A STUDY ON CAPITAL STRUCTURE IN ARIGNAR ANNA

SUGAR MILLS - KURUNGALAM

The Project Submitted to theBHARATHIDASAN UNIVERSITY,THIRUCHIRAPALLI

In partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted byC.PRABHU

Reg.No.11290617

Under the guidance of Prof.A.DIRAVIAM, M.Com.,B.Ed.,M.B.A.,M.Phil.,(Ph.D)

(Head of the Department - Bharath Institute of Management)

BHARATH INSTITUTE OF MANAGEMENT

BHARATH COLLEGE OF SCIENCE AND MANAGEMENT

THANJAVUR-613 005

FEBRUARY 2013

BHARATH INSTITUTE OF MANAGEMENTBHARATH COLLEGE OF SCIENCE AND MANAGEMENT

Bharat Avenue, Near New Bus Stand,

Thanjavur – 613 005, Fax:

04362 – 227185

Phone: 04362 -227937 / 228081

GUIDE . Prof.A.DIRAVIAM, M.Com.,B.Ed.,M.B.A.,M.Phil.,(Ph.D) Date : Head of the Department,Bharath Institute of Management

CERTIFICATE

This is to certify that the project report entitled A STUDY ON CAPITAL STRUCTURE IN ARIGNAR ANNA SUGAR MILLS – KURUNGALAM is the bonafide research work done and submitted by C.Prabhu (Reg. No.11290617) under my guidance in partial fulfillment of the requirements for the award of MASTER OF BUSINESS ADMINISTRATION and the project has not previously formed the basis for the award of any other degree.

Signature of the Guide

]

Signature of the Director Signature of the external examiner

C.PRABHUReg.No.11290617II M.B.A.,BHARATH INSTITUTE OF MANAGEMENTBHARATH COLLEGE OF SCIENCE AND MANAGEMENTThanjavur- 613 005.

DECLARATION

I hereby declare that the project report entitled A STUDY ON CAPITAL

STRUCTURE IN ARIGNAR ANNA SUGAR MILLS – KURUNGALAM submitted for

the M.B.A., Degree is my original work and the project report has not formed the basis for

the award of any other degree.

Place : Thanjavur.Date : Signature of the student

ACKNOWLEDGEMENT

I am deeply indebted to Shri. N.GANESAN M.COM., M.Phil., Ph.D., Founder of Bharath Group of Institutions , Thanjavur for having given me an opportunity to undergo M.B.A course in this institution.

Iexpress my sincere gratitude to Mrs.PUNITHA GANESAN, B.Sc., M.A., Secretary Bharath Group of institutions,Thanjavur for his encouragedment to pursue this project.

I express my sincere and deep sense of gratitude to Prof.Dr.T.VEERASAMY, M.A.,M.Phil., Ph.D., Principal Bharath College, for having promoted strict discipline and hard work during the period of my study in this college.

I wish to express my profound thanks to Dr.RM.CHIDAMBARAM, M.Com.,MA.,MBA.,Ph.D., Director. Bharath Institute of Management, for her constant encouragement for giving me all the assistance to complete this project.

I express my sincere and deep sense of gratitude to Prof.A.DIRAVIAM, M.Com.,B.Ed.,M.B.A.,M.Phil.,(Ph.D).,vice principal &Head of theDepartment, Bharath Institute of Management for the valuable guidance without which it would not have been possible for me to complete this report successfully.

I take this opportunity to express my deep sense of gratitude and respect to my beloved guide Prof.A.DIRAVIAM MBA., M.Phil., (Ph.D) Faculty, Bharath Institute of Management for the valuable guidance without which it would not have been possible for me to complete this project report successfully.

My sincere thanks to xxxxx, Mr xxxxxxxxxx, Training and Development, and other staff who help me in various ways while completing this work.

And last but not least, I would like to thank my beloved parents and all my friends for their moral support during my project work.

Place : ThanjavurDate : Signature of the student.

CONTENTS

Sl.No Title of the Chapter Page

Chapter I 1.1 Introduction

1.2 Review Of Literature

1.3 objective

1.4 Scope

1.5 Limitations

Chapter II 2.Company Profile

Chapter III 3.Analysis & Interpretation

Chapter IV 4.1 Findings

4.2 Suggestion

4.3 Conclusion

Annexure Bibliography

Introduction

Capital Structure refers to planning the divide of available capital for the purpose of

maximizing the long term profitability of the firm. The project planning is a process by which

companies allocate the funds to the various investment projects designed to ensure the growth

and profitability.

Capital structure means the mixture of share capital and other long term liabilities. In

the company, we know that liability of each shareholder is limited but how much be the total

liability of shareholder is the important question? It can be decided by choosing best capital

structure. In capital structure, we include, equity share capital, preference share capital,

debenture and long term debt. Suppose, our company's capital structure may show 50%

equity share capital, 30% pref. share capital and 20% debentures. But all companies' capital

structure may not be equal because different business need different type of capital structure

which will be suitable according to the need of business.

Some of companies want to become smart. They slowly decrease equity share

capital and increases loan excessively which may be very risky because these company has to

pay fixed cost of interest and has to manage repayment of loan after some time. Some

mistake in it, may be risky for its solvency. So, decision relating to capital structure is very

important for company

Capital structure planning is very important to survive the business in long run. After

simple watching  the balance sheet of company, you see two sides of balance sheet. One side

is liability side and other side is asset side. Liability side is the mixture of finance of company

which company has collected from internal and external sources and it has been used or will

be used for development of company.

Liability side of balance sheet is made under perfect capital structure planning.

Finance manager and other promoters decides which source of fund or funds should be

selected after monitoring the factors affecting capital structures. So, capital structure planning

makes strong balance sheet. The right capital structure planning also increases the power of

company to face the losses and changes in financial markets. Following points shows the

importance of capital structure and its planning.

The research title to study the “A STUDY ON CAPITAL STRUCTURE AT

ARIGNAR ANNA SUGAR MILLS LTD.” The importance of study is Capital Structure

helps in decision making process when company making Expansion, Establishment of new

projects etc. It helps to know the present value of the company and it avoids unnecessary

expenditure in to undertake the new projects, in the time of removing the decline stage’s

products Etc.

Research objective of the study is to determine whether acquiring capital asset is a

viable or not, to find out the Post Payback Profitability and to find out the Accounting Rate of

Return on investment and to know the Net Present Value.

As I studied in my project on capital structure I found out since the capital invested in

the assets are recovered within a short period of 1.6 year. The proposal is viable to the

company. Post pay back profitability is Rs.14259.49 lakhs. Finally, I would like to suggest

that The Arignar Anna Sugar Mills was located at Kurungulam. It is a small village in

Thanjavur Districts. It was established in the year 1971-72. The company achieved high

crushing of sugar cane session in the year 2005-06 that is 16,39 424 tones. The present year

2008-09 it crushed sugar cane at 17, 44,267 tones. The company also celebrated in company

premises and award given who are directly involved in this achievement.

COMPANY PROFILE

The Tamilnadu Sugar Corporation Limited, Chennai, is a Registered Company under

the provisions of Companies Act, 1956. The Arignar Anna Sugar Mills is one of the Units of

Tamilnadu Sugar Corporation Limited. The Arignar Anna Sugar Mills is situated in

Kurungulam Melpathy Village, Thanjavur Taluk, about 16 Kilometres away from Thanjavur

on the Thanjavur — Pudukkottai Highways.

The total area of land, in which the Mill is situated, is 154.25 Acres. Crushing

operation will be going on for about 6 months in between December —May. During June to

November the work of Overhauling of Machineries will be undertaken. The Factory had its

maiden crushing during 1976-77 with an installed capacity 1250 Metric Tonnes of Cane per

day. The crushing capacity of the Mills was expanded during 1989-90 from 1250 Metric

Tonnes to 2500 Metric Tonnes and crushing at the expanded capacity was started on

26.1.1990 under Expansion and Modernization Scheme.

SUGAR

       The main product of Sugar Industry is White Crystal Sugar. A typical White Crystal Sugar contains sucrose (97.5%) reducing sugar (0.86%) other organic compound (0.46%) ash (0.43%) and water (0.75%). Sugar Cane contains 11 to 15% sucrose out of which only 8 to 11% is crystalizable. The remaining sucrose goes into by product along with other sugars viz. Glucose and Fructose.

BAGGASE  

Baggase is the first by-product of cane sugar production. The fibrous residual matter left out after extraction of sugar cane juice is known as Baggase. It contains about 48.50% moisture, 48.0% fibre and 2.40% sugar and other minor constituents. It has been mainly used as fuel in Boiler to raise steam. Nowadays it can be used for paper production.

PAPER PRODUCTION FROM BAGASSE

Baggase is used as a raw material in the paper industry. Cuba leads in this industry. A Fungi called white-rot fungi degrades the fibre to cellulose. Hemi cellulose and the lignin. It is done in huge fermentation vessels where the fungi is inoculated. After this preliminary treatment , the material is washed and mixed with a 2 % NaOH solution. This enables

dissolution of lignins. The fibrous matter is washed followed by pulping impresser digesters using sodium sulphide. . sodium sulphide liquors for about 4 hours. The pressure is released in tanks, followed by straining and washing to remove the pith. The digested, washed, pulp is now suitable for mixing with other bamboo pulps to be used for paper making.

FILTER CAKE:

It is obtained from the cane juice, which is used as manure. In the process of clarification, the hot limed juice is delivered to large setting tanks. It consists of large tank with centrally placed slow moving agitator. Horizontal compartments or trags enable mud to slow down, and each having over flow take off for clarified juice. The muds separating in the settling tanks are pumped to rotary filters. Here they are filtered under vacuum using some powdered bagasse (bagacillo) as a filter aid. The pH of the mud to be filtered will be around 7.5. The temperature of sludge is maintained around 60 ° C to enable effective filtration. The cake is continuously washed on the filter and some sugar is recovered here. The cake is rich in protein and waxes.

 

MOLASSES

Molasses is one of the important by-products , its production depends on the total quantity of cane crushed as well as quality, which varies from region to region . The increases in the percentage of sucrose in molasses greatly affects the final quantity of sugar.

Molasses is the final effluent obtained in the preparation of sugar by repeated crystallization;  it is the heavy viscous liquid from which no further sugar can be crystallized by the usual methods.

BLACKSTRAP MOLASSES

  Molasses is called as blackstrap molasses because of its dark brown viscous nature. It must not contain less than 40% of total sugar as invert.  

The components of molasses include  

1. Major components ( water, sugar, non-sugars ) 2. Minor components ( Trace elements, vitamins, growth substance)

 WATER:

  Commercial molasses have an average water content of 20% . The original end-products in the factory contain 12-17 % water.

  The principal sugar present in the molasses are sucrose, glucose

and fructose, the later two making up the major portion of the reducing sugars. The alkaline degradation of sucrose leads not only to glucose and fructose but also to Psicose and other carbohydrates. Molasses sometimes contain another non-reducing sugar namely the trisaccharide ketose.

CO-GENERATION PROJECT: The cane growing share holders of our Company have given their

Consent for the implementation of Co-generation Project at our Mills during the special meeting convened to come out from the sickness and to get Profit in the long run of the industry as the cost of production has considerably increased.  Accordingly, action has been taken to implement the Co-generation Project at a capital outlay of Rs.60.00 crores in which the Cane growing members’ share is 10%. (i.e. Rs.6 crores). In respect of growers’ share amount, we have collected Rs.50.00 per tonne of Cane from the Cane proceeds of our cane growers towards share amount. The balance share amount will be collected from the cane growing members in the ensuing season’s cane proceeds. Necesary proposals has been submitted to the Government by our Head Office for implementing the project in our Mills. Orders are awaited.

CANE INFORMATION            Sugar cane is  a traditional crop of India and it is under cultivation since time immemorial in the Indo-Gangetic belt. There are numerous mentions of sugarcane in several of our ancient books such as "Atharva Veda", "Rig Veda" etc dataing back to 1000BC TO 3000BC. Foreign travelers to India, about 2000 years ago, have mentioned about sugar cane. Buddhist literature has several mentions of sugar cane and sugar.

SUGARCANE   Family GraminaeaClass   MonocotyledenesOrder  GlumaceaeCultivars Complex Hybrids evolved from SpeciesScientific Name Saccharum  officinarum . LCultivated Species 1. Saccharum officinarum . L  2. Saccharum sinense Roxb  3. Saccharum barberi JeswSEASONS FOR SUGARCANE   Early   December – January ( Margazhi – ThaiMid     February – March ( Masi – PankguniLate April – May ( Chitthirai – VaikasiSpecial June – August ( Aanni – Avani )AREA COVERAGE  Early and Mid Season planting 70%Late Season Planting 20%

Special Season Planting 10%VARIETIES UNDER CULTIVATION  Early    Co 86032,Co-89014,Co-99004,Co-

99006,CoC-23,Co-94101,Co-94008,Co-92012,CoV-94101

Midlate CoSi-6,CoC-22,Clone-960067

Special All early varieties   Varieties Specially Suited to  Drought Co-99004,Co-99006,CoSi-6,Saline/ Alkaline Soils CoSi-6,CoG-930076 

Cane varieties under cultivationSl.No.

High Sugar Varieties Medium Sugar Varieties Low Sugar VarietiesVariety % Variety % Variety %

1 Co 86032 75.53 Co-Si-6 5.35 0.00 0.002 Co-89014  7..62 CoC 0.42    3 CoC-23   1.45 C-960067 2.08    4 Co-99004   1.34        5 Co-94101   0.25        6 Co-94008   4.67        7 O.V   1.29          TOTAL 92.15   7.85 0.00 0.00

Arignar Anna Sugar Mills was a pioneer in the research-based Sugar Industry,

situated in the state of Tamilnadu; it combines modern technology and the latest

mechanization techniques and compliments it with a 6-decade experience.

Alongside, the factory waste, namely molasses is used by TASCO Oregano

Chemicals. Industrial alcohol/rectified spirit are manufactured with the sugar waste. The

TASCO is also looking towards Venturing into cogeneration of power at all of its sites, with

excess power being sold off to the state power grids.

VISION

The TASCO will continue to expand its operations by expanding production into new

markets and applications. Growth will also come from value added diversification derived

from the group’s strengths in products and processes.

The quality of the products and services delivered by the TASCO will always strive to exceed

customer expectations.

MISSION

The TASCO always has and will continue to use renewable resources in its products.

It believes that this is an important need for sustainable development.

The TASCO has been and always is aware of its social commitment to the community

that it serves. It believes that we have a responsibility and obligation to return to society what

we earn from it.

History of the Arignar Anna Sugar Mills – KURUNGULAM

Tamilnadu Sugar Corporation Limited an undertaking of the Government of

Tamilnadu was incorporated in 17-10-1974. The first mill to be commissioned by Tamilnadu

Sugar Corporation Limited was “Arignar Anna Sugar Mills”. Arignar Anna Sugar Mills is

situated at a distance of 15 Kms. away from Thanjavur – Pudukottai Main Road. The mill

had acquired 154.25 acres of land belonging to the Government and Private Owners. The

Unit commenced its trial (Maiden) crush on 20-02-1977 with an installed capacity of 1250

TCD. The actual cost of the Project was Rs.643.62 Lakhs, whereas the cost of the project

was originally envisaged at Rs.640.32 Lakhs. The Capital outlay of the project viz.

Rs.643.62 Lakhs, whereas the cost of the project was originally envisaged at Rs.640.32 Lakhs

was met out by the issue of Share Capital, obtaining Long Term Loans from Financial

Institutions like Industrial Development Bank of India, Industrial Finance Corporation of

Indian and Indian Overseas Bank. Tamilnadu Sugar Corporation Limited had alloted Share

worth Rs.100.00 Lakhs (constituting 24.33 % of the total Share Capital Rs.411.10 Lakhs) to

cane Growers and Public in the Mill’s jurisdiction, the balance Capital was subscribed the

Government of Tamilnadu.

EXPANSION:--

The Mill had obtained a Letter of Indent from the Government of India for Expansion of its

capacity from 1250 TCD to 2500 TCD during March 1988 (L.I.No.66(1998), dt.14-03-1988).

The capacity was expanded during 1989-90 from 1250 TCD to 2500 TCD and crushing at

expanded capacity was commenced on 26-01-1990.

Arignar Anna Sugar Mills entered the sugar industry in the late thirties. Based in the

Indian state Tamil Nadu, it began operations by setting up two sugar factories, both of which

used a scientific method of cultivation. Despite increasing emphasis on traditional cultivation

methods, Arignar Anna Sugar was among the few to introdmodernity to this industry. During

Sugar factories in Tamil Nadu were being victimized through state policies. Private farms

were being nationalized and the co-operative movement quickened the pace of the ultimate

closure of these farms. This was unfortunate because the yields from the ARIGNAR ANNA

farms were among the best in the world. The yield of cane was 64 ton per acre, recovery of

sugar was 11.5% per acre and yield of Sugar was 7.36 tons per acre. Realizing that it could

no longer work towards its full potential, the TASCO gave up its pioneer position in Tamil

Nadu Sugar industry and re-opened the Arignar Anna Sugar Mills at Kurungulam in the dean

state of Karnataka.

On 6th June 1971, the foundation stone at the factory of the Arignar Anna Sugar Mills

was laid by the Governor of Tamil Nadu. Due to the prevalent India-Pakistan war at that

time. The factory was erected on a war footing and commissioned in a record time of less

than ten months. Production started on 20th April 1972.Today, advanced technology and a

high level of mechanization has made Arignar Anna Sugar Mills one of India’s largest sugar

producers. This TASCO has one of the highest average recovery rates in the industry.

ABOUT THE GROUP

The TASCO Group beats with strong traditional values; hard work, dedication and a

caring attitude. At the same time, it employs modern industrial techniques and is today, the

epitome of contemporaries, omnipresence has a new name. TASCO, manifesting in ways &

means the touch your life, in more ways than you could imagine. Society too experiences the

humane touch of TASCO; in terms of healthcare, rural development and environment-effort.

Going beyond the call of duty because ‘More than state-of-the-art, its state-of-the-heart’ that

matters.

Dynamism put to a growth-oriented approach, underlined with the will to achieve best

describe the group that is the air supply of various industries in India. The TASCO Group

will continue to expand its operations by expanding production into new markets and

applications. Growth will also come from value added-diversification derived from the

Group’s strengths in products and processes.

The Quality of the Products and Services delivered by the TASCO Group will always

strive to exceed customer’s expectations. The TASCO Group always has and will continue to

use renewable resources in its products. It believes that this is an important need for

sustainable development.

The TASCO Group has been always being aware of its Social commitment to the

community that is serves. It believes that we have a responsibility and Obligation to return to

society what we earn from it. Since the last six decades, commencing operations in the high

growth field of sugar, the Group has created the perfect platform for its future success. Built

upon the foundation of care, each of the following facets of the Group was response to a

need.

LOCATION

Arignar Anna Sugar Mills is Located at Kurungulam, a small village in the Thanjavur.

Kurungulam lies in the potential basin between two rivers, Kaveri.

BANKERS AND INSTITUTION:

BANK OF INDIA.

ANDHRA BANK.

BANK OF BARODA.

SYNDICATE BANK.

UNION BANK OF INDIA.

INDUSTRIAL DEVELOPMENT BANK OF INDIA.

KARNATAKA STATE INDUSTRIAL INVESTMENT AND DEVELOPMENT.

CORPORATION BANK.

SICOM LIMITED.

STATE BANK OF INDIA.

COMPANY ACHIVEMENTS

Record crushing by GSM LTD

Arignar Anna Sugar Mills Ltd., Kurungulam completed its crushing season 2005-06

with record crushing achievement. In the season GSM Kurungulam has crushed 16, 39,424

tones with an average sugar recovery of 11.65%. In view of this record crushing the co-

operation from cane suppliers, harvesting and transport agencies and workers are really

commendable. The present year 2008-09 cane crushing of 17, 44,267 tonnes is the highest in

South India. In 1994-95 the GSM got 2nd place in India for cane crushing.

Celebration Rewards and Recognitions by GSM LTD

Achievements made in record crushing were celebrated in GSM Kurungulam by

encouraging and motivating the cane growers, Harvesting and transport agencies. This was

done in a colorful function in the premise of factory on 30.05.2006. As mark of their

contribution in each category highest three prizes were distributed during the function

wherein farmers of the area, harvesting and transport agencies were participated.

PRODUCTION PROCESS

The Specification of Kurungulam Sugar is:

Polarization: 99.80 to 99.88

Moisture: 0.35 to 0.06

Icumsa: up to 150 units

Ash: 0.08 to 0.10Granulation: S-30 of Indian Sugar

Standard Color: Sparking WhitePacking: Present Packing: 100Kg

The ARIGNAR ANNA SUGAR MILLSLTD is the manufacturer of “White Crystal

Sugar”. Along with sugar some other main products manufactured in Arignar Anna Sugar

works Ltd. Are

1. CO – GENARATION (POWER).

2. DISTLERY PRODUCTS.

3. BIO – GAS.

4. OTHER BY PRODUCT.

COMPANY QUALITY POLICY

1. We are committed to produce and supply products to meet our costumer’s needs.

2. We shall continually strive to improve the effectiveness of our Quality

Management system.

3. We shall train and motivate our employees for continual improvement.

4. We are conscious of our responsibility towards Safety, Health and Environment.

5. Quality is what we Think, Act and Believe

POWER DIVISION

The factory being the cooperative society with more then 25.000 farmer members of

the local area involved in its activity and selling their produce to the factory and dependent on

the sugar factory for their existence and livelihood, the creation of co-generation facility has

become prime need due to socio-economic reasons. Secondly, the enormous quantity of

Bagasse that is generated by the factory shall be best utilized by the creation of co-generation

which will help the factory by generating and making available the power.

Further taking into consideration the acute power shortage in the country, both on

demand and energy terms and effort to generate power and augment the grid supply will be a

laudable and worthy effort; the factory has been planning for setting up a 41MW Multi-fuel

Co-generation power project at the factory site. This will enable the factory to play a

significant role in supplying power to the public utility simply by increasing its operating

efficiency in addition to meeting its need of power.

The main purpose of setting up this power project ,as principal fuel, supplemented by

Bagasse, other bio-mass fuel and conventional fuels(as needed for maximizing utilization of

proposed power project) for at least 300 days per year. The part of the project cost shall be

raised by increase in Share Value, a resolution for which has already been passed at an

Annual general Body Meeting held on 22/09/2003 and the same have been got approved by

the Govt of India & Central Register of Co-operative Societies, New Delhi vide their Letter

No.L-11016 /46/87-L&M dated 5th Feb.2004.

The factory, for this worthy project, has obtained all statutory/non-statutory

clearances such as Karnataka State Pollution Board, Airports Authority of India,

Environmental clearance, In- principal clearance, Clearance for installation of 110 KV Sub-

Station from the Karnataka Power Transmission Corp. Ltd which has already been set up

now, to commence with the project.

PRODUCTION AND DISTRIBUTION OF POWER

Particulars Capacity ( MW)

Self load 2.00 MW

Sugar Unit 4.50MW

Export to HESCOM 17.50MW

TOTAL 24 MW

In the off season the plant will import the power of 1.11 MW to maintain the whole

plant.

To produce 1 MW of power the required Bagasse and 60 tonne of water should be

needed. Whole plants machineries has manufactured by Bharat Heavy Electrical Limited.

And to maintain the whole plant automatically the plant management will use DCS software

(Distribution Control System)

DISTILLERY AND CHEMICAL DIVISION

TASCO Organo Chemicals

The factory had installed its own Distillery Unit in October 1984 as a by-product

industry with its capacity of 30KL liters per day .However taking into consideration the stage

wise expansion of the Sugar Mill and the excess availability of molasses, the installed

capacity was later on increased 30 to 90KL Liters with another extra investment of 30.27

crores. The average recovery of Spirit per MT of molasses is 265 Ltrs.

Basically in the beginning means 1986 to 1999 the plant was given on rent to

Saptagiri Enterprise, Bangalore

Recently means in the year 2002 the plant was expanded with extra of 30KL capacity

with extra investment of 30.27 crores. And also recently its expansion work is going on by

increasing the capacity 60 to 200

BAGASSE

Bagasse is the main raw material to the co-generation. It will obtained from sugar unit

as a waste material. So this will become main raw material to the co-generation department.

ETHANOL PLANT PROJECT

The factory also has planned to install Ethanol Plant at the factory site having capacity

of 30,000 LPD for which a detailed Project report is under the progress.

FUTURE GROWTH AND PROSPECTUS

Financials - Projects under Implementation

New Projects

A: The Company has a well-defined strategy for near future. It has identified certain

profitable opportunities that may be captured. These are as follows:

 Capacity increase Schedule for commissioning

1. Sugar 8500 TCD to 12000 TCD

12000 TCD to 15000

TCD

IV quarter of 2009

IV quarter of 2009

2. Cogeneration 24 MW to 44 MW IV quarter of 2010

3. Distillery 60 KLPD to 120 KLPD IV quarter of 2009

4. Bulk & Specialty

Chemicals – Expansion

& New Products  

IV quarter of 2009

B: Leased sugar factories & distillery Tamil Nadu, GSML has acquired two sugar factories

and one distillery on lease recently further adding to its capacities. These units are in high

recovery areas of western Tamil Nadu.

Projects under Implementation at Kurungulam

Expansion of Ethyl Acetate from 60 TPD to 100 TPD

TASCO Organo Chemicals will boost its Ethyl Acetate (EA) production capacity to

cater to the increasing Local & International demand. The expansion was scheduled for

completion by mid 2006. On completion of the project the Company possessed a production

capacity of 30000 MT per annum, widening its global export base.

Our technology uses Renewable resources to manufacture EA, which is ever so

important in this age of rising prices due to depleting crude oil reserves our long-term goal is

to grow our markets by expanding existing product lines and by introducing new products

based on sustainable technologies & renewable resources”.

Specialty Chemicals

With a view to augment our range of specialty chemicals, we have added one more

baldheaded based product and successfully commissioned the plant recently. The product is

having good export potential.

One time land application for bio-machinated distillery spent wash

Besides the pollution control measures like bio-composting etc for distillery effluent,

Pollution control board has for the first time allowed us to use bio-machinated spent wash to

be used as liquid manure on farm lands. This is being done successfully with our tie-up with

Rahuri Agricultural University for close co-ordination & effective implementation.

Projects under Implementation at Kurungulam

Ethyl Lactate project (450 Tonnes per annum (TPA)

The product is eco-friendly solvent and used for various applications such as the

cleaning of printing equipment, rolls, lithographic plates or blankets, etc., and is will

respected for its superior cleaning ability The raw material used for the manufacture is

molasses which is renewable resource and coming as by product of sugar. The plant is under

commissioning.

PRODUCTION DEPARTMENT

PRODUCTION HIERARCHY

GM (Manufacturing)

Asst. Manager(Lab)

Sr. Manager (Mfg)

Asst. Manager

(Mfg)

Officer (Jr.) Officers

Lab Chemist

Manufacturing Process of Sugar

Sugar (Sucrose) is a Carbohydrate that occurs naturally in every fruit and vegetable.

Sugar occurs in greatest quantities in sugar cane and sugar beet from which it is separated for

commercial use. The natural sugar stored in the cane stalk is separated from the rest of the

plant material through a process known as refining.

In the first stage the sugar cane is cut into small pieces through cutter, and then the

small pieces are pressed to extract the juice. The extracted juice is then sent to boiler house

and heated into two stages. In primary stage it is heated up to 72 ○C and in the secondary

stage to 102 ○ C. hen lime sulphur dioxide and phosphoric acid is added.

Lime is added to settle impurities, sulphur dioxide for bleaching a phosphoric acid to

maintain phosphate content. Then again the juice is heated to 100 ○C to 103 ○C. The juice

begins to thicken and sugar begins to crystallize. Then the crystals are spinned in the

centrifugal pan to remove the syrup producing the raw sugar. And in the final stage, shipping

the sugar to a refinery where it is washed and filtered to remove remaining non-sugar

ingredients and Color and then crystallizing, drying, and packing the refined sugar

OBJECTIVES

1. Production department is the hearts of the industry so it should be continue till the

organization will close.

2. Production department has to maintain good quality of sugar.

3. Production department should produce the particular type of sugar as per requirement

of customer and as per quality, which is approved by quality control department and

govt.

4. This department should maintain the production procedure without any stoppages

PRODUCTION DEPARTMENT

Sugarcane contains about 14% fibred and 86% juice consists of about 13% Sucrose and

73% moistures and non-sugar solids.

Production Process

Cane

Mills Bagasse Fuel Boiler

Juice

Weight Mixed Juice

Juice Heater

(Heater of 70 c)

Juice

Sulphitation

Sulphured Juice

Juice Heater (heater to 100 c)

Clarities

Clear Juice

Evaporator

Syrup

Syrup Sulphured Syrup

Pons

Masscult

Crystallizes

Centrifugal

White sugar

Graders

Sugar weighted and Baggage’s

AGRICULTURAL DEPARTMENT

INTRODUCTION

The agri departments one of the important dept of the company as its function is to the

provide raw materials to the factory & providing proper guidance to the farmer about

cultivation of cane new techniques and supplying seeds and fertilizer.

In the agricultural department 13 Cluster officer i.e. 4 at Mudhol, 1 at Jamakhandi, 1

at Rabakavi, 1 at Terdal, 1 at Harugeri, 1 at Satti, 1 at Mugalkhod, Mudalgi, Kulgod, and one

at Saidapur and Mahalingpur.

The farmers are providing Cane & bonded.i.e. Seasonal 1 year short term, long

Term 15-20years. The objective of agricultural department is to increase yield level

and increasing cane area horizontally and vertically utilizing minimum water.

Objectives

New variety & good quality seeds are provided to former on credit basic without

interest and due a amount incurred in next season. Fertilizers are also provided on credit basic

with interest. Margin money help for mini lift irrigation schemes and recovered through three

installments.

AGRICULTURE DEPARTMENT HIRERARCHY

General manager

Office manager

Assistant Manager

Fertilizer section

Clerk

Clerks

Office clerk

CANE DEVELOPEMENT DEPARTMENT

General Manager

Cane DevelopmentOfficer

Assistant Cane Development Officer

Supervisors

Office Boy

OBJECTIVES OF CANE DEVELOPMENT DEPARTMENT

To get high yield of sugar cane to the factory in right time.

To improve of variety of cane.

To develop the backward area.

To provide all facilities like seeds, fertilizers, unloading and loading charges.

To maintain registration of cane, gang and plantation.

To undertake seeds distribution program.

To soil of this area is varying alluvial fertile soil is there on the bank of Krishna and

Ghataprabha rivers. Further upwards, there is medium deep black soil, vary fertile well

drained light to medium clay soil, which has received heavy application if from yard Manu

science last 10-12 years also is presently in some parts.

The main function of cane development department is to arrange for raw material,

which is required to the factory. For this order is received by priority basis (that is growers

who grows sugar cane first in his led). They also are providing a loading gang with 8 to 10

members per village and also a bonded tractor for transportation.

SUGAR CANE VARIETIES

As present COC-671, COC-8011 is very popular sugar cane varieties in this area. The

factory had introduced a new variety of sugar that COC-86032 three years back. Here more

than 85% of sugar cane is of variety COC-671 which is mainly grown in this area.

S.L NAME OF THE VARIETY AREA IN (HECATRE) ( R )

1 COC-671 1153 60.02%

2 COC-8011 0480 24.99%

3 COC-86032 1921 14.99%

HUMAN RESOURCE DEPARTMENT

INTRODUCTION

Personal management is that the field of management which has to do with has to do with

the planning, organizing and controlling various operative activities. Operative activities

includes procuring, developing maintaining and utilizing a labor force in order that the

objectives and interest for which the company is established or attained as effectively and

economically as possible and the objectives and interests of labour itself are served to the

highest degree. It is clear that personal management. It is clear that personnel management. It

involves following functions,

It is a management of human resources of the enterprises.

It is concerned with the effective utilization of human resource.

It is staff activities requiring special knowledge and skill.

It is concerned with the achievement of common goals as well as integration of

individual effects with the common goals.

The principal and functions of general management are applicable at this area of

management

Personal management in Arignar Anna sugar mills ltd. Is a neglected area. No

separate personnel department is maintained there. The administration section

performs personnel function in this organization.

Personnel department helps in performing the functions like Recruitment, Selection,

training, Motivating and Placement of workers. If there is no personnel department, it reduces

the moral of the workers.

This is also one of the important function of this department, keeping in view to

update his knowledge and to increase his efficiency, so time after time such program are

arranged by this department and employees of the company are kept in touch with the least

ways of morale booster and fondness towards the company is generated in the blood of

employees.

OBJECTIVES

To maintain a healthy relationship and act as a mediator between employer

and employees.

To recruit and select the prospective candidate arrange for an interview and fill

the vacancies in the concerned department.

To take care of all the activities done by the other departments.

Personal department is responsible all the good and bad workers done by the

workers.

HR department has to maintain the good relationship with all other

departments

To know the meaning definition and methods of Capital Structure.

To determine whether acquired capital asset is viable or not.

To find out the Post Payback Profitability.

To find out the Accounting Rate of Return on investment.

To know the Net Present Value.

To find out the Internal Rate of Return on investment.

To know the Profitability Index.

SCOPE

1) To maintain full and systematic records of business transactions: Accounting is the

language of business transactions. Given the limitations of human memory, the main

objective of accounting is to maintain a full and systematic record of all business

transactions.

2) To ascertain profit or loss of the business: Business is run to earn profits. Whether the

business earned profit or incurred loss is ascertained by accounting by preparing profit

and loss account or income statement. A comparison of income and expenditure gives

either profit or loss.

3) To depict financial position of the business: A company is interested in ascertaining

its financial position at the end of this period. For this purpose, a position statement

called Balance Sheet is prepared in which assets and liabilities are shown if the assets

exceed liabilities, it is financially healthy in other case it is financially weak.

4) The study under taken on Capital Structure decisions at Arignar Anna (distillery and

chemicals division) helps in the evaluation of the Capital Structure decisions already

taken and to be take in future. The study will cover the different methods used for the

Capital decisions and their viability, their payback or return on the investment

5)

LIMITATIONS

Every company or organization should have well-established training policy. A

training policy is considered necessary for the following reasons.

a. To indicate a company’s intention to develop its personnel to provide guidance in the

framing and implementations of programs to provide information concerning them to

all concerned

b. To discover critical areas where training is given on a priority basis and

c. To provide suitable opportunities to the employee for his own betterment.

Employees are coached and instructed by training instructors, they learn the job by personal

observation and practice. It is learning by doing.

Merits

1. Learns on the actual equipment in case and in the true environment of his job and

therefore, gets a feel of actual production condition and requirements

2. It is highly economically.

3. Learns rules and regulations through observation.

4. It is appropriate for short term learning programs

Demerits

1. Instruction is often highly disorganized and not properly supervised.

2. Lack of motivation.

COMPANY PROFILE

The Historical Background Of The Indian Sugar Industry

The sugar industry is proud to be an industry, which spreads the taste of sweetness to

the mankind. The history of origin of this industry is as old as the history of main him self.

Sugar is generally made from sugarcane and beet. In India, sugar is produced mainly from

sugarcane. India had introduced sugarcane all over the worlds and is a leading country in the

making sugar from sugarcane.

‘Saint Vishwamitra’ is known as the research person of the sugarcane in religious

literature. We can find the example of sugarcane in Vedic literature also as well as sugarcane.

We can also find the reference of sugar and the sugarcane in Patanjali’s Mahabashya and the

treaty on the grammar of ‘Panini’. Greek traveler ‘Niyarchus’ and Chinese traveler ‘Tai-

Sung’ have mentioned in their travelogue that the people of India used to know the methods

of making sugar and juice from sugarcane the great Emperor Alexander also carried

sugarcane with him while returning to his country.

Thus from different historical references and from some ‘Puranas’ it can be concluded

that method of making sugar from sugarcane was known to the people of Bihar. The

historical evidences of sugar industry prospering in ancient India concrete and this has helped

to develop and prosper the co-operative sugar movement in India.

National Scenario of Sugar Industry

The first sugar mill in the country was set up in 1903 in the United Provinces. There

are 566 installed sugar mills, of which 453 were in operation in the year 2002-03 and utilized

194.4 million ton of sugarcane (69% of total cane production) to produce 20.14 million tons

of sugar. About 5 lakh workmen are directly employed in the sugar. About 5 lakh workmen

are directly employed in the sugar industry besides many in industries, which utilize by-

products of sugar industry as raw material.

India is the largest consumer and second largest producer of sugar in the world. The

Indian sugar industry is the second largest agro-industry located in the rural India. Indian

sugar industry has been a focal point for socio-economic development in the rural areas.

About 50 million sugarcane farmers and a large number of agricultural laborers are involved

in sugarcane cultivation and ancillary activities, constituting 7.5% of the rural population.

Besides, the industry provides employment to about 2 million skilled/semi skilled workers

and others mostly from the rural areas. The industry not only generates power for its own

requirement but surplus power for export to the grid based on by-product–Bagasse. It also

produces ethyl alcohol, which is used for industrial and potable uses, and can be used to the

manufacture Ethanol, an ecology friendly and renewable fuel for blending with petrol.

The sugar industry in the country uses only sugarcane as input, hence sugar

companies have been established in large sugarcane growing states like Uttar Pradesh, Tamil

Nadu, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. In sugar year 2003-04,these six

states contribute more than 85%of total sugar production in the country; Uttar Pradesh, Tamil

Nadu, and Karnataka together contribute more than 65%of total production.

The government of India licensed new units with an initial capacity of 1250 TCD up

to the 1980s and with the revision in minimum economic size to 2500 TCD, the Government

issued licenses for setting up of 2500 TCD plants thereafter. The government de-licensed

sugar sector in the year of 11.September.1988. The entrepreneurs have been allowed to set up

sugar factories of expand the existing sugar factories as per the techno-economic feasibility

of the project. However, they are required to maintain a radial distance of 15 kms from the

existing sugar factory. After de-licensing, a number of new sugar plants of varying capacities

have been set up and the existing plants have substantially increased their capacity.

There are 566 installed sugar mills in the country as on March 31st 2005, with a

production capacity of 180 lack MTs of sugar, of which only 453 are working. These mills

are located in 18 states of the country.

The sector wise break up’s as follows:

Table no-1

Sl. No. Sector No of factories

1. Private 189

2. Public 62

3. Co-operative 315

Total 566

International Scenario of Sugar Industry

Sugar is produced in 110 countries. The leading sugarcane producing countries are

Brazil, India, Australia, Thailand, China and Cuba.

Sugar is extracted from two different raw materials, sugarcane and beet. Both produce

identical refined sugar. Sugarcane is grown in semi-tropical regions, and accounts for around

two-thirds of world accounts for the balance one third of world production. The Russian

Federation, Ukraine and Europe account for around 80 per count of total beet sugar

production. In addition to weather conditions, diseases, insects, and quality of soil,

international trade agreements and domestic price support programmers affect production of

sugarcane and beet.

International Sugar Industry

Demand- Supply

Brazil and India are the largest sugar producing countries followed by China, USA,

Thailand, Australia, Mexico, Pakistan, France and Germany. Global sugar production

increased from approximately 125.88 MMT in 1995-1996 to 149.4 MMT in 2002-2003 and

then declined to 143.7 MMT in 2003-2004, whereas consumption increased steadily from

118.1 MMT in 1995-1996 to 142.8 MMT in 2003-2004 as shown in below given chart. The

word consumption is projected to grow to 160.7 MMT by 2010 and 176.1 MMT by 2015.

The world’s largest consumers of sugar are India, China, Brazil, USA, Russia,

Mexico, Pakistan, Indonesia, Germany and Egypt. According to USDA Foreign Agriculture

Service, the consumption of sugar in Asian countries has increased at a faster rate, as a direct

result of increasing population, increasing per capita income and increased availability.

Diagram no-1

Contribution of Sugar Industry to Indian Economy

Sugar industry contributes about Rs.1650 corers to the Central Exchequer as excise

duty and other taxes annually. In addition, about Rs.600 corers is realized by the State

Governments annually through purchase tax and chess on cane. At the prevailing sugarcane

price, the total sugar cane produced in the country value at about Rs.24000 corers per year.

World Sugar Trade

Word trade in raw sugar is typically around 22 MMT and white sugar around 16

MMT. Brazil is the largest importer, followed by EU, Thailand, Australia and Cuba. The

largest importers are Russia, Indonesia, UK, South Korea, Japan, Malaysia, the Middle East,

and North Africa.

Sugar Prices

World sugar prices fell steadily from 1994-1995 till 1998-1999 and have been almost

stable at those levels. The trend seems to have now reversed and refined sugar prices have

increased by 30% in the last 5 quarters – from 9.16 cents per pound in January, 2004 to 12.02

cents in March,2005 (Source: USDA Foreign Agriculture Services).

Sugarcane Availability

Table showing sugar cane availability in cultivated area:

Table no-2

Year Cultivated area (%) MMT

1980-81 2.7 154

1990-91 - 241

2000-11 - 296

2012-13 4.3 300

Sugarcane occupies about 2.7% of the total cultivated area and it is one of the most

important cash crops in the country. The area under sugarcane gradually increased from 2.7

million hectares in 1980-81 to 4.3 million hectares in 2002-03, mainly because of much

larger diversion of land from other crops to sugarcane by the farmers for economic reasons.

The sugarcane area, however, declined in the year 2003-04 to 3.9 million hectares and to 3.7

million hectares in 2004-05, mainly due to drought and pest attacks. From a level of 154

MMT in 1980-1981, the sugarcane production increased to 241 MMT in 1990-1991 and

further to 296 MMT in 2000-2001. Since then, it has been hovering around 300 MMT until

last year. In the season 2003-2004, however, sugarcane production declined to 236 MMT

mainly due to drought and pest attacks. Not only sugarcane acreage and sugarcane production

has been increasing, even drawal of sugarcane by the sugar industry has also been increasing

over the years. In India, sugarcane is utilized by sugar mills as well as by traditional

sweeteners like guru and khandsari producers. However, the diversion of sugarcane to guru

and khandsari is lower in states of Tamil Nadu and Karnataka, as compared to Northern states

like UP.

SUGARCANE UTILIZATION

Table no-3

Year

% Sugarcane utilization for

White Sugar Guru and

Khandsari

Seed, feed and

chewing

1980-1981 33.4 54.8 11.8

1990-1991 50.7 37.4 11.8

2000-2001 59.7 28.8 11.5

2001-2002 57.4 31.5 11.1

2002-2003 68.9 20.1 11.1

2003-2004 56.1 32.5 11.4

Sugar Production

Most of the sugar in India is manufactured and sold as “White Crystal Sugar” which

is produced by Double Suspiration Process, while the norm in developed and emerging

nations is refined sugar, which is produced by the Phosphoflotation Process.

Most of the mills in India are not equipped to make refined sugar Mills which are

designed to produce refined sugar can manufacture sugar not only from sugarcane but also

from raw sugar which can be imported. Therefore, such mills can run their production all the

year round, as opposed to single state mills, which are dependent upon the seasonal supply of

sugarcane.

Time Office

WORKING HOURS

GENERAL SHIFT 8 AM – 5.30PM

MORNING SHIFT 4 AM – 12.00PM

AFTERNOON SHIFT 12 PM – 8.00PM

LEAVE ENTRIES

CASUAL LEAVE 10 DAYS

SICK LEAVE 8 DAYS

EARNED LEAVE 25 DAYS

PRIVILEGE LEAVE NOT < 3 DAYS AND NOT > 4 DAYS

FINANCE DEPARTMENT

Finance Department hierarchy

Deputy GM (Finance & Accounts)

Officer Cashier

Jr. Officer Cane Accounts Account Asst.

Asst. Cane Accountant

Clerks

Clerks

Accounting Process

Recording the transactions.

Classifying the transactions.

Summarizing the transactions.

Analyzing and interpreting the results.

In this section accounts are maintained. Accounts are maintained in traditional method in this

section accounts are maintained. Accounts are maintained in traditional method

The main functions are

Recording all the accounts including employees and workers salary, their P.F. etc.

It records all the payments of the factory.

It records all the transaction of the factory

INDUSTRY PROFILE

The Historical Background Of The Indian Sugar Industry

The sugar industry is proud to be an industry, which spreads the taste of sweetness to

the mankind. The history of origin of this industry is as old as the history of main him self.

Sugar is generally made from sugarcane and beet. In India, sugar is produced mainly from

sugarcane. India had introduced sugarcane all over the worlds and is a leading country in the

making sugar from sugarcane.

‘Saint Vishwamitra’ is known as the research person of the sugarcane in religious

literature. We can find the example of sugarcane in Vedic literature also as well as sugarcane.

We can also find the reference of sugar and the sugarcane in Patanjali’s Mahabashya and the

treaty on the grammar of ‘Panini’. Greek traveler ‘Niyarchus’ and Chinese traveler ‘Tai-

Sung’ have mentioned in their travelogue that the people of India used to know the methods

of making sugar and juice from sugarcane the great Emperor Alexander also carried

sugarcane with him while returning to his country.

Thus from different historical references and from some ‘Puranas’ it can be concluded

that method of making sugar from sugarcane was known to the people of Bihar. The

historical evidences of sugar industry prospering in ancient India concrete and this has helped

to develop and prosper the co-operative sugar movement in India.

National Scenario of Sugar Industry

The first sugar mill in the country was set up in 1903 in the United Provinces. There

are 566 installed sugar mills, of which 453 were in operation in the year 2002-03 and utilized

194.4 million ton of sugarcane (69% of total cane production) to produce 20.14 million tons

of sugar. About 5 lakh workmen are directly employed in the sugar. About 5 lakh workmen

are directly employed in the sugar industry besides many in industries, which utilize by-

products of sugar industry as raw material.

India is the largest consumer and second largest producer of sugar in the world. The

Indian sugar industry is the second largest agro-industry located in the rural India. Indian

sugar industry has been a focal point for socio-economic development in the rural areas.

About 50 million sugarcane farmers and a large number of agricultural laborers are involved

in sugarcane cultivation and ancillary activities, constituting 7.5% of the rural population.

Besides, the industry provides employment to about 2 million skilled/semi skilled workers

and others mostly from the rural areas. The industry not only generates power for its own

requirement but surplus power for export to the grid based on by-product–Bagasse. It also

produces ethyl alcohol, which is used for industrial and potable uses, and can be used to the

manufacture Ethanol, an ecology friendly and renewable fuel for blending with petrol.

The sugar industry in the country uses only sugarcane as input, hence sugar

companies have been established in large sugarcane growing states like Uttar Pradesh, Tamil

Nadu, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. In sugar year 2003-04,these six

states contribute more than 85%of total sugar production in the country; Uttar Pradesh, Tamil

Nadu, and Karnataka together contribute more than 65%of total production.

The government of India licensed new units with an initial capacity of 1250 TCD up

to the 1980s and with the revision in minimum economic size to 2500 TCD, the Government

issued licenses for setting up of 2500 TCD plants thereafter. The government de-licensed

sugar sector in the year of 11.September.1988. The entrepreneurs have been allowed to set up

sugar factories of expand the existing sugar factories as per the techno-economic feasibility

of the project. However, they are required to maintain a radial distance of 15 kms from the

existing sugar factory. After de-licensing, a number of new sugar plants of varying capacities

have been set up and the existing plants have substantially increased their capacity.

There are 566 installed sugar mills in the country as on March 31st 2005, with a

production capacity of 180 lack MTs of sugar, of which only 453 are working. These mills

are located in 18 states of the country.

The sector wise break up’s as follows:

Table no-1

Sl. No. Sector No of factories

1. Private 189

2. Public 62

3. Co-operative 315

Total 566

International Scenario of Sugar Industry

Sugar is produced in 110 countries. The leading sugarcane producing countries are

Brazil, India, Australia, Thailand, China and Cuba.

Sugar is extracted from two different raw materials, sugarcane and beet. Both produce

identical refined sugar. Sugarcane is grown in semi-tropical regions, and accounts for around

two-thirds of world accounts for the balance one third of world production. The Russian

Federation, Ukraine and Europe account for around 80 per count of total beet sugar

production. In addition to weather conditions, diseases, insects, and quality of soil,

international trade agreements and domestic price support programmers affect production of

sugarcane and beet.

International Sugar Industry

Demand- Supply

Brazil and India are the largest sugar producing countries followed by China, USA,

Thailand, Australia, Mexico, Pakistan, France and Germany. Global sugar production

increased from approximately 125.88 MMT in 1995-1996 to 149.4 MMT in 2002-2003 and

then declined to 143.7 MMT in 2003-2004, whereas consumption increased steadily from

118.1 MMT in 1995-1996 to 142.8 MMT in 2003-2004 as shown in below given chart. The

word consumption is projected to grow to 160.7 MMT by 2010 and 176.1 MMT by 2015.

The world’s largest consumers of sugar are India, China, Brazil, USA, Russia,

Mexico, Pakistan, Indonesia, Germany and Egypt. According to USDA Foreign Agriculture

Service, the consumption of sugar in Asian countries has increased at a faster rate, as a direct

result of increasing population, increasing per capita income and increased availability.

Diagram no-1

Contribution of Sugar Industry to Indian Economy

Sugar industry contributes about Rs.1650 corers to the Central Exchequer as excise

duty and other taxes annually. In addition, about Rs.600 corers is realized by the State

Governments annually through purchase tax and chess on cane. At the prevailing sugarcane

price, the total sugar cane produced in the country value at about Rs.24000 corers per year.

World Sugar Trade

Word trade in raw sugar is typically around 22 MMT and white sugar around 16

MMT. Brazil is the largest importer, followed by EU, Thailand, Australia and Cuba. The

largest importers are Russia, Indonesia, UK, South Korea, Japan, Malaysia, the Middle East,

and North Africa.

Sugar Prices

World sugar prices fell steadily from 1994-1995 till 1998-1999 and have been almost

stable at those levels. The trend seems to have now reversed and refined sugar prices have

increased by 30% in the last 5 quarters – from 9.16 cents per pound in January, 2004 to 12.02

cents in March,2005 (Source: USDA Foreign Agriculture Services).

Sugarcane Availability

Table showing sugar cane availability in cultivated area:

Table no-2

Year Cultivated area (%) MMT

1980-81 2.7 154

1990-91 - 241

2000-01 - 296

2002-03 4.3 300

2003-04 3.9 -

2004-05 3.7 236

Sugarcane occupies about 2.7% of the total cultivated area and it is one of the most

important cash crops in the country. The area under sugarcane gradually increased from 2.7

million hectares in 1980-81 to 4.3 million hectares in 2002-03, mainly because of much

larger diversion of land from other crops to sugarcane by the farmers for economic reasons.

The sugarcane area, however, declined in the year 2003-04 to 3.9 million hectares and to 3.7

million hectares in 2004-05, mainly due to drought and pest attacks. From a level of 154

MMT in 1980-1981, the sugarcane production increased to 241 MMT in 1990-1991 and

further to 296 MMT in 2000-2001. Since then, it has been hovering around 300 MMT until

last year. In the season 2003-2004, however, sugarcane production declined to 236 MMT

mainly due to drought and pest attacks. Not only sugarcane acreage and sugarcane production

has been increasing, even drawal of sugarcane by the sugar industry has also been increasing

over the years. In India, sugarcane is utilized by sugar mills as well as by traditional

sweeteners like guru and khandsari producers. However, the diversion of sugarcane to guru

and khandsari is lower in states of Tamil Nadu and Karnataka, as compared to Northern states

like UP.

SUGARCANE UTILIZATION

Table no-3

Year

% Sugarcane utilization for

White Sugar Guru and

Khandsari

Seed, feed and

chewing

1980-1981 33.4 54.8 11.8

1990-1991 50.7 37.4 11.8

2000-2001 59.7 28.8 11.5

2001-2002 57.4 31.5 11.1

2002-2003 68.9 20.1 11.1

2003-2004 56.1 32.5 11.4

Sugar Production

Most of the sugar in India is manufactured and sold as “White Crystal Sugar” which

is produced by Double Suspiration Process, while the norm in developed and emerging

nations is refined sugar, which is produced by the Phosphoflotation Process.

Most of the mills in India are not equipped to make refined sugar Mills which are

designed to produce refined sugar can manufacture sugar not only from sugarcane but also

from raw sugar which can be imported. Therefore, such mills can run their production all the

year round, as opposed to single state mills, which are dependent upon the seasonal supply of

sugarcane.

Conclusion

India is a largest consumer of sugar in the world and second largest manufacturer of

sugar followed by China, USA, Thailand, Germany, and Pakistan. In the sugar industry the

top position is Brazil as it is a world largest manufacturer of sugar. As seeing the

consumption of sugar the India is having a big market for sugar industry. As it is a large-scale

industry it provides large profit for the country and it can also be helpful for development of

industrial infrastructure. India is a world’s largest consumer and second largest

manufacturing of sugar so the sugar must be cheaper. It can be provide by our sugar industry.

“A STUDY ON CAPITAL STRUCTURE AT ARIGNAR ANNA SUGAR

MILLS LTD.”

OBJECTIVES

1) To know the meaning definition and methods of Capital Structure.

2) To determine whether acquired capital asset is viable or not.

3) To find out the Post Payback Profitability.

4) To find out the Accounting Rate of Return on investment.

5) To know the Net Present Value.

6) To find out the Internal Rate of Return on investment.

7) To know the Profitability Index.

SCOPE OF THE STUDY

The study under taken on Capital Structure decisions at Arignar Anna (distillery and

chemicals division) helps in the evaluation of the Capital Structure decisions already taken

and to be take in future. The study will cover the different methods used for the Capital

decisions and their viability, their payback or return on the investment.

LIMITATIONS

Considering the scope mentioned above, some or few limitations are arising. That is

Arignar Anna Sugar Mills Ltd is big organization. Its finance and accounts department is also

big departments. But due to shortage of information providing, I am concentrating on

equations as per information given by the finance and accounts department.

TECHNIQUES OF INVESTMENT ANALYSIS

Techniques of investment analysis in one of the important functions of the financial

management the funds are raised through the primary market, secondary market, capital

market and money market by selecting the appropriate instrument which would help the

organization to starts its activities on the expected lines. The cast is recovered and margin is

kept for the risk the promoter under takes. This kind of planning of funds with an forecasted

profits are earned only by analyzing the various investment alternatives available to him.

Generally investments are made on fixed assets and as well as current assets. These assets

structure have to be build scientifically, to earn sufficient profits to meet the objectives.

INVESTMENT DECISIONS

This is a decision based on risk and uncertainty. He has to evaluate the investment

praposuals in relation of their expected rate of risk and returns. The process which defferent

projects are evaluated is known as ‘Capital Structure’.

The profit cost and cash inflows of the projects are compared and best projects are

selected for the purpose of investment.

CAPITAL STRUCTURE

The project planning is a process by which companies allocate the funds to the

various investment projects designed to ensure the growth and profitability.

Capital Structure refers to planning the devide of available capital for the purpose of

maximizing the long term profitability of the firm.

Definitions of the Capital Structure

“Capital Structure is long term planning for making and financing proposed capital

outlays”. By Charles T Horngreen.

Capital Structure consists in planning, dividing of available capital for the purpose of

maximizing the long term profitability of the concern.

METHODS OF CAPITAL STRUCTURE

The Capital Structure techniques or evaluation of investment proposals have

considerably gained the importance. This is more true in the modern business environment.

After introduction of new economic policy, the environment in the industry and service sector

have considerably changed. Number of mergers, acquisitions and joint ventures.

There are methods for evaluating or ranking the capital investment proposals. It has

mainly two methods.

TRADITIONAL METHODS

PAY BACK PERIOD METHOD.

POST BACK PROFITABILITY METHOD.

ACCOUNTING RATE OF RETURN METHOD.

DISCOUNTED CASH FLOW METHODS

THE NET PRASENT VALUE METHOD

INTERNAL RATE OF RETURN METHOD

PROFITABILITY INDEX METHOD

TRADITIONAL METHODS

PAYBACK PERIOD METHOD

The term payback period refers to the period in which the project give the necessary

cash to recover the initial investment. It is a traditional, simple method of evaluate the

projects. It does not take the effect of time value of money. Cash flows refer to profit before

depreciation and after tax.

MERITS

1) It is a old method and traditional one.

2) It involves simple calculations

3) It is the best method for evaluating high risk projects.

4) The Results obtained under this method is more reliable.

DEMERITS

1) It is based on the principle ‘rule and thumb’.

2) It does not recognize the importance of ‘time value of money.

3) It does not recognize the pattern of cash flows and its timing.

POST PAYBACK PROFITABILITY METHOD

To remove the drawbacks of payback period, the post payback profitability method

was developed. The cash inflow generated from a project during the life of the project. As

payback period the cash flow were considered only to the extend of recovering the

investment. But in practical, after the recovery of pay back period the project can capable to

generate the cash inflows or not. Therefore, to evaluate the project the entire amount of cash

inflows.

MERITS

1) It is based on simple calculations.

2) It takes less time consuming.

3) It is easy to follow and even ordinary man can also understand

DEMERITS

1) It is also based on principle of “rule and thumb”.

2) It doesn’t consider the impact of time value of money.

3) It ignores depreciation.

ACCEPT OR REJECT CRITERION

The pay back period can be used as an accept or reject criterion. It can also be used as

a method of ranking project. If the pay back period calculated for a project is less than the

maximum payback period set up by the management. It would be accepted project whose

actual payback period is more than what has been pre-determined by the management.

ACCOUNTING RATE OF RETURN:

Accounting Rate of Return considers life time the earnings of the project. This

method is based on conventional accounting concepts. The Rate of Return is expressed as

percentage of the earnings. This method has been introduced to over come the dis-advantage

of payback period. The profit under this method is calculated as profit after depreciation and

tax.

Formulae:

Average annual income (after depreciation and tax)

ARR = Initial Investment x 100

Total cash inflows

Average annual income = No of Years

As ARR is commonly accepted in assessing the profitability of capital expenditure.

Because the method does to consider the heavy cash inflow during the project period. As the

earnings with averaged.

Accept or Reject criterion

Under this method, all project, having Accounting Rate of Return higher than the

minimum rate determined by management will be consider and those having ARR less than

pre determined rate. This method ranks a project as number one. If it has highest ARR, and

lowest rank is assigned to the project with the lowest ARR.

MERITS

1) It is very simple to understand and use.

2) This method takes into account saving over the entire life of the project.

3) This method through the concept of “net earnings”.

4) It can be readily by calculated by using the accounting data.

DEMERITS

1) It ignores time value of money.

2) It does not consider the length of life of the project.

3) It does not consistent with the firm’s objective of maximising the market value of

shares.

4) It ignores the fact that the profits earned can be reinvested.

DISCOUNTED CASH FLOW METHODS

Discounted cash flow method is improved over pay back method and ARR. An

investment is essential out flow of funds aiming at percentage of rate of return. This method

includes the following methods.

NET PRESENT VALUE METHOD

Net present value method recognizes the impact of time value of money. It is

considered as the best method of evaluating the Capital Structure proposals. It is widely used

in practice. The cash inflow to be received at different period of time will be discounted at a

particular discount rate. The present value of cash inflows are compared with the original

investment. The difference between the two will be used for accept or reject criterion.

MERITS

1) It recognizes the time value of money.

2) It considers the cash flow of the entire life.

DEMERITS

1. The NPV method is based on discount rate. In a real life situation, it is very

difficulty to find and understand the concept of cost of capital.

2. It may not give reliable answer when dealing with alternative projects under of

anequal lives of project.

INTERNAL RATE OF RETURN METHOD

IRR is that rate at which the sum of discounted cash inflow equals the sum of

discounted cash out flow. It is that rate at which NPV of the investment is zero. This method

is advised by Joel dean. This method is also known as

a) marginal efficiency of capital

b) Rate of Return on Investment

c) Time adjusted Rate of Return.

ACCEPT OR REJECT CRETERION

Accept the project if the internal rate of return is higher than or equal to minimum

required rate of return is also known as cut-off rate.

Calculation of IRR

Factor = Initial Investment

Average cash flow

IRR = A+(C − O) * (B−A)

(C − D)

MERITS

1) It considers the time value of money.

2) Calculation of cost of capital is not a prerequisite for adopting IRR.

3) It considers cash inflows throught the life of the project.

DEMERITS

1) Computation of IRR is tedious and difficulty to understand.

2) Both NPV and IRR assume that the cash inflows can be reinvested at the

discounting rate in the new projects.

PROFITABILITY INDEX

Profitability index is a conceptually sound method of appraising investment projects.

It provides ready comparison between investment proposals of different investment proposals

of different magnitudes. Project can be ranked on the bases of profitability index.

PROFITABILITY INDEX = P V of Cash Inflow

Initial investment.

DISTILERY AND CHEMICALS DIVISION

Year EBIT&D Interest

@12.25%

EBT&D Depreciation EBT

2007-08 7829.24 959.08 6870.16 336.22 6533.94

2008-09 6455.93 790.85 5665.08 359.20 5305.88

2009-10 5502.78 674.09 4828.69 416.42 4412.27

2010-11 8456.91 1035.97 7420.94 438.03 6982.91

2011-12 7199.94 881.99 6317.95 477.65 5840.30

Tax@35% EAT &Depre. EAT +Depre

2286.88 4247.06 4583.28

1857.06 3448.82 3808.02

1544.29 2867.98 3284.40

2440.02 4538.89 4976.92

2044.11 3796.20 4273.85

18898.95 20926.47

TRADITIONAL CASH FLOW METHODS

PAY BACK PERIOD METHOD:

(Rs in Lakhs)

YEAR CASH INFLOWS CUMILATIVE

2007-08 4583.28 4583.28

2008-09 3448.82 8032.10

The initial investment is Rs 6666.98 lakhs. The first year cash inflow is Rs 4583.28

lakhs. The second year cash inflow is Rs 3448.82 lakhs. The cash flow need only 6666.98 –

4583.28 = 2083.16 lakhs for recovery of the initial investment.

PAY BACK PERIOD = REMAINING CASH FLOW ∕ 2ND YEAR CASH FLOW

= 2083.16 ∕ 3448.82

= 0.604 year.

PAY BACK PERIOD = 1.604 YEARS.

Analysis:

For the 5 years period from 2004-05 to 2008-09 the above calculation the pay back

period is very low that is 1.604 years. So the investment was recovered early.

POST PAY BACK PROFITABILITY METHOD

(Rs in Lakhs)

The cash inflow during 2004-05 to 2008-09 20,926.47.

(4583.28+ 3808.02+ 3284.40+ 4976.92+ 4273.85)

Less: Initial investment 06,666.98

POST PAYBACK PROFITABILITY 14,259.49

Analysis:

For the 5 years period from 2004-05 to 2008-09 the above calculation the post

payback profitability is very high that is 14259.49 lakhs. So the project is more profitable

one.

ACCOUNTING RATE OF RETURN METHOD

ARR = Average annual income after tax and depre’n. X 100

Initial investment

Average annual income = Total income

No of years

Average income = 4247.06+ 3448.82+2867.98+4538.89+3796.20

5

Average income = 18898.95

5

Average income = 3779.79.

ARR = 3779.79 X 100

6666.98

ARR = 56.94%

Analysis:

For a 5 years period from 2004-05 to 2008-09, the above calculation the ARR works

out to be 56.94%. This indicates that the company is having high rate of return.

DISCOUNTED CASH FLOW METHODS

NET PRESENT VALUE:

Year Discounting factor

@ 17%

Cash inflows P V of cash inflows

2007-08 0.855 4247.06 3631.24

2008-09 0.731 3448.82 2521.09

2009-10 0.625 2867.98 1792.49

2010-11 0.534 4538.89 2423.76

2011-12 0.457 3796.20 1734.86

PRASENT VALUE 12103.44

Less: Initial Investment 06666.98

NET PRESENT VALUE 5436.46

Analysis:

For a 5 years period from 2004-05 to 2008-09, the above calculation the NPV is very

high that is 5436.46 lakhs. It indicates the value of the is high.

INTERNAL RATE OF RETURN METHOD: (Rs in lakhs)

Initial investment

FACTOR = Average cash inflow

Average cash inflow = Total cash inflows

No of years

Average cash inflows = 4247.06+3448.82+2867.98+4538.89+3796.20

5

Average cash inflows = 18898.95

5

Average cash inflows = 3779.79

FACTOR VALUE = 6666.98

3779.79

FACTOR VALUE = 1.76

Calculation of present value of cash inflows

Year Cash inflows

Discounting factor@40%

P V of CIF@40%

Discounting factor@50%

P V of CIF@50%

2007-08 4247.06 0.714 3032.40 0.667 2022.61

2008-09 3448.82 0.510 1758.90 0.444 1531.28

2009-10 2867.98 0.364 1043.95 0.296 848.92

2010-11 4538.89 0.260 1180.11 0.198 898.70

2011-12 3796.20 0.186 699.40 0.132 501.10

7714.76 5802.61

IRR = A + C – O X (B-A)

C - D

Where, A = 40

B = 50

C = 7714.76

D = 5802.61

O = 6666.98

7714.76 – 6666.98 X (50 - 40)

IRR = 40 + 7714.76 – 5802.61

IRR = 40 + 1047.78 X 10

1912.15

IRR = 40 + 5.48

IRR = 45.48.

Analysis:

For a 5 years period from 2004-05 to 2008-09, the IRR works out to be 45.48. This is

good for the company.

PROFITABILITY INDEX METHOD

Year Discounting

factor @ 17%

Cash inflows P V of cash inflows

2007-08 0.855 4247.06 3631.24

2008-09 0.731 3448.82 2521.09

2009-10 0.625 2867.98 1792.49

2010-11 0.534 4538.89 2423.76

2011-12 0.457 3796.20 1734.86

TOTAL P V of CIF 12103.44

Present value of CIF

PROFITABILITY INDEX = Initial investment

12103.44

PROFITABILITY INDEX = 6666.98

PROFITABILITY INDEX = 1.15

Analysis:

For a 5 years period from 2004-05 to 2008-09, the above calculation the profitability

index or cost- benefit ratio is 1.15. So the project is viable.

Findings

1. Since the capital invested in the assets are recovered within a short period of 1.60

year. The proposal is viable to the company.

2. Post pay back profitability is Rs.14259.49 lakhs.

3. Accounting Rate of Return is 56.94%

4. Since the Net Present Value is positive the project is financially viable.

Suggestions

Even though the distillery and chemicals division have high potentiality to earn huge profits,

the company is not giving the importance to the division continuously. The company is

giving the importance to 1 division among 3 divisions. Here they are neglecting the

importance of other two divisions for the year. This is resulted in high fluctuations on cash

inflows for the company. Here the company may work on the area and improve the

company’s profitability.

CONCLUSION

The Arignar Anna Sugar Mills was located at Kurungulam. It is a small village in

Thanjavur district. It was established in the year 1971-72. The company achieved high

crushing of sugar cane session in the year 2005-06 that is 16,39 424 tones. The present year

2011-12 it crushed sugar cane at 17, 44,267 tones. The company also celebrated in company

premises and award given who are directly involved in this achievement.

The Distillery and Chemicals division was established in the year 1984-85. The

Distillery division started working initially 30000 Ltrs. It has some by-products. that are

Ethyle Actate, Bhoomilabha, SOC etc.

The Capital Structure means the capital project planning is a process by which

companies allocate funds to various investment projects to ensure the profitability and

growth. The Capital Structure mainly has two methods, first, Discounted cash flow methods

and second one is traditional cash flow methods.

The Distillery and Chemicals division’ at Arignar Anna Sugars Ltd, performance is

very well in turns high Net Present Value early recovery period of initial investment. So the

Distillery and Chemicals division performing very well.

BIBLIOGRAPHY

References:

1) Financial Management

BY- D B KULKARNI.

P V SATYAPRASAD.

2) FINANCIAL MANAGEMENT

BY- I M PANDE

3)TASCO-Web Site

Annexure

Calculation of Weighted Average Cost of Capital [WACC]

(RS IN LAKHS)

SOURCES AMOUNT PRAPORTION COST WACC

EQUITY

SHARES

2748,25 0.0590 0.375 0.02212

PREFERENCE

SHARES

1800.00 0.0390 0.120 0.00468

LOANS 36238.18 0.7829 0.1225 0.09591

RETAINED

EARNINGS

5500.07 0,1188 0.375 0.04455

46286.50 0.16726

Cost in % = 16.73 OR 17.

CALCULATION OF INVESTMENT FOR THE YEAR 2004-05

Net Assets on 31st march 2005 = 19330.71

Cash inflow of Distillery and Chemicals Division = 14140.36

2004-05

Total Cash Inflow of Arignar Anna Sugar Mills is = 40999.54

Investment in the year 2004-05 = Net Assets X CIF of Distillery and Chemicals

Total CIF of GSM.

Investment = 19330.71 X 14140.36

40999.54

Investment = 6666.98.