Professional Documents
Culture Documents
The Project Submitted to the BHARATHIDASAN UNIVERSITY,THIRUCHIRAPALLI In partial fulfillment of the requirements for the award of the degree of
Submitted by C.PRABHU Reg.No.11290617 Under the guidance of Prof.A.DIRAVIAM, M.Com.,B.Ed.,M.B.A.,M.Phil.,(Ph.D) (Head of the Department - Bharath Institute of Management)
BHARATH INSTITUTE OF MANAGEMENT BHARATH COLLEGE OF SCIENCE AND MANAGEMENT THANJAVUR-613 005
FEBRUARY 2013 BHARATH INSTITUTE OF MANAGEMENT BHARATH COLLEGE OF SCIENCE AND MANAGEMENT Bhar at Avenue, Near New Bus Stand, Than javur 613 005, Fax: 04362 227185 Phon e: 04362 -227937 / 228081
Date :
CERTIFICATE This is to certify that the project report entitled A STUDY ON CAPITAL STRUCTURE IN ARIGNAR ANNA SUGAR MILLS KURUNGALAM is the bonafide research work done and submitted by C.Prabhu (Reg. No.11290617) under my guidance in partial fulfillment of the requirements for the award of MASTER OF BUSINESS ADMINISTRATION and the project has not previously formed the basis for the award of any other degree.
C.PRABHU Reg.No.11290617 II M.B.A., BHARATH INSTITUTE OF MANAGEMENT BHARATH COLLEGE OF SCIENCE AND MANAGEMENT Thanjavur- 613 005.
DECLARATION I hereby declare that the project report entitled A STUDY ON CAPITAL STRUCTURE IN ARIGNAR ANNA SUGAR MILLS KURUNGALAM submitted for the M.B.A., Degree is my original work and the project report has not formed the basis for the award of any other degree.
ACKNOWLEDGEMENT
I am deeply indebted to Shri. N.GANESAN M.COM., M.Phil., Ph.D., Founder of Bharath Group of Institutions , Thanjavur for having given me an opportunity to undergo M.B.A course in this institution. Iexpress my sincere gratitude to Mrs.PUNITHA GANESAN, B.Sc., M.A., Secretary Bharath Group of institutions,Thanjavur for his encouragedment to pursue this project. I express my sincere and deep sense of gratitude to Prof.Dr.T.VEERASAMY, M.A.,M.Phil., Ph.D., Principal Bharath College, for having promoted strict discipline and hard work during the period of my study in this college. I wish to express my profound thanks to Dr.RM.CHIDAMBARAM, M.Com.,MA.,MBA.,Ph.D., Director. Bharath Institute of Management, for her constant encouragement for giving me all the assistance to complete this project. I express my sincere and deep sense of gratitude to Prof.A.DIRAVIAM, M.Com.,B.Ed.,M.B.A.,M.Phil.,(Ph.D).,vice principal &Head of theDepartment, Bharath Institute of Management for the valuable guidance without which it would not have been possible for me to complete this report successfully.
I take this opportunity to express my deep sense of gratitude and respect to my beloved guide Prof.A.DIRAVIAM MBA., M.Phil., (Ph.D) Faculty, Bharath Institute of Management for the valuable guidance without which it would not have been possible for me to complete this project report successfully. My sincere thanks to xxxxx, Mr xxxxxxxxxx, Training and Development, and other staff who help me in various ways while completing this work. And last but not least, I would like to thank my beloved parents and all my friends for their moral support during my project work.
CONTENTS
Sl.No
Page
Chapter I
1.1 Introduction 1.2 Review Of Literature 1.3 objective 1.4 Scope 1.5 Limitations
2.Company Profile 3.Analysis & Interpretation 4.1 Findings 4.2 Suggestion 4.3 Conclusion
Annexure
Bibliography
Introduction
Capital Structure refers to planning the divide of available capital for the purpose of maximizing the long term profitability of the firm. The project planning is a process by which companies allocate the funds to the various investment projects designed to ensure the growth and profitability. Capital structure means the mixture of share capital and other long term liabilities. In the company, we know that liability of each shareholder is limited but how much be the total liability of shareholder is the important question? It can be decided by choosing best capital structure. In capital structure, we include, equity share capital, preference share capital, debenture and long term debt. Suppose, our company's capital structure may show 50% equity share capital, 30% pref. share capital and 20% debentures. But all companies' capital structure may not be equal because different business need different type of capital structure which will be suitable according to the need of business.
Some of companies want to become smart. They slowly decrease equity share capital and increases loan excessively which may be very risky because these company has to
pay fixed cost of interest and has to manage repayment of loan after some time. Some mistake in it, may be risky for its solvency. So, decision relating to capital structure is very important for company Capital structure planning is very important to survive the business in long run. After simple watching the balance sheet of company, you see two sides of balance sheet. One side is liability side and other side is asset side. Liability side is the mixture of finance of company which company has collected from internal and external sources and it has been used or will be used for development of company. Liability side of balance sheet is made under perfect capital structure planning. Finance manager and other promoters decides which source of fund or funds should be selected after monitoring the factors affecting capital structures. So, capital structure planning makes strong balance sheet. The right capital structure planning also increases the power of company to face the losses and changes in financial markets. Following points shows the importance of capital structure and its planning.
The research title to study the A STUDY ON CAPITAL STRUCTURE AT ARIGNAR ANNA SUGAR MILLS LTD. The importance of study is Capital Structure helps in decision making process when company making Expansion, Establishment of new projects etc. It helps to know the present value of the company and it avoids unnecessary expenditure in to undertake the new projects, in the time of removing the decline stages products Etc. Research objective of the study is to determine whether acquiring capital asset is a viable or not, to find out the Post Payback Profitability and to find out the Accounting Rate of Return on investment and to know the Net Present Value. As I studied in my project on capital structure I found out since the capital invested in the assets are recovered within a short period of 1.6 year. The proposal is viable to the company. Post pay back profitability is Rs.14259.49 lakhs. Finally, I would like to suggest that The Arignar Anna Sugar Mills was located at Kurungulam. It is a small village in Thanjavur Districts. It was established in the year 1971-72. The company achieved high crushing of sugar cane session in the year 2005-06 that is 16,39 424 tones. The present year 2008-09 it crushed sugar cane at 17, 44,267 tones. The company also celebrated in company premises and award given who are directly involved in this achievement.
COMPANY PROFILE
The Tamilnadu Sugar Corporation Limited, Chennai, is a Registered Company under the provisions of Companies Act, 1956. The Arignar Anna Sugar Mills is one of the Units of Tamilnadu Sugar Corporation Limited. The Arignar Anna Sugar Mills is situated in Kurungulam Melpathy Village, Thanjavur Taluk, about 16 Kilometres away from Thanjavur on the Thanjavur Pudukkottai Highways. The total area of land, in which the Mill is situated, is 154.25 Acres. Crushing operation will be going on for about 6 months in between December May. During June to November the work of Overhauling of Machineries will be undertaken. The Factory had its maiden crushing during 1976-77 with an installed capacity 1250 Metric Tonnes of Cane per day. The crushing capacity of the Mills was expanded during 1989-90 from 1250 Metric Tonnes to 2500 Metric Tonnes and crushing at the expanded capacity was started on 26.1.1990 under Expansion and Modernization Scheme.
SUGAR The main product of Sugar Industry is White Crystal Sugar. A typical White Crystal Sugar contains sucrose (97.5%) reducing sugar (0.86%) other organic compound (0.46%) ash (0.43%) and water (0.75%). Sugar Cane contains 11 to 15% sucrose out of which only 8 to 11% is crystalizable. The remaining sucrose goes into by product along with other sugars viz. Glucose and Fructose.
BAGGASE Baggase is the first by-product of cane sugar production. The fibrous residual matter left out after extraction of sugar cane juice is known as Baggase. It contains about 48.50% moisture, 48.0% fibre and 2.40% sugar and other minor constituents. It has been mainly used as fuel in Boiler to raise steam. Nowadays it can be used for paper production. PAPER PRODUCTION FROM BAGASSE Baggase is used as a raw material in the paper industry. Cuba leads in this industry. A Fungi called white-rot fungi degrades the fibre to cellulose. Hemi cellulose and the lignin. It is done in huge fermentation vessels where the fungi is inoculated. After this preliminary treatment , the material is washed and mixed with a 2 % NaOH solution. This enables dissolution of lignins. The fibrous matter is washed followed by pulping impresser digesters using sodium sulphide. . sodium sulphide liquors for about 4 hours. The pressure is released in tanks, followed by straining and washing to remove the pith. The digested, washed, pulp is now suitable for mixing with other bamboo pulps to be used for paper making.
FILTER CAKE: It is obtained from the cane juice, which is used as manure. In the process of clarification, the hot limed juice is delivered to large setting tanks. It consists of large tank with centrally placed slow moving agitator. Horizontal compartments or trags enable mud to slow down, and each having over flow take off for clarified juice. The muds separating in the settling tanks are pumped to rotary filters. Here they are filtered under vacuum using some powdered bagasse (bagacillo) as a filter aid. The pH of the mud to be filtered will be around 7.5. The temperature of sludge is maintained around 60 C to enable effective filtration. The cake is continuously washed on the filter and some sugar is recovered here. The cake is rich in protein and waxes.
MOLASSES Molasses is one of the important by-products , its production depends on the total quantity of cane crushed as well as quality, which varies from region to region . The increases in the percentage of sucrose in molasses greatly affects the final quantity of sugar. Molasses is the final effluent obtained in the preparation of sugar by repeated crystallization; it is the heavy viscous liquid from which no further sugar can be crystallized by the usual methods. BLACKSTRAP MOLASSES Molasses is called as blackstrap molasses because of its dark brown viscous nature. It must not contain less than 40% of total sugar as invert. The components of molasses include 1. Major components ( water, sugar, non-sugars ) 2. Minor components ( Trace elements, vitamins, growth substance) WATER: Commercial molasses have an average water content of 20% . The original end-products in the factory contain 12-17 % water. The principal sugar present in the molasses are sucrose, glucose and fructose, the later two making up the major portion of the reducing sugars. The alkaline degradation of sucrose leads not only to glucose and fructose but also to Psicose and other carbohydrates. Molasses sometimes contain another non-reducing sugar namely the trisaccharide ketose.
CO-GENERATION PROJECT: The cane growing share holders of our Company have given their Consent for the implementation of Co-generation Project at our Mills during the special meeting convened to come out from the sickness and to get Profit in the long run of the industry as the cost of production has considerably increased. Accordingly, action has been taken to implement the Co-generation Project at a capital outlay of Rs.60.00 crores in which the Cane growing members share is 10%. (i.e. Rs.6 crores). In respect of growers share amount, we have collected Rs.50.00 per tonne of Cane from the Cane proceeds of our cane growers towards share amount. The balance share amount will be collected from the cane growing members in the ensuing seasons cane proceeds. Necesary proposals has been submitted to the Government by our Head Office for implementing the project in our Mills. Orders are awaited.
CANE INFORMATION Sugar cane is a traditional crop of India and it is under cultivation since time immemorial in the Indo-Gangetic belt. There are numerous mentions of sugarcane in several of our ancient books such as "Atharva Veda", "Rig Veda" etc dataing back to 1000BC TO 3000BC. Foreign travelers to India, about 2000 years ago, have mentioned about sugar cane. Buddhist literature has several mentions of sugar cane and sugar. SUGARCANE Family Graminaea Class Monocotyledenes Order Glumaceae Cultivars Complex Hybrids evolved from Species Scientific Name Saccharum officinarum . L Cultivated Species 1. Saccharum officinarum . L 2. Saccharum sinense Roxb 3. Saccharum barberi Jesw SEASONS FOR SUGARCANE Early December January ( Margazhi Thai Mid February March ( Masi Pankguni Late April May ( Chitthirai Vaikasi Special June August ( Aanni Avani ) AREA COVERAGE Early and Mid Season planting 70% Late Season Planting 20% Special Season Planting 10% VARIETIES UNDER CULTIVATION Early Co 86032,Co-89014,Co-99004,Co99006,CoC-23,Co-94101,Co-94008,Co92012,CoV-94101 Midlate CoSi-6,CoC-22,Clone-960067 Special All early varieties
7.85
0.00
0.00
Arignar Anna Sugar Mills was a pioneer in the research-based Sugar Industry, situated in the state of Tamilnadu; it combines modern technology and the latest mechanization techniques and compliments it with a 6-decade experience. Alongside, the factory waste, namely molasses is used by TASCO Oregano Chemicals. Industrial alcohol/rectified spirit are manufactured with the sugar waste. The TASCO is also looking towards Venturing into cogeneration of power at all of its sites, with excess power being sold off to the state power grids.
VISION
The TASCO will continue to expand its operations by expanding production into new markets and applications. Growth will also come from value added diversification derived from the groups strengths in products and processes. The quality of the products and services delivered by the TASCO will always strive to exceed customer expectations.
MISSION
The TASCO always has and will continue to use renewable resources in its products. It believes that this is an important need for sustainable development. The TASCO has been and always is aware of its social commitment to the community that it serves. It believes that we have a responsibility and obligation to return to society what we earn from it.
Tamilnadu Sugar Corporation Limited an undertaking of the Government of Tamilnadu was incorporated in 17-10-1974. The first mill to be commissioned by Tamilnadu Sugar Corporation Limited was Arignar Anna Sugar Mills. Arignar Anna Sugar Mills is situated at a distance of 15 Kms. away from Thanjavur Pudukottai Main Road. The mill had acquired 154.25 acres of land belonging to the Government and Private Owners. The Unit commenced its trial (Maiden) crush on 20-02-1977 with an installed capacity of 1250 TCD. The actual cost of the Project was Rs.643.62 Lakhs, whereas the cost of the project was originally envisaged at Rs.640.32 Lakhs. The Capital outlay of the project viz. Rs.643.62 Lakhs, whereas the cost of the project was originally envisaged at Rs.640.32 Lakhs was met out by the issue of Share Capital, obtaining Long Term Loans from Financial Institutions like Industrial Development Bank of India, Industrial Finance Corporation of Indian and Indian Overseas Bank. Tamilnadu Sugar Corporation Limited had alloted Share worth Rs.100.00 Lakhs (constituting 24.33 % of the total Share Capital Rs.411.10 Lakhs) to cane Growers and Public in the Mills jurisdiction, the balance Capital was subscribed the Government of Tamilnadu.
EXPANSION:-The Mill had obtained a Letter of Indent from the Government of India for Expansion of its capacity from 1250 TCD to 2500 TCD during March 1988 (L.I.No.66(1998), dt.14-03-1988). The capacity was expanded during 1989-90 from 1250 TCD to 2500 TCD and crushing at expanded capacity was commenced on 26-01-1990.
Arignar Anna Sugar Mills entered the sugar industry in the late thirties. Based in the Indian state Tamil Nadu, it began operations by setting up two sugar factories, both of which used a scientific method of cultivation. Despite increasing emphasis on traditional cultivation methods, Arignar Anna Sugar was among the few to introdmodernity to this industry. During Sugar factories in Tamil Nadu were being victimized through state policies. Private farms were being nationalized and the co-operative movement quickened the pace of the ultimate closure of these farms. This was unfortunate because the yields from the ARIGNAR ANNA farms were among the best in the world. The yield of cane was 64 ton per acre, recovery of sugar was 11.5% per acre and yield of Sugar was 7.36 tons per acre. Realizing that it could no longer work towards its full potential, the TASCO gave up its pioneer position in Tamil Nadu Sugar industry and re-opened the Arignar Anna Sugar Mills at Kurungulam in the dean state of Karnataka.
On 6th June 1971, the foundation stone at the factory of the Arignar Anna Sugar Mills was laid by the Governor of Tamil Nadu. Due to the prevalent India-Pakistan war at that time. The factory was erected on a war footing and commissioned in a record time of less than ten months. Production started on 20th April 1972.Today, advanced technology and a high level of mechanization has made Arignar Anna Sugar Mills one of Indias largest sugar producers. This TASCO has one of the highest average recovery rates in the industry.
The TASCO Group beats with strong traditional values; hard work, dedication and a caring attitude. At the same time, it employs modern industrial techniques and is today, the epitome of contemporaries, omnipresence has a new name. TASCO, manifesting in ways & means the touch your life, in more ways than you could imagine. Society too experiences the humane touch of TASCO; in terms of healthcare, rural development and environment-effort. Going beyond the call of duty because More than state-of-the-art, its state-of-the-heart that matters. Dynamism put to a growth-oriented approach, underlined with the will to achieve best describe the group that is the air supply of various industries in India. The TASCO Group will continue to expand its operations by expanding production into new markets and applications. Growth will also come from value added-diversification derived from the Groups strengths in products and processes. The Quality of the Products and Services delivered by the TASCO Group will always strive to exceed customers expectations. The TASCO Group always has and will continue to use renewable resources in its products. It believes that this is an important need for sustainable development.
The TASCO Group has been always being aware of its Social commitment to the community that is serves. It believes that we have a responsibility and Obligation to return to society what we earn from it. Since the last six decades, commencing operations in the high growth field of sugar, the Group has created the perfect platform for its future success. Built upon the foundation of care, each of the following facets of the Group was response to a need.
LOCATION
Arignar Anna Sugar Mills is Located at Kurungulam, a small village in the Thanjavur. Kurungulam lies in the potential basin between two rivers, Kaveri.
The ARIGNAR ANNA SUGAR MILLSLTD is the manufacturer of White Crystal Sugar. Along with sugar some other main products manufactured in Arignar Anna Sugar works Ltd. Are 1. CO GENARATION (POWER). 2. DISTLERY PRODUCTS. 3. BIO GAS. 4. OTHER BY PRODUCT.
POWER DIVISION
The factory being the cooperative society with more then 25.000 farmer members of the local area involved in its activity and selling their produce to the factory and dependent on the sugar factory for their existence and livelihood, the creation of co-generation facility has become prime need due to socio-economic reasons. Secondly, the enormous quantity of Bagasse that is generated by the factory shall be best utilized by the creation of co-generation which will help the factory by generating and making available the power.
Further taking into consideration the acute power shortage in the country, both on demand and energy terms and effort to generate power and augment the grid supply will be a laudable and worthy effort; the factory has been planning for setting up a 41MW Multi-fuel Co-generation power project at the factory site. This will enable the factory to play a significant role in supplying power to the public utility simply by increasing its operating efficiency in addition to meeting its need of power. The main purpose of setting up this power project ,as principal fuel, supplemented by Bagasse, other bio-mass fuel and conventional fuels(as needed for maximizing utilization of proposed power project) for at least 300 days per year. The part of the project cost shall be raised by increase in Share Value, a resolution for which has already been passed at an Annual general Body Meeting held on 22/09/2003 and the same have been got approved by the Govt of India & Central Register of Co-operative Societies, New Delhi vide their Letter No.L-11016 /46/87-L&M dated 5th Feb.2004.
The factory, for this worthy project, has obtained all statutory/non-statutory clearances such as Karnataka State Pollution Board, Airports Authority of India, Environmental clearance, In- principal clearance, Clearance for installation of 110 KV SubStation from the Karnataka Power Transmission Corp. Ltd which has already been set up now, to commence with the project. PRODUCTION AND DISTRIBUTION OF POWER Particulars Self load Sugar Unit Export to HESCOM TOTAL Capacity ( MW) 2.00 MW 4.50MW 17.50MW 24 MW
In the off season the plant will import the power of 1.11 MW to maintain the whole plant. To produce 1 MW of power the required Bagasse and 60 tonne of water should be needed. Whole plants machineries has manufactured by Bharat Heavy Electrical Limited. And to maintain the whole plant automatically the plant management will use DCS software (Distribution Control System)
The factory had installed its own Distillery Unit in October 1984 as a by-product industry with its capacity of 30KL liters per day .However taking into consideration the stage wise expansion of the Sugar Mill and the excess availability of crores. The average recovery of Spirit per MT of molasses is 265 Ltrs. Basically in the beginning means 1986 to 1999 the plant was given on rent to Saptagiri Enterprise, Bangalore Recently means in the year 2002 the plant was expanded with extra of 30KL capacity with extra investment of 30.27 crores. And also recently its expansion work is going on by increasing the capacity 60 to 200 molasses, the installed capacity was later on increased 30 to 90KL Liters with another extra investment of 30.27
BAGASSE
Bagasse is the main raw material to the co-generation. It will obtained from sugar unit as a waste material. So this will become main raw material to the co-generation department.
FUTURE GROWTH AND PROSPECTUS Financials - Projects under Implementation New Projects
A: The Company has a well-defined strategy for near future. It has identified certain profitable opportunities that may be captured. These are as follows:
quarter
of
2009
B: Leased sugar factories & distillery Tamil Nadu, GSML has acquired two sugar factories and one distillery on lease recently further adding to its capacities. These units are in high recovery areas of western Tamil Nadu.
PRODUCTION DEPARTMENT
PRODUCTION HIERARCHY
GM (Manufacturing)
Lab Chemist
OBJECTIVES
1. Production department is the hearts of the industry so it should be continue till the organization will close. 2. Production department has to maintain good quality of sugar. 3. Production department should produce the particular type of sugar as per requirement of customer and as per quality, which is approved by quality control department and govt. 4. This department should maintain the production procedure without any stoppages
PRODUCTION DEPARTMENT
Sugarcane contains about 14% fibred and 86% juice consists of about 13% Sucrose and 73% moistures and non-sugar solids.
Juice Heater (Heater of 70 c) Juice Sulphitation Sulphured Juice Juice Heater (heater to 100 c) Clarities Clear Juice Evaporator
AGRICULTURAL DEPARTMENT
INTRODUCTION
The agri departments one of the important dept of the company as its function is to the provide raw materials to the factory & providing proper guidance to the farmer about cultivation of cane new techniques and supplying seeds and fertilizer. In the agricultural department 13 Cluster officer i.e. 4 at Mudhol, 1 at Jamakhandi, 1 at Rabakavi, 1 at Terdal, 1 at Harugeri, 1 at Satti, 1 at Mugalkhod, Mudalgi, Kulgod, and one at Saidapur and Mahalingpur. The farmers are providing Cane & bonded.i.e. Seasonal 1 year short term, long Term 15-20years. The objective of agricultural department is to increase yield level and increasing cane area horizontally and vertically utilizing minimum water.
Objectives
New variety & good quality seeds are provided to former on credit basic without interest and due a amount incurred in next season. Fertilizers are also provided on credit basic with interest. Margin money help for mini lift irrigation schemes and recovered through three installments.
General manager
Office manager
Assistant Manager
Office clerk
Clerks
General Manager
Supervisors
Office Boy
To improve of variety of cane. To develop the backward area. To provide all facilities like seeds, fertilizers, unloading and loading charges. To maintain registration of cane, gang and plantation.
To undertake seeds distribution program.
To soil of this area is varying alluvial fertile soil is there on the bank of Krishna and Ghataprabha rivers. Further upwards, there is medium deep black soil, vary fertile well drained light to medium clay soil, which has received heavy application if from yard Manu science last 10-12 years also is presently in some parts. The main function of cane development department is to arrange for raw material, which is required to the factory. For this order is received by priority basis (that is growers who grows sugar cane first in his led). They also are providing a loading gang with 8 to 10 members per village and also a bonded tractor for transportation.
S.L 1 2 3
OBJECTIVES
To maintain a healthy relationship and act as a mediator between employer and employees. To recruit and select the prospective candidate arrange for an interview and fill the vacancies in the concerned department. To take care of all the activities done by the other departments. Personal department is responsible all the good and bad workers done by the workers. HR department has to maintain the good relationship with all other departments To know the meaning definition and methods of Capital Structure. To determine whether acquired capital asset is viable or not. To find out the Post Payback Profitability. To find out the Accounting Rate of Return on investment. To know the Net Present Value. To find out the Internal Rate of Return on investment. To know the Profitability Index.
SCOPE
1) To maintain full and systematic records of business transactions: Accounting is the language of business transactions. Given the limitations of human memory, the main objective of accounting is to maintain a full and systematic record of all business transactions. 2) To ascertain profit or loss of the business: Business is run to earn profits. Whether the business earned profit or incurred loss is ascertained by accounting by preparing profit and loss account or income statement. A comparison of income and expenditure gives either profit or loss. 3) To depict financial position of the business: A company is interested in ascertaining its financial position at the end of this period. For this purpose, a position statement called Balance Sheet is prepared in which assets and liabilities are shown if the assets exceed liabilities, it is financially healthy in other case it is financially weak. 4) The study under taken on Capital Structure decisions at Arignar Anna (distillery and chemicals division) helps in the evaluation of the Capital Structure decisions already taken and to be take in future. The study will cover the different methods used for the Capital decisions and their viability, their payback or return on the investment 5)
LIMITATIONS
Every company or organization should have well-established training policy. training policy is considered necessary for the following reasons. a. To indicate a companys intention to develop its personnel to provide guidance in the framing and implementations of programs to provide information concerning them to all concerned b. To discover critical areas where training is given on a priority basis and c. To provide suitable opportunities to the employee for his own betterment. A
Employees are coached and instructed by training instructors, they learn the job by personal observation and practice. It is learning by doing.
Merits
1. Learns on the actual equipment in case and in the true environment of his job and therefore, gets a feel of actual production condition and requirements 2. It is highly economically. 3. Learns rules and regulations through observation. 4. It is appropriate for short term learning programs
Demerits
1. Instruction is often highly disorganized and not properly supervised. 2. Lack of motivation.
COMPANY PROFILE
The government of India licensed new units with an initial capacity of 1250 TCD up to the 1980s and with the revision in minimum economic size to 2500 TCD, the Government issued licenses for setting up of 2500 TCD plants thereafter. The government de-licensed sugar sector in the year of 11.September.1988. The entrepreneurs have been allowed to set up sugar factories of expand the existing sugar factories as per the techno-economic feasibility of the project. However, they are required to maintain a radial distance of 15 kms from the existing sugar factory. After de-licensing, a number of new sugar plants of varying capacities have been set up and the existing plants have substantially increased their capacity. There are 566 installed sugar mills in the country as on March 31st 2005, with a production capacity of 180 lack MTs of sugar, of which only 453 are working. These mills are located in 18 states of the country.
The sector wise break ups as follows: Table no-1 Sl. No. 1. 2. 3. Sector Private Public Co-operative Total No of factories 189 62 315 566
Diagram no-1
Sugar Prices
World sugar prices fell steadily from 1994-1995 till 1998-1999 and have been almost stable at those levels. The trend seems to have now reversed and refined sugar prices have increased by 30% in the last 5 quarters from 9.16 cents per pound in January, 2004 to 12.02 cents in March,2005 (Source: USDA Foreign Agriculture Services).
Sugarcane Availability
Table showing sugar cane availability in cultivated area:
Table no-2
Sugarcane occupies about 2.7% of the total cultivated area and it is one of the most important cash crops in the country. The area under sugarcane gradually increased from 2.7 million hectares in 1980-81 to 4.3 million hectares in 2002-03, mainly because of much larger diversion of land from other crops to sugarcane by the farmers for economic reasons. The sugarcane area, however, declined in the year 2003-04 to 3.9 million hectares and to 3.7 million hectares in 2004-05, mainly due to drought and pest attacks. From a level of 154 MMT in 1980-1981, the sugarcane production increased to 241 MMT in 1990-1991 and further to 296 MMT in 2000-2001. Since then, it has been hovering around 300 MMT until last year. In the season 2003-2004, however, sugarcane production declined to 236 MMT mainly due to drought and pest attacks. Not only sugarcane acreage and sugarcane production has been increasing, even drawal of sugarcane by the sugar industry has also been increasing over the years. In India, sugarcane is utilized by sugar mills as well as by traditional sweeteners like guru and khandsari producers. However, the diversion of sugarcane to guru and khandsari is lower in states of Tamil Nadu and Karnataka, as compared to Northern states like UP.
SUGARCANE UTILIZATION
Table no-3
% Sugarcane utilization for Year White Sugar 33.4 50.7 59.7 57.4 68.9 56.1 Guru Khandsari 54.8 37.4 28.8 31.5 20.1 32.5 and Seed, feed and chewing 11.8 11.8 11.5 11.1 11.1 11.4
Sugar Production
Most of the sugar in India is manufactured and sold as White Crystal Sugar which is produced by Double Suspiration Process, while the norm in developed and emerging nations is refined sugar, which is produced by the Phosphoflotation Process. Most of the mills in India are not equipped to make refined sugar Mills which are designed to produce refined sugar can manufacture sugar not only from sugarcane but also from raw sugar which can be imported. Therefore, such mills can run their production all the year round, as opposed to single state mills, which are dependent upon the seasonal supply of sugarcane.
LEAVE ENTRIES
CASUAL LEAVE SICK LEAVE EARNED LEAVE PRIVILEGE LEAVE 10 DAYS 8 DAYS 25 DAYS NOT < 3 DAYS AND NOT > 4 DAYS
FINANCE DEPARTMENT
Finance Department hierarchy
Officer Cashier
Account Asst.
Clerks
Clerks
Accounting Process
Recording the transactions. Classifying the transactions. Summarizing the transactions. Analyzing and interpreting the results.
In this section accounts are maintained. Accounts are maintained in traditional method in this section accounts are maintained. Accounts are maintained in traditional method
INDUSTRY PROFILE
in sugarcane cultivation and ancillary activities, constituting 7.5% of the rural population. Besides, the industry provides employment to about 2 million skilled/semi skilled workers and others mostly from the rural areas. The industry not only generates power for its own requirement but surplus power for export to the grid based on by-productBagasse. It also produces ethyl alcohol, which is used for industrial and potable uses, and can be used to the manufacture Ethanol, an ecology friendly and renewable fuel for blending with petrol. The sugar industry in the country uses only sugarcane as input, hence sugar companies have been established in large sugarcane growing states like Uttar Pradesh, Tamil Nadu, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. In sugar year 2003-04,these six states contribute more than 85%of total sugar production in the country; Uttar Pradesh, Tamil Nadu, and Karnataka together contribute more than 65%of total production.
The government of India licensed new units with an initial capacity of 1250 TCD up to the 1980s and with the revision in minimum economic size to 2500 TCD, the Government issued licenses for setting up of 2500 TCD plants thereafter. The government de-licensed sugar sector in the year of 11.September.1988. The entrepreneurs have been allowed to set up sugar factories of expand the existing sugar factories as per the techno-economic feasibility of the project. However, they are required to maintain a radial distance of 15 kms from the existing sugar factory. After de-licensing, a number of new sugar plants of varying capacities have been set up and the existing plants have substantially increased their capacity. There are 566 installed sugar mills in the country as on March 31st 2005, with a production capacity of 180 lack MTs of sugar, of which only 453 are working. These mills are located in 18 states of the country.
The sector wise break ups as follows: Table no-1 Sl. No. 1. 2. 3. Sector Private Public Co-operative Total No of factories 189 62 315 566
international trade agreements and domestic price support programmers affect production of sugarcane and beet.
Diagram no-1
Sugar Prices
World sugar prices fell steadily from 1994-1995 till 1998-1999 and have been almost stable at those levels. The trend seems to have now reversed and refined sugar prices have increased by 30% in the last 5 quarters from 9.16 cents per pound in January, 2004 to 12.02 cents in March,2005 (Source: USDA Foreign Agriculture Services).
Sugarcane Availability
Sugarcane occupies about 2.7% of the total cultivated area and it is one of the most important cash crops in the country. The area under sugarcane gradually increased from 2.7 million hectares in 1980-81 to 4.3 million hectares in 2002-03, mainly because of much larger diversion of land from other crops to sugarcane by the farmers for economic reasons. The sugarcane area, however, declined in the year 2003-04 to 3.9 million hectares and to 3.7 million hectares in 2004-05, mainly due to drought and pest attacks. From a level of 154 MMT in 1980-1981, the sugarcane production increased to 241 MMT in 1990-1991 and further to 296 MMT in 2000-2001. Since then, it has been hovering around 300 MMT until last year. In the season 2003-2004, however, sugarcane production declined to 236 MMT mainly due to drought and pest attacks. Not only sugarcane acreage and sugarcane production has been increasing, even drawal of sugarcane by the sugar industry has also been increasing over the years. In India, sugarcane is utilized by sugar mills as well as by traditional sweeteners like guru and khandsari producers. However, the diversion of sugarcane to guru and khandsari is lower in states of Tamil Nadu and Karnataka, as compared to Northern states like UP.
SUGARCANE UTILIZATION
Table no-3
% Sugarcane utilization for Year White Sugar 33.4 50.7 59.7 57.4 68.9 56.1 Guru Khandsari 54.8 37.4 28.8 31.5 20.1 32.5 and Seed, feed and chewing 11.8 11.8 11.5 11.1 11.1 11.4
Sugar Production
Most of the sugar in India is manufactured and sold as White Crystal Sugar which is produced by Double Suspiration Process, while the norm in developed and emerging nations is refined sugar, which is produced by the Phosphoflotation Process. Most of the mills in India are not equipped to make refined sugar Mills which are designed to produce refined sugar can manufacture sugar not only from sugarcane but also from raw sugar which can be imported. Therefore, such mills can run their production all the year round, as opposed to single state mills, which are dependent upon the seasonal supply of sugarcane.
Conclusion
India is a largest consumer of sugar in the world and second largest manufacturer of sugar followed by China, USA, Thailand, Germany, and Pakistan. In the sugar industry the top position is Brazil as it is a world largest manufacturer of sugar. As seeing the consumption of sugar the India is having a big market for sugar industry. As it is a large-scale industry it provides large profit for the country and it can also be helpful for development of industrial infrastructure. India is a worlds largest consumer and second largest manufacturing of sugar so the sugar must be cheaper. It can be provide by our sugar industry.
LIMITATIONS
Considering the scope mentioned above, some or few limitations are arising. That is Arignar Anna Sugar Mills Ltd is big organization. Its finance and accounts department is also big departments. But due to shortage of information providing, I am concentrating on equations as per information given by the finance and accounts department.
TRADITIONAL METHODS
PAY BACK PERIOD METHOD. POST BACK PROFITABILITY METHOD. ACCOUNTING RATE OF RETURN METHOD.
DISCOUNTED CASH FLOW METHODS THE NET PRASENT VALUE METHOD INTERNAL RATE OF RETURN METHOD PROFITABILITY INDEX METHOD
TRADITIONAL METHODS
PAYBACK PERIOD METHOD
The term payback period refers to the period in which the project give the necessary cash to recover the initial investment. It is a traditional, simple method of evaluate the projects. It does not take the effect of time value of money. Cash flows refer to profit before depreciation and after tax. MERITS 1) It is a old method and traditional one. 2) It involves simple calculations 3) It is the best method for evaluating high risk projects. 4) The Results obtained under this method is more reliable. DEMERITS 1) It is based on the principle rule and thumb. 2) It does not recognize the importance of time value of money. 3) It does not recognize the pattern of cash flows and its timing.
POST PAYBACK PROFITABILITY METHOD To remove the drawbacks of payback period, the post payback profitability method was developed. The cash inflow generated from a project during the life of the project. As payback period the cash flow were considered only to the extend of recovering the investment. But in practical, after the recovery of pay back period the project can capable to generate the cash inflows or not. Therefore, to evaluate the project the entire amount of cash inflows.
MERITS 1) It is based on simple calculations. 2) It takes less time consuming. 3) It is easy to follow and even ordinary man can also understand DEMERITS 1) It is also based on principle of rule and thumb. 2) It doesnt consider the impact of time value of money. 3) It ignores depreciation.
As ARR is commonly accepted in assessing the profitability of capital expenditure. Because the method does to consider the heavy cash inflow during the project period. As the earnings with averaged.
MERITS 1) 2) 3) 4) DEMERITS 1) 2) 3) 4) It ignores time value of money. It does not consider the length of life of the project. It does not consistent with the firms objective of maximising the market It ignores the fact that the profits earned can be reinvested. It is very simple to understand and use. This method takes into account saving over the entire life of the project. This method through the concept of net earnings. It can be readily by calculated by using the accounting data.
value of shares.
PROFITABILITY INDEX Profitability index is a conceptually sound method of appraising investment projects. It provides ready comparison between investment proposals of different investment proposals of different magnitudes. Project can be ranked on the bases of profitability index. PROFITABILITY INDEX = P V of Cash Inflow Initial investment.
The initial investment is Rs 6666.98 lakhs. The first year cash inflow is Rs 4583.28 lakhs. The second year cash inflow is Rs 3448.82 lakhs. The cash flow need only 6666.98 4583.28 = 2083.16 lakhs for recovery of the initial investment. PAY BACK PERIOD = REMAINING CASH FLOW 2ND YEAR CASH FLOW
= 2083.16 3448.82 = 0.604 year. PAY BACK PERIOD = 1.604 YEARS. Analysis:
For the 5 years period from 2004-05 to 2008-09 the above calculation the pay back period is very low that is 1.604 years. So the investment was recovered early.
Analysis:
For the 5 years period from 2004-05 to 2008-09 the above calculation the post payback profitability is very high that is 14259.49 lakhs. So the project is more profitable one.
Average income =
ARR = 56.94%
Analysis:
For a 5 years period from 2004-05 to 2008-09, the above calculation the ARR works out to be 56.94%. This indicates that the company is having high rate of return.
@ 17% 2007-08 0.855 2008-09 0.731 2009-10 0.625 2010-11 0.534 2011-12 0.457 PRASENT VALUE Less: Initial Investment NET PRESENT VALUE
Analysis:
For a 5 years period from 2004-05 to 2008-09, the above calculation the NPV is very high that is 5436.46 lakhs. It indicates the value of the is high.
INTERNAL RATE OF RETURN METHOD: Initial investment FACTOR = Average cash inflow
(Rs in lakhs)
Average cash inflows = 4247.06+3448.82+2867.98+4538.89+3796.20 5 Average cash inflows = 18898.95 5 Average cash inflows FACTOR VALUE = = 3779.79 6666.98 3779.79 FACTOR VALUE = 1.76
IRR = Where,
7714.76 6666.98 X (50 - 40) IRR = 40 + 7714.76 5802.61 IRR = 40 + 1047.78 X 10 1912.15 IRR = 40 + 5.48 IRR = 45.48.
Analysis:
For a 5 years period from 2004-05 to 2008-09, the IRR works out to be 45.48. This is good for the company.
Year
Discounting
factor @ 17% 2007-08 0.855 2008-09 0.731 2009-10 0.625 2010-11 0.534 2011-12 0.457 TOTAL P V of CIF
PROFITABILITY INDEX =
1.15
Analysis:
For a 5 years period from 2004-05 to 2008-09, the above calculation the profitability index or cost- benefit ratio is 1.15. So the project is viable.
Findings
1. Since the capital invested in the assets are recovered within a short period of 1.60 year. The proposal is viable to the company. 2. Post pay back profitability is Rs.14259.49 lakhs.
3. Accounting Rate of Return is 56.94% 4. Since the Net Present Value is positive the project is financially viable.
Suggestions
Even though the distillery and chemicals division have high potentiality to earn huge profits, the company is not giving the importance to the division continuously. The company is giving the importance to 1 division among 3 divisions. Here they are neglecting the importance of other two divisions for the year. This is resulted in high fluctuations on cash inflows for the company. Here the company may work on the area and improve the companys profitability.
CONCLUSION
The Arignar Anna Sugar Mills was located at Kurungulam. It is a small village in Thanjavur district. It was established in the year 1971-72. The company achieved high crushing of sugar cane session in the year 2005-06 that is 16,39 424 tones. The present year 2011-12 it crushed sugar cane at 17, 44,267 tones. The company also celebrated in company premises and award given who are directly involved in this achievement. The Distillery and Chemicals division was established in the year 1984-85. The Distillery division started working initially 30000 Ltrs. It has some by-products. that are Ethyle Actate, Bhoomilabha, SOC etc. The Capital Structure means the capital project planning is a process by which companies allocate funds to various investment projects to ensure the profitability and growth. The Capital Structure mainly has two methods, first, Discounted cash flow methods and second one is traditional cash flow methods. The Distillery and Chemicals division at Arignar Anna Sugars Ltd, performance is very well in turns high Net Present Value early recovery period of initial investment. So the Distillery and Chemicals division performing very well.
BIBLIOGRAPHY
References: 1) Financial Management BYD B KULKARNI. P V SATYAPRASAD. 2) FINANCIAL MANAGEMENT BY- I M PANDE 3)TASCO-Web Site
(RS IN LAKHS)
SOURCES EQUITY SHARES PREFERENC E SHARES LOANS RETAINED EARNINGS 46286.50 0.16726 Cost in % = 16.73 OR 17. AMOUNT 2748,25 1800.00 36238.18 5500.07 PRAPORTION COST 0.0590 0.375 0.0390 0.7829 0,1188 0.120 0.1225 0.375 WACC 0.02212 0.00468 0.09591 0.04455
CALCULATION OF INVESTMENT FOR THE YEAR 2004-05 Net Assets on 31st march 2005 Cash inflow of Distillery and Chemicals Division 2004-05 Total Cash Inflow of Arignar Anna Sugar Mills is Investment in the year 2004-05 = Net Assets X = 40999.54 CIF of Distillery and Chemicals Total CIF of GSM. Investment = 19330.71 X 14140.36 40999.54 Investment = 6666.98. = 19330.71 = 14140.36