A STUDY OF THE PERFORMANCE OF HINDUSTAN NEWSPRINT LIMTED USING RATIO ANALYSIS

Organization Study
Submitted to

MAHATMA GANDHI UNIVERSITY, KOTTAYAM

In partial fulfilment of requirement for the award of

MASTERS DEGREE IN BUSINESS ADMINISTRATION (2009-2011) By REMYA M.R Register No: 10819

RAJAGIRI COLLEGE OF SOCIAL SCIENCES

RAJAGIRI P.O Kochi 683104

ACKNOWLEDGEMENT

The satisfaction that accompanies the successful completion of any project would be incomplete without mentioning the names of people who made it possible and with whose guidance and encouragement helped me through the difficult time. It gives me immense pleasure to acknowledge and to express my deepest gratitude to all who have helped me throughout the project. Firstly, I bow before God the Almighty for his bountiful blessings without which I could not have completed this endeavour successfully. I would like to express my sincere thanks and gratitude to Mrs. Saramma Mathew (Dy. Manager HRA) who has kindly given me the consent to conduct the project work in the company. I also express my sincere thanks to Mr. Rakesh Krishnan, Faculty, Rajagiri School Of Management for timely encouragement, assistance & guidance for this study and throughout my academic career. I also thank Mr. K M John, Sr. Manager (Finance ), HNL for his valuable guidance and constant assistance in helping me to complete this project. I am deeply indebted to Mr. S.Narayana Swamy , (Dy Manager ,Finance) , Hindustan Newsprint Limited for his valuable advice and effective guidance, which were very useful for developing this report in a well planned manner and also thank Mr. Markose, Sibi Cyriac, Mrs. Molly M.O, Mrs. Shylaja and Mr. Jayakumar for their valuable support. Last, but not the least I take this opportunity to thank my family and all my friends who have encouraged and helped me during the project.

Remya M.R.

DECLARATION

I, REMYA MR student of Rajagiri College of Social Sciences, Kochi, and here by declare that the internship report entitled A study of the performance of Hindustan Newsprint Limited, (HNL) using Ratio Analysis is a bonafide report of the project work done by me at Hindustan Newsprint Limited., Kottayam during April 29 June 19th 2010. This study was undertaken in the partial fulfilment of the requirement of the degree in Masters in Business Administration at Rajagiri College of Social Sciences, Kochi, affiliated to Mahatma Gandhi University, Kottayam, Kerala. I also declare that this project has not been submitted to any other university/board for the award of any degree/diploma.

Place: Date:

Remya MR

TABLE OF CONTENTS

SERIAL NO.
1 2 Acknowledgement Declaration

CONTENTS

PAGE NUMBER

Section 1
1 2 3 4 5 6 7 8 9 10 11 12 13

Profile Study of Hindustan Newsprint Ltd

Industry Profile Company Profile Vision & Mission Customers Product Profile Functional Departments 2 6 8 8 9 12 14 19 19 20 21 22 23 27

Forestry Department Commercial Department Information Department Human Resource Department Marketing Department Finance Department Swot Analysis Problem Centered Study Of HNL Introduction

Section 2 1

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2
3 4 5 6 7 8 9 10

Financial Management Ratio Analysis

Research Methodology Objectives of the study Research design Limitations of the study Data analysis & interpretation Findings Conclusion Bibliography

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29 30 30 32 33 57 58 59

LIST OF TABLES

NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

NAME

PAGE NUMBER 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

Table showing Current Ratio

Table showing Liquid Ratio Table showing Absolute Liquid Ratio Table showing Inventory to Working Capital Ratio Table showing Gross Profit Ratio Table showing Net Profit Ratio Table showing Operating Ratio Table showing Return on Assets Table showing Inventory Turnover Ratio Table showing Fixed Assets Turnover Ratio Table showing Working Capital Turnover Ratio Table showing Current Assets Turnover Ratio Table showing Total Assets Turnover Ratio Table showing Debtors Turnover Ratio Table showing Creditors Turnover Ratio Table showing Current Assets of HNL Table showing Current Liabilities of HNL Tables Showing Schedule of changes in working capital (2003 - 04 to 2004 - 05).

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Tables Showing Schedule of changes in working capital (2004 - 05 to 2005 - 05).

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20 21 22

Tables Showing Schedule of changes in working capital (2005 - 06 to 2006 - 07). Tables Showing Schedule of changes in working capital (2006 - 07 to 2007 - 08). Tables Showing Schedule of changes in working capital (2007 - 08 to 2008 - 09).

53 54 55

LIST OF GRAPHS

NO. 1 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14

NAME

PAGE NUMBER 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Graph showing Current Ratio Graph showing Liquid Ratio Graph showing Absolute Liquid Ratio Graph showing Inventory to Working Capital Ratio Graph showing Gross Profit Ratio Graph showing Net Profit Ratio Graph showing Operating Ratio Graph showing Return on Assets Graph showing Inventory Turnover Ratio Graph showing Fixed Assets Turnover Ratio Graph showing Working Capital Turnover Ratio Graph showing Current Assets Turnover Ratio Graph showing Total Assets Turnover Ratio Graph showing Debtors Turnover Ratio Graph showing Creditors Turnover Ratio

SECTION I PROFILE STUDY OF HINDUSTAN NEWSPRINT LIMITED

INDUSTRY PROFILE
Paper is one of the important industrial products used for the production of books, magazines and newspaper. Educational, government and industrial sectors cannot operate without paper. Other important paper products include cardboard, which is used in packing and adsorbent paper such as tissue and towels. The different type of the paper being produced is paper, paperboards and newsprint. Newsprint is a major material input into production of newspapers. During the course of analysis of the paper industry there is an imperative need to study the prospects of newsprint industry. Prior to 1956, India did not have any newsprint mill. Hence, imports alone met the demand for newsprint in India. It was only in early 1956 that the first mill, owned by government, came to produce newsprint in India. Since then additional government-owned and many private mills had sprung up. At present, the newsprint manufacturing industry consists of 73 mills. Five of the mills are large, and these account for about one-third of the total installed newsprint capacity in India. However, by current international trends it is debatable whether all five mills can be regarded as large. The industry, consisting of many small mills that use obsolete technology and machines, is further characterised by relatively high costs of papermaking fibre, energy and transport.

WORLD SCENARIO
International trade in the paper industry has not been significant. In the world, United States consumption of paper and cardboard averages about 300 kilogram per person each year. Nearly 64 million metric tons of paper and cardboard are produced in the United States annually. Paper industry tends to be concentrated in those countries that are industrially advanced and have abundant supplies of fibrous raw material wood. There is large-scale international trade for wood pulp; pulpwood is flowing from those countries with large forest resources to those countries that are under-developed. The Chinese are credited with the invention of paper in AD 105. From China the knowledge
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of papermaking traveled gradually westward and the Arabs are known to have made paper in the eighth century. As the art progressed westward through Morocco and through Spain in Europe, the process was constantly improved. The major restructuring programmes embarked upon worlds leading paper companies in 2005 will not begin to be reflected in full year results until the end of the 2006 financial year. Hence International Paper, Stora Enso and Svenska Cellular (SCA) retained their one-two-three spot in Paper and Pulp International top 100 for 2005 and each with an increase in net sales. For the top 100 as a whole, net sales from pulp paper and converting operations were up 3.7% and $ 281, 175.6 million. Earning however remained depressed at a combined total of $ 17, 905.1 million, compared to $ 19,764.4 million for same for same top 100 companies year earlier. The future of this industry is very bright. Word paper and board demand has grown rapidly over three consecutive years reaching to a record of 359 million tons in 2004. The growth has been in the east and south, namely Asia-Pacific, Eastern Europe and South America. The new forecast for long term paper demand and supply looks at what seems contradictory-a slowing demand but an explosive growth. The shift in growth from west to east and from north to south was particular dramatic in 2001 to 2204. In this period Asia accounted for 64% of the global demand growth, while North America and Western Europe contributed only 11% and 10% respectively. Eastern Europe only has 4% of global market, but earned 9% of the global demand growth in that period. If prospects are modest in the industrial west, they are dramatic in the BRIC countries with Asias share of global production raising from 35% to 42% Asia will be responsible for 60% of the growth of which china and India will be the leaders.

INDIAN SCENARIO
Newsprint is a special type of paper used in newspaper and magazines. At present there are 22 newsprint-manufacturing units in our country with a total capacity of 600000 TPA, of which 5 public sectors unit alone constitutes 63% of the total capacity. Demand for newsprint, which is dependent on the literacy rate and growth of newspaper and
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magazines publishing industry has increased every year. Imports have a significant impact on the industry. Newsprint pricing is expected to grow by around 6.5% per annum while supply may grow at a much slower pace resulting in increased imports. The total manufacturing capacity of 6 Lakhs tons constitutes by 22 mills manufacturing newsprint in the country, of which 5 are public sector units. Wood based units constitute about 58% of the total capacity while agro and waste paper based units accounts for 23% and 19% of the newsprint capacity respectively. All public sector units with the exception of TNP are wood based. The paper industry in India is more than a century old. At present there are over 600 paper mills manufacturing a wide variety of items required by the consumers. These paper mills are manufacturing industrial grades, cultural grades and other specialty papers. The paper industry in India could be classified into 3 categories according to the raw material consumed. Wood based Agro based & Waste paper based

While the numbers of wood based mills are around 20 and balance 580 mills are based on non-conventional raw materials. The Govt. of India has relaxed the rules and regulations and also relicensed the paper industry to encourage investment into this sector and joint ventures are allowed and some of the joint ventures have also started in India. The paper industry in India is looking for state-of-art technologies to reduce its production cost and to upgrade the technology to meet the international standards. It is estimated that the paper industry would be growing at the present rate of 7-8% of compounded rate and would require 9.5-10 million MT by the end of the decade from the existing production of around 6.7 million tones.

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Estimated Demand of Paper in the Country

The demand is growing @ 7% to 8% CAGR per Annum and is likely to reach to 9.5-10 million MT by the end of decade Projected Demand in Million Tones is 8.100 by 2006-07, 8.500 by 2007-08 and 9.00 respectively. The Indian paper industry has been exposed to direct competition from international players in the recent times after import duties where lowered to favor the entry of such competitors. From a height of 140%, the duties were reduced to a low of 20% in as span of 5 years. The import duties have been currently fixed at 30%. The newsprint mills have been adversely affected by this decision of the government. Due to overall all rise in costs, the paper mill began activities to generate the economies of scale .Several of the mills went on a cost cutting measure by generating their own power and electricity via co-generation. The medium sized paper mills too followed the suit observing the success of the large scaled mills. In spite of these measures being taken ,the Indian paper industry still confronts various other challenges, such as uncertain market condition. Due to these reasons some small companies are compelled to shut down as they could not meet the rising cost of operation and could not confirm to the norms and standards set by Pollution Control Board.

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The share of newsprint in the total cost of production of newspapers is likely to vary across newspapers and over time. However, the fact that this share for the Hindustan Times group of newspapers in India is currently around 40 to 50 per cent shows that newsprint is a major material input into production of newspapers (HT Media Ltd, 2006). Over the 25 years, production, imports, exports and consumption of newsprint in India have all had rising trends . Some computed trend growth rates indicated that the average annual growth rate of production was 7.6 per cent, imports 5.4 per cent and consumption 6 per cent. In the first half of the period, the consumption growth rate was 3.8 per cent a year; the rate more than doubled to 8.8 per cent in the second half, indicating acceleration in newsprint consumption by India's newspapers.

STATE SCENARIO
Hindustan newsprint ltd is a government company in the central public sectors. Hindustan Newsprint Ltd was incorporated as a wholly owned subsidiary of the Hindustan Paper Corporation limited (HPC) on June 07, 1983. HNL produces exceptional quality newsprint for the Indian and International market. The strength properties of HNL newsprint are comparable to the best in world market. In 1998, HNL became the first newsprint manufacturers in the country to achieve the coveted ISO9002 certification.

COMPANY PROFILE
Hindustan Newsprint Limited (HNL) is a Government of India Enterprise under the administrative jurisdiction of the Department of Heavy Industry, Ministry of Heavy Industries and Public Enterprises. HNL was incorporated as a wholly owned subsidiary of the Hindustan Paper Corporation limited (HPC) on June 07, 1983.

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The Government of India had established HPC on May 29, 1970 for developing indigenous capacity in production of paper and newsprint with a view to reduce dependence on imports. HPC launched the Kerala Newsprint Project (KNP) in 1976. The Kerala Newsprint mill rolled out the first newsprint reel on February 26, 1982 and t went into commercial production with effect from November 01, 1982. HNL took over the business of KNP with effect from October 01, 1983.

The core competence of HNL lies in its highly skilled technical manpower, which is rated as the best in the domestic Newsprint industry and the quality of its product , which is comparable with international standards. The fact that HNL maintains its profitable track record in a very challenging post-liberalized business environment post liberalized characterized by abysmally low import duties (3%) which is quite lower than even the WTO bound rates (25%) without any protection, support or preferential treatment stands testimony to the international competitiveness of the company.

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Newsprint of HNL has following characteristics: Capacity to see through, as the newspaper is printed on both sides. Suitable to run with the modern high printing process without any break. Brightness level at par with that of the imported newsprint. Less bulky newspaper due to low gram mage. Capacity to absorb instantaneously the mineral oil present in the printing ink to

avoid blurring of impression.

VISION & MISSION

Vision

To be the dominant player in the mass consumption segment of writing & printing paper To be the foremost and largest producer of quality newsprint To attain a group sales turnover of RS.1500 crore by FY 2009-2010 Mission

To operate large capacity integrated newsprint/paper mills on sound commercial principles To continuously upgrade plant and equipment, upscale production output and enhance market share within the country and outside.

CUSTOMERS
Newspapers printed on HNL newsprint greet millions of Indians daily morning. It is the information carrier to millions. HNL Newsprint is preferred by the major publishing houses in the country. Malayala Manorama, Mathrubhumi, Deshabhimani, Kerala Kaumudi, Mangalam, Madhyamam, The Hindu, The New Indian Express, Sanmarg,
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Ananda Bazaar Patrika, Eenadu, Vartha, Andhra Jyothi, Vijay Anand Printers, Deccan Chronicle, Deccan Herald, Lokprakashan, Dinamalar, Sandesh, Thuglak, Kalki, Rashtra Deepika, Chandrika etc. are the majors among HNL customers across the country. HNL is also establishing its market in Srilanka and Malaysia.

PRODUCT PROFILE
HNL produces a wide range of newsprint grades. Initially, the company was producing 52 GSM (Grams per Square Meter) newsprint. Later, to meet changing market demands, HNL commenced production of 48.8 GSM newsprint. As requirement for newsprint with still lower GSM increased, HNL started production of 45 GSM newsprint also. HNL maintains consistent quality in all grades of newsprint that it manufactures. At the time of commissioning in 1982, HNL was producing newsprint having brightness of just 48-50 % ISO. Later, it switched over to a superior and ecofriendly technology in bleaching using Hydrogen Peroxide (H202). This change enhanced the brightness to 53-55% ISO. The companys competitors soon followed suit. Always a step ahead, HNL further advanced the brightness levels and is at present producing newsprint with 55 - 58 % ISO. Better brightness, better product! Salient Features Grammage 48.8 / 45 GSM Standard / Pink 55 - 58 % ISO 34 cm to 163 cm

Colour

Brightness Size of reel

Today, brightness level is at par with that of imported newsprint. Further improvements are possible by putting a premium value on the product.
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In terms of quality, HNL newsprint has an enviable position in the domestic newsprint market being comparable to the world-class product standards. HNL is highly customer focused and cherishes good relationship with them. Regular visits are made by HNLs production managers to newspaper establishments to understand the customers demands. It is found that press room operators favour HNL newsprint for its excellent runability and printing properties. The production technology at HNL is modified to match exacting requirements of sophisticated high-speed printing machines. The quality of the product is given primary importance in the quality policy at HNL.

Newsprint is the major input for the newspaper industry. Quality newsprint provides excellent prints to satisfy the discerning and demanding readers - the ultimate customers of the product HNL commands leadership position in the domestic newsprint market. HNLs current product range is from 48.8 GSM to 45 GSM, standard and pink newsprint. Quality of HNL newsprint is well accepted in the market and services of HNL's marketing department have been appreciated by customers across the country. Today, HNL produces exceptional quality newsprint for the Indian and International market. The strength properties of HNL newsprint are comparable to the best in world market. It is a matter of great pride for the company that its product is always compared with imported newsprint. HNL, with its state-of-the-art technology, has emerged in its short span of operations as a company that is truly contemporary in a global context.

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BRIEF DESCRIPTION ABOUT PROCESS FLOW:

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FUNCTIONAL DEPARTMENTS

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FORESTRY DEPARTMENT

Forestry, which procures the raw materials for production, therefore, the main function of the forestry department is raw material procurement.

SOURCES OF RAW MATERIALS 1) GOVERNMENT OF KERALA 2) OWN PLANTATIONS 3) PURCHASE AT GATE

OPERATIONS DEPARTMENT

TECHNOLOGY At Hindustan Newsprint Ltd, is using the worlds most advanced technology to make itself claim to be Asias biggest manufactures of paper. It has technical collaborations with the leaders of the field. The premier producer of paper machines VOITH of Germany has supplied erected and commissioned the grant installation of HNL. KMW of Sweden supplies the super heavy-duty wood chipper and the reed and bamboo chipper is erected by Palman of Sweden. The huge boilers which are recently modernized and atomized (digital central) are supplied and erected by Bamboock Ltd of Great Britain. Almost all plants and machineries are supplied and commissioned by global leaders in the particular field. No wonder HNL has a consistent record of production very much higher than the installed capacity and soaring profits right from starting production in the year1992.

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LOG YARD

It is the area responsible for the collection and storage of the primary raw material i.e., wood, bamboo, reed for the production of newsprint. Materials for production are collected from 3 main sources. Govt Forests Units own plantations Purchase at gate from the individual farmers There are 2 contractors working in Log yard 1. Wood unloading and stacking, destacking and feeding up to chipper mouth. 2. Reed/Bamboo unloading, stacking and destacking and feeding up to chipper mouth. Wood unloading, stacking and feeding is done mechanically (by contractors poclain) but destacking and loading is done manually by contract workers. Reed/Bamboo unloading, stacking and destacking, loading and feeding is done manually by contract workers.

CHIPPER HOUSE
The raw materials are fed to the chipper house to chip it into the required size. Five numbers of chipping machine are in operation to convert forest-based raw material into chips, out of the five two numbers are wood chippers and three are reed chippers. The waste material like undersized chips, bark, wood dust generated during chipping operation are collected separately and used as fuel in power boilers. Chipper house has a capacity to produce 700 metric tons of chips per day. The chips produced are stored in the chip silo, from there it is conveyed to pulp mill for further processing, and there making different types of pulp.
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PULP MILL
The pulp mill is sub divided into following 3 sections CHEMICAL PULP CHEMI-MECHANICAL PULP DE-INKING PLANT

CHEMICAL PULP PLANT (CP)

In this plant chips of reeds and bamboo are used. These chips are charged into vertical digesters. White liquor and high pressure steam are supplied to the digesters. White liquor is the mixture of Sodium Hydroxide and Sodium Sulfide. In these digesters the chips are cooked around 4 hours for converting it into pulp. The pulp produced in the digesters is in unbleached form. This is called brown stock. It is then convert to the blow tank. At brown stock washers the liquor and pulp are separated. Now the liquor is of black color, hence the name black liquor. From the blow tank the pulp is supplied to another chest for bleaching. After bleaching it is then stored in another high density storage tank. Hydrogen Peroxide is used as bleaching agent. From it to the storage tank, then the pulp is supplied to paper machine. Black liquor is send to recovery plant. The quantity of pulp yielded from the chemical plant is 14 to 18%.

CHEMI MECHANICAL PULP (CMP) MILL

The Newsprint quality paper is conventionally made from a mixture of mechanical pulp and chemical pulp made from soft/hard woods. In chemi mechanical pulping process both chemical and mechanical process are involved. Before the wood chips are grouped in a raffinator, they are softened by adding NaOH (50%). Steam is used for deacration. The pulp obtained is bleached, washed and used for paper making.

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For chemi-mechanical pulping hard wood eucalyptus are used. At HNL, CMP process yield higher yield at lower cost.

DE- INKING PLANT

With the opening up of the Indian market to the world HNL has been facing stiff competition from overseas Newsprint Manufacturers. The only way of facing the challenges of globalization and to be competitive in the market is to reduce the cost of production. The cost of production can be controlled only are innovative technologies, energy conservation, reducing consumption of inputs, and alternate use of raw materials and increasing the volume of production through better capacity utilization. HNL has been using Reed, Bamboo and Eucalyptus as the main raw materials. With the forest resources dwindling, the mill is experiencing difficulties in procuring the raw material even for its present operations. Stringent guidelines for environmental protection and the social obligations of providing a clean environment to the society forced the company to use cleaner technologies for long-term survival. In this plant, pulp is produced from old newspaper (ONP) and old magazine grade (OMG).This plant uses the recycling process. It was inaugurated in December 2002. ONP:OMG ratio maintained is 70:30. The wastepaper is weighed and fed into the hot water tank where it is mixed with four chemicals, namely sodium hydroxide (for dislodging ink), sodium silicate, hydrogen peroxide and soap. At a time 3.8 tonnes of wastepaper can be used in one batch. The pulp formed is taken to the contaminex where heavy and light rejects are separated and the pulp is pumped into the storage tower called Dump Tower. From the dump tower the stock enters the purifier for removing heavy contaminants. Purifier is used for high density cleaning. After purifier the stock enters a two-stage hole screening system where rejects from first one is processed in the second one. After this the pulp is sent to the reject sorter to recover fibers and to remove debris. The pulp is then taken to the floatation unit and then to the centricleaners, slots screening and disc filters respectively. After these thorough cleaning the pulp is pumped to the screw press where
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the excess water is squeezed out and the thick stock enters heating screw where the stock is made still thicker. Then it is sent to the disperger to disperse the residual ink and dirt specks. After this it is bleached and stored in the HD chest. The production capacity of this unit is 100 MT per day. Rejects from the different screens are solidified and the solidified sludge is burned in boilers along with coal.

PAPER MACHINE
STOCK PREPARATION Here the pulp from both CP CMP and DIP are received in separate chests. The pulp, which is thicker, is diluted and refined in separate refiners. Refined pulp from CP plant, CMP plant and DIP is stored separately. It is then mixed in the ratio of 15:50:35 respectively. Then the mixture is diluted and cleaned free of heavy particles like metal pieces, sand, stone etc in centrifugal cleaners called centricleaners. Passing them through pressure screens separates oversized particles. Now the pulp is called stock. The stock after the dilution and de aeration is supplied to paper machine. Currently the proportion of different types of pulp for stock preparation is as follows: CP 10-15% CMP- 50-55% DIP 30-35%

EFFLUENT TREATMENT PLANT

The effluent treatment plant installed in HNL has a capacity of 40,000 M3 per day, while the effluent generated presently is only 24,000 M3 per day. Two clarifiers are used to treat the colored and fibrous effluent separately. Aeration lagoons having 16 aerators follow the primary clarifiers. The treated effluent from the lagoon is disposed off into the Muvattupuzha River through gravity pipelines. The effluent treatment sludge is thickened in a belt press.
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The domestic sewage from the township is taken into an oxidation pond and treated. The overflow from the sewage pond, after treatment joins the discharge from the aeration pond and the combined wastewater is let out to the river through dispersion pipe.

COMMERCIAL DEPARTMENT

The commercial department of HNL consists of 3 sections. They are: 1) Purchase Section. 2) Central Stores 3) Distribution. There is constant interaction between the purchase section and central stores section. The central store raises indents whenever their stock of goods gets replenished. Central stores have got good interaction with distribution section since material planning is done according to the sales forecast. The paper produced in the factory is distributed to various parts of our country. Due to transportation facility, the Newspapers in Kerala consume most of the produce. There is not much of competition in the market since HNL Kerala, is the sole producer and distributor of paper to most parts of the South India.

INFORMATION DEPARTMENT

Enterprise Resource Planning (ERP) is a package software solution that addresses the enterprise needs of an organization by tightly integrating the various functions of an organization. It is a software that comes with it generals features that meet the general requirements of any business in mind and also has facility for customization to meet specific organizational needs.

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ERP software is used for managing all the business operations of HNL. It caters to the needs of all the departments like finance, commercial, production, service, HR & QMS. Each user is mapped with their functions in the ERP using the Dynamic Enterprise Moderator (DEM) tool of the Baan ERP. This ERP system is available on the Local Area Network (LAN) to all the users of HNL. HNL implemented Baan IV C4 ERP package consisting of the following modules in 2001. 1) Finance 2) Distribution 3) Stores and Inventory 4) Purchase 5) Sales 6) Production and Management (Process) 7) Maintenance 8) Quality Management 9) Human Resource

E-PROCUREMENT PROCESS Apart from the traditional system of processing goods through tenders, now HNL procures certain items by the process of E-Auction. Mainly HNL procures old newspapers and magazines by this process of e-auction for the purpose of recycling it in the De-Inking plant. E-procurement of these goods is done through a separate service provider having a facility of e-auction activities, which is web based (Matexnet.com).

HUMAN RESOURSE DEPARTMENT

Human resource is of paramount importance for the success of any organization. It is the source of strength and aid. And is the wealth of every organization which can help in achieving its goals. Its concerned with human beings in an organization, it reflects a new outlook which views organisations manpower and its recourses and
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assets. The values, ethics, beliefs of the individuals working in an organization also form a part of human resource. It helps in creating a better understanding between employees and management; this in turn helps the workers to attain individual and organizational goals. In the present complex and rapidly changing socio-cultural environment, no business or organization can survive or grow without effective management of human resource. So human resource has become the force of attention of every progressive organization.

Here in HNL human resource management was earlier known as Personal and Administration department. As the time changed it became statutory for having an effective human resource management for the growth of organization, even though P&A department worked quite well. The introduction of HR &ES has become more effective and goal achieving.

HR & ES department in HNL is divided into two sections as training department (HRD) and Employee Service (ES) take care of the training of the employees to have a greater awareness and better performance in the work. Employee service department take care of employee welfare, medical facilities etc.

MARKETING DEPARTMENT
Marketing is social and managerial process by which individuals and groups obtain what they need and want through creating exchanging products and value with others.

MARKETING STRATEGY AND DISTRIBUTION NETWORK The most important marketing strategy for every company is advertisement of its product, but in case of HNL its totally different- ITS PRODUCT ITSELF IS A MEDIA FOR ADVERTISEMENT. And the main marketing strategy HNL has adopted is to maintain the high quality of the product as the product appears to be appealing and
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attractive to the onlooker in gloss and brightness. The company is currently selling its products all over India and is exporting to South East Asian countries. The mills being situated in the southern parts of the country, major marketing thrust is in the southern, central and western regions. With six sales depots located in Delhi, Mumbai, Kolkata, Chennai, Bangalore and Cochin, the company has an effective distribution network, ably completed by an 85 member dealer network in 30 locations spread across the country. All the dealers have necessary experience in sales and marketing of the companys product. Besides, the dealers provide the feedback regarding customer preferences and competitor activities and participate strategically in the field of new product development.

FINANCE DEPARTMENT

Finance department plays the pivoted role in the performance of a company.The department has to interact with various customers, tax authorities,contractors,employers of the company,financial institutions etc in exercising the duties. Proper functioning of the department was a long way in customer satisfaction by providing proper services regarding receipts and payments of funds,sending of invoices,granting credit advices for discount attempting to their correspondents etc. Financial Accounting System The functions of finance dept. are organized as follows: 1) Cash section. 2) Sale section. 3) Compilation. 4) Insurance. 5) Establishment section. 6) Purchase section. 7) Work bills 8) Miscellaneous section.

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SWOT ANALYSIS

Strengths
High productivity. There is high quality production technology present over here. The production capacity of HNL is to 1, 00,000 MT. Eco-friendly Company. The company has been encouraging pulp wood cultivation on agricultural land through farm forestry scheme in which seedlings of Accacia, mangium etc.. are distributed to farmers at subsidized rates. De-Inking plant. In line with the global shift towards recycled fiber in paper making, HNL operates a 100 tpd state-of-the-art, energy efficient and environment friendly De inking plant for the last four years to supplement its fiber requirements, reducing its dependence on forest based virgin resources to a considerable extent. Two Turbo generators (producing electricity). The commission of 7 MW steam Turbo generator by optionally utilizing the existing facilities is a significant step in controlling the energy costs and also in realizing the objective of self-sufficiency in the power front. Good customer relationship. The company is maintaining a good relationship with the customers by giving credit facilities to the customers etc. Timely payment to the contractors The contractors are been paid timely according to the work done and there is no delay in payment of the work. Timely payment to the contractors As per this scheme, pulp wood raw materials are purchased directly from farmers of kerala and neighboring states at a very remunerative price at the company gate doing away with middlemen and also avoiding procedural delays. Efficient and scientific disposal of wastes. HNL is the first to substitute 90% of chlorine in bleaching with environment friendly Hydrogen peroxide thereby reducing toxic discharges. Lime sludge is reburned to produce the lime required in production
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 Good relationship between employees and management. There exist a cordial relationship between employees and management. Good relationship with unions. A friendly relationship is been maintained in the company with all the trade unions of the company. Experienced employees. A well experienced employees are there in the company. Introduction of farm forestry. The company has been encouraging pulp wood cultivation on agricultural land through farm forestry scheme in which seedlings of Accacia, mangium etc.. are distributed to farmers at subsidized rates. Fully developed safety wing. All safety measures have been taken in the company for the efficient functioning. ISO 9001-2000 company. ISO 9001: 2000 certification for the quality initiatives showcase the best practices and procedures and made it an agile user of IT. ISO 14001 company. ISO 14001 Certification for Environment Management System Fully computerized plants. All the plants in the company are fully computerized. ERP system. ERP, Enterprise Resource Planning is a package software solution that addresses the enterprise needs of an organisation by tightly integrating the various functions of an organisation using a process view of the organisation. Regular training programs for employees. The employees are given regular training for efficient functioning of the company. Imported machines are used for production. Most of the machines are been imported from foreign countries, which help in reducing the cost of production. Well established and modern IT department. Largest newsprint factory in India. Hindustan newsprint ltd is the largest newsprint factory in India.

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Weaknesses
High cost of production. High cost of production is due to the rise in price of the raw materials and increase in the electicity charges by the government . Scarcity of raw materials. There is huge scarcity of raw materials as wood is the major raw material for the production. Only a few types of products. There are only few types of products are been produced. Dependency on KSEB for electricity. As there is acute shortage of electricity the company is depending largely on KSEB for electricity.

Opportunities
Increase the capacity of DIP. By Increasing the capacity of the de inking plant , company can increase its production capacity. Implement a new Turbo generator. By implementing a new turbo Generator Company can produce its own electricity so that shortage of electricity solved. Diversification through manufacture of writing paper. Diversification of products will be a great opportunity for the company. Increase the production, as large market is available. In order to cope up the demand, increase the production, as large market is available.

33

Threats
Competition from foreign paper mills. The major threats is competition from the foreign paper mills. Increase in the price of imported pulp. Increasing price of the imported pulp will result in high cost of production. Deforestation. Deforestation is the major threats to the environment and the company too.

34

SECTION II PROBLEM CENTERED STUDY OF THE ORGANIZATION

35

INTRODUCTION
FINANCIAL MANAGEMENT
Finance is considered the life-blood of any business. It is defined as "the provision of money at the time it is wanted". All the plans of a business person would remain mere dreams unless adequate money is available to convert them into reality. It has given birth to "Financial Management" as a separate subject. Financial Management, also referred to as corporate finance, emerged as a distinct field of study at the turn of the 20th century. Financial Management is that management activity which is concerned with the planning and controlling of the firm's financial resources. The financial management function, in the modern sense of the term covers the decision making in three inter-related areas namely, Investment including Capital Budgeting and Working Capital Management, Financing and Dividend policy. Financial Management involves the procurement and use of funds. The fundamental object is to use business funds in the most profitable manner. But it must contribute towards the accomplishment of organizational goals. Although the importance of financial functions depends largely on the size of the firm, financial management is an integral part of the overall management of the firm.

RATIO ANALYSIS
Ratio analysis is powerful tool of financial analysis. A ratio is defined as the relationship between two or more things 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 to make qualitative judgments about the firms financial performance. According to Accountants Handbook by Wixon, Kell and Bedford a ratio is an expression of the quantitative relationship between two numbers. A ratio is a simple

36

arithmetic expression of the relationship of one number to another. The ratios are as follows

RATIOS

Liquidity ratio -Current ratio.

Leverage ratio - Debt equity ratio.

Turnover ratio

Profitability ratio -Net profit ratio.

Valuation ratio - Price earnings ratio.

-Inventory turnover.

-Acid test ratio.

- Debt asset ratio.

-Debtors turnover.

-Return on assets.

-Interest coverage

-Average collection period. -Fixed assets.

-Earning power.

-Market value to book value ratio.

RESEARCH METHODOLOGY
Research methodology is a systematic way of solving a problem. It is a science of studying how research is done scientifically. The methodologies used in this study are both descriptive and analytical. Descriptive studies are fact-finding investigation with adequate interpretation. It focuses on particular aspects of in this study. It is designed to gather descriptive information and provides information for formulating more sophisticated studies. In analytical research, the researcher has to use the facts and information already available and analyze these to make the critical evaluation of the material.
37

STATEMENT OF STUDY

A study on the finance department its factories, data analysis and plant capacity of Hindustan Newsprint Limited. This project intends to study the financial performance of the company using ratio analysis and to identify the areas that could be improved. Further suggestions were quoted which the company could use if in the future programmed changing better utilization of all resources.

OBJECTIVES OF THE STUDY

To ascertain the liquidity position of Hindustan Newsprint Ltd by using liquidity ratios. To analyze and evaluate profitability position of the company by using profitability ratios. To measure the efficiency of the firm by using efficiency ratios. To analyze the schedule of changes in working capital.

RESEARCH DESIGN
The type of study used in the research is descriptive research as the study about the description of the state of affairs, as it existed in the part.

Descriptive Research
Among the different types of research. Researches have used descriptive research. Descriptive studies are fact finding investigation with adequate interpretation. It focuses on particular aspects of the study. It is designed to gather descriptive information and provides information for formulating more sophisticated studies.

38

SOURCE OF DATA
The study is conducted with the help of secondary data available at during the period of study. The secondary data was available from the annual reports, balance sheet and profit and loss account.

Primary data
Information was obtained from the officials of the Finance Department and other officers of the company.

Secondary data
Secondary data was collected from published reports like Annual Reports, Balance Sheet and Profit and Loss account, Booklets and unpublished source from the company. Records such as files and reports maintained by the company and also informal talks with officers. Some datas are collected through, personal discussions and interviews with managers and senior officials of the organization.

DATA ANALYSIS
Data analysis is done by using the following: Balance sheet Profit and Loss account Schedule of changes in working capital Ratio analysis

RESEARCH PERIOD
The research was conducted for 1 and half months starting from 29th April 2010 to 19th June 2010.
39

LIMITATIONS OF THE STUDY

In depth study of the project was not possible due to lack of time. The datas are collected mainly on the basis of secondary data. So all the limitations of the secondary data are possible. The data are collected for the study was historic in nature, so they affect limitations.

40

DATA ANALYSIS & INTERPRETATION

41

To ascertain the liquidity position of the company by using liquidity ratios

1). Current Ratio

CURRENT ASSETS (Rs. In Lakhs) 13151.89 13815.95 15637.09 16176.95 21912.82 CURRENT LIABILITIES ( Rs. In Lakhs) 4773.82 4955.42 6080.00 5243.28 8617.82 CURRENT RATIO (In %) 2.76 2.79 2.57 3.09 2.54

YEAR

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

25000 20000 15000 10000 5000 0

current assets current liabilities

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its obligations in time, as and when they become due. A ratio equal or near to the rule of thump of 2:1 is considered to be satisfactory. In all periods under study the firm is liquid and has the ability to pay its obligation in time. The firms current ratio is always above the ideal ratio 2:1.
42

2). Liquid Ratio

YEAR

LIQUID ASSETS (Rs. In Lakhs) 6077.95 6995.89 8568.22 9152.98 7497.52

CURRENT LIABILITIES (Rs. In Lakhs) 4773.82 4955.42 6080.00 5243.28 8617.82

LIQUID ASSETS (In %) 1.27 0.14 1.41 1.75 0.87

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Quick assets Current liabilities

A high quick ratio is an indication that the firm is liquid and has the ability to meet its current liabilities. As a rule of thump quick ratio of 1:1 is considered to be satisfactory. Except in the years 2005-2006 and 2008-2009 the firms liquidity ratio is above the ideal ratio.
43

3). Absolute Liquid Ratio

YEAR

ABSOLUTE LIQUID ASSETS (Rs. In Lakhs)

CURRENT LIABILITIES (Rs. In Lakhs)

ABSOLUTE LIQUID RATIO (In %) 0.24 0.55 0.79 1.07 0.04

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

1148.21 2711.69 4773.14 5610.37 374.7

4773.82 4955.42 6080.00 5243.28 8617.82

10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2004-20052005-20062006-20072007-20082008-2009 Absolute Liquid Assets Current liabilities

The ideal ratio is 2:1. It indicates 50% worth of absolute liquid assets are considered adequate to pay 100% claims of current liabilities in time. From the above table, we can see that absolute liquid ratio is less than the standard ratio. It is not satisfactory for the company. The highest ratio is in 2007-08 and the lowest ratio is in the year 2008-09.
44

4). Inventory to Working Capital ratio

INVENTORY YEAR (Rs. In Lakhs) 7073.94 6820.06 7068.87 7023.97 14414.83 WORKING CAPITAL (Rs. In Lakhs) 8378.07 8860.53 9557.09 10933.67 13295.00 INVENTORY TO WORKING CAPITAL RATIO (In %) 0.84 0.77 0.74 0.67 1.08

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

16000 14000 12000 10000 8000 6000 4000 2000 0 INVENTORY WORKING CAPITAL

The inventory should not exceed the working capital. It means that there is no over stocking of material but there is under stocking of materials. In the year 2008-2009 inventory exceeds working capital. To avoid over stocking of materials in the company effective measures must be taken.

45

To analyze the profitability position of the company by using profitability ratios 1). Gross Profit Ratio
GROSS PROFIT (Rs. In Lakhs) 2409.32 4353.24 5892.18 3049.38 3446.26 NET SALES (Rs. In Lakhs) 27393.28 30296.34 31519.30 29860.84 29767.37 RATIO (In %) 0.08 0.14 0.18 0.10 0.12

YEAR

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

35000 30000 25000 20000 15000 10000 5000 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 GROSS PROFIT NET SALES

A gross profit ratio measures the relationship of gross profit to net sales and is calculated by dividing the gross profit by sales.From the table, the gross profit ratio is highest in the year 2006-07, i.e., 0.18% and lowest in the year 2004-05, i.e., 0.08%. First the gross profit ratio is increasing and in the year 2007-08 it was decreasing and in the year 2008-09 it again shows an increasing trend.

46

2). Net Profit Ratio

NET PROFIT (Rs. In Lakhs)
421.55 1568.11 3192.31 1153.69 1263.56

YEAR

NET SALES (Rs. In Lakhs)

27393.28 30296.34 31519.30 29860.84 29767.37

RATIO (In %)
0.02 0.05 0.10 0.01 0.04

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

35000 30000 25000 20000 15000 10000 5000 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 NET PROFIT NET SALES

Net Profit Ratio establish a relationship between net profit (after taxes) and sales and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. This ratio is the overall measure of firms profitability. The table shows that the net profit ratio first increases and then it decreases. But in 2008-09, it comes down to 0.04%. The highest ratio is 0.10% in 2006-07. The average ratio is 0.044 which shows that net profit is 0.044% of sales.
47

3). Operating Ratio

YEAR

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

OPERATING COST (Rs. In Lakhs) 2057.28 4043.34 5580.30 2502.84 2752.37

NET SALES (Rs. In Lakhs) 27393.28 30296.34 31519.30 29860.84 29767.37

OPERATING RATIO (In %) 7.51 13.35 17.70 8.38 9.25

35000 30000 25000 20000 15000 10000 5000 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Operating Profit Net sales

Operating Profit ratio establishes the relationship of operating profit to net sales. It indicates operational efficiency of the concern. Lower the ratio more is the efficiency. The ratio should be low enough to provide fair return to the shareholders and other investors. The table shows that the operating profit ratio first increases and then it decreases. But in 2008-09, it shows again an increasing tendency i.e., 9.25%. The highest ratio is 17.70% in 2006-07. The average ratio is 11.23% which shows that net profit is 11.23% of sales.
48

4). Return on Assets

YEAR

NET PROFIT (Rs. In Lakhs) 421.55 1568.11 3192.31 1153.69 1263.56

TOTAL ASSETS (Rs. In Lakhs) 30933.58 31688.32 32658.82 33376.99 39105.33

RAT IO (In %) 0.01 0.04 0.09 0.03 0.03

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 NET PROFIT TOTAL ASSETS

From the above table, it is noted that the ratio first increases and then decreases. In the year 2008-09, the ratio is decreasing to 0.03%. It is the lowest ratio in the 5 year study. The ratio is highest in the year 2006-07, i.e., 0.09%.

49

To analyze the efficiency of the company by using efficiency ratios. 1). Inventory Turnover Ratio
COST OF GOODS SOLD (Rs. In Lakhs) 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 25336.24 26253.32 25939.42 27358.28 27015.16 AVERAGE INVENTORY (Rs. In Lakhs) 7073.94 6820.06 7068.87 7023.97 14415.30 RATIO (In %) 3.58 times 3.84 times 3.66 times 3.89 times 1.87 times

YEAR

35000 30000 25000 20000 15000 10000 5000 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 NET SALES INVENTORY

Inventory turnover ratios are also known as stock turnover ratio. This ratio shows the number of times, the stock or the finished goods will be converted to sales. It reflects the efficiency of inventory management. The higher the ratio, the more efficient management of inventories and vice versa. The average inventory ratio is 3.4 times, which denotes the time taken to convert the finished goods into sales. The highest ratio is 3.89 times in the year 2007-08, which indicates that the stock will be converted into sales, 3 times in a year. The inventory turnover ratio of the company shows an increasing trend till the year 2007-08 and then it decreases to 1.87.
50

2). Fixed Assets Turnover Ratio

YEAR

NET SALES (Rs. In Lakhs) 27393.28 30296.34 31519.30 29860.84 29767.37

FIXED ASSET (Rs. In Lakhs) 17783.62 17872.37 17021.73 17200.04 17192.51

RATIO (In %) 1.54 1.70 1.85 1.79 1.73 This ratio determines efficiency

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

35000 30000 25000 20000 15000 10000 5000 0 NET SALES FIXED ASSET

From this table, it is clear that an average of 1.7% of sales is done from the fixed assets. Here, the highest ratio is 1.85% in 2006-07 and the lowest ratio is 1.54% in the year 2004-05.

51

3). Working Capital Turnover Ratio

SALES YEAR (Rs. In Lakhs) WORKING CAPITAL (Rs. In Lakhs) 8378.07 8860.53 9557.09 10933.67 13295.00 WORKING CAPITAL TURNOVER RATIO (In %) 3.27 3.42 3.29 2.75 2.24

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

27398.97 30304.22 31532.63 30065.17 29781.74

35000 30000 25000 20000 15000 10000 5000 0 SALES WORKING CAPITAL

Working capital ratio measures the effective utilization of working capital. It indicates whether the working capital has been efficiently utilized in making sales. The ratio establishes the relationship between sales and working capital. From this table here, the highest ratio is 3.42% in 2005-06 and the lowest ratio is 2.24% in the year 2008-09.
52

4). Current Assets Turnover Ratio

NET SALES (Rs. In Lakhs) 27393.28 30296.34 31519.30 29860.84 29767.37 AVERAGE CURRENT ASSETS (Rs. In Lakhs) 13151.89 13815.95 15637.09 16176.95 21912.82 2.08 2.19 2.01 1.84 1.36 RATIO (In %)

YEAR

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

35000 30000 25000 20000 15000 10000 5000 0 NET SALES AVERAGE CURRENT ASSETS

This ratio measures the number of times current assets are being turnover. It also measures the efficiency with which the current assets utilized; a high ratio indicates high degree of efficiency in asset utilization and vice versa. So the company has an effective current asset turnover ratio. The ratio is high in the year 2005-06 and it is low in the year 2008-09. The ratio starts to show a decreasing trend from the year 2006-2007.
53

5). Total Assets Turnover Ratio

YEAR

NET SALES (Rs. In Lakhs) 27393.28 30296.34 31519.30 29860.84 29767.37

TOTAL ASSETS (Rs. In Lakhs) 30933.58 31688.32 32658.82 33376.99 39105.33

RATI O (In %) 0.88 0.95 0.96 0.89 0.76

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

45000 40000 35000 30000 25000 20000 15000 10000 5000 0 NET SALES TOTAL ASSETS

This ratio measures how efficiently the total assets are employed. It also measures the efficiency with which the assets are employed; a high ratio indicates overall trading of total assets and a low ratio indicates idle capacity. Up to 2006-2007 ratio shows increasing trend, from 2007-2008 it starts to decrease.

54

6). Debtors Turnover Ratio

Year Sales (Rs. In Lakhs) Average Debtors (Rs. In Lakhs) 2467.93 1593.4 1436.21 901.31 4297.76 Debtors Turnover Ratio (In %) 11.10times 19.01times 21.9 times 33.3 times 6.9 times Debtors convers ion period 32days 19days 16days 10days 52days

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

27398.97 30304.22 31532.63 30065.17 29781.74

35000 30000 25000 20000 15000 10000 5000 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 SALES DEBTORS

It indicates the number of time on an average the receivables are turn over in each year in terms of sales. This ratio also indicates the efficiency of credit collection and efficiency of credit policy. The higher the turnover ratio and shorter the average collection period, better is the liquidity of debtors The liquidity of debtors is good in the year 2007-08, because the turnover ratio is high and the conversion period is less in that year. It is bad in the year 2008-09, because turnover ratio is low and the collection period is long, it implies that payments by debtors are delayed.

55

7). Creditors Turnover Ratio

Year Purchases (Rs. In Lakhs) 7645.26 8025.01 8576.24 9101.65 9644.02 Average Creditors (Rs. In Lakhs) 2304.87 1302.74 1964.42 2136.39 5360.33 Creditors Turnover Ratio (In %) 3.3 times 6.2 times 4.4 times 4.3 times 1.8 times Creditors Payable Period 110 days 58 days 83 days 85 days 202 days

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

12000 10000 8000 6000 4000 2000 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 PURCHASES AVERAGE CREDITORS

Creditors turnover ratio indicates the number of times the payables rotate in a year. This ratio is also known as accounts payable or creditors velocity. A higher ratio and fewer days indicate that creditors are paid in time. A lower ratio and higher number of days indicate delayed payment of creditors. From the above table, we can see that there was a high turnover ratio and low creditors payable period in the year 2005-06. But in the year 2008-09 the company takes a long time to payback to the creditors. In that year there is a low turnover ratio and high creditors payable period.

56

1). TABLE SHOWING CURRENT ASSETS OF HINDUSTAN NEWSPRINT LIMITED

(Value in Lakhs) Cas h& Ban k 114 8.21 271 1.69 477 3.14 561 0.37 374. 7 Other Curre nt Assets 7.11 24.59 34.04 50.63 22.5 Loa ns & Adv ance s 2452 .77 2727 .46 2324 .83 2590 .67 2802 .56 Total Curr ent Asset s 1315 1.89 1381 5.95 1563 7.09 1617 6.95 2191 2.82

Year

Stoc k

Debt ors

20042005 20052006 20062007 20072008 20082009

7073. 94 6820. 06 7068. 87 7023. 97 1441 5.30

2467. 93 1593. 40 1436. 21 901.3 1 4297. 76

INTERPRETATION

The Total current assets of HNL shows an increasing trend from 2004 to 2008. The stock contributes more to the total current assets every year, and the other current assets contributes the least.

57

2). TABLE SHOWING CURRENT LIABILITIES OF HINDUSTAN NEWSPRINT LIMITED (Value in Lakhs) Year 20042005 20052006 1303 20062007 20072008 2136 20082009 5360

Creditor s Advance s From Custome rs Security Deposits Liability to Govt. & Local Other Liability Provisio ns Current Account Total

2305

1388

18

31

39

96

26

552 69 143 967

630 128 156 2151

885 209 112 2575

972 130 137 1760

1257 77 89 1343

720 4774

557 4955

871 6080

11 5243

466 8618

INTERPRETATION

In the year 2004 to 2007 current liabilities shows an increasing trend. But in the year 2007-2008 it shows a decreasing trend, and then again in 2008-2009 it shows an increasing trend
58

To analyze the schedule of changes in working capital

3). TABLE SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2004-2005 AND 2003-2004 (Rs. In Lakhs) PARTICULA RS CURRENT ASSETS Stock Sundry Debtors Cash & Bank Other Current Assets Loans and Advances
TOTAL CURRENT ASSET

2004-05

2003-04

INCREAS E

DECREA SE

7073.93 2467.93 1148.21 7.11 2454.70

6076.12 3955.07 424.72 1.18 2663.74

997.82723.49 5.93 -

1487.14 209.04

13151.89

13120.83

CURRENT LIABILITY Current Liabilities Provisions

TOTAL CURRENT LAIBILITIES Net Working Capital

3806.93 966.89 4773.82 8378.07

2455.01 627.83 3082.84 10037.99

1351.92 339.06 -

Increase in Working Capital

TOTAL

1659.92 10037.99

10037.99

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4). TABLE SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2005 - 2006 AND 2004 - 2005 (Rs. In Lakhs) PARTICULA RS CURRENT ASSETS Stock Sundry Debtors Cash & Bank Other Current Assets Loans and Advances
TOTAL CURRENT ASSET

2005-06

2004-05

INCREAS E

DECREA SE

6820.06 1593.40 2711.69 24.59 2666.21 13815.9 5

7073.93 2467.93 1148.21 7.11 2454.70 13151.8 9

1563.48 17.48 211.51

253.88 874.53 -

CURRENT LIABILITY Current Liabilities Provisions

TOTAL CURRENT LAIBILITIES Net Working Capital

2804.75 2150.67 4955.42 8860.53

3806.93 966.89 4773.82 8378.07

1002.18 -

1183.78

Increase in Working Capital

TOTAL

482.46

8860.53

8860.53

2794.65

2794.65

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5). TABLE SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2006 - 2007 AND 2005 - 2006 (Rs. In Lakhs) PARTICULA RS CURRENT ASSETS Stock Sundry Debtors Cash & Bank Other Current Assets Loans and Advances
TOTAL CURRENT ASSET

2006-07

2005-06

INCREAS E

DECREA SE

7068.87 1436.21 4773.14 34.04 2324.83 15637.0 9

6820.06 1593.40 2711.69 24.59 2666.21 13815.9 5

248.81 2061.45 9.45 -

157.19 341.38

CURRENT LIABILITY Current Liabilities Provisions

TOTAL CURRENT LAIBILITIES Net Working Capital

3505.19 2574.81 6080 9557.09

2804.75 2150.67 4955.42 8860.53

700.44 424.14

Increase in Working Capital

TOTAL

696.56

9557.09

9557.09

2319.71

2319.71

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6). TABLE SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2007 - 2008 AND 2006 2007 (Rs. In Lakhs) PARTICULA RS CURRENT ASSETS Stock Sundry Debtors Cash & Bank Other Current Assets Loans and Advances
TOTAL CURRENT ASSET

2007-08

2006-07

INCREAS E

DECREA SE

7023.97 901.31 5610.37 50.63 2590.67

7068.87 1436.21 4773.14 34.04 2324.83 15637.0 9

837.23 16.59 265.84

44.90 534.90 -

1676.95

CURRENT LIABILITY Current Liabilities Provisions

TOTAL CURRENT LAIBILITIES Net Working Capital

3482.88 1760.40 5243.28 10933.6 7 10933.6 7

3505.19 2574.81 6080

22.31 814.41

9557.09

Increase in Working Capital

1376.58 10933.6 7

TOTAL

1956.38

1956.38

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7). TABLE SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2008 - 2009 AND 2007 - 2008 (Rs. In Lakhs) PARTICULA RS CURRENT ASSETS Stock Sundry Debtors Cash & Bank Other Current Assets Loans and Advances
TOTAL CURRENT ASSET

2008-09

2007-08

INCREAS E

DECREA SE

14415.3 0 4297.76 374.70 22.50 2802.56 21912.8 2

7023.97 901.31 5610.37 50.63 2590.67

7391.33 3396.45 211.89

5235.67 28.13 -

1676.95

CURRENT LIABILITY Current Liabilities Provisions

TOTAL CURRENT LAIBILITIES Net Working Capital

7275.29 1342.53 8617.82

3482.88 1760.40 5243.28 10933.6 7 2361.33 13295

417.87

3792.41 -

13295

Increase in Working Capital

TOTAL

13295

2361.33 11417.54 11417.54

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Considering the above, it is realized that in all the years under study i.e., 200405, 2005-06, 2006-07, 2007-08 and 2008-09, there is an increase in the working capital. This shows that there has been application of funds. In the year 2004-05 there is an increase in working capital. As we can see that the current assets and the current liabilities are more in 2004-05 as compared to 200304. The current ratio is more in 2004-05, i.e., 2.79 as compared to 2.76 in 2003-04. Similarly the absolute liquid ratio is more in 8004-05 as compared to 2003-04. But the liquid ratio is less in the year 2004-05 as compared to the year 2003-04 In the year 2005-06,there is an increase in working capital as we can see that the current assets is more in 2005-06 as compared to 2004-05. The current liabilities are also more in 2005-6 than 2004-05. However, the increase in the current assets is more than the increase in current liabilities in 2005-06.The current ratio is less in 2005-06, i.e., 2.57 as compared to 2.79 in 2004-05. But the liquid ratio as well as absolute liquid ratio is more in 2005-06 as compared to 2004-05. In the year 2006-07, we can see that the current ratio of 2006-07 is less as compared to 2005-06, which is 2.57 in 2006-07 and 2.79 in 2005-06. Similarly, the liquid ratio and absolute liquid ratio is more in 2006-07 as compared to 2005-06. All these have led to the increase in working capital in the year 2006-07. In the year 2007-08,we can see that the current ratio of 2007-08 is more than 2006-07, i.e., 3.09. We can see that the current assets are much more in 2007-08 as compared to 2006-07. The current liabilities are also more. However, the increase in the current assets is greater than the increase in current liabilities in 2007-08. This has led to an increase in working capital in the year 2007-08. In the year 2008-09, there is an increase in working capital as we can see that the current assets and current liabilities are more in 2008-09 as compared to2007-08. Current ratio is less in 2008-09, i.e., 2.54 as compared to 3.09 in 2007-08. But the liquid ratio as well as absolute liquid ratio is more in 2008-09 as compared to 2007-08.

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FINDINGS
The companys liquidity position is good. The company has the ability to meet its obligations as and when it is required. The current ratio, liquid ratio, and the absolute liquid ratios of the company show an increasing trend. HNLs current ratio is more than that of its ideal ratio it means excess amount of capital is blocked up in the business without proper utilization. Higher current rtio is an indication of poor planning.

The company has an effective fixed asset turnover. It shows that the firm utilizes its fixed assets efficiently. The ability of a firm to make maximum profit from optimum utilization of resources is termed as profitability. The companys profitability position is not satisfactory, and the cost of production is also high.

The turnover ratios of the company show an increasing tendency, it highlights the operational efficiency of the business concern. This ratio measures how efficiently the assets are utilized by the firm. It also measures the efficiency with which the assets are employed. Actual production has been increasing consistently, but the cost of production is very high and due to the high price of newsprint the customers started to import paper then the sale of newsprint also come down.

65

CONCLUSION

The company is a very stable one, incurring profit for last many years the reason being, low cost for newsprint due to import of paper. The company has a very sound financial management system. Though the current ratio is higher which indicates that unnecessary blockage of working capital, this is because of the higher inventory carried by the company. At the same time the company has to offer credit sales to push its sales, which leads to a higher sundry debtor. This results in higher current assets. On the contrary the current liabilities have not increased, as advances payments are made for the purchases. It is also observed that the company made reasonable profit for more than a decade. The marginal loss for the year was due to the fluctuating price in the international market. However HNL made a relatively high profit in 2006-2007, as the market improved. The study is subject to certain limitations on account of the time constraints and selection of data. The study is mainly based on secondary data obviously cause certain limitations.

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BIBILOGRAPHY

1) FINANCIAL MANAGEMENT, by I.M Panday 2) FINANCIAL MANAGEMENT, by Prasanna Chandra 3) FINANCIAL AND MANAGEMNT ACCOUNTING, by S.N Maheswary

4) www.hnlonline.com 5) ANNUAL REPORTS 6) FINANCIAL STATEMENTS 7) JOURNALS

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