1.3.

CHAPTER SCHEME

CHAPTER 1:

It deals with Introduction which gives brief description of the study. It also deals
with Research Methodology, scope, sample list, method of data collection, and the tools
applied in the study. with objectives, need, scope.

CHAPTER 2:

It deals with the Company Profile and Profile of the Study Area.

CHAPTER 3:

It deals with Review of Literature. Literature review is a discussion of the

literature in a given study. It is a concise overview of the topic, and it is usually
chronologically or thematically. A literature review is written in essay format.

CHAPTER 4:
It deals with the Analysis and Interpretation of the study.

CHAPTER 5:

It deals with the Findings, Suggestions, and Conclusion of the study. Findings
from each analysis have been listed separately. Suitable suggestions were given by the
researcher. Conclusion gives the result of the study for which the study was conducted.

1
 CHAPTER – II

COMPANY PROFILE

VERITAS FINANCE PRIVATE LIMITED, 2ND FLOOR, DOOR.NO.

70 & 70A, NORTH STREET, THIRUVARUR - 610 001

OVERVIEW

Veritas Finance Private Limited (Veritas) is focused on meeting the financial

needs of the micro, small and medium enterprises (MSME) in India, which has remained
largely underserved despite several initiatives. A company run by professionals with rich
experience in financial services industry, aims to make availing credit easy to this
segment and make a positive impact on the lives of millions of Indians engaged in
informal activities and who actually build the nation.

A Veritas Finance Company, registered with Reserve Bank of India, the company
has grown the loan book to more than 1,445 crores, expanded to 203 branches and having
over 51,602 customers across various regions. Veritas Finance has been largely working
to meet the working capital and business credit requirements of the small businesses in
the MSME sector.

Veritas Finance has been promoted with a primary purpose of meeting the
working capital and business credit requirements of the small businesses in the MSME
sector. It aims to make availing credit easy for below the line segment who are backbone
of our nation thus by making a positive impact on the lives of millions of Indians engaged
in informal activities who actually build the nation.

2
VISION

To be recognized by our fairness, responsible approach, and service quality as the

most admired company in the inclusive financing space by all stakeholders.

MISSION

Make a difference and create positive impact in the lives of million informal
customers of micro, small and medium enterprises in India through sustainable financing
solutions.

VALUES

Veritas in Latin means “Truth”. As an organization, striving to make a true

difference in the lives of millions of small businesses, Veritas Finance would always
maintain high standards of ethics, transparency in all its dealings. The following Core
Values of the organization build the Veritas Way of doing business. We strive to be
organization which is:

 Value-Driven in its approach

 Ethical in all our dealings
 Responsible in its engagement with people, focused on offering
 Inclusive and sustainable finance
 Transparent and Fair practices
 Accessible to the underserved segment to make a meaningful contribution
 Self employed, Small Business segment of the society.

PRODUCTS & FEATURES

MSME Loans

MSME Loans are part of a secured loan where the customers use their property as
a guarantee and security. It is a multipurpose financial assistance which helps and
empowers the borrower to understand the value of the owned property at the time of
need. The reason for borrowing could be personal or professional. It is designed to meet
the financial needs of a person who already owns a house, which is free from any
impediment that is not given as security for any purpose.

3
Eligibility for MSME Loans

The eligibility for MSME loans depends upon various factors including the
following important ones:

 Income of applicant
 Credit health of applicant
 Property type
 Property value

POLICIES

Veritas Finance is committed to protect Users privacy and working towards

offering Users a safe and secured online experience. The Privacy Policy governs the use
of this website www.veritasfin.in (Website) of Veritas Finance Private Limited and
Veritas Finance values of the privacy of the Users (Users).

INFORMATION Submission of Information: Submissions to Veritas Finance of

information via Veritas Finance's Web site and pages thereon shall be deemed to be the
property of Veritas Finance. Please note that Veritas Finance does not warrant that any e-
mail from its Web site is secure and does not guarantee that any such e-mail from Users
or from Veritas Finance are secure during Internet transmission.

Personal Information: Please note that Users should exercise caution when
deciding to disclose or key-in Users personal information on-line, and ensure that no third
party is able to access such personal information as Users key it in or view it on the
screen of Users computer. This caution is to be exercised in respect of the information
that Users may provide, to apply to become a customer of Veritas Finance as well. This
Privacy Policy shall be subject to change without notice.

Veritas Finance recommends visiting this Privacy Policy every time the Users
visits the Website, in order to be informed about change, if any. In the event the modified
privacy policy is not acceptable to the Users, the Users should discontinue using the
Website. However, if the Users continues to use the service the Users shall be deemed to
have agreed to accept and abide by the modified privacy policy of this Website.

4
USAGE OF VERITAS

Veritas Finance treats Users personal information or Users use of service as

private and confidential and does not reveal it to any third parties except where it believes
in good faith, such action is necessary to comply with the applicable legal and regulatory
processes or to protect and defend the rights of other Users or to enforce the terms of
service which are binding on all the Users of www.veritasfin.in.

Our website www.veritasfin.in does not collect personal information about

individuals except when such individuals specifically provide such information on a
voluntary basis which information will not be sold or otherwise transferred to any
unaffiliated third parties unless otherwise stated at the time of collection or with the
approval of the Users as the case may be.

Veritas Finance will not send Users any unsolicited information except where
specifically agreed or necessary for operational or regulatory reasons. Veritas Finance
reserves right to use mobile numbers of Users to send occasional SMS pertaining to
information on product and services. All information submitted to Veritas Finance via
this site shall be deemed and remain the property of Veritas Finance and Veritas Finance
shall be free to use, for any purpose, any idea, concepts, know-how or techniques
contained in information given by any Users to this site provides Veritas Finance through
this site.

However, Veritas Finance shall not be subject to any obligations of confidentiality

regarding submitted information except as agreed by Veritas Finance having direct
customer relationship or as otherwise specifically agreed or required by law. Users, who
believe they are receiving our communications in error or no longer desire to receive
them, should inform us and we will remove those Users' names from our mailing lists.
Veritas Finance reserves its right to correct any part of the content of the Website at any
time as and when required at its sole discretion.

5
 PROFILE OF STUDY AREA

OVERVIEW

The town is the administrative headquarters of Thiruvarur district and Thiruvarur

taluk. It was one of the five traditional capitals of the Chola empire, with one of the
emperors of the dynasty, Kulothunga Chola I, having it as his capital. The town is
believed to be of significant antiquity and has been ruled, at different times, by
the Medieval Cholas, Later Cholas, Later Pandyas, Vijayanagar Empire, Marathas and
the British. The town is also known for the Thyagaraja temple and the
annual chariot festival held in the month of April.

Thiruvarur is the birthplace of Tyagaraja, Muthuswami Dikshitar and Syama

Sastri, popularly known as the Trinity of Carnatic music of the 18th century CE. The
temple chariot of the Thyagaraja temple, which weighs 300 tonnes (660,000 lb), and is 27
metres (89 ft) tall is the largest temple chariot in Tamil Nadu.

Thiruvarur was a part of Thanjavur district until 1991. The Odampokki

River passes through the centre of the town. Thiruvarur covered an area of 10.47 square
kilometres (4.04 sq mi) and had a population of 58,301 as of 2011. It is administered by
a first grade municipality. The town is a part of the Cauvery delta region and agriculture
is the major occupation. Roadways are the major means of transportation with a total of
94.06 km (58.45 mi) of district roads including three national highways passing through
the town. Thiruvarur is the third largest town by population in its region after Thanjavur
and Kumbakonam.
6
HISTORY

Thiruvarur is mentioned in a folk legend as the capital of a legendary Chola

king, Manu Needhi Cholan, who killed his own son to provide justice to a cow.
Thiruvarur was one of the five traditional capitals of the Chola empire and the history of
town revolves around the Thyagarajaswamy temple. Thiruvarur is mentioned in the saiva
canonical work, Tevaram by Thirugnana Sambanthar, Tirunavukkarasar and Sundarar,
the foremost Saivite saints of 7th–8th century CE and classified as Padal petra
stalam. Tirunavukkarasar mentions several traditions of the temple like Marghazhi
Aathirai Vizha, Panguni Uttirai Perunaal and Veedhivitakanin Veedhi Panni. The granite
structure of the temple was first constructed by Aditya Chola I in the 9th century CE and
was revamped during the reign of Rajaraja Chola I (985–1014 CE). The temple was
upgraded and rebuilt with stone by Rajendra Chola I (1012–44 CE). The temple has
inscriptions from both the emperors, later Cholas and Pandyas. The temple is believed to
be an inspiration for Rajaraja Chola to build the Brihadeeswarar Temple, a UNESCO
World Heritage Site.

GEOGRAPHY

Thiruvarur is located at 9.28°N

79.3°E. The Vellar River passes to the north of
the town, while the Vennaaru River passes to the
south, and the Odampokki River flows through
the city The town has an average elevation of 3
metres (9.8 ft) above sea level. land covers an area
of 10.47 km2 (4.04 sq mi). Thiruvarur is 300 km (190 mi) from Chennai, 24 km (15 mi)
from Nagapattinam, 40 km (25 mi) from Karaikal, 40 km (25 mi) from Mayiladuthurai,
and 56 km (35 mi) from Thanjavur. The town receives an average annual rainfall of 1,260
millimetres (50 in). The town experiences a tropical climate during summer; from March
to May. The proximity to sea results in high humidity throughout the year that peaks at an
average 70% from August to May. The town is situated on plain terrain of alluvial
soil consisting of sand, silt and clay. Surface water meets 89% of irrigation and water
needs in the town, while dug and tube wells address the remaining 11% of need.

7
 As of 2001, Thiruvarur has a lower literacy rate compared to other part of the
state.[49] There are three government high schools out of a total of 15 schools in the
town. The Central University of Tamil Nadu, established by an act of parliament in 2009,
provides collegiate education in the fields of arts and science. There are five other arts
and science colleges, one teacher training institute, three polytechnic colleges and two
Industrial training institutes (ITI) in the town.

Electricity supply to Thiruvarur is regulated and distributed by the Thiruvarur

circle of Tamil Nadu Electricity Board (TNEB). Water supply is provided by the
Thiruvarur Municipality from Odambokki river; the distribution through water tanks
located at Madapuram, Thendral Nagar, Kidarakondan, Kattapomman street,
Mettupalayam, IP Koil street, Maruthapttinam and Weekly Shandy having a total
capacity of 4,260 kl (1,130,000 US gal). About 18 t (40,000 lb) of solid waste is
collected from the town everyday; 56% domestic wastes and 40% commercial
wastes. Thiruvarur municipality is implementing underground drainage and the current
sewerage system for disposal of sullage is through septic tanks and public
conveniences.[55] Roadside drains carry untreated sewage out of the town to let out raw
into the sea or accumulates in low-lying area.

ECONOMY

Thiruvarur lies in the Kaveri River basin and the main occupation of the
inhabitants of the town and surrounding regions is agriculture.[32] More than 70% of the
workforce is involved in agriculture; 14% being cultivators and rest are agricultural
labourers.[33] Paddy is cultivated in three seasons namely Kuruvai (June–
August), Samba (August–January) and Thaladi (January–March). The daily wages of the
agricultural labourers is more than the rates fixed by the Tamil Nadu government, but due
to the decline in number of days of work, the income levels are lower. As of 1998, the
male labourers were employed 150 days a year, while the female labourers for 120 days.

8
 A government report in 2006 put these numbers at 120 and 100 days
respectively Due to the discontinuity in the working days, the labourers migrate to other
states or countries. They also shift to other professions like construction industry in the
urban centres and textile industry in the district. There are no industrial estates in the
town and the district – as of 2012, a government proposal is formulated to develop one at
Vaippur village. Modern agricultural tools like hullers have replaced labourers and reduce
the profit margin of small traders and labourers. There are no co-operative societies who
acquire the farm products and the District Purchasing Centre, operated by the government
of Tamil Nadu is the major procurer.

Being an agricultural town, the predominant industries are agriculture based like
modern rice milling, palm oil refinery, poultry, live stock and coir based. Tamil Nadu
Civil Supplies Corporation operating a modern rice mill and South India Edible Oil
involved in refining oil are the large scale industries in the town. There are small service
enterprises involved in automobile servicing, hotels, hospitals, boat repairing and nylon
fishnet repairing. There is a weekly market at Thanjai Salai and a daily market
maintained by the municipality, where vegetables and fish are sold.

Nationalized banks such as State Bank of India, Indian Bank, Central Bank of
India, Punjab National Bank, Indian Overseas Bank and private banks like ICICI
Bank, City Union Bank have their branches in Thiruvarur.[42] Kumbakonam Co-operative
Bank, Tiruvarur Co-operative Bank and Primary Agriculture Bank are the cooperative
banks that have their branches in the town.[42] All these banks have their Automated teller
machines located in various parts of the town.

THE THYAGARAJA TEMPLE

Worship of Lord Thyagaraja is associated with the Somaskanda depiction of

Lord(s) Shiva, Skanda and Parvathi. The ancient Thyagaraja Temple at Thiruvarur is
dedicated to the Somaskanda aspect of Shiva. Thygaraja is the iconic form of
Somaskanda and is believed to have spread widely from the 10th century CE, the period
coinciding the reign of Raja Raja Chola. The temple complex spanning over an area of 20
acres (81,000 m2) has shrines dedicated to Vanmikanathar, Thyagaraja, Kamalaamba and
numerous other deities. Vanmikinathar is believed to have arisen from an anthill and from
the trumpet flower, Bignonia Chelenoides.

9
 The Kamalalayam temple tank covers
around 33 acres (130,000 m2), making it one of
the largest in the country. The temple chariot is
the largest of its kind in Tamil
Nadu. Thyagaraja is believed to have performed
364 miracles in Thiruvarur similar to the 64
performed at Madurai Meenakshi
Temple. Pilgrims take a holy dip in the tank during Hindu auspicious occasions like
equinox and eclipse. The temple is also classified as Saptha Vidangam, meaning the
seven temples having unique dance moves by Thyagaraja. The Chola inscriptions refer
Thyagaraja as Vidhividangar and the name "Thyagaraja" is believed to have emerged
during the 15–16th century CE.

MUSIC, DANCE AND LITERATURE

Historically Thiruvarur has been a centre of eminent people in religion, arts and
science. Sundarar, an 8th-century Saivite saint, mentions "I am the slave of all those born
in Thiruvarur" in his works in Tevaram. Two of the 63 nayanmars of Saivite tradition
namely, Kalarsinga Nayanar and Tandiyadigal Nayanar were born in
Thiruvarur. The Periyapuranam, a 12th-century Saiva canonical by Sekkizhar, dedicates
a chapter to those born in Thiruvarur including these two saints. The town was a
traditional centre of music and dance – the inscriptions from Rajaraja Chola associates a
large body of dancers associated with the temple. Thiruvarur is home to Trinity
of Carnatic music namely Thyagaraja (1767–1847 CE), Muthuswami Dikshitar (1775–
1835 CE) and Shyama Shastri (1762–1827 CE).

Muthuswami Dikshitar has sung eulogies of the temple deities of the

Thyagarajaswami temple. There was large influx of the acumen of South Indian culture to
the town during the 17th century CE due to the political unrest in Thanjavur and
increased patronage of the Maratha kings to Thiruvarur, resulting in developments in
music and dance. A unique musical instrument called Panchamuga Vadyam with each of
its five ends ornamented differently is used in the temple. A type of nadaswaram (pipe
instrument) called Barinayanam is also a unique instrument found only in Thiruvarur.

10
CHARIOT FESTIVAL

Thiruvarur temple chariot festival depicting the largest temple chariot in World.
Kulothunga Chola II (1133–50 CE) enlarged the temple ritual to have fifty six festivals,
some of which are followed in modern times. The annual chariot festival of the
Thygarajaswamy temple is celebrated during April – May, corresponding to the Tamil
month of Chitrai. The chariot is the largest of its kind in Tamil Nadu and also No.1 Place
of Biggest Chariot in the World weighing 300 tonne with a height of 90 feet. The chariot
comes around the four main streets surrounding the temple during the festival. The event
is attended by lakhs of people from all over Tamil Nadu. The chariot festival is followed
by the "Theppam", meaning float festival

11
 CHAPTER – IV
DATA ANALYSIS AND INTERPRETATION

4. FINANCIAL ANALYSIS

RATIO ANALYSIS

An integral aspect of financial appraisal is financial analysis, which takes into

account the financial features of a project, especially source of finance. Financial analysis
helps to determine smooth operation of the project over its entire life cycle.

The two major aspects of financial analysis are liquidity analysis and capital
structure. For this purpose ratios are employed which reveal existing strengths and
weakness of the project.

4.1. LIQUIDITY RATIOS

Liquidity ratio or solvency ratio‟s measure a project‟s ability to meet its current
or short-term obligations when they become due. Liquidity is the pre-requisite for the
very survival of a firm. A proper balance between the liquidity and profitability is
required for efficient financial management. It reflects the short-term financial strength or
solvency of the firm. Two ratios are calculated to measure liquidity, the current ratio and
quick ratio.

4.1.1. Current Ratio

The current ratio is defined as the ratio of total current assets to total current
liabilities. It is computed by,

Current Assets

Current Ratio =

Current Liabilities

12
4.1.2. Acid Test or Quick Ratio

It is a measure of liquidity calculated dividing current assets minus inventory and

prepaid expenses by current liabilities. Since inventories among current assets are not
quite liquid (means not quickly converted into cash), the quick ratio excludes it. The
quick ratio includes only assets, which can be readily converted into cash and constitutes
a better test of liquidity. It is often called as quick quick ratio because it is a measurement
of a firms ability to convert its assets quickly into cash in order to meet its current
liabilities.

Current Assets - Inventory

Quick Ratio =

Current Liabilities

4.2. CAPITAL STRUCTURE RATIO

The long-term lenders/creditors would judge the soundness of a firm on the basis
of the long term financial strength measured in terms of its ability to pay the interest
regularly as well as repay the installment of the principal on due dates or in one lump sum
at the time of maturity. The long term solvency of firm can be examined by using
leverage or capital structure ratios. The leverage or capital structure ratio‟s may be
defined as financial ratios which throw light on the long term solvency of a firm as
reflected in its ability to assure the long term lenders with regard to (i) periodic payment
of interest during the period of the loan and (ii) repayment of the principal on maturity or
in predetermined installments at due dates.

4.2.1. Debt Equity Ratio - This ratio measures the long term or total debt
to shareholders equity. This ratio reflects claims of creditors and
shareholders against the assets of the firm. Debt Equity Ratio is given by:

13
 Long Term Debt

Debt Equity Ratio =

Shareholders’ Equity

4.3. PROFITABILITY RATIO’S RELATED TO SALES

These ratios are based on the premise that a firm should earn sufficient profit on
each rupee of sales. If adequate profits are not earned on sales, there will be difficulty in
meeting the operating expenses and no returns will be available to the owners.

4.3.1. Net Profit Margin

It is also known as net margin. This measures the relationship between

the net profits and sales of a firm. Depending on the concept of net profit
employed. , this ratio can be computed as follows.

Earnings After Tax

Net Profit Ratio =  100

Net Sales

14
4.4 . PROFITABILITY RATIOS RELATED TO INVESTMENTS

Return on Investments

Return on investments measures the overall effectiveness of management in

generating profits with its available assets. There are three different concepts of

investments in financial literature: assets, capital employed and shareholder‟s equity.

Based on each of them, there are three broad categories of ROIs. They are

1. Return on Assets,

2. Return on Total Capital Employed.

4.4.1. Return on Assets

The profitability ratio is measured in terms of relationship between net profits and

assets. The ROA may also be called profit-to-asset ratio. It can be computed as follows,

Net Profit after Tax

Return on Assets =  100

Average Total Assets

15
4.5. RETURN ON CAPITAL EMPLOYED

It is similar to ROI except in one respect. Here the profits are related to the total

capital employed. The term capital employed refers to long term funds supplied by the

lenders and owners of the firm. It is given by the formula-

EBIT

Return on Capital Employed =  100

Average Total Capital Employed

4.6. DEBT SERVICE COVERAGE RATIO:(DSCR)

It is considered a more comprehensive and apt measure to compute debt service

capacity of firm. It provides the value in terms of the number of times the total debt
service obligations consisting of interest and repayment of principal in installments are
covered by the operating funds available after the payment of tax : earnings after taxes,
EAT + interest + Depreciation + Other non cash expenditure like amortization.

EAT + Interest + Depreciation + Other Non Cash Expenditure

DSCR =

Installments

16
4.7. CAPITAL INVESTMENT EVALUATION METHODS

Successful completion of a project mainly depends on the selection criteria

adopted while choosing the project in the initial phases itself and the choice of a project
must be based on a sound „financial assessment‟ and not based on „impressions‟. Among
the several criteria available for financial assessment of projects, Discounted Cash Flow
(DCF) techniques are being widely used in both public and private sectors. Usually the
basic criterion used in project appraisal is Internal Rate of Returns (IRR), which is the
most popular DCF technique used in the country. However, in most of the projects of the
projects , the actual returns are vastly different from the expected returns based on IRR,
necessitating looking for alternative project appraisal criteria. Therefore, an attempt is
made to analyse other alternative project appraisal methods available for catering to the
requirements of vivid circumstances. Emphasis is given for DCF techniques as they were
proved to be the best techniques for project appraisal all over the world.

1. Pay Back Period (PBP) Method

Payback period is the minimum period required to cover the initial cost and a
project with minimum PBP is acceptable in this model. This is a very useful tool to
decide rapidly if it is worth to do a small investment by a local manager and also helps to
reduce the risk of bad choices. But the basic economic principles involved in PBP method
are not as reliable as the other methods like NPV etc. The most important drawback of
PWP method is, it is insensitive to changes in timing within the payback period and
ignores the cash flows beyond the PBP. This method also lacks a „natural‟ bench mark
against which comparisons can be made among various projects. Discounted PBP method
gives a more accurate period to cover the initial cost but doesn‟t overcome the above
drawbacks. However this is a very good method to use in combination with other
methods.

Initial Investment

Pay Back Period =

Annual Cash Inflow

17
2 . Profitability Index

It is also known as Benefit –Cost Ratio. It is similar to NPV approach. The

profitability index approach measures the present value of returns per rupee invested,
While the NPV is based on the difference between the present value of the future cash
inflows and the present value of cash outlays. It may be defined as the ratio which is
obtained dividing the present value of cash inflows by the present value of cash outlays. It
is given by the formula:

Present Value of Cash Inflows

Profitabillity Index =

Present Value of Cash Outflows

158.807

Profitabillity Index =

152.5

Profitability Index = 1.041

18
4.1. LIQUIDITY RATIOS

TABLE NO: 4.1.1

4.1.1. CURRENT RATIO

Particulars 2016 2017 2018 2019 2020

Current Assets 91.47 101.72 112.76 128.7 145.25

Current Liabilities 144.32 127.66 121.59 96.05 80.09

Current Ratio 0.634 0.767 0.927 1.339 1.8134

Interpretation

It is an indicator of the extent to which short term creditors are covered by

assets that are expected to be converted to cash in a period corresponding to the maturity
of claims. The ideal current ratio is 2:1. The firm current ratio indicate that the firm is in
a position to meet its short term obligation because the ratio is in increasing trend , by
observing the above table we can say that though the firm does not maintain ideal current
ratio, it is still in a position to meet its current obligations. After clearing all the dues the
firm is still in a position to maintain liquidity.

19
 CURRENT RATIO

CHART NO. 4.1.1

CURRENT RATIO

2
1.8134
1.8
1.6
1.339
1.4
Current 1.2
Ratio 0.927
1 0.767
0.8 0.634
0.6
0.4
0.2
0
2016 2017 2018 2019 2020
Years

20
 TABLE NO: 4.1.2

4.1.2. ACID TEST OR QUICK RATIO

Particulars 2016 2017 2018 2019 2020

Quick Assets 60.47 67.65 75.28 87.47 99.9

Current Liabilities 144.32 127.66 121.59 96.05 80.09

Current Ratio 0.534 0.53 0.62 0.911 1.247

Interpretation

Acid test ratio is a rigorous measure of firm‟s ability to service short term

liabilities. The usefulness of the ratio lies in the fact that it is widely accepted as the best

available test of liquidity position of a firm. Generally an acid test ratio of 1:1 is

considered satisfactory as a firm can easily meet all its current claims. In the case of the

above firm the quick ratio is in increasing trend by year on. So it shows that firm is

capable of paying its quick short term obligations.

21
 ACID TEST OR QUICK RATIO

CHART NO. 4.1.2

Quick Ratio

1.4 1.247
1.2
1 0.911

Quick 0.8
0.62
Ratio 0.534 0.53
0.6
0.4
0.2
0
2016 2017 2018 2019 2020
Years

22
4.2. CAPITAL STRUCTURE RATIO

TABLE NO: 4.2.1

4.2.1. DEBT EQUITY

Particulars 2016 2017 2018 2019 2020

Debt 82.00 61.50 41.00 20.05 0.00

Equity(Promoter Contribution) 56.38 54.07 56.88 68.94 84.49

Debt Equity Ratio 1.454 1.14 0.721 0.291 0.00

Interpretation

The debt equity ratio is an important tool of financial analysis to appraise the
financial structure of the firm. The ratio reflects the relative contribution of creditors and
owners of the business in its financing. A high ratio shows a large share of financing by
the creditors of the firm; a low ratio implies the a smaller claim of the creditors. Debt –
Equity ratio indicates the margin of safety to the creditors. The debt-equity ratio is in
decreasing and in 2020 it become nil, which implies that the owners are putting up
relatively more money of their own.

23
 DEBT EQUITY

CHART NO. 4.2.1

Debt Equity Ratio

1.6
1.454
1.4
1.2
1.14
1
Debt/Equity
0.8
0.721
0.6
0.4
0.291
0.2
0 0
2016 2017 2018 2019 2020
Years

24
4.2.PROFITABILITY RATIO’S RELATED TO SALES

TABLE NO: 4.3.1

4.3.1. NET PROFIT MARGIN

Particulars 2016 2017 2018 2019 2020

Earnings After Tax 10.68 17.82 27.05 35.56 43.75

Net Sales 265.49 292.04 321.24 353.36 388.7

Net Profit Margin 4.023% 6.102% 8.420% 10.06% 11.25%

Interpretation

The net profit margin is indicative of management‟s ability to operate the business

with sufficient success not only to recover from revenues of the period, the cost of

services, the operating expenses and the cost of borrowed funds, but also to leave a

margin of reasonable compensation to the owners for providing their capital at risk. A

low net profit margin has the opposite implications. With respect to the above firm the net

profit margin is increasing trend so it will show that the company is in good condition and

the demand for the product is increasing.

25
 TABLE: 4.3.1

4.3.1. NET PROFIT MARGIN

Net Profit Margin

8

0
2016 2017 2018 2019 2020

26
4.4 . PROFITABILITY RATIOS RELATED TO INVESTMENTS

TABLE NO: 4.4.1

4.4.1. RETURN ON ASSETS

Particulars 2016 2017 2018 2019 2020

Earnings after Tax 10.68 17.82 27.05 35.56 43.75

Average Total Assets 208.39 199.54 195.9 200.54 208.34

ROA 5.125% 8.93% 13.81% 17.73% 20.99%

Interpretation

Return on assets employed is favorable. That means the firm is in a position to

employ its assets in an efficient manner.

27
 RETURN ON ASSETS

CHART NO. 4.4.1

ROA

5.13%
20.99% 8.93%

13.81%

17.73%

28
4.5. RETURN ON CAPITAL EMPLOYED

TABLE NO.: 4.5

Particulars 2016 2017 2018 2019 2020

EBIT 34.82 42.24 52.66 62.04 70.99

Total Capital Employed 203.39 199.54 195.90 200.54 208.34

ROCE 17.2% 21.16% 28.92% 30.9% 34.07%

Interpretation

The capital employed basis provides a test of profitability related to the source of

long term funds. The higher the ratio, the more efficient is the use of capital employed.

From the above table we can say that the ROCE is quite high. Compared to previous

years ratio. It is good for the company.

29
 RETURN ON CAPITAL EMPLOYED

CHART NO. 4.5

ROCE

35.00% 34.07%
30.90%
28.92%
30.00%
25.00% 21.16%
20.00% 17.20%
Returns
15.00%
10.00%
5.00%
0.00%
2016
2017 2018
2019
2020
Years

30
4.6. DEBT SERVICE COVERAGE RATIO:(DSCR)

TABLE NO: 4.6

Net Profit for the

Year Interest on Term Loan Repayment of Term Loan
Year

2016 35.66 19.55 20.5

2017 36.92 16.78 20.5

2018 41.72 14.01 20.5

2019 46.86 11.25 20.5

2020 52.50 8.48 20.5

31
 Particulars 2016 2017 2018 2019 2020

Net Cash Accruals 35.66 36.92 41.72 46.86 52.50

Instalment 20.5 20.5 20.5 20.5 20.5

DSCR 1.74 1.80 2.03 2.29 2.56

Interpretation

The higher the ratio, the better it is, A ratio of less than one may be taken as a sign
of long term solvency problem as it indicates that the firm does not generate enough cash
internally to service debt. in general, lending financial institution consider 2:1 as
satisfactory ratio. In this project DSCR is in increasing trend it shows that firm is able to
meet its debt obligation.

32
 DEBT SERVICE COVERAGE RATIO:(DSCR)

CHART NO: 4.6

Debt Service Coverage Ratio

3
2.56
2.5 2.29
1.8 2.03
2 1.74
1.5

0.5

0
2016
2017 DSCR
2018
2019
2020
Years

33
4.7. CAPITAL INVESTMENT EVALUATION METHODS

TABLE NO: 4.7.1

4.7.1. PAY BACK PERIOD (PBP) METHOD

Year Cash Flows (In Lakhs) Cumulative Cash Flows

2016 35.66 35.66

2017 36.92 72.58

2018 41.72 114.3

2019 46.86 161.16

2020 52.50 213.66

Interpretation

The Payback period is a measure of liquidity of investments rather than their

profitability. Since the period within which the total cost of the period is less than the
completion period, the project can be accepted. It means that the firm will be able to pay
the dues out of their inflows. Therefore the project is said to be feasible.

34
4.7.2. AVERAGE RATE OF RETURN

Average Annual Profit after Tax

Average Rate of Return = * 100

Average Investment

213.66/ 5

Average Rate of Return = * 100

152.5/ 2

42.732

Average Rate of Return = * 100

76.25

Average Rate of Return = 56.04%.

Interpretation

Here the ARR is more consistent as the ARR is quite higher ( more than average)
and the project can be accepted.

35
4.8. REPAYMENT PERIOD AND DEBT SERVICE COVERAGE

TABLE NO: 4.8.1

4.8.1. PROJECTIONS OF PERFORMANCE AND PROFITABILITY

Particulars 2016 2017 2018 2019 2020

A) Sales 300.00 330.00 363.00 399.30 439.23
Less: Excise 34.51 37.96 41.76 45.94 50.53
Net sales 265.49 292.04 321.24 353.36 388.70

B) cost of Production
1.Raw material consumed 185.84 204.42 224.87 247.35 272.09
2.Power & Fuel 6.00 6.60 7.26 7.99 8.78
3.Direct labor & wages 12.24 13.46 14.81 16.29 17.92
4.consumable stores 0.60 0.66 0.73 0.80 0.88
5.Repair & Maintenance 1.20 1.32 1.65 2.48 3.47
6.Othermanufacturingexpences 0.72 0.79 1.11 1.55 2.17
7.Depreciation 24.97 19.10 14.66 11.30 8.75
8.Preliminary expenses w/off 2.40 2.40 2.40 2.40 2.40
Total Cost of Production 233.47 248.76 267.49 290.16 316.46
Add: Opening stock 0.00 4.50 4.78 5.14 5.58
Less: Closing Stock 4.50 4.78 5.14 5.58 6.09
D)Cost of goods sold 229.47 248.78 267.13 289.72 315.96
E) Gross Profit (B-D) 36.02 43.56 54.11 63.64 72.74
F) Interest on
1) Term Loan 12.80 10.03 7.26 4.50 1.73
2) Working Captial 6.75 6.75 6.75 6.75 6.75
Total 19.55 16.78 14.01 11.25 8.48
G) Selling, administration Exp 1.20 1.32 1.45 1.60 1.76
H)Profit Before Taxation(E-(F+G)) 15.27 25.45 38.65 50.80 62.51

I) Provision for Taxation 4.58 7.64 11.59 15.24 18.75

J) Profit after tax (H-I) 10.69 17.82 27.05 35.56 43.75
K) Depreciation 24.97 19.10 14.66 11.30 8.75

36
 TABLE NO: 4.8.2

4.8.2. PROJECTD BALANCE SHEET

S. No Particulars 2016 2017 2018 2019 2020

A Capital & Liability
Promoter capital 0.00 64.07 71.88 83.94 104.49
Own contribution 56.38 0.00 0.00 0.00 0.00
Less Drawings 3,00 10.00 15.00 15.00 20.00
Equity 53.38 54.07 56.88 68,94 84.49
Retained Earning 10.69 17.82 27.05 35.56 43.75
64.07 71.88 83.94 104.49 128.25
Term loan(Debt) 82.00 61.50 41.00 20.50 0.00
Sundry creditors 7.74 8.52 9.37 10.31 11.34
Working Captial loan 50.00 50.00 50.00 50.00 50.00
Provision for tax 4.58 7.64 11.59 15.24 18.75
Grand Total 203.39 199.54 195.90 200.54 208.34
Assets:
Fixed assets 89.91 70.81 56.14 44.84 36.09

land 22.00 22.00 22.00 22.00 22.00

Electricity deposit 5.00 5.00 5.00 5.00 5.00

Cash & Bank Balances 2.15 7.00 11.80 20.6 29.03

Receivables 44.25 48.67 53.54 58.89 64.78

Stock of material 30.97 34.07 37.48 41.23 45.35

Stock of finished goods 4.50 4.78 5.14 5.58 6.09

Preliminary expences not w/off 9.60 7.20 4.80 2.40 0.00

Grand Total 208.39 199.54 195.9 200.54 208.34

37
 TABLE 4.9.1

4.9.1. COMPARATIVE BALANCE STATEMENT OF THE YEAR OF

2018 - 2019

38
 CHAPTER – V

FINDINGS & SUGGESTIONS

FINDINGS

This analysis part is related to the financial viability of the project Flow Controls:-

 Through ratio analysis I analyzed that the liquidity position of the firm is good

and it is maintaining the standard ratio..

 Debt Equity ratio is in decreasing trend, it shows that the firm is reducing its

liability portion by paying the loan year on year so the financial risk less.

 Profitability ratios related to sales and capital employed are in increasing

trend, it shows that the sales are increasing and the firm using its resources

efficiently.

 Debt Service Coverage Ratio is also in increasing trend, it shows that the

firm‟s ability to make the loan repayments on time over the debt life of the

project.

 The payback period is within the debt life of the project.

 The net present value of the project is positive, The positive net present value

will result only if the project generates cash inflows at a rate higher than the

opportunity cost of capital . Since the Net Present Value of the above project

is positive, the proposal can be accepted.

 The internal rate of the return is higher than what accepted so the project is

accepted.

39
 Veritas Finance Ltd. is strictly following the guidelines of RBI on Project
Financing

 The bank finances the projects only through term loans.

 Interest rates are fixed depending upon the projects which is known as RBI
advance rate.

 When the clients fail to pay the interest, 3 months from the due date the term
loan granted will be treated as Non Performing Assets.

 If the interest is due further 3 more months then it will be treated as doubtful
assets and interest rates becomes zero.

 Every firm starting up a new project should make an insurance policy with the
same bank itself.

40
SUGGESTIONS

 Veritas Finance Ltd. check only financial, technical and commercial

feasibility of the project and it should not consider sensitivity analysis and

social cost benefit analysis of the project so bank should consider this

because these are also important from the point of view of risk and economy

growth.

 It should be caution about the availability of security and ensure honesty of

both borrower and guarantor so as to avoid the account becoming the loss

assets.

41
 BIBLIOGRAPHY

The data is collected from the list of books and web site given below,

BOOKS

1. Kennedy & McMullen, Financial Statements : Form , P.17, Analysis and Intel-
presentation., Richard D. Irwin Inc.

2. Roy A. Foulke, Practical Financial Statement Analysis, P. 516, McGraw Hill.

3. R. Metcalf & P. Litard , Principles of Accounting, P. 157, WB Saunders & Co.,

197

WEBSITES

 www.veritas.in

 Company Manuals

 Commercial Banks Book

 Financial Management by – Khan and Jain

42
2016-2017 FINANCIAL YEAR

43
44
2017-2018 FINANCIAL YEAR

45
46
2018-2019 FINANCIAL YEAR

47
48
2019-2020 FINANCIAL YEAR

49
50
2020 – 2021 FINANCIAL YEAR

51
52