A SUMMER TRAINING PROJECT REPORT 0N

STUDY OF RATIO ANALYSIS AT

SUBMITTED TO

UP TECHNICAL UNIVERSITY, NOIDA

IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE
OF
MASTER OF BUSINESS ADMINISTRATION
Submitted to:
Submitted by:
Dr. Sandeep Kumar
Harshit Rastogi

IIMT MANAGEMENT COLLEGE MEERUT

DECLARATION
It is certified that the Summer Training Project Report entitled STUDY OF
CUSTOMER PERCEPTION FOR CIRCULAR BUSINESS

OF HINDI

NEWS PAPERS IN MEERUT submitted in partial fulfillment of the

requirement for the degree of Master of Business Administration of UPTU, Noida is
a record of bonafide Summer Training project work conducted by me. I have
collected the data personally. The data given in the Summer Training Project Report
is genuine e and original. Further, I also declare that it not submitted to any other
university for the award of any degree or diploma.

ACKNOWLEDGEMENT
I am extremely grateful to Mr. Sandeep , for having extended his guidance during
the course of this research project.
This acknowledgement would be incomplete without grateful mention of all the
people who formed the sample and were kind enough to fill in the questionnaire and
respond warmly to my questions.
I shall be falling in my duty if I do not thank to Bajaj computers who typed this
report well in time.
Last but not the least; I thank ALMIGHTY for His blessings.

A TRAINING PROJECT REPORT

ON
STUDY OF RATIO ANALYSIS AT TRIVENIN ENGINEERING LTD.

Submitted for the partial fulfillment of

the requirement for the award of degree
OF
Master of Business Administration
(Affiliated to U.P.T.U LUCKNOW)
(2012-2014)

SUBMITTED TO:

SUBMITTED BY:

Ms. SANIYA MATHUR

(School of Management)

Roll no. 1206970035

MBA III Sem.

FOR
RADHA GOVIND GROUP OF INSTITUTION MEERUT
UTTAR PRADESH TECHNICAL UNIVERSITY LUCKNOW

Date: ..

To Whom So Ever It May Concern

This is to certify that Mr. MOHD. SAMIR ANSARI has prepared a project report
on the title ANALYSIS OF MUTUAL FUNDS INDUSTRY (WITH SPECIAL
REFERENCE TO BULANDSHAHR REGION) for the partial fulfillment of
Masters Degree in Business Administration from Uttar Pradesh Technical
University, Lucknow.
To the best of my knowledge the matter presented in project report is satisfactory
and I wish her success in her future endeavor.

MS. SANIYA MATHUR

(Supervisor of Project)

Anuyogipuram, Garh Road, Meerut-250 004 (UP) INDIA

Telefax : 0121 2760396, 2765023, 2603082 Fax : 0121-2600771
e-mail : info@rgec.edu, info@iims.edu.in, website : www.rgec.edu, www.iims.edu.in

STUDENT DECLARATION
I MOHD. SAMIR ANSARI student MBA here by declared that the research report
entitled ANALYSIS OF MUTUAL FUNDS INDUSTRY (WITH SPECIAL
REFERENCE TO BULANDSHAHR REGION) is completed and submitted
under the guidance of Ms. SANIYA MATHUR is my original work. The imperial
finding in this report is based on the data collected by me. I have not submitted this
project report to U.P.T.U., Lucknow or any other University for the purpose of
compliance of any requirement of any examination or degree.

DATE:
PLACE:

MOHD. SAMIR ANSARI

MBA III Sem
Roll No. 1206970035

ACKNOWLEDGEMENT
First and foremost I would want to thank my Institute RADHA GOVIND GROUP
OF INSTITUTIONS, Meerut for giving each and every student a platform of such
nature where even before the completion of twos course, interaction with the
industry and exposure to the same is made possible.
I express my immense pleasure and solemn gratitude to Mr. MOHD. SAMIR
ANSARI for giving me this opportunity to study an entire sector very closely.
Last but not the least I am grateful to all those persons who were involved with me
in the project for their co-operation and support.
6

MOHD. SAMIR ANSARI

MBA III SEM.
Roll No. 1206970035

EXECUTIVE SUMMARY
The significant outcome of the government policy of liberalization in industrial
and financial sector has been the development of new financial instruments. These
new instruments are expected to impart greater competitiveness flexibility and
efficiency to the financial sector. Growth and development of various mutual fund
products in Indian capital market has proved to be one of the most catalytic
instruments in generating momentous investment growth in the capital market.
There is a substantial growth in the mutual fund market due to a high level of
precision in the design and marketing of variety of mutual fund products by banks
and other financial institution providing growth, liquidity and return.
In this context, prioritization, preference building and close monitoring of
mutual funds are essentials for fund managers to make this the strongest and most
preferred instrument in Indian capital market for the coming years. With the decline
in the bank interest rates, frequent fluctuations in the secondary market and the
inherent attitude of Indian small investors to avoid risk, it is important on the part of
fund managers and mutual fund product designers to combine various elements of
liquidity, return and security in making mutual fund products the best possible
alternative for the small investors in Indian market.
There are various parameters which an investor should consider before
investing in mutual funds. The comparative analysis between two mutual fund will
help the investor to take appropriate decision before investing in mutual funds.

TABLE OF CONTENTS
CHAPTER

TITLE

NO.
EXECUTIVE SUMMARY
LIST OF TABLES
LIST OF TABLE & FIGURES
1.
2.

V
VI
VII

INTRODUCTION

LITERATURE REVIEW
TYPES OF MUTUAL FUNDS
ADVANTAGE AND DISADVANTAGE

MARKETING STRATEGY ADOPTED BY MF

MARKETING OF FUNDS
PRODUCT INNOVATION AND VARIETY
DISTRIBUTION NETWORK

ADVERTISE AND SALES PROMOTION

PAGE NO.

1-4
0-22
23-28
29-34
35-37
38-41
42-43
44-45

46-58

3.
4.

MARKET SHARE OF MUTUAL FUND

OBJECTIVE

10.

RESEARCH METHODOLOGY
DATA INTERPRETATION AND ANALYSIS
FINDINGS AND INFERENCES
RECOMMENDATIONS
LIMITATIONS
CONCLUSION
BIBLIOGRAPHY

11.

APPENDIX

5.
6.
7.
8.
9.

61-62
63-69
70-83
84-85
86-87
88-89
90-91
92-93
94-98

INTRODUCTION

INDUSTRY PROFILE

Indian sugar Industry:

India is the second largest producer of sugar in the world. The Indian sugar industry is the
second largest agro industry located in the rural India. The Indian sugar industry has a turnover of
Rs.500 billion per annum and it contributes almost Rs.22.5 billion to the central and state as tax,
and excise duty every year. It is the second largest agro processing industry in the country offers
cotton textiles.

About 50 million sugar cane farmers and a large number of agricultural laborers are
involved in sugar cane cultivation and ancillary activities, constituting 7.5% of the rural
population. The industry provides employment to about 2 million skilled/semiskilled workers and
others mostly from the rural areas.

The industry not only generates power for its own requirement but surplus power for
export to the grid based on by - product- bagasse. It also produces ethyl alcohol, which is used for
industrial and potable uses, and can also be used to manufacture Ethanol, an ecology friendly and
renewable fuel for blending with petrol.

The sugar industry in the country uses only sugar cane as input; hence sugar companies
have been established in large sugar cane growing states like Uttar Pradesh, Maharashtra,
Karnataka, Gujarat, Tamil Nadu and Andhra Pradesh. In the year 2003-04 these six states

10

contribute more than 85% of total sugar production in the country. Exhibit 1 shows the state-wise
sugar production in India for 2004-2005 and 2005-06.

The government de-licensed the sugar sector in the August 1998, there by removing the
restriction on the expansion of existing as well as on the establishment of new units , with the only
stipulation that a minimum distance of 15 kms would continue to be observed between an
existing sugar mill and a new mill.

EXHIBIT 1: Sugar production by state in India (in Metric Million Ton):

There are 566 installed sugar mills in the country with a production capacity of 180 lakh
Million tons of sugar, of which only 453 are working. These mills are located in 18 states of the
country. Around 315 of the total installed mills are in the co-operative sector, 189 in the private
sector and 62 in the public sector.
The number of operating sugar mills in the country has increased from 29 in sugar year
(SY) 1930-31 to 412 by (S) Y1996-97 (sugar year = October 1 st to September 30th). The
addition in number of mills was at its peak during seventies that when nearly 100 mills were

11

added between 1970 and 1980 to increase the number of operating units to 300. The development
of industry in the past is as given in table below.

The average capacity of the sugar mills in the industry has considerably moved up from
just 644 ton per day in SY 1930-31 to 2656 ton per day. But still the production of sugar in India
is inching. Industry was driven by horizontal growth (increase in number of units) compared to
the vertical growth witnessed in other countries (increase in average capacity) Refer Exhibit (3)

1.1

Sugar Availability:

Sugarcane occupies about 2.7% of the total cultivated land and it is one of the most
important cash crops in the country. The area under sugar cane has gradually increased from 2.7
million hectares in 1980-81 to 4.3 million hectares in 2002-03, mainly because of much larger
diversions of land from other crops to sugarcane by the farmers for economic reasons. The
sugarcane area, however, declined in the year 2003-04 to 3.9 million hectares and to 3.7 million
hectares in 2004-05, mainly due to drought and pest attack.

From a level of 154 MMT in 1980-81, the sugarcane production increased to 241 MMT in
1990-91 and further to 296 MMT in 2000-2001. Since then it has been hovering around 300
MMT until last year. In the season 2003-2004, however, sugarcane production declined to drought
and pest attack. Not only sugarcane acreage and sugarcane production has bas been increasing,
even drawl of sugarcane by sugar industry has also been increasing over the years. In India,
sugarcane is utilized by sugar mills as well as by traditional sweeteners like Gur and Khandsari
producers. However, the diversions of sugarcane to Gur and Khandsari are lower in states of

12

Maharashtra and Karnataka, as compared to Northern states like Uttar Pradesh. Exhibit 2 gives
data on sugarcane utilization for different purposes.

EXHIBIT 2: Sugar Utilization:

The three largest sugarcane growers in terms of production are Brazil, India and China, yielding
between them more than half of total sugar production. Exhibit 3 compares production and yield
figures for the top 11 sugar growing countries as shown below.

EXHIBIT 3: Sugarcane production and consumption by country.

13

Most of the mills in India are not equipped to make refined sugar. Mills which are
designed to produce refined sugar can manufacture sugar not only from sugarcane but also from
raw sugar which can be imported. Therefore, such mills can run their production all the year
round, as opposed to single stage mills which are dependent upon the seasonal supply of
sugarcane.

14

COMPANY PROFILE
Mr. Dhruv M. Sawhney, Chairman & Managing Director graduated with a Masters in
Mechanical Sciences from Emmanuel College, University of Cambridge, U.K. and M.B.A with
distinction from the Wharton School, University of Pennsylvania, U.S.A. He was on the Dean's
list for all terms, came second in the University, and is a life member of Beta Gama Sigma. Mr.
Sawhney has received the highest civilian award "Chevalier de la Legion d'Honneur" from
President Chirac of the French Republic.

Mr. Sawhney is a Past President of the Confederation of Indian Industry (CII), the Indian Sugar
Mills Association and the Sugar Technologists Association of India. He was the first Chairman
from the developing world of the International Society of Sugar Cane Technologists. Mr.
Sawhney has served on the Board of various public sector organizations and chaired Government
advisory councils on Industry, Energy and Sugar. He chairs the Commonwealth Leadership
Development Conferences founded by HRH Prince Philip, The Duke of Edinburgh in 1956 to
foster and broaden the understanding and decision-making ability of individuals in the
commonwealth countries. Mr Sawhney is Deputy Chairman of the Evian Group and Chairman of
the India Steering Committee of the World Economic Forum, Switzerland. He also chairs CII's
International and Internal Audit Committees.

Mr. Sawhney takes a keen interest in education, and was a past Governor of the Indian Institute of
Management, Lucknow, the Management Institute at the University of Delhi and Chairman of the
Doon School, Dehra Dun, one of India's most famous Public Schools. He is a Companion
Member of the Chartered Institute of Management, U.K. and chairs the Board of Trustees of
Delhi's oldest private charitable hospital. He was President of the All India Chess Federation for
12 years.

15

TRIVENI NGINEERING AND INDUSTRIES LIMITED

16

PERFORMANCE:
Particulars
Sales (Gross)
Sales (Net)
Operating Profit ( EBIDTA)
Interest and Financial Charges
Depreciation and amortization
Profit before tax (PBT)
Tax liability- Normal
- Net deferred tax charges
Profit after tax (PAT)
Surplus brought forward
Available for appropriation
APPROPRITATIONS
Provision for Dividend (included dividend
distribution tax)
Equity
Preference
Transfers to molasses reserves
Transfer to capital redemption reserves
Transfer to general reserves
Surplus carried forwarded
Earning per equity share of Re. 1 each (in Rs.)

2005-06
12702.96
11920.37
2130.00
229.96
288.25
1611.79
165.32
131.51
1314.96
82.40
1397.36

2010-09
10212.92
9610.50
1724.46
304.67
178.73
1241.06
235.29
10.57
995.20
44.55
1039.75

% Increase
24.38
24.04
23.52
(24.52)
61.29
29.87

147.54
1.27
19.87
1150.00
78.68
5.88

93.95
2.70
0.83
19.87
840.00
82.40
4.77

57.04
-

32.13

23.27

During the year under review, the company reported a record performance across the
following parameters:

Net sales increased 24.04 % to Rs 11920.37 million.

Profit after tax increased 32.13 % to Rs 1314.96 million.

17

2004-2005

16.86
SBG

TBG

CBG

GBG

WBG

Others

79.17

There was a remarkable growth

in turnover in all the engineering units accompanied by an attractive increase in their respective
margins. The company is optimistic of a similar or higher growth in turnover and profit of all
businesses in Financial Year 2006-07.

Divisionwise breakup of total external sales (%)

18

22.63

SBG

TBG

CBG

GBG

WBG

Others

70.32

CORPORATE
INFORMATION:
Sl. No.
01.

Name and Address of Stock Exchange

Bombay Stock Exchange Limited

Stock Code
532356

Phiroze Jeejeebhoy Towers,

Dalal Street, Fort
02.

Mumbai 400023
National Stock Exchange of India Ltd.
Exchange Plaza, 5th Floor, Plot no c/1, G block, Bandera (E),
Mumbai - 400051

Enhancing shareholders value:

19

TRIVENI

The Triveni public issue: The shares of Triveni Engineering & industries Limited are listed on
the Bombay stock Exchange and National stock Exchange, the major stock exchange of India.
The company issued 50 million equity shares in November 2005 and the issue was oversubscribed
more then ten times reflecting investor confidence. The equity shares of RS. 1 each were issued
through a book building process within a price range of Rs. 42.50. While 97% of the demand was
for shares in the upper band, the company prudently fixed the issue price at Rs. 48 in general
investor interest. Consequent to this issue, the equity shares of the company were listed on NSE
and BSE on 13 December 2005. As on 31 March 2006, reputed institutional investors including
mutual funds, foreign institutional investors and domastic banks held 21.53% of the companys
shareholding. The closing price of Triveni share at NSE on 31 March 2006 was Rs. 125.95,
impaling a market capitalisation of Rs.32480 million. The company has increased the limit of
investment by FIIs to 49%, which will enable more international investors to participate in its
growth story.

20

SHARE PERFORMANCE OF TRIVENI Vs BSE SENSEX

12000
11000
10800
10000

10200

10000
9500

9500

Triveni Share Price- BSE low

8800

8000

10000

9000Triveni Share Price - BSE high

BSE Sensex low

8000
7500
7000
6500

6000

6300

6000

4500
4000BSE Sensex high

2000

0
39056

38723

38754

38782

At Triveni, our principal achievement is that we started with one business, but leverage our
engineering knowledge to extend into four other growing and profitable business.

21

SUGAR BUSINESS GROUP (SBG)

Highlights, 2005-06

13% increase in turnover from Rs. 7676.07 million in 2010-09 to Rs. 8663.25 million.

Recovery of the Deoband sugar unit of the highest in Western UP during the 2005-06 sugar
seasons.

60% increase in sugar capacity from TCD in 2010-09 to 40500 TCD.

Commissioning of the 7000 TCD Greenfield sugar unit in Sabitgarh in January 2006.

Outlook, 2006-07

Sugar prices are expected to stay firm for the next two years on account of domestic demand
and supply, high crude price influencing higher ethanol production as well as due to other
international factors.

The company will expend capacity from 40500 TCD to 61000 TCD in 2006-07

It will commission three Greenfield units in Chandanpur (6000 TCD) and Rani Nagal (5500
TCD) by the start of the 2006-07 sugar season; the third plant in Narainpur (6000 TCD) will
be completed in the fourth quarter of 2006-07; capacity expansion of the Ramkola sugar unit
from 3500 TCD to 6500 TCD will be complete by the start of the 2006-07 sugar season.

The company is setting up a captive 160 KLPD distillery for ethanol production that will be
commissioned in the fourth quarter of 2006-07.

Performance
The company achieved 7% higher crushed in 2005-06, a good performance as it competed
successfully with producers of alternative sweeteners to reduce cane diversion and increase

22

drawal of sugarcane. Further, the company produces Rs. 0.38 million tones of White sugar in
2005-06. Due to late rains, winter frodt and overfertilisation, the sugar recovereries in Western UP
were lower by around 0.6-0.7% than what had been achieved in 2010-09. Averages recover for
our sugar units declined from 10.08% in 2010-09 to 9.59% in 2005-06 due to the aforesaid. It is to
the companys credit that despite poor
weather, the Deoband units reported one of the highest recoveries among all Western UP sugar
factories during the season under review.

In Sugar Division area during the down turn, they invested in the
modernization of the sugar units to achieve benefits which are fully
under their control and invested additionally in the cogeneration
plant to insulate themself from the sugar cycle, developing an alternative stable revenue stream.
Besides they invested in state-of-the-art vacuum pans in a joint collaboration with sugar research
international of Australia. The result of these initiatives is that when the industry turned around,
Triveni was in the right place at the right time with the right capacity and the right efficiencies.
The government did not permit the import of white sugar during the last two years even when a
shortage was evident, but quite pragmatically allowed the import of raw sugar under an advance
License scheme with corresponding export obligations. Considering all the factors and as
described in detail in the Management Discussion and Analysis, the sugar outlook appears stable
till 2009.
The Khatauli sugar unit is being modernized and expanded to 16000 tcd and they are planning to
setup three new units, one of which will be set up at Sabitgarh, district Bulundshahar, UP. All
these units would have capacity of 5000-7000 tcd, expandable to 12000tcd. As a result, they
expect their sugarcane crushing capacity to significantly rise over our current base of 25250 tcd.

23

THE BRANDED SUGAR (SHAGUN)

The Companys branded sugar is manufactured in Khatauli
and marketed under the Shagun Brand. The company
announced this sugar in 26 September 2003.the branded sugar
provides in 1-5 KG.packets. During the year under review, the
off take of Branded sugar increased by 44 % to 6522 MT.
While the market of branded sugar is not large, demand is
increasing due to increased urbanization and life style changes.And the branded sugar of Triveni
Shagun is packaged in a state-of-the-art sugar packaging section located in the sugar factory
premises. The sugar packaging section is considered to be the best designed sugar packaging
sections amongst all the players in branded sugar business in India.

THE COGENERATION GROUP (CBG)

Cogen plant at
Khatauli was one
of the quickest
commissioning
schedules for cogeneration plants
in India.

Plant:
Khatauli and Deoband
Bagasse-based cogeneration
power

is

enviournmant

renewable,
friendly

driver of sustainable development. The government of India has issued the national electricity
policy, which calls for the promotion of cogeneration and generation from renewable
Sources of energy.

Performance, 2005-2006
24

222% increased in the divisions revenue from Rs. 188.03 million in 2004-2005 to Rs. 605.5
million.

304% increased in EBIDTA from Rs. 58.6 million in 2004-2005 to Rs. 237 million.

Commissioning of new 23 MW co-generation plant in Khatauli reported PLF of over 98% in

March 2006.

92% plant load factor for the Deoband unit across 207 days of working (99% and 100% PLF
in February and March 2006 respectively).

Power purchase agreement with Utter Pradesh Power Corporation Ltd. (UPPCL), the buyer
for the power supplied to the grid; timely payments from UPPCL for the power supplied.

Trivenis co-generation units

DEOBAND:
State of the art, bagasse-based co-generation unit with a capacity of 22 MW.

The company captivity consumed 31 % of the electricity produced by this plant and the rest
was supplied to the Utter Pradesh power corporation Limited, secured by a ten-year power
purchase agreement.

Plant operated at an average plant load factor of 92% for the 207 days it was operational in
2005-06; PLF could have been higher but for fuel shortage during the start of the sugar season
and high grid disturbances in January 2006. Plant achieved 99 % and 100 % PLF in February
2006 and March 2006 respectively.

KHATAULI:

25

State of the art and energy efficient, bagaees-based 23 MW cogeneration power plant
(commenced operation during 2005-06-sugar season).

The company captivity consumed 25 % of the electricity produced by this plant and the rest
was supplied to the Utter Pradesh Power Corporation Limited, secured through a 10- year
power purchase agreement.

One of the quickest commissioning schedules for co-generations plant in India. Commenced
the export of power in October 2005. After an initial period of stabilization, the cogen plant
has achieved full capacity; PLF was over 98 % for March 2006.

Additionally utilizes continuous Electro de-ionization (CEDI) process in its Boiler feed water
system (installed through the companys water business Group) with the objective to
rationalize bulk acid and alkali handling as well as improve water quality. This is the largest
CEDI-based water treatment module in India and the first in a power plant in the country.

THE ENGINEERING BUSINESSES

Overview
GDP growth increased from 6.9% in 2004-2005 to 8.1% in 2005-2006, driven by the
manufacturing and power sector. The index of industrial production for February 2006 rose to
227.3, up 8.8% against the corresponding month of the previous year.
According to figures available, the IIP for mining, manufacturing and electricity sectors stood at
153.9, 242.3 and 186 respectively in February 2006 against 152.5, 221.3 and 170.7 in February
2005. The cumulative growth during April- February 2005-2006 in these three sectors was 0.5%,
9% and 5.3% respectively.

Power sector (including IPP and co-generation units)

India consumes almost 3% of the worlds commercial energy and is the sixth largest consumer
of energy in the World. During 2005, the recorded energy requirement was 626 billion units

26

whereas energy available was only 546 billion units, reflecting a shortage of 80 billion units
(13%).

Captive power

It is estimated that a capacity addition 100000 MW will be required by 2012 to bridge the
supply deficit. Electricity generation will have to grow at a minimum of 10% per annum in
order to support the targeted industrials and economic growth. The government expects to
bring around 5000 MW of electricity (2010) to the grid through the captive generation route to
supplement capacity addition.

Out of the countrys installed captive power generation of 18740 MW, steam generation power
accounted for 46%, followed by diesel-based power generation.

The contribution of
the division to the
companys revenue
increased from
16.9% in 2004-2005
to 22.6% in 20052006
Pan

uvyfvhfyshcc gdftrth

Syrup Clarifier System

Short Retention Clarifier

Continuous vacuum Pan

27

TECHNOLOGYS
TECHNOLOGIES

IN

SUGAR DIVISION:

Continuous

Vacuum

Developed by Triveni SRI Limited, a wholly owned subsidiary, in association with Sugar
Research International (SRI) of Mackay, Australia, the CVC was installed in the Deoband sugar
factory for usage on C massecuite, the first time an SRI pan was installed for C massecuite in a
sulphitation plant.
SRI is one of the sugar machinery technology authorities in the world; its subsidiary,
Triveni SRI Limited, has an exclusive license in India from SRI International for many of their
products. Owing to technical improvements made on the CVP, Triveni and SRI are now eligible to
jointly own the intellectual property for this new improved vacuum pan. Company has in the past
presented these details in a paper jointly presented with SRI at a convention of the International
Society for Sugar Sugarcane Technology.

28

 Syrup Clarifier System:

Installed at the Deoband and Khatauli sugar plants to improve the quality of sugar, this
licensed product from SRI has been sold to EID parry in Tamil Nadu, where it is working
efficiently.

Short retention Clarifier:

To be installed in 2005-06 at the Khatauli unit and at the new plant, the clarification of
juice is achieved in only 30 minutes while in a normal clarifier juice is retained for approximately
150 minutes. This prevents the inversion of sugar and also leads to an improved sugar recovery
and quality.

Mill-Tandem:
Designed and manufactured by the company (captive technology), installed in companys

sugar plants. The mill-tandem has proved to be one of the most efficient in India: reflected in the
reduction in Bagasse losses and increase in reduced mills extraction (RME); RME for the unit is
96 while that of the industry is around 95; bagasse loss in the unit is 1.6 compared to 1.9 for the
rest of the industry; strong design feature ensures a negligible downtime. Triveni has set up over
65 sugar plants and supplied over 300 cane mills to sugar factories in India and overseas.

29

FINANCIAL REWIEW
KEY PARAMETRES:
2006-07
Return on Net worth (RONW) (%)
Return on Capital employed (ROCE) (%)
Total Debt Equity Ratio (Times)
EBDITA margin (%)
PAT margin (%)

2010-09

72.59
43.52
2.74
17.94
10.36

38.92
29.34
0.79
17.87
11.03

Interest Cover (Times)

4.89

8.60

Book value (Rs. Per equity share of Re. 1, post bonus)

7.91

19.82

30

CORPORATE INFORMATION
Chairman and Managing Director
Mr. Dhruv M. Sawhney

Board of Directors
Dr. F.C. Kohli
Lt. Gen. K.K. Hazari (Retd.)
Mr. M. K. Daga
Mr. R. C. Sharma
Mr. V. Venkateswarlu
Mr. R. K. Kapoor (IDBI Nominee)

Vice President (legal) and Company Secretary

Mr. V.P. Ghuliani

Bankers
Punjab National Bank
Central Bank of India
Canara Bank
Oriental bank of Commerce
Union Bank of India
Standard Chartered Bank
State Bank of Travancore
UTI bank Ltd.

31

Auditors
M/s. J.C. Bhalla & Co.

Branch Auditors
M/s. Virmani & Associates

COMPANYS BUSINESS LOCATIONS

Registered Office
Deoband, District Saharanpur
Utter Pradesh 247554
Phone: (01336) 222497, 222185,222866
Fax: 222220

Corporate Office
Express Trade Towers, 8th floor
15-16, sector 16 A, Noida 201301 (UP)
Phone: (0120) 5308000
Fax: 5311010-11

Share department/investors grievances

Express Trade Tower; 8th floor
15-16, sector- 16 A Noida 201301 (U.P.)
STD code: 0120
Phone: 4308000
Fax: 4311010-11

32

Email: shares@trivenigroup. Com

Registrar and share transfer agents

For equity shares held in physical and electronic mode. M/s
Karvy computer share Pvt. Ltd. Karvy house,46, Avenue 4
Street No. 1, Banjara Hills Hyderabad 500034 STD Code :040
Phone: 23312454,23320751
Fax: 23311968
Email: mailmanager@karvy.com

Turbine business group

12-A, peenya industrial Area, Peenya, Banglore-560058
STD Code: 080
Phone: 28394721(4 lines), 28394843, 28394771
Fax: 28395211

Gear business group

1, 2, 3 belagola industrial Area Metagalli, K.R.S. road,
Mysore-570016, STD code: 0821
Phone: 5280502, 5280501
Fax: 2582694

Fixed deposit section

Accounts Department
Express Trade Tower; 8th floor
15-16, Sector-16A Noida 201301 (U.P.)
STD Code: 0120 Phone: 4308000
Fax: 4311010-1
Email:hoaccts@trivenigroup.com
33

Khatauli sugar unit

Khatauli, District- Muzaffarnagar
Uttar Pradesh 251201
STD code-01396
Phone: 272561, 272562
Fax: 272309

Deoband Sugar Unit

Deoband, District Saharanpur
Utter Pradesh 247554
Phone: (01336) 222497,222185, 222866
Fax: 222220

Ramkola sugar unit

Ramkola, District-Kushinager
Utter Pradesh-247305
STD Code: 05567 Phone: 256021
Fax: 256248

Satigarh Sugar unit

P.O. Karora, Tehsil Khurja
Districrt-Bulandshare(U.P.)
STD Code: 05738
Phone:228894
Fax: 228893

34

LITERATURE REVIEW
OVERVIEW OF SUGAR BUSINESS

Global sugar
production is
expected to increase
from 144.05 MMT in
2004-2005 to 148.80
MMT in 2005-2006.

The companys installed capacity of 40500 tcd across the three units is among the largest
in India. The companys Khatauli unit is credited with having crushed the largest quantity of sugar
across any unit in India in the 2005-06-sugar season.

RATIONALE FOR PRESENCE

India is the largest consumer of sugar and its per capita consumption is still below the
levels achieved by peer countries. With a projected increase in per capita incomes and an
improvement in lifestyle quality across Indias middle and lower economic classes, we expect that
sugar consumption will increase significantly on account of two factors: the crossover from the
consumption of gur and khandsari to sugar and an increase in direct consumption by all sections
of the Indian society.

COMPANYS VALUE PROPOSITION

Sugarcane is the only significant raw material for the domestic sugar industry. Consequently,
any interruption in sowing or harvesting of sugarcane could lead to a detrimental impact on the
sugar industry at large and to our company.

35

As a forward-looking organization, Triveni is actively engaged in mitigating foreseeable

risk factors. In relation to fostering the availability of sugarcane in its command area,

Cane Development Programme

Triveni protects farmer interests in a number of ways-ensuring consistent and equitable cane
purchases from farmers, providing access to advanced farming best-practices, arranging timely
remuneration and taking a leadership position in community development. In turn these initiatives
encourage farmers to allocate a significant acreage towards the cultivation of sugarcane, making
the arrangement mutually rewarding. The quality of the companys output has helped it graduate
to the states of a major brand in Indias retail and wholesale markets, thereby enabling it to enjoy
a premium and a distinctive recall in a relatively unbranded marketplace.
The philosophy of the cane development and marketing is almost common for all the sugar units.
While in following paragraphs, description is for Khatauli but applies generally to Deoband &
Ramkola units as well. After identifying the constraints in the area of operation, the mill has
undertaken an ambitious programme of Cane Development for improvement in productivity and
quality of cane. The mill has separate cane development wing with qualified staff and experienced
personnel. For this purpose the operational area has been divided into sub-zones and the field
supervisory staff has been provided with the necessary facilities for efficient working and proper
supervision of the various cane development activities. The cane development programme is
planned with following activities:To educate the farmers regarding modern agricultural practices in sugarcane cultivation.
To replace the unapproved and degenerated cane varieties
To initiate and propagate the use of healthy and generically pure, seed material.
To initiate heat therapy for the treatment of cane seed through moist hot air treatment plant to
eliminate the diseases.

36

The details of various schemes of cane development being undertaken by mill are enumerated as
below: Plantation of High Yield Variety of Sugarcane
Seed Distribution
Demonstration Plots
Technical Assistance to Cane Growers
Moist Hot Air Treatment
Irrigation
Ratoon Management
Biological Laboratory
Soil Analysis and Soil Treatment
Control of Post Harvest Sugar Losses
Awareness Among Cultivators
General

37

COMPANYS STRENGTHS

Advanced technological assets and capital equipment, represented by world-class continuous

vacuum pans at the B (sugar boiling) and C (sugar boiling) stages, resulting in boiling
consistency, uniform crystal size, reduced molasses purity, decline in steam consumption and
enhanced product quality. The technology and intellectual property for this equipment were
jointly developed with Sugar Research International, the premier Australian organization.

Positive recall in a competitive marketplace, translating into a premium and quicker off-take.

The location of the sugar manufacturing plants in the fertile Doab region (between the Ganga and
Yamuna rivers), resulting in a superior sugarcane quality and an exceptionally high yield.

Canal water availability over a large part of the region, representing one of the highest
penetrations of man-made water intervention in India, reducing the companys dependence on
monsoon vagaries.

Established culture of cane cultivation in the region.

Largest cane crushing capability across any one unit in India (18.66 million quintals in the 201009-sugar season at Khatauli); a quicker crush enables the farmer to grow wheat on fallow land and
earn an attractive supplementary income.

Excellent cane procurement logistics, critical for any large sugar unit, demonstrated in the
systematic pooling of cane from no less then 220 purchase centers in the Khatauli command area
without any shortage or inventory pile-up.

Dependable relations with more than 160,000 farmers across the Khatauli, Deoband and Ramkola
command areas, resulting in a reliable and increasing supply of sugarcane.

Strong in-house technical and project management capability, resulting in the commissioning of
the Deoband co-generation project in the fastest implementation time lines; proposed expansion
of the Khatauli capacity from 11750 tcd to 16000 tcd.

38

Vast project execution experience in setting up sugar plants and carrying out expansions in view
of our earlier experience in sugar plant machinery and through our subsidiary, Triveni SRI
Limited.

INDUSTRY ANALYSIS

World Sugar

The total
consumption of
sugar increases by
1.2 MMT in 2003-04
to 18.5 MMT in 20042005.

The forecast of the

world sugar balance
(October2004
September

to
2005)

indicates

that

production will be 2
mn tones lower than consumption: world sugar output (October 2004 to September 2005) has
been estimated at 146.1 mn tones (raw value) as against 143.7 mn tones in the previous year while
consumption is estimated 2.1 per cent higher at 148 mn tones (raw value) with increased demand
coming out of Asia and the Far East.
Interestingly, leading trade house ED&F Man sees this global (2010-09, Oct-Sept) deficit
widening to 4 mn tones; its production estimate for 2010-09 is unchanged from its 2009-08
benchmark of 143 mn, while consumption, driven by Asia, is forecast to increase from 144 mn to
147 mn.
In fact, the principal factor behind the price rise over the past 18 months was the
conviction that global demand growth could outstrip production in 2010-09, depleting stocks, as
well as the belief that high oil prices may induce Brazil and other countries to divert more cane
towards the production of ethanol, reducing cane supplies directed towards sugar manufacture.

39

Looking into the short-term, two developments are likely to tip yhr Asian balance: Indias
sugar consumption has been growing at an average annual rate of around 3 per cent over the last
ten years; besides, global sucrose demand, discounting the role of artificial sweeteners, is
expected to grow by around one mn tones a year. China too is likely to become a major importer
after 2009, given the limited availability of its resources to expand sugar production.

WTO
Sugar and dairy products are probably the most protected agricultural sector. As a result,
the impact of product-specific negotiations in the WTO Doha Round (as agreed in the July 2004
framework) on sugar was more significant then in the last WTO round of multilateral trade
negotiations.
The critical factors: the base period chose for the duty reduction commitments, the length
of the implementation period for making the reductions and whether sugar would be included in a
WTO list of sensitive products, which would allow it to escape a part of the WTO trade reform
process.
More recently, the World Trade Organizations highest court issued a final ruling on April
28, 2005, ordering the European Union to stop dumping subsidized sugar illegally on the global
markets or face trade sanctions. The decision by the Whos Appellate Body in Geneva gives the
EU up to 15 months to strictly comply with this directive. It is important to note that the export of
white sugar, especially from European Union, is heavily subsidized at prices less than 25 percent
of the prices prevailing in the European domestic markets. But for such exports, the international
prices of the white sugar would be higher and would in turn have a favorable impact on Indias
domestic prices.
In 2004, a panel of WTO experts estimated that the EU exported about four million metric
tones of sugar in 2004-05 (period under investigation) or about three times more then what the
rules permitted. As a result, any reform in this area will give Indian exports a significant boost and
have a positive impact on global prices.

40

India also suffers from a small quota in the Loma and ACP conventions, which gives
members a preferential price in the lucrative EU and US markets. Any increase in these quotas
could help domestic manufactures in the short term.

Ethanol
At the 13th annual International Sugar Organization seminar in 2004, Chairman Francisco
varua (also President of the Philippines Sugar Millers Association) pronounced that ethanol could
become the sugar cane industrys principal product by the end of the first decade of the new
millennium. Not only are fuel ethanol programmes spreading across the globe, but more players
are becoming aware of the need for cross-order trade to help the product become more
competitive against gasoline.
Since Brazil will need to raise ethanol production by 14 bn liters (25 mn tones sugar
equivalent) just to meet its growing domestic demand- this represents 175 mn tones of cane, 2.5
mn hectare of extra land and an addition 85 to 90 mills FO Licht does not expect a large
Brazilian sugarcane crop to upset the world sugar balance, especially as ethanol is expected to
become dearer over the foreseeable future.

41

DOMESTIC INDUSTRY SCENARIO AND OUTLOOK

Industry Structure
The sugar industry in India is highly fragmented, with 566 sugar units spread over 16 states. The
total capital employed by the sugar industry is Rs 250 bn, annual sugarcane payments Rs 180 bn,
direct employment for 500,000 and the involvement of 45 mn farmer/families in cane growth.
The average size of each unit is approximately 3300 tcd, substantially below the new
international economic size of 7500 tcd. Nearly 35 percent of all Indian mills are in the private
sector, 6 per cent in the public sector and 59 per cent in the co-operative sector. Despite the large
recent profits shown by the Indian sugar industry, 112 mills old and inefficient remained closed
during the year.
In a raw material-dependant industry, profitability is influenced by the following factors:

Cane availability:
Within the reserved area of any factory, the yield and size of the area under sugarcane are
critical success drivers.

Economic size:
Without a minimum economic size of 5000 tcd (generally 10000 tcd in western Uttar
Pradesh), it is becoming increasingly difficult for a sugar unit to command pricing power.

Technology:
The ability to minimize sugar-processing losses depends on process technology.

Demand-pull:
The ability to draw a higher percentage of sugarcane from the reserved area reduces the
diversion to other sweeteners.

Sucrose content:
42

This is directly influenced by soil quality and cane development programmes initiated by
progressive manufacturers; a higher sugar content in sugarcane leads to the manufacture of more
sugar, while payment is still based on weight.

Operating efficiency:
The ability to bring cane in quickly from the fields and continuously operate a sugar unit
minimizes post-harvest sucrose evaporation.

OPERATIONAL PERFORMANCE:
The company achieved 7 % higher crush in 2005-06,a good performance as it competed
successfully with producers of alternative sweeteners to reduce cane diversion and increase
drawled of sugarcane. Further, the company produced Rs 0.38 million tones of White sugar in
2005-06. Due to late rains, winter frost and overfurtilisation, the sugar recovers in western UP
were lower by around 0.6-0.7 % then what had been achieved in 2010-09. Average recovery for
our sugar units declined from 10.08 % in 2010-09 to 9.59 % in 2005-06 due to reasons a foresail.
It is to the companys credit that despite poor weather, the Deoband unit reported one of the
highest recoveries among all western U.P. sugar factories during the season under review.
Trivenis Khatauli, Deoband and Ramkola units crushed 18.66 mn tones, 13.8 mn tones
and 3.4 mn tones of sugarcane respectively during the 2010-09 sugar seasons. The sugarcane
crushed at the Khatauli sugar unit was the highest across any unit in the country. Recovery was
10.06 per cent at Khatauli, 10.19 per cent at Deoband and 9.86 per cent at Ramkola. The company
also imported 0.185 mn tones of raw sugar, which was converted into white sugar during the
2010-09-sugar season.
The company produced 1, 96,000 tones in Khatauli (included processed raw sugar),
1,52,000 tones in Deoband (included processed raw sugar) and 33,600 tones in Ramkola, a

43

cumulative 3,81,600 tones in 2010-09 (3,64,400 tones in 2009-08). As a result, company emerged
as one of the largest sugar producers in India and expects to preserve this position following the
increased production from its ongoing expansion programmes.
The companys Khatauli unit procured cane from over 220 out-centers during the letter
part of the season, a record across any sugar unit in India. Dispersed prudently over a 59000
hectare commend area, Khataulis sugarcane marketing staff refined the logistical system of cane
harvest and transportation in the shortest time (empirical studies suggest that if whole stalk
sugarcane is not crushed within 16 hours following harvest, the sucrose in the cane is converted
into non-sugars with a consequent drop in sugar recovery). This efficiency will stand the company
in good stead when it expends its capacity to 16000 tcd in the 2005-06 seasons. Besides
engineering stoppages were within the estimated budget there was an attractive improvement in
steam consumption, thereby increasing the allocation of Bagasse for the Deoband co-generation
plant.

FORWARD-LOOKING STATEMENTS
Global Corporate Strategy
In the opinion of leading international sugar expert F.O.Licht, regulatory, technological and
organizational issues will drive the growth of sugar companies. Since sugar is an agricultural
commodity, the last factor is expected to influence profits the most. In this connection, it would be
reasonable to assume that regulatory differences between various production locations may
decline. As a result, companies that profited from regulation rents (guaranteed income within a
protected business environment) will need to change their strategy to protect their longer-term
survival.
The last of these determinants limits the expansionary drive of sugar companies to national
and /or supranational entities (EU) where an identical set of rules guarantees a high degree of

44

planning security. The regulatory environment under which sugar companies operate is often
challenging, requiring skill, experience and potential clout.
From an international perspective, the industry structure of the sugar sector is surprisingly
mature and yet fragmented; technology is advanced but innovations restricted to normal
technological progress; markets saturated but driven by economic or population growth. As a
result, technological economies of scale are important in determining the size of an individual
plant.
From an organizational perspective, companies can succeed through prudent cost
reduction by centralizing functions (cost accounting and data processing) or optimizing
competencies (bargaining contracts with suppliers and customers etc.).

Companys Expansion Plans

Company intends to complete the following projects which will enable it to avail benefits /
incentives under the UP Government sugar policy:

The commissioning of three new sugar plants. Each plant to have 5000 to 7000 tcd
capacities (expandable to 10000-12000 tcd at a minimal cost). The commissioning of one of the
plants (Sabitgarh) at one of the best sites in India today, with 75 per cent of the cultivable area
being canal irrigated with almost no low lying sugarcane areas. In preparation, over 5000 hectares
of high recovery sugarcane have been planted.

The modernization and expansion of the Khatauli sugar unit from 11750 tcd to 16000 tcd,
which will make it the largest single standalone sugar unit in India.

The commissioning of a 23 MW co-generation plant at Khatauli by September 2005 to

supplement the 22 MW cogeneration plant at Deoband.
Following the establishment of these three units and the expansions at the existing units,
companys cane crushing capacity will significantly rise from its existing aggregate of 25,250 tcd.
45

The benefits of this scale equate to a better coverage of overheads, generation of adequate
bagasse to ensure the fullest utilization (over 270 days) of companys two cogenerations units and
tax-free profits from the two-cogeneration units for ten years.
Going ahead, company also intends to commission a large distillery to fully consume the
large throughput of molasses with the objective to manufacture ethanol in line with the
government policy.
It is our opinion that there will be an inevitable consolidation over the next few years in
the sugar industry, with unviable plants in the co-operative, state government and private sectors
closing down. This will present attractive acquisition opportunities and your company expects to
avail of them especially if they lie in their targeted geographies.

46

RATIO ANALYSIS:

Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative)
factors of a company. The other side considers tangible and measurable factors (quantitative).
This means crunching and analyzing numbers from the financial statements. If used in
conjunction with other methods, quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement, and cash flow statement. It's comparing the number against previous years, other
companies, the industry, or even the economy in general. Ratios look at the relationships between
individual values and relate them to how a company has performed in the past, and might perform
in the future.

MEANING OF RATIO:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick that
measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is
an expression relating one number to another. It is simply the quotient of two numbers. It can be
expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many
times. As accounting ratio is an expression relating two figures or accounts or two sets of
account heads or group contain in the financial statements.

MEANING OF RATIO ANALYSIS:

Ratio analysis is the method or process by which the relationship of items or group of
items in the financial statement are computed, determined and presented.

47

Ratio analysis is an attempt to derive quantitative measure or guides concerning the

financial health and profitability of business enterprises. Ratio analysis can be used both in trend
and static analysis. There are several ratios at the disposal of an annalist but their group of ratio he
would prefer depends on the purpose and the objective of analysis.
While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus on
a technique, which is easy to use. It can provide you with a valuable investment analysis tool.
This technique is called cross-sectional analysis. Cross-sectional analysis compares financial
ratios of several companies from the same industry. Ratio analysis can provide valuable
information about a company's financial health. A financial ratio measures a company's
performance in a specific area. For example, you could use a ratio of a company's debt to its
equity to measure a company's leverage. By comparing the leverage ratios of two companies, you
can determine which company uses greater debt in the conduct of its business. A company whose
leverage ratio is higher than a competitor's has more debt per equity. You can use this information
to make a judgment as to which company is a better investment risk.
However, you must be careful not to place too much importance on one ratio. You obtain a better
indication of the direction in which a company is moving when several ratios are taken as a group.
OBJECTIVE OF RATIOS
Ratio is work out to analyze the following aspects of business organizationA Solvency1

Long term

Short term

Immediate

B Stability
C Profitability
D Operational efficiency
48

E Credit standing
F Structural analysis
G Effective utilization of resources
H Leverage or external financing

FORMS OF RATIO:
Since a ratio is a mathematical relationship between to or more variables / accounting
figures, such relationship can be expressed in different ways as follows
A] As a pure ratio:
For example the equity share capital of a company is Rs. 20,00,000 & the preference share
capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital is 20,00,000:
5,00,000 or simply 4:1.
B] As a rate of times:
In the above case the equity share capital may also be described as 4 times that of
preference share capital. Similarly, the cash sales of a firm are
Rs. 12,00,000 & credit sales are Rs. 30,00,000. so the ratio of credit sales to cash sales can be
described as 2.5 [30,00,000/12,00,000] or simply by saying that the credit sales are 2.5 times that
of cash sales.
C] As a percentage:
In such a case, one item may be expressed as a percentage of some other item. For
example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000,
then the gross profit may be described as 20% of sales [ 10,00,000/50,00,000]

49

STEPS IN RATIO ANALYSIS

The ratio analysis requires two steps as follows:
1] Calculation of ratio
2] Comparing the ratio with some predetermined standards. The standard ratio may be the past
ratio of the same firm or industrys average ratio or a projected ratio or the ratio of the most
successful firm in the industry. In interpreting the ratio of a particular firm, the analyst cannot
reach any fruitful conclusion unless the calculated ratio is compared with some predetermined
standard. The importance of a correct standard is oblivious as the conclusion is going to be based
on the standard itself.
TYPES OF COMPARISONS
The ratio can be compared in three different ways
1] Cross section analysis:
One of the way of comparing the ratio or ratios of the firm is to compare them with the
ratio or ratios of some other selected firm in the same industry at the same point of time. So it
involves the comparison of two or more firms financial ratio at the same point of time. The cross
section analysis helps the analyst to find out as to how a particular firm has performed in relation
to its competitors. The firms performance may be compared with the performance of the leader in
the industry in order to uncover the major operational inefficiencies. The cross section analysis is
easy to be undertaken as most of the data required for this may be available in financial statement
of the firm.
2] Time series analysis:
The analysis is called Time series analysis when the performance of a firm is evaluated
over a period of time. By comparing the present performance of a firm with the performance of

50

the same firm over the last few years, an assessment can be made about the trend in progress of
the firm, about the direction of progress of the firm. Time series analysis helps to the firm to
assess whether the firm is approaching the long-term goals or not. The Time series analysis looks
for (1) important trends in financial performance (2) shift in trend over the years (3) significant
deviation if any from the other set of data\
3] Combined analysis:
If the cross section & time analysis, both are combined together to study the behavior &
pattern of ratio, then meaningful & comprehensive evaluation of the performance of the firm can
definitely be made. A trend of ratio of a firm compared with the trend of the ratio of the standard
firm can give good results. For example, the ratio of operating expenses to net sales for firm may
be higher than the industry average however, over the years it has been declining for the firm,
whereas the industry average has not shown any significant changes.

The combined analysis as depicted in the above diagram, which clearly shows that the ratio of the
firm is above the industry average, but it is decreasing over the years & is approaching the
industry average.

51

52

PRE-REQUISITIES TO RATIO ANALYSIS

In order to use the ratio analysis as device to make purposeful conclusions, there are
certain pre-requisites, which must be taken care of. It may be noted that these prerequisites are not
conditions for calculations for meaningful conclusions. The accounting figures are inactive in
them & can be used for any ratio but meaningful & correct interpretation & conclusion can be
arrived at only if the following points are well considered.
1

The dates of different financial statements from where data is taken must be same.

If possible, only audited financial statements should be considered, otherwise there must
be sufficient evidence that the data is correct.

Accounting policies followed by different firms must be same in case of cross section
analysis otherwise the results of the ratio analysis would be distorted.

One ratio may not throw light on any performance of the firm. Therefore, a group of ratios
must be preferred. This will be conductive to counter checks.

Last but not least, the analyst must find out that the two figures being used to calculate a
ratio must be related to each other, otherwise there is no purpose of calculating a ratio.

53

CLASSIFICATION OF RATIO

CLASSIFICATION OF RATIO

BASED ON FINANCIAL

BASED ON FUNCTION

BASED ON USER

STATEMENT

1] BALANCE SHEET
RATIO
2] REVENUE

1] LIQUIDITY RATIO
2] LEVERAGE RATIO

SHORT TERM

3] ACTIVITY RATIO

CREDITORS

STATEMENT

4] PROFITABILITY

RATIO

RATIO

3] COMPOSITE

RATIO

1] RATIOS FOR

2] RATIO FOR
SHAREHOLDER

5] COVERAGE

3] RATIOS FOR

RATIO

MANAGEMENT

4] RATIO FOR
LONG TERM
CREDITORS

54

BASED ON FINANCIAL STATEMENT

Accounting ratios express the relationship between figures taken from financial
statements. Figures may be taken from Balance Sheet , P& P A/C, or both. One-way of
classification of ratios is based upon the sources from which are taken.
1] Balance sheet ratio:
If the ratios are based on the figures of balance sheet, they are called Balance Sheet Ratios.
E.g. ratio of current assets to current liabilities or ratio of debt to equity. While calculating these
ratios, there is no need to refer to the Revenue statement. These ratios study the relationship
between the assets & the liabilities, of the concern. These ratio help to judge the liquidity,
solvency & capital structure of the concern. Balance sheet ratios are Current ratio, Liquid ratio,
and Proprietory ratio, Capital gearing ratio, Debt equity ratio, and Stock working capital ratio.

2] Revenue ratio:
Ratio based on the figures from the revenue statement is called revenue statement ratios.
These ratio study the relationship between the profitability & the sales of the concern. Revenue
ratios are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit
ratio, Stock turnover ratio.

3] Composite ratio:
These ratios indicate the relationship between two items, of which one is found in the
balance sheet & other in revenue statement.
There are two types of composite ratios-

55

Some composite ratios study the relationship between the profits & the investments of the
concern. E.g. return on capital employed, return on proprietors fund, return on equity
capital etc.

Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend
payout ratios, & debt service ratios

BASED ON FUNCTION:

Accounting ratios can also be classified according to their functions in to liquidity ratios,
leverage ratios, activity ratios, profitability ratios & turnover ratios.

1] Liquidity ratios:
It shows the relationship between the current assets & current liabilities of the concern e.g.
liquid ratios & current ratios.

2] Leverage ratios:
It shows the relationship between proprietors funds & debts used in financing the assets of
the concern e.g. capital gearing ratios, debt equity ratios, & Proprietory ratios.

3] Activity ratios:
It shows relationship between the sales & the assets. It is also known as Turnover ratios &
productivity ratios e.g. stock turnover ratios, debtors turnover ratios.

4] Profitability ratios:
a

It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios,
operating net profit ratios, expenses ratios

56

It shows the relationship between profit & investment e.g. return on investment, return on
equity capital.

5] Coverage ratios:
It shows the relationship between the profit on the one hand & the claims of the outsiders
to be paid out of such profit e.g. dividend payout ratios & debt service ratios.

BASED ON USER:
1] Ratios for short-term creditors:
Current ratios, liquid ratios, stock working capital ratios
2] Ratios for the shareholders:
Return on proprietors fund, return on equity capital

3] Ratios for management:

Return on capital employed, turnover ratios, operating ratios, expenses ratios
4] Ratios for long-term creditors:
Debt equity ratios, return on capital employed, proprietor ratios.

57

58

LIQUIDITY RATIO: Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations.
The ratios, which indicate the liquidity of a company, are Current ratio, Quick/Acid-Test ratio, and
Cash ratio. These ratios are discussed below

59

CURRENT RATIO
Meaning:
This ratio compares the current assests with the current liabilities. It is also known as working
capital ratio or solvency ratio. It is expressed in the form of pure ratio.
E.g. 2:1
Formula:

Current assets
Current ratio =

Current liabilities

The current assests of a firm represents those assets which can be, in the ordinary course of
business, converted into cash within a short period time, normally not exceeding one year. The
current liabilities defined as liabilities which are short term maturing obligations to be met, as
originally contemplated, with in a year.
Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current
assets include cash and bank balances; inventory of raw materials, semi-finished and finished
goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills
receivable; and prepaid expenses. Current liabilities consist of trade creditors, bills payable, bank
credit, provision for taxation, dividends payable and outstanding expenses. This ratio measures
the liquidity of the current assets and the ability of a company to meet its short-term debt
obligation.
CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash in the
operating cycle of the firm and provides the funds needed to pay for CL. The higher the current

60

ratio, the greater the short-term solvency. This compares assets, which will become liquid within
approximately twelve months with liabilities, which will be due for payment in the same period
and is intended to indicate whether there are sufficient short-term assets to meet the short- term
liabilities. Recommended current ratio is 2: 1. Any ratio below indicates that the entity may face
liquidity problem but also Ratio over 2: 1 as above indicates over trading, that is the entity is
under utilizing its current assets.
LIQUID RATIO:
Meaning:
Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compare the quick assets
with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1.
The term quick assets refer to current assets, which can be converted into, cash immediately or at
a short notice without diminution of value.
Formula:
Quick assets
Liquid ratio =

Quick liabilities
Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to those
current assets that can be converted into cash immediately without any value strength. QA
includes cash and bank balances, short-term marketable securities, and sundry debtors. Inventory
and prepaid expenses are excluded since these cannot be turned into cash as and when required.

61

QR indicates the extent to which a company can pay its current liabilities without relying on the
sale of inventory. This is a fairly stringent measure of liquidity because it is based on those current
assets, which are highly liquid. Inventories are excluded from the numerator of this ratio because
they are deemed the least liquid component of current assets. Generally, a quick ratio of 1:1 is
considered good. One drawback of the quick ratio is that it ignores the timing of receipts and
payments.

CASH RATIO
Meaning:
This is also called as super quick ratio. This ratio considers only the absolute liquidity available
with the firm.
Formula:
Cash + Bank + Marketable securities
Cash ratio

=
Total current liabilities

Since cash and bank balances and short term marketable securities are the most liquid assets of a
firm, financial analysts look at the cash ratio. If the super liquid assets are too much in relation to
the current liabilities then it may affect the profitability of the firm.

62

INVESTMENT / SHAREHOLDER

EARNING PER SAHRE:Meaning:

Earnings per Share are calculated to find out overall profitability of the organization. An earnings
per Share represents earning of the company whether or not dividends are declared. If there is
only one class of shares, the earning per share are determined by dividing net profit by the number
of

equity

EPS measures the profits available to the equity shareholders on each share held.

Formula:
NPAT
Earning per share =
Number of equity share

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shares.

The higher EPS will attract more investors to acquire shares in the company as it indicates that the
business is more profitable enough to pay the dividends in time. But remember not all profit
earned is going to be distributed as dividends the company also retains some profits for the
business

DIVIDEND PER SHARE:Meaning:

DPS shows how much is paid as dividend to the shareholders on each share held.
Formula:
Dividend Paid to Ordinary Shareholders
Dividend per Share =
Number of Ordinary Shares

DIVIDEND PAYOUT RATIO:Meaning:

Dividend Pay-out Ratio shows the relationship between the dividend paid to equity shareholders
out of the profit available to the equity shareholders.

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Formula:
Dividend per share
Dividend Pay out ratio =

*100

Earning per share

D/P ratio shows the percentage share of net profits after taxes and after preference dividend has
been paid to the preference equity holders.
GEARING

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CAPITAL GEARING RATIO:Meaning:

Gearing means the process of increasing the equity shareholders return through the use of debt.
Equity shareholders earn more when the rate of the return on total capital is more than the rate of
interest on debts. This is also known as leverage or trading on equity. The Capital-gearing ratio
shows the relationship between two types of capital viz: - equity capital & preference capital &
long term borrowings. It is expressed as a pure ratio.

Formula:
Preference capital+ secured loan
Capital gearing ratio =
Equity capital & reserve & surplus
Capital gearing ratio indicates the proportion of debt & equity in the financing of assets of a
concern.

PROFITABILITY
These ratios help measure the profitability of a firm. A firm, which generates a substantial amount
of profits per rupee of sales, can comfortably meet its operating expenses and provide more
returns to its shareholders. The relationship between profit and sales is measured by profitability
ratios. There are two types of profitability ratios: Gross Profit Margin and Net Profit Margin.

66

GROSS PROFIT RATIO:Meaning:

This ratio measures the relationship between gross profit and sales. It is defined as the excess of
the net sales over cost of goods sold or excess of revenue over cost. This ratio shows the profit
that remains after the manufacturing costs have been met. It measures the efficiency of production
as well as pricing. This ratio helps to judge how efficient the concern is I managing its production,
purchase, selling & inventory, how good its control is over the direct cost, how productive the
concern , how much amount is left to meet other expenses & earn net profit.

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Formula:
Gross profit
Gross profit ratio

* 100
Net sales

NET PROFIT RATIO:Meaning:

Net Profit ratio indicates the relationship between the net profit & the sales it is usually expressed
in the form of a percentage.
Formula:
NPAT
Net profit ratio =

* 100

Net sales
This ratio shows the net earnings (to be distributed to both equity and preference shareholders) as
a percentage of net sales. It measures the overall efficiency of production, administration, selling,
financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios
provide an understanding of the cost and profit structure of a firm.
RETURN ON CAPITAL EMPLOYED:Meaning:
The profitability of the firm can also be analyzed from the point of view of the total funds
employed in the firm. The term fund employed or the capital employed refers to the total long-

68

term source of funds. It means that the capital employed comprises of shareholder funds plus
long-term debts. Alternatively it can also be defined as fixed assets plus net working capital.
Capital employed refers to the long-term funds invested by the creditors and the owners of a firm.
It is the sum of long-term liabilities and owner's equity. ROCE indicates the efficiency with which
the long-term funds of a firm are utilized.

Formula:
NPAT
Return on capital employed =

*100
Capital employed

FINANCIAL
These ratios determine how quickly certain current assets can be converted into cash. They are
also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in
managing assets. These ratios are based on the relationship between the level of activity
represented by sales or cost of goods sold and levels of investment in various assets. The
important turnover ratios are debtors turnover ratio, average collection period, inventory/stock
turnover ratio, fixed assets turnover ratio, and total assets turnover ratio. These are described
below:

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DEBTORS TURNOVER RATIO (DTO)

Meaning:
DTO is calculated by dividing the net credit sales by average debtors outstanding during the year.
It measures the liquidity of a firm's debts. Net credit sales are the gross credit sales minus returns,
if any, from customers. Average debtors are the average of debtors at the beginning and at the end
of the year. This ratio shows how rapidly debts are collected. The higher the DTO, the better it is
for the organization.
Formula:
Credit sales
Debtors turnover ratio =
Average debtors

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INVENTORY OR STOCK TURNOVER RATIO (ITR)

Meaning:
ITR refers to the number of times the inventory is sold and replaced during the accounting period.
Formula:
COGS
Stock Turnover Ratio =
Average stock

ITR reflects the efficiency of inventory management. The higher the ratio, the more efficient is the
management of inventories, and vice versa. However, a high inventory turnover may also result
from a low level of inventory, which may lead to frequent stock outs and loss of sales and
customer goodwill. For calculating ITR, the average of inventories at the beginning and the end of
the year is taken. In general, averages may be used when a flow figure (in this case, cost of goods
sold) is related to a stock figure (inventories).

FIXED ASSETS TURNOVER (FAT)

The FAT ratio measures the net sales per rupee of investment in fixed assets.
Formula:
Net sales
Fixed assets turnover =
Net fixed assets
This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a
high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets.
However, this ratio should be used with caution because when the fixed assets of a firm are old

71

and substantially depreciated, the fixed assets turnover ratio tends to be high (because the
denominator of the ratio is very low).

PROPRIETORS RATIO:
Meaning:
Proprietary ratio is a test of financial & credit strength of the business. It relates shareholders fund
to total assets. This ratio determines the long term or ultimate solvency of the company.
In other words, Proprietary ratio determines as to what extent the owners interest & expectations
are fulfilled from the total investment made in the business operation.
Proprietary ratio compares the proprietor fund with total liabilities. It is usually expressed in the
form of percentage. Total assets also know it as net worth.
Formula:
Proprietary fund
Proprietary ratio

OR

Total fund

Shareholders fund

Proprietary ratio =
Fixed assets + current liabilities

72

STOCK WORKING CAPITAL RATIO:

Meaning:
This ratio shows the relationship between the closing stock & the working capital. It helps to
judge the quantum of inventories in relation to the working capital of the business. The purpose of
this ratio is to show the extent to which working capital is blocked in inventories. The ratio
highlights the predominance of stocks in the current financial position of the company. It is
expressed as a percentage.
Formula:
Stock
Stock working capital ratio =
Working Capital

Stock working capital ratio is a liquidity ratio. It indicates the composition & quality of the
working capital. This ratio also helps to study the solvency of a concern. It is a qualitative test of
solvency. It shows the extent of funds blocked in stock. If investment in stock is higher it means
that the amount of liquid assets is lower.

DEBT EQUITY RATIO:

MEANING:
This ratio compares the long-term debts with shareholders fund. The relationship between
borrowed funds & owners capital is a popular measure of the long term financial solvency of a
firm. This relationship is shown by debt equity ratio. Alternatively, this ratio indicates the relative
proportion of debt & equity in financing the assets of the firm. It is usually expressed as a pure
ratio. E.g. 2:1

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Formula:
Total long-term debt

Debt equity ratio =

Total shareholders fund

Debt equity ratio is also called as leverage ratio. Leverage means the process of the increasing the
equity shareholders return through the use of debt. Leverage is also known as gearing or trading
on equity. Debt equity ratio shows the margin of safety for long-term creditors & the balance
between debt & equity.

RETURN ON PROPRIETOR FUND:

Meaning:
Return on proprietors fund is also known as return on proprietors equity or return on
shareholders investment or investment ratio. This ratio indicates the relationship between net
profit earned & total proprietors funds. Return on proprietors fund is a profitability ratio, which
the relationship between profit & investment by the proprietors in the concern. Its purpose is to
measure the rate of return on the total fund made available by the owners. This ratio helps to
judge how efficient the concern is in managing the owners fund at disposal. This ratio is of
practical importance to prospective investors & shareholders.
Formula:
NPAT
Return on proprietors fund =

* 100
Proprietors fund

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CREDITORS TURNOVER RATIO:

It is same as debtors turnover ratio. It shows the speed at which payments are made to the supplier
for purchase made from them. It is a relation between net credit purchase and average creditors
Net credit purchase
Credit turnover ratio =
Average creditors

Months in a year
Average age of accounts payable =
Credit turnover ratio

Both the ratios indicate promptness in payment of creditor purchases. Higher creditors turnover
ratio or a lower credit period enjoyed signifies that the creditors are being paid promptly. It
enhances credit worthiness of the company. A very low ratio indicates that the company is not
taking full benefit of the credit period allowed by the creditors.

75

IMPORTANCE OF RATIO ANALYSIS:

As a tool of financial management, ratios are of crucial significance. The importance of
ratio analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of
interference regarding the performance of a firm. Ratio analysis is relevant in assessing the
performance of a firm in respect of the following aspects:
1] Liquidity position,
2] Long-term solvency,
3] Operating efficiency,
4] Overall profitability,
5] Inter firm comparison
6] Trend analysis.

1] LIQUIDITY POSITION: With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of
a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current
obligation when they become due. A firm can be said to have the ability to meet its short-term
liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually
within a year as well as to repay the principal. This ability is reflected in the liquidity ratio of a
firm. The liquidity ratio are particularly useful in credit analysis by bank & other suppliers of
short term loans.

2] LONG TERM SOLVENCY: Ratio analysis is equally useful for assessing the long-term financial viability of a firm.
This respect of the financial position of a borrower is of concern to the long-term creditors,

76

security analyst & the present & potential owners of a business. The long-term solvency is
measured by the leverage/ capital structure & profitability ratio Ratio analysis s that focus on
earning power & operating efficiency.
Ratio analysis reveals the strength & weaknesses of a firm in this respect. The leverage
ratios, for instance, will indicate whether a firm has a reasonable proportion of various sources of
finance or if it is heavily loaded with debt in which case its solvency is exposed to serious strain.
Similarly the various profitability ratios would reveal whether or not the firm is able to offer
adequate return to its owners consistent with the risk involved.
3] OPERATING EFFICIENCY:
Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of
management, is that it throws light on the degree of efficiency in management & utilization of its
assets. The various activity ratios measures this kind of operational efficiency. In fact, the
solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the
use of its assets- total as well as its components.
4] OVERALL PROFITABILITY:
Unlike the outsides parties, which are interested in one aspect of the financial position of a
firm, the management is constantly concerned about overall profitability of the enterprise. That is,
they are concerned about the ability of the firm to meets its short term as well as long term
obligations to its creditors, to ensure a reasonable return to its owners & secure optimum
utilization of the assets of the firm. This is possible if an integrated view is taken & all the ratios
are considered together.
5] INTER FIRM COMPARISON:
Ratio analysis not only throws light on the financial position of firm but also serves as a
stepping-stone to remedial measures. This is made possible due to inter firm comparison &

77

comparison with the industry averages. A single figure of a particular ratio is meaningless unless
it is related to some standard or norm. one of the popular techniques is to compare the ratios of a
firm with the industry average. It should be reasonably expected that the performance of a firm
should be in broad conformity with that of the industry to which it belongs. An inter firm
comparison would demonstrate the firms position vice-versa its competitors. If the results are at
variance either with the industry average or with the those of the competitors, the firm can seek to
identify the probable reasons & in light, take remedial measures.
6] TREND ANALYSIS:
Finally, ratio analysis enables a firm to take the time dimension into account. In other
words, whether the financial position of a firm is improving or deteriorating over the years. This
is made possible by the use of trend analysis. The significance of the trend analysis of ratio lies in
the fact that the analysts can know the direction of movement, that is, whether the movement is
favorable or unfavorable. For example, the ratio may be low as compared to the norm but the
trend may be upward. On the other hand, though the present level may be satisfactory but the
trend may be a declining one.
ADVANTAGES OF RATIO ANALYSIS
Financial ratios are essentially concerned with the identification of significant accounting
data relationships, which give the decision-maker insights into the financial performance of a
company. The advantages of ratio analysis can be summarized as follows:
Ratios facilitate conducting trend analysis, which is important for decision making and
forecasting.
Ratio analysis helps in the assessment of the liquidity, operating efficiency,
profitability and solvency of a firm.

78

 Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons.

The comparison of actual ratios with base year ratios or standard ratios helps the
management analyze the financial performance of the firm.

LIMITATIONS OF RATIO ANALYSIS

Ratio analysis has its limitations. These limitations are described below:
1] Information problems

Ratios require quantitative information for analysis but it is not decisive about analytical
output .
The figures in a set of accounts are likely to be at least several months out of date, and so
might not give a proper indication of the companys current financial position.
Where historical cost convention is used, asset valuations in the balance sheet could be
misleading. Ratios based on this information will not be very useful for decision-making.

2] Comparison of performance over time

When comparing performance over time, there is need to consider the changes in price.
The movement in performance should be in line with the changes in price.
When comparing performance over time, there is need to consider the changes in
technology. The movement in performance should be in line with the changes in
technology.
Changes in accounting policy may affect the comparison of results between different
accounting years as misleading.

79

3] Inter-firm comparison
Companies may have different capital structures and to make comparison of performance
when one is all equity financed and another is a geared company it may not be a good
analysis.
Selective application of government incentives to various companies may also distort
intercompany comparison. comparing the performance of two enterprises may be
misleading.
Inter-firm comparison may not be useful unless the firms compared are of the same size
and age, and employ similar production methods and accounting practices.
Even within a company, comparisons can be distorted by changes in the price level.

Ratios provide only quantitative information, not qualitative information.

Ratios are calculated on the basis of past financial statements. They do not indicate future
trends and they do not consider economic conditions.
PURPOSE OF RATIO ANLYSIS:
1] To identify aspects of a businesses performance to aid decision making
2] Quantitative process may need to be supplemented by qualitative
Factors to get a complete picture.

80

3] 5 main areas: Liquidity the ability of the firm to pay its way
Investment/shareholders information to enable decisions to be made on the extent of the
risk and the earning potential of a business investment
Gearing information on the relationship between the exposure of the business to loans as
opposed to share capital
Profitability how effective the firm is at generating profits given sales and or its capital
assets
Financial the rate at which the company sells its stock and the efficiency with which it
uses its assets

ROLE OF RATIO ANALYSIS:

It is true that the technique of ratio analysis is not a creative technique in the sense that it
uses the same figure & information, which is already appearing in the financial statement. At the
same time, it is true that what can be achieved by the technique of ratio analysis cannot be
achieved by the mere preparation of financial statement.
Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of
performance, either individually or in relation to those of other firms in the same industry. The
process of this appraisal is not complete until the ratio so computed can be compared with
something, as the ratio all by them do not mean anything. This comparison may be in the form of
intra firm comparison, inter firm comparison or comparison with standard ratios. Thus proper
comparison of ratios may reveal where a firm is placed as compared with earlier period or in
comparison with the other firms in the same industry.

81

Ratio analysis is one of the best possible techniques available to the management to impart
the basic functions like planning & control. As the future is closely related to the immediate past,
ratio calculated on the basis of historical financial statements may be of good assistance to predict
the future. Ratio analysis also helps to locate & point out the various areas, which need the
management attention in order to improve the situation.
As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e.
liquidity, solvency, activity, profitability & overall performance, it enables the interested persons
to know the financial & operational characteristics of an organisation & take the suitable decision.

82

OBJECTIVE OF THE STUDY

To be able to apply the theoretical knowledge obtained at the institute in a practical

manner in the actual business environment.

To get the knowledge about organizational problems, perceptions and challenges.

To get an opportunity of real life business experience.
To analysis and find ratio for financial year 2009-2011

83

RESEARCH METHODOLOGY

The data collected for the project was in the form of written as well as verbal information
regarding ratio analysis of the company.
1) Primary data: The information about the Company is gathered from the discussion with the
employees/staff and from the web site of the Company.
2) Secondary data:The secondary data collected The balance sheets as on the date of 31st march for the years2008 2009
2009 2010
2010 - 2011
The methodology of this study has been adopted on the following basis:

Study of various Journals, Notes & Books.

Study through web-sites

Collection of Primary & Secondary data records of the organization.

Analysis of the collected data for its application.

84

ANALYSIS

85

RATIO
ANALYSIS

86

1)Debt Equity Ratio:

Debt Equity Ratio =

Long Term Debt

Share Holders Fund

Debt= Secured loan + unsecured loan (long term)

Particulars
Debt
Equity
Ratio

2011
135,33,40,965.26
34,03,59,000.00
3.97

2010
63,80,64,000
34,03,59,000
1.87

2009
76,80,20,840
33,19,71,481
2.31

Chart showing changes in Debt Equity Ratio

2009; 28%
2011; 49%
2010; 23%

87

2) Shareholders equity ratio:

Shareholders equity ratio:

Share holders Equity

Total assets (Tangible)

Particulars
Shareholders funds

2011

2010

2009

83,45,92,364.65

60,93,74,000

34,38,69,627

Total assets

2,18,79,33,329.91

152,67,00,000

110,46,90,466

Ratio

0.38

0.39

0.31

Share holders equity: Equity shares+ Preference+ Reserves and surplus- losses (if any)

Chart showing changes in Shareholders equity ratio

2009; 29%

2011; 35%

2010; 36%

88

3)Debt to net worth ratio:

Debt to Net worth Ratio

= Long term debt

Net worth

Net worth: equity + preference+ reserves and surplus- losses

Particulars
Long term debt
Net worth

2011

2010

2009

135,33,40,965.26

63,80,64,000

76,80,20,840

83,45,92,364.65

60,93,74,000

34,38,69,627

1.62

1.04

2.23

Ratio

Debt to Net worth Ratio

2011; 33%
2009; 46%

2010; 21%

If we look at this ratio we can say the company is having more long term debts than its net worth.
So the company has to taken care of it. Here higher the ratio higher the obligation and vice-versa.

89

4) Fixed assets to long term funds:

Fixed assets to long term funds:

Fixed assets
Long term funds.

Long term funds = equity + debt

Particulars
Fixed Assets
Long term funds.

2011

2010

2009

1,63,08,90,394.60

84,09,12,000

83,19,52,687

169,36,99,965.26

97,84,23,000

109,99,92,321

0.96

0.85

0.75

Ratio

Fixed assets to long term funds

2009; 29%
2011; 38%

2010; 33%

If we look at this ratio the company is getting more and more long term funds from year to year.
This analysis states us that the company securing itself by raising its long term funds. This raise
the companys capability of investment.

90

5) Current ratio:
Current ratio:

Current assets
Current liabilities

Particulars

2011

Current assets
Current Liability

2010

2009

111,96,08,329.53

68,35,78,842.26

42,20,67,183.97

58,42,63,485.22

27,92,61,185.52

15,17,08,691.07

1.91

2.44

2.78

Ratio

Current ratio
3

2.5

2
Current ratio
1.5

0.5

0
2009

2010

2011

As the current ratio is moving downwards from year to year, it states us that the company is
becoming lesser capable to meet its short term obligations. If the companys current ratio goes
lesser than 1 it would be very harmful to the company. So the company has taken care of it.

91

6) Quick Ratio:
Quick Ratio: Current assets- stock
Current liabilities- bank o/d
Particulars

2011

2010

2009

Current Assets- Stock

66,90,90,723.72

37,81,31,521.16 19,65,75,176.36

Current Liability Bank

overdraft

58,42,63,485.22

27,92,61,185.52 15,17,08,691.07

Ratio

1.14

1.35

1.29

Quick Ratio

2011; 30%

2009; 34%
2010; 36%

If we look at the quick ratio we can say that the company is not so consistent to meet its short
term debt obligations. By above analysis the company from 2009 to 2010 it had more capability
of repaying its debt obligations and if compare 2010 to 2011 it has lost its capability of
repayment of its debt obligations.

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7)Return on capital employed:

Return on Capital Employed =

Particulars
Net Profit
Capital Employed
Ratio

Net Profit
Capital Employed

100

2011
2010
2009
22,52,18,081.25
21,64,97,137.69
7,09,29,391.60
83,45,92,364.65
60,93,74,000
34,38,69,627
0.26
0.35
0.20

Return on Capital Employed

2009; 25%

2011; 32%

2010; 43%

This position of the company states us that the company is fair enough in its return on capital
employed. The above analysis states us that the company as compared to 2011 into 2010 it is not
having fair margin and if we 2010 into 2009 it has gained good margin in it.

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8) Net profit margin:

Net Profit Margin = Net Profit before interest and Tax
Sales
Particulars
Net Profit before
interest and Tax
Sales
Ratio

2011

100

2010

2009

251,079,243.25

247,131,501.69

70929391.60

1,160,705,003.75
0.21

942,877,990.40
0.26

518359946.19
0.13

Net Profit Margin

2009; 22%
2011; 35%

2010; 43%

By above analysis we can say that as compared to 2009 into 2010 it has gained good control over
its costs and if we compare 2011 into 2010 the company is not having much control over its costs.

94

SUGGESTION AND RECOMMENDATION

On the basis of analysis, the recommendation to further improves the working capital
management, which would level the company to greater heights.
1) As we seen in the current ratio, we can say that the company is utilizing its equity
fully. This states us that there is no unutilized fund in the company.
2) By observing current ratio, we can say that the company is having more current
assets than its current liabilities.

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SUGGESTIONS

Sometimes gap between top-level management and lower level management may cause
some harmful results. So proper steps should be taken to reduce this communication gap.

Proper empowerment.

Sufficient number of computers should be there.

Company should take the help of the cane society and local administrative authority of
their area to avoid unhealthy competitions.

Company should arrange sufficient number of trucks at centers to avoid accumulation of

cane purchased.

Company should have their own transportation.

Company should improve the supply chain management.

Try to get the payment as early as possible by giving the various discount.

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CONCLUSION
The conclusion of whole project Financial Analysis of Sugar Production and sale is that
Triveni Engineering and Industries Limited is one of the largest sugar producers of India. The
revenue of sugar business is 70 % in respect of other businesses of the company. Company has
many sugar plants in west U.P. and East U.P. also in which total cane crushing is 40,500 tcd in
2005-06. In all the plants Khatauli plant has the largest cane crushing is 16000 tcd and in
Deoband plant 14000 tcd. These two plants gives the maximum revenue to the company.

There are twelve types of risks in the company and so many technologies are used by the
different divisions of the company. Companys sugar plant gives the highest profit with the help of
large sugar production. Company produces two types of sugar Branded Sugar and white Sugar.
Sugar prices are decided by the government under the U.P. Sugar Policy. Company sales
their sugar in the different states of the country as Haryana, Punjab and Rajasthan etc.

The performance of the company in year 2005-06 is:

Net Sales

11920.37 Million

EBIDTA

2130.00 Million

Profit after Tax

1314.96 Million

Earning Per Share

5.98 Million

Book Value

19.83 Million

Total Debt / Equity ratio

0.79 Million

The overall working of the factory during the year 2005-06 was considering satisfactory.

97

LIMITATION OF THE STUDY

Generally company does not allow outsiders to conduct any study or research work in
company. Therefore, get the project done in company itself was very difficult.

Due to confidentiality some important information, which are important for the project,
could not be collected.

Some of the information is lack of accuracy, due to which approximately values were used
for the analysis. Hence, the results also reveal approximate values.
The project is based on theoretical guidelines and as per situations prevalent at the time of
practical training. Hence, it may not be apply to different situations.
The time span for the project was very short which was of 2 months, which itself acts as a
major constraint. Moreover, studying the guidelines and applied it practically within such
short time span was a task of great pressure.

98

BIBLIOGRAPHY
www.google.com
www.trivenigroup.com
Annual Report 2010-09.
(Triveni Engg. And Ind. Ltd)
Annual Report 2009-08.
(Triveni Engg. And Ind. Ltd)
Economic Times

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QUESTIONNAIRE
Name

Address:

Phone No.:

Q1)

What is the proportion of distribution of produced sugar?

Free
Levy

Q2)

What is the proportion of distribution of Molasses?

Free
Levy

Q3)

What is the quantity of cane crushing in a particular unit / day?

Khatauli
Deoband
Ramkola
Sabitgarh

Q4)

what is the Percentage of use of the different way in distribution of produced sugar?

Rail
Road

100

Q5)

What is the contribution of a particular state in generating the sales revenue?

Utter Pradesh
Punjab
Rajasthan
Haryana

Q6)

What is the Percentage of total profit contributed by the sugar business in respect of other

businesses of the company?

In 2010-09
Sugar
Other

In 2009-08
Sugar
Other

Q7)

What is the per capita sugar consumption in different countries?

Brazil
Pakistan
India
Africa

101

Q8)

what is the percentage role of banks played in the payment of sugarcane payment?

Bank Role
Company Role

Q9)

does raw sweet affects the sale of sugar?

Yes
No

Q10) Up to what extent raw sweet affects the sale of sugar?

Affects
Not Affect

Q11) What is the percentage of sugar production in each unit?

Khatauli
Deoband
Ramkola
Sabitgarh

102

Q12) What is the percentage contribution of profit given by each unit?

Khatauli
Deoband
Ramkola
Sabitgarh

Q13) Does company give any commission to the agents of the company?

Yes
No

Q14) What is the percentage of sale of sugar in Utter Pradesh with respect to other states?

U.P. Sale

Central sale

Q15)

which type of sugar does the company produce?

S-31
M-31
L-31
Q16)

What is the mode of sugar payment by agents? a

In cash
In credit
By check
Partially by check and credit
103

Q17) Which type of transportation facility you have?

Own facility
Hired

Q18) What is the time spending in between the delivery of sugar and payment of sugar?

With in 7 days
With in 15 days
With in 30 days

Q19) To whom agents give the payment of sugar?

To Bank
To Company

104