Definitions: in The Earlier Years of Its Evaluation It Was Created Rising of Funds. in The
Definitions: in The Earlier Years of Its Evaluation It Was Created Rising of Funds. in The
Definitions: in The Earlier Years of Its Evaluation It Was Created Rising of Funds. in The
In the earlier years of its evaluation it was created rising of funds. In the
current year literal pertaining to financial management is a border scope. So as to
include in additional to procurement of funds efficient of funds efficient of resources
in universally recognized. The term nature as applied to financial management refers
to its relationship with the closely related fields of economics and accounting its
functions, scope.
DEFINITIONS:
“Financial management is concerned with the efficient use of an important
economic resources namely capital funds”. –Solomon.
“Financial management is the application of the planning and control
function to the finance functions”. –Howard and Upon
Scope of finance:
Firm create manufacturing capacities for production of goods some provide
service to customers. They sell their goods or services to earn profit. They raise funds to
acquire manufacturing and other facilities. Thus the three most important activities of
business firm are:
Production
Marketing
Finance
A firm as wheat ever capital it needs and employees it (finance activity) in activities
which generate returns on invested capital (production and marketing activities). So
financial management helps to the firm to take the correct decisions. And also helpful to
firm how to utilize the economic resources likely capital funds in the proper way. It is also
controlling tool to control the financial functions of the firm. So it is very important aspect
in every organization.
Meaning and types of financial statements:
A financial statement is an organized collection of data according to logical and
consistent accounting procedures. It purposes is to convey in understanding of some
financial; aspects of a business firm.
1
Thus, the term ‘financial statements’ generally refers to two basic statements.
1. Income statement
2. Balance sheet
1. Income Statement:
The income statement may be prepared in the form manufacturing account to find
out the cost of the production, in the form of trading account to determine the gross loss in
the form of profit & loss account to determine the net profit or net loss.
If the profit is increasing year after year or it is higher than the other
competitors, it means the business is a profitable one. Otherwise it is better to switch over
to other lines or to close down. Similarly if the expenditure is more than the income then
there will be no loss. It means that the firm is losing the capital.
2. Balance sheet:
The balance sheet is one of the Important statement which shows the financial
position of the firm, measured in terms of assets & liabilities i.e., Balance sheet shows all
the assets owned by the firm on one side and on other side owners funds and other external
liabilities. The difference between the total assets and the external liabilities is known as
“Owners Equity”. If the owners equity is increasing over a period of time, it means.
Otherwis3 it will be a cause of financial insolvency
OBJECTIVES OF FINANCIAL STATEMENTS
Financial; statement are the sources of information on the basis of which
conclusions are drawn about the profitability and financial position of a concern. The
primary objective of the financial statement is to assist in decision making to those who
are interested in the financial affairs of the business enterprise. The accounting principles
board of America (APB) state that following objectives of financial statements.
To information about the working capital and other funds flow
To disclose, to the extent possible, other information related to the financial statements
that is relevant to its users.
To provide reliable financial information about economic resource and obligation of a
business firm i.e., cash inflows and cash outflows.
To provide other needed information about changes in such economic resource and
obligations. To provide a financial information the assist in estimating the earning of
potentials of the business
2
INDUSTRY PROFILE
Industry Background:
The history of the cement industry in India dates back to the 1889 when a
Kolkata-based company started manufacturing cement from Argillaceous. But the
industry started getting the organized shape in the early 1900s. In 1914, Srikalahasthi
pipes Ltd India was established in Porbandar with a capacity of 10,000 tons and
production of 1000 installed. The World War I gave the first initial thrust to the
cement industry in India and the industry started growing at a fast rate in terms of
production, manufacturing units, and installed capacity. This stage was referred to as
the Nascent Stage of Indian Cement Company. In 1927, Concrete Association of
India was set up to create public awareness on the utility of cement as well as to
propagate cement consumption.
The cement industry in India saw the price and distribution control system in
the year 1956, established to ensure fair price model for consumers as well as
manufacturers. Later in 1977, government authorized new manufacturing units (as
well as existing units going for capacity enhancement) to put a higher price tag for
their products. A couple of year later, government introduced a three-tier pricing
system with different pricing on cement produced in high, medium and low cost
plants.
3
Cement Production and Growth Domestic demand plays a major role in the
fast growth of cement industry in India. In fact the domestic demand of cement has
surpassed the economic growth rate of India. The cement consumption is expected to
rise more than 22% by 2012-13 from 2010-11. In cement consumption, the state of
Maharashtra leads the table with 12.18% consumption, followed by Uttar Pradesh. In
terms of cement production, Andhra Pradesh leads the list with 14.72%ofproduction,
while Rajasthan remains at second position.
Lanco Industries Limited Changes Name as Srikalahasthi Pipes
Limited.
The Board of Directors of Lanco Industries Ltd., has approved the proposal of
changing the name of the Company, subject to the approval of shareholders. The
shareholders have assented for changing the name of the company from Lanco
Industries Ltd., to Srikalahasthi Pipes Limited at the 22 nd Annual General Meeting of
the company held on September 27, 2014.
Subsequently, the Company has filed requisite from with Registrar of
Companies, Andhra Pradesh seeking its approval and accordingly Registrar of
Companies, Andhra Pradesh has issued fresh Certificate of Incorporation dated
September 29, 2014 changing the name of the company, pursuant to Rule 29 of the
companies (Incorporation) Rules, 2014.
The name of the company has been changed from Lanco Industries Ltd., to
Srikalahasthi Pipes Limited with effect from September 29, 2014.
4
Jaiprakash Associates Ltd has signed a MoU with Assam Mineral
Development Corporation Limited to set up a 2 MT cement plant. The
estimated project cost is US$ 221.36 million.
Rungta Mines (RML) is also planning to invest US$ 123 million for setting up
a 1 MT cement plant in Orissa.
In India, the different types of cement are manufactured using dry, semi-dry, and
wet processes. In the production of Clinker Cement, a lot of energy is required. It is
produced by using materials such as limestone, iron oxides, aluminum, and silicon
oxides. Among the different kinds of cement produced in India, Portland Pozzolana
Cement, Ordinary Portland Cement, and Portland Blast Furnace Slag Cement are the
most important because they account for around 99% of the total cement production
in India.
The Portland variety of cement is the most common one among the types of
cement in India and is produced from gypsum and clinker. The Ordinary Portland
cement and Portland Blast Furnace Slag Cement are used mostly in the construction
of airports and bridges. The production of white cement in the country is very less for
5
it is very expensive in comparison to grey cement. In India, while cement is usually
utilized for decorative purposes, marble foundation work, and to fill up the gaps
between tiles of ceramic and marble.
The different types of cement in India have registered an increase in
production in the last few years. Efforts must be made by the cement industry in India
and the government of India to ensure that the cement industry continues innovation
and research to come up with more and more varieties in the near future. For more
information click on following links:
Tata Chemicals Limited is a major producer of OPC Grade 43 and 53. The
value of each of these grades of cement has been briefly mentioned below:
6
Mixes for general purposes. The chemical components of Ordinary Portland
Cement are Magnesium (MgO), Alumina (AL2O3), Silica (SiO2), Iron
(Fe2O3), and Sulphur trioxide (SO3).
Some of the big names involved in OPC manufacture are Tata Chemicals,
Ultratech Cement, and ACC cement. Ordinary Portland Cement is in great
demand in India and will continue to be used in Indian infrastructural
upgradation and other constructions.
PPC is resistant to harsh water attacks and prevents the formation of calcium
hydroxide at the time of cement setting and hydration. It withstands aggressive gases,
thermal cracks, wet cracking, etc. The BIS quality
Specifications for Pozzolana materials used in PPC have been mentioned below:
Fly ash - IS 3812:1981
Calcined clay - IS 1344:1981
7
and all applications of ordinary Portland cement. One of the top Indian brands of
Portland Pozzolana is 'Shudh Cement' manufactured by Tata Chemicals Limited.
Shudh cement has 5 percent of the market share and is available abundantly in
Gujarat, penetrating all 3 - primary, secondary, and tertiary markets. Some of the
other big names in the Portland Pozzolana manufacture are Ultratech, Ambuja, ACC
cements, Star Cement, and Birla group.
Portland Pozzolana Cement is highly popular in India and with many cement
plants setting up jetties for transportation, initial costs would gradually decrease as
well.
The Slag Cement of the Portland Blast Furnace is a type of cement that is
hydraulic and is manufactured in a blast furnace where iron ore is reduced to iron. The
molten slag which is tapped is quickly drenched with water, dried, and then grounded
to a fine powder. This fine powder that is produced is commonly known as the
Portland Blast Furnace Slag Cement.
The manufacture of Portland Blast Furnace Slag Cement requires 75% less
energy than that needed for the production of the Portland cement. The low cost of
production of Portland Blast Furnace Slag Cement makes it cheaper than Portland
cement. It is for this reason that in recent years, the sales of Portland Blast Furnace
Slag Cement have increased.
Portland Blast Furnace Slag Cement has a typical light color and an easier
'finish' ability. Its concrete workability is better and it has a higher flexural and
compressive strength. It is resistant to chemicals and also has more hardened
consistency. This is the reason that Portland Blast Furnace Slag Cement is used in the
construction of dams, bridges, building complexes, and pipes.
8
The various raw materials required for the production of Portland Blast
Furnace Slag Cement are:
Limestone
Iron Ore
Iron Scrap
Coke
J K Cement
Grasim Industries and Ultra Tech
ACC
India Cement Ltd
Gujarat Ambuja Cement Ltd
The major countries where Portland Blast Furnace Slag Cement is exported
from India are:
South Africa
UAE
Sri Lanka
Nepal
Bangladesh
Australia
Doha-Qatar
The production and use of Portland Blast Furnace Slag Cement have increased
over the years. The Indian government has undertaken several investments in the
production of the Portland Blast Furnace Slag Cement so that its quality and
durability can be improved
9
Oil Well Cement as the name suggests, is used for the grouting of the oil wells,
also known as the cementing of the oil wells. This is done for both, the off-shore and
on-shore oil wells.
As the number of oil wells in India is increasing steadily, the sales of Oil Well
Cement have also increased. This has boosted the Indian cement industry to a large
extent.
Oil Well Cement is manufactured from the clinker of Portland cement and also
from cements that have been hydraulically blended. Oil Well Cement can resist high
pressure as well as very high temperatures. Oil Well Cement sets very slowly because
it has organic 'retarders' which prevent it from setting too fast. It is due to all these
characteristics that it is used in the building of the oil wells where the pressure is
around 20,000 PSI and the temperature is around 500 degrees Fahrenheit.
There are 3 grades of Oil Well Cements. Grades O is ordinary and is used
commonly; HSR is high sulphate resistant; and MSR is moderate sulphate resistant.
Each grade is used where it is applicable at a particular range of oil well sulphate
environments, temperatures, pressures, and depths. Oil Well Cement has proved to be
very beneficial for the petroleum industry due to its characteristics. For it is due to the
Oil Well Cement that the oil wells function properly.
The various raw materials required for the production of Oil Well Cement are:
Limestone
Iron Ore
Coke
Iron Scrap
10
Rapid Hardening Portland cement:
The raw materials required for the manufacture of Rapid Hardening Portland
Cement are:
Limestone
Shale
Gypsum
Coke
11
The major companies producing Rapid Hardening Portland Cement in India
are:
ACC
Gujarat Ambuja
J K Cement
Grasim Industries
Indian Cement Ltd.
12
Works in coastal areas
Piles and foundations
Water and sewage treatment plants
Sugar, chemical, and fertilizers factories
Petrochemical and food processing industries
Limestone
Iron Ore and scrap
J K Cement
Indian Cement Ltd
Grasim Industries and Gujarat Ambuja
White Cement:
White Cement has registered growth in production and sale in India in the last
few years. The White Cement sector has been growing at the rate of 11% per year.
This has given the Indian cement industry a major boost.
White Cement is much like the ordinary grey cement except that it is white in
color. In order to get this color of the White Cement, its method of production is
different from that of the ordinary cement.
13
The production of White Cement requires exact standards and so it is a product which
is used for specialized purposes. White Cement is produced at temperatures that hover
around 1450-1500 degrees Celsius. This temperature is more than what is required by
the ordinary grey cement. As more energy is required during the manufacture of
White Cement, it goes to make it more expensive than the ordinary grey cement.
White Cement is used in architectural projects the use of white cement has
been specified. It is used in decorative works and also wherever vibrant colors are
desired. White Cement is used to fill up the gaps between marble and ceramic tiles for
a smoother and more beautiful finish.
The various raw materials required for the production of White Cement are:
Limestone
Sand
Iron Ore
Nickel
Titanium
Chromium
Vanadium
The major countries where White Cement is exported from India are:
UAE
Australia
South Africa
Sri Lanka
14
Doha- Qatar
Bangladesh
Nepal
Clinker Cement:
Clinker Cement has registered a growth over the last few years in India. The
Indian cement industry is growing at a rapid pace and this has given a major boost to
the production and sale of Clinker Cement in India. The production of Clinker
Cement requires a lot of energy because it needs to be manufactured at the
temperature of around 1400-1450 degree Celsius.
The various raw materials required for the production of Clinker Cement are:
Iron Ore
Bauxite
Clay
Limestone
Quartz
ACC
Gujarat Ambuja Cement Ltd.
15
JK Cements
Grasim Industries and Ultra Tech
Due to the poor demand and other reasons, the operations of the cement unit
of the Company was suspended and the unit was reengineered for producing a
different product mix having potential in south India.
As a measure of forward integration project for adding value to the Pig Iron
manufactured by the Company, LIL floated an another company named Lanco, Sri
Kalahasthi Castings Limited (LKCL) on 4th March 1997 to manufacture iron castings
and spun pipes in the same campus of the Company with an annual capacity of 40,000
TPA and 35,700 TPA respectively. Accordingly, LIL had an arrangement with LKCL
for supply of molten iron and Pig Iron to LKCL, being a value added product, as such
iron pipes manufactured by LKCL offered better returns.
However, due to falling Pig Iron prices, increase additional capacity in the
industry, competition and the technical & financial assistance, the operations of both
LIL and LKCL were affected and the Company was exploring financial and technical
strategic alliance with Indian / Foreign Partner.
During the same time M/s. Electro steel Castings Limited, SRIKALAHASTHI
PIPES LTD was also looking for additional capacities for producing spun pipes.
Considering the synergies involved, SRIKALAHASTHI PIPES Industries Limited
entered into a strategic alliance partnership during December 2002, with M/s. Electro
steel Castings Limited (ECL), Kolkatta a leading manufacturer of CI, Pipes and DI
pipes. This was win-win situation for both LIL and ECL. After takeover, a financial
re-engineering and re-structuring of LIL was undertaken by ECL by implementing the
following: -
16
Immediately after take over an amount of Rs.2200 lakhs was infused as share
capital of the Company by M/s. ECL to strengthen the equity base of the
company.
During 2002, the capacity of Pig Iron was increased from 90,000 TPA to
150,000 TPA.
With effect from 1st April, 2003 LKCL was merged with the company to take
advantage of the close synergy in the business of the two companies, since a
large part of Molten Iron / Pig Iron is consumed by LKCL for manufacture of
DI Pipes.
After the merger, the share capital of LIL, the paid up share value of Rs.10/-
was reduced to Rs.2.50 per share and accordingly one share of Rs.10/- each
fully paid up in LIL was issued to all the existing shareholders for every 4
shares held by them
During 2003, the capacity of the DI pipes was increased to 90,000 TPA.
During 2004, the company took the step of backward integration by setting up
150,000 TPA coke oven plant in the same complex, which was commissioned
in June 2005.
The above has resulted in the company witnessing a profitable years after a gap
of 8 years during the years ended 31st March, 2003, 2004 and 2005 and a dividend of
10% was declared for the years ended 31st March 2004 and 2005 to the shareholders.
17
Step by Step Company's Growth:
18
COMPANY PROFILE
19
“An integrated industrial complex for manufacture of DI Pipes”
Spun Pipe Division : Capacity increased from 60,000 TPA to 90,000 TPA
Pig Iron Division : Capacity increased from 90,000 TPA to 1, 75,000 TPA
Coke Oven Division : New Plant with a Capacity of 1,50,000 TPA
12 MW Capacity Power Plant : Expected Commissioning by End May'07
Power Generation
Thermal Power
Wind Power
Biomass Power
Hydro Power
Information Technology
Civil Construction
Water Infrastructure
Road and Building
IT Parks
Property Development
Manufacturing
Pig iron
20
Slag Cement
Ductile Iron Spun Pipes
Metallurgical Coke
Service to Society:
In additional to his entrepreneurial spirit, Rajagopal has a strong sense of
social responsibility. He established SRIKALAHASTHI PIPES LTD Institute of
General Humanitarian Trust (LIGHT), a Charitable Trust, in 200 to reach out to the
needy and has been involved in various philanthropic activities.
Member of Parliament:
After one-and-a-half decades of outstanding contribution to the industry,
Rajagopal chose to enter public life in 2003. He contested the recent elections to the
Lower House of parliament from Vijayawada constituency and won a landslide
victory. As a Member of Parliament, his avowed mission is to make a difference in
public life.
21
9 Shri. V.Nagi Reddy, IAS Nominee of APIDC
POWER PROJECTS
With operational experience in gas, wind and biomass-based power projects
and a strong foothold in coal and hydropower generation, SRIKALAHASTHI PIPES
LTD is emerging as a key player in the Indian power sector.
INFORMATION TECHNOLOGY
LGS is a strategic initiative to provide world-class Information Technology
solutions to global costumers, delivering them maximum business value through
continuous innovation.
CIVIL CONSTRUCTION
Power projects, industrial structures, institutional facilities, mass housing,
water supply projects, flyovers and bridges – such varied operations serve to explicate
the diversification roadmap of SRIKALAHASTHI PIPES LTD.
PROPERTY DEVELOPMENT
Being a Pioneer in civil Construction and Infrastructure Development,
SRIKALAHASTHI PIPES LTD is venturing into Property Development with the
winning of the bid for IT Parks – cum – Commercial and Residential Complex in
Hyderabad and Visakhapatnam of Andhra Pradesh.
MANUFACTURING
Being one of the largest integrated foundries in India with Ductile Iron Spun
Pipes, Metallurgical Coke, Pig Iron and Slag Cement as productions,
SRIKALAHASTHI PIPES LTD has a towering presence in the Indian manufacturing
sector.
SRIKALAHASTHI PIPES LTD GLOBAL SYSTEMS LTD (LGSL)
ABOUT LGS
Information Technology services is a strategic initiative of
SRIKALAHASTHI PIPES LTD Group to provide world-class Information
22
Technology solutions to global customers, delivering them maximum business value
through continuous innovation.
IT solution and services are delivered to global customers through
Srikalahasthi pipes ltd Global System Inc (LGSI) headquartered in Atlanta, GA, the
US and Srikalahasthi pipes ltd Global Systems Limited (LGSL) based in Hyderabad,
India. The organization specializes in designing and implementing IT solutions and
services aligned to business needs of customers.
LGS delivers a portfolio of services and solutions that help clients embrace
speed, transform their enterprises, respond quickly to opportunities, protect their
physical and digital assets and go to market ahead of their competitors. The array of
offerings includes.
Technology Strategy Consulting.
Application Development
Conversion and Migration
Tools/Technology Based Implementation Services
Business Intelligence Solutions
Application Management Services
IT Infrastructure Services
Optimized Offshore Solution Frameworks
23
It is this realization that has led SRIKALAHASTHI PIPES LTD Group to set
up SRIKALAHASTHI PIPES LTD Institute of General Humanitarian Trust (LIGHT)
in 2000. In a short time, the Trust has succeeded in making its presence felt in the
social service sector through its various programmers.
SRIKALAHASTHI PIPES INFRATECH LTD.
SRIKALAHASTHI PIPES INFRATECH limited was established in 1993
with an annual turnover of about Rs.200 corers (US $ 40 million). The company is a
leader in infrastructure sector in roads, Water, & also undertakes large housing &
industrial projects.
Areas of Specialization
Mass Housing
Institutional Buildings
Industrial Structures
Water Supply
Flyovers and Bridges
Roads
Water treatment Plant
Sewage Treatment Plant
Interiors
Infrastructural Developments
Hydro / Thermal Power Projects
Dams & Irrigation Projects
Marine Works
PRODUCT PROFILE
SRIKALAHASTHI PIPES KONDAPLLI POWER PVT. LTD.
Srikalahasthi pipes ltd Kondaplli Power is an Independent Power Project
(IPP) located at kondaplli Industrial Development Area near Vijayawada in Krishna
District (A.P), India. The project cost is Rs.11, 000 million (US $ 275 Million). The
plant is 368.144 MW Combined Cycle Power Project operating Natural Gas.
LKPPL is Co-promoted by NRG Energy Corporation. USA, Common
Wealth Development Corporation (CDC), UK & Dosan Heavy Industries &
Construction Company Ltd., (Korea).
24
The project has 2 Gas Turbines of GE Frame 9E. 2 Heat Recovery Steam
Generators & 1 Stream Turbine.
The company supplies Power to Transmission Corporation of Andhra
Pradesh Limited (AP TRANSCO) & has entered into a Power Purchase Agreement
(PPA) for 15 years. The plant can also operate on liquid fuels like Naphtha, speed
Diesel (HSD), etc
PROMOTERS & EQUITY PARTNERS:
SRIKALAHASTHI PIPES LTD Kondapalli Power Pvt. Limited, has set up
the power project at kondapalli Industrial Development Area (IDA), Krishna Dist in
the state of Andhra Pradesh, India, at a cost of Rs.11,000 Millions(US $ 275 Millions
at 1 USD = Rs. 40). This power project is promoted by SRIKALAHASTHI PIPES
LTD Group of India and is co- promoted by NRG Energy Inc., USA (Worlds 5th
largest power Generation Company). United Kingdom and Dosan Heavy Industries &
Construction Co. Ltd (DOOSAN) (erstwhile HASNUNG), Korea are the other equity
partners.
POWER DISTRIBUTION
Srikalahasthi pipes ltd Power Group is very serious of exploiting the
lucrative emerging business opportunity of Distribution of Electric Power i.e.,
formation / takeover of Electric Utilities in India.
The aggressively reforming state of Andhra Pradesh is on the way of
privatization of all the four Power Distribution Companies in its fold.
The Srikalahasthi pipes ltd Group with its rich experience in power sector,
with first hand local knowledge, connections, and strong local presence in the state of
Andhra Pradesh is advantageously positioned it self to take over the Distribution
Companies.
Srikalahasthi pipes ltd Group power division is interested to have tie up
with experienced foreign partners to exploit this emerging and growing business
opportunity.
25
Cement is manufactured at LIL to profitably make use of the slag from the
MBF. Hence a mini cement manufacturing facility has been conceived. Out of various
processes available for mini cement plants, Vertical Shaft Kiln (VSK) process is
found to be more viable & economical, hence it is more popular. Accordingly VSK
process has been chosen
26
In VSK technology of cement manufacturing, nodulizing is the most important
step. Nodulization means agglomeration of all uniform small size particles to form
large nodules. Since fuel is underground in the raw meal, for uniform sintering
(clinkering) nodulization is very important & critical.
Nodulization is done in a specially designed dish revolving at an angle.
Ground raw meal is fed to the dish which is revolving & water is sprayed to convert
the powder into globules called nodules. Perfect nodulization is achieved by having
proper size of fuel, size of dish, angle of inclination of dish & the spread of water jets
sprayed.
Clinkering:
Nodules made, called the black meal, are fed into the vertical shaft kiln. The nodules
are converted into clinker by sintering of the meal by blowing control air supplies by
root blower. The various zones of reactions starting from the top of the kiln are the
drying zone, calcimine zone, sintering zone & cooling zone. Clinker thus made is
stacked in hoppers, using belt conveyors.
Slag drying:
Usually, the slag coming out of slag granulation plant of a
blast furnace or MBF has a moisture content of 20 to 25%. It needs
to be dried before grinding. A rotary dryer is installed for this
purpose which uses hot flue gas from the air pre heaters of MBF.
Cement Grinding:
Clinker, gypsum & slag are fed into the cement mill (ball mill), after passing
through proper weighing & feeding mechanism. The grinding steel balls grind the
cement to required fineness. Over size materials will return for regrinding. Gypsum is
added in the range of 2 to 3% to regulate the setting property of cement.
Packing:
27
The cement stored in silos is packed in bags of 50 Kgs using an automatic
double sprouted packing machine
Quality Control:
Tests are carried-out at every stage for required chemical & physical
properties such as composition, strength, fuel value, setting properties, notarization,
roundness etc. Cement is manufactured to national standards.
Dust control:
Since fine material is handled after crushing, bag dust filters are installed at
raw mill grinding, slag drying, clinker transporting, cement grinding & cement
packing.
Pipes manufacturing unit:
VISION
28
We are in the business of manufacturing pipes for conveying safe drinking
water and other fluids for domestic and overseas markets. For sustained growth we
intend to venture into related businesses in the area of
29
REVIEW OF LITERATURE
INTRODUCTION:
The term Working Capital refers to firm’s investment in short term assets such
as short-term securities, accounts receivables and inventories.
Working capital is the fund available for meeting the Day-to-day requirements
of an enterprise.
30
KINDS OF WORKING CAPITAL:
Working Capital can be classified under the following heads:
Permanent of Regular and Variable Working Capital:
The need for current assets arises because of the operating cycle. The
operating cycle is a continuous process, and therefore, the need for current assets is
felt constantly. But the magnitude of current assets needed is not always same it
increases over time. However, there is always a minimum level of current assets,
which is continuously required by the firm to carry on its business operations. This
minimum level of current assets is refereed to as permanent of fixed working capital.
Depending upon changes in production and sales, the need for working capital, over
and above permanent working capital, will fluctuate.
Permanent working capital stables over time, while temporary working capital
fluctuate according to the volume of production and sales. But permanent working
capital need not be fixed always; when the firm is continuously growing fixed capital
needs may also increase. The position with regard to the permanent working capital
and variable working capital can be shown with the help of the following figures.
31
Amount of Working
Temporary
Permanent
Time
Amount of Working
Temporary
Permanent
32
Cash Working Capital:
Cash Working Capital is calculated form the items appearing in the profit and
loss account. It shows the real flow of money or value at a particular time and is
considered to be the most realistic approach in working capital management.
33
The basic ingredients of the theory of working capital management may be
said to include its definition, need, and optimum level of current assets. The trade off
between profitability and risk, which is associated with the level of current assets and
liabilities, financing, mix strategies and so on.
34
CONCEPT OF OPERATING CYCLE:
Operating cycle is a process of investing cash in raw materials and converting
them into semi finished goods they finished goods then into receivable through sale
and transforming receivable into cash as illustrated in the following diagram:
Cash
Work in Process
Finished Goods
35
FACTORS DETERMINING WORKING CAPITAL
Nature of Industry: Based on the size of the industry, a company requires assets.
Small companies have smaller amounts of inventory and have smaller proportions of
cash than large companies.
Demand of Industry: Creditors want that their demands be taken care of as the
fluctuating nature of demand of the industry.
Cash requirements: Cash is one of the current assets, which is essential for
successful operating of the production cycle. Hence, cash should be utilized properly.
Nature of business: Working capital requirements very much demand upon the
general nature or type of business.
Time: The level of working capital is depending upon the time required to
manufacturing goods. If the time is longer, the size of working capital will increase.
Volume of Sales: The volume of sales and size of working capital are directly related
to each other. As volume of sales increases, investment in working capital increases.
Inventory Turnover: A better inventory control will help the firm reduce its
working capital requirements.
Business Cycle: Working capital requirements increase when the business is doing
well or on a use and less during periods of depression.
Attitude of Risk: The greater the amount of working capital, the lower the risk of
liquidity.
36
Size of the firm: Bigger firms, with many sources of funds, may need less working
capital as compared to their total assets or sales.
Inflation: As inflation uses, working capital size is increased in order for firms to
achieve better cash inflows.
37
1. PERMANENT WORKING CAPITAL
This refers to that minimum amount of investment in all current assets which
is require at all times to carry out minimum level of business activities. In other
words, it represents the current assets required on a continuing basis over the entire
year.
38
ESTIMATION OF WORKING CAPITAL REQUIREMENTS
Estimation of working capital requirements is not an easy task and a large
number of factors have to be considered before starting this exercise. For a
manufacturing organization, the following factors have to be taken into consideration
while making an estimate of working capital requirements.
The various sources for the financing of working capital are as follows:
SOURCES OF WORKIING CAPITAL
Finished Goods Inventory: Working Capital required to finance the finished goods
inventory is given by the following equation.
40
12 Months / 365 Days
Trade Creditors
Direct Wages
The average credit period for the payment of wages approximates to a half-a-
month in the case of monthly wage payment.
41
CONSTITUENTS OF WORKING CAPITAL
Working Capital has two constituents i.e.,
1. Current Assets and
2. Current Liabilities
CURRENT ASSETS
Current assets refer to those assets, which are easily convertible into cash
within a year.
42
RESEARCH METHODOLOGY
SOURCES OF DATA
The data required for the project work is collected from the period 2013-2018.
Primary Data:
Secondary Data:
43
NEED FOR THE STUDY
The study has been conducted for gaining practical knowledge about working
capital management &activities of sri kalashathi pipes ltd
The study is on internal financing pattern of the working capital management
which deals with determining size of working capital needs to achieve certain
long-term operating goals.
Therefore, an analysis is to be made to know the reasons & find out the
measures to be taken to make successful.
44
SCOPE OF THE STUDY
The main scope of the study was to put into practical the theoretical aspect
in to real life work experience.
The yearly increase or decrease of currents assets or current liabilities in the
budget of Srikalahasthi Pipes Ltd., is being reviewed.
The study of working capital is based on tools like ratio analysis, statement
of changes in working capital.
Further the study is based on last 5 years annual reports of sri kalashathi
pipes ltd.
This also deals with key ratio’s to obtain a clearer picture of different
resources available and at the disposal of the organization, which will enable
one to give appropriation suggestion to the company to improve is
performance, if any.
45
OBJECTIVES OF THE STUDY
46
LIMITATIONS OF THE STUDY
47
DATA ANALYSIS & INTERPRETATION
Table: 4.1
Particulars 2013-14 2014-15 Changes in Working Capital
Increase Decrease
Current Assets (CA)
Inventories 2752.55 1193.25 - 1559.29
Sundry Debtors 2619.99 2011.67 - 608.32
Cash and Bank Balances 1669.88 629.03 - 1040.85
Loans and advances 332.21 338.81 6.59 -
Total Current Assets 7374.65 4172.77 - 3201.88
Current Liabilities (CL)
Current Liabilities 3536.64 2828.57 708.07
Provisions 40.39 66.55 26.15 -
Total Current Liabilities 3577.04 2879.51 - 697.53
Net current assets (CA-CL) 3797.61 1277.65 - 2519.96
Increase or decrease in - 2519.95 2519.95 -
working capital
Total working capital 3797.62 3797.62 3234.63 3234.63
INTERPRETATION:
From the above table is observed that the networking capital of the company
shows decreasing trend. The total current assets of the company have decreased from
Rs.7374.65 in 2013-2014to Rs.4172.77 in 2014-15.
Table: 4.2
Particulars 2014-15 2015-16 Changes in Working Capital
48
Increase Decrease
Current Assets (CA)
Inventories 1193.26 5294.05 4100.79 -
Sundry Debtors 2011.67 4098.66 2086.99 -
Cash and Bank Balances 629.04 447.49 - 181.55
Loans and advances 338.81 1462.76 1123.95 -
Total Current Assets 4172.78 11302.96 7130.18 -
Current Liabilities (CL)
Current Liabilities 2828.58 5052.57 2223.99 -
Provisions 66.55 527.72 461.17 -
Total Current Liabilities 2895.13 5625.29 2730.16 -
Net current assets(CA-CL) 1277.65 5677.67 4400.02 -
Increase or decrease in 4400.02 - - 4400.02
working capital
Total working capital 5677.67 5677.67 7311.73 7311.73
INTERPRETATION:
From the above table is observed that the networking capital of the company
shows increasing trend. The total current assets of the company have increased from
Rs.4172.78 in 2014-15to Rs.11302.96 in 2015-16.
But the bank balance decreased from Rs. 629.04 to Rs.447.49 i.e., 181.55.
The total current liabilities decreased from Rs.2828.58 to Rs.5052.57. The net
working capital increases Rs. 4400.02.
49
Net current assets(CA-CL) 5677.67 7460.95 -1783.28 -
Increase or decrease in - 1783.28 - 1783.28
working capital
Total working capital 7460.95 7460.95 5034.35 5034.5
INTERPRETATION:
From the above table is observed that the networking capital of the company
shows increasing trend. The total current assets of the company have increased from
Rs.11302.96 in 2015-16 to Rs.16137.54 in 2016-17.
But the bank balance decreased from Rs.447.49 to Rs.247.72 i.e., 199.77. The
total current liabilities increased from Rs. 5677.67 to Rs.8676.59. The net working
capital increases Rs.1783.28.
50
Net increase in the working capital is 1304.48
INTERPRETATION:
From the above table is observed that the networking capital of the company
shows increasing trend. The total current assets of the company have increased from
Rs.16137.54 in 2016-17 to Rs.18321.76 in 2017-18.
But the bank balance increased from Rs.247.72 to Rs.350.67 i.e., 102.95. The
total current liabilities increased from Rs.8676.59 to Rs.9556.53. The net working
capital increases Rs.1304.48.
GRAPH: 4.5
51
CHANGES IN WORKING CAPITAL
5000 4400.02
4000
3000
1783.28
2000 1304.48
NWC
INCREASE
1000
DECREASE
0
2014-15 2015-16 2016-17 2017-18
-1000
-2000
-3000 -2519.95
YEARS
INTERPRETATION:
The above diagram clearly shows that the net working capital of the
Srikalahasthi Pipes Ltd., showing an increase with a decreasing trend. As the net
working capital for the year 2013-14 is -2519.95 it is decrease in the net working
capital but for the years after 2014-15 the net working capital of the firm was
increasing at a decreasing rate i.e., 4400.02, 1783.28, 1304.48 respectively for the
years 2015-16, 2016-17, 2017-18.
1. CURRENT RATIO
The current ratio is a measure of the firm’s short-term solvency. It indicates
the availability of current assets in rupees for every one rupee of current liability. A
ratio of greater than one means that the firm has more current assets than current
claims against them.
Current Ratio = Current Assets
Current Liabilities
TABLE: 4.6
YEARS CURRENT CURRENT RATIO
ASSETS LIABILITIES
2013-14 161.36 96.25 1.68
2014-15 183.22 95.57 1.92
2015-16 261.97 107.26 2.44
2016-17 266.16 100.3 2.65
52
2017-18 359.74 108.83 3.31
GRAPH: 4.1
CURRENT RATIO
3.5 3.31
3
2.65
2.44
2.5
RATIO
1.92
2 1.68
1.5
0.5
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS
INTERPRETATION:
The firm’s current ratio is almost 2:1 in years 2013-14, 2014-15. This refers
that the company’s current assets are almost equal to current liabilities it is not a very
good position of short-term solvency. But in 2014-15 to 2017-18 the ratio is too low
then the standard ratio 2:1.
2. QUICK RATIO
Quick Ratio, also called acid-test ratio, establishes a relationship between
quick, or liquid, assets and current liabilities. An asset is liquid if it can be converted
into cash immediately or reasonable soon without a loss of value. Cash is the most
liquid asset and other assets that are considered to be relatively liquid. Inventories are
considered to be less liquid. The quick ratio is found out by dividing quick assets by
current liabilities.
Quick Ratio = Current Assets – Inventories
Current Liabilities
TABLE: 4.7
YEARS QUICK ASSETS CURRENT LIABILITIES RATIO
2013-14 90.61 96.25 0.94
2014-15 91.28 95.57 0.96
2015-16 155.6 107.26 1.45
2016-17 145.23 100.3 1.45
2017-18 215.38 108.83 1.98
53
GRAPH: 4.2
QUICK RATIO
2.5
1.98
2
RATIO
1.45 1.45
1.5
0.94 0.96
1
0.5
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS
INTERPRETATION:
The higher the Quick Ratio indicates the ability of a firm is liquid and has the
ability to meet its current liabilities in time. The company’s Quick Ratio is almost
equal to standard ratio 1:1 in the years, 2015-16, 2016-17 and 2017-18. But in
2014-15 and 2013-14 it is not equal to ideal ratio.
3. CASH RATIO
Cash Ratio establishes relation between cash and current assets. It indicates
the proportion of cash in current assets. It is calculated by dividing cash by current
assets.
Cash Ratio = Cash
Current Assets
TABLE: 4.8
YEARS CASH CURRENT LIABILITIES RATIO
2013-14 2.47 161.36 0.02
2014-15 3.51 183.22 0.02
2015-16 26.5 261.97 0.1
2016-17 4.2 266.16 0.02
2017-18 34.64 359.74 0.1
GRAPH: 4.3
54
CASH RATIO
0.12
0.1 0.1
0.1
0.08
RATIO
0.06
0.04
0.02 0.02 0.02
0.02
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS
INTERPRETATION:
High Cash Ratio indicates the idle cash reserves in the company, but low cash
ratio is also not favorable to the company. By studying the above data the company
has in-sufficient cash reserves with it. In 2017-2018 the company’s cash ratio is
0.116 only.
GRAPH: 4.4
55
NET WORKING CAPITAL TURNOVER RATIO
4.5
4 3.84
3.46
3.5
3 2.8
RATIO
2.57
2.39
2.5
2
1.5
1
0.5
0
2013-14 2014-15 2015-17 2017-18 2018-19
YEARS
INTERPRETATION:
The average working capital ratio is 3.324. Thus it is indicated that for one
Rupee of sales, the company needs 0.33324 of net current assets. The remaining is
met from the long term funds and bank borrowings. In the study period the working
capital turnover ratio was continuously fluctuated.
GRAPH: 4.5
56
GROSS PROFIT MARGIN RATIO
35
30.42 30.5
30
25 22.93 23.31
RATIO
20 17.41
15
10
0
2013-15 2015-16 2016-17 2017-18 2017-18
YEARS
INTERPRETATION:
The higher gross profit ratio is indicated better performance and lower gross
profit ratio is shown unfavorable. By seeing the graph it is clear that the company’s
performance is high in the year 2013-14. But in the year 2015-16 the gross profit
ratio is down to 17.41 and again it was increased year by year.
GRAPH: 4.6
57
CURRENT ASSETS TURNOVER RATIO
2
1.78 1.74 1.79
1.8 1.65
1.6
1.41
1.4
RATIO
1.2
1
0.8
0.6
0.4
0.2
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS
INTERPRETATION:
This ratio indicates effective utilization of current assets. For one Rupee of
sales the company needs average Rs. 0.50 investment in current assets.
GRAPH: 4.7
58
CURRENT ASSETS TO FIXED ASSETS
1.4 1.27
1.2 1.1 1.08
0.99 1.01
1
RATIO
0.8
0.6
0.4
0.2
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS
INTERPRETATION:
In 2013-14 the ratio is recorded as 1.1, current assets are 110% in the fixed
assets. In the entire study period this ratio is approximately constant. In 2017-18 it is
1.27.
Stock Turnover Ratio / Inventory Turn over Ratio indicates the number of
time the stock has been turned over during the period and evaluates the efficiency
with which a firm is able to manage its inventory.
59
INVENTORY TURNOVER RATIO
4
3.49
3.5
2.82 2.93
3 2.69 2.62
RATIO
2.5
1.5
0.5
0
2013-14 2013-14 2014-15 2015-16 2016-17
YEARS
INTERPRETATION:
Usually a high inventory turnover / stock velocity indicate efficient
management of inventory because more frequently the stocks are sold; the lesser
amount of money is required to finance the inventory. A low inventory turnover ratio
indicates an inefficient management of inventory. The ratio is increasing every year,
in 2013-14 it is 2.82 and in 2017-18 it is recorded as 3.49.
GRAPH: 4.9
60
CURRENT LIABILITIES TO TOTAL LIABILITIES
40
34.26
35
29.04
30 26.56
RATIO
25 22.88
20.25
20
15
10
0
2013-14 2014-15 2015-16 2015-16 2016-17
YEARS
INTERPRETATION:
In 2013-14 the ratio is recorded as 34.26%, current liabilities are 34.56% in
the total assets. This ratio is continuously decreasing in the study period.
In 2017-18 it is 20.25%.
GRAPH: 4.10
61
DEBTORS TURNOVER RATIO
6
5.26 5.39
4.82
5 4.52
3.98
4
RATIO
0
2013-14 2014-15 2015-16 2016-17 2017-18
YEARS
INTERPRETATION:
The higher the value of debtors’ turnover the more efficient is the management
of debtors or more liquid the debtors are. Similarly, Debtors turn over ratio shows a
higher value, in 2013-14 it is 3.98 and it continuously increase, in 2017-15 it recorded
as 5.39.
FINDINGS
62
SUGGESTIONS
Working capital of the company has increasing every year. profit also
increasing every year this is good sign for the company. It has to maintain it
further, to run the business long run.
The current and quick ratios are almost up to the standard requirement.so the
working capital management
Company maintains Current Assets equal to Fixed Assets, it is better to invest
the ideal funds in other sources to get other income.
As it is found that Debt-Equity ratio is fluctuating the company is suggested to
maintain a low debt by procuring the funds through equity shares in order to
main a better debt-equity ratio.
The company is suggested to improve the net profit by increasing the volume
of sales ass it found that sales percentage is fluctuating over the year.
Generally, the higher the value of debtor’s turnover the more efficient is the
management of credit.
63
CONCLUSION
From the study it is noticed that the Working Capital is fluctuating i.e.,
increasing from year to year with slight variations. Company position is currently
good and utilization of all funds must be efficient to acquire good position in the
industry.
From the overall analysis of the company I can conclude that financial
position and profitability of the firm are good because.
It has the good future after expansion of the industry.
The firm has sufficient liquidity to meet its short-term obligation effectively.
64
ANNEXURES
65
OF FUNDS
1. Fixed Assets
31824.3 40286.29
a)Gross-Block 25,035.99 35516.23 38974.86
2
b) (-) Depreciation, 6,51,0.29 7666.24 9127.88 10734.88 12527.20
24158.0 27759.09
c) Net Block 18,525.70 26388.35 28239.98
8
d) Capital Work in 3441.21
5596.64 754.45 862.01 425.37
Progress
2. Investments - - - -
3. Current Assets,
Loans and Advances
a) Inventories 2752.55 1193.25 5294.05 7075.18 9194.08
b) Sundry Debtors 2619.99 2011.67 4098.66 7197.89 6706.59
c) Cash & Bank 350.67
1669.88 629.03 447.49 247.72
balances
d)Loans and Advances 332.21 338.81 1462.76 1616.75 2070.42
Total 7374.63 4172.77 11302.96 16137.54 18321.76
Less: Current Liabilities 9556.53
3536.64 2828.57 5625.29 8676.59
and provisions
8765.23
Total 3837.99 1344.2 7460.95
5677.67
66
Increase/Decrease in 503.99
741.46 471.24 14.16 (246.82)
stock
31,114.7 37,441.4 46,473.0 64,434.9 69633.8
TOTAL
6 8 0 7 8
EXPENDITURE
Raw materials 18,264.9 19,232.4 24,779.9 39,775.5 37578.1
Consumed 4 5 3 1 4
10,091.7
6,79.97 8,629.04 8,874.80
1
Excise Duty paid - - - -
Cost of Materials Sold 276.09 6445 659.16 607.33
Salaries, wages and 18761.1
1,254.33 1,449.85 1,862.53 2.14275
other allowances 1
Other Expenses 1,879.06 2,331.70 2,479.56 2,745.53
Financial Charges 1,257.86 1,l32.36 2,302.59 4,607.48 2061.82
Depreciation 1,093.60 1,156.89 1,51199 1,641.84 1794.60
30,505.8 35,Z76.7 60836.2
TOTAL 42471.56j 61,612.15
5 4 5
Profit/(Loss) before tax 608.91 2,164.74 4001.44 282182 8797.63
Provision for tax 1984.16
193.9 42.93 453.41 318.20
Current
MAT Credit Entitlement ( 242.45) (453.41) 108.14 707.49
Provision for Deferred
Tax 66.73 1392.16 54.6.78 I 312.01
.
Provision for Fringe
7.21 17.54 14.41 -
Benefit Tax
Profit / (Loss) after tax 415.02 1580.80 2591.74 1835.29 5793.97
67
Balance brought
forward from the 748.77 837.09 858.92 l242.48 1143.80
previous year
Prior Period
adjustment (Note 9 - - (55.46) - 67.99
onSchedule20)
Profit available for
1,163.79 2417.89 3395.2 3077.77 7755.76
appropriation
Appropriations
Transfer to Debenture
93.75 187.50 468.75 -
Redemption Reserve
Transfer to General
100.00 1000.00 1,500.00 1000.00 5400.00
reserve
Proposed dividend 198.82 397.64 397.64 397.64 596.45
Tax on Dividend. ,27.88 67.58 67.58 67.58 101.37
Balance carried to
837.09 858.92 1242.48 1143.80 1657.94
Balance Sheet
2698.38 2417.89 3395.20 3077.77 7755.76
Basic & Diluted
1.04 3.98 6.52 4.62 14.57
Earning per share
N. of share used in
computing Basic & 39,763,59 39,763,59 39,763.59 39,763,59
39,763,595
Diluted 5 5 5 5
EPS.
68
BIBLIOGRAPHY
JOURNALS:
The ICFAI Journal of Applied Finance
Finance INDIA (INDIA INSTITUTE OF FINANCE )
WEBSITE:
www.srikalahasthipipesltd.com
www.wikipedia.com
69