DISSERTATION STUDY ON

“The Study of the Sugar Industry and the Financial Performance

Analysis of Three Sugar Units done for IDBI”

This project report is being submitted as part of the requirements

of the MBA Program of Bangalore University (2003-05). The study

has been undertaken by:

CIBY OOMMEN

Reg. No. 03VWCM6023

With the guidance and support of

Prof. Guha

Faculty, ABA

ALLIANCE BUSINESS ACADEMY

BANGALORE – 560 076

Batch: 2003-2005

1

DECLARATION

I, Ciby Oommen, studying in Alliance Business Academy,

Bangalore do hereby declare that this dissertation study on the

topic “The study of the Sugar Industry and

the Financial Performance Analysis of Three

Sugar Units done for IDBI” is an original research

work carried out by me as part of the requirements of the MBA

Program of Bangalore University (Batch of 2003 – 2005).

My guide for the training has been Prof. K. N. Guha.

I further declare that this project report has not been submitted

earlier to any other University or Institute for the award of any

Degree or Diploma.

Date: 9.06.2005 CIBY OOMMEN

Reg. No 03VWCM6023

Place: Bangalore ALLIANCE BUSINESS ACADEMY

2

CERTIFICATE

This is to certify that Ms. Ciby Oommen, of Alliance Business

Academy, pursuing her MBA degree through Bangalore University

has done a dissertation study on:

“The study of the Sugar Industry and the

Financial Performance Analysis of three

Sugar Units done for IDBI”

This work is based on an original project study conducted by her

under my guidance. This has not formed a basis for award of any

degree by Bangalore University or any other university.

Date: 10.06.05

Place: Bangalore

Prof. K.N. Guha

Faculty

Alliance Business Academy

3

ACKNOWLEDGEMENT

It would not be fair to start the formal proceedings in this study report without recognizing the efforts and input of all those people without whom this would not have been possible.

At first hand I would like to thank Mr. Sudhir. G. Angur, our chairman and Dr. B. V. Krishnamurthy, our director for giving me this opportunity.

I extend my deepest gratitude to Prof. Guha, my guide and teacher without whose valuable guidance it would have been impossible for me to make sense of this project.

I would also like to mention the valuable inputs given by the managing directors of the three sugar units without whom this would not have been possible.

I also like to thank my friends who have rendered their help and support in the completion of the project work.Finally, just a word for my parents, if not for whom this would be pointless.

Thank You.

4

ABSTRACT

Industrial Development Bank of India (IDBI), one of the major Financial

Institutions in India has contributed to the growth of National economy and has

always been supportive to the Government by assisting in its development

activities. This institution was established with a view to analyzing/ determining the

problems and prospects of the emerging industries in India. In addition to analysis

and determining the problems, the institution also strives towards enhancing the

scope for overall development of those emerging industries. One such emerging

industries namely the sugar industry, has been the topic of the study.

India is the largest producer and consumer of sugar in the world, with Maharashtra

contributing over one-third of country’s sugar output. There are around 434 Sugar

Mills in India. In India sugar is produced mainly in the states of Andhra Pradesh,

Bihar, Gujarat, Karnataka, Maharashtra, Madhya Pradesh, Punjab, Rajasthan, Tamil

Nadu and Uttar Pradesh. Indian sugar industry is highly fragmented with organized

and unorganized players. The unorganized players mainly produce Khandasari and

Khandari, the less refined forms of sugar. The government had a controlling grip

over the industry, which has slowly yet steadily given way to liberalization.

In the past few years the sugar industry in India has been facing several problems

like mounting stocks, controls by the Government, low capacities etc.

To understand the reasons for such problems and the effect of the industry trends

three sugar units assisted by IDBI have been studied. The financial analysis of the

sugar units was done using financial analysis tools like ratio analysis, common-size

statements and trend analysis. This financial analysis forms the basis for

sanctioning of loans by IDBI.

1.0 INDUSTRY PROFILE

5

1.1 HISTORY OF FINANCIAL INSTITUTIONS

The Government of India had set up Financial Institutions (FIs) for providing

finance to those sectors of the economy to which commercial banks do not

provide finance. These institutions handle the problem of providing long-term

finances at affordable rates. The Industrial Finance Corporation of India (IFCI)

was formed in 1948 to finance development especially in the industrial sector.

Broadly speaking such FIs are known as Development Banks. For each

category of term financing activity, an apex All India Development has been

promoted. There are separate development institutions for agriculture, industry,

investment, tourism, SSI, etc.

FIs in India comprises of 14 institutions at the national level and 46 at the State

Level. The national level institutions comprise 6 All India Development Banks

(AIDBs), 5 Specialized Financial Institutions (SFIs) and 3 Investment

Institutions (IIs). At the State Level, there are 18 State Financial Corporations

(SFCs) and 28 State Industrial Development Corporations (SIDCs). These

institutions have played an important role in the development of the industries

and thus the success of the economy.

1.1.1 All India Development Banks (AIDBs)

Industrial Finance Corporation of India (IFCI) was set up in 1948 to

provide long-term finance to industrial sectors.

Industrial Credit and Investment Corporation of India (ICICI) followed

in 1955, and State Financial Corporations under the SFC Act were set up

thereafter to cater the specific industrialization needs of the States.

Industrial Development Bank of India (IDBI) was incorporated by an

Act of Parliament in 1964, mainly to provide the required thrust to

accelerate industrialization and to meet the increasing need of capital.

Industrial Reconstruction Bank of India (IRBI) was set up in 1971 to

nurture sick units.

IRBI is renamed as Industrial Investment Bank of India (IIBI) and

Small Industries Development Bank of India (SIDBI)

6

1.1.2 Specialized Financial Institutions (SFIs)

In recent years, the government has set up 4 Specialized Financial Institutions

and they are as follows:

Export and Import Bank of India (EXIM bank) was hived off from IDBI

in 1982 as a separate institution.

The Risk Capital and Technology Corporation Ltd. (RCTC)

Tourism Finance Corporation of India Ltd. (TFCI)

Technology Development and Information Corporation of India (TDICI)

and

ICICI set up to fund VC projects.

1.1.3 Investment Institutions (IIs)

The following are the Investment Institutions:

Life Insurance Corporation of India (LIC)

Unit Trust of India (UTI)

General Insurance Corporation of India (GIC)

1.2 COMPANY PROFILE - IDBI

Industrial Development Bank of India (IDBI) was established in 1964 by the

Government of India under an Act of the Parliament, called the Industrial

Development Bank of India Act, 1964 (IDBI Act). The IDBI Act governs the

functions and working of IDBI.

Initially, IDBI was set up as a wholly owned subsidiary of the Reserve Bank

of India (RBI), to provide credit and other facilities for the development of

industry. Due to manifold increase in its activities and diverse responsibilities,

IDBI was reconstituted through legislation in 1976 enacted by Parliament and

was made the premier financial institution of the country. In 1976, the

ownership of IDBI was transferred from RBI to the Government of India and

it was entrusted with the additional responsibilities of acting as the principal

7

financial institution for coordinating the activities of institutions engaged in

the financing, promoting or development of industry.

In 1982, IDBI transferred its International Finance Division, which was

providing export finance to industry to the Export and Import Bank of India,

which was established as a wholly owned corporation of the Government of

India. In 1990, IDBI transferred its portfolio comprising the operations

relating to small-scale industries were shifted to the Small Industries

Development Bank of India (SIDBI), as a wholly owned subsidiary. CARE is

the credit rating agency promoted by IDBI.

In October 1994, the IDBI Act was amended, which permitted IDBI to raise

equity from the public, subject to the provision that the holding of the

Government should not be below 51% of the issued capital. The amendment

also aimed at providing greater operational flexibility to IDBI. This would

help IDBI in responding to the changing needs of industrial sector in a much

more prompt and decisive manner. Following this amendment, in July 1995,

IDBI made its initial public offering of equity shares aggregating Rs.2184

crore. Simultaneously, the Government also offered for sale a part of its

holding of equity shares in the capital of IDBI aggregating Rs.187.5 crore to

the Indian public. On completion of allotment of shares to the public, the

Government shareholding in IDBI was reduced to 72.14% in line with

recommendations of Narasimham Committee, and as on date.

The Government stake now stands at 57.76%. In August 2000, IDBI became

the first All India Financial Institution to obtain ISO 9002 Certification for its

treasury operations. Since its inception IDBI has played a pioneering role in

fulfilling its mission of promoting industrial growth in line with national plans

and priorities.

1.3 PRODUCTS AND SERVICES PROFILE

8

IDBI provides finance for the establishment of new industrial projects as well

as for expansion, diversification and modernization of existing industrial

enterprises. IDBI has made efforts to respond to the financial needs of the

industry by constantly expanding its range of products and services.

IDBI currently offers the following major products and services to industrial

concerns:

1.3.1 Direct Finance

Under direct finance, assistance is provided to the industrial units directly.

During 2003-04, approximately 91% of total sanctions and 94% of the total

disbursements were under direct finance.

Project Finance

Project Finance involves providing credit and other facilities to medium and

other large scale units as well as for the establishment of new projects as well

as for expansion, diversification and modernization of existing industrial

units. Project finance is granted directly to units established as companies in

private, joint and public sectors, and also to co-operatives. Assistance under

project assistance can be either in the form of equity, term loans or a mix of

both.

Infrastructure Finance

Infrastructure development has been a keen commitment on the country’s

macro agenda on account of its deterministic influence on overall economic

growth. Reflecting national priorities, IDBI has adopted infrastructure

financing a key focus area. Infrastructure financing continues to be the Bank’s

thrust area with IDBI financing projects involving large financial outlay.

Assistance to infrastructure projects during 2003-04 amounted to Rs.440 crore

(sanctions) and Rs.813 crore (disbursements).

9

Financing of Feature Films

Pursuant to the Government of India giving industry status to Entertainment

industry, including films and approving the same as an eligible activity for

financing under the IDBI Act, IDBI has introduced a scheme for financing the

film industry.

Equipment Finance and Asset Credit

Under equipment finance, rupee and foreign currency loans are given to

industrial units conforming to certain financial criteria for the purpose of

financing acquisition of specific items of machinery and equipment. Such loans

are secured by charge on specific assets and generally have a maturity of up to 6

years.

Under asset credit facility, a line of credit is extended to industrial units for

financing of their normal capital expenditure over a period of about 5-6 years

and is secured by a charge on the assets so acquired.

Equipment leasing

Financial lease is provided by IDBI for the purchase of indigenous / imported

equipment for a period of 3-10 years, in the form of full payout financial lease.

Direct Discounting of Bills

IDBI provides facilities for direct discounting of bills of exchange and

promissory notes, which arise from the sale of indigenous machinery on a

deferred payment basis by a seller to a domestic purchaser.

Underwriting and Direct Subscription

As part of project finance and capital market activities, IDBI underwrites public

and rights issues and provides direct subscription support in respect of equity as

well as debt instruments.

Energy Conservation

10

IDBI provides rupee and foreign currency loans for the acquisition and

installation of energy conservation equipment. It also provides term loans to

pollution control and prevention projects in highly polluting industrial sectors. It

also provides finance for implementing Ozone Depleting Substances (ODS)

phase out projects under the Montreal Protocol.

Venture Capital

Venture Capital finance is extended by IDBI for projects involving the

development and use of indigenous technology, for projects involving

adaptation and development of imported technology, as well as for projects

which fall in the high-risk, high-return venture category.

Corporate Loans & Working Capital

IDBI also provides loans to corporates to meet the working capital and other

normal expenditure under the corporate loan Scheme and Treasury product

facilities.

1.3.2 Indirect Finance

This refers to the provision of finance to industrial concerns through State

Financial Corporations (SFCs), State Industrial Development Corporation

(SIDCs) and Commercial Banks. Under indirect finance, the responsibility for

repayment of loans to IDBI rests with the relevant intermediary institution or

bank, by ways of:

Refinance facilities to SFCs, SIDCs, and banks against their loans to

medium-sized industrial concerns throughout India.

Rediscounting of bills of exchange discounted by banks arising from

sale of indigenous machinery on deferred payment terms.

Investment is shares of other financial institutions/SFCs and;

Line of credit to SFC/SIDCs.

Indirect finance form only 3% of the total IDBIs portfolio.

1.3.3 Financial Services

11

Merchant Banking

IDBI’s capital market division provides professional advice and service to

industry for capital market issues, loan and guarantee syndication, project

advice or appraisal, capital restructuring and mergers and acquisitions.

Forex Services

IDBI offers various foreign exchange related services namely spot and forward

purchases of currencies for letters of credit and debt servicing, swaps, forward

exchange rate agreements and other derivative products.

Corporate Advisory Services

IDBI offers advisory services to corporates. These include techno-economic

evaluation of projects, identification of foreign partners/investors and assistance

in evaluation and negotiations. It also provides support in structuring financing

plan and advising on financing options. Assistance is provided in restructuring

of existing corporates through mergers, acquisitions and divestments. It

undertakes valuation of shares and advises public sector undertakings of

industry studies.

1.4 SUBSIDIARIES

IDBI has set up a host of subsidiaries and associates with a view to expand the

functional reach of the IDBI Group and take advantage of opportunities in a

liberalized market economy.

The main subsidiaries of IDBI are:

IDBI Bank Ltd

Small Industries Development Bank of India (SIDBI)

IDBI Capital Market Services Ltd (ICMS)

IDBI Trusteeship Services Ltd. (ITSL)

IDBI Intech Ltd. (INTECH)

IDBI Home Finance

12

1.5 SOURCES OF FUNDS

With a view to foster industrialization and to provide concessional finance to

the industry, the GOI granted IDBI concessional funds. Besides equity support

by the Government, IDBI also enjoyed tax exemption, raised concessional funds

by way of SLR bonds, borrowings under capital bonds scheme, borrowings

from the corporates I.T. scheme, etc. Since the advent of liberalization,

concessional funds more or less evaporated and the IDBI had to rely on market

borrowings.

At present, the principal sources of funds are:

Equity.

Market related borrowings including Public Issue, Certificates of deposits,

fixed deposits and private placement of unsecured bonds.

Borrowings from the Government and RBI.

Borrowings by way of Government Guaranteed Rupee Bonds.

Deposits and borrowing from other sources.

Foreign currency borrowings.

Multilateral and bilateral credits, syndicated loans and other foreign

currency borrowings.

Internal generation

1.6 OPERATIONS

IDBI’s portfolio of direct finance comprises over 3200 companies representing

the complete range of industrial activities and a well-diversified client profile.

Its portfolio which includes loans, investments and guarantees, etc. as on

September 30, 2004 was Rs.54677 crore and March 31, 2005 was Rs.57850

crore.

Particulars regarding the effective sanctions and disbursements for the last four

years are given in APPENDIX A – Tables A1, A2 and Graph G1.

1.7 INDUSTRY-WISE BREAK-UP OF PORTFOLIO

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IDBI’s loan portfolio is well diversified among industries. The major

outstandings are to the iron & steel, power, cotton textiles, telecom services and

petrochemicals, which together accounted for about 48% of the outstandings as

on March 31, 2004. Recently IDBI has revised the exposure limit to individual

industry at 10% of its total portfolio or Rs.5000 crore whichever is lower. As on

March 31, 2004 only two industries viz Iron & Steel and Electricity Generation

exceeded the limit. The industry-wise breakdown of the outstandings as on

March 31, 2004 is given in APPENDIX B – Tables B1 and Graph G1.

1.8 IDBI’S CREDIT RATING

1.8.1 International Rating

Japan Rating and Investment Information Inc (R&I) has accorded to

IDBI, the highest international rating obtained by an Indian borrower viz

“BBB” for its Japanese yen bond issues in February 1991.

Standard & Poor’s assigned “BB” long term foreign currency credit

rating to IDBI.

Moody’s Investors services have assigned a long-term foreign currency

debt rating of “Baa3” with positive outlook.

Fitch, the international rating agency, has assigned long-term foreign

currency rating of “BB+” to IDBI.

1.8.2 Domestic Rating

“AAA” by the domestic rating agencies.

The recent Flexi Bonds of IDBI have been rated as “AA+” by CRISIL, FITCH

and “LAA” by ICRA, indicating high credit quality with a low expectation of

Credit risk.

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2.0 RESEARCH METHODOLOGY

2.1 STATEMENT OF PROBLEM

The problems is to find out a basis for sanctioning of loans by IDBI to the Sugar

Industry particularly in reference to three units.

2.2 OBJECTIVES OF STUDY

Identify the problems prevalent in the sugar industry.

Identify the problems faced by the three units under study.

Identify the possible ways of reviving the ailing sugar units.

2.3 SCOPE OF THE RESEARCH

The study was done for three sugar units in Coimbatore namely Rajshree

Sugars and Chemicals Ltd, Shakthi Sugars Ltd and Bannari Amman Sugars Ltd

2.4 RESEARCH DESIGN

Exploratory research was conducted to understand the present state of the

industry and the problems faced by the industry. Secondary data was collected

from published articles in magazines and the internet. The financial details of

the three sugar companies under study were obtained from the published annual

reports of these units.

2.5 DATA ANALYSIS

The performance analysis of the sugar units were done by analyzing the

financial statements of the units over the past four years using tools like ratio

analysis, trend analysis and common-size analysis.

15

3.0 THE SUGAR INDUSTRY

3.1 INTRODUCTION

Sugar is one of the oldest commodities in the world and traces its origin to 4th

century AD in India and China. In those days, sugar was manufactured only

from sugarcane. The eighteenth century witnessed the development of new

technology to manufacture sugar from sugar beet. The European, American, and

Oceanic countries pioneered this.

Today, sugar is produced in 121 Countries and global production exceeds 120

million tons a year. Approximately 70 percent is produced from sugar cane, a

very tall grass with big stems, largely grown in the tropical countries. The

remaining 30 percent is produced from sugar beet, a root crop resembling a

large parsnip grown mostly in the temperate zones of the northern hemisphere.

In India sugar is produced from sugar cane. A typical sugar content for mature

cane would be 10% by weight but the figure depends on the variety and varies

from season to season and location to location. Equally, the yield of cane from

the field varies considerably but a rough and ready overall value to use in

estimating sugar production is 100tons of cane per hectare or 10 tons of sugar

per hectare.

3.2 THE INDIAN SUGAR INDUSTRY

India, along with Brazil, is presently a dominant player in the global sugar

industry. Given the growing sugar production and the structural changes

witnessed in Indian sugar industry, India is all set to continue its domination at

the global level.

India is the largest producer and consumer of sugar in the world, with

Maharashtra contributing over one-third of country’s sugar output. There are

around 434 Sugar Mills in India as on March 2004. In India, sugar is produced

mainly in the states of Andhra Pradesh, Bihar, Gujarat, Karnataka, Maharashtra,

16

Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu, and Uttar Pradesh. Indian

sugar industry is highly fragmented with organized and unorganized players.

The unorganized players mainly produce Gur and Khandari, the less refined

forms of sugar. The government had a controlling grip over the industry, which

has slowly yet steadily given way under liberalization.

Sugar is a controlled commodity in India. It comes under the Essential

Commodities Act, 1955. The Government controls the price of sugarcane and

sugar capacity additions, decides the quantity that can be sold in the open

market, fixes the levy quota of sugar etc. Thus, the Government exercises a

control over all aspects of the production and sale of sugar, and this control

extends to the level of wholesalers in the distribution chain.

Sugar is produced in two sectors in India - The Corporate sector and the Co-

operative sector. The Corporate sector includes the Public sector.

A Dual Pricing System is adopted in the Indian sugar industry, which includes

sugar price in Public Distribution System (PDS) and the Free Market Price. The

Government of India fixes the sugar prices distributed through the PDS, based

on the levy sugar prices and the subsidy to be provided through budgetary

system.

The basic parameters by which the sugar industry is measured are: Total units;

Working units; Production value; Cane purchases; Cane crushed; Production of

sugarcane; Production of molasses; Sugar recovery; Population; Total

consumption; Per capita consumption etc.

Sugar has always been the most political of all commodities. In India with a

large section of the agriculture-dependent population involved in the farming of

sugar-cane (which constitutes 60-70% of the cost of sugar), the domestic sugar

industry has traditionally attracted political protectionism, with too many

restrictions on input and output prices as well as on the distribution of the

commodity.

17

The sugar recovery and crushing period during the years 2001-02 and 2002-03

are given below.

Year

Average Crushing

Period (days)

Average Sugar

Recovery (%)

2001-02 139 10.48

2002-03 140 10.27

Given below is the annual release of levy sugar and free sugar (thousand MT).

Year Levy Sugar Free Sugar

2001-02 26.32 121.25

2002-03 20.5 112

The production of sugar and its associated products for the period 2001-02 and

2002-03 is given below.

Year Sugarcane

(million MT)

Sugar (lakh

MT)

Molasses (lakh

MT)

2001-02 26.32 121.25 78.2

2002-03 20.5 112 80.7

3.3 THE PROBLEMS

In the past few years the sugar industry in India has been facing several

problems like mounting stocks, controls by the Government, low capacities etc.

Each of these problems has been dealt in detail below.

3.3.1 Stocks

The Rs 25,000 crore sugar industry has been suffering from the problem of

plenty for nearly five years causing distress both to the sugar factories and

sugarcane growers. Most of the 450 sugar factories in the country are beset with

18

four successive years of excess production resulting in the build-up of

unsustainable stocks.

The prices of sugar have crashed from Rs 1300 per quintal in 2001-02 to Rs

1180 per quintal in 2002-03 and Rs 1070 per quintal in 2003-04, which is below

the levy sugar price. Financial viability has been eroded with the industry

suffering a loss of Rs 5500 crore in the last two years.

Large arrears of sugarcane price have accumulated and the industry is unable to

pay cane prices, even the Minimum Support Price (MSP) fixed by the

government. To make matters worse the MSP of sugarcane is arbitrarily hiked

every year. This year an additional price hike of Rs 5 a quintal has been made.

3.3.2 Regulations

In India, the sugar industry, from sugarcane production to sugar distribution is

highly regulated by the Government. In addition to the regulations issued by the

Central Government, the sugar industry is also affected by regulations issued by

the state governments. State governments intervene in matters relating to

sugarcane production and pricing. The industry was mired in an intricate web

of controls and restrictions for long because sugar has been considered as one of

the essential commodities.

Some of the regulations, which govern the sugar industry, include, The

Essential Commodities Act, 1964; Sugar Control Orders, 1943, 1966 and 1999;

Sugar Wage Board Rules; Molasses Control Order, 1961; and Molasses

Decontrol, 1993.

In India, sugarcane farming by corporates is not allowed, as sugar producers can

not hold/own land. In addition, the state governments have control over the

allocation of the command area; hence, the sugar mills have no assurance

regarding the adequate availability of sugarcane for the installed capacity base.

As a result, in India, the capacity additions and production planning for sugar

19

producers is difficult. The sugar mills have a limited ability to control the

quality, quantity and the cost of the sugarcane procured.

In addition to the regulations issued by the Central Government, the sugar

industry is also affected by regulations issued by the state governments. State

governments intervene in matters relating to sugarcane production and pricing.

State governments announce the support/advice prices for sugarcane, which are

usually announced without any economic consideration and are not linked to

sugar realizations. State advice/support prices announced by the state

governments are usually higher than the Minimum Support Price (MSP) of

sugarcane announced by the Central Government.

The Government has a control on the sale of sugar through the quota release

mechanism. Levy quota sugar is to be sold at a subsidized rate. Sugar sales

higher than the fixed quotas are not permitted. Sugar sales lower than the

allocated quota would have to be surrendered to the Government at levy prices.

As a result, the sales and distribution of sugar are controlled. In addition, sugar

prices are monitored carefully and sugar produced can not be increased as sugar

is considered as an essential commodity.

Over the years, the control of the Governments on the sugar industry has been

declining. In a phased decontrol over past three years, most restrictions were

removed, except the 10 per cent levy on mills (Government procurement below

market price) and the monthly free-sale quota release mechanism (marketing

restrictions).

3.3.3 Pricing

The sugar industry follows a highly controlled pricing mechanism, which has

adversely affected the profitability of sugar units.

Statutory Minimum Price (SMP)

The Statutory Minimum Price (SMP) is the minimum price fixed by the Central

Government that the mills have to compulsorily pay to the sugar cane growers.

20

The Centre fixed an SMP of Rs 73 per quintal (linked to a basic sugar recovery

of 8.5 per cent) for the ongoing 2004-05 crushing season.

Sugarcane: Statutory minimum price (SMP)

(Rs per quintal) 1999-

00

2000-

01

2001-

02

2002-

03

2003-

04

SMP(Linked to the

basic recovery rate of

8.5 per cent)

52.7 56.1 59.5 62.1 69.5

Growth over the

previous year - 6.5 6.1 4.3 12.0

State advised price (SAP)

In addition to SMP announced by the Centre, State governments announce the

support/advice prices for sugarcane. State advice/support prices announced by

the state governments are usually higher than the Minimum Support Price

(MSP) of sugarcane announced by the Central Government.

Levy quota, levy price and public distribution system (PDS)

The Government procures, at a price lower than the cost of production (levy

price) a fixed proportion of the sugar production (called levy quota). The

Government distributes the sugar procured to the poorer sections of society

through fair price shops (public distribution system).

Free-sale quota

Free-sale quota is the balance production, left after levy quota that can be sold

by producers to the consumers in the open market. The Government issues

release orders allowing producers to sell a fixed quantity of sugar in the open

market in each month.

21

PDS issue price

It is the retail price at which sugar is sold through PDS shops. The difference

between the PDS issue price and the cost to the Government (cost of levy sugar,

and the cost of storing and transporting such sugar) is the subsidy provided by

the Government.

3.3.4 Capacity

In 1998, over 50 per cent of the units (accounting for approximately over one-

third of the installed capacity) had a capacity of less than 2,500 tcd (tonnes of

cane crushed per day-minimum economic size capacity).

In general, sugar producers prefer to increase capacity by acquiring small units,

instead of expanding the capacity beyond 10,000 tcd at the same location, since

the sugar producers would have access to the cane command area of the

acquired unit, and thereby the gestation period for sugarcane development

would be lower. In addition, the existing infrastructure is unable to support

sugarcane management and transportation of sugarcane in large volumes, which

is required to support the increased capacity.

3.3.5 Cost of Production

Sugarcane is the key input for sugar production. It accounts for around two-

thirds of the cost of production of sugar. Sugarcane is handled by hand and

involves extensive labour. Labour costs account for a significant share of the

total cost of producing sugarcane.

India has ideal conditions for growing sugarcane at a low cost, such as tropical

climate, easy availability and low cost of labour, and low cost of irrigation

facilities. Sugar recovery rates in India are not significantly lower, as compared

with the international standards.

22

India is relatively competitive at the farm level (as measured by the cost of

sucrose), as compared with other leading sugar producing countries. However,

its overall competitiveness is lower, due to the high factory production costs.

The main reasons for the inefficiencies at the mill level are lower overall

recovery rates and smaller capacities.

In India, the total cost of white sugar producing mill is high (indexed at around

82 per cent, with the world average at 100 per cent), as compared with that in

other countries, such as Brazil (60 per cent) and Australia (70 per cent).

However, cost of production is higher in countries, such as Thailand (98 per

cent), Pakistan (110 per cent) and China (130 per cent).

3.3.6 Performance

Operating margins in the sugar industry are moderate. However, the net profit

margins are low, due to the high debt levels. The debt-equity ratio of the sugar

industry is high, due to the high borrowings required for funding sugar

inventories. (Inventory levels with domestic producers are high, as sugar

production is seasonal.) In addition, sales of domestic producers are controlled

by the release mechanism. As a result of the high debt-equity ratio, the interest

coverage ratio of the sugar industry is low.

In a decontrolled environment, the sugar producers would need to implement

new strategies, in order to be successful. Sugar producers are expected to

benefit with the discontinuation of the release mechanism, as producers would

be able to control the sales volume, based on the prevailing demand-supply

situation.

3.4 BY-PRODUCTS

During the manufacturing of sugar from sugar cane not all the sugar can be

extracted out of the juice, thus a sweet by-product is formed called the

molasses. This can be turned into a cattle food or sent to a distillery where

alcohol is made.

23

The fibre obtained from crushing the sugar cane is called bagasse in the

industry. The factory needs electricity and steam to run, both of which can be

generated using this fibre. The bagasse is burnt in large furnaces where a lot of

heat is given out which can be used in turn to boil water and make high pressure

steam. The steam is then used to drive a turbine in order to make electricity and

create low-pressure steam for the sugar making process.

3.5 SUGAR INDUSTRY STANDARDS

Operating margins in the sugar industry are moderate.

The net profit margins are low.

The debt levels are high due to the high borrowings required for funding

sugar inventories.

Inventory levels with domestic producers are high, as sugar production

is seasonal

The interest coverage ratio of the sugar industry is low.

3.6 THE CURRENT INDUSTRY SCENARIO

Sugar has always been the most political of all commodities. In India with a large

section of the agriculture-dependent population involved in the farming of sugar-

cane (which constitutes 60-70% of the cost of sugar), the domestic sugar industry

has traditionally attracted political protectionism, with too many restrictions on

input and output prices as well as on the distribution of the commodity.

However the scenario is changing. The restrictions over the distribution of the

commodity have gone. The by-products of sugar, i.e. alcohol (potable as well as

industrial) and bagasse are driving the growth in the bottom line of sugar

companies. Most importantly, for the first time India will see a sugar supply crunch

since the 1980s. With diminishing closing stock India has started to import sugar

after a long time. Going forward, as further pressure builds up on the sugar

inventory in the country, the prices will move higher. In such a scenario the

companies that can source the raw material, i.e. sugar-cane, with no trouble due to

24

their locational advantage or due to long-term relationship with farmers are poised

to benefit.

A study was done for three sugar units in Coimbatore namely Rajshree Sugars and

Chemicals Ltd, Shakthi Sugars Ltd and Bannari Amman Sugars Ltd. The profiles of

these industries are as follows:

3.6.1 RAJSHREE SUGARS AND CHEMICALS LTD

The sugar factory has a capacity of 2500 TCD (tonnes of cane crushed per day) and

is balanced to handle 3000 tonnes of cane per day. The factory was commissioned

in 1990 and is today one among the leading sugar factories in the country. The

factory produces sugar of ISS grade S-30 with an ICUMSA value less than 100.

Crushing over 900,000 tons of cane in a single year, the Company has set a record

for a plant in its category. The factory has an extended crushing duration of over

300 days in a season as against the industry norm of 180 days and has consistently

recorded an average sugar recovery of around 10%. The Company has some of the

most distinguished specialists in sugar engineering, technology and sugarcane

development and has in-house expertise in all areas of sugar factory operation.

The Company has focused on agricultural extension services with a view to

encourage modern methods of cultivation to improve sugarcane yield per hectare.

The Company has a dedicated and intensive cane development program to ensure

the required quantity of cane with high CCS. A well-trained team of agricultural

experts man far-flung divisional operations of its sugar cane procurement

department. The programme requires close interaction with farmers and involves

providing requisite material and technical support. High quality seeds of improved

cane varieties are raised in nurseries and supplied for planting in a staggered

schedule. Eco-friendly organic practices are imparted to farmers. The Company

today is an integral part of the rural economy.

3.6.2 SAKTHI SUGARS LTD

Sakthi Sugars Limited is one of the largest producers of white crystal sugar in the

country accounting for a capacity of 12,750 tonnes of cane crush per day.  Sakthi

Sugars has set up sugar units in different parts of India. It has:

25

Mills equipped with Auto Setting facilities.

Best export quality of Sugar produced.

Scientific farming

Continuous R&D in sugar rich, pest resistant and high yielding sugarcane

varieties

Mechanization of cane harvesting.

Efficient Sugar manufacturing method used thereby reducing the sugar loss.

Factory sites are maintained neat and clean - Hygiene at its best.

Sugar manufactured is of international standard of ICUMSA 35 units maximum and

exported overseas. 

3.6.3 BANNARI AMMAN SUGARS LTD

WHITE CRYSTAL PLANTATION CANE SUGAR production in the two units of

Bannari Amman Sugars Limited is now double at 7500 tonnes of cane crush / day

from the initial capacity of 3750.

The first Sugar unit near Sathyamangalam of Erode District, Tamil Nadu State,

started its commercial production in the year 1986 with an initial capacity of 1250

tonnes of Cane crush per day and expanded to 2500 tonnes in 1998. The crushing

capacity is now expanded to 4000 TCD. The unit has many credits and firsts in the

sugar industry of the country.

Sugar Unit-1: An EN/ISO 9002 unit accredited by RWTUV of Germany in 1997

for its good system of quality management ensuring a better product. This has been

upgraded to ISO 9001:2000 valid upto 20.7.2007. The unit's sugar is also marketed

in consumer packs of 1 kg in select cities of Tamil Nadu.

4.0 FINANCIAL PERFORMANCE ANALYSIS

The financial statements of the three sugar units Rajshree Sugars and Chemicals

Ltd, Shakthi Sugars Ltd and Bannari Amman Sugars Ltd that had taken loans from

IDBI were studied and analyzed using the following tools.

26

•Ratio Analysis

•Common-size Statements

•Trend Analysis

4.1 RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial

statements. It helps us understand the financial strengths and weaknesses of a

firm. A single ratio in itself does not make much of sense. The ratios are useful

only when they are further interpreted.

Some of the ratios calculated have been explained below:

Gross Profit Margin Ratio

The gross profit margin ratio indicates how efficiently a business is using its

materials and labor in the production process. It shows the percentage of net

sales remaining after subtracting cost of goods sold. A high gross profit margin

indicates that a business can make a reasonable profit on sales, as long as it

keeps overhead costs in control.

Current Ratio

The current ratio is the standard measure of any business' financial health. It

will tell you whether your business is able to meet its current obligations by

measuring if it has enough assets to cover its liabilities. The standard current

ratio for a healthy business is two, meaning it has twice as many assets as

liabilities. The current ratio should be part of your business' basic financial

planning, meaning it should be tracked monthly or quarterly. By keeping a close

eye on this figure, you will recognize if it begins to get out of line. This will

allow you to take early action to prevent your business from ending up in a

difficult position.

27

Quick Ratio

Like the current ratio, the quick ratio (also sometimes called the acid test ratio)

measures a business' liquidity. However, many financial planners consider it a

tougher measure than the current ratio because it excludes inventories when

counting assets. It calculates a business' liquid assets in relation to its liabilities.

The higher the ratio is, the higher your business' level of liquidity, which

usually corresponds to its financial health. The optimal quick ratio is 1 or

higher.

This is an important planning tool, especially for businesses that can tie up a lot

of assets in inventory. By tracking it monthly, we can keep an eye out for

negative trends that could hamper our business' ability to meet its obligations.

We can also use the quick ratio to evaluate the financial health of potential

customers, since it also indicates whether a business can pay off its debts

quickly. A firm with a low quick ratio may be more likely to delay payments

because its assets are tied up elsewhere.

Debt Equity Ratio

The debt equity ratio is ideally 1:1. A low ratio is considered as favorable from

the long-term creditors point of view because a high proportion of owner’s fund

provide a larger margin of safety for them. A high debt equity ratio which

indicates that the claims of outsider’s (creditor’s) are greater than those of

owner’s may not be considered by the creditors because it gives a lesser margin

of safety for them at the time of liquidation of the firm. Caution to be taken as a

very high ratio may be unfavorable from the point of view of the firm as its hard

to get credit without paying a very rate of interest and without accepting undue

pressure and conditions of the creditors.

Interest Coverage Ratio

The higher the ratio, safer is the long-term creditors because even if the earnings

of the firm fall the firm shall be able to meet its commitments of fixed interest

charges.

28

Inventory Turnover Ratio

This ratio tells how often a business' inventory turns over during the course of

the year. Because inventories are the least liquid form of asset, a high inventory

turnover ratio is generally positive. On the other hand, an unusually high ratio

compared to the average for your industry could mean a business is losing sales

because of inadequate stock on hand.

If your business has significant assets tied up in inventory, tracking your

turnover is critical to successful financial planning. If inventory is turning too

slowly, it could indicate that it may be hampering your cash flow. Because this

ratio judge’s annual inventory turns, it is usually conducted once a year.

Working Capital Turnover Ratio

Working capital of a concern is directly related to sales. Working Capital

Turnover Ratio indicates the velocity of the utilization of net working capital.

This ratio measures the efficiency with which the working capital is being used

by the firm. A higher ratio indicates efficient utilization of working capital and a

low ratio indicates otherwise.

4.2 INTERPRETATIONS

The financial statements and the ratio analysis for Rajshree Sugars and Chemicals Ltd are given in APPENDIX C – Tables C1, C2 and C3.

Rajshree Sugars and Chemicals Ltd

The gross profit margin ratio has shown considerable variation over the

past four years. It ranges from -7.4% to 23.9%. The high variability of

gross margin is not a good sign.

The operating profit ratio improved in the period 1999-00 to 2002-03

from 13.7% to 26.3%. However, in 2003-04, it declined to 23.3%.

The net margin ratio increased from negative levels to 1.01% in 2002-

03. The net income has decreased in 2003-04 due to substantial increase

in raw material prices and the sales have gone up. Thus in 2003-04 the

ratio has again decreased to 0.16%.

29

Like for the other ratios the ROE and ROA have increased till 2002-03

and declined in the recent financial year. The total assets have increased

over the period. But the trend in these ratios is due to the rise and then a

decrease in the net income.

Earnings per share has shown a steady improvement from Rs. -6.03 per

share to a small positive Rs. 0.04 per share.

Current ratio has improved from 2.6 to 3.6 over the last 4 years.

However, the quick ratio is well below 0.5, suggesting severe liquidity

problems.

The debt equity ratio, which has declined till 2002-03 has again

increased in 2003-04 because of an increase in both secured and

unsecured loans.

Interest coverage ratio has improved from 0.2 to 1.0, a positive sign for

lenders to this unit.

Inventory turnover has declined from 2.07 to 0.63 over the last four

years. This suggests that the unit has problems selling its inventory and

that they are not moving fast.

Working Capital Turnover has also deteriorated from 1.46 to 0.96,

suggesting that the unit’s efficiency in utilizing working capital has

declined.

Overall, the company’s profitability has improved in the last four years,

although it suffered a reversal in the most recent fiscal year; It has severe

liquidity and turnover problems that need to be addressed.

The financial statements and the ratio analysis for Shakthi Sugars Ltd is given in

APPENDIX D – Tables D1, D2 and D3.

Shakthi Sugars Ltd

The gross profit margin ratio has drastically decreased from 73.22 in

2001-02 to –63.83 in 2003-04. This reflects the poor performance of the

company. The cost of goods sold has increased manifolds over the years.

In 2003-04 a major contribution to the CGS is from excise duty and

taxes.

30

From 2000-01 to 2003-04 the operating profit has decreased by 95%.

This has reduced the operating profit ratio from 18.25 to 1.76.

The net margin ratio decreased from 4.86% in 2000-01 to –15.88% in

2003-04.

From 2000-01 to 2003-04 the net profit has decreased by 250%. Thus

ROE has decreased from 3.9% to -13.77% and ROA has decreased from

2.6% to -4.0%.

We can conclude that the asset utilization is very low and the company’s

return on equity is not attractive.

Earnings per share have shown a decline from Rs. 4.6 per share to a

small positive Rs.-13.5 per share.

Current ratio has decreased from 3.8 to 2.0 in 2001-02 and then slightly

increased to 2.09. However, the quick ratio has gone down continuously

from 1.18 to 0.4. The increase in current ratio is due to the increase in

inventories and debtors. The liquidity of the company is going below

accepted levels.

The increase in 2003-04 in the debt equity ratio is because the company

has taken more secured and unsecured loans. The debt equity ratio is

low compared to the industry standards.

Interest coverage ratio has improved from 1.2 to 0.14, a positive sign for

lenders to this unit. Interests have come down by 63% in the four years.

Inventory turnover has declined from 2.07 to 0.63 over the last four

years. This suggests that the unit has problems selling its inventory and

that they are not moving fast.

Working Capital Turnover has also increased from 1.43 to 2.14 and

again decreased in 2003-04 suggesting that the unit’s efficiency in

utilizing working capital has increased.

On the whole the company’s performance has been declining over the

years, which is dangerous.

31

The financial statements and the ratio analysis for Bannari Amman Sugars Ltd

is given in APPENDIX E – Tables E1, E2 and E3.

Bannari Amman Sugars Ltd

The gross profit ratio, operating profit ratio and net profit margin ratio

have decreased rapidly in the last three years. In 2004 the cost of goods

sold has gone up, decreasing the gross profit. The operating profit has

also gone down and the company has made losses.

The current liabilities have increased significantly in 2003-04. Hence the

current ratio has come down from 3.04 in 2001-02 to 2.04 in 2003-04,

which is not advisable. Also the inventories have been increasing for the

past three years. Thus the quick ratio has decreased rapidly.

The debt equity ratio has increased mainly due to decrease in equity. But

they have acceptable values.

The interest coverage ratio has been decreasing due to decreasing profits

for the past three years. It is 0.6 in 2003-04 which is dangerously low

from the point of view of creditors.

Till 2002 the inventory turnover ratio had been decreasing. But in 2004

due to a sudden increase in the cost of goods sold the ratio has gone up

from 0.8 in the previous year to 1.02.

ROE and ROA had increased in 2001-02 but has then shown a steady

decline.

4.3 COMMON-SIZE STATEMENTS

The common-size statements are shown in analytical percentages. The figures

are shown as percentages of the total assets, total liabilities and total sales. The

total figures are taken to be 100. Common-Size Balance Sheet can be used to

compare companies of differing size.

The common size balance sheet is given in APPENDIX C, D and E – Tables

C6, D6 and E6.

32

4.3.1 Common Size Analysis

For Rajshree Sugars and Chemicals Ltd the debt is around 65% of liabilities

and for Shakthi Sugars Ltd it is around 50%.

Bannari Amman Sugars has it around 60%, which has been reduced to 40%

in the previous year.

The inventories of Rajshree Sugars and Chemicals Ltd are 40% of the total

assets, of Shakthi Sugars Ltd is varying between 20-35% and for Bannari

Amman Sugars it is 50% of the total assets.

The depreciation amounts for Rajshree Sugars and Chemicals Ltd and

Bannari Amman Sugars is between 5-10% while that of for Shakthi Sugars

Ltd is higher at 13-20%.

4.4 TREND ANALYSIS

Trend analysis is done by computing trends of series of information. It involves

the computation of the percentage relationship that each item bears to the same

item in base year. The figures of the base year are taken as 100 and trend ratios

for other years are calculated based on the base year. This analysis helps in

understanding the trend of figures, whether upward or downward.

The trend analyses for Rajshree Sugars and Chemicals Ltd are given in

APPENDIX C – Tables C4 and C5.

Rajshree Sugars and Chemicals Ltd

Balance Sheet

The secured loan has increased by 15% in 2003-04 compared to the base

year.

The net block has decreased because of a huge depreciation.

Depreciation has increased by 48%, 97% and then 140% in the three

years.

Inventories have increased by around 10% every year while debtors

have drastically increased – by 150% in 2003-04.

33

P&L

The sales have shown only a slight increase over the years.

The raw materials consumed and the total expenditure have declined,

though not continuously, compared to the base year.

The trend analyses for Shakthi Sugars Ltd are given in APPENDIX B – Tables

B4 and D5.

Shakthi Sugars Ltd

Balance Sheet

The share capital has decreased.

The total debt that had decreased in the previous two years has risen by

6% compared to the base year in 2003-04.

P&L

Sales have continuously decreased to just 46% of the base year.

Total income and total expenditure have declined compared to the base

year. But the figures for 2003-04 are higher with respect to 2002-03.

The trend analyses for Bannari Amman Sugars Ltd are given in APPENDIX E –

Tables E4 and E5.

Bannari Amman Sugars Ltd

Balance Sheet

The share capital has reduced to 87% of the base year due to buy back of

shares.

The total debt has remained same for 2001-02 and 2002-03. But there

has been a decline in 2003-04.

34

P&L

Sales for 2002-03 and 2003-04 are down compared to the base year.

Material costs have gone up except in 2002-03.

5.0 FINDINGS

In view of the difficulties faced by certain industries IDBI has been

extending relief to select corporates.

Restructuring of liabilities is done by way of reschedulement of

principal, reduction in interest rates/ stepping-up of interest payments in

line with the revised cash-flow projections.

IDBI, while sanctioning the term loans under project finance to Rajshree

Sugars and Chemicals Ltd, had charged an interest of 21% p.a which

was subsequently reduced due to changes in Government policies.

Rajshree Sugars and Chemicals Ltd had been making losses amounting

to Rs. –127118211 in the year 2000-2001 and Rs. –47569342 in 2001-2002.

At the request of the company, during February 2001, IDBI has

sanctioned financial restructuring, allowing a reduction in the interest

rate on the term loans/debentures to 14%p.a.

Due to heavy cut in interest charges the company’s performance has

stabilized. It has made a profit of Rs. 5259252 and Rs. 871824 in the

years 2002-03 and 2003-04 respectively.

Thus we find that restructuring is an attractive option to revive the

beleaguered sugar units.

6.0 SUGGESTIONS AND RECOMMENDATIONS

35

Restructuring of loans will bring some relief to the beleaguered industry.

The industry must seek to become globally competitive.

In order to remain profitable, mills must examine ways and means to

improve operational efficiency, economies of scale, operational

efficiency and better management of resources.

Sugar producers should also diversify and set up co-generation power

units from bagasse, and distilleries for producing anhydrous ethanol

from molasses.

All attempts to minimize costs have to be technology driven. The

technology upgradation of the sugar industry is therefore every

important to ensure its global competence.

7.0 REVIVAL OF SICK SUGAR MILLS

As on April 01, 2004, there were 45 sick sugar companies in the

public/private sectors. The number of cooperative sugar units with negative

net worth as on 31/3/2003 was 130, as per information provided by

NABARD. Loans from the Sugar Development Fund (SDF) at concessional

rates of interest are available now for the revival of potentially viable sick

sugar mills. In regard to the cooperative sugar mills which are not within

the purview of BIFR, the Government has constituted a Committee under

the Chairmanship of Joint Secretary, Food & Public Distribution, to

recommend revival packages for potentially viable sick cooperative sugar

mills. Also, the Central Government has amended the Sugar Development

Fund Act, 1982 to provide for loans from the SDF at concessional rate of

interest to sugar factories for undertaking baggase based cogeneration of

power projects and for production of anhydrous alcohol/ethanol from

alcohol/molasses.

8.0 CONCLUSION

36

Sugar has always been the most political of all commodities. In India with a

large section of the agriculture-dependent population involved in the farming of

sugar-cane (which constitutes 60-70% of the cost of sugar), the domestic sugar

industry has traditionally attracted political protectionism, with too many

restrictions on input and output prices as well as on the distribution of the

commodity.

However the scenario is changing. The restrictions over the distribution of the

commodity have gone. The by-products of sugar, ie alcohol (potable as well as

industrial) and bagasse are driving the growth in the bottom line of sugar

companies. Most importantly, for the first time India will see a sugar supply

crunch since the 1980s. With diminishing closing stock India has started to

import sugar after a long time.

The performances of the three sugar units were studied. It is found that the

problem prevalent in the sugar industry has affected the performance of the

companies to a great extent. So it has become inevitable for the companies to

adopt measures to arrest the losses at the earliest.

Under efficient management sugarcane is one of the most viable crops to grow

economically compared to other crops hence with the findings it can be

concluded that with a focus on achieving low costs of production and high

levels of efficiency that will firstly mutually benefit the two primary

stakeholders: growers and millers, and secondly influence economic growth and

job creation at national level.

37

APPENDIX A

TABLE A1

TREND IN SANCTIONS

Year Ending March 31 2004 2003 2002 2001

(Rs crores)Rs crores) (Rs crores) (Rs crores)

DIRECT FINANCE (Rs crore)

Rupee Loans 1377 9722 17121 15604

Foreign Currency Loans 1123 2029 2564 3442Underwriting and direct subscription to shares, bonds and debentures of industrial concerns 105 512 457 512

Equipment Leasing 0 12 250 299

2605 12275 20392 19857

Guarantees for loans and deferred payments 31 403 1362 236

TOTAL DIRECT FINANCE 2636 12678 21754 20093

INDIRECT FINANCE

Refinance of Industrial Loans 0 187 363 242

Bills Finance 87 123 286 723Loans to and Investments in shares and bonds of financial institutions 53 291 246 968

Others 113 226 529 34

TOTAL INDIRECT FINANCE 253 827 1424 1967

TOTAL SANCTIONS 2889 13505 23178 22060

38

TABLE A2

TRENDS IN DISBURSEMENTS

DISBURSEMENTS

Year Ending March 31 2004 2003 2003 2001 (Rs.crores) ( Rs.crores) ( Rs.crores) ( Rs.crores)

DIRECT FINANCERupee Loans 2011 5812 11182 10719Foreign Currency Loans 1542 1610 1341 2614Underwriting and direct subscription to shares, bonds and debentures of industrial concerns 140 2892 3391 1745Equipment Leasing 0 12 255 370

3693 10326 16169 15448Guarantees for loans and deferred payments 0 0 0 0TOTAL DIRECT FINANCE 3693 10326 16169 15448

INDIRECT FINANCERefinance of Industrial Loans 0 158.8 332 229.5Bills Finance 60.8 84.9 202 527.9Loans to and Investments in shares and bonds of financial institutions 53.8 313 287 823.5Others 117.1 267.9 484 34TOTAL INDIRECT FINANCE 231.7 824.6 1305 1614.9

TOTAL DISBURSEMENTS 3924.7 11150.6 17474 17062.9

39

GRAPH A1

TRENDS IN SANCTIONS AND DISBURSEMENTS MARCH 2001 – MARCH 2004

40

APPENDIX B

TABLE B1

INDUSTRY WISE BREAK-UP OF OUTSTANDING LOAN AMOUNT BY IDBI

INDUSTRYOUTSTANDING AMOUNT (Rs. crore)

O/S AMOUNT AS % OF TOTAL OUTSTANDING

Iron and Steel 9104.9 18.63349

Electricity Generation 6257.9 12.80701

Cotton Textiles 4414.66 9.034752

Telecom Services 2132.63 4.3645

Petrochemicals 2045.08 4.185326

Fertilizers 1895.71 3.879635

Cement 1517.69 3.106004

Artificial Fibres 1704.43 3.488174

Chemical (Others) 1082.12 2.214595

Food (Others) 1174.34 2.403327

Basic Industrial Chemicals 1216.21 2.489015

Services (Others) 912.54 1.867544

Electronics 1069.87 2.189525

Drugs & Pharmaceuticals 1080.28 2.21083

Paper & Paper Products 1250.76 2.559723

Other Industries( incl sugar industry) 12003.98 24.56655

41

GRAPH B1

GRAPH OF OUTSTANDING AMOUNT AS % OF TOTAL OUTSTANDING

42

APPENDIX C

RAJSHREE SUGARS AND CHEMICALS LTD

TABLE C1 - BALANCE SHEET

2003-04 2002-03 2001-02 2000-01SOURCES OF FUNDS: (Rs.Crores)  (Rs.Crores)  (Rs.Crores) (Rs.Crores)SHAREHOLDERS' FUNDS        Share capital 298500000 298500000 275500000 210500000Reserves and surplus 1977657 1977657 1977657 1977657Net worth 300477657 300477657 277477657 212477657LOAN FUNDS        Secured Loan 1062765745 984918358 1002490870 923651092Unsecured Loan 21000700 0 7837500 0Total debt 1083766445 984918358 1010328370 923651092Capital employed 1384244102 1285396015 1287806027 1136128749DEFERRED TAX LIABILITY 0 0 0 0TOTAL 1384244102 1285396015 1287806027 1136128749APPLICATION OF FUNDS:        FIXED ASSETS        Cost 729765860 723639625 715055470 706840651Less: Depreciation 174320671 142942770 107428701 72492031Net block 555445189 580696855 607626769 634348620Capital work-in-progress 0 0 21846 225413Total fixed assets 555445189 580696855 607648615 634574033

       DEFERRED TAX ASSET 89571179 0 0 0INVESTMENTS 0 0 0 0CURRENT ASSETS, LOANS AND ADVANCES        Current Assets    Inventories 700720682 654637854 606008259 492954327Sundry debtors 19831487 16478828 9671753 7883272Cash and bank balances 2750689 1323650 856292 1100288Loans and advances 46466726 36131129 26764953 24922959

769769584 708571461 643301257 526860846Less: Current Liabilitites and provisions 211711419 284880131 253400026 201447798Net current assets ( Working Capital) 558058165 423691330 389901231 325413048Miscellaneous Expenditure(not written off) 69753240 79148500 83137598 16592437P&L Account 111416329 201859331 207118583 159549229TOTAL(Capital deployed) 1384244102 1285396016 1287806027 1136128747

TABLE C2 - P&L ACCOUNT

2004 2003 2002 2001(Rs.crores)  (Rs.crores) (Rs.crores) (Rs.crores)

Sales inclusive of Excise Duty 534189496 520670838 498658387 475853118Other Income 43205939 35541909 19465366 1356960

43

Inventory Change 51520364 37661763 103056474 112369847TOTAL INCOME 628915799 593874510 621180227 589579925

       Raw Material Consumed 367906172 343556435 363545644 374524193Process & Packaging Materials Consumed 25830669 13444933 17447771 19982417Power & Fuel 1588320 1098090 1167884 2927841Employees cost 20353248 21076388 20312691 22588834Repairs and Maintenance 13107236 16962214 18961298 25973854Excise duty 0 0 31141163 56722810Other Expenses 22987088 21110977 19081185 18241425Expenses Written Off 9395260 4114098 4101598 2241489TOTAL EXPENDITURE 461167993 421363135 475759234 523202863

       Profit/Loss before interest and depreciation 167747806 172511375 145420993 66377062Interest and financing charges 135482601 131738055 158048876 158916109Depreciation 31393381 35514068 34936670 34457408Profit before tax 871824 5259252 -47564553 -126996455Add: Income Tax Paid 0 0 -4789 -121756Profit after tax 871824 5259252 -47569342 -127118211

       Deferred Tax Asset 89571179 0 0 0Loss b/f from the previous year -201859331 -207118583 -159549230 -32431019

     Balance carried forward -111416328 -201859331 -207118572 -159549230

TABLE C3 - RATIOS ANALYSIS

2003-04 2002-03 2001-02 2000-01LIQUIDITY RATIOS:        Current Ratio=Current Assets/Current Liabilities 3.6359 2.4873 2.5387 2.6154Acid test ratio=Quick assets/Current Liabilities 0.3261 0.1893 0.1472 0.1683

       LEVERAGE RATIOS:        Debt-Equity ratio=Long term debt/Equity 3.6068 3.2778 3.6411 4.3471Interest Coverage ratio=Profit before interest and taxes/Interest 1.0064 1.0399 0.6991 0.2009

       

44

TURNOVER RATIOS:        Inventory turnover ratio=Cost of goods sold/Average inventory 0.6364 0.6287 0.8806 2.0741Total assets turnover=Net sales/Average total assets 0.4031 0.4038 0.3986 0.4097Working capital turnover ratio=Net sales/Working capital 0.9572 1.2289 1.2789 1.4623

       PROFITABILITY RATIOS:        Gross Profit Margin ratio=Gross profit/Net sales 19.2618 23.8868 2.9654 -7.4342Operating profit margin ratio=Operating profit/Net sales 23.3142 26.3063 25.2589 13.6639Net Profit margin ratio=Net profit/Net sales 0.1632 1.0101 -9.5385 -26.6882Return on total assets=Net income/Average total assets 0.0658 0.4079 -3.8027 -10.9449Return on equity=Equity earning/Average net worth 0.3779 2.3762 -24.4774 -64.8942

       VALUATION RATIOS:        Earnings per share=Profit after tax and preference dividend/No of equity shares 0.0373 0.2252 -2.2598 -6.0389

       COVERAGE RATIOS        Financial charges coverage ratio 0.0064 0.0399 -0.3009 -0.7991

       COMPONENT RATIOS        Material cost component(% earnings) 68.8718 65.9834 72.9047 78.7058

TABLE C4 - TREND ANALYSIS - BALANCE SHEET

2003-04 2002-03 2001-02 2000-01SOURCES OF FUNDS:SHAREHOLDERS' FUNDSShare capital 141.8052 141.8052 130.8789 100Reserves and surplus 100 100 100 100Net worth 141.4161 141.4161 130.5915 100LOAN FUNDSSecured Loan 115.0614 106.6332 108.5357 100Unsecured Loan NA NA NA 100Total debt 117.335 106.6332 109.3842 100Capital employed 121.8387 113.1382 113.3504 100DEFERRED TAX LIABILITY NA NA NA 100TOTAL 121.8387 113.1382 113.3504 100APPLICATION OF FUNDS:FIXED ASSETS

45

Cost 103.2433 102.3766 101.1622 100Less: Depreciation 240.4687 197.1841 148.1938 100Net block 87.5615 91.54223 95.78751 100Capital work-in-progress 0 0 9.691544 100Total fixed assets 87.5304 91.50971 95.75693 100

DEFERRED TAX ASSET NA NA NA 100INVESTMENTS NA NA NA 100CURRENT ASSETS, LOANS AND ADVANCESCurrent AssetsInventories 142.1472 132.7989 122.934 100Sundry debtors 251.5642 209.0354 122.687 100Cash and bank balances 249.9972 120.3003 77.82435 100Loans and advances 186.4414 144.9713 107.3908 100

146.1049 134.4893 122.1008 100Less: Current Liabilities and provisions 105.0949 141.4164 125.7894 100Net current assets (Working Capital) 171.4923 130.2011 119.8173 100Miscellaneous Expenditure (not written off) 420.3918 477.0155 501.0572 100P&L Account 69.83194 126.5185 129.8148 100TOTAL (Capital deployed) 121.8387 113.1382 113.3504 100

25

TABLE C5 - TREND ANALYSIS - P&L

2003-04 2002-03 2001-02 2000-01

Sales inclusive of Excise Duty 112.2593 109.4184 104.7925 100Other Income 3184.025 2619.23 1434.483 100Inventory Change 45.84892 33.5159 91.71186 100TOTAL INCOME 106.6718 100.7284 105.3598 100

Raw Material Consumed 98.23295 91.73144 97.06867 100Process & Packaging Materials Consumed 129.267 67.28382 87.31562 100Power & Fuel 54.24885 37.50511 39.88891 100Employees cost 90.10314 93.30445 89.92359 100Repairs and Maintenance 50.46319 65.30496 73.00148 100Excise duty 0 0 54.9006 100Other Expenses 126.0159 115.731 104.6036 100Expenses Written Off 419.1526 183.5431 182.9854 100TOTAL EXPENDITURE 88.14325 80.53533 90.93208 100

Profit/Loss before interest and depreciation 252.7195 259.8961 219.0832 100

46

Interest and financing charges 85.25416 82.89786 99.45428 100Depreciation 91.10778 103.0666 101.3909 100Profit before tax -0.68649 -4.14126 37.45345 100Add: Income Tax Paid 0 0 3.933276 100Profit after tax -0.68584 -4.13729 37.42134 100

Deferred Tax Asset NA NA NA 100Loss b/f from the previous year 622.4267 638.6435 491.9649 100

Balance carried forward 69.83194 126.5185 129.8148 100Surplus carried to balance sheet NA NA NA 100

TABLE C6 - COMMON-SIZE - BALANCE SHEET

2003-04 2002-03 2001-02 2000-01

SOURCES OF FUNDS:SHAREHOLDERS' FUNDSShare capital 18.703529 19.0094 17.87561 15.73742Reserves and surplus 0.1239168 0.125943 0.128319 0.147854Net worth 18.827446 19.13534 18.00393 15.88527LOAN FUNDSSecured Loan 66.591188 62.72262 65.04587 69.05407Unsecured Loan 1.31587 0 0.50853 0Total debt 67.907058 62.72262 65.5544 69.05407Capital employed 86.734504 81.85796 83.55833 84.93934DEFERRED TAX LIABILITY 0 0 0 0Current Liabilitites and provisions 13.265496 18.14204 16.44167 15.06066TOTAL 100 100 100 100APPLICATION OF FUNDS:FIXED ASSETSCost 45.725952 46.08359 46.39584 52.84487Less: Depreciation 10.922652 9.103034 6.970431 5.419655Net block 34.8033 36.98056 39.42541 47.42522Capital work-in-progress 0 0 0.001417 0.016852

47

Total fixed assets 34.8033 36.98056 39.42683 47.44207

DEFERRED TAX ASSET 5.6123857 0 0 0INVESTMENTS 0 0 0 0CURRENT ASSETS, LOANS AND ADVANCESCurrent AssetsInventories 43.906028 41.68935 39.32039 36.85429Sundry debtors 1.242609 1.049422 0.627544 0.58937Cash and bank balances 0.1723537 0.084294 0.05556 0.08226Loans and advances 2.9115301 2.300941 1.736624 1.863292

48.232521 45.124 41.74012 39.38921Miscellaneous Expenditure(not written off) 4.3706256 5.040419 5.394321 1.240485P&L Account 6.9811676 12.85502 13.43873 11.92823TOTAL(Capital deployed) 100 100 100 100

APPENDIX D

SHAKTHI SUGARS LTD

TABLE D1 - BALANCE SHEET2003-04 2002-03 2001-02 2000-01

SOURCES OF FUNDS: (Rs crores)  (Rs crores) (Rs crores) (Rs crores)SHAREHOLDERS' FUNDS        Share capital 300853570 300853570 350853570 397520240Reserves and surplus 765910162 886239860 911898685 894733127Net worth 1066763732 1187093430 1262752255 1292253367LOAN FUNDS        Secured Loan 1914363298 1702495999 1627312571 1784933469Unsecured Loan 62348435 40824000 36258000 69297000Total debt 1976711733 1743319999 1663570571 1854230469Capital employed 3043475465 2930413429 2926322826 3146483836DEFERRED TAX LIABILITY 0 0 0 0TOTAL 3043475465 2930413429 2926322826 3146483836APPLICATION OF FUNDS:        FIXED ASSETS        Cost 2241466582 1294213101 1831978441 1814272674Less: Depreciation 726289131 559590547 576685573 487197380Net block 1515177451 734622554 1255292868 1327075294Capital work-in-progress 284600 288968 284600 15872648Capital expenditure on project 7189411 737791839 13159050 7189411Total fixed assets 1522651462 1472703361 1268736518 1350137353INVESTMENTS 757966908 763664920 764103020 404283320

48

CURRENT ASSETS, LOANS AND ADVANCES        Current Assets        Inventories 1049503976 688136860 842309040 1284770524Sundry debtors 107956358 80467934 175753283 54217809Cash and bank balances 6764615 5477515 54181159 7850361Loans and advances 150376473 312713948 403111367 526847569

1314601422 1086796257 1475354849 1873686263Less: Current Liabilitites and provisions 627813002 541686436 604256353 494975799Net current assets ( Working Capital) 686788420 545109821 871098496 1378710464Deferred Tax asset 62018525 58110257 0 0Miscellaneous Expenditure(not written off) 14050150 90825070 22384792 13352699TOTAL(Capital deployed) 3043475465 2930413429 2926322826 3146483836

TABLE D2 - P&L ACCOUNT2004 2003 2002 2001

(Rs. Crore) (Rs. Crore) (Rs. Crore) (Rs. Crore)Sales 912514837 1168024194 1583522819 1973291732Other income 98824583 60179003 260249797 385286222Inc/Dec in stock 360289079 -155323194 -437712329 515766505

       TOTAL INCOME 1371628499 1072880003 1406060287 2874344459

       Material cost 789476738 577225284 533929051 1163858284Purchase of fertilisers and insecticides 3025025 1506908 1895134 2917300Manufacturing and other expenses 461106826 343021373 477235280 956561780Research, farma nd devt expenditure 1672819 1099101 1748579 2814433Interest and finance charges 171591732 141852929 239154032 466916022Depreciation 91221196 63769600 97140558 182500764Extra-Ordinary expenditure 1477004 2913972 310846 2690795

TOTAL EXPENDITURE 1519571340 1131389167 1351413480 2778259378

Profit/Loss before tax -147942841 -58509164 54646807 96085081

LESS:Prvn of tax 931791 0 0 0LESS:Current tax 0 0 0 0LESS: Deferred tax -3908268 -1671785 0 0LESS:Wealth tax 30000 50000 81137 50596

Pft/Loss after tax -144996364 -56887379 54565670 96034485

ADD: Prvn for tax for earlier yrs written back 0 0 368931 0LESS:Share issue expenses written off 0 543252 931297 1164125TOTAL net pft for the yr -144996364 -57430631 54003304 94870360

ADD: surplus from previous year 83552793 155650090 138484532 104604797

49

Debenture Redemption reserve written back 0 10000000 0 0Proposed dividend on Preference Shares written back 24666666Transfer from General Reserve -36776905TOTAL PFT AVAILA BLE FOR APPROPRIATION -73553810 108219459 192487836 199475157

APPROPRIATIONS:Debenture redemption reserve 0 0 0 10000000Proposed dividend on pref. Shares 0 24666666 33428082 45937500Tax on distributed pft 0 0 3409664 5053125

Surplus carried to b/s -73553810 83552793 155650090 138484532

TABLE D3 - RATIO ANALYSIS

2003-04 2002-03 2001-02 2000-01LIQUIDITY RATIOS:        Current Ratio=Current Assets/Current Liabilities 2.0939 2.0063 2.4416 3.7854Acid test ratio=Quick assets/Current Liabilities 0.4223 0.7360 1.0476 1.1898

       LEVERAGE RATIOS:        Debt-Equity ratio=Long term debt/Equity 1.8530 1.4686 1.3174 1.4349Interest Coverage ratio=Profit before interest and taxes/Interest 0.1378 0.5875 1.2285 1.2058

       TURNOVER RATIOS:        Inventory turnover ratio=Cost of goods sold/Average inventory 1.7208 0.8726 0.3987 1.8915Working capital turnover ratio=Net sales/Working capital 1.3287 2.1427 1.8178 1.4313

       PROFITABILITY RATIOS:        Gross Profit Margin ratio=Gross profit/Net sales -63.8358 42.8309 73.2200 -23.1497Operating profit margin ratio=Operating profit/Net sales 1.7584 7.4429 8.2532 18.2546Net Profit margin ratio=Net profit/Net sales -15.8898 -4.8704 3.4458 4.8667Return on total assets=Net income/Average total assets -4.0330 -1.7118 1.5554 2.6470Return on equity=Equity earning/Average net worth -13.7736 -7.4392 1.7041 3.9172

       VALUATION RATIOS:        Earnings per share=Profit after tax and preference dividend/No of equity shares -13.4855 -7.5850 1.9659 4.6593

       COMPONENT RATIOS        Material cost component (% earnings) 86.5166 49.4189 33.7178 58.9805

50

TABLE D4 - TREND ANALYSIS - BALANCE SHEET

2003-04 2002-03 2001-02 2000-01SOURCES OF FUNDS:SHAREHOLDERS' FUNDSShare capital 75.6826 75.6826 88.2606 100Reserves and surplus 85.6021 99.0507 101.9185 100Net worth 82.5507 91.8623 97.7171 100LOAN FUNDSSecured Loan 107.2512 95.3815 91.1694 100Unsecured Loan 89.9728 58.9116 52.3226 100Total debt 106.6055 94.0185 89.7176 100Capital employed 96.7262 93.1330 93.0030 100DEFERRED TAX LIABILITY NA NA NA 100TOTAL 96.7262 93.1330 93.0030 100APPLICATION OF FUNDS:FIXED ASSETSCost 123.5463 71.3351 100.9759 100Less: Depreciation 149.0749 114.8591 118.3680 100Net block 114.1742 55.3565 94.5909 100Capital work-in-progress 1.7930 1.8205 1.7930 100Capital expenditure on project 100.0000 10262.2014 183.0338 100Total fixed assets 112.7775 109.0780 93.9709 100INVESTMENTS 187.4841 188.8935 189.0019 100CURRENT ASSETS, LOANS AND ADVANCESCurrent AssetsInventories 81.6880 53.5611 65.5610 100Sundry debtors 199.1160 148.4161 324.1615 100Cash and bank balances 86.1695 69.7741 690.1741 100Loans and advances 28.5427 59.3557 76.5139 100

70.1612 58.0031 78.7408 100Less: Current Liabilitites and provisions 126.8371 109.4370 122.0780 100Net current assets ( Working Capital) 49.8138 39.5377 63.1821 100Deferred Tax asset NA NA NA 100Miscellaneous Expenditure(not written off) 105.2233 680.2001 167.6425 100TOTAL(Capital deployed) 96.7262 93.1330 93.0030 100

51

TABLE D5 - TREND ANALYSIS - P&L2003-04 2002-03 2001-02 2000-01

Sales 46.2433 59.1917 80.2478 100Other income 25.6497 15.6193 67.5471 100Inc/Dec in stock 69.8551 -30.1150 -84.8664 100

TOTAL INCOME 47.7197 37.3261 48.9176 100

Material cost 67.8327 49.5958 45.8758 100Purchase of fertilisers and insecticides 103.6926 51.6542 64.9619 100Manufacturing and other expenses 48.2046 35.8598 49.8907 100Research, farma nd devt expenditure 59.4372 39.0523 62.1290 100Interest and finance charges 36.7500 30.3808 51.2199 100Depreciation 49.9840 34.9421 53.2275 100Extra-Ordinary expenditure 54.8910 108.2941 11.5522 100

TOTAL EXPENDITURE 54.6951 40.7229 48.6425 100

Profit/Loss before tax -153.9707 -60.8931 56.8734 100

LESS:Prvn of tax NA NA NA 100LESS:Current tax NA NA NA 100LESS: Deferred tax NA NA NA 100LESS:Wealth tax 59.2932 98.8220 160.3625 100

Pft/Loss after tax -150.9836 -59.2364 56.8188 100

ADD: Prvn for tax for earlier yrs written back NA NA NA 100LESS:Share issue expenses written off 0.0000 46.6661 79.9997 100TOTAL net pft for the yr -152.8363 -60.5359 56.9233 100

ADD: surplus from previous year 79.8747 148.7982 132.3883 100Debenture Redemption reserve written back NA NA NA 100Proposed dividend on Preference Shares written back NA NA NA 100Transfer from General Reserve NA NA NA 100TOTAL PFT AVAILA BLE FOR APPROPRIATION -36.8737 54.2521 96.4971 100

APPROPRIATIONS:Debenture redemption reserve 0.0000 0.0000 0.0000 100Proposed dividend on pref. Shares 0.0000 53.6961 72.7686 100Tax on distributed pft 0.0000 0.0000 67.4763 100

Surplus carried to b/s -53.1134 60.3337 112.3953 100

52

TABLE D6 - COMMON-SIZE - BALANCE SHEET

2003-04 2002-03 2001-02 2000-01

SOURCES OF FUNDS:SHAREHOLDERS' FUNDSShare capital 8.1947679 8.664888 9.937564 10.91651Reserves and surplus 20.862162 25.52461 25.82859 24.57073Net worth 29.05693 34.1895 35.76615 35.48724LOAN FUNDSSecured Loan 52.144181 49.03361 46.09194 49.01698Unsecured Loan 1.6982712 1.175773 1.02697 1.903001Total debt 53.842452 50.20939 47.11891 50.91998Capital employed 82.899382 84.39888 82.88506 86.40721DEFERRED TAX LIABILITY 0 0 0 0Current Liabilities and provisions 17.100618 15.60112 17.11494 13.59279TOTAL 100 100 100 100APPLICATION OF FUNDS:FIXED ASSETSCost 61.053949 37.27465 51.88889 49.82268Less: Depreciation 19.782949 16.11678 16.33402 13.37918Net block 41.271 21.15788 35.55487 36.4435Capital work-in-progress 0.007752 0.008323 0.008061 0.435887Capital expenditure on project 0.195828 21.24915 0.372716 0.197432Total fixed assets 41.47458 42.41535 35.93565 37.07682INVESTMENTS 20.645801 21.99432 21.64243 11.10223CURRENT ASSETS, LOANS AND ADVANCESCurrent AssetsInventories 28.586802 19.81904 23.85753 35.28175Sundry debtors 2.9405578 2.317558 4.97803 1.488903Cash and bank balances 0.1842572 0.157758 1.534625 0.215583Loans and advances 4.0960135 9.006479 11.41771 14.46803

35.807631 31.30084 41.7879 51.45426Deferred Tax asset 1.689285 1.673634 0 0Miscellaneous Expenditure(not written off) 0.3827035 2.615854 0.634026 0.366685TOTAL(Capital deployed) 100 100 100 100

53

APPENDIX E

BANNARI AMMAN SUGARS LTDTABLE E1 - BALANCE SHEET

2003-04 2002-03 2001-02 2000-01SOURCES OF FUNDS: (In crores)  (In crores) (In crores) (In crores)SHAREHOLDERS' FUNDS        Share capital 113385050 113385050 113385050 128930160Reserves and surplus 496280973 538493501 677283826 610568115Net worth 609666023 651878551 790668876 739498275LOAN FUNDS        Secured Loan 1039720204 1118228820 1070011427 1096594244Unsecured Loan 187570830 191029580 227856330 197400830Total debt 1227291034 1309258400 1297867757 1293995074Capital employed 1836957057 1961136951 2088536633 2033493349DEFERRED TAX LIABILITY 242799798 234667839 0 0TOTAL 2079756855 2195804790 2088536633 2033493349APPLICATION OF FUNDS:        FIXED ASSETS        Cost 1266284128 1224809282 1073907076 1293995074Less: Depreciation 311459113 256759370 200167752 147752864Net block 954825015 968049912 873739324 1146242210Capital work-in-progress 59288422 13439199 85197609 25651993Total fixed assets 1014113437 981489111 958936933 1171894203INVESTMENTS 11432776 11432776 11432776 11432776CURRENT ASSETS, LOANS AND ADVANCES        Current Assets        Inventories 1538260271 1438565711 1362400236 1466308018Sundry debtors 73185488 48026504 64565339 70807258Cash and bank balances 53091438 41091432 28213254 41281015Other Current Assets 1298174 2467261 1972164 3038828Loans and advances 204018611 207141557 207141557 203237660

1869853982 1737292465 1664292550 1784672779Less: Current Liabilities and provisions 914432890 643943637 546125626 660568372Net current assets ( Working Capital) 955421092 1093348828 1118166924 1124104407Deferred Tax asset 98789550 75107132 0 0TOTAL(Capital deployed) 2079756855 2161377847 2088536633 2307431386

TABLE E2 - P&L ACCOUNT

2004 2003 2002 2001(In crores) (In crores) (In crores) (In crores)

Sales 1625408635 1329033413 2204239579 1866025044

54

Other income 38908759 93190909 16238269 27921254Inc/Dec in stock 104741590 72551349 -95461989 42166810

       TOTAL INCOME 1769058984 1494775671 2125015859 1936113108

       Material cost 1037442988 755205124 1052671113 845924271Payment and Benefits to Employees 139030265 145464594 205851214 211439715Manufacturing, Selling, Administrative and other expenses 239620032 201691893 262899174 277454142Excise Duty and Taxes 199427266 138119829 231578628 319920563Interest 150180052 143090270 152069513 120143593Depreciation 61121368 57587316 53130148 42873471

TOTAL EXPENDITURE 1826821971 1441159026 1958199790 1817755755

Profit/Loss before tax -57762987 53616645 166816069 118357353

LESS:Prvn of tax 30000000 20000000Current tax 0 4500000Deferred tax 0 15097710ADD:Reversal of Deferred Tax 15550459 0 0 0

Pft/Loss after tax -42212528 34018935 136816069 98357353Balance brought forward from previous year 208379987 207170312 135999711 86966057

166167459 241189247 272815780 185323410

APPROPRIATIONS:Transfer to Capital Redemption Reserve-Shares Buy Back 0 0 15545110 0Proposed dividend 0 28346263 28346263 32232540Transfer to General Reserve 0 4462997 18862775 10000000Tax on distributed profits 0 0 2891320 7091159Surplus carried to b/s 166167459 208379987 207170312 135999711

TABLE E3 - RATIO ANALYSIS

2003-04 2002-03 2001-02 2000-01LIQUIDITY RATIOS:        Current Ratio=Current Assets/Current Liabilities 2.044824 2.697895 3.047454 2.701723Acid test ratio=Quick assets/Current Liabilities 0.362622 0.463902 0.552789 0.481956

       LEVERAGE RATIOS:        

55

Debt-Equity ratio=Long term debt/Equity 2.013055 2.008439 1.641481 1.749828Interest Coverage ratio=Profit before interest and taxes/Interest 0.615375 1.374705 2.096972 1.985132

       TURNOVER RATIOS:        Inventory turnover ratio=Cost of goods sold/Average inventory 1.025622 0.797946 0.970805 0.972248Working capital turnover ratio=Net sales/Working capital 1.701248 1.215562 1.971297 1.660010

       PROFITABILITY RATIOS:        Gross Profit Margin ratio=Gross profit/Net sales 6.082173 15.915567 37.708146 23.601484Operating profit margin ratio=Operating profit/Net sales 7.052360 12.121841 16.140599 13.582517Net Profit margin ratio=Net profit/Net sales -0.025970 0.025597 0.062070 0.052710Return on total assets=Net income/Average total assets -1.457917 1.246017 5.192926 3.313927Return on equity=Equity earning/Average net worth -9.474529 8.224944 21.098095 16.005088

       VALUATION RATIOS:        Earnings per share=Profit after tax and preference dividend/No of equity shares -3.722936 0.500302 9.566500 5.128731

       COMPONENT RATIOS        Material cost component (% earnings) 63.826595 56.823637 47.756656 45.332954

TABLE E4 - TREND ANALYSIS - BALANCE SHEET

2003-04 2002-03 2001-02 2000-01SOURCES OF FUNDS:SHAREHOLDERS' FUNDSShare capital 87.9430 87.9430 87.9430 100Reserves and surplus 81.2818 88.1955 110.9268 100Net worth 82.4432 88.1515 106.9196 100LOAN FUNDS 100

56

Secured Loan 94.8136 101.9729 97.5759 100Unsecured Loan 95.0203 96.7724 115.4283 100Total debt 94.8451 101.1796 100.2993 100Capital employed 90.3350 96.4418 102.7068 100DEFERRED TAX LIABILITY NA NA NA 100TOTAL 102.2751 107.9819 102.7068 100APPLICATION OF FUNDS:FIXED ASSETSCost 97.8585 94.6533 82.9916 100Less: Depreciation 210.7973 173.7762 135.4747 100Net block 83.3005 84.4542 76.2264 100Capital work-in-progress 231.1260 52.3905 332.1286 100Total fixed assets 86.5363 83.7524 81.8279 100INVESTMENTS 100.0000 100.0000 100.0000 100CURRENT ASSETS, LOANS AND ADVANCESCurrent AssetsInventories 104.9070 98.1080 92.9136 100Sundry debtors 103.3587 67.8271 91.1846 100Cash and bank balances 128.6098 99.5408 68.3444 100Other Current Assets 42.7196 81.1912 64.8988 100Loans and advances 100.3843 101.9209 101.9209 100

104.7729 97.3452 93.2548 100Less: Current Liabilitites and provisions 138.4312 97.4833 82.6751 100Net current assets ( Working Capital) 84.9940 97.2640 99.4718 100Deferred Tax asset NA NA NA 100TOTAL(Capital deployed) 90.1330 93.6703 90.5135 100

TABLE E5 - TREND ANALYSIS - P&L

2003-04 2002-03 2001-02 2000-01SalesOther income 87.1054 71.2227 118.1249 100Inc/Dec in stock 139.3518 333.7633 58.1574 100

248.3982 172.0580 -226.3913 100TOTAL INCOME

91.3717 77.2050 109.7568 100Material costPayment and Benefits to Employees 122.6402 89.2757 124.4403 100Manufacturing, Selling, Administrative and other expenses 65.7541 68.7972 97.3569 100Excise Duty and Taxes 86.3638 72.6938 94.7541 100Interest 62.3365 43.1732 72.3863 100Depreciation 125.0005 119.0994 126.5731 100

57

142.5622 134.3192 123.9231 100TOTAL EXPENDITURE

100.4988 79.2823 107.7262 100Profit/Loss before tax

-48.8039 45.3006 140.9427 100LESS:Prvn of taxCurrent tax 0.0000 0.0000 150.0000 100Deferred tax NA NA NA 100ADD:Reversal of Deferred Tax NA NA NA 100

NA NA NA 100Pft/Loss after taxBalance brought forward from previous year -42.9175 34.5871 139.1010 100

239.6107 238.2197 156.3825 10089.6635 130.1451 147.2106 100

APPROPRIATIONS:Transfer to Capital Redemption Reserve-Shares Buy BackProposed dividend NA NA NA 100Transfer to General Reserve 0.0000 87.9430 87.9430 100Tax on distributed profits 0.0000 44.6300 188.6278 100Surplus carried to b/s 0.0000 0.0000 40.7736 100

122.1822 153.2209 152.3314 100

TABLE E6 - COMMON-SIZE - BALANCESHEET

2003-04 2002-03 2001-02 2000-01SOURCES OF FUNDS:SHAREHOLDERS' FUNDSShare capital 3.78683583 3.992785 4.30359 4.785717Reserves and surplus 16.5748004 24.52374 32.42863 30.02558Net worth 20.3616362 29.68745 37.85755 36.36591LOAN FUNDSSecured Loan 34.724593 50.92569 51.23259 53.92662Unsecured Loan 6.26449377 8.699752 10.90986 9.707474Total debt 40.9890868 59.62545 62.14245 63.63409Capital employed 61.350723 69.06024 79.27151 75.48058DEFERRED TAX LIABILITY 8.10903178 8.263684 0 0TOTAL 30.5402452 22.67608 20.72849 24.51942APPLICATION OF FUNDS:FIXED ASSETS 100 100 100 100CostLess: DepreciationNet block 42.2913788 43.66021 40.76071 43.59822

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Capital work-in-progress 10.4021168 9.152583 7.597473 4.978197Total fixed assets 31.8892621 34.50763 33.16324 38.62002INVESTMENTS 1.98011573 0.479061 3.23372 0.864286CURRENT ASSETS, LOANS AND ADVANCES 33.8693778 34.98669 36.39696 39.48431Current Assets 0.38183205 0.407539 0.433937 0.385201InventoriesSundry debtors Cash and bank balances 51.3748427 51.27989 51.71062 49.40391Other Current Assets 2.44425017 1.711979 2.450612 2.385689Loans and advances 1.77314875 1.464767 1.070849 1.39087

0.04335644 0.087949 0.074855 0.102386Less: Current Liabilitites and provisions 6.81381704 7.383879 7.862167 6.847631Net current assets ( Working Capital) 62.4494151 61.92846 63.1691 60.13049Deferred Tax asset 3.29937507 2.677309 0 0TOTAL(Capital deployed) 100 100 100 100

BIBLIOGRAPHY

IDBI Annual Report 2001 - 04

IDBI Offer Document

Management Accounting – Principles and Practice, R.K. Sharma and Shahi K.

Gupta.

www.securities.com

www.idbi.com

www.indiainfoline.com

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