Professional Documents
Culture Documents
(IRCTC)
Submitted
Mani
FMS-WISDOM
(Finance)
ACKNOWLEDGEMENT
The successful completion of the project would have been far from reality without mentioning the people who made an indelible impression while making the project. All the very outset thanks to IRCTC for instructing me and giving me an opportunity to work for them. I am especially thankful to Mr. M P Mall, Group General Manager (Finance) IRCTC who made it possible for me to do summer training in Indian Railway Tourism and Corporation Ltd. and Mr. Pankaj Malhotra, Additional General Manager (Finance) IRCTC and Megha Arora Executive (Finance) who have guided me to understand the intricacies of companys financial operations. Without their support, it would not have been possible for me to complete my summer training successfully. I am indebted to Prof. Siddharth Shastri, Dean (FMS WISDOM), Banasthali University for his affectionate guidance and continuous encouragement. It has also been my proud privilege and good fortune to work on this study under the guidance of Dr. Harsh Purohit, (FMS WISDOM), Banasthali University, Rajasthan. His thoughtful comments and conceptual insights into the subject kept me from floundering in my quest. Despite his busy schedule he spared valuable moments for reviewing and rectifying this work. I also extend my thanks to various departmental heads for the co-operation and help extended to me during the preparation of the project. In the end I would like to thank the Almighty God and my Parents, who blessed me and supported me every time I required. Mani Maheshwari
TABLE OF CONTENTS
SERIAL NO.
1.
TITLE
INTRODUCTION
COMPANY PROFILE TITLE OF PROJECT SIGNIFICANCE OF TOPIC OBJECTIVE OF TRAINING
Page no.
5-16
6-14 15 15
16
2.
RESEARCH METHODOLOGY
STEPS OF REPORT GENERATION TYPE OF STUDY TYPE OF DATA AND DATA COLLECTION DATA ANALYSIS TECNIQUES LIMITATIONS OF STUDY
17-20
18 19 19-20 20 20
3.
INTRODUCTION TO TOPIC
21-31
4.
32-47
5.
CONCLUSION
48-49
6. 7.
REFRENCES ANNEXURES
COMPANY PROFILE
BACKGROUND Indian Railway Catering and Tourism Corporation Ltd. (IRCTC) is a Public Sector Enterprise under Ministry of Railways. IRCTC was incorporated on 27th September, 1999 as an extended arm of the Indian Railways to upgrade, professionalize and manage the catering and hospitality services at stations, on trains and other locations and to promote domestic and international tourism through development of budget hotels, special tour packages, information & commercial publicity and global reservation systems. While discharging its mandate, the Company has made a significant mark in its passenger-services oriented business lines like setting up of Food Plazas on Railway premises, Railneer', Rail Tour Packages and Internet Ticketing' bringing great deal of professionalism into the operations. In addition to above, IRCTC is managing on Board Catering Services in Rajdhani / Shatabdi / Duronto and Mail / Express Trains and Static Catering Units such as Refreshment Rooms, AVMs, Book Stalls, Milk Stalls, Ice Cream Stalls, Petha & Peda Stalls etc. across the Indian Railway Network
ORGANIZATION STRUCTURE Corporate Office of IRCTC is situated at New Delhi , which is headed by the Managing Director. Managing Director is being assisted by three Directors, Director(Catering Services), Director(Tourism & Marketing) and Director(Finance) and nine Group General Managers. For smooth operations of the business across all over the country, five Zonal Offices are working at Delhi , Kolkata, Mumbai, Chennai & Secunderabad. South Zone Office is headed by Regional Director and all other Zonal Offices are headed by Group General Managers. All Group General Managers have vast experience of working in IndianRailways. These Zonal Offices are assisted by ten Regional Offices at Lucknow , Chandigarh , Jaipur, Bhubneshwar, Guwahati, Patna , Bhopal , Ahemedabad, Bangalore and Ernakulam, which are headed by Chief Regional Managers / Regional Managers
MANPOWER At present IRCTC has 4453 employees (as on 31st December, 2009) on its roll. The employees comprise of IRCTC Direct Employees, Deemed Deputation absorbees, Deemed Deputationists, deputationists and fixed term employees. For bringing professionalism in the work culture, IRCTC has recruited professionals in different field like HR, Tourism, Catering and Finance, through direct recruitment or campus recruitment.
FINANCIAL PERFORMANCE During the year 2008-09, the Corporation achieved a total income of Rs. 618.77 Crores as compared to Rs. 527.66 Crores in 2007-08 thereby registering a growth of 17.30 %. The increase was achieved in spite of the fact that bed roll and cleaning business has been transferred back to Railways. The major increase in the income in the year 2008-09 over previous year was achieved due to licensee catering (from Rs. 289.20 Crores to Rs. 341.02 Crores), quantum jump in internet ticketing (from Rs. 39.18 Crores to Rs.74.81 Crores) and tourism activities (from Rs. 9.72 Crores to Rs. 27.94 Crores). The income of licence catering increased on account of higher number of units put on tender, efficient tendering system and increase in licence fee from static units. Quantum jump in internet ticketing was witnessed due to good marketing efforts, upgraded infrastructure and improved customer care. The growth in tourism business was achieved due to IRCTC's foray into educational tour business, tour package business take over of Bharat Darshan trains by IRCTC. A net profit of Rs. 46.50 Crores was earned during 2008-09 as compared to Rs. 20.75 Crores in 2007-08 due to enhanced revenue and control on expenditure. An amount of Rs.30.00 Crore has been provided as Haulage Charges as was provided during the previous year. As at 31 st March 2009, the Reserves and Surplus of the Corporation stood at Rs.94.46 Crore. The Net Worth went up from Rs. 78.85 Crore during the previous year to Rs.114.46 Crore during the year under review
During the year the Corporation contributed a sum of Rs.76.26 crore to the revenues of Indian Railways as against a sum of Rs. 62.76 Crore during the previous year. Contribution to the Revenues of Railways comprises Haulage Charges, Concession fee, License fee, User Charges and Dividend. The sharing of revenues with the various Zonal Railways has been made in terms of Memorandum of Understanding dated 17 th January, 2007 . In addition to the above, tickets worth Rs.3888.82 Crore were booked during the year as against Rs.1705.03 Crore during the previous year.
MAIN BUSINESS ACTIVITIES IRCTC's main business activities are : (i) On Board Catering Services and Static catering units on the Indian Railway Network:
Hospitality Services covers on board catering services in the trains, catering services at stations through stalls, food plazas/fast food units & Automatic Vending Machines commissioned at A, B & C class of Railway stations. IRCTC is managing currently 19 Rajdhani, 13 Shatabdi, 16 Jan Shatabdi, 6 Duronto Express , 9 Garib Raths, 205 Mail/Express trains and 118 trains have train side vending facility. The graphical representation of various types of trains is depicted below:
IRCTC has currently 53 Food Plazas, 13 Fast Food units and 1 Quick Service Food Kiosks, 677 Automated Vending Machine , 2950 Stalls, 3291 Trolleys & Khomchas , 698 Book Stalls, 249
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Milk Stall & 7918 Static units spread over 1008 no. of Special A, A, B & C Category of Stations over Indian Railways network.
Two plants of Railneer packaged drinking water are operating at Nangloi ( Delhi ) and Danapur ( Bihar ).The capacity of the plants was increased from 5,500 cartons per day to 8,500 cartons per day during March, 2009 for Nangloi Plant and during December, 2009 of Danapur Plant. New Rail Neer plants: For Southern Region, Rail Neer Plant of 15,000 cartons per day is being set up at Palur near Chennai. Tender has been awarded and physical work for setting up building is in advance stage. For Western region, architect and plant consultants have been appointed for Rail Neer plant at Ambernath near Mumbai. The rated capacity of the plant is 25,000 cartons per day.
(iii) Managing the Departmental Catering units, taken over from Indian Railways: Four Rajdhani trains and four mail/express trains were operational as on 31.3.09. Patna Rajdhani train was taken over under departmental operation from August 2008. Total 518 stalls and 419 trolleys were under departmental operation during the year. (iv) Quality Control and Complaint Redressal System
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To maintain quality of services onboard trains, IRCTC has set up control rooms at New Delhi , Mumbai, Kolkata, Chennai and Secunderabad. Food Safety Audit Complaint Management System On-line Complaint Management System has been introduced to facilitate the passengers for lodging their online complaint by logging on our website at www.irctc.com . Expansion of passenger ticketing and PRS network through Internet / modern technology based ticketing. Managing all India Railway Enquiry Call Centre, .Running of Special Train, Special Charters / Coach and promotion of Value added tours, Budget Hotel Luxury Tourist Train
National award for E-Governance Best Citizen Centric application for the year 2007-08 National Award for E-Governance, 2007-08 jointly by Department of IT, Govt. of India and Govt. of Haryana. National Tourism Award for Travel Portal Railtourismindia.com in Feb 2008. EMPI Indian Express IT Innovation Award for excellent work in Citizen Centric Services 2008 - 2009. Madhya Pradesh State Tourism Award for Most Innovative Tourism Packages in Mass Facilitation category by Govt. of Madhya Pradesh. National Tourism Award and Award of Excellence by Ministry of Tourism, Govt. of India for the Buddhist Circuit Special Train in Feb'09. CNBC Awaaz Special Commendation for redefining Indian Railways Award 2009 PC Quest Most Innovative Project Award 2009 D.L.Shah Economic on Quality National Award from Quality Council of India on 19th February, 2010.
VISSION
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"To be a respected world class corporation and the leader in Indian Railways Catering & Tourism business in quality, productivity, profitability and customer satisfaction.
We build lasting relationships with customers based on trust and mutual benefit. We uphold highest ethical standards in conduct of our business. We create and nurture a culture that supports flexibility, learning and is proactive to change. We chart a challenging career for employees with opportunities for advancement and rewards. To maintain leading position in internet ticketing, e-commerce and technology for customers interface for railway passengers/ customers. We value the opportunity and responsibility to make a meaningful difference in people's lives. To provide high quality package drinking water (Railneer). To adopt strong Corporate Governance practices. To work towards creation of additional infrastructure on Railway or non-railway premises in their mandated line of business with a view to improve the Gross Block.
MISSION To be the leader for providing high quality catering, tourism and travel related services on the Indian Railways primarily and also outside the Railways in the country.
OBJECTIVES
and non
To promote railway tourism across the country for all segments of Rail Passengers. To provide single window solution to its customers including train travel, hotel accommodation, road transfers, hospitality, catering etc. To promote private sector participation and expertise to improve quality of products and services for all segments of Railway Passengers across all price bands. To imbibe strong customer friendly, professional and ethical work culture. To maintain leading position in internet ticketing, e-commerce and technology for customers interface for railway passengers/ customers. To develop budget hotels on Railway and non- Railway land. To provide high quality package drinking water (Railneer). To adopt strong Corporate Governance practices. To work towards creation of additional infrastructure on Railway or non-railway premises in their mandated line of business with a view to improve the Gross Block.
FUTURE PLANS Some of the initiatives planned for tourism, catering activities and Internet Ticketing are as under : Catering :
Strategic tie ups : IRCTC is working towards tie ups in the areas of mobile catering, Rail Neer and product formation. Static Units: Streamlining of procurement process, standardization of services and major static units.
automation in base kitchens is the focus area in Chennai. for Tender has been awarded and
New Rail Neer Plants : For Southern Region, Rail Neer plant is being set up at Pulur near physical work for setting up building is in advance stage. For Western region, architect and plant consultants have been appointed Rail Neer plant at Ambernath near Mumbai. Steel is working on a prototype which will Modular Stalls : Replacement of all catering stalls with uniform design of modular stalls is proposed to be undertaken and M/s Jindal give longer life and aesthetic look.
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Cell Kitchens/Base Kitchens : Plans are to set up another 100 licensee cell kitchens. Food Plazas/Fast Food Units/Quick Service Food Kiosks : More than 20 food plazas, 20 Fast Food Units and 5 QSFK are in advance interior designs. stage of planning. Food Courts : IRCTC is planning to develop food courts at stations with contemporary
Tourism : Launching of a Luxury Tourist Train with pan India itineraries. Thrust of Educational Tour on All India basis. Further development of rail tour package business Strategic tie-ups for promoting tourism Comprehensive travel services to foreign tourists booking tickets on IRCTC website. Internet Ticketing Modernization of IT infrastructure. Setting up of disaster recovery site.
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TITLE OF PROJECT
Comparative financial analysis of Annual Report of India Railway Catering and Tourism Corporation Ltd. (IRCTC)
SIGNIFICANCE OF TOPIC
As it is known that a short-term creditor will be interested in the current financial position of the firm, while a long term creditor will pay more attention to the solvency of the firm. The long term creditor will also be interested in the profitability of the firm. The equity shareholders are generally concerned with their return and may bother about the firms financial condition only when their earnings are depressed. In fact it has to be realized that the short term and long term financial position and profitability of the firm are tested in every kind of financial analysis, but the emphasis would differ. Some ratios are more important in one kind of analysis than others. If a short term creditor analyze only the current position and find it satisfactory, he/she cannot be certain about the safety of his/her claim if the firms long term financial position or profitability is unfavorable. The satisfactory current position would become adverse in future if the current resources are consumed by the unfavorable long term financial condition. Similarly, the good long term financial position is no guarantee for the long term creditors claim if the current position or profitability of the firm is bad. A way of tracing the periodic changes in the financial performance of a company is to prepare a comparative financial statement which will contain items at least for two periods but to depict the true picture I have taken the data of three financial years from 2006-07 to 2008-09. An investigation of the comparative financial statements helps to highlight the significant facts and points out the items which need further analysis. In the financial analysis the direction of changes over the period of years is of crucial importance. Trend analysis of ratios indicates the direction of change. This kind of analysis is particularly applicable to the items of profit & loss account.
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OBJECTIVE OF TRAINING
The objective of the study was to gain a clear understanding of the Financial operations of IRCTC and subsequently assess the financial stance of the corporation. The other inherent objectives, which were accomplished in the due course of fulfilling the primary motive, were detailed study of corporations profile, analysis of firms financial statements with the help of various ratios like liquidity, profitability, turnover and leverage ratios, its financial dealings with the bank, its vendors and the customers, etc. While the information used is historical, the intent is clearly to arrive at recommendations and forecasts for the future rather than provide a picture of the past.
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TYPE OF STUDY
The type of study used in the research is analytical in nature i.e. the research in which the researcher has to use facts or information already available and analyze these to make a critical
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evaluation of the material. In this research too facts and information already available in the form of Annual reports, Articles, Journals, etc. are critically analyzed.
Primary Sources: The data for the research can be collected directly through some form of interaction between the researcher and the people or organization concerned, using such methods as interviews, focus groups, surveys and participant observation. Such sources are called the primary sources. The primary sources used in the study are: 1. 2. Discussions with the management officers. Interviews with the concerned offices.
Secondary sources: Sometimes the researcher uses data which has already been collected for other purposes in other words, he or she is going to use an existing source rather than directly interacting with people. Such sources of data include Government reports, annual reports, journals, etc and are known as secondary sources of data. The secondary sources used for the study are: Annual Report of the IRCTC for the year 2008-2009 Annual Report of the IRCTC for the year 2007-2008 Annual Report of the IRCTC for the year 2007-2006 Records of the company
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LIMITATIONS OF STUDY
The financial data collected may be biased and subjected to different interpretations by the users. The data for the current financial year 2009-2010 of IRCTC was not available as the annual report 2009-10 is not published. Study is confined only to finance department of companies, so it does not give picture about The research will be valid only for the limited period of time, due to fast growth of the Indian Limited time period was a major constraint of this study. Confidential information is not available.
the working of other departments like marketing, operations. economy and fast change in the norms.
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FINANCE
Finance is a branch of economics that deals with the management of funds, financial resources and other assets. In broader terms, finance is raising or investing money either as equity or debt. Finance is a wide-ranging term which includes funding, investments, trading and risk management (through various types of insurance policies).
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Finance: Financial Assets Finance involves investment of funds in financial assets, such as stocks, bonds, mutual funds and private equities for income generation. Financial institutions like banks play a major role in funding these financial assts. Investment in financial assets is generally extensive so it must be protected by risk management and risk transference organizations like insurance companies. Finance: Types Personal finance focuses on the extent of funds that are required by a person or a family. This further includes protection from mishap, transfer of assets through inheritance and the impact of tax policy on personal finance. Personal finance also includes financial planning and access to credit. Corporate finance: This type of finance uses the principles of finance to help corporate raise funding and to help investors earn good returns from meeting those funding needs, usually with the help of corporate bankers or financiers. The objective of corporate finance is to maximize the valuation of financial assets, while striking a balance between the risks and profitability potential of the assets. Corporate finance takes into account the valuation of financial assets primarily for tax assessments and business analysis. Corporate houses focus on making either long-term capital investments or managing working capital for the short term. It also involves finding short- and long-term funding for corporations. While short-term funding can be obtained from banks line of credit, funds for the long term can be acquired by issuing equity or bonds. For investors who want updates and advice on any financial matters such as savings, investment, retirement planning, portfolio management and asset management, it is best to seek financial advice from a trustworthy financial advisor.
FINANCIAL MANAGEMENT
Financial management entails planning for the future of a person or a business enterprise to ensure a positive cash flow. It includes the administration and maintenance of financial assets. Besides, financial management covers the process of identifying and managing risks.
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The primary concern of financial management is the assessment rather than the techniques of financial quantification. A financial manager looks at the available data to judge the performance of enterprises. Managerial finance is an interdisciplinary approach that borrows from both managerial accounting and corporate finance. Some experts refer to financial management as the science of money management. The primary usage of this term is in the world of financing business activities. However, financial management is important at all levels of human existence because every entity needs to look after its finances.
FINANCIAL ANALYSIS
Financial statement analysis involves analyzing the firms financial statements to extract information that can facilitate decision-making. Financial analysis is performed by both internal management and external groups. Firms would perform such an analysis in order to evaluate their overall current performance, identify problem/opportunity areas, develop budgets and implement strategies for the future. whether to extend credit etc. External groups (such as investors, regulators, lenders, suppliers, customers) also perform financial analysis in deciding whether to invest in a particular firm,
BASIC STEPS
For the financial analysis of a company, the basic steps which should be followed are described in brief as under: Step 1: Acquire the companys financial statements for several years. These may be found in a recent annual report; auditors report; or from other secondary sources. As a minimum, get the following statements, for at least 3 to 5 years:
Balance sheets Income statements Shareholders equity statements Cash flow statements
Step 2: Quickly scan all of the statements to look for large movements in specific items from one year to the next. For example, did revenues have a big jump, or a big fall, from one particular year
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to the next? Did total or fixed assets grow or fall? If anything looks very suspicious, research the information that has been collected about the company to find out why. For example, did the company purchase a new division, or sell off part of its operations, that year?
Step 3: Review the notes accompanying the financial statements for additional information that may be significant for the analysis.
Step 4: Examine the balance sheet. Look for large changes in the overall components of the company's assets, liabilities or equity. For example, have fixed assets grown rapidly in one or two years, due to acquisitions or new facilities? Has the proportion of debt grown rapidly, to reflect a new financing strategy? If there is anything that looks very suspicious, research the information available about the company to find out why. Step 5: Examine the income statement. Look for trends over time. Calculate and graph the growth of the following entries over the past several years. Revenues (sales) Net income (profit, earnings)
Are the revenues and profits growing over time? Are they moving in a smooth and consistent fashion, or erratically up and down? Investors value predictability, and prefer more consistent movements to large swings. For each of the key expense components on the income statement, calculate it as a percentage of sales for each year. For example, calculate the percent of cost of goods sold over sales, general and administrative expenses over sales, and research and development over sales. Look for favorable or unfavorable trends. For example, rising G&A expenses as a percent of sales could mean lavish spending. Also, determine whether the spending trends support the companys strategies. For example, increased emphasis on new products and innovation will probably be reflected by an increased proportion of spending on research and development. Look for non-recurring or non-operating items. These are "unusual" expenses not directly related to ongoing operations. However, some companies have such items on almost an annual basis. How do these reflect on the earnings quality?
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Step 6: Examine the shareholder's equity statement. Has the company issued new shares, or bought some back? Has the retained earnings account been growing or shrinking? Why? Are the signals about companys long-term strategy here? Step 7: Examine the cash flow statement, which gives information about the cash inflows and outflows from operations, financing, and investing. While the income statement provides information about both cash and non-cash items, the cash flow statement attempts to reconstruct that information to make it clear how cash is obtained and used by the business, since that is what investors and creditors really care about. . Step 8: Calculate financial ratios in each of the following categories, for each year. The formulas found in the textbook or other materials from finance and accounting courses may be used. Some of the useful ratios that must be included in the study are enumerated as below: Liquidity ratios Leverage (or debt) ratios Profitability ratios Efficiency ratios Value ratios
Graph the ratios over time, to find the trends in the ratios from year to year. Are they going up or down? Is that favorable or unfavorable? This may trigger further questions in mind, and help to look for the underlying reasons. Step 9: Obtain data for the companys key competitors, and data about the industry. For competitor companies, collect the data and calculate the ratios in the same way as was carried out for the company being studied. Compare the ratios for the competitors and the industry to the company being studied. Is the company favorable in comparison? Is sufficient information available to determine why or why not? If not, further research needs to be carried out.
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Step 10: Review the market data available about the companys stock price, and the price to earnings (P/E) ratio. Try to research and understand the movements in the stock price and P/E over time. Determine in mind whether the stock market is reacting favorably to the companys results and its strategies for doing business in the future. Review the evaluations of stock market analysts. These may be found at any brokerage site. Step 11: Review the dividend payout. Graph the payout over several years. Determine whether the companys dividend policies are supporting their strategies. For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Based on the research into the industry, does the company has sufficient opportunities for profitable reinvestment and growth, or should they be distributing more to the owners in the form of dividends? Viewed another way, could something be learnt about the companys long-term strategies from the way they pay dividends? Step 12: Review all of the data that has been generated.
The logical reason behind the use of ratio analysis lies in the fact that it makes related data and figures comparable and easy to correlate. Ratio analysis is a diagnostic tool that helps to identify
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problem areas and opportunities within a company. Further is a discussion on how to measure and interpret some key ratios.
The most frequently used ratios by Financial Analysts provide insights into a firm's Liquidity Degree of financial leverage or debt Profitability Efficiency Value
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LIQUIDITY RATIOS
Liquid assets are those assets that can be converted into cash quickly. The short-term liquidity ratios show the firms ability to meet short-term obligations. The liquidity position of a firm would be satisfactory it is able to meet its current obligations when they become due. Thus a higher ratio would indicate a greater liquidity and lower risk for shortterm lenders. While high liquidity means that the company will not default on its short-term obligations, note that by retaining assets as cash, valuable investment opportunities might be lost. Obviously, Cash by itself does not generate any return only if it is invested will we get future return. The liquidity ratios are particularly useful in credit analysis by banks and other suppliers of short-term loans.
LEVERAGE RATIO
This ratio is used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.
INVENTORY RATIO
These ratios reflect how well the firms assets are being managed. The inventory ratios shows how fast the inventory is being produced and sold.
PROFITABILITY RATIOS
Profitability is a relative term. It is hard to say what percentage of profits represents a profitable firm, as profits depend on such factors as the position of the company and its products on the
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competitive life cycle (for example profits will be lower in the initial years when investment is high), on competitive conditions in the industry, and on borrowing costs. For decision-making, we are concerned only with the present value of expected future profits. Past or current profits are important only as they help us to identify likely future profits, by identifying historical and forecasted trends of profits and sales.
3. Ratios are based on financial statements that reflect the past and not the future.
Unless the
ratios are stable, it may be difficult to make reasonable projections about future trends. Furthermore, financial statements such as the balance sheet indicate the picture at one point in time, and thus may not be representative of longer periods. 4. Financial statements provide an assessment of the costs and not value. For example, fixed assets are usually shown on the balance sheet as the cost of the assets less their accumulated depreciation, which may not reflect the actual current market value of those assets. 5. Financial statements do not include all items. For example, it is hard to put a value on human capital (such as management expertise). And recent accounting scandals have brought light to the extent of financing that may occur off the balance sheet. 6. Accounting standards and practices vary among countries, and thus hamper meaningful global comparisons.
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By considering the following ratios, analysis of corporations financial position can be done.
Liquidity ratios
Current ratio Quick ratio Cash ratio Net working Capital ratio
Inventory ratios
Inventory turnover ratio Total assets turnover ratio
Profitability ratios
Gross profit margin Net profit margin Return on net worth Earning per share Dividend per share
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LIQUIDITY RATIOS
CURRENT RATIO
The current ratio is a measure of the firms short term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. The current ratio of 2 is to 1 is considered to be the ideal ratio, that is, the current assets held by a company must be at least twice the current liabilities that the company is required to fulfill.
Current Ratio = Current Assets/Current Liabilities
YEAR 2006-07 2007-08 2008-09 CURRENT RATIO 0.95 0.99 1.01
It is shown in the above data that current ratio of IRCTC over the years is satisfactory. It may be interpreted to be sufficiently liquid.
QUICK RATIO
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Quick ratio establishes a relationship between liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately without a loss of value. Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial condition. It is an important index of the firms liquidity. Quick Ratio = (Current Assets-Inventories) /Current Liabilities
YEAR 2006-07 2007-08 2008-09 QUICK RATIO 0.92 0.97 1.00
In case of quick ratio, if a company doesnt sell its inventories and it has to pay all its current liabilities, it may find it difficult to meet its obligations if it doesnt have sufficient amount of other current assets which can be easily converted into cash during one accounting period. Here the satisfactory quick ratio of approx. 1:1 over the years shows that even if all sales revenues disappear, the firm can meet its current obligations with the readily convertible quick funds on hand.
Cash Ratio
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Cash ratio establishes a relationship between cash & cash equivalent securities and the current liabilities. It can be computed by dividing the sum of cash and marketable securities by current liabilities as follows:
Cash ratio= (Cash+ Marketable securities) / Current liabilities.
YEAR 2006-07 2007-08 2008-09 CASH RATIO 0.56 0.41 0.48
Cash ratio of approximately 50% is satisfactory. There is nothing to be worried about the lack of cash.
Net Working Capital=Current Assets-Current Liabilities Net Assets=Fixed Assets + Net Current Assets
YEAR 2006-07 2007-08 2008-09 NET WORKING CAPITAL RATIO -0.22 -0.03 0.03
Firm having the large NWC has great ability to meet its current obligations. NWC ratio of IRCTC has increased over the years but it is not satisfactory.
LEVERAGE RATIO
1. INVENTORY RATIO
(In times)
YEAR 2006-07 2007-08 2008-09 INVENTORY TURNOVER RATIO 13.86 17.08 13.82
A high inventory turnover is the indication of good inventory management. As from the above data it is clearly shown that the entire corporation has high inventory turnover over the years which shows how rapidly the inventory is turning into receivables through sales.
(In days)
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DIH 26 21 26
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A high asset turnover is the indication of good assets management. As from the above data it can be seen that ratio is decreasing over successive years which is not good sign of managing financial resources. As the turnover ratio shows the firms ability in generating sales from all financial resources committed to total assets. The total asset turnover of 1.56 times in FY 2006-07 implies that IRCTC generates a sale of Rs 1.56 for 1 rupee investment in fixed and current assets together which is 1.41 in FY 2008-09.
PROFITABILITY RATIOS
(In %)
YEAR GROSS PROFIT MARGIN
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(In %)
YEAR 2006-07 NET PROFIT MARGIN 4.6
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2007-08 2008-09
3.9 7.5
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As the PAT has increased over the years therefore the firms earning power on per share basis has also increased
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Dividend distributed has increased over the years as EPS has increased.
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Payout ratio remained constant over years because there is equal increase in DPS relative to EPS.
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IRCTC is a unique organization in itself which provides On Board Catering and Static Catering units on the Indian railway network along with Luxury Tourist Trains. The comparative financial analysis of company shows that during the year 2008-09, the Corporation achieved a total income of Rs. 618.77 Crores as compared to Rs.527.66 Crores in 2007-08 thereby registering a growth of 17.3 %. Growth registered from 2006-07 to 2007-08 was 21.7%. The expenditure has been controlled and it has been reduced to 88 % of the total income as compared to 93 % in the previous year. With the result, there is quantum jump in the net profit of the Company which has been increased from Rs. 20.75 Crores in 2007-08 to Rs. 46.50 Crores in 2008-09, thereby registering a growth of 124 % which was just 2.57% from year ending 2006-07 to year 2007-08. The earnings on an equity share of Rs. 10 work out to Rs. 23.25 per share. It reveals that the companys performance over the years has been continuously improving. The firm is operating profitably yet the improvement should be done in working capital management.
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Books:
Grewal, T.S (2007), Analysis of Financial Statement, New Delhi: Sultan Chand and Sons. Pandey, I.M (2009), financial management, New Delhi: Vikas Publishing House Pvt. Ltd.
Accounts:
Annual Reports of IRCTC for 3 financial year starting year from 2006-07 to 2008-09.
Web Sites:
http://www.irctc.com/displayServlet http://www.irctc.com/Company_Profile.html http://www.irctc.com/Vission.htm http://www.irctc.com/annual_report.html http://www.irctc.com/Organization%20Chart/album/slides/Org_structur.html http://www.irctc.com/objective.htm
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Schedule
Amount
Amount
Amount
Amount
Sources of Funds
Shareholders Funds Share Capital Reserves and Surplus Deferred Tax Liability (net) (Refer Note 21 in Schedule XXV) TOTAL I II 2,000.00 9,445.81 186.70 11,632.51 III 7,636.09 3,423.54 4,212.55 995.84 IV V VI VII VIII IX X 0.12 519.19 23,972.02 13,732.94 448.04 13,348.30 52,020.61 38,334.64 7,512.05 45,846.69 6,173.92 6,137.97 2,438.02 3,699.95 90.58 2,000.00 5,884.92 258.97 8,143.89
Application of Funds
Fixed Assets Gross Block Less: Depreciation Net Block Add : Capital Work in Progress
5,208.39 250.20
3,790.53 0.20
Investments
Current Assets, Loans and advances Interest accrued on Investments Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loans & Advances Less: Current Liabilities and provisions Current Liabilities Provisions
0.10 573.19 19,206.69 11,677.32 651.52 8,554.20 40,663.02 32,389.69 3,920.17 36,309.86 4,353.16
XI
11,632.51
8,143.89
M L Jotwani
Partner Place : New Delhi Dated : 26th August, 2009
V R Gupta
Director (Finance)
Rakesh Gogia
Company Secretary
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Adjustments pertaining to earlier years XXIV Profit before tax C) Less : Provision for Income Tax Provision for Fringe Benefit Tax Deferred Tax (Refer Note 21 in Schedule XXV) Profit after taxation Profit brought forward Profit Available for appropriation APPROPRIATIONS Dividend - Interim - Final Tax on Dividend Transfer to General Reserve Profit Carried to Reserve & Surplus (Balance Sheet) Earning per share (Face Value of Rs. 10 per share) Basic ( in Rs. ) Diluted ( in Rs. ) Significant Accounting Policies and Notes to the XXV Accounts I to XXV form an integral part of Schedules accounts report of even date attached As per our
M L Jotwani
Partner Secretary Place : New Delhi Dated : 26th August, 2009
V R Gupta
Director (Finance) Company