Financial Analysis of Crompton Greaves- r.priya

ANALYSIS OF FINANCIAL STATEMENT

Financial Analysis of Crompton Greaves Ltd.:

(A Report Submitted in Partial Fulfillment of the Requirements for the award of Degree of Master of Business Administration of Pondicherry University)

Submitted by:

Ms/Mr: Priya REnrolment No:MBA: Finance

Under the guidance of Guides name (with qualification) .Guides designation

DIRECTORATE OF DISTANCE EDUCATION PONDICHERRY UNIVRSITY PONDICHERRY 605 014 May- 2014

CERTIFICATE OF THE GUIDE

This is to certify that the Project Work titled Financial Analysis of Crompton Greaves Ltdis a bonafide work of Ms./Mr. Priya .R(Enroll No:..) carried out in partial fulfillment for the award of degreeof MBA in Finance (Branch) of Pondicherry University under my guidance. Thisproject work is original and not submitted earlier for the award of any degree /diploma (or) associateship of any other University / Institution.

Signature of the Guide

Name and Official Address of the Guide

Place: ChennaiDate:

EXECUTIVE SUMMARY INDUSTRY PROFILEThe healthy growth in the industrial sector achieved during 2005-2006 has continued during the current year as well with overall industrial growth (measured in terms of the index of Industrial Production) growing at a rate of 8.5 percent during the April- September 2004-05 compared with 6.2 percent achieved during the same last year. The existing installed capacity in the industry is of the order of 4500 MW thermal, 1345 MW of Hydro and about 25 MW of gas based power generation equipment per annum and manufacturing units depending upon the needs and their capacity are augmenting the capacity.

COMPANY PROFILETHE CROMPTON GREAVES GROUP Col. R.E.B. Crompton founded R.E.B. Crompton & Company in 1878. The company was merged with F.A. Parkinson in 1927 to form Crompton Parkinson Ltd. Greaves Cotton and Company, established by James Greaves in 1859, was appointed as their concessionaire in India.In 1937, Crompton Parkinson established Crompton Parkinson Works Ltd. in Bombay as a wholly owned Indian subsidiary. In collaboration with Greaves Cotton, it also established a sales organization, Greaves Cotton & Crompton Parkinson Ltd. In 1947, just before India's independence, Lala Karam Chand Thapar, an eminent Indian industrialist, bought Greaves Cotton when the company was put up for sale. With this acquisition, Karam Chand Thapar gained control of several associated companies such as Crompton Parkison Works, Greaves Cotton and Crompton Parkinson Company.The name Crompton Greaves Limited was adopted on August 2, 1966, following a court-directed amalgamation of Greaves Cotton and Crompton Parkinson Ltd.Over the years, the company has evolved into one of India's largest private sector enterprises.After the acquisition of theBelgium-based Pauwels Trafo/Pauwels Group in May 2005, Crompton Greaves was ranked amongst the world's top ten electricaltransformer manufacturers. The company subsequently acquired a host of companies outside India. These includeGanz(Hungary), Microsol (Ireland), Sonomatra (France), MSE Power Systems (USA) and ZIV (Spain).Crompton Greaves is a part of theUS$4 billionAvantha Group, and is headquartered in a self-owned landmark building CG House at Worli, Mumbai. In 2009, reflecting its global presence and diverse businesses, Crompton Greaves adopted a new brand identity and is known as CG.Crompton Greaves made series of acquisitions overseas which includes[4]- ZIV Group for Euro 150 Mn, QEI Inc, provider of SCADA and automation systems for $30.0 Mn and Emotron Group, a power electronics and engineering company, for $82.3 Mn (57.8 Mn Euros).In September 2012, HSBC Global Investment Funds raised its stake in Crompton Greaves from 1.29% to 2.68% through bulk deal on BSE for R92.73 Cr.In March 2009, Crompton Greaves acquired 41% stake in Avantha Power & Infrastructure Limited for R227Cr.Mr Gautam Thapar is the Chairman of the Board and Mr Laurent Demortier is the Managing Director and CEO of the company.

OBJECTIVES OF THE STUDY To study on the financial performance of the company for the past 5 years. To bring out the results of financial statements through ratio analysis. To study about the Crompton Greaves Company Limited, Mandideep in general. To study the financial position of the company.

SCOPE OF THE STUDY The scope of the study is the covered area for the purpose of study. The study is limited to Plant M7 (unit of CG ltd).

METHODOLOGY Methodology is the systematic method or an activity, which is used to collect the information required to complete this project work. The data is collected by 2 methods:1. Primary data2. Secondary data.Primary data is collected through collecting information from company officers, from external guide.Secondary data, which is secondary in nature i.e. already, collected information this secondary data is collected through Companys Annual Report and discussion with them.Interpretation of: Balance sheet Profit and loss account Annual reports

INTRODUCTION OF THE STUDY The accounting process begins with the recording of transactions in the books of primary entry. The accounting information resulting from the transactions so recorded gets posted in to various accounting heads in the ledger. In the ledger each account is balanced at the end of an accounting period and a summary of all balances in the various accounting heads from the ledger is prepared which is known as trial balance from such trial balances and after effecting certain adjustments considered necessary (which is dependent on the particular accounting system followed by the organizations) the financial statements relating to the accounting period are prepared. NEED FOR THE STUDY There are some questions, which arise from the study of financial statements. These could be Is Companys profitability adequate? Why is a profit low in spite of increased sales? Why is there liquidity problem though profitability is good? Why no reasons for changes in assets, liabilities and equity between two dates? Why no dividends are paid though there are good profits? From where have come cash flows and how they are applied? These and many other questions need answers, which can be possible when the financial statements are suitably analyzed

Thus financial statement analysis deals with meaningful interpretation of financial data available in financial statements to serve specific purpose of organizations of such data for their decision making .this involves identifying the purpose and selecting suitable means of analysis. Financial statement analysis is essentially purposive.

ABOUT THE ORGANIZATION Crompton Greaves group of companies are a century old company which comprises of over 20 companies with a total turnover of over Rs.1200crores and personnel strength of over 25000 workers, engineers and managers.In the history of India industry, a significant event was the rise of Crompton Greaves group of company.

The Crompton Greaves stands for excellence in engineering, quality and reliability. The business areas of the group companies reflects its diversity, process control equipment and machine tools, rotating electrical machines, internal combustion, engines, computers etc.

The company started with manufacture of AC Motors 1984. Today CG manufactures diversified product range consisting of AC Motors, AC Generators, Transformers, DC Motors and Electric equipments. The Unit-II in Mandideep, Crompton Greaves Company limited is a subsidiary of Crompton Greaves (PLANT M-7). It manufactures AC Motors and AC Generators.

INDUSTRY PROFILE

The healthy growth in the industrial sector achieved during 2003-04 has continued during the current year as well with overall industrial growth (measured in terms of the index of Industrial Production ) growing at a rate of 7.9 percent during the April- September 2004-05 compared with 8.5 percent achieved during the same last year.

The worldwide electric power industry provides vital services essential to modern life. It provides the nation with the most prevalent energy form known in history electricity. It advances the nations economic growth and productivity; promotes business development and expansion; and provide solid employment opportunities to workers globally in general and India in particular. It is a robust industry that contributes to the progress and prosperity of our nation. Today the electric power industry operates in a hybrid model of competition and regulation. The worldwide electrical and electronics industry is growing at a fast pace which consist of manufacturers, suppliers, dealers, electricians, electronic equipment manufacturers.

Power industry restructuring, around the world, has a strong impact on Asian power industry as well. Indian power industry restructuring with a limited level of competition, since 1991, has already been introduced at generation level by allowing participation of independent power producers (IPPs). The new Electricity Act 2003 provides the provision of competition in several sectors. It is felt that the prevailing condition in the country is good only for wholesale competition and not for the retail competition at this moment.

As per the recent survey, the global electric & electronic market is worth $1, 03.8 billion, which is forecasted to grow to $ 1,216.8 billion at the end of the year 2008. If we talk of electric & electronic production statistics, the industry accounted for $ 1,025.8 billion in 2006, which is forecasted to reach $1,051.5 billion in future.

Size of the Electric/ Electronic Industry

Top three electric and electronic goods manufacturing countries in the world are;United States of America, Japan and Korea respectively, The United States of America being the largest producer of electronic products worldwide contributes the total share of around 21% furthermore; USA is at the forefront to have the largest market share with around 29% in the global market.

The worlds electrical market size was $ 1038.8 billion in 2006, since last year an increase of 10.6% is forecasted to grow even more. The industrial electrical goods industry size was $ 651.3 billion, contributing around 62.7% of the total. With regard to electronics parts and components sector, the total market share was around $ 282.7 billion i.e.; 27.2% while home electronics was 104.7 billion. This figure is supposed to increase in this decade.

Major Production and Export Centers As electronic manufacturing industry is growing with a fast pace, Western Europe is developing gradually to contribute this industry. Western Europe comprising of 16 countries is contributing around 22% of the global market. Simultaneously, Eastern Europe is forecasted to grow about $ 24 billion in 2013 from $ 9 billion in 2006.

If we talk of Asia Pacific region, China, Japan, North & South Korea, Singapore and India are the top manufacturer of electrical and electronic products. Among these Asian countries, China is becoming the manufacturing region of electronic products on the globe.

In United States of America, cities like New York, Atlanta, Colorado, Detroit, Florida, and New England, San Diego, San Francisco, and Texas can be named as industrial hubs of electronics industry.

At present, Asia is growing with more speed in comparison to America and Europe. In 2002, Asia occupied 41% of total electronics market share, which grew up to 56% in 2007. Those days are not far away when Asia will become the market leader globally.

Future Outlook of Electric & Electronic Industry

Totally, the electrical and electronic industry is experiencing phenomenon and remarkable changes worldwide. The worldwide electronics industry is distinguished by fast technological advances and has grown rapidly than most other industries over the past 30 years.

Products are heading towards new destinations where cost is less than other place with higher costs involved. These places offer the most long term potential for market growth. Companies indulged in manufacturing electrical products are investing a lot on research and development for the best products to meet the demand of the market. They are manufacturing the products with the best quality at reduced cost due to many competitors.

COMPANY PROFILE

THE CROPMTON GREAVES GROUP A significant event in history of Indian industry was the rise of the Crompton Greaves Group of companies to a multibillion conglomerate. The Chairmen Mr. Gautam Thaper Crompton Greaves strongly believed that a companys progress was determined by the integration of man and his intellect with technological growth and environment.

The first Cropmton Greaves product 1200 KV Capacitive Voltage Transformer was an innovation far ahead of its time a product designed wholly with the customer in mind. It ultimately became an instrument of wealth for an entire society. The group is committed to innovation, quality and continuing technological advancement. This is evident in there and customs designed products, which have already gained a worldwide reputation for meeting critical industrial needs. The companys growth within the country and their entry into global market is based on their highly skilled Human resource and their vast distribution network. We have some of the best engineering and technical brains in the country, who have made their mission immensely productive and successful.

CG at a glance A countrys progress has been closely linked to effective harnessing and use of electrical energy for the benefit of its people. Cropmton Greaves Electric Companys endeavor has been to contribute cost effective solutions in all application of electricity. They are actively involved in supplying electrical industrial electronic equipment, systems to industry, agriculture and utilities. In all these ventures, their focus has been to provide state of the art technology that can living standards and thereby make the environment a better place to live in.In the words of Mr. Gautam Thapar: My faith is in the human intellect. It gives us our means to create wealth by directing our talents towards procedure work. And therefore, freedom for individual ability is the only way a society can prosper. After all, you cannot distribute wealth unless you first create it. And you cannot create it unless you know how

His words breathe the spirit with the Crompton Greaves industrial journey began. And this spirit has continued through the passage of time. CG Ltd. An ISO 9001 certified company was established in 1966 with its registered office at worli in Mumbai. As a part of diversification activity, CG PLANT-M7. started another unit at Mandideep in 1969, to manufacture Electric motors ranging from fractional horsepower to motor up 20HP. Under the leadership of Shri Gautam Thapar CG PLANT-M7 Was started in Mandideep Crompton Greaves Electric Company is the pioneer in India in the manufacture of quality equipments like AC and DC electric motors, generators, welding equipments, controls equipments transformers etc.

The company started with manufacture of AC Motors in 1984. Today CG M7 manufacturers diversified product range consisting of AC Motors, AC Generators, Transformers, DC Motors and Electronic Equipments. The M7 in Mandideep, Crompton Greaves Electric Company Limited is a subsidiary of Crompton Greaves Electric Company Limited. It manufactures AC Motors and AC Generators.

EMPLOYEES PROFILEKEC Ltd. has a strong employee base. It has maintained fully trained and experienced workers. It values its employees and the employees are considered the real Asset of the company.The employees are very hard working and dedicated towards the growth of the company. The employee base can be depicted based on the number of employees in each section.

SECTION NO. OF EMPLOYEES

Canteen 09 Central Planning Dept. 05 Production Dept. 32 Engineering Dept. 13 Finance Dept. 14 Forwarding Dept. 03 General Stores 12 MED 03 Marketing Dept. 07 Packing Dept. 32 MMD and MSD 17 Personnel Dept. 04 Quality Assurance Dept. 73 Reception 01

---------- 229

MILESTONES IN THE HISTORY OF KEC

1966 ---- CG established at Mumbai.

1948 -- A new era opens for Indian CG PLANT-M7 produces the countrys very first AC Motors 1954 ---- Impatient for progress, the company gets into product diversification producing its first transformers.

1956 ---- First transformer manufactured.

1958 --- A critical power situation inspires production of the countrys first transformers.

1963 ---- The patient of breakdown continues. DC motors and DC generators roll off the assembly line. 1965 ---- Market demand increases. Indias first motorized gear unit joins the CG PLANT-M7 product range.

1966 ---- Intensive research and development sets the pace for production of the first induction heating equipment.

1982 ---- New collaborations. Better products. Thyristor, Converters, made in collaboration with Thorn EMI, U.K.

1987 ---- Introduction of CNC systems and factory automation.

1989 ---- More collaboration. More products. With Fuji of Japan for investors and with Toshiba of Japan for UPS

1991 ----Toyo Denki collaboration for motors and generators up to 10MW/ MVA. Production of technologically advanced large DC motors and large AC machines in collaboration with AEG Daimler Benz of Germany up to 20MW

1992 ---- The company starts production of Hi- Tech CRT based CNC systems.

1993 ---- Cropmton Greaves Electric becomes the first company in India to receive ISO 9001 certification for its entire product range and for all its manufacturing units.

1995 ---- Took over Voltas Transformer and started manufacturing plant at Tumkur for Manufacturing units

1996 ---- Celebrated Golden jubilee and started manufacture of wind turbine.

2001 ---- Company restructure.

2002 ---- First test lab was started at Tumkur.

2003 ---- Received NVLAP certificate test lab.

2004 ---- Customer Excellence Certificate.

COLLABORATIONCG provides the latest technology products to customers. Towards this, it has entered into collaboration with foreign companies apart from indigenous research and development efforts. Some of the major collaboration is: AC induction motors ---- AEG, Germany

AC generators ---- AEG, Germany

Cast resin transformer ----- OCREV, Italy

Inverters ----- Fuji Electric, Japan

Vector control inverters ---- University of Wuppertal, Germany Uninterruptible power systems ---- Toshiba Corporation, Japan

CNC Controls ---- ADOLPH numerical controls. Ltd, UK

Transformers ---- Peebles Electric Ltd.

Wind turbine generators ---- Wind energy group, UK.

CG PRODUCTS AND SEVICES

Power Systems Industrial SystemsConsumer Products

Transformers and Reactors Motors: High/Low Voltage AC&DCFans

Switchgear Products-MV/HV/EHV/UHVGenerators/AlternatorsAppliances

nstrument Transformers-MV/HV/EHV/UHV raction Motors/Alternators/Control ElectricsLighting

Power Quality SolutionsFHP/Commercial Motors Pumps

T&D Systems/Engineering Solutions Railway Signaling and Coach ApplicationsHome Automation

Protection Control & AutomationDrives and AutomationIntegrated Security Systems

Services for Power SystemsStampings and LaminationsWiring Accessories

Transformer & Switchgear ComponentsServices for Industrial SystemsLV Switches & Panel Products

ORGANISATION SET UP OF CGL

BOARD OF DIRECTORS

The Board of Directors is vested with the responsibility of guiding and reviewing the Company`s overall Management philosophy and direction; and, influencing the CG Group`s Global footprint and business perspective across all its companies worldwide.

Gautam Thapar - Chairman

Sudhir M Trehan - Vice Chairman

Laurent Demortier- CEO and Managing Director

Scott BaymanIndependent Director on the Board

Dr. Omkar GoswamiIndependent Director on the Board

B HariharanNon-Executive Director

Sanjay LabrooIndependent Director on the Board

Dr Colette LewinerIndependent Director on the Board

Suresh PrabhuIndependent Director on the Board

Meher PudumjeeIndependent Director on the Board

Satya Pal TalwarIndependent Director on the Board

Dr. Valentin von MassowIndependent Director on the Board

BANKERS

Bank of Maharashtra

Canara Bank

Corporation Bank

Credit Agricole CIB

ICICI Bank Ltd

IDBI Bank

Royal Bank of Scotland

Standard Chartered Bank

State Bank of India

Union Bank of India

Yes Bank Ltd

REGISTERED OFFICE

C G House 6th Floor,Dr Annie Besant Road Worli,Mumbai,Maharashtra-400030Phone : 91-22-24237777Fax : 91-22-24237788

FACTORYCG Energy Management Ltd

CG PPI Adhesive Products Ltd

CG-ZIV Power Automation Products Ltd

CG PLANT-M7The CG PLANT-M7, Mandideep was founded on 2nd march 1969 and is situated on Mandideep- 580030. It covers 110 acres, which presents a gigantic picture. Crompton Greaves Plant Motor Division is also known, as M7. It is mainly concerned with production whereas CG PLANT-M7 looks carries out all other activities. The main branch is at Mumbai. The board of Directors at Mumbai formulates all the policies and plans.

CG has been brought into existence to overcome financial problems which are the results of accumulated losses of 30 crores because of heavy competition. Performance of CG PLANT-M7 has been disappointing as concerned to the financial year 1997-1998. This unit is the only one unit that seems to be contributing to the profits in terms of turnover, which is the highest among all over units of CG group. The production activity is carried out throughout the year in this unit.

QUALITY POLICY

The quality price of CG shall be to design, manufacture and market at competitive prices, products of such quality, which results in customer satisfaction, quality reputation and market leadership.

VISSION"To Create Lasting Value"We strive to create lasting value for all our stakeholders through extraordinary efforts. With integrity, imagination and respect for individuals.Lastingto us means timeless - value that will endure, regardless of changes in our businesses, people, markets or geographies. By constantly setting and redefining the gold standard in every business we operate in, we will create enduring value for our employees, customers, partners, shareholders and society.For our employees -valuein the form of professional growth, through an enabling work environment, knowledge sharing, implementation of best practices and growth in their personal life.For our customers -valuethrough quality products and services, understanding of their needs and proactively providing solutions, and contributing to their business growth.For our partners -valuethrough building mutually beneficial long term relationships, knowledge sharing and support, and helping them optimise their business potential.For our shareholders -valuethrough a high return on investment, a profitable and sustainable growth platform, and developing the spirit of enterprise.For society -valueby focusing on the development needs of the communities we engage with, adopting responsible business practices, and making a sustained effort to preserve the environment.

VALUESIntegrity. Imagination. IndividualIntegrity - in both personal and professional relationshipsFollowing ethical business practices

Honouring our commitments to all stakeholders

Being open and sincere in all our dealings

Being accountable and taking ownership

Providing genuine value through our products and services

Imagination - that drives our actionsConstantly searching for "the new" in all spheres(be it products, processes, markets, geographies)

Encouraging and implementing original ideas and "out-of-the-box" thinking

Being agile and responsive to change

Leveraging knowledge and technology to drive innovation

Individual - a commitment to valuing peopleRespect for individuals and recognising their contribution

Being fair, offering equal opportunity

Encouraging openness and freedom of expression

Ensuring prompt response to issues and concerns

Empowering and stimulating employees to realise their potentia

MISSION"To achieve a Group turnover of US$ 10 bn and a market capitalisation of US$ 25 bn by 2013 through a focus on profitability.""To become one of the most admired Indian transnational business houses by 2015."By 2015, our Group will be recognised and admired in the world community. We will set benchmarks and be the gold standard in every business we operate in.We will be a Group that combines the best of the old and the new: respect for people and relationships, integrity, our pioneering spirit and performance orientation.In our businesses, we will:aggressively seek opportunities for profitable growth and creation of long terminvestment value

be a leader in the domestic market

establish a significant global footprint

use technology as an asset and to our advantage

We will be admired for our people orientation: strong relationships with our employees and business partners, and a preferred employer status for our work culture, respect for people and learning opportunities.We will be respected for being a good corporate citizen by adhering to best governance practices, and fulfilling our responsibility to society by engaging positively with our communities.

GUIDING PRINCIPLES Innovate continuously to excel in design and manufacturing. Development products required by market. Manufacture products of highest quality Focus on customer in all actions. Respond promptly to customer needs. Deliver supplies on time every time. Treat each other with trust and respect to build a team. Develop people by training and delegation. Adopt process-oriented thinking, continuous improvement, and management by facts priority. Reduce costs constantly to remain competitive. Earn enough profits to fund growth and diversification. Offer goods and services at competitive prices. Look upon dealers, suppliers and business associates as partners. Maintain safe, clean and healthy environment. Conduct business in a socially responsible manner.

HODS OF CROPMTON GREAVES LIMITED,M7 PLANT

CEO-G. THAPARPERSONNEL - SOFIYA ANJUMPRODUCTION-A.B.JOSHI -D.S.WODEYARFINANCE-K.SHRIDHARMARKETING-V.RAMPRASADENGINEERING-D.A.DESAIMMD-ASHOK KADAKOLIMED & MSD-S.V.PUROHITCEN.PLANNING-A.B.JOSHI

ORGANISATION STRUCTURE OF CG PLANT M7

Personnel Department(Senior Manager)MANDIDEEPChief ExecutiveDeputy General ManagerProduction Department(Senior Manager)Finance Department(Senior Manager)Central Planning(Assistant Manager)Stores(junior Manager)Engineering Department(Senior Manager)Quality Assurance Department(Senior Manager)Marketing(Deputy Manager)M.M.D(Assistant Manager)

MANPOWER IN CG PLANT M7 Human ResourceTotal Members

Daily rated employees (DREs) From grade 1 to 8432

Monthly rated employees (MREs) From grade 1 to 745

Officers, Engineers and above From grade 8 to 1685

Total562

AS on 01-05-2007

Table: 1Besides these permanent employees, around 81 trainees are recruited and contract Labour are hired only for some specific purposes and in never employed in production or feeder shops.Officers cadre is divided into 2 categories.1. Junior officers from the grade from 5 to 7 Junior officer 1: Grade 5 Junior officer 2: Grade 6 Junior officer 3: Grade 72. Senior officers from the grade from 8 to 9Officer:Grade 8Senior Officer: Grade 9The manager cadre is classified as follows from grade 10 to 16Assistant Manager-Grade 10Deputy Manager- Grade 11Manager-Grade 12Deputy Senior Manager-Grade 13Senior manager- Grade 14Deputy General Manager-Grade 15General Manager-Grade 16

PRODUCT PROFILE

AC GeneratorAC motor `

DC MotorTraction Equipment

We design and manufacture our products according to the standards of :

ISO (International Organization for Standardization) IEC (International Electro technical Commission) BIS (Bureau of Indian Standards) BSI (British Standards Institution) JEM(Japan Electrical Manufactures Association)

PERSONNEL DEPARTMENTCG Company recognizes its employees as its most important asset for its continued growth. Human resources management in CGL shall striver to ensure continuous organizational growth by nurturing the strengths of its employees and providing the environment and opportunity for every individual to rise to his/her highest potential, identity and achieve his/her personal goal within the framework of organizational, social and natural objectives. To achieve this following sections are formed to perform the various functions including, Positive Motivation, Preparation and maintenance of quality plans with aid of systems, procedures and work instructions published collectively in quality manuals.Scope: Personnel Department is applicable to personal welfare safety and security.Responsibility of Personnel Department:Implementation and maintenance of various functions is the responsibilities of the Head of Department (HOD) with appropriate duties assigned to section in charges (SIC) and staff.Functions: The Main functions of Personnel Department are:HOD-PERSONAL AND INDUSTRIAL RELATIONS:

To ensure that harmonious relations exists between workers and management To ensure safe working conditions and to provide safety equipments. To Co-ordinate security and vigilance activities Manpower planning accountability.

ORGANISATION CHART OF PERSONNEL DEPARTMENT

HODSIC TRAINING IN CHARGE CANTEENDEPARTMENT ASSISTANT SECURITY OFFICER WELFARE OFFICERIND.REL OFFICERAMBULANCE ROOM TIME OFFICE I.C

MARKETING DEPARTMENTSuccess of any product totally depends on HO it is marked and positioned din the market. Marketing department is on of the important functional divisions of KEC UNIT-II, which is basically, identifies and meets the needs of customers profitably. The people in the marketing department are responsible for the growth of a business concern because they come in direct contact with the customers who now are considered as King of the market as it is a buyers market and no more a sellers market.

As marketing departments basic principle is to take care of the customers to achieve way they have divided their department in to there sections such as : Marketing Customer Service CommunicationMarketing is further having its subgroups i.e. technical group, which does the job of tendering or equally handling Execution, is planning group.The network of marketing department has all over India at 28 branches known as sales office/branches.The function of this division in CG PLANT-M7 starts to determine the needs of the customers their documents concurrently then accurately to communicate then to various departments.

Marketing:-

When a branch office in any part of its network receives an order in case of special product (i.e. as per customer requirements) it sends an order acceptance copy i.e. duly verified by the sales engineering of that branch to the tendering group where this OA copy is examined and sent to planning department and further forwarded engineering department for design and development of special product who prepares its engineering

specification and sends it to the purchase department if any new or additional components are regard to the production department. The marketing department based on the demand contacts the materials management department issues materials on the amount and the type of material, which required. Based on the amount required the department based on the demand contacts the materials management department issued materials on the amount required the production scheduling, routing and the like has to be carried out.

CG PLANT-M7 is planning turnover is 100 crores for last year achieved to the 84 crore. This planning for turnover is 110 crores.

AC-Generator Marketing:-In case of AC-Generator the final customer is directly purchase through Manufacture of Branch office or Dealer.

The O.E.M. (Original Equipment Manufacturers) who in turn places the purchase order to the branch office, the order acceptance form along with desired specifications is studied. Carefully in the marketing department and if found possible for production is immediately informed to the O.E.M the information is also forwarded to the production units

AC Motor Marketing:-The customer decided the rating of a motor required and approaches to the dealer, the dealer in turn acceptance and passes it on to the branch office which prepares an order acceptance and passes to customers and another to the unit of the production otherwise customer is directly contact through the marketing department.

The order acceptance is then separated into the one for standard products and other for special products. The special products requirements have to be discussed with the engineering department and then accepted.

CREDIT POLICY: Generally CG PLANT-M7 does not follow the policy. But sometimes the credit is issued to a particular customer depending on the volume of the purchase, the type of a customer CG PLANT-M7 has a credit policy extending to a maximum of 30 days.Objectives:The objectives of marketing department are to achieve customer satisfaction with quality products, price, and delivery in time, and presale service after sale service, maintain brand image and earn profit for further diversification.

COMPETITIORS1. Organized sector BHEL ASEA KIRLOSKAR Ltd. Bharat Bijli ltd. Asian Brawn Boweri Ltd (ABB Ltd.) General Electrical Company Ltd. Jyoti Ltd.

Unorganized Sector: Mainly cottage industries.

Direct Customers. OEMs (Original Equipment Manufacturers) OEAs (Original Equipment Assemblers)

Government organization (Railway, Airports) Indian Defense Indian Railways Other Industries

ORGANISATION CHART OF MARKETING

GROUP ACMSIC WEST AND EAST JMUSIC NORTH AND SOUTH RNASIC PING & EXECN RPK FIC GKNSIC AKN SIC PING & EXEN SGMGROUP ACG HOD MARKETING

MATERIAL MANAGEMENT DEPARTMENTObjectives:To provide components can service for manufacturing as required by others functional divisions.Scope: To plan and procure materials confirming to specifications through adequate selection of sub contractor. To feed the materials to the production division at required schedules at an economic cost.Functions:- Work out material requirement based on sales requisite plan (SRP), Sales constancy plan (SCP) and Critical credit requirement (CCR) To exercise purchase order as per procedure. To plan for non-production item based on purchase requisitions to materials management division. To finalize terms of purchase.Job Description and Responsibility To maintain and direct the organization, which is adequate to perform material management functions. To define the duties and responsibilities of MMD and to ensure that they carried out effectively. To plan for realistic purchase budget. To manage obsolete surplus and scrap material.SICS:

To plan the material requirement To order material and on approved suppliers and supply in the quantity necessary to satisfy marketing requirement.

To monitor the material recipient as per delivery schedule indicated in purchase order and co-coordinating with supplier. To monitor the material release for production in accordance with SRP/SCP/CCP.

FICS To plan the materials requirement. To order material and on approved supplied and supply in the quantity necessary to satisfy marketing requirement. To monitor the material release for production in accordance with SRP/SCP/CCP To follow with supplier for supplier for supplying, required material at required time of manufacturing. To keep the manufacturing division and other functional divisions other than the manufacturing informed of related activities to facilitate overall coordination related activities include information regarding material availability supplier training programs reasoning for user training for supplier products etc. To determine the need of stock replacement through use of daily material receipt perpetual inventory. To monitor and reconcile materials issued to suppliers.

ORGANIZATION CHART OF MMD

CEOHOD MMDACM S3 SIC SHOP3OFFICE ASSISTANT SIC SHOP V ACG FIC EXECUTIVE SHOPS

FINANCE DEPARTMENT

Finance department is the blood of any business organization to survive. Any organization handicapped by finance will never complete an ultimately results in failure and a burden to economy. Finance department is concerned with planning and controlling of company financial resources.The company policy is formulated and credit worthiness of the customer is evaluated audits such as cash audit, internal audit, cost audit is done per month. In the finance department of CG M7, there are 26 staff members contributing towards the effective functioning of the department.

ORGANISATIONAL HIERARCHY OF FINANCE DEPARTMENT

CORPORATE FINANCECHIEF EXECUTIVEGRADE 8 AND ABOVEM.R.Es up to GRADE 7

CG is characterized by the fact that all the collaboration are sent to corporate office at Mumbai and the expenditure of the particular day are sent to the unit as per the requirement of the units.

FUNCTIONS:-FINANCING FUNCTIONSIt includes cash payments, receipts, bank receipts and payments.CREDIT MANAGEMENT:Due to the competition, now a days credit is a means to achieve the target without credit sale any organizational can fulfill their targets.COSTINGCosting relates to calculation of production cost per unit and it tries to minimize the cost of production and helps in the function of pricing with marketing department.AUDITS:-Audit is a way to confirm about the accountancy of the functions and records of all over activities. It has employed cost Audit and Internal Audit etc.RECORDING AND MAINTAINING OF ACCOUNTS:-These are the present and future reference of the companys financial position. These are useful for Shareholders, Creditors, Suppliers, and Bankers etc.

BANKERS OF CG CG PLANT-M7 has the following Bankers:Bank of Maharashtra

Canara Bank

Corporation Bank

ICICI Bank Ltd

IDBI Bank

State Bank of India

Union Bank of India

Yes Bank Ltd

Financial Institutions:Following are the financial Institutions of CG PLANT-M7:1. Industrial Credit & Investment Corporation of India (ICICI)2. Industrial Development Bank of India (IDBI)3. Axis BankCG production per month is worth 10 crores. But now it attempting to rise to Rs 11 to 11.5 crores, the raw materials is steel and copper. These are procured from steel Authority of India Ltd., and Hindustan Copper Ltd. 1% of the total turnover is used for welfare expenses and 6% of total turnover is used for salary or expenditure. On an average the CG is paying Rs.150 lakhs as excise duty/month, 6% of total turnover is given as salary and 1% of the total turnover is spent on welfare activities. The method of depreciation followed is straight-line method. The company has adopted FIFO method for costing.

Listing on Stock exchanges: NSE, (CROMPGREAV) BSE(500093)

ENGINEERING DEPARTMENTQuality Policy of Engineering: The quality policy of CGL shall be continuously improving the quality management system in design, manufacture, market and service at competitive prices. Product of such quality, resulting in customer satisfaction, quality, reputation and market leadership, The role of engineering department is to design and develop products and components taking into consideration the cost, product ability, usability, and maintenance of the product.Scope:Applicable to quality objectives identified for improvement in design and development of products manufactured CGL.Responsibility:The head of the engineering department is responsible for receiving the objectives.Procedure:Objectives shall be derived from the organizational quality policy and need to meet customer and product requirement.Quality objectives by engineering department will lead to Simplification in design Standardization of components Reduction in reworking of design Reduction cost of production. For achieving or reworking quality objectives appropriate statistical quality control technique shall be used.Functions: Preparation revision and release of engineering and electrical specifications. Preparation, revision and control of drawings and release of material risk. Validation of design of products. Effective implementation of the design changes.

PRODUCTION DEPARTMENTIn many manufacturing unit production department forms the most important department of all the whole running of the unit depends upon this department the proper and timely functioning of this department helps in products reaching the customers end at right time. Slight difference in timing and quality upsets the cycle. Thus the production department we can say is the heart of the firm.

CGL philosophy has always been to excel in what one knows best in the process of development. CGL has laid great emphasis on adopting technology to suit the environment in which it has to operate CGL production process are continuously of upgraded from time to time by the latest technology.Objectives: To follow up the production schedule as per the plan. To maintain the close and coordinated relationship with other department. To upgrade technical efficiency of production.

CGL there is six shops in this department all of which have got different functions to perform. The product moves from first to sixth shop and then to the dispatch.H.O.D Production heads the production department with a total shop of 600.The whole shop is divided into among six shops.The department is divided into 2 groups.1. Feeder shop (Shop I and Shop II)2. Assembly Shop (Shop III and Shop V)3. Shop IV is used as Research and Development Center is also called as Invotech Center and Shop VI is painting section.

Brief description of shops:SHOP I:The matching functions are carried out in this shop which has 5 lines engaged in production namely welding section, sub assembly, labor section, tools and jigs crib and tool room.There are totally 80 machines and 100 workers in shop I. The raw materials arrived in this shop where the metal drilling, milling and shaft fixing is done and sent to the next process. The winding are also done in the shop I. Here the process of Bodies KH 100 to LD 225 frames.Covers KH 63 to LD 225 frame. Shaft KH 63 to LD 180 frame.Gear cases MGH 100 to MGH 225 frame.

Gears/pinions for Geared motors are done and also undertake manufacturing JIGS and FIXTURES and DIE-CASTING dies.

ROTOR SUB ASSEMBLY:Rotor is the static part in the ACMs and dynamic that is moving in the ACGs. The rotor goes through the following process.1) Sinking:The roots are treated in the solution for convenience of inserting the shaft so that they expand and make it easy for insertion of the shaft.2) Turning:The correct turning and made according to the specification.3) Fan Shop Drilling:This is the process where in the fan is to be fixed and for this purpose drilling is done and then locks are fixed for safety.4) Balancing:This step involves balancing the rotor properly.

WINDING:Winding is the most important functional part of the machine. It has to be done manually and precisely. This is the only process, which is totally manual. The motor is wound with correct rating wires.SHOP IIShop II is die cast shop. Here in this shop only die-casting is done. That is the shapes of body and nameplates final shape. The shop II has two machines, one for nameplate pressing and another for body.It houses the router section, here stampings are received and die casting of the metal stamping is carried in a furnace heated at 675 degrees Celsius 755 degree Celsius

ROTOR SECTION:Here processing of rotor sub assembling for KH 63 to 180 frames, SD 71 flange machine is undertaken.DIE-CASTING SECTION:Here die-casting for motor for 63 to 225 frame motors and die-casting of bodies, flanges, covers, and terminal boxes from KH 63 to 10 frames.SHOP-IIIThis shop can be called as assembly shop because the products here will get upto 90% only, final finishing will be at this stage.The assembling of motors of the frame size motors are assembled in this shop in three different assembly lines namely: The non-standard line for custom mode and is operated manually. The standard line for this standard motor is also called verticals assembly line where the motors are assembled mechanically by various stations in the machines acquired for the specific purposes. The export line is where the motors have to be exported assembled with due care and is done manually. After assembling the motors they are sent to the painting section, which is housed in the same shop.

SHOP IV:It works as research and development center for the company. It keeps its eye on the changes that are taking place in the electrical world and tries to adopt those changes in their manufacturing process. So it acts as research and development in the company.SHOP V:Here assembling of medium and large motors generators and MGUs under separate bays like ACM bay, ACG bay and MGUU bay.

ProductRating

A.C Motors Frame200 to 22515 KW to 75 K W

A.C Generator Frame and 180 & 250DS-DL-CMA2.5KVA to 90KVA

Motorized gear units90 to 2250.75 KW to 22 KW

Painting and testing is also done here.SHOP VI:In this section, components used in the motors are pre treated and painted.CGL has to its credit the pioneering of the latest technology called Unibake system. Earlier this system was applied to all the products but recently it has been restricted only for export orders. The domestic products are painted in conventional manner.

ORGANISATION CHART OF FEEDER SHOPS

CEOHOD ProductionSIC FEEDER SHOPSFIC, T ROOM AND T CRIBFIC, Shaft Body FIC DIE CASTING FIC SHOP6

CG PLANT-M7 has its corporate and marketing office at Mumbai. National Offices are divided into 4 zones.1. North Zone: Delhi, Ludhiana, and Jaipur2. East Zone: Kolkatta, Jamshedpur, Guwahati, Bhubaneshwar and Ranchi.3. West Zone: Mumbai, Nagpur, Pune, Ahmedabad, Surat and Indore.4. South Zone: Chennai, Coimbatore, Cochin, Hyderabad, Bangalore, Belgaum, Pondichery

QUALITY ASSURANCE Quality is the fitness to end-use, it is all persuasive. In this modern and competitive world each and every company is trying hard to introduce to quality and every defect free product CGL has a full fledge quality assurance department headed by highly qualified professionals committed to developing products that keep phase with the changing desires and needs of the consumers. Quality plays important role in CGL because its products are used for industrial customer applications. Hence it must satisfy and come up to the customer expectations.Objective:The role of QA division is to assist all functional division in achieving and maintaining level of specified quality requirement economically.This unit being ISO-9001, certified unit, has to follow the stringent quality specification. This department facilitates the total quality management (TQM) in all the departments, by adopting process controls at all stages.The quality assurance department follows a definite set of systems and procedures, which are incorporated in the manuals. The manuals are drafted to the lines of the standards as specified by the ISO-9000 series of clause for quality documentation.Functions:The functional responsibilities of different sections of QA divisions are as follows: Releasing of accepted products for further process. Evaluating quality rating of suppliers. Generation of NC reports for analysis/ review and initiating corrective action and preventive action. Quality information and reporting. Maintaining documents and records as per procedures.

FEEDER SHOPS QA:Feeder shops QA is responsible for:

Inspection/ Testing of parts, sub assembly as per appropriate quality plan/ documents procedures/ inspection plans other documents. Ensuring proper identification and inspection status. Updating, revising inspection plans procedure as and when found necessary. Generation of Non-conformance reports for analysis, revive and collective action, preventive action. Ensuring that calibrated instruments are used for measurements and coordinating with calibration section for periodic calibration.

FINAL INSPECTION AND TESTINGConduction routing/ type/ engineering tests on products to specified requirements as per documented procedures: Maintaining test records and providing test certificates. Ensuring tested products and conforming to specified requirements and complete in all respects. Providing inspection/ tests stating for confirming products. Providing engineering test results for design modification where necessary. Assisting in customer inspection

QUALITY LABORATORY: Periodic calibration of instruments as per documented process. Arranging for repair/ rectification/ disposal of measuring instruments. Planning for new instruments/ organizing calibration function from external agencies. Maintaining documents/ records as per procedures.

QUALITY SYSTEMS: Maintaining quality systems as per ISO 9001-2000 Assisting HOD QA for conduction quality related training programs.

Analysis and reporting of customer complaints internal non-conformance reports. Conducting systems audits, monitoring corrective actions, preventive actions. Implementing of corrective actions and preventive actions. ORGANIZATION CHART OF QUALITY ASSURANCE

CEO

HOD Q.A

SIC-QA IMI 7 Feeder Shop QA (Shop 1&2)SIC Final Inspection & Testing Shop5 7 QA Lab SIC-Final Inspection Shop 3 FIC-QS

`

FIC-QA IMI FIC-Shop 6 QA FIC Shop 1 & 2 QA FIC-Final Inspection & Testing Shop 3 FIC Final inspection & Testing & Customer Inspection Shop5FIC Customer Inspection FIC Winding Inspection FIC-QA Lab FIC-Winding Inspection PROCESS FLOW CHART

Customer-RequirementscuuuMMDPlanning & Procurement of materialEngineering-Release of specificationPersonnel & Computer- Supporting ServicesStores-Receipt & Issueof materialsCentral Planning-SchedulingQA-Supporting ServicesMSD-Supporting ServicesProduction-Feeder Shop 1,2,&6-Product shop 3&5MED-Supporting servicesPacking & ForwardingAfter Sales & servicesMarketing-EnquryHandling-Order execution-Customer Feedback

COMPUTER DIVISIONWe are into technology revolution where process and manual jobs have been atomized or computerized. So getting along with revolution CGL has also steeped into the field of computers and has computerized its various departments of the unit.Objective:The computer division is responsible for software developments, maintenance of computer hardware accessories, using appropriate methods.Scope:This is applicable to all the functions performed by the computer divisions of CG PLANT-M7, Mandideep.The head of computer division has overall responsibility and delegate works to other staff as appropriate.FUNCTIONS: Maintenance of computer hardware accessories: User department raises requisition for hardware breakdown. The call is attended enclosed after acknowledge for the user.

Preventive maintenance of computers and accessories:Preventive maintenance is carried out for computer hardware every half yearly and every quarterly and updated in the history card. This activity is acknowledged with the preventive maintenance sticker and stuck on the computer accessories. Software Revalidation:Software revalidation is done annually as per the procedure defined in software revalidation and records are maintained. Back Ups:Regular backup is ensured department wise as per the procedure defined. Document Control: Records files are updated and maintained in the document control register.GENERAL FUNCTIONS:Computer department works as a supporting device for all department and all the functional activities like payroll preparation and accounts receivables management is done with the help of computer department. In production field, it will help in planning, investment management etc. The company also has CMAN and ERP procedure to strengthen their production activities.

ORGANIZATION OF COMPUTER DEPARTMENT

SIC-Software Development/Revalidation MaintenanceFIC-Software Development/MaintenanceSIC-Software Devlopment/modification/Heardware/BackupFIC-Hardware/Electrical Maintenance HOD CD CEO

CENTRAL PLANNINGObjective:To describe the quality management system process & procedures followed in production department.Scope: Applicable to Central Planning Department. To demonstrate product manufactured meets requirements by following applicable process. For effective application, implementation, continued improvement in the different areas of work.Approach:Activities in the department are carried out with required resources. Resources include Building, Personnel, Manufacturing equipments, Test equipment etc. the available resources are managed to make quality products. The department, Organization, Process & Other activities followed for QMS requirements is given.Functions: Release of material against SR/SCP to all departments. Plan on basis of material availability. Sub-contract is given. Re-planning of material against the non-conformance. Maintain of product identification and tractability. Corrective action. Maintain quality records.

ORGANISATION CHART OF CENTRAL PLANNING

CEO HOD CPSIC-PlanningSIC-component manufacturing/sub contract FICFIC-Assembly planningFIC-Die-casting& Rotor sub- assemblyFUC-Sub contractFIC-Records

MANUFACTURING ENGINEERING DEPARTMENT(MED)Functions: Preparation general assembly drawings of jigs, fixtures, dies, tooling, storage devices & gauges. Recession of drawing with design changes. Coordinating with production for finalizing the manufacturing process. Preparation of process sheets.Job Responsibilities: HOD Overall administration of MED. Development around organization to achieve the required objectives of the department. Coordinate with other department to carry out the department activities. Monitor the activities of the department through proper documentation. Planning & procurement of Capital equipment. Establish quality objective for the department function. Design of jigs/ fixtures/ tooling. Determining and defining of process for manufacturing activities process sheets. Assisting process determination at supplier for component machining activities & release of process sheets wherever required. Organizing for procurement of capital required for manufacturing activities.

ORGANISATIONAL CHART OF MED

CEOHOD MEDSIC MEDFICJigs/Fixtures/Dies & Tooling &Preparation & Release of Process Sheets

GENERAL STORES To describe the process and procedure followed in stores department. A guide for effective,ORGANIZATION CHART OF STORES

CEOHOD StoresSIC StoresObjective:The role of stores is to maintain accountability of the materials received, stored and issued as per the specified requirements.Scope: Applicable to stores activities.Responsibility:The head of stores division is responsible for overall function of the stores with duties delegated to SIC/FIC as applicable.Functions: Receive material as per delivery Chilean/ Invoice/ Credit Reports. Ensure identification, inspection status, and supplier identification on the components vendor code/ material code in the delivery challan/ invoice.DUTIES AND RESPONSIBILITIES OF HOD: Overall administration of stores. Establishment of inventory norms & controls. Establishing & maintaining quality systems in stores division.DUTIES & RESPONSIBILITIES OF SIC STORES: Overall administration of stores. Ensuring that all components / products received in stores are inspected and tested as per the applicable specification/procedures. Ensure receipt, storage & issue of materials.

DUTIES AND RESPONSIBILITIES OF FIC STORES Receive and stores materials as per delivery Challan/ Invoice/ Audit reports. Ensure identification & inspection status for the components/ products. Preparation of receipt memos. Storing of outstanding in specified areas like mobile racks/ pallets etc., Issue of materials to shops/ suppliers as per indents.

INTRODUCTION Financial Ratios are used in the evaluation of the financial condition and profitability of a company. The ratios are calculated from the financial information provided in the balance sheet and income statements. While analyzing the financial statements you should keep in mind the principles/practices that accountants use in preparing statements to examine at the financial condition and preference of a company. RATIO ANALYSIS Ratio Analysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives a skilled and experienced analyst a better understanding of the financial condition and performance of the firm. MEANING AND DEFINITION:- A ratio is a simple arithmetic expression of the relationship of one number to another. Ratio is relationships expressed in mathematical terms between figures which are connected with each other in some manner. DEFINITION:- Ratio analysis is defined as, The systematic use of ratios to interpret the financial statements so that the strengths and weaknesses of the firm as well as its historical performance and current financial condition can be determined. This relationship can be expressed as: 1) Percentages:- For example, Assuming that net profits of Rs 25,000 and Sales of Rs 1,00,000. Then the net profits are 25% of sales. 2) Fraction:- net profit is of sales. 3) Proportion:- the relationship between net profits and sales is 1:4. To take managerial decision the ratio of such items reveals the soundness of financial position. Such information will be useful for creditors, shareholders management and all other people who deal with company.

IMPORTANCE OR SIGNIFICANCE OF RATIO ANALYSIS: The ratio analysis is one of the most powerful tools of financial analysis. It is used as a device to analyze and interprets the financial health of enterprise. Just like a doctor examines his patient by recording his body temperature, blood pressure etc. before making his conclusion regarding the illness and before giving his treatment, a financial analyst analyses the financial statements with various tools of analysis before commenting upon the financial health or weaknesses of an enterprise. Following are the uses of ratio analysis: Liquidity position Long term solvency Operating efficiency Overall profitability Inter firm comparison Trend analysis.Liquidity PositionWith the help of ratio analysis conclusions can be drawn regarding the liquidity position of a firm. It would be satisfactory if it is able to meet its current obligations when they become due. A firm can be said to have the ability to meet its short term liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually within a year as well as to repay the principal. This ability is reflected in the liquidity ratios of a firm. The liquidity ratios are particularly useful in credit analysis by banks and other suppliers of short term loans.Long term solvency:Ratio analysis is equally useful for assessing the long term financial viability of a firm. This aspect of the financial position of a borrower is of concern to the long term creditors, security analysts and the present and potential owners of a business. The long term solvency is measured by the leverage/capital structure and profitability

ratios which focus on earning power and operating efficiency. Ratio analysis reveals the strengths and weakness of a firm in this respect.

Operating efficiency Yet another dimension of the usefulness of the ratio analysis, relevant from the viewpoint of management, is that it throws light on the degree of efficiency in the management and utilization of its assets. The various activity ratios measure this kind of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the use of its assets total as well as its components.Overall profitability:Unlike the outside parties which are interested in one aspect of the financial position of a firm, the management is constantly concerned about the overall profitability of the enterprise. That is, they are concerned about the ability of the firm to meet its short term as well as long term obligations to its creditors, to ensure a reasonable return to its owners and secure optimum utilization of the assets of the firm. This is possible if an integrated view is taken and all the ratios are considered together.Inter- firm comparisonRatio analysis not only throws light on the financial position of a firm but also serves as a stepping stone to remedial measures. This is made possible due to inter-firm comparison and comparison with industry averages. A single figure of a particular ratio is meaningless unless it is related to some standard or norm. One of the popular techniques is to compare the ratios of a firm with the industry average. It should be reasonably expected that the performance of a firm should be in broad conformity with that of the industry to which it belongs. An inter-firm comparison would demonstrate the firms position vis--vis its competitors. Trend AnalysisFinally, ratio analysis enables a firm to take the time dimension into account. In other words, whether the financial position of a firm is improving or

deteriorating over the years. This is made possible by the use of trend analysis. The significance of a trend analysis of ratios lies in the fact that the analysts can know the direction of movement, that is, whether the movement is favorable or unfavorable. For example, the ratio may be low as compared to the norm but the trend may be upward. On the other hand, though the present level may be satisfactory but the trend may be a declining one.

LIMITATION OF RATIO ANALYSIS:-Ratio analysis is a widely used tool of financial analysis. Though ratios are simple to calculate and easy to understand, they suffer from some serious limitations: Limited use of Single Ratio:- A single ratio usually does not convey much of a sense. To make a better interpretation a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any meaningful conclusion. Lack of Adequate Standards:- There are no well accepted standards or rules of thumb for all ratios which can be accepted as norms. It renders interpretation of the ratio difficult. Change Of Accounting Procedure:- Change in accounting procedure by a firm often makes ratio analysis misleading e.g. a change in the valuation of methods of inventories, from FIFO to LIFO increases the cost of sales and reduces considerably the value of closing stocks which makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio. Window Dressing:- Financial statements can easily can be window dressed to present a better picture of its financial and profitability position to outsiders. Hence one has to be very careful in making a decision from ratios calculated from such financial statements. But it may be very difficult for an outsider to know about the window dressing made by a firm. Personal Bias:-

Ratio is only means of financial analysis and not an end in itself. Ratios have to be interpreted and different people may interpret the same ratio in different ways.

Incomparable:- Not only industries differ in their nature but also the firms of the similar business widely differ in their size and accounting procedure etc.. It makes comparison of ratios difficult and misleading. Moreover, comparisons are made difficult due to differences in definitions of various financial terms used in the ratio analysis. Absolute Figures Distortive:- Ratios devoid of absolute figures may prove distortive as ratio analysis is primarily a quantitative analysis and not a qualitative analysis. Price Level Changes:- While making ratio analysis, no consideration is made to the changes in price levels and this makes the interpretation of ratios invalid. Ratios No Substitutes:- Ratio analysis is merely a tool of financial statements. Hence, ratios become useless if separated from the statements from which they are computed. CLASSIFICATION OF RATIOS: 1) LIQUIDITY RATIO Current Ratio Quick Acid Ratio

2) CAPITAL STRUCTURE RATIO Debt-equity Ratio Proprietary Ratio. Interest Coverage Ratio

3) ACTIVITY RATIO: Inventory Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Capital Turnover Ratio Working Capital Turnover Ratio Fixed Assets Turnover

4) PROFITABILITY RATIO: Gross Profit Ratio Net Profit Ratio Operating Profit Ratio Operating Expenses Ratio Or Operating Ratio Return on Investment RatioLiquidity Ratios:These ratios are also termed as working capital or short term solvency ratio. The importance of adequate liquidity in the sense of the ability of a firm to meet current/short term obligations when they become due for payment can hardly be overstressed. In fact, liquidity is a prerequisite for the very survival of a firm. The short term creditors of the firm are interested in the short term solvency or liquidity of a firm. But liquidity implies, from the viewpoint of utilization of the funds of the firm that funds are idle or they earn very littleLeverage/capital structure ratios:The second category of financial ratios is leverage or capital structure ratios. These ratios explain how the capital structure of a firm is made up or the debt-equity mix adopted by the firm. The long term solvency ratio of a firm can be examined by using leverage or capital structure ratios. The leverage or capital structure ratios may be defined as financial ratios which throw light on the long term solvency of a firm as reflected in its ability to assure the long term creditors with regard to: (1) Periodic payment of interest

during the period of the loan and (2) Repayment of principal on maturity or in pre determined instalments at due dates.Activity Ratios:Activity ratios are concerned with measuring the efficiency in asset management. These ratios are also called efficiency ratios or assets utilization ratios. The efficiency with which the assets are used would be reflected in the speed and rapidity with which assets are converted into sales. The greater is the rate of turnover or conversion, the more efficient is the utilization/management, other things being equal. For this reason, such ratios are also designated as turnover ratios. Profitability Ratios:Profitability is indication of the efficiency with which the operations of the business are carried on. Poor operational performance may indicate poor sales and hence poor profits. A lower profitability may arise due to the lack of control over the expenses. Bankers, financial institutions and other creditors look at the profitability ratios as an indicator whether or not the firm earns substantially more than it pays interest for the use of borrowed funds and whether ultimate repayment of their debt appears reasonably certain. The Management of the firm is naturally eager to measure its operating efficiency of a firm and its ability to ensure adequate return to its shareholders depends ultimately on the profits earned by it. The profitability of a firm can be measured by its profitability ratios. In other words, the profitability ratios are designed to provide answers to questions such as: (1) Is the profit earned by the firm adequate? (2) What rate of return does it represent? (3) What is the rate of profit for various divisions and segments of the firm? (4) What is the rate of return to equity holder?

1) CURRENT RATIO: This ratio is an indicator of firms commitment to meet its short- term liabilities. Higher ratio, better the coverage. 2:1 ratio is treated as standard ratio. This ratio is also called as solvency / working capital ratio. The current ratio is the ratio of the current assets and current liabilities. It is calculated by dividing current assets by current liabilities.Formula:Current Ratio= Current assetsCurrent liabilitiesTable-1 (Amount in Lakhs)Year2004-052005-062006-072007-08

Current Assets14,11,79817,37,75324,09,64731,59,775

Current Liabilities12,86,10315,76,50718,05,20022,14,785

Current Ratio1.091.101.331.43

SOURCE: ANNUAL REPORTS OF COMPANY

Interpretation: - The current ratio of last four years is less than ideal ratio 2:1, i.e. fluctuating. This indicates that firms commitment to meet its short liabilities was not so good. In 2007-08 and 2006-07 the current ratios are good compare to 2004-05, 2005-06. 2) QUICK / ACID TEST / LIQUID RATIO: Liquid ratio is indication of availability of quick assets to honor its immediate claims. Higher the ratio betters the coverage. And the standard ratio is 1:1.An asset is liquid if is can be converted into cash immediately without loss of value. Hence cash is most liquid assets after assets which are considered to be relatively liquid are; Debtors balance, marketable securities etc. inventories considered to be less liquid therefore they require some time form relishing into cash and their value also has tendency to fluctuate. Formula:Quick ratio = Current Assets- Inventories / Current Liabilities Table-2 (Amount in Lakhs)Year2004-052005-062006-072007-08

Quick Assets12,84,26915,19,79221,79,92027,03,911


Quick Ratio.99.961.201.22


Interpretation: The ideal ratio is 1:1. The quick ratio is also fluctuating. In 2007-08 the ratio is satisfactory because it is higher than 1. And it is also good in 2006-07 and 2007-08.Because it is more than 1.But it has decreased in 2005-06 and 2004-05 i.e. 0.96 and 0.99 respectively. Overall the quick ratio is satisfactory, means liquidity position of the company is good.

CASH RATIO: An asset which converts suddenly without doubtful is called as cash ratios. Here cash balance included trade investment or marketable securities that are equivalent to cash.Formula:Cash Ratio=Cash +Marketable Securities /Current Liabilities.

Table- 3: ( Amount in lakhs)Year2004-052005-062006-072007-08

Cash+ marketable securities2,17,7731,39,4344,13,6685,24,749


Cash Ratio.17.08.22.23


Interpretation: In Cash ratio there is no standard ratios for maintained the cash balance because now a days nothing to be worried about the lack of cash if the company has reserve borrowing power for its day to days activities. Holding of Cash in the year 2007-08 was 23% of current liabilities in the 2005-06 it came down to 8%, in the 2006-07 it again increased to 23%.

INTERVAL MEASURES RATIO: The ratio which assesses a firms ability to meet its regular cash expenses is the interval measures. An interval measure relates to liquid asset and average daily operating cash flows.Formula:Interval Measure ratio = current assets-inventories/average daily operating expenses /360Table-4 (Amount in lakhs)Year2004-052005-062006-072007-08

Current asset inventories12,84,26915,19,79221,79,92027,03,911

Average daily operating exp585644762919

Interval Measures2,1952,3602,8602,942


Interpretation: Interval measure is said to be good if No of days are sufficient liquid asset to finance its operations. This chart Indicates that CGL have sufficient Liquid assets to finance its operations for 2942 days even though it does not receive any cash for 2942 days.

LEVERAGE RATIOLEVERAGE RATIO is also called as capital structure ratio. It relates to the study of various types of capital structure of firm. The long- term solvency of a company can be examined by using leverages or capital structure ratios. These ratios are for long-term creditors to judge the long-term financial strength of the company. THE DIFFERENT LEVERAGE RATIOS ARE:1. Debt Equity Ratio2. Proprietary Ratio3. Interest Coverage Ratio

1) DEBT RATIODebt ratios are use to analyze the long term solvency of firm. It is the proportion of the interest bearing debt in the capital structure. Debt ratio is calculated by total debt by total debt by capital employed or net asset of the firm. Formula:Total debt /Total debt +Net worthTable-5 (Amount in lakhs) Year2004-052005-062006-072007-08

Long term debt2,03,1211,93,5743,16,3434,41,152

Shareholders Funds13,11,35013,01,80311,08,22912,52,506

Debt-equity ratio.15.14.28.35


Interpretation: The debt ratio for the 2007-08 was .35 or 35% of the capital employed. It indicates owners have provide the remaining finance that is 1-35=65% of capital employed. From above analysis the firm has lower risk in the year 2004-05 & 2005-06.But afterwards it has increased its risk in the year 2006-07 &2007-08.

2) DEBT-EQUITY RATIOIt measures the relation between debt and equity in the capital structure of the firm. In other words, this ratio shows the relationship between the borrowed capital and owners capital.Formula:Debt equity ratio= Long term debt/Net worthTable-6 (Amount in lakhs)Year2004-052005-062006-072007-08

Long term debt2,03,1211,93,5743,16,3434,41,152

Net worth11,08,22911,08,22911,08,22912,52,506

Debt-Equity Ratio.18.17.28.35


Interpretation:- The ratio is high in 2007-08. It shows that a large share of financing by the creditors of the firm and it is more risky to the creditors. In 2004-05 and 2005-06 it has declined to .18 and 0.17 respectively. In 2005-06 and 2006-07 the ratio is low i.e., 0.18 and 0.17. It indicates that the firm finance point of view, the company has low risk. It means that the company is in safer side of finance and a margin of safety to the creditors.

3) PROPRIETORY RATIO: It establishes relationship between the propitiator or shareholders funds & total tangible assets. The ratio indicates properties stake in total assets. Higher the ratio lowers the risk and lower the ratio higher the risk. Debt equity ratio & current ratio affects the proprietary ratio. Formula:Proprietary Ratio=Shareholders Funds Total AssetsTable-7 (Amount in lakhs) Year2004-052005-062006-072007-08

Shareholders Fund4,32,6884,32,6884,32,6884,52,688

Total Assets15,39,26418,56,70225,25,49832,92,946

Proprietary Ratio(%).28.23.17.13


Interpretation: The equity ratio is high in 2004-05 i.e. 28%. It indicates that a high proprietary ratio relatively little danger to the creditors and it is better for long-term solvency position of the company. But it has been decreased to 13% and 17% in the year 2006-07 and 2007-08 respectively. A ratio below 50% is dangerous to the creditors at the time of winding up of a company.

4) EQUITY RATIO: Equity Ratio is calculated by dividing capital employed (CE) by Net worth (NW)Formula: Equity Ratio= Capital employed (CE)/Net worthTable-8(Amount in lakhs)Year2004-052005-062006-072007-08

Capital employed4,32,6884,32,6884,32,6884,52,688

Net worth11,08,22911,08,29911,68,22912,52,506

Equity Ratio.39.39.37.36


Interpretation: There are no standard rules for maintaining equity ratio. It differs according to the nature of the business. The lower performance in maintain Net worth in 2004-05 & 2005-06 but in 2006-07 &2007-08 good performance maintaining of capital employed to net worth.

TURNOVER / ACTIVITY RATIOS OF THE COMPANYIntroduction: Activity ratios are employed to evaluate the efficiently with which the firm manages and utilizes its assets. These ratios are also called as turnover ratio. Therefore they indicate the speed with which assets are being converted / turned over in to sales.Thus an activity ratio involves relationship between sales and assets. A proper balance between sales and assets generally reflects that assets are managed well.In other words, turnover ratio indicates the efficiency with which the capital employed is rotated in the business.Higher the ratio of rotation, the greater will be the profitability

DIFFERENT TURNOVER RATIOS:1) Inventory stock turnover Ratio2) Debtors (Accounts Receivable) Turnover Ratios.3) Creditors (Account Payable) Turnover Ratios4) Fixed Assets turnover Ratio5) Current Assets turnover Ratio6) Working capital turnover Ratio7) Total Assets turnover Ratio8) Net Assets turnover Ratio

1) INVENTORY / STOCK TURNOVER RATIO (ITR/STR).It indicates the efficiency of firm in producing and selling its products. High Ratio is good from the view point of liquidity and vice versa. A low ratio would signify that inventory does not sell fast and stably in the warehouse for a longtime.Formula: Cost of Goods Sold OR Sales ________________ __________ Avg. Inventory InventoryTable-9 (Amount in lakhs)Year2004-052005-062006-072007-08

Sales31,20,43441,40,24659,13,95772,77,768

Inventory1,27,5292,17,9612,29,7274,55,864

Inventory turnover ratio24.418.925.7415.96


Interpretation:- In the above chart, the inventory turnover ratio is high in 2006-07, 2004-05, i.e. 25.7, 24.4 respectively. But it is low in 2007-08 and 2005-06 i.e. 15.9 and 18.9 respectively. Usually, a high inventory turnover indicates efficient management of inventory because more frequently the stocks are sold.

DAYS OF INVENTORY HOLDING:Formula: Inventory*360/SalesTable -10 (Amount in lakhs)Year 2004-052005-062006-072007-08

Inventory1,27,5292,17,9612,29,7274,55,864

Sales31,20,43441,40,24659,13,95772,77,768

Days of inventory holding14.718.9513.9822.5


Interpretation:- In the year 2004-05, 2006-067 due to increase in sale of inventory, the inventory holding period is less i.e. the inventory has been disposed off or sold on an average in 14.7, 13.9 and in 2007-08 the days have increased .

2) DEBTORS TURNOVER RATIO: Debtors constitute an important constituent of current assets and therefore the quality of debtors to great extent determines that firms liquidity. There are two ratios. They are:1) Debtors turnover Ratio2) Debtors collection period RatioDebtors turnover ratio:Formula: Debtors turnover ratio = Creditor Sales

DebtorsHigher the ratio is better, since it indicate that debts are being collected more promptly.Table-11 (Amount in lakhs)Year2004-052005-062006-072007-08

Sales31,20,43441,40,24659,13,95772,77,768

Debtors8,25,00811,26,39013,78,92315,98,625

Debtors turnover3.783.674.24.5


Interpretation: - The ratios are increasing year by year. In 2006-07, it is 4.25and it has been increased to 4.5 in 2007-08. The ratio is not so high. It shows that the payments of debtors are not so prompt. It is less standard ratio i.e. 8 times.

Debtors Collection Period:Formula: Debtors collection period ratio= Debtor*360/salesTable-12 (Amount in lakhs)Year2004-052005-062006-072007-08

Debtor8,25,00811,26,39013,78,92315,98,625

Sales31,20,43441,40,24659,13,95772,77,768

Debtors Collection Period95988479


Interpretation: - The collection period of CGL is not good

ASSETS TURN OVER RATIO: Asset turnover ratio indicates Sales for every one rupee which is invested in fixed and current asset together. Assets are used to generate sales. A firm should manage its efficiently to masculine sales.

Formula: Asset turnover ratio= Sales/ Net Asset

Table-13 (Amount in lakhs)

Year2004-052005-062006-072007-08

Sales31,20,43441,40,24659,13,95772,77,768

Net Asset15,39,26418,56,70225,25,49832,92,946

Asset turn over ratio2.02.22.32.2


Interpretation: The total asset turnover ratio is 2.3 times in the year 2006-07 it is good. The same is maintained in year 2005-06, 2007-08. In the 2004-05 the ratio is low. It indicates poor perform.

FINDINGS:

The important findings of the study are as follows.1) Cash ratio of the company is poor hence they will find problem of liquidity position.2) The debtors collection period of CGL is good.3) The quick ratio of Crompton Greaves Limited is showing a increasing trend & it is also below the standard ratio 1:1.4) The current ratio of Crompton Greaves Limited is not satisfactory but it is below the standard ratio i.e. 2:1.5) Debt equity ratio of the company is far below the standard. They have not utilized the potential of borrowing for the debts.6) In the Crompton Greaves Limited the creditors are paid promptly.7) The company maintains a co-operation among the staff member & management.8) On an average all together other ratios are normal.9) As per order given by the customer supply manufacture products to them at right time & at right places.

SUGGESTIONS:

1) Company should try to maintain its current ratio at the standard 2:1.2) The company should reduce its cost of production through adopting new technology. It will help to increase the sales.3) The CG average collection period is very high. For avoiding the company should take major techniques to collect the money from debtors.4) Company should try to reduce its credit sales through cash discount at the time of sales. It will help to meet the current obligation.5) Company is suggested to maintain sufficient amount of cash & bank balance to pay its quick liabilities, which will increase its credit worthiness & goodwill.6) The company is in loss due to heavy interest burden to avoid this the company should plan to adoption of share capital in the business.7) The company should conduct weekly meetings for central planning, material management department, and production department towards operations of the company.8) The company should conduct monthly meetings to knowing its performance. If the performance is not reached then it will helps to take necessary decisions.

CONCLUSION:

Financial statements plays very important role in providing facts and figures for the decision makers. In the same way ratios will act as analysis kit in the hands of financial analyst. These ratio will help us and in answering the basic question like why, how, what of these statements. Now a days financial statement are very much in consideration for decision making. In deciding what to do and what not to do they are required to analyze the data as per their requirement. Thus in our project we try to give brief outline of ratio analysis (i.e., how to analyze the facts and figures given in the financial statements) form the angle of all stake holders. Throughout my project I have analyzed companys financial position and pros and cons of the situation and we have also interpreted the data. In spite of some limitation we try to analyze and interpreted the facts and figures with accuracy. Based on the analysis and interpretation I tried to give my findings and suggestions for the company as per my best knowledge. Finally project really helps us in knowing the practical things of the corporate world. Really I enjoyed this project work in its real spirit.

Balance Sheet of Crompton Greaves------------------- in Rs. Cr. -------------------

Mar '12Mar '11Mar '10Mar '09Mar '08

12 mths12 mths12 mths12 mths12 mths

Sources Of Funds

Total Share Capital128.30128.30128.3073.3273.32

Equity Share Capital128.30128.30128.3073.3273.32

Share Application Money0.000.000.000.000.00

Preference Share Capital0.000.000.000.000.00

Reserves2,

Financial Analysis of Crompton Greaves- r.priya

Documents

Transcript of Financial Analysis of Crompton Greaves- r.priya