1.

1 General Introduction About the Sector

The Indian feed industry is about 35 years old. It is mainly restricted to dairy and poultry feed
manufacturing; the beef and pork industry is almost non-existent. The quality standards of
Indian feed are high and up to international levels. Row materials for feed are adequately
available in India. the industry’s production is about 3.0 million tons, which represent only 5
present of the total potential, and feed exports are not very high. The feed industry has
modern computerized plant and latest equipment for analytical procedures and least-cost
ration form formulation, and it employs the latest manufacturing technology. In India, most
research work on animal feed is practical and focuses on the use of by-products, the
upgrading of ingredients and the enhancing of productivity.

The country has entered into a period of liberalization and this is bound to influence the
livestock industry. The per capita consumption of milk, eggs and broiler meat will grow. The
Indian feed industry is undergoing a very exciting phase of growth for the next decade.

1.2 Industry Profile

A) Origin and Development of Industry

INTRODUCTION TO FEED INDUSTRY: Feed manufacturing on a commercial and

scientific basis started around 1965 with the setting up of medium size feed plants in northern
and western India. Feed was produced mainly to cater to the needs of dairy cattle. The poultry
sector was not developed at that time and was restricted to backyard production, with the desi
(or native bird) kept mainly for the production of eggs. The poultry industry is now growing
in abundance. Today, the Indian feed industry is worth approximately Rs 47 billion.

THE LIVESTOCK INDUSTRY IN INDIA

India’s animal wealth is quite large in terms of its population of cattle, poultry, sheep and
goats, camels, horses, and pets. Recently, aquaculture has also been growing in importance in
India.

Table 1: - Livestock population in India

Livestock type: - population (Millions)

Cattle 204.5
Buffaloes 84.2
Sheep 50.8

1|Page
Goats 115.3
Pigs 12.8
Horses/ Ponies 0.8
Mules 0.2
Donkeys 0.9
Camels 1
Yaks 0.06
Mithun’s 0.15
TOTAL LIVESTOCK 470.71

Dairy cattle

Worldwide, India is number one in milk production, at 78 million tons per annum, and the
dairy industry is spread across the whole country. India has one of the largest populations of
cattle and buffalo in the world. In total of 288 million head, there are 10 million cross-bred
cows, 15 million good milch cows of local varieties and 36 million buffaloes of good milch
varieties. The remainder is of a non-descript variety and a sizeable proportion consists of
bullocks.

Table 2: - Cattle and poultry indicators

Dairy
Cross-bred cows (millions) 10
Improved cows (millions) 15
Improved buffaloes (millions) 36
Milk production (million tons) 78
per capita consumption (g/day) 240
Poultry
Commercial layers (millions) 150
Commercial broilers (millions) 650
Stock breeders(millions) 6.5
Egg production (109) 40
per capita availability(eggs/year) 40
Poultry meat production (million tons) 1
per capita availability(g/year) 1000
Poultry feed production (million tons) 9
ANNUAL GROWTH
Dairy industry 5%
Layer Industry 6-7%
Broiler Industry 10%

The cross-bred population is either Jersey or Holstein-Friesian, crossed with local cows.
Cross-breeding was a natural solution to upgrading the milk yield in the absence of high-
value imported varieties of pure-bred animals. The buffalo breeds are unique to India, and
produce milk with a fat content of 7 to 8 percent.
Milk is seen as a health drink and a variety of Indian sweets are prepared from milk. The ice-
cream market is growing.
Farms are located on the outskirts of cities and within cities. Almost all villages have a
number of cattle, but there are only a few organized dairy farms. In India, dairy is not so
much an industry as a smallholder farming activity.
Growth in the milk sector has occurred mainly through cooperative efforts. Cooperatives
started by supplying milk collection centers, where milk was collected from villagers in
quantities as small as 1 liter, and gradually started to provide other services to farmers,
including education, artificial insemination, veterinary health support and feeding. The small
farmers became prosperous, loan facilities were made available through banks, and member
farmers started to share the profits from cooperatives. Cooperatives also set up their own
modern computerized feed plants. They have modern milk processing plants from which they
produce and market pasteurized milk, butter, butter oil, chocolate, ice-cream and milk sweets,
which are very popular with Indian consumers. Today, the feed production from cooperatives
is about 0.6 million tons per year.
The National Dairy Development Board (NDDB), which has excellent facilities for research
on breeding, nutrition and health care, has played a pivotal role in setting up cooperatives.
Without NDDB and several of the existing dairy cooperatives, the milk sector in India would
have suffered.
The dairy industry in India is expected to grow, but growth will be restricted to individual
small farmers. It is unlikely that India will see the advent of large, organized dairy farming in
the near future.
POULTRY

Compared with the rest of the livestock sector, the poultry industry in India is more scientific,
better organized and continuously progressing towards modernization. Breeding and feeding
management have improved through education, training, competition, expansion and survival
instincts. India is the world's fifth largest egg producer, with a total production of 40 billion
eggs per year. The broiler industry is growing at the rate of 10 percent per annum. Indicators
are given in Table 2.
India has 150 million layers and 650 million broilers. Annual per capita consumption of
eggs is 40, and that of broiler meat is 1 000 g. Although these figures are low in comparison
with those for developed countries, the industry has great potential to expand because 30
percent of the country's population (about 300 million people) is developing economically
and the demand for poultry products is therefore likely to grow.
The poultry industry has witnessed several ups and downs in the last 25 years as a result of
unplanned growth and a lack of government regulation. Currently, it is growing at the rate of
10 percent in broilers and 6 to 7 percent in layers and is going through a phase of integration
in broilers which is likely to change the face of the industry. Although the phenomenon is
new, it is expected that there will be very rapid changes towards integration as more farmers
find it increasingly difficult to run farms with marginal profits or negative margins. The
poultry industry is very modern, with pure-line breeding, the latest vaccines and medicines,
environmentally controlled poultry houses, up-to-date processing units, the latest
management practices, chicken processing, exports of hatching eggs and excellent feed
quality.

Sheep, goats and camels

The sheep and goat sector are mostly in the hands of nomadic tribes and no significant
scientific husbandry, rearing and management practices are implemented. Research on
breeding and nutrition is being conducted at research institutes and agricultural universities.
Camels are reared by individuals who feed them local ingredients. There is a lack of scientific
management practices, genetic studies and scientific feeding practices in camel rearing and
the industry survives mostly on the basis of local, long-established knowledge of feeding and
breeding. There is, however, a fairly good disease diagnosis and treatment system, with
modern medicines and vaccines.
Swine

Most states in India have banned cow slaughter and the beef industry is therefore non-
existent. The majority of people disapprove of pork consumption, maybe because of the lack
of scientific management on swine farms & religious taboos. Swine reared on the streets are
very unhygienic and buyers are always suspicious about the source of pork, so there is no
organized pork industry.

Aquaculture

The aquaculture industry is relatively young. Prawns and fish are grown in both fresh and
brackish water, the latter being located mostly in the southeast and southwest coasts.
Aquaculture feed is manufactured with highly scientific methods and modern plants that use
new technologies and are highly efficient. Multinational companies from Thailand and
Taiwan Province of China have invested in this business. India exports most of its
aquaculture products.

Horses and pets

The Indian equine industry goes back more than 50 years and is considered modern, scientific
and very well equipped in terms of every aspect of animal husbandry practices. The equine
industry is spread across India and is restricted to horse racing. The feeding of these valuable
animals is mostly at the farm level under the supervision of experienced people following
traditional practices. What innovation there is tends to be closely guarded by the companies
concerned.

The Indian pet industry is in a nascent stage, with the main focus being on dogs rather than
cats and the emphasis on breeding and training. Regular dog shows are held by enthusiastic
dog owners to increase awareness of the rearing of good-quality pure-breeds; dogs are a
source of pride for households. Some commercial preparations are available in the form of
dog biscuits, chews, etc., but dogs are fed mostly on home-cooked food. One of the reasons
for this could be the high cost of commercial pet food.

1.2 (B) Growth and Present Status of the Industry

India is currently self-sufficient in livestock feeds and does not depend on imports. Instead,
the country exports large quantities of solvent extracted meals, which are a major source of
foreign exchange earnings.
Cereals and grains

Maize, sorghum and bajra (a type of millet) are commonly used in animal feeds. Wheat and
rice are mainly retained for human consumption.

Cakes and meals

Commonly used commodities of this kind are soybean, groundnut, rapeseed, sesame and
sunflower meals in poultry feed. In cattle feed, in addition to these meals, others such as
cottonseed and copra are used as premium ingredients.

Feeds of animal origin

Meat-meal, fishmeal, bone-meal and dicalcium phosphate of bone origin are the common raw
materials available for animal feeding. It is interesting to note that, with the exception of
some bone-based dicalcium phosphate, the Indian feed industry does not use materials of
animal origin in dairy cattle feed. This was not out of fear of any zoonotic problems but the
result of deep-rooted beliefs that the cow is sacred and must therefore be vegetarian. Now
even the use of bone-based dicalcium phosphate has been banned and mineral-based
dicalcium phosphate is used instead.
Fishmeal and meat-meal were popularly used in poultry feed, but the increased production,
improved availability and better awareness of soybean meal has led to its replacing fishmeal
and meat-meal in most poultry rations. It should be mentioned that farmers have faced
production problems owing to the bacterial contamination of fishmeal and meat-meal. The
quality of fishmeal is also very poor.

Popular by-products
Some by-products are very nutritious and palatable to cattle, and these products form the bulk
of cattle feed. They include wheat bran, rice bran and oil-extracted rice bran, tapioca, guar
meal, safflower meal, maize gluten and molasses. A special mention should be made of
Indian cattle feed's unique use of hulls or shells, popularly known as chunnis in the local
language. These shells come from pulses: horse gram, black gram, mung bean and pigeon
pea.
Minerals and vitamins
Cattle feed is necessarily enriched with vitamins A and D3, and trace minerals such as iron,
zinc, manganese, copper, cobalt and iodine. Calcium and phosphorus are also included.
Poultry feed is enriched with all of these and all of the B complex vitamins.

Feed additives and supplements

Feed additives and supplements have played a very important role in enhancing the
performance of dairy animals and, even more so, poultry. Today they are necessary in any
feed formulation and essential for the formulation of a balanced diet. The additives and
supplements used are antibiotic growth promoters (their usage is not banned in India),
prebiotics, probiotics, enzymes, mould inhibitors, toxin binders, anti-coccoidal supplements,
acidifiers, amino acids, by-pass fat, by-pass protein, non-antibiotic growth promoters, milk
boosters, antioxidants, feed flavor’s and herbal preparations of Indian origin. A number of
these products are imported from developed countries.

1.2 (C) the Future of the Indian Feed Industry - Winds of Change
At the beginning of the twenty-first century, India has a population of 1 billion people.
Although the annual growth rate has slowed from 2 to 1.8 percent, the base is so broad that
changes in population dynamics are not perceptible. The purchasing power of the middle
class is growing (the middle-class accounts for approximately 300 million people) and food
habits are also changing.
The Indian economy is growing at the rate of 6 to 8 percent per annum. The livestock
industry in India is the second largest contributor to gross domestic product (GDP), after
agriculture, and accounts for 9 percent of the total.
A major change is occurring in India on the economic front. The country has adopted a model
that lies midway between liberal and public sector production, but growth has been affected
by the poor performance of most of the public sector units, rising government costs and fiscal
deficit, and the economy has suffered. A process of liberalization was set in motion by the
government and has been implemented for the last eight to ten years. This has caused India to
open up and invite investment from multinationals, liberalize imports, reduce government
expenditure and remove public sector businesses. It also means that the days of
nationalization, unnecessary government controls and restrictions will soon be over thanks to
progress in the country's economy.
India has entered into an agreement with its trade partners under the World Trade
Organization (WTO). The changes brought about by the liberalization process will be slow
but certain. The government is opening up imports in a phased manner, and it is expected that
this process will be completed by April 2003. In the meantime, about 930 items, including
agricultural products, will be open for import under open general license from April 2001,
making it possible to import dressed chicken, milk and milk products.
Various livestock industry associations have taken issue with such imports in an attempt to
protect their members. If the livestock industry is affected, the feed industry will also be
affected. The Government of India has raised the tariff on all poultry and poultry products
from 35 percent to the WTO boundary level of 100 percent. It therefore appears that there
will be a level playing field.
In view of the expected rise in per capita consumption of chicken meat, eggs and milk,
livestock production and productivity will grow. The dairy industry, which is cooperative-
based, is growing with the increased capacities of milk processing units. The population of
cross-bred cattle and buffaloes is also growing. Milk is very popular in India. The poultry
industry is developing towards vertical integration and a few multinational companies have
already entered the Indian poultry business. Although the live bird market currently accounts
for about 90 percent of the total market, it is expected that the consumption of dressed
chicken will grow in the next five years, from the existing 10 percent to 25 percent or more.
This would mean establishing very hygienic and scientific processing units. Cold chains,
branded chicken, chicken cuts, etc. will be introduced and, depending on the success and
consistent quality, consumer preference for dressed meat will grow.
The next decade will see significant changes in restructuring, mergers, acquisitions,
amalgamations, joint ventures, diversification, integration and efficient service chains, e-
commerce and use of the latest information technology in global tenders, trading,
export/import and other commercial activities. At the root of all these developments will be
the scientific development of feed manufacturing technology. The Indian feed industry will
increasingly use biotechnology, more scientific formulations, new molecules and natural and
herbal products to improve animal productivity. Indian agriculture will also use
biotechnology and genetically modified organisms (GMOs) to support the feed industry,
which is entering a very exciting phase of growth for the next decade.
2.1 OVERVIEW OF THE
INDUSTRY 2.1.1History
The company celebrated its centenary in 1997. In 1897 a young man named Ardeshir Godrej
gave up law and turned to lock making. Ardeshir went on to make safes and security
equipment of the highest order, and then stunned the world by creating toilet soap from
vegetable oil. His brother Pirojsha Godrej carried Ardeshir's dream forward, leading Godrej
towards becoming a vibrant, multi-business enterprise. Pirojsha laid the foundation for
the sprawling industrial garden township (ISO 14001-certified) now called Pirojshanagar in
the suburbs of Mumbai. Godrej touches the lives of millions of Indians every day. To them, it
is a symbol of enduring ideals in a changing world. Time and again, with the launch of every
new product, Ardeshir Godrej changed perceptions in the Industry by adding exciting newdi
mensions. Be it the manufacture of the finest range of security equipment or soap from
vegetable oils, the world was thrilled and stunned too. His dream had become a huge
movement, which was carried forward by another just as capable Godrej. The man, who did
so, was Ardeshir Godrej's own brother Pirojsha Godrej. He laid the foundation of the Godrej
Empire.

2.1.2 LANDMARK Incorporation

Established in 1897, the Company was incorporated with limited liability on March 3, 1932,
under the Indian Companies Act, 1913.

The Beginning

The beginning of the Godrej Group can be traced to India's freedom struggle. Its founder,
Ardershir Godrej, a lawyer by profession and a staunch nationalist, believed that India could
attain freedom only by being self-reliant. In doing so, India would overcome economic
degradation.

The Godrej Name

The Godrej Name displaced well-established foreign brands from the Indian market. The
name 'Godrej' engraved into the shiny metal of the Godrej Locks came to be known as
asymbol of self-reliance, trust-worthiness, assertiveness and progressiveness for a new
generation of Indians.

 1971 Started as Animal Feeds division of Godrej Industries Ltd.

 1984 Diversified into Agricultural Inputs
  1992 Godrej Agrovet born as a separate corporate entity expanded into Chemical
Pesticides.
 1993 Acquired Unicorn Biotech a Tissue Culture business.
 1995 Foray into branded chicken- Real Good Chicken.
 1997 Acquired Oil Palm Plantation business of Godrej Industries Ltd.
 1999 Acquired India Poultry Farm breeding and hatchery business to become an
integrated player.
 2001 Acquired Hindustan Unilever Feed business – Goldmohur food & Feeds ltd.
(now a 100% subsidiary of Godrej Agrovet Limited)

2.1.3 GODREJ MISSION

 Our Mission is to operate in existing and new businesses, which capitalize on the
Godrej brand and our corporate image of reliability and integrity. Our objective is to
delight our customer both in India and abroad.\
 We shall achieve this objective through continuous improvement in quality, cost
andcustomer service. We shall strive for excellence by nurturing, developing and
empowering our employees and suppliers.
 We shall encourage an open atmosphere, conducive to learning and teamwork.

2.1.4 GODREJ VALUES

 Commitment to Quality
 Customer Orientation
 Dedication & Commitment
 Discipline
 Honesty & Integrity
 Openness & Transparency
 Respect/Care & Concern for People
 Team work
 Trust

2.2 PROFILE OF THE COMPANY

Godrej Agrovet was formerly a division of Godrej Soaps Limited. It was set up as a separate
company with focus on the Agri-sector. Over the years, the company has developed and
nurtured a close relationship with farmers. Providing them with innovative Products as well
as educating them on world-class farming practices.
Together with its subsidiaries Goldmohur foods and Feeds Limited and Golden feed products
Limited, Godrej Agrovet has revenues close to Rs. 1000 Crores(US $250 Million-FY 2007).
The activities of the company are vast compound animal feeds, Agricultural Inputs,
Integrated Poultry Business, Oil Palm Plantations, Plant Biotech, Retailing of Fresh Farm
Produce in urban areas, and rural retailing of a wide range of products including Agricultural
inputs. Godrej Agrovet acquired Goldmohur Foods and Feeds Limited from Hindustan Lever,
a Unilever subsidiary in India, in 2001.Goldmohur Foods and Feeds Limited enjoys
strong brand equity due to its poultry and cattle feed brands. Goldmohur Foods and Feeds
Limited have a state-of-the-art R&D center in Bangalore named 'ANIC' (Animal Nutrition
Innovation Centre). This center is devoted to development of innovative animal feed
products. Today, Godrej Agrovet together with its subsidiaries has manufacturing facilities
spread over 40 strategic locations and a network of over 10,000 distributors, dealers and
C&F agents. In its journey of growth, Godrej Agrovet has set new standards of corporate
performance, reliably delivering quality products and services to all its customers at
competitive prices.

GLOBAL FORAYS: Having successfully grown to be the leader in many segments, Godrej
Agrovet feels confident to take on global competition and has started making its presence felt
in the international arena too. A joint venture with ACI Group of Bangladesh for poultry and
feed operations in Bangladesh, and acquisition of controlling stake in Al-Rahaba, which
runs broiler farms in UAE exemplify this confidence.

Board of Directors
 Adi B. Godrej Chairman, Godrej group
 Nadir B. Godrej, Chairman
 Balram Singh Yadav, Managing Director
 Jamshyd N. Godrej, Director
 Vijay M. Crishna, Director
 Tanya A. Dubash, Director
 Nisaba Godrej, Director
 Pirojsha Godrej, Director
 Kavas N. Petigara, Independent Director
 Dr. Sudhir L. Anaokar, Independent Director
 Amit B. Choudhury, Independent Director
  Dr. Raghunath Mashelkar, Independent Director
 Dr. Ritu Anand, Independent Director
 Aditi Kothari Desai, Independent Director
 Roopa Purushothaman, Independent Director

2.3 HISTORY OF GODREJ AGROVET

Godrej Agrovet Limited is a Rs 1000 Crores company. Manufacturing facilities spread

over 40 strategic locations. Its network is over 10000 distributors, dealers and
C&F agents. First Company in India to retail processed fresh chicken, under the brand
name "Godrej Real Good Chicken". First Company in India to retail fresh fruits and
vegetables under the brand name “Godrej Nature’s Basket” First Company in
India to set up rural service & retail chain for complete Agri-solutions under the brand
name “Godrej Aadhaar”. Started in 1897 as a lock manufacturing company, the Godrej
Group is today one of the most accomplished and diversified business houses in
India. Godrej’s success has been driven by the company’s commitment to
delivering innovation and excellence. Through the consistent application of this
commitment and a century of ethical business conduct, Godrej has earned an
unparalleled reputation for trust and reliability. In 1930, Godrej became the first company in
the world to develop the technology to manufacture soap with vegetable oil; that spirit of
innovation has continued throughout the organization’s history. Today Godrej is delivering
consumers exciting innovations across a spectrum of businesses. The company’s pursuit of
excellence is equally well established and enduring. In the 1944 Mumbai docks blast, Godrej
safes were the only security equipment whose contents were unharmed; an equal level of
product quality continues to be expected from every product bearing the Godrej brand name.
Godrej management understands that the company’s greatest asset is the trust and faith that
consumers have reposed in it, and recognizes that the company must continue to earn this
trust. This translates to the organization delivering outstanding quality and value in
everything it does. Godrej’s ethical and visionary practices have allowed the company to
successfully expand into a number of businesses. Today is a Godrej being leading
manufacturer of goods and provider of services in a multitude of categories: home appliance,
consumer durables, consumer products, industrial products, and Agri products to name few.
A recent estimate suggested that 400 million people across India use at least one Godrej
product every day. The group has move recently entered in real estate and information
technology sector, and management views these as avenues for enormous growth. Godrej
Group is one of India’s largest professionally run private sector group. It has well established
presence in varied businesses ranging from foods and consumer durables to real estate and
information technology. Godrej completed 100 years of service to the nation. Today, the
name Godrej is synonymous with quality and trust. It is amongst the most admired Business.
OBJECTIVE

1. The main objective is to study financial statements like Balance Sheet of Godrej
Agrovet Ltd.
2. To study various ratios to determine the relationship of deferent factor which
have impact on the financial position of the company.
3. To study financial position of Godrej Agrovet Ltd over 3 years for
determining historical performance & current financial position of the
company.
4. To assess the present profitability, operating efficiency and liquidity position of
the company.
RESEARCH METHODOLOGY

Research

Research can be defined as, “systematized effort to gain new knowledge.” A research carried
different methodologies, which has pros and cons. Research methodology is way to solve
research in studying and solving a research problem along with the logic behind them, is
defined through research methodology but also consider the logic behind methods we use in
the context of our research study and explain why we are using a particular method or the
techniques and why we are not using other so that research result are capable of being
evaluated either by research him-self or by other.

1.1 Research types used in project

Descriptive Research:

Descriptive research is used to describe characteristics of a population or phenomenon being

studied. It does not answer questions about how/when/why the characteristics occurred.
Rather it addresses the "what" question (what are the characteristics of the population or
situation being studied? The characteristics used to describe the situation or population are
usually some kind of categorical scheme also known as descriptive categories. For example,
the periodic table categorizes the elements. Scientists use knowledge about the nature of
electrons, protons and neutrons to devise this categorical scheme. We now take for granted
the periodic table, yet it took descriptive research to devise it. Descriptive research generally
precedes explanatory research. For example, over time the periodic table’s description of the
elements allowed scientists to explain chemical reaction and make sound prediction when
elements were combined. Hence, descriptive research cannot describe what caused a
situation. Thus, descriptive research cannot be used as the basis of a causal relationship,
where one variable affects another. In other words, descriptive research can be said to have a
low requirement for internal validity. The description is used for frequencies, averages and
other statistical calculations. Often the best approach, prior to writing descriptive research, is
to conduct a survey investigation. Descriptive research includes survey and fact-finding
enquiries of different kinds. The major purpose of descriptive research is description of the
state of affairs as it exists at present. In social science and business research we quite often
use the term Ex post factor research f descriptive research studies.
The main characteristic of this method is that the researcher has no control over the variables;
they can only report what happened or what is happening. Most of the ex post factor research
projects are used for descriptive studies in which the researcher seeks to measure such items.
Export factors studies also include attempts by researcher to discover causes even when they
cannot control the variables. The methods of research utilized in the descriptive research are
survey method of kinds, including comparative and correlation method.

Analytical Research:

Analytical research is a specific type of research that involves critical thinking skills and the
evaluation of facts and information relative to the research being conducted. A variety of
people including students, doctors and psychologists use analytical research during studies to
find the most relevant information. From analytical research, a person finds out critical
details to add new ideas to the material being produced.

Research of any type is a method to discover information. Within analytical research articles,
data and other important facts that pertain to a project is compiled; after the information is
collected and evaluated, the sources are used to prove a hypothesis or support an idea. Using
critical thinking skills (a method of thinking that involves identifying a claim or assumption
and deciding if it is true or false) a person is able to effectively pull out small details to form
greater assumptions about the material.

Some researchers conduct analytical research to find supporting evidence to current research
being done in order to make the work more reliable. Other researchers conduct analytical
research to form new ideas about the topic being studied. Analytical research is conducted in
a variety of ways including literary research, public opinion, scientific trials and Meta-
analysis.

1.2 Method of data collection

There are two types of data collection that are fallows:

Primary Sources of Data

The primary data pertain to demographic and socio-economic characteristic of the customer
attitude and opinions of respondent, their awareness and knowledge and other similar aspect.
Method of primary data collection:

 Observation

The primary data for present rough work was obtained through the observations.

Secondary Sources of Data

Secondary data refers to data which is collected by someone who is someone other than the
user. Common sources of secondary data for social science include censuses, information
collected by government departments, organizational records and data that was originally
collected for other research purposes. Primary data, by contrast, are collected by the
investigator conducting the research.

Secondary data analysis can save time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, can provide larger and higher-
quality databases that would be unfeasible for any individual researcher to collect on their
own. In addition, analysts of social and economic change consider secondary data essential,
since it is impossible to conduct a new survey that can adequately capture past change and/or
developments. However, secondary data analysis can be less useful in marketing research, as
data may be outdated or inaccurate.

It includes those data which are collected for some earlier research work & are applicable in
the study the researcher has presently undertaken. The sources of secondary data for the
present research work were.

Sources of secondary data collection:

The secondary data is most important for inferring the conclusions of the project.

 Company Records

 Websites

 Financial Analysis Research Papers

 Company Annual Report

The data collected through schedule was analyzed on the basis of which certain conclusions
were done and recommendations were made.
5.1 FINANCAL STATEMENT ANALYSIS

Financial statement analysis (or financial analysis) is the process of reviewing and analyzing
a company's financial statements to make better economic decisions. These statements
include the income statement, balance sheet, statement of cash flows, and a statement of
changes in equity. Financial statement analysis is a method or process involving specific
techniques for evaluating risks, performance, financial health, and future prospects of an
organization.

It is used by a variety of stakeholders, such as credit and equity investors, the government,
the public, and decision-makers within the organization. These stakeholders have different
interests and apply a variety of different techniques to meet their needs. For example, equity
investors are interested in the long-term earnings power of the organization and perhaps the
sustainability and growth of dividend payments. Creditors want to ensure the interest and
principal is paid on the organization’s debt securities (e.g., bonds) when due.

Common methods of financial statement analysis include fundamental analysis, DuPont

analysis, horizontal and vertical analysis and the use of financial ratios. Historical
information combined with a series of assumptions and adjustments to the financial
information may be used to project future performance. The Chartered Financial
Analyst designation is available for professional financial analysts.

Investors typically are attempting to understand how much cash the company will generate in
the future and its rate of profit growth, relative to the amount of capital deployed. Analysts
may modify ("recast") the financial statements by adjusting the underlying assumptions to aid
in this computation. For example, operating leases (treated like a rental transaction) may be
recast as capital leases (indicating ownership), adding assets and liabilities to the balance
sheet. This affects the financial statement ratios.

Recasting financial statements requires a solid understanding of accounting theory. Once the
cash flow in future years is projected, a discount rate or interest rate will be applied to
measure the value of the company and its stock or debt.

Nature of Financial Statement Analysis

Financial Statement Analysis consist of the application of analytical tools and techniques to
the data in financial statements in order to derive from them measurement and relationships
that are significant and useful for decision making. The process of financial analysis can be
described in various ways, depending on the objectives to be obtained. Financial analysis can
be used as a preliminary screening tool in the selection of stocks in the secondary market. It
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can be used as a forecasting tool for future financial conditions and results. It may be used as
a process of evaluation and diagnosis of managerial, operating or other problems areas.
Above all financial analysis reduces reliance on intuition, guesses and thus narrows the area
of uncertainty that is present in all decision-making processes. Financial analysis does not
lesson the need for judgment but rather establish a sound and systematic basis for its rational
application.

Sources of Financial Information

The financial data needed in financial analysis come from many sources. The primary source
is the data provided by itself in the annual report and required disclosures. The annual report
comprises the income statement, balance sheet, and the statement of cash flows, as well as
footnote to these statements. besides this information such as the market price of securities
publicly traded corporations can be found in the financial press and the electronic media
daily. The financial press also provides information to stock indices for industries and for
market as a whole.

5.2 A) The Principal Tools of Analysis

In the analysis of financial statements, the analyst can have a variety of tools available from
which he can choose the best suited to his specific purpose. The following are the important
tools of analysis.

The Principles Tools/Techniques of Financial Analysis

Tools of Financial
Analysis

RATIO FUNDS CASH FLOW TREND

ANALYSIS FLOW ANALYSIS ANALYSIS
ANALYSIS

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20 | P a g e
Ratio Analysis

This is the important tool available to financial analyst for their work. An accounting ratio
shows the relationship in mathematical terms between two interrelated, between two figures,
which are all related to each other. A ratio analysis is a quantitative analysis of information
contained in a company’s financial statements. Ratio analysis is used to evaluate various
aspects of a company’s operating and financial performance such as its efficiency, liquidity,
profitability and solvency.

Fund flow Analysis

Fund flow analysis has become an important tool in the analytical kit of financial analysis,
credit granting institutions and financial managers. This is because the balance sheet of the
business reveals its financial status at a particular point of time. It reveals the changes in
working capital position. It tells about the sources from which the working was obtained and
the purpose for which it was used. It brings out the changes, which have taken place behind
the balance sheet.

The information it contains in the selection, reclassification and summarization of the data
contained in profit and loss account and balance sheet, it is no way replacement of either
these statements. To provide a comparative view of movement of funds by the statement of
changes in financial position is prepared for the period covered by the profit and loss account
as well as the corresponding previous period.

Cash Flow Analysis

Cash flow analysis is a statement, which measures inflows and outflows of cash on account
of any type of business activity. The cash flow statement also explains reasons for such
inflows and outflows of cash. Cash flow statement may be prepared on the basis of actual or
estimated data. A projected cash are the ‘where come’ part of the statement. Sources of cash
can be both internal and external. A proper planning of cash resource will enable the
management to have cash available whenever resources will enable the management to have
cash available whenever needed and put it to some profitable or productive use in case there
is surplus cash available.
Trend Analysis

Analysis makes a trend analysis of performance over the past five to ten years to get an
overall picture. Tread analysis is made in respect of sales, cost of sales, gross profit, net profit
(before tax), net profit (after tax), net worth, debt, dividend policy, bonus and rights issues,
return on net worth, earning per share, etc.

B) HISTORY OF FINANCIAL ANALYSIS

Analysis of financial statement has had its growth since 1990’s. A major impetus came from
increasing need form increasing need on the part of grantors of commercial credit such as
bankers, financial instruction etc., to understand the conditions of their customers. At the
same time businessman need to understand their own conditions of their own enterprise in
order to assure its survival in stress of competition. Satisfaction of this need has been assisted
by the continuous development of accounting as a science and passing of income tax law in
1993. This required preparation of balance sheet and income statement, as they are the basic
statement required for the income tax purpose. Thus, a reasonably reliable data form which
typical financial ratio could be calculated has become increasingly available.

Between 1919 and 1929 four men pioneered in development of financial ratios. These where
James bliss who published a book on this subject in 1923. Alexander wall, head of Robert
Morris associated and Raymond W Dunning, published a work on this subject in 1928 and
Roy Foulke, who made some of the detailed compilations and studies between 1925 &1928.

C) Conceptual Framework of Ratio Analysis

Financial ratio is always fascinating because they convey the impression of precision in
analyzing the financial position of the company. Financial ratio are only tools of analysis.
However, their effectiveness depends upon the know-how of using them for specific purpose.
The ratio is relationship between two variables. Any number of relationships that is can
construct we first identify the variables to be studied. Therefore, there is nothing like standard
set of ratios which can be used at any times for any purpose. new ratio can develop
specifically for the purpose or the mechanics of constructing the given ratio can be suitable
adjusted to suit the purpose. Intact a resourceful financial analysis can develop novel and
fascinating ratios which can serve his purpose better than the pedestrian stock.

Having established the point that ratio should be constructed and used keeping in view the
purpose, we shall examine generally the purpose for which the ratio analysis could be
employed. Ratios are used as tools of appraising financial performance of the company.
There two distinct viewpoints in such analysis; the managements viewpoint and the investors
viewpoint. The investors viewpoint. The interests of both these groups are not mutually
exclusive; they are complimentary to each other. Both these groups are interested in key areas
that compromise the financial performance of the company.

5.2 Balance Sheet Statement

In Financial Accounting , a balance sheet or statement of financial position is a summary of a

persons or organizations balance. A balance sheet is often described as a snapshot of a
company financial condition. It summarizes a company assets, liabilities and Shareholders’
equity at a specific point in time. These three balance sheet segments gives investors an ideas
as to what the company owns and owes, as well as the amount invested by the shareholders.
Of the four basic financial statements, the balance sheet is the only statement which applies to
a single point in time.
A company balance sheet has three parts assets, liabilities and ownership equity. The main
categories of assets are usually listed first and are followed by the liabilities . The difference
between the assets and the liabilities is known as equity or the net assets or the net worth or
capital of the company. It’s called a balance sheet because the two sides balance out. A
typical format of the balance sheet has been given.
BALANCE SHEET
Name of the Company…………………….
Balance Sheet as at ………………………
(Rupees in…............)

Particulars Note No. Figures as at the Figures as at the

end of current end of the previous
reporting period reporting period
1 2 3 4
I. EQUITY AND
LIABILITIES

(1) Shareholders’ funds

(a) Share capital xxx xxx

(b) Reserves and surplus xxx xxx

(c) Money received against share xxx Xxx

warrants

(2) Share application money xxx Xxx

pending
allotment

(3) Non-current liabilities

(a) Long-term borrowings xxx Xxx

(b) Deferred tax liabilities (Net) xxx Xxx
(c) Other Long term liabilities xxx Xxx
(d) Long-term provisions xxx Xxx
(4) Current liabilities
(a) Short-term borrowings xxx Xxx
(b) Trade payables xxx Xxx
(c) Other current liabilities xxx Xxx
(d) Short-term provisions xxx Xxx
TOTAL XXX XXX
II. ASSETS
(1) Non-current assets
(a) Fixed assets

(i) Tangible assets xxx Xxx

(ii) Intangible assets xxx Xxx
(iii) Capital work-in-progress xxx Xxx
(iv) Intangible assets under xxx Xxx
development
(b) Non-current investments xxx Xxx
(c) Deferred tax assets (net) xxx Xxx
(d) Long-term loans and xxx Xxx
advances
(e) Other non-current assets xxx Xxx
(2) Current assets
(a) Current investments xxx Xxx
(b) Inventories xxx Xxx
(c) Trade receivables xxx Xxx
(d) Cash and cash equivalents xxx Xxx
(e) Short-term loans and xxx Xxx
advances
(f) Other current assets xxx Xxx
TOTAL XXX XXX

5.3 CONTENTS OF BALANCE SHEET

I. LIABILITIES

Liabilities are debts and obligations owed by the company; the opposite of assets. Liabilities
include monthly lease payments on real estate, bills to keep the lights turned on and the water
running, corporate credit card debt, bonds issued to investors, and other outflows.

(1) Shareholders’ funds

(a) Share capital :- Share capital consists of all funds raised by a company in exchange for
shares of either common or preferred shares of stock. The amount of share capital or equity
financing a company has can change over time. A company that wishes to raise more equity
can obtain authorization to issue and sell additional shares, thereby increasing its share
capital.

(b) Reserves and surplus :- Reserves and Surplus shall be classified as: Capital Reserves,
Capital Redemption Reserve Securities Premium Reserve, Debenture Redemption Reserve,
Revaluation Reserve, Share Options Outstanding Account, Other Reserves–(specify the
nature and purpose of each reserve and the amount in respect thereof), Surplus i.e., balance in
Statement of Profit and Loss disclosing allocations and appropriations such as dividend,
bonus shares and transfer to/ from reserves, A reserve specifically represented by earmarked
investments shall be termed as a “fund”. Debit balance of statement of profit and loss shall be
shown as a negative figure under the head “Surplus”. Similarly, the balance of “Reserves and
Surplus”, after adjusting negative balance of surplus, if any, shall be shown under the head
“Reserves and Surplus” even if the resulting figure is in the negative. “Reserves and Surplus”
even if the resulting figure is in the negative.

(2) Non-current liabilities :- Noncurrent liabilities, also called long-term liabilities, are
long-term financial obligations listed on a company’s balance sheet that are not due for
settlement within one year – as opposed to current liabilities which are short-term debts.

(a) Long-term borrowings :- Long-term borrowings shall be classified as

Bonds/debentures, Term loans, Deferred payment liabilities, Deposits, Loans and
advances from related parties, Long term maturities of finance lease obligations,
Other loans and advances. Borrowings shall further be sub-classified as secured and
unsecured. Where loans have been guaranteed by directors or others, the aggregate
amount of such loans under each head shall be disclosed. Bonds/debentures (along
with the rate of interest and particulars of redemption or conversion, as the case may
be) shall be stated in descending order of maturity or conversion, starting from
farthest redemption or conversion date, as the case may be. Where bonds/debentures
are redeemable by installments, the date of maturity for this purpose must be
reckoned as the date on which the first installment becomes due.
(b) Other Long-term liabilities: - Other long-term liabilities are a balance sheet item
that lumps together obligations not due within 12 months. They are part of total
 liabilities, and the components of "other" long-term liabilities are deemed by the
company to be not important enough to warrant identification of each amount
individually on the balance sheet.
(c) Long-term provisions: - long term provisions are "ESTIMATED LIABILITIES".
They are definite liability but their precise timings and amount cannot be
determined. e.g. Income tax, Product warranties, Pension.

(3) Current liabilities: - Current liabilities are a company's debts or obligations that are
due within one year or within a normal operating cycle. Furthermore, current liabilities are
settled by the use of a current asset, such as cash, or by creating a new current liability.

(a) Short-term borrowings: - Short-term borrowings shall be classified as. Loans

repayable on demand, Loans and advances from related parties, Deposits, Other
loans and advances. Borrowings shall further be sub-classified as secured and
unsecured. Where loans have been guaranteed by directors or others, the aggregate
amount of such loans under each head shall be disclosed. Period and amount of
default as on the balance sheet date in repayment of loans and interest, shall be
specified separately in each case.

(b) Other current liabilities :- Current maturities of long-term debt, Current maturities
of finance lease obligations, Interest accrued but not due on borrowings, Interest
accrued and due on borrowings, Income received in advance, Unpaid
dividends, Application money received for allotment of securities and due for refund
and interest accrued thereon. Share application money includes advances towards
allotment of share capital.

(c) Short-term provisions: - A provision is a liability of uncertain amount and timing.

Examples of short -term provisions are; -provision for doubtful debts. -provision for
tax. -provision for discount on debtors.

II. ASSETS
An asset is a resource with economic value that an individual, corporation or country owns or
controls with the expectation that it will provide a future benefit. Assets are reported on a
company's balance sheet and are bought or created to increase a firm's value or benefit the
firm's operations. An asset can be thought of as something that, in the future, can generate
cash flow, reduce expenses or improve sales, regardless of whether it's manufacturing
equipment or a patent.

(1) Non-current assets: - Noncurrent assets are a company's long-term investments for
which the full value will not be realized within the accounting year. Examples of noncurrent
assets include investments in other companies, intellectual property (e.g. patents), and
property, plant and equipment.

(a) Fixed assets: - Assets which are purchased for long-term use and are not likely to be
converted quickly into cash, such as land, buildings, and equipment. (Tangible assets,
Intangible assets, Capital work-in-progress, Intangible assets under development.).
(b) Non-current investments :- Non-current investments shall be classified as trade
investments and other investments and further classified as. Investment property,
Investments in Equity Instruments, Investments in preference shares, Investments in
Government or trust securities, Investments in debentures or bonds, Investments in
Mutual Funds.
(c) Long-term loans and advances: - Long-term loans and advances shall be classified
as Capital Advances, Security Deposits, Secured, considered good, Unsecured,
considered good, Doubtful. Allowance for bad and doubtful loans and advances shall
be disclosed under the relevant heads separately. Loans and advances due by directors
or other officers of the company or any of them either severally or jointly with any
other persons or amounts due by firms or private companies respectively in which any
director is a partner or a director or a member should be separately stated.
(d) Other non-current assets: - Other non-current assets shall be classified as Long-
term Trade Receivables. Allowance for bad and doubtful debts shall be disclosed
under the relevant heads separately. Debts due by directors or other officers of the
company or any of them either severally or jointly with any other person or debts due
by firms or private companies respectively in which any director is a partner or a
director or a member should be separately stated.

(2) Current assets :- Current assets represent all the assets of a company that are
expected to be conveniently sold, consumed, utilized or exhausted through the standard
business operations, which can lead to their conversion to a cash value over the next one year
period. Since current assets is a standard item appearing in the balance sheet, the time horizon
represents one year from the date shown in the heading of the company's balance sheet.
Current assets include cash, cash equivalents, accounts receivable, stock inventory,
marketable securities, pre-paid liabilities and other liquid assets. In a few jurisdictions, the
term is also known as current accounts . Current assets contrast with long-term assets, which
represent the assets that cannot be feasibly turned into cash in the space of a year. They
generally include land, facilities, equipment, copyrights, and other illiquid investments.

(a) Current Investments:- Current investments shall be classified as Investments in

Equity Instruments, Investment in Preference Shares, Investments in Government or
trust securities, Investments in debentures or bonds, Investments in Mutual Funds.
(b) Inventories:- Inventories shall be classified as Raw Materials, Work-in-progress,
Finished goods , Stock-in-trade, Stores and spares, Loose tools, Goods-in-transit shall
be disclosed under the relevant sub-head of inventories.
(c) Trade Receivables:- Trade Receivables is the accounting entry in the balance sheet
of an entity, which arises due to the selling of the goods and services by the Entity to
Its Customers on credit. Since this is an amount which the Entity has a legal claim
over its Customer and also the Customer is bound to pay the same to Entity, it is
classified as Current Asset in the Balance sheet of the Entity. Trade receivables
and accounts receivable are used interchangeably in the industry.
(d) Cash and cash equivalents:- Cash and cash equivalents shall be classified as
Balances with banks, Cheques, drafts on hand, Cash on hand.
(e) Short-term loans and advances:- Short-term loans and advances shall be classified
as Loans and advances. A short term loan is a type of loan that is obtained to support
a temporary personal or business capital need. As it is a type of credit, it involves a
borrowed capital amount and interest that needs to be returned or paid back at a given
due date, which is usually within a year from getting the loan.
5.4 Information and Analysis

Financial analysis is the process of identifying the financial strength and weaknesses of the
firm by properly establishing relationship between the items of the balance sheet and profit
and loss statement.

Analysis and Interpretation of Financial Statements:

Financial statement comprises the following:

Trading and profit &loss account which gives the result of years working. Profit and loss
appropriation account, which gives details about the disposal of the retained income.

The meaning of analysis and Interpretation

The financial statements are of much interest to a number of groups of persons. A part from
management, there are other interested parties like shareholder, debenture holder potential
investors, large and bankers, trade creditors, journalists etc. who are increasingly getting
interested in the analysis and interpretation of financial statement. According to F Wood
‘business accounting ‘to interpret means, ‘to put the meaning of a statement into simple terms
for the benefit of person”. This is essentially done through the tools of analysis such as
comparative statement, common size statement and ratio analysis. The tools of analysis only
help in establishing relationship between one account figure and another in the financial
statement and go no far. It is the expert who has to grasp the significance of related figures
and form an opinion as to whether the ratio calculated indicates figures and favourable or
adverse state of affairs. Therefore, while analysis comprise resolving the statement by
breaking them in to simpler statements by a process of understanding the term such statement
and forming opinions or inferences about the financial health, profitability, efficiency and
such other aspects of the under taking.

Ratio Analysis

Introduction:

Ratio analysis is the powerful tool of financial analysis. A ratio analysis is defined as “the
indicated quotient of two mathematical expressions and as the relationship between two or
more things”. In financial analysis, a ratio is used as an index or yardstick for figure reported
in the financial statement do not provide a meaningful understanding of the performance and
financial position of the firm. An accounting figure conveys meaning when it is aa related to
some other relevant information. The relationship between two accounting figures expressed
29 | P a g e
mathematically is known as a financial data and to make a qualitative judgment about the
firm’s financial performance.

Standard of Comparison:

The ratio analysis involves comparison for a useful interpretation of the financial statements.
A single ratio in itself does not indicate favorable or unfavorable condition. It should be
compared with some standard.

Standard of comparison may consist of: ratio calculated from the past financial statements
of the same firm. Ratio developed using the projected or pro forma, financial statement of the
same firm. Ratio of same selected banks, especially, the most progressive and successful at
the same point in time. Ratio o the same industries to which firm belongs. To evaluate the
performance of a firm, compare its current ratio with the past ratio. When financial ratio over
a period of time are compared, it is known as time series or trend analysis. It gives an
indication of the direction of change and reflects whether the firm’s financial performance
has improved or deteriorated or remained same over time.

The Analyst should not simply determine the change, but more importantly he should
understand why ratio have changed. The change may be affected by changes in the
accounting polices without material change in the firm’s performance. Sometimes future ratio
is used as the standard of comparison. Future ratio can be developed from the projected or
proforma financial statements. The comparison of past ratio with future shows the firms
relative strength and weaknesses in the past corrective actions should be initiated. Another
way of comparison is to compare ratio of one firm with some selected firm in the same
industry at the same point in time. This kind of comparison is known as the cross-sectional
analysis. In most cases it is more useful to compare the firm’s ratio of carefully selected
competitor, which have similar operations. This kind of comparison indicates the relative
financial position and performance of the firm. A firm can easily resort to such a comparison,
as it is not difficult to get the published financial statements of similar firms.

To determine the financial condition and performance of a firm, its ratios may be compared
with average ratios of industry to which the firm belongs. This sort of analysis, known as the
industry analysis helps to ascertain the financial standing and capability of the firm in the
industry to which it belongs. Industry ratio are important standards in view of the fact that
each its characteristics, which influence the financial and operating relationship. But there are
certain difficulties in using the industry ratios. First it is difficult to get average ratio for the
industries. Second, even if industry ratios are available, they are the averages of the strong

30 | P a g e
 and weak firms. Sometimes spread may so wide that the average may belittle utility. Third,
the average may be meaningless and the comparison futile if the firms with in the same
industry widely differ in their accounting polices and practices. If it is possible to standardize
the accounting data for the companies in the industry and eliminate extremely strong and
extremely weak firms. The industry ratios will prove to be very useful in evaluating the
relative financial condition and performance of the firm.

Classification of Ratio
Several ratios calculated form the accounting data can be grouped by in to various classes
according to financial activities or functions to be evaluated. The parties, which generally
undertake financial analysis, are short term and long term creditors, owners and management.
Short term creditors main interest is in the liquidity position or the short term solvency and
profitability of the firm. Similarly, owners concentrate on firm’s profitability and analysis of
the firm’s financial positions. Management is interested in evaluated every aspect of the
firm’s performance. They have to protect the interest of the parties and see that the firm
grows profitably. One of the ways of Classification according to the following basis is more
effective for analyzing and interpreting the financial statement.

Financial Ratios

Profitability Ratio

Turnover RatioFinancial RatioLeverage Ratio

Profitability Ratio:

Profitability is an indication of the efficiency with the operation of the business are carried
on. The primary objective of a business undertaking is to earn profits. profits earning is
considered essential for the business. ‘profit is the engine that drives the business enterprise”.
A business needs profits not only for its existence but also for its expansion and
diversification. the investors want an adequate return on their investments, workers want
higher wages, creditors want higher security for interest and loan and so on.

The following ratio related to sales are included in this category:

1. Gross Profit Ratio:

The ratio expresses relationship between gross profit and net sales. The formula is

Table 4: Gross Profit Ratio

(Figures in Cr.)

YEAR 2018 2017 2016

Gross Profit 1023.61 957.16 839.71

Net Sales 3641.19 3592.05 3343.87

Gross Profit Ratio 28.11% 26.65% 25.11%

(%)
 GROSS PROFIT RATIO
3641.19 3592.05
4000
3343.87
3500
3000
2500
2000
1500 957.16
1000 1023.61
839.71
500 26.65%
0 28.11% 25.11%

Gross ProfitNet SalesGross Profit Ratio(%)

201820172016

INTERPRATION:

To find out gross profit ratio gross profit and net sales for past 3 years was taken into
consideration. The above ratio was derived from profit and loss account of the company.

2. Operating Profit Ratio:

This ratio expresses relationship between operating profit and net sales. The formula is,

OPERATING PROFIT
OPREATING PROFIT RATIO =X 100
NET SALES

(Figure in Cr.)

YEAR 2018 2017 2016

OPERATING 366.51 377.54 305.59

PROFIT

NET SALES 3641.19 3592.05 3343.87

OPREATING 9.97% 10.44% 8.64%

PROFIT RATIO
 OPERATING PROFIT RATIO
3674.86 3617.85 3538.5
4000

3000

2000
377.54
1000 366.51305.59 10.44%
9.97%8.64%
0
OPERATING PROFIT NET SALES OPREATING PROFIT
RATIO

201820172016

INTERPRATION:

To find out Operating profit ratio operating profit and net sales for past 3 years was taken into
consideration. The above ratio was derived from profit and loss account of the company.

3. Net Profit Ratio:

This ratio indicated net margin earned on a sale. It is calculated as follows;

Table 6: Net Profit Ratio

(Figure in Cr.)

YEAR 2018 2017 2016

Net Profit 190.87 207.97 160.12

NET SALES 3641.19 3592.05 3343.87

Net Profit Ratio 5.24% 5.79% 4.79%

 NET PROFIT RATIO
4000 3641.19 3592.05
3500 3343.87
3000
2500
2000
1500
1000
190.87 207.97 160.12
500 5.24% 5.79% 4.79%
0
2018 2017 2016

Net Profit NET SALES Net Profit Ratio

INTERPRATION:

To find out Net profit ratio net profit and net sales for past 3 years was taken into
consideration. The above ratio was derived from profit and loss account of the company.

Liquid Ratios

Liquidity refers to the ability of a concern to meet its current obligations as and when they
become due. The short term obligations are met by realizing amounts from current, floating
or circulating assets. The current assets should either be liquid or near liquidity. If current
assets can pay off current liabilities, then liquidity position will be satisfactory. On the other
hand, if current liabilities may not be easily met out of current assets then liquidity position
will be bad. The bankers, suppliers of goods and short term creditors are interested in
liquidity position of the concern.

4. Current ratios:

This ratio indicates the margin of safety available with the company. The formula for
calculating is as follows:

35 | P a g
 (Figure in Cr.)

Year 2018 2017 2016

Current Assets 1240.73 1158.19 1182.33

Current liabilities 1078.1 1014.21 546.07

Current Ratio 1.15% 1.14% 2.17%

Current Ratio

1400
1200
1000
800
600 2018
400 2017
200 2016
0 2016
2017

2018
Current Assets
Current
liabilities Current Ratio

INTERPRETATION

Current ratio 2:1 shows excellent liquidity position of the firm. Current ratio between 1:1 to
2:1 shows satisfactory position of the company. Ratio less than 1:1 shows no liquidity at all.
Current ratio of any company may be 2:1. As the current ratio of MOIL is more than 2:1 for
the year from 2016-2018. This shows that current ratio is favorable from the company’s as
well as shareholders point of view. Thus, company is in position to meet its current liabilities
out of its current assets.

36 | P a g e
5. Quick ratio:

Quick ratio, also known as Acid test ratio, is a more rigorous test of liquidity than the
current ratio. The term liquidity refers to ability of the firm to pay its short term
obligations as and when they become due.

The quick ratio can be calculated by dividing the total assets by total current liabilities.
Thus,

Year 2018 2017 2016

Liquid Assets 689.54 585.15 659.49

Current 1078.1 1014.21 546.07

Liabilities

Quick Ratio 63.96% 57.70% 120.77%

Quick Ratio

1200
1000
800
600 2018
400 2017
200 2016
2016
0
2017
2018
Liquid Assets
Current
Liabilities Quick Ratio

37 | P a g e
 INTERPRETATION

The Standard of liquid ratio is 1:1. The company’s liquidity ratio for the last three years is
less than 1. Which indicates the liquidity position of the company is bad. Thus liquid
assets are less than current liabilities. So, company is in position to not pay its obligations.

Turnover Ratio

Fund are invested in various assets in business to make sales and earn profits. The
efficiency with which assets are managed directly affects the volume of sales. The better
the management of assets, the larger is the amount of sales and the profits. Activity ratio
measures the efficiency with which a firm manages the assets. These ratios are called as
turnover ratios because they indicate the speed with which assets are converted or turned
over in to sales.

6. Working Capital Turnover Ratio:

This is also known as working capital leverage. This ratio indicates whether or not
working capital has been effectively utilized in making sales. The formula for calculating
is as follows:

(Figure in Cr.)

Year 2018 2017 2016

Net sale 3,674.86 3,617.85 3,538.50

Working Capital 162.63 144.19 636.26

Working Capital 22.60% 25.1% 5.56%

Turnover Ratios
 Working Capital Turnover Ratio

4,000.00
3,000.00
2,000.00
1,000.00 2018
0.00 2017
2016

Net sale
Working
Capital Working
Capital Turnover Ratios

INTERPRETATION

The working capital turnover ratio of the company indicates that the working capital of
the company has been effectively utilized for the three years. The company is achieving
higher volume of working capital with relatively small amount of net sales. The company
has maintained the stability in effective utilization of working capital for three years.

7. Total Assets Turnover Ratio:

This is also known as working capital leverage. This ratio indicates whether or not
working capital has been effectively utilized in making sales. The formula for calculating
is as follows:

Year 2018 2017 2016

Net Sale 3,674.86 3,617.85 3,538.50

Total Assets 1503.73 1384.64 1845.81

Total Assets Turnover 244.38% 261.28% 191.70%

Ratio
 Total Assets Turnover Ratio

4,000.00
3,000.00
2,000.00
1,000.00 2018
0.00 2017
2016

Net Sale
Total Assets
Total Assets
Turnover Ratio

INTERPRETATION

This ratio indicates how efficiently a firm is using its assets.

TABLE SHOWING SUMMARY OF FINANCIAL RATIOS OF LAST 3
YEAR’S

Year 2018 2017 2016

GROSS PROFIT RATIO 28.11% 26.65% 25.11%

(%)
OPERATING PROFIT 9.97% 10.44% 8.64%
RATIO (%)

NET PROFIT RATIO (%) 5.24% 5.79% 4.79%

CURRENT RATIO (%) 1.15% 1.14% 2.17%

QUICK RATIO (%) 63.96% 57.70% 120.77%

WORKING CAPITAL 22.60% 25.1% 5.56%

TURNOVER RATIO (%)

TOTAL ASSETS 244.38% 261.28% 191.70%

TURNOVER RATIO (%)
OBSERVATION AND FINDING

1. The financial performance of the company for the 3 years reflected a good growth in
sales and through all market segments sustained or bettered their performance over
the previous year.

2. Total revenue for period of 3 years was registering an increase from 3420.05 cr. (in
2016) to 3702.49 cr. (in 2018).

3. The net profit earned by the company during 2017-18 was 190.87 cr. against 160.12
cr. in 2015-16.

4. The overall performance of the company good. The company is continuing its drive
for volume with continued focus on profitability.

5. Excellent cash flow management of the company is the forte of the company.
LIMITATION

The study conducted and done is analytical, subject to the following limitation.

1. The study is mainly carried out based on the secondary data provided in the financial
statements.
2. This is study based on the historical data and information provided in the annual
reports therefore it may not be a future indicator.
3. There may be some fractional differences in the calculated ratios.
CONCLUSON

1. Profitability of the good and the shareholder of company are happy as their earning is
getting better day by day.

2. The overall efficiency of the company is good. The returns are good hence the
investment in company also good.

3. The company has maintained the stability in effective utilization of working capital
for 3 years.

4. The profitability as compared to the turnover is going on balance with the

administrative and other costs.
BIBLOGRAPHY

1. www.moneycontrol.com

2. https://www.moneycontrol.com/annualreport/godrejagrovet/directorsreport/GA03#A0
3

3. Company Records

4. Financial Analysis Research Papers

5. Accounting Handbook (Barron’s Accounting Handbook)

6. http://www.mca.gov.in/SearchableActs/Schedule3.htm
 Profit And Loss Statement
Of Godrej Agrovet
(Figure in cr.)
Particular MAR'18 MAR'17 MAR'16
(Cr.) (Cr.) (Cr.)
Gross Sales 3,691.73 3,617.85 3,538.50

Less: Inter divisional transfers 0 0 0

Less: Sales Returns 0 0 0

Less: Excise 16.87 0 0
Net Sales 3,674.86 3,617.85 3,538.50
EXPENDITURE:
Increase/Decrease in Stock 8.59 5.81 -24.78
Raw Materials Consumed 2,788.39 2,818.49 2,712.41
Power & Fuel Cost 45.91 42.89 43.77
Employee Cost 195.16 164.7 137.47
Other Manufacturing Expenses 104.32 94.4 89.75
General and Administration 23.35 24.3 20.21
Expenses
Selling and Distribution 74.82 64.39 242.62
Expenses
Miscellaneous Expenses 95.44 77.71 65.72
Expenses Capitalized 0 0 0
Total Expenditure 3,335.98 3,292.70 3,287.17
PBIDT 338.88 325.15 251.33
Other Income 27.63 52.39 54.27
Operating Profit 366.51 377.54 305.59
Interest 31.88 68.04 52.6
PBDT 334.63 309.51 252.99
Depreciation 53.31 48.84 43.59
Profit Before Taxation & 281.33 260.67 209.41
Exceptional Items
Exceptional Income / 0 20 0
Expenses
Profit Before Tax 281.33 280.67 209.41
Provision for Tax 90.46 72.7 50.09
PAT 190.87 207.97 159.32
 BALANCE SHEET
Of
GODREJ AGROVET
(Figure in cr.)
Particulars Mar'18 Mar'17 Mar'16
Liabilities 12 Months 12 Months 12 Months
Share Capital 192.03 185.14 92.57
Reserves & Surplus 1096.85 717.48 605.54
Net Worth 1288.88 902.62 698.11
Secured Loan 8.92 0 0
Unsecured Loan 205.93 482.01 1147.69
TOTAL LIABILITIES 1503.73 1384.64 1845.81
Gross Block 829.49 788.35 723.78
(-) Acc. Depreciation 139.43 88.67 41.97
Net Block 690.06 699.68 681.81
Capital Work in Progress 118.55 34.99 45.97

Investments 532.48 505.99 481.77

Inventories 551.19 573.04 522.84
Sundry Debtors 501.1 407.45 366.18
Cash and Bank 12.37 44.46 26.2
Loans and Advances 176.07 133.24 267.11
Total Current Assets 1240.73 1158.19 1182.33

Current Liabilities 1044.31 986.21 531.86

Provisions 33.79 28 14.21
Total Current Liabilities 1078.1 1014.21 546.07

NET CURRENT ASSETS 162.64 143.98 636.26

Misc. Expenses 0 0 0
TOTAL ASSETS(A+B+C+D+E) 1503.73 1384.64 1845.81