Study on two cooperative institution

Amul vs verka
Financial Analysis Of Amul
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Financial Performance Analysis can be carried out by using various analytical tools like
trend analysis, horizontal analysis, cash flow statement analysis, & various important
ratios. Ratios have evolved substantially over a period of time. I have studied the effect of
different variable of liquidity & profitability of AMUL for last 10 years from 2001-02 to
2010-11 by using Pearson’s correlation for analysis. The result shows that there is
moderate negative correlation between liquidity & profitability. 

INTRODUCTION:
AMUL is Asia’s no. 1 and world’s second number co-operative dairy. It has large market
and dairy network in every state of India and across the India, like central Asian countries,
It was started with 250 liters of milk and 2 societies and now, it produces 10 lakhs litters
milk per day and has 1113 societies and more than 6 lakes farmer members. It produces
milk and milk products. The main motto of AMUL is to help farmers. Farmers were the
foundation stone of AMUL. The system works only for farmers and for consumers, not for
profit. The main aim of AMUL is to provide quality products to the consumers at minimum
cost. The goal of AMUL is to provide maximum profit in terms of money to the
farmers.   Vision of AMUL is to provide and vanish the problems of farmers (milk
producers). The AMUL apparition was to run the organization with the co-operation of
four main parties, the farmers, the representatives, the marketers, and the consumers.
Year Milk procured (in kgs) Sales turnover (Rs. In lack)
2000-01 277840861 50919
2001-02 258692443 46878
2002-03 257957726 48834
2003-04 255856435 54593
2004-05 276150374 60047
2005-06 297436246 70922
2006-07 324410536 81632
2007-08 401718616 107712
2008-09 468587136 137807
2009-10 498033310 169989
2010-11 515900000 211140
OBJECTIVE OF THE STUDY:
• The objective of financial statement is to know information about the
financial position, performance & cash flows of an enterprise with the help of
analytical tools.
• To know the Market Position AMUL by taking Market Value Ratios
• To know the tradeoff between Liquidity & Profitability.
DEVELOPMENT OF HYPOTHESIS:
H0: There is no positive relationship between the Liquidity & Profitability of AMUL.
H1: There is positive relationship between the Liquidity & Profitability of AMUL.
TESTING OF HYPOTHESIS:
STEP 1:

Financial Performance on the basis of Profitability & Liquidity Analysis

Relationship Between Current Ratio & Operating Profit Ratio
Years CR OPR
2001-02 2.702 88.380
2002-03 3.240 89.342
2003-04 2.376 90.460
2004-05 2.344 90.199
2005-06 2.136 91.035
2006-07 1.738 90.957
2007-08 2.136 92.178
2008-09 1.652 91.873
2009-10 1.394 92.580
2010-11 1.431 947.906
r -0.415
Relationship Between Current Ratio & Net Profit Ratio
Years CR NPR
2001-02 2.702 0.314
2002-03 3.240 0.405
2003-04 2.376 0.467
2004-05 2.344 0.523
2005-06 2.136 0.461
2006-07 1.738 0.504
2007-08 2.136 0.421
2008-09 1.652 0.419
2009-10 1.394 0.436
2010-11 1.431 0.440
r -0.323

STEP 2: FIVE DIFFERENT CORRELATIONS

1) Strong Negative Correlation (r=-0.933)
2) Moderate Negative Correlation (r=-0.674)
3) Moderate Positive Correlation (r=0.514)
4) Strong Positive Correlation (r=0.909)
5) Virtually No Correlation (r=-0.004)
STEP 3: INTERPRETATION
1) Correlation Result between the Operating Profit & Current Ratio shows a “Moderate
Negative Correlation” between them, & that if the current ratio increases it will have a
negative impact on profitability & it will decreases because there is a correlation
r=-0.41472. Here AMUL’s current ratio is more than standard of 2:1, this indicate negative
reflection towards current assets
2) Correlation Result between the Net Profit & Current Ratio shows a “Moderate Negative
Correlation” between them, & that if the current ratio increases it will have a negative
impact on profitability & it will decreases because there is a correlation r=-0.32255. This
indicates that if CR is increased by 1 Rs on liquidity basis, it reduces NPR by 0.32255
paisa on profitability.
3) Correlation result between Liquidity & Profitability have “Moderate Negative
Correlation”
ANALYSIS & DISCUSSION:
Financial analysis is the starting point for the making plans, before using any sophisticated
forecasting & planning procedures. A number of tools are available in the tool kit of the
analyst for the purpose certain tools are:
1. Trend analysis
2. Horizontal analysis
3. Cash flow statement analysis
4. Ratio analysis
1) TREND ANALYSIS:

 
 
 
 
 
 

 
 

INTERPRETATION:
1. Consistent rise in sales that shows overall growth in sales of their products in
dairy consumption.
2. Consistent rise in production throughout the year. Consistent rise in sales
throughout the year, but production is more than the sales.
3. Growth in gross block & sales neck to neck that shows high fixed assets
efficiency & its utilization of uses are more. Growth in net worth is neck to
neck that shows high leverage & high dividend distribution around 75% to
their consistent farmers
2) HORIZONTAL ANALYSIS:

Gross Profit 16342.74 14314.02 2028.72 14.173

PBDIT 4327.00 3350.05 976.95 29.162
less: Depreciation 1614.63 1121.41 493.22 43.982
EBIT 2712.37 2228.64 483.73 21.705
less: Interest 1569.38 1252.58 316.8 25.292
EBT 1142.99 976.06 166.93 17.102
less: Tax Provision 212.78 255.00 -42.22 -16.557
PAT 930.21 721.06 209.15 29.006
Net Profit 926.67 735.75 190.92 25.949
Shareholders' Funds: 6826.57 5756.61 1069.96 18.587
Loan Funds: 21227.56 19111.57 2115.99 11.072
FIXED ASSETS (Net Block) 15270.87 14046.24 1224.63 8.719
Investments 1040.58 515.33 525.25 101.925
Current Assets, Loan & Advances: 37290.61 40524.27 -3233.66 -7.980
Current Liabilities & Provisions 27362.69 30422.64 -3059.95 -10.058
Net Current Assets 9927.92 10101.63 -173.71 -1.720

INTERPRETATION:
1. The results: through profit at every stage that is PBDIT, PBIT, PBT is higher in
absolute terms, it has not been able to maintain growth equal to sales. PBT
has grown by just 17.10%
2. Tax provision is lower by 16.56% thus improving PAT growth to 29.01% as
against PBT growth. In comparison to sales growth however PAT growth in
very positive due to maintaining material cost, manufacturing cost. It shows
increment in net profit.
3. Net worth (shareholder’s fund) up by 18.59% as against lower growth in loan
funds by 11.07%. it shows very strong financial position. Net fixed assets
higher by only 8.72% where as net sales grew by 24.69%. it shows very
efficient fixed assets utilization.
4. Investment grew by 101.92%. Investment in absolute terms very high. It is
much more than net worth (18.59%). So it shows a very unique feature.

3) DUPONT ANALYSIS:
 


OR

3) DU PONT ANALYSIS
RATIO NET PROFIT MARGIN * NET WORTH TURNOVER = RONW
FORMULAE PAT/Net Sales*100 * Net Sales/Net Worth = PAT/Net Worth*100
2001-02 0.31 * 37.09 = 11.65
2002-03 0.41 * 30.13 = 12.20
2003-04 0.47 * 16.89 = 7.89
2004-05 0.52 * 17.22 = 9.01
2005-06 0.46 * 19.06 = 8.79
2006-07 0.50 * 19.72 = 9.94
2007-08 0.42 * 23.89 = 10.06
2008-09 0.42 * 29.67 = 12.43
2009-10 0.44 * 34.48 = 15.03
2010-11 0.44 * 36.49 = 16.06

INTERPRETATION:
1) Increase in ROA contributed by improvement in both the net profit margin as well as net
assets turnover.
2) This finding indicates that an ideal situation for the AMUL.

OVERALL CONCLUSION:
Financial statement summarizes an AMUL’s financial position at a given moment in time
as well as over longer period. They should reflect any variance between the actual
operating result & the budgeted goals that were previously approved by the company.

Organisational structure of Amul  

Amul is a dairy cooperative in Anand, Gujarat. It is
managed by the Gujarat Co-operative Milk Marketing
Federation Ltd. which is jointly owned by 3.6 million
milk producers in Gujarat.
The Amul Model or Anand Pattern has a three-tier
cooperative structure. First, at the village level there is a
cooperative society.  Next at the district level there is a
milk union. Finally, at the state level there is a milk
federation. They are all affiliated to each other.

Milk is collected at the village dairy society. Milk

procurement and processing is done at the District Milk
Union. The marketing of the milk products is done at
the State Milk Federation.

So the farmers own the complete value-chain from the

farm to the table of the consumer.

Capacity and output of Amul

The Organisation – An Overview

Number of Producer Members 694,271

Number of Village Dairy Cooperative
1713
Societies

Total Milk Handling Capacity 5 Million liters per day

Milk Collection (Daily Average) 2.5 Million liters

Milk Drying Capacity 150 Mts per day

Whey Drying Capacity 60 Mts per day

Cattle Feed Manufacturing Capacity 2500 Mts per day

 MARKETING STRATEGY BY
AMULThe Marketing strategy of Amul covers various
aspects of the business right
from segmentationand targeting to the
overall mission and vision of the company and the
various parameters which the company executes to
become the top brand.
Amul uses a very deep product portfolio, it does
not differentiate in its customers but uses a mass
marketing principle.Which has worked pretty well for them .
This is because higher end customers do have a lot of high end
products as an
alternative in ice
cream. However, for
other products like
Butter and cheese,
both high end and
low end customers
are the target. In
terms of positioning,
Amul has top of the
mind positioning because it is the first brand which comes in
mind when talking of Ice cream, milk, cheese, butter or any
other milk based products.Amul is responsible for one of the
most unique and longest running outdoor campaign as well as
one of the most known outdoor advertising characters –  The
Amul girlis hardly sweet or cute. She is known to be the most
naughty advertising girl ever. Amul hoardings mainly feature
the current news and are used to take a tongue in cheek
viewpoint at current happenings. However, each advertisement
hits the nail on the head.
 Amul sales
Distribution and Dealers

Amul products are available in over 800000 retail outlets

across India through its network of over 5000 retailers.

• First leg-from manufacturing units to depots; Amul has 65

depot across major cities of India.
•Second leg-from defeats to wholesale defeats: Amul has a
network of over 5000 distributors.
• Third leg-there is a flow of goods from wholesaler defeats to
retailers a beat plan is prepared and transportation is done
through auto rickshaw and bicycle

Verka milk cooperative

Verka is a flagship brand of MILKFED.The
Punjab State Cooperative Milk Producers’
Federation Limited, popularly known as
MILKFED.

Turnover:-The annual turnover of Milkfed

which was Rs.1250 crores in the year
2011has hit the level of Rs.1438 crores in
the year 2012.

 Turnover [in crores]

2000

1500

1000

500

0
2009 2010 2011 2012

MILKFEED GROWTH AT A GLANCE


PARTICULARS UNIT 2007-8 2008-9 2009-10 2010-11 2011-12

FUNCTIONAL CUMMU.NOS 6445 6104 6101 5989 6155

SOCIETIES

MEMBERSHIP CUMMU.NOS IN 3.76 3.56 3.63 3.60 3.65

LACS

AVERAGE LKG SPD 7.45 7.81 7.82 7.78 8.21

DAILY MILK
PRODUCED

PEAK MILK LKG SPD 10.04 11.64 11.37 11.54 12.39

PRODUCTION

A.I. CLUSTER COOMU.NOS 323 341 388 433 504

SOCS.

FODDER SEED M.T.S 444.10 400.30 430.00 500.00 572.00

SUPPLIED

CATTLE FEED M.T.S 73724 66970 66750 73577 86174

SOLD

AVERAGE LLPD 4.97 5.27 5.67 5.81 6.16

DAILY CITY
SUPPLY

SALES OF SFM LAC PKTS/BTLS 30.32 35.85 42.49 41.92 61.11

SALES OF LAC PACKETS 10.54 12.20 16.89 19.16 29.51

LASSI

SALES OF ICE LAC LITRES 9.17 10.23 12.18 15.61 17.68

CREAM

EXPORTS R.S IN LACS 698.17 1142.28 713.67 1140.35 1334.90

TURNOVER R.S IN CRORES 585.00 653.00 675.00 760.00 931.00

From practical point of view, generally, two financial statements are prepared in comparative
form for financial analysis purpose. These are balance sheet and income statement.
These show not only the comparison of figures of two periods but also
are relationship between balance sheet and income statement enables an in depth study
of financial position and operative surplus.

a.Comparative Balance Sheet:The comparative balance sheet analysis is the study of the trendof
the same items, and computed items in two or more balance sheets of the same business
enterprise on different dates. The changes in periodic balance sheet items reflect the
conduct of a business. The changes can be observed by comparison of balance sheet at the
beginning and at the end of the period and these changes can help in forming an opinion about
the progress of an enterprise.
Interpretation

1) Comparative balance sheet reveals that during 2012there has been increased in fixed
assets of Rs. 12,01,776,i.e.1.64% while the share capital has increased by Rs. 1005 and
loans decreased by Rs. 80087655.22..

2) The current assets have been increased by Rs.6,83,876 i.e. 92.71%. The current liabilities
have been decreased by Rs. 23,81,796.This depicts that the company has somewhat
improved.

3)The overall financial position of the company is bad.

Advantages of Comparative Balance Sheet:

The following are the main advantages of the comparative balance sheet:

• The comparative balance sheet depicts the position of the firm on different dates
and also the extent of the increase or decrease between these dates.

• The comparative balance sheet shows the position of the firm as well as it marks
out travels over a period of time.

• Comparative balance sheet highlights the change as well as the position whereas
in single balance sheet only position can be known.

• Comparative balance sheet bridges the Balance Sheet and Profit & Loss Account.
It shows the effects of operations on the assets, liabilities and capital.

b.Comparative Income Statement:

The comparative income statement gives the results of the operations of the business. The
statement discloses the net profit or net loss resulting from the operation of the business. Such
statements show the operating results for a number of accounting periods so that changes in
absolute data from one period to another period may be stated in terms of absolute
changes or in terms of percentages. This statement helps in deriving meaningful conclusion as
it is very easy to ascertain the changes in sales volume, administrative expenses, selling
and distribution expenses, cost of sales etc.

Liquidity Ratios:
Liquidity refers to the ability of a conce
rn to meet its current obligations as and when
these become due. If current assets can pay off current liabilities, then liquidity position
will be satisfactory. The bankers, suppliers of goods and other short term creditors are
interested in the liquidity
of the concern. They will extend credit only if they are sure
that current assets are enough to pay out the obligations. To ensure the liquidity of the
firm, the following ratio of can be calculated:

Current Ratio:
COMPRATIVE INCOME STATEMENT as on 31.3.2011 and 31.3.2012
current ratio
current ratio may be defined as the relationship between current assets and
current liabilities. This ratio, also known as working capital ratio, is a measure of
general liquidity and is most widely used to make the analysis of a short term
financial position of the firm.
Current ratio= current Assets/Current Liabilities
Current ratio=142151557.93/258264140.47=0.554

Profitability Ratios: The primary objective of a business undertaking is to earn profits.

Profits area useful measure of overall efficiency of a business.
Profits are the test of efficiency to the management and a measurement of control.
Generally, profitability ratios are calculated in relation to sales or in relation to investment.
The various profitability ratios are discussed below:

Gross Profit Ratio:

Gross profit ratio measures the relationship of gross profit to net sales and usually
represented as a percentage. Thus, it is calculated by dividing the gross profit by sales:
Gross Profit Ratio=Gross Profit/Net Sales*100
=11669011.72/720989597.53*100 =1.618

Net Profit Ratio:

Net profit ratio establishes a relationship between profit and sales, and indicates the
efficiency of the management in firm. This ratio is the overall measure of firm‟s
profitability and is calculated as:
Net profit ratio= net profit after tax/net sales*100= -9707455.59/720989597.53*100= -1.346

Interpretation of the Analysis

From the whole analysis we can interpret that the company is going worse. As the liabilities
of the firm are more than its assets. The other expenses of the firm are increasing day-by-day.
But the sill firm is going on. The main reason behind this is social welfare. The firm is
recovering its position through the rehabilitation scheme of National Diary Development
Board (NDDB). This board has provided Rs. 13.60 crores this year for the recovery. The rest
will be recovered by selling land which as deal of Rs. 15-20 crores. Here in this study
we cannot do CVP analysis, the reason for it is that this firm is not fulfilling the main
assumptions. By the entire study the conclusion is that the firm is facing worst position from
the last very8 years.

Conclusion
From the analysis of financial statements of Verka Milk Plant Bathinda we can conclude
at the end that the unit is running at the loss. There are many reasons for this loss. The main are
the hike in prices of milk, low rates of product, low commission to dealers lead to less sale of
Verka products, rise in salaries, increasing variable expenses per year and also because
of lack of awareness among customers. The other main reason of loss is that Verka‟s main aim
is social welfare and not profit earning. Verka is brand known for its quality and welfare.
This has improved the structure of Punjab dairy sector
.
Organisational structure of verka

The VERKA Model has a three-tier cooperative

structure. First, at the state federation level there is a
cooperative society.  Next at the district level there is a
milk union. Finally, at the levvillageel there is a milk
federation. They are all affiliated to each other.

Milk is collected at the village dairy society. Milk

procurement and processing is done at the District Milk
Union. The marketing of the milk products is done at
the State Milk Federation.

So the farmers own the complete value-chain from the

farm to the table of the consumer.


Capacity and output of verka

11 District Cooperative Milk Producers’ Unions Ltd. covering entire State of Punjab with 9
Milk Plants are affiliated to Milkfed.    The handling capacity of these 9 Milk Plants is 15.25
lacs litres per day, Milkfed has two Cattle Feed Plants with 300 MT’s manufacturing capacity
per day.  

Sr. MILK HANDLING AND PRODUCT CAPACITIES - MILK

No. UNION AMRITSAR
1 City Supply 50000 Litres per day
2 Dahi 3 MT/day
3 Lassi 9 MT/day
4 Paneer 400 KGs per day
5 Kheer 600 KGs per day
6 Ghee 5 MT/day
7 Powder Plant 10 MT/day
8 Sweetened Flavoured Milk 10000 Bottles/day
9 Panjiri (CDPO) 5 MT/day
10 Table Butter 1 MT/day
TOTAL MILK HANDLING 160000 Litres per day
CAPACITY
MARKET SHARE OF VERKA



MILK CURD LASSI PANEER GHEE

FLAVOURED DRINKS

10%

12%
41%

15%

16% 7%
Market share of Amul

BY THE GIVEN DATA WE CAN CLEARLY SEE THAT MOST

OF THE MARKET SHARE FOR THIS COMPANY IS
EARNED BT THE MILK DEPARTMENT LIKE CHOCOLATE
DRINKS CONDENSED MILK MILK POWDER ETC AND THE
REST OF THE MARKET SHARE FOR AMUL IS EARNED BY
THE CURD BUTTER ECTT AAND THE PODUCT WHICH
HAS EARNED THE LEAST MARKETS SHARE FOR THIS
COMPANY IS THE CE CREAM AND THE CHOCOLATES.