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1.1 PROFITABILITY PERFORMANCE

Every firm is most concerned with its profitability. One of the most frequently used tools of financial ratio analysis is profitability ratios which are used to determine the companys bottom line. Profitability measures are important to company managers and owners alike. if a small business has outside investors who have put their own money into the company ,the primary owner certainly has to show profitability to those equity investors. Profitability is an indication of the efficiency with which the operations of the business are carried on. Poor operational performance may indicate poor sales and hence poor profits. A lower profitability may arise due to the lack of control over the expenses. Banks, financial institutions and other creditors look at the profitability ratios as an indicator whether or not the firm earns substantially more than it pays interest for the use of borrowed funds and whether the ultimate repayment of their debt appears reasonably certain. Owners are interested to know the profitability as it indicates the return which they can get on their investments. Profitability ratios show a companys overall efficiency and performance. we can divide profitability ratios into two types: margins and returns .ratios that show margins represent the firms ability to translate sales dollars a into profits at various stages of measurement. Ratios that show returns represent the firms ability to measure the overall efficiency of the firm in generating returns for its shareholders. A financial analysis assists in identifying the major strengths and week nesses of a business enterprise. It can also be used assess a firms viability as an on going enterprise and to determine whether a satisfactory return is being earned for the risks taken. the information contained in the financial statements is of major significance to a variety of interested parties who regularly need to have relative measures of the companys operating efficiency. The analysis of financial statements is based on the use of ratios. Ratio analysis involves methods of calculating and interpreting financial ratios to analyze AITS, RAJAMPET Page 1 09701E0016

ANANTHA PVC PIPES PRIVATE LTD and monitor a firms performance. The basic inputs to ratio analysis are firms income statement and balance sheet. The analysis and use of financial ratios is an increasingly important area of financial research and practice. Parties interested in financial ratios are shareholders, creditors, and a firms own management. Both current and prospective shareholders are interested in the firms current and future level of risk and return, which directly affect the share price. The firms creditors are interested primarily in the short-term liquidity of the company and its ability to make the interest and principal payment. A secondary concern of creditors is the firm profitability they want assurance that the business is healthy. The management like shareholders is concerned with all aspects of firms financial situation, and it attempts to produce financial ratios that will be considered favorable by both the owners and creditors. In addition, the management uses ratios to monitor the firms performance from period to period. Finance is viewed as the most important factor in every enterprise and it is provision of money at the time when it is required. Every enterprise whether big, medium or small needs finance to carry on its operations and to achieve its targets. Finance is so indispensable today that it is rightly said it is the lifeblood of an enterprise. Without adequate finances, no enterprise can possibly accomplish its objectives. Capital required for a business can be classified under two main categories i.e., fixed capital and working capital. Fixed capital stands for the amount of capital which is required for long term to create production facilities through purchase of fixed assets such as plant, machinery, land and buildings etc, working capital refers to that part of the firms capital which is needed for financing short terms or current assets such as marketable securities, debtors and inventories etc, working capital in brief, is the amount of funds necessary to cover the cost of operating the enterprise. Just as circulation of blood is essential in the human body for maintaining life of a person, working capital is very essential to maintain the smooth running of a business.

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ANANTHA PVC PIPES PRIVATE LTD The modern thinking in financial management gives greater importance to management decision making and policy. Today, the financial manager is not in a passive role of score keeper of the accounting information and arranging funds. Whenever directed to do so. Rather, he occupies a key role in solving the complex management problems. He is not responsible for shaping the fortunes of the enterprise and is involved in the most vital management decision of allocation of resources.

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ANANTHA PVC PIPES PRIVATE LTD

1.2 INDUSTRY PROFILE

Pipe industry The world needs pipe to survive for water, oil, gas and sewage. Pipes have been a fundamental part of civilization since 3,000 BC and as the world has developed, both in terms of population and infrastructure, the demand for pipe has expanded and is set Overview Pipe systems were first developed from clay and wood, but since the Industrial Revolution, materials such as steel, ductile iron, plastic and concrete have become more prevalent. Fiberglass followed in the 1950s with the development of downstream petrochemical products. Today the world needs pipe to survive. We are reliant on water, gas, oil and electricity and pipes carry these materials from their source to their users. Pipes also carry away waste and sewage, from factories and homes. Utilization Pipes are used across a diverse number of end-markets for transmission and distribution or as engineering and manufacturing components. Historically, certain pipe materials have been associated with particular end-markets and applications e.g. steel pipes for gas transmission, however, fiberglass has gained increasing acceptance in many end-markets.
A combination of population growth, urbanization and industrialization has made Water Distribution a strong and growing market for our pipe systems

In the Industrial end-market, pipes are used in various industrial manufacturing applications including dredging, mining (slurries), sugar refineries, resin plants, cooling water systems, and process automation piping.

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ANANTHA PVC PIPES PRIVATE LTD Demand Governments and municipal authorities must invest in pipe systems due to: The rising global population and greater urbanization bringing increased need for housing, non-residential buildings and infrastructure Accelerated economic growth of developing nations leading to increasing construction activity, infrastructure investment and industrial and residential water consumption Old piping systems in established economies requiring replacement Growth in downstream petrochemical plants and infrastructure investment in the Oil & Gas industry Importance Of Pipes Industry: We shall look at the basic data about plastics and particularly those properties, which are so, fuse in practical working with plastics. Plastics are man-made materials. The oldest raw material for producing plastics is carbonaceous material obtained from coal tar (benzene, phenol). Today the majority of raw materials are obtained from petrol chemical source and they can be economically produced in large quantities. Plastics have changed our world and day-by-day they are becoming important. They own their success to whole series of advantage, which they have over conventional materials such as: Lightweight Excellent mould ability Attractive colors Low energy requirements for convention Low labor and cost of manufacture Low maintenance & High strength weight ratio Page 5

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ANANTHA PVC PIPES PRIVATE LTD Plastic Pipes classified as HDPE Pipe Polyethylene Pipe PVC Pipes UPVC Pipes Plastic Composite Pipes Plastic Flexible Pipe Plastic Filter Pipe The Govt. of India recognizing the importance of plastics in agriculture appointed on march 7th, 1981 a National Committee on the use of plastics in agriculture under the chairmanship of Dr.G.V.K.Rao. This committee has forecast a tremendous growth of drip irrigation through a net work of plastic pipes and tubes. In its opinion large scale adoption of irrigation would lead to sports in demand for PVC pipes, L.D.P.E tubes and polypropylene emitters. The committee made a number of recommendations for promoting the use of plastics. The implementation of recommendations would go along away in increasing the consumption of plastics, which at present is very low. The rigid pipes, flexible pipes and sheeting, which are being used for agricultural operations to carry out water place to place and also lining of ponds and reservoirs to reduce seepage and most important in drip irrigation system. Role of plastics in the national economy: Plastics are got perceived as just simple colorful household products in the mind so common person. A dominant part of the plastics of the percent and future find their utilization in the areas. Agriculture, forestry and water-management. Automobile and transportation Electronics and telecommunications, buildings, construction and. Food processing and packaging Power and gas distributor.

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ANANTHA PVC PIPES PRIVATE LTD The Indian pipe industryreaping the benefits of good time The replacement demand market for pipes from the matured markets has remained consistent throughout the volatile period on the back of higher infrastructure spending. In India, the government is focused on developing pipeline network by increasing the availability of city-based gas distribution (CGD) and is aiming to cover approximately 200 cities by 2015. Also, with the pipeline network of India for oil & gas transport being lower at 19,103 kms as on April 2010, (32% penetration level) it represents a huge scope for growth for the pipe industry. As most of the Indian pipe manufacturers are converters, the industry is highly Raw Material (RM) intensive with the RM cost accounting for more than 70-80% of the total cost for steel and PVC pipe companies. These companies rely heavily on imports and hence many steel pipe companies have backward integration facilities to reduce dependency on imports and price volatility. Freight cost is another key cost component due to higher imports and exports. Going forward, with the expected softness in international steel prices and reasonably low level of Baltic Dry Index (a barometer for shipping freight rates), pipe companies will be benefited due to lower input costs.

Indian companies produce a wide range of steel, cement and plastic pipes which are used in various critical and non-critical applications. Indian steel pipe manufacturing companies have won several certifications and accreditations from major oil & gas companies across the globe in the recent past. With the low-cost and high-quality products supplemented by various international certifications, Indian companies have augmented their export sales over the last 3 to 4 years.

CARE Research expects the positive trend in the Indian pipe industry to continue for the next 3-5 years on the back of higher E&P activities due to resurgence in crude oil price, increased efforts by the Government of India (GoI) on infrastructure development for laying pipelines for oil & natural gas transport (e.g. the National Gas Grid project), replacement demand from North America and European countries, water & sewage transport and irrigation facilities. The growth will mainly be driven by steel pipes especially SAW pipes. The order-book position (currently equivalent to total of FY10 sales) of many steel pipe companies is sufficient for the next 6-12 months.

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ANANTHA PVC PIPES PRIVATE LTD PVC pipes in India: Pipes products have found wide acceptance in India and abroad. PVC is one of the more versatile plastics. It can be extruded, mounded, calendared and thermoformed into a multitude of furnished products. The PVC resin can be formulated to give a wide range of properties ranging from hand, tough materials for load bearing application lime pipes, windows and doors to flexible materials for products a due as wire and cable insulation and shooting and flooring. PVC products cater to both interiors and exteriors. In interiors it can be used for flooring, profile and cable tray, wall covering modular office systems, houses and furniture. For exteriors it is used for doors and windows, fencing partitions and paneling, roofing and rain systems. The other external applications are in the field of irrigation, portable water supplies. In the field of irrigation there are several methods to irrigate the fields. There are minor irrigation projects and major irrigation projects apart from individual sources like wells, tube wells, bore wells. Major irrigation sector small projects will have canals and lift irrigation schemes etc., will have canals and lift irrigation schemes etc., will have pipelines. Cement and GI pipes were the pipes used in conventional methods of irrigation. Now-a-days PVC pipes replaced the conventional pipes and they constituted almost 90% in this respect. Drip irrigation popular in the agricultural sector especially in the field of horticulture commercial cropping and green ply houses. The drip irrigation concept is becoming more popular with its advantages like highly yield, water conversion, less labour cost, less fertilizer, less past management costs, less power costs and many more advantages. The demand for this concept is increasing at a place of 30%-40% per annum. Agriculture a sunrise industry in the Indian economy is mainly dependent on the PVC pipes for the seawater sector and pumping to their aqua ponds. They are using pipelines of four to five kilometers of 10-16 diameters pipes.

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ANANTHA PVC PIPES PRIVATE LTD The state Govt. of A.P is using rigid PVC pipes for the irrigation water supplies for the past few years. The state Govt. is producing PVC pipes through APSIDC (Andhra Pradesh State Irrigation Development Corporation) for its lift irrigation schemes. The panchayatraj department is producing pipes for public water supply schemes. These pipes can be used for the main distributors, sub-distributors and individual connections.

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ANANTHA PVC PIPES PRIVATE LTD

1.3 COMPANY PROFILE

ANANTHA PVC PIPES PRIVATE LTD: Anantha PVC Pipes Pvt Ltd. was incorporated in the year Feb 2002. The factory is situated at NH-7, Hampapuram village, Raptadu mandal, and Anantapur district. It was taken over by Nandi group company, and it is one of the sister company among the Nandi groups. Its annual production capacity is 18,000 mts. And it is one of the leading manufacturers of PVC pipes in south India. This company is equipped with technical collaboration from Batten field of West Germany. It has made possible few other small ventures. Pipes are sold under the brand names of MONARCH, KOHINOOR and KRISHNA. Anantha PVC Pipes with their good quality, trouble free services, durability and commercial use are a better choice than mild steel, galvanized steel, cast iron and plastic pipes. The company is managed by a term of professionals under the guidance of a young, experienced and well qualified dynamic managing director Mr. Sreedhar Reddy. Origin: Rayalaseema is economically backward area in Andhra Pradesh, was rare field region for industries. A dynamic entrepreneur sir S.P.Y.Reddy who is basically mechanical engineer started a unit at Nandyal, which manufactures black pipes in 1977. The determination and hard work of Sri S.P.Y.Reddy helped him to overcome the problems faced by the company in the initial years, and with financial assistance from local commercial banks. The company could overcome the problems of the merger and now it is running smoothly. Later the company started manufacturing of PVC pipes which terminated the manufacturing of black pipes. This resulted in the formation of a Pvt. Ltd. company called SUJALA PIPES PVT.LTD. with Sri S.P.Y.Reddy as the Managing Director.

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ANANTHA PVC PIPES PRIVATE LTD The only major competitors to the company are Sudhakar pipes, Maharaja Pipes. The only backdrop to it is the competition from local brands. As the majority of the customers belong to farmers, they consider the quality. The company has to make aware of the companys quality standards to them. Board of directors: S.P.Y.Reddy: Sri S.P.Y.Reddy locally well known industrialist with the base at nandyal, Kurnool district who has been successful entrepreneur, he is technically qualified person with B.E (MEC) from R.E.C (Warangal) and with work experience at BAARC (Bombay). He has daringly ventured and established industries in and around Nandyal from 70s. As years went of he has established most successfully the following Nandi group of companies: Nandi Milk Maha Nandi Mineral Water Nandi Infosys Nandi Online Services Anantha PVC Pipes Pvt Ltd. Integrated Thermos Plastic Ltd. Nandi PVC Projects.

Promoter: Sri. S. Sreedhar Reddy, a computer engineer and a student of IIM, Ahemadabad has been entrusted the management of Anantha PVC Pipes Pvt Ltd., Hampapuram and great assistance and a great upcoming engineer and industrialist. Branches: Pondicherry Bellary Sangli Vellore Page 11 09701E0016

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ANANTHA PVC PIPES PRIVATE LTD Goa Kerala

Coverage: At present Andhra Pradesh, parts of southern states of Karnataka, Tamilnadu and Kerala are ambit of Sujala Pipes Pvt Ltd Sizes: Various sizes ranging from to 10 are offered to customers. Even pipes with different gauges and sizes are manufactured to suit specified conditions. Packing: Packing plays less important role into the products like PVC pipes because the hallow space inside can be utilized. For the purpose of cubic space utilization in trucks while transport, organization is adopting the techniques like pipes in pipes. Payment period: For monarch brand the company adopts zero credit policy and goods are not delivered unless cash remittances are made. For monarch and Sagar brands credit is entitled up to a week. The difference between these brands is due to brand image.

Technical details about PVC pipes: Ingredients: PVC resin D.B.L.S T.B.L.S L.S C.S Stearic Acid Hydro Carbon Calcium Carbonate AITS, RAJAMPET Page 12 09701E0016

ANANTHA PVC PIPES PRIVATE LTD Manufacturing process: The main raw materials are HDPE granules and PP granules. The manufacturing process for pipes consists of mixing various resins along with the coloring materials in a mixture and the prepared material is fed to the extruder. In the extruder, the material is heated to the required politicizing temperature (190deg. centigrade to 230deg. centigrade) the extruder through the die hard to form the pipe. The hot pipe coming out of the extruder is cooled in a water bath to retain the final shape. The pipe coming out of the extruder is guided through the water bath suitable transaction system. The temperature of the water is maintained by circulating through the cooling towards and with the help of a chilling plant. The required length of the pipe is cut with a planetary saw. The cut lengths are titled by titling units and get corrected in the pipe rack attached to the titling frames. Later they are stocked separately. The company has entered into a technical with its own processing technology. Channels of distribution: Anantha PVC Pipes Pvt Ltd. has got zero level and single level channel of distribution.
MANUFACTURER CONSUMER

MANUFACTURER

DEALER

CONSUMER

Anantha PVC Pipes Pvt Ltd. has an extensive network of 350 dealers in Andhra Pradesh and who are directly serviced by company sales force and 620 dealers in South India. Transportation: Transportation vehicles of Anantha PVC Pipes Pvt Ltd. outnumber the fleet of the competitors vehicle. This unique strength of the organization enables the delivery system AITS, RAJAMPET Page 13 09701E0016

ANANTHA PVC PIPES PRIVATE LTD to be efficient. This event helps the dealers to reduce inventory levels to the minimum. The dealers are also supplemented with the benefit of the lower paid up capital in the form of inventory. Mission Statement: The mission statement of ANANTHA PVC Pipes Pvt Ltd. is as follows: To be preferred supply chain partner to out customer. To be recognized as the best in the world at we do. To create new values in the quality for our customers and employees.

Vision Statement: The vision statement of ANANTHA PVC Pipes Pvt. Ltd. is as follows: Creating new values in quality by working together for you Functional departments of the company: Financial department: Through initially the company approached the external source for financial aid, now the financial status of the company is very sound and is being run only with self finance excepting for loans taken for hypothecation of machinery and stock from SBI Nandyal. The company follows cash and carry policy for monarch brand. The product is not delivered until the cash is paid and financial department with the help of marketing department looks after these transactions. Marketing department: Marketing Department is headed by the Executive Director. Marketing Manager is in charge of all operations who reports to the Executive Director. Marketing Manager and 35 Sales Representatives are under the control of Executive Director. There are also 20 salesmen who have to report to the sales representatives above them.

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ANANTHA PVC PIPES PRIVATE LTD Personal Department: The Personal department consist the details of the executives and workers of the organization. The organization is formed with Sri. S. P. Y. Reddy as the managing Director. Two Marketing managers, financial managers, public relations officer and quality control officer who all reports to executive director. Other than executives there are thousands workers in the organization. Panel consisting of managing director, executive director and managers of concerned departments makes the recruitment and selections of persons. Apart from the attractive salaries company provides health cards facilities. Purchasing department: The perplexing situation i.e. conformed by the manufactures of the PVC pipes is scarcity of resin. Though the government of India has taken various steps to improve the supply conditions of PVC resin, the Indian manufactures could meet only 50 percent of demand and remaining 50 percent is met from imports. The major petrochemical company is Reliance Petrochemical Ltd. The lead time for the acquisition of raw materials is 4 days. The following lines highlight the human resources policies and practices: Effective utilization of manpower. To provide good working condition. To promote industrial development.

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ANANTHA PVC PIPES PRIVATE LTD Application of PVC pipes: Agriculture and irrigation schemes. Rural and urban water supplies scheme. Tube well casing. Gas and oil supply lines. Industrial effluent disposal. Sewerage and drainage scheme. Air-condition ducting. Building installations. Industrial ducting.

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ANANTHA PVC PIPES PRIVATE LTD 2.1 NEED FOR THE STUDY: Profitability ratios are used by investors and analysts to evaluate a companys ability to generate earnings as compared to its competitors and other industry players. They also highlight the strength and efficiency of a companys business model. While profit margin ratios are used to judge the efficiency with which the company earns profits, rate of return ratios provide information of the efficiency with which the company employees its assets and other available resources. 2.2 OBJECTIVES OF THE STUDY: To find out profitability ratios of the Anantha PVC Pipes Private Limited. To test the significance of the profitability ratios through coefficient of the correlation.

2.3 DESCRIPTIVE RESEARCH: Descriptive research studies are those studies which are concerned with describing the characteristics of a particular individual or a group. The main characteristic of this method is the researcher has no control over the variables, he can only report what has happened or what happened or what is happening. The methods of search utilized in described research are survey methods at all kinds, including comparative and correlation method

2.4 DATA COLLECTION METHOD: The data used for this study was secondary data. And it is collected from annual reports.

2.5 LIMITATIONS OF THE STUDY:

The study is limited to only profitability performance of the company.

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2.6 TOOLS OF ANALYSIS:

GROSS PROFIT RATIO: The gross profit margin looks at cost of goods sold as a percentage of sales. This ratio looks at how well a company controls the cost of its inventory and the manufacturing of its products and subsequently passes on the costs to its customers. The larger the gross profit margin, the better for the company. The calculation is: Gross Profit/Net Sales*100. Both terms of the equation come from the companys income statement.

OPERATING PROFIT RATIO: The Operating profit margin is a type of profitability ratio known as margin ratio. The information with which to calculate the operating profit margin comes from a companys income statement. Operating income is often called earnings before income and taxes or EBIT. EBIT is the income that is left, on the income statement, after all operating costs and overhead, such as selling costs and administration expenses, along with cost of goods sold, are subtracted out.

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ANANTHA PVC PIPES PRIVATE LTD NET PROFIT RATIO: It measures how profitable a companys sales after all expenses, including taxes on interest and preferred stock dividends, have been deducted. This higher the firms net profit margin, the better.

EARNINGS PER SHARE RATIO (EPS): This ratio highlights overall success of the concern from owners point of view and it is helpful in determining market price of equity shares. It reflects up on capacity of the concern to pay dividend to its equity shareholders this ratio is calculated by dividing the net profit after tax and preference dividend by number of equity shares.

RETURN ON TOTAL ASSETS RATIO (ROA): The return on total assets (ROA), often called the return on investment (ROI), measures the overall effectiveness of the management in generating profits with its available assets. The higher the firms return on total assets, the better.

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ANANTHA PVC PIPES PRIVATE LTD RETURN ON EQUITY RATIO (ROE): This ratio signifies the return on equity shareholders funds. The profit considered for computing the ratio is taken after payment of preference dividend the ratio of return on equity shareholders.

CORRELATION: Correlation is the degree of association between two variables and it is represented in terms of a co-efficient known as correlation. The range of the correlation co-efficient is in between -1 and +1. If the correlation co-efficient is negative, then the variables are inversely proportional and maximum when the co-efficient is +1 and variables are associated. If co-efficient of correlation =0 then there is no correlation.

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ANANTHA PVC PIPES PRIVATE LTD 3.1 GROSS PROFIT RATIO: The gross profit margin looks at cost of goods sold as a percentage of sales. The larger the gross profit margin, the better for the company.

Table Year 2004 2005 2006 2007 2008 2009 2010

No. 3.1 Calculation of Gross Profit Ratio during 2004-2010

Net Sales(Rs in cores) 38.09 27.36 35.65 33.23 35.92 42.88 60.40 Gross Profit(Rs in cores) 3.98 2.86 4.72 6.06 4.80 6.65 8.56 Gross profit Ratio (%) 10.44 10.45 13.25 18.23 13.37 15.51 14.18

SOURCE: compiled from the annual reports of Anantha PVC Pipes Private Ltd. Graph No. 3.1

20 Ratio 15 10 5 0 2004 2005 10.44 10.45

Gross Profit Ratio 18.23

13.25 13.37 15.51 14.18

2006

2007

2008 2009 years

2010

Gross Profit Ratio

Interpretation: From the above table3.1, it was observed that gross profit ratio was ranges from 10.44% to18.23%. During the years 2004-2010 sales value increases from 38.09 Crs to 60.40 Crs. In the year 2007, Gross profit ratio was high because of increase in gross profit and also decreases in sales compared to previous year.

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ANANTHA PVC PIPES PRIVATE LTD 3.2 OPERATING PROFIT RATIO: Operating income is the income that is left, on the income statement, after all operating costs and overhead, such as selling costs and administration expenses, along with cost of good s sold, are subtracted out.

Table No. 3.2 Calculation of Operating Profit Ratio during 20042010

Year 2004 2005 2006 2007 2008 2009 2010 Net Sales(Rs in cores) 38.09 27.36 35.65 33.23 35.92 42.88 60.40 Operating Profit(Rs in cores) 0.38 0.51 0.59 1.40 0.50 1.66 0.09 Operating profit Ratio (%) 0.98 1.85 1.66 4.21 1.40 3.88 0.15

Source: compiled from the annual reports of Anantha PVC Pipes Private Limited. Graph No. 3.2

Operating Profit Ratio

6 4 2 0 4.21 0.98 2004 1.85 1.66 2006 1.4 2007 2008 Years 2009 Ratio 3.88 0.15 2010 Operating Profit Ratio

2005

Interpretation: From the above table3.2, it was observed that operating profit ratio was fluctuated from year to year and it ranges from 0.15 %to 4.21%. In the year 2010, it was low i.e., 0.15 because of increase of operating expenses compared to previous year and it leads to decrease in operating profit. AITS, RAJAMPET Page 22 09701E0016

ANANTHA PVC PIPES PRIVATE LTD 3.3 NET PROFIT RATIO: It measures how profitable a companys sales after all expenses, including taxes on interest and preferred stock dividends, have been deducted. This higher the firms net profit margin, the better.

Table No. 3.3 Calculation of Net Profit Ratio during 2004 2010
Year 2004 2005 2006 2007 2008 2009 2010 Net Sales(Rs in cores) 38.09 27.36 35.65 33.23 35.92 42.88 60.40 Earnings After Tax(Rs in cores) 0.04 0.06 0.08 0.05 0.39 0.56 0.68 Net profit Ratio (%) 0.12 0.21 0.24 0.15 1.1 1.32 1.13

Source: compiled from the annual reports of Anantha PVC Pipes Private Limited. Graph No. 3.3

Net Profit Ratio

2 Ratio 1 0 2004 2005 2006 2007 2008 2009 2010 Years 0.12 0.21 0.24 0.15 Net Profit Ratio 1.1 1.32 1.13

Interpretation: From the above table3.3, it was observed that net profit ratio ranges from 0.12% to 1.32%. In the year 2004 Net profit ratio was low because of low earning after tax with respect to high sales. Earnings after tax was continuously increases from 2004 to 2010 except in the year 2007.from the year 2008 to 2010 earnings after tax was high because of increase in income and decrease in expenditure. AITS, RAJAMPET Page 23 09701E0016

ANANTHA PVC PIPES PRIVATE LTD 3.4 EARNINGS PER SHARE (EPS): This ratio highlights overall success of the concern from owners point of view and it is helpful in determining market price of equity shares. It reflects up on capacity of the concern to pay dividend to its equity shareholders this ratio is calculated by dividing the net profit after tax and preference dividend by number of equity shares.

Table No. 3.4 Calculation of earnings per share during 2004 2010
Year 2004 2005 2006 2007 2008 2009 2010 Number of shares(Rs in cores) 0.20 0.20 0.20 0.20 0.20 0.20 0.20 Earnings After Tax(Rs in cores) 0.04 0.06 0.08 0.05 0.39 0.56 0.68 Earnings per share(Rs) 0.22 0.28 0.42 0.24 1.98 2.83 3.42

Source: compiled from the annual reports of Anantha PVC Pipes Private Limited Graph no 3.4

4 3 Rs 2 1 0 2004 2005 2006 0.22 0.28 0.42

Earnings Per Share

1.98 0.24 2007 year 2008

2.83

3.42

Earnings Per Share 2009 2010

Interpretation: From the above table3.4, it was observed that earnings per share was ranges from Rs0.22 to 3.42. In the year 2004 it was low i.eRs. 0.22 because of low earnings after tax, after that it was increased and reaches to high earnings per share in the year 2010 i.e Rs3.42.

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ANANTHA PVC PIPES PRIVATE LTD 3.5 RETURN ON TOTAL ASSETS RATIO (ROA): The return on total assets (ROA), often called the return on investment (ROI), measures the overall effectiveness of the management in generating profits with its available assets. The higher the firms return on total assets, the better.

Table No. 3.5 Calculation of Return on Total Assets during 2004 2010
Year 2004 2005 2006 2007 2008 2009 2010 Total assets (Rs in cores) 5.66 5.93 7.12 8.89 9.22 13.85 16.57 Earnings After Tax(Rs in cores) 0.04 0.06 0.08 0.05 0.39 0.56 0.68 Return on Total Assets (%) 0.78 0.95 1.19 0.54 4.27 4.08 4.13

Source: compiled from the annual reports of Anantha PVC Pipes Private Limited. Graph no 3.5

Return On Total Assests

5 4 3 2 1 0 4.27 4.08 4.13

Ratio

0.78 2004

0.95

1.19

0.54 2007 Year 2008 2009 2010

Return On Total Assests

2005

2006

Interpretation: From the above table3.5, it was observed that Return On Total Assets ranges from 0.54%to 4.27%. year to year total assets values was continuously increased and also profits also increased. In the year 2008, company had high Return On Total Assets. AITS, RAJAMPET Page 25 09701E0016

ANANTHA PVC PIPES PRIVATE LTD 3.6 RETURN ON EQUITY RATIO (ROE): This ratio signifies the return on equity shareholders funds. The profit considered for computing the ratio is taken after payment of preference dividend the ratio of return on equity shareholders.

Table No. 3.6 Calculation of Return On Equity during 2004 2010

Year 2004 2005 2006 2007 2008 2009 2010 Total Shareholders Equity(Rs in cores) 0.32 0.42 0.50 2.05 2.44 5.01 5.42 Earnings After Tax(Rs in cores) 0.04 0.06 0.08 0.05 0.39 0.56 0.68 Return on Equity(%) 13.88 13.34 16.82 2.35 16.08 11.28 12.60

Source: compiled from the annual reports of Anantha PVC Pipes Private Limited. Graph no 3.6 Return On Equity
20 Ratio 10 2.35 0 2004 2005 2006 2007 2008 2009 2010 Years Return On Equity 13.88 13.34 16.82 16.08 11.28 12.6

Interpretation: From the above table3.6, it was observed that Return on Equity was fluctuated from year to year and it ranges from 2.35% to 16.82%. In the year 2006, it was 16.82% which was high but in next year, it was 2.35% which was low. This was due to Total Shareholders Equity was increase nearly 1.50 cores and also Earnings are decreased. AITS, RAJAMPET Page 26 09701E0016

ANANTHA PVC PIPES PRIVATE LTD

3.7 Co-efficient of Correlation between Gross profit margin and sales

Correlations grossprofit grossprofit Pearson Correlation Sig. (2-tailed) N Sales Pearson Correlation Sig. (2-tailed) N *. Correlation is significant at the 0.05 level (2-tailed). 7 .873* .010 7 7 1 Sales .873* .010 7 1

Interpretation: The Pearson correlation was used to test the relationship between Gross profit margin and sales of the company .A significant relationship found at (0.05) level between Gross profit margin and sales with r = 0.873, which was positive and high correlated. Therefore, there was a significant relationship between Gross profit margin and the Performance of the company during the period 2004 to 2010.

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3.8 Co-efficient of Correlation between Operating profit margin and sales

Correlations operatingprofit Operatingprofit Pearson Correlation Sig. (2-tailed) N Sales Pearson Correlation Sig. (2-tailed) N 7 -.274 .552 7 7 1 Sales -.274 .552 7 1

Interpretation: The Pearson correlation was used to test the relationship between Operating profit margin and sales of the company .It was found that there was an insignificant relationship between Operating profit margin and sales with r =-0.274, which was negative and low. Therefore, there was an insignificant relationship between Operating profit margin and Performance of the company during period of the study 2004 to 2010.

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3.9 Co-efficient of Correlation between Earning after Tax and sales

Correlations earningaftertax Earningaftertax Pearson Correlation Sig. (2-tailed) N Sales Pearson Correlation Sig. (2-tailed) N *. Correlation is significant at the 0.05 level (2-tailed). 7 .817* .025 7 7 1 Sales .817* .025 7 1

Interpretation: The Pearson correlation was used to test the relationship between Net profit margin and sales of the company. A significant relationship found at (0.05) level between earnings after tax and sales with r = 0.817, which was positive and high correlated. Therefore, there was a significant relationship between Net profit margin and Performance of the company during the period 2004 to 2010.

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3.10 Co-efficient of Correlation between Earnings after tax and Total assets
Correlations Earningaftertax Earningaftertax Pearson Correlation Sig. (2-tailed) N Totalassets Pearson Correlation Sig. (2-tailed) N **. Correlation is significant at the 0.01 level (2-tailed). 7 .934** .002 7 7 1 Totalassets .934** .002 7 1

Interpretation: The Pearson correlation was used to test the relationship between earnings after tax and total assets of the company. A significant relationship found at (0.01) level between earnings after tax and total assets with r = 0.934, which was positive and high correlated. Therefore, there was a significant relationship between Return on total assets and the Performance of the company during the period 2004 to 2010.

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3.11 Co-efficient of Correlation between earnings after tax and total shareholders equity
Correlations Totalshreholdersequi earningaftertax Earningaftertax Pearson Correlation Sig. (2-tailed) N Totalshreholdersequity Pearson Correlation Sig. (2-tailed) N **. Correlation is significant at the 0.01 level (2-tailed). 7 .939** .002 7 7 1 ty .939** .002 7 1

Interpretation: The Pearson correlation was used to test the relationship between earnings after tax and total shareholders equity of the company. A significant relationship found at (0.01) level between Earnings after tax and total shareholders equity with r = 0.939, which was positive and high correlated. Therefore, there was a significant relationship between return on total shareholders equity and the Performance of the company during the period 2004 to 2010.

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4.1 FINDINGS
During the study period, Gross profit ratio of ANANTHA PVC PIPES PRIVATE LTD was relatively low and it ranges from 10.44% to 18.23%.The company had high cost of production reflecting the acquisition of raw materials and other inputs ,this leads to increase in cost of goods sold and decrease in gross profit.

Operating profit ratio represents the pure profit of the company. It ranges from 0.15% to 4.21%.During the study period operating expenses of the company increases with respect to increase in Gross profit and the company had no control over the operating expenses. So that the company had low Operating profit ratio.

Net profit ratio, which measures how a profitable to a company after deducting all expenses, interest and taxes from sales. It was an indicative of management ability to operate the business with sufficient success and proper returns for investment. During the study period, the company had good earning from year to year. So that the company had good Net profit ratio from year to year.

Earnings per share was closely observed by investors because it was the good indicator of the corporate success. The company had good earnings from year to year, this was due to increase of total income level of the company and decrease of total expenditure of the company. During the study period the company had good Earnings per share due to effective management functions and it had satisfactory returns to the investors.

Return on Total Assets, which measures the return earned by company from its total assets. During the study period the company had good returns on the total assets and it ranges from 0.54% to 4.27%. This was due to increase in earnings value was higher than increase in total assets value.

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ANANTHA PVC PIPES PRIVATE LTD Return on Equity, this was the most important ratio to judge whether the company had a satisfactory returns for its Equity shareholders or not. During the study period Equity shareholders funds were highly increased from year to year but the Earnings level were slightly increased. So that the company had no satisfactory returns to Equity shareholders from year to year.

During the study period, it was observed that the company had insignificant relationship between Operating profit and sales.

The overall performance of the company during the study period was satisfactory. The company market value growing from year to year and over all it is showing good performance.

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4.2 SUGGESTIONS The Gross profit margin of ANANTHA PVC PIPES PRIVATE LTD was low. So
it is suggested to the company should increase the sales volume by improving product quality, service and also the company should maintain its cost at optimum level, through this it can improve their profits.

The companys operating profit compared to sales revenue was low, so it is

suggested that the company should control the operating expenses. Through this the company earnings before interest and tax will be high and it would help the company to pay its debts and gain more Earnings after tax.

Earnings after tax of the company were not satisfactory during the study period
and it was low, because of increase of cost of goods sold and operating expenses. So it is suggested the company should control the expense with that the profit after tax will be more and it will provide sufficient returns to investors.

Earnings per share, which measures how the price of share in the stock market
compares to key financial markets, performance indicator was not encouraging. So it is suggested to the company should improve their sales revenue by increase of sales and it will provide good returns.

Return on total assets was the overall measure of the company performance. In
the present study, the return on total assets was low. So it is suggested that company should concentrate on assets and use them at maximum extent to improve sales and income level.

Return on equity shareholders, during the study period it was observed that the
company had low returns to equity shareholders. So it is suggested that the company should maintain optimum expenditure level to provide high returns to equity shareholders.

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4.3 CONCLUSION
In the study period it was observed that, the companys sales were improved and over all returns to investors was good. The companys operating profit and sales had insignificant relationship. Finally it is concluded that performance of the company is satisfactory and the company having good opportunity in future to expand their services.

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