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CHAPTER-I
INTRODUCTION OF THE STUDY

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1.1 INTRODUCTION

Finance is an integral part of modern economic life and occupies and important place in all
economic activities. Financial is the science of money and life blood of industrial system.
Finance management us that managerial activities which is concerned with the planning and
controlling of the forms financial management is in its fancy dealt with the financing of
corporate enterprises. Its evaluation may be dividends in the two broad phases that is the
traditional phase and the modern phase. Its scope was treated in the narrow scne of procurement
of funds by corporate enterprises to meet their financing needs. Because of its central emphasis
on the procurement of funds.

Thus the field of study dealing with the finance was treated as encompassing their
interrelated aspects of raising and administration resources from outside.
Financial management is the management activity which is concerned with the planning
and controlling of firms financial resource. As a separate activity of discipline it is recent origin.
It was a branch of Economics till 1890. It has no unique of knowledge of it own and draws
heavily on economics for it theoretical concepts.

The subject of Financial Management is of immense to both academicians and practicing

managers. It is of great interest to academicians because subject is still developing and there are
still certain areas where a controversy exists for which unanimous solutions have been reached as
yet. Practicing managers are interested in this subject because among the crucial decisions of the
firm are those which related to finance and understanding of the theory of financial management
provides them with conceptual and analytical insight to make those decisions skillfully.

Finance is regarded the life blood of a business enterprise. This is because in the modern
money oriented economy. Finance in one if the basic foundations of all kinds of economic
activities. It is the master key, which provides access to all the sources for being employed in
manufacturing activities. It has been rightly said that business needs money to make more
money. Finance is the science of money and life blood of industrial system. Hence, efficient
management of its finances.

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DEFINITIONS
According to Prof. Bradley
Financial Management is the area of business management, devoted to a judicious use
of capital and careful selection of sources of capital in order to enable a spending unit to move in
the direction of reaching its goals

According to Colin Brooks

Bad production management and sales management of slain their hundreds but faulty
finance has slain its thousands. The financial manager pays a crucial role in utilizing the
resources in a most profitable manner.

Financial analysis
Financial statements provide a summarized view of the financial position and operations of
the firm. The analysis is the process of selection relation and evaluation. The analysis of the
financial statements is the process of evaluating relationship between component part of financial
statements to obtain a better understanding of the firms position and performance. There are
three steps involved in financial analysis.
To select the information relevant to the decision under consideration from the total
information contained in the financial statement.
To arrange the information in a way to highlight significant relationship.
The final step is the interpretation and dewing of inferences and conclusion.

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FINANCE FUNCTIONS:

Although it may be difficult to separate the finance functions from production marketing
and other functions. Yet the functions themselves can be readily identified. The functions of
raising funds investing them in assets and distributing return earn from assets to shareholders are
respectively know as financing investment and dividend decision while perfuming these
functions a firms attempts to balance cash inflows. This is called liquidity decision and we add it
to the list of important financial decision include.
Investment of long term assets mix decision
Financing are capital mixed decision
Dividend or profit allocation decision
Liquidity or short term mixed decision
A firm performs finance functions simultaneously and continuously in the normal course of the
business. They do not necessarily occur in a sequence. Finance function call for skillful planning
control and executive of affirms activities.

Investment Decision:

Investment decision or capital budgeting involves the decision of allocation of capital of

commitment of funds to long term assets. Which would yield benefits in future? Its one very
significance aspect is the task of measuring the prospective profitability of new investment.
Future benefits see difficult to measure and can not be predicted with certainty. Because of the
uncertain future. Capital budgeting decision involves risk. Besides the decision of recommitting
funds an assets becomes profitable or non profitable.

Financing Decision:
Financing Decision is the second important function to be performed by the financial
manager. Broadly he must decide when where and how to acquire funds to meet the firms
investment needs. The central issue before him is to determine the proportion of equity is known

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as the firms capital structure. The financial manager must strive to obtain the best financing mix
of the optimum capital structure of his firm.

Dividend Decision:
Dividend Decision is the third major financial decision. The financial manager must
decide whether their firm should distribute all profit or retain them or distribute a portion and
retain the balance. Like the debt policy the dividend policy should be determined in terms of its
impact on the shareholders value. The optimum dividend policy is as which is maximized
determines the optimum dividend payout ratio.

Liquidity Decision:
Current assets management which affects a firms liquidity is another important finance
function it addition ton the management of long term assets. Current assets should be managed
efficiency for safe guarding the firms against the dangers of liquidity and risk. A conflict exists
between profitability and liquidity while managing current assets. If the firm does not invert
sufficient funds in current assets would not earn anything. Thus proper trade off must be
achieved between profitability and liquidity. In order to ensure that neither in sufficient nor
unnecessary funds are invested in current assets.
The financial manager should develop sound techniques of managing current assets. He
should estimate firms needs for current assets and make sure the funds would be made available
when needed.

TYPES OF FINANCIAL ANALYSIS

The financial analysis can be classified into two types. They are as follows:

Horizontal analysis
In case of this type of analysis, financial statements for number of years are reviewed and
analyzed. The current year figures are compared with the standard or base year.
Vertical analysis
In case of this type of analysis a study is made of the quantities relationship of various
terms in the financial statements on a particular data.

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SCOPE OF FINANCIAL MANAGEMENT
Financial Management, as an academic discipline, has under gone significant changes
over year as regards are scope and coverage. In order to have a better exposition to these
changes, it will be approach to study both traditional approach and the modern.
Traditional approach
The traditional concept of financial management included with in its scope the whole
gamut management had also a limited role to perform. He was expected keep accurate financial
records prepare reports on the corporations status and performance and manage cash in a way
that the corporation is I apposition to pay its bills time.
Modern approach
The traditional approach outlived its utility due to charged business situation since mid
1959s technological improvements widened marketing operations, development of a strong
corporate structure keen to make optimum use of available financial resources for continued
survival.The scope of financial management increased with the introduction of capital budgeting
techniques. As a result if new methods and techniques, capital investments projects led to
framework for efficient allocation of capital with in the firm also. During the next two decades
various pricing medals valuation models and investment portfolio theories also developed. These
environmental changes enlarged the scope of finance.In this sense the central issue of financial
policy so the use of funds and the central process involved is a rational matching of advantages
of potential uses against the cost of alternative potential uses.Funds requirement
decisionfinancingdecision,investment decision, and dividend decision. These are the scope of
financial management.

OBJECTIVES OF FINANCIAL MANAGEMENT

Basic objectives
Traditionally the basic objectives of financial management are the maintained of liquid
assets and maximization of profitability of the firm. Maintenance of liquid assets means that the
firms have adequate cash in hand to meet its obligations at all times.

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Other objectives
The following are the other objectives
Ensuring a fair return to share holders.
Building up reserves for growth and expansion.
Ensuring maximum operational efficient and effective utilization of finance.

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 1.2 NEED FOR THE STUDY

It is a part and parcel for every management student to obtain a practical knowledge on
concept of finance.
To acquire comprehensive skills in financial analysis.
To learn the Ratio analysis and its practical use in organization.
It is also need for the student to do a project as a part of the fulfillment of masters
degree.
The study has significance as it provides information to various parties who directly or
indirectly interact with the company.

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 1.3 OBJECTIVES OF THE STUDY

To study the profile of the Vamsadhara Paper Mills Limited (VPML) and highlights of its
performance.
To study the financial performance of the VPML with the help of Ratio analysis.
To study the impact of the reforms on long-term and short-term financial position through
Ratio Analysis
Finally to suggest measures required for long- term sustainability.

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 1.4 METHODOLOGY OF THE STUDY
Methodology is a systematic procedure of collecting information in order to analysis. The
collection of information has been done by two principle sources.
Primary data: It is the information collected directly for accounts and financial departments
through personnel observation and certain data was collected.
Secondary data: The data was collected through companys annual reports and other published
data.

PRESENTATION OF THE STUDY:

The out come of the study is in the form of this published book entitled RATIO
ANALYSIS IN VAMSHADHARA PAPER MILLS LTDwhich has five chapters in which the
information is resented.

The first chapter being INTRODUCTION in which a brief up need of this projective
works, methodology followed, objectives and limitations of this project work and presentation of
this project study are present.

The second chapter being INDUSTRY PROFILE AND COMPANYPROFILE in which

brief studies of VAMSHADHARA PAPER MILLS LTD.

The third chapter being THEORETICAL FRAME WORK OF RATIO ANALYSIS

consists of types of ratios, and discussed all the ratios.

The fourth chapter consists of FINANCIAL PERFORMANCE OF THE

ORGANIZATION through RATIO ANALYSIS was presented by graphical representation with
interpretation.

The fifth chapter consists of Summary, Importance of Ratio Analysis, Findings,

Suggestions and Bibliography.
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 1.5 LIMITATIONS OF THE STUDY

The main source of information is the published annual reports which are not sufficient to
make a proper study.
Working Capital indicates only the present working capital position, but does not predict
the future working capital requirements exactly.
Due to the time constraints it is difficult to study the performance of a big size
organization of VPML.
Comparison of the firms financial performance with any other organization is not
possible in the financial statements the financial statements of other organization are not
available in the organization under study.
The study is also subject to the limitations of Balance Sheet and Profit and Loss Account.
Time is limited factor since six weeks period is not enough for in depth study.

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 1.6 CHAPTERIZATION OF THE PROJECT

The project work titled A Study on Ratio Analysis - with reference to vamshadhara
paper mill (Pvt )Ltd, Madapamin divided in to six chapters.

The first chapter i.e. Introduction has been divided in to 6 sub-chapters i.e. Introduction,
Need for the study, Objectives of the study, Methodology, Limitations and chapterization.
The second chapter deals with Review of Literature related with the topic.

The third chapter deals with the Industry Profile where the emphasis has laid on Industry
Scenario, Future focus, Government Policy, Major players etc. and in Company Profile the
emphasis has laid on Vision and Mission, Future Plans and Functional Profile etc.

The fourth chapter deals with the Theoretical Framework which laid emphasis on the
theoretical aspects of employee welfare measures.

The fifth chapter deals with Data analysis and Interpretation. The sixth chapter deals with
Summary, Findings and Suggestions followed with Bibliography and Annexure.

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 Chapter-II
REVIEW OF LITERATURE

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 2. REVIEW OF LITERATURE

Financial ratios are important to analysts due to conquer the little meaning of typically

numbers. Thus, ratios are intended to provide meaningful relationship between individual values

in the financial statement (Reilly, Brown, 2006). Because the major financial statement report

numerous individual items, it is possible to produce a vast number of potential ratios, many

which will have little value.

A single number from a financial statement is of little use, an individual financial ratio

has a little value except in relation to comparable ratios for other entities. That is, only relative

financial ratios are relevant. A firms performance relative can be compared by the aggregate

economy; or by its industries; or by its past performance (Reilly, Brown, 2006).

Ho and Zhu (2004):

have reported that the evaluation of a companys performance has been focusing the
operational effectiveness and efficiency, which might influence the companys survival directly.
Furthermore, Gopinathan (2009) has presented that the financial ratios analysis can spot better
investment options for investors as the ratio analysis measures various aspects of the
performance and analyzes fundamentals of a company or an institution. Andrew and Schmidgall
(1993) in their study classified financial ratios into five categories liquidity ratios, solvency
ratios, activity ratios, profitability ratios, and operating ratios. They indicated that financial
ratios themselves do not provide valuable information about a firms performance, Andrew
(1993) in his study conducted on automobile industry investigated the leverage ratio of
companies and suggested that a value-maximizing capital structure. Hitchings (1999), in his
study realized that ratio analysis is a sensitive and valuable tool in credit assessment which is to
forecast the ability of a borrower to meet its debt obligations.
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Zopounidis (2000):

in his study proposed methodological framework based on financial ratio analyses for
estimating small and medium size enterprises performance, Hsieh and Wang (2001) in their study
examined and stressed the need of selecting relevant financial ratios for the purpose of analysis.
They proposed new approach for finding useful financial ratio and also emphasized that industry
differs in product, in size and have its own unique business practices and internal and external
environment thus financial ratio analysis should be according to industry which suit it the most.
Dr. Sugan C.Jain (2002) in his study examined the performance of automobile industry. He used
composite index approach to analyze the operational efficiency and profitability and suggested to
strengthening the soundness, profitability improvisation, working capital and in the performance
of fixed assets.

Harrision (2003):

conducted study and argued that financial ratio analyses are very useful. During his study
he found that financial ratios analysis are also effective in automobile industry, it guide
governing body to determine effective and efficient strategies and identify the weak areas which
need attention.

Chen and Shimerda (1981):

in their study noted that there are 41 different financial ratios which were earlier used
sufficiently in studies and conclude that it is difficult to select ratio with the approximate and
absolute factors loading as the representative financial ratio for the observed factors.

Virtanen and Yli-Olli (1989):

in their study tested the temporal behavior of financial ratio distributions and found that
business cycle affects the cross sectional financial ratio distributions.

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Tippett (1990):

in his study examined models financial ratio in terms of stochastic processes and reveled
that in general inference normality will be the exception rather than the rule.

Khan and Zuberi (1999):

Being considered as bed-rock of security analyzing investment, fundamental analysis
plays an extremely crucial role to analysts. This is top-ranking and indispensable method in share
analyzing investment. Hence, this can be a fairly solid base, on which we can make investing
decisions effectively. There are approximately 90% investors using fundamental analysis.

Warrant Edward Buffett:

who made most of money from investment; he is an excellent example of successful
people of fundamental analysis. His analysis focused on the simplicity of the business, the
consistency of its operating history, the attractiveness of its long-term prospects, the quality of
management, and the firms capacity to create value.
The main goal of fundamental analysis is identifying the weaknesses of the market during
the formation of market share price, through elaborating the amount of deviation of the market
price of shares relative to the real-intrinsic value of shares. (Banchuenvijit, 2008).
Fundamental analysis research has involved testing the ability of fundamental signals to
predict either future earnings or stock returns. In addition, it tests for other contextual factors
such as the state of the economy or industry that may affect the prediction of future earnings or
stock returns (Seng, 2011)

Richardson (2006):
fundamental analysis is based upon constructing highquality estimates of the parameters in the
valuation model, which can be written in the following three mathematically equivalent forms:
the discounted dividend model, the free cash flow model, and the residual income model.
Fundamental analysis involves the use of current and past financial statements in conjunction

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with industry and economic data in order to determine firms intrinsic value and identify
mispriced securities (Kothari, 2011)
Galyadkina, Gerasimova andBykovsky (2011):
the factors will be analyzed, which should be taken into account on every step while
carrying out the fundamental analysis of a company, and also look at the steps of potential
investor, who wants to create an attractive portfolio of stocks. Scientists usually highlight two
basic approaches of the way of carrying out fundamental analysis: traditional Top-Down
Approach to Investing and alternative Bottom-Up Approach to Investing. Traditional
approach starts with macroeconomic analysis, continues with the analysis of the branch of the
economy and finishes with the analysis of a company performance. Contrary to it, an alternative
analysis means starting from the micro level and finishing with the analysis of economic
situation in the country. Fundamental question in accounting is the relative ability of accrual-
based earnings and cash flows to predict a firms ability to generate future cash flows by

K.R Subramanyam and Venkatachalam (2007):

contribute to this important debate by examining the relative ability of earnings and cash flows
in explaining ex post intrinsic value of equity. They determine ex post intrinsic values using the
dividend discount model.

Kim and Doyoun (2010):

was determine the intrinsic value by used Discount Cash Flow model and free cash flows of the
firm were projected and discounted to the present value at the decent discount rate calculated
through cost of capital. By adding up discounted free cash flows, the firm value of Jinro was
reckoned, and by subtracting debt amount, the value of equity portion was gathered. Through
dividing the equity value by the number of outstanding share, the final intrinsic value of each
share was determined. This paper examines how well the Firm-Foundation Theory predicts the
price.

Goodman, Neamtiu and Zhang (2011):

they investigate whether fundamental accounting signals can predict extreme stock price
movements and whether such information is appropriately priced by the option market. Elleuch

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(2009), he examine whether a simple fundamental analysis strategy based on historical
accounting information can predict stock returns.

His goal is to that simple screens based on historical financial signals can shift the
distribution of return earned by an investment by separating eventual winner stock from losers.

Seng and Hancook (2011):

They investigate how detailed financial statement data enter the decision of market
makers by examining how current changes in the fundamental signals chosen can provide
information on subsequent earnings changes. They extend the body of research using
fundamental signals for predict future of earning change. The result shown that detail of finance
signal has relationship for the prediction of earning and stock return. Fundamental signals are
significant predictor of both short and long-term future earnings change.

Garood and Rees (1999):

used the four fundamental variables of stockholders rights, net income, dividend, and
stock price to explain and forecast changes in incomes. The variables that were compared with
rights of stockholders showed considerable potential to explain the changes in the net incomes of
next two years.
Fundamental analysis can be regarded as one of the effective tools to predict changes in
stock price (Sarikhani andZEbrahimi, 2011).

Sarikhani and Ebrahimi (2011):

the use of fundamental analysis can be regarded as one of the effective tools to predict
changes in stock prices. The residual income model is considered among the effective models for
fundamental analysi

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 CHAPTER III
VAMSHADHARA PAPER MILL PVT LTD
-AN OVERVIEW

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3.1 INDUSTRY PROFILE

3.1.1 INTRODUCTION TO PAPER INDUSTRY:

It is fact that paper is inevitable for the development of human race, and the economy of country.
Hence the paper industry of any country plays vital role. In this chapter how the present material
form of paper has come in to existence, how they worked paper industry is, the role of Indian
paper industry and that of Tamilnadu are explained. The origin of paper goes to the early
Egyptian civilization. The Egyptians used the stalks of the papyrus plant to manufacture a
material resembling paper. Several changes have been made and many new materials have been
used in the paper making process, but base of most papers is still fiber form plant.
HISTRICAL DEVELOPMENT OFPAPER INDUSTRY IN THE WORLD
Paper making can be traced to about 105 AD, when TSai Lun, an official in the imperial court of
China created a sheet of paper using mulberry and other bast fibres along with fishnets,old rags
and hemp
waste.In its slow travel westward, the art of papermaking reached Samarkand, in central asia, in
751 AD and in 793 ADthe first paper was made in Baghdad during the time of Harunat-Rashid,
with the golden age of 10thcentury, Arabians substituted linen fibres and bamboo to create finer
sheet of paper. By 12thcentury, paper making reached Europe. Johannes Gutenberg invented
printing machine in 1448 which led to rapid increase in demand of paper. The first successful
paper machine was built by JLN Robert in 1798. Thereafter, papermaking underwent
revolutionary changes, when several major pulping processes were gradually developed, which
relieved paper industry of its crucial dependence upon cotton and linen rags. The origin and
development of paper industry is segregated in five stages and presented.
PAPER INDUSTRY DEVELOPMENTAL PHASES
Phase Period covered Development Process First 1800-1860
Mechanization rage preparation, use of filler, pulp beating and paper machine Second1840-
1880
Industrial scale rage substitute (ground wood/chemical pulp)
Appropriate pulp mills were developed Third 1860-1950
Enlargement of web width - 85 to 770cm
Increase in production speed - 5 m pm to 500mpm

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Introduction of electric drive
Machines to produce particular type of paper Fourth1950-1980
Further increase in web width and working speed, use of new materials (TMP, dinked paper,
new filler, chemicals and dyes), new sheet forming (twin wire formers) etc. Fifth 1980 onwards
Leads into future
Evolution of new sheet forming principles and chemical pulp processes 69
VARIOUS PAPER PRODUCTS:

TYPES OF PAPERS PRODUCED IN PAPER INDUSTRY

There are different types and grades of paper for different uses, which are often reflected in their
names. Coated text and cover are used for the majority of four-color printing. Uncoated text and
cover are also used regularly. Bond, book, offset, label, index, and news-print are some of the
other grades used commercially. Paper choice can make a major difference in the appearance of
the finished job. A dull or plain design can be perked up with an exciting color or texture.

a)Coated Papers
It is best suited for higher-quality jobs. Coated papers may be gloss-coated, dull-coated,
machine-coated, and cast-coated on one or both sides. Printing ink does not soak into a coated
sheet as much as it does with an uncoated paper. So, coated papers can make halftones and color
images look richer. Coated papers are associated with corporate capability brochures and annual
reports. Since coated papers come in several grades and prices, user should not have to shy away
from using them.Today, more and more coated papers are recycled, which also lowers their costs.

b)Uncoated Papers
Uncoated papers are also known as text. These papers can be excellent sheets for printing. Some
uncoated papers are so smooth that it's hard to tell that they're not coated. Uncoated papers are
manufactured in many textures and colors. Uncoated papers are used for halftones, when the
designer is trying to achieve a certain effect or look.

c)Bond

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It is often used for stationery. It takes ink wellfrom a laser printer or a pen. Part of this
absorbency comes from the paper's rag content, which is the percentage of cotton fiber in a sheet
of bond. Twenty five per cent or 50 percent is the usual amount added.

d)Note Book Paper

It is used, for books and textbooks. These papers come in antique or smooth finishes. They also
come in many weight so that a book can be bulked up or down.

e)Offset Papers
It is similar to the coated and uncoated sheets. It resis ts the moisture that occurs in offset
printing.
f)Index Papers
It is stiff. It takes writing ink well. Index papers are less expensive than cover grades. Index
papers are used for cards or tabs and are also used in place of the more expensive cover stocks.
They come in a smooth or vellum finish.

g)Newsprint Papers
As their name suggests, they are used for newspapers. The sheets are not as white as other
papers. Ink tends to soak into them. Being relatively inexpensive, newsprint is ideal forthe large
volumes of paper that modern newspapers need.

h)Computer Paper
This is the general term used to describe paper used in a computer. It can also refer to paper used
with a copier or for alaser printer. Although the fan-fold paper was probably the Copier Paper,
or just plain bond paper. This is because of the move from the dot-matrix printer to the laser and
inkjet printers. If so, take a look below for some valuable information that may help you in your
search.

i)Copier Paper

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 It is standard paper used for copies. It is 20 per grams square meter, thin and somewhat
transparent. Copier Paper has many different properties that affect the quality of the copies.
White Point - Contrast is a key element between the toner and the paper. The whiter the paper the
better your copies, Texture- The smoother the paper, the better the toner transfers to it. Smoother
paper gives sharper copies and better fills. Smooth paper, however, can sometimes be difficult to
feed.

j)Coating Coating paper

needs some type of clay or dust coating to help the paper separate and feed it. Most copier paper
will have some type of indicator to show which side should be copied on.

k)Gloss Paper
It is ideal for photographic images, posters and printing of graphic designs. Matte Paper-is a high
resolution bright white coated paper. Ideal is for everyday printing and it features superior drying
properties.

l)Picture Paper
It is water resistant. It dries spontaneously for easy handling. This inkjet paper, in the popular 4"
x 6" format, is ideal for consumer use.

m)Inkjet Paper If the task is a printing of a document an email ormemo, plain copier paper will
work best. If color is important, then coated paper stock is preferred. Coated paper allows colors
to sharper than regular copier paper. A high level of coating allows for a high print resolution
from 600dpi -1440 dpi. There are many different types of paper available. But, only coated
papers designed specifically for inkjet printers, will give the highest quality output.

VARIOUS TYPES OF PAPER INDUSTRY

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a)Wood Based industry
Forest policy should be revised wish a view to raising plantation by
industry/Cooperatives of farmers/State Government.

b)Waste Paper based Industry

Introduction of ecolabeling system wherein products
made from recycled fibre, are rated higher than the products made from virgin fibre.

c)Agro Based Industry

Funds are made available for technology up-gradation for handling
and processing of agro residue fibre, in small andmedium scale industries.

WORLD PAPER INDUSTRY

Although modern inventions and engineering have transformed an ancient craft into a highly
technical industry, the basic operations in papermaking remain the same to this day. The steps in
the process are as follow
suspension of cellulose fibre is prepared by beating it in water, so that the fibres are
throughly separated and saturated with water;
The paper stock is filtered on a woven screen to form amatted sheet of fibre;
The wet sheet is pressed and compacted to squeeze out a large proportion of Water
The remaining water is removed by evaporation; and
Depending upon the use and requirements, the dry paper sheetis further
compressed,coated or impregnated.

The differences among various grades and types of paper are determined by the type of fibre or
pulp, the degree of beating, the addition of various materials to stock, formation conditions of the
sheet, including basisweight, or substance per unit are, and the physical or chemical treatment

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applied to the paper after its formation. Government has completely delicensed the paper
industry with effect from 17 thJuly, 1997. The entrepreneurs are now required to file an
Industrial Entrepreneur Memorandum with the Secretariat for Industrial Assistance for setting up
a new paper mill or substantial expansion of the existing mill in permissible locations.The new
millennium is going to be the millennium of knowledge. So demand for paper would go on
increasing in times to come. In view of paper industry'sstrategic role for the society and also for
the overall industrial growth, it is necessary that the paper industry performs well. The Paper
industry is a priority sector for foreign collaboration and foreign equity participation up to 100
percent receives automatic approval by Reserve Bank of India. Several fiscal incentives have
also been provided to the paper industry, particularly to those mills which are based on non-
conventional raw material. Global production of paper and paper board was around 350million
tons which contributes to about 3.5 percent of worlds Industrial production and 2 percentage of
worlds trade. India was ranked15thin the World in terms of paper and boards production
capacity. The world paper industry was growing at a CAGR (Compound Annual Growth Rate)

3.1.2 INDUSTRY SCENARIO

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 The Indian paper industry has been in existence for more than a decade. Today there are
more than 850 paper mills functioning all over the country. These industries manufacture various
types of paper materials required for different purposes. This industry is known to be one of the
leading industries in India as it provides employment to more than 1.5 million people.

The widespread demand for different types of paper products such as book, magazines,
newspapers, bags, plates, cups, envelopes and so forth has further escalated the growth of this
industry. But the lack of proper raw materials has affected the future of this thriving industry in
India. Large scale deforestation has led to the depletion of raw materials for the production of
paperproducts.

According to the type of raw materials used for production purposes, the paper industry in India
is classified into three categories which include the wood based, waste paper based and the agro
based industries. Most of the mills in India are based on raw materials which are non-
conventional such as waster paper. Today the paper industry in India is in search of
technologically advanced methods to reduce the cost of production and augment the existing
technologies to meet the international standard levels. The government of India has introduced
various rules and regulations to encourage joint ventures and investments in this field.

Current Scenario
The strong demand of paper products has pushed the Indian paper industry to a new level. It is
expanding to meet the growing demands of the people. Vast changes have taken place in the field
of printing paper, tissues, newsprint and so forth. Modern management along with latest
technological machines is used for the completion of various projects. Nowadays, foreign
investors are interested in setting up new plants for manufacturing paper to bring forth huge
revenue to the paper industry.

The paper industry is planning to widen its horizons with the help of joint ventures and new
investors. However, the paper industry is facing many challenges due to the shortage of raw
materials and the rise in population. The demand for industrial wood, fire wood and timber is
continuing to grow due to the ever increasing population. Challenges Faced by the Industry

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Some of the other challenges faced by this industry are the location of paper units. Most of the
paper units in the country are located in remote areas. The industry is quite unattractive to the
young generation as it is located away from the city and modern facilities.

3.1.3 GOVERNMENT POLICY

The industrial policy of a country, sometimes denoted IP, is its official strategic effort to
encourage the development and growth of part or all of the manufacturing sector as well as other
sectors of the economy. The government takes measures "aimed at improving the
competitiveness and capabilities of domestic firms and promoting structural transformation." A
country's infrastructure (transportation, telecommunications and energy industry) is a major part
of the manufacturing sector that often has a key role in IP.
Industrial policies are sector-specific, unlike broader macroeconomic policies. Examples of the
latter, which are horizontal, economy-wide policies, are tightening credit and taxing capital
gains. Traditional examples of industrial policy that involves vertical, sector-specific policies,
include protecting textiles from imports and subsidizing export industries. More contemporary
industrial policies include measures such as support for linkages between firms and support for

27 | P a g e
upstream technologies Industrial policies are interventionist measures typical of mixed economy
countries.
Many types of industrial policies contain common elements with other types of interventionist
practices such as trade policy and fiscal policy. An example of a typical industrial policy is
import-substitution-industrialization (ISI), where trade barriers are temporarily imposed on some
key sectors, such as manufacturing By selectively protecting certain industries, these industries
are given time to learn (learning by doing) and upgrade. Once competitive enough, these
restrictions are lifted to expose the selected industries to the international market

History
The traditional arguments for industrial policies go back as far as the 18th century. Prominent
early arguments in favor of selective protection of industries were contained in the 1791 Report
on the Subject of Manufactures of US economist and politician Alexander Hamilton, as well as
the work of German economist Friedrich List. List's views on free trade were in explicit
contradiction to those of Adam Smith, who, in The Wealth of Nations, said that "the most
advantageous method in which a landed nation can raise up artificers, manufacturers, and
merchants of its own is to grant the most perfect freedom of trade to the artificers, manufacturers,
and merchants of all other nations." The arguments of List and others were subsequently picked
up by scholars of early development economics such as Albert Hirschman and Alexander
Gerschenkron, who called for the selective promotion of key sectors in overcoming economic
backwardness.
The relationship between government and industry in the United States has never been a simple
one, and the labels used in categorizing these relationships at different times are often misleading
if not false. In the early nineteenth century, for example, "it is quite clear that the laissez faire
label is an inappropriate one." In the US, an industrial policy was explicitly presented for the first
time by the Jimmy Carter administration in August 1980, but it was subsequently dismantled
with the election of Ronald Reagan the following year.
Historically, there is a growing consensus that most developed countries, including United
Kingdom, United States, Germany and France, have intervened actively in their domestic
economy through industrial policies. These early examples are followed by interventionist ISI
strategies pursued in Latin American countries such as Brazil, Mexico or Argentina More
recently, the rapid growth of East Asian economies, or the newly industrialized countries (NICs),

28 | P a g e
has also been associated with active industrial policies that selectively promoted manufacturing
and facilitated technology transfer and industrial upgrading. The success of these state-directed
industrialization strategies are often attributed to developmental states and strong bureaucracies
such as the Japanese MITI. According to Princeton's Atul Kohli, the reason Japanese colonies
such as South Korea developed so rapidly and successfully was down to Japan exporting to its
colonies the same centralised state development that it had used to develop itself. Many of these
domestic policy choices, however, are now seen as detrimental to free trade and are hence
limited by various international agreements such as WTO, TRIM or TRIPS. Instead, the recent
focus for industrial policy has shifted towards the promotion of local business clusters and the
integration into global value chains.
During the Reagan administration, an economic development initiative called Project Socrates
was initiated to address US decline in ability to compete in world markets. Project Socrates,
directed by Michael Sekora, resulted in a computer-based competitive strategy system that was
made available to private industry and all other public and private institutions that impact
economic growth, competitiveness and trade policy. A key objective of Socrates was to utilize
advanced technology to enable US private institutions and public agencies to cooperate in the
development and execution of competitive strategies without violating existing laws or
compromising the spirit of "free market". President Reagan was satisfied that this objective was
fulfilled in the Socrates system. Through the advances of innovation age technology, Socrates
would provide "voluntary" but "systematic" coordination of resources across multiple "economic
system" institutions including industry clusters, financial service organizations, university
research facilities and government economic planning agencies. While the view of one president
and the Socrates team was that technology made it virtually possible for both to exist
simultaneously, the industrial policy vs. free market debate continued as later under the George
H. W. Bush administration, Socrates was labeled as industrial policy and de-funded.
Following the Financial Crisis of 2007-08, many countries around the world - including the
USA, the United Kingdom, Australia, Japan and most countries of the European Union - have
embraced industry policies. However contemporary industry policy generally accepts
globalisation as a given, and focuses less on the decline of older industries, and more on the
growth of emergent industries. It often involves government working collaboratively with
industry to respond to challenges and opportunities . China is one of the most prominent cases

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where the central and subnational governments still intervene in nearly all economic sectors and
processes.

3.1.4 MAJOR PLAYERS

MAJOR PLAYERS
The following are the of the paper units are major player in Tamilnadu

A)Tamil Nadu Newsprint and Papers Ltd.

B)Seshasayee Paper and Boards Ltd.,
C)Sun Paper Mill Ltd.
D)Subburaj Papers Ltd.

The particulars of operational efficiency and other details of such units are given in Annexure
part of this report.
ROLE OF PAPER INDUSTRY IN ECONOMIC DEVELOPMENT

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Paper industry is the second largest sector providing employment to 0.3 million directly and
about 1 million people indirectly. Industry turnover is 120 billion rupees and contributes about
2.3 percentage of overall Indian industrys output. Generally, the composition of Indian paper
industry is wood-based (35-40 percent) and non-wood based (60-65 percent). The wood based
industries are functioning under imported/indigenous hardwood/ softwood, bamboo and the non
wood based industries are classified as agro-residue based (functions under baggase and sabai
grass, Jute/rag, wheat straw) and waste paper based (imported/ indigenous waste paper,
corrugated/kraft waste paper, waste cuttings). The end products of paper industry are classified
under
(i) Cultural paper accounts for 44 percentage of total domestic demand. It consists of
writing and printing paper, office stationery, communication paper and specialty
paper such as cheques and currency papers. The demand is a function of the GDP, the
population, the literacy levels, and the standard of living.

(ii) Industrial paper accounts for 43 percentage the total demand in India. It consists of
kraft paper, pulp board and duplex board, and is used in packaging applications.
Demand depends on growth in industrial production, consumer durables, processed
food, and other kind of packaging. This segment is relatively price inelastic.

(iii) Newsprint accounts for 80 percentage of the output. It depends on the number of
newspapers, the size of the paper and the circulation. It has been placed under the
OGL which me s that newspaper companies are free to import any quantity of
newsprint. Large size mills (above50,000tpa) are reasonably modern and efficient but
design capacities of world paper machines are about 20-30 times the capacity of the
best Indian paper machines. Smaller size machines result in higher energy
consumption besides quality constraints. Quality benchmarking with international
standards improved technology are being used for cleaner, brighter and stronger
paper. High speed machines of more than 1000 mpm are not many in India. Paper
industry represents an important segment of the Indian economy. The Industry has
witnessed. A steady increase in installedcapacity and production over the decades.

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 The paperindustry in India is primarily tree-free as 62 per cent of the market iscatered
by paper products from non-conventional raw material like agro-waste,agro-resides
and recycled papers. The demand is estimated to be around 84.80 lakh tons in 2012-
2014 on the basis of growth rate of 6.5 per cent for the period 2007-08 to 2012-2014.
At present, there are about 400 mills in the country with an annual installed capacity
of about 51 lakh tons. They account for more than 5 per cent of the total installed
capacity and production. At present, the capacity utilization in the paper industry is
about 67 percent, as 125 paper mills particularly small mills are sick and are lying
closed. Several fiscal incentives have also been provided to the paper industry,
particularly to those mills which are based on non-conventional rawmaterial. Import
was 2.20 lakhs tons in 2009-10 and 3.05 lakhs tons in 2010-11. It is estimated to be
almost 4.20 lakh tons in 2011-12. About 70,000 tons of paper is exported per annum
mainly to the neigh bouring countries. India is the 10th largest industrialized sector in
the world and it accounts for Asias 4th largest economy. The GDP growth rate is
around 7 percent, one of the highest in the world and the GNP per capita is
Rs.21,9576 or GNP 22,834 billion rupees. The economy size contributed to US $ 600
billion, growing @ 6 percent for the last five years. The value of exports (2007-08) is
Rs.28,3605 crore and the values of Imports (2007-08) is Rs 34,6475. 99 3.6.3

CHAPTER III

3.2 COMPANY PROFILE

3.2.1 GENESIS AND GROWTH

Paper has played a vital role in the development of mankind, since time is
immemorial, as a means of communication, as the most versatile material for packaging of
goods, as a medium of preserving knowledge for progeny.

Paper is defined as A mat of cellulose fibers arranged in crises-cross fashion with

hydrogen bond and other forces.

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 Paper is derived from the word papyrus. Today, paper includes a wide range of
products with very different applications: communication, cultural, educational, artistic, hygienic
and sanitary as well as storage and transport of all kinds of goods. Its almost impossible to
imagine a life without paper.

There is a degree of consensus that the art of making paper was first discovered in China
and its origin in that country is traced back to 2nd century. In about A.D 105 Tsai-Lun, an
official attached to Imperial Court of China; created a sheet of paper using Mulberry and other
baste fibers along with fishnets, old rags and hemp waste.

EVOLUTION OF PAPER INDUSTRY

A courier named Tsai-Lun, from Lei-Yang in China, was the inventor of paper (not
papyrus) circa 105 A.D. However, the world paper is derived from the name of the reedy plant
papyrus, which grows abundantly along the Nile River in Egypt. Paper is made of pulped
cellulose fibers like wood, cotton or flax. Papyrus is made from the sliced sections of the flower
stem of the papyrus plant, pressed together and dried.

EVOLUTION OF PAPER

3000 BC

Of all the writing and drawing materials that people have employed down the ages, paper
is the most widely used around the world. Its name derives from the material used by the ancient
Egyptians, Greeks and Romans: papyrus. Papyrus, however, is one of those predecessors of
paper produced by beating or pressing. They are known by the generic term tapa and are
mostly made from the inner bark of paper mulberry, fig and Daphne.

Tapa is found extensively in nearly all cultures along the equator belt. The oldest
papermaking technique - and one still practiced at a few locations in the Himalayas and in South-

33 | P a g e
East Asia -leaves no doubt as to the origin of the tapa technique. Cooked baste is flattened with a
wooden to form a thin fibrous layer and then dissolved in a vat with water to make a pulp. A
screen consisting of a wooden frame with a fabric bottom is laid in a puddle or big basin and
floats with the fabric under the surface of the water.

The papermaker then pours the quantity of pulp needed to make one sheet into this
floating mould and spreads it evenly, by hand across the surface. The screen is carefully lifted
out of water and allowed to drain off. This technique has two basic drawbacks. Firstly, a separate
screen is needed for each new sheet, and is only available for use again after the last sheet has
dried. Moreover, an increase in production can soon lead to shortage of raw materials, since fresh
baste is not always available everywhere in the required quantity.

As recent findings of the oldest paper in Chinese tombs show, paper has been produced in
China ever since the last centuries before our time reckoning. The fibers normally used for
textiles, i.e., flax and hemp, also served as substitutes for baste. In late times, the wire was made
of fine bamboo sticks, which freed the papermaker of then need to let the paper dry naturally on
the wire, sine the poured or ladled sheet could be couched off.

1980 onwards

The fifth stage (from 1980 on) leads into the future. The evolution of new sheet-forming
principles (with fluid boundaries between paper and now-woven fabrics) and chemical pulp
processes, but also the situation on the global market (increased demand, above all in the Third
World, trends in chemical pulp pries, location problems) are again raising capital intensity and
encouraging the formation of big company groups with international operations.
Simultaneously, however, there are definite opportunities for smaller local firms satisfying
specific needs.

19th& 20th century

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 The history of the paper industry in the 19th and 20th centuries can be broken down into
five partly overlapping periods, each marked by definite trends.

In the first stage (from approximately 1800 to 1860), all work sequences previously
performed by hand were mechanized. This was true of rag preparation, the use of fillers, pulp
beating, the paper machine with its various parts, and the machines required for finishing the
paper (head box, wire section, press section, dryer section, units for reeling, smoothing and
packaging).

In the second stage (from approximately 1840 to 1880) efforts were made to obtain rag
substitutes on an industrial sale (Ground wood pulp and Chemical pulp) and the development of
appropriate industrial plants (Ground wood and Chemicals pulp mills).

The third stage (from approximately 1860 to 1950) was marked by the enlargement or the
web width, an increase in working speeds, the introduction of electric drive, further
improvements to various machine parts, the development of machines designed specifically for
the production of particular paper and broad grades (e.g. Yankee cylinder, multi-cylinder
machines).

Web working width grew from 85 cm (1830) to 770 m (1930), while production speeds
rose from 5m/min. (1820) to over 500m/min. (1930).

The fourth stage (1950 to 1980), which was still dependent on the old methods as far as
the mechanics were concerned - brought unprecedented changes in papermaking. Alongside
further increases in web width and working speeds, the changes included the use of new
materials (thermo mechanical pulp, de-inked recovered paper, new fillers, process chemicals and
dyes), new sheet forming options (e.g. by twin wire formers), neutral sizing, greater stress on
ecology (closed loops) and - most of all automation.

The operational impact of these changes is there for all to see: specialization in certain
paper types; development of new paper grades (LWC-light weight coated paper); corporate
mergers, company groups with their own raw material supply and trading organizations; shut
downs of unprofitable operations.

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INDIAN PAPER INDUSTRY

Indians were using Copper plates, Iron plates and for the purpose of writing, before paper
came into existence. Papermaking entered our country through Arabs as an art. This art was
restricted to Muslim families as a secret, at that time, which were mainly based and lived in
Kashmir and Punjab named Kagazius.

Nothing can be said about the First Paper Mill in India. But it was said that, William
Warvaty, in 1812 started the First Paper Mill at Sarampur, with the help of Kagazius. In 1832
four machines were installed and introduced in India. Royal Black Paper Mills started at Hubli
in 1870s and was merged in Telegram Paper Mills. Later the remaining paper mills are
established one by one.

The per capita paper consumption in India is only 3.62; it is inclusive of Newsprint Paper
consumption. According to this it is clear that, we are much backward in paper consumption that
compared to the some developed countries.

Paper Industry supplies various types of paper, paper boards and specially papers to a
number of end users, which includes Government, Education, Companies, Packing, Printing,
News Paper and Magazines etc. Use of paper and paper product is intimately linked with the
Cultural and Economic Development of a country.

The demand for paper depends on a number of intangible factors such as Population, National
Income; Growth of Literacy spread Education, Standard of Living and Industrial Production.

GLOBAL PAPER INDUSTRY

Industry Structure

The Global industry is configured for volume driven operation with distinct pulp
manufacturers and paper makers. Europe and Canada dominate the pulping industry while North
America Western Europe and parts of Asia dominate paper manufacturing.

36 | P a g e
 The global paper consumption in FY 2008 was approximately 825mn tones. Writing and
printing segment for 32 percent of the global paper consumption while packaging, tissue and
sanitary and newsprint accounted for 50 percent, 6 percent and 12 percent respectively.

Demand- Supply Scenario

Geographically, Asia accounts for around 32 percent for 31 percent and 28 percent respectively.
Asian countries have experienced higher growth in demand due to higher economic growth,
ranging from 7 percent to 10 percent per annum. As of 2010, the aggregate global capacity of
paper and paper boards stood at 865 MTPAresulting in excess supply to the extent of 40 mn
TPA. However, due to geographical capacity inequalities global prices have remained steady.
Global paper & board demand growth in china along other Asian economies.

The growth in world paper demand and consumption pattern for the last 5 years in
indicated in the chart. As per global industry estimates, paper and paper boards demand is
expected to grow at a CAGR of 2 percent p.a. and is expected to touch 883MTPA by 2015.

DOMESTIC INDUSTRY

Demand scenario

Despite being the 15th largest paper manufacturer in the world, India is highly under penetrated
form the consumption perspective, which makes it a Large and latent at the same time. A major
portion of the consumption is attributable to the western and southern regions of the country,
which account for nearly 65 percent of the countrys total paper consumption. This skew in paper

37 | P a g e
consumption in India has also been in line with the literacy levels and industrialization in these
regions of the country.

Supply Scenario

Effective paper & paperboard capacity was approximately 6.2 MTPAfor FY2010. The
average utilization levels of the industry were at 82 percent resulting in production of 5.1 tpa in
fy 2010. As per the Indian paper manufacturers association, the Indian paper industry is expected
to report a 5-10 percent improvement in production and sales during the coming years. This
growing demand is not expected to be met by a corresponding rise in capacity due to the high
capital costs and environmental constraints.As the domestic paper industry has low duty
protection levels, the domestic prices have been in line with international prices. This has
resulted import of paper, which is now mainly confined to waste paper pulp does impact
domestic pricing there by impacting profitability, but the paper imports constitutes less than 10
percent of the total paper & paper board supply.

Recent scenario & outlook

After a prolonged down cycle, the domestic paper industry started to firm up in the last
year. As the same time in the past 6-9 months has witnessed sharp rise in operating costs as
inputs like caustic soda and chlorine have risen about 40 percent over the past year.The fore cast
in the capacity expansion during the same period is expected to be much lower resulting in a gap
between demand and supply within the country. In view of the above the overall industry outlook
is expected to be positive with relatively low per capital consumption, rising demand, slow
capacity additions and rise in price trends.

PAPER AND ITS ESTABLISHMENT

The word Paper is derived from the Water Plant called Papyrus that grows around the
Nile River, Egypt. The citizens of Egypt used the bark of papyrus Plant after cutting and dry
it. It was said that T.Jariluru Chin had prepared with the bark of the mulberry tree in 105 A.D.
In 751 A.D. the Arabs imported the knowledge of paper making with the help of Chinese, later
the art of paper making was spread to Europeans and Central Countries of the world.Paper was

38 | P a g e
highly popularized by the Baud has especially by the BOKZA mark throughout the world. The
first paper mill in the world was started in 1336 A.D. in Germany, viewing the tremendous aspect
of paper Industry paper mills were started in 1586 in Switzerland and London. Later it was
spread to all other countries of the world in no great amount of time.

The technology used in paper making has made many modifications and was entirely
different from the technology used in the beginning. In the year 1927 Chlorine gas was used for
bleaching of the pulp. In 1979, Robert Micholas the French scientist has designed first paper
machine in the world. The paper machine used in the late 1960s was designed by LoberDidut
and Brimal Conklin. The machines used now a day are quite different and very well advanced
both in capacity to produce and the enormous speed with which they operated.

Another major development came in its way in 1862 when the soda pulping process was
first used in England. The consumption of Rosin and Alwen was started in 1900 A.D. The
industry in these days has been much development with production technology.

SIZE AND CAPACITY OF PAPER INDUSTRY

The economic size of a paper industry is determined by the availability of raw materials
and density of markets availability of power and transport facilities etc. The beginning of 1 st V
plan there were only 19 paper and production was 1.34 lakh tons. At present there are 106 mills
with total annual capacity of 1394 lakh tons and production is about 11.12 lakh tones although
there has been a several spreading of mills in large dimensions.

There are some units well organized and well equipped with a production capacity of
more than 50,000 tones and units too small with a capacity of 1,000 tons. In India the growth of
paper industry after independence is satisfactory under the guidance of 5 year plans.

Its growth is reflected by the fact that from a major 17 mills with annual capacity of 1.37
lakh tons. In 1957, the industry has been enlarged to 319 mills with annual capacity of 32.31
lakh tons at the end of VII five year plan.

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 The paper and paper boards production in India during 1951 was 17 units and the total
installed capacity of 1.40 lakh tons, file the production excluding news print is about 1.30 lakh
ton.

TYPES OF PAPER PRODUCT

Paper industry supplies various types of paper board, special paper to a number of uses
which include Government education, companies packaging, news paper and magazines etc.

The Indian paper industry produces a number of varieties of paper and paper boards.
These include glassine paper, art paper, carbon papers, insulation papers, draft papers, map litho
papers, quoted papers, quoted board, duplex boards, triplex boards, straw boards, paper boards,
lottery paper, and Xerox paper.

PRESENT STATUS

In 1974 Government of India introduced the paper control order to regulate the prices and
qualities of paper boards with the withdrawal of paper control order. The industry has received
some received some receipt and its hope to achieve higher profitability by producing these
blends of paper and paper board which are supported by terrible demand.

A significant term around has been achieved by a large no. of units during the past two or
three years. However, the paper industry put a lot of something conflicting signals during 1992.

The Government has taken the following step of encourage and enhance production of
paper and paper boards in the country. They are

Paper units based on the use of minimum 75 percent of pulp derived from baggage,
agricultural, residues and other non contravention raw materials have been exempted for
industrial licensing subjected to 10 caution angles.

Manufacture of writing and printing paper and unquoted craft paper containing not less
than 75 percent by weight of pulp made for rice, wheat, straws, jute and baggage mix of
more pulps of the above mentioned materials exempted for excise duty.

40 | P a g e
 Import of water paper has been freely allowed without the need import license at low rate
of customs duty (20 percent). In recent years the Government in other certain
concessions with a review to help the industries to improve its capacity utilization and
financial liability.

These include liberalized import of raw materials board sanding of different vacant of
paper and paperboards and de-licensing the manufacturing of certain varieties of paper.

FUTURE PROSPECTS

The challenges to be met by the paper industry include production of stronger paper and
paperboards. Cost reduction through modernization encouragement of the use of non
conventional materials for the production of paper and paperboards and striking and equilibrium
between demand and supply.

Both the Central and State Government along with the private sector should strive the
basic input for papers and paper boards and implement research and development. The above
measures should be used in order to improve the technology used and also measures must be
taken to increase the productivity of the paper industry in this country through safe methods

CAPACITYPAPER INDUSTRY STATE-WISE DISTRIBUTION OF UNITS &

CAPACITY

41 | P a g e
 S.no. State No. Of mills InstalledCapacity Production

1. Andhra Pradesh 18 4.106 2.173

2. Assam 4 2.208 1.084

3. Bihar 8 0.915 0.025

4. Gujarat 45 2.743 1.670

5. Haryana 17 1.496 1.110

6. Karnataka 15 1.933 1.770

7. Jammu & Kashmir 1 0.033 0.009

8. Himachal Pradesh 13 0.094 0.215

9. Kerala 3 0.393 -

10. Madhya Pradesh 15 1.813 0.991

11. Maharashtra 52 4.697 3.555

12. Nagaland 1 0.030 0.218

13. Orissa 7 2.136 1.207

14. Punjab 17 1.378 0.820

15. Rajasthan 9 0.433 0.064

16. Tamilnadu 21 2.051 1.616

17. Uttar Pradesh 58 3.120 2.092

18. West Bengal 21 2.386 0.858

19. Chandigarh 1 0.030 0.016

(In Lakes & tones)

COMPANY PROFILE

42 | P a g e
 The Vamsadhara Paper Mills Ltd., was established at MADAPAM on the Bank of river
VAMSADHARA in SRIKAKULAM District, a centrally declared backward area as an agro
based industry in the year 1980 for manufacture of KRAFT PAPER using PADDY STRAW and
GUNNY as the main raw materials with a licensed capacity; of 7500 tones per annum with the
assistance of State level Financial institutions and banks and seed capital assistance and equity
participation from IDBI and ICICI.

LOCATION ADVANTAGE

Fuels and water

Though infrastructure wise the district Srikakulam lags, inputs like unconventional fuels
such as husk, groundnut shell, cashew shell, jute waste etc., are available, in plenty, and the low
water table poses no threat of scarcity of water.

Transport

As the unit is located not only on the national high way, but also nearer to the state
border, it faces no problem for transporting the fuels. Whenever required, coal can be
transported through wagons from Orissa and the Srikakulam road station will be made use of for
unloading and transportation.

Labour

The labor force available in the district is of unskilled type. However, as they posses the
required educational background, we had drawn them into the skilled and semi-skilled pools by
imparting training. The company was successful in carrying out this task and about 99 percent of
todays labor force is from local only. Even majorities of the executives are from local area only.

BRIEF DETAILS OF THE UNIT

Location : Madapam village, Srikakulam dist.

Constitution : Public Limited company

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 Date of incorporation : 2nd April 1980

Date of commencement of Business : 28th January 1983

Initial proposed cost of the project : 264.37 lakhs

Present existing cost of the project : 38.00 cores.

PROMOTERS

The Main promoters are Shri.S.R.Rabindar and ShriR.Rajendran. The other promoters
have since left, and the equity is presently held predominantly by Sri. S.R.Rabindar, Sri
R.Rajendarn and relatives.

Share holding pattern

Particulars Number of shares held Face value No. of shares held

i) Promoters 708092 Rs. 70,08,920

ii) Associates 871230 Rs. 87,12,300

iii) Public 26895 Rs. 2,68,950

iv) Financial Institutions 187000 Rs. 18,70,000

v) Others 680458 Rs. 68,04,580

RAW MATERIAL

Waste paper

Imported waste paper

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CHEMICALS

Alum Rosin and Caustic Soda.

SOURCES OF WATER

Underground through bore-wells

FUEL

Coal

Paddy husk

Jute waste

POWER SOURCE:

A.P. Trans Co. Ltd. D.G. Sets and T.G. Set

45 | P a g e
3.2.2 ORGANISATION STRUCTURE

It implies a formalized international structure of rotes of positions. Hence international

structure means, people working together must fill certain roles. The peoples are asked to till
should be intentionally designed to ensure that required activities are done and that activities fit
together that people can work smoothly effectively and efficiently in groups.

. Organizational set up in Vamsadhara Paper Mills is a functional deparetmentation headed by

VC & CEO, who assisted by Managing Director and Director i.e. grouping activities in
accordance with the functions.

Here the basic enterprises functions are personnel, production, finance, commercial
(purchase) and marketing co-ordination among these different functional activities has been
achieved successfully so far

. Managing Director is the total in charge of the all functions of the departments in the company.
All department heads are required to report and work under him. Managing Director is directly
looking over the Marketing, Commercial and Finance department in the organization

Different Departments of VPML

In the VMPL, there are six departments. They are

Civil Department : This department function is to take up civil

. construction working the factory
Mechanical Department : To install the new machines
Electrical Department : To control over total electrical system.

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Pulp Mill Department : To collect raw materials and prepare pulp.
Paper machine Department : To making paper according to the customer
requirements.
Administration Department : To control over the manpower in the factor.

ORGANIZATIONAL STRUCTURE

ORGANIZATION CHART

PERSONNEL DEPARTMENT STRUCTURE

Vamsadhara Paper Mills Ltd. has personnel department it is headed by Manager (Personnel). He
is reported to General Manager. Under him Ass.Manager(Time Officer) and Ass.Security
Supervisor. Under the assistants for first aid; co-operative stores & time keepers, security guard.

47 | P a g e
 Manager HR

Deputy Security
Officer
Manager Officer

First Aid ( AM ) ( AM ) Stores Assistant Head Security

Mgr Manager Officer

Security
Officer
guards

PERSONNEL DEPARTMENT CHART

48 | P a g e
PERSONNEL DEPARTMENT CHART

CEO/ CHAIRMAN

He will be available at Chennai SENNARS GROUPS SENNARS FACTORY.

SRIKAKULAM, VAMSHADHARA PAPER MILLS PRIVATE LIMITED

HYDERABAD, HUMS PAPER MILLS LIMITED

CHENNAI, SEENAR FACTORY

MANAGING DIRECTOR

Managing Director available at VAMSAHARA PAPER MILLS PRIVATE LIMITED,

Srikakulam. He is looking activities in VPML. These activities are all marketing and production
as well as administration office.

EXECUTIVE DIRECTOR

Wereport M.D. we will follow the activities of all production as well as administration and
reporting to M.D.

49 | P a g e
G.M.PROJECTS Inreporting M.D. he bring after looking activities of mostly collective the
collection department under he is control these are all activities. And staff members, they will
follow the GM instructions.

G.M.WORKS.

He will be report E.D. as well as M.D. under his control all administrative and production. All
department heads, executives reported to G.M. executives.

Under his control eight DGMs from different departments and HR Manager his working.
Every day he has to intimate the regular activities of the as well as production to the M.D. &
E.D. and he will be the responsible to the factory for occurrence of the problem as well as
rectification of problem. And also he will be pick the man power according to the requirement of
work and ensure that number of absenteeism.

DGM COMMERCIAL He is reported to GM works and under his control Manager

commercial working. He is the responsible for material procurement for various places as per
the requirement and concern departments. And also while procured the material.

DGM WORKS (PULP MILL)

He will report to GM works under his control there are two Manager people are working
there are AM (ELEC) and staff, MGR (PM) and his staff, he should coordinate under his
subordinates to fulfill the work in time as well as up to date for G.M. works.

DGM BOILER

He his report to GM works under his control staff are working during the duty hours who
should the subordinate the process of the boiler and there is any break downs gets if repair at the
sufficient people as well as inform to the GM works.

DGM (MACHINE)

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 One Manager electrical and staff working he is the responsible for the all repairs machinery
and rectification. The problems shall be rectified with the staff.

MARKETING DEPARTMENT

Sales are the major functional areas in marketing in VAMSADHARA PAPER MILLS, LTD.,
Managing Director is directly with sales. He takes the assistance of Dy. General Manager (sales)
in doing so. Managing Director is the chief of the Marketing Department.

His duties include

He has to coordinate work of all departments.

He has to study the market conditions to make necessary changes.
Controlling and supervising of various sections in the Department.

He has to increase the sales volume to the extent possible.

Collection of payments.

Procurement of orders.

Dispatch of material and planning of Transportation.

Coordinating with Excise department.

TECHNICAL DEPARTMENTS

General Manager headed three departments, namely General Security and Personnel
Department.

The Main responsibility of the General Manager is to look after the production, Maintenance
and operations of the factory.

Under the General Manager, four types of Dy. General Managers are working. Their
activities are.

51 | P a g e
 Mill

Paper Machine

Maintenance

Boiler

FUNCTIONAL PROFILE

3.2.3 PRODUCTION PROCESS

The raw materials used in the process of Production paper are

Imported waste paper

Indian waste Paper and making Semi-virgin Kraft Paper varieties.

Waste paper pulping

Waste Paper, generally corrugated boxes, paper cuttings, trimmings etc., of Kraft variety
both Indian and Imported are used for waste paper pulping. The waste paper, in suitable
proportion, is fed in the pulp through salt conveyor, where it is slashed along with water. The

52 | P a g e
pulp thus generated contains a lot of plastics, pins, ropes etc., partially the plastics and pins are
removed in pulpier and the rest is sent to a chest, from where it goes to Turbo Separator through
an HD cleaner.

While, HD Cleaner removes the pins and heavy materials, plastics are removed in Turbo
Separator. The cleaned pulp is sent to thickener for removing excess water. The thickened pulp
is then processed in refiners to impart strength and then stored in a chest.

Paper machine

In Head Box, the consistency of the pulp is maintained at, as low as 0.75 to 0.8 percent to
have the better formation of the paper web. This excess water is removed in four-drainer at
various drainage elements to the extent of 80 percent i.e. 20 percent solids come out of four-
drainer. Then this wet web of the paper with 20 percent solids will pass through press part where
the wet web is subjected to high compression loads between press rolls up to 60-120 Kg/Cm to
increase the solids concentration to 40 percent

The water thus removed from wet will be absorbed by the press felts and in turn removed
by vacuum pump from press felts.

From press section, the wet web (paper) with 40 percent solids, will pass through Dryer
Section and get dried to 93-95 percent solids. The water in the wet will be evaporated in the
dryer part by indirect steaming i.e. steam is injected in the individual dryers, by which the
surface of the dryers gets heated up and in turn transmit the heat to wet web to remove water.

The condensate thus formed inside the dryers will be removed through condensate
removal system and sent to boiler house for re-using in the boiler. The paper after drying will be
wound at the pope reel in Tam bur Roll.

Rewinder

The paper rolls thus manufactured will be concerted to required sizes, as desired by the
customers, and then packed and stored in the paper go down. From go down, the paper is
dispatched to various parties as per the orders.

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Back water

The paper machine backwater, mostly collected at four drainer is sent to SAVELL to
remove the fibers and the clarified back water is re circulated in the system to reduce the fresh
water consumption. The fibers from Save-all take back into the system for further processing.

Effluent Treatment Plant

The company is having a full-fledged effluent treatment plant, to take care of the
effluents generated from the mills.

CAPACITY AND PRODUCTION

The actual production/sales for the last two years & estimation/projection for the ensuring
year/next years.

Actual/ Production Sales

Net Sales value
Year Estimates Quantity Quantity
(Rs. In lakhs)
(MT) (MT)

2010-11 Actual 18867 18717 3098.71

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2011-12 Actual 17750 17749 2992.30

2012-13 Estimates 17500 17500 6058.00

2015-14 Projections 19575 19575 9310.00

2014-2015 Kraft/News print 19800 19800 9410.00

RAW MATERIALS

The company used unconventional raw material chemicals, and packaging materials for
manufacturing the paper, un-conventional raw material includes, waste paper and imported waste
paper etc. Waste paper is the main raw material for the unit. It is available plenty in near village
of the plant site. The company has procuring paper from Vizag, Madras, Mumbai, Cuttack,
Vijayawada etc., The company is also importing waste paper from other countries.

The mill uses chemicals along with above mentioned raw materials. Chemicals like
Alum Sodium sulphate, caustic soda, Guar gum, Rosin and other Chemicals.

PACKAGING MATERIAL

It is also purchasing packaging materials like Hessian cloth, reel cores, wooden plugs,
cum tap and PP strips roles and other.

POWER & FUEL

Electricity

Own generation (Captive power)

through diesel generator

55 | P a g e
 APSEB

ELECTRICITY

It is the main source of energy for the unit. The unit is having 33/140 substation with an
installed capacity of 2000 kv. This substation has a 33 KV. This substation has a 33KV line
passing site. The maximum record demand is past around 12,200 KVA.

The substation is sufficient to meet the requirements of the unit. But initially the company
has to face lot of problem because of heavy power cut. To overcome this problem two die
generator sets of capacity 750 KVA each have been installed in the plant. They are capable of
taking care of 100 percent of power cut at the existing installed capacity and around 5 lacks was
invested for some auxiliaries, such as motors, capacitors, cables etc.,

MACHINERY

M/S several Engineering works who are one of the reputed paper mill machinery
manufactures has made the technical evaluation of the machine condition. As per their findings
the areas requiring immediate attention were the head base, press part dryers section calendaring
and pope sections of the paper machinery.

In these sections of the reconditioning required are mainly grading of surfaces, changing
of bearings and religion of rubber roller etc., which will improve performance and reduce in
mechanical breakdown.Also a thorough study of the units performance and available facilities
made by Andhra Pradesh Industrial and Technical Consultancy Organization Limited (APITCO)
revealed certain deficiencies in the plant, and certain area where modernization are needed to
reduce variable costs to improve the performance and validity of the plant

MANUFACTURING PROCESS

The process for manufacturing Kraft Paper consists of following steps

Boiling

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 Clarifying

Mixing

Rolling

Drying

Rewinding

To analyze the process it is in the following way.

BOILING- In this process the water is boiled and the steam is produced for the purpose of
running the mill.

CLARIFYING- In this gunny bags and straw and waster paper are washed through the water
and clarified in routine manner.

MIXING-In this crushed paper is mixed with some chemicals big drums to bring the thickness
of paper to a particular level.

ROLLING -After mixing the paste of the above mentioned materials are rollers for purpose of
preparing swath paper.

DRYING -In this after the rolling the paper is crushed and dried with steam on rollers.

REWINDING -The purpose of rewinding is to roll paper in a sufficient manner so that it could
be loaded on trucks.

3.2.4 FINANCE DEPARTMENT

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 Under Financial Department, Dy. General Manager (finance) is controlling the activities
namely, Finance, Accounts, Sales, Purchase, Stores, Salaries and Wages and Dispatches. He is
directly reporting the Managing Director of the company. He has prepared and annual accounts
of profit and loss account and Balance sheet of the company.

Further he has to look after secretarial works of conducting Board Meeting/Annual general
Meetings of the company. Attending statutory audits of the company. Dy.General Manager
(Finance) is the person responsible for arranging and managing the total finance of the company,
coordinating with financial institutions/Banks etc.

COMMERCIAL DEPARTMENT

Under commercial Department, Dy. General Manager (Commercial) is the chief of the
following Officers, Senior Commercial Officer, Commercial Officer and Purchase Officer. He is
looking of procurement of raw materials, fuels, and stores and spares for uninterrupted
production of the company.

BALANCE SHEET/POSITION STAMENT OF VAMSADHARA PAPER MILLPVT LTD AS ON

31-03-2011 TO31-03-2016

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S.N PARTICULARS 31-03-2011 31-03-2012 31-03- 31-03- 31-03-2015 31-03-
O 2013 2014 2016
A A A A A A
MOUNT MOUNT MOUNT MOUNT MOUNT MOUNT
1 SOURCE OF
FUNDS
(A)share capital 18906 20622 23077 24545 26591 29564
(B) reserve and 56641 84402 65843 74821 69382 65972
surplus
75547 86465 88920 99366 95973 95536
2 LOANS OF
FUNDS
A)secured loans 29302 35462 37024 31909 21154 19754
B)un secured 65001 61002 75854 94276 56612 49682
loans
94303 96464 112878 126185 77766 69436
TOTAL 169850 201488 201798 227551 173739 164972
3 APPLICATION
OF FUNDS
FIXED ASSETS
A)Gross block 67919 85450 82651 93736 91334 89654
B)depreciation 43065 51065 47992 56857 52486 49587
C)capital work in 24854 34385 34658 36879 38848 3978
progress
CURRENT
ASSETS
LOANS&
A)inventories 32696 32800 31452 35995 46453 48235
B)sundry debtors 79549 13311 15005 12359 52421 53859
C)cash & bank 50182 34339 45291 32231 11491 11025
balance
D)loans and bank 75107 59735 65709 61516 50588 49865
TOTAL 237534 140185 157457 284202 149462 325968
Current liability 21212 28741 30848 33542 37622 39541
&prior
NET CURRENT 216322 109337 126609 250660 111840 246886
ASSETS
Miscellaneous 2535 2768 2956 2562 2453 2215
expenditure (to
the extent not
written off of
adjusted)
preliminary
expenses
Debit balance in 19626 67856 98567 61577 22504 29856

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 profit & loss
account
TOTAL 169850 201488 201798 227551 173739 164972

P & L INCOME STAMENT OF VAMSADHARA PAPER MILLPVT LTD AS ON 31-03-2011

TO31-03-2016
S.N PARTICULARS 31-03-2011 31-03-2012 31-03- 31-03- 31-03-2015 31-03-
O 2013 2014 2016
A A A A A A
MOUNT MOUNT MOUNT MOUNT MOUNT MOUNT
1 INCOME
sales 14024 25095 25776 27899 31519 34512
Other income 21701 81548 54782 76521 62485 59628
Increase/decrease 31290 44857 52461 64234 56852 51982
in
Inventory
TOTAL 67015 151500 306258 168654 150856 146122
2 EXPENDITURE
Manufacturing 10965 20659 22025 23715 24726 26584
expenses
Payment & 22458 33676 22444 31265 56564 59874
benefits
To employee
Administrative 60836 91455 70198 82145 95142 94581
charges
depreciation 39404 45782 53475 58246 58246 77842
TOTAL 133663 191572 168142 195371 234678 258881
3 Profits/loss before 66648 40072 138116 26717 83822 112759
taxation
Provision for
taxies
A)current tax 66132 34339 45291 32231 11491 11025
B)differed tax 65232 59735 65709 61516 50588 49865
(assets/liability)

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C)fringe benefits 55136 140185 157457 284202 149462 325968
tax
Profit/loss after 253148 274331 282268 404666 295363 1224245
taxation
TOTAL 453826 617403 756668 768691 680897 1632248

NATURE OF ACTIVITY

Actually paper is made by the using of raw material that are

Forestry Soft wood, hard wood, Eucalyptus and some grasses

Agro based Paddy straw, Wheat and food grains and

Re-cycling of paper waste paper.

According to the M/S Vamasadhara Paper Mills Ltd. Follows the re cycling system in
this process waste paper cooking is started with pulpier in this pulpier waste paper is grind,
and remove the plastic tapes this grinded pulp put into a sand trap her sand trap.

Remove the unwashed pulp after removing off unwashed pulp the raw material put in to a
Turbo Separate in this process storage the pulp in the tank that is chest.

Cooking of waste paper pulp mixed in Blending Chest in this process mixing of both
pulps with adding or rose in the alum and dyes (with a requirement of customer order).

MISSION OF VAMSADHARA PAPER MILLS LTD.

To carry on the business of manufactures buyers, sellers, importers and exporters and
dealers in all kinds and classes of paper board, card-board and pulp.To carry on the business of
manufacturing purchasing, selling or otherwise, dealing in cartons fib rite-boxes, corrugated
wrappers, corrugated papers and other packing materials products and the like.

61 | P a g e
 VPML is located at village at Madapam, about 15 kms from, Srikakulam the district head
quarters, on the NH 5 connecting Madras-Howrah, Srikakulam district is classified as category
b in industrial backwardness. The nearest broad gauge railway head is Srikakulam road station
(Amadalavalasa) which is about 15 kms from the plant-site. The railhead is connecting Calcutta-
Madras and Calcutta-Hyderabad.

VPML is located at about 120 kms. From Visakhapatnam, this is one of the fast
developing industrial centers in India. Visakhapatnam has the facilities of airport and
harbor.

POLLUTION CONTROL & ABATEMENT

The company obtained consent orders under the water (Prevention and Control of
Pollution) Act for effluent treatment and disposal and air consent under air (Prevention and
Control of Pollution) Act 1981 valid up to 31 12 2010. Effluent treatment and disposal
measures are being carried out satisfactorily.

3.2.5 PERSONAL

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Man power particular Total manpower of Vamsadhra Paper Mills Ltd. is 350. In this number 39
are staff and permanent workmen are 196 and casuals are 115. Manpower particulars are given
below. Since the unit is located in a remote back ward area, recruitment of trained and experience
persons was a big problem to the firm. However the company able to strength its organizational
structure by giving some training facilities to the selected employees. Through this they increase
the ability of the employees.

Manpower Particulars

Particulars Manpower

Managing director 1

Executive manager 1

General manager 1

Deputy General manager Staff 6

Manager 5

Deputy manager 4

Manager(assistant) 11

Senior draft man 1

Officer Casuals 6

Flore man 1

63 | P a g e
Workman 72

Casuals 87

Total 350

3.2.6 MARKETING

THE FOUR PS MODEL

Product- The first of the four ps of marketing is product. A product can be either a tangible
good or an intangible service that fulfills a need or want of consumers. Whether you sell custom
pallets and wood products or provide luxury accommodations, its imperative that you have a
clear grasp of exactly what your product is and what makes it unique before you can successfully
market it.

Price Once a concrete understanding of the product offering is established we can start making
some pricing decisions. Price determinations will impact profit margins, supply, demand and
marketing strategy. Similar (in concept) products and brands may need to be positioned
differently based on varying price points, while price elasticity considerations may influence our
next two Ps. Promotion Weve got a product and a price now its time to promote it.
Promotion looks at the many ways marketing agencies disseminate relevant product information
to consumers and differentiate a particular product or service. Promotion includes elements like:
advertising, public relations, social media marketing, email marketing, search engine marketing,

64 | P a g e
video marketing and more. Each touch point must be supported by a well positioned brand to
truly maximize return on investment.

Place Often you will hear marketers saying that marketing is about putting the right product,
at the right price, at the right place, at the right time. Its critical then, to evaluate what the ideal
locations are to convert potential clients into actual clients. Today, even in situations where the
actual transaction doesnt happen on the web, the initial place potential clients are engaged and
converted is online.

The Segmentation, Targeting and Positioning model

Today, Segmentation, Targeting and Positioning (STP) is a familiar strategic approach in Modern
Marketing. It is one of the most commonly applied marketing models in practice.

How to use STP?

Through segmentation ,you can identify niches with specific needs, mature markets to find new
customers, deliver more focused and effective marketing messages.

Well known ways to segment your audience include:

1. Demographics

Breakdown by any combination: age, gender, income, education, ethnicity, marital status,
education, household (or business), size, length of residence, type of residence or even
profession/Occupation.

An example is Firefox who sell 'coolest things', aimed at younger male audience. Though, Moshi
Monsters, however, is targeted to parents with fun, safe and educational space for younger
audience.

2. Psychographics

This refers to 'personality and emotions' based on behaviour, linked to purchase choices,
including attitudes, lifestyle, hobbies, risk aversion, personality and leadership traits. magazines

65 | P a g e
read and TV. While demographics explain 'who' your buyer is, psychographics inform you 'why'
your customer buys.

There are a few different ways you can gather data to help form psychographic profiles for your
typical customers.

1. Interviews: Talk to a few people that are broadly representative of your target audience.
In-depth interviews let you gather useful qualitative data to really understand what makes
your customers tick. The problem is they can be expensive and difficult to conduct, and
the small sample size means they may not always be representative of the people you are
trying to target.

2. Surveys: Surveys let you reach more people than interviews, but it can be harder to get as
insightful answers.

3. Customer data: You may have data on what your customers tend to purchase from you,
such as data coming from loyalty cards if an FMCG brand or from online purchase
history if you are an ecommerce business. You can use this data to generate insights into
what kind of products your customers are interested in and what is likely to make them
purchase. For example, does discounting vastly increase their propensity to purchase? In
which case they might be quite spontaneous.

3. LifestyleThis refers to Hobbies, recreational pursuits, entertainment, vacations,

and other non-work time pursuits.Companies such as on and off-line magazine will
target those with specific hobbies i.e. Four Four Two for football fans.Some hobbies
are large and well established, and thus relatively easy to target, such as the football
fan example. However, some businesses have found great success targeting very
small niches very effectively. A great example is the explosion in 'prepping' related
businesses, which has gone from a little heard of fringe activity to a billion dollar
industry in recent years. Apparently

4. Belief and ValuesRefers to Religious, political, nationalistic and cultural beliefs and
values.The Islamic Bank of Britain offers Sharia-compliant banking which meets specific

66 | P a g e
 religious requirements.A strange but interesting example of religious demographics
influencing marketing that you might not have guessed is that Mormons are really into
'multi-level marketing'. They're far more likely to be engaged in the practice than any
other US group. Going the extra mile with demographic research can lead to discovering
new marketing opportunities and thinking outside the box. For example, did you
know 55-64-year-olds are the most likely age group to buy a new car? But you don't tend
to see them in the car ads. An opportunity waiting to be seized!

5. Life StagesLife Stages is the Chronological benchmarking of peoples lives at

different stages.An example is Saga holidays which are only available for people aged
50+. They claim a large enough segment to focus on this life stage.

6. GeographyDrill down by Country, region, area, metropolitan or rural location,

population density or even climate.An example is Neiman Marcus, the upmarket
department store chain in the USA now delivers to the UK.

7. BehaviourRefers to the nature of the purchase, brand loyalty, usage level, benefits
sought, distribution channels used, reaction to marketing factors.In a B2B
environment, the benefits sought are often about how soon can it be delivered?
which includes the last minute segment - the planning in advance segment.An
example is Parcelmonkey.co.uk who offer same day, next day and international
parcel deliveries.

8. Benefit Benefit is the use and satisfaction gained by the

consumer.Smythson Stationary offer similar products to other stationery companies,

67 | P a g e
 but their clients want the benefit of their signature packaging: tissue-lined Nile Blue
boxes and tied with navy ribbon!

Market targeting

The list below refers to whats needed to evaluate the potential and commercial attractiveness of
each segment.

Criteria Size: The market must be large enough to justify segmenting. If the market is
small, it may make it smaller.

Difference: Measurable differences must exist between segments.

Money: Anticipated profits must exceed the costs of additional marketing plans and other
changes.

Accessible: Each segment must be accessible to your team and the segment must be able
to receive your marketing messages

Focus on different benefits: Different segments must need different benefits.

Product positioning

Positioning maps are the last element of the STP process. For this to work, you need two
variables to illustrate the market overview.

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In the example here, Ive taken some cars available in the UK. This isnt a detailed product
position map, more of an illustration. If there were no cars in one segment it could indicate a
market opportunity.

3.2.9 SWOT ANALYSIS

Competitive strengths

Large and growing domestic paper market

Some competitive PMs in newsprint, carton board and coated wood free
Relatively low personnel and fuel costs (although personnel productivity is lower than in
many competing countries and the quality of coal varies)
Up to date research institute (CPPRI)
Know how in non wood pulping and applications
Well developed printing industry
Local market knowledge

Competitive weaknesses

Harmful to environment
Infrastructure inefficiencies, severe shortage of skilled labour
High transaction cost
Lack of awareness of global technologies, and trends in Manufacturing IT has also
contributed to this low adoption
Paper making factories are associated with pollution and causing harm to abjacent areas.

69 | P a g e
Competitive Opportunities

The increase in e-commerce industry has resulted in high demand for packaging solutions
Consolidation and expansion of business in other geographies through acquisition route
Due to scale of international paper, it would have the backing of the government for
expansion

Competitive Threats

Focus on digitalizing all mass media content which will ultimately lead to decrease in
consumption of paper and related items
Destruction of rain forest in Amazon basin which forms the main source of raw material
for manufacturing
Considerable resource in Russia which may be affected due to global crises and US
stance against Russia
Impact of environment laws could harmful to the company
Competitors
1. Balapur paper industry
2. Jk paper industry
3. Asia pulp and paper
4. Stora enso group
5. Smurfit kappa group

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 Chapter -IV
Ratio analysis-Theoretical Frame Work

71 | P a g e
 THEORY OF RATIO ANALYSIS

A financial ratio is the relationship between two accounting figures expressed mathematically.
Financial ratio analysis is one of the technique of financial analysis, where the financial ratios
are used as a yardstick are evaluating the financial condition and performance of firm. It is
defined as the systematic way to interpret the financial statement as well as its historical
performance. It is a widely used tool of financial analysis. Analysis and interpretation of
various ratios gives a skilled and experienced analyst a better understanding of the financial
condition and performance of the firm than what he could have obtained only through perusal
of financial statements.

Financial ratios describe the significant relationship that exists between figures of balance
sheets, profit and loss account and other parts of the accounting organization. The analysis of
these ratios are of great value in determining the financial position and efficiency of the business,
supplying valuable information to assets them in planning, policy making and controlling the
activities, in establishing standards and budgets. These ratios are also valuable in determining the
financial relationship between the business and the several of classes of share holders and
providers of capital, employees, suppliers, customers and other members of the industry. The
govt and the national have a whole. Moreover, they are useful in facilitating or eliminating
routine checking,. In assessing the validity of general results, in report presentation and in
interpretation and criticism of final accounts. Ratios enable masses of data to be summarized and
simplified for presentation to management.

INTERPRETATION OF THE RATIOS

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 The interpretation of the ratios is an important factor to obtain full utility of them. The
interpretation of ratios can be made in the following ways.
SINGLE ABSOLUTE RATIOS
It is difficult to draw a meaningful conclusion when a single ratios is considered in
isolation. However they may be studies in relation to certain rules of thumb which are based
upon will prove conventions.

GROUP OF RATIOS
Ratios may be interpreted by calculating a group of related ratios. A single ratio
supported by other related additional ratios becomes more understandable and meaningful.

HISTORICAL COMPARISON
It is the easiest and most popular way of evaluating the performance of the firm. It aims
at comparing the financial ratios over a period of find, giving indication of direction of change
and reflects whether the firms performance and financial position has improved, deteriorated are
remained constant over a period of time.

PROJECTED RATIOS
These ratios are calculated for future standards based upon the projected or proforma
financial statements. These future ratios may be taken as standards form comparison and the
ratios calculated on actual financial statements can be compared with the standard ratios to find
out variance.

INTER FIRM COMPARISON

Ratios of one firm are compared with the ratios of some other selected firms in the same
industry point of time.

TYPES OF RATIOS
Several ratios calculated from the accounting data can be grouped into various classes
according to the financial activity or function to be evaluated attested earlier. The parties who
generally undertake financial analysis are short and long term creditors. Owners and

73 | P a g e
management short term creditors main interest is in the liquidity position or the long term
creditors on the other hand are more interested in the long term solvency and profitability of the
firm. Similarly owners concentrate of firms profitability and the analysis of the firms financial
Conditions. Management is interested in evaluating every part of the firms performance. They
have to project the interest of all parties and have to see that the firm grows in profitability. In
view of requirements of the various users of ratios we may classify them into the following four
importantcategories.
1. liquidity ratios
2. Capital structure / Leverage ratios
3. Activity ratios
4. Profitability ratios
Liquidity ratios measure the firms ability to meet current obligations. Capital ratios show
the proportions of debt and equity in financing the firms. Activity ratios reflect the firms
efficiency in the utilization of its assets and profitability ratios measure the overall performance
and effectiveness of the firms. Each of these ratios is discussed below.
LIQUIDITY RATIOS:
There are two kinds of liquidity
1. Static
2. Dynamic

STATIC LIQUIDITY
The financial manager can calculate static measure of liquidity from a firms balance
sheet. These ratios are static because there is measure at a single point of time.
DYNAMIC LIQUIDITY
If often happens that static liquidity ratio may change with the passage of time. Since a
firm undergoes different phases of business cycles. Current ratio or working capital levels may
be also under go similar changes. Thus aspects ofliquidity are dynamic because it is related time.
A firms liquidity may very over the business cycle because:
The availability of credit varies over a business cycle.
The market value of assets varies over a business cycle.
The credit worthiness of firm receivables varies over a business cycle.

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 In fact analysis of liquidity needs the preparation of cash budgets and cash funds flow
statements but liquidity ratios by establishing a relationship between cash and other current
assets to current obligations. Provide quick measure liquidity. A firm should ensure that it does
not suffer from lack or liquidity and also that it is not too much highly liquid. The failure of a
company to meet its obligation due to lack of sufficient liquidity will result in bad credit images,
loss of creditors confidence or even in law suit resulting in the closure of the company. A very
highly degree of liquidity is also bad as idle assets earn nothing. The firms funds will be
unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper balance
between liquidity and lack of liquidity.

The most common ratios which indicate the extent of liquidity or lack of it are:
1) Current Ratio
2) Quick Ratio
3) Absolute Liquidity Ratio

CURRENT RATIO
It attempts to measure the ability of a firm to meet its business requirements. The current
ratio also is calculated by dividing Current Assets / Current Liabilities.
Current Assets
Current Ratio =
Current Liabilities
Current assets include cash and those assets which can be converted into cash within a
year. Such as marketable securities, debtors, and inventories, prepaid expenses are also included
in current assets as they represent the payments that will have not to make by firm in the near
future. All obligations nurturing within a year are included in current liabilities.
Thus current liabilities included creditors, bills payables, accrued expenses, short term
bank loans,.Income tax liability and long term debt maturing in the current year. The current ratio
is the measure of the firms short term solvency. It indicates the availability of current assets in
rupees for every rupee of current liability. A ratio of greater than one means that the firm has
more current assets than their current claims against them.
QUICK RATIO

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 This ratio establishes a relationship between quick or liquid assets and current liabilities.
An asset is liquid if in can be converted into cash immediately or reasonable soon without a loss
of value. Cash is the most liquid asset: other liquid assets are book debts and marketable
securities. Inventories are considered to be les liquid as inventories normally require some time
for realizing into cash and their value also has tendency to fluctuation. The quick ratio is found
out by dividing the total of the quick assets by total current liabilities.

Current Assets-Inventories
Quick Ratio = Current Liabilities

Quick Assets = Current Assets Inventories

Generally a quick ratio of 1 to 1 considered to represent satisfactory current financial conditions.

ABSOLUTE LIQUIDITY RATIO
This ratio gains much significance only when it is used conjunction with the first two
ratios. A standard 0.5:1 absolute liquidity ratio is considered as an acceptable norm. Fifty paisa
worth of absolute liquid assets is considered sufficient for one rupee worth of liquid liabilities.
However this ratio is not much use. Cash and near cash items represents absolute liquidity.
Hence in the computation of this ratio only the absolute liquid assets are compared with
liquid liabilities. The absolute liquid assets are cash, bank and marketable securities.
It is also to be observed that receivables are eliminated from the list of liquid assets in
order to obtain liquid assets since there are some doubts relating to their liquidity.
Cash + Bank + Marketable Securities
Absolutely Liquidity Ratio =
Liquidity Liabilities

CAPITAL STRUCTURE RATIOS

LEVERAGE RATIO

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 The short term creditors like bankers and suppliers of raw material and more concerned
with the firms current debt paying ability on the other hand long term creditors. Like debenture
holders, financial institutions etc., are more concerned with the firms financial strength. The
capital structure ratios indicate mix of funds provided by owners and lenders. As a general rule,
there should be an appropriate mix debt owners equity in financing the firms assets. The
manner in which assets are financed has number implications.
First between debt and equity .Debt is more risky from the firms point of view. The firm
has legal obligation to pay interest to debt holders, irrespective of the profit made or losses
incurred. If the firm fails to pay to debt holders in time, they can take legal action against it to get
payments and in extreme cases.
Can force the firm into liquidation . Second, employment of debt is advantageous for
stakeholders in two ways.
a) They can retain control of the firm with a limited state
b) Their earning will be magnified.
When the firm earns a rate of returns on the total capital employed higher than the
interest rate on the borrowed funds.
The process of magnifying the shareholders return through the employment of debt is
called financial leverage or trading on equity.Third a highly debt burdened firm will find difficult
in rising funds from creditors and owners in future. Creditors treat the owners equity as a margin
of safety. If the equity base is thin, the creditors risk will be high. Thus leverage ratios are
calculated to measure the financial risk and the firms ability of using debt for the benefit of
shareholders.
Leverage ratios may be calculated from the balance sheet items to determine the
proportion of debt in debt in total financing. Many variations of these ratios exist but all these
ratios indicate the same thing .The extent to which the firm has relied on debt in financing assets.
Leverage ratios are also calculated from the income statements items by determine the extent to
which operating profits are sufficient to cover fixed charges.

Leverage ratios are classified as:

A. Debt Equity Ratio

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 B. Proprietary Ratio
A. Debt Equity Ratio: debt equity ratio is another classification into:
(a) Total Debt Equity Ratio
(b) Long term Debt Equity Ratio

(a) Total Debt Equity Ratio

Several debt ratios may be used to analyze the long term solvency of a firm. The firm may be
interested in knowing the proportion of the interest bearing debt in the capital structure. It may
therefore compute debt-equity ratio by dividing total debt by capital employed or total net assets.
Total debt will include short and long term borrowing from financial institutions;
debentures, bonds, deferredpayment agreement for buying capital equipment and bank
borrowing publicdeposits and any other interest bearing loan capital employed will include total
debt and net worth.
Total Debt
Total Debt Equity Ratio =
Capital Employed

(b) Long term Debt Equity Ratio

A firm may wish to calculate leverage ratio in the terms of the long term capitalization
which include long term debt and net worth. Thus the firm may calculate the following long term
debt ratio in the following manner.

Long term debt equity ratio = Long term debt

Net worth
B. proprietary ratio
This is a variant of the debt equity ratio. This ratio relates the shareholders funds to total
assets. It is calculated by dividing the shareholders funds by the total tangible assets. This ratio
indicates the long term or future solvency position of the business 50% or more.
Shareholder Funds

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Proprietary Ratio = Total assets
Shareholders funds include preference and equity share capital plus reserves and surplus
items. Total assets include all assets including goodwill. Some authors exclude goodwill from
total shareholders funds and are to be divided by total tangible assets. As the total assets are
always equal to total liabilities, the total liabilities, may also be used as the denominator in the
above formula.
Shareholder Funds
Proprietary Ratio = Total Liabilities

COVERAGE RATIOS
Interest coverage Ratio
This ratio relates the fixed interest charges to the income earned by the business. It is also
known as interest coverage ratio. It indicates whether the business has earned sufficient profits to
pay periodically the interest charges. It is calculated as follows.

Net Profit before Interest and Tax

Interest coverage Ratio =
Fixed interest and charges
ACTIVITY RATIOS
The funds of creditors and owners are invested in various assets to generate sales and
profits.The better the management of assets, the larger the amount of sales. Activity ratios are
employed to evaluate the efficiency with which the firm manages and utilizes its assets. These
ratios are called turnover ratios because they indicate the speed with which assets are being
concerted or turned over into sales. Activity ratios thus involve a relationship between sales and
assets. Several activity ratios can be calculated to judge the effectiveness of assets utilization.
Inventory turnover ratio
This ratio indicates the efficiency of the firm in selling its product. It is calculated by
dividing the cost of goods sold by average inventory in any operating concern.

Cost of Goods Sold

Inventory Turnover Ratio =
Average Inventory
Cost of Goods Sold = Sales Gross Profit

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Average Inventory = Opening stock + Closing Stock / 2
The average inventory is the average of opening and closing balance of inventory in a
manufacturing company. Inventory of finished goods is used to calculate inventory turnover.
The cost of goods sold figure may not be available to an outside analyst. He may
therefore compute inventory turnover as sales divided by the average inventory of the year ended
inventory.

Debtors turnover ratio

A firm sells goods for cash and credit. Credit is used as a marketing tool by a number of
companies. When the firm extends credits to its customers, book debts are created in the firms
accounts. Book debts are expected to be converted into cash over a short period and therefore,
are include in current assets. The liquidity position of the firm depends on the quality of debtors
to a great extent financial analysis applies to ratios to judge the quality of liquidity of debtors.
The first ratio is debtors turnover and it is found out by dividing credit sales by average debtors.
Net Credit Sales
Debtors Turnover Ratio =
Average Debtors

Net Credit Sales = Gross Credit Sales Returns

Average Debtors = Simple average of Drs (including bills receivable)
This debtors turnover indicates the number of times on an average that debtors turnover each
year. Generally, the higher the value of the debtors turnover, the more efficient is the
arrangement of a credit.
To outside analyst information about credit sales and opening and closing balance of
debtors may not be available. Therefore the debtors turnover canbe calculated by dividing sales
by the year ended balance at debtors in anyoperation concern.

Creditors turnover ratio

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 The ratio is similar to receivables turnover ratio. It compares the accounts payable with
the local credit purchases. It signifies the credit period enjoyed by the firm in playing creditors.
Accounts payable includes both sundry creditors and bills payable. It is calculated as follows.

Net Credit Purchase

Creditors Turnover Ratio =
Average Creditors

Net Credit Purchases = Gross Credit Purchases Returns to suppliers

Average Creditors = Average of Creditors (including bills payable)
Out standing at the buying and at the end of year.

Fixed assets turnover ratio

The firm may wish to known its efficiency of utilizing fixed assets and current assets
separately.

Sales or Cost of Goods Sold

Fixed Assets Turnover Ratio =
Net Fixed Assets

The use of depreciated value of fixed assets in computing the fixed assets turnover may
render comparison of firms performance over period or with other firm meaningless. Therefore
gross fixed assets ratio may be used to calculate the fixed assets turnover for a meaningful
comparison.

Working capital turnover ratio

This ratio indicates whether or not working capital has been effectively used in making
sales. It is calculated as follows:
Net Sales
Working Capital Turnover Ratio =
Net Working Capital

For the sake of convenience the figure of net working capital at the end of the year should be
considered. This ratio makes it clear whether the business is being carries
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 on with small or large amount of working capital in relation to sales. A low working
capital turnover ratio may reflect an inadequacy of net working capital. As a result of low
turnover of inventory and receivables considerable caution should be exercised while
interpreting this ratio. Working capital turnover ratio takes a number of forms in the analysis.

Profitability ratios
A company should earn profits to survive and grow over a long period the word profit is
looked upon as term of abuse since some firms always want to maximize profits at the cost of
employees. Customers and society expect such in frequent cases, it is a fact that sufficient profits
must be earned to sustain the operation of the business and to be able to obtain funds from
invertors for expansion and growth and to contribute towards the social overheads for the welfare
of the society.
Profits are the difference between revenues and expenses over a period of time. Profit is
the unlimited output of a company and it will have no future if it fails to make sufficient profits.
Therefore the financial manager should continuously evaluate the efficiency of its company in
term of profits; the profitability ratios are calculated to measure the operation efficiency of the
company. Besides management of the company, creditors want to get interest and interest and
repayment of principal regularly. Owners want to get reasonable return of their investment. This
is possible only when the company earns enough profits.
Generally two major types of profitability ratios are calculated.

Profitability in relation to sales.

Profitability in relation to investment.
A company should be able to produce adequate profit on every rupee of sales. If sales do not
generate sufficient profits if would be very difficult of the firm to cover, operating expenses and
as a result, it will fail to earn any profit for owners.
The profitability of the company should also be evaluated in terms of the firms investment in
assets and in term of capital contributed by creditors and owners. If the company is unable to
earn a satisfactory return on return investment its survival is threatened.

RELATED TO SALES

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(A)GROSS PROFIT RATIO
The first profitability ratio in relation to sales is the gross profit ratio or margin. It is
calculated by dividing the gross profit by sales.
The gross profit margin reflects the efficiency with which management produces each
unit or product. This ratio indicates the average spread between the cost of goods sold and the
sales revenue. When we subtract the gross profit margin from 100% we obtain the ratio of cost
goods sold to sales Both these ratio show profits relative to sales after the deduction of
production costs. And indicate the relation between production cost and selling price .A high
gross profit margin relative to the industry average that the firm is able produce at relatively
lower cost.
A high gross profit margin ratio is a sign of good management. A gross margin ratio may
increase due to any of the following factors.
a) Higher sales price cost of goods sold remaining constant.
b) A combination of variation in sales and costs, and the margin between them widening and
c) An increase in the proportionate volume of margin items.
The analysis of these factors will reveal to the management how a depressed gross profit
margin can be improved.
A low gross profit margin may reflect higher cost of goods sold due to firms inability to
purchase at favorable terms, inefficient utilization of plant and machinery of over investment in
plant and machinery, resulting in higher cost of production.
The ratio will also be low due to a fill in prices in the market or reduction in selling
prices.
Gross profit
Gross profit ratio= ------------ X 100
Sales

(B) NET PROFIT RATIO

Net pro-fit is obtained when operating expenses, interest and taxes are subtracted from
gross profit. The net profit ratio is measured by dividing profit after tax by sales.
Profit after Tax
Net Profit Ratio =
Sales

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 If the non operation income future is substantial, it may be excluded from profit after tax
to see profitability arising directly from sales. Net profit margin ratio establishes a relationship
between net profit and sales and sales and indicates managements efficiency manufacturing,
administering and selling the products. This ration is the overall measure of the firms ability to
turn each rupee sales into net profit. If the net margin is inadequate, the firm will fail to achieve
satisfactory return their equity.

This ratio also indicates the firms capacity to withstand adverse economic conditions.
A firm with a high net margin ratio would be in advantageous position to survive in the face of
face of falling sales price, rising costs of production or declaiming demand for the product.
It would really be difficult for a low net margin firm to with stand these adversities similarly, a
firm with high net profit margin can make better use of favorable conditions, such as rising sales
prices, falling cost of production or increasing demand for the product.
Net Profit
Net Profit Ratio = X100
Sales

Related to Investment

(a) Return on investment:

The term investment may refer to total assets or net assets. The funds employed in net
assets are known as capital employed. Net assets equal net fixed asset plus current asset minus
current liabilities, excluding band loans. Alternatively, capital employed is equal to net worth
plus total debt.
The conventional approach of calculating return on investment is to divide profit after tax
by investment represent, pool of funds supplied by share holders and lenders, while profit after
tax represents residue income of share holders.

Net Profit after Tax

Return on Investment or Assets = X100
Total Assets

(b) Return on capital employed:

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 The ROCE is the second type of the ratio. It is similar to the ROA expect in one respect
where the profits are related to the total capital employed. The term capital employed refers
to long term funds supplied by the creditors and owners of the firm. It is equal to non
current liabilities plus owners equity alternatively; it is equivalent to net working.

Net Profit after Taxes + Internet

ROCE = X100
Capital Employed

(c) Return on shareholders equity

According to this ratio, profitability is measured by dividing net profit after taxes by the
shareholders equity and includes:
1. Preference Share Capital
2. Ordinary shareholders equity consisting
Equity Share Capital
Share Premium
Reserves and surplus less accumulated losses.

Net Profit after Tax, Interest and Preference Divided

ROSE = X 100
Shareholders Equity

ROSE indicates how well the firm has used to resources of owners. In fact, this ration is
one of the most important relationships in ratio analysis. The earning of a satisfactory return is
the most desirable objective of business. The ratio of net profit to owners equity reflects the
extent to which this objective has been accomplished. This ratio is thus of great interest to
represent as well as prospective shareholders as also of great concern to management, which has
the responsibility of maximizing the owners welfare.
The returns on owners equity of the company should be compared with the ratios of
other similar companies and industry average. This will evaluate performance and strength of the

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company in attraction future investment. If a company has both preference and common
shareholders ROE should be calculated after deduction preference dividend from PAT (profit
after taxes).

Net Profit after Tax

Return on Working Capital Ratio = X 100
Working Capital

GUIDE LINES OR PRECAUTIONS FOR USE OF RATIOS:

The calculation of ratios may not be difficult task but their use is not easy. The
information on which these are based, the constraints of financial statements, objective for using
them, he caliber of the analyst are important factors which influence the use of ratios. Following
guidelines or factors may be kept in mind while interpreting various ratios.
(a) Accuracy of financial statements:
The ratios are calculated from the data available in financial statement. The reliability of
ratios is linked to the accuracy of information in these statements. Before calculating ratios one
should also be properly audited by competent auditors. The precautions will establish the
reliability of data given in financial statements.

(b) Objective or purpose of analysis:

The type of ratios to be calculated will depend upon the purpose for which these are
required. If the purpose is to study current financial position then ratios relation to current assets
liabilities will be studied. The purpose of the user is also important for the analysis of ratios.

(c) Selection of ratios:

Another precaution in ratio analysis is the proper selection of appropriate ratios. The
ratios should match the purpose for which these are required. Calculation of large number of
ratios without determining their need in the present context may confuse the things instead of
solving them.

(d). use of standards:

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 The ratio will give an indication of financial position only when discussed with reference
to certain standards. Unless otherwise these ratios are compared with certain standards one will
not be able to reach at conclusions.
(e) Caliber of the analyst:
The ratios are only the tools of analysis and their interpretation will depend upon the caliber and
competence of the analyst. He should be familiar with various financial statements and the
significance of changes etc.

LIMITATIONS OF RATIO ANALYSIS:

ratio analysis is subject to certain limitations:
They are given below:
(1) Comparative study required
Ratios are useful in judging the efficiency of the business only when they are compared
with past results or with the results of similar business. However much a comparison only
provides a simple of the past performance and forecasts for future may not prove correct since
several other. Factors live market conditions, management policies etc., may affect future
operations.
(2) Limitations of financial statements:
Ratios are based only on the information, which has been recorded in financial
statements. Financial statements suffer from a number of limitations; the ratios derived therefore
are also subject to those limitations, for example non financial changes, though important for the
businessb are not revealed by the financial statements. If the management of the company
changes, it may have ultimately adverse effects on the future profitability of the company but this
cannot be judged by having a balance at the financial statements of the company.
Similarly the management has a choice about the accounting policies. Different
accounting policies may be adopted by management of different companies regarding valuation
of inventories, depreciation, research and development expenditure and treatment of deferred
revenue expenditure etc. The comparison of one firm with another on the basis of ratio analysis
without taking into account the fact that companies have different accounting policies, will be

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misleading and meaningless. Moreover the management of the firm itself may change its
accounting policies form the one period to another.
(3) Ratio analysis is alone inadequate:
Ratios are only indicator they cannot be taken as final regarding good or bad financial
position of the business other things have also to be seen. For example a high current ratio does
not necessarily mean that the concern has a good or bad liquid position in case current assets
mostly comprise of outdated stocks. It has been correctly observed, no ratio may be regarded to
have good or bad interest. It may be an indication that aa firm is weak or strong but it must never
be taken as proof of either one, Ratio may be linked to railroads. They tell the analyst stop look
and listen.
(4) Window dressing

Then term window dressing means manipulation of accounts in a way so as to conceal

vital facts and present the financial statements in a way to show a better position of such a
situation. Presence of particular ratio may not be a definite indication of good or bad
management. For example, a high stock turnover ratio is generally considered to be an indication
of operational efficiency of failure to maintain proper stock of goods.
(5) Problem of price level changes

Financial analysis based on accounting ratio will give misleading results if the affects of
changes in prices level are not taken into account. For example two companies set up different
years, having or traditional machinery of different ages cannot be compared on the traditional
accounting statements. This is because he depreciation changed on plant and machinery incase of
old company would be at a much lower figure as compared to the company which has been be up
recently.
(6) No fixed standards
No fixed standards can be laid down, for ideal ratios for example, current ratio is
generally considered to be ideal of current assets are twice the current liabilities. However in
case of those concerns that have thus required, it may be perfectly ideal if current assets are equal
to or slightly more than current liabilities. It may therefore be concluded that ratio analysis, if
done mechanically, is not misleading but also dangerous, it is indeed a double edged sword,
which requires a great deal of understanding and sensitivity of the management process. The

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ratio analysis is an aid to management in taking correct decision, but as a mechanical substitute.
If indiscriminately calculated and wisely interpreted, it can be a useful tool for financial analysis.

Chapter-V
Data analysis and Interpretation

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 DATA ANALYSIS AND INTERPRETATION

The liquidity position of the organization can be found by using these ratios. These ratios are
mainly attributable to the simplicity in calculation and indication of the direction in which
further probing necessary.

CURRENT RATIO: Current Ratio is the ratio of current assets to current liabilities which can
be represent as follows

Current Ratio = Current assets

Current libilities

A firm having this ratio in 2:1 said to be perfectly good. A high ratio indicates that the
firm is having more ideal cash and a low ratio indicates inadequacy of cash. The following table
explains the short-term liquidity position of Vamsadhara Paper Mills Ltd., during 2011-2016.
Current Assets:

Cash, bank, debtors, bills receivable, loans and advances, inventories.

Current Liabilities:

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 Bills payable, outstanding expenses, bank overdraft and short term provisions.

Current Ratio During2011-2016

YEAR CURRENT ASSETS CURRENT LIABILITIES RATIO

2011-2012 14,94,40,214 3,28,12,704 4.55
2012-2013 16,33,73,821 5,97,34,995 2.73

2013-2014 16,64,28,366 7,59,13,806 2.19

2014-2015 34,81,88,577 13,73,39,454 2.53

2015-2016 40,47,93,876 16,45,03,613 2.46

CURRENT RATIO

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 RATIO
5
4.55
4.5
4
3.5
3 2.73 RATIO
2.53 2.46
2.5 2.19
2
1.5
1
0.5
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Interpretation

From the above table it is clear that the current ratio in the year 2011-2012 is 4.55 and in the
year 2015-2016 it was found to be 2.46 from this we can concluded that the liquidity position
the company is satisfactory. VPML should have to increase its current assets and decrease it is
the current liabilities so as to reach the current ratio at 2:1 from the table through the current
assets of increased to14,94,40,214 (in lakhs) the current ratio increased to 4.55, this was the
effect of decrease in the current liabilities in the year 2011-2012. i.e.,3,28,12,704 (in lakhs)

QUICK OR ACID TEST RATIO

This is the ratio of quick assets to current liabilities, which gives exact liquidity
position of the organization. Quick assets are obtained after deducting inventory from
current assets.
This is represented as follow
Quick Assets
Quick Assets = ----------------------------
Current Liabilities

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 An increase in ration indicates the increased liquidity position of the organization and
decrease in ration indicates inability to meet its payments. The following is the quick ratio for the
past 5 year.
Quick Assets:

Current assets excluding stock and prepaid expenses.

Current Liabilities:
Bills payable,outstanding expenses, bank overdraft and short term provisions.

Quick (or) Acid Test Ratio during 2011-2016

Quick Assets Current Liabilities RATIO
YEAR
2011-2012 11,89,54,809 3,28,12,704 3.62
2012-2013 13,18,39,681 5,97,34,995 2.21
2013-2014 12,09,16,074 7,59,13,806 1.59
2014-2015 23,17,91,411 13,73,39,454 1.69
2015-2016 30,99,30,196 16,45,03,613 1.88

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QUICK RATIO

RATIO
4
3.62
3.5
3
2.5 2.21 RATIO
2 1.88
1.59 1.69
1.5
1
0.5
0
YEAR 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

(Note: Quick Assets = Current Assets Inventory)

Interpretation
Generally Quick ratio of 1:1 is considered to be a satisfactory financial condition. As seen from
the table, the quick ratio in the year 2011-2012 is 3.62 and in the year 2012-2013 ,the quick ratio
is 2.21 and in the year 2013-2014 it was found as1.59 and in 2014-2015 it was found as 1.69and
in the year 2015-2016the quick ratio is 1.88.

CASH RATIO:

The liquidity position of the corporation can be calculated by cash ratio. This ratio gives a clear
picture of the firm because cash is the most liquid from assets.

Cash ratio = Cash / Current liabilities

Quick Assets:Bank balance, Cash and Marketing Securities.

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 Current Liabilities: Creditors, Bills payable, outstanding expenses, bank overdraft.

Cash ratio during the year2011-2016 (Rs.In crores)

Years Cash Current Liabilities Ratio (In times)

2011-12 3,28,12,704 0.85

2,82,08,116

2012-13 5,97,34,995 0.57

3,45,49,419

2013-14 98,92,593 7,59,13,806 0.13

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 2014-15 13,73,39,454 0.15
2,06,88,796

2015-16 16,45,03,613 0.15

2,49,96,976

Source; balance sheets of VPML from 2011-2012

CASH RATIO

Ratio (In times)

0.9 0.85
0.8
0.7
0.6 0.57
0.5 Ratio (In times)

0.4
0.3
0.2 0.13 0.15 0.15
0.1
0
2011-12 2012-13 2013-14 2014-15 2015-16

Graph shows changes the cash ratio for the past five years

Interpretation: The cash ratio for the past years is fluctuating. This ratio shows the
relationship between cash marketable securities and current liabilities.
LEVERAGE RATIO:
The leverage ratio shows the firms ability to meet its long term liabilities out if its net
worth. The leverage ratios may be calculated from the balance sheet items to determine the
proportion of the debt in total financing. Many variations of these ratios exists but all the ratios
indicate the same thing extent of which the firm his relied on debt in financing assets

DEBT - EQUITY RATIO:

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The Debt Equity ratio is measure of the relative clime of creditors and owners against the firms
assets.

Long-term Debt
Debt Equity Ratio = ------------------------
Shares holders equity

Debt - equity ratio during the year 2011-2016

Years Long Term Debt Shareholders equity Ratio

2011-2012 14,97,33,009 6,08,94,318 2.46

2012-2013 26,39,33,622 8,88,65,317 2.97

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 2013-2014 29,00,51,983 9,44,77,612 3.07

2014-2015 43,27,63,707 16,08,24,693 2.69

2015-2016 49,22,91,926 17,34,05,354 2.83

Source; balance sheets of VPML from 2011-2016

DEBT - EQUITY RATIO

Ratio
3.5
2.97 3.07
3 2.83
2.69
2.46
2.5
2 Ratio

1.5
1
0.5
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Graph shows changes the debt equity ratio for the past five years

Interpretation:The above graph is a study on the Debt Equity Ratio. This ratio showed a
fluctuating trend dependence on debt than an equity funds. Maximum dependence may result in
cost of capital i.e. interest cost. The company has to pay large sums of money in the form of
interest to the debenture holders and other loan providers.

PROPRIETARY RATIO

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 This is a variant of the debt equity ratio. This ratio relates the shareholders funds to total
assets. It is calculated by dividing the shareholders funds by the total tangible assets. This ratio
indicates the long term or future solvency position of the business 50% or more.

Shareholder Funds
Proprietary Ratio =
Total assets

proprietary ratio during the year 2011-2016

(Rs. In crores)

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 Years Shareholder funds Total assets Ratio (In times)

2011-2012 6,08,94,318 24,15,63,057 0.25

2012-2013 8,88,65,317 41,12,72,691 0.22

2013-2014 9,44,77,612 45,97,97,887 0.21

2014-2015 16,08,24,693 73,08,97,902 0.22

2015-2016 17,34,05,354 83,02,00,893 0.20

Source; balance sheets of VPML from 2011-2015

PROPRIETARY RATIO

Ratio (In times)

0.3

0.25
0.25
0.22 0.22
0.21
0.2
0.2
Ratio (In times)
0.15

0.1

0.05

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

Graph showsChanges the proprietary ratio for the past years

interpretation:

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The above table shows that the total assets increased in the every year. The proprietary ratio was
equal in the every year. The share holders funds increase in the every year.
ACTIVITY RATIOS:

Activity ratios are employed to evaluate the efficiency with which the firm manages and
utilizes its assets. These ratios are called turnover ratios. Because they indicate the speed with
which assets are being converted or turnover in to sales. Activity ratios are calculated in order to
judge the effectiveness of asset utilization.

FIXED ASSETS TURN OVER RATIO

The Fixed Assets Turnover Ratio measures the efficiency with which the firm is
utilizing the investment in fixed assets. It also indicates tight adequacy of sales relation to the
investment in fixed asset The fixed assets turnover ratio is calculated by dividing the sales/
income by net fixed assets i.e. the depreciated value fixed assets.

Sales
Fixed Assets Turn Over Ratio= ------------------
Net fixed Assets

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 fixed assets turn over ratio during the year 2011-2016

Years Sales Net Fixed assets Ratio (In times)

2011-2012 30,89,71,737 9,21,22,843 3.35

2012-2013 29,92,29,704 24,78,98,870 1.20

2013-2014 39,65,05,651 29,33,69,521 1.35

2014-2015 1,02,65,24,032 38,27,09,325 2.68

2015-2016 1,32,16,53,736 42,54,07,017 3.10

Source; balance sheets of VPML from 2011-2016

FIXED ASSETS TURN OVER RATIO

Ratio (In times)

4
3.5 3.35
3.1
3 2.68
2.5
Ratio (In times)
2
1.5 1.35
1.2
1
0.5
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

graph shows changes the fixed assets turnover ratio for the past five years

102 | P a g e
Interpretation
The fixed assets turnover ratio shows the efficiency of utilizing the concerns fixed to
maximize is sales/income operations. If this ratio is normal it shows that the concern is managing
its fixed assets effectively in generating sales/ income from operations. By analyzing the above
table it is inferred that the fixed assets turnover ratio is 3.35 highly in the year2011-12.ln the year
2012-13 the fixed assets turnover ratio is 1.20 it is low with compare the other years. On the
whole the fixed assets turnover ratio is satisfactory.

DEBTORS TURN OVER RATIO

It measures the cash position of the firm. It shows how quickly the accounts receivable
are convertible into cash. The debtor turns over gives relation between the credited sales and
cash realization.
Debtors turnover ratio is calculated by dividing credit sales by average debtors. Some
times the information about the credit sales and the opening and closing balance of debtors is not
allowable in that case the debtor turnover ratio can be calculated by dividing the sales by sundry
debtors.

Debtors Turnover ratio = Total sales / Debtors

103 | P a g e
Debtors turnover ratio during the year 2011-2016

Years Sales Debtors Ratio (In times)

2011-12 30,89,71,737 5,86,47,013 5.27

2012-13 29,92,29,704 6,30,44,214 4.75

2013-14 39,65,05,651 8,23,54,838 4.81

2014-15 1,02,65,24,032 16,19,51,810 6.33

2015-16 1,32,16,53,736 20,57,95,883 6.42

Source; balance sheets of VPML from 2011-16

DEBTORS TURN OVER RATIO

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 Ratio (In times)
7
6.33 6.42
6
5.27
5 4.75 4.81

4 Ratio (In times)

0
2011-12 2012-13 2013-14 2014-15 2015-16

WORKING CAPITAL TURNOVER RATIO:

The surplus of the current assets over the current liabilities is known as the working capital
and the management. Of short-term assets and liabilities is known as working capital and
management. This play an important role in maintaining the financial health of the firm. This
turnover is the relationship between the net sales it may thus compute net working capital
turnover by dividing sales by the net current assets.

Working capital turnover ratio: sales/ working capital

Net Working Capital:Total Current Assets Total Current liabilities

Sales: Sales

105 | P a g e
WORKING CAPITAL TURNOVER RATIO (Rs. In crores)

Years Sales Working Capital Ratio (In times)

30,89,71,737 11,66,27,510 2.64

2011-12

29,92,29,704 10,36,38,826 2.88

2012-13

39,65,05,651 9,05,14,560 4.38

2013-14

1,02,65,24,032 21,08,49,123 4.86

2014-15

1,32,16,53,736 24,02,90,263 5.50

2015-16

Source; balance sheets of VPML from2011=16

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 Ratio (In times)
6 5.5

5 4.86
4.38
4
Ratio (In times)
2.88
3 2.64

0
2011-12 2012-13 2013-14 2014-15 2015-16

Chart showing the changes of working capital for the past five years
Interpretation: The above table and graphical representation is shown the changes in the net
working capital ratio. In the year 2011=12 the net working capital ratio is very low i.e., 2.64 and
the net working capital ratio is high in the year 2015=16 i.e., 5.50 The difference between the
current assets and current liabilities are influenced the net working capital. So the companys
overall networking capital ratio is satisfactory.

TOTAL CURRENT ASSETS TURNOVER RATIO

Total Current Assets Turnover Ratio=Sales/current assets

sales: sales
Current assets: cash, bank, debtors, bills receivables, loans and advances, inventories etc.

Total Current Assets Turnover Ratio during the year 2011-16 (Rs. In crores)

Years Sales Current Assets Ratio (In times)

30,89,71,737 14,94,40,214
2011-12 2.06

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 29,92,29,704 16,33,73,821
2012-13 1.83

39,65,05,651 16,64,28,366
2013-14 2.38

1,02,65,24,032 34,81,88,577
2014-15 2.94

1,32,16,53,736 40,47,93,876
2015-16 3.26

Source; balance sheets of VPML from2011-16

TOTAL CURRENT ASSETS TURNOVER RATIO

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 Ratio (In times)
3.5 3.26
2.94
3

2.5 2.38
2.06
2 1.83 Ratio (In times)

1.5

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Chart showing the changes of current assets turn over ratio for past five years.

interpretation:

The current assets turn over ratio explains the relationship between the sales and current
assets. The ratio was fluctuated from past five years. It was decreased in the year 2011-12so the
company has to take measures to increase both sales and the current assets.

FIXED ASSETS TURN OVER RATIO

109 | P a g e
 The Fixed Assets Turnover Ratio measures the efficiency with which the firm is
utilizing the investment in fixed assets. It also indicates tight adequacy of sales relation to the
investment in fixed asset The fixed assets turnover ratio is calculated by dividing the sales/
income by net fixed assets i.e. the depreciated value fixed assets.
Fixed Assets Turn Over Ratio= Sales /Net fixed Assets

Fixed Assets Turn Over Ratio during the year 2011-16

110 | P a g e
 Years Sales Net Fixed assets Ratio (In times)

2011-12 30,89,71,737 9,21,22,843 3.35

2012-13 29,92,29,704 24,78,98,870 1.20

2013-14 39,65,05,651 29,33,69,521 1.35

2014-15 1,02,65,24,132 38,27,09,325 2.68

2015-16 1,32,16,53,736 42,54,07,017 3.10

Source; balance sheets of VPML from 2011-16

FIXED ASSETS TURN OVER RATIO

Ratio (In times)

4
3.5 3.35
3.1
3 2.68
2.5 Ratio (In times)
2
1.5 1.35
1.2
1
0.5
0
2011-12 2012-13 2013-14 2014-15 2015-16

The graph shows the changes the fixed assets turnover ratio for the past five years
INTERPRETATION: The fixed assets turnover ratio shows the efficiency of utilizing the
concerns fixed to maximize is sales/income operations. If this ratio is normal it shows that the
concern is managing its fixed assets effectively in generating sales/ income from operations. By
analyzing the above table it is inferred that the fixed assets turnover ratio is 3.35 highly in the

111 | P a g e
year 2011-12.ln the year 2012-13 the fixed assets turnover ratio is 1.20 it is low with compare the
other years. On the whole the fixed assets turnover ratio is satisfactory.

PROFITABILITY RATIOS

Profit is the difference between total revenue and total expenses in a particular period of
time. On the other hand shareholder who wants fair return from their investment generally two
types of profitability ratios are calculated. They are
1. Profitability related to sales 2.profitability related to investment

1. Profitability ratios as related to sales

These ratios are calculated on the basis of sales and are based on the promise that the firm
should earn a sufficient profit on its sales. Otherwise it may feel difficult in the operating
expenses and the shareholders will get on return. Under this group we calculate

1Gross profit Ratio 2.Net profit Ratio

GROSS PROFIT RATIO

This ratio gives the relationship between gross profit and sales as it measure the operating
efficiency of the firm reflects it in its price policy. This ratio is calculated by dividing the gross
profit by sales.
Gross profit
Gross profit Ratio= ------------------------
Sales

112 | P a g e
NET PROFIT RATIO

Net pro-fit is obtained when operating expenses, interest and taxes are subtracted from
gross profit. The net profit ratio is measured by dividing profit after tax by sales.
Profit after Tax
Net Profit Ratio =
Sales
If the non operation income future is substantial, it may be excluded from profit after tax
to see profitability arising directly from sales.

Net profit margin ratio establishes a relationship between net profit and sales and sales
and indicates managements efficiency manufacturing, administering and selling the products.
This ration is the overall measure of the firms ability to turn each rupee sales into net profit. If
the net margin is inadequate, the firm will fail to achieve satisfactory return their equity.

It would really be difficult for a low net margin firm to with stand these adversities
similarly, a firm with high net profit margin can make better use of favorable conditions, such as
rising sales prices, falling cost of production or increasing demand for the product.

113 | P a g e
Net Profit Ratio during the year 2011-16 (Rs. In crores)

Years Net profit Sales Ratio (In times)

2011-12 51,16,232 30,89,71,737 1.7

2012-13 49,338 29,92,29,704 0.02

2013-14 1,12,46,721 39,65,05,651 2.8

2014-15 31,75,680 1,02,65,24,032 0.30

2015-16 50,73,073 1,32,16,53,736 0.38

Source; balance sheets of VPML from 2011-16

NET PROFIT RATIO

Ratio (In times)

3 2.8

2.5

2
1.7
Ratio (In times)
1.5

0.5 0.3 0.38

0.02
0
2011-12 2012-13 2013-14 2014-15 2015-16

114 | P a g e
PROFITABILITY RELATED TO INVESTMENT

Return on investment the profitability of the firm is also measured in relation to

investment. The term investment may refer to total assets capital employed and owners equity.
And ratio may be based on these concepts

RETURN ON SHAREHOLDERS EQUITY

This ratio reveals the relationship provided by the owners investment to the profit earned
on that. It measures the rate of return on investment of shareholders equity.
The shareholders equity will include ordinary share capital preferential share capital
premium reserves and surplus. It is otherwise some times called as net worth for the company.
The return on shareholders equity can be calculated by dividing the net profit by net worth.

Net profit after tax

Return on shareholders equity = ------------------------
Net worth

115 | P a g e
Return on shareholders equity during the year2011-16 (Rs. In crores)

Years Net profit after tax Net worth Ratio (In times)

2011-12 51,16,232 6,08,94,318 8.40

2012-13 49,338 8,88,65,317 0.05

2013-14 1,12,46,721 9,44,77,612 1.19

2014-15 31,75,680 16,08,24,693 1.97

2015-16 50,73,073 17,34,05,354 2.92

Source; balance sheets of VPML from 2011-16

RETURN ON SHAREHOLDERS EQUITY

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 Ratio (In times)
9 8.4
8
7
6
5 Ratio (In times)

4
2.92
3
1.97
2
1.19
1
0.05
0
2011-12 2012-13 2013-14 2014-15 2015-16

The above graph shows the changes the return on shareholders equity for the past five yeras

Interpretation:

The above graph shows the return on shareholders equity was highest during the year
2011-12. And lowest during the year2012-13

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31stMAR,2012

PARTICULARS AMOUNT(RS) AMOUNT(RS)

INCOME:
SALES 30,89,71,737
OTHER INCOME 50,76,553
INCREASE IN INVENTORY
OPENING STOCK
FINSHED GOODS 39,81,270
WORK-IN-PROCESS 4,68,894 44,50,164
LESS:CLOSING STOCK
FINISHED GOODS 62,56,537
WORK-IN-PROCESS 4,98,825 67,55,361 23,05,197
TOTAL 31,63,53,488

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EXPENDITURE:
PAYMENTS AND BENEFITS TO EMPLOYEES
MANUFACTURING EXPENSES 1,55,33,705
RENT RATES&TAXES 22,22,01,910
ADMINISTRATIVE &OTHER EXPENSES 3,31,13,197
DEPRECIATION 82,11,480
INTEREST AND OTHER 85,18,182
FINANCIAL CHARGES
SELLING EXPENSES 75,43,091
TOTAL 1,27,44,338
PROFIT FOR THE PERIOD 30,78,65,903
ADD:PRIOR YEAR ADJUSTMENT (NET) 84,87,585
PROFIT BEFORE TAX 51,244
PROVISION FOR TAX 85,38,829
PROFIT AFTER TAX&BEFORE APPROPRITION 11,00,000
LESS:A.TRNSFER TO GENERAL RESERVE 74,38,829
B.PROPOSED DIVIDEND 2,13,471
C.PROVISION FOR DIVIDEND TAX 18,49,706
2,59,421 23,22,598
BALANCE CREDITED TO BALANCE SHEET
51,16,232

BALANCE SHEET AS AT 31stMARCH,2012

PARTICULARS AMOUNT(RS.) AMOUNT(RS.)

SOURCE OF FUNDS
1.SHARE HOLDERS FUNDS
A.SHARE CAPITAL 4,01,27,750
B.RESERVES AND SURPLUS 2,07,66,568
2.LOAN FUNDS
A.SECURED LOANS 10,07,93,205
B.UNSECURED LOANS 3,70,10,332
C.DEFERED TAX LIABILITY 1,19,29,479
TOTAL 21,06,27,327
APLICATION OF FUNDS
1.FIXED ASSETS
A.GROSS BLOCK 18,19,18,311
LESS:DEPRECIATION 12,11,39,114

118 | P a g e
 NETBLOCK 6,07,79,197
B.ADD:CAPITAL WORK IN PROGRESS 3,13,43,646 9,21,22,843
2.CURRENT ASSETS,LOANS AND ADVANCES
A. INVENTORIES 3,04,85,405
B.SUNDRY DEBTORS 5,86,47,013
C.CASH AND BANK BALANCE 2,82,08,116
D.LOANS AND ADVANCE 3,20,99,680
TOTAL CURRENT ASSETS,LOANS AND ADVANCES 14,94,40,214
LESS:CURRENT LIABILITIES AND PROVISIONS
A.SUNDRY CREDITORS
B.INTEREST ACCRED BUT NOT DUE 1,79,39789
C.CREDITORS FOR EXPENCES 17,16,631
D.PROVISION FOR TAXTION 29,17,539
E.SECURITY DEPOSITS 9,50,000
F.ADVANCES FROM CUSTEMERS 20,000
E.PROPOSED DIVIDEND 46,50,647
F.PROVISION FOR DIVIDEND TAX 18,49,706
G.OTHER LIABILITIES 2,59,421
NET CURRENT ASSET 25,08,972
3.MISC.EXPENDITER(TO THE EXTENT NOT
WRITTEN OFF OR ADJUSTED)
A.DEFERED REVENUE EXP 11,66,27,510

18,76,974

TOTAL 21,06,27,327

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31stMAR,2013

PARTICULARS AMOUNT(RS) AMOUNT(RS)

INCOME:
SALES 29,92,29,704
OTHER INCOME 45,94,205
INCREASE IN INVENTORY
OPENING STOCK
FINSHED GOODS 62,56,537
WORK-IN-PROCESS 4,98,825 67,55,362
LESS:CLOSING STOCK
FINISHED GOODS 65,81,145
WORK-IN-PROCESS 5,22,789 71,03,934 3,48,573
TOTAL 30,41,72,482

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EXPENDITURE:
PAYMENTS AND BENEFITS TO EMPLOYEES 1,65,61,847
MANUFACTURING EXPENSES 22,24,21,376
RENT RATES&TAXES 3,11,50,895
ADMINISTRATIVE &OTHER EXPENSES 63,49,229
DEPRECIATION 84,76,983
INTEREST AND OTHER
FINANCIAL CHARGES 58,61,312
SELLING EXPENSES 1,20,07,404
TOTAL 30,28,29,046
PROFIT FOR THE PERIOD 13,43,436
ADD:PRIOR YEAR ADJUSTMENT (NET) (29,230)
PROFIT BEFORE TAX 13,14,206
PROVISION FOR TAX 1,64,868
PROFIT AFTER TAX&BEFORE APPROPRITION 49,338
LESS:A.TRNSFER TO GENERAL RESERVE 0 0
B.PROPOSED DIVIDEND 0
C.PROVISION FOR DIVIDEND TAX 0
49,338
BALANCE CREDITED TO BALANCE SHEET

BALANCE SHEET AS AT 31stMARCH2013

PARTICULARS AMOUNT(RS.) AMOUNT(RS.)

SOURCE OF FUNDS
1.SHARE HOLDERS FUNDS
A.SHARE CAPITAL 2,46,62,750
B.SHARE APLICATION MONEY 4,21,41,000
B.RESERVES AND SURPLUS 2,20,61,567
2.LOAN FUNDS
A.SECURED LOANS 21,44,03,931
B.UNSECURED LOANS 3,88,45,880
C.DEFERED TAX LIABILITY 1,06,83,812
TOTAL 35,27,98,940

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APLICATION OF FUNDS
1.FIXED ASSETS
A.GROSS BLOCK 18,46,77,026
LESS:DEPRECIATION 12,12,49,260
NETBLOCK 6,34,27,766
B.ADD:CAPITAL WORK IN PROGRESS 18,44,71,104 24,78,98,870
2.CURRENT ASSETS,LOANS AND ADVANCES
A. INVENTORIES 3,15,34,140
B.SUNDRY DEBTORS 6,30,44,214
C.CASH AND BANK BALANCE 3,45,49,419
D.LOANS AND ADVANCE 3,42,45,048
TOTAL CURRENT ASSETS,LOANS AND ADVANCES 16,33,73,821
LESS:CURRENT LIABILITIES AND PROVISIONS
A.SUNDRY CREDITORS 4,45,17,260
B.INTEREST ACCRED BUT NOT DUE 36,01,264
C.CREDITORS FOR EXPENCES 35,32,381
D.PROVISION FOR TAXTION 11,08,798
F.ADVANCES FROM CUSTEMERS 36,84,540
E.PROPOSED DIVIDEND 0
F.PROVISION FOR DIVIDEND TAX 0
G.OTHER LIABILITIES 32,90,751
NET CURRENT ASSET
3.MISC.EXPENDITER(TO THE EXTENT NOT 10,36,38,826
WRITTEN OFF OR ADJUSTED)
A.DEFERED REVENUE EXP 12,61,244
TOTAL 35,27,98,940

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31stMAR2014

PARTICULARS AMOUNT(RS) AMOUNT(RS)

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INCOME:
SALES 39,65,05,651
OTHER INCOME 41,23,052
INCREASE IN INVENTORY
OPENING STOCK
FINSHED GOODS 65,81,145
WORK-IN-PROCESS 5,22,790 71,03,935
LESS:CLOSING STOCK
FINISHED GOODS 64,36,781
WORK-IN-PROCESS 14,92,381 79,29,162 8,25,227
TOTAL 40,14,53,931
EXPENDITURE: 1,95,50,689
PAYMENTS AND BENEFITS TO EMPLOYEES 31,55,07,614
MANUFACTURING EXPENSES 2,23,18,409
RENT RATES&TAXES 91,28,553
ADMINISTRATIVE &OTHER EXPENSES 1,48,06,515
DEPRECIATION 1,76,44,000
INTEREST AND OTHER 1,34,11,536
FINANCIAL CHARGES
SELLING EXPENSES
TOTAL 41,23,67,316
PROFIT/(LOSS) FOR THE PERIOD (1,09,13,385)
ADD:PRIOR YEAR ADJUSTMENT (NET) (1,33,337)
PROFIT/(LOSS) BEFORE TAX (1,10,46,721)
PROVISION FOR TAX 2,00,000
PROFIT/(LOSS) AFTER TAX&BEFORE (1,21,46,721)
APPROPRITION
LESS:A.TRNSFER TO GENERAL RESERVE --------
B.PROPOSED DIVIDEND -------
C.PROVISION FOR DIVIDEND TAX --------

(1,12,46,721
BALANCE CREDITED TO BALANCE SHEET
)

BALANCE SHEET AS AT 31stMARCH,2014

PARTICULARS AMOUNT(RS.) AMOUNT(RS.)

122 | P a g e
SOURCE OF FUNDS
1.SHARE HOLDERS FUNDS
A.SHARE CAPITAL 2,46,62,750
B.SHARE APLICATION MONEY 5,57,51,000
B.RESERVES AND SURPLUS 1,40,63,862
2.LOAN FUNDS
A.SECURED LOANS 24,20,22,596
B.UNSECURED LOANS 4,05,94,592
C.DEFERED TAX LIABILITY 74,34,795
TOTAL 38,45,29,595
APLICATION OF FUNDS
1.FIXED ASSETS
A.GROSS BLOCK 40,87,43,627
LESS:DEPRECIATION 13,60,55,775
NETBLOCK 27,26,87,852
B.ADD:CAPITAL WORK IN PROGRESS 2,06,81,669 29,33,69,52
2.CURRENT ASSETS,LOANS AND ADVANCES 1
A. INVENTORIES 455,12,292
B.SUNDRY DEBTORS 823,54,838
C.CASH AND BANK BALANCE 98,92,593
D.LOANS AND ADVANCE 286,68,643
TOTAL CURRENT ASSETS,LOANS AND ADVANCES 166,428,366

LESS:CURRENT LIABILITIES AND PROVISIONS

A.SUNDRY CREDITORS
B.INTEREST ACCRED BUT NOT DUE 5,73,62,225
C.CREDITORS FOR EXPENCES 5,95,423
D.PROVISION FOR TAXTION 55,65,718
E.ADVANCES FROM CUSTEMERS 0
F.OTHER LIABILITIES 68,36,512
55,53,928
NET CURRENT ASSET
3.MISC.EXPENDITER(TO THE EXTENT NOT 9,05,14,560
WRITTEN OFF OR ADJUSTED)
A.DEFERED REVENUE EXP
6,45,514
TOTAL 38,45,29,595
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31stMAR2015

123 | P a g e
 PARTICULARS AMOUNT(RS) AMOUNT(RS)
INCOME:
SALES 1,02,65,24,032
OTHER INCOME 1,25,93,241
INCREASE IN INVENTORY
OPENING STOCK
FINSHED GOODS
WORK-IN-PROCESS 1,22,79,455
LESS:CLOSING STOCK
FINISHED GOODS
WORK-IN-PROCESS 1,29,01,672 6,22,218
TOTAL 1,03,97,39,491
EXPENDITURE:
PAYMENTS AND BENEFITS TO EMPLOYEES 3,72,14,651
MANUFACTURING EXPENSES 82,81,83,866
RENT RATES&TAXES 3,29,68,594
ADMINISTRATIVE &OTHER EXPENSES 1,79,04,455
DEPRECIATION 4,21,79,478
INTEREST AND OTHER
FINANCIAL CHARGES 4,04,69,602
SELLING EXPENSES 3,42,27,541
TOTAL 1,03,31,48,187
PROFIT FOR THE PERIOD 65,91,304
ADD:PRIOR YEAR ADJUSTMENT (NET) 0
PROFIT BEFORE TAX 65,91,304
(LESS)PROVISION FOR TAX(DEFFERED TAX 34,15,624
31,75,680
PROFIT AFTER TAX&BEFORE APPROPRITION ------
LESS:A.TRNSFER TO GENERAL RESERVE ------
B.PROPOSED DIVIDEND ----- --------
C.PROVISION FOR DIVIDEND TAX
31,75,680
BALANCE CREDITED TO BALANCE SHEET

BALANCE SHEET AS AT 31stMARCH,2015

PARTICULARS AMOUNT(RS.) AMOUNT(RS.)

124 | P a g e
SOURCE OF FUNDS
1.SHARE HOLDERS FUNDS
A.SHARE CAPITAL 7,06,53,220
B.SHARE APLICATION MONEY 2,36,11,515
B.RESERVES AND SURPLUS 6,65,59,958
2.LOAN FUNDS
A.SECURED LOANS 35,14,55,267
B.UNSECURED LOANS 5,99,41,512
C.DEFERED TAX LIABILITY 2,13,66,928
TOTAL 59,35,88,400
APLICATION OF FUNDS
1.FIXED ASSETS
A.GROSS BLOCK 55,77,48,030
LESS:DEPRECIATION 21,88,67,619
NETBLOCK 33,88,80,411
B.ADD:CAPITAL WORK IN PROGRESS 4,38,28,915 38,27,09,326
2.CURRENT ASSETS,LOANS AND ADVANCES
A. INVENTORIES 11,63,97,166
B.SUNDRY DEBTORS 16,19,51,810
C.CASH AND BANK BALANCE 2,06,88,796
D.LOANS AND ADVANCE 4,91,50,805
TOTAL CURRENT ASSETS,LOANS AND ADVANCES 34,81,88,577

LESS:CURRENT LIABILITIES AND PROVISIONS

A.SUNDRY CREDITORS
B.INTEREST ACCRED BUT NOT DUE 11,00,43,340
C.CREDITORS FOR EXPENCES 4,85,467
D.PROVISION FOR TAXTION 1,78,56,637
E.ADVANCES FROM CUSTEMERS 38,093
F.OTHER LIABILITIES 1,44,995
NET CURRENT ASSET 87,70,923
3.MISC.EXPENDITER(TO THE EXTENT NOT 21,08,49,123
WRITTEN OFF OR ADJUSTED)
A.DEFERED REVENUE EXP
29,951
TOTAL 59,35,88,400

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31stMAR,2016

125 | P a g e
 PARTICULARS AMOUNT(RS) AMOUNT(RS)
INCOME:
SALES 1,32,16,53,736
OTHER INCOME 1,53,10,985
INCREASE/(DECREASE) IN INVENTORY
OPENING STOCK
FINSHED GOODS
WORK-IN-PROCESS 1,29,01,672
LESS:CLOSING STOCK
FINISHED GOODS
WORK-IN-PROCESS 81,26,377 (47,75,295)
TOTAL 1,33,21,89,426
EXPENDITURE:
PAYMENTS AND BENEFITS TO EMPLOYEES 4,22,89,666
MANUFACTURING EXPENSES 1,06,90,36,747
RENT RATES&TAXES 3,80,47,008
ADMINISTRATIVE &OTHER EXPENSES 2,02,23,792
DEPRECIATION 4,71,07,906
INTEREST AND OTHER
FINANCIAL CHARGES 4,83,27,265
SELLING EXPENSES 4,47,32,306
TOTAL 1,30,97,64,689
PROFIT FOR THE PERIOD 2,24,24,736
ADD:PRIOR YEAR ADJUSTMENT (NET) 0
PROFIT BEFORE TAX 2,24,24,736
LESS:PROVISION FOR TAX
A) MAT ENTITLEMENT 46,00,000
B)DEFFERED TAX 27,51,663 7351663
150,73,073
PROFIT AFTER TAX&BEFORE APPROPRITION -----
LESS:A.TRNSFER TO GENERAL RESERVE -----
B.PROPOSED DIVIDEND ----- -------
C.PROVISION FOR DIVIDEND TAX

BALANCE CREDITED TO BALANCE SHEET 150,73,073

BALANCE SHEET AS AT 31stMARCH,2016

PARTICULARS AMOUNT(RS.) AMOUNT(RS.)

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SOURCE OF FUNDS
1.SHARE HOLDERS FUNDS
A.SHARE CAPITAL 7,80,75,270
B.SHARE APLICATION MONEY 16,75,000
B.RESERVES AND SURPLUS 9,36,55,083
2.LOAN FUNDS
A.SECURED LOANS 40,89,65,295
B.UNSECURED LOANS 5,92,08,040
C.DEFERED TAX LIABILITY 2,41,18,591
TOTAL 66,56,97,280
APLICATION OF FUNDS
1.FIXED ASSETS
A.GROSS BLOCK 65,06,76,201
LESS:DEPRECIATION 25,96,80,574
NETBLOCK 39,09,95627
B.ADD:CAPITAL WORK IN PROGRESS 3,44,11,390 42,54,07,017
2.CURRENT ASSETS,LOANS AND ADVANCES
A. INVENTORIES 9,48,63,680
B.SUNDRY DEBTORS 20,57,95,883
C.CASH AND BANK BALANCE 2,49,96,976
D.LOANS AND ADVANCE 7,91,37,337
TOTAL CURRENT ASSETS,LOANS AND ADVANCES 40,47,93,876

LESS:CURRENT LIABILITIES AND PROVISIONS

A.SUNDRY CREDITORS
B.INTEREST ACCRED BUT NOT DUE 12,92,23,157
C.CREDITORS FOR EXPENCES 50,186
D.PROVISION FOR TAXTION 1,36,39,899
E.ADVANCES FROM CUSTEMERS 46,00,000
F.OTHER LIABILITIES 2,76,398
1,67,13,971
NET CURRENT ASSET
24,02,90,263
3.MISC.EXPENDITER(TO THE EXTENT NOT
WRITTEN OFF OR ADJUSTED)
A.DEFERED REVENUE EXP
0
TOTAL 66,56,97,280

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 Chapter-VI
Summary, Findings and Suggestions

6.1 SUMMARY
The project entitled A Study on RATIO ANALYSIS with reference to
VAMSHADHARA PAPER MILLS. Has been divided into five chapters to arrange the
Total information in a perfect manner.

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 The first chapter includes the Introduction, Need for the study, Objectives of
theStudy and Limitations of the study. Through this chapter we can understand the
opinion of the investigator on that project and the interest he paid on the project. Form this
chapter wecan know the over view of the paper Manufacturing Industry industry and the
Vamshadhara paper mills over view in a very detailed manner. In the Introduction (1.1) the
details of the Paper Manufacturing industry i.e. origin of the paper manufacturing industry,
growth of the industry and the major players of the industry and the total details of the
vamshadhara paper mills and the position of vamshadhara in Andhra Pradesh and some other
details pertaining to the company has been given. After giving the details of the company, the
topic introduction was given like the definitions of the topic collected from different
sources and the analysis of those definitions were explained. After the explanation of the
definition, the importance of the study and the use of the study to the company were
clearly explained.

After the introduction the Need for the study (1.2) has been explained briefly. In

this, why the investigator has chosen that topic and what can he get from that study and the use

of the study and how it is useful to him is explained briefly. Because without any need the study

will not be conducted. After explaining the need of the study the objectives of the study (1.3),

was given. In this part, what information the investigator wanted collect and why he wanted to

do the project in that particular company and what goal he wanted to reach through this project

has been clearly explained.

The second chapter includes Review of literature of the topic. To collect Researchers

brief report to the topic.

The Third chapter includes Genesis and Growth of the company, organization

structure of the company, all the functional areas like Marketing, HR, Finance and Production,

finally the Future trends of the company. All these functions are explained, in Genesis and

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Growth of the company, the origin of the two wheelers industry and vamshadhara paper mills
growth of the company has been explained. The growth of the company has shown year by
year. has also been included in this portion of the

Third chapter. After the explanation Genesis and Growth of the company the

organization structure of the company and its importance and the use has been explained

with the organization structure can decide the future of the subordinates in the company. The

organization structure can decide the future of the company whether it is going to be successful

or a failure one.

The Fourth chapter is about the topic Theoretical frame work of

vamshadhara paper mills Ratio analysis. can have wide range of choices to select and
purchase the different products. Vamshadhara is a first leading player in paper manufacturing
Industry in Andhra Pradesh. It has its own brand image and having width and depth of
distribution through their branches in many parts of Andhra Pradesh. The companys
marketing objectives and strategies influences the development of sales promotion objectives
and strategies.

Fifth Chapter It deals with analysis and interpretation of financial performance of

the company by using ratio analysis and we are calculate the overall ratios in this chapter.

The Sixth chapter includes the summary, findings and the suggestions which were

Given to the company. Summary is a tool to understand the total study of the investigator at a

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glance very briefly. In this summary the details of each and every Chapter were kept to make the

observer understood the total project clearly. After the summary part the findings from the study

were given. All the findings are very useful to the company to understand the position of the

companies in the two wheeler industry. From these findings the company can know their merits

and the demerits of the company in these three clusters where the survey was conducted.

6.2 FINDINGS

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 VPML sales were showed an increasing trend. In the year 2011-12 their sales were
Rs.30,89,71,737. and in the year 2015-16 their sales were Rs.1,32,16,53,736. So the
company sales increased by Rs.1,01,26,81,999. The increase of sales from the year 2011-
12 to 2015-16 is 3.3times to 2011-12 sales.

The quick ratio was decreasing from the last three years. But it is maintaining nearly 1:1.

The current ratio during the year 2015-16 was 2.46. it is healthful to the organization.

Debt equity ratio showed a fluctuating trend in VPML was depended more on debt than
equity funds.

The fixed assets in VPML are not proper and stable.

The management of working capital in VPML is not in efficient manner. It is showing

decreasing in the year 2015-16

The net profit ratio was fluctuating for the past five years.

Return on shareholder equity was very low except 2012-13

Debtors position is satisfied. in the year 2015-16 the debtors increased.

6.3 SUGGESTIONS

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 Current ratio is decreasing from the last two years. But is better to increase more.

For increase of current ratio, the company should increase of current assets and decrease
of current liabilities.

The company should maintained fixed assets properly and stable.

Working capital ratio is decreasing during the year 2011-12..and in the year 2015-16 the
working capital is 5.5.for maintaining working capital properly the company having
current assets.

In VPML long term debt is two times to equity shareholders funds. Long term debt is
increasing. They have to pay more interests to the debenture holders. So it is better to
increase the funds from shareholder equity.

THE MAIN OBJECTIVES OF THE ORGANIZATION ARE AS FOLLOWS

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 To provide employment to rural area or villagers.
To produce production distribute to requirement of the country for a lower post.
To reduce droughtness in this area through business activity.
To utilizing maximum resources and provide some amount contribution in countries
economy
Total manpower of Vamshadara paper mills Ltd is 335. In this number 39 are staff and permanent
work man 149, casuals are 147.

In the third chapter theoretical framework of the ratio analysis was discussed.

Ratio expresses numerical relation between two numbers. it is the relationship of one time to
another expressed in simple mathematical form. Ratio analysis is not only a technique to point
out relationship between two figures but also points out the devices to measure the fundamental
strength or weakness of a concern.

Financial ratios may be categorized four ways. Liquidity Debt, Profitability and coverage
ratios are computed form the income statements and sometimes, from both the statements

Liquidity ratios measure the ability of a firm to meet it short term obligations and reflect
the short term financial strength/ solvency of a firm. The leverage ratio shows the firms ability
to meet it long term liabilities out of its net worth. Activities ratio are also called as turnover
ratio. Activities ratios are employed to evaluate the efficiency with which thaw firm manages and
utilizes its assets. Profitability is a measure efficiency and control. It indicates the efficiency of
effectiveness with which the operations of the business are carried on.

In the fourth chapter deals with data analysis and interpretation. In this chapter current
ratio, quick ratio, cash ratio, activity ratios, profitability ratios were shown in graphs and
interpretation was presented under the graph.

In the fifth chapter deals with findings and suggestions. VPML sales increase from 2010-
15 is 3.3 times to 2010-11 sales. VPML was depend more on debt. The company should
maintained fixed assets properly and stable.

BIBILOGRAPHY

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Data source
Financial reports Annual Reports of
Vamsadhara paper mills Ltd. (2007-2012)

REFERENCE:

PANDEY.I.M Financial Management

Vikas publishers, New Delhi

CHANDRA PRASANNA Financial Management

Principles & practice
Sultan chand& sons publications
New Delhi `

WEBSITES:

www.managementparadise.com
www.google.com
www.sennargroup.com

ANNEXURE

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 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31stMAR,2016

PARTICULARS AMOUNT(RS) AMOUNT(RS)

INCOME:
SALES 1,32,16,53,736
OTHER INCOME 1,53,10,985
INCREASE/(DECREASE) IN INVENTORY
OPENING STOCK
FINSHED GOODS
WORK-IN-PROCESS 1,29,01,672
LESS:CLOSING STOCK
FINISHED GOODS
WORK-IN-PROCESS 81,26,377 (47,75,295)
TOTAL 1,33,21,89,426
EXPENDITURE:
PAYMENTS AND BENEFITS TO EMPLOYEES 4,22,89,666
MANUFACTURING EXPENSES 1,06,90,36,747
RENT RATES&TAXES 3,80,47,008
ADMINISTRATIVE &OTHER EXPENSES 2,02,23,792
DEPRECIATION 4,71,07,906
INTEREST AND OTHER
FINANCIAL CHARGES 4,83,27,265
SELLING EXPENSES 4,47,32,306
TOTAL 1,30,97,64,689
PROFIT FOR THE PERIOD 2,24,24,736
ADD:PRIOR YEAR ADJUSTMENT (NET) 0
PROFIT BEFORE TAX 2,24,24,736
LESS:PROVISION FOR TAX
A) MAT ENTITLEMENT 46,00,000
B)DEFFERED TAX 27,51,663 7351663
150,73,073
PROFIT AFTER TAX&BEFORE APPROPRITION -----
LESS:A.TRNSFER TO GENERAL RESERVE -----
B.PROPOSED DIVIDEND ----- -------
C.PROVISION FOR DIVIDEND TAX

BALANCE CREDITED TO BALANCE SHEET 150,73,073

BALANCE SHEET AS AT 31stMARCH,2016

PARTICULARS AMOUNT(RS.) AMOUNT(RS.)

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SOURCE OF FUNDS
1.SHARE HOLDERS FUNDS
A.SHARE CAPITAL 7,80,75,270
B.SHARE APLICATION MONEY 16,75,000
B.RESERVES AND SURPLUS 9,36,55,083
2.LOAN FUNDS
A.SECURED LOANS 40,89,65,295
B.UNSECURED LOANS 5,92,08,040
C.DEFERED TAX LIABILITY 2,41,18,591
TOTAL 66,56,97,280
APLICATION OF FUNDS
1.FIXED ASSETS
A.GROSS BLOCK 65,06,76,201
LESS:DEPRECIATION 25,96,80,574
NETBLOCK 39,09,95627
B.ADD:CAPITAL WORK IN PROGRESS 3,44,11,390 42,54,07,017
2.CURRENT ASSETS,LOANS AND ADVANCES
A. INVENTORIES 9,48,63,680
B.SUNDRY DEBTORS 20,57,95,883
C.CASH AND BANK BALANCE 2,49,96,976
D.LOANS AND ADVANCE 7,91,37,337
TOTAL CURRENT ASSETS,LOANS AND ADVANCES 40,47,93,876

LESS:CURRENT LIABILITIES AND PROVISIONS

A.SUNDRY CREDITORS
B.INTEREST ACCRED BUT NOT DUE 12,92,23,157
C.CREDITORS FOR EXPENCES 50,186
D.PROVISION FOR TAXTION 1,36,39,899
E.ADVANCES FROM CUSTEMERS 46,00,000
F.OTHER LIABILITIES 2,76,398
1,67,13,971
NET CURRENT ASSET
24,02,90,263
3.MISC.EXPENDITER(TO THE EXTENT NOT
WRITTEN OFF OR ADJUSTED)
A.DEFERED REVENUE EXP
0
TOTAL 66,56,97,280

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