gujarat alkalies and chemicals limited
TRANSCRIPT
GUJARAT ALKALIES AND CHEMICALS LIMITED
1
HISTORY
Gujarat Alkalies and Chemicals Limited (GACL) were incorporated on 29 th March, 1973 in the
State of Gujarat by Gujarat Industrial Investment Corporation Limited (GIIC), a wholly owned
company of Govt. of Gujarat, as a Core Promoter.
GACL has two units located at Vadodara and Dahej, both in the State of Gujarat. It has
integrated manufacturing facilities for Caustic Soda, Chlorine, Hydrogen Gas, Hydrochloric
Acid, Chloromethane, Hydrogen Peroxide, Phosphoric Acid, Potassium Hydroxide, Potassium
Carbonate, Sodium Cyanide, and Sodium Ferro cyanide. The Dahej unit also has 90 MW
Captive Power Plant (CPP) for regular and economical power supply.
The Company commenced its operations in 1976 with 37,425 MTPA Caustic Soda Plant based
on the then, state-of-the-art Mercury Cell process at its Plant which is situated 16 km North of
Vadodara near Village Ranoli on the main Railway track route between Ahmedabad and
Mumbai.
Right from the inception, GACL has been following the strategy of continuous capacity
expansion in core areas. The first stage expansion of the Caustic Soda Plant raising the capacity
to 70,425 MTPA was undertaken in October, 1981 followed by a diversification programmed to
produce 2000 MTPA of Sodium Cyanide in December, 1982.
In 1984, the second stage expansion to increase the capacity of Caustic Soda Plant to 103,425
MTPA was undertaken. Simultaneously, the Company undertook the diversification project for
manufacture of 10,560 MTPA of Chloromethane using Chlorine, a co-product of the Company
and in 1991, the capacity of Chloromethane production was doubled.
As power is the major input for production of Caustic Soda and constitutes about 65% - 70% of
the cost of production, the Company along with other Corporations likes M/s. GSFC, Petrofils
Co-operative Ltd. and Gujarat Electricity Board promoted a gas based power unit in Vadodara
2
under the name of Gujarat Industrial Power Company Ltd. (GIPCL) during the year 1985. As a
promoter of GIPCL, the Company gets low cost power, as the plant is gas based and is
depreciated.
Since production of Caustic Soda is highly power intensive, in order to reduce power cost and to
eliminate mercury pollution, the Company during the year 1989 converted one of its Cell Houses
producing Caustic Soda from Mercury Cell Technology to environment friendly Membrane Cell
Technology, thereby eliminating the use of mercury. The Capacity of Caustic Soda was also
increased to 132000 MTA.
The conversion of second Mercury Cell to Membrane Cell was carried out during March, 1994,
thereby eliminating the total use of mercury from the Complex for production of Caustic Soda
and increasing the capacity of plant along with this conversion to 170000 MTA including
Potassium Hydroxide facility.
As part of this Membrane Cell Conversion Project, a new facility for manufacture of 16500
MTA of Potassium Hydroxide Lye based on Membrane Cell was also set up. The Company has
further set up facility for converting part of this Caustic Potash Lye into Potassium Carbonate
with a capacity of 13200 MTA.
In order to add further value to its products, the company had set up manufacturing facility for
production of 11000 MTA Hydrogen Peroxide (100%) at Vadodara Complex during the year
1996 to utilize Hydrogen gas, which is a co-product from Caustic Soda Process.
In 1995, as a part of diversification programmed and to meet the growing demand of its products
manufacture of Technical Grade Phosphoric Acid with capacity of 26400 MTA (85% Phosphoric
Acid) at a new location at Dahej, District Bharuch. The Company also set up Membrane Cell
based grass root Caustic-Chlorine Unit with a capacity of 100000 MTA at Dahej. Along with
this, a captive 90 MW co-generation Power Plant was set up so as to ensure uninterrupted and
low cost power for its captive operations.
3
CORPORATE PROFILE
WORLD CLASS TECHNOLOGY
Technology moulds generations. Our endeavor to continually upgrade technology has
allowed us to optimize resources, thus bringing down the cost of production and
increasing revenues. Acquired through the best and prestigious collaborations means
that they meet international specifications for our products. Besides, our
manufacturing plants are eco-friendly, which ensure that the environment is well
looked after.
The location of both the plants 'Vadodara' and 'Dahej' has dual advantage of
proximity to the raw material suppliers and the end users.
While the capacity utilization is about 70% in the Caustic Soda Industry, GACL's
plants are working at almost 100% capacity thereby utilizing the assets to the fullest
extent.
Further the company takes pride in having honored it's commitments without fail. The
company has made its presence felt across the globe even against stiff competition by
exporting products to USA, Europe, Australia, Africa, Far & Middle East countries,
China & South Asian Markets.
GACL has adapted to the age of information technology for fast and uninterruptible
information exchange. Both plants of Vadodara and Dahej are connected by VSAT
and lease lines. This provides on-line information at any given point of time.
4
SELF RELIANCE:
Various factors that influence the success of any corporation the self sufficiency ranks the
foremost we at GACL understand this all too well power being a major input to the electrolytic
caustic soda process , we promoted a join captive power plant GIPCL to meet our energy
requirement for Vadodara complex. Our complex at dahej is also integrated with captive
cogeneration plant of capacity of 90 MW.
Cost effective natural gas has substituted as fuel in plant of naphtha for captive power plant. The
plant load factor has increased and surplus power supply to state grid this has achieve economies
of operations.
Green all the way.
Nature bestows human race with umpteen benefits. Clean air lush screen trees, GACL’s
commitment towards environment is undying safe and unadulterated nature is high on our list of
priorities, we are an organization with green attitude.
A dedicated senior executive has a safety and environment department to maintain high standard
of safety and harmonious relationship between environment and technology.
The company has plants more than 27000 plants and it keeps maintaining same with a tree
plantation being a regular feature. It plants 1000 sampling every year.
Rain water harvesting and collection is a part of routine activity at GACL. This water is and
utilize for the maintenance of green belts.
The vermin culture concept has been implemented in the premises to convert waste generated by
the canteen gardens and plants to vermin compost.
GACL has been the pioneer in adopting the environment friendly and energy efficient
technologies. It converted to membrane cell technology from mercury cell technology way back
in 1989 and since 1994 all the plants are running on mercury free a membrane cell technology.
As a matter of strategy, the company has placed sensor at a strategic location in an around the
complex to monitor ambient air quality.
5
For a disposal of solid waste GACL has secured dedicated landfill site conforming to the
hazardous waste management act. Being a member of effluent channel project, it releases its
liquid effluent in this channel and adheres to the necessary parameters of the Gujarat Pollution
control Board before discharging it in to the channel.
6
ISO CERTIFICATION
GACL is ISO certified company
ISO 9001-2000 for proper maintenance and
documentation
ISO 14001-2004 for SHE policy
ISO 18001-2000 for occupational safety and health
hazards
7
Products
Caustic Soda Group
Caustic Soda Flakes (NaOH)
Caustic Soda Lye (NaOH)
Caustic Soda Prills (NaOH)
Sodium Hypo Chlorite (NaOCl)
Liquid Chlorine (Cl2)
Compressed Hydrogen Gas (H2)
Hydrochloric Acid (HCL)
Caustic Potash Group
Caustic Potash Flakes (KOH)
Caustic Potash Lye (KOH)
Potassium Carbonate (K2CO3)
Chloromethane Group
Methyl Chloride (CH3Cl – Mono chloromethane)
Methylene Chloride (CH2Cl2 - Dichloromethane)
Carbon Tetrachloride ( CCL4 - Tetra chloromethane)
Chloroform (CHCL3 - Trichloromethane)
Sodium Group
Sodium Cyanide (NaCN)
Sodium Ferro Cyanide (Na4Fe(CN)6 : 10H2O)
Hydrogen Peroxide Group
Hydrogen Peroxide (H2O2) Bleachwin (Special Grade Hydrogen Peroxide Package)
Phosphoric Acid Group
8
PRODUCT DISCRIPTION
Product Application
1) Caustic soda flake : - dyes and pharmaceuticals
- Pump and paper
- Rayon
- Aluminum metal
- Acid neutralization
- Sodium salts
- processing of vegetable oil
- Petroleum products
- Rubber chemical
2) Caustic soda lye : - dyes and pharmaceuticals
- Pump and paper
- Rayon
- Aluminum metal
- Acid neutralization
- Sodium salts
- processing of vegetable oil
- Petroleum products
- Rubber chemical
3) Sodium cyanide : - ore extraction silver and gold, metal and
Mining
- Industries dyes
- Agrochemicals
- electo plating
- Mortal cleaning
4) Sodium Ferro cyanide : - photography
- dyeing industry
- Blue print paper
- Antic king agent
Sodium Group
Sodium Cyanide (NaCN)
Sodium Ferro Cyanide (Na4Fe(CN)6 : 10H2O)
Hydrogen Peroxide Group
Hydrogen Peroxide (H2O2) Bleachwin (Special Grade Hydrogen Peroxide Package)
Phosphoric Acid Group
9
- Bio-chemical processes
- Metal and leather tanning industries
5) Hydrogen peroxide : - raw material for organic and inorganic
Chemical
- Dye stuff and pest
- Effluent treatment
- bleaching agent for pulp, textile, sugar, coin
-Tobacco sterilizing agent and aseptic packing.
6) Methyl chloride : - dry stuff industry
- Raw material of pesticides
- Refrigerant
- Drugs and pharmaceutical industry
7) Methylene chloride: - Manufacturing of polycarbonate, phonetics,
Rayon yard
- Solvent for cellulose acetates
- Paint and grease removing agent
- For fighting agent
- Chemical reaction media
8) Caustic potash lye and flakes : - potassium carbonate
- dye stuff industries
- Rubber chemicals
- Acid neutralization
- Potassium permanganate
- Other potassium based chemicals Parma
industries.
9) Potassium carbonate : - TV picture tubs
- GLS lamp and ophthalmic
- Glasses
- Fertilizers in industries
- Rubber chemicals
- Pesticide industries
10
- Drug and Parma industries
10) Chloroform : - Fluorocarbon refrigerant and resign
- Fire fighting agents
- Parma prep
- Solvent in dyes and perform
- Manufacture
- Soil fumigants
11
CAUSTIC SODA AND CHLORINE UTILIZED
Caustic soda
Utilized India Global
Pulp and paper 16 17
Alumina 11 9
Soaps, detergents and textiles 28 12
Organic -- 18
Inorganic -- 15
Water treatment 10 15
Dyes 08 --
Pharma 05 --
Other 22 24
Total 100 100
12
Chlorine
Utilized India Global
Vinyl 07 34
Organic 07 19
Water treatment 03 06
Pulp and paper 22 04
Chlorinated intermediate 13 07
Chlorinated Para 10 02
Pesticides 06 --
Pharma 03 --
End product 23 --
Other 06 28
Total 100 100
COMPANY POLICIES
13
PERSONAL POLICY
GACL believe that employees are the most valuable assets and the company is committed to
their professional growth and development to meet challenge of global competitiveness by
1) Recreating right person for right job
2) Constant evaluation and optimum utilization of employee potent ional
3) Providing opportunity for their growth and development
4) Encouraging employees participation in management
5) Promoting welfare activity for the culture of “parivar”
ENERGY MANAGEMANT POLICY
A GACL we are committed to minimize the specific energy consumption for our products to
international standards through
1) Maximizing the capacity utilization
2) Fire burning our operations and maintenance continuously to achieve the organization goal.
3) Technology up gradation with energy efficient processes and equipments.
4) Motivating training and encouraging our employees to achieve target of reducing specific
energy. Consumption by minimum 1% every year till 2010 by employee awareness and incentive
program.
5) Promoting the use of natural resources for substantive development natural resources for
substantive development safeguarding and society and protecting the environment.
I.T. POLICY
Preamble:
It is no longer just a computing tool by an undependable intelligent assistant providing through
and adding decision making in day to day business activities to be at the present of the business
environment, GACL setup its management information services department to identify develop
and implement its requirement
14
OBJECTIVE:
Bring a change in attitude of employees and make them it literates to meet the challenges in the
present business scenario.
Provide an easy of use exp system to tap reliable information for decision making provide the
confidentiality and privacy in key. IT enable to business processes provide LAN and WAN
facilities to avail the speed of e-communication provide protection against mendacious codes and
formulate a plan for guide recovery in case of a disaster disability the system.
THE VISION:
To continue to be identified and recognized as a dynamic, modern and eco- friendly
chemical company with enduring ethics and values.
THE MISSION: To manage our business responsibly and sensitively, in order to address the needs of
our Customers & Stakeholders.
To strive for continuous improvement in performance, measuring results precisely,
and ensuring GACL's growth and profitability through innovation
to demand from ourselves and others the highest ethical standards and to ensure
products and processes to be of the highest quality
15
QUALITY POLICY
GACL aims to be a market leader by:
1. Providing best quality products.
2. Always delivering on time.
3. Continuous review and up gradation of system.
4. A strong commitment to preserve the environment.
TRAINING AND DEVELOPMENT POLICY:
It will be companies endeavor to recognize the value of its HR for their growth the company is
committed to provide adequate opportunities to employees to enrich their knowledge, skill and
attitudes contributing to steady growth of the company and feeling proud of working for the
company.
By methodically identifying needs for employees to upgrade their knowledge sharpen skills and
improve attitudes for improving performance at their present and future functions and imparting
search training to employees after assessing their capabilities and potential.
16
SAFETY, HEALTH AND ENVIRONMENT POLICY (SHE):
They are committed to ensure safe, Health and clean environment to their employees and the
society. Though:
1. Selection of state of art environment friendly technology for our manufacturing Processes
a) To minimize west and emissions
b) To conserve natural resources
2. Pro-active SHE management system so as to
a) Fully comply with standard laid down by legislation and regulation
b) Provide a framework to set review and improve Safety, Health and
Environment pertaining to safety, health and Environment protection.
3 Involvement and dedication of one and all employees in SHE performance
4 Revalidation of measures to control hazards by periodic assessment of risk and
By SHE audits
5 Avoidance of all activities that will have adverse impact on our SHE
Performance. Their SHE policy and its performance will be made available to the
peruse.
17
5 “S” MODELS:
1 Sort
Clearly distinguish needed items from unneeded items remove all items from the work
place that are not needed for current operation
2 Set in order
Arrange needed items so that they are easy to use and liable them so that one can find
them and put them away.
3 Shine
To keep work place swept and clean
4 Standard
It is the reasons that exist properly maintain this integrated sort set in order and shine in
unfilled whole.
5 Sustain
To make a habit of properly maintaining current procedures.
18
19
HUMAN RESOURCE DEPARTMENT
Concept of HR department:
Human resource department is the wave of future but in each country HRD is the history of its
own and of the Potential divergent futures direction must be recognized.
Every human being has a potential to do remarkable thing to enable every person to understand
develop and utilize his or her potential, organization should provide a development climate as
well as opportunities for such a development. Due to our fighting operation, profit etc. The
Human resources are being neglected done the work live of most organization and development
agents on this neglected aspects of a potential resources the HRD movement has taken safe. The
Above description of HRD was treated as a definition of HRD however recently HRD as
continuous process of ensure the development of an employee’s competencies, dynamism,
motivation and effectiveness in a systematic and plan way.
“HRD may be defined as a system and a process involving serious of activities designed to
product behavioral change in the available human resources for a maximization and proper
utilization of their competence level as well as their potent abilities for their present or a future
role to optimize the organizational performance.
HR FUNCTIONS:
1. Job analysis
2. Recruitment
3. selection
4. Orientation
5. training and development
6. performance appraisal
7. promotion
8. transfer
20
JOB ANALYSIS:
Job analysis the process of collecting job related information. Such a information held in the
preparation of the job description and the job specification. Job description is an important
document, which is basically in descriptive in nature and contents a statement of a job analysis
which provides both organizational and functional information GACL does not have any specific
job description at a managerial level and it is the time condemning proves. They allot a job
according to the recruitment and believe that of a specific job is assign practically no one will be
ready to accept the other job or activity to be performed.
RECRUITMENT:
The process of recruitment begins after manpower requirement are determined in terms of
quality through forecasting and planning it is the process the identifying the source of
prospective candidates and stimulate them to apply for the job in the organization.
GACL adores basically two source of manpower.
1 Internal source
2 External Source
In internal source, transfer and promotion of other section of the organization and fill the
vacancies the transfer may be helpful and avoiding the replacement, job enrichment, shift
changes and removing individual’s grievance.
As far the external sources concerned vacancies are filled through
1 Advertisement
2 Employee recommendation
3 Recommendation of the trade union and
4 Government employment agencies
21
Procedure of the recruitment in GACL:
Identify the recruitment, scrutinize it and obtained the MD’s approval
Issue Office order regarding creation of post
Prepare the advertisement draft
Receive application and classify them
Verify the rejected application against its norms.
SELECTION:
Selection is the process of individual (out of a pool of job applicants) with requisite qualification
and competence to fill the job in the organization the selection is the process of ascertain in
whether or not the selected candidates possess the requisite qualification, training and experience
require.
Process of Selection in GACL:
Obtain a Manager’s approval for the nomination committee for a different grade
Decide data and time of interview, issue call letter in a prescribed form of candidate
Prepare a candidate’s bio-data for the time of interview.
Verify certificate and testimonial at the time of interview and
Conduct a test interview.
Obtain list of selected candidates verify antecedent from by sending them to public and
previous employer prepare a prescribed appointment and dispatch
Issue copies of appointment letter and joining letter to the concern.
22
ORIENTATION:
Orientation, also called induction is designed to provide a new employee with the information
he/ she needs to functions comfortably and effectively in the organization. Orientation is the
technique by which a new employee is re-habilited in to the changed surrounding and
introduction to the practices, policies and purpose of the organization.
The process of orientation in GACL is carried out by the way that newer shown time of arrival,
place of reporting work, he meet boss and boss welcomed him and he should complete
administrative work and then introduced to the department and then, job introduce to the whom
he should looked for held when he has any problem. GACL completely believe in a socialization
of employee with the friendly culture of the organization at the time of orientation.
TRAINING AND DEVELOPMENT:
Trainings refers to the process of importing specific skills development, refers to the learning
opportunities designed to have employee’s growth
There are three types of training to employees of GACL like :
1 Technical / functional
2 Behavioral / general
3 ISO related
For an effective training
1 Determine the training needs objectives
2 Translate them into a program that meets to needs of the selected trainee
3 Evaluate the results.
23
PERFORMANCE APPRAISAL:
Performance appraisal done every year in the month of January and for this, forms are sent to
various departmental heads in the month of December. It is compulsory for all employees
irrespective of their categories i.e. whether they are in management category i.e. whether they are
in management category or non-management category based on such system.
Department head takes the appraisal meeting annually together with the employee and after
discussion they fill the forms. Performance appraisal is an essential management activity it is a
necessary for all important decision making meeting relating to people such as placement and
promotion rewords or punishment, training as well as long term planning of the organizational
development. Performance appraisal however employees are performing their duties and meeting
their job responsibility
In GACL performance appraisal is implemented for the following objectives:
1 For a providing feed back to the employee about their performance levels, this serves
them for improving and changing their behavior toward effective working habit.
2 For analyzing the strengths and weakness of current employees and identify employee
who have the potential of growth and advancement.
In a GACL, performance appraisal certificate is provided to the new employee joining the
organization after completion their training period. Performance appraisal is the basically for
promotion or up gradation. Performance appraisal from after duty filled up by immediate boss
and employee in the meeting and it forwarded to top person and it is with a recommendation of
immediate boss and give a positive remarks then after it is sent to the HR department read each
and every performance appraisal and made positive and negative remarks. Through performance
appraisal form they decide promotion for an employee.
At a GACL there are various appraisal forms like
1 Management category
2 Non management category and
3 Security category
24
PROMOTION:
Promotion is a upward advancement of an employee in particular job which commands better
status and higher challenges, responsibility and authority, better working environment for higher
risk. GACL consider employees attendance, seniority, past performance, merit for deciding
promotion or up gradation of certain post.
In GACL matter regarding promotion policy discuss in various meeting of department promotion
committee which consider performance of individual employee and decide about the promotion
whether to give or not. During deliberation of various suggestions are received from members
represent management employee.
GACL gives promotion
To put the worker in a position were his personal satisfaction and income increase
Increase organizational effectiveness and attract him for competent work for the
organization
Promotions are made on the basis of ability, hard work, co-operation, honesty. GACL
provide education, training etc.
The managerial level employees are to be given promotion after six to eight year as per
their qualification.
TRANSFER:
A transfer is a horizontal or a lateral movement of an employee from one job, section,
department, shift, plant or a position to another place where his salary status and responsibility is
the same. It does not involve the promotion other than the movement from one job or a place to
another.
In GACL, the following reasons/causes of transfer
As a penalty
Transfer as a promotion
In case of injury
25
Resignation of an employee
Shortage of manpower
WAGE AND SALARY ADMINISTRATION
Wage and salary are payments made to the employees are compensation for a service rendered
by them to the organization. Wage and salary represents a substantial part of total companies
from wage and salary policy in such a way, the maximum satisfaction of an employee decided
keeping in a view having a standard and need of employee.
The wage is paid to the employee who directly engages in the production. The term salary refer
to record to be paid to employee make who are engage in clerical and official work which are not
direct activity to the production.
Determinant of wage and salary
Demand and supply of money
Government’s rule and
Basic qualification and merit
Urgency of a requirement
Surrounding industry
26
TIME KEEPING OFFICE
Time keeping office is keeping attendance, leave record of all employee or trainee or apprentice
and also looking after the welfare item to be provided to all employee or trainee or apprentice.
The function of TKO at CS plant, NSCN plant (Baroda) and PAP complex (Dahej) are on same
line.
1) WAGE AND SALARY ADMINISTRATION
Attendance
Posting of various for regularization
Salary statement details for payment of salary or stipends
Canteen coupon amount deduction from canteen allowance payment
Leave record
Supply of contract labour as and when required by different department
To fill up various under various industrial law
Issue of show cause notice
2) WEL FARE
To look after canteen facilities
Uniforms
Safety items
First aid box
Sports
General activities
3) GENERAL ACTIVITIES OF THE TIME OFFICE
Arrangement of the function
Distribution of silver medals for a long service award
Distribution of various gift on various occasions
Forwarding medical bills issue of registration number for a long term cause
Arrangement for medical treatment in case of accident in plant premises
Casual contract workers
27
Preparation for disciplinary action proceeding
TIME SHIFTS
8:30 AM TO 5:15 PM General
6:00 AM TO 2:00 PM First
2:00 PM TO 10:00 PM Second
10:00PM TO 6:00 AM Third
EMPLOYEE SERVICE:
1 Canteen facilities:
GACL provide canteen facilities to all its employees. All employee get coupon of Rs.
46/- p.m. the person who does not avail the canteen facility where the allowance of Rs.
630/- p.m.
2 Bus Facilities:
Company provides bus service to their employees. They can pick the bus at
A Certain selected points.
3 LIC policy:
The employees are given LIC per 2 years it is calculated on basic pay.
Cycle Allowance :
150/- p.m.
4 Educational Allowances :
The company also helps the employee for educating their children by providing some
amount for their uniform, notebook as well as school fees.
5 Food grain advantage :
The employee are given some money in advance to purchase food grains in season
Management category : 3500 per year
Non management category : 3000 per year
6 Convenience Expense :
28
The employees who do not take company’s transport service and use their personal
vehicle are given convenience expense.
7 Medical Allowance :
The company gives different type of facility and its employee it provide free payment
checkup and also provide allowance of Rs 500/- to its employees.
8 Loans :
The company provides some loans to the employee
Housing building loan
Vehicle loan
Car loan
SALARY STATEMENT DETAILS FOR A PAYMENT OF A
SALARY
Attendance statement : 11th to 10th
Overtime statement (OT hours) : 11th to 10th
Shift allowance statement : 11th to 10th
Canteen allowance : monthly
LEAVE RECORD / NATURE OF LEAVE
PL working of 11 days : 1 day
CL yearly : 12 days
SL yearly : 10 days
Accident leave : minimum 1 day and maximum 90 days or
It may extend of approval of M.D.
Special leave : 6 days leave for a family planning in case of
Wife / employee self undergo for operation.
Leave for a spot : As per Mgt. approval as and when require for
a participate in tournament
Short Leave : two hours in a calendar month for a one time
29
LEAVE FOR TRAINING:
PL after one year : 15 days
CL and SL : every 36 days 1 day
LEAVE FOR APPRENTICE:
PL : Nil
CL : 12 days
SL : 15 days
GENERAL INSTRUCTIONS:
All the leaves must be applied on a leave card only accept short leave, must be applied in a short
leave form.
All employees / trainees / apprentices punch their own punching card while coming in and out
from plant / office.
Various forms available in the time office
Outgoing sleep form
Attendance certificate form
Outside duty form
Overtime claim form
Outside overtime performance form
Convenience allowance form
Accident form
One day’s salary deduction
Benevolent fund form
Nomination for a graduate
Nomination for a provident fund
Nomination for a Gratuity
30
Transfer of provident fund amount
WORKING OF E.S.I. SCHEME:
The employee state insurance scheme is nothing but the scheme which regulate under the
government act 1948, this act is to introduce certain facilities to the employees to cause of
sickness industry and may other relation compensation this scheme has not adopted by GACL
because the company pay medical allowance to its employee and company also cover the
insurance contract with LIC which applicable to them. According to the employee state
insurance act, 1948, employee it extent to the whole India including the state of Jammu and
Kashmir the insurance scheme contend in the act has up till death been applied to a selected
industries in a certain selected by amendment of 1960 to 1991. all contribution paid and money
received by the employees state insurance corporation are to be paid on to hand called employee
state insurance scheme and contribution are to be paid on to hand called employee state
insurance fund.
PROVIDENT FUND SCHEME:
The provident fund scheme is a king of financial security of employee. After recruitment of
employee, they have to contribute a certain amount of money from their pays wage and salary.
The company also contribute equal amount in respect of each employee toward provident fund
scheme in every month.
The present prevailing provident fund contribution is 10% of the basic pay plus D.A. maintain
equal contribution is being made by the company as share of each employee which include
contribution toward fund for family person. After deducting this fang company shall credit at to
the employee’s individual account, the board of trustee shall credit to member in own
contribution account.
31
TASK OF ADMINISTRATION DEPARTMENT Furniture purchase
Maintenance work
Bill of telephone
Procurement of steel and wooden furniture and stationaries
Service required to GACL house
Payment of all bill
Housing loan and vehicle loan
Booking of hotels, railway, air
Function arrangement
AGM / Diwali functions, photographs
Mail from post office to plants
Cellular phone activation
Government liaison work
Arrangement of donation
Preparation of a sign board
Advertisement in a news paper
Membership with institution / clubs
Procurement of books, magazine, videos
Exhibition
Repairing of lift
Maintain of dead stock register
Printing of office stationary
Invoice received from marketing department
Computer work and office work
Xerox, etc.
32
QUALITY CONTROL
Check RM Quality in process centers & finished goods whether they are as per
specification of not than only are accepted samples are analyzed to check the quality.
Incase of finished goods if they are approved then only warehouse say they are ready for
dispatch.
Department head than conveys the interpretation of analysis done to the respective
process dept.
Lab technician maintain eqpt, he collects the samples from respective stores than analysis &
tests the sample according to the specification given by the purchase & inventor.
Section in charge does instrument calibration i.e. solution preparation & sees whether the
same results it obtained using standard material. Then dept. head approves it that everything
is as per specified.
Shift head looks after all general activities, i.e. practical which include all test conducted &
administrative work.
Function of QC dept. is to give remark but action is not their authority. It is done by the
inventor but their remaining is having weight age. It in process anything happens then control
room takes in-charge of it.
Instruments used for testing are as follows:
Auto type writers
PH meters
Ministry meters
Special photo meter
33
HPCL
Gas chromatograph
Total carbon analysis
Responsibilities & Authorities of HOD (MKT)
The responsibilities & authorities of HOD (MKT) are defined in quantity manual of company
Department In-charge
1. Co-ordinate the overall activity of marketing dept.
2. Entirely into contract or re-new contract with sales represented/transporters based
approvals.
3. Discussion, negotiation, entering into contract with customers.
Product in-charge :
(Product in charge is a change who looks after marketing and sales of any particular
finished product he can be Dy. Manager, senior sales officer, sales officer, and assist.
Sale officer).
34
35
STORES INVENTORY MANAGEMENT
The raw material are stored in the stores section, GACL is manufacturing 26 products. Raw
materials of all the products are stored in the stores section there is no specific storage section
facility required for the materials. General spares and include all the mechanical electrical
process instruments.
While the trucks full of goods enter the gate following documents are enclosed;
1. Challan
2. lorry / railway receipt
3. excise, moderate gate pass (I G P)
These documents are issued against purchase order to the supplier.
After goods inward goods receipt voucher inspection is done, RM is checked by the engineers.
They are verified according to the Challan given by the supplier, Quantity is checked and
measured.
Then comes GRV approve, i.e. if RM are as per specification then are stored in the stores
section.
If any RM is rejected the reject voucher is prepare, in case of materials, being not as per
specified then they are returned so material return voucher is prepared similarly materials issued
to the respective plants than goods is note CGIN is prepared.
Selling of scrap materials is also done, they are disposed from the plant after shut down and are
sold by the stores section mineral state transport corporation (MSTC) is dealing with purchase
and sale of scrap of scrap goods to which it is charging 3.306% commission from GACL on
scrap realization.
36
PROCESS OF STORES:
1. Requirement of plants & dept.
2. Indent by purchase
3. Receive material from party
4. Checking of material
5. Make inward and goods receive voucher
6. Properly arrange material for inspection
7. Material inspection by the engineer or senior officer
8. Sign by the engineer on a GRV
9. Put a material on its location
10. Issue a material as per the requirement of plants and departments.
GACL follows ABC analysis for the Inventory Management:
ABC analysis is used for the management of inventory at GACL. The raw materials are
classified as A, B and C on the basis of the cost of the raw materials. The raw material whose
cost is more are categorized under. A category and the other raw materials are categorized
under B and the packing materials are categorized under C category. There are five raw
materials under A category at GACL the classification of raw material is as under.
ABC CLASSIFICATION OF RAW MATERIAL OF GACL:
“A” items:
Salt
Barium Carbonate
Soda Ash
Sodium Bisulphate
Alfa Cellulose
Sulpharic Acid
37
“B” items:
Magnafloc/ Fastfloc
Sodium Sulphite
Sodium Thio Sulphate
Ammonium Nitrate
Mono Ethylene Glycol
Nitric Acid
Mono Ethylamine
Palladium Catalyst
“C” items:
HM-HDPE Barrels 200 Liters.
HDPE Bags-CSF
HM-HDPE Carboys
HDPE Bags- KOH Flakes
HM-HDPE Drums
Furnace Oil
Cast Iron Powder
Polythene Bags
MS Drum
Alumina Cryohydrate Powder
Sugar
Prills Bags
Morph line
GACL also uses Natural gas as a raw material which is supplied through pipeline from GAIL
so it is not included in the ABC list.
38
E-Tendering
The annual rate contracts are finalized electronically so as to cut the cost and save the time.
GNFC is the service provider for E-Tendering and is done through a GNFC’s (n) code solution.
The suppliers who bid for the tender can directly send there quotation through internet and after
receiving the quotation from the suppliers the lowest bidder is issued the contract but since the
quantity required by GACL is large so the other bidders are also asked to match there prices with
the lowest bidder and then the quantity is distributed among different suppliers. The contract is
finalize by a committee in which chief general manger (purchase). Chief financial officer and the
executive director (electrical) is member.
SETTING OF INVENTORY LEVEL
The various inventory levels like minimum stock level, maximum stock level, and reorder
level are set through the annualized budget by the top management.
Major raw material inventory levels at GACL are:
Salt: Minimum 3000 MT
Maximum 22000 MT
Potassium Chloride: Minimum 500 MT
Maximum 5000 MT
Rock Phosphate: Minimum 3000 MT
Maximum 18000 MT
These above levels are set annually and are fixed through out the year.
39
ORDERING OF RAW MATERIAL
The Raw material are ordered on receiving an Indent in which the quantity to be ordered is
mentioned. The purchase department then place the order on the basis of the indent received and
then the order proposal is approved by the committee and then finally the order is placed.
COMMITTES FOR APPROVING THE ORDER
PROPOSAL:
There are different purchase committees for granting purchase approval which are as under:
Purchase of 1 lack to 5 lacks:
This committee consists of chief financial officer, deputy general manager (finance),
executive director (technical) and chief general manager purchase.
Purchase of over 5 lacks:
All the purchases of above 5 lacks are made by a committee consisting of Managing director,
chief financial officer, chief general manger (purchase), executive director (marketing).
Purchase committee for Salt
GACL is having a separate committee for salt as this the most important raw material and is
known as “black gold” in the company. The committee consist of managing director, chief
financial officer, executive director (technical), executive director (marketing).
40
DISPATCH DEPARTMENT:In dispatch section, invoice is prepared, other books such as RG 1 register is prepared as the
format specified by the company ACT 1956 here, in this register then entry is to made for the
production of everyday and dispatch made for the day everyday physical stock taking of finished
goods should be matched with the stock of finished goods in daily stock of account. I.e. RG 1.
Similarly lodger account is to prepared at the company makes payment of duty consignment
arise or by making though deposit in bank & taking credit of the same in the account called
personal ledger account when and company OPD to make payment through account current i.e.
PLA, it has to make deposit in advance in the corporation bank for the period for which the
payment is not made daily production report is also generate from dispatch section and is availed
work through physical check-up.
41
SAFETY GADGET
Personal protective equipment:
1. head protection :-Safety helmet
2. Eye protection : -safety goggles
-Welder’s goggles
-Chipper’s goggle
3. Face protection : -face shield
-welder’s goggles/face shield
-acid and alkali proof hood
4. hearing protection : -Ear plug, Ear muff
5. hands and fingers protection : -canvas hand gloves
-canvas, leather hand gloves
-asbestos hand gloves
-rubber, PVC,
surgical hand
Gloves
6. Body protection : -cotton aprons and
-cotton boiler suit
-PVC neck
-Asbestos suit
7. foot or leg protection : -Asbestos suit
-safety shoes
-gum boots
8. respiratory protection : -full gas mask with canister
(for HCN, chlorine, acid gases and
organic vapors)
-Half face mask with filter on the air
respiratory protection with full face gas
mask and risk proof tube for compressed air
42
self contained breathing Apparatus With full
face mask.
-Air tube and air cylinder
-Dust mask
9. protection from falling : -safety belt
43
44
MARKETING DEPARTMENT
Product Planning:
The competitive pressure levers to the displacement of existing products and free management to
look ground for alternative source of income through the development of new products to
replacing existing procedure or through diversification and extension of the produce line itself
such an approach to product development is generally called product planning.
Product planning is done every years as per needs company has its own research and
development department. By this department company also take so many decisions about selling
and manufacturing of products.
Destination for Export
Australia Philippines Brazil
China Singapore Hong Kong
Indonesia Belgium Malaysia
Morecious Kenya Nepal
South Africa Netherland Sri Lanka
Thailand USA Bangladesh
Zimbabwe UK Japan
Spain Egypt Canada
Because of the large demand of caustic soda and law level of supply the government decide to
produce caustic soda per annum. The location of the plant decided at Baroda keeping in a view,
the availability of infrastructure and also convenience transport facility.
At this time the production of chlorine and hydrochloric acid also increase. Initially the old
technology of mercury is adopted by GACL. GACL’s latest technology helps company to
manufacture mercury free product in India.
45
PRODUCT ANALYSIS
Sr.no. Name of the Product
Productconsumption/
sales place
mainby
product own customer India both1 Caustic soda lye √ √ √ √ 2 Caustic soda flakes √ √ √3 Caustic soda Prills √ √ √4 Liquid chlorine √ √ √ √5 Hydrochloric acid √ √ √ √6 sodium hypo chloride √ √ √
7compressed hydrogen gas √ √ √
8 dilute sulpharic acid √ √ √ √
9aluminum, chlorine, anhydrous √ √ √
10 chlorinated paraffin wax √ √ √11 sodium cyanide √ √ √12 sodium Ferro cyanide √ √ √ 13 caustic potash lye √ √ √ √ 14 caustic potash flake √ √ √15 potassium carbonate √ √ √16 methaline chloride √ √ √17 Chloroform √ √ √18 carbon tetrachloride √ √ √19 phosphoric acid √ √ √20 calcium chlorine powder √ √ √ 21 hydrogen peroxide √ √ √22 bleach win √ √ 23 scale win √ √ 24 Poly Aluminum Chloride √ √ √ √
46
MARKET SEGMENTATION:
The priority of GACL is to marked its product in such a way the supply and demand of
homogenous and heterogeneous pattern informally more popular as most of its products are
organic and inorganic chemicals when every products are in liquid form the segmentation of
market area is decided in such a way that customer are near to main complex of GACL. The
products like caustic soda lye, hydrochloric acid, liquid chlorine and hazardous nature are
sufficient for its safe handling are taken. It is proffered to have sales as near as possible.
Pricing policies:
The main aim behind formulating policies of organization is obviously to fetch minimum return.
I.e. Best prices of its products while deciding the policies, the producer has to consider the
following:
The cost of Raw material
The fixed and variable cost
The administration cost
Marketing cost including commission of distribution channel
The statutory liabilities
The above factors play a vital role in determining the prices for demand and supply scenario
prevailing in domestic and global market.
The prices are decided keeping in a view the philosophy of organization of its export plan
Channel of distribution:
In the field of marketing channel the distribution indicator routes through which goods and
services flow or moves from producers to customers.
The route of channel includes the manufacturers and the ultimate cumulative as well as all
intermediatories GACL has been gathering all the three channel of distribution as under
47
For large consumer’s public sector like IPCL, GSFC, IFFCO, etc. the company has adopted the
zero level channel of distribution where the manufactured goods are sold directly from
manufacturer to consumer hence channel of distribution.
For medium scale consumer where price negotiation and transportation arrangement payment
follow up are regularly requisite and the quantity requisite is not very large GACL has adopted
first level of channel of distribution as under.
Also top consumer having very small quantity requirement where and availability pays main side
in buying decision GACL has been operating through and level of channel of distribution as
follows
Manufacturing dealer, trader, sub dealer sales
In GACL the product are sold out of two ways
Through dealers:
The company appoints same dealers to sell its products. Such dealers work for the company
discovers the customer’s negotiation with them and try to expand the market. They charge some
commission for their duties. The company has appointed 15 dealers for the domestic market.
Direct contact:
The company also enters in to direct contact with other large companies like GSFC , IPCL, IOC ,
IFFCO, etc. both the parties negotiate with each other directly and if the terms and condition of
contract is accepted mutually.
Sales promotion:
Sales promotion is very vital for any company to increase its sales promotion is mainly done in
three ways
Advertisement
48
Samples
Discount
GACL’s sales promotion is mainly done by two ways.
giving sample of product to customer
credit facilities up to 30 days
Apart from these two mains GACL has no particulars sales promotion policy. The company is
striving to makes better one forts great goodwill and maintain good relationship with customers.
Advertising:
Gujarat Alkalies & Chemical limited company therefore it does not have big advertising system
mostly there is not advertising for GACL but sometimes in international market for export of its
products new a days GACL has started giving advertisement on website for international
business.
49
Main customers of GACL
Indian petrochemicals corporation limited
Indian Rayon Corporation limited.
Indian Oil Corporation limited.
Indian dye staff industry limited.
Indian farmer fertilizer limited.
Gujarat state fertilizer limited.
Gujarat Narmada valley fertilizer limited.
Baroda Rayon corporation limited
Sarabhai group of industry
Transport industry limited.
Hindustan photo time manufacture limited
Hindustan lever limited.
50
Main competitors of GACL
Atul product limited.
Century chemical limited.
Gwalious Rayon & chemical limited
Gujarat heavy chemical limited.
National Alkalies & Chemical limited.
Punjab Alkalies and chemical limited.
Standard Alkalies and chemical limited.
Tata chemical limited.
Saurashtra chemical limited.
Punjab national fertilizer & Chemical limited.
51
52
FINANCE DEPARTMENT
INTRODUCTION:
Finance is one of the most important functions of the firm. It is a managerial activities concerned
with planning and controlling the finance resources of the firm. It is considered as a like of an
organization. In short it is concerned with procurement of fund and effective utilization of the
business. In simple words, financial management means rising of adequate funds, minimum cost
and using them effectively in business, in other words, financial management is concerned with
the financial problem of the business organization. It concerned with the problem of raising
finance to established, expand and modernize business unit, problem of providing, fixed and
working capital problem at distribution of income, etc.
According to the soloman, “financial management is concerned with the efficient use of
imported economic resources namely capital.”
Hoagland said, “Financial management is concerned mainly with such a matter as lower business
corporation raise its finance and how it make use of it.”
The manager is interested in this function because it is a crucial division of a firm and
understanding theory of financial management provide them with a conceptual and analytical
sign to make a division. Financial management involves the objective regarding management of
working capital, dividend distribution and finance account. Thus financial management does not
stop procuring the required finance, it has also to see that it is a effectively utilized in the
business. It is concerned with the maintaining adequate funds on hand to meet the expenses of
both revenue and capital nature.
53
FINANCIAL PLANNING:
Financial planning means planning of the procurement of funds from financial institution or a
general public.
Financial planning involves the following steps:
Determining the firm’s past performance as certain to the relationship between various
financial variables and its financial strengths and weaknesses.
Determining the firm’s operating features. i.e. product, market condition and competition,
production, marketing policies, control system, operating risk.
Determine investment made its growth objectives and overall business strategy.
Forecasting the firm’s revenue expenses and firm’s requirement based on its policy of
investment and dividend payment.
Analysis of financial alternative with its financial plans for the long-term health and
survival of firm.
Analysis of financial alternative with its financial policy and deciding appropriate time
for raising the funds.
Evaluating the consistency of financial policy with regard to each other and vice-a-versa
the business strategy.
Financial planning is generally concerned with the long term growth profitability and
financial decision.
Financial management includes the following planning:
Procurement of fund
Application of fund
Dividend policy
Types of issue and
Working capital
54
CAPITALIZATION:
The word capitalization can be defined as some of all kinds of long term securities at their par
value thus it can be interested at the some of the ownership capital bonds and other long term
debts and the surplus it consists of
Owner’s capital: the value of shares of a different class.
Borrowed capital : the value of bonds and debentures
Surplus: the value of surplus i.e. accumulated profit whether of revenue.
The capital nature surplus of its profit earned by the company over no. of year are written in a
business to meet the long term financial requirement in the names of various results
a. Over capitalization
b. Under capitalization
The over capitalization is the situation in which the funds are accumulated more than its
requirement and the under capitalization is the situation in which funds are accumulated less than
its requirement. GACL is having over capitalization situation from last two years, in GACL
capital is less than loans and fund means greater availability of fund, company has to pay more
interest.
55
CAPITAL STRUCTURE:
The capital structure is the vital aspect of financial management, it represents relations between
the terms of a financing like debentures, long term loans, preference shares equity share and
reserve. Thus optimum structure is obtained when the market value per share is changed as
change in the capital structure of the company in every year. GACL’s main sources of capital
are:
Equity share capital
Debentures
Loan from bank
Loan from institutions
Liabilities 31.03.2007 31.03.2006
Equity share capital 7343.84 7343.84
Reserve and surplus 81503.84 64963.50
Debentures ----------- 2040.73
Secured loan 22497.97 35142.02
Unsecured loan 17564.65 10077.58
(Rupees in Lakhs)
Management is the fixed assets which are maintain and operated for a long period of time, like
plant, machinery, building, etc.
They are depreciating yearly as a fixed rate and a presize method for calculated depreciation
which is adopted by the company.
56
CAPITAL BUDGETING:
Capital budget is the plan intended activities expressed in monitory terms for a specified period
of time, it also provided for a resources needed for budgeting goals. It is a very important
weapon for profit planning and financial management of a company. Capital project are prepared
annually which mainly discuss in the account of a production as per the policy, rules and
decision taken by the management.
Statement of fixed assets
Sr.no. Fixed assets Gross block
31.03.2007
Depreciation
31.03.2007
Net block
31.03.2007
Owned assets
1. Free hold land 102.75 0.0 102.75
2. Lease hold land 282.08 0.0 282.08
3. Buildings, roads and
culverts
9605.30 1709.30 7896.00
4 Plant and machinery 176195.92 84528.33 91667.59
5. Furniture, fixture and
equipment
976.35 573.56 402.79
6. Vehicle 157.60 32.32 125.27
Lease Assets
7. Plant and Machinery 3895.23 2244.05 1615.18
Capital Expenditure
8. Power, water and service 1743.81 835.81 908
Total 192923.04 89923.37 102999.68
57
RATIO ANALYSIS & INTERPRETATIONS
INTRODUCTION
Ratio analysis is a powerful tool of financial analysis. A Ratio defined as the indicated quotient
of two mathematical expressions and 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 pf
a organization. The absolute accounting figures reported in the financial statements do not
provide a meaningful understanding of the performance and financial position of a organization.
An accounting figure conveys meaning when it is related to some other relevant information. For
example at Rs 5 core not profit may look impressive, but the firms performance can be said to be
good or bad only when the net profit figure is related to the firms investments. The relationship
between to accounting figures, expressed mathematically is known as Financial Ratio. Ratios
help to summarized large quantities of financial data and to make qualitative judgment about the
firm’s financial performance. The grater the ratio, the greater the firms liquidity and vice versa.
The point to note is that ration reflecting a qualitative relationship helps to form a qualitative
judgment. Such is the nature of all financial ratios.
Formula’s used for Ratio Analysis
LIQUIDITY RATIOS
CURRENT ASSETS
CURRENT RATIO = CURRENT LIABILITIES
CURRENT ASSETS INVENTORIES
QUICK RATIO = CURRENT LIABILITIES
58
TURNOVER RATIOS
SALES
ACCOUNTS RECEIVABLE TURNOVER RATIO = CLOSING DEBTORS
INVENTORY TURN COGS
OVER RATIO = AVERAGE INVENTORY
ASSETS TURN SALES
OVER RATIO = TOTAL ASSETS
PROFITABILITY RATIOS
NET PROFIT MARGIN NET PROFIT
RATIO = SALES
EBIT
EARNING POWER = TOTAL ASSETS
NET PROFIT
RETURN ON EQUITY = EQUITY OR NET WORTH
LEVERAGE RATIOS
TOTAL DEBT
DEBT – EQUITY RATIO = NET WORTH
TOTAL DEBT
DEBT – ASSET RATIO = TOTAL ASSETS
59
INTEREST COVERAGE EARNING BEFORE INTEREST &TAX
RATIO = INTEREST
Quarter on Quarter Ratio Analysis of GACL
LIQUIDITY RATIOS June
Quarter
September
Quarter
December
Quarter
March
Quarter
Current Ratio
2003-2004 2.82 2.32 2.15 2.54
2004-2005 2.02 2.20 2.37 2.62
2005-2006 1.91 2.11 2.15 1.86
2006-2007 1.62 1.51 1.63 1.72
Quick Ratio
2003-2004 2.26 1.91 1.72 2.10
2004-2005 1.67 1.76 1.96 2.18
2005-2006 1.56 1.73 1.71 1.54
2006-2007 1.32 1.24 1.32 1.42
TURNOVER RATIOS
Accounts Receivable turnover
ratio
2003-2004 1.65 1.91 1.85 1.84
2004-2005 1.88 1.84 1.74 1.98
2005-2006 1.50 1.51 1.50 1.68
2006-2007 1.65 1.74 1.80 1.79
Inventory turnover Ratio
2003-2004 3.86 4.46 4.03 3.56
2004-2005 3.43 3.77 3.79 4.36
2005-2006 2.94 2.64 2.32 2.34
2006-2007 2.53 2.71 2.42 2.13
Assets turnover ratio
60
2003-2004 0.19 0.21 0.21 0.20
2004-2005 0.21 0.23 0.26 0.29
2005-2006 0.21 0.19 0.17 0.17
2006-2007 0.17 0.19 0.18 0.17
PROFITABILITY RATIOS
Net Profit margin ratio
2003-2004 2.97% 5.77% 5.78% 8.54%
2004-2005 3.84% 11.69% 14.37% 12.21%
2005-2006 22.19% 21.06% 18.85% 10.03%
2006-2007 15.18% 16.67% 16.70% 12.75%
Earning power
2003-2004 2.57% 3.28% 3.45% 3.08%
2004-2005 3.06% 5.66% 7.59% 10.38%
2005-2006 6.52% 5.69% 3.94% 4.31%
2006-2007 3.70% 4.40% 3.91% 3.67%
Return on equity
2003-2004 2.19% 4.49% 4.47% 5.64%
2004-2005 2.48% 7.92% 9.78% 8.89%
2005-2006 10.45% 8.69% 7.04% 3.74%
2006-2007 5.56% 6.55% 6.10% 4.38%
LEVERAGE RATIOS
Debt-equity ratio
2003-2004 2.61 2.29 2.17 1.88
2004-2005 1.60 1.41 1.14 1.00
2005-2006 0.69 0.58 0.61 0.65
2006-2007 0.52 0.47 0.44 0.45
Debt-Assets Ratio
2003-2004 0.66 0.62 0.59 0.56
2004-2005 0.52 0.48 0.43 0.39
2005-2006 0.30 0.27 0.29 0.29
61
2006-2007 0.25 0.22 0.22 0.22
Interest Coverage Ratio
2003-2004 1.77 2.03 2.47 2.09
2004-2005 2.17 4.70 7.24 12.56
2005-2006 8.20 6.73 7.28 8.64
2006-2007 7.20 8.03 5.60 8.33
62
Interpretation of Quarterly Ratios of GACL
Current Ratio
Current ratio of GACL is always greater than 1.5:1 which shows the sound liquidity position of
the company. The current ratio has come down from 2.82:1 in June quarter 2003 to 1.72:1 in
March quarter 2007 and the main reason for this is to reduce the idle investment in current assets.
Quick Ratio
A Quick ratio of Greater than 1 is good sign for the company and if we look at the quick ratio of
GACL it has always been much higher than 1. The quick ratio of GACL has improved from
1.32:1 in December quarter 2006 to 1.42:1 in March Quarter 2007 which is a good sign for the
company.
Accounts Receivables Turnover Ratio
Accounts receivables turnover ratio of GACL is consistently increasing for the previous seven
quarters which shows the effective collection effort and steps taken by the company for the
realization of sales. The Ratio is 1.79:1 in March Quarter 2007 as compare to 1.80:1 in the
previous quarter.
Inventory Turnover Ratio
Inventory Turnover Ratio of GACL has decreased from 2.42:1 in December quarter 2006 to
2.13:1 in the March Quarter 2007 and the main reason for this is the reduction in the cost of
goods sold and increase in the inventory.
Asset Turnover Ratio
The asset turnover ratio of GACL has been consistently varying from 0.21:1 to 0.17:1 in the
seven quarters. During the financial year 2004-2005 the ratio has gone up to 0.29:1 and the
reason was tremendous increase in sales other wise the ratio tends to vary from 0.21:1 to 0.17:1
constantly.
Net Profit Margin Ratio
The Net Profit Margin ratio is fluctuating during the last quarters for GACL. The ratio has gone
down to 12.75% in March quarter 2007 from 16.70% in the previous quarter the main reason for
this is the increase in the cost of production.
63
Earning Power
The Earning Power ratio of GACL has decline in the March Quarter 2007 due to the decline in
EBIT. The ratio has decreased to 3.67% in March quarter 2007 from 3.91% in the previous
quarter. The reduction in sales is and increase in the cost of production are the reason for this
decline and the ratio can be improved by increasing the sales and cutting down the expenditure
and thereby optimizing the return on assets.
Return on Equity
Return on equity of GACL for March quarter 2007 has declined to 4.38% from 6.10% in the
previous quarter due to the decrease in the Net profit.
Debt-Equity Ratio
The Debt-Equity Ratio of GACL is consistently declining over last quarters. The reason for this
is the debt restructuring which has been undertaken by the company. The Debt- Equity ratio of
the company was 0.45:1 in March quarter 2007 as compare to 0.44:1 in the previous quarter.
Debt-Asset Ratio
The Debt-Asset Ratio of GACL is also consistently declining as the debt in the capital structure
is reducing over the past quarters. The ratio is same at 0.22:1 in the March quarter 2007 as
compare to the December quarter 2006.
Interest Coverage Ratio
The interest coverage ratio of GACL has improved to 8.33:1 in March Quarter 2007 from 5.60:1
in the previous quarter This Shows that the earnings of the company are still 8 times more than
the interest obligations.
64
RATIO ANALYSIS OF GACL AND OTHER COMPANIES
LIQUIDITY RATIOS
Current RatioATUL LTD.
GACL LTD.
DCW LTD.
2002 3.85 2.44 0.962003 2.90 2.07 1.262004 3.14 1.65 1.242005 2.50 2.79 1.382006 2.47 1.94 1.44
Quick RatioATUL LTD.
GACL LTD.
DCW LTD.
2002 2.55 2.00 0.392003 1.81 1.75 0.582004 2.10 1.38 0.542005 1.60 2.34 0.822006 1.48 1.62 0.69
TURNOVER RATIOS
Accounts Receivable turnover ratio
ATUL LTD.
GACL LTD.
DCW LTD.
2002 2.67 4.93 15.992003 2.87 5.63 16.952004 2.63 6.20 17.102005 3.31 5.74 15.832006 3.74 7.36 13.46
Inventory turnover RatioATUL LTD.
GACL LTD.
DCW LTD.
2002 0.85 3.76 1.982003 0.81 3.72 2.112004 0.82 3.68 1.972005 1.04 3.49 2.182006 1.09 3.34 1.66
Assets turnover ratioATUL LTD.
GACL LTD.
DCW LTD.
2002 0.80 0.62 1.432003 0.85 0.73 1.602004 0.80 0.77 1.662005 0.95 0.91 1.662006 1.03 0.66 1.19
65
Net Profit margin ratioATUL LTD.
GACL LTD.
DCW LTD.
2002 2.85% -4.48% 2.66%2003 6.85% 2.74% 1.59%2004 0.55% 5.88% 2.95%2005 2.40% 11.27% 2.62%2006 9.34% 18.10% 3.88%
Earning power ATUL LTD.
GACL LTD.
DCW LTD.
2002 8.33% 5.75% 7.36%2003 11.36% 10.51% 6.84%2004 4.01% 12.55% 6.56%2005 5.53% 23.51% 5.84%2006 13.88% 20.38% 7.37%
Return on equityATUL LTD.
GACL LTD.
DCW LTD.
2002 6.72% -12.45% 8.15%2003 15.64% 8.80% 5.51%2004 1.26% 16.51% 10.46%2005 9.18% 26.63% 9.55%2006 29.78% 27.38% 11.32%
LEVERAGE RATIOS
Debt-equity ratioATUL LTD.
GACL LTD.
DCW LTD.
2002 1.28 3.14 0.242003 0.99 2.78 0.262004 1.08 2.01 0.222005 1.85 1.00 0.332006 1.26 0.65 0.54
Debt-Assets RatioATUL LTD.
GACL LTD.
DCW LTD.
2002 0.43 0.70 0.112003 0.37 0.63 0.122004 0.38 0.55 0.102005 0.46 0.38 0.152006 0.41 0.29 0.22
Interest Coverage RatioATUL LTD.
GACL LTD.
DCW LTD.
66
2002 1.45 0.68 2.242003 2.32 1.56 2.792004 1.35 2.01 5.062005 1.88 5.37 6.102006 3.95 8.26 6.14
Interpretations of Ratio Analysis of GACL & Its competitors
LIQUIDITY RATIOS
CURRENT RATIO
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2002 2003 2004 2005 2006
Current Ratio
ATUL LTD.
GACL
DCW LTD.
The Current Ratio is a measure of the firm’s short term solvency. It indicates the availability
of current assets in rupee for every one rupee of current liability. A Ratio of greater than one means that the firm has more current claim against them. Current ratio Between 1.5:1 to 2:1 is good for a company. GACL’s ratio for the year 2006 was 1.94:1 as compare to 2005 it was 2.79:1. The current ratio of ATUL LTD was 2.47:1 which indicates idle funds and the current ratio of DCW LTD. is 1.44:1.
67
QUICK RATIO
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2002 2003 2004 2005 2006
Quick Ratio
ATUL LTD.
GACL
DCW LTD.
A company with a high value of Quick Ratio can suffer from shortage of funds if
it has large amount of inventory which takes time to get converted into cash. The Quick Ratio of GACL is 1.62 as compare to ATUL LTD. whose is at 1:48 and DCW LTD which has a Quick ratio of 0.69. This shows the healthy liquidity position of GACL in comparison to its competitors.
TURNOVER RATIOS
ACCOUNT RECEVABLE TURN OVER RATIO
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2002 2003 2004 2005 2006
Accounts Receivable Turnover Ratio
ATUL LTD.
GACL
DCW LTD.
68
The Analysis of the debtors turn over ratio supplements the information regarding
the liquidity of one item of current assets of the firm. The ratio measures how rapidly receivables are collected. A high ratio is indicative of shorter time lag-between sales & cash collection. A low ratio shows that debts are not being collected rapidly. The Ratio of GACL has considerably improved to 7.36 in 2006 from 5.74 in 2005. The ratio of DCW LTD. has decreased to 13.46 in 2006 as compare to 15.83 in 2005 and the ratio of ATUL LTD. has slightly improved to 3.74 in 2006 from 3.31 in 2005.
This shows effective efforts and steps which GACL is taking for quick realization of Sales for enhancing the liquidity position of the company.
INVENTORY TURN OVER RATIO
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2002 2003 2004 2005 2006
Inventory Turnover Ratio
ATUL LTD.
GACL
DCW LTD.
The ratio indicates how fast inventory is sold. A high ratio is good from the viewpoint of liquidity and vice versa. A low ratio would signify that inventory does not sell fast and stays on the shelf or in the warehouse for a long time. The ratio of GACL is highest at 3.34 as compare to ATUL LTD. whose ratio is at 1.09 and DCW LTD. whose ratio is at 1.66.
69
ASSETS TURN OVER RATIO
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2002 2003 2004 2005 2006
Assets Turnover Ratio
ATUL LTD.
GACL
DCW LTD.
The Assets Turn over Ratio, , measures the efficiency of a firm in managing and utilizing it’s
assets. The higher the turn over ratio, the more efficient is the management and utilization of the assets while low turnover ratio is indicative of underutilization of available resources and presence of idle capacity. The ratio of GACL was 0.66 in 2006 whereas for ATUL LTD was at 1.03 and for DCW LTD. was at 1.19 in 2006. GACL should make effective utilization of idle assets which can help in enhancing the liquidity of the company.
PROFITABILITY RATIOS
NET PROFIT MARGINE RATIO
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2002 2003 2004 2005 2006
Net Profit Margin Ratio
ATUL LTD.
GACL
DCW LTD.
70
Net profit is obtained expenses, interested and taxes are subtracted from the gross profit. Net profit margin ratio establishes a relationship between net profit and sales and indicates management efficiency in manufacturing, administrating and selling the product. This ratio is the overall measures of the firm’s ability to turn each rupee sales in to profit. If the net margin is inadequate, the firm will fail to achieve satisfactory return on share holder firm. GACL has the highest net profit margin ratio which is 18.10% as compare to ATUL LTD. which has a ratio of 9.34% and DCW LTD. which has a ratio of just 3.88% in 2006. The net profit margin ratio of GACL is consistently improving over the last years whereas the ratio of ATUL LTD. and DCW LTD are fluctuating.
EARNING POWER
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2002 2003 2004 2005 2006
Earning Power
ATUL LTD.
GACL
DCW LTD.
Earning power is the overall profitability of a firm is computed by multiplying net profit margin and assets turnover. The ROA ratio is a central measure of the overall profitability and operational efficiency of a firm. The ratio of GACL is much higher in comparison to its competitors and is at 20.38% in 2006 whereas the ratio of ATUL LTD. is at 13.88% and DCW LTD is at 7.37% in 2006.
71
RETURN ON EQUITY
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
2002 2003 2004 2005 2006
Return On Equity
ATUL LTD.
GACL
DCW LTD.
Return on equity how well the firm has used the resources of the owners. In fact, their ratio is one of the most important relationships in financial analysis. The ratio of net profit to owner’s equity reflects the extent which this objective has been accomplish, this ratio is thus a great interest to the present as well as the prospective share holders and also of grate concerned to management, which has the responsibility of maximizing the owner’s welfare. The returns on owner’s equity of the company should be compared with the ratio for other similar company and the industrial average. The ratio of GACL is 27.38% which is higher than DCW LTD. whose ratio is at 11.38% but lower than 29.78% in 2006 but the ratio of GACL is consistently improving over the years whereas as the ratio of competitors are fluctuating.
72
LEVERAGE RATIOS
DEBT EQUITY RATIO
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2002 2003 2004 2005 2006
Debt-Equity Ratio
ATUL LTD.
GACL
DCW LTD.
The D/E ratio is an important tool of financial analysis to appraise the financial structure of a firm. It has important implications from the view-point of the creditors, owners and the firm itself. The ratio reflects the relative contribution of the creditors and owners of business in its financing. A high ratio shows a large share of financing by the creditors of the firm; and vice versa. The ratio of GACL is at 0.65:1 in 2006 and has considerably reduced over the last year as the effect of company’s debt restructuring. The ratio of ATUL LTD. is at 1.26:1 and for DCW LTD. it is at 0.54:1 in 2006. This also indicates that the company has to pay less interest and the debt is lower.
DEBT ASSETS RATIO
73
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
2002 2003 2004 2005 2006
Debt-Asset Ratio
ATUL LTD.
GACL
DCW LTD.
The Analysis of The Debt Assets Ratio, How so defined, measures the efficiency of a firm in
managing and utilizing its assets. Debt refers to the Secured plus unsecured loan funds borrowed by the company. GACL is having debt-asset ratio of 0.29:1 in 2006 whereas ATUL LTD. is having it at 0.41:1 and for DCW LTD. it is at 0.22:1 in 2006. The ratio of GACL is reducing over last year whereas the ratio of competitors is fluctuating and more over the lenders are having very less claim over the asset of the company.
INTEREST COVERAGE RATIO
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2002 2003 2004 2005 2006
Interest Coverage Ratio
ATUL LTD.
GACL
DCW LTD.
It is also known as “Time Interest Earned Ratio”. This ratio measures the
debt servicing capacity of a firm in so far as fixed interest on long term loan is concerned. It is determine by dividing the operating profits or earnings before interest and tax by the fix
74
interest charges on loan. This ratio is used the concept of net profit before taxes because interest is used the tax is calculated of net paying interest on loan. The Ratio of GACL is at 8.26 in 2006 whereas ratio of ATUL LTD. is at 3.95 and for DCW LTD. the ratio is at 6.14 in 2006. the numbers itself shows that GACL is having better Debt servicing in comparison to its competitors.
Working Capital Management at GACL
Working capital management at GACL starts with setting up the working capital required by the
company in the financial year. The amount of working capital required by the company is set by
State bank of India. The company has to provide the Income statement and the balance sheet to
the State bank of India and after analyzing the financial statements the bank sets the limit of
working capital for the company. The working capital is financed by the company through cash
credit which is availed from different banks at a lower rate of interest then the prevailing market
rates through negotiations.
The amount of working capital used by the company in 2007 is Rs.130 cr. Out of which Rs.55 cr.
are availed from SBI, Rs.10 cr. each from HDFC, UTI and UCO bank, Rs.15 cr. from CBI, Rs.5
cr. from IDBI and Rs.25 cr. from IB. The amount of working capital has increased from Rs.70
cr. in 2002 to Rs.130 cr. in 2007. The additional funds required for the operations are raised
through Short term loans which are taken for a period of 6 months. At present GACL is having
Rs.145 cr. of short term loans out of which Rs.120 cr. are financed from GSFS, and Rs.25 cr. are
from City Bank.
GACL is efficiently managing its working capital through the effective management of
Inventory, Cash and Receivables of the company. The payment and collection system of the
company also plays an important role in the optimum working capital management of the
company. The payments are made through the purchase department in consultation with the
75
finance department and the collection is done by marketing department and the majority of the
payments are received through E-Banking which ensures the fast collection of receivables.
Statement of working capital:
Particular
Amount Amount
Current assets
Inventory 9549.36 7540.86
Sandry debtors 17072.72 16061.27
Cash and Bank balance 3545.18 2597.45
Loans and advances 23529.27 17827.15
Current liabilities
Sundry Creditors 5331.37 4901.04
Security deposite 838.58 698.67
Advance from customer 169.05 197.58
Interest accrued 394.45 43.95
Investor’s education and protection fund 38.95 25.12
Other statutory liabilities 422.25 563.58
Others 4089.34 4668.55
Provisions 19851.28 12579.38
76
Working capital play very important role in deciding about the expense to incur by the
company in a day to day operation.
Formula:
Working capital = current assets – current liabilities
ADVANTAGES OF MAINTAINING WORKING
CAPITAL
PROFITABILITY
Profit is the difference between sale and cost of sale. Greater sale gives greater profitability.
Availability of adequate working capital ensures desired level of sales.
The term risk refers to probability that affirm will become technically insolvent; it will not be
able to meet its current obligations when they are due for payment. When net working capital is
negative technical insolvency exists. Greater the Net working Capital is, more liquid the firm is
and less likely to become insolvent. The relationship between liquidity, Net Working Capital and
risk is such that if either Net Working Capital or liquidity increases, the firm’s risk decreases.
Profit is directly related to the volume of sales. Any attempt to increase production and sales will
call for higher level of working capital needs.
RISK AVOIDANCE
An aggressive management tries to reduce the level of working capital in general, and inventory
in particular, even when sales are increasing. While on the other hand this effort tends to increase
profit and seriously effect the liquidity position.
Profitability = 1_____
77
Liquidity
DETERMINANTS OF WORKING CAPITAL
GENERAL NATURE OF BUSINESS
If the firm is a manufacturing industry or a service based industry:
In a manufacturing unit they have to maintain more of raw materials and inventory, which means
more of investment, and capital needs. If the business is a service based, then there is less need
of working capital.
Are the sales on cash or credit basis?
If sales are based on cash then there is less need of working capital and if the sale is based on
credit then working capital is needed more.
PRODUCTION CYCLE
This refers to the time involved in the manufacturing of goods. It covers the time span between
the procurement of raw materials and the completion of manufacturing process leading to the
production of finished goods. During such cycles the funds are locked up in the business. The
gap between the time of raw material purchase and the finished goods sale is relevant and the
working capital need during this time has to be met, hence production cycles are important.
Technological ability also plays a part in the operating cycle determination.
BUSINESS CYCLE
Business fluctuations also lead to cyclical and seasonal changes which in turn cause a shift in the
working capital position, particularly for temporary capital requirements. There may be an
upswing or a downswing depending on boom or depression. During upswing the need increases
and vice-versa.
GROWTH AND EXPANSION
As a company grows in size we can imagine that there will naturally be an increase in the capital
requirement. But the amount and ratio of increase is not related. Other things being equal growth
industries need more working capital than static industries. Advance planning of working capital
is, therefore, a continuing necessity for a growing concern.
78
PROFIT LEVEL
The level of profit earned differs from industries. Manufacturing industries earn lesser profit if
you consider the scale of operations and service industry is in a position to earn more profits as
the manufacturing costs are lesser in their case.
LEVEL OF TAXES
The first appropriation out of profits is payment for taxes. This is determined by the prevailing
tax regulations. Taxes are to be paid in advance depending on the level of profit estimated.
Increased tax liability leads to an increase in the working capital needs. Tax planning is needed
to reduce the tax liability systematically and legally.
DIVIDEND POLICY
The payment of dividend consumes cash resources and effect working capital to the extent. If the
firm does not pays dividend and retains profits the working capital will increase. In theory a firm
must retain profits to preserve cash resources and it must pay dividend to satisfy investor
expectations.
DEPRECIATION POLICY
Depreciation is an allowable expenditure in calculating net profits. Enhanced rates of
depreciation will reduce the profits and tax liability and therefore lower the cash profits. If
current capital expenditure falls short of depreciation provision, working capital position is
strengthened and there is no need for short term borrowings. If current capital expenditure
exceeds depreciation provision either outside borrowing will have to be resorted to or a
restriction on dividend payment coupled with retention of profits will have to be adopted to
prevent the working capital position being affected.
PRICE LEVEL CHANGES
Rising prices will necessitate use of more funds to maintain an existing level of activity. For
same level of current assets higher cash outlay will be required. Effect of rising price being that
higher amount of working capital will be needed. In case of companies, which can raise their
prices, there is no problem.
79
OPERATING EFFICIENCY
Management cannot control the rise in prices but they can ensure the efficient utilization of
resources of the organization by eliminating wastes and taking out the full utilization of existing
resources. Efficient planning and coordination leads to appropriate working capital strategy.
Receivables Management at GACL
When firm sales goods for cash, payments are received immediately and there for now
receivables are created, however, when a firm sells goods or service on credit, payments are
received only at a future date and receivables are created. It is an essential marketing tool in
modern business trade. Credit creates receivables which the firm is expected to collect in near
future. The term receivable is referred to as debt owed to the firm by customers arising from sale
of goods or services in the ordinary course of business.
Accounts receivables constitutes significant portion of the total current assets of the business
after inventories. There should be effective management of receivables to increase the firm’s
profitability. For this purpose different credit and collection policy formulated and implemented,
under which different aspects such as credit period, credit amount, cash discounts, etc. are taken
into great care.
While business firms would like to sell on cash basis, they are not always able to do so. They
have to resort to credit sales as it helps increase the customer base. It is convenient for some
customers who find it difficult to borrow from other sources to pay for the purchase. Credit
period ranges from 15-60 days. When goods are sold on credit, finished goods get converted into
accounts receivable in the books of the seller. The firm’s investment in accounts receivable
depends on how much it sells on credit and how much time it takes to recover the receivables.
Almost all the sales in GACL are credit sales and hence receivables management becomes one of
the most important factor affecting cash profit. Receivables or debtors are taken care by the
marketing department as sales are done by marketing department.
Collection Methods at GACL
The company has divided the customers on the basis of geographical segments. The company
has appointed its employees in each segment and their job is to remind the customer from time to
80
time for the payment of the receivables. The company also send periodic invoice to the
customers for prompt payments. Company also has commission agents in some segments.
The job of all the employees and commission agents mentioned above is to remind the customers
about their payments which are due but the final payment are made directly by customers
through cheque or draft.
Credit Policy at GACL
The credit policy at GACL is framed by the marketing department. GACL gives a credit period
of 60 days to its customers. The credit period is revised on quarterly basis in a dealers meeting
which takes place every quarter. The customers are evaluated on the following basis for allowing
the credit:
Financial Background
Past Performance
Past 3 Years Turnover
Purchase Quantity
Market Standing or Goodwill
In order to have fast realization of receivables GACL also gives a Discount @ 1.5% for early
payment made by the customers. GACL is also implementing advance payments for the 2 of its
products which are:
Caustic Soda Flakes
Caustic Soda Pills
This will help in improving the liquidity position of the company. GACL is also making efforts
for the collection of receivables directly through banks i.e. electronic transfer payment which is
the fast means of sales realization.
81
Cash Management at GACL
Cash is managed at GACL in a very simple way. A monthly statement of Receipts and payments
is prepared in which all the receipts and the payments are included. This statement is divided into
3 parts
Revenue Receipts
Revenue Payments
Financial Payments
The first part of the statement is Revenue Receipts in which the collection of sales is included
and is taken from the marketing department. The various payments for raw material, energy,
sales tax, marketing commission etc are included in the Revenue payment category and these
figures are taken from the respective departments. All the Financial payments are included in the
third part of the statement and the payments of Interest and capital expenditure is included in this
part.
82
Balance sheet of GACL
Particulars 2006-2007
SOURCES OF FUNDS :
Shareholders’ Funds :
Share Capital 7344
Reserves and Surplus 81503
Sub Total/ Net worth 88847
Loan Funds :
Secured Loans 22498
Unsecured Loans 17565
Sub Total 40063
Deferred Tax (Net) 22141
Total Funds Employed 151051
83
APPLICATION OF FUNDS :
Fixed Assets :
Gross Block 192923
Less : Depreciation 89923
Net Block 103000
Capital Work-in-Progress 10331
Net Fixed Assets 113331
Investments 12232
Current Assets, Loans and Advances :
Inventories 9549
Sundry Debtors 17073
Cash and Bank Balances 3545
Loans and Advances 23529
Gross working capital 53696
Less : Current Liabilities and Provisions 31135
Net Current Assets 22561
Miscellaneous Expenditure 2928
(To the extent not written off or adjusted)
Total Assets 161381
84
Profit & Loss Account
Particulars 2006/2007
Sales 117817
Excise duty 16490
Net Sales 101326
Total income 104272
Expenditure
material consumed 31647
power fuel & other utilities 13078
other manufacturing expenses 11729
Staff cost 6877
other expenditure 4401
67732
EBITDA 36540
Depreciation 8625
EBIT 24969
Interest expenses 3831
85
EBT 23848
Tax 7909
EAT 15939
Income Statement in the prescribed format
Particulars Amount
Sales 132172
Less: Excise duty 18504
Net Sales 113668.1
Add other income 1983
Total Income 115651
Cost of Sales:
Raw material 37008
Power fuel expenses 15095
Manufacturing Expenses 12922
Depreciation 8672
Stores and Spares 3075
other expenditure 4561
Sub total 81333
86
Add Op. WIP 468.409
81801.88
Less Cl. WIP 465.97
Cost of Production 81335.91
Add Op. FG 1873.636
83209.55
Less Cl. FG 1863.867
Cost of Sales 81345.68
Selling General & Administrative O/H 7319
Total Cost of Sales 88664.52
Profit Before Interest 25003.61
Less: Interest 2576
Profit After Interest 22427.76
Less: Provision for Taxation 9074
Profit After TAX 13353.57
Dividend 1001.517
Retained Profit 12352.05
Retained Profit/Net profit (%) 0.925
87
Operating Cycle of GACL from 2002-2007
Particular 2006 2007
(A) Raw material storage period 37.64 33.27
(B) Conversion period 1.95 1.90
(C) Finished goods storage period 5.98 6.93
(D) Collection period 68.68 58.83
(E) Payment Period 66.14 55.75
OPERATING CYCLE (A+B+C+D-E) 48.10 45.18
Number of Operating Cycles 7.48 7.97
Raw Material Storage Period
The Raw Material Storage Period of GACL has increased considerably during the past few
years. GACL’s Storage period is increasing due the the policy of the company to avoid the
shortage of raw material so that the production is not affected. As compare to 2006 the storage
88
period has improved to 33.27 days in 2007. This is a good sign for the company as the storage
period has improved as compare to previous year.
Conversion Period
The conversion period is varying between 1.93 days to 1.90 days in past three years which shows
the sound production policy of the company. The conversion period of GACL has come
improved to 1.90 days in 2007 as compare to 2006 where it was at 1.95 days.
Finished Goods Storage Period
Finished Goods Storage Period of GACL is consistently varying between 5 to 7 days. The
Finished goods storage period has increased to 6.93 days in 2007 as compare to 2006 where it
was 5.98 days. GACL is having continuous production therefore the production can not be
stopped as it will affect the production of other products.
Collection Period
The collection period of GACL has improved by 10 days in 2007. the collection period has come
down to 58.83 days in 2007 as compare to 68.68 days in 2006. This reflects the sound collection
policy of the company so as to quickly collect the sales receipts.
Payment Period
The payment period has also come down to 55.75 days in 2007 as compare to 66.14 days in
2006. The company is availing discounts offered by the suppliers in for the early payments made
by the company.
Efficiency of Working Capital Cycle
The working capital cycle of GACL has improved to 45.18 days in 2007 as compare to 48.10
days in 2006. The main reason for this is the faster collection of sales receipts and decrease in the
storage period. The number of operating cycle ha also increased to 7.97 or 8 in 2007 as compare
to 7.48 in 2006. This shows the working capital efficiency of the company.
89
Financial Appraisal
GACL has recently taken a financial assistance of Rs. 115 crores for 38 TPD Hydrogen Peroxide Project at Dahej, 75 TPD Poly Aluminum Chloride Project at Dahej and 75 TPD Aluminum Chloride Project at Baroda. The financial assistance is taken from IDBI at the interest rate of 8 % p.a. The total cost of project is Rs.165 Crores out of which Rs. 50 Crores are met through internal accruals. Rs. 108 crores is the total project cost of hydrogen peroxide project at Dahej, Rs. 31 Crores is the total project cost of Poly Aluminum Chloride project at Baroda and Rs. 26 Crores is the total project cost of Poly Aluminum Chloride project at Dahej.
Net Present Value Analysis Net present value method is used to know the financial feasibility of the project. The analysis is done in five steps which are as under:
Step 1
In this first the projected Income and expenditure statement is made in which all the income and expenditure are included so as to calculate the operating profit. The format of income and expenditure statement is as under:
Particulars Year(A) Raw Material (B) Utilities © Power (D) Factory Overheads Repairs & Maintenance Packing Expenses Total (E) Employee's cost
90
Estimated Cost of Manufacturing Administrative Cost Total Cost of Sales Sales Realization Profit before interest & Depreciation Interest Profit before Depreciation Depreciation Operating Profit
Step 2The next step in Net present value analysis is to calculate the projected cash flows. Projected cash flows = Operating Profit + Depreciation
Step 3The next step in the process is to discount the projected cash flows with the cost of capital or the rate of interest at which the loan is raised. The method of discounting is as follows:
Discounted cash flow = projected cash flow (1+ r)^n
Here n = number of years = Rate of Interest
Step 4The next step is to add the discounted cash flows to get the Present Value of Future Cash Flows.
Step 5In this step the Net present value of the project is calculated and if the net present value is positive than the project is approved. Net present value is calculated as under: Net Present Value = Present Value of Future Cash Flows Less: Initial Investment Net Present Value
Statement Showing Calculation of Net Present value for 3 projects at GACL :
Particulars2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Initial Investment 16500 (A) Raw Material 0 993 1979 2456 2620 2680 2680 2680(B) Utilities 0 135 383 482 562 605 605 605
91
© Power 0 90 326 392 447 488 491 493(D) Factory Overheads Repairs & Maintenance 0 74 219 225 231 237 243 249 Packing Expenses 0 9 17 24 29 30 30 30Total (E) 0 83 236 249 260 267 273 279 Employee's cost 0 220 355 373 391 411 432 453 Estimated Cost of Manufacturing 0 1521 3279 3952 4280 4451 4481 4510 24 Administrative Cost 0 50 126 132 138 145 152 159 Total Cost of Sales 0 1571 3405 4084 4418 4596 4633 4669 Sales Realization 0 2659 7045 8579 9460 10007 10007 10007 Profit before interest & Depreciation 0 1088 3640 4495 5042 5411 5374 5338Interest 0 391 943 796 566 336 106 20Profit before Depreciation 0 697 2697 3699 4476 5075 5268 5318Depreciation 0 355 868 868 868 868 868 868Operating Profit 0 342 1829 2831 3608 4207 4400 4450 Free Cash Flow 0 697 2697 3699 4476 5075 5268 5318Rate of Interest 8% 8% 8% 8% 8% 8% 8% Discounted Cash Flows 645.37 2312.2 2936.4 3290 3454 3319.7 3103 Net Present Value:- Present Value of Future Cash Flows 19061 Less: Initial Investment 16500 Net Present Value 2560.7
The project is having a net present value of Rs. 2560.7 (lacs) therefore will lead to increasing the free cash flows to the firm.
92
SUGGETION
o GACL can use the cash flows which are generated during the financial year for the purpose of working capital financing. It will save the interest payment which the company has to pay on the cash credit loans in the present.
o The asset turnover ratio shows that GACL is not optimizing the use of its assets therefore GACL should look forward towards the optimum utilization of assets. GACL should make efforts for the optimizing the use of Assets which can be done by disposing of the non- productive assets.
o The payment period should be delayed. GACL is availing the discount offered by the
supplier @0.3% per week and the credit given by the suppliers is 60 days therefore
GACL can make the payments in the seventh week and can also avail the discount and it
will also help in improving the number of operating cycles in the year.
o GACL should use the Net Present Value Analysis for checking the financial feasibility of
the project. It is helpful in making the correct decision as the project which is having
negative Net present value if approved then it will lead to the loss and negative cash flow.
o Return on Equity can be increased by reducing and controlling the expenditure which
will help in increasing the profit and thereby will lead to the increase in the Return on
Equity which is important for enhancing the shareholder’s wealth.
84
o The inventory levels should be set as per the requirements. The purchase department,
production department and the stores department can set the inventory levels which will
help in ordering the right quantity which is required for the production and will reduced
the storage cost.
93
CONCLUSION
During the one and half months training I explore my knowledge of corporate field. I also know
that how to implement theory in practice. I also got chance to study all the department of GACL
so that it improve my convincing power and also give chance to meet different people .It also
increase my confidence. It is a memorable experience to be a part of GACL “PARIVAR”. I am
always thankful to them. I studied lots many thing during my project work. I am very happy to
say that GACL’s are like “parivar” so there is a very less chance to arise negative conflict,
dissatisfaction and grievance. In that types of organization there is very less chance to fail. All
the employees of company give the respect of each other and his/her boss.
GACL is one of the unique organizations of Gujarat government that make huge profit .the
Company always treats their employees as human being and they have excellent and experienced
managerial staff that always increases the organization’s reputation in the society. I personally
observed that all the employees of the organization cooperate each other and also to new
employees and trainees. I have studied all the department of the company with proper schedule
and that schedule is provided by company itself with rules and regulation.
Finally during my project period I taught lots many things from GACL. I am always thankful to
GACL PARIVAR.
94
Data used for various calculations
Data of ATUL LTD. (In Cr.)
ATUL Ltd.
Mar
2002
Mar
2003
Mar
2004
Mar
2005
Mar
2006
Share capital 29.67 29.67 29.67 29.67 29.67
Reserves & Surplus 223.15 252.19 248.01 166.09 249.14
DEBT 322.39 278.64 300.36 362.09 352.47
Sundry creditors 97.34 139.66 116.98 136.05 144.21
Provisions 21.22 22.93 18.03 31.37 33.41
Other current liabilities 9.95 6.78 21.33 22.7 34.27
Fixed Assets:
Gross Fixed Assets 572.45 610.28 666.5 655.51 696.85
Less: Accumulated Depreciation 349.01 366.73 390.42 406.71 426.32
Net Fixed Assets 223.44 243.55 276.08 248.8 270.53
Investments 24.48 22.39 24.03 69.03 65.15
Current Assets, Loans and
Advances:
Purchase 250.53 281.7 278.05 392.2 484.83
Raw material 26.91 27.38 26.32 37.9 40.17
Stores & Spares 20.33 21.29 21.39 22.01 29.68
Work in Progress 61.96 69.66 57.83 51.07 62.21
Finished Goods 57.35 65.35 57.61 60.19 77.17
95
Total inventory 166.55 183.68 163.15 171.17 209.23
Sundry Debtors 223.17 224.11 240.64 226.51 237.85
Cash and Bank Balances 7.49 8.64 10.65 14.21 13.79
Loans and Advances 96.95 74.64 76.85 62.68 62.56
Total Assets 742.08 757.01 791.4 792.4 859.11
Sales 596.72 643.75 633.03 750.48 888.66
Raw materials, stores, etc. 256.17 280.27 279.01 380 474.89
Wages & salaries 70.44 71.89 72.79 67.63 71.65
Energy (power & fuel) 82.7 81.68 72.47 76.85 94.72
Indirect taxes (excise, etc.) 42.48 42.83 43.12 56.98 63.83
Advertising & marketing
expenses 14.38 13.8 13.23 17.56 22.63
Distribution expenses 9.85 12.2 13.38 15.94 22.05
Others 63.76 71.92 68.41 85.18 94.52
COGS 530.15 566.59 570.15 697.56 827.31
Net Profit 16.98 44.07 3.5 17.98 83.04
EBT 19.23 48.96 8.19 20.49 89.03
INTEREST 42.55 37.03 23.55 23.34 30.19
EBIT 61.78 85.99 31.74 43.83 119.22
96
Data of GACL (In Cr.)
Mar
2002
Mar
2003
Mar
2004
Mar
2005
Mar
2006 Mar-07
Share capital 45.9 45.9 45.9 73.44 73.44 73.44
Reserves & Surplus 281.54 272.89 336.7 468.41 649.63 815
DEBT 1027.96 887.82 770.79 539.82 472.62 401
Sundry creditors 45.92 58.55 52.82 50.46 49.01 53.3137
Provisions 3.43 9.74 23.6 50.77 125.79 198.51
Other current liabilities 82.36 84.87 152.82 43.89 61.98 60
Fixed Assets:
Gross Fixed Assets 1592.46 1607.82 1614.12 1669.21 1869.24 2032.5384
Less: Accumulated Depreciation 497.02 575.97 652.51 728.51 805.89 899.2337
Net Fixed Assets 1095 1032 962 941 1063 1133
Investments 60.38 60.34 59.99 62.51 122.49 122.3151
Current Assets, Loans and
Advances:
Purchase 288.96 334.12 318.16 296.8781 266.7734 344.2638
Raw material 12.62 14.53 19.62 30.47 24.23 36
Stores & Spares 22.23 19.41 27.18 22.61 34.02 40.7105
Work in Progress 2.6 2.9 2.7 2.87 3 3.2352
Finished Goods 20.7 13.57 11.77 9.04 14.16 15.5546
Total inventory 58.15 50.41 61.27 64.99 75.41 95.4936
Sundry Debtors 184.29 181.96 173.2 223.11 179.86 170.7272
97
Cash and Bank Balances 24.86 26.84 83.44 29.56 25.97 35.4518
Loans and Advances 54.2 58.52 59.93 86.57 178.27 235
Total Assets 1477.32 1409.92 1399.44 1407.44 1645.35 1792.59
Sales 909.4 1024.31 1073.26 1280.4 1093.95 1215.069
Raw materials, stores, etc. 287.63 335.03 305.3 290.5981 261.6034 325.81
Wages & salaries 33.01 38.84 47.98 46.75 59.51 68.7857
Energy (power & fuel) 319.2 280.05 302.11 108.09 120.66 127.0949
Indirect taxes (excise, etc.) 89.78 99.08 112.69 143.9 151.11 170.27
Advertising & marketing
expenses 7.21 7.68 7.54 8.33 10.37 11.9645
Distribution expenses 0 0.3 0.08 0 0.26 0
Others 30.9 38.58 44.58 51.97 66.53 28.59
COGS 753.03 806.69 822.08 652.3681 664.9234 731.1205
Net Profit -40.78 28.04 63.15 144.28 197.97 186.5556
EBT -40.78 53.28 88.35 269.27 294.68 273.494
INTEREST 125.71 94.87 87.22 61.61 40.57 37.73
EBIT 84.93 148.15 175.57 330.88 335.25 311.224
98
Data of DCW LTD. (In Cr.)
DCW LTD.
Mar
2002
Mar
2003
Mar
2004
Mar
2005
Mar
2006
Share capital 34.5 34.51 34.51 34.51 34.51
Reserves & Surplus 149.73 154.2 169.88 185.68 206.43
DEBT 45.05 49.82 44.72 71.7 130
Sundry creditors 50.07 26.77 27.78 19.33 26.81
Provisions 14.37 16 17.98 20.88 11.87
Other current liabilities 52.81 73.19 91.82 102.03 122.76
Fixed Assets:
Gross Fixed Assets 488.99 497.56 515.94 557.44 630.79
Less: Accumulated Depreciation 208.02 233.43 249.79 268.72 285.13
Net Fixed Assets 281 264 266 289 346
Investments 0.25 0.24 0.39 0.84 11.09
Current Assets, Loans and
Advances:
Purchase 276.57 375.43 445.25 477.24 394.77
Raw material 16.31 21.69 32.81 31.77 32.71
Stores & Spares 14.76 19.54 24.09 19.35 29.9
Work in Progress 0.51 0.78 1.04 0.57 1
Finished Goods 35.03 35.84 38.46 28.09 57.14
Total inventory 66.61 77.85 96.4 79.78 120.75
Sundry Debtors 35.3 38.67 42.42 50.76 52.27
99
Cash and Bank Balances 1.41 6.81 3.04 3.66 3.7
Loans and Advances 9.13 22.32 28.53 61.66 55.81
Total Assets 393.67 410.02 436.93 485.42 589.28
Sales 564.44 655.52 725.17 803.45 703.59
Raw materials, stores, etc. 273.61 365.27 429.58 483.02 383.28
Wages & salaries 39.02 36.3 36.66 35.48 38.81
Energy (power & fuel) 66.64 75.11 77.57 75.92 104.4
Indirect taxes (excise, etc.) 71.98 79.78 89.92 98.15 100.1
Advertising & marketing
expenses 5.44 5.17 5.72 4.34 5.53
Distribution expenses 16.79 9.31 7.44 10.18 10.55
Others 36.77 38.31 42.17 48.95 50.36
COGS 507.26 608.44 686.44 766.41 663.98
Net Profit 15.02 10.4 21.38 21.03 27.27
EBT 16.05 18.01 23.01 23.7 36.35
INTEREST 12.92 10.04 5.67 4.65 7.07
EBIT 28.97 28.05 28.68 28.35 43.42
100
Quarterly Data of GACL (2003-04)
(In Lakhs)
Particulars Jun-03 Sep-03 Dec-03 Mar-04
Sundry Debtors 14781 14680 14963 14675
Loans and Advances 3532 6187 6014 6039
Current Assets 24284 28075 28675 35184
Inventories 4794 4994 5745 6126
Cash 1176 2215 1953 8343
Net sales 21871 25025 24875 24113
Excise duty 2491 2968 2873 2948
Gross Sales 24362 27993 27748 27061
Quick assets 19490 23081 22930 29057
Current liabilities 8614 12100 13344 13858
Gross profit 5360 6158 6105 5953
COGS 19002 21835 21643 21108
Average Inventory 4917 4894 5370 5936
Investments 5849 5849 5847 5846
Net profit 724 1614 1604 2312
Total Assets 130007 133410 132648 137193
Fixed assets 99874 99486 98126 96163
Interest 1892 2152 1850 2019
EBIT 3342 4373 4574 4221
Share Capital 4590 4590 4590 7344
Reserves and Surplus 28514 31350 31292 33671
101
Equity 33105 35940 35882 41015
Debt 86366 82304 77931 77078
Quarterly Data of GACL (2004-05) (In Lakhs)
Particulars Jun-04 Sep-04 Dec-04 Mar-05
Sundry Debtors 14376 16807 19781 19968
Loans and Advances 5997 6438 7371 8657
Current Assest 28447 33043 35686 38081
Inventories 4933 6556 6183 6500
Cash 3141 3242 2350 2956
Net sales 24193 27443 30576 35373
Excise duty 2893 3485 3887 4089
Gross Sales 27086 30928 34463 39462
Quick assets 23513 26487 29502 31581
Current liabilities 14063 15029 15076 14513
Gross profit 8126 9278 10339 11839
COGS 18960 21650 24124 27623
Average Inventory 5530 5745 6370 6342
Net profit 1041 3617 4953 4817
Total Assets 129208 132996 135050 138401
Fixed assets 94915 94107 93518 94069
Interest 1816 1599 1417 1144
EBIT 3948 7522 10254 14371
Investments 5846 5846 5846 6251
Share Capital 7344 7344 7344 7344
Reserves and Surplus 34712 38327 43280 46841
Equity 42055 45671 50624 54185
Debt 67140 64484 57647 53981
102
Quarterly Data of GACL (2005-06)
(In Lakhs)
Particulars Jun-05 Sep-05 Dec-05 Mar-06
Sundry Debtors 18948 18106 17781 16061
Loans and Advances 11083 13986 14184 17827
Current Assets 38423 41554 42131 44027
Inventories 7055 7461 8590 7541
Cash 1337 2000 1577 2597
Net sales 24640 23507 22991 23272
Excise duty 3850 3835 3636 3664
Gross Sales 28490 27342 26627 26936
Quick assets 31368 34093 33541 36486
Current liabilities 20077 19689 19631 23678
Gross profit 8547 8203 7988 8081
COGS 19943 19139 18639 18855
Average Inventory 6777 7258 8025 8065
Net profit 6321 5757 5019 2701
Total Assets 138616 141567 152189 162610
Fixed assets 93942 93762 97807 106334
Interest 1102 1198 825 811
EBIT 9031 8058 6003 7010
Investments 6251 6251 12251 12249
Share Capital 7344 7344 7344 7344
Reserves and Surplus 53161 58918 63937 64963
103
Equity 60505 66262 71281 72307
Debt 41557 38504 43471 47260
Quarterly Data of GACL (2006-07) (In Lakhs)
Particulars Jun-06 Sep-06 Dec-06 Mar-07
Sundry Debtors 17021 16793 17367 17073
Loans and Advances 16772 19689 22689 23529
Current Assets 43050 47560 51715 53697
Inventories 7979 8359 9792 9549
Cash 1278 2719 1868 3545
Net sales 24183 27175 26913 26,213
Excise duty 3854 4472 4411 4,290
Gross Sales 28037 31647 31324 30,503
Quick assets 35071 39201 41924 44147
Current liabilities 26541 31490 31744 31135
Gross profit 8411 9494 9397 9892
COGS 19626 22153 21927 20611
Average Inventory 7760 8169 9075 9671
Net profit 4257 5277 5232 3889
Total Assets 162952 169834 173840 179259
Fixed assets 107653 110028 109883 113330
Interest 837 931 1214 791
EBIT 6024 7478 6793 6587
Investments 12249 12246 12242 12232
Share Capital 7344 7344 7344 7344
Reserves and Surplus 69220 73242 78474 81504
Equity 76564 80586 85818 88848
Debt 40131 37848 37379 40063
104
BIBLOGRAPHY
Websites:
1. www.goggle.com
2. www.gujaratalkalies.com
3. financial management : M.Y.Khan & P.K.Jain
105
106