53714283 Summer Training Project Report (2)

7/30/2019 53714283 Summer Training Project Report (2)

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SUMMER TRAINING PROJECT REPORTAt

SHAH PULP AND PAPER MILLS LTD, VAPI(FROM 1ST MAY 2010 TO 10TH JUNE 2010)

SHRI RAJJU SHROFF ROFEL INSTITUTE OF B.B.A PROGRAMME,VAPI

SUBMITTED TO:VEER NARMAD SOUTH GUJARAT UNIVERSITY, SURAT

GUIDED BY:FACULTIES OF B.B.A

SUBMITTED BY:PRIYANKA TANWAR

ARADHANA SINGHVANRAJ SOLANKIVAIBHAV PATEL

SAURABH SINGH

DECLARATION

We here declare that this project is entirely done our own

research work with the help of employees and website of the

company and is not copied from any other sources.

We hereby would also like to declare that all the

information provided here are true and authentic and is not

provided artificially.


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PREFACE

It is a great pleasure to come forward with such a project

that has fulfilled the needs of our learning desires and has made us

closer to the subject.In this project we have tried to cover all the major

constituents of an ideal project. We do know that, we are still

unpolished stones, which are still to be converted onto diamonds

but as per the requirements of our sylabbi, we have paid utmost

attention to the application part rather than on theoretical part.

We have also tried to avoid any kind of discrepancy of the

matter in the project. However, if there be any suggestions for the

up gradation from our teachers, we are ready to welcome them.

At the end we co-cordially thank Mr. P. R. Mallaya for their

strong guidance and support.

ACKNOWLEDGEMENT

We are very grateful to all those who have co-operated

with us in completing our project report. Without them this

project report could not been completed as easily as it had.

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We are heartily indebted to all the employees of the

shah pulp and paper Mills Limited, especially Mr. P. R. Mallaya

who is the finance manager of the company. Mr. Mallaya has

supported us during the entire training session and provided

us all the needed information that can help us in completing

the project report. Besides him all the employees of the shah

pulp and paper mills Limited co-operated with us and helped

us as much they could.

CONTENTS

Sr no. Particulars

1. Objectives of the project2. Introduction of the firm & details3. Organizational structure4. No. of departments5. Production department6. Quality control department7. Finance department8. Marketing and sales department9. Human resource department10. Conclusion11. Suggestion12. Annexture

OBJECTIVES OF THE PROJECT

TO GAIN THE PRACTICAL KNOWLEDGE.

TO LEARN ABOUT THE PROFESSIONAL

ATMOSPHERE.

TO ADOPT THE PROFESSIONAL BEHAVIOUR.

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TO LEARN HOW TO INNOVATE YOUR IDEAS AND

FULFILL THE MAIN OBJECTIVE OF THE ORGANISATION AND ALSO

THE PERSONAL GOALS.

TO BECOME A HUMAN ASSET.

INTRODUCTION OF THE COMPANY

Shah Pulp & Paper Mills Limited is a Public Limited

Company first incorporated as a private limited Company in

November 1993, vide certificate of incorporation number 11-

74945 of 1993 dated 5thNovember, 1993 issued by the

Registrar of Companies, Maharashtra. The Company wassubsequently converted into a public limited Company vide

certificate of change of name dated 15th March, 1995 issued by

ROC, Maharashtra. The object of the Company, is to carry on

the business of manufacturers and dealers of newsprint. It

was to this end the Company set up a 16,500 TPA newsprint

plant at G.I.D.C., Vapi.

MISSION OF THE COMPANY

For Achieving Market Leadership in Paper

Products.

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Sourcing Worldclass Raw Material from

Internationally Reputed Manufacturers.

To enter the new phase of challenge driven by

commissioning of additional capacity.

Creating strong R & D department to develop new

kind of qualitative paper.

To ensure customers success, provide specially

designed process by which the customer receives

quality products, on time and adequate quantity

HISTORY OF THE COMPANY

SHAH GROUP is closely held public ltd company. The

management of the Company vests with the Board of Directors

headed by Shri Amritlal K Shah. Shri Mahendra H Shah,

Managing Director, looks after the day-to-day activities of the

Company including procurement, production, marketing and

finance. He is assisted by other directors as well as by a team of

qualified and experienced professionals in key responsibility

areas.

The Company is having Associate Concern namely, Shah

Paper Mills limited.

Shah pulp and paper mills Limited supplies to all major and

leading newspapers in India as newsprint is the major segment

of the industry where as substantial demand and supply exist.

Raw material for newsprint is imported from USA, EUROPE

and Latin American companies. The Company lead ahead of its

competitors.

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Plant performance

The Company initially started this unit with an installed

capacity of 16500 TPA. Subsequently looking to the newsprint

demand and supply in the domestic market and to remain

competitive with the other newsprint manufacturer, the

Company has made investments regularly in the existing plant in

due course of business. The Company has borrowed term loans

from IDBI, GIIC and SBI time to time for their expansion project

to increase the installed capacity of the plant as well as to

produce better quality of newsprint.The Company has

concentrated on quality and quantity. The Company has

increased the installed capacity of the plant from 16500 TPA to

18000 TPA in the year 1998-1999, 19800 TPA in the year 1999-

2000, 24750 TPA in the year 2000-2001, 26400 TPA in the year

2001-2002 and 29700 TPA in the year 2002-2003 to 2003-04 and

33250 TPA in 2005-06. Currently, the installed capacity of the

plant is 36000 TPA.

LOCATION OF OFFICES,BRANCHES AND FACTORIES

REGISTERED OFFICE AND MANUFACTURING CENTER:

5202,3rd PHASE

GIDC VAPI:396195

GUJARAT(INDIA)

TEL(0260)2400248.

CORPORATE OFFICE:

ANGELINE APARTMENT,B/202,

JUNCTION OF OLD POLICE STATION ROAD

& SAROJINI ROAD,VILE PARLE(W),

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MUMBAI:400056

E-MAIL:[email protected]

[email protected]

LOCATION OF THE PLANT

PLANT ADDRESS:

PLOT NO.97,SILVASSA ROAD,

GIDC,VAPI-396 195

GUJARAT(INDIA)

TELO260)2425858

PLANTS LOCATION IN VAPI HAS FOLLOWING ADVANTAGES:

ON NATIONAL HIGHWAY.

180 KM FROM MUMBAI.

ADVANCED INFRASTRUCTURE

WATRE FILTERATION PLANT SO WASTE OF WATER IS

CONTROLLED.

ORGANISATIONAL STRUCTURE

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OF SHAH PAPER MILLS LTD.

NO OF DEPARTMENTS

8

BOARD OF

DIRECTORS

DIRECTORMANAGING

DIRECTOR

PRODUCTION

MANAGER

SUPERVISORS

LABORATORY

INCHARGE

MACHINE

OPERATOR

WORKERS

ASSISTANTS

ACCOUNT

MANAGER

ACCOUNTS

ASSISTANT

COMPUTER

OPERATOR

CASHIER

TELEPHONEOPERATOR

PERSONNEL

INCHARGE

DESPATCH

CLERK

STORES


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SR

NO.

NAMES OF THE DEPARTMENTS.

1. Production department

2. Quality control

3. Finance department

4. Marketing and sales department

5. Human resource department

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PLANS OF PRODUCTION

PRODUCTION PLAN OUT OF SALES PLAN

In SHAH PULP due to tough competition and other factors,

they everyday do production planning. General Manager of

production department, Quality Control head of SHAH PULP

have meeting and also production planning.

MATERIAL REQUIREMENT PLAN AND PURCHASE

On the basis of the orders mentioned in the previous point,

production department issues raw material from stores.

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For example, if 100kg of a particular raw material is required by

production department, stores will give it if its available

otherwise it would place orders to its supplier of raw material.

ANALYSIS OF PLANT LOCATION

The main factor affecting plant location is its sequence. Here

in SHAH PULP the finished product i.e. paper roll are send for

newsprint in the press printing.

Sequencing and transportation, these are the major factors

affecting location of the plant.

PRODUCTION PROCEDURE

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SortingRM loaded to pulp

mill

Chemicals added Screening

Dying process

Refining

Fan pump

Ready for finalprocess

Wire

Dryer

Rewinder

final product

QC

DISPATCH

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TYPES AND CLASSES OF MATERIAL HANDLING EQUIPMENTS.

controlled movement of material from receipt, through

storage and production and up to the shipment of finished

products is known to be MATERIAL HANDLING

The equipment used for this purpose is called material

handling equipments.

In SHAH PULP the following materials are used

1. CLASSIFICATION ON THE BASIS OF FORM OF MATERAIAL:

According to classy there can be three broad categories:

For solid materials

o Lifts

o Conveyer belts

o Drum trolleys

For liquid materials

o Pipes

o Tanks

for gaseous materials

o pipe lines

2.CLASSIFICATION ON THE BASIS OF PATH

variable path

o drum trolleys

fixed path

o pipe lines

o conveyer

o lifts

3.CLASSIFICATION ON THE BASIS OF AUTOMATION

Semi automatic handling system

o Conveyer belts

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o Lifts

Manual system

o Hand carts

INVENTORY CONTROL SYSTEM

SHAH PULP follows a very simple inventory control system

process.

ABC analysis:-

The purpose of ABC analysis for which SHAH PULP follows this

analysis is because of the lab test and different types of

papers.

They sum up the materials rate amount, freight and C.S. and

get the value of the material.

STORES DEPARTMENTS MATERIAL RECEIPT AND ISSUE PROCESS

For the stores department the most important document is the

G.R.N. i.e. Goods Received Note.

It contains the most of the information like,

Suppliers name

Suppliers challen no.

Material received

Quantity received Approved quantity

L.R. number

Vehicle number

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Time of arrival of material

Purchase order date

MATERIAL RECEIPT PROCESS

As the goods enter the company premises G.R.N. is

prepared.P.O. i.e. purchase order is compulsory to receive

the material. The material entered is kept on weighing

machine and verified whether the qty is okay, it is then

unloaded in stores.G.M. is informed about the receipt of

material.

MATERIAL ISSUE PROCESS

Material issue process is simple in SHAH PULP. The plant

which needs any material, be it RM , they give a requisition

slip to the inventory department. On the basis of the

requisition slip inventory department allocates material to

the concern department according to REQ.NO i.e. requisition

number. As the material is issued on the port as all the

material comes through ship.

DOCUMENT RELATED TO RECEIPT AND ISSUE OF MATERIAL

The document related are as follows:

Gate register number

Store inspection by concerned department.

GRN being prepared by stores.

GRN being passed by concerned authority.

MAINTENANCE PLANNING SYSTEM

Maintenance is well planned in shah pulp. This department

consists of main head and workers.It works at three levels. they are as follows:-

1.REGULAR MAINTENANCE:-

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This level consists of maintaining machines at a regular period

of time. It includes checking of bearings, belts and other such

parts. this activity is done periodically.

2. PREVENTIVE MEASURES:-

It is an activity where parts of machines are repaired or

replaced before they are actually gets damaged and result into

some large and serve losses. For example :- welding of any part

before it is damaged completely.

3.BREAK DOWN:-

If any plant machinery undergoes breakdown, the plant in

charge or production head will inform maintenance department

through break-down slip. After receiving the slip, maintenance

department head would send his workers to breakdown area. In

the breakdown slip following details are filled:

Machine details, timings of breakdown, nature of breakdown.

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QUALITY CONTROL SYSTEM

QC is mostly done of three levels. In shah pulp, the quality of

the material is checked at RM level, work-in-process level and

finished goods level.

1.RAW MATERIAL:-

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For controlling the quality of the material, it starts testing the

RMthe company uses for manufacturing its goods. After

purchase dept. receives the RM ordered previously, it prepares

G.R.I.N., Showing amount of goods i.e. RM entered in the

company.

This is stored in the warehouse making store head aware of the

details of the material.

The store head prepares format of RM, G.R.I.N. and is

forwarded to the QC dept.

As QC dept. receives RM, G.R.I.N. it takes a sample of the RM

from store for testing purpose.

Each RM has to posses certain specifications. The presence and

absence of each specification is monitored while QC dept. does

testing.

The RM used are mixed waste, old news papers, over issued

newspapers, magazines. The RM is imported from foreign

country like European, Latin and U.S.A.

2.WORK-IN-PROCESS MATERIAL:-

In shah pulp everyday, production head, QC head, and unit

head have meeting and decide the product to be manufactured

for that day. The different types of chemicals are used to

remove the printed ink on the paper like hydrogen peroxide,

bleaching powder, diesel, washing powder.

In QC dept, premix sheet is prepared, which includes :

Number of RM required for the product

Name of the RM

This premix sheet is sent to the prod. Dept. and according to

the details stated prod. Dept. orders RM from stores and prod.

Starts.

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As and when required, prod. Dept. sends work-in-process

samples to QC dept. for testing. Here also different tests are

applied for different goods and its different grades.

After testing QC MEMO is prepared where the result of the test

are mentioned. It also states if any specifications are missing in

the product. If there is any drawback, it is also marked in QC

MEMO. This is sent to the prod. Dept. they make the

modifications in its manufacturing and do further production.

3.FINISHED GOODS

After final product is manufactured, it is also tested by QC

dept. in the final product same specification as in semi-finished

product are required only few additional mechanical properties

are required like:

Tensile strength

Cross bracking strength

Electrical strength surface

Volume strength

Shrinkage is detected

After testing these properties in the final product QC dept.

verbally informs prod. Dept. about the reliability of the

products and get daily production deposition slip from the

prod. Dept.

This slip specifies the following:-

Grade

Bags*kgs

Total qty

Batch no.

Remarks

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Now finally, when the product is forwarded to the prod. Dept.

after being approved and then the final product is forwarded to

dispatch dept.

And their the final product is packed and dispatched according

to sizes and different qty.

DOCUMENTS KEPT IN QC DEPT

goods receipt no.

goods received inspection report

premix sheet

QC MEMO

Daily production deposition slip

Certificate of product conformity

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FINANCIAL POSITION OF THE FIRM ON THE BASIS OF KEY

WORKING CAPITAL RATIOS

Ratio Formulae Result Interpretation

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Stock Turnover

(in days)

For imported stock:

Average StockX 365/Cost of =[(833*+2210*)/2]

Goods 5800* X (365)

Sold

For indigenous stock:

Average Stock

X 365/

Cost of =[(644*+223*)/2]

Goods 3768* X (365)

Sold

*THE AMOUNT GIVEN IS IN LAKH

= 96

days

= 42

days

On average, company turns over the value of its entirestock every 96 and 42 days.

Obsolete stock, slow moving lines will extend overall

stock turnover days. Faster production, fewer productlines, just in time ordering will reduce average days.

Receivables

Ratio

(in days)

Debtors x 365/Sales =1115* x 365*

7661*


= 53

days

It takes company on average 53 days to collect monies

due to the company. One or more large or slow debts

can drag out the average days. Effective debtor

management will minimize the days.

Payables Ratio

(in days)

Creditors X 365/

Cost of Sales = 1904* X 365(Or Purchases) 6960*


= 100

days

On average, company pays to its suppliers every 100

days. If company negotiates better credit terms this

will increase. If company pays earlier, say, to get adiscount this will decline. If company simply defers

paying its suppliers (without agreement) this will also

increase - but companys reputation, the quality of

service and any flexibility provided by its suppliers

may suffer.

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Current Ratio

Total Current Assets/

Total Current = 4754*Liabilities 2611*


= 1.82

Times

Current Assets are assets that the company can readily

turn in to cash or will do so within 12 months in thecourse of business. Current Liabilities are amount

company is due to pay within the coming 12 months.

For example, 1.5 times means that company should be

able to lay its hands on Rs1.50 for every Rs1.00

company owe. Less than 1 times e.g. 0.75 means that

company could have liquidity problems and be under

pressure to generate sufficient cash to meet oncoming

demands. But the ratio shows that company is in good

position.

Quick Ratio

(Total Current Assets - Inventory)/ =4754*-2677*

Total Current 2611*

Liabilities

*(THE AMOUNT GIVEN IS IN LAKH)

= 0.79

Times

This figure takes account of the fact that it may take

time to convert inventory into cash.

Working

Capital Ratio

(Inventory + Receivables

- Payables)/

Sales =2677*+1115*- 1904*7661*

*(THE AMOUNT GIVEN IS IN LAKH)

25 % of

Sales

This percentage means that working capital needs are

not so high relative to companys sales.

The following, ratios are important measures of working capitalutilization.

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WORKING CAPITAL RATIOS SHOWING LIQUIDITY OF THE FIRM

The Current Ratio:

The current ratio is also known as the working capital ratio andis normally presented as a real ratio. That is, the working capitalratio looks like this:

Current Assets: Current Liabilities = x: y e.g. 1.82: 1

So here is the information to help us work out The Shah pulp

and paper mills current ratio.

Consolidated Balance Sheet 31 March 2009 31 March 2008

In lakh In lakh

Total Current Assets 4,754 3,115

Creditors: 1,904 1,064

Current Ratio For The Shah pulp and paper mill

31 March2009

Current Assets: Current Liabilities 475,378,554:

261,172,653

1.82: 1

31 March2008

Current Assets: Current Liabilities 311,525,549:

149,242,328

2.08: 1

We got the ratio 1.82: 1 for the year ended 31 March 2009 was

to divide the current assets by the current liabilities and thatgives us:

Current assets=

475,378,554 =

1.82

Currentliabilities

261,172,653

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So we automatically know that the ratio is 1.82: 1

The same with the year before:

Current assets=

311,525,549 =

2.08Currentliabilities

149,242,328

So these ratios shows that companys liquidity position wassuperior in 2008as compare to 2009.Although in 2008 companysliquidity position is not bad or we can say its very good becausethe ratio 1.82:1 shows that the company is able to lay its handson Rs1.80 for every Rs1.00 company owe. It means thatcompany can generate sufficient cash to meet oncomingdemands.

These are the additional information, which help in the analysis.

Current assets 2009In

lakh

2008In lakh

Stock 2,677 1,146

Debtors due within one year 1,115 1,110

Cash at bank and in hand 27 22

Loans and advances 695 638


Creditors: Amounts falling due within oneyear

1,904 1,064

Provision for taxation 369 282

Other liabilities 338 146

Total liabilities2,611 1,492

Net current assets (liabilities) 2,143 1,623

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The Acid Test Ratio:

The acid test ratio is also known as the liquid or the quick ratio.The idea behind this ratio is that stocks are sometimes aproblem because they can be difficult to sell or use. That is, eventhough a supermarket has thousands of people walking throughits doors every day, there are still items on its shelves that don'tsell as quickly as the supermarket would like. Similarly, thereare some items that will sell very well.

Nevertheless, there are some businesses whose stocks will sellor be used slowly and if those businesses needed to sell some oftheir stocks to try to cover an emergency, they would bedisappointed. Engineering companies can have their materials instock for as much as 9 months to a year; a greengrocer shouldhave his stocks for no longer than 4 or 5 days - a goodgreengrocer anyway.

We'll look at the stock turnover ratio in detail later but here'sthe acid test ratio for The Shah pulp and paper mill.

Acid Test Ratio = (Current Assets - Stocks): Current Liabilities

We can take the figures we need from the current ratio sectionand then do the calculations. Here are the acid test ratios for theyear ended 31 March 2001:

Acid Test Ratio For The Shah pulp and paper mill.

31 March2009

Current Assets - Stocks: CurrentLiabilities

4754*-2677*: 2611* 0.79:1

31 March2008

Current Assets - Stocks: CurrentLiabilities

3115*-2145*: 1492* 0.65:1

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NOTE: *THE AMOUNT GIVEN IS IN LAKH

We need to put the current and acid test ratios side-by-side tohelp us to understand what is happening to the business:

Comparison

Current

Acid Test

2008 1.82: 1 0.79: 1

2009 2.07: 1 0.65: 1

The fact that the differences between the current and acid testratios are too large tells us that the Shah pulp and paper millstocks are too large. The stocks are worth around Rs. 2,677 lakhin 2009,BUTsince current assets are Rs.4,754 lakh, that's a hugelevel of stock holdings. But yes the difference between thecurrent ratio and acid test ratio in 2009is lower as compare to2008,so this is a good indication for the company.

Additionally, the acid test ratio has increased over the two-yearperiod, meaning that the Shah pulp and paper mill has astronger liquidity position than it had before. Normally that is a

good thing.

Bottom of Form

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Return on Working Capital:

.

Consolidated Profit and Loss

Account

31 March

2009

31 March

2008

In lakh In lakh

Profit before interest and taxation 729 657

Total Fixed Assets 4,500 4,200


ROWC For The Shah pulp and paper mill.

31 March2009

Profit before Interest andTaxWorking Capital

729*2143*

= 34 %

31 March2008

Profit before Interest andTaxWorking Capital

657*1623*

= 41%


These are the additional information, which help in the analysis.

Current assets 2009In

lakh

2008In lakh

Stock 2,677 1,146

Debtors due within one year 1,115 1,110

Cash at bank and in hand 27 22

Loans and advances 695 638


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1,904 1,064

Provision for taxation 369 282

Other liabilities 338 146

Total liabilities2,611 1,492


There has been a decline in ROWC in 2009as compare to2008.Although this difference is not too large but still companyshould do check on its working capital and all the expenses.

Return on Capital Employed Ratio:

The Return on Capital Employed ratio (ROCE) tells us how muchprofit the company earns from the investments the shareholdershave made in the company. Think of it this way: if we had asavings account with a bank and we'd been paid, say, Rs.25interest at the end of a year; and we had saved Rs.500, we couldwork out the rate of interest we had earned:

Rate ofinterest

= Interestearned *100

= 25 *100

= 1 *100

=100=5%

Amount saved 500 20 20

So, we have earned 5% interest on our savings.

Imagine now that instead of talking about a savings account, wewere talking about a company and the profit for the year and itscapital employed had been Rs.25 and Rs.500 respectively thenthe ROCE for that company would be 5% too.

ROCE =

Profit for the Year

*100

=

25

*100

=

1

*100

=

100

=5%

Equity Shareholders'Funds

500 20 20

We have used the Equity Shareholders' Funds instead of CapitalEmployed. In fact, they are different names for the same thing!We could call the ratio the Return on Shareholders' Funds

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(ROSF) just as easily if we wanted, but generations ofaccountants consider it as ROCE.

In accounting, there can be different definitions of what certainterms mean. The use of the term 'capital employed' can meandifferent things. It can, for example, include bank loans and

overdrafts since these are funds employed within the firm.

There is the Calculation of ROCE for the Shah pulp and paper millnow; and here are the figures:

The Shah pulp and papermill

31 March2009

31 March2008

In lakh In lakh

Profit for the financialperiod

728.81 654.14

Equity shareholders' funds 2,837.45 2,463.33

For 2009

ROCE =Profit for the Year

*100

=728.81

*100

=25.71%

Equity Shareholders'Funds

2837.45

For 2008

ROCE =

Profit for the Year*

100 =

654.14*

100

=26.55

%Equity Shareholders'Funds

2463.33

So the percentage shows that return on capital employed isalmost similar for both the year 2008and 2009.

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ROCE for the year 2009is almost 26% thats a good percentageby all standards. This is a good result as it shows that thebusiness is effectively earning around 26% on the (investment)funds that the shareholders have invested in the Shah pulp andpaper mill.

:

Working Capital Management II:

What we are about to study - stock, debtors and creditorscontrol - are all part of working capital management in the sameway that a discussion of liquidity was part of working capitalmanagement.

We know that working capital is concerned with the ability of abusiness to be able to pay its way. The three ratios we areconcerned with now are concerned with spending and savingmoney in the right places. Too much stock and we waste moneyon buying it and keeping it. Too much money loaned to ourdebtors and it's money we can't use for something else, such as

buying machinery, paying our creditors or even investing it. Toomuch money in the form of creditors and we might have aproblem that no one else will give us credit for anything elsebecause they think we can't afford it, and, if we suddenly have acash problem, we might not be able to pay our creditors.

Working capital management is concerned with the controlaspects of the issues.

Stock Turnover: stock control:

In principle, the lower the investment in stocks the better. Apart

from buffer stocks that businesses sometimes need in case ofshortages of supply and strategic stocks in case of war, suddenchanges in demand and so on, modern stock control theory tellsus to minimize our investment in stocks.

The formula for this ratio is:

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StockTurnover

=

AverageStocks

(Cost ofSales/365)

The Shah pulp and paper mill ConsolidatedProfit and Loss Account

31 March2009

31 March2008

In lakh In lakh

Cost of sales 6960 6810

Stock 2677 1146

Stock Turnover Ratio for the Shah pulp and papermill

31 March 2009 2677*6960* / 365

140 days

31 March 2008 1146*6810* / 365

61 days


Firstly, the result of this calculation is that the answer isinstantly in terms of the number of days, on average, thatthe stocks are held in the business.

Secondly, we use the cost of sales figure because stocksare bought and shown in the profit and loss account andthe balance sheet at cost; so we need to compare like withlike.

Thirdly, we only have two years' worth of stockinformation, so we can't use the average stock for both

years, as we should do according to the formula.

This ratio has increased from 61 days to 140 days becauseinvestment in stock has increased 57% over the two years andthat is probably not a good thing. This shows that the companyneeds 140 days to sell inventory it means that so mush cash istied up in inventory which is not a good sign for the company

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because If there's less stock to worry about, lower investment instocks meaning that the money they used to have tied up in thestock room is now free to spend somewhere else. But now largeamount of investment is done in inventory, company should docheck upon it.

Debtors' Turnover Ratio:

In the same way that stock control is a vital aspect of workingcapital management, so too is debtors' control. Many businessesneed to sell their goods on credit, otherwise they might find itdifficult to survive if their competitors provide such creditfacilities; this could mean losing customers to the opposition.

Nevertheless, since company does provide credit, it must do soas optimally as possible. It doesn't necessarily mean the bestpossible, but the best possible under the circumstances.

There are good reasons why the company allows people to payon credit even though literally it doesn't make sense! If thecompany allow people time to pay their bills, they are morelikely to buy from it than from another business that doesn'tgive credit.

The length of credit period allowed is also a factor that can helpa potential customer decide whether to buy from your companyor not: the longer the better, of course.

Why is credit control so important? For the Shah pulp and papermill total amount owing by debtors was Rs.1115lakh at the endof 31 March 2009,which as a percentage of total assets, is12.09%. That's a lot of money in absolute terms.

What we need to know, though, is how the company iscontrolling these debtors. We can do that by looking at their

debtors' turnover ratios for the two years, firstly.

Shah pulp and paper mill 31 Mar2009

31 Mar 2008

In lakh In lakh

Turnover 7,661 7,372

Debtors due within one

year

1,115 1,110

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The formula for debtors' turnover is:

Debtors'Turnover

=Average

Debtors

Credit Sales/365

We have to assume, by the way, that all sales are credit salesunless we know which sales are for cash.

The calculations:

Debtors Turnover Ratio for the Shah pulp and papermill

31 March 2009 1,1157,661 365

53 days

31 March 2008 1,110

7,372 365

56 days

Firstly, the ratio seems to have good by going from 56 to 53days over the two years; but we can not say that this ratio isgood because it means that, on average, the Shah pulp andpaper mill debtors are taking one and a half months or we cansay two months to pay their accounts.

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Creditors' Turnover Ratio:

Creditors are the businesses or people who provide goods andservices in credit terms. That is, they allow the company time to

pay rather than paying in cash.

Creditors will need to optimize their credit control policies inexactly the same way that the company did when it wasassessing its debtors' turnover ratio - after all, if you are mydebtor I am your creditor!

Company takes credit but it needs to control how much itshould, how often and for how long. There are the calculationsfor Shah pulp and paper mill:

The formula for this ratio is:

Creditors'Turnover

=Average

Creditors

(Cost of Sales/365)

As with the stock turnover ratio, creditor values relate to thecosts of raw materials, goods and services, which is why we usethe cost of sales, figure in the denominator.

Shah pulp and paper mill 2009 2008

Inlakh

In lakh

Cost of sales 6,960 6,810


1,904 1,064

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Creditors Turnover Ratio for the Shah pulp and papermill

31 March 2009 1,9046,960 365

100 days

31 March 2008 1,0646,810 365

57 days

We interpret this ratio in exactly the same way as the debtors'turnover ratio. Having found that debtors are taking somewherebetween 45 and 60 days to pay their accounts, notice that the

business is taking over three months credit for itself in 2009andabout two months' credit in 2008.

The ratio has drastically increased by going 57 to 100 over thetwo years which shows that the company now takes threemonths to pay its accounts as compare to two months in 2008.Itsgood but company should take it in mind that with theincreasing number of Days, Companys reputation, the quality ofservice and any flexibility provided by its suppliers may suffer.

CASH BUDGET FOR THE SHAH PULP AND PAPER MILL

Net Cash Inflows

2009 2008(In lakh) (In lakh)

Sales 7,661 7,372

Other incomes 42 24

Total payments 1,904 1,063Net CF 5,799 6,333

Net Cash Inflows:

2009 2008

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(In lakh) (In lakh)

Cash at start 27 22

Net CF 5,799 6,333

CumulativeCash 5,826 6,355

CALCULATION OF CASH CONVERSION CYCLE FOR

THE SHAH PULP AND PAPER MILL

Cash conversion cycle = Inventory conversion period (in days) +Debtors conversion period (in days) - Creditors deferral period

(in days)

Where

Inventory conversion period = Raw material conversion period(RMCP) + Work-in-progress conversion period (WIPCP) +Finished goods conversion period (FGCP)

Raw material conversion period (RMCP) = 1795/(4920/360)= 131days.

Work-in-progress conversion period (WIPCP)=637/(6424/360)=36days.

Finished goods conversion period (FGCP)=76.45 /(6565/360)=4days.

Hence

Inventory conversion period=131+36+4=171 days

Debtors conversion period=1115/(7661/360)=52 days.

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Creditors deferral period=1904/(6960/360)=100 days.

Cash conversion cycle=171+52-100=123 days.

Note: THEENTIRE AMOUNT GIVEN IS IN LAKHS.

SALES TURNOVER COMPARATIVE

OF 2008 AND 2009.

YEAR SALES TURNOVER

(In crores)

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2008 92

2009 82

S A L E S S C E N A

Y E A R , 1 , 20 Y E A R , 2 , 20

S A L E S

T U R N O V E R , ,

920000000S A L E S

T U R N O V E R , ,

820000000

0

100000000

200000000

300000000

400000000

500000000

600000000

700000000

800000000

900000000

1000000000

1 2

YEA

SALES Y E A R

S A L E S TU R N O

COMPARATIVE BALANCE SHEET OF THE YEAR 2008 AND 2009

PARTICULARS 2009 2008 ABSOLUTE IN PERCENTAGE

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SOURCES OFFUNDS

SHARE HOLDERSFUND

(incrores)

(incrores)

Share capital 11 11 0 100

Reserves and surplus 17.38 18.85 (1.47) 7.79

Total 28.38 29.85 (1.47) 4.92

LOAN FUND

Secured loans 16.93 2.29 14.64 639.3

Unsecured loans 12.65 4.69 7.96 169.7

Total 29.58 6.98 22.6 323.7

APPLICATION OFFUND

Gross block 43.96 46.58 (2.62) 5.62

Less: depreciation 15.44 17.53 (2.09) 11.92

Net block 28.52 29.05 (0.53) 1.82

Investments 51.39 50 1.39 2.78

Land 2.76 2.76 0 100

Tax 54.34 11.04 43.3 392.2

Current assets 4.754 3.115 1.639 52.61

Less : currentliabilities

2.611 1.492 1.119 75

Net current assets 2.143 1.623 0.52 32.03

GRAPHICAL REPRESENTATION

OF THE COMPARATIVE BALANCE SHEET

OF THE YEAR 2009 AND 2008

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0

1 0 0 0 0 0 0 0 0

2 0 0 0 0 0 0 0 0

3 0 0 0 0 0 0 0 0

4 0 0 0 0 0 0 0 0

5 0 0 0 0 0 0 0 0

6 0 0 0 0 0 0 0 0

7 0 0 0 0 0 0 0 0

8 0 0 0 0 0 0 0 0

Y E A R L IA B IL IT IE S A S S E T S

S e r i e

S e r i e

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TYPES AND CLASSIFICATION OF PRODUCTS

SHAH PULP & PAPER LTD is a non-marketing organization asthey are manufacturer of inters mediate media in the country.

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They have a dealers network. They export their products to Srilankans and china.

The company is manufacturing the Newsprint-Medium GradePaper and the company sells Newsprint directly to Newspapersas well as through dealers. The company is having very good

marketing and distribution network all over the India. Thecompany is supplying Newsprint to all the major and leadernewspapers in India. The demand of the product is very goodand market is very potential. Newsprint is the only majorsegment of the paper industry where a substantial demand andsupply gap exists. The company has never found any difficulty tosupply the entire products in the Indian market.

Shah pulp & PAPER LTD. Is leading manufacturer ofcrafts paper,writing & printing paper & newsprint.

NEWS PRINT IS MAINLY DIVIDED INTO THREE CATEGORIES:

PRIME

SUPER DELUX

SPECIAL SUPER DELUX

As we are mainly concerned with newsprint, our focus is to studythe newsprint unit of the organization.

CATEGORY OF NEWSPRINT

1.PRIME:- its the most used paper category by the local and

small print media centers. Its the lowest in quality, cheaper inprice & light shaded. It uses mixed & ONP(old news paper).

2.SUPERDELUX:betterthanthe above category. Its brighter inshade, its price is more than prime. It uses special onip as rawmaterial.

3.SPECIAL SUPER DELUX:- Its made of the most superior quality.Its costlier than the above mentioned category. Its best inevery aspect and brightest of all. It also uses special onip as rawmaterial.

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SALES PROCEDURE

SHAH PULP & PAPER LTD. Its a dealers network organization.They deal directly with their customers. The dealers send indentor orders to the sales department.

The indent consist of the following information:-

Grade

Quantity Rate

Date

Mode of payment

Mode of dispatch

Transporters name

Freight, etc.

All this information is entered in the computer system andproduction according to the indent is manufactured withrequired qty. if the production is carried out in required rate

then invoice is prepared.

An invoice contains invoice no.,party name, mode of payment,mode of dispatch etc.

If the Rate is not valid order is rejected.

MARKETING CHANNEL

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SHAH PULP & PAPER LTD. Deals with consumer products.Therefore, only one marketing channel exists.

DOCUMENTS OF SALES:-

INDENT

INVOICE

GATE PASS FORM 45(SALES TAX)

TAXES APPLICABLE ON SALES

As far as newsprint is concerned they have to pay 0.125% CESSi.e. central excise secondary sess to be paid.

And after the earthquake they have to pay education (cess) onthe basic value of 0.125%. Basic value +cess+2% sales tax, ifthe product is carried to the other states. And if it is within theboundaries of the state than 5% Gujarat state vat is charged. 2%

MANUFACTURER

DEALERS

CUSTOMER

FINAL CONSUMER

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is against the sea form or else 5% tax is to be paid. 0.15% transitinsurance is paid.

Freight charges, sales bills, challan no., excise invoice is a mustused document in manufacturing industry.turnover of 50 lacs ormore than commercial invoice is prepared. It goes with

transporters during loading.

PURCHASE PROCEDURE

Purchase procedure is done only from the approved supplier. Allsuppliers supplying prior to the system effective data aredeemed to be evaluated. The type and extend of control appliedon the suppliers is based on the suppliers performance and theeffect of the supplied product on the quality of final product.

The criteria for the selection of new suppliers are:-

Previous experience

Customers recommendations.

Data source available on internet.

The inclusion of such suppliers is based on their clearance ofthe product being as per raw material sheet and commercialterms as per the requirement by the firm.

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The re-evaluation of the supplier is done on the basis of thequality performance of the supplier. The quality rating iscalculated on a monthly basis.

PURCHASING INFORMATION:-

Purchasing information is gives to the suppliers through thepurchase order, i.e. P.O. It contains the details such as:

Specifications

Price

Quantity

Packing

Delivery date

Mode of transportation

Credit

Quality system requirement. If any

Verification of purchased product.

The QC DEPT. does the verification of the purchased product toensure that all the requirements are incorporated in the productas per specification in the p.o.

DIFFERENT DOCUMENT OF PURCHASING:

Purchase order

Purchase register

Indents

CUSTOMERS LIST

SR.NO. NAMES

1 The Sandesh ltd.

2 Divya bhaskar

3 Dainik Bhaskar

4 Jagaran group

5 Lokmat etc.

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6 Bombay samachar

SUPPLIERS LIST OF

SHAH PULP & PAPER LTD.

SR.NO. CATEGORY NAMESINDIGENOUS

RAW MATERIAL1. Mayur paper mart2. Paras papers

CHEMICALS1. Agarwal coal corporation2. Maheswari builders3. G.M.D.C4. Kemoax corporation5. Nikhil epec chemicals6. Shah chemicals

STORES &SPARES, WIRES

& FABRICS.1. Paper international2. V.G. recycling group3. Gautam enterprises

PRICE LIST

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PRODUCT

NAMES

PRICES

(PER METRIC TONNE)

Prime 21000 Rs/-

Super deluxe 22500 Rs/-

Special super deluxe 26000 Rs/-

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HUMAN RESOURCE PLANNING

In SHAH PULP & PAPER LTD. Human resource planning is aoutcome of four steps.

They are as follows:-

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1. Determining job specifications

2. Analyzing job responsibility and workload.3. Forecasting human resource demand & supply.4. Finalize the no. of personnel required with eligibility.

Thus in this way human resource planning process is completed.

Let us know right now what are the total no of employeesworking in the firm.

CATEGORY NO. OF EMPLOYEES

Staff 71

workers 185

Contract labours 350

TOTAL 606

RECRUITMENT PROCEDURE

The recruitment procedure in SHAH PULP & PAPER LTD.Comprises of the following few steps:

Recruitment process starts when the head or manager of theconcern dept. reveals that there is a vacancy for a particular job.

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When the head reveals a vacancy, the first step in this directionof employing people is requisition of workers for the vacancyarises. This requisition should clearly state the following:

Name and specification of the job.

Jorate of pay

Time bounded ness i.e. full time or part time.

Temporary or permanent

Age limit

Sex

Special qualification and skills required.

Thus by preparing such form the company gets the detailedinformation about kind of employee to be advertised andrecruited.

SOURCES OF RECRUITMENT

In SHAH PULP & PAPER LTD. They firstly make a study of thevacancy with regard to its urgency and need and decide whetherit should be fulfilled through internal or external source.

1. Internal source:- Internal sourcesinclude promoting or transferring aperson who is already working withthe firm.

2. External source:- The variousexternal sources include:

Advertisement

Labour contractors

Personal sources

Placement agencies

Gate recruitment

After gathering a pool off employees from the above-mentionedsources they collect their biodata and carry on with theirselection process.

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SELECTION PROCEDURE

Selection is the process of picking individuals with requisitequalification and competence to fill jobs in the firm.

The selection procedure comprises of the following steps:-

1. General interview2. Application blank3. Depth interview4. Medical test

PROMOTION, DEMOTION & INCREMENT POLICIES

PROMOTION AND INCREMENTS

SHAH PULP & PAPER LTD. Promotes an employee in merit basis.Every month they evaluate the performance of the employees bygiving targets. The employee fulfilling the target getsappropriate promotion. The promotion also depends uponsincerity, regularity and performance.

Same rules are applied for increment purpose.

DEMOTION

In SHAH LTD. If any employee is not able to perform as permanagement targets, management will not provide any

increment or opportunity for future advancement.

INDUCTION & TRAINING

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In SHAH LTD. When a new employee is placed, he has to spentthree days in each department to understand the overallfunction and methods of the organization and staff.

Here, qualification and experience of an employee is comparedwith existing nature of the job and the requirement of training is

identified by the department heads and to personal head andtraining is planned.

After getting trained, three months evaluation is carried out.This is done to check the improvement of work.

The probation time period is 6 months for middle levelemployees.

METHODS OF TRAINING

Here, on the job methods are being implemented.

They are as follows:-

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WAGES AND SALARY ADMINISTRATION

SHAH industries is a large industry, thus proper administrationof wage and salary is important. Here the company followspunch card system.

SEMINARS

CONDUCTE

D BY

ASSOCIATIONS

VESTIBULE

TRANING

TRAINING

FULFILL

MENT

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In this system each employee is provided with a particular cardand has to punch his or her card as they enter and exit thecompany premises. It is done at the entrance in the securityroom.

There are three types of leaves allowed:

1. P.L.(Privilege leave) :There are 30 P.L. forstaff members and 15 for workers.

2. C.L.(Causal leave) :There are 10 paid holidays per year.3. S.L.(Sick leave) :There are 7 S.L. for each employee.

Against each employees absence he has to submit leave forms.Also, wage and salary distribution is with conformity withgovernment rules.

According to details available from time keepers with the help

of the punch card system, initially discussed, wage and salary iscalculated as per the working hours of the employees.

Thus company follows TIME WAGE SYSTEM.

They consider overtime offered and leaves taken and based onpunch cards information, company prepares salary sheet andwages and salary is distributed among the employees.

On the recommendation of department head in terms of facilityor increments is a motivational tool of the firm.

The daily wages paid to a worker irrespective of gender andskills are 106.5 RS/- Per head in SHAH PULP & PAPER LTD.

Therefore, the monthly wages are 3200 RS p.m.

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COMPENSATION STRUCTURE

PARTICULARS PERCENTAGE OF ALLOWANCES

BASIC _

HRA 10%

CONVEYANCE 10%

MEDICAL 5%

PF 12%

ESIF 6.5%

BONUS 8.33%

ESIF stands for employees state insurance fund.

WELFARE ACTIVITIES

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The following services are being provided to SHAH LTD.Employees:-

ACCOMODATION FACILITY.

SAFETY FACILITY such as gumboots, masks, apron for lab

technicians etc. MEDICAL FACILITY as the employees are provided withgroup medical insurance and yearly medical checkup for allemployees is mandatory.

REST ROOMS

PURE & COLD DRINKING WATER.

LUNCHROOM for staff and workers.

ADEQUATE LIGHT AND VENTILATION FACILITY.

UNIFORMS to workers at production area.

These facilities are provided to workers at lower cost than theactual cost.

CONCLUSION

The working capital management of the company is

good. Its working capital is:

Current Assets- Current Liabilities

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475,378,554- 261,172,654= 214205900

Which shows that company has good amount of working

capital, which can be very useful for the company in meeting

its oncoming demands. And it has sufficient cash flow tosatisfy both maturing short-term debt and upcoming

operational expenses.

The cash conversion cycle of the company is 123

days, which shows that companys policy for converting current

assets into cash is fine. But it should be somewhat careful about

the inventory management because much cash is tied up in

inventory. And By holding excessive inventory, the firm isincreasing its costs, which reduces its ROE. Moreover, this

additional working capital must be financed, so EVA is also

lowered.

The cash budget of the company shows that company

remains sufficient amount of cash with its hand so that it can be

used in the required time.

Debtors turnover ratio of the company is 6.9 and its

collection period is 53 days which shows that the company

allows longer period of credit to its customer because if the

company allow people time to pay their bills, they are more

likely to buy from it rather than from another business that

doesn't give credit for that much period. The length of credit

period allowed is an important factor that can help a potential

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customer decide whether to buy from that company or not: the

longer the better, of course.

Credit policy of the company is satisfactory. The

credit provided to the customers is in the form of suppliers

credit (bills of exchange). Management is so concerned about

its credit policy. But they should do check on their debtors and

should also be strict about their credit policy otherwise it would

lead to bed debts.

Stock turnover ratio of the company is 3.8 for

imported stock and 8.7 for indigenous stock and average days to

sell its inventory is 96 days and 42 days respectively which

indicates that it takes some time to convert inventory into cash

and as company has large amount of working capital in the form

of inventory it can not use cash anywhere else because if theres

less stock to worry about, lower investment in stocks meaning

that the money they used to have tied up in the stock room is

now free to spend somewhere else.

Creditors turnover ratio of the company is 3.7 and its

payment period is 100 days, which shows that the company pays

its account in three months means company has good credit

terms with its suppliers.

If company pays earlier, say, to get a discount this

will decline. If company simply defers paying its

suppliers (without agreement) this will also increase -

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but companys reputation, the quality of service and

any flexibility provided by its suppliers may suffer.

As for short term financing company uses bank loan

for having short-term funds to finance its working capital.

Hence its clear that company manages its working capital

effectively and is much concerned about it. And the effective

management of working capital has very much enhanced the

financial position of the company.

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SUGGESTIONS

The suggestions for SHAH PULP & PAPER LTD are as

determined:-

Sanitation facilities for the workers lacks adequacy.

Cleanliness is a must for good working conditions.

The workers who come from far off places should be

provided canteen facilities if it suits the budget of

the company

The drainage system for the waste water after

purification process is not proper, this affects the

cleanliness of company premises. The costs of the firm are on a steady increment

which has affected the net profit of the firm 2 times

the previous year.

The company must try for better management of

HRIS through computerized techniques.

The company must adopt some cost cutting

measures in the upcoming year.

ANNEXTURE

All the details in the project are being captured from

companys formal documents and the website of the

firm.

The figurative details are from master file of the SHAH

PULP & PAPER LTD.

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53714283 Summer Training Project Report (2)

Documents

Transcript of 53714283 Summer Training Project Report (2)