Fund Flow Statement

Meaning of Fund Flow

The financial statement of the business indicates assets, liabilities and capital on a
particular date and also the profit or loss during a period. But it is possible that there is enough
profit in the business and the financial position is also good and still there may be deficiency of
cash or of working capital in business. If the management wants to find out as to where the cash
is being utilized, financial statement cannot help. Therefore, a statement is prepared of the
sources and applications of funds from where Working Capital comes and where it is utilized.
This is called Fund Flow statement.
Definition:
According to R.N. Anthony, “Fund Flow is a statement prepared to indicate the increase in cash
resources and the utilization of such resources of a business during the accounting period.”
According to Smith Brown, “Fund Flow is prepared in summary form to indicate changes
occurring in items of financial condition between two different balance sheet dates.” Coleman
rightly states that, “The fund statement is statement summarizing the significant financial change
which have occurred between the beginning and the end of a company’s accounting period.”

INDUSTRY PROFILE

OVERVIEW OF NATIONAL TEXTILE CORPORATION LIMITED

The National Textile Corporation Limited (NTC) is a Central Public Sector

Enterprise under the Ministry of Textiles which was incorporated in April 1968 for managing the
affairs of sick textile undertakings, in the private sector, taken over by the Government. Starting
with 16 mills in 1968, this number gradually rose to 103 by 1972-73.In the year 1974 all these
units were nationalized under the Sick Textile Undertaking (Nationalization) Act 1974. The
number of units increased to 119 by 1995. These 119 mills were controlled by NTC(HC)Ltd with

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the help of 9 subsidiary Corporations, with an authorized capital of Rs 10 crores which was
raised from time to time and which is now Rs 5000 crores and the paid up share capital of the
corporation is Rs 3062.16 crores as on 31.03.2008. In the year 2002 BIFR/GOI approved revival
of 53 viable mills and closure of 66 unviable mills.65 unviable mills have so far been closed
under the ID Act after paying MVRS to the employees by raising funds through private
Placement of Bonds, 2 Mills (one viable and one unviable) located in the state of Puducherry
have been transferred to the State Government of Puducherry w.e.f 01.04.2005. NTC now has
52 mills and 99 showrooms as on 1.4.2008. BIFR approved a modification to the NTC scheme in
the year 2006, which was necessary due to the changed scenario of the textile industry and
directions of GOI &GOM. The 2nd modified revival scheme now prepared has been submitted
to BIFR through IDBI for approval, which will be received shortly as per the hearing conducted by
BIFR on 27.05.08.

In the implementation of the Revival Scheme sanctioned for NTC mills, Government
has decided to modernize 22 mills by itself through generation of funds from the sale of its
surplus assets .The remaining 30 mills requiring heavy dose of modernization, for which NTC
did not have adequate resources for modernization after meeting the cost of servicing the Bonds
raised and also to quicken the modernization process, private partnership through joint venture
was explored for 18 mills .Also, 12 mills are to be closed further where most of the employees
have opted for MVRS and production activity is totally stopped since the last 2 years. Looking to
the reduced number of mills and in line with the contemporary industry’s trend all 9 subsidiary
companies have been merged with NTC-HC making it into a single Company w.e.f .01.04.2006.

Joint Venture

It was also decided to modernize 18 mills through JV route by inducting private partners with
NTC stake of 51%. In pursuance to the GOM decision dated 22.08.2007 NTC has finalized 3
parties namely M/s Alok Industries, M/s Pantaloon Retail India Ltd (consortium) and M/s
Bhasker Industries Ltd (consortium) for 5 mills for modernization through Joint Venture .NTC
has signed MOU and other transaction documents with the said 3 parties. As per the terms of JV
agreement, NTC is not transferring the ownership of the land but is only giving a right to use of

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the land to the JVC in which NTC is the major shareholder with 51% stake. Some more
decisions have been taken in the Group of Ministers meeting dated 11.06.2008 and 07.08.2008,
minutes of which are awaited. 12 more mills are in the process for consideration of suitable JV
partners.

India International Trade Tower

The matter regarding setting up of the I.IT.T was placed before the GOM in their recent
meeting of GOM held on 07.08.08 and the decision is awaited.

Indian Textile Plaza

Indian Textile Plaza is under construction at the land of Jehangir Textile Mills,
Ahmedabad (a closed NTC mill) with facilities like Handloom & Handicrafts Mall, Exhibition
Hall, Convention Hall, Theater Complex, Textile/Handicraft Museum, Food Court, Children
Plaza, Youth & Women Training Center & City Plaza --by NTC forming SPV with NBCC .An
MOU has been signed with NBCC for construction of the Plaza.

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Modified revival scheme

NTC appointed a Consultant to prepare a Second Modified Revival Scheme for modernizing 22
mills and other allied matters keeping in view the present trends of the Textile Industry. In this
scheme, it is proposed to further expand the spindle capacity wherever space is available in the
mills to accrue benefit from the economics of scale. The total capital outlay for modernization of
22 mills would be Rs1155 crores instead of Rs.530 Crores proposed in the first Modified Revival
Scheme. The proposal is under active consideration of BIFR.

So far, NTC has completed modernization of 5 mills where the total machinery was received
and commissioned by December, 2007. Now these 5 mills are running on full capacity to
produce desired level of production and quality of yarn.

In 11 mills, most of the machineries except Speed Frames & Ring Frames have been received.
The mills have placed orders and opened L/Cs for purchase of Speed Frames & Ring Frames. It
is planned to complete the modernization in up to another 11 mills by October, 2008. The
balance 6 mills proposed to be modernized as under:-

1. For modernization of 2 mills on turn-key basis by NTC itself a contract has been awarded to
the M/s LMW to supply, erect and commission the total spinning machinery up to December,
2008

2. For 4 mills to be modernized by re-location as green field mills, the renowned consultants’ i.e.
M/s Techno pack (for 3 mills &M/s Gherzi Eastern (for 1 mill) have been appointed. These 4
mills will be modernized by December, 2008.

COMPANY PROFILES
BRIEF HISTORY

Tirupati cotton mills were established by M/s P. Suryanarayana & Sons Pvt. Limited in
Suryanarayana puram, Renigunta, Chittoor District; Andhra Pradesh in the year 1956 with a
licensed capacity of 30320 spindles to manufacture cotton yarns. The mill was inaugurated by

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Shri N. Sanjeeva Reddy, Chief Minister of Andhra Pradesh on 29th Aug, 1957. The commercial
production started with commissioned capacity of 6000 spindles which was later increased to
21040 and subsequently to 29668 spindles.

TAKE OVER BY NTC

The mill was taken over by Central Govt. under an ordinance promulgated during 1972
and subsequently the mill was nationalized under the provision of SICK TEXTILE
UNDERTAKING (NATIONALISATION) ACT, 1974 with effect from 1.4.1974. However the
physical position was taken over on 23rd September 1974.

LOCATION

The mill was situated at 2.5 km away from Renigunta and 13 km away from tirupati on
the state Highway no.32 towards Chennai. The mill is well connected by road, rail and air.

LAND PROPERTY

The mill has 89.40 Acres of land out of which 5.22 Acres of land acquired by Govt. of
A.P., for laying bypass road(Renigunta to Chandragiri) and the mill has received Rs. 3.13 lakhs
(under protest ) towards compensation and the same was sent to holding company, New Delhi
,under advise of the Head office ,Bangalore. The residential accommodation provided to
employee occupied 27.04 acres of land the surplus land identified is to be extent of 43.40 acres.

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WELFARE

Mill has totally 103 quarters provided to officers, staffs and workers out of which 68
quarters are occupied .All quarters including guest house are in dilapidated condition which
require major repairs.

PLANT AND MACHINARY

The mill equipped with following machineries.

1. BLOW ROOM

a) Reiter Blow Room 1957 year make single line with double scutchers for processing cotton
(poor condition)

b) Lakshmi Reiter Blow Room 1991 year single line scutcher exclusively for synthetic process
(good condition).

2. CARDING CONDITON

a) Lakshmi Reiter makes cards C 1/3 1991/1992 9 Nos. Good

b) Toyoda makes Cards 1957 year LCC converted 2 Nos. V Poor
c) Toyoda makes Cards 1957 year IRHP converted 8 Nos. V Poor
d) Toyoda makes Cards 1957 year SHIP Converted 9 Nos. V Poor
TOTAL 29 Nos.

3. DRAW FRAMES

a) LR make Draw frames DO6 model 1992 year 2 Nos. Avg.

with 3/3 drafting.
b) LR make Draw frames DO2 model 1976 year 2 Nos. V.Poor. with 3/5
drafting.
c) LR make Draw frames DO2s model 1978 year 2 Nos. Avg.
with 3/5 drafting.
Total Draw Frames 6 Nos.

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4. SIMPLEX
a) LR make LF 1400 model 1990/91/92 year 6 Nos. Good
b) TOYODA make 1957 year with UTM 620 2 Nos. Poor drafting system
c) Texaco Howa make 1989 year with SKF 1 Nos. Poor 1600 drafting
system

5. SPINNING
a) L R make G5/1 1992 year with each machine 5 Nos. Avg
having 864 spindles ,drafting 7” lift and 42 mm
Ring Diameter
b) MEI Ring Frames 1980 year with 440 spindles 12Nos. Poor each UT
620 Drafting 7” lift 42mm Ring Diameter
c) Zingers Ring Frames 1976 year with 400 spindles 12Nos. Poor each, PK
211E Drafting, 7” lift 42mm Ring Diameter
d) OM Ring Frames 1957 year with 400 spindles 15Nos. Poor each, PK
211E Drafting, 7” lift 42mm Ring Diameter
e) Texmoco Ring Frames 1957 year with 400 spindles 13Nos. V Poor each, PK
211-9, UT 3E-3, Kunal-1 Drafting,
7” lift 42mm Ring Diameter
f) NMM Ring Frames 1964 year with 452 spindles 9Nos. V Poor
each,UT 620 Drafting ,7” lift 42mm Ring Diameter
Thus the numbers of Ring Frames are 66 with 27860 total spindles

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6. CONE WINDING
a) The mill has padmatex 138 Model 1990 year 1 Nos. Avg.
auto corner with 60 drums capacity with splices.
b) Textool make 1976/78/87/94 year with 120 drums each 4 Nos. Poor
c) Brady make 1980/81/85 year within 120 drums each 3 Nos. Poor

7. DOUBLING.

a) Doublers winder Kamitsu make with 80 drums 1 Nos. V Poor

b) NMM make 1964 year with 340 spindles each with 3 Nos. Poor

dry process, 8” lift and 2 1 Ring Diameter. (RF Converted).

4

The above machines are suitable to produce Cotton, Hosiery and Synthetic Yarns. The
production capacity being 5500 Kg’s of Yarn per day.

MODERNISATION

After Nationalization of the mill, National Textile Corporation has taken first phase of

modernization during 1975 with an outlay of Rs. 92.41 lakhs. The second phase of

modernization was done during 1982 with an outlay of Rs. 69.92 lakhs. The third phase of

modernization was carried out during 1991-92 with the assistance from financial institutions at

an outlay of Rs. 425 lakhs. The total amount spent was Rs.587.03 lakhs.

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FINANCIAL PERFORMANCE

The Tirupati Cotton Mill was one of the profits making unit in the NTO up to 1993. The

sale turnover was of Rs. 178.29 Lakhs during the year 1974-75 and was at Rs. 120 Lakhs during

the year 1994-95 due to various reasons, the working of the mills receding and it incurring

losses. As on 31st March, 1988 the mill had an accumulated loss of Rs. 12.15 Crores with

negative net worth of Rs.10.45 Crores.

SUSPENSION OF OPERATION AND INTRODUCTION OF VRS TO EMPLOYEES.

To avoid further losses, the NTC management has introduced VRS in the month

of October, 1996.Consequently about 350 employees out of 463opted for VRS involving the

payment of Rs. 452.96 Lakhs. As a result, the operations of the mill remained suspended from

Dec.1996.The total amount spent for VRS Gratuity up to 2001 March is Rs. 674.43 Lakhs.

THE SICK TEXTILE UNDERTAKINGS (NATIONALISATION) ACT, 1974(No. 57 of

74)

An act to provide for the acquisition and transfer of the sick textile undertakings

and the right, title and interest of the owners in respect of the sick textile undertakings, specified

in the first schedule with a view to re-organizing and rehabilitating such sick textile undertakings

so as to sub serve the interests of the general public by the augmentation varieties of cloth and

yarn, and for matters connected therewith or incidental thereto:

BE it enacted by parliament in the Twenty first year of the Republic of India.

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