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Venkatesh Project
Venkatesh Project
REVIEW OF LITERATURE
LIQUIDITY:
Liquidity is an attribute that signifies the capacity to meet financial obligation as
and when required. According to Oxford Advandictionary, Liquidity is The state of
owning things of value that can easily be exchanged for Cash.
Liquidity management is the most essential component of financial management. It
plays most dominant role in the successful functioning of an enterprise Liquid assets may
be defined as the money and assets that are readily convertible into money. Different
degree liquidity. Money itself, by definition, the most liquid of assets, other assets have
varying degrees of liquidity, depending on the most liquid of they can be turned into cash.
The study focus on the most liquid assets of the company, cash and marketable securities.
Liquidity management involves determining the total amount of their two types of assets
the company will hold. The day-to-day problem of liquidity management consists of the
highly important task of finding sufficient cash to meet current obligations.
A firm should ensure that it does not suffer from lack of liquidity, and also that it
is not too highly liquid. The failure of the company to meet its obligations, due to lack of
sufficient liquidity, will result in bad credit image, loss of creditors confidence, or even
in lawsuits resulting in the closure of the company. A very high degree of liquidity is also
had; idle assets earn nothing. The firms fund will be unnecessarily tied up current assent
management. It is very important for maintaining minimum liquidity position in the firm
for profitability, so that company would maintain the liquidity in their business.
Effective liquidity management is one of the requirements for the survival of an
organization. Various components of working capital should be managed in such a way
that the organization is able to maintain appropriate working capital.
Adequate working capital enables an organization to meet its obligations in time. It
avoids the organization for making payment of unnecessary interests to the creditors. The
firm has to invest enough funds in current assets for generating adequate sales capacity;
there should be proper quantity & quality of inventories for maintaining and improving
sales capacity. Working capital can be assumed as a lifeline of every concern. Without
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INTRODUCTION:
Accounting is the process of identifying, measuring and communicating economic
information to present informed judgments and decisions by users of the information. It
involves recording, classifying and summarizing various business transactions.
LIQUIDITY:
Liquidity is an attribute that signifies the capacity to meet financial obligation as
and when required. According to Oxford Advandictionary, Liquidity is The state of
owning things of value that can easily be exchanged for Cash.
Liquidity management is the most essential component of financial management.
It plays most dominant role in the successful functioning of an enterprise Liquid assets
may be defined as the money and assets that are readily convertible into money. Different
degree liquidity. Money itself, by definition, the most liquid of assets, other assets have
varying degrees of liquidity, depending on the most liquid of they can be turned into cash.
The study focus on the most liquid assets of the company, cash and marketable securities.
Liquidity management involves determining the total amount of their two types of assets
the company will hold. The day-to-day problem of liquidity management consists of the
highly important task of finding sufficient cash to meet current obligations.
A firm should ensure that it does not suffer from lack of liquidity, and also that it is
not too highly liquid. The failure of the company to meet its obligations, due to lack of
sufficient liquidity, will result in bad credit image, loss of creditors confidence, or even
in lawsuits resulting in the closure of the company. A very high degree of liquidity is also
had; idle assets earn nothing. The firms fund will be unnecessarily tied up current assent
management. It is very important for maintaining minimum liquidity position in the firm
for profitability, so that company would maintain the liquidity in their business.
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RATIO ANALYSIS:
The ratio analysis is one of the powerful tools of financial analysis. A ratio is
defined as the indicated quotient of two mathematical expressions and as the.
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing relationships between the items of the
balance sheet and profit and loss account. Financial analysis provides reliable
financial information to management of the firm and to parties outside the firm, viz.,
owners, creditors, investors and others.
Liquidity ratios measure the firms ability to meet its current obligations
effectively and profitability ratios measure overall performance and effectiveness of the
firm.
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1. CURRENT RATIO:
Current Ratio used to measures whether or not a firm has enough resources to
meet its short-term obligation. Current Ratio defined as the relationship between current
assets and current liabilities. This ratio, also known as working capital ratio, is a measure
of general liquidity and is most widely used to make the analysis of a short-term financial
position (or) liquidity of a firm.
This ratio is calculated as follows:
Current Ratio
Current Assets
Current Liabilities
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inventory for more than this cost. The sale will therefore generate substantially more cash
than the value of inventory on the balance sheet. Low current ratios can also be justified
for businesses that can collect cash from customers long before they need to pay their
suppliers.
Current assets include cash and those can be easily converted into each with in a
short period of time generally, one year such as marketable securities, debtors,
inventories, work- in-progress etc. current liabilities are those obligations which are
payable within a short period of times generally one year and include outstanding
expenses, bills payable, sundry creditors, accrued expenses short term advances, income
tax etc.
2. QUICKRATIO:
Quick ratio is known as acid test ratio or liquid ratio is a more rigorous test of
liquidity then the current ratio. The term liquidity refers to the ability of a firm to pay its
short-term obligations as and when they become due. The two determinates of currents
ratio as a measure of liabilities. One current assets and current liabilities. Quick ratio may
be current or liquid asset because they can not be converted into cash immediately
without a sufficient loss of value. The quick ratio can he calculated by dividing the total
of the quick assets by total current liabilities. As a rule of thumb (or) as a convention
quick ratio of 1: 1 is considered satisfactory. A company with a quick ratio of less than 1
cannot currently fully pay back its liabilities.
This ratio is calculated as follows:
Quick Ratio
Liquid Assets
Current Liabilities
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The inventory is excluded from the sum of assets in the quick ratio, but included in
the current ratio. Ratios are tests of viability for business entities but do not give a
complete picture of the business' health. If a business has large amounts in accounts
receivable which are due for payment after a long period (say 120 days), and essential
business expenses and accounts payable due for immediate payment, the quick ratio may
look healthy when the business is actually about to run out of cash. In contrast, if the
business has negotiated fast payment or cash from customers, and long terms from
suppliers, it may have a very low quick ratio and yet be very healthy.
The acid test ratio should be 1:1 or higher, however this varies widely by
industry. In general, the higher the ratio, the greater the company's liquidity (i.e., the
better able to meet current obligations using liquid assets).
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liabilities are sufficient for satisfactory liquid position of a business. However, this ratio is
not as popular as the previous two ratios discussed.
This ratio is calculated as follows:
Absolute Liquidity Ratio
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The net working capital metric is directly related to the current, or working capital
ratio, so called because if a company as more short-term assets than liabilities it can
work. The current ratio is a liquidity and efficiency ratio that measures a firms ability
to pay off its short term liabilities with its current assets.
This ratio is calculated as follows:
Working Capital Turnover Ratio
Working Capital
Net Sales
Current Assets
Net Fixed Assets
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It expresses the fund investment in working capital and the proportion of current
assets to total assets. This ratio helps to assess the importance of current assets in total
assets. Higher proportion reveals that the company gives more importance to working
capital investments and vice versa.
This ratio is calculated as follows:
Current Assets to Total Assets Ratio
Current Assets
Total Assets
The proportion of the total assets to current assets are expressed for the invested fund
against the working capital. Lower proportion against the current assets into total assets
reveals the company gives less importance to working capital investments.
7. RETURN ON IN VESTMENT:
Return on investment is also stated as Return on capital employed. It is used
measures the gain or loss generated on an investments relative to the amount of money
invested. Return on investment is usually expressed as percentage.
Return on capital employed is used to prove the value of the business gains from its
assets and liabilities. Companies create values whenever they are able to generate returns
on capital above the weighted average cost of capital. A business which owns lots of land
will have similar return on capital employed compared to a business which owns little
land but makes same profit.
The ratio is an indicator of the earning capacity of capital employed in the
business. It reflects the overall efficiency with which capital is used. The ratio is a helpful
tool for making capital budgeting decisions. A project yielding higher return is favored.
It basically can be used to show how much a business gaining or losing for its
investment or capital employed.
This ratio is calculated as follows:
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Return on Investment
9. RETURN ON EQUITY:
The return on equity (ROE) is the amount of net income returned as a percentage
of shareholders equity.
revealing how much profit a company generates with the money of shareholders invested.
Common or ordinary shareholders are entitled to residual profits the rate of
dividend is not fixed. The earnings may be distributed to shareholders or retained in the
business. Nevertheless, the net profit after taxes represents their return. A return on
shareholders equity or net worth will include paid-up share capital, share premium and
reserves and surplus less accumulated losses. Net worth can also found by subtracting
total liabilities from total assets.
Return on Equity
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Above ratio used to determine the return on the total assets which includes
current assets and non-current assets employed.
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plant and machinery, or over-investment in plant and machinery, resulting in higher cost
of production.
This ratio is calculated as follows:
Gross Profit
X100
Sales
Operating Ratio
Operating Cost
X100
Net Sales
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OR
Operating profit = Net sales - Operating cost
OR
Operating profit= Net sales - (Cost of goods sold + Administrative and office expenses +
Selling and distribution exp.)
OR
(Net profit + Non-operating expenses) - (Non-operating incomes)
Any above mentioned formulas can be used for the calculation of operating profit ratio.
14. NET PROFIT RATIO:
It measures the managements ability to operate the business with sufficient
success, not only, to recover from revenues of the period, the cost of merchandise or
service, the expenses of operating the business and the cost of the burrowed funds, but
also to leave a margin of reasonable compensation to the owners for providing their
capital at risk. It is expressed as ratio of net profit to sales.
This ratio is calculated as follows:
Net Profit
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Payout Ratio
STATISTICAL ANALYSIS
The statistical analysis of data requires a number of closely related operations
such as establishment of categories the application of these categories to raw data through
coding tabulations and then drawing statistical inferences. The unwieldy data should
necessarily be condensed into a few manageable groups and tables for further analysis.
Statistical analysis may help the researcher classify the data into some. purposeful
arid useable categories. In the process of statistical analysis, relationship or difference
supporting or confluent with original or new hypothesis should be subjected to statistical
test of significance to determine with what validity data can be said to indicate any
conclusions.
The financial viability of small companies depends on their ability to meet sales
demands and collect receivables from the sales of goods and provision of services. The
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efficiency of debt recovery plays the fundamental role in determining the liquidity of a
small business. Shortages of cash in the company are rarely subsidized not from external
sources but most often from the owners own funds that such shortages are made up,
including the amounts previously accumulated as a result of the so-called excess liquidity.
The main purpose of the article is the hypothesis that application of statistical analysis in
liquidity management can be a useful tool in effective debt collection in an enterprise.We
looked at the monthly or short-term liquidity of a small business and its impact on the
defined performance metrics of debt collection. The analytical tool is a dynamic
econometric model that describes the impact of the efficiency of recovery for liquidity in
small business.
The statistical techniques adopted .to draw statistical inference and conclusions about the
study may include the following.
ARITHMETIC MEAN:
The mean or average when the context is clear, is the sum of a collection of
numbers divided by the number of numbers in the collection. The collection is often a set
of results of an experiment, or a set of results from a survey. The term "arithmetic mean"
is preferred in some contexts in mathematics and statistics because it helps distinguish it
from other means, such as the geometric mean and the harmonic mean.
The most popular and widely used for representing the entire data by One value is
what most laymen call an average and what the statistical call the arithmetic mean an
average is a single value selected from a group of values to describe them in mean is
obtained by adding together all the items and by dividing this total by number of items it
can be calculated as follows.
It is most commonly used and readily understood measure of central tendency. It is
an statistical tool, used to measure central tendency of an individual values.
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Xi
i 1
N
Where,
X
Arithmetic mean
Number of items
STANDARD DEVIATION:
The standard deviation of a random variable, statistical population, data set,
or probability distribution is the square root of its variance. It is algebraically simpler,
though in practice less robust, than the average absolute deviation. A useful property of
the standard deviation is that, unlike the variance, it is expressed in the same units as the
data. There are also other measures of deviation from the norm, including mean absolute
deviation, which provide different mathematical properties from standard deviation.
In addition to expressing the variability of a population, the standard deviation
is commonly used to measure confidence in statistical conclusions. For example,
the margin of error in polling data is determined by calculating the expected standard
deviation in the results if the same poll were to be conducted multiple times. This
derivation of a standard deviation is often called the "standard error" of the estimate or
"standard error of the mean" when referring to a mean. It is computed as the standard
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deviation of all the means that would be computed from that population if an infinite
number of samples were drawn and a mean for each sample were computed. It is very
important to note that the standard deviation of a population and the standard error of a
statistic derived from that population (such as the mean) are quite different but related
(related by the inverse of the square root of the number of observations). The reported
margin of error of a poll is computed from the standard error of the mean (or alternatively
from the product of the standard deviation of the population and the inverse of the square
root of the sample size, which is the same thing) and is typically about twice the standard
deviationthe half-width of a 95 percent confidence interval.
In science, researchers commonly[citation needed]report the standard deviation
of experimental data, and only effects that fall much farther than two standard deviations
away from what would have been expected are considered statistically significant
normal random error or variation in the measurements is in this way distinguished from
likely genuine effects or associations. The standard deviation is also important in finance,
where the standard deviation on the rate of return on an investment is a measure of
the volatility of the investment.
When only a sample of data from a population is available, the term standard
deviation of the sample or sample standard deviation can refer to either the abovementioned quantity as applied to those data or to a modified quantity that is an unbiased
estimate of the population standard deviation (the standard deviation of the entire
population).
The standard deviation concept was introduced by Karl Pearson in 1823. It is the
most widely used measure of series. Dispersion is the measurable of studying the several
of the items. The standard deviation is also known as root mean square deviation for the
reason that it is the square deviation from the arithmetic mean.
It is calculated as
d d
2
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Standard Deviation
Number of items
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moment", that is, the mean (the first moment about the origin) of the product of the meanadjusted random variables; hence the modifier product-moment in the name.
Karl Pearsons co-efficient of correlation is most widely used measure of
correlation between two series and is denoted by the symbol r, it is universally used for
describing the degree of correlation between two series. This method is to be applied only
where deviations of items are taken from mean and not from assumed mean. The formula
for computing Karl Pearsons co-efficient of con-elation is given below.
R
XY
X2 X X2
r
The value of the co=efficient of correlation as obtained by the above formula shall always
lie between 1, when r = 1 it means there is perfect correlate on between the variables
When r = - 1 it means there is perfect negative con-elation between the variables. When r
0 it means there is no relationship between the two variables However in practice the
value of r may lie between +2 and -1.
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The study is purely based on secondary data which were then primarily
from published annual reports of SRIKALAHASTI PIPES Ltd.
The study is not completely generalized because limited ratios are only
calculated based on the financial information given by the company.
The accounting ratios calculated may also suffer from the inherent
weakness of accounting data provided by the company.
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RESEARCH METHODOLOGY
SECONDARY: Company annual reports and other necessary financial
statements.
Data is collected completely from the financial annual reports of the
company.
WEB SITE: www.lancoindustrie.com
STUDY PERIOD: June 10th to July 28th 2016
TOOLS OF ANALYSIS: Ratio analysis.
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DATA PRESENTATION: The data collected for the study is presented in the
form of tables and simple bar diagrams.
INDUSTRY PROFILE
Cement, the wonder material for binding stones and bricks, together has
contributed to the development of modern civilization in a number of ways, due to which
is known as the builder of modem civilization. It is a grayish powdered lime stones as the
basic material, mixed with clay, culminated to clinker; gypsum added ground to a
powdered cement
In past historic times lime stone was roasted in hot fire to have a crude ibrm of
Jime which when mixed with water formed mortar. The use of burnt system and also lime
dates back to the fix Egyptians. The Greek civilization used some form of mortal but
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Romans developed it. The cement has thus form the very early era contributed to the
advancement of the civilization in general measure.
When one speaks of cement today it invariably refers to Portland cement only.
Portland cement has its origin in England bud until 19th century mixture of limestone
with possalona a type of volcanic earth was known as cement. It was JOSEPI-1 ASPDTN
who in 1924 took out the first sample of cement, being an improvement in the modes of
producing artificial stone and it came to bear the Portland cement. The first cement
factory was established around 1890 by Jinn at both Canada and Australia, while it was
found in 1884 in New Zealand.
CEMENT INDUSTRY IN INDIA:
Cement was produced for the first time in at Washer manpet in Madras in 1904 by
South India industries limited. This unit had an installed capacity of 30 tones per day.
Since the partial decontrol in 1989, the cement industry has witnesss secular progress
mainly due to the forces of economic liberalization and the jettisoning of price controls
and capacity restriction.
The foundation of Stable Indian cement industry was in 1914. The Indian cement
company. First manufacture cement at Porbundar in Gujarat. At the end of the march
1988 there were .20 large cement units and 136 mini cement plants with a total installed
capacity of 57 million tones and actual production of 40 tones. Over two lakh persons are
employed in the industry. India is the 41fl largest cement producer in the world with 106
large plants belonging to 34 companies. The per capital consumption of cement in India
however is one of the lowest in the world ranking i.e. 32 kgs per capita in India in car
1979) compared to 689kgs in Japan, 528kgs in West Germany, 500 kgs iii France and
483kgs in U.S.S.R.
In 1936, all the cement companies with exception of song valley Portland
Company limited merged to form the associated cement companies limited. This more
facilitated cost reduction as well as uniformity in quality by 1947 the installed capacity of
the industry rose to 2.2 million tones per annum.
PRESENT SCENARIO OF CEMENT INDUSTRY IN INDIA:
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India is the second largest producer of cement in the world. No wonder, India's
cement industry is a vital part of its economy, providing employment to more than a
million people, directly or indirectly. Ever since it was deregulated in 1982, the Indian
cement industry has attracted huge investments, both from Indian as well as foreign
investors.
India has a lot of potential for development in the infrastructure and construction sector
and the cement sector is expected to largely benefit from it. Some of the recent major
government initiatives such as development of 98 smart cities are expected to provide a
major boost to the sector.
Expecting such developments in the country and aided by suitable government foreign
policies, several foreign players such as Lafarge-Holcim, Heidelberg Cement, and Vicat
have invested in the country in the recent past. A significant factor which aids the growth
of this sector is the ready availability of the raw materials for making cement, such as
limestone and coal.
Market size:
Cement demand in India is expected to increase due to governments push
for large infrastructure projects, leading to 45 million tonnes (MT) of cement needed in
the next three to four years.
India's cement demand is expected to reach 550-600 Million Tonnes Per
Annum (MTPA) by 2025. The housing sector is the biggest demand driver of cement,
accounting for about 67 per cent of the total consumption in India. The other major
consumers of cement include infrastructure at 13 per cent, commercial construction at 11
per cent and industrial construction at 9 per cent.
To meet the rise in demand, cement companies are expected to add 56 MT
capacity over the next three years. The cement capacity in India may register a growth of
eight per cent by next year end to 395 MT from the current level of 366 MT. It may
increase further to 421 MT by the end of 2017. The country's per capita consumption
stands at around 190 kg.
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Over the next 2 to 3 years, with reasonable growth in demand to the tune
of around 7 to 9% sure to take place, in vies of the incentives granted to housing and
infrastructure, the ambitious plans of the Government boost rural housing and kick start
the National Highways development project, all trace of capacity demand mismatch will
vanish. As such, the overall outlook of the cement industry is good in the future years.
Investments:
On the back of growing demand, due to increased construction and
infrastructural activities, the cement sector in India has seen many investments and
developments in recent times.
According to data released by the Department of Industrial Policy and
Promotion (DIPP), cement and gypsum products attracted Foreign
Some of the major investments in Indian cement industry are as follows:
KKR Mauritius Cement Investments Limited acquired 8.5 per cent stake in
Dalmia Bharat Limited (DBL).
Cement maker Burnpur Cement plans to invest Rs 500 crore (US$ 74.64 million)
for expansion of its production capacity to 3 MTPA in the next three to four years.
Birla Corporation Ltd, a part of the MP Birla Group, has agreed to acquire two
cement assets of Lafarge India for an enterprise value of Rs 5,000 crore (US$
733.6 million).
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Dalmia Cement (Bharat) Ltd has invested around Rs 2,000 crore (US$ 293
million) in expanding its business in North East over the past two years. The
company currently has three manufacturing plants in the region one in
Meghalaya and two in Assam.
JSW Group plans to expand its cement production capacity to 30 MTPA from 5
MTPA by setting up grinding units closer to its steel plants.
UltraTech Cement Ltd has charted out its next phase of Greenfield expansion after
a period of aggressive acquisitions over the last two years. UltraTech has plans to
set up two Greenfield grinding units in Bihar and West Bengal.
UltraTech Cement Ltd bought two cement plants and related power assets of
Jaiprakash Associates Ltd in Madhya Pradesh for Rs 5,400 crore (US$ 792.3
million).
JSW Cement Ltd has planned to set up a 3 MTPA clinkerisation plant at Chittapur
in Karnataka at an estimated cost of Rs 2,500 crore (US$ 366.8 million).
Andhra Cements Ltd has commenced the commercial production in the company's
cement plants Durga Cement Works at Dachepalli, Guntur and Visakha Cement
Works at Visakhapatnam.
Government Initiatives:
In the 12th Five Year Plan, the Government of India plans to increase investment
in infrastructure to the tune of US$ 1 trillion and increase the industry's capacity to 150
MT.
The Cement Corporation of India (CCI) was incorporated by the Government of
India in 1965 to achieve self-sufficiency in cement production in the country. Currently,
CCI has 10 units spread over eight states in India.
In order to help the private sector companies thrive in the industry, the
government has been approving their investment schemes. Some such initiatives by the
government in the recent past are as follows:
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The Parliament of India has cleared amendments to the Mines and Minerals
Development and Regulation (MMDR) Act, which will enable companies to transfer
captive mines leases similar to mines won through an auction, and which is expected to
lead to increased Mergers and Acquisitions (M&A) of steel and cement companies.
he Government of India is planning to revive the state-run cement factories across India,
in order to give a boost to road and realty projects by bringing down their construction
costs.
Budget 2016-17 has proposed a slew of measures to boost infrastructure and
investment, which will be positive for the cement sector, as increased spending on
infrastructure increases the demand for cement. 100 per cent deduction for profits to an
undertaking in housing project for flats up to 30 square metres in four metro cities and 60
square metres in other cities approved during June 2016 to March 2019 and completed in
three years
Incremental spend on smart city development, the government has allocated Rs
7,296 crore (US$ 1.09 billion) towards Urban Rejuvenation Mission (AMRUT and
Mission for Development of 100 Smart Cities
Rise in allocation under Pradhan Mantri Gram Sadak Yojana (PMGSY) to Rs
19,000 crore (US$ 2.79 billion) for FY17.
The Government of India plans to enact a law that will allow the companies
which have received mining licenses without having gone through the auction process, to
transfer these leases, in a move that is expected to make mergers and acquisitions
(M&As) easier in the steel, cement, and metals sectors.
The Government of Tamil Nadu has launched low priced cement branded
'Amma' Cement. The sale of the cement started in Tiruchi at Rs 190 (US$ 2.84) a bag
through the Tamil Nadu Civil Supplies Corporation (TNCSC). Sales commenced in five
godowns of the TNCSC and will be rolled out in stages with the low priced cement
available across the state from 470 outlets.
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approved proposals worth Rs 9,200 crore (US$ 1.35 billion) including three cement plants
and concessions to Hero MotoCorp project. The total capacity of these three cement
plants is likely to be about 12 MTPA and the plants are expected to generate employment
for nearly 4,000 people directly and a few thousands more indirectly.
India has joined hands with Switzerland to reduce energy consumption and
develop newer methods in the country for more efficient cement production, which will
help India meet its rising demand for cement in the infrastructure sector.
The Government of India has decided to adopt cement instead of bitumen for the
construction of all new road projects on the grounds that cement is more durable and
cheaper to maintain than bitumen in the long run
Road Ahead:The eastern states of India are likely to be the newer and virgin markets for
cement companies and could contribute to their bottom line in future. In the next 10
years, India could become the main exporter of clinker and gray cement to the Middle
East, Africa, and other developing nations of the world. Cement plants near the ports, for
instance the plants in Gujarat and Visakhapatnam, will have an added advantage for
exports and will logistically be well armed to face stiff competition from cement plants in
the interior of the country.
A large number of foreign players are also expected to enter the cement
sector, owing to the profit margins and steady demand. In future, domestic cement
companies could go for global listings either through the FCCB route or the GDR route.
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With help from the government in terms of friendlier laws, lower taxation, and increased
infrastructure spending, the sector will grow and take Indias economy forward along
with it.
COMPANY PROFILE
SRIKALAHASTHI PIPES LIMITED industries limited are one of the best miniblast furnace pig iron manufacturing units in our country and it was 5th plant under TATA
- KORE technology. The company was incorporated on 1st November 1991 under
company's act-1956, in the name of SRIKALAHASTHI PIPES LIMITED LTD.,
THE COMPANY started construction work in august 1993. The entire
construction work was completed in a record time of 12 months. This was achieved by
teamwork of SRIKALAHASTHI PIPES LIMITED collective and the best efforts of the
contractors. With this achievement the company started commercial productions in
September 1994.
Administration
The general administration of the company is carried out by managing director,
and general managers of finance. Commercial, operations, materials, purchase, human
resource and administration.
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The distance between the harbor and present work spot is less.
Proximity to marketing.
Availability of labour.
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Vision:
To empower, enable and enrich partners, business and associates.
To be the chosen vehicle of growth for the stakeholders and a source of inspiration
for the society.
Mission:
To be a leader in all areas key to the development of a nation and progress of the
world.
To be a in the field of infrastructure, manufacturing and information technology.
To become learning organization and enable people to think like geniuses.
To make association with us an enriching experience to our partners, businesses
and associates.
To work with honest purpose, strategic planning and enduring perseverance to
achieve customer satisfaction, stakeholder benefits and measurable economic
growth for the organization.
Philosophy:
Assemble best people , delegate authority and dont interfere people make the
difference
Business heads are entrepreneurs
Mistakes are facts of life. It is response to the error that counts.
Success:
Create your luck by hard work
Trust + delegation = growth.
Work Culture:
Commitment, Creativity, Efficiency, Team spirit.
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LIQUIDITY MANAGEMENT
Administration:
The general administration of the company is carried out by managing Director
and general managers of finance. Commercial, operations, materials, purchase, human
resource and administration.
The chairman and managing director are holding overall control on administration
in all aspects, with the help of vice-president and other general.
Manage. The board consists of five members directors, Vice-Chairman, a Managing
Director and a Company Secretary.
Sri kalahasthi pipes Industries Limited (SPL) was incorporated on 1st November, 1991 by
SRIKALAHASTI Group of Companies to manufacture Pig Iron using Korf (German)
technology and Cement. The unit is located at Rachagunneri Village on Tirupathi /Srikalahasthiroad which is about 30 kms. From
Tirupathi and 10 kms. From
Srikalahasthi. The installed capacity of Pig Iron was 90,000 TPA and with similar
capacity 90,000 TPA for cement.
Due to the poor demand and other reasons, the operations of the cement unit of the
Company was suspended and the unit was reengineered for producing a different product
mix having potential in south India.
However, due to falling Pig Iron prices, increase additional capacity in the industry,
competition and the technical & financial assistance, the operations of both SPL and
LKCL were affected and the Company was exploring financial and technical strategic
alliance with Indian / Foreign Partner.
RCR Institutes of Management & Technology- Tirupati
Page 36
LIQUIDITY MANAGEMENT
During the same time M/s. Electro steel Castings Limited, was also looking for
additional capacities for producing spun pipes. Considering the synergies involved,
Srikalahasthi pipes Limited entered into a strategic alliance partnership during December
2002, with M/s. Electro steel Castings Limited (ECL), Kolkata a leading manufacturer of
CI, Pipes and DI pipes. This was win-win situation for both SPL and ECL. After takeover,
a financial re-engineering and re-structuring of SPL was undertaken by ECL by
implementing the following: Immediately after take over an amount of Rs.2200 lakhs was infused as share
capital of the Company by M/s. ECL to strengthen the equity base of the
company.
During 2002, the capacity of Pig Iron was increased from 90,000 TPA to
150,000 TPA.
With effect from 1st April, 2003 LKCL was merged with the company to take
advantage of the close synergy in the business of the two companies, since a large
part of Molten Iron / Pig Iron is consumed by LKCL for manufacture of DI Pipes.
After the merger, the share capital of SPL, the paid up share value of Rs.10/- was
reduced to Rs.2.50 per share and accordingly one share of Rs.10/- each fully paid
up in SPL was issued to all the existing shareholders for every 4 shares held by
them
During 2003, the capacity of the DI pipes was increased to 90,000 TPA.
During 2004, the company took the step of backward integration by setting up
150,000 TPA coke oven plant in the same complex, which was commissioned in June
2005.
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LIQUIDITY MANAGEMENT
An additional amount of Rs.25 corers is being spent on other capital works like
revamping of bitumen coating machine, balancing equipment and facilities for
production of higher diameter DI pipes etc. to increase the capacity of DI pipes
from the present 90,000 TPA to 120,000 TPA by 2006-07.
The above has resulted in the company witnessing a profitable years after a gap of
8 years during the years ended 31st March, 2003, 2004 and 2005 and a dividend of 10%
was declared for the years ended 31st March 2004 and 2005 to the shareholders.
1991
1994
1995
1997 -
2004
2006
Page 38
LIQUIDITY MANAGEMENT
restructuring
2009
2010
2012
2013
2013
2014
2014
G Bhaskara Rao
Vice
Chairman,SRIKALAHASTHI
LIMITED Group of Companies
L Sridhar
G VenkateshBabu
Joint
Managing
Director,SRIKALAHASTHI
PIPES LIMITED Group
PIPES
Page 39
LIQUIDITY MANAGEMENT
J Suresh Kumar
P Panduranga Rao
Director
and
Chief
Executive
Officer
SRIKALAHASTHI PIPES LIMITEDKondapalli
Power
Private
Limited
and ABAN Power Company Limited
D V Rao
Director
and
Chief
Executive
Officer
SRIKALAHASTHI PIPES LIMITED Green Power
Private Limited
K Raja Gopal
Director
and
Chief
Executive
Officer
SRIKALAHASTHI PIPES LIMITEDAmarkantak
Power Private Limited
D N Reddy
KK V Nagaprasad
V Sreenivas
Director
Corporate
Affairs
SRIKALAHASTHI PIPES LIMITED Groups.
Page 40
LIQUIDITY MANAGEMENT
PLANT LAYOUT
Gate Entrance
Security
Administration
Block
Temple
Physical\chemical lab
Power Production
Cement Production
pig-iron
Page 41
LIQUIDITY MANAGEMENT
The data after collection have to be processed and analyzed in accordance with the
outline laid down for the purpose at the time of developing the research plan. The
processing of data implies editing, coding, Justification, tabulation and presentation of
collected data SO that they are amenable to data analysis.
Editing of data is a process of examining the collected raw data to detect errors
and omissions and to correct these when even possible. It involves a careful scouting of
the collection data. Editing is done to assure that the data are accurate, consistent with the
facts gathered, uniformly ended and well atoned to facilitate coding and tabulation. The
editing of data improves the quality of the data for coding. Coding of data refers to the
process of transforming the categories or classes of data into symbols which may be
tabulated and counted.
The classification of data refers to the process of arranging the data in groups or
classes on the basis of common characteristics. It classifies a large volume of raw data
into homogeneous, groups and classes depending upon the nature of phenomenon
involved in the study. Tabulation of data is the process of summarizing the classified data
and displaying the same in the impact form of tables further analysis. It is an orderly
arrangement of data in columns and rows. Tabulation can be done with the use of
computers which not only save time but also make it possible to study large number of
variables affecting a problem simultaneously. Data are analyzed and tabulated with the
help of percentage Analysis and chi-square test. After the data have been organized and
tabulated, they are ready for presentation. The tabulated data arc presented with the help
of diagrams, charts and graphs.
Page 42
LIQUIDITY MANAGEMENT
LIQUIDITY RATIOS:
CURRENT RATIO
Current Ratio
Current Assets
X100
Current Liabilities
Year
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
CURRENT
3.5 RATIO 2011-2016
3.31
2.65
2.5
2.01
1.86
1.44
1.5
1
2012-2013
2013-2014
2014-2015
2015-2016
Year
Page 43
LIQUIDITY MANAGEMENT
INTERPRETATION:
During 2012-2013 current ratio was 2.01 times which indicates that for every
current liability, the company equal current assets, later in 2013-2014 it has been
decreased to 1.86 times. During 2014-2015, 2015-2016 it has found to be increased to
(2.65 and 3.31). it indicates that the companys liquidity position is well it has enough
current assets to meet its current liability during the period of study. The current ratio is
said to be in satisfactory for the period of study.
Page 44
LIQUIDITY MANAGEMENT
QUICK RATIO
Quick Ratio
Liquid Assets
Current Liabilities
TABLE NO:4.2
QUICK RATIO 2011-2016
Year
Quick
Assets
(Rs.in Lakhs)
2979.52
6008.91
9062.36
14524.07
21537.36
2011-12
2012-13
2013-14
2014-15
2015-16
Current Liabilities
(Rs.in Lakhs)
2895.13
5625.29
8679.59
10030.68
10883.33
Ratio
1.03
1.07
1.04
1.45
1.97
2
1.45
1.5
1.03
1.07
1.04
2011-2012
2012-2013
2013-2014
1
Quick Ratio (Times)
0.5
0
2014-2015
2015-2016
Year
INTERPRETATION:
INTERPRETATION
The quick ratios standard ratio is 1:1 times. During 2012-2013 the quick ratio is
1.07 times of its current liabilities but it has been decreased in 2013-2014 was (1.03 and
1.04). Later in 2014-2015 and 2015-2016 the quick ratio has increased tol.45 andl.97
which was more than its standard ratio. The quick ratio is said to be in satisfactory level
during the period of the study. The companys liquidity position is said to be satisfactory.
RCR Institutes of Management & Technology- Tirupati
Page 45
LIQUIDITY MANAGEMENT
TABLE NO:4.3
ABSOLUTE LIQUIDITY RATIO
Year
Cash and bank
balances
(Rs.in Lakhs)
2011-12
629.04
2012-13
447.49
2013-14
247.72
2014-15
420.10
2015-16
3463.66
0.21
0.08
0.03
0.04
0.31
12000
10000
8000
6000
4000
Quick Ratio (Times)
2000
0
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
Year
INTERPRETATION:
The absolute liquidity ratios standard ratio is 0.50:1 .During 2011-2012 and 20152016 the ratio was increased to 0.21 and 0.31 and in 2013-2014, 2014-2015 the ratio was
decreased to 0.08,0.03,0.04 which was less than the standard ratio of absolute liquidity
Page 46
LIQUIDITY MANAGEMENT
ratio. It assumes that the liquidity position of the company is said to be not satisfactory to
meet its day to-day activities.
Working Capital
Net Sales
TABLE NO:4 .4
NET WORKING CAPITAL RATIO 2011-2016
Net
Working
Capital
(Rs.in Lakhs)
1277.65
5677.67
7460.95
16586.30
25090.51
Year
2011-12
2012-13
2013-14
2014-15
2015-16
Net Sales
(Rs.in Lakhs)
Ratio
8085.85
21024.15
28607.79
46365.63
64471.61
0.15
0.24
0.26
0.36
0.38
0.4
0.36
0.35
0.3
0.24
0.25
0.2
0.15
0.38
0.26
(Times)
0.15
0.1
0.05
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
Year
Page 47
LIQUIDITY MANAGEMENT
INTERPRETATION:
It shows clear results from the above figure that the net working capital ratio is
absolute decreased in all the five years from the period of study. It is said to be that the
liquidity position is not satisfactory and the company is not able to meet its day- to- day
financial activities of the company.
Page 48
LIQUIDITY MANAGEMENT
Current Assets
Net Fixed Assets
Table no.4.5
CURRENT ASSETS TO FIXED ASSETS RATIO PERIOD 2011-2016
Year
2011-12
Current Assets
(Rs. In Lakhs)
(Rs. In Lakhs)
4172.78
1130.96
4350.62
0.95
13236.37
14604.33
0.85
2012-13
16137.54
2013-14
Ratio
1.10
26616.98
26388.35
2014-15
1.01
35973.84
28239.98
2015-16
1.27
35000
30000
25000
20000
15000
10000
Quick Ratio (Times)
5000
0
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
Year
Page 49
LIQUIDITY MANAGEMENT
INTERPRETATION:
During 2015-2016 the current assets to fixed assets ratio has increased to
1.27.later it has been fluctuating in 2012-2013 to2015-2016. it indicates that the current
assets to fixed assets is highly proportionate and it is said to be satisfactory .The company
has more current assets when compared to fixed assets .The overall liquidity position of
the company is said to be satisfactory during the period of study.
Page 50
LIQUIDITY MANAGEMENT
Current Assets
Total Assets
Current Assets
Total Assets
Ratio
(Rs. In Lakhs)
(Rs. In Lakhs)
2011-12
4172.78
8523.40
0.48
2012-13
11302.96
24593.33
0.46
2013-14
16137.54
30741.87
0.52
2014-15
26616.98
53005.33
0.50
2015-16
35973.84
64213.82
0.56
0.6
0.5
0.48
0.46
2011-2012
2012-2013
0.56
0.52
0.50
2013-2014
2014-2015
0.4
0.3
Ratio (Times)
0.2
0.1
0
Year Tirupati
RCR Institutes of Management & Technology-
2015-2016
Page 51
LIQUIDITY MANAGEMENT
INTERPRETATION:
During 2015-2016 the current assets to total assets is increased to 0.56 and the
ratio has been fluctuating in all five years. Later the liquidity position of the company is
said to be satisfactory during the period of the study .when the company is not quite
satisfactory in maintaining the low percentage in its liquidity position of CA to TA during
the period of study.
Page 52
LIQUIDITY MANAGEMENT
FINDINGS
Page 53
LIQUIDITY MANAGEMENT
SUGGESTIONS
As the economy is a profit seeking one, it has directed all its resources to achieve
its goal. The company is looking towards to enhance its value and thereby its shareholders
base. There are two important elements to achieve its goal for every company is to look
for profitability and liquidity position of the company. On this basis of the analysis and
observation the following suggestions are made.
It is very clear from the above study that it is found that the over all liquidity
position of the SRIKALAHASTI PIPES Ltd., was found to be satisfactory
during the period of study. It is suggested that the company needs to maintain
its liquidity position by making all the resources available to meet its day to day
financial operations effectively in the upcoming period of time.
It is clearly observed from the study that the net working capital position of the
company is said to be satisfactory during the period of study. It is suggested that
the company needs to maintain its working capital position by showing that
every current asset has been effectively utilized by the company for meeting its
current liability.
The study reveals that the gross profit margin of SRIKALAHASTI PIPES Ltd.,
was said to be fluctuating during the period of study. It clearly indicates that the
financial expenses and depreciation of the company might have been incurred
more during the period of study. It is suggested that the company should take
the appropriate steps to control and reduce its financial expenses and
depreciation effectively.
The study clearly shows the positive relationship between the liquidity and
profitability position of the company during the period of study. The company
has to maintain the same tradeoff between the liquidity and profitability for
enhancing its value and thereby its shareholders value over a period of time.
It clearly indicates that the growth rate of fixed assets of the company is said to
be satisfactory during the period of study. It is suggested that the company has
to take appropriate
Page 54
LIQUIDITY MANAGEMENT
CONCLUSION
The study has come to conclusion that the liquidity and profitability position of
SRIKALAHASTI Industries Ltd., is said to be satisfactory during the period of study
(2011-2012 to 2015 - 2016).
This study indicates the positive relationship between liquidity and profitability of
the company during the period of the study. It is found that the net working capital
position of the company was said to be satisfactory during the period of the study.
It is found that the gross profit margin was fluctuating during the period of study.
It is concluded that the net working capital position of the company should be utilized
effectively for meeting its day to day financial operations and also it is concluded that it
should take appropriate measures to control the expenses and depreciation of gross profit
margin of the company for over period of time.
Page 55
LIQUIDITY MANAGEMENT
ANNEXURE
SRI KALAHASTI PIPES LIMITED BALANCE SHEET FOR THE YEAR 2011-2012
PARTICULARS
2011
2010
A) Share capital
3,976.36
3,976.36
3,993.06
3,804.74
A) Secured Loans
9,244.81
10,886.36
B) Unsecured Loans
15,069.11
9,588.74
618.06
Total
32,901.40
28,680.37
A) Gross Block
25,035.99
20,021.36
B) Less: Depreciation
6,510.29
5,417.03
Net Block
18,525.70
14,604.33
5,604.02
6,015.09
Sources of funds:
Share holders funds:
Loan Funds:
424.17
Application of funds:
Fixed Assets:
Investment
589,83
9,194.08
7,075.18
B) Sundry Debtors
6,706.59
7,197.89
350.67
247.72
2,070.42
1,616.75
18,321.76
16,137.54
A) Current Liabilities
9,202.11
8,090.45
B) Provisions
354.42
586.14
8,765.23
7,460.95
Miscellaneous Expenditure
6.45
10.17
Total
32,901.40
28,680.37
Page 56
LIQUIDITY MANAGEMENT
PARTICULARS
2013
2012
A) share capital
3,976.36
3,976.36
5,108.64
3,993.06
A) Secured Loans
16,382.92
9,244.81
B) Unsecured Loans
13,733.65
15,069.11
1,184.79
618.06
Total
40,386.36
32,901.40
A) Gross Block
31,824.32
25,035.99
B) Less: Depreciation
7,666.24
6,510.29
Net Block
24,158.08
18,525.70
754.45
5,604.02
Sources of funds:
Share holders funds:
Loan Funds:
Application of funds:
Fixed Assets:
Investment
10,636.86
9,194.08
B) Sundry Debtors
7,667.92
6,706.59
2,650.37
350.67
5,241.68
2,070.42
26,196.83
18,321.76
A) Current Liabilities
10,188.34
9,202.11
B) Provisions
538.25
354.42
10,726.59
9,556.53
15,470.24
8,765.23
Miscellaneous Expenditure
3.59
6.45
Total
40,386.36
32,901.40
2014
2013
Page 57
LIQUIDITY MANAGEMENT
Sources of funds:
Share holders funds:
A) share capital
3,976.36
3,976.36
7,179.70
5,108.64
A) Secured Loans
17,832.33
16,382.92
B) Unsecured Loans
12,271.32
13,733.65
2,576.95
Total
43,836.66
40,386.36
A) Gross Block
35,516.23
31,824.32
B) Less: Depreciation
9,127.88
7,666.24
Net Block
26,388.35
24,158.08
862.01
754.45
Loans funds
1,184.79
Application of funds:
Fixed Assets:
Investments
Current Assets, Loans and Advances
A) Inventories
12,092.91
10,636.86
B) Sundry Debtors
8,814.31
7,667.92
420.10
2,650.37
5,289.66
5,241.68
26,616.98
26,196.83
A) Current Liabilities
9,319.38
10,188.34
B) Provisions
711.30
538.25
10,030.68
10,726.59
16,586.30
15,470.24
Miscellaneous expenditure
3.59
Total
43,836.66
40,386.36
SRI KALAHASTI PIPES LIMITED BALANCE SHEET FOR THE YEAR 2014-15
PARTICULARS
RCR Institutes of Management & Technology- Tirupati
2015
2014
Page 58
LIQUIDITY MANAGEMENT
Sources of funds:
Share holders funds:
A) Share capital
3,976.36
3,976.36
8,549.77
7,179.70
A) Secured Loans
22,645.54
17,832.33
B) Unsecured Loans
15,460.46
12,271.32
3,123.73
2,576.96
Total
53,755.86
43,836.66
A) Gross Block
38,974.86
35,516.23
B) Less: Depreciation
10,734.88
9,127.88
Net Block
28,239.98
26,388.35
425.37
862.01
Investment
A) Inventories
14,436.48
12,092.91
B) Sundry Debtors
11,966.16
8,814.31
3,550.27
420.10
6,020.93
5,289.66
A) Current Liabilities
10,108.38
9,319.38
B) Provisions
774.95
711.30
10,883.33
10,030.68
25,090.51
16,586.30
Miscellaneous Expenditure
Total
53,755.86
43,836.66
Loans funds
Application of funds:
Fixed Assets:
Page 59
LIQUIDITY MANAGEMENT
PARTICULARS
2016
2015
A) Share capital
3,976.36
3,976.36
13,713.91
8,549.77
A) Secured Loans
26,486.50
33,227.46
B) Unsecured Loans
6,130.29
4,878.54
3,435.74
3,123.73
Total
53,742.80
53,755.86
A) Gross Block
40,286.29
38,974.86
B) Less: Depreciation
12,527.20
10.734.88
Net Block
27,759.09
28,239.98
3,441.21
425.37
Investment
A) Inventories
11,519.49
14,436.48
B) Sundry Debtors
11,845.80
11,966.16
1,516.42
3,550.27
5,581.47
6,020.93
A) Current Liabilities
6,853.94
10,108.38
B) Provisions
1,066.74
774.95
7,920.68
10,883.33
22,542.50
25,090.51
Miscellaneous Expenditure
Total
_
53,742.80
_
53,755.86
Sources of funds:
Share holders funds:
Loan Funds
Application of funds:
Fixed Assets:
BIBILIOGRAPHY
Page 60
LIQUIDITY MANAGEMENT
1.
2.
M.Y.
KHAN
&
P.K.
JAIN
2005
4th
edition,
FINANCIAL
4.
5.
6.
S.P.
JAIN,
K.L.NARANG
MANAGEMENTACCOUNTING,
7.
2005
Kalyani
4th
edition
Publishers,
COST
New
AND
Delhi.
Page 61