INTRODUCTION TO AMUL

Amul is an Indian dairy cooperative, based in Anand, Gujarat. The word Amul is derived from the Sanskrit word Amulya, meaning invaluable. The co-operative is also sometimes referred to by the unofficial backronym: Anand Milk Union Limited. Formed in 1946, it is a brand name managed by an Indian cooperative organisation, the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3.03 million milk producers in Gujarat. The Kaira District Co-operative Milk Producers' Union was registered on December 1, 1946 as a response to exploitation of marginal milk producers by traders or agents of existing dairies in the small town named Anand (in Kaira District of Gujarat). Milk Producers had to travel long distances to deliver milk to the only dairy, the Polson (brand) dairy in Anand. Often milk went sour as producers had to physically carry the milk in individual containers, especially in the summer season. The prices of buffalo and cow milk were arbitrarily determined. Moreover, the government at that time had given monopoly rights to Polson Dairy to collect milk from Anand and supply it to Bombay city in turn The success of the dairy co-operative movement spread rapidly in Gujarat. Within a short span five other district unions Mehsana, Banaskantha, Baroda, Sabarkantha and Surat were organized. In order to combine forces and expand the market while saving on advertising and avoid a situation where milk cooperatives would compete against each other it was decided to set up an apex marketing body of dairy cooperative unions in Gujarat. Thus, in 1973, the GCMMF was established. The Kaira District Co-operative Milk Producers Union Ltd. which had established the brand name Amul in 1955 decided to hand over the brand name to GCMMF (AMUL)

HISTORY OF THE ORGANISATION

During the fourth decade of the 19th century, the basic sources of income for farmers of the Kaira district was farming and selling milk. At that time there was great demand of milk in Bombay. The biggest purchaser of milk was Polson Ltd. It was a privately owned dairy that produced milk products and also supplied milk to various regions of the state. It enjoyed monopoly. All farmers of the Kaira district were at the mercy of the milk traders who dictated the process; they had nowhere to turn to. This unfair system spread widespread discontent amongst the farmers. Hence they all decided and appealed to Shri Sardar Patel, a great leader of Indias freedom movement, for help. Shri Sardar Patel advised them to market milk through a co-operative society that was operated by them individually. He sent his very trusted person, Shri Morarji Desai to organize the farmers. At a meeting held at Samarkha (a village near Anand) on January 4, 1946, it was resolved that milk co-operative societies would be organized in each village of Kaira district to collect milk from the producers and bring it to the district union. The government should be asked to buy milk from the union. When the government turned down the demand, Kaira districts farmers organized a milk strike for 15 days, not a single drop of milk was sold to traders. The Bombay Milk Scheme was badly affected. The milk commissioner of Bombay visited Anand, assessed the situation and decided to concede to the farmers demands. Thus, KDCMPUL Kaira District Co-operative Milk Producers Union Limited, came to existence. It was formally registered on December 14, 1946. During winter season, the quantity of milk received was very high. But the Bombay Milk Scheme did not accept the excess milk brought in by the farmers. Hence, this forced the farmers to sell excess milk to traders, which gave them very nominal amount for this quantity. This led to the decision to set up a plant to pasteurize milk. In the beginning there were only few farmers supplying about 250 liters of milk everyday.

With the financial help from UNICEF, assistance from the government of New Zealand under the Colombo plant, and technical assistance provided by FAO for Rs. 5 million, planning for the factory to manufacture milk powder and butter was done. Dr. Rajendra Prasad the then President of India laid the foundation on November 15, 1954. On October 31, 1955, Pandit Jawaharlal Nehru, the then Prime Minister of India, declared the plant open. In 1958, the plant expanded. It produced sweetened condensed milk. Two years later, Shri Morarji Desai, the then Finance Minister, inaugurated a new wing designed to manufacture 600 tons of cheese and 2500 tons of baby food per year. This was the first time in the world that cheese and baby food was processed and produced from buffalos milk on a large and commercial scale. A plant to manufacture balanced cattle feed, donated by OXYFAM, was formally commissioned on October 31, 1964, by Shri Lal Bahadur Shastri the then Prime Minister of India, at Boriavi. KDCMPUL then set up a plant to manufacture high protein weaning food, chocolate and malted drink at Mogar, about 8 kms south of Anand.

AMUL means "priceless" and it comes from the Sanskrit word Amoolya. This brand name suggested by a quality control expert in Anand. Variants, all meaning "priceless", are found in several Indian languages. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul

Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (Turnover: Rs. 42.78 billion in 2006-07). Today Amul is a symbol of many things. Of high-quality products sold at reasonable prices, of the genesis of a vast co-operative network, of the triumph of indigenous technology, of the marketing survey of a farmers' organisation. And have a proven model for dairy development. Today there are twelve dairies producing products under the brand name of AMUL. AMUL is now Asias largest dairy brand and it is the worlds second largest firm producing dairy products. FOUNDER OF THE COMPANY

Mr. Verghese Kurien showed main interest in establishing union who was supported by Shri Tribhuvandas Patel who lead the farmers in forming the Cooperative unions at the village level. The Kaira district milk producers union was thus established in ANAND and was registered formally on 14th December 1946. Since farmers sold all the milk in Anand through a co-operative union, it was commonly resolved to sell the milk under the brand name AMUL.

STAGES OF DEVELOPMENT

Growth of Amul is not a one-night story. It took several decades to succeed in the present manner. Initially, Amul started with one single society, now it has around 1231 societies in its net. It poured in 250 liters of milk per day initially, which has now reached up to 15 lac liters per day in FLUSH (winter) season and about 8 lac to 9 lac liters of milk per day during LEAN (summer) season. The main stages of development of Amul are as follows: In 1954: UNICEF provided financial help worth Rs. 50 million to Amul. This financial help led Amul to establish fully automatic plant for producing milk and milk powder. In 1958: Amul expands; it started producing sweetened condensed milk. In 1960: Excess milk that was brought in by the farmers in the winter season and huge amount of profit made it possible the expansion of Amul. Amul established producing cheese and baby food. This created history in the world dairy industry because, it was for the first time in the world that cheese and baby food was processed from buffalos milk instead of cows milk. In 1981: The new cattle feed plant at Kanjari was commissioned. In 1992: For getting the benefits of excess supply of milk, Amul established another plant named Amul III. This plant has a capacity of processing 14 lac liters of milk everyday. In 1994: The new cheese plant was established at Khatraj. Together with it was established the Mogar plant to produce chocolates and malted drink. Both of these plants were commenced with the help of NDDB. In 2001: Amul launched its flavored milk variety. This was a major jump taken by Amul. In 2003: For expanding the market share, Amul launched the Snowball pizza and flavored lassi. These helped Amul to gain a major chuck of market share. In 2004: Amul keeps on achieving new heights in the competitive world. It has launched Chocozoo (chocolate) and Munchtime (crunchy snack). Amul also started new satellite dairies at Pune and Kolkata. This will be a help in gaining larger portion of market share.

ORGANISATION PROFILE

Name: Kaira District Co-operative Milk Producers Union Limited Address: The KDCMPU Ltd. Amul Dairy Road, Anand 388001 Gujarat [INDIA] Date of Establishment: 14 December, 1946 E-MAIL: amuldairy@amuldairy.com

Form of unit: A Co-operative Society, registered under Co-operative Societies Act, 1912. Bankers: 1. Kaira District Central Co-operative Bank Limited. 2. Axis Bank 3. Corporation Bank 4. State Bank of India

Plants:

1. Anand Plant

Anand plant is the main plant. Most of the raw-milk is procured here. Products being manufactured here are butter, flavored milk, ghee, milk powder and baby food.

2.Mogar Plant

It is situated on Anand-Vadodara national highway no.8. It produces chocolates, nutramul, Amul lite and, Amul Bread and Amul ganthia.

2. Kanjari Plant

Cattle feed is produced here.

3.Khatraj Plant

This plant is situated between Nadiad and Mhemdabad highway. Cheese, Paneer and Whey powder is produced here.

3. Satellite Dairies

Amul has got satellite dairies at Mumbai, Pune and Kolkata. It helps in handling operations of the organisation from a distant place.

INITIAL PROMOTERS 1). Shri Tribhuvandas Patel. 2). Shri Morarjibhai Desai.

BOARD OF DIRECTORS:
Shri Bhaijibhai A. Zala Shri Ramsinh P. Parmar Shri Rajendrasinh D. Parmar Shri Dhirubhai A. Chawda Shri Mansinh K. Chauhan Shri Maganbhai G. Zala Shri Sivabhai M. Parmar Shri Pravinsinh F. Solanki Shri Chadubhai M. Parmar Chairman Vice Chairman Member Member Member Member Member Member Shri Bipinbhai M. Joshi Shri Madhuben D. Parmar Shri Saryuben B. Patel Shri Ranjitbhai K. Patel Shri B. M. Vyas Shri Rahulkumar Shrivastav Shri I M Purohit Registrar Member Member Member Member Individual Member MD (GCMMF) MD (KDCMPU) District

NUMBER OF EMPLOYEES Approximately 1432

TOTAL NUMBER OF SOCIETY MEMBERS Approximately 2.28 million.

TOTAL NUMBER OF SHIFTS First Shift Time Second Shift Time Third Shift Time 8:30 a.m. to 4:30 p.m. 4:30 p.m. to 12:30 a.m. 12:30 a.m. to 8:30 a.m.

PEOPLE POWER: AMUL'S SECRET OF SUCCESS

The system succeeded mainly because it provides an assured market at remunerative prices for producers' milk besides acting as a channel to market the production enhancement package. What's more, it does not disturb the agro-system of the farmers. It also enables the consumer an access to high quality milk and milk products. Contrary to the traditional system, when the profit of the business was cornered by the middlemen, the system ensured that the profit goes to the participants for their socio-economicupliftment and common good.Looking back on the path traversed by Amul, the following featuresmake it a pattern and model for emulation elsewhere. Amul has been able to: Produce an appropriate blend of the policy makers farmersboard of management and the professionals: each group appreciating its rotes and limitations, Bring at the command of the rural milk producers the best of the technology and harness its fruit for betterment. Provide a support system to the milk producers without disturbing their agro-economic systems, Plough back the profits, by prudent use of men, material and machines, in the rural sector for the common good and betterment of the member producers and Even though, growing with time and on scale, it has remainedwith the smallest producer members. In that sense. Amul is an example par excellence, of an intervention for rural change.The Union looks after policy formulation, processing and marketing of milk, provision of technical inputs to enhance milk yield of animals, the artificial insemination service, veterinary care, better feeds and the like - all through the village societies. Basically the union and cooperation of people brought Amul into fame i.e. AMUL (ANAND MILK UNION LIMITED), a name which suggest THETASTE OF INDIA.

PRODUCT PROFILE
Bread spreads: Amul Butter Amul Lite Low Fat Bread spread Amul Cooking Butter Amul Shakti Toned Milk Amul Fresh Cream Amul Snowcap Softy Mix

Pure Ghee: Amul Pure Ghee Sagar Pure Ghee Amul Cow Ghee

Cheese Range: Amul Pasteurized Processed Cheddar Cheese Amul Processed Cheese Spread Amul Pizza (Mozzarella) Cheese Amul Shredded Pizza Cheese Amul Emmental Cheese Amul Gouda Cheese Amul Malai Paneer (cottage cheese) Utterly Delicious Pizza

Infant Milk Range: Amul Infant Milk Formula 1 (0-6 months) Amul Infant Milk Formula 2 ( 6 months above) Amulspray Infant Milk Food

Milk Powders: Amul Full Cream Milk Powder Amulya Dairy Whitener Sagar Skimmed Milk Powder Sagar Tea and Coffee Whitener

Mithaee Range (Ethnic sweets): Amul Shrikhand (Mango, Saffron, Almond Pistachio, Cardamom) Amul Amrakhand Amul Mithaee Gulabjamuns Amul Mithaee Gulabjamun Mix Amul Mithaee Kulfi Mix Avsar Ladoos

Sweetened Condensed Milk: Amul Mithaimate Sweetened Condensed Milk

Fresh Milk: Amul Taaza Toned Milk 3% fat Amul Gold Full Cream Milk 6% fat Amul Shakti Standardised Milk 4.5% fat Amul Slim & Trim Double Toned Milk 1.5% fat Amul Saathi Skimmed Milk 0% fat Amul Cow Milk

UHT Milk Range: Amul Shakti 3% fat Milk

Amul Taaza 1.5% fat Milk Amul Gold 4.5% fat Milk Amul Lite Slim-n-Trim Milk 0% fat milk

Utterly Delicious (Vanilla, Strawberry, Chocolate, Chocochips, Cake Magic)

Curd Products: Yogi Sweetened Flavored Dahi (Dessert) Amul Masti Dahi (fresh curd) Amul Masti Spiced Butter Milk Amul Lassee

Chocolate & Confectionery: Amul Milk Chocolate Amul Fruit & Nut Chocolate

Brown Beverage: Nutramul Malted Milk Food

Milk Drink: Amul Kool Flavored Milk (Mango, Strawberry, Saffron, Cardamom, Rose, Chocolate) Amul Kool Cafe

Amul Ice creams: Royal Treat Range (Butterscotch, Rajbhog, Malai Kulfi) Nut-o-Mania Range (Kaju Draksh, Kesar Pista Royale, Fruit Bonanza, Roasted Almond) Nature's Treat (Alphanso Mango, Fresh Litchi, Shahi Anjir, Fresh Strawberry, Black Currant, Santra Mantra, Fresh Pineapple) Sundae Range (Mango, Black Currant, Sundae Magic, Double Sundae) Assorted Treat (Chocobar, Dollies, Frostik, Ice Candies, Tricone, Chococrunch, Megabite, Cassatta) Bread Bun

Health Beverage: Amul Shakti White Milk Food

Bakery Products:

10

PRODUCTION DEPARTMENT

Since Milk is the basic raw material that the organization procures, we shall first study the process flow chart for pasteurizing milk.

Process Flow Chart for Amul 3 is as follows:

Raw chilled milk (in tankers or cans)

Tested for acidity and temperature (Fat and SNF)

Filter

Chiller (temperature up to 2 degree Celsius)

Raw milk buffer tank

Milk clarifier

Raw milk silos

Balance tank of pasteurize

1st regeneration section of milk pasteurize

Cream separator (60-65 degree Celsius)

11

Cream separated

Sent to cream buffer tanks

Cream pasteurize (at 90 degree Celsius for no hold)

Cream balance tank

Sent to butter or ghee section

EXPLAINING THE PROCESS:

Milk from various villages is collected at chilling centers and from there milk is sent to the dairy in tankers. Still at some places where a chilling center is not available, milk is collected in cans. From the milk collected at the Milk Reception Bay or the Raw Milk Receiving Dock, samples are taken and sent for quality check at the laboratory. Various tests that are done to check the quality of the milk tests for fat, SNF (Solid Non Fat), Bacterial count, etc. are done. Acidity and temperature of milk is recorded first because on this basis milk is accepted or rejected. Unloading of milk is done in a milk buffer tank. Milk stored there is cooled at 4 deg. Celsius and sent for clarification. Clarification is a very important process wherein dust, dirt or any kind of other impurities are removed and milk is purified. From clarifiers milk is sent to the raw milk silos and stored temporarily, from where milk is sent for pasteurization and then to further processes. Pasteurization is a process whereby the germs and bacteria and pathogens are killed. In this process, milk is heated up to 76 deg. Celsius and is held at that temperature for about 15 to seconds and then cooled up to 4 deg. Celsius. Simultaneously after heating cream is separated from milk. Cream that is separated here is used for standardization of milk and surplus cream is used for production of butter and ghee. Cream is added to milk as per the type of milk that is low fat (skimmed) milk will have minimum fat, while Amul Gold will have more percentage of fat. Surplus of standardized milk is used for production of milk powder or for making flavored milk and sent to market for sale.The separated cream is further pasteurized at 90 deg. Celsius to make it fit for human consumption. After that it is cooled and is stored in cream tanks for ripening and then it is sent for butter manufacturing.

12

Reception of Milk

Raw milk collected at Amul 3 is received through cans and in tankers from Amul 2, where three reception lines unload milk tankers.

Each reception line is equipped with following 1. Centrifugal pumps each of capacity of 30,000 liters per hour. 2. Deaerator tank to remove air from the milk. 3. Filters to filter out sludge and other impurities from milk. 4. One Pre-heat exchanger after each filter. 5. Raw milk silo for storing raw milk.

Milk pasteurizing has six sections:

1. Regeneration 1st milk first enters in this section, here the heat of outgoing milk is utilized to heat the incoming chilled milk and incoming chilled milk cools down the outgoing milk. 2. Pre-heating section at this juncture milk is heated at 60 deg. Celsius. 3. Regeneration 2nd now the standardized milk is further heated before going to heating section by milk coming from holding tubes. 4. Heating section milk from the regeneration section 2nd is heated up to the pasteurization temperature by hot water. 5. Holding tubes pasteurized milk is held in the holding tubes, which is 42 m long, and 72 mm wide in diameter. 6. Chilling section milk is chilled here by chilled water.

13

Milk Pouch Packing Process (Liquid Milk)

Raw Milk Receiving Dock or the Milk Reception Bay at Amul 2 receives milk twice a day. It receives cows, buffalos and mix milk from different co-operative societies associated with Amul. They collect milk in the morning as well as in the evening. There are total 102 routes and 1230 societies from where milk is collected and sent to Anand plant. Milk is then standardized to prepare flavored milk. It is homogenized and then flavored milk is produced from it. Surplus milk is sent to Amul 3 where various other milk products are manufactured.

The farthest milk collection centre is at Balasinor while the nearest is at Anand.

Milk Reception

For reception of milk there are two reception lines. Cans are manually put on the conveyor. At first instance the cans are tested by the person in charge of it by putting a plunger inside the can and smelling the milk whether it is good or sour. Sour milk and curd are dumped into another tank. Milk is then put on the weighing tank and is along with weighing it, it is tested for fat and SNF. Then the valve of the weighing tank is opened and milk flows into the raw milk storage tank and cans move to the can washer. On each line there is a can washer and each can washer has a capacity of 20 cans per minute.

Butter

Contents Milk Fat 80% Moisture 16% Salt Curd 2.5% 0.8%

Process Cream for manufacturing butter in Amul 3 is to be received from following sources: a) Cream from other dairies through tankers. b) Cream produced in Amul 3 while standardization of milk. c) Cream pumped from Amul 2.

14

Before initiating the butter making process the Continuous Butter Making Machine has to be rinsed with cold water for about 10 to 15 minutes. The very first step in butter making is churning of cream. Cream is churned at a speed of 800 to 1200 rpm at 12 degree Celsius. Although the speed for churning the cream depends upon the quality of cream and the type of product that is desired from the cream. The properties of cream that influence and are required to be known before churning are viscosity (its thickness), ripening of cream and whether cream is sweet or sour in taste. The butter grains formed in the churning process enter the working cannon along with the buttermilk. Process: Raw cream

Pastuerisation (at 90 oC)

Cooled

Ripening (at 9 oC for 20 hours)

Cream balance tank

Heat exchanges (for temperature adjustment at 6 to 10 oC)

Churning

Unsalted Butter

Salting

White Butter

Grinding

Used for ghee manufacturing 100 gm and 500 gm packs

Brine and color addition

15

PARTICULARS Opening stock of Raw Material ADD: Purchase of raw material LESS: Closing stock of Raw material COST OF RAW MATERIAL CONSUMED ADD: Labour expenses ADD: Opening stock of Work in Progress LESS: Closing stock of Work in Progress PRIME COST ADD: Manufacturing Expenses 1.Research and extension expenses 2.Processing Expenses 3.Packaging Expenses 4.Power and fuel expenses 5.Salaries and wages 6.Staff provident fund, Gratuity and other amenities 7.Repairs and Maintenance expenses 8.Insurance premium 9.Rent,rates and taxes 10.Depreciation 682.36 67.76 33.15 535.35 954.67 711.64 6438.42 2305.88 822.08 282.21 154.85

06-07 207.39 93690.87 266.58 93631.68 _ 1902.08 2319.85 93213.91

07-08 266.58 114617.8 415.92

08-09

64030.16 207.39 63977.62 _ 1821.55 1902.08 63897.09

114468.46 _ 2319.85 2539.55 114248.76

1182.12 1089.17 8363.90 3046.28 1006.18 288.06

910.43 1581.04 10477.66 4003.98 1067.71 343.15

850.84 48.41 34.89 459.16 16359.39 109573.3

1024.60 36.08 88.52 641.74 20174.93 134423.69

12833.55 FACTORY COST/COST OF PRODUCTION ADD: Administration expenses 1.Power and fuel expenses 2.Salaries and wages 3.Repaires and maintenance 4.Insurance premium 5.Rent,rates and taxes 6.Depreciation 7.Postage,Telegram,Telephone,Printing And stationary expenses 8.Audit fees 9.Adminstration expenses 10.Staff Provident fund, Gratuity and other amenities 1925.24 OFFICE COST ADD: Opening stock of finished goods LESS: Closing stock of finished goods 78655.88 6013.22 4843.32 92.87 133.51 188.14 576.48 548.06 170.6 16.95 8.29 133.83 56.51 76730.64

761.58 670.79 212.71 12.11 8.73 114.75 56.14

1001 711.81 256.16 9.03 22.13 160.43 63.05

99.66 166.77 192.04

103.79 198.96 228.76

2295.28 111868.58 4843.32 10890.43

2755.12 137178.81 10890.43 13379.03

16

COST OF GOODS SOLD ADD: Selling and distribution expenses 1.Freight and forwarding expenses 2.Marketing expenses

79825.788

105821.47

134690.21

695.21 106.17 801.38

1015.17 109.99 1125.16 106946.63 240.65 107187.29

1554.12 125.87 1679.99 136370.20 842.144 137212.35

COST OF SALES ADD: PROFIT OR SALES SALES

80627.16 1004.522 81631.69

Finance Department Finance is the art and science of managing money. Financial management is concerned with the duties of the financial managers in the business firm. Financial managers actively manage the financial affairs of any type of business namely, financial and non- financial, private and public, large and small, profit seeking or not-for-profit.

Scope of Financial Management

The approach to the scope of financial management is divided in to two broad categories, 1. Traditional Approach 2. Modern Approach 1. Traditional Approach

The traditional approach to the scope of finance function evolved during the 1920s and 1930s. As the name suggests, the concern of corporate finance was with the financing of corporate activities. In the other words, the scope of the finance function was treated by the traditional approach in the narrow sense of procurement of funds by corporate enterprise to meet their financial needs. The term procurement was used in a broad sense so as to include the whole gamut of raising funds externally. There are several weaknesses of this approach forcing us to discard this as an out-dated approach. The first argument against the traditional approach was based on its emphasis on issues relating to the procurement of funds by corporate enterprises. This approach ignored the views and opinions of those who are to use the funds inside the organisation. They considered the outsider-in approach. The internal decision makers were ignored. The second weakness was that focus was on financing problems of corporate enterprise. It did not consider non-corporate enterprises. Finally, the traditional treatment was found to have a lacuna to the extent that the focus was on long-term financing. It believed that issues pertaining to working capital management were not under the purview of financial management. 2. Modern Approach

17

The modern approach views the term financial management in a broad sense. According to it, the finance function covers both acquisitions of funds as well as their allocations. Thus, apart from the issues involved in acquiring external funds, the main concern of financial management is the efficient and wise allocation of funds to various uses. The principal contents of modern approach to financial management can be said to be: (i) (ii) (iii) How large should an enterprise be, and how fast should it grow? In what form should it hold assets? And What should be the composition of its liabilities?

The questions posed above cover major issues faced by any enterprise. The financial management is concerned with the solution of investment, financing and dividend decisions. Thus, financial management, in the modern sense of the firm, can be broken down into three major decisions as functions of finance: (A) (B) (C) The Investment Decision, The Financing Decision, and The Dividend Decision.

(A) The Investment decision relates to the selection of assets in which funds will be invested by a firm. The assets which can be acquired can be divided broadly into two groups: (i) long term assets which yield a return over a period of time in future, (ii) short term assets, defined as those assets which in normal course of business can be converted into cash without diminution in value, usually within a year.It normally includes decisions for capital budgeting and working capital management.

(B) The Financing decision is concern with the financing-mix or capital structure or leverage. The term capital structure refers to the proportion of debt (fixed interest sources for financing) and equity (variable-dividend securities/source of funds). A capital structure with a reasonable proportion of debt and equity capital is called the optimum capital structure. Thus, one dimension of the financing decision whether there is an optimum capital structure and in what proportion should funds be raised to maximize the return to shareholders? The second aspect of the financing decision is the determination of an appropriate capital structure given the facts and figures. (D) The third major decision area of financial management is the decision relating to the Dividend policy. The dividend decision should be analyzed in the relation to the financing decision of the firm. Two alternatives are available relating to the dividend decision: (i) they can be distributed to the shareholders in the form of dividend or (ii) they can be retained in the business itself. The decision as to which course should be followed depends largely upon the significant element in the dividend decision, the dividend payout ratio, that is, what proportion of net profits should be paid out to the shareholders. The final decision will rest with the preference of the shareholders and investment opportunities available within the firm. The second major aspect of the dividend decision is the factors determining dividend policy of a firm in practice.

Functions of Financial Management 1. Financial Forecasting The financial management sees that an adequate supply of cash is available at the proper time for smooth flow of firms activities. As cash inflow and outflow both are closely related to the volume of sales, it requires financial forecasting. The estimation of the prospective cash inflow and cash outflow in the next quarter or year is necessary to maintain the liquidity in the funds.

2. Investment decision The investment decision is the most important function of financial management. It involves the allocation of capital to various investment proposals in order of their priority and profitability. As each investment decision involves risk a financial manager assists in evaluating the various proposals in the processes of capital budgeting.

18

3. Management of Income Management of income is a major function of financial executive. It includes the allocation of net earnings after payment to taxes among shareholders and retaining earning for employers. The shareholders generally are interested in current cash dividends. In order to provide for future contingencies, the top management (management) wants to retain earnings to the maximum possible extent. Deciding between these two is very crucial.

4. Management of Cash Estimating and controlling cash flows is an important function of financial management The cash must be managed for the benefit of the owners. The financial manager tries two things: (i) how can managers choose the best among alternative uses of funds, and (ii) how can they ascertain that this is a better use than stock-holders could find outside the company? The finance manager must choose most desirable investment option.

5. Deciding about New Sources of Finance A business firm is always in need of funds. Therefore, on the basis of forecast of the volume of operations the finance manager should decide upon the needs and prepare the detailed financial plan both short term and long term for the procurement of funds. 6. Analysis and appraisal of Financial Performance Proper analysis, checking and appraisal of financial performance are very essential to carry out finance function smoothly. Various financial statements are prepared, analyzed and then necessary guidelines are set for the future.

Organization Chart of Finance Department

Managing Director

Manager

Dept. Manager

Asst. Manager

19

Senior Executive

Executive

Senior Officer

Senior Assistant

Junior Assistant

Accounting Policies

1. Method of Accounting (a) (b) The union follows accrual system of accounting in preparation of accounts. The financial statements are prepared on historical costs, convention and in accordance with the generally accepted accounting principals. 2. Fixed Assets Fixed assets are valued at cost. The cost of assets comprises of purchase price and any directly attributable cost on bringing the assets to its present condition or intended use. 3. Depreciation Depreciation on Fixed assets is provided on Written down Value Method at the applicable rates prescribed under the Income Tax Act, 1961. Depreciation has been provided for the full year for the assets acquired and commissioned by September, and others acquired later are subject to half-year depreciation. Where grant has been received against any assets the depreciation on the grant proportion has been adjusted against the grant (except for the assets of Amul 1 & 2). 4. Inventories (a) (b) (c) Raw material, Packing material, Semi-packed goods and finished goods are valued at FIFO basis. Store and spares are valued at cost on FIFO basis. Excise duty applicable on finished goods stock has been included in the valuation of finished goods.

20

5. Investment Investments are primarily meant to be held on long-term basis at stated cost.

6. Retirement Benefits Unions contribution towards Gratuity and Super-annuation for its employees is funded with LIC of India. 7. Excise Duty Provision has been made for the excise duty applicable on the finished goods stock in the excise expenses. 8. Income Tax In view of the carry forward losses, there is no taxable income and hence no provision for income tax is required to be made under the Income Tax act, 1961. The union has unabsorbed depreciation and carry forward losses under the income tax laws. In absence of virtual certainty of sufficient future taxable income, net deferred tax assets has not been recognized by way of prudence in accordance with the Accounting standard AS 22 Accounting for tax on income issued by the ICAI. 9. Crate Accounting Crates used in the milk distribution at Anand, Pune and Kolkata has been treated as deferred revenue expenditure and charged to Profit and Loss A/c over a period of three years considering their life of usage

Inventory Management

Inventory is composed of assets that will be sold in future in the normal course of business operations. The assets which firms store as inventory in anticipation of need are (i) (ii) (iii) Raw materials Work-in-progress (semi-finished goods) Finished goods

The raw material inventory contains items that are purchased by the firm from others and are converted into finished goods through the manufacturing process. The firm it-self might be producing the raw material. The work-in-progress inventory consists of items currently being used in the production process. They are normally semi-finished goods that are at various stages of production process in a multi-stage production process.

21

Finished goods represent final or completed products, which are available for sale. The inventory of such goods consists of items that have been produced but are yet to be sold.

The views concerning the appropriate level of inventory would differ among the different functional areas. The job of the financial manager is to reconcile the conflicting viewpoints of the various functional areas regarding the appropriate inventory levels in order to fulfill the overall objective of maximizing the owners wealth.

Objectives of Inventory Management can be explained as follows: The basic responsibility of the financial manager is to make sure the firms cash flows are managed efficiently. Efficient management of inventory should ultimately result in the maximization of the owners wealth. In order to minimize cash requirements, inventory should be turned over as quickly as possible, avoiding stock-outs that might result in closing down the production line or lead to a loss of sales. It implies that while the management should try to pursue the financial objective of turning inventory as quickly as possible at the same time not affecting its production activities. Since the production runs 24x7 it is necessary to have enough stock on hand so as to not to adversely affect the production process. Various costs involved in inventory management are: (i) (ii) Ordering costs Carrying costs

The term ordering cost is used in case of raw material and includes the entire costs of acquiring raw material. They include cost include in the following activities: Requisition purchase, ordering transporting, receiving inspecting, and storing. The ordering costs increase in proportion to the number of order placed, thus the more frequently the inventory is acquired the higher the firms ordering cost. On the other hand, if the firm maintain large inventory levels there will be few order placed and ordering cost will be relatively small. Thus the ordering cost decrease with increasing size of inventory.

The term carrying cost means the costs which are incurred for holding the level of inventory. They include the opportunity cost of funds invested in inventories, storage cost, insurance, taxes, and cost in the deterioration and obsolescence. Opportunity costs are the earning foregone on the other best available investment opportunity. The carrying costs move in direct proportion to inventory size. Higher the inventory sizes, higher the carrying cost and lower the inventory size, lower the inventory costs.

Funds Flow Statement

To understand the importance of Funds Flow Statement (FFS) it is necessary to clearly understand the meaning of the word fund. For a common layman, fund means only cash i.e. liquid cash. But it is actually a wrong understanding. Fund is not affected by changes in cash only; it also changes with any transaction that takes place. For example, when goods are sold on credit to any debtor then cash is not increased or decreased but yes the funds would increase. Similarly, when we purchase goods and pay cash, our cash balance would definitely get reduced. But when we avail credit from creditors we dont have to pay immediately. Hence funds are affected in this case. Increase in creditors has thus become a source of funds and in the same way increase in debtor would result into decrease in funds. In short: When liabilities increase, it is a Source of Funds;

22

When assets increase, it is an Application of Funds. A summarized list of source and application of funds is given below: A] Sources of Funds: (i) (ii) (iii) (iv) Increase in capital (by way of issuing shares) Borrowing or incurring any liability Profit from operation of business Sale of fixed assets or investments

B] Application of Funds: (i) (ii) (iii) (iv) (v) Purchase of fixed assets Purchase of investments Repayment of Capital (eg. Redemption of preference shares) Repayment of loans or debentures Payment of cash dividends

The list reveals that funds would increase with any increase in assets or when there is any decrease in liability and vice versa.

WORKING CAPITAL MANAGEMENT: THEORIES AND APPROACHES INTRODUCTION The operating efficiency of an organization is decided by the provision of optimum liquidity. Working capital constitutes part of the important investments in the organization. it not only manages the current assets but also manages the manages the current liability of the organization.In simple language working capital can be explained as the capital which is required for the day to day expenses. Working capital can be viewed as the amount of capital required for the smooth functioning of the normal business operation of en organization ranging from the procurement of raw material , converting the same into finished products for sale and realizing cash along with profit from the accounts receivables that arises from the sale of finished goods on credit. Working capital is a qualitative concept. it indicates the liquidity position of the firm and suggest the extent to which the working capital needs are to be financed through the help of permanent sources of finance. Current assets should be in excess of current liability for maturing the obligation in normal operating cycle.

23

A weak working capital position poses a threat to the management and also bad position.

also shows a negative liquidity, and excessive working capital is organization in order to manage and improve the liquidity

for the organization. Therefore a timely action should be taken in an

CONCEPTS OF WORKING CAPITAL There are two concepts of working capital namely gross working capital Net working capital.

Gross working capital means the total of current assets. Net working capital is the difference between current assets and liabilities. An alternate definition of net working capital is that position of current asset which is financed with the long term funds.

NATURE Working capital management is concerned with the problems that arise in attempting to manage the current asset, the current liabilities and the interrelationship hat exist between them. The term current asset refers to those assets which in the ordinary course of business can be, or will be converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The current liabilities are those liabilities which are intended , at their inception ,to be paid in the ordinary course of business, within a year out of current asset or earnings. The main goal of working capital management is to manage the firms current asset and liability in a way as to maintain value of the company in a satisfactory way. The current assets should be large enough to cover the current liability to maintain a margin of safety. In order to maintain the liquidity position adequate amount of current assets are required. NEED To maximize the shareholders wealth it is necessary to generate adequate profit which in turn depends the magnitude of sales. As the sales may not convert into cash immediately there is a need of working for working capital in the form of current assets to deal the problem arising out of lack of realization of cash against goods hence sufficient working capital is required to maintain the level of activity.

CONSTITUENTS OF WORKING CAPITAL The main constituents of working capital are Current asset Current liability The main components under current asset in AMUL ARE Stock Deposits Due from societies Advances

24

Trade and sundry debtors Income tax deposits Cash and bank balances

The main components of current liabilities ARE Creditors Due to societies Outstanding against expenses and purchases

DETERMINANTS OF WORKING CAPITAL GENERAL NATURE OF BUSINESS

Working capital requirement of the firm are basically influenced by nature of the business. If the firm is a manufacturing industry they have to maintain more of raw material and inventory, which means more of investments, and capital needs. if the business is a service based , then there is less need of working capital. If sales are based on cash then there is less need of working capital and if the sale is based on credit then working capital is needed more. PRODUCTION CYCLE

It covers the time- span between the procurement of raw material and the completion of the manufacturing process leading to the production of finished goods. During such cycles the funds are locked up in the business. The longer the time span the larger will be the funds tied up and therefore the larger is the working capital needed and vice verse. BUSINESS CYCLE

Business fluctuations lead to cyclical and seasonal changes which, in turn cause a shift in the working capital position, particular for the temporary working capital. The variations in business conditions may be in two direction (i)upward phase when boom condition prevail and (ii) downward phase when economic activity is marked by a decline. CREDIT POLICY

The credit policy influences the requirement of working capital in two ways: (i) through credit terms granted by the firms to its customer of goods. (ii) credit terms available to the firm from its creditors. The firm should be prompt in making collection. A high collection period will mean tie up of funds in making collection. GROWTH AND EXPANSION

As a company grows in size we can imagine that there will naturally be an increase in the capital requirement. The composition of working capital in a growing company also shifts with the economic circumstances and corporate practices. PROFIT LEVEL

The level of profit earned differs from enterprise. Manufacturing industries earn lesser profit if considering the scale of operation.

LEVEL OF TAXES

The first appropriation out of profit is payment or provision of tax. The amount of taxes to be paid is determined by the prevailing tax regulations. If the tax liability increases, it leads to an increase in the requirement of working capital and vice-verse. DIVIDEND POLICY

The payment of dividend consumes cash resources and thererby, affects working capital to that extent. If the firm does not pays dividend and retains profits the working capital will increase.

25

DEPRECIATION POLICY

The effect of depreciation policy on working capital is therefore ,indirect. Enhanced rates of depreciation will reduce the profit and tax liability and therefore lowers the profit. BALANCED WORKING CAPITAL POSITION The firm should maintain a sound working capital position. It should have adequate working capital in order to run its business operation. Both excessive as well as inadequate working capital position are dangerous from firms point of view. Excessive working capital means holding cost and idle funds, which earns no profit to the firm. The dangers of excessive working capital are: It is an indication of defective credit policy and slack collection policy. Consequently higher incidence of bad debts results, which adversely affects the profit. It results in unnecessary accumulation of inventories .thus chances of inventory mishandling waste ,theft and loss increases. Excessive working capital makes management complacent ,which degenerates into management inefficiency. Tendency of accumulating inventories tend to make speculative profits grow.

Inadequate working capital is also bad these are the following dangers:

It becomes difficult to implement operating plans and achieve the firms target. Operating inefficiencies creep in when it becomes difficult to meet day to day commitment. It stagnates growth, It becomes difficult for the firm to undertake profitable projects because of non-availability of working capital funds.

Therefore a firm should maintain the right amount of working capital on a continuous basis only then proper functioning of business operation is ensured. OPERATING CYCLE This figure depicts the interdependence among the components of working capital. In Amul all the operation starts with the cash purchase of raw material .in amul the main raw material is the raw milk which is collected from the 1100 societies. This raw milk is been converted into finished good after undergoing the stage of work in process. For this purpose the organization has to make payment towards wages, salaries, and the other manufacturing cost. Payment to suppliers is been made on purchase in the case of cash purchase and on expiry of credit period in the case of credit purchase. Further the organization has to meet other operating cost such as selling and distribution cost, and non operating cost described as financial cost.Here in amul the goods are sold on credit basis. it will pass through one stage that is account receivables and get back cash along with profit on the expiry of credit period. And once again the cash will be used for the purchase of material or payment to suppliers and the whole cycle is termed as working capital cycle.

OPERATING CYCLE: 1. RAW-MATERIAL CONVERSION PERIOD: =AVERAGE STOCK OF RAW-MATERIAL/PER DAY RAW-MATERIAL AVERAGE STOCK OF RAW-MATERIAL: CONSUMPTION

=OPENING STOCK OF RAW-MATERIAL + CLOSING STOCK OF RAW- MATERIAL/2

26

PER DAY RAW-MATERIAL CONSUMPTION:

=RAW-MATERIAL CONSUMPTION/360 2. WORK-IN PROCESS CONVERSION PERIOD: =WORK-IN PROCESS INVENTORY * 360/COST OF PRODUCTION 3. FINISHED GOODS INVENTORY CONVERSION PERIOD: =FINISHED GOODS INVENTORY * 360/COST OF GOODS SOLD 4. DEBTORS CONVERSION PERIOD: =DEBTORS * 360/CREDIT SALES 5. CREDITORS DEFERRAL PERIOD: =CREDITORS * 360/CREDIT PURCHASES RAW-MATERIAL STORAGE PERIOD (IN DAYS): PARTICULARS RAW-MATERIAL CONSUMPTION PER DAY RAWMATERIAL CONSUMPTION AVERAGE STOCK OF RAW MATERIAL RAW-MATERIAL STORAGE PERIOD WORK-IN PROCESS CONVERSION PERIOD(IN DAYS) PARTICULARS WORK-IN PROCESS INVENTORY COST OF PRODUCTION WORK-IN PROCESS INVENTORY CONVERSION PERIOD 10.64 9.57 10.82 71441.49 91427.30 103972.69 2007-08 1902.08 2008-09 2319.85 2009-10 2539.55 0.91 1.07 1.31 236.985 341.85 471.85 260.08 317.96 361.02 2007-08 93631.68 2008-09 114468.46 2009-10 129967.85

27

FINISHED GOODS INVENTORY CONVERSION PERIOD(IN DAYS) PARTICULARS FINISHED GOODS INVENTORY COST OF GOODS SOLD FINISHED GOODS INVENTORY CONVERSION PERIOD DEBTORS CONVERSION PERIOD (IN DAYS) PARTICULARS 2007-08 DEBTORS CREDIT SALES DEBTORS CONVERSION PERIOD 7625.86 107187.29 25.61 2008-09 7437.28 137212.35 19.51 2009-10 5302.24 169700.00 42.42 39.64 47.78 42.42 71441.49 91427.30 103972.69 2007-08 7866.88 2008-09 12134.73 2009-10 12252.00

CREDITORS DEFERRAL PERIOD (IN DAYS) PARTICULARS CREDITORS CREDIT PURCHASE CREDITORS DEFERRAL PERIOD 46.99 48.13 53.17 2007-08 12228.14 93690.87 2008-09 15322.54 114617.80 2009-10 19195.23 129967.85

28

OPERATING CYCLE (A+B+C+D-E) PARTICULARS RAW-MATERIAL CONVERSION PERIOD(A) WORK IN PROCESS INVENTORY PERIOD(B) FINISHED GOODS INVENTORY(C) DEBTORS CONVERSION PERIOD(D) CREDITORS DEFERRAL PERIOD(E) 46.99 48.13 53.17 25.61 19.51 11.25 39.64 47.78 42.42 10.64 9.57 10.82 2007-08 0.91 2008-09 1.07 2009-10 1.31

RATIO ANALYSIS

YEAR 06-07 07-08 08-09 [1] CURRENT RATIO Current assets

CURRENT ASSETS 19874.21 28995.9 28874.39

CURRENT LIABILITIES 12106.54 13892.41 17798.69

RATIO= CA/CL 1.64 2.08 1.62

Current Ratio = ________________ Current liabilities

[2] QUICK RATIO Quick Ratio= Quick Assets _____________ Quick Liabilities

29

YEAR 06-07 07-08 08-09

QUICK ASSETS 10796.31 13258.02 9433.42

CURRENT LIABILITY 12106.54 13892.41 17798.69 0.89 .095 0.53

RATIO (Q.A/C.L)

INTERPRETATION: The quick ratio signifies more liquidity, and out of the three years, its was best in 2007-08.The ideal Quick Ratio is 1:1. . In AMUL the Quick Ratio is less than 1 in all the three years. The reason is increase in the current liability.

[3] CASH RATIO Cash Ratio= (Cash+Marketable securities) _______________________________ Current Assets YEAR 06-07 07-08 08-09 CASH + BANK 224.93 160.55 584.65 CURRENT ASSETS 19874.21 28995.9 28874.39 RATIO= (CASH/CA) 0.01 0.005 0.02

[4] DEBTORS TURNOVER RATIO D.T.R= NET CREDIT SALES AVERAGE ACCOUNTS RECEIVABLE YEAR NET CREDIT SALES 06-07 07-08 08-09 81631.69 107187.29 137212.35 6759.24 7625.77 7437.28 AAR RATIO= NCS/AAR 12.07 14.06 18.45

INTERPRETATION: From the above ratios we can say that AMULS Debtors remain outstanding for 12.07 days in 2006-07,14.05 in 2007-08,19.83 in 200809 respectively. The Collection period of Debtors is decreasing day by day. It is good sign for AMUL. [4A] AVERAGE COLLECTION PERIOD ACP=(AAR*365)/NCS YEAR AAR*365 NCS RATIO= AAR*365/NCS 06-07 07-08 6759.24*365 7625.77*365 81631.69 107187.29 30.22 25.96

30

08-09

6916.46*365

137212.35

18.39

[5] CREDITORS TURNOVER RATIO CTR = NET CREDIT PURCHASE ______________________________ AVERAGE ACCOUNTS PAYMENT YEAR 06-07 07-08 08-09 NCP 52312.16 93690.87 114617.80 AAP 387.93 12228.14 15322.54 RATIO=NCP/AAP 134.84 7.66 7.48

INTERPRETATION: From the above we can say that the payment of Creditors is outstanding by AMUL.134.84 days in 2006-07,195.84 days in 200708,237.01 days in 2008-09. The payment period to Creditor remain same in every year. It is good for AMUL. [5A] AVERAGE PAYMENT PERIOD AAP= AVERAGE PAYMENT PERIOD*365 _____________________________________ NET CREDIT PERIOD YEAR AAP*365 NCP RATIO= AAP*365/NCP 06-07 07-08 08-09 387.935*365 398.1*365 397.81*365 52312.16 77965.56 94284.94 2.71 1.86 1.54

[6]CAPITAL TURNOVER RATIO CTR= NET SALES ______________ CAPITAL EMPLOYED YEAR NET SALES CAPITAL EMPLOYED 06-07 07-08 08-09 81631.69 107187.29 137212.35 13572.19 12367.04 13499.5 6.01 8.66 10.16 RATIO=NS/CE

INTERPRETATION: It will be good if capital turnover ratio is increasing year by year,and it shows how efficiently AMUL has invested in capital.

31

[7] TOTAL ASSETS TURNOVER RATIO= NET SALES _____________ TOTAL ASSETS YEAR 06-07 07-08 08-09 NET SALES 81631.69 107187.29 137212.35 TOTAL ASSETS 25678.73 35759.45 36298.19 RATIO=NS/TA 3.17 2.99 3.78

INTERPRETATION From the above data we can say that in AMUL Total Asset Turnover is recovered 3.17 times in 06-07,2.99 times in 07-08,3.78 times in 08-09. But in 2007-08 the Total Assets is increasing by 40% from 2006-07. So the turnover ratio is declining in that year. [8] FIXED ASSETS TURNOVER RATIO= NET SALES _______________ FIXED ASSETS TURNOVER YEAR NET SALES FIXED ASSETS TURNOVER 06-07 07-08 08-09 INTERPRETATION From the above ratio we can say that in AMUL Fixed Assets is recovered in 15.19 times in 06-07,17.50 times in 07-08,19.91 times in 0809 respectively. We can say that the total Fixed Assets Turnover is increasing day by day. It is good sign for AMUL. 81631.69 107187.29 137212.35 5371.69 6122.97 6888.25 15.19 17.50 19.91 NS/FAT

[9] CURRENT ASSETS TURNOVER RATIO= NET SALES ______________ CURRENT ASSETS YEAR 06-07 07-08 08-09 NET SALES 81631.69 107187.29 137212.35 CURRENT ASSETS 19874.21 28995.9 28874.39 RATIO=NS/CA 4.10 3.69 4.75

32

[10] NET WORKING CAPITAL TURNOVER RATIO= NET SALES __________________ NET WORKING CAPITAL

YEAR

NET SALES

NWC

RATIO= NS/NWC

06-07 07-08 08-09

81631.69 107187.29 137212.35

7767.67 15103.49 11075.7

10.50 7.096 12.3

INTERPRETATION From the above we can say that AMUL is able to recover its Working Capital 10.50 times in 06-07,7.096 times in 07-08,12.3 times in 08-09 respectively. If working capital turnover ratio increases, it is good for AMUL as it can generate more and more sales. [11] OWNERS EQUITY TO TOTAL EQUITY RATIO= OWNERS EQUITY _____________________ TOTAL EQUITY YEAR OWNERS EQUITY TOTAL EQUITY RATIO= OWNERS/TOTAL 06-07 07-08 08-09 6208.48 6492.09 6698.98 13572.19 12367.04 0.45 0.52

33

[12] DEBT EQUITY RATIO RATIO= LONG TERM DEBT _________________________ SHAREHOLDERS EQUITY YEAR LONG TERM DEBT 06-07 07-08 08-09 7363.71 14873.32 6800.52 6208.48 6492.09 6698.98 SHAREHOLDERS RATIO= LTD/SHAREHOLDERS 1.18 2.29 1.01

[12A] DEBT RATIO DEBT RATIO= TOTAL DEBT _________________ CAPITAL EMPLOYED YEAR TOTAL DEBT CAPITAL EMPLOYED 06-07 07-08 08-09 7363.71 14873.32 6800.52 13572.19 12367.04 13499.5 RATIO= TD/CE 0.54 1.20 0.50

[13]CAPITAL GEARING RATIO RATIO= FIXED INCOME-BEARING FUNDS _____________________________________ EQUITY YEAR FIXED INCOME EQUITY RATIO= FI/EQUITY 06-07 07-08 08-09 7363.71 14873.32 6800.52 6208.48 6492.09 6698.98 1.18 2.29 1.01

34

[14] FIXED ASSETS TO LONG TERM FUND RATIO= FIXED ASSETS ____________________ LONG TERM FUND YEAR FIXED ASSETS LONG TERM FUND RATIO= FA/LTF 06-07 07-08 08-09 5371.69 6122.97 9888.25 7363.71 14873.32 6800.5 0.72 0.41 1.01

[15] INTEREST COVERAGE RATIO RATIO= EBIT ____________ INTEREST YEAR EBIT INTEREST RATIO= EBIT/INTEREST 06-07 07-08 08-09 1131.64 1275.3 1802.6 705.14 814.81 1122.07 1.60 1.57 1.60

[16] RETURN ON CAPITAL EMPLOYED RATIO= (RETURN*100) __________________ CAPITAL EMPLOYED YEAR RETURN*100 CAPITAL EMPLOYED RATIO= RETURN*100/CE 06-07 07-08 08-09 1131.64*100 1840.09*100 1802.6*100 9500 12367.04 13499.5 8.33 14.87 13.35

35

INTERPRETATION From the above data we can say that Return on Capital Employed,if the recover Ratio of Capital Employed in the business is increasing it is good sign for AMUL.

[17] RETURN ON EQUITY RATIO= (PAT-PREF.DIVIDEND) ________________________________ SHAREHOLDERS EQUITY YEAR PAT-PREF.DIVIDEND SHAREHOLDERS EQUITY 06-07 07-08 08-09 411.50 451.51 575.53 6208.48 6492.09 6698.98 RATIO= PAT/SHAREHOLDER 0.066 0.069 0.085

[18] EARNING PER SHARE(EPS) RATIO= NET PROFIT AVAILABLE TO EQUITY SHAREHOLDERS _________________________________________________________ NO. OF EQUITY SHARES OUTSTANDING YEAR NET PROFIT EQUITY SHARES RATIO= NP/EQUITY 06-07 07-08 08-09 411.50 451.51 575.53 19800000 2229180 2265990 20.78 20.25 25.39

[19] DIVEDEND PER SHARE(DPS) RATIO= PROFIT DISTRIBUTED TO EQUITY SHAREHOLDERS _______________________________________________________ NO. EQUITY SHARES OUTSTANDING YEAR PROFIT NO.EQUITY SHARES RATIO= PROFIT/NO.EQUITY SHARES 06-07 07-08 08-09 287.10 325.50 337.15 1980000 2229180 2265990 14.50 14.60 14.87

[20] DIVEDEND PAYOUT RATIO

36

RATIO= DIVEDEND PER SHARE __________________________ EARNINGS PER SHARE YEAR 06-07 07-08 08-09 DPS 14.5 14.60 14.87 EPS 20.78 20.25 25.39 RATIO= DPS/EPS 0.006 0.72 0.58

37

Suggestions & Recommendations

The first and foremost recommendation to be made is to have a proper and well defined inventory management procedure and process. There is lot of undue wastage of raw materials as well as packing materials, which can be minimized if proper supervision and control is there.

Proper ABC classification would help in reducing the cash expenses also sufficient goods would be bought under each category.

On the other hand, the required storage facility can be set up for different materials as required by them.

A minimum stock level should be set up so that the firm does not run out of stock or do not have to handle the surplus stock.

Since Amuls chocolates are good in taste and also with high nutrition value, due to lack of marketing people get diverted to the competitors brands rather than buying Amuls chocolates.

Lots of packing materials are wasted and no account of such looses is maintained, this makes people working there to resort to undue use and hence wasting the materials.

38

CONCLUSION

Amul has developed itself to a great extent since its establishment. Still it has been trying hard to expand its activities and also to diversify itself. There are very good opportunities lying ahead for Amul not only at the domestic level but also at the international front. Since India is the largest producer of milk it can export its milk and dairy products to other countries and can help them nurture their nation with more nutritious food. There are certain points where the firm needs to take steps to check undue activities and wastages made by its employees. Its working capital management is not as efficient as it should be. They have no well defined principles and policies through which they can manage their working capital, so they can have policies for inventory management like ABC classification, EOQ level, Miller & Orr Model for cash management. They can co-ordinate their receivables and payables standards so as to efficiently utilize cash and hence save interest paid on Cash Credit taken form various banks. There are loopholes where the organization itself can get stuck up if not taken care of. But since last 60 years it has been working making profits all the way. The year 2007-08, Amul has out performed in terms of milk receipts, sales turn over and profits. I expect the same trend would continue for years to come. And this project would help Amul a lot. In all, my experience at Amul was very good. I have learnt many practical things at Amul and how actually real time people work in organizations.

39