Davangere Sugar
Content
CHAPTER - 1
Introduction 1.1 THEORETICAL BACKGROUND OF THE STUDY:-
The art of making sugar was discovered in India around 4th century. Sugar is an important ele element ment in m mans ans food and def definit initely ely wid wideely used product. It provides employment to nearly 5lakhs of people directly. Sugar industry is an agro based industry it is k own to the second largest industry in the ountry, in spite of bein being go one ne of tthe he llar arge gest producer producer of sugar in the wor world ld the expor ratio is the lowest among am ong sug sugar ar eexpo xport rtin ing cou count ntri ries es,, hard hardly ly 2% of th thee ttot otal al pr prod oduc uction is exported .It plays an major role in the eco econom nomic ic d deve evelop lopme ment nt o off ru rura rall ar areas eas in the state. The industry evolution introduced the concept of mass production which revolutions the manu act ctu uring ing proc oceess and techn hnol olog ogy y of pr pro odu tion. The industry re revol voluti ution on mec mecha haniz nizee the product production ion as pro process cessing ing un unit it the me metho thod of manufacturing led for the birth of v riou ouss ccon onccepts pts lliike pr pro ocess eng ngin inee eerrin ing g, p prrocess management and process maintena ce. Sugar is is a sw swee t white white or brow brown nu usual sually ly crystall crystalline ine subs substan tan e obtained cheaply from sugarcane or sugarcane beets and used commonly in food pro ucts.
1.2 LITERATURE EVIEW:-
William F. Slater (Fi ance Ratio Analysis):
This research paper will reveal the financial analysis techniques used to evaluate the financial pe perf rfor orma manc ncee o off ssam ampl plee C Com ompa pany ny,, aand nd ev eval al ate the company’s worthiness as an investment. The paper is divided into three sections. The first sections the memo,
hich hic h iiss tthe he ma main in bod body y o off tthe he pap paper. er. T e second section.
Appendix Appe ndix,, inclu includes des as a reference contains each of the sets of the four financial statements that show ample Company’s performance from 1999 to 2001. The third section, Appendix B, contains the actual financial ratio analysis t chniques, showing the company’s perfor ance.
Rune Stenbacka and Mihkel Jombak:
Both oth tthe he autho uthors de deve velo lope ped d a mo mode dell of si simu mult ltan aneo eous us in inve vest stment and financing decisions made by the owners of firms in the presence of capital market imperfections. They maximize their value by dete determining rmining th
capital structure
simu simult ltan aneo eous usly ly with with t e magnitude of the investment program. Initially the authors characterize tth heore oretic lly how the opt optima imall co comb mbina inatio tion n of deb debtt a d equity financing will depend on the irms irms inte intern rnal al fund fundss aava vail ilab able le fo forr iinv nves estm tments. Their theory identifies conditions under which which th there ere wou would ld be ccompleme omplementaritie ntarities between debt and new equity. Subseque tly the authors tested these predictions emp rically on financial data for the year 1982 – 1992 on 3119 publicly traded Telecommunications
anufacturing and
orporation.
Kashiram Rana:
He describes that the new challenges and opportunities presented by the ra rapi pidl dly y ccha hang ngin ing g gl glob ob l een nvironment th the in industry has to b beecome globally competitive by adopting a modernizat izatio ion np pro rogr gram am.. A An n iimp mpor orta tant nt fa fact ctor or in inhi hibi bi ing the technology up grad gradat ation ion is th thee hi hig gh cost of capital capital re requir quired ed for ca carryi rrying ng out such a programmed.
1.3 STATEMENT OF THE PROBLEM:-
To eval evalua uate te tth h reas reason onss le lead adin ing g to tthe he d dec ecli lini ning ng rrev even enue ue ffrr m past three years in Davangere Sugar C mpany Limited (DSCL) in Davangere.
1.4 OBJECTIVES OF THE STUDY:-
For the the prog ogrress of an any y rres esea earc rch, h, ob obje ject ctiv ives es ar aree m mus ust, t, without the objectives the tasks cannot be co pleted. The ma main in objec objectives tives of the study ar as follows:
To know the earning apacity of the Sugar company.
To analyze the overall financial performance of the Sugar compan .
To judge the liquidity, sol solven vency cy an and d pro profit fitabi abilit lity y pos positi ition on of the Sugar Company.
To eexa xam min inee the the work orki g capital position of the Sugar Company.
To know know the ass assets ets an liabilities of the company. To examine the fund flow position of the company.
To examine major fin ings and offer useful suggestions to improve the performance.
1.5 SCOPE OF THE ST DY:-
The study mainly co duct ucted tto o aatttempt h haas b beeen m maade ffo or aan nalyzing the financial performance of Sugar Company.
1.6 AREA OF THE STUDY:-
The study h s been made with reference to Sugar Company limited,
Davangere.
1.7 1.7 LIM LIMIT ITAT ATION IONS S OF OF TH STUDY:-
The study is based on secondary data such as published annual rep rts.
During Durin g th thee st study udy ssom ome impor important tant and conf confiden idential tial matt matters ers are n t disclosed by the respective authorities.
Due to the changes in the price level of var various ious year ccomparison omparison o ratio of such years cannot give correct co clusion.
There is absence of st ndard ratio, so comparing of the ratio is misl eading.
As the study period is only only for for 3 yea ears rs,, so the the coll collec ecte ted d and and anal analy y ed belongs to only those years
1.8 DATA COLLECTION METHODOLOGY SED FOR THE STUDY: The methodol gy occupies important place for studying any problems. The
required data may be ollected in two ways. They are a) Primary Data b) Secondary Data a) Primary Data: The data which is obtained for the first time for the statistical
investigation collected in a sspe peci cifi fied ed wa way y aare re know known n aass a pr prim imary ary data. b) Secondary data: If If the da data aallrea eady dy ha hass b beeen ccol olllecte ted db by y som omee person or institution
and and tthey hey ma made de avai availa lab ble for statistical investigation is known as the secondary data.
SOURCES OF DATA:-
CHAPTER - 2 INDUSTRIAL PROFILE
It iiss tho thoug ught ht that it cane sugar was first used by man in Polynesia from where it spread to India. In 10 BC tth he eem mper eror or Dariu iuss o off w wha hatt tthe hen n P rsia invaded India where he found “the r ed which hich give givess ho hone ney y wit itho hout ut be bees es”. ”. The s cret of cane sugar, as with many other of man man’s ’s di disco scove verie ries, s, w was as ke kept pt a cclos losely ely g gua uard rd d secret whilst the finished product was exported for a rich profit. It was the maj r exp expan ansi sion on o off the the Ar Arab ab peop people less iin n th thee sev sevee th century AD that led to a b bre reaki aking ng of th secr secret. et. When they inva invaded ded P Pers ersia ia iin n 642 642 AD they found sugar cane being grown and le lear arn nh how ow su sug gar wa wass m mad ade. e. As tthe heir ir ex expa pan n ion continued they established sugar product duction ion in ot other her la lands nds tha thatt they co conque nquere red including North Africa and Spain. 2.1 THE INDIAN SUGAR INDUSTRY
India is the l rges rgestt co consum nsumer er and seco second nd llarge argest st p produ roduccer of sugar in the world. The Indian su ar indu indust stry ry is the the ssec econ ond d llar arge gest st agro agro-i -ind ndu ustry located in the rural India. It is the se ond largest agro-processing industry in the ountry after cotton textiles. With 566 operating ting sug ugar ar mills ills in dif iffferen entt p paarts of of tthe he country, Indian sugar industry has been a f cal point for socio-economic development in the rural areas. About 65 million sug rcane farmers and a large number of agricultural laborers are involved invol ved iin n sug sugarc arcan an cu culltiva tivattion ion aan nd aan ncil illa lary ry acti tiv vit itie iess, con const stiituting 7.5% of the rural population. Besides ides,, the ind industry ustry provi provides des emp employ loyment ment to about 2 million skilled/semi skilled w rkers and others mostly from the rural areas. Ind ndia ia is tthe he only nly cou oun ntry in tthe he w worl orld d th that at pro produc duces es p plan lantat tation ion white sugar. All other countr cou ntries ies aare re pr produ oduci cin ng either raw sugar or refined sugar or both. hus the processi processing ng capacities are quite di ferent and so also is the quality of sugar. Sugar production ion ccom omme menc nced ed in 19 1920 20''s b but ut it go gott ind indu ustry status in late 20's/earl y 30's w wh hen Ind ndia ia ha had d 29 29 ssug ugar ar mi mill llss p pro rodu duci cing ng ju just st 10 100 0,000 tons of sugar. The industry facing c mpet mpetitio ition n fro from m imp importe orted d sugar sugar sou sought ght ttari ari f protection. Sugar production picked up under the Sugar Industry Protection Act assed in 1932 and country became self Sufficient in 1935. Also cane-pricing act was nforced to provide
mer. r. Th This is wa wass ffol ollo lowe wed db by y la land nd re refo form rmss p put ut ing ceiling on land good cane price to farme ho hold ldin ings gs to prot protec ectt sm small farmers, formation of cane grower co-op ratives and setting up of sugar ugar mills lls jjoi oin ntly with farmers called as co-operative mills on ownership and sha sharin ing g ba bassis is.. T Tod oday ay t is sector produces 60% of country's product on. The industry ot only generates power for its own requirement but surplus po powe werr for for ex expo port rt to t e grid based on by-product - Bagasse. It lso produces ethyl industria riall and po potable table uses uses,, and ccaan also be used to al alco coho hol, l, which hich is us d for indust ogy friendly and renew newable fuel for blending with petrol. manufacture Ethanol, n ecology The sugar ind stry in the country uses only sugarcane as input; hence sugar companies have been stablished in large sugarcane growing states like Uttar Pradesh, Gujarat at,, T Tam amil il Na Nadu du,, an and d A Andh ndhra ra Pr Prade ade h. . In Sugar Year Maha harrasht htra ra,, Karna arnatta a, Gujar (SY)) 200 (SY 2006-20 6-2007, 07, ssuga ugar production in the country is provisionally stimated at 283.28 lakh lak h ton tones es w whic hich h we werr 194.94 lakh tones in the year 2005-2006. The production of sugar was 2 27 71 lakh tto one ness d dur urin ing g the the y yea earr 2 200 0066-07 07.. Du Duri ring ng th thee ccu u rent season (200708 08)) tthe he pr prod oduc ucti tion on is 265 lakh tones. The center’s orig rigina inall sug sugar ar p prod roduct uction ion es estim timate ate of 2 220 20 llaakh tones for 200809.The Government de-licensed the sugar se sector ctor in Aug August ust 1998 thereby removing the restrictions on ex ansion of existing capacity as well as on establishment of new units, with the only stipulation that that a minimum distance of 15 k km m would continue to be observed between an exist existing ing sug sugar ar m mill ill and a ne new w m mill. ill. The e are 566 installed sugar mills in the country with a producti production on capa capacity city of 180 lak MTs of sugar, of which only 453 are
orking ork ing.. T Thes hesee m mill illss aare re loc locat ated ed in 18s 18sta ta es of the country.
Around 315 of the t tal installed mills are in the co-operative sector, 189 in the privat pri vatee se secto ctorr an and d 62 in the public sector.
2.2 STRUCTURE OF PRO UCTION DEPARTMENT:
...
.
2.3 MARKET PLAYERS
The Mysore sugar co pany ltd. (MYSORE)
The G Go odavari ssug ugaar mills ltd. (GODAVARI)
Gangavathi sugars ltd.(GANGAVATHI)
Bann Ba nnar arii Am Amma man n su suga ga s ltd.
Sri Renuka sugars ltd.
Sri Pra Prabhul bhulinge ingeshwa shwarr sugars and chemicals ltd.
Shamanur Sugars ltd.(DUGGATHI)
Sirguppa Sugars and chemicals.(SIRGUPP)
2.4 CURRENT POSTION
F SUGAR INDUSTRY /SCENARIO IN I NDIA
However the likely suste sustenanc nancee of firm glob global al pric prices es would permit export of around arou nd 20 lakh lakhss MT of sugar P.A for the next two sugar seasons.
here by easing the
pressure on domestic stocks. Sugar Sugar y year ear 20072007-08 08 on wo words rds sug sugaa year refers to the period October to Sep ember.
INTERNATIONAL
Sugar prices likely to remain firm over the medium term or most of the late 19 1990 90ss and and clea clearl rly y2 200 00 s sugar prices in the international market re ained in the range of US$ 20 2000-25 250M 0MT T but 2004 2004 pric prices es have have firm firmed ed up and and aare re curr curreently at around US$ 450 MT. KEY SUCCEESS FA TORS 1. Cane development activities 2. Level of integration 3. Capital structure 4. Regulatory risks
2.5 2. 5 PRO PROBL BLEM EMS S OF SUGA SUGA
INDUSTRY
1. Weak representative f rmers’ institutions. 2. Po Poor or & pa patr tron onag agee ba bass d management system at all levels 3. Lack of accountability 4. Ex Exce cess ssiv ivee de dedu duct ctio ion n and taxation of farmer income 5. Delayed payment to f rmers 6. Inefficiency in service provisions and payment 7. Poor accountability systems 8. Poor marketing and distribution policy 9. Negative effects of re ional trading system 2.6 Sugarcane Availability
Sugarcane is the main raw material for sugar production. Sugar can also be produced b y ‘sugar b et’. About About 7 70% 0% of w world orld ssugar ugar iiss prod produce uce by sugarcane and the rreemaining by su ar beet. Indian sugar factories’ production is based only on Sugarcane. Sugarcane is a yearly crop. T There here are v varieties arieties of sugar seeds available to farmers which differ from their sugar content and time taken for rowing. Sugarcane is a genus of tropical grasses which requires strong sunlight and abundant water for satisfa sati sfactory ctory gro growth wth.. As gro growi wing ng of su suga garc rcan anee rreq equi uire ress aabu bund ndan antt w ter the major areas which grow sugarcane are having sufficient irrigation facilities. Sugarcane occ pies about 2.7% of the total cultivated area and it is one of the most important cash c ops ops in in tthe he coun country try.. In In IInd ndia ia,, ssug ugar arca cane ne is ut util ilized by sugar mills as we well ll aass by trad tradit itio ion n l sweeteners like gur and khandsari produce s. Indian sugar ompanies have sufficient sugarcane for production of sugar. Strongly established c mp mpan anie ies, s, faci facili liti ties es of ir irri riga gati tion on,, lles esss rres estr tric icttions of government on establishment and xpan xpansi sion on,, m mar arke kett op oppo port rtun unit itie ies, s, sstr tron ong gd dem em nd for by-products Encouraging farmers to grow sugarcane. Today sugarcane is characterized as an energy crop. Brazi zill aand nd Ind a are the largest sugar producing countries followed by China, USA, Thailand, A Au ustr lia, Mexico, Pakistan, France and Germany. All these countries
are p prroducing more sugar than than they internally consume. The supply of sugar in world marke ma rkett is m more ore tthan han tth he actual demand. The world’s largest
on onsu sume mers rs of su suga garr aare re In Indi dia, a, Ch Chin ina, a, Br zil, USA, Russia,
Mexico, Pakistan, Ind ne nessia, ia, G Geermany and Egy gypt pt.. A Acccor ord din ing g to to U DA Foreign Agri Ag ricu cult ltur uree S Ser ervi vice ce,, t e consumption of sugar in Asian countries has increased at a faster fast er rat rate, e, as a dir direc ec result of increasing population, increasing per capita income and iin ncreased aav vailability of sugar.
2.7 HISTORICAL INDUSTRIAL DEVELOPMENT
India has been known as the original home of sugarcane and sugar. Indians knew kne w th thee ar artt of ma makin kin sugar since since the fo fourth urth ce century ntury.. Howe However ver th advent of modern sugarr iindus suga ndustry try in IIndi ndi date datess b bac ack k tto om mid id 1930 1930's 's wh when en a ffew ew vacu vacuum pan units were established in the sub-tropical belts of Uttar Pradesh and Bihar. Until the mid 0s, the sugar industry was almost wholly c nfined to the states of Uttar Pradesh and ihar ihar.. A Aft fter er la late te fift fiftie iess o orr eear arly ly si sixt xtie iess tthe he in ind d stry dispersed into Sout So uthe hern rn India ndia,, We West steern India and other parts of Northern India. India is the l rges rgestt co consum nsumer er and seco second nd llarge argest st p produ roduccer of sugar in the world. The sufficient nd well distributed monsoon rains, rapid po ulation growth and subst sub stant antial ial in incr creas eases es in sugar production capacity have combined to make India the largest consumer and econd largest producer of sugar in the world . The Indian su ar ind ndus ustr try y ha hass not on only ly achi hieeve ved d th thee sin ular distinction of bein being go one ne of tthe he larg largee t producer producer of whi white te plan plantatio tation n crystal crystal suga sugarr in the world but has also turned out to be a massive enterprise of gigantic dimensions.
ith over 450 sugar
factories located thro ghout the country, the sugar industry is amongst the largest agro processing Industries, with with an annual tturnover urnover of R Rs150bn. s150bn. I plays a major role in rural development and its its im imp port ortanc ncee for for Indi diaa str treetche hess far b yond the role of a sweetener supplier. The sugar factories located in various parts of the country work as nuclei for development of rural rea reas by mobili bilizi zing ng rural res eso our urcces and g geene ating employment, transport and commu ication facilities. facilities. Over 45m 45mn n farme farmers, rs, thei dependants and a large mass of agricult ral ral lab labor or are are iinv nvol olve ved d iin n ssug ugar arca cane ne cult cultiv ivat ation, harvesting and
ancillary activities c nstituting 7.5% of the rural population.
he sugar industry
illed aand nd un unski skill lled ed w work orkmen men,, mo mostl stly y from from t e rural areas. employs over 0.5mn s illed
2.8 GLOBAL SCENARIO ( NTERNATIONAL TRADE OPPORTU ITY)
International t ade is of strategic importance to India as it can help maintain stab st abil ilit ity y in th thee dom domes estic marke kett, de despi pitte the the cy cycl cliicali lity ty in pr prod odu uction. If there is a sugar surplus either due to excess production or due to greater economic attractiveness of cane for ethanol and cogen in the future, exports ould be used if the surplus cannot be man anag aged ed in th thee dom domes esti ticc mar marke ket. t. Ac Acce cept ptab ability as a credible expo ex port rter er wil illl pro provi vide de the India Indian n sector sector an an altern alternate ate set set of of market marketss f r diverting surplus production. Similarly, in cas casee of of defi defici cits ts,, raw raw su suga garr imp impor orts ts co co ld help bridge the supply gap.
Globally, in most of the key geographies like Brazil and T ailand, regulations have a significant infl ence on the sugar sector. Perishable nature of cane, small farm landholdings and the eed to influence domestic prices; all have een the drivers for regulations. In India, to too, o, sug sugar ar is hig highly hly re regu gula late ted. d. Si Sinc ncee 19 1993, the regulatory environment has considerably eased, but sugar still continues to be an essential commodity under the Essential Commodity Act. There are reg lations across the entire ent ire val value ue chai chain n land demarcation, sugarcane price, sugarcane rocurement, sugar production and sale of sugar by mills in domestic and international markets. However, fundamental changes in th thee con consu sume merr pro profi file le an and d the the de demo mons nstr trated ability of the sector sec tor to conti continuo nuousl usl ensure availabil availability ity of sugar for domesti domesti consumption has dilu di lutted th thee need for suga garr to to be be con consi side dere red d as as an an ess essen enti tial al co comm mmo o ity. According to a recently conducted na ionw ionwide ide surv survey, ey, near nearly ly 75 perc percent ent of of the tot l non-levy sugar is consumed by Indust ial, small business and high income household segments. Furt Fu rthe her, r, ev even en fo forr a lo
income household, 10 percent increase in sugar price would
result in less than 1 percent increase in the 3 monthly food expense s.
2.9 INDIAN SUGAR INDU TRY SCENARIO
there is a need for for inclusive inclusive growth, growth, th sugar industry is In an era where there amongst the few indu tries that that have have successfully successfully contribut contributed ed to the rural economy. It has done so by commercially utilizing the rural resources to meet the large domestic deman dem and d for for sug sugar ar an by generating surplus energy to meet the increasing energy needs of India. In additi tion on to th this is,, th thee in indu dusstr try y ha hass bec becom omee th thee ma maii stay of the alcohol industry. The sector s pports over 50 million farmers and the heiir fa ilies; and1 delivers value val ue addi additio tion n at th the farm farm side. In general, general, sugarcane sugarcane price accounts for 2 app pprrox oxiimate tely ly 70p 0per ercc nt of the ex-mill sugar price. The sector al o has a significant standing in the global sug ugar ar spa pace ce.. The Ind ndiian Dom omeesti ticc sug ugar ar market is one of the largest markets in the wor orlld, in vo volu lum me te terrms. Indi diaa is also th thee s cond largest sugar producing geography. In India dia re rema mains ins a key key gr growt owth h dri driver ver fo forr wo world sugar, growing above the Asian and
orld consumption Growth average.
2.10 GOVERNMENT POL CY
Sugar is a controll trolled ed com commod modity ity in In India dia.. IItt iiss cove covere red d u un nder the purview of the Essential Comm ditie ditiess A Act ct,, 1 1955 955.. Th Thee g gove overn rnme ment nt co contr ntr ls sugar capacity additions through ind strial licensing, determines the price of the major input which sugarcane, decides the quantity that that can be sold iin n the open mar market ket, fixes the prices of the levy quota sugar, etc. Government control over all aspects of the production and sale of sugar extends to the level f wholesalers in the distribution chain. All sugar wholesalers ne need ed to ob obta tain in a llic icen ense issued issued by th thee gove governme rnment nt bef before ore th they ey can begin to operate. Also they should con irm irm tto o g gov over ernm nmen entt n not otif ific icat atio ions ns fo forr tthe he amount of inventories they can maintain.
The g go overnment polic policies ies for the suga sugarr in indust dustry ry ar aree br broad oadly classified in the fo foll llow owin ing g ssec ecti tion on for for the better understanding.
Licen Licensin sing g po polic licies ies:: Till recently sugar is used to be amongst the 9 industries under li lice cens nsin ing g pr prov ovis isio ion. n. T e majo majorr cri criter terion ion for iss issuin uing gn new ew lic licens enses es w re as follows
New sugar factories s ould have minimum economic capacity of 2500 TCD with no acit ity. y. Ho Howe weve verr iin n iind ndus ustr tria iall lly yb bac ackw kwar ard d aarr as, co-operative & maximum limit on ca ac publ public ic se sect ctor or n new ew uni units are are al allow lowed ed w with ith an iinit nitia iall capac capacity ity of 1750 TCD subject to the Cond Conditi ition on tthat hat tth h unit unitss w wou ould ld expa expand nd th thei eirr ca capa paci citi ties es to 2 00 TCD within a period of 5 years of g ing into production.
New sugar fa tori tories es aare re p per ermi mitt tted ed ssub ubje ject ct tto o th thee m min inim imum distance of 15 kilomet kilo meters ers betw between een th prop alread y licensed proposed osed ne new w suga sugarr fact factory ory an and d an exist existin in / already sugar factory.
Other things being equal, preference in licensing is given to proposals from the co-op co-opera erativ tivee ssect ecto o , public sector, private sector, etc. in that ord er. Thee pa Th past st po polic licie iess hav helped in planned development of sugar industry taking into ac acco coun untt eeco cono nomi micc si e and availability of sugarcane and simultaneously avoiding unhealthy
cco ompetiti n.
The mushrooming
growth
of
co- peratives,
whose
performance is worse ing of late, is also an offshoot of these polici es. Further, a large num er of parties have obtained licenses during 1990s but are not impl im plem emen enti ting ng them them d e to several several reason reasons, s, leadi leading ng to a bloc blocking king of the entry of other interested parties. To tackle this problem, the government has educed validity of Letter of Intent (LoI) from from thre threee y yea ears rs to on onee y yea ear. r. The The su suga garr in ind dustry is unlicensed since sin ce Aug Augus ustt 19 1998 98 aan n any interested interested party/p party/person erson is allow allowed ed to set up a sugar mill in the country provided they they sa sati tisf sfy y ffew ew cond condit itio ions ns.. T The he new new ssu u ar factory is at a minimum distance of 15 kilo kilome mete ters rs from from an ex exis isti ting ng al alre read ady y llic iceensed sugar factory. No incentive will be rov rovide ided d an and d ne new wu unit nitss ha have ve tto o aadhe dhere re to llee y quota regulation from first year of operations. Pricing of sugarcane:
overnment of IIndia ndia reg regulates ulates & co controls ntrols th rates of sugarcane
supplied to the mills y far farme mers rs.. T The he Stat Statut utor ory yM Min inim imum um Pric Pricee ((S SMP) announced by GOI year on year is used as as a be bench nchmar mark k by tthe he sta state te g gover overnmen nments to fix their State Advised Price (SAP). The SAP SAP coul could d be a recov recovery ery lin linked ked ave averag rag or just a flat rate. Thee ab Th above ove sai said d pr pric icin ing pro proce cedu dure re has has b bee een n aado dopt pted ed so as to pr pro otect the farmers &
ensure them a good price for cane. Also it reduces the impact of cane prices on the cos ostt ssttruc uctture ure o off d dif ifffer nt mills depending on their location.
2.11 7 S FRAME WORK
ODEL
The 7S frame ork for management analysis was developed by Mckensy’s and company. 7S model provides aan n eefffective w waay analyzing aan no orrganization, in terms of dynamic relationship am amon ong g 7 k key ey elem elemen ents ts na name mely ly-- sstr truc uctu ture re s ill, style, strategy, system, staff, shared value. Richa harrd Pasc l identified these factors in his book
The art Japanese
mana ma nag gem emen ent” t” ac acco cord rdiing to Pasc scaal iitt w waas b beecaus usee o off tthe hesse ffaa tors the Japanese companies eexc xceelled o er Amer American ican firms. firms. A ve very ry iimpo mportan rtantt featu feature of this modal is that Mckinsey’s consultants in their studies of several firms have e tensively tested it. 7S mo model del is ve very ry g goo oo tool available to the mangers, to study the organizations. This study is important from from a str strat ateg egic, ic, ma marke rketin ting, g, org organi anizat zatio ional behavior and com omp peti tittiv ivee p peerspe specti e. A major premise of the model is that
any performances
rela latted issue ssuess are rooted among the 7 factors outlines. The 7S are interconnected, aligned and working t gether in high performing organizations.
The 7 S’s are
Structure
Skill
Style
Strategy
System
Staff
Shared
2.12 SUGAR PRICING &
ISTRUBITION:
Government enforces a dual pricing policy for the sugar industry. Presently governmen rnmen which is used for 10% of the pro produc ductio tio is sold at a fixed price to the gove operrations ions.. T The he ne new w & ex expa pan nde ded d ssug ugar ar plants are exempted PDS and and oth other er ma marke rket ope per erio iod d o off five five to ei eigh ghtt y yea ears rs whi hich ch m kes the new sugar fr from om th thee llev evy y qu quot otaa for a p units more profitable. But mills under levy are free to sell the emaining 90 % of sugar (as 1 10 0% iiss ssu upplied to government) in the open market at the market determined controlss su supply pply of ssugar ugar in th thee op open en m mark ark t through monthly price. pric e. The go gover vernmen nment control sugar re release n no otifications based on market conditions and thus i fluencing the open market prices to a great extent. Though, the incentive scheme has achieved the objec obj ectiv tivee of att attrac ractin tin more p pllayers, due tto o b beetter margin tth han e isting players, the returns retu rns for olde olderr un unit it reduces substantially due to low increase in levy prices for controlling fiscal de icit icitss. How oweeve verr new uni nits ts face th thee pro lem of procuring sugarcane from the farmers and some sometime timess en end d up pay paying ing a pre premiu mium to SAP.
Import Export Polic : Sugar exports exports we were re governed by the Sug Sugaa Export Promotion
Act, 1958, which stip late latess th that at tthe he Go Gove vern rnme ment nt ccan an u use se 2 20 0 pe perr c nt of the country’s to tota tall p prrodu ducction ion ffo or sale abroad. Till a very recent past imports and exports were routed through Indian Sugar and General Industry Export Import Corporation Limited (I (ISG SGIE IEC) C),, a ccon onso sort rtiu ium of apex organizations of private and co-o erative sugar mills and government agen ie ies. s. Th Thee im impo port rtss an and d ex expo porrts ar aree ma main inly ly re ress rted to when there is mismatch in dome tic sugar production. The government decimalized exports in 1997 199 7 all allow owing ing p priv rivat at parties to export sugar. The government has also put sugar imp im port rtss o on nO Ope pen nG Gen eneeral License License ((OGL) OGL) allowing private parties t import sugar. The impo im port rted ed suga sugarr ha hass b bee n subjected to a customs duty of 20% from anuary 1999, so as to provide a level pla ing field to the do dom mesti ticc ind ndus ustr try y, whic ich h su plies sugar at levy price pri cess to GO GOI, I, for PD supply.
Excise and taxes: So e of the st state ate g governments overnments impose purchase on the sugarcane
purrcha pu hasses m maade b by y t e sugar mills, which varies from state to tate. The states of
Assam, Nagaland, R jasthan, Orissa, West Bengal & Goa which produce small ver, d do on no ot le levy cuss o on n tth he ssu ugarcane p pu urchases. quantities of cane, ho ever
2.13 SWOT ANALYSIS
weaknes knesses ses are ess essenti entially ally in inter ternal nal to th organization and Stre Streng ngth th an wea cernin ning g re resou source rces, s, pr progr ograms ams aand nd or organ ganiza izati ti n in key areas such relate to the matter co cer as
Sales
Marketing
Capacity
Manufacturing cost et hreat at aare re eexte xterna rnall to tthe he o org rgani anizat zation ion an and d can exist or develop Opportunity and hre
in the following areas
Size & Segmentation
Growth pattern and m turity
International dimensi ns
Relative attractive of segments
New Technologies etc.
WEAKNESSES Sr.
Key Word
1
SKILLE
2
CAPACITY
3
INFRAS RUC RUCTUR TURE E
The infr infrastr astructur ucturee i not is developed
4
FINANCE
Lack of financial funds
Description LABOR
Lac ack k o off sski kill lled ed la lab bor as the company is situated in rural areas The capacity of su arcane crushing is less cco ompare to to ssu upply of sugarcane.
STRENGTHS Keyw rd
Sr.
Description The production of
1
AUT MATIZED
2
COST
lowest cost producer
3
EXPE IENCE
36 years of experience
4
BRAND
Brand name establishe
5
SPEE
Faster decision making
ugar plant is fully
automatized
THREATS Sr.No
Keyword
Description Thee Th
1
RECOVERY
pe perc rcen enta tag g
recovery
is
compa com para rativ tively ely le lesss than other areas in the country.
2
GOVERN ENT
The price & qua tity of supply of
INTERVE TION
sugar is fixed by
ovt.
The competition is very high in foreign market & the cost of 3
EXPORT
production is
igh than other
foreign companies. The global price is not favor ble.
OPPORTUNITIES Sr. No
1
2
3
4
Key Wor
Description
SUGARCANE
The supply of sugarcane is abundant.
FREE M RKET
Thee rrat Th atio io of fr free ee ma mark rk t is increased by 90%
FOREIG
The central Govt is encouraging for
MARKE
foreign market.
CENTRAL GOVER MENT
The cen central tral Govt is givin giving subsidy.
2.14 PEST ANALYSIS:-
It is very important that an organization considers its environment before proces ess. s. In fact fact,, envi enviro ronm nmen enta tall anal analys ysis is should be continuous be beg gin inni ning ng the the ma mark rket etii g proc and feed feed aall ll as aspect pectss of planning. The organization’s marketing environment is made up of: 1. The internal environ ent e.g. staff (or internal customers), office technology, wages and finance, etc. 2. Th Thee mi micr cro o envi enviro ronm nmee t e.g. our external customers, agents and distributors, suppliers, our competitors, etc. 3. Th Thee ma macr cro o envi enviro ronm nmeent e.g. political forces, Economic Forces, So io-cultural Forces, and Technological Fo ces. These are known as PEST Factors.
The political environment of sugar industry is not stable it keeps on changing change ge beca becaus usee of th thee pr prod oduc ucti tion on ca capa pacity and the price as pe perr tthe he go gove vern rnme me t chan gove vern rnme ment nt ch chan angi ging ng pa patt tter ern. n. The go gove vern rn ent polices affects fluctuations as per the go policy y iiss fr fram amed ed by gov gover ernm nment ent gi give vess t e guide line to the th thee iind ndus ustr try y be beca caus usee the polic
operation of the industry. The government has restricted the open sale of sugar. The salee mu sal must st b bee pa packe cked d s that there will be less amount of wastage.
POLITICAL ANAL SIS:
1) Pricing Regulation: The price and upply of sugar to free market is fixed by the Government. Even the pri price ce of sug sugar arcan can is fixed by the Government. So, there is more influence of political environment n sugar industry. 2) Taxation: The taxation p licy of the government changes with time & this change effects the indus industry try tto o a lar large ger extent. Any increase in the tax policy will decrease the profit marg ma rgin inss o off the the indu indust stry & vice-ver versa. And sugar industry is en oying the taxation poli policy cy as th ther eree aare re mo e tax exemption & reduction in sugar indust y. 3) Wage Legislation: The g go over vernment has taken taken sev severa erall ini initia tiativ tives es in the we welf lf re of the workers. The government has ame with the acts acts of Minimum Wages Ac Actt, which regulates a
fixed aamoun mountt of w wage agess to th their eir w worke orkerrs. The government company to pay a certain fixed also has intr introduc oduced ed th Work Limit for the manufacturing compani es. 4) Ma Mand ndat atory ory empl employe oye benefits: has ma made de iitt ma manda ndator tory y fo forr the ccomp ompani anies to provide their The g go overnment has emplo em ploye yees es wi with th ce certa rtaii benefits like Insurance, provident fund, all wances, etc. if any company who doesn’t follow it will be legally charged. 5) Industrial safety reg lations: mandat datory ory for the ind indust ustry ry to pro provid videe th ir employees with It has been made man the training to handle the equipments & must also provide some safety accessories likee ey lik eyee ge gear ars, s, h helm elmee , shoes, etc. to ensure the safety of the employees & workers and if the sugar comp ny has COGEN plant then the company has more safety policy which has to be follo ed. 6) En Envir viron onme ment ntal al safet safet act: dustry ry is v vie iewe wed d aass tthe he one one o off th thee p pol ollu lutting company. The The viscose i dust go gover vernm nment ent has tak takee several measures to prevent the industry from polluting the environment. Any industry not following the rules of this policy
ill be closed down
by government. 7) Export-Import polic : The g go overnment has made it very easy to export the sugar to the other countrie coun tries. s. Ther Theree eexcis xcis duty uty is les less & in fac actt Gove verrnment is promoting the industries to export more sugar.
Economic Analysis:
1. Type of economic: The performance of an industry depends upon the market & economy in which it perfor performs. ms. As ssugar ugar is a essential commodity which we use in our daily life. 2. Infrastructure qualit : The iin nfrastructure of the country affects the performance of the industry. As India is lacking in inf infra rastr struct ucture ure the the in indus dustry try is ffaci acing ng the problems like transportation, warehousing, etc
3. Skill level of workforce: abundant in IIndia ndia but the majority o the labors are not We find labor force abundant level is po poor or & must be ttrain rained ed eespec special ially for this type of skilled, skil led, thei theirr eeffi fficien cienccy level manufacturing activity. 4. Labor cost: ourcee is abund abundant ant in IIndia ndia & iitt is aalso lso chea . This is one of the The human resourc cost of the indu industry stry.. Bu Butt tod today ay w wee fi find nd that as the country is factors which control he cost deve develo lopi ping ng this this reso resour ur e is also being expensive. 5. Economic growth ra e: The current growth of the country is 9% which is very encouraging for the development of these industries.
Port rteer’ r’ss Five For e Model: provid vided ed wi with th a ffra ramew mework ork tha thatt eexpl xplain ainss how an industry gets Michael P Po ort r pro forces es.. T The he stra strate teg gic bu busi sine ness ss ma mana nage gerr ssee eeking to develop an influenced by the five forc edge over rival firms can use this model to better understand the industry context in which the firm operates
Bargaining Power of Suppliers
The price of raw-materials (sugarcane) is fixed by the Government. The suppliers are farmers and the the ttotal otal of ssuppl upplier ierss is very high high.. S , there is no such bargaining power of s ppliers in sugar industry.
Bargaining Power of Customers
The bargaining p wer of customers determines how much cu tomers can impose pr pres essu sure re on ma marg rgin inss a d volumes. But in sugar industry the price f sugar is fixed by the Government. So, here is no bargaining power of customers in sugar industry.
Threat of New Entrants
The competiti n in an industry will not be so hig higher, her, a sugar is essential commodity; but the Gov over ernm nmen entt is is eenc ncou oura rag gin ing g & ta taki king ng mo more re in intterest in developing
& increasing the number of Sugar Company. So it is easier for ther companies to enter this industry. In such a situation, new entrants could change major determinants of the market environ ent (e.g. market shares, prices, customer l yalty) at any time. Theree iiss aalw Ther lway ayss a late latent pressure for reaction and adjustment for existing players in th this is ind ndus ustr try y. T The he thr at of new entries will depend on the extent to which there are barriers to entry.
These are typically
Economies of scale ( inimum size requirements for profitable ope ations),
Hi High gh ini initia tiall inv inves estme tmen nts and fixed costs,
Scarcity of important esources, e.g. qualified expert staff
Acce Ac cess ss tto o ra raw wm mat ater eria ia s is controlled by existing players,
Distribution channels re controlled by existing players, Existing players have lose customer relations, e.g. from long-term service contracts,
Legislation and government action- the sugar industry is totally ontrolled by strict regulation of government. Threat of Substitutes
A threat from substitutes exists if there are alternative p oducts with lower
prices of better perfor anc ancee pa param ramete eters rs ffor or tthe he ssame ame pur purpos pose. e. T Th h y could potentially attract a significant propor oportion tion of ma market rket vol volume ume and he hence nce red reduc uc the potential sales volume for existing players. This category also relates to compl mentary products. Similarly to the threat of new entrants, the treat of substitutes is determined by factors like
Current Curr ent tre trendsnds- this i most import important ant be becau cause se the sug sugar ar indu industr stry do not have any trend for consumption of sugar.
Thee subs Th substi titu tute te’s ’s prod produ ucts like gur guru u & khan khandasr dasrii whi which ch are are ssubst ubstitut itutes of sugar. Butt tthe Bu here re is no such impact of substitutes which create a threat to sugar industry. Competitive Rivalry between Existing Players
This for force ce desc describe ribe
the intensity of competition between existing players
(companies) in an ind stry... Competition between existing players is likely to be high when
Theree aare Ther re ma many ny play playee s of about the same size- the sugar industry have many players almost many are of same size, so there eex xist tth he competition b tween the existing players.
There is not much dif erentiation between players and their commodities, but there is commo modit dity y ssuga ugarr is ssimi imilar lar but the quality of much price competition- the com
are
different so the prices followed according to the size & quality ex: large size, medium size or small size. There is no much co petition between competitors as sugar is co trolled commodity & the prices, the quan ity of sugar sugar suppl supplied ied to market iiss fixed by th Government.
2.15 INDUSTRY COMPETITION:-
The internatio al scenario of sugar is highly favorable for nother 4to 5 years.
This Th is is an ac acco coun untt o off t e following reasons.
The W.T.O. has banned the dumping of D grade sugar to the world
•
arket.
Th Thee p pet etro role leum um indu indust stri ri s are are in nee need d of eetha thanol nol for ble blendi nding ng w with ith the petrol hence the
•
sugar factories are div rting to ethanol manufacturing gradually.
On amo amount unt o off th thee ab abov ov reasons the availability of the sugar in the international market
•
has been reduced substantially. •
ernati tion onal al ma mark rket et,, b but ut su supp pply ly is defi defici citt h heence the prince has Demand in more at in erna sugar an international level is soaring up.
This trend is giving to be continued for another 4 to 5 years. As
CHAPTER - 3
COMPANY PROFILE
3.1 COMPANY INFORMT ON:
DAVANGER
SUGAR SUG AR C COMP OMPANY ANY was star started ted iin n 197 1970’ 0’s. The company is
DAVANGERE. RE. F Firstly irstly the nature o the company was sit situa uated ted iin n Kuk Kukkuw kuwad ada near DAVANGE the com company pany b becam ecamee priv private ate li limite mite company i.e. the publi pub licc lim limite ited, d, tthe hen n i 1996 the administration and m nagement of the company came under SH MANUR GROUP the comp company any is ttotal otally ly pr privat ivatize ize OF INDUSTRIES. Now the
and named as
DAVANGERE SUG R COMPANY PRIVATE LIMITED.
HISTORY: set u up paS Sug ugar ar F Fac actory tory at K Kukk ukkuwa uwada da to k a concrete shape The proposal to set
vasst irr irriga gattion ion ffaacili liti ties es create ted d by ne work of canals of with the the dev develop elopmen men of va Bhadra Dam in the T luk of Davangere, Channagiri, Honnali and Harihar and nearly 1, 20 20,0 ,000 00 he hect ctar ares es of the land brought under irrigation in 1970-80
ithin radius of 100
Km from the present location of DAVANGERE SUGAR CO PANY PRIVATE LIMITED, at Kukku ada village to exploit this vast irrigation potential, a Sugar ing ccap apac acit ity y o off 1 125 250 0 T TCD CD wa wass est estab abli lisshed by the name Factory with a crus ing MIT TED, as a Joi Joint Sector Government DAVA DA VANG NGER ER SU SUG GAR COMPANY LIMI 970 aatt th the in initiative o off tth he lo local F Faarmers, L aders of the above Company in the year 970 financial part participation icipation and guida guidance nce of Karnataka Agro Talu Ta luks ks wi with th the the ac acti tive financial In Indus dustri tries es Cor Corpor porati atio o
an and d K KSI SIIIDC, who su subs bsta tant ntia iall lly y ccon ontr trib ib ted to the Equity
The othe otherr fi fina nanc ncia iall in inst stit itut utio ions ns llik ikee IIDB DBI, I, IFCI and ICICI also Funds Fun ds of the ccompa ompany ny. The pa part rtic icip ipat ated ed in the the E Equ quity of the company to some extent.
3.2 MISSION AND VISION STATEMENT
VISION:
part of th thee ccompa ompany ny tthat hat about about 2000 20000 0 ac acrres of land has been It iiss proud o on n the part brought u un nder ssu ugarc ne cultivation for the ensuring season 200 -08. The company
could able to achieve his on acco account unt of cco-op o-operat eration ion of the ffarme armerr . The management has a vision to bring t least least 25,00 25,000 0 acre acress of land unde underr sugar sugarcan can cultivation for the season in the next co ing years years.. Thi Thiss is w with ith a v view iew tto o crus crush h at le leaa t 8.00,000 tones of suga sugarc rcan anee tto o aach chie ieve ve t e prosperity of the company
MISSION:
1. To prov provide ide gui guidanc dance’ e’s and early warnings to Cane and Sugar Industry including Sugar-related Industri s. 2. To support Cane and Sugar industry including Sugar-related In ustries to develop their competitiveness apacity and sustainable growth with balances. 3. To sup upeervi vise se sust sustaaina ina le growth of Cane and Sugar Industry.
4. To increase increase their sales. 5. To ac achi hiev evee the the reco recove ve y level of 11% at the end of 2009 6. During 2009-2010 co pan pany has a target to crush a sugar cane of 2 0000 MT. 7. To increase quality of the product & fulfill the needs of the custom r.
3.3 GENERAL OBJECTIV S:-
OBJETIVES:
To increase quality of sugar.
•
To increase their sales.
•
•
Increase the sales by conducting many programs like consumer inf rmation programs. To inc ncrrease the memb rs of the union
•
To regularly supply th re product all the customers according to customer needs.
•
3.4 PRODUCTS AND SER ICES MARKETING
In DSCL the ma major jor p prod roduc uctio tion n is ssuga ugar. r. T The he co compa mpany ny has to produce two types of sugars. They re, 1. Brown sugar 2. Raw sugar.
1. Brown sugar In the form of dry, brown sugar crystals (the colour being ue to the presence of impur impuriti ities) es) o obta btaine ine from from the the eeva vapo pora rati tion on of cl clar arif ifie ied d sug sugar ar c ne juices imported for processing into refined ined su suga gar, r, this this prod produc uctt iiss not not so sold ld to cu cust sto o ers because it does not meet Canadian sta dards for health and hygiene. By products The chief by products of sugar manufacturing are,
Bagasse
Molasses
Press mud
Bagasse
Bagasse is the byproduct left left behin behind d after crushing of sugar cane. It is used as a fuel in the sugar boilers. Excess Bagasse finds use as a raw material in paper manufacture. Molasses
Molasses is a yproduct of sugar refining chiefly used for alcohol production the entire molasses ou put is routed to the distillery unit and acetic cid plant. Press mud
the by bypr prod oduc uctt ge gene nera rate ted d by ca cane ne ju juic icee fi filt ltrration during sugar Press mud is the manuf ma nufac actur turee curr curren entl tl press mud is used as a fertilizer in su arcane cultivation. mixe xed dw wit ith hp pre ress ss mu mud d ttha hatt ccom omes es fr from om su ar factory to make Distille Dist illery ry effl effluent uentss ar mi bi bio o fe fert rtil iliz izer erss a su subs bsti tittute for chemical fertilizer. of the these se pote potent ntia ials ls wo woul uld db bes esid ides es si sign gnif ific icaantly contributing to Full ex exploitati n of ntry an and d ther theree b by y im imm men ense sely ly be bene nefi fiti ting ng s gar cane formers. the energy of the co ntry Hence central govern ent shows keen interest in setting up many
ore sugar units as
nd h heelps to to g geenerate eecco- ffrriendly ren wable energy. The it uplifts the rural ma ses aan ompany ny iiss su sugar. gar. Apa Apart rt ffrom rom prod producin ucing g su sug g r the company also major product by the compa produces liquor, acetic acid, arrack etc.
The DSCL area of in ter ereeste sted/op d/opeeration tion in the di disstr triicts of Chit itrra urga, Davanagere, Shiv Sh ivam amog oga. a. Ch Chik ikam aman angl glur ur a d Bel Bella lary ry has has b bro roug ught ht cons consid ider erab able le pr pros ospe pe ity to the formers. Forr the Fo the purp purpos osee o off m mai aint ntai ain n the phase of economic growth the promoters have setup a plant for manufac manufacturi turing ng whit whitee sugar at Davanagere. Davanagere. The plan plantt will al also so meet th demands from the agricultural community for stablishing a sugar factory in the region. The company as accordingly with the active suppo upport rt of the st state ate gov governm ernment ent KS KSIID IIDC C an KAIC the central governm gove rnment ent tto o issu issuee a li licens cens to setup the sugar factory at Davanagere. The DSCL export whitee suga whit sugarr to the o other ther p place lace and countries like Bangladesh and Srilanka.
3.5 ORGANISATION STR CTURE:
&
..
3.6 DEPARTMENTAL ST DY: 3.6.1 FINANCE
:-
The Financial Department is plays an important role as everything that company does is reve led in this matter in the sense of financial st tement and reports thiss iiss tthe he de depar partm tment ent wh which ich con consti stitut tutee ttow owaards the shareholder of the company. And thi an and d tthe he inve invest stor orss o off t e company so to maintain this department prior concentration ustt b bee p pre repa pare red d o onl nly y b by y th thee aacc ccou ount nt nts who have the must mu st be th ther eree aand nd this mus knowledge or b y co pany secretary or by charted accountant appointed by the reviewed by the compa company ny audi auditor. tor. T Thi his report shows the company which must be reviewed mpan any y aand nd by keep keepin ing g tthi hiss d dep epar artm tmen entt aacc ccu u ate and transparent performance of the comp they can attract more investors or can get competitive advantage. meeans a concern, which unde takes trading, or A business oncern m manu ma nufa fact ctur urin ing g aact ctiv ivit itiies of goods/services. The basic criteria for starting a business rom tha that. The here re are so ma many ny tr traadi ding ng ac acti ti ities in a financial unit are are to m make ake pr profi ofit from year. T Th here for the c mpany has to make the records of all these ctivities. So these arises the used for book-keeping.
Now a day
very business has to keep books of a counts. It is the
requirements o off th the l w. Generally the companies are required o maintain mainly two types of accounts.
1. Trading and P&L Account. Balan lance ce sshee heett an and d ev evee cash flow statement. 2. Ba
The same process is f llowed in DSCL as mentioned above.
NEEDS FOR ACCOUNTING SYSTEM:
To ascertain the profit and loss of the business.
To ascerta taiin the finan ial position of the business.
To providing control ver assets and properties of the company.
To providing informa ion to tax authorities like, sales tax, income tax, control excise etc.
Assistance to manage ent on
a) Decision-making b) Forward planning and budgeting.
3.6.2 MARKETING:
INTRODUCTION:
DSCL ha hass ma mark rket etin ing g cu cum m sa sale less de depa part rtme ment nt.. Sugar is controlled co comm mmod odit ity y & the the p pri ri e of the the su suga garr & qu quan anti tity ty of su suga garr ttha hatt sh uld be released in markett is ffixe marke ixed d by tth h government. So, there is much influence of government on sugar pricing & releas ng. In DSC
there the re are are sseve even n eempl mploy oyees ees wo worki rking ng in sales cum marketing
department.
3.6.3 CURRENT SC NARIO:
Every sugar in ustry has a dual policy that is Free & Levy. a) Free market: Free market means the company can sell sugar directly to the market, but the quantity of sugar that hou hould ld b bee so sold ld iiss fi fixed xed by tthe he g gove overn rnme ment. nt. The government will fi fix x tthe he quan quanti tity ty of su sug g r that should be sold on monthly basis. b) Levy: The governm nt will fix the ratio of levy which means in total production some p peercentage of sugar ssh hould b bee ssu upplied tto o PD PDS( P Pu ublic D Diistri ution System) and the percentage is fixed by the government. a) The current ratio is 9 :10, which means 90% of sugar can be sold in sugar market & 10% should be sold to government.
b) The curre rent nt marke kett pr ce of su suga garr in in iint nter erna nati tion onal al ma mark rket et is 22 229D 9Do ollars per metric ton that is 900 per quintal. c) Th Thee curr curren entt ma mark rket et pri price of of su sugar gar in d dome omestic stic mark market et iiss Rs. Rs. 11 1180 80 p r quintal. As the internat atio iona nall p pri rice ce is not not ffav avor orab able le th thee ccom omp pany is selling its commodity in Indian
arket.
3.6.4 MARKET SEGMENTATION:
DSCL has 900 dealers across across th thee country country.. The company has a market share of 0.37%. There aarre mai ly 6states where DSCL is concentrating they are:
a) KARNATAKA b) TAMIL NADU
c) ANDRA PRADESH d) WEST BENGAL e) BIHAR
f) KERALA 3.6.5 HUMAN RES URCES -
INTRODUCTION:
The Human Resources Department is performing a vital role in the esou ourc rces es Ma Mana nag gem emen entt iiss con conce cern rned ed with with people dimensions in organization. Human es organi niza zati tion on is ma made de up of peop people le,, ac acqu quiiring their services, manag ma nagem ement ent.. As ever every orga oh hiigher her levels o off per perfor ance and ensuring developi deve loping ng their skil skills ls, motivating them tto th thei eirr ccom ommi mitm tmen entt to to the organization.HRM is the qualitative imp ovement of human beings who are considered the most valuable assets of an organiza tion. In DSCL also Huma Hu man n Re Reso sourc urces es aarr given more importance, cared & always motivated towards organization goal.
3.6.6 PROCESS OF
R DEPT IN DSCL:
The pr process fol follow d in DSCL as follows
a) Ac Acqu quis isiti ition on of of Huma Human Resources:
In DSCL acquisition process is concerned with securing
employing people
who are required by the the org organiza nizati tio on, accor ccordi din ng to the hi hieer rchy level in the organi org anizat zation ion k kee eepin ping g in mind organizational objectives. b) Development of Hu an Resources:
In DSCL dev lopment p prrocess iiss cco oncerned w wiith iim mpr ving the skills of employees, molding t eir behavior behavior according to orga organization nization needs & changing their skills, knowledge, aptitud udee,& va valu luees. All th this proc oceess iiss d do one to im rove the quality of service which he ren ers for the organization & these qualities of employees are improved to achieve organization goal. c) Mo Motiv tivati ation on of Huma Huma Resources:
As DSCL is situated in rural areas where the motivational xpenses( expenses made on employees to mo moti tiva vate te them them)) aare re low low comp compar aree to to u urb rban an ar as. For example: if you i crease salary o orr if y you ou give a gift/ incentive of Rs.250 to 500 the employee gets motiva ivated ted. In case of work orkers iiff you giv ivee a inc ntive of Rs. 150 to 250 then he will be m tivated. tivated. In DSCL most of the em employees ployees ar self motivated are they are working in the org organ aniza izatio tion n fr from om p past ast 15 tto o 25 ye yeaa s. Nearly 85% of empl em ploy oyee eess in in D DSC SCL L a e working from past 15 years. d) Maintenance of Hu an Resources:
The maintenance fun functi ction on is cconc oncern erned ed w with ith pr provi ovidi di g those working conditions that employees believe are necessary in order to maintain their commitment to the
rganization. The HR dept iiss aallso contin ously working to
improve the working conditions of the employees.
For example: conditio itions ns wer weree not goo good d in Admi Administ nistrat ratio ion and Management As the the w wor orki kin n cond block of the organi ation & the employees were disturbed with the working quested ed to HR d dept ept to iimpro mprove ve the w worki orkin ng conditions of the conditions. So, they r quest office. All this happene ned d 2 y year earss ba back ck & thi thiss p prob roblem lem wa wass so solv lv d by the HR dept within a span of 6mo ths. That That is, A new building was b build uild wer Administration & Mana Ma nag gem emen entt blo block ck w s shifted. Now the employees are happy and HR dept Head said that afte afterr th this is aactio ction n the efficiency of employees is increased by 20 .
HOW HR DEPT W RKS IN DSCL:
The ssu ugar p pllant works on seasonal basis, so HR Dept has two different policies & procedures to acqu quir iree, d deeve vellop op,, m mot otiv ivaate & main inta taiin Human Resources of th thee o org rgan aniz izat atio ion. n. Th Theere is a committee named TRIPRIATE COMMITTEE, which makes policies & procedures for th thee welf welfare are of employee employeess in whol Sugar Industry.
3.6.7 ABOUT TRIP IATE COMMITTEE:
TRIPRIATE
OMMITTEE is a body which functioned for the welfare of
employees and it is re ulated by the: a) Government-( Sugar Ministry, Labor Ministry ry,, labor commis ioner, joint labor commissioner etc) b) Members of Co-operat ativ ivee S Sug ugar ar fact factory ory and and Go Gove vern rnme ment nt Su ar Factory ( Few selected members) c) Karnataka State Sugar Federation-(President, General Secretary, T easurer, etc). The above committee is functioned for the welfare of employees in sugar industry. It solves pro lems between between workers & ma management nagement in th organization.
The functions as foll ws
a) The committee fixes the the ssal alar arie iess o off w wor orke kers rs,, eem mpl ploy oyee eess aand nd others who rendered service for the organization. b) The committee cond cts employee welfare & safety programs.
c) Ove Overr all all tthe he comm committe itte look after the employees in sugar industry.
3.6.8 EMPLOYEES
ELFARE:
DSCL has conducted many programs for the welfare
f employees. The
different allowances aid by the com ompa pany ny to the employ oyeees aacc cco o ding to employees act as follows; 1. Provident fund: The company ays 12% on Basic + DA as provident fund. 2. Gratuity:
The company pay payss 15 15da days ys sa sala lary ry ((pe perr ye year ar)) fo forr pe perm rman an nt employees and 7day 7dayss sa sala lary ry for se seaaso al employees. 3. EDLI (Employees D posit Linked Fund):
The prese sen nt ra rate of EDLI EDLI iiss Rs.6 Rs.67000 7000.. EDL EDLII mea means ns if an employee expired during the course of e ployment, then Rs. 67000 is paid to his dep ndents. 4. Workmen Compens tion Payment:
The company ays compens compensatio ation, n, if any em employ ployee ee met wi witth an accident while working and the payment is done according to the act. 5. Medical Allowances:
The company pays Rs 250 per month for all the employees as Medical Allowances. 6. Traveling Allowance :
aveli ling ng al allow lowan ances ces aacc ccor ordin ding g to th thee dis dista tan nce traveled by the The company pays t ave employees. 0.1 to 4.9 4.9 k kil ilom omet eter erss R Rs. s. 175 per month
5 to 9.9 kilometers Rs. 225 per month
10 to 14.5 kilometers s. 275 per month
15 and above Rs.325 er month. The company also has transportation facility for employees.
7. Uniform:
The company also also prov provid ides es un unif ifor orms ms fo forr tthe he em empl ploy oy es. The company provides 3 pairs of uniform for 2years to permanent employees & 2 pairs of uniform for seasona sonall eem mploy ployee s. The compa pany ny also pa pay ys st stiitc tch hin ing g all llow ow nces and washing all llow owaanc ncees. The stit stitcching ing aall llow owan ance cess aare re Rs Rs.8 .87. 7.5 5p per er pa pair ir an and d was washing allowance Rs. 25 per month. 8. Night Shift Allowances:
The company ays Night Shift Allowances to the employee s. (Rs. 5 per night).
9. Canteen Facility:
The company has clean & hygiene canteen facility. The company charges Rs.0. Rs. 0.60 60 fo forr tea tea,, Rs. Rs.1. 1.2 20 for Tiffin & Rs.3.50 for full meals. 10. Safety Training Prog rammers:-
The company has cond nduc uctted many sa safe feti tiees tr traaini ning ng pr prog ogrra med in both sugar plant pla nt & cog cogen en p pla lant. nt. I coge cogen n plant th thee safety ttrain raining ing pr progra ogramme mme is conducted once in two months. The c mpany has done many othe others rs pr programmer ogrammer for the welfare of empl em ploy oyee eess aand nd ther theree are m maany othe otherr aall llo owanc ncees m maade by the com any for the welfare of employees.
TIME OFFICE: As every organization has Time Office, even DSCL has Time Office were
attendance register of he employees is maintained.
TIME OFFICE PR CESS:
The company has three three sh shifts ifts & th there ere aare re di differ fferent ent w worke orke s in different shift. Each ssh hif iftt iiss o off 8 8h hours. In time office has installed Electronic Punching Machine where each employee ha hass g giv iveen a pu punc nch hing ing ccaard & when aan n eem mpl yee enters into the organization goes through this process and the data is saved.
CHAPTER 4 FINANCIAL ANALYSIS
4.1 INTRODUCTIO :
The Financial Department is plays an important role as everything that company does is reve led in this matter in the sense of financial st tement and reports thiss iiss tthe he de depar partm tment ent wh which ich con consti stitut tutee ttow owaards the shareholder of the company. And thi an and d tthe he inve invest stor orss o off t e company so to maintain this department prior concentration ustt b bee p pre repa pare red d o onl nly y b by y th thee aacc ccou ount nt nts who have the must mu st be th ther eree aand nd this mus knowledge or b y co pany secretary or by charted accountant appointed by the reviewed by the compa company ny audi auditor. tor. T Thi his report shows the company which must be reviewed mpan any y aand nd by keep keepin ing g tthi hiss d dep epar artm tmen entt aacc ccu u ate and transparent performance of the comp they can attract more investors or can get competitive advantage.
A business
oncern m meeans a concern, which unde takes trading, or
manu ma nufa fact ctur urin ing g aact ctiv ivit itiies of goods/services. The basic criteria for starting a business rom tha that. The here re are so ma many ny tr traadi ding ng ac acti ti ities in a financial unit are are to m make ake pr profi ofit from year. T Th here for the c mpany has to make the records of all these ctivities. So these arises the used for book-keeping. Now a day’s every business have to keep books of ccounts. It is the requirements o off th the l w. Generally the companies are required o maintain mainly two types of accounts.
1. Trading and P&L Account. Balan lance ce sshee heett an and d ev evee cash flow statement. 2. Ba THE SAME PROCESS IS OLLOWED IN DSCL AS MENTIONED ABOVE.
DSCL expanded its og ogen ener erat atio ion n ca capa paci city ty fr from om 3M 3MW W to 24 24.4 .45 5 W during March 2008 with a capital in estment of INR 6,800 lakhs.
DSCL DS CL has de devel velope ope
its own farm of about 30 acres for
xperimentation &
development of new arie arieties ties of h high igh y yield ield suga sugarcan rcanee wi with th h high igh r sucrose content. During 2 20 007-08, D DS S L was su succ cces essf sful ully ly in br brin ingi ging ng ab abou outt 1 18 8 000 acres of land belonging to farmers under sugarcane cultivation. During 2008-09, as meas me asur uree o off u upg pgra radi ding ng te tech chno nolo logy gy in su ar manufacturing, DSCL has aad dopted ssy y up clarifier technology imported from Tate & Lyle, London to produced carbonized efined sugar. sugar. DSCL is envis envisaging aging n next ext phase expansion of this project currently. The obje objectiv ctivee is tto o rea realize lize hig higher her p price rice for p per er kg. of sugar sold by INR 4 to 5.
DSCL is managed by highl ighly y exp xpeerienc nceed tea eam m of techn hnic icaal & fin ncial people under the strong leadership f Mr. S. S. Ganesh, Managing Director.
Managing Director Mr. G Gaanesh aaw warded ded w wiith “B “Best B Bu usiness –Leadership Cogeneration” by the olar Ener En ergy gy So Soci ciet ety yo off Ind India and and W Win in rock rock IInt nter erna nati tion onal al fo forr b bes estt m man anaaged power plant in India in 2009.
Mr. S S Ganesh is w rking with
DSCL DS CL aw award arded ed wit with the honor of “Industrial Excellency” in technology & management by Insti ute of Indian Economic Studies, New Delhi
Documentary on DS L co-gen unit by BBC, UK.
DSCL has entered into pow power er tr tradi ading ng ag agre reeme ement nt w with ith Relia Relian n e Energy Trading Limited after grant of perm permiss ission ion of o open pen aacce ccess ss by the order of CERC. The agreement is renew ble every 12 months. Due to this develo ment, the average re real aliz izat atio ion np per er unit unit h s improved to INR 7.50 during the current y ar.
DSCL has brought ,000 ,000 acr acres es of la land nd und under er cul culti tivat vation ion of hi h yield variety of sugarcane b y encouraging farmers.
DSCL DS CL ha hass iimpr mprove ove
its sugar manufacturing process by implementation of re-
engine neeering the the exis xisting process and semi- atomizing few of the key manufacturing processes.
DSCL DS CL is ccont ontrol rolled led by Shamanur family. Promote Pro moterr g group roup hold 96% stake and balance 4% is with public
Current Curr ent sh share are ca capita pita of DSCL is INR 3686.85 lakhs (equivalent equity shares with face value of INR 1 )
DSCL is listed with Bangalore stock exc exchange, hange, currently trading is suspended DSCL Shareholding pattern
Shamanur Group of
ompanies are promoted by Dr. S. Shivshankarappa. Shamanur
Group has business inter nteres estt iin n E Edu duca cati tion on,, B Ban ank, k, Su Suga gar, r, an and d Po Po er, Commodities, Distilleries & food pr cessing. The group is highl y infl nfluen uentia tiall in in K Kar arna natak takaa p part artic icula ularly rly Da Davan vang gere region with its flagship eed ducation b bu usiness under the name & sty tylle of Bapuji Educational Association
Davangere Sugar C mp mpany any Li Limit mited ed (D (DSCL SCL)) iiss unde underr m majo ajorr ty control of the Managing
Director
r S. S. Ganesh.
Other sugar & power o-gen unit of the group includes:
Indian Cane Power Li ited
o
Shamanur Sugar Mills Limited
o
Sams mson on Dist Distil ille leri ries es P t. Limited Sa
o
4.2 CURRENT RATIO:
This ratio measu sure ress the the so solv lven ency cy of th thee ccom ompa pany ny in th thee s ort term. It is the ratio of current assets to current liabilities. It shows the firm’s ability to cover its current liabilities with its current assets. It is expressed as follows; Generally 2:1 is consid considered ered idea ideall for a con concern cern i.e. i.e.,, cu curre rre t assets should be twice of the current liabilities current assets are thos thosee ass assets ets w whic hich can be converted into int o ccash ash withi within n a ye yeaar. Current Current li liabilities abilities and pr provisions ovisions are th thos os liabilities that are payabl pay ablee w with ithin in a y yea ea . Cur Curre rent nt as asse sets ts incl includ udes es ca cash sh in hand hand,, c sh at bank, , bills receivable , sundry debtors, inventories, readily marketable securities, prepaid expenses etc., current liabi liabiliti lities es in includ cludes es it item em ssuch uch as bill billss pay payabl abl , sundry creditors, bank overdraft, cash redit, short term loans, occurred expenses, income received in advance provision for income tax, proposed dividend etc.,
Current Ratio
=
TABLE NO – 4.2
Year
Current
Current
Asset
Liabilities
Ratios
2008
77726.01
9650.07
8.05
2009
85393.95
14493.57
5.89
2010
100167.69
16501.10
6.07
10 6 4 2 0 2007
200
200
Interpretation :
The standard urrent ratio ratio is 2:1. The ccurrent urrent ratio of th Davangere Sugar Compa ompany ny is 6. 6.0 07 iin n t e year 2009 as compar compared ed to 8.0 8.05 5 in the year 2007. This shows that tth he ffiinancial p po osi ion of tthe he S Suga ugarr Co Compa mpany ny iiss no nott g good ood;; w wh h n we observed the current ratio of all th ree ree ye year arss we ccom omee to tthe he cconc onclus lusio ion n th that at the current ratio of Davangere Sugar Company is less than 2.
It means the co pany fined some
difficul diff icultie tiess in payme paymen n of current liabilities and also day to day op rations of business may suffer
4.3 4.3 LIQ LIQUI UID D / QUIC QUICK K / ACI ACID RATIO:
The term liquidity refers to the ability of a firm to
ay its short term
ob obli liga gati tion onss as an and d when the they yb bec ecom omee d due ue.. T Thi hiss is th thee rat ratio io o off lliq iquid assets to liquid liabilities. It shows a irm’s ability to meet the current liabilities ith its most liquid asse assets ts.1 .1:1 :1 iiss ccon onsi side derr d as iidea deall ra ratio tio ffor or a co conce ncern. rn. The co conce nce n should keep the liquid assets at least e ual ual to to tthe he liqu liquid id liab liabil ilit itie iess aatt aall ll th thee tim times es.. L Liiquid assets are that asset which are rea ily ily ccon onve vert rted ed into into ca cash sh and and iinc nclu lude dess c sh balances, bills receivables, sundry debtor btorss and shor shortt ter erm m inv nveestm tmeents ts.. IInv nveentories and prepaid expenses are not incl ded ded iin n tthe he liqu liquid id as asse sets ts beca becaus usee tthe he em emph ph sis is on the ready availability of cash in ca case se o off li liqu quid id aass sset ets. s. L Liq iqui uid d li liab abil ilit itie iess in incl cl de all the items of curr curren entt lia liabi bili liti ties es eexc xceept bank overdraft. This is the acid test of a concern’s financial soundness.
Ratio
=
=
TABLE NO -4.3
Year
Quick Asset
Current Liabilities
Ratio
2007
3781.41
9650.07
0.39
2008
13948.34
14493.57
0.96
2009
9151.57
16501.10
0.55
1 0.5 0 2 07
200 200
Interpretation :
Thee q Th qui uick ck rati rati was lowest during the year 2007 i.e., 0.39 and lowest during the year year 200 2009 9 i. i.e. e.,, 0. 0.5 55 the the id idea eall st stan anda dard rd q qui uick ck rrat atio io iiss 1: 1:1. 1. It means the company is in a posit position ion tto o me meet et iitts immediate current liabilities.
4.4 DEBT EQUITY RATIO:
This ratio is c lculated to measure the relative proportions of outsider’s funds
and shareholders fund invested in the company. This ratio is determined to ascertain the soundness of long term finan financial cial po polici licies es of that co compa mpany ny and is also known as external – internal eeq quity rati ratio. o. D Debt ebt g gener enerally ally refe refers rs to long term liabilities equity means owners fund. It consists of capital reserves and profits. It is calculated as follows: Debtors Turnover Ratio: Debto s Turnover Ratio
=
TABLE NO -4.4
Year
Sales
Debtor
Ratio
2007
4742.71
3409.54
1.39
2008
7805.8
2002.95
3.90
2009
7948.48
2398.48
3.31
4 3.5 3 2.5 2 1.5 1 0.5 0 2007
200
200
Interpretation: -
The high Debt Equ Equity ity R Ratio atio show showss tha thatt the claim claim of cre credito ditors is more than that of own owner ers. s. IIff th thee ra rati ti is very high then it is unfavorable as per the firm’s point of view. In the year 2007, 2008 and 2009, the ratio was 1.39, 3.90 and 3.31.
4.5 AVERAGE COLLECT ON PERIOD:
Aver Av erag agee Coll Collec ecti tio o Period =
TABLE NO - .5
Days In a
Debtor Turnover
Coll Co llec ecti tio o
Year
Ratio
Period
2007
365
1.39
263
2008
365
3.90
94
2009
365
3.31
110
Year
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2007
200
200
Interpretation :
The average c lle llecti ction on per period iod rep repres resen ents ts the num number ber of day’s worth of credit sales that locked in eb ebtor tors. s. L Low ow ave averag ragee ccoll ollect ection ion pe perio riod d sh sho o s that company’s collection is fast and rompt. Form y year ear 2007 and 2009 there wa an increase in the average collection p riod but in 2008 it was decreased. This is good sign for company.
4.6 FIXED ASSET AND CURRENT ASSET RATIO:
the eff efficiency iciency of the assets use. T Th h efficiency use of This ratio me sures the sales per rupee in invested vested in all the assets of a concern. The assets will generate greater sales will rres esult ult in llow ow sa sales les volume volume co coupl upled ed w th higher overhead in insu suff ffic icie ient nt u use se o off as asss t will available lable ca capacity. pacity. This ra ratio tio is important in case charges and under utilization of the avai because se the sa sales les are pr produc oduced ed not on onlly by use of current of manufacturing con erns becau invested in fixed assets. The higher is the ratio better is the asset but also by amo nt invested performance. On the ther hand, a low ratio indicated that fixed ssets are not being efficiently utilized. The firm may wish to know its efficiency utilizing fixed assets and current assets separately. Fixed Asset Turnover Ratio:
Sales Fixed Asset T rnover Ratio
= Fi ed Assets
Year
Sales
Fixed Asset
Ratio
2007
4742.71
4870.14
0.97
2008
7805.8
6060.01
1.29
2009
7948.48
7206.42
1.10
1.5 1 0.5 0 2007
200
200
TABLE NO -3.7
Current asset tu nover Ratio
Sales
=
Curre t Asset
Year
Sales
Current Asset
Ratio
2007
4742.71
3781.41
1.25
2008 2009
7805.8 7948.48
13948.34 9151.57
0.56 0.87
1.5
1
0.5
0 2007
200
200
TABLE NO -3.8 Interpretation :
Thee fix Th fixed ed as asse se tur turnov nover er of the Su Sugar gar Com Compan pany y is ffas aster ter than the current asset turnover. The fixed sset turnover turnover rratio atio du during ring the year 2008 i highest i.e., 1.29 times. It implies that company generates a sale of Rs. 1.29 for one upee investment in fix ixeed asse ssets ts.. The current as asset set tur turnov nover er rrat atio io d duri uring ng tthe he y year ear 20 7 was highest i.e., 1.25 times it implies that that comp company any gene genera rate tess a ssal ales es of Rs Rs.. 1.25 for one rupee investment in current as asse sets ts.. T The he high high fixe fixed d aass sset etss aand nd curr curren entt aasssets ratio indicates that the overtrading on assets.
NET PROFIT RATI :
This ratio explains per rupee profit generating capacity of sales. If the cost of
profitt wi will ll b bee hi highe gherr and the then n we div divii e it with net sales, saless is low sale lower, er, then th net profi fficie ienc ncy y. If If the the lowe lowerr iiss tthe he ne nett p pro rofi fitt per per r pee of sales, lower the result is the sales ffic icienc ncy y. T The he co conc ncer ern n m mus ustt ttry ry fo forr aach chie ieving greater sales will be the sales ef icie efficiency for maximizing the ROI. This ratio is very useful to he proprietors and reveals the overall pr profitabili ofitability ty of the concern. This prospective investors ecause it reveals operat atin ing g rrat atio io iin n as mu much ch aass it iiss ca calc lcul ulaated after deducting ratio rati o is diff differ er ffrom rom th oper such as loss loss on sa sale le of fi fixe xed d aass sset etss eetc tc fr m operating profit no non n oper operat atin ing g eexp xpen enss s such and adding non operating income like interest or dividends on in estments profit on fixed d aass sset etss llik ikee h hig ighe herr tthe he ra rati tio, o, th thee b bee ter it is because it sales of investments r fixe gives gives ide ideaa of iimpr mprove ove efficiency of the concern.
Profit aft r Tax Net Profit Ratio = Net Sales
Year
Profit
After
Sales
Ratio
Tax 2007
8612.90
4742.71
1.82
2008
5218.10
7805.8
0.66
2009
3586.06
7948.48
0.45
2
1.5
1
0.5
0 2007
200
200
TABLE NO -3.9
Interpretation :
The net profit atio of the Sugar Company during the year 007 was 11%, this high operating profit. The n net et profit is low during the is because of low interest and high beca ecause use of llow ow o operat perating ing prof profit. it. Fro year 2009 was 4.5%, this is b net profit has been
2007 onward the
decreases. This is because the company faces the adverse
economic conditions such as price competition, low demand etc.
WORKING CAPIT L TURNOVER RATIO:
Working capital of co cern is directly related to sales. The current assets like debtors, bills receivable, cash, stock etc. The working capital is taken as; Working capital = current curr ent ass assets ets – curr curren ent liabilities. Work orking ing ccaapit pital turnover turnover ratio iindicates ndicates the velocity o utilization of net working capital. This atio atio in indic dicate atess th thee nu numbe mberr of tim times es tthe he w work orkiing capital is turned over in tthe he ccours oursee of a year year.. Th This is rrat atio io m mea easur sures es tthe he eeffi ffici cien en y with which the work wo rkin ing g ca capi pita tall is is b bei ei g us used b by y a ffiirm. A higher her rraatio iin ndicates eeff icient utilization of working capital and a low ratio ratio iindi ndica cate tess oth other erwis wise. e. But But a v very ery high working capital turnover ratio is not a good situation for any firm and hence care interpreting the ratio.
ust be taken while
N t sales Working cap tal turnover Ratio = Worki g capital
Net Sales
Year
Ratio
Working Capital
2007
4742.71
6807.59
0.70
2008
7805.8
7090.03
1.10
2009
7948.48
8038.96
0.99
1.2 1 0. 0.6 0.4 0.2 0 2007
200
200
TABLE NO -3.10
Interpretation :
pitall tur turno nov ver ra ratio tio o off tth he S Su uga garr C Co ompa pany ny during the year 2008 The working c pita while le com omp par areed to the wo worrki king ng capit itaal ttur ur over ratio of other is hi high gh (i (i.e .e., ., 1.10 1.10)) tim tim s whi years. This high ratio indicates efficient utilization of working capi al.
PROPRIETORY RATIO OR EQUITY RATIO:
Pr Prop opri riet etar ary y ra rattio or equity ratio is also called as the shareholders to total orth h tto o ttota otall aasse ssett rrati atio. o. Th This is ra ratio tio es estab tablis lis es the relationship equities ratio or net ort between shareholders funds and total assets of the firm. This is an important ratio for solv lven ency cy of a ffir irm. m. The The ssha hare reho hold lder erss ffu u ds are equity share determining the long t rm so capital, undistrib undistributed uted pr profits, ofits, reserve reservess an surplus. The total capi pita tall. P Prrefere erence sh re capital, asset denotes the total resources of the concern
Net worth Propriet ry ratio = Total
sset
Year
Net worth
Total Asset
Ratio
2007
3702.59
1650.11
2.24
2008
4010.11
1613.51
2.48
2009
4368.71
1686.00
2.59
2.6 2.5 2.4 2.3 2.2 2.1 2 2007
200
TABLE NO -3.11
200
Interpretation :
The proprietary ratio
as highest during the year 2009 (i.e., 2.59) while compared to
the p prroprietary ratio from 2007 and 2008 2008.. The rati ratio o of 2.24 2.24:: 2 2.4 .48 considered as an ideal proprietary ratio. The proprietary ratio of Sugar Company is more than the ideal ratio. Therefore, the company financial position is very good and strong. The Sugar Compan Com pany y aalso lso ha hass lo lon n term solvency position.
CHAPTER 5 SUMMARY OF FI DING DINGS, S, SUG SUGGES GESSIO SIONS, NS, CONCLU CONCLUSIO SIO
AND FUTURE
LINE OF RESEARCH
5.1 FINDINGS BAS D ON RATIO:-
In tth his chapter invol ed brief result of the study in terms of findings and some suggesti sugg estions ons to impr improv ov over come the drawbacks. Following are the findings identified from the analysis made on the working capital.
The company is large scale growth growth or oriented iented company aand nd it show a profitable figure throughout period of study, among the 3 years.
The company has managi aging ng its wo worki rking ng ca capit pital al is not mor moree eeff ffic icien iently. Current ratio of the Davangere sugar company Ltd., decrease but increased in 2008
09.
Thee fi Th firm rm is ma main inta tain in d in in m mor oree eeff ffic icie ient nt inve invent ntor ory y of ra raw w mat matee ials in next future production.
The company has followed the inventory system of the company preparing on daily ba basi sis, s, mon onth thly ly ba basi siss a d yearly basis.
The quick ratio of Da ange angere re ssugar ugar com company pany Ltd Ltd.. ha hass de decrea creased sed y yeear to year.
Working capital turnover rati ratio o of Dava Davanger ngeree ssugar ugar comp company any Ltd., was decreased in
the year 2008-09 Company has maintained suf suffic ficient ient ccash ash and b bank ank bal balance ance d durin uring the study period except 2008-09.
The fixe xed d asse setts turn urnover rat ratio io o off D Davang avanger er sugar comp company any Ltd Ltd., ., has increased during the year 2007-08 (but slightly decreased in 2008-09.
The company failed to manage inventory turnover ratio in the year 2008-09.
Thee co Th comp mpan any y is orde orderred raw material by calling tenders. This is purely looked after by the purchase department.
he eecconomic o orrder q qu uantity on o orr ering for the raw The compan y is foll wing tth
materials. Thee ccom ompan pany y aaim im is t increase the production of Sugar and power in future. Th
5. 5.2 2 FIN FINDI DIN NG BAS BASE E
ON OBSERVATION:
Growth is the main o jective or goal of any organizatio organization n & the organization will be
•
frequently working on it. The gov governm ernment ent play an important role in framing policies & p ocedures for sugar
•
industry.
Flow of information
•
understanding understan ding between departm departments ents play an important role
for the success of an o rganization.
•
Each and every department is interlinked & acts as a source of information to one another.
The effect of external factors like, suppliers(farmers), government, natural
•
environment etc plays an important role in agro-based industries
The company is plann ng to increase its sugarcane crushing capacit y. The company is plann ng to supply its power to TATA Company limited.
•
•
The ccoompa pany ny is show showiing more interest towards foreign market.
•
department ca called lled cane developme developmen n department where The company has a s parate department
•
fa farm rmer erss are en encou courag ragee by giving loans to grow more & more sugarcane.
The company has ado ted new techniques & procedures to cut the total cost.
•
5.3 SUGGESTION:-
Thee foll Th follow owin in
are are ffew ew su sugg gges esti tion on of offe fere red d tto o tthe he Sugar Company for
improving its perform nce. 1) Th Thee ccom ompan pany y sho shoul ul
ra rais isee tthe he fund fundss tthr hrou ough gh is issu suin ing g tthe he equity share capital,
debe bent ntur ures es,, bo bond ndss and and ot othe herr so sour urce cess of fi fin nance. pr pref efer eren ence ce sh shar aree ccap apit it l, de hou uld improv ovee its sho short tteerm sol olv venc ncy y position by investing 2) The sugar Company sho more and more in curr ent assets.
3) The sugar Company should improve its production methods by upgrading the latest te tech chno nolo logi gies es so it he hell s tthe he comp compan any y to prod produc ucee tthe he pr prod oduc uctt aatt llo o er cost with better quaali qu lity ty whic hich ccaan aatttr ct more and more customers. 4) For the day to day ope rations of the com company pany the working capital is very essential. So the company should maintain the high working capital ratio. 5) The company can reduce the the loss by rreduc educing ing the ccert ertain ain positi positio on of cost of goods sold. 6) While upgrading the tec techno hnolog logy y th thee com compa pany ny ne needs eds o orr re requi quire the fund so the government should pr vide the fund for the development of the co pany. 7) Sug Sugar ar C Com ompan pany y sshou houll take the effective barriers to reduce the co petition. 8) The Sugar Company should hould co conce ncentr ntrat atee on to impro improve ve the sal sales es.. This is possible only by adopt adopting ing the vari variou ous marketing strategies. 9) While observing the balance sheets it clearly shows that there is xistence of sundry debtor deb tors. s. IItt me means ans tth h
company comp any sell sellss the good goodss on ccredi reditt ba basi si . Credit sales are
inevitable, but future is u un ncertain. So tth he company should iim m rove its collection policy. 10) It is very important or the the ccom ompan pany y tto o co contr ntrol ol aand nd m man anage aged d the inventory in an effecti eff ective ve man manner. ner. The company company sshoul hould d mak makee an in invest vestment ment in inventories. The company should try to reduce the holding period of the stock.
5.4 CONCLUSION:
Sugar industry a seasonal, agro-based industry occupies an important place in the economy. It has n immense potential for transforming the ural economy into
self self-g -gen ener erat atin ing g on one. e. The industry can except to grow and emerge as a key player in the international arena.
safety and welfare measure observed in th industries have an When such When such is the the ccas as , safety important role to play in the development of the industries.
DAVANGERE SUGAR COMPANY LIMITED ha has made gr at efforts after its
privatization and succ eded in market from past 36 years and it is frequently working on its objective that is growth, as DSCL believes growth as the success of the organization.
BIBLIOGRAPHY BOOKS
Mark Ma rket etin ing g ma mana nage geme me t by Philip kotler, 2005 edition Human resource management Ashwathappa k. 2000 edition Produc oducttion and ope perrat on management Ashwathappa k.3rd edition Compan Com pany y thre threee year year annual report
1. 2007-08 2. 2008-09 3. 2009-10
NEWS PAPER
Nagar vane local news paper on 14/06/2008 Prajavani news paper n 13-09-2009 LIST LI ST OF WEBS WEBSIT ITE E
Www.sugar.co.in www.dscl.co.in www.indiansugar. o.in LINKS
http://www.proces register.com/Davangere_Sugar_Co_L d/Supplier/sid2 2751.htm 13 13-0
2010 http://business.mapsofindia.com/sugar-industry/karnatak .html 06-0
-2010
http://www.karnataka.com/industry/sugar 19-0
-2010
http://www.project monitor.com/detailnews.asp?newsid=5869 11-0
-2010
http://www.busine sbeacon.com/kommon/bin/sr.php?kall=wcos&tab=1010& ocode=56459
17-0 -2010
http://www.gorecr ot.com/hiring/India/Davangere-Sugar Co-Ltd- 14-0 -2010
PROFIT & LOSS ACCOUNT FOR THE YEAR EN ING 31.3.2008 INCOME SALE OF P ODUCTS
SCHEDULE
AS AT
AS AT
31.03.2008
31.03.2007
DOMESTIC SALES
37,45,41,04 .66
59,64,74,504.28
EXPORTS
9,97,30,250. 00
18,41,06,650.00
47,69,10,12 .80
43,17,06,571.00
3,08,98,630.00
3,54,87,501.00
1.SUGAR
2. POWER
3. MOLASSES SALE 4 OTHER INCOME
2.01
55,82,731.5
4,89,82,670.20
TOTAL
98,76,62,78 .96
1,29,67,57,896.48
EXPENDITURE
CANE PURCHASED
52,88,49,841 .00
31,08,59,217.00
CANE PURCHASE T X
2,77,13,381
1,40,51,071.26
CANE PROCUREM NT & DEV 2.02
1,84,46,384. 96
1,98,66,885.53
2.03
8,62,42,224. 78
6,39,16,100.42
2.04
1,34,95,787. 48
2,50,31,439.15
2.05
0.00
74,77,149.08
SUGAR UNIT:
EXP MANUFACTURING EXPENSES ADMINISTRATIVE EXPENSES RAW SUGAR CON
SELLING
&
DIS RUBUTION 2.06
3,44,51,852. 75
1,10,45,549.07
5,86,53,665. 29
6,13,29,090.64
EXPENSES FINANCIAL CHARGES
2.08
FRINGE BENEFIT T X
1,43,377.00
CO-GEN UNIT: CONSUMPTION OF OAL
19,68,94,62 .40
26,61,36,962.05
FINANCIAL CHARGES
2.08
5,40,59,769. 00
5,48,11,390.80
DECREASE(+) /INCREASE(-) IN
2.07
1,96,70,692. 43
1,65,60,384.53
-21,36,15,03 6.00
29,01,61,403.00
82,50,06,56 .09
1,14,12,46,642.53
16,26,56,21 .87
15,55,11,253.95
1.05
10,03,79,10 .99
10,07,65,618.96
OPBPT
6,22,77,108.88
5,47,45,634.99
LESS:
MAT
70,55,996.4
45,82,293.28
FRINGE BEN TAX
3,13,073.36
1,32,666.00
PAT
5,49,08,039. 08
5,00,30,675.71
27,27,007.31
3,60,98,317.26
FINI FINISH SHED ED
GO GOOD OD
&
BY
PRODUCTS TOTAL
PROFIT BEFORE TA LESS: TOTAL DEPRECIAT ON
ADD:
DEFERRED
INCOME
TAX
ON
NET PROFIT
5,21,81,031. 77
8,61,28,992.97
LOSS B/F PREV YEAR
-5,10,84,345 .96
-13,72,13,338.93
BAL LOSS C/F BAL NCE SHEET
10,96,685.81
-5,10,84,345.96
BAL NCE SHEET as at 31.03.2008 SOURCES OF FUNDS
SCHEDULE
AS AT 31.03.200
AS AT 31.03.2007
1.01
36,85,64,570.00
33,89,09,940.00
1.02
3,24,46,432.46
3,13,49,746.65
40,10,11,002.46
37,02,59,686.65
1)SHAE H HO OLDERS F FU UND : A.
SHARE
HOLDERS
CAPITAL B. RESERVES & SUR LUS
TOTAL ‘A’ 2)LOAN FUNDS: A. SECURED LOA
1.03
1,20,13,35,441.89
1,30,46,23,164.25
B. UNSECURED L AN
1.04
1,11,72,819.96
1,11,19,677.96
TOTAL ‘B’
1,21,25,08,261.85
1,68,60,02,528.86
TOTAL (A+B)
1,61,35,19,264.31
1,68,60,02,528.86
APPLICATIONS OF F NDS: 1.FIXED ASSETS: A. GROSS BLOCK
1.05
B. DEP TO DATE
1,23,05,00,985.61
1,04,44,28,682.10
C. NET BLOCK
48,29,51,456.50
38,25,72,346.51
D. CAPITAL W.I.P
74,75,49,529.11
66,18,56,335.59
6,57,57,253.17
19,08,72,768.50
81,33,06,782.28
85,27,29,104.09
1.06
5,35,900.00
5,35,900.00
1.07
43,98,97,606.92
13,45,69,762.44
1.08
20,02,95,265.17
34,09,54,491.46
1.09
9,59,93,775.54
2,43,57,261.29
1.10
11,77,52,950.11
27,73,78,683.17
85,39,39,597.74
77,72,60,198.36
14,49,35,718.51
9,65,00,714.66
70,90,03,879.23
68,07,59.483.70
5,73,01,392.85
6,47,95,377.85
TOTAL ‘C’ NVE EST STME MEN NTS 1. INV TOTAL ‘D’ 4.CURRENT
ASSETS,
LOAN&ADVANCES: A. INVENTORIES B. SUNDRY DEB ORS C. CASH & BANK BAL D. LOANS ADVA CES
TOTAL ‘E’ LESS: CURENT LIABILI IES & PROVISION: PROVISIONS TO AL ‘F’ NET
CU RENT
1.11
ASSETS(E-F) DEFERRED
RE
EXP
‘H’ DEFERRED TAX ASSET
‘H’ PROFIT & LOSS /C ‘J’
TOTAL ( C+D+G+H+I+J)
3,33,71,309.95
3,60,98,317.26
0.00
5,10,84,345.96
1,61,35,19,264.31
1,68,60,02,528.86
PROFIT & LOSS ACCOUNT FOR THE YEAR EN ING 31.3.2009 AS AT
AS AT
31.03.2009
31.03.2008
72,58,62,806.20
37,45,41,049.66
6,89,86,550.00
9,97,30,250.00
2. POWER
42,07,02,266.40
47,69,10,124.80
3. MOLASSES SALES
1,27,39,836.00
3,08,98,630.00
INCOME SALE OF PRODU TS
SCHEDULE
1.SUGAR DOMESTIC SALES EXPORTS
4 OTHER INCOME
2.01
TOTAL EXPENDITURE
63,86,448.95
55,82,731.50
1,23,46,77,907.95
98,76,62,785.96
58,17,00,763.00
52,88,49,841.00
57.40,710.00
2,77,13,381
SUGAR UNIT: CANE PURCHASED CANE PURCHASE TAX CANE PROCUREMENT
1,73,62,738.31
1,84,46,384.96
2.03
10,06,19,886.51
8,62,42,224.78
2.04
1,56,56,050.91
1,34,95,787.48
DEV 2.02
EXP MANUFACTURING EXPENSES ADMINISTRATIVE
EXPENSES
SELLING
&
0.00
2.05
RAW SUGAR CON
DISTRUB TION 2.06
58,71,146.53
3,44,51,852.75
8,42,08,069.22
5,86,53,665.29
EXPENSES 2.08
FINANCIAL CHARGES
1,43,377.00
FRINGE BENEFIT TAX CO-GEN UNIT: CONSUMPTION OF COAL
18,07,26,782.00
19,68,94,627.40
FINANCIAL CHARGES
2.08
4,40,41,807.00
5,40,59,769.00
DECREASE(+) /INCREASE -) IN
2.07
2,47,81,260.49
1,96,70,692.43
+3,58,79,023.00
-21,36,15,036.00
TOTAL
1,09,92,88,236,97
82,48,63,190.09
PROFIT BEFORE TAX
13,53,89,670.58
16,26,56,218.87
10,54,31,593.83
10,03,79,109.99
2,99,58,076.75
6,24,20,485.88
MAT
34,57,848.06
70,55,996.44
FRINGE BEN TAX
4,22,265.35
3,13,073.36
PAT
2,60,77,963.34
5,49,08,039.08
97,82,681.49
27,27,007.31
NET PROFIT
3,58,60,644.83
5,21,81,031.77
LOSS B/F PREV YEAR
10,96,685.81
-5,10,84,345.96
BAL LOSS C/F BALANCE HEET
3,96,57,330.64
10,96,685.81
FINISHED
GOODS
&
BY
PRODUCTS
1.05
LESS: TOTAL DEPRECIATION OPBPT LESS:
ADD: AD D:
DE DEFE FERR RRED ED
TA
ON
INCOME
BA ANCE SHEET as at 31.03.2009 SOURCES OF FUNDS 1)SHARE HOLDERS F ND :
SCHEDULE
AS AT 31.03.2 09
AS AT 31.03.2008
A. SHARE HOLDERS APITAL B. RESERVES & SURP US
1.01
36,85,64,570.0
36,85,64,570.00
1.02
6,83,07,077.29 43,68,71,647.2
3,24,46,432.46 40,10,11,002.46
A. SECURED LOAN
1.03
1.20,21,19,191. 27
1,20,13,35,441.89
B. UNSECURED L AN
1.04
TOTAL ‘B’
1,21,32,38,869.23
1,21,25,08,261.85
TOTAL (A+B)
1,65,01,10,516.52
1,61,35,19,264
B. DEP TO DATE
1,32,25,99,159. 77
1,23,05,00,985.61
C. NET BLOCK
58,83,83,050.3
48,29,51,456.50
D. CAPITAL W.I.P
73,42,16,109.4
74,75,49,529.11
1,74,16,362.28
6,57,57,253.17
75,16,32,417.7
81,33,06,782.28
TOTAL ‘A’ 2)LOAN FUNDS:
1,11,19,677.96
1,11,72,819.96
APPLICATIONS OF FUNDS: 1.FIXED ASSETS: A. GROSS BLOCK
1.05
TOTAL ‘C’
4.CURRENT ASSETS, LOANS & ADVANCES: A. INVENTORIES
1.07
45,21,28,310.1
43,98,97,606.92
B. SUNDRY DEBTORS
1.08
23,98,48,063.2
20,02,95,265.17
C. CASH & BANK BAL
1.09
4,63,02,992.81
9,59,93,775.54
D. LOANS & ADVANC S
1.10
26,33,97,549.8
11,77,52,950.11
TOTAL ‘E’
1,00,16,76,916.09
85,39,39,597.74
INV VES EST TME MEN NT 3. IN TOTAL ‘D’
1.06
5,35,900.00
5,35,900.00
LESS: CURENT
LIABILI IES
&
PROVISION: PROVISIONS TOTAL ‘ ’ NET CURRENT ASSET (E-F)
1.11
19,77,81,345.5 80,38,95,570.5
14,49,35,718.51 70,90,03,879.23
DEFERRED REV EXP ‘ ’
5,08,92,582.85
5,73,01,392.85
DEFE DE FERR RRED ED TA TAX XA ASS SSE E ‘H’
4,31,53,991.44
3,33,71,309.95
PROFIT & LOSS A/C ‘J’
TOTAL ( C+D+G+H+I+J)
0.00
1,65,01,10,516.52
1,61,35,19,264
