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SUMMER TRAINING PROJECT REPORT

At
SHAH PULP AND PAPER MILLS LTD, VAPI
(FROM 1ST MAY 2010 TO 10TH JUNE 2010)

SHRI RAJJU SHROFF ROFEL INSTITUTE OF B.B.A PROGRAMME,


VAPI

SUBMITTED TO:
VEER NARMAD SOUTH GUJARAT UNIVERSITY, SURAT

GUIDED BY:
FACULTIES OF B.B.A
SUBMITTED BY:
PRIYANKA TANWAR
ARADHANA SINGH
VANRAJ SOLANKI
VAIBHAV PATEL
SAURABH SINGH
DECLARATION

We here declare that this project is entirely done our own


research work with the help of employees and website of the
company and is not copied from any other sources.

We hereby would also like to declare that all the


information provided here are true and authentic and is not
provided artificially.
PREFACE

It is a great pleasure to come forward with such a project

that has fulfilled the needs of our learning desires and has made us

closer to the subject.

In this project we have tried to cover all the major

constituents of an ideal project. We do know that, we are still

unpolished stones, which are still to be converted onto diamonds

but as per the requirements of our sylabbi, we have paid utmost

attention to the application part rather than on theoretical part.

We have also tried to avoid any kind of discrepancy of the

matter in the project. However, if there be any suggestions for the

up gradation from our teachers, we are ready to welcome them.

At the end we co-cordially thank Mr. P. R. Mallaya for their

strong guidance and support.

ACKNOWLEDGEMENT

We are very grateful to all those who have co-operated


with us in completing our project report. Without them this
project report could not been completed as easily as it had.

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We are heartily indebted to all the employees of the
shah pulp and paper Mills Limited, especially Mr. P. R. Mallaya
who is the finance manager of the company. Mr. Mallaya has
supported us during the entire training session and provided
us all the needed information that can help us in completing
the project report. Besides him all the employees of the shah
pulp and paper mills Limited co-operated with us and helped
us as much they could.

CONTENTS
Sr no. Particulars
1. Objectives of the project
2. Introduction of the firm & details
3. Organizational structure
4. No. of departments
5. Production department
6. Quality control department
7. Finance department
8. Marketing and sales department
9. Human resource department
10. Conclusion
11. Suggestion
12. Annexture

OBJECTIVES OF THE PROJECT


• TO GAIN THE PRACTICAL KNOWLEDGE.
• TO LEARN ABOUT THE PROFESSIONAL
ATMOSPHERE.
• TO ADOPT THE PROFESSIONAL BEHAVIOUR.

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• TO LEARN HOW TO INNOVATE YOUR IDEAS AND
FULFILL THE MAIN OBJECTIVE OF THE ORGANISATION AND ALSO
THE PERSONAL GOALS.
• TO BECOME A HUMAN ASSET.

INTRODUCTION OF THE COMPANY

Shah Pulp & Paper Mills Limited is a Public Limited


Company first incorporated as a private limited Company in
November 1993, vide certificate of incorporation number 11-
74945 of 1993 dated 5thNovember, 1993 issued by the
Registrar of Companies, Maharashtra. The Company was
subsequently converted into a public limited Company vide
certificate of change of name dated 15th March, 1995 issued by
ROC, Maharashtra. The object of the Company, is to carry on
the business of manufacturers and dealers of newsprint. It
was to this end the Company set up a 16,500 TPA newsprint
plant at G.I.D.C., Vapi.

MISSION OF THE COMPANY


• For Achieving Market Leadership in Paper
Products.

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• Sourcing World—class Raw Material from
Internationally Reputed Manufacturers.
• To enter the new phase of challenge driven by
commissioning of additional capacity.
• Creating strong R & D department to develop new
kind of qualitative paper.
• To ensure customers success, provide specially
designed process by which the customer receives
quality products, on time and adequate quantity

HISTORY OF THE COMPANY


SHAH GROUP is closely held public ltd company. The
management of the Company vests with the Board of Directors
headed by Shri Amritlal K Shah. Shri Mahendra H Shah,
Managing Director, looks after the day-to-day activities of the
Company including procurement, production, marketing and
finance. He is assisted by other directors as well as by a team of
qualified and experienced professionals in key responsibility
areas.
The Company is having Associate Concern namely, Shah
Paper Mills limited.

Shah pulp and paper mills Limited supplies to all major and
leading newspapers in India as newsprint is the major segment
of the industry where as substantial demand and supply exist.

Raw material for newsprint is imported from USA, EUROPE


and Latin American companies. The Company lead ahead of its
competitors.

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Plant performance
The Company initially started this unit with an installed
capacity of 16500 TPA. Subsequently looking to the newsprint
demand and supply in the domestic market and to remain
competitive with the other newsprint manufacturer, the
Company has made investments regularly in the existing plant in
due course of business. The Company has borrowed term loans
from IDBI, GIIC and SBI time to time for their expansion project
to increase the installed capacity of the plant as well as to
produce better quality of newsprint.The Company has
concentrated on quality and quantity. The Company has
increased the installed capacity of the plant from 16500 TPA to
18000 TPA in the year 1998-1999, 19800 TPA in the year 1999-
2000, 24750 TPA in the year 2000-2001, 26400 TPA in the year
2001-2002 and 29700 TPA in the year 2002-2003 to 2003-04 and
33250 TPA in 2005-06. Currently, the installed capacity of the
plant is 36000 TPA.

LOCATION OF OFFICES,BRANCHES AND FACTORIES

REGISTERED OFFICE AND MANUFACTURING CENTER:


5202,3rd PHASE
GIDC VAPI:396195
GUJARAT(INDIA)
TEL(0260)2400248.

CORPORATE OFFICE:
ANGELINE APARTMENT,B/202,
JUNCTION OF OLD POLICE STATION ROAD
& SAROJINI ROAD,VILE PARLE(W),

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MUMBAI:400056
E-MAIL:SPPML@SIFY.COM
SHAHPULP@GMAIL.COM

LOCATION OF THE PLANT

PLANT ADDRESS:
PLOT NO.97,SILVASSA ROAD,
GIDC,VAPI-396 195
GUJARAT(INDIA)
TELO260)2425858

PLANTS LOCATION IN VAPI HAS FOLLOWING ADVANTAGES:


 ON NATIONAL HIGHWAY.
 180 KM FROM MUMBAI.
 ADVANCED INFRASTRUCTURE
 WATRE FILTERATION PLANT SO WASTE OF WATER IS
CONTROLLED.

ORGANISATIONAL STRUCTURE

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OF SHAH PAPER MILLS LTD.

BOARD OF
DIRECTORS

MANAGING
DIRECTOR
DIRECTOR

PRODUCTION PERSONNEL DESPATCH


MANAGER INCHARGE CLERK

SUPERVISORS STORES

MACHINE ACCOUNT
OPERATOR MANAGER

ACCOUNTS
WORKERS
ASSISTANT

LABORATORY COMPUTER
INCHARGE OPERATOR

ASSISTANTS CASHIER

TELEPHONE
OPERATOR

NO OF DEPARTMENTS

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SR NAMES OF THE DEPARTMENTS.
NO.

1. Production department

2. Quality control

3. Finance department

4. Marketing and sales department

5. Human resource department

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PLANS OF PRODUCTION

 PRODUCTION PLAN OUT OF SALES PLAN


In SHAH PULP due to tough competition and other factors,
they everyday do production planning. General Manager of
production department, Quality Control head of SHAH PULP
have meeting and also production planning.

 MATERIAL REQUIREMENT PLAN AND PURCHASE


On the basis of the orders mentioned in the previous point,
production department issues raw material from stores.

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For example, if 100kg of a particular raw material is required by
production department, stores will give it if it’s available
otherwise it would place orders to its supplier of raw material.

ANALYSIS OF PLANT LOCATION


The main factor affecting plant location is its sequence. Here
in SHAH PULP the finished product i.e. paper roll are send for
newsprint in the press printing.
Sequencing and transportation, these are the major factors
affecting location of the plant.

PRODUCTION PROCEDURE

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Sorting

RM loaded to pulp
mill

Chemicals added Screening

Dying process

Refining

Fan pump

Ready for final


process

Wire

Dryer

Rewinder

final product

QC

DISPATCH

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TYPES AND CLASSES OF MATERIAL HANDLING EQUIPMENTS.
“controlled movement of material from receipt, through
storage and production and up to the shipment of finished
products is known to be MATERIAL HANDLING”
The equipment used for this purpose is called material
handling equipments.
In SHAH PULP the following materials are used
1. CLASSIFICATION ON THE BASIS OF FORM OF MATERAIAL:
According to classy there can be three broad categories:
 For solid materials
o Lifts
o Conveyer belts
o Drum trolleys

 For liquid materials


o Pipes
o Tanks

 for gaseous materials


o pipe lines
2.CLASSIFICATION ON THE BASIS OF PATH
 variable path
o drum trolleys
 fixed path
o pipe lines
o conveyer
o lifts
3.CLASSIFICATION ON THE BASIS OF AUTOMATION
 Semi automatic handling system
o Conveyer belts

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o Lifts
 Manual system
o Hand carts

INVENTORY CONTROL SYSTEM


SHAH PULP follows a very simple inventory control system
process.
ABC analysis:-
The purpose of ABC analysis for which SHAH PULP follows this
analysis is because of the lab test and different types of
papers.
They sum up the materials rate amount, freight and C.S. and
get the value of the material.

STORES DEPARTMENTS MATERIAL RECEIPT AND ISSUE PROCESS

For the stores department the most important document is the


G.R.N. i.e. Goods Received Note.
It contains the most of the information like,
♦ Supplier’s name
♦ Supplier’s challen no.
♦ Material received
♦ Quantity received
♦ Approved quantity
♦ L.R. number
♦ Vehicle number

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♦ Time of arrival of material
♦ Purchase order date
MATERIAL RECEIPT PROCESS
As the goods enter the company premises G.R.N. is
prepared.P.O. i.e. purchase order is compulsory to receive
the material. The material entered is kept on weighing
machine and verified whether the qty is okay, it is then
unloaded in stores.G.M. is informed about the receipt of
material.
MATERIAL ISSUE PROCESS
Material issue process is simple in SHAH PULP. The plant
which needs any material, be it RM , they give a requisition
slip to the inventory department. On the basis of the
requisition slip inventory department allocates material to
the concern department according to REQ.NO i.e. requisition
number. As the material is issued on the port as all the
material comes through ship.

DOCUMENT RELATED TO RECEIPT AND ISSUE OF MATERIAL


The document related are as follows:
♦ Gate register number
♦ Store inspection by concerned department.
♦ GRN being prepared by stores.
♦ GRN being passed by concerned authority.

MAINTENANCE PLANNING SYSTEM


Maintenance is well planned in shah pulp. This department
consists of main head and workers.
It works at three levels. they are as follows:-
1.REGULAR MAINTENANCE:-

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This level consists of maintaining machines at a regular period
of time. It includes checking of bearings, belts and other such
parts. this activity is done periodically.
2. PREVENTIVE MEASURES:-
It is an activity where parts of machines are repaired or
replaced before they are actually gets damaged and result into
some large and serve losses. For example :- welding of any part
before it is damaged completely.
3.BREAK DOWN:-
If any plant machinery undergoes breakdown, the plant in
charge or production head will inform maintenance department
through break-down slip. After receiving the slip, maintenance
department head would send his workers to breakdown area. In
the breakdown slip following details are filled:
Machine details, timings of breakdown, nature of breakdown.

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QUALITY CONTROL SYSTEM
QC is mostly done of three levels. In shah pulp, the quality of
the material is checked at RM level, work-in-process level and
finished goods level.
1.RAW MATERIAL:-

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For controlling the quality of the material, it starts testing the
RMthe company uses for manufacturing its goods. After
purchase dept. receives the RM ordered previously, it prepares
G.R.I.N., Showing amount of goods i.e. RM entered in the
company.
This is stored in the warehouse making store head aware of the
details of the material.
The store head prepares format of RM, G.R.I.N. and is
forwarded to the QC dept.
As QC dept. receives RM, G.R.I.N. it takes a sample of the RM
from store for testing purpose.
Each RM has to posses certain specifications. The presence and
absence of each specification is monitored while QC dept. does
testing.
The RM used are mixed waste, old news papers, over issued
newspapers, magazines. The RM is imported from foreign
country like European, Latin and U.S.A.

2.WORK-IN-PROCESS MATERIAL:-
In shah pulp everyday, production head, QC head, and unit
head have meeting and decide the product to be manufactured
for that day. The different types of chemicals are used to
remove the printed ink on the paper like hydrogen peroxide,
bleaching powder, diesel, washing powder.
In QC dept, premix sheet is prepared, which includes :
♦ Number of RM required for the product
♦ Name of the RM
This premix sheet is sent to the prod. Dept. and according to
the details stated prod. Dept. order’s RM from stores and prod.
Starts.

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As and when required, prod. Dept. sends work-in-process
samples to QC dept. for testing. Here also different tests are
applied for different goods and its different grades.
After testing QC MEMO is prepared where the result of the test
are mentioned. It also states if any specifications are missing in
the product. If there is any drawback, it is also marked in QC
MEMO. This is sent to the prod. Dept. they make the
modifications in its manufacturing and do further production.
3.FINISHED GOODS
After final product is manufactured, it is also tested by QC
dept. in the final product same specification as in semi-finished
product are required only few additional mechanical properties
are required like:
♦ Tensile strength
♦ Cross bracking strength
♦ Electrical strength surface
♦ Volume strength
♦ Shrinkage is detected
After testing these properties in the final product QC dept.
verbally informs prod. Dept. about the reliability of the
products and get “daily production deposition slip” from the
prod. Dept.

This slip specifies the following:-


♦ Grade
♦ Bags*kgs
♦ Total qty
♦ Batch no.
♦ Remarks

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Now finally, when the product is forwarded to the prod. Dept.
after being approved and then the final product is forwarded to
dispatch dept.
And their the final product is packed and dispatched according
to sizes and different qty.
DOCUMENTS KEPT IN QC DEPT
♦ goods receipt no.
♦ goods received inspection report
♦ premix sheet
♦ QC MEMO
♦ Daily production deposition slip
♦ Certificate of product conformity

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FINANCIAL POSITION OF THE FIRM ON THE BASIS OF KEY
WORKING CAPITAL RATIOS

Ratio Formulae Result Interpretation

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For imported stock:

Average Stock
X 365/ On average, company turns over the value of its entire
Cost of =[(833*+2210*)/2] = 96 stock every 96 and 42 days.
Goods 5800* X (365) days
Sold
Obsolete stock, slow moving lines will extend overall
Stock Turnover For indigenous stock: stock turnover days. Faster production, fewer product
(in days) lines, just in time ordering will reduce average days.
Average Stock
X 365/
Cost of =[(644*+223*)/2] = 42
Goods 3768* X (365) days
Sold

*THE AMOUNT GIVEN IS IN LAKH

It takes company on average 53 days to collect monies


due to the company. One or more large or slow debts
can drag out the average days. Effective debtor
Debtors x 365/ management will minimize the days.
Receivables Sales =1115* x 365*
= 53
Ratio 7661*
days
(in days)

*THE AMOUNT GIVEN IS IN LAKH

On average, company pays to its suppliers every 100


Creditors X 365/ days. If company negotiates better credit terms this
Cost of Sales = 1904* X 365 will increase. If company pays earlier, say, to get a
Payables Ratio (Or Purchases) 6960* = 100 discount this will decline. If company simply defers
(in days) days paying its suppliers (without agreement) this will also
increase - but company’s reputation, the quality of
*THE AMOUNT GIVEN IS IN LAKH service and any flexibility provided by its suppliers
may suffer.

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Current Assets are assets that the company can readily
turn in to cash or will do so within 12 months in the
course of business. Current Liabilities are amount
company is due to pay within the coming 12 months.
For example, 1.5 times means that company should be
Total Current Assets/ able to lay its hands on Rs1.50 for every Rs1.00
Total Current = 4754* company owe. Less than 1 times e.g. 0.75 means that
Liabilities 2611*
= 1.82 company could have liquidity problems and be under
Current Ratio
Times pressure to generate sufficient cash to meet oncoming
demands. But the ratio shows that company is in good
position.
*THE AMOUNT GIVEN IS IN LAKH

(Total Current Assets - Inventory)/ =


4754*-2677*
= 0.79 This figure takes account of the fact that it may take
Quick Ratio Total Current 2611*
Times time to convert inventory into cash.
Liabilities
*(THE AMOUNT GIVEN IS IN LAKH)

(Inventory + Receivables
- Payables)/
Working 25 % of This percentage means that working capital needs are
Sales =2677*+1115*- 1904*
Capital Ratio Sales not so high relative to company’s sales.
7661*
*(THE AMOUNT GIVEN IS IN LAKH)

The following, ratios are important measures of working capital


utilization.

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WORKING CAPITAL RATIOS SHOWING LIQUIDITY OF THE FIRM

The Current Ratio:

The current ratio is also known as the working capital ratio and
is normally presented as a real ratio. That is, the working capital
ratio looks like this:

Current Assets: Current Liabilities = x: y e.g. 1.82: 1

So here is the information to help us work out The Shah pulp


and paper mill’s current ratio.

Consolidated Balance Sheet 31 March 2009 31 March 2008


In lakh In lakh
Total Current Assets 4,754 3,115
Creditors: 1,904 1,064

Current Ratio For The Shah pulp and paper mill’


31 March Current Assets: Current Liabilities 475,378,554 1.82: 1
2009 :
261,172,653
31 March Current Assets: Current Liabilities 311,525,549 2.08: 1
2008 :
149,242,328

We got the ratio 1.82: 1 for the year ended 31 March 2009 was
to divide the current assets by the current liabilities and that
gives us:

475,378,55
Current assets
=4 =
1.82
Current 261,172,65
liabilities 3

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So we automatically know that the ratio is 1.82: 1

The same with the year before:

311,525,54
Current assets
=9 =
2.08
Current 149,242,32
liabilities 8

So these ratios shows that company’s liquidity position was


superior in 2008as compare to 2009.Although in 2008 company’s
liquidity position is not bad or we can say its very good because
the ratio 1.82:1 shows that the company is able to lay its hands
on Rs1.80 for every Rs1.00 company owe. It means that
company can generate sufficient cash to meet oncoming
demands.

These are the additional information, which help in the analysis.

Current assets 2009 2008


In In lakh
lakh
Stock 2,677 1,146
Debtors due within one year 1,115 1,110
Cash at bank and in hand 27 22
Loans and advances 695 638
Total Current Assets 4,754 3,115
Creditors: Amounts falling due within one 1,904 1,064
year
Provision for taxation 369 282
Other liabilities 338 146
2,611 1,492
Total liabilities

Net current assets (liabilities) 2,143 1,623

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The Acid Test Ratio:

The acid test ratio is also known as the liquid or the quick ratio.
The idea behind this ratio is that stocks are sometimes a
problem because they can be difficult to sell or use. That is, even
though a supermarket has thousands of people walking through
its doors every day, there are still items on its shelves that don't
sell as quickly as the supermarket would like. Similarly, there
are some items that will sell very well.

Nevertheless, there are some businesses whose stocks will sell


or be used slowly and if those businesses needed to sell some of
their stocks to try to cover an emergency, they would be
disappointed. Engineering companies can have their materials in
stock for as much as 9 months to a year; a greengrocer should
have his stocks for no longer than 4 or 5 days - a good
greengrocer anyway.

We'll look at the stock turnover ratio in detail later but here's
the acid test ratio for The Shah pulp and paper mill.

Acid Test Ratio = (Current Assets - Stocks): Current Liabilities

We can take the figures we need from the current ratio section
and then do the calculations. Here are the acid test ratios for the
year ended 31 March 2001:

Acid Test Ratio For The Shah pulp and paper mill.

31 March Current Assets - Stocks: Current 4754*-2677*: 2611* 0.79:


2009 Liabilities 1

31 March Current Assets - Stocks: Current 3115*-2145*: 1492* 0.65:


2008 Liabilities 1

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NOTE: *THE AMOUNT GIVEN IS IN LAKH

We need to put the current and acid test ratios side-by-side to


help us to understand what is happening to the business:

Compariso Curren Acid Test


n t
2008 1.82: 1 0.79: 1
2009 2.07: 1 0.65: 1

The fact that the differences between the current and acid test
ratios are too large tells us that the Shah pulp and paper mill
stocks are too large. The stocks are worth around Rs. 2,677 lakh
in 2009,BUTsince current assets are Rs.4,754 lakh, that's a huge
level of stock holdings. But yes the difference between the
current ratio and acid test ratio in 2009is lower as compare to
2008,so this is a good indication for the company.

Additionally, the acid test ratio has increased over the two-year
period, meaning that the Shah pulp and paper mill has a
stronger liquidity position than it had before. Normally that is a
good thing.

Bottom of Form

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Return on Working Capital:

Consolidated Profit and Loss 31 March 31 March


Account 2009 2008
In lakh In lakh
Profit before interest and taxation 729 657
Total Fixed Assets 4,500 4,200
Net current assets (liabilities) 2,143 1,623

ROWC For The Shah pulp and paper mill.

31 March Profit before Interest and 729* = 34 %


2009 Tax 2143*
Working Capital
31 March Profit before Interest and 657* = 41%
2008 Tax 1623*
Working Capital

NOTE: *THE AMOUNT GIVEN IS IN LAKH

These are the additional information, which help in the analysis.

Current assets 2009 2008


In In lakh
lakh
Stock 2,677 1,146
Debtors due within one year 1,115 1,110
Cash at bank and in hand 27 22
Loans and advances 695 638
Total Current Assets 4,754 3,115

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Creditors: Amounts falling due within one 1,904 1,064
year
Provision for taxation 369 282
Other liabilities 338 146
2,611 1,492
Total liabilities

Net current assets (liabilities) 2,143 1,623

There has been a decline in ROWC in 2009as compare to


2008.Although this difference is not too large but still company
should do check on its working capital and all the expenses.

Return on Capital Employed Ratio:

The Return on Capital Employed ratio (ROCE) tells us how much


profit the company earns from the investments the shareholders
have made in the company. Think of it this way: if we had a
savings account with a bank and we'd been paid, say, Rs.25
interest at the end of a year; and we had saved Rs.500, we could
work out the rate of interest we had earned:

Interest
Rate of * 25 * 1 * 100 =
= earned = = =
interest 100 100 100 5%
Amount saved 500 20 20

So, we have earned 5% interest on our savings.

Imagine now that instead of talking about a savings account, we


were talking about a company and the profit for the year and its
capital employed had been Rs.25 and Rs.500 respectively then
the ROCE for that company would be 5% too.

Profit for the Year 25 1 100


* * * =
ROCE = Equity Shareholders' = = =
100 500 100 20 100 20 5%
Funds

We have used the Equity Shareholders' Funds instead of Capital


Employed. In fact, they are different names for the same thing!
We could call the ratio the Return on Shareholders' Funds

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(ROSF) just as easily if we wanted, but generations of
accountants consider it as ROCE.

In accounting, there can be different definitions of what certain


terms mean. The use of the term 'capital employed' can mean
different things. It can, for example, include bank loans and
overdrafts since these are funds employed within the firm.

There is the Calculation of ROCE for the Shah pulp and paper mill
now; and here are the figures:

The Shah pulp and paper 31 March 31 March


mill 2009 2008
In lakh In lakh
Profit for the financial 728.81 654.14
period
Equity shareholders' funds 2,837.45 2,463.33

For 2009

Profit for the Year 728.81


* * =25.71
ROCE = Equity Shareholders' = 2837.4
100 100 %
Funds 5

For 2008

Profit for the Year 654.14


* * =26.55
ROCE = Equity Shareholders' = 2463.3
100 100 %
Funds 3

So the percentage shows that return on capital employed is


almost similar for both the year 2008and 2009.

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ROCE for the year 2009is almost 26% that’s a good percentage
by all standards. This is a good result as it shows that the
business is effectively earning around 26% on the (investment)
funds that the shareholders have invested in the Shah pulp and
paper mill.

Working Capital Management II:

What we are about to study - stock, debtors and creditors


control - are all part of working capital management in the same
way that a discussion of liquidity was part of working capital
management.

We know that working capital is concerned with the ability of a


business to be able to pay its way. The three ratios we are
concerned with now are concerned with spending and saving
money in the right places. Too much stock and we waste money
on buying it and keeping it. Too much money loaned to our
debtors and it's money we can't use for something else, such as
buying machinery, paying our creditors or even investing it. Too
much money in the form of creditors and we might have a
problem that no one else will give us credit for anything else
because they think we can't afford it, and, if we suddenly have a
cash problem, we might not be able to pay our creditors.

Working capital management is concerned with the control


aspects of the issues.

Stock Turnover: stock control:

In principle, the lower the investment in stocks the better. Apart


from buffer stocks that businesses sometimes need in case of
shortages of supply and strategic stocks in case of war, sudden
changes in demand and so on, modern stock control theory tells
us to minimize our investment in stocks.

The formula for this ratio is:

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Average
Stock Stocks
=
Turnover (Cost of
Sales/365)

The Shah pulp and paper mill Consolidated 31 March 31 March


Profit and Loss Account 2009 2008
In lakh In lakh
Cost of sales 6960 6810
Stock 2677 1146

Stock Turnover Ratio for the Shah pulp and paper


mill
31 March 2009 2677* 140 days
6960* / 365
31 March 2008 1146* 61 days
6810* / 365

NOTE: *THE AMOUNT GIVEN IS IN LAKH

• Firstly, the result of this calculation is that the answer is


instantly in terms of the number of days, on average, that
the stocks are held in the business.
• Secondly, we use the cost of sales figure because stocks
are bought and shown in the profit and loss account and
the balance sheet at cost; so we need to compare like with
like.
• Thirdly, we only have two years' worth of stock
information, so we can't use the average stock for both
years, as we should do according to the formula.

This ratio has increased from 61 days to 140 days because


investment in stock has increased 57% over the two years and
that is probably not a good thing. This shows that the company
needs 140 days to sell inventory it means that so mush cash is
tied up in inventory which is not a good sign for the company

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because If there's less stock to worry about, lower investment in
stocks meaning that the money they used to have tied up in the
stock room is now free to spend somewhere else. But now large
amount of investment is done in inventory, company should do
check upon it.

Debtors' Turnover Ratio:

In the same way that stock control is a vital aspect of working


capital management, so too is debtors' control. Many businesses
need to sell their goods on credit, otherwise they might find it
difficult to survive if their competitors provide such credit
facilities; this could mean losing customers to the opposition.

Nevertheless, since company does provide credit, it must do so


as optimally as possible. It doesn't necessarily mean the best
possible, but the best possible under the circumstances.

There are good reasons why the company allows people to pay
on credit even though literally it doesn't make sense! If the
company allow people time to pay their bills, they are more
likely to buy from it than from another business that doesn't
give credit.

The length of credit period allowed is also a factor that can help
a potential customer decide whether to buy from your company
or not: the longer the better, of course.

Why is credit control so important? For the Shah pulp and paper
mill total amount owing by debtors was Rs.1115lakh at the end
of 31 March 2009,which as a percentage of total assets, is
12.09%. That's a lot of money in absolute terms.

What we need to know, though, is how the company is


controlling these debtors. We can do that by looking at their
debtors' turnover ratios for the two years, firstly.

Shah pulp and paper mill 31 Mar 31 Mar 2008


2009
In lakh In lakh
Turnover 7,661 7,372 33

Debtors due within one 1,115 1,110


year
The formula for debtors' turnover is:

Average
Debtors'
= Debtors
Turnover
Credit Sales/365

We have to assume, by the way, that all sales are credit sales
unless we know which sales are for cash.

The calculations:

Debtors Turnover Ratio for the Shah pulp and paper


mill
31 March 2009 1,115 53 days
7,661 ÷ 365
31 March 2008 1,110 56 days
7,372 ÷ 365

Firstly, the ratio seems to have good by going from 56 to 53


days over the two years; but we can not say that this ratio is
good because it means that, on average, the Shah pulp and
paper mill debtors are taking one and a half months or we can
say two months to pay their accounts.

34
Creditors' Turnover Ratio:

Creditors are the businesses or people who provide goods and


services in credit terms. That is, they allow the company time to
pay rather than paying in cash.

Creditors will need to optimize their credit control policies in


exactly the same way that the company did when it was
assessing its debtors' turnover ratio - after all, if you are my
debtor I am your creditor!

Company takes credit but it needs to control how much it


should, how often and for how long. There are the calculations
for Shah pulp and paper mill:

The formula for this ratio is:

Average
Creditors'
= Creditors
Turnover
(Cost of Sales/365)

As with the stock turnover ratio, creditor values relate to the


costs of raw materials, goods and services, which is why we use
the cost of sales, figure in the denominator.

Shah pulp and paper mill 2009 2008


In In lakh
lakh
Cost of sales 6,960 6,810
Creditors: Amounts falling due within one 1,904 1,064
year

35
Creditors Turnover Ratio for the Shah pulp and paper
mill
31 March 2009 1,904 100 days
6,960 ÷ 365
31 March 2008 1,064 57 days
6,810 ÷ 365

We interpret this ratio in exactly the same way as the debtors'


turnover ratio. Having found that debtors are taking somewhere
between 45 and 60 days to pay their accounts, notice that the
business is taking over three months credit for itself in 2009and
about two months' credit in 2008.

The ratio has drastically increased by going 57 to 100 over the


two years which shows that the company now takes three
months to pay its accounts as compare to two months in 2008.Its
good but company should take it in mind that with the
increasing number of Days, Company’s reputation, the quality of
service and any flexibility provided by its suppliers may suffer.

CASH BUDGET FOR THE SHAH PULP AND PAPER MILL

Net Cash Inflows

2009 2008
(In lakh) (In lakh)

Sales 7,661 7,372

Other incomes 42 24

Total payments 1,904 1,063


Net CF 5,799 6,333

Net Cash Inflows:

2009 2008

36
(In lakh) (In lakh)

Cash at start 27 22

Net CF 5,799 6,333


Cumulative
Cash 5,826 6,355

CALCULATION OF CASH CONVERSION CYCLE FOR

THE SHAH PULP AND PAPER MILL

Cash conversion cycle = Inventory conversion period (in days) +


Debtors’ conversion period (in days) - Creditors’ deferral period
(in days)

Where

Inventory conversion period = Raw material conversion period


(RMCP) + Work-in-progress conversion period (WIPCP) +
Finished goods conversion period (FGCP)

Raw material conversion period (RMCP) = 1795/(4920/360)= 131


days.

Work-in-progress conversion period (WIPCP)=637/(6424/360)=36


days.

Finished goods conversion period (FGCP)=76.45 /(6565/360)=4


days.

Hence

Inventory conversion period=131+36+4=171 days

Debtors’ conversion period=1115/(7661/360)=52 days.

37
Creditors’ deferral period=1904/(6960/360)=100 days.

Cash conversion cycle=171+52-100=123 days.

Note: THE ENTIRE AMOUNT GIVEN IS IN LAKHS.

SALES TURNOVER COMPARATIVE

OF 2008 AND 2009.

YEAR SALES TURNOVER

(In crores)

38
2008 92

2009 82

S A L E S S C E N A R IO
S A LE S
TU R N O V E R , 1 ,
1 0 0 0 0 0 00 0 0 S A LE S
920000000
TU R N O V E R , 2 ,
9 00 0 0 00 0 0 82 0 0 0 0 0 0 0
8 00 0 0 00 0 0
7 00 0 0 00 0 0
6 00 0 0 00 0 0
YEAR
SALES

5 00 0 0 00 0 0
S A L E S TU R N O V E R
4 00 0 0 00 0 0
3 00 0 0 00 0 0
2 00 0 0 00 0 0
1 00 0 0 00 0 0
Y E A R, 1, 2008 Y E A R, 2, 2009
0
1 2
YEA R

COMPARATIVE BALANCE SHEET OF THE YEAR 2008 AND 2009

PARTICULARS 2009 2008 ABSOLUTE IN PERCENTAGE

39
SOURCES OF
FUNDS
SHARE HOLDERS (in (in
FUND crores) crores)
Share capital 11 11 0 100
Reserves and surplus 17.38 18.85 (1.47) 7.79
Total 28.38 29.85 (1.47) 4.92
LOAN FUND
Secured loans 16.93 2.29 14.64 639.3
Unsecured loans 12.65 4.69 7.96 169.7
Total 29.58 6.98 22.6 323.7
APPLICATION OF
FUND
Gross block 43.96 46.58 (2.62) 5.62
Less: depreciation 15.44 17.53 (2.09) 11.92
Net block 28.52 29.05 (0.53) 1.82
Investments 51.39 50 1.39 2.78
Land 2.76 2.76 0 100
Tax 54.34 11.04 43.3 392.2
Current assets 4.754 3.115 1.639 52.61
Less : current 2.611 1.492 1.119 75
liabilities
Net current assets 2.143 1.623 0.52 32.03

GRAPHICAL REPRESENTATION

OF THE COMPARATIVE BALANCE SHEET

OF THE YEAR 2009 AND 2008

40
800000000

700000000

600000000

500000000
S e rie s 1
400000000
S e rie s 2
300000000

200000000

100000000

0
YEAR L IA B IL IT IE S A S S E TS

41
TYPES AND CLASSIFICATION OF PRODUCTS

SHAH PULP & PAPER LTD is a non-marketing organization as


they are manufacturer of inters mediate media in the country.

42
They have a dealers network. They export their products to Sri
lankans and china.

The company is manufacturing the Newsprint-Medium Grade


Paper and the company sells Newsprint directly to Newspapers
as well as through dealers. The company is having very good
marketing and distribution network all over the India. The
company is supplying Newsprint to all the major and leader
newspapers in India. The demand of the product is very good
and market is very potential. Newsprint is the only major
segment of the paper industry where a substantial demand and
supply gap exists. The company has never found any difficulty to
supply the entire products in the Indian market.

Shah pulp & PAPER LTD. Is leading manufacturer of crafts paper,


writing & printing paper & newsprint.

NEWS PRINT IS MAINLY DIVIDED INTO THREE CATEGORIES:

♦ PRIME
♦ SUPER DELUX
♦ SPECIAL SUPER DELUX

As we are mainly concerned with newsprint, our focus is to study


the newsprint unit of the organization.

CATEGORY OF NEWSPRINT

1.PRIME:- it’s the most used paper category by the local and
small print media centers. It’s the lowest in quality, cheaper in
price & light shaded. It uses mixed & ONP(old news paper).

2.SUPERDELUX:betterthanthe above category. Its brighter in


shade, its price is more than prime. It uses special onip as raw
material.

3.SPECIAL SUPER DELUX:- It’s made of the most superior quality.


It’s costlier than the above mentioned category. It’s best in
every aspect and brightest of all. It also uses special onip as raw
material.

43
SALES PROCEDURE

SHAH PULP & PAPER LTD. It’s a dealers network organization.


They deal directly with their customers. The dealers send indent
or orders to the sales department.

The indent consist of the following information:-

♦ Grade
♦ Quantity
♦ Rate
♦ Date
♦ Mode of payment
♦ Mode of dispatch
♦ Transporter’s name
♦ Freight, etc.

All this information is entered in the computer system and


production according to the indent is manufactured with
required qty. if the production is carried out in required rate
then invoice is prepared.

An invoice contains invoice no.,party name, mode of payment,


mode of dispatch etc.

If the Rate is not valid order is rejected.

MARKETING CHANNEL

44
SHAH PULP & PAPER LTD. Deals with consumer products.
Therefore, only one marketing channel exists.

MANUFACTURER

DEALERS

CUSTOMER

FINAL CONSUMER

DOCUMENTS OF SALES:-

♦ INDENT
♦ INVOICE
♦ GATE PASS
♦ FORM 45(SALES TAX)

TAXES APPLICABLE ON SALES

As far as newsprint is concerned they have to pay 0.125% CESS


i.e. central excise secondary sess to be paid.

And after the earthquake they have to pay education (cess) on


the basic value of 0.125%. Basic value +cess+2% sales tax, if
the product is carried to the other states. And if it is within the
boundaries of the state than 5% Gujarat state vat is charged. 2%

45
is against the sea form or else 5% tax is to be paid. 0.15% transit
insurance is paid.

Freight charges, sales bills, challan no., excise invoice is a must


used document in manufacturing industry.turnover of 50 lacs or
more than commercial invoice is prepared. It goes with
transporters during loading.

PURCHASE PROCEDURE

Purchase procedure is done only from the approved supplier. All


suppliers supplying prior to the system effective data are
deemed to be evaluated. The type and extend of control applied
on the suppliers is based on the suppliers performance and the
effect of the supplied product on the quality of final product.

The criteria for the selection of new suppliers are:-

♦ Previous experience
♦ Customers’ recommendations.
♦ Data source available on internet.

The inclusion of such supplier’s is based on their clearance of


the product being as per raw material sheet and commercial
terms as per the requirement by the firm.

46
The re-evaluation of the supplier is done on the basis of the
quality performance of the supplier. The quality rating is
calculated on a monthly basis.

PURCHASING INFORMATION:-

Purchasing information is gives to the suppliers through the


purchase order, i.e. P.O. It contains the details such as:

♦ Specifications
♦ Price
♦ Quantity
♦ Packing
♦ Delivery date
♦ Mode of transportation
♦ Credit
♦ Quality system requirement. If any
♦ Verification of purchased product.

The QC DEPT. does the verification of the purchased product to


ensure that all the requirements are incorporated in the product
as per specification in the p.o.

DIFFERENT DOCUMENT OF PURCHASING:

♦ Purchase order
♦ Purchase register
♦ Indents

CUSTOMER’S LIST

SR.NO. NAMES

1 The Sandesh ltd.

2 Divya bhaskar

3 Dainik Bhaskar

4 Jagaran group

5 Lokmat etc.

47
6 Bombay samachar

SUPPLIER’S LIST OF

SHAH PULP & PAPER LTD.

SR.NO. CATEGORY NAMES


INDIGENOUS

RAW MATERIAL
1. Mayur paper mart
2. Paras papers
CHEMICALS
1. Agarwal coal corporation
2. Maheswari builders
3. G.M.D.C
4. Kemoax corporation
5. Nikhil epec chemicals
6. Shah chemicals
STORES &
SPARES, WIRES
& FABRICS.
1. Paper international
2. V.G. recycling group
3. Gautam enterprises

PRICE LIST

48
PRODUCT PRICES

NAMES (PER METRIC TONNE)

Prime 21000 Rs/-

Super deluxe 22500 Rs/-

Special super deluxe 26000 Rs/-

49
HUMAN RESOURCE PLANNING

In SHAH PULP & PAPER LTD. Human resource planning is a


outcome of four steps.

They are as follows:-

50
1. Determining job specifications
2. Analyzing job responsibility and workload.
3. Forecasting human resource demand & supply.
4. Finalize the no. of personnel required with eligibility.

Thus in this way human resource planning process is completed.

Let us know right now what are the total no of employees


working in the firm.

CATEGORY NO. OF EMPLOYEES

Staff 71

workers 185

Contract labours 350

TOTAL 606

RECRUITMENT PROCEDURE

The recruitment procedure in SHAH PULP & PAPER LTD.


Comprises of the following few steps:

Recruitment process starts when the head or manager of the


concern dept. reveals that there is a vacancy for a particular job.

51
When the head reveals a vacancy, the first step in this direction
of employing people is requisition of workers for the vacancy
arises. This requisition should clearly state the following:

♦ Name and specification of the job.


♦ Jorate of pay
♦ Time bounded ness i.e. full time or part time.
♦ Temporary or permanent
♦ Age limit
♦ Sex
♦ Special qualification and skills required.

Thus by preparing such form the company gets the detailed


information about kind of employee to be advertised and
recruited.

SOURCES OF RECRUITMENT

In SHAH PULP & PAPER LTD. They firstly make a study of the
vacancy with regard to its urgency and need and decide whether
it should be fulfilled through internal or external source.

1. Internal source:- Internal sources


include promoting or transferring a
person who is already working with
the firm.
2. External source:- The various
external sources include:
♦ Advertisement
♦ Labour contractors
♦ Personal sources
♦ Placement agencies
♦ Gate recruitment

After gathering a pool off employees from the above-mentioned


sources they collect their biodata and carry on with their
selection process.

52
SELECTION PROCEDURE

Selection is the process of picking individuals with requisite


qualification and competence to fill jobs in the firm.

The selection procedure comprises of the following steps:-

1. General interview
2. Application blank
3. Depth interview
4. Medical test

PROMOTION, DEMOTION & INCREMENT POLICIES

♦ PROMOTION AND INCREMENTS

SHAH PULP & PAPER LTD. Promotes an employee in merit basis.


Every month they evaluate the performance of the employees by
giving targets. The employee fulfilling the target gets
appropriate promotion. The promotion also depends upon
sincerity, regularity and performance.

Same rules are applied for increment purpose.

♦ DEMOTION

In SHAH LTD. If any employee is not able to perform as per


management targets, management will not provide any
increment or opportunity for future advancement.

INDUCTION & TRAINING

53
In SHAH LTD. When a new employee is placed, he has to spent
three days in each department to understand the overall
function and methods of the organization and staff.

Here, qualification and experience of an employee is compared


with existing nature of the job and the requirement of training is
identified by the department heads and to personal head and
training is planned.

After getting trained, three months evaluation is carried out.


This is done to check the improvement of work.

The probation time period is 6 months for middle level


employees.

METHODS OF TRAINING

Here, on the job methods are being implemented.

They are as follows:-

54
VESTIBULE
TRANING

TRAINING
FULFILL
MENT

SEMINARS
CONDUCTE
D BY
ASSOCIATI
ONS

WAGES AND SALARY ADMINISTRATION

SHAH industries is a large industry, thus proper administration


of wage and salary is important. Here the company follows
“punch card system”.

55
In this system each employee is provided with a particular card
and has to punch his or her card as they enter and exit the
company premises. It is done at the entrance in the security
room.

There are three types of leaves allowed:

1. P.L.(Privilege leave) :There are 30 P.L. for


staff members and 15 for workers.
2. C.L.(Causal leave) :There are 10 paid holidays per year.
3. S.L.(Sick leave) :There are 7 S.L. for each employee.

Against each employees absence he has to submit leave forms.


Also, wage and salary distribution is with conformity with
government rules.

According to details available from time keepers with the help


of the punch card system, initially discussed, wage and salary is
calculated as per the working hours of the employees.

Thus company follows TIME WAGE SYSTEM.

They consider overtime offered and leaves taken and based on


punch cards information, company prepares salary sheet and
wages and salary is distributed among the employees.

On the recommendation of department head in terms of facility


or increments is a motivational tool of the firm.

The daily wages paid to a worker irrespective of gender and


skills are 106.5 RS/- Per head in SHAH PULP & PAPER LTD.

Therefore, the monthly wages are 3200 RS p.m.

56
COMPENSATION STRUCTURE

PARTICULARS PERCENTAGE OF ALLOWANCES

BASIC _

HRA 10%

CONVEYANCE 10%

MEDICAL 5%

PF 12%

ESIF 6.5%

BONUS 8.33%

ESIF stands for employees state insurance fund.

WELFARE ACTIVITIES

57
The following services are being provided to SHAH LTD.
Employees:-

 ACCOMODATION FACILITY.
 SAFETY FACILITY such as gumboots, masks, apron for lab
technicians etc.
 MEDICAL FACILITY as the employees are provided with
group medical insurance and yearly medical checkup for all
employees is mandatory.
 REST ROOMS
 PURE & COLD DRINKING WATER.
 LUNCHROOM for staff and workers.
 ADEQUATE LIGHT AND VENTILATION FACILITY.
 UNIFORMS to workers at production area.

These facilities are provided to workers at lower cost than the


actual cost.

CONCLUSION

 The working capital management of the company is


good. Its working capital is:

Current Assets- Current Liabilities

58
475,378,554- 261,172,654= 214205900

Which shows that company has good amount of working


capital, which can be very useful for the company in meeting
its oncoming demands. And it has sufficient cash flow to
satisfy both maturing short-term debt and upcoming
operational expenses.

 The cash conversion cycle of the company is 123


days, which shows that company’s policy for converting current
assets into cash is fine. But it should be somewhat careful about
the inventory management because much cash is tied up in
inventory. And By holding excessive inventory, the firm is
increasing its costs, which reduces its ROE. Moreover, this
additional working capital must be financed, so EVA is also
lowered.

 The cash budget of the company shows that company


remains sufficient amount of cash with its hand so that it can be
used in the required time.

 Debtors turnover ratio of the company is 6.9 and its


collection period is 53 days which shows that the company
allows longer period of credit to its customer because if the
company allow people time to pay their bills, they are more
likely to buy from it rather than from another business that
doesn't give credit for that much period. The length of credit
period allowed is an important factor that can help a potential

59
customer decide whether to buy from that company or not: the
longer the better, of course.

 Credit policy of the company is satisfactory. The


credit provided to the customers is in the form of supplier’s
credit (bills of exchange). Management is so concerned about
it’s credit policy. But they should do check on their debtors and
should also be strict about their credit policy otherwise it would
lead to bed debts.

 Stock turnover ratio of the company is 3.8 for


imported stock and 8.7 for indigenous stock and average days to
sell its inventory is 96 days and 42 days respectively which
indicates that it takes some time to convert inventory into cash
and as company has large amount of working capital in the form
of inventory it can not use cash anywhere else because if there’s
less stock to worry about, lower investment in stocks meaning
that the money they used to have tied up in the stock room is
now free to spend somewhere else.

 Creditors turnover ratio of the company is 3.7 and its


payment period is 100 days, which shows that the company pays
its account in three months means company has good credit
terms with its suppliers.

If company pays earlier, say, to get a discount this


will decline. If company simply defers paying its
suppliers (without agreement) this will also increase -

60
but company’s reputation, the quality of service and
any flexibility provided by its suppliers may suffer.

 As for short term financing company uses bank loan


for having short-term funds to finance its working capital.

Hence it’s clear that company manages its working capital


effectively and is much concerned about it. And the effective
management of working capital has very much enhanced the
financial position of the company.

61
SUGGESTIONS

The suggestions for SHAH PULP & PAPER LTD are as


determined:-

 Sanitation facilities for the workers lacks adequacy.


Cleanliness is a must for good working conditions.
 The workers who come from far off places should be
provided canteen facilities if it suits the budget of
the company
 The drainage system for the waste water after
purification process is not proper, this affects the
cleanliness of company premises.
 The costs of the firm are on a steady increment
which has affected the net profit of the firm 2 times
the previous year.
 The company must try for better management of
HRIS through computerized techniques.
 The company must adopt some cost cutting
measures in the upcoming year.

ANNEXTURE

All the details in the project are being captured from


company’s formal documents and the website of the
firm.

The figurative details are from master file of the SHAH


PULP & PAPER LTD.

62
63

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