A PROJECT REPORT ON CAPITAL STRUCTURE FOR EXCEL CROP CARE LIMITED SUBMITTED TO

C.K.SHAH VIJAPURWALA INSTITUTE OF MANAGEMENT

IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

UNDER

GUJARAT TECHNOLOGICAL UNIVERSITY

UNDER THE GUIDANCE OF Faculty Guide Company Guide

Ms. Savitha. K
Lecturer SUBMITTED BY

Mr. M.V. MER

Training Officer

PATEL RAKESH. H..

ENROLLMENT NO: 107050592034 M.B.A SEMESTER III

C.K.SHAH VIJAPURWALA INSTITUTE OF MANAGEMENT

M.B.A PROGRAMME Affiliated to Gujarat Technological University Ahmedabad. July 2011

PREFACE
Finance is considered as the circulatory system of the economic body which makes possible the needed co operation between many units of activity. It is easy to imagine the plight of the management in case of insufficiency of finance. It is not possible to avail of the opportunities without finance. Business administration is a challenging career which

requires an adapt knowledge of the business affairs. Finance management is the most important branch of business administration. Financial management is concerned with the efficient use of an important economic resource, namely capital funds. It includes both theoretical and practical aspects. Practical and theoretical knowledge are the two sides of a coin. Practical aspect is an application of theoretical knowledge. Practical training has become an integral part in the field of management. Practical knowledge enables one to face the real life situation. It is my pleasure to present this project report on Capital Structure. This training has expanded my horizon of knowledge in practical as well as theoretical area which is vital for any student of management studies. Whatever I learned during my industrial training is presented in this project report. I tried my best to present each and every aspect into project report. This report is a mirror of what I have understood during my training at Excel Crop Care Limited. It helped me in understanding the Capital Structure of the company.

ACKNOWLEDGEMENT
I feel great pleasure to submitting this report as a part of my practical studies. I want to thank the entire person who has helped me in preparing report. First of all, I want to thank the Mr. S B Bhatt, General Manager of the Excel Crop Care Limited. Without his permission I would never have got opportunity to prepare my report. He also provided me best of his knowledge and all the information of the company. I am also thankful to all the staff of the Excel Crop Care Limited for their kind support. I express my sincere thank to my college Director, Dr. Rajesh Khajuriya and my Faculty Guide, Ms. Savitha.k for their valuable guidance & encouragement during the whole course of my study and preparing report. Last but not least; I am very thankful to all persons who directly or indirectly, have helped me in completing my project report.

DECLARATION
I, Patel Rakesh, hereby declare that the report for Summer Training Project entitled Capital Structure is a result of my own work and my indebtedness to other work publications, reference, if any, have been duly acknowledged. Place : Vadodara Date : 18/07/2011 Name: Patel Rakesh H.

EXECUTIVE SUMMARY
With a view to obtaining practical training, I have visited Excel Crop Care Limited for 45 days. Excel Crop Care Limited is one of the biggest industries producing pesticides chemical in india. OBJECTIVE OF STUDY The main objective for preparing capital structure project is to know about effect of leverage on the firm. With the help of capital structure, we can know proportion of equity, debenture and long term liabilities. i.e. debt or equity. RESEARCH METHODOLOGY In common word, research refers to search for knowledge. Research can be defines as a scientific and systematic search for information on a specific search for information on specific topic. In my research and methodology, I have included following topics: Objective of research Scope of research Meaning of research Process of research Data collection method My project report is based on secondary data. This secondary data, which I have collected from the following sources provided by Excel Crop Care Limited. Profit & Loss a/c Balance sheet.

INTERPRETATION AND ANALYSIS Data collection is useless if they are not analysis properly. I have

used ratio analysis method to analysis data through which, I came to know many things which could not be understand without appropriate analysis. To interpret this data more easily, I have calculated following capital structure ratios and draw bar-diagram or chart. Debt-equity ratio Return on Capital employed Return on share holders fund

At the end of my project report, I have given finding & suggestion, conclusion and bibliography.

TABLE OF CONTENTS
SR. NO. PATRICULAR Preface Acknowledgement Declaration Executive summary 1 Overview of company profile 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 1.15 1.16 1.17 1.18 1.19 1.20 1.21 2 Overview Of the Indian Chemical Industry Introduction Of Excel Momentary Look Of Excel Excel In India History Of the Industry Excel Crop Care Limited, Bhavnagar Company Profile Products and Its Uses Potency Of the Company A Vision Into the Future Mission Size Of Organization Manufacturing Products Product Planning Organization Structure Market Share Export Area Finance Department Organization structure of finance department Financial Planning Capitalization 1 2 3 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 PAGE NO.

Introduction Of Topic 2.1 2.2 2.3 Introduction Objective Of Capital Structure Planning Factor Affecting Capital Structure 24 26 27

2.4 2.5 3

Various Approaches Of Capital Structure Patterns Of Capital Structure

31 35

Research Methodology 3.1 3.2 3.3 3.4 Meaning Of Research Objective Of the study Method Of Data Collection Limitation Of the study 39 40 42 44

Data Analysis & Interpretation 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 Capital Structure For the Year 2008-09 Capital Structure For the Year 2009-10 Capital Structure For the Year 2010-11 Share Capital Reserve and Surplus Secured Loans Unsecured Loans Debt-Equity Ratio Return On Capital Employed Return On Shareholders Fund 45 46 47 48 49 50 51 52 55 58 61 63

5 6

Finding & Suggestion Conclusion Bibliography Annexure

List of charts
Sr. No. 1. 2 3. 4. 5. 6. 7. 8. 9. 10. Name of chart Capital structure for the year 2008-09 Capital structure for the year 2009-10 Capital structure for the year 2010-11 Capital Structure Reserve and surplus Secured Loans Unsecured Loans Debt-Equity ratio Return on capital employed Return on shareholders fund Page no. 45 46 47 48 49 50 51 52 55 58

Overview of company profile

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OVERVIEW OF THE INDIAN CHEMICAL INDUSTRY

The process of globalization of Indian chemical industry was initiated in the early 1990s. The erstwhile Indian chemical industry suffered due to the absolute monopoly of the government of India enterprises. But with the opening of the Indian market to foreign institutional investors (FII) and foreign direct investment (FDI). The monopoly of this government institution was curtailed substantially. This gave rise to the opening up of the Indian chemical industry to host of the untapped opportunities. With the introduction of the open market economic policy by the government of India the process of globalization of Indian chemical industry took a steady rise. The Department of chemicals & Agrochemicals under Government of India is the concerned highest authority that regulates the indian chemical Industry and the allied areas of environment concern. The chemical Industry of India is at par with world standard and it shares a good portion of chemical business in world market. Asian countries, african countries and even arab world buys Indian chemical products. The demand for Indian chemical products is high across the world. The reason for this popularity is its high quality and competitive price. Indias low cost and high quality chemical product manufacturing expertise coupled with world class. Manufacturing infrastructure is the main leveraging factor for the rise of this industry. India offers high class chemical products at a substantial discount than its a western counterpart while delivering the same grade of output.

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INTRODUCTION OF EXCEL
The EXCEL is always excellent in running INDUSTRY and marketing. The company deserves the meaning of word EXCEL that means better than anything. The name occupies very prestigious role in pesticides. It has covered itself and molded in such shapes that its reputation is running ahead of them. It has reputation in pesticides. It provides phosphorus and pesticides in the country. For our 65% market it shared EXCEL INDUSTRIES LTD. For its various products like white and yellow phosphorous, Butane-Diol, Endosulfan in the field of phosphorous based pesticides. EXCEL has a place in Asia because it is the first company that manufacturing phosphorous. However today the other companied here have also been developed in this field, as they are named by, united phosphorous ltd, Ankleshwar, and star chemical Mumbai. Today EXCEL is a largest company in India and second in the world for producing Endosulfan. MR.C.C.SHROF founded it, he was actually a science graduate. He set himself on putting India as a chemical man of the world and he succeeded. He thought, if it can be done elsewhere why not in India? He had started his experiment in kitchen laboratory and then established the EXCEL INDUSTRIES LTD.

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MOMENTARY LOOK OF EXCEL

The growth of and INDUSTRY named EXCEL CROP CARE LIMITED was a small seed planted in 1941 which grew into a big tree. It is still growing and giving shade to many. The beginning seems like a story of SINDBAD. It was said that the EXCEL has been derived from the word EXCELLENT. The name of the company is rightly chosen IT MEANS BETTER THAN ANYTHING, In this era, a few industries cares about their employees and ECCL is among one of them. It is not only cares for their employees, but also for the society. The company plays a very key role in pesticide, insecticide. With growing Indian economy and its the increasing emphasis placed by the government on improving productivity in the agriculture sector it is true that the company also sold the farmers problems. EXCEL CROP CARE LIMITED is primarily manufacturing high quality pesticide chemicals relevant to the need for agricultural sector. and agro products are marketed all over India and also are exported to over 50 countries around the globe. In Asia the first place where phosphorus manufactured commercial was in EXCEL with on developed technology. After a long run of phosphorus manufacturing, they have exchanged the technology to united phosphorus limited who is a sister concerned of EXCEL group is now one of the leading manufacture in phosphorus in India. They own a centralized a world class research center at their head office in Mumbai supported by individual research center at each manufacturing unit. During the last 6 decades the EXCEL CROP CARE LIMITED has received various national and international awards in different areas for their excellent in manufacturing, exports and HRD activities. They introduced active pest management for Indian farmers by demonstrating the use of crop management techniques to the farmers.

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EXCEL CROP CARE LIMITED was founded on a close relationship with the farmers, who use its products and their derivatives from an original narrow range of products for specific uses; EXCEL has expanded its activities so that today it provides the farmer with broad range of products and technical guidance. The idea of creation of EXCEL was of a late shri C.C.SHROF who is the father founder of this organization established in the year of the 1941. After years passes, it has a grown up as a unique organization with value base system of management style. A majority of raw materials are made in house for captive consumption. Record profit has become so much easier for EXCEL because of benefiting ranger of agro chemical easily available in market such as Endosulfan, range endocel35% EC Tricel 20% EC, etc. which has covered almost 65 to 70% market of India. So it is good luck to farmers too. Main products of the company are pesticides like Endosulfan, Trical, Butane-Diol, Cloropyriphos, Endocel, Trycel and Celcron. EXCEL exports their products to countries like Africa, Germany, Netherlands, Australia, U.S., UK, Japan, France, Italy, Singapore, Argentina, Chile, Mexico, Iran, Israel. The company has setup its office in Antwerp, Belgium to get closer to its closer customers in Europe, Africa and America etc.

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EXCEL IN INDIA
EXCEL has started with an establishment of white phosphorus plant by MR.C.C.SHROF in the year 1968 1969 presently they have more than 120 products s are being produced from EXCEL from different plants in India. Starting from Jogeshwari Mumbai, EXCEL has established the various plants at different region at India. At present the major 7 manufacturing units are located as under having registered and head office at Mumbai. 1. EXCEL CROP CARE LIMITED, JOGESHWARI, MUMBAI,

MAHARASHTRA. 2. EXCEL CROP CARE LIMITED, AMBOLI, MUMBAI MAHARASHTRA. 3. EXCEL CROP CARE LIMITED, ROHA RAIGADH. DIST MAHARASHTRA 4. EXCEL CROP CARE LIMITED, LOTE PARSHURAM, CHIPLUIN, MAHARASHTRA 5. EXCEL CROP CARE LIMITED, BHAVNAGAR, GUJARAT 6. EXCEL CROP CARE LIMITED, GAJOG KUTCH, GUJARAT 7. EXCEL CROP CARE LIMITED, SILVASA, GUJARAT

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HISTORY OF THE INDUSTRY

EXCEL INDUSTRY was established in 1941 by Shri Champraj Chhatrabhuj Shroff, a young member of a kutchi family and who is later on respected and loved as papa by all. The first job he did was analytical chemist with a starting salary of Rs. 25. When Second World War was started in 1939 at the time he thought of helping India to be independent, he used his education, knowledge and skills and established a chemical INDUSTRY to helping India in independent at least for the needs of chemicals. In 1994, EXCEL become the first Indian agro chemical compact to be certified ISO 9002. Four of its major plants are IS0 9002 certified and two of its sites have ISO 14001 certification. They have achieved over 100 products and process breakthroughs. It is the first company in Asia and third in the world to make Endosulfan. It is the first company in India to make butane Diol. It is the second company in the world to develop Glyphosate. It is the third company in the world to develop Aluminum, Phosphide. Company is operating through 8 manufacturing plants which are strategically spread across the country. EXCEL is known for unit drive of sustainable and environmental friendly agriculture processes. The company was earlier known as EXCEL PRIVATE PVT. LTD. But after its merger with an Australian company NUFARM in 2003 it become EXCEL CROP CARE LTD. Nufarm is an international company which is ranked 10th in the world. The basic motives behind this merger were avoided competition and achieve target customers. EXCEL CROP CARE LTD. is one of the Indias leading manufactures exporters of agrochemicals and industrial chemicals. The company has setup its office in Europe, Africa and America.

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EXCEL CROP CARE LIMITED, BHAVNAGAR

Amongst all Bhavnagar site is big and large contributing unit. Shri C.C.SHROF starts the Bhavnagar unit with the establishment of white phosphorus plant in the year 1968. There after two more plants named as Butane-Diol and Endosulfan technical was established in 1982. a pesticide formulation unit has also setup to formulate Endocel 355 EC and Tricel 20% increasing the manufacturing activities, another plant was setup in 1994 to manufactory Chloropyriphosphate technical. Presently the phosphors plant is closed down due to international market competition. The capacity of Butane-Diol and Endosulfan (tech) is 1200 TPA and 5000 TPA respectively. The Chloropyriphosphate plant produces 400 TPA. The turnover of INDUSTRY is 60% from all above products and 25% from Phosphorus and other from special chemicals.

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COMPANY PROFILE

NAME ADDRESS REGISTERED OFFICE

: : :

EXCEL CROP CARE LTD 6/2 RUVAPARI ROAD, BHAVNAGAR. 184-87 S.V.ROAD, JOGESHWARI WEST, MUMBAI.

BOARD OF DIRECTORS

A.C. SHROFF (CHAIRMAN) DIPESH K SHROFF (MD) J.R. NAIK MUKUL G ASHAR SANDEEP JUNNARKA B.V. BHARGAVA KEVIN MARTIN SHARAD L PATEL VINAYAK B BUCH L. RAJGOPALAN

VICE PRESIDENT (FINANCE & ACCOUNTS) BANKERS : : PRAVIN D DESAI BANK OF INDIA SYNDICATE BANK STATE BANK OF INDIA CITI BANK N.A. AXIS BANK LTD AUDITORS : S.V. GHATALIA & ASSOCIATES (CHARTERED ACCOUNTANTS) SECRETARY : PRAVIN D DESAI

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REGISTERED OFFICE

184-87, SWAMI VIVE. ROAD, JOGESHWARI (W), MUMBAI-400102

CORPORATE OFFICE

13&14, NEAR VIRWANI ESTATE, GOREGAON (EAST), MUMBAI-400063

DIVISONS

1. JOGESHWARI WEST, MUMBAI 2.AMBOLI, MUMBAI 3. RUVAPARI ROAD, BHAVNAGAR 4. MIDS AREA ROHA 5. MIDC LOTE,CHIPLAN 6. SILVASSA, UNION BRANCH TERRITORY OF DADRA & NAGAR HAVELI 7. KOTLA ROAD, VIJAY VADA 8. BAHERAMPURA, AHMEDABAD 9. KERA VILLAGE HIGHWAY, GAJOD, KUTCH

BRANCH OFFICE

NEW DELHI, CALCUTTA, HYDERERABAD, MADURAI, BANGALORE, PATNA AND AHMEDABAD

FACTORIES AT

SILVASSA, DADRA AND NAGAR HAVELI., VIJAYVADA

WEBSITE

www.excelcropcare.com

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PRODUCTS AND ITS USES

1. WHITE PHOSPHORUS
For producing pesticides phosphorus is being used as basic raw materials

2. ENDOSULFAN (TECHNICAL)
This is used as raw materials in manufacturing pesticides viz.endocel EC 35% which being applied to protect the crop and vegetables from pest and insects.

3. BUTENE-DIOL
It is being used as captive raw materials for the manufacturing of the Endosulfan technical.

4. CHLOROPYRIPHOSPHATE TECH
This is also basic raw material for the manufacturing PF pesticides named, Tricel 20% EC to protect the crop and vegetables from pest and insects.

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POTENCY OF THE COMPANY

EXCEL CROP CARE LIMITED adopts an integrated approach to manufacturing and has built world class capabilities to make technical activities and formulations. To ensure quality and quantity of supply we produce key raw materials our selves. Or source them from our associate companies leveraging our capabilities in basic chemistry. We have developed and built a range formulation to cater to special needs arising from peculiar climatic and post conditions. EXCEL CROP CARE LIMITED is known for mastering hazardous technologies and manufacturing corrosive compounds that other considers difficult to make. We are among the worlds leading manufacturer of Endosulfan, glyph sate, Choloropyriphos, aluminum Phosphide and Zink Phosphide which are made to the highest purity. All over manufacturing plants are the results of inhouse research and engineering and have been installed by our own project teams. Our main manufacturing plants at Bhavnagar is ISO 9002, ISO 14000 and OSHAS 18000 certified and meet statutory requirement on quality and safety. The more recent plant of Gajod and Silvasa are equipped with state of art machinery and are In the process of obtaining the ISO certification. Our quality consciousness is not limited to manufacturing, each of our manufacturing location has a well equipped to manufacturing has a well equipped R&D facility which is govt. of India approved, thats busy exploring never eco-friendly chemistry for crop care and effective formulation technology and recipes. This helps us to serve the change in needs of our demanding customers in cost effective ways.

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A VISION INTO THE FUTURE

EXCEL CROP CARE LIMITED technical activities bulk and branded formulations are presently registered and marketed in Asia pacific, south Asia, west Asia, Africa, Europe central and south America and the USA. Presently they do exports 25% of their turnover and give a more significant role in the companys business in the coming years. Besides the necessary infrastructure at the plants, we have a subsidiary in Antwerp, Belgium manned by professionals who perfectly understand the requirements and specialty of consumers in that part of the world. Here they also stock way products to reduce transect time and meet urgent customer needs. To become a truly global company we plant to strength their stewardship role in promoting molecules where they have core competences. Initially we intend gaining market excess in countries that have crops, climatic conditions and size of land holdings similar to India. For this they are joining hand with companies across the world that offers complimentary skills, products and services, pooling resources and knowledge base will speed up market access and build a firm strong hold in these countries. In return they will offer their marketing and distribution strength and our knowledge base.

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MISSION
Beyond crop protection , behind every farmer. Beliefs : Work is worship Self-education is the best education Industrys primary responsibility is to save the society. Quality is more important than quantity. Harmony and growth go hand to hand. Help, service and guidance even after sales. In any successful work there is 1% inspiration and 99% hard working.

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SIZE OF ORGANIZATION
There are three types of organization Small scale, Medium scale & Large scale. SMALL SCALE: These industries have been defined in terms of capital investment. In the industrial policy of 1991, the small units are defined as those units in which capital investment is not more than Rs 60 lacs. For the export oriented small units however the investment limit is Rs 75 lacs. MEDIUM SCALE: The industrial units, which stand in a midway between the small and the large units, are included in the category of mediums industries. These industries generally use labor intensive methods of production that is they produce goods with the help of more labor and less capital. LARGE SCALE: Industries, which require huge investment in land, building and machinery, are known as large industries. Large industries generally employed capital intensive methods of production. They use latest methods and produce consumption goods as well as capital goods, for internal market and external markets both. The capital investment of EXCEL CROP CARE LTD. is Rs. 300.25 Crore that implies it is large scale industry.

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MANUFACTURING PRODUCTS
EXCEL CROP CARE LTD. is producing chemicals for industries as well as agriculture use. Most of agriculture most of agriculture chemicals are made at Bhavnagar unit. EXCEL CROP CARE LIMITED has five manufacturing units. They are as under. AMBALI HILL, MUMBAI JOGESHWARI, MUMBAI MIDC AREA, ROHA LOTE PARSHURAM CHIPLAN RUVAPARI ROAD, BHAVNAGAR There are so many types of products; they are produced by the company. Following products are manufactured at Bhavnagar unit. 1. YELLOW PHOSPHORUS 2. ENDOSULFAN. TECHNICAL 3. ENDO 35% EC 4. BUTENE DIOL 5. OXALIC ACID 6. CHLOROPYRIPHOSPHATE 7. TRICAL 35% EC 8. PROFENOPHOS 9. CELCRON 35% EC 10. GLYPHOSATE ( TECHNICAL ) 11. GLYCEL

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PRODUCT PLANNING
Product is a key element in the market offering. product is anything that can be offered to a satisfy a want or need. In absence of product there is nothing to distribute, promote or to sale. Thus there is a need for proper planning of the product. Product planning is the process of determining that line of product, which can secure maximum net realization from the intended markets. Long Range Planning It includes planning over period of 3-5 years. The planning is done at corporate level. It is for overall development of the organization. Annual Operation Planning The annual operation planning is yearly plan set after consulting the concerned persons from different sites. It involves marketing, production and purchase functions. It considers

Market Share Market Demand Market Competition Monsoon Position Distribution Demand

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ORGANISATIONAL STRUCTURE OF EXCEL CROP CARE LIMITED BHAVNAGAR

The organization chart of EXCEL CROP CARE shows its simple and easy administrative techniques which is suitable for fast and accurate working environment as it does not have any ambiguous of exaggerated levels of hierarchy.

Board of directors General Manager Manager SR. Executive Executive SR. Officer Officer Staff Supervisor Staff

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MARKET SHARE
COMPANY NAME Bayer Cropscien Rallis India Meghmani Organi Excel Crop Care PI Industries Insecticides In Sabero Organics Dhanuka Agritec Monsanto India TOTAL PERCENTAGE SALES 29.75 2,139.27 14.94 1,074.22 12.04 865.83 10.16 731.15 10.00 719.3 6.64 477.9 5.74 412.72 5.66 407.53 5.03 362.12 100 7,190.04

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EXPORT AREA
AMERICA EUROP AFRICA MIDDLE EAST ASIA SPESIFIC USA, Mexico , Haiti, Argentina, Chile Belgium, Bulgariya, Germany, France, U.K., Spain, Italy, Netherlands, Greece. Kenya , Zimbabwe , Sudan , Egypt , Ethiopia , Tanzania, South Africa , Djibouti Iran, Saudi Arabia, U.A.E., Turkey , Israel , Syria. Australia ,New Zealand, Thailand, Myanmar, malasia Philipppines , Bangalore, Hong Kong, Singapore, Japan, South Korea , Taiwan , Nepal.

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FINANCE DEPARTMENT
Introduction
Finance may be defined as the part of Art and science it is the art and science of managing money. Financial management is that managerial activity which is concerned with the planning and controlling of the firms financial resource. Finance and accounting as such are separate function but are sufficiently related to be described together. Accounting covers the classification of financial transactions and summarization into the standard financial statement. The finance function of management will have particular responsibility Ensuring a fair return on investment Generating and building up surplus Planning, directing and controlling the utilization of fund. Excel Crop Care Ltd Bhavnagar has its accounting department and head of account department is K.K Mehta.

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ORGANISATION STRUCTURE OF FINANCE DEPT.

General manager

Finance manager

Office (Auditing)

Staff manager

Office (Accounting)

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FINANCIAL PLANNING
Financial planning is pre-requisite for the smooth functioning finance department and for the purpose of growth and expansion of business activities. There are two types of financial plan: 1. Long term Financial planning 2. Short term Financial planning The term financial plan are formulated for the expansion of business for starting new units for developing new products for modernization of the unit and for the purpose of sales of fixed assets. At excel they have planning about long term as well as short term financial planning. Short term financial planning is for monthly planning and long term planning is for yearly planning. Financial planning and decision making are undertaken at central level decision are made in the contest of organisation objectives.

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CAPITALIZATION
Capitalization is defined as the sum of par value of outstanding stock and the bonds. Capitalization word is used to refer capital and funded obligation. In common word, Capitalization refers to total amount of capital employed in business depending upon the efficiency of management of utilize installed capacity. A company may be under capitalization or over capitalization or fair capitalization. A company is undercapitalized if its real value is more than book value. A company is over capitalized value is less than book value. A company is said to be fair capitalized if its real value is equal to book values.

Book value of shares

capital + reserves & surplus No .of equity shares

= 5,50,28000 + 2,02,19,36000 1,10,05,630 = 188.72 In a broader sense, capital structure includes shares reserves etc, and the components of the total capital the optimum capital structure may be defined as the capital maximize value of firm. The capital structure of excel crop care ltd as on 31st March 2011 is as follow. Particulars Share capital Reserves and surplus Secured loan Unsecured loan RS. (in lacs) 550.28 20219.36 8702.00 3556.51

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Introduction of Topic

34

INTRODUCTION
Capital structure is a very useful to the company. It is the most important part of the company. Capital Structure should be examined from the view point of its impact on the value of the firm. Capital structure decisions affect the total value of the firm, a firm should select such a financing-mix as will maximize the shareholders wealth. Capital structure is referred to as the optimum capital structure. The optimum capital structure may be defined as the capital structure or combination of debt and equity that leads to the maximum value of the firm. The importance of an appropriate capital structure is, thus, obvious. There is a view point that strongly supports the close relationship between leverage and value of a firm. There is an equally strongly body of opinion, which believes that financing-mix or the combination of debt and equity has no impact on the shareholders wealth and the decision on financing structure is irrelevant. Capital structure can affect the value of a company by affecting either its expected earnings or the cost of equity or both. The capital structure decisions can influence the value of the firm through the earnings available to the shareholders.

DEFINITION OF CAPITAL STRUCTURE:

1. ACCORDING TO GERSTERNBERG, capital structure of a company refers to the make- up of its capitalization. That is, the type of securities to be issued and the relative proportion of each type of securities in the total capitalization. It includes all long term debts, preference share capital and shareholders fund.

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2. ACCORDING TO WEST & BRINGHAM WRITE, capital structure is the permanent finance of the firm representation by long- term debt, preferred stock and net worth. Thus capital structure = long term debts + preferences share capital + equity share capital + reserves. Capital structure of a company shows how or through which sources its capital has been raised-by issuing equity shares, preference shares, debentures or any two of them. It is concerned with the determination of bebtequity composition. This influences both return and risk of the shareholders. It has an effect on value of the firm and its cost of capital. Hence, determining proper capital is an important question of financial management. The capital structure may be presented as follows:

CAPITAL STRUCTURE

OWNED CAPITAL

DEBT CAPITAL

1.EQUITYSHARE CAPITAL 2. PREF. SHARE CAPITAL 2. SHARE PREMIUM 3. SHARE PREMIUM RESERVES & SURPLUS 4. SHARE PREMIUM 5. RESERVES & SURPLUS 4. RESERVES & SURPLUS

1.DEBENTURES 2. LONGTERM LOANS 2. DEFERRED PAYMENT LIABILITIES

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OBJECTIVE OF CAPITAL STUCTURE PLANNING

While planning capital structure, the following objectives of the capital structure planning come in to play: 1. To maximize the profit of the company. This can be ensured by issuing the securities carrying lower or less cost of capital. 2. To issue the securities which are easily transferable this can be ensured by listing the securities on the stock exchanges. 3. To issue such kind of securities which are acceptable to the lenders.

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FACTORS AFFECTING CAPITAL STRUCTURE

Determination of capital structure cannot be left to the arbitrary decision and personal opinions of the management. Some concrete factor must be kept in mind while determining capital structure of The Company. They are as follows: a) INTERNAL FACTORS b) EXTERNAL FACTORS c) GENERAL FACTORS

a) INTERNAL FACTORS:
There are the different types of internal factor which is determining the capital structure. 1. COST OF CAPITAL: The process of raising the funds involves some cost. While planning the capital structure, it should be ensured that the use of the capital should be capable of earning the revenue enough to meet the cost of capital. It should be noted here that the borrowed fund are cheaper than the equity fund so far as the cost of capital is concerned.

2. RISK FACTOR: While planning the capital structure, the risk factors consideration invariably comes into picture, if the company raises the capital by way of borrowed capital, it accepts the risk in two ways. Firstly, the company has to maintain the commitment of payment of the interest as well as installments of the borrowed capital, at a pre-decided rate and agreed time, irrespective of the fact, whether there are profits or losses. Secondly, the borrowed capital is usually the

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secured capital. If the company fails to meet its contractual obligations, the leaders of the borrowed capital can enforce the sale of assets offered to them as security. 3. CONTROL FACTOR: While planning the capital structure and more particularly while raising additional fund, the control factor plays an important role, especially in case of closely held private limited company. If the company decides to raise the long term fund by issuing further equity shares or preference shares, it dilutes the controlling interest of the present shareholders or owners, as the equity shareholders enjoy absolute voting rights and preference shareholders enjoy limited voting right.

b) EXTERNAL FACTORS:
There are the different types of external factors which are as under: 1. GENERAL ECONOMIC CONDITIONS: While planning the capital structure, the general economic condition should be considered. If the company is in the state of depression, preference will be given to equity form of capital as it involves less amount of risk. But it may not be always possible, as the investors may not be willing to take. Under such circumstances, the company may be requiring to go in for borrowed capital.

2. LEVEL OF INTEREST RATES: If fund are available in the capital market, only at the higher rates of the interest, the raising of capital in the form of borrowed capital may be delayed till the interest rates become favorable.

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3. POLICY OF LENDING INSTITUTIONS: If the policy of term leading institution is rigid and harsh, it will be advisable not to go in for borrowed capital but the equity capital form should be tapped. 4. TAXATION POLICY: Taxation policy of the government has to be viewed from the angles of both corporate taxation and as well as individual taxation. The return n on borrowed capital, i.e., interest is an allowable deduction for income tax purposes while computing taxable income of the company, while return on equity capital, i.e., divided is not considered similarly as it is the appropriation out of the taxable profit. 5. STATUTORY RESTRICTIONS: The statutory restriction prescribed by the government and various statuteries are required to be taken into consideration before the capital structure is planned. The company has to decide the capital structure within the overall framework prescribed by the government and various statuteries.

c) GENERAL FACTORS:
There are the several factored of the general factures are as follows:

1. CONSTITUION OF THE COMPANY: While deciding about the capital structure, the constitution of the company plays an important role. In case of private limited company, the control factor may be more important, while in case of public limited company, cost factor may be more important.

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2. CHARACTERISTICS OF COMPANY: Characteristics of the company, in terms of size, age and credit standing plays a very important role in deciding capital structure. Very small companies and the companies in their early stages of life to depend more on the equity capital, as they have limited bargaining capacity, they cannot tap various sources of raising the finds, and they do not enjoy confidence of the various group of investors. Similarly, the companys good credit standing in the market may be in the position to get the funds from the sources of their choice.

3. STABILITY OF EARNINGS: If the sales and earnings of the company are not likely to be stable enough over a period of time but are likely to be subject to wider fluctuations, the risk factor plays more important role, and the company may not be able to have more borrowed capital in its capital structure as it carries more risk. However, if the earning and sales of the company are fairly constant and stable over the period of time, it may afford to take the risk, where the cost factor or control factor may play an important role.

4. ATTITUDE OF THE MANAGEMENT: If the attitude of the management is too conservative, the control may play an important role in capital structure decision, if the policy of the management is liberal, the cost factor may get more important.

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VARIOUS APPROACHES TO CAPITAL STUCTURE

In order to achieve the goal of identifying an optimum debt-equity mix, it is necessary for the finance manager to be conversant with the basic theories underlying the capital structure of corporate enterprises. In the following pages we are reviewing these major theories and trying to develop a unified theory of optimum capital structure. However, it will be seen that the existence of optimum capital structure is not accepted by all. There exist extreme views. There is a viewpoint that strongly supports the argument that the financing or debt-equity mix has a major impact on the financial structure is irrelevant as regards maximization of shareholders wealth. There are four major theories/ approaches explaining the relationship between capital structure, cost of capital and value of the firm: 1. NET INCOME (NI) APPROACH, 2. NET OPERATING INCOME (NOI) APPROACH, 3. MODIGILING MILLER (MM) APPORACH ,AND 4. TRADITIONAL APPROACH.

We discuss each of them in detail are as following:

1. NET INCOME (NI) APPROACH This approach has been suggested by Durand. According to this approach, capital structure decision is relevant to the valuation of the firm. In other words, a change in the capital structure causes a corresponding change in the overall cost of capital as well as the total value of the firm.

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According to this approach, higher debt content in the capital structure (i.e., high financial leverage) will result in decline in the overall or weighed average cost of capital. This will causes increase in the value of the firm and consequently increase in the value of the equity shares of the company. Reserve will happen in a converse situation. ASSUMPTIONS: Net income approach is based on the following three assumptions: 1. There are no corporate taxes. 2. The cost of debt is less than cost of equity or equity capitalization rate. 3. The debt content does not change the risk perception of the investors.

2. NET OPERATING INCOME (NOI) APPROACH This approach has also been suggested by Durand. This is just opposite of net income approach. According to this approach, the market value of the firm is not at all affected by the capital structure changes. The market value of the firm is ascertained by capitalizing the net operating income at the overall cost of capital, which is considered to be constant. The market value of equity is ascertained by deducting the market value of the debt from the market value of the firm. ASSUMPTIONS: The Net Operating Income (NOI) Approach Is Based On The Following Assumptions: 1. The overall cost of capital remains constant for all degrees of debt-equity mix or leverage. 2. The market capitalizes the value of the firm as a whole and, therefore, the split between debt and equity is not relevant.

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3. The use of debt having low cost increase the risk of equity shareholders, these results in equity capitalization rate. Thus, the advantage of debt is set off exactly by increase in the equity capitalization rate. 4. There are no corporate taxes.

3. MODIGILIANI MILLER (MM) APPORACH The Modigiliani-miller (MM) approach is similar to the net operating income (NOI) approach. In other words, according to this approach the value of a firm is independent of its capital structure. However, there is a basic difference between the two. The NOI approach is purely definitional or conceptual. It does not provide operational justification for irrelevance of the capital structure in the valuation of the firm. While MM approach supports the NOI approach providing behavioral justification for the independence of the total valuation and the cost capital of the form from its capital structure. In other words, MM approach maintains that the average cost of capital does not change with change gives operational justification for this and not merely states only a proposition.

ASSUMPTIONS: The Modigiliani-miller approach is subject to the following assumptions: 3. The capital market is perfect in the sense that investors have perfect knowledge of market forces; they are free to buy and sell securities; the cost of transactions is zero; and they behave rationally. 4. All investors have the same expectation of a firms net operating income (EBIT) with to evaluate the value of any firm. 5. There are no corporate taxes. However, this assumption has been removed later.

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4. TRADITIONAL APPROACH In the preceding pages, we have explained that the net income (NI) approach and net operating income (NOI) approach represent two extremes. According to NI approach, the debt content in the capital structure affected both the overall cost capital and total valuation of the firm while NOI approach suggests that capital structure is totally irrelevant so far as total valuation of is concerned. The MM approach supports the NOI approach. However, the limitation of MM approach as discussed in the previous pages show that MM approach with its assumption is of doubtful validity. The traditional approach or the intermediate approach is a mid-way between the two approaches.

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PATTERNS OF CAPITAL STRUCTURE

On the basis of the relative of various types of securities issued, it is possible to differentiate between four patterns of capital structure. They are as follows: 1. Capital structure with equity shares only. 2. Capital structure with equity and preference shares. 3. Capital structure with equity shares and debentures. 4. Capital structure with equity shares, preference shares and debentures. Relative merits and demerits of these patterns of capital structure are described as below: 1. CAPITAL STRUCTURE WITH EQUITY SHARES ONLY This type of capital structure comes into being when a company issues equity share only and does not rely on preference shares and debentures. This type of capital structure is preferred when a companys business is risky and its earning is highly unstable of course. It raises additional capital through public deposits. All companies have to raise its basic capital by issue of equity shares.

MERITS: 1. It is simple and understandable to all investors. All the necessary information about management of business can be easily obtained. 2. It is not compulsory for the company to return the equity shares during its existence.

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DEMERITS: 1. The company loses the benefit of the trading on equity. By not trading on equity, the company loses the opportunity to pay high dividend to its shareholders. 2. When company issue additional equity share, it has to grant to the existing shareholders a right to purchase a right to purchase them on a priority basis. Hence managerial control may get concentrated into a few hands.

2. CAPITAL STRUCTURE WITH EQUITY AND PREFERANCE SHARES: Preference shares may be issued along with the equity shares to makes capital structure more attractive to the investors. Both securities represent ownership capital. Equity shares attract the more venturesome investors, while preference shares satisfy the investors who are content with fixed income. To make preference shares more attractive, different varieties such as cumulative preference shares and non cumulative preference shares are issued. MERITS: 1. The capital structure of the company is made more economical because it is usually cheaper to raise capital with preference share than with equity shares. 2. All the advantage of capital structure with equity share only is available in this type also.

DEMERITS: 1. Some of the respective provision of the preference share curtails directors freedom.

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2. In computation of income tax, interest paid on debentures is regarded as expenditure and there for deductible.

3. CAPITAL STRUCTURE WITH EQUITY SHARE AND DEBENTURES: Most of the companies now adopt the capital structure which includes equity share and debenture with the aim to maintain dividend rate on equity share by combining owners capital with creditors capital. This types of capital structure exists in some well known companies.

MERITS: 1. The cost of issuing debenture is relatively low. Much publicity is not required as debenture represent self investment. 2. Since debenture holders have no voting right, interference in the management is avoided and yet additional capital can be obtained through the issue of debenture.

DEMERITS: 1. During period of depression, interest payment becomes a burden on the company. Because it has to pay a fixed interest on debenture regularly whether profit are positive or negative. 2. In case of default, debenture holder can put a company in to difficulty. The company may be dragged to the low-court and may be force into liquidation.

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4. CAPITAL STRUCTURE WITH EQUITY SHARE, PREFERANCE SHARE AND DEBENTURES: A company which required capital on a large scale will have to adopt a capital structure consisting of equity shares, preference shares and debentures. Thereby, the company can attract all classes of investors. The capital structure in many of the companies in India is exactly of this nature.

MERITS: 1. A company with the pattern of capital structure can enjoy advantage of the entire pattern stated above. 2. It is the most economical pattern of capital structure.

DEMERITS: 1. This is most complicated pattern of capital structure and makes financial administration difficult. 2. The directors are not free to deal with the earning of the company as they wish.

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Research Methodology

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MEANING OF RESEARCH
In common words, research refers to a search for knowledge. Research can be defines as a scientific and systematic search for information on a specific search for information on specific topic. Research comprises defining problem collecting data, evaluating data, formulating hypothesis, reaching conclusion and testing the conclusion whether they fit the formulating hypothesis. It is the pursuit of truth with the help of study, observation, comparison and experiment. In short, the search for knowledge through objective and systematic method of finding solution to the problem is research. 1. According to Redman and Mary, Research is a systematized effort to gain new knowledge.

2. According to John W. West, Research is the systematic and objective analysis and recording of controlled observations that may leave to development of generalizations, principles or theories result in prediction and possibly ultimate control of events. Research Methodology is a way to systematically solve the research problems. It is necessary for the researcher to know not only the research methods techniques but also the methodology. It is necessary for the researchers to design his methodology for his problem as the some may differ from problem to problem. It may be understood as a science of studying how research is done scientifically. It has many dimensions. The scope of research methodology is wider than that of research methods. In short, the search for knowledge through objective and systematic method of finding solution to a problem is research.

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Research can be classified into two categories which are as follows,

Basic Research :Basic research is also called fundamental or pure research. As the name itself refers that basic research is of basic nature which is not carried out in response to a problem. It is more educative towards undertaking the fundamentals and aim at expanding the knowledge base of an individual or organization.

Applied Research :On the other hand, applied research is carried out to seek alternate solution for a problem at hand. Applied research is done to solve specific practical questions. Applied research refers the investigation undertaken to discover the application and use of theories, knowledge and principles in actual works or in problem solving. But the main objective of research is to provide accurate & relevant and timely information to the top management so that they can take effective decisions.

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OBJECTIVES OF THE STUDY

The purpose of research is to discover answer to question through the application of scientific procedure. The main aim of research is to find out the truth which has not been discovered as yet. Though each research study has own specific purpose, we may think of research objectives as falling into a number of following broad grouping:

PRIMARY OBJECTIVE:
To know the companys internal and external sources of finance. To understand the organizational structure and functioning of ECCL. To know the debt or equity of the ECCL. Analyzing the financial health of ECCL. Identifying loopholes in the functioning and in the area of study and recommending the suggestion for the same. To know the companys debt-equity ratio with the help of capital structure.

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METHOD OF DATA COLLECTION

There are the different types of method of data collection. The task of data collection begins after a research problem has been defined and research design/ plan chalked out. While deciding the methods of data collection to be use for the study, the researcher should keep in mind two types of data viz., primary and secondary. The primary data are those which are collected afresh and for the time, and thus happen to be original in character. The secondary data on the other hand are those which have already been collected by someone else and which have already been passed thought the statistical process. The researcher would have to decide which sort of data he would be using (thus collecting) for his study and according to him he will have to select one or the other method of data collection. The method of collecting primary and secondary differ since primary data are originally collected, while in case of secondary data the nature of data collection works is merely that of compilation, we describe the different of data collection, with the pros and cons of each method.

PRIMARY DATA:
The primary data are those which are collected afresh and for the time, and thus happen to be original in character. We collect primary data during the course of doing experiments research but in case we do research of the descriptive type and perform surveys, whether sample surveys or census surveys, then we can obtain primary data either through observation or through direct communication with respondent in one form or another or through personal interview.

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In respect or concern with my project I have used only secondary data so my project report is based on secondary data from the following sources of firm, 1. Profit and loss account 2. Balance sheet

SECONDARY DATA:
Secondary data means data that are already available i.e., they refer to the data which have already been collected and analyzed by someone else. When the research utilized secondary data, then he has to look into various sources form where he can obtain them. In this case he is certainly not confronted with the problems that are usually associated with the collection of original data. Secondary data may either be published data or unpublished data. My project is based on the secondary data, all the data which are I have used is based on the available or published data viz. balance sheet.

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LIMITATIONS OF THE STUDY

During my project report I found following difficulty but with the help our guide and manger of the firm I was able to solve it great extent. My project report is based on only secondary data collected from EXCEL CROP CARE LIMITED account department. In my project report I have included data of last three year only so before taking any decision information about more years must be collected. My project report is purely based on secondary data so before taking any decision research on primary data should also be done.

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Data analysis & Interpretation

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 CAPITAL STRUCTURE ANALYSIS

CAPITAL STRUCTURE FOR THE YEAR 2008-09: (Rs. In Lacs)

Year

Share capital 550.28

Reserve and Surplus 13389.06

Secured Loans 7905.62

Unsecured Loans 6891.83

2008-09

The table and graph for the year 2008-09 shows the followings: The share capital of the company is Rs.550.28 Lacs, which contains the 1.91% of the total capital employed. Reserve and surplus is Rs.12838.78 Lacs more than the share capital. The Reserve and Surplus is Rs.13389.06 Lacs, which contains the 46.59% of the total capital employed approximately. The secured loan is Rs. 7905.62 Lacs, which contains the 27.51% of the total capital employed approximately. The Unsecured Loan is Rs. 6891.83 Lacs, which contains the 23.98% of the total capital employed approximately.

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 CAPITAL STRUCTURE FOR THE YEAR 2009-10: (Rs. In Lacs) Year 2009-10 Share capital 550.28 Reserves and Surplus 16330.41 Secured Loans 5002.75 Unsecured Loans 9531.82

The table and the graph for the year 2009-10 show the followings: The Share capital for the year 2009-10 of the company is Rs.550.28 Lacs which contains approximately 1.75% of the total capital employed. Reserve and surplus is Rs.15780.13 Lacs more than the share capital. The Reserves and Surplus of the company is Rs,.16330.41 Lacs, which contains approximately 51.98% of the total capital employed. The secured loan of the company is Rs.5002.75 Lacs, which contains approximately 15.92% of the total capital employed. The unsecured loan of the company is Rs.9531.82 Lacs, which contains approximately 30.34% of the total capital employed.

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 CAPITAL STRUCTURE FOR THE YEAR 2010-11: (Rs. In Lacs) Year 2010-11 Share capital 550.28 Reserve and Surplus 20219.36 Secured Loans 8702.00 Unsecured Loans 3556.51

The table and the graph for the company show the followings: The Share capital of the company is Rs.550.28 Lacs, which contains approximately 1.67% of the total capital employed. Reserve and surplus is Rs.19669.08 Lacs more than the share capital. The reserve and Surplus of the company is Rs.20219.36 Lacs, which contains approximately 61.22% of the total capital employed. The secured loan of the company is Rs. 8702 Lacs, which contains approximately 26.35% of the total capital employed. The Unsecured loan of the company is Rs.3556.51 Lacs, which contains approximately 10.77% of the total capital employed.

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 CAPITAL STRUCTURE HIGHLIGHTS

SHARE CAPITAL: Year Percentage Net amount (Rs. In Lacs) 2008-09 1.91 550.28 2009-10 1.75 550.28 2010-11 1.67 550.28

As shown in the Table or chart, we can conclude that the share capital of 2008-09, 2009-10, and 2010-11 was 550.28 Lacs constant. And it contains the 1.91%, 1.75% and 1.67% respectively of total capital structure. In all the financial year share capital does not change. EXCEL CROP CARE LIMITED is the public limited company, thus the shares of this company hold by its owners and general public.

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 RESERVE AND SURPLUS: Year Percentage Net amount (Rs. In Lacs) 2008-09 46.59 13389.06 2009-10 51.98 16330.41 2010-11 61.22 20219.36

As shown in the table, the company has 46.59% reserve and surplus with the

total capital employed in the year 2008-09 with the net reserve and surplus of Rs.13389.06 lacs. And also, in 2009-10, the companys reserves and surplus was to 51.98% with the net amount of Rs. 16330.41 Lacs.. It means the company has taken more debts in the year 2009-10. But, from 2010-11, the part of the companys reserve and surplus is

increasing and become the 61.22% part of the total capital employed in the year 2010-11 with net amount increases to Rs. 20219.36 lacks. It means from the year 2008-09, the company has retained more profit and

employed less debts in the capital structure.

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 SECURED LOANS:

Year Percentage Net amount (Rs. In Lacs)

2008-09 27.51 7905.62

2009-10 15.92 5002.75

2010-11 26.35 8702.00

As shown in the table, the company has the highest percentage of secured

loan is in the year 2008-09 and the lowest percentage is in 2009-10 with the 15.92% part in the total capital employed. It means the company has taken the lowest amount of secured loans in the

years 2009-10 with the net amount of Rs. 5002.75 Lacs. During 2010-11 firm increased their secured loan by 10.43% compared to

previous year.

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 UNSECURED LOANS:

Year Percentage Net amount (Rs. In Lacs)

2008-09 23.98 6891.83

2009-10 30.34 9531.82

2010-11 10.77 3556.51

As shown in the above table, the company has the highest percentage of

unsecured loans of 30.34% with the net amount of Rs. 9531.82 Lacs in the year 2009-10. But, the company has taken the lowest amount of unsecured loans of

Rs.3556.51 Lacs with the 10.77% part in the total capital employed. While during 2010-11 the firm decreased their unsecured loan approximately

19.55% as compared to previous year.

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 CAPITAL STRUCTURE RATIO

DEBT EQIUTY RATIO:
The debt-equity is determined to ascertain the soundness of the long-term financial policies of the company. It is also known as external-internal equity ratio. It may be calculated as follows: Debt-equity ratio = Long term liability Share holders funds

The term external equity refers to total outside liabilities and the term internal equity refers to shareholders fund or the tangible net worth. If the ratio is 1(i.e., outsiders fund are equal to shareholder funds) it is considered to be quite satisfactory. However, a lower ratio, say2/3rds borrowed funds and 1/3 rd owned fund, may also not be considered as unsatisfactory if the business need heavy investment in fixed asset and has a assured return on its investment, e.g., in case of public utility concerns. The debt equity ratio measures the relationship of the capital provided by the creditors to the amount provided by shareholders. This ratio indicates the extent of use of leverage. A high ratio indicates the aggressive leverage, and highly Leverage Company is more risky for the creditors. A low ratio indicates that the company is making little use of leverage and is too conservative.

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EQUATION:

FOR THE YEAR 2008-09 (Rs. In Lacs)

DEBT-EQUITY RATIO = LONG TERM LIABILITY SHARE HOLDERS FUNDS

DEBT-EQUITY RATIO = =

13582.13 13939.34 0.97:1

FOR THE YEAR 2009-10 (Rs. If Lacs)

DEBT-EQUITY RATIO = LONG TERM LIABILITY SHARE HOLDERS FUNDS

DEBT-EQUITY RATIO = =

13440.72 16880.69 0.80:1

FOR THE YEAR 2010-11 (Rs. In Lacs)

DEBT-EQUITY RATIO = LONG TERM LIABILITY SHARE HOLDERS FUNDS

DEBT-EQUITY RATIO = =

11408.41 20769.64 0.55:1

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ANALYSIS:

INTERPRETATION:
From the above calculation or chart, we can conclude that the

debt-equity ratio of 2008-09 WAS 0.97:1, while 2009-10 it was 0.80:1. The ratio is decrease because of increase in the shareholders funds and decrease in debt and loan from the bank and other financial institution. And also in the year 201011 the debt equity ratio decrease and become 0.55:1. It shows that the debtequity ratio continuously decreases. The company has the highest liquidity ratio that is 0.97 in the year 2008-09, which is quite satisfactory as compared to year 2010-11 that is 0.55.

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 RETURN ON CAPITAL EMPLOYED

This ratio measures the return on the owners investment. It is an indicator of the measure of the success of a business from the owners point of view. The ultimate interest of any business is the rate of return on invested capital. It may be measured by the ratio of income to equity capital. It determines whether a certain return has been received or not. This rating measures the relationship between net profit before interest and tax & capital employed. This ratio estimates how efficiently dong term debts and shareholders fund has been used.

RETURN ON CAPITAL EMPLOYED = NET PROFIT (EBIT) CAPITAL EMPLOYED

100

It indicates how effectively the operating assets are used in earning return. ROI analysis provides a strong incentive for optimal utalization of the assets of the company. It provides a suitable measure for assessment of profitability of each proposal.

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EQUATION:
FOR THE YEAR 2008-09 (Rs. In Lacs)

RETURN ON CAPITAL EMPLOYED = NET PROFIT (EBIT) 100 CAPITAL EMPLOYED RETURN ON CAPITAL EMPLOYED = 4460.38 28736.71 = 15.52%

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FOR THE YEAR 2009-10 (Rs. In Lacs)

RETURN ON CAPITAL EMPLOYED = NET PROFIT (EBIT) 100 CAPITAL EMPLOYED RETURN ON CAPITAL EMPLOYED = 5719.08 100 31415.26 = 18.20%

FOR THE YEAR 2010-11 (Rs. In Lacs)

RETURN ON CAPITAL EMPLOYED = NET PROFIT (EBIT) 100 CAPITAL EMPLOYED

RETURN ON CAPITAL EMPLOYED =

6225.27 100 33028.15 = 18.85%

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ANALYSIS

INTERPRETATION:
From the above, the return on capital employed for last three years are

15.52%, 18.20% and 18.85%. The Standard ratio for return on capital employed is 25%. Return on capital employed of EXCEL CROP CARE LIMITED increase continuously, which shows that company try to reach at standard ratio that is 25% in next several years. In 2008-09, Return on capital employed was 15.52%, it increase in year 2009-10 and become 18.20%, and in next year it increase and become 18.85% in 2010-11 which shows continuously increase in Return on capital employed.

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 RETURN ON SHAREHOLDERS FUND

This ratio works out the profitability of business from the viewpoint of the shareholders. This ratio indicates how well the firm has used the resources of the owners. It shows one of the most important relationships inn financial analysis. The earnings of the satisfactory return are the most desirable objective of any business & these ratios shows to what extent this objective is achieved. It should be compared with ratios of other similar firms as well as the industry average, which shows the relative performance.

RETURN ON SHARE HOLDERS FUND = NET PROFIT (AFTER TAX) 100 SHARE HOLDERS FUND This ratio is obtained by dividing profit after tax with total share capital. Here share capital also includes reserves and surplus as well as preference and equity share capital. This ratio include the probable amount of dividend that shareholder are going to get from company. The return on shareholders equity is measure exclusively the return on the owners funds. It is of great practical importance to the prospective investors, as it enable the profitability of a company to be compared with the other company. It also indicates whether the return on proprietors funds is enough in relation of dividend is likely to be received on share.

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EQUATION:

FOR THE YEAR 2008-09 (Rs. In Lacs)

RETURN ON SHARE HOLDERS FUND = NET PROFIT (AFTER TAX) 100 SHARE HOLDERS FUND RETURN ON SHARE HOLDERS FUND = 2780.04 X 100 13939.34 = 19.94%

FOR THE YEAR 2009-10 (Rs. In Lacs)

RETURN ON SHARE HOLDERS FUND = NET PROFIT (AFTER TAX) 100 SHARE HOLDERS FUND

RETURN ON SHARE HOLDERS FUND

3743.44 100 16880.69 = 22.18%

FOR THE YEAR 2010-11 (Rs. In Lacs)

RETURN ON SHARE HOLDERS FUND = NET PROFIT (AFTER TAX) 100 SHARE HOLDERS FUND RETURN ON SHARE HOLDERS FUND = 4368.61 100 20769.64 = 21.03%

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ANALYSIS

INTERPRETATION:
As show in the above chart or equation, the return on shareholders

funds of the company in 2008-09, 2009-10 and 2010-11 was 19.94%, 22.18% and 21.03%. The share holders get the highest return on their investment in 2009-10 with 22.18%. And lowest return in 2008-09 was 19.94%.

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Finding And Suggestion

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FINDING AND SUGGESTION

The management of EXCEL CROP CARE LIMITED is satisfactory but some effective steps can increase companys position which is as under:

Particular Share capital Reserve & surpluses Secured loan Unsecured loan Debt-equity ratio Return on capital employed Return on share holders funds

2008-09 550.28 13389.06 7905.62 6891.83 0.97:1 15.52% 19.94%

2009-10 550.28 16330.41 5002.75 9531.82 0.80:1 18.20% 22.18%

2010-11 550.28 20219.36 8702.00 3556.51 0.55:1 18.85% 21.03%

During my project report I found that Share capital of the firm is same for the three years. SUGGESTION: So I suggest that firm should increase their share capital with increase in their debt and to maintain their leverage at minimum cost of capital. Their reserve and surpluses are increasing continuously. SUGGESTION: so I suggest that company should not increase their reserve & surpluses and the money should be invested in other assets or investment so that return can be earned from that reserve & surpluses. I found that firms secured loan and unsecured loan is fluctuating means increase or deceased in loan funds and though they maintain their debt-equity.

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 Debtequity ratio of the firm is very low recently compared to standard ratio. Ratios of three year are respectively 0.97, 0.80, and 0.55 it means that firms debt is low as compared to equity. SUGGESTION: So company can take more debt from outside lenders to maintain balance of debt-equity ratio. Return on capital employed was 15.52%, 18.20%, and 18.85% which shows that firms return on capital employed is less than standard ratio. SUGGESTION: So I suggest that firm should remove all hurdles and increase their return on capital employed. Returns on share holders funds are lower than stranded ratio SUGGESTION: so I suggest that firm should distribute more dividends to increase their return on share holder funds ratio. In ECCL, the ratio of debts to equity was 0.97:1 in 2008-09. While in 2009-10, it was 0.80:1 and is further reduced to 0.55:1 in 2010-11. Thus, there will be an increase in weighted average cost of capital and decrease in market value of share of the company. SUGGESTION: So, company can implement Net Income (NI) approach.

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Conclusion

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CONCLUSION
As a part of my subject (Summer Internship Project) I have undergone training in EXCEL CROP CARE LIMITED for 45days. During my training I study and analysis capital structure of the firm. During my study I found that EXCEL CROP CARE LIMITED is one of the biggest company producing pesticides chemical in India. When firm needs finance, they borrowed money from bank or use their retain earning and they also try to maintain their debt equity ratio every year. ECCL has very good financial structure as we can see from the all capital ratios that company can repay its debt easily, Debt interest can also be paid easily. The company has enough funds and assets from that company can pay its all term loans. In future, company can think for more leverage because all ratios are favorable to the company. If company is enough to pay its all debt, interest and loans company is processing and there is more chance to get more leverage in future. Return on capital employed ratio of the ECCL is very good, this ratio shows that company is getting high return on their investment. Return on shareholders fund ratio of ECCL is satisfactory that shows company give high return to the investor for their investment. Currently the company gives Rs.3.75 dividend per share.

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BIBLIOGRAPHY

BOOKS
FINANCIAL MANAGEMENT,: I.M. PANDEY 8th EDITION PUBLISHER :- VIKAS PUBLISHING HOUSE PVT LTD. BUSINESS FINANCE : PRIN. T. J. RANA, 3rd EDITION PUBLISHER :- SUDHIR PRAKASHAN. RESEARCH METHODOLOGY, C.R. KOTHARI ANNUAL REPORT OF EXCEL CROP CARE LIMITED. YEAR :- 2008-09, 2009-10, 2010-11

WEBSITE
www.excelcropcare.com

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