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CHAPTER - III

METHODOLOGY OF THE STUDY

3.1. Introduction

The present chapter describes the theoretical background and statement of

the problem. Further, this chapter also describes the objectives of the study,

hypotheses, methodology adopted and sources of data for the study.

3.2. Theoretical background

Many studies were conducted earlier on various aspects of Tamil Nadu

Newsprints and Papers Limited. One among them was the “Organizational study on

Tamil Nadu Newsprints and Papers Limited – Karur”. The objective of the study

was to analyze the existing system of working capital of Tamil Nadu Newsprints and

Papers Limited and to analyze and compare the changes in the working capital and

to suggest measures to maintain adequate liquidity capital. The researcher has found

that the net working capital of Tamil Nadu Newsprints and Papers Limited was

effective in utilization of working capital, gross profit ratio, fixed assets ratio,

liquidity ratio, current ratio and fixed assets turnover ratio.

Another study was conducted on the stock volatility and technical

performance of Tamil Nadu Newsprints and Papers Limited. The objective of this

study was to examine the corporate business performance by conducting the study of

financial and technical performance of the Company. The researcher has concluded

that the stock volatility and performance of Tamil Nadu Newsprints and Papers
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Limited was very good and the company has increased its capital to a considerable

extent.

Studies conducted on TNPL to examine its share prices and to suggest views

to improve the financial performances of TNPL. These studies found out that the

Earnings per Share of the

TNPL was growing from 1997-98 to 2000-01 but during the year 2001-02

was declined by Rs. 9.45. The leverage ratios of the TNPL were decreasing from

year to year. Intrinsic value of shares was always higher than the market value of

shares.

Another study has examined the profitability performance of the TNPL. The

main objective of the study was to examine the profitability of Tamil Nadu

Newsprint Paper Limited.

3.3. Statement of problem

Many studies were conducted on various aspects of Indian paper and pulp

industries. These studies have focused on impact of energy and environment and

profits of various paper mills. These studies have not addressed the issues on

production, sales and profits sufficiently. They also have not addressed the issue of

efficiency with respect to their ownership, viz, public sector undertaking and

privately owned enterprise. Thus, the present study focuses on the impact of

technology on production, sales and profits of TNPL, a public sector enterprise and

Seshasayee Papers and Boards Limited, (SPBL) a private sector enterprise.

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3.4. Case Study

This study follows the case study approach; case study is one of the best

means to conduct an intensive study on various issues pertaining to the problems

faced by the companies. By this method, a specific case can be dealt with full

participation and attention to its problems and finding solutions to solve the

problems. In this study, Tamil Nadu Newsprints and Papers Limited and Seshasayee

Papers and Boards have been selected for the case study to analyze the impact of

technology on production sales, income and employment generation.

3.5. Objectives of the study

The objectives of the study are to examine the effectiveness of two paper

industries with the diverse nature of ownership, viz, private sector and public sector

undertaking. The specific objectives of the study are:

1. to evaluate the sales of public sector enterprise with that of the private
sector enterprise
2. to examine the production of public sector enterprise with that of the private
sector enterprise.
3. to compare the income of public sector enterprise with that of the private
sector enterprise.
4. to assess the expenditure of public sector enterprise with that of the private
sector enterprise.
5. to analyze the exports of public sector enterprise with that of the private
sector enterprise.
6. to compare the net profits between the public sector enterprise with that of
the private sector enterprise.
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7. to evaluate the employment generation between the public sector enterprise

and private sector enterprise.
8. to examine the CSR activities between the public sector enterprise and
private sector enterprise.
9. to assess the measures taken up by the respective paper mills to prevent the
environmental damage.

3.6. Hypotheses

The study intends to verify the following hypotheses.

1) There is no difference in sales between the public sector enterprise, and the

private sector enterprise.

2) There is no difference in production between the public sector enterprise and

the private sector enterprise.

3) There is no significant difference in the income of the public sector enterprise

and private sector enterprise.

4) There is no significant difference in expenditure between the public sector

enterprise and private sector enterprise.

5) There is no significant difference in exports between the public sector

enterprise and the private sector enterprise.

6) There is no significant difference in net profits between the public sector

enterprise and the private sector enterprise.

7) There is no significant difference in employment generation between the

public sector enterprise and the private sector enterprise.

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3.7. Methodology

3.7.1. Data Source

Data were collected from the published annual reports of the mills which

have been suitably rearranged, classified and tabulated according to the requirements

of the study.

3.7.2. Data Processing

Data collected from various Annual Reports of Tamil Nadu Newsprints and

Papers Limited and Seshasayee Papers and Boards Limited were entered into

Microsoft excel and the data were transferred to SPSS for an appropriate analysis

and the hypotheses formulated were empirically tested based on the results of the

data analysis.

3.8 .Sampling design

The aim of the study is to compare the efficiency of public sector paper

industry with that of private sector paper industry in Tamil Nadu. There are 88 paper

mills in Tamil Nadu.

Table 3.1 : List of paper mills in Tamil Nadu manufacturing writing and printing
papers.
S.No. Names of the Paper Mills
1 Tamil Nadu Newsprints and Papers Limited
2 Seshasayee Papers and Boards Limited
3 Servalakshmi Paper Limited
4 Sastha Paper Mills
5 Vishnupriya Paper Mills
6 Vishnu Vardhan Paper Mills Pvt Ltd
7 Amaravathi Sri Venkatesa Paper Mills Ltd
8 Subburaj Papers Limited
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9 Sapthagiri Paper Mills

10 Blue Mount Paper and Boards Ltd
11 Saradha Papers and Boards Pvt Ltd
12 Dhanalakshmi Paper Mills Pvt Ltd
13 Mizpah Traders
14 Shafi Papers
15 Sri Venkateshwara Paper Company
16 Vimala Papers
17 Metro Papers
18 Anandavalli Paper and Boards Co
19 AR Enterprises
20 Jana Agencies
21 Sapthagiri Enterprises
22 Madan Impex
23 Rajaganapathy Boards Mills P Ltd
24 Agasthya Paper Board
25 Shri Raghunanda Paper and Boards P Ltd
26 Sree Paper Traders
27 Kovai Traders
28 Krishna Resources
29 Safiyah Enterprises
30 Ravindra Bindings
31 KCT Trading Pvt Ltd
32 Yespee Packaging
33 Jothi International
34 Saradambika Paper and Boards Mills P Ltd
35 Rajasthan Paper Mart
36 Chaganraj and Co
37 Mount Everest Global Services
38 Sagar Enterprises
39 Srivari Paper Conversion
40 Prethi Impex
41 Valcos Paper
42 Amit Impex
43 Sripathi Paper and Boards Pvt Ltd
44 Shri Harikrishna Papers Pvt Ltd
45 Jai Hind
46 Jhn Sharasanem Trade Centre Pvt Ltd
47 Raghavan Paper Process
48 Jai Shree Krishna Co
49 Print-on Computer Forms
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50 N-rain Impex
51 Arunachalam Trading Company
52 Tidel Forms
53 Aaditya Aswin Paper Mills Pvt Ltd
54 Dots Transfers
55 Prabu Traders
56 Rk Agencies
57 Sri Puvaneswari Paper and Co
58 Sri Venkatramana Paper Mills Pvt Ltd
59 Sri Annamalaiyar Paper Mills P Ltd
60 Dhanalakshmi Paper Emporium
61 Sudirman Paper (P)Ltd
62 Rapaa International
53 Saraswathi Udyog India Ltd
64 Vinayaga Art and Pack
65 Nagammal Exports
66 Ashok Paper Mart
67 Amma Agencies
68 Nelson and Co
69 Servall Engineering Works Pvt Ltd
70 Subam Papers Ltd
71 Star Paper Products
72 K.U.Sodalamuthu and Co
73 Malar Paper Mills
74 Palar Paper Mills
75 Prakash Paper Mills
76 Vijayalakshmi Paper Mills
77 Papanasam Paper Mills
78 Meredian Paper Mills
79 Sri Sakthi Paper Mills
80 Kumaravel Paper MIlls
81 Hindustan Paper Mills
82 Jayam Paper Mill
83 Dinakaran Paper Mills
84 Sri Gajendra Paper and Boards Private Limited
85 Sanrag Enterprises
86 Kr Impex
87 SriLakshmi Paper Board
88 Sathguru Enterprises
Source: 1. www.http:/www.hotfrog.in/find/papermills/Tamil Nadu
2. http:/www. sulekaindia.com
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Out of 88 paper mills, there is only one public sector enterprise, viz, Tamil

Nadu Newsprints and Papers Limited (TNPL) which is engaged in production of

printing and writing papers. Out of 87 private sector enterprises engaged in printing

and writing papers, Seshasayee Papers and Boards Limited (SPBL) is producing a

very large quantity of papers as compared to other private paper mills and was a

competitor to the public sector enterprise. The other paper mills are medium and

small paper mills producing lesser quantities of writing and printing papers. Hence

it was decided to select one public sector paper industry and one private sector paper

industry for studying the efficiency of the paper industry. The following two paper

mills have been chosen for the study:

1) Tamil Nadu newsprints and papers limited (TNPL)

2) Seshasayee paper and paper boards limited (SPBL)

3.9. Application of Statistical Tools

The focus of the study was to compare the public sector enterprise with that

of the private sector enterprise. For this purpose, the collected data were analyzed

with appropriate statistical tools. Mann – Whitney U test, Wilcoxon test, Karl

Pearson rank correlation, ARIMA models were used.

3.9.1. Mann – Whitney ‘ U’ Test

In statistics, the Mann – Whitney U test (also called the Mann–Whitney

Wilcoxon (MWW), Wilcoxon rank-sum test (WRS), or Wilcoxon–Mann–Whitney

test) is a nonparametric test . Although Mann and Whitney developed the MWW test

under the assumption of continuous responses with the alternative hypothesis being
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that one distribution is stochastically greater than the other, there are many other

ways to formulate the null and alternative hypotheses such that the MWW test will

give a valid test.

A very general formulation is to assume that:

1. All the observations from both groups are independent of each other,

2. The responses are ordinal (i.e. one can at least say, of any two observations,

which is the greater),

3. The distributions of both groups are equal under the null hypothesis, so that

the probability of an observation from one population (X) exceeding an

observation from the second population (Y) equals the probability of an

observation from Y exceeding an observation from X. That is, there is

symmetry between populations with respect to probability of random

drawing of a larger observation.

4. Under the alternative hypothesis, the probability of an observation from one

population (X) exceeding an observation from the second population (Y)

(after exclusion of ties) is not equal to 0.5. The alternative may also be stated

in terms of a one-sided test, for example:

P(X > Y) + 0.5 P(X = Y) > 0.5.

Under more strict assumptions than those above, e.g., if the responses are

assumed to be continuous and the alternative is restricted to a shift in location

(i.e. F1(x) = F2(x + δ)), can interpret a significant MWW test as showing a difference

in medians. Under this location shift assumption, can also interpret the MWW as

assessing whether the Hodges of the difference in central tendency between the two
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populations differs from zero. The Hodges–Lehmann estimate for this two-sample

problem is the median of all possible differences between an observation in the first

sample and an observation in the second sample.

The test involves the calculation of a statistic, usually called U, whose

distribution under the null hypothesis is known. In the case of small samples, the

distribution is tabulated, but for sample sizes above ~ 20 approximations using

the normal distribution is fairly good. Some books tabulate statistics equivalent to U,

such as the sum of ranks in one of the samples, rather than U itself.

The U test is included in most modern statistical packages. It is also easily

calculated by hand, especially for small samples.

For comparing two small sets of observations, a direct method is quick, and

gives insight into the meaning of the U statistic, which corresponds to the number of

wins out of all pairwise contests.

3.9.2. Karl Pearson Rank Correlation

In statistics, the Pearson product-moment correlation coefficient (sometimes

referred to as the PPMCC or PCC or Pearson's r) is a measure of the linear

correlation (dependence) between two variables X and Y, giving a value between +1

and −1 inclusive, where 1 is total positive correlation, 0 is no correlation, and −1 is

total negative correlation. It is widely used in the sciences as a measure of the degree

of linear dependence between two variables. It was developed by Karl Pearson from

a related idea introduced by Francis Galton in the 1880s.

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3.9.3. Box Jenkins Methodology (BJ)

The basic idea underlying the BJ methodology to forecasting is to analyze

the probabilistic, or stochastic, properties of economic time series on their own

under the philosophy “let the data speak for themselves”. Unlike traditional

regression models, in which the dependent variable Yt is explained by k explanatory

variables X1, X2, X3,…….,Xk, the BJ time series models allow Yt to be explained by

the past, or lagged, values of Yt, itself and the current and lagged values of u t, which

is an uncorrelated random error term with zero mean and constant variance ᶛ2 – that

is, a white noise error term.

The BJ methodology has several ways of forecasting a time series. The BJ

methodology is based on the assumption that the time series under study is

stationary.

The Autoregressive (AR) model

Consider the following model:

Yt = β0 + β1Yt-1+β2Yt-2+………..βpYt-p + ut

Where ut is a white noise error term. The model is called an Autoregressive

model of order p, AR(p) for it involves regressing Y at times t on its values lagged

p periods into the past, the value of p being determined empirically.

The Moving Average (MA) model

Consider the following model:

Yt= C0+C1ut+C2ut-1+………+Cqut-q
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Yt is expressed as a weighted or moving average of the current and past

white noise error term. Model is known as MA (q) model, the value of q being

determined empirically.

The Autoregressive Moving Average (ARMA) model

On combining the AR and MA models and form what is called the ARMA

(p,q) model, with p autoregressive terms and q moving term average terms. The

values of p and q are determined empirically.

The Autoregressive Integrated Moving Average (ARIMA) model

The BJ methodology is based on the assumption that the underlying time

series is stationary or can be made stationary by differencing it one or more times.

This is known as ARIMA (p,d,q) model where d denotes the number of times a time

series has to be differenced to make it stationary. In most applications, d=1, that is,

only the first differences of the time series are taken. If a time series is already

stationary, then an ARIMA (p,d,q) becomes ARMA (p,q) model.

The methodology follows a four-step procedure:

Step 1: Identification – Determine the appropriate values of p, d and q. The main

tools in this search are the correlogram and partial correlogram.

Step 2:Estimation – After identifying the model, the next step is to estimate the

parameters of the chosen model. In some cases, method of ordinary least

squares is used, but in some cases have to resort to nonlinear (in parameter)

estimation methods.
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Step 3:Diagnostic checking – BJ ARIMA models are more an art than science

because considerable skill is required to choose the right ARIMA model.

One simple test of this is to see if the residuals from the fitted model are

white noise; if they are, can accept the chosen model, but if they are not,

have to start afresh. That is why the BJ methodology is an iterative process.

Step 4:Forecasting – The ultimate test of a successful ARIMA model lies in its

forecasting performance, within the sample period as well as outside the

sample period.

3.9.4. Compound Annual Growth Rate

The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of

an investment over a specified period of time longer than one year.

3.10. Reference period and Scope of the Study

The present study aimed to analyze the impact of technology on production,

sales, profits, and employment. The whole study and its conclusions are totally

depended on the published annual reports of the paper industry and the reference

period of the study ranging from 2000-2001 to 2013-14 has been considered and

taken for the study. And the total number of industries considered for the study is

two, consequently all the findings and results are relating this period.
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3.11. Limitations of the Study

The present study is based officially on secondary sources of data derived

from published annual reports and accounts of selected companies. Hence it is

subject to some limitations that are inherent in the condensed published financial

statement and other item as such their finding depends entirely on the accuracy of

such data.

1) The study is based on the data and information relating to 14 years from
2001 to 2014.

2) Due to constraint of time, a sample of two paper mills has been selected
among the entire paper industry of India which might not be the true
representative.

3) The Researcher tried to find out the profit- capital ratio for both the TNPL
and SPBL. The data relating to capital was not available for SPBL.
Hence, profit- capital ratio could not be done.

3.12. Conclusion

An attempt has been made in this chapter to give the theoretical background,

statement of the problem, objectives of the study, hypotheses to be verified,

collection of data that is the Annual Reports of both the paper mills , appropriate

statistical tools such as Mann- Whitney U test- Wilcoxon rank test to compare the

public sector with that of private sector enterprises, ARIMA models to predict the

future production and sales of both the paper mills, Karl Pearson rank correlation

was used to analyze the income , expenditure , net profits, exports and employment

generation of the paper mills.

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References:

1. Damodhar Gujarati, Econometrics by Example, Palgrave Mcmillan Reprinted

in 2011, pp. 257-269.

2. Damodar N Gujarati, Dawn C Porter and Sangeetha Gunasekar, Basic

Econometrics, McGraw Hill Publications, 2011 pp. 820-846

3. https://en.wikipedia.org/wiki/Mann%E2%80%93Whitney_U_test.

4. https://en.wikipedia.org/wiki/Pearson_product-moment_correlation_coefficient

5. http://www.hotfrog.in/find/PAPER-MILLS/Tamil-Nadu

6. http://www.sulekaindia.com