A PROJECT REPORT ON STRATRGIC PERSPECTIVE OF KINGFISHER BEER- UB GROUP

A PROJECT REPORT ON STRATEGIC PERSPECTIVE OF KINGFISHER BEER UB GROUP

SUBMITTED TO PROF.HARI BANDHU PANDA SUBMITTED BY PRANAB KUMAR SAHOO(S0936)

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DECLARATION

We the students of Centurion School of Rural Enterprise and Management do here by declare that the project report entitled A PROJECT REPORT ON STRATRGIC PERSPECTIVE OF KINGFISHER BEER- UB GROUP is a bonafied work done by us in partial fulfillment for the award of degree in Post Graduate Programme in Management 2008-2010. No part of this report has been submitted to anyone at time before and any other University for award of any degree or diploma

PLACE DATE Pranab Kumar Sahoo(s0936)

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Table of Contents
Serial No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Title Abstract Introduction Industry Analysis PESTEL Analysis FIVE Force Analysis Key Drivers of Change Diamond Analysis Organization Analysis BCG Matrix Critical Evaluation Resource Analysis Capabilities Strategy Recommended Ansoff Marix Conclusion Reference Appendix Page No. 5 5 7 8 8 10 11 13 14 16 16 17 19 19 21 22 23

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ABSTRAC This project report is prepared as it is required for the partial fulfillment of the Strategic Formulation and Management course. The present report is an unique effort to highlight the achievements of the Kingfisher beer segment of United Breweries Ltd, and the report, in a nutshell, has tried to give a glimpse on the company position, Industry analysis, comparative study, portfolio of its products, its core competencies, value chain etc. The project also tries to bring out the shortcomings, if any in the present system and thus recommends suggestions to improve the same. INTRODUCTION The Indian beer industry has been witnessing steady growth of 10-17% per year over the last ten years. The rate of growth has increased in recent years, with volume passing 170m cases during the 2008-2209 financial years. The Indian beer industry has witnessed a big change during the last five years. The industry was previously dominated by competition between the Vijay Mallya controlled United breweries group and the Manu Chabbria controlled Shaw Wallace. The scenario changed, however after the entry of SAB Miller in India. The international beer giant started by acquiring small breweries in the South but then completely changed the landscape with the acquisition of Shaw Wallaces beer portfolio for a reported $264m in 2003. This gave SABMiller ownership of strong brands like Haywards 5000 along with its existing brands. After the acquisition, SABMiller focused on spreading its footprints across India, including opening new breweries in states where Shaw Wallace did not have a presence. Excessive regulations and further extensions of government interventions, in the areas of distribution and pricing, is affecting the profitability of the industry as well as restricting government revenues. In addition restrictions on advertizing and licensing of retail outlets continue to be the present challenges to the industry. Unlike most developed countries where beer is less regulated and available freely, high level of regulation and higher price hampers beer sales in India. Uniform tax regime for beer in all states will be a boon for the industry. The UB group was established in 1947 when the late Mr.Vittal Mallya acquired United Breweries Limited. Kingfisher, the most visible and modest brand made its entry in 1960. United Breweries Limited which is also referred to as the beer division of the company is led by Mr. Kalyan Ganguly, President and Managing Director. UBL, the flagship company of the UB Group has an association with the brewing dating back over five years, starting with five CSREM 2009-11 Page 5

breweries in South India. from the Bullock Cart loaded barrels or hogheads of frothing ale, the beer business has gone on to become the undisputed King in the Indian Beer market. Kingfisher Beer 50% market share nationally Sold in 52 countries and also on international flights. Every third beer sold in India is Kingfisher. Indias 1st global consumer brand-Kingfisher

Its flagship brand Kingfisher has achieved international recognization consistently, and has won many awards in International Beer Festivals. Kingfisher Premium Lager Beer is currently available in 52 countries outside India. It has been ranked amongst the top ten fastest growing brands in UK.

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INDUSTRY ANALYSIS There are many factors in the environment that affects the industry. To know about those factors analysis of the immediate and extended environment is done and many tools have been formulated for the same.

The blue color indicates the immediate environment and the violet color indicates the extended environment of the organization.

PESTEL Analysis is one such tool to analyze the extended environment. It includes studying the Political, Economic, Social, technological, Ecological, and legal factors in the industry that affect the organization.

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PESTEL ANALYSIS: Political factors: - Extensions of government intervention, in the areas of distribution and pricing, is affecting the growth and profitability of the industry as well as restricting government revenues. In addition, restrictions on advertising and licensing of retail outlets continue to present challenges to the Industry. Economic factor: - The Indian beer industry is plagued with a myriad of taxes & levies that vary from state to state. These along with price regulation, inadequate market infrastructure and restrictions in interstate movement of beer, pose a great challenge for the industry. Unlike most developed countries where beer is less regulated and available freely, high level of regulation and higher end consumer price hampers beer sales in India. There is no uniform tax regime for beer in our country. Social factors: - consumption of beer and its manufacturing is considered unethical by some Indians. So setting up infrastructure for beer manufacturing is a challenge as it is not easily accepted by the locality and its people. Technological factor: - innovative R & D used by the organizations is leading to high quality technological changes. So Kingfisher needs to adopt rapidly to the changing technology. Ecological factor: - It is important to realize that the beer sector can contribute immensely to the agricultural sector, as beer is an agro-based product. Also marginal barley farmers, particularly stand to benefit from the growth of the beer sector. Legal factors: - Restrictions on advertising and licensing of retail outlets is a legal challenge to the industry. FIVE FORCE ANALYSIS: This is a tool devised by Micheal Portor for studying the immediate environment of the organization. It is done to increase the competitiveness of the organization. All companies can be defined by five forces: Bargaining power of the buyer Bargaining power of the supplier

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Threat of entry Threat of substitute Rivalry

To be competitive enough companies should try to decrease all the five factors mentioned above. Threat of entry Barriers to entry are: Economies of scale Product differentiation Capital requirement Switching cost to buyer Access to distribution channel Other cost advantage Govt policies Incubments defense to market share Determinants of supplier power Supplier concentration Availability of substitute input Importance of suppliers input to buyer Suppliers product differentiation Importance of industry to buyer Buyers switching cost to other inputs Suppliers threat to forward integration Buyers threat to backward integration Determinants of buyer power Number of buyers relative to sellers Product differentiation Switching cost to use other product Buyers profit margins Buyers use of multiple sources Buyers threats of backward integration Sellers threat of forward integration Importance of product to the buyer Buyers volume

Rivalry among existing firms Number of competitors Relative size of the competitors Industry growth rate Product differentiation Capacity augmented in large increments Buyers switching costs Diversity of competitors Exit barriers Strategic stakes

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Threat of substitute Relative price of substitute Relative quality of substitute Switching cost to buyers

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KEY DRIVERS OF CHANGE: Bargaining Power of Customers: It is the extent to which customers are successful in forcing prices down, or securing high quality or more service at the same price. Customers tend to be powerful when the quantities they purchase from a large portion of the sellers total sales. Buyer does not understand the quality of the beverages and as there are not many players in the market the customer has less command over price. Rivalry : As a CAGR of 11% is expected in beer for the next five years, many MNCs are eyeing the Indian market. Currently the major rivalry of Kingfisher premium are Budwiser, Carlsberg, Foster, and Tiger and for kingfisher Strong its Haywards 5000, Palone. SABMiller has made its hold as Best selling Strong beer brand but Kingfisher is till the largest selling strong beer brand with 29% market share and is currently supplying in 55 countries. There are also some local players that re in the market but does not provide much threat to Kingfisher. Threats to new entrance: Beer industry is in growth phase with 11% CAGR, so it is attractive for new player. But strong brands like Kingfishers and Haywards which already have their brand recall and extensive advertisement new entrants are expected to struggle to expand their consumer base as they try to penetrate the beer market in India. Foreign brewers have been eyeing the Indian market for some year now as India is widely acknowledged to be the last untapped big growth market. Several international brewers have currently built brand association and are marketing their brands aggressively through various point of sale promotions throughout their distribution network. Threats of Substitutes: India is predominantly a spirits market and beer is a minority preference for those who consume beverage alcohol. So substitutes is biggest threat as preference for beer among beverage drinker is less but the low penetration in beer consumption in comparison to international levels offers the expectation of substantial and sustainable growth in demand for beer in years to come, particularly given the youthful age of Indias population. Bargaining Power of Suppliers: With increasing cost of raw materials and decreasing cost of barley suppliers bargaining power was high but with backward integration by acquiring Maltex Malsters Ltd. And shifting their production of beer on Malt Company has achieved a CSREM 2009-11 Page 10

hold on its raw material and considerable reduced the supplier strength and dependency. Company has also collaborated with Govt. of Punjab and Haryana of its raw material. DIAMOND ANALYSIS This is another tool for analyzing the extended environment of the organization.

Factor Market Condition

Demand Condition Demand Condition

Rivalry

Related & Supporting Industries

The individual points on the diamond and the diamond as a whole affect four ingredients that lead to a national competitive advantage. These ingredients are 1. Availability of resources and skills 2. Information that firms use to decide which opportunities to purse with those resources and skills 3. The goals of individuals in companies. 4. The pressure on companies to innovate and invest. CSREM 2009-11 Page 11

Factor Condition India is becoming an emerging hub for tourist and hence the hotel and hospitality industry is increasing Demand Condition Demand condition is increasing in India due the fast changing life of the people. the more income opportunities for youth. Related and Supporting Industries For Kingfisher Beer the local supporting industries are Hotel and Hospitality Industry, Tourism Industry, Air lines Industry etc So a competition in these industries gives an added advantage to Kingfisher. Rivalry Lots of foreign companies are entering with new innovative ideas and products. There are some strong competitor of Kingfisher in India are Foster-Australia, Carlsberg Beer, Pilsner, Heineken, Budweiser etc, and some of local rivalry are Ambari, Cobra. Still Kingfisher has very few strong rivalries so which makes it more attractive. In case of Kingfisher Beer there are low local rivalry pressures than global rivalry. Local rivalry forces firms to move beyond basic advantages that the home country may enjoy, such as low factor cost. OPPORTUNITIES Beer consumption is increasing Per capita beer consumption in India 0.5 liters which is very low Brand extension benefits

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 Changing lifestyles of middle class Increase in disposable income THREATS High taxes & regulation Prohibition on advertising Indian culture is a major hindrance Negative perception about alcoholic beverages widely prevalent Many international players entering in India This is a Regulated industry

ORGANIZATION ANALYSIS MISSION AND VISION: We are focused on assuming leadership in all our target markets We seek to be most preferred employer wherever we operate. We recognize that our organization is built around people who are our most valuable asset. We will always be the partner of choice for customers, suppliers and other creators of innovative concepts. We will operate as a decentralized organization and allow each business to develop within our stated values. We will be a major contributor to our National Economy and take full advantage of our staring resource base. SBUs:SBUs are the elements or units within the organization which undertakes all the activities to make the product and services available to the customers. CSREM 2009-11 Page 13

As each brand of the of the UBL is targeted to a particular segment of custyomers, each brand of th UBL forms one Strategic Business Unit. The different brands which forms the SBUs are as follows: TajMahal beer Kingfisher Strong Kingfisher Lager Beer London Pilsner Kingfisher Draught Kingfisher Blue UB Ice Beer Kalyani Black Label

BCG MATRIX
It is a widely used portfolio management method for evaluating the performance of business units. There are four quadrants in BCG matrix: question marks, stars, cash cows, and dogs. On the X axis market growth is measured, which indicates the level of market attractiveness. On Y axis, market share is measured, that serves as a measure of the companys strength in the market.

STAR
Star is high growth, high-share businesses. Very often, they need heavy investment for financing their rapid growth. Eventually, their growth slows down and they turn into cash cow. TAJMAHAL BEER:Taj Mahal premium larger beer is prepared with finest malt made at United Brewery own malt house using premium quality barley. It has a distinct aroma and a unique taste. The demand of this beer is mainly in abroad (Australia, France, U.S.A) as it is premium priced and have bitter taste which is not liked much in India, though it is served in some premier hotels in India. The demand outside is very good and it accounts for good market share in the exported beer in India. KINGFISHER STRONG:CSREM 2009-11 Page 14

Spectacular growth of 36% is seen in strong beer (against a market growth of 16%) was witnessed. Kingfisher strong has now achieved the number one position in the strong beer segment.

CASH COW
Cash cows are low-growth and high-share businesses. Such established and successful business lines require less investment to maintain their market share. They generate a lot of surplus that accompany can use to pay its bills, or invest in other business. KINGFISHER LARGER BEER:-It has witnessed a market growth of 13% in comparison to the larger beer industry growth of 9.4% in the larger beer segment; UBL is the market leader in all the 10 largest states of the country. UBL commands

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market share of around 40% with 67% of the market share in the beer segment.

QUESTION MARK
Question marks are low-share business units, in a high growth-market. They require a lot of cash, for maintaining the market share. Any business has to think between building a question mark into stars or whether they have to be phased out. LONDON PILSNER:It has witnessed a market growth of more than 20% and targeting a market share a market share of 15%. CSREM 2009-11 Page 16

 KINGFISHER DRAUGHT:This beer has less water in comparison to other beer type. It has good market growth as it proving success in its 2nd year still the market share is less. KINGFISHER BLUE:This is launched around 8-9 months before to tap those customers who want less alcoholic beer in comparison to strong beer but more than mild. It has around 6% alcohol content. Since it has launched sometime before hence the market share occupied is less as strong beer and larger beer segment is increasing is very fast, however growth rate main up.

DOG
Dogs are low-growth and low-share businesses. They may generate enough surplus to maintain themselves, but do not hold out the promise to be a larger source of cash. UB ICE BEER:This beer is launched for trendy people in 330ml can. It was different from the traditional larger beer as it was made using unique refrigeration which involves the formation of ice crystals which were filtered out giving the brew a crisp, clear and strong taste. It didnt got good response as it is very low market growth instead people are drinking more the larger and strong beer. KALYANI BLACK LEVEL:One of the oldest brands launched in 1969. It has low market share as it is only popular in eastern India and it assumed to be economical, the market growth for this brand is not good as people are shifting towards other beers such as London pilsner which is also economical brand. CRITICAL EVALUATION Mission statement (modified) :- To be a global supplier of world class exotic alcoholic and non- alcoholic beverages according to the taste and preference of the customers. Vision statement (modified):- To be the market leader and the most preferred employer industry RESOURCE ANALYSIS CSREM 2009-11 Page 17

STOCK RESOURCE Physical resource: UB group has a strong infrastructure making a strong foothole in 60 countries over the whole world with eight beer brands and a huge human resource.it is available throughout India and is dominant particularly in South and West India. Ub has 16 company owned breweries apart from 9 contract breweries in 20 different location across the contry. It has five brands which are in top 50 spirit brands in the world wide list. It has a strong distribution network and has reduced its intermediaries to make it more cost efficient.it has sixteen hundred shops apart from pus and bars. Better retailing outlets are also to be opened under the Kingfisher Brand. Financial resource: The company saves a lot of money in financial area as it is a cash rich and debt free company and does not bear any interest burden. It has captures about 50 % market shares in the industry. Subtle Resource: The Company has a strong brand image and customer loyalty. It is the first global consumer brand. It has a brand market share of about 35 % in the beer industry. Technological resources: In the area of technological development the company has adopted the concept of informalisation rather than structuring various processes and methods. It has efficient R & D activities and they are always oriented to make product more functionally rather than adding packaging which are reserved for exports. CAPABILITIES: Segmentation: Demographic segmentation- Kingfisher Mild is for the segment of youth from 16 to 25 yrs and Kingfisher Strong for the people of age group 25 years and above. Segmentation based on situation- birthdays, anniversaries, New year parties Targeting: Kingfisher Mild (alchohol<4%) for youths who drink for fun, first time drinkers who drink for experience and urban women who prefer to drink light.Kingfisher Strong (Alchohol>4%)- those who want to light beer to something straonger and regular drinkers who prefer stronger flavor. The marketing mix of Kingfisher.
Product No 1 selling product in its segment good quality raw material is used to maintain the quality standards. consistency of product quality is high always tastes fresh due to good quality and well developed distribution network Place It is available throughout India, and is dominant particularly in south and west India. Kingfisher also has a presence in 60 countries It has some sixteen hundred shops apart from pubs and bars

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Price In both mild and strong beer segments Kingfisher uses competitive pricing strategy For 650ml- Rs 65 For 330ml-Rs35

Promotion Swimsuit calendar Kingfisher Goodtimes F1 race

STRENGTH Strongest worldwide distribution system Huge finances backing from UB group Oldest & Largest player in India Worldwide known brand

WEAKNESS High concentration on strong beer market Too much diversified

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STARTEGIES RECOMMENDED

The portray alternative corporate growth strategies. Igor Ansoff presented a matrix that focused on the firms present and potential products and markets (customers). By considering growing via existing products and new products, and in existing markets and new markets, there are four possible product market combinations. It consists of four parts: Market Penetration Market Development Product Development Diversification
Exi stin g Ma rket Existing product New product Ne w Ma rket

Market Penetration

The firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market shares. Consolidation: The firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market shares. As Kingfisher lager premium has captured 40%-67% of market share in the lager beer segment, it should invest more on this product and make it more widely available. Kingfisher strong beer is the most happening brand of Kingfisher, it is also the market leader, however to increase its sales and market share, new promotional activities and new packaging/bottling should be considered. Market Development The firm seeks growth by targeting its existing products to new market segments. Some very hard drinks which are less preferred by Indians can be segmented to foreign countries and mainly be exported.

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Affordable beers should be penetrated to segments of low income group who mainly prefer unbranded alcohols and position it accordingly.

Product Development The firm develops new products targeted to its existing market segments. UBL should produce beers with more alcoholic contents as the customers for strong beers are increasing in the country. The Company should also manufacture zero alcohol beers and sell it in 500ml cans at affordable as well as premium price depending upon the existing segments. New brand of beer which has a sweet fragrance and taste will be highly demanded in India.

Diversification This result the company entering new markets where it had no presence before. Forward integration - The company should diversify into hotel industry where it can supply its premium brands which are mostly exported but some amount is supplied to premium hotels in India. Forward integration - It should also establish some value for money bars and restaurants as well as premium bars and restaurants and establish it throughout the country. Backward integration - The Company should try to grow barley scientifically used for manufacturing of beers which can add up value and quality to its products. Kingfisher can start manufacturing soft drinks which have a strong taste like thumbs up. There is an another wonderful scope for Kingfisher to establish its own retail chain to sell exclusively Kingfisher brands in the name KF PARLOR, GOODTIMES PARLOR etc

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CONCLUSION It would not be an exaggeration to say that Kingfisher Beer is the undisputed market leader in India. Every third beer in India sold is Kingfisher Beer. But the scenario is changing; now foreign country players are showing more interest in India, and hence they are entering to this market with new innovative ideas and products. In this situation in the whim of past achievements Kingfisher should not be a victim of marketing myopia. So the key drivers of change should be highly taken care of. The bargaining power of the customers of Kingfisher is low which an added advantage to the company is. But the bargaining power of its suppliers is high as the barley production is in the hands of farmers. However it has up to a certain extent has gained hold on the raw materials. Still the company has to create strategies to reduce the bargaining power of their suppliers. Due to the attractiveness of the industry the company is likely to face rivalry and threat of new entrants up to a great extent for which it should be prepared from now. All these analysis give a clear picture of the strategies and plans they should create to maintain their position and survive in the near predicted competition. The project has been done without much interaction with the Organization due to location constraint. Another big constraint for this project was time, so in limited time best effort has been given to prepare this project. This project has been done only in reference to Kingfisher beer and the analysis is only restricted to this organization. However the suggestion and recommended strategy can be incorporated to any organization in beer industry.

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REFERENCE

1. www.ubgroup.com 2. www.kingfisherworld.com 3. www.mckinsey.com 4. www.scribd.com 5. www.slideshare.net 6. www.quickindia.com 7. http://www.scribd.com/doc/19612509/final-report-on-kingfisher-beer 8. http://www.quickmba.com/strategy/global/diamonds 9. http://www.kingfisherworld.com/corporate/UBL_Annual_Report_2009.pdf 10. http://www.bestmarkeingtextbook.com/detailedcontent.pdf 11. www.authorstream.com 12. www.linkedin.com

13. Johnson Gerry & Scholes Kevan, Exploring Corporate Stratrgy, 6th edition 2005,Pearson Education

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APPENDIX BALANCE SHEET

Balance Sheet as at March 31, 2009

Rs. in Thousands Particulars 2009 2008

SOURCES OF FUNDS

Shareholders Funds Capital Reserves and Surplus 6,112,597 2,709,048 8,106,431 10,815,479 2,685,043 3,427,554

LOAN FUNDS Secured Loans Unsecured Loans 5,348,372 Deferred Tax Liability 90,302 [Refer Schedule 19 Note 15] 17,152,166 11,551,271 4,410,559 1,753,006 6,163,565 4,538,387 809,985

173,122

APPLICATION OF FUNDS Fixed Assets Gross Block 9,272,547 2,294,917 7,149,646 1,547,755

Less: Accumulated Depreciation and Amortization Net Block Capital Work in Progress 7,177,980

6,977,630 865,308 7,842,938

5,601,891 1,576,089

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Investments 1,040,709

1,940,957

Current Assets, Loans and Advances Inventories Sundry Debtors 3,221,537 Cash and Bank Balances 175,912 Other Current Assets 2,282 Loans and Advances 1,630,376 4,699,634 1,169,167

417,733

140,769

2,728,788

1,179,419

9,617,300

5,748,317

Less: Current Liabilities and Provisions

Liabilities 291,592 Provisions

2, 065,734

2,

183,295 2, 249,029

124,143 2,

415,735

Net Current Assets 3, 332,582

7, 368,271

17, 152,166 11, 551,271

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Profit and Loss Account for the year ended March 31, 2009
Rs. in Thousands Particulars 2009 2008

INCOME

Sales and Service

Less: Excise Duty

24,604,481
7,621,772
16,982,709

19,802,844
6,112,233
13,690,611

Other Income 13,948,559

492,991

17,475,700

257,948

EXPENDITURE Cost of Sales Other Expenses Interest and Finance Charges Depreciation and Amortization 13,016,419 Profit t before taxation 932,140 10,472,894 4,327,570 896,377 762,150 16,458,991 8,611,492 3,364,369 428,282 612,276

1,016,709

Provision for Taxation

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[Refer Schedule 19 Note 15]

Current Tax Fringe Benefit t Tax Deferred Tax (Charge)/Write back (307,415) Profit t after taxation 624,725

(294,549) (14,400) (82,820)

(264,889) (12,000) (391,769) (30,526)

624,940

Less: Dividends [Refer Schedule 19 Note 22] (86,658) (170,912)

Transfer to General Reserve Profit t carried to Balance Sheet 538,067

(65,000)

389,028

Earnings per share (Basic/Diluted) [Refer Schedule 19 Note 13] 2.49 2.29

Cash Flow Statement for the year ended March 31, 2009
Rs. in Thousands Particulars 2009 2008

A Cash Flow from Operating Activities Profit t before taxation 932,140 Adjustments for: Interest Income (29,692) Depreciation and Amortization 612,276 (147,143) 1,016,709

762,150

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Interest Expenses (Net) 428,282 Dividend Income Provision for Doubtful Debts 34,008 Provision for Doubtful Advances 8,220 Bad debts written off 2,700 Bad advances written off 543 (Profit t)/Loss on Sale of Assets 5,926 1,062,263

896,377

(48,954) 2,710

928

8,991

5,866

2,185

1,483,110

Operating Profits before Working1,994,403 Capital changes

2,499,819

Adjustment for Working Capital Changes: (Increase) / Decrease in Sundry Debtors (1,112,436) (Increase) / Decrease in Inventories (45,524) Increase / (Decrease) in Current Liabilities 245,864 And Provisions (Increase) / Decrease in Other Current Assets, Loans and Advances (895,914) Cash generated from Operations 1,098,489 Direct Taxes paid (including TDS) (295,386) Net cash generated from Operating Activities 803,103 (1,556,589) (3,716,429) 16,182 (1,489,798)

(461,209)

(208,833)

(1,216,610)

(309,292)

(1,525,902)

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B. Cash flow from Investing Activities Purchase of Fixed Assets (including acquisition on Amalgamation) (2,566,939) Sale of Fixed Assets 33,109 Purchase of Investments (450,010) Interest Income 29,692 Dividend Income Net cash used in investing activities (2,954,148) 48,954 (1,441,519)

12,226

(900,248)

9,547

(2,271,040)

C Cash Flow from Financing Activities (Repayment) / Proceeds from unsecured term loans (net) 392,997 (Repayment) / Proceeds from Bank Borrowings (net) 182,917 Loan / Repayment from United Breweries (Holdings) 801,310 Limited Proceeds from Rights Issue Advance to subsidiary companies / others (223) Interest Paid (417,500) Dividend paid (including distribution tax) (25,276) Net cash generated from Financing Activities 934,225 4,248,854 943,021

(267,215)

(122)

(756,990)

(128,785)

4,038,763

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Net Increase/ (Decrease) in cash and cash equivalents (1,216,820)

241,821

Opening Cash and cash equivalents Cash on hand including Remittances in Transit 7,192 Bank Balances including Cheque on hand 1,385,540 1,392,732 Closing cash and cash equivalents Cash on hand including Remittances in Transit 8,037 Bank Balances including Cheque on hand 167,875 175,912 1,760 8,037

167,875

175,192

415,973

417,733

Cash Flow Statement Analysis Balance Sheet Analysis Balance sheet is the most significant financial statement and it also indicates the companies financial condition. It also contains the information about resources and obligations of a business entity and about the owners interest in the business. Generally balance sheet provides the information about asset, liability and owners equity. Thus the balance sheet of a firm is prepared on 31 march reveal the firms financial position on the specific date. Here there is an analysis of balance sheet and the profit and loss account of the year 2008-09 of UB Group is given from the companies annual report which has given in the annexture of this report and it is given below. UB Groups sources of funds include shareholders funds (equity or net growth) and Loan funds (borrowing, both short term and long term). Then the UB Groups capital employed (CE) will come out. CE = Net worth + Borrowings = 10,815,477 + 6,163,565 = 16,979,074

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UB Groups sources of funds do not include current liabilities. It has shown net current asset (NCA) after finding the difference between current asset (CA) and the current liabilities (CL), as application of funds. To find out the UB groups net current asset we have to calculate NCA. NCA = CA CL = Rs.9, 617,300 Rs.2, 249029 = Rs.7, 368,271

UB Groups application funds includes net fixed asset (NFA), investment (INVT), net current asset (NCA), and other assets (OA). The total application of funds represents UB Groups net asset (NA) is given below. NA = NFA + INVT + NCA + OA = Rs.7, 842,938 + Rs.1, 940,937 + Rs.7,

368,271 + Nil = Rs.17, 152,146 UB Groups sources of funds are equal to application of funds.

P&L A/c Analysis Profit and loss account represents the companies income, expenditure, revenue otherwise it is also called as a score card. So to analyze this profit and loss account we have to use some formulas and it is given as under. UB Groups net sales is sales turnover, minus excise duty i.e. (Rs.24, 604,481 Rs.7, 621,722 = Rs.16, 982,709). The stock adjustment should be considered in the calculation of cost of goods sold. UB Groups earning before interest, tax and depreciation (EBDIT) is EBDIT = Profit before tax (PBT) + Depreciation + Interest = Rs.1, 016,709 + Rs.762, 150 + Rs.796, 377 = Rs.2, 575,236

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UB Groups profit before depreciation, interest and tax (PBDIT) is Rs.1, 016,709 and profit after tax (PAT) is Rs.624, 940.

Financial Statement Analysis Financial statement analysis is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. All the analysis can be done by calculating different ratio and those are summarized as follows.

RATIO ANALYSIS
Current Ratio: - It is calculated by dividing current asset by current liabilities. Current ratio = Current assets / Current liabilities = Rs.9, 617, 300 / Rs.2, 249,029 = 4.27 Quick Ratio: - It is also called as acid test ratio, which establish a relationship between quick or liquid assets and current liabilities. Quick ratio = (Current asset Inventories) / Current liabilities = (Rs.9, 617,300 Rs.1, 630,376) / Rs.2, 249,029 = 3.55 Cash Ratio: - Cash is the most important liquid asset. The formula is Cash ratio = (Cash + Marketable securities) / Current liabilities = Rs.417, 733 / Rs. 2,249,029= 0.18 Net Working Capital Ratio (NWC):- it is the difference between current asset and current liability excluding the short term bank borrowing. NWC is also known as net current asset. NWC ratio = NWC / Net asset = Rs.7, 368,271 / Rs.15, 211,209 = 0.48 Debt Ratio: - This ratio is basically used to analyze the long-term solvency of a firm. Debt ratio = Total debt / Capital employed = Rs.6, 163,565 / Rs.17, 152,166

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= 0.35 Debt-equity Ratio:Rs.10,815,479 Total debt / Net worth = Rs.6,163,565 /

= 0.56 Capital Employed to Net worth Ratio (CE-to-NW):- It is the part to express the relationship between the debt and equity. CE-to-NW ratio = Capital employed / Net worth = Rs.17, 152,166 / Rs.10, 815,479 = 1.5

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