PREFACE
As a part of the course curriculum, the first year M.B.A. students are required to
prepare a financial project report. The objective behind preparing this project report is
to relate the management subjects taught in the classroom to their practical
application.

The preparation of this project report is based on financial analysis of annual reports
of 5 consecutive years for a public limited company using Ratio Analysis, Common
Size Statements and other financial tools.

The scope of the project report is limited to the study of the financial position of the
company 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, which
may please be excused.

1
S .V. INSTITUTE OF MANAGEMENT

ACKNOWLEDGEMENT
Through this Acknowledgement we express our sincere gratitude towards all those
people who have helped us in the preparation of the project, which has been a learning
experience.

We would like to thank the Director, Prof. Bhavin Pandya, the faculty, the computer
lab 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 who
guided us throughout the project and gave us valuable suggestions and
encouragement.

“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 this
beautiful World.

Purvi Rathi

Anushree Karani
(MBA - 1)

2

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.

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CONTENT

Chapter 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

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CHAPTER 1:
INTRODUCTION

5

A.BRIEF OVERVIEW OF THE INDUSTRY:

Plastics, is one of the fastest growing industries in India. Plastics have a vital role to
play. Indian Plastics Industry is expanding at a phenomenal pace. The plastic
industry of India has a big market potentiality and is gradually prospering. This
potentiality of the market will surely actuate the entrepreneurs to invest in this
industry. Entrepreneurs are trying to provide high quality plastic products, so that it
becomes a booming industry.
Many companies from various sectors such as automobiles, electronics,
telecommunications, food processing, packing, healthcare etc. have set-up large
manufacturing bases in India. Therefore, demand for plastics is rapidly increasing and
soon 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 grow
side by side. One of such growing industry is petrochemical industry. Both these
industries are reciprocal to each other. The petrochemical industry facilitates the
plastic industry to produce plastic products that will meet the domestic demand as
well 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 a
wide range of plastic products through the process of injection moulding, then blow
moulding, extrusion, and finally calendaring.
End user markets: These are the plastic products basically used for domestic
purposes. 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 plastic
bearings, plastic bellows, plastic belting etc. Some other industries, where plastic
materials 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 boost
the plastic industry by joint venturing, foreign investments.

PROSPECT OF PLASTIC INDUSTRY INDIA:
Plastic industry India is symbolizing a promising industry and at the same time
creating new employment opportunities for the people of India. The per capita
consumption of plastic products in India is growing and is moving towards 8% GDP
growth.

6

B. HISTORY OF THE 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.
They have also created extensive finishing, assembling, metal fabrication and
concrete products facilities. Combination of such varied capabilities along with their
state-of-the-art design and tool room facilities enables them to give vast array of
products and solutions.

Established in India in 1931, Sintex has a proven track record of pioneering
innovative concepts in plastics and textile sectors in India and an uninterrupted 77
years of dividend payment to its shareholders. They strive to develop products that no
one else had made before.

Pioneers in the development of innovation in building products, custom moulding and
textiles, the Sintex group creates best in class products that deliver better utility and
value to its customers.

It is Sintex‟s quest to deliver quality products at affordable prices. Recently, they have
even expanded their global footprints by acquisitions to offer total solutions to their
customers.

Their application driven Research & Development team is constantly on the look-out to
come up with products that can be made by integrating different materials with Custom
Moulded solutions.

7

HISTORY OF SINTEX INDUSTRY LIMITED:

1931-74
• Incorporated as The Bharat Vijay Mills Limited in June 1931
• Established composite textile mill in Kalol, Gujarat

1975-90
• 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 business

2000-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

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

D. PHILOSOPHY/MOTTO/OBJECTIVES OF THE COMPANY:

Objectives are goals or aims which the management wishes the organisation to
achieve. Any industry first has to decide objectives. Objectives are helpful to achieve
target 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 is
generally believed that business activity is carried out only for profit. To a certain
extent it has been found that successful business cannot afford to keep profit as its
sole objective. So they have other objectives which are secondary objective which are
equally important.

OBJECTIVE OF SINTEX INDUSTRIES LIMITED:

Sintex Industries Limited is a multi-faceted activity industry. They are doing flexible
thinking 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 while
at 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 quality
excellence 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 and
technical innovation, customer orientation and a focus on cost effectiveness,
quality and services”.

10

ORGANISATIONAL
DESIGN

11

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
 B.sc from Bombay University

 More than 5 decades of work experience

Vice-chairman : Arun P Patel
 B.sc 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

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 related

III.) ORGANISATIONAL STRUCTURE AND CHART:

13

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

PRODUCTION

15

I.) PLANT LOCATION:

The plant of Sintex Industry Ltd. is located in Kalol (N.Gujarat) near Gandhinagar.
The address of the plant location is as under.

ADDRESS:
SINTEX INDUSTRIES LIMITED
Plastic Division
NEAR SEVEN GARNALA
KALOL (N. GUJARAT) 382 721. INDIA
Phone: 253500, Fax: (02764) 253800
Email: plastic@sintex.co.in

HEAD OFFICE OF SINTEX INDUSTRY LIMITED

BRANCHES OF SINTEX INDUSTRIES LIMITED
AHMEDABAD BANGALORE BHOPAL
CHANDIGARH CHENNAI JAIPUR
KOLKATA LUCKNOW MUMBAI
NEW DELHI PUNE RANCHI
SECUNDERABAD TRIVANDRUM

16

FACTORS AFFECTING PLANT LOCATION:
There are so many factors affecting plant location. Factors are categorized into two
parts i.e. primary data and secondary data.

Primary Factors includes-

RAW-MATERIAL: The basic raw material used by Sintex Industry Ltd. is powder
which is in granule form. The major suppliers of raw material for Sintex are
Reliance, Haldia and IPCL.

MARKET: Sintex is located in Kalol near Gandhinagar which is a good place for
manufacturing products. Sintex is a national player so it has a network in internal as
well 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 a
village. So the unskilled labourers are easily available over there which is beneficial
for the industry as they are employed at very low wages.

There are Secondary Factors that may affect the industry which are.....

Land

Climate

Political and strategically considerations

17

II.) PRODUCT PORTFOLIO:

Sintex leads in meaningful innovations and solutions. With their multifarious
capabilities in the field of plastics, metals, concrete etc. they have created many path
breaking products. They have an excellent design, engineering, marketing and
manufacturing set up to offer many standard and custom products and solutions for
satisfying 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 Name
Prefabs 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 Drums
Electrical 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 Plates
Consumer 1. Multi Bins

18

PICTURES OF PRODUCTS MANUFACTURED BY SINTEX INDUSTRY
LIMITED:

BUILDING
AND
CONSTRUCTI
ON

PREFABRICATED
BUILDING

ELECTRICAL
ENGINEERING

INTERIO
RS

INDUSTRI
AL

CONSUM
ER

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CUSTOM
MOULDI
NG

PALLE
TS

OPEN MOUTH
PACKAGING
DRUMS

INSULATED
BOXES

SINTEX WATER
TANKS

CONTINOUS
SANDWICH PANEL

20

MARKETING

21

4 P’s OF MARKETING.
Marketing is a completely separate function that helps position products and services
correctly 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 these
components to arrive at a mix that the customer will prefer over competitors

Diagram showing 4 P‟s of management:

PRODUCT:

The product is the full bundle of goods and services offered to the customer. This
includes the appearance, functionality, and support or non-tangibles the customer will
receive.

The plastic segment of Sintex Industry Ltd. produces a wide range of plastic products
that 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 products
that Sintex produces are as under:
SMC Panel Tanks
Prefabs for Anganwadis

Wall paneling and false ceiling

Septic Tanks

Primary and integrated waste collection

FRP Underground Water Storage Tanks

Home and office furniture

The above mentioned is a list of some products manufactured by the Sintex Industry
and products are already shown in the portion of product portfolio.

22

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 to
market situation and the prices are fixed at a reasonable price so that everyone can
afford 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 the
internet or telephone? These all questions involves “place”. Place means distribution
network 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 markets
including countries like France, Germany and USA.

PROMOTION:

Promotions are activities such as advertising, personal selling, and sales promotion
which 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

II.) TARGET CUSTOMERS

Customer is the king of the market. Today customers are harder to please, they are
smarter, more price conscious, more demanding, etc. Company has to spend
considerable time and resources searching for new customers. For these company
creates ads and places them in media, sends direct mail, etc. Market is more
customers oriented. Market is operated according to customer‟s tastes and
preferences. 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 customers
of 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 Paper

III.) PLACE: DISTRIBUTION NETWORK:

A set of interdependent organisations involved in the process of making a product or
service 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 with
Western and Southern part of the country. They have their presence in 9 countries
across 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 or
decreases their prices if other stores having the same product.
Sintex is the pioneer for manufacturing of plastic products. They are producing high
quality products at affordable price so that the consumers are happy with the products.

24

V.) PROMOTIONAL AND ADVERTISING CAMPAIGN:

Advertising and promotions is bringing a service to the attention of potential and
current customers. Advertising and promotions are best carried out by implementing
advertising and promotions plan. The goals of the plan should depend very much on
the overall goals and strategies of the organization.
Sintex is promoting cost savings, new products and new ideas. Sintex promotes
through various advertisements, news papers, various websites, campus recruitment,
etc.

VI.) COMPETITORS:

Competitors are the other business entities that compete for resources as well as
market. They offer substitute which attract our present customers. Competition may
be direct and indirect. Competition shapes business. A study of the competitive
scenario 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 Paper

VII.) EXPORTS:
Sintex is an international player. They have their presence in 9 countries across 4
continents. Sintex has a strong presence in the European, American, African, and
Asian markets including countries like France, Germany and USA.

25

PERSONNEL

26

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

CHAPTER 2:
COMPARATIVE BALANCE
SHEET AND ANALYSIS OF
BALANCE SHEET

28

COMPARATIVE BALANCE SHEET
PARTICALAR 2006 2007 2008 2009 2010
(RS IN CRORES)
SOURCES OF FUNDS:
Share Capital 19.73 22.19 27.10 27.10 27.10
Share Warrants & Outstandings 5.41 0.00 50.53 12.00 22.27
Total Reserves 429.73 628.68 1434.02 1588.63 1832.75
Shareholder's Funds 454.87 650.87 1511.65 1627.73 1882.12
Secured Loans 359.53 506.00 636.15 791.99 1058.72
Unsecured Loans 223.13 172.26 900.78 1146.37 1115.65
Total Debts 582.66 678.26 1536.93 1938.36 2174.37
Total Liabilities 1037.53 1329.13 3048.58 3566.09 4056.49
APPLICATION OF FUNDS :
Gross Block 674.96 881.85 1079.02 1575.11 1773.64
Less: Accumulated Depreciation 205.43 246.42 295.06 353.82 437.05
Net Block 469.53 635.43 783.96 1221.29 1336.59
Capital Work in Progress 19.02 38.79 242.68 197.38 136.75
Investments 156.83 206.54 429.77 637.89 807.94
Current Assets, Loans & Advances
Inventories 86.28 145.54 162.93 181.15 168.70
Sundry Debtors 150.67 213.04 476.70 495.80 677.06
Cash and Bank 355.35 385.30 1325.87 1099.47 815.04
Other Current Assets 0.00 0.00 0.00
Loans and Advances 36.99 66.83 327.14 444.73 789.26
Total Current Assets 629.29 810.71 2292.64 2221.15 2450.06
Less: Current Liabilities and Provisions
Current Liabilities 163.98 254.79 312.43 289.79 228.63
Provisions 15.73 37.30 289.74 291.31 294.07
Total Current Liabilities 179.71 292.09 602.17 581.10 522.70
Net Current Assets 449.59 518.62 1690.47 1640.05 1927.36
Miscellaneous Expenses not written off 4.52 2.12 1.15 0.17
Deferred Tax Assets / Liabilities -61.95 -72.37 -99.45 -130.69 -152.15
Total Assets 1037.53 1329.13 3048.58 3566.09 4056.49
Contingent Liabilities 26.65 304.10 317.82 247.31
Book Value 45.10 58.47 107.75 119.23 137.26
Adjusted Book Value 22.55 29.24 53.87 59.61 68.63

29

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

CHAPTER 3:
COMPARATIVE PROFIT AND LOSS
ACCOUNT AND ANALYSIS OF
PROFIT AND LOSS ACCOUNT

31

COMPARATIVE PROFIT & LOSS ACCOUNT

PARTICULAR 2006 2007 2008 2009 2010
(RS IN CRORES)
INCOME :
Gross Sales 913.98 1212.80 1790.29 1982.04 2103.56
Less: Sales Returns
Less: Excise Duty 60.56 95.04 134.59 98.63 93.01
Net Sales 853.42 1117.76 1655.70 1883.41 2010.55
EXPENDITURE :
Increase/Decrease in Stock 6.89 -37.47 -20.76 -20.91 14.01
Raw Material Consumed 510.54 695.40 1025.08 1159.22 1272.89
Power & Fuel Cost 34.47 46.63 58.79 70.80 59.86
Employee Cost 32.70 43.17 57.69 70.82 77.44
Other Manufacturing Expenses 58.70 75.56 94.15 93.75 104.17
General and Administration Expenses 41.88 55.60 71.78 72.63 68.43
Selling and Distribution Expenses 20.80 20.25 24.01 30.72 32.98
Miscellaneous Expenses 3.17 1.33 1.04 33.08 0.85
Less: Expenses Capitalised
Total Expenditure 709.14 900.47 1311.78 1510.11 1630.63
Operating Profit (Excl OI) 144.29 217.29 343.92 373.30 379.92
Other Income 29.79 26.70 44.56 94.73 96.91
Operating Profit 174.08 243.99 388.48 468.03 476.83
Interest 29.09 40.99 56.25 63.97 51.32
PBDT 144.99 203.00 332.23 404.06 425.51
Depreciation 30.68 41.47 51.70 62.40 84.03
Profit Before Taxation & Exceptional Items 114.30 161.53 280.53 341.66 341.48
Profit Before Tax 114.30 161.53 280.53 341.66 341.48
Provision for Tax 22.29 30.95 64.20 74.95 67.78
Profit After Tax 92.02 130.58 216.33 266.71 273.70
Adjustments to PAT
Profit Balance B/F 110.88 177.80 280.80 456.16 674.17
Appropriations 202.90 308.38 497.13 722.87 947.87
Equity Dividend % 44.00 48.00 50.00 55.00 60.00
Earnings Per Share 9.33 11.77 15.97 19.68 20.20
Adjusted EPS 4.66 5.88 7.98 9.84 10.10

32

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

CHAPTER 4:
COMMON SIZE
STATEMENTS

34

COMMON SIZE STATEMENT OF BALANCE
SHEET

PARTICULARS 2006 2007 2008 2009 2010
(RS IN CRORES)
SOURCES OF FUNDS:
Share Capital 1.90 1.67 0.89 0.76 0.67
Total Reserves 41.42 47.30 47.04 44.55 45.18
Secured Loans 34.65 38.07 20.87 22.21 26.10
Unsecured Loans 21.51 12.96 29.55 32.15 27.50
Total Debts 56.16 51.03 50.41 54.36 53.60
Total Liabilities 100 100 100 100 100
Gross Block 65.05 66.35 35.39 44.17 43.72
Less: Impairment of Assets 0.00 0.00 0.00 0.00 0.00
Net Block 45.25 47.81 25.72 34.25 32.95
Lease Adjustment A/c 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
Investments 15.12 15.54 14.10 17.89 19.92
Current Assets, Loans & Advances 0.00 0.00 0.00 0.00 0.00
Inventories 8.32 10.95 5.34 5.08 4.16
Sundry Debtors 14.52 16.03 15.64 13.90 16.69
Cash and Bank 34.25 28.99 43.49 30.83 20.09
Other Current Assets 0.00 0.00 0.00 0.00 0.00
Less: Current Liabilities and
Provisions 0.00 0.00 0.00 0.00 0.00
Provisions 1.52 2.81 9.50 8.17 7.25
Miscellaneous Expenses not written
off 0.44 0.16 0.04 0.00 0.00
Deferred Tax Assets / Liabilities -5.97 -5.44 -3.26 -3.66 -3.75
Total Assets 100 100 100 100 100

35

Application of Funds

36

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

COMMON SIZE STATEMENT OF PROFIT AND
LOSS ACCOUNT
PARTICULARS 2006 2007 2008 2009 2010
(RS IN CRORES)
INCOME :
Gross Sales 104.63 105.24 108.13 108.50 107.10
Less: Inter divisional transfers 0.00 0.00 0.00 0.00 0.00
Less: Sales Returns 0.00 0.00 0.00 0.00 0.00
Less: Excise Duty 4.63 5.24 8.13 8.50 7.10
Net Sales 100.00 100 100 100 100
EXPENDITURE :
Increase/Decrease in Stock 0.70 -0.06 -1.25 -3.35 0.81
Raw Material Consumed 63.31 3.22 61.91 62.21 59.82
Power & Fuel Cost 2.98 0.20 3.55 4.17 4.04
Employee Cost 3.85 0.20 3.48 3.86 3.83
Other Manufacturing Expenses 5.18 0.26 5.69 6.76 6.88
General and Administration Expenses 3.40 0.20 4.34 4.97 4.91
Selling and Distribution Expenses 1.64 0.09 1.45 1.81 2.44
Miscellaneous Expenses 0.04 0.09 0.06 0.12 0.37
Less: Expenses Capitalised 0.00 0.00 0.00 0.00 0.00
Total Expenditure 81.10 4.20 79.23 80.56 83.09
Operating Profit (Excl OI) 18.90 1.04 20.77 19.44 16.91
Other Income 4.82 0.26 2.69 2.39 3.49
Operating Profit 23.72 1.30 23.46 21.83 20.40
Interest 2.55 0.18 3.40 3.67 3.41
PBDT 21.16 1.12 20.07 18.16 16.99
Depreciation 4.18 0.17 3.12 3.71 3.60
Profit Before Taxation & Exceptional Items 16.98 0.95 16.94 14.45 13.39
Exceptional Income / Expenses 0.00 0.00 0.00 0.00 0.00
Provision for Tax 3.37 0.21 3.88 2.77 2.61
Profit After Tax 13.61 0.74 13.07 11.68 10.78

38

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

CHAPTER 5:
TREND
ANALYSIS

40

TREND ANALYSIS OF BALANCE SHEET

PARTICALAR 2006 2007 2008 2009 2010
(RS IN CRORES)
SOURCES OF FUNDS:
Share Capital 100.00 112.46 137.34 137.34 137.34
Total Reserves 100.00 146.30 333.70 369.68 426.48
Secured Loans 100.00 140.74 176.94 220.29 294.48
Unsecured Loans 100.00 77.20 403.70 513.77 500.00
Total Debts 100.00 116.41 263.78 332.68 373.18
Total Liabilities 100.00 128.11 293.83 343.71 390.98
Gross Block 100.00 130.65 159.86 233.36 262.78
Net Block 100.00 135.33 166.97 260.11 284.67
Investments 100.00 131.70 274.04 406.75 515.18
Current Assets, Loans & Advances
Inventories 100.00 168.68 188.83 209.95 195.52
Sundry Debtors 100.00 141.39 316.38 329.06 449.36
Cash and Bank 100.00 108.43 373.12 309.41 229.37
Other Current Assets
Less: Current Liabilities and
Provisions
Provisions 100.00 237.08 1841.62 1851.60 1869.14
Miscellaneous Expenses not written
off 100.00 46.95 25.47 3.76 0.00
Deferred Tax Assets / Liabilities 100.00 116.82 160.53 210.96 245.60
Total Assets 100.00 128.11 293.83 343.71 390.98
Contingent Liabilities 100.00
Book Value 100.00 129.65 238.91 264.37 304.34
Adjusted Book Value 100.00 129.65 238.91 264.37 304.34

41

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

TREND ANALYSIS OF PROFIT &LOSS
ACCOUNT

PARTICULAR 2006 2007 2008 2009 2010
(((RS IN CRORES)(RS)IN CRORES
INCOME :
Gross Sales 100 132.69 195.88 216.86 230.15
Less: Sales Returns 100
Less: Excise Duty 100 156.94 222.24 162.86 153.58
Net Sales 100 130.97 194.01 220.69 235.59
EXPENDITURE :
Increase/Decrease in Stock 100 -543.99 -301.39 -303.57 203.40
Raw Material Consumed 100 136.21 200.78 227.06 249.32
Power & Fuel Cost 100 135.28 170.56 205.41 173.67
Employee Cost 100 132.01 176.41 216.57 236.81
Other Manufacturing Expenses 100 128.72 160.39 159.71 177.46
General and Administration Expenses 100 132.76 171.40 173.43 163.40
Selling and Distribution Expenses 100 97.38 115.46 147.72 158.59
Miscellaneous Expenses 100 42.00 32.84 1044.69 26.84
Total Expenditure 100 126.98 184.98 212.95 229.95
Operating Profit (Excl OI) 100 150.59 238.35 258.72 263.30
Other Income 100 89.63 149.58 318.00 325.32
Operating Profit 100 140.16 223.16 268.86 273.92
Interest 100 140.89 193.35 219.88 176.40
PBDT 100 140.01 229.15 278.69 293.48
Depreciation 100 135.15 168.49 203.36 273.85
Profit Before Taxation & Exceptional Items 100 141.32 245.43 298.91 298.75
PBDT 100 140.01 229.15 278.69 293.48
Provision for Tax 100 138.88 288.09 336.32 304.15
Profit After Tax 100 141.91 235.10 289.85 297.45
Adjustments to PAT
Profit Balance B/F 100 160.35 253.24 411.40 608.01
Appropriations 100 151.99 245.02 356.27 467.17
Equity Dividend % 100 109.09 113.64 125.00 136.36
Earnings Per Share 100 126.19 171.18 211.04 216.57
Adjusted EPS 100 126.19 171.18 211.04 216.57

43

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

 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

CASH FLOW STATEMENT
PARTICULARS Mar-10 Mar-09 Mar-08 Mar-07 Mar-06
(RS IN CRORES)
Adjustment 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 2.73
Changes 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 17.50
Cash 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 -12.09
Cash From Operating Activities -280.91 220.31 40.44 150.03 152.48
Cash 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 -0.85
Cash 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 Share
Capital 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 -45.62
Net Cash Inflow / Outflow -139.81 -611.01 1083.56 63.37 276.09
Opening Cash & Cash Equivalents 1046.50 1657.51 573.95 510.58 234.49
Closing Cash & Cash Equivalent 906.69 1046.50 1657.51 573.95 510.58

46

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

CHAPTER 7:
RATIO ANALYSIS

48

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 forms
a) Pure ratio which are arrived at by the simple division of one number by another, e.g.,
current ratio to current liability ratio 2:1
b) 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

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 maturing
short- term obligations. It refers to the ability to pay in cash, the obligations that are
due.

The corporate liquidity has two dimensions that are quantitative and qualitative
concepts. The quantitative aspects includes the quantum, structure and utilization of
liquid assets and in the qualitative aspect, it is the ability to meet all present and
potential demands on cash from any source in a manner that minimizes cost and
maximizes the value of the firm.

Excess liquidity results into:
1) lower profitability
2) Deterioration in managerial efficiency
3) Ideal cash fund giving lower returns
4) Too liberal credit and dividend policies

Too little liquidity result into:
1) Reduce rate of return
2) Missing of profitable business opportunities

The important ratio measuring short-term solvency are :
1) Current ratio

2) Quick ratio

50

1)CURRENT RATIO

1.1) Meaning:

Current ratio measures relationship between current assets and current liabilities. This
ratio measures the solvency of the company in the short-term. Current assets are those
which can be converted into cash within a year. Current liabilities and provisions are
those liabilities that are payable within a year.

1.2) Formula:

Current ratio =Current Assets
Current Liabilities

Where current assets include inventories, sundry debtors, cash & bank balances
etc. 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 4.69:1

1.4) Analysis:

The ideal current ratio is 2:1. When current ratio is double than current liabilities the
firm has no difficulties in paying short term obligations on time. From the above
table, the current ratio is increasing. This may be bcause the inventory of the company
ahs 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 definitely
weak

51

2) QUICK RATIO

2.1) Meaning:

Quick ratio is used as a measure of the company‟s ability to meet its current
obligations. The quick ratio establishes a relationship between quick assets and
current liabilities. Here inventory is deducted because rupee of cash is more readily
available to meet current obligations than a rupee of inventory.

2.2) Formula:

Quick ratio = Current Assets - Inventory
Current Liabilities

2.3)

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 4.36:1

2.4) Analysis:

The ideal quick ratio is 1:1. From the table it is clear that quick ratio for all the 5 years
is more than the ideal ratio. This indicates that the company‟s liquidity position is
good and it has enough cash resources on hand to meet its urgent cash requirements

52

B) LEVERAGE RATIO

The leverage ratio may be defined as financial ratios which throw light on the long
term solvency of a firm as reflected in its ability to assure the long term lenders.

There are two aspect of long term solvency

1) 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 its
ability to meet all its liabilities, including those not currently payable. Thus long term
solvency of the firm can be examined by using the leverage ratios.

There are three type of leverage ratios :

1) Debt – Equity ratio

2) Capital Employed to Net Worth ratio

3) Fixed Interest Coverage ratio

53

1) DEBT-EQUITY RATIO

1.1) 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 of
the long term financial solvency of a firm. This relationship is shown by the debt
equity 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 1.17

1.4) 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 not
taking advantage of trading on equity. Debt equity ratio of 2:1 is accepted norm for
financial institutions for giving loans for projects. In this company debt equity ratio is
very low than required once. In 05-06 it was 1.31, in 09-10 it was 1.17. The main
reason behind this is that therre are no preference shares and debentures.
Capital structure of the company does not include debentures and pref. shares so
company loses advantage. Ultimately ratio is very low so company is low geared one.

54

2) CAPITAL EMPLOYED TO NET WORTH RATIO

2.1) Meaning:

This ratio establishes a relationship between how much capital employed in the
company and the net worth. This ratio is found out to know how much capital is
employed to net worth.

Capital employed including share capital, reserves and surplus and long term loans
and net worth includes share capital and reserves and surplus.

2.2) Formula:

CE to NW Ratio = Capital Employed
Net Worth inclu. Pref. share capital

Capital Employed = share capital + reserves & surplus + secured Loans –
fictitious Assets
Net 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 1.57

2.4) Analysis:

This ratio is found out to know how much capital is employed to net worth. In this
company in 05-06 capital employed ratio was 1.81 that means company‟s total
capital 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 was
1.49 & 1.57 respectively. Long term loans are not much employed so this ratio is near
to one and it remains same for last three years.

55

3) FIXED INTEREST COVERAGE RATIO

3.1) Meaning:

This ratio measures the debt serving capacity of a firm insofar as fixed interest on
long term loan is concerned. This ratio can be determined by dividing the operating
profits by the fixed interest charges on loan.

3.2) Formula:

Fixed Interest Coverage Ratio = Earning Before Interest And Taxes
Interest

3.3)

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 9.29

3.4) Analysis:

This ratio measures the debt serving capacity of a firm insofar as fixed interest on
long term loan is concerned. From the table, it is clear that this ratio shows increasing
trend. It means that the financial strength of the company is sound because it has
greater ability to handle fixed charge liabilities.

56

C) PROFITABILITY RATIO

The purpose of study and analysis of profitability ratios are to help assessing the
adequacy of profits earned by the company and also to discover whether profitability
is increasing or declining. The profitability of the firm is the net result of a large
number of policies and decisions. The profitability ratios show the combined effects
of 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 Ratio

2) Net Profit Ratio

3) Operating Profit Ratio

4) Operating Ratio

5) Expenses Ratio

6) Return On Shareholder’s Fund

7) Return On Total Assets

8) Return On Capital Employed

57

1) GROSS PROFIT RATIO

1.1) Meaning:

The ratio measures the gross profit margin on the total net sales made by the
company. The gross profit represents the excess of sales proceeds during the period
under 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 Sales

1.3)

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 21.16

Cost Of Goods Sold = Opening Stock+ direct exp. – closing stock
Net sales = sales – other income

1.4) Analysis:

The ratio measures the gross profit margin on the total net sales made by the
company. In 05-06 this ratio was 17.04% which is low because near to 30% is good
for the company. From 06-07 to 09-10 it shows increasing trend.

58

2) NET PROFIT RATIO

2.1) Meaning:

This ratio establishes relationship between net profit and sales of firm. The ratio is
designed to focus attention on the net profit margin arising from the business
operations business after operating expenses, interest & tax is deducted.

2.2) Formula:

Net Profit Ratio = Profit After Tax *100
Net Sales

2.3)

Particular 2006 2007 2008 2009 2010
PAT(RS IN CRORES) 92.02 130.58 216.33 366.71 273.7
Net Profit Ratio(%) 10.78 11.68 13.07 19.47 13.61

2.4) Analysis:

This ratio establishes relationship between net profit and sales of firm. In 05-06 the
ratio was 10.78% which is not good for the company. In 06-07 it slightly increased
and it was 11.68%. As compare to both years in 07-08 it further increased and it was
13.07%. The ratio was highest in 08-09 which was 19.47%

59

3) OPERATING PROFIT RATIO

3.1) Meaning:

This ratio measures a relationship between operating profit and net sales of the
company. It is focus on profit arising from business operations before interest & tax is
deducted and after the deduction of other incomes.

3.2) Formula:

Operating Profit Ratio = (Earning Before Interest & Tax – Other Income)
Net sales

3.3)

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
Operating Profit Ratio 0.17 0.19 0.21 0.20 0.19

3.4) Analysis:

This ratio measures a relationship between operating profit and net sales of the
company. In 05-06 Operating Profit Ratio was 0.17 which was very low. As compare
to previous year in 06-07 it was 0.19 and it was same in 2010 which is slightly
increasing. Though sales were showing increasing trend but operating profit was
fluctuating.

60

4) OPERATING RATIO

4.1) 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 Ratio

4.3)

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 0.81

4.4) 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 say
that operating ratio is almost constant in last 5 years and it is high. This is less
favourable because it would have small margin to cover interest, income tax,
dividends and reserves.

61

5) EXPENSE RATIO

5.1) Meaning:

This ratio measures a relationship between total expense incurred by the company and
net sales. It shows that how much company is expending for selling its product.

5.2) Formula:

Expense Ratio = Total Expenses *100
Net Sales

5.3)

Particular 2006 2007 2008 2009 2010

Total Expenses(RS IN CRORES) 709.14 900.47 1311.78 1510.11 1630.63


Expenses Ratio(%) 83.09 80.56 79.23 80.18 81.10

5.4) Analysis:
This ratio measures a relationship between total expense incurred by the company and
net sales. Total expenditure shows small fluctuations since last 5 years. 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.

62

6) RETURN ON SHAREHOLDER’S FUND

6.1) Meaning:

This ratio express the profit after tax in terms of the equity shareholder‟s funds. This
ratio is an important yardstick of performance for equity shareholder since its
indicates the return on the funds employed by them.

6.2) Formula:

Return On Shareholder’s Fund = Profit After Tax *100
Shareholder’s Fund

Shareholder’s Fund = equity sh. Capital + reserves & surplus – fictitious assets

6.3)

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 14.72

6.4) Analysis:
This ratio expresses the profit after tax in terms of the equity shareholder‟s funds. In
05-06 the ratio was 20.68%. In 07-08 it decreased up to 14.82%. And in 09-10 it
further decreased to 14.72%. Decreasing trend shows that this is not a good option for
investing. Funds employed by the shareholder are not giving them sufficient return.

63

7) RETURN ON TOTAL ASSETS

7.1) Meaning:

This ratio indicates relationship between profit after tax and total assets employed.The
profitability of the firm is measured by establishing relation of net profit with the total
assets of the organization. This ratio indicates the efficiency of utilization of assets in
generating 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 5.96

7.4) 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 the
company was increasing but profits was not constant in last five years.

64

8) RETURN ON CAPITAL EMPLOYED

8.1) Meaning:

This ratio shows relationship between profit after tax and total capital employed. It
indicates how effectively the operating assets are used in earning return.

8.2) Formula:

Return On Capital Employed = Profit After Tax *100
Total Capital Employed

Total Capital Employed = share capital + reserves & surplus + secured loan

8.3)

Particular 2006 2007 2008 2009 2010
PAT(RS IN CRORES) 92.02 130.58 216.33 366.71 273.7
Total Capital Employed(RS IN
CRORES) 808.99 1156.87 2097.27 2407.72 2918.57
Return On Total capital
Employed(%) 11.37 11.29 10.31 15.23 9.38

8.4) Analysis:
This ratio shows relationship between profit after tax and total capital employed. In
this company, the return was highest in 2009 which indicates the company is able to
earn good profits on its capital employed. The ratio in the year 2010 is bit low which
is not satisfactorily.

65

D) TURNOVER RATIO

Turnover ratio involved a relationship between sales and assets. Turnover ratios are
also called activity ratios because they indicate the spend with which assets are being
converted into sales. This ratio measures how effectively the firm employes its
resources. This ratio involves comparison between the level of sales and investment in
various accounts – inventories, debtors, fixed assets etc.

In turnover ratio, following ratios are to be computed :

1) Inventory Turnover Ratio

2) Fixed Assets Turnover Ratio

3) Working Capital Turnover Ratio

4) Total Assets Turnover Ratio

5) Net Worth Turnover Ratio

6) Debtors Turnover Ratio

66

1) INVENTORY TURNOVER RATIO

1.1) Meaning:

The inventory turnover ratio measures how many times a company‟s inventory has
been sold during the year. The higher the stock turnover rate or the lower the stock
turnover period the better.

1.2) Formula:

Inventory Turnover Ratio = Cost Of Goods Sold
Average Inventory

Average Inventory = opening stock + closing stock
2

1.3)

Particular 2006 2007 2008 2009 2010
COGS(Sales - GP) (RS IN CRORES) 707.99 914.76 1333.47 1479.35 1585.04
Average Inventory(RS IN CRORES) 86.28 115.91 154.24 172.04 174.93
Inventory Turnover Ratio(Times) 8.21 7.89 8.65 8.60 9.06

1.4) Analysis:
The inventory turnover ratio measures how many times a company‟s inventory has
been sold during the year. In 05-06 inventory turnover ratio was 8.21 times that means
8.21 times inventory was sold during the year that is good for the company. In 06-07
this ratio slightly decreased from the previous year and that is 7.89 times their
inventory was decreasing. In 07-08 it was further increased up to 8.65 times and also
cost of goods sold increased in 07-08 is higher than previous year. It was highedt in
2009-10 which means that the company is able to secure more sales.

67

2)FIXED ASSETS TURNOVER RATIO

2.1) Meaning:

The relationship between net sales and fixed assets is known as fixed assets turnover
ratio. The assets are used to generate sales. Hence, the company should utilize its
assets efficiency to maximize the amount of sales.

2.2) Formula:

Fixed Assets Turnover Ratio = Net Sales
Net Fixed Assets

2.3)

Particular 2006 2007 2008 2009 2010
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 1.50

2.4) Analysis:
The relationship between net sales and fixed assets is known as fixed assets turnover
ratio. In 05-06 ratio was 1.82 times and in 2009-10 it was 1.50.Net sales was
increasing in last five years. Net assets were also increased up to considerable extent.
The management purchased new fixed assets because they had expanded their
operation. In 06-07 assets were not effectively used so it results into slight decreased
in this ratio.

68

3)WORKING CAPITAL TURNOVER RATIO

3.1) Meaning:

This ratio indicates the extent of working capital turned over in achieving sales of the
firm.
Working capital is difference between current assets and current liability of the
company.

3.2) Formula:

Working Capital Turnover Ratio = Net Sales
Net Working Capital

Net Working Capital = current assets – current liability

3.3)

Particular 2006 2007 2008 2009 2010
Net Working Capital(RS IN
CRORES) 449.59 518.62 1690.47 1640.05 1927.36
Working Capital Turnover
Ratio(Times) 1.90 2.16 0.98 1.15 1.04

3.4) Analysis:

This ratio indicates the extent of working capital turned over in achieving sales of the
firm. This ratio was highest in 2006-07 and it was lowest in 2007-08.

69

4)TOTAL ASSETS TURNOVER RATIO

4.1) Meaning:

This ratio establish a relationship between net sales and total assets. This ratio shows
firm‟s ability in generating sales from all financial resources commited to total assets.

The assets are used to generate sales for a firm. Hence, the company should utilize its
assets efficiently to maximize the amount of sales.

4.2) Formula:

Total Assets Turnover Ratio = Net Sales
Total Assets

4.3)

Particular 2006 2007 2008 2009 2010
Total Assets(RS IN CRORES) 1255.65 1652.68 3506.37 4080.33 4594.59
Total Assets Turnover
Ratio(Times) 0.68 0.68 0.47 0.46 0.44

4.4) Analysis:

This ratio establishes a relationship between net sales and total assets. This ratio
shows firm‟s ability in generating sales from all financial resources committed to total
assets. In 05-06 & 06-07 this ratio was 0.68 times. In 09-10 ratio was 0.44 times
which was slightly lower than previous years. It shoes inefficient utilization of
resources.

70

Here are the key details about the history and founding of Sintex Industries Limited:- Founded in 1960 as The Bharat Vijay Mills Ltd, a textile manufacturing company. - Started its Plastics Division in 1975, initially manufacturing plastic sheets and later diversifying into other plastic products.- Over the years, it expanded its plastic manufacturing capabilities with 10 plants across India and over 12 manufacturing processes under one roof. - Became one of the largest integrated plastic processors in India with a wide range of products. - In 2001, the company changed its name from The Bharat Vijay Mills Ltd to Sintex Industries Limited to reflect its focus on plastics business

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