nearly
50% of the raw material requirement from the
bamboos already planted in the acquired land by
providing little source of income to the farmers
engaged in the said land.

27.  It is feasible to extend the existing
plantation land to cultivate the bamboos to
make it available the remaining raw material
required per annum.
 The company should take necessary steps
to get the other raw materials like coal etc
on cheaper basis to minimize transportation
cost, freight etc.