Ratio analysis Tirupati Cotton Mills Ltd
Ratio analysis Tirupati Cotton Mills Ltd
INTRODUCTION
ABOUT RATIO ANALYSIS: The ratio analysis is the most powerful
tool of financial analysis.several ratios to be calculated from the
accounting data can group into various classes according to
financial activity or function to be evaluated.DEFINITION: The
indicate quotient of two mathematical expressions and the
relationship between two or more things. It evaluates financial
position and performance of the firm. As started in the beginning
many diverse groups of people are interested analyzing financial
information to indicate the operating and financial efficiency and
growth of firm. These people use ratios to determine those
financial characteristics of firm in which they interested with the
help of ratios one can determine. The ability of the firm to meet
current obligation The extent to which the firm has used its
long-term solvency by borrowing funds. The efficiency with which
the firm is utilizing its assets in generating the sales revenue.
The overall operating efficiency and performance of firm.
The information contained in these statements is used by
management, creditors, investors and others to form judgment about
the operating performance and financial position of firm. Uses of
financial statement can get further insight about financial
strength and weakness of the firm if they properly analyze
information reported in these statements. Management should be
particularly interested in knowing financial strength of the firm
to make their best use and to be able to spot out financial
weaknesses of the firm to take suitable corrective actions. The
further plans firm should be laid down in new of the firms
financial strength and weaknesses. Thus financial analysis is the
starting point for making plans before using any sophisticated
forecasting and planning procedures. Understanding the past is a
prerequisite for anticipating the future.
REVIEWOFLITERATUREFINANCIALANALYSIS: Financial analysis is the
process of identifying the financial strengths and weakness of the
firm. It is done by establishing relationships between the items of
financial statements viz., balance sheet and profit and loss
account. Financial analysis can be undertaken by management of the
firm, viz., owners, creditors, investors and others.
Objectivesofthefinancialanalysis:Analysis of financial
statements may be made for a particular purpose in view.1. To find
out the financial stability and soundness of the business
enterprise.2. To assess and evaluate the earning capacity of the
business3. To estimate and evaluate the fixed assets, stock etc.,
of the concern.4. To estimate and determine the possibilities of
future growth of business.5. To assess and evaluate the firms
capacity and ability to repay short and long term loans.
Partiesinterestedinfinancialanalysis:The users of financial
analysis can be divided into two broad groups. Internalusers1.
Financial executives 2. Top management Externalusers1. Investors 2.
Creditor. 3. Workers 4. Customers 5. Government 6. Public 7.
Researchers
SignificanceoffinancialanalysisFinancial analysis serves the
following purpose: Toknowtheoperationalefficiencyofthebusiness: The
financial analysis enables the management to find out the overall
efficiency of the firm. This will enable the management to locate
the weak Spots of the business and take necessary remedial action.
Helpfulinmeasuringthesolvencyofthefirm: The financial analysis
helps the decision makers in taking appropriate decisions for
strengthening the short-term as well as long-term solvency of the
firm.Comparisonofpastandpresentresults: Financial statements of the
previous years can be compared and the trend regarding various
expenses, purchases, sales, gross profit and net profit can be
ascertained. Helpsinmeasuringtheprofitability: Financial statements
show the gross profit, & net profit. Interfirmcomparison: The
financial analysis makes it easy to make inter-firm comparison.
This comparison can also be made for various time periods.
BankruptcyandFailure: Financial statement analysis is significant
tool in predicting the bankruptcy and the failure of the business
enterprise. Financial statement analysis accomplishes this through
the evaluation of the solvency position.
Helpsinforecasting: The financial analysis will help in
assessing future development by making forecasts and preparing
budgets.
METHODSOFANALYSIS: A financial analyst can adopt the following
tools for analysis of the financial statements. These also termed
as methods of financial analysis. A. Comparative statement analysis
B. Common-size statement analysis C. Trend analysis D. Funds flow
analysis E. Ratio analysis
NATUREOFRATIOANALYSIS Ratio Analysis is a powerful tool of
financial analysis. A ratio is defined as "the indicated quotient
of mathematical expression" and as "the relationship between two or
more things". A ratio is used as benchmark for evaluating the
financial position and performance of the firm. The relationship
between two accounting figures, expressed mathematically, is known
as a financial ratio. Ratio helps to summarizes large quantities of
financial data and to make qualitative judgment about the firm's
financial performance.
The persons interested in the analysis of financial statements
can be grouped under three head owners (or) investors who are
desired primarily a basis for estimating earning capacity.
Creditors who are concerned primarily with Liquidity and ability to
pay interest and redeem loan within a specified period. Management
is interested in evolving analytical tools that will measure costs,
efficiency, liquidity and profitability with a view to make
intelligent decisions.
STANDARDSOFCOMPARISON
The ratio analysis involves comparison for an useful
interpretation of the financial statements. A single ratio in
itself does not indicate favorable or unfavorable condition. It
should be compared with some standard. Standards of comparison are:
1. Past Ratios 2. Competitor's Ratios 3. Industry Ratios 4.
Projected Ratios
PastRatios: Ratios calculated from the past financial statements
of the same firm. Competitor'sRatios: Ratios of some selected
firms, especially the most progressive and successful competitor at
the same point in time.IndustryRatios: Ratios of the industry to
which the firm belongs.ProjectedRatios: Ratios developed using the
projected financial statements of the same
firm.TIMESERIESANALYSIS
The easiest way to evaluate the performance of a firm is to
compare its present ratios with past ratios. When financial ratios
over a period of time are compared, it is known as the time series
analysis or trend analysis. It gives an indication of the direction
of change and reflects whether the firm's financial performance has
improved, deteriorated or remind constant over time.
CROSSSECTIONALANALYSIS Another way to comparison is to compare
ratios of one firm with some selected firms in the industry at the
same point in time. This kind of comparison is known as the
cross-sectional analysis. It is more useful to compare the firm's
ratios with ratios of a few carefully selected competitors, who
have similar operations.
INDUSTRYANALYSIS To determine the financial conditions and
performance of a firm. Its ratio may be compared with average
ratios of the industry of which the firm is a member. This type of
analysis is known as industry analysis and also it helps to
ascertain the financial standing and capability of the firm &
other firms in the industry. Industry ratios are important
standards in view of the fact that each industry has its
characteristics which influence the financial and operating
relationships.
TYPESOFRATIOS Management is interested in evaluating every
aspect of firm's performance. In view of the requirement of the
various users of ratios, we may classify them into following four
important categories: 1. Liquidity Ratio 2. Leverage Ratio 3.
Activity Ratio 4. Profitability Ratio
3.1LiquidityRatio It is essential for a firm to be able to meet
its obligations as they become due. Liquidity Ratios help in
establishing a relationship between cast and other current assets
to current obligations to provide a quick measure of liquidity. A
firm should ensure that it does not suffer from lack of liquidity
and also that it does not have excess liquidity. A very high degree
of liquidity is also bad, idle assets earn nothing. The firm's
funds will be unnecessarily tied up in current assets. Therefore it
is necessary to strike a proper balance between high liquidity.
Liquidity ratios can be divided into three types: 3.1.1 Current
Ratio 3.1.2 Quick Ratio 3.1.3 Cash Ratio
3.1.1CurrentRatio Current ratio is an acceptable measure of
firms short-term solvency Current assets includes cash within a
year, such as marketable securities, debtors and inventors. Prepaid
expenses are also included in current assets as they represent the
payments that will not made by the firm in future. All obligations
maturing within a year are included in current liabilities. These
include creditors, bills payable, accrued expenses, short-term bank
loan, income-tax liability in the current year. The current ratio
is a measure of the firm's short term solvency. It indicated the
availability of current assets in rupees for every one rupee of
current liability. A current ratio of 2:1 is considered
satisfactory. The higher the current ratio, the greater the margin
of safety; the larger the amount of current assets in relation to
current liabilities, the more the firm's ability to meet its
obligations. It is a cured -and -quick measure of the firm's
liquidity. Current ratio is calculated by dividing current assets
and current liabilities. Current Ratio = _Current Assets__ Current
Liabilities
3.1.2QuickRatio Quick Ratio establishes a relationship between
quick or liquid assets and current liabilities. An asset is liquid
if it can be converted into cash immediately or reasonably soon
without a loss of value. Cash is the most liquid asset, other
assets that are considered to be relatively liquid asset and
included in quick assets are debtors and bills receivables and
marketable securities (temporary quoted investments).
Inventories are converted to be liquid. Inventories normally
require some time for realizing into cash; their value also has a
tendency to fluctuate. The quick ratio is found out by dividing
quick assets by current liabilities. Quick Ratio = Current
Assets-Inventories Current Liabilities
Generally, a quick ratio of 1:1 is considered to represent a
satisfactory current financial condition. Quick ratio is a more
penetrating test of liquidity than the current ratio, yet it should
be used cautiously. A company with a high value of quick ratio can
suffer from the shortage of funds if it has slow- paying, doubtful
and long duration outstanding debtors. A low quick ratio may really
be prospering and paying its current obligation in time.
3.1.3CashRatio Cash is the most liquid asset; a financial
analyst may examine Cash Ratio and its equivalent current
liabilities. Cash and Bank balances and short-term marketable
securities are the most liquid assets of a firm, financial analyst
stays look at cash ratio. Trade investment is marketable securities
of equivalent of cash. If the company carries a small amount of
cash, there is nothing to be worried about the lack of cash if the
company has reserves borrowing power. Cash Ratio is perhaps the
most stringent Measure of liquidity. Indeed, one can argue that it
is overly stringent. Lack of immediate cash may not matter if the
firm stretch its payments or borrow money at short notice. Cash
Ratio= Cash and bank balances + Current Investment Current
liabilities
3.2LEVERAGERATIOS Financial leverage refers to the use of debt
finance while debt capital is a cheaper source of finance: it is
also a riskier source of finance. It helps in assessing the risk
arising from the use of debt capital. Two types of ratios are
commonly used to analyze financial leverage.
1. Structural Ratios & 2. Coverage ratios.
Structural Ratios are based on the proportions of debt and
equity in the financial structure of firm. Coverage Ratios shows
the relationship between Debt servicing, Commitments and the
sources for meeting these burdens.
The short-term creditors like bankers and suppliers of raw
material are more concerned with the firm's current debt-paying
ability. On the other hand, long-term creditors like debenture
holders, financial institutions are more concerned with the firm's
long-term financial strength. To judge the long-term financial
position of firm, financial leverage ratios are calculated. These
ratios indicated mix of funds provided by owners and lenders.
There should be an appropriate mix of Debt and owner's equity in
financing the firm's assets. The process of magnifying the
shareholder's return through the use of Debt is called "financial
leverage" or "financial gearing" or "trading on equity". Leverage
Ratios are calculated to measure the financial risk and the firm's
ability of using Debt to share holder's advantage. Leverage Ratios
can be divided into five types.
3.2.1 Debt equity ratio. 3.2.2 Debt ratio. 3.2.3 Interest
coverage ratio 3.2.4 Proprietary ratio. 3.2.5 Capital gearing
ratio.
3.2.1Debtequityratio It indicates the relationship describing
the lenders contribution for each rupee of the owner's contribution
is called debt-equity ratio. Debt equity ratio is directly computed
by dividing total debt by Net worth. Lower the debt-equity ratio,
higher the degree of protection. A debt-equity ratio of 2:1 is
considered ideal. The debt consists of all short term as well as
long-term and equity consists of net worth plus preference capital
plus Deferred Tax Liability. Long term Debts Debt equity Ratio =
Share holder funds (Equities)
3.2.2Debtratio Several debt ratios may used to analyze the
long-term solvency of a firm. The firm may be interested in knowing
the proportion of the interest-bearing debt in the capital
structure. It may, therefore, compute debt ratio by dividing total
debt by capital employed on net assets. Total debt will include
short and long-term borrowings from financial institutions,
debentures/bonds, deferred payment arrangements for buying
equipments, bank borrowings, public deposits and any other
interest-bearing loan. Capital employed will include total debt net
worth. Debt Debt Ratio= Equity
3.2.3InterestCoverageRatio The interest coverage ratio or the
time interest earned is used to test the firms debt servicing
capacity. The interest coverage ratio is computed by dividing
earnings before interest and taxes by interest charges. The
interest coverage ratio shows the number of times the interest
charges are covered by funds that are ordinarily available for
their payment. We can calculate the interest average ratio as
earnings before depreciation, interest and taxes divided by
interest.
Interest coverage ratio= EBIT Interest
3.2.4Proprietaryratio The total shareholder's fund is compared
with the total tangible assets of the company. This ratio indicates
the general financial strength of concern. It is a test of the
soundness of financial structure of the concern. The ratio is of
great significance to creditors since it enables them to find out
the proportion of share holders funds in the total investment of
business. Net worth Proprietary Ratio =
-------------------------------------- x 100 Total tangible
assets
3.2.5Capitalgearingratio: This ratio makes an analysis of
capital structure of firm. The ratio shows relationship between
equity share capital and the fixed cost bearing i.e., preference
share capital and debentures. Equity capital Capital gearing ratio
= P.S capital +Debentures +Loans
3.3ACTIVITYRATIOS Turnover ratios also referred to as activity
ratios or asset management ratios, measure how efficiently the
assets are employed by a firm. These ratios are based on the
relationship between the level of activity, represented by sales or
cost of goods sold and levels of various assets. The improvement
turnover ratios are inventory turnover, average collection period,
receivable turn over, fixed assets turnover and total assets
turnover. Activity ratios are employed to evaluate the efficiency
with which the firm manages and utilize its assets. These ratios
are also called 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 and
assets. A proper balance between sales and assets generally
reflects that asset utilization.
Activityratiosaredividedintofourtypes:3.3.1 Total capital turnover
ratio 3.3.2 Working capital turnover ratio 3.3.3 Fixed assets
turnover ratio 3.3.4 Stock turnover ratio
3.3.1Totalcapitalturnoverratio: This ratio expresses
relationship between the amounts invested in this assets and the
resulting in terms of sales. This is calculated by dividing the net
sales by total sales. The higher ratio means better utilization and
vice-versa. Some analysts like to compute the total assets turnover
in addition to or instead of net assets turnover. This ratio shows
the firm's ability in generating sales from all financial resources
committed to total assets.
Sales Total assets turnover = ----------------------------
Capital employed.
3.3.2Workingcapitalturnoverratio: This ratio measures the
relationship between working capital and sales. The ratio shows the
number of times the working capital results in sales. Working
capital as usual is the excess of current assets over current
liabilities. The following formula is used to measure the
ratio:
Sales Working capital turnover ratio =
------------------------------- Working capital
3.3.3Fixedassetturnoverratio: The firm may which to know its
efficiency of utilizing fixed assets and current assets separately.
The use of depreciated value of fixed assets in computing the fixed
assets turnover may render comparison of firm's performance over
period or with other firms. The ratio is supposed to measure the
efficiency with which fixed assets employed a high ratio indicates
a high degree of efficiency in asset utilization and a low ratio
reflects inefficient use of assets. However, in interpreting this
ratio, one caution should be borne in mind, when the fixed assets
of firm are old and substantially depreciated, the fixed assets
turnover ratio tends to be high because the denominator of ratio is
very low Net sales Fixed asset turnover ratio =
------------------------- Fixed assets
3.3.4Stockturnoverratio Stock turnover ratio indicates the
efficiency of firm in producing and selling its product. It is
calculated by dividing the cost of goods sold by the average stock.
It measures how fast the inventory is moving through the firm and
generating sales. The stock turnover ratio reflects the efficiency
of inventory management. The higher the ratio, the more efficient
the management of inventories and vice versa .However, this may not
always be true. A high inventory turnover may be caused by a low
level of inventory which may result if frequent stock outs and loss
of sales and customer goodwill. Cost of goods sold Stock turnover
ratio = ------------------------------ Average stock
Opening stock + Closing stock Average stock =
-------------------------------------------- 2
3.4PROFITABILITYRATIOS 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. Profit is the
difference between revenues and expenses over a period of time.
Profit is the ultimate 'output' of a company and it will have no
future if it fails to make sufficient profits. The financial
manager should continuously evaluate the efficiency of company in
terms of profits. The profitability ratios are calculated to
measure the operating efficiency of company. Creditors want to get
interest and repayment of principal regularly. Owners want to get a
required rate of return on their investment. Generally, two major
types of profitability ratios are calculated: Profitability in
relation to sales Profitability in relation to investment
ProfitabilityRatioscanbedividedintosixtypes:3.4.1 Gross profit
ratio 3.4.2 Operating profit ratio 3.4.3 Net profit ratio 3.4.4
Return on investment 3.4.5 Earns per share 3.4.6 Operating expenses
ratio
3.4.1Grossprofitratio First profitability ratio in relation to
sales is the gross profit margin the gross profit margin reflects.
The efficiency with management produces each unit of product. This
ratio indicates the average spread between the cost of goods sold
and the sales revenue. A high gross profit margin is a sign of good
management. A gross margin ratio may increase due to any of
following factors: higher sales prices cost of goods sold remaining
constant, lower cost of goods sold, sales prices remaining
constant. A low gross profit margin may reflect higher cost of
goods sold due to firm's inability to purchase raw materials at
favorable terms, inefficient utilization of plant and machinery
resulting in higher cost of production or due to fall in prices in
market.
This ratio shows the margin left after meeting manufacturing
costs. It measures the efficiency of production as well as pricing.
To analyze the factors underlying the variation in gross profit
margin, the proportion of various elements of cost (Labor,
materials and manufacturing overheads) to sale may study in detail.
Gross profit Gross profit ratio = ------------------------x 100 Net
sales
3.4.2OperatingprofitratioThis ratio expresses the relationship
between operating profit and sales. It is worked out by dividing
operating profit by net sales. With the help of this ratio, one can
judge the managerial efficiency which may not be reflected in the
net profit ratio. Operating profit Operating profit ratio =
---------------------------x 100 Net sales
3.4.3Netprofitratio Net profit is obtained when operating
expenses, interest and taxes are subtracted from the gross profit.
Net profit margin ratio established a relationship between net
profit and sales and indicates management's efficiency in
manufacturing, administering and selling products. 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 the face of falling selling
prices, rising costs of production or declining demand for product
This ratio shows the earning left for share holders as a percentage
of net sales. It measures overall efficiency of production,
administration, selling, financing. Pricing and tax management.
Jointly considered, the gross and net profit margin ratios provide
a valuable understanding of the cost and profit structure of the
firm and enable the analyst to identify the sources of business
efficiency / inefficiency. Net Profit Net Profit Ratio =
--------------------------- x 100 Net sales
3.4.4Returnoninvestment: This is one of the most important
profitability ratios. It indicates the relation of net profit with
capital employed in business. Net profit for calculating return of
investment will mean the net profit before interest, tax, and
dividend. Capital employed means long term funds.
E.B.I.T Return on investment =
---------------------------------------- x 100 Capital employed
3.4.5Earningspershare This ratio is computed by earning
available to equity share holders by the total amount of equity
share outstanding. It reveals the amount of period earnings after
taxes which occur to each equity share. This ratio is an important
index because it indicates whether the wealth of each share holder
on a per share basis as changed over the period.
Net profit Earnings per share =
------------------------------------ x 100 Number of equity
shares
3.4.6Operatingexpensesratio It explains the changes in the
profit margin ratio. A higher operating expenses ratio is
unfavorable since it will leave a small amount of operating income
to meet interest, dividends. Operating expenses ratio is a
yardstick of operating efficiency, but it should be used
cautiously. It is affected by a number of factors such as external
uncontrollable factors, internal factors. This ratio is computed by
dividing operating expenses by sales. Operating expenses equal cost
of goods sold plus selling expenses and general administrative
expenses by sales. Operating expenses Operating expenses ratio =
----------------------------- x 100 Sales
NEEDS FOR STUDY
The prevalent educational system providing the placement
training at a company being a part of the curriculum has helped in
comparison of theoretical knowledge with practical. It has led to
note the convergences and divergence between theory and practice.
The study enables us to have access to various facts of the
organization. It helps in understanding the needs for the
importance and advantage of materials in the organization, the
study also helps to exposure our minds to the integrated materials
management the various procedures, methods and technique adopted by
the organization. The study provides knowledge about how the
theoretical aspects are put in the organization in terms of
described below To pay wages and salaries. For the purchase of raw
materials, spares and components parts. To incur day-to-day
expenses. To meet selling costs such as packing, advertising. To
maintain inventories and raw materials, work-in-progress and
finished stock.
SCOPEOFTHESTUDY
The scope of the study is limited to collecting financial data
published in the annual reports of the company every year. The
analysis is done to suggest the possible solutions. The study is
carried out for 4 years (2011 15). Using the ratio analysis, firms
past, present and future performance can be analyzed and this study
has been divided as short term analysis and long term analysis. The
firm should generate enough profits not only to meet the
expectations of owner, but also to expansion activities.
OBJECTIVESOFSTUDY
1. To study and analyze the financial position of the Company
through ratio analysis. 2. To suggest measures for improving the
financial performance of organization. 3. To analyze the
profitability position of the company. 4. To assets the return on
investment. 5. To analyze the asset turnover ratio. 6. To determine
the solvency position of company. 7. To suggest measures for
effective and efficient usage of inventory.
Limitation of Study
1. The study is being done from the annual reports provided by
the company only2. Confidential matters like financial position,
soundness etc. or naturally not disclosed fully. This is certainly
set back while drawing the conclusion3. The limited time does not
allowed to do more analysis
ResearchMethodologyResearchDesign In view of the objects of the
study listed above an exploratory research design has been adopted.
Exploratory research is one which is largely interprets and already
available information and it lays particular emphasis on analysis
and interpretation of the existing and available information. To
know the financial status of the company. To know the credit
worthiness of the company. To offer suggestions based on research
finding. DataCollectionMethodsPrimaryData Information collected
from internal guide and finance manager. Primary data is first hand
information. SecondaryData Company balance sheet and profit and
loss account. Secondary data is second hand information.
DataCollectionTools To analyze the data acquire from the secondary
sources Ratio Analysis The scope of the study is defined below in
terms of concepts adopted and period under focus. First the study
of Ratio Analysis is confined only to the Tirupati cotton mills
ltd. Secondly the study is based on the annual reports of the
company for a period of 4 years from 2011-12 to 2014-15 the reason
for restricting the study to this period is due time
constraint.
INDUSTRY PROFILEOVERVIEW OF TEXTILE INDUSTRY There were various
stages from a historical perspective where the textile industry
evolved from being a domestic small-scale industry, to the status
of supremacy it currently holds. The cottage stage was the first
stage in its history where textiles were produced on domestic
basis. During this period cloth was made from materials including
wool, flax and cotton. The material depended on the area where the
cloth was being produced, and the time they were being made. In the
latter half of the medieval period in the northern parts of Europe,
cotton came to be regarded as an imparted fiber. During the later
phase of the 16th century was grown in the warmer climes of America
and Asia. When the Romans ruled, wool, leather and linen were the
materials used for making clothing in Europe, while flax was the
primary material used in the northern parts of Europe. A variety of
processes and innovations were implemented for the purpose of
making clothing during this time. These processes were dependent on
the material being used, but there were three basics steps commonly
employed in making clothing. These steps included preparing
material fibers for the purpose of spinning, knitting and weaving.
During the Industrial Revolution, new machines such as spinning
wheels and handlooms came into the picture. A number of new
innovations led to the industrialization of the textile industry in
Great Britain. Clothing manufactured during the Industrial
Revolution formed a big part of the exports made by Great Britain.
They accounted for almost 25% of the total exports made at that
time, doubling in the period between 1701 and 1770. In the
Industrial Revolution era, a lot of effort was made to increase the
speed of the production through inventions such as the flying
shuttle in 1773, the flyer-and-bobbin system, and Roller Spinning
machine by John Wyatt and Lewis Paul in 1738. Lewis Paul later came
up with the carding machine in 1748 and in 1764 the sampling jenny
was also developed. The water frame was invented in 1771 by Richard
Arkwright. The power loom was invented in 1784 by Edmund
Cartwright. In the initial phases, textile mills were located in
and around the rivers since they were powered by water wheels.
After the steam engine was invented, the dependence on the rivers
ceased to a great extent. Today, modern techniques, electronics and
innovation have led to a competitive, low predict textile industry
offering almost any type of cloth or design a person could desire.
With its low cost labor base, China has come to dominate the global
textile industry.TEXTILE INDUSTRY IN INDIA
The chakra or the spinning-wheel will help to redeem man from
the evils of poverty and ignorance. Gandhi stressed the use of the
spinning-wheel as an occupation supplementary to agriculture. India
Textile Industry is one of the leading textile industries in the
world. Though was predominantly unorganized industry even a few
years back, but the scenario started changing after the economic
liberalization of Indian economy in 1991. The opening up of economy
gave the much-needed thrust to the Indian textile industry, which
has now successfully become one of the largest in the world.VARIOUS
CATEGORIES Indian textile industry can be divided into several
segments, some of which can be listed as below: Cotton Textiles
Silk Textiles Woolen Textiles Readymade Garments Hand-crafted
Textiles Jute and Coir etcCURRENT SCENARIO The Indian textile
industry is one of the major sectors of Indian economy largely
contributing towards the growth of the countrys industrial sector.
As per the Ministry of Textiles, the Indian textile industry
contributed about 14% to industrial production, 4% to the countrys
GDP and 17% to the countrys export earnings in 2013. It provides
direct employment to over 35 million people and is the second
largest provider of employment after agriculture.India enjoys a
significant lead in terms oflabor cost per hourover developed
countries like US and newly industrialized economies like Hong
Kong, Taiwan, South Korea and China. As per data from National
Bureau of Statistics, due to steep wage inflation, the average wage
cost in China stood at US$ 450 per month in 2012 as against US$ 200
per month in India.
According to the Ministry of Textiles, the domestic textile and
apparel industry in India is estimated to reach US$ 141 billion by
2021 from US$ 58 billion in 2011. Apparel exports from India is
expected to increase to US$ 82 billion by 2021 from US$ billion 31
billion in 2011. Total cloth production in India is expected to
grow to 112 square meters by FY17 from 62 billion square meters in
FY12. India is rich in traditional workers adept at value-adding
tasks, which could give Indian companies significant margin
advantage. However, India's inflexible labor laws have been a
hindrance to investments in this segment. Unlike in home textiles,
garment capacities are highly fragmented and leading Indian textile
companies have been slow to ramp up their apparel capacities,
despite strong order flows from overseas buyers who are trying to
diversify out of China The textile industry aims to double its
workforce over the next 3 years. As a thumb rule, for every Rs. 1
lack invested in the industry, an average of 7 additional jobs is
created. Growing at a rapid pace, the Indian Market is being
flocked by foreign investors exploring investment purposes and with
an increasing trend in the demand for the textile products in the
country, a number of new companies and joint ventures are being set
up in the country to capture new opportunities in market. Textile
exports did remarkably well in an otherwise dull exports scenario
in FY14. A weaker rupee and firm overseas demand helped the sector
add US$ 4 billion to overall exports of US$ 312 billion, second
only to engineering goods. Readymade garments, which accounts for
nearly half of all textile exports at US$ 14.9 billion, grew 15.5%.
Cotton yarn and fabrics grew 18% to US$ 8.9 billion, while manmade
textiles grew nearly 13% to US$5.7 billion. Most companies in the
sector timed their expansion plans FY04 onwards, so as to avail
themselves of the funding under TUF (Technology Up gradation Fund,
offering loans at 6% subsidy). This led to the apex-spending phase
in the textile sector peaking in the last three fiscals. However,
with the slump in demand for textile products from the overseas
markets, a number of companies had to defer their expansion plans
due to large under-utilized capacities. Relatively lower cost of
cotton helped the margins of export dependant textile industry in
the second half of FY14. However, since these trends are temporary
in nature, pressure on margins could increase the debt levels for
players in the sector. Textile exports in FY15 are expected to grow
by 25% to US$ 50 bn. Incremental capital investments in debt
reliant textile industry could, however, remain subdued given banks
unwillingness to lend to the sector and higher cost of funds. This
is in view of the improved sector outlook, near full use of
existing capacities and continued subsidy benefits under the
Revised Restructured Technology Up gradation Fund Scheme notified
in October 2013..India and China are currently competing in the
same categories (premium segment) of apparels and home textiles and
given Indias established presence in the high end segment, India
could gain significant market share in US apparel imports. However,
the ongoing economic slowdown in the US could result in lower
orders from US retailers that, in turn, may result in lower
capacity utilization and impact profitability of textile companies
in India.
Key Points
SupplyDespite some pick-up in demand from both global and
domestic markets, most new capacities in the apparel and home
textile segments are not operating at full capacities.
DemandHigh for premium and branded products due to increasing
per capita disposable income.
Barriers to entrySuperior technology, skilled and unskilled
labor, distribution network, access to global customers
Bargaining power of suppliersBecause of oversupply in the
unorganized market like that of denim, suppliers have little
bargaining power. However, premium products and branded players
continue to garner higher margins.
Bargaining power of customersDomestic customers - Low for
premium and branded product segments. Global customers- High due to
presence of alternate low cost sourcing destinations
CompetitionHigh. Very fragmented industry. Competition from
other low cost producing nations is likely to intensify.
JOB OPPORTUNITIES As per the 12th Five Year Plan, the Integrated
Skill Development Scheme aims to train over 26,75,000 people within
the next 5 years (this would cover over 2,70,000 people during the
first two years and the rest during the remaining three years).
This scheme would cover all sub-sectors of the textile sector, such
as textiles and apparel, handicrafts, handlooms, jute and
sericulture.
OBJECTIVES OF TEXTILE INDUSTRY
1. To have sustainable growth and development of Textiles Sector
in the country. Overall capacity addition in the Textile Industry
to be increased by 10% per year.2. To achieve the turnover of
Rs.2014crores by the year 2014 & Rs.2, 245 cores by 2016-17.3.
To expand spinning capacity from existing level 6.40 lacks spindles
to 12.68 lack spindles and 338 looms to 736 by 2013-144. To
increase the market share of yarn of NTC from existing 0.4% to 1%
in the next 5 years.5. To improve the exports from the presents
Rs.50 cores per annum to Rs.50 cores by 2013-36. To ensure
integrated development and promotion of jute sector. Jute
production to grow at 3.6% per year.7. to develop Sericulture &
Silk Sector Raw silk production targeted to grow at an annual
average rate of 4.5% during 2010-158. To promote Growth and
Development of technical textiles in India. Production of technical
textiles to grow at 11% per year 2012-13 and thereafter at 6 to 8%
per year till 2020.9. To develop Wool & Woolen Textiles Sector.
Wool production grows 1% per year.10. To develop and modernize the
decentralized Power looms Sector. Power loom cloth production
targeted to grow at 10% per year.11. To develop handloom sector and
ensure welfare of weavers. Handloom cloth production projected to
grow at an annual average rate of 5%.12. To develop Handicrafts
Sector and ensure welfare of artisans. To achieve production and
export growth rate of 15% per year.13. To improve the functioning
of PSUs and to make all PSUS profitable by 2015-16.
FUNCTIONS OF TEXTILE INDUSTRY1. To formulate appropriate policy
for all sectors of textiles and fibers.2. To promote domestic and
foreign direct investments in the textiles sector.3. To improve the
technology in the textiles sector.4. To increase the production of
textiles.5. To raise productivity, improve quality and reduce
contamination in cotton.6. To strengthen, modernize and expand the
market base of the power loom sector.
7. To promote exports of all types of textiles and handicrafts
items.
8. To promote R&D in textiles sector.
9. To strengthen data base.
10. To increase productivity, production and diversity of jute
goods.
11. To increase production and productivity in the silk sector.
12. To develop and strengthen the power loom sector by modernizing
and encouraging adoption of advanced technology.
13. To formulate regulatory framework and standards for
technical textiles.
OUTLOOK FOR TEXTILES INDUSTRY IN 2015 The cotton industry is
presently facing challenges like slow demand and a loss in margins,
but a recovery is expected on account of facing cotton prices,
through this could be negated by further volatility in input costs
or force movements. Weak demand for cotton and cotton products last
year was mainly a result of surplus inventories prompting mills to
postpone further buying in the backdrop of uncertainty in overseas
demand for textiles. Due to the current situation, instead of
adding capacity here, garment manufacturers are looking at the
option of setting up capacity or outsourcing job work to Bangladesh
to benefit from the lower cost of production. Position difficulties
for textile units, the agency said refinancing risks would increase
for distressed textiles companies in 2014, as the Reserve Bank of
India and the Finance Ministry have rejected the proposal for
reconstructing of textile loans. The National Textile Corporation
Limited (NTC) is a Central Public Sector Enterprise under the
ministry of Textile which was incorporated in April 1968 for
managing the affairs of sick textile undertakings, in the private
sector, taken over by the Government. Starting with 16 mills in
1968, this number gradually rose to 103 by 1972-73. In the year
1974 all these units were nationalized under the Sick Textile
Undertakings (Nationalization) Act 1974. The number of units
increased to 119 by 1995 and 1 new mills were controlled by NTC
(HC) Ltd with the help of 9 subsidiary Corporations, with an
authorized capital of Rs 10 cores which was raised from time to
time and which is now Rs.5000 cores and the paid up share capital
of the corporation is Rs.3062.16crores as on 31.03.2013. NTC has so
far closed 78 mills and has transferred 2 mills in the State of
Pondicherry to the state Government of Maharashtra. NTC is to
modernize/set up 24(22+2) mills by itself through generation of
funds from sale of its surplus assets.
JOINT VENTURE It was also decided to modernize 16 mills through
JV route by including private partners with NTC stake of 51%. NTC
has finalized 3 parties namely M/s Alok Industries, M/s Pantaloon
Retail India Ltd (consortium) and M/s Bhaskar Industries Ltd
(consortium) for mills to be revived and run through Joint Venture.
NTC has not transferred the ownership of the land in the
arrangement but is only giving a right to use of the land to Joint
Venture Companies (JVC) in Which NTC is the major shareholder with
51% stake with 5 out of 8 directors on the Board of JVC.SALE OF
ASSETS (LAND) THROUGH E-AUCTIONING NTC for the first time in Indian
history sold its prime lands of transparent system, permitting
parties to improve bids through reverse auction, and fetched record
returns for them. The funds are being utilized for the revival of
the company. INDUSTRY PRODUCTS Popular products of family brands
like Shahzada Mahamanthri have been revived in a new look. In
addition to it NTC has recently launched a new range of bed linen
and bath end support from Rosebay Interior India Ltd.VISION OF
INDUSTRY To be a world class eco-friendly integrated Textile
Company, catering primarily to the clothing needs of the
nation.MISSION OF INDUSTRY To be a leading textile enterprise
steadily improving capacity utilization, economy of operations,
productivity, quality, brand image, market share & export.
OBSTRUCTS & CHALLENGES OF INDUSTRY Sickness Obsolete
technology Cotton grown per hectare of land is very low Competition
from man-made fibersDOMESTIC MARKET NTC is manufacturing Yarn &
Fabric in 22mills (5 fully modernized and 17 I process of
modernization) through the country. The details of countries yarns
as well as different products of fabrics being produced are
enclosed. In addition to this the activities of Readymade garments
like shirts, Trousers Kurt Pajama, Ladies Top, Undergarments Nigh
ties, jackets, Coats etc. is also carried out by NTC.INTERNATIONAL
MARKET NTC has been products like Grey Satin, Dyed mulls, Towels,
Yarn to US, UK, Singapore, Malaysia, China and Germany. The main
objective of NTC is to provide quality fabric to consumers at
reasonable prices and to meet the requirement of common man by
manufacturing Bed to Bath fabrics.RETAIL MARKETING DIVISION The
Retail Marketing Division at NTC (HO) is looked after by Sh.
Alokendra Banerjee, Director (Marketing). There are 86 show rooms
and 09 Exhibition-Cum-Sales Centers controlled by Regional/Sub
offices as detailed below:1. NTC Sub Office, Delhi - 272. NTC
Western Region, Mumbai - 08 (+)09 (Exhibition-cum-sales centers) 3.
NTC Southern Region, Coimbatore - 334. NTC Sub Office, Kolkata - 18
YearQuantity (in lakh bales of 170 kegs)Value(in Rs./crores)
2005-060.5044.40
2006-070.8366.31
2007-0812.111089.15
2008-099.14657.34
2009-1047.003951.35
2010-1158.005267.08
2011-1285.008365.98
2012-1350.009267.12
2013-1468.008123.16
2014-1572.158926.03
COTTON EXPORTS FROM INDIA
CURRENT FACTORS IN INDIAN TEXTILE INDUSTRY: India retained its
position as worlds second highest cotton producer. Acreage under
cotton reduced about 1% during 2012-13 The production of cotton
which was growing up over the years has decreased in
2012-13.Philosophy:1) Assemble best people , delegate authority and
dont interfere people make the difference 2) Business heads are
entrepreneurs 3) Mistakes are facts of life. It is response to the
error that counts.Success:1. Create your luck by hard work 2. Trust
+ delegation = growth. Work Culture: Commitment, Creativity,
Efficiency Team spirit.SWOT ANALYSIS OF TEXTILE INDUSTRY IN INDIA
STRENGTHS:- Indian Textile Industry is an Independent &
Self-Reliant industry. Availability of low cost and skilled
manpower provides competitive advantage to industry. India has
great advantage in sampling sector and has a presence in all
process of operation and value chain. India is one of the largest
exporters of yarn in international market and contributes around
25% share of the global trade in cotton yarn. Industry has large
and diversified segments that provide wide variety of products.
WEAKNESSES:- Indian Textile Industry is highly Fragmented Industry.
Industry id highly dependent on cotton. Lower productivity in
various segments. There is Declining in mill segment. Unfavorable
labor law. Lacking to generate Economies of scale. OPPORTUNITIES:-
Growth rate of Domestic Textile Industry is 6-8% per annum. Large
potential Domestic and International Market. Product development
and diversification to cater global needs. Market is gradually
shifting towards Branded Readymade Garment. Greater investment and
FDI opportunities are available. THREATS:- Competition from other
developing countries, especially china. Geographical Disadvantages.
International labor and environment laws. To balance the demand and
supply. To make balance between price and quality.
THE ROAD AHEAD With the increase in investments in the
industrial production, and the positivity observed by the textile
sector has resulted in progress and development of the sector.
Integrating the spectral needs and continued investments with
technical advancements will completely modernize the industry china
across the country, and further assist in reaping benefits for the
Indian Textile sector.
COMPANY PROFILETIRUPATI COTTON MILLS Tirupati cotton mills were
established by M/s P.Suryanarayana & Sons Pvt. Limited in
Suryanarayanapuram, Renigunta, Chittoor District; Andhra Pradesh in
the year 1956 with a licensed capacity of 30320 spindles and
installed of 21040 spindles to manufacture cotton yarns. The
commissioned capacity was further increased to 27860. The mill was
inaugurated by Shri N. Sanjeevaiah Reddy, Chief Minister of Andhra
Pradesh on 29th Aug, 1957.TAKE OVER BY NTC The mill was taken over
by Central Government. Under an ordinance promulgated during 1972
and subsequently the mill was nationalized under the provision of
sick textile undertaking (Nationalization) Act 1974 with effect
from 1/4/1974 however the physical position was take over on 23rd
September 1974.
LOCATION The mill was situated at 2.5 km away from Renigunta and
13 km away from Tirupati on the State Highway y no.32 towards
Chennai. The mill is well connected by road, rail and air.LAND
PROPERTY The mill has 89.40 Acres of land out of which 5.22 Acres
of land acquired by Govt. of AP for laying bypass road (Renigunta
to Chandragiri) and the mill has received Rs.3.13 lacks (under
protest) towards compensation and the same as sent to holding
company, New Delhi, under advise of the Head office, Bangalore. The
residential accommodation provided to employee occupied 27.04 acres
of land identified is to be extent of 47.44 acreWELFARE Mill has
totally 103 quarters provided to officers, staffs and workers out
of which 68 quarters are occupied .All quarters including guest
house are in dilapidated condition which require major
repairsFINANCIAL PERFORMANCE The Tirupati Cotton Mill was one of
the profits making unit in the NTO up to 1993. The sale turnover
was of Rs.178.29 Lacks during the year 1974-75 and was at Rs.120
Lacks during the year 1994-95 due to various reasons, the working
of the mills receding and it incurring losses. As on 31st March,
1988 the mill had an accumulated loss of Rs.12.15 Cores with
negative net worth of Rs.10.45 Cores. And present running with loss
of Rs.8.27 Cores in during the year 2015. CAPTIVE GENERATING
CAPACITY The mill has self-generating capacity to the tune of 1354
HP to meet out power requirement during power cut/shutdowns.
PRESENT PERFORMANCE OF THE MILLS The mill could always achieve
capacity utilization of around 60% only and one of the major
reasons is attributed to the non-availability of power to run the
entire capacity of the mills. The mill earns a contribution of only
50-60% of its Wages/Salary and claims the balance amount towards
shortfall in Wages/Salary commitments. The performance in the major
areas of operations is enclosed.ORGANIZATIONAL CHART
K.BALASUBRAMANIN(GM)
SV.KRISHNA VUNNI(AAM)MV. RAMA RAO(PM)S. PRATAP(AEM)DOMINIC
AROKYARAJ (SM)
V.ERR ANNA&K.ASWINI(ACCOUNTANTS)V.RADHIKASALES
(DEPT)K.N.REDDY(CASHIER)A.RAVIPRAKASH &V.RADHIKA(PRODUCTION
& COTTON CLERKS)C.VENKATESWARALU(SENIOR
ACCOUNTANT)RAMKUMARMOHAN(SUPERVISORS)V.MUTHU(HEAD TIME
KEEPER)J.ARAVINDAN(GENERAL
CLERK)P.NAGENDRA(CLERK)R.RAJENDRANG.RAVI(ELECTRICIANS)K.MUNI
REDDYM.KODANDAREDDYP.VENKATESH(SHIFT IN CHARGERS)
COMPANY OBJECTIVES Fulfillment of market strategies. Market
leadership. Low cost and energy efficiency operations. Consistent
quality.COMPANY GOALS1. Zero defective products.2. Cost
effectiveness productivity.3. Safety, high efficiency.4. The most
competitive & reasonable price5. Products quality guarantee.6.
Prompt & superior service.7. Punctual delivery.PLANT AND
MACHINERY OF THE MILLS The mill equipped with following
machineries:-1. BLOW ROOMa) Reiter Blow Room 1957 year make single
line with double sketchers for processing cotton (poor condition)
b) Lakshmi Reiter Blow Room 1991 year single line sketcher
exclusively for synthetic process (good condition).2. CARDING
CONDITIONa) Lakshmi Reiter makes cards C 1/3 1991/1992 9 Nos.
Goodb) Toyoda makes Cards 1957 year LCC converted 2 Nos. V Poorc)
Toyoda makes Cards 1957 year IRHP converted8 Nos. V Poord) Toyoda
makes Cards 1957 year SHIP Converted9 Nos. V Poor Total 28 Nos.3.
DRAW FRAMESa) LR make Draw frames DO6 model year 2 Nos. Avg. With
3/3 drafting.b) LR makes Draw frames DO2 model 1976 year 2 Nos. V.
Poor. With 3/5 drafting.c) LR makes Draw frames DO2s model 1978
year 2 Nos. Avg. With 3/5 drafting.Total Draw Frames6 Nos. 4.
SIMPLEX a) LR make LF 1400 model 1990/91/92 year 6 Nos. Goodb)
TOYODA make 1957 year with UTM 620 2 Nos.Poordrafting systemc)
Texaco Howa make 1989 year with SKF1 Nos.Poor 1600 drafting
system5. SPINNINGa) LR makes G 5/1 1992 year with each machine 5
Nos. Avg. Having 864 spindles, drafting 7 lift and 42 mm Ring
Diameter.b) MEI Ring Frames 1980 year with 440 spindles Nos. Poor
each UT 620 Drafting 7 lift 42mm Ring Diameterc) Zingers Ring
Frames 1976 year with 400 spindles 12Nos. Poor each, PK 211E
Drafting, 7 lift 42mm Ring Diameterd) OM Ring Frames 1957 year with
400 spindles 15Nos. Pooreach, PK 211E Drafting, 7 lift 42mm Ring
Diameter.e) Temuco Ring Frames 1957 year with 400 spindles13Nos.V
Poor each, PK 211-9, UT 3E-3, Kunal-1 Drafting, 7 lift 42mm Ring
Diameter.f) NMM Ring Frames 1964 year with 452 spindles 9Nos. V
Poor each, UT 620 Drafting, 7 lift 42mm Ring Diameter.Thus the
numbers of Ring Frames are 66 with 27860 total spindles
6. CONE WINDINGa) The mill has padmatex 138 Model 1990 year 1
Nos.Avg. auto corner with 60 drums capacity with splices.b) Textual
make 1976/78/87/94 year with 120 drums each 4 Nos.Poorc) Brady make
1980/81/85 year within 120 drums each 3 Nos. Poor7. DOUBLINGa)
Doublers winder Kapitsa makes with 80 drums 1 Nos. V Poorb) NMM
make 1964 year with 340 spindles each with 3 Nos.Poor dry process,
8 lift and Ring Diameter. (RF Converted). The above machines are
suitable to produce Cotton, Hosiery and Synthetic Yarns. The
production capacity being 5500 Kgs of Yarn per day.LABOR FORCE The
present strength of workers is 127 consisting of 24 permanent, 103
badly and about 100 casual workers. The total strength of staff
& officers of our mill is 16. PLANS UNDER CONSIDERATION FOR
EXPANSION OF THE MILLS NTC, under modified Draft rehabilitation
scheme (MS-10), prepared by NITRA and approved by the Board in the
year 2010 included modernization of Tirupati Cotton mills also with
58752 in new 2 sheds, rising the spindle age to 84672, with an
estimated cost of Rs.225.20 cores. As the above scheme did not go
through, a revised MDRS -12 was submitted to MOT for modernization
of this mill will a reduced capacity of 24480 spindles in the
existing shed only with and estimated out-lay of Rs.67.15 cores.
The present company share is 1.82% through across world; it is
proposal to increase 3 to 4% in the year 2020.
MODERNIZATION After Nationalization of the mill, National
Textile Corporation has taken first phase of modernization during
1975 with an outlay of Rs.92.41 lacks. The second phase of
modernization was done during 1982 with an outlay of Rs.69.92
lacks. The third phase of modernization was carried out during
1991-92 with the assistance from financial institutions at an
outlay of Rs.425 lacks. The total amount spent was Rs.587.03 lacks.
The mill is proposed for interim-modernization with an investment
out-lay of Rs.173.58 lacks.COMPANY AUTONOMOUS MAINTENANCE Initial
clean-up Action for easy clean inspection Improve tentative
standards General inspection Autonomous inspection Standardization
Full autonomous maintenance COMPANY VISION The cotton yarn
industries fortunes are closely linked to fluctuations in the
cotton market any upward movement of the cotton prizes puts
pressure on profit margins of mills operating in the intensely
competitive yarn market. At the same time new entrance with modern
mills have the advantage better productivity and quality after
lower prices and the credit facilities to achieving market entity.
This is increased expectation in terms of quality, price &
delivery hence they have been, Strengthen the business systems for
cotton purchase. Reduce operational costs by improving the
productivity of machinery & employer. Retain our relationship
by improving consistency.
COMPANY MISSION The company primary mission is to achieve
customer satisfaction through the collective commitment of
employees that is manufacturing and marketing of cotton products
and services.COMPANY PLC
TOP 10 TEXTILE COMPANIES IN INDIa1. ARVIND MILLS2.
BOMBAYDYEING3. GRASIMINDUSTRIES4. RAYMOND5. RELIANCE TEXTILES6. JCT
LIMITED7. LAKSHMI MILLS8. MYSORE SILK (KSIC)9. VARDHMAN GROUP OF
COMPANIES10. FABINDIA
AWARDS AND HONOURS NCQC PAR EXCELLENT AWARD 2009 KOLKATA. CCQC
EXCELLENT AWARD 2007 (QCFI) HYDERABAD. CCQC DISTINGUISHED AWARD
2006 (QCFI) HYDERABAD. NCQC DISTINGUISHED AWARD 2006 (QCFI) KANPUR.
TOP AWARD IN TPM BY ABK-AOTS DOSOKAI CHENNAI. PRODUCT PROFILE The
Cotton Mill product only single type of product .The product is
name COTTON YARN. The raw materials of the cotton mill are only
COTTON and the sources of Cotton were required from the Cotton
Corporation of India Ltd.TYPES OF COTTON (IN COUNTS)1. 40 S Carded
Cone Yarn2. 2/40s Carded Cone Yarn3. 40s Carded Plain hand Yarn4.
2/40s Carded Plain hand Yarn5. 40s Carded assessed hunk Yarn6.
2/40s Carded assessed hunk Yarn7. 42s Carded cone Yarn The above
seven product are produced in Cotton Mill, because the Cotton Mill
way only single product. Company was not importing and exporting
the product because the products are utilized only within the
country .It means local domestic market within the India.MARKET
AREA OF THE PRODUCT The Cotton Mill sold the product within the
India. Their mainly selling areas of the Cotton Mill was
Ekambarakuppam (In Andhra Pradesh) Cheerala (In Andhra Pradesh)
Ichala Karunji (In Maharashtra) Malegaon (In Maharashtra) The above
all areas are the main areas to sell the product and also to move
the product within the overall India.
MODE OF SALESThe Mode of Sales is two types. Direct Sales
Consignment Sales DIRECT SALES Direct Sales means selling the
products directly to the consumers and other cloth to the
companies. There is no mediate/ blocked to sell the product.
CONSIGNMENT SALES No credit sales accept even for the Govt
organization also. Not some companies has to receivables the credit
sales they are;- NHD(national Handloom Development Company)
KHDC(Karnataka Handloom Development Company) The above companies
are to facilitate the credit sales within 60 days, because these
companies are required more products from the Cotton Mills
products.
PRODUCTION The licensed capacity for manufacturing cotton yarn
is 30,320 spindles. The production started with commissioned
capacity of 6000 spindles which used to last increased to 21,040
spindles and subsequently to 29,668 spindle of the production
manufactured to the company The cotton is measured in kg only. The
present machines can produce 5,500kgs of yarn per day within an
average count of the product of 40 % per day. The Tirupati Cotton
Mill area only profit earns company in Andhra Pradesh.
QUALITY POLICY TIRUPATI COTTON MILL aim is to achieve customer
satisfaction through the collective commitment of employees is
manufacturing and marketing of cotton products and services. To
accomplish above TCM focus on, Establishing supervisor
specifications for our products & proceed. Employing state-of
art technologies and robot principles. Implementing methods and
techniques to monitor quality level. Providing prompt after sales
service.They believe that effective implementation techniques will
result in Consist and better quality product. Lesser accidents.
Higher employee morale.Strengths: Strong and well organized
customer base. Full agonized in restructure in place. Proven field
performance in all users segment.
DATA ANALYSIS AND INTERPRETATIONS 4.1 LIQUIDITY RATIOS 4.1.1
CURRENT RATIOThe ratio between all current assets and all current
liabilities. Another way of expressing liquidity. It is a measure
of the firms short-term solvency. It indicates the availability of
current assets in rupees for every one rupee of current liability.
A ratio of greater than one means that the Firm has more current
assets than current claims against them. Current AssetsCurrent
ratio = ----------------------------------------- Current
Liabilities
Table 4.1.1 CurrentRatio S.NOYearCurrent AssetsCurrent
LiabilitiesCurrent Ratio
12011-125,73,59,6013,06,75,6801.86
22012-135,54,25,6193,66,02,2731.51
32013-146,20,39,9473,57,66,5351.73
42014-155,98,55,2872,70,11,4702.21
Graph 4.1.1 Current ratio
Interpretation: The standard for current ratio is 2:1 normally.
During the year 2011-12 the ratio is decreased to 1.86 during the
year 2012-13 the ratio decreased to 1.51 during the year 2013-14
the ratio is increased to 1.73 during the year 2014-15 the ratio is
increased to 2.21. The ratio 2014-15 exactly ratio so the ratio was
satisfactory.
4.1.2.Quick ratio: Quick ratio establishes a relationship
between quick, or liquid, assets and current liabilities. An Asset
is liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. Current Assets
InventoriesQuick Ratio = _______________ Current liabilities
Table 4.1.2 Quick RatioS.NOYearQuick AssetsCurrent
LiabilitiesQuick Ratio
12011-124,52,74,6673,60,75,6801.25
22012-132,76,37,4993,66,02,2730.75
32013-145,27,91,1743,57,66,5351.47
42014-153,79,04,6682,70,11,4701.40
Graph 4.1.2 Quick ratio
Interpretation: The standard normal for the quick ratio
1:1.quick ratio decreased in the year 2011-12 to 1.25 from 0.75.
Then, it decreased to 0.75 in the year 2012-13. And it has
increased to 1.47 in the year 2013-14 and then it decreased to 1.40
in the year 2014-15. However the ratio was above the standard
normal so the ratio was satisfactory.
4.1.3. Cash ratio:
The ratio between cash plus marketable securities and current
liabilities.Cash Ratio = cash & Bank balances Current
liabilities
Table 4.1.3 Cash Ratio S.NOYearCash& Bank BalancesCurrent
LiabilitiesCash Ratio
12011-1225,99,9433,60,75,6800.07
22012-1319,77,0553,66,02,2730.04
32013-1423,94,3513,57,66,5350.06
42014-155,26,1642,70,11,4700.01
Graph 4.1.3 Cash Ratio
Interpretation: The standard normal for the cash ratio 0.05:1.
During the year 2011-12 the ratio was 0.07and the next year 2012-13
the ratio was decreased to 0.04. During the year 2013-14 the ratio
was increased to 0.06 but the next year 2014-15 the ratio was very
low. The company is failed to keeping sufficient cash and bank
balances, marketable securities.
4.1.4. NET WORKING CAPITAL RATIO: The difference between current
assets and current liabilities excluding short-term bank borrowing
is called net working capital or net current assets.
Net working capital ratio = Net Working Capital Net assets
Net Working Capital = Current Assets - Current LiabilitiesNet
Assets = Total Assets - DepreciationTotal assets = Fixed Assets +
Current Assets
Table 4.1.4 Net working capital ratio S.NOYearNet Working
CapitalNet AssetsNet Working Capital Ratio
12011-122,66,83,9214,19,93,6670.63
22012-131,88,23,3465,66,59,2320.33
32013-142,62,73,4125,93,00,8710.44
42014-153,28,43,8175,32,54,6930.61
Graph 4.1.4 Net Working Capital Ratio
Interpretation: Net working capital ratio is 0.63 in 2011-12 but
decreased to 0.33 in the next year 2012-13. From that year the
ratio decreased to 0.33 in 2012-13 and next year increased to 0.44
in 2013-14 also and increased to 0.61 in 2014-15 but condition of
business working capital is not shortage.
4.2 LEVERAGE RATIOS
4.2.1 Debt RatioIf the firm may be Interested in knowing the
proportion of the interest bearing debt in the capital
structure.
Total Debt Debt ratio =
----------------------------------------- Total Debt + Net
Worth
S.NOYearTotal DebtTotal Debt + Net WorthDebt Ratio
12011-1220,03,49,48930,43,47,1330.65
22012-1341,16,74,64171,86,84,3540.57
32013-1451,17,06,12388,34,14,4420.57
42014-151,49,07,78648,31,00,0810.03
Table 4.2.1 Debt ratio
Graph 4.2.1 Debt ratio
Interpretation: This ratio gives results relating to the capital
structure of a firm. Debt ratio is 0.08 in the year 2011-12 it
increased to 0.65. During the year 2012-13 the ratio is decreased
to 0.57 &the next year same ratio 2013-14 to 0.57.again it is
decreased to 0.03. From the above in fluctuating trend we can
conclude that the companys dependence on debt is decreasing. It is
better position in collection of debt.
4.2.2 Debt Equity Ratio Debt equity ratio indicates the
relationship describing the lenders contribution for each rupee of
the owners contribution is called debt- equity ratio. Debt equity
ratio is computed by dividing Long term Liabilities divided by
Equity. Lower debt equity ratio higher the degree of protection. A
debt-equity ratio of 2:1 is considered ideal. LONG TERM
LIABILITIESDebt Equity Ratio =
---------------------------------------- EQUITY
Table 4.2.2 Debt equity ratioS.NOYearLong Term LiabilitiesNet
WorthDebt Equity Ratio
12011-1220,03,49,48910,39,97,6441.92
22012-1341,16,74,64130,70,09,7131.34
32013-1451,17,06,12337,17,08,3191.37
42014-151,49,07,78646,81,92,2950.31
Graph 4.2.2 Debt equity ratio
Interpretation: The ratio gives results relating to the capital
structure of a firm. Debt equity ratio is the year 2011-12
increased to 1.92 & the next year 2012-13 ratio is decreased
to1.34.the next year 2013-14 the ratio is increased to 1.37. The
next year 2014-15 the ratio is decreased to 0.31. It is not better
position in collection of debt funds.
4.2.3 Proprietary Ratio This ratio indicates the general
financial strength of the concerned firm. It is also test the
soundness of the financial strength (structure of the firm).
Net worth Proprietary Ratio =
-------------------------------------- x 100 Total tangible
assets
Table 4.2.3 Proprietary Ratio S.NOYearNet WorthTotal Tangible
AssetsProprietary Ratio
12011-1210,39,97,64487,27,33811.91
22012-1330,70,09,7131,71,03,00017.95
32013-1437,17,08,3193,66,87,77510.13
42014-1546,81,92,2952,42,64,11219.29
Graph 4.2.3 Proprietary Ratio
Interpretation: This ratio indicates the general financial
strength of the concerned firm. During the year 2011-12 the ratio
is 11.91 & the next year 2012-13 increased to 17.95.during the
year 2013-14 decreased to 10.13 & the next year 2014-15
increased to 19.25. The financial structure is not better
position.
4.3 ACTIVITY RATIOS
4.3.1 Inventory Turnover Ratio: It indicates the firm efficiency
of the firm in producing and selling its product. It is calculated
by dividing the cost of goods sold by the average inventory.
Cost of goods sold Inventory Turnover Ratio =
------------------------------ Average stock
S.NOYearCost Of Goods SoldAverage StockInventory Turnover
Ratio
12011-123,25,67,16534,08,0169.55
22012-1332,03,71,08165,39,0244.89
32013-1423,28,12,32185,44,1032.72
42013-1530,93,41,43192,38,7413.34
Table 4.3.1 Inventory Turnover Ratio
Graph 4.3.1 Inventory Ratio
Interpretation: The above table shows the inventory turnover
ratio. The highest ratio was recorded as 9.55 during the year
2011-12, and the lowest ratio was recorded as 2.72 during the year
2013-14. By seeing this ratio we can say that the company is
showing that finished stock is rapidly turnover into sales.
4.3.2 Debtors turnover ratio: It is found out by dividing the
credit sales by average debtors. Debtors turnover indicates the
number of times debtors turnover each year.
SalesDebtors turnover ratio = _________________ Average
Debtors
Table 4.3.2 Debtors Turnover RatioS.NOYearSalesAverage
DebtorsDebtors Turnover Ratio
12011-1235,60,19,0324,42,65,8088.04
22012-1336,01,60,5082,10,20,65117.13
32013-1426,14,10,5803,26,57,4258.00
42014-1535,65,74,5502,83,80,06212.56
Graph 4.3.2 Debtors Turnover Ratio
Interpretation: Generally more the ratio better is the cash
position of the company. In 2011-12, the companys debtors turnover
ratio was reduced as 8.00 times, which increased to 17.13 times in
2012-13.the debtors turnover ratio of the company increasing and
decreasing year by year it reveals that the management is showing
better performance to connect the debts in time.
4.3.3 Fixed Asset Turnover Ratio: The ratio is supposed to
measure the efficiency with which fixed assets are employed a high
ratio indicates a high degree of efficiency in asset utilization
and a low ratio reflects inefficient use of assets. However, in
interpreting this ratio, one caution should be borne in mind. When
the fixed assets of the firm are old and substantially depreciated,
the fixed assets turnover ratio tends to be high because the
denominator of the ratio is very low.
Net SalesFixed Asset Turnover Ratio = __________ Net Fixed
Asset
S.NOYearNet SalesFixed AssetsFixed Assets Turnover Ratio
12011-1235,60,19,0322,07,09,74617.19
22012-1336,01,60,5083,78,35,8879.51
32013-142,61,41,05,6803,30,27,4587.91
42014-1535,65,74,5504,04,10,8768.82
Table 4.3.3 Fixed Assets Turnover Ratio
Graph 4.3.3 fixed assets turnover ratio
Interpretation: The above table shows the fixed assets turnover
ratio during the period 2011-12 to 2014-15.the lower ratio was
recorded as 7.91 times in 2013-14, and the highest ratio was
recorded as 17.19 times in 2011-12. It is decreasing by every
compare to previous year. The company doesnt show the interest
turning out the fixed assets.
4.3.4 Total Assets Turnover Ratio: This ratio ensures whether
the total asset has been effectively used or not. This is also test
of managerial efficiency and business performance. Higher total
capital turnover ratio is always required in the interest of the
company. Sales Total assets turnover = ----------------------------
Total Assets
Table 4.3.4 Total Assets Turnover RatioS.NOYearNet SalesTotal
AssetsTotal Assets Turnover Ratio
12011-1235,60,19,0327,80,69,3474.56
22012-1336,01,60,5089,32,61,5063.86
32013-1426,14,10,5809,50,67,4062.74
42014-1535,65,74,55080,66,1644.44
Graph 4.3.4 Total Assets Turnover Ratio
Interpretation: The above ratio shows the total assets turnover
ratio, the highest ratio was recorded as 4.56 times in 2011-12, and
the lowest ratio was recorded as 2.74 times in 2013-14.
4.3.5 Working capital turnover ratio: The term net working
capital refers to the difference between current assets and current
liabilities. A positive net working capital will arise when current
assets are more than current liabilities. A negative net working
capital occurs when current liabilities are more than current
asset. This ratio calculated as under. Sales Working capital
turnover ratio = ------------------------------- Working
capital
Table 4.3.5 Working Capital Turnover RatioS.NOYearNet
SalesWorking Capital Working Capital Turnover Ratio
12011-1235,60,19,0322,12,83,92116.72
22012-1336,01,60,5081,88,23,34519.13
32013-1426,14,10,5802,62,73,4129.94
42014-1535,65,74,5503,28,43,81610.85
Graph 4.3.5 Working Capital Turnover Ratio
Interpretation: When compared to 2011-13 the net working capital
turnover ratio is decreased in 2011-12 and few percentages
increased in 2012-13 year. The highest value recorded as 19.13 in
the year 2011-2 and lowest value recorded as 9.94 percentages in
2012-13.
4.3.8 Capital turnover ratio: The ratio obtains by dividing
sales with the capital employed.
Sales Capital turnover ratio = ----------------------------
Capital employed
Table 4.3.6 Capital Turnover RatioS.NOYearNet salesCapital
employeeCapital turnover ratio
12011-1235601903230,43,47,1331.16
22012-1336016050871,86,84,3540.50
32013-1426141058088,34,14,4420.29
42014-1535657455048,31,00,0810.73
Graph 4.3.6 Capital Turnover Ratio
Interpretation: Capital turnover ratio is 1.16 in the year
2011-12 and it decrease 0.50 in the year 2012-13 and it is
decreased to 0.29 in the year 2013-14 and it is increased to 0.73
in the year 2014-15.
4.4 PROFITABILITY RATIOS
4.4.1 Gross Profit Ratio: This ratio shows that the margin left
after meeting manufacturing costs. It measures the efficiency of
production as well as pricing. Gross profit Gross profit ratio =
------------------------x 100 Net sales
Table 4.4.1 Gross Profit RatioS.NOYearGross ProfitNet SalesGross
Profit Ratio
12011-123,05,51,86635,60,19,0328.58
22012-133,97,89,42736,01,60,50811.04
32013-142,85,98,2592,61,410,58010.94
42014-154,72,33,11835,65,74,55013.25
Graph 4.4.1 Gross Profit Ratio
Interpretation: The above table shows the gross profit ratios.
The highest gross profit ratio was recorded as 13.25% in 2013-14
and the lowest gross profit ratio was recorded as 8.58% in 2011-12
by seeing this ratio, we can say that the gross profit of the firm
is bad because the cost of goods sold is increasing every year.
4.4.2 Net Profit Ratio: This ratio indicates the firms capacity
to with stand adverse economic conditions. A firm with a high net
margin ratio would be in an advantageous position to survive in the
face falling selling prices, rising costs of production or
declining for the product.
Net Profit Net Profit Ratio = --------------------------- x 100
Net sales
Table 4.4.2 Net Profit RatioS.NOYearNet ProfitNet SalesNet
Profit Ratio
12011-124,19,51535,60,19,0320.11
22012-134,42,68936,01,60,5080.12
32013-145,64,82426,14,10,5800.21
42014-156,48,92035,65,74,5500.18
Graph 4.4.2 Net Profit Ratio
Interpretation: The above table shows the net profit percentage.
2011-13 the net profit every year increase few percentage and
2013-14 net profit decreased compare to previous year. The company
maintaining the smooth growth percentage in net profit.
4.4.3 Return on Investment: The conventional approach of
calculated ROI is to divide PAT by investment.
E.B.I.T Return on investment =
---------------------------------------- x 100 Capital employed
Table 4.4.3 Return on InvestmentS.NOYearE.B.I.TCapital
EmployedReturn On Investment
12011-122244690630,43,47,1337.37
22012-135226697871,86,84,3547.27
32013-146469860588,34,14,4427.32
42014-158271596648,31,00,08117.12
Graph 4.4.3 Return on Investment
Interpretation: Return on investment is increases in all years.
But, in the year 2014-15, it reached to highest is 17.12 in the
year 2014-15.
4.4.4 Return on Equity Share HoldersFund The return on equity
share holders fund explains about the return of share holders with
they get on their investment.
Net profit Return on equity share holders fund =
------------------------------------ x 100 Number of equity
shares
Table 4.4.4 Return on Equity Share Holders FundS.NOYearNet
ProfitEquity Share Holders FundReturn On Equity Share Holders Fund
Ratio
12011-1241951510,39,97,6440.40
22012-1344268930,70,09,7130.14
32013-1456482437,17,08,3190.15
42014-1564892046,81,92,2950.13
Graph 4.4.4 Return on Equity Share Holders Fund
Interpretation: Return on equity in the year 2011-12 is 0.40 and
it is decreased suddenly to 0.14 in the year 2012-13 and the next
year increased to 0.15 in 2013-14. During the year decreased to
0.13 in 2014-15.return on equity of the company is at does not
satisfactory
FINDINGS The current ratio of the company is well the standard
2:1 throughout the study period. It decreases from 2.21times to
1.51 times which indicates the firm is in a very good position to
meet its short term obligations. Generally the quick ratio standard
is 1:1 throughout the study period it from 1.48times to 0.76times.
It shows that the company is maintaining sufficient investments in
quick assets. The debit ratio of the company slightly increased
from 0.90 to 0.94 times, but not up to the standard ratio 1:3. It
is mainly caused by decrease in total tangible assets. The stock
turnover ratio of the company has been increased from 27.22 times
to 95.50 times. It indicates the company sale has been increasing
rapidly. The fixed assets turnover ratio is increasing from 7.91
times to 17. Times fixed assets turnover ratio is increasing year
by year and it reveals that the company is showing better
performance in turning out its fixed assets.
SUGGESTIONS The company shall maintain the stable financial
position. So that, the company can earns better profits. The
company may increase investment in current assets to meet its
short-term obligations. He company needs to adopt sales forecasting
and budgetary control methods to check the rising expenses. The
company may increase its capital employed turnover ratio by
increasing sales every year.
CONCLUSION
Liquidity ratios, both current ratio and quick ratio are showing
effectiveness in liquidity as in all the years current ratio is
greater than the standard 2:1 and quick ratio is greater than the
standard 1:1 ratio.
The firm is maintaining a low cash balance and marketable
securities which means they done cash payments.
Debt equity ratio, solvency ratio and interest coverage ratio
are showing an average increase in the long term solvency of the
firm. The proprietary ratio is showing an average increase which
means, the shareholders have contribute more funds to the total
assets.
Average payment period of the firm is showing the credit
worthiness of the firm to its suppliers.
Fixed assets turnover ratio is showing that the firm needs
lesser investment in fixed assets to generate sales.
The gross profit ratio, net profit ratio is showing the
increasing trends. The profitability of the firm the
increasing.
The interest that has to be paid is very less when compared to
the sales. The firm is not utilizing the debt conservatively.
The firm is retaining much of the earnings (based on dividend
payout ratio).
The company financial performance is very good and also they
will increase their business year by year by expanding their
branches.
BALANCE SHEET AS AT 31ST MARCH, 2012 particularsSchedule
no31.03.201231.03.2011
I. SOURCE OF FUNDS
a. Shareholder Funds 11,35,34,0001,35,34,000
i. Share capital
ii. Share, pending allotment(state GOVT) -
iii. Advance against equity - -
iv. Reserves & surplus 29,04,63,6449,04,63,644
b. Loan Fund
1) Secured loan 3 - -
2) Unsecured loan 420,03,49,48915,57,99,161
c. Deferred tax liability - -
TOTAL30,43,47,13325,97,96,805
II. Application Funds
a) Fixed assets 5
i. Gross block6,24,03,1946,82,55,395