Gujarat Alkalies and Chemicals Limited

GUJARAT ALKALIES AND CHEMICALS LIMITED1 HISTORY Gujarat Alkalies and Chemicals Limited (GACL) were incorporated on 29th March, 1973 in the State of Gujarat by Gujarat Industrial Investment Corporation Limited (GIIC), a wholly owned company of Govt. of Gujarat, as a Core Promoter. GACL has two units located at Vadodara and Dahej, both in the State of Gujarat. It has integrated manufacturing facilities for Caustic Soda, Chlorine, Hydrogen Gas, Hydrochloric Acid, Chloromethane, Hydrogen Peroxide, Phosphoric Acid, Potassium Hydroxide, Potassium Carbonate, Sodium Cyanide, and Sodium Ferro cyanide. The Dahej unit also has 90 MW Captive Power Plant (CPP) for regular and economical power supply. The Company commenced its operations in 1976 with 37,425 MTPA Caustic Soda Plant based on the then, state-of-the-art Mercury Cell process at its Plant which is situated 16 km North of Vadodara near Village Ranoli on the main Railway track route between Ahmedabad and Mumbai. Right from the inception, GACL has been following the strategy of continuous capacity expansion in core areas. The first stage expansion of the Caustic Soda Plant raising the capacity to 70,425 MTPA was undertaken in October, 1981 followed by a diversification programmed to produce 2000 MTPA of Sodium Cyanide in December, 1982. In 1984, the second stage expansion to increase the capacity of Caustic Soda Plant to 103,425 MTPA was undertaken. Simultaneously, the Company undertook the diversification project for manufacture of 10,560 MTPA of Chloromethane using Chlorine, a co-product of the Company and in 1991, the capacity of Chloromethane production was doubled. As power is the major input for production of Caustic Soda and constitutes about 65% - 70% of the cost of production, the Company along with other Corporations likes M/s. GSFC, Petrofils Co-operative Ltd. and Gujarat Electricity Board promoted a gas based power unit in Vadodara under the name of Gujarat Industrial Power Company Ltd. (GIPCL) during the year 1985. As a 2 promoter of GIPCL, the Company gets low cost power, as the plant is gas based and is depreciated. Since production of Caustic Soda is highly power intensive, in order to reduce power cost and to eliminate mercury pollution, the Company during the year 1989 converted one of its Cell Houses producing Caustic Soda from Mercury Cell Technology to environment friendly Membrane Cell Technology, thereby eliminating the use of mercury. The Capacity of Caustic Soda was also increased to 132000 MTA. The conversion of second Mercury Cell to Membrane Cell was carried out during March, 1994, thereby eliminating the total use of mercury from the Complex for production of Caustic Soda and increasing the capacity of plant along with this conversion to 170000 MTA including Potassium Hydroxide facility. As part of this Membrane Cell Conversion Project, a new facility for manufacture of 16500 MTA of Potassium Hydroxide Lye based on Membrane Cell was also set up. The Company has further set up facility for converting part of this Caustic Potash Lye into Potassium Carbonate with a capacity of 13200 MTA. In order to add further value to its products, the company had set up manufacturing facility for production of 11000 MTA Hydrogen Peroxide (100%) at Vadodara Complex during the year 1996 to utilize Hydrogen gas, which is a co-product from Caustic Soda Process. In 1995, as a part of diversification programmed and to meet the growing demand of its products manufacture of Technical Grade Phosphoric Acid with capacity of 26400 MTA (85% Phosphoric Acid) at a new location at Dahej, District Bharuch. The Company also set up Membrane Cell based grass root Caustic-Chlorine Unit with a capacity of 100000 MTA at Dahej. Along with this, a captive 90 MW co-generation Power Plant was set up so as to ensure uninterrupted and low cost power for its captive operations. CORPORATE PROFILE 3 WORLD CLASS TECHNOLOGY Technology moulds generations. Our endeavor to continually upgrade technology has allowed us to optimize resources, thus bringing down the cost of production and increasing revenues. Acquired through the best and prestigious collaborations means that they meet international specifications for our products. Besides, our manufacturing plants are eco-friendly, which ensure that the environment is well looked after. The location of both the plants 'Vadodara' and 'Dahej' has dual advantage of proximity to the raw material suppliers and the end users. While the capacity utilization is about 70% in the Caustic Soda Industry, GACL's plants are working at almost 100% capacity thereby utilizing the assets to the fullest extent. Further the company takes pride in having honored it's commitments without fail. The company has made its presence felt across the globe even against stiff competition by exporting products to USA, Europe, Australia, Africa, Far & Middle East countries, China & South Asian Markets. GACL has adapted to the age of information technology for fast and uninterruptible information exchange. Both plants of Vadodara and Dahej are connected by VSAT and lease lines. This provides on-line information at any given point of time. SELF RELIANCE: Various factors that influence the success of any corporation the self sufficiency ranks the foremost we at GACL understand this all too well power being a major input to the electrolytic 4 caustic soda process , we promoted a join captive power plant GIPCL to meet our energy requirement for Vadodara complex. Our complex at dahej is also integrated with captive cogeneration plant of capacity of 90 MW. Cost effective natural gas has substituted as fuel in plant of naphtha for captive power plant. The plant load factor has increased and surplus power supply to state grid this has achieve economies of operations. Green all the way. Nature bestows human race with umpteen benefits. Clean air lush screen trees, GACL’s commitment towards environment is undying safe and unadulterated nature is high on our list of priorities, we are an organization with green attitude. A dedicated senior executive has a safety and environment department to maintain high standard of safety and harmonious relationship between environment and technology. The company has plants more than 27000 plants and it keeps maintaining same with a tree plantation being a regular feature. It plants 1000 sampling every year. Rain water harvesting and collection is a part of routine activity at GACL. This water is and utilize for the maintenance of green belts. The vermin culture concept has been implemented in the premises to convert waste generated by the canteen gardens and plants to vermin compost. GACL has been the pioneer in adopting the environment friendly and energy efficient technologies. It converted to membrane cell technology from mercury cell technology way back in 1989 and since 1994 all the plants are running on mercury free a membrane cell technology. As a matter of strategy, the company has placed sensor at a strategic location in an around the complex to monitor ambient air quality. For a disposal of solid waste GACL has secured dedicated landfill site conforming to the hazardous waste management act. Being a member of effluent channel project, it releases its 5 liquid effluent in this channel and adheres to the necessary parameters of the Gujarat Pollution control Board before discharging it in to the channel. ISO CERTIFICATION 6 GACL is ISO certified company  ISO 9001-2000 for proper maintenance and documentation  ISO 14001-2004 for SHE policy ISO 18001-2000 for occupational safety and health hazards  7 Products Caustic Soda Group Caustic Soda Flakes (NaOH) Caustic Soda Lye (NaOH) Caustic Soda Prills (NaOH) Sodium Hypo Chlorite (NaOCl) Liquid Chlorine (Cl2) Compressed Hydrogen Gas(H2) Hydrochloric Acid (HCL) Caustic Potash Group Caustic Potash Flakes(KOH) Caustic Potash Lye (KOH) Potassium Carbonate(K2CO3) Chloromethane Group Methyl Chloride (CH3Cl – Mono chloromethane) Methylene Chloride (CH2Cl2 - Dichloromethane) Carbon Tetrachloride (CCL4 - Tetra chloromethane) Chloroform (CHCL3 - Trichloromethane) Sodium Group Sodium Cyanide (NaCN) Sodium Ferro Cyanide (Na4Fe(CN)6 : 10H2O) Hydrogen Peroxide Group Hydrogen Peroxide (H2O2) Bleachwin (Special Grade Hydrogen Peroxide Package) Phosphoric Acid Group Phosphoric Acid (H3PO4 Technical Grade) Calcium Chloride Flakes (Cacl2) Calcium Chloride Powder (Cacl2) Others Dilute Sulphuric Acid (H2SO4) Scalewin (Water Treatment Chemical) Aluminum Chloride Anhydrous (ALCL3) New Products Poly Aluminum Chloride 8 PRODUCT DISCRIPTION 9 Product 1) Caustic soda flake : Application - dyes and pharmaceuticals - Pump and paper - Rayon - Aluminum metal - Acid neutralization - Sodium salts - processing of vegetable oil - Petroleum products - Rubber chemical 2) Caustic soda lye : - dyes and pharmaceuticals - Pump and paper - Rayon - Aluminum metal - Acid neutralization - Sodium salts - processing of vegetable oil - Petroleum products - Rubber chemical 3) Sodium cyanide : - ore extraction silver and gold, metal and Mining - Industries dyes - Agrochemicals - electo plating - Mortal cleaning 4) Sodium Ferro cyanide : - photography - dyeing industry - Blue print paper - Antic king agent - Bio-chemical processes - Metal and leather tanning industries 10 5) Hydrogen peroxide : - raw material for organic and inorganic Chemical - Dye stuff and pest - Effluent treatment - bleaching agent for pulp, textile, sugar, coin -Tobacco sterilizing agent and aseptic packing. 6) Methyl chloride : - dry stuff industry - Raw material of pesticides - Refrigerant - Drugs and pharmaceutical industry 7) Methylene chloride: - Manufacturing of polycarbonate, phonetics, Rayon yard - Solvent for cellulose acetates - Paint and grease removing agent - For fighting agent - Chemical reaction media 8) Caustic potash lye and flakes : - potassium carbonate - dye stuff industries - Rubber chemicals - Acid neutralization - Potassium permanganate - Other potassium based chemicals Parma industries. 9) Potassium carbonate : - TV picture tubs - GLS lamp and ophthalmic - Glasses - Fertilizers in industries - Rubber chemicals - Pesticide industries - Drug and Parma industries 10) Chloroform : - Fluorocarbon refrigerant and resign - Fire fighting agents 11 - Parma prep - Solvent in dyes and perform - Manufacture - Soil fumigants CAUSTIC SODA AND CHLORINE UTILIZED 12 Caustic soda Utilized Pulp and paper Alumina Soaps, detergents and textiles Organic Inorganic Water treatment Dyes Pharma Other Total India 16 11 28 --10 08 05 22 100 Global 17 9 12 18 15 15 --24 100 Chlorine Utilized Vinyl Organic Water treatment Pulp and paper Chlorinated intermediate Chlorinated Para India 07 07 03 22 13 10 Global 34 19 06 04 07 02 13 Pesticides Pharma End product Other Total 06 03 23 06 100 ---28 100 COMPANY POLICIES PERSONAL POLICY GACL believe that employees are the most valuable assets and the company is committed to their professional growth and development to meet challenge of global competitiveness by 1) Recreating right person for right job 2) Constant evaluation and optimum utilization of employee potent ional 3) Providing opportunity for their growth and development 4) Encouraging employees participation in management 5) Promoting welfare activity for the culture of “parivar” 14 ENERGY MANAGEMANT POLICY A GACL we are committed to minimize the specific energy consumption for our products to international standards through 1) Maximizing the capacity utilization 2) Fire burning our operations and maintenance continuously to achieve the organization goal. 3) Technology up gradation with energy efficient processes and equipments. 4) Motivating training and encouraging our employees to achieve target of reducing specific energy. Consumption by minimum 1% every year till 2010 by employee awareness and incentive program. 5) Promoting the use of natural resources for substantive development natural resources for substantive development safeguarding and society and protecting the environment. I.T. POLICY Preamble: It is no longer just a computing tool by an undependable intelligent assistant providing through and adding decision making in day to day business activities to be at the present of the business environment, GACL setup its management information services department to identify develop and implement its requirement OBJECTIVE: Bring a change in attitude of employees and make them it literates to meet the challenges in the present business scenario. Provide an easy of use exp system to tap reliable information for decision making provide the confidentiality and privacy in key. IT enable to business processes provide LAN and WAN facilities to avail the speed of e-communication provide protection against mendacious codes and formulate a plan for guide recovery in case of a disaster disability the system. THE VISION: 15 To continue to be identified and recognized as a dynamic, modern and ecochemical company with enduring ethics and values. friendly THE MISSION: To manage our business responsibly and sensitively, in order to address the needs of our Customers & Stakeholders. To strive for continuous improvement in performance, measuring results precisely, and ensuring GACL's growth and profitability through innovation to demand from ourselves and others the highest ethical standards and to ensure products and processes to be of the highest quality QUALITY POLICY GACL aims to be a market leader by: 1. 2. 3. 4. Providing best quality products. Always delivering on time. Continuous review and up gradation of system. A strong commitment to preserve the environment. TRAINING AND DEVELOPMENT POLICY: It will be companies endeavor to recognize the value of its HR for their growth the company is committed to provide adequate opportunities to employees to enrich their knowledge, skill and 16 attitudes contributing to steady growth of the company and feeling proud of working for the company. By methodically identifying needs for employees to upgrade their knowledge sharpen skills and improve attitudes for improving performance at their present and future functions and imparting search training to employees after assessing their capabilities and potential. SAFETY, HEALTH AND ENVIRONMENT POLICY (SHE): They are committed to ensure safe, Health and clean environment to their employees and the society. Though: 1. a) b) 2. a) b) Selection of state of art environment friendly technology for our manufacturing Processes To minimize west and emissions To conserve natural resources Pro-active SHE management system so as to Fully comply with standard laid down by legislation and regulation Provide a framework to set review and improve Safety, Health and 17 Environment pertaining to safety, health and Environment protection. 3 4 5 Involvement and dedication of one and all employees in SHE performance Revalidation of measures to control hazards by periodic assessment of risk By SHE audits Avoidance of all activities that will have adverse impact on our SHE Performance. Their SHE policy and its performance will be made available peruse. to the and 5 “S” MODELS: 1 Sort Clearly distinguish needed items from unneeded items remove all items from the work place that are not needed for current operation 2 Set in order Arrange needed items so that they are easy to use and liable them so that one can find them and put them away. 3 4 Shine To keep work place swept and clean Standard 18 It is the reasons that exist properly maintain this integrated sort set in order and shine in unfilled whole. 5 Sustain To make a habit of properly maintaining current procedures. 19 HUMAN RESOURCE DEPARTMENT Concept of HR department: 20 Human resource department is the wave of future but in each country HRD is the history of its own and of the Potential divergent futures direction must be recognized. Every human being has a potential to do remarkable thing to enable every person to understand develop and utilize his or her potential, organization should provide a development climate as well as opportunities for such a development. Due to our fighting operation, profit etc. The Human resources are being neglected done the work live of most organization and development agents on this neglected aspects of a potential resources the HRD movement has taken safe. The Above description of HRD was treated as a definition of HRD however recently HRD as continuous process of ensure the development of an employee’s competencies, dynamism, motivation and effectiveness in a systematic and plan way. “HRD may be defined as a system and a process involving serious of activities designed to product behavioral change in the available human resources for a maximization and proper utilization of their competence level as well as their potent abilities for their present or a future role to optimize the organizational performance. HR FUNCTIONS: 1. Job analysis 2. Recruitment 3. selection 4. Orientation 5. training and development 6. performance appraisal 7. promotion 8. transfer JOB ANALYSIS: Job analysis the process of collecting job related information. Such a information held in the preparation of the job description and the job specification. Job description is an important 21 document, which is basically in descriptive in nature and contents a statement of a job analysis which provides both organizational and functional information GACL does not have any specific job description at a managerial level and it is the time condemning proves. They allot a job according to the recruitment and believe that of a specific job is assign practically no one will be ready to accept the other job or activity to be performed. RECRUITMENT: The process of recruitment begins after manpower requirement are determined in terms of quality through forecasting and planning it is the process the identifying the source of prospective candidates and stimulate them to apply for the job in the organization. GACL adores basically two source of manpower. 1 2 Internal source External Source In internal source, transfer and promotion of other section of the organization and fill the vacancies the transfer may be helpful and avoiding the replacement, job enrichment, shift changes and removing individual’s grievance. As far the external sources concerned vacancies are filled through 1 2 3 4 Advertisement Employee recommendation Recommendation of the trade union and Government employment agencies Procedure of the recruitment in GACL:     Identify the recruitment, scrutinize it and obtained the MD’s approval Issue Office order regarding creation of post Prepare the advertisement draft Receive application and classify them 22  Verify the rejected application against its norms. SELECTION: Selection is the process of individual (out of a pool of job applicants) with requisite qualification and competence to fill the job in the organization the selection is the process of ascertain in whether or not the selected candidates possess the requisite qualification, training and experience require. Process of Selection in GACL:  Obtain a Manager’s approval for the nomination committee for a different grade  Decide data and time of interview, issue call letter in a prescribed form of candidate  Prepare a candidate’s bio-data for the time of interview.  Verify certificate and testimonial at the time of interview and  Conduct a test interview.  Obtain list of selected candidates verify antecedent from by sending them to public and previous employer prepare a prescribed appointment and dispatch  Issue copies of appointment letter and joining letter to the concern. ORIENTATION: Orientation, also called induction is designed to provide a new employee with the information he/ she needs to functions comfortably and effectively in the organization. Orientation is the 23 technique by which a new employee is re-habilited in to the changed surrounding and introduction to the practices, policies and purpose of the organization. The process of orientation in GACL is carried out by the way that newer shown time of arrival, place of reporting work, he meet boss and boss welcomed him and he should complete administrative work and then introduced to the department and then, job introduce to the whom he should looked for held when he has any problem. GACL completely believe in a socialization of employee with the friendly culture of the organization at the time of orientation. TRAINING AND DEVELOPMENT: Trainings refers to the process of importing specific skills development, refers to the learning opportunities designed to have employee’s growth There are three types of training to employees of GACL like : 1 2 3 1 2 3 Technical / functional Behavioral / general ISO related Determine the training needs objectives Translate them into a program that meets to needs of the selected trainee Evaluate the results. For an effective training PERFORMANCE APPRAISAL: Performance appraisal done every year in the month of January and for this, forms are sent to various departmental heads in the month of December. It is compulsory for all employees irrespective of their categories i.e. whether they are in management category i.e. whether they are in management category or non-management category based on such system. 24 Department head takes the appraisal meeting annually together with the employee and after discussion they fill the forms. Performance appraisal is an essential management activity it is a necessary for all important decision making meeting relating to people such as placement and promotion rewords or punishment, training as well as long term planning of the organizational development. Performance appraisal however employees are performing their duties and meeting their job responsibility In GACL performance appraisal is implemented for the following objectives: 1 2 For a providing feed back to the employee about their performance levels, this serves them for improving and changing their behavior toward effective working habit. For analyzing the strengths and weakness of current employees and identify employee who have the potential of growth and advancement. In a GACL, performance appraisal certificate is provided to the new employee joining the organization after completion their training period. Performance appraisal is the basically for promotion or up gradation. Performance appraisal from after duty filled up by immediate boss and employee in the meeting and it forwarded to top person and it is with a recommendation of immediate boss and give a positive remarks then after it is sent to the HR department read each and every performance appraisal and made positive and negative remarks. Through performance appraisal form they decide promotion for an employee. At a GACL there are various appraisal forms like 1 2 3 Management category Non management category and Security category PROMOTION: Promotion is a upward advancement of an employee in particular job which commands better status and higher challenges, responsibility and authority, better working environment for higher risk. GACL consider employees attendance, seniority, past performance, merit for deciding promotion or up gradation of certain post. 25 In GACL matter regarding promotion policy discuss in various meeting of department promotion committee which consider performance of individual employee and decide about the promotion whether to give or not. During deliberation of various suggestions are received from members represent management employee. GACL gives promotion  To put the worker in a position were his personal satisfaction and income increase  Increase organizational effectiveness and attract him for competent work for the organization  Promotions are made on the basis of ability, hard work, co-operation, honesty. GACL provide education, training etc.  The managerial level employees are to be given promotion after six to eight year as per their qualification. TRANSFER: A transfer is a horizontal or a lateral movement of an employee from one job, section, department, shift, plant or a position to another place where his salary status and responsibility is the same. It does not involve the promotion other than the movement from one job or a place to another. In GACL, the following reasons/causes of transfer  As a penalty  Transfer as a promotion  In case of injury  Resignation of an employee  Shortage of manpower WAGE AND SALARY ADMINISTRATION Wage and salary are payments made to the employees are compensation for a service rendered by them to the organization. Wage and salary represents a substantial part of total companies from 26 wage and salary policy in such a way, the maximum satisfaction of an employee decided keeping in a view having a standard and need of employee. The wage is paid to the employee who directly engages in the production. The term salary refer to record to be paid to employee make who are engage in clerical and official work which are not direct activity to the production. Determinant of wage and salary  Demand and supply of money  Government’s rule and  Basic qualification and merit  Urgency of a requirement  Surrounding industry TIME KEEPING OFFICE Time keeping office is keeping attendance, leave record of all employee or trainee or apprentice and also looking after the welfare item to be provided to all employee or trainee or apprentice. 27 The function of TKO at CS plant, NSCN plant (Baroda) and PAP complex (Dahej) are on same line. 1) WAGE AND SALARY ADMINISTRATION  Attendance  Posting of various for regularization  Salary statement details for payment of salary or stipends  Canteen coupon amount deduction from canteen allowance payment  Leave record  Supply of contract labour as and when required by different department  To fill up various under various industrial law  Issue of show cause notice 2) WEL FARE  To look after canteen facilities  Uniforms  Safety items  First aid box  Sports  General activities 3) GENERAL ACTIVITIES OF THE TIME OFFICE  Arrangement of the function  Distribution of silver medals for a long service award  Distribution of various gift on various occasions  Forwarding medical bills issue of registration number for a long term cause  Arrangement for medical treatment in case of accident in plant premises  Casual contract workers  Preparation for disciplinary action proceeding TIME SHIFTS 8:30 AM TO 5:15 PM General 28 6:00 AM 2:00 PM 10:00PM TO TO TO 2:00 PM 10:00 PM 6:00 AM First Second Third EMPLOYEE SERVICE: 1 Canteen facilities: GACL provide canteen facilities to all its employees. All employee get coupon of Rs. 46/p.m. the person who does not avail the canteen facility where the allowance of Rs. 630/p.m. 2 Bus Facilities: Company provides bus service to their employees. They can pick the bus at A Certain selected points. 3 LIC policy: The employees are given LIC per 2 years it is calculated on basic pay. Cycle Allowance : 150/- p.m. 4 Educational Allowances : The company also helps the employee for educating their children by providing some amount for their uniform, notebook as well as school fees. 5 Food grain advantage : The employee are given some money in advance to purchase food grains in season  Management category : 3500 per year  Non management category : 3000 per year 6 Convenience Expense : The employees who do not take company’s transport service and use their personal vehicle are given convenience expense. 7 Medical Allowance : The company gives different type of facility and its employee it provide free payment checkup and also provide allowance of Rs 500/- to its employees. 29 8 Loans : The company provides some loans to the employee  Housing building loan  Vehicle loan  Car loan SALARY STATEMENT DETAILS FOR A PAYMENT OF A SALARY  Attendance statement : 11th to 10th : 11th to 10th  Overtime statement (OT hours)  Shift allowance statement  Canteen allowance : 11th to 10th : monthly LEAVE RECORD / NATURE OF LEAVE  PL working of 11 days  CL yearly  SL yearly  Accident leave  Special leave  Leave for a spot : 1 day : 12 days : 10 days : minimum 1 day and maximum 90 days or It may extend of approval of M.D. : 6 days leave for a family planning in case of Wife / employee self undergo for operation. : As per Mgt. approval as and when require for a participate in tournament  Short Leave : two hours in a calendar month for a one time LEAVE FOR TRAINING:  PL after one year : 15 days 30  CL and SL : every 36 days 1 day LEAVE FOR APPRENTICE:    PL CL SL : Nil : 12 days : 15 days GENERAL INSTRUCTIONS: All the leaves must be applied on a leave card only accept short leave, must be applied in a short leave form. All employees / trainees / apprentices punch their own punching card while coming in and out from plant / office. Various forms available in the time office  Outgoing sleep form  Attendance certificate form  Outside duty form  Overtime claim form  Outside overtime performance form  Convenience allowance form  Accident form  One day’s salary deduction  Benevolent fund form  Nomination for a graduate  Nomination for a provident fund  Nomination for a Gratuity  Transfer of provident fund amount WORKING OF E.S.I. SCHEME: 31 The employee state insurance scheme is nothing but the scheme which regulate under the government act 1948, this act is to introduce certain facilities to the employees to cause of sickness industry and may other relation compensation this scheme has not adopted by GACL because the company pay medical allowance to its employee and company also cover the insurance contract with LIC which applicable to them. According to the employee state insurance act, 1948, employee it extent to the whole India including the state of Jammu and Kashmir the insurance scheme contend in the act has up till death been applied to a selected industries in a certain selected by amendment of 1960 to 1991. all contribution paid and money received by the employees state insurance corporation are to be paid on to hand called employee state insurance scheme and contribution are to be paid on to hand called employee state insurance fund. PROVIDENT FUND SCHEME: The provident fund scheme is a king of financial security of employee. After recruitment of employee, they have to contribute a certain amount of money from their pays wage and salary. The company also contribute equal amount in respect of each employee toward provident fund scheme in every month. The present prevailing provident fund contribution is 10% of the basic pay plus D.A. maintain equal contribution is being made by the company as share of each employee which include contribution toward fund for family person. After deducting this fang company shall credit at to the employee’s individual account, the board of trustee shall credit to member in own contribution account. TASK OF ADMINISTRATION DEPARTMENT 32                          Furniture purchase Maintenance work Bill of telephone Procurement of steel and wooden furniture and stationaries Service required to GACL house Payment of all bill Housing loan and vehicle loan Booking of hotels, railway, air Function arrangement AGM / Diwali functions, photographs Mail from post office to plants Cellular phone activation Government liaison work Arrangement of donation Preparation of a sign board Advertisement in a news paper Membership with institution / clubs Procurement of books, magazine, videos Exhibition Repairing of lift Maintain of dead stock register Printing of office stationary Invoice received from marketing department Computer work and office work Xerox, etc. 33 QUALITY CONTROL  Check RM Quality in process centers & finished goods whether they are as per specification of not than only are accepted samples are analyzed to check the quality.  Incase of finished goods if they are approved then only warehouse say they are ready for dispatch.  Department head than conveys the interpretation of analysis done to the respective process dept. Lab technician maintain eqpt, he collects the samples from respective stores than analysis & tests the sample according to the specification given by the purchase & inventor. Section in charge does instrument calibration i.e. solution preparation & sees whether the same results it obtained using standard material. Then dept. head approves it that everything is as per specified. Shift head looks after all general activities, i.e. practical which include all test conducted & administrative work. Function of QC dept. is to give remark but action is not their authority. It is done by the inventor but their remaining is having weight age. It in process anything happens then control room takes in-charge of it. Instruments used for testing are as follows:  Auto type writers  PH meters  Ministry meters  Special photo meter  HPCL 34  Gas chromatograph  Total carbon analysis Responsibilities & Authorities of HOD (MKT) The responsibilities & authorities of HOD (MKT) are defined in quantity manual of company  Department In-charge 1. Co-ordinate the overall activity of marketing dept. 2. Entirely into contract or re-new contract with sales represented/transporters based approvals. 3. Discussion, negotiation, entering into contract with customers.  Product in-charge : (Product in charge is a change who looks after marketing and sales of any particular finished product he can be Dy. Manager, senior sales officer, sales officer, and assist. Sale officer). 35 36 STORES INVENTORY MANAGEMENT The raw material are stored in the stores section, GACL is manufacturing 26 products. Raw materials of all the products are stored in the stores section there is no specific storage section facility required for the materials. General spares and include all the mechanical electrical process instruments. While the trucks full of goods enter the gate following documents are enclosed; 1. Challan 2. lorry / railway receipt 3. excise, moderate gate pass (I G P) These documents are issued against purchase order to the supplier. After goods inward goods receipt voucher inspection is done, RM is checked by the engineers. They are verified according to the Challan given by the supplier, Quantity is checked and measured. Then comes GRV approve, i.e. if RM are as per specification then are stored in the stores section. If any RM is rejected the reject voucher is prepare, in case of materials, being not as per specified then they are returned so material return voucher is prepared similarly materials issued to the respective plants than goods is note CGIN is prepared. Selling of scrap materials is also done, they are disposed from the plant after shut down and are sold by the stores section mineral state transport corporation (MSTC) is dealing with purchase and sale of scrap of scrap goods to which it is charging 3.306% commission from GACL on scrap realization. PROCESS OF STORES: 37 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Requirement of plants & dept. Indent by purchase Receive material from party Checking of material Make inward and goods receive voucher Properly arrange material for inspection Material inspection by the engineer or senior officer Sign by the engineer on a GRV Put a material on its location Issue a material as per the requirement of plants and departments. GACL follows ABC analysis for the Inventory Management: ABC analysis is used for the management of inventory at GACL. The raw materials are classified as A, B and C on the basis of the cost of the raw materials. The raw material whose cost is more are categorized under. A category and the other raw materials are categorized under B and the packing materials are categorized under C category. There are five raw materials under A category at GACL the classification of raw material is as under. ABC CLASSIFICATION OF RAW MATERIAL OF GACL:  “A” items: Salt Barium Carbonate Soda Ash Sodium Bisulphate Alfa Cellulose Sulpharic Acid “B” items: 38  Magnafloc/ Fastfloc Sodium Sulphite Sodium Thio Sulphate Ammonium Nitrate Mono Ethylene Glycol Nitric Acid Mono Ethylamine Palladium Catalyst “C” items: HM-HDPE Barrels 200 Liters. HDPE Bags-CSF HM-HDPE Carboys HDPE Bags- KOH Flakes HM-HDPE Drums Furnace Oil Cast Iron Powder Polythene Bags MS Drum Alumina Cryohydrate Powder Sugar Prills Bags Morph line GACL also uses Natural gas as a raw material which is supplied through pipeline from GAIL so it is not included in the ABC list.  E-Tendering 39 The annual rate contracts are finalized electronically so as to cut the cost and save the time. GNFC is the service provider for E-Tendering and is done through a GNFC’s (n) code solution. The suppliers who bid for the tender can directly send there quotation through internet and after receiving the quotation from the suppliers the lowest bidder is issued the contract but since the quantity required by GACL is large so the other bidders are also asked to match there prices with the lowest bidder and then the quantity is distributed among different suppliers. The contract is finalize by a committee in which chief general manger (purchase). Chief financial officer and the executive director (electrical) is member. SETTING OF INVENTORY LEVEL The various inventory levels like minimum stock level, maximum stock level, and reorder level are set through the annualized budget by the top management. Major raw material inventory levels at GACL are: Salt: Potassium Chloride: Rock Phosphate: Minimum 3000 MT Maximum 22000 MT  Minimum 500 MT Maximum 5000 MT  Minimum 3000 MT Maximum 18000 MT These above levels are set annually and are fixed through out the year.  ORDERING OF RAW MATERIAL 40 The Raw material are ordered on receiving an Indent in which the quantity to be ordered is mentioned. The purchase department then place the order on the basis of the indent received and then the order proposal is approved by the committee and then finally the order is placed. COMMITTES FOR APPROVING THE ORDER PROPOSAL: There are different purchase committees for granting purchase approval which are as under:  Purchase of 1 lack to 5 lacks: This committee consists of chief financial officer, deputy general manager (finance), executive director (technical) and chief general manager purchase.  Purchase of over 5 lacks: All the purchases of above 5 lacks are made by a committee consisting of Managing director, chief financial officer, chief general manger (purchase), executive director (marketing).  Purchase committee for Salt GACL is having a separate committee for salt as this the most important raw material and is known as “black gold” in the company. The committee consist of managing director, chief financial officer, executive director (technical), executive director (marketing). DISPATCH DEPARTMENT: 41 In dispatch section, invoice is prepared, other books such as RG 1 register is prepared as the format specified by the company ACT 1956 here, in this register then entry is to made for the production of everyday and dispatch made for the day everyday physical stock taking of finished goods should be matched with the stock of finished goods in daily stock of account. I.e. RG 1. Similarly lodger account is to prepared at the company makes payment of duty consignment arise or by making though deposit in bank & taking credit of the same in the account called personal ledger account when and company OPD to make payment through account current i.e. PLA, it has to make deposit in advance in the corporation bank for the period for which the payment is not made daily production report is also generate from dispatch section and is availed work through physical check-up. SAFETY GADGET 42 Personal protective equipment: 1. head protection 2. Eye protection : :-Safety helmet -safety goggles -Welder’s goggles -Chipper’s goggle 3. Face protection : -face shield -welder’s goggles/face shield -acid and alkali proof hood 4. hearing protection : -Ear plug, Ear muff -canvas hand gloves -canvas, leather hand gloves -asbestos hand gloves -rubber, PVC, surgical hand Gloves 6. Body protection : -cotton aprons and -cotton boiler suit -PVC neck -Asbestos suit 7. foot or leg protection : -Asbestos suit -safety shoes -gum boots 8. respiratory protection : -full gas mask with canister (for HCN, chlorine, acid gases and organic vapors) -Half face mask with filter and risk face mask. -Air tube and air cylinder -Dust mask on the air respiratory protection with full face gas mask proof tube for compressed air self contained breathing Apparatus With full 5. hands and fingers protection : 43 9. protection from falling : -safety belt 44 45 MARKETING DEPARTMENT Product Planning: The competitive pressure levers to the displacement of existing products and free management to look ground for alternative source of income through the development of new products to replacing existing procedure or through diversification and extension of the produce line itself such an approach to product development is generally called product planning. Product planning is done every years as per needs company has its own research and development department. By this department company also take so many decisions about selling and manufacturing of products. Destination for Export Australia China Indonesia Morecious South Africa Thailand Zimbabwe Spain Philippines Singapore Belgium Kenya Netherland USA UK Egypt Brazil Hong Kong Malaysia Nepal Sri Lanka Bangladesh Japan Canada Because of the large demand of caustic soda and law level of supply the government decide to produce caustic soda per annum. The location of the plant decided at Baroda keeping in a view, the availability of infrastructure and also convenience transport facility. At this time the production of chlorine and hydrochloric acid also increase. Initially the old technology of mercury is adopted by GACL. GACL’s latest technology helps company to manufacture mercury free product in India. PRODUCT ANALYSIS Sr.no. Name of the Product Product consumption/sale s place 46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Caustic soda lye Caustic soda flakes Caustic soda Prills Liquid chlorine Hydrochloric acid sodium hypo chloride compressed hydrogen gas dilute sulpharic acid aluminum, chlorine, anhydrous chlorinated paraffin wax sodium cyanide sodium Ferro cyanide caustic potash lye caustic potash flake potassium carbonate methaline chloride Chloroform carbon tetrachloride phosphoric acid calcium chlorine powder hydrogen peroxide bleach win scale win Poly Aluminum Chloride main √ √ √ √ by product own √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ customer √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ India √ both √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ MARKET SEGMENTATION: 47 The priority of GACL is to marked its product in such a way the supply and demand of homogenous and heterogeneous pattern informally more popular as most of its products are organic and inorganic chemicals when every products are in liquid form the segmentation of market area is decided in such a way that customer are near to main complex of GACL. The products like caustic soda lye, hydrochloric acid, liquid chlorine and hazardous nature are sufficient for its safe handling are taken. It is proffered to have sales as near as possible. Pricing policies: The main aim behind formulating policies of organization is obviously to fetch minimum return. I.e. Best prices of its products while deciding the policies, the producer has to consider the following:  The cost of Raw material  The fixed and variable cost  The administration cost  Marketing cost including commission of distribution channel  The statutory liabilities The above factors play a vital role in determining the prices for demand and supply scenario prevailing in domestic and global market. The prices are decided keeping in a view the philosophy of organization of its export plan Channel of distribution: In the field of marketing channel the distribution indicator routes through which goods and services flow or moves from producers to customers. The route of channel includes the manufacturers and the ultimate cumulative as well as all intermediatories GACL has been gathering all the three channel of distribution as under 48 For large consumer’s public sector like IPCL, GSFC, IFFCO, etc. the company has adopted the zero level channel of distribution where the manufactured goods are sold directly from manufacturer to consumer hence channel of distribution. For medium scale consumer where price negotiation and transportation arrangement payment follow up are regularly requisite and the quantity requisite is not very large GACL has adopted first level of channel of distribution as under. Also top consumer having very small quantity requirement where and availability pays main side in buying decision GACL has been operating through and level of channel of distribution as follows Manufacturing dealer, trader, sub dealer sales In GACL the product are sold out of two ways Through dealers: The company appoints same dealers to sell its products. Such dealers work for the company discovers the customer’s negotiation with them and try to expand the market. They charge some commission for their duties. The company has appointed 15 dealers for the domestic market. Direct contact: The company also enters in to direct contact with other large companies like GSFC , IPCL, IOC , IFFCO, etc. both the parties negotiate with each other directly and if the terms and condition of contract is accepted mutually. Sales promotion: Sales promotion is very vital for any company to increase its sales promotion is mainly done in three ways  Advertisement 49  Samples  Discount GACL’s sales promotion is mainly done by two ways. • • giving sample of product to customer credit facilities up to 30 days Apart from these two mains GACL has no particulars sales promotion policy. The company is striving to makes better one forts great goodwill and maintain good relationship with customers. Advertising: Gujarat Alkalies & Chemical limited company therefore it does not have big advertising system mostly there is not advertising for GACL but sometimes in international market for export of its products new a days GACL has started giving advertisement on website for international business. 50 Main customers of GACL  Indian petrochemicals corporation limited  Indian Rayon Corporation limited.  Indian Oil Corporation limited.  Indian dye staff industry limited.  Indian farmer fertilizer limited.  Gujarat state fertilizer limited.  Gujarat Narmada valley fertilizer limited.  Baroda Rayon corporation limited  Sarabhai group of industry  Transport industry limited.  Hindustan photo time manufacture limited  Hindustan lever limited. 51 Main competitors of GACL  Atul product limited.  Century chemical limited.  Gwalious Rayon & chemical limited  Gujarat heavy chemical limited.  National Alkalies & Chemical limited.  Punjab Alkalies and chemical limited.  Standard Alkalies and chemical limited.  Tata chemical limited.  Saurashtra chemical limited.  Punjab national fertilizer & Chemical limited. 52 53 FINANCE DEPARTMENT INTRODUCTION: Finance is one of the most important functions of the firm. It is a managerial activities concerned with planning and controlling the finance resources of the firm. It is considered as a like of an organization. In short it is concerned with procurement of fund and effective utilization of the business. In simple words, financial management means rising of adequate funds, minimum cost and using them effectively in business, in other words, financial management is concerned with the financial problem of the business organization. It concerned with the problem of raising finance to established, expand and modernize business unit, problem of providing, fixed and working capital problem at distribution of income, etc. According to the soloman, “financial management is concerned with the efficient use of imported economic resources namely capital.” Hoagland said, “Financial management is concerned mainly with such a matter as lower business corporation raise its finance and how it make use of it.” The manager is interested in this function because it is a crucial division of a firm and understanding theory of financial management provide them with a conceptual and analytical sign to make a division. Financial management involves the objective regarding management of working capital, dividend distribution and finance account. Thus financial management does not stop procuring the required finance, it has also to see that it is a effectively utilized in the business. It is concerned with the maintaining adequate funds on hand to meet the expenses of both revenue and capital nature. 54 FINANCIAL PLANNING: Financial planning means planning of the procurement of funds from financial institution or a general public. Financial planning involves the following steps:  Determining the firm’s past performance as certain to the relationship between various financial variables and its financial strengths and weaknesses.  Determining the firm’s operating features. i.e. product, market condition and competition, production, marketing policies, control system, operating risk.  Determine investment made its growth objectives and overall business strategy.  Forecasting the firm’s revenue expenses and firm’s requirement based on its policy of investment and dividend payment.  Analysis of financial alternative with its financial plans for the long-term health and survival of firm.  Analysis of financial alternative with its financial policy and deciding appropriate time for raising the funds.  Evaluating the consistency of financial policy with regard to each other and vice-a-versa the business strategy. Financial planning is generally concerned with the long term growth profitability and financial decision. Financial management includes the following planning:  Procurement of fund  Application of fund  Dividend policy  Types of issue and  Working capital 55 CAPITALIZATION: The word capitalization can be defined as some of all kinds of long term securities at their par value thus it can be interested at the some of the ownership capital bonds and other long term debts and the surplus it consists of  Owner’s capital: the value of shares of a different class.  Borrowed capital : the value of bonds and debentures  Surplus: the value of surplus i.e. accumulated profit whether of revenue. The capital nature surplus of its profit earned by the company over no. of year are written in a business to meet the long term financial requirement in the names of various results a. Over capitalization b. Under capitalization The over capitalization is the situation in which the funds are accumulated more than its requirement and the under capitalization is the situation in which funds are accumulated less than its requirement. GACL is having over capitalization situation from last two years, in GACL capital is less than loans and fund means greater availability of fund, company has to pay more interest. 56 CAPITAL STRUCTURE: The capital structure is the vital aspect of financial management, it represents relations between the terms of a financing like debentures, long term loans, preference shares equity share and reserve. Thus optimum structure is obtained when the market value per share is changed as change in the capital structure of the company in every year. GACL’s main sources of capital are:  Equity share capital  Debentures  Loan from bank  Loan from institutions Liabilities Equity share capital Reserve and surplus Debentures Secured loan Unsecured loan (Rupees in Lakhs) 31.03.2007 7343.84 81503.84 ----------22497.97 17564.65 31.03.2006 7343.84 64963.50 2040.73 35142.02 10077.58 Management is the fixed assets which are maintain and operated for a long period of time, like plant, machinery, building, etc. They are depreciating yearly as a fixed rate and a presize method for calculated depreciation which is adopted by the company. CAPITAL BUDGETING: 57 Capital budget is the plan intended activities expressed in monitory terms for a specified period of time, it also provided for a resources needed for budgeting goals. It is a very important weapon for profit planning and financial management of a company. Capital project are prepared annually which mainly discuss in the account of a production as per the policy, rules and decision taken by the management. Statement of fixed assets Sr.no. Fixed assets Owned assets Free hold land Lease hold land Buildings, roads and culverts Plant and machinery Furniture, fixture and equipment Vehicle Lease Assets Plant and Machinery Capital Expenditure Power, water and service Total Gross block 31.03.2007 1. 2. 3. 4 5. 6. 7. 8. 102.75 282.08 9605.30 176195.92 976.35 157.60 3895.23 1743.81 192923.04 Depreciation 31.03.2007 0.0 0.0 1709.30 84528.33 573.56 32.32 2244.05 835.81 89923.37 Net block 31.03.2007 102.75 282.08 7896.00 91667.59 402.79 125.27 1615.18 908 102999.68 RATIO ANALYSIS & INTERPRETATIONS INTRODUCTION Ratio analysis is a powerful tool of financial analysis. A Ratio defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things in financial 58 analysis. A ratio is used as a benchmark for evaluating the financial position and performance pf a organization. The absolute accounting figures reported in the financial statements do not provide a meaningful understanding of the performance and financial position of a organization. An accounting figure conveys meaning when it is related to some other relevant information. For example at Rs 5 core not profit may look impressive, but the firms performance can be said to be good or bad only when the net profit figure is related to the firms investments. The relationship between to accounting figures, expressed mathematically is known as Financial Ratio. Ratios help to summarized large quantities of financial data and to make qualitative judgment about the firm’s financial performance. The grater the ratio, the greater the firms liquidity and vice versa. The point to note is that ration reflecting a qualitative relationship helps to form a qualitative judgment. Such is the nature of all financial ratios. Formula’s used for Ratio Analysis LIQUIDITY RATIOS CURRENT ASSETS CURRENT RATIO = CURRENT LIABILITIES CURRENT ASSETS INVENTORIES QUICK RATIO = CURRENT LIABILITIES TURNOVER RATIOS SALES ACCOUNTS RECEIVABLE TURNOVER RATIO = CLOSING DEBTORS 59 INVENTORY TURN OVER RATIO ASSETS TURN OVER RATIO = = COGS AVERAGE INVENTORY SALES TOTAL ASSETS PROFITABILITY RATIOS NET PROFIT MARGIN RATIO = EBIT EARNING POWER = TOTAL ASSETS NET PROFIT RETURN ON EQUITY = EQUITY OR NET WORTH NET PROFIT SALES LEVERAGE RATIOS TOTAL DEBT DEBT – EQUITY RATIO = NET WORTH TOTAL DEBT DEBT – ASSET RATIO = INTEREST COVERAGE RATIO = TOTAL ASSETS EARNING BEFORE INTEREST &TAX INTEREST Quarter on Quarter Ratio Analysis of GACL LIQUIDITY RATIOS June September December Quarter March Quarter 60 Quarter Quarter Current Ratio 2003-2004 2004-2005 2005-2006 2006-2007 Quick Ratio 2003-2004 2004-2005 2005-2006 2006-2007 TURNOVER RATIOS Accounts Receivable turnover ratio 2003-2004 2004-2005 2005-2006 2006-2007 Inventory turnover Ratio 2003-2004 2004-2005 2005-2006 2006-2007 Assets turnover ratio 2003-2004 2004-2005 2005-2006 2006-2007 PROFITABILITY RATIOS Net Profit margin ratio 2003-2004 2004-2005 2005-2006 2006-2007 Earning power 2003-2004 2004-2005 2005-2006 2006-2007 Return on equity 2003-2004 2004-2005 2005-2006 2006-2007 LEVERAGE RATIOS Debt-equity ratio 2.82 2.02 1.91 1.62 2.26 1.67 1.56 1.32 2.32 2.20 2.11 1.51 1.91 1.76 1.73 1.24 2.15 2.37 2.15 1.63 1.72 1.96 1.71 1.32 2.54 2.62 1.86 1.72 2.10 2.18 1.54 1.42 1.65 1.88 1.50 1.65 3.86 3.43 2.94 2.53 0.19 0.21 0.21 0.17 1.91 1.84 1.51 1.74 4.46 3.77 2.64 2.71 0.21 0.23 0.19 0.19 1.85 1.74 1.50 1.80 4.03 3.79 2.32 2.42 0.21 0.26 0.17 0.18 1.84 1.98 1.68 1.79 3.56 4.36 2.34 2.13 0.20 0.29 0.17 0.17 2.97% 3.84% 22.19% 15.18% 2.57% 3.06% 6.52% 3.70% 2.19% 2.48% 10.45% 5.56% 5.77% 11.69% 21.06% 16.67% 3.28% 5.66% 5.69% 4.40% 4.49% 7.92% 8.69% 6.55% 5.78% 14.37% 18.85% 16.70% 3.45% 7.59% 3.94% 3.91% 4.47% 9.78% 7.04% 6.10% 8.54% 12.21% 10.03% 12.75% 3.08% 10.38% 4.31% 3.67% 5.64% 8.89% 3.74% 4.38% 61 2003-2004 2004-2005 2005-2006 2006-2007 Debt-Assets Ratio 2003-2004 2004-2005 2005-2006 2006-2007 Interest Coverage Ratio 2003-2004 2004-2005 2005-2006 2006-2007 2.61 1.60 0.69 0.52 0.66 0.52 0.30 0.25 1.77 2.17 8.20 7.20 2.29 1.41 0.58 0.47 0.62 0.48 0.27 0.22 2.03 4.70 6.73 8.03 2.17 1.14 0.61 0.44 0.59 0.43 0.29 0.22 2.47 7.24 7.28 5.60 1.88 1.00 0.65 0.45 0.56 0.39 0.29 0.22 2.09 12.56 8.64 8.33 62 Interpretation of Quarterly Ratios of GACL Current Ratio Current ratio of GACL is always greater than 1.5:1 which shows the sound liquidity position of the company. The current ratio has come down from 2.82:1 in June quarter 2003 to 1.72:1 in March quarter 2007 and the main reason for this is to reduce the idle investment in current assets. Quick Ratio A Quick ratio of Greater than 1 is good sign for the company and if we look at the quick ratio of GACL it has always been much higher than 1. The quick ratio of GACL has improved from 1.32:1 in December quarter 2006 to 1.42:1 in March Quarter 2007 which is a good sign for the company. Accounts Receivables Turnover Ratio Accounts receivables turnover ratio of GACL is consistently increasing for the previous seven quarters which shows the effective collection effort and steps taken by the company for the realization of sales. The Ratio is 1.79:1 in March Quarter 2007 as compare to 1.80:1 in the previous quarter. Inventory Turnover Ratio Inventory Turnover Ratio of GACL has decreased from 2.42:1 in December quarter 2006 to 2.13:1 in the March Quarter 2007 and the main reason for this is the reduction in the cost of goods sold and increase in the inventory. Asset Turnover Ratio The asset turnover ratio of GACL has been consistently varying from 0.21:1 to 0.17:1 in the seven quarters. During the financial year 2004-2005 the ratio has gone up to 0.29:1 and the reason was tremendous increase in sales other wise the ratio tends to vary from 0.21:1 to 0.17:1 constantly. Net Profit Margin Ratio 63 The Net Profit Margin ratio is fluctuating during the last quarters for GACL. The ratio has gone down to 12.75% in March quarter 2007 from 16.70% in the previous quarter the main reason for this is the increase in the cost of production. Earning Power The Earning Power ratio of GACL has decline in the March Quarter 2007 due to the decline in EBIT. The ratio has decreased to 3.67% in March quarter 2007 from 3.91% in the previous quarter. The reduction in sales is and increase in the cost of production are the reason for this decline and the ratio can be improved by increasing the sales and cutting down the expenditure and thereby optimizing the return on assets. Return on Equity Return on equity of GACL for March quarter 2007 has declined to 4.38% from 6.10% in the previous quarter due to the decrease in the Net profit. Debt-Equity Ratio The Debt-Equity Ratio of GACL is consistently declining over last quarters. The reason for this is the debt restructuring which has been undertaken by the company. The Debt- Equity ratio of the company was 0.45:1 in March quarter 2007 as compare to 0.44:1 in the previous quarter. Debt-Asset Ratio The Debt-Asset Ratio of GACL is also consistently declining as the debt in the capital structure is reducing over the past quarters. The ratio is same at compare to the December quarter 2006. 0.22:1 in the March quarter 2007 as Interest Coverage Ratio The interest coverage ratio of GACL has improved to 8.33:1 in March Quarter 2007 from 5.60:1 in the previous quarter This Shows that the earnings of the company are still 8 times more than the interest obligations. 64 RATIO ANALYSIS OF GACL AND OTHER COMPANIES LIQUIDITY RATIOS Current Ratio 2002 2003 2004 2005 2006 Quick Ratio 2002 2003 2004 2005 2006 ATUL GACL DCW LTD. LTD. LTD. 3.85 2.44 0.96 2.90 2.07 1.26 3.14 1.65 1.24 2.50 2.79 1.38 2.47 1.94 1.44 ATUL GACL DCW LTD. LTD. LTD. 2.55 2.00 0.39 1.81 1.75 0.58 2.10 1.38 0.54 1.60 2.34 0.82 1.48 1.62 0.69 TURNOVER RATIOS Accounts Receivable turnover ATUL GACL DCW ratio LTD. LTD. LTD. 2002 2.67 4.93 15.99 2003 2.87 5.63 16.95 2004 2.63 6.20 17.10 2005 3.31 5.74 15.83 2006 3.74 7.36 13.46 Inventory turnover Ratio 2002 2003 2004 2005 2006 Assets turnover ratio ATUL GACL DCW LTD. LTD. LTD. 0.85 3.76 1.98 0.81 3.72 2.11 0.82 3.68 1.97 1.04 3.49 2.18 1.09 3.34 1.66 ATUL GACL DCW LTD. LTD. LTD. 2002 0.80 0.62 1.43 2003 0.85 0.73 1.60 65 2004 2005 2006 0.80 0.95 1.03 0.77 0.91 0.66 1.66 1.66 1.19 Net Profit margin ratio 2002 2003 2004 2005 2006 Earning power 2002 2003 2004 2005 2006 Return on equity 2002 2003 2004 2005 2006 LEVERAGE RATIOS Debt-equity ratio 2002 2003 2004 2005 2006 Debt-Assets Ratio 2002 2003 2004 2005 2006 ATUL GACL DCW LTD. LTD. LTD. 2.85% -4.48% 2.66% 6.85% 2.74% 1.59% 0.55% 5.88% 2.95% 2.40% 11.27% 2.62% 9.34% 18.10% 3.88% ATUL GACL DCW LTD. LTD. LTD. 8.33% 5.75% 7.36% 11.36% 10.51% 6.84% 4.01% 12.55% 6.56% 5.53% 23.51% 5.84% 13.88% 20.38% 7.37% ATUL GACL LTD. LTD. 6.72% -12.45% 15.64% 8.80% 1.26% 16.51% 9.18% 26.63% 29.78% 27.38% DCW LTD. 8.15% 5.51% 10.46% 9.55% 11.32% ATUL GACL DCW LTD. LTD. LTD. 1.28 3.14 0.24 0.99 2.78 0.26 1.08 2.01 0.22 1.85 1.00 0.33 1.26 0.65 0.54 ATUL GACL DCW LTD. LTD. LTD. 0.43 0.70 0.11 0.37 0.63 0.12 0.38 0.55 0.10 0.46 0.38 0.15 0.41 0.29 0.22 66 Interest Coverage Ratio 2002 2003 2004 2005 2006 ATUL GACL DCW LTD. LTD. LTD. 1.45 0.68 2.24 2.32 1.56 2.79 1.35 2.01 5.06 1.88 5.37 6.10 3.95 8.26 6.14 Interpretations of Ratio Analysis of GACL & Its competitors LIQUIDITY RATIOS CURRENT RATIO Current Ratio 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. The Current Ratio is a measure of the firm’s short term solvency. It indicates the availability of current assets in rupee for every one rupee of current liability. A Ratio of greater than one means that the firm has more current claim against them. Current ratio Between 1.5:1 to 2:1 is good for a company. GACL’s ratio for the year 2006 was 1.94:1 as compare to 2005 it was 2.79:1. The current ratio of ATUL LTD was 2.47:1 which indicates idle funds and the current ratio of DCW LTD. is 1.44:1. 67 QUICK RATIO Quick Ratio 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. A company with a high value of Quick Ratio can suffer from shortage of funds if it has large amount of inventory which takes time to get converted into cash. The Quick Ratio of GACL is 1.62 as compare to ATUL LTD. whose is at 1:48 and DCW LTD which has a Quick ratio of 0.69. This shows the healthy liquidity position of GACL in comparison to its competitors. TURNOVER RATIOS ACCOUNT RECEVABLE TURN OVER RATIO 68 Accounts Receivable Turnover Ratio 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. The Analysis of the debtors turn over ratio supplements the information regarding the liquidity of one item of current assets of the firm. The ratio measures how rapidly receivables are collected. A high ratio is indicative of shorter time lag-between sales & cash collection. A low ratio shows that debts are not being collected rapidly. The Ratio of GACL has considerably improved to 7.36 in 2006 from 5.74 in 2005. The ratio of DCW LTD. has decreased to 13.46 in 2006 as compare to 15.83 in 2005 and the ratio of ATUL LTD. has slightly improved to 3.74 in 2006 from 3.31 in 2005. This shows effective efforts and steps which GACL is taking for quick realization of Sales for enhancing the liquidity position of the company. INVENTORY TURN OVER RATIO Inventory Turnover Ratio 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. The ratio indicates how fast inventory is sold. A high ratio is good from the viewpoint of liquidity and vice versa. A low ratio would signify that inventory does not sell 69 fast and stays on the shelf or in the warehouse for a long time. The ratio of GACL is highest at 3.34 as compare to ATUL LTD. whose ratio is at 1.09 and DCW LTD. whose ratio is at 1.66. ASSETS TURN OVER RATIO Assets Turnover Ratio 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. The Assets Turn over Ratio, , measures the efficiency of a firm in managing and utilizing it’s assets. The higher the turn over ratio, the more efficient is the management and utilization of the assets while low turnover ratio is indicative of underutilization of available resources and presence of idle capacity. The ratio of GACL was 0.66 in 2006 whereas for ATUL LTD was at 1.03 and for DCW LTD. was at 1.19 in 2006. GACL should make effective utilization of idle assets which can help in enhancing the liquidity of the company. PROFITABILITY RATIOS NET PROFIT MARGINE RATIO 70 Net Profit Margin Ratio 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% ATUL LTD. GACL DCW LTD. 2002 2003 2004 2005 2006 Net profit is obtained expenses, interested and taxes are subtracted from the gross profit. Net profit margin ratio establishes a relationship between net profit and sales and indicates management efficiency in manufacturing, administrating and selling the product. This ratio is the overall measures of the firm’s ability to turn each rupee sales in to profit. If the net margin is inadequate, the firm will fail to achieve satisfactory return on share holder firm. GACL has the highest net profit margin ratio which is 18.10% as compare to ATUL LTD. which has a ratio of 9.34% and DCW LTD. which has a ratio of just 3.88% in 2006. The net profit margin ratio of GACL is consistently improving over the last years whereas the ratio of ATUL LTD. and DCW LTD are fluctuating. EARNING POWER Earning Power 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% ATUL LTD. GACL DCW LTD. 2002 2003 2004 2005 2006 71 Earning power is the overall profitability of a firm is computed by multiplying net profit margin and assets turnover. The ROA ratio is a central measure of the overall profitability and operational efficiency of a firm. The ratio of GACL is much higher in comparison to its competitors and is at 20.38% in 2006 whereas the ratio of ATUL LTD. is at 13.88% and DCW LTD is at 7.37% in 2006. RETURN ON EQUITY Return On Equity 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. Return on equity how well the firm has used the resources of the owners. In fact, their ratio is one of the most important relationships in financial analysis. The ratio of net profit to owner’s equity reflects the extent which this objective has been accomplish, this ratio is thus a great interest to the present as well as the prospective share holders and also of grate concerned to management, which has the responsibility of maximizing the owner’s welfare. The returns on owner’s equity of the company should be compared with the ratio for other similar company and the industrial average. The ratio of GACL is 27.38% which is higher than DCW LTD. whose ratio is at 11.38% but lower than 29.78% in 2006 but the ratio of GACL is consistently improving over the years whereas as the ratio of competitors are fluctuating. 72 LEVERAGE RATIOS DEBT EQUITY RATIO Debt-Equity Ratio 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. The D/E ratio is an important tool of financial analysis to appraise the financial structure of a firm. It has important implications from the view-point of the creditors, owners and the firm itself. The ratio reflects the relative contribution of the creditors and owners of business in its financing. A high ratio shows a large share of financing by the creditors of the firm; and vice versa. The ratio of GACL is at 0.65:1 in 2006 and has considerably reduced over the last year as the effect of company’s debt restructuring. The ratio of ATUL LTD. is at 1.26:1 and for DCW LTD. it is at 0.54:1 in 2006. This also indicates that the company has to pay less interest and the debt is lower. DEBT ASSETS RATIO 73 Debt-Asset Ratio 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. The Analysis of The Debt Assets Ratio, How so defined, measures the efficiency of a firm in managing and utilizing its assets. Debt refers to the Secured plus unsecured loan funds borrowed by the company. GACL is having debt-asset ratio of 0.29:1 in 2006 whereas ATUL LTD. is having it at 0.41:1 and for DCW LTD. it is at 0.22:1 in 2006. The ratio of GACL is reducing over last year whereas the ratio of competitors is fluctuating and more over the lenders are having very less claim over the asset of the company. INTEREST COVERAGE RATIO Interest Coverage Ratio 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2002 2003 2004 2005 2006 ATUL LTD. GACL DCW LTD. It is also known as “Time Interest Earned Ratio”. This ratio measures the debt servicing capacity of a firm in so far as fixed interest on long term loan is concerned. It is determine by dividing the operating profits or earnings before interest and tax by the fix interest charges on loan. This ratio is used the concept of net profit before taxes because 74 interest is used the tax is calculated of net paying interest on loan. The Ratio of GACL is at 8.26 in 2006 whereas ratio of ATUL LTD. is at 3.95 and for DCW LTD. the ratio is at 6.14 in 2006. the numbers itself shows that GACL is having better Debt servicing in comparison to its competitors. Working Capital Management at GACL Working capital management at GACL starts with setting up the working capital required by the company in the financial year. The amount of working capital required by the company is set by State bank of India. The company has to provide the Income statement and the balance sheet to the State bank of India and after analyzing the financial statements the bank sets the limit of working capital for the company. The working capital is financed by the company through cash credit which is availed from different banks at a lower rate of interest then the prevailing market rates through negotiations. The amount of working capital used by the company in 2007 is Rs.130 cr. Out of which Rs.55 cr. are availed from SBI, Rs.10 cr. each from HDFC, UTI and UCO bank, Rs.15 cr. from CBI, Rs.5 cr. from IDBI and Rs.25 cr. from IB. The amount of working capital has increased from Rs.70 cr. in 2002 to Rs.130 cr. in 2007. The additional funds required for the operations are raised through Short term loans which are taken for a period of 6 months. At present GACL is having Rs.145 cr. of short term loans out of which Rs.120 cr. are financed from GSFS, and Rs.25 cr. are from City Bank. GACL is efficiently managing its working capital through the effective management of Inventory, Cash and Receivables of the company. The payment and collection system of the company also plays an important role in the optimum working capital management of the company. The payments are made through the purchase department in consultation with the finance department 75 and the collection is done by marketing department and the majority of the payments are received through E-Banking which ensures the fast collection of receivables. Statement of working capital: Amount Particular Current assets Inventory Sandry debtors Cash and Bank balance Loans and advances Current liabilities Sundry Creditors Security deposite Advance from customer Interest accrued Investor’s education and protection fund Other statutory liabilities Others Provisions Amount 9549.36 17072.72 3545.18 23529.27 5331.37 838.58 169.05 394.45 38.95 422.25 4089.34 19851.28 7540.86 16061.27 2597.45 17827.15 4901.04 698.67 197.58 43.95 25.12 563.58 4668.55 12579.38 Working capital play very important role in deciding about the expense to incur by the company in a day to day operation. Formula: 76 Working capital = current assets – current liabilities ADVANTAGES OF MAINTAINING WORKING CAPITAL PROFITABILITY Profit is the difference between sale and cost of sale. Greater sale gives greater profitability. Availability of adequate working capital ensures desired level of sales. The term risk refers to probability that affirm will become technically insolvent; it will not be able to meet its current obligations when they are due for payment. When net working capital is negative technical insolvency exists. Greater the Net working Capital is, more liquid the firm is and less likely to become insolvent. The relationship between liquidity, Net Working Capital and risk is such that if either Net Working Capital or liquidity increases, the firm’s risk decreases. Profit is directly related to the volume of sales. Any attempt to increase production and sales will call for higher level of working capital needs. RISK AVOIDANCE An aggressive management tries to reduce the level of working capital in general, and inventory in particular, even when sales are increasing. While on the other hand this effort tends to increase profit and seriously effect the liquidity position. Profitability = 1_____ Liquidity DETERMINANTS OF WORKING CAPITAL GENERAL NATURE OF BUSINESS If the firm is a manufacturing industry or a service based industry: In a manufacturing unit they have to maintain more of raw materials and inventory, which means more of investment, and capital needs. If the business is a service based, then there is less need of working capital. 77 Are the sales on cash or credit basis? If sales are based on cash then there is less need of working capital and if the sale is based on credit then working capital is needed more. PRODUCTION CYCLE This refers to the time involved in the manufacturing of goods. It covers the time span between the procurement of raw materials and the completion of manufacturing process leading to the production of finished goods. During such cycles the funds are locked up in the business. The gap between the time of raw material purchase and the finished goods sale is relevant and the working capital need during this time has to be met, hence production cycles are important. Technological ability also plays a part in the operating cycle determination. BUSINESS CYCLE Business fluctuations also lead to cyclical and seasonal changes which in turn cause a shift in the working capital position, particularly for temporary capital requirements. There may be an upswing or a downswing depending on boom or depression. During upswing the need increases and vice-versa. GROWTH AND EXPANSION As a company grows in size we can imagine that there will naturally be an increase in the capital requirement. But the amount and ratio of increase is not related. Other things being equal growth industries need more working capital than static industries. Advance planning of working capital is, therefore, a continuing necessity for a growing concern. PROFIT LEVEL The level of profit earned differs from industries. Manufacturing industries earn lesser profit if you consider the scale of operations and service industry is in a position to earn more profits as the manufacturing costs are lesser in their case. LEVEL OF TAXES The first appropriation out of profits is payment for taxes. This is determined by the prevailing tax regulations. Taxes are to be paid in advance depending on the level of profit estimated. Increased 78 tax liability leads to an increase in the working capital needs. Tax planning is needed to reduce the tax liability systematically and legally. DIVIDEND POLICY The payment of dividend consumes cash resources and effect working capital to the extent. If the firm does not pays dividend and retains profits the working capital will increase. In theory a firm must retain profits to preserve cash resources and it must pay dividend to satisfy investor expectations. DEPRECIATION POLICY Depreciation is an allowable expenditure in calculating net profits. Enhanced rates of depreciation will reduce the profits and tax liability and therefore lower the cash profits. If current capital expenditure falls short of depreciation provision, working capital position is strengthened and there is no need for short term borrowings. If current capital expenditure exceeds depreciation provision either outside borrowing will have to be resorted to or a restriction on dividend payment coupled with retention of profits will have to be adopted to prevent the working capital position being affected. PRICE LEVEL CHANGES Rising prices will necessitate use of more funds to maintain an existing level of activity. For same level of current assets higher cash outlay will be required. Effect of rising price being that higher amount of working capital will be needed. In case of companies, which can raise their prices, there is no problem. OPERATING EFFICIENCY Management cannot control the rise in prices but they can ensure the efficient utilization of resources of the organization by eliminating wastes and taking out the full utilization of existing resources. Efficient planning and coordination leads to appropriate working capital strategy. Receivables Management at GACL When firm sales goods for cash, payments are received immediately and there for now receivables are created, however, when a firm sells goods or service on credit, payments are 79 received only at a future date and receivables are created. It is an essential marketing tool in modern business trade. Credit creates receivables which the firm is expected to collect in near future. The term receivable is referred to as debt owed to the firm by customers arising from sale of goods or services in the ordinary course of business. Accounts receivables constitutes significant portion of the total current assets of the business after inventories. There should be effective management of receivables to increase the firm’s profitability. For this purpose different credit and collection policy formulated and implemented, under which different aspects such as credit period, credit amount, cash discounts, etc. are taken into great care. While business firms would like to sell on cash basis, they are not always able to do so. They have to resort to credit sales as it helps increase the customer base. It is convenient for some customers who find it difficult to borrow from other sources to pay for the purchase. Credit period ranges from 15-60 days. When goods are sold on credit, finished goods get converted into accounts receivable in the books of the seller. The firm’s investment in accounts receivable depends on how much it sells on credit and how much time it takes to recover the receivables. Almost all the sales in GACL are credit sales and hence receivables management becomes one of the most important factor affecting cash profit. Receivables or debtors are taken care by the marketing department as sales are done by marketing department. Collection Methods at GACL The company has divided the customers on the basis of geographical segments. The company has appointed its employees in each segment and their job is to remind the customer from time to time for the payment of the receivables. The company also send periodic invoice to the customers for prompt payments. Company also has commission agents in some segments. The job of all the employees and commission agents mentioned above is to remind the customers about their payments which are due but the final payment are made directly by customers through cheque or draft. 80 Credit Policy at GACL The credit policy at GACL is framed by the marketing department. GACL gives a credit period of 60 days to its customers. The credit period is revised on quarterly basis in a dealers meeting which takes place every quarter. The customers are evaluated on the following basis for allowing the credit:      Financial Background Past Performance Past 3 Years Turnover Purchase Quantity Market Standing or Goodwill In order to have fast realization of receivables GACL also gives a Discount @ 1.5% for early payment made by the customers. GACL is also implementing advance payments for the 2 of its products which are:   Caustic Soda Flakes Caustic Soda Pills This will help in improving the liquidity position of the company. GACL is also making efforts for the collection of receivables directly through banks i.e. electronic transfer payment which is the fast means of sales realization. 81 Cash Management at GACL Cash is managed at GACL in a very simple way. A monthly statement of Receipts and payments is prepared in which all the receipts and the payments are included. This statement is divided into 3 parts    Revenue Receipts Revenue Payments Financial Payments The first part of the statement is Revenue Receipts in which the collection of sales is included and is taken from the marketing department. The various payments for raw material, energy, sales tax, marketing commission etc are included in the Revenue payment category and these figures are taken from the respective departments. All the Financial payments are included in the third part of the statement and the payments of Interest and capital expenditure is included in this part. 82 Balance sheet of GACL Particulars SOURCES OF FUNDS : Shareholders’ Funds : Share Capital Reserves and Surplus Sub Total/ Net worth Loan Funds : Secured Loans Unsecured Loans Sub Total Deferred Tax (Net) Total Funds Employed APPLICATION OF FUNDS : Fixed Assets : Gross Block Less : Depreciation Net Block Capital Work-in-Progress Net Fixed Assets Investments Current Assets, Loans and Advances : Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Gross working capital Less : Current Liabilities and Provisions Net Current Assets Miscellaneous Expenditure (To the extent not written off or adjusted) 2006-2007 7344 81503 88847 22498 17565 40063 22141 151051 192923 89923 103000 10331 113331 12232 9549 17073 3545 23529 53696 31135 22561 2928 83 Total Assets 161381 Profit & Loss Account Particulars Sales Excise duty Net Sales Total income Expenditure material consumed power fuel & other utilities other manufacturing expenses Staff cost other expenditure EBITDA Depreciation EBIT Interest expenses 2006/2007 117817 16490 101326 104272 31647 13078 11729 6877 4401 67732 36540 8625 24969 3831 84 EBT Tax EAT 23848 7909 15939 Income Statement in the prescribed format Particulars Sales Less: Excise duty Net Sales Add other income Total Income Cost of Sales: Raw material Power fuel expenses Manufacturing Expenses Depreciation Stores and Spares other expenditure Sub total Add Op. WIP Less Cl. WIP Cost of Production Add Op. FG Less Cl. FG Cost of Sales Selling General & Administrative O/H Amount 132172 18504 113668.1 1983 115651 37008 15095 12922 8672 3075 4561 81333 468.409 81801.88 465.97 81335.91 1873.636 83209.55 1863.867 81345.68 7319 85 Total Cost of Sales Profit Before Interest Less: Interest Profit After Interest Less: Provision for Taxation Profit After TAX Dividend Retained Profit Retained Profit/Net profit (%) 88664.52 25003.61 2576 22427.76 9074 13353.57 1001.517 12352.05 0.925 Operating Cycle of GACL from 2002-2007 Particular (A) Raw material storage period (B) Conversion period (C) Finished goods storage period 2006 37.64 1.95 5.98 2007 33.27 1.90 6.93 86 (D) Collection period (E) Payment Period OPERATING CYCLE (A+B+C+D-E) Number of Operating Cycles Raw Material Storage Period 68.68 66.14 48.10 7.48 58.83 55.75 45.18 7.97 The Raw Material Storage Period of GACL has increased considerably during the past few years. GACL’s Storage period is increasing due the the policy of the company to avoid the shortage of raw material so that the production is not affected. As compare to 2006 the storage period has improved to 33.27 days in 2007. This is a good sign for the company as the storage period has improved as compare to previous year. Conversion Period The conversion period is varying between 1.93 days to 1.90 days in past three years which shows the sound production policy of the company. The conversion period of GACL has come improved to 1.90 days in 2007 as compare to 2006 where it was at 1.95 days. Finished Goods Storage Period Finished Goods Storage Period of GACL is consistently varying between 5 to 7 days. The Finished goods storage period has increased to 6.93 days in 2007 as compare to 2006 where it was 5.98 days. GACL is having continuous production therefore the production can not be stopped as it will affect the production of other products. Collection Period The collection period of GACL has improved by 10 days in 2007. the collection period has come down to 58.83 days in 2007 as compare to 68.68 days in 2006. This reflects the sound collection policy of the company so as to quickly collect the sales receipts. Payment Period 87 The payment period has also come down to 55.75 days in 2007 as compare to 66.14 days in 2006. The company is availing discounts offered by the suppliers in for the early payments made by the company. Efficiency of Working Capital Cycle The working capital cycle of GACL has improved to 45.18 days in 2007 as compare to 48.10 days in 2006. The main reason for this is the faster collection of sales receipts and decrease in the storage period. The number of operating cycle ha also increased to 7.97 or 8 in 2007 as compare to 7.48 in 2006. This shows the working capital efficiency of the company. Financial Appraisal GACL has recently taken a financial assistance of Rs. 115 crores for 38 TPD Hydrogen Peroxide Project at Dahej, 75 TPD Poly Aluminum Chloride Project at Dahej and 75 TPD Aluminum Chloride Project at Baroda. The financial assistance is taken from IDBI at the interest rate of 8 % p.a. The total cost of project is Rs.165 Crores out of which Rs. 50 Crores are met through internal accruals. Rs. 108 crores is the total project cost of hydrogen peroxide project at Dahej, Rs. 31 Crores is the total project cost of Poly Aluminum Chloride project at Baroda and Rs. 26 Crores is the total project cost of Poly Aluminum Chloride project at Dahej. Net Present Value Analysis Net present value method is used to know the financial feasibility of the project. The analysis is done in five steps which are as under: Step 1 88 In this first the projected Income and expenditure statement is made in which all the income and expenditure are included so as to calculate the operating profit. The format of income and expenditure statement is as under: Particulars (A) Raw Material (B) Utilities © Power (D) Factory Overheads Repairs & Maintenance Packing Expenses Total (E) Employee's cost Estimated Cost of Manufacturing Administrative Cost Total Cost of Sales Sales Realization Profit before interest & Depreciation Interest Profit before Depreciation Depreciation Operating Profit Step 2 The next step in Net present value analysis is to calculate the projected cash flows. Projected cash flows = Operating Profit + Depreciation Step 3 The next step in the process is to discount the projected cash flows with the cost of capital or the rate of interest at which the loan is raised. The method of discounting is as follows: Discounted cash flow = projected cash flow (1+ r)^n Here n = number of years = Rate of Interest Step 4 The next step is to add the discounted cash flows to get the Present Value of Future Cash Flows. Year 89 Step 5 In this step the Net present value of the project is calculated and if the net present value is positive than the project is approved. Net present value is calculated as under: Net Present Value = Present Value of Future Cash Flows Less: Initial Investment Net Present Value Statement Showing Calculation of Net Present value for 3 projects at GACL : Particulars Initial Investment (A) Raw Material (B) Utilities © Power (D) Factory Overheads Repairs & Maintenance Packing Expenses Total (E) Employee's cost Estimated Cost of Manufacturing Administrative Cost Total Cost of Sales Sales Realization Profit before interest & Depreciation Interest Profit before Depreciation Depreciation Operating Profit Free Cash Flow Rate of Interest Discounted Cash Flows 2005- 200606 07 16500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 993 135 90 74 9 83 220 1521 50 1571 2659 1088 391 697 355 342 697 8% 645.3 7 200708 1979 383 326 219 17 236 355 3279 126 3405 7045 3640 943 2697 868 1829 2697 8% 2312. 2 200809 2456 482 392 225 24 249 373 3952 132 4084 8579 4495 796 3699 868 2831 3699 8% 2936. 4 2009 -10 2620 562 447 231 29 260 391 4280 24 138 4418 9460 5042 566 4476 868 3608 4476 8% 3290 201011 2680 605 488 237 30 267 411 4451 145 4596 1000 7 5411 336 5075 868 4207 5075 8% 3454 201112 2680 605 491 243 30 273 432 4481 152 4633 201213 2680 605 493 249 30 279 453 4510 159 4669 10007 10007 5374 106 5268 868 4400 5268 8% 3319. 7 5338 20 5318 868 4450 5318 8% 3103 90 Net Present Value:Present Value of Future Cash Flows Less: Initial Investment Net Present Value 19061 16500 2560. 7  The project is having a net present value of Rs. 2560.7 (lacs) therefore will lead to increasing the free cash flows to the firm. SUGGETION o GACL can use the cash flows which are generated during the financial year for the purpose of working capital financing. It will save the interest payment which the company has to pay on the cash credit loans in the present. o The asset turnover ratio shows that GACL is not optimizing the use of its assets therefore GACL should look forward towards the optimum utilization of assets. GACL should make efforts for the optimizing the use of Assets which can be done by disposing of the nonproductive assets. o The payment period should be delayed. GACL is availing the discount offered by the supplier @0.3% per week and the credit given by the suppliers is 60 days therefore GACL 91 can make the payments in the seventh week and can also avail the discount and it will also help in improving the number of operating cycles in the year. o GACL should use the Net Present Value Analysis for checking the financial feasibility of the project. It is helpful in making the correct decision as the project which is having negative Net present value if approved then it will lead to the loss and negative cash flow. o Return on Equity can be increased by reducing and controlling the expenditure which will help in increasing the profit and thereby will lead to the increase in the Return on Equity which is important for enhancing the shareholder’s wealth. 84 o The inventory levels should be set as per the requirements. The purchase department, production department and the stores department can set the inventory levels which will help in ordering the right quantity which is required for the production and will reduced the storage cost. CONCLUSION During the one and half months training I explore my knowledge of corporate field. I also know that how to implement theory in practice. I also got chance to study all the department of GACL so that it improve my convincing power and also give chance to meet different people .It also increase my confidence. It is a memorable experience to be a part of GACL “PARIVAR”. I am always thankful to them. I studied lots many thing during my project work. I am very happy to say that GACL’s are like “parivar” so there is a very less chance to arise negative conflict, dissatisfaction and grievance. In that types of organization there is very less chance to fail. All the employees of company give the respect of each other and his/her boss. 92 GACL is one of the unique organizations of Gujarat government that make huge profit .the Company always treats their employees as human being and they have excellent and experienced managerial staff that always increases the organization’s reputation in the society. I personally observed that all the employees of the organization cooperate each other and also to new employees and trainees. I have studied all the department of the company with proper schedule and that schedule is provided by company itself with rules and regulation. Finally during my project period I taught lots many things from GACL. I am always thankful to GACL PARIVAR. Data used for various calculations Data of ATUL LTD. ATUL Ltd. Mar Share capital Reserves & Surplus DEBT Sundry creditors 2002 29.67 223.15 322.39 97.34 Mar 2003 29.67 252.19 278.64 139.66 Mar 2004 29.67 248.0 1 300.3 6 116.9 8 Mar 2005 29.67 166.0 9 362.0 9 136.0 5 Mar 2006 29.67 249.14 352.47 144.21 93 (In Cr.) Provisions Other current liabilities Fixed Assets: Gross Fixed Assets Less: Accumulated Depreciation Net Fixed Assets Investments Current Assets, Advances: 21.22 9.95 22.93 6.78 18.03 21.33 31.37 22.7 655.5 33.41 34.27 572.45 349.01 223.44 24.48 Loans and 610.28 366.73 243.55 22.39 666.5 390.4 2 276.0 8 24.03 1 406.7 1 248.8 69.03 696.85 426.32 270.53 65.15 278.0 Purchase Raw material Stores & Spares Work in Progress Finished Goods Total inventory Sundry Debtors Cash and Bank Balances Loans and Advances Total Assets Sales Raw materials, stores, etc. Wages & salaries Energy (power & fuel) Indirect taxes (excise, etc.) Advertising & marketing expenses Distribution expenses Others COGS Net Profit EBT INTEREST 250.53 26.91 20.33 61.96 57.35 166.55 223.17 7.49 96.95 742.08 596.72 256.17 70.44 82.7 42.48 14.38 9.85 63.76 530.15 16.98 19.23 42.55 281.7 27.38 21.29 69.66 65.35 183.68 224.11 8.64 74.64 757.01 643.75 280.27 71.89 81.68 42.83 13.8 12.2 71.92 566.59 44.07 48.96 37.03 5 26.32 21.39 57.83 57.61 163.1 5 240.6 4 10.65 76.85 791.4 633.0 3 279.0 1 72.79 72.47 43.12 13.23 13.38 68.41 570.1 5 3.5 8.19 23.55 392.2 37.9 22.01 51.07 60.19 171.1 7 226.5 1 14.21 62.68 792.4 750.4 8 380 67.63 76.85 56.98 17.56 15.94 85.18 697.5 6 17.98 20.49 23.34 484.83 40.17 29.68 62.21 77.17 209.23 237.85 13.79 62.56 859.11 888.66 474.89 71.65 94.72 63.83 22.63 22.05 94.52 827.31 83.04 89.03 30.19 94 EBIT 61.78 85.99 31.74 43.83 119.22 Data of GACL Mar Share capital Reserves & Surplus DEBT Sundry creditors Provisions Other current liabilities Fixed Assets: Gross Fixed Assets 2002 45.9 281.54 1027.9 6 45.92 3.43 82.36 1592.4 6 Mar 2003 45.9 272.89 887.82 58.55 9.74 84.87 1607.8 2 1614.12 1669.21 1869.24 Mar 2004 45.9 336.7 770.79 52.82 23.6 152.82 Mar 2005 73.44 468.41 539.82 50.46 50.77 43.89 2006 73.44 649.63 472.62 49.01 125.79 61.98 (In Cr.) Mar Mar-07 73.44 815 401 53.3137 198.51 60 2032.5384 95 Less: Accumulated Depreciation Net Fixed Assets Investments Current Assets, Loans and Advances: 497.02 1095 60.38 575.97 1032 60.34 652.51 962 59.99 728.51 941 62.51 805.89 1063 122.49 899.2337 1133 122.3151 296.878 Purchase Raw material Stores & Spares Work in Progress Finished Goods Total inventory Sundry Debtors Cash and Bank Balances Loans and Advances Total Assets Sales Raw materials, stores, etc. Wages & salaries Energy (power & fuel) Indirect taxes (excise, etc.) Advertising & marketing expenses Distribution expenses Others COGS Net Profit EBT INTEREST EBIT 288.96 12.62 22.23 2.6 20.7 58.15 184.29 24.86 54.2 1477.3 2 909.4 287.63 33.01 319.2 89.78 7.21 0 30.9 753.03 -40.78 -40.78 125.71 84.93 334.12 14.53 19.41 2.9 13.57 50.41 181.96 26.84 58.52 1409.9 2 1024.3 1 335.03 38.84 280.05 99.08 7.68 0.3 38.58 806.69 28.04 53.28 94.87 148.15 318.16 19.62 27.18 2.7 11.77 61.27 173.2 83.44 59.93 1 30.47 22.61 2.87 9.04 64.99 223.11 29.56 86.57 266.773 4 24.23 34.02 3 14.16 75.41 179.86 25.97 178.27 1645.35 1093.95 261.603 4 59.51 120.66 151.11 10.37 0.26 66.53 664.923 4 197.97 294.68 40.57 335.25 344.2638 36 40.7105 3.2352 15.5546 95.4936 170.7272 35.4518 235 1792.59 1215.069 325.81 68.7857 127.0949 170.27 11.9645 0 28.59 731.1205 186.5556 273.494 37.73 311.224 1399.44 1407.44 1073.26 1280.4 290.598 305.3 47.98 302.11 112.69 7.54 0.08 44.58 822.08 63.15 88.35 87.22 175.57 1 46.75 108.09 143.9 8.33 0 51.97 652.368 1 144.28 269.27 61.61 330.88 96 Data of DCW LTD. DCW LTD. Mar Share capital Reserves & Surplus DEBT Sundry creditors Provisions Other current liabilities Fixed Assets: Gross Fixed Assets 2002 34.5 149.7 3 45.05 50.07 14.37 52.81 488.9 9 208.0 497.56 233.43 264 0.24 515.94 249.79 266 0.39 Mar 2003 34.51 154.2 49.82 26.77 16 73.19 Mar 2004 34.51 169.88 44.72 27.78 17.98 91.82 (In Cr.) Mar 2005 34.51 185.68 71.7 19.33 20.88 102.03 Mar 2006 34.51 206.43 130 26.81 11.87 122.76 557.44 268.72 289 0.84 630.79 285.13 346 11.09 Less: Accumulated Depreciation 2 Net Fixed Assets 281 Investments 0.25 Current Assets, Loans and Advances: Purchase 276.5 375.43 445.25 477.24 394.77 97 Raw material Stores & Spares Work in Progress Finished Goods Total inventory Sundry Debtors Cash and Bank Balances Loans and Advances Total Assets Sales Raw materials, stores, etc. Wages & salaries Energy (power & fuel) Indirect taxes (excise, etc.) Advertising & marketing expenses Distribution expenses Others COGS Net Profit EBT INTEREST EBIT 7 16.31 14.76 0.51 35.03 66.61 35.3 1.41 9.13 393.6 7 564.4 4 273.6 1 39.02 66.64 71.98 5.44 16.79 36.77 507.2 6 15.02 16.05 12.92 28.97 21.69 19.54 0.78 35.84 77.85 38.67 6.81 22.32 410.02 655.52 365.27 36.3 75.11 79.78 5.17 9.31 38.31 608.44 10.4 18.01 10.04 28.05 32.81 24.09 1.04 38.46 96.4 42.42 3.04 28.53 436.93 725.17 429.58 36.66 77.57 89.92 5.72 7.44 42.17 686.44 21.38 23.01 5.67 28.68 31.77 19.35 0.57 28.09 79.78 50.76 3.66 61.66 485.42 803.45 483.02 35.48 75.92 98.15 4.34 10.18 48.95 766.41 21.03 23.7 4.65 28.35 32.71 29.9 1 57.14 120.75 52.27 3.7 55.81 589.28 703.59 383.28 38.81 104.4 100.1 5.53 10.55 50.36 663.98 27.27 36.35 7.07 43.42 98 Quarterly Data of GACL (2003-04) (In Lakhs) Particulars Sundry Debtors Loans and Advances Current Assets Inventories Cash Net sales Excise duty Gross Sales Quick assets Current liabilities Gross profit COGS Average Inventory Investments Net profit Total Assets Fixed assets Interest EBIT Share Capital Reserves and Surplus Equity Debt Jun-03 14781 3532 24284 4794 1176 21871 2491 24362 19490 8614 5360 19002 4917 5849 724 130007 99874 1892 3342 4590 28514 33105 86366 Sep-03 14680 6187 28075 4994 2215 25025 2968 27993 23081 12100 6158 21835 4894 5849 1614 133410 99486 2152 4373 4590 31350 35940 82304 Dec-03 14963 6014 28675 5745 1953 24875 2873 27748 22930 13344 6105 21643 5370 5847 1604 132648 98126 1850 4574 4590 31292 35882 77931 Mar-04 14675 6039 35184 6126 8343 24113 2948 27061 29057 13858 5953 21108 5936 5846 2312 137193 96163 2019 4221 7344 33671 41015 77078 99 Quarterly Data of GACL (2004-05) Particulars Sundry Debtors Loans and Advances Current Assest Inventories Cash Net sales Excise duty Gross Sales Quick assets Current liabilities Gross profit COGS Average Inventory Net profit Total Assets Fixed assets Interest EBIT Investments Share Capital Reserves and Surplus Equity Debt Jun-04 14376 5997 28447 4933 3141 24193 2893 27086 23513 14063 8126 18960 5530 1041 12920 8 94915 1816 3948 5846 7344 34712 42055 67140 Sep-04 16807 6438 33043 6556 3242 27443 3485 30928 26487 15029 9278 21650 5745 3617 13299 6 94107 1599 7522 5846 7344 38327 45671 64484 (In Lakhs) Dec-04 19781 7371 35686 6183 2350 30576 3887 34463 29502 15076 10339 24124 6370 4953 13505 0 93518 1417 10254 5846 7344 43280 50624 57647 Mar-05 19968 8657 38081 6500 2956 35373 4089 39462 31581 14513 11839 27623 6342 4817 138401 94069 1144 14371 6251 7344 46841 54185 53981 Quarterly Data of GACL (2005-06) (In Lakhs) Particulars Sundry Debtors Loans and Advances Current Assets Jun-05 18948 11083 38423 Sep-05 18106 13986 41554 Dec-05 17781 14184 42131 Mar-06 16061 17827 44027 100 Inventories Cash Net sales Excise duty Gross Sales Quick assets Current liabilities Gross profit COGS Average Inventory Net profit Total Assets Fixed assets Interest EBIT Investments Share Capital Reserves and Surplus Equity Debt 7055 1337 24640 3850 28490 31368 20077 8547 19943 6777 6321 13861 6 93942 1102 9031 6251 7344 53161 60505 41557 7461 2000 23507 3835 27342 34093 19689 8203 19139 7258 5757 14156 7 93762 1198 8058 6251 7344 58918 66262 38504 8590 1577 22991 3636 26627 33541 19631 7988 18639 8025 5019 15218 9 97807 825 6003 12251 7344 63937 71281 43471 7541 2597 23272 3664 26936 36486 23678 8081 18855 8065 2701 162610 106334 811 7010 12249 7344 64963 72307 47260 Quarterly Data of GACL (2006-07) Particulars Sundry Debtors Loans and Advances Current Assets Inventories Cash Net sales Excise duty Gross Sales Quick assets Current liabilities Gross profit COGS Average Inventory Net profit Total Assets Jun-06 17021 16772 43050 7979 1278 24183 3854 28037 35071 26541 8411 19626 7760 4257 16295 Sep-06 16793 19689 47560 8359 2719 27175 4472 31647 39201 31490 9494 22153 8169 5277 16983 (In Lakhs) Dec-06 17367 22689 51715 9792 1868 26913 4411 31324 41924 31744 9397 21927 9075 5232 17384 Mar-07 17073 23529 53697 9549 3545 26,213 4,290 30,503 44147 31135 9892 20611 9671 3889 179259 101 2 10765 Fixed assets Interest EBIT Investments Share Capital Reserves and Surplus Equity Debt 3 837 6024 12249 7344 69220 76564 40131 4 11002 8 931 7478 12246 7344 73242 80586 37848 0 10988 3 1214 6793 12242 7344 78474 85818 37379 113330 791 6587 12232 7344 81504 88848 40063 BIBLOGRAPHY Websites: 1. www.goggle.com 2. www.gujaratalkalies.com 3. financial management : M.Y.Khan & P.K.Jain 102 103