ratio shree renuka sugars ltd 2

8/13/2019 Ratio Shree Renuka Sugars Ltd 2

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ANALYTICAL STUDY ON RATIO ANALYSIS AT SHREE RENUKA SUGARS LTD

CHAPTER-1

INTR ODUCTION

OVERVIEW OF SUGAR INDUSTRY:

India is one of the largest consumer and second largest producer of sugar

in the world. With 516 sugar mills operating in India during SY 2008P in

different parts of the country the Indian sugar industry has !een a focal

point for socio"economic de#elopment in the rural areas$

%he sugar industry in India is highly fragmented$ %here is a large

num!er of small sugar mills located in #arious parts of the countries$ In

SY 2008 a total of 516 sugar factories crushed cane for an a#erage of

152 days$ &ooperati#e mills largely operate in 'aharashtra (u)arat

*ttar Pradesh and +arnata,a$ In addition there are a num!er of players

in the unorganised segment producinggur and khandsari, which are less

refined forms and act as a su!stitute$

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Sugarcane Acreage Pr!"uc#$!n :

%he sugar industry in India uses only sugarcane as input hence sugarcane

acreage and production is a ,ey factor in determining sugar production

for the year$ %he area under sugarcane culti#ation has gradually increased

o#er the years mainly due to the di#ersion of land !y the farmers from

other crops to sugarcane for economic reasons$

Sugar mills ha#e !een largely esta!lished in large sugarcane growing

states li,e *ttar Pradesh 'aharashtra .ndhra Pradesh +arnata,a

(u)arat and %amil /adu$ %hese si states together account for 80"0 of

the sugarcane produced in India$

.ccordingly the leading sugar producing states are *ttar Pradesh

'aharashtra %amil /adu (u)arat .ndhra Pradesh and +arnata,a

accounting for 85"5 of the total sugar produced in India$

In SY 2008P these states accounted for a!out 0 of the total sugarcane

production in India with 'aharashtra and *ttar Pradesh leading with

23 and 4 respecti#ely of the total sugarcane production and for

a!out 2 of total sugar production in India again with 'aharashtra and

*ttar Pradesh leading with 43 and 28 respecti#ely of the total sugar

produced in India$



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Sugar C%c&e:

Process of Sugar Cycle

Sugar industry typically follows a cycle which spans o#er a period of fi#e

to se#en year$ igher sugarcane and higher sugar production results in a

fall in sugar prices which in turn result in non"payment of dues to

farmers$ %his compels the farmers to switch to other crops there!y

causing a shortage of sugarcane which in turn lead to an increase in

sugarcane prices and there!y increases profits$ Since prices of sugarcane

ha#e increased farmers now switch !ac, to sugarcane production which

in turn leads to a fall in sugar prices$

INTRODUCTION TO FINANCE :



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7inance is the life!lood and central ner#e system of any !usiness

organiation$ %his !ecause of the modern money oriented economy$ 9ust

as circulation of !lood is necessary in the human !ody to maintain life

finance is #ery essential to the !usiness organiation for smooth running

of the !usiness$ 7inance is one of the !asic foundations of all ,inds of

economic acti#ities$ It is the master ,ey which pro#ides access to all the

sources for !eing employed in manufacturing and merchandising

acti#ities $%he importance of 7inancial 'anagement cannot !e denied$ In

e#ery organiation where funds are in#ol#ed sound 7inancial

'anagement is indispensa!le$ :fficient management of any !usiness

enterprise is closely lin,ed with efficient management of its finance$

DEFINITION OF FINANC E :

;ay ($9atin word ?7inis@ in simple word 7inance is the economics and

accounting$ :conomics is proper utiliation of scare resources and

accounting is ,eeping a record of thing$

+enneth 'idglay and ;onald Aurns state B7inance is the process of

organiing the flow of funds so that a !usiness firm carry out its

o!)ecti#es in the most efficient manner and meet its o!ligations as they

fall due$C

SCOPE OF FINA N CE:



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*ntil the middle of the century the scope of finance was simply that of

rising of funds from #arious sources and loo,ing after the legal and

accounting relationship !etween the company and the suppliers of

#arious sources of funds$

owe#er se#eral technological inno#ations and impro#ements widening

mar,eting operation strong corporate structure etc$ too, place in 150@s

ha#e since reduced the popularity of traditional approach finance$

%he scope of finance function is as wide as the periphery of finance$ It

concentrates primarily on more money management and different

auiliaries which are incidental to it$ 7or effecti#e money management

the different resources of !usiness enterprises must !e mo!ilied$

%he finance penetrates all the acti#ities irrespecti#e of whether they relate

to product pricing epansion and re"organiation and in fact anything

which needs finance$

I'PORTANCE OF FINANCE:



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%he importance of finance is one of the important areas of the

management$ It is the management of monetary affairs of the

organiation$ It considered as that administration area or set of

administration function which relate to arrangement of cash and credit

so that the organiation may ha#e the means to carry out its o!)ecti#e$ So

it is rightly said B7inance is the life !lood of the Ausiness :conomyC

7inance is a #ery important tool for the organiation for its smooth

wor,ing$ Without of finance neither a !usiness can !e started nor

successfully run$ Pro#ision of sufficient funds at the reDuired time is the

,ey of success of a !usiness$ .s a matter of fact finance may !e said to

!e a circulatory system of the economic !ody$

. !usiness needs the finance at e#ery stage of its operation$ Some of the

operation or stage where the finance is reDuired for the organiation isE

7or starting of a !usiness

7or operating of a !usiness

7or epansion and moderniation of a !usiness

7or closing up or liDuidation of the !usiness$

A(OUT THE SU()ECT:

%he preparation of financial statements is not the end aim$ %he purpose

of preparing the statement is to use them for decision ma,ing$ %he



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statement !ecomes further planning and forecasting$ .n opinion is

formed in respect to the financial conditions and concern$ %he analysis

of these statements in#ol#es their decision according to similar groups

and arranged in desired form$ %he interpretation in#ol#es the epansion

of financial facts in a simplified manner$

%he financial statement analysis is largely a study of relationship among

the #arious financial factors as shown !y different statement are an

attempt to determined the significance and meaning of the financial

statement data so that the forecast may !e made !y prospects for future

earning a!ility to pay interest and delete maturities F!oth current and

long termG and profita!ility of a sound di#idend policy$

%he analysis and interpretation !eing out the mystery !ehind the figures

in financial statement$ %he interpretation includes the comparisons of the

smaller figures at different time different figures at the same point of

time$

INTRODUCTION:

:#ery organiation irrespecti#e of sie and mission may !e #iewed as a

financial entity$ 'anagement of the organiation particularly a !usiness

firm is confronted with issues and decision li,e the following which

ha#e important financial implicationE

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What ,ind of plant and machinery should the firm !uyH

ow should it raise financeH

ow much should it in#est in in#entoriesH

What should !e its credit policyH

ow should it gauge and monitor its financial performanceH

'EANING OF RATIO ANALYSIS :

;atio is the relationship !etween two accounting num!ers$ It is one of the

effecti#e tools of financial analysis$ It indicates the relationship of

accounting aspect li,e profit and profit and sales incomes and epenses

current assets and lia!ilities etc$ with each other and reflects the

soundness of concern$

;atio .nalysis is the techniDue of the computation of num!er of

accounting ratios from the data deri#ed from the financial statements and

comparing those with the ideal or standard ratios or the pre#ious year@s

ratios or the ratios of other similar concerns$ It is a techniDue of

comparati#e analysis in which current year ratios are compared with the

past or other organiations which are in similar line of operations so as to

ascertain the financial soundness of the concern$

USERS *$n#ere+#e" ,ar#$e+ :

1. SHAREHOLDERS

Some shareholders are interested in the performance of the

company$ %hey want to )udge the long term sol#ency position

return capital employed and earnings per share of a company$



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/. ANALYST ADVISOR :

%hey ad#ise the present and potential in#estors a!out their !uy or

sell and lending decisions !y re#iewing all financial characteristics

and ma,e inter firm comparisons$

0. TA AUTORITIES :

%hey are the financial rate to )udge the relia!ility of financial

information presented !y the assesses$

I'PORTANCE OF RATIO ANALYSIS:

;atio .nalysis stands for the process of determining and presenting the

relationship of items and groups of items in the financial statements$ It is

an important techniDue of financial analysis$ It is an important techniDue

of financial analysis$ It is a way !y which financial sta!ility and health of

a concern can !e )udged$ %he following are the main points of

importance of ;atio .nalysisE



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1) .ccounting ratios re#eal the financial positions of a concern$

%his helps the !an,s insurance companies and other financial

institutions in lending and ma,ing in#estments decisions$

2) ;atio .nalysis is an instrument for diagnosing the financial

health or condition of a !usiness$ 7inancial analysts can

diagonise the financial condition of an enterprise through ratio

analysis$ %hey e#aluate the important aspects of the conduct of a

!usiness li,e liDuidity sol#ency capital gearing profita!ility

etc$

3) .ccounting ratios simplify summaries and systematie the

accounting figures in order to ma,e them more understanda!le

and in lucid form$ %hey highlight the interrelationship which

eists !etween #arious segments of the !usiness as epressed !y

accounting statements$

4) ;atio .nalysis is an in#alua!le aid to the management in the

efficient discharge of its !asic functions of forecasting planning

communications controlled$ ;atios are a useful instrument of

management control particularly in the areas of sales and costs$

5) ;atios are #ery helpful in esta!lishing standard costing system

and !udgetary control$



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LI'ITATIONS OF RATIO ANALYSIS :

1) ;atios are calculated from the data found in the financial

statements$ %he 7inancial statements suffer from a num!er of

limitations$ %hat means the ratio deri#ed from the financial

statements are also su!)ected to those limitations$

2) 7inancial analysis is !ased on ratio analysis will gi#e miss leading

results if the effects of change in price le#el are not ta,en into

account in the compilation of ratio analysis$



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3) ;atio alone is adeDuate for )udging the financial position of a

!usiness$ %hey cannot !e ta,en as final as regards the financial

position of a !usiness other things also ha#e to see$

4) ;atios gi#e )ust a fraction if information needed for )udging the

financial soundness of a concern such the information o!tained

from the ratios must !e used in con)unction with the information

o!tained from others sources so as to )udge the financial soundness

of a concern correctly$

5) . ratio is hyper sensiti#e$ . new entry of a transaction can change

its magnitude drastically$

STEPS INVOLVED IN RATIO ANALYSIS:

1. Selection of rele#ant data from the financial statements depending

upon the o!)ecti#e of the analysis$

2. &alculating of appropriate ratios from the a!o#e data$

3. &omparision of calculated ratios with the ratios of the same firm inthe past or the ratios de#eloped from pro)ected financial statements

the ratios of some other firms of the comparision with the ratios of

the industry to which the firm !elongs$



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4. %he ratio analysis in#ol#es the comparison for useful interpretation

of the financial statements$ . single ratio in itself does not indicate

fa#ora!le or unfa#ora!le conditions$ It should !e compared with

some standards$

CHAPTER-/

RESEARCH DESIGN

INTRODUCTION :

%he efficiency of the company is mainly measured !y its financial

sta!ility$ It can !e assesses with the help of audited and certified

financial statements$

;atio .nalysis is an important tool for financial strength of the

company$ ;atio analysis is the techniDue of analyses and interpretation

of financial statement through calculation of a num!er accounting ratios

from the financial statements for the purpose of comparisons of



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accounting ratio with those of pre#ious year with those other concern

engaged in similar line of acti#ities or with the standards to draw

conclusion a!out the financial performance of the organisaton$

.nalyses and interpretation of #arious accounting ratio gi#e Fs,illed and

eperienced analystG a !etter understanding of the financial condition of

the organiation through financial statement$

TITLE OF THE STUDY:

%his pro)ect is su!mitted under the title 2RATIO ANALYSIS3at Shree

;enu,a Sugars >td Aelgaum where a special preference is gi#en to

;atio .nalysis$

STATE'ENT OF PRO(LE':

%he success and failure of the company depends on the financial results

that the company has achie#ed during the period which will !e reflected

in financial statements$ .nalysis and interpretation of financial

statements of its regular eercise to re#iew the performance of the

company the present study is underta,en to analyse the financial position

of the concern$ i$e$ whether the concern is in profit or loss or in !rea,

e#en$

O()ECTIVE OF THE STUDYE

%o study and analyse financial statements of the concern$

%o identify the loops and finding techniDues to impro#e the same$

%o ,now the current assets and current lia!ilities structure of

S;S>$



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%o study and compare the financial performance of .> o#er the

last fi#e years$

&ompetition of different accounting ratios to analyse the financial

performance of concern for current year$

%o ,now the sol#ents of the firm and to decide a!out the long

term liDuidity of the funds of the organiation$

%o suggest and recommend a proper techniDues for ;atio .nalysis

of S;S>$

SCOPE OF THE STUDYE

%he study has !een done to analyse the financial performance of S;S>

for the period of 3years from 2005"200$ %he study help in the learning

of the financial statements as well as understanding the #arious

components in#ol#ed in the analysis of the financial statements$ %he

financial statement consists of Aalance Sheet Profit and >oss and Profit

and >oss .ppropriation account$ %hrough this studying the financial

statement of pre#ious 3years is analysed$

'ETHODOLOGY OF STUDY :

%o get rele#ant data the correct result is necessary to conduct a research

study in a 'ethodical way$ Important criteria for the #alidity of any

research study lies in 'ethodology adopted !y it$ .s these was no

primary data to !e collected only secondary data was used for research

this secondary data is analysed for the pro)ect to !e carried out$



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DATA COLLECTION AND ANALYSISE

%he secondary data was collected such as annual reports and study

report was set to purpose of calculating the ratios$

Aased on secondary data collected analysis was carried out using ;atio

.nalysis as tool and the findings of the study where interpreted and

recommendation were gi#en$

INFOR'ATION NEEDSE

Aalance Sheet of 2005"06 2006"0 200"08 2008"0

Profits and >oss accounts of 2005"06 2006"0 200"08 2008"0

Wor,ing ;esults

.nnual ;eports

LI'ITATIONS OF STUDYE

It has not !een possi!le to calculate all the ratios for the purpose

of analysis due to non a#aila!ility of data$

%his !asically !een an academic study suffers from time and the

cost constrains$

ighly confidential matter could not !een procured due to ,nown

and un,nown reasons$

7indings and conclusions are applica!le to this concern only and

cannot !e generalied$



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CHAPTER-0

CO'PANY PROFILE:

A4!u# S5ree Renu6a Sugar+:

Shree ;enu,a Sugars >td FS;S>G is a transnational agri!usiness

and !io energy corporation$

Shree ;enu,a Sugars >td was not !orn out of necessity !ut it was

a result of a compelling #ision to emerge as the most efficient

sugar processor and the largest mar,eter of sugar and ethanol in

India to consolidate large renewa!le !usiness and to dri#e an

inspiring !usiness model$

%he company was founded !y 'r.Naren"ra 'ur6u74$and his

mother 'r+.V$"%a 'ur6u74$ in 18 not )ust dreamers !ut

doers in their own right$

%he com!ination of dreamers and doers produced enriching

results o#er the last decade$ %he company has emerged among the



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most eciting proies of a con#entional Indian industry$ %he

company has !een one of the largest and fastest growing sugar

companies in India and now has eposed its glo!al footprint with

an entry in Arail through acDuisitions$

%he company is currently the 5 th largest sugar producers in the

world leading manufacturer of sugar in India"the world@s largest

sugar mar,et and one of the largest refiners glo!ally$

It operates sugar mills in India with a total crushing capacity of

45000 tons crushed per day and two large port !ased sugar

refineries with capacity 1$ million tons per annum$

It has significant presence in South Arail the most cost"efficient

and scala!le production area with a total cane crushing capacity of

13million tons at its 3 mills$

Shree ;enu,a Sugars >td has its corporate office in 'um!ai

FIndiaG and headDuarters in Aelgaum in the state of +arnata,a

FIndiaG$

Ke% (u+$ne++E

Shree ;enu,a Sugars >td has integrated cane crushing capacities in

India responsi!le for the production of"

Sugar

:thanol and

Power$



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S5ree Renu6a Sugar+ L#" *SRSL (u+$ne++ Seg7en#+ :

Shree ;enu,a Sugars >td !usiness operations can !e segregated into four

segments as !elowE

Sugar =i#ision

=istillery =i#ision

&o"generation =i#ision and

:ngineering$

S5ree Renu6a Sugar+ L#" V$+$!n :

B%o !ecome the most efficient processor of sugar and the largest

mar,eter of sugar and ethanol in India$ %o !ecome one of the largest

producers of sugar Fcane and refinedG renewa!le energy and !io"fuel

FethanolG in IndiaC$



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ORGANISATIONAL CHART



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S#reng#5+ !8 S5ree Renu6a Sugar+ L#":

E9#en+$e In#egra#$!nE

Shree ;enu,a Sugars is etensi#ely integrated etracting the

maimum #alue out of sugarcane through the processing of cane

molasses and !agasse to produce sugar power and ethanol$ In 200"

08 re#enues of the &ompany@s non"sugar !usiness increased from

15 in 2006"0 to28 in 200"08 and its proportion in the !ottom"line enhanced from 28 to during the period

S#r!ng g&!4a& ,re+ence :

%he &ompany is the second largest eporter of sugar from India with

a presence in the 'iddle :ast South :ast .sia and :ast .frica

among others$ %his eport re#enue pro#ides the &ompany with an

enhanced trade flow larger than its production acting as a

consolidator and ena!ling it to capitalise on glo!al price as well as

purchasing trends$

Pre8erre" +u,,&$er +#a#u+ :

%he &ompany is a sugar ?supplier of choice@ across !rand"enhancing

'ultinational companies that produce car!onated soft drin,s fruit

)uices chocolates !a!y foods and dairy products$ Its clients include

reputed names li,e &oca &ola Pepsi I%& Aritannia /estle and

&ad!ury among others.



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Succe++8u& ac;u$+$#$!n+ :

%he &ompany scaled capacity !y acDuiring co"operati#e mills and

leased production assets reducing direct and opportunity costs$ It

acDuired a standalone ethanol plant of 100 +> epanded to 400 +> to

cater to the ethanol reDuirements of oil mar,eting companies F


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%he &ompany en)oys one of the industry@s highest capacity utilisation

and asset turno#er ratios on the !ac, of a longer operating season

higher sugar content a#aila!ility in cane and dual raw material

capa!ility$ It produces 20 tons of sugar per %&= capacity as against

the top four sugar companies !y mar,et capitalisation Fecluding

S;S>G which produce 10 tons of sugar per %&= capacity$

Tec5n$ca& e9,er#$+e :

%he &ompany has tied up with %ate - >yle Industries P>& of *+ a

(AP 3$0" !illion organisation and one of :urope@s largest sugar

refiners Ffor the &ompany@s refinery !usinessG$ %he international

partner pro#ides a ro!ust technical epertise in refining$

In+#$#u#$!na& 8!cu+ :

%he &ompany directly mar,ets sugar to institutional !uyers a

paradigm shift from the tradition of selling to wholesale agents and

dealers$ %his has translated into a relati#ely large mar,et share an

effecti#e hedge against price"dri#en ris,s$ %his has also rationalised

wor,ing capital outlay and has reduced the &ompany@s

dependence on sugar !ro,ers$

L!ca#$!na& a"an#age+ :

%he &ompany en)oys a num!er of ad#antages on account of its South



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Indian location$ It en)oys a longer crushing season Fo#er 200 days

starting from


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Possesses India@s largest sugar refining capacityF6000%P=G

.ccounts for o#er 20 of India@s international sugar trade$

India@s leading fuel ethanol producer$

De8$n$#$e nu74er+ a+ ,er Annua& Re,!r# />>?">@:

SRSLCO'PANY

SRSL SUGBUSINES

Marketcapitalizatio

Canecrushing

+oreign

ol-ing

3!.54

Cane

crushing

/units

In$#$a#$e+:

Pioneered the concept of leased sugar manufacturing assets in

India$

Popularised the concept of sugar refining as an independent

!usiness #erticalE strengthened sugar refining technology$



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:merged as the first Indian sugar company to esta!lish a

manufacturing footprint outside India$

:ponentially increased the ethanol manufacturing capacity$

G&!4a&&%-8!cu+e" Ca,ac$#%:

Shree ;enu,a Sugars was the only Indian company intent on

concurrently !uilding sugar refining capacities to cater to the glo!al

mar,et$

In#ested in ad#anced sugar refining technology to meet eacting

:* Duality parameters$

&reated India@s largest cumulati#e refining capacity F6000 %P=G

that is primarily port"!ased$

:ngaged in the commissioning of India@s largest refinery F4000

%P=G in (u)aratE epected to !e commercial in 2010"11$

G&!4a& P!+$#$!n$ng:

Shree ;enu,a Sugars !ecame India@s first company to acDuire a foreign

sugar company$ %he company acDuired a sugar company in Arail the

largest glo!al sugar producing and eporting nation in return for the

following !enefitsE

Securing ma)ority of its annual raw sugar feedstoc, reDuirement

of 2 mn tonsF2010"11 onwardsG$



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Jalue"addition and profita!ility of its Indian refinery operations$

. first"hand insight into glo!al trends and opportunities in the

sugar and ethanol segments$

G&!4a&$+e" '$n"+e#:

&reated a !usiness model deris,ed through a presence in sugar

Ffrom caneG refining ethanol and co"generated power with

technology that generates re#enue e#en in the a!sence of cane$

Stretched the #alue chain a step in !oth directions"cane culti#ation

on 18000 hectares through its Arailian acDuisition at one end and

Duality refined sulphurless sugar at the other$

:sta!lished a trading hu! in =u!ai to capitalie on trade

opportunities in the .sian region$

>e#eraged its rich ,nowledge to generate engineering and pro)ect

management re#enues through its sta,e in +A+ &hem

:ngineering P#t$ >td around 45 re#enue from glo!al

assignmentsK ;s$2500 mn order !oo, as on Septem!er 40200$

Oer$e= !8 In"$an O,era#$!n+ :

1G %he cane crushing units of Shree ;enu,a Sugars >td are located

in the States of +arnata,a and 'aharashtra in India$

2G *nits in +arnata,a 'unoli .thani a#alga (o,a, ;ai!ag$

4G *nits in 'ahahrashtraE .rag ;atnapra!ha Panchagana$



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3G ;ai!ag and .rag are operated on lease Panchagana is operated on

A has 2 refining capacities on the east coast at aldia in West

Aengal and on the west coast at +andla in (u)arat$

6G %he acDuisition of a ma)ority sta,e in +A+ &hem":ngineering P#t

>td facilities turn,ey distillery ethanol and !io"fuel plant

solutions$

7) %he company has also acDuired a 100+>P= distillery from

=hanu,a Petrochem F+hopoli 'aharashtraG that con#erts rectified

spirit into ethanol and increase its capacities to 400+>P=$

Oer$e= !8 (ra has acDuired two companies in ArailE

Jale do I#ai is wholly owned su!sidiary of S;S>

S;S> owns 50$43 of ;enu,a do Arail SL. Fformerly

:Duipa# .cucar e .lcoolG

&om!ined crushing capacity of 14$6 million tonsFunder

epansion to 15$5mn mtG

1) %otal inward in#est in Arail so far is *S= 450mn$

2) Shree ;enu,a is the second largest !uyer of raw sugar world"wide

since 200 and !uys 100 of its reDuirements from Arail$



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S%nerg% !8 (ra


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S;S> launched ?'adhur@ a sugar !rand

for the retail mar,ets in /o#em!er 200$ Within 4 years of its

launch 'adhur has emerged as the fastest growing !rand in its

category F&.(; 36G$

2. P!=erE

S;S> produces power from !agasse

Fsugar !y"productG for capti#e consumption and sale to the stategrid$ Aesides this !agasse !ased cogeneration plant is eligi!le for

car!on credit compensation under the +yoto product$ S;S>@s

cogeneration capacity increases to 134 'W with eporta!le

surplus of 0 'W in the SY 2008"0$



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3. E#5an!& :

.lcohol is produced from molasses a

!rown"coloured residue left after sugar etraction from cane )uice$

%he alcohol can !e purified to produce fuel grade ethanol that can

!e !lended with petrol$ In SY 2008"0 S;S>@s distillery capacity

touched 40 +>P= F640 +>P= from molasses to ethanol and 400

+>P= from rectified spirit to ethanolG$

4. ($!-8er#$&$+er+ :

%he residue products from distillery operations !lended with

chemicals are sold as !io"fertilisers$



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SRSL+ C!7,e#$#$e A"an#age+:

Ca,ac$#% gr!=#5: %he company multi"folded its capacity growing

organically and inorganicallyE sugar producing capacity increased from

5000 %&= to 45000 %&=K sugar refining capacity grew to 6000 %P=K

ethanol producing capacity surged from 60 +>P= to 00 +>P=K capti#e

power generation increased from 20 'W to 14 'W$ %he &ompany

in#ested ;s$15010 mn in asset creation o#er the fi#e years leading to

2008"0$

In#egra#e" ,&a%er: %he &ompany is completely integrated across the

sugar #alue chain from cane culti#ation to sugar Ffrom caneG sugar

refining ethanol and power$ 'ore than ;s$ 4224 mn re#enues accrued



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from co"product !usinesses accounting for 13 of the &ompany@s

re#enues$

F$nanc$a& +#reng#5: S;S>@s superior performance is #indicated !y its

financialsE de!t"eDuity ratio stood at 0$62 strengthening its a!ility to

!orrow and sustain growthK cash profit was a healthy ;s$ 211 mn in

2008"0 operating margin stood at 16$4 interest co#er was a strong

3$48 reflecting the company@s comforta!le de!t"ser#icing a!ility$

In!rgan$c Succe++: %he &ompany acDuired ;atnapra!ha Sugars >imited

and (o,a, Sugars >imited leased four units and operated each

profita!ility thereafter$ It acDuired a standalone 100 +> distillery$ In

2008"0 the &ompany acDuired a 100 sta,e in J=I a Arailian sugar

and ethanol player$

N!n-c%c&$ca& 4u+$ne++ 7!"e& : %he &ompany@s multi feed stoc,

capa!ility for its sugar and power !usiness facilitates asset utiliation

!eyond the sugar season and a continuous cash flow for the organiation$

%he &ompany refined 664042 tons of raw sugar and sold 242 mn units

of power in 2008"0$

E9ce&&ence a# S5ree Renu6a Sugar+ L#" :

1. O,era#$!n+ :In a !usiness with di#erse manufacturing opportunities there is a

premium on product process and capacity selection leading to

competiti#eness$ Shree ;enu,a Sugars consciously selected to

integrate sugar manufacture with downstream possi!ilities in its

factories across 'aharashtra and +arnata,a$ It in#ested in



35/103


integration within a year of inception emphasising its

understanding of multi"product profita!ility$ %he &ompany

processes co"products to generate ethanol power and !io"

fertilisers$


36/103


It acDuired a 53 sta,e in +A+ :ngineering an ethanol

technology company$ %he sta,e will !e increased to 6 in

.ugust 200$

It in#ested ;s$ 60 million in =hanu,a Petroleum F100

+>P=G which specialises in direct fuel ethanol production

from rectified spirit$

Ou#&!!6:It redesigned its ethanol plants to flei!ly produce ethanol from

molasses andLor sugarcane )uice depending on the relati#e prices of

sugar and ethanol$ It is epected to increase its current capacity

from 600 +>P= to 00 +>P= in SY 08"0$

c C!-genera#$!n:In a power"intensi#e !usiness li,e sugar manufacture the sa#ing grace is

the &ompany@s a!ility to generate power from sugar !y"product !agasse$

%he &ompany en)oys a 12 'W co"generation capacity lea#ing an

adeDuate eporta!le surplus of 0 'W$ %he !agasse"!ased co"generation

units Dualify as a clean de#elopment mechanism pro)ect helping the

&ompany earn car!on credits$

H$g5&$g5#+ />>B->?:%he eport of power increased !y 402 from 48 million units

in 2006"0 to 154 million units in 20008$

Ou#&!!6:

.n additional 30$5 'W will !e made operational during

2008"0$

1. Cane 'anage7en# :



37/103


In a !usiness where the growing space is finite and the options

#aried the &ompany is reDuired to consistently demonstrate cane

#ia!ility at all times$

%o incenti#ise sugarcane planting and protect the sugarcane

acreage in its command areas the &ompany remunerates farmers

higher than the S'P$ %he &ompany is fa#oura!ly locatedK its

manufacturing units are located in southwest India a region that

en)oys a high cane reco#eryK !esides the state en)oys a crushing

season of si"se#en months against four"fi#e months in other sugar

producing regions$ %he conseDuent #ia!ility in growing cane

translates into enhanced a#aila!ility for the &ompany leading to

related economies of scale and conseDuent growth$ Aesides !oth

states of the &ompany@s presence do not ha#e State .dministered

Prices FS.PG of cane$ %he &ompany underta,es #arious cane

de#elopment initiati#es and pro#ides crop loans to augment cane

production in its #arious command areas$ It also pro#ides

numerous other agroinputs and fertiliser su!sidies to encourage

sugarcane production$ =edicated cane procurement teams manage

cane procurement$ %he &ompany purchases sugarcane directly

from farmers eliminating intermediaries$ Its har#esting

programme is !ased on crop age #ariety and maturity for desired

cane Duantity and Duality leading to streamlined procurement$

&ane managers issue cutting orders or har#esting permits !ased on

date"wise cum pre"har#esting maturity sur#eys$

H$g5&$g5#+ />>B->?:%he &ompany@s cane crushing increased 1 from202200 tons

in 2006"0 to 3624550 tons in 200" 08$



38/103


2. Far7er Re&a#$!n+5$,+ :

In a !usiness where the raw material supplier en)oys the flei!ility

to mar,et produce to another !uyer or shift focus to alternati#e

crops there is a premium on the need to graduate a transaction to a

relationship of mutual sustaina!le !enefit$

%he !uilding !loc, of growth at Shree ;enu,a Sugars is trusted

farmer relationships$


39/103


=e#elopment of small irrigation sources on a collecti#e !asis to

widen acreage under culti#ation$

&lose wor,ing with commercial !an,s and go#ernment

agencies to pro#ide soft loans to sugarcane growers$

%he &ompany also formed a trust Shree ;enu,a Sugars

=e#elopment 7oundation to promote sustaina!le education

healthcare and holistic well!eing of farmers and the local community$

1. 'ar6e#$ng :In a !usiness where the &ompany mar,ets di#erse products across

different customer segments there is a need to identify the nature

of the customer with the o!)ecti#e to enhance organisational

#alue$

Shree ;enu,a Sugars mar,ets around 25 of its sugar to

institutional !uyers 5 to retail stores and the rest to domestic and

international customers through spot trading$

%he &ompany accounts for 20 of the country@s ethanol mar,et$ It

entered into a three"year agreement with ma)or oil mar,eting

companies to supply 21 million litres at an agreed price of ;s$

21$50 per litre$

H$g5&$g5#+ />>B->?:

:thanol supply to customers in four states F+arnata,a .ndhra

Pradesh (oa and +eralaG$

Pac,aged sugar mar,eting through retail !rands li,e Aig Aaaar

and 'etro$



40/103


Ou#&!!6: %he &ompany intends to enhance its mar,et share of the

fuel ethanol mar,et$ . proprietary !rand of refined sugar will !e

launched for the retail mar,et$

1. UALITY :In a !usiness where the raw material is drawn from di#erse points

it is imperati#e to produce an end product of consistently high

Duality at all times$

Shree ;enu,a Sugars has in#ested consistently and

comprehensi#ely in Duality management$ %he &ompany complies

with stringent Duality guidelines demanded !y clients$ Aesides its

plants processes and practices are periodically inspected for

Duality standards$ %he &ompany has standardised operatingprocedures across its owned and leased units leading to a high

le#el of operational consistency$

H$g5&$g5#+ />>B->?:

%he &ompany applied for .&&P certification$ It@s reduced the

sugar re)ection rate to !elow 0$5 of the aggregate sugar sold$

Ou#&!!6:

(oing ahead the &ompany see,s to enhance Duality standards$



41/103


C!r,!ra#e S!c$a& Re+,!n+$4$&$#%:

Shree ;enu,a Sugars !elie#es in superior performance lin,ed to a spirit

of prosperity"sharing with sta,eholders underlining its approach to

corporate social responsi!ility$ %o institutionalise this approach the

&ompany created Shree ;enu,a Sugars =e#elopment 7oundation a trust

wor,ing in the field of education healthcare and hygiene$ %o ser#e the

!roader interests of its employees and their families the &ompany

created a trust called Shree ;enu,a Sugars :mployee Welfare %rust to

ser#ice education health recreation financial and social reDuirements$

%hese trusts en)oy their respecti#e corpus enhancing accounta!ility$

&ollecti#ely these trusts own 3$81 of the &ompany@s eDuity generating

a precious di#idend income for onward deployment$

E"uca#$!n: %he &ompany created schools for the children of cane

har#esters who tra#el a long distance during the cane har#esting

period$ %hese elementary schools FSakhar ShalaG are functional

near most of our units$ %he 7oundation also runs primary schools

with an emphasis on good teaching staff and facilities for Duality

education$ Scholarships were pro#ided to deser#ing students

especially the girl child$

Heacare:Primary healthcare facilities were made a#aila!le at

all plant locations supported !y Dualified doctors and state"of"the"

art eDuipment$ . focus on first"aid and timely ailment diagnosis

facilitated effecti#e medical support$ . speciality multi"!ed

hospital is !eing planned for the Aurlatti #illage in .thani %alu,



42/103


FAelgaum districtG to cater to the rural population$ ealth chec,"up

camps were organised Duarterly attended !y employees and local

resident$

H%g$ene an" en$r!n7en#:Safe drin,ing water was pro#ided free

to employees$ :n#ironment protection was prioritised$ %he local

forest department wor,ed with the &ompany to create green !elts

in the plant #icinity$ Jillage camps were conducted for children

and adults to enhance the awareness of hygiene and en#ironment

protection$ . large land area was dedicated to the production of

!io"fertilisers of the distillery effluent ensuring 100 !io"

degradation and waste recycling contri!uting to the green

re#olution$ %he &ompany donated !udgeted funds to #arious

educational art and cultural institutes as well as to rele#ant

initiati#es around the factory area$



43/103


'ILESTONES:

18 .cDuistions of the assets of /iam Sugars >td$

1 &ommencement of production at 'unoli$

2000 &ommencement of 11$2 'W cogeneration plant at 'unoli$

2001 Start of 60 +>P= distillery at 'unoli$

2002 :sta!lishments of 250 %P= sugar refinery at 'unoli$

2004 >easing of first co"operati#e mill$

2003 S;S> IP< launched$

2005 .cDuisition of (reenfield pro)ect at .thaniF+arnata,aG

2006 .cDuisition of sugar mill in Sindh,heda and relocated to a#alga

F+arnata,aG$

200 .cDuisition of +A+ &hem :ngineering P#t >td$

2008 &ommissioning of 2000 %P= port"!ased refinery at aldia

200 &ommissioning of a cogeneration plant in Panchganga cooperati#e

sugar mill$

2010 .cDuisition of 100 sta,e in :Duipa# .cucar .lcool SL. F/ow

renamed as ;enu,a do Arail SL.G



44/103


CHAPTER-

DATA ANALYSIS AND INTERPRETATION

LIUIDITY RATIO:

>iDuidity ratio measures the a!ility of firm to meet current o!ligations$ In

fact analysis liDuidity needs the presentation of cash !udget and fund

flow statement !ut liDuidity ratios !y esta!lishing relation !etween cash

and other current assets to current o!ligations pro#ide a Duic, measure

of liDuidity$ . firm should ensure that it does not ha#e ecess of

liDuidity$ %his failure of company to meet its o!ligations due to lac, of

sufficient of liDuidity will results in credit worthiness loss of creditor@s

confidence or e#en legal tangles results in the closure of company$ %he

firm@s fund will !e unnecessarily tied up in current assets$ %herefore it is

necessary to stri,e a proper highly liDuidity and lac, of liDuidity$

I'PORTANT LIUIDITY RATIOS:

1$ &*;;:/% ;.%IIM*I= ;.%IIM*I= ;.%IiDuid ;atio tending to 0$6 !ut in 200 there is increase in >iDuid ;atio

upto 0$3 times

3. A4+!&u#e L$;u$" Ra#$! :

%his ratio is also ,nown as super Duic, ratio$ %his ratio considers

only the .!solute >iDuidity a#aila!le with the firm$ %he cash the

!an, !alance and mar,eta!le securities are considered as highly

liDuid assets$ If the highly liDuid assets are too much in relation to

the current lia!ility than it may affect the profita!ility of the firm

as these assets are the most unproducti#e assets of all$

Ta4&e N!.0:

Ta4&e S5!=$ng A4+!&u#e L$;u$" Ra#$!

All amounts in million Indian Rupees


*Ca+5(an6S5!r# #er7 $ne+#7en#+

A4+!&u#e L$;u$"$#%N """"""""""""""""""""""""""""""""""""""""""""""""""""""

Ra#$! Curren# L$a4$&$#$e+


50/103


C5ar# N!.0:

Gra,5 S5!=$ng A4+!&u#e L$;u$" A++e#+ an" Curren# L$a4$&$#%

Gra,5 =$#5 %ear an" A4+!&u#e L$;u$" Ra#$!:


Year />> />> />>B />>? />>@A4+!&u#e

L$;u$" A++e#+

/B.>/ 1B1. 0>.B1 100.? /1>/.?0

Curren#

L$a4$&$#$e+

1B?1.?@ 1/0./ 1/1/.>@ /1B./? @[email protected]

A4+!&u#e

L$;u$" Ra#$!

>.0 >.10 >./ >.> >.//


51/103


Ana&%+$+:

7rom the a!o#e ta!le one can #isualie that none of the years ha#e

.!solute >iDuid ;atio to meet the reDuired Standard ;atio 1E2

In#er,re#a#$!n:

Ay seeing the graph a!o#e one can interpret the .!solute >iDuidity ;atio

of the organiation which is not satisfactory in any of the years$

4. Inen#!r% #! W!r6$ng Ca,$#a& Ra#$! :

In order to ascertain that there is no o#er stoc,ing the ratio of

in#entory to wor,ing capital is calculated$

It is calculated !yE

Ta4&e N!.:

Ta4&e S5!=$ng Inen#!r% #! W!r6$ng Ca,$#a& Ra#$!:

.



Inen#!r%

Inen#!r% #! W!r6$ng Ca,$#a& N """""""""""""""""""""""""

W!r6$ng Ca,$#a&


52/103


C5ar# N!.:

Gra,5 S5!=$ng Inen#!r% an" W!r6$ng Ca,$#a&


Year />> />> />>B />>? />>@

Inen#!r% 1124$36 1121$84 1001$6 186$08 10024$21

W!r6$ng

Ca,$#a&

2$2 640$2 806$38 116$12 660$41

Inen#!r%

#! WC

3$01 1$8 1$23 1$60 1$408


53/103


54/103


mi of funds pro#ided to owners and lenders$ .s a rule this ratio should

!e an appropriate mi of department and owners eDuity in financing

company@s assets$

'!+# C!77!n&% u+e" Leerage Ra#$!+ are:

1. Sol#ency ;atio

2$ Proprietary ;atio

4$ 7ied .ssets to /et Worth ;atio

3$ &urrent .ssets to /et Worth ;atio

5$ &urrent >ia!ility to /et Worth ;atio

6$ %otal >ia!ility to %otal .ssets

1. S!&enc% Ra#$!:

Sol#ency ratio is the ratio !etween the total assets and total

lia!ility of the concern$ It means the a!ility of the concern to meet

its total lia!ility of its concern$ %hough no ideal sol#ency ratio of a

concern has !een esta!lished one can say higher the sol#ency ratio

of a concern the financial position and lower the sol#ency ratio

the wea,er is it financial position$


T!#a& A++e#+

S!&enc% ra#$! N """"""""""""""""""""""""

T!#a& L$a4$&$#%


55/103


Ta4&e N!.:

Ta4&e +5!=$ng S!&enc% Ra#$!


C5ar# N!. :

Gra,5 S5!=$ng S!&enc% Ra#$!:

Ana&%+$+:

7rom the a!o#e ta!le sol#ency ratio of 200 and 2008 !earing 0$6 and

0$64 is considered to !e good when compared to other years$

In#er,re#a#$!n:

%he sol#ency ratio indicates the a!ility of the concern to meet its lia!ility

out of its %otal .ssets$ In last fi#e years sol#ency ratio of the concern is


Year />> />> />>B />>? />>@T!#a&

A++e#+

135$2 258$32 64$43 1002$5 228$38

T!#a&L$a4$&$#%

4424$61 22$83 11231$33 180$43 454$53

S!&enc%

Ra#$!

0$34 0$45 0$60 0$542 0$64


56/103


fa#oura!le$ %he sol#ency ratio of 200 and 200 is 0$6 and 0$64 which

is said to !e good for a concern$

2. Pr!,r$e#ar% Ra#$! :

%he proprietary ratio is an inde of the amount of proprietary fund

in#ested in %otal .ssets of a concern$ It is also indicates the

proportion !etween owned capital and loaned capital$ In addition

it indicates the relati#e ris, of the owners and the creditors of the

company$

igher the proprietary ratio the stronger is the financial position of

the concern and lower the proprietary ratio the wea,er is the

financial position of an enterprise$ . ratio of 5E1 is considered

ideal$

Ta4&e N!.:

Ta4&e S5!=$ng Pr!,r$e#ar% Ra#$!


Year />> />> />>B />>? />>@Ne# W!r#5 64$18 2223$34 445$33 64$32 12631$4T!#a& A++e#+ 135$2 258$32 64$43 1002$5 228$38Pr!,r$e#ar%

Ra#$!

0$34 0$85 0$34 0$64 0$53

Ne# W!r#5

Pr!,r$e#ar% Ra#$! """"""""""""""""""""

T!#a& A++e#+


57/103



C5ar# N!. :

Gra,5 S5!=$ng Pr!,r$e#ar% Ra#$!

Ana&%+$+:

7rom the a!o#e ta!le we can #isualie that the year 2006 has maintained

higher proprietary ratio of 0$85times compared to other years$

In#er,re#a#$!n:

7rom the a!o#e graph we can conclude that the company has maintained

higher Proprietary ;atio in the year 2006 that is 0$85times compared toother 3years$ .nd it is said that higher the Proprietary ;atio stronger is

the financial position of the company$

3. F$9e" A++e#+ #! Ne# W!r#5 Ra#$! :

%he 7ied .ssets to /et Worth ;atio indicates that the proportion

of fied assets financed !y the owners or proprietors$ In other

words it indicates as to etent the owners ha#e in#ested funds on

the fied assets which constitute the main structure of the

!usiness$ %he ideal fied assets to net worth ratio for an industrial

underta,ing is 6 that is the fied assets should not !e constitute

more than 6 of the proprietor@s fund$



58/103


Ta4&e N!.B:

Ta4&e S5!=$ng F$9e" A++e#+ #! Ne# W!r#5 Ra#$!


C5ar# N!.B:

Gra,5 S5!=$ng F$9e" A++e#+ #! Ne# W!r#5 Ra#$!

Ana&%+$+:


Year />> />> />>B />>? />>@

F$9e" A++e#+ 1053$4 114$52 5624$04 611$56 12568$56

Ne# W!r#5 64$18 2223$34 445$33 64$32 12631$4

F$9e" A++e#+

#! Ne# W!r#5

Ra#$!

1$65 0$546 1$63 1$08 0$33

F$9e" A++e#+

F$9e" A++e#+ #! Ne# W!r#5 Ra#$! N """"""""""""""""""""""

Ne# W!r#5


59/103


60/103


C5a r # N!.? :

Gra,5 S5!=$ng Curren# A++e#+ #! Ne# W!r#5 Ra#$!

Ana&%+$+:

7rom the a!o#e ta!le we can conclude the proportion of &urrent .ssets

to /et Worth in years 2005 and 200 is satisfactory when compared to

other years$

In#er,re#a#$!n:igher the current assets to net worth ratio higher will !e financial

strength of the concern$ .s per a!o#e graph 2005 has maintained

4$24times of &urrent .ssets to /et Worth ratio and 200 has maintained

1$45times of &urrent .ssets to /et Worth ratio$


Year />> />> />>B />>? />>@Curren#

A++e#+

2061$81 1865$3 2018$5 4432$3 10$6

Ne# W!r#5 64$18 2223$34 445$33 64$32 12631$4Curren#

A++e#+ #!

Ne# W!r#5

4$24 0$84 0$60 0$52 1$45


61/103


5. Curren# L$a4$&$#% #! Ne# W!r#5 Ra#$! :

%he ratio indicates the relati#e contri!ution of the short term

creditors and owners in the capital of an enterprise$ %he desira!le

le#el set for this ratio is 44$44$ If the actual ratio were #ery high it

would mean that the lia!ility !ase of the concern would not

pro#ided an adeDuate co#er for the long term creditors$ %hat means

it would not !e difficult for the concern to long term fund$

Ta4&e n!.@:

Ta4&e S5!=$ng Curren# L$a4$&$#% #! Ne# W!r#5 Ra#$!


C5ar# N!.@:


Year />> />> />>B />>? />>@

Curren#

L$a4$&$#%

181$8 1245$25 1212$0 215$28 34$46

Ne# W!r#5 64$18 2223$34 445$33 64$32 12631$4

Curren#

L$a4$&$#% #!

Ne# W!r#5

2$ 0$55 0$46 0$44 0$3

Curren# L$a4$&$#%

Curren# L$a4$&$#% #! Ne# W!r#5 """""""""""""""""""""""""""

Ne# W!r#5


62/103


Gra,5 S5!=$ng Curren# L$a4$&$#% #! Ne# W!r#5 Ra#$!

Ana&%+$+:

%he a!o#e ta!le indicates &urrent >ia!ility to /et Worth ratio which is

decreasing from year to year$ We can see a gradual raise in 200 with

0$55times$

In#er,re#a#$!n:

%he a!o#e graph indicates the proportion of &urrent >ia!ility to /et

Worth in which the ratio of 2005 to 200 are 2$ 0$55 0$46 0$44and

0$3 out of which 2005@s &urrent >ia!ility to /et Worth is more

compared to other 3years$

6. T!#a& L$a4$&$#% #! T!#a& A++e#+ Ra#$! :

ia!ility on the ground that they

are important determinants of company@s financial ris, since they

represent o!ligations and pressure on company and restrict its

acti#ities$ %hus to assess the proportion of total funds short term

and long term pro#ided !y outsiders to finance total assets$

Ta4&e N!.1>:

Ta4&e S5!=$ng T!#a& L$a4$&$#$e+ #! T!#a& A++e#+ Ra#$!


T!#a& L$a4$&$#%

T!#a& L$a4$&$#% #! T!#a& A++e#+ """""""""""""""""""""""" T!#a& A++e#+


63/103


All amounts in million Indian

Rupees.

C5ar# N!. 1>:

Gra,5 S5!=$ng T!#a& L$a4$&$#% #! T!#a& A++e#+

Ana&%+$+:

7rom the a!o#e ta!le we can conclude that the proportion of %otal

>ia!ility and %otal .ssets in 2006 is more when compared to other years

of proportion$


Year />> />> />>B />>? />>@

T!#a&

L$a4$&$#$e+

4424$61 22$83 11231$33 180$43 454$53

T!#a&A++e#+

135$2 258$32 64$43 1002$5 228$38

TL #! TA 2$2 2$81 1$33 1$8 1$562


64/103


In#er,re#a#$!n:

%he ratio indicates the proportions of total funds short and long term

pro#ided !y outsiders to finance %otal .ssets$ %he ratio calculated a!o#e

indicates that the year 2006 has higher rate of proportion 2$8 times

compared to other years$

ACTIVITY RATIOS:

7unds of the creditors and owners are in#ested in #arious assets to

generate sales and profit$ %hese ratios are employed to e#aluate the

efficiency with the company manager and utilie its assets$ %hese ratios

are also called as %urno#er ratios they indicate the speeds with assets are

!eing con#erted or %urno#er into Sales$ .cti#ity ratio thus in#ol#e

relationship !etween sales to assets$ . proper !alance !etween sales and

assets generally reflects that assets are managed well$ Se#eral .cti#ity

;atios are calculated to )udge effecti#eness of assets utilisation$

S!7e !8 #5e Ac#$$#% Ra#$!+ are:

1$ &ash %urno#er ratio

2$ In#entory %urno#er ratio

4$ Wor,ing &apital %urno#er ;atio

3$ =e!tors %urno#er ;atio

5. &urrent .ssets %urno#er ;atio

6$ 7ied .ssets %urno#er ;atio

$ %otal .ssets %urno#er ;atio

8$ 7ied .ssets to /et Worth

$ /et Sales to /et Worth



65/103


1. Ca+5 Turn!er Ra#$! :

&ash %urno#er ratio or cash #elocity is the ratio !etween cash and

turno#er or sales$ %his ratio indicates the etent of which cash

resources are utilied !y the enterpriseK it is also helpful in

determining the liDuidity of a company$ %he ideal &ash %urno#er

ratio is 10E1 as suchK &ash %urno#er ratio of 10E1 or more indicates

the utilsation of cash resources of the enterprise$ In addition less

than 10E1 indicates that the cash resources of the enterprise are not

effecti#ely utilied$

Ta4&e N!.11:

Ta4&e S5!=$ng Ca+5 Turn!er Ra#$!


Year />> />> />>B />>? />>@

Ne# Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

Ca+5 62$02 11$66 406$1 144$86 2102$84

Ca+5

Turn!er

Ra#$!

10$15 36$6 24$8 146$2 10$62

Ne# Sa&e+

Ca+5 Turn!er Ra#$! N """""""""""""""""

Ca+5


66/103


All amounts in million Indian Rupees.

C5ar# N!. 11:

Gra,5 S5!=$ng Ca+5 Turn!er ra#$!

Ana&%+$+:

%he a!o#e ta!le indicates &ash %urno#er ;atioK the year 2008 has

satisfactory &ash %urno#er ;atio compared to others$

In#er,re#a#$!n:

%he ideal &ash %urno#er ;atio is 10E1 in the a!o#e graph we can see all

the years of &ash %urno#er ;atio has maintained more than the standard

ratio 10E1 which is a good sign for a firm$

2. Inen#!r% Turn!er Ra#$! :

. considera!le amount of a company@s capital may !e tied up in

the financing of raw materials wor,"in"progress and finished

goods$ It is important to ensure that the le#el of Stoc,s is ,ept as

low as possi!le consistent with the need to fulfill customer@s order

in time$ If the in#entory turno#er ratio has decreased from past it

means that either in#entory is growing or sales are dropping$ In



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addition to that if a firm has a turno#er that is slower than for its

industry then there may !e o!solete goods on hand$


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7rom the a!o#e ta!le we can #isualie that in the year 2006 !earing

In#entory %urno#er ;atio of 2$04 times has maintained the highest

turno#er ratio compared to other years$

In#er,re#a#$!n:

7rom the a!o#e &hart we can conclude in the year 2006 in#entory

turno#er ratio !eing 2$04 times whereas in the year 200 the in#entory

ratio is 0$15 times$

/oteE It is said that if In#entory %urno#er ;atio has decreased from past

it means that either In#entory is growing or sales is dropping$

3. W!r6$ng Ca,$#a& Turn!er Ra#$! :

%he wor,ing capital turno#er ratio is the ratio that epresses the

relationship !etween wor,ing capital and net sales$

Wor,ing &apital is the ecess of &urrent .ssets o#er &urrent

>ia!ility$ %his ratio indicates the efficient or inefficient utilisation

of Wor,ing &apital of an enterprise$ %here is no ideal or standard

wor,ing capital turno#er ratio$ %he wor,ing capital ratio is

generally epressed as a proportion and can !e calculated using the

following formula$

Ta4&e N!.10:

Ta4&e S5!=$ng W!r6$ng Ca,$#a& Turn!er Ra#$!


Ne# Sa&e+

W!r6$ng Ca,$#a& Turn!er N """"""""""""""""""""""""""""""""""""

Ra#$! *Aerage W!r6$ng Ca,$#a&


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C5ar# N!. 10:

Gra,5 S5!=$ng W!r6$ng Ca,$#a& Turn!er Ra#$!

Ana&%+$+:

7rom the a!o#e ta!le we can #isualie that in the year 200 has a least

Wor,ing &apital %urno#er ;atio of 0$20 times when compared to the

highest Wor,ing &apital %urno#er ;atio of 4$2 times in the year 2005$

In#er,re#a#$!n:

7rom the a!o#e graph it can !e concluded that in the year 200 the

wor,ing capital turno#er ratio is of 0$2 times whereas in the year 2005

has the highest Wor,ing &apital %urno#er ;atio of 4$2 times$ .nd in theyear 2006 200 and 2008 has respecti#e Wor,ing &apital %urno#er

;atio of 4 times 1$61 times and 1$82 times$


Year />> />> />>B />>? />>@

COGS 185$60 2160$81 158$18 8038$6 153$34

Ag. WC 355$08 18$46 86$8 3314$1 660$41

WCTR 4$2 4$00 1$610 1$82 0$20


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4. De4#!r+ Turn!er Ra#$! :

%he de!tor@s turno#er ratio is also ,nown as the accounts

recei#a!le turno#er ratio and it is the ratio that epresses the

relationship !etween a#erage de!tors and sales$

. de!tor refers to sundry de!tors plus !ills recei#a!le$ 7urther

de!tors mean gross de!tors i$e$ !efore deducting the !ad de!ts

and reser#es for dou!tful de!ts$

Sales mean net credit sales i$e$ credit sales minus sales returns$

%he accounts recei#a!le ratio indicates the rate at which the

amounts are collected from the de!tors$ It also indicates liDuidity

of the concern$ %he de!tor@s turno#er ratio is generally epressed

in rate$ It can !e calculated using the following formulaE

Ta4&e N!.1:

Ta4&e S5!=$ng De4#!r+ Turn!er Ra#$!


C5ar# N!.1:


Year />> />> />>B />>? />>@Cr Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1Ag.

De4#!r+

468$1 362$8 346$625 63$52 1032$65

DTR 1$44 1$41 16$ 24$86 21$32

Cre"$# Sa&e+

De4#!r+ Turn!er Ra#$! N """""""""""""""""""""""""

Aerage De4#!r+


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Gra,5 S5!=$ng De4#!r+ Turn!er Ra#$!

Ana&%+$+:

7rom the a!o#e ta!le we can see that in the year 2008 has the highest

=e!tors %urno#er ;atio !earing 24$86 times$

In#er,re#a#$!n+:

7rom the graph we can conclude that the company has maintained

satisfactory le#el !y maintaining the consistency ratios without much

increase or decrease in the ratios$

In the year 2008 and 200 has higher ratio of 24$86 times and 21$32 times

respecti#ely$ igher the ratio the !etter will !e the position of the firm$

5. Curren# A++e#+ Turn!er Ra#$! :

&urrent assets turno#er ratio indicates the company@s a!ility to

generate the sales of rupee from current assets$ %his ratio is the

relationship !etween the sales and current assets of the firm$ %here

is no standard current assets turno#er ratio$ Yet the inference is the

high current assets turno#er ratio indicates of !etter utilisation of

current assets$


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Ta4&e NO.1:

Ta4&e S5!=$ng Curren# A++e#+ Turn!er Ra#$!


C5ar# N!. 1:

Gra,5 S5!=$ng Curren# A++e#+ Turn!er Ra#$!

Ana&%+$+:

7rom the a!o#e ta!le we can conclude that there is proper utilisation of

current assets in the year 2006 and 2008 when compared to other years$

In#er,re#a#$!n:


Year />> />> />>B />>? />>@

Ne# Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

Curren#

A++e#+

2061$81 1865$3 2018$5 4432$3 10$6

CATR 4$10 3$2 4$62 5$35 1$40


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%he ratio shows how much the company a!le to generate the sales from

the amount of current assets$ In the year 2008 company generated the

sales of 5$35 which were more when compared with other year$ .nd in

200 the company generate 1$40 times of sales which is less compare to

other year$

6. F$9e" A++e#+ Turn!er Ra#$! :

%his ratio eplains the relationship !etween the costs of goods sold

and fied assets$ It eplains the efficiency with which fied assets

ha#e !een used in utilisation of fied assets and !etter profits$ %he

fied assets calculated after deduction of depreciation$ %he

standard fied assets turno#er ratio is 5 times$ %herefore a fied

turno#er ratio of 5 times more indicates !etter utilisation of fied

assets$

Ta4&e N!.1:

Ta4&e S5!=$ng F$9e" A++e#+ Turn!er Ra#$!


Ne# Sa&e+

F$9e" A++e#+ Turn!er Ra#$! N """"""""""""""""""""""

F$9e" A++e#+


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C5ar# N!.1:

Gra,5 S5!=$ng F$9e" A++e#+ Turn!er Ra#$!

Ana&%+$+:

7rom the a!o#e ta!le one can analyse that in the year 2005 and 2006 the

7ied .ssets %urno#er ratio is high which means the 7ied .ssets are

used well in the organiation$

In#er,re#a#$!n:7rom the a!o#e graph we can #isualise in the year 2005 and 2006 has

good 7ied .ssets %urno#er ;atio of 6$05 and 6$1 !ut following


Year />> />> />>B />>? />>@

Ne# Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

F$9e"

A++e#+

1053$4 114$52 5624$04 611$56 12568$56

FATR 6$05 6$1 1$40 2$64 1$


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conseDuent years of 200 2008 and 200 had least 7ied .sset %urno#er

;atio compared to 2005 and 2006$

7. T!#a& A++e# Turn!er Ra#$! :

%otal assets turno#er ratio refers to the company@s a!ility to

generating the sale from all financial sources committed to total

assets$ %he assets include net fied assets and current assets$ %he

greater the ratio of turno#er or con#ersion the more efficient is the

utilisation$ %he ideal of turno#er ratio is sales should !e least two

times the #alue of assets$

Ta4&e N!.1B:

Ta4&e S5!=$ng T!#a& A++e#+ Turn!er Ra#$!

.



Year />> />> />>B />>? />>@

Ne# Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

T!#a&A++e#+

135$2 258$32 64$43 1002$5 228$38

TATR 3$480 4$083 0$34 1$810 0$1

Ne# Sa&e+

T!#a& A++e#+ Turn!er Ra#$! N """""""""""""""""""

T!#a& A++e#+


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Ta4&e N!.1 ? :

Ta4&e S5!=$ng Ne# Sa&e+ #! Ne# W!r#5 Ra#$!


C5ar# N!.1?:

Gra,5 S5!=$ng Ne# Sa&e+ #! Ne# W!r#5 Ra#$!

Ana&%+$+:

7rom the a!o#e ta!le we can conclude the proportion of /et Sales to /et

Worth of each year is deducting from year to year$

In#er,re#a#$!n:


Year />> />> />>B />>? />>@

Ne# Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

Ne#

W!r#5

64$18 2223$34 445$33 64$32 12631$4

NS #!

NW

10$04 4$60 2$181 2$85 1$6


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/et Sales to /et Worth ratio indicates whether there is o#er capitaliastion

or under capitalisation$ It ser#es as a guide in the proper administration of

a company$

%he proportion of /et Sales to /et Worth ratio has !een declining from

10$04 to 4$60 4$60 to 2$18 in 2005 to 200 respecti#e years and also we

can see the decline in /et Sales to /et Worth ratio from 2$85 to 1$6 in

2008 to 200$

PROFITA(ILITY RATIO:

. &ompany should earn profit to sur#i#e and grow o#er a long period$

Profit is essential !ut it would wrong to assume that e#ery action ta,en

!y the management of a company should !e aimed at maimiation of

profit irrespecti#e of social conseDuences$ . profit is the difference

!etween the re#enue and epenses o#er a period of time Fusually one

yearG$ Profit is ultimate ?output@ of the company and it will ha#e no

future if it will fail to ma,e sufficient profit$ %herefore a financial

manager should continuously e#aluate the efficiency of the company$

Aeside the management of the company creditors and owners are also

interested in the profita!ility of the company$ &reditors want to get

repayment of principle regularly$


79/103


5$ Selling and =istri!ution ;atio

6$ :arning Per Share

$ ;eturn on In#estment

8$ ;eturn on Share olders 7und

$ ;eturn on %otal asset employed

10$;eturn on &apital :mployed

1. Gr!++ ,r!8$# ra#$! :

%he (ross profit margin reflects the efficiency with which the

management produces each unit of product$ %his ratio indicates the

a#erage spread !etween the costs of goods sold and the sales

re#enue$ When we su!tract the gross profit from 100 percent we

o!tain ratio of goods sold to sales$ Aoth these ratios show profit

related to sales after deduction of production costs and indicates

the relationship !etween production cost and selling prices$

Ta4&e N!.1@ :

Ta4&e S5!=$ng Gr!++ Pr!8$# Ra#$!


Gr!++ Pr!8$#

Gr!++ Pr!8$# Ra#$! """""""""""""""""" 1>>

Sa&e+


80/103



C5ar# N!.1@ :

Gra,5 S5!=$ng Gr!++ Pr!8$# Ra#$!

Ana&%+$+:

%he a!o#e ta!le is showing (ross Profit ;atio$ Year 2008 has least (ross

Profit ;atio$ .nd the year 200 has comparati#ely a good (ross Profit

;atio$

In#er,re#a#$!n:7rom the a!o#e graph one can conclude in the year 200 has good (ross

profit ratio compared to 2008 which has least (ross profit ratio whereas


Year />> />> />>B />>? />>@

Gr!++

Pr!8$#

3606$8 5855$03 543$51 1014$02 203$3

Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

GJP

Ra#$!

2$06 4$03 8$40 55$8 4$0


81/103


(ross profit ratio for the year 2005 2006 and 200 is in incrementing

proportion from 2$06 to 4$03 and from 4$03 to 8$40$

/. Ne# Pr!8$# Ra#$!:

/et profit is o!tained when :

Ta4&e S5!=$ng Ne# Pr!8$# Ra#$!



Year />> />> />>B />>? />>@

Ne#

Pr!8$#

443$64 555$80 533$44 2$86 1345$11

Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

NJP

Ra#$!

5$24 6$4 $34 5$08 6$32

Ne# Pr!8$#

Ne# Pr!8$# Ra#$! """""""""""""""" 1>>

Sa&e+


82/103


C5ar# N!. /> :

Gra,5 S5!=$ng Ne# Pr!8$# Ra#$!

Ana&%+$+:

7rom the a!o#e ta!le we can analyse that the year 200 has a good /et

profit$ %he year 2008 has relati#ely low net profit$

In#er,re#a#$!n:

We can see that the graph showing /et Profit has a freDuent raise in the

conseDuent years of 2005 2006 and 200 with raise in 5$24 to $34$

Aut had a least /et Profit in the year 2008$

0. O,era#$ng E9,en+e+ Ra#$!:

&ost of sales includes direct cost of goods sold as well as other

operating epenses which ha#e matching relationship with sale$ It

ecludes incomes and epenses which ha#e no !earing on

production and sales i$e$ non operating incomes and epenses asinterest and di#idend recei#ed on in#estments interest paid on long

term loans and de!entures profit or loss on of fied assets or long

term in#estment$ %he operating ratio indicates the efficiency of the

management in the conduct of the !usiness$



83/103


. low operating ratio is an indication of the operating efficiency of

the !usiness$


84/103



C5ar# N!. /1 :

Gra,5 S5!=$ng O,era#$ng E9,en+e+ Ra#$!


Year />> />> />>B />>? />>@

O,era#$ng

E9,en+e+

2022$33 23$4 2111$54 221$32 4085$3

Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

OER 41$64 41$18 28$84 50$555 14$81


85/103


Ana&%+$+:

7rom the a!o#e ta!le we can analyse that the year 200 has least

operating epenses ratio and the year 2008 has high operating epenses

compared to other years$

In#er,re#a#$!n:

It is said that higher the operating ratio lower will !e the /et Profit ratio$

%he year 200 had least operating epenses ratio of 14$81 which in turn

yield high net profit ratio of 6$32$

4. A"7$n$+#ra#$e e9,en+e+ Ra#$! :

It refers to all epenses which are incurred for the general

administration of the concern $:amples of administrati#e

epenses are office salaries office rent printing and stationary

postage and telegrams$

It is epressed as followsE

Ta4&e N!./ / :

Ta4&e S5!=$ng A"7$n$+#ra#$e E9,en+e+ Ra#$!


A"7$n$+#ra#$e e9,en+e+

A"7$n$+#ra#$e e9,en+e+ ra#$! N """"""""""""""""""""""""""""""""""" 1>>

Ne# Sa&e+


86/103



C5ar# N!./ / :

Gra,5 S5!=$ng A"7$n$+#ra#$e E9,en+e+ Ra#$!

Ana&%+$+:

%he a!o#e ta!le shows .dministrati#e epenses ratio$ %he year 2005 has

least administrati#e epenses ratio of 1$18$ .nd in the year 200 has

2$0

In#er,re#a#$!n:

We can interpret from the a!o#e graph the year 200 !earing

.dministrati#e epenses ratio of 2$0 has 424$6mn of sales o#er


Year />> />> />>B />>? />>@

A"7$n.

E9,.

5$6 144$34 212$2 48$50 465$

Sa&e+ 642$3 8015$85 424$6 18231$6 22432$1

AER 1$18 1$66 2$0 2$14 1$64


87/103


88/103


C5ar# N!./ 0 :

Gra,5 S5!=$ng Se&&$ng an" D$+#r$4u#$!n E9,en+e+ Ra#$!

Ana&%+$+:

7rom the a!o#e analytical ta!le we can o!ser#e there are high selling and

distri!ution epenses ratio in the year 2006 with 5$48 and least ratio in

the year 200 with 1$31$

In#er,re#a#$!n:

%he graph of the year 2005 has the selling and distri!ution ratio of 2$42

which has increased to 5$48 in 200$ Aut has a fall in 200 with

4$014 and again rise of 4$62 in 2008 and had a least ratio of 1$31

in 200$

6. Earn$ng Per S5are :

%he :PS is one of the important measures of economic

performance of a corporate entity$ %he flow of capital to the

companies under the present imperfect capital mar,et conditions

would !e made on the e#aluation of :PS$

. higher :PS means !etter capital producti#ity$ :PS is one of the

most important ratios which measures the net profit earned per



89/103


share$ :PS is one of the ma)or factors affecting the di#idend policy

of the firm and the mar,et prices of the company$ . steady growth

in :PS year after year indicates a good trac, of profita!ility$ :PS

is computed !y di#iding the net profit after ta and di#idend to

preference shareholders$

Ta4&e N!./ :

Ta4&e S5!=$ng Earn$ng Per S5are

C5ar# N!./ :

Gra,5 S5!=$ng Earn$ng Per S5are

Ana&%+$+:


Year />> />> />>B />>? />>@

Earn$ng

Per S5are

24$ 24$8 21$03 2$8 3$

Ne# Pr!8$# a8#er #a9

EPS N """""""""""""""""""""""""""""""

N!. !8 E;u$#% S5are+


90/103


7rom the a!o#e ta!le 2006 !ears 24$8 :PS compared to 2008@s

:PS had least :PS !earing 2$8

In#er,re#a#$!n:

. higher :PS means !etter &apital Producti#ity$ In the Year 2006

:PS recorded to !e 24$8 which showed !etter capital producti#ity

compared to other ratios whereas 2008 showed less capital

producti#ity with 2$8 as :PS$

7. Re#urn !n Ine+#7en# :

%he strategic aim of a !usiness enterprise is to earn a return on

capital$ If in any particular case the return in the long"run is not

satisfactory then the deficiency should !e corrected or the acti#ity

!e a!andoned for a more fa#oura!le one$ %he rate of return on

in#estment is determined !y di#iding net profit or income !y the

capital employed or in#estment made to achie#e that profit$

It is calculated as followsE

Ta4&e N!./ :

Ta4&e S5!=$ng Re#urn !n Ine+#7en#+ Ra#$!


NJP 4e8!re In#ere+# an" #a9e+

Re#urn !n Ine+#7en# """""""""""""""""""""""""""""""""""""""""" 1>>

T!#a& Ca,$#a& E7,&!%e"


91/103



C5ar# N!./ :

Gra,5 S5!=$ng Re#urn !n Ine+#7en#

Ana&%+$+:

7rom the a!o#e analytical ta!le we can conclude the year 2005 has

highest ;eturn on In#estment !earing 6$8 and least ;eturn on

In#estment at the year 200 !earing 1$216

In#er,re#a#$!n:

7rom the a!o#e graph we can conclude that the year 2005 has higher;eturn on In#estment of 6$8 with 64$18mn of total capital

employed whereas 200 !earing had 1$216 of ;eturn on In#estment

with 12631$4mn of total capital employed$


Year />> />> />>B />>? />>@NJP

4e8!re

Ta9

30$52 35$54 $1 114$01 216$3

T!#a&

Ca,$#a&

E7,&!%e"

64$18 2223$34 445$33 64$32 12631$4

ROI 6$8 44$51 24$22 1$6 1$216


92/103

ANALYTICAL STUDY ON RATIO A

ratio shree renuka sugars ltd 2

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