Financial Analysis of IDEA
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1.1 INDIAN TELECOMMUNICATIONS INDUSTRY The Indian telecommunications market is currently among the fastest growing telecommunication markets in the world. India’s current mobile subscriber base is approximately 126.72 million as at September 30, 2007 as compared with 3.6 million in 2001, according to COAI and AUSPI. There has been rapid growth inthe industry following several initiatives undertaken by TRAI and DoT. In addition, the tele-density of mobile (CDMA and GSM) and fixed-line subscribers, or the number oftelephone connections in use for every 100 individuals in an area, in India has increased significantly since 2001. The Mobile Landscape in India The Indian telecommunications market has been separate into 23 areas referred to as “Circles”. There are four metropolitan Circles (Mumbai, Delhi, Kolkata and Chennai) and 19 regional Circles which are classified into three categories – ‘A’, ‘B’ and ‘C’. There are five categories ‘A’ Circles, eight categories ‘B’ Circles and six category ‘C’ Circles. Although the metropolitan Circles currently account for only 5% of the total population of India, they account for approximately 27.04 million, 21.3%, of the total number of subscribers in India, as atSeptember 30, 2006. The category ‘A’, category ‘B’ and category ‘C’ Circles, by comparison, currently account for approximately 31%, 44% and 19% of the total population of India and account forapproximately 35.5%, 34.3% and 8.7% of the total number of subscribers, respectively. A detailedbreakdown of the total number of subscribers, as at September 30, 2006, in each of these Circles is givenbelow. The chart below excludes CDMA subscribers of BSNL and MTNL:
History and evolution of the telecommunications sector in India Growth in the telecom industry in India can be divided into three phases: Phase I from financial year 1997 to financial year 2001; Phase II – from financial year 2001 (later half) to financial year 2004; Phase III –from financial year 2004 onwards.
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Phase I – Take off Phase Prior to 1991, the telecommunications industry in India was state-owned. In December 1991, the DoTbegan the process of introducing private sector participation in the telecommunications sector by inviting bids from Indian companies with no more than 49% foreign ownership for non-exclusive licenses to provide cellular services in the four metropolitan Circles.
Phase II – High Growth Phase In January 2001, the Government published guidelines concerning the fourth license to be awarded for each Circle. The guidelines called for a non-exclusive license for a period of 20 years (thereafter extendable by 10 years) in the 1,800 MHz frequency range.. The guidelines further provided that for the entire duration of the license, total foreign held equity in the licensee company should not exceed 49% of the paid-up capital and that management control should vest with an Indian promoter.
Phase III – Recent Phase In November 2005, the Government, through Press Note 5 of 2005, dated November 3, 2005 raised theforeign direct investment limit applicable to the telecommunications sector from 49% to 74% (held directlyor indirectly), subject to compliance with certain conditions, including that the majority of the directors and selective key senior management personnel of a company operating in the telecommunications sector be resident Indian citizens, any shareholder agreements and the memorandum and articles of association of the company be amended to ensure compliance with the conditions of the relevant license agreement, and a resident Indian promoter holds at least 10% equity of the company. Companies affected by this legislative change originally were given four months from the date of notification to comply with the specified conditions although this time period has since been extended by Press Note 7 of 2006 to January 2, 2007.
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1.2 HISTORY & DEVELOPMENT OF THE COMPANY We were incorporated as Birla Communications Limited on March 14, 1995 and granted a certificate of commencement of business on August 11, 1995. Our registered office was in Mumbai, Maharashtra. Our name was changed to Birla AT&T Communications Limited on May 30, 1996 following the execution of a joint venture agreement dated December 5, 1995 between AT&T Corporation and Grasim Industries Limited pursuant to which the Aditya Birla Group held 51% of our Equity Share capital and AWS Group held 49% of our Equity Share capital. Our registered office was transferred from Industry House, 1st Floor, 159 Church Gate Reclamation, Mumbai 400 020, Maharashtra to Suman Tower, Plot No. 18, Sector 11, Gandhinagar 382011 Gujarat on October 22, 1996. With effect from January 1, 2001 following our merger with Tata Cellular Limited the joint venture agreement between AT&T Corporation and Grasim Industries Limited dated December 5, 1995 was replaced by a shareholders agreement dated December 15, 2000 entered into between Grasim Industries Limited on behalf of the Aditya Birla Group, Tata Industries Limited on behalf of the Tata Group and AT&T Wireless Services Inc. on behalf of the AWS Group following which our name was changed to Birla Tata AT&T Limited on November 6, 2001. Consequent to the introduction of the “Idea” brand, our name was changed to Idea Cellular Limited on May 1, 2002. The AWS Group exited from the Company on September 28, 2005 by selling 371,780,740 Equity Shares of the Company, which constituted 50% of the holding of AT&T Cellular Private Limited in our equity share capital, to ABNL and by transferring the remaining 371,780,750 Equity Shares to Tata Industries Limited. The Tata Group ceased to be a shareholder of the Company on June 20, 2006 when Tata Industries limited and Apex Investments (Mauritius) Holding Private Limited (formerly known as AT&T Cellular Private Limited) sold all their shares in the Company to the Aditya Birla Group
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1.3 COMPANY PROFILE CORPORATE OFFICE IDEA CELLULAR LIMITED Windsor, 5th floor, Off CST Road, Near Vidya Nagari, Kalian, Santacruz (East), Mumbai - 400098. REGISTERED OFFICE IDEA CELLULAR LIMITED Sunflower Tower, Plot no. 18, sector 11, Gandhingar – 382011, Gujarat
AUDITORS Deloitte Haskins and sells Chartered accountants 706, B Wing, ICC Trade Tower, Senapati Bapat road, Pune - 411016
WEBSITE http://www.ideacellular.com
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1.4 OBJECTIVE Our main objects, as set forth in our Memorandum of Association, are: 1. To provide all or any of the following services namely: basic telephone services, cellular telephone services, unified access services (basic and cellular services), international long distance calling services, national long distance calling services, public mobile radio trunked services (PMRTS), global mobile personal communications services (GMPCS), V-SAT, electronic mail services, video text, voice mail services, data communication services, paging services, private switching
network
services,
transmission
network
of
all
types,
computer networks i.e. local area network, wide area network, multimedia services,
intelligent network and other value-added
services and all such activities which are incidental to the provision of such services like excavation, construction, infrastructure fabrication, installation, commissioning and testing of equipment, marketing and selling. 2. To carry on the business of manufacture, assemble, buy, sell, import, export, service, repair or otherwise deal in all types of electronics equipment
viz,
electronic
communication,
microwave
and
facsimile
equipment,
telematics
equipment,
network
teletext,
televideo,
telecommunication
switching
equipment,
and
network
communication equipment, all sorts of electrical and electronic wireless sets, high frequency apparatus, radar equipment, sonars, oscilloscopes of all kinds and description, electronic and electrical products,
industrial
electronics,
software
procedures,
peripheral
products, modules, instruments, hardware and software system, all
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kinds of solid state devices, control system and allied equipment,
aerospace
and
defense
electronics,
entertainment
electronics, household electronics and such other electronic equipment gadget items which may be developed and introduced in India and elsewhere. 3. To carry on the business of manufacture, improve, assemble, prepare, design, develop and install equipment, fabrication repair, anything and everything in electronics, telephone networks, cellular mobile networks systems, paging systems, electronic mail, voice mail, data communications, electric gadgets and appliances, measuring and testing instruments, components, accessories and spares for control engineering, communication, defense and computer data processing applicationthat may be developed by invention, experiment and research.
MISSION Our Mission
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1.5 PROMOTERS OF IDEA CELLULAR LIMITED The Aditya Birla Group is India's first truly multinational corporation. Global in vision, rooted in Indian values, the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders The Group's footprint extends to 20 countries and is a  US$ 24 billion conglomerate, with a market capitalisation of US$ 31.5 billion. Over 50 per cent of its revenues flow from its overseas operations. The Group  is anchored by an extraordinary force of 1,00,000 employees belonging to over 25 different nationalities and has been adjudge All The Best Employer in India and among the top 20 in Asiaâ€ﾝ by the Hewitt-Economic Times and Wall Street Journal Study 2007.. A premium corporation, the Aditya Birla Group is a leader in envelop of products Aviscose staple fibre, aluminium, cement, copper, carbon black, insulators, garments. The Group has also made successful forays into financial services, telecom, software, and BPO and retail sectors. Today, the Group is India's most diversified business house. Currently around 57 percent of our Equity Shares are held by our Promoter companies belonging to the Aditya Birla Group.
Promoters 1. Aditya Birla Nuvo Limited 2. Grasim Industries Limited
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3. Hindalco Industries Limited and 4. Birla TMT Holdings Private Limited
1.6 PARTNERS OF THE IDEA CELLULAR LIMITED IDEA welcomes all businesses and individuals interested in partnering with us to enhance and strengthen the IDEA products & services portfolio. To explore such potential partnerships, kindly get in touch with us by submitting the Partners Form. Some of our Technology and Content Partners:
Onmobile Asia Pacific Ltd
Cellebrum India Ltd
Siddhivinayak Astro Services Ltd.
Kodiak Ltd
Mauj
Net4nuts India Ltd
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Yahoo Rediff Indiatimes Mobile2win Sify NDTV ROAMING Roamware.inc Starhome
Bharti Telesoft MARKETING COMMUNICATIONS Lowe India Pvt Ltd
Insight Media Ltd NETWORK Nokia - Siemens
Ericsson BILLING Atos Origin
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1.7 EXISTING MANAGEMENT BOBY The company is a professionally managed organization. The company functions under the control of a board consisting of professional directors. The day-to-day matters are looked after by qualified key personnel, under the supervision of Mr. Kumar Mangalam Birla, (chairman) and Mr. Sanjeev aga, (M.D.) Mr. Kumar Mangalam Birla
Mr. Sanjeev Aga
Chairman
Managing Director
BOARD OF DIRECTORS NAME
DESIGNATION
Mr. Kumar Mangalam Birla
Chairman
Mrs. Rajashree Birla
Non-Executive Director
Mr. Arun Thiagarajan
Independent Director
Mr. Gian prakash Gupta
Independent Director
Mr. Mohan Gyani Ms. Tarjani Vakkil
Independent Director Independent Director
Mr. Biswajit A. Subramnjan
Non-Executive Director
Mr.m.r. Prasanna Mr. Saurabh Misra
Non-Executive Director Non-Executive Director
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Mr. Sanjeev Aga
Managing Director
1.8 BUSINESS STRATEGY OUR GROWTH STRATEGIES We believe that we are well positioned to grow in the rapidly expanding Indian telecommunications industry. We believe our growth strategies have and will continue to enable us to:
● Build on our strong position in the Established Circles As at September 30, 2006, the footprint of our Established Circles alone covered approximately 47% of India’s subscriber base. We enjoy a strong market position, distribution strengths, brand recognition and the use of the 900 MHz band in seven of the eight Established Circles. This platform, now leveraged through increased investment in our network and our brand, has delivered growth in market share upon which we believe we can build to strengthen our position in our Established Circles. For our New Circles and the Bihar Circle, and for the licenses for which we have applied in category B and C Circles, mobile penetration as at September 30, 2006 is 6.5%, which is lower than the 12.5% in the Established Circles. This should mean that the entry barriers are less formidable and the market opportunities greater. Additionally, our strong position in our Established Circles should provide us with advantages in additional Circles. For example, when we launched in the Uttar Pradesh (East) Circle we benefited from our strong market position in the neighboring Circles of Uttar Pradesh (West) and Madhya Pradesh.
● Derive synergies and economies of scale from an expanding operation Since our incorporation in 2002, we have grown both organically and through acquisitions and takeovers. In January 2004, we operated in only 5 Circles whereas now we have operations in 11 of India’s 23 Circles. We believe that standardizing and centralizing our operations, wherever appropriate, will help eliminate duplication and improve operational efficiencies. We have, for example, standardized our approach to NSVKMS, MBA COLLAGE.
customer care. We have successfully centralized several applications; including Enterprise Resource Planning using Oracle Financials, interconnect billing using customized software, a call management system and a fraud management system. .
● Build a meritocratic organization with a strong focus on people We are an equal opportunity employer and encourage diversity. The values we embrace are integrity, commitment, passion, seamlessness and speed. We place emphasis on employee development and we have, for example, committed ourselves to an average of 10 days training per employee this financial year. As part of the Aditya Birla Group, we make full use of the facilities of Gyanodaya, the Aditya Birla Group’s renowned management institute located outside Mumbai, to ensure adequate training and team building. We regularly evaluate our employees’ engagement levels to help ensure that subscribers’ experiences exceed expectations. It is with this objective that we are optimizing and standardizing our processes across the organization using the “6 SIGMA” approach which is designed to minimize human error and enhance revenue and productivity. The Aditya Birla Group offers career opportunities to high performing talent across its locations world-wide, which contributes to its attractiveness as an employer.
● Focus on customer service to enhance brand appeal We place significant emphasis upon delivering an efficient and friendly experience at all contact points in the subscriber life cycle. Our tariffs are designed to be transparent and easy to understand. We have developed call centers to focus on our subscribers’ needs for service and to cross-sell our various products. We have consistently focused on innovative products that address existing and latent needs of our subscribers. For example, we have recently promoted a free one-year life insurance cover of Rs. 10,000 to a section of customers who subscribe to our “Dialler Tone” VAS. The simplicity of application for and the security provided by the cover matched the profile of the segment of customers to which it was targeted. At present, approximately 46% of our employees serve in customer-facing roles.
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1.9 SWOT ANALYSIS STRENGTHS OF THE COMPANY •
Attractive existing footprint
•
Original licensee in seven of the Established Circles providing incumbency advantages
•
Market leader in two of, and established positions in the remainder of, the Established
•
Circles.
•
Critical mass of 10.36 million subscribers
•
Strong distribution channels
•
High quality network structure
•
A national brand
•
Part of the Aditya Birla Group
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1.10 COMPETITION AND MAJOR COMPETITOR Competition in the Indian telecommunications industry is intense. We believe that the principal parameters for competition are price, network coverage, distribution channels, brand recognition, service quality and customer care. Our ability to compete successfully depends, in part, on our ability to anticipate and respond to competitive factors affecting the Indian telecommunications industry. MAJOR COMPETITOR AND ITS MARKET SHARE 1)Bharti Airtel (21.6%) 2)Vodafone-Essar Company Limited (15.9) 3)MTNL(1.7) 4)Bharat Sanchar Nigam Limited (BSNL) (16.4) 5)Tata Telecommunication Limited (9.9) 6)Reliance Communication Limited (20.4)
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1.11PRODUCTS AND SERVICES OF THE COMPANY We offer pre-paid and post-paid mobile services in our 11 Circles under the brand names of “Idea Chit Chat” and “Idea”, respectively. We seek to identify new business opportunities and be the first mover amongst our competitors for value added services (“VAS”). We were the first mobile operator to offer an extended validity post-paid product, which now forms a sizeable percentage of our post-paid base. In addition to our core mobile voice services, we offer our subscribers features such as: • Easy to use missed call alerts; • GPRS enabled entertainment services like MMS, Video Tones, WAP, wallpapers, Java games and Mobile Magazine; • GPRS enabled information services like internet browsing, data cards and mobile email; • Voice and SMS based entertainme nt services like Ring Back Tones, background Music, voice and SMS chat, ringtones, horoscopes, expert advise and subscription services; • Call-forwarding (allowing a subscriber to divert incoming calls to another telephone number); • call conferencing (allowing a subscriber to speak to two or more persons simultaneously); • Voice mail (allowing callers to leave voice messages for the subscriber); • Regional, on-net, national and international roaming options for the subscribers; • GPRS roaming available with key national and international operators; and • Fixed Cellular Terminal for corporate needs, GSM gateways, vehicle tracking; and Automatic Meter Reading.
Our Service Areas NSVKMS, MBA COLLAGE.
The Indian telecommunications market for mobile services is divided into 22 "Service Areas" classified into "Metropolitan", Category "A", Category "B" and Category "C" service areas by the Government of India. These classifications are based principally on a Service Area’s revenue generating potential. Our operational 13 Service Areas are broken up into established and New Service Areas.
Established Service Areas The established service areas are Delhi, Andhra Pradesh, Gujarat and Maharashtra, Haryana, Kerala, Madhya Pradesh and Uttar Pradesh (West).
New Service Areas The New Service Areas are Uttar Pradesh (East), Rajasthan and Himachal Pradesh Licenses for these New Service Areas were acquired through the acquisition of Escotel (Escorts Telecommunications Limited).
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2.1 INTRODUCUION OF FINANCE The position of finance in business can be match with the position of blood in the human body. Finance is the life blood of the business. Finance, today is not only limited up to function that circulate business but also extended its boundries. Today success or failure of any business concerned heavily depends upon how effective finance management a firm has. It is the portfolio that gives maximum return at minimum cost. Furter different parties, both inside and outside of the firm are intrested in financial position of firm and fixed interval they often evaluate financial position by assessing financial statement of firm. FINANCIAL STUDY This chapter deals with the following issues related to research study 1. Project objective 2. Project methodology PROJECT OBJECTIVE The aim of the project is to study working procedure and financial analysis of DYNEMIC PRODUCTS LIMITED in comparision with industry average. The study will highlight the following objective. 1. Study the ratio analysis of DPL with industry average. 2. Study the cash flow analysis of DPL. 3. Study the cost of production and leverage of DPL.
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PROJECT METHODOLOGY FINANCIAL ANALYSIS & TECHNIQUE. As stated earlier success or failure of any firm heavily depends on its financial management. The function of financial management is to manage the inflow and outflow of firm in such a way so that firm can carry out its objective easily.for earning out the objective management also have to be familiar with the financial position of firm time by time. So for knowing of financial position management has to go for financial analysis. Management can analyse fiorm’s financial position by evaluating and analyzing financial statement of the firm. Here we define some techniques of analyzing financial statements are as follows. 1. Comparative statement. 2. Commonsize statement 3. Trend analysis 4. Ratio analysis 5. Cash flow statement By using this techniques management or any person who knows these techniques can analyze the financial position with adequate data and interpret it and also deriving conclusion from it.
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2.2 COMPARATIVE STATEMENT
Horizontal analysis is also one f the techniques of the financial statement analysis. Financial statement presents comparative information for the current year and the previous year. A simple approach to financial statement analysis, known as horizontal analysis, is to calculate amount changes and percentage changes from the previous years to the current year. While an amount change in itself may mean something, converting amount changes to percentages is more useful in appreciating the order of magnitude of the change. Horizontal analysis of the financial statements of IDEA CELLULAR LIMITED is presented below:
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(1) PROFIT & LOSS PARTICULAR
2005-06 ( in million)
2006-07 ( in million
Increase/dec rease
% (inc. /dec.)
20,070.68
43500.16
23,429.48
116.73
-
163.84
163.84
-
Other income
105.70
209.29
103.59
98
TOTAL INCOME
20,176.38
43873.29
23,696.91
117.45
51.73
51.73
(A) Income Service revenue Sales of trading goods
(B)operating Expenditure Cost of trading goods sold
-
-
personnel expenses
1,184.84
2608.46
1,423.82
120.15
Network operating expenditure Licence & WPC charge
2,174.46
5335.72
3,161.26
145.38
2,208.19
4487.01
2,278.82
103.20
roaming and access charges
3,459.11
7320.96
3,861.26
111.64
Subscriber acqui.& service exp. Add. & business Promotion exp. administration & other exp.
2,258.00
5643.27
3,385.27
149.92
850.68
2006.20
1,115.52
135.83
780.58
1560.31
779.73
99.89
TOTAL OPERATING EXP.
12,915.86
29013.66
16,097.80
124.63
(D) PBFC,D,A&T
7,260.52
14859.63
7,599.11
104.66
depreciation
2,628.80
5636.66
3,007.86
114.42
finance and treasury charges (net) Amortization of intangible assets PBT
2,500.10
3051.06
550.96
22.04
846.57
1081.39
234.82
27.74
1,285.05
5090.52
3,805.47
296.13
Provision for taxation
29.02
69.81
40.89
104.54
PAT
1,256.03
5020.61
3,764.58
299.72
EPS
0.36
2.19
1.83
508.33
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PARTICULARS Income Expenditure Profit before depreciation Charges, amortizationexp. and tax profit before tax Profit(loss) After tax Earning per share
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GROWTH IN PERCENTAGE (%) 117.45 124.63 financial. 104.66 296.13 299.72 508.33
(1) PROFIT & LOSS PARTICULAR
2006-07 ( in million)
2007-08 ( in million
Increase/dec rease
% (inc. /dec.)
Service revenue
43500.16
67,199.83
23,699.67
54.48
Sales of trading goods
163.84
0.07
-163.77
-99.96
Other income
209.29
174.55
-34.74
-16.60
TOTAL INCOME
43873.29
67,374.45
23,501.16
53.56
Cost of trading goods sold
51.73
0.06
-51.67
-99.88
personnel expenses
2608.46
3,417.82
809.36
31.03
Network operating expenditure Licence & WPC charge
5335.72
10,469.53
5,133.81
96.22
4487.01
6,851.03
2,364.02
52.68
roaming and access charges
7320.96
11,334.41
4,013.45
54.82
Subscriber acqui.& service exp. Add. & business Promotion exp. administration & other exp.
5643.27
6,469.63
826.36
14.64
2006.20
3,224.29
1,218.09
60.72
1560.31
2,895.03
1,334.72
85.54
TOTAL OPERATING EXP.
29013.66
44,661.80
15.648.14
53.93
(D) PBFC,D,A&T
14859.63
22,712.65
7,853.02
52.85
depreciation
5636.66
7,568.52
-275.18
-9.10
finance and treasury charges (net) Amortization of intangible assets PBT
3051.06
2,776.42
1,931.86
34.27
1081.39
1,199.10
117.71
10.88
5090.52
11,168.61
6,078.09
119.40
Provision for taxation
69.81
714.99
-645.18
PAT
5020.61
10,443.62
5,423.01
108.01
EPS
2.19
3.96
1.77
80.82
(A) Income
(B)operating Expenditure
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PARTICULARS Income Expenditure Profit before depreciation, Charges, amortizationexp. and tax Profit before tax Profit(loss) After tax Earning per share
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GROWTH IN PERCENTAGE (%) 53.56% 53.93% financial. 52.85% 119.40% 108.01% 80.82%
(2) BALANCE SHEET PARTICULAR [A] Source Of Funds (1) share holders fund (a) share capital (b) reserves & surplus Outstanding employee stock option TOTAL (2) loan fund (a)secured loan (b)un secured loan TOTAL (3) differed tax liability TOTAL ( 1+2+3) [B] Application Of Funds (1) fixed assets (a) gross block (b) depreciation (c) net block Intangible asset (net) Capital work in progress (2) Investment (3) Current Assets, Loans& Advances (a) inventories (b) sundry debtors (c) cash & bank balance (d)Other current assets (e) loans & advances Total current assets Less(3-): Current Lianilities & Provisions) Net current assets P&L account TOTAL RS. NSVKMS, MBA COLLAGE.
2005-06 (in million)
2006-07 ( in million)
Increase/de crease
% (inc./dec.)
27425.25 998.41 28423.68
25928.6 20371.49
-1496.67 19373.08
-5.46 1940.39
46300.09
17876.41
62.89
14707.53 14448.54 29156.07 57579.75
35397.68 7107.36 42505.04 10.55 88815.68
20690.15 -7341 13348.97 10.55 31235.93
140.68 -50.81 45.78
31663.73 (11576.31) 20087.42 8087.39 959.05 3070.31
70169.64 (-26371.75) 44247.89 11676.42 5065.15 138.31
38955.91 14795.44 24160.47 3589.03 4106.1 -2932
123.03 127.81 120.28 44.38 428.14 -95.49
88.11 908.18 1290.91 451.35 13634.95 16373.50 (-7736.31)
179.1 1524.77 18197.28 757.40 4040.57 24699.12 (-21519.77)
90.99 616.59 16906.37 306.05 -9594.38 8325.62 13783.46
103.27 67.89 1309.65 67.81 -70.37 50.85 178.16
8637.19 16378.39 57579.75
3179.35 24508.56 88815.68
-5457.84 7770.17 31235.93
-63.19 46.42 54.25
54.25
PARTICULAR [A] Source Of Funds (1) share holders fund (a) share capital (b) reserves & surplus Outstanding employee stock option TOTAL (2) loan fund (a)secured loan (b)un secured loan TOTAL (3) differed tax liability TOTAL ( 1+2+3) [B] Application Of Funds (1) fixed assets (a) gross block (b) depreciation (c) net block Intangible asset (net) Capital work in progress (2) Investment (3) Current Assets, Loans& Advances (a) inventories (b) sundry debtors (c) cash & bank balance (d)Other current assets (e) loans & advances Total current assets Less(3-): Current Lianilities & Provisions) Net current assets P&L account TOTAL RS.
2.3 TREND ANALYSIS NSVKMS, MBA COLLAGE.
2006-07 2007-08 ( in million) ( in million
Increase/de crease
% (inc./dec.)
25928.6 20371.49
425.01 2762.51 37.59 3225.11
1.64 13.56
46300.09
26353.61 23134 37.59 49525.20
35397.68 7107.36 42505.04 10.55 88815.68
54544.33 10603.26 65147.59 661.85 115334.64
19164.65 3495.90 22642.55 651.3 26518.96
54.09 49.19 53.27 6173.45 29.86
70169.64 (-26371.75) 44247.89 11676.42 5065.15 138.31
110119.82 -31238.26 78881.56 17792.38 9411.27 5699.31
39653.61 4932.78 34720.83 6028.80 4346.12 5561
56.27 18.75 78.62 51.25 85.80 4020.68
179.1 1524.77 18197.28 757.40 4040.57 24699.12 (-21519.77)
276.15 1985.93 4970.55 520.66 7986.73 15740.02 -26254.84
97.05 461.16 -13226.73 -236.74 3946.16 -8959.10 4735.07
54.19 30.24 -72.68 -31.26 97.66 -36.27 22
3179.35 24508.56 88815.68
-10514.82 14064.94 115334.64
-10443.62 26518.96
-42.61 29.86
6.965
Trend analysis involves calculation of percentage changes in financial statement items for a number of successive years. It is an extension of horizontal analysis to several years. Trend analysis is carried out by first assigning a value of 100 to the financial statements items in a past financial year used as the base year and then expressing financial statements items in the following years as percentages of the base year value.
Trend analysis over longer periods helps in identifying certain basic changes in the nature of the business. Since many large corporations publish a summary of operating results and selected financial indicators for five years or more, it is possible to perform trend analysis using published reports.
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2.3 TREND ANALYSIS (1) PROFIT & LOSS ACCOUNT (In %) PARTICULAR
2005-06
2006-07
2007-08
100
216.79
334.82
Sales of trading goods
100
0.043
Other income
198
165.14
100
217.45
333.93
Cost of trading goods sold
-
100
0.12
personnel expenses
100
220.15
288.46
Network operating expenditure
100
245.38
481.78
Licence & WPC charge
100
203.2
310.26
roaming and access charges
100
211.64
327.67
Subscriber acqui.& service exp.
100
249.92
286.52
Add. & business Promotion exp.
100
235.83
379.03
administration & other exp.
100
199.89
370.88
TOTAL OPERATING EXP.
100
224.65
345.79
(D) PBFC,D,A&T
100
204.66
312.82
depreciation
100
214.42
287.91
PBFCA&T
100
199.13
326.52
finance and treasury charges (net)
100
122.04
111.05
Amortization of intangible assets
100
127.74
141.64
PBT
100
396.13
869.12
Provision for taxation
100
240.9
2498.24
PAT
100
399.72
831.48
EPS
100
663.89
1100
(A) Income Service revenue
TOTAL INCOME (B)operating Expenditure
NSVKMS, MBA COLLAGE.
TREND ANALYSIS
PERCENTAGE
1500 2005-06
1000
2006-07 500 0
2005-06
2007-08 TOTAL EXPE PBFC INCOM NSES A&T 100
100
100
PBT
PAT
EPS
100
100
100
2006-07 217.45 224.65 199.13 396.13 399.72 663.89 2007-08 333.93 345.79 326.52 869.12 831.48 1100
INTERPRETATION: Here, I have taken the base year as 2005-06. SALES:The sales of the company is continuously increase from the 100% to 334.82% in the last three years. TOTAL INCOME:The total income of the company is continuously increased from 100% to 333.93% in the last three years from 2005-06 to 2007-08 because of hihly increase in the service revenue. The total income is less increased because of decrease in the other income from209.29 million to 174.55 million. EXPENSES:Theoperating expenses of the company is increasing in last 3 years from 100% to 345.79% because of the highly increase in the network operating expenses from 2208.19milion to 10469.53 million, advertisement and business promotion expense and administrative expenses from 1684.24million to 6019.32million.it was comparatively highly incease than the total inome so it inversely affects the profit margin of the company.
NSVKMS, MBA COLLAGE.
PBFCT:The profi before financial charges, amortization expenses and taxes increases from 100% to 326.52% but it increases less than seles increases because of highly increase in the operating expenses. PBT:The PBT of the company was continuously increased in last three yearsfrom 2005-06 to 2007-08 because of the comparatively less increased in the financial charges and the amortization expenditures. The profit before tax is increased in the 2007-08 than 2006-07 because of decrease in the financial charges from 3051.06mn.to 2776.42mn. PAT:The PAT of the company is increasing from 100% to 831.48% because of continuously increase in the profit before tax. It expresses the satisfactory situation for the company and one can say that company has high ability to operate the business efficiently.
NSVKMS, MBA COLLAGE.
(2) BALANCE SHEET (In %) PARTICULAR [A] Source Of Funds (1) share holders fund (a) share capital (b) reserves & surplus Outstanding employee stock option TOTAL (2) loan fund (a)secured loan (b)un secured loan TOTAL (3) differed tax liability TOTAL ( 1+2+3)
2005-06
2006-07
2007-08
100 100 100
94.54 2430.39 162.89
96.09 2317.08 3759 174.24
100 100 100 100 100
240.68 49.19 145.78 100 154.25
370.86 73.39 223.44 6273.46 200.30
100 100 100 100 100 100
223.03 227.81 220.28 144.38 528.14 4.5
347.78 269.84 392.69 220 981.31 185.63
100. 100 100 100 100 100 100 100 100
203.27 167.89 1409.65 167.81 29.63 278.17 36.81 146.42 154.25
313.42 218.67 385.04 115.36 58.58 339.37 (121.74) 84.03 200.30
[B] Application Of Funds (1) fixed assets (a) gross block (b) depreciation (c) net block Intangible asset (net) Capital work in progress (2) Investment (3) Current Assets, Loans& Advances (a) inventories (b) sundry debtors (c) cash & bank balance (d)Other current assets (e) loans & advances Less(3-): Current Lianilities & Provisions) Net current assets P&L account TOTAL RS. [NET WORTH]
NSVKMS, MBA COLLAGE.
TREND ANALYSIS 240 PERCENTAGE
200 160 120 80 40 0
2005-06
2006-07
2007-08
SHARE HOLDER'S FUND
100
162.89
174.24
LOAN FUND
100
145.78
223.44
TOTAL
100
154.25
200.304 YEAR
INTERPRETATION:1) SHARE HOLDER’S FUND:The share holders’fund of the company increases from 100% to 492.72% in the last five yearsthe share holders’ fund was increased because the company had issued bonus share 1:1 in 2004-05. And also issues the additional shares of 44, 21,000 in 2005-06. 2) LOAN FUNDS:The loan fund of the company increases fromv100% to 208.12% (including secured & unsecured loan) the company has increased in the secured loan but drcreased in the unsecured loan. 3) DIFFERED LIABILITIES:The differed liabilities of the company increased from 100%to128.85 upto 2004-05but drcreased from 132.74% to 123.12% upto 2006-07. TOTAL The net worth of the company increased from 100% to 340.3% because highly increased in the shareholdre’s fund.
NSVKMS, MBA COLLAGE.
APPLICATION OF FUNDS PERCENTAGE
600 400 200 0 -200
2005-06
2006-07
207-08
NET FIXED ASSETS
100
220.28
392.69
INVESTMENTS
100
4.5
185.63
NET CURRENT ASSTS
100
36.81
-121.74 YEAR
APPLICATION OF FUND:1) FIXED ASSETS Company’s fixed assets increased from 100% in the year 2005-06 to 392.69% in 200708. 2) CAPITAL WORK IN PROGRESS:The capital work in progress increased from 100% in 2005-06 to 1681%in 2006-07. There is no capital work in progress from 2002-03 to 2004-05. the capital work in progress increased in 2006-07 because the company had invest its capital in two plants 2&3 in 2005-06 &2006-07. 3) INVESTMENT:The invest ment of the company increased from 100% to 41393.41% in 2005-06 and 32601.2% in 200-07 because of the company has invested its capital in stock market, mutual fund & subsidiary compny. 4) CURRENT ASSETS, LOANS & ADVANCES: The current asasets, loans and advances of the company increased because of highly increased in the cash& bank balance. 5) CURRENT LIABILITIES:The current liabilities and provisions of the company decreased because of decreased in the short term loan and in creditors.
2.4 COMMON SIZE STATEMENT OR VERTICAL ANALYSIS NSVKMS, MBA COLLAGE.
Ratio analysis apart, another useful way of analyzing financial statement is to convert them in to commansize statement by expressing absolute rupee amount in to percentage. When this method is pursued, the income statement exhibits each expense item or group of expense items as a percentage of net sales, and net sales are taken at 100 percent. Similarly, each individual asset and liability classification is shown as percentage of total assets and liabilities respectively. Statements prepared in this way are referred to as common size statements. Common size statement prepared for one firm over the yeas would highlight the relative changes in each group of expenses, assets and liabilities. This statement can be equally used for inter-firm comparisions, given the facts that absolute figures of two firms of the same industry are not comparable.
2.4 VERTICA LANALYSIS NSVKMS, MBA COLLAGE.
(1) PROFIT & LOSS ACCOUNT (In %) PARTICULAR (A) Income Service revenue Sales of trading goods Other income TOTAL INCOME (B)operating Expenditure Cost of trading goods sold personnel expenses Network operating expenditure Licence & WPC charge roaming and access charges Subscriber acqui.& service exp.
2005-06
2006-07
2007-08
99.48 0.52 100
99.15 0.37 0.48 100
99.74 0.00004 0.25996 100
5.87 10.78 10.94 17.14 11.19
0.12 5.95 12.16 10.23 16.69 12.86
0.00004 5.07 15.54 10.17 16.82 9.6
Add. & business Promotion exp. administration & other exp. TOTAL OPERATING EXP. (D) PBFC,D,A&T Depreciation PBFCA&T finance and treasury charges (net) Amortization of intangible assets PBT Provision for taxation PAT Bal. of loss brought forward from prev. year Accumulated losses acquired on amalgamation Leave enhancement provision for earlier year
4.22 3.87 64.01 35.99 13.03 22.96 12.39 4.2 6.37 0.14 6.23 (89.18) -
4.57 3.56 66.13 33.87 12.85 21.02 6.95 2.46 11.61 0.16 11.44 (38.15) (28.87)
4.79 4.3 66.29 33.71 11.23 22.48 4.12 1.78 16.58 1.08 15.5 (36.38) -
-
(2.52)
-
Bal. of loss carried forward to balance sheet
(82.96)
(55.86)
(20.88)
NSVKMS, MBA COLLAGE.
PROFIT AND LOSS ACCOUNT PERCENTAGE
80 60 40 20 0
2005-06
2006-07
207-08
OPERATING. EXP.
64.01
66.13
66.29
PBFDAT
35.99
33.87
33.71
6.37
11.6
16.58
PBT
YEAR
NSVKMS, MBA COLLAGE.
(2) BALANCE SHEET PARTICULAR [A] Source Of Funds (1) share holders fund (a) share capital (b) reserves & surplus Outstanding employee stock option TOTAL (2) loan fund (a)secured loan (b)un secured loan TOTAL (3) differed tax liability TOTAL ( 1+2+3)
2005-06
2006-07
2007-08
47.63
29.19
1.73
22.94
22.85 20.06 0.03 42.94
25.54 25.09 50.64 100
39.85 8 47.85 0.02 100
47.29 9.19 56.49 0.57 100
54.99 20.1 34.89 14.05 1.67 5.33
79.34 29.62 49.72 13.24 5.70 0.16
95.48 27.08 68.4 15.42 8.16 4.94
0.15 1.58 2.24 0.78 23.68 28.44 (13.44) 15 29.07 100
0.2 1.72 20.49 0.85 4.55 27.81 (24.23) 3.58 27.59 100
0.8 0.24 4.31 0.45 6.92 13.64 (22.76) (9.12) 12.19 100
[B] Application Of Funds (1) fixed assets (a) gross block (b) depreciation (c) net block Intangible asset (net) Capital work in progress (2) Investment (3) Current Assets, Loans& Advances (a) inventories (b) sundry debtors (c) cash & bank balance (d)Other current assets (e) loans & advances Total currnt assets Less(3-): Current Lianilities & Provisions) Net current assets P&L account TOTAL RS. [NET WORTH]
NSVKMS, MBA COLLAGE.
2005-06
SHARECAPITAL 0 25.09
RESEVE AND SURPLUS 47.63
SECURED LOAN UNSECUREDLOAN
25.54 DEFFERED TAX LIABILITY
1.73
2006-07
8
SHARECAPITAL
0.02 29.19
RESEVE AND SURPLUS SECURED LOAN
39.85
UNSECUREDLOAN 22.94
DEFFERED TAX LIABILITY
SOUR C E OF FUND
2007-08 60
9.19 0.57
SHARECAP ITAL
50 40
22.85 RESEVE AND SURPLUS SECURED LOAN
30 20 10
47.29
20.06
UNSECUREDLOAN DEFFERED TAX LIABILITY
0
SHARECA
RESEVE
PITAL
AND
SECURED UNSECUR DEFFERE LOAN
EDLOAN
2005-06
47.63
1.73
25.54
25.09
0
2006-07
29.19
22.94
39.85
8
0.02
2007-08
22.85
20.06
47.29
9.19
0.57
D TAX
INTERPRETATION: 1) SHARE HOLDER’S FUND:Share capital: The proportion of share capital of the company is 47.63 % in 2005-2006, 29.19% in 2006-2007 and 22.85% in 2007-2008. The proportion of share capital decreases because of increase in the use of loan funds and increase in the Reserve and surplus from 1.73% to 20.06% in 2005-2006 share capital increases 8.39% preference share capital to 39.24 % of equity capital.
NSVKMS, MBA COLLAGE.
Total:The total share holder’s fund is 49.36%, 52.13% and 42.94% in 2006-2007 or respectively. The proportion of shareholder’s fund increases despite decrease in share capital in 2007 because increase in proportion of R&S from 1.73% to 22.94 % .It was decreased in 2008 but lesser proportion than share capital because increase in reserve &surplus from 1.73 to 20.06 %. Loan Funds:The loan fund is decreased in 2007 from from 2006 (50.64% to 47.85%) because of proportionate decrease in unsecured loans (25.09% to 8%) and increased in 2008 from 2006 from 50.64% to 56.49% despite decrease in unsecured loan from 25.09% to 9.19% because of increase in secured loan from 25.54% to 47.29%. 3) Differed Tax Liabilities:The differed lauilitues of the company was 0%, 0.02%, 0.57% in the year 2005-06, 2006-07 and in 2007-08 respectively.in 2005-06 in 2005-06 the differed liabilities of the company was zero because of the deffered tax assets (605.98) is equal to the deffered tax liability (605.98)
APPLICATION OF FUND:2005-06
2006-07
NET FIXED ASSETS
NET FIXED ASSETS INVESTMENT 29
34.89
1.67
5.33 14.05
INTENGIBLE ASSETS
INTENGIBLE ASSETS CAP ITAL WORKIN P ROGESS
15
INVESTMENT
28
NET CURRENT ASSETS P &L ACCOUNT
NSVKMS, MBA COLLAGE.
49.72 3.58
CAP ITAL WORKIN P ROGESS NET CURRENT ASSETS
5.7 13.24
0.16
P &L ACCOUNT
2005-06
NET FIXED ASSETS INVESTMENT 29
34.89
INTENGIBLE ASSETS CAP ITAL WORKIN P ROGESS
15 1.67
NET CURRENT ASSETS
5.33 14.05
P &L ACCOUNT
80 70 60 50 40 30 20 10 0 - 10 -20
NET FIXED AS S ET
INVES T MENT
INTENGI CAP ITA BLE
L
NET
P &L
CURRE ACCOU
ASS ET
WORKI
NT
NT
2005-06
34.89
5.33
14.05
1.67
15
29
2006-07
49.72
0.16
13.24
5.7
3.58
28
2007-08
68.4
4.94
15.42
8.16
-9.12
0.13
1) FIXED ASSETS The fixed assets of the company are 34.89%, 49.72%, 68.40%. In 2005-06 to 2007-08 respectively. It was because of the continuously highly increase in the Plant and Machinery from19647.36mn in 2005-06 to 77396.05mn.in 2007-08. Investment
NSVKMS, MBA COLLAGE.
2.6 RATIO ANALYSIS OF IDEA CELLULAR LIMITED Ratio, broadly speaking, is the numerical relationship between to numbers, and hence ratio analysis of statement stands for the process of determining and presenting the relationship of items and groups of items in the statement The ratio analysis is one of the most powerful tools of the financial analysis. It is used as a device to analysis and interpret the financial statements can be analyse more clearly and decision made from such analysis. The use of ratio is not confined to financial manager only. There are different parties in ratio analysis for knowing the financial position of the firm for different purposes. The supplier of goods on credit, banks, financial institution, investors, shareholders and management make use of ratio analysis as a tool in evaluating the financial position and
NSVKMS, MBA COLLAGE.
performance of a firm for granting credit, providing loans for making investments in the firm. Thus, ratios have wide applications and are of immergence use today.
2.6.1 PROFITABILITY RATIO A number of ratios designs to indicate the profitability of the business and grouped in to the category of profitability ratio. For ex. Gross profit ratio 1. GROSS PROFIT RATIO This ratio is important for knowing the results of the business during the year. We can come to know by this ratio that what is the ratio of gross profit is to sales. These shows inter relationship between sales and cost of goods sold. This ratio can be finding out by dividing gross profit with sales. By this ratio we can find the percentage of profit on cost of goods sold. At which level this ratio is satisfactory is not specified clearly. But it is
NSVKMS, MBA COLLAGE.
sufficient enough to pay operating expenses depreciation interest and for payment of dividend.
G.P. Ratio =
Gross Profit
* 100
Sales
YEAR
2005-06
2006-07
2007-08
Gross profit (in million)
7704.9
16139.8
24913.3
Sales (in million)
20070.68
43664
67199.9
Gross Profit Ratio (in %)
38.38
36.96
37.07
GROSS PROFIT RATIO
PERCENTAGE
38.5 38 37.5 G.P.RATIO
37 36.5 36 G.P.RATIO
2005-06 2006-07 2007-08 38.38
36.96
37.07
YEAR
INTERPRETATION:Gross profit is the result of relation between prices, sales volume and cost. A change in gross profit ratio can be brought by change in any of these factors. -Gross profit ratio indicates total cost of goods sold to the revenue. -It reflects the efficiency of the of the usage of direct inputs at given price.
NSVKMS, MBA COLLAGE.
-The gross profit ratio of the company is 38.38 % . but it has decreased in 2007-2008 upto 36.39 % it means that it has decreased by 4% than previous year because of great hike in network operating charges. It was increased by 145% than previous year also highly increase in the liecence upc chareges and roaming access charges . -The gross profit ratio of the than somewhat increases in the year 2007-2008 because of high increase in sales revenue from 4366.40 to 6719.99 crore it means risen by 54 % and manufacturing expenses by 53.65 %.
2. EBIT/ OPERATING PROFIT RATIO Operating profit ratio can be found out after excluding all non-operating expenses like interest and taxes that means earning before interest and tax. YEAR
2005-06
2006-07
2007-08
EBIT (in million)
5076.1
8141.58
13945.03
Sales (in million)
20070.68
43664
67199.9
EBIT Ratio (in %)
18.86
18.65
20.75
NSVKMS, MBA COLLAGE.
PERCENTAGE
EBIT RATIO 21 20 19 18 17
EBIT RATIO
2005-06
2006-07
2007-08
18.86
18.65
20.75
YEAR
INTERPRETATION:This ratio is giving the overall picture of the firm. As the profit are high, the firm’s ability to pay dividend, interest, reserves for debts etc. is sufficient and the returns on their investments. While low profit or losses shows inefficiency of the firm to sustain the operations of the business. -E.B.I.T ratio is decreased in the 2006-2007 than 2005-06 from 18.86% to 18.65% because of decrease in the Gross profit ratio. -E.B.I.T. ratio than increase in 2007-2008 upto 20.75 % because of less proportionate increase in the depreciation as compared to 2005-06 to 2006-07 . -The depreciation and amortization expenses increases in 2005-06 by 93 % while in the year 2007-08 . It will increase only bt 30.50 % so the E.B.I.T. increases in the 2007-08 as compared to 2006-07.
2. NET PROFIT RATIO This ratio measures the ralationship between net profitsand sales of the firm. It is also known as net margin. Net profit ratio measures the percentage of each rupee remaining after all costs and expences including interests and taxes have been deducted. The net profit ratio is indicative of management’s ability to operate the business with sufficient
NSVKMS, MBA COLLAGE.
success not only to recover from revenues of the period, the cost of mercandies or services, the expences of operating the business and the cost of the borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk.the ratio of net profit to sales essentially express the cost price effectiveness of the operation. N.P. Ratio =
Net Profit
* 100
Net Sales
YEAR
2005-06
2006-07
2007-08
Net Profit (In Million)
1256.03
5020.61
10443.62
Sales (in million)
20070.68
43664
67199.9
Net Profit Ratio (In %)
6.25
11.5
15.54
N.P.RATIO 20 PERCENTAGE
15 10
N.P.RATIO
5 0
2005-06
2006-07
2007-08
6.25
11.5
15.54
N.P.RATIO
YEAR
INTERPRETATION: Net profit ratio indicates the management ability to operate the business efficiency. It also expressed the cost price effectiveness of the operation.
NSVKMS, MBA COLLAGE.
Net profit ratio was 6.25 % in 2005-2006 Net profit ratio is constantly rising from
6.25 % to 15.54% from 2005-06 to 2007-
2008. Net profit ratio increases in 2006-2007 upto 11.50 % from 6.25 % in 2005-06 because of less proportionate increase in financial and treasure expenses as compared to service sales revenue increase by 2007-08 to 117.55 % while the financial and treasure expenses increases by 2500.1 mn to 3651.06 (22.03 %) Net profit ratio also increases in 2007-08 than 2006-2007 from 11.50% to 15.54% because of the decrease in the financial treasury expenditure (from 3051.06 to 2776.42 mn ) and increased in the E.B.I.T
3. EXPENSES RATIO Another profitability ratio related to sales is the expenses ratio. It is computed by deviding expenses by sales the term ‘expenses’ includes (1) cost of goods sold, (2) administrative expenses,(3) selling & distribution expenses,(4) financial expenses, but exludes taxes, dividends and extraordinary losssesdue to theft, goods destroyed by fire and so on.the expenses ratio is therefore, very important for analyzing the profitability of the firm. It should compared over a periodof time with the industry average as well as firmsof similar type.as a working position low ratio is favourable, while high one is un favourable. Expenses Ratio
=
Expenses Net Sales
NSVKMS, MBA COLLAGE.
* 100
YEAR
2005-06
2006-07
2007-08
20070.68
43664
67199.9
Expenses (in million) Sales (in million) Expenses Ratio (in %)
INTERPRETATION:The expenses ratio is closely related to the profit margin, gross as well as net. From the above data we can say that the expenses ratio of the DPL was contiously decline from 2002-03 to 2004-2005, from 98.21% to 93.13% respectively then it was increase in the year up to 95.52% in 2005-06 because of increase in the staff expenses & financial expense. Then it was decrease in the year of 2006-07 up to the 89.15% because of decrease in the financial expenses % increased in the sales volume compare to other expenses. The expenses of theindustry are also declining from 137.61% to 113.31%. But the expenses ratio of the company (DPL) is low so it good situation for the company. A decline in expenses shows the increased in the profitability of the company and also shows the efficiency of the management. 4. RETURN ON CAPITAL EMPLOYED/ INVESTMENT (ROCE) Here the profits are related to the capital employed. The term capital employed refers to the total longterm funds supplied by the lenders and owners of the firm.thus the capital employed basis provides a test of profitability related to sources of longterm funds. Acomparision of this ratio with similar firms, with the industry average and over timewould provide sufficient insight into how efficient the long-termfunds of owners and lenders are being used.the higher the ratio, the more efficient is the use of capital employed. Return on capital employed =
Net Profit (PBIT)
NSVKMS, MBA COLLAGE.
* 100
Capital Employed
YEAR
2005-06
2006-07
2007-08
EBIT (in million)
3785.15
8148.58
13945.03
Capital employed (in million)
57579.75
88815.68
115334.64
ROI or ROCE (in %)
6.57
9.17
12.09
RETURN ON INVESTMENT
PERCENTAGE
15 10 ROI 5 0
2005-06
2006-07
2007-08
6.57
9.17
12.09
ROI
YEAR
INTERPRETATION: The ROI increased from 6.57 % in 2005-06 to 9.17 % in 2006-07 because of the less proportionately increases in the total assets on capital employed of the company as compared to in the E.B.I.T. the E.B.I.T. increased from 3785.15 to 8148.58 mn while total capital employed increase from 57579.75 to 88815.68 (only by 54.25 %) The same thing happens in 2007-08. it was increased upto the 12.09 % in 2007-08 that was 9.17 % in 2006-07 .
NSVKMS, MBA COLLAGE.
The ROI is increased year by year that means the company is mere efficient in using of the capital employed.
5. RETURN ON EQUITY SHAREHOLDER’S FUND (NETWORTH) Where there is no doubt that the preference share hordes are also owners of a firm. The real owner are the equity shareholders who bear all the risk, participate in management and are entiteled to all the profits remaining after all outside claims including preferencedividends are met in full. The profitability of a firm from the owners’ point of view should therefore, in the fitness of things be assessed in terms of the return to the ordinrry shareholders. The ratio under reference serves this purpose. It is calculated by dividing the profits after taxes and preference dividend by the average equity of the equity shareholders. Return on shareholders fund (Net Worth) =
Net Profit (Pat)—Preference Dividend
* 100
Shareholders’ fund (Net Worth) YEAR
2005-06
2006-07
2007-08
PAT – pref. div (in million)
821.07
5020.61
10443.62
Net worth (in million)
28423.68
46300.09
49525.2
ROI or ROCE (in %)
2.89
10.84
21.09
NSVKMS, MBA COLLAGE.
RETURN ON NETWORTH
PERCENTAGE
25 20 15
RON
10 5 0 RON
2005-06
2006-07
2007-08
2.89
10.84
21.09
YEAR
INTERPRETATION:The Return on networth is constantly is increased by year from 4.42% to 21.09 % The Return on networh (RON) of the company is highly increasing because of increase in the Net Profit as compared to the network of the company and there is also decreased in the share capital of the from 27425.27 mn to 25928.6 mn .As the net profit increased from 821.07 mn to 5020.61 (by 299.72) while networth increased only by (62.90%). The Return on networth of the company is increased from 10.84% to 21.09% because of high increase I net profit by 108% from 5020.61 to 10443.62 in less increase in the networh. It was increased by 7% only.
6. EARNING PER SHARE (EPS) EPS measures the profit available to the equity shareholder on a per share basis, that is, the amount they can get on every share held. It is calculated by deviding the profits available to the equity share holders by the numbers of the outstanding shares. Earning per share is the widely used ratio.yet, EPS as a measure of profitability of a firm from the
NSVKMS, MBA COLLAGE.
owner’s point of view, should be used cautiously as it does not recognize the effect of increase in equity capital as a result of retention of earnings. The another limitation of the EPS is that it does not reveal how much is paid to the owners as dividend, nor how belong to the ordinary shareholders (per share basis) As a profitability ratio, the EPS can be used to draw inferences on the basis of (1) its trends over a period of time, (2) comparision with the EPS of other firms, and (3) comparision with the industry average. Earning per share =
Net Profit (PAT) No. Of equity shares
YEAR
2005-06
2006-07
2007-08
PAT Available To Eq.Share
821.07
5020.61
10443.62
Holder(in million) No.of equity shares (in million)
2259.527206
2291.992960
2634.896058
EPS
0.36
2.19
3.96
NSVKMS, MBA COLLAGE.
EARNING PER SHARE 5
RUPEES
4 3 EARNING PER SHARE 2 1 0
2005-06
200-07
2007-08
0.36
2.19
3.96
EARNING PER SHARE
YEAR
INTERPRETATION: This yield can be used by a Share holder while making decisions about the investment on comparison to other alternative investments. The E.P.S. when compared to the current market price of the share ,gives measure of the rate of yield . The E.P.S. of the company is currently increasing because of the increasing in the networth. The earning per share of the IDEA CELLULAR LIMITED is continuousl increased in the year 2006-07 from 2005-06 ( from 0.36rs. to 2.19 rs.) because of highly increased in the net profit as well as decreasing in the no. of equity share in the year 2006-07 Then it was also increased in the year 2007-08 because of the increased in the net profit and relatively less percentage increase in the no.of equity share. The EPS is continuously increase which express that the compay is effectively uses its capital and also efficiently uses the loan funds instead of the owner’s fund.it was good for the share holder’s of the company and they get the satisfactory return. 8. BOOK VALUE PER SHARE (BVPS)
NSVKMS, MBA COLLAGE.
BVPS represents the equity/claim of the equity shareholder on per share basis. It is computed dividing net worth by the no. of equity shares outstanding. The ratio is sometimes used as a benchmark for comparision with the market price per share. However, the book value per share has a serious limitation as a valuation tool as it is based on the historical costs of the firm. There may be a significant difference between the market value of assets from the book value of assets. Besides, there may be hidden assets or other intangible assets of uncertain value.
Book Value per Share =
Net Worth No. Of equity shares
YEAR
2005-06
2006-07
2007-08
Networth (in million)
23593.68
46300.09
49525.2
No.of equity shares (in million)
2259.527206
2592.860539
2634.896058
Book value per share
10.44
20.20
18.80
BOOK VALUE PER SHARE
RUPEES
20 15 10 5 0 BOOK VALUE PER SHARE
2005-06
200-07
2007-08
10.44
17.86
18.8
YEAR
INTERPRETATION:-
NSVKMS, MBA COLLAGE.
The book value per share of theIDEA cellular limited is continuously increased from rs.1044 to rs. 17.86 in 2006-07 from 2005-06 because of the increased in the networth. It was increased in 2007-08 upto rs.18.80 because of the increased in the reserve and surplus. It is good news for the shareholders’ but this ratio has a limitation as a valuation tool as it is based on historical costs of the firm.
2.6.2 LIQUIDITY RATIO The importance of adequqte liquidity in the sense of the ability of a firm to current/short term obligations when they become due for payment can hardly be over stressed. In fact, liquidity is a pre requisite for the very survival of firm. The liquidity ratios measure the ability of a firm to meet its short-term obligation and reflect the short-term financial strength/solvency of a firm. 1.0 CURRENT RATIO:The current ratio is the ratio of total current assets to total current liabilities. It is calculated by dividing current assets by current liabilities. The current assets of a firm represents those assets which can be in the ordinary business, converted into cash with in
NSVKMS, MBA COLLAGE.
a short period of time, normally not exceeding one year and include cash and bank balance etc. The current liabilities defined as liabilities which are short-term maturing obligations to met, as originally contemplated, with in a year. Thus, the current ratio in a way measures the margin of safety to the creditors. The TONDON committee appointed by the RBI.had recommended a current ratio of 2:1. But later on the view of CHORE committee appointed by the RBI.Recommended a satisfactory current ratio of 1.33:1. The formula of calculating current ratio is as under: Current Ratio =
Current Assets Current Liabilities
YEAR
2005-06
2006-07
2007-08
Current assets
16373.5
24699.12
15740.02
Current liabilities
7736.31
21519.77
26254.84
Current ratio
2.12:1
1.15:1
0.6:1
NSVKMS, MBA COLLAGE.
CURRENT RATIO 2.5
TIMES
2 1.5 1 0.5 0 CURRENT RATIO
2005-06 2.12
2006-07
2007-08
1.15
0.6
YEAR
INTERPRETATION: The Current Ratio of the Company decreased from 2.12:1 to 0.6:1 The Current Ratio of the Company decreased in 2006-07 from 2.12:1 to 1.15:1 because of decrease in the loans and advances from 13634.95mn to 4040.57mn and increase in sundry creditors from 5433.94 to 16108.74mn. The Current Ratio of the Company decreases in 2007-08 up to 0.6:1 because of the decrease in Cash and Bank Balance from 18197.28 to 4970.55. The Chore Committee appointed by the R.B.I recommended a satisfaction current ratio is 1.33:1 but here the company’s current ratio is goes down continuously so it is not satisfactory.
2. QUICK/ ACID-TEST RATIO
NSVKMS, MBA COLLAGE.
As observed above, one defect of the current ratio is that it fails to convey any information on the composition of the current assets of a firm. A rupee of cash considered equivalent to a rupee of inventory or recievables. But it is not so. The rupee of cash is readily available to meet current obligation than a rupee of say, inventory. The term quick ratio refers to current assets which can be converted into cash immediately or at a short notice without diminution of value. Thus current assets exludes the prepaid expenses & inventory.the formula of quick ratio is as follow: Quick Ratio =
quick assets Quick liability
YEAR
2005-06
2006-07
2007-08
Quick assets
16285.39
24520.02
15463.83
Quick liabilities
7362.02
20854.74
23180.92
Quick ratio
2.21:1
1.17:1
0.67:1
QUICK RATIO 2.5
TIMES
2 1.5 1 0.5 0 QUICK RATIO
2005-06
2006-07
2007-08
2.21
1.17
0.67
YEAR
NSVKMS, MBA COLLAGE.
INTERPRETATION:As the standered ratio the quick ratio of 1:1 is satisfactory. The quick ratio of the company is decreasing faster from 2.21:1 to 1.17:1 in 2006-07 because of increase in sundry creditors and decrease in the loans and advances. The quick ratio of the company is decreasing from 1.17:1 to 0.67:1 because of decrease in cash bank balance. This situation express the company’s has less quick assets which are used to meet the quick liability of the current,thus company may come in trouble for a short period of time.
2.6.3 ACTIVITY OR EFFICIENCY RATIOS: These are the ratios showing the effectiveness with which the resources of the business are employed. It signifies the efficiency of the management. For example; stock turnover is an activity ratio, showing the number of times the average stock is turned over during the year. Activity or efficiency ratios are as under: Debtor’s ratio Creditor’s ratio Fixed assets turnover ratio Total assets turnover ratio Stock turnover ratio 1. INVENTORY TURNOVER RATIO NSVKMS, MBA COLLAGE.
The number of times, the average stock is turned over during the year is known as stock turnover. It is computed by dividing the cost of goods sold by average stock of opening stock and closing stock of the year. This ratio is very important in judging the ability of management with which it can move the stock. The higher the stock turnover ratio the more profitable the business would be. A firm in such a case will be able to trade on a smaller margin of gross profit. A lower turnover indicates accumulation of slow moving Obsolete and low-quality goods, which is a signal to the management. The formula to calculate this artio is as under. Cost of goods sold Inventory turnover Ratio = ------------------Average stock
YEAR
2002-03
2003-04
2004-05
2005-06
2006-07
Stock TurnoverRatio Of DPL Stock TurnoverRatio of INDUSTRY
5.27
9.67
6.98
5.83
6.91
34.63
10.69
11.20
7.91
17.8
STOCK TURN OVER RATIO 40 35 30 25 20 15 10 5 0
DPL INDUSTRY
2002- 2003- 2004- 2005- 200603 04 05 06 07 YEAR
INTERPRETATION:The equity turnover ratio measures the goe quickly inventory are sold. It is a test of efficient inventory management to judge whether the ratio of a firm is satisfactory or not.
NSVKMS, MBA COLLAGE.
The stock turnover ratio of the company is less than the industry average. In the year 2006-07 the stock turnover ratio of the compny was 6.91 times while the industrial average was 17.80 times. Thus it will adversely affect the ability to meet customer demand as it may not cope with its requirements that is; there is a danger of the firm being out of stock and incurring high stock out cost. 2. DEBTORS TURNOVER RATIO It is determined by deviding the net credit sales by average debtors outstanding during the year. Net credit sales consist of growth credit sales minus returns, if any, from customers. Average debtors are the simple average of debtors at the beginning and at the end of the year. The analysis of the debtor’s turnover ratio supplements the information regarding the liquidity of one item of current assets of the firm. The ratio measures how rapidly recievables are collected. The high ratio indicative of shorter time-lag credit sales and cash collection.a low ratio shows that debts are not being collected rapidly.the formula is given below:Debtors Turnover Ratio =
Debtors Collection period =
Net Credit Sales Average debtors 12 months Debtor’s turnover
YEAR
2002-03
2003-04
2004-05
2005-06
2006-07
Debtors TurnoverRatio Of DPL Debtors TurnoverRatio of INDUSTRY
5.93
4.89
4.25
3.87
4.42
5.55
5.89
11.15
6.29
6.23
NSVKMS, MBA COLLAGE.
DEBTORS TURN OVER RATIO 12 10 8 DPL
6
INDUSTRY
4 2 0 200203
200304
200405
200506
200607
YEAR
INTERPRETATION:This ratio indicates the speed with which debtors / accounts receivable are being collected. Thus, it is indicative of efficiency of trade management. The higher the ratio and shorter the collection period, better is the trade credit management and the better is the liquidity of debtors. And vise a versa. Debtors’ turnover ratio of the company decreased from last five years. It means company delay in the collection of receivables. The debtor’s turnover ratio of the company is less than the industry average. It does not satisfactory for the company. The delay oin coolection of receivables would mean that, apart from the interest cost involved in maintaining a higher level of debtors, the liquidity position of the firm would be adversely affected.
3. FIXED ASSETS TURNOVER RATIO To ascertain the efficiency and profitability of business the net fixed assets are compare to sales the more the sales in relation to amount investment in fixed assets, the more efficient is the use of fixed assets. It indicates higher efficiency. If the sales are less as compare to investment in fixed assets, it means that fixed assets are not adequately
NSVKMS, MBA COLLAGE.
utilized in business of course expressive sales is an indication of over trading and is dangerous. If the ratio is low, it indicates that investment in fixed assets is more than what is necessary and must be reduced. If this ratio is high it means that the fixed assets are being used effectively to earn profit in business
Fixed Assets Turnover Ratio =
YEAR
Net Sales Fixed Assets
2005-06
2006-07
2007-08
Sales
20070.68
43664
67199.9
Net fixed assets
20087.42
44247.89
78881.56
Net fixed assets turnover ratio
0.999:1
0.987:1
0.852:1
NET FIXED ASSETS TURNOVER RATIO 1.05 1 TIMES
0.95 0.9 0.85 0.8 0.75 NET FIXED ASSETS TURNOVER RATIO
2005-06
200-07
2007-08
0.999
0.987
0.852
YEAR
INTERPRETATION: The fixed assets turnover ratio measures the efficiency of a firm in managing and utilizing its assets.
NSVKMS, MBA COLLAGE.
The Net fixed assets Ratio is decreased from 0.999 to 0.987 in 2006-07 and 0.852 in 2007-08 because of increase in the plant & machinery from 44927.65 to 77396.05mn while sales increase from 43500.16 to 67199.9mn It means that company’s efficiency to managing & utilizing assets is decreasing so the company should try maximum utilization of its fixed assets to produce goods.
4. TOTAL ASSETS TURNOVER RATIO The amount invested in business are invested in all assets jointly and sales are effected through them to earn profits so in order to find out relationship between total assets to sales total assets turnover is calculated. Total Assets Turnover Ratio =
YEAR
Net Sales Total Assets
2005-06
2006-07
2007-08
Sales
20070.68
43664
67199.9
Total assets
57579.75
88815.68
115334.64
Total assets turnover ratio
0.35:1
0.49:1
0.58:1
NSVKMS, MBA COLLAGE.
TOTAL ASSETS TURNOVER RATIO 0.8
TIMES
0.6 0.4 0.2 0 TOTAL ASSETS TURNOVER RATIO
2005-06
200-07
2007-08
0.35
0.49
0.58
YEAR
INTERPRETATION: The assets turnover atio how ever measures the efficiency of a firm in managing and utilizing the assets. The Total Assets turn over of the company increased from 0.35 to 0.49 in 2006-07 and 0.58:1 in 2007-08 because of the highly increases in the Sales than the assets of the company. The Company’s Assets turn over ratio is continuously increases that show that the company has efficiency to managing and utilizing its assets than the previous year.
2.6.4 LEVERAGE RATIO: The long-term solvency of a firm can be examined by using leverage or capital structure ratios. The leverage or capital structure ratio can be defined as financial ratios which throw light on the long-term solvency of a firm as reflected in its ability to assure the long-term lenders with rehards to (1) periodic payment of interest during the period of loan, & (2) repayment of principal on maturity or predetermined instalments at due dates. DEBT-EQUITY RATIO
NSVKMS, MBA COLLAGE.
The relation between borrowed funds and owner’s capital is a popular measure of long-term financial solvency of a firm. This relationship is shown by debtequity ratio. This ratio reflects the relative claims of creditors & shareholdersagainst the assets of the firm. The D/E Ratio is, thus the ratio of total outside liabilities to owner’s total funds. Debt- Equity Ratio =
Total liabilties
* 100
Shareholders fund
YEAR
2005-06
2006-07
2007-08
Total long-term debt
29156.07
42515.59
65809.44
Networth
28423.68
46300.09
49525.2
Debt-equity ratio
1.03:1
0.92:1
1.33:
DEBT-EQUITY RATIO 1.4 1.2 TIMES
1 0.8 0.6 0.4 0.2 0 DEBT-EQUITY RATIO
2005-06
200-07
2007-08
1.03
0.92
1.33
YEAR
INTERPRETATION:The debt-equity ratio is an important tool of financial analysis to appraise the financial structure of a firm.it has important implication from the view point of the creditors, owners and the firm itself. NSVKMS, MBA COLLAGE.
The greater is the debt-equity ratio, the greater is the risk to the creditors. The debt-equity ratio increased from 41% to 58% from 2002-03 to 2004-05, after it decreased to 19% upto 2006-07. The D/E ratio decreased upto 19% means for every rupee of out side liability the firm has four (4) rupee of owner’s capital.therefore, a safety margin of 81 percentage available to creditors of the firm. The debt-equity ratio decreased because of the company hsd issed the additional 44, 21,000 shares in 2005-06. The D/E ratio of the company is less than the industry averages it implies safety view point of creditors as well as firm.
2. PROPRIETORY RATIO This ratio shows the proportion of proprietors’ funds to total assets employed in the business. The proprietors’ fund or shareholders equity fund consists of share capital, and reseves and surpluses. The higher the raito the stronger the the financial position of the company as it signifies that proprietors have provided larger funds to purchase the assets. A very high ratio is not desirable. Because it means that insufficient use is being made of outside funds. There can not be a standered ratio for all type of business, but it can be said that the proprietors’ fund should be enough to cover the fixed assets. According to study under taken by RBI this ratio was between 36-38% in most of Indian countries. It is obtained by dividing proprietors fund by total assets.the formula of calculating this ratio uis as under: Proprietory Ratio =
Proprietots Fund Total Assets
* 100
(IN %) YEAR
2002-03
2003-04
2004-05
2005-06
2006-07
Proprietory Ratio Of DPL
40.17
45.28
44.45
65.95
70.59
NSVKMS, MBA COLLAGE.
PERCENTAGE
TOTAL ASSETS TURN OVER RATIO 80 70 60 50 40 30 20 10 0
DPL INDUSTRY
2002-03 2003-04 2004-05 2005-06 2006-07 YEAR
INTERPRETATION:The proprietory ratio increased from 40.17% to 70.59% it means the proprietor has invested larger fund to purchage the assets. The proprietory ratio of the company is not sufficient because of high ratio; it implies unsufficient use made by out side fund. The ratio increases because of the company gave the bonus share in the 2004-05 and issued the additional shares in 2005-06 for expansion of the new project.thus the proprietory ratio increased faster than previous year. Because of higher percentage of ratio other parties has less claim in company but too much higher ratio results we cannot get benefit of trade on equity. 3. FIXED CAPITAL – ASSETS RATIO Normally, the fixed assets of business must be purchased out of fixed capital only, which includes share capital, reserves and surpluses and long term liabilities. This ratio, there fore shows the relationship between fixed capital and fixed assets. The ratio between 1:1 or more for i.e. the fixed capital must be more than fixed assets or must at least be equal to fixed assets. If fixed caapital is less than fixed assets, it would mean that short term funds have been used in purchasing fixed assets. To calculate this ratio following formula is used: Fixed Capital- Assets Ratio = fixed capital Fixed assets YEAR 2002-03 fixed capital-assets ratio of DPL
0.96
NSVKMS, MBA COLLAGE.
2003-04
2004-05
2005-06
2006-07
1.01
1.22
3.05
2.59
INTERPRETATION:The fixed capital-assets turnover ratio of the company increased from the 0.96 times to 2.59 times. This ratio implies that company has 2.59 rupee to purchage fixed assets of each rupee. It implies that it is good for the company.
2.7 CASH FLOW STATEMENT
NSVKMS, MBA COLLAGE.
PARTICULAR B) Cash Flow from Investing 2005-06 2006-07 0.00 A] CashActivities Flow From Operational Activities Purchase of Fixed assets & (2924.95) (22,815.17) intangible assets (including CWIP)1256.03 Net profit after tax 5020.61 Proceeds 23.01 19.12 Adjustments for: from Sale of Fixed assets Depreciation 2628.80 5636.66 Payment for purchase of Shares 846.57(100.00) Amortization of lntagible assets 1081.39 Interest charge and forex 2529.57 3051.06 Sale/ (purchase) of Other 81.25 Profit on sale of current investment (10.39) (81.25) Investments Provision for bad &doubtful 194.13 368.17 Interest and Dividend Received 32.69 63.91 debts/advances Employee cost in) investing Netstock cash option from/ (used (2869.40) - (22,750.89) Provision for gratuity, leave incashment 20.84 153.54 activities Provision fring benefit taxFinancing 29.02 59.36 C)for Cash Flow from Provision for deferred tax 10.55 Activities LiabilityProceeds no longer required written (91.23) (174.94) from issue of Share 25,000.00 back Capital InterestShare received (22.30)(170.76) Issue Expenses (620.04) (profit)/loss on sale of fixed 1.19 (1.92) assets/assets discarded Repayment of Preference Share (4,830.00) 6126.20 9931.86 Capital Premium on redemption of (2,733.26) Operating profit before working capital 7382.23 14,952.47 Preference Shares changesProceeds from Long Term 35,397.20 ChangesBorrowings in current assets and curren liabilities Repayment of Long Term (2217.75) (15,690.05) (increase)/decrease (4.17) (590.08) Borrowing in sundry bebtors (increase)/decrease in inventories 46.55 Proceeds from Short Term Loan 16120.00(69.97) 17,874.66 (increase)/decrease in other current (124.86) 27.79 (12702.21 (27,958.54) assets Repayment of Short Term Loan ) (increase)/decrease in loans and (179.13) (2,043.67) Proceeds from Foreign Currency (4099.41) advances Loan Increase/(decrease) in current liabilities 1144.16 3,871.52 Interest Paid (2680.71) (3,039.25) Case generated from operations 8264.78 16,148.06
2007-08
Tax paidNet (including FBT & TDS) (96.97) Cash from/(used in) financing (43.27) (5580.08) 23,400.72 Net cashactivities from operating activities 8221.51 16,051.09
(428.20) 21312.90 25022.21
Net increase/(decrease) in Cash and Cash equivalent Cash and Cash equivalent at the beginning Add: Cash and Cash Equivalent acquired on account of amalgamation Cash and Cash equivalent at the end NSVKMS, MBA COLLAGE.
(55506.36) 10443.62 150.80 7568.52 (1.00) 1199.10 4592.27 (5128.21) (431.79) 244.94 922.93 37.59(59561.84) 53.53 73.69 651.30 (139.73) 3187.52 (849.52) 8.89 13008.79 23452.41 14968.89 (1480.44) (706.10) (97.05) 22120.90 163.33 (18625.00) (3585.68) 5658.20 6223.50 (4517.17) 25450.41
(227.97)
16,700.92
(13226.73)
1518.88
1,290.91
18197.28
1290.91
205.45 18,197.28
4970.55
A firm basically generates cash & spends cash that from a financial point of view. It generates cash when it issues securities, raises a bank loan, disposes an asset, sells a product so on. It spends cash when it redeems securities puechases materials etc. the aivities that generate cash are called source of cash and the activitie that absorb ash are called use of cash. INTERPRETATION:The statements of cash flows provide a summury of source of cash inflows and uses of out flows during a period of time. Cash Flow from Operating Activity Here in starting of statement we can clearly see that increase in the net profit after tax & extra ordinary items in last five years, it only decrease in the 2003-04. Here the operating profit before working capital changes is more because of increase in dividend income. And the cash generated from operation decrease because of hige trade payables, and also, net cash generated from operating ativities decreasedbecause of hige direct taxes than previous year. Cash Flow from Investing Activity Here, the cash from investing activities is more than previous year because of sales of investment and high dividend income receved while in the previous year the company has purchased the investment. Cash Flow from Financing Activity In the previous year cash use from financing activities increases because of preceeds from issuing shares while in the current year the cash flow from financing activities decreases because of high interest and financial charges and dividend ad dividend taxes paid.
NSVKMS, MBA COLLAGE.
2.8 COST OF PRODUCTION Cost of production is depending on the fixed cost and the variable cost incurred in the production. In variable cost include the material use in the production and power, fuel, water and packaging and other manaufacturing expenditure. In fixed expenditure cost includes staff expenses, financial expenses etc. in cost of production, raw material price is mostly affected n the production.
NSVKMS, MBA COLLAGE.
PARTICULAR
2006-07
2005-06
Opening stock
101.81
129.51
Purchase
2125.66
1556.05
(-) closing stock
1928.79
101.81
A] VARIABLE COST (a)Raw Material Consumed
Total rs.
2034.58
1583.75
(b)packaging material consumed Opening stock
3.2
4.68
Purchase
63.86
39.40
(-) closing stock
7.38
3.2
Total rs. (c)E.T.P. material consumed (e) Other stock mfgs. Expenses Opening Transportation Purchase Conversion charges (-) closing stock Factory Total rs.expenses Labour charges (d)Power & fuel consumed
59.68
40.88
0.38 27.47 17.23
0.80 132.55
21.97
61.522 0.26 5.02
0.38
42.98 13.83 13.67 20.7
17.35
21.44
Forwarding & handling charges Electric power & burning
62.03 62.13
63.85
49.94
Pallatisation charges Fuel purchased & consumed
1.62 1.4
1.59
3.12
Consumable storescharges Gas consumption
32.78 80.8
6.41
0
Totalrs. rs. Total
144.32 211.89
TOTAL MFGS.EXP.
2467.83
129.54 152.55 1920.39
B] FIXED COST Salary, Wages & bonus
99.03
83.49
Repairs& maintainance
80.95
84.61
Administrative expenses
156.36
15.34
Interest & financial charges
47.46
50.48
Depreciation
47.94
44.12
Total fixed cost
431.74
416.39
NSVKMS, MBA COLLAGE. TOTAL COST
2847.10
2333.92
CHART OF TOTAL COST OF PRODUCTION
80 70 60 50 40 30 20 10 0
2005-06
ing ag
pa ck
R. M
E. T. P. M . ut i ot he lity rm fg s sa lar y re ad pa m irs in ist ra t io fin n an de cia pr ec l iat io n
2006-07
.
cost (in %)
cost of production comarision
expenses
INTERPRETATION:Raw Material:Here, raw material increased by 1.98% because of increase in the cost of purchasing raw material than the previous year. Packaging:The packaging cost increase by 0.25% inspite of increased in closing stock because of increased in the more than 150% than pprevious year.
NSVKMS, MBA COLLAGE.
E.T.P. Material:There is a normal increase in the E.T.P. material than the previous yearbecause of increase in the purchasing of material.by more than 180% than previose year and increase in the closing stock. Other Manufacturing Expences:The other manufacturing expenses increase by 0.8% because of increase in the consumable stores than previous year. Salary, Wages and Bonus:Here, salary and wages includes salary & wages to employees, salary to directors and bonus charges increased than previous year but it decrease in the concept of total cost of production than previous year. Repairs & Maintenance:Repairs and maintenance decreased by 0.79% because of decreased in the repairs and maintenance from 8.5 lacs to 8 lacs than previous year. Interest and Financial Charges:It decreased because of decreased in the interest on loan from 5, 00,000 to 4, 75,000 as compared to previous year. Administrative Expenses:Here the administrative expenses increased, but decreased in the concept of cost of production than previous year. Depreciation:The depreciation decreased related with cost of production than previous year by 0.21%
NSVKMS, MBA COLLAGE.
3. FINDING AND RECOMMANDETION The company is growing fastly in term of sales, net profit, gross profit as compare to industry average, and the company’s second unit is expected to complete latest by Jan.2008 and its commercial production will start from feb.2008. Company’s gross margin decrease in the current year because of highly increase in the manufacturing cost and decrease in the stock so the company has to try to decrease in the operting cost and try to effective utilization of the rawmaterial. The company has accounted about 75% export sales out of total sales. India is the second largest food producing country next to the china in the world and the food processing industry is growing fastly in the India, so company has to expand its domestic market, thus company can increase the sales. The company’s reserve and surplus increae year after year so company has to give more dividend thus company’s reputation increase.
NSVKMS, MBA COLLAGE.
The company’s total assets turnover ratio decreased continuously while increase in the industry average company shall try to effective utilization of its resources. The company shall try to increase its products quality and productivity and also to make more coustomer to increase the domestis as well as export sales and get the opportunity to grow with the growth of food processing industry. The company’s debtor’s turnover ratio decline it means that company delays in the receivables so the company shall try to make fast collection of debt for it company shall try to make such offer for ex. Gives discout etc. thus company can increase its networking capital.
NSVKMS, MBA COLLAGE.
4. CONCLUSION Dynemic product limited is a well-developed company in the dyes & pigment industry India’s one of the manufactures. The organization wants to expand new project at ankleshwar to produce food colour and lack colour to expand the domestic market.the Dynemic products limited is an enviornmetal oriented unit and also believe in research and development thus they always try to improve their quality and the company also working for the social welfare. From above financial data we conclude that the company’s profitability is continuous increasing as compare to the industry, but the EPS decreases because of issuing additional shares in 2005-06 and also decrease the assets turn over ratio in terms of both fixed and total assets than industry, because of high Capital work in progress. To expanding themarket reach as well as product range the company have formed a 100% subsidiary company Dynemic USA Inc in the USA to capture the market of USA. During the training that I got at this organization was an excellent and it was superb experience for me to undergo this 28 days’ training.
NSVKMS, MBA COLLAGE.
5. BIBLIOGRAPHY Books and Reports “Finance Management” by Khan& Jain, Fifth Edition, published by Tata Mc Graw-Hill Publishing Company Limited. Prospectus of the company. Annual Report of Dynemic products limited of 2006-07 & 2005-06 Web sites: www.dynemic.com www.google.com www.bseindia.com www.asiancerc.com
NSVKMS, MBA COLLAGE.
NSVKMS, MBA COLLAGE.
6. ANNEXURE Dynemic Products Ltd. : Profit and Loss (Rs in Cr.) 0703-(12) 0603-(12)0503-(12) 0503-(12) 0403-(12) 0403-(12) 0703-(12) 0603-(12)
0303-(12) 0303-(12)
32.31
19.53
Income : & LIABILITIES CAPITAL Operating Income Owners' Fund Equity Share Capital Expenses Share Application Money Financial Expenses Peference Share Capital Personnel Expenses Reserves & Surplus Selling Expenses Loan Funds Administrative Expenses Deposits Expenses Capitalized
0.47 0.99 0.00 0.00
Total Operating Profit ASSETS Other Recurring Income Cash & Balances with RBI
11.33
6.91
3.45
3.42
0.00
0.00
0.00 0.34 0.00 0.61 4.31 0.00
0.00 0.32 0.00 0.54 2.76 0.00
1.96 0.000.00
1.26 0.00 0.00
0.00 15.19
0.52 0.88 0.36
5.80
29.29
Adjusted PBDIT Money at call and Short Notice
30.71
0.00 3.43
Provisions Made
0.00 0.48
Other Write offs
0.01
Advances Adjusted PBT
30.22
13.93
1.12
0.78
0.00 0.00
0.00
0.00
8.00
2.915.78
2.12 6.67
33.26
15.60 22.49
13.54 22.39
12.85 17.41
0.76
0.19
1.41 0.13
0.49 0.11
23.25 0.00
23.80 0.00
17.90 0.00
0.00
0.00
0.00
0.42 0.04
0.380.04
0.32 0.03
0.01
0.00
0.00
0.00 22.82
0.00 23.42
0.00 17.58
1.52
9.63
0.76 9.25
0.91 7.64
1.44
13.20
0.01 25.43
2.41
0.00
0.00
0.00
0.81
0.00
3.49 6.28
0.00 0.44
0.79
0.00
25.88
10.40
0.46
1.43 0.00
25.10
0.00
Depreciation Investments
0.00
1.67 0.00
32.32
1.42
25.30
0.00
0.00 3.02
25.98
11.33
1.56
Borrowings made by the bank Operating Expenditure Other Liabilities & Provisions
28.53
0.00
Fixed Assets Tax Charges Gross Block
1.02
Less: Revaluation Reserve Adjusted PAT
29.20
0.00
24.05 0.00
21.300.00
0.00 22.66
0.00 16.67
Less: Accumulated Depreciation Non Recurring Items
0.00
2.81
-0.07
2.36
0.13 1.97
0.001.61
1.23 0.00
Other Non Cash adjustments Net Block
-0.11
8.35
0.02
8.15
0.03 7.66
0.697.65
-0.80 6.41
0.11
0.00
0.00 1.25
0.00 1.56
13.30
9.46 4.37
8.94 3.30
0.04
0.00 21.23
0.00 0.34 0.0017.28
0.01 0.62 15.50 0.00
5.36
3.99
2.61
Capital Work-in-progress Reported Net Profit
2.67
Other Assets Earnigs Before Appropriation
5.74
Miscellaneous Expenses not written off Equity Dividend Total Preference Dividend
1.13
Note Retained Earnings
4.41
11.16
1.38
1.88
0.00
10.51
2.46 16.96 0.02 38.73
4.59 1.13 0.00
2.05 16.89 0.03 39.82
3.30
5.85 0.44
Contingent liabilities
1.19
0.26
0.00
0.00
0.00
Book Value of Unqouted Investment
0.00
13.20
0.04
0.00
0.00
Market Value of Qouted Investment
0.00
0.00
0.00
0.00
0.00
Dynemic Products Ltd. : Balance Sheet (Rs in Cr.)
NSVKMS, MBA COLLAGE.
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