“Financial Performance

Analysis of MSMEs”
Nilesh Purayar
1804
17PIAF036872

Supervised by
Prof. Ekta Arya
 BACKGROUND OF THE STUDY

According to MSMED Act, 2006 SME Definition was based on Investment. On 13th May 2020, Finance Minister Nirmala
Sitharaman added the additional principle of turnover along with the investment.
 RELEVANCE OF THE STUDY

The Micro, Small and Medium Enterprises (MSMEs) have Activity Employment generation (in lakh) Share (%)
contributed significantly towards propelling India as one of
the fastest growing world economies. Rural Urban Total

Manufacturing 186.56 173.86 360.41 32

Value wise, the MSME sector accounts for 45% of the
manufacturing output and around 40% of the total exports of Trading 160.64 226.54 387.18 35
the nation.
Others 150.53 211.69 362.22 33
The remarkable growth in this sector is making forward and Electricity 0.06 0.02 0.08 0
backward linkages and thus, channelizing more productive
Total 497.78 612.10 1109.88 100
investments into this sector. Since this sector requires low
capital to start a new venture, it creates huge employment
opportunities for many unemployed youth.
Source : Annual Report F.Y. 2018-19, Ministry of Micro, Small and Medium Enterprises,
Government of India
 
 RESEARCH OBJECTIVES

The Micro, Small and Medium enterprises have performed remarkably well in recent times and enabled the nation to reach
higher levels of industrial growth and diversification. Hence, the objectives of my research are as follows:

1. To analyse the financial performance of two entities: Pushpsons Industries Limited and Sueryaa Knitwear Limited
based on certain financial ratios for a period of 5 years (F.Y. 2014-15 to F.Y.2018-19)

2. To identify areas where such entities have potential for growth and diversification.
 RESEARCH METHODOLOGY

Type of Research Type of Data

Descriptive Research Secondary Data has been collected from the

official websites of the two companies and the
Ministry of Micro, Small and Medium
Enterprises

Sampling Technique and Sample Size Tools and Techniques used

Convenient Sampling has been used to form a Ratio Analysis has been used to analyse the
sample of 2 companies : Pushpsons Industries performance of the companies for a period of 5
Limited & Sueryaa Knitwear Limited years. (F.Y. 2014-15 to F.Y. 2018-19)
 RESEARCH METHODOLOGY

The financial performance of two entities has been measured and analyzed using Financial Ratio Analysis
for a period of 5 years from F.Y. 2014-15 to F.Y. 2018-19.

 Pushpsons Industries Limited is a New Delhi based company, directly engaged in the exports and
manufacturing of floor coverings and home furnishings.

 Sueryaa Knitwear Limited is a Punjab based company engaged in the manufacturing and import of all
kinds of textile fabrics and yarns.
 RATIO ANALYSIS FOR PUSHPSONS INDUSTRIES LIMITED

LIQUIDITY RATIOS

Particulars F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19

Current Assets (A) 1,79,28,072 1,96,14,682 1,94,11,893 2,05,97,260 1,50,37,998

Current Liabilities (B) 21,64,281 21,08,262 7,10,758 92,63,789 12,12,833

Current Ratio (A/B) 8.28 9.30 27.31 2.22 12.40
Inventory (C) 49,93,020 45,66,896 33,04,929 29,83,032 16,88,166
Liquid Assets (D= A-C) 1,29,35,052 1,50,47,786 1,61,06,964 1,76,14,228 1,33,49,832
Quick Ratio (D/B) 5.98 7.14 22.66 1.90 11.01
Source : Annual Report F.Y. 2018-19, Pushpsons Industries Limited
30.00
30.00
25.00
25.00
20.00
20.00
15.00
15.00 Current Ratio
Quick Ratio 10.00
10.00
5.00
5.00
-
- 14-15 15-16 16-17 17-18 18-19
14-15 15-16 16-17 17-18 18-19
Current Ratio Quick Ratio
SOLVENCY RATIOS

Particulars F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19
Net Profit (A) 13,85,137 5,79,273 88,059 (25,375) 17,69,069
Depreciation (B) 11,27,922 11,14,311 11,14,312 9,27,690 7,53,436
(C=A+B) 25,13,059 16,93,584 12,02,371 9,02,315 25,22,505
Short Term Liabilities 21,64,281 21,08,262 7,10,758 92,63,789 12,12,833
Long Term Liabilities 80,00,000 83,32,000 83,93,059 4,16,888 4,68,073
(F=D+E) 1,01,64,281 1,04,40,262 91,03,817 96,80,677 16,80,906
Solvency Ratio (C/F) 24.72% 16.22% 13.21% 9.32% 150.07%
Source : Annual Report F.Y. 2018-19, Pushpsons Industries Limited

160.00%
140.00%
120.00%
100.00%
80.00% Solvency Ratio
60.00%
40.00%
20.00%
0.00%
14-15 15-16 16-17 17-18 18-19
PROFITABILITY RATIOS

Particulars F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19

Net Profit after Tax (A) 13,85,137 5,79,273 88,059 (25,375) 17,69,069
Sales Income (B) 2,73,42,385 2,35,19,437 2,10,57,428 2,36,98,504 2,56,21,135
Net Profit Margin (A/B*100) 5.07% 2.46% 0.42% (0.11%) 6.90%

Total Assets (C) 4,45,80,828 4,51,63,526 4,39,18,927 4,45,29,831 3,82,78,759

Return on Assets (A/C*100) 3.11% 1.28% 0.20% (0.06%) 4.62%

Earning per Share (D) 0.30 0.13 0.01 0.01 0.38

Source : Annual Report F.Y. 2018-19, Pushpsons Industries Limited

45.00%
40.00%
35.00%
30.00%
25.00% Net Profit Margin
20.00% Return on Assets
15.00% EPS
10.00%
5.00%
0.00%
-5.00% 14-15 15-16 16-17 17-18 18-19
ASSET MANAGEMENT RATIOS

Particulars F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19
Inventory at Beginning (A) 40,39,182 49,93,030 45,66,896 33,04,929 29,83,032
Inventory at End (B) 49,93,020 45,66,896 33,04,929 29,83,032 16,88,166
Average Inventory [C=(A+B)/2] 45,16,101 47,79,958 39,35,913 31,43,981 23,35,599
Sales Income (D) 2,73,42,385 2,35,19,437 2,10,57,428 2,36,98,504 2,56,21,135
Inventory Turnover Ratio(D/C) 6.05 times 4.92 times 5.35 times 7.54 times 10.97 times
Total Assets (E) 4,45,80,828 4,51,63,526 4,39,18,927 4,45,29,831 3,82,78,759
Total Assets Turnover Ratio (D/E) 0.61 times 0.52 times 0.48 times 0.53 times 0.67 times
Source : Annual Report F.Y. 2018-19, Pushpsons Industries Limited

12.00 0.80
0.70
10.00
0.60
8.00 0.50
6.00 Inventory Turnover Ra- 0.40 Total Assets Turnover
tio Ratio
0.30
4.00
0.20
2.00 0.10
0.00 0.00
14-15 15-16 16-17 17-18 18-19 14-15 15-16 16-17 17-18 18-19
 RATIO ANALYSIS FOR SUERYAA KNITWEAR LIMITED

LIQUIDITY RATIOS

Particulars F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19

Current Assets (A) 2,76,00,000 2,85,40,920 2,17,16,287 3,18,98,755 1,34,94,406

Current Liabilities (B) 21,00,000 79,22,317 9,51,650 1,49,23,270 23,600

Current Ratio (A/B) 13.14 3.6 22.82 2.14 571.79
Inventory (C) 1,10,00,000 1,37,93,114 33,69,600 84,07,933 38,91,703
Liquid Assets (D= A-C) 1,66,00,000 1,47,47,806 1,83,46,687 2,34,90,822 96,02,703

Quick Ratio (D/B) 7.90 1.86 19.28 1.57 406.89

Source : Annual Report F.Y. 2018-19, Sueryaa Knitwear Limited

700 700
600 600
500 500
400
400
Current Ratio 300
300 Quick Ratio
200
200
100
100 0
14-15 15-16 16-17 17-18 18-19
0
14-15 15-16 16-17 17-18 18-19
Current Ratio Quick Ratio
SOLVENCY RATIOS

Particulars F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19

Net Profit (A) 5,00,000 1,43,116 (4,99,399) (10,06,417) (42,43,514)

Depreciation (B) 19,00,000 12,56,582 12,58,717 9,00,600 3,32,959
(C=A+B) 24,00,000 13,99,698 7,59,318 (1,05,817) (39,10,555)
Short Term Liabilities (D) 21,00,000 79,22,317 9,51,650 1,49,23,270 23,600
Long Term Liabilities (E) 83,00,000 30,81,346 6,30,793 1,50,686 12,06,375
(F=D+E) 1,04,00,000 1,10,03,663 15,82,443 1,50,73,956 12,29,975
Solvency Ratio (C/F) 23.08% 12.72% 47.98% (0.70%) (317.94%)

Source : Annual Report F.Y. 2018-19, Sueryaa Knitwear Limited

100.00%
50.00%
0.00%
14-15 15-16 16-17 17-18 18-19
-50.00%
-100.00%
Solvency Ratio
-150.00%
-200.00%
-250.00%
-300.00%
-350.00%
PROFITABILITY RATIOS

Particulars F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19

Net Profit after Tax (A) 5,00,000 1,43,116 (4,99,399) (10,06,417) (42,43,514)
Sales Income (B) 5,94,00,000 3,46,22,865 3,96,76,826 3,59,16,501 61,94,958
Net Profit Margin (A/B*100) 0.84% 0.41% (1.26%) (2.8%) (68.5%)
Total Assets (C) 2,55,00,000 4,10,45,318 3,15,90,700 4,45,45,702 2,67,27,144
Return on Assets (A/C*100) 1.96% 0.35% (1.58%) (2.26%) (15.88%)
Earning per Share (D) 0.16 0.04 (0.19) (0.39) (1.63)
Source : Annual Report F.Y. 2018-19, Sueryaa Knitwear Limited

50.00%

0.00%
14-15 15-16 16-17 17-18 18-19

-50.00% Net Profit Margin

Return on Assets
-100.00% EPS

-150.00%

-200.00%
ASSET MANAGEMENT RATIOS

Particulars F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19
Inventory at Beginning (A) 95,30,000 1,10,00,000 1,37,93,114 33,69,300 84,07,933
Inventory at End (B) 1,10,00,000 1,37,93,114 33,69,300 84,07,933 38,91,703
Average Inventory [C=(A+B)/2] 1,02,65,000 1,23,96,557 85,81,207 58,88,616 61,49,818
Sales Income (D) 5,94,00,000 3,46,22,865 3,96,76,826 3,59,16,501 61,94,958
Inventory Turnover Ratio(D/C) 5.79 times 2.79 times 4.62 times 6.09 times 1.01 times
Total Assets (E) 2,55,00,000 4,10,45,318 3,15,90,700 4,45,45,702 2,67,27,144
Total Assets Turnover Ratio (D/E) 2.33 times 0.84 times 1.26 times 0.81 times 0.23 times
Source : Annual Report F.Y. 2018-19, Sueryaa Knitwear Limited

7 2.5
6
2
5
1.5
4
Inventory Turnover Ra- Total Assets
3 tio 1 Turnover Ratio
2 0.5
1
0
0 14-15 15-16 16-17 17-18 18-19
14-15 15-16 16-17 17-18 18-19
 KEY ANALYSIS AND FINDINGS

Both companies Excessively high Issue of delayed Absence of modern Profitability levels for
have low Total Current ratios payments from technology restricts both companies have
Assets Turnover indicate that these vendors leads to the growth of MSMEs been erratic over the
Ratio indicating companies might be stress in credit flow due to underutilization period of 5 years.
they have scope missing out on and in turn of resources. Making Improved
for better Asset productive adversely affects available modern infrastructural support
Management and opportunities and the receivables technology could and access to markets
optimization of more profitable position of the assist in improving can enable consistent
assets. investment options. companies. Inventory Turnover. performance.
 CONCLUSION

In India, MSME sector is providing balanced development to the society and helping in eradicating regional imbalances across
the nation. In order to sustain this contribution, this sector needs to be nurtured. It should be established that MSME policies are
to be framed for attaining socio-economic development in terms of social equality and employment along with individual
aspirations.

For this sector to fully utilize its potential, the combined efforts of the entrepreneurs and the Government are required. It is
completely evident that the economic well being of India depends largely on the growth of this sector. Hence, it is essential to
nurture this sector so that it can nurture the Indian economy.
 
 RECOMMENDATIONS

The MSME sector is one of the most crucial factors in Indian economy. This sector has emerged as a vital and dynamic sector by
virtue of its increasing contribution to the National GDP, employment generation potential and increasing share in exports of the
country. In consideration of its potential, recommendations are as follows:
 

 Uplifting of barriers and promotion of a free environment for these enterprises to earn foreign exchange could help them contribute
significantly to economic growth.

 Integration into the global supply chain can enhance productivity of such medium enterprises.

 Growth and diversification into the field of Information Communication Technologies can provide greater recognition to this sector.

 Globalization of commerce and transformation in economical environment through WTO agreement can help MSMEs to flourish.
THANK YOU