A

INTERNSHIP REPORT
ON

COMPARATIVE STUDY OF RATIO ANALYSIS

Submitted for partial fulfilment of Masters of Business Administration [M.B.A.]

GautamBudh Technical University Lucknow. By

AVTAR SINGH
MBA III Semester

Invertis Institute of Eng. &Management Bareilly (U.P)

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Certificates
The following Summer Internship Report titled "COMPARATIVE STUDY OF RATIO ANALYSIS" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of MBA in FINANCE for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Internship Report only for the purpose it is submitted.

Summer Internship Report Examination Committee for evaluation of Summer Internship Report Organizational Guide : Signature. : Name- Mr. V. K periwal : Designation- Cane Manager Cane Department : Address- The Oudh Sugar Mills Limited
P.O:- Hargaon District- Sitapur (U.P) Pin:- 261121 India. Phone:- 91 05862 256221 Email birlasugar@birla_sugar.com 2|Page

DECLARATION

I declare that the project entitled COMPARATIVE STUDY OF RATIO ANALYSIS(Conducted on behalf of The Oudh Sugar Mills Ltd.) under the guidance of Mr. NitinSareensubmitted in partial fulfilment of the requirement for the award of the degree of Masters of Business Administration to Invertis Institute of Eng. &Management, BAREILLY (U.P.) is my original work carried out during 15th June, 2011 to 30th July, 2011, and not submitted for the award of any other degree, diploma, fellowship or other similar or prize to any other institute, organization or university by any other person.

Place: BAREILLY(AVTAR SINGH)

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PREFACE
Welcome to sugar, an open source customer relationship management(CRM) application. Sugar enables organizations to efficiently organise, populate, and maintain information on all aspects of their customer relationships. It provide integrated management of corporate information on customer accounts on contacts, sales leads and opportunities, plus activities such as calls, meetings and assigned tasks. The system blends seamlessly all of the functionality required to manage information on many aspects of your business into an initiative and user- friendly graphic interface. The system also offers the graphical dashboard to track the sales pipeline, the most successful lead sources and the month-by-month outcomes for opportunities in the pipeline. Sugar is based on an open source project, and therefore, advances quickly through the development and contribution of new features by its supporting activities.

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ACKNOWLEDGEMENT
I would like to thanks many individuals at Oudh Sugar Mills Limited who have contributed greatly to the success of this project. Thanks are due to Mr. V.K Periwal

and Mr. NitinSareen (project guide) for their valuable assistance in preparing the manuscript. The idea of this project was guided by my project guide, Mr. NitinSareen . My special thanks are not only for the idea but also for the encouragement and unstinted support throughout the preparation of the project.

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LIST OF CONTENTS
1. Front page or Title page. 2. Certificate. 3. Preface. Acknowledgement. List of Tables. List of Graphs. List of Abbreviations. Introduction. (a) General profile of the organization. (b) Products and Services. Need of study or Research Problem. Objective of the Study. Research Methodology. (a) Tools used in the study. (b) Sources of Data. Data presentation and Analysis. (a) Table form. (b) Graphical. Findings of the study. Suggestions and Recommendations. Conclusion. Bibliography. Appendix. (a) Other relevant information.

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LIST OF TABLES
Performance at a glance. FINANCIAL STATEMENTS Standalone:Balance sheet as on 30thjune 2010. Profit and loss account for the year ended 30thjune 2010. Cash flow statement for the year ended 30thjune 2010. Consolidated:Consolidated Balance sheet as on 30thjune 2010. Consolidated Profit and Loss Account as at 30thjune 2010. Consolidated Cash Flow Statement for the year ended 30thjune 2010. Subsidiaries:Balance sheet as on 31st march 2010. Profit and Loss Account for the year ended 31st march 2010.

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LIST OF GRAPHS
Total income graph. EBIT graph. PAT graph. EPS graph. Net Worth graph. Graph showing performance of companys equity shares.

LIST OF ABBREVIATIONS
O.S.M.L- Oudh Sugar Mills Limited C.A.C.P- Commission on Agricultural Costs and Prices S.A.P- State Advised Price S.S- Sugar Session S.M.P- Statutory Minimum Price P.D.S- Public Distribution System F.R.P- Fair and Remunerative Price M.A.T- Minimum Alternative Tax

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INTRODUCTION GENERAL PROFILE OF ORGANISATION

The Oudh Sugar Mills Limited (OSML) belongs to the renowned K.K. Birla Group of Companies. K.K. Birla Group is a major player in key industries like fertilizers, chemicals, heavy engineering, textiles, shipping, media etc. apart from sugar. From a modest beginning in 1932, OSML has grown to become the pioneers in Sugar Industry. It is one of the largest and rapidly growing Company in the Sugar Industry.

Shri C.S. Nopany, Chairman cum Managing Director, is in the overall management of the Company and is the driving force of the Company.

Through organic and inorganic modes of growth, the Company has cautiously but consistently grown from a single unit sugar manufacturing company to a company having four sugar manufacturing units with an aggregate crushing capacity of about 28,700 tonnes of sugarcane per day, two Distilleries producing 160 kilo litre per day (KLPD) of industrial alcohol/ethanol, three Co-generation Power Plants with a total capacity of 60 MW Power, Bio-Compost plant producing organic fertilizer. Sugar Mills :Hargaon Sugar Mills, Hargaon, Dist. Sitapur(U.P.) with a crushing capacity of about 10,000 tonnes of sugarcane per day. New Swadeshi Sugar Mills, Narkatiaganj, Dist. West Champaran (Bihar) with a crushing capacity of about 7,500 tonnes of sugarcane per day. Rosa Sugar Works, Rosa, Dist. Shahjahanpur, (U.P.) with a crushing capacity of about 4,200 tonnes of sugarcane per day. New India Sugar Mills, Hata, Dist. Kushinagar, (U.P.) with a crushing capacity of about 7,000 tonnes of sugarcane per day. Distilleries :Hargaon Distillery, Hargaon, Dist. Sitapur (U.P.) with a capacity of producing 100 (KLPD) of Industrial Alcohol/Ethanol. New
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SwadeshiDistillery, Narkatiaganj, Dist. West Champaran (Bihar) with a capacity of producing 60 (KLPD) of Industrial Alcohol/Ethanol. Co-Generation Power Plants :Hargaon Co-generation Power Plant, Hargaon, Dist. Sitapur (U.P.) with a capacity of 15 MW Power. Narkatiaganj Co-generation Power Plant, Narkatiaganj, Dist. West Champaran (Bihar) with a capacity 10 MW Power. Hata Power Plant, Dist. Kushinagar, (U.P.) with a capacity of 35 MW Power. Organic Fertilizer : Bio-Compost Plant producing organic fertilizer marketed under the brand name Oudh Shakti JaivikKhad.

PRODUCTS AND SERVICES

Sugar : Sugar is produced at the Hargaon Sugar Mills and Rosa Sugar Works both situated in the State of Uttar Pradesh and at New Swadeshi Sugar Mills situated in the State of Bihar having crushing capacity of 7500, 4000 and 6500 tonnes of sugarcane per day respectively. The sugar factories are equipped with the state of the art technology to produce pure crystal cane sugar of the highest purity.

Molasses : Molasses is a by product generated in the process of manufacture of sugar. It can either be sold untreated or be used as principal feedstock for manufacture of alcohol. The molasses generated in the Companys sugar factories at Hargaon and Narkatiaganj is used as raw material in its distilleries for production of Industrial Alcohol/Ethanol. Bagasse : Bagasse is a by product generated in the process of manufacture of sugar. It can either
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be sold or be captively consumed for generation of steam. The bagasse produced in the Sugar Factories is used for generation of steam.

Industrial Alcohol : The Company has installed Distilleries at Hargaon and Narkatiaganj with a capacity to produce 11.53 million litres and 9 million litres of industrial alcohol/ethanol per annum respectively.

Ethanol : One of the most remunerative applications of molasses is in the manufacture of ethanol, an environment friendly fuel. Being an oxygenate it contains high percentage of oxygen which helps combust fuel more completely and reduces vehicular injurious emission. The Government has made blending of fuel petrol with 5% ethanol mandatory with effect from 1st October, 2003 in nine states and four union territories. To meet the increasing demand of ethanol, the Company's Distillery at Hargaon installed ethanol producing plant to convert Rectified Spirit into Ethanol 30 klpd. Organic Fertilizer Spent wash, an effluent generated from processed molasses is used with press mud for the production of organic fertilizer. The Company has installed a Bio Compost Plant at Hargaon to produce organic fertilizer which is marketed under the brand name "Oudh Shakti JaivikKhad".

Canning Factory : The Company has a Canning factory at Bamrauli near Allahabad and markets its processed food products under the brand name MORTON.

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NEED OF STUDY/RESEARCH PROBLEM

To study the financial position of the sugar industry through various ratios. To study the various ratios and their impact on certain functional areas in the organization. To compare the financial position of the organization through various ratios, in the current financial year and the next . To study the financial position of the sugar industry through various ratios. To study the various ratios and their impact on certain functional areas in the organization. To compare the financial position of the organization through various ratios, in the current financial year and the next .

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OBJECTIVE OF STUDY
The Oudh Sugar Mills Limited is amongst the most efficient sugar companies in sugar industry. As a Company we strive to - Excel in our core areas of competence i.e., manufacture of sugar and allied products; Uphold and nurture the core values of good Corporate Governance, i.e. transparency, empowerment, accountability, independent monitoring and environmental consciousness; Fulfill the aspirations of customers, employees, financers and of the society in general; Provide every opportunity for employees and business associates to realise their potential to the fullest; Maximise shareholders' wealth through value addition by integration and expansion.

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RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem.

It may be understood as a science of studying how research is done scientifically.

In it we study the various steps that are generally adopted by a researcher in

Why a research study has been undertaken how a research problem has been defined, what data have been collected and what particular method has been adopted, why particular technique of analyzing data has been used and a host of similar other questions are usually

answered when we take research methodology, concerning a research problem or study. Achieving accuracy in any research requires in depth study regarding the subject. As the prime objective of the project is to find out and analyse the actual financial position of O.S.M.L .

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TOOLS USED IN STUDY

1.LIQUIDITY RATIOS 2.CAPITAL STRUCTURE /LEVERAGE RATIOS 3. PROFITABILITY RATIOS 4.ACTIVITY RATIOS.

SOURCES OF DATA
MANAGEMENT DISCUSSION AND ANALYSIS REPORT ON CORPORATE GOVERNANCE FINANCIAL STATEMENTS(STANDALONE) FINANCIAL STATEMENTS(CONSOLIDATED) FINANCIAL STATEMENTS(SUBSIDIARIES) PERFORMANCE AT A GLANCE.

The research methodology adopted is basically based on primary data via which The most recent and accurate piece of first hand information could be collected. Secondary data has been used to support primary data wherever needed.

The method of data collection continues with the observation method, as one continuously observes the surrounding environment when he works.

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SOURCE OF SECONDARY DATA

Secondary data were used to obtain information on OSML,OSML history, current Issues, Various sources are :-

* Internet

* Annual reports

* Newspaper

* Journal

DATA PRESENTATION AND INTERPRETATION

LITERATURE REVIEW TYPES OF RATIOS The ratios can be classified, for the purpose of exposition into four broad groups:1.LIQUIDITY RATIOS 2.CAPITAL STRUCTURE /LEVERAGE RATIOS 3. PROFITABILITY RATIOS 4.ACTIVITY RATIOS.

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LIQUIDITY RATIOS.
The liquidity ratios measure the ability of a firm to meet its short term obligations and reflect the short tern financial strength/solvency of a firm. The ratios which indicate the liquidity of a firm are: Net working capital. Current ratio. Acid test/quick ratio Super quick ratio. Turnover ratio.

Net working capital.

Net working capital represents the excess of current assets over current liabilities. It is frequently employed as a measure of a companys liquidity position. An enterprise should have sufficient NWC to meet the claims of the creditors and meeting the day to day needs of the business. The greater the amount of NWC, the greater the liquidity of a firm. Accordingly, NWC is the measure of liquidity.

Interpretation of Net Working Capital

Positive working capital means that the business is able to pay off its short-term liabilities. Also, a high working capital can be a signal that the company might be able to expand its operations. Negative working capital means that the business currently is unable to meet its short-term liabilities with its current assets. Therefore, an immediate increase in sales or additional capital into the company is necessary in order to continue its operations.

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Working capital also gives an idea of company's efficiency. Money tied up in inventory or accounts receivable cannot pay off any of the company's short term financial obligations. Therefore, working capital analysis is very important, but very complex too. For example, an increase in working capital can be explained by sales increase, but can also be explained by slow collection or inadequate increase in inventory.

CURRENT RATIO.
The current ratio is the ratio of total current assets to total current liabilities.. It is calculated by dividing the total current assets by the total current liabilities. Current ratio = current assets/ current liabilities.

Interpretation of Current Ratio.

The current ratio of a firm measures its short term solvency, i.e, its ability to meet its short/ term obligations. As a measure of short term current financial liquidity, it indicates the rupees of current assets available for each rupee of current liability/ obligation. The higher the current ratio, the larger the amount of rupees available per rupee of current liability, the more the firms ability to meet current obligations and greater the safety of funds of short term creditors. It is very important to note that a very high ratio of current assets to current liabilities may be indicative of slack management practices, as it might signal excessive inventories for the current requirements and poor credit management in terms of over extended accounts

receivable. At the same time, the firm may not be making full use of its current borrowing capacity. Thus, a firm should have reasonable current ratio.

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3. Acid test or Quick Ratio.

The acid test ratio is the ratio between quick current assets and current liabilities and is calculated by dividing the quick assets by the current liabilities. Acid Test Ratio = Quick Assets/ Current Liabilities.

Interpretation of Acid Test Ratio

It is a rigorous measure of a firms ability to service short term liabilities. The usefulness of the ratio lies in the fact that it is widely accepted as the best available test of the liquidity position of the company. The acid test ratio is superior to the current ratio. Generally speaking, an acid test ratio of 1:1 is considered satisfactory as a firm easily meet all current claims. The acid test ratio provides in a sense a check on the liquidity position of the firm as shown by its current ratio. The quick ratio is more rigorous and penetrating test of the liquidity position of the firm. Both the acid test ratio and the current ratios should be considered in relation to the industry average to infer whether the firms short term financial position is satisfactory or not.

4. Super Quick Ratio.

This ratio is calculated by dividing the super quick current assets by the current liabilities of the firm. Super Quick Ratio= super quick current assets/current liabilities. The super quick current assets are cash and marketable securities. This ratio is the most rigorous and conservative test of a firms liability position. Further it is suggested that it
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would be useful for the management if the liquidity measure also takes into account reserve borrowing power as the firms real debt paying ability depends not only on cash resources available with it but also on its capacity to borrow from the market short notice.

5. TURNOVER RATIO.
Another way of examining the liquidity is to determine how quickly certain current assets are converted into cash. The three turnover ratios that are relevant are:1. Inventory Turnover Ratio. 2. Debtors Turnover Ratio 3. Creditors Turnover Ratio.

1. Inventory Turnover Ratio.

It is computed by dividing the cost of goods sold by the average inventory. Thus, Inventory Turnover Ratio= cost of goods sold/ average inventory. The cost of goods sold means sale minus gross profit. The average inventory refers to the simple average of the opening and the closing inventory. The ratio indicates how fast inventory is sold. A high ratio is good from the viewpoint of the liquidity and vice versa. A low ratio would signify that the inventory does not sell and stays on the shelf in the warehouse for a long time.

Interpretation of Inventory Turnover Ratio

A low inventory turnover ratio is a signal of inefficiency, since inventory usually has a rate of return of zero. It also implies either poor sales or excess inventory. A low turnover rate can indicate poor liquidity, possible overstocking, and obsolescence, but it may also reflect a

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planned inventory build up in the case of material shortages or in anticipation of rapidly rising prices. A high inventory turnover ratio implies either strong sales or ineffective buying (the company buys too often in small quantities, therefore the buying price is higher).A high inventory turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate inventory levels, which may lead to a loss in business.

2. Debtors Turnover Ratio.

It is determined by dividing the net credit sales by the average debtors outstanding during the year. Debtors Turnover Ratio= net credit sales/ average debtors. Net credit sales consists of gross credit sales minus returns, if any, from customers. Average debtors is the simple average of debtors at the beginning and at the end of the year.

Interpretation of Debtors Turnover Ratio.

The analysis of the Debtors turnover ratio supplements the information regarding the liquidity of one item of current assets of the firm. The ratio measures how rapidly debts are collected. A high ratio is indicative of shorter time lag between credit sales and cash collection. A low ratio shows that debts are not being collected rapidly.

3. Creditors Turnover Ratio.

It is the ratio between net credit purchase and average amount of creditors outstanding during the year. Thus, Creditors Turnover Ratio= net credit purchase/ average creditors. Net Credit Purchase= Gross credit purchase less returns to suppliers.

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Average Creditors= Average of creditors outstanding during the beginning and at the end of the year.

Interpretation of Creditors Turnover Ratio.

A low turnover ratio reflects the liberal credit terms granted by the suppliers, while a high ratio shows that accounts are to settled rapidly. The Creditors Turnover Ratio is an important tool of analysis a firm can reduce its requirement of current assets by relying on the suppliers credit. The extent to which trade creditors are willing to wait for payment can be approximated by the Creditors turnover ratio.

2. CAPITAL STRUCTURE /LEVERAGE RATIOS

The capital structure ratio shows the percent of long term financing represented by long term debt. A capital structure ratio over 50% indicates that a company may be near their borrowing limit (often 65%). Formula to calculate capital structure ratio: Capital Structure Ratio = long term debt / (shareholders equity + long term debt).

TYPES OF CAPITAL STRUCTURE RATIOS 1. DEBT EQUITY RATIO

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. Debt/Equity Ratio = Total Liabilities/ Shareholders Equity.

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Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the calculation.

Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as corporate ones.

Interpretation of Debt Equity Ratio

The debt equity ratio is an important tool of financial analysis to appraise the financial structure of a firm. It has important implications from the point of view of creditors, owners and the firm itself. The ratio reflects the relative contribution of creditors and the owners of business in its financing. A high ratio shows a large share of financing by the creditors relative to the owner and therefore a larger claim against the assets of the firm. A low ratio implies a smaller claim of creditors. The ratio indicates the margin of safety to the creditors.

DEBT TO TOTAL CAPITAL RATIO

A measurement of a company's financial leverage, calculated as the company's debt divided by its total capital. Debt includes all short-term and long-term obligations. Total capital includes the company's debt and shareholders' equity, which includes common stock, preferred stock, minority interest and net debt.

Interpretation of Debt to Total Capital Ratio

As this ratio is like D/E equity, it gives results similar to the D/E ratio. A firm with a very high ratio would expose the creditors to higher risk. The implications of the ratio to the equity capital to the total assets are exactly opposite to that of the debt to the total assets. A firm should have neither a very high ratio nor too very low ratio.

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PROFITABILITY RATIOS
A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return. Profitability ratios measure how well a company is performing by analyzing how profit was earned relative to sales, total assets and net worth. (a)Based on Sales. 1.Gross Profit Ratio. Gross profit ratio expresses relationship between gross profit and net sales. It is obtained by dividing gross profit by net sales and expressing this relationship as a percentage. Gross profit is obtained by deducting cost of goods sold from net sales. Net sales are basically determined by deducting sales returns from sales. Gross profit ratio evaluates the effectiveness of business. It indicates the efficiency of firm in terms of its production and how much it has gained profit. Gross profit reflects the profit firm has made on cost of goods sold. If firm has higher gross profit margin then it is a sign of success because all operating expenses, interest charges and dividends would have to be taken off from GP. If company increase selling price of goods sold and decrease cost of goods sold then this ratio increases. However If company decrease selling price of goods sold and increase cost of goods sold then this ratio decreases. [Gross Profit Ratio = (Gross profit / Net sales) 100]

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Interpretation of Gross Profit Ratio

It should be observed that an increase in the GP ratio may be due to the following factors. 1. Increase in the selling price of goods sold without any corresponding increase in the cost of goods sold. 2. Decrease in cost of goods sold without corresponding decrease in selling price. 3. Omission of purchase invoices from accounts. 4. Under valuation of opening stock or overvaluation of closing stock. On the other hand, the decrease in the gross profit ratio may be due to the following factors. 1. Decrease in the selling price of goods, without corresponding decrease in the cost of goods sold. 2. Increase in the cost of goods sold without any increase in selling price. 3. Unfavourable purchasing or mark up policies. 4. Inability of management to improve sales volume, or omission of sales. 5. Over valuation of opening stock or under valuation of closing stock Hence, an analysis of gross profit margin should be carried out in the light of the information relating to purchasing, mark-ups and markdowns, credit and collections as well as merchandising policies.

NET PROFIT RATIO

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage. The two basic components of the net profit ratio are the net profit and sales. The net profits are obtained after deducting income-tax and, generally, non-operating expenses and incomes
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are excluded from the net profits for calculating this ratio. Thus, incomes such as interest on investments outside the business, profit on sales of fixed assets and losses on sales of fixed assets, etc are excluded. Formula:-Net Profit Ratio=Net Profit/Net Sales*100

Interpretation of Net Profit Ratio

NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in mind that the performance of profits also be seen in relation to investments or capital of the firm and not only in relation to sales.

PRICE EARNING RATIO

A valuation ratio of a company's current share price compared to its per-share earnings. Formula:- Market value per share/ Earning Per Share.

Interpretation of PriceEarning Ratio

The price-to-earnings ratio is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with a lower P/E ratio. The P/E ratio can be seen as being expressed in years, in the sense that it shows the number of years of earnings which would be required

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to pay back purchase price, ignoring inflation. The P/E ratio also shows current investor demand for a company share. The reciprocal of the P/E ratio is known as the earnings yield.

(b) Based on Capital:RETURN ON CAPITAL EMPLOYED

The return on capital employed (ROCE) ratio, expressed as a percentage, complements the return on equity (ROE) ratio by adding a company's debt liabilities, or funded debt, to equity to reflect a company's total "capital employed". This measure narrows the focus to gain a better understanding of a company's ability to generate returns from its available capital base.

Interpretation of return on capital employed

The return on capital employed is an important measure of a company's profitability. Many investment analysts think that factoring debt into a company's total capital provides a more comprehensive evaluation of how well management is using the debt and equity it has at its disposal. Investors would be well served by focusing on ROCE as a key, if not the key, factor to gauge a company's profitability. An ROCE ratio, as a very general rule of thumb, should be at or above a company's average borrowing rate.

RETURN ON ASSETS
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".
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The formula for return on assets is:- Net Income/ Total Assets.

Interpretation of return on assets

ROA tells you what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or the ROA of a similar company.

RETURN ON EQUITY CAPITAL

Return on equity capital which is the relationship between profits of a company and its equity, can be calculated as follows: Return on Equity Capital= N.P after tax, interest and pref. dividend/Equity Share Capital*100

Interpretation of return on equity capital

This ratio is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them. Interpretation of the ratio is similar to the interpretation of return on shareholder's investments and higher the ratio better is.

OPERATING RATIO
Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. Operating ratio measures the cost of operations per dollar of sales. This is closely related to the ratio of operating profit to net sales. Components:

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The two basic components for the calculation of operating ratio are operating cost (cost of goods sold plus operating expenses) and net sales. Operating expenses normally include (a) administrative and office expenses and (b) selling and distribution expenses. Financial charges such as interest, provision for taxation etc. are generally excluded from operating expenses.

Formula:-Operating Ratio= Operating Cost/ Net Sales*100

Interpretation of Operating Ratio

Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns. This ratio is considered to be a yardstick of operating efficiency but it should be used cautiously because it may be affected by a number of uncontrollable factors beyond the control of the firm. Moreover, in some firms, non-operating expenses from a substantial part of the total expenses and in such cases operating ratio may give misleading results.

ACTIVITY RATIOS.
Activity ratios measure company sales per another asset accountthe most common asset accounts used are accounts receivable, inventory, and total assets. Activity ratios measure the efficiency of the company in using its resources. Since most companies invest heavily in accounts receivable or inventory, these accounts are used in the denominator of the most popular activity ratios. An indicator of how rapidly a firm converts various accounts into cash or sales. In general, the sooner management can convert assets into sales or cash, the more effectively the firm is being run.
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TYPES OF ACTIVITY RATIOS.

Accounts Receivables Turnover Accounts receivable is the total amount of money due to a company for products or services sold on an open credit account. The accounts receivable turnover shows how quickly a company collects what is owed to it. Accounts Receivables Turnover = Total Credit Sales/ Accounts Receivables. Interpretation of Accounts Receivables Turnover Accounts receivable represents the indirect interest free loans that the company is providing to its clients. Therefore, it is very important to know how "costly" these loans are for the company. A high receivables turnover ratio implies either that the company operates on a cash basis or that its extension of credit and collection of accounts receivable are efficient. Also, a high ratio reflects a short lapse of time between sales and the collection of cash, while a low number means collection takes longer. The lower the ratio is the longer receivables are being held and the risk to not be collected increases. A low receivables turnover ratio implies that the company should re-assess its credit policies in order to ensure the timely collection of credit sales that is not earning interest for the firm.

Inventory Turnover Ratio

For a company to be profitable, it must be able to manage its inventory, because it is money invested that does not earn a return. The best measure of inventory utilization is
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the inventory turnover ratio ( inventory utilization ratio), which is the total annual sales or the cost of goods sold divided by the cost of inventory. Inventory Turnover= Total Annual Sales or Cost of Goods Sold/Inventory Cost. Using the cost of goods sold in the numerator is a more accurate indicator of inventory turnover, and allows a more direct comparison with other companies, since different companies would have different mark ssssups to the sale price, which would overstate the actual inventory turnover. In seasonal businesses, where the amount of inventory can vary widely throughout the year, the average inventory cost is used in the denominator.

Interpretation of Inventory Turnover Ratio

Inventory Turnover Ratio measures company's efficiency in turning its inventory into sales. Its purpose is to measure the liquidity of the inventory. Inventory Turnover Ratio is figured as "turnover times". Average inventory should be used for inventory level to minimize the effect of seasonality. This ratio should be compared against industry averages. A low inventory turnover ratio is a signal of inefficiency, since inventory usually has a rate of return of zero. It also implies either poor sales or excess inventory. A low turnover rate can indicate poor liquidity, possible overstocking, and obsolescence, but it may also reflect a planned inventory build up in the case of material shortages or in anticipation of rapidly rising prices. A high inventory turnover ratio implies either strong sales or ineffective buying (the company buys too often in small quantities, therefore the buying price is higher).A high

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inventory turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate inventory levels, which may lead to a loss in business.

Total Asset Turnover

The total asset turnover measures the return on each dollar invested in assets and is equal to the net sales, which is total sales minus returns and allowances, divided by the average total assets.

Average Assets =

Assets at Beginning of Year + Assets at End of Year Total 2

Total Assets Turnover= Net Sales/Average Total Assets. Interpretation of Total Assets Turnover Ratio
The lower the total asset turnover ratio, as compared to historical data for the firm and industry data, the more sluggish the firm's sales. This may indicate a problem with one or more of the asset categories composing total assets - inventory, receivables, or fixed assets. The small business owner should analyze the various asset classes to determine where the problem lies. There could be a problem with inventory. The firm could be holding obsolete inventory and not selling inventory fast enough. With regard to accounts receivable, the firm's collection period could be too long and credit accounts may be on the books too long. Fixed assets, such as plant and equipment, could be sitting idle instead of being used to their full capacity. All of these issues could lower the total asset turnover ratio.

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FINDINGS OF THE STUDY

RATIO ANALYSIS

LIQUIDITY RATIOS:Current Ratio= Current assets / Current Liabilities.

Calculation of Current Ratio With Diagram Year Particulars

2007-08

2008-09 24716.28 10989.56

2009-10 37915.06 12716.61

Current assets 35815.04 Current Liabilities 11094.86

Current Ratio 3.23

2.25

2.99

Current Ratio
3.5 3.23 3 2.5 2.25 2 1.5 1 0.5 0 2007-08 2008-09 2009-10 Current Ratio 2.99

Interpretation:-The current ratio of a firm measures its short term solvency, i.e., its ability to meet its short-term obligations.As we can see that the current ratio of the company hasdecreased from year 2007-08 to year 2008-09 and then again increased in year 200933 | P a g e

10.Hence, the higher ratio indicates the better liquidity position and the firm will be able to pay its current liabilities more easily. Liquid Ratio=Liquid assets/ Current liabilities =(current assets-stock and prepaid expenses)/current liabilities

Calculation of Liquid Ratio with Diagram Year Particulars

2007-08 1075.23

2008-09 1305.97 10989.56 0.119

2009-10 1557.1 12716.61 0.123

Liquid assets Current liabilities Liquid Ratio

11094.86 0.097

Liquid Ratio
0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2007-08 2008-09 2009-10 Liquid Ratio 0.097 0.119 0.123

Interpretation:-The cash ratio of the company has decreased year by year; it means that the firm is investing more in its liquid assets. As we know that a very high cash ratio indicatesmajor items of current assets and may be a poor indicator of profitability because

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cash by itself does not earn any profit.Ideallythe proportion should be kept as low as possible, so the cash ratio shows that it is good for a company.

CAPITAL STRUCTURE OR LEVERAGE RATIO:-

Debt Equity Ratio=Debt(Issued+subscribed)/ Equity

Calculation of Capital Structure Ratio with Diagram

Year Particulars

2007-08 3634.83

2008-09 4409.17 2191.89 2.012

2009-10 5210.71 2591.72 2.011

Debt 1817.38 Equity 2 Debt Equity Ratio

Debt Equity Ratio

2.014 2.012 2.01 2.008 2.006 2.004 2.002 2 1.998 1.996 1.994 2007-08 2008-09 2009-10 2 Debt Equity Ratio 2.012 2.011

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Interpretation:This ratio is the solvency ratio of the company. Debt holders are assured that on liquidation ofthe company, the company will be able to repay their funds. This ratio shows that the company is able to manage its capital structure. If the capital structure is properly managed then it contributes to earnings per share held by theowners. In this industry 2 or 2.012 is the average ratio. In any industry a debt equity ratio of 2 is considered ideal.. Proprietary Ratio=Shareholder fund or Propriter fund/Total Assets Shareholder fund =share capital +Reserves and Surplus + Profit and Loss Account. Total Assets=Current Assets + Fixed Assets.

Calculation ofProprietary Ratio with Diagram Year Particulars

2007-08 10083.42

2008-09 15130.68

2009-10 12591.88

Proprietor Fund Total Assets

Proprietary Ratio

84163.26 0.1199

82603.66 0.184

92345.03 0.136

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Proprietary Ratio
0.2 0.18 0.16 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2007-08 2008-09 2009-10 0.119 Proprietary Ratio 0.136 0.184

Interpretation:-The objective of computing this ratio is to measure the proportion of total assets financed by the equity or proprietors funds. The ratio indicates the extent to which the assets of the enterprise have been financed out of equity. A high proprietary ratio indicates the larger safety margin for creditors, and a low value of the same indicates the greater risk to the creditors. Here, in this particular case, the ratio has first increased and then declined in the following year; this means that there is a potential risk for the creditors in the years 2007-08 and year 2009-10, as they would face difficulty in recovering the same amount from the firm. In other words, the firm feels itself incapable of meeting the creditors obligation.

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Solvency Ratio=Total Outside Liabilities/Total Assets =Current Liabilities + Provisions/Current Assets + Fixed Assets.

Calculation of Solvency Ratio with Diagram Year

2007-08

2008-09 10989.56 82603.66 0.134

2009-10 12716.61 92345.03 0.138

Particulars Total Outside 11096.84 Liabilities

84163.26
Total Assets Solvency Ratio

0.132

Solvency Ratio
0.139 0.138 0.137 0.136 0.135 0.134 0.133 0.132 0.131 0.13 0.129 2007-08 2008-09 2009-10 0.132 0.134 Solvency Ratio 0.138

Interpretation:- Solvency ratio shows the long term financial solvency and measures the enterprise ability to pay the principal; i.e., capital amount on maturity or in pre-determined installments at due dates. In the above case, as we can see that the value of solvency ratio is increasing continuously from year 2007-08 to 2008-09, following 2009-10. This means that the firm has the enough funds to pay the capital amount in the years to come. This also indicates the firms sufficiently strong credit policy as framed by it.
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PROFITABILITY RATIO (a) Based on Sales:Gross Profit Ratio= Gross Profit/Net Sales*100

Calculation of Gross Profit Ratio with Diagram Year Particulars

2007-08 11857.36

2008-09 15554 55958.62 27.79%

2009-10 8839.63 53893.94 16.41%

Gross Profit

34181.84
Net Sales*100 Gross Profit Ratio

34.69%

Gross Profit Ratio

40 35 30 27.79 25 20 15 10 5 0 2007-08 2008-09 2009-10 16.41 Gross Profit Ratio 34.69

Interpretation:Gross profit ratio evaluates the effectiveness of business. It indicates the efficiency of firm in terms of its production and how much it has gained profit. Gross profit reflects the profit firm has made on cost of goods sold. Here, we can see that the firms gross profit is decreasing

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which indicates that the firmsraw material or the direct labour (ie manufacturing costs) have gone up. Net Profit Ratio=Net Profit/Net Sales*100 Calculation of Net Profit Ratio with Diagram Year Particulars Net Profit Net Sales*100

2007-08 5280.58 34181.84 15.45%

2008-09 10621.36 55958.62 18.99%

2009-10 1166.04 53893.94 2.17%

Net Profit Ratio

Net Profit Ratio

20 18 16 14 12 10 8 6 4 2 0 2007-08 2008-09 2009-10 2.17 Net Profit Ratio 15.61 18.99

Interpretation:-This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability and as we can see that from year 2006 to 2010 the net profit ratio is decreasing so we can say that a company is not in good condition. The turnover of the

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company is increasing but due to lower profitability & higher indirect expenses the net profit is decreasing. Earning Ratio=Particular Expense/ Particular Expense*100 Calculation of Earnings Ratio with Diagram Year Particulars Particular Expense

2007-08 28301.83 34181.84

2008-09 24430.58 55958.62 43.66%

2009-10 55013.40 53893.94 102.08%

Particular Expense

82.798%
Earnings Ratio

Earning Ratio
120 100 80 60 40 20 0 2007-08 2008-09 2009-10 43.66 82.798 102.08

Earning Ratio

Interpretation:-The price-to-earnings ratio is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with a lower P/E ratio. The P/E ratio also shows current investor demand for a company share. The reciprocal of the P/E ratio is known as

41 | P a g e

the earnings yield. Here, in this case, the firms P/E ratio has decreased in the year 2008-09 as compared to years 2007-08 and 2009-10. Operating Ratio= Operating Cost/ Net Sales*100 Calculation of Operating Ratio with Diagram Year Particulars

2007-08 28875.27

2008-09 45337.26 55958.62 81.02%

2009-10 52727.9 53893.94 97.84%

Operating Cost Net Sales*100

34181.84 84.48%

Operating Ratio

Operating Ratio
120 100 80 60 40 20 0 2007-08 2008-09 2009-10 84.48 81.02 97.84

Operating Ratio

Interpretation:-Operating ratio measures the cost of operations per dollar of sales. This is closely related to the ratio of operating profit to net sales.From the year 2007-08, the ratio has slightly decreased in the year 2008-09and it is again in the increasing order in the year 200910.

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(b) Based on Capital: Return on capital employed=N.P before interest and tax/Capital Employed*100

Calculation of ROCE with Diagram Year Particulars N.P before interest and tax Capital Employed*100 Return on capital employed

2007-08 5280.58 5452.21 96.86%

2008-09 10621.36 6601.06 160.91%

2009-10 1166.04 102454.90 1.139%

Return on capital employed

180 160 140 120 100 80 60 40 20 0 2007-08 2008-09 1.138 2009-10 96.86 Return on capital employed 160.91

Interpretation:The company s ROCE is consistently increasing and then decreasing, which shows that the company is utilizing itsfunds in not the best but fair enough possible manner, so as to
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increase the shareholders value. Shareholders and debt holders are assured of their investment. As we know that this ratio reflects the overall profitability of the business, and we can see that only in year 2008-09 thereturn on capital employed increased so we can say that ratios doesnt reflect the overall profitability of the business, hence it is not good for company.s

Return on Assets=N.P before interest and tax/Total Assets*100 Calculation of ROA with Diagram Year Particulars N.P before interest and tax Total Assets*100 Return on Assets

2007-08 5280.58 84163.26 6.28%

2008-09 10621.36 82603.66 12.86%

2009-10 1166.04 92345.03 1.263%

Return on Assets
14 12.86 12 10 8 6 4 2 1.263 0 2007-08 2008-09 2009-2010 6.28 Return on Assets

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Interpretation:-ROA gives an idea as to how efficient management is at using its assets to generate earnings. ROA is displayed as a percentage. Sometimes this is referred to as "return on investment. This ratio is increasing continuously, which means that the firm is quite capable enough of utilising its all the assets in order to generate revenues, which ultimately tends to increase the profitability of the firm, and then decreases in the financial year 2009-10. Return on Equity Capital= N.P after tax, interest and pref. dividend/Equity Share Capital*100 Calculation of ROEC with Diagram Year Particulars

2007-08 (824.73)

2008-09 1957.03

2009-10 (8179.86)

N.P after tax, interest and pref. dividend

1817.38
Equity Share Capital*100 Return on Equity Capital

2191.89

4000

(45.39)

88.77

(314.07)

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Return on Equity Capital

350 300 250 200 150 100 50 0 2007-08 2008-09 2009-10 45.39 88.77 Return on Equity Capital 314.07

Interpretation:The return on equity measures the profitability of equity funds invested in the firm. This ratio isof utmost importance to the shareholders i.e. the true owners of the firm.

ACTIVITY/ TURNOVER RATIOS.

Stock Turnover Ratio= Cost of Goods Sold/ Average Stock Average Stock=Opening Stock + Closing Stock/2 Calculation of STR with Diagram Year

2007-08

2008-09 40404.62 289.325 139.66

2009-10 45054.31 562.59 80.09

Particulars Cost of Goods 22324.38 Sold

249.095
Average Stock

89.63
Stock Turnover Ratio

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Stock Turnover Ratio

160 140 120 100 89.63 80 60 40 20 0 2007-08 2008-09 2009-10 80.09 Stock Turnover Ratio 139.66

Interpretation:-As we know that this ratio indicates whether stock has been used or not. It shows the speed with which the stock is rotated into sales or the number of times the stock is turned into sales during the year. As we can see that stock turnover ratio is increased except 2008-2009.hence its good for the company since it indicates that stock is selling quickly.

Total Assets Turnover Ratio= Net Sales/ Total Assets Calculation of TATR with Diagram Year Particulars

2007-08 34181.84

2008-09 55958.62 82603.66 0.678

2009-10 53893.94 92345.03 0.584

Net Sales

84163.26
Total Assets

0.407
Total Assets Turnover Ratio
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Total Assets Turnover Ratio

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2007-08 2008-09 2009-10 0.407 Total Assets Turnover Ratio 0.678 0.584

Interpretation:-The lower the total asset turnover ratio, as compared to historical data for the firm and industry data, the more sluggish the firm's sales. This may indicate a problem with one or more of the asset categories composing total assets - inventory, receivables, or fixed assets.

Working Capital Turnover Ratio= Net Sales/ Working Capital. Calculation of WCTR with Diagram Year Particulars Net Sales

2007-08 34181.84 24718.2

2008-09 55958.62 13726.72 4.08

2009-10 53893.94 25198.45 2.14

Working Capital

1.39
Working Capital
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Turnover Ratio

Working Capital Turnover Ratio

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2007-08 2008-09 2009-10 1.39 2.14 Working Capital Turnover Ratio 4.08

Interpretation:-Working capital also gives an idea of company's efficiency. Money tied up in inventory or accounts receivable cannot pay off any of the company's short term financial obligations.

OVERALL INTERPRETATION
Introduction to ratio analysis

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Financial information is always prepared to satisfy in some way the needs of various interested parties (the "users of accounts"). Stakeholders in the business (whether they are internal or external to the business) seek information to find out three fundamental questions: (1) How is the business trading? (2) How strong is the financial position? (3) What are the future prospects for the business? For outsiders, published financial accounts are an important source of information to enable them to answer the above questions. To some degree or other, all interested parties will want to ask questions about financial information which is likely to fall into one or other of the following categories, and be about:

Performance Area

Key Issues

Profitability

Is the business making a profit? How efficient is the business at turning revenues into profit? Is it enough to finance reinvestment? Is it growing? Is it sustainable (high quality)? How does it compare with the rest of the industry?

Financial efficiency

Is the business making best use of its resources? Is it generating adequate returns from its investments? Is it managing its working capital properly?

Liquidity and gearing Is the business able to meet its short-term debts as they fall due?

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Is the business generating enough cash? Does the business need to raise further finance? How risky is the finance structure of the business?

Shareholder return

What returns are owners gaining from their investment in the business? How does this compare with similar, alternative investments in other businesses?

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Interpretation of Financial Ratios

Financial statements analysis is the process of examining relationships among elements of the company's "accounting statements" or financial statements (balance sheet, income statement, statement of cash flow and the statement of retained earnings) and making comparisons with relevant information. Financial statements analysis is a valuable tool used by investors, creditors, financial analysts, owners, managers and others in their decision-making process.

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SUGGESTIONS AND RECOMMENDATIONS

Here are some suggestions which may help to strengthen the firm better: The following recommendations reflect the general thrust of the Assessment. Further ideas and specific actions are indicated in the text of the report, to be developed by industry and, as appropriate, government. (1)INDUSTRY AND COMPETITION Scenario:

At present the sugar industry is largely unprofitable and the business management skills are variable and often not well-developed. The notion of industry leadership is often focused on sectoral representation at state level while the profit center is at regional level. The technical and production needs of the industry are generally known, as is the required technology. However a whole of value chain systems approach to all aspects of operations is lacking. Action: The Queensland industry must establish a strong mill area or mill region focus of operations. For improved mill area economic outcomes, election to the Mill Suppliers Committee specified in the (Queensland) Act should be completely free of any link whatsoever to the constitution of CANEGROWERS or ACFA, with no unity tickets permitted, and with voting to reflect economic interests of farmers. A Queensland industry body should be established to represent all mill regions (farm and mill) on extra-regional issues (e.g. water, transport, health and safety). Industry must develop local economic leadership for local negotiations, in preference to established sectoral state representational route. With government support, the
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industry must build business management skills in the regions. An upgrading of business management training is urgently required. Industry should install a whole of value chain systems approach to all operations, particularly in relation to harvest and transport arrangements. Within mill areas, a rationalization of the industry into larger units of farms or farm cooperatives is highly desirable. Government should be fully supportive of industrys efforts. Worldwide benchmarking of industry activities against the strongest competitors is required, followed by implementation of cost effective options. Millers need to work to ensure the early rationalization of mill areas and feeder farms in Far North Queensland. (2).THE MARKET Scenario: The world sugar price is at a low level and is likely to remain so for the short to medium term. The Australian sugar industry is fully exposed to world price at home and abroad. Action: Urgent continued efforts are required by government and industry to gain

access to protected European, US and Japanese markets. (3). DIVERSIFICATION Scenario: There are diversified products available such as ethanol and surplus power cogenerated at the mill. Investment in ethanol for transport fuel requires market access and supply undertakings, at a price sufficiently profitable to divert sugar potential. Ethanol from molasses has limited production potential. Action:

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(4). ENVIRONMENT Scenario: The sugar industry has tended to isolate itself in the environmental debate, despite having been a leader in rural environmental work. Action: The industry must adopt an engage not defend approach to all environmental matters and demonstrate leadership on a catchment-focused level. The industry should continue to develop and promote voluntary programs such as COMPASS (and beyond) and advance its environmental performance through independent audits. The industry should work to ensure sustainability through ongoing education. 5. SOCIAL Scenario: The local communities in sugar regions are under pressure as a result of successive poor seasons, low prices, higher debt levels, and succession difficulties. Many cane farmers are prepared to endure extreme economic deprivation to preserve the lifestyle of the family farm, but the lifestyle itself is declining severely. Action: Options should be explored for allowing some industry participants to exit the industry with support, in the context of achieving more consolidated and viable industry arrangements. Further work is needed on the local impacts of industry change on industry participants and the broader community, especially the decreased labour requirements of larger farm units.
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Support must be provided to vulnerable

communities in sugar regions, through an urgent review of existing assistance measures and the provision of training and retraining wherever necessary. Scenario: The research base is contracting through a sudden funding reduction. The main funding source of facilitation work in systems-thinking solutions and best management practices will cease this year, and the industry is also losing scientists. A CRC bid is under way for sugarcane as a bio factory. Action:

Government should investigate the continuation of supplementary funding for the development of systems-thinking solutions, particularly towards integrated harvest and transport arrangements, in order to consolidate strategic mill area viability. The industry should be encouraged to leverage its intellectual property base, through seeking suitable funding partners. Industry and government should work at least to maintain and where possible broaden the researcher base serving the industry.

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CONCLUSION
1. Sugar as a commodity will see an upswing in the near future as the demand and the supply for sugar will match each other worldwide. The sugar industry sees a bright future ahead with the additional prospect of ethanol. This industry has huge growth prospects. 2. On comparing various sugar companies with each other on the basis of the set parameters the Oudh Sugar Mills Ltd was found to be the best sugar producing company. A detailed company analysis of the Oudh Sugar Mills Ltd. on the basis of various aspects showed that the company has tremendous growth potential. With their foreign forays and huge capacity expansions the company is set to rule the sector for a long time to come. Bajaj Hindustan Ltd. definitely is a viable investment option for the long term investors.

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BIBLIOGRAPHY
Annual Report 2009-10(The Oudh Sugar Mills Limited). www.birla-sugar.com www.quickmba.com

APPENDIX Financial Results And Appropriations

Cash Flow Statement 30, June 2008 30, June 2009

Particulars A. CASH FLOW FROM OPERATING ACTIVITIES Profi t / (Loss) before Tax Adjustments for : Depreciation Interest & Finance Charges (net of capitalisation & subsidy) Molasses Storage and Maintenance Reserve Loss / (Profi t) on Fixed Assets sold / discarded (net) Interest & Dividend Income Preliminary Expenses written off Bad Debts, irrecoverable claims & advances written off Provision for Warranties & Claims Provision for bad and doubtful debts / advances (net) Operating Profi t before Working Capital Changes : Adjustments for : Increase / (Decrease) in Trade Payables Decrease / (Increase) in Trade & Other Receivables

30, June 2010

-626.92 2232.02 3717.39 6.55 -66.42 -15.31 -39.86 11.97 6.86 -0.25 5278.53

3,047.80 2,634.91 5,120.35 4.02 -21.38 -225.08 0.13 29.03 5.78 101.31 10,696.87

-11,017.07 4,083.89 8,140.34 5.3 2.89 -95.17

5.37 11.65 186.92 1,324.12

-4274.67 -2310.36

-748.85 -324.07

3,102.96 -269.44

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Decrease / (Increase) in Inventories Cash Generated from Operations : Direct Taxes Refund / (Paid) Net Cash from Operating Activities B. CASH FLOW FROM INVESTING ACTIVITIES Sale of Fixed Assets Capital Subsidy Sale of Investments Loans Received Back / (Given) Interest Received Dividend Received Purchase of Investments Fixed deposits Purchase of Fixed Assets Net Cash used in Investing Activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Borrowings Repayment of Loans Proceeds from Right issue of Shares Share Premium on rights issue of shares Rights Shares Issue Expenses Interest & Finance Charges Paid Subsidy towards interest on Excise Duty Loan Dividend Paid (including dividend tax) Net Cash from Financing Activities NET CHANGES IN CASH & CASH EQUI ALENTS (A+B+C) * Cash & Cash equivalents Opening Balance * Cash & Cash equivalents Closing Balance 59 | P a g e

-9565.96 -16150.99 -10872.46 41.02 -10913.48

11,659.65 10,586.73 21,283.60 51.42 21,335.02

-13,911.34 -11,077.82 -9,753.70 -163.55 -9,917.25

201.77 200.83 16.62 1.44 38.57 0.28 -1 -17747.44 -17288.93

194.84 142.18 0.23 10.42 174.35 46.26 -75 -173.16 -8,600.88 -8,280.76

50.75 113.27 -49.53 39.3 56.9 -1,250.50 191.4 -2,505.61 -3,354.02

45791.39 -11320.13

10,243.17 -16,931.24 387.17 1,935.84 -173.1

26,818.72 -5,624.49 399.83 1,304.62

-6358.51

-8,591.45 -10.83 -13,140.44 -86.18 367.42 281.24

-9,727.86 557.55 -384.67 13,343.70 72.43 281.24 353.67

-0.32 28112.43 -89.98 512.27 422.29

Profit & Loss Account 30, June 2008 35393.59 30, June 2009 30, June 2010

Particulars

Schedule 13

INCOME Gross Sales Less : Excise Duty : Cess Net Sales Other Income Agricultural Profi t / (Loss) EXPENDITURE Decrease / (Increase) in Stocks Excise Duty & Cess on Stocks (Refer note no. 4 on Schedule 23) Purchase of Finished Goods Raw Materials Consumed Stores, Spares & Packing Materials Consumed Fuel & Electricity Payments to and Provisions for Employees Manufacturing, Selling and Other Expenses Directors Remuneration Gross Profit
14 15

58,309.13 2,085.46 1,646.13 2,659.76 55,649.37 330.73 -21.48

55958.62

55,498.33

2237.69 33155.9 1025.94 25.99 34207.83

574.3

279.87

1,926.00 53,572.33 306.73 14.88

53893.94

-9630.41 16 574.12

12,606.43 -1,242.30

14,495.38 497.45

145.74 17 28301.83

260.67 24,430.58

259.99 55,013.40

18

2970.39

2,406.05

3,007.40

536.86 19 2887.82

700.89 2,928.36

1,031.44 3,980.49

20

3040.49

3,199.56

3,385.16

21

48.43 28875.27 11857.36

47.02
45337.26 15554

47.95
52727.9 8839.63

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Profit before Interest, Depreciation & Taxation Less : Interest & Finance Charges (net) Depreciation Profit / (Loss) before Taxation Provision for Taxation: Deferred Tax charge / (credit) Current tax [including wealth tax Rs. 3.40 Lakh (Rs. 3.00 Lakh)] Minimum Alternative Tax Credit (Entitlement) / Reversal Provision for Income Tax no longer required written back Provision for Fringe Benefit Tax [including Rs. 2.82 Lakh (Rs. Nil) for earlier years ] Profit / (Loss) after Taxation Surplus brought forward from previous year Transfer from General Reserve Balance available for Appropriation Appropriations
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5332.56

10621.36

1166.04

22

3677.82 2229.68 5907.5 -574.94

4,941.53 2,632.03
7573.56 3047.8

8,105.81 4,077.30
12183.11 -11017.07

212.12

1,062.33

3,684.77

122.02

4.53

3.93

-119.02

836.59

0.6

1.69

3.62

30.14

23.75

2.82

-824.73 29.96

1957.03

-8179.86

743.38

2,210.23

500

1,725.12
2700.41 -4244.51

-294.77

Transfer to Reserve Fund Transfer to General Reserve Proposed dividend on Equity Shares Tax on Dividend Balance carried to Balance Sheet Earning per Share of Rs. 10 each (Refer note no. 16 on Schedule 23) : Basic Earning per share (Rs.) Diluted Earning per share (Rs.) Accounting Policies and Notes to Accounts

8.89 100

11.30

328.79 55.88 -294.77 -294.77 2206.85 2700.41 -4255.81 -4244.51

-2.48 -2.48

9.01 8.97

32.65 32.65

23

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Balance Sheet SOURCES OF FUNDS A. Shareholders Funds (a) Share Capital (b) Reserves & Surplus B. Loan Funds (a) Secured (b) Unsecured C. Deferred Tax Liability (net) 85674.96 APPLICATION OF FUNDS A. Fixed Assets (a) Gross Block (b) Less: Accumulated Depreciation (c) Net Block (d) Capital Work- in- Progress (e) Capital Expenditure on New / Expansion Projects TOTAL B. Investments C. Deferred Tax Asset (net) D. Current Assets, Loans & Advances (a) Inventories (b) Sundry Debtors (c) Cash & Bank Balances (d) Other Current Assets (e) Loans & Advances Less: Current Liabilities & Provisions (a) Current Liabilities (b) Provisions Net Current Assets E. Pofi t & Loss Account - Debit Balance Less: Set off with General Reserve (as per contra) 85674.96 4 48601.07 15174.12 33426.95 340.8 5 6 25677.31 59445.06 1079.46 432.24 71,840.50 17,493.15 54,347.35 209.9 14,319.69 68,876.94 2,229.21 81,893.53 21,510.32 60,383.21 210.6 6,552.77 67,146.58 3,479.71 3,054.68

1 2 3

1817.49 8265.93 10,083.42 54868.69 20722.76 75591.54

2,204.66 12,926.02 15,130.68 53,103.55 15,968.55 69,072.10 -630.09 84,832.87

2,604.49 9,987.39 12,591.88 65,002.21 25,209.40 90,211.61 1,02,803.49

7 8 9 10 11 12

29039.82 648.39 422.29 4.55 5699.99 35815.04 10937.78 159.06 11096.84 24718.2

17,380.17 775.32 521.63 9.02 6,030.14 24,716.28 10,444.14 545.42 10,989.56 13,726.72 84,832.87

31,291.51 1,142.15 406.96 7.99 5,066.45 37,915.06 12,495.30 221.31 12,716.61 25,198.45 4,248.57 324.5 3,924.07 1,02,803.49

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OTHER RELEVANT INFORMATION

CODE OF CONDUCT AND ETHICS Introduction This Code of Conduct and Ethics is made pursuant to Clause 49 (Corporate Governance) of the Listing Agreement with Stock Exchanges and shall hereinafter be known as the Code. The Code will become effective from the date it is approved and adopted by the Board of Directors of the Company.

The objective of the Code is to promote and uphold the high standards of ethics observed by the Company in conducting its business. The Code lays down a broad policy for ones conduct in dealing with the Company, fellow directors and employees and the external environment in which the Company operates. The Company believes in conducting its business with responsibility, transparency, empowerment, honesty and environmental consciousness. The Company seeks to be a leader in its chosen area of operation and to operate and achieve excellence in everything it does.

All concerned are expected to read and understand the Code, uphold the standards prescribed therein in letter and spirit and to act within the bounds of the authority conferred upon them with duty to make and enact informed decisions and policies which result in enhancement of the value of the Company to its shareholders and simultaneously enable the Company to full fill its obligations to other stake holders such as customers, employees and financers and to the society in general. Applicability of the Code The Code applies to all the members of the Board of Directors and to senior management personnel of the Company. Senior management personnel shall mean personnel of the Company who are members of its core management team excluding Board of Directors and shall comprise of all the members of management one level below the executive director, including all functional heads. Respect for individual The Companys vision is based on inspiring and unleashing creative potential in human assets of
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the Company. This is possible in an environment where we all respect the rights of those around us. In this direction, we endeavour: a. To treat individuals in all aspects of employment solely on the basis of ability irrespective of race, caste, creed, religion, age, disability, gender, sexual orientation or marital status. b. Not to tolerate racial, sexual or any other kind of harassment. Honest and Ethical Conduct the Directors and senior management personnel are expected to act in accordance with the highest standards of personal and professional integrity, honesty and ethical conduct while working for the Company.

We consider honest conduct to be conduct that is free from any fraud or deception. The ethical conduct is the conduct conforming to the accepted professional standards of conduct. Ethical conduct includes the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Conflicts of Interest Each of us have a responsibility to the Company, its shareholders and towards each other. Although this duty does not prevent us from engaging in personal transactions and investments, it does demand that we avoid situations where conflict of interest might occur or appear to occur. A conflict of interest occurs when an individuals private interest interferes or appears to interfere with the interests of the Company. The Directors and senior management personnel must act at all times in the Companys best interests and avoid putting themselves in a position where their personal interests conflict or appears to conflict with the interest of the Company. The personal interests will include those of their close relatives. Any Director or senior management personnel, who is aware of a conflict of interest or is concerned that a conflict might develop, is required to disclose the matter promptly to the Board of Directors in case of a Director and to the Chairperson in case of senior management personnel.
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The Directors and senior management personnel shall not engage in any activity or enter into any relationship which might result in conflict of interest, either directly or indirectly. An illustrations only and not being exhaustive, some of the common instances of conflict of interest which should be avoided are given below:

a. None shall receive a personal benefit from a person or any entity which is seeking to do business or does business with the Company. They shall not participate in any decision making process of the Board involving another entity/person in which they have direct or indirect interest. b. None shall receive remuneration, in any form, for service rendered for the Company from any source other than the Company. Corporate Opportunities None shall exploit for their personal gain opportunity that is discovered through the use of corporate property, information or position unless the opportunity is disclosed fully in writing to the Companys Board of Directors and the Board of Directors declines to pursue such opportunity. The Directors and senior management personnel are prohibited from using corporate property, information or position for personal gain and from competing with the Company. Wherever, it is difficult to differentiate between personal and Company benefits or there are both personal and Company benefits in certain activities, the only prudent course of conduct for the Directors and senior management personnel is to make sure that any use of corporate property or services or such transactions that is not solely for the benefit of the Company has prior approval of the Board of Directors. Confidential Information Confidentiality of information must be maintained by all concerned. Any information concerning the Companys business, its customers, suppliers etc. which has been received or to
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which one has access during the course of employment or dealing with the Company shall be considered as confidential unless such information is publicly available. Such information must be held in confidence and used only for the purposes of the business of the Company and not disclosed otherwise unless authorised to do so or required to do so under law. This obligation continues for three years even after one leaves or disassociates himself from the Company. Prohibition of Insider Trading. The Company has formulated a Code of Internal Procedure and Conduct for Prevention of Insider Trading and all concerned are required to comply with the requirements of the said Code. The Directors and senior management personnel and their close relatives shall not directly or indirectly derive or attempt to derive any benefit or assist others to derive benefit when in possession of any price sensitive/unpublished information. Fair Dealing .The Company does not seek competitive advantages through illegal or unethical business practices. Each Director and senior management personnel should endeavour to deal fairly with the Companys customers, service providers, suppliers, competitors and employees. None should take advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice. The Directors and senior management personnel shall immediately bring to the notice of the Board any unethical behaviour and actual or suspected fraud. Protection and proper use of Company Assets Protecting the assets of the Company is a key responsibility of every employee. The Directors and senior management personnel must safeguard and protect the assets of the Company against misappropriation, loss, damage and ensure their efficient use. They must ensure that assets are not put into use, sold, loaned or dealt with in any other manner without appropriate authorisation. All Company assets should be accounted for and used only for legitimate business purposes of the Company. Gifts

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and Donations Though business gifts and donations are customary in many parts of the world they need to be viewed with caution. No Director or senior management personnel shall receive or offer, directly or indirectly, any gifts, donation or benefits which are intended or perceived to be intended to obtain unethical favour. Nominal gifts of commemorative nature for special events may be accepted. Corporate Social Responsibility The Company is committed to serve the community around its area of operations. The Company believes that no organization can survive in isolation and it has a responsibility towards public at large. The Company aims to reach out to the neighbouring villages, conserve the environment and nurture young people. The Company shall take requisite community development initiatives around the areas of its operations. Safety, Health and Environment. The Companys vision envisages no compromise in its commitment to safety, health and responsible care for the environment. Health and safety of the people in and around its area of operations are of paramount importance to the Company. The Company is committed to environment protection, pollution control and maintenance of ecological balance. The Company shall maintain high standards of pollution control, environment protection and safety. Compliance with Laws, Rules and Regulations The Company is committed to high standards of corporate governance and believes in compliance of all the laws, rules and regulations and other legal requirements directly or indirectly, effecting or concerning the Company and or required to be observed in connection with the business and affairs of the Company. The Company has endeavoured in setting standards for itself, which are ahead of time and higher than those stipulated by law. All concerned are required to comply with the applicable laws, rules and regulations both in letter and spirit. Financial and Operational Integrity the Company is committed to disclose in its financial statements
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all the information required to be disclosed under the relevant accounting standards or under any law or regulation. It is essential to record all the transactions fully and properly in the financial statements. The Company shall prepare and maintain accounts of its business affairs truly and fairly in accordance with the accounting and financial reporting standards which represent the generally accepted guidelines, principles, standards, laws and regulations of the country. There shall be no will full omission of any transaction from the books and records of the Company.

No record, entry or document shall be false or misleading and no undisclosed or unrecorded account, fund or asset shall be established or maintained. The Auditors shall be provided full access to all information and records of the Company. Prevention of Sexual Harassment the Company firmly believes in the rule of Justice, Equity and Fair Play which demands of the Company that it be committed to renounce all such practices as are derogatory to the dignity and self respect of women working in the Company. With this end in view the Company is committed to maintain a non-hostile work environment, free of harassment and discrimination of whatsoever nature for all its employees particularly the women employees. With the aforesaid end in view the Compliance Officer of the Company has been authorized and empowered to closely investigate any reported case of sexual harassment and should there be the need to constitute and appoint a Sexual Harassment Investigation team consisting of such number of male/female senior employees of the Company as he/she thinks most appropriate in a given case to make a dispassionate investigation into such complaint and make any remedial suggestion to the Compliance Officer. Annual Review the Directors and senior management personnel shall affirm in writing compliance with the Code on an annual basis i.e. in
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July each year. Disciplinary Actions the matters covered in the Code are of utmost importance to the Company and are essential to the Companys ability to conduct its business in accordance with the stated values. The Directors and senior management personnel are expected to adhere to the Code in carrying out their duties for the Company. Appropriate actions will be taken by the Board of Directors in case of Directors and by the Chairperson in case of senior management personnel for breach of the Code. Actions may include serious disciplinary action, removal from office as well as other remedies to the extent permitted by law and as considered appropriate in the circumstances. Compliance Officer the Company has appointed the Secretary as Compliance Officer for the purpose of the Code. The Compliance Officer will be available to the Directors and senior management personnel to resolve their queries and assist them in complying with the Code. Any question relating to how this Code should be interpreted or complied should be addressed to the Compliance Officer. Implementation/Modification The decision of the Board of Directors with regard to all matters relating to the Code will be final and binding on all concerned. The Board of Directors of the Company shall have power to modify or replace the Code in part or in full, as they may deem fit from time to time in their absolute discretion.

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CORPORATE ADDRESS
Registered Office Corporate Office The Oudh Sugar Mills P.O.: Hargaon Dist: Sitapur (U.P.) Pin: 261121 India Phone : 91 05862 256221 E-mail: birlasugar@birla-sugar.com Unit No. 210/212 Solaris - 1 'A' Wing (2nd Floor) Sakivihar Road Opp. L & T Gate No. 6 Andheri (East) Mumbai - 400 072 India Phone : 91 022 2847 0249 E-mail: oudhsugar@mtnl.net.in Head Office 9/1 R.N. Mukherjee Road Birla Building Kolkata - 700 001 India Phone: 91 033 2243 0497/98 E-mail: birlasugar@birla-sugar.com

INVESTOR RELATION
Contact Addresses The Secretary The Oudh Sugar Mills Ltd. Unit Number 210/212, Solaris -1, 'A' Wing, 2nd Floor, Sakivihar Road, Andheri (East) Mumbai - 400072 India. Tel. No. : 91-22-2847 0249 E-mail :gnpareek@birla-sugar.com Link Intime India Pvt. Ltd., (RTA) (Unit : The Oudh Sugar Mills Limited) C-13, Pannalal Silk Mills Compound L.B.S. Marg, Bhandup Mumbai - 400078. Tel No. : 91 - 22 - 25963838 E-mail :isrl@linkintime.co.in

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EQUITY SHARES MANAGEMENT

Management of the Company vests with the Board of Directors comprising eminent industrialists, professionals and persons having wide industrial experience and business acumen. Majority of the Directors on the Board are independent.

The Board is headed by Shri C. S. Nopany, aged 45 years, who is the Chairman-cumManaging Director. He is a Chartered Accountant and Master in Science of Industrial Administration from Carnegie Mellon University, Pittsburgh, USA. He is an eminent industrialist having vast industrial experience in diverse fields like sugar, tea, shipping, textiles, fertilisers and chemicals, etc. He is the past President of Indian Chamber of Commerce. He looks after the overall management and is the driving force of the Company. The other members of the Board are :Shri S.V. Muzumdar, aged 82 years, is B.A., L.L.B. Advocate. He has got wide and varied experience in the legal field. In addition, he is also on the Board of several other public Companies. ShriAshvin C. Dalal, aged 74 years, is a Commerce Graduate. He is a partner in the firm of M/s. Chimanlal J. Dalal& Co., leading share and stock brokers. ShriRohit Kumar Dhoot, aged 42 years, is a Chartered Accountant. He is a businessman of wide experience occupying position of Managing Director of Dhoot Industrial Finance Limited and Directorship in several companies. Smt. MadhuVaderaJayakumar, aged 47 years, is a holder of Post Graduate Diploma in Management from Indian Institute of Management, Ahmedabad and Mathematics Honours Degree from University of Delhi. She was associated with Mineral Metals Trading Corporation during 1985-1988 and later with Citi Bank N. A. during 1988-2000. Shri J. N. Godbole, aged 65 years, is an ex73 | P a g e

Chairman and Managing Director of Industrial Development Bank of India. His area of expertise include banking, financial management, corporate restructuring mechanism etc. ShriHaigreveKhaitan, Aged 40 years, is a practicing Advocate since 1995 and a Partner in Khaitan& Co. His area of expertise include Commercial & corporate laws, tax laws, mergers and acquisitions, restructuring, foreign collaboration, licensing etc. Shri C. B. Patodia, aged 62 years, possesses rich experience of over 37 years especially in Cane Marketing, Sugar Manufacturing Process, Administration and Finance. The Board of Directors is assisted by a team of competent persons.

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MANAGEMENT DISCUSSION AND ANALYSIS

GLOBAL SUGAR INDUSTRY REVIEW
The sugar industry is one of the worlds major agro-based industries. Around 75% of the global sugar production comes from the top 10 producers, of which the top three (Brazil, India and the European Union) contribute 40% of the total As of August, 2010, global sugar production stands at 158.830

The sugar cycle

The Indian Sugar Industry is cyclical in nature. The industry downtrend starts with improved mill profitability, prompt farmer payment resulting in higher sugarcane acreage and a bumper sugar output. This results in supply exceeding demand, leading to a decline in sugar prices which in turn leads to lower mill profitability, delayed payment to farmers, high sugarcane arrears, lower cane production, all culminating into higher sugar prices. Million tonnes, increasing just 4.65% over that of the previous year. Owing to high international prices and lingering impacts of global downturn, the worlds global consumption (163.779 million tonnes) posted a negative growth rate of 0.1244%, compared to last 10 years average of 2.64%. The world sugar economy witnessed a statistical deficit for a second year in a row.

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Import figure for SY 2008-09 includes 1.2 million of unprocessed raw sugar lying with sugar mills.

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World sugar balance

2009/10

2008/09

Change million tonnes in %

4.65 -0.1244

Production 158.830 Consumption Surplus/deficit Import demand 163.779 -4.949 52.722

151.769 163.983 -12.214 50.167

7.061 -0.204

2.555

5.093

Export availability End stocks

52.688

49.216

3.472 7.0546

54.903

60.676 37.00

-5.773

-9.5145

Stocks/consump 33.52 tion ratio in %

INDIAN SUGAR INDUSTRY REVIEW

In India, sugar industry is the second largest industry after textiles. The country is the second largest sugar producer in the world (accounting 13% of the worlds sugar production). The sub-tropical region (Uttar Pradesh) contributes almost 60% of Indias total sugar production, while the balance comes from the tropical region, mainly from Tamil Nadu, Karnataka, Maharashtra and Madhyapradesh.

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Production and consumption of sugar in India

After consecutive decline in production in 2007-08 and 2008-09, Indias sugar production has started increasing. With the increase in the sugarcane output to 274 million tonnes in sugar season 2009-10, the production of sugar is expected to touch 18.75 million tonnes by the time the current sugar season comes to an end in

September, 2010. According to ISO, a further 34% production recovery is expected in the sugar year 2010-11, with a revised production of 25.5 million tonnes. Indias sugar is mostly produced from sugarcane, and the swings in production were driven primarily by large swings in the acreage of land cultivated for sugarcane and rainfall patterns. The sugar consumption, on the other hand, is estimated to have grown marginally to 23.5 million tonnes. The growth is on account of rising per capita income and government interventions to adjust stocks and facilitate trade to assure adequate monthly availability. Despite rising price, the sugar demand did not reduce among bulk consumers. Bakeries, soft drinks and local sweet manufacturers accounted for around 60% of the sugar demand. ISO estimates an approximate growth of 4% in 2010-11 in Indias sugar consumption, accounting for about 19.8% of the global sugar consumption. The industry is highly fragmented with the presence of organised and unorganised players. The unorganised sector usually produces jaggery (unrefined concentrated sugar) or khandsariaccounting for smaller shares of overall use. The production and consumption of khandsari has been declining, while it is a reverse situation in case of jaggery. Its production and consumption are unregulated and tend to rise in years, when higher jaggery prices or increase in payment arrears by

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sugar mills incentivise farmers to divert sugarcane for jaggery production. During 2009-10, jaggerys market share rose to about 35% of the total demand of the sweetener, reflecting a drop in sugar production caused by reduced sugarcane plantings. India ranks sixth in per capita sugar consumption. Indias sugar consumption currently hovers around 20 kg/capita compared to 57.6 kg of Brazil. The lower per capita consumption leads to anticipation of increasing demand in the future, though in the last few years, the per capita consumption is increasing at a steady 3.7% annually.

Recovery rate
A higher recovery rate (percentage of sugar produced from sugarcane crushed) ensures higher production. Frequent switching of crops and climatic conditions affect the recovery rate considerably. In India, the recovery varies from the plantation in the subtropical region and tropical region. Indias current recovery rate stands at around 10%, compared to Brazils recovery rate of 3.7% annually.

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Pricing
Until the last sugar season (SS), there were two types of pricing that were followed by the sugar mills to remunerate the farmers State Advised Price (SAP) and Statutory Minimum Price (SMP). The Commission on Agricultural Cost s and Prices (CACP) decides the SMP, whereas the state governments fix the SAP, which is significantly higher than SMP. The difference in pricing led to regional variation in productivity and profitability. To include reasonable margin for both the sugarcane and sugar producers, the Centre replaced the Statutory Minimum Price (SMP) with Fair and Remunerative Price (FRP) in early 2010, for the minimum price to be paid to sugarcane farmers for the sugar season 2009-10. FRP for 2009-10 sugar seasons was fixed at Rs. 129.84 per quintal and has been further raised to Rs. 139.12 per quintal for the 2010-11 seasons. SAP was fixed at Rs. 165 per quintal.

AUDIT COMMITTEE
Overall purpose/objective The Audit Committee of the Company is constituted in line with the provisions of Clause 49 of the Listing Agreement with the Stock Exchange read with Section 292A of the Companies Act, 1956. The purpose of the Audit Committee is to assist the Board of Directors(the Board) in reviewing the financial information which will be provided to the shareholders and others, reviewing the systems of internal controls established in the Company, appointing, retaining and reviewing the performance of independent accountants internal auditors and overseeing the Companys accounting and financial reporting processes and the audit of the Companys financial statements. a) Terms of Reference The terms of reference of the Audit Committee are broadly as under:

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Overview of the Companys financial reporting process and the disclosure of its financial information to ensure that the financial statements reflect a true and fair position and that sufficient and credible information are disclosed.

Recommending the appointment and removal of external auditors, Fixation of audit fee and also. Approval for payment for any other services. Discussion with statutory auditors before the audit commences, of the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.

Reviewing the financial statements and draft audit report, including quarterly/half yearly financial information.

Holding periodic discussions and reviewing with the management, the Statutory Auditors and internal.

Auditors the annual and quarterly financial reports and statements before submission to the Board, focusing primarily on:

i. ii. iii. iv. v. vi. vii.

any changes in accounting policies and practices; ii. major accounting entries based on exercise of judgment by management; iii. qualifications and observations in draft audit report; iv. significant adjustments arising out of audit; v. the going concern assumption; vi. compliance with accounting standards; vii. compliance with stock exchange and legal requirements concerning financial statements;

viii.

viii. any related party transactions as per Accounting Standard 18

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ix.

ix. Significant findings of the statutory and internal auditors and follow up thereon.

x. xi.

Reviewing the Companys financial and risk management policies. Reviewing with the management, statutory and internal auditors, the adequacy of and compliances with internal control systems.

xii.

Reviewing the adequacy of internal audit function,including structure of the internal audit department, approval of the audit plan and its execution, staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internal audit.

xiii.

Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

xiv.

Reviewing the functioning of the Whistle Blower mechanism.

Objectives: I) Though the constitution of the Remuneration Committee is not mandatory, the Company has constituted the Remuneration Committee review and determine the Companys policy on managerial remuneration and recommends to the Board on the specific remuneration of Executive Directors, so as to ensure that they are fairly rewarded for their individual contributions to the Companys overall performance and their remuneration is in line with the industry practice and standards.

The Committee has all the powers and authority as may be necessary for implementation, administration and superintendence of various fringe benefits for managerial remuneration.

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Terms of Reference:

The broad terms of reference of the Remuneration Committee are as under: a. To recommend to the Board salary, perquisites and incentive payable to the Companys executive. b. To recommend to the Board any new appointments including re-appointments and tenure of office, whether of executive or non-executive Directors Such other matters as the Board may from time to time request the Remuneration Committee to examine and recommend/approve.

Composition and Meetings

The Committee, presently, comprises of three Independent Non-executive Directors, viz. Mr. S V Muzumdar (Chairman), Mr.Ashvin C Dalal and Mr. Rohit K Dhoot. One meeting of the Committee was held during the year. Remuneration Policy: The Company, while deciding the remuneration package of the senior management, takes into consideration the following items: a. Job profile and special skill requirements. b. Prevailing compensation structure in companies of similar size and in the industry. c. Remuneration package of comparable managerial talent in other industries. The Non-Executive Directors are paid remuneration by way of commission besides sitting fees, if approved by the Board, on the net profit of the Company at the rate not exceeding 1% of the net profit of the Company determined in accordance with the

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terms and provisions of Section 349 of the Companies Act, 1956. The distribution of such commission amongst the non-executive directors is placed before the Board for its decision subject to a maximum of Rs. 1 lac per Director per year. During the last 4 years the Company has not been able to pay any commission to the Non- Executive Directors in view of inadequacy of the net profit of the Company.

MEANS OF COMMUNICATION
i) Since the financial results in respect of each quarter and annual audited financial results of the Company are sent to the Stock Exchanges immediately after they are approved by the Board/Committee and posted on the Companys Website and also published in Business Standard, in English in Lucknow and Mumbai editions and Business Standard, in Hindi in Lucknow edition, the same were not separately sent to the shareholders.
ii) The financial results are simultaneously posted on the Companys website at www.birla-

sugar.com/osugar. Distribution of shareholdings is also displayed on the website. iii) The Company also displays official press releases every quarter on the above website. iv) No presentation was made to any Analysts during the year.

GENERAL SHAREHOLDERS INFORMATION

i) 78th Annual General Meeting

Day : Tuesday Date : 21st December, 2010 Time : 11.00 AM Venue : Registered Office: Sugar Mills Complex, Hargaon, District Sitapur Uttar Pradesh-261121
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ii) Book Closure The Register of Members and Share Transfer Books of the Company shall remain closed from 17th December, 2010 21st December, 2010 (both days inclusive) for the purpose of Annual General Meeting. iii) Dividend Payment Date the Board of Directors do not recommend any dividend for the year under review IV) Registrar & Share Transfer Agent. The Company has appointed Link Intime India Pvt. Ltd. as its Registrar & Share Transfer Agent (RTA) for handling work related to share registry in terms of both physical and electronic modes. Accordingly, all correspondence, shares for transferdemat / remat requests and other communication in relation thereto should be mailed/hand delivered to the said RTA directly at the following address: Link Intime India Pvt. Ltd. Unit : The Oudh Sugar Mills Ltd. C-13, Pannalal Silk Mills Compound. L.B.S Marg, Bhandup (West) Mumbai - 400 078 Tel : 91 022 2596 3838 Fax : 91 022 2594 6969 e-mail : mumbai@linkintime.co.in v) Share Transfer System After the requests for transfer/transmission of shares in physical form are approved by the Investors Grievance Committee the same are sent to the Registrar & Share Transfer Agent for completing the necessary procedural formalities and despatch to the shareholders. The Board of Directors have authorised the Secretary to approve transfer/transmission of up to 1,000 shares. Share transfer requests, if found valid and complete in all respects, are normally
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effected within a period of 15 days from the date of receipt. A total of 5,589 shares were transferred/ transmitted during the year 2009-10. 11. INTERNAL CONTROL SYSTEM The Internal Control System prevalent in the Company is aimed at proper utilisation and safeguarding of the Companys resources and also at promoting operational efficiency. The system is reviewed periodically by the Audit Committee in consultation with the senior management of the Company, the Statutory Auditors and the external internal auditors. The Internal Audit of the Company is conducted by PARM & SMRN, Chartered Accountants. The findings of the Internal Audit and consequent corrective actions initiated and implemented from time to time by the Executive Management are placed before the Audit Committee. The Audit Committee reviews such audit findings and the adequacy of Internal Control System.

12. HUMAN RESOURCE DEVELOPMENT/INDUSTRIAL RELATION Continuous learning is the cornerstone of the Companys human resource policy. The Companys human resource policy is structured to meet the aspirations of the employees as well as of the organisation. The Company has adopted a progressive policy of continuous development of its human resources by training and motivating its employees to attain greater efficiency and competence besides striving to retain the talent. The current strength of management staff is 77 and non management staff is 1801. Industrial relations in all the units were cordial throughout the year under review. 13. RISK MANAGEMENT The Company has in place a Risk Management Policy, which lays down the process for identification and mitigation of risks. This Policy has been approved by the Board of
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Directors of the Company. The Board of Directors reviews the risk management and mitigation policy from time to time, the last such review having been made on 25th August, 2009. 15. CODE OF CONDUCT & ETHICS The Company has also adopted a Code of Conduct and Ethics (Code) for the members of Board of Directors and Senior Management Personnel of the Company to follow. The Code is posted on the website of the Company at www. birla-sugar.com. The essence of the Code is to conduct the business of the Company in an honest and ethical manner, n compliance with applicable laws and in a way that excludes considerations of personal advantage. All Directors and Senior Management Personnel have affirmed their compliance with the Code, and a declaration to this effect, signed by the Managing Director, is attached to this report.

16. LEGAL COMPLIANCES The Board reviews periodically compliance reports of all laws applicable to the Company, prepared by the Company as well as steps taken by the Company to rectify instances of non compliances, if any. 17. COMPLIANCES WITH CORPORATE GOVERNANCE NORMS The Company has complied with all the mandatory requirements of the Code of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges. The Company has submitted the compliance report in the prescribed format to the stock exchanges for the quarters ended September 30, 2009, December 30, 2009, March 2010 and June 2010. The Statutory Auditors have certified that the Company has complied with the conditions of corporate governance as stipulated in Clause 49 of the listing agreements with
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the stock exchanges. The said certificate is annexed to this Report and will be forwarded to the Stock Exchanges and the Registrar of Companies, Uttar Pradesh along with the Annual report. As regards compliance with the non-mandatory requirements, the following have been adopted: 1. Remuneration Committee. As detailed in the earlier paragraphs, the Company has constituted a Remuneration Committee. The Chairman of the Remuneration Committee is Mr. S.V. Muzumdar. 2. Whistle Blower Mechanism. Though a codified Whistle Blower Policy of the Company is not in place every employee of the Company is encouraged to escalate to the level of the Audit Committee

any issue of concerns impacting and compromising with the interest of the Company and its stakeholders in any way. The company is committed to adhere to highest possible standards of ethical, moral and legal business conduct and to open communication and to provide necessary safeguards for protection of employees from reprisals or victimisation, for whistle blowing in good faith. 3. Other non mandatory requirements have not been adopted by the company 18. SUBSIDIARY COMPANIES: The Company does not have any material non listed Indian Subsidiary Company. The Audit Committee reviews the financial statements and in particular, the investments made by unlisted subsidiary companies. The minutes of the Board meetings as well as statements of all significant transactions of the unlisted subsidiary companies are placed before the Board of Directors of the Company for their review.

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19. SHAREHOLDERS RIGHTS: The quarterly financial results are published in leading financial newspapers, uploaded on the Companys website and any major developments are covered in the press releases/intimation to stock exchanges by the Company. The Company therefore has not been sending the half yearly financial results to the shareholders. 20. CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009 The Ministry of Corporate Affairs recently announced a set of voluntary guidelines on Corporate Governance. The Company in line with its stated policy of being committed to the principles and practices of good corporate governance is in compliance with many of these guidelines, as reported in the earlier paragraphs. As regards the remaining guidelines, the Company is in the process of evaluating the feasibility of implementing the same progressively.

Performance of Companys Equity Shares in comparison to BSE Sensex and BSE 200

Series 1
120 115 110 105 100 95

Series 1

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