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A PROJECT REPORT ON FINANCIAL ANALYSIS OF ARVIND MILLS LIMITED Submitted by : Parth Shah-

A

PROJECT REPORT ON FINANCIAL ANALYSIS OF ARVIND MILLS LIMITED

Submitted by:

Parth Shah- P1645;

&

Ravi Shah- P1646

PGDM

Term-1

Under the Guidance of:

Prof. Hiteksha Joshi

& Ravi Shah- P1646 PGDM Term-1 Under the Guidance of : Prof. Hiteksha Joshi N.R. Institute

N.R. Institute of Business Management

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Acknowledgement : We take this opportunity to express our profound gratitude and deep regards to

Acknowledgement:

We take this opportunity to express our profound gratitude and deep regards to our mentor- Prof. Hiteksha Joshi for her exemplary guidance, monitoring and constant encouragement throughout the course of this project. The blessings, help and guidance given by her time to time shall carry us a long way in the journey of life on which we are about to embark.

We also take this opportunity to express a deep sense of gratitude to N.R. Institute of Business Management for giving us this opportunity to do this project and providing us with the information and guidance, which helped us in completing this task through various stages.

Lastly, we thank our group members and friends for their constant encouragement and help without which this project would not be possible.

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Executive Summary : “Our project is basically on financial analysis and a brief study on

Executive Summary:

“Our project is basically on financial analysis and a brief study on

Arvind mills Ltd. So firstly, we need to understand what Financial Analysis

is?”

Financial analysis is an aspect of the overall business finance function that involves examining historical data to gain information about the current and future financial health of a company. The financial function in business organizations involves evaluating economic trends, setting financial policy and creating long range plans for business activities. There is ratio analysis, common Size Statement, trend analysis which gives detailed analytical information of the financial position of the company. It also helps to forecast the future trend.

Ratio analysis is a widely used tool of financial analysis it is defined as a systematic use of ratio to interpret the financial statement so that the strength and the weakness of the firm as well as its historical performance and its current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between to variables or items. The ratio analysis helps managers in making critical decisions. We studied the balance sheet and have given recommendation as well. With the help of Ratios, we have tried to analyze companies’ performance compared to previous year.

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Introduction of Indian Textile Industry : The Indian textile industry has a significant presence in

Introduction of Indian Textile Industry:

The Indian textile industry has a significant presence in the economy as well as in the international textile economy. Its contribution to the Indian economy is manifested in terms of its contribution to the industrial production, employment generation and foreign exchange earnings. It contributes 28% of industrial production, 13% of excise collections, and 25% of employment in the industrial sector, nearly 28% to the country’s total export earnings and 6% to the GDP.

Industrial Production

28%

Excise Collections

13%

Employment in the industrial sector

25%

Country’s total export sharing

28%

GDP

6%

Contribution of Textile Industry

6% 28% 28% 13% 25%
6%
28%
28%
13%
25%

Industrial ProductionExcise Collections Employment in the Industrial Sector Country’s total Export Earning GDP

Excise CollectionsIndustrial Production Employment in the Industrial Sector Country’s total Export Earning GDP

Employment in the Industrial SectorIndustrial Production Excise Collections Country’s total Export Earning GDP

Country’s total Export EarningIndustrial Production Excise Collections Employment in the Industrial Sector GDP

GDPIndustrial Production Excise Collections Employment in the Industrial Sector Country’s total Export Earning

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The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption

The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand. Abundant availability of raw materials such as cotton, wool, silk and jute and skilled workforce has made India a sourcing hub. According to Ministry of Textiles, the current size of India’s textile and apparel industry is estimated at Rs. 4,41,800 crores in 2012. By 2020, Indian textile and apparel industry is expected to reach Rs. 1,034,000 crores with CAGR of 11%.

crores in 2012. By 2020, Indian textile and apparel industry is expected to reach Rs. 1,034,000

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Major Players in the Indian Textile Industry: 1 . ARVIND MILLS: Arvind Mills, now Arvind

Major Players in the Indian Textile Industry:

1. ARVIND MILLS:

Players in the Indian Textile Industry: 1 . ARVIND MILLS: Arvind Mills, now Arvind Limited, is

Arvind Mills, now Arvind Limited, is one of the largest manufacturer of textile products. Headquartered in Naroda, Ahmedabad, Gujrat, Arvind Limited was founded in 1931.Arvind Mills is one of the largest manufacturer and exporter of denim in India and fourth in the world. The company’s product portfolio includes:

Denim

Knits

Woven

Engineering

Retail

Telecom

Agri Business

2. BOMBAY DYEING:

Retail  Telecom  Agri Business 2. BOMBAY DYEING: Bombay Dyeing is the second largest producer

Bombay Dyeing is the second largest producer of textile in India. Headquartered in Mumbai, Bombay Dyeing was established in 1879.The key products of the company include: Towels, Bed linen and Furnishings. Apart from textile manufacturing, the company is also involved in the manufacturing of chemicals.

3. GRASIM INDUSTRIES:

in the manufacturing of chemicals. 3. GRASIM INDUSTRIES: Grasim Industries Limited is another big name in

Grasim Industries Limited is another big name in the textile industry of India, established in the year 1947. Grasim Industries Limited is the flagship company

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of the Aditya Birla Group and involved in the production of Textile, Fibre and pulp,

of the Aditya Birla Group and involved in the production of Textile, Fibre and pulp, chemicals and cement.

4. RAYMOND:

Textile, Fibre and pulp, chemicals and cement. 4. RAYMOND: Raymond is the 90 years old (as

Raymond is the 90 years old (as in 2015) Indian textile manufacturing company established in 1925. Headquartered in Thane, Mumbai, Maharashtra, Raymond Industries is the largest producer of worsted fabric in India. It is the largest woolen fabric and one of the largest textile exporter of India, with exports to countries like Japan, USA, Canada and many other countries. Apart from manufacturing, the company also makes readymade suiting & shirting and sells it them under its various brands. Some of the popular brands that the group owns are:

Raymond

Park Avenue

ColorPlus

Parx

5. RELIANCE TEXTILES:

Park Avenue  ColorPlus  Parx 5. RELIANCE TEXTILES: Reliance Textiles is a subsidiary of an

Reliance Textiles is a subsidiary of an Indian conglomerate holding company:

Reliance Industries Ltd. Established in the year 1966, Reliance Textiles Industries Pvt Ltd started manufacturing synthetic fabrics, polyester, auto- textiles, Silk-Amino suiting fabrics and water-repellent fabrics for defense/police services, with “Vimal” becoming the flagship retail brand of the company in the later years.

Today, Reliance Industries Ltd. operates majorly in 5 segments:

Exploration and production

Refining and marketing

Petrochemicals

Retail

Telecommunications

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Introduction of Arvind Limited : Arvind Limited (formerly Arvind Mills ) is a textile manufacturer

Introduction of Arvind Limited:

Arvind Limited (formerly Arvind Mills) is a textile manufacturer and the flagship company of the Arvind Group. Its headquarters is in Naroda, Ahmedabad, Gujarat, India. It has units at Santej (near Kalol). It manufactures cotton shirting, denim, knits and bottom weights (Khakis) fabrics. It has also recently ventured into technical textiles when it started Advanced Materials Division in 2011. It is India's largest denim manufacturer apart from being the world’s fourth-largest producer and exporter of denim.

Sanjaybhai Lalbhai is the Chairman & Managing Director of Arvind & Lalbhai Group. In the early 1980s, Sanjay Lalbhai led the 'Reno-vision' whereby the company brought denim into the domestic market, thus starting the jeans revolution in India. Today it retails its own brands like Flying Machine, Newport and Excalibur and licensed international brands like Arrow, Lee, Wrangler and Tommy Hilfiger, through its nationwide retail network. Arvind also runs a value retail chain, Megamart, which stocks company brands.

History of Arvind Limited:

The year 1930 was when the world suffered the great depression. At about this time, Mahatma Gandhi championed the Swadeshi Movement and at his call, people from all across India began boycotting fine and superfine fabrics, which had so far been imported from England. In the midst of this depression one family saw opportunity. The Lalbhais reasoned that the demand for fine and superfine fabrics still existed. And any Indian company that met this demand would surely prosper. The three brothers, Kasturbhai, Narottambhai and Chimanbhai, decided to set up a mill to produce superfine fabric.

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Next they looked around for state-of-the-art machinery that could produce such high quality fabric. The
Next they looked around for state-of-the-art machinery that could produce such high quality fabric. The

Next they looked around for state-of-the-art machinery that could produce such high quality fabric. The best technology of that time was acquired at a most attractive price. And a company called Arvind Limited was born. Arvind Limited started with a share capital of Rs 2,525,000 ($55,000) in the year 1931. With the aim of manufacturing the high-end superfine fabrics Arvind invested in very sophisticated technology. With 52,560 ring spindles, 2552 doubling spindles and 1122 looms it was one of the few companies in those days to start along with spinning and weaving facilities in addition to full-fledged facilities for dyeing, bleaching, finishing and mercerizing. Steadily producing high quality fabrics, year after year, Arvind took its place amongst the foremost textile units in the country.

Divisions of Arvind Limited:

Denim: The late 1980’s saw Arvind pioneer the manufacture of denim in India. Today with an installed capacity of over 110 million meters per annum, Arvind is a leading producer of denim worldwide. The denim facility at Arvind is accredited with ISO 9001, ISO 14001, OEKOTEX 100, GOTS, and Organic exchange standard. Our labs are certified by NABL (ISO 17025 certification) and customers like Levi’s etc.

Woven Fabrics: Arvind expertise in new age shirting fabric and bottom weights is unparalleled. Our shirting fabrics have consistently fetched a premium in the local and international markets. Our state of the art facility is capable of producing a total of 65 million meters per annum of Shirting and bottom weight fabrics. This capacity is set to increase reaching a total of 84 million meters by the next financial year.

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 Knit Fabrics : Arvind’s knits department has an annual knitting capacity of 5,000 tons.

Knit Fabrics: Arvind’s knits department has an annual knitting capacity of 5,000 tons. The knits vertical has a fabric dyeing capacity of 5000 tons per annum and yarn dyeing capacity of 1800 tons per annum. It has the ability to process both tubular and open-width fabrics and offers specialty finishes like mercerization, singeing and various forms of brushing and peaching.

Garment Exports: At Arvind, our range of fabrics is universal in appeal. We aim to inspire a diverse mix of customers enriching lifestyles globally. We have successfully established ourselves as a one-stop shop for apparel solutions catering to an array of national and international clients.

Gap Inc Patagonia Tommy Hilfiger Quicksilver Brooks Brothers Silver Jeans Calvin Klein FCUK Pull & Bear Jack & Jones Energie Esprit S. Oliver Mexx Sisley Benetton Coin

Advanced Materials: Arvind's Advanced Materials is a certified ISO 9001: 2008 manufacturing facility producing high performance industrial fabrics with world class technology and knowhow based on a strong foundation of knowledge, research and market needs. We are committed to offer textile solutions for rapidly growing sectors like General Industrial manufacturing and processing, infrastructure, transport, energy and personal protection.

Arvind Composites: Arvind Composites, is an advanced & integrated composite design, development and manufacturing facility, is the one stop destination for FRP/ GRP Composite Solutions. From the simplest to the most complex application, Arvind is equipped to deliver excellence.

Arvind Brands: Arvind is amongst a few organizations worldwide with a portfolio of brands that are as distinctive and relevant across diverse consumers. At Arvind, brands work across multiple channels, price points and consumer segments. The expanse of the Arvind brandscape is spread across the Indian market with around 273 standalone brand stores in addition to 975 counters selling through key accounts and multibrand outlets across India.

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Own Brands: Licensened Brands: Joint Venture Brands: Mainstream Bridge to Luxury Bridge to Luxury

Own Brands:

Licensened Brands:

Joint Venture Brands:

Mainstream

Bridge to Luxury

Bridge to Luxury

Excalibur Gant

U.S.A. 1949

Tommy Hilfiger

Flying Machine

Energie

 

Popular:

Premium:

 

Ruf & Tuf

USPA

 

New Port University

Arrow

 
 

Izod

 
 

Popular:

 
 

Cherokee

 

Mega Mart Retail: Arvind runs India's largest Value Retail Chain - Megamart. The Megamart format offers a unique and differentiated proposition to the consumers. It offers mega brands at amazingly low prices and provides a retail experience of a high-end department store.

The Megamart stores range in size from 2000 sq ft. to 65000 sq ft. The larger stores are called Big Megamart and there are 6 such stores across Bangalore, Chennai, Pune and Mumbai. The smaller formats spread across the country are 205 in number. Megamart is expanding rapidly and is expected to be a Rs. 1000 cr chain within the next two years.

The brands sold exclusively in Megamart include:

RUGGERS - SKINN - ELITUS - DONUTS - KARIGARI - MEA CASA - AUBURN HILL - BAY ISLAND - COLT - LEISHA- EDGE

- MEA CASA - AUBURN HILL - BAY ISLAND - COLT - LEISHA- EDGE  The

The Arvind Store: The Arvind Store bring together, under one roof, the best that Arvind has to offer. It is a convergence of three of Arvind’s strongest capabilities, the best of fabrics from Arvind’s textiles division, leading apparel brands from Arvind Brands and bespoke styling solutions

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based on the latest garment styles from Arvind Studios. In a world where bespoke tailoring

based on the latest garment styles from Arvind Studios. In a world where bespoke tailoring meets cutting edge fashion, The Arvind Store will create a shopping experience to rival the best in the Indian Marketplace.

Over a 1000 different fabric styles across shirting, suiting and denim

Leading apparel brands such as Arrow, US Polo & Flying Machine

Arvind Denim Labs (ADL), a bespoke denim concept offering customized washed denim - a first of its kind in India and perhaps the world

Arvind Studio A styling and tailoring solution to rival the best brands in the world

and tailoring solution to rival the best brands in the world  Engineering : 1. ANUP

Engineering:

1. ANUP Engineering-

The Anup Engineering Limited (established in 1963), is the flagship Engineering Company of the Lalbhai Group, and is a subsidiary of Arvind Limited. It is an accredited ASME “U” & “NB” stamp and ISO- 9001: 2008 certified company, conforming to specified standards. Anup has extensive experience in working with critical metallurgies like low temperature CS, NACE/HIC, low alloy, stainless steel, duplex, super duplex, monel, cupro nickel, etc. Anup is approved by IBR, CCOE & TDC certifications, and works closely with and under the surveillance of renowned national and international inspection agencies like Lloyds, BVI, DNV, EIL, Toyo Engineering, UHDE, and TUV etc.

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2.Arvind Accel- Arvind Accel Limited is a multi-specialty Engineering Procurement and Construction Company. We provide

2.Arvind Accel-

Arvind Accel Limited is a multi-specialty Engineering Procurement and Construction Company. We provide customized engineering solutions starting from consultancy and design to the final implementation and commissioning of projects on a turnkey basis. Their certified support teams can also undertake complete operations and maintenance of a plant site or facility. Their employ state of the art technology and equipment to provide unparalleled services for water, wastewater treatment and recycling projects.

Telecom:

1.Arya Omnitalk-

Arya Omnitalk is a 50:50 Joint Venture between India's highly reputed business houses, the J M Baxi Group & Arvind. The joint venture offers the following services:

GPS based Fleet Automation & Management for

City-wide Walky Talky services

Highway Traffic Management Solutions with CSSI

2.Syntel-

Syntel is a division of Arvind. With more than a million users as on date, Syntel has a dominant position in the Business Communication Solutions landscape offering a range of Analog and Digital EPABX based enterprise communication solutions for SMEs and leading Corporates.

Some of our esteemed clientele includes:

Wipro, Whirlpool, Ashok Leyland, Blue Dart, Sahara Airlines, The Indian Armed Forces, State Bank of India, The World Bank, ICICI Lombard, etc.

Infrastructure: Arvind Infrastructure is steadily rising name in developing lifestyle spaces of quality. They are already on an ambitious drive to change the landscape of realty - with approx. 9 million square feet of real estate emerging across the country. Arvind Infrastructure - Building Pride. Building Joy.

Agri-Business: Arvind Agribusiness was established in 2007 with the aim of creating a more balanced and healthy ecosystem. Being a leading textile manufacturer and a major consumer of cotton, we focus to make

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our key resources more eco-friendly and sustainable. Arvind Agribusiness aim to educate farmers and extend

our key resources more eco-friendly and sustainable. Arvind Agribusiness aim to educate farmers and extend support so that they switch over to more sustainable farming practices. Since our foray into sustainable agriculture, our organic agriculture practices and Better Cotton Initiative have not only preserved our environment but have also empowered farmers with over 18% better yield and fair pay. Arvind procures organic cotton which is majority (approx. 50%) of the farmers' produce.

E-Commerce: An initiative that houses all of Arvind’s ecommerce initiatives, Arvind Internet Ltd (AIL) is an entity that epitomizes smart shopping in a world that is defined by the internet and technology. A melting pot of talent, AIL’s play boasts of a number of ecommerce professionals who have been a part of the industry since its nascent stage. With its first initiative, Creyate, revolutionizing fashion globally, AIL also has a major launch lined up next year.

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Introduction of Financial Analysis Theory : In the financial world , every company must know

Introduction of Financial Analysis Theory:

In the financial world, every company must know its financial position. It is necessary for the company to know its profitability and for that purpose it is require analyzing company's financial statements. Financial statement shows the real picture of the company in terms of money. Management of the company is keenly interested in knowing the real performance of the company. So it is required to analysis the financial statement for knowing the actual financial position and forecasting the future trend.

Financial Statements:

Financial statements as used in corporate business, refers to a set of report and schedule which an accountant prepare at the end of the period for a business enterprise. The financial statements are the means with the help of which the accounting system perform its main function of providing summarized information about the financial affair of the business. This statement comprises of balance sheet position statement and profit & loss account or income statement.

Analysis of Financial Statements:

Financial analysis determines the significant operation and financial characteristics of a firm from accounting data. It is a technique typical devoted to evaluate the past, current and projected information of a business firm. Financial Analysis is an attempt to determine the significance and meaning of financial statement data so that forecast can be made of the future prospects for earnings, ability to pay interest and debit maturities and profitability.

Types of Financial Statements:

Financial statements are analyzed by different parties for different purposed. The analysis is done from different angles. Accordingly, we can classify financial statement analysis into different categories as follows:

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1. On the basis of concerned parties : According to different parties concerned with the

1. On the basis of concerned parties:

According to different parties concerned with the operation of the company, the financial statement analysis can be of two types:

External Analysis

Internal Analysis

External Analysis:

When the analysis is undertaken by outside parties namely existing and prospective investors, suppliers, lenders, government agencies, customers etc., it is external financial statement analysis.

Internal Analysis:

This analysis is undertaken by the management of the company to monitor its financial and operating performance.

2. On the basis of time period of the study:

Based on the time period covered for the study, the financial statement analysis can be grouped into:

Horizontal Analysis

Vertical Analysis

Horizontal Analysis:

This analysis refers to the study of past consecutive balance sheets, income statements or statements of cash flow at a time. The analysis can be made between two periods or over a series of periods. This analysis is very much effective for understanding the direction and trend of the organization particularly when it is undertaken for several years. Comparative statements and trend analysis are two important tools that can be employed for horizontal analysis.

Vertical Analysis:

When the analysis is restricted to the financial statements of one particular period only, it is known as vertical analysis of financial statements. In this analysis each item of a particular financial statement is expressed as

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percentage of a base figure selected from the same statement. Common- size statements and accounting

percentage of a base figure selected from the same statement. Common- size statements and accounting ratios are two important tools used for vertical analysis. This analysis is very much useful for understanding the structural relationship of various items in a financial statement.

3. On the basis of objective of analysis:

Long term analysis:

This analysis is made in order to study the long term financial stability and liquidity as well as profitability and earning capacity of the business.

Short term analysis:

This analysis is done in order to determine the short term solvency, stability, liquidity and earning capacity of the business.

Tools of Financial Analysis:

The analysis of financial statements consists of relationship and trends, to determine whether the financial position of the company is satisfactory or not. The analytical methods listed below are used to ascertain the relationships among the financial statements items.

Analytical methods used in analyzing financial statements are as follows:

1) Ratio analysis 2) Common size financial statement 3) Trend Analysis

Financial Ratio:

Ratio analysis means the proportionate comparisons of any two variables of Trading Account, Profit and loss account, Balance sheet. Ratio analysis is a widely used tool of financial analysis it is defined as a systematic use of ratio to interpret the financial statement so that the strength and the weakness of the firm as well as its historical performance and its current financial condition can be determined.

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Accounting Analysis : Comparative and Common Size Financial Statement : Financial statements reveal the financial

Accounting Analysis:

Comparative and Common Size Financial Statement:

Financial statements reveal the financial credibility of a company. A financial statement, which expresses the different values in form of percentage, is called a Common size financial statement. A common size financial statement helps in comparing two companies, which differ in size. Two components of the common size financial statement are:

Balance sheet

Income statement

When both these components are clubbed together, a comparative and common size financial statement is obtained.

comparative and common size financial statement is obtained. Features of a common size financial statement: A

Features of a common size financial statement:

A common size financial statement consists of various amounts expressed as

percentage. For example, if cash of a particular company is calculated to be 847678395. In the common size financial statement, it will be represented as 15%

of the total assets. If the total assets of a company are found to be 5567069464, it

will appear as 100% in the common size financial statement as it is the base for calculation. Similarly, if the current liabilities of a company are found to be 295273778, it will appear as 5%. The numbers obtained in the income statement will appear in form of percentage.

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Comparative Balance Sheet of 5 Years :   Values in Rs.   Particulars 2006-07 2007-08

Comparative Balance Sheet of 5 Years:

 

Values in Rs.

 

Particulars

2006-07

2007-08

2008-09

2009-10

2010-11

Sources of Funds:

         

Equity Share Capital

209.38

218.98

218.98

231.98

254.4

Reserve & Surplus

1106.9

1172.5

919.82

1107.3

1236

Net Worth

1316.3

1391.5

1138.8

1339.3

1490.4

Secured Loan

1772.7

1774.9

1920.9

1728.7

1763.2

Unsecured Loan

161.57

97.52

103.04

141.85

48.89

Total Debt

1934.3

1872.5

2023.9

1870.6

1812.1

C.L. & Provisions

466.15

395.17

608.77

453.62

651.33

Total Liabilities

3716.8

3659.1

3771.5

3663.5

3953.9

Application of Funds:

         

Gross Block

2817.2

2943

3056.8

3002.5

3172.2

(-) Depreciation

-772.3

-906.78

-1015

-1084

-1170

Net Block

2044.9

2036.2

2042.3

1918.1

2002

Capital Work in Progress

71.45

116.14

81.58

46.86

142.28

Investments

46.05

104.99

100.06

300.29

309.4

Inventories

645.01

575.34

581.47

432

699.16

Sundry Debtors

204.85

261.77

350.84

424.16

563.63

Cash & Bank Balance

20.86

14.79

20.15

33.35

14.2

Total Current Assets

870.72

851.9

952.46

889.51

1277

Loans & Advances

752.93

617.71

633.37

579.64

514.19

Fixed Deposits

1.45

1.53

6.68

9.79

14.89

Total CA, Loans & Advances

1742.6

1692.3

1774.2

1826.1

2257.8

Total Assets

3787.5

3728.5

3816.4

3744.2

4259.7

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Common Size Balance Sheet of 5 Years :   Common Size%   Particulars 2006-07 2007-08

Common Size Balance Sheet of 5 Years:

 

Common Size%

 

Particulars

2006-07

2007-08

2008-09

2009-10

2010-11

Sources of Funds:

         

Equity Share Capital

5.63

5.98

5.81

6.33

6.43

Reserve & Surplus

29.78

32.04

24.39

30.23

31.26

Net Worth

35.41

38.02

30.2

36.56

37.69

Secured Loan

47.7

48.51

50.93

47.19

44.6

Unsecured Loan

4.35

2.67

2.73

3.87

1.24

Total Debt

52.05

51.18

53.66

51.06

45.84

C.L. & Provisions

12.54

10.8

16.14

12.38

16.47

Total Liabilities

100

100

100

100

100

Application of Funds:

         

Gross Block

74.38

78.93

80.1

80.19

74.47

(-) Depreciation

-20.39

-24.32

-26.58

-28.96

-27.47

Net Block

53.99

54.61

53.51

51.23

47

Capital Work in Progress

1.89

3.11

2.14

1.25

3.34

Investments

1.22

2.82

2.62

8.02

7.26

Inventories

17.03

15.43

15.24

11.54

16.41

Sundry Debtors

5.41

7.02

9.19

11.34

13.23

Cash & Bank Balance

0.55

0.4

0.53

0.89

0.33

Total Current Assets

22.99

22.85

24.96

23.76

29.98

Loans & Advances

19.88

15.58

16.6

15.48

12.07

Fixed Deposits

0.04

0.04

0.18

0.26

0.35

Total CA, Loans & Advances

46.01

45.39

46.49

48.77

53

Total Assets

100

100

100

100

100

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 Interpretation : For the analysis of Balance sheet, we have taken the total of

Interpretation:

For the analysis of Balance sheet, we have taken the total of the liabilities side as base.

The total capital of the company has increased compared to last year because of increase in reserves & surplus by 6.87 % compared to 2008-09 year.

The secured loan amount has decreased by 2.59 % this means that company has paid off some its loan amount and so its liability is less.

The fixed assets of the company have increased by 2.09 % which is good for company.

Total Current assets of the company has increased by 6.22 % as there is a decrease in the cash balance which is not good for the company because now it cannot pay off its liability easily.

The current liability of the company has increased by 4.09 % which is not good because now it has to pay more amounts.

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The Trend Analysis of the Balance Sheet : NOTE : Base year taken is 2007.

The Trend Analysis of the Balance Sheet:

NOTE: Base year taken is 2007.

Particulars

2006-

2007-

2008-

2009-

2010-

07

08

09

10

11

Sources of Funds:

         

Equity Share Capital

1

1.05

1.05

1.11

1.22

Reserve & Surplus

1

1.05

0.83

1

1.11

Net Worth

1

1.05

0.86

1.01

1.13

Secured Loan

1

1

1.08

0.97

0.99

Unsecured Loan

1

0.6

0.64

0.88

0.3

Total Debt

1

0.97

1.05

0.97

0.94

C.L. & Provisions

1

0.85

1.3

0.97

1.4

Total Liabilities

1

0.98

1.01

0.99

1.06

Application of Funds:

         

Gross Block

1

1.04

1.08

1.06

1.12

(-) Depreciation

1

1.17

1.31

1.4

1.51

Net Block

1

1

1

0.94

0.98

Capital Work in Progress

1

1.62

1.14

0.66

1.08

Investments

1

2.28

2.17

6.52

6.72

Inventories

1

0.89

0.9

0.67

1.08

Sundry Debtors

1

1.28

1.71

2.07

2.75

Cash & Bank Balance

1

0.7

0.97

1.6

0.68

Total Current Assets

1

0.98

1.09

1.02

1.46

Loans & Advances

1

0.82

0.84

0.77

0.68

Fixed Deposits

1

1.05

4.6

6.75

10.26

Total CA, Loans & Advances

1

0.97

1.02

1.05

1.3

Total Assets

1

0.98

1

0.99

1.12

 

22

  Explanation : Trend analysis is an extension of horizontal analysis. Their methodology is
  Explanation : Trend analysis is an extension of horizontal analysis. Their methodology is

Explanation:

Trend analysis is an extension of horizontal analysis. Their methodology is very simple. The utility of this tool of analysis lies in the fact that while two years’ comparisons may provide indication of growth.

Overall assessment:

The equity share capital is increasing year by year and the higher amount of the base year value.

The net worth is increasing year by year but the total debt is decreasing

year by year.

The total of the balance sheet is higher than base year means increasing year by year.

Gross block amount is increasing stage but in the net block is not much in increasing stage. Because the reason behind that depreciation and the working progress amount is calculated.

The bad thing is that the cash and bank balance is highly decreasing in 2011 year as compared to the Value of base year.

It is not good for the company, if they want to some fund which is required that fulfilled the new technology.

23

Comparative and Common Size Income statement : An income statement in which each account is

Comparative and Common Size Income statement:

An income statement in which each account is expressed as a percentage of the value of sales. This type of financial statement can be used to allow for easy analysis between companies or between time periods of a company. While most firms don’t report their statements in common size it is beneficial to compute if you want to analyze two or more companies of differing size against each other. It also allows for the analysis of a company over various time periods, revealing for example what percentage of sales is cost of goods sold and how that value has changed over time.

Comparative Income Statement:

 

Values in Rs.

 

Particulars

2006-

2007-

2008-

2009-

2010-

07

08

09

10

11

Income:

         

Sales Turnover

1845.01

2215.65

2347.5

2318.49

2665.81

(-) Excise Duty

-15.78

-2.33

-2.68

-1.74

-2.23

Net Sales

1829.23

2213.32

2344.82

2316.75

2663.58

Other Income

143.09

97.11

-54.05

69.5

80.71

Stock Adjustments

97.95

9.49

34.85

-18.78

93.63

Total Income

2070.27

2319.92

2325.62

2367.47

2837.92

Common Size Income Statement:

 

Common Size % age

 

Particulars

2006-

2007-

2008-

2009-

2010-

07

08

09

10

11

Income:

         

Sales Turnover

89.12

95.51

100.94

97.93

93.94

(-) Excise Duty

-0.76

-0.1

-0.12

-0.07

-0.08

Net Sales

88.36

95.41

100.83

97.86

93.86

Other Income

6.91

4.19

-2.32

2.94

2.84

Stock Adjustments

4.73

0.41

1.5

-0.79

3.3

Total Income

100

100

100

100

100

24

 Interpretation : The income statement or profit and loss account is considered as a
 Interpretation : The income statement or profit and loss account is considered as a

Interpretation:

The income statement or profit and loss account is considered as a very useful statement of all financials statement. It depicts the expenses incurred on production, sales and distribution and sales revenue and the net profit or loss for a particular period. It shows whether the operations of the firm resulted in profit or loss at the end of a particular period. In comparative analysis for the income is that the income of the company is gradually increase in every year.

25

Trend Analysis of Income Statement : Note : Base year taken is 2007. Particulars 2006-

Trend Analysis of Income Statement:

Note: Base year taken is 2007.

Particulars

2006-

2007-

2008-

2009-

2010-

07

08

09

10

11

Income:

         

Sales Turnover

1

1.2

1.27

1.25

1.44

(-) Excise Duty

-1

-0.15

-0.17

-0.11

-0.14

Net Sales

1

1.21

1.28

1.27

1.45

Other Income

1

0.68

-0.38

0.49

0.56

Stock

         

Adjustments

1

0.1

0.36

-0.2

0.96

Total Income

1

1.12

1.12

1.14

1.37

0.96 Total Income 1 1.12 1.12 1.14 1.37  Trend analysis is an extension of horizontal

Trend analysis is an extension of horizontal analysis. Their methodology is very simple. The utility of this tool of analysis lies in the fact that while two years’ comparisons may provide indication of growth.

The amount of sale is very variable. The amount of net sale is also very

Interpretation:

variable. But it is good position.

Total income is increasing means the base year value is lower than other years. The reason behind that, the stock adjustments are increasing good stage.

26

Changes in Assets :   In Rs. Cr. Particulars 2006- 07 2007- 08 2008- 09

Changes in Assets:

 

In Rs. Cr.

Particulars

2006-07

2007-08

2008-09

2009-10

2010-11

Assets

2044.89

2036.21

2042.29

1918.11

2001.96

2044.89 2036.21 2042.29 1918.11 2001.96  In comparative analysis for assets, it is showing that

In comparative analysis for assets, it is showing that in 2010 the assets have gradually decrease and in 2012 it is stable. No major assets increase in last three years. It means there are not purchasing the assets in major quantity.

Interpretation:

27

Change in Liabilities :   In Rs. Cr.   Particulars 2006-07 2007-08 2008-09 2009-10 2010-11

Change in Liabilities:

 

In Rs. Cr.

 

Particulars

2006-07

2007-08

2008-09

2009-10

2010-11

Liabilities

3716.77

3659.14

3771.51

3663.49

3953.85

3716.77 3659.14 3771.51 3663.49 3953.85  Interpretation : In comparative analysis for 2011 years

Interpretation:

In comparative analysis for 2011 years is that liabilities of the company are increasing highly which is not good for the company. The debtors have not given money regularly.

28

Change in Profit :   In Rs. Cr.   Particulars 2006-07 2007-08 2008-09 2009-10 2010-11

Change in Profit:

 

In Rs. Cr.

 

Particulars

2006-07

2007-08

2008-09

2009-10

2010-11

Profit

11.34

-21.55

12.36

20.27

24.2

Profit 11.34 -21.55 12.36 20.27 24.2  Interpretation : In comparative analysis of profit, in

Interpretation:

In comparative analysis of profit, in 2010-11 profit of the company has increase substantially but in 2008 it has decrease substantially.

29

Common Size Statements of Arvind Limited & Raymond Limited : Income statement of Arvind Limited

Common Size Statements of Arvind Limited & Raymond Limited:

Income statement of Arvind Limited & Raymond Limited of Mar’16:

Arvind

   

Raymond

   
 

------------

       

--------------

Consolidated Profit & Loss account

------- in Rs. Cr. ---

------------

Common

Consolidated Profit & Loss account

----- in Rs. Cr. ---------

Common

----------

----

Size%

Size%

 

Mar '16

   

Mar '16

 
   
 
   
 

Income:

Income:

Sales Turnover

8,581.26

101.55

Sales Turnover

5,169.15

100.74

Excise Duty

-130.85

-1.55

Excise Duty

-37.79

-0.74

Net Sales

8,450.41

100

Net Sales

5,131.36

100

Other Income

88.46

1.05

Other Income

535.3

10.43

Stock Adjustments

27.68

0.33

Stock Adjustments

102.3

1.99

(A)Total Income

8,566.55

101.37

(A)Total Income

5,768.96

112.43

Expenditure:

 

Expenditure:

 

Raw Materials

4,170.96

49.36

Raw Materials

2,738.69

53.37

Power & Fuel Cost

494.89

5.86

Power & Fuel Cost

193.61

3.77

Employee Cost

927.75

10.98

Employee Cost

725.08

14.13

Other Manufacturing Expenses

28.98

 

Other Manufacturing

403.24

 

0.34

Expenses

7.86

Miscellaneous Expenses

1,790.37

21.19

Miscellaneous Expenses

1,198.74

23.36

(B)Total Expenses

7,412.95

87.72

(B)Total Expenses

5,259.36

102.1

       
   
       
   

PBDIT(A-B)

1,153.60

13.65

PBDIT(A-B)

509.6

9.93

Interest

-381.14

-4.51

Interest

-183.45

-3.58

PBDT

772.46

9.14

PBDT

326.15

6.36

Depreciation

-255.94

-3.03

Depreciation

-164.25

-3.2

Profit Before Tax

516.52

6.11

Profit Before Tax

161.9

3.16

Tax

-151.69

-1.8

Tax

-72.13

-1.4

Reported Net Profit

364.83

4.32

Reported Net Profit

89.78

1.75

30

Balance sheet statement of Arvind Limited & Raymond Limited of Mar’16: Arvind     Raymond

Balance sheet statement of Arvind Limited & Raymond Limited of Mar’16:

Arvind

   

Raymond

   
 

-----------------

       

------------------

Consolidated Balance Sheet

-- in Rs. Cr.

Common

Consolidated Balance Sheet

- in Rs. Cr. ---

Common

-----------------

Size%

Size%

 

----------------

 

--

   
 

Mar '16

   

Mar '16

 
   
 
   
 

Sources of Funds:

Sources of Funds:

Total Share Capital

258.24

4.37

Total Share Capital

61.38

1.79

Equity Share Capital

258.24

4.37

Equity Share Capital

61.38

1.79

Reserves

2,387.38

40.41

Reserves

1,569.98

45.68

Net worth

2,645.62

44.78

Net worth

1,631.36

47.46

Secured Loans

2,789.63

47.22

Secured Loans

1,050.16

30.55

Unsecured Loans

419.41

7.1

Unsecured Loans

692.55

20.15

Total Debt

3,209.04

54.32

Total Debt

1,742.71

50.7

Minority Interest

52.89

0.9

Minority Interest

62.95

1.83

Total Liabilities

5,907.55

100

Total Liabilities

3,437.02

100

   
 
   
 

Application of Funds:

Application of Funds:

Gross Block

5,584.70

94.53

Gross Block

3,204.43

93.23

Less: Revaluation

         

Reserves

-266.09

-4.5

Less: Revaluation Reserves

0

0

Less: Accum.

         

Depreciation

-2,125.17

-35.97

Less: Accum. Depreciation

-1,897.95

-55.22

Net Block

3,193.44

54.06

Net Block

1,306.48

38.01

Capital Work in Progress

146.9

2.49

Capital Work in Progress

249.98

7.07

Investments

72.64

1.23

Investments

502.37

14.62

Inventories

1,831.88

31.01

Inventories

1,266.03

36.86

Sundry Debtors

1,417.25

23.99

Sundry Debtors

1,047.48

30.48

Cash and Bank Balance

65.08

1.1

Cash and Bank Balance

92.45

2.69

Total Current Assets

3,314.21

56.1

Total Current Assets

2,405.96

70

Loans and Advances

1,578.57

26.72

Loans and Advances

603.96

17.57

(A)Total CA, Loans & Advances

4,892.78

82.82

(A)Total CA, Loans & Advances

3,009.92

87.57

Current Liabilities

2,282.20

38.63

Current Liabilities

1,575.37

45.84

Provisions

116.01

1.96

Provisions

56.37

1.64

(B)Total CL & Provisions

2,398.21

40.59

(B)Total CL & Provisions

1,631.74

47.48

(A-B) Net Current Assets

2,494.57

42.23

(A-B) Net Current Assets

1,378.18

40.1

Total Assets

5,907.55

100

Total Assets

3,437.02

100

31

 Interpretation :  From the income point of view Arvind Ltd. is better than

Interpretation:

From the income point of view Arvind Ltd. is better than Raymond Ltd, because if we compare total income of both companies with their profit then Arvind Ltd.’s ratio comes to approx. 4.26 as compared to Raymond Ltd.’s i.e. 1.56.

From the investment point of view Raymond Ltd. is better because of following reasons:

1. Raymond Ltd. has 25times Reserves as compared to its Equity Share Capital, while Arvind Ltd. has only 9 times Reserves as compared to its Equity Share Capital. Raymond Ltd. Raymond Ltd. can use these Reserves to give bonus shares, to declare share premium, to declare dividends & to pay its debts in case of bankruptcy.

2. Raymond Ltd. also has lesser amount to take from its debtors as compared to Arvind Limited.

3. Raymond Ltd. also has lesser amount to give to its creditors as compared to Arvind Limited.

4. Raymond Ltd. has taken lesser amount of loans & advances from third parties. So we can say that Raymond Ltd. is able to manage its funds very nicely.

5. Raymond Ltd. also has higher amount of liquidity compared to Arvind Ltd. Raymond Ltd. also has higher investments in comparison of cash balance. So, we can say that Raymond Ltd. has not put all its cash balance in its business.

6. If Raymond Ltd. gets bankrupt then after utilization of Reserves, it has to only bring Rs. 172.73 cr. to pay its debts, while Arvind Ltd. has to bring Rs. 821.66 cr. in case of bankruptcy after utilization of Reserves.

32

Ratio Analysis :  RETURN ON INVESTMENT (ROI) RATIOS :  Return on Capital Employed

Ratio Analysis:

RETURN ON INVESTMENT (ROI) RATIOS:

Return on Capital Employed:

Ratio%:

Formula:( EBIT/CE

ROCE

*100)

Years

Rs. Crores

 

(197.12/3787.49) *100

2006-07

=5.20

 

(206.81/3737.98) *100

2007-08

=5.53

 

(168.15/3826.51) *100

2008-09

=4.39

 

(265.32/3290.58) *100

2009-10

=8.06

 

(350.24/4259.71) *100

2010-11

=8.22

Note: Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus + Long Term Debt- Fictitious Assets

Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus + Long Term Debt-

33

 Interpretation : A measure of the return that a company is realizing from its

Interpretation:

A measure of the return that a company is realizing from its capital

employed. The ratio can also be seen as representing the efficiency with which capital is being utilized to generate revenue. It is commonly used as a measure for comparing the performance between businesses and for assessing whether a business generates enough returns to pay for its cost

of

capital. Of course the higher the ratio, the better will be the profitability

of

the company.

Return on Net Worth:

Ratio%:

 

RONW

Formula:( PAT/ NW *100)

Years

Rs. Crores

2006-07

(25.27/1316.31) *100 =1.92

2007-08

(27.36/1391.51) *100 =1.96

 

(-47.87/1138.80) *100 = -

2008-09

4.20

2009-10

(52.00/1339.29) *100 =3.88

2010-11

(134.8/1490.40) *100 =9.06

*100 = - 2008-09 4.20 2009-10 (52.00/1339.29) *100 =3.88 2010-11 (134.8/1490.40) *100 =9.06 34

34

 Interpretation : The amount of net income returned as a percentage of shareholder’s equity.

Interpretation:

The amount of net income returned as a percentage of shareholder’s equity. Return on net worth measures a corporation's profitability by revealing how much profit a company. This ratio indicates the productivity of the owned funds employed in the firm. However, in judging the profitability of a firm, it should not be overlooked that during inflationary periods, the ratio may show an upward trend because the numerator of the ratio represents current values whereas denominator represents historical values. it concludes the resources of the firm are being used, higher the ratio, better are the results.

SOLVENCY RATIOS:

Net Asset Value:

Ratio: NAV

Formula:( NW/ Avg. outstanding Eq. shares *100)

(Rs.)

Years

Rs. Crores

 

(1316.31/20. 938)*100

2006-07

=62.87

 

(1391.51/21.898) *100

2007-08

=63.55

 

(1138.80/21.898) *100

2008-09

=52.00

 

(1339.29/23.198) *100

2009-10

=57.73

 

(1490.40/25.440) *100

2010-11

=58.58

35

 Interpretation : This ratio measures the net worth or net asset value per equity
 Interpretation : This ratio measures the net worth or net asset value per equity

Interpretation:

This ratio measures the net worth or net asset value per equity share. Its thus seeks to assess as to what extent the value of equity share of a company contributed at par or at a premium has grown or the value/wealth has been created for the shareholders. The higher the ratio is, the better the financial position of the company. If, we assume the no. of equity shares issued is no change in net worth of the company. The book value per share decreased from 2008-09 and increased in 2011 indicating that the net worth of the company decreased and then increased in 2011.

Debt Equity:

Ratio: Debt Equity ((Times)

Formula:( Long Term Debt/ NW*100)

Years

Rs. Crores

 

(1934.31/1316.31) *100 =

2006-07

1.47

 

(1872.46/1391.51) *100 =

2007-08

1.35

 

(2023.94/1138.80) *100 =

2008-09

1.77

 

(1870.58/1339.29) *100 =

2009-10

1.40

 

(1812.12/1490.40) *100 =

2010-11

1.22

36

 Interpretation : This ratio indicates the ability to pay back the long term borrowings
 Interpretation : This ratio indicates the ability to pay back the long term borrowings

Interpretation:

This ratio indicates the ability to pay back the long term borrowings so the lower the ratio, the better it is. As we see that the debt equity ratio is increasing from 2008-09, this indicates that the company does not have sufficient funds to pay back its debts. The ratio should be ideally less than 1, but then as the ratio has slightly decreased from 2010-11, this indicates the company’s position has improved to some extent. But still company is facing crisis in terms of paying back the long term borrowings.

DU PONT ANALYSIS:

Ratio

RONW (%)

:

Net Profit Margin (%)

*

Net Worth Turnover

Formula

(PAT/ NW) *100

:

(PAT / NS) *100

*

Net Sales/ Net Worth

 

(25.27/1316.31) *100=

 

(25.27/1829.23)

   

2006-07

1.92

:

*100=1.38

*

(1829.23/1316.31) =1.39

 

(27.36/1391.51) *100=

 

(27.36/2213.32)

   

2007-08

1.96

:

*100=1.23

*

(2213.32/1391.51) =1.59

 

(-47.87/1138.80.31) *100=

 

(-47.87/2344.82) *100=-

   

2008-09

-4.20

:

2.04

*

(2344.82/1138.80.31) =2.06

 

(52.00/1339.29) *100=

 

(52.00/2316.75)

   

2009-10

3.88

:

*100=2.24

*

(2316.75/1339.29) =1.73

 

(134.80/1490.40) *100=

 

(134.8/2663.58)

   

2010-11

9.06

:

*100=5.06

*

(2663.58/1490.40) =1.79

 

37

 Interpretation : This ratio analysis shows increase in RONW through which we can see
 Interpretation : This ratio analysis shows increase in RONW through which we can see

Interpretation:

This ratio analysis shows increase in RONW through which we can see improvement in both net profit margin as well as net worth turnover. In other word the overall ROI has improved due to higher resource efficiency as well as higher operating margins. In year 2009 thus there is fall in both net profit margin as well as net worth turnover. When it gradually increases in year 2010 and 2011 thus we can see improvement in both ratios which is good for company.

38

Suggestions:  In 2010-11 as compared to 2009-10, the sales have comparatively decreased and Assets

Suggestions:

In 2010-11 as compared to 2009-10, the sales have comparatively decreased and Assets have increased, Company should take efforts in boosting up its sales and make optimum utilization of Assets which it possesses.

  It is observed that Company’s Net profit margin ratio has increase by 5.06%
 It is observed that Company’s Net profit margin ratio has increase by 5.06%
in 2010-11 as compared to 2009-10; here company is doing excellence
work so no need to change it. 
 It has been seen that RONW in 2008-09 was -4.20% 2009-10 was 3.88 %
and finally in 2010-11 was only 9.06 %. Thus RONW is increase gradually.
So the Company should has made effort in optimizing the usage of the
funds invested by Equity share holder. 
 It is observed that Debt Equity has increased in 2008-09 was 1.77 times &
2010-11 it has decreased to 1.22 times. This indicates company has to do
more work to improve their condition. 

39

Conclusion : The project report on the topic “Financial statement analysis” is a best method

Conclusion:

The project report on the topic “Financial statement analysis” is a best method to analyze the financial position of the company and helps in forecasting the future trend.

It is observed that company has improved its standing by lowering the debts, but it is not achieved satisfactory profit margin, it has gone low in 2008-09. Company has to adopt various methods that improve sales i.e. paying incentives to staff, advertisement in market, etc. if the sale will increase the Service provided will increase which will indeed decrease the production cost (operating cost) which will lead to maximization of profit and optimum utilization of resources available to the company. Another thing, company has to maintain a cash flow to decide cash required to be kept for speculation, operation and emergency purpose, as excess cash is loss of interest. It is also seen that Return on investment is very low. Company should properly analyze different option available for investment and after considering the cost of investment, selection of a proper investment plan should be done, so that more returns are possible.

40