Financial

Accounting for
9/16/2019

Managers
RUCHIRA PAPERS LIMITED

Garima Sharma (201921017)

Rohit Dubey (201921040 )
The Company is engaged in the manufacturing of Kraft Paper and Writing & Printing Paper.
Writing and Printing Paper is used for multiple purposes like printing and stationery etc. The
company’s white writing & printing paper is used in the fabrication of note books and writing
material; the coloured paper is used in the fabrication of spiral notebooks, wedding cards,
shade cards, children’s colouring books, coloured copier paper and bill books. Kraft Paper
finds its application in the packaging Industry especially for making Corrugated Boxes /
Cartons and for other packaging requirements. The special feature of its Kraft Paper is load
bearing Capacity & tensile Strength which makes its most suitable for Corrugated packing
application.

The company had set up 33000 TPA unit for manufacturing of writing & printing paper
adjoining to its existing unit in March,2008.
The ever increasing demand for Writing and Printing paper in domestic as well as
international markets has thrown up a plethora of opportunities to the Company to diversify
into Writing and Printing paper segment.

Backed by buoyant economy coupled with the commitment of Government to increase

literacy and growing awareness of quality paper among the consumers, this industry is on the
threshold of a promising future.

By delivering the international quality products and improving the operational efficiency and
also by harnessing its inherent strengths, the Company has diversified into Writing and
Printing paper.
The Indian paper industry with approximately 13 mn tonnes of capacity accounts for about
3% of global paper production. According to Indian Paper Mills Association, the domestic
consumption of paper in India during 2014-15 was 13.9 mn tones, yoy growth of 6%. The per
capita consumption of paper in India stands at ~11 kg, which is relatively lower compared to
other developed and developing countries. With increasing focus by government on
education and general uptick in macro economy, CARE Rating expects Indian paper industry
to witness a CAGR of 7% over the next five years to about 20 mn tones. The growth will be
largely driven by printing & writing and packaging & paper board segment. The Indian paper
industry can be broadly classified into three segments:

 PRINTING & WRITING (P&W)

 PACKAGING PAPER & BOARD
 NEWSPRINT

Methodology

 To carry out the Financial Statement Analysis of Ruchira Papers Limited.

 The period of study is taken as three years 20117-18, 2016-17 and 2015-16.
 The study is conducted by studying the annual reports of the mentioned years.
 The type of data taken is secondary.
 Ratio analysis is taken as a tool to analyse financial statement.
Main Revenue Generating Activities-

Ruchira Papers manufactures and markets kraft paper as well as writing & printing paper.
The Company is a prominent player in these segments in Northern India. The Company’s
writing & printing paper finds application in note books, writing material, wedding cards,
shade cards, children’s colouring books, copier paper and bill books. The Company’s kraft
paper is used widely in the packaging industry especially in the fabrication of corrugated
boxes and other packaging material.

Accounting Policies

Basis for preparation and measurement

These financial statements have been prepared in accordance with the Indian Accounting
Standards (referred to as “Ind AS” as prescribed under section 133 of the Companies Act,
2013 read with Companies (Indian Accounting Standards) Rules, 2015 as amended from time
to time under the historical cost convention on the accrual basis. Effective April 01, 2017 the
Company has adopted all the Ind AS standards and the adoption was carried out in
accordance with Ind AS 101, First time adoption of Indian Accounting Standards, with April
01, 2016 as the transition date. The transition was carried out from Indian Accounting
Principles Generally accepted in India as prescribed under section 133 of the Act, read with
rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which were previous GAAP.
Accounting Policies have been consistently applied except where a newly issued Accounting
Standard is initially adopted or a revision to existing accounting standard requires a change in
the accounting policy either to in use. The financial statements are presented in Indian
Rupees rounded off to the nearest rupees.

Inventories
Inventories are valued at the lower of cost and net realizable value after providing for
obsolescence, if any except in case of by-product which are valued at net realizable value.
The cost is computed on First in First out (FIFO) basis. Cost for the purpose of valuation of
finished goods and goods in process is computed on the basis of cost of material, labour and
other related overheads. For the given three years same accounting policies are being
followed by the company.

Depreciation
Depreciation on fixed assets other than vehicles and furniture & fixtures is provided on
straight line method based on estimated useful life prescribed under Schedule II of the
Companies Act, 2013. Depreciation on vehicles and furniture & fixtures has been provided
on written down value method under Schedule II of the Companies Act, 2013. The
depreciation on plant and machinery and effluent treatment plant has been provided on the
rates applicable to continuous process plant. Freehold land is not depreciated. The residual
values, useful lives and method of depreciation of property, plant and equipment is reviewed
at the end of each financial year and adjusted prospectively, if appropriate. For last three
years the company is following SLM method for depreciation.

Cash flow Analysis

Year 2015-16 2016-17 2017-18

Operating activity 404146307 330407450 471062447
Investing activity (321974486) (186954917) (587046754)
Financing activity (86610044) (142836456) 112089789

 From operating activity, profit from sale of fixed assets was high and
interest/dividend income increased at a huge level. Earlier they were in negative value
but later it turned to positive value because of which they were deducted from PAT.
Also trade payables decreased in 2017-18 at a very large rate which were increasing
in previous two years which shows that liabilities were paid off by the company.

 From investing activity, the cash generated was negative because huge amount was
spent on purchase on fixed assets and also interest received were increasing in every
year but purchase of fixed assets were very high. This is the reason of negative value
of cash generated from investing activities.

 From financing activity, the company is continuously increasing cash flow because in
2015-16 proceeds from short term borrowings were in negative value but later in
further two years it became positive. Also Proceeds from share warrants were
generated in 2017-18 because of net cash generated from financing activity was
positive.
Ratios
A)
2015-16 2016-17 2017-18
Net profit ratio 5.35% 7.59% 8.36%
NPA/Operating 5.37% 7.61% 8.44%
revenue
This ratio is useful for Managers, Shareholders/Owner and Lenders. Net profit ratio indicates
the amount of profit available for dividend distribution after deducting total expenses from
total revenue. Operating revenue includes Revenue from sales and other operating revenue.
We can see that ratio is increasing from 2015 to 2018. Because Net profit is increasing in fast
rate as compared to Revenue.
B)
2015-16 2016-17 2017-18
Operating profit 10.47% 10.87% 12.92%
Ratio
This ratio is useful for Managers, Shareholders/Owner and Lenders. This ratio indicates the
profit available after deducting Manufacturing and Operating Expenses from operating
revenue. Provide information of the cushion available for paying Interest & Taxes. We can
see that ratio is increasing from 2015 to 2018. Because Operating profit is increasing in fast
rate as compared to Operating Revenue.

C)
2015-16 2016-17 2017-18
Debt Equity ratio 0.30 0.23 0.22
This ratio is useful for Lenders, Shareholders and Potential Shareholders. Indicates the
Organization’s reliance on own funds or debt funds. Higher debt is cause of concern for
Organization. We can see that reliance on debt funds is decreasing year after year (from 2016
to 2018). which is good sign for Organization. The Reserve and Surplus is increasing at a fast
rate as compare to Non-current liabilities, which is the reason behind decrease in ratio.
D)
2015-16 2016-17 2017-18
Current Ratio 1.12 1.40 1.88
This ratio is useful for managers and working capital fund providers. Measures the
company’s liquidity and also the margin of safety, the company has in order to meet any
emergency arising out of uneven flows of fund through current assets and current liabilities
account. In ratio we can see that company has more current assets and it is increasing year
after year. which is good sign.
E)
2015-16 2016-17 2017-18
Non-Current 2.78 2.87 3.21
Assets/Non-Current
Liabilities
This ratio is useful for managers and working capital fund providers. Here we calculate by
Non-Current Assets upon Non-current liabilities. The reason behind increase in ratio is
increasing Non-Current Assets.
F)
2015-16 2016-17 2017-18
Total Assets/Non- 4.30 4.74 5.09
Current Liabilities
This ratio is useful for managers and working capital fund providers. Ratio is increasing year
after year which is good sign for company. Total Assets is increasing fast as compared to
Non-current liabilities, which is the main reason behind increasing ratio.
G)
2015-16 2016-17 2017-18
Receivables 10.53 9.75 9.46
Turnover Ratio
Average collection 35 days 38 days 39 days
period
Inventory Turnover 33.77 11 11.96
Ratio
These ratios are useful for managers and working capital fund providers. These ratios tell you
about of efficiency of company. Receivables Turnover ratio is decreasing which is a bit
concern for company.
H)
2015-16 2016-17 2017-18
Cash Realization 2.08 1.02 1.24
This ratio is useful for Shareholders and lenders. This ratio indicates how much percentage of
PAT is being realized in cash. Higher the ratio better is the quality of earning. It decreased in
2016-17, because cash generated from Operating activities decreased. But company improved
its inflows from Operating activities in 2017-18.
I)
2015-16 2016-17 2017-18
Earnings Per Share 8.68 14.50 16.96
This ratio is useful for shareholders. Indicates the amount of profit available for equity
shareholders after paying off all expenses and if the entire amount of profit is distributed to
all shares, how much each share will be getting. We can see that company EPS is increasing
year after year which is good sign for company as well as shareholders. The reason behind
this is the PAT, which is increasing.
J)
 2015-16 2016-17 2017-18
Interest Coverage 5.28 6.87 8.55
Ratio
This ratio is useful for Lenders and Managers. It indicates the safety net available to the
Organization for the payment of Interest Charges. As Profit after Tax is increasing year after
year which leads to increase in ratio.
K) Yes, company’s industry segment plays important role in deciding profitability, Liquidity
and Solvency of the company. If company’s industry segment is doing well this shows that
there is good opportunity for the company to improve its profitability, Liquidity and
Solvency. It helps in comparing industry segment performance and company performance.
For e.g. if Paper industry segment has profitability, Liquidity and Solvency more than
Company. Then we can say that company is not performing well. But if company has
profitability, Liquidity and Solvency more than paper industry segment than company is
performing well. So industry segment plays important role.
L) Price Movement Chart of Ruchira Papers Ltd from July 01,2019 – September 10,2019
Bibliography
http://www.ruchirapapers.com/

http://www.ruchirapapers.com/financial.html

http://www.ruchirapapers.com/pdf/Annual_Report_RPL_16-17.pdf

http://www.ruchirapapers.com/pdf/results_march_2018.pdf

http://www.ruchirapapers.com/pdf/Annual_Report_Ruchira_17-18.pdf

https://www.moneycontrol.com/india/stockpricequote/paper/ruchirapapers/RP25