A STUDY ON RATIO ANALYSIS

(A Study with Reference to Coromandel International Limited, Visakhapatnam)

A project report submitted to ANDHRA University in partial fulfillment for the award of the Degree of BACHELOR OF BUSINESS MANAGEMENT By Ms. PANKAJ RATHORE Regd.No: 111131607023 Under the guidance of Mr. Zafrulla Mohammed Asst. Professor, Dept. of BBM PRISM DEGREE & POST GRADUATE COLLEGE

Department of Management Studies DEGREE & POST GRADUATE COLLEGE (Affiliated ANDHRA University) VISAKHAPATNAM 2011-13

PRISM

DECLARATION

I hereby declare that this project work entitled A Study on Ratio Analysis in Coromandel International Limited Submitted by me to the Andhra University, Vishakhapatnam in partial fulfillment for the award of Degree of BBM is entirely based on my own study is being submitted for the first time and it has not been submitted to any other university or institution for any degree or diploma.

(Ms. PANKAJ RATHORE) PRISM DEGREE & POST GRADUATE COLLEGE Department of Management Studies (Affiliated Andhra University ,Visakhapatnam), RAJENDRA NAGAR, DWARAKANAGAR VISAKHAPATNAM.

CERTIFICATE

This is to certify that the project report titled A Study on Ratio Analysis in Coromandel International Limited; Visakhapatnam is being submitted by Ms. PANKAJ RATHORE in partial fulfillment for the award of the Degree of BBM has been carried out by her under my guidance and supervision.

(Mr.ZafrullaMohammed) Project Guide Dept.of BBM. Visakhapatnam.

ACKNOWLEDGEMENT I express my sincere thanks to my project guide Mr. Zarfulla Mohammed for his valuable guidance and cooperation throughout the project work. I am also thankful to our Head of the Department Mr. P.S.Subbarao and all other faculty members who helped me directly and indirectly for the successful completion of my project work. I also express my gratitude and heartfelt thanks to my company guide Mr.Ch.V.S.R.Sanjeeva Rao, Manager-Finance Coromandel International Limited, fertilizer Unit and other executives/employees of Coromandel International Limited who extended their cooperation and timely support and providing necessary data for early completion of my project work. Finally I would like to express my gratitude and thanks my parents and friends whose unremarkable encouragement had helped me throughout my educational endeavor and to do this project work.

Ms. PANKAJ RATHORE

CONTENTS CHAPTER-I INTRODUCTION CHAPTER-II ORGANISATION PROFILE CHAPTER-III CONCEPTUAL FRAMEWORK CHAPTER-IV DATA ANALYSIS & INTERPRETATION CHAPTER-V SUMMARY AND SUGGESTIONS

Bibliography Annelures

GENERAL INTRODUCTION The end products of the business transactions are the financial statements comprising the position statement or Balance Sheet and the Income Statement or Profit and Loss Account. Financial statements are the basics for the decision making by the management and as well as all other stakeholder who are interested in the affairs of the firm such as investors, creditors , customers ,suppliers , financial institutions , employees ,potential investors , govt., and the general public. In this project an attempt is made to know the financial performance of Coromandel International Limited, Visakhapatnam through Ratio Analysis.

NEED FOR THE STUDY: The process of my study focuses mainly on the analysis of financial ratios in Coromandel International Limited. The study has great significance provide benefits to various: This study gives me a practical insight into the organizations activities and enables me on know the practical problems and solutions in Coromandel International Limited in the area of financial management. Good Financial analysis with the help of Ratio analysis guides the board and management to pursue objectives that are in the interests of the company and share holders and facilitates effective monitoring thereby promoting optimal use of financial reserves more efficiently. The study is also beneficial to employees and offers motivation by sharing how they are contributing of the company growth. The investors who are interested in investing the companys share will also get benefited by going through the study and can easily take a decision whether to invest or not in the company shares. This study is also beneficial to top management of the company by providing relevant information regarding important aspects like liquidity, leverage, activity and profitability.

IMPORTANCE OF THE STUDY:

The financial management should be to achieve the objective of the business owners who are the suppliers of capital. The need for finance to any firm is the basic and most important function in order to seem the company & to achieve its goals/objectives. Profit & wealth maximization is the first & foremost function which help the organization to run smoothly. The profit is the one which determines the wealth or the net worth of the organization. Therefore, a good profit making company is known to be a wealthy company.

It also helps in decision making activity, whether it may be long term or short-term decisions. Long term decisions are related to the investment and dividend policies and short-term are related to working capital policies. It helps in planning & controlling activities as a part of might. This would provide a basis for the sales forecasting, project planning, capital investing & various budget programs. It is very useful to the Govt. to take various policies regarding t he companys performance and financial statements. It helps the outside parties, such as creditors, banks & other financial institutions on the basis of their financial statements like balance sheet and profit & loss accounts

OBJECTIVES OF THE STUDY: The main objective of the study is to apply theoretical concepts to the practical situations of Coromandel International Limited (CIL), Visakhapatnam. so as to compare and correlate the actual achievements with a theoretical conclusion. The main objectives of the study are: To know the extent to which Coromandel International Limited (CIL), Visakhapatnam is efficiently utilizing its sources to its operations.

To study the efficiency of overall operations.

To analyze the financial position of the Coromandel International Limited (CIL), Visakhapatnam..

 To understand the capital structure of the Coromandel International Limited (CIL), Visakhapatnam through calculating of leverage ratios. To know the profitability of the Coromandel International Limited (CIL), Visakhapatnam through calculation of profitability ratios. To give appropriate suggestions to the best performance of the organization.

1.4. METHODOLOGY OF THE STUDY: Methodology is a systematic procedure of collecting information in order to analyze and verify a phenomenon. The collection of information has been done by me through two-principle sources Primary Data Secondary Data

For my study of ratio analysis in CIL, the data is collected as below.

PRIMARY DATA: Primary data is collected through the informal discussions with the concerned Heads and other staff members of Coromandel International Ltd., Visakhapatnam.

SECONDARY DATA: Secondary data is obtained from the published Annual Reports of CIL, broachers, booklets, Journal, records and other printed materials supplied by the company, text books published by different authors and from some useful websites. For the study of Financial Analysis in CIL, I have used the method of secondary data for the collection of information.

LIMITATIONS OF THE STUDY: Though the project is completed successfully a few limitations may be there. Since the procedure and polices of the company will not allow to disclose some confidential financial information, the project has to be completed with the available data given to us. The study is carried basing on the information and documents provided by the organization and based on the interaction with the various employees of the respective departments. Analysis is limited to the results of Coromandel International Limited (CIL), Visakhapatnam and not compared to industry standards / results.

Data in some of the ratios has been directly taken from the prepared reports of Coromandel International Limited (CIL), Visakhapatnam due to non-disclosure of input data due to confidentiality.

2. ORGANISATION PROFILE
2.1. INTRODUCTION: The fertilizer industry present one of the most energy intensive sectors within the Indian economy and is therefore of particular interest in the context of both local and global environmental discussions. Increase in productivity through the adoption of more efficient and cleaner technologies in the manufacturing sector ill is most effective in merging economic, environmental and social development objectives. A historical examination of productivity growth in India s industries embedded into a broader analysis of structural composition and policy changes will help, identify potential future development strategies that lead towards a more sustainable development path. Issues of productivity growth and patterns of substitution in the fertilizer sector as well as in other energy intensive industries in India have been discussed in various perspectives. However, analyzing the use and substitution possibilities of these factors as well as identifying the main drivers of productivity growth among these and other factors is of special importance for understanding technological and overall development of an industry. With liberalization of the fertilizer sector and reduction of subsidies productivity declined substantially since the early 1990s, despite an increase in capacity utilization. In comparing current energy consumption to best achievable energy consumption, energy savings of up to 17%

could be achieved. However, the implementation of initiatives towards energy efficiency is being hampered by barriers both of general and process specific nature occurring at the macro and micro level of the economy. Energy policies in general and price based policies in particular can help overcome these barriers in giving proper incentives and correcting distorted prices. Appropriate provisions should be made in the retention pricing scheme to further encourage investment in energy conservation projects. Originally, normative consumption of various inputs was taken into account under the retention price system which encouraged the implementation of energy efficiency measures. These and other fiscal incentives need to be reinstated under the current scheme. Future energy use depends on the level of production and the technologies employed. Furthermore, different economic and policy settings affect structures and efficiencies within the sector. The final section therefore examines the ongoing changes in the fertilizer industry structure. It compares best practice technologies to Indian technologies and identifies potentials and barriers to the adoption of such efficiency improvements. Agriculture continues to contribute about 25% of national income and remains a major sector that employs 60% of the labor force in rural India Although economic reforms initiated in the early 1990s had an indirect effect on the agricultural sector and its performance. It is important to examine various policy measures that have been implemented in the 1980s and 1990s that have had implications for the growth of the agricultural sector. The economic reforms initiated in 1991 provided a major jump start for liberalization of the agriculture sector as well. Prior to the initiation of economic reforms in 1991, the Indian agriculture sector was plagued with high levels of regulations in the context of

both domestic and external markets. Such regulations have had their origin, which goes back in the 1960s when the country was faced with acute food shortage and famine like conditions. Several controls and regulations were placed in order to achieve self sufficiency in food production and to provide an adequate supply of food to the countrys burgeoning population. From 1965 to `980, the agriculture sector was characterized by high level of investment in research and development with a focus on achieving self sufficiency through increased agricultural production. The green revolution technologies along with several policy support measures adopted and implemented such as fertilizer subsidy and extension system helped to achieve self sufficiency in food grains by the early 1970s. Until the early 1980s, the emphasis continued to be self sufficiency in food grain production in staple crops such as rice and wheat. In the early 1990s, the investment in agriculture research and development has seen a decline compared to levels in the 1970s. Furthermore, the production levels of cereal crops reached a plateau. The agriculture reforms that accompanied economic reforms in the `990s have led to many policy changes in the ground. Yet, the impact of such reforms and policy measures on the performance of the agriculture sector in the 1990s compared to the 1980s is still being debated. Over the past many decades, the dissemination of agricultural technologies has not effectively percolated to the grass root level in spite of the presence of various extension agencies. An extension agency had been addressing the needs of farmers, but in an isolated manner with no coordination among themselves. Lack of sound feedback mechanism has been caused system fatigue. At present , public extension services for agriculture is centrally directed and highly target oriented. Two changes in the extension approach would benefit.

First , it would be desirable to move from fragmented message based extension process to a broad based farm management approach. Extension must be focused on conservation and better use of natural resource of basin and maximizing farm profits by assessing the market potential.

2.2. INTERNATIONAL INDUSTRIES IN INDIA:

The International are immense value to man. They help to the growth of agricultural production. India is primarily an agricultural or an agro-based country. Hence it plays an immense role in providing support to millions of people of the country.

The use of International enables the plants to increase the crop production by absorbing greater amount of nutrient present in the soil. Hence, the International sector is one of a vital sector in the economy of the country. Of late , a large number of private and public sector fertilizer plant have come up in the country. These plants engage those selves in production of several sample and complex International such as urea, ammonium phosphate and other complex nitrogenous and phosphates International, which play strategic role in creating the needs of the various sectors of the society.

The advent of globalization has ushered in stronger and larger players on the Indian scenario, in the fertilizer business. A need was therefore felt to create large and focused business entities in the fertilizer business. Some of the major International making companies are Nagarjuna International and Chemicals ltd.., Coromandel International ltd.. are the major phosphoric plant in the country .In fact, all the other International plants in the country are either Nitrogenous or potash based CIL is only integrated.

2.3. HISTORY OF INDIAN INTERNATIONAL INDUSTRY: The first fertilizer factory in India was established at Ranipet, Tamilnadu by EID Parry Ltd.., in 1996 to produce super phosphate from the acidulation of crushed bones with an annual capacity of 6400. This was followed by Dharmasri Maurarji Chemical Factor at Ambernath in Maharastrain 1924 and DCM Factory at Delhi in 1964, both produced only super phosphate . The best production of nitrogenous fertilized Via , Ammonium sulfate was in 1993 as a byproduct in the Tata Iron and Steel plant company at Jamshedpur. This was followed in 1941 by production of small qualities of Ammonium sulfate at Belagula and Mysore. The acute shortage of food immediately after the second world war necessitated a fresh look at the ways of increasing production of food grains in the country. In this process, the need for International as an essential input for increased yields was realized .As a result , the government of India started fertilized plants in Sindri. India was fourth largest producer on nitrogenous International in the world. It was ranked 8th in the phosphate International.

2.4. DEVELOPMENT AND GROWTH OF INTERNATIONAL INDUSTRY: At present, there are 66 large sized fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphate and complex International. Of these, 29 units produce urea, 20 units are of DAP and complex International., 7 units produce low analysis straight nitrogenous International and remaining 9 manufacture ammonium sulfate as by-product. Besides, there

are about 74 small and medium scale plants in operation producing single super phosphate (SSP). The total installed capacity of fertilizer production, which was 120.58 lakh MT of nitrogen and 52.31lakh MT of phosphate as on 31.03.2003 has marginally reduced to 119.98 lakh MT of nitrogen and 53.60lakh MT has raised to 54.20.

As of 2000, installed capacity in nitrogen based nutrients was 11 million tons and in phosphate based nutrients, 3.6 million tons potassium based nutrients must all be imported. Since 1992, the government has been gradually decontrolling the price of International. The prices of urea are scheduled to be completely decontrolled by 2006/07.

2.5. ROLE OF INTERNATIONAL- AGRICULTURAL SECTOR IN INDIA: Agriculture is very vital sector of Indian economy. It accounts for 32% of the countrys GDP, provides employment to 65% of the workforce and earns 27% of the Indias foreign exchange. Growth of agricultures and indicator of health of the overall economy. The most important factor that contributes to the growth of agriculture is the use of International. The development of fertilizer industry in India has been synonym agriculture and with rapidly growing agricultural. About 50% of the increasing crop productivity in recent times can be credited to the use of International. India has different kinds of soils and climatic regions. Centers of cropping and inadequate manure have left the Indian soil largely depleted of plant nutrients. T o advice and educate the farmers about the use of International and ensure the supply at qualitative products, a member of soil testing laboratories have been set up. These helped the farmer in judicious use of International. The consumption International is directly related to the availability of subsoil and surface water for irrigation and on the vagaries of the weather. The Indian economic growth is largely depends on agriculture. health of fertilizer

industry indicates the trends of economic recession

In 1997, the government introduced

retention price scheme for nitrogenous

International, which was later extended to other International. To make adequate quality of International to farmers in time, government also gave a freight subsidy , which covered the movement of fertilizer to the block head quarters. Due to ample mishandling , political interference of government gave up all those plants and gave permissions for decontrol of phosphate and potassium International from august 25, 1992 and gave adore subsidies on indigenous phosphate International.

PRESENT TRENDS: During the 8th plan in 1992-98, the production came to very close to 100 degrees 10 capacity utilization in spite of the problems of sickness and raw material constraints. There would have been a short fall in production during 8th plan but for the failure of planned capacity addition of 7lakhs tons for nitrogen and 2lakhs tons for phosphate due to feed stock supply constraints(natural gas). Incase of fertilizer which depends wholly on imported raw material ,only a small capacity addition was included in the 8th plan with the adoption of pipe reactor technology in the existing plans to enable and to achieve a production increase of 25%-30%. This did not help the units because of the policy changes in 1992 resulting in decontrol of phosphate International. The major of 9th plan (1999-2002) strategy, is to frame long term feed stock and price

policies for International and the steady tapering of subsidies. It also aims to encourage inflow of fresh investments and bring about an increase in fertilizer consumption. To realize optimum application, the large price disparity between the different nutrients to realize optimum

application will also have to be corrected. Infrastructure will have to be strengthened to ensure smooth rail movement of International and post handling of imported nutrients. The lack of fertilizer policy made difficult by the political uncertainties created by coalition compulsions at the center. In the health of this vital industry through production wise , it has had a better year in 1997-1998 than in the previous year. This underlined the need for a comprehensive fertilizer policy. As a response to this, a high power committee an fertilizer pricing was submitted. As per the report , the committee recommended scraping of unit wise retention price cut subsidies scheme for both urea and complex International to facilitate balanced application by farmers. The pricing methodology was based on long range marginal cost principle to enhance production efficiency. This pricing formula urea also proposed to increase new investments and efficient use of feedstock. Indias current International production is 32.7 million metric tons, nitrogen, phosphate and potash combined , while the demand is about 37.4 million metric tons during 2007-08, the country imported 6.92 million metric tons of urea , 2.9 million metric tons of DAP&MAP and 2.8million metric tons of MOP. With a number of units in the country not producing phosphatic International to their full capacity for various reasons including non-availability of raw materials , the volume of DAP imports is expected to go up further in the year 2008-09.During the year , the International consumption showed a growth of 4.1% compared to the previous year. While the phosphatic International (DAP&MAP) usage recorded a growth of 5.9% ,the complex International usage recorded a drop of 3.36% during the year 2007-08. There is obviously a strong case for higher usage of chemical International for improving farm productivity.

2.6. MAJOR PLAYERS FERTILISERS IN INDUSTRY: National International Limited (NFL) Madhya Pradesh, Haryana, Punjab. International& Chemicals Travancore of India Ltd..(FACT) Kerala. Para deep Phosphates Ltd..(PPL) Jagatsinghpur Hindustan International Corporation Limited(HFCL) West bengal, Bihar. The Fertilizer Corporation of India Limited(FCIL)Orissa, Jharkhand, Uttar Pradesh . India Farmers International Corporative Limited(IFFCO) Gujarat, Uttar Pradesh. Deepak International &Petrochemicals Limited(DFPL) Maharashtra. Nagaraju International & Chemicals Limited(NFCL) Kakinada Steel Authority of India limited(SAIL)Rourkela steel plant Brahmaputra Valley Fertilizer Corporation limited(BVFCL) Assam. Zuari Industries Fertilizer limited(ZIFL) Goa

Duncans Industries limited (DIL) Southern Petrochemicals Indus corporation limited(SPICL) Tuticorin Mangalore Chemicals and International limited(MCIL) Punambur, Mangalore. Gujarat Narmada Valley International cooperation limited (GNVFCL)Bharuch, Gujarat. Indo-Gulf International & Chemicals Corporation limited (IFCCL)Uttar Pradesh.. Sriram International and Chemicals limited(SFCL) Kota, Rajasthan Krishak Bharati Cooperative Limited(KBCL) Gujarat.

2.6.1.ECONOMIC SCENARIO:

After achieving three years of GDP growth of nearly 9%,GDP growth for the fiscal year 2008-09 is 6.7% as per the estimates released by CSO. India. The growth rate in agriculture sector is estimated to be much lower at 1.65 for 2008-09 compared to 4.9% achieved in 2007-08. Food production in the country during 2008-09 is estimated in excess of 230 million tones with record procurement of rice and wheat . Prices of a number of agricultural commodities were below MSP adversely affecting the farming community. That despite record production of food grains, the consumer prices of a number of commodities like rice, wheat, sugar , oil etc.. have steeply risen, has been a cause for serious concern. The year 2008-09 was marked by considerable volatility in the prices of imported International and fertilizer raw materials and intermediates. The international prices of DAP ,Urea and various raw materials like phosphoric acid, sulfur , ammonia rock phosphate and potash touched unprecedented levels by September, 2008 and then fell sharply over the next 6months.This volatility caused lot of uncertainty to the fertilizer manufactures including your company. It is expected that the prices will remain reasonably stable during the year 2009-10.

2.6.2.INDUSTRY SCENARIO: The Indian economy has registered a growth rate of 9.2% during 2006-07, although the agriculture sector with which company is associated is expected to achieve a growth rate of only 2.7%. The average growth of the agriculture sector during the tenth plan period is estimated at only 2.3% and is below the desired level of 4% per year , which is necessary for achieving the target growth of 8% CAGR in total GDP on a sustained basis. In the recent Economic Survey released by government of India, it has been acknowledged that the low yield per unit area across almost all the crops has become a regular

feature of Indian agriculture. It is also admitted that imbalanced fertilizer use is one of the major factors resulting in the lackluster performance of the agriculture sector. The survey emphasizes on the urgent need for taking agriculture to a 4% annual growth through various reforms aimed at efficient use of resources and conservation of soil , water and ecology on a sustainable basis and in a holistic framework. The recent moves to focus on large investment in major and medium irrigation projects as well as for renovation and restoration of water bodies directly linked to agriculture is expected to provide a strong base for more consistent and broad based growth. The use of chemical International plays an important role in increasing agricultural production, productivity and farm income. Equally important is the fact that higher doses of International are required to replenish the nutrients that are removed by the crops to prevent soil degradation. There is considerable scope for further increasing fertilizer consumption especially phosphatic International, though there has been reasonably good increase in the consumption of phosphatic International during the last 3 years . In this context, CIL has been working on a project covering more than 1200 low International consuming villages spread over several districts of Andhra Pradesh and Orissa for educating the farmers on the need for increasing fertilizer consumption and provide balanced nutrition to the crops in order to improve the farm yields and maintain soil health. While there has been an increase in the overall consumption of chemical International from a mere 89.63kg per hectare in 2000-01 to 113.26kg per hectare in 2006-07, there is a still considerable scope for increasing fertilizer consumption. Government has emphasized that acceleration of growth in agriculture sector will not only push the overall GDP growth upward, it would also make the growth more inclusive. Increasing farm incomes is necessary for an

equitable growth. Further, with uncertainties in global market and hardening of the international prices of food, fuel and edible oils, domestic prices stability and food security critically depend in the growth in agricultural sector.

2.7. FUTURE DEVELOPMENT OF THE FERTILIZER SECTOR: Ongoing changes in the fertilizer industry: The fertilizer industry today as in the past faces major challenges. Continued supply and use of fertilizer is important to ensure the countrys food security goal . Food grain production was declining in the most recent past (between 199496) potentially jeopardizing this goal (Government of India, Department of Agriculture and cooperation ,1999;Trivedi, 1998) .The industrys challenges relate to the uncertainty in the supply and pricing of feedstock, especially of natural gas and naphtha , low efficiency and small size of older plants, high investment costs, infrastructural bottlenecks and an uncertain policy environment .

2.8. RISK MANAGEMENT: The company recognizes that there are several risks that impact the business. The company has constituted a risk management committee headed by the CEO and comprising of the senior management personnel. The committee meets periodically and reviews the various risks associated with the business and the effectiveness of the mitigation measures. The report of the committee is presented to the board of directors for its review. The Board in turn reviews and interacts with the senior management team on the major risks associated with the business at the Board meeting.

The major risks associated with the companys business are grouped under the following heads: a) Environmental risks b) Regulatory risks c) Economic risks d) Operational risks e) Financial risks f) legal and statutory risks g) Other risks

2.8.1. Environmental Risks: Nature of Risk: Handling and storage of hazardous materials. Mitigating strategy/Measures: 1. Strict adherence to maintenance/inspection schedule, training and emergency/ disaster management plans. 2. Continuous implementation and adherence to: a)Process Safety Management System(PSMS) b)ISO 14001(Environmental Management) c)ISO 18001(Occupational ,Health and Safety Management )

2.8.2 Regulatory Risks: Nature of Risk: 1. Uncertainties in Government policies with regard to Fertilizer subsidy affecting

realization and profitability.

2. Restriction on sale/usage of some pesticide products in India/abroad. 3. Non compliance with legal , taxation, corporate and other regulations. Mitigating strategy/Measures: 1. Development of non subsidy products and business like specialty nutrients. 2. Flexibility in product mix. 3. Continuous cost reduction efforts. 4. Seek opportunities for better control across the entire value chain and reduce the zone of uncertainty. 5. Development of newer and safer formulations ;extension of product life cycle and education on proper usage. 6. Public relations exercised through industry body and stewardship activity. 7. Strict adherence to quality standards as per FCO. 8. Strict adherence to standard operating procedures and audit of statutory compliance. 9. Advice/consultation from expert professional firms. 10. Compliance certification by Management Team.

2.8.3. Economic/ Business Portfolio Risks: Nature of Risk: 1. Product / Market concentration affecting sales / profitability in case of seasonal failures. 2. Absence of New Chemistry / Enzymes / Fermented products / Monopoly products. 3. Introduction of pest /pesticide resistant BT crops/ change in Cropping pattern, impacting sale volume.

2.8.4. Operational Risks: Nature of Risk: 1.Critical machinery / equipments breakdown. 2.Non availability of critical Raw Materials. 3.Volatility in the prices of key raw materials . 4. Loss or damage to finished goods stored in the field Ware houses . 5.Loss of inventory /cash at rural retail centers

2.8.5. Financial Risks: Nature of Risks: 1. Currency risks/ Exchange fluctuation risks impacting cost of Raw materials. 2. Credit risks impacting working capital and translating into Bad debts. 3. Interest rate risk impacting cost of borrowing. 2.8.6. Legal and Statutory Risks: Nature of Risks: 1. Contractual liability Risks that may impose onerous Responsibility. 2. Non compliance of statutes resulting in heavy penalties.

2.8.7. Human Resource Risks: Nature of Risks: High attrition of skilled/ trained man power. Mitigating Strategy /Measures: 1. Career Progression Policy. 2. Regular succession planning exercise. 3. Multi skills training. 4. Engagement and training of Engineers and Management Trainees. 5. Compensation revision in line with market including Performance related incentives.

2.9.COROMANDEL INTERNATIONAL LIMITED (CIL).: A Brief Profile : Coromandel International Limited is located spreading over 464 acres of land (which is leased from VSP port trust on renewal basis) at VSP, at 5kms far from VSP Port on the east coast of India. The CIL was set as a private ltd company on 16oct 1961,with a capital investment of Rs.50crores . Then it was converted into Public ltd company. Coromandel International Limited (CIL) incorporated in 1964,now belonging to the Rs.6200crore Murugappa group, is a leading company in India manufacturing a wide range of International and pesticides(technical and formulations).Along with subsidiary company Godavari International &Chemicals Ltd.., CIL markets around 2million tones of phosphatic International making it a leader in its addressable markets and the second largest phosphatic fertilizer player in india. The company also markets phospho - gypsum and sulfur pastilles. Coromandel International Ltd has multi- locational production facilities and markets its products all over India and exports pesticides to various countries across the globe. It is managed by competent and committed professionals using advanced management practices. The company is known for fostering a climate of high performance and continuous improvement. The company also has strategic partnerships with leading companies across the globe. Voted as one of the ten greenest companies in India, reflects the companys commitment to the environment and society. CIL brought world class technology to India for the production of high analysis International. Ever since its facility at Visakhapatnam went on stream in 1967. The company has

pioneered several initiatives to enhance quality and productivity and has followed a careful calibrated strategy to move up the value chains. The merger of the farm inputs division of EID Parry (India)Ltd and the acquisition of the Godavari International and chemicals Ltd (GFCL)in the yr2003 ,have catapulated CIL to leadership status in its addressable markets , and to a close second in the phosphatic fertilizer industry in the country. Coromandel International having production facilities at VSP, Ennore, Ranipet, Navy Mumbai .CIL, VSP plant has certified for ISO9001:2000,ISO14001and OHASA 18001 standards . Ennore plant was commissioned in 1963 and has an ISO14001.The company produces pesticides at Navy Mumbai and Ranipet. The pesticide business of the company encompasses over 35types of insecticides, fungicides and herbicides and having market network of 13 branches and 4000dealers. The companys products are marketed through 13 marketing officers and a network of over 7000 dealers , who act as an interface between the company and the ultimate consumers , Farmers etc,..

VISION: To be one of the leaders in International industry with an all India presence it has to go through. High quality products and brand image Modem, cost effective and energy efficient manufacturing facility Profitable operations High level of satisfactory to stakeholders

MISSION:

The mission is to enhance the prosperity of the farmer through the supply of

quality farm inputs and related services to ensure value for money.

VALUE AND BELIEFS: o Adhere:

The following are the values and belief of the company: To ethical norms in all dealings with shareholders ,employees,

customers ,suppliers, financial and government. o Provide: Value for money to customers-through quality products and services. o Treat: Our people with respect and concern provide opportunities to learn,

contribute and advance , recognize and reward initiative, innovativeness and creativity. o Maintain: An organizational climate conducive to trust, open communication

and team spirit a style of operation , benefiting our size , but reflecting moderation and humility. o Manage: Environment effectively for harnessing opportunities. o Discharge: Responsibilities to various sections of society and preserve environment. o Grow: In an accelerated manner, consistent with values and beliefs by continuous organization renewal.

PRINCIPLES: The following are the basic principles of CIL: o To propagate and adhere the group values and beliefs.

o To achieve cost effective operations through profitable funds management and efficient financial control o To create cost and quality consciousness at all levels. o To increase levels of employee motivation, commitment and sense of belonging

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o To strictly adhere to all statutory norms on environmental protection, pollution control and ensure total safety to employee and neighborhood.

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CIL LOGO: CIL emblem depicts the farmer with a branch of seven leaves on one hand whom the company strives to serve providing them the International to ensure that this crop grows

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better and more abundantly. The registered trade mark GROMOR is a catch work depicting the companys intention to grow more food. The Coromandel farmer appears on all the packages of the company as well as in the media of sales promotion. The color chosen is GREEN representing the green revolution in agriculture. After acquisition of shareholding by M/S.EIDparry(India)ltd. CIL formed a part in the Murugappa group of companies whose logo is PEACOCK. Murugappa group has varied business batches both nationally and internationally starting from a chocolate cycle in filling unit to big manufacture. Out of the 12 companies, Murugappa group in holding CIL claims first in revenue earnings and hence it has been rightly placed in the plumage of the peacock symbol.

HISTORICAL GROWTH: Independent India realized that its largely agrarian economy needed at thrust in the

1959:

right direction for its people to benefit and prosper. The Prime Minister Jawaharlal Nehru invited the Ford Foundation to carry out a comprehensive study of Indian agriculture and give its recommendations. The study revealed a crucial need to produce indigenous chemical International to increase agricultural output to meet the countrys ever increasing food demand. 1961: An industrial license was granted to three companies IMC(the worlds Largest

producer of International then), Chevron chemical company (A Major American player in International/industrial chemicals)and EID Parry (India)Ltd(Indias largest private fertilizer producer with 60yrs standing)-to set up a giant chemical fertilizer complex. The first Board of Directors was constituted on oct16, with HVR Iyengar as its Chairman. others on the board included JQ Cope ,Charles Dennison, J.K. John, DR. L. Bharat ram ,A.W. Horton, J. T. Gibson, S.C. Dholakia, V.K. Rao and Raja Rameshwara Rao, L.L. Powell and P.J. Davis were the first managing director and Dy. managing director respectively. Donald I Michael was the first company secretary. 1962: Market development commence in the form of a seeding- Programme. EID Parry was appointed CILS Principal sales agent in India for our product aptly name GROMOR epitomizing the idea of growing more food for the nation. A 483.5 acres site was identified at VSP along the Coromandel coast (Indias east coast),from where the company derived its name. The land, taken under a 50-yr lease from Vsp port trust , has a private jetty just 5km from the plant site . With a capital investment of Rs.50crores,Lumus company undertook construction of the plant.

1967:

On December 10,Mr.Morarji Desai ,The Deputy Prime minister of India ,dedicated the

fertilizer plant to the nation, in the presence of Mr. Kasu Brahmananda Reddy,the Chief Minister of A.P . Grandhi Ramamurthy, a local Farmer ,was given the honour of cutting the ribbon. The 245feet high urea prill tower was one of the tallest industrial structures in India

then. Though not operational today, it still presents a formidable sight , towering against the skyline ,recalling old memories for those who were associated with its operation. 1970: The GROMOR farmer was developed as a marketing symbol and introduced on our bags

to spread the message of higher yields, bigger profits. Today ,farmer households across our addressable markets identify CILs brand by this symbol. 1971: The Coromandel Lecture was instituted to provide a forum for thinkers, economists, social and agricultural research scientists around the world to share their thoughts on issues of global concern such as food security, environment and extension activity. The Borlaug Award instituted in honour of noble laureate Dr. Norman Borlaug (father of the wheat revolution), honors eminent men of science and industry for their distinctive contribution to the cause of agriculture . This reflects CILS concern to develop a symbiotic interaction between agriculture, industry and academia. 1976: Our fertilizer retail outlet at Secunderabad got a boost with garden lovers fervently seeking small quantities of International for bigger and richer blooms and fruit. 1977: CIL completed a decade of participation in augmenting agricultural production for the nation .Its vital role covered soil nourishment, sharing agronomic expertise ,supporting agricultural education and rewarding research- all of which had progressively grown in width and depth during the decade.

1980-1990: Plans to diversify were a foot. A ground breaking ceremony was performed in November 1980 at Chilamkur (A.P), which is rich in limestone deposits, to set up a one million tone cement plant. The fully computerized plant (designed by world renowned cement manufacturer Krupp Polysius of West Germany) was commissioned in 1984. It was later sold to India cements in 1990. 1995-99: Chevron Chemical company divested its stake in favor of EIDParry(1)Limited acquired majority shareholding in CIL.., Making it a part of the Murugappa Group ,a highly reputed industrial conglomerate. 2000: CIL s growth over the years has been punctuated with several path breaking modernizations / up gradation programmes .Begun in 1975,the programme gathered momentum in 1992-95,when the sulfuric acid ,phosphoric acid and complex granulation plants were debottlenecked. Production capacity wends up from the original 247,000MT to 400,000MT.On September 29, Mr. .N. ChandraBabunaidu, the chief minister of A.P, inaugurated a new complex granulation train. This further augmented capacity to 600,000Mt, a boon to the entire farming community. 2003: On july12, CIL consolidated its business by acquiring, controlling stake in Godavari

International &chemicals Limited(GFCL). To optimize synergy of operations in the group , 0the farm inputs division of EIDParry(1)limited was merged with CIL on Dec1. 2004: Mr.V.Ravichandran took over as president &WTD on January 22. Mr.A.Vellayan took over as chairman on September 1. Other directors on the board are: Udwadia, Mr.S.Viswanathan and Mr. .K.A.Nair .The first post merger AHGM of the company was held on july15. 2005: CIL signs a business assistance agreement with Foskor limited, South Africa.

LOCATIONS: CILS has fertilizer plants in Visakhapatnam, Ennore and Ranipet and plant protection Chemicals plant at Navy Mumbai , Ranipet AND Jammu. It also has marketing branches in the following states: Madhya Pradesh Chhattisgarh Orissa Andhra Pradesh Karnataka Tamilnadu Haryana Punjab Maharashtra Rajasthan Kerala Gujarat

2.10.Organizational Structure of CIL:

The supervisory board of Murugappa group supervises the organization if Coromandel fertilizer limited. Top most authority of the CIL, is administered and controlled by the president and managing director . The main registered office of CIL is located at Hyd .The present president of CIL is Mr.K.A.Nair who undertakes the charge of all the levels of departmental in the organization. A Diagrammatic representation of the authority and the subordination of the position of each employee in the organization and the relationship he has with others in the organization are called the organizational chart.

ORGANISATIONAL STRUCTURE

MURUGAPPA SUPERVISORY BOARD

CHAIRMAN

PRESIDENT&MANAGING DIRECTOR

GENERAL VICEPRESIDENT MANAGER(MARKETING) (MANUFACTURING&PT).

VICEPRESIDENT(FINANCE)

GM

DGM(C)

DGM(IT) SR.MGRIR&PA

SR.MGR(M) MGR(SH&E)

DGM(A)

MGR(SH&E)

FUNCTIONS:

The Vice President Manufacturing and projects is over all in charge of manufacturing International at plant and implementation of all projects in time. The Vice President Finance is in charge of overall fund management, internal audit and secretarial functions. The General manager marketing is in charge of overall marketing of CIL s finished products as well as the byproducts like gypsum, fluorine etc.., The Employees of the organization are divided into three grades, they are:

Technical Clerical Managerial

Technical: The technical employees are subdivided into highly skilled, semiskilled and unskilled people. The labors come under unskilled works men. Technical staff is graded in to S1 to S7. Clerical: The Clerical staff is graded in to C1 to C3 ranks where C1 grade is for assistant ,C2

for junior assistant andC3 for senior assistant. The Clerical staff mainly looks after the office work. Managerial: The management staff is graded in to MG10 to MG10 ranks. Thus according to the ranks the employees of coromandel International ltd are graded and the company runs round the clock. The employees work in shifting times. The timings of three shifts are: 0700hrs to 1500hrs 1500hrs to 2300hrs 2300hrs to 0700hrs The general shift is from 0800hrs to 1630hrs.Thus the employees working under all the shift timings receive all the welfare facilities like canteen, transport, drinking water etc..,

Main products in CIL: Gromor 14-35-14: Contains nitrogen, phosphate and potash.

Highest total nutrients content(63%) Nitrogen & phosphorus ratio same as DAP. But 14-35-14 has extra 14%potash. Highest in phosphate(35%). Best for cotton, groundnut, chilly, Soya beans, Potato, etc .. Not suitable for tobacco and grapes.

Gromor 28-28-0: Complex with highest Nitrogen &Phosphorus in 1:1 ratio. Unique granulation by coating prilled urea with ammonium phosphate layer. Such granule configuration ensures efficient utilization for nutrients. Highly suitable for Paddy, Wheat.

Gromor 20-20-0-13: Ammonium phosphate sulfate with N&P in 1:1 ratio. Its special feature is 13% sulfur which is not available in most other International. The response to the sulfur has been very encouraging in many crops, particularly oil seeds in sulfur deficient soil. Gromor 10-26-26: A High analysis complex fertilizer containing all three major nutrients such as :Nitrogen, Phosphate ,Potash was launched by CIL in march 2003. This complex contains Phosphate and Potash in the ratio of 1:1, the highest among the N,P,K International.

Paramfos 16-20-0-13: Ammonium phosphate sulfate containing Nitrogen, phosphate and sulfur. It is the most preferred fertilizer in drill-sown areas. Parry Super(Single Super Phosphate): First chemical fertilizer to be manufactured in India. Favored fertilizer for dry land areas. Controls acidity in soil and increase productivity.

Parry Gold: Ammonium phosphate sulfate containing Nitrogen and Phosphate in 1:1 ratio . It is an ideal fertilizer for all crops grown in sulfur deficient soils.

PRODUCTION PROCESS: Sulfuric acid plant: We are operating 1700tons per day capacity sulfuric acid plant designed

and constructed by Miss. Simon Carves(India). Sulfuric acid is used as in acidulated in the phosphoric acid plant and is therefore only an intermediate production. Solid Sulfur is melted and filtered then sent to the combustion chamber where it reacts with oxygen in the air. Dioxide is formed from where hot gases converter containing four beds of vanadium pent oxide catalyst. The Euphoric dioxide is observed, converted to sulfuric trioxide in the water in the final absorption tower to give sulfuric acid at a concentration of 93%. The sulfuric acid generated in the inter absorption tower and final absorption tower is routed to the sulfuric acid storage tanks from where it is frawn for the use in the manufacture of phosphoric acid.

Phosphoric acid plant: The phosphoric acid plant was designed and constructed by M/S. Dorr Oliver USA. The original capacity of the plant was 255tons per day whish was increased to 325perday during years, the plant now produced on an average above 500tons of phosphoric acid per day. Rock phosphate containing calcium phosphate is ground a fine powder and reacted with sulfuric acid in reactor slurry of phosphoric acid gypsum. The reactor slurry is filtered on a rotary tilting pan type filter to separate the acid from gypsum. The gypsum from the filter is washed down to gypsum pond. The phosphoric acid is recovered at 28%p205 acid is

concentrated in a two stage evaporation process to give 485 p205 acids drawn from use in the complex plant. The off gases from evaporation section are subscribed in fluorine recovery plant to produce 13 tons per day of hydrofluoric acid. The effluents from the reactor and evaporation stages are treated in an effluent treatment plant. Reduce the fluorine , phosphorus levels to appropriate low values as fixed by the central pollution control board. Complex plant: The plant was designed and constructed by M/S. Wellman lord company

USA. The complex plant utilizes ammonia ,phosphoric acid and urea to make urea ammonium phosphate 28-28-0 where as for manufacturing complex N,P,K 14-35-14,ammonia and phosphoric acid are used along with potash, which is an ought out raw material, mixed with other feed stocks in the complex plant in case of manufacturer of 16-20,20-20-0. Ammonia phosphoric acid and sulfuric acid are used as feeds. These two are first reacted in a reactor .The wet granules from granulator are then grid in a rotary drier using hot air derived from a furnace. The drier output is screened and the proper size of granules is recovered as product. The product granules are cooled in a cooling drum and sent to the product storage area

or to the bagging plant. The product material is a bagged in 50kg bags and are dispatched by rail/road to various parts in India.

STRENGTHS OF COROMANDEL INTERNATIONAL LTD: CIL is promoted by two internally renowned US multinationals dealing in International and petrochemicals. Good manpower, productivity and industrial relations. Low capital cost hence cost or productivity is low. Excellent maintenance practices and timely planned replacement decreasing down time in plant. Reliable supply of raw materials , long time contract with suppliers for supply of raw materials. Well located in respect of raw materials and market. Own berthing facilities for handling imported rock phosphate and sulfur in shiploads. These facilities can be offered to outsiders by giving scope for income generation to the company. Adequate storage at the factory Company enjoys a good brand image and value. Good revenue from by-products such as gypsum, fluorine etc..,

ACCOUNTING POLICIES: The accounting have been prepared Primarily on the historical cost convention and in accordance with the mandatory accounting standards. The significant accounting policies followed by the company are stated below Fixed assets: Fixed assets are shown at cost or valuation less depreciation. Cost

comprises the purchase price and other attribute expenses. Fixed assets other than leasehold land /improvement. Office equipment, furniture, fitting, certain vehicles and roads had been revalued on 31st march 1991,based on a valuation by an approved value. The indices, if any used are not stated in the valuation. Depreciation on fixed assets: depreciation has been provided on straight line method. Depreciation on all assets (except those revalued and certain and vehicle, equipment) has been provided over the useful lives of the assets derived from the rates prescribed in schedule XIV of the companies act,1956 or at the rates given in the schedule. Certain vehicles and equipment are depreciated at 20% in certain equipment (including material handling equipment) or depreciated at 12.5% or 20% per annum. Depreciation on assets revalued as at 31march 2008 is provided on the basis of the residual technical life as ascertained by the value. Leasehold is being amortized over the lease period. Foreign currency transactions: Transactions made during the years in foreign currency are recorded at the exchange rate prevailing at the time of transactions. Assets and liabilities related to foreign currency transactions remaining unsettled at the yearend are translated at contract rates, when covered by foreign exchange contracts and at the yearend rates in other assets. Investments: Investments are valued at cost of acquisition and related expenses.

Inventories: Stores and spares are valued at monthly weighed average cost, other inventories are valued at lower of cost and net realized value. The method of determination of cost of various categories of inventory is as follows: 1. Raw material: First in first out method. Cost includes purchase cost and attributable expenses. 2. Finished goods and Work in Progress: weighted average cost of production which comprises overheads . 3. Goods for Resale: weighted average cost. Sundry Debtors and advances: Specific debts and advances identified as of direct material costs, direct wages and appropriate

irrecoverable and doubtful are written off or provided for respectively

SAFETY POLICY: It is the policy of COROMANDEL INTERNATIONAL LTD to conduct its activities in manner which ensure health work environment and safety to its employees. Management has the responsibilities to ensure that all process, equipment and facilities are designed, constructed, operated and maintained in safe condition. Cost considerations or the demands of production and operations must not overshadow safety considerations. It is the obligation of every employee to know and follow our safety rules and procedures; to teach what we know to others to report promptly hazards or unsafe practices and conditions to concerned department head ;to protect the company properly from the loss or accident and to perform his or her tasks to ensure the health and safety of themselves, fellow employees and the neighboring communities.

At one time plant secured the first place on the international fertilizer industries sectional contest among 162 participating companies. In June 1998 CIL won a five star rating from the British safety council for its safety management systems for year 1995-96CIL won the BEST PERFORMANCE OF A PHOSPHORIC ACID PLANT and BEST ENVIRONMENT PROTECTION AMONG PHOSPHORIC FERTILIZER PLANT

AWARDS/ RECOGNITION: Over the years, Coromandel has received a number of awards and recognitions including the British Council Five Star rating for Safety Management Systems and being adjudged one of the Ten Greenest Companies in India" by a joint survey of TERI and magazine. Business Today

RECENT AWARDS: Some of the recent awards and recognitions received by Coromandel include: Ranked among the Top 20 Best Employers to work for by Business Today CNBC award for most engaged work force DMA EREHWON National Award for Innovation in HR. Public Relations Society of India National Award (1st Prize) for The VOICE, Coromandel's in-house magazine, received for the 4th time. International Award for The VOICE magazine. FAI Best Production Performance Award for the Phosphoric Acid Plant at Vizag received for the 9th time.

 FAI Best Production Performance Award for Complex (P2O2)International for Kakinada Plant. FAI Environment Protection Award for Complex (P2O2) Plant, Vizag. FAI Best Video Film Award received for the 6th time. National Energy Conservation Award (Commendation Certificate) for efforts in Energy Conservation from Ministry of Power, New Delhi, for Kakinada Plant.

OTHER AWARDS: Received certificate of merit for International sector for the year 2002-2003 in the national ENCON award contest conducted by Bureau of Energy Efficiency. Received the National ENCON award for 2004 from the Ministry of power. Received certificate of merit for implementation of ISO 18001 from Ministry of Labor ,Government0 of A.P.

RATIO ANALYSIS
INTRODUCTION: We have already studied that there are various methods or techniques used in analyzing financial statements, such as comparative and common size statements, trend analysis etc. The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios. MEANING OF RATIO: The term Ratio means Reason in Latin word. A ratio is a simple arithmetic expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. This means the arithmetical relationship between two variables is treated as Ratio. Ratios provide clues to the financial position of a concern. NATURE OF RATIO ANALYSIS: Ratio Analysis is a technique of analysis and interpretation of financial accounting data. Calculation of mere ratios does not serve any purpose, unless several appropriate ratios are analyzed and interpreted. The following are the three important steps involved in the ratio analysis. Selection of relevant data from the financial statements depends upon the objective of analysis. Calculation of appropriate ratios from the data. Comparison of the calculated ratio with the ratio of the same firm in the past, or the ratios developed from projected financial statements or the ratios analysis

facilitates easy understanding of financial statements. With the use of ratio analysis one can measure the financial conditions of the firm and can point out whether the condition is strong, good, questionable or poor. The importance of Ratio analysis is summarized as under. 1. Ratio analysis helps in making decisions from the information provided in financial statements. 2. It helps in forecasting and planning. 3. Ratio analysis helps in simplifying the financial statements. 4. It helps management to take better decisions by comparing actual with the standard so as to take corrective action at the right time. 5. It helps in investigating the financial soundness. 6. It helps to know the relationship between the related items of financial statements.

LIMITATIONS OF RATIO ANALYSIS:

RATIO ANALYSIS is a widely used tool of financial analysis. Though the ratios offer various advantages they also suffer from the following limitations-

1. 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 has to b calculated which is likely to confuse the analyst than help him make any meaningful conclusion.

2. LACK OF ADEQUATE STANDARDS:

There are no well accepted standards or rules for calculation of ratios. Hence it is very difficult to ascertain the standard ratio in order to make a proper comparison.

3. RELIABILITY OF DATA:
The accuracy & correctness of ratios is totally dependent upon reliability of data given in financial statements. If there are any mistakes or omissions in financial statements, ratio analysis presents a wrong picture about a concern.

4. CHANGE IN ACCOUNTING PROCEDURE:

Change in accounting procedure by a firm makes a ratio analysis misleading e.g. a change in the valuation of method of inventories, from FIFO to LIFO increases/decreases the cost of sales and the value of closing stock thereby vitiating turnover ratio, gross profit ratio etc.

5. WINDOW DRESSING:
It means manipulation of accounts in a way so as to conceal vital tax and present a better picture of its financial and profitability position to its outsiders.

6. PERSONAL BIAS:
Ratios are most powerful tools of financial analysis. Hence they have to be interpreted very carefully. if any personal bias takes place in any analysis and interpretation, the firm suffers a lot.

CLASSIFICATION OF RATIOS:
In view of various users of ratios, there are many types of ratios which can be calculated from the information given in the financial statements. Accounting ratios are classified in various ways. Ratios are broadly classified intoLiquidity Ratios

Leverage Ratios Activity Ratio and Profitability Ratios. 1. LIQUIDITY RATIOS: Liquidity ratio measures the short-term solvency of a firm the following are some of the important liquidity ratios. A) CURRENT RATIO: Current ratio is the ratio of current assets to current liabilities. A current ratio of 2:1 is considered as ideal. A ratio less than 2 indicates that business does not enjoy adequate liquidity. However a high ratio indicates that firm has ideal funds.

B) QUICK RATIO:

Quick Ratio is also known as Acid Test Ratio or Liquid Ratio. It shows the relationship between liquid assets to liquid/quick liabilities. A quick ratio of 1 is usually considered as ideal. A quick ratio of less than 1 is indicative as inadequate liquidity of business. A very high quick ratio is also not advisable as funds cannot be properly employed.

C) ABSOLUTE LIQUID RATIO

This ratio enables us to known the immediately liquidity position of the firm. It is the relationship between absolute liquid assets to current liabilities. Absolute liquid assets which can be converted into cash within a very short period.

2. LEVERAGE RATIOS: Leverage ratios indicate the relative interests of owners and creditors of business. The long term creditors would judge the soundness of the firm which can be known by leverage ratios. Some of the leverage ratios are: A) DEBT-EQUITY RATIO: This ratio explains the relationship between the owners funds and burrowed funds. The ratio indicates the relationship between the external equities or the outsiders funds and the internal equities or the shareholders funds this is why this ratio is also known as External-Internal Equity Ratio or Debt to Net worth Ratio. A high ratio shows that the claims of the creditors are greater than that of owners and is unfavorable from the firms point of view. Sometimes sufficient profit cannot be earned to pay even the interest changes of the creditors. Thus a low ratio shows a favorable position.

B) PROPRIETORY / EQUITY RATIO:

This ratio establishes the relationship between the equity share holders funds to total assets of the firm. The ratio of proprietors funds to total funds (Total assets) is an important ratio for determining long term solvency of a firm. This ratio is also known as share holders to Net Worth Ratio.

C) SOLVENCY RATIO: This ratio establishes the relationship between the total liabilities to outsiders and total assets. Solvency generally refers to the capacity or ability of the business to meet its short term and long term obligations. If a company is in a position to pay its long term liabilities easily, it is said to poses long term solvency. If a companys financial position is strong to pay current liabilities it is regarded as short term solvency.

D) INTEREST COVERAGE RATIO: This ratio shows the relationship between the profit (before interest and Tax) to interest. It is expressed the number of times. This ratio is useful to debenture holders and other creditors who have lent their money.

Where PBIT = Profit Before Interest and Tax

E) FIXED ASSETS TO NET WORTH RATIO: This ratio establishes the relationship between the fixed assets and share holders funds of a firm

A ratio of 0.6 to 0.65 is considered favorable.

F) FIXED ASSETS RATIO: This ratio establishes the relationship between the fixed assets of a firm and its long term funds.

A ratio of 1:1 is considered satisfactory.

3. PROFITABILITY RATIOS The primary objective of a business undertaking is to earn profits. Profit earning is considered essential for the survival of the business. Profitability ratios are calculated to measure the overall efficiencies of the business. Various Profitability ratios are discussed below.

A) GROSSPROFIT RATIO: Gross profit ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. It indicates the extent to which selling prices of goods per unit may decline without resulting in losses on operation of a firm. A comparison of gross profit ratio over time for different firms in the same industry is a good measure of profitability.

A higher ratio is considered favorable.

B) NET PROFIT RATIO: Net profit ratio establishes a relationship between net profit (after taxes) and sales. It indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm.

A higher ratio is considered favorable.

C) OPERATING PROFIT RATIO: This ratio establishes the relationship between operating profit to net sales of a firm.

D) EXPENSES RATIO: It indicates the relationship of various expenses to net sales. The operating ratio reveals the average total variation in expenses. Expenses ratios are calculated by dividing each item of expenses or groups of expenses by net sales. These ratios can be for each individual item of expenses.

OVERALL OTHER PROFITABILITY RATIOS: This ratio indicates the overall profitability of the business. Profits are the measures of the overall efficiency of the business. The higher the profits, the more efficient are the business considered. Various types of overall profitability ratios are

A) RETURN OF ASSETS RATIO: This ratio is useful to measure the profitability of all the financial resources invested in the firms assets. It indicates how effectively the pool of funds is utilized to generate favorable earnings.

B) RETURN ON NET WORTH RATIO (RNW): It indicates the post tax return on the share holders funds i.e., equity and reserves. BHPV being a public limited company the question of dividend does not arise. This ratio is one of the most important ratios used for measuring the overall efficiency of a firm. This ratio is of great importance to the present and prospective as well as the management of the firm.

C) RETURN ON EQUITY CAPITAL: This ratio establishes the relationship between the net profit after tax and dividend and preference dividend and paid up equity share capital.

D) EARNING PER SHARE (EPS) This ratio enables us to know the profit earnings by the company for every equity share.

E) EARNING POWER RATIO (EPR) It establishes a relationship between profit after tax and profit employed. It is of great significance to the shareholders as it measures how much of return on cash on each rupee of capital employed is gained.

4. ACTIVITY RATIOS: Activity Ratio measures the efficiency or effectiveness with which a firm manages its resources or assets. The ratios are also called turn over ratios

because they indicate the speed with which assets are converted or turned over into sales.

A) INVENTORY TURN OVER RATIO: Inventory Turnover Ratio (I.T.R) 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. If the turnover is higher, then it means lesser amount of capital is blocked up in the form of working capital. A very low ratio indicators excessive inventory.

B) DEBTORS TURN OVER RATIO: A concern may sell goods on cash as well as on credit. Credit is one of the important elements of sales promotion. Debtors velocity indicates the number of times the debtors are turned over during a year. Generally, the higher the value of debtors turn over, the more efficient is the management. Similarly, low debtors turnover implies inefficient management of debtors.

AVERAGE COLLECTION PERIOD: Average collection period represents the average number of days for which a firm has to wait before its receivables are converted into cash.

C) CREDITORS TURNOVER RATIO (CTR) This ratio enables us to understand the efficiency of the payables management of the firm.

A lower CTR than DTR is considered favorable.

AVERAGE PAYMENT PERIOD: This ratio represents the average no. of days taken by the firm to pay its creditors.

D) WORKING CAPITAL TURNOVER RATIO (WCTR): This ratio indicates the velocity of the utilization of net working capital. It indicates the number of time the working capital is turned over in a year.

E) FIXED ASSETS TURNOVER RATIO (F.A.T.R) This ratio indicates the efficiency of the utilization of fixed assets of a firm.

F) CAPITAL TURNOVER RATIO : Capital turnover ratio is the relationship between cost of goods sold and the capital employed. This ratio is calculated to measure the efficiency or effectiveness with which a firm utilizes its resources or the capital employed.

CALUCULATION OF RATIO ANALYSIS:

CURRENT RATIO: Current ratio has been calculated by considering current assets and current liabilities for the past five years.

Current Ratio =

Current Assets --------------------------Current Liabilities

Years

Current assets

Current liabilities

Ratio

2008 2009 2010 2011 2012

1,17,366.73 1,94,310.61 3,72,638.62 3,36,223.88 4,17,026.03

59,749.60 83,552.45 1,75,502.51 95,235.04 1,77,904.85

1.96 2.32 2.12 3.53 2.34

CURRENT RATIO
4 3.5 3 2.5 2 1.5 1 0.5 0 3.53 2.32 1.96 2.12 2.34

2008

2009

2010

2011

2012

Interpretation: The current assets must be twice of its current liabilities. In CIL the ratio is always in the range of 1.90 to 3.50, which is accepted level. From 2008 to 2010, the ratios are between 1.90 and 2.30 which is reasonable to meet its current obligations and in 2011 this ratio shown an increase but in 2012 there is a slight decrease.

QUICK RATIO: Quick ratio has been calculated by considering quick assets and current liabilities for the past five years. Quick assets = Current assets Inventory

Quick ratio =

Quick assets ---------------------Current Liabilities Current liabilities 59,749.60 83,552.45 1,75,502.51 95,235.04 1,77,904.85 Ratio 1.28 1.29 1.35 2.55 1.49

Year 2008 2009 2010 2011 2012

3 2.5 2 1.5 1 0.5 0 2008 1.28

Quick assets 76,894.08 1,07,823.78 2,37,887.57 2,43,581.61 2,65,713.91

QUICK RATIO
2.55

1.29

1.35

1.49

2009

2010

2011

2012

Interpretation: From the above table it is clear that the ratio is stable from 2008 to 2010 by containing ratio in between 1.28 to 1.35. In 2011, the ratio has been increased to 2.55 but in 2012 this ratio has decreased.

CASH RATIO: Cash ratio is calculated by considering cash and marketable securities and current liabilities for the past five years.

Cash Ratio =

Cash ---------------Current liabilities

Years 2008 2009 2010 2011 2012

Cash and Bank balances 16,949.16 10,271.45 34,149.28 80,985.86 90,205.59

Current liabilities 59,749.60 83,552.45 1,75,502.51 95,235.04 1,77,904.85

Ratio 0.28 0.12 0.19 0.85 0.51

CASH RATIO
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 0.85

0.51

0.28 0.12 2008 2009 0.19 2010 2011 2012

Interpretation: The cash ratio of CIL was found fluctuating during the past five years. As this is a ratio between liquidity of cash and liabilities any figure above 0.10 is reasonable. In 2011 it was at a high of 0.85 and the lowest was at 0.12 in 2009.

(2) LEVERAGE RATIOS: DEBT RATIO: Total debt ratio has been calculated by using total debts and total assets for the past five years.

Total debt ratio =

Total debt ---------------------Total capital employed

Years 2008 2009 2010 2011 2012

Total debts 54896.04 100197.52 171989.99 191779.39 147116.13

Total capital employed 113273.79 191977.54 292650.75 343824.91 345673.19

Ratio 0.48 0.52 0.58 0.55 0.42

DEBT RATIO
1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

0.58 0.48 0.52 0.55 0.43

2008

2009

2010

2011

2012

Interpretation: The total debt ratio depicts the proportion of total assets financed by the total liabilities. The higher the total debt the more risky is the situation. Besides 2008, Total debt ratio was above 0.50 until 2011. In 2012, the values came down below 0.45 which shows a satisfactory decrease in total debt.

DEBT EQUITY RATIO: Debt equity ratio has been calculated by using total debt and net worth for the past five years. Debt equity ratio = Total debt ---------------------Equity share capital

Years 2008 2009 2010 2011 2012

Total debts 54896.04 100197.52 171989.99 191779.39 147116.13

Equity share capital 51243.41 79443.5 112714.05 143499.81 190411.57

Ratio 1.07 1.26 1.52 1.34 1.77

DEBT EQUITY RATIO

2.5 2 1.5 1 0.5 0 2008 2009 2010 2011 2012

Interpretation: This ratio is computed to know the changes in debt and equity from the last five years debt proportion. Every manufacturing concern is better to maintain 1:2 is adequate debt-equity ratio. But the above figures show an unsatisfactory debt situation which lowered largely in 2012.

(3)ACTIVITY RATIOS:

INVENTORY TURNOVER RATIO: The ratio is caluculated by dividing the cost of goods sold by the average inventory for past four years.

Inventory turn over ratio =

Cost of Goods Sold --------------------------------Average Inventory

Years 2008 2009 2010 2011 2012

Cost of Goods Sold 114922.68 171307.35 120625.78 198748.60 213064.27

Average Inventory 40001.71 63479.74 110618.94 113696.66 121977.20

Ratio 2.87 2.69 2.09 1.75 1.75

INVENTORY TURNOVER RATIO

2.5 2 1.5 1 0.5 0 2008 2009 2010 2011 2012 2.87 2.69 2.09 1.75

1.75

Interpretation: It expresses the relationship between the cost of goods sold and average inventory. It shows the decreasing position of the inventory turnover ratio in 2008 and 2009. It shows a increasing position 2009-2010 because of cost of goods sold is increasing and after certain period it was constant.

DEBTORS TURN OVER RATIO: DTR is calculated by considering credit sales and average debtors for the past five years.

Credit Sales DTR = ------------------------Average debtors Years 2008 2009 2010 2011 2012 Net Credit sales 121216.40 216845.35 215528.78 283052.60 326506.27 Average debtors 13363.30 13155.27 10346.13 12352.30 17394.49 Ratio 9.07 16.48 20.83 22.91 18.77

DEBTORS TURNOVER RATIO

25 20 15 10 5 0 2008 2009 2010 2011 2012

20.83 16.48 9.07

22.91 18.77

Interpretation: Debtors turnover ratio expresses the relationship between debtors and sales. A debtors turnover ratio of 10-12 and debt collection period of 30-36 days are considered to be ideal. In 2008 it is below ten. In 2010& 2011 it shows a high increase above 20 and in 2012 it is 18.77.

WORKING CAPITAL RATIO: This ratio has been calculated by considering sales and net working capital for the past five years.

Working capital =

Sales -------------------------Net working capital

Years 2008 2009 2010 2011 2012

Net sales 121216.40 216845.35 215528.78 283052.60 326506.27

Net working capital 57617.13 110758.16 197136.11 240988.84 239121.18

Ratio 2.10 1.96 1.09 1.17 1.37

WORKING CAPITAL RATIO

2.5 2 1.5 1 0.5 0 2008 2009 2010 2011 2012 1.09 1.17 2.1 1.96 1.37

Interpretation: Working capital management is the relation between sales and working capital. Here we observed the performance of working capital management of CIL during the period from 0809 to 2011-12. There was a raise in the ratio in 2008 and 2009 with a slight decrease and it fell down in 2010 and 2011. In 2012 again it started increasing.

(4) PROFITABILITY RATIOS:

GROSS PROFIT RATIO: This ratio has been calculated by considering gross profit and sales for the past five years. Gross profit GP ratio = --------------------- X 100 Net Sales Years 2008 2009 2010 2011 2012 Gross profit 21812.28 45537.44 94903.00 84304.00 113442.00 Net sales 121216.40 216845.35 215528.78 283052.60 326506.27 Ratio 17.99 20.99 44.03 29.78 34.74

GROSS PROFIT RATIO

50 40 30 20 10 0 2008 2009 2010 2011 2012 20.99 17.99 44.03 34.74 29.78

Interpretation: The ratio reveals the result of trading operation of the business. The higher the ratio, the better will be the performance of the business. Analysis shows a high ratio in 2010. There was a fall in the ratio in 2008 & 2009 and again in the year 2011, there is improvement in the GP ratio of CIL and a slight fall in 2011 & 2012 so company has to make sure that the ratio doesnt come down further.

NET PROFIT RATIO: This ratio has been calculated by considering earnings after tax for the past five years.

Profit after tax NP ratio = ------------------------------- X 100 Sales Net sales 121216.40 216845.35 215528.78 283052.60 326506.27 Ratio 8.31 9.67 23.03 16.54 21.27

Years 2008 2009 2010 2011 2012

Profit after tax 10073.65 20976.00 49638.00 46819.89 69446.00

NET PROFIT RATIO

25 20 15 10 5 0 2008 2009 2010 2011 2012 8.31 9.67 23.03 16.54 21.27

Interpretation: The NP ratio establishes the relation between the earnings after tax and the net sales. This ratio shows the net contribution funds. The NP ratio of CIL reveals the net contribution made by every one rupee of sales to the owner funds. It shows an exponential growth from past five years. It is high-quality indication to the firm, but in the year 2011 it has slightly decreased by 6.49%& in 2012it has increased to 21.27. So the company has to take little care regarding this change.