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Executive Summary Industry Profile: Belgium Ganz Hungary Ireland France USA Spain
Executive Summary Industry Profile: Belgium Ganz Hungary Ireland France USA Spain
EXECUTIVE SUMMARY
INDUSTRY PROFILE
The healthy growth in the industrial sector achieved during 2005-2006 has continued during the
current year as well with overall industrial growth (measured in terms of the index of Industrial
Production) growing at a rate of 8.5 percent during the April- September 2004-05 compared with 6.2
percent achieved during the same last year.
The existing installed capacity in the industry is of the order of 4500 MW thermal, 1345
MW of Hydro and about 25 MW of gas based power generation equipment per annum and
manufacturing units depending upon the needs and their capacity are augmenting the capacity.
COMPANY PROFILE
THE CROMPTON GREAVES GROUP
Col. R.E.B. Crompton founded R.E.B. Crompton & Company in 1878. The company was merged
with F.A. Parkinson in 1927 to form Crompton Parkinson Ltd. Greaves Cotton and Company,
established by James Greaves in 1859, was appointed as their concessionaire in India.
In 1937, Crompton Parkinson established Crompton Parkinson Works Ltd. in Bombay as a wholly
owned Indian subsidiary. In collaboration with Greaves Cotton, it also established a sales
organization, Greaves Cotton & Crompton Parkinson Ltd. In 1947, just before India's independence,
Lala Karam Chand Thapar, an eminent Indian industrialist, bought Greaves Cotton when the
company was put up for sale. With this acquisition, Karam Chand Thapar gained control of several
associated companies such as Crompton Parkison Works, Greaves Cotton and Crompton Parkinson
Company.
The name Crompton Greaves Limited was adopted on August 2, 1966, following a court-directed
amalgamation of Greaves Cotton and Crompton Parkinson Ltd.
Over the years, the company has evolved into one of India's largest private sector enterprises.
After the acquisition of the Belgium-based Pauwels Trafo/Pauwels Group in May 2005, Crompton
Greaves was ranked amongst the world's top ten electrical transformer manufacturers. The company
subsequently acquired a host of companies outside India. These include Ganz (Hungary), Microsol
(Ireland), Sonomatra (France), MSE Power Systems (USA) and ZIV (Spain).
To study on the financial performance of the company for the past 5 years.
METHODOLOGY
INDUSTRY PROFILE
The healthy growth in the industrial sector achieved during 2003-04 has continued during the current
year as well with overall industrial growth (measured in terms of the index of Industrial Production )
growing at a rate of 7.9 percent during the April- September 2004-05 compared with 8.5 percent
achieved during the same last year.
At present, Asia is growing with more speed in comparison to America and Europe. In 2002, Asia
occupied 41% of total electronics market share, which grew up to 56% in 2007. Those days are not
far away when Asia will become the market leader globally.
Future Outlook of Electric & Electronic Industry
Totally, the electrical and electronic industry is experiencing phenomenon and remarkable changes
worldwide. The worldwide electronics industry is distinguished by fast technological advances and
has grown rapidly than most other industries over the past 30 years.
Products are heading towards new destinations where cost is less than other place with higher costs
involved. These places offer the most long term potential for market growth. Companies indulged in
COMPANY PROFILE
THE CROPMTON GREAVES GROUP
A significant event in history of Indian industry was the rise of the Crompton Greaves Group
of companies to a multibillion conglomerate. The Chairmen Mr. Gautam Thaper Crompton Greaves
strongly believed that a companys progress was determined by the integration of man and his
intellect with technological growth and environment.
The first Cropmton Greaves product 1200 KV Capacitive Voltage Transformer was an
innovation far ahead of its time a product designed wholly with the customer in mind. It ultimately
became an instrument of wealth for an entire society. The group is committed to innovation, quality
and continuing technological advancement. This is evident in there and customs designed products,
which have already gained a worldwide reputation for meeting critical industrial needs. The
companys growth within the country and their entry into global market is based on their highly
skilled Human resource and their vast distribution network. We have some of the best engineering
CG at a glance
A countrys progress has been closely linked to effective harnessing and use of electrical
energy for the benefit of its people. Cropmton Greaves Electric Companys endeavor has been to
contribute cost effective solutions in all application of electricity. They are actively involved in
supplying electrical industrial electronic equipment, systems to industry, agriculture and utilities. In
all these ventures, their focus has been to provide state of the art technology that can living standards
and thereby make the environment a better place to live in.
In the words of Mr. Gautam Thapar:
My faith is in the human intellect. It gives us our means to create wealth by directing our
talents towards procedure work. And therefore, freedom for individual ability is the only way a
society can prosper. After all, you cannot distribute wealth unless you first create it. And you cannot
create it unless you know how
His words breathe the spirit with the Crompton Greaves industrial journey began. And this
spirit has continued through the passage of time. CG Ltd. An ISO 9001 certified company was
established in 1966 with its registered office at worli in Mumbai. As a part of diversification activity,
CG PLANT-M7. started another unit at Mandideep in 1969, to manufacture Electric motors ranging
from fractional horsepower to motor up 20HP. Under the leadership of Shri Gautam Thapar CG
PLANT-M7 Was started in Mandideep Crompton Greaves Electric Company is the pioneer in India
in the manufacture of quality equipments like AC and DC electric motors, generators, welding
equipments, controls equipments transformers etc.
The company started with manufacture of AC Motors in 1984. Today CG M7 manufacturers
diversified product range consisting of AC Motors, AC Generators, Transformers, DC Motors and
Electronic Equipments. The M7 in Mandideep, Crompton Greaves Electric Company Limited is a
subsidiary of Crompton Greaves Electric Company Limited. It manufactures AC Motors and AC
Generators.
EMPLOYEES PROFILE
KEC Ltd. has a strong employee base. It has maintained fully trained and experienced workers. It
values its employees and the employees are considered the real Asset of the company.
The employees are very hard working and dedicated towards the growth of the company. The
employee base can be depicted based on the number of employees in each section.
SECTION
NO. OF EMPLOYEES
Canteen
09
05
Production Dept.
32
Engineering Dept.
13
Finance Dept.
14
Forwarding Dept.
03
General Stores
12
MED
03
Marketing Dept.
07
Packing Dept.
32
17
Personnel Dept.
04
73
Reception
01
---------229
---
critical
power
situation
inspires
production
of
the
countrys
first
transformers.
1963 ---- The patient of breakdown continues. DC motors and DC generators roll off the
assembly line.
1965 ---- Market demand increases. Indias first motorized gear unit joins the CG PLANT-M7
product range.
COLLABORATION
CG provides the latest technology products to customers. Towards this, it has entered into
collaboration with foreign companies apart from indigenous research and development efforts. Some
of the major collaboration is:
AC induction motors
AC generators
Cast resin transformer
Inverters
Vector control inverters
Uninterruptible power systems
CNC Controls
Transformers
Wind turbine generators
Industrial Systems
Motors: High/Low Voltage
AC&DC
Consumer Products
Fans
Generators/Alternators
Appliances
raction
Motors/Alternators/Contro
l Electrics
Lighting
FHP/Commercial Motors
Pumps
Home Automation
Stampings and
Laminations
Wiring Accessories
ProductsMV/HV/EHV/UHV
nstrument
TransformersMV/HV/EHV/UHV
Power Quality
Solutions
T&D
Systems/Engineerin
g Solutions
Protection Control &
Automation
Services for Power
Systems
Transformer &
Switchgear
Components
BOARD OF DIRECTORS
The Board of Directors is vested with the responsibility of guiding and reviewing the Company`s
overall Management philosophy and direction; and, influencing the CG Group`s Global footprint
and business perspective across all its companies worldwide.
Gautam Thapar Sudhir M Trehan -
Chairman
Vice Chairman
Laurent Demortier -
Scott Bayman
B Hariharan
Non-Executive Director
Sanjay Labroo
Dr Colette Lewiner
Suresh Prabhu
Meher Pudumjee
BANKERS
Bank of Maharashtra
Canara Bank
Corporation Bank
Credit Agricole CIB
ICICI Bank Ltd
IDBI Bank
Royal Bank of Scotland
Standard Chartered Bank
State Bank of India
Union Bank of India
Yes Bank Ltd
CG PLANT-M7
The CG PLANT-M7, Mandideep was founded on 2nd march 1969 and is situated on Mandideep580030. It covers 110 acres, which presents a gigantic picture. Crompton Greaves Plant Motor
Division is also known, as M7. It is mainly concerned with production whereas CG PLANT-M7
looks carries out all other activities. The main branch is at Mumbai. The board of Directors at
Mumbai formulates all the policies and plans.
CG has been brought into existence to overcome financial problems which are the results of
accumulated losses of 30 crores because of heavy competition. Performance of CG PLANT-M7 has
been disappointing as concerned to the financial year 1997-1998. This unit is the only one unit that
seems to be contributing to the profits in terms of turnover, which is the highest among all over units
of CG group. The production activity is carried out throughout the year in this unit.
QUALITY POLICY
The quality price of CG shall be to design, manufacture and market at competitive prices,
products of such quality, which results in customer satisfaction, quality reputation and market
leadership.
VISSION
"To Create Lasting Value"
We strive to create lasting value for all our stakeholders through extraordinary efforts. With integrity,
imagination and respect for individuals.
Lasting to us means timeless - value that will endure, regardless of changes in our businesses,
people, markets or geographies. By constantly setting and redefining the gold standard in every
business we operate in, we will create enduring value for our employees, customers, partners,
shareholders and society.
For our employees - value in the form of professional growth, through an enabling work
environment, knowledge sharing, implementation of best practices and growth in their personal life.
For our customers - value through quality products and services, understanding of their needs and
proactively providing solutions, and contributing to their business growth.
For our partners - value through building mutually beneficial long term relationships, knowledge
sharing and support, and helping them optimise their business potential.
For our shareholders - value through a high return on investment, a profitable and sustainable
growth platform, and developing the spirit of enterprise.
For society - value by focusing on the development needs of the communities we engage with,
adopting responsible business practices, and making a sustained effort to preserve the environment.
VALUES
Integrity. Imagination. Individual
Integrity - in both personal and professional relationships
Following ethical business practices
Honouring our commitments to all stakeholders
Being open and sincere in all our dealings
Being accountable and taking ownership
Providing genuine value through our products and services
Imagination - that drives our actions
growth
and
creation
of
long
term
We will be admired for our people orientation: strong relationships with our employees and business
partners, and a preferred employer status for our work culture, respect for people and learning
opportunities.
We will be respected for being a good corporate citizen by adhering to best governance practices,
and fulfilling our responsibility to society by engaging positively with our communities.
G. THAPAR
PERSONNEL
SOFIYA ANJUM
PRODUCTION
A.B.JOSHI
D.S.WODEYAR
K.SHRIDHAR
FINANCE
MARKETING
ENGINEERING
V.RAMPRASAD
D.A.DESAI
ASHOK KADAKOLI
S.V.PUROHIT
CEN.PLANNING
A.B.JOSHI
MANDIDEEP
Personnel
Department
(Senior
Manager)
Chief Executive
Deputy General Manager
Production Department
Finance Department
EngineeringQuality
Department
Assurance Department
Marketing
M.M.D
Stores
Central Planning
(Senior Manager)
(Senior Manager)
(Senior Manager)
(Senior Manager)
(Deputy Manager)
(Assistant Manager)
(junior Manager)
(Assistant Manager)
MANPOWER IN CG PLANT M7
AS on 01-05-2007
Table:
1
Besides
these
Human Resource
Daily rated employees (DREs) From grade
1 to 8
Monthly rated employees (MREs) From
grade 1 to 7
Officers, Engineers and above From grade
8 to 16
Total
Total Members
432
45
85
562
Grade 8
Senior Officer:
Grade 9
Grade 10
Deputy Manager
Grade 11
Manager
Grade 12
Grade 13
Senior manager
Grade 14
Grade 15
General Manager
Grade 16
PRODUCT PROFILE
AC Generator
AC motor
`
DC Motor
Traction Equipment
PERSONNEL DEPARTMENT
CG Company recognizes its employees as its most important asset for its continued growth. Human
resources management in CGL shall striver to ensure continuous organizational growth by nurturing
the strengths of its employees and providing the environment and opportunity for every individual to
rise to his/her highest potential, identity and achieve his/her personal goal within the framework of
CANTEEN
AMBULANCE ROOM
MARKETING DEPARTMENT
Success of any product totally depends on HO it is marked and positioned din the market.
Marketing department is on of the important functional divisions of KEC UNIT-II, which is
basically, identifies and meets the needs of customers profitably. The people in the marketing
department are responsible for the growth of a business concern because they come in direct contact
with the customers who now are considered as King of the market as it is a buyers market and no
more a sellers market.
As marketing departments basic principle is to take care of the customers to achieve way
they have divided their department in to there sections such as :
Marketing
Customer Service
Communication
Marketing is further having its subgroups i.e. technical group, which does the job of tendering or
equally handling Execution, is planning group.
The network of marketing department has all over India at 28 branches known as sales
office/branches.
The function of this division in CG PLANT-M7 starts to determine the needs of the customers their
documents concurrently then accurately to communicate then to various departments.
Marketing:When a branch office in any part of its network receives an order in case of special product (i.e. as
per customer requirements) it sends an order acceptance copy i.e. duly verified by the sales
engineering of that branch to the tendering group where this OA copy is examined and sent to
planning department and further forwarded engineering department for design and development of
special product who prepares its engineering
specification and sends it to the purchase department if any new or additional components are regard
to the production department. The marketing department based on the demand contacts the materials
management department issues materials on the amount and the type of material, which required.
The order acceptance is then separated into the one for standard products and other for
special products. The special products requirements have to be discussed with the engineering
department and then accepted.
CREDIT POLICY:
BHEL
ASEA
KIRLOSKAR Ltd.
Jyoti Ltd.
Unorganized Sector:
Direct Customers.
Indian Defense
Indian Railways
Other Industries
GROUP ACM
FIC GKN
HOD MARKETING
SIC AKN
GROUP ACG
SIC SHOP3
CEO
HOD MMD
ACM S3
OFFICE ASSISTANT
FINANCE DEPARTMENT
Finance department is the blood of any business organization to survive. Any organization
handicapped by finance will never complete an ultimately results in failure and a burden to economy.
Finance department is concerned with planning and controlling of company financial resources.
The company policy is formulated and credit worthiness of the customer is evaluated audits such as
cash audit, internal audit, cost audit is done per month. In the finance department of CG M7, there
are 26 staff members contributing towards the effective functioning of the department.
ORGANISATIONAL HIERARCHY OF FINANCE DEPARTMENT
CORPORATE FINANCE
CHIEF EXECUTIVE
M.R.Es up to GRADE 7
CG is characterized by the fact that all the collaboration are sent to corporate office at Mumbai and
the expenditure of the particular day are sent to the unit as per the requirement of the units.
FUNCTIONS:FINANCING FUNCTIONS
It includes cash payments, receipts, bank receipts and payments.
CREDIT MANAGEMENT:
Due to the competition, now a days credit is a means to achieve the target without credit sale any
organizational can fulfill their targets.
COSTING
Costing relates to calculation of production cost per unit and it tries to minimize the cost of
production and helps in the function of pricing with marketing department.
AUDITS:Audit is a way to confirm about the accountancy of the functions and records of all over activities. It
has employed cost Audit and Internal Audit etc.
Financial Institutions:
Following are the financial Institutions of CG PLANT-M7:
1. Industrial Credit & Investment Corporation of India (ICICI)
2. Industrial Development Bank of India (IDBI)
3. Axis Bank
CG production per month is worth 10 crores. But now it attempting to rise to Rs 11 to 11.5
crores, the raw materials is steel and copper. These are procured from steel Authority of India
Ltd., and Hindustan Copper Ltd. 1% of the total turnover is used for welfare expenses and
6% of total turnover is
NSE, (CROMPGREAV )
BSE(500093)
ENGINEERING DEPARTMENT
Quality Policy of Engineering:
The quality policy of CGL shall be continuously improving the quality management system in
design, manufacture, market and service at competitive prices. Product of such quality, resulting in
customer satisfaction, quality, reputation and market leadership, The role of engineering department
is to design and develop products and components taking into consideration the cost, product ability,
usability, and maintenance of the product.
Scope:
Applicable to quality objectives identified for improvement in design and development of
products manufactured CGL.
Responsibility:
The head of the engineering department is responsible for receiving the objectives.
Procedure:
Objectives shall be derived from the organizational quality policy and need to meet customer
and product requirement.
Quality objectives by engineering department will lead to
Simplification in design
Standardization of components
For achieving or reworking quality objectives appropriate statistical quality control technique
shall be used.
Functions:
PRODUCTION DEPARTMENT
In many manufacturing unit production department forms the most important department of all the
whole running of the unit depends upon this department the proper and timely functioning of this
department helps in products reaching the customers end at right time. Slight difference in timing
and quality upsets the cycle. Thus the production department we can say is the heart of the firm.
CGL philosophy has always been to excel in what one knows best in the process of
development. CGL has laid great emphasis on adopting technology to suit the environment in which
it has to operate CGL production process are continuously of upgraded from time to time by the
latest technology.
Objectives:
Gears/pinions for Geared motors are done and also undertake manufacturing JIGS and FIXTURES
and DIE-CASTING dies.
ROTOR SUB ASSEMBLY:
Rotor is the static part in the ACMs and dynamic that is moving in the ACGs. The rotor
goes through the following process.
1) Sinking:
The roots are treated in the solution for convenience of inserting the shaft so that they expand
and make it easy for insertion of the shaft.
2) Turning:
The correct turning and made according to the specification.
3) Fan Shop Drilling:
WINDING:
Winding is the most important functional part of the machine. It has to be done manually and
precisely. This is the only process, which is totally manual. The motor is wound with correct rating
wires.
SHOP II
Shop II is die cast shop. Here in this shop only die-casting is done. That is the shapes of body
and nameplates final shape. The shop II has two machines, one for nameplate pressing and another
for body.
It houses the router section, here stampings are received and die casting of the metal
stamping is carried in a furnace heated at 675 degrees Celsius 755 degree Celsius
ROTOR SECTION:
Here processing of rotor sub assembling for KH 63 to 180 frames, SD 71 flange machine is
undertaken.
DIE-CASTING SECTION:
Here die-casting for motor for 63 to 225 frame motors and die-casting of bodies, flanges,
covers, and terminal boxes from KH 63 to 10 frames.
SHOP-III
This shop can be called as assembly shop because the products here will get upto 90% only,
final finishing will be at this stage.
The assembling of motors of the frame size motors are assembled in this shop in three
different assembly lines namely:
The standard line for this standard motor is also called verticals assembly line where the
motors are assembled mechanically by various stations in the machines acquired for the
specific purposes.
The export line is where the motors have to be exported assembled with due care and is done
manually. After assembling the motors they are sent to the painting section, which is housed
in the same shop.
SHOP IV:
It works as research and development center for the company. It keeps its eye on the changes
that are taking place in the electrical world and tries to adopt those changes in their
manufacturing process. So it acts as research and development in the company.
SHOP V:
Here assembling of medium and large motors generators and MGUs under separate bays like
ACM bay, ACG bay and MGUU bay.
Product
A.C Motors Frame
200 to 225
A.C Generator Frame and DS-DL-CMA
Rating
15 KW to 75 K W
2.5KVA to 90KVA
0.75 KW to 22 KW
90 to 225
CEO
HOD Production
FIC SHOP6
CG PLANT-M7 has its corporate and marketing office at Mumbai. National Offices are divided into
4 zones.
1. North Zone
2. East Zone
3. West Zone
4. South Zone
QUALITY ASSURANCE
Quality is the fitness to end-use, it is all persuasive. In this modern and competitive world
each and every company is trying hard to introduce to quality and every defect free product CGL has
a full fledge quality assurance department headed by highly qualified professionals committed to
developing products that keep phase with the changing desires and needs of the consumers. Quality
plays important role in CGL because its products are used for industrial customer applications.
Hence it must satisfy and come up to the customer expectations.
Objective:
The role of QA division is to assist all functional division in achieving and maintaining level
of specified quality requirement economically.
This unit being ISO-9001, certified unit, has to follow the stringent quality specification. This
department facilitates the total quality management (TQM) in all the departments, by adopting
process controls at all stages.
The quality assurance department follows a definite set of systems and procedures, which are
incorporated in the manuals. The manuals are drafted to the lines of the standards as specified by the
ISO-9000 series of clause for quality documentation.
Functions:
The functional responsibilities of different sections of QA divisions are as follows:
Generation of NC reports for analysis/ review and initiating corrective action and preventive
action.
Inspection/ Testing of parts, sub assembly as per appropriate quality plan/ documents
procedures/ inspection plans other documents.
Generation of Non-conformance reports for analysis, revive and collective action, preventive
action.
Ensuring that calibrated instruments are used for measurements and coordinating with
calibration section for periodic calibration.
Ensuring tested products and conforming to specified requirements and complete in all
respects.
QUALITY LABORATORY:
Planning for new instruments/ organizing calibration function from external agencies.
QUALITY SYSTEMS:
HOD Q.A
FIC-QS
SIC-Final
Inspection Shop 3
SIC-QA IMI 7
Feeder Shop
QA (Shop 1&2)
SIC Final
Inspection &
Testing Shop5 7
QA Lab
FIC-QA Lab
FIC Winding Inspection
FIC-Winding Inspection
FIC-QA IMI
FIC Shop 1
& 2 QA
FIC-Shop 6
QA
Stores
-Receipt & Issueof materials
Central Planning
-Scheduling
MSD
-Supporting Services
Production
-Feeder Shop 1,2,&6
-Product shop 3&5
QA
-Supporting Services
MED
-Supporting services
COMPUTER DIVISION
We are into technology revolution where process and manual jobs have been atomized or
computerized. So getting along with revolution CGL has also steeped into the field of computers and
has computerized its various departments of the unit.
Objective:
The computer division is responsible for software developments, maintenance of computer
hardware accessories, using appropriate methods.
Scope:
This is applicable to all the functions performed by the computer divisions of CG PLANTM7, Mandideep.
The head of computer division has overall responsibility and delegate works to other staff as
appropriate.
FUNCTIONS:
Software Revalidation:
Software revalidation is done annually as per the procedure defined in software
revalidation and records are maintained.
Back Ups:
Regular backup is ensured department wise as per the procedure defined.
Document Control:
Records files are updated and maintained in the document control register.
CEO
HOD CD
SIC-Software
Devlopment/modification/H
eardware/Backup
FICHardware/Electrical
Maintenance
SIC-Software
Development/Revalidation
Maintenance
FICSoftware
Development/Maintenanc
e
CENTRAL PLANNING
Objective:
To describe the quality management system process & procedures followed in production
department.
Approach:
Activities in the department are carried out with required resources. Resources include
Building, Personnel, Manufacturing equipments, Test equipment etc. the available resources are
managed to make quality products. The department, Organization, Process & Other activities
followed for QMS requirements is given.
Functions:
Sub-contract is given.
Corrective action.
CEO
HOD CP
SIC-Planning
FIC-AssemblyFIC-Die-casting&
planning
Rotor sub- assembly
FUC-Sub contract
FIC-Records
Preparation general assembly drawings of jigs, fixtures, dies, tooling, storage devices &
gauges.
Assisting process determination at supplier for component machining activities & release of
process sheets wherever required.
HOD MED
SIC MED
FIC
Jigs/Fixtures/Dies & Tooling &
Preparation & Release of Process Sheets
GENERAL STORES
To describe the process and procedure followed in stores department. A guide for effective,
ORGANIZATION CHART OF STORES
HOD Stores
SIC Stores
ive:
The role of stores is to maintain accountability of the materials received, stored and issued as
per the specified requirements.
Scope: Applicable to stores activities.
Responsibility:
The head of stores division is responsible for overall function of the stores with duties
delegated to SIC/FIC as applicable.
Functions:
Ensure identification, inspection status, and supplier identification on the components vendor
code/ material code in the delivery challan/ invoice.
Ensuring that all components / products received in stores are inspected and tested as per the
applicable specification/procedures.
Receive and stores materials as per delivery Challan/ Invoice/ Audit reports.
INTRODUCTION
Financial Ratios are used in the evaluation of the financial condition and profitability of a company.
The ratios are calculated from the financial information provided in the balance sheet and income
statements. While analyzing the financial statements you should keep in mind the
principles/practices that accountants use in preparing statements to examine at the financial
condition and preference of a company.
RATIO ANALYSIS
Liquidity position
Operating efficiency
Overall profitability
Trend analysis.
Liquidity Position
With the help of ratio analysis conclusions can be drawn regarding the liquidity
position of a firm. It would be satisfactory if it is able to meet its current obligations when they
become due. A firm can be said to have the ability to meet its short term liabilities if it has sufficient
liquid funds to pay the interest on its short maturing debt usually within a year as well as to repay the
principal. This ability is reflected in the liquidity ratios of a firm. The liquidity ratios are particularly
useful in credit analysis by banks and other suppliers of short term loans.
Long term solvency:
Ratio analysis is equally useful for assessing the long term financial viability of a
firm. This aspect of the financial position of a borrower is of concern to the long term creditors,
security analysts and the present and potential owners of a business. The long term solvency is
measured by the leverage/capital structure and profitability
ratios which focus on earning power and operating efficiency. Ratio analysis reveals the strengths
and weakness of a firm in this respect.
Operating efficiency
Yet another dimension of the usefulness of the ratio analysis, relevant from the
viewpoint of management, is that it throws light on the degree of efficiency in the management and
utilization of its assets. The various activity ratios measure this kind of operational efficiency. In fact,
the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by
the use of its assets total as well as its components.
Overall profitability:
A single ratio usually does not convey much of a sense. To make a better
interpretation a number of ratios have to be calculated which is likely to confuse the analyst than
help him in making any meaningful conclusion.
Change Of Accounting Procedure:Change in accounting procedure by a firm often makes ratio analysis misleading
e.g. a change in the valuation of methods of inventories, from FIFO to LIFO increases the cost of
sales and reduces considerably the value of closing stocks which makes stock turnover ratio to be
lucrative and an unfavorable gross profit ratio.
Window Dressing:Financial statements can easily can be window dressed to present a better picture
of its financial and profitability position to outsiders. Hence one has to be very careful in making a
decision from ratios calculated from such financial statements. But it may be very difficult for an
outsider to know about the window dressing made by a firm.
Personal Bias:-
Ratio is only means of financial analysis and not an end in itself. Ratios have to be
interpreted and different people may interpret the same ratio in different ways.
Incomparable:Not only industries differ in their nature but also the firms of the similar business widely
differ in their size and accounting procedure etc.. It makes comparison of ratios difficult and
misleading. Moreover, comparisons are made difficult due to differences in definitions of various
financial terms used in the ratio analysis.
Absolute Figures Distortive:Ratios devoid of absolute figures may prove distortive as ratio analysis is primarily a
quantitative analysis and not a qualitative analysis.
Price Level Changes:While making ratio analysis, no consideration is made to the changes in price levels and
this makes the interpretation of ratios invalid.
Ratios No Substitutes:-
CLASSIFICATION OF RATIOS:
1) LIQUIDITY RATIO
Current Ratio
Quick Acid Ratio
2) CAPITAL STRUCTURE RATIO
Debt-equity Ratio
Proprietary Ratio.
Interest Coverage Ratio
3) ACTIVITY RATIO:
Inventory Turnover Ratio
Debtors Turnover Ratio
Creditors Turnover Ratio
Capital Turnover Ratio
Working Capital Turnover Ratio
Fixed Assets Turnover
4) PROFITABILITY RATIO:
Gross Profit Ratio
Net Profit Ratio
Operating Profit Ratio
Operating Expenses Ratio Or Operating Ratio
Return on Investment Ratio
Liquidity Ratios:
1) CURRENT RATIO:
This ratio is an indicator of firms commitment to meet its short- term liabilities. Higher
ratio, better the coverage. 2:1 ratio is treated as standard ratio. This ratio is also called as solvency /
working capital ratio.
The current ratio is the ratio of the current assets and current liabilities. It is calculated by
dividing current assets by current liabilities.
Formula:
Current Ratio= Current assets
Current liabilities
Table-1
(Amount in Lakhs)
Year
Current Assets
Current
Liabilities
Current Ratio
2004-05
14,11,798
12,86,103
2005-06
17,37,753
15,76,507
2006-07
24,09,647
18,05,200
2007-08
31,59,775
22,14,785
1.09
1.10
1.33
1.43
Current Ratios
1.6
1.4
1.2
1
Times
0.8
0.6
0.4
0.2
0
2004-05
2005-06
2006-07
2007-08
Interpretation: - The current ratio of last four years is less than ideal ratio 2:1, i.e. fluctuating. This
indicates that firms commitment to meet its short liabilities was not so good. In 2007-08 and 200607 the current ratios are good compare to 2004-05, 2005-06.
2) QUICK / ACID TEST / LIQUID RATIO:
Liquid ratio is indication of availability of quick assets to honor its immediate claims.
Higher the ratio betters the coverage. And the standard ratio is 1:1.An asset is liquid if is can be
converted into cash immediately without loss of value. Hence cash is most liquid assets after assets
which are considered to be relatively liquid are; Debtors balance, marketable securities etc.
inventories considered to be less liquid therefore they require some time form relishing into cash and
their value also has tendency to fluctuate.
Formula:
Quick ratio = Current Assets- Inventories / Current Liabilities
Table-2
(Amount in Lakhs)
Year
2004-05
2005-06
2006-07
2007-08
Quick Assets
12,84,269
15,19,792
21,79,920
27,03,911
Current
Liabilities
Quick Ratio
12,86,103
15,76,507
18,05,200
22,14,785
.99
.96
1.20
1.22
Quick Ratio
1.5
1
Times
0.5
0
2004-05
2005-06
2006-07
2007-08
Interpretation: The ideal ratio is 1:1. The quick ratio is also fluctuating. In 2007-08 the ratio is
satisfactory because it is higher than 1. And it is also good in 2006-07 and 2007-08.Because it is
more than 1.But it has decreased in 2005-06 and 2004-05 i.e. 0.96 and 0.99 respectively. Overall the
quick ratio is satisfactory, means liquidity position of the company is good.
CASH RATIO:
An asset which converts suddenly without doubtful is called as cash ratios. Here cash balance
included trade investment or marketable securities that are equivalent to cash.
Formula:
Cash Ratio=Cash +Marketable Securities /Current Liabilities.
Table- 3:
Year
2004-05
2005-06
( Amount in lakhs)
2006-07
2007-08
Cash+
marketable
securities
2,17,773
1,39,434
4,13,668
5,24,749
Current
Liabilities
12,86,103
17,37,753
18,05,200
22,14,785
Cash Ratio
.17
.08
.22
.23
Cash Ratio
0.25
0.2
Percent
0.15
0.1
0.05
0
2004-05
2005-06
2006-07
2007-08
Interpretation: In Cash ratio there is no standard ratios for maintained the cash balance because
now a days nothing to be worried about the lack of cash if the company has reserve borrowing
power for its day to days activities. Holding of Cash in the year 2007-08 was 23% of current
liabilities in the 2005-06 it came down to 8%, in the 2006-07 it again increased to 23%.
INTERVAL MEASURES RATIO: The ratio which assesses a firms ability to meet its regular cash
expenses is the interval measures. An interval measure relates to liquid asset and average daily
operating cash flows.
Formula:
Interval Measure ratio = current assets-inventories/average daily operating expenses /360
Table-4
(Amount in lakhs)
Year
2004-05
Current asset 12,84,269
2005-06
15,19,792
2006-07
21,79,920
2007-08
27,03,911
inventories
Average daily 585
644
762
919
operating exp
Interval
2,360
2,860
2,942
2,195
Measures
SOURCE: ANNUAL REPORTS OF COMPANY
Interval Measures
3,500
3,000
2,500
Days
2,000
1,500
1,000
500
0
2004-05
2005-06
2006-07
2007-08
Interpretation: Interval measure is said to be good if No of days are sufficient liquid asset to
finance its operations. This chart Indicates that CGL have sufficient Liquid assets to finance its
operations for 2942 days even though it does not receive any cash for 2942 days.
LEVERAGE RATIO
LEVERAGE RATIO is also called as capital structure ratio. It relates to the study of various
types of capital structure of firm. The long- term solvency of a company can be examined by using
leverages or capital structure ratios. These ratios are for long-term creditors to judge the long-term
financial strength of the company.
THE DIFFERENT LEVERAGE RATIOS ARE:
1. Debt Equity Ratio
2. Proprietary Ratio
3. Interest Coverage Ratio
1) DEBT RATIO
Debt ratios are use to analyze the long term solvency of firm. It is the proportion of the interest
bearing debt in the capital structure. Debt ratio is calculated by total debt by total debt by capital
employed or net asset of the firm.
Formula:
Total debt /Total debt +Net worth
Table-5
Year
2004-05
2005-06
Long term debt 2,03,121
1,93,574
Shareholders
13,11,350
13,01,803
Funds
Debt-equity
.15
.14
ratio
SOURCE: ANNUAL REPORTS OF COMPANY
(Amount in lakhs)
2006-07
3,16,343
11,08,229
2007-08
4,41,152
12,52,506
.28
.35
Debt Ratio
0.4
0.35
0.3
0.25
Percentage
0.2
0.15
0.1
0.05
0
2004-05
2005-06
2006-07
2007-08
Interpretation: The debt ratio for the 2007-08 was .35 or 35% of the capital employed. It indicates
owners have provide the remaining finance that is 1-35=65% of capital employed. From above
analysis the firm has lower risk in the year 2004-05 & 2005-06.But afterwards it has increased its
risk in the year 2006-07 &2007-08.
2) DEBT-EQUITY RATIO
It measures the relation between debt and equity in the capital structure of the firm. In other
words, this ratio shows the relationship between the borrowed capital and owners capital.
Formula:
Debt equity ratio= Long term debt/Net worth
Table-6
Year
2004-05
2005-06
Long term 2,03,121
1,93,574
debt
Net worth 11,08,229
11,08,229
Debt-Equity
.18
.17
Ratio
SOURCE: ANNUAL REPORTS OF COMPANY
(Amount in lakhs)
2006-07
3,16,343
2007-08
4,41,152
11,08,229
.28
12,52,506
.35
Times
2004-05
2005-06
2006-07
2007-08
Interpretation:- The ratio is high in 2007-08. It shows that a large share of financing by the
creditors of the firm and it is more risky to the creditors. In 2004-05 and 2005-06 it has declined to .
18 and 0.17 respectively. In 2005-06 and 2006-07 the ratio is low i.e., 0.18 and 0.17. It indicates that
the firm finance point of view, the company has low risk. It means that the company is in safer side
of finance and a margin of safety to the creditors.
(Amount in lakhs)
2004-05
4,32,688
2005-06
4,32,688
2006-07
4,32,688
2007-08
4,52,688
15,39,264
.28
18,56,702
.23
25,25,498
.17
32,92,946
.13
Times
0.3
0.25
0.2
Times
0.15
0.1
0.05
0
20004-05
2005-06
2006-07
2007-08
Interpretation: The equity ratio is high in 2004-05 i.e. 28%. It indicates that a high proprietary ratio
relatively little danger to the creditors and it is better for long-term solvency position of the
company. But it has been decreased to 13% and 17% in the year 2006-07 and 2007-08 respectively.
A ratio below 50% is dangerous to the creditors at the time of winding up of a company.
4) EQUITY RATIO:
Equity Ratio is calculated by dividing capital employed (CE) by Net worth (NW)
Formula:
Equity Ratio= Capital employed (CE)/Net worth
Table-8
Year
2004-05
2005-06
Capital
4,32,688
4,32,688
employed
Net worth
11,08,229
11,08,299
Equity Ratio
.39
.39
SOURCE: ANNUAL REPORTS OF COMPANY
(Amount in lakhs)
2006-07
2007-08
4,32,688
4,52,688
11,68,229
.37
12,52,506
.36
Times
0.4
0.39
0.38
Times
0.37
0.36
0.35
0.34
2004-05
2005-06
2006-07
2007-08
Interpretation: There are no standard rules for maintaining equity ratio. It differs according to the
nature of the business. The lower performance in maintain Net worth in 2004-05 & 2005-06 but in
2006-07 &2007-08 good performance maintaining of capital employed to net worth.
2004-05
31,20,434
1,27,529
24.4
2005-06
41,40,246
2,17,961
18.9
OR
Sales
__________
Inventory
(Amount in lakhs)
2006-07
2007-08
59,13,957
72,77,768
2,29,727
4,55,864
25.74
15.96
times
15
10
5
0
2004-05
2005-06
2006-07
2007-08
Interpretation:- In the above chart, the inventory turnover ratio is high in 2006-07, 2004-05, i.e.
25.7, 24.4 respectively. But it is low in 2007-08 and 2005-06 i.e. 15.9 and 18.9 respectively.
Usually, a high inventory turnover indicates efficient management of inventory because more
frequently the stocks are sold.
2004-05
1,27,529
31,20,434
of 14.7
2005-06
2,17,961
41,40,246
18.95
(Amount in lakhs)
2006-07
2,29,727
59,13,957
13.98
2007-08
4,55,864
72,77,768
22.5
Days
10
5
0
2004-05
2005-06
2006-07
2007-08
Interpretation:- In the year 2004-05, 2006-067 due to increase in sale of inventory, the inventory
holding period is less i.e. the inventory has been disposed off or sold on an average in 14.7, 13.9 and
in 2007-08 the days have increased .
(Amount in lakhs)
2006-07
59,13,957
13,78,923
4.2
2007-08
72,77,768
15,98,625
4.5
3
2
1
0
2004-05
2005-06
2006-07
2007-08
Interpretation: - The ratios are increasing year by year. In 2006-07, it is 4.25and it has been
increased to 4.5 in 2007-08. The ratio is not so high. It shows that the payments of debtors are not so
prompt. It is less standard ratio i.e. 8 times.
Debtors Collection Period:
Formula:
Debtors collection period ratio= Debtor*360/sales
Table-12
Year
Debtor
Sales
Debtors
(Amount in lakhs)
2004-05
8,25,008
31,20,434
95
2005-06
11,26,390
41,40,246
98
Collection
Period
SOURCE: ANNUAL REPORTS OF COMPANY
2006-07
13,78,923
59,13,957
84
2007-08
15,98,625
72,77,768
79
Days
60
40
20
0
2004-05
2005-06
2006-07
2007-08
(Amount in lakhs)
Year
Sales
2004-05
31,20,434
2005-06
41,40,246
2006-07
59,13,957
2007-08
72,77,768
Net Asset
Asset turn over
ratio
15,39,264
2.0
18,56,702
2.2
25,25,498
2.3
32,92,946
2.2
Times
Times
2004-05
2005-06
2006-07
2007-08
Interpretation: The total asset turnover ratio is 2.3 times in the year 2006-07 it is good. The same is
maintained in year 2005-06, 2007-08. In the 2004-05 the ratio is low. It indicates poor perform.
FINDINGS:
The important findings of the study are as follows.
1) Cash ratio of the company is poor hence they will find problem of liquidity position.
2) The debtors collection period of CGL is good.
3) The quick ratio of Crompton Greaves Limited is showing a increasing trend & it is also
below the standard ratio 1:1.
4) The current ratio of Crompton Greaves Limited is not satisfactory but it is below the standard
ratio i.e. 2:1.
5) Debt equity ratio of the company is far below the standard. They have not utilized the
potential of borrowing for the debts.
6) In the Crompton Greaves Limited the creditors are paid promptly.
7) The company maintains a co-operation among the staff member & management.
8) On an average all together other ratios are normal.
9) As per order given by the customer supply manufacture products to them at right time & at
right places.
SUGGESTIONS:
1) Company should try to maintain its current ratio at the standard 2:1.
2) The company should reduce its cost of production through adopting new technology. It will
help to increase the sales.
3) The CG average collection period is very high. For avoiding the company should take major
techniques to collect the money from debtors.
4) Company should try to reduce its credit sales through cash discount at the time of sales. It
will help to meet the current obligation.
5) Company is suggested to maintain sufficient amount of cash & bank balance to pay its quick
liabilities, which will increase its credit worthiness & goodwill.
6) The company is in loss due to heavy interest burden to avoid this the company should plan to
adoption of share capital in the business.
7) The company should conduct weekly meetings for central planning, material management
department, and production department towards operations of the company.
8) The company should conduct monthly meetings to knowing its performance. If the
performance is not reached then it will helps to take necessary decisions.
CONCLUSION:
Financial statements plays very important role in providing facts and figures for the decision
makers. In the same way ratios will act as analysis kit in the hands of financial analyst. These ratio
will help us and in answering the basic question like why, how, what of these statements.
Now a days financial statement are very much in consideration for decision making. In
deciding what to do and what not to do they are required to analyze the data as per their requirement.
Thus in our project we try to give brief outline of ratio analysis (i.e., how to analyze the facts and
figures given in the financial statements) form the angle of all stake holders.
Throughout my project I have analyzed companys financial position and pros and cons of the
situation and we have also interpreted the data. In spite of some limitation we try to analyze and
interpreted the facts and figures with accuracy.
Based on the analysis and interpretation I tried to give my findings and suggestions for the
company as per my best knowledge.
Finally project really helps us in knowing the practical things of the corporate world. Really I
enjoyed this project work in its real spirit.
Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Mar '11
Mar '10
Mar '09
Mar '08
12 mths
12 mths
12 mths
12 mths
12 mths
128.30
128.30
0.00
0.00
2,572.58
0.00
2,700.88
0.20
2.06
2.26
2,703.14
Mar '12
128.30
128.30
0.00
0.00
2,161.51
14.27
2,304.08
8.23
5.17
13.40
2,317.48
Mar '11
128.30
128.30
0.00
0.00
1,622.00
14.42
1,764.72
13.82
12.96
26.78
1,791.50
Mar '10
73.32
73.32
0.00
0.00
1,153.99
14.58
1,241.89
34.52
19.15
53.67
1,295.56
Mar '09
73.32
73.32
0.00
0.00
842.67
14.76
930.75
62.37
25.19
87.56
1,018.31
Mar '08
12 mths
12 mths
12 mths
12 mths
12 mths
1,365.61
748.42
617.19
58.29
1,052.50
449.60
1,735.62
321.10
2,506.32
336.19
0.00
2,842.51
0.00
1,717.06
150.29
1,867.35
975.16
0.00
2,703.14
1,604.18
728.88
875.30
47.69
781.64
405.72
1,510.18
124.22
2,040.12
587.55
26.67
2,654.34
0.00
1,634.38
407.11
2,041.49
612.85
0.00
2,317.48
1,171.40
637.59
533.81
33.03
688.06
303.53
1,212.79
112.43
1,628.75
402.31
436.07
2,467.13
0.00
1,534.63
395.90
1,930.53
536.60
0.00
1,791.50
1,111.53
600.82
510.71
12.95
265.52
281.32
1,012.26
181.49
1,475.07
516.55
291.02
2,282.64
0.00
1,265.88
510.38
1,776.26
506.38
0.00
1,295.56
1,055.51
562.80
492.71
22.59
194.33
262.95
956.22
109.67
1,328.84
294.15
47.98
1,670.97
0.00
1,108.20
254.10
1,362.30
308.67
0.00
1,018.30
326.08
42.10
278.74
35.70
362.56
27.28
788.21
33.48
BIBLIOGRAPHY:
M.Y.KHAN, P.K.JAIN (1981), Financial Management, and cost accounting (third edition)
New Delhi: McGraw-Hill Publishing Company Ltd.
I.M.PANDEY, Financial Management New Delhi Vikas Publishing House Private Ltd-ninth
addition 2004.
www.cgglobal.com
www.wikipedia.com
801.03
24.99