G.S.F.C Financial Analysis (Gujarat State Fertilizers & Chemicals LTD.)

A
Project Report
On
Financial Analysis
Of
Prepared by:
Vivek Negandhi (08039)
IN PARTIAL FULFILLMENT OF PGDM PROGRAMME
TOLANI INSTITUTE OF MANAGEMENT STUDIES
TOLANI INSTITUTE OF MANAGEMENT STUDIES Page 1

ADIPUR - KACHCHH.
An
Summer Internship Report
On

DECLARATION
I Vivek Negandhi student of PGDM – 1St Year of Tolani Institute
Of Management Studies, Adipur – Kachchh hereby declare that this
report, which is my own work, has been carried out successfully.
This unit which I had visited was Large Scale, Joint Sector Holding
Company its name is Gujarat State Fertilizers & Chemicals Ltd.
situated at Moti Khavdi (Jamnagar). I undersigned this project and this
project report was not previously submitted to any other college.

Place: Adipur (Kachchh) (Mr. Vivek Negandhi)
Date: PGDM – 1st Year
PREFACE
Experience is the best teacher as solution of any problem is

concern. As a Student of Management, we must have enough practical
knowledge. This practical knowledge cannot be available to student in
classroom. So that field work is essential for achieving such practical
knowledge or experience.
As far as the rule of PGDM from the college recognized by
AICTE – NEW DELHI is concerned, it is compulsory for all the
Management Students to visit an Industry for Summer Training for 6 to 8
weeks. This visit is playing a crucial role to develop practical view points

of the students and also making them aware of the problems,
opportunities & situations of the Industrial unit.
I had visited Gujarat State Fertilizer & Chemical Ltd. at
Jamnagar (Sikka Unit). I tried my level best to collect information from
Finance Department of the company. The project report consists of
Financial Analysis of Gujarat State Fertilizer &Chemicals Ltd.
My basic aim behind undergone this training is to evaluate
applicability of different Financial Analysis in practice. This report
reflects the image that I observed and come to know during my visit at
this industry.
I hope this project will also receive its generous support and kind
encouragement.
ACKNOWLEDGEMENT
During the Industrial Training at Gujarat State Fertilizer &

Chemicals Ltd. and during the preparation of this report, I have received
help from many people.
I am extremely thankful to Mr. K. R. Gevaria Sir (Finance
H.O.D) at G.S.F.C. and Mr. Paresh R. Adhiya Sir (P & A Dept.) who
had helped us in showing me right direction during my project.
Words are insufficient to express my gratitude towards Mr. K. R.
Gevaria Sir, Mr. M. H. Gandhi Sir, Mr. D. V. Parikh Sir, Mr. P. M.
Gusani Sir, and Mr. Paresh Adhiya for their immense help and

invaluable guidance in conduction of this study from its conception to its
completion.
I am especially thankful Of Mr. G. S. Iyer Sir, Mr. A. M. Patel
Sir, Mr. R. I. Shaikh Sir, Mr. B. M. Kothari Sir, Mr. J. H.
Chaudhary Sir, Mr. Sitapara Sir, Mr. J. J. Dhruna Sir & Mr. R. H.
Joshi Sir for their guidance and help. And the whole staff of G.S.F.C.
who have been very co-operative to me during my visits to the Sikka
Unit.
I am also thankful to faculty members at Tolani Institute of
Management Studies, Adipur – Kachchh who all guided me in my
Summer Internship Programme.
Place: Adipur (Kachchh) (Mr. Vivek Negandhi)
INDEX
SR. NO. PARTICULARS PAGE NO
1. Executive Summary 07
2. Fertilizer Industry in India 09
3. Chemical Industry in India 14
4. G.S.F.C – Company Detail 17
5. Financial Analysis of G.S.F.C. 38
6. Ratio Analysis 50
7. Working Capital Management 79
8. Inventory Management 86
9. Other Graph of G.S.F.C. 101
10. Balance sheet 103
11. P & L Account 104
12. Financial Analysis of ten years 105
13. Appendix 106
14. Bibliography 107

EXECUTIVE SUMMARY
The Indian fertilizer industry with a capacity of 121 lakh MT of
Nitrogen and 56 lakh MT of Phosphatic nutrients is one of the largest in
the world and has over the years, played a significant role in the
development of agriculture in the country. Fertilizer consumption in India
is among the highest in the world, though we rank low in comparison to
most of developing and some of developed countries in terms of intensity
of consumption. The industry is dependent to a large extent on gas for
Urea production and Phosphoric acid for production of DAP and other
phosphatic fertilizers.
Fertilizer sector is a crucial for Indian economy because it provides
a very important input to agriculture. The fertilizer industry in India has
played a pivotal role in achieving self – sufficiency in food grains as well
as in rapid and sustained agriculture growth. India is the third largest
producer and consumer of fertilizers in the world after China and the
United States. The growth of the Indian fertilizer industry has been
largely determined by the policies pursued by the government.
The fertilizer sector in last few months has shown some upward
trend on the ground that government may come out with policies favoring
the sector which would provide boost to the companies in this sector. The
sector looks attractive as there can be unlimited opportunity to increase
the volumes to fulfill the gap between supply and demand.

The main issues confronting the fertilizer industry at present are
with regard to feedstock and the uncertain policy environment.
G.S.F.C. is one of the largest fertilizer manufacturing units in Asia,
which was incorporated under companies Act 1956, on 15th Feb, 1962.
G.S.F.C. was established with the objective of enhancing food production
in the state of Gujarat which was food deficit at the time.
G.S.F.C. has cordial & harmonious relations with their employees.
The Company appreciates the hard work put in by all the employees of
the Company. Presently there are 4,179 employees are on the roll of the
Company. Personnel &Administration Dept very effectively carries out
functions like recruitment, selection, training and development, welfare
activities, wage structure, trade union.
G.S.F.C. instant strive for products diversification on and value
addition has created an product mix ranging from more than 24 brands of
fertilizer to petrochemical, chemical, industrial gases, plastics, fibers and
other products. G.S.F.C. manufactures urea, ammonia & bio-fertilizers at
Vadodara in the State of Gujarat, on the Vadodara-Ahmedabad National
Highway G.S.F.C.’s distribution network is set of independent
organization involved in the process of making a product or service
available for use or consumption.
Finance and Account department of G.S.F.C can be described as
the life-blood of the company. This department very effectively carries
out financial functions like preparation of balance-sheet, profit and loss
account. Cash flow statement, financial planning, budgeting, bill passing.
Reaching Millions of G.S.F.C. Fertilizer to the farmer every year is
a great adventure done by logistic department. In logistic department in
G.S.F.C. carry out various operations i.e. packaging, branding inventory
control at factories, warehouses / storage place, transportation of material
by various modes arranging for warehouses at various places / trade

points supply of material at right time at right place and with minimum
cost.

FERTILIZER INDUSTRY IN INDIA
ABOUT FERTILIZER:
“Fertilizer is generally defined as "any material, organic or

inorganic, natural or synthetic, which supplies one or more of the
chemical elements required for the plant growth"
Sixteen elements are identified as essential elements for plant
growth, of which nine are required in macro quantities and seven in micro
quantities. They are Carbon, Oxygen, Hydrogen, Nitrogen, Phosphorus,
Potassium, Calcium, Magnesium, Sulphur, Boron, Chlorine, Copper,
Iron, Manganese, Molybdenum, and Zinc.
INDUSTRY HIGHLIGHTS:

India is the 3rd largest producer and consumer of fertilizers in
the world with an installed capacity of Nitrogen (N) and Phosphate (P)
nutrients at 14 million tons annually.
The Indian Fertilizer Industry is broadly divided into Nitrogenous,
Phosphatic and Potassic segments. In addition to these, nutrients are
combined to produce several complex fertilizers.
Urea, a nitrogenous type of fertilizer, is most widely consumed in
India. Currently the urea capacity is 20.2 million tons while
consumption is 21.7 million tones. The demand of urea is expected to
grow at a CAGR of 4 percent. Urea segment currently subsidized under
the Retention Price Scheme, with controls on distribution, to be
decontrolled by 2006. First phase of reform in this segment initiated
through a move towards Group Retention Scheme, as announced in
Financial Year 02 Budget.
The total production of phosphate in the country was 3.36
million tons per annum in FY00–a 6 percent increase over FY99. Main
phosphatic fertilizers produced in India are Di-Ammonium Phosphate
(DAP) and Single Super Phosphate (SSP).
Entire requirement of potassic fertilizers is imported. The
major potassic fertilizer consumed in the country is Muriate of Potash
(MOP).
Fertilizer production is highly energy intensive with cost of
feedstock and fuel alone accounting for between 55 to 80 per cent of the
cost of production. Plants in India are based primarily on three feedstock
Naphtha, Fuel oil/LSHS and Natural gas with a significant proportion
of domestic capacity of urea plants based on Naphtha or Fuel oil /LSHS
which cost more than natural gas. High cost feedstock and increased
production / consumption have caused a steady increase in fertilizer
subsidy.

INDUSTRY OVERVIEW:
Fertilizer sector is a very crucial for Indian economy because it

provides a very important input to agriculture. The fertilizer industry in
India has played a pivotal role in achieving self – sufficiency in food
grains as well as in rapid and sustained agriculture growth. India is the
third largest producer and consumer of fertilizers in the world after
China and the United States. The growth of the Indian fertilizer industry
has been largely determined by the policies pursued by the government.
The government exercised extensive controls on the pricing, distribution
and movement of fertilizers.
The industry is capital intensive and the production process energy
intensive with the combined cost of feedstock and fuel accounting for
anywhere between 55 and 80 per cent of cost of production, depending on
the type of fertilizers.
LANDMARKS IN INDIAN FERTILIZER INDUSTRY:
Year Landmarks
1906 Fertilizer Production Limited.
1943 Grow more food campaign launched in the wake of great

famine in Bengal.
1944 Central fertilizer pool created.
1947 Independent India’s emphasis in improving domestic

production of fertilizer.
1957 Fertilizer control order Enactment under essential

commodities Act (ECA) 1955
1964 The Government of India appointed Sivaraman Committee

to examine problems in fertilizer distribution.
1966 Inclusion of Private trade in marketing of fertilizer.

1971-72 The government of India brought control on distribution of
fertilizer in view of shortage after oil crisis.
1973 Fertilizer movement control order enacted.
1977 Retention price and subsidy scheme was introduced.
1980-81 Block delivery scheme introduced.
1992 Phosphatic and potassic fertilizer decontrolled.
2000-01 The total production of phosphate in the country was 3.36

million tons per annum in FY 00– 01 a 6 percent increase
over FY 99
2006-07 Growth in the consumption of fertilizers.
SOURCE : FERTILIZER NEWS, Krishi Jivan
RISING DEMAND FOR FERTILIZERS:
There has been significant growth in the consumption of fertilizers

in last three years due to overall good monsoon. The growth in NPK
consumption was 9.50% in 2004-05, 10.60 % in 2005-06 and 8.40%
per cent in 2006-07. It is expected to grow by at least by eight per cent
during 2007-08 in anticipation of good monsoon. Against the robust
growth in consumption, domestic fertilizer production has remained
range – bound in the last decades. Fertilizers output grew by a modest
6.50 per cent during 2006-07. The surge in fertilizers demand and
stagnant to modest increase in production has widened the gap between
consumption and production causing larger dependence on imports.
Therefore, the rising demand for fertilizers is providing ample
scope for the companies in this sector to increase their production
capacity and volumes thereby, driving the growth of fertilizer sector.
FUTURE OUTLOOK OF FERTILIZER INDUSTRY:

The fertilizer sector in last few months has shown some upward
trend on the ground that government may come out with policies favoring
the sector which would provide boost to the companies in this sector. The
sector looks attractive as there can be unlimited opportunity to increase
the volumes to fulfill the gap between supply and demand. The
companies with huge capex plans are in queue just waiting for the node
of DoF, and once the sector gets ground clearance from DoF than we can
see new highs for this sector as whole.
Therefore, we are bullish on the sector with the time horizon of 1-2 years
and expect that sector would outperform the broad market in coming
years.

CHEMICAL INDUSTRY IN INDIA:
Market Overview:
The chemicals industry is diverse and heterogeneous comprising

several sectors that are largely unrelated to one another.
The key sectors that make up the industry are:
Petrochemicals
In 2004, global chemicals sales were estimated at US$ 2208
billion. EU 25 is the leading chemicals producing area in the world, with
an output of US$ 728 billion, followed by Asia and USA. Taken together,
these three regions account for about 85 per cent of the world’s turnover.
The chemicals industry, being one of the oldest knowledge/technology-

based industries in the world and requiring huge capital and power for
production, plays an important role in the overall economic development
of a country. It is also one of the most diversified of all industrial sectors
covering a large number of commercial products.
The chemical industry has been one of the fastest growing
industries in India and it occupies a very important position in the
national economy. India ranks 12th in the world for production of
chemicals by volume. India’s chemicals industry contributes about 3 per
cent to the nation’s Gross Domestic Product (GDP). The industry has a
turnover of about US$ 30 billion, and accounts for about 14 per cent in
the general Index of Industrial Production (IIP) and 17.6 per cent in the
manufacturing sector. It also accounts for about 13-14 per cent of total
exports and 8-9 per cent of total imports of the country. The industry is
mostly concentrated in western India, which accounts for 45-50 per cent
of the total industry size.
The Indian chemicals industry comprises both small and large-
scale units. While the fiscal concessions granted to the small sector in
mid-eighties led to the establishment of a large number of units in the
Small Scale Industries (SSI) sector, the industry is currently in the midst
of major restructuring and consolidation. With the shift in emphasis on
product innovation, branch building and environmental friendliness, this
industry is increasingly moving towards greater customer orientation.
INDIA HAS KEY STRENGTHS TO ASSIST CHEMICALS SECTOR
GROWTH:
India’s unique strengths that can be leveraged for growth of the
chemicals Industry can be summarized under the following heads:
➢ Low cost, technically trained manpower.
➢ Large domestic markets, with good potential for growth.
➢ Presence of supporting industries.
➢ Supportive Government policies.

G.S.F.C. – INTRODUCTION
“G.S.F.C. -Gujarat's Pride - Nation's Strength”

The facet of care can be expressed in thought and action. And since
its beginning, in 1962, GSFC has consistently translated the facet of care
in its every activity. Unfolding before you is the epic of the Gujarat State
Fertilizers & Chemicals Ltd, an organization, in the annals of Indian
Corporate history, founded on the single minded principle of offering the
best to the customer.
GSFC is taking its philosophy of care and extending it to every
facet of its existence, employees, suppliers, services, society and even the
environment.

In offering its care to an even larger section of society, GSFC has
transcended the boundaries of the ordinary to be able to truly fulfill its
goal of being “Back to India’s progress”.
Initially with the quality structure, comprising of 49% of State
Government participation and 51% of Public and Financial Institutions,
today the Government’s involvement has come down to 37.84% as on
31st March 2009.
As an organization formed for supporting the farmers, GSFC’s
every act revolves around the avowed goal of “Not only selling
fertilizers, but also offering happiness.” Translating this belief has been
the constant standard that its every act must measure Upto.
G.S.F.C. – HISTORY
1967 –The Genesis
Translating G.S.F.C.'s philosophy is its vast network of plants that

make its possible. This infrastructure took its first step in 1967 with the
setting up of 6 plants with an initial investment of Rs. 40 Crore.
These six nitrogenous and phosphatic fertilizer plants started production
of:
➢ Ammonia
➢ Urea
➢ Ammonia Sulphate (AS)
➢ Di-ammonium Phosphate(DAP)
➢ Sulphuric Acid
➢ Phosphoric Acid
1969 – First Expansion
The expansion of Ammonia and Urea production began with Phase

II in 1969 and an investment of Rs. 23 Crore. Was made to meet the
increasing demand for Nitrogenous fertilizers.
1974 - Phase III
Phase III began in 1974 when diversification of products occurred.

Plants to manufacture Caprolactam, Melamine, Nylon-6, Oleum - SO2
and OXO - Synthesis Gas unit and Purge Gas Recovery Unit were set up.
With Phase III, G.S.F.C. became India's first & only Melamine producer.
This provided the boost for further diversification to Nylons / Fibers /
Melamine / MEK-Oxime and industrial gases like Argon Gas & Oxon
Synthesis Gas.
1989 - Further expansion and diversification
Three Co-generation units using LSHS and Natural Gas were set
up. Also further expansion of Ammonia and Caprolactam production was
initiated. Diversification into Fibers, Nylons, and Acrylic was completed
and a DAP plant was also set up.
This extensive diversification and expansion drive has been fuelled
by G.S.F.C.'s compelling need to ensure full utilization of available
resources while also maintaining its profitability and leadership status.

G.S.F.C. – VISION & MISSION
Vision
“To emerge as a world- class, multi-

product, eco-friendly global company through technological
development, innovation and customer satisfaction and thereby to
contribute to the welfare of society.”
Mission
➢ To provide quality inputs and services to agriculture and industry

at competitive prices and thereby improving quality of life of the
people.

➢ To achieve excellence through creativity, innovation and services
to the society.
Values
➢ Strong Commitment towards clean environment and social

services.
➢ Hard work, Discipline, Integrity, Honesty, Dedication, Mutual
respect and Transparency.
➢ Strong commitment to quality of products and customer services.
➢ Promotion of creativity and professionalism through HRD.
G.S.F.C. – COMPANY PROFILE
Name of Company : Gujarat State Fertilizer &

Chemicals Ltd.
Old Name of Company : Gujarat State Fertilizer Company Ltd.
Organization Structure : Joint Sector Holding
Registered Office & Factory : Sikka Unit,
(SIKKAUNIT) Moti Khavdi,
Jamnagar - 361140, Gujarat – India.
Registered Office & Factory : Baroda Unit,
(BARODA UNIT) P. O Fertilizernagar,
Vadodra – 391750, Gujarat.
Registrar & : M C S Limited,
Share Transfer Agent 88, Neelam Apartments,
Samptrao Colony,
Above Chhappan Bhog,
Vadodra - 390007, Gujarat.
Phone : 0265 - 2242051, 2242451, 2242651,

2242751.
Fax : 0265 - 2240966, 2240119
E – Mail : vdnanavaty@gsfcltd.com
Website : www.gsfclimited.com
Listings : BSE, NSE
BSE Code : 500690
NSE Code : GSFCEQ
Employees : 102 – Officer (Sikka Unit)
228 – Staff (Sikka Unit)
25 – Apprentice (Sikka Unit)
G.S.F.C. – PROMOTERS & BORD OF DIRECTORS
Who are Promoters?
Person who had the idea to the establish company, those who
make the pre-preparation for it and take personal responsibility for it are
called Promoters. Promoters, brings a company into existence on their
own imagination, they find out new business opportunities, examine
their feasibility and if found practical, they establish a company through
proper co-ordination of the required capital, materials and manpower.
BOARD OF DIRECTORS:
Mr. D Rajagopalan, IAS (CHAIRMAN)
Mr. D.C. Anjaria (DIRECTOR)

Prof. Vasant P. Gandhi (DIRECTOR)
Mr. Ajay N. Shah (DIRECTOR)
Mr. Vijai Kapoor (DIRECTOR)
Mr. P.N. Roy Chowdhury, IAS (DIRECTOR)
Mr. S. Jagadeesan, IAS (DIRECTOR)
Mr. Haribhai V Patel, IAS (MANAGING DIRECTOR)

SPECIAL DIRECTOR:
➢ Mr. C. R. Rao (SPECIAL DIRECTOR)

EXECUTIVE DIRECTOR:
➢ Mr. D. M. Butala (EXECUTIVE DIRECTOR)

➢ Mr. V. N. Buch (EXECUTIVE DIRECTOR)
➢ Mr. G.M. Patel (EXECUTIVE DIRECTOR)
➢ Mr. H. P. Pandya (EXECUTIVE DIRECTOR)
GENERAL MANAGER (FINANCE):
➢ Mr. B. M. Bhorania G. M. (FINANCE)

COMPANY SECRETARY:
➢ Mr. V. V. Vachhrajani COMPANY SECRETARY

STATUTORY AUDITORS:
➢ M/s. S. C. Bapna & Associates, Vadodara

BRANCH AUDITORS: (Polymers & Fibre Units for 2008-09)
➢ M/s. Parikh Mehta & Associates, Vadodara
COST AUDITORS:
➢ M/s. R. K. Patel & Co., Vadodara

BANKERS:
Bank of Baroda State Bank of India
Bank of India Vijaya Bank
Dena Bank Central Bank of India
Indian Bank Indian Overseas Bank
ICICI Bank Ltd. Punjab National Bank
Yes Bank Ltd. Axis Bank Ltd.

REGISTRAR & SHARE TRANSFER AGENT:
M C S Limited,
88, Neelam Apartments,
Samptrao Colony,

Above Chhappan Bhog,
Vadodra - 390007, Gujarat.
GSFC – FORM OF ORGANISATION:

FORM OF ORGANISATION
(ON THE BASIS OF OWNERSHIP)
PRIVATE SECTOR PUBLIC SECTOR JOINT SECTOR

SOLE–PROPIRIETOR DEPARTMENTAL ORG. MNC
PARTNERSHIP PUBLIC CORPORATION (MULTINATIONAL
JOINT STOCK CO. GOVT. COMPANY COMPAINES)
CO. – OPERATIVE
➢ PRIVATE SECTOR
The units owned and managed by the individuals come under this
sector.
➢ PUBLIC SECTOR
The units owned and managed by the government come under this
sector.
➢ JOINT SECTOR
The units that are the joint venture of the government and the
individuals come under this sector.
G.S.F.C. belongs to Joint Venture Unit.
“INDIA’S FIRST JOINT SECTOR INDUSTRIAL COMPLEX”
G.S.F.C. - A JOINT VENTURE UNIT.

➢ 49% of State Government participation
➢ 51% of Public and Financial Institutions
Today,
➢ The Government’s involvement has come down to 37.84% as on 31st
March 2009.
GSFC – SIZE OF THE ORGANISATION:
There are three types of Organization as shown below:
G.S.F.C.’s total investment touches Rs. 221 Crores and the

production Capacity is Lakhs M.T. per year so it is considered to be the
LARGE SCALE INDUSTRY, because its total investment in the
Business is more than 100 Crores.
Promoters Holding 37.84%
Non Promoters Holding
➢ Institutional Investors 28.95%

➢ Other Investors 15.13%
➢ General Public 18.08%
L ARG E
TOTAL 100.00%
As investment of the company for 2008 was 221 Crores which was
much higher than 100 Crores. So it is called “Large Scale Industry”.
TOLANI INSTITUTE OF MANAGEMENT STUDIES

IND U Page 27
GSFC – PLANT LOCATION:
The location means that place where factory and industry are
established. The location of an industry refers its surrounding situations
and the area. The location factors play a very vital role into the success of
an industry.
Availability of raw materials
Facility of transportation
Availability of labors
Natural climatic condition
Safety maximization
The location of GSFC (Sikka Unit) is in Moti Khavdi, Jamnagar

(Gujarat). The facilities of Telephone, Banking, Electronics, Transport etc
are getting from this surrounding & area is an industrial hub nearby only
two big refineries are placed Reliance Refinery & Essar, Company also
has its own JETTY which is 8 to 10 km away from Plant. GSFC Sikka
unit is on Jamnagar – Dwarika highway and the nearest broad-gage
railway station is on Jamnagar-Sikka section of Western Railway.
Thus, are concluding that at present GSFC is at its optimum
location. The DAP (Di – Ammonium Phosphate) is made at the
manufacturing unit of GSFC (SU), at Jamnagar.
The main plants of GSFC are located at,
➢ Main Plant : Fertilizernagar, Vadodara
➢ Polymer Unit : Nandesari, Vadodara district
➢ Sikka Unit : Moti Khavdi, Jamnagar district
➢ Fiber Unit : Kuwarada, Surat district

GSFC – JOINT VENTURES:
GNFC - Gujarat Narmada Valley Fertilizers Company
Gujarat Narmada Valley Fertilizers Company Limited is basically

a joint sector company, with GSFC and Gujarat Government, holding
26% and 25% of the share Capital, respectively. GNFC is the largest fuel-
based Ammonia plant and was the first largest single stream Urea plant in
the world when commissioned.
This project was set-up at Bharuch in the industrially-backward
area with an investment of Rs.445 Crores and now it has become the
largest complex among other industries by major diversification not only
in fertilizers, but also in industrial products.
GIPCL – Gujarat Industries Power Company Limited
GSFC has also promoted Gujarat Industries Power Company Ltd.

(GIPCL) which is the one of the leaders in Power Sector by its
performance.
GGRC -- Gujarat Green Revolution Company Limited
GAPC jointly promoted by GSFC, GAIC & GNFC was in

existence since 1999 and undertaking production of Banana Tissue
Culture Plants and also maintaining farm at Dakor. Board of Directors of
GAPC decided to rename this Company as Gujarat Green Revolution
Company Limited (GGRC) and modify article of association so that
business of Micro Irrigation System could be taken up.
GILC – GSFC Investment and Leasing Company Limited
Now merged with GSFC

Polymer Corporation of India Ltd. Now GSFC-POLYMER
UNIT
GSFC LTD – POLYMERS UNIT (PU), erstwhile Polymers
Corporation of Gujarat Ltd. a GIIC sponsored Company was established
in the year 1973 and subsequently in the year 1985 amalgamation took
place with GSFC Ltd. Since then it is unit of Gujarat State Fertilizers &
Chemicals Ltd. GSFC-PU is located in the PCC Notified Area near
Ranoli Village, Dist. Vadodara. Technical know-how is from world
renowned M/s Mitsubishi Rayon Company, Japan.
Gujarat Nylons Limited now GSFC - FIBER UNIT

GSFC – PEER GROUP COMPANIES:
COMPETITORS DETAIL
OF
G.S.F.C. [GUJARAT STATE FERTILIZER & CHEMICALS LTD.]
Company Name BSE Code NSE Code
Basant Agro Tech (India) Ltd. 524687

Belsund Sugar & Industries Ltd.
Chambal Fertilizers & Chemicals Ltd. 500085 CHAMBLFERTEQ
Coromandel Fertilizers Ltd. 506395 COROMNFERTEQ
Deepak Fertilizers & Petrochemicals Corp. Ltd. 500645 DEEPAKFERTEQ
Fertilizers and Chemicals Travancore Ltd. 590024 FACTEQ
Godavari Fertilizers and Chemicals Ltd. 590026 GODAVRFERTEQ
Gujarat Narmada Valley Fertilizers Company
500670 GNFCEQ
Ltd.
Gujarat State Fertilizer & Chemicals Ltd. 500690 GSFCEQ
M P Agro Industries Ltd. 506543 MPAGROFERTBE
Madras Fertilizers Ltd. 532168 MADRASFERTEQ
Mangalore Chemicals & Fertilizers Ltd. 530011 MANGCHEFEREQ
Nagarjuna Fertilizers & Chemicals Ltd. 500075 NAGARFERTEQ
National Fertilizers Ltd. 523630 NFLEQ
Oswal Chemicals & Fertilizers Ltd. 500063 BINDALAGROEQ
Rashtriya Chemicals & Fertilizers Ltd. 524230 RCFEQ
Southern Petrochemicals Industries Corp. Ltd 590030 SPICEQ
Zuari Industries Ltd 500780 ZUARIAGROEQ
GSFC – AWARDS & CERTIFICATES:

Year Name of Award Award Issued By / For
GSFC bags National Award for Excellence By the Honorable Minister of Corporate
2007
in Cost Management for 2006 Affairs
National Award for one of the best By Ministry of Social Justice and
2006
employers for disabled persons Empowerment, New Delhi
FAI video film competition Award for
increased in Fertilizer use efficiency through
By Fertilizer Association of India-New
2006 micro irrigation system to GGRC (a
Delhi.
company jointly promoted by GSFC, GAIC
& GNFC)
Award for Production, Promotion & By Fertilizer Association of India-New
2006
Marketing of Bio-fertilizers Delhi.
Best Production Performance Award for By Fertilizer Association of India-New
2006
Complex (P2O5) Fertilizer Plant Delhi.
ICWAI National Award for Excellence in By Institute of Cost & Works Accountants
2005
Cost Management-2005 of India.
By Fertilizer Association of India-New
2004 Important in Overall Performance-2004
Delhi.
Production, Promotion & Marketing of Bio- By Fertilizer Association of India-New
2003
fertilizer-2003 Delhi.
For Manufacture and Marketing of
Caprolactam (Flakes & Crystals),
Melamine, Nylon-6, Sulphuric Acid,
2002 ISO 90012000 in 2002
Oleum, Ammonia, Argon, Carbon Di-
oxide, Urea, MEK-Oxime and other
associated utilities and offsite
British Safety Council awarded this for
maintaining a good record, which was
1998 National Safety Award 1998
significantly better than the national
average.
Best Performance in Production,
Promotion and Marketing of Bio-Fertilizer
1998 FAI Award 1998
and was identical as "Ideal Model Unit" by
Government of India and FAI
Best Product and Productivity Gold Award
1998 JNMN Award 1997-98 from Jawaharlal Nehru Memorial National
Award
1997 FAI Award Best performance in Biofertilizer
1997 NPC Award 1996-97 Best performance in Fertilizer Industries
1997 FAI Award 1996-97 Best Phosphatic Fertilizer
For Production and performance for
1997 FAI Runners up Award 1996-97 Nitrogenous group of plants (Ammonia,
Urea Plants).

Moreover, several trophies and shields have also been awarded
every year at state and related-level competition shows on Horticulture,
Vegetables, Fruits and Flowers at different places.
GSFC has also received
➢ 40 States
➢ 12 National
➢ 18 International Safety Awards
GSFC – QUALITY, ENVIRONMENT, HEALTH & SAFETY POLICY

GSFC – SOCIAL RESPONSIBILITY:

As a socially responsible Corporate, GSFC undertake various
programmes for the socially under-privileged. Since located within the
vicinity of urban community, various social activities for urban sector are
undertaken.
Health being a vital factor, GSFC conducts various medical camps
in nearby villages like eye check-up camps, blood donation camps,

etc.
For providing drinking water, GSFC has build up many overhead
tanks and water connections for nearby villages.

GSFC has put street lights on village roads and has constructed bus-
stand and other facilities for nearby villages.

GSFC has constructed school & college buildings, donated funds for
library facility to the rural youth & encourages young children for
primary schooling.
GSFC organizes various sports camps to focus on individual talent
and foster greater camaraderie. GSFC also has job facility on sports
quota for upcoming youth talents.
In order to create healthy environment, GSFC educates youth about
the environment and safety measures & cleanliness.

Helping rural families remain self-reliant, GSFC has spearheaded
Biogas as an alternative energy source and has installed over 22000

Biogas plants.
Ensuring better value for money, GSFC constantly gears itself
towards boosting crop productivity and recreating the Green

Revolution in Gujarat.

As a responsible corporate, GSFC continue donating towards Chief
Minister’s Relief Fund for natural calamities.

GSFC can proudly claim to have the highest safety level and the
lowest pollution level amongst similar Industries.

GSFC has promoted many gardens circles and assisted Barodians in
maintenance of common infrastructure.

INTRODUCTION
The Finance department is a very important division in any
organization and is generally it is described as eyes and ears of the
Management. The financial management is not only limited to accounting
of transactions and preparation of statements of accounts but it is also a
tool of control over the various functions of organization such as
marketing, project management, export pricing, purchase of materials &
services etc.
For achieving the financial discipline and efficiency in the
organization, the finance department has to see that the internal controls,
systems and procedures of the department are well set in such a way that
only there is co-ordination between the various departments but also there
is effective cost control so as to bring about higher returns on the
investments.
FINANCIAL STRATEGIES
To achieve sufficient internal generation of resources for financing
partly/wholly expenditure on new capital projects and to develop self

financing system.
To develop long term corporate plan for providing adequate growth
of the activities of the Company.

To manage the money, men and materials in the most effective and
efficient manner.
To ensure optimum economy in expenditure.
To ensure adequate return on the equity capital and to better year by
year, net worth of shares.

HEAD OF THE FINANCE DEPARTMENT (SU)

SR. NO. NAME DESIGNATION
1. SHRI. K. R. GEVARIA SENIOR MANAGER (FINANCE)
2. SHRI. D. V. PARIKH MANAGER (ACCOUNTS)
3. SHRI P. M. GUSANI ACCOUNTS OFFICER
ORGANIZATION CHART OF FINANCE DEPARTMENT
H. O. D.
Mr. K. R. G.
MANAGER ACC. OFFICER

Mr. D. V. P. Mr. P. M. G.
Sr. Sup. Sr. Sup. Sr. Sup. Sr. Sup. Jr. Acc. Sr. Sup. Sr. Sup. Sr. Sup. Sr. Sup.
Acc. Acc. Acc. Acc. K. A. D. Acc. Acc. Acc. Acc.
G. S. I. R. I. S. P. D. R. N. G. R. B. M. K. A. M. P. B. M. S. J. H. C.
Sr. Acc. Sr. Acc.

A. H. J. J. A. D.
KEY OFFICIALS OF THE FINANCE DEPARTMENT (SU)

H.O.D. : K. R. Gevaria
Manager : D. V. Parikh
Account officer : P. M. Gusani
Sr. Sup. Accountant : G. S. Iyer
Sr. Sup. Accountant : R. I. Shaikh
Sr. Sup. Accountant : N. G. Rijiya
Sr. Sup. Accountant : P. D. Rindani
Sr. Sup. Accountant : B. M. Kothari
Sr. Sup. Accountant : A. M. Patel
Sr. Sup. Accountant : B. M. Sonagra
Sr. Sup. Accountant : J. H. Chaudhary
Sr. Accountant : A. H. Jadeja
Sr. Accountant : J. A. Dave
Jr. Accountant : K. A. Dave

CAPITAL STRUCTURE
“Capital structure of a company refers to the make-up of its capitalization”

That is the type of securities to be issued and the relative
proportion of each type of security in the total capitalization. It includes
all long term debts, preference share capital and shareholders fund.
Capital Structure : Long term debts + Preference Share Capital

+ Equity Share Capital + Reserves
GUJARAT STATE FERTILIZER CAPITAL STRUCTURE
From To Class Of Authorized Issued Paid Up Paid Up Paid Up

Year Year Share Capital Capital Shares Face Capital
(Crores) (Crores) (NoS) Value (Crores)
2007 2008 Equity Share 200.00 79.82 79695506 10 79.70
2006 2007 Equity Share 200.00 79.82 79695506 10 79.70
2005 2006 Equity Share 200.00 79.82 79695506 10 79.70
2004 2005 Equity Share 200.00 79.82 79695506 10 79.70
2003 2004 Equity Share 200.00 79.82 79695506 10 79.70
2002 2003 Equity Share 200.00 79.82 79695506 10 79.70
2001 2002 Equity Share 200.00 79.82 79695506 10 79.70
2000 2001 Equity Share 200.00 79.82 79813937 10 79.81
SHARE HOLDING PATTERNS

OWNEDCA
Share Holding Pattern of G.S.F.C. as on 31/03/2009 on basis of
Promoter’s Holding & Non-Promoters holding.
GUJARAT STATE FERTILIZER SHARE HOLDING PATTERN
Share Holding Pattern as

31/03/2009 31/12/2008 30/09/2008
on :
Face Value 10.00 10.00 10.00
%
No. Of % No. Of % No. Of
Holdin
Shares Holding Shares Holding Shares
g
PROMOTER'S HOLDING
Indian Promoters 30159981 37.84 30159981 37.84 30159981 37.84
Sub Total 30159981 37.84 30159981 37.84 30159981 37.84
NON PROMOTER'S HOLDING
Institutional Investors
Mutual Funds and UTI 8637226 10.84 8665680 10.87 9101314 11.42
Banks Fin. Inst. and
10620146 13.33 11069132 13.89 10396225 13.04
Insurance
FII's 3810575 4.78 3834143 4.81 4692635 5.89
Sub Total 23067947 28.95 23568955 29.57 24190174 30.35
Other Investors
Private Corporate Bodies 10702446 13.43 10728356 13.46 11657616 14.63
NRI's/OCB's/Foreign Others 432445 0.54 428543 0.54 338063 0.42
Directors/Employees 551 0.00 290 0.00 290 0.00
Others 923181 1.16 1515320 1.90 1493684 1.87
Sub Total 12058623 15.13 12672509 15.90 13489653 16.93
General Public 14408955 18.08 13294061 16.68 11855698 14.88
GRAND TOTAL 79695506 100.00 79695506 100.00 79695506 100.00
INVESTORS RETURN & DIVIDEND DETAIL
GUJARAT STATE FERTILIZER INVESTOR RETURNS
Rights Announcements
Year Ratio Ex Right Date

1996 1:5 6 / 5 / 1996
1992 1:10 16 / 7 / 1992
Bonus Announcements

Year Ratio Ex Bonus Date
1990 3:10 7 / 1 / 1991
1987 3:10 Nil
1984 1:4 Nil
1980 1:3 Nil
1975 1:3 Nil
Dividend Details
Year Dividend (%)

2008 45
2007 45
2006 45
2005 15
2004 0
2003 0
2002 0
2001 0
Promoters are planning to give dividend of 45% for 2008 – 09 year

data as per www.religareonline.com
INSURANCE SECTION
Policy taken by the Company G.S.F.C.:

Mega Turnover Policy : Fire Risk, Break down etc.
Group Personal Accident Policy : Staff & Officer
Marine Policy : Stocks, Stores inland
Foreign P & Ammonia (Insp.)

P – Morocco
Tunisia
South Africa
Ammonia – Saudi – Arabia

Vehicle policy as per motor insurance Act – Vehicle of Co.
Loss of Profit : by Natural Circumstances etc.
Public liability Policy : For Pension of Employee
Cash in Safe : Building, Goodwill
Cash in transaction : Project Financing etc.
Generally all Main policy are been paid by company head

office Baroda only other department policy are been handled by
different unit.
ESTABLISHMENT SECTION
Period of Settlement:
It is agreed by and between the parties that the pay – revision and
revision in other in other allowances and benefits granted vide office
orders GM(p)/IR dated 2-08-2005 and GM(p)/382 dated 11-10-2005 for
the period from 01-11-2004 to 31-10-2008 and the benefits thereof have
already been paid to all eligible employees, gets settled as full and final
settlement for the aforesaid period i.e. for the period from 01-11-2004 to
31-10-2008 and the union and / or employees shall not raise any dispute /
demand / litigation involving directly or indirectly any financial burden
for the said period.

Pay – Scales:
The demand of the union with regard to revision of pay – scale of

each grade is settled as under:
Executive from 01-11-2008:
Grade Existing Scale Revised Scale
S – 10 5550-235-7900-280-13500 7880-330-11180-400-19180
S–9 4900-185-6750-235-11450 6960-260-9560-330-16160
S–8 4385-140-5785-185-9485 6225-190-8125-260-13325
S–7 3835-100-4835-140-7635 5445-145-6895-190-10695
S–6 3290-90-4190-100-6190 4670-125-5920-145-8820
S–5 2740-70-3440-90-5240 3890-100-4890-125-7390
S–4 2465-55-3015-70-4415 3500-75-4250-100-6250
S–3 2055-50-2555-55-3655 2920-70-3620-75-5120
S–2 1645-40-2045-50-3045 2330-55-2880-70-4280
S–1 1150-27-1420-40-2220 1630-40-2030-55-3130
Fixation formula:
Rise of 40% in Basic pay and personal pay drawn by an employee

as on 31/10/2008 will be given. The new basic so arrived will be fixed in
the revised pay scale. In case, new basic does not fit in the incremental
stage of the respective scale, then the new basic will be fixed at the
immediate lower stage of the respective scale and the difference between
the revised basic pay and the amount at the immediate lower stage will be
considered as his/her personal pay.
Dearness Allowance:
The revised slab of Basic pay for the payment of Dearness

Allowance effective from 01-11-2008 shall be as hereunder:
Revised slab of Basic pay Dearness Allowances as on 01-11-2008

Upto Rs. 4661 Rs. 7483/-
Rs. 4662 to Rs. 5159 Rs. 7518/-
Rs. 5160 to Rs. 5453 Rs. 7538/-
Rs. 5454 to Rs. 6136 Rs. 7568/-
Rs. 6137 and above Rs. 7603/-
Both the parties agree that this settles wholly and completely the
demand pertaining to Dearness Allowance.
Allowances and Benefits Recommended for Employees of Sikka Unit – Staff

Particulars Present Allowance Allowances/Benefit
Benefit at GSFC-SU Recommended at GSFC
Basic Pay 40% Rise in Present pay
fixation will be made in
the scale.
ALLOWANCES
Dearness Allowance Rs. 9 per 3 points No Change
House Rent Allowance 27% & 29.5% No Change

Washing Rs. 240 Rs. 400
Vehicle Allowance
Grade S-10/S-9/S-8 Rs. 1340 Rs. 1800
S-7/S-6 Rs. 960 Rs. 1290
S-5/S-4 Rs. 655 Rs. 880
Cycle Rs. 390 Rs. 525
Education Rs. 105 Rs. 120
Canteen Coupon Rs. 975 Rs. 1450
Shift
1st & 2nd Shift Rs. 17 Rs. 40
3rd Shift Rs. 33 Rs. 80
Hazardous

Inside Battery limit Rs. 102 Rs. 120
Outside Battery limit Rs. 36 Rs. 45
CCA
A Rs. 220 No Change
B1 Rs. 210 No Change
B2 Rs. 55 No Change
Medical on Declaration
Colony Rs. 3910 Rs.4025 Rs. 4530 Rs. 4660
Other than Colony Rs. 4025 Rs. 4140 Rs. 4660 Rs. 4800
Safari – p.a. Rs. 950 Rs. 1200
Stitching Charges - Uniform Rs. 840 Rs. 1000
Long Service Award
20 yrs. 300 Gms Sliver No Change
30 yrs. 500 Gms Sliver No Change
Family Planning Incentives
After 1st Child Rs. 3000 No Change
After 2nd Child Rs. 2000 No Change
Adhoc Allowance Employee - wise 10% Rise in present
Different Allowance
Tea Making Allowance Rs. 110 No Change
Hardship (SST) Rs. 110 No Change
Cash Handling Allowance Rs. 275 No Change
Funeral Expenses Rs. 2000 Rs. 2500
Leave Travel Concession 2 Month Salary No Change
Loan & Advances
OYOH Bulk Rs. 3.50 Lakhs Rs. 10 Lakhs
OYOH Anywhere in India Rs. 1.75 Lakhs Rs. 7.5 Lakhs
OYOH Addl. Rs. 75000 Rs. 2.5 Lakhs
Const/Renovation
Vehicle
Motor Cycle Rs. 40000 Rs. 50000
Scooter Rs. 25000 Rs. 35000
Moped Rs. 14000 Rs. 25000
Cycle Rs. 1500 Rs. 2000
Food grain Rs. 3000 Rs. 5000
Festival Rs. 1250 Rs. 2500
Marriage 7 Month Salary – 1 Lakh No Change
Education Nil Rs. 100000 @ 7% Int.

INTRODUCTION TO RATIO ANALYSIS
The information given in the Financial Statements serves no useful

purpose unless it is interpreted and analyzed in some comparable terms.
The Ratio Analysis is one of the tools in the hands of those who want to
know more from the Financial Statement. Ratio Analysis is the process of
determining & presenting in arithmetical terms the relationship between
figures and groups of figures drawn from these statements.
Ratio is mathematical expression of the relationship between only
two accounting figures.
It may be expressed as a percentage or as a rate (No of Items) or as
a pure ratio.
Ratio analysis is a powerful tool of Financial Analysis. In Financial
Analysis, ratio is used as a Benchmark for evaluating the Financial
Position and performance of a firm the relationship between two
accounting figures expressed mathematically, is known as Ratio Analysis.
Ratio helps to summarize large quantities of financial data and to make
qualitative judgments about the firm’s financial performance.
DEFINATION
A ratio is simple arithmetical expression of the relationship of one
number to another. It may be defined as the indicated quotient of two
mathematical expressions.
According to Accountant’s Handbook by Wixon, Kell and

Bedford, “A ratio is an expression of the quantitative relationship
between two numbers”.
RATIO ANALYSIS

Ratio analysis is the process of determining and presenting the
relationship of items and group of items in the statements. According to
Batty J. Management Accounting “Ratio can assist management in its
basic functions of forecasting, planning coordination, control and
communication”.
It is helpful to know about the liquidity, solvency, capital structure

and profitability of an organization. It is helpful tool to aid in applying
judgment, otherwise complex situations.
Ratio may be expressed in the following three ways:
Pure Ratio or Simple Ratio:
It is expressed by the simple division of one number by another.

For example, if the current assets of a business are Rs. 200000 and its
current liabilities are Rs. 100000, the ratio of ‘Current assets to current
liabilities’ will be 2:1.
‘Rate’ or ‘So Many Times:
In this type, it is calculated how many times a figure is, in

comparison to another figure. For example , if a firm’s credit sales during
the year are Rs. 200000 and its debtors at the end of the year are Rs.
40000 , its Debtors Turnover Ratio is 200000/40000 = 5 times. It shows
that the credit sales are 5 times in comparison to debtors.
Percentage:
In this type, the relation between two figures is expressed in

hundredth. For example, if a firm’s capital is Rs.1000000 and its profit is
Rs.200000 the ratio of profit capital, in term of percentage, is
200000/1000000*100 = 20%

ADVANTAGES OF RATIO ANALYSIS
Helpful in analysis of Financial Statements.
Helpful in comparative Study.
Helpful in locating the weak spots of the business.
Helpful in Forecasting.
Estimate about the trend of the business.
Fixation of ideal Standards.
Effective Control.
Study of Financial Soundness.
LIMITATIONS OF RATIO ANALYSIS

Comparison not possible if different firms adopt different
accounting policies.
Ratio analysis becomes less effective due to price level changes.
Ratio may be misleading in the absence of absolute data.
Limited use of a single data.
Lack of proper standards.
False accounting data gives false ratio.
Ratios alone are not adequate for proper conclusions.
Effect of personal ability and bias of the analyst.
CLASSIFICATION OF RATIOS

We may classify ratio in to the following four categories:
Liquidity Ratio
Profitability Ratio
Leverage Ratio
Activity Ratio
LIQUIDITY RATIOS
Liquidity refers to the ability of a firm to meet its current
obligations as and when these become due. The short-term obligations are
met by realizing amounts from current, floating or circulating assts. The
current assets should either be liquid or near about liquidity. These should
be convertible in cash for paying obligations of short-term nature.
Comparing them with short-term liabilities should assess the sufficiency
or insufficiency of current assets. If current assets can pay off the current
liabilities then the liquidity position is satisfactory. On the other hand, if
the current liabilities cannot be met out of the current assets then the
liquidity position is bad. To measure the liquidity of a firm, the following
ratios can be calculated
Current Ratio Current Assets / Current Liabilities
Quick/Acid Test Ratio Current Assets –Inventories / Current
Liabilities
Net Working Capital Net Working Capital / Net Assets
Cash Ratio Cash + Marketable Securities / Current Liabilities
Current Ratio:
Current Ratio, also known as working capital ratio is a measure of

general liquidity and its most widely used to make the analysis of short-
term financial position or liquidity of a firm. It is defined as the relation
between current assets and current liabilities. Thus,
CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITES
Current assets include cash, marketable securities, bill receivables,
sundry debtors, inventories and work-in-progresses. Current liabilities
include outstanding expenses, bill payable, dividend payable etc.
A relatively high current ratio is an indication that the firm is liquid
and has the ability to pay its current obligations in time. On the hand a
low current ratio represents that the liquidity position of the firm is not
good and the firm shall not be able to pay its current liabilities in time. A
ratio equal or near to the rule of thumb of 2:1 i.e. current assets double
the current liabilities is considered to be satisfactory.
CALCULATION OF CURRENT RATIO
Year 2007-08 2006-07

Current Assets (Rs. in Lakhs) 148757.72 173073.76
Current Liabilities (Rs. in Lakhs) 68248.94 54980.42
Current Ratio 2.18 3.15
Interpretation:
As we know that ideal current ratio for any firm is 2:1. The current
ratio of company is more than the ideal ratio. This depicts that company’s
liquidity position is sound. Its current assets are more than its current
liabilities. Though it is less than last financial year.
Quick/Acid Test Ratio:
Quick ratio is a more rigorous test of liquidity than current ratio.

Quick ratio may be defined as the relationship between quick/liquid
assets and current or liquid liabilities. An asset is said to be liquid if it can
be converted into cash with a short period without loss of value. It
measures the firm’s capacity to pay off current obligations immediately.
QUICK RATIO = QUICK ASSETS

CURRENT LIABILITES
A high ratio is an indication that the firm is liquid and has the
ability to meet its current liabilities in time and on the other hand a low
quick ratio represents that the firms’ liquidity position is not good.
As a rule of thumb ratio of 1:1 is considered satisfactory. It is
generally thought that if quick assets are equal to the current liabilities
then the concern may be able to meet its short-term obligations. However,
a firm having high quick ratio may not have a satisfactory liquidity
position if it has slow paying debtors. On the other hand, a firm having a
low liquidity position if it has fast moving inventories.
CALCULATION OF QUICK RATIO
Year 2007-08 2006-07

Quick Assets (Rs. in Lakhs) 86352.77 119270.2
Quick Ratio 1.265 2.1693
Interpretation:
A quick ratio is an indication that the firm is liquid and has the
ability to meet its current liabilities in time. The ideal quick ratio is 1:1
Company’s quick ratio is more than ideal ratio. This shows company has
no liquidity problem.
Net Working Capital:
The difference between current asset & current liability excluding
short term borrowing is called net working capital. It is a measure of the
industry of the firm.
NET WORKING CAPITAL RATIO = NET WORKING CAPITAL
NET ASSETS
Net working capital: Current Assets – Current Liabilities
CALCULATION OF NET WORKING CAPITAL RATIO
Year 2007-08 2006-07
Net Working Capital (Rs. in Lakhs) 80508.78 118093.34
Current Assets (Rs. in Lakhs) 148757.72 173073.76
Net Working Capital Ratio 0.5412 0.6823
Interpretation:
Net working capital measures the firm’s potential reservoir of
funds. In GSFC limited better net working ratio is in FY 2006 – 07 as
compared to FY 2007 – 08.
Cash Ratio:

Cash ratio is most liquid assets, a financial analyst may examine.
Cash rationed its equivalent to current liabilities. Trade investments or
Marketable securities are equivalent of cash they may include in the
computation of cash ratio.
CASH RATIO = CASH + MARKETABLE SECURITIES

CURRENT LIABILITIES
CALCULATION OF CASH RATIO
Year 2007-08 2006-07
Cash + Marketable Securities (Rs. in Lakhs) 30422.49 41367.49
Cash Ratio 0.45 0.75
Interpretation:
GSFC cash ratio in the year FY 2006 – 07 & FY 2007 – 08 is
75% & 45% respectively. So, the company carries a more amount of
cash. There is a decrease in cash flow due to current market situation but
there is no sign of worry for the organization as there is no shortage of
cash.

PROFITABILITY RATIOS
Profitability ratio measure overall performance and effectiveness of
the firm. The profitability ratios are calculated to measure the operating
efficiency of the company. Generally to measure types of profitability
ratio are calculated.
Gross Profit Margin Ratio G.P. / Sales
Net Profit Margin Ratio N.P. / Sales
Operating Profit Ratio EBIT / Sales
Expense Ratio
➢ Cost of Goods Sold Ratio COGS / Sales

➢ Operating Expense Ratio COGS + Selling Exp.+ General
Exp. & Administrative Exp.
– Interest / Sales
Gross Profit Margin Ratio:
Gross profit margin ratio reflects the efficiency with which
management produces each unit of product. The ratio indicates the
average speed between the cost of goods sold and sales revenue.
GROSS PROFIT MARGIN RATIO: GROSS PROFIT
Year 2007-08 2006-07
Gross Profit (Rs. in Lakhs) 99065.71 85626.58
Sales (Rs. in Lakhs) 35576.55 331871.80
Gross Profit Margin Ratio 27.85 25.80
SALES
CALCULATION OF GROSS PROFIT MARGIN RATIO
Interpretation:

The gross profit margin of FY 2006-07 was 25.80% compare to
27.85% in FY 2007-08. The G.P margin has been improving which is a
good sign of profitability.
Net Profit Margin Ratio:
The net profit margin is indicative of management’s ability to
operate the business with sufficient success not only to recover from
revenues of the period, but also to live a margin of reasonable
compensation to the owners for providing their capital at risk. The ratios
of net profit (after interest and tax) to sales essentially express the coast
price effectiveness of the operation. Net profit margin is also known as
net margin. This measures the relationship between the net profit and
sales of a firm.
NET PROFIT MARGIN RATIO: NET PROFIT
SALES
CALCULATION OF NET PROFIT MARGIN RATIO
Year 2007-08 2006-07

Net Profit (Rs. in Lakhs) 23845.08 26691.30
Sales (Rs. in Lakhs) 355769.55 331871.80
Net Profit Margin Ratio 6.70 8.04
Interpretation:
The N.P. margin ratio was 8.0426% in FY2006-07 but in FY 2007-08 it
was 6.7024%. It was on decline but the situation is under control. As
the organization has a profit.
Operating Profit Ratio:

This ratio measures the proportion of an enterprise cost of sales
and operating expenses in comparison to its sales.

Cost of Goods Sold = Opening Stock + Purchases + Carriage +
Wages + Other Direct Expenses - Closing
Stock.
Operating Expenses = Office and Administration Exp. + Selling and

Distribution Exp. + Discount + Bad Debts +
Interest on Short- term loans.
‘Operating Ratio’ and ‘Operating Net Profit Ratio’ are inter-related.

Total of both these ratios will be 100.
OPRETING PROFIT RATIO: EBIT

SALES
CALCULATION OF OPRETING PROFIT RATIO
Year 2007-08 2006-07

EBIT (Rs. in Lakhs) 37620.25 37949.17
Sales (Rs. in Lakhs) 355769.55 331871.80
Operating Profit Ratio 10.57 11.43
Interpretation:
The usual scenario is that operating ratio should be lower because it will
result in higher profit margins. In FY 2006-07 the O.P. margin was
11.43% which lowered in 2007-08 at 10.57%. It is a good sign for
organization.
Expense Ratio:
These ratios indicate the relationship between Expenses and Sales.
Although the operating ratio reveals the ratio of total operating expenses
in relation to sales but some of the expenses include in operating ratio
may be increasing while some may be decreasing. Hence, specific
Expenses Ratio is computed by dividing each type of expense with the
Net Sales to analyze the causes of variation in each type of expense.

It has two parts:
➢ Cost of Goods Sold Ratio Cost of Goods Sold / Net Sales

➢ Operating Expense Ratio COGS + Selling Exp. + General Exp.
& Administrative Exp. – Interest / Sales
COST OF GOODS SOLD RATIO: COST OF GOODS SOLD
NET SALES
CALCULATION OF COST OF GOOD SOLD RATIO
Year 2007-08 2006-07

COGS (Rs. in Lakhs) 256703.84 246245.22
Sales (Rs. in Lakhs) 355769.55 331871.80
Cost of Goods Sold Ratio 72.15 74.20
Interpretation:
The expense ratio should be lower compare to other expenses in
relation to sales. The Expense Ratio (C.O.G.S ratio) was 74.19% in FY
2006-07 which lowered to 72.15% in FY 2007-08.
OPERATING EXPENCE RATIO: COGS + SELLING EXP. +
GENERAL EXP. &
ADMINISTRATIVE – INTEREST
SALES
CALCULATION OF OPERATING EXPENCE RATIO
Year 2007-08 2006-07

Operating Expense (Rs. in Lakhs) 311001.69 301321.6
Sales (Rs. in Lakhs) 355769.55 331871.80
Operating Expense Ratio 87.42 90.79
Interpretation:
A higher Operating Expenses Ratio is unfavorable since it will leave a
small amount of operating income to meet interest dividends etc. it was

on decline which was a good sign for organization. It was 90.79% in FY
2006-07 and in FY 2007-08 it is 87.42%.
LEVERAGE RATIOS
A firm has a strong short as well as long term financial position. To
judge the long term financial position of the firm, financial leverage of
capital structure ratio is calculated. This ratio indicates mix of funds
provided by owners and lenders.
Debt Ratio Total Debt / Capital Employed
Debt Equity Ratio Total Debt / Net Worth
Capital Equity Ratio Capital Employed / Net worth
Coverage Ratio EBIT / Interest
Debt Ratio:
Debt ratio is used to analyze the long-term solvency of firm. The
firm may be interested in knowing the proportion of the interest – bearing
debt (also called funded debt) in the capital structure.
DEBT RATIO: TOTAL DEBT (TD)
CAPITAL EMPLOYED (CE)

Year 2007-08 2006-07
Total Debt (Rs. in Lakhs) 150498.9 184062.86
Capital Employed (Rs. in Lakhs) 203283.58 232999.37
Debt Ratio 0.74 0.79
CALCULATION OF DEBT RATIO
Interpretation:
The Debt ratio in FY 2006-07 is 0.7403 whereas in FY 2007-08 it
0.7899 times that means the proportion of lenders fund has been declined.
Debt Equity Ratio:
The relationship of lenders contribution in owner’s total capital is
called debt equity ratio.
DEBT EQUITY RATIO: TOTAL DEBT (TD)
NET WORTH
Net Worth: Share capital + Reserve
CALCULATION OF DEBT EQUITY RATIO
Year 2007-08 2006-07
Total Debt (Rs. in Lakhs) 150498.9 184062.86
Net Worth (Rs. in Lakhs) 147333.79 136520.06
Debt Equity Ratio 1.0215 1.3482
Interpretation:
The debt equity ratio inFY2006-07 is 1.3482 and in 2007-08 it is
1.0215 times which a good sign for the organization.
Capital Equity Ratio:

There is yet another alternative way of expressing the basic
relationship between debt and equity. Calculating the ratio of capital
employed or net assets can find this.

CAPITAL EQUITY RATIO= CAPITAL EMPLOYED
NET WORTH
CALCULATION OF CAPITAL EQUITY RATIO
Year 2007-08 2006-07
Capital Employed (Rs. in Lakhs) 203283.58 184062.86
Net Worth (Rs. in Lakhs) 147333.79 136520.06
Capital Equity Ratio 1.38 1.71
Interpretation:
In the FY2006-07 it was 1.7067 and in FY 2007-08 it was 1.3797,
it shows that the borrower’s funds are declining.
Coverage Ratio:
In interest coverage ratio shows the number of items the interest
charges are covered by fund that are ordinary available for their payment.
Coverage ratio or the time interest earned is used to firm’s debt

servicing capacity. The interest coverage ratio is computed by dividing
Earnings before interest and taxes (EBIT) by interest.
INTEREST COVERAGE RATIO= EBIT

INTEREST
CALCULATION OF INTEREST COVERAGE RATIO
Year 2007-08 2006-07
EBIT (Rs. in Lakhs) 37620.25 37949.17
INTEREST (Rs. in Lakhs) 1789.85 2638.39
Interest Coverage Ratio 21.02 14.38
Interpretation:

In FY 2006-07 was 14.38 times comparing to FY 2007-08 which
was 21.01 times it shows the interest payment capabilities of the firm. In
our case it is a good sign of debt payment.
ACTIVITY RATIOS
These ratios are calculated on the bases of ‘cost of sales’ or sales,
therefore, these ratios are also called as ‘Turnover Ratio’. Turnover
indicates the speed or number of times the capital employed has been
rotated in the process of doing business. Higher turnover ratio indicates
the better use of capital or resources and in turn leads to higher
profitability.
Inventory Turnover Ratio C.O.G.S / Average Inventory
No of Days Inventory 360 / Inventory Turnover
Ratio
Debtors Turnover Ratio Total Sales / Average Debtors
Average Collection Period Ratio 360 / Debtors Turnover Ratio
Assets Turnover Ratio Sales / Capital Employed
Fixed Assets Turnover Ratio Sales / Fixed Assets
Working Capital Turnover Ratio Sales / Net Working Capital
Inventory Turnover Ratio:

Every firm has to maintain a certain amount of inventory of
finished goods so as to meet the requirements of the business. But the
level of inventory should neither be too high nor too low. Because it is
harmful to hold more inventory as some amount of capital is blocked in it
and some cost is involved in it. It will therefore be advisable to dispose
the inventory as soon as possible.

INVENTORY TURNOVER RATIO = COST OF GOOD SOLD
AVERAGE INVENTORY
CALCULATION OF INVENTORY TURNOVER RATIO
Year 2007-08 2006-07
C.O.G.S (Rs. in Lakhs) 256703.84 246245.22
Average Inventory (Rs. in Lakhs) 62404.95 53803.56
Inventory Turnover Ratio 4.11 4.58
Interpretation:
In FY 2006-07 it was 4.57 times compare to 4.11 times in FY

2007-08. Due to slowdown situation it was on a slight decline but there is
no bad sign to overall operations.
No. of Days Inventory:

It is been counted on 360 Days by Inventory Turnover Ratio.
NO. OF DAYS INVENTORY= 360
INVENTORY TURNOVER RATIO
CALCULATION OF NUMBER OF DAYS INVENTORY

Year 2007-08 2006-07
Days 360 360
Inventory Turnover Ratio 4.11 4.58
No. of Days Inventory 88 days 79 days
Interpretation:
In FY 2006-07 it was 79 days compare to 88 days in 2008-09
which was a good sign for the organization’s turnover over the period.

Debtors Turnover Ratio:
A concern may sell its goods on cash as well as on credit to
increase its sales and a liberal credit policy may result in tying up
substantial funds of a firm in the form of trade debtors. Trade debtors are
expected to be converted into cash within a short period and are included
in current assets. So liquidity position of a concern also depends upon the
quality of trade debtors. Two types of ratio can be calculated to evaluate
the quality of debtors.
DEBTORS TURNOVER RATIO= TOTAL SALES (CREDIT)

AVERAGE DEBTORS
CALCULATION OF DEBTORS TURNOVER RATIO
Year 2007-08 2006-07
Sales (Credit) (Rs. in Lakhs) 355769.55 331871.80
Average Debtors (Rs. in Lakhs) 55920.34 77892.77
Debtors Turnover Ratio 6.36 4.26
Interpretation:
In FY 2006-07 it was 4.26 and in FY it was 6.3620 times which is
a good sign because the debtors are paying much faster than in previous
financial year.
Average Collection Period:
The average collection period ratio represents the average number

of days for which a firm has to wait before its receivables are converted
into cash. It measures the quality of debtors. Generally, shorter the
average collection period the better is the quality of debtors as a short
collection period implies quick payment by debtors and vice-versa.
AVERAGE COLLECTION PERIOD= NO. OF WORKING DAY
DEBTORS TURNOVER RATIO

CALCULATION OF AVERAGE COLLECTION PERIOD
Year 2007-08 2006-07
Days 360 360
Debtors Turnover Ratio 6.36 4.26
Average Collection Period 57 Days 85 Days
Interpretation:
In FY 2006-07 it was 85 days compare to 57 days in FY 2007-08
which is a good sign for the organization.
Assets Turnover Ratio:

Some analysts like to compute the total assets turnover in addition
to or instead of the net assets turnover. This ratio shows the firm’s ability
in generating sales from all financial resources committed to total assets.
ASSETS TURNOVER RATIO= SALES

TOTAL ASSETS
CALCULATION OF ASSETS TURNOVER RATIO

Year 2007-08 2006-07
Sales 355769.55 331871.80
Capital Employed 203283.58 232999.37
Assets Turnover Ratio 1.75 1.42
Interpretation:
In FY 2006-07 it was 1.42 times comparing to 1.75 times in FY 2007-08
which is a good sign for the organization.
Fixed Assets Turnover Ratio:

This ratio reveals how efficiently the fixed assets are being utilized.
FIXED ASSETS TURNOVER RATIO: SALES
NET FIXED ASSETS
CALCULATION OF FIXED ASSETS TURNOVER RATIO
Year 2007-08 2006-07
Sales 355769.55 331871.80
Net Fixed Assets 126941.04 133578.18
Fixed Assets Turnover Ratio 2.80 2.48
Interpretation:
This ratio is particular importance in manufacturing concerns
where the investment in fixed asset is quite high. Compared with the
previous year, if there is increase in this ratio, it will indicate that there is
better utilization of fixed assets. So in FY 2006-07 it was 2.48 times
compare to 2.80 times in FY 2007-08 which is a good sign for the
organization.
Working Capital Turnover Ratio:

Working capital turnover ratio indicates the velocity of utilization
of net working capital. This ratio indicates the number of times the
working capital is turned over in the course of the year. This ratio
measures the efficiency with which the working capital is used by the
firm. A higher ratio indicates efficient utilization of working capital and a
low ratio indicates otherwise. But a very high working capital turnover is
not a good situation for any firm.
WORKING CAPITAL TURNOVER= SALES

NET WORKING CAPITAL
CALCULATION OF WORKING CAPITAL TURNOVER

Year 2007-08 2006-07

Sales 355769.55 331871.80
Net Working Capital 80508.78 118093.34
Working Capital Turnover Ratio 4.42 2.81
Interpretation:
In FY 2006-07 it was 2.81 times compare to 4.42 times in FY
2007-08 which is a good sign as liquidity for the organization.

WORKING CAPITAL MANAGEMENT
Funds are also needed for short-term purposes for the purchase of
raw material, payment of wages and other day – today expenses etc.
These funds are known as working capital.
In simple words, working capital refers to that part of the firm’s

capital which is required for financing short- term or current assets such
as cash, marketable securities, debtors & inventories.
Concept of Working Capital
There are two concepts of working capital:
➢ Gross working capital

➢ Net working capital
Gross working capital:
Gross working capital refers to the amounts invested in the various
components of current assets.
Net working capital:
Net working capital is the excess of currents assets over Current
liabilities and provisions.
NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABLITIES
Net working capital of GSFC LTD. is as follows:

PARTICULAR 31 March,2008 31 March,2007

(Rs. In Lakhs) (Rs. In Lakhs)
CURRENT ASSETS
Income accrued on int. 9.94 9.94
Inventories 62404.95 53803.56
Sundry Debtors 55920.34 77892.77
Cash and bank balances 8191.53 19446.23
Loans and advances 22230.96 21921.26
(A) 148757.72 173073.76
CURRENT LIABLITIES
Current liabilities 42553.53 42336.61
Provisions 25695.41 12643.81
(B) 68248.94 54980.42
NET WORKING CAPITAL (A-B) 80508.78 118093.34
The gross working capital concept is financial or going concern

concept whereas net working capital is an accounting concept of working
capital.
Classification of Working Capital
➢ Permanent or Fixed working capital

➢ Temporary or variable working capital
Permanent or Fixed Working Capital:
Permanent or fixed working capital is minimum amount which is
required to ensure effective utilization of fixed facilities and for
maintaining the circulation of current assets. Every firm has to maintain a
minimum level of raw material, work- in-process, finished goods and
cash balance. This minimum level of current assets is called permanent or
fixed working capital as this part of working is permanently blocked in
current assets.
Temporary or Variable Working Capital:
Temporary or variable working capital is the amount of working
capital which is required to meet the seasonal demands and some special
exigencies. Variable working capital can further be classified as seasonal
working capital and special working capital. The capital required to meet
the seasonal need of the enterprise is called seasonal working capital.
Special working capital is that part of working capital which is required
to meet special exigencies such as launching of extensive marketing for
conducting research, etc.
Temporary working capital differs from permanent working capital
in the sense that is required for short periods and cannot be permanently
employed gainfully in the business.
Objectives of Working Capital Management:
Objective of working capital management is to ensure smooth

functioning of the normal business operations of a firm. The firm has to
decide on the amount of working capital to be employed.
Objective of working capital management is achieving a trade – off
between liquidity and profitability of operations for the smooth conduct
of normal business operations of the firm.
Need for Working Capital:
The need for working capital arises on account of two reasons:

➢ To finance operations during the time gap between sale of goods
on credit and realization of money from customers of the firm.
➢ To finance investment in current assets for achieving the growth
target in sales.
Operating Cycle:
The time gap between acquisition of resources and collection of

cash from Customers is known as the operating cycle.
In case of a manufacturing company, the operating cycle is the
length of time necessary to complete the following cycle of events.
➢ Conversion of cash into raw material.
➢ Conversion of raw material into work in progress.
➢ Conversion of work in progress into finished goods.

➢ Conversion of finished goods into account receivable.
➢ Conversion of account receivable into cash.
This cycle will be repeated again and again. The operating cycle of
the manufacturing business can be shown as in the following.
OPERATING CYCLE OF MANUFACTURING
ACCOUNT
RECEIVABLE
FINISHED
CASH
GOODS
WORK
RAW
IN
MATERIAL
PROGRESS
Operating Cycle Approach:
The operating cycle begins with the acquisition of raw material

ends with the collection of receivables. It may be broadly classified into
the following four stages viz.
➢ Raw material and stores storage stage.
➢ Work in progress stage.
➢ Finished goods inventory stage.
➢ Receivable collection stage.
Symbolically, the duration of the working capital cycle can be put as follows.

O= R + W + F + D – C
Where,
O = Duration of Operating Cycle
R = Raw Material and Stores Stage Period
W = Work in Progress
F = Finished Stock Storage Period
D = Debtors Collection Period
C = Creditors Collection Period
Raw Material Storage Period = Average Stock of Raw Material

Cost of Raw Material Consumption per day
= 902221597.5
11100699000
= 30 days
W.I.P. Holding Inventory = Average Stock in Progress Inventory
Cost of Production per day
= 79926746.5
12157836000
=2 days
Finished Goods Storage Period = Average Stock of Finished Goods

Average Cost of Goods Sold per day
= 959110631.5
12827038200
= 27 days
Credit Period Available = Average trade Creditors
Average credit purchase per day
= 1310434447.96
11500842201
= 42 days
GROSS OPERATING CYCLE = Raw material storage + Work in progress

+ Finished Goods + Debtors conversion
period
= 30 + 2 + 27
= 59 days
NET OPERATING CYCLE = Gross operating cycle – Credit period
available
= 59 – 42
= 17 days
NO. OF OPERATING CYCLES IN A YEAR = 365
Total operating cycles period
=365
17
= 21 days
AMOUNT OF WORKING CAPITAL REQUIRED = Total Operating Cost
No. of Operating Cycle in a year
=12157836000
21
=Rs. 57894457.12

INVENTORY MANAGEMENT
Inventory management is an important concern for managers in all

types of business. Inventory includes raw material cash & little
equipment. It is not just raw material but also work in process & finished
stock also. Inventories is created when the receipts of materials, parts or
finished goods exceeds in the organization.
Inventories constitute the most significant part of current assets of
large majority of companies in India. On an average inventories are
approximately 60% of current assets in public limited companies in India
it is therefore absolutely imperative to manage the inventories efficiently
and effectively in order to avoid unnecessary inventory. A firm
neglecting the management of inventories will be jeopardizing its long
run profitability and may fail ultimately. It is possible for a company to
reduce its level of inventories to considerable degree example 10% to
20% without any adverse effect on production and sales, by using simple
inventory planning and control techniques. The reduction in excessive
inventories carries a favorable impact on company’s profitability. The
firm inventory refers to the stock pile of the products a firm is offering
for sale and the components that make up the product. In other words
inventory is composed of assets that will be sold in future in the normal
course of business operation.
IMPORTANCE OF INVENTORY MANAGEMENT
Inventory constitutes the largest part of current assets in
organization.
Poor management of inventories leads to business failures.

In manufacturing organization, the inability to supply an item from
inventory could bring production process to half.

Efficient inventory control can significantly contribute to control
over production position of the organization.

Efficient inventory management controls over the holding cost &
carrying cost.
OBJECTIVE OF INVENTORY MANAGEMENT
The objective of inventory management consists of two counter

balancing parts:
To minimize investment in inventory.
To meet for the product by efficient organizing the production
and sales operations.
These two conflicting objectives of inventory management can also

be expressed in terms of cost and benefit associated with inventory. The
cost of the firm is lower if smaller the inventory as well as inventories
provides benefits to the extent that they facilitate the smooth functioning
of the firm.
PURPOSES OF INVENTORY MANAGEMENT
Protection against fluctuating demand.
Protection against delayed supply.
Protection against inflation.
Benefits of large quantities.
Primary basis for business

INVENTORY MANAGEMENT AT G.S.F.C.
Inventory management is basically a function of materials
management department. It consists of three sections:
Purchase Section: Purchase section looks after the procurement
function of all items.

Inventory Section: Inventory Section performs the following
functions:
➢ Stock Control
➢ Codification
➢ Identification
➢ Standardization
➢ Indenting etc.
Stores Section: Stores Sections performs the following functions:
➢ Receipt of goods
➢ Inspection
➢ Stock Verification
➢ Reconciliation of Queries etc.
GSFC LTD. has to maintain high inventories particularly in

finished goods and work in process. Through raw material is imported
particularly Phosphoric Acid, Ammonia is available in India. Since the
most of its machinery are imported it has to maintain high inventories of
spare parts. A quite sum of funds is blocked in inventory. During peak
season the inventory is as high as 50% of turnover. More over due to
seasonal business it has to keep high inventory of finished goods.

The assets which firm store as inventory in anticipation of need are:
Raw Materials:
It contains items that are purchased by the firm from and are
converted into finished goods through the manufacturing process. They
are an imported input of the final product.
In GSFC LTD. Raw Material consist of three imported components:
➢ Phosphoric Acid
➢ Ammonia
➢ Sulphuric Acid
Ammonia & phosphoric acid is imported from Saudi Arabia

whereas Sulphuric Acid is bought from Baroda unit. Government order
for the raw material according to requirement & provides it to the unit.
Raw material is not provided according to the demand of the company by
government. Hence company stores raw material as and when raw
material is provided by the government. It takes 2 to 3 weeks to reach
India & about 7 days to clear the material from India port. Thereafter, it
takes 2 days to reach Jamnagar either by train or by road. Thus, generally
20 days are required to reach the material from Saudi Arabia & the
company keeps inventory of 30 days.
Sulphuric Acid is one more raw material needed for DAP & it is
easily available in India GSFC Baroda unit is providing Sulphuric Acid to
Sikka unit. Thus, it gets regular supply of it.

Work-in-Progress:
It consists of items currently being used in the production process.

They are normally semi finished goods that are at various stages of
production in a multi stage production process.
Raw material processed in to finished goods in just one day so the
production process is very small still the company but company keeps
inventory for about 8 days. The average inventory of working process is
around Rs. 3000 Lakhs.
Finished goods:
It represents final or completed products which are available for

sale. The inventory of such goods consists of items that have been
produced that but are yet to be sold.
In GSFC LTD. finished goods inventory is on higher side as this
product is a seasonal product & sales are concentrated only while sowing
seeds i.e. twice a year demand of DAP is high but due to globalization
company is also finding difficulty to sale its products.
Engineering Stores:
This makes up a considerable part of inventory at GSFC Sikka

unit. It accounts for almost about Rs. 6 Crores per annum.
INVENTORY ANALYSIS

Below are the types of Inventory analysis, which are carried out for
classifying materials so that materials and processes can be treated
differently based on the classes of materials.
ABC – Analysis or XYZ – Analysis
FSN – Analysis
F – Fast Moving, S – Slow Moving, N – Non Moving

Sometimes the terms FNS is also being used, where
F – Fast Moving, N- Normal Moving, S- Slow Moving.
VED – Analysis
V – Vital, E – Essential, D – Desirable.

SOS – Analysis
S – For Seasonal Material, Os – For Non Seasonal Material

HML – Analysis
H – High Price Material, M – Medium Price Material, L – Low

Price Material.
GOLF – Analysis
G -Government suppliers,
O- Ordinary or non government suppliers,
L - Local suppliers,
F - Foreign suppliers.
SDE – Analysis:
S- Scarce Material i.e. hardly available,

D- Difficult material i.e. difficult in sourcing,
E- Easy materials i.e. materials available easily
ABC –Analysis:

“Classify the items on the basis of importance and the technique of
grouping is called as ABC analysis”. To provide maximum overall
protection against the stock outs for a given investment in safety stock.
This analysis prepared and checked weekly or monthly. ABC analysis
classifies the materials based on their consumption during a particular
time period (usually one year). Depending upon the company.
To company A, B & C can be as under.

➢ A – Approx 5% to 10% of the Items accounting for 60% to 80% of
consumption value.
➢ B – Approx 10 % to 30% of the Items accounting for 10% to 30%
of consumption value.
➢ C – Approx 60% to 85% of the Items accounting for 5% to 15% of
consumption value.
Table Showing Items & its Value % & as per its Consumption in
Volume % are shown below and its representation in the Chart.

ITEM NO. OF VALUE IN CONSUMPTION VOLUME IN
ITEMS PRESENT (%) PRESENT (%)
A 3017044.22 75% 33 3.87%
B 747112 18.71% 114 13.36%
C 228944.53 5.73% 706 82.77%
Total 3993100.75 100% 853 100%
The following procedure is suggested for developing an ABC

analysis:
➢ List each item carried in inventory by number or some other
designation.
➢ Determine the annual volume of usage and rupee value of each

item.
➢ Multiply each item’s annual volume of usage by its rupee value.
➢ Compute each item’s percentage of the total inventory in terms of

annual usage in rupees.
➢ Select the top 10% of all items, which have the highest rupee
percentages and classify them as ‘An’ items.
➢ Select the next 20% of all items with the next highest rupee
percentages and designate them as ‘B’ items
➢ Items are not available then there is not going to be immediate

production loss; stock out cost is very less.

ITEMS A ITEMS B ITEMS C
Very strict control Moderate control Loose control
No safety stocks Low safety stocks High safety stocks
Frequent ordering or Ordering once in 3 Bulk ordering, once in
weekly deliveries. months 6 months
Weekly control Monthly control Quarterly reports
statements statements
Maximum follow up Periodic follow up Follow up in
exceptional cases
Accurate forecasts Estimates based on Rough estimates
past data
Maximum efforts to Moderate efforts Minimum efforts.
reduce lead time
To be handled by To be handled by Can be fully

senior officers middle management delegated.
Economic Order Quantity
One of the popular models developed for items of repetitive nature

(dynamic), future demands for which can be projected with certainty is
Economic Order Quantity (EOQ) model. This model assumes that price
of the material remains constant with time and also does not vary with
order quantity. This model can be developed mathematically by
differentiating total cost of inventory (ordering cost + inventory carrying
cost) with respect to Quantity.
Cost of Holding Inventory
The objective of inventory management is to minimize cost which

is further divided into:

➢ Ordering cost
➢ Carrying cost
Ordering cost:
The ordering costs are cost involved in Preparing a purchase order
or requisition form Recovering, inspecting & recording the goods
received to ensure both quantity and quality.
Carrying cost:
It is costs involved in maintaining or carrying inventory and are
divided in to two categories:
➢ Those that arise due to the storing of inventory: The main
components of this category are storage cost, insurance of
inventory, deterioration in inventory, serving.
➢ Opportunity cost of funds: If funds were not locked up in
inventory. They would have earned a return. This is the
opportunity cost of funds.
The formula so derived is given below:

Economic Order Quantity (EOQ) = Sq. Rt. {2xAxCo / (Cu x Ci)}
Where,
A : Annual Consumption Quantity
Co : Cost of placing one order
Ci : Annual inventory carrying cost represented as fraction
Cu : Unit Cost (Rate/Unit) of the material
Assumptions
➢ The rate of demand for the item is deterministic and is a constant D

unit per annum, independent of time.
➢ Production rate is infinite, i.e. production is instantaneous
Shortages are not allowed.

➢ Lead – time is zero or constant independent of demand and the
quantity ordered.
➢ The entire quantity is delivered as a single package or (production
in a single run).
Objective
➢ To Minimize the Average Annual Variable cost.

Problem
➢ To determine when an order should be placed and how much

quantity should be ordered.
The Annual variable costs for this problem are two types:
➢ Ordering or Set – up Cost
➢ Inventory Holding Cost
As Q is the Order Quantity and D is the Annual Demand, The

Number of Orders per Years will be D/Q. Therefore, the Annual Ordering
cost will be = A.D/Q.
GRAPHICAL PRESENTATION:
TC
HC
COST EOQ
“The Company uses ABC METHOD for THE INVENTORY

CONTROL”

Inventory Analysis at G.S.F.C.
Raw materials, stores, spares, equipments and loose tools are

valued at cost except that stores returns, non-standard/obsolete items are
valued at assessed or realizable value below cost. Year end stock of
imported raw materials lying at port is valued at cost based on the
weights of Bill of Lading/Draught Survey Report as per the option
exercised for respective vessels. Items of stock & stores, spares,
consumables, etc. are valued at the purchase order price. The difference,
if any, between the purchase order price and the invoice price is charged
to consumption.
Finished products and stock-in-process are valued at lower of cost
or actual/estimated realizable value. In respect of closing stock of
finished products lying at Depots, Warehouses, Consignment Stockiest
and other parties, value is computed inclusive of excise duty and
transportation cost. Stock of purchased items traded is valued at lower of
landed cost or realizable value.
Consumable stores categorized separately with an annual

consumption of less than RS. 1000/- per item, are charged to Profit &
Loss Account at the time of purchase. In Sikka Unit such items are
charged to Profit & Loss account as and when consumed.
Finance and bank charges on imported and indigenous stores and
spares and freight on indigenous stores and spares are directly charged to
Profit & Loss account.
Stores and spares issued to consuming departments and which are
in the process of utilization and/or remaining with them at the yearend are
considered as consumed. At Sikka unit, Stock of chemicals, fuel items
etc. are included in the inventory.
Inventory accounts section

Functions:
➢ Maintaining priced ledgers for items of Stores and Spares.
➢ Accounting of consumption of stores and spares.
➢ Writing off the value of obsolete items.
➢ Accounting the value of stores and spares issued or received on
loan basis.
➢ Accounting of the value of physical stock of stores and spares at
the end of the year duly reconciled with the book stock.
Groups and classes of materials
Stores and spares procured, stocked and consumed are divided into
different groups ranging from 02 to 99, which are handled by Stores
section of Materials Management department, comprising of
approximately 1 lakh items. Materials are also divided into different
categories on the basis of their value of consumption per annum and
nature of items.
➢ ‘C’ class of items of Stores, the annual consumption value is Rs.
1000 or below.
➢ ‘B’ class of items of Stores, the annual consumption value is Rs.
1001 to 20,000.
➢ ‘A’ class of items of Stores, the annual consumption value is Rs.
20001 and above.
➢ ‘N’ class Items of stores indicates non-regular consumption.
➢ ‘S’ indigenous – Indigenous spares.
➢ ‘S’ Imports – Imported spares.
Obsolete materials
Stores Department in consultation with the Plants draws up lists of

materials which have become obsolete and gets the same approved by CMD.
The Stores Department prepares issue slips for such material and feeds the
data thereof into the system. Inventory Accounts Section arranges to have
the same written off from the Stores Ledger.

Perpetual Verification of Stores Inventory
Material GroupWise physical verification of stores and spares is

carried out once in a year. Programme of physical verification is advised to
Materials Management Department every year. Verification is accordingly
taken up group by group. Discrepancies noticed during physical verification
are reported to the Materials Management Department for comments/
verification and for carrying out necessary adjustments in Stock records
wherever necessary after obtaining approval of competent authority.
Physical verification of finished stocks
At the yearend stocks of finished goods are physically verified in

association with the Statutory Auditors and closing stock statements are
drawn up. Copies of these statements are made available to Costing and
Central Accounts Sections for the purpose of valuation and incorporation in
the annual accounts.
OTHER GRAPHS OF G.S.F.C.
BALANCE SHEET, P&L A/C, & FINANCIAL STATEMENT OF

G.S.F.C
BALANCE SHEET AS AT 31ST MARCH 2008

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED
31ST MARCH 2008

FINANCIAL HIGHLIGHT OF TEN YEARS

APPENDIX
Sr. No. Particular Page No.

Chart No CHARTS
1. Form of organizations 26
2. Size of organizations 27
3. Organization Chart 40
4. Capital Structure 42
5. Operating Cycle 83
6. ABC Analysis 98
7. Production Fertilisers in (MTs) 101
8. Net Sales (Rs. Crores) 101
9. Operating Profit EBIDT 101
10. Profit Before Tax 102
11. Contribution to Exchequers 102
12. Market Price per share 102
Table No TABLES
1. Landmarks in Indian Fertilizer Industry 12
2. Competitors Detail 31
3. Awards & Certificates 32
4. Head of Finance Department 40
5. Capital Structure 42
6. Share Holding Patterns 43
7. Investors Return & Dividend Details 44
8. Allowances & Benefits 48
9. Net Working Capital 81
10. Table of Consumption & Volume for ABC 94
11. Classification of Items 95

BIBILOGRAPHY
I got help from all the Sikka unit staff member of Finance
Department & P&A Department many data I got from them also.
Fertilizer Industry in India
➢ www.scribd.com/doc/7184877/Fertilizer-Industry-in-India
Chemical Industry in India
➢ www.scribd.com/doc/13885171/GPTIE-PPT-Chemical-
Sector
GSFC Detail
➢ www.gsfclimited.com
GSFC Detail
➢ www.religareonline.com
Ratio Analysis
➢ Annual Report 2007 – 08

Book
➢ I. M. Pandey – Finance Management

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TOLANI INSTITUTE OF MANAGEMENT STUDIES

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Summer Internship Report

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Date: PGDM – 1st Year

Experience is the best teacher as solution of any problem is

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During the Industrial Training at Gujarat State Fertilizer &

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Place: Adipur (Kachchh) (Mr. Vivek Negandhi)

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“Fertilizer is generally defined as "any material, organic or

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Fertilizer sector is a very crucial for Indian economy because it

LANDMARKS IN INDIAN FERTILIZER INDUSTRY:

1906 Fertilizer Production Limited.

1943 Grow more food campaign launched in the wake of great

1944 Central fertilizer pool created.

1947 Independent India’s emphasis in improving domestic

1957 Fertilizer control order Enactment under essential

1964 The Government of India appointed Sivaraman Committee

1966 Inclusion of Private trade in marketing of fertilizer.

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1973 Fertilizer movement control order enacted.

1977 Retention price and subsidy scheme was introduced.

1980-81 Block delivery scheme introduced.

1992 Phosphatic and potassic fertilizer decontrolled.

2000-01 The total production of phosphate in the country was 3.36

2006-07 Growth in the consumption of fertilizers.

SOURCE : FERTILIZER NEWS, Krishi Jivan

RISING DEMAND FOR FERTILIZERS:

There has been significant growth in the consumption of fertilizers

TOLANI INSTITUTE OF MANAGEMENT STUDIES Page 13

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The chemicals industry is diverse and heterogeneous comprising

TOLANI INSTITUTE OF MANAGEMENT STUDIES Page 15

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“G.S.F.C. -Gujarat's Pride - Nation's Strength”

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1967 –The Genesis

Translating G.S.F.C.'s philosophy is its vast network of plants that

The expansion of Ammonia and Urea production began with Phase

Phase III began in 1974 when diversification of products occurred.

1989 - Further expansion and diversification

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“To emerge as a world- class, multi-

➢ To provide quality inputs and services to agriculture and industry

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➢ Strong Commitment towards clean environment and social

G.S.F.C. – COMPANY PROFILE

Name of Company : Gujarat State Fertilizer &

TOLANI INSTITUTE OF MANAGEMENT STUDIES Page 22

G.S.F.C. – PROMOTERS & BORD OF DIRECTORS

Who are Promoters?

Mr. D Rajagopalan, IAS (CHAIRMAN)

Mr. D.C. Anjaria (DIRECTOR)

TOLANI INSTITUTE OF MANAGEMENT STUDIES Page 23