Final Draft

CHAPTER-1
1.1 INTRODUCTION
First, we can now introduce a definition of portfolio that relates more directly to the
context of our preceding discussion. In the CUMI (Carborundum universal limited) view, a
portfolio is: One of a number of mechanisms, constructed to actualize significant elements in the
Enterprise Business Stratergy. It contains a selected, approved, and continuously evolving,
collection of Initiatives which are aligned with the organizing element of the Portfolio, and,
which contribute to the achievement of goals or goal components identified in the Enterprise
Business Strategy. The basis for constructing a portfolio should reflect the enterprise's particular
needs. For example, you might choose to build a portfolio around initiatives for a specific
product, business segment, or separate business unit within a multinational organization.
A combination of securities with different risk & return characteristics will constitute the
portfolio of the investor. Thus, a portfolio is the combination of various assets and/or instruments
of investments. The combination may have different features of risk & return, separate from
those of the components. The portfolio management is also built up out of the share over a period
of time, with a view to suiting his risk and return preference to that of the portfolio that he holds.
The portfolio analysis of the risk and return characteristics of individual securities in the
portfolio and changes that may take place in combination with other securities due to interaction
among themselves and impact of each one of them on others.
A share holder considering investments in securities is faced with the problem of choosing from
among a large number of securities. His choice depends upon the risk and return characteristics
of individual securities. He would attempt to choose the most desirable securities and like to
allocate is funds over this group of securities. Again he is faced with the problem of deciding
which securities to hold and how much to invest in each. The investor faces an infinite number of
possible portfolios or groups of securities. The risk and return characteristics of portfolio differ
from those of individual securities combining to form a portfolio. The investor tries to choose the
optimal portfolio taking in to consideration the risk return characteristics of all possible
portfolios.
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As the economy and the financial environment keep changing the risk return characteristics of
individual securities as well as portfolios also change. This calls for periodical review and
revision of investment portfolios of investors. An investor invests his funds in a portfolio
expecting to get a good return consistent with the risk that he has to bear. The return realized
from the portfolio has to be measured and the performance of the portfolio has to be evaluated.
It is evident that national investment activity involves creation of an investment portfolio.

Portfolio management comprises all the processes involved in the creation and maintenance of
an investment portfolio. It deals specifically with the security analysis, portfolio analysis,
portfolio selection, portfolio revision and portfolio evaluation. Portfolio management makes use
of analytical techniques of analysis and conceptual theories regarding rational allocation of
funds. Portfolio management is a complex process which tries to make investment activity more
rewarding and less risky.
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PORTFOLIO
Meaning of portfolio:
those of the components. The portfolio is also built up out of the wealth or income of the investor
over a period of time, with a view to suit his risk and return preference to that of the portfolio
that he holds. The portfolio analysis of the risk and return characteristics of individual securities
in the portfolio and changes that may take place in combination with other securities due to
interaction among themselves and impact of each one of them on others.
Types of portfolio for study:
In portfolio Design, we are considering only two types of portfolio. They are as follow:
1. Random Portfolio
2. Sector Portfolio
1. Random portfolio
Random portfolio consists of the scripts that are randomly selected by the investor by its own
knowledge and preference of the stocks. Here there is no analysis is done of the script, they are
selected on the tips and buts received by the investors from the external sources.
Features of random portfolio:
• There is no method used for selection of the script in the portfolio.

• Selection is based on the individual criteria for the scripts.
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• The investment is made for higher return in short term.
• Generally in India most of the portfolio are selected according to this random methods as
no investor himself in that much analysis of the script.
those of the components. The portfolio is also built up out of the wealth or income of the investor
over a period of time, with a view to suit his risk and return preference to that of the portfolio
that he holds. The portfolio analysis of the risk and return characteristics of individual securities
in the portfolio and changes that may take place in combination with other securities due to
interaction among themselves and impact of each one of them on others.
• Easier to keep a track on the market as not much time wasted in the analysis.
• This portfolio seems to have perform better in short term as script are generally which are
performing better at that time.
• Tips are available every where for the investor to pouch.
• It is the experience of the individual that can fetch him good return.
Disadvantages of random portfolio:
• There is every chance that you may select a script that has a very bad background in the
market.
• Not every time the tips pay off for you. You need to have strong reason to select that
script.
• Such portfolios are not able to sustain when there is a crisis in the market.
• There is a very high risk and return involve in such portfolio.
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2. Sector specific portfolio
Sector specific portfolio includes securities of those companies which are in the same business.
Sector portfolios are very useful when there is a particular sector which is doing very good and
has a bright future a head. Sector portfolio has the securities of those companies that engage in
same kind of business.
e.g. In late 1990’s sector that was providing the highest return was information technology.
Investors who have invested their money in these securities had earned very high return.
Features of sector portfolio:
• Script form the same group of companies that are in to the similar type of business.
• Maximum exposure to the industry/sector. So any news or event has the direct effect on
the portfolio.
• Risk regarding the portfolio increases as it is expose to sector specific ups and downs.
• Useful investment tools for speculator and short-sellers.
• It is better suited for the sectors which have been providing good revenue in the near past.
Advantages of sector portfolio:
• It is better suited to investors who are willing to take risk.

• It provides better short term return then other portfolios.
• It is easy to keep a watch on one sector rather than many. You can have a good command
over the things happening.
• Limited exposure to other sectors keeps the portfolio safe from the performance of other
sectors in the economy.
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Disadvantages of sector portfolio:
• It is a highly risky portfolio as risk associated with the sector directly affects the
performance of the portfolio.
• These types of portfolios are not suited for long-term investor as risk taken for the return
can be too high.
There is always the possibly many scripts in the sector may not be giving that much good
attractive return as others. They may eat the profits from other scripts.
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1.2 INDUSTRY PROFILE
The abrasives industry is a vast and unsung hero in manufacturing providing the critical enabling
technology for many businesses. Companies in the abrasives industry provide not only the
products but the technology that allows others t shape, finish, and clean countless parts for
manufacturing. From the massive machine tool that grind rolls for the steel industry to the hand-
held tools used by dentists, abrasives are used in thousands of ways. The raw materials for
abrasives range for walnut shells to diamond. Abrasive products can be found in the finishing
industry supporting cleaning and deburring operations as well as preparation for plating and
painting applications. In the machining industry, abrasives in bonded, coated and loose forms
shape and finish parts made from every conceivable material used to make industrial and
consumer products. The blast cleaning and peening industries rely upon hundred of abrasive
products to prepare and maintain bridges, steel structures, aircraft and ships. The following is
some of the companies that produce abrasive products which include grinding wheels, coated
abrasives, hones, diamond tools and accessories, grinding machine tools, and related supplies
and equipment
The use of abrasives goes back to earliest man’s rubbing of one hard stone against another to
shape a weapon or a tool. The Bible mentions a stone called shamir that was very probably
emery, a natural abrasive still in use today. Ancient Egyptian drawings show abrasives being
used to polish jewelry and vases. A statue of a Scythian slave, called “The Grinder,” in the Uffizi
Gallery in Florence, shows an irregularly shaped natural sharpening stone used to whet a knife.
Sand and pieces of flexible hide were early man’s sandpaper. Later, craftsmen tried to fix
abrasive grains to flexible backings with crude adhesives. A 13th-century Chinese document
describes the use of natural gums to fix bits of seashell to parchment. About two centuries later,
the Swiss began coating crushed glass on a paper backing.
Early sand and glass abrasives lacked sharpness, and by the 19th century early abrasive products
like the natural sandstone that had been formed into the “grinding wheel” no longer met the
needs of developing industry. In 1873 Swen Pulson, working in the Norton and Hancock Pottery
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Company, Worcester, Mass., U.S., won a jug of beer by betting that he could make a grinding
wheel by combining emery with potter’s clay and firing them in a kiln. Pulson succeeded on his
third try; this incident signaled the end of unsatisfactory glue-and-silicate bonded products and
the birth of the vitrified grinding wheel.
Just before the beginning of the 20th century, when the natural abrasives emery, corundum, and
garnet were falling short of industry’s demands, the American inventor Edward G. Acheson
discovered a method of making silicon carbide in electric furnaces, and scientists at the Ampere
Electro-Chemical Company in Ampere, N.J., U.S., developed alumina. In 1955 the General
Electric Company succeeded in manufacturing synthetic diamonds. Like other man-made
abrasives, synthesized diamond proved superior in many applications to the natural product,
which had been used in grinding wheels since 1930.
Once used only when precise dimensional accuracy and smooth surfaces were necessary,
abrasives have become a widely applied industrial tool. Higher grinding-wheel speeds, more
powerful grinding machines, and improved abrasives have steadily augmented their role.
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1.3 Company profile
Carborundum Universal Limited (CUMI), a leader in the abrasives and ceramics market
and part of the $1.6 billion Murugappa Group announced the inauguration of their fourth coated
abrasives manufacturing facility in India at Sriperumbudur today. Spread over 22.5 acres, the
facility has been established at an investment of Rs 50 crore. This facility will enable
Carborundum universal limited to more than double its manufacturing capacity for coated
abrasive products - from 11 million square meters to 25 million square meters. This world-class
facility will offer significant improvement in product consistency and yield giving CUMI the
capability to produce the next-generation coated products.
Present at the inauguration, Mr. Murugappan, Chairman, Carborundum Universal Limited said,
"It is proud moment for all of us at Carborundum Universal as the launch of this factory is yet
another testimony to Carborundum universal limited making its mark in the global area. With
international acceptance of our coated products in places like Australia, Europe and North
America, there is an increasing demand of newer requirements and designs. With this facility,
CUMI is equipped to deliver inimitable quality coated abrasives to markets worldwide".
"The commencement of this facility further strengthens our leadership position in the abrasives
market" said Mr. K Srinivasan, Managing Director, Carborundum Universal Limited.
"Engineered with unparalleled technology, the facility will enhance our supply capability to
deliver within 24 hours and manufacture a wide range of products with leadership in select
applications. The plant will support the supply of products to markets all over India and also our
meet our export targets of 30 per cent of total sales", he added
The facility houses the state-of-the-art abrasives maker and a full conversion line
It has the capacity to process fabrics and paper used for coated abrasives upto 1650 MM width
vis-à-vis the existing capacity of 940 MM. The new facility will enable CUMI to build a range of
high performance products through next generation input materials and consistency in product
performance and geometry through high degree of process controls. To the customers, the
facility offers wide belts, waterproof cloth backing and power tool abrasives.
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The Sriperumbudur facility is in keeping with CUMI's environmental principles of adopting
environmentally acceptable production methods and materials
What started 100 years ago as a small family run business in indigenous financing is today an
INR 85,000 million (USD 2 billion) corporate with diversified interests in abrasives,
engineering, farm inputs, plantations, sugar, bio-products, chemicals, nutraceuticals, insurance
and financial services
The cumi is today an industry leader in many fields and enjoys a high degree of credibility in the
market place. The group is also one of the first Indian corporates to begin the process of
transformation from being a family owned business to a professionally run organisation.
Recently changes have been effected at the Board level by bringing in professional non family
members to run the business. The group has been working on transition of the family owned
business into a professionally managed one. In November 1999 the Murugappa Corporate Board
was formed which included family members and three independent directors. In April 2001, Mr.
M V Subbiah, a family member, stepped down as chairman and handed over the reins to Mr. N S
Raghavan, a non-family professional who became the non-executive chairman of the Board -a
landmark in the history of family run businesses where chairmanship is handed over to a
professional non-family member. With the appointment of Mr. P S Pai, former Vice Chairman of
Wipro, as Executive Chairman, the Murugappa Group has once again reiterated its commitment
to practice a high degree of corporate governance.
On attaining the age of retirement, Mr M V Subbiah stepped down from the Murugappa
Corporate Board and relinquished office from all other statutory boards in January 2004 yet
another move towards upholding corporate governance.
The group is also the first and only business group in Asia to have been awarded the ‘IMD
Distinguished Family Business Award’ by the internationally famous Management Development
Institute located in Lausanne, Switzerland. Right through its one hundred years of evolution, the
group has maintained transparency in all its activities and enjoys an excellent reputation for high
ethical standards in whatever business it is in. Highly people oriented, the group has a workforce
of nearly 20,000 satisfied employees. Traditional in values but innovative and modern in its
outlook, the group is also known to be very environment conscious and eco friendly. Nearly half
of its turnover is from agro based products.
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CUMI's constant innovation and product upgradation, through in-house R&D and strategic
alliances with global leaders in grinding technology
CUMI's products are being exported to 43 countries spread across North America, Europe,
Australia, South Africa and Asia.
CUMI, has signed a Joint Venture agreement with Jingri and CEEB - the promoters of Jingri to
acquire a stake of 49 per cent in the parent company (JINGRI) for an investment of USD $ 4.9
million. The Joint venture will be re-christened as JINGRI CUMI Super Hard Metal Company
Ltd.
A state-of-the-art 2000 tons Bonded Abrasive plant will be set up in the Yanjiao Province at a
new site.This facility will eventually house all the Jingri and its JV operations. CUMI will supply
the technology for the ABRASIVE Plant besides it will also be involved in the management of
the business as a JV Partner.
With this JV, CUMI will move a step further in its twin stated objectives of, (1) Offering the Full
Range of Abrasives and (2) Creating a strong manufacturing back-end in India and China to
serve its Global Customers.
Jingri Industrial Diamond Company (JINGRI) is one of the leading Synthetic Diamond
manufacturing companies in China since 1970
The company pioneered the manufacture of Coated and Bonded Abrasive in India in addition to
the manufacture of Super Refractories, Electro Minerals, Industrial Ceramics and Ceramic
Fibres. Today the company's range of over 20,000 different varieties of abrasives, refractory
products and electro-minerals are manufactured in ten locations across various parts of the
country.
CUMI was founded in 1954 as a tripartite collaboration between the,The Carborundum Co.,
USA and the Universal Grinding Wheel Co. Ltd., U.K.
The company pioneered the manufacture of Coated and Bonded Abrasive in India in addition to
the manufacture of Super Refractories, Electro Minerals, Industrial Ceramics and Ceramic
Fibres. Today the company's range of over 20,000 different varieties of abrasives, refractory
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products and electro-minerals are manufactured in ten locations across various parts of the
country.
With state-of-the art facilities and strategic alliances with global partners, CUMI has achieved a
reputation for quality and innovation.CUMI is one of the five manufacturers in the world with
fully integrated operations that include mining, fusioning, wind and hydro power stations,
manufacturing, marketing and distribution.
Almost all of CUMI's ten manufacturing facilities have received the ISO 9001:2000
accreditation for quality standards. A well connected marketing and distribution network of
offices and warehouses in India and abroad ensure that service to customers is given prime
importance.
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1.4 PRODUCT PROFILE
The Murugappa Group, headquartered at Chennai, India, is a USD 2.4 billion (Rs 96
billion) conglomerate with interests in engineering, abrasives, fertilisers, finance, bio-products
and plantations. It has 29 companies under its umbrella, of which six are listed and actively
traded on the National Stock Exchange and the Bombay Stock Exchange. Together, they have
over 32,000 employees.
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An abrasive is a material, often a mineral, that is used to shape or finish a workpiece through
rubbing which leads to part of the workpiece being worn away. While finishing a material often
means polishing it to gain a smooth, reflective surface it can also involve roughening as in satin,
matte or beaded finishes.
Abrasives are extremely commonplace and are used very extensively in a wide variety of
industrial, domestic, and technological applications. This gives rise to a large variation in the
physical and chemical composition of abrasives as well as the shape of the abrasive. Common
uses for abrasives include grinding, polishing, buffing, honing, cutting, drilling, sharpening,
lapping, and sanding. For simplicity, "mineral" in this article will be used loosely to refer to both
minerals and mineral-like substances whether man-made or not.
Files act by abrasion but are not classed as abrasives as they are a shaped bar of metal. However,
diamond files are a form of coated abrasive as they are metal rods coated with diamond powder
Bonded abrasives
A bonded abrasive is composed of an abrasive material contained within a matrix,

although very fine aluminium oxide abrasive may comprise sintered material. This matrix is
called a binder and is often a clay, a resin, a glass or a rubber. This mixture of binder and
abrasive is typically shaped into blocks, sticks, or wheels. The most usual abrasive used is
aluminium oxide. Also common are silicon carbide, tungsten carbide and garnet. Artificial
sharpening stones are often a bonded abrasive and are readily available as a two sided block,
each side being a different grade of grit.
Coated abrasives
A coated abrasive comprises an abrasive fixed to a backing material such as paper, cloth,
rubber, resin, polyester or even metal, many of which are flexible. Sandpaper is a very common
coated abrasive. Coated abrasives are commonly the same minerals as are used for bonded
abrasives. A bonding agent often some sort of adhesive or resin is applied to the backing to
provide a flat surface to which the grit is then subsequently adhered. A woven backing may also
use a filler agent again, often a resin to provide additional resilience.
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1.5NEED FOR THE STUDY
 The purpose of the study was to compare views of various financial statements in a stimulated
environment.
 The resulting view of the profitability ratio’s of the company and also the turnover ratio of the
company.
 The profitable to the investors based on return and marketability and risk.
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1.6 OBJECTIVES OF THE STUDY
 To provide basic idea of different stock market investment instruments to investor.
 To provide knowledge to investor about various type of risk associated with various
investment instruments.
 To provide investor knowledge about share that would help them in selection of script
and creation of portfolio.
PRIMARY OBJECTIVE:
 To study about the FINANCIAL PORTFOLIO MANAGEMENT of an

organization.
SECONDARY OBJECTIVES:
 To understand the policies of the company.
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 To understand the various Business transactional activities.
 To study the existing Financial Statements.
 To classify,analyze,interpret and summarize the provided Financial statements.
1.7 SCOPE OF THE STUDY
The study on portfolio management it helps in understanding behavior of share market. It helps
share holders to be aware about deviations in the returns of the stocks. The ratio analysis
calculation indicates the stock value to the share holders.
This helps the share holder in taking good decisions when investing in share market.
It also helps the customers to ascertain the risk and return of the stocks. This will help
the share holder in identifying the stocks which would yield them higher return and lesser risk.
The analysis of the data would be immense help to the share holder on the hand and the
officials of the stock market to understand the responsiveness of market price.
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1.8 LIMITATIONS OF THE STUDY
 As the numbers of share holder in sector I have confine my study only to the share that
have high turnover.
 The numbers of share holder in sector as my study to the share that have high Return &
Marketability.
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1.9 REVIEW OF LITERATURE
Portfolio Management is used to select a portfolio of new product development projects to

achieve the following goals:
• Maximize the profitability or value of the portfolio

• Provide balance
• Support the strategy of the enterprise
Portfolio Management is the responsibility of the senior management team of an organization or

business unit. This team, which might be called the Product Committee, meets regularly to
manage the product pipeline and make decisions about the product portfolio. Often, this is the
same group that conducts the stage-gate reviews in the organization.
A logical starting point is to create a product strategy - markets, customers, products, strategy
approach, competitive emphasis, etc. The second step is to understand the budget or resources
available to balance the portfolio against. Third, each project must be assessed for profitability
(rewards), investment requirements (resources), risks, and other appropriate factors.
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The weighting of the goals in making decisions about products varies from company. But
organizations must balance these goals: risk vs. profitability, new products vs. improvements,
strategy fit vs. reward, market vs. product line, long-term vs. short-term.
Several types of techniques have been used to support the portfolio management process:
• Heuristic models
• Scoring techniques
• Visual or mapping techniques
The earliest Portfolio Management techniques optimized projects'

profitability or financial returns using heuristic or mathematical models. However, this approach
paid little attention to balance or aligning the portfolio to the organization's strategy. Scoring
techniques weight and score criteria to take into account investment requirements, profitability,
risk and strategic alignment. The shortcoming with this approach can be an over emphasis on
financial measures and an inability to optimize the mix of projects. Mapping techniques use
graphical presentation to visualize a portfolio's balance. These are typically presented in the form
of a two-dimensional graph that shows the trade-off's or balance between two factors such as
risks vs. profitability, marketplace fit vs. product line coverage, financial return vs. probability of
success, etc.
M. Markowitz (1927 - )
Every practical discipline is based on a collection of fundamental concepts that people have
identified and proven (and sometimes refined or discarded) through continuous application.
These concepts are useful until they become obsolete, supplanted by newer and more effective
ideas.
For example, in Roman times, engineers discovered that if the upstream supports of a bridge
were shaped to offer little resistance to the current of a stream or river, they would last longer.
They applied this principle all across the Roman Empire. Then, in the Middle Ages, engineers
discovered that such supports would last even longer if their downstream side was also shaped to
offer little resistance to the current. So that became the new standard for bridge construction.
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Portfolio management, like bridge-building, is a discipline, and a number of authors and
practitioners have documented fundamental ideas about its exercise. Recently, based on our
experiences with clients who have implemented portfolio management practices and on our
research into the discipline, we have started to shape an IBM view of fundamental ideas around
portfolio management. We are beginning to express this view as a collection of "essentials" that
are, in turn, grouped around a small collection of portfolio management themes.
For example, one of these themes is initiative value contribution. It suggests that the value of an
initiative (i.e., a program or project) should be estimated and approved in order to start work, and
then assessed periodically on the basis of the initiative's contribution to the goals and goal
components in the enterprise business strategy. These assessments determine (in part) whether
the initiative warrants continued support.
(MCFARLAN)
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CHAPTER-2
2.1 RESEARCH METHODOLGY
D. SLESSINGER and M. STEPHENSION in the encyclopedia of social sciences define

research as “the manipulation of things, concepts or symbols for the purpose of generalizing to
extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in
the practice of an art”.
Research Methodology is the specification of methods and procedures for acquiring the
information needed to structure or solve problems. It is the overall operational pattern or
framework of the project that stipulates what information is to be collected, from which sources
and with what procedures. A Research Methodology is a plan of the proposed research work. It
involves a compromise dictated mainly by practical considerations.
• RESEARCH DESIGN:
It is a Blue Print specifying every stages of action in the course of research.

It is an arrangement of conditions for collection and analysis of data. In a manner that
aims to combine relevance to the research purpose with economy in procedure.
• OBSERVATIONAL DESIGN:
If the study makes use of observational techniques, then what type of

observation technique would be used, conditions under which observations made would
be indicated.
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DATA SOURCES:
• PRIMARY SOURCES:
Primary sources of data included interactions with senior managers, employees, field
staffs.
• SECONDARY SOURCES:
The major sources of secondary data were the documents and records of the organization,
the annual reports and the literature review books, journals, internet, observation, interviewing etc.
• Descriptive Research Design

It is designed to describe something, such as demographic characteristics of
consumers who use the products. It deals with determining frequency with something occurs or
how two variables vary together. This study is also guided by an initial Hypothesis.
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2.2 ANALYSIS OF INVESTMENT
MEANING OF INVESTMENT:
Investment is the activity, which is made with the objective of earning some sort of
positive returns in the future. It is the commitment of the funds to earn future returns and it
involves sacrificing the present investment for the future return. Every person makes the
investment so that the funds he has increases as keeping cash with himself is not going to help as
it will not generate any returns and also with the passage of time the time value of the money
will come down. As the inflation will rise the purchasing power of the money will come down
and this will result that the investor who does not invest will become more poor as he will not
have any funds whose value have been increased. Thus every person whether he is a
businessman or a common man will make the investment with the objective of getting future
returns.
TYPES OF INVESTMENT:
There are basically three types of investments from which the investors can choose. The
three kinds of investment have their own risk and return profile and investor will decide to invest
taking into account his own risk appetite. The main types of investments are
Economic investments:
These investments refer to the net addition to the capital stock of the society. The capital
stock of the society refers to the investments made in plant, building, land and machinery which
are used for the further production of the goods. This type of investments are very important for
the development of the economy because if the investment are not made in the plant and
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machinery the industrial production will come down and which will bring down the overall
growth of the economy.
Financial Investments:
This type of investments refers to the investments made in the marketable securities
which are of tradable nature. It includes the shares, debentures, bonds and units of the mutual
funds and any other securities which is covered under the ambit of the Securities Contract
Regulations Act definition of the word security. The investments made in the capital market
instruments are of vital important for the country economic growth as the stock market index is
called as the barometer of the economy.
General Investments:
These investments refer to the investments made by the common investor in his own
small assets like the television, car, house, motor cycle. These types of investments are termed as
the household investments. Such types of investment are important for the domestic economy of
the country. When the demand in the domestic economy boost the over all productions and the
manufacturing in the industrial sectors also goes up and this causes rise in the employment
activity and thus boost up the GDP growth rate of the country. The organizations like the Central
Statistical Organization (CSO) regularly takes the study of the investments made in the
household sector which shows that the level of consumptions in the domestic markets.
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CHARACTERISICS OF INVESTMENT:
Certain features characterize all investments. The following are the main characteristics
features if investments
Return:
All investments are characterized by the expectation of a return. In fact, investments are
made with the primary objective of deriving a return. The return may be received in the form of
yield plus capital appreciation. The difference between the sale price & the purchase price is
capital appreciation. The dividend or interest received from the investment is the yield. Different
types of investments promise different rates of return. The return from an investment depends
upon the nature of investment, the maturity period & a host of other factors.
Risk:
Risk is inherent in any investment. The risk may relate to loss of capital, delay in
repayment of capital, nonpayment of interest, or variability of returns. While some investments
like government securities & bank deposits are almost risk less, others are more risky. The risk
of an investment depends on the following factors. The longer the maturity period, the longer is
the risk. The lower the credit worthiness of the borrower, the higher is the risk. The risk varies
with the nature of investment. Investments in ownership securities like equity share carry higher
risk compared to investments in debt instrument like debentures & bonds.
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Safety:
The safety of an investment implies the certainty of return of capital without loss of
money or time. Safety is another features which an investors desire for his investments. Every
investor expects to get back his capital on maturity without loss & without delay.
Liquidity:
An investment, which is easily saleable, or marketable without loss of money & without
loss of time is said to possess liquidity. Some investments like company deposits, bank deposits,
P.O. deposits, NSC, NSS etc. are not marketable. Some investment instrument like preference
shares & debentures are marketable, but there are no buyers in many cases & hence their
liquidity is negligible. Equity shares of companies listed on stock exchanges are easily
marketable through the stock exchanges. An investor generally prefers liquidity for his
investment, safety of his funds, a good return with minimum risk or minimization of risk &
maximization of return.
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2.3 TOOLS USED FOR ANALYSIS
RATIO ANALYSIS
Ratios provide clues to the financial position of a concern. These are the pointers or
indicate of financial strength, soundness, position or weakness of an enterprise. Once can draw
conclusions about exact financial position of a concern with a help of ratios.
Ratio analysis is technique of analysis and interpretation of financial statements. It is the
process of establishing and interpreting various ratios for helping in making certain decisions. It
is only a means of better understanding of financial strengths and weakness of a firm.
Calculation of more ratios doesn’t serve any purpose, unless several appropriate ratios are
analyzed and interpreted.
RETURN ON SHARE HOLDER’S FUNDS:
It indicates how well firm has used the resources of owners. This ratio is of great interest
to existing and prospective investors and also of great concern for managements, who is
responsible for maximizing the owner’s welfare.
Net profit after interest and tax

_________________________ * 100
Return on Shareholder’s Funds =
Shareholder’s funds
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STOCK TURNOVER RATIO:
This ratio is also called stock velocity ratio. It shows the relationship between the cost of
goods sold and the amount of average inventory.
Stock Turnover Ratio = Cost of sales (or) Net sales

Average inventory
DEBTORS TURNOVER RATIO:
Debtors’ turnover ratio is also called as receivables turnover ratio (or) debtors’ velocity.
It measures the number of times are related in a year in terms of sales.
Debtors Turnover Ratio = Net credit sales

Average account receivables
SHORT TERM SOLVENCY RATIOS:
This ratio is also called “Quick” or “Acid test ratio”. It is calculated by comparing the
Quick assets with current liabilities.
Liquid ratio = Liquid assets
Current liabilities
Liquid assets = Current Assets – Stock – Prepaid Expenses.
29
LONG TERM SOLVENCY:
Long term solvency ratio’s measures how a company can need its long term financial
leverage of the obligation. Long term solvency ratio’s include the total debt ratio, the debt equity
ratio, the equity multiplier, the times interest earned ratio, and the cost coverage ratio.
DEBT EQUITY RATIO:
This ratio is ascertained to determine long term solvency position of a company. Debt
equity ratio is also called ‘external’ equity ratio.
Debt equity ratio = External equities

Internal liabilities
PROFIT BEFORE TAX:
A profitability measure that looks at a company's profits before the company has to pay
corporate income tax. This measure deducts all expenses from revenue including interest
expenses and operating expenses, but it leaves out the payment of tax.
DIVIDENDS:
Dividends provide an incentive to own stock in stable companies even if they are not
experiencing much growth. Companies are not required to pay dividends. The companies that
offer dividends are most often companies that have progressed beyond the growth phase, and no
longer benefit sufficiently by reinvesting their profits, so they usually choose to pay them out to
their shareholders.
30
CHAPTER-3
DATA ANALYSIS AND INTERPRETATION
3.1.1 Return on shareholder’s funds

CALCULATION OF RATIO
(Rs in millions)
Year Net profit after Shareholder’s fund Return on
interest and tax Rs shareholder’s funds
Rs
2004-05 384 1991.96 19.27
2005-06 766 2374.16 32.26
2006-07 587 2739.73 21.42
2007-08 972 3518.75 27.62
2008-09 597 3908.56 15.27
31
Chart No. 3.1.1
Return on shareholder’s funds
35
30
25
20 MILLIONS
32.26 27.62 15
19.27 21.42 10
15.27
5
0
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09
YEARS
INFERENCE:
Return on shareholder funds for the year 2008-2009 is 15.27. But for the year 200-2005 it
is only 19.27. Return has considerably decrease which is not satisfactory.
3.1.2 Stock turnover ratio
32
(Rs in millions)
Year Net sales Average inventory Stock turnover
Rs. (in times)
Rs
2004-05 3565 478 7.45
2005-06 4242 511 8.30
2006-07 5268 897 5.87
2007-08 6606 1698 3.89
2008-09 7151 1722 4.15
Chart No. 3.1.2
33
Stockturnover ratio
2008-09,
2004-05,
4.15
7.45
2007-08,
3.89
2006-07, 2005-06,
5.87 8.3
INFERENCE:
The stock turnover ratio for the year 2008-2009 is 4.15. But for the year 2004-2005 it is
only 7.45. This shows there is a decrease which is not satisfactory.
34
3.1.3 Debtors’ turnover ratio
(Rs in millions)
Year Net credit sales Average account Debtors turnover
receivables
Rs Rs
2004-05 3565 678.42 5.25
2005-06 4242 824.90 5.14
2006-07 5268 937.43 5.61
2007-08 6606 1322.86 4.99
2008-09 7151 1529.64 4.67
Chart No. 3.1.3
35
Debtor turnover ratio
6
5.61
5 5.25 5.14 4.99
4.67
4
MILLIONS 3
2
1
0
2004-05 2005-06 2006-07 2007-08 2008-09
YEARS
INFERENCE:
The stock turnover ratio for the year 2008-2009 is 4.67. But for the year 200-2008 it is
only 5.25. This shows there is a decrease of debtor turnover ratio its not satisfactory.
36
3.1.4 Liquid Ratio
(Rs in millions)
Year Liquid assets Current liabilities Liquid ratio
Rs Rs
2004-05 935.12 369.48 2.53
2005-06 1087.26 446.20 2.43
2006-07 1370.93 693.59 1.97
2007-08 1867.41 815.71 2.28
2008-09 2325.27 892.63 2.60
Chart No. 3.1.4
37
LIQUID RATIO
3
2
MILLIONS 2.53 2.43 2.6
1 1.97 2.28
0
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09
YEARS
INFERENCE:
The liquidity position for the year 2004-2005 is 2.53 and for the year 2008-2009 it is only
2.60. There is increase in the liquidity position but it is quiet satisfactory.
38
3.1.5 Debt Equity Ratio
(Rs in
millions)
Year External equities Internal equities Debt equity ratio
Rs
Rs
2004-05 405.88 1991.96 0.20
2005-06 723.40 2374.16 0.30
2006-07 1814.51 2739.73 0.66
2007-08 3010.04 3518.75 0.85
2008-09 3479.72 3908.56 0.89
Chart No. 3.1.5
39
Debt equity ratio
0.9 0.89
0.85
0.8
0.7 0.66
0.6
0.5
MILLIONS
0.4
0.3 0.3
0.2 0.2
0.1
0
2004-05 2005-06 2006-07 2007-08 2008-09
YEARS
INFERENCE:
The debt equity ratio for the year 2004-2005 is 0.20 and for the year 2008-2009 it is 0.89.
Though there is a increase in the ratio it is satisfactory since the internal equities are more than
borrowed funds.
40
3.1.6 SALES
SALES (Rs in
YEAR
Millions)
2004-05
3565
2005-06
4242
2006-07
5268
2007-08
6606
2008-09
7151
Chart No. 3.1.6
41
Sales
8000
7000 7151
6606
6000
5268
5000
4242
MILLIONS 4000 3565
3000
2000
1000
0
2004-05 2005-06 2006-07 2007-08 2008-09
YEARS
INFERENCE:
Sales for the year 2008-2009 is 7151. But for the year 2004-2005 it is only 3565. Return
has considerably increasing
3.1.7 PROFIT BEFORE TAX
42
PROFIT BEFORE TAX
YEAR
(In Millions)
2004-05
524
2005-06
1007
2006-07
853
2007-08
861
2008-09
1372
Chart No. 3.1.7
43
Profit before tax
1400
1200
1000
800
MILLIONS
600
400
200
0
2004-05 2005-06 2006-07 2007-08 2008-09
YEARS
INFERENCE:
Profit before tax for the year 2004-2005 is 524. But the year 2008-2009 its only 1372.
Return as considerably increase which is satisfactory
44
3.1.8 RESERVES
RESERVES (Rs in
YEAR
millions)
2004-05
1866
2005-06
2156
2006-07
2522
2007-08
3304
2008-09
3694
45
Chart No. 3.1.8
Reserves
4000 3694
3304
3000
2522
MILLIONS 20001866 2156
1000
0
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09
YEARS
INFERENCE:
Profit before tax for the year 2004-2005 is 1866. But the year 2008-2009 its only 3694.
Return as considerably increase which is satisfactory
3.1.9 DIVIDENDS
46
YEAR DIVIDENDS (%)
2004-05
139
2005-06
177
2006-07
207
2007-08
283
2008-09
368
Chart No. 3.1.9
47
Dividends
400
350
300
MILLIONS
250
200 368
150 283
100 177 207
139
50
0
2004-05 2005-06 2006-07 2007-08 2008-09
YEARS
INFERENCE:
Dividend for the year 2007-2008 is 283. But the year 2008-2009 its only 368. Return as
considerably increasing
3.1.10 RETURN ON CAPITAL EMPLOYED (%)
48
RETURN ON CAPITAL
YEAR EMPLOYED (%) (Rs in
Millions)
2004-05
22.1
2005-06
31.9
2006-07
19.5
2007-08
14.7
2008-09
22.7
Chart No. 3.1.10
49
Return on capital employed
2008-09, 2004-05,
22.7 22.1
2007-08,
14.7 2005-06,
2006-07, 31.9
19.5
INFERENCE:
Return on capital employed for the year 2004-2005 is 22.1. But the year
2008-2009 its only 22.7. Return as increase which is quiet satisfactory
50
CHAPTER-4
4.1 FINDINGS
1.Return on shareholder funds for the year 2008-2009 is 15.27. But for the year 200-2005 it is
only 19.27. Return has considerably decrease which is not satisfactory.
2. The stock turnover ratio for the year 2008-2009 is 4.15. But for the year 2004-2005 it is only
7.45. This shows there is a decrease which is not satisfactory.
3. The stock turnover ratio for the year 2008-2009 is 4.67. But for the year 200-2008 it is only
5.25. This shows there is a decrease of debtor turnover ratio its not satisfactory.
4. The liquidity position for the year 2004-2005 is 2.53 and for the year 2008-2009 it is only
2.60. There is increase in the liquidity position but it is quiet satisfactory.
5. The debt equity ratio for the year 2004-2005 is 0.20 and for the year 2008-2009 it is 0.89.
Though there is a increase in the ratio it is satisfactory since the internal equities are more than
borrowed funds.
6. Sales for the year 2008-2009 is 7151. But for the year 2004-2005 it is only 3565. Return has
considerably increasing.
7. Profit before tax for the year 2004-2005 is 524. But the year 2008-2009 its only 1372. Return
as considerably increase which is satisfactory.
8. Profit before tax for the year 2004-2005 is 1866. But the year 2008-2009 its only 3694. Return
as considerably increase which is satisfactory.
51
9. Dividend for the year 2007-2008 is 283. But the year 2008-2009 its only 368. Return as
considerably increasing.
10. Return on capital employed for the year 2004-2005 is 22.1. But the year 2008-2009 its only
22.7. Return as increase which is quiet satisfactory.
52
4.2 SUGGESTIONS
 The first and foremost importance should be given to NPV of the project (Net present
value )
 The company can go for share split or reverse split.
 Allocating Bonus share is always preferable, that helps in keeping the market value of the
company high.
 Preference share holders always enjoys more benefits and remain safe compare to
ordinary share holders, so atleast ordinary share holders must have a right to claim on
income like that of a preference share holder
 Involving long term financing concept like lease into the concept of share. Might bring a
a big positive financial revolution in mere future (wherein both the firm & the share
holders wealth could be maximized)
53
4.3 CONCLUSION
Over the last five years, the company has been making efforts to increase its presence in
the export market. As a result export turnover has been increasing steadily. The company had to
divert the electro cast refractory unit at Palakkad to SEPR Refractory, a port of the Saint Gobain
Group.
Four decades and more of pioneering work in abrasives and among the first to
manufacture super refractories and industrial ceramics in India. Carborundum Universal Limited
has earned the mantle of a leader with its passion for charting new paths.
CUMI is one of the key players in the domestic ceramics industry. The universal
ceramics plant is located at Hosur in Tamil Nadu and is ISO 9002 certified in refractories. CUMI
is present in the top end of the product line.
The various departments of the company involves grouping of activities and employer in
to departments so as to facilitate the accomplishment of organization objectives. This co-
ordination which prevails among the various department of CUMI helps to maintain the
“Nemerouno” position in India.
The financial position of the company is good on whole most of the ratios are favorable
and normal the company can initiate over all cost control measures to increase profitability
position of the company favorable.
The office is a place where records are initiated for communication, control and efficient
operation of the company. By supplying the necessary information, the office enables the
management to take quick and correct decisions.
For CUMI Limited it has been a journey in innovation, in spear heading technological
break through in setting new trends, it has been journey in involvement and abiding customer
relationship.
54
A balanced organization knows that the growth comes in many forms. A new
competency added new technology acquired employee morale on an upswing. An enhanced
public image having a holistic approach to growth is the hallmark of most durable business view.
This applies to CUMI also.
55
(Rs. (Rs.
Balance Sheet As at 31st March 2005 million) million)
31.03.2005 31.03.2004
SOURCES OF FUNDS
Shareholders’ Funds
Share Capital 1 93.35 93.35
Reserves and Surplus 2 1,898.61 1,621.84
1,991.96 1,715.19
Loan Funds
Secured Loans 3 275.92 395.78
Unsecured Loans 4 119.02
Long term lease liability 10.94 8.19
405.88 403.97
Deferred Tax Liability (Net) 138.58 138.56

Total 2,536.42 2,257.72
APPLICATION OF FUNDS
Fixed Assets
Gross Block 2,424.45 2,139.04
Less: Depreciation 1,331.83 1,256.51
Net Block 5 1,092.62 882.53
Capital work-in-progress at cost 30.39 15.11
1,123.01 897.64
Investments 6 478.29 452.25
Current Assets, Loans & Advances
Inventories 7 451.96 387.36

Sundry Debtors 8 678.42 665.98
Cash & Bank Balances 9 62.79 110.16
Loans & Advances 10 217.87 191.66
1,411.04 1,355.16
Less: Current Liabilities &
Provisions 11
Current Liabilities 369.48 315.69
Provisions 106.44 131.64
475.92 447.33
Net Current Assets 935.12 907.83
Total 2,536.42 2,257.72
56
Balance Sheet As at 31st March 2006
(Rs.
(Rs. million) million)
31.03.2006 31.03.2005
SOURCES OF FUNDS
2,374.16 1,991.96
Loan Funds
Secured Loans 3 652.11 275.92
Unsecured Loans 4 60.55 119.02
Long term lease liability 10.74 10.94
723.4 405.88
Total 3,274.44 2,536.42

Fixed Assets
Gross Block 2,676.9 2,424.45
Net Block 5 1,251.46 1,092.62

Capital work-in-progress 424.95 30.39
1,676.41 1,123.01

Loans & Advances 10 248.6 217.87
1,733.71 1,411.04
Provisions 11
646.45 475.92
Net Current Assets 1,087.26 935.12
Total 3,274.44 2,536.42
57
Balance Sheet As on 31-03-07
(Rs. (Rs.
million) million)
31.03.2007 31.03.2006
SOURCES OF FUNDS
2,739.73 2,374.16
Loan Funds
Secured Loans 3 1,797.02 652.11
Long Term Lease Liability 17.49 10.74
1,814.51 723.4
Total 4,760.78 3,274.44
Fixed Assets
Gross Block 3,570.95 2,676.9
Net Block 5 2,103.17 1,251.46

2,492.49 1,676.41

Loans & Advances 10 278.98 248.6
2,228.35 1,733.71

Provisions 11
857.42 646.45
Net Current Assets 1,370.93 1,087.26
Total 4,760.78 3,274.44
58
Balance Sheet as at 31st March 2008
(Rs.
(Rs. million) million)
31.03.2008 31.03.2007
SOURCES OF FUNDS
3,518.75 2,739.73
Loan Funds
Secured Loans 3 2,267.27 1,797.02
3,010.04 1,814.51
Total 6,811.4 4,760.78
Fixed Assets
Gross Block 4,282.04 3,570.95
Net Block 5 2,640.41 2,103.17

3,246.31 2,492.49
Investments 6 1,697.68 897.36
Sundry Debtors 8 1,322.86 937.43
Loans & Advances 10 460.17 278.98
2,898.31 2,228.35
Provisions 11
1,030.9 857.42
Total 6,811.4 4,760.78
59
as at 31st
March
Balance Sheet 2009
(Rs. (Rs.
million) million)
31.03.20 31.3.200
09 8
SOURCES OF FUNDS
3,908.56 3,518.75
Loan Funds
Secured Loans 3 2,872.76 2,267.27
Unsecured Loans 4 593.41 726.93
3,479.72 3,010.04
Deferred Tax Liability 368.23 282.61

Total 7,756.51 6,811.4
Fixed Assets
Gross Block 5,418.73 4,282.04
Net Block 5 3,500.87 2,640.41
3,709.53 3,246.31
Investments 6 1,721.71 1,697.68

Current Assets, Loans &
Advances
Inventories 7 1,165.47 945.57
Sundry Debtors 8 1,529.64 1,322.86
Loans & Advances 10 393.13 460.17
3,431.45 2,898.31

Provisions 11
1,106.18 1,030.9
Total 7,756.51 6,811.4
60
BIBLIOGRAPHY
BOOKS REFERED
1.”I.M. Pandey Financial Management”, Vikas Publishing, New Delhi, 9th Edition, 2009
2.”C.R. Kothari, Research Methods and Techniques”, Wishwa Prakashan publishing,
New Delhi, 1990
3.”T.S. Reddy & Y.Hari Prasad Reddy Management Accounting”, Margham
Publications, T.Nagar, 2000
WEBSITES
1. www.google.com
2. www.cumi.murugappa.com
61
62
S.No Name, Address and Description of Number of
subscribers. shares taken Witness
by each
subscriber
1. Jaya chamaraja wadiyar, his H.N. Palligar, Hosur,
Highness maharaja of Mysore, The secretary to H.H. the
100
place, Mysore. maharaja of Mysore
18.4.1954.
P.Govindarajan, office
N. Ranganadhan, Merchant, 31, Luz
2. Manager, Ajax products
Church Road,
20 ltd., Madras – 1.
Mylapore, Madras.
Dr. Sir A. Lakshmanaswami, Vice – P.Govindarajan, office

3. Chancellor, Madras. 10 Manager, Ajax products
ltd., Madras – 1.
C.V.C.T.V. Venkatachalam Chettiar, T.K.T. Chary, Agent of Sri

4. Banker, Kanadukathan. C.V.CT.V. Venkatachalam
25 Chettiar, Kanadukathan.
P. Venkataramana Rao, Judge,
5. Madras High Court [Retd], Chief P. Govindarajan, officer
Justice, Mysore High Court [Retd.], Manager, Ajax Products
‘Gautami’ 16, Victoria Crescent 30 Ltd., Madras – 1.
Road, Egmore, Madras.
A.M.M. Murugappa Chettiar, Leslie D. Miller, Solicitor,

6. Banker and merchant, Santhome, Regal House, Mc Lean
Mylapore, Madras. 160 Street, Madras.
A.M.M. Arunachalam, banker and Leslie D. Miller, Solicitor,

7. Merchant, Chittaranjan road, Madras Regal House, Mc Lean
-18. 160 Street, Madras
E. H. Coe, Engineer, 3, Kellys road 63 R.Narasimhachari,

8. Kilpauk, Madras Advocate, ‘Sarnath’,
64

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CHAPTER-1

It is evident that national investment activity involves creation of an investment portfolio.

Types of portfolio for study:

Features of random portfolio:

• There is no method used for selection of the script in the portfolio.

Disadvantages of random portfolio:

Features of sector portfolio:

Advantages of sector portfolio:

• It is better suited to investors who are willing to take risk.

A bonded abrasive is composed of an abrasive material contained within a matrix,

 To provide basic idea of different stock market investment instruments to investor.

 To study about the FINANCIAL PORTFOLIO MANAGEMENT of an

 To understand the policies of the company.

 To study the existing Financial Statements.

 To classify,analyze,interpret and summarize the provided Financial statements.

1.7 SCOPE OF THE STUDY

Portfolio Management is used to select a portfolio of new product development projects to

• Maximize the profitability or value of the portfolio

Portfolio Management is the responsibility of the senior management team of an organization or

The earliest Portfolio Management techniques optimized projects'

2.1 RESEARCH METHODOLGY

D. SLESSINGER and M. STEPHENSION in the encyclopedia of social sciences define

It is a Blue Print specifying every stages of action in the course of research.

If the study makes use of observational techniques, then what type of

• Descriptive Research Design

RETURN ON SHARE HOLDER’S FUNDS:

Net profit after interest and tax

Stock Turnover Ratio = Cost of sales (or) Net sales

DEBTORS TURNOVER RATIO:

Debtors Turnover Ratio = Net credit sales

SHORT TERM SOLVENCY RATIOS:

Liquid assets = Current Assets – Stock – Prepaid Expenses.

DEBT EQUITY RATIO:

Debt equity ratio = External equities

PROFIT BEFORE TAX:

DATA ANALYSIS AND INTERPRETATION

3.1.1 Return on shareholder’s funds

2004-05 384 1991.96 19.27

2005-06 766 2374.16 32.26

2006-07 587 2739.73 21.42

2007-08 972 3518.75 27.62

2008-09 597 3908.56 15.27

Return on shareholder’s funds

3.1.2 Stock turnover ratio

2004-05 3565 478 7.45

2005-06 4242 511 8.30

2006-07 5268 897 5.87

2007-08 6606 1698 3.89

2008-09 7151 1722 4.15

Chart No. 3.1.2

2004-05 3565 678.42 5.25

2005-06 4242 824.90 5.14

2006-07 5268 937.43 5.61

2007-08 6606 1322.86 4.99

2008-09 7151 1529.64 4.67

Chart No. 3.1.3

2004-05 935.12 369.48 2.53

2005-06 1087.26 446.20 2.43

2006-07 1370.93 693.59 1.97

2007-08 1867.41 815.71 2.28

2008-09 2325.27 892.63 2.60

Chart No. 3.1.4

2004-05 405.88 1991.96 0.20