CHAPTER I INRODUCTION

Finance is a process of organizing the flow of funds so that a business can carry out its objectives in the most efficient manner and meet its obligations as they fall due. The main objective of every business concern is wealth maximization. To attain that goal, the business concern has to generate wealth. And for this purpose they have to manage their day-to-day activities in a proper and preplanned way. The ratio analysis is a yardstick to evaluate the progress. Hence the topic entitled Financial Analysis of Vimal Oils and Foods Limited has been undertaken for a detailed study. Vimal Oil & Foods Ltd. (VOFL), the flagship company of Vimal Group, was started in 1993 with the holy hand of Param Punjay Pramukh Swami Maharaj (Head BAPS), in Mehsana, Gujarat, with a small 50-ton refinery, and today it has evolved into a fully integrated and automatic oil-processing unit with an annual turnover or Rs. 630 crores, listed with Ahmedabad and Bombay Stock Exchange. VOFL is always committed to quality and integrity, and thats what reflects in our products that never fail to delight our customers. With a single goal of offering our customers a superior range of products that they can choose as per their needs. In that quest, we have broadened our business horizons by introducing cottonseed oil, groundnut oil, mustard oil, Soyabean oil, Sunflower oil, Corn oil and table margarine. VISION:

Our vision is to be a globally recognized company producing and marketing the best world class quality food products by adopting latest environment friendly technology.

MISSION: Vimal oils is leading edible oil and food product company in india and our mission is to discover, develop, innovate and successfully reach to each and every Indian family with the bestpure healthy oils and food products to fulfill our mission statement Healthy u, Happy u.

OBJECTIVE OF THE STUDY: 1. To study the financial position of the firm using ratio analysis as a tool, this includes calculation and evaluation of various results of the company for the past 5 year. 2. To give suggestions required for the improvement. To put in to practice the theoretical aspect of ratio analysis. 3. To measure short-term financial position and obligations of the firm in terms of current assets, current liabilities. 4. Finally to gain knowledge and experience during the study.

SCOPE OF THE STUDY: 1. It also gives an analysis on the financial condition and performance of the organization an indication of the trend of the organization. 2. The study covers information about the financial statement of the company for the past three years calculated ratios. 3. Finally this project will save as a foundation document based upon which the management students and others who may want to broaden their horizon.

LIMITATION OF THE STUDY: 1. The study undertaken is purely on the basis of the date furnished in the financial statements of the firm over the years. 2. Financial statements represent just one part of the information spectrum. 3. Financial statements are based on historical data and do lack current information.

METHODOLOGY: The methodology used for the study is data collection method. The study is based on the secondary data which are collected from the sources such as magazines, newspapers, internet and books as mentioned in bibliography. The primary data are not taken for the study.

CHAPTER II COMPANY PROFILE

Vimal Oil & Foods Ltd. (VOFL), the flagship company of Vimal Group, was started in 1993 with the holy hand of Param Punjay Pramukh Swami Maharaj (Head BAPS), in Mehsana, Gujarat, with a small 50-ton refinery, and today it has evolved into a fully integrated and automatic oil-processing unit with an annual turnover or Rs. 630 crores, listed with Ahmedabad and Bombay Stock Exchange.

DETAILS OF VIMAL OILS AND FOODS LIMITED The details of Vimal Oils and Foods Limited are mentioned below: Sr. NO. 1. 2. 4. 5. TYPE OF INFORMATION COMPANY NAME INDUSTRY INCORPORATION YEAR RESGISTERED OFFICE DETAILS VIMAL OILS AND FOODS LIMITED EDIBLE OIL INDUSTRY 1992 4th Floor, Heritage, Near The Grand Bhagwati, Sarkhej-Gandhinagar Highway, Ahmedabad 380 054. At : Village Hanumant Heduva, Nr. Palavasna Railway Crossing, Highway, Mehsana - 384 002. Shri Jayesh C. Patel Chairman & Managing Director Shri Mahendra V. Patel Shri Mukesh N. Patel Shri Harnarayan J. Patel M/s. R R S & Associates Chartered Accountants Ahmedabad. Bank of India Bank of Baroda Dena Bank IDBI Bank Bombay Stock Exchange www.vimaloil.com

6.

FACTORY

7.

BOARD OF DIRECTORS

8.

AUDITORS NAME

9.

BANKER/S NAME

10. 11.

LISTING WEBSITE

Table 1: Details of Vimal oils and foods limited

ORGANISATION STRUCTURE OF VOFL:

Vice President(Purchase ) Chandrakant Panchal

Raw Material Team (7)

Finance & Account Manager Jitendra Patel

Sales and Marketing Head Yogesh Patel

Factory Incharge Umesh Patel

Account Team (10)

Regional Heads (16)

Packaging Manager Suresh Chaudhary

Sales Team (85)

Production Team (150)

Figure 1: Organizational Chart of Vimal Oils and Foods Ltd.

HISTORY OF THE COMPANY: Vimal Oil & Foods (Vimal) was incorporated on 14th May 1992. It received the certificate of commencement of business on 19 May 1992 from the Registrar of Companies; Gujarat. The company has embarked upon a project for setting up a 200 TPD solvent extraction and 50 TPD edible refined oil plant at village Hanumant Heduva, Dist. Mehsana (North Gujarat). Presently the company is engaged in the production of edible oils in its edible oil refinery which commenced commercial production on 25.09.93. Vimal is promoted by a group of qualified entrepreneurs viz. Shri Chandubhai I Patel , Shri G K Patel, Shri J C Patel and Shri K S Patel from Mehsana (Gujarat).In 2003,Members approve delisting from Delhi Stock Exchange. The Company is engaged in the production of edible oil in its edible oil refinery which commenced commercial production with a 50 TPD capacity in September, 1993.

The Company made the Public Issue of 27, 50, 000 Equity Shares of Rs. 10/- for cash at par aggregating Rs. 2,75,00,000/- in March, 1994 to part finance the project for setting up a 200 TPD Solvent Extraction Plant which was commenced in December, 1994. In the year 1995, additional Oil Refinery capacity of 100 TPD was commenced. In the year 1995, the Company has set up a Wind Mill at Survey No. 128, Mouj: Kalyanpur, Tal: Kalyanpur, Dist: Jamnagar. The Company has set up a Milk Powder plant in the year 1997 at Village: Hanumant Heduva, Nr. Palvasna Railway Crossing, Highway and Mehsana. In the year 2003, refining capacity was enhanced to 80,000 TPA (approx. 300 TPD). The said expansion was funded by term loan and internal accruals. The Company is exporting the De-oiled Cake (DOC), a by-product under the solvent extraction to various foreign countries. The Company has been presented with the Export Awards in the years 1998, 1999 and 2001.The Company has obtained One Star Export House status from the office of the Joint Director General of Foreign Trade, Ahmedabad on 18th October, 2005 which is valid from 01.04.2005 to 31.03.2009.The Company has adhered to the Quality Management System Standard of ISO 9001: 2000 issued by the Det Norske Veritas (DNV).

CHAPTER III DATA ANALYSIS AND INTERPRETATION

Financial Analysis Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and the profit & loss account / Income statement.
3.1 LIQUIDITY RATIOS

Liquidity ratios measure the ability of the firm to meet its current obligations. In fact analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements; but liquidity ratios by establishing a relationship between cash and other current assets to current obligations, provide a quick measure of liquidity. 3.1.1 Current Ratio: Definition: Current ratio is the relationship between current assets and current liabilities. Formula: Current Assets / Current liabilities

CURRENT RATIO
1.24 1.22 1.2 TIMES 1.18 1.16 1.14 1.12 1.1 CURRENT RATIO 2007 1.18 2008 1.22 2009 1.15 2010 1.19 2011 1.21

Figure: 3.1.1 Current Ratio (Source: capital line database)

Interpretation: Figure 3.1.1 determines the current ratio. The current ratio should be ideally around 2:1. However the ideal ratio varies from industry to industry. So the ideal ratio normally varies from 1.5:1 to 2:1. Here we see an increasing trend from 2007 to 2008, decreasing trend from the year 2008 to 2010 and again increased in 2011. But the range of variation lies in the range of ideal ratio. Current ratio shows the amount of rupees available to meet the current obligations. This industry is a capital intensive industry. Hence the companies will always have to establish a tradeoff between the debtors and creditors to manage their working capital. The reason for the decline seen in the ratio is that the current liabilities are increasing at a greater rate than the current assets. The increase in current liabilities is due to the lenient credit terms that are provided to the customers.

3.2ACTIVITY RATIOS Funds of creditors and owners are invested in various assets to generate sales and profits. The better the management of assets, the larger the amount of sales. Activity ratios are employed to evaluate the efficiency with the firms manages and utilizes its assets. These ratios are also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. 3.2.1Fixed Asset Turnover Ratio: Definition: This ratio shows the firms ability in generating sales from all financial resources committed to total assets. Formula: Sales / Fixed Assets

3.2.2 Inventory Turnover Ratio: Definition: It indicates the number of times inventory is replaced during the year. It measures the relationship between the cost of goods sold and the inventory level. It is a test of efficient inventory management. Formula: Cost of goods sold / Average inventory

3.2.3 Debtors Turnover Ratio: Definition: It shows how quickly receivables or debtors are converted into cash. It is a test of the liquidity of the debtors of a firm. Formula: Credit Sales / Average debtors

Activity ratio
25 20 times 15 10 5 0 FIXED ASSET TURNOVER INVENTORY TURNOVER DEBTOR TURNOVER 1 21.95 15.03 11.85 2 23.75 14.38 13.37 3 18.11 15.01 8.78 4 17.21 19.81 6.13 5 23.72 22.67 5.52 6

Figure: 3.2 Activity Ratios (Source: capital line database)

Interpretation: The figure 8 represents the activity ratios in which, Assets turnover ratio measures how efficiently assets are used to maximize sales. A firms ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. The net assets turnover should be interpreted cautiously. The net assets in the denominator of the ratio include fixed assets net of depreciation. Thus old assets with lower book values may create a misleading impression of high turnover without any improvement in sales. For Vimal oil and foods , the asset turnover ratio is increasing uniformly over the period. For 2011, it is 23.72; which implies that Rs. 23.72 of sales is produced for one rupee of capital employed in net assets and the chart reflects there is slowly upward trend up to 2011.

Inventory turnover ratio measures the efficiency of inventory management. Therefore ideally an increasing trend is expected. Inventory turnover ratio is more stabilize one with less fluctuation over a period of time which indicates effective inventory management. The chart reflects there is slowly upward trend up to 2011. We can see that vis--vis industry Vimal Oil and Foods inventory turnover is greater which indicates better management of inventories. Hence we can say that inventory is converted into sales at a faster pace. Debtors turnover ratio and collection period measure the speed with which the accounts receivable are collected. A reduction in collection period would mean faster conversion of debtors into cash and so the company can meet its working capital requirement in a better manner. A chart shows slowly decreasing trend of Vimal Oils and Foods debtor turnover ratio upto 2011.

3.3 CAPITAL STRUCTURE OR LEVERAGE RATIOS

To judge the long-term financial position of the firm, financial leverage, or capital structure ratios are calculated. These ratios indicate mix of funds provided by owners and lenders.

3.3.1 Interest Coverage Ratio: Definition: It is used to test the firms debt servicing capacity. It shows the number of times the interest charges are covered by funds that are ordinarily available for their payment. Formula: EBIT/ Interest

3.3.2 Long term Debt-Equity Ratio: Definition: It is a relationship describing the long term lenders contribution of each rupee of the owners contribution

Formula: Long term debt / Net Worth

3.3.3 Debt-Equity Ratio: Definition: It is a relationship describing the lenders contribution of each rupee of the owners contribution. Formula: Total debt / Net Worth

Leverage ratio
3 2.5 2 times 1.5 1 0.5 0 Long term debt equity ratio Debt equity ratio interest coverage ratio 1 0.04 1.53 2.03 2 0.2 1.71 2.14 3 0.43 2.4 1.33 4 0.64 2.58 1.57 5 0.45 2.37 2.32 6 1.57

Figure 3.3 : Leverage Ratios (Source: capital line database)

Interpretation: In the figure 3.3, Interest coverage ratio indicates the extent to which a fall in EBIT is tolerable such that the ability of the firm to service its interest payments would not be adversely affected. For example and interest coverage ratio of 2.32 times in 2011 would imply that even if the firms EBIT were to decline to one-twenty sixth of the present level, the operating profits available for servicing the interest on loan would still be equivalent to the claims of the lenders. However too high a ratio implies unused debt capacity. And a lower ratio indicates a firm using

excessive debt. The trend of a ratio of Vimal oil and foods shows that it is increasing but it is lower than average of industry. Vimal oil and foods is progressing with growing ability to service its interest payments from 2010 till 2011 with faster rate. So we can say that Vimal oil and foods is not conservative but is using its debt capacity in a good manner. Debt to equity ratio is ratio of the total debt to the net worth. If it is high, the claim of the all creditors is high and if it is low, the claim of all creditors is low. The trend observed in this ratio is similar to that of the long term debt to equity ratio because here inclusion of just short term fund provider. This ratio describes the relationship between the all enders contribution and the owners contribution. Here for the year 2010, the lenders contribution is 2.37 times to that of the owners.

3.4 PROFITABILITY RATIOS

The profitability ratios are calculated to measures the operating efficiency of the company. Generally two major types of profitability ratios are calculated: Profitability in relation to sales Profitability in relation to investment

3.4.1 Return on Net worth: Definition: It is the relationship between profit after tax and net worth. Formula: EBIT (1-tax rate) / Net Worth

3.4.2 Return on capital employed: Definition: It is the relationship between profit after tax and total capital employed. Formula: EBIT (1-tax rate) / Capital employed

Profitabilty
30 25 Percentage 20 15 10 5 0 ROCE RONW 2007 15.68 12.2 2008 17.72 17.58 2009 16.96 14 2010 15.01 23.74 2011 13.6 24.25

Figure: 3.4 Profitability Ratios (Source: capital line database) Interpretation: Figure 3.4 represents the profitability ratios in which, Return on equity is calculated to see the profitability of owners investment. The shareholders equity or new worth will include paid-up share capital, share premium and reserved and surplus less accumulated losses. RONW indicates how well the firm has used the resources of owners. Over here the RONW has increased from 2007 till 2011 but decreasing trend is there with the industry , which is a good indication for the company. Thus from the overall profitability ratios we can see that the profitability of the company is increasing. Return on capital employed is found by dividing EBIT (1-tax rate) by capital employed. Capital employed represents pool of funds supplied by shareholders and lenders. This ratio therefore measures what actually a firm has earned in comparison to the investments made. The movement of this ratio is almost similar to the trend of return on net worth ratio.

3.5 PROFIT MARGIN RATIO:

Profit margin, net margin, net profit margin or net profit ratio all refer to a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue. The profit margin is mostly used for internal comparison. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage. 3.5.1 Gross Profit Margin: Definition: The first profitability ratio in relation to sales is the gross profit margin. Formula: Gross profit / sales

3.5.2 Net Profit Margin: Definition: The net profit margin ratio is measured by dividing profit after tax by sales. Formula: Profit after tax / Sales

3.5.3 Operating Profit Margin: Definition: The operating profit margin ratio is measured by dividing Operating Profit by sales. Formula: Operating Profit / Sales

Profit margin
3.5 3 Percentage 2.5 2 1.5 1 0.5 0 operating profit margin Gross profit Margin Net Profit Margin 1 2.15 1.92 0.69 2 2.95 2.76 0.87 3 1.88 1.61 0.45 4 3 2.71 0.72 5 2.51 2.3 0.9

Figure: 3.5 Profit Margin ratio (Source Capital line Database) Interpretation: Gross Profit Margin, Net Profit Margin and Operating Profit Margin is increasing over the period of time which shows the sign of good management. Hence it implies that the firm is able to produce at relatively lower cost and withstand adverse economic condition.

3.6 EPS Definition: EPS indicates earning power available with share holders. The EPS calculations made over years indicate whether or not the firms earning power on per-share basis has changed or over that period. Formula: PAT / Total number of ordinary shares outstanding.

EPS
14 12 10 RUPEES 8 6 4 2 0 EPS 2007 7.53 2008 12.28 2009 6.22 2010 9.28 2011 9.81

Figure 3.6 : Earnings per share (Source: capital line database)

In the figure 3.6, the EPS shows how much rupees available to share holders from net profit. From chart we can see that EPS has a increasing trend from 2007 till 2008 then it has decreased in 2009 and again its showing increasing trend from 2010 upto 2011. 3.7 DIVIDEND PAYOUT Definition: Dividend payout shows how much percentage of earning to be distributed to share holders in the form of dividends. Formula: DPS / EPS

Divident Payout ratio

25 20 percentage 15 10 5 0 Divident Payout ratio

2007 15.94

2008 14.66

2009 19.29

2010 16.16

2011 15.29

Figure 3.7: Dividend Payout Ratio (Source: capital line database)

From the figure 3.7, we can say that we can say that Vimal oils and foods is following a very stable dividend policy. Earning not distributed to shareholders is retained in the business.

3.8 DUPONT ANALYSIS Return on Net Asset (RONA) or Return on Capital Employed (ROCE) is the measure of the firms operating performance. It indicates the firms earning power. It is a product of the asset turnover, gross profit margin and operating leverage. All the firms would like to improve their RONA. In practice competition puts a limit on RONA. Also, firms may have to trade-off between asset turnover and gross profit margin. To improve profit margin, some firms resort to vertical integration for cost reduction and synergic benefits. RONA = Asset turnover * Gross profit margin * Operating Leverage A firm can convert its RONA into an impressive ROE through financial efficiency. Financial leverage and debt-equity ratios affect ROE and reflect financial efficiency. ROE is thus a products of RONA (reflecting operating efficiency) and financial leverage ratios (reflecting financial efficiency). ROE = Operating Performance * Leverage Factor

The firm can convert its ROE into growth in equity through retention. Equity Growth = ROE * Retention Ratio The combined effect of three aspects - operating efficiency, financial efficiency and retention shows the overall performance. The computation of ratios clearly shows the interaction between operating ratios, profitability ratios and leverage ratios for obtaining return on the shareholders earnings.
RATIOS - DUPONT MODEL Vimal Oils and Foods Ltd
PBIDT/Sales(%) Sales/Net Assets PBDIT/Net Assets PAT/PBIDT(%) Net Assets/Net Worth ROE(%) 2003 2.3 6.42 0.15 23.57 3.69 13.02 2004 2.06 5.53 0.11 18.2 4.29 9.13 2005 2.56 5.99 0.15 16.54 3.89 9.97 2006 2.15 7.14 0.15 25.86 4.18 17.73 2007 2.48 5.45 0.14 28.21 2.04 12.2 2008 2.77 6.73 0.19 31.82 4.83 17.58 2009 3.05 5.64 0.17 14.83 5.31 14 2010 3.03 4.67 0.14 23.93 6.55 23.74 2011 2.54 4.92 0.12 35.78 3.78 24.25

Table 14 : Du Pont Analysis (Source: capital line data base)

CONCLUSION:
From financial analysis we can conclude that Vimal Oils and Foods Ltd is having a very strong financial capability. From the interpretation of Current ratios, activity ratios, liquidity ratios, profitability ratios, EPS, Dividend payout, DuPont analysis and leverage analysis it is clear that Vimal Oils and Foods Ltd is financially viable and has a capability to meet contractual obligation effectively that arise over a period of time. It is advisable to investor to make Investment in Vimal Oils and Foods Ltd which ensures stable earnings in the form of dividends.

Bibliography:
VOFL. (2012, April 4). about us. Retrieved April 6, 2012, from www.vimaloil.com. VOFL. (2010-11). ANNUAL REPORT - 2010-11. VOFL. PANDEY, I. M. (2010). FINANCIAL MANAGEMENT. VIKAS.

Annexure: