DISSERTATION STUDY ON

“The Study of the Sugar Industry and the Financial Performance Analysis of Three Sugar Units done for IDBI”

This project report is being submitted as part of the requirements of the MBA Program of Bangalore University (2003-05). The study has been undertaken by: CIBY OOMMEN Reg. No. 03VWCM6023 With the guidance and support of Prof. Guha Faculty, ABA

ALLIANCE BUSINESS ACADEMY BANGALORE – 560 076 Batch: 2003-2005

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DECLARATION I, Ciby Oommen, studying in Alliance Business Academy, Bangalore do hereby declare that this dissertation study on the topic “The study of the Sugar Industry and

the Financial Performance Analysis of Three Sugar Units done for IDBI” is an original research
work carried out by me as part of the requirements of the MBA Program of Bangalore University (Batch of 2003 – 2005). My guide for the training has been Prof. K. N. Guha. I further declare that this project report has not been submitted earlier to any other University or Institute for the award of any Degree or Diploma.

Date: 9.06.2005 Place: Bangalore

CIBY OOMMEN Reg. No 03VWCM6023 ALLIANCE BUSINESS ACADEMY

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CERTIFICATE
This is to certify that Ms. Ciby Oommen, of Alliance Business Academy, pursuing her MBA degree through Bangalore University has done a dissertation study on:

“The study of the Sugar Industry and the Financial Performance Analysis of three Sugar Units done for IDBI”
This work is based on an original project study conducted by her under my guidance. This has not formed a basis for award of any degree by Bangalore University or any other university.

Date: 10.06.05 Place: Bangalore Prof. K.N. Guha Faculty Alliance Business Academy

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ACKNOWLEDGEMENT It would not be fair to start the formal proceedings in this study report without recognizing the efforts and input of all those people without whom this would not have been possible. At first hand I would like to thank Mr. Sudhir. G. Angur, our chairman and Dr. B. V. Krishnamurthy, our director for giving me this opportunity. I extend my deepest gratitude to Prof. Guha, my guide and teacher without whose valuable guidance it would have been impossible for me to make sense of this project. I would also like to mention the valuable inputs given by the managing directors of the three sugar units without whom this would not have been possible. I also like to thank my friends who have rendered their help and support in the completion of the project work. Finally, just a word for my parents, if not for whom this would be pointless. Thank You.

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ABSTRACT
Industrial Development Bank of India (IDBI), one of the major Financial Institutions in India has contributed to the growth of National economy and has always been supportive to the Government by assisting in its development activities. This institution was established with a view to analyzing/ determining the problems and prospects of the emerging industries in India. In addition to analysis and determining the problems, the institution also strives towards enhancing the scope for overall development of those emerging industries. One such emerging industries namely the sugar industry, has been the topic of the study. India is the largest producer and consumer of sugar in the world, with Maharashtra contributing over one-third of country’s sugar output. There are around 434 Sugar Mills in India. In India sugar is produced mainly in the states of Andhra Pradesh, Bihar, Gujarat, Karnataka, Maharashtra, Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu and Uttar Pradesh. Indian sugar industry is highly fragmented with organized and unorganized players. The unorganized players mainly produce Khandasari and Khandari, the less refined forms of sugar. The government had a controlling grip over the industry, which has slowly yet steadily given way to liberalization. In the past few years the sugar industry in India has been facing several problems like mounting stocks, controls by the Government, low capacities etc. To understand the reasons for such problems and the effect of the industry trends three sugar units assisted by IDBI have been studied. The financial analysis of the sugar units was done using financial analysis tools like ratio analysis, common-size statements and trend analysis. This financial analysis forms the basis for sanctioning of loans by IDBI.

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1.0 INDUSTRY PROFILE 1.1 HISTORY OF FINANCIAL INSTITUTIONS The Government of India had set up Financial Institutions (FIs) for providing finance to those sectors of the economy to which commercial banks do not provide finance. These institutions handle the problem of providing long-term finances at affordable rates. The Industrial Finance Corporation of India (IFCI) was formed in 1948 to finance development especially in the industrial sector. Broadly speaking such FIs are known as Development Banks. For each category of term financing activity, an apex All India Development has been promoted. There are separate development institutions for agriculture, industry, investment, tourism, SSI, etc. FIs in India comprises of 14 institutions at the national level and 46 at the State Level. The national level institutions comprise 6 All India Development Banks (AIDBs), 5 Specialized Financial Institutions (SFIs) and 3 Investment Institutions (IIs). At the State Level, there are 18 State Financial Corporations (SFCs) and 28 State Industrial Development Corporations (SIDCs). These institutions have played an important role in the development of the industries and thus the success of the economy. 1.1.1 All India Development Banks (AIDBs)  Industrial Finance Corporation of India (IFCI) was set up in 1948 to provide long-term finance to industrial sectors.  Industrial Credit and Investment Corporation of India (ICICI) followed in 1955, and State Financial Corporations under the SFC Act were set up thereafter to cater the specific industrialization needs of the States.  Industrial Development Bank of India (IDBI) was incorporated by an Act of Parliament in 1964, mainly to provide the required thrust to accelerate industrialization and to meet the increasing need of capital.  Industrial Reconstruction Bank of India (IRBI) was set up in 1971 to nurture sick units.  IRBI is renamed as Industrial Investment Bank of India (IIBI) and  Small Industries Development Bank of India (SIDBI)

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1.1.2 Specialized Financial Institutions (SFIs) In recent years, the government has set up 4 Specialized Financial Institutions and they are as follows:  Export and Import Bank of India (EXIM bank) was hived off from IDBI in 1982 as a separate institution.  The Risk Capital and Technology Corporation Ltd. (RCTC)  Tourism Finance Corporation of India Ltd. (TFCI)  Technology Development and Information Corporation of India (TDICI) and  ICICI set up to fund VC projects. 1.1.3 Investment Institutions (IIs) The following are the Investment Institutions:  Life Insurance Corporation of India (LIC)  Unit Trust of India (UTI)  General Insurance Corporation of India (GIC)

1.2 COMPANY PROFILE - IDBI Industrial Development Bank of India (IDBI) was established in 1964 by the Government of India under an Act of the Parliament, called the Industrial Development Bank of India Act, 1964 (IDBI Act). The IDBI Act governs the functions and working of IDBI. Initially, IDBI was set up as a wholly owned subsidiary of the Reserve Bank of India (RBI), to provide credit and other facilities for the development of industry. Due to manifold increase in its activities and diverse responsibilities, IDBI was reconstituted through legislation in 1976 enacted by Parliament and was made the premier financial institution of the country. In 1976, the ownership of IDBI was transferred from RBI to the Government of India and 7

it was entrusted with the additional responsibilities of acting as the principal financial institution for coordinating the activities of institutions engaged in the financing, promoting or development of industry. In 1982, IDBI transferred its International Finance Division, which was providing export finance to industry to the Export and Import Bank of India, which was established as a wholly owned corporation of the Government of India. In 1990, IDBI transferred its portfolio comprising the operations relating to small-scale industries were shifted to the Small Industries Development Bank of India (SIDBI), as a wholly owned subsidiary. CARE is the credit rating agency promoted by IDBI. In October 1994, the IDBI Act was amended, which permitted IDBI to raise equity from the public, subject to the provision that the holding of the Government should not be below 51% of the issued capital. The amendment also aimed at providing greater operational flexibility to IDBI. This would help IDBI in responding to the changing needs of industrial sector in a much more prompt and decisive manner. Following this amendment, in July 1995, IDBI made its initial public offering of equity shares aggregating Rs.2184 crore. Simultaneously, the Government also offered for sale a part of its holding of equity shares in the capital of IDBI aggregating Rs.187.5 crore to the Indian public. On completion of allotment of shares to the public, the Government shareholding in IDBI was reduced to 72.14% in line with recommendations of Narasimham Committee, and as on date. The Government stake now stands at 57.76%. In August 2000, IDBI became the first All India Financial Institution to obtain ISO 9002 Certification for its treasury operations. Since its inception IDBI has played a pioneering role in fulfilling its mission of promoting industrial growth in line with national plans and priorities.

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1.3 PRODUCTS AND SERVICES PROFILE IDBI provides finance for the establishment of new industrial projects as well as for expansion, diversification and modernization of existing industrial enterprises. IDBI has made efforts to respond to the financial needs of the industry by constantly expanding its range of products and services. IDBI currently offers the following major products and services to industrial concerns: 1.3.1 Direct Finance Under direct finance, assistance is provided to the industrial units directly. During 2003-04, approximately 91% of total sanctions and 94% of the total disbursements were under direct finance. Project Finance Project Finance involves providing credit and other facilities to medium and other large scale units as well as for the establishment of new projects as well as for expansion, diversification and modernization of existing industrial units. Project finance is granted directly to units established as companies in private, joint and public sectors, and also to co-operatives. Assistance under project assistance can be either in the form of equity, term loans or a mix of both. Infrastructure Finance Infrastructure development has been a keen commitment on the country’s macro agenda on account of its deterministic influence on overall economic growth. Reflecting national priorities, IDBI has adopted infrastructure financing a key focus area. Infrastructure financing continues to be the Bank’s thrust area with IDBI financing projects involving large financial outlay. Assistance to infrastructure projects during 2003-04 amounted to Rs.440 crore (sanctions) and Rs.813 crore (disbursements).

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Financing of Feature Films Pursuant to the Government of India giving industry status to Entertainment industry, including films and approving the same as an eligible activity for financing under the IDBI Act, IDBI has introduced a scheme for financing the film industry. Equipment Finance and Asset Credit Under equipment finance, rupee and foreign currency loans are given to industrial units conforming to certain financial criteria for the purpose of financing acquisition of specific items of machinery and equipment. Such loans are secured by charge on specific assets and generally have a maturity of up to 6 years. Under asset credit facility, a line of credit is extended to industrial units for financing of their normal capital expenditure over a period of about 5-6 years and is secured by a charge on the assets so acquired. Equipment leasing Financial lease is provided by IDBI for the purchase of indigenous / imported equipment for a period of 3-10 years, in the form of full payout financial lease. Direct Discounting of Bills IDBI provides facilities for direct discounting of bills of exchange and promissory notes, which arise from the sale of indigenous machinery on a deferred payment basis by a seller to a domestic purchaser. Underwriting and Direct Subscription As part of project finance and capital market activities, IDBI underwrites public and rights issues and provides direct subscription support in respect of equity as well as debt instruments.

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Energy Conservation IDBI provides rupee and foreign currency loans for the acquisition and installation of energy conservation equipment. It also provides term loans to pollution control and prevention projects in highly polluting industrial sectors. It also provides finance for implementing Ozone Depleting Substances (ODS) phase out projects under the Montreal Protocol. Venture Capital Venture Capital finance is extended by IDBI for projects involving the development and use of indigenous technology, for projects involving adaptation and development of imported technology, as well as for projects which fall in the high-risk, high-return venture category. Corporate Loans & Working Capital IDBI also provides loans to corporates to meet the working capital and other normal expenditure under the corporate loan Scheme and Treasury product facilities. 1.3.2 Indirect Finance This refers to the provision of finance to industrial concerns through State Financial Corporations (SFCs), State Industrial Development Corporation (SIDCs) and Commercial Banks. Under indirect finance, the responsibility for repayment of loans to IDBI rests with the relevant intermediary institution or bank, by ways of:  Refinance facilities to SFCs, SIDCs, and banks against their loans to medium-sized industrial concerns throughout India.  Rediscounting of bills of exchange discounted by banks arising from sale of indigenous machinery on deferred payment terms.  Investment is shares of other financial institutions/SFCs and;  Line of credit to SFC/SIDCs.

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Indirect finance form only 3% of the total IDBIs portfolio. 1.3.3 Financial Services Merchant Banking IDBI’s capital market division provides professional advice and service to industry for capital market issues, loan and guarantee syndication, project advice or appraisal, capital restructuring and mergers and acquisitions. Forex Services IDBI offers various foreign exchange related services namely spot and forward purchases of currencies for letters of credit and debt servicing, swaps, forward exchange rate agreements and other derivative products. Corporate Advisory Services IDBI offers advisory services to corporates. These include techno-economic evaluation of projects, identification of foreign partners/investors and assistance in evaluation and negotiations. It also provides support in structuring financing plan and advising on financing options. Assistance is provided in restructuring of existing corporates through mergers, acquisitions and divestments. It undertakes valuation of shares and advises public sector undertakings of industry studies. 1.4 SUBSIDIARIES IDBI has set up a host of subsidiaries and associates with a view to expand the functional reach of the IDBI Group and take advantage of opportunities in a liberalized market economy. The main subsidiaries of IDBI are: IDBI Bank Ltd Small Industries Development Bank of India (SIDBI) IDBI Capital Market Services Ltd (ICMS) IDBI Trusteeship Services Ltd. (ITSL) IDBI Intech Ltd. (INTECH) 12

IDBI Home Finance 1.5 SOURCES OF FUNDS With a view to foster industrialization and to provide concessional finance to the industry, the GOI granted IDBI concessional funds. Besides equity support by the Government, IDBI also enjoyed tax exemption, raised concessional funds by way of SLR bonds, borrowings under capital bonds scheme, borrowings from the corporates I.T. scheme, etc. Since the advent of liberalization, concessional funds more or less evaporated and the IDBI had to rely on market borrowings. At present, the principal sources of funds are:  Equity.  Market related borrowings including Public Issue, Certificates of deposits, fixed deposits and private placement of unsecured bonds.  Borrowings from the Government and RBI.  Borrowings by way of Government Guaranteed Rupee Bonds.  Deposits and borrowing from other sources.  Foreign currency borrowings.  Multilateral and bilateral credits, syndicated loans and other foreign currency borrowings.  Internal generation 1.6 OPERATIONS IDBI’s portfolio of direct finance comprises over 3200 companies representing the complete range of industrial activities and a well-diversified client profile. Its portfolio which includes loans, investments and guarantees, etc. as on September 30, 2004 was Rs.54677 crore and March 31, 2005 was Rs.57850 crore.

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Particulars regarding the effective sanctions and disbursements for the last four years are given in APPENDIX A – Tables A1, A2 and Graph G1. 1.7 INDUSTRY-WISE BREAK-UP OF PORTFOLIO IDBI’s loan portfolio is well diversified among industries. The major outstandings are to the iron & steel, power, cotton textiles, telecom services and petrochemicals, which together accounted for about 48% of the outstandings as on March 31, 2004. Recently IDBI has revised the exposure limit to individual industry at 10% of its total portfolio or Rs.5000 crore whichever is lower. As on March 31, 2004 only two industries viz Iron & Steel and Electricity Generation exceeded the limit. The industry-wise breakdown of the outstandings as on March 31, 2004 is given in APPENDIX B – Tables B1 and Graph G1. 1.8 IDBI’S CREDIT RATING 1.8.1 International Rating  Japan Rating and Investment Information Inc (R&I) has accorded to IDBI, the highest international rating obtained by an Indian borrower viz “BBB” for its Japanese yen bond issues in February 1991.  Standard & Poor’s assigned “BB” long term foreign currency credit rating to IDBI.  Moody’s Investors services have assigned a long-term foreign currency debt rating of “Baa3” with positive outlook.  Fitch, the international rating agency, has assigned long-term foreign currency rating of “BB+” to IDBI. 1.8.2 Domestic Rating “AAA” by the domestic rating agencies. The recent Flexi Bonds of IDBI have been rated as “AA+” by CRISIL, FITCH and “LAA” by ICRA, indicating high credit quality with a low expectation of Credit risk.

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2.0 RESEARCH METHODOLOGY 2.1 STATEMENT OF PROBLEM The problems is to find out a basis for sanctioning of loans by IDBI to the Sugar Industry particularly in reference to three units. 2.2 OBJECTIVES OF STUDY
  

Identify the problems prevalent in the sugar industry. Identify the problems faced by the three units under study. Identify the possible ways of reviving the ailing sugar units.

2.3 SCOPE OF THE RESEARCH The study was done for three sugar units in Coimbatore namely Rajshree Sugars and Chemicals Ltd, Shakthi Sugars Ltd and Bannari Amman Sugars Ltd 2.4 RESEARCH DESIGN Exploratory research was conducted to understand the present state of the industry and the problems faced by the industry. Secondary data was collected from published articles in magazines and the internet. The financial details of the three sugar companies under study were obtained from the published annual reports of these units. 2.5 DATA ANALYSIS The performance analysis of the sugar units were done by analyzing the financial statements of the units over the past four years using tools like ratio analysis, trend analysis and common-size analysis.

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3.0 THE SUGAR INDUSTRY 3.1 INTRODUCTION Sugar is one of the oldest commodities in the world and traces its origin to 4th century AD in India and China. In those days, sugar was manufactured only from sugarcane. The eighteenth century witnessed the development of new technology to manufacture sugar from sugar beet. The European, American, and Oceanic countries pioneered this. Today, sugar is produced in 121 Countries and global production exceeds 120 million tons a year. Approximately 70 percent is produced from sugar cane, a very tall grass with big stems, largely grown in the tropical countries. The remaining 30 percent is produced from sugar beet, a root crop resembling a large parsnip grown mostly in the temperate zones of the northern hemisphere. In India sugar is produced from sugar cane. A typical sugar content for mature cane would be 10% by weight but the figure depends on the variety and varies from season to season and location to location. Equally, the yield of cane from the field varies considerably but a rough and ready overall value to use in estimating sugar production is 100tons of cane per hectare or 10 tons of sugar per hectare. 3.2 THE INDIAN SUGAR INDUSTRY India, along with Brazil, is presently a dominant player in the global sugar industry. Given the growing sugar production and the structural changes witnessed in Indian sugar industry, India is all set to continue its domination at the global level.

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India is the largest producer and consumer of sugar in the world, with Maharashtra contributing over one-third of country’s sugar output. There are around 434 Sugar Mills in India as on March 2004. In India, sugar is produced mainly in the states of Andhra Pradesh, Bihar, Gujarat, Karnataka, Maharashtra, Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu, and Uttar Pradesh. Indian sugar industry is highly fragmented with organized and unorganized players. The unorganized players mainly produce Gur and Khandari, the less refined forms of sugar. The government had a controlling grip over the industry, which has slowly yet steadily given way under liberalization. Sugar is a controlled commodity in India. It comes under the Essential Commodities Act, 1955. The Government controls the price of sugarcane and sugar capacity additions, decides the quantity that can be sold in the open market, fixes the levy quota of sugar etc. Thus, the Government exercises a control over all aspects of the production and sale of sugar, and this control extends to the level of wholesalers in the distribution chain. Sugar is produced in two sectors in India - The Corporate sector and the Cooperative sector. The Corporate sector includes the Public sector. A Dual Pricing System is adopted in the Indian sugar industry, which includes sugar price in Public Distribution System (PDS) and the Free Market Price. The Government of India fixes the sugar prices distributed through the PDS, based on the levy sugar prices and the subsidy to be provided through budgetary system. The basic parameters by which the sugar industry is measured are: Total units; Working units; Production value; Cane purchases; Cane crushed; Production of sugarcane; Production of molasses; Sugar recovery; Population; Total consumption; Per capita consumption etc. Sugar has always been the most political of all commodities. In India with a large section of the agriculture-dependent population involved in the farming of sugar-cane (which constitutes 60-70% of the cost of sugar), the domestic sugar 17

industry has traditionally attracted political protectionism, with too many restrictions on input and output prices as well as on the distribution of the
commodity.

The sugar recovery and crushing period during the years 2001-02 and 2002-03 are given below. Average Year 2001-02 2002-03 Period (days) 139 140 Crushing Average Recovery (%) 10.48 10.27 Sugar

Given below is the annual release of levy sugar and free sugar (thousand MT). Year 2001-02 2002-03 Levy Sugar 26.32 20.5 Free Sugar 121.25 112

The production of sugar and its associated products for the period 2001-02 and 2002-03 is given below.

Year 2001-02 2002-03

Sugarcane (million MT) 26.32 20.5

Sugar MT) 121.25 112

(lakh

Molasses MT) 78.2 80.7

(lakh

3.3 THE PROBLEMS In the past few years the sugar industry in India has been facing several problems like mounting stocks, controls by the Government, low capacities etc. Each of these problems has been dealt in detail below. 3.3.1 Stocks

The Rs 25,000 crore sugar industry has been suffering from the problem of plenty for nearly five years causing distress both to the sugar factories and sugarcane growers. Most of the 450 sugar factories in the country are beset with 18

four successive years of excess production resulting in the build-up of unsustainable stocks. The prices of sugar have crashed from Rs 1300 per quintal in 2001-02 to Rs 1180 per quintal in 2002-03 and Rs 1070 per quintal in 2003-04, which is below the levy sugar price. Financial viability has been eroded with the industry suffering a loss of Rs 5500 crore in the last two years. Large arrears of sugarcane price have accumulated and the industry is unable to pay cane prices, even the Minimum Support Price (MSP) fixed by the government. To make matters worse the MSP of sugarcane is arbitrarily hiked every year. This year an additional price hike of Rs 5 a quintal has been made. 3.3.2 Regulations In India, the sugar industry, from sugarcane production to sugar distribution is highly regulated by the Government. In addition to the regulations issued by the Central Government, the sugar industry is also affected by regulations issued by the state governments. State governments intervene in matters relating to sugarcane production and pricing. The industry was mired in an intricate web of controls and restrictions for long because sugar has been considered as one of the essential commodities. Some of the regulations, which govern the sugar industry, include, The Essential Commodities Act, 1964; Sugar Control Orders, 1943, 1966 and 1999; Sugar Wage Board Rules; Molasses Control Order, 1961; and Molasses Decontrol, 1993. In India, sugarcane farming by corporates is not allowed, as sugar producers can not hold/own land. In addition, the state governments have control over the allocation of the command area; hence, the sugar mills have no assurance regarding the adequate availability of sugarcane for the installed capacity base. As a result, in India, the capacity additions and production planning for sugar

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producers is difficult. The sugar mills have a limited ability to control the quality, quantity and the cost of the sugarcane procured. In addition to the regulations issued by the Central Government, the sugar industry is also affected by regulations issued by the state governments. State governments intervene in matters relating to sugarcane production and pricing. State governments announce the support/advice prices for sugarcane, which are usually announced without any economic consideration and are not linked to sugar realizations. State advice/support prices announced by the state governments are usually higher than the Minimum Support Price (MSP) of sugarcane announced by the Central Government. The Government has a control on the sale of sugar through the quota release mechanism. Levy quota sugar is to be sold at a subsidized rate. Sugar sales higher than the fixed quotas are not permitted. Sugar sales lower than the allocated quota would have to be surrendered to the Government at levy prices. As a result, the sales and distribution of sugar are controlled. In addition, sugar prices are monitored carefully and sugar produced can not be increased as sugar is considered as an essential commodity. Over the years, the control of the Governments on the sugar industry has been declining. In a phased decontrol over past three years, most restrictions were removed, except the 10 per cent levy on mills (Government procurement below market price) and the monthly free-sale quota release mechanism (marketing restrictions). 3.3.3 Pricing The sugar industry follows a highly controlled pricing mechanism, which has adversely affected the profitability of sugar units. Statutory Minimum Price (SMP) The Statutory Minimum Price (SMP) is the minimum price fixed by the Central Government that the mills have to compulsorily pay to the sugar cane growers. 20

The Centre fixed an SMP of Rs 73 per quintal (linked to a basic sugar recovery of 8.5 per cent) for the ongoing 2004-05 crushing season. Sugarcane: Statutory minimum price (SMP) (Rs per quintal) SMP(Linked to the 52.7 56.1 59.5 62.1 69.5 199900 basic recovery rate of 8.5 per cent) Growth over previous year the 6.5 6.1 4.3 12.0 200001 200102 200203 200304

State advised price (SAP) In addition to SMP announced by the Centre, State governments announce the support/advice prices for sugarcane. State advice/support prices announced by the state governments are usually higher than the Minimum Support Price (MSP) of sugarcane announced by the Central Government. Levy quota, levy price and public distribution system (PDS) The Government procures, at a price lower than the cost of production (levy price) a fixed proportion of the sugar production (called levy quota). The Government distributes the sugar procured to the poorer sections of society through fair price shops (public distribution system).

Free-sale quota Free-sale quota is the balance production, left after levy quota that can be sold by producers to the consumers in the open market. The Government issues release orders allowing producers to sell a fixed quantity of sugar in the open market in each month.

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PDS issue price It is the retail price at which sugar is sold through PDS shops. The difference between the PDS issue price and the cost to the Government (cost of levy sugar, and the cost of storing and transporting such sugar) is the subsidy provided by the Government. 3.3.4 Capacity In 1998, over 50 per cent of the units (accounting for approximately over onethird of the installed capacity) had a capacity of less than 2,500 tcd (tonnes of cane crushed per day-minimum economic size capacity). In general, sugar producers prefer to increase capacity by acquiring small units, instead of expanding the capacity beyond 10,000 tcd at the same location, since the sugar producers would have access to the cane command area of the acquired unit, and thereby the gestation period for sugarcane development would be lower. In addition, the existing infrastructure is unable to support sugarcane management and transportation of sugarcane in large volumes, which is required to support the increased capacity. 3.3.5 Cost of Production Sugarcane is the key input for sugar production. It accounts for around twothirds of the cost of production of sugar. Sugarcane is handled by hand and involves extensive labour. Labour costs account for a significant share of the total cost of producing sugarcane. India has ideal conditions for growing sugarcane at a low cost, such as tropical climate, easy availability and low cost of labour, and low cost of irrigation facilities. Sugar recovery rates in India are not significantly lower, as compared with the international standards.

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India is relatively competitive at the farm level (as measured by the cost of sucrose), as compared with other leading sugar producing countries. However, its overall competitiveness is lower, due to the high factory production costs. The main reasons for the inefficiencies at the mill level are lower overall recovery rates and smaller capacities. In India, the total cost of white sugar producing mill is high (indexed at around 82 per cent, with the world average at 100 per cent), as compared with that in other countries, such as Brazil (60 per cent) and Australia (70 per cent). However, cost of production is higher in countries, such as Thailand (98 per cent), Pakistan (110 per cent) and China (130 per cent). 3.3.6 Performance Operating margins in the sugar industry are moderate. However, the net profit margins are low, due to the high debt levels. The debt-equity ratio of the sugar industry is high, due to the high borrowings required for funding sugar inventories. (Inventory levels with domestic producers are high, as sugar production is seasonal.) In addition, sales of domestic producers are controlled by the release mechanism. As a result of the high debt-equity ratio, the interest coverage ratio of the sugar industry is low. In a decontrolled environment, the sugar producers would need to implement new strategies, in order to be successful. Sugar producers are expected to benefit with the discontinuation of the release mechanism, as producers would be able to control the sales volume, based on the prevailing demand-supply situation. 3.4 BY-PRODUCTS During the manufacturing of sugar from sugar cane not all the sugar can be extracted out of the juice, thus a sweet by-product is formed called the molasses. This can be turned into a cattle food or sent to a distillery where alcohol is made. 23

The fibre obtained from crushing the sugar cane is called bagasse in the industry. The factory needs electricity and steam to run, both of which can be generated using this fibre. The bagasse is burnt in large furnaces where a lot of heat is given out which can be used in turn to boil water and make high pressure steam. The steam is then used to drive a turbine in order to make electricity and create low-pressure steam for the sugar making process. 3.5 SUGAR INDUSTRY STANDARDS  Operating margins in the sugar industry are moderate.  The net profit margins are low.  The debt levels are high due to the high borrowings required for funding sugar inventories.  Inventory levels with domestic producers are high, as sugar production is seasonal  The interest coverage ratio of the sugar industry is low. 3.6 THE CURRENT INDUSTRY SCENARIO Sugar has always been the most political of all commodities. In India with a large section of the agriculture-dependent population involved in the farming of sugarcane (which constitutes 60-70% of the cost of sugar), the domestic sugar industry has traditionally attracted political protectionism, with too many restrictions on input and output prices as well as on the distribution of the commodity. However the scenario is changing. The restrictions over the distribution of the commodity have gone. The by-products of sugar, i.e. alcohol (potable as well as industrial) and bagasse are driving the growth in the bottom line of sugar companies. Most importantly, for the first time India will see a sugar supply crunch since the 1980s. With diminishing closing stock India has started to import sugar after a long time. Going forward, as further pressure builds up on the sugar inventory in the country, the prices will move higher. In such a scenario the companies that can source the raw material, i.e. sugar-cane, with no trouble due to

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their locational advantage or due to long-term relationship with farmers are poised to benefit. A study was done for three sugar units in Coimbatore namely Rajshree Sugars and Chemicals Ltd, Shakthi Sugars Ltd and Bannari Amman Sugars Ltd. The profiles of these industries are as follows: 3.6.1 RAJSHREE SUGARS AND CHEMICALS LTD The sugar factory has a capacity of 2500 TCD (tonnes of cane crushed per day) and is balanced to handle 3000 tonnes of cane per day. The factory was commissioned in 1990 and is today one among the leading sugar factories in the country. The factory produces sugar of ISS grade S-30 with an ICUMSA value less than 100. Crushing over 900,000 tons of cane in a single year, the Company has set a record for a plant in its category. The factory has an extended crushing duration of over 300 days in a season as against the industry norm of 180 days and has consistently recorded an average sugar recovery of around 10%. The Company has some of the most distinguished specialists in sugar engineering, technology and sugarcane development and has in-house expertise in all areas of sugar factory operation. The Company has focused on agricultural extension services with a view to encourage modern methods of cultivation to improve sugarcane yield per hectare. The Company has a dedicated and intensive cane development program to ensure the required quantity of cane with high CCS. A well-trained team of agricultural experts man far-flung divisional operations of its sugar cane procurement department. The programme requires close interaction with farmers and involves providing requisite material and technical support. High quality seeds of improved cane varieties are raised in nurseries and supplied for planting in a staggered schedule. Eco-friendly organic practices are imparted to farmers. The Company today is an integral part of the rural economy. 3.6.2 SAKTHI SUGARS LTD Sakthi Sugars Limited is one of the largest producers of white crystal sugar in the country accounting for a capacity of 12,750 tonnes of cane crush per day. Sakthi Sugars has set up sugar units in different parts of India. It has: 25

• • • •

Mills equipped with Auto Setting facilities. Best export quality of Sugar produced. Scientific farming Continuous R&D in sugar rich, pest resistant and high yielding sugarcane varieties Mechanization of cane harvesting. Efficient Sugar manufacturing method used thereby reducing the sugar loss. Factory sites are maintained neat and clean - Hygiene at its best.

• • •

Sugar manufactured is of international standard of ICUMSA 35 units maximum and exported overseas. 3.6.3 BANNARI AMMAN SUGARS LTD WHITE CRYSTAL PLANTATION CANE SUGAR production in the two units of Bannari Amman Sugars Limited is now double at 7500 tonnes of cane crush / day from the initial capacity of 3750. The first Sugar unit near Sathyamangalam of Erode District, Tamil Nadu State, started its commercial production in the year 1986 with an initial capacity of 1250 tonnes of Cane crush per day and expanded to 2500 tonnes in 1998. The crushing capacity is now expanded to 4000 TCD. The unit has many credits and firsts in the sugar industry of the country. Sugar Unit-1: An EN/ISO 9002 unit accredited by RWTUV of Germany in 1997 for its good system of quality management ensuring a better product. This has been upgraded to ISO 9001:2000 valid upto 20.7.2007. The unit's sugar is also marketed in consumer packs of 1 kg in select cities of Tamil Nadu.

4.0 FINANCIAL PERFORMANCE ANALYSIS The financial statements of the three sugar units Rajshree Sugars and Chemicals Ltd, Shakthi Sugars Ltd and Bannari Amman Sugars Ltd that had taken loans from IDBI were studied and analyzed using the following tools.

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•Ratio Analysis •Common-size Statements •Trend Analysis 4.1 RATIO ANALYSIS Ratio analysis is a technique of analysis and interpretation of financial statements. It helps us understand the financial strengths and weaknesses of a firm. A single ratio in itself does not make much of sense. The ratios are useful only when they are further interpreted. Some of the ratios calculated have been explained below: Gross Profit Margin Ratio The gross profit margin ratio indicates how efficiently a business is using its materials and labor in the production process. It shows the percentage of net sales remaining after subtracting cost of goods sold. A high gross profit margin indicates that a business can make a reasonable profit on sales, as long as it keeps overhead costs in control. Current Ratio The current ratio is the standard measure of any business' financial health. It will tell you whether your business is able to meet its current obligations by measuring if it has enough assets to cover its liabilities. The standard current ratio for a healthy business is two, meaning it has twice as many assets as liabilities. The current ratio should be part of your business' basic financial planning, meaning it should be tracked monthly or quarterly. By keeping a close eye on this figure, you will recognize if it begins to get out of line. This will allow you to take early action to prevent your business from ending up in a difficult position.

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Quick Ratio Like the current ratio, the quick ratio (also sometimes called the acid test ratio) measures a business' liquidity. However, many financial planners consider it a tougher measure than the current ratio because it excludes inventories when counting assets. It calculates a business' liquid assets in relation to its liabilities. The higher the ratio is, the higher your business' level of liquidity, which usually corresponds to its financial health. The optimal quick ratio is 1 or higher. This is an important planning tool, especially for businesses that can tie up a lot of assets in inventory. By tracking it monthly, we can keep an eye out for negative trends that could hamper our business' ability to meet its obligations. We can also use the quick ratio to evaluate the financial health of potential customers, since it also indicates whether a business can pay off its debts quickly. A firm with a low quick ratio may be more likely to delay payments because its assets are tied up elsewhere. Debt Equity Ratio The debt equity ratio is ideally 1:1. A low ratio is considered as favorable from the long-term creditors point of view because a high proportion of owner’s fund provide a larger margin of safety for them. A high debt equity ratio which indicates that the claims of outsider’s (creditor’s) are greater than those of owner’s may not be considered by the creditors because it gives a lesser margin of safety for them at the time of liquidation of the firm. Caution to be taken as a very high ratio may be unfavorable from the point of view of the firm as its hard to get credit without paying a very rate of interest and without accepting undue pressure and conditions of the creditors. Interest Coverage Ratio The higher the ratio, safer is the long-term creditors because even if the earnings of the firm fall the firm shall be able to meet its commitments of fixed interest charges.

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Inventory Turnover Ratio This ratio tells how often a business' inventory turns over during the course of the year. Because inventories are the least liquid form of asset, a high inventory turnover ratio is generally positive. On the other hand, an unusually high ratio compared to the average for your industry could mean a business is losing sales because of inadequate stock on hand. If your business has significant assets tied up in inventory, tracking your turnover is critical to successful financial planning. If inventory is turning too slowly, it could indicate that it may be hampering your cash flow. Because this ratio judge’s annual inventory turns, it is usually conducted once a year. Working Capital Turnover Ratio Working capital of a concern is directly related to sales. Working Capital Turnover Ratio indicates the velocity of the utilization of net working capital. This ratio measures the efficiency with which the working capital is being used by the firm. A higher ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. 4.2 INTERPRETATIONS The financial statements and the ratio analysis for Rajshree Sugars and Chemicals Ltd are given in APPENDIX C – Tables C1, C2 and C3. Rajshree Sugars and Chemicals Ltd The gross profit margin ratio has shown considerable variation over the past four years. It ranges from -7.4% to 23.9%. The high variability of gross margin is not a good sign.  The operating profit ratio improved in the period 1999-00 to 2002-03 from 13.7% to 26.3%. However, in 2003-04, it declined to 23.3%.  The net margin ratio increased from negative levels to 1.01% in 200203. The net income has decreased in 2003-04 due to substantial increase

29

in raw material prices and the sales have gone up. Thus in 2003-04 the ratio has again decreased to 0.16%.  Like for the other ratios the ROE and ROA have increased till 2002-03 and declined in the recent financial year. The total assets have increased over the period. But the trend in these ratios is due to the rise and then a decrease in the net income.  Earnings per share has shown a steady improvement from Rs. -6.03 per share to a small positive Rs. 0.04 per share.  Current ratio has improved from 2.6 to 3.6 over the last 4 years. However, the quick ratio is well below 0.5, suggesting severe liquidity problems.  The debt equity ratio, which has declined till 2002-03 has again increased in 2003-04 because of an increase in both secured and unsecured loans.  Interest coverage ratio has improved from 0.2 to 1.0, a positive sign for lenders to this unit.  Inventory turnover has declined from 2.07 to 0.63 over the last four years. This suggests that the unit has problems selling its inventory and that they are not moving fast.  Working Capital Turnover has also deteriorated from 1.46 to 0.96, suggesting that the unit’s efficiency in utilizing working capital has declined.  Overall, the company’s profitability has improved in the last four years, although it suffered a reversal in the most recent fiscal year; It has severe liquidity and turnover problems that need to be addressed. The financial statements and the ratio analysis for Shakthi Sugars Ltd is given in APPENDIX D – Tables D1, D2 and D3. Shakthi Sugars Ltd  The gross profit margin ratio has drastically decreased from 73.22 in 2001-02 to –63.83 in 2003-04. This reflects the poor performance of the company. The cost of goods sold has increased manifolds over the years.

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In 2003-04 a major contribution to the CGS is from excise duty and taxes.  From 2000-01 to 2003-04 the operating profit has decreased by 95%. This has reduced the operating profit ratio from 18.25 to 1.76.  The net margin ratio decreased from 4.86% in 2000-01 to –15.88% in 2003-04.  From 2000-01 to 2003-04 the net profit has decreased by 250%. Thus ROE has decreased from 3.9% to -13.77% and ROA has decreased from 2.6% to -4.0%.  We can conclude that the asset utilization is very low and the company’s return on equity is not attractive.  Earnings per share have shown a decline from Rs. 4.6 per share to a small positive Rs.-13.5 per share.  Current ratio has decreased from 3.8 to 2.0 in 2001-02 and then slightly increased to 2.09. However, the quick ratio has gone down continuously from 1.18 to 0.4. The increase in current ratio is due to the increase in inventories and debtors. The liquidity of the company is going below accepted levels.  The increase in 2003-04 in the debt equity ratio is because the company has taken more secured and unsecured loans. The debt equity ratio is low compared to the industry standards.  Interest coverage ratio has improved from 1.2 to 0.14, a positive sign for lenders to this unit. Interests have come down by 63% in the four years.  Inventory turnover has declined from 2.07 to 0.63 over the last four years. This suggests that the unit has problems selling its inventory and that they are not moving fast.  Working Capital Turnover has also increased from 1.43 to 2.14 and again decreased in 2003-04 suggesting that the unit’s efficiency in utilizing working capital has increased.  On the whole the company’s performance has been declining over the years, which is dangerous.

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The financial statements and the ratio analysis for Bannari Amman Sugars Ltd is given in APPENDIX E – Tables E1, E2 and E3. Bannari Amman Sugars Ltd  The gross profit ratio, operating profit ratio and net profit margin ratio have decreased rapidly in the last three years. In 2004 the cost of goods sold has gone up, decreasing the gross profit. The operating profit has also gone down and the company has made losses.  The current liabilities have increased significantly in 2003-04. Hence the current ratio has come down from 3.04 in 2001-02 to 2.04 in 2003-04, which is not advisable. Also the inventories have been increasing for the past three years. Thus the quick ratio has decreased rapidly.  The debt equity ratio has increased mainly due to decrease in equity. But they have acceptable values.  The interest coverage ratio has been decreasing due to decreasing profits for the past three years. It is 0.6 in 2003-04 which is dangerously low from the point of view of creditors.  Till 2002 the inventory turnover ratio had been decreasing. But in 2004 due to a sudden increase in the cost of goods sold the ratio has gone up from 0.8 in the previous year to 1.02.  ROE and ROA had increased in 2001-02 but has then shown a steady decline. 4.3 COMMON-SIZE STATEMENTS The common-size statements are shown in analytical percentages. The figures are shown as percentages of the total assets, total liabilities and total sales. The total figures are taken to be 100. Common-Size Balance Sheet can be used to compare companies of differing size.

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The common size balance sheet is given in APPENDIX C, D and E – Tables C6, D6 and E6. 4.3.1 Common Size Analysis For Rajshree Sugars and Chemicals Ltd the debt is around 65% of liabilities and for Shakthi Sugars Ltd it is around 50%.  Bannari Amman Sugars has it around 60%, which has been reduced to 40% in the previous year.  The inventories of Rajshree Sugars and Chemicals Ltd are 40% of the total assets, of Shakthi Sugars Ltd is varying between 20-35% and for Bannari Amman Sugars it is 50% of the total assets.  The depreciation amounts for Rajshree Sugars and Chemicals Ltd and Bannari Amman Sugars is between 5-10% while that of for Shakthi Sugars Ltd is higher at 13-20%.

4.4 TREND ANALYSIS Trend analysis is done by computing trends of series of information. It involves the computation of the percentage relationship that each item bears to the same item in base year. The figures of the base year are taken as 100 and trend ratios for other years are calculated based on the base year. This analysis helps in understanding the trend of figures, whether upward or downward. The trend analyses for Rajshree Sugars and Chemicals Ltd are given in APPENDIX C – Tables C4 and C5. Rajshree Sugars and Chemicals Ltd Balance Sheet The secured loan has increased by 15% in 2003-04 compared to the base year.

33

The net block has decreased because of a huge depreciation. Depreciation has increased by 48%, 97% and then 140% in the three years. Inventories have increased by around 10% every year while debtors have drastically increased – by 150% in 2003-04.

P&L The sales have shown only a slight increase over the years. The raw materials consumed and the total expenditure have declined, though not continuously, compared to the base year. The trend analyses for Shakthi Sugars Ltd are given in APPENDIX B – Tables B4 and D5. Shakthi Sugars Ltd Balance Sheet The share capital has decreased. The total debt that had decreased in the previous two years has risen by 6% compared to the base year in 2003-04. P&L Sales have continuously decreased to just 46% of the base year. Total income and total expenditure have declined compared to the base year. But the figures for 2003-04 are higher with respect to 2002-03. The trend analyses for Bannari Amman Sugars Ltd are given in APPENDIX E – Tables E4 and E5. Bannari Amman Sugars Ltd

 

 

 

34

Balance Sheet The share capital has reduced to 87% of the base year due to buy back of shares.  The total debt has remained same for 2001-02 and 2002-03. But there has been a decline in 2003-04. P&L Sales for 2002-03 and 2003-04 are down compared to the base year. Material costs have gone up except in 2002-03.

 

5.0 FINDINGS  In view of the difficulties faced by certain industries IDBI has been extending relief to select corporates.  Restructuring of liabilities is done by way of reschedulement of principal, reduction in interest rates/ stepping-up of interest payments in line with the revised cash-flow projections.  IDBI, while sanctioning the term loans under project finance to Rajshree Sugars and Chemicals Ltd, had charged an interest of 21% p.a which was subsequently reduced due to changes in Government policies.  Rajshree Sugars and Chemicals Ltd had been making losses amounting to Rs. –127118211 in the year 2000-2001 and Rs. –47569342 in 2001-2002.  At the request of the company, during February 2001, IDBI has sanctioned financial restructuring, allowing a reduction in the interest rate on the term loans/debentures to 14%p.a.  Due to heavy cut in interest charges the company’s performance has stabilized. It has made a profit of Rs. 5259252 and Rs. 871824 in the years 2002-03 and 2003-04 respectively.  Thus we find that restructuring is an attractive option to revive the beleaguered sugar units.

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6.0 SUGGESTIONS AND RECOMMENDATIONS    Restructuring of loans will bring some relief to the beleaguered industry. The industry must seek to become globally competitive. In order to remain profitable, mills must examine ways and means to improve operational efficiency, economies of scale, operational efficiency and better management of resources.  Sugar producers should also diversify and set up co-generation power units from bagasse, and distilleries for producing anhydrous ethanol from molasses.  All attempts to minimize costs have to be technology driven. important to ensure its global competence. The technology upgradation of the sugar industry is therefore every

7.0 REVIVAL OF SICK SUGAR MILLS As on April 01, 2004, there were 45 sick sugar companies in the public/private sectors. The number of cooperative sugar units with negative net worth as on 31/3/2003 was 130, as per information provided by NABARD. Loans from the Sugar Development Fund (SDF) at concessional rates of interest are available now for the revival of potentially viable sick sugar mills. In regard to the cooperative sugar mills which are not within the purview of BIFR, the Government has constituted a Committee under the Chairmanship of Joint Secretary, Food & Public Distribution, to recommend revival packages for potentially viable sick cooperative sugar mills. Also, the Central Government has amended the Sugar Development Fund Act, 1982 to provide for loans from the SDF at concessional rate of interest to sugar factories for undertaking baggase based cogeneration of 36

power projects and for production of anhydrous alcohol/ethanol from alcohol/molasses.

8.0 CONCLUSION
Sugar has always been the most political of all commodities. In India with a large section of the agriculture-dependent population involved in the farming of sugar-cane (which constitutes 60-70% of the cost of sugar), the domestic sugar industry has traditionally attracted political protectionism, with too many restrictions on input and output prices as well as on the distribution of the commodity. However the scenario is changing. The restrictions over the distribution of the commodity have gone. The by-products of sugar, ie alcohol (potable as well as industrial) and bagasse are driving the growth in the bottom line of sugar companies.
Most importantly, for the first time India will see a sugar supply crunch since the 1980s. With diminishing closing stock India has started to import sugar after a long time.

The performances of the three sugar units were studied. It is found that the problem prevalent in the sugar industry has affected the performance of the companies to a great extent. So it has become inevitable for the companies to adopt measures to arrest the losses at the earliest. Under efficient management sugarcane is one of the most viable crops to grow economically compared to other crops hence with the findings it can be concluded that with a focus on achieving low costs of production and high levels of efficiency that will firstly mutually benefit the two primary stakeholders: growers and millers, and secondly influence economic growth and job creation at national level.

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APPENDIX A
TABLE A1

Year Ending March 31 DIRECT FINANCE (Rs crore) Rupee Loans Foreign Currency Loans Underwriting and direct subscription to shares, bonds and debentures of industrial concerns Equipment Leasing Guarantees for loans and deferred payments TOTAL DIRECT FINANCE INDIRECT FINANCE Refinance of Industrial Loans Bills Finance Loans to and Investments in shares and bonds of financial institutions Others TOTAL INDIRECT FINANCE

2004

2003

2002

2001

(Rs crores)Rs crores) (Rs crores) (Rs crores) 1377 1123 105 0 2605 31 2636 9722 2029 512 12 12275 403 12678 17121 2564 457 250 20392 1362 21754 15604 3442 512 299 19857 236 20093

0 87 53 113 253

187 123 291 226 827

363 286 246 529 1424

242 723 968 34 1967

TOTAL SANCTIONS

2889

13505

23178

22060

TREND IN SANCTIONS

38

TABLE A2 TRENDS IN DISBURSEMENTS

39

DISBURSEMENTS Year Ending March 31 2004 2003 2003 2001

(Rs.crores) ( Rs.crores) ( Rs.crores) ( Rs.crores) DIRECT FINANCE Rupee Loans Foreign Currency Loans Underwriting and direct subscription to shares, bonds and debentures of industrial concerns Equipment Leasing Guarantees for loans and deferred payments TOTAL DIRECT FINANCE INDIRECT FINANCE Refinance of Industrial Loans Bills Finance Loans to and Investments in shares and bonds of financial institutions Others TOTAL INDIRECT FINANCE TOTAL DISBURSEMENTS 2011 1542 140 0 3693 0 3693 5812 1610 2892 12 10326 0 10326 11182 1341 3391 255 16169 0 16169 10719 2614 1745 370 15448 0 15448

0 60.8 53.8 117.1 231.7 3924.7

158.8 84.9 313 267.9 824.6 11150.6

332 202 287 484 1305 17474

229.5 527.9 823.5 34 1614.9 17062.9

GRAPH A1 TRENDS IN SANCTIONS AND DISBURSEMENTS MARCH 2001 – MARCH 2004

40

Trend in Sanctions and Disbursement March 2001 - March 2004
25000 20000 Rs. crore 15000 10000 5000 0 2003 2002 2001 2000 YEAR
SANCTIONS DISBURSEMENT S

APPENDIX B
TABLE B1

41

INDUSTRY WISE BREAK-UP OF OUTSTANDING LOAN AMOUNT BY IDBI
O/S AMOUNT AS % OUTSTANDING OF TOTAL AMOUNT (Rs. crore) OUTSTANDING 9104.9 6257.9 4414.66 2132.63 2045.08 1895.71 1517.69 1704.43 1082.12 1174.34 1216.21 912.54 1069.87 1080.28 1250.76 12003.98 18.63349 12.80701 9.034752 4.3645 4.185326 3.879635 3.106004 3.488174 2.214595 2.403327 2.489015 1.867544 2.189525 2.21083 2.559723 24.56655

INDUSTRY Iron and Steel Electricity Generation Cotton Textiles Telecom Services Petrochemicals Fertilizers Cement Artificial Fibres Chemical (Others) Food (Others) Basic Industrial Chemicals Services (Others) Electronics Drugs & Pharmaceuticals Paper & Paper Products Other Industries( incl sugar industry)

GRAPH B1 GRAPH OF OUTSTANDING AMOUNT AS % OF TOTAL OUTSTANDING

42

OUTSTANDING AMOUNT AS % OF TOTAL OUTSTANDING

Other Industries 26%

Paper & Paper Products 3% Drugs & Pharmaceuticals 2% Electronics 2% Services (Others) 2% Basic Industrial Chemicals 2% Food (Others) 2% (Others) Chemical 2% Artificial Fibres Cement 3% 3% Fertilizers 4%

Iron and Steel Electricity Generation Cotton Textiles Telecom Services Petrochemicals Fertilizers Cement Artificial Fibres Electricity Generation 13% Chemical (Others) Food (Others) Basic Industrial Chemicals Services (Others) Electronics Cotton T extiles Drugs & Pharmaceuticals 9% Paper & Paper Products T elecom Services Other Industries 4%
Petrochemicals 4%

Iron and Steel 19%

APPENDIX C
RAJSHREE SUGARS AND CHEMICALS LTD TABLE C1 - BALANCE SHEET
SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital 2003-04 (Rs.Crores) 298500000 2002-03 (Rs.Crores) 298500000 2001-02 (Rs.Crores) 275500000 2000-01 (Rs.Crores) 210500000

43

Reserves and surplus Net worth LOAN FUNDS Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block Capital work-in-progress Total fixed assets DEFERRED TAX ASSET INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets Inventories Sundry debtors Cash and bank balances Loans and advances Less: Current Liabilitites and provisions Net current assets ( Working Capital) Miscellaneous Expenditure(not written off) P&L Account TOTAL(Capital deployed)

1977657 300477657 1062765745 21000700 1083766445 1384244102 0 1384244102

1977657 300477657 984918358 0 984918358 1285396015 0 1285396015

1977657 277477657 1002490870 7837500 1010328370 1287806027 0 1287806027

1977657 212477657 923651092 0 923651092 1136128749 0 1136128749

729765860 174320671 555445189 0 555445189 89571179 0

723639625 142942770 580696855 0 580696855 0 0

715055470 107428701 607626769 21846 607648615 0 0

706840651 72492031 634348620 225413 634574033 0 0

700720682 19831487 2750689 46466726 769769584 211711419 558058165 69753240 111416329 1384244102

654637854 16478828 1323650 36131129 708571461 284880131 423691330 79148500 201859331 1285396016

606008259 9671753 856292 26764953 643301257 253400026 389901231 83137598 207118583 1287806027

492954327 7883272 1100288 24922959 526860846 201447798 325413048 16592437 159549229 1136128747

TABLE C2 - P&L ACCOUNT
2004 (Rs.crores) 534189496 43205939 51520364 628915799 367906172 25830669 1588320 20353248 13107236 0 22987088 9395260 2003 (Rs.crores) 520670838 35541909 37661763 593874510 343556435 13444933 1098090 21076388 16962214 0 21110977 4114098 2002 (Rs.crores) 498658387 19465366 103056474 621180227 363545644 17447771 1167884 20312691 18961298 31141163 19081185 4101598 2001 (Rs.crores) 475853118 1356960 112369847 589579925 374524193 19982417 2927841 22588834 25973854 56722810 18241425 2241489

Sales inclusive of Excise Duty Other Income Inventory Change TOTAL INCOME Raw Material Consumed Process & Packaging Materials Consumed Power & Fuel Employees cost Repairs and Maintenance Excise duty Other Expenses Expenses Written Off

44

TOTAL EXPENDITURE Profit/Loss before interest and depreciation Interest and financing charges Depreciation Profit before tax Add: Income Tax Paid Profit after tax Deferred Tax Asset Loss b/f from the previous year Balance carried forward

461167993 167747806 135482601 31393381 871824 0 871824 89571179 -201859331 -111416328

421363135 172511375 131738055 35514068 5259252 0 5259252 0 -207118583 -201859331

475759234 145420993 158048876 34936670 -47564553 -4789 -47569342 0 -159549230 -207118572

523202863 66377062 158916109 34457408 -126996455 -121756 -127118211 0 -32431019 -159549230

TABLE C3 - RATIOS ANALYSIS
2003-04 LIQUIDITY RATIOS: Current Ratio=Current Assets/Current Liabilities Acid test ratio=Quick assets/Current Liabilities LEVERAGE RATIOS: Debt-Equity ratio=Long term debt/Equity Interest Coverage ratio=Profit before interest and taxes/Interest TURNOVER RATIOS: Inventory turnover ratio=Cost of goods sold/Average inventory Total assets turnover=Net sales/Average total assets Working capital turnover ratio=Net sales/Working capital PROFITABILITY RATIOS: Gross Profit Margin ratio=Gross profit/Net sales Operating profit margin ratio=Operating profit/Net sales Net Profit margin ratio=Net profit/Net sales Return on total assets=Net income/Average total assets Return on equity=Equity earning/Average net worth 3.6359 0.3261 2002-03 2.4873 0.1893 2001-02 2.5387 0.1472 2000-01 2.6154 0.1683

3.6068 1.0064

3.2778 1.0399

3.6411 0.6991

4.3471 0.2009

0.6364 0.4031 0.9572

0.6287 0.4038 1.2289

0.8806 0.3986 1.2789

2.0741 0.4097 1.4623

19.2618 23.3142 0.1632 0.0658 0.3779

23.8868 26.3063 1.0101 0.4079 2.3762

2.9654 25.2589 -9.5385 -3.8027 -24.4774

-7.4342 13.6639 -26.6882 -10.9449 -64.8942

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VALUATION RATIOS: Earnings per share=Profit after tax and preference dividend/No of equity shares COVERAGE RATIOS Financial charges coverage ratio COMPONENT RATIOS Material cost component(% earnings)

0.0373

0.2252

-2.2598

-6.0389

0.0064

0.0399

-0.3009

-0.7991

68.8718

65.9834

72.9047

78.7058

TABLE C4 - TREND ANALYSIS - BALANCE SHEET
2003-04 SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital Reserves and surplus Net worth LOAN FUNDS Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block Capital work-in-progress Total fixed assets DEFERRED TAX ASSET INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets 2002-03 2001-02 2000-01

141.8052 100 141.4161 115.0614 NA 117.335 121.8387 NA 121.8387

141.8052 100 141.4161 106.6332 NA 106.6332 113.1382 NA 113.1382

130.8789 100 130.5915 108.5357 NA 109.3842 113.3504 NA 113.3504

100 100 100 100 100 100 100 100 100

103.2433 240.4687 87.5615 0 87.5304 NA NA

102.3766 197.1841 91.54223 0 91.50971 NA NA

101.1622 148.1938 95.78751 9.691544 95.75693 NA NA

100 100 100 100 100 100 100

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Inventories Sundry debtors Cash and bank balances Loans and advances Less: Current Liabilities and provisions Net current assets (Working Capital) Miscellaneous Expenditure (not written off) P&L Account TOTAL (Capital deployed)

142.1472 251.5642 249.9972 186.4414 146.1049 105.0949 171.4923 420.3918 69.83194 121.8387

132.7989 209.0354 120.3003 144.9713 134.4893 141.4164 130.2011 477.0155 126.5185 113.1382

122.934 122.687 77.82435 107.3908 122.1008 125.7894 119.8173 501.0572 129.8148 113.3504

100 100 100 100 100 100 100 100 100 100

25 TABLE C5 - TREND ANALYSIS - P&L
2003-04 Sales inclusive of Excise Duty Other Income Inventory Change TOTAL INCOME Raw Material Consumed Process & Packaging Materials Consumed Power & Fuel Employees cost Repairs and Maintenance Excise duty Other Expenses Expenses Written Off TOTAL EXPENDITURE Profit/Loss before interest and depreciation Interest and financing charges Depreciation Profit before tax Add: Income Tax Paid Profit after tax Deferred Tax Asset Loss b/f from the previous year Balance carried forward Surplus carried to balance sheet NA 622.4267 69.83194 NA NA 112.2593 3184.025 45.84892 106.6718 98.23295 129.267 54.24885 90.10314 50.46319 0 126.0159 419.1526 88.14325 252.7195 85.25416 91.10778 -0.68649 0 -0.68584 NA 638.6435 126.5185 NA 2002-03 109.4184 2619.23 33.5159 100.7284 91.73144 67.28382 37.50511 93.30445 65.30496 0 115.731 183.5431 80.53533 259.8961 82.89786 103.0666 -4.14126 0 -4.13729 NA 491.9649 129.8148 2001-02 104.7925 1434.483 91.71186 105.3598 97.06867 87.31562 39.88891 89.92359 73.00148 54.9006 104.6036 182.9854 90.93208 219.0832 99.45428 101.3909 37.45345 3.933276 37.42134 2000-01 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

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TABLE C6 - COMMON-SIZE - BALANCE SHEET
2003-04 SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital Reserves and surplus Net worth LOAN FUNDS Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY Current Liabilitites and provisions TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block Capital work-in-progress Total fixed assets DEFERRED TAX ASSET INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets Inventories Sundry debtors Cash and bank balances Loans and advances 2002-03 2001-02 2000-01

18.703529 0.1239168 18.827446 66.591188 1.31587 67.907058 86.734504 0 13.265496 100

19.0094 17.87561 0.125943 0.128319 19.13534 18.00393 62.72262 65.04587 0 0.50853 62.72262 65.5544 81.85796 83.55833 0 0 18.14204 16.44167 100 100

15.73742 0.147854 15.88527 69.05407 0 69.05407 84.93934 0 15.06066 100

45.725952 10.922652 34.8033 0 34.8033 5.6123857 0

46.08359 9.103034 36.98056 0 36.98056 0 0

46.39584 6.970431 39.42541 0.001417 39.42683 0 0

52.84487 5.419655 47.42522 0.016852 47.44207 0 0

43.906028 1.242609 0.1723537 2.9115301 48.232521

41.68935 1.049422 0.084294 2.300941 45.124

39.32039 0.627544 0.05556 1.736624 41.74012

36.85429 0.58937 0.08226 1.863292 39.38921

48

Miscellaneous Expenditure(not written off) P&L Account TOTAL(Capital deployed)

4.3706256 6.9811676 100

5.040419 5.394321 12.85502 13.43873 100 100

1.240485 11.92823 100

APPENDIX D
SHAKTHI SUGARS LTD TABLE D1 - BALANCE SHEET
SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital Reserves and surplus Net worth LOAN FUNDS Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block Capital work-in-progress Capital expenditure on project Total fixed assets INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets Inventories Sundry debtors Cash and bank balances Loans and advances Less: Current Liabilitites and provisions Net current assets ( Working Capital) Deferred Tax asset 2003-04 (Rs crores) 300853570 765910162 1066763732 1914363298 62348435 1976711733 3043475465 0 3043475465 2002-03 (Rs crores) 300853570 886239860 1187093430 1702495999 40824000 1743319999 2930413429 0 2930413429 2001-02 (Rs crores) 350853570 911898685 1262752255 1627312571 36258000 1663570571 2926322826 0 2926322826 2000-01 (Rs crores) 397520240 894733127 1292253367 1784933469 69297000 1854230469 3146483836 0 3146483836

2241466582 726289131 1515177451 284600 7189411 1522651462 757966908

1294213101 559590547 734622554 288968 737791839 1472703361 763664920

1831978441 576685573 1255292868 284600 13159050 1268736518 764103020

1814272674 487197380 1327075294 15872648 7189411 1350137353 404283320

1049503976 107956358 6764615 150376473 1314601422 627813002 686788420 62018525

688136860 80467934 5477515 312713948 1086796257 541686436 545109821 58110257

842309040 175753283 54181159 403111367 1475354849 604256353 871098496 0

1284770524 54217809 7850361 526847569 1873686263 494975799 1378710464 0

49

Miscellaneous Expenditure(not written off) TOTAL(Capital deployed)

14050150 3043475465

90825070 2930413429

22384792 2926322826

13352699 3146483836

TABLE D2 - P&L ACCOUNT
Sales Other income Inc/Dec in stock TOTAL INCOME Material cost Purchase of fertilisers and insecticides Manufacturing and other expenses Research, farma nd devt expenditure Interest and finance charges Depreciation Extra-Ordinary expenditure TOTAL EXPENDITURE Profit/Loss before tax LESS:Prvn of tax LESS:Current tax LESS: Deferred tax LESS:Wealth tax Pft/Loss after tax ADD: Prvn for tax for earlier yrs written back LESS:Share issue expenses written off TOTAL net pft for the yr ADD: surplus from previous year Debenture Redemption reserve written back Proposed dividend on Preference Shares written back Transfer from General Reserve TOTAL PFT AVAILA BLE FOR APPROPRIATION APPROPRIATIONS: Debenture redemption reserve Proposed dividend on pref. Shares Tax on distributed pft 2004 (Rs. Crore) 912514837 98824583 360289079 1371628499 789476738 3025025 461106826 1672819 171591732 91221196 1477004 1519571340 -147942841 931791 0 -3908268 30000 -144996364 0 0 -144996364 83552793 0 24666666 -36776905 -73553810 108219459 192487836 199475157 2003 (Rs. Crore) 1168024194 60179003 -155323194 1072880003 577225284 1506908 343021373 1099101 141852929 63769600 2913972 1131389167 -58509164 0 0 -1671785 50000 -56887379 0 543252 -57430631 155650090 10000000 2002 2001 (Rs. Crore) (Rs. Crore) 1583522819 1973291732 260249797 385286222 -437712329 515766505 1406060287 533929051 1895134 477235280 1748579 239154032 97140558 310846 1351413480 54646807 0 0 0 81137 54565670 368931 931297 54003304 138484532 0 2874344459 1163858284 2917300 956561780 2814433 466916022 182500764 2690795 2778259378 96085081 0 0 0 50596 96034485 0 1164125 94870360 104604797 0

0 0 0

0 24666666 0

0 33428082 3409664

10000000 45937500 5053125

50

Surplus carried to b/s

-73553810

83552793

155650090

138484532

TABLE D3 - RATIO ANALYSIS
2003-04 LIQUIDITY RATIOS: Current Ratio=Current Assets/Current Liabilities Acid test ratio=Quick assets/Current Liabilities LEVERAGE RATIOS: Debt-Equity ratio=Long term debt/Equity Interest Coverage ratio=Profit before interest and taxes/Interest TURNOVER RATIOS: Inventory turnover ratio=Cost of goods sold/Average inventory Working capital turnover ratio=Net sales/Working capital PROFITABILITY RATIOS: Gross Profit Margin ratio=Gross profit/Net sales Operating profit margin ratio=Operating profit/Net sales Net Profit margin ratio=Net profit/Net sales Return on total assets=Net income/Average total assets Return on equity=Equity earning/Average net worth VALUATION RATIOS: Earnings per share=Profit after tax and preference dividend/No of equity shares COMPONENT RATIOS Material cost component (% earnings) 2.0939 0.4223 2002-03 2.0063 0.7360 2001-02 2.4416 1.0476 2000-01 3.7854 1.1898

1.8530 0.1378

1.4686 0.5875

1.3174 1.2285

1.4349 1.2058

1.7208 1.3287

0.8726 2.1427

0.3987 1.8178

1.8915 1.4313

-63.8358 1.7584 -15.8898 -4.0330 -13.7736

42.8309 7.4429 -4.8704 -1.7118 -7.4392

73.2200 8.2532 3.4458 1.5554 1.7041

-23.1497 18.2546 4.8667 2.6470 3.9172

-13.4855

-7.5850

1.9659

4.6593

86.5166

49.4189

33.7178

58.9805

51

TABLE D4 - TREND ANALYSIS - BALANCE SHEET
2003-04 SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital Reserves and surplus Net worth LOAN FUNDS Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block Capital work-in-progress Capital expenditure on project Total fixed assets INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets Inventories Sundry debtors Cash and bank balances Loans and advances Less: Current Liabilitites and provisions Net current assets ( Working Capital) Deferred Tax asset Miscellaneous Expenditure(not written off) TOTAL(Capital deployed) 2002-03 2001-02 2000-01

75.6826 85.6021 82.5507 107.2512 89.9728 106.6055 96.7262 NA 96.7262

75.6826 99.0507 91.8623 95.3815 58.9116 94.0185 93.1330 NA 93.1330

88.2606 101.9185 97.7171 91.1694 52.3226 89.7176 93.0030 NA 93.0030

100 100 100 100 100 100 100 100 100

123.5463 71.3351 149.0749 114.8591 114.1742 55.3565 1.7930 1.8205 100.0000 10262.2014 112.7775 109.0780 187.4841 188.8935

100.9759 118.3680 94.5909 1.7930 183.0338 93.9709 189.0019

100 100 100 100 100 100 100

81.6880 199.1160 86.1695 28.5427 70.1612 126.8371 49.8138 NA 105.2233 96.7262

53.5611 148.4161 69.7741 59.3557 58.0031 109.4370 39.5377 NA 680.2001 93.1330

65.5610 324.1615 690.1741 76.5139 78.7408 122.0780 63.1821 NA 167.6425 93.0030

100 100 100 100 100 100 100 100 100 100

TABLE D5 - TREND ANALYSIS - P&L
2003-04 2002-03 2001-02 2000-01

52

Sales Other income Inc/Dec in stock TOTAL INCOME Material cost Purchase of fertilisers and insecticides Manufacturing and other expenses Research, farma nd devt expenditure Interest and finance charges Depreciation Extra-Ordinary expenditure TOTAL EXPENDITURE Profit/Loss before tax LESS:Prvn of tax LESS:Current tax LESS: Deferred tax LESS:Wealth tax Pft/Loss after tax ADD: Prvn for tax for earlier yrs written back LESS:Share issue expenses written off TOTAL net pft for the yr ADD: surplus from previous year Debenture Redemption reserve written back Proposed dividend on Preference Shares written back Transfer from General Reserve TOTAL PFT AVAILA BLE FOR APPROPRIATION APPROPRIATIONS: Debenture redemption reserve Proposed dividend on pref. Shares Tax on distributed pft Surplus carried to b/s

46.2433 25.6497 69.8551 47.7197 67.8327 103.6926 48.2046 59.4372 36.7500 49.9840 54.8910 54.6951 -153.9707 NA NA NA 59.2932 -150.9836 NA 0.0000 -152.8363 79.8747 NA NA NA -36.8737

59.1917 15.6193 -30.1150 37.3261 49.5958 51.6542 35.8598 39.0523 30.3808 34.9421 108.2941 40.7229 -60.8931 NA NA NA 98.8220 -59.2364 NA 46.6661 -60.5359 148.7982 NA NA NA 54.2521

80.2478 67.5471 -84.8664 48.9176 45.8758 64.9619 49.8907 62.1290 51.2199 53.2275 11.5522 48.6425 56.8734 NA NA NA 160.3625 56.8188 NA 79.9997 56.9233 132.3883 NA NA NA 96.4971

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

0.0000 0.0000 0.0000 -53.1134

0.0000 53.6961 0.0000 60.3337

0.0000 72.7686 67.4763 112.3953

100 100 100 100

53

TABLE D6 - COMMON-SIZE - BALANCE SHEET
2003-04 SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital Reserves and surplus Net worth LOAN FUNDS Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY Current Liabilities and provisions TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block Capital work-in-progress Capital expenditure on project Total fixed assets INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets Inventories Sundry debtors Cash and bank balances Loans and advances Deferred Tax asset Miscellaneous Expenditure(not written off) TOTAL(Capital deployed) 2002-03 2001-02 2000-01

8.1947679 20.862162 29.05693 52.144181 1.6982712 53.842452 82.899382 0 17.100618 100

8.664888 25.52461 34.1895 49.03361 1.175773 50.20939 84.39888 0 15.60112 100

9.937564 25.82859 35.76615 46.09194 1.02697 47.11891 82.88506 0 17.11494 100

10.91651 24.57073 35.48724 49.01698 1.903001 50.91998 86.40721 0 13.59279 100

61.053949 19.782949 41.271 0.007752 0.195828 41.47458 20.645801

37.27465 16.11678 21.15788 0.008323 21.24915 42.41535 21.99432

51.88889 16.33402 35.55487 0.008061 0.372716 35.93565 21.64243

49.82268 13.37918 36.4435 0.435887 0.197432 37.07682 11.10223

28.586802 2.9405578 0.1842572 4.0960135 35.807631 1.689285 0.3827035 100

19.81904 2.317558 0.157758 9.006479 31.30084 1.673634 2.615854 100

23.85753 4.97803 1.534625 11.41771 41.7879 0 0.634026 100

35.28175 1.488903 0.215583 14.46803 51.45426 0 0.366685 100

54

APPENDIX E
BANNARI AMMAN SUGARS LTD TABLE E1 - BALANCE SHEET
SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital Reserves and surplus Net worth LOAN FUNDS Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block Capital work-in-progress Total fixed assets INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets Inventories Sundry debtors Cash and bank balances Other Current Assets Loans and advances Less: Current Liabilities and provisions Net current assets ( Working Capital) Deferred Tax asset TOTAL(Capital deployed) 2003-04 (In crores) 113385050 496280973 609666023 1039720204 187570830 1227291034 1836957057 242799798 2079756855 2002-03 (In crores) 113385050 538493501 651878551 1118228820 191029580 1309258400 1961136951 234667839 2195804790 2001-02 (In crores) 113385050 677283826 790668876 1070011427 227856330 1297867757 2088536633 0 2088536633 2000-01 (In crores) 128930160 610568115 739498275 1096594244 197400830 1293995074 2033493349 0 2033493349

1266284128 311459113 954825015 59288422 1014113437 11432776

1224809282 256759370 968049912 13439199 981489111 11432776

1073907076 200167752 873739324 85197609 958936933 11432776

1293995074 147752864 1146242210 25651993 1171894203 11432776

1538260271 73185488 53091438 1298174 204018611 1869853982 914432890 955421092 98789550 2079756855

1438565711 48026504 41091432 2467261 207141557 1737292465 643943637 1093348828 75107132 2161377847

1362400236 64565339 28213254 1972164 207141557 1664292550 546125626 1118166924 0 2088536633

1466308018 70807258 41281015 3038828 203237660 1784672779 660568372 1124104407 0 2307431386

TABLE E2 - P&L ACCOUNT
2004 (In crores) 1625408635 2003 (In crores) 1329033413 2002 (In crores) 2204239579 2001 (In crores) 1866025044

Sales

55

Other income Inc/Dec in stock TOTAL INCOME Material cost Payment and Benefits to Employees Manufacturing, Selling, Administrative and other expenses Excise Duty and Taxes Interest Depreciation TOTAL EXPENDITURE Profit/Loss before tax LESS:Prvn of tax Current tax Deferred tax ADD:Reversal of Deferred Tax Pft/Loss after tax Balance brought forward from previous year

38908759 104741590 1769058984 1037442988 139030265 239620032 199427266 150180052 61121368 1826821971 -57762987

93190909 72551349 1494775671 755205124 145464594 201691893 138119829 143090270 57587316 1441159026 53616645

16238269 -95461989 2125015859 1052671113 205851214 262899174 231578628 152069513 53130148 1958199790 166816069 30000000

27921254 42166810 1936113108 845924271 211439715 277454142 319920563 120143593 42873471 1817755755 118357353 20000000

0 0 15550459 -42212528 208379987 166167459

4500000 15097710 0 34018935 207170312 241189247

0 136816069 135999711 272815780

0 98357353 86966057 185323410

APPROPRIATIONS: Transfer to Capital Redemption ReserveShares Buy Back Proposed dividend Transfer to General Reserve Tax on distributed profits Surplus carried to b/s

0 0 0 0 166167459

0 28346263 4462997 0 208379987

15545110 28346263 18862775 2891320 207170312

0 32232540 10000000 7091159 135999711

TABLE E3 - RATIO ANALYSIS
2003-04 LIQUIDITY RATIOS: Current Ratio=Current Assets/Current Liabilities Acid test ratio=Quick assets/Current Liabilities LEVERAGE RATIOS: 2.044824 0.362622 2002-03 2.697895 0.463902 2001-02 3.047454 0.552789 2000-01 2.701723 0.481956

56

Debt-Equity ratio=Long term debt/Equity Interest Coverage ratio=Profit before interest and taxes/Interest TURNOVER RATIOS: Inventory turnover ratio=Cost of goods sold/Average inventory Working capital turnover ratio=Net sales/Working capital PROFITABILITY RATIOS: Gross Profit Margin ratio=Gross profit/Net sales Operating profit margin ratio=Operating profit/Net sales Net Profit margin ratio=Net profit/Net sales Return on total assets=Net income/Average total assets Return on equity=Equity earning/Average net worth VALUATION RATIOS: Earnings per share=Profit after tax and preference dividend/No of equity shares COMPONENT RATIOS Material cost component (% earnings)

2.013055 0.615375

2.008439 1.374705

1.641481 2.096972

1.749828 1.985132

1.025622 1.701248

0.797946 1.215562

0.970805 1.971297

0.972248 1.660010

6.082173 7.052360 -0.025970 -1.457917 -9.474529

15.915567 12.121841 0.025597 1.246017 8.224944

37.708146 16.140599 0.062070 5.192926 21.098095

23.601484 13.582517 0.052710 3.313927 16.005088

-3.722936

0.500302

9.566500

5.128731

63.826595

56.823637

47.756656

45.332954

TABLE E4 - TREND ANALYSIS - BALANCE SHEET
2003-04 SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital Reserves and surplus Net worth LOAN FUNDS 2002-03 2001-02 2000-01

87.9430 81.2818 82.4432

87.9430 88.1955 88.1515

87.9430 110.9268 106.9196

100 100 100 100

57

Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block Capital work-in-progress Total fixed assets INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets Inventories Sundry debtors Cash and bank balances Other Current Assets Loans and advances Less: Current Liabilitites and provisions Net current assets ( Working Capital) Deferred Tax asset TOTAL(Capital deployed)

94.8136 95.0203 94.8451 90.3350 NA 102.2751

101.9729 96.7724 101.1796 96.4418 NA 107.9819

97.5759 115.4283 100.2993 102.7068 NA 102.7068

100 100 100 100 100 100

97.8585 210.7973 83.3005 231.1260 86.5363 100.0000

94.6533 173.7762 84.4542 52.3905 83.7524 100.0000

82.9916 135.4747 76.2264 332.1286 81.8279 100.0000

100 100 100 100 100 100

104.9070 103.3587 128.6098 42.7196 100.3843 104.7729 138.4312 84.9940 NA 90.1330

98.1080 67.8271 99.5408 81.1912 101.9209 97.3452 97.4833 97.2640 NA 93.6703

92.9136 91.1846 68.3444 64.8988 101.9209 93.2548 82.6751 99.4718 NA 90.5135

100 100 100 100 100 100 100 100 100 100

TABLE E5 - TREND ANALYSIS - P&L
2003-04 Sales Other income Inc/Dec in stock TOTAL INCOME 91.3717 Material cost Payment and Benefits to Employees Manufacturing, Selling, Administrative and other expenses Excise Duty and Taxes Interest Depreciation 122.6402 65.7541 86.3638 62.3365 125.0005 77.2050 89.2757 68.7972 72.6938 43.1732 119.0994 109.7568 124.4403 97.3569 94.7541 72.3863 126.5731 100 100 100 100 100 100 87.1054 139.3518 248.3982 2002-03 71.2227 333.7633 172.0580 2001-02 118.1249 58.1574 -226.3913 2000-01 100 100 100

58

142.5622 TOTAL EXPENDITURE 100.4988 Profit/Loss before tax -48.8039 LESS:Prvn of tax Current tax Deferred tax ADD:Reversal of Deferred Tax Pft/Loss after tax Balance brought forward from previous year 0.0000 NA NA NA NA NA NA -42.9175 239.6107 89.6635

134.3192 79.2823 45.3006 0.0000 NA NA NA 34.5871 238.2197 130.1451

123.9231 107.7262 140.9427 150.0000

100 100 100 100 100 100 100 100 100 100

139.1010 156.3825 147.2106

APPROPRIATIONS: Transfer to Capital Redemption Reserve-Shares Buy Back Proposed dividend Transfer to General Reserve Tax on distributed profits Surplus carried to b/s

NA 0.0000 0.0000 0.0000 122.1822

NA 87.9430 44.6300 0.0000 153.2209

NA 87.9430 188.6278 40.7736 152.3314

100 100 100 100 100

TABLE E6 - COMMON-SIZE - BALANCESHEET
2003-04 SOURCES OF FUNDS: SHAREHOLDERS' FUNDS Share capital Reserves and surplus Net worth LOAN FUNDS Secured Loan Unsecured Loan Total debt Capital employed DEFERRED TAX LIABILITY TOTAL APPLICATION OF FUNDS: FIXED ASSETS Cost Less: Depreciation Net block 2002-03 2001-02 2000-01

3.78683583 3.992785 16.5748004 24.52374 20.3616362 29.68745 34.724593 6.26449377 40.9890868 61.350723 8.10903178 30.5402452 100 50.92569 8.699752 59.62545 69.06024 8.263684 22.67608 100

4.30359 32.42863 37.85755 51.23259 10.90986 62.14245 79.27151 0 20.72849 100

4.785717 30.02558 36.36591 53.92662 9.707474 63.63409 75.48058 0 24.51942 100

42.2913788 43.66021

40.76071

43.59822

59

Capital work-in-progress Total fixed assets INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Current Assets Inventories Sundry debtors Cash and bank balances Other Current Assets Loans and advances Less: Current Liabilitites and provisions Net current assets ( Working Capital) Deferred Tax asset TOTAL(Capital deployed)

10.4021168 9.152583 31.8892621 34.50763 1.98011573 0.479061 33.8693778 34.98669 0.38183205 0.407539

7.597473 33.16324 3.23372 36.39696 0.433937

4.978197 38.62002 0.864286 39.48431 0.385201

51.3748427 2.44425017 1.77314875 0.04335644 6.81381704 62.4494151 3.29937507 100

51.27989 1.711979 1.464767 0.087949 7.383879 61.92846 2.677309 100

51.71062 2.450612 1.070849 0.074855 7.862167 63.1691 0 100

49.40391 2.385689 1.39087 0.102386 6.847631 60.13049 0 100

BIBLIOGRAPHY IDBI Annual Report 2001 - 04 IDBI Offer Document Management Accounting – Principles and Practice, R.K. Sharma and Shahi K. Gupta. www.securities.com www.idbi.com www.indiainfoline.com

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