A PROJECT REPORT ON

Comparative Analysis of Financial Statement with the help of Ratio Analysis Techniques
At

Brahmaputra Valley Fertilizer Corporation Limited

In partial fulfillment of the requirement for the award of the Degree of Master of Business Administration (MBA) of Nagaland University, 2011-13

Submitted By, Dilip Kumar Sah NU/MN - 06/11

School of Management Studies (SMS), Nagaland University DC Court Junction, Dimapur-797112 Nagaland
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Table of Contents

Chapters PARTICULARS
DECLARATION PREFACE ACKNOWLEDGEMENT EXECUTIVE SUMMARY AIMS AND OBJECTIVE OF THE PROJECT 1 1.1 OVERVIEW OF FERTILIZER INDUSTRY IN INDIA HISTORY OF FERTILIZER INDUSTRY IN INDIA PUBLIC SECTOR UNDERTAKINGS AND MULTI-STATE CO-OPERATIVE SOCIETIES OF FERTILIZER INDUSTRY 1.2 OVERVIEW OF FERTILIZER INDUSTRY IN ASSAM FORMATION OF BVFCL 1.3 INTRODUCTION TO RATIO ANALYSIS 1.4 NEED AND SCOPE OF THE STUDY 2 OBJECTIVES OF THE STUDY 3 RESEARCH METHODOLOGY
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Page No.
1 2 3 4 5 7 8 8

INTRODUCTION

9 13 13 14

PROFILE OF NAMRUP PROJECT CITIZENS CHARTER OF BVFCL HISTORY OF BVFCL 22 PRODUCTS OF BVFCL THE PLANTS BRIEF (NAMRUP-I, II & III) DESCRIPTION 23 32 39 40 42 17 19

4 DATA ANALYSIS AND INTERPRETATION SUMMARY OF THE COMPARATIVE ANALYSIS MICHAEL PORTER ANALYSIS OF BVFCL 5 CONCLUSION AND RECOMMENDATION ANNEXURES RATIO

45 68 69 71 75 83 BIBLIOGRAPHY

DECLARATION

I hereby declare that the Project work entitled Comparative Analysis of Financial Statement with the help of Ratio Analysis Techniques, at Brahmaputra Valley Fertilizer Corporation Limited submitted by me to the department of School of Management Studies, Nagaland University, is a bonafide work undertaken by me. It is not submitted to any other University or Institution for the Award of any degree diploma/certificate or published any time before.

Name and address of the student: Dilip Kumar Sah Burma Camp Dimapur, Nagaland

Signature of the student

PREFACE

The project undertaken by me is actually an effort on behalf of the department of School of Management Studies, Nagaland University, to bring to the surface the hidden potentials of its students through continuous learning and experience theoretically as well as practically. To enrich our practical exposure in the changing market scenario, we are being imparted with Industrial training at various companies to make a match between the theory learnt and the reality followed.

This project Comparative Analysis of Financial Statement with the help of Ratio Analysis Techniques, at Brahmaputra Valley Fertilizer Corporation Limited tries to help in establishing and interpreting various ratios (quantitative relationship between figures and groups of figures). It is with the help of ratios that the financial statements can be analyzed more clearly and management decisions can be made from such analysis.

The report has been prepared keeping in mind all the important practical aspects and in depth analysis of the collected data. This report has been compiled as partial fulfillment of the MBA curriculum. This project has given me an opportunity to learn about the practical applicability of ratio analysis concept and theory and develop a better ability to analyze problem and the solutions thereof. This two months training w.e.f 4th June, 2012 to 31st July, 2012 at Brahmaputra Valley Fertilizer Corporation Limited has come out as a very fruitful and beneficial training for me.

DILIP KUMAR SAH

ACKNOWLEDGEMENT

My special thanks go to Brahmaputra Valley Fertilizer Corporation Ltd. for providing me the opportunity to carry out my Internship Programme in the firm and undertake the project as a part of the programme. I sincerely acknowledge my gratitude to Mr. Manik Chandra Mahanta (Senior Account Officer), without whose support and help it would have been impossible for me to bring out this report. I am also grateful to Mr. Sudhansu Shasmal (Jr. Account Officer) for his valuable guidance and help in preparing the report. Their constant support, innovative ideas & practical approach helped me to make the project more objective. I am also happy to express my deep sense of gratitude and gratefulness to all the staff members of finance department without whose support and help it would have been difficult for me to carry out the project. I extend my gratitude to the entire finance department staffs of BVFCL, NAMRUP. I would like to express special thanks to Sir, Ditalak Mpanme, (HOD) and all the faculties of School of Management Studies for their constant guidance and support. I would like to thanks my family members for their constant faith and support, encouragement who directly or indirectly helped me in this regard. Last but not the least, I am thankful to School of Management Studies, Nagaland University for providing me the opportunity to work on a project under the course curriculum of MBA.

DILIP KUMAR SAH

EXECUTIVE SUMMARY

Title of the Project

Comparative Analysis of Financial Statement of (FY 2009-10 & 2010-11) with the help of Ratio Analysis Techniques

Name of the organization Name of the student Project duration Institutional Guide Organizational Guide

: : : : :

Brahmaputra Valley Fertilizer Corporation Limited, Namrup, Assam. DILIP KUMAR SAH 58 Days (4th June 2012 to 31st July 2012) Sir, Ditalak Mpanme, (HOD), SMS - Nagaland University Mr. Manik Chandra Mahanta (Sr. Account Officer) Mr. Sudhansu Shasmal (Jr. Account Officer)

AIMS AND OBJECTIVES Any project work exposes the research scholar to the ground realities prevailing in the particular industry and thereby enables to carry out a meaningful realistic analysis.

The objectives of the project are as follows: To study a glimpse of Brahmaputra Valley Fertilizer Corporation Limited (BVFCL). To understand the functioning of various sections of the Finance Department of Brahmaputra Valley Fertilizer Corporation Limited (BVFCL). To make a comparative study of the Balance Sheet of two years i.e. 2009-10 and 2010-11 of BVFCL. To suggest measures for underperformance of BVFCL. To provide a sound basis for evaluating the productivity, efficiency and profitability of companys current performance level.

LIMITATIONS The limitations of this study are as follows: Time taken to complete the project work is very limited. The study is conducted within the framework of the Brahmaputra Valley Fertilizer Corporation Ltd. The balance sheet of two years is studied. The analysis and the result of the studying are applicable only to BVFCL not to the other corporation. The accuracy of the analysis of the companies and suggestion is totally depends upon the information shared with and the observation. The primary data collected are assumed to be correct.

RESEARCH METHODOLOGY

The data collection is carried out mainly through the various audited Annual accounts, personal interviews as well as through the literature review from the relevant policy manuals. The various daily reports made by the Finance Department like journals, trail balance etc. are also referred.

SOURCES OF DATA: For collecting necessary data two sources have been used. They are primary data & secondary data.

a) PRIMARY DATA: Face to face discussion with the Finance Manager, Training Department personnel, Finance Department Personnel and the employees of Brahmaputra Valley Fertilizer Corporation Limited (BVFCL).

b) SECONDARY DATA: 1. Data provided from the finance dept. regarding Cost of Investment, Cost of Capital and other related information. 2. Journals and magazines published by Brahmaputra Valley Fertilizer Corporation Limited (BVFCL). 3. Library: Records and Manuals. 4. Also through Company websites i.e. http://www.bvfcl.com

DATA ANALYSIS: The Research carried out is a Descriptive study including mostly the secondary data. The data are analyzed using the various Ratio Analysis techniques with the help of Charts & graphs.

CHAPTER ( 1 )

INTRODUCTION

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Overview of the Fertilizer Industry In India

1.1 Overview of the Fertilizer Industry In India: Agriculture the backbone of Indian Economy still holds its relative importance for more than a billion peoples. Agriculture, which accounts for 27% of GDP, provides sustenance to two-thirds of our population. Besides, it provides crucial backward and forward linkages to the rest of the economy. The Government of India from time to time has taken considerable steps for the upliftment of Agriculture Sector. Successive five-year plans have stressed self-sufficiency and self-reliance in food grain production and concerted efforts in this direction have resulted in substantial increase in agriculture production and productivity. In Indias success in agricultural sector for not only meeting the total requirement but also generating exportable surplus of food grains, the significant role played by chemical fertilizers is well recognized and established. Fertilizer in the agricultural process is an important area of concern. Fertilizer industry in India has succeeded in meeting the demand of all chemical fertilizers in the recent years. The Fertilizer Industry in India started its first manufacturing unit of Single Super Phosphate (SSP) in Ranipet near Chennai with a capacity of 6000 MT a year. Chemical fertilizers have played a vital role in the success of Indias green revolution and consequent selfreliance in food grain production. The increase in fertilizer consumption has contributed significantly to sustainable production of food grains in the country. The Government of India has been consistently pursuing policies conductive to increased availability and consumption of fertilizers in the country. The sector experienced a faster growth rate and presently India is the third largest fertilizer producer in the world.

History of the Fertilizer Industry in India:

The Fertilizer factory in India was established in 1906 at Ranipet, near Chennai by EID Parry (India) Ltd. for manufacture of Single Super Phosphate (SSP). First Urea and Ammonium Sulphate plants were set up in 1959 at Sindri (Bihar) by FCI Ltd. And first CAN (Calcium Ammonium Nitrate) plant was set up at Nangal by NFL (National Fertilizers Limited) in 1961. First DAP plant was set by GSFC at Baroda in 1967. Since then India has come a long way. The main thrust in establishment of indigenous capacity came after the introduction of

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Retention Price cum Subsidy scheme for nitrogeneous fertilizers in 1977 which was extended to phosphatic fertilizers in 1979. India ranks fourth in terms of both production and consumption of fertilizers in the world.

Needs of Fertilizer Industry:

In the countrys planned development the first priority goes to agriculture when our country is predominantly an agriculturist. In order to secure the maximum agriculture production to feed the enormous growing mouths it is essential that the productivity of the soil must be restored and increases considerably. Chemical fertilizers will make an effective contribution towards achieving the increase targets of food production. During recent years there has been rapid use in the demand of Chemical fertilizers in the country. Consumption of fertilizer in the fourth Five Year plan is expected to be still higher which shall be of the order of 2.4 million tons of Potassic fertilizers and 1.0 million tons of Phosphate fertilizer.

Public Sector Undertakings And Multi-State Co-operative Societies of Fertilizer Industry:

The Department of Fertilizers (DOF) perform the activities which include planning, promotion and development of the fertilizer industry, planning and monitoring of production, import and distribution of fertilizers and management of financial assistance by way of subsidy/concession for indigenous and imported fertilizers. The Office of Fertilizer Industry Coordination Committee (FICC) is an attached office under the Department of Fertilizers headed by Executive Director, who is of the rank of Joint Secretary to the Government of India. The FICC comprises of the Secretaries to the GOI in the Departments of Fertilizers, Industrial Policy and Promotion, Agriculture and Cooperation, Expenditure, Ministry of Petroleum & Natural Gas, Chairman, Tariff Commission and two representatives of the urea industry. FICC, which was initially constituted w.e.f. 1.12.1977 to administer and operate the erstwhile Retention Price Cum Subsidy Scheme (RPS), has been replaced vide Resolution dated 13.3.2003 to administer and operate the New Pricing Scheme (NPS), which has come into existence w.e.f. 1.4.2003. The Department of Fertilizer has under its administrative control ten public sector undertakings (PSUs) and two multi-state co-operative society and one joint sector company.

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1) Fertilizer Corporation Of India Ltd. (FCI): The Fertilizer Corporation Of India Limited was incorporated as early as 1961.FCIL is a Central Government Undertaking under the administrative control of Ministry of Chemicals & Fertilizers (Department of Fertilizers).In 1978, the company was revamped and 5 separate companies FCI, NFL, Hindustan Fertilizer Corporation Limited, Rashtriya Chemicals and Fertilizers Limited, and Projects and Development India Limited started operating under one umbrella. The Fertilizer Corporation of India Ltd. (FCI) has its units located at Sindri (Jharkhand), Gorakhpur (Uttar Pradesh), Ramagundam (Andhra Pradesh) and Talcher (Orissa). It also has a mining organization at Jodhpur in Rajasthan and an incompleted project in Korba (Chattisgarh).

2) Hindustan Fertilizer Corporation Ltd. (HFC): The Hindustan Fertilizer Corporation Limited (HFC) was incorporated on 14th March, 1978 as a result of their organization of the Fertilizer Corporation of India Limited (FCI). After de-merger of the Namrup units into a new company under the name of Brahmaputra Valley Fertilizer Corporation Ltd. (BVFCL) w.e.f. 1.4.2002, HFC has three units, namely Barauni, Durgapur and Haldia Fertilizer Project besides the Fertilizer Promotion & Agricultural Research Division (FP&ARD).

3) Rashtriya Chemicals & Fertilizers Ltd(RCF): RCF was incorporated as a separate company in March, 1978 consequent to reorganization of the Fertilizer Corporation of India Ltd. At the time of its formation, the company had only one operating unit at Trombay (near Mumbai) and two major projects under implementation viz. Trombay-IV and Trombay-V Expansion. The gas based Thal Vaishet Fertilizer Complex about 100 kms from Trombay, was also later implemented by RCF and it commenced commercial production on 1.6.1985.

4) National Fertilizers Limited (NFL): National Fertilizers Limited (NFL) was incorporated on23rd August, 1974 for setting up of two nitrogenous plants, one at Bhatinda (Punjab) and another at Panipat (Haryana) with LSHS as feedstock, each having urea production capacity of 5.11 lakh MT per annum. Consequent upon there organization of the Fertilizer
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Corporation of India Limited (FCI), the Nangal unit (including Nangal Expansion Project) of FCI was transferred to NFL w.e.f. 1.4.1978.

5) Projects & Development India Limited(PDIL): Projects & Development India Limited (PDIL), an erstwhile Division of the Fertilizer Corporation of India Limited (FCI), was registered as a separate company in March 1978. The Company has its registered office at Sindri, Jharkhand.

6) Pyrites, Phosphates & Chemicals Limited (PPCL): Pyrites, Phosphates & Chemicals Ltd. (PPCL), set up in 1960 was entrusted with the responsibility of exploiting the countrys pyrites deposits. The company had three production units located at Amjhore (Bihar), Dehradun (Uttaranchal) and Saladipura (Rajasthan). The Company was also engaged in trading of indigenous fertilizers.

7) The Fertilizers And Chemicals Travancore Ltd. (FACT): The Fertilizers and Chemicals Travancore Limited (FACT) was incorporated in 1943. In 1947 FACT started production of Ammonium Sulphate with an installed capacity of 50,000 MT per annum at Udyogamandal, near Cochin. From a modest beginning, FACT has grown and diversified into a multi-division/multi-function organization with basic interest in manufacture and marketing of Fertilizers and Petrochemicals, Engineering Consultancy and Design and in Fabrication and Erection of Industrial Equipments.

8) Madras Fertilizers Limited (MFL): Madras Fertilizers Limited (MFL) was incorporated in December, 1966 as a Joint Venture between GOI and AMOCO India. Incorporated of USA (AMOCO) with GOI holding 51% of the equity share capital.

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9) Brahmaputra Valley Fertilizer Corporation Limited (BVFCL): Brahmaputra Valley Fertilizer Corporation Ltd. was formed as a new company w.e.f. 1.4.2002 after de-merger from Hindustan Fertilizer Corporation Ltd. The first group of plants, i.e. Namrup-I was established in the sixties and went into commercial production in 1969. Namrup-II group of plants were added in the seventies and went into commercial production in 1976 and followed by Namrup-III group of plants established in the eighties which went into commercial production in 1987. All these three phases were established under Hindustan Fertilizer Corporation Ltd. The new Company is presently having its head quarter at Namrup.

10) FCI Aravali Gypsum And Minerals India Limited (FAGMIL): The Jodhpur Mining Organization (JMO) after hiving off from FCI has been incorporated under Companies Act, 1956as a Public Sector Undertaking viz. FCI Aravali Gypsum and Minerals India Limited (FAGMIL) on 14.2.2003 with an authorized share capital of Rs.10crore. Apart from taking over the JMO, the nascent Companys objectives include expanding the mining activities in other minerals available in the State of Rajasthan. The JMO is mining in nine Mineral Gypsum Mines in four districts of the State of Rajasthan, with the best quality gypsum reserves of 60 lakh MT at their Mohangarh Mines in the district of Jaisalmer.

11) Indian Farmers Fertilizer Cooperative Limited (IFFCO): Indian Farmers Fertilizer Cooperative Limited (IFFCO) was registered as a Multi-State Cooperative Society on November 3, 1967. Subsequently with the enactment of Multi-State Cooperative Societies Act, 1984, IFFCO came under the purview of the same. However, with the enactment of Multi-State Cooperative Societies Act, 2002 effective from 19th August, 2002, IFFCO is presently under the purview of this Act. By the end of 1988, IFFCO had set up four plants, two in the State of Gujarat and two in the State of Uttar Pradesh with total investment of Rs.981.2crore.

12) Krishak Bharti Cooperative Limited (KRIBHCO): KRIBHCO was incorporated as a Multi-State Cooperative Society on 17.04.1980 to implement the Ammonia/Urea fertilizer project at Hazira, based on natural gas from Bombay High/South Bassein. The society
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commissioned its Ammonia/Urea Plant in 1985. The Hazira complex has two ammonia plants and four streams of Urea.

1.2 Overview of Fertilizer Industry in Assam:

The discovery of natural gas in the rich oils fields at Naharkatia created a problem as to how it could be utilized. In the year 1955 the State Government approached the Government of India to find a solution accordingly a Technical Committee under the Chairmanship of Dr. G.P. Kane was appointed into the possibility of establishing a fertilizer factory. The committee recommended the setting up of a fertilizer factory at Namrup with a capacity of 32,500 tons of nitrogen (50,000 tons of Ammonium Sulphate and 50,000 tons of Urea).The Committees recommendation were accepted by the factory should have a production capacity of 45,000 tons of nitrogen in the form of 1,00,000 tons of Ammonium Sulphate and 55,000 tons of Urea per year. By and large the establishment of the fertilizer factory here was a natural sequence of the availability of a large stock of natural gas in this area which also reflected the Governments determination to have more fertilizer factories in the country to help bridge the gap between demand and supply of fertilizer as well as wide employment avenues on one hand and balancing the economic development to the extent possible on the other.

1.2.1 Formation of BVFCL:

Brahmaputra Valley Fertilizer Corporation Ltd.(BVFCL) was formed as a new company w.e.f. 1.4.2002 after de-merger from Hindustan Fertilizer Corporation Ltd. located on the bank of the river Dilli in the south-western border of Dibrugarh district in Assam. It is the first factory of its kind in India to use associated natural gas as basic raw material for producing nitrogenous fertilizer. Till the beginning of sixties, Namrup a sleepy village was little known to the rest of the country. Discovery of oil and natural gas in Naharkatia region promoted a serious thinking on proper utilization of gas which had to be otherwise to be flared up. Consequent upon the recommendation of M/S. Snodgrass Associates of USA suggesting utilization of this hidden treasure to produce a large number of utilities including chemical fertilizers and electricity, the then Ministry of Mines and Fuel appointed a Committee headed by Shri S.S Khera, ICS and based on its broad recommendation in respect of possible use of natural gas, a Technical Committee under the Chairmanship of Dr. G P Kane further studied the possibilities of setting up a fertilizer plant in Assam while the Central Water
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and Power Commission was entrusted to explore the scope of setting up a power project based on this resource . The Kane Committee, after making detailed techno-economic study, recommended a fertilizer factory to be located at Namrup. Needless to say that, Central Water and Power Commission too recommended favorably resulting in the setting-up of Thermal Power Plant within the striking distance from the fertilizer factory at Namrup. The first group of plants, i.e. Namrup-I was established in the sixties and went into commercial production in 1969. Namrup-II group of plants were added in the seventies and went into commercial production in 1976 and followed by Namrup-III group of plants established in the eighties which went into commercial production in 1987. All these three phases were established under Hindustan Fertilizer Corporation Ltd. The new Company is presently having its head quarter at Namrup. In 2002, the Namrup Fertilizer Complex was bifurcated from the Hindustan Fertilizer Corporation Limited and came to exist as one of the important public sector fertilizer companies under the new name, Brahmaputra Valley Fertilizer Corporation Limited.

1.2.2 Profile of Namrup Project:

Brahmaputra Valley Fertilizer Corporation Limited (BVFCL) is one of the major public sector fertilizer companies in India. In fact, it is considered the pioneer in using associated natural gas for producing nitrogenous fertilizer. In 2002, the Namrup Fertilizer Complex was bifurcated from the Hindustan Fertilizer Corporation Limited and came to exist as one of the important public sector fertilizer companies under the new name, Brahmaputra Valley Fertilizer Corporation Limited. There are in total, 3 production plants at Namrup, in the Assams Dibrugarh district. The discovery of surplus natural gas and oil in the Naharkatia-Moran region and Lakwa oil fields respectively, provided the incentive for setting up the third production unit of Namrup. The Namrup Fertilizer Complex, renamed as Brahmaputra Valley Fertilizer Corporation Ltd after bifurcation from erstwhile Hindustan Fertilizer Corporation Ltd w.e.f 1st April 2002 located on the bank of river Dilli in the south western border of Dibrugarh district of Assam. a) Registered OfficeP.O- Parbatpur, Namrup- 786623
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District- Dibrugarh (Assam) Phone- 0374-2500207 Fax- 0374-2500317 Email: bvfclnam@vsnl.net Website address: www.bvfcl.com

b) Companys Share Resources - Rs. 3,65,83,24,000

c) Units of Namrup Fertilizer ComplexNamrup Fertilizer Complex is consisted of three units 1) Namrup I. 2) Namrup II 3) Namrup III However at present only Namrup II & III are in operating condition.

Plant Namrup- I Namrup- II Namrup- III

Year of Commissioning 1969 1976 1987

Capacity 280 MT/Day 480 MT/Day 580MT/Day

Table 1.1: Units of Namrup Fertilizer Complex d) Products: 1) Mukta Urea 2) Mukta Bio - Fertilizers. 3) Mukta Vermi - Compost.
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e) Legal Advisorsf) Bankers

M/s Steel & Hadow, Dibrugarh

1) State Bank of India 2) UCO Bank 3) Syndicate Bank, 4) Punjab National Bank, 5) Bank of India.

g) Board Of Directors1. Shri. N.K Saha (Chairman & Managing Director) 2. Shjri. K.K. Padmanabham [Deputy Secretary(P&I). DOF] 3. Shri. Manish Tripathi [Deputy Secretary(F),DOF] 4. Shri. Deepak Kumar [Director(Movement),DOF] 5. Shri. N.K Saha [Director(Production)] 6. Shri. N.K. Ghosh [Director(Finance)]

h) Company Secretary-

Shri. R.K. Gupta

i) Chief Vigilance Officer-

Shri. H. Abbas, Deputy Secretary (PPF), DOF

j) Statutory Auditors-

M/s G. Choudhury & Associates Chartered Accountants, Siliguri (WB)

k) Cost Auditors-

M/s Subhadra Dutta & Associates Cost Accountants, Duliajan, Assam

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l)

Citizens CharterPreamble- This Charter is a declaration of our mission, objectives, values, commitments, standards and our expectations from others. Mission1. To produce fertilizer efficiently, economically and in environment friendly manner. 2. To established itself as profit making enterprises. 3. To work for all round improvement of the strategically important North Eastern parts of the country. 4. To diversify into production of other industrial products. 5. To provide balanced economic growth in the region. ObjectiveThe Namrup Fertilizer plant was set up with the primary objectives of:1) Setting up countrys overall output. 2) Achieving higher agricultural production in general and food grains in particular. 3) Reduction of import of fertilizer and food from abroad. 4) Economic use of natural gas and prevent its wastage 5) Creating industrial infrastructure essential for further industrialization leading economic development of this region. 6) Optimum and judicious utilization of Natural Gas available in the region. 7) Making fertilizers available at door step of the farmer to grow more food for the country men. ValuesWe shall carryout our functions and duty with utmost: Sincerity Speed Equity
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Integrity Transparency and without any fear or favor.

VisionBVFCL is incorporated with the vision to become a world class fertilizer complex, committed to enhancing stakeholders value. StandardsWe have set up upon ourselves the standards for all transactions with you. We undertake that in case of likely or inevitable delay, we shall promptly communicate the same to the party concerned.

CommitmentsThey commit to1. Produce & distribute quality fertilizers conforming to the specifications. 2. Timely distribution of our fertilizers to ensure consumer satisfaction. 3. Continual up gradation of Technology & Development of HR. 4. Strict adherence to the prescribed Safety, Health & Environmental Protection Standards.

m) Service extended to the Customers/Citizens-

Training is imparted to the farmers free of cost by the Company in village/block level for balanced use of fertilizers for improving productivity. The following grievances redressal mechanism has been constituted in the company. 1. Employees Grievance Redressal Committee 2. Township Welfare Committee 3. Information under the Right to Information Act, 2005 4. Customer Grievances Redressal Cell
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5. Complaints involving redressal for bribes or financial irregularities, public may approach to the Chief Vigilance Officer of the Company

Time limit for disposal of grievancesa. Issue of acknowledgement /interim reply to petitioner b. Forwarding of the grievance petition to the concerned authority c. Final disposal of the grievance petition 2 weeks 3 weeks 2 months

n) Expectation from Customers/Citizens-

We expect from the customers / citizens to be reasonable and prompt in exercising your rights and obligations in all your transactions with the company without extending inducement of any kind and not raising any frivolous issues. a. Timely feed-back of information about the product purchased by the customer, its quality, weight, etc. b. Suggestion for further improvement.

1.2.3 History of BVFCL:

Brahmaputra Valley Fertilizer Corporation Limited (BVFCL) is one of the major public sector fertilizer companies in India. In fact, it is considered the pioneer in using associated natural gas for producing nitrogenous fertilizer. Brahmaputra Valley Fertilizer Corporation Ltd. was formed as a new company w.e.f. 1.4.2002 after de-merger from Hindustan Fertilizer Corporation Ltd. There are in total, 3 production plants at Namrup, in the Assams Dibrugarh district. The discovery of surplus natural gas and oil in the Naharkatia-Moran region and Lakwa oil fields respectively, provided the incentive for setting up the third production unit of Namrup. The first group of plants, i.e. Namrup-I was established in the sixties and went into commercial production in 1969. Namrup-II group of plants were added in the seventies and went into commercial production in 1976 and followed by Namrup-III group of plants established in the eighties which went into commercial production in 1987. All
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these three phases were established under Hindustan Fertilizer Corporation Ltd. The new Company i.e. BVFCL is presently having its head quarter at Namrup.

The Starting Namrup I: The entire project planning of Namrup-I, group of plants was started in the middle of 1960 by Hindustan Chemicals and Fertilizers, staring from invitation of quotation, preparation of tender specification scrutiny and of contact, co-ordination with various contracting agencies, preparation of overall factory plan,

procurement of indigenous materials and equipments etc. was taken care of by the technicians and engineers. It was merged with Fertilizer Corporation of India on 1st January 1961. After crossing various hurdles successfully, the foundation stone could be laid on 1st January 1966, by the Chief Minister of Assam, late B.P. Chaliha and the factory went into stream in the month of august 1968. Commercial production however commenced from 1st January 1969 with annual capacity of only 55000MT of Urea and 100000mt of Ammonium sulphate.Namrup-1 was built at a cost of 24.26 cores including foreign exchange of

6.36crores. Namrup-1 is the first factory in India to use natural gas as the basic raw material. Also it happened to be the first factory in the country to have used indigenous catalysts developed by then Planning and Development Division of FCL. The Expansion - Namrup-II: While operation of Namrup-|I was in progress, it was found that the surplus natural gas would be available in the adjoining Moran-Naharkatia oilfields of M/s Oil India Limited. In 1965, Government decided to gainfully utilized this associated natural gas by putting up another fertilizer factory. The techno-economic report of expansion of Namrup Fertilizer Factory was approved by the Ministry of Chemicals and Fertilizer in 1967. For implementation of the scheme the then FCI entered into a contract with M/s Technimont of Italy for supply of plant and machinery and signed a 10 years credit agreement in October 67 which became effective from 10th March 1968. The execution work then started on 27th March 1968. This plant was designed and engineered by Fertilizer (P&D) India limited, earlier known as Planning and Development division of FCI. To promote indigenous fabrication, Namrup fertilizer has gone all the way to provide facilities like workshop drawing, special quality raw materials special types of machineries for fabrication and also undertaken inspection/testing at different stages of fabrication. The factorys equipments, which were imported earlier, are now being indigenously manufactured. Another major achievements of this project have been import substitution by using FCIs own catalysts. Except ammonia synthesis and natural gas desulphurization catalysts all other catalysts were developed by P&D
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Division of FCI. Namrup was commissioned on 23rd April 76 when ammonia was produced and the plant produce Urea on 30tth April,1976. The plant went into commercial production on 1st October 1976. Namrup-II was built at a cost of Rs.74.9crores including foreign exchange of 23.6 crores rupees. RATED / DAY 600 tones 1000 tones CAPACITY

PLANT

Ammonia- II Urea-II

Table 1.2:Rated capacity per day of Namrup-II Total output of nutrient in the end of product is 1,51,800 tones Nitrogen in the form of 3,30,000 tons of Urea per annum. Thus total capacity of Namrup-I and Namrup-II is 1,96,800 tons of Nitrogen, the end product being 3,85,000 tons of Urea and 1,00,000 tones of Ammonium Sulphate per annum..

Namrup-II Project The Aggrandizement Namrup-III: The availability of surplus natural gas in the Naharkatia, Moran and Lakwa Oilfields led to the second phase of expansion of Namrup plants. Namrup-III was designed to produce 1167 MT/Day of Urea. The capacity of 167 MT/day of Urea I plant, operation of which was stopped w. e. f, September 86 was also included in this. However, with effect from 1.11.94. Urea-III plant has been declined with Namrup-I plant and
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capacity reduced to 1000 MT/Day. Namrup-II has been erected at a cost of about Rs. 301 crores including a foreign exchange component of Rs. 54 crores.

Namrup-III Project

1.2.4 Products of BVFCL:

1. Mukta Urea 2. Mukta Bio - Fertilizers. 3. MuktaVermi - Compost. 1) Mukta Urea: BVFCL, Namrup has one important finished product i.e. Prilled Urea (Brand Name: Mukta Urea). Ammonia is produced as Intermediate Product, which is used for the production of Urea. Mukta urea fertilizers are produced in its urea plant Urea-II and Urea-III.

2) Mukta Bio Fertilizers:

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Mukta Bio Fertilizers are produced by the BVFCL, in its Bio Fertilizer production Unit at Namrup, Assam. Bio Fertilizers are divided into two categories: a) Nitrogen fixing Bio Fertilizers. a) Mukta Rhizobium. b) Mukta Azotobacter. c) Mukta Azospirillum. These fixes Nitrogen and produce growth promoting substances thereby increasing crop yield from 10 to 35 %. b) Phosphate solubilizing Bio-Fertilizers. Mukta Phosphobactrin.

a) Nitrogen Fixing BioFertilizers: Mukta Bi Rhizobium:

i.

On seed treatment these Bacteria multiply rapidly in soil and enter into the developing roots of the legume plants to form nodules in due course. More nodules means more yield. Rhizobium BioFertilizer meant for one legume crop say Moong, Masoor or Black Gram cannot be used in any other legume. ii. Mukta BioAzotobacter :

These BioFertilizers contain very high population of live Azotobacter Bacteria which is aerobic, free living Nitrogen fixer. Azotobacter can be used in nonlegume crops of short, medium and long duration.

iii.

Mukta BioAzospirillum:

This Bio-Fertilizer also meant for many non-legume crop of any duration. Being microscopic this bacteria perform better in medium, heavy to heavy textured soils with high moisture levels. On application to soil, seed or saplings they multiply rapidly more towards root system and develop a thick population on root surface.

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b) Phosphate Solubilising Bio Fertilizers: Mukta Bio Phosphobactrin: This bio-fertilizer is a mixture of bacteria and fungi when applied to seed, seedling on soil, they multiply around developing roots and soils where they secrets various organic acids which acts upon otherwise unavailable phosphate substances in the soil and transform them to available phosphorus for plants to absorb and obtain phosphorus nourishment. 3) MuktaVermi Compost: Manufacture of Organic Manure and Vermi Compost Manure has been started from 12-06-2008 at Namrup, necessary infrastructure has been erected and manufacturing Organic Manure and Vermi. Compost Manure enriched with BioFertilizers. The filling of pits and de-composition of vegetation & cowdung are under process.

1.2.4 The Plants Brief Description (Namrup-I, II & III):

Water Treatment Plant: a) Raw Water: Raw Water from the River Dilli will be drawn into jack well through concrete bed underground. River water in the jack well also joined with the water from seepage of subsoil water through pipes embedded with the wall of jack well. After detention for some time clear water is obtained. Water pumped from jack well is fed to water treatment plant through 24 main line.

b) Capacities:i. ii. Process Water Sanitary Water4MG/D. 2MG/D.

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Water Treatment plant of BVFCL, Namrup

Ammonia Plant: Designed to produce 600MT of Ammonia per day in a single steam, this plant is based on steam reformation of Associated Natural gas. The Various Steps involved are: Desulphurization. Reformation. Shift conversion. Carbon dioxide removal. Methanation gas compression and ammonia synthesis.

The primary reformers and Ammonia synthesis sections have been designed by M/S Haldor Topsoe while Benefield process is used for gas purification. The rest of the plant is designed by M/s Project and Development.
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Ammonia Plant of BVFCL, Namrup Urea Plant: The urea plant uses conventional recycling process and its design and engineering have been done by M/s Project and Development India Limited. Ammonia, Carbon-dioxide gas and recycle carbonate are compressed and fed to a Urea Reactor at high pressure. The conventional stainless steel line reactor of multilayer construction is being is used for Urea synthesis. Laid in a single system the plant has a capacity to produce 1167 tons per day. Its various sections include Synthesis Decomposition, Concentration, Pilling, Recovery and Recycling. The special feature of Namrup-III Urea plant is its inbuilt effluent treatment facilities and recycle of the products from effluent back to the reactor.

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Urea Plant of Namrup-II Project

Bagging Plant: There are two modern bagging plants, one each for Urea II &III plants. The urea pills fallen from the top pilling tower collected on a conveyor belt, and sent to the bagging plant by running conveyor belts for packaging purpose. There the urea pills are measured accurately by the automatic weighing machine at 50kgs rate and are stitched the bags by automatic sewing machines after filled with weighed urea. The bags are marked as Mukta Urea with the symbol representing the Brahmaputra Valley Fertilizer Corporation Ltd., Namrup. The bags are purchased from competitive markets.

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Bagging Plant

Safety: The corporation stresses emphasis on safety and has received several awards from National Safety Council for brilliant safety records. In order to make the employees safety conscious, exhibitions and competition on safety are organized every year. All necessary safety gears/equipments /garments provided to the workmen so that safety rules can be observed while on duty.

Welfare: The corporation has made arrangements to provide self-contained housing accommodation with sanitation and electricity. The township is spread over a wide area and has a provision for education, clubs, market, hospital etc. Constant attempt has been made to improve the dwelling condition. The corporation has extended some financial assistance to the nearby educational institutions and other social organization depending on the merit of the cases from the Special Welfare Funds. Some of the Welfare Schemes of BVFCL are given below: 1) One sixty-bedded hospital.
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2) Seven numbers of schools. 3) One open stadium. 4) One indoor stadium. 5) One daily market. 6) Two recreational clubs. 7) Drinking water. 8) Grants. Training: The training centre of the corporation designed on the modern concept of Training Institute elsewhere gradually developed into the status of a fledged staff members and an independent workshop to train the apprentices with such facilities, it is in a position to meet with the training requirements of the newly recruited trainees along with the development of the workers, supervisor and the executives. To keep running the plants the job involved are categorized to be attend by the employees, these areas follows 1) The other parts of the employees involved are of maintenance group and categorized in three departments. 2) Mechanical group of employees attend jobs involved mechanically. These are repair of pumps, compressors, many other mechanical types of equipments. 3) Electrical group of employees look after the power supply, power cut-off, repair of electrical equipments. 4) Instrumentation group of employees works on the instruments keep them workable in all the times. Malfunctioning instruments are calibrated /set to work as desired by the process operation. All these three maintenance departments maintain workshop equipped with modern machines. There is a wing which looks after the quality control of the products. This is known as technical service wing. They keep advising from time to time to enhance product quality thus helping in increasing productivity.

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A group of chemicals under this wing are engaged in a well equipped laboratory. They analyze the process reaction and inform the operating group so that they can take action to correct the reaction. There is a wing to look after the safety of the employees as well as the machineries, equipment used in the factory. To enhance the safety sense among employees the seminars, training programmes are arranged from to time. A well equipped fire fighting department is in function. All kinds of Materials to be purchased or dispatched are taken by the Material management department. To develop skills of the employees there is an independent training centre equipped with training workshops for different trades, library, class rooms and laboratory etc. Seminars in different subjects are arranged from time to time for development of knowledge and skills of the employees. In addition to above the department like Personnel & Welfare, Human Resource Development, Public Relation, Administrative, Finance etc. take care of the employees for their better lively hood. The overall security of factory is under CISF(Central industrial Security Force). Revamping Project: Hindustan Fertilizer Corporation Ltd. was a gas based fertilizer factory producing Urea. The plants consisting of Ammonia and Urea units with total designed capacity of 1400 TPD of Ammonia and 2167 TPD of Urea were installed and commenced production in three stages, Namrup-I,II,III during 1969,1976 and 1987 respectively. However, the performance of the unit has been far from satisfactory due to the continuing hardware and equipment problems leading to a very frequent production outages and losses. Namrup-I is lying idle since 1994 requiring major repair and replacements. Namrup-II & III are on steam through their performance need to be improved. BVFCL was awarded contract to Process Licensors for examining the technical & economical feasibility of either future revamping of the existing Namrup plants to achieve energy consumption levels which are comparable to that of other gas based units within the country or setting up of a new Brown filed project to effectively utilize the natural gas available to BVFCL. Considering the above facts BVFCL has requested DOF (Department of Fertilizer) to allocate fund for the year 2011-12 for setting up Brown filed ammonia-urea complex. The company has received Rs. 45 crores as plan fund for the year 2010-11 and has already proposed requirement of Rs. 134 crores as plan fund for the year 2011-12 in addition to fund requirement for setting up Brown filed ammonia-urea complex

Scheme of De-Merger:
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Namrup Fertilizer Complex has not only been supplying much needed fertilizers required by farmers and foreign exchange earning planters of this region, but also supplementing Government efforts to educate farmers with various agronomic services. The historic condition made by Namrup Fertilizer Factory is the creation of an industrial society and environment in the North-Eastern region of country. Namrup was originally a unit of Hindustan Fertilizer Corporation Ltd. The other units were situated at Haldia and Durgapur at West Bengal and Barauni of Bihar. But due to the constant loss faced by the other units except Namrup the Government of India has decided to wind up the other factories and declared Namrup plant as a new company with the name BVFCL. Namrup-I is now closed down because of its old design the company is going into losses, Namrup II& III plant are currently running is full swing with a capacity of 1000 MT and Urea per day . Thus out of the rural landscape, Namrup fertilizer complex in the north-eastern region. Namrup being the oldest factory of HFCL, is always looking forward to higher fertilizer production and will always continue to contribute towards economic development of the nation in general and this region in particular. Namrup Fertilizer Complex is conscious of its obligations and it has been making every endeavor to achieve its goal. Today it is standing as a tower spreading its beacon all round this region.

Environmental Aspects: In regard to environmental protection, special consideration is given to control of discharge of industrial wastes in all forms of solid, liquid and gas in BVFCL, industrial area. Some of the discharge from the plants are particular matters like Oxides of Carbon, Ammonia Vapour etc(in air), suspended materials, Acidic, Alkaline substances, Nitrogenous Matters (in water). As Namrup-II group of were set up in several seventies, specific attention was not paid to the aspect of pollution and in-built facilities were not provided for pre-treatment of discharged effluents. However, Namrup-III plants came up with in built facilities for treatment and recycling of recovered solution back into the process and discharge of effluents from Namrup-III generally conform to the standards as per the Environmental Protection Act. Under the revamp scheme, these facilities are being provided in Namrup-II plants also. Several schemes that have been implanted are- Ammonia cal Effluent Control Scheme, Chromium Effluent, Oil Removal Scheme, PH control, safe disposal of hazardous wastes and emissions. Regular monitoring has been done to check the gaseous emission level. BVFCL, Namrup has been contemplating on maintaining all the safety and environmental related to agriculture.

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1.3 Introduction to Ratio Analysis:

To study the financial position of a firm various tools can be used. The ratio analysis is one of the most powerful tools of financial analysis. It is process of establishing and interpreting various ratios (quantitative relationship between figures and groups of figure). It is with the help of ratios that the financial statements can be analyzed more clearly and decisions made from such analysis. Meaning of Ratio: A ratio is simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. According to Kohler, a ratio is the relation, of the amount a to another b expressed as the ratio of a to b: a:b (a is to b);or as a simple fraction ,integer, decimal, fraction or percentage. In simple language ratio is one number expressed in terms of another and can be worked out by dividing one number into the. Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. However, ratio analysis is not an end in itself. It is only a means of better understanding of financial strengths and weaknesses of a firm. Calculation of mere ratios does not serve appropriate ratios are analyzed and interpreted. There are number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objective of analysis.

Interpretation of the Ratios: The interpretation of ratios is an important factor. Though calculation of ratios is also important but it is only a clerical task whereas interpretation needs skill, intelligence and foresightedness. The inherent limitations of ratios analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accountings polices, window dressing etc., should also kept in mind when attempting to interpret ratios. A single ratio in itself does not convey much of the sense. To make ratios useful, they have to be further interpreted. The interpretation of the ratios can be made in the following ways:

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1. Single Absolute Ratio: Generally speaking one cannot draw any meaningful conclusion when a single ratio is considered in isolation. But single ratio may be studied in relation to certain rules of thumb which are based upon well proven conventions as for example 2:1 is considered to be a good ratio for current assets to current liabilities. 2. Group of Ratios: Ratio may be interpreted by calculating a group of related ratios. A single ratio supported by other related additional ratios becomes more understandable and meaningful. For example, the ratio of current assets to current liabilities may be supported by the ratio of liquid liabilities to draw more dependable conclusion.

3. Historical Comparison: One of the easiest and most popular ways of evaluating the performance of the firm is to compare its present ratios with past ratios called comparison overtime. When financial ratios are compared over a period of time, it gives an indication of the direction of change and reflect whether the firms performance and financial position has improved, deteriorated or remain constant over a period of time. But while interpreting ratios from comparison over time, one has to be careful about the changes, if any, in the firms polices and accounting procedures.

4. Projected Ratios: Ratios can also be calculated for future standards based upon the projected or proforma financial statements. These future ratios may be taken as standards for compared with the standards ratios to find out variances, if any. Such variances help in interpreting and taking corrective action for improvement in future.

5. Inter-firm Comparison: Ratios of one firm can also be compared with the ratios of some other selected firms in the same industry at the same point of time. This kind of comparison helps in evaluating relative financial position and performance of the firm. But while making use of such comparison one has to be very careful regarding the different methods, policies and procedures adopted by different firms.

Uses of Ratio Analysis:

The use of ratios is not confined to financial managers only. The supplier of goods on credit, banks, financial institutions, investors, shareholders and management all make use of ratio analysis as a tool in evaluating the financial position and performance of a firm for granting credit, providing loans or making investments in the firm. With the use of ratio analysis one can measure the financial condition of a firm and can point out whether
36

the condition is strong, good, questionable or poor. The conclusions can also be drawn as to whether the performance of the firm is improving or deteriorating. Thus, ratios have wide applications and are of immense use today. A. Managerial use of ratio Analysis: 1) Helps in decision-making: Financial statements are prepared primarily for decision making. But the information provided in financial statements is not an end in itself and no meaningful conclusion can be drawn from these statements alone. Ratio analysis helps in making decisions from the information provided in these financial statements. 2) Helps in financial forecasting and planning: Ratio analysis is of much help in financial forecasting and planning. Planning is looking ahead and the ratios calculated for a number of years work as a guide for the future. Meaningful conclusions can be drawn for future from these ratios. Thus, ratio analysis helps in forecasting and planning. 3) Helps in communication: The financial strength and weakness of a firm are communicated in amore easy and understandable manner by the use of ratios. The information contained the financial statements is conveyed in meaningful manner to the one for whom it is meant. Thus, ratios help in communication and enhance the value of the financial statements. 4) Helps in co-ordination: Ratios help in co-ordination which is of utmost importance in effective business management. Better communication of efficiency and weakness of an enterprise results in better co-ordination in the enterprise. 5) Helps in control: Ratios analysis even help in making effective control of the business. Standards ratios can be based upon proforma financial statements and variances or deviations, if any, can be found by comparing the actual with the standards so as to take a corrective action at the right time. The weaknesses or otherwise, if any, come to the knowledge of the management which helps in effective control of the business. 6) Other uses: There are so many other uses of the ratio analysis. It is an essential part of the budgetary control and standard costing. Ratios are of immense importance in the analysis and interpretation of financial statements as they bring the strength or weakness of the firm.

B. Utility to shareholders/Investors: An investor in the company will like to assess the financial position of the concern where he is going to invest. His first interest will be the security of his investment and then a return in the form of dividend or interest. For the first purpose he will try to assess the value of fixed assets and the loans raised against them. The investor will feel satisfied only if the concern has

37

sufficient amount of assets. Long-term solvency ratios will help him in assessing financial position of the concern. Profitability ratios, on the otherhand, will be useful to determine profitability position.

C. Utility to Creditors: The creditors or suppliers extend short-term credit to the concern. They are interested to know whether financial position of the concern warrants their payments at a specified time or not. The concern pays short-term creditors out of its current assets. If the current assets are quite sufficient to meet current liabilities then the creditor will not hesitate in extending credit facilities. Current and acid-test ratios will give an idea about the current financial position of the concern.

D. Utility to Employees: The employees are also interested in the financial position of the concern especially profitability. Their wage increase and amount of fringe benefits are related to the volume of profits earned by the concern. The employees make use of information available in financial statements. Various profitability ratios relating to gross profit, operating profit, net profit etc. enable employees to put forward their viewpoint for the increase of wages and other benefits. E. Utility to Government: Government is interested to know the overall strength of the industry. Various financial statements published by industrial units are used to calculate ratios for determining short-term, long-term and overall financial position of the concerns. Profitability indexes can also be prepared with the help of ratios. Government may base its future policies on the basis of industrial information available from various units. The ratios may be used as indicators of overall financial strength of public as well as private sector. In the absence of the reliable economic information, governmental plans and policies may not prove successful.

F. Tax Audit Requirements: Section 44 AB was inserted in the Income Tax Act by the Finance Act, 1984. Under this section every assessee engaged in any business and having turnover or gross receipts exceeding Rs. 40 lakh is required to get the accounts audited by a chartered accountants and submit the tax audit report before the due date for filing the return of income under Section 139 (I). In case of a professional, a similar report is required if the gross receipts exceed Rs. 10 lakh. Clause 32 of the Income Tax Act requires that the following accounting ratios should be given: 1) Gross Profit/Turnover 2) Net Profit/Turnover 3) Stock-in-trade/Turnover 4) Material Consumer/Finished Goods Produced

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Limitations of Ratio Analysis:

The ratio analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from some serious limitations: A. Limited use of Single Ratio: A single ratio, usually, does not convey much of a sense. To make a better interpretation a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any meaningful conclusion. B. Lack of Adequate Standards: There are no well accepted standards or rules of thumb for all ratios which can be accepted as norms. It renders interpretation of the ratios difficult. C. Inherent Limitations of Accounting: Like financial statements, ratios also suffer from the inherent weakness of accounting records such as their historical nature. Ratios of the past are not necessarily true indicators of the future. D. Change of Accounting Procedures: Change in accounting procedure by a firm often makes ratio analysis misleading, e.g., a change in the valuation of methods of inventories, from FIFO to LIFO increases the cost of sales and reduces considerably the value of closing stocks which makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio. E. Window Dressing: Financial statements can easily be window dressed to present a better picture of its financial and profitability position to consider. Hence, one has to be very careful in making a decision from ratios calculated from such financial statements. But it may be very difficult for an outsider to know about the window dressing made by a firm. F. Personal Bias: Ratio are only means of financial analysis and not an end in itself. Ratios have to be interpreted and different people may interpret the same ratio in different ways. G. Uncomparable: Not only industries differ in their nature but also firms of the similar business widely differ in their size and accounting procedures, etc. It makes comparison of ratios difficult and misleading. Moreover, comparisons are made difficult due to differences in definitions of various financial terms used in the ratio analysis. H. Absolute Figures Distortive: Ratios devoid of absolute figures may prove distortive as ratio analysis is primarily a quantitative analysis and not a qualitative analysis. I. Price Level Changes: while making ratio analysis, no consideration is made to the changes in price levels and this makes the interpretation of ratios invalid. J. Ratios no Substitutes: Ratio analysis is merely a tool of financial statements. Hence, ratios become useless if separated from the statements from which they are computed.
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Classification of Ratios : Classification of ratios depends upon the objectives for which they are calculated. It may also depend upon the availability of data. Analysis of financial statements is made with a view to ascertain the efficiency and financial soundness of the company, as such Ratios can be classified on the basis of profitability, turnover and financial capability. For our purpose we have classified ratios as:

1. Liquidity Ratios- Liquidity refers to the ability of a concern to meet its current obligations as and when these become due. The short term obligations are met by realizing amount from current, floating or circulating assets. The current assets should either be liquid or near liquidity. These should be convertible into cash for paying obligations of short-term nature. To measure the liquidity of a firm, the following ratios can be calculated: a) Current Ratio b) Quick or Acid Test or Liquid Ratio c) Absolute Liquid Ratio or Cash Position Ratio.

2. Solvency Ratio It shows the proportion of debt and equity in financing the firms assets. Many variations of these ratios exist but all these ratios indicate the same thing. The extent to which the firm has relied on debt in financing assets. Some of the Solvency Ratio are: a) Debt Ratio b) Debt Equity Ratio

3.

Turnover ratios It reflects the firms efficiency in utilizing its assets. Several activity ratios can be calculated to judge the effectiveness of asset utilization. Some of them are: a) Inventory turnover

b) Days of Inventory Holding

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c) Debtors Turnover Ratio

d) Debtors collection Period

e) Fixed Assets Turnover Ratio

f) Current Assets Turnover Ratio

g) Creditors Turnover

h) Average Creditors Payment Period

4. Profitability ratio It measures the overall performance and effectiveness of the firm. Some of the profitability ratios are a) Gross profit Margin Ratio

b) Net Profit Margin Ratio

c) Return on Investment (before tax)

d) Return on Equity

5. Equity-Related Ratiosa) Earnings Per Share

b) Dividend Per Share

c) Dividend Payout Ratio

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1.4 Scope of the study:

The field of Ratio Analysis is crucial for identifying the profitability of the company. Ratio Analysis helps the management to make decision making process. The study was conducted to one organization i.e. Brahmaputra Valley Fertilizer Corporation Ltd. (BVFCL) to make a comparative study of the financial statement with the help of ratio analysis technique. Analysis was done within the organization and within the time period during which the study was conducted. Each and every efforts are being made to reach realistic conclusion and to give a true and clear picture of the financial statements with the help of various ratios.

1.5 Limitation of the study:

The limitations of the project are as follows: 1. The balance sheet of two years is studied. 2. The study is conducted within the framework of the Brahmaputra Valley Fertilizer Corporation Ltd. 3. Time taken to complete the project work is very limited. 4. The study aims at providing the practical knowledge by taking help of Corporation officials as well other staff members of the finance department. 5. The analysis and the result of the studying are applicable only to BVFCL not to the other corporation. 6. The accuracy of the analysis of the companies and suggestion is totally depends upon the information shared with and the observation. 7. The primary data collected are assumed to be correct.

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CHAPTER ( 2 )

OBJECTIVE OF THE STUDY

43

OBJECTIVES OF THE STUDY

The main aim of the study is to get an overview of the Financial Statement of Brahmaputra Valley Fertilizer Corporation Ltd. Namrup with the help of ratio analysis technique. And the specific objectives are as follows: 1. To provide a glimpse of Brahmaputra Valley Fertilizer Corporation Limited.(Namrup) In my project I have studied about the three plants of the company i.e. Namrup- I, II & III. The method that is used to find out this objective is through Internet, Companys website, Companys brochure etc.

2.

To understand the functioning of various sections of the Finance Department of Brahmaputra Valley Fertilizer Corporation Limited (BVFCL).

3. To make a comparative study of the Financial Statements of two years viz. 2009-10 and 2010-11 of BVFCL: The main purpose of this objective is to analyze the financial position of the company through ratio analysis with reference to the balance sheet of two financial years. The method that is used to find out this objective is through Companys Annual Report.

4. To suggest measures for underperformance of BVFCL. I have also studied the underperformance of the company. There are many reasons for the underperformance of the company which I have with the help of ratio analysis techniques. 5. To provide a sound basis for evaluating the productivity, efficiency and profitability of companys current performance level. After analyzing the financial position of the company through ratio analysis with the data collected from the companys Annual Report, I have came to know the current performance level of the company and its efficiency.

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CHAPTER ( 3 )

RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY

Definition:
Research methodology is a way to systematically show the research problem. It may be understood as a science of studying how research is done scientifically. It is necessary for the researcher to know not only the research methods but also the methodology. This section includes the methodology which includes the research design, sources of data, and tools of analysis and plane of analysis.

Good Research Requires:

The scope and limitations of the work to clearly defined. The process to be clearly explained so that it can be reproduced and verified by other researchers. . Highly ethical standards are applied. Data be adequately analyzed and explained. All findings are presented unambiguously all conclusions be justified by sufficient evidence.

Research Design:
The research design of the study is both exploratory as well as quantitative in nature. The study begins with the concept of knowing Fertilizer Industry in India and then about the activities and performance of Brahmaputra Valley Corporation Ltd. in particular which is the exploratory part. Later various annual accounts data collected with regards to BVFCL, Namrup is represented with the help of Ratio analysis, charts and graph which forms the quantitative part of he study.

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Data Collection:
The objective of the project becomes imperative together various information about BVFCL, basically the financial statement of Finance Department, the combination of various efforts were followed to obtain both primary and secondary data. Primary Data: Primary data are collected through various methods such as Observation and Personal Interview with the officers of Finance Department. Secondary Data: Secondary data are collected through various records registered maintained by the organization e.g.- Accounting and Financial Record, Personal Records and the Annual report of the two respective years. It also provides us online data collection facility; data serve as the basis for analysis

Tools and Techniques:

For analysis of data, various qualitative as well as quantitative tools have been used to make the study simple and precise. The tools like bar graph are used for the understanding of the data more clear, meaningful and interesting.

Plan of Analysis:
Charts and Graphs were used for the analysis of collected data.

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CHAPTER ( 4 )

DATA ANALYSIS AND INTERPRETATION

48

DATA ANALYSIS AND INTERPRETATION

1. CURRENT RATIO: Current ratio may be defined as the relationship between current assets and current liabilities. This ratio, also known as working capital ratio, is a measure of general liquidity and is most widely used to make the analysis of a short term financial position or liquidity of a firm. It is calculated by dividing the total of current assets by total of the current liabilities. Current Ratio= Current Assets / Current Liabilities. Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited 2010-11 2009-10 34894.00 20890.19 1.670 26065.57 18203.43 1.432

Year Current Assets

Current Liabilities Current Ratio Table: Current Ratio

Current Ratio
1.800 1.600 1.400 1.200 1.000 0.800 0.600 0.400 0.200 0.000 2010-11 2009-10 1.670 1.432

Fig: Current Ratio

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INTERPRETATION: The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands. Acceptable current ratios vary from industry to industry. If a company's current assets are in the range of 2:1, then it is generally considered to have good short-term financial strength. If current liabilities exceed current assets (the current ratio is below 1), then the company may have problems meeting its short-term obligations. If the current ratio is too high, then the company may not be efficiently using its current assets. As a conventional rule a current ratio of 2 to 1 or more is considered satisfactory. This rule is based on the logic that in a worse situation, even if the value of current assets becomes half, the firm will be able to meet its obligation. However an arbitrary standard of 2 to 1 should not be blindly followed. Firms with less than 2 to 1 current ratio may be doing well, while firms with 2 to 1 or even higher current ratios may be struggling to meet their obligations. This is because current ratio is a measure of quantity and not quality. ANALYSIS: The liquidity position of BVFCL in 2010-11 is 1.670 which is better when compared with the year 2009-10 (i.e., 1.432). The reason for the increase in the current ratio is mainly due to the increase in the current assets by 74.70 %, mainly on account of increase in sundry debtors, cash & bank balances. 2. QUICK RATIO: Quick Ratio, also known as Acid Test or Liquid Ratio, it is a more rigorous test of liquidity than the current ratio. The term Liquidity refers to the ability of a firm to pay its short term obligations as and when they become due. Quick ratio may be defined as the relationship between quick/liquid assets and Quick or liquid liabilities. Quick Ratio or Acid Test Ratio = Quick or Liquid Assets/Quick Liabilities Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year Quick Assets Quick Liabilities Quick /Acid Test Ratio Table: Quick Ratio 2010-11 31131.47 17032.04 1.830 2009-10 22019.07 15260.68 1.440

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Quick /Acid Test Ratio

2.000 1.800 1.600 1.400 1.200 1.000 0.800 0.600 0.400 0.200 0.000 2010-11 2009-10 1.830 1.440

Fig: Quick Ratio

INTERPRETATION: All current assets are not equally liquid. While cash is readily available to make payments to suppliers and debtors can quickly convert in to cash, inventories are two steps away from conversion into cash (sale & collection). Thus a larger current ratio by itself is not a satisfactory measure of liquidity when inventories constitute a major part of the current assets. Therefore the quick ratio, or acid test ratio, is computed as a supplement to the current ratio. The ratio relates highly liquid current assets, usually current assets less inventories, to current liabilities. A general rule of thumb states that the ratio should be 1 to 1 (or 1:1 or 1/1) Generally, a quick ratio of 1to 1 is considered to represent a satisfactory financial condition. However it should be remembered that all debtors may not be liquid and all the inventories are not absolutely non- liquid. Thus a company with a high value of quick ratio can suffer from the shortage of funds if it has slow paying, doubtful and long-duration outstanding debtors. On the other hand, a company with a low value of quick ratio may really be prospering and paying its current obligation in time if it has been turning over its inventories effectively.

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ANALYSIS: The Quick ratio of BVFCL in the year 2010-11 is 1.83 which is better as compared to the year 2009-10 (i.e. 1.44) which shows that in the year 2010-11 the company has the capacity to pay off its current obligation immediately and also it can easily converts its quick assets i,e cash and bank balances, sundry debtors, loans and advances to meet its current liabilities as compared to the year 2009-10. 3. ABSOLUTE LIQUIDITY RATIO or CASH RATIO: Absolute liquid ratio should also be calculated together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets. Absolute Liquid Assets include cash in hand and at bank and marketable securities or temporary investments. The acceptable norm for this ratio is 50% or 0.5 : 1 or 1:2 i.e. 1 worth absolute liquid assets are considered adequate to pay Rs 2 worth current liabilities in time as all the creditors are not expected to demand cash at the same time and then cash may also be released from debtors and investments. Absolute Liquid Ratio = Absolute Liquid Assets/Current Liabilities Figures ( In Lakhs )

Brahmaputra Valley Fertilizer Corporation Limited Year Absolute Liquid Assets Quick Liabilities Absolute Liquid Ratio 2010-11 16833.43 20890.19 0.806 2009-10 15489.37 18203.43 0.851

Table: Absolute Liquid Ratio

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Absolute Liquid Ratio

0.900 0.800 0.700 0.600 0.500 0.400 0.300 0.200 0.100 0.000 2010-11 2009-10 0.806 0.851

Fig: Absolute Liquid Ratio INTERPRETATION: Since cash is the most liquid asset, a financial analyst may examine cash ratio and its equivalent to current liabilities. Trade investment or marketable securities are equivalent of cash; therefore, they may be included in the computation of cash ratio. Cash Ratio shows the extent to which cash and marketable securities are able to meet the current liabilities. ANALYSIS: In 2010-11 the absolute liquid ratio is (0.806) which is quite lower as compared to 2009-10 i.e. (0.851). But still the company can easily convert its cash in hand, cash at bank balances to meet its current liabilities since the ratio 0.806 is quite satisfactory because it is much higher than the rule of thumb i.e. 0.500 4. DEBT RATIO: Debt Ratio = Debt/Capital Employed (Debt + Equity) Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year Debt Capital Employed Debt Ratio Table: Debt ratio 2010-11 90034.90 126618.14 0.711
53

2009-10 77760.9 114344.14 0.680

Debt Ratio
0.800 0.700 0.600 0.500 0.400 0.300 0.200 0.100 0.000 2010-11 2009-10 0.711 0.680

Fig: Debt Ratio

INTERPRETATION: The Debt Ratio establishes the relationship between the longs- terms funds raised from outsiders and total long- term funds available in the business. The lesser the reliance on outsiders the better it will be. If this ratio is smaller, it is better for the business itself; up to 50% or 55% this ratio may be acceptable. ANALYSIS: Since the company is running in losses for the past several years so the dependency on outsiders funds has increased. From the above table it can be seen that the debt ratio of the two considered years (71 % & 68%) is very much beyond the acceptable rule of thumb i.e. 50% to 55%. The main reason for increase in the debt ratio of the two years is mainly because of increase in the loan from Bank of India (Noida) and Government of India.

5. 5. DEBT- EQUITY RATIO: Debt- equity ratio is also known as External- Internal Equity Ratio is calculated to measure the relative claims of outsiders and the owners (i,e. shareholders) against the firms assets. This ratio indicates the relationship between the external equities or the outsiders funds and the internal equities or the shareholders funds.

54

Debt- Equity Ratio =

Outsiders Funds / Shareholders Funds Figures ( In Lakhs )

Brahmaputra Valley Fertilizer Corporation Limited Year Long Term Debts Share Holder's Fund Debt Equity Ratio Table: Debt- Equity Ratio 2010-11 90034.90 36583.24 2.461 2009-10 77760.9 36583.24 2.126

Debt Equity Ratio

2.500 2.000 1.500 1.000 0.500 0.000 2010-11 2009-10

2.461 2.126

Fig: Debt-Equity Ratio INTERPRETATION: The debt- equity ratio is calculated to measure the extent to which debt financing has been used in a business. The ratio indicates the proportionate claims of owners and the outsiders against the firms assets. The main purpose is to get an idea of the cushion available to outsiders on liquidation of the firm. As a general rule, there should be an appropriate mix of owners funds and outsiders funds in financing the firms assets. The interpretation of this ratio mainly depends upon the financial policy of the firm and upon the firms nature of
55

business. A ratio of 1:1 may be considered to be a satisfactory ratio although there cannot be any rule of thumb or standards for all type of business.

ANALYSIS: For the year 2009-10 the debt-equity ratio of BVFCL is the lower (2.126) when compared to the year 20102011 (2.461). As the debt equity ratio of both the considered financial years is high as compared to the rule of thumb 1:1, so the company should keep this ratio as low as possible. The main reason for increase in the debt equity ratio was due to increase in the outsiders funds. 6. INVENTORY TURNOVER RATIO OR STOCK: Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the requirements of the business. But the level of inventory should neither be too low or too high. It is very essential to keep sufficient stocks in business. Inventory Turnover Ratio indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory At Cost Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year COGS Av. Inventory at Cost Inventory Turnover Ratio 2010-11 16101.00 278.35 57.840 2009-10 15876.34 421.34 37.680

Table: Inventory Turnover Ratio

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Inventory Turnover Ratio

60.000 50.000 40.000 57.840 30.000 37.680 20.000 10.000 0.000 2010-11 2009-10

Fig: Inventory Turnover Ratio INTERPRETATION: Inventory turnover ratio measure the velocity of conversion of stock into. A high inventory turnover indicates efficient management of inventory because more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. A low inventory turnover ratio indicates an inefficient management of inventory. A low inventory turnover implies over-investment in inventories, dull business, poor quality of goods, stock accumulation, accumulation of obsolete and slow moving goods and low profits as compared to total investments. A too high turnover of inventory may not necessarily always imply a favorable situation. A high inventory turnover may be the result of a very low level of inventory which results in shortage of goods in relation to demand and a position of stock-out or the turnover may be high due to a conservative method of valuing inventories at lower values or the policy of the firm being to buy frequently in small lots. High inventory turnovers are indicative of efficient inventory management. This ratio should be as high as possible. ANALYSIS: The inventory turnover ratio of BVFCLL for the year 2010-11 is much higher (57.84 %) as compared to the year 2009-10 (37.68 %). Higher inventory turnover ratio indicates efficient management of inventory as stocks were sold more frequently; thus, enabling the company to meet its current business requirements.

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7. DAYS OF INVENTORY HOLDING: This period is calculated by dividing the number of days by inventory turnover. The formula may be as: Days of Inventory Holding = Days in a Year / Inventory Turnover ratio Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year Days in a Year Inventory Turnover Ratio Days of Inventory Holding Table: Days of Inventory Holding 2010-11 365 57.840 6.310 2009-10 365 37.680 9.690

Days of Inventory Holding

10.000 9.000 8.000 7.000 6.000 5.000 4.000 3.000 2.000 1.000 0.000 2010-11 2009-10 6.310 9.690

Fig: Days of Inventory Holding

INTERPRETATION: It is of the interest on the part of the management to see average time taken for clearing the stocks. A high numbers of days inventory indicates that there is lack of demand for the product being sold and a low days inventory ratio may indicates that the company is not keeping enough stock on hand to meet its future demands.
58

ANALYSIS: From the above table it can be seen that in the year 2010-11 the days of inventory Holding of BVFCL was lower i.e.(6.31) as compared to the previous year 2009-10 i.e. (9.69) which is an indicator of less time taken for clearing the stocks in the FY 2010-11.

8. DEBTORS TURNOVER RATIO: Debtors turnover ratio indicates the velocity of debts collection of business. In simple words, it indicates the number of tims average debtors or receivables are turned over during a year. Debtors Turnover Ratio: Net Sales / Average Debtors

Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year Net Sales Average Debtor's Debtor's Turnover Ratio Table: Debtors Turnover Ratio 2010-11 40092.81 9561.350 4.190 2009-10 26177.6 3787.660 6.910

Debtor's Turnover Ratio

7.000 6.000 5.000 4.000 3.000 2.000 1.000 0.000 2010-11 2009-10 4.190 6.910

Fig: Debtors Turnover Ratio

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INTERPRETATION: Debtors velocity indicates the number of times the debtors are turned over during a year. Generally the higher the value of debtors turnover the more efficient is the management of debtors/sales. Similarly low debtors turnover implies inefficient management of debtors/sales. There is no rule of thumb which may be used as a norm to interpret the ratio as it may be different from firm to firm, depending upon the nature of business. ANALYSIS: The debtors turnover ratio of BVFCL in the year 2009-10 is (6.91) as compared to the present year (4.19). The turnover ratio is lower in the present year which indicates inefficiency in the management of debtors/sales. In the year 2009-10 the debtors turnover is high which shows that the company had the ability to realize proceeds early against goods sold on credit basis.

9. DEBTORS COLLECTION PERIOD: Debtors Collection Period represents the average number of days for which a firm has to wait before its receivables are converted into cash. Debtors Collection Period = Number of Days in the year / Debtors Turnover Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year No. of Days in Year Debtor's Turnover Ratio Debtor's Collection Period 2010-11 365 4.190 87.110 2009-10 365 6.910 52.820

Table: Debtors Collection Period

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Debtor's Collection Period

90.000 80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0.000 2010-11 2009-10 52.820 87.110

Fig: Debtors Turnover Ratio INTERPRETATION: The debtors collection period ratio represents the average number of days for which a firm has to wait before its receivables are converted into cash. It measures the quality of debtors. The shorter the collection period the better is the quality of debtors as a short collection period implies quick payment by debtors. Similarly, a higher collection period implies as inefficient collection performance which in turn adversely affects the liquidity or short term paying capacity of a firm out of its current liabilities.

ANALYSIS: In the year 2009-10 BVFCL has a short collection period i,e (52.82) which implies quick payments by debtors. Whereas in the year 2010-11 the collection period increased to (87.11) which may in turn adversely affect the short- term paying capacity of BVFCL, out of its current liabilities.

10. CURRENT ASSETS TURNOVER RATIO: Current Assets Turnover Ratio indicates the velocity of the utilization of net current assets. This ratio indicates the number of times the current assets is turned over in the course of a year. This ratio measures the efficiency with which the current assets are being used by the company. Current Assets Turnover Ratio = Net Sales / Current Assets.

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Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year Net Sales Current Assets Current Assets Turnover Ratio Table: Current Assets Turnover Ratio 2010-11 40092.810 34894.000 1.150 2009-10 26177.6 26065.570 1.000

Current Assets Turnover Ratio

1.200 1.000 0.800 0.600 0.400 0.200 0.000 2010-11 2009-10 1.150 1.000

Fig: Current assets Turnover Ratio

INTERPRETATION: Current Assets Turnover ratio measures the efficiency with which the current assets are being used by the company. This ratio shows the productivity of the companys current assets. ANALYSIS: In the year 2009-10 the current assets turnover ratio of BVFCL is (1.00) as compared to the year 2010-11 (1.15) The main reason for increase in the current assets turnover ratio is due to increase in the net sales of FY 2010-11.

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11. FIXED ASSETS TURNOVE RATIO: Fixed asset turnover ratio is the ratio of sales (on the Profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales. Fixed Assets Turnover Ratio = NET SALES / NET FIXED ASSET Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year Net Sales Net Fixed Assets Fixed Assets Turnover Ratio Table: Fixed Assets Turnover Ratio 2010-11 40092.810 44547.130 0.900 2009-10 26177.6 47800.110 0.550

Fixed Assets Turnover Ratio

0.900 0.800 0.700 0.600 0.500 0.400 0.300 0.200 0.100 0.000 2010-11 2009-10 0.550 0.900

Fig: Fixed Assets Turnover Ratio INTERPRETATION: Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales. Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money
63

tied up in fixed assets for each rupee of sales revenue. A declining ratio may indicate that the business is overinvested in plant, equipment, or other fixed assets. ANALYSIS: In the year 2010-11 the fixed assets turnover ratio of BVFCL is high (0.90) as compared to the year 2009-10 which stood at (0.55) it indicates that BVFCL investment in plant, equipment and other fixed assets have been efficiently employed to yield proceeds. In the year 2010-11 BVFCL had made a huge investment in fixed assets as compared to the year 2009-10. Another important reason in the increase in the fixed asset turnover ratio is due to increase in net sales and increase in the fixed assets. 11 CREDITORS TURNOVER RATIO : In the course of business operations, a firm has to make credit purchases and incur short- term liabilities. Creditors Turnover Ratio = Purchases / Average Creditors. Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year Purchases Av. Creditors Creditor's Turnover Ratio Table: Creditors Turnover Ratio 2010-11 6574.120 16146.360 0.407 2009-10 3947.51 12706.420 0.311

Creditor's Turnover Ratio

0.450 0.400 0.350 0.300 0.250 0.200 0.150 0.100 0.050 0.000 2010-11 2009-10 0.407 0.311

Fig: Creditors Turnover Ratio

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INTERPRETATION: Creditors turnover ratio establishes the relationship between the payables and net credit purchases. This ratio indicates the velocity with which the creditors are turned over in relation to purchase. A lower ratio indicates that the company is able to make frequent payment to its creditors and outside parties whereas a higher ratio is considered to be unfavorable. ANALYSIS: In the year 2009-10 BVFCL has been able to maintain a low creditors turnover ratio (0.311) as compared to the present year 2010-11 (0.407). The reason for increase in creditors turnover ratio of BVFCL was due to rise in purchases on account of increase in purchase of raw materials and also increase in the sundry creditors. It shows that the company was not able to make quick payment to its creditors and outsiders parties in 2010-11 when compared to the FY 2009-10.

13. AVERAGE CREDITORS PAYMENT PERIOD: Payment period carries greater importance for business concerns, is the process to calculate the extent to which the payments have been made in time. Hence, average payment period is a step further for measuring the liquidity position of the firm. Average age of payables is the time margin between credit purchases and its timely payment to creditors. This further helps the company to gain strong creditworthiness in the market. The longer the payment period, the more liquid is the firms position.

Average Creditors Payment Period = Number of Days in the Year / Creditor Turnover Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year No. of Days in Year Creditor's Turnover Ratio Av. Creditors Payment Period 2010-11 365 0.407 896.810 2009-10 365 0.311 1173.630

Table: Average Creditors Payment Period

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Av. Creditors Payment Period

1200.000 1000.000 800.000 1173.630 600.000 400.000 200.000 0.000 2010-11 2009-10 896.810

Fig: Average Creditors Payment Period

INTERPRETATION: The average Creditors payment period ratio represents the average number of days taken by a business to pay its creditors. Generally, the lower the ratio the better is the liquidity position of the business and higher the ratio, less liquid is the position of the business. It is the process to calculate the extent to which the payments have been made in time. Hence, average payment period is a step further for measuring the liquidity position of the firm.

ANALYSIS: The average creditors payment period of BVFCL in the year 2009-10 was 1173.63 however the ratio sharply declined to (896.81) in the FY 2010-11. It shows that BVFCL has taken only 897 days to pay its creditors in the present year as compared to previous year of 1174 days. This interpretation shows that the liquidity position of the company is much better than the previous year.

14 GROSS PROFIT RATIO: Gross profit ratio measures the relation of gross profit to net sales and is usually represented as a percentage. Thus it is calculated by dividing the gross by sales.

Gross Profit / Loss Ratio = (Gross Profit / Net Sales) * 100

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Figures ( In Lakhs ) Brahmaputra Valley Fertilizer Corporation Limited Year Gross Profit Net Sales Gross Profit/Loss Ratio Table: Gross Profit / Loss Ratio 2010-11 3036 40092.810 7.570 2009-10 4179 26177.600 15.960

Gross Profit/Loss Ratio

16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0.000 2010-11 2009-10 7.570 15.960

Fig: Gross Profit / (Loss) Ratio

INTERPRETATION: The gross profit ratio indicates the extent to which selling prices of goods per unit may decline without resulting in losses on operations of a firm. It reflects the efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from the net sales, higher the gross ratio better the result. There is no standard norm for gross profit ratio as it may vary from business to business but the gross profit should be adequate to cover the operating (administrative and office expenses , selling and distribution expenses) and to provide for fixed charges , dividends and accumulation of reserves. A lower gross profit ratio, generally indicates high cost of goods sold due to unfavorable purchasing policies, lesser sales, lower selling prices, excessive competition, over investment in plant and machinery, etc.
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ANALYSIS: In the year 2009-10 the company has made a gross profit of 15.96% but as compared to the current year 2010-11 the companys gross Profit declined to (7.57%) which shows that the company declined from its previous year performance in the current year. The main reason for decrease in the gross profit ratio of 2010-11 is due to increase in cost of production and selling expenditure.

15 15 NET PROFIT / (LOSS) RATIO: Net Profit ratio establishes a relationship between net profit (after taxes) and sales, and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. This ratio is the overall measure of firms profitability and is calculated as: Net Profit / Loss Ratio =( Net Profit / Loss After Tax / Net Sales) * 100 Figures ( In Lakhs )

Brahmaputra Valley Fertilizer Corporation Limited Year Net Profit Net Sales Net Profit/Loss Ratio Table: Net Profit/(Loss)Ratio 2010-11 -8509 40092.810 -21.220 2009-10 -2786 26177.600 -10.640

0.000 2010-11 -5.000 -10.640 -10.000 -21.220 -15.000 -20.000 2009-10

Net Profit/Loss Ratio

-25.000

Fig: Net Profit/(Loss)Ratio

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INTERPRETATION: Net profit / loss ratio is very much useful because if the profit is not sufficient the company shall not be able to achieve a satisfactory return on its investment. If the ratio is lower than it is suitable for the company and if the ratio is higher than it is unfavorable for the company.

ANALYSIS: In the year 2009-10 the net loss ratio of the company stood at (-10.64%) much lower as compared to the Current Financial Year 2010-11 i.e.: (21.22%). In both the year the company has made loss. However the main reason for high loss in the current year was due to increase in expenditure i,e. on account of repairs & maintenance, power & fuel and other manufacturing expenses. The company should have focused on minimizing its expenditure and its selling expenditure.

16 RETURN ON SHAREHOLDER INVESTMENT: Return on shareholders investment, popularly known as R O I or return on shareholder / proprietors funds is the relationship between net profits (after interest & tax) and the proprietors funds. Return on Shareholders Investment = Net Profit / Loss (After Interest & Tax) / Shareholders Funds

Figures ( In Lakhs )

Brahmaputra Valley Fertilizer Corporation Limited Year Net Profit Net Sales Return on Share Holder's Investment 2010-11 -8509 36583.240 2009-10 -2786 36583.240

0.232

0.076

Table: Return on shareholders Investment

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Return on Share Holder's Investment

0.250

0.200

0.150 0.232 0.100 0.076

0.050

0.000 2010-11 2009-10

Table: Return on shareholders Investment

INTERPRETATION: This ratio is one of the most important ratios used in measuring the overall efficiency of a firm. As the primary objective of business is to maximize its earnings, this ratio indicates the extent to which this primary objective of business is being achieved. This ratio is of great importance to the present and prospective shareholders as well as the management of the company. As this ratio reveals how well the resources are being used. ANALYSIS: As the company is loss running company for the consecutive years the return on shareholder investment is also low or negative. This analysis shows that if there is profit then the ratio which is higher is considered to be better but as the company is making losses for both the year the ratio which is lower is considered to be better Therefore in the year 2009-10 the return on shareholders investment is (-0.076) which is quit better as compared to the year 2010-11 (-0.232). The main reason for low return on investment is due to heavy investment in fixed assets, decrease in profit and the accumulated losses.

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SUMMARY OF THE COMPARATIVE RATIO ANALYSIS:

The main motive of undertaking an in-depth financial analysis of the BVFCL Company is to provide access to assess its competitive position and also to know the performance of the company is improving or deteriorating. It is to be believed that a comparison of the financial statements with the help of ratio analysis would provide a sound basis for evaluating the productivity, efficiency and profitability of companys current performance level. Depending upon the performance of the business it will help in establishing future performance targets, objectives and in reaching the companys best practice level nationally and globally. The main aim was not only to make simply a comparison of the financial statement but also to explain the tools and techniques, which are very much necessary to show the clear cut view of the financial strength and weakness of the company. The conclusion can also be drawn as to whether the performance of the business is improving or deteriorating. Thus, ratios have wide application and are of immense use today.

NOTE: Since the company is a loss making company it was not possible to show all the ratios.

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4.1 MICHAEL PORTER ANALYSIS for BVFCL

Professor Michael Porter the guru of competitive strategy at Harvard Business School has identified five forces that drive competition within an industry:

a) Threat of new entrants. b) Competition. c) Bargaining power of buyers. d) Bargaining power of suppliers. e) Substitutes.

One obvious application of this is to would-be entrants and its problem of entering into new markets. Another is to the current competitors and the ongoing task of staying competitive in markets where they already operate. Perhaps the most important thing to be kept in mind is the inverse relationship between profit margins and the intensity of competition: as the intensity of competition goes up, margins and returns are driven down. This can require changes in competitive strategy to remain in an industry and, under some circumstances; it can even decide to exit from the business or an industry. `Michael Porters Five Forces Model

ENTRANT

SUPPLIERS

INDUSTRY COMPETITORS

BUYERS

SUBSTITUTES

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 Factors of Michael Porter Analysis:

A) Barriers to entrants: a) High capital requirement b) Government support to only public companies (in the form of subsidies) c) New players may not earn huge profits due to interference of government for price fixation. d) Intense competition from oil companies like Fertilizer Corporation of India Ltd., Indian Farmers Fertilizer Cooperative Limited etc. e) Access to inputs. f) Access to distribution g) Economies of scale may not be enjoyed by not-so-huge private player. B) Rivalry of Industry Competitors: a) Intense competition exists among the present players in this sector. C) Bargaining Power of Buyers: a) Government support to buyers in the form of reduced price of fertilizers products. b) Large number of buyers. c) Low profit margin. d) Presence of substitutes. e) Low switching cost. D) Bargaining power of Suppliers: a) Dominated by a few suppliers FCI and IFFCO b) Very few substitutes/ no substitutes c) Supply hindrance can cause impact on the flow of production. E) Threat of Substitutes: a) There are number of traditional substitutes to the fertilizers.

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CHAPTER ( 5 )

CONCLUSIONs AND RECOMMENDATIONs

74

CONCLUSIONs AND RECOMMENDATIONs

Conclusions:
The BVFCL is the one and only fertilizer industry in the entire North-Eastern region. BVFCL has used Natural Gas as its basic raw material, produced nearby gas fields of Oil India Limited. In addition, BVFCL is the only industry in the North East region who has been contributing the nation towards industrial and agricultural development of the country. The main motive of BVFCL is to produce urea in bulk but due to leakages in the plant and use of outdated machineries and equipment the company is not able to compete with rest of the newly developed industries. The object of nationalization of Public Sector Undertaking (PSU) by the Prime Minister Smt. Indira Gandhi was not for making profit but to improve Human Resource Development, Industrial Infrastructure development, Agriculture Development, Development of Information & Technology and many more.

Findings:
1) BVFCL is the only urea producing Fertilizer Company in the entire North East Region. 2) Ratio Analysis is done to have a clear view of the financial strength and weakness of the company. 3) The company had an accumulated loss of Rs. 64966.13 Lacs at the end of the financial year ending on 31.03.2011, which exceeds 50% of its Net Worth. Hence company comes within the preview of Sick Industrial Undertaking as per Section 2(46AA) of the Companies Act 1956. 4) The company possesses land measuring 840.66 acres. The company is yet to receive patta for 131.02 acres of land out of above and consequently mutation of the same in the name of the company is pending. 5) The company has accounted for Escalation Price (Subsidy) amounting to ` 1,399.14 lacs on claim lodged basis for the financial year 2010-11. Pending final settlement of such claims, the effect arising out of this, if any, is unascertainable. 6) Depreciation on Plant & Machinery (Revamp) is being charged @ 6.33% against 5.28% as per Companies Act, 1956 to keep parity with the FICC pricing policy as well as the project feasibility report of M/s. PDIL
75

which has the effect of increasing the loss for the year by ` 623.73 lacs and cumulative effect to the extent of loss of ` 3,538.66 lacs from F.Y.2002-03 onwards.

7) 1,705.84 lacs payable to Oil India Limited, Duliajan in terms of agreement entered with them for lower off take than YMGO quantity of Natural Gas (Previous Year ` 1,705.84 lacs) and ` 772.52 lacs on account of interest on late payment (Previous Year ` 322.43 lacs) has not been accounted for by the company in the books and has been shown as contingent liabilities. 8) Balances due from Sundry Debtors as at 31st March,2011 amounts to ` 13,458.43 lacs, which includes ` 79.91 lacs due for more than 3 years, against which the company holds a provision of ` 52.35 lacs resulting in short provision of ` 27.56 lacs.

9) In the year 2010-11 the current ratio was 1.670 which was better as compared to the year 2009-10 (1.432). The main reason for increase in the current ratio is due to increase in the inventories, sundry debtors, cash and bank balances.

10) Since the company has completed its life period of 15 years, the energy consumption is high due to excess consumption of raw material and its cost. The energy consumption is significantly high due to very old technology, reciprocating machines and natural gas supply at low pressure.

11) During the year, the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act 1956.

12) The Company has not raised any money by public issues during the year.

13) The performance of the Company is affected due to shortage of qualified and competent manpower in all most all the disciplines of the company.

14) Performance of plants has improved in the year 2010-11 with the help of various schemes. Schemes like replacement of leaky tubes of coolers and condensers are being taken up which will increase energy efficiency and help in sustained production. During 2011 Synthesis reactor catalyst basket (S- 100) of Namrup- III which had developed leakage and was causing Ammonia-III plant production limitation, was replaced with improved energy efficient S- 200 basket.
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Recommendation:
1) The profitability of the BVFCL should be maximized through proper product sale, lower cost of production. 2) The net sales should be increased more to increase the fixed asset turnover ratio. 3) The debtors collection period should reduce because it adversely affect the short- term paying capacity of BVFCL out of its current liabilities. 4) IT up gradation is required because most of the paper works are done manually which requires a huge involvement of time and also huge manpower. 5) Quick response should be given to meet market demand and contingencies. 6) The company should minimizes its net loss by minimizing its expenditure i,e. repair & maintenance, power & fuel and other manufacturing expenses. 7) There should be proper mix of debt and equity in raising funds from external sources which will maximize the value of the firm. 8) Present installed Machinery has lots of leakage; efforts should be made to stop same so as to get optimum production. 9) Finance departments top managements posts which are unoccupied and should be filled by way of hiring top professional so that a makeover of the company can be initiated. 10) Outdated machinery is still in use at BVFCL, efforts should be made to install the latest upgraded machinery which increases the efficiency of production thus lowering the production cost.

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BRAHMAPUTRA VALLEY FERTILIZER CORPORATION LIMITED BALANCE SHEET AS AT 31ST MARCH , 2011 PARTICULARS SCHEDULE AS AT 31.03.2011 (` in lacs) AS AT 31.03.2010

SOURCES OF FUNDS A. SHAREHOLDERS' FUNDS - Share Capital - Reserves & Surplus B. LOAN FUNDS - Secured Loan - Unsecured Loan

36,583.24 36,583.24 90,034.90 90,034.90 126,618.14

36,583.24 36,583.24 151.38 77,609.52 77,760.90 114,344.14

2 3

C. TOTAL FUNDS EMPLOYED [(A) + (B)] APPLICATION OF FUNDS D. FIXED ASSETS - Gross Block - Less : Depreciation - Net Block - Provision for Impairment of Assets

102,454.30 57,794.21 44,660.09 112.96 44,547.13 3,839.49 1,708.17 2,131.32 852.77 47,531.22 -

101,591.42 53,678.35 47,913.07 112.96 47,800.11 3,552.76 1,708.17 1,844.59 219.65 49,864.35 -

Capital Work-in-progress - Provision for Impairment of Assets Advance to contractors/suppliers/others against capital works done/to be done

E F

INVESTMENTS CURRENT ASSETS, LOANS & ADVANCES - Inventories - Sundry Debtors - Cash and Bank Balances - Other Current Assets - Loans and Advances 78

8 9 10 11 12

3,651.59 13,458.43 16,833.43 354.66 595.89

3,971.74 5,664.27 15,489.37 389.58 550.61

34,894.00 G. CURRENT LIABILITIES & PROVISIONS - Current Liabilities - Provisions

26,065.57

13 14

17,032.04 3,858.15 20,890.19 14,003.81

15,260.68 2,942.75 18,203.43 7,862.14 Cont.

H. NET CURRENT ASSETS [(F) - (G)]

BRAHMAPUTRA VALLEY FERTILIZER CORPORATION LIMITED BALANCE SHEET AS AT 31ST MARCH 2011 (Contd) (` in lacs) AS AT 31.03.2010

PARTICULARS

SCHEDULE

AS AT 31.03.2011

MISCELLANEOUS EXPENDITURE - Deferred Revenue Expenditure (Refer note 23 of Schedule 27)

15

116.98

160.85

- Profit & Loss Account (Dr Balance)

64,966.13 65,083.11

56,456.80 56,617.65

TOTAL ASSETS (NET) [(D)+(E)+(H)+(I)]

126,618.14

114,344.14

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BRAHMAPUTRA VALLEY FERTILIZER CORPORATION LIMITED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2011 (` in lacs) For the year ended 31.03.2010

P A R T I C U L A R S

Schedule

For the year ended 31.03.2011

A. Income from Operations - Sales Less : Excise Duty Subsidy Received/Receivable {Includes ` 4,837.85 lacs related to earlier years (Previous Year( -) ` 428.88 lacs)} (Refer note 11 of Schedule 27) - Other Income - Closing Stock TOTAL (A) :: B. Cost of Operations - Opening Stock - Materials Consumed (net of recovery) - Cost of Trading goods - Salaries, Wages, Bonus & Other Benefits to Employees - Power & Fuel - Freight & Handling Charges (net of recovery) - Repairs & Maintenance - Other Expenses - Interest (Net) - Depreciation 80 22 23 24 4 21 19 20 357.31 8,005.16 1,283.50 4,504.12 17,010.43 2,741.44 767.23 1,388.11 7,446.34 4,099.56 485.38 5,381.97 1,781.18 4,155.74 9,733.58 2,632.04 1,044.88 1,253.90 6,360.65 4,071.56 16 17,609.81 20.48 17,589.33 22,503.48 40,092.81 17,762.61 0.52 17,762.09 8,415.51 26,177.60

17 18

1,309.42 199.39 41,601.62

1,528.96 357.31 28,063.87

TOTAL (B) :: C. Deferred Revenue Expenditure w/o (Refer note 23 of Schedule 27) TOTAL (C) :: D. Provisions - For Loss on Disposal of Surplus/Obsolete Stores, Spares & Packing Materials. - For Doubtful Debts, Advances & Deposits - For Leave Encashment - For Gratuity TOTAL (D) ::

47,603.20 43.87 43.87

36,900.88 43.87 43.87

146.81 32.82 334.15 1,183.45 1,697.23

35.88 24.78 60.66

BRAHMAPUTRA VALLEY FERTILIZER CORPORATION LIMITED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2011 (Contd) (` in lacs) For the year ended 31.03.2010 37,005.41 (7,742.68) 25 766.65 (8,509.33) (56,456.80) 81 3,467.30 (5,474.24) (2,688.59) (2,785.65) (53,671.15)

P A R T I C U L A R S

Schedule

For the year ended 31.03.2011 49,344.30

E.

Total (B+C+D) ::

F. Exceptional items being adjustment in interest on GOI Loans G. Profit (Loss) for the Year [(A)-(E)+(F)] ::

H. Adjustments Relating to Prior Period (Dr. + / Cr. - ) I. Profit (Loss) after Prior Period adjustments (G+H) J. Brought Forward Profit (Loss)

K. Balance Profit (Loss) Carried to Balance Sheet L. Earning per Share (Face value ` 1000/- per share) - Basis and Diluted on PAT before exceptional items (`) - Basis and Diluted on PAT after exceptional items (`) (Refer note 24 of Schedule 27) M. Significant Accounting Policies N. Notes on Accounts 26 27

(64,966.13)

(56,456.80)

(232.61) (232.61)

(170.92) (76.15)

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BRAHMAPUTRA VALLEY FERTILIZER CORPORATION LIMITED, NAMRUP. PERFOMANCE AT A GLANCE Rs. In Lacs S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 SALES Subsidy TOTAL (1+2) Other income Stock: accretion(+)decretion(-) TOTAL INCOME Raw materials (Feed Stock) packing materials etc. Salaries & Allowances Repairs & Maintenance Power & Fuel Other Manufacturing Expences TOTAL EXPENDITURE Gross margin(6-12) Interest & Financial charges Depreciation Profit before taxation Provision for taxation Exceptional items NET PROFIT/LOSS Transfer to invesment Allowance Reserve Transfer from invesment Allowance Reserve Provision for dividend Corporate tax on propose dividend Net block Capital work in progress Current assets,Loan & Advance Current Liabilities & Provision Invesments Misc. expenditure (To the extent not written off or adjusted) Accumulated Losses Total Utilisation WORKING CAPITAL (26-27) 2010-11 17589 22504 40093 1309 -158 41244 8005 4504 767 17011 7921 38208 3036 7446 4099 -8509 0 0 -8509 0 0 0 0 44547 2984 34894 20890 0 117 2009 10 17762 8416 26178 1529 -128 27579 5382 4156 1045 9734 3083 23400 4179 6361 4071 -6253 0 3467 -2786 0 0 0 0 46092 3750 26088 18204 0 161 2008 09 11245 3827 15072 1396 -494 15974 4841 4109 1230 8418 7083 25681 -9707 7951 3845 -21503 0 0 -21503 0 0 0 0 46798 2917 15875 13849 0 0 2007 08 15994 9381 25375 946 -228 26093 5767 3868 1245 9551 5110 25541 552 7185 3951 -10584 0 0 -10584 0 0 0 0 52711 2807 20321 11658 0 0 2006-07 15317 13158 28475 930 -153 29252 5472 4213 1164 9560 5070 25479 3773 6137 3873 -6237 0 0 -6237 0 0 0 0 56587 2783 17244 11797 0 0 2005-06 9946 3469 13415 820 1132 15367 3828 3426 667 6957 5868 20746 -5379 2698 1900 -9977 0 0 -9977 0 0 0 0 58800 3496 12926 14687 0 40 2004-05 12469 2364 14833 1030 -2226 13637 3210 2686 448 4672 2905 13921 -284 774 709 -1767 0 4021 2254 0 0 0 0 14215 42585 14400 12622 0 80

30 31 32

64966 126618 14004

56457 114344 7884

53671 105412 2026 Page..2

32168 96349 8663

21584 86401 5447

15347 75922 -1761

5369 64027 1778

33 34 35 36

Long Term Borrowings Short Term Borrowings Share Capital Deferred Tax Liability

90035 0 36583 0

77610 151 36583 0

68684 145 36583

59687 79 36583 0

49818 0 36583 0

42425 0 33497 0

32879 0 31148 0

83

37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56

57

58 59

Reserve & Surplus Total Sources NET WORTH (35+30) Capital Employed (24+32) Finished Goods Work Progress Trading Goods Stores & Spares etc. Sundry Debtors Cash & Bank Balance Other Current Assets Loans & Advances Total (41 to 47) Less: Current Liabilities Provisions Total (49+50) NET WORKING CAPITA(48-51) Gross Internal Resources (15+19) Cumlative Gross Internal Resources INSTALLED CAPACITY (N) Urea (MT) Total PRODUCTION (N) Urea (MT) Total Capacity Utilisation (%) UREA SALES QUANTITY (MT) Urea Total

0 126618 -28383 58551 82 50 68 3452 13458 16833 355 596 34894 17032 3858 20890 14004 -4410 -7172 510000 510000 285143 285143 55.91 288303 288303

0 114344 -19874 53976 278 79 1 3614 5664 15489 390 573 26088 15261 2943 18204 7884 1285 -2779 510000 510000 309577 309577 60.70 308812 308812

105412 -17088 48824 279 153 54 3244 1911 9352 515 367 15875 10152 3697 13849 2026 -17658 -4792 510000 510000 190528 190528 37.36 200067 200067

0 96349 4415 61374 926 53 0 3023 3659 11765 581 314 20321 8147 3511 11658 8663 -6633 12866 510000 510000 329977 329977 64.70 333473 333473

0 86401 14999 62034 1182 26 0 3353 4684 7288 436 275 17244 8226 3571 11797 5447 -2364 19637 510000 510000 308303 308303 60.45 314676 314676

0 75922 18150 57039 1355 5 0 3444 1567 5719 142 694 12926 10925 3762 14687 -1761 -8077 22004 351320 351320 234578 234578 66.77 213700 213700

0 64027 25779 15993 195 35 0 3463 2087 8049 98 473 14400 8969 3653 12622 1778 2963 30081 315000 315000 203060 203060 64.46 247572 247572

84

BIBLIOGRAPHY

Books Refered:
Management Accounting: Principles and Practices by Pandey I.M, Gupta, S. K. and Sharma, R.K. (Kalyani Publishers, 2005)

WEBSITES:

www.bvfcl.com http://www.bvfcl.com/showpage.asp?id=25 http://business.mapsofindia.com/national-fertilizers/public/brahmaputra-valley.html

MAGAZINES REFERED: Annual Report of BVFCL for the year ended 2010-11 and 2009-10, Manuals published by BVFCL.

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