Shree Renuka Sugars Ltd (2)

CHAPTER-1

INTRODUCTION

OVERVIEW OF SUGAR INDUSTRY:

India is one of the largest consumer and second largest producer of sugar

in the world. With 516 sugar mills operating in India during SY 2008P in

different parts of the country, the Indian sugar industry has been a focal

point for socio-economic development in the rural areas.

The sugar industry, in India, is highly fragmented. There is a large

number of small sugar mills located in various parts of the countries. In

SY 2008, a total of 516 sugar factories crushed cane for an average of

152 days. Cooperative mills largely operate in Maharashtra, Gujarat,

Uttar Pradesh and Karnataka. In addition, there are a number of players

in the unorganised segment, producing gur and khandsari, which are less

refined forms and act as a substitute.

Seshadripuram Institute of Commerce & Management Page 1

Sugarcane Acreage & Production:

The sugar industry in India uses only sugarcane as input, hence sugarcane

acreage and production is a key factor in determining sugar production

for the year. The area under sugarcane cultivation has gradually increased

over the years mainly due to the diversion of land by the farmers from

other crops to sugarcane for economic reasons.

Sugar mills have been largely established in large sugarcane growing

states like Uttar Pradesh, Maharashtra, Andhra Pradesh, Karnataka,

Gujarat and Tamil Nadu. These six states together account for 80-90% of

the sugarcane produced in India.

Accordingly, the leading sugar producing states are Uttar Pradesh,

Maharashtra, Tamil Nadu, Gujarat, Andhra Pradesh and Karnataka,

accounting for 85-95% of the total sugar produced in India.

In SY 2008P, these states accounted for about 90% of the total sugarcane

production in India, with Maharashtra and Uttar Pradesh leading with

24% and 37% respectively of the total sugarcane production, and for

about 92% of total sugar production in India, again with Maharashtra and

Uttar Pradesh leading with 34% and 28% respectively of the total sugar

produced in India.


Sugar Cycle:

Process of Sugar Cycle

Sugar industry typically follows a cycle which spans over a period of five

to seven year. Higher sugarcane and higher sugar production results in a

fall in sugar prices, which in turn result in non-payment of dues to

farmers. This compels the farmers to switch to other crops thereby

causing a shortage of sugarcane, which in turn lead to an increase in

sugarcane prices and thereby increases profits. Since prices of sugarcane

have increased, farmers now switch back to sugarcane production, which

in turn leads to a fall in sugar prices.


INTRODUCTION TO FINANCE:

Finance is the lifeblood and central nerve system of any business

organization. This because of the modern money oriented economy. Just

as circulation of blood is necessary in the human body to maintain life,

finance is very essential to the business organization for smooth running

of the business. Finance is one of the basic foundations of all kinds of

economic activities. It is the master key, which provides access to all the

sources for being employed in manufacturing and merchandising

activities .The importance of Financial Management cannot be denied. In

every organization where funds are involved, sound Financial

Management is indispensable. Efficient management of any business

enterprise is closely linked with efficient management of its finance.

DEFINITION OF FINANCE:

Ray G.JONES and Dean Dudley observe that the word finance comes

from Latin word ‘Finis’ in simple word Finance is the economics and

accounting. Economics is proper utilization of scare resources and

accounting is keeping a record of thing.

Kenneth Midglay and Ronald Burns state “Finance is the process of

organizing the flow of funds so that a business firm carry out its

objectives in the most efficient manner and meet its obligations as they

fall due.”


SCOPE OF FINANCE:

Until the middle of the century, the scope of finance was simply that of

rising of funds from various sources and looking after the legal and

accounting relationship between the company and the suppliers of

various sources of funds.

However, several technological innovations and improvements, widening

marketing operation, strong corporate structure etc. took place in 1950’s

have since reduced the popularity of traditional approach finance.

The scope of finance function is as wide as the periphery of finance. It

concentrates primarily on more money management and different

auxiliaries, which are incidental to it. For effective money management,

the different resources of business enterprises must be mobilized.

The finance penetrates all the activities irrespective of whether they relate

to product, pricing, expansion and re-organization and in fact anything,

which needs finance.


IMPORTANCE OF FINANCE:

The importance of finance is one of the important areas of the

management. It is the management of monetary affairs of the

organization. It considered as that administration area or set of

administration function, which relate to arrangement of cash and credit,

so that the organization may have the means to carry out its objective. So

it is rightly said “Finance is the life blood of the Business Economy”

Finance is a very important tool for the organization for its smooth

working. Without of finance, neither a business can be started nor

successfully run. Provision of sufficient funds at the required time is the

key of success of a business. As a matter of fact, finance may be said to

be a circulatory system of the economic body.

A business needs the finance at every stage of its operation. Some of the

operation or stage where the finance is required for the organization is:

For starting of a business

For operating of a business

For expansion and modernization of a business

For closing up or liquidation of the business.


ABOUT THE SUBJECT:

The preparation of financial statements is not the end aim. The purpose

of preparing the statement is to use them for decision making. The

statement becomes further planning and forecasting. An opinion is

formed in respect to the financial conditions and concern. The analysis

of these statements involves their decision according to similar groups

and arranged in desired form. The interpretation involves the expansion

of financial facts in a simplified manner.

The financial statement analysis is largely a study of relationship among

the various financial factors as shown by different statement are an

attempt to determined the significance and meaning of the financial

statement data so that the forecast may be made by prospects for future

earning, ability to pay interest and delete maturities (both current and

long term) and profitability of a sound dividend policy.

The analysis and interpretation being out the mystery behind the figures

in financial statement. The interpretation includes the comparisons of the

smaller figures at different time, different figures at the same point of

time.


INTRODUCTION:

Every organization, irrespective of size and mission, may be viewed as a

financial entity. Management of the organization, particularly a business

firm, is confronted with issues and decision like the following which

have important financial implication:

What kind of plant and machinery should the firm buy?

How should it raise finance?

How much should it invest in inventories?

What should be its credit policy?

How should it gauge and monitor its financial performance?

MEANING OF RATIO ANALYSIS:

Ratio is the relationship between two accounting numbers. It is one of the

effective tools of financial analysis. It indicates the relationship of

accounting aspect like profit and profit and sales, incomes and expenses,

current assets and liabilities etc. with each other and reflects the

soundness of concern.

Ratio Analysis is the technique of the computation of number of

accounting ratios from the data derived from the financial statements, and

comparing those with the ideal or standard ratios or the previous year’s

ratios or the ratios of other similar concerns. It is a technique of

comparative analysis in which current year ratios are compared with the

past or other organizations which are in similar line of operations so as to

ascertain the financial soundness of the concern.


USERS (interested parties):

1. SHAREHOLDERS

Some shareholders are interested in the performance of the

company. They want to judge the long term solvency position,

return capital employed and earnings per share of a company.

2. ANALYST ADVISOR :

They advise the present and potential investors about their buy or

sell and lending decisions by reviewing all financial characteristics

and make inter firm comparisons.

3. TAX AUTORITIES :

They are the financial rate to judge the reliability of financial

information presented by the assesses.


IMPORTANCE OF RATIO ANALYSIS:

Ratio Analysis stands for the process of determining and presenting the

relationship of items and groups of items in the financial statements. It is

an important technique of financial analysis. It is an important technique

of financial analysis. It is a way by which financial stability and health of

a concern can be judged. The following are the main points of

importance of Ratio Analysis:

1) Accounting ratios reveal the financial positions of a concern.

This helps the banks, insurance companies and other financial

institutions in lending and making investments decisions.

2) Ratio Analysis is an instrument for diagnosing the financial

health or condition of a business. Financial analysts can

diagonise the financial condition of an enterprise through ratio

analysis. They evaluate the important aspects of the conduct of a

business like liquidity, solvency, capital gearing, profitability

etc.

3) Accounting ratios simplify, summaries and systematize the

accounting figures in order to make them more understandable

and in lucid form. They highlight the interrelationship which

exists between various segments of the business as expressed by

accounting statements.


4) Ratio Analysis is an invaluable aid to the management in the

efficient discharge of its basic functions of forecasting, planning,

communications, controlled. Ratios are a useful instrument of

management control, particularly in the areas of sales and costs.

5) Ratios are very helpful in establishing standard costing system

and budgetary control.


LIMITATIONS OF RATIO ANALYSIS:

1) Ratios are calculated from the data found in the financial

statements. The Financial statements suffer from a number of

limitations. That means the ratio, derived from the financial

statements are also subjected to those limitations.

2) Financial analysis is based on ratio analysis will give miss leading

results if the effects of change in price level are not taken into

account in the compilation of ratio analysis.

3) Ratio alone is adequate for judging the financial position of a

business. They cannot be taken as final as regards the financial

position of a business other things also have to see.

4) Ratios give just a fraction if information needed for judging the

financial soundness of a concern, such the information obtained

from the ratios must be used in conjunction with the information

obtained from others sources so as to judge the financial soundness

of a concern correctly.

5) A ratio is hyper sensitive. A new entry of a transaction can change

its magnitude drastically.


STEPS INVOLVED IN RATIO ANALYSIS:

1. Selection of relevant data from the financial statements depending

upon the objective of the analysis.

2. Calculating of appropriate ratios from the above data.

3. Comparision of calculated ratios with the ratios of the same firm in

the past or the ratios developed from projected financial statements

the ratios of some other firms of the comparision with the ratios of

the industry to which the firm belongs.

4. The ratio analysis involves the comparison for useful interpretation

of the financial statements. A single ratio in itself does not indicate

favorable or unfavorable conditions. It should be compared with

some standards.


CHAPTER-2

RESEARCH DESIGN

INTRODUCTION:

The efficiency of the company is mainly measured by its financial

stability. It can be assesses with the help of audited and certified

financial statements.

Ratio Analysis is an important tool for financial strength of the

company. Ratio analysis is the technique of analyses and interpretation

of financial statement through calculation of a number accounting ratios

from the financial statements for the purpose of comparisons of

accounting ratio with those of previous year with those other concern

engaged in similar line of activities or with the standards to draw

conclusion about the financial performance of the organisaton.

Analyses and interpretation of various accounting ratio give (skilled and

experienced analyst) a better understanding of the financial condition of

the organization through financial statement.

TITLE OF THE STUDY:

This project is submitted under the title “RATIO ANALYSIS” at Shree

Renuka Sugars Ltd Belgaum, where a special preference is given to

Ratio Analysis.


STATEMENT OF PROBLEM:

The success and failure of the company depends on the financial results

that the company has achieved during the period, which will be reflected

in financial statements. Analysis and interpretation of financial

statements of its regular exercise to review the performance of the

company the present study is undertaken to analyse the financial position

of the concern. i.e., whether the concern is in profit or loss or in break

even.

OBJECTIVE OF THE STUDY:

To study and analyse financial statements of the concern.

To identify the loops, and finding techniques to improve the same.

To know the current assets and current liabilities structure of

SRSL.

To study and compare the financial performance of HAL over the

last five years.

Competition of different accounting ratios, to analyse the financial

performance of concern for current year.

To know the solvents of the firm and to decide about the long

term liquidity of the funds of the organization.

To suggest and recommend a proper techniques for Ratio Analysis

of SRSL.


SCOPE OF THE STUDY:

The study has been done to analyse the financial performance of SRSL

for the period of 4years from 2005-2009. The study help in the learning

of the financial statements as well as understanding the various

components involved in the analysis of the financial statements. The

financial statement consists of Balance Sheet, Profit and Loss and Profit

and Loss Appropriation account. Through this studying the financial

statement of previous 4years is analysed.

METHODOLOGY OF STUDY:

To get relevant data the correct result is necessary to conduct a research

study in a Methodical way. Important criteria for the validity of any

research study lies in Methodology adopted by it. As these was no

primary data to be collected, only secondary data was used for research

this secondary data is analysed for the project to be carried out.

DATA COLLECTION AND ANALYSIS:

The secondary data was collected such as annual reports and study

report was set to purpose of calculating the ratios.

Based on secondary data collected, analysis was carried out using Ratio

Analysis as tool and the findings of the study where interpreted and

recommendation were given.


INFORMATION NEEDS:

Balance Sheet of 2005-06, 2006-07, 2007-08, 2008-09

Profits and Loss accounts of 2005-06, 2006-07, 2007-08, 2008-09

Working Results

Annual Reports

LIMITATIONS OF STUDY:

It has not been possible to calculate all the ratios for the purpose

of analysis due to non availability of data.

This basically been an academic study suffers from time and the

cost constrains.

Highly confidential matter could not been procured due to known

and unknown reasons.

Findings and conclusions are applicable to this concern only and

cannot be generalized.


CHAPTER-3

COMPANY PROFILE:

About Shree Renuka Sugars:

Shree Renuka Sugars Ltd (SRSL) is a transnational agribusiness

and bio energy corporation.

Shree Renuka Sugars Ltd was not born out of necessity, but it was

a result of a compelling vision to emerge as the most efficient

sugar processor and the largest marketer of sugar and ethanol in

India, to consolidate large renewable business and to drive an

inspiring business model.

The company was founded by Mr.Narendra Murkumbi and his

mother Mrs.Vidya Murkumbi in 1998, not just dreamers but

doers in their own right.

The combination of dreamers and doers produced enriching

results over the last decade. The company has emerged among the

most exciting proxies of a conventional Indian industry. The

company has been one of the largest and fastest growing sugar

companies in India and now has exposed its global footprint with

an entry in Brazil through acquisitions.


The company is currently the 5 th largest sugar producers in the

world, leading manufacturer of sugar in India-the world’s largest

sugar market and one of the largest refiners globally.

It operates 7 sugar mills in India with a total crushing capacity of

35000 tons crushed per day and two large port based sugar

refineries with capacity 1.7 million tons per annum.

It has significant presence in South Brazil, the most cost-efficient

and scalable production area with a total cane crushing capacity of

14million tons at its 4 mills.

Shree Renuka Sugars Ltd has its corporate office in Mumbai

(India) and headquarters in Belgaum in the state of Karnataka

(India).

Key Business:

Shree Renuka Sugars Ltd has integrated cane crushing capacities in

India responsible for the production of-

Sugar

Ethanol and

Power.


Shree Renuka Sugars Ltd (SRSL) Business Segments:

Shree Renuka Sugars Ltd business operations can be segregated into four

segments as below:

Sugar Division

Distillery Division

Co-generation Division and

Engineering.

Shree Renuka Sugars Ltd Vision:

“To become the most efficient processor of sugar and the largest

marketer of sugar and ethanol in India. To become one of the largest

producers of sugar (cane and refined), renewable energy and bio-fuel

(ethanol) in India”.


ORGANISATIONAL CHART


Strengths of Shree Renuka Sugars Ltd:

Extensive Integration :

Shree Renuka Sugars is extensively integrated, extracting the

maximum value out of sugarcane through the processing of cane,

molasses and bagasse to produce sugar, power and ethanol. In 2007-

08, revenues of the Company’s non-sugar business increased from

15% in 2006-07 to28% in 2007-08, and its proportion in the bottom-

line enhanced from 28% to77% during the period

Strong global presence :

The Company is the second largest exporter of sugar from India with

a presence in the Middle East, South East Asia and East Africa,

among others. This export revenue provides the Company with an

enhanced trade flow larger than its production, acting as a

consolidator and enabling it to capitalise on global price as well as

purchasing trends.

Preferred supplier status :

The Company is a sugar ‘supplier of choice’ across brand-enhancing

Multinational companies that produce carbonated soft drinks, fruit

juices, chocolates, baby foods and dairy products. Its clients include

reputed names like Coca Cola, Pepsi, ITC, Britannia, Nestle and

Cadbury, among others.


Successful acquisitions :

The Company scaled capacity by acquiring co-operative mills and

leased production assets, reducing direct and opportunity costs. It

acquired a standalone ethanol plant of 100 KL expanded to 300 KL, to

cater to the ethanol requirements of oil marketing companies (OMC)

located in the coastal states of Goa, Maharashtra and Kerala for

exports. The Company also acquired a strategic 54% stake in KBK

Chem- Engineering Pvt. Ltd., engaged in providing turnkey solutions

(EPC contracts) in the field of distilleries, ethanol plants and biofuels.

Increasing capacities :

The Company has relentlessly enhanced its capacity. Since its IPO in

October2005, its sugar capacity grew seven-fold (5,000 TCD to

37,500 TCD), ethanol capacity 15-fold (60 KLPD to 450 KLPD to

900 KLPD by March 2009) and power capacity eight-fold (20 MW

to158 MW).

Moderating the impact of sugar cyclicality :

The Company is unique in consuming multiple feedstocks (sugarcane

and raw sugar). During the off-season, it consumes raw sugar for

conversion, enhancing its asset utilisation and sustaining cash flows.


Super fixed asset utilization :

The Company enjoys one of the industry’s highest capacity utilisation

and asset turnover ratios on the back of a longer operating season,

higher sugar content availability in cane and dual raw material

capability. It produces 20 tons of sugar per TCD capacity, as against

the top four sugar companies by market capitalisation (excluding

SRSL) which produce 10 tons of sugar per TCD capacity.

Technical expertise:

The Company has tied up with Tate & Lyle Industries PLC of UK – a

GBP 4.07- billion organisation and one of Europe’s largest sugar

refiners (for the Company’s refinery business). The international

partner provides a robust technical expertise in refining.

Institutional focus :

The Company directly markets sugar to institutional buyers – a

paradigm shift from the tradition of selling to wholesale agents and

dealers. This has translated into a relatively large market share, an

effective hedge against price-driven risks. This has also rationalised

working capital outlay and has reduced the Company’s

dependence on sugar brokers.


Locational advantages:

The Company enjoys a number of advantages on account of its South

Indian location. It enjoys a longer crushing season (over 200 days,

starting from October till May), higher recovery (10-20% higher than

that of other regions), matured market for cogeneration power as well

as port proximity (160-200 kms).

Excellent farmer relationships:

Farmer dues are cleared on time, encouraging them to grow more

sugarcane than switching to alternatives. Being shareholders, farmers

also enjoy a preferential sale and an attractive dividend income. The

Company enjoys the benefit of healthy relationships with more than

5,000 farmers as shareholders.

Seamless sugarcane collection network:

The Company possesses a dedicated department to supervise cane

development and procurement. It is engaged in organising the

harvesting programme for desired cane quantity and quality to be

harvested daily, with adequate transportation to the mills. Besides, it

acquires cane directly from the farmers without going through

intermediaries.

SRSL Identity:

Shree Renuka Sugars ltd. (SRSL) defied convention to create a dynamic

business model in a challenging cyclical sector.


Diversified Business:

Convergence of three businesses in one organization. Sugar, Biofuels,

Renewable energy.

Decade-old presence:

Possesses India’s largest sugar refining capacity(6,000TPD)

Accounts for over 20% of India’s international sugar trade.

India’s leading fuel ethanol producer.

Definitive numbers as per Annual Report 2008 - 09:

SRSL COMPANY

SRSL SUGAR BUSINESS

SRSL REFINING BUSINESS

SRSL POWER BUSINESS

SRSL ETHANOL BUSINESS

Market capitalizationRs. 62,572mn

Cane crushing capacity35000TCD

Refining capacity6,000TPD

Generating capacity 173 MW

Distillery capacity 900 KLPD

Foreign Holding30.54%

Cane crushing 8 units

Refining facilities 1 standalone unit and 3 units at mills

Exportable capacity 95 MW

Sales volume65 mn litres

Promoter Holding

Recovery10.73%

Volume refined

Average realization

Average realization per


Initiatives:

Pioneered the concept of leased sugar manufacturing assets in

India.

Popularised the concept of sugar refining as an independent

business vertical: strengthened sugar refining technology.

Emerged as the first Indian sugar company to establish a

manufacturing footprint outside India.

Exponentially increased the ethanol manufacturing capacity.

Globally-focused Capacity:

Shree Renuka Sugars was the only Indian company intent on

concurrently building sugar refining capacities to cater to the global

market.

Invested in advanced sugar refining technology to meet exacting

EU quality parameters.

Created India’s largest cumulative refining capacity (6,000 TPD)

that is primarily port-based.

Engaged in the commissioning of India’s largest refinery (3,000

TPD) in Gujarat: expected to be commercial in 2010-11.


Global Positioning:

Shree Renuka Sugars became India’s first company to acquire a foreign

sugar company. The company acquired a sugar company in Brazil, the

largest global sugar producing and exporting nation in return for the

following benefits:

Securing majority of its annual raw sugar feedstock requirement

of 2 mn tons(2010-11 onwards).

Value-addition and profitability of its Indian refinery operations.

A first-hand insight into global trends and opportunities in the

sugar and ethanol segments.

Globalised Mindset:

Created a business model derisked through a presence in sugar

(from cane), refining, ethanol and co-generated power with

technology that generates revenue even in the absence of cane.

Stretched the value chain a step in both directions-cane cultivation

on 18,000 hectares through its Brazilian acquisition at one end and

quality, refined sulphurless sugar at the other.

Established a trading hub in Dubai to capitalize on trade

opportunities in the Asian region.

Leveraged its rich knowledge to generate engineering and project

management revenues through its stake in KBK Chem

Engineering Pvt. Ltd around 35% revenue from global

assignments; Rs.2,500 mn order book as on September 30,2009.

Overview of Indian Operations:


1) The 7cane crushing units of Shree Renuka Sugars Ltd are located

in the States of Karnataka and Maharashtra in India.

2) Units in Karnataka, Munoli, Athani, Havalga, Gokak, Raibag.

3) Units in Mahahrashtra: Arag, Ratnaprabha, Panchagana.

4) Raibag and Arag are operated on lease, Panchagana is operated on

BOOT for cogeneration and the remaining units are owned by

Shree Renuka Sugars Ltd.

5) SRSL has 2 refining capacities on the east coast at Haldia in West

Bengal and on the west coast at Kandla in Gujarat.

6) The acquisition of a majority stake in KBK Chem-Engineering Pvt

Ltd facilities turnkey distillery, ethanol and bio-fuel plant

solutions.

7) The company has also acquired a 100KLPD distillery from

Dhanuka Petrochem (Khopoli, Maharashtra) that converts rectified

spirit into ethanol and increase its capacities to 300KLPD.

Overview of Brazil Operations:


1) SRSL has acquired two companies in Brazil:

Vale do Ivai is wholly owned subsidiary of SRSL

SRSL owns 50.34% of Renuka do Brazil S/A (formerly

Equipav Acucar e Alcool)

Combined crushing capacity of 13.6 million tons(under

expansion to 15.5mn mt)

2) Total inward invest in Brazil so far is USD 350mn.

3) Shree Renuka is the second largest buyer of raw sugar world-wide

since 2009 and buys 100% of its requirements from Brazil.

Synergy of Brazil Investment with Asia Demand:

India, South Asia and the Middle East are emerging of the largest

sugar import markets in the world with increasing challenges of

land and water availability.

Sugar/Ethanol sector in Brazil has low operating cost, high

scalability and highly conducive climatic conditions.

Ability to cultivate significant portion of cane supply allows

manufacturer to capture of value of the agriculture part of the

business.

BOARD LEVEL STRATEGIES AND PLANS:


SRSL believe in the Jack Welch’s saying “Good Business leaders create

a vision, articulate the vision, passionately own the vision, relentlessly

drive it to completion”

Here is a proof:

SRSL, possess the largest capacities in sugar manufacture, distillery and

cogeneration per ton of cane crushed. Going ahead, SRSL expect to

commission India’s largest capacity in the shortest possible time across

all verticals.

General Strategy Used For Securing Raw Materials:

1. Facilitating sugarcane development and crop loans to enhance

sugarcane planting in SRSL reserve area.

2. Aligning farmer’s interest by making them Shareholders in the

company.

3. Paying on time, irrespective of prevailing industry cycle.

4. Providing quality seeds, agri-inputs and fertilizer subsidies to

farmers.

5. Assisting farmers to enhance yields.

6. Educating farmers about cane advantages over other crops.

7. Developing irrigation sources and other forms of land

development.

8. Encouraging commercial Banks and government agencies to

provide soft loans to sugarcane growers.

9. Creating Shree Renuka Sugars Development Foundation,

Promoting education, Healthcare and Educating Framer life quality


RESULT: SRSL cane procurement has increased year on year since

inception and SRSL drawal rate is now close to 100%.

Shree Renuka Sugars Ltd Products:

1. Sugar : Renuka Sugars produces ECII grade refined sugar

conforming to EU norms (less than 45 ICUMSA). The company’s

phosphorisation process produces sulphurless sugar for direct

consumption and industrial usage in Europe and Africa.

SRSL’s two integrated refineries are located in Munoli and Athani.

Madhur-the sugar of choice:

SRSL launched ‘Madhur’, a sugar brand

for the retail markets, in November 2007. Within 3 years of its

launch, Madhur has emerged as the fastest growing brand in its

category (CAGR 46%).

2. Power :


SRSL produces power from bagasse

(sugar by-product) for captive consumption and sale to the state

grid. Besides, this bagasse based cogeneration plant is eligible for

carbon credit compensation under the Kyoto product. SRSL’s

cogeneration capacity increases to 143 MW with exportable

surplus of 70 MW in the SY 2008-09.

3. Ethanol :

Alcohol is produced from molasses, a

brown-coloured residue left after sugar extraction from cane juice.

The alcohol can be purified to produce fuel grade ethanol that can

be blended with petrol. In SY 2008-09, SRSL’s distillery capacity

touched 930 KLPD (630 KLPD from molasses to ethanol and 300

KLPD from rectified spirit to ethanol).


4. Bio-fertilisers :

The residue products from distillery operations blended with

chemicals are sold as bio-fertilisers.

SRSL’s Competitive Advantages:


Capacity growth: The company multi-folded its capacity, growing

organically and inorganically: sugar producing capacity increased from

5,000 TCD to 35,000 TCD; sugar refining capacity grew to 6,000 TPD;

ethanol producing capacity surged from 60 KLPD to 900 KLPD; captive

power generation increased from 20 MW to 173 MW. The Company

invested Rs.15,010 mn in asset creation over the five years leading to

2008-09.

Integrated player: The Company is completely integrated across the

sugar value chain from cane cultivation to sugar (from cane), sugar

refining, ethanol and power. More than Rs. 3,223 mn revenues accrued

from co-product businesses, accounting for 14% of the Company’s

revenues.

Financial strength: SRSL’s superior performance is vindicated by its

financials: debt-equity ratio stood at 0.62, strengthening its ability to

borrow and sustain growth; cash profit was a healthy Rs. 2,911 mn in

2008-09, operating margin stood at 16.73%, interest cover was a strong

4.38, reflecting the company’s comfortable debt-servicing ability.

Inorganic Success: The Company acquired Ratnaprabha Sugars Limited

and Gokak Sugars Limited, leased four units and operated each

profitability thereafter. It acquired a standalone 100 KL distillery. In

2008-09, the Company acquired a 100% stake in VDI, a Brazilian sugar

and ethanol player.


Non-cyclical business model: The Company’s multi feed stock

capability for its sugar and power business facilitates asset utilization

beyond the sugar season and a continuous cash flow for the organization.

The Company refined 663,032 tons of raw sugar and sold 232 mn units

of power in 2008-09.

Excellence at Shree Renuka Sugars Ltd:

1. Operations :In a business with diverse manufacturing opportunities, there is a

premium on product, process and capacity selection leading to

competitiveness. Shree Renuka Sugars consciously selected to

integrate sugar manufacture with downstream possibilities in its

factories across Maharashtra and Karnataka. It invested in

integration within a year of inception, emphasising its

understanding of multi-product profitability. The Company

processes co-products to generate ethanol, power and bio-

fertilisers. Of its five factories, three possess integrated facilities,

while the rest are in the process of integration.

a. Sugar :The Company’s ten manufacturing units enjoy a cumulative

capacity of 37,500 TCD. Most of these units were situated near

ports – the closest was port-based, while the most distant was only

150 kms away - enhancing their flexibility to address domestic and

export markets. The Munoli and Athani raw sugar units (1,000

TPD each) enhanced off-season asset utilisation, while the

Company commissioned a 2,000-TPD sugar refinery, strategically


located in the port-town of Haldia to facilitate imports and enhance

exports.

Highlights 2007-08: All sugar manufacturing units achieved a near 100%

capacity utilisation.

The Company averaged over 20 tons of sugar production

per TCD of crushing capacity, twice the industry standard.

b) Ethanol:Ethanol will enjoy growing demand, following an enhanced

demand for ‘green’ energy and an expanding need for increased oil

security amid depleting reserves. The Company’s distilleries (600

KLPD going to 900 KLPD) convert molasses and/or juice into

ethanol for fuel and potable purposes.

Highlights 2007-08 It acquired a 54% stake in KBK Engineering, an ethanol

technology company. The stake will be increased to 67% in

August 2009.

It invested Rs. 60 million in Dhanuka Petroleum (100

KLPD), which specialises in direct fuel ethanol production

from rectified spirit.

Outlook:It redesigned its ethanol plants to flexibly produce ethanol from

molasses and/or sugarcane juice depending on the relative prices of

sugar and ethanol. It is expected to increase its current capacity

from 600 KLPD to 900 KLPD in SY 08-09.


c) Co-generation:In a power-intensive business like sugar manufacture, the saving grace is

the Company’s ability to generate power from sugar by-product bagasse.

The Company enjoys a 129 MW co-generation capacity, leaving an

adequate exportable surplus of 70 MW. The bagasse-based co-generation

units qualify as a clean development mechanism project, helping the

Company earn carbon credits.

Highlights 2007-08:The export of power increased by 302% from 38 million units

in 2006-07 to 153 million units in 2007–08.

Outlook:An additional 40.5 MW will be made operational during

2008-09.

2. Cane Management :

In a business where the growing space is finite and the options

varied, the Company is required to consistently demonstrate cane

viability at all times.

To incentivise sugarcane planting and protect the sugarcane

acreage in its command areas, the Company remunerates farmers

higher than the SMP. The Company is favourably located; its

manufacturing units are located in southwest India, a region that

enjoys a high cane recovery; besides, the state enjoys a crushing

season of six-seven months against four-five months in other sugar

producing regions. The consequent viability in growing cane

translates into enhanced availability for the Company, leading to


related economies of scale and consequent growth. Besides, both

states of the Company’s presence do not have State Administered

Prices (SAP) of cane. The Company undertakes various cane

development initiatives and provides crop loans to augment cane

production in its various command areas. It also provides

numerous other agroinputs and fertiliser subsidies to encourage

sugarcane production. Dedicated cane procurement teams manage

cane procurement. The Company purchases sugarcane directly

from farmers, eliminating intermediaries. Its harvesting

programme is based on crop age, variety and maturity for desired

cane quantity and quality leading to streamlined procurement.

Cane managers issue cutting orders or harvesting permits, based on

date-wise cum pre-harvesting maturity surveys.

Highlights 2007-08:The Company’s cane crushing increased 71% from2,702,200 tons

in 2006-07 to 4,623,550 tons in 2007- 08.

3. Farmer Relationships :

In a business where the raw material supplier enjoys the flexibility

to market produce to another buyer or shift focus to alternative

crops, there is a premium on the need to graduate a transaction to a

relationship of mutual sustainable benefit.

The building block of growth at Shree Renuka Sugars is trusted

farmer relationships. Over the years, this trust has translated into a


willingness to grow cane in good years and bad, leading to

increased crushing in every single year of the last five years.

This distinctive company-farmer relationship is enshrined in a

paradigm understanding: at the Company, farmers are not just

treated as vendors, but partners. There is a broad realisation that if

growth is to be sustainable, one will need the other.

This inevitability has been most visibly manifested in a large

number of farmers – accounting for a significant 9% of the

Company’s equity - being shareholders.

This trust has been manifested in various other initiatives

undertaken by the Company:

Coordination and management of cane harvest and

transportation, saving farmers’ effort, time and money.

Education of farmers in cane economics over competing crops.

Development of small irrigation sources on a collective basis to

widen acreage under cultivation.

Close working with commercial banks and government

agencies to provide soft loans to sugarcane growers.

The Company also formed a trust – Shree Renuka Sugars

Development Foundation – to promote sustainable education,

healthcare and holistic wellbeing of farmers and the local community.


4. Marketing :In a business where the Company markets diverse products across

different customer segments, there is a need to identify the nature

of the customer, with the objective to enhance organisational

value.

Shree Renuka Sugars markets around 25% of its sugar to

institutional buyers, 5% to retail stores and the rest to domestic and

international customers through spot trading.

The Company accounts for 20% of the country’s ethanol market. It

entered into a three-year agreement with major oil marketing

companies to supply 217 million litres, at an agreed price of Rs.

21.50 per litre.

Highlights 2007-08:

Ethanol supply to customers in four states (Karnataka, Andhra

Pradesh, Goa and Kerala).

Packaged sugar marketing through retail brands like Big Bazaar

and Metro.

Outlook: The Company intends to enhance its market share of the

fuel ethanol market. A proprietary brand of refined sugar will be

launched for the retail market.


5. QUALITY :In a business where the raw material is drawn from diverse points,

it is imperative to produce an end product of consistently high

quality at all times.

Shree Renuka Sugars has invested consistently and

comprehensively in quality management. The Company complies

with stringent quality guidelines demanded by clients. Besides, its

plants, processes and practices are periodically inspected for

quality standards. The Company has standardised operating

procedures across its owned and leased units, leading to a high

level of operational consistency.

Highlights 2007-08:

The Company applied for HACCP certification. It’s reduced the

sugar rejection rate to below 0.5% of the aggregate sugar sold.

Outlook:

Going ahead, the Company seeks to enhance quality standards.


Corporate Social Responsibility:

Shree Renuka Sugars believes in superior performance linked to a spirit

of prosperity-sharing with stakeholders – underlining its approach to

corporate social responsibility. To institutionalise this approach, the

Company created Shree Renuka Sugars Development Foundation, a trust

working in the field of education, healthcare and hygiene. To serve the

broader interests of its employees and their families, the Company

created a trust called Shree Renuka Sugars Employee Welfare Trust to

service education, health, recreation, financial and social requirements.

These trusts enjoy their respective corpus, enhancing accountability.

Collectively, these trusts own 4.81% of the Company’s equity, generating

a precious dividend income for onward deployment.

Education: The Company created schools for the children of cane

harvesters who travel a long distance during the cane harvesting

period. These elementary schools (Sakhar Shala) are functional

near most of our units. The Foundation also runs primary schools

with an emphasis on good teaching staff and facilities for quality

education. Scholarships were provided to deserving students,

especially the girl child.

Healthcare: Primary healthcare facilities were made available at

all plant locations supported by qualified doctors and state-of-the-

art equipment. A focus on first-aid and timely ailment diagnosis

facilitated effective medical support. A speciality multi-bed

hospital is being planned for the Burlatti village in Athani Taluk


(Belgaum district) to cater to the rural population. Health check-up

camps were organised quarterly, attended by employees and local

resident.

Hygiene and environment: Safe drinking water was provided free

to employees. Environment protection was prioritised. The local

forest department worked with the Company to create green belts

in the plant vicinity. Village camps were conducted for children

and adults to enhance the awareness of hygiene and environment

protection. A large land area was dedicated to the production of

bio-fertilisers of the distillery effluent, ensuring 100% bio-

degradation and waste recycling contributing to the green

revolution. The Company donated budgeted funds to various

educational, art and cultural institutes as well as to relevant

initiatives around the factory area.


MILESTONES:

1998 Acquistions of the assets of Nizam Sugars Ltd.

1999 Commencement of production at Munoli.

2000 Commencement of 11.2 MW cogeneration plant at Munoli.

2001 Start of 60 KLPD distillery at Munoli.

2002 Establishments of 250 TPD sugar refinery at Munoli.

2003 Leasing of first co-operative mill.

2004 SRSL IPO launched.

2005 Acquisition of Greenfield project at Athani(Karnataka)

2006 Acquisition of sugar mill in Sindhkheda and relocated to Havalga (Karnataka).

2007 Acquisition of KBK Chem Engineering Pvt Ltd.

2008 Commissioning of 2000 TPD port-based refinery at Haldia

2009 Commissioning of a cogeneration plant in Panchganga cooperative sugar mill.

2010 Acquisition of 100% stake in Equipav Acucar Alcool S/A (Now renamed as Renuka do Brazil S/A)


CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

LIQUIDITY RATIO:

Liquidity ratio measures the ability of firm to meet current obligations. In

fact, analysis liquidity needs the presentation of cash budget and fund

flow statement, but liquidity ratios, by establishing relation between cash

and other current assets to current obligations, provide a quick measure

of liquidity. A firm should ensure that it does not have excess of

liquidity. This failure of company to meet its obligations due to lack of

sufficient of liquidity, will results in credit worthiness, loss of creditor’s

confidence or even legal tangles results in the closure of company. The

firm’s fund will be unnecessarily tied up in current assets. Therefore it is

necessary to strike a proper highly liquidity and lack of liquidity.

IMPORTANT LIQUIDITY RATIOS:

1. CURRENT RATIO

2. LIQUID RATIO

3. ABSOLUTE LIQUID RATIO

4. INVENTORY TO WORKING CAPITAL RATIO


1. Current ratio :

Current Ratio is a measure of the firm’s short term solvency. It

indicates the availability of current assets in rupees for every current

liability. It is the relationship between total current assets to current

liability of the firm. The ratio greater than one means that, the firm

has more current assets than claims against them a current ratio of 2:1

is considered as satisfactory.

Table No.1:

Table showing Current Ratio

Year 2005 2006 2007 2008 2009

Current

Assets

2061.81 1865.49 2018.57 3342.4 17099.67

Current

Liability

1718.89 1235.25 1212.09 2175.28 9439.36

Current

Ratio

1.15 1.51 1.66 1.53 1.81

All amounts in million Indian Rupees

.


Current Assets

CURRENT RATIO = -------------------------

Current Liability

Chart No. 1

Graph Showing Current Assets and Current Liability

2005 2006 2007 2008 20090

2000

4000

6000

8000

10000

12000

14000

16000

18000

Current AssetsCurrent Liability


Graph with year and current ratio:

2005 2006 2007 2008 20090

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Current Ratio

Current Ratio

Analysis:

From the above table it is evident that, all the years of current ratio is

less than the expected standard ratio 2:1

Interpretation:

From the above graph, current ratio of the year 2009 is satisfactory when

compared to other current ratios of previous year which has maintained

more than 1:1 proportion but less than the standard ratio 2:1.


2. Liquid Ratio :

The Standard Quick Ratio is 1:1. If liquid ratio is less than

standard ratio, it can be concluded that the concern is not liquid.

But if an organization had greater Quick Ratio than Standard Ratio

of 1:1, it can be concluded that concern is liquid. It can pay-off its

short-term liabilities out of it’s quickly realize assets without any

difficult. Because the liquid assets is greater than liquid liabilities

is greater than Standard Quick Ratio. It shows the Quick Ratio is

increasing every year in company.

Table no.2:

Table showing Liquid Ratio

Year 2005 2006 2007 2008 2009

Liquid

Assets

938.35 743.66 1016.88 1473.32 7076.46

Current

Liability

1781.89 1235.25 1212.09 2175.28 9439.36

Liquid

Ratio

0.52 0.60 0.83 0.67 0.74



Liquid Assets

LIQUID RATIO = ----------------------------

Current Liability

Chart No. 2:

Graph Showing Liquid Assets and Current Liability

2005 2006 2007 2008 20090

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Liquid AssetsCurrent Liability


Graph with Year and Liquid Ratio:

2005 2006 2007 2008 20090

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Liquid Ratio

Liquid Ratio

Analysis:

The Liquid Ratio of 1:1 indicates a highly solvent position. As per the

above table, Liquid Ratios of all the year is less than 1:1 proportion.

Interpretation:

From the above graph, the liquid ratios of the year 2005 is 0.52 which

shows further increment of Liquid ratio upto 0.83 in the year 2007, which

is the highest liquid ratio of all the 4years. And in 2008 there is decline of

Liquid Ratio tending to 0.67 but in 2009 there is increase in Liquid Ratio

upto 0.74 times


3. Absolute Liquid Ratio :

This ratio is also known as super quick ratio. This ratio considers

only the Absolute Liquidity available with the firm. The cash, the

bank balance and marketable securities are considered as highly

liquid assets. If the highly liquid assets are too much in relation to

the current liability than it may affect the profitability of the firm,

as these assets are the most unproductive assets of all.

Table No.3:

Table Showing Absolute Liquid Ratio


Year 2005 2006 2007 2008 2009

Absolute

Liquid Assets

627.02 171.66 306.71 133.86 2102.83

Current

Liabilities

1781.89 1235.25 1212.09 2175.28 9439.36

Absolute

Liquid Ratio

0.35 0.13 0.25 0.06 0.22

Chart No.3:


(Cash+Bank+Short term investments)

Absolute Liquidity = ------------------------------------------------------

Ratio Current Liabilities

Graph Showing Absolute Liquid Assets and Current Liability

2005 2006 2007 2008 20090

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Absolute Lquid AssetsCurrent Liability

Graph with year and Absolute Liquid Ratio:


2005 2006 20070

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Absolute Liquid Ratio

Analysis:

From the above table one can visualize that none of the years have

Absolute Liquid Ratio to meet the required Standard Ratio 1:2

Interpretation:

By seeing the graph above one can interpret the Absolute Liquidity Ratio

of the organization, which is not satisfactory in any of the years.

4. Inventory to Working Capital Ratio :


In order to ascertain that there is no over stocking the ratio of

inventory to working capital is calculated.

It is calculated by:

Table No.4:

Table Showing Inventory to Working Capital Ratio:

.


Year 2005 2006 2007 2008 2009

Inventory 1123.46 1121.83 1001.69 1869.08 10023.21

Working

Capital

279.92 630.92 806.48 1167.12 7660.31

Inventory

to WC

4.01 1.78 1.24 1.60 1.308


Inventory

Inventory to Working Capital = -------------------------

Working Capital

Chart No.4:

Graph Showing Inventory and Working Capital

2005 2006 2007 2008 20090

2000

4000

6000

8000

10000

12000

InventoryWorking Capital

Graph Showing Inventory to Working Capital Ratio:


2005 2006 2007 2008 20090

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Inventory to WC Ratio

Inventory to WC Ratio

Analysis:

Ideal Inventory to Working Capital Ratio 1:1, except 2005, all other

consequent year from 2005 to 2009 has maintained more than unity but

less than 2:1 which is good for organization.

Interpretation:

From the above Graph we can conclude that all the years has good

inventory to working capital ratio, but in the year 2005 Inventory to

Working Capital ratio is 4.01times which is high compared to other

years.

LEVERAGE RATIO:


Leverage or capital ratios are those ratios which measure the relative

interest of lenders and proprietors in a business organization. These ratios

indicate the long-term solvency position of an organization. These ratios

help the management in the proper administration of the capital.

A company should have a short term as well as long term financial

position. Company financial or capital structure ratios are calculated by

these short term and long term financial position. These ratios indicate

mix of funds provided to owners and lenders. As a rule, this ratio should

be an appropriate mix of department and owners equity in financing

company’s assets.

Most Commonly used Leverage Ratios are:

1. Solvency Ratio

2. Proprietary Ratio

3. Fixed Assets to Net Worth Ratio

4. Current Assets to Net Worth Ratio

5. Current Liability to Net Worth Ratio

6. Total Liability to Total Assets

1. Solvency Ratio:

Solvency ratio is the ratio between the total assets and total

liability of the concern. It means the ability of the concern to meet


its total liability of its concern. Though no ideal solvency ratio of a

concern has been established, one can say higher the solvency ratio

of a concern, the financial position and lower the solvency ratio,

the weaker is it financial position.

Table No.5:

Table showing Solvency Ratio


Year 2005 2006 2007 2008 2009

Total

Assets

1459.29 2598.42 7763.34 10072.75 22998.48

Total

Liability

3323.61 7227.84 11241.44 18909.34 35937.54

Solvency

Ratio

0.439 0.359 0.690 0.532 0.639

Chart No.5:

Graph Showing Solvency Ratio:


2005 2006 2007 2008 20090

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Solvency Ratio

Solvency Ratio

Analysis:

From the above table, solvency ratio of 2007 and 2008 bearing 0.69 and

0.63 is considered to be good when compared to other years.

Interpretation:

The solvency ratio indicates the ability of the concern to meet its liability

out of its Total Assets. In last five years solvency ratio of the concern is

favourable. The solvency ratio of 2007 and 2009 is 0.69 and 0.63 which

is said to be good for a concern.

2. Proprietary Ratio :


The proprietary ratio is an index of the amount of proprietary fund

invested in Total Assets of a concern. It is also indicates the

proportion between owned capital and loaned capital. In addition,

it indicates the relative risk of the owners and the creditors of the

company.

Higher the proprietary ratio, the stronger is the financial position of

the concern and lower the proprietary ratio the weaker is the

financial position of an enterprise. A ratio of 5:1 is considered

ideal.

Table No.6:

Table Showing Proprietary Ratio

Year 2005 2006 2007 2008 2009

Net Worth 637.18 2224.43 3357.44 6399.42 12641.93

Total Assets 1459.29 2598.42 7763.34 10072.75 22998.48

Proprietary

Ratio

0.43 0.85 0.43 0.63 0.54


Chart No. 6:


Net Worth

Proprietary Ratio = --------------------

Total Assets

Graph Showing Proprietary Ratio

2005 2006 2007 2008 20090

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Proprietary Ratio

Proprietary Ratio

Analysis:

From the above table we can visualize that, the year 2006 has maintained

higher proprietary ratio of 0.85times compared to other years.

Interpretation:

From the above graph we can conclude that the company has maintained

higher Proprietary Ratio in the year 2006 that is 0.85times compared to

other 4years. And it is said that higher the Proprietary Ratio stronger is

the financial position of the company.

3. Fixed Assets to Net Worth Ratio :

The Fixed Assets to Net Worth Ratio indicates that the proportion

of fixed assets financed by the owners or proprietors. In other


words, it indicates as to extent the owners have invested funds on

the fixed assets, which constitute the main structure of the

business. The ideal fixed assets to net worth ratio for an industrial

undertaking is 67% that is the fixed assets should not be constitute

more than 67% of the proprietor’s fund.

Table No.7:

Table Showing Fixed Assets to Net Worth Ratio

Year 2005 2006 2007 2008 2009

Fixed Assets 1054.93 1193.52 5623.03 6911.56 12568.56

Net Worth 637.18 2224.43 3357.44 6399.42 12641.93

Fixed Assets

to Net Worth

Ratio

1.65 0.536 1.674 1.08 0.944


Chart No.7:

Graph Showing Fixed Assets to Net Worth Ratio


Fixed Assets

Fixed Assets to Net Worth Ratio = ----------------------

Net Worth

2005 2006 2007 2008 20090

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Fixed Assets to Net Worth

Fixed Assets to Net Worth

Analysis:

The above table shows the proportion of Fixed Assets to Net Worth Ratio

which is fluctuating every year.

Interpretation:

The above graph shows that, the year 2005, 2007, and 2008 has 1.65,

1.67 and 1.08 times of Fixed Assets to Net Worth which is good for

enterprise compared to 2006 and 2009’s ratio of 0.53 and 0.99times.

4. Current Assets to Net Worth Ratio :

This ratio indicates proportion of the current assets financed by the

owner. There is no standard current asset to net worth ratio, we can


Current Assets

say that, if this ratio is high, the financial strength of the concern is

good and if this ratio is low, the financial position of the concern is

weak.

Table No.8:

Table Showing Current Assets to Net Worth Ratio:


Year 2005 2006 2007 2008 2009

Current

Assets

2061.81 1865.49 2018.57 3342.4 17099.67

Net Worth 637.18 2224.43 3357.44 6399.42 12641.93

Current

Assets to

Net Worth

3.23 0.83 0.60 0.52 1.35

Chart No.8:

Graph Showing Current Assets to Net Worth Ratio


Current Assets

2005 2006 2007 2008 20090

0.5

1

1.5

2

2.5

3

3.5

Current Assets to Net Worth Ratio

Current Assets to Net Worth Ratio

Analysis:

From the above table, we can conclude the proportion of Current Assets

to Net Worth in years 2005 and 2009 is satisfactory when compared to

other years.

Interpretation:

Higher the current assets to net worth ratio, higher will be financial

strength of the concern. As per above graph 2005 has maintained

3.23times of Current Assets to Net Worth ratio and 2009 has maintained

1.35times of Current Assets to Net Worth ratio.

5. Current Liability to Net Worth Ratio :

The ratio indicates the relative contribution of the short term

creditors and owners in the capital of an enterprise. The desirable

level set for this ratio is 33.33. If the actual ratio were very high, it


would mean that the liability base of the concern would not

provided an adequate cover for the long term creditors. That means

it would not be difficult for the concern to long term fund.

Table no.9:

Table Showing Current Liability to Net Worth Ratio


Year 2005 2006 2007 2008 2009

Current

Liability

1781.89 1235.25 1212.09 2175.28 9439.36

Net Worth 637.18 2224.43 3357.44 6399.42 12641.93

Current

Liability to

Net Worth

2.79 0.55 0.36 0.33 0.74

Chart No.9:

Graph Showing Current Liability to Net Worth Ratio


Current Liability

Current Liability to Net Worth = ---------------------------

Net Worth

2005 2006 2007 2008 20090

0.5

1

1.5

2

2.5

3

Current Liability to Net Worth Ratio

Current Liability to Net Worth Ra-tio

Analysis:

The above table indicates Current Liability to Net Worth ratio which is

decreasing from year to year. We can see a gradual raise in 2009 with

0.55times.

Interpretation:

The above graph indicates the proportion of Current Liability to Net

Worth in which the ratio of 2005 to 2009 are 2.79, 0.55, 0.36, 0.33and

0.74 out of which 2005’s Current Liability to Net Worth is more

compared to other 4years.

6. Total Liability to Total Assets Ratio :

One may like including Current Liability on the ground that they

are important determinants of company’s financial risk since they

represent obligations and pressure on company and restrict its


activities. Thus, to assess the proportion of total funds short term

and long term provided by outsiders to finance total assets.

Table No.10:

Table Showing Total Liabilities to Total Assets Ratio

Year 2005 2006 2007 2008 2009

Total

Liabilities

3323.61 7227.84 11241.44 18909.34 35937.54

Total

Assets

1459.29 2598.42 7763.34 10072.75 22998.48

TL to TA 2.27 2.781 1.44 1.877 1.562

All amounts in million Indian Rupees.

Chart No. 10:

Graph Showing Total Liability to Total Assets


Total Liability

Total Liability to Total Assets = ------------------------

Total Assets

2005 2006 2007 2008 20090

0.5

1

1.5

2

2.5

3

Total Liability to Total Assets Ratio

Total Liability to Total Assets Ratio

Analysis:

From the above table, we can conclude that the proportion of Total

Liability and Total Assets in 2006 is more when compared to other years

of proportion.

Interpretation:

The ratio indicates the proportions of total funds, short and long term

provided by outsiders to finance Total Assets. The ratio calculated above

indicates that the year 2006 has higher rate of proportion 2.78 times

compared to other years.

ACTIVITY RATIOS:

Funds of the creditors and owners are invested in various assets to

generate sales and profit. These ratios are employed to evaluate the

efficiency with the company manager and utilize its assets. These ratios


are also called as Turnover ratios they indicate the speeds with assets are

being converted or Turnover into Sales. Activity ratio, thus, involve

relationship between sales to assets. A proper balance between sales and

assets generally reflects that assets are managed well. Several Activity

Ratios are calculated to judge effectiveness of assets utilisation.

Some of the Activity Ratios are:

1. Cash Turnover ratio

2. Inventory Turnover ratio

3. Working Capital Turnover Ratio

4. Debtors Turnover Ratio

5. Current Assets Turnover Ratio

6. Fixed Assets Turnover Ratio

7. Total Assets Turnover Ratio

8. Fixed Assets to Net Worth

9. Net Sales to Net Worth

1. Cash Turnover Ratio :

Cash Turnover ratio or cash velocity is the ratio between cash and

turnover or sales. This ratio indicates the extent of which cash

resources are utilized by the enterprise; it is also helpful in

determining the liquidity of a company. The ideal Cash Turnover


ratio is 10:1 as such; Cash Turnover ratio of 10:1 or more indicates

the utilsation of cash resources of the enterprise. In addition less

than 10:1 indicates that the cash resources of the enterprise are not

effectively utilized.

Table No.11:

Table Showing Cash Turnover Ratio

Year 2005 2006 2007 2008 2009

Net Sales 6392.47 8015.85 7323.69 18241.69 22342.17

Cash 627.02 171.66 306.71 133.86 2102.83

Cash

Turnover

Ratio

10.195 46.69 23.87 136.27 10.62


Chart No. 11:

Graph Showing Cash Turnover ratio


2005 2006 2007 2008 20090

20

40

60

80

100

120

140

160

Cash Turnover Ratio

Cash Turnover Ratio

Analysis:

The above table indicates Cash Turnover Ratio; the year 2008 has

satisfactory Cash Turnover Ratio compared to others.

Interpretation:

The ideal Cash Turnover Ratio is 10:1, in the above graph we can see all

the years of Cash Turnover Ratio has maintained more than the standard

ratio 10:1 which is a good sign for a firm.

2. Inventory Turnover Ratio :

A considerable amount of a company’s capital may be tied up in

the financing of raw materials, work-in-progress and finished

goods. It is important to ensure that the level of Stocks is kept as


low as possible, consistent with the need to fulfill customer’s order

in time. If the inventory turnover ratio has decreased from past, it

means that either inventory is growing or sales are dropping. In

addition to that, if a firm has a turnover that is slower than for its

industry, then there may be obsolete goods on hand. Or inventory

stocks may be high.

Table No.12:

Table Showing Inventory Turnover Ratio

Year 2005 2006 2007 2008 2009

COGS 1785.60 2160.81 1589.18 8048.67 1547.43

Avg. Stock 1122.645 1061.76 1435.38 5946.14 10023.21

Inventory

Turnover Ratio

1.59 2.03 1.10 1.35 0.15


Chart No. 12:

Graph Showing Inventory Turnover Ratio


COGS

Inventory Turnover Ratio = ---------------------

Average Stock

2005 2006 2007 2008 20090

0.5

1

1.5

2

2.5

Inventory Turnover Ratio

Inventory Turnover Ratio

Analysis:

From the above table we can visualize that in the year 2006, bearing

Inventory Turnover Ratio of 2.03 times has maintained the highest

turnover ratio compared to other years.

Interpretation:

From the above Chart we can conclude, in the year 2006 inventory

turnover ratio being 2.03 times, whereas in the year 2009, the inventory

ratio is 0.15 times.

Note: It is said that if Inventory Turnover Ratio has decreased from past,

it means that either Inventory is growing or sales is dropping.

3. Working Capital Turnover Ratio :

The working capital turnover ratio is the ratio that expresses the

relationship between working capital and net sales.


Working Capital is the excess of Current Assets over Current

Liability. This ratio indicates the efficient or inefficient utilisation

of Working Capital of an enterprise. There is no ideal or standard

working capital turnover ratio. The working capital ratio is

generally expressed as a proportion and can be calculated using the

following formula.

Table No.13:

Table Showing Working Capital Turnover Ratio

Year 2005 2006 2007 2008 2009

COGS 1785.60 2160.81 1589.18 8048.67 1547.43

Avg. WC 455.08 718.36 986.8 4413.71 7660.31

WCTR 3.92 3.00 1.610 1.82 0.20


Chart No. 13:

Graph Showing Working Capital Turnover Ratio


Net Sales

Working Capital Turnover = ------------------------------------

Ratio (Average Working Capital)

2005 2006 2007 2008 20090

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Working Capital Turnover Ratio

Working Capital Turnover Ratio

Analysis:

From the above table, we can visualize that in the year 2009 has a least

Working Capital Turnover Ratio of 0.20 times when compared to the

highest Working Capital Turnover Ratio of 3.92 times in the year 2005.

Interpretation:

From the above graph, it can be concluded that in the year 2009 the

working capital turnover ratio is of 0.2 times whereas in the year 2005

has the highest Working Capital Turnover Ratio of 3.92 times. And in the

year 2006, 2007 and 2008 has respective Working Capital Turnover

Ratio of 3 times, 1.61 times and 1.82 times.

4. Debtors Turnover Ratio :


The debtor’s turnover ratio is also known as the accounts

receivable turnover ratio and it is the ratio that expresses the

relationship between average debtors and sales.

A debtor refers to sundry debtors plus bills receivable. Further,

debtors mean gross debtors, i.e., before deducting the bad debts

and reserves for doubtful debts.

Sales mean net credit sales, i.e. credit sales minus sales returns.

The accounts receivable ratio indicates the rate at which the

amounts are collected from the debtors. It also indicates liquidity

of the concern. The debtor’s turnover ratio is generally expressed

in rate. It can be calculated using the following formula:

Table No.14:

Table Showing Debtors Turnover Ratio


Year 2005 2006 2007 2008 2009

Cr Sales 6392.47 8015.85 7323.69 18241.69 22342.17

Avg.

Debtors

368.71 462.98 436.625 764.52 1042.65

DTR 17.33 17.31 16.77 23.86 21.42

Chart No.14:


Credit Sales

Debtors Turnover Ratio = -------------------------

Average Debtors

Graph Showing Debtors Turnover Ratio

2005 2006 2007 2008 20090

5

10

15

20

25

30

Debtors Turnover Ratio

Debtors Turnover Ratio

Analysis:

From the above table, we can see that in the year 2008 has the highest

Debtors Turnover Ratio bearing 23.86 times.

Interpretations:

From the graph we can conclude that the company has maintained

satisfactory level, by maintaining the consistency ratios without much

increase or decrease in the ratios.

In the year 2008 and 2009 has higher ratio of 23.86 times and 21.42 times

respectively. Higher the ratio, the better will be the position of the firm.

5. Current Assets Turnover Ratio :


Current assets turnover ratio indicates the company’s ability to

generate the sales of rupee from current assets. This ratio is the

relationship between the sales and current assets of the firm. There

is no standard current assets turnover ratio. Yet, the inference is the

high current assets turnover ratio indicates of better utilisation of

current assets. On the other hand, a low current assets turnover

ratio suggest that the current assets have been utilize properly.

Table NO.15:

Table Showing Current Assets Turnover Ratio

Year 2005 2006 2007 2008 2009

Net Sales 6392.47 8015.85 7323.69 18241.69 22342.17

Current

Assets

2061.81 1865.49 2018.57 3342.4 17099.67

CATR 3.10 4.29 3.62 5.45 1.30



Net Sales

Current Assets Turnover Ratio = -----------------------

Current Assets

Chart No. 15:

Graph Showing Current Assets Turnover Ratio

2005 2006 2007 2008 20090

1

2

3

4

5

6

Current Assets Turnover Ratio

Current Assets Turnover Ratio

Analysis:

From the above table we can conclude that, there is proper utilisation of

current assets in the year 2006 and 2008 when compared to other years.

Interpretation:

The ratio shows how much the company able to generate the sales from

the amount of current assets. In the year 2008 company generated the

sales of 5.45 which were more when compared with other year. And in

2009, the company generate 1.30 times of sales, which is less compare to

other year.

6. Fixed Assets Turnover Ratio :


This ratio explains the relationship between the costs of goods sold

and fixed assets. It explains the efficiency with which fixed assets

have been used in utilisation of fixed assets and better profits. The

fixed assets calculated after deduction of depreciation. The

standard fixed assets turnover ratio is 5 times. Therefore, a fixed

turnover ratio of 5 times more indicates better utilisation of fixed

assets.

Table No.16:

Table Showing Fixed Assets Turnover Ratio

Year 2005 2006 2007 2008 2009

Net Sales 6392.47 8015.85 7323.69 18241.69 22342.17

Fixed

Assets

1054.93 1193.52 5623.03 6911.56 12568.56

FATR 6.05 6.71 1.30 2.63 1.77



Net Sales

Fixed Assets Turnover Ratio = ----------------------

Fixed Assets

Chart No.16:

Graph Showing Fixed Assets Turnover Ratio

2005 2006 2007 2008 20090

1

2

3

4

5

6

7

8

Fixed Asset Turnover Ratio

Fixed Asset Turnover Ratio

Analysis:

From the above table one can analyse that in the year 2005 and 2006 the

Fixed Assets Turnover ratio is high which means the Fixed Assets are

used well in the organization.

Interpretation:

From the above graph, we can visualise in the year 2005 and 2006 has

good Fixed Assets Turnover Ratio of 6.05 and 6.71 but following

consequent years of 2007, 2008 and 2009 had least Fixed Asset Turnover

Ratio compared to 2005 and 2006.

7. Total Asset Turnover Ratio :


Total assets turnover ratio refers to the company’s ability to

generating the sale from all financial sources committed to total

assets. The assets include net fixed assets and current assets. The

greater the ratio of turnover or conversion, the more efficient is the

utilisation. The ideal of turnover ratio is sales should be least two

times the value of assets.

Table No.17:

Table Showing Total Assets Turnover Ratio

.

Year 2005 2006 2007 2008 2009

Net Sales 6392.47 8015.85 7323.69 18241.69 22342.17

Total

Assets

1459.29 2598.42 7763.34 10072.75 22998.48

TATR 4.380 3.084 0.943 1.810 0.971


Chart No.17:


Net Sales

Total Assets Turnover Ratio = -------------------

Total Assets

Graph Showing Total Assets Turnover Ratio

2005 2006 2007 2008 20090

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Total Assets Turnover Ratio

Total Assets Turnover Ratio

Analysis:

From the above table, we can conclude that the year 2005 has 4.38 times

of total assets turnover ratio which is satisfactory compared to other year.

Interpretation:

The total assets turnover ratio indicates the company’s ability to produce

the volume of sale for a given amount of Total Assets. And it says that

higher the ratio is higher the utilisation of assets. The total assets turnover

ratios of 2005 to 2009 are 4.38, 3.08, 0.94, 1.81 and 0.97 out of which the

year 2005 has more turnover ratio compared to other years.

8. Net Sales to Net Worth :


Net sales to net worth ratio are the ratio between sales and net

worth. This ratio is the good index of the utilisation of the owner’s

fund. It also indicates whether there is over trading or under

trading. In addition, it indicates whether there is over capitalization

or under capitalization.

Table No.18:

Table Showing Net Sales to Net Worth Ratio

Year 2005 2006 2007 2008 2009

Net Sales 6392.47 8015.85 7323.69 18241.69 22342.17

Net

Worth

637.18 2224.43 3357.44 6399.42 12641.93

NS to

NW

10.03 3.60 2.181 2.85 1.767


Chart No.18:

Graph Showing Net Sales to Net Worth Ratio


Net Sales

Net Sales to Net Worth = ------------------

Net Worth

2005 2006 2007 2008 20090

2

4

6

8

10

12

Net Sales to Net Worth Ratio

Net Sales to Net Worth Ratio

Analysis:

From the above table we can conclude, the proportion of Net Sales to Net

Worth of each year is deducting from year to year.

Interpretation:

Net Sales to Net Worth ratio indicates whether there is over capitaliastion

or under capitalisation. It serves as a guide in the proper administration of

a company.

The proportion of Net Sales to Net Worth ratio has been declining from

10.03 to 3.60, 3.60 to 2.18 in 2005 to 2007 respective years and also we

can see the decline in Net Sales to Net Worth ratio from 2.85 to 1.76 in

2008 to 2009.

PROFITABILITY RATIO:


A Company should earn profit to survive and grow over a long period.

Profit is essential but it would wrong to assume that every action taken

by the management of a company should be aimed at maximization of

profit, irrespective of social consequences. A profit is the difference

between the revenue and expenses over a period of time (usually one

year). Profit is ultimate ‘output’ of the company, and it will have no

future if it will fail to make sufficient profit. Therefore, a financial

manager should continuously evaluate the efficiency of the company.

Beside the management of the company, creditors and owners are also

interested in the profitability of the company. Creditors want to get

repayment of principle regularly. Owners want to get require rate of

interest for their investment. This possible only when company earns

profit regularly.

The Profitable Ratios are:

1. Gross Profit Ratio

2. Net Profit Ratio

3. Operating Expenses Ratio

4. Administrative Expenses Ratio

5. Selling and Distribution Ratio

6. Earning Per Share

7. Return on Investment

8. Return on Share Holders Fund

9. Return on Total asset employed

10.Return on Capital Employed

1. Gross profit ratio :


The Gross profit margin reflects the efficiency with which the

management produces each unit of product. This ratio indicates the

average spread between the costs of goods sold and the sales

revenue. When we subtract the gross profit from 100 percent, we

obtain ratio of goods sold to sales. Both these ratios show profit

related to sales after deduction of production costs and indicates

the relationship between production cost and selling prices.

Table No.19:

Table Showing Gross Profit Ratio

Year 2005 2006 2007 2008 2009

Gross

Profit

4606.87 5855.04 5734.51 10193.02 20794.74

Sales 6392.47 8015.85 7323.69 18241.69 22342.17

G/P

Ratio

72.06% 73.04% 78.30% 55.87% 93.07%



Gross Profit

Gross Profit Ratio = ------------------ * 100

Sales

Chart No.19:

Graph Showing Gross Profit Ratio

2005 2006 2007 2008 20090.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Gross Profit Ratio

Gross Profit Ratio

Analysis:

The above table is showing Gross Profit Ratio. Year 2008 has least Gross

Profit Ratio. And the year 2009 has comparatively a good Gross Profit

Ratio.

Interpretation:

From the above graph one can conclude in the year 2009 has good Gross

profit ratio compared to 2008 which has least Gross profit ratio, whereas

Gross profit ratio for the year 2005, 2006, and 2007 is in incrementing

proportion from 72.06% to 73.04% and from 73.04% to 78.30%.

2. Net Profit Ratio:


Net profit is obtained when Operating Expenses, interest and taxes

are subtracted from gross profit. Net profit margin establishes a

relationship between net profit and sales indicates management’s

efficiency, manufacturing, administration and selling the product.

This ratio is overall measures of the company’s ability to turn each

rupee sales into net profit.

Table No.20:

Table Showing Net Profit Ratio

Year 2005 2006 2007 2008 2009

Net

Profit

334.63 555.80 544.33 927.86 1435.11

Sales 6392.47 8015.85 7323.69 18241.69 22342.17

N/P

Ratio

5.23% 6.93% 7.43% 5.08% 6.42%


Chart No. 20:


Net Profit

Net Profit Ratio = ---------------- * 100

Sales

Graph Showing Net Profit Ratio

2005 2006 2007 2008 20090.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Net Profit Ratio

Net Profit Ratio

Analysis:

From the above table we can analyse that, the year 2007 has a good Net

profit. The year 2008 has relatively low net profit.

Interpretation:

We can see that, the graph showing Net Profit has a frequent raise in the

consequent years of 2005, 2006, and 2007 with raise in 5.23% to 7.43%.

But had a least Net Profit in the year 2008.


3. Operating Expenses Ratio:

Cost of sales includes direct cost of goods sold as well as other

operating expenses, which have matching relationship with sale. It

excludes incomes and expenses which have no bearing on

production and sales, i.e., non operating incomes and expenses as

interest and dividend received on investments, interest paid on long

term loans and debentures, profit or loss on of fixed assets or long

term investment. The operating ratio indicates the efficiency of the

management in the conduct of the business.

A low operating ratio is an indication of the operating efficiency of

the business. On the other hand, a high operating is an indication of

the operating efficiency of the business. This ratio should be

analysed further to throw lights of efficiency prevailing in different

elements of total cost.

Table No.21:


Operating expenses + COGS

Operating Expenses Ratio = -------------------------------------- * 100

Net Sales

Table Showing Operating Expenses Ratio


Chart No. 21:


Year 2005 2006 2007 2008 2009

Operating

Expenses

2022.44 2499.39 2111.53 9221.42 3085.47

Sales 6392.47 8015.85 7323.69 18241.69 22342.17

OER 31.63% 31.18% 28.83% 50.555 13.81%

Graph Showing Operating Expenses Ratio

2005 2006 2007 2008 20090.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Operating Expenses Ratio

Operating Expenses Ratio

Analysis:

From the above table we can analyse that, the year 2009 has least

operating expenses ratio and the year 2008 has high operating expenses


Interpretation:

It is said that, higher the operating ratio lower will be the Net Profit ratio.

The year 2009 had least operating expenses ratio of 13.81% which in turn

yield high net profit ratio of 6.42%.

4. Administrative expenses Ratio :


It refers to all expenses which are incurred for the general

administration of the concern .Examples of administrative

expenses are office salaries, office rent, printing and stationary,

postage and telegrams.

It is expressed as follows:

Table No.22:

Table Showing Administrative Expenses Ratio

Year 2005 2006 2007 2008 2009

Admin.

Exp.

75.96 133.43 212.72 389.50 365.77

Sales 6392.47 8015.85 7323.69 18241.69 22342.17

AER 1.18% 1.66% 2.90% 2.13% 1.637%


Chart No.22:


Administrative expenses

Administrative expenses ratio = ----------------------------------- * 100

Net Sales

Graph Showing Administrative Expenses Ratio

2005 2006 2007 2008 20090.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

Administrative Expenses Ratio

Administrative Expenses Ratio

Analysis:

The above table shows Administrative expenses ratio. The year 2005 has

least administrative expenses ratio of 1.18%. And in the year 2007 has

2.90%

Interpretation:

We can interpret from the above graph, the year 2007 bearing

Administrative expenses ratio of 2.90% has 7323.69mn of sales over

212.72mn administrative expenses, leading to highest administrative

expenses compared to other years.

5. Selling and Distribution expenses ratio :


It refers to all those expenses incurred for the selling and

distribution of goods. Examples of this are advertisement, cash

discount allowed, carriage outwards, etc.

It is expressed as follows:

Table No.23:

Table Showing Selling and Distribution Overhead Ratio

Year 2005 2006 2007 2008 2009

Selling and

Distribution

148.78 431.78 220.72 722.75 315.03

Sales 6392.47 8015.85 7323.69 18241.68 22342.17

Selling and

Distribution

Ratio

2.32% 5.38% 3.013% 3.962% 1.41%


Chart No.23:


Selling and Distb’n expenses

Selling and Distb’n expenses ratio = --------------------------------------- * 100

Net Sales

Graph Showing Selling and Distribution Expenses Ratio

2005 2006 2007 2008 20090.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Selling and Distribution Expenses Ratio

Selling and Distribution Expenses Ratio

Analysis:

From the above analytical table we can observe there are high selling and

distribution expenses ratio in the year 2006 with 5.38% and least ratio in

the year 2009 with 1.41%.

Interpretation:

The graph of the year 2005 has the selling and distribution ratio of 2.32%

which has increased to 5.38% in 2009. But has a fall in 2007 with

3.013% and again rise of 3.962% in 2008 and had a least ratio of 1.41%

in 2009.

6. Earning Per Share :


The EPS is one of the important measures of economic

performance of a corporate entity. The flow of capital to the

companies under the present imperfect capital market conditions

would be made on the evaluation of EPS.

A higher EPS means better capital productivity. EPS is one of the

most important ratios which measures the net profit earned per

share. EPS is one of the major factors affecting the dividend policy

of the firm and the market prices of the company. A steady growth

in EPS year after year indicates a good track of profitability. EPS

is computed by dividing the net profit after tax and dividend to

preference shareholders.

Table No.24:

Table Showing Earning Per Share

Year 2005 2006 2007 2008 2009

Earning

Per Share

23.79 23.98 21.04 2.78 4.99

Chart No.24:


Net Profit after tax

EPS = -------------------------------

No. of Equity Shares

Graph Showing Earning Per Share

2005 2006 2007 2008 20090

5

10

15

20

25

30

Earning Per Share

Earning Per Share

Analysis:

From the above table 2006 bears 23.98 EPS compared to 2008’s

EPS had least EPS bearing 2.78

Interpretation:

A higher EPS means better Capital Productivity. In the Year 2006

EPS recorded to be 23.98 which showed better capital productivity

compared to other ratios, whereas 2008 showed less capital

productivity with 2.78 as EPS.

7. Return on Investment :


The strategic aim of a business enterprise is to earn a return on

capital. If in any particular case, the return in the long-run is not

satisfactory, then the deficiency should be corrected or the activity

be abandoned for a more favourable one. The rate of return on

investment is determined by dividing net profit or income by the

capital employed or investment made to achieve that profit.

It is calculated as follows:

Table No.25:

Table Showing Return on Investments Ratio

Year 2005 2006 2007 2008 2009

N/P

before

Tax

490.52 745.53 779.91 1137.01 2176.47

Total

Capital

Employed

637.18 2224.43 3357.44 6399.42 12641.93

ROI 76.98% 33.51% 23.22% 17.76% 17.216%


Chart No.25:


N/P before Interest and taxes

Return on Investment = ------------------------------------------ * 100

Total Capital Employed

Graph Showing Return on Investment

2005 2006 2007 2008 20090.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

Return On Investment

Return On Investment

Analysis:

From the above analytical table, we can conclude the year 2005 has

highest Return on Investment bearing 76.98% and least Return on

Investment at the year 2009 bearing 17.216%

Interpretation:

From the above graph, we can conclude that the year 2005 has higher

Return on Investment of 76.98% with 637.18mn of total capital

employed whereas 2009 bearing had 17.216% of Return on Investment

with 12,641.93mn of total capital employed.

8. Return on Shareholders Fund :


This ratio expresses the net profit in terms of the equity

shareholders funds. This ratio is an important yardstick of

performance for equity shareholders since it indicates the return on

the funds employed by them. However, this measure is based on

the historical net worth and will be high for old plants and low for

new plants.

Table No.26:

Table Showing Return on Share Holders Funds Ratio

Year 2005 2006 2007 2008 2009

N/R after

Tax

407.34 562.70 544.33 745.47 1435.11

SHF 637.18 2224.43 3357.44 6399.42 12641.93

Return

on SHF

63.92% 25.29% 16.21% 11.64% 11.35%


Chart No.26:


N/P after interest and tax

Return on Shareholders Fund = ------------------------------------- * 100

Shareholders Fund

Graph Showing Return on Share Holders Fund

2005 2006 2007 2008 20090.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Return on SHF

Return on SHF

Analysis:

From the above analytical table, the year 2005 has higher Return on

Shareholders Fund Compared to 2009 which has least Return on

Shareholders Fund.

Interpretation:

From the above graph, we can visualise the year 2005’s Shareholders

Fund contributing to 637.18mn with Return on Shareholders Fund of

63.92%, which shows greater sign of Return on Shareholders Fund


9. Return on Total Assets Ratio :


The Return on total assets measures the profitability of company.

The return on assets is calculated by establishing the relationship

between the profit and the total assets employed to earn that profit.

Thus, the return on total assets measures the overall efficiency of

the management in generating profit given level of assets at its

disposal.

Table No.27:

Table Showing Return on Total Assets Ratio

Year 2005 2006 2007 2008 2009

EAT+Interest 407.34 562.70 544.33 745.47 1435.11

Total Assets 1459.29 2598.42 7763.34 10072.75 22998.48

Return On

Total Assets

27.91% 21.65% 7.01% 7.40% 6.24%


Chart No. 27:


EAT + Interest

Return on Total Assets Ratio = ------------------------ * 100

Total Assets

Graph Showing Return on Total Assets Ratio

2005 2006 2007 2008 20090.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Return on Total Assets Ratio

Return on Total Assets Ratio

Analysis:

The above table indicates, the return on Total assets of the year 2005 is

more when compared to others.

Interpretation:

From the above graph we can conclude that Return on Total Assets in the

year 2005 is more constituting to 27.91% as company has maintained less

total assets compared to other years and least Return on Total Assets in

the year 2009 constituting to 6.24%

10. Return on Capital Employed Ratio:


Return on capital employed is the ratio of adjusted net profit to

capital employed in percentage. The return on ‘Capital Employed”

may be based on gross capital or net capital employed.

Formulation for calculation of return on capital employed is as

follows:

Table No.28:

Table Showing Return on Capital Employed Ratio

Year 2005 2006 2007 2008 2009

PAT 407.34 562.70 544.33 745.47 1435.11

Capital

Employed

637.18 2224.43 3357.44 6399.42 12641.93

Return On

Capital

Employed

63.92% 25.29% 16.212% 11.649% 11.351%


Chart No.28:


PAT

Return on Capital Employed Ratio = -------------------------- * 100

Capital Employed

Graph Showing Return on Capital Employed

2005 2006 2007 2008 20090.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Return on Capital Employed Ratio

Return on Capital Employed Ratio

Analysis:

The above table represents the capital employed ratio. The table clearly

shows capital is properly employed, except in 2008 and 2009, which has

got least ratio. The year 2005 shows good capital employment.

Interpretation:

From the above graph one can interpret that the year 2005 has good

capital employment with highest ratio of 63.92%. Year 2008 and 2009

has least ratio 0f 11.64% and 11.35% respectively.

CHAPTER-5


FINDINGS, SUGGESTION AND CONCLUSIONS

The current ratio for the year 2005 is 1.15, which increased to 1.51

in 2006 and again there is a rise of current ratio in the year 2007

upto 1.66 but in 2008 there is slight decline of current ratio tending

to 1.53 and at the year 2009 has the highest ratio of 1.89 compared

to other previous year current ratios.

The liquid assets and current liability of SRSL in the year 2007 is

satisfactory as it has maintained liquid ratio of 0.83 times which is

close to 1:1 standard ratio. Whereas in the year 2005, the liquid

ratio has least proportion of 0.52 times. But we can observe there is

increment of liquid ratio from 0.52 to 0.60 and 0.60 to 0.83 in

respective years of 2006 and 2007.

When we analyse the data and graphs of absolute liquid ratio of

SRSL, necessary steps has to be taken to increase current liability

inorder to maintain the norms of absolute liquid ratio of 1:2.

The company has maintained good inventory to working capital

ratio with all ratios being more than ideal ratio 1:1.

The solvency ratio indicates the ability of the concern to meet its

liability out of its total assets. Higher the solvency ratio better will


be the financial position. Here the company has good solvency

ratio in 2007 and 2009 with 0.69 and 0.63times.

We can see that proprietary ratio in the year 2006 having a ratio of

0.85 times is considered to be a sound capital structure for the

company. As it is said that the proprietary ratio tending to unity is

considered to be the stronger financial position of the company.

It is said that a fixed assets turnover ratio of 5 times more,

indicates better utilisation of fixed assets. And from the graph of

fixed assets turnover ratio, we can see better utilisation of fixed

assets in the year 2005 and 2006 as it has 6.05 times and 6.71 times

of fixed assets turnover ratio.

The fixed assets to net worth ratio is said to be satisfactory in the

year 2005, 2007 and 2008 compared to 2006 and 2009. As those

3years had maintained more than unity value compared to 0.53 and

0.99 in 2006 and 2009 respective years.

A current asset to net worth ratio throws a light on financial

strength of the concern. Higher the current assets to net worth,

ratio, higher will be financial strength of the concern. The

company has maintained current asset to net worth ratio to the

mark in 2005and 2009 when compared to other years.

The above table indicates current liability to net worth ratio which

is decreasing from year to year.


The total liability to total assets gives an idea of total funds, short

term and long term provided by outsiders to finance total assets,

here the company shows higher rate of proportion of total liability

to total assets in the year 2006 with 2.78 times.

The more cash turnover ratio indicates the effective utilisation of

cash resources of the enterprise. The company has maintained

more than the standard ratio 10:1 in all the years. It has been

successful in effective utilisation of cash resources of enterprise.

By looking at analytical table and chart of inventory ratio, it is

found that in the year 2009, COGS is less compared to past years

and average stock has been increase compared to past years.

Whereas in the year 2006 has a highest record of sales with an

inventory turnover ratio of 2.03 times.

The working capital turnover ratio of SRSL in the years of 2007,

2008 and 2009 had least working capital turnover ratio of 1.61,

1.82 and 0.2 times. And the highest working capital turnover ratio

recorded at the year 2005 and 2006 were 3.92times and 3times

respectively.

The higher the debtor’s turnover ratio is considered to be a sound

financial position. The SRSL has maintained its consistency to


keep the debtors turnover ratio at its peak. In the year 2008 and

2009 has a sound ratio of 23.86 times and 21.42 times respectively.

The current assets turnover ratio of the company represents the

sales from the amount of current assets. In SRSL, the 2009 sales

has been generated more with current assets turnover ratio of 5.45

times with net sales of 18241.69mn, which is the good sign of

utilisation of current assets whereas we can see least utilisation of

current assets at the year 2009 with current assets turnover ratio of

1.30 times.

The total assets turnover ratio indicates the company’s ability to

produce the volume of sale for a given amount of total assets. The

company has maintained 4.38 total assets turnover ratio in the year

2005 which is more compared to other years TATR -3.08, 0.94,

1.81 and 0.971. The year 2005 has utilized the assets effectively

compare to other year.

A net sale to net worth ratio indicates whether there is over

capitalisation or under capitalisation. It serves as a guide in the

proper administration of a company. We can see decline in ratio

from 2005 to 2007 with 10.03 to 2.181 decline and increase in ratio

from 2.18 to 2.85 in 2007 to 2008 and again decline in 2008 to

2009 from 2.85 to 1.767 times.

The gross profit ratio of the SRSL has been in good position, as we

can see there is increase in gross profit ratio from 2005 to 2007


with gross profit ratio of 72.06% to 78.30%, but there was a slight

drop in gross profit ratio in the year 2008 tending to 55.87%. But

had a greatest raise in gross profit in the year 2009 tending to

93.07%.

The graph showing net profit of SRSL, had recorded the highest

net profit ratio at the year 2007 of 7.43% and also showed a sound

net profit from the year 2005 to 2007 with net profit being

increased from 5.23% to 7.43% and also we can observe a slight

fall in net profit at the year 2008 tending to 5.08% and there is

greatest increase in net profit with 6.42%.

It is said that lower the operating ratio, higher will be the net profit

ratio, as we interpret the analytical table we can find 2009 has least

operating expenses ratio of 13.81% which inturn yields the highest

net profit ratio of 6.42%.

The administration expenses ratio is been increasing from 2005 to

2007 with 1.18% to 2.90%. But we can observe fall in

administration expenses ratio in consequent years of 2008 and

2009 with 2.13% to 1.637%.

Selling and distribution ratio is constantly fluctuating from 2005 to

2009, as we can see increase in ratio from 2005 to 2006 and again


fall of ratio in 2007 and again raise in selling and distribution

expenses ratio in 2008 and finally showing least ratio in the year

2009.

The EPS of 2005, 2006 and 2007 is satisfactory with 23.79, 23.98

and 21.04 respectively. But there is a decline in 2008’s and 2009’s

EPS contributing only 2.78 and 4.99 respectively. It is said that a

higher EPS means better capital productivity, from the analytical

table and chart we can interpret that 2006 had better capital

productivity as its EPS had a value of 23.98 times.

We can see SRSL, has high ROI at the year 2005 bearing 76.98%

with less of total capital employed with 637.18mn compared to

other years of capital employed, which shows good ROI position

of the company.

Shree Renuka Sugars Ltd has good return on shareholders’ fund, at

the year 2005 with 63.92% with shareholders fund contributing

around 637.18mn whereas other years shows gradual fall in return

on shareholders’ funds from 25.29% to 11.35% w.r.t 2006 to 2009.

Return on total assets of SRSL is more in the year 2005 with

27.91% compared to other consequent year which contributes

around 21.65%, 7.01%, 7.40% and 6.24% from 2006 to 2009.


The company’s return on capital employed has a good percentage

in all years, with 63.92% in 2005; 25.29% in 2006; 16.215 in 2007

but ratio had been declined in 2008 to 2009 from 11.64% to

11.35%. The company’s return on capital employed is satisfactory.


Shree Renuka Sugars Ltd (2)

Documents

shree renuka

million indian

corporate

provide soft

desired cane

net worth

absolute liquid

highly liquid