CHAPTER III FINANCIAL PERFORMANCE OF PUBLIC SECTOR ENTERPRISES –AN ANALYSIS The present chapter contains three sections. Significance of financial ratios in financial performance analysis are discussed in the first section , the theoretical base of the selected financial ratios in the second section and the evaluation of financial and operating performance are detailed in the third section. Section 1: Significance of Financial Ratios in the Performance Analysis For evaluating the financial performance, financial ratios are used. These ratios help in evaluating whether the company is performing well or not. The pivotal instruments for providing most of such economic information are the financial statements prepared at regular intervals by the public enterprises. It is worth quoting in this connection the observation made by Eaton Marquis (1957) 1 former president of AICPA (Association of the Institute of Certified Public Accountants of America), who asserted that one thing which holds the economy together under all the pressures and in the midst of this swift evolutionary passage through time is our system of financial reporting. Without adequate information about the results of business operations, no one could make intelligent decisions, and our economy would fall apart. Financial statements, as vehicles of communication, intend to convey information about the workings of the unit over a period of time as well as its state of affairs at a point of time. The Tuyeblood Committee (1973) 2 , in its report
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CHAPTER III
FINANCIAL PERFORMANCE OF PUBLIC SECTOR
ENTERPRISES –AN ANALYSIS
The present chapter contains three sections. Significance of financial ratios in
financial performance analysis are discussed in the first section , the theoretical base
of the selected financial ratios in the second section and the evaluation of financial
and operating performance are detailed in the third section.
Section 1: Significance of Financial Ratios in the Performance Analysis
For evaluating the financial performance, financial ratios are used. These
ratios help in evaluating whether the company is performing well or not. The pivotal
instruments for providing most of such economic information are the financial
statements prepared at regular intervals by the public enterprises.
It is worth quoting in this connection the observation made by Eaton
Marquis (1957)1 former president of AICPA (Association of the Institute of Certified
Public Accountants of America), who asserted that one thing which holds the
economy together under all the pressures and in the midst of this swift evolutionary
passage through time is our system of financial reporting. Without adequate
information about the results of business operations, no one could make intelligent
decisions, and our economy would fall apart.
Financial statements, as vehicles of communication, intend to convey
information about the workings of the unit over a period of time as well as its state
of affairs at a point of time. The Tuyeblood Committee (1973)2, in its report
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enunciating the objectives of financial statements, states that the function of external
accounting reports is to provide information for making of economic decisions by
parties who rely on such reports as a basic source of information. These financial
statements purport to communicate economic messages of the results of business
decisions and events which can be expressed in terms of quantifiable data in such a
way as to achieve the maximum understanding with the users and correspondence of
the message with economic reality.
Financial statements are multifunctional, catering to the needs of several
users, both from within and outside the economic unit, viz., managers, creditors,
investors, taxation authorities, regulatory bodies, trade unions and employees. These
varied users are concerned with the relevant information of their own areas of
interest in the firm for which they analyse and interpret these financial statements.
Some of the users are interested in the quality of operational performance whereas
others are concerned with adjudging the capability of the concern in meeting its debt
obligations. On the basis of the information gained from these financial statements,
these varied users reach the decisions pertaining to their own areas of interests.
Thus, shareholders decide about the shareholding of the concern on the basis of its
expected profitability, credit analysts including financial institutions, bankers and
other lending agencies, about the lending policy on the basis of the creditworthiness
of the concern; and the taxation authorities decide about the amount of tax to be
levied on the basis of the operating results.
Economic messages that the various users draw from these financial
statements get facilitated when the individual variables are transformed into
77
financial ratios. This transformation allows direct comparison of economic units of
different sizes and provides a better picture of a firm’s financial position and the
interrelationships of the data. The denominator of financial ratios acts as size
deflator to remove the effects of scale from comparison (Geoffrey, 1980)3. The
usage of financial ratios is also justified by the fact that the selection of pertinent
material from a plethora of published information is more useful than wide and
indiscriminate reading. Financial ratios serve this purpose by reducing the size of
data disclosed in financial statements to precise information. Financial ratios, the
derivatives of financial statements, therefore, are widely applied to reach certain
judgments about the firm under study. They are expected to provide the economic
and objective justification for the decisions. In this connection Laurent (1979)4 has
opined that in principle the justification for employing financial ratio analysis to
investigate a company’s financial state is highly defensible.
The logical reason behind this type of analysis is the proposition that there
are certain normative relationships which exist between different financial
components of a company as displayed in the balance sheet and profit and loss
account. The extent to which a company does or does not conform to these norms
for the activities that it is engaged in is indicative of something favourable or
unfavourable, depending on the relationship being examined.
It is, thus, clear that financial ratios are used not only in analyzing the past
and present financial performance of an economic unit but also can be applied to
predict its future financial performance. The prediction of future events is of great
interest to the varied users of financial statements since it is a necessary pre-
78
condition for decision making. The predictive capability of financial ratios has
assumed such an importance in the past few years that it is now used as a criterion
for judging the usefulness of financial statements (Beaver, 1974)5.
It is well established that the earlier the trouble is detected, the more easily
and economically it may be countered. Forewarning helps in forearming. Early
detection of state of affairs and the profitability enable the management to rectify it.
Advance information regarding the condition of an enterprise should be an important
factor in streamlining the allocation of resources by financial institutions, banks and
investors in general, to achieve efficiency.
Section 2: Theoretical Frame Work for Analysis
The ratios applied by the Bureau of Public Enterprises in Kerala for evaluation of
the financial and operating performance such as Debt Equity Ratio, Current Ratio ,
Receivables to Sales , Stock of Finished Goods to Sales , Stock of Raw Materials
to Consumption , Consumption to Sales , Net Profit to Sales and Return on
Investment ,Net worth, Capital Employed, Capital Invested and the Working capital
are taken for evaluation of the financial performances of selected Public Sector
Enterprises under study.
The net worth comprises of paid up capital plus reserves and surplus minus
preliminary expenses, accumulated loss, miscellaneous expenditure not written off
and intangible assets ( as given in balance sheet ) .Capital Employed means net fixed
assets including capital work in progress plus working capital. Capital Invested
means paid up capital plus long term borrowals and Working Capital means the
Current assets including loans and advances minus current liabilities and provision.
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Debt Equity Ratios
Long term debt-to equity ratio reveals the extent of support that the long term
debt holders are enjoying from the equity capital. It thereby provides guidelines as to
what magnitude they can take a shelter of the equity cover available with the
organisation. The basic reason attributable in this case is to avoid further risk
attached to equity capital and shareholders are unwilling to supply additional capital.
This is the ratio of long term borrowals to paid up capital . The computation is made
by using the following formula:
Debt to Equity Ratio = Long term Borrowals / Paid up Capital
An enhanced level of borrowed funds are compared to owner’s investment
which evidently results in higher service obligations in terms of interest payments
and consequently increases the possibility of the firm’s inability to meet its
obligations in time. It exhibits the relationship between loan funds and net worth. Its
main object is to increase the owners benefits ie, possibility to earn income from
such investment exceeds the interest payable to them. A high ratio of debt to equity
is appreciable in the case of capital intensive industries.
Liquidity Ratios
Liquidity ratios measure the ability of the firm to meet its current obligations.
A firm should ensure that it does not suffer from lack of liquidity and also that it
does not have excessive liquidity. The failure of a company to meet its obligations
due to lack of sufficient liquidity, will result in a poor creditworthiness, loss of
creditors’ confidence, or even in legal tangles resulting in the closure of the
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company. A very high degree of liquidity is also bad; e.g. idle assets earn nothing.
The most common ratio, which indicates the extent of liquidity, is current ratio.
Current Ratio
Current Ratio establishes the relationship between assets which are cash or
cash equivalents convertible within a period of one year (Current Assets) to
liabilities which are to be met within a period of one year (Current Liabilities).The
ratio of current assets including loans and advances to current liabilities including
provisions is current ratio.
Current Ratio = Current Assets / Current Liabilities
It measures solvency of the company in the short term. The ideal is
considered as 2:1 but banks consider the minimum acceptable level as 1.33:1 . A
very high current ratio will have an adverse impact on the profitability of the
organisation. It may be due to piling up of inventory, inefficiency in collection of
debtors , high balance in cash and banks without proper investment . It is generally
symptomised by a mismatch of the current liabilities against current assets. If the
money receipts from debtors as well as cash sales and other income are insufficient
to meet the payments which should be made to creditors, there shall be a built up of
creditors balances.
Persisting with such a situation will result in the creditors waiting for longer
periods for recovery of their money. Pressure from creditors will increase, and
illiquidity will become a problem. Part of such crisis is created by the fact that under
the accrual system of accounting, units are made liable to pay advance tax, declare
81
and pay dividends to shareholders within a specified period of time in cash. An
unrealistic increase in accounts receivables which are no better than partial truths
does not help. The current ratio endeavours to provide an idea about the cushion
available with the firm to meet its short term obligations. If an enterprise cannot
meet its current obligations when they become due, its continued existence becomes
doubtful, and that renders all other measures of performance irrelevant. Therefore,
liquidity crisis generally leads to solvency crisis. Current ratio, therefore, aids in the
prediction of future operational activity and assists both internal and external users
of financial information in the decision making process.
The ratio, however, is subject to serious theoretical and practical
shortcomings. The ratio is a static concept. What is of greater relevance is the
availability of resources to meet future cash outflows whenever they arise rather than
keeping a buffer as explained by the ratio. These flows depend on elements not
included in the ratio itself, such as sales, profits and changes in economic conditions.
Moreover, the ratio is easily amendable to manipulation. Despite the shortcomings
entailed in the current ratio, more precisely its static nature, its use in predicting
corporate failure has been indicated in the empirical works of Merwin (1942)16
wherein it was suggested that current ratios of the failed firms were in general less
than those of industry as a whole and, therefore, this ratios is expected to possess the
barometric capacity to forewarn imminent problems. A deteriorating ratio is an
indicator of problems in the offing and warrants an effective management over
inventory, accounts receivables, cash and accounts payables.
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Activity Ratios
Activity ratios are employed to evaluate the efficiency with which the firm
manages and utilizes its assets. These ratios are also called as turnover ratios
because they indicate the speed with which assets are being converted or turned over
into sales. Activity ratios thus involve a relationship between sales/production and
assets. A proper balance between sales and assets generally reflects that assets are
managed well. The prominent activity ratios to judge the effectiveness of assets
utilization are capacity utilisation, finished goods turnover, raw material turnover,
debt collection period, credit payment period, asset turnover and working capital
turnover.
a. Receivables to Sales (in months)
The ratio indicates the Account Receivables (Debtors plus Bills Receivables)
to Sales in terms of months. The formula used for computation is:
Receivables to Sales (in months) = Accounts Receivables/ Sales (x) 12
b. Stock of Finished Goods to Sales (in months)
The ratio indicates the stock of finished goods (excluding semi finished
goods) to Sales in terms of months and can be computed by :
Stock of Finished Goods to Sales = Closing stock of finished goods / Sales (x) 12
Change in stock to sales ratio can be either positive or a negative fraction.
Positive change in stock ratio reveals that production was more than the sales,
whereas a negative change indicates market demand exceeded current production
levels. This ratio, if read with capacity utilization ratio, gives more insights. A low
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capacity utilization ratio coupled with negative change in stock ratio points towards
urgent improvement in production levels to avoid stock out situations. Similarly, a
low capacity utilization ratio with a positive inventory build up highlights the need
of intensifying the marketing efforts to push up the sales further.
c. Stock of Raw Materials to Consumption
Material consumed can be found out as opening balance of raw material plus
purchases minus closing balance of raw material. The firms’ operational efficiency
lies in the number of times it will be able to convert the raw material inventory into
finished goods during the period under report. A firm’s operational margin is
realised only when value is added on the raw materials procured by it. This value
addition potential of the process undertaken by the concern contributes towards its
profitability to the extent of the number of times it can transform input into intended
saleable output. A higher ratio indicates the velocity of addition on account of
operating margin is high and the operation is a value generating one.
The ratio of stock of raw materials (excluding general stores and spares ) to
Consumption in terms of months is ascertained by :
Stock of Raw Material to Consumption
= Closing Stock of Raw materials / Raw materials Consumed (x) 12
d. Consumption to Sales
The ratio indicates the raw materials consumed to Sales expressed as a
percentage on Sales and is computed by using the following formula:
Consumption to Sales (%) = Raw material Consumed / Sales (x) 100
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e. Net Profit to Sales
A company should earn profits to survive and grow over a long period of
time. Profits are essential, but it would be wrong to assume that every action
initiated by management of a company should be aimed at maximizing profits,
irrespective of concerns for customers, employees, suppliers or social consequences.
Profitability ratios are calculated to measure the operating efficiency of the
company. Besides management of the company, creditors and owners are also
interested in the profitability of the firm. The profitability ratios discussed here are
return on investment and net profit to sales.
The net profit margin ratio is measured by dividing net profit after taxes
including non- operating incomes less non-operating expenses as appearing in the
profit and loss account by sales. Net profit is obtained when operating expenses,
interest and taxes are subtracted from the gross profit.
Net profit margin ratio establishes a relationship between manufacturing,
administering and selling the products. This ratio is the overall measure of the
firm’s ability to turn each rupee sales into net profit. If the net margin is inadequate,
the firm will fail to achieve satisfactory return on shareholders’ funds.
This ratio also indicates the firm’s capacity to withstand adverse economic
conditions. A firm with a high net margin ratio would be in an advantageous
position to survive in phases of falling selling prices, rising costs of production or
declining demand for the product. It would really be difficult for a low net margin
firm to withstand these adversities. Similarly, a firm with high net profit margin can
make better use of favourable conditions, such as rising selling prices, falling costs
85
of production or increasing demand for the product. Such a firm will be able to
accelerate its profits at a faster rate than a firm with a low net profit margin.
An analyst will be able to interpret the firm’s profitability more meaningfully
if one evaluates both the ratios - gross margin and net margin - jointly. For example,
if the gross profit margin has increased over years, but the net profit margin has
either remained constant or declined, or has not increased as fast as the gross margin,
this implies that the operating expenses relative to sales have been increasing. The
increasing expenses should be identified and controlled. Gross profit margin may
decline due to fall in sales price or increase in the cost of production. As a
consequence, net profit margin will decline unless operating expenses decrease
significantly. The crux of the argument is that both the ratios should be jointly
analysed and each item of expense should be thoroughly investigated to find out the
causes of decline in any or both the ratios. The ratio of net profit before tax and
dividend to sales expressed as a percentage on Sales:
Net Profit to Sales (%) = Net Profit Before Tax and Dividend / Sales (x) 100
f. Return on Investment
Return on Investment (ROI) measures the return generated by net fixed
assets plus current assets minus current liabilities excluding bank loans. The ratio of
return on investment is calculated as:
Return on Investment
=Net Profit before Tax and Dividend / Capital Employed (x) 100
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Since taxes are not controllable by management and since firm’s
opportunities for availing tax incentives differ, it is prudent to use net profit before
tax as a measure of profit. In order to survive in the long run a firm should generate
a ROI at least equal to its overall weighted average cost of capital. Any return over
and above ROI on capital employed creates an Economic Value Addition (EVA) on
the shareholder equity.
Section 3: Analysis of Financial Performance of selected Public Sector
Enterprises
For the purpose of evaluation of financial performance, 18 PSUs are selected
from various sector categories of industries in Kerala. They are: 1.Kerala Financial
Corporation ; 2.Kerala Tourism Development Corporation; 3. The Kerala Ceramics
Limited; 4. The Kerala Minerals and Metals Limited ; 5. Travancore Titanium
Products Limited; 6. Transformers and Electrical Kerala Limited ; 7. Kerala State
Electronics Development Corporation Limited; 8. Kerala Agro Machinery
Corporation Limited; 9. Kerala Automobiles Limited; 10.Kerala Agro Industries
Source : Computed from Annual Reports of Bureau of Public Enterprises, various issues It is seen that direct correlation exist between net worth to capital employed ,
capital invested and negative correlation exist between other items (Table 3.6)
102
Table 3.6
Correlation
Sl. No. Item Correlation
1 Net worth 1 2 Capital Employed 0.951 3 Capital Invested 0.936 4 Working capital 0.088 5 Debt to Equity Ratio -0.907 6 Current Ratio -0.166 7 Return on Investment (%) -0.573 8 Receivable to sales ( in Months) -0.873 9 Stock of raw materials to consumption ( in months ) -0.870 10 Consumption to Sales (%) -0.987 11 Net Profit to sales ( %) -0.512
Source: Computed from Table 3.4 and Table3.5
3. THE KERALA CERAMICS LIMITED
Kerala Ceramics Limited (KCL) was promoted jointly by Government of
Kerala and Kerala State Electronics Development Corporation (KSEDC) with the
name “Dielectro Magnetics Ltd.” in 1974 for manufacture of 25 million pieces of
Ceramic Capacitors per annum. Technical knowhow used by the company was
developed by National Physical Laboratories. The company became a subsidiary of
Kerala State Electronics Development Corporation Ltd (KELTRON) in the year
1977 and was rechristened as “Keltron Electro Ceramics Ltd.”, in January 1985.
The capacity was enhanced to 90 million ceramic capacitors per annum.
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a. Net Worth
The net worth of Kerala Ceramics Limited is analysed and is seen negative in
all the 20 years from 1990-91 to 2009-10. It means that during the entire period
under analysis the net worth is negative (Table 3.7).
b. Capital Employed
The capital employed of Kerala Ceramics Limited was Rs 108.5 crores
during 1990-91 which declined to Rs 14.52 crores during 1994-95. From 1995-96
capital employed shows a negative growth. The trend of 20 years from 1990-91 to
2009-2010 is a declining one .It means that during the entire period under analysis
the capital employed is seen negative ( Table 3.7).
c. Capital Invested
The capital invested by Kerala Ceramics Limited was Rs 1321.2 crores
during 1990-91 which increased to Rs 1478.7 crores during 1994-95. Again this
increased to Rs 1556.4 crores in 1995-96 which increased to Rs 1736.7 crores in
1999-2000. It was Rs 1745.7 crores in 2000-2001 which increased to Rs 1760.9
crores in 2004-05 and a further increase to Rs 2090.5 crores in 2009-2010 .The
capital invested for the entire period of 20 years under study from 1990-91 to
2009-2010 shows an increasing trend (Table 3.7).
d. Working Capital
The working Capital of Kerala Ceramics Limited is analyzed and is seen it
was negative in all the years under study from 1990-91 to 2009-2010 ( Table 3.7).
104
Table 3.7
Net worth, Capital Employed , Capital Invested and Working Capital of Kerala Ceramics Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
2009-2010 0.72:1 0.37:1 -1.38 0.72 3.69 0.76 18.67 0.92 Source: Compiled from the Review of Public Enterprises , Various issues, Bureau of Public Enterprises , Government of Kerala .
It is seen that there is direct correlation exist between net worth to working
capital , stock of finished goods to sales and stock of raw materials to consumption
and a negative correlation exists between other items (Table 3.9)
110
Table 3.9
Correlation
Sl. No. Item Correlation
1 Net worth 1
2 Capital Employed 0.933
3 Capital Invested -0.910
4 Working capital 0.918
5 Debt to Equity Ratio 0.269
6 Current Ratio 0.319
7 Return on Investment (%) -0.274
8 Receivable to sales ( in Months) 0.006
9 Stock of finished goods to sales( in months ) 0.730
10 Stock of raw materials to consumption 0.738
11 Consumption to Sales (%) -0.243
12 Net Profit to sales ( %) 0.082
Source: Computed from Table 3.7 and Table3.8
4. THE KERALA MINERALS AND METALS LIMITED
Kerala Minerals and Metals Limited (KMML) was incorporated in 1972 to
take over M/s FXP Minerals, Chavara. The entire equity capital is held by
Government of Kerala. The Company set up a Titanium Dioxide Pigment
manufacturing unit in Chavara, with a capacity of 22000 Tonnes Per Annum (TPA)
at an estimated cost of Rs. 6500 lakh. Industrial Development Bank of India (IDBI),
Industrial Finance Corporation of India (IFCI), Life Insurance Corporation of India
(LIC), State Bank of India (SBI) and State Bank of Travancore (SBT) jointly
111
sanctioned term loans for commencing the project. The Company has two
distinguishable sets of plants viz., Titanium Pigmentation Plant and Mineral
Separation Plant to support the processing of mineral sand and other need based
sections.
a. Net Worth
The net worth of KMML was Rs -6535.8 crores during 1990-91 which
further increased to Rs -1391.44 crores during 1994-95. During 1995-96 onwards
the position of net worth changed into positive which amounted to Rs 4813.37 crores
and increased to Rs 18571.7 crores in 1999-2000. It increased to Rs. 26254.27
crores in 2000-01 and to Rs 41913.59 crores in 2004-05. There was an increase to
Rs. 42776.2 crores in 2005-06 and again it increased to Rs 48267.49 crores in 2009-
10. Thus during the initial years under study there was negative net worth but shows
an increasing trend during the entire period under liberalization (Table 3.10).
b. Capital Employed
The capital employed of KMML was Rs340.3crores during 1990-91 which
increased to Rs 4915.4 crores during 1994-95. During 1995-96 capital employed was
Rs 5029.97 crores which increased to Rs 18571.6 crores in 1999-2000. It was Rs
26254.7 crores in 2000-1 which again increased to Rs 42212.14 crores in 2004-05.It
was Rs 43074.93 crores in 2005-06 which increased to Rs49434.3 crores in 2009-10.
It means that the capital employed is found favourable during the liberalization
period (Table 3.10).
112
c. Capital Invested
The capital invested by KMML was Rs 17095.5 crores during 1990-91
which declined to Rs 9400.22 crores during 1994-95. During 1995-96 it was Rs
3309.97 crores which again declined to Rs 3093.27 crores in 1999-2000. In 2000-01
it was Rs 3093.3 crores which increased to Rs 3391.92 crores in 2004-05. It was Rs
3392.1 crores in 2005-06 which increased to Rs 4277.74 crores in 2009-10. It shows
that during the entire period under analysis the capital invested is found
unfavourable (Table 3.10).
d. Working Capital
The working Capital of KMML was Rs 3756.2 crores during 1990-91 which
declined to Rs 3041.5 crores during 1994-95. It was Rs 3187.47 crores in 1995-96
which increased to Rs 16694.31 in 1999-00. It was Rs 23567.25 crores in 2000-01
which increased to 32606.29 crores in 2004-05. It was Rs 27753.85 crores in 2005-
06 which declined to 18969.04 crores in 2009-2010.The overall position of working
capital during the period under review shows an increasing trend(Table 3.10).
113
Table 3.10
Net worth, Capital Employed, Capital Invested and Working Capital of KMML (Rs in Crores )
Source : Computed from Annual Reports of Bureau of Public Enterprises, various issues. It is seen that direct correlation exists between net worth and capital
employed, working capital and consumption to sales and a negative correlation
exists between other items ( Table 3.12).
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Table 3.12
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.984 3 Capital Invested -0.686 4 Working capital 0.867 5 Debt to Equity Ratio -0.409 6 Current Ratio -0.153 7 Return on Investment (%) -0.288 8 Receivable to sales ( in Months) 0.425 9 Stock of finished goods to sales( in months ) -0.375 10 Stock of raw materials to consumption -0.748 11 Consumption to Sales (%) 0.691 12 Net Profit to sales ( %) 0.193
Source: Computed from Table 3.10 and Table3.11
5. TRAVANCORE TITANIUM PRODUCTS LIMITED
Travancore Titanium Products Limited was incorporated in 1946 under the
Department of Industries, Government of Kerala. Manufacture and sale of Titanium
Dioxide and Sulphuric Acid are the main activities.
a. Net Worth
The net worth of Travancore Titanium Products Limited was Rs 3065.3
crores during 1990-91 which further increased to Rs 3517.97 crores. During1995-
96 the position of net worth was Rs 3687.5 crores which increased to Rs. 5395.2
crores in 1999-2000. It increased to Rs 5669.13 crores in 2000-01 which slightly
declined to Rs. 5658.72 crores in 2004-05. Again it declined to Rs 4854.32 crores in
2009-10. Overall position of net worth during the liberalization period shows an
increasing trend (Table 3.13).
120
b. Capital Employed
The capital employed of Travancore Titanium Products Limited was Rs
2734.3 crores during 1990-91 which increased to Rs 3155.1crores during 1994-95.
During 1995-96, capital employed was Rs 3225.4 crores which increased to Rs
4959.2 crores in 1999-2000. It was Rs 5296.13 crores in 2000-01 which again
increased to Rs 5568.94 crores in 2004-05. It was Rs 3949.8 crores in 2005-06
which increased to Rs 11268.21 crores in 2009-10. The capital employed during the
entire period under analysis shows an increasing trend with fluctuations(Table 3.13).
c. Capital Invested
The capital invested by Travancore Titanium Limited was Rs 175.35 crores
during 1990-91 which increased to Rs 176.8 crores during 1994-95. During 1995-96
it was Rs 218.09 crores which declined to Rs 176.75 in 1999-2000. In 2000-01 it
was Rs 176.75 crores which increased to Rs 330.07 crores in 2004-05. It was Rs
267.65 crores in 2005-06 which increased to Rs 6030.18 crores in 2009-10 showing
an abnormal increase compared to other years . It indicates a fluctuating trend of
increase during the entire period under analysis from 1990-91 to 2009-10 (Table
3.13).
d. Working Capital
The working capital of Travancore Titanium Products Limited was Rs
2318.82 crores during 1990-91 which declined to Rs 1159.72 crores during 1994-
95. It was negative in the next two years and increased up to Rs 2728.1 crores in
1999-2000 and Rs 3836.7 crores in 2004-05. It was Rs 2160.8 crores in 2005-06
which declined to Rs -49.20 crores in 2009-10. Thus the ratio shows a fluctuating
121
trend with negative working capital in certain years during the liberalization periods
(Table 3.13).
Table 3.13
Net worth, Capital Employed, Capital Invested and Working Capital of Travancore Titanium Products Limited
Source: Compiled from the Review of Public Enterprises, Various issues, Bureau of Public Enterprises , Government of Kerala .
It is seen that direct correlation exists between net worth and capital
employed, working capital and stock of finished goods to sales (Table 3.15).
127
Table 3.15
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.566 3 Capital Invested -0.013 4 Working capital 0.696 5 Current Ratio 0.152 6 Return on Investment (%) 0.044 7 Receivable to sales ( in Months) 0.242 8 Stock of finished goods to sales( in months ) 0.560 9 Stock of raw materials to consumption 0.001 10 Consumption to Sales (%) -0.544 11 Net Profit to sales ( %) -0.021
Source: Computed from Table 3.13 and Table3.14
6. TRANSFORMERS AND ELECTRICAL KERALA LIMITED
Transformers and Electrical Kerala Limited was incorporated in 1963 under
the Department of Industries, Government of Kerala. Its activities include
manufacturing and supply of transformers and switch gears.
a. Net Worth
The net worth of Transformers and Electrical Kerala Limited was Rs -
2155.21 crores during 1990-91 which declined to Rs -647 .11 crores during 2005-
06 . During 2006-07 onwards there was positive net worth. It was Rs 2338 crores in
2006-07 which increased to Rs 9810 crores in 2009-10. The overall position of net
worth for a period of 16 years is negative and positive net worth is seen only 4 years
under study and the overall trend is not a favourable one (Table 3.16).
128
b. Capital Employed
The capital employed of Transformers and Electrical Kerala Limited was Rs
876.23 crores during 1990-91 which increased to Rs 1403.31 crores during 1994-95.
During 1995-96 capital employed was Rs 1124.38 crores which declined to Rs
495.48 crores in 1999-2000. It was Rs -279.79 crores in 2000-01 which again
increased to Rs 1913.88 crores with a very high increase compared to the past. It was
Rs 2440.93 crores in 2005-06 which increased to Rs 9809 crores in 2009-10. The
overall position of capital employed for a period of 20 years study from 1990-91 to
2009-2010 shows a fluctuating trend during the liberalization period(Table 3.16).
c. Capital Invested
The capital invested by Transformers and Electrical Kerala Limited was Rs
5288.20 crores during 1990-91 which increased to Rs 4707.4 crores during 1994-95.
During 1995-96 it was Rs 4178.7 crores which again increased to Rs 6175.2 crores
in 1999-2000. In 2000-01 it was Rs 7107.5 crores which decreased to Rs 7063.4
crores in 2004-05. It was Rs 7385.7 crores in 2005-06 which declined to Rs 4297
crores in 2009-10. The trend in capital invested for a period of 20 years under study
from 1990-91 to 2009-2010 shows a fluctuating trend of increase (Table 3.16).
d. Working Capital
The working Capital of the Transformers and Electrical Kerala was Rs
507.34 crores during 1990-91 which increased to Rs 1029.7 crores during 1994-95.
It was Rs 786.5 crores in 1995-96 which declined to Rs 201.66 in 1999-00. It was
negative for further three years and positive figure is shown in 2003-04 with Rs
701.1 crores and again increased to Rs 1635.39 crores in 2004-05. It was Rs 2152.44
129
crores in 2005-06 which increased to Rs. 9303 crores in 2009-2010. The trend in
working capital for a period of 20 years study from 1990-91 to 2009-2010 shows a
fluctuating trend of increase with negative growth in some years (Table 3.16).
Table 3.16
Net worth, Capital Employed, Capital Invested and Working Capital of
2009-2010 0.65 2.95:1 46.47 3.1 0.49 2.58 50.68 21.38 Source : Computed from Annual Reports of Bureau of Public Enterprises, various issues
The correlation values depict that there is direct correlation between net
worth and capital employed, current ratio, working capital and net profit to sales
(Table 3.18).
136
Table 3.18 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.955 3 Capital Invested -0.514 4 Working capital 0.958 5 Debt to Equity Ratio -0.777 6 Current Ratio 0.814 7 Return on Investment (%) 0.279 8 Receivable to sales ( in Months) -0.553 9 Stock of finished goods to sales( in months ) 0.507 10 Stock of raw materials to consumption 0.350 11 Consumption to Sales (%) -0.410 12 Net Profit to sales ( %) 0.725
Source: Computed from Table 3.16 and Table3.17
7. KERALASTATE ELECTRONICS DEVELOPMENT CORPORATION LIMITED
Kerala State Electronics Development Corporation Limited was incorporated
in 1972 under the Department of Industries, Government of Kerala. The main
activities include designing, manufacturing and marketing of various IT / Electronic
products / systems.
a. Net Worth
The net worth of the Kerala State Electronics Development Corporation
Limited was Rs 1125.08 crores during 1990-91 which declined to Rs 238.31 crores
during 1994-95. During 1995-96 there was negative net worth and it continues
throughout the entire period under study (Table 3.19).
137
b. Capital Employed
The capital employed of the Kerala State Electronics Development
Corporation Limited was Rs 3886.79 crores during 1990-91 which increased to Rs
5455.84 crores during 1994-95. During 1995-96 capital employed was Rs 4450.23
crores which declined to Rs -1155.28 crores in 1999-2000. It was Rs -935.08 crores
in 2000-01 which again increased to Rs -13379.54 crores in 2004-05 and a positive
capital employed is seen from 2006-07 onwards (Rs. 12241.25 crores) . It was Rs
14923.76 crores in 2009-10.It is seen from the analysis that capital employed for a
period from 1990-91 to 2009-2010 shows an increasing trend except for 7 years
during which it was negative ( Table 3.19).
c. Capital Invested
The capital invested by the Kerala State Electronics Development
Corporation Limited was Rs 12635.82 crores during 1990-91 which increased to Rs
13707.9 crores during 1994-95. During 1995-96 it was Rs 14012.09 crores which
again increased to Rs 18369.95 crores in 1999-2000. In 2000-01 it was Rs 25040.96
crores which increased to Rs 30998.6 crores in 2004-05. It was Rs 33210.14 crores
in 2005-06 which increased to Rs 37826.28 crores in 2009-10. The trends in capital
invested for a period of 20 years under study from 1990-91 to 2009-2010 shows an
increasing one (Table 3.19).
d. Working Capital
The working capital of the Kerala State Electronics Development
Corporation Limited was Rs 2027.38 crores during 1990-91 which increased to Rs
3721.21 crores during 1994-95. It was Rs 2951.98 crores in 1995-96 which declined
138
to Rs -2555.8 crores in 1999-00. It was negative for further six years and positive
figure is shown from 2006-07 onwards to Rs 13528.33 crores in 2009-2010. The
analysis on working capital during the period from 1990-91 to 2009-2010 shows a
trend of increase except in seven years (Table 3.19).
Table 3.19
Net worth, Capital Employed , Capital Invested and Working Capital of Kerala State Electronics Development Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
145
It is seen that direct correlation exists between net worth and capital
employed, current ratio ,working capital , Return on capital employed and stock of
finished goods to sales (Table 3.21).
Table 3.21
Correlation Sl. No. Item Correlation
1 Net worth 1 2 Capital Employed -0.567 3 Capital Invested -0.514 4 Working capital 0.754 5 Debt to Equity Ratio -0.707 6 Current Ratio 0.594 7 Return on Investment (%) 0.079 8 Receivable to sales ( in Months) -0.013 9 Stock of finished goods to sales( in months ) 0.504 10 Stock of raw materials to consumption 0.192 11 Consumption to Sales (%) 0.316 12 Net Profit to sales ( %) 0.385
Source: Computed from Table 3.19 and Table3.20
8. KERALA AGRO MACHINERY CORPORATION LIMITED
Kerala Agro Machinery Corporation Limited was incorporated in 1973 under
the Department of Agriculture, one of the administrative Departments of
Government of Kerala. Kerala Agro Machinery Corporation Limited is involved in
the manufacture and sale of power tillers, diesel engines and power reapers.
a. Net Worth
The net worth of Kerala Agro Machinery Corporation Limited was Rs 522.1
crores during 1990-91 which declined to Rs 100 crores during 1994-95. During
146
1995-96 there was negative net worth of Rs 3931.5 crores which increased to Rs
5994.1 crores in 2004-05. It was Rs 6466.7 crores in 2005-06 which again increased
to Rs 9097.89 crores in 2009-10. It is noticed from the data that the net worth
position shows a steep increase except in 1993-95 to 1995-96 periods (Table 3.22).
b. Capital Employed
The capital employed of Kerala Agro Machinery Corporation Limited was
Rs 544.11 crores during 1990-91 which increased to Rs 969.87 crores during 1994-
95. During 1995-96 capital employed was Rs 1146.22 crores which increased to Rs
3162.21 crores in 1999-2000. It was Rs 3756.5 crores in 2000-01 which again
increased to Rs 581.1 crores in 2004-05. It was Rs. 6291.7 crores in 2005-06 which
again increased to Rs 8933.31 crores. The position of capital employed for a period
of 20 years under study from 1990-91 to 2009-2010 shows a trend of increase
(Table 3.22).
c. Capital Invested
The capital invested by Kerala Agro Machinery Corporation Limited was Rs
161.46 crores during 1990-91 which remained stagnant up to 2006-07 and changed
to Rs 201.88 crores in 2009-10. The capital invested remains stagnant from 1990-91
to 2006-07 and then shows an increase in trend during the remaining years under
study (Table 3.22).
d. Working Capital
The Working Capital of Kerala Agro Machinery Corporation Limited was Rs
401.49 crores during 1990-91 which increased to Rs 582.03 crores during 1994-95.
147
It was Rs 615.93 crores in 1995-96 which increased to Rs 2207.15 crores in 1999-00
. It was Rs 5104.21 crores in 2004-05 which increased to Rs. 8193 .5 crores in 2009-
10. The analysis on working capital for a period of 20 years from 1990-91 to 2009-
2010 clearly shows an increasing trend( Table 3.22).
Table 3.22
Net worth, Capital Employed, Capital Invested and Working Capital of Kerala Agro Machinery Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5
1990-1991 522.10 544.1 161.46 401.23
1991-1992 544.11 544.11 161.46 402.49
1992-1993 681.68 681.66 161.46 534.33
1993-1994 100 811.27 161.46 578.7
1994-1995 100 969.87 161.46 582.03
1995-1996 100 1146.22 161.46 615.93
1996-1997 1372.69 1222.69 161.46 766.56
1997-1998 1903.5 1753.5 161.46 1205.49
1998-1999 2545.78 2395.78 161.46 1751.36
1999-2000 3337.21 3162.21 161.46 2207.15
2000-2001 3931.49 3756.49 161.46 2817.27
2001-2002 4554.92 4379.92 161.46 3490.53
2002-2003 5144.19 4969.19 161.46 4141.38
2003-2004 5601.66 5426.66 161.46 4654.18
2004-2005 5994.1 5819.1 161.46 5104.21
2005-2006 6466.7 6291.7 161.46 5627.03
2006-2007 6987.66 6782.66 161.46 6163.32
2007-2008 7561.54 7398.04 202.96 6792.21
2008-2009 8274.39 8111.42 203.49 7495.23
2009-2010 9097.89 8933.31 201.88 8193.5 Source: Compiled from the Review of Public Enterprises, Various issues, of the Bureau of Public Enterprises , Government of Kerala .
148
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of Kerala Agro Machinery
Corporation Limited during 1990-91 to 2009-2010 with the trend line and regression
equation is shown in fig. 3(viii)
Fig. 3(viii)
Net worth, Capital Employed, Capital Invested and Working Capital of Kerala Agro Machinery Corporation Limited
Source : Table 3.22
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y = 498.2x – 1490. The slope is 498.2x and intercept is 1490. The R² is
0.9665 which shows that the equation is most suitable for prediction. There is an
increase in net worth of Kerala Agro Machinery Corporation Limited during the 20
years under study.
149
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 465.46x – 1132.3. The slope is 465.46x and intercept
is 1132.3. The R² is 0.9739 which shows that the equation is most suitable for
prediction. There is an increase but at a reduced rate in most of the years and the
increase is not high and steep as far as the capital employed of Kerala Agro
Machinery Corporation Limited during the liberalization period is considered.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 1.5827x + 151.04. The slope is 1.5827x and intercept
is 151.04. The R² is 0.3990 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested by Kerala Agro Machinery
Corporation Limited during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 435.12x – 1392.5 The slope is 435.12x and intercept
is 1392.5.The R² is 0.9540 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of Kerala Agro Machinery
Corporation Limited during certain years and decline in certain other years during
liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of Kerala Agro Machinery Corporation Limited
during 1990-91 was 1.25 : 1 which increased to 2.5 : 1 in 1994-95 periods . It was
2.01: 1 in 1995-96 which increased to 3.11: 1 in 1998-99 and increased to 3.52 : 1 in
150
1999-2000. Again there was an increase to 3.89 : 1 in 2000-01 which declined to
0.26:1 in 2004-05 and again declined to 0.25 : 1 in 2009-10. The overall trend
shows fluctuating one. The ratio gives an indication that the debt in their capital
structure is low (Table 3.23).
ii. Current Ratio
The Current ratio of Kerala Agro Machinery Corporation Limited during
1990-91 was 1.75 : 1 which increased to 2.03 : 1 in 1994-95 periods . It was 1.62 : 1
in 1995-96 which increased to 2.76 : 1 in 1998-99 and marginally declined to
2.70 : 1 in 1999-2000. Again there was an increase to 3.78: 1 in 2000-01 which
increased to 5.63:1 in 2004-05. Again in 2005-06 it increased to 6.54 :1 and declined
to 4.69 :1 in 2009-10 periods . The overall trend shows a trend of increase and all
time higher than ideal one in most of the years under study ( Table 3.23) .
iii. Return on Investment
The return on the capital employed by Kerala Agro Machinery Corporation
Limited shows negative one in certain years under study. It was 47.20 per cent in
1990-91 which declined to 16.35 per cent in 1994-95. It was 16.65 per cent in 1995-
96 which increased to 40.49 per cent in 1999-2000. It is very low in 2000-01 (0.74
per cent ) . In 2001-02 it was 22.5 per cent which declined to 12.56 per cent in 2004-
05 and again declined to 14.93 per cent in 2009-10 periods. The return on
investment of Kerala Agro Machinery Corporation shows a fluctuating trend
throughout the period under study (Table 3.23).
151
iv. Net Profit to Sales
The analysis on the net profit before tax and dividend to total sale of Kerala
Agro Machinery Corporation Limited shows that net profit to sales in 1990-91 was
12.54 per cent and it declined to 6.41 per cent in 1994-95. It was 5.19 per cent in
1995-96 which increased to 18.04 per cent in 1999-2000. It was 26.34 per cent in
2000- 01 which declined to 9.21 per cent and again it increased to 10.03 per cent in
2005-06 which declined to 9.55 per cent in 2009-10. It is clear from the analysis of
net profit to sales of Kerala Agro Machinery Corporation Limited that even though
they are earning profit in all years under study but the profit earned is not up to the
mark during the whole period of 20 years under study (Table 3.23).
v. Receivables to Sales
The ratio of receivables to sales was 0.30 in 1990-91 which decreased to 0.17
in 1994-95 and increased to 0.25 in 1998-99 . It was 0.33 in 1999-2000 which
increased to 1.35 in 2004-05 which increased to 2.67 in 2009-10 periods .A
fluctuating trend is noticed during 1990-91 to 2009-10 the whole 20 year period
under analysis. The lower the months in the receivable to sales is really good for
increasing the amount of cash by way of sales. It was not so good in certain years
under study ( Table 3.23).
vi. Stock of Finished Goods to Sales
The ratio of stock of finished goods to sales was 0.04 in 1990-91 which
increased to 0.13 in 1994-95 . It was 0.26 in 1998-99 which declined to 0.12 in
1999-2000. This ratio increased to 0.89 in 2004-05 and it further declined to 0.35 in
152
2009-10 .A fluctuating trend is noticed during 1990-91 to 2009-10 the whole 20 year
period under analysis. The lower the months in the stock of finished goods to sales is
an indication of increased sales (Table 3.23).
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to consumption was 2.17 in 1990-91
which increased to 3.62 in 1994-95. It was 2.91in 1995-96 which again decreased to
2.04 in 1999-2000. It was all time high in 2000-01 ( 61.8) but declined to 1.99 in
2004-05 and to 1.84 in 2009-10. A fluctuating trend of increase is noticed in all the
20 years from 1990-91 to 2009-10. The lesser number of months in raw materials to
consumption is appreciable ( Table 3.23).
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage shows
62.38 per cent in 1990-91 which declined to 58.42 percent in 1994-95. It was 62.87
per cent in 1995-96 which declined to 58.74 per cent in 1999-2000. It declined to
14.53 per cent in 2000-01 which slightly increased to 63.83 per cent in 2004-05. It
was 72.66 per cent in 2005-06 which decreased to 72.38 per cent in 2009-10. A
fluctuating trend of increase is noticed during 1990-91 to 2009-10 the whole 20 year
period under analysis. The trend is somewhat high which indicates that consumption
depends on sales ( Table 3.23).
153
Table 3.23 Financial and Operating Ratios of Kerala Agro Machinery Corporation
2009-2010 0.25:1 4.69:1 14.93 2.67 0.35 1.84 72.38 9.55 Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
It is seen that direct correlation exists between net worth and capital
employed, capital invested, current ratio, working capital and Receivable to sales
(Table 3.24)
154
Table 3.24 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.993 3 Capital Invested 0.650 4 Working capital 0.989 5 Debt to Equity Ratio -0.886 6 Current Ratio 0.897 7 Return on Investment (%) -0.529 8 Receivable to sales ( in Months) 0.936 9 Stock of finished goods to sales( in months ) 0.374 10 Stock of raw materials to consumption -0.018 11 Consumption to Sales (%) 0.203 12 Net Profit to sales ( %) -0.004
Source: Computed from Table 3.22 and Table3.23
9. KERALA AUTOMOBILES LIMITED
Kerala Automobiles Limited (KAL), incorporated in March 1978, is a wholly
owned Company promoted by Government of Kerala. It has an installed capacity to
manufacture 5400 numbers of three wheelers per annum at Thiruvananthapuram,
with technical collaboration from Automobile Products of India Ltd. (APL). The
commercial production was started in the year 1985-86. The operations of the
company had been unsatisfactory since inception due to weak management, lopsided
organizational set up, teething troubles and stiff competition in the market. The
collaborators turned up to be the main competitor as most of the dealers were
common to both KAL and APL. Despite of the reliefs and concessions extended by
the institutions and banks during the period from 1989 to 1991, KAL continued to
incur losses and by the end of March 1993, the accumulated losses stood at Rs. 1403
155
lakh against net worth of Rs. 373 lakh. At the hearing held on 11th February 1993,
KAL was declared as a sick industrial company under section 3(1)(o) of the Sick
Industrial Companies Act (SICA) 1985 and Industrial Development Bank of India
(IDBI) was appointed as the Operating Agency (OA).
a. Net Worth
The net worth of the Kerala Automobiles Limited was Rs -872 .27 crores
during 1990-91and this negative trend repeated upto 2000-01 periods. It was Rs
468.89 crores in 2001- 02 which increased to Rs 975.11 crores in 2004-05. It was Rs
765.34 crores in 2005-06 which declined to Rs 85.56 crores in 2007-08 and turned to
negative net worth afterwards. It means that during the entire period under analysis
the net worth does not give a good picture ( Table 3.25).
b. Capital Employed
The capital employed of the Kerala Automobiles Limited was Rs 432.18
crores during 1990-91 which increased to Rs 439.77 crores during 1994-95. During
1995-96 capital employed was Rs 494.18 crores which increased to Rs 883.16
crores in 1999-2000. It was Rs 883.16 crores in 2000-01 which again increased to
Rs 1355.12 crores in 2004-05. It was Rs 1432.81 crores in 2005-06 which declined
to Rs 515.4 crores in 2009-10. The position of capital employed for a period of 20
years study from 1990-91 to 2009-2010 shows a fluctuating trend (Table 3.25) .
156
c. Capital Invested
The capital invested by the Kerala Automobiles Limited was Rs 1628.45
crores during 1990-91 which increased to Rs 2010.01 crores during 1994-95.
During 1995-96 it was Rs 2034.01 crores which declined to Rs 1537.66 crores in
1999-2000. In 2000-01 it was Rs 1537.44 crores which declined to Rs 1402.83
crores in 2004-05. It was Rs 1690.19 crores in 2005-06 which increased to Rs
1767.03 crores in 2009-10. The position of capital invested shows an increasing
trend in the liberalization period( Table 3.25) .
d. Working Capital
The working capital of Kerala Automobiles Limited was Rs 73.75 crores
during 1990-91 which increased to Rs 195.36 crores during 1994-95. It was Rs
225.38 crores in 1995-96 which declined to Rs 630.02 crores in 1999-00. It was Rs
630.02 crores in 2000-01 which increased to Rs 1151.63 crores in 2004-05 and it
declined to Rs 306.72 crores in 2009-2010. The working capital from 1990-91 to
2009-2010 shows an increasing trend (Table 3.25).
157
Table 3.25 Net worth, Capital Employed, Capital Invested and Working Capital of Kerala
Automobiles Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5
1990-1991 -872.27 432.18 1628.45 73.75
1991-1992 -873.27 432.18 1628.45 73.75
1992-1993 -1269.77 200.04 1792.81 -67.33
1993-1994 -1258.1 397.91 1979.01 144.15
1994-1995 -839.25 439.77 2010.01 195.36
1995-1996 -808.84 494.18 2034.01 225.38
1996-1997 -815.51 416.62 1963.13 130.18
1997-1998 -741.72 332.2 1804.92 47.8
1998-1999 -793.94 457.79 1787.66 191.64
1999-2000 -118.57 883.16 1537.66 630.02
2000-2001 -118.57 883.16 1537.66 630.02
2001-2002 468.89 1160.74 1567.34 925.96
2002-2003 775.66 1178.02 1318.21 962.79
2003-2004 852.48 1203.01 1266.38 988.66
2004-2005 975.11 1355.12 1402.83 1151.63
2005-2006 765.34 1432.81 1690.19 1246.8
2006-2007 577.42 900.71 1346.11 721.01
2007-2008 85.56 290.51 1227.77 130.78
2008-2009 -230.99 356.58 1610.39 191.22
2009-2010 -228.81 515.4 1767.03 306.72
Source: Compiled from the Review of Public Enterprises, Various issues, of
the Bureau of Public Enterprises , Government of Kerala .
158
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of Kerala Automobiles Limited
during 1990-91 to 2009-2010 with the trend line and regression equation is shown in
fig. 3(ix)
Fig. 3(ix) Net worth, Capital Employed, Capital Invested and Working capital of Kerala
Automobiles Limited
Source : Table 3.25
The trend line (linear trend of first degree) of the Net worth from 1990-91 to
2009-2010 is Y = 93.393x – 1203.1. The slope is 93.393xand intercept is 1203.1.
The R² is 0.5394 which shows that the equation is most suitable for prediction.
The trend line (linear trend of first degree) of the Capital Employed from
1990-91 to 2009-2010 is Y =29.101x + 382.55 . The slope is 29.101x and intercept
is 382.55. The R² is 0.1715 which shows that the equation is most suitable for
prediction. There is a decrease in most of the years and the increase noticed in some
159
years is not high and steep as far as the capital employed of Kerala Automobiles
Limited during the liberalization period is considered.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = -23.72x+1894.1 . The slope is -23.72xand intercept is
1894.1. The R² is 0.3762 which shows that the equation is most suitable for
prediction. There is a decrease in the capital invested by Kerala Automobiles
Limited during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 37.281x + 53.565 . The slope is 37.281x and intercept
is 53.565. The R² is 0.2452 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of Kerala Automobiles
Limited during all the years under liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of Kerala Automobiles Limited during 1990-91 was
4.04: 1 which declined to 1.75 : 1 in 1994-95 periods . It was 1.78: 1 in 1995-96
which increased to 1.87: 1 in 1999-2000. It was 1.87: 1 in 2000-01 which declined to
0.37:1 in 2004-05. It again declined to 0.32 :1 in 2006-07 which slightly increased to
0.73:1 in 2009-10 . The overall trend is a fluctuating one. In the initial years the ratio
shows that debt to equity was lower and increased gradually during the liberalization
periods (Table 3.26).
160
ii. Current Ratio
The Current ratio of Kerala Automobiles Limited during 1990-91 was 1.17:
1 which increased to 1.30:1 in 1994-95 periods. It was 1.29 : 1 in 1995-96 which
decreased to 1.18 : 1 in 1998-99 and further increased to 1.94: in 1999-2000. Again
it increased to 2.46 : 1 in 2004-05 but declined to 1.27 :1 in 2009-10 . The overall
trend shows fluctuations and the ratio is not ideal in most of the years under study
(Table 3.26).
iii. Return on Investment
The return on the capital employed by the Kerala Automobiles Limited in
certain years is negative. It was -67.65 per cent in 1990-91 and shows a negative
growth in 1992 -93 and increased to 6.31 in 1995-96. It decreased to 0.73 in 2000-01
and then increased to 1.6 in 2004-05 . From 2005 -06 on wards there was negative
trend and in the year 2009-10 it was positive (0.42 per cent) . It is a clear indication
from the ratios that the return on investment of Kerala Automobiles Limited is not a
promising one during the entire period of 20 years from 1990-91 to 2009-10.(Table
3.26).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of Kerala
Automobiles Limited is not a promising one. The net profit to sales in 1990-91 was
52.63 per cent and it declined to 0.6 per cent in 1994-95. It was 3.2 per cent in 1998-
99 which declined to 0.45 per cent in 2004-05. In 2005-06 and 2006-07 there was
loss and again in 2007-08 onwards there was a profit of 19.33 per cent and came
161
down to 0.11 in 2009-10. It is clear from the analysis of profit to sales of Kerala
Automobiles Limited that even though they are earning profit in certain years the
profit earned is not up to the mark during the whole period of 20 years under study
from 1990-91 to 2009-10 ( Table 3.26).
v. Receivables to Sales
This ratio of accounts receivable to sales was 0.95 in 1990-91 which declined
to 0.6 in 1994-95 and again increased to 1.19 in 1999-2000 . It was 1.19 in 2000-01
which declined to 0.54 months in 2004-05 and then increased to 1.75 in 2009-10. A
fluctuating trend is noticed during 1990-91 to 2009-10, the whole 20 year period
under analysis. The lower the months in the receivable to sales is really good for
increasing the amount of cash by way of sales (Table 3.26).
vi. Stock of Finished Goods to Sales
This ratio reveals the trends in stock of finished goods to sales . It was 1.06
in 1990-91 which declined to 0.55 in 1994-95 . It increased to 0.610 in 1998-99
which again declined to 0.16 in 1999-00. It was 1.15 in 2004-05 which increased to
2.51 in 2005-06 and slightly declined to 2.21 in 2009-10 periods . A fluctuating
trend of increase is noticed during 1990-91 to 2009-10, the whole 20 year period
under analysis. The lower the months in the stock of finished goods to sales is an
indication of increased sales but the trend is not favourable (Table 3.26).
162
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to consumption was 4.48 in 1990-91
which declined to 2.46 in 1994-95 . It was 2.22 in 1995-96 which increased to 60.47
in 1999-2000 and it further declined to 1.56 in 2004-05. It was 1.83 in 2005-06
which again declined to 0.25 in 2009-10. In this case a fluctuating trend is noticed
in all the 20 years from 1990-91 to 2009-10 . The lesser is the number of months in
raw materials to consumption is appreciable one but more time is taken for
consumption of raw materials in this case ( Table 3.26).
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage
was57.64 per cent in 1990-91 which increased to 66.44 per cent in 1994-95 . It was
68.09 per cent in 1995-96 which decreased to 7.18 per cent in 1999-2000. It was
58.42 per cent in 2001-02 which slightly increased to 61.17 per cent in 2004-05 . It
was 70.33 per cent in 2005-06 which decreased to 68.8 per cent in 2009-10. A
fluctuating trend of increase is noticed during 1990-91 to 2009-10 the whole 20 year
period under analysis (Table 3.26).
163
Table 3.26 Financial and Operating ratios of Kerala Automobiles Ltd
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
It is seen that there is direct correlation between net worth and capital
employed, current ratio, working capital and Stock of finished goods to sales (Table
3.27)
164
Table 3.27
Correlation
Sl. No. Item Correlation 1 Net worth 1 2 Capital Employed 0.875 3 Capital Invested -0.788 4 Working capital 0.908 5 Debt to Equity Ratio -0.795 6 Current Ratio 0.800 7 Return on Investment (%) 0.261 8 Receivable to sales ( in Months) -0.003 9 Stock of finished goods to sales( in months ) 0.534 10 Stock of raw materials to consumption 0.012 11 Consumption to Sales (%) -0.022 12 Net Profit to sales ( %) 0.319
Source: Computed from Table 3.25 and Table3.26
10. KERALA AGRO INDUSTRIES CORPORATION LIMITED
The Kerala Agro Industries Corporation Limited was incorporated in 1968
under the Agriculture Department, one of the Administrative Departments of the
Government of Kerala, involved in the process of trading of agricultural machineries
and implements, fabrication of farm equipment, implementation of Government
sponsored schemes and projects .
a. Net Worth
The net worth of Kerala Agro Industries Corporation Limited was Rs 18
crores during 1990-91 which increased to Rs 21 crores during 1993-94 and shows
negative figures for further two years. It was Rs 538.7 crores in 1999-2000. During
2000-01 it was Rs 542.55 crores which declined to Rs. 490.6 crores in 2002-03.
165
There is negative net worth in most of the period under analysis during the
liberalization period ( Table 3.28).
b. Capital Employed
The capital employed of Kerala Agro Industries Corporation Limited was Rs
110. 58 crores during 1990-91 which declined to Rs 46.23 crores during 1994-95.
During 1995-96 capital employed was Rs 2.69 crores which increased to Rs 658.4
crores in 1999-2000. It was Rs 689.24 crores in 2000-01 which declined to Rs 5.72
crores in 2004-05. It was Rs 238. 62 crores in 2005-06 which increased to Rs 373.85
crores in 2009-10. The overall position of capital employed for a period of 20 years
under study from 1990-91 to 2009-2010 shows a trend of increase with fluctuations
and negative growth in certain years(Table 3.28) .
c. Capital Invested
The capital invested by Kerala Agro Industries Corporation Limited was Rs
575.64 crores during 1990-91 which declined to Rs 541.9 crores during 1994-95.
During 1995-96 it was Rs 541.9 crores which declined to Rs 620.9 crores in 1999-
2000. It was Rs 911.89 crores in 2005-06 which increased to Rs 1081.89 crores in
2009-10. The position of capital invested for a period of 20 years under study from
1990-91 to 2009-2010 shows an increasing trend (Table 3.28).
d. Working Capital
The Working Capital of Kerala Agro Industries Corporation Limited was Rs
75.82 crores during 1990-91 which declined to Rs 18.67 crores during 1994-95. It
was negative working capital from 1995-96 to 2009-10 with exception on 2002-03.
166
The overall position of working capital for a period of 20 years study from 1990-
91 to 2009-2010 shows declining a trend. (Table 3.28).
Table 3.28 Net worth, Capital Employed, Capital Invested and Working Capital of Kerala Agro
Industries Corporation Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
2009-2010 1.28:1 0.87:1 30.86 3.32 0.37 0.65 0.87 2.62 Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues A direct correlation exists between net worth and capital employed ,current
ratio , working capital ,stock of finished goods to sales, stock of raw material to
consumption (Table 3.30).
173
Table 3.30
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.852 3 Capital Invested - 0.631 4 Working capital 0.686 5 Debt to Equity Ratio -0.630 6 Current Ratio 0.398 7 Return on Investment (%) -0.0494 8 Receivable to sales ( in Months) 0.320 9 Stock of finished goods to sales( in months ) 0.404 10 Stock of raw materials to consumption 0.315 11 Consumption to Sales (%) -0.618 12 Net Profit to sales ( %) -0.324
Source: Computed from Table 3.28 and Table3.29
11. TRAVANCORE SUGARS AND CHEMICALS LIMITED
Travancore Sugars and Chemicals Ltd (TSCL), originally owned by M/s
Parry and Company was taken over by Government of Kerala in the year 1974 by
acquiring the shares held by them. The company’s product profile included sugar,
spirit, Indian Made Foreign Liquor (IMFL) and arrack. In all the years under study,
the company’s operations were not upto the mark. The plant in the Sugar Unit is
quite old with a cane crushing capacity of 900 Tonnes per day (tpd), whereas the
economically viable capacity is 2500 tpd. Even for 900tpd, the availability of
sugarcane was uncertain. The company has only seven per cent sugar recovery from
crushed cane and as such, is capable of producing only about 60 tpd of sugar at 100
per cent capacity utilization which is not a viable scale of operation.
174
The Distillery Unit was commissioned in 1951 with an installed capacity of
46.53 lakh litres. This unit has also not been functioning efficiently which is evident
from the low and diminishing capacity utilization ranging from 25 per cent to 35 per
cent. The main raw material for the Distillery Unit is molasses. Only ten per cent of
the molasses requirement was being met from the Sugar Unit and the Company was
depending on imported molasses from other States for the balance 90 per cent
requirements. This has resulted in the steep increase in raw material cost. Being an
old plant, the efficiency and output were very poor.
a. Net Worth
The net worth of the Travancore Sugars and Chemicals was Rs 8 crores
during 1990-91 and Rs 9 crores in 1991-92. In all other years except during 2009-10
there is negative net worth . In 2009-10 it was Rs 55.05 crores. There is negative net
worth in all period under analysis except two years (Table-3.31)
b. Capital Employed
The capital employed of Travancore Sugars and Chemicals Limited was Rs 8
crores during 1990-91 and a negative capital employed is seen except during 2009-
10 ( Rs 57. 88 crores) . The overall position of capital employed for a period of 20
years study from 1990-91 to 2009-2010 shows a negative growth. During the entire
period under analysis the capital employed is found declining (Table 3.31).
c. Capital Invested
The capital invested by Travancore Sugars and Chemicals Limited was Rs 50
crores during 1990-91 which increased to Rs 111 crores during 1994-95. During
1995-96 it was Rs 148 crores which declined to Rs -210.4 crores in 1999-2000. In
2000-01 it was Rs 184.5 crores which increased to Rs 291.5 crores in 2004-05. It
175
was Rs 173.97 crores in 2005-06 which declined to Rs 146.07 crores in 2009-10.
During the entire period under analysis the capital invested is seen increasing but
with a fluctuating trend (Table 3.31).
d. Working Capital
The working Capital of Travancore Sugars and Chemicals Limited was Rs -
29.3 crores during 1990-91 which continues up to 2008-09 the whole 19 years with
exception of the year 2009-10 . During this year there was Rs 22.88 crores as
working capital. During the entire period under analysis there is negative working
capital with the exception of 2009-10 (Table 3.31).
Table 3.31
Net worth, Capital Employed, Capital Invested and Working Capital of Travancore Sugars and Chemicals Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
181
It is seen that direct correlation exists between net worth and capital
employed, working capital current ratio, receivable to sales, consumption to sales,
and net profit to sales the result of which is shown in Table 3.33.
Table 3.33 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.729 3 Capital Invested - 0.351 4 Working capital 0.914 5 Debt to Equity Ratio -0.849 6 Current Ratio 0.845 7 Return on Investment (%) -0.250 8 Receivable to sales ( in Months) 0.146 9 Stock of finished goods to sales( in months ) - 0.282 10 Stock of raw materials to consumption -0.764 11 Consumption to Sales (%) 0.465 12 Net Profit to sales ( %) 0.497
Source: Computed from Table 3.31 and Table3.32
12. SITARAM TEXTILES LIMITED
Sitaram Textiles Limited was incorporated in 1975 under Industries
Department, one of the administrative Department of the Government of Kerala. The
main activity of it is to carry out the manufacturing of cotton yarn.
a. Net Worth
The net worth of the Sitaram Textiles was Rs -1062.82 crores during 1990-91
and a negative net worth is seen in all the years under study (Table 3.34).
182
b. Capital Employed
The capital employed of the Sitaram Textiles was Rs -165.21 crores during
1990-91 and the negative capital employed is seen in all the years under study. The
overall position of capital employed for a period of 20 years study from 1990-91 to
2009-2010 shows a negative growth ( Table 3.34).
c. Capital Invested
The capital invested by the Sitaram Textiles Limited was Rs 1142.42crores
during 1990-91 which increased to Rs 1666.25 crores during 1994-95. During 1995-
96 it was Rs 1771.79crores which increased to Rs 2242.1 crores in 1999-2000. In
2000-01 it was Rs 2516.02 crores which increased to Rs 3406.55 in 2004-05. It was
Rs 3540.98 crores in 2005-06 which increased to Rs 4419.83 crores in 2009-10. The
overall position of capital invested for a period of 20 years under study from 1990-
91 to 2009-2010 shows a fluctuating trend of increase (Table 3.34).
d. Working Capital
The working Capital of the Sitaram Textiles Limited is analysed for
knowing the trend in current assets over current liabilities for meeting its short term
obligations. The working capital invested was Rs -280.1crores during 1990-91 and
this negative trend continued during the entire period under analysis (Table 3.34).
183
Table 3.34 Net worth, Capital Employed, Capital Invested and Working Capital of the Sitaram
Textiles Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
2009-2010 6.44:1 0.69:1 -72.83 0.07 0.24 0.38 56.61 3.6 Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
It is seen that direct correlation exists between net worth and capital
employed, current ratio, working capital, receivables to sales, stock of finished
goods to sales, stock of raw materials to consumption ( Table 3.36).
189
Table 3.36 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.591 3 Capital Invested - 0.989 4 Working capital 0.617 5 Debt to Equity Ratio -0.912 6 Current Ratio 0.765 7 Return on Investment (%) -0.357 8 Receivable to sales ( in Months) 0.684 9 Stock of finished goods to sales( in months ) 0.548 10 Stock of raw materials to consumption 0.622 11 Consumption to Sales (%) 0.035 12 Net Profit to sales ( %) 0.293
Source: Computed from Table 3.34 and Table3.35
13. HANDICRAFTS DEVELOPMENT CORPORATION LIMITED
Handicrafts Development Corporation was incorporated in 1968 and is under
Industries Department, one of the Administrative Departments of Government of
Kerala. It is engaged in procuring and marketing handicraft products by giving fair
returns to the artisans through its Kairali emporia spread all over India .
a. Net Worth
The net worth of the Handicrafts Development Corporation Limited was Rs
31.52 crores during 1990-91 which increased to Rs 155.09 crores in 1995-96. It was
Rs 148.83 crores in 1996-97 which decreased to Rs 138.81 crores in 1999-00. But a
negative net worth was noticed from 2000-01 to 2007-08. It turned into positive net
worth of Rs 344.39 crores in 2009-10. The overall picture of net worth shows a
positive one but in some years negative trend is noticed (Table 3.37).
190
b. Capital Employed
The capital employed of the Handicrafts Development Corporation Limited
was Rs 84.72 crores during 1990-91 which increased to Rs 204.42 crores in 1994-
95. It was Rs 223.86 crores in 1995-96 which increased to Rs 389.49 crores in 1999-
2000. It was Rs 262.76 crores in 2000-2001 which declined to Rs 255.68 crores in
2004-05. It was Rs 181.87 crores in 2005-06 which increased to Rs 1098.11 crores
in 2009-10. The overall position of capital employed for 20 years of study from
1990-91 to 2009-2010 shows an increasing trend with fluctuations. It means that
during the period under analysis the capital employed is seen increasing (Table
3.37).
c. Capital Invested
The capital invested by the Handicrafts Development Corporation was Rs
212.11 crores during 1990-91 which increased to Rs 278.03 crores during 1994-95.
During 1995-96 it was Rs 293.03 crores which increased to Rs 507.22 crores in
1999-2000. In 2000-01 it was Rs 579.63 crores which increased to Rs 743.36 crores
in 2004-05. It was Rs 768.42 crores in 2005-06 which increased to Rs 1030.51
crores in 2009-10. The overall position of capital invested for a period of 20 years
under study from 1990-91 to 2009-2010 shows an increasing trend (Table 3.37).
d. Working Capital
The working Capital of the Handicrafts Development Corporation Limited
is analysed for knowing the trend in current assets over current liabilities for meeting
its short term obligations. It is seen from Table 3.37 that the working capital invested
was Rs 46.58 crores during 1990-91 which increased to Rs 163.6 crores in 1994-
191
95. It was Rs 219.75 crores in 1996-97 which increased to Rs 341.59 crores in 1999-
2000. It was Rs 227.84 crores in 2000-01 and decreased to Rs 213.98 crores in 2004-
05. It was Rs 143.71 in 2005-06 which increased to Rs 963.84 crores in 2009-10. It
means that during the entire period under analysis that the working capital is
increasing but with a trend of fluctuations (Table 3.37).
Table 3.37
Net worth, Capital Employed, Capital Invested and Working Capital of Handicrafts Development Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
Source : Computed from Annual Reports of Bureau of Public Enterprises, various issues
197
The correlation value shows that direct correlation exists between net worth
and capital employed, working capital, current ratio, return on investment, stock of
raw materials to consumption and net profit to sales.(Table 3.39).
Table 3.39
Correlation Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.398 3 Capital Invested - 0.353 4 Working capital 0.388 5 Debt to Equity Ratio -0.324 6 Current Ratio 0.526 7 Return on Investment (%) 0.601 8 Receivable to sales ( in Months) - 0.087 9 Stock of finished goods to sales( in months ) - 0.179 10 Stock of raw materials to consumption 0.076 11 Consumption to Sales (%) -0.421 12 Net Profit to sales ( %) 0.641
Source: Computed from Table 3.37 and Table3.38
14. KERALA STATE BAMBOO CORPORATION LIMITED
Kerala State Bamboo Corporation was set up in 1971 with the objective to
develop and promote industries based on bamboo, reed, cane and rattan, provide
financial and technical assistance and guidance to the bamboo workers/artisans. The
major activities of the corporation is to collect good quality reeds from Government
forest, distribute the reeds to the registered bamboo mat weavers of the corporation
on credit basis and to procure woven mats, thus providing employment and means of
livelihood to the weaker sections of the society.
198
Bamboo Species in Kerala is a major biodiversity source which accounts for
19 per cent of the total bamboo distributed in India. Bamboo industry in Kerala is
providing livelihood to a majority of tribes and other weaker sections of the society,
majority of which are women.
a. Net Worth
The net worth of the Kerala State Bamboo Corporation Limited was Rs
215.22 crores during 1990-91 which increased to Rs 378.04 crores in 1994-95. It
was Rs 388.04 crores in 1995-96 which increased to Rs 725.51 crores in 1999-2000.
It was Rs 677.26 crores in 2000-2001 which declined to Rs 229 crores in 2003-04.
After that there was negative net worth up to 2009-10. The net worth shows an
increasing trend till 2003-04 but turns negative after that ( Table 3.40).
b. Capital Employed
The capital employed of the Kerala State Bamboo Corporation Limited was
Rs 274.29 crores during 1990-91 which increased to Rs 471.98 crores in 1994-95. It
was Rs 486.98 crores in 1995-96 which increased to Rs 851.29 crores in 1999-2000.
It was Rs 818.03 crores in 2000-01 which declined to Rs 492.36 crores in 2004-05.
It was Rs 318.51 crores in 2005-06 which increased to Rs 896.71 crores in 2009-
10.The trends in capital employed for a period of 20 years study from 1990-91 to
2009-2010 shows an increasing trend with fluctuations (Table 3.40).
c. Capital Invested
The capital invested by the Kerala State Bamboo Corporation Limited was
Rs 334.78 crores during 1990-91 which increased to Rs 434.86 crores during 1994-
95. During 1995-96 it was Rs 444.86 crores which increased to Rs 749.74 crores in
1999-2000. In 2001-02 it was Rs 933.82 crores which declined to Rs 118.14 crores
199
in 2004-05. It was Rs 1198.97 crores in 2005-06 which increased to Rs 1873.1
crores in 2009-10. The trends in capital invested for a period of 20 years under study
from 1990-91 to 2009-2010 is an increasing one but with fluctuations (Table 3.40).
d. Working Capital
The working Capital of the Kerala State Bamboo Corporation was Rs 215.1
crores during 1990-91 which increased to Rs 412.6 crores in 1994-95. It was Rs
406.1 crores in 1996-97 which increased to Rs 616.55 crores in 1999-2000. It was
Rs 719.5 crores in 2001-02 which declined to Rs 364.25 crores in 2004-05. It was Rs
209.7 crores in 2005-06 which increased to Rs 590.96 crores in 2009-10. It means
that during the entire period under analysis that the working capital is increasing but
with a trend of fluctuations (Table 3.40 ).
200
Table 3.40
Net worth, Capital Employed, Capital Invested and Working Capital of Kerala State Bamboo Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
Source: Computed from Annual Reports of Bureau of Public Enterprises, various
issues It is seen that direct correlation exists between net worth and capital
employed, working capital , current ratio and receivables to sales(Table 3.42).
206
Table 3.42
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.562 3 Capital Invested - 0.550 4 Working capital 0.709 5 Debt to Equity Ratio -0.850 6 Current Ratio 0.814 7 Return on Investment (%) 0.431 8 Receivable to sales ( in Months) 0.747 9 Stock of finished goods to sales( in months ) 0.227 10 Stock of raw materials to consumption 0.262 11 Consumption to Sales (%) 0.176 12 Net Profit to sales ( %) 0.293
Source: Computed from Table 3.40 and Table3.41
15. KERALA STATE CIVIL SUPPLIES CORPORATION LIMITED
The Kerala State Civil Supplies Corporation better known as Supplyco was
set up in the state in 1974 with the mission of “food security for Kerala” and acts as
a second line of Public Distribution System in the State by distributing essential
commodities like rice, sugar, pulses and spices at reduced prices through a network
of 2975 outlets spread all over the State. Prices of essential items distributed by
Supplyco is on an average 30 per cent to 60 per cent less than open market prices.
The intervention of Supplyco in the market in respect of essential commodities has
given immense relief to the people of the State.
207
a. Net Worth
The net worth of the Kerala State Civil Supplies Corporation during 1990-91
was Rs- 3068.22 crores which increased to Rs -623.31 crores in 2009-10.The overall
picture of net worth shows negative trend in all the years under study (Table 3.43).
b. Capital Employed
The capital employed of the Kerala State Civil Supplies Corporation shows a
negative one from 1990- 91 to 1994-95. In the remaining years under study it shows
a positive one. It was Rs 517.4 crores in 1995-96 which increased to Rs.11847.7
crores in 1999-2000 with an abnormal increase. It was Rs 13,024.58 crores in 2000-
01 which increased to Rs 14696.4 crores. It was Rs 15,216.06 crores in 2005-06
which declined to Rs 12722.2 crores in 2009-10. The trends in capital employed for
a period of 20 years study from 1990-91 to 2009-2010 shows an increasing trend
with fluctuations in certain years(Table 3.43).
c. Capital Invested
The capital invested by the Kerala State Civil Supplies Limited was Rs
3821.09 crores during 1990-91 which increased to Rs 9292.7 crores during 1994-95.
During 1995-96 it was Rs 12284.48 crores which increased to Rs 35839.2 crores in
1999-2000. In 2000-01 it was Rs 41345.3 crores which increased to Rs 68627.98
crores in 2004-05. It was Rs 68685.08 crores in 2005-06 which declined sharply to
Rs 14201.5 crores in 2009-10. The trends in capital invested for a period of 20 years
under study from 1990-91 to 2009-2010 shows mostly an increasing trend (Table
3.43).
208
d. Working Capital
The working Capital of the Kerala State Civil Supplies Corporation during
1990-91 was Rs -588.81 crores which increased to Rs. 1696.54 crores during
1996-97. It increased to Rs 10976.93 crores in 1999-2000. It was Rs 12090.94 crores
in 2000-01 which declined to Rs 6225.74 crores in 2006-07.It was Rs. 10729.44
crores in 2009-10. It means that during most of the years under analysis, the working
capital shows an increasing trend with wide fluctuations(Table 3.43) .
Table 3.43
Net worth, Capital Employed, Capital Invested and Working Capital of Kerala State Civil Supplies Corporation Limited
2009-2010 15.59:1 1.52:1 13.11 0.24 1.29 0.42 90.89 0.72 Source: Computed from Annual Reports of Bureau of Public Enterprises, various
issues
214
It is seen that direct correlation exists between net worth and capital
employed, working capital, current ratio and receivables to sales (Table 3.45).
Table 3.45
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.543 3 Capital Invested - 0.551 4 Working capital 0.794 5 Debt to Equity Ratio -0.853 6 Current Ratio 0.840 7 Return on Investment (%) 0.435 8 Receivable to sales ( in Months) 0.791 9 Stock of finished goods to sales( in months ) 0.227 10 Stock of raw materials to consumption 0.262 11 Consumption to Sales (%) 0.189 12 Net Profit to sales ( %) 0.235
Source: Computed from Table 3.43 and Table3.44
16. KERALA STATE ARTISANS DEVELOPMENT CORPORATION
LIMITED
The Kerala Artisans Development Corporation ( KADCO) was established in
1981. It is one of the State agencies which provide assistance to artisans for
establishing production units, promoting marketing of products and providing
employment opportunities through the activities of trade fairs and marketing centres.
KADCO has also been nominated as one of the State channelizing agencies for the
implementation of schemes announced by the National Backward Classes Finance
and Development Corporation (NBCFDC).
215
a. Net Worth
The net worth of the Kerala Artisans Development Corporation shows
negative growth during 1990-91 to 1996-97 periods. It was Rs 40.54 crores during
1997-98 which declined to 19.04 in 1999-2000. It was 21.51 crores in 2000-01 and
nearly to the same level of Rs 21.51 crores in 2004-05 periods. It increased to Rs
47.95 crores during 2005-06 which increased to Rs 132.07 crores in 2009-10.The
trends in net worth was negative in the initial years but later turns positive and shows
an increasing trend (Table 3.46) .
b. Capital Employed
The capital employed of the Kerala Artisans Development Corporation was
Rs 1.82 crores during 1990-91 which increased to Rs 18.89 crores in 1994-95. It was
Rs 15.1crores in 1995-96 which increased to Rs 205.5 crores in 1999-2000 with an
abnormal increase. It was Rs 208.72 crores in 2000-01 which increased to Rs 228.41
crores in 2004-05. It was Rs 248.42 crores in 2005-06 which increased to Rs 383.97
crores in 2009-10. The trends in capital employed for a period of 20 years from
1990-91 to 2009-2010 is an increasing one with fluctuations ( Table 3.46).
c. Capital Invested
The capital invested by the Kerala Artisans Development Corporation was
Rs 68.41crores during 1990-91 which increased to Rs106.69 crores during 1994-95.
During 1995-96 it was Rs 122.5 crores which increased to Rs 381.8 crores in 1999-
2000. In 2000-01 it was Rs 400.02 crores which increased to Rs 441.8 crores in
2004-05. It was Rs 467.58 crores in 2005-06 which increased to Rs 687.93 crores in
216
2009-10. The trends in capital invested for a period of 20 years under study from
1990-91 to 2009-2010 is an increasing one. During the entire period under analysis
capital invested shows an increasing trend with minor fluctuations (Table 3.46).
d. Working Capital
The working capital of the Kerala Artisans Development Corporation was
Rs 0.82 crores during 1990-91 which increased to Rs.17.51 crores in 1994-95. It was
Rs 13.7 crores in 1995-96 which increased to Rs 191.02 crores in 1999-2000. It was
Rs 145.52 crores in 2000-01 which increased to Rs 227.27 crores in 2004-05. It was
Rs 247.75 crores in 2005-06 which increased to Rs 381.24 crores in 2009-10.It
means that during the entire period under analysis the working capital is increasing
with a trend of fluctuations (Table 3.46).
217
Table 3.46 Net worth, Capital Employed, Capital Invested and Working Capital of Kerala
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
The correlation values indicate that direct correlation exists between net
worth and capital employed ,capital invested and net profit to sales the result of
which is shown in Table 3.48.
223
Table 3.48
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.930 3 Capital Invested 0.900 4 Working capital 0.932 5 Debt to Equity Ratio -0.612 6 Current Ratio -0.623 7 Return on Investment (%) 0.494 8 Receivable to sales ( in Months) - 0.067 9 Stock of finished goods to sales( in months ) -0.277 10 Stock of raw materials to consumption 0.349 11 Consumption to Sales (%) 0.349 12 Net Profit to sales ( %) 0.644
Source: Computed from Table 3.46 and Table3.47
17. KERALA STATE PALMYRAH DEVELOPMENT AND WORKER’S
WELFARE CORPORATION LIMITED
Kerala State Palmyrah Development and Workers Welfare Corporation
Limited which comes under welfare agency was incorporated in 1985. It comes
under the Industries Department being the Administrative department of the
Government of Kerala. The financial performance evaluation is made as follows:
a. Net Worth
The net worth of the Kerala State Palmyrah Development and Worker’s
Welfare Corporation Limited was negative during 1990-91 to 1991-92 periods. It
was Rs 0.17 crores during 1992-93 which increased to Rs 26.01 crores in 1994-95.
It was Rs 43.49 crores in 1995-96 which increased to Rs 98.15 crores in 1999-00.
224
It declined to Rs 40.27 crores in 2009-10 .The overall picture of net worth shows a
trend of increase in all the years but with fluctuations (Table 3.49).
b. Capital Employed
The capital employed of the Kerala State Palmyrah Development and
Worker’s Welfare Corporation Limited was Rs 6.95 crores during 1990-91 which
increased to Rs 34.17 crores in 1994-95.It was Rs 47.57 crores in 1995-96 which
increased to Rs 98.15 crores in 1999-2000. It was Rs 98.15 crores in 2000-01 which
declined to Rs 54.15 crores in 2004-05. It was Rs 58.34 crores in 2005-06 which
increased to Rs 131.69 crores in 2009-10. The capital employed for a period of 20
years study shows an increasing trend but with fluctuations in certain years (Table
3.49).
c. Capital Invested
The capital invested by the Kerala State Palmyrah Development and
Worker’s Welfare Corporation was Rs 16.35 crores during 1990-91 which increased
to Rs 50.16 crores during 1994-95. During 1995-96 it was Rs 62.08 crores which
increased to Rs 116.08 crores in 1999-2000. In 2000-01 it was Rs 87 crores which
increased to Rs 701.4 crores in 2004-05. It was Rs 99.87 crores in 2005-06 which
increased to Rs 177.99 crores in 2009-10. The capital invested for a period of 20
years under study from 1990-91 to 2009-2010 shows an increasing trend but with
fluctuations (Table 3.49).
d. Working Capital
The working Capital of the Kerala State Palmyrah Development and
Worker’s Welfare Corporation Limited was Rs 6.61 crores during 1990-91 which
225
increased to Rs 26.03 crores in 1994-95. It was Rs 21.11 crores in 1995-96 which
increased to Rs 21.68 crores in 1999-2000. It was Rs 43.28 crores in 2000-01 which
decreased to Rs 11.36 crores in 2004-2005. It was Rs 20.32 crores in 2005-06 which
increased to Rs 87.81 crores in 2009-10. It means that during the entire period under
analysis that the working capital is increasing but with a trend of fluctuations during
the period under study (Table 3.49).
Table 3.49
Net worth, Capital Employed , Capital Invested and Working Capital of Kerala State Palmyrah Development and Worker’s Welfare Corporation Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
231
It is seen that direct correlation exists between net worth and all items except
stock of finished goods to sales and consumption to sale (Table 3.51)
Table 3.51 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.781 3 Capital Invested 0.044 4 Working capital 0.299 5 Debt to Equity Ratio 0.047 6 Current Ratio 0.125 7 Return on Investment (%) 0.231 8 Receivable to sales ( in Months) 0.225 9 Stock of finished goods to sales( in months ) -0.039 10 Stock of raw materials to consumption 0.992 11 Consumption to Sales (%) -0.424 12 Net Profit to sales ( %) 0.174
Source: Computed from Table 3.49 and Table3.50
18. KERALA SHIPPING INLAND NAVIGATION CORPORATION
LIMITED
The Corporation was formed in 1989 by the statutory amalgamation of
Kerala Inland Navigation Corporation Limited (KINCO) and Kerala Shipping
Corporation Limited ( KSC), two Government of Kerala Companies. The main
objective of the company is to develop passenger and cargo transportation through
Inland Waterways of Kerala, docking and repair of marine vessels, construction of
boats, conducting navigation training programmes, conducting tourist cruises,
providing navigational aids and maintenance in National Waterway-III. The
Corporation at present has 12 barges, 11 boats and 2 Jhankars. With the
commissioning of Goshree bridges the ferry services of the Corporation slumped and
have since diversified into tourism sector.
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Construction and repair of boats, barges and other marine vessels of the
Corporation and of the customers in the public and private sector are carried out by
the corporation leasing a slipway complex from Cochin Port Trust since 1991. The
Corporation had also started a Marine Training Institute for giving training for
operating Inland Vessels and Crafts.
a. Net Worth
The net worth of the Kerala Shipping Inland Navigation Corporation Limited
was Rs 470.10 crores in 1990-91 which increased to Rs 761.6 crores in 1994-95. It
was Rs 851.2 crores in 1995-96 which increased to Rs 1320.08 crores in 1999-2000.
It was Rs 1470.47 crores in 2000-01 which declined to Rs 204.91 crores in 2004-05.
It was Rs 1115.32 crores in 2005-06 which increased to Rs 2154.55 crores in 2009-
10. The overall picture of net worth shows an increasing one with some fluctuations
(Table 3.52).
a. Capital Employed
The capital employed of the Kerala Shipping Inland Navigation Corporation
was Rs 530.32 crores during 1990-91 which increased to Rs 866.51 crores in 1994-
95. It was Rs 947.81 crores in 1995-96 which increased to Rs.1323.08 crores in
1999-2000. It was Rs 1473.47 crores in 2000-01 which declined to Rs 204.91 crores
in 2004-05. It was Rs 115.32 crores in 2005-06 which increased to Rs 2157.48
crores in 2009-10. The capital employed for a period of 20 years study from 1990-
91 to 2009-2010 shows an increasing trend fluctuations ( Table 3.52).
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c. Capital Invested
The capital invested by the Kerala Shipping Inland Navigation Corporation
Limited was Rs 556.30 crores during 1990-91 which increased to Rs 783.87 crores
during 1994-95. During 1995-96 it was Rs 855.57 crores which increased to Rs
1166.96 crores in 1999-2000. In 2000-01 it was Rs 1266.96 crores which declined
to Rs 915.99 crores in 2004-05. It was Rs 915.99 crores in 2005-06 which increased
to Rs 2726.89 crores in 2009-10. The trends in capital invested for a period of 20
years under study from 1990-91 to 2009-2010 shows an increasing one ( Table
3.52).
b. Working Capital
The working Capital of the Kerala Shipping Inland Navigation Corporation
Limited was Rs 322.21 crores during 1990-91 which increased to Rs 562.1 crores in
1994-95. It was Rs 664.46 crores in 1995-96 which increased to Rs 1011.18 crores
in 1999-2000. It was Rs 1149.87 crores in 2000-01 which declined to –Rs 35.62
crores in 2004-05 and increased to Rs 1119.18 crores in 2006-07. It again increased
to Rs 1514.1 crores in 2009-10.It shows that during most of the years under analysis
the working capital shows an increasing trend with some fluctuations (Table 3.52).
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Table 3.52 Net worth, Capital Employed, Capital Invested and Working Capital of Kerala
Shipping Inland Navigation Corporation Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
It is seen that direct correlation exists between net worth and all items except
debt equity ratio, receivable to sales, consumption to sale (Table 3.54)
239
Table 3.54 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.997 3 Capital Invested 0.817 4 Working capital 0.979 5 Debt to Equity Ratio -0.833 6 Current Ratio 0.244 7 Return on Investment (%) 0.488 8 Receivable to sales ( in Months) - 0.197 9 Consumption to Sales (%) -0.238 10 Net Profit to sales ( %) 0.202
Source: Computed from Table 3.52 and Table3.53 Hypotheses Testing
Based on the analysis, the researcher here attempts to test the hypotheses
already formulated. For that a summary table showing the overall financial
performance of Public Sector Enterprises is prepared and depicted in Table 3.55.
Table 3.55 Overall Financial Performance of PSEs
Item Increase Decrease Fluctuating Total
Net Worth 10 (55.6) 8 (44.4) - 18 (100)
Capital Employed 15 (83.3) 3 (16.7) - 18 (100)
Capital Invested 16 (88.9) 1 (5.55) 1 (5.55) 18 (100)
Working Capital 12 (66.67) 6 (33.33) - 18 (100)
Debt to Equity - 3 (17.6) 14 (82.4) 17 (100) Current Ratio 2 (11.1) 1 (5.6) 15 (83.3) 18 (100)
Return on Investment 1 (5.6) 6 (33.3) 11 (61.1) 18 (100) Net Profit to Sales - 8 (44.4) 1 0(55.6) 18 (100) Recievables to Sales - 1 (5.88) 16 (94.12) 17 (100)
Figures in bracket shows the percentage to total
Source : Computed values
240
From Table 3.55 it is found that the average net worth of selected public
sector enterprises in Kerala shows an increase in 10 out of 18 cases under study.
Hence the null hypothesis that public sector enterprises failed to attract ownership
funds during the liberalization period stands rejected.
It is clear from the trend line analysis done in this chapter that there is
increase in both the capital employed and the capital invested, but in certain years
they are not in the same proportion. Further the correlation analysis of capital
employed and capital invested with respect to net worth shows that positive
correlation exists in majority of the cases for capital employed and negative
correlation exists for capital invested. Hence the hypothesis that there exists
disparity in fund invested and the capital employed in public sector enterprises in
Kerala during the liberalization period stands accepted.
It is seen from the analysis that the debt equity ratio of 14 out of 17 PSEs
under study shows a fluctuating trend and in 3 cases there is a declining trend (Table
3.55).It means that they are not able to collect debt funds for its investment
compared to equity funds. So the hypothesis that during the liberalization era, the
public sector enterprises failed to attract debt funds into the business stands
accepted.
Table 3.55 clearly indicates that the current ratio, which is the indicator of
short term solvency showed a fluctuating trend in 15 out of 18 cases. Hence the
hypothesis that public sector enterprises in Kerala failed to manage short term funds
during the liberalization period stands accepted.
241
It is seen from Table 3.55 that the return on investment of majority of PSEs
under study showed a fluctuating trend in 11 out of 17 cases. In 6 cases there is a
declining trend. It is an indication that investments are not properly allocated in the
form of fixed assets. So the hypothesis that lack of adequate return on investment
hinders the development of public sector enterprises in Kerala stands accepted.
It is seen from the analysis that PSEs earn less profit and sometimes even
incurs loss on account of inadequate sales. From Table 3.55 it is seen that net profit
to sales ratio shows a fluctuating trend in 10 out of 18 cases and in 8 cases there is a
declining trend. In none of the 18 selected cases, it showed an increasing trend.
Hence the hypothesis that profit earned by majority of public sector enterprises is
meager stands accepted.
The trends in the financial management of Public Sector Enterprises are
analysed during the period of liberalization and it is seen that there is an increasing
trend in some cases but remains static in certain other cases. The debt to equity ratio,
current ratio, return on investment and net profit to sales shows a fluctuating trend
during the period under study.
From the analysis it is clear that a distinct trend set is visible for different
categories of Public Sector Enterprises which is a function of behavioural pattern of
decisions makers involved in the context of liberalization. Hence, the study
proceeded by analyzing the opinion from the selected respondents and is dealt in
Chapter IV.
242
REFERENCES
1 Eaton, Marquis. 1957. “Financial Reporting in a Changing Society,” The
Journal of Accountancy, August. p 25
2 Report of the Study Group on the Objectives of Financial Statements,
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3 Wittington, Geoffrey. 1980. “Some Basic properties of Financial Ratios,”
Journal of Business Finance and Accounting, Vol. 7, No.2. p 226
4 Laurent, L.R. 1979. “Improving the Efficiency and Effectiveness of Financial
Ratios Analysis” Journal of Business Finance and Accounting, pp 401-405.
5 Beaver, W .H., J.W. Kennely, and W.M.Voss. 1974. “Predictive Ability
Criterion for the Evaluation of Accounting Data ,” The Accounting Review,
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6. Merwin, C.L. 1942. Financing of Small Corporations in Give Manufacturing
industries, 1926-36, New York: National Bureau of Economic Research.