A STUDY OF FINANCIAL PERFORMANCE OF INDIAN SUGAR INDUSTRIES Submitted in partial fulfillment of the requirements for Master in Management Studies

(MMS) 2010-2012 SUBMITTED BY FORAM SHETH (MMS) Roll No. 48 Batch: Year 2010 2012

H K Institute of Management Studies and Research, Jogeshwari, Mumbai 400102 MAY 2010 - JUNE 2011

Students Declaration

I hereby declare that this report submitted in partial fulfillment of the requirement of the award for the Master in Management Studies to H K Institute of Management Studies and Research is my original work and not submitted for award of any degree or diploma fellowship or for similar titles or prizes.

I further certify that I have no objection and grant the rights to H K Institute of Management Studies and Research to publish any chapter/ project if they deem fit in Journals/Magazines and newspapers etc. without my permission. Place Date Name Class : Mumbai : 30/07/2011 : Foram Sheth : (MMS Sem. III)

Roll No. : 48

Certificate

This is to certify that the dissertation submitted in partial fulfillment for the award of (insert course name) of H K Institute of Management Studies and Research is a result of the bonafide research work carried out by Miss. Foram Sheth under my supervision and guidance, no part of this report has been submitted for award of any other degree, diploma, fellowship or other similar titles or prizes. The work has also not been published in any Journals/Magazines.

Date 30th July 2011

Industry guide: Sandeep Sachdev Company : Nirmal Bang Securities Ltd

Place: Mumbai

Designation : Sales Manager

Prof K C Pandey Director HKIMSR

Project guide: Prof Aftab Shaikh Core Faculty HKIMSR

Acknowledgement

It is difficult to acknowledge precious a debt as that of learning as it is the only debt that is difficult to repay except through gratitude. It is my profound privilege to express my sincere thanks to Prof. K C Pandey, Director HKIMSR, for giving me an opportunity to work on the Project and giving me full support in completing this project. I am indebted to Mr. Amit Joshi, Area Head, Broking, for his support in completion of my project. I am also thankful to Mr. Sandeep Sachdev (Sales Executive) of Nirmal Bang Securities Private Ltd. I acknowledge their support and guidance for giving shape to this project. I am very thankful to my internal guide Prof. Aftab shaikh and other faculty members for their full support. I am indebted to librarian Ms. Ashwini Joshi and other staff members of library for their timely support in completion of my project. I also acknowledge the support of Mr. Virendra Singh, System Analyst and other technical staff for extending their support in completion of this project. I am also thankful to University of Mumbai for making Summer Internship part of their Curriculum. Last but not least, I would like to thank my parents & my friends for their full cooperation & continuous support during the course of this assignment. Table of Contents

CHAPTER 1 CHAPTER 2

: 1.1

Executive Summary

: 2.1.1 Introduction to the Financial Analysis : 2.1.2 Introduction to the Sugar Industry (Globally) : 2.1.3 Introduction to the Sugar Industry (India) : 2.2 : 2.3 : 2.5 Objectives Methodology Limitation Analysis & Findings

CHAPTER 3

: 3.1

CHAPTER 4

: 4.1

Conclusions

BIBLIOGRAPHY :

Executive Summary

The project report is written with an objective in mind, which is to analyse the Financial Status of the Sugar Industry in India. As the sugar industry in India is a well-developed sector with a consumer base of more than billions of people. India is the second largest producer of sugar in the world. There are around 45 millions of sugar cane growers in India and a larger portion of rural labourers in the country are largely relied upon this industry. Sugar Industry is one of the agricultural based industries. In India it is the second largest agricultural industry. This project is to analyze and understand the performance of 3 major Sugar producing Industries of India. These 3 companies are Shree Renuka Sugar, Balrampur Chini and Rajshree Sugar. And the analysis is done after understanding the data of all the 3 companies for the previous five years (2006 to 2010). The ratio analysis is done using Current Ratio, Quick ratio, Debt Equity Ratio etc. Graphical Representation is also used for better understanding of the financial position of the companies when compared with each other and when compared with previous years.

Introduction to Sugar industries in India (Globally)

Sugarcane, Saccharum officinarum L., an old energy source for human beings and, more recently, a replacement of fossil fuel for motor vehicles, was first grown in South East Asia and Western India. Around 327 B.C. it was an important crop in the Indian sub-continent. It was introduced to Egypt around 647 A.D. and, about one century later, to Spain (755 A.D.).

Global Distribution of Sugarcane

Since then, the cultivation of sugarcane was extended to nearly all tropical and sub-tropical regions. Portuguese and Spaniards took it to the New World early in the XVI century. It was introduced to the United States of America (Louisiana) around 1741.

Botanically, sugarcane belongs to the Andropogonae tribe of the family Gramineae, order Glumiflorae, class Monocotyledoneae, subdivision Angiospermae, division Embryophita siphonogama. The subtribe is Sacharae and the genus, of course, Saccharum, derived from the Sanskrit "sarkara = white sugar", a reminder that the plant reached the Mediterranean region from India.

Sugarcane growing countries of the world are lying between the latitude 36.7 north and 31.0 south of the equator extending from tropical to subtropical zones. This map depicts the distribution of sugarcane in the world.

Worldwide sugarcane occupies an area of 20.42 million ha with a total production of 1333 million metric tons (FAO, 2003). Sugarcane area and productivity differ widely from country to country (Table 1). Brazil has the highest area (5.343 million ha), while Australia has the highest productivity (85.1 tons/ha). Out of 121 sugarcane producing countries, fifteen countries (Brazil, India, China, Thailand, Pakistan, Mexico, Cuba, Columbia, Australia, USA, Philippines, South Africa, Argentina, Myanmar, Bangladesh) 86% of area and 87.1% of production (Table 1). Out of the total white crystal sugar production, approximately 70% comes from sugarcane and 30% from sugar beet.

Sugarcane area and productivity differ widely from country to country (Table 1). Brazil has the highest area (5.343 million ha), while Australia has the highest productivity (85.1 tons/ha). Out of 90 sugarcane producing countries, fifteen countries (Brazil, India, China, Thailand, Pakistan, Mexico, Cuba, Columbia, Australia, USA, Philippines, South Africa, Argentina, Myanmar, Bangladesh) 86% of area and 87.1% of production (Table 1).

Table 1. Sugarcane In The world: Area, Production And Productivity

Country

Area (million ha) 5.343 4.608 1.328 0.970 1.086 0.639 0.435 0.423 0.404 0.385 0.350 0.654 0.325 0.295 0.165 0.166 20.42

Production (million tons) 386.2 289.6 92.3 64.4 52.0 45.1 36.6 36.0 31.3 25.8 25.6 22.9 20.6 19.2 7.5 6.8 1333.2

Productivity (Tons/ha) 72.3 62.8 65.5 66.4 47.9 70.6 84.1 85.1 77.5 67.1 73.1 35.0 63.4 65.2 45.4 41.2 65.2

Brazil India China Thailand Pakistan Mexico Colombia Australia USA Philippines Indonesia Cuba South Africa Argentina Myanmar Bangladesh WORLD

Sugarcane is a renewable, natural agricultural resource because it provides sugar, besides biofuel, fibre, fertilizer and myriad of by products/co-products with ecological sustainability.

Sugarcane juice is used for making white sugar, brown sugar (Khandsari), Jaggery (Gur) and ethanol. The main byproducts of sugar industry are bagasse and molasses.

Molasses, the chief by-product, is the main raw material for alcohol and thus for alcohol-based industries. Excess bagasse is now being used as raw material in the paper industry. Besides, co-generation of power using bagasse as fuel is considered feasible in most sugar mills.

Introduction to Sugar Industries in India

Sugar industry is one of the most important agro-based industries in India and is highly responsible for creating significant impact on rural economy in particular and countrys economy in general. Sugar industry ranks second amongst major agro-based industries in India. As per the Government of Indias recent liberalised policy announced on 12th December, 1986 for licensing of additional capacity for sugar industries during 7th five-year plan, there will be only one sugar mill in a circular area of 40 sq km. Also the new sugar mill is allowed with an installation capacity of 2500 TCD (Tonne Sugar Cane crushed per day) as against the earlier capacity norms of 1250 TCD. Similarly, the existing sugar mills with sugar cane capacity of about 3500 TCD can crush sugar cane to the tune of 5000 TCD with a condition imposed that additional requirement of sugar cane be acquired through increased productivity and not by expansion of area for growing sugar cane. Cane sugar is the name given to sucrose, a disaccharide produced from the sugarcane plant and from the sugar beet. The refined sugars from the two sources are practically indistinguishable and command the same price in competitive markets. However, since they come from different plants, the trace constituents are different and can be used to distinguish the two sugars. One effect of the difference is the odor in the package head space, from which experienced sugar workers can identify the source. In the production scheme for cane sugar, the cane cannot be stored for more than a few hours after it is cut because microbiological action immediately begins to degrade the sucrose. This means that the sugar mills must be located in the cane fields. The raw sugar produced in the mills is item of international commerce. Able to be stored for years, it is handled as raw material shipped at the lowest rates directly in the holds of ships or in dump trucks or railroad cars and pushed around by bulldozers. Because it is not intended to be eaten directly, it is not handled as food. The raw sugar is shipped to the sugar refineries, which are located in population centers. There it is refined to a food product, packaged, and shipped a short distance to the market. In a few places, there is a refinery near or even within a raw-sugar mill. However, the sugar still goes through raw stage. The principle by-product of cane

sugar production is molasses. About 10 15% of the sugar in the cane ends up in molasses. Molasses is produced both in the raw-sugar manufacture and also in refining. The blackstrap or final molasses is about 35 40% sucrose and slightly more than 50% total sugars. In the United States, blackstrap is used almost entirely for cattle feed. In some areas, it is fermented and distilled to rum or industrial alcohol. The molasses used for human consumption is of a much higher grade, and contains much more sucrose. Sugarcane characteristics: Sugarcane contains not only sucrose but also numerous other dissolved substances, as well as cellulose or woody fibre. The percentage of sugar in the cane varies from 8 to 16% and depends to a great extent on the variety of the cane, its maturity, condition of the soil, climate and agricultural practices followed. The constituents of ripe cane vary widely in different countries and regions but fall generally within the following limits:

Constituent Percentage range Water 69.0 75.0 Sucrose 8.0 16.0 Reducing sugars 0.5 2.0 Organic matter other than sugar 0.5 1.0 Inorganic compounds 0.2 0.6 Nitrogenous bodies 0.5 1.0 Ash 0.3 0.8 Fibre 10.0 16.0 Organic matters other than sugar include proteins, organic acids, pentosan, colouring matter and wax. Organic acids present in cane are glycolic acid, malic acid, succinic acid and small quantity of tannic acid, butyric acid and aconitic acid. These vary from 0.5 to 1.0% of the cane by weight. The organic compounds are made up of phosphates, chlorides, sulphates, nitrates and silicates of sodium, potassium, calcium, magnesium and iron chiefly. These are present from 0.2 to 0.6%.

The nitrogenous bodies are albuminoid, amides, amino acids, ammonia, xanthine bases, etc. These are present to the extent of 0.5 to 1.0%. Fibre is the insoluble substance in the cane. Dry fibre contains about 18.0% lignin, 15% water-soluble substances, 45% cellulose and the rest hemicellulose. The juice expressed from the cane is an opaque liquid covered with froth due to air bubbles entangled in it. The colour of the juice varies from light grey to dark green. Colouring matter is so complex that very little is known about them and there is a great need for research in this direction. Colouring matters consist of chlorophyll, Anthocyanin, saccharatin and tannins. Canes which have been injured or which are over-ripe contain ordinarily invert sugar as well. When severe frost damages sugarcane, all buds are killed and the stalk split. Then the juice produced has low purity, less sucrose, high titrable acidity, and abnormal amounts of gum, which make processing difficult and at times impossible. Frost is generally not a very common phenomenon in Indian crops. Insects and pests cause a greater damage. Cane juice has an acidic reaction. It has a pH of about 5.0. The cane juice is viscous owing to the presence of colloids. The colloids are particles existing in a permanent state of fine dispersion and they impart turbidity to the juice. These colloids do not settle ordinarily unless conditions are altered. The application of heat or addition of chemicals brings about flocculation or coagulation. They may be coagulated by the action of electric current and adsorption by sucrose attractions using porous or flocculent material. Some colloids are flocculated easily while others do so with great difficulty. Each colloid has a characteristic pH at which flocculation occurs most easily. It is known as the isoelectric point of the colloid. The cane juice is turbid owing to the presence of such colloidal substances as waxes, proteins, pentosans, gums, starch and silica.

FINANCIAL ANALYSIS

INTRODUCTION MEANING OBJECTIVE TYPES OF FINANCIAL ANALYSIS PROCEDURE OF FINANCIAL ANALYSIS STATEMENTS METHODS OF FINANCIAL ANALYSIS

.1

Introductions

Financial statements are prepared primarily for decision-making. They play a dominant role in setting the framework of the managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However the information provided in the financial statements is of immense use in decision making through analysis and interpretation of financial statements. Financial analysis is the process of identifying the financial strength & weaknesses of the Firm by property, establishing relationship between the items of the Balance Sheet and the Profit and Loss Account.

.2

Meaning

The term Financial Analysis also known as analysis and interpretation of financial statements refer to the process of determining financial

strength and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data. According to Metcalf and Titard, Analyzing financial statements is the process of evaluating the relationship between the component parts of the financial statements to obtain a better understanding of a firms position and performance. In the words of Myers, Financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements, and a study of the trend of these factors as shown in a series of statements.

.3

Objective

The purpose of objective of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. Just like a doctor examines his patient by recording his body temperature, blood pressure etc. before making his conclusion regarding the illness and before giving his treatment, a financial analyst analysis the financial statements with various tools of analysis before commenting upon the financial wealth or weaknesses of an enterprise. The analysis and interpretation of financial statements is essential to bring out the mystery behind the figures in financial statements. Financial statements analysis is an attempt to determine the significance and meaning of the financial statement data so that forecast may be made of the future earnings, ability to pay

interest and debt maturities (both current and the long term) and profitability of a sound dividend policy.

.4

Types of financial analysis

However, we can classify various types of financial analysis into different categories depending upon (i) the material used, and (ii) the method of operation followed in the analysis or the modus operandi of analysis.

Types of Financial Analysis

On the basis of material used

On the basis of modus operandi

External analysis

Internal analysis

Horizontal analysis

Vertical analysis

(i)

On the basis of Material used: a. External analysis b. Internal analysis

a. External analysis This analysis is done by outsiders who do not have access detailed internal accounting records of the business firm. These outsiders include investors, potential investors, creditors, potential creditors, government agencies, credit agencies, and the general public. For financial analysis, these external parties to the firm depend almost entirely on the published financial statements.

b. Internal analysis The analysis conducted by persons who have access to the internal accounting records of a business firm is known as internal analysis. Such an analysis can therefore, be performed by executives and employees of the organization as well as government agencies which have statutory powers vested in them. Financial analysis for managerial purposes is the internal type of analysis that can be affected depending upon the purpose to be achieved.

(ii)

On the basis of modus operandi a. Horizontal analysis b. Vertical analysis

a. Horizontal analysis Horizontal analysis refers to the comparison of financial data of a company for several years. The figure for this type of analysis is presented horizontally over a number of columns. The figures of the various years are compared with standard or base year. A base year is a year of analysis is also called Dynamic analysis as it is based on the data from year to year rather than on data of any one year.

b. Vertical analysis Vertical analysis refers to relationship of the various items in the financial statements of one accounting period. In this type of analysis the figures from financial statements of the year are compared with a base selected from the same years statement. It is also known as static analyses. Common size financial statements and financial ratios are the two tools employed in vertical analysis. Since vertical analysis considers data for one time period only. It is not very conducive to a proper analysis of financial statements.

.5

Procedure of financial statement analysis. There are three steps involved in the analysis of financial

statements. These are (i) selection (ii) classification (iii) interpretation. The first step involves selection of information (data) relevant to the purpose of analysis of financial statements. The second step involved is the methodical classification of the data and the third step includes drawing of inferences and conclusion.

The following procedure is adopted for the analysis and interpretation of financial statements: 1. The analyst should acquaint himself with the principles and postulants of accounting. He should know the plans and policies of the management so that he may be able to find out whether these plans are properly executed or not. 2. The extent of analysis should be determined so that the sphere of work may be decided. If the aim is to find out the earning capacity of the enterprise then analysis of income statement will be undertaken. On the other hand, if financial position is to be studied then Balance sheet analysis will be necessary. 3. The financial data given in the statements should be re-organized and rearranged. It will involve the grouping of similar data under same heads, breaking down of individual components or statements according to the nature. The data is reduced to a standard form.

4. A relationship is established among financial statements with the help of tools and techniques of analysis such as ratios, trends, common size, funds flow etc. 5. The information is interpreted in a simple and understandable way. The significance and utility of financial data is explained for helping decision taking. 6. The conclusions drawn from interpretation are presented to the management in the form of reports.

.6

Methods or devices of financial analysis: -

The analysis and interpretation of financial statements is used to determine the financial position and results of operations as well. A number of methods or devices are used to study the relationship between different statements. The following methods of analysis are generally used: 1. Comparative statements 2. Trend analysis 3. Common size statements 4. Funds flow analysis 5. Cash flow analysis 6. Ratio analysis 7. Cost volume profit analysis These are explained as follows:

1. Comparative statements The comparative financial statements are statements of the financial position at different periods of time. The elements of financial position are shown in a comparative form so as to give an idea of financial position at two or more periods. Any statement prepared in a comparative form will be covered in comparative statements. From practical point of view. Generally, two financial statements (Balance Sheet and the Income Statement) are prepared in comparative form for financial analysis purposes.

2. Trend analysis The financial statements may be analyzed by computing trends of series of information. This method determines the direction upwards or downwards and involves the computation of the percentage relationship that each statement items bears to the same in the base year. The information for a number of years is taken up and one year, generally taken for the base year. In figures for the base year are taken as 100 and trend ratios for other years are calculated on the basis of the base year. The analyst is able to see the trend of the figures, whether upward or downward.

3. Common size statements The common size statements, balance sheet and the income statements are shown in analytical percentages. The figures are shown as percentages of total assets, total liabilities and the total sales. The total sales are taken as 100 and different assets are expressed as a percentage of the total. Similarly various liabilities are taken as a part of the total liabilities. These statements are also known as component percentage as 100 percent statements because every individual item is stated as a percentage of the total 100.

4. Funds flow analysis The fund flow statement is a statement, which shows the movement of the funds and is the report of the financial operations of the business undertaking. It indicates various means by which funds were obtained during a particular period and the ways in which these funds were employed. In simple words, it is a statement of sources and application of funds.

5. Cash flow analysis Cash flow statement is a statement, which describes the inflow (sources) and outflow (uses) of the cash and cash equivalents in an

enterprise during the specified period of time. Such a statement enumerates net effects of the various business transactions on cash and its equivalents and takes into account receipts and disbursements of cash. A cash flow statement summarizes the causes of changes in cash position of a business enterprise between the dates of the two balance sheets.

6. Ratio analysis Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. However ratio is not end itself. It is only a means of better understanding of financial strengths and weaknesses of a firm. A ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of the two mathematical expressions.

7. Cost volume profit analysis Profit is the most important measure of a firms performance. In the free market economy, profit is a guide for allocating resources efficiently. An analysis of the effects of various factors on profit is an essential step in financial planning and decision-making.

The analytical techniques used to study the behavior of profit in response to the changes in the volume costs and price is called the Cost Volume Profit (CVP) analysis.

OBJECTIVES

To study the financial performance of sugar industries in India To study the liquidity position through various financial related ratios.

METHODOLOGY

The study is based on secondary data and covers the period of 5 years ranging from 2006-2010. A sample of three sugar industries has been taken for analysis.

METHODS OF QUANTITATIVE ANANLYSIS a) Ratio Analysis b) Graphical Representation

LIMITATIONS

The project is based only on secondary data.

Data was available for 5 years only.

Analyzing & Findings

Current ratio Current ratio is defined as the relationship between current asset and current liabilities. It is a measure of general liquidity &is most widely used to make analysis of short term financial position of a firm.

Current Ratio: Current Assets/Current Liabilities

Current ratio
4 3.5 3 2.5 2 1.5 1 0.5 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugar 0.83 1.02 0.68 2007 0.89 1.33 0.71 2008 0.9 1.98 0.51 2009 1.15 1.39 0.61 2010 0.71 3.53 0.73

Interpretation: Current ratio of Renuka sugar was 0.83% for the year 2006 which increased to 0.89% for the year 2007. The trend continued as the ratio increased to 0.90% in 2008 which again slightly increased in 2009 to 1.15. The ratio decreased in 2010 to 0.71%. Whereas Balrampur chini had the current ratio1.02 for the Year 2006, which increased to 1.33 for the year 2007. The ratio continued the trend for the year 2008 as well when the ratio was 1.98 and in 2009 it was 1.39 but in 2010 it is increased to 3.53.

The third industry Rajshree sugar had the current ratio as 0.68 for the year 2006 which went upto 0.71 in the year 2007.There was a sudden decline in the ratio in the year 2008 when the ratio was 0.51 after which the ratio continuously increased, from 0.51 to 0.61 in the year 2009 and to 0.73 in the year 2010.

Quick Ratio Quick Ratio establish the relationship Between quick or liquid Assets and Liabilities. An assets is liquid if it can converting in to cash immediately or reasonable soon without a loss of value. Cash is the most liquid asset other asset which are consider to be relatively liquid and include in quick asset are debtors and bills receivable and marketable securities.s Quick ratio: current assets-inventory/Current Liabilities

Quick ratio
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugar 1.16 0.57 0.34 2007 1.45 0.47 0.8 2008 1.15 0.64 0.43 2009 0.88 0.74 0.68 2010 0.42 0.82 0.78

Interpretation: The ideal ratio for industry is 1. And from above comparison it is evident that Renuka Sugar Quick ratio is looking better than that of other two till 2008. And after that due recession effect the quick ratio has fallen in 2009 and further in 2010 for Renuka industries which shows that this sugar company has still not come out from Recession effect. And Balrampur chini and Rajshree sugar since 2006 the quick ratio has not been met to Industry Ideal ratio.

Debt Equity Ratio Financial leverage ratios provide an indication of the long-term solvency of the firm. Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt. Debt-to-Equity Ratio = Total Debt Total Equity

Debt Equity Ratio

4 3 2 1 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugar 1.64 0.6 1.43 2007 1.98 1.49 2.14 2008 1.6 1.34 3.11 2009 1.04 0.82 3.44 2010 0.96 1.56 2.87

Interpretation: Renuka Sugars moderately depends on outsiders as the Debt Equity Ratio is 1.64% for the Year 2006 which went upto 1.98% for the year 2007 and then the ratio kept declining to 1.6 for the year 2008,1.04 for the year 2009 and 0.96 for the year 2010 respectively. As compared to Balrampur Chini which had their Debt Equity Ratio 0.60% for the Year 2006 which went up to 1.49% for the Year 2007.The company then saw the Debt equity ratio falling for 2 consecutive years, from 1.34 in the year 2008 to 0.82 in the year 2009. However for the Year 2010 the ratio increased to 1.56%. Rajshri Sugar is highly depended on Outsiders(Creditors) which can be interpreted from its figures which is 1.43%,2.14%,3.11%,3.44% and 2.87% for the years 2006,2007,2008,2009 and 2010 respectively.

Fixed Asset Turnover Ratio Fixed Asset Turnover Ratio is also known as The Investment Turnover Ratio. It is based on relationship between the Cost of Goods Sold and Assets/Investments of a Firm.

Fixed Asset Turnover Ratio= Cost of Goods Sold/Average Fixed Assets

Fixed assets turnover ratio

3.5 3 2.5 2 1.5 1 0.5 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugar 3.04 1.43 1.52 2007 1.31 0.67 2.02 2008 2.26 0.61 1.3 2009 1.59 0.72 0.7 2010 3.06 1.71 1.05

Interpretation: Fixed Asset Turnover ratio of Renuka Sugar Industry was 3.04% in the year 2006 which declined to 1.31% for the year 2007. The Ratio was 2.26% for the Year 2008 which decreased to 1.59% in the Year 2009 and then increased to 3.06% for the Year 2010. As compared to Balrampur Chini which initially in the year 2006 had the ratio 1.43% and since then showed a steady growth from 0.61% in the Year 2008 to 0.72% for the Year 2009 and again it increased to 1.71% for the Year 2010. When we compare it with Rajshree Sugars, the companys Fixed Asset Turnover

Ratio was 1.52% for the year 2006 which increased to 2.02% for the year 2007.The ratio then declined to 1.3% for the year 2008 which again decreased to almost half i.e.; 0.7% for the year 2009 and which then increased to 1.05% for the Year 2010.

Gross Profit Margin Ratio Profitability ratios offer several different measures of the success of the firm at generating profits. The gross profit margin is a measure of the gross profit earned on sales. The gross profit margin considers the firm's cost of goods sold, but does not include other costs. It is defined as follows: Gross Profit Margin = Sales - Cost of Goods Sold Sales

Gross Profit Margin

25 20 15 10 5 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugar 11.33 20.7 20.18 2007 14.33 0.81 11.11 2008 11.24 14.18 4.42 2009 14.03 20.35 16.76 2010 10.28 11.86 20.96

Interpretation: The Gross Profit Margin of Renuka Sugar Industry for the year 2006 was 11.33% which increased to 14.33% for the year 2007.The ratio then showed a sudden decline when it fell to 11.24% in the year 2008.And the very next year the ratio went up to 14.03% in the year 2009.Again the company saw a decline in the ratio when it was 10.28% in the year 2010.

When we compare with Balrampur Chini Industry, the company had the Gross Profit Margin standing at 20.7% in the year 2006 which suddenly saw a decline when the ratio went down to 0.81% in the year 2007. After this the ratio went up steadily from 14.18% in the year 2008 to 20.35 in the year 2010.There was again a decline in the ratio when it went down to 11.86% in the year 2010. The third industry Rajshree Sugars had the ratio 20.18% in the year 2006 which went down to 11.11% in the year 2007.Again in the next year i.e.2008 the ratio went down to 4.42% in the year 08.After the year 2008 the ratio steadily increased from 16.76% to 20.96 for the years 2009 and 2010 respectively.

Net Profit Margin Ratio: Net profit Margin is known as net margin. This measure the relationship between net profit and sales of a firm. Depending on the concept of net profit employed, this ratio can be computed in three ways:

Net profit ratio = Earning after interest and taxes (EAT) Net Sale

Net Profit Margin

30 25 20 15 10 5 0 -5 2006 Renuka Sugar Balrampur Chini Rajshree Sugars 6.44 15.16 11.9 2007 6.72 -3.01 5.87 2008 5.27 22.23 -1.41 2009 6.41 26.63 6.28 2010 7.43 17.61 8.19

Interpretation: The Net Profit Margin of Renuka Sugar Industry was 6.44% in the year 2006 which slightly increased to 6.72% for the year 2007.The ratio declined in the year 2008 to 5.27%.After the year 2008 the ratio showed improvement and increased to 6.41for the year 2009 and 7.43 for the year 2010. Whereas the Net Profit Margin of Balrampur Chini was 15.16 in the year 2006 which went drastically down to -3.01% in the year 2007.Since then

for the next 2 years the ratio increased to 22.23% and 26.63% for the years 2008 and 2009 respectively. However in the year 2010 the ratio again went down to 17.61%. When we compare with the Third Sugar Industry i.e. Rajshree Sugars, their Net Profit Margin ratio stood at 11.9% in the year 2006.Which drastically declined to 5.87 in the year 2007.The very next year 2008 the ratio went down to -1.41% .Since then the ratio has shown improvement, from 6.28 in the year 2009 it went to 8.19% in the year 2010.

Inventory Turnover Ratio Asset turnover ratios indicate of how efficiently the firm utilizes its assets. They sometimes are referred to as efficiency ratios, asset utilization ratios, or asset management ratios. Two commonly used asset turnover ratios are receivables turnover and inventory turnover. Inventory Turnover = Cost of Goods Sold Average Inventory

Inventory Turnover Ratio

16 14 12 10 8 6 4 2 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugar 7.69 14.75 2.58 2007 8.08 4.06 3.95 2008 12.77 3.14 4.19 2009 2.42 5.94 4.12 2010 5.19 2.05 3.5

Interpretation: Inventory turnover ratio of Renuka Sugar in Year 2006 was 7.69% which increased to 8.08 in the year 2007. The very next year the company saw a sharp increase in the ratio which went upto 12.77% for the year 2008. And the very next year the ratio decreases very rapidly to 2.42% in the Year 2009. While for the 2010 it stood at 5.19%. As compared to Balrampur Chini which had the ratio at 14.75% for the year 2006 which fell to 4.06% in the year 2007. Again in the next year 2008 the ratio declined to 3.14%. The company saw an upper ward trend

in the year 2009 where the ratio increased to 5.94. However in the next year i.e. 2010 the ratio again declined and stood at 2.05%. Rajshree Sugars had the ratio 2.58% in the year 2006 which gradually increased to 3.95% and 4.19% for the years 2007 and 2008 respectively. However in the next two consecutive years the ratio declined to 4.12% for the year 2009 and 3.5% for the year 2010 respectively. Overall the Inventory turnover Ratio of Renuka Sugar is at a better standing as compared to both the other companies.

Interest Coverage Ratio: This ratio shows the number of times the interest charges are covered by funds that are available for the payments.

Interest Coverage Ratio =

EBIT Interest Expenses

Interest Coverage Ratio

14 12 10 8 6 4 2 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugars 4.97 11.47 5.09 2007 5.34 0.44 2.96 2008 2.68 2.21 1.34 2009 3.46 3.3 2.39 2010 7.8 2.64 2.53

Interpretation: The Interest Coverage Ratio of Renuka Sugar is at a better condition as compared to other companies as the it was stable in the initial years i.e. 2006 & 2007. However it decreased in the year 2008 and then showed a good increase in the next two years.

Rajshree Sugars had a fluctuating Interest Coverage Ratio from the year 2006 to 2010.

Earning Price Ratios: this ratio is a summary measure which primarily reflects the following factors : Growth prospects Risks characteristics Share holder orientation Corporate image and The degree of liquidity.

Earning Price Ratio = M.P.S E.P.S

Earning Price Ratios

15 10 5 0 -5 -10 -15 -20 -25 2006 Renuka Sugar Balrampur Chini Rajshree Sugars 4 3.1 2.84 2007 6.47 -17.78 4.46 2008 6.65 10.43 -20.47 2009 8.66 5.62 5.24 2010 4.33 7.71 3.5

Interpretation: The Earning Price Ratio of all the 3 companies were fluctuating every year apart from Balrampur Chini and Rajshree Sugars. Both these companies had a negative EPR for the years 2007 & 2008 respectively.

Dividend per share : This ratio shows the earnings distributed to ordinary shareholders divided by the number of ordinary shares outstanding.

Dividend Per share Ratio = D.P.S. E.P.S

Dividend per share

6 5 4 3 2 1 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugars 2 3.5 5 2007 2 0 3.5 2008 0.2 0.5 0 2009 1 3 1 2010 1 0.75 3

Interpretation: The Dividend Per Share ratio of all the 3 industries were at a good condition in the year 2006 when we compare it with the rest of the years. However in the year 2007 Balrampur Chini did not had a good profit margin to declare dividends and similar condition was observed of Rajshree Sugars in the year 2008.

Return On Investment: The term investment may refer to total assets or net assets. It is the pool of finds supplied by the shareholders and the lenders.it is therefore more appropriately used for comparing the operating efficiency of firms.

Return on Investment =

EBIT Capital Employed

Return On Investment
30 25 20 15 10 5 0 2006 Renuka Sugar Balrampur Chini Rajshree Sugars 17.32 22.38 24.78 2007 1.44 0.97 15.47 2008 4.18 9.42 4.4 2009 12.4 3.16 12.06 2010 6.44 11.33 2.53

Interpretation:
From the above diagram we can conclude that the return on investment ratio of all the three industries has been fluctuating every year. In the year 2006 the Return On Investment Ratio of all the 3 industries were at a better condition when compared to the other years

CONCLUSION

While analyzing the Indian sugar industry, it was found that the Shri Renuka Sugar has better financial position than Balrampur chini Rajshree sugar industry. The data which I have collected for this project is secondary data. Secondary data was required for this project and analysis has been prepared basically through ratio analysis for the period of five years. Thus we observe that the Indian Sugar Industry has been facing some challenges but if effective steps are taken then it will surely help it to remain competitive in the future as well. As described above every part has been scheduled in such a manner so as to enable the reader to appreciate the contents easily. The report is supported by figures and data wherever necessary with view to assist the reader in developing a clear cut understanding of the topic.

BIBLIOGRAPHY

http://www.moneycontrol.com/financials/shreerenukasugars/balancesheet/SRS03 http://money.rediff.com/companies/shree-renuka-sugarsltd/11320019/balance-sheet http://www.moneycontrol.com/financials/rajshreesugarschemicals/balan ce-sheet/RSC http://www.moneycontrol.com/financials/rajshreesugarschemicals/balan ce-sheet/RSC http://www.moneycontrol.com/companyfacts/balrampurchinimills/history/BCM http://money.rediff.com/companies/rajshree-sugars-and-chemicalsltd/11080010/balance-sheet

Reference Book: Financial Management by M Y Khan P K Jain Financial Management by 10th Edition - I M PANDEY

Annual Report of last Five Years