A STUDY ON

WORKING CAPITAL MANAGEMENT

With reference to
PARRYS SUGAR INDUSTRIES LIMITED,
SANKILI
A project report submitted to JNTU kakinada, in partial fulfillment for the award of
the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
CH.SANYASI RAO
(Regd. No. 12331E0025)
Under the guidance of
Mr.P.V.S.SIVA KUMAR
M.B.A,M.phil,NET,(Ph.d)
Assistant professor


SCHOOL OF MANAGEMENT STUDIES
M.V.G.R. COLLEGE OF ENGINEERING
(Approved by AICTE, New Delhi,and permanetly affiliated to JNTU,kakinada)
Accredited by NBA,NAAC withAGrade of UGC,
Chintalavalasa,VIZIANAGARAM-535005,A.P
2012-2014




(DECLARATION)
I hereby declare that the project titled WORKING CAPITAL
MANAGEMENT with reference to PARRYS SUGAR INDUSTRIES
LTD.(Formerly GMR Industries Ltd) Sugar division, Sankili is original and has been
carried out by me towards partial fulfillment for the award of the degree in
MASTER OF BUSINESS ADMINISTRATION submitted to the Andhra
University. The findings of the report are based on the information collected by me
during this study.


Date:
Place: (CH.SANYASI RAO)























































ACKNOWLEDGEMENT

I take this opportunity to express my grateful thanks to all those who have
Contributed towards this work and without whom these works have not taken its
Present shape. I would like to thank Mr. SRINIBAS PANDA finance manager, for
Giving me a golden opportunity for doing the dissertation work as per the
specialization area.

I express my sincere gratitude to my project guide and other employees of
PARRYS SUGAR INDUSTRIES LTD, who extended their cooperation and timely
support and providing necessary data for early completion of my project work.

I am thankful to my beloved professor & HOD Dr.K.S.S Rama Raju, and other
Faculty members for their constant support, help, encouragement, co-operation
and valuable suggestions throughout the progress of the report.

I would also like to extend my thanks to Mr. P.V.S. SIVA KUMAR, Assistant
professor who always helped in the true sense to solve my queries and always
guided me at each step during the dissertation period for the successful
completion of my project.

I am highly indebted to the staff of our central library from where I have drawn
more material in relation to my project work.

Finally, a special thanks to my family members and friends for their constant
support, without which I would not have been able to complete my report.


























TABLE OF CONTENTS
Page No
CHAPTER 1: INTRODUCTION 7-19
Sugar Industry in India
Need for the Study
Objectives of the Study
Methodology
Limitations of the Study
Frame work of the Study

CHAPTER 2: INDUSTRY PROFILE 20-46
World sugar production
Indian sugar industry-Analysis and
No. of sugar factories in India
Sugar industry cycle
Major reasons for low productivity
Indian Govt. on sugar industry
Andhrapradesh sugar industry

CHAPTER 3: COMPANY PROFILE 47-61
Profile of Parrys industries
Mission and Objectives
Financial structure
Technological Achievements
Major awards
Future Plans



CHAPTER 4: THEORITICAL ASPECTS OF WORKING
CAPITAL MANAGEMENT 62-88
Meaning of Working Capital Management
Nature of Working Capital Management
Need of Working Capital Management
Objectives of Working Capital Management
Importance of Working Capital Management
Kinds of Working Capital Management
Management of Working Capital Management
Statement of Working Capital Management
Factors of Working Capital Management
Financial Analysis
Ratio Analysis

CHAPTER 5: FINANCIAL ANALYSIS OF PARRYS INDUSTRIES 89-103
Analysis and Interpretation from Company
Balance sheets from 2008-2013

CHAPTER 6: SUMMARY AND SUGGESTIONS 104-109
Summary
Findings
Suggestions
References


PREFACE

Working capital management is the process of planning and controlling the level
and mixing of the current assets of the firm as well as financing these specially
working capital management requires financial manager to decide what quantities of
cash other liquid assets, account receivables and inventories the firm will hold at any
point of time.
In addition to financial manager must decide how the current assets are financed.
Finally choices include the mix of current as well as long term liabilities.
The term working capital refers to the amount of capital which is readily available
to an organization. That is working capital is the difference between resources in cash
or readily convertible into cash ( current assets ) and organizational commitments for
which will soon be required ( current liabilities). Current assets are resources, which
are in cash or will soon be converted into cash in the ordinary course of business .
Current liabilities are commitments, which will soon require cash settlement in the
ordinary course of business.
The goal of working capital management is to manage the current assets and
current liabilities of the firm in such a way that satisfactory level of working capital is
maintained. Working capital is the difference between in the flow and out flow of
funds. Working capital is also known as revolving or circulating or short term capital.
The investment in inventories constitutes the most significant of current assets or
working capital in most of the undertakings. Thus, it is very essential to have proper
control and management of inventories. The purpose of inventory management is to
ensure availability of materials in sufficient quantity as and required and to minimize
investment in inventory.























CHAPTER I
INTRODUCTION











INTRODUCTION

Finance is an integral part of modern economic life and occupies an important
place in all economic activities. Finance is the science of money and life blood of
industrial system. Financial management is that managerial activity, which is
concerned with the planning and controlling of the firms financial resources.
Financial management in its infancy dealt with financing of corporate enterprises. Its
evolution may be dividends into two broad phases the traditional phase and the
modern phase. Its scope was treated in the narrow sense of procurement of funds by
corporate enterprises to meet their financing needs because of its central emphasis on
the procurement of funds.

The finance functions of rising and using money through has a significant
effect on other functions, yet it needs no necessarily limit or constraint the general
running of the business. A company in a right financial position, will of course, give
more weight to financial considerations, and devices its marketing and production
strategies in the light of the financial constraint on the other hand management of a
company which has a regular supply of funds will be more flexible in formulating its
production and marketing policies. In fact, financial policies will be devised to fit
production and marketing decisions of a firm in practice.

The basic for financial planning and decisions making is financial information.
Financial information is needed to predict, compare and evaluate the firms earning
ability; it is also required to an enterprise to find out the actual performance.


Management should be particularly interested in knowing financial strength of
the firm to make their best use and to be able to spot out financial weakness of the


firm to take suitable corrective actions thus financial analysis is the starting point of
making plans before using any forecasting & planning procedure.

Financial analysis is the process of identifying the finance strength &
weakness of the firm by properly establishing relationship between the items of the
balance sheet and profit and loss account. The study on ration analysis of PARRYS
focuses on identifying the strength and weaknesses of financial position as well as its
financial performance for the year 2005-2006 to 2009-2010. This study also analyzes
the profitability and liquidity position of the company.

Ratio analysis is one of the techniques of financial analysis where ratios are
used as a yardstick for evaluating the financial condition and performance of a firm.
Analysis and interpretation of various accounting ratios gives a skilled and
experienced analyst, a better understanding of the financial conditions and
performance of the firm.

Ratios are relationships expressed in mathematical figures which are
connected with each other in some manner. The ratio analysis is one of the most
powerful tools of financial analysis. It is used as a device to analyze and interpret the
financial health of enterprise.

The study on the ratio analysis in the organization help in assessing corporate
excellence judging credit worthiness and it also helps in determining the financial
performance of the company for this purpose data are collected for the period of 5
years, various ratios are used in the study to find out the liquidity and profitability
position of the organization.


SUGAR INDUSTRY IN INDIA

The following paragraphs provide a basic overview of the industry,
especially its size and health (growth) as it relates to the potential fobagasse-based
cogeneration. For a more detailed discussion of the sugar sector, the reader is referred
to the ESMAP study.


India is the largest and sugarcane producer in the world. Sugar
output in 1989- 90 was 10.8 million tonnes. Projected output is expected to
increase to 13.4 million tones by 1994-95, sufficient to keep pace with a 5%
annual growth rate in sugar consumptive


The total requirement of cane by sugar factories at a 10% rate of
recovery (sugarre covered from cane) will be 131 million tonnes in 1994-95.
These estimates are some what optimistic, since sugar output has grown on
average by 3.5% over the period from 1977-87. The country imports a small
amount of sugar to meet demand (40,000tonnes in 1987-88).


The figures cited assume that the sugar factories have access to 50%of
the total cane production. In India, about 60% of the cane produced goes into
makingrefined (centrifugal) sugar, while the remaining 40% is used by the small-
scale industry to produce gur and khandsari -- traditional forms of sugar made from an
open pan process at atmospheric pressure.


In 1989-90, the country produced 222,628,000 tonnes of sugar
cane from 3,405,000 hectares under cultivation or 65,383 kg/hectare. The northern
state of Uttar Pradesh is theleading producer of cane, accounting for over 97 million
tonnes or 44.6% of the total .Maharashtra and Tamil Nadu are




the second and third ranking sugarcane producers, with34,008,000 tonnes or 13.5% of
total and 21,918,000 tonnes or 11.2% of total, respectively. Bagasse, the fibrous
residue of the sugarcane used for raising steam in boilers, accounts for approximately
30% of the cane weight.


Sugar mills are privately owned, publicly owned, and owned by
cooperatives. Of the 491licensed sugar factories, 288 are in the cooperative sector,
accounting for 59% of the factories installed and 62.4% of the national output of
sugar. Most of the remaining millsare in private hands.


The size of sugar mills in India is small by international standards.
Average mill size is under 2,000 tons crushed per day. Since 1987, however, a
minimum 2,500 TCD standardhas been imposed for new mills, and incentives have
been created to encourage expansion to up to 5,000 TCD.



Estimates of the potential for cogeneration from the sugar
industry vary widely. The ESMAP study on Maharashtra identified 13 mills with a
current or expanding capacity of 3,500 TCD. This study estimated the potential of
these mills to export cumulatively either87 MW or 102 MW, depending on whether
four of the mills opt for bagass emaximization or electricity maximization
configurations.







NEED FOR THE STUDY

Management should be interested in knowing the financial strengths of the
firm to make their best use and to be able to spot out the financial weaknesses
of firm to take suitable corrective actions.

Users of the financial statements can get better insight about the financial
strength and weakness of the firm if they properly analyze the information
reported in the statements.

The future plans of the firm should be laid down in the view of the firms
financial strengths and weaknesses.

Thus, financial analysis is the starting point for making plans, before using any
sophisticated forecasting and planning procedures. Understanding the past a
prerequisite for anticipating the future. The natures of the analysis were
differing depending on the purpose of the analyst.

Ratio analysis is a powerful tool of financial analysis. In financial analysis, a
ratio is used as a benchmark for evaluating the financial position and
performance of a firm.




Ratios help to summarize large quantities of financial data and help to make
qualitative judgment about the firms financial position. It is used as a device
to analyze and interpret the financial health of enterprise.

The study on ratio analysis in the organization helps in determining the
financial performance of the company for this purpose data are collected for
the period of 5 years. Various ratios are used in the study to find out the
liquidity & profitability of the organization.











OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the
working capital is managed effectively, monitored efficiently planed properly and
reviewed periodically at regular intervals to remove bottlenecks if any the company
can not earn profits and increase its turnover. With this primary objective of the study,
the following further objectives are framed for a depth analysis.
The project was designed keeping in view the following objectives

To studies the working capital management of PARRYS industries
Ltd.

To evaluate the financial performance of PARRYS industries Ltd by
computing various ratio's.

To study the optimum level of current assets and current liabilities of
the company.

To analyze the profitability and liquidity position of PARRYS
industries Ltd.

To identify the strengths and weaknesses of the organization by
properly establishing relationship between items of the balance sheet
and profit and loss account.

To offer suggestions to management for the improvement of
organizations financial performance.


METHODOLOGY


Introduction

Research methodology is a way to systematically solve the research problem.
It may be understood as a science of studying now research is done systematically. In
that various steps, those are generally adopted by a researcher in studying his problem
along with the logic behind them.
It is important for research to know not only the research method but also
know methodology. The procedures by which researchers go about their work of
describing, explaining and predicting phenomenon are called methodology. Methods
comprise the procedures used for generating, collecting and evaluating data. All this
means that it is necessary for the researcher to design his methodology for his
problem as the same may differ from problem to problem.
Data collection is important step in any project and success of any project will
be largely depend upon now much accurate you will be able to collect and how much
time, money and effort will be required to collect that necessary data, this is also
important step.
Data collection plays an important role in research work. Without proper data
available for analysis you cannot do the research work accurately.





Types of data collection:

There are two types of data collection methods available

1) Primary data
The primary data is that data which is collected fresh or first hand, and for first time
which is original in nature. Primary data can collect through personal interview,
questionnaire etc. to support the secondary data.
2) Secondary data collection method
The secondary data are those which have already collected and stored. Secondary data
easily get those secondary data from records, journals, annual reports of the company
etc. It will save the time, money and efforts to collect the data. Secondary data also
made available through trade magazines, balance sheets, books etc.
This project is based on secondary information collected through five years annual
report of the company, supported by various books and internet sides. The data
collection was aimed at study of working capital management of the company.

Project is based on
1. Annual report of PARRYS LTD 2007-08
2. Annual report of PARRYS LTD 2008-09
3. Annual report of PARRYS LTD 2009-10
4. Annual report of PARRYS LTD 2010-11
5. Annual report of PARRYS LTD 2011-12



SCOPE AND LIMITATION OF THE STUDY
The scope of the study is identified after and during the study is conducted. The study
of working capital is based on tool like Ratio Analysis Further the study is based on
last 5 years Annual Reports of PARRYS Industries Ltd. And even factors like
competitor s analysis, industry analysis were not considered while preparing this
project.
Limitations of the study
Following limitations were encountered while preparing this project:

1) Limited data:-
This project has completed with annual reports; it just constitutes one part of data
collection i.e. secondary. There were limitations for primary data collection because
of confidentiality.
2) Limited period:-
This project is based on five year annual reports. Conclusions and recommendations
are based on such limited data. The trend of last five year may or may not reflect the
real working capital position of the company
3) Limited area:-

Also it was difficult to collect the data regarding the competitors and their financial
information. Industry figures were also difficult to get.

The scope of the study of the financial analysis is limited to the areas of ratios
analysis.
Another limitation of the study is data collected has some hurdles due to large
size of the organization.
The limitation of the financial tools applies for the study.


FRAME WORK OF THE STUDY


1) Chapter One deals with Introduction, Need, Objectives, Methodology and
Limitations of the study and frame work.

2) Chapter Two deals with the profile of Sugar Industries in India.

3) Chapter Three deals with organizational profile PARRYS Industries Ltd,
Sugar Division, Sankili.

4) Chapter Four deals with theoretical aspects of Working Capital Management -
Meaning, Nature, Objectives and Importance. And also Ratio Analysis -
Meaning and types of ratio analysis, objectives, Essentials of ratio analysis.

5) Chapter Five deals with Analysis and interpretation of the Financial Data.
Different years of the companys consolidated abstract Income & Expenditure
accounts, revised estimates for Five years.

6) Chapter Six comprises of summary and suggestions. In this chapter some of
the improvements and suggestions are given on the study of ratio analysis of
the company.















CHAPTER - II
INDUSTRY PROFILE







WORLD SUGAR PRODUCTION

Country wise sugar production:





SUGAR INDUSTRIES IN INDIA





Sugar Industry in India is well developed with a consumer base of more than
billions of people. It is also the second largest producer of sugar in the world.
There is around 45 millions of sugar cane growers in India and a larger portion
of rural laborers in the country largely rely upon this industry. Sugar Industry is one
of the agricultural based industries. In India it is the second largest agricultural
industry after china.
Statistics on Sugar Production
As to the statistics there were a total number of 566 Sugar Factories in India as
on March 31, 2005 compared to 138 during 1950-51. These 566 sugar mills produce a
total quantity of 19.2 million tons (MT). Sugar production in India increased from
15.5 MT in 1998-99 to 20.1 MT in 2002-03. Now the total number of sugar factories
in India is 553 as on march 31, 2010.
Department of Agriculture and Co-operation, sugarcane production in 2004-05
is estimated at 232.3 MT from 237.3 MT in 2003-04. Sugarcane production is
expected to reach 257.7 MT in 2005-06.






Production (1961-2012), Source: ISMA


INDIAN SUGAR INDUSTRY- ANALYSIS

Indian sugar industry has entered the strongest up cycle (lowest stock to use
ratio) in the history of 50 years after witnessing supply glut in previous two sugar
seasons in a row (SS 2006-08). In SS2006-07, sugar production reached all-time high
of 28.3 mn tonnes, registering a growth of 46.6% on year by year basis and it declined
marginally by 7.1% to 26.3 mn tonnes in SS2007-08. Sugar production reached an all-
time low of 14.7 mn tonnes during SS2008-09 due to sharp fall in the sugarcane
acreage. However, sugar consumption continued to grow at a steady pace.







In SS2008-09, on account of a steep fall in sugar production and fall in the
stock to use ratio, the average wholesale prices increased by almost 50% on year by
year basis. This had a positive impact on the margins of sugar companies in quarterly
for the year 09.

The production of sugar is spread across the country. Maharashtra, Uttar
Pradesh, Karnataka, Tamil Nadu, Gujarat and Andhra Pradesh are the major sugar
producing states in the country. In SS2007-08, these six states together accounted for
almost 92% of the total sugar produced in India. In SS2007-08, the State of
Maharashtra produced the highest sugar at 9.1 mn tonnes followed by UP with 7.3 mn
tonnes. These two states together account for almost 62% of the total sugar produced
in India.


Sugarcane is the primary raw material for the sugar industry. It accounts for
almost 75%-80% the total operating cost of the sugar industry. UP is the largest
sugarcane-producing state in the country and accounted for about 37% of the total
sugarcane output in SS 2007-08 followed by Maharashtra with 24%. Even though, UP
is the largest sugarcane-producing state in the country it is the second-largest sugar
producer in India as drawl and recovery rates in UP are one of the lowest in India.


We expect sugar deficit situation in India to continue in SS2009-10 and
SS2010-11. We believe that India will bridge the gap between demand and supply
through imports. We expect that sugar prices will continue to rise till SS2009-10 on
account of tight demand and supply situation in country.





1. Indian Sugar Industry Concept & Terminologies in India, it is classified under
essential commodities which makes it vulnerable to regulatory policies by the regime.
The quantum of sugar produced by a mill is determined by the factors like daily
crushing capacity, duration of crushing season and percentage of sugar recovery.

[Tones Crushed per Day (TCD), 180 days and 10-12%] The Sugar Year (SY)
is from October to September At present, sugar mills are required to provide 10 per
cent of their total production as levy sugar (Rs 13 / kg) for the Public Distribution
System (PDS) Sugar is a cyclic industry which follows a three year cycle. SMP is the
Govt. determined price at which sugar manufacturers purchase cane from farmers
whereas SAP is the price at which sugar manufacturers sell sugar in the free market.

2. Indian Sugar Industry An Overview India is the second largest producer of sugar
cane after Brazil. On the domestic front, the Indian sugar industry has a turnover of
Rs. 700 billion per annum (US $ 14.6 billion). There are 553 installed sugar mills in
the country with a production capacity of 180 lakh MT of sugar.

These mills are located in 18 states of the country, with Maharashtra
contributing over one-third of it. About 60% of these mills are in the co-operative
sector, 35% of the total are in the private sector and rest in the public sector. Until the
mid 50s, the sugar industry was almost wholly confined to the states of Uttar
Pradesh and Bihar. After late fifties or early sixties the industry dispersed into
Southern India, Western India and other parts of Northern India.



Almost 75% of the sugar available in the open market is consumed by bulk
consumers like bakeries, candy makers, sweet makers and soft drink manufacturers.
The crushing season in the country starts from October and reaches its peak in
January before finally ending in March or April of the next year. Mr. Samir S
Somaiya is the current President of Indian Sugar Mills Association (ISMA) and
Managing Director of Godavari Sugar Mills Ltd.

3. Raw Material (Sugar cane) In India, sugarcane is the key raw material, planted once
a year during January to March. It being an agricultural crop is subject to the
unpredictable vagaries of nature, yielding either a bumper crop or a massive shortfall
in its cultivation from year to year.

The sugarcane growing areas may be broadly classified into two agro-climatic
regions: Tropical Maharashtra, AP, Tamil Nadu Subtropical - UP, Bihar, Punjab,
Haryana, Gujarat, Karnataka, Maharashtra and UP are the main cane producing states.
Sugar cane prices comprise more than 70% of the total costs of Sugar production.

4. Demand-Supply Mismatch 30% of the total consumption is used Reduction in
cultivation area by about directly by households, while 70% is used 17% during SY
2008-09, would result in indirectly. Reduction in production of sugarcane to Sugar
consumption is expected to grow approx. 280.5 MT. at the rate of 4-4.5% because of
Farmers are shifting to alternate crops Steady growth in population by 1.3-1.4% p.a.
like wheat, jowar, sweetcorn, bajra, etc.




Growth of per capita income by 6.5-7.5% p.a. which are more profitable.
Sugar Prices over last 5 years the lack of intervention from government is having
potential to push sugar prices to new high in Indian markets. The market will remain
well above Rs.2000/qtl during the sugar year 2009-10.

5. Government Policies and Interventions Statutory Minimum Price (SMP) and
State Administered Price (SAP) As sugar falls under essential commodities, it is
being regulated by the state government in coordination with the Center. For the
season 2009-10, the regime is under tremendous pressure for declaring SMP as this
crop has fallen from surplus to deficit category. Subsidies The Govt. has given
transportation subsidy to sugar exporters in order to release excess stocks piled up at
millers end, but this has ended last September.

Huge Capex - During 2004-05 (Mulayam Singh) government had flooded sops
for inviting investments in UP which have seen overwhelming response. The state
was able to garner around Rs 30,000 crores in form of various investments. The sugar
millers have also undergone huge debt lead expansion\n based on the investment slabs
dictated by regime. It is these debts only which the millers are still tackling. Levy
sugar The govt. is planning to increase levy quota (for BPL under PDS) from
current 10% to 20-25% due to concern of increasing sugar price.

6. Integrated Sugar Manufacturing Model 100 Kgs of Sugarcane gives approx. 10
kgs of Sugar, 5-6 Kgs of Molasses, 33 Kgs of Bagasse and around 4 Kgs of Press
mud. 100 Kgs of Molasses gives approx. 22-25 litres of Alcohol 100 Kgs of Bagasse
can generate approx. 35 units of Power.


7. Indian Sugar Industry Five Forces Analysis

A. New entrants Medium Incentives given by the Govt. been withdrawn and new
sugar units are required to comply with levy quota regulations from 1
st
year of
operations.
B. Competitors
C. High Bargaining power of Buyers
D. Bargaining power of Suppliers High With around 500 units engaged in
production of Govt. influences distribution, As Govt. announces the purchase sugar,
Industry is highly purchase price of levy sugar price (SMP), it protects the
fragmented and the free sale quota releases interest of the sugar cane farmers for
sugar
E. Threat of Substitutes Low Alternate sweeteners to sugar are gur and
khandsari, whose use is declining.

8. Indian Sugar Industry SWOT Analysis
STRENGTHS & WEAKNESSES
Higher End Product Prices:-Sugar is the main product of Fall in derivatives - The
fall in prices of derivatives like sugar mills, which is most likely to fetch record prices
this ethanol, baggase, waste or manure etc. will also have year. The mills that are able
to secure cane supply will be the adverse impact on almost all the companies. Biggest
beneficiaries.



In recent past the mills have Currency risk: - Most of the companies which have
exposure undergone capacity expansion, which will increase their in form of overseas
loans, imports etc. will be vulnerable to processing capacity leading to higher
productivity. The forex losses in advent of rupee depreciation.
Favorable policy: - Like any other industry, sugar companies too have liquidity
crunch which can be meet through Sugar Development Fund of the Government of
India under special case schemes.

OPPORTUNITIES & THREATS
Seasonality: - Sugar follows 3-5 years cycle,
Which is Low Cane availability: - Limited or non-availability of cane function of
prices. We have already witnessed the bearish will eventually lead to early closure of
mills. Phase following excess supply.
Now the situation is of lower Unfavorable policy:- The call for change in policy
will now production and higher consumption, which calls for higher be via inflation
route only, since for securing supplies remuneration to the farmers for attracting
higher government has already relaxed norms for imports, which acreage coverage
under sugarcane. Are acceptable at zero duty.
Crude oil revival: - The revival in crude oil prices will throw.
Higher debt: - The fund was raising capabilities of most of the industry into limelight
again. The derivative products of existing companies in this sector are under serious
threat cane would be in demand and supply constraints are amid ongoing tight
liquidity. Clearly visible to push prices higher.
Alternate Crops: - Alternate crops to sugarcane are more profitable.


SUGAR INDUSTRY CYCLE


Like any other agricultural product, cane production follows a cycle. This
impacts the sugar industry which has a typical of 3-5 year cycle. Higher sugarcane
production results in a fall in sugar prices and non-payment of dues to farmers. This
compels the farmers to switch to other crops causing a shortage, which in turn results
in increase in sugarcane prices and extraordinary profit. Taking into account the
higher prices for cane, the farmers switch back to sugarcane, which completes the
cycle.










SUGAR PRODUCTION IN STATES
The following table shows level of sugar production (In Lakh Tonnes) in Indian
States:
State 2008-09 2009-10 2010-11
Uttar Pradesh 58.74 46.08 50.32
Maharashtra 61.64 31.99 22.29
Karnataka 17.98 11.57 13
Tamil Nadu 17.04 11.9 9.84
Andhra Pradesh 11.88 8.81 9.75
Gujarat 12.38 10.77 8.32





The sugar production in the states largely depends upon monsoon. From 1998
- 05 good monsoon resulted a larger production of sugar in the country.

Cane Area, Yield, Sugar Production and Sugar Recovery Percent

Year
Area
000 ha.
Yield
ton/ha.
Production of
sugarcane
(000 ton)
Recovery
%
No. of factories in
operation
1999-00 4220 70.90 299324 10.20 423
2000-01 4316 68.60 295956 10.48 436
2001-02 4430 67.40 297208 10.27 434
2002-02 4361 64.60 281575 10.36 453
2003-04 2995 59.1 236176 N.A. N.A.


It can be noted from the above table that though the recovery percentage has
remained stable during the last 5 years, the yield of sugarcane during the same period
has reduced from 70 T/ha in the year 1999-00 to 59.1 T/ha in the year 2003-04. The
low yield of sugarcane is a matter of great concern to the industry. Cane development
activity with specific target is necessary to achieve improvements both in yield and
quality of sugarcane.




MAJOR REASONS FOR LOW PRODUCTIVITY

Recently there has been a major reduction in area under sugarcane
cultivation and its yield mainly due to drought in almost the whole of tropical and
sub-tropical regions. The effect of drought, delayed payment of cane price and low
sugar prices in the recent past have led to fall in sugarcane production and closure of
some sugar mills.
The incidence of woolly aphid as a new pest on sugarcane came to light in
August 2002 in Belgaum district and moved swiftly to Bhadra canal areas and
Cauvery basin in southern Karnataka. The incidence and alarming rate of spread and
severity has created panic among the cane growers in Cauvery basin who have
already suffered substantial losses due to drought during the previous years.

The following interventions on the various issues are required for the purpose:

1. Sugarcane Variety
Various experiments conducted under All India Coordinated Research Project
(AICRP) has shown that the newly developed varieties are suitable to be grown under
specific climatic conditions. Therefore only the recommended varieties are to be
cultivated suitable to the regions.
Bihar records the lowest sugar recovery % cane as compared to other major
sugar producing States of the country. Against an all India average recovery of
10.36% in 2002-03, Bihars recovery was only 9%, some factories have even
recorded recovery as low as 7.0 8.23%. This is against an average recovery of
10.93% which was achieved by the Bihar factories in 1942-43.


Special attention is therefore required to be given to varietal composition in
regions recording low sugar in cane. It was suggested by the stake holders that the
Sugarcane Research Institute, Pusa which is the only Research Institute in Bihar
should be allocated adequate funds by the Central and State Government for
developing suitable varieties of sugarcane which are high yielding and have high
sugar content. It was noted that in some regions like Uttar Pradesh a number of low
sugared cane varieties continue to occupy large areas in spite of being rejected by the
State Government. Therefore, there is an urgent need for replacement of such
rejected varieties through extension services.

2. Water Conservation
Out of the total irrigated area in the country, nearly 58% is irrigated by Tube
wells and other wells, 32% by canals, 5% by tanks and remaining 5% by other
sources. For conserving water, all the area under well irrigation in sugarcane needs to
be brought under drip irrigation. Drip irrigation will facilitate improvements in
production and optimize use of fertilizer and other nutrients.
Lack of sufficient knowledge about the pest in the ecosystem and preparation
to gear up to situation among the technologies has been a major concern to suggest
effective management practices. The pest occurring mostly in tropical Asiatic region,
cool and cloudy weather (19 35
o
C) in conjunction with high relative humidity
(85%) favored faster infestation of the pest. Therefore, keeping in view the bio-
ecology of the pest some of the agronomic practices to mitigate the spread and ill
effect has to be developed. VSI has extended its services to control the diseases by
developing and providing the natural enemies, viz. Trichgramma, Chrysopera,
Encarsia, Isotima, Dipha etc.




3. Alternate Feed Stocks
Sugarcane has been conventionally used as raw material for manufacture of
sugar in India. The sugarcane yield has remained stagnant for the past many years
and the sugar content also has not shown any significant increase despite efforts by
the industry. The moot point is whether the sugar industry should remain solely
dependent on one crop, viz. Sugarcane or explore the use of various other alternate
raw materials.
Recent studies have shown that it is possible to cultivate sugar beet under
tropical conditions and that this can effect economics of the industry in many ways.
Sugar beet can be used as a co-crop to sugarcane to extend the duration of the
crushing season and also to enhance the sugar yields. It can also be used as a stand
alone crop.
Another crop that can have a good potential in improving the economics of the
sugar industry is Sweet Sorghum. Sweet Sorghum can be processed alongside
sugarcane or sugar beet to produce ethanol. Therefore a combination of cultivation of
sugarcane, sugar beet and sweet sorghum can facilitate the sugar industry to have a
right product mix and achieve commercial sustainability on a global basis. A
comparison of the features of the three crops clearly indicate that each of the three
crops have their own merits and demerits and a combination of these can effectively
solve the problems of adequate availability of raw material for the success of a sugar
complex.
The Committee recommends that the use of alternate feed stocks like sugar
beet and sweet sorghum may be encouraged and projects for seed development,
cultivation and processing of such crops may be provided loans from SDF.
4. Purchases through Intermediaries
The Committee observed that in Uttar Pradesh, the sugarcane is purchased by
the factory through cooperative societies, whereas, the factories deal directly with the
sugarcane growers in all the other major sugarcane producing States including
Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka and Punjab. The Committee


noted that the Lok Sabha Standing Committee on Civil Supplies and Public
Distribution (1995-96) have recommended a direct link between the factories and the
farmers. In U.P. most of the sugar factories have already computerized the following
operation:
Preparation of cane supply calendars
Issuance of supply tickets to the farmers
Making cane price payment through the banks
Maintenance of grower-wise records etc.
The above functions were previously being done by the cane societies.
Therefore the Committee observed that the factories in UP should enter into a direct
contract with the growers like in other States and execute tri-partite agreement with
banks and farmers for procurement of sugarcane to facilitate use of Kisan Credit
Cards and availability of soft loans to farmers.
5. Taxes on Sugarcane
The stakeholders expressed concern on the impact of the incidence of various
taxes including purchase tax on the profitability of the industry in the various States.
The quantum of taxes on sugarcane affects the capacity of the sugar mills to pay cane
price. It was suggested that if these taxes could be uniform throughout the country,
level playing field could be established. The Committee felt that it was not possible
to achieve uniformity as these taxes are in the purview of the respective States.
An alternate suggestion, namely that these taxes might be credited against
VAT, which is to be brought into operation from April 01, 2005 was discussed. It
was brought to the notice of the committee that some States are not agreeable to the
crediting of such taxes against VAT and in any case, matters of this kind are to be
finalized by the Empowered Committee of State Finance Ministers.


6. Infrastructure
The Committee after discussions with the representatives of industry and stake
holders of major sugar producing States observed that infrastructure required for
sugarcane cultivation and transportation is poor in many parts of the country.
Sugar industry in many States need better infrastructure like good irrigation
facilities, availability of power, properly maintained road for transportation of
sugarcane from field to sugar mills etc. The sugarcane cultivation in many parts of
the country suffer from flood and water logging. The causes for the frequent flooding
in Bihar is due to release of excessive water from Nepal. In states like Maharashtra
and Karnataka sugarcane growers require basic facilities for irrigation, power etc.
Inadequate Infrastructure has adversely affected the yield and quality of sugarcane.
The Committee therefore felt that the State governments should pay special
attention to provide and maintain necessary infrastructure like irrigation, power, roads
and drainage etc. for sugarcane cultivation and transportation.

7. Alternate Usages
Vacuum pan sugar factories are bound to produce plantation white sugar
only. Some presentations made before the Committee suggested that this restriction
could be lifted and sugar factories might be left free to produce other sweeteners like
gur and khandsari, if they wished.
The Committee discussed the idea of allowing sugar mills to manufacture
sweeteners other than sugar if required. The Committee noted that the use of
sugarcane for manufacturing products other than white sugar should be commercially
and legally examined.



INDIAN GOVERNMENT ON SUGAR INDUSTRY

The following policy initiatives are taken to boost the Sugar industry:
Government declared the new policy on August 20, 1998 with regards to
licenses for new factories, which shows that there will be no sugar factory in a
radius of 15 km.
Setting up of Indian Institute of Sugar Technology at Kanpur is meant for
improving efficiency in the industry.
In the year 1982, the sugar development fund was set up with a view to avail
loans for modernization of the industry.

Sugar has historically been classified as an essential commodity and has been
regulated across the value chain. The heavy regulations in the sector artificially
impact the demand-supply forces resulting in market imbalance.

Sensing this problem, since 1993 the regulations have been progressively
eased. The key regulatory milestones include de-licensing of the industry in 1998 and
the removal of control on storage and distribution in 2002.











However, policy still plays an important role in the industry.

Legislation
Sugarcane
procurement
- Concept of Command Area which binds Cane farmers and Sugar
mills to sell and buy from each.
- Sugar mills have to purchase all the Cane sold to them, even if it
exceeds their requirement.
- In case of capacity expansions at existing Sugar mills, there is
uncertainty regarding allocation of additional Area based on the
expanded capacity.
Sugarcane
pricing
- Government administered Statutory Minimum Price (SMP) which
acts as a floor.
- States like UP, Haryana and Punjab fix a higher price for cane,
called the State Advised Price (SAP). . Historically, the SAP has
been as high as 20-30% above SMP.
Sugar sales
- Government mandates 10% of sugar to be sold as levy quota sugar
at prices much lower than the market.
- The government also specifies monthly release quotas for free sale
sugar.
Capacity and
Production
- Sugar producers are not allowed to own cane fields in India.
- New sugar mills cannot be set up within 15 km of existing units.
Exports &
Imports
- Imports of both raw and white sugar attract a basic duty of 60%
and a countervailing duty of Rs. 910 per ton.
- In periods of sugar shortage, under the Advanced License Scheme
(ALS), license holders can import raw sugar without paying any
duty, subject to the condition that they re-export white sugar within
a fixed period.
Others - Restriction on Cogen PLF, currently only in AP.



SUGAR INDUSTRY IN ANDHRA PRADESH





About Andhra Pradesh Sugar Industry

Andhra Pradesh (AP) abounds in maximum number of private sector sugar
companies in India along with Tamil Nadu and Karnataka. In the year 1933-34,
vacuum process was adopted for sugar manufacturing in the state. Previously, the
state government was planning to support Cooperative sector as against other sectors.
However, with passing time, a considerable change in the policy was noticed. Letters
of Intent (L.O.I.) were given to the deserving entrepreneurs including 20 LOIs to the
private sector companies.

This gradually resulted in major benefits
for the state government as well as for India as a
whole. Today, Andhra Pradesh sugar industry
ranks 3rd in terms of recovery and 5th in terms
of cane crushing. As per production capacity is
concerned, Andhra Pradesh stands at the
position 5 in India.

The agricultural laborers who do sugarcane harvesting and cultivation are
employed in the sugar industry in Andhra Pradesh. Today, the unprecedented growth
of this industry in the state has led to the consolidation of village resources and has
facilitated communication, employment and transport system here.








Types of Sugar Industry in Andhra Pradesh

Andhra Pradesh sugar industry can be classified into two parts such as
organized sector including sugar mills and unorganized sector including
manufacturers of gur (jaggery) and khandsari. The unorganized sector is often
referred to as the rural industry. The rural industry plays major role in the level of
production.
ANDHRA PRADESH TOTAL SUGAR INDUSTRIES
Factory Name Village Nearest City
Empee Sugars & Chemicals Ltd. NAYUDUPET
Ganpati Sugar Industries Ltd., Fasalwadi / Kulbugoor Sangareddy
Gayatri Sugars Limited
ADLOOR
YELLAREDDY
Kamareddy
PARRYS SUGAR INDUSTIRES
LTD
(GMR Industries Limited)
Sankili, Regidi Andhra Pradesh
GSR Sugars Limited MAAGI Nizamabad
K.C.P. Sugar & Industries
Corporation Ltd
Vuyyuru
K.C.P. Sugar & Industries
Corporation Ltd
LAKSHMIPURAM
Kakatiya Cement Sugar & Industries
Ltd
P E R U V A N C H A Khammam
KBD Sugars & Distilleries Ltd Mudipapanapalli
P U N G A N U R -
517 247



Madhucon Sugars Limited RAJESWARAPURAM
Navabharat Ventures Ltd S A M A L K O T Visakhapatnam
NCS Sugars Limited Latchayyapeta
Nizam Deccan Sugars Limited MOMBAJIPALLY Deccan
Nizam Deccan Sugars Limited Muthyampet Muthyam
Nizam Deccan Sugars Limited Shakkarnagar Nizam
NizamDeccanSugarsLimited Muthyampet Metpally
Prudential Sugar Corporation Ltd KOPPEDU POST
Sagar Sugar & Allied Products Ltd Nelavoy Village
Sarita Sugars Limited Prabhagiripatnam
Sree Rayalseema Sugar & Energy
Ltd
Ponnapuram Nandyal
Sri Sarvaraya Sugars Ltd CHELLURU Chelluru
Sri Venkateswara Co-op. Sugar
Fct.Ltd
GAJULAMANDYAM Tirupati
Sri Vijayarama Gajpathi Co-op.
Sugars Ltd
BHIMSINGHI Vijayarama
Sudalagunta Sugars Ltd
BUCHINAIDU
KANDRIGA
Mayuranagar
The Amadalavalasa Co-op Sugars
Ltd
AMADALAVALASA Amadalavalasa
The Anakapalli Co-op.Sugars Ltd Thummapala Anakapalli


The Andhra Sugars Ltd- Unit -I TANUKU Tanuku
The Andhra Sugars Ltd. - Unit -III BHIMADOLE Bhimadole
The Andhra Sugars Ltd., - Unit -II TADUVAI Taduvai
The Chittoor Co-Operative Sugars
Ltd
Chittoor
The Chodavaram Co-op Sugars Ltd GOVADA Chodavaram
The Cuddapah Co-op Sugars Ltd Doulathapuram Cuddapah
The Etikoppaka Co-op Agri & Indl
Society Ltd
Etikoppaka Etikoppaka
The Jeypore Sugar Co.Ltd CHAGALLU Chagallu
The Kovur Co-op Sugar Factory Ltd POTHIREDDIPURAM Kovur
The Nannapaneni Venkat rao Coop
Sugars Ltd
JAMPANI JAMPANI
The Nizamabad Co-op Sugar Factory
Ltd
SARANGAPUR Nizamabad
The Thandava Co-op.Sugars Ltd PAYAKARAOPETA Thandava
Trident Sugars Limited MADHUNAGAR Zaheerabad



In Andhra Pradesh there are 34 sugar factories of which are under co
operative sector (including the new mills constructed in Tenali, Gurajala, Kurnool,
Hanuman Junction, Kovvur and Nandyala) 8 are under the public sector and private
sector. Presently 39 factories are participated in sugar cane crushing.

Sugar industry continues to play a dominant role in the economy of other
states as sugarcane is one of the important commercial crops. The installed capacity of
the 42 sugar factories in the state is 54000 tones of cane crushing per day (TCD).
During 1986-87 season the sugar factories in the state crushed 56 lakh tones of
sugarcane with an average recovery of 9.43% about 5028 lakh tones sugar was
produced by these factories.

Directorate of Sugar and Commissionerate of Cane in Andhra Pradesh

Belonging to Industries and Commerce Department, the Directorate of Sugar
and Commissionerate of Cane has been vested with the power to guide and deal with
the sugar factories in Andhra Pradesh. It is the responsibility of the department to
encourage sugarcane farmers and to help this developing industry contribute
effectively towards Gross State Domestic Product (GSDP). The department also takes
care of the technological advancements of the industry.







CHAPTER - III
COMPANY PROFILE




PROFILE OF PARRYS INDUSTRIES



INTRODUCTION:

EID Parry (India) Ltd is one of the largest business groups in the country. The
company is engaged in the manufacture and marketing of a wide-range of products
that includes Sugar, Bio-Pesticides and Neutraceuticals. The company made their
presence felt across the globe by developing and nurturing tie-ups with various
organizations such as Sugarcane Research Institute in Australia, Sugar Processing
Research Institute in Louisiana, Tate and Lyle International in UK and Mitr Phol
Sugar Corporation Ltd in Thailand.

EID Parry (India) Ltd is a pioneer in the manufacture of plantation white
sugar from sugarcane. The British trader, Thomas Parry established the House of
Parry in the year 1788. Parry set up the first Sugar Factory in 1842 at Nellikuppam in
Tamilnadu. In the year 1952, the company factory at Ranipet launched 'Parry ware',
their gleaming vitreous sanitary ware collection that makes bathrooms decorative. In
the year 1975, the company was converted into an Indian company.



1788 On July 17, Thomas Parry, one of the first
British traders to see the future that existed in India's rural
areas reached India and established his business on piece
goods and banking.



The company became the member of the Murugappa group in the year 1981.
In November 1992, the company acquired the sugar unit at Pugalur in Tamilnadu. The
electronics division of Murugappa Electronics merged with the company with effect
from April 1991. In December 1995, they acquired the pesticides business of Bharat
Pulverising Mills and in March 1996, the wall tiles project of the company at Karaikal
commenced their production.

During the year 1998-99, the seeds division of the company was sold as an
undertaking to Parry Monsanto Seeds Pvt Ltd, in which Monsanto India Ltd holds
51% and the company holds 49% of the equity. The company along with
Santhanalakshmi Investments Ltd acquired 95.96% of the paid up capital of Cauvery
Sugars and Chemicals Ltd.

In April 1999, the magnetic Media Unit at Mysore has been sold as a going
concern to Meltrack India Pvt Ltd. During the year 1999-2000, the company acquired
Johnson Pedder Ltd with sanitary ware unit at Dewas in Madhya Pradesh. Thus, the
company became a wholly owned subsidiary company. The company increased their
capacity at Pugaur plant to 4000 TCD. In March 2000, they commissioned 2500 TCD
green field plant at Pudukottai.

Coromandel Fertilizers Ltd and Santhanalakshmi Investment Pvt Ltd became
the subsidiary of the company with effect from December 14, 2001 and January 31,
2002. Also, Parry America Inc commenced their operation from January 2002. The
Farm Inputs Division of the company was de-merged and transferred to Coromandel
Fertilisers Ltd with effect from April 1, 2003.



Also, Parry & Company Ltd and The Mofussil Warehouse & Trading
Company Ltd amalgamated with the company. During the financial year 2003-04, the
company acquired 95% stake in East India Sugars Pvt Ltd, Chennai that is engaged in
sugar trading. During the year 2005-06, the company incorporated Parrys Sugar
Ltd with an initial capital of Rs. 1.50 crore.

Parrys Investment Ltd became a wholly owned subsidiary of company during
the year. Santhalakshmi Investments Pvt Ltd was amalgamated with the company
with effect form May 1, 2005 and subsequently Coromandel Bathware Ltd became a
subsidiary. In March 2006, the company transferred their Parryware division on a
going concern basis by way of slump sale to Parryware Glamourooms Pvt Ltd, a
wholly owned subsidiary of the company for Rs. 160.66 crore. Also, they
commissioned 18 MW co-generation plant at Pudukottai. The company transferred
432580 equity shares of Rs. 10 each held by the company in Parryware Glamourooms
Pvt Ltd in favour of Roca Sanitario SA of Spain for the consideration of about Rs.
118.55 crore. Consequent to this, PGPL ceased to be a subsidiary of EID with effect
from June 1, 2006 and became a joint venture company.

In December 8, 2006 the company entered into a joint venture agreement with
Cargil Asia Pacific Holdings Pvt Ltd, a wholly owned subsidiary of Cargill
International. In March 2007, the company commissioned 22 MW co-generation
power plants at Pugalur. During the year 2007-08, the company invested Rs. 45.92
crore in the equity of the Joint Venture entity, Silkroad Sugar Private Ltd. In February
2008, the company acquired 51% stake in Phytoremedies Biolabs Private Ltd, a
company engaged in the business of Nutraceuticals the said company became a
subsidiary company.





The company approved to sale 47% equity holding in Parryware Roca Private
Ltd to Roca Bathroom Investments SP, an affiliate of Roca Sanitario SA, Spain for a
conideration of Euro 11,11,49,111. In November 2008, the company acquired 48%
stake in a leading US Nutraceuticals company. The Company proposes to set up
Green Field Distilleries at Pudukottai and Sivaganga entailing an overall investment
of about Rs. 165 crores. Also there are in the process of setting up a Sugar refinery in
Food Processing Special Economic Zone of Parry Infrastructure Company Pvt Ltd at
Vakalapudi, Kakinada rural mandal, Kakinada.

SUGAR DIVISION:

Nellikuppam has been recognized as a Zero-waste plant with a strict
adherence to quality and high productivity. They have been the recipients of several
awards and certifications with the course of time. Some of the most significant
achievements by the company are:

ISO 14001 certification in Pudukottai & Nellikuppam
The recipients of the Green Tech Award on Safety
Instrumental in organizing a SHE event at the Murugappa Group level

EID Parry has 5 plants in the country situated at Nellikuppam in Cuddalore
district, Pugalur in Karur district, Pudukottai in Pudukottai district, Pettavaithallai in
Trichy district and Puducherry. The combined crushing capacity of all the five plants
is 15800 (TCD) Metric Tonnes of cane per day.


The Pudukottai unit of E.I.D. Parry bears testimony to the phenomenal
instinct, the company has, of honing onto potential possibilities and turning them into
resounding successes. The Pudukottai site had continuously been rejected as a
prospective site for building a factory. After several futile attempts to lure companies
into building their units, the Government of India approached Parrys requesting them
to start a venture at Pudukottai.

Although there was a lot of speculation and skepticism about the venture,
Parrys took on the project with their usual indomitable will and enthusiasm
determined to achieve at least a modicum of success. Currently, the Pudukottai
factory is one of the largest revenue generators of the organization clearly
accentuating the determination and hard work invested in it by the employees and
management of Parrys.

NEW PLANTS IN ANDHRA PRADESH:
Indian sugar producer E.I.D Parry is renaming GMR Industries Ltd as Parrys
Sugar Industries Ltd after acquiring a majority stake in the company. Early this year,
E.I.D Parry struck a deal to acquire 51% in GMR Industries from its promoter GMR
Holdings that marked the exit of GMR group from the sugar business. Rothschild was
the sole financial advisor to GMR Group on the transaction.
Thereafter E.I.D made an open offer and as of end September owns 65%
stake. GMR Holdings continues to hold 22% in the loss-making small-sized sugar
firm.
The deal was in line with GMR group's overall strategy to divest non-core
assets and focus on infrastructure and energy businesses in the future.




GMR Industries, which reported a net loss of Rs 30 crore for the quarter
ended September 30, currently operates three fully-integrated sugar complexes in
Andhra Pradesh and Karnataka with a combined installed crushing capacity of 11,000
TCD (tonne crushing capacity per day), 46 MW of co-generation and 95 KLPD (kilo
litre per day) of distillery.
Net loss of the company was Rs 30 crore for the July-September quarter as
against a loss of Rs 18.3 crore during the same period of 2009-10, the filing added.
Net sales of the company during the second quarter jumped to Rs 19.89 crore,
slightly up from Rs 16.65 crore reported last year for the same quarter.
Shares of the company were traded today at Rs 147 apiece on the BSE, up
0.38 per cent from the previous close.
The company also holds a license to set up and operate an integrated sugar
complex of 3,500 TCD sugar mill at Raibagh in Karnataka. It also owns land and
license to set up another plant in Andhra Pradesh.
Sugar is a cyclical industry and is one of the heavily regulated. The industry
that follows a four year business cycle saw prices peaking out in January this year and
has retracted sharply since then with almost a third decline in price.








EID PARRY Launches Branded Sugar

18 November 2004 marks yet another milestone in the 216 year old history of
E.I.D Parry. The day marks the first-ever launch of branded refined sugar by a South
Indian company. The day marks the launch of Parry's pure refined sugar.

Sugar making in E.I.D Parry's history dates back to 1842. It was then that the
company pioneered the production of sugar by establishing the country's first sugar
factory at Nellikuppam. This factory also holds the distinction of being the first ever
integrated sugar complex in India.

Today, like in the past, the company continues to set standards in the sugar
industry. Parry's sugar has been initially launched in Tamil Nadu in one-kg refill
packs and pet bottles. Every grain of Parry's pure refined sugar is a product of a
superior refining process and is processed hygienically from first grade cane.


In addition, Parry's pure refined sugar has a longer shelf life of over 18 months
and is absolutely pure and free of all impurities.

Over the last two months since its launch, the brand has received good
response. Not just from consumers but also from the channel members. Over the next
few months the company also plans to expand its availability across the country. The
success of Parry's pure refined sugar marks just the first step in E.I.D Parry's foray
into this business. The company's ambitious plans for the future include sugar variants
such as, brown sugar, a range of flavored sugar apart from sachets, cubes, etc.




PARRYS SUGAR INDUSTRY - SANKILI DIVISION


PARRYS Industry ISO 9001:2000 accredited Sugar division started
production in 1997. It has a cane crushing capacity of 5000 tones per day, Co-
generation capacity of 16 Megawatt (MW) and a Distillery unit capacity of 45 Kilo
liters per day (KLPD). More significantly, this plant has brought rapid economic
development to Srikalulam district, a remote area in Andhra Pradesh. Livelihood
generated through it has helped to improve the economic & social standard of living
of the farmers.

The company uses the most advanced technology to produce two grades
of superior quality sugar, namely M - 30 and S - 30. It is the first fully fledged co-
generation plant in Andhra Pradesh with an installed capacity of 16 MW.
The molasses produced from sugar is utilized as a feed stock in the distillery and the
bagasse produced from cane is used as fuel for the boilers.

The Sugar Plant has adopted several cost-effective and steam-conservation
technologies such as Falling Film Evaporator, Vertical Continuous Pans and Short
Retention Time Clarifier. Through these measures it has been able to reduce the
existing steam consumption from 35% to 32%, thereby earning the distinction of
being the lowest steam consuming plant in the sugar industry.





Financial structure:
The original cost of the project was Rs. 75 crores. The project was appraised by
industrial finance corporation of India (IFCI) for evaluating and the availability.
The project founding was as given below:
a) authorized capital : 75 crores
b) Issued and subscribed: 60,46,00,000.
c) Opening capital: 59,29,00,000
1997
The sugar factory with an installed capacity of 2500 TCD is commissioned.

1997
An intensive cane development programme is launched. From the initial availability
of 70,000 Metric Tonnes (MT) of cane in 1997, the availability is enhanced to more
than 600,000 plus MTs by 2004.

1999
Another Co-generation plant of 2.3 MW is added to the existing facility.

2001
A full-fledged 16 MW cogeneration facility is installed by August.

2002
Crushing capacity is further enhanced to 3125 TCD through modernization
schemes.



2005
A distillery plant to produce Ethanol and Rectified Spirit is added, making it an
integrated sugar complex.

2006
Cane crushing capacity is expanded from 3,125 TCD to 5,000 TCD at an
investment of Rs. 40 crore.

Fully automated, the plant uses bagasse during season and other biomass products
such as jute sticks, cotton stems, cane trash, groundnut shells etc. as fuel in off season.


Fact Sheet
Product Electricity

Date of
commencement
August 2001

Capacity 16 MW

Fuel Bagasse, cane trash and other biomass fuels

Location Sugar complex, Sankili



Distillery Modern distillery with zero pollution discharge and reverse
osmosis to reduce effluent generation by 50%.


An ISO 9001 certified Sugar Factory with latest state of the art technology
including provision for carbon-di-oxide recovery and zero pollution discharge. Uses
advanced technology like Falling Film Evaporator, Vertical Continuous Pans and
Short Retention Time Clarifier to reduce steam consumption from 35% to 32%

Fact Sheet
Location
Sankili, Srikakulam District, close to Visakhapatnam Port, Andhra
Pradesh

Crushing
capacity
5000 TCD

No. of
surrounding
villages
supported
500

Accreditation 9001:2000 American Quality Assessors




BOARD OF DIRECTORS:
The board of directors of the company has an optimum combination of executives and
non executive directors. The board consists of eight members, of whom 4 directors
are independent and 5 directors are non executive. Mr. K. V. K. Seshavataram is
non executive chairman.

NAME OF THE DIRECTOR DESIGNATION CATEGORY

Mr. S. Sandilya
Mr. D. Kumaraswamy
Mr. V. Ravichandran
Mr. N.Srinivasan
Mr. K. Balasubramanian
Mr. K. Ramadoss

Chairman
Managing Director
Director
Director
Director
Director


Independent & Non Executive
Promoter & Executive
Promoter & Non Executive
Independent & Non - Executive
Independent & Non Executive
Independent & Non Executive


BOARD MEETINGS:
Normally, the board meetings are held at least once in a quarter to review and discuss
the operating results and other items of the agenda. In addition, the Board Meetings
are held whenever required. The maximum time gap between any two meetings is not
more than three calendar months. Generally, the Board Meetings are held at the
Corporate Office of the company at Hyderabad. During the financial years the board
met 27 times.



PARRYS (GMR) Products and Technological Achievements
The company mainly producing two grades of superior quality sugar, namely
M - 30 and S - 30 through the adoption of the latest technology.
Several innovative Energy Conservation Measures have been adopted to bring
down the energy consumption levels. Steam consumption has been reduced
from 35% to 32%, the lowest steam consumption figure in the Sugar industry.
As a part of Total Quality Management, the Group has introduced Quality
Circle concept for the first time in the Sugar Industry of Andhra Pradesh
through voluntary participation of the employees.
The plant is the first in the Sugar industry of Andhra Pradesh to receive the
ISO 9001-2000 certificate
The Sankili plant is the first fully fledged co-generation plant in Andhra
Pradesh, with an installed capacity of 16 MW.
The plant has 100% DCS controls generating power for both in-house
consumption and export to the grid.
The plant is the first in Andhra Pradesh to undertake full-fledged cane trash
procurement and utilization as fuel in the boilers.
The plant also has the most modern distillery of 45 KLPD capacity with
Molecular Sieve Dehydration system to produce best quality Ethanol and
Rectified Spirit.
Management's commitment towards environmental protection is exhibited
through a massive investment of Rs. 6.50 crores on Effluent Treatment Unit,
incorporating Reverse Osmosis Technology for the first time in Andhra
Pradesh. The plant has also installed an Anaerobic Digester and RCC bio
compost yards to achieve `zero' discharge of effluents.
The plant has been recognized by the Pollution Control Authorities as being a
model Effluent Treatment Factory. The Pollution Control Board has also rated
it as a benchmark plant for other distilleries to emulate.



Major Awards
Received SISSTA Awards for 'The Best Cane Development Factory' for the
year 2002-03.
Received the S.V. Parthasarathy Memorial Award from SISSTA for 'The Best
Performance Sugar Factory' for the year 2003-04.
PARRYS (GMR) Sankili Sugar plants, Sr. Manager (Cane) was awarded the
Best Cane Development Officer by the Regional Agricultural Research
Station, Anakapalli for the year 2002.
'Best Organization' Award for supporting Quality Circle Movement by the
Quality Circle Forum India, Hyderabad Chapter.
The plant's Quality Circles received Excellent Awards at Regional and
National Level Competitions.
First Sugar Factory in Andhra Pradesh to be accredited with 'ISO 9001:2000'
in the year 2003.

Future plans
Addition of Extra Neutral Alcohol (E.N.A) facility in the distillery to produce
45 KLPD ENA.
Additional facility for production of Refined Sugar.
Full Plant Automation.
Milk Chilling Plant for the benefit of the farmers.
Bio-fertilizer Plant.
Implementation of Total Quality Management through various initiatives in the
next few years for achieving Business Excellence. Some initiatives include
International Organization for Standardization (ISO) 14000, Safety, Health,
Environment (SHE) and Occupational Health & Safety Assessment Series (OHSAS),
5 S and KAIZEN.





CHAPTER IV

THEORITICAL ASPECTS OF
WORKING CAPITAL
MANAGEMENT







MEANING OF WORKING CAPITAL MANAGEMENT

Working capital is that part of companys capital which is used for purchasing
raw material and involve in sundry debtors. We all know that current assets are very
important for proper working of fixed assets.

Suppose, if you have invested your money to purchase machines of company
and if you have not any more money to buy raw material, then your machinery will no
use for any production without raw material.

From this example, you can understand that working capital is very useful for
operating any business organization. We can also take one more liquid item of current
assets that is cash. If you have not cash in hand, then you cannot pay for different
expenses of company, and at that time, your many business works may delay for not
paying certain expenses.

If we define working capital in very simple form, then we can say that
working capital is the excess of current assets over current liabilities.

According to Guttmann & Dougall -Excess of current assets over current
liabilities.

According to Shubin working capital is the amount of funds necessary to cover the
cost of operating the enterprise.



NATURE OF WORKING CAPITAL MANAGEMENT

The working capital refers to current assets which may be defined as

(i) Those which are convertible into cash or equivalents with in a
period of one year and
(ii) Those which are required to meet day to day operations.

The fixed assets as well as the current assets, both required investment of
funds. So, the management of working capital and of fixed assets, apparently seem to
involve same type of considerations but it is not so. The management of working
capital different concepts and methodology then the technique used in fixed assets
management. The very basic of fixed assets decision process and the working capital
decision process are different.

The fixed assets involve long period perspective and therefore, the concept of
time value of money is applied in order to discount the future cash flows; whereas in
working capital the time horizon is limited to one year only and the time value of
money concept is not considered. The fixed assets affect the long term profitability of
the firm while the current assts affect the short term liquidity position. The fixed
assets decisions are irreversible and affect the growth of the firm, whereas the
working capital decisions can be changed and modified without many implications.






Managing current assets may require more attention than managing fixed
assets. The financial manager cannot simply decide the level of the current assets and
stop there. The level of investment in each of the current assets varies from day to
day, and the financial manager must therefore, continuously monitor these assets to
ensure that the desired levels are being maintained.

Since, the amount of money invested in current assets can change rapidly, so
does the financing required. Mismanagement of current assets can be costly. Too
large an investment may also expose the firm to undue risk.

The working capital management may be defined as the management of firms
sources and uses of working capital in order to maximize the wealth of the share
holders. The proper working capital management required both the medium term
planning and also the immediate adaptations to changes arising due to fluctuations in
operating levels of the firm.









NEED OF WORKING CAPITAL MANAGEMENT

The need for working capital cannot be over emphasized. Every business
needs some amount of working capital. The need of working capital arises due to the
time gap between production and realization of cash from sales.

There is an operating cycle involved in the sales and the realizations of cash.
There are time gaps in purchase of raw materials and production; production and
sales; and sales and realization of cash. Thus, working capital is needed for the
following purposes:

a) For the purchase of raw materials, components and spares.
b) To pay wages and salaries.
c) To incur day to day expenses and overhead costs such as fuel,
power and office expenses etc.,
d) To meet the selling costs as packing, advertising etc.,
e) To provide credit facilities to the customers.
f) To maintain the inventories of raw materials, work in progress,
stores and spares and finished stock.






OBJECTIVES OF WORKING CAPITAL MANAGEMENT

The objectives of working capital management could be stated as;
(a) To ensure optimum investment in current assets.
(b) To strike a balance between the twin objectives of liquidity and profitability in
the use of funds.
(c) To ensure adequate flow of funds for current operations.
(d) To speed up the flow of funds or to minimize the stagnation of funds.
(e) For the purchase of raw materials, components and spares.
(f) To pay wages and salaries.
(g) To incur day to day expenses and overhead costs such as fuel, power, and
office expenses etc
(h) To provide credit facilities to customers etc.









IMPORTANCE AND ADVANTAGES OF WORKING CAPITAL
MANAGEMENT

Working capital is the life blood and nerve centre of a business. Working
capital is very essential to maintain the smooth running of a business. No business can
run successfully without an adequate amount of working capital.

The main advantages of maintaining adequate amount of working capital are as
follows:

A) Solvency of the business:
Adequate working capital helps in maintaining solvency of the business to be
providing uninterrupted flow of production.

B) Goodwill :
Sufficient working capital enables a business concern to make prompt payments
and hence helps in creating and maintaining goodwill.

C) Easy loans:
A concern having adequate working capital, high solvency and good credit
standing can arrange loans from banks and others on easy and favorable terms.




D) Cash discounts:
Adequate working capital also enables a concern to avail cash discounts on the
purchases and hence it reduces costs.

E) Regular supply of raw materials:
Sufficient working capital ensures regular supply of raw materials and
continuous production.

F) Ability to face crisis:
Adequate working capital enables a concern to face business crisis in
emergencies such as depression because during such periods, generally, there
is much pressure on working capital.

G) Quick and regular return on investments:
Every investor wants a quick and regular return on his investments.
Sufficiency of working capital enables a concern to pay quick and regular
dividends to its investors as there may not be much pressure to plough back
profits. This gains the confidence of its investors and creates a favorable
market to raise additional funds in the future.





KINDS OF WORKING CAPITAL MANAGEMENT

The working capital is mainly four types:
1. Gross working capital

Total or gross working capital is that working capital which is used for all the
current assets. Total value of current assets will equal to gross working capital.

2. Net Working Capital
Net working capital is the excess of current assets over current liabilities.

Net Working Capital = Total Current Assets Total Current Liabilities

This amount shows that if we deduct total current liabilities from total current
assets, then balance amount can be used for repayment of long term debts at any
time.

3. Permanent Working Capital
Permanent working capital is that amount of capital which must be in
cash or current assets for continuing the activities of business.
4. Temporary Working Capital

Sometime, it may possible that we have to pay fixed liabilities, at that time we need
working capital which is more than permanent working capital, then this excess
amount will be temporary working capital. In normal working of business, we dont
need such capital.


WORKING CAPITAL CYCLE
Cash flows in a cycle into, around and out of a business. It is the business's life
blood and every manager's primary task is to help keep it flowing and to use the
cashflow to generate profits. If a business is operating profitably, then it should, in
theory, generate cash surpluses. If it doesn't generate surpluses, the business will
eventually run out of cash and expire.
The faster a business expands, the more cash it will need for working capital
and investment. The cheapest and best sources of cash exist as working capital right
within business. Good management of working capital will generate cash will help
improve profits and reduce risks. Bear in mind that the cost of providing credit to
customers and holding stocks can represent a substantial proportion of a firm's total
profits.
There are two elements in the business cycle that absorb cash - Inventory
(stocks and work-in-progress) and Receivables (debtors owing you money). The main
sources of cash are Payables (your creditors) and Equity and Loans.





Each component of working capital (namely inventory, receivables and
payables) has two dimensions ........TIME ......... and MONEY. When it comes to
managing working capital TIME IS MONEY. If you can get money to move faster
around the cycle (e.g. collect monies due from debtors more quickly) or reduce the
amount of money tied up (e.g. reduce inventory levels relative to sales), the business
will generate more cash or it will need to borrow less money to fund working capital.
As a consequence, you could reduce the cost of bank interest or you'll have additional
free money available to support additional sales growth or investment. Similarly, if
you can negotiate improved terms with suppliers e.g. get longer credit or an increased
credit limit, you effectively create free finance to help fund future sales.
I f you ....... Then ......
Collect receivables (debtors)
faster
You release cash
from the cycle
Collect receivables (debtors)
slower
Your receivables
soak up cash
Get better credit (in terms of
duration or amount) from
suppliers
You increase your
cash resources
Shift inventory (stocks) faster You free up cash
Move inventory (stocks) slower You consume more
cash
It can be tempting to pay cash, if available, for fixed assets e.g. computers,
plant, vehicles etc. If you do pay cash, remember that this is now longer available for
working capital. Therefore, if cash is tight, consider other ways of financing capital
investment - loans, equity, leasing etc.



SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following:
Existing cash reserves
Profits (when you secure it as cash !)
Payables (credit from suppliers)
New equity or loans from shareholders
Bank overdrafts or lines of credit
Long-term loans
If you have insufficient working capital and try to increase sales, you can easily over-
stretch the financial resources of the business. This is called overtrading. Early
warning signs include:
Pressure on existing cash
Exceptional cash generating activities e.g. offering high discounts for early
cash payment
Bank overdraft exceeds authorized limit
Seeking greater overdrafts or lines of credit
Part-paying suppliers or other creditors
Paying bills in cash to secure additional supplies
Management pre-occupation with surviving rather than managing
Frequent short-term emergency requests to the bank (to help pay wages,
pending receipt of a cheque).







MANAGEMENT OF WORKING CAPITAL IN INDIA
Indian corporate seems to have adequate and satisfactory level of working
capital as reflected in their liquidity ratios. The foreign controlled companies
are placed in a better position relative to the domestic companies.
There are wide inter industry variations in the liquidity ratio of the corporate
enterprises. With the exception of sugar, all other industry groups have sage
and satisfactory liquidity position.
The majority of Indian companies maintain relatively lower cash\bank
balances. Marketable securities are yet to emerge as a popular means of cash
management. The excess cash is deployed to retire short term debt\in short
term bank deposits.
In spite of the notable decline over the years, inventory constitutes a sizeable
part of the total current assets of the Indian corporate. The most important
objective of inventory management in India is avoid loss of production\sales.
The popular control techniques are ABC, FSN and SDE and inventory
turnover ratio and comparison with competitors are widely used to assess the
performance of inventory management.
Account payable and short term loans\ advances are the major components
of current liabilities.
Debtors/receivables also constitute a significant component of current assets.
Growth in sales is the most important objective of credit policy and the
open credit with approval if exceeds a specified limit is the most favored
policy. It is common practice to prepare ageing schedule of debtors to
assess the financial health of the customers before granting credit and
monitoring purposes. To speed up collections, the corporate offer cash
discount. The majority of the companies also charge penal interest.

STATEMENT OF WORKING CAPITAL



Particulars Amount (Rs) Amount (Rs)
A. Estimation of Current Assets:
i) Raw materials
ii) Work in process
Raw materials(full cost) xxx
Direct labor(to the extent of
Completed stage) xxx
Overheads (to the extent of
Completed stage) xxx
iii) Finished goods inventory
iv) Debtors
v) Cash balance required

xxx
xxx



xxx
xxx
xxx








xxxx
Total Current Assets xxxx
B. Estimation of current liabilities:
i) Creditors
ii) Expenses
Overheads xxx
Labor xxx

xxx
xxx



xxx
Total current liabilities xxx
C. Working Capital (A B)
Add, contingency (Percentage on Working Capital)
xxx
xx
D. Working Capital Required xxxx





FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT
The working capital needs of a firm are influenced by numerous factors. The
important ones are:
1. Nature of business
2. Seasonality of operations
3. Production conditions
4. Market conditions
5. Conditions of supply
Nature of business: The working capital requirement of a firm is closely related to
the nature of its business. A service firm, like an electricity undertaking or a transport
corporation, which has a short operating cycle and which sells predominantly on cash
basis, has a modest working capital requirement. On the other hand, a manufacturing
concern like a machine tools unit, which has a long operating cycle and which sells
largely on credit, has a very substantial working capital requirement.
Seasonality of Operations: Firms which have marketed seasonally in their operations
usually have highly fluctuating working capital requirements. To illustrate, consider a
firm manufacturing ceiling fans. The sale of ceiling fans reaches a peak during the
summer months and drops sharply during the winter period. The working capital need
of such a firm is likely to increase considerably in summer months and decrease
significantly during the winter months. Electric bulbs, tubes and CFL lamps have
fairly even sales round the year, tends to have stable working capital needs.
Production Policy: A firm marketed by pronounced seasonal fluctuations in its sales
may pursue a production policy which may reduce the sharp variations in working
capital requirements. For example, a manufacturer of ceiling fans may maintain a
steady production throughout the year rather than intensify the production activity
during the peak business season. Such a production policy may dampen the
fluctuations in working capital requirements.


Market conditions: The degree of competition prevailing in the market-place has an
important bearing on working capital needs. When competition is intense, a larger
inventory of finished goods is required to promptly serve customers who may be
inclined to wait because other manufacturers are ready to meet their needs. Further,
generous credit terms may have to be offered to attract customers in a highly
competitive market. Thus, working capital needs tend it be high because of greater
investment in finished goods inventory and accounts receivable.
If the market is strong and competition is weak, a firm can manage with smaller
inventory of finished goods, because customers can be supplied with some delay.
Further, in such a situation the firm can insist on cash payment and avoid lock-up of
funds in accounts receivable it can even ask for advance, partial or total.
Conditions of Supply: The inventory of raw materials, spares and stores depends on
the conditions of supply. If the supply is prompt and adequate, the firm can manage
with small inventory. However, if the supply is unpredictable and scant, then the firm,
to ensure continuity of production would have to acquire stocks as and when they are
available and carry larger inventory on an average. A similar policy may have to be
followed when the raw material is available only seasonally and production
operations are carried out round the year.

CONCLUSION
Working capital management involves deciding upon the amount and
composition of current assets and how to finance these assets. Similarly, the larger the
proportion of long term funds to finance the firm, the lesser the risk of cash
insolvency, all other things being equal. However the profit of the firm is likely to be
less. Thus, while making decisions about composition and the extent of current assets
and financing structure, the firm has to resolve the tradeoff between the risk and
profitability.



FINANCIAL ANALYSIS


Financial analysis is the process of identifying the finance strengths and
weakness of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss account.

The study on ratio analysis in PARRYS Industries Ltd., help in assessing
corporate excellence judging credit worthiness and it also helps in determining the
financial performance of the company of this purpose date are collected for the period
of 5 years. Various ratios are used in the study to find out the liquidity position of
PARRYS limited.

The organization has to submit its true picture of financial position to the
potential lender of money and to the upcoming partners for that it wanted to have the
first utilize of the analysis to rectify the problem of any. The process of identifying the
finance strengths and weakness of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account.

Financial analysis can be undertaken by management of the firm or by parties
outside of the firm viz. owners, creditors, investors, and other to form judgment about
the operating performance and financial position of the firm. Users of the financial
statements can get insight about the financial strength and weakness of the firm if they
properly analyze the information reported in the statements. Management should be
interested in knowing the financial strengths of the firm to make their best use and
able to spot out the financial weakness of firm to take suitable corrective action.



For example, trade creditors are interested in the firms ability to their claims over a
period of time. The will guide the preference to the evaluation of the firms liquidity
position. The suppliers of long term debt are concerned with the firms profitability
over time, its ability to generate cash to be able to pay interest and repay principal and
relationship between the various sources of funds. Investors, who have invested their
money in the firms shares, are more confidence in those firms that show steady
growth in earnings. It is helpful in assessing corporate excellence, judging
creditworthiness, forecasting, redirecting bank, market risk.

Objectives of the financial statement analysis:

The following are the main objectives of the analysis of the financial statements.

1. To estimate the earning capacity of the firm.
2. To gauge the financial position and financial performance of the firm.
3. To determine the long term liquidity of the funds as well as solvency.
4. To decide about the future prospects of the firm.


Types of financial analysis:

The analysis of financial statements consist of a study of a relationship and trends to
determine whether or not the financial position of the concerned and its operating
efficiency have been satisfactory. In process of this analysis various tools of methods
or devices are used to the financial analysis for this purpose as follows.
1. Comparative Statements
2. Common Size Statements
3. Trend Analysis
4. Funds Flow Analysis
5. Ratio Analysis



1. COMPARATIVE STATEMENTS:

The preparation of comparative financial and operating statements is an important
device of horizontal financial analysis. Financial data becomes more meaningful
when compared with similar data for previous period or a number of prior periods.
Statements prepared in a firm that reflect financial data for two or more periods are
known as comparative statements. Annual data can be compared with similar data for
prior years. Such statements are very helpful in measuring the effects of the conduct
of a business during a period under consideration. Comparative statements can be
prepared for both types of financial statements balance sheet as well as present a
review of operating activities of the assets and liabilities change in the financial
position during the period under consideration.


2. COMMON SIZE STATEMENTS:

Comparative statements that give only the vertical percentage of ratio for
financial data without given rupee values are known as common size statements.
They are also known as 100% statements. For example, if the balance sheet items
are expressed as the ratio of each sheet to total assets and ratio of each liability, it
will be called a common size of balance sheet. Thus a common size statement
shows the relation of each component to the whole. It is useful in the vertical
financial analysis and comparison of two business enterprise at a certain data.








3. TREND ANALYSIS:

Trend analysis is also an important tool of horizontal financial analysis. Under
this technique of financial analysis he rations of different items of various periods
are calculated and then a comparison is made. Analysis of the ratios over the past
few years may well suggest the trend of direction in which the concern is going
upward or downward. Each item of base year is taken as 100 and on that basis the
percentage of the items of each of the year is calculated. These percentages can
also be taken an index numbers showing relative changes in the financial data
resulting with the passage of time.

4. FUNDS FLOW ANALYSIS:

Funds flow analysis is a valuable aid to the financial executives and creditors
for evaluating the uses of funds by the firm and in determining those uses were
financed. A funds flow statements indicates where funds came from and where
they were used during the period under review. These statements can be prepared
separately also. Funds flow statements and cash flow statements. These are
important tools of communication and very helpful for financial executives in
planning the intermediate and long term financing of the firm.

5. RATIO ANALYSIS:

This is the most important tool available to financial analyst to complete their
work. An accounting ratio shows the relationship in mathematical terms between
two interrelated accounting figures. The figures are to be interrelated (example
gross profit and sales, current assets and current liabilities). Because on useful
purpose will be served if ratios are calculated between two figures which are not
at all related to each other, example, sales and discount on issue of debentures. A
financial analyst may calculated different accounting ratios for different purposes.


RATIO ANALYSIS


Introduction
Ratio analysis is the powerful tool of financial statements analysis. A ratio is
defined as the indicated quotient of two mathematical expressions and as the
relationship between two or more things. The absolute figures reported in the
financial statement do not provide meaningful understanding of the performance and
financial position of the firm. Ratio helps to summaries large quantities of financial
data and to make qualitative judgment of the firm s financial performance
Role of ratio analysis
Ratio analysis helps to appraise the firms in the term of their profitability and
efficiency of performance, either individually or in relation to other firms in same
industry. Ratio analysis is one of the best possible techniques available to
management to impart the basic functions like planning and control. As future is
closely related to the immediately past, ratio calculated on the basis historical
financial data may be of good assistance to predict the future.

E.g. On the basis of inventory turnover ratio or debtor s turnover ratio in the
past, the level of inventory and debtors can be easily ascertained for any given amount
of sales. Similarly, the ratio analysis may be able to locate the point out the various
arias which need the management attention in order to improve the situation. E.g.
Current ratio which shows a constant decline trend may be indicate the need for
further introduction of long term finance in order to increase the liquidity position. As
the ratio analysis is concerned with all the aspect of the firm s financial analysis
liquidity, solvency, activity, profitability and overall performance, it enables the
interested persons to know the financial and operational characteristics of an
organization and take suitable decisions.


Limitations of ratio analysis

1. The basic limitation of ratio analysis is that it may be difficult to find a basis for
making the comparison

2. Normally, the ratios are calculated on the basis of historical financial statements.
An organization for the purpose of decision making may need the hint regarding the
future happiness rather than those in the past. The external analyst has to depend upon
the past which may not necessary to reflect financial position and performance in
future.
3. The technique of ratio analysis may prove inadequate in some situations if there is
differs in opinion regarding the interpretation of certain ratio.

4. As the ratio calculates on the basis of financial statements, the basic limitation
which is applicable to the financial statement is equally applicable In case of
technique of ratio analysis also i.e. only facts which can be expressed in financial
terms are considered by the ratio analysis.

5. The technique of ratio analysis has certain limitations of use in the sense that it only
highlights the strong or problem arias; it does not provide any solution to rectify the
problem arias.












Classification of working capital ratio
Working capital ratio means ratios which are related with the working capital
management e.g. current assets, current liabilities, liquidity, profitability and risk
turnoff etc. these ratio are classified as follows
1. Efficiency ratio
The ratios compounded under this group indicate the efficiency of the
organization to use the various kinds of assets by converting them the form of sale.
This ratio also called as activity ratio or assets management ratio. As the assets
basically categorized as fixed assets and current assets and the current assets further
classified according to individual components of current assets viz. investment and
receivables or debtors or as net current assets, the important of efficiency ratio as
follow
1. Working capital turnover ratio
2. Inventory turnover ratio
3. Receivable turnover ratio
4. Current assets turnover ratio
5. Liquidity ratio
The ratios compounded under this group indicate the short term position of the
organization and also indicate the efficiency with which the working capital is being
used. The most important ratio under this group is follows
1. Current ratio
2. Quick ratio
3. Absolute liquid ratio






1) Working capital turnover ratio
It signifies that for an amount of sales, a relative amount of working capital is
needed. If any increase in sales contemplated working capital should be adequate and
thus this ratio helps management to maintain the adequate level of working capital.
The ratio measures the efficiency with which the working capital is being used by a
firm. It may thus compute net working capital turnover by dividing sales by working
capital.
Sales
Working capital turnover ratio =
Net working capital


2) Inventory turnover ratio
Inventory turnover ratio indicates the efficiency of the firm in producing and
selling its products. It is calculated by dividing the cost of goods sold by average
inventory:
Cost of goods sold
Inventory TOR =
Average inventory

3) Receivable turnover ratio

The derivation of this ratio is made in following way

Gross sales
Receivable turnover ratio =
Average account receivables
Gross sales are inclusive of excise duty and scrap sales because both may
enter in to receivables by credit sales. Average receivable calculate by opening plus


closing balance divide by 2. Increasing volume of receivables without a matching
increase in sales is reflected by a low receivable turnover ratio. It is indication of
slowing down of the collection system or an extend line of credit being allowed by the
customer organization. The latter may be due to the fact that the firm is losing out to
competition. A credit manager engage in the task of granting credit or monitoring
receivable should take the hint from a falling receivable turnover ratio use his market
intelligence to find out the reason behind such failing trend.
Debtor turnover indicates the number of times debtors turnover each year.
Generally the higher the value of debtor s turnover, the more is the management of
credit.
365 days
Debtor s turnover ratio =
Receivable turnover ratio



4) Current assets turnover ratio
Current assets turnover ratio is calculate to know the firms efficiency of
utilizing the current assets .current assets includes the assets like inventories, sundry
debtors, bills receivable, cash in hand or bank, marketable securities, prepaid
expenses and short term loans and advances. This ratio includes the efficiency with
which current assets turn into sales. A higher ratio implies a more efficient use of
funds thus high turnover ratio indicate to reduced the lock up of funds in current
assets. An analysis of this ratio over a period of time reflects working capital
management of a firm.
Sales
Current assets TOR=
Current assets
5) Liquidity ratio



i) Current ratio

The current is calculated by dividing current assets by current liabilities:

Current assets
Current ratio =
Current liabilities


Current assets include cash and those assets which can be converted in to cash
within a year, such marketable securities, debtors and inventories. All obligations
within a year are include in current liabilities. Current liabilities include creditors,
bills payable accrued expenses, short term bank loan income tax liabilities and long
term debt maturing in the current year. Current ratio indicates the availability of
current assets in rupees for every rupee of current liability.

ii) Quick ratio
Quick ratios establish the relationship between quick or liquid assets and
liabilities. An asset is liquid if it can be converting in to cash immediately or
reasonably soon without a loss of value. Cash is the most liquid asset .other assets
which are consider to be relatively liquid and include in quick assets are debtors and
bills receivable and marketable securities. Inventories are considered as less liquid.
Inventory normally required some time for realizing into cash. Their value also be
tendency to fluctuate. The quick ratio is found out by dividing quick assets by current
liabilities.

Current asset Inventory
Quick ratio =
Current liabilities





iii) Absolute liquid ratio

`Even though debtors and bills receivables are considered as more liquid then
inventories, it cannot be converted in to cash immediately or in time. Therefore while
calculation of absolute liquid ratio only the absolute liquid assets as like cash in hand
cash at bank, short term marketable securities are taken in to consideration to measure
the ability of the company in meeting short term financial obligation. It calculates by
absolute assets dividing by current liabilities.

Absolute liquid assets
Absolute liquid ratio =
Current liabilities




























CHAPTER V
FINANCIAL ANALYSIS OF
PARRYS (GMR) INDUSTRIES








WORKING CAPITAL STATEMENT ON PARRYS INDUSTRIES LTD.

PARTICULARS 2008-09 2009-10 2010-11 2011-2012
2012-2013
(A)
Current Assets:

Inventori
es
22,86,26,254 18,21,68,307 55,64,41,299 48,10,93,506 1,135,121,485.17
Sundry
Debtors
5,14,01,414 13,76,18,767 11,20,54,200 19,64,78,569 103,117,308.18
Cash &
Bank balance

Other
Current Assets
51,60,793 52,95,896 72,39,762 1,79,58,930 9,998,137.74
Loan &
Advances
22,439 18,446 - --

3,78,81,783 5,95,46,590 3,02,58,186 3,28,56,551 122,693,580.96
Total Current
Assets
32,30,92,
683
38,46,48,006 70,59,93,446 72,82,87,556 1370930512
(A)


(B)
Current
Liabilities:

Current
Liabilities
9,36,77,892 17,65,89,357 33,12,56,591 39,93,14,513 577,407,679.61

Provisions
17,35,22,565 3,78,41,645 50,47,384 58,80,282 7,278,227.18
Total Current
Liabilities
26,72,00,457 21,44,31,002 33,63,03,975 40,51,94,794 587,685,906.79
(B)



Net Working
Capital
5,58,92,226 17,02,17,004 36,96,89,471 32,31,92,761 786,244,605.26
(A-B)









Interpretation:

During the five years period the Working Capital position of PARRYS
industries limited decreased. The networking capital has decreased from Rs.
109,43,04,871 to Rs. 36,96,89,471 during the years 2007 to 2011. That means losses
are increased. Because there is Decreasing Current Assets, and Increasing Current
Liabilities. Cash balance and debtors has decreased noticeably by the end of the
period. Other liabilities had increased by the end of the period.












0
100000000
200000000
300000000
400000000
500000000
600000000
700000000
800000000
900000000
working capital statement for period
of five years
working capital statement
for period of five years



PARTICULARS 2008-09
(A) Current Assets:
Inventories 22,86,26,254
Sundry Debtors 5,14,01,414
Cash & Bank balance
Other Current Assets 51,60,793
Loan & Advances 22,439

3,78,81,783
Total Current Assets 32,30,92, 683
(A)

(B) Current Liabilities:
Current Liabilities 9,36,77,892
Provisions 17,35,22,565
Total Current Liabilities 26,72,00,457
(B)


Net Working Capital 5,58,92,226
(A-B)






























0
50000000
100000000
150000000
200000000
250000000
300000000
350000000
current assets current liabilities
Series1






































GRAPHICAL PRESENTATION OF WORKING CAPITAL

CURRENT RATIO:

Current assets
Current Ratio =
Current liabilities

STATEMENT OF CURRENT RATIO

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

Current Assets


32,30,92,683

38,46,48,006

70,59,93,446

72,83,87,556

137,093,051
2

Current Liabilities

26,72,00,457

21,44,31,002


33,63,03,975

40,51,94,794

584,685,906.
79

Current Ratio

1.20:1

1.79:1

2.10:1

1.79:1

2.34:1

Graphical presentation of Current Ratio


0
0.5
1
1.5
2
2.5
2008-09 2009-10 2010-11 2011-12 2012-13
CURRENT RATIO


Interpretation:
Current Ratio is a measure of general liquidity and is most widely used to
make the analysis to pay its current obligations in time as and when they became due.
The low current ratio represents that the low liquidity position of the firm is not good
generally, the current ratio of 2:1 or more is considered satisfactory. In the year 2005-
06 only the current ratio was 2.58:1 in this year only the prescribed industry standard,
remaining years the current ratio below the 2:1 position. So the industry current ratio
is not satisfactory.

STATEMENT SHOWING ON COMPONENTS OF CURRENT ASSETS
PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13
Components of Current
Assets



Cash and Bank balances
Sundry Debtors



51,60,793
5,14,01,414


52,95,896
13,76,18,767


72,39,762
55,64,41,299


1,79,58,930
19,64,78,569


9,998,137.74
103,117,308.
18

Quick Assets


5,65,62,207

14,29,14,663

56,36,81,061

21,44,37,499

113,115,445.
92
Components of Current
Liabilities



Current Liabilities
Provisions


9,36,77,892
17,35,22,565


17,65,89,357
3,78,41,645


33,12,56,591
50,47,384


39,93,14,513
58,80,282

577,407,679.
61
7278,227.18

Total Current Liabilities


26,72,00,457

21,44,31,002

33,63,03,975

40,51,94,794

584,685,906.
79



Graphical presentation



I. QUICK RATIO:
Quick Assets
Quick Ratio =
Current Liabilities

STATEMENT OF QUICK RATIO


PARTICULAR
S

2008-09

2009-10

2010-11

2011-12

2012-13

Quick Assets

5,65,62,207

14,29,14,66
3

56,36,81,06
1

21,44,37,49
9

113,115,445.9
2

Current
Liabilities

26,72,00,45
7

21,44,31,00
2

33,63,03,97
5

40,51,94,79
4

584,685,906.7
9

Quick Ratio

0.21

0.67

1.59

0.52

0.19



0
100000000
200000000
300000000
400000000
500000000
600000000
2008-09 2009-10 2010-11 2011-12 2012-13
QUICK ASSETA
CURRENT LIABILITIES


Graphical Presentation of Quick Ratio





Interpretation:

Quick Ratio is a measure of general liquidity and is most widely used to make
the analysis to pay its current obligations in time as and when they became due. The
low Quick ratio represents that the low liquidity position of the firm is not good
generally, the Quick ratio of 1:1 or more is considered satisfactory. In the year 2011-
12 the Quick ratio was 0.52 this is the very dangerous position of the company.






0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2008-09 2009-10 2010-11 2011-12 2012-13
QUICKRATIO




II. STATEMENT SHOWING CURRENT ASSETS TO TOTAL
ASSETS



PARTICULARS

2008-09

2009-10


2010-11

2011-12

2012-13
Total Current
Assets

32,30,92,683

38,46,48,006

70,59,93,446

72,83,87,556

1,37,09,30,512

Total Assets

191,05,37,386

181,94,53,459

1,61,44,21,797

32,31,92,761

Percentage of
total Current
Assets to Total
Assets

16.91

21.14

43.73

44.37


GRAPHICAL PRESENTATION OF PERCENTAGE OF TOTAL CURRENT
ASSETS IN TO TOTAL ASSETS

0
500000000
1E+09
1.5E+09
2E+09
2008-09 2009-10 2010-11 2011-12 2012-13
TOTAL CURRENT ASSETS
TOTAL ASSETS


III. WORKING CAPITAL TURNOVER RATIO:
Sales
Turnover Ratio=
Net Working Capital

PARTICULARS

2008-09

2009-10

2010-11

2011-12

2012-13
Sales 104,81,70,742 105,18,17,204 1,05,04,55,345 1,95,81,83,552 1,745,989,430
Net Working
Capital

5,58,92,226

17,02,17,004

36,96,89,471

32,31,92,761

786,244,605.2
6
Working Capital
Turnover Ratio
18.75:1 6.18:1 2.84:1 1.87:1 0.57:1

GRAPHICAL PRESENTATION WORKING CAPITAL TURNOVER RATIO


0
5
10
15
20
2008-09 2009-10 2010-11 2011-12 2012-13
WORKING CAPITAL TURNOVER
RATIO


IV. STATEMENT SHOWING ON CASH VELOCITY RATIO


PARTICULARS

2008-09

2009-10


2010-11

2011-12

2012-13

Sales

104,81,70,742

105,18,17,204

1,05,04,55,345

1,95,81,83,552

1,745,989,430

Cash

51,60,793

52,95,896

72,39,762

1,79,58,930

2,042,432,69

Cash Velocity
Ratio

203.1

198.60

145.09

109.03

60.55




GRAPHICAL PRESENTATION CASH VELOCITY RATIO






0
500000000
1E+09
1.5E+09
2E+09
2008-09 2009-10 2010-11 2011-12 2012-13
SALES
CASH
0
50
100
150
200
250
2008-09 2009-10 2010-11 2011-12 2012-13
CASH VELOCITY FACTOR


PARRYS (GMR) PROFIT AND LOSS ACCOUNT
PARTICULARS 2011-12 2012-13
I.INCOME:
Sales (Gross) 1,95,81,83,552 1,745,989,430
Inter Unit Sales 26,03,45,007 305,274,251
Less: Duties & Taxes 5,57,42,886 42,061,930
Sales (Net) 2,16,27,85,673 2,009,201,751
Other Income 5,14,79,123 33,230,939
TOTAL 2,21,42,64,796 2,042,432,690
II. EXPENDITURE
Materials and Consumption 1,35,00,26,288 937,600,929
Inter Unit Purchases 26,03,45,007 305,274,251
Manufacturing, Selling
&Administrative expenses
34,17,68,774 414,270,057
Interest and finance charges 8,23,28,478 166,952,355
Depreciation 10,08,53,835 109,471,900
TOTAL 2,13,53,22,382 1,933,569,491
III. PROFIT BEFORE PRIOR
PERIOD EXPENSES &
TAXATION

7,89,42,413

108,863,199
Prior Period Income - -
IV. PROFIT BEFORE
TAXATION
7,89,42,413 108,863,199
Provision for Taxation Current - -
Deferred - -
FBT - -
V.PROFIT AFTER TAXATION 7,89,42,413 108,863,199
Balance brought forward 1,04,49,13,264 -
VI.AVAILABLE FOR
APPROPRIATION
1,12,38,55,678 -
Preference Dividend - -
Income Tax on Preference Dividend - -
Proposed Equity Dividend - -
Income Tax on Proposed Dividend - -
Transfer to General Reserve - -
VII.AVAILABLE SURPLUS
CARRIED TO BALANCE
SHEET
1,12,38,55,678 108,863,199



PARRYS BALANCE SHEET
(Rs. in Crores)
Particulars Mar-12
Mar-13


SOURCES OF FUNDS :



Share Capital 08.78 -
Reserves Total 121.42 108.86
Total Shareholders Funds 130.11 108.86
Secured Loans 12.41 17.45
Unsecured Loans 0.00 0.00

Total Liabilities 142.52 126.31

APPLICATION OF FUNDS :


Gross Block 212.88 218.58
Less : Accumulated Depreciation 91.73 102.39
Net Block 121.15 116.19
Capital Work in Progress 49.59 38.59
Investments 0.0020 -

Current Assets, Loans & Advances


Inventories 48.10
Sundry Debtors 19.64
Cash and Bank 1.79
Loans and Advances 3.28

Total Current Assets

72.83


Less : Current Liabilities and Provisions


Current Liabilities 39.93
Provisions 0.58
Total Current Liabilities 40.51
Net Current Assets 32.31
Miscellaneous Expenses not written off 0.00
Inter Divisions 20.12
Net Differed Tax (-)

TOTAL

133.83






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T
o
t
a
l






CHAPTER VI

SUMMARY
AND
SUGGESTIONS







SUMMARY

The basic for financial planning and decisions making is financial
information. Financial information is needed to predict, compare and
evaluate the firms earning ability, it is also required to an enterprise to find
out the actual performance.

Management should be particularly interested in knowing financial strength
of the firm to make their best use and to be able to spot out financial
weakness of the firm to take suitable corrective actions thus financial
analysis is the starting point of making plans before using any forecasting
and planning procedure.

Financial analysis is the process of identifying the finance strength and
weakness of the firm by properly establishing relationship between the items
of the balance sheet profit and loss account.

Indian has been known as the original homes of sugar and sugarcane Indian
mythology supports the above fact as it contains some legends showing the
origin of sugar cane. The growth of sugar industry is full of tales of
adventures and conquest. It received attention of the builder of different
emperors from time to time.

Sugar industry continues to play a dominant role in the economy of other
states as sugarcane is one of the important commercial crops. The installed
capacity of the 39 sugar factories in the state is 54000 tones of cane crushing
per day (TCD).



FINDINGS




There is decrease in assets in the organization for past 5 years. This indicated
poor financial performance of the organization.

The company followed poor working capital management.

The company current ratio is also not satisfactory.

The quick ratio is not up to the mark for the past 4 years.

Working capital turnover ratio is also not comfortable.

The inventory of the company is also not satisfactory.

There is a high fluctuation in the return on investment which would be a
dangerous position for the company.













SUGGESTIONS


Some of the suggestions drawn form the findings of the ratio analysis for better
performance of organization are as follows:


The liquidity position of the firm not satisfactory. The company has
to maintain the investments on current assets, especially in terms of
cash balances to meet the day to day obligation of the firm.

The organization should reduce the current liability and enhances the
current assets as to keep us the ratio on par with the standard norms.

The organization management should try to control and minimize the
operating expenses to improve the net profit position.

Proper control is to be increased in inventory management of the
company.

The company should settle off at least a part of debt as the total debt
is quite high.















BIBLOGRAPHY

Reference books:

1. I. M. Pandey - Financial Management - Vikas Publishing House Pvt. Ltd. Ninth
Edition 2006
2. M.Y. Khan and P.K. Jain, Financial management Vikas Publishing house ltd.,
New Delhi.
3. K.V. Smith- management of Working Capital- Mc-Grow- Hill New York
4. Accounting, Kalyani Plublishers, New delhi, 1998.

Web Address:
www.researchandmarkets.com/reports/2397/
www.researchandmarkets.com/info/terms.asp
www.Indiansugars.com
www.gmr_group.com
www.esugarindia.com
www.mapsofindia.com/sugar-industry
www.sugarindia.com/sugar_industryindia.asp
www.citeman.com/3680-factors-influencing-working-capital-management