A PROJECT REPORT ON FINANCIAL STATEMENT ANALYSIS AT NAGARJUNA FERTILIZERS AND CHEMICALS LTD.

IN PARTIAL FULFILLMENT OF THE AWARD OF MASTER OF BUSINESS ADMINISTRATION SUBMITTED TO

OSMANIA UNIVERSITY BY SIVAJEERAJU.INDUKURI (071060107) Malla Reddy Institute of Management Secunderabad (Affiliated to Osmania University, Hyderabad)

CERTIFICATE

This

is

to

certify

that

the

Dissertation that is

entitled

FINANCIAL by

STATEMENT

ANALYSIS

being

submitted

SIVAJEERAJU.INDUKURI in partial fulfillment of the requirements for the award of the degree of MBA in FINANCE & MARKETING to MALLAREDDY INSTITUTE OF MANAGEMENT is a bonafide work carried out by him under the guidance and supervision of the undersigned. The results embodied in this dissertation have not been submitted to any other university or institution for the award of any degree or diploma.

DATE: Place:

Supervisors Signature and designation

DECLARATION
I here by declare that this project report titled FINANCIAL STATEMENT ANALYSIS submitted by me to the department of business management, Osmania University, Hyderabad, is a bonafide work undertaken by me and it is not submitted to any other university or institution for the award of any degree, diploma/certificate or published.

(SIVAJEERAJU.INDU KURI)

ACKNOWLEDGEMENT I am highly indebted to the management of NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED, for permitting me to do a project in their company. My special thanks are due to Mr. K. V. K RAJU and Mr. JANARDHANA REDDY of the company, for the valuable information, guidance and for providing me the help needed to accomplish this project. I am thankful to Miss.ARUNA (faculty of MALLAREDDY INSTITUTE OF MANAGEMENT), for his guidance, and encouragement and valuable suggestions offered during this project. I offer my sincere thanks to the management and staff of the college for their support provided to me during my course. (SIVAJEERAJU.INDUKURI)

ABSTRACT:
The present project financial statement analysis comprises of seven units. Unit-I Deals with introduction about the project, objectives of the study, need, and

scope of the study. Unit-II In this unit Research design, data sources, limitations, data collection methods. UNIT-III In this unit Industry profile i.e. Industry over view . UNIT-IV In this unit, information regarding the company profile and different methods of financial statement analysis are discussed. UNIT-V In this unit data analysis and interpretation of financial statements are done. UNIT-VI The findings of the study are presented in this unit.

UNIT- VII In this unit, suggestions and to the project is presented.

CONTENTS
Chapter No. Introduction I Objectives Need, and scope Research Methodology II Data Source, & limitations Industry profile III Company profile Data Analysis & interpretation Findings Suggestions& Recomandations Bibliography 21-33 34-46 48-78 79 80-81 82 Name of the concept Page No. 1-3 4 5 6 6 7-20

IV V VI VII

INTRODUCTION The project is taken up with an aim to study the financial statement analysis of NFCL.The study is mainly intended to know about the financial performance of NFCL. A comparative study was made making use of financial statements of other two firms namely Chambal fertilizers & National fertilizers L.T.D. The comparative Study was done on the parameters like Qty produced, sales value, PAT, EPS ets. About 95 per cent of the fertilizer produced in the world is used on farm crops. The United States is one of the world's leading producers of fertilizer. India is the fifth leading fertilizer producer in the world after Canada, China and France. India is the fourth largest consumer of fertilizer in the world. India is poised for another green revolution. With increasing population it needs to correspondingly increase its food production to feed its mammoth population. To be able to do this India is aiming to double its food production by 2010-12.However if this is going to happen then fertilizer industry is going to play a very crucial role and so it needs to increase its urea production. Thus a project at a fertilizer company like Nagarjuna Fertilizers and Chemicals limited was interesting and challenging as well as it would not only provide an opportunity to get a picture of fertilizer industry (urea in particular) and study of Financial Statement Comparison, its process and techniques of Nagarjuna Fertilizers and Chemicals Limited (NFCL) but would also provide an opportunity to interact to industry people through NFCL employees.

OBJECTIVES i. ii. iii. To study the financial statements of Nagarjuna Fertilizers and Chemicals Limited for the Financial years 2004-05 , 2005-06 &2006-07 To compare with the financial statements of similar like Chambal, NFL in Fertilizer Industry. To study the over all performance of NFCL.

NEED OF THE STUDY: Financial statement is an important source of information for evaluating the performance and prospects and prospects of a firm. If properly analyzed and interpreted, financial statements can provide valuable insights into a firms performance .analysis of financial statements is of interest to lenders (short term as well as long term), investors, security analysts, managers and others. IMPORTANCE: Financial statement analysis may be done for a variety of purposes, which may range from a simple analysis of the short term liquidity position of the firm to a comprehensive assessment of the strengths & weakness of the firm in various areas .it is helpful in assessing corporate excellence, edging credit worthiness, forecasting bond ratings, evaluating intrinsic value of equity shares, predicting bankruptcy and assessing market risk. The principal tool of financial statement analysis is financial ratio analysis which essentially involves a study of ration between various items or groups of items in financial statements; financial ratios may be divided into five broad types; liquidity ratio, leverage ratio, profitability ratio, turnover ratio and valuation ratios. Generally the financial ratios of a company are compared with some bench mark ratios. Industry averages often serve as bench mark ratios, while analysis based on a single set of financial statement is helpful, it may often have to be supplemented with time series analysis which provides insight into a firms performance and conditions over a period of time. SCOPE OF THE STUDY: The scope of the study is confined to NFCL Particularly Hyderabad division.

RESEARCH METHODOLOGY:
RESEARCH DESIGN:

Research design is some statement or specification of procedures for collecting and analyzing the information required for the solution of some specific problem. Here exploratory research is used to analyze the performance of NFCL .Exploratory research is carried out by making use of primary data and secondary data. DATA SOURCE: Primary data: The primary data is obtained from one to one interaction with employees of the company. Secondary data: It is collected from the books, journals, magazines, past records and all other types of published data and fact sheet, offer documents. DATA COLLECTION METHODS: The key for creating useful system is selectivity in collection of data and linking that selectivity to the analysis and decision issue of the action to be taken. the accuracy of collected data is of great significance for drawing correct and valid conclusions from the investigation. The Profit and Loss statement and Balance sheet of NFCL for three consecutive years viz 2004-05, 2005-06, and 2006-07 are taken. Subsequently P&L and balance sheet three consecutive years (2004to2007) of Chambal and NFL are downloaded from the respective web sites for comparison. DATA ANALYSIS: Mainly analytical (quantitative) tools are utilized .however qualitative tools were employed as and when required.

LIMITATIONS: 1) Study is based at Hyderabad division only, though NFCL has its operations in Orissa, Madhya Pradesh, West Bengal and Karnataka also. 2) Too much dependence on secondary data 3) A much of relevant data is inaccessible because of the data being confidential 4) The time taken to undertake the project is very short ,hence only few parameters were taken for the study .

Industry Overview
Urea comes under the purview of essential commodity act and so its production , pricing and distribution is controlled by the Department of Agriculture & Cooperation, government of India under the Fertilizer (Control) Order, 1985(FCO), issued under the Essential Commodities Act, 1955. Fertilizer is a key ingredient in ensuring the food security of the country by increasing the production and productivity of the soil. The domestic food grain production target has been set at 320 million tonnes by 2011-12 from the present production of 210 million tonnes. This target could be achieved by higher productivity through improved farming practices, expansion of irrigation, better seeds and extensive and balanced use of fertilizers. Towards this end, the Department is planning to raise the production of urea from the present installed capacity of 197 LMT to 300 LMT by the end of 11th Five Year Plan i.e., 2011-12 by taking concrete steps to boost production and productivity, removing regional imbalances in production and distribution, securing long term tie-ups for supply of feedstock and raw material etc. The demand for urea during 2005-06 was assessed at 234.25 LMT, the cumulative availability at 239.78 LMT and sales at 221.91 LMT. In respect of DAP, the demand assessment was 78.06 LMT, availability was 86.38 LMT and cumulative sales was 67.51 LMT. As regards MOP, the demand assessment was 28.88 LMT, the availability was 55.22 LMT and sales at 28.01 LMT. This buoyant trend has continued during the current year with the demand during Kharif, 2006 in respect of urea at 122.37 LMT against which the availability was 125.04 LMT and sales are estimated at 113.65 LMT. In respect of DAP, the demand during Kharif, 2006 was 33.10 LMT, the availability was 48.67 LMT and sales was 32.06 LMT. In

respect of MOP, the demand during Kharif, 2006 was 14.66 LMT, the availability is estimated at 20.47 LMT and sales at 9.99 LMT. Similarly, in respect of Rabi 2006-07, the demand for urea, DAP and MOP is at 127.08 LMT, 48.19 LMT and 18.57 LMT respectively. The DOF has made plans for ensuring availability at the level of 149.39 LMT of urea, 50.37 LMT of DAP and 26.31 LMT of MOP. The availability during the year 2006-07 is being augmented substantially through imports of over 52 LMT of urea, 27.16 LMT of DAP and 26.98 LMT of MOP. The Government has accorded high priority to boosting agricultural production through greater fertilizer usage, increasing efficiency in the fertilizer sector and regional balance in the production and availability of fertilizers. One of the major decisions of the Government was to halt the process of liquidation and closing of public sector fertilizer companies and to take steps for their revival. It may be noted that there are 8 urea plants in the Eastern Region of the country which are closed. This region has a high population density and huge demand for fertilizers. The Government is in an advanced stage of preparing a concrete action plan for revival of these plants. The revival of these plants will lead to an additional urea capacity of about 60 lakh tones and remove the existing regional disparity with regard to production and availability of urea. The revival of the closed plants would also create an environment of industrial development in backward regions of Bihar, Jharkhand, West Bengal and Chhatisgarh. Further, it would also lead to employment generation in these regions. The Department of Fertilizers has made huge strides in ushering in a new era of efficiency, transparency and international competitiveness in the Indian fertilizer industry in the last couple of years. The capacity utilization of urea units, which was only 92% in 2001-02 and 96.2% in 2002-03 and 98.7% in 2003-04, increased to over 100% of the installed capacity 2004-05 onwards. It has been 102% in 2005-06. Similarly, in the field of energy efficiency, in 2005-06, 22 urea units achieved better energy consumption levels than their pre-set norms.

In the context of its significance on subsidy and production efficiency, the Government has put special emphasis on early conversion of non-gas based urea units to gas and in the last two years, 3 naphtha based units namely, CFCL-Gadepan-II and IFFCO-PhulpurI&II have converted to gas and a 4th unit namely, SFC-Kota will convert by the end of the current financial year. For the remaining 8 functional non-gas based units, the Department has made strenuous efforts with the other stakeholders such as Ministry of Petroleum & Natural Gas, GAIL, gas producing companies, fertilizer companies and the Fertilizer Association of India. As a result of these efforts, a concrete and cogent plan of action to ensure pipeline connectivity and adequate availability of NG/LNG to the fertilizer sector has been agreed upon. It will ensure availability of gas to the non-gas based urea units by 2008-09 and for the revival of the closed urea units in the Eastern part of the country by the year 2009-10. A few units are expected to use gas from new technologies such as coal gasification and Coal Bed Methane. Conversion of all non-gas based units to gas will result in subsidy saving of Rs. 3300 crore per annum. Steps are being taken for additional urea production beyond 100% of the installed capacity of the functional units. Some brown field expansion of the existing plants is also in the pipeline. A special revival package for FACT, Cochin has been approved by the Government in March 2006. As a result, the company has increased its efficiency and production levels. A financial restructuring package for MFL, Chennai, which is passing through a financial crisis, is also under consideration of the Government. The Government is carrying out reforms in the delivery mechanism of fertilizers. A Fertilizer Monitoring System which will track the movement of de-controlled fertilizers as also production, distribution and sales of all fertilizers under the Concession Scheme is proposed to be activated from 1st December 2006. The same system will also monitor the dispatch of urea to each State, district-wise. An important component of the policy of the Government to ensure long term food security for the country and availability of fertilizers at reasonable rates to the farmers is to encourage setting up of Joint Ventures in countries abroad where feedstock for fertilizers is available at reasonable prices. This is so because the country has to import

substantial quantities of raw material and finished fertilizers such as urea, ammonia, phosphoric acid, rock phosphate, sulphur, Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP). The Department has, therefore, adopted a very proactive approach of late in the matter. A delegation led by Secretary (Fertilizers) visited Jordan and Morocco, countries which are rich in phosphate deposits and are amongst the biggest producers of phosphates in the world. Plans for cooperation and investment with major companies of these countries in mining of rock phosphate and setting up of phosphoric acid plant were discussed. Possibilities of sourcing potash economically from countries like Argentina, Belarus and Thailand are also actively being explored. Another delegation led by Joint Secretary (Fertilizers) has visited Nigeria recently and has held talks for long term import of LNG to India for its fertilizer plants. Another delegation led by Principal Secretary to the Prime Minister and including Secretary (Fertilizers) visited Kuwait last month and as a result a Kuwaiti delegation is coming to India this month to visit Indian fertilizer and petrochemical plants to hold discussions on areas of collaboration. The Kuwaitis have also offered to take India as a partner in their Joint Venture in fertilizer sector in Algeria. Possibility of similar joint ventures in countries such as Saudi Arabia, Egypt, Myanmar, Bangladesh, Libya, Syria, Iran etc is also being explored. All the aforementioned steps taken by the Government with a long term perspective in view will result in reduction in subsidy expenditure on fertilizers in the years to come. The requirement of subsidy on all fertilizers in the year 2005-06 was Rs. 20475.78 crore, which is expected to rise to a level of Rs. 27000 crore in 2006-07. The rise in subsidy expenditure has been mainly on account of rise in the prices of feedstock and raw materials and increasing consumption levels of fertilizers. However, the Government has kept the Indian farmer protected from these rising input costs by keeping the MRP/indicative MRPs of fertilizers unchanged for the last four years and subsidizing the sale of chemical fertilizers in the interest of food security of the country and for promoting growth in agriculture and food grain production.

Urea comes under the purview of Essential Commodity act and so its production, pricing and distribution is controlled by the Department of Agriculture & Cooperation, government of India under the Fertilizer (Control) Order, 1985(FCO), issued under the Essential Commodities Act, 1955.

Urea industry consists of various players that are of public sector, private and cooperative sector. Main players of public sector are NFL (National Fertilizers Limited), RCF (Rashtriya Chemicals and Fertilizers Limited) Main players of private sector are NFCL (Nagarjuna Fertilizers And Chemicals Limited), Chambal Fertilizers, Indo Gulf etc. Main players of cooperative sector are IFFCO (Indian Farmers Fertilizer Cooperative Limited) and KRIBHCO (Krishna Bharti Cooperative Limited).

The market share of various players are as shown in the pie chart below Percentage share in urea production in the year 2004-05:

Pricing of urea:
Fertilizer comes under the purview of essential commodity and so its production, pricing and distribution are controlled by the Department of Agriculture & Cooperation, government of India. Under the Fertilizer (Control) Order, 1985(FCO), issued under the Essential Commodities Act, 1955. Earlier retention pricing cum subsidy scheme was implemented for pricing of urea but a new pricing policy keeping in view the recommendation of Expenditure Reforms Commission was approved by the Government which came into effect from 1-4-2003. A high powered fertilizer pricing review committee was constituted to review the existent fertilizer subsidy scheme and propose a new methodology for subsidization of urea. Accordingly the committee recommended that the unit wise RPS (retention pricing scheme) to be discontinued and Normative Referral Price to be fixed for the gas based urea units and DAP. A Feedstock Differential Cost Reimbursement (FDCR) is given for a period of five years for urea units. Expenditure reforms commission (Sep 2000) recommended dismantling of existing RPS and in its place introduction of a Concession Scheme for urea units based on feedstock used and the vintage of plants in respect of gas based units. Thereafter in accordance with recommendations of Expenditure Reforms Commission, Government in consultation with relevant department and ministry approved the new pricing scheme replacing RPS (retention pricing scheme) in December 2002.

The new scheme came into effect in April 2003. The new policy aims at greater uniformity, transparency and efficiency in distribution of subsidy to the urea units and inducing them to take cost reduction methods on their own and become competitive. There will be six groups based on vintage and feedstock for determining the group based concession under the new Scheme, namely, pre-1992 gas based units, post-1992 gas based units, pre-1992 naphtha based units, post-1992 naphtha based units, fuel oil/low sulphur heavy stock (FO/LSHS) based units and mixed energy based units. The mixed energy based group shall include such gas-based units that use alternative feedstock/fuel to the extent of more than 25%. The scheme was planned to be implemented in four phases to decontrol urea over a period of six years: 1. Stage I (2001/02) adaptation of uniform concession for all five groups -pre-1992 gas based plants, post-1992 gas based plants, naphtha based plants, fuel oil/LSHS based plants and mixed feed plants. Concession rate to be determined taking weighted average RP of plants in each group as of 1 April 2000. 2. Stage II (2002-2005) further reduction in concessions on naphtha fuel oil/LSHS and mixed feed plant based on reduction in energy consumption and lowering of capital related charges (CRC). 3. Stage III (2005/06) concession on naphtha and mixed feed plants on basis of assumed switch over to LNG. 4. Stage IV (w.e.f. 1.4.2006) reduction in groupings from five to two namely naphtha based plants being accepted for FDCR of Rs. 1,900 per ton. For all other plants, concession to be NIL. Selling price of urea to be increased by 7 per cent per annum from 2001 to Rs. 6,900 per ton on 1 April 2006, which would also be the import parity price on urea.

Production
At present 57 fertilizer plants are operating of which 29 are producing urea, 20 DAP and rest other type of fertilizers. The amount of urea produced during April 2005 January 2006 is 17267000 MTs as against the target of 17281000 MTs1With permission of government most of the companies are targeting more than 100 % capacity utilization. Example NFCL produced at the capacity of 116% of its capacity last year

NAGARJUNA FERTILIZERS AND CHEMICALS Ltd Industry in Harmony with Nature The group Foundation in 1973 by Late Shri K V K Raju, a technopreneur, with a modest investment of Rs 180 Million (USD 24 million), the Nagarjuna Group is a prominent business house in India. A diversified conglomerate, with interests in agriculture and energy, the Group has as asset base close to Rs 30 Billion (USD 600 million). In pursuit of its mission - serving society through industry, the Group is guided by its values: commitment, Excellence, Ethics, Learning and Concern and is accountable to its stakeholders viz., Customers, Investors, Business Partners, Associates and Community. At Nagarjuna, dreams for the future are unending. Growth for us is journey to explore areas of endless possibilities. If is this spirit of enterprise that propels The Nagarjuna Group to look for challenging opportunities helping it surpass itself. Group Chairman Mr. K S Raju, born on June 29, 1950 at Nidadavole, West Godavari District, was groomed in an agriculture family by his grandfather and father, Shri KVK Raju. He completed Mechanical Engineering from University of Mysore in 1973 and dedicated himself to the dream his father had natured. K V K realizing the zeal and dedication of his son encouraged him.

He moved in as director to the flagship company of the Group Nagarjuna Fertilizer project. He was proactive in doubling its capacity and leading the Group's foray in to core sectors while structuring the businesses to meet the customer's needs. Mr. K S Raju, like his father continued to emphasize the philosophy of industry in harmony with nature. The 667 acres of sandy, salt barren land, devoid of vegetation around the Group's Fertilizer Complex was turned into a vast green belt, under his leadership. He has supported community development activities in areas of environment, health, education and community asset creation. He has been closely associated with the world Business Academy and State of the World Forum. In association with there forums and ILO he founded the K V K Raju International Leadership Academy, to enable managers to become value based leaders. The Nagarjuna Group under the stewardship and guidance of Mr. K S Raju is emerging as an enterprise based on values and commitment to the society at large. Agri : India is primarily an agrarian economy and agriculture to be a dominant force in the foreseeable future. The strong potential for growth this sector offers can be gauged by the fact that presently, Indian crop yields are among the lowest in the world. Despite being a major producer, the country's presence in would trade is negligible. For Nagarjuna this sector is on the top of its priority list. The Group has made significant investments and presently derives a large percentage of its turnover and profits from agri business. Adopting an integrated approach, the Group has involved itself in key aspects of the farming cycle through plant nutrition, plant protection, micro irrigation products and agri research and development. The objective of the Group is not only farm productivity improvement but better returns for the farmers as well. The close association that Nagarjuna has maintained with the farming community has seen it become an integral part of their lives. In turn for the Group, it has meant a strong

presence in growth are and enabled it to establish vital linkage as India prepares to become a major international player in agri products.

Plant Nutrition Business Enormous pressure to produce more food from less land with shrinking natural resources is a challenge for farmers. As a transition from the past, the need for providing balanced and customized nutrition from the past, the need providing balanced and customized nutrition to enhance agricultural productivity exists. Nagarjuna Fertilizers and Chemicals Limited, the flagship company of the group, endeavors to fulfill this market need. Nagarjuna Fertilizers and Chemicals Limited. Nagarjuna Fertilizers and Chemicals Limited (NFCL), is among the largest fertilizer companies in India with a turnover of about Rs. 10 billion (USD 200 million). Located at Kakinada on the East coast NFCL's fertilizer facility is the single largest private sector investment in South India. The first has-based fertilizer unit in the region, the facility unit in the region, the facility produces 11, 94,600 MT Urea and 6, 90,000 MT Ammonia in two streams. The plants are the best operated fertilizers units with one of the lowest energy consumption rates in the world. Spread over 1130 acres, two-thirds of the plant site is completely developed as a green belt with trees and water bodies from virtually a barren and saline land. The Green Belt extends over a kilometer with more than three lakh fifty thousand trees of 175 species, a number of large water bodies with marine life, birds and animals. This is a humble tribute towards our philosophy of industry in Harmony with Nature. NFCL has implemented a comprehensive environment plan in the fertilizer plant at Kakinada, resulting in near zero pollution of air water through treatment of chemical pollutants, recycling and effluent control.

With over 4200 strong dealer network, spread around the country, the company's efforts at customer interface include spot demonstrations, adoption of villages, farmer training and kisan Meals. The company has also set-up Krishi Vigyan Kendras to impact regular training in scientific agricultural practices and procedures for improving farm yield. The Company markets a wide range of plant nutrients - Urea, MOP, Zinc Sulphates, Micro Nutrient mixes, Growth Regulators and Organic Fertilizers under the Nagarjuna brand. "Nagarjuna" is a synonym for quality, trust and well being among its customers. Nagarjuna's market shares ranging from 27-50% in the areas of presence is hardly surprising considering the above efforts at providing a better product range and convenience to its customers. NFCL is also the best fertilizer unit in India in terms of operating profit margin. The company has achieved excellence in quality, plant safety and environmental protection and has been conferred various recognition and awards. Some of these are ISO 9001: 2002 by BVQL, Netherlands. National Safety Award 1994, 1995, 1996, & 1997 by British Safety Council. Award for Environmental control Strategies and Safety in Chemical Plants for the year 1994 by Indian Chemical Manufactures Association. Golden Peacock Environment Management award for 1998 by World Environment Foundation, New Delhi. Vana Mitra Award for the year 1999 for outstanding efforts made in developing and sustaining the Green Belt by Govt. of AP. ISO 14001 by BVQL, Netherlands.

 OHSAS - 18001 certification by BVQL, India. Environmental protection Award in Nitrogenous Fertilizer plants category for the year 2002 - 02 by Fertilizers Association of India, New Delhi. With a plethora of credits of its favor NFCL endeavors to be a total solution provider in the plant nutrition segment in the near future. A range of customized nutrition products will be developed and offered in increased number of markets in the time to come.

Products

Manufactured products Urea (46 % nitrogen) used as fertilizer Anhydrous ammonia used for production of urea and several other products Marketed products Diammonium phosphate (DAP) used as fertilizer Muriate of potash (MOP) used as fertilizer, water softener and in the manufacturing of KOH Zinc sulphate heptahydrate- used as fertilizer Zinc sulphate monohydrate used as fertilizer Services offered---KVK Raju krishi vigyan kendram for imparting knowledge, technology and latest agricultural practices to farmers to increase farm output Trading products Specialty Fertilizers imported from Israel and China Micro irrigation providing water management services. Company ranks third in providing micro irrigation solutions in the country

Operations (manufacturing)
The company has its manufacturing operations at Kakinada, East Godawari District, and Andhra Pradesh. There are two manufacturing units. The gas based plant was established with the help of technical expertise of Snamprogetti, Italy and Haldor Topsoe, Denmark. Plant 1 Gas based Urea: 1500 mt/day Ammonia: 900mt/day Plant 2 40% gas 60% naphtha urea: 1500mt/day ammonia: 900mt/day

In the year 2004-05 the company produced 13.93 lakh tones of urea as against the target of 11.94 tones, which was an all time high. The British Safety Council conducted an audit of companys plants at Kakinada and awarded Five Star Rating to the Plants. During the year, 2004-05, the company registered cumulative accident free days of 388 days as on March 31, 2005. During the year under review the companys plant received ISO 9001:2000 upgraded certification for Quality Management System and ISO 14001:1996 re-certification for Environmental Management System.2 The Plant Protection Business Plant protection chemicals are the next most important inputs affecting agricultural productivity. The growing use of these agro chemicals has increased the resistance of pest, rendering the products ineffective. Consequently, a market change to high value low dosage products is evident in the market, Nagarjuna Agrichem Limited, focuses on

bringing in such valued products to the market to deep pace with the evolving plant diseases and pests.

Nagarjuna agrichem limited. As an integrated approach to agribusiness, the Group ventured in the manufacture of highly effective plant protection products through Nagarjuna Agrichem Limited (NACL). BASED ON Srikakulam district on the eastern coast of India, NACL has a modern Agrochemical manufacturing facility set up at a total capital investment of Rs 570 million. (US$ 13 million). The manufacturing facility has been built on an area of 25 acres and another 75 acres has been developed into a green belt. NACl also has a government recognized R&D Laboratory for developing process technology to manufacture various chemicals. A wide range of products including insecticides, Fungicides and Herbicides are manufactured by the company. NACL is the first Indian manufactures of the Fungicides, Tricylazole and Propiconazople. In the domestic market the company's products are sold in retail packed formulations in sixteen States and also to several reputed companies. Apart from catering to the Indian market, NACL exports to various countries in Asia, Europe, Africa and Latin America. During the last three years NACL has introduced several new products, many of which were previously imported. Nagarjuna Agrichem is among the top five Indian companies in the agrochemical industry with a turnover of Rs 2 Billion (USD 40 million) and is slated to elevate into the top three Indian companies, in the next few years. The micro irrigation business.

The importance of water management to an agricultural economy like India cannot be over emphasized. Sprinkler and micro irrigation are well known ways of effective utilization of water in the farmland. However, the area covered by there systems in India is abysmally low as compared to the global averages. The Government of India has also recognized this need and is taking a series of measures including subsidizing micro irrigation systems. With renewed thrust, the market for micro irrigation systems is all set to reach a historical zenith. The Nagarjuna group, with a field learning of over a decade in this market is well placed to service the micro irrigation needs through Micro Irrigation Division. Agri research and development The Nagarjuna Group recognized the need for scientific study, testing and validation of various agri inputs in different agro climatic zones through out the country ensure the best yields. Nagarjuna Agricultural research and development institute signifies this commitment of the Nagarjuna Group to enhance value delivery to the customer. Nagarjuna agriculture research and development institute The Nagarjuna Group established Nagarjuna Agriculture Research and Development (NARDI), a private sector agricultural R&D institute, in 1995. The Department of Scientific and Industrial Research (DSIR), Govt. of India has recognized NARDI as a non-profit, scientific and industrial Research Organization (SIRO). Eminent academicians, administrators and management professionals govern NARDI while eminent scientists from agriculture and allied fields, guide its research. The well-developed laboratory-cum-office complex of NARDI is organized along with farm service facility of 107 acres at Gowraram, Medak District, Andhra Pradesh, 50 km away from Hyderabad. NARDI under takes field and laboratory testing of all agricultural inputs at multi-location testing centers spread all over the country. Its facilities are

available for performance evaluation of hybrid varieties, transgenics and new technologies. Strict scientific conditions are ensured during testing by qualified and experienced field staff. NARDI provides scientific validation services to help agri-business companies market their products. NARDI also generates backup data for patenting or registration under the sui generis systems. Fuels India is not only a net importer of crude ail but is also faces increased demand of petroleum products. The shortage is expected to be acute in South India, the location of the group's refinery project.

Nagarjuna Oil Corporation Limited Nagarjuna Oil Corporation Limited ( NOCl ) is implementing a 6 million tonnes per annum Refinery Project at Cuddalore, a coastal town in Tamil Nadu, with a capital outlay of Rs. 39 billion (US$ 867 million). The refinery will have integrated facilities like Captive power plant, dedicated water sources, Single point Mooring for import of crude by Very Large Container Carriers (VLCC), two jetties and facilities for product evacuation by road, rail and pipeline. The project has been appraised and approved by Industrial development Band of India (IDBI).The land acquisition process is almost complete while Mobil's Refinery from Woerth, Germany, is being relocated. Most of the equipment has arrived at the site and infrastructure works at the site are in progress. A competent project team is also in place.

The detailed engineering is nearing completion and leading organizations like ABB Lumus and Krupp Uhde have associated themselves in different aspects of the project. All major contracts like equipment supply, project management and licensor agreements have been finalized while oil major IBP has tied up for marketing arrangement with NOCL. The refinery is expected to be commissioned within 30 months from the date of financial closure. Corporate Social Responsibility The Nagarjuna Group is a socially responsible corporate citizen. The Group supports community development programs covering a wide range of activities like environment, health, education; income generation and community assert creation. These activities have created awareness of environment, good health and opportunities for a better life among communities it is associated with.

Service Organizations The service organizations of the Group include KVK Raju International Leadership Academy, Nagarjuna foundation and Lakshmi Memorial Cancer Research Foundation. The KVK Raju International Leadership Academy is a non-profit center for excellence in leadership training. The academy endeavors to incorporate ethics and innate spiritual values in management. The Nagarjuna Foundation focuses on promoting sustainable development, humanities, culture preservation, spiritually, philanthropy, philosophy and education. Recent publications of the Foundations are "Cheluva Kannada Nadu" [A comprehensive publication on Karnataka] and "Maa Telugu Talli" [A comprehensive publication on Andhra Pradesh].

The Lakshmi Memorial Cancer Research Foundation (LMCRF) established in November 1996 in memory of Late Smt. Lakshmi Raju, wife of Mr. K.S.Raju, promotes early cancer detection, prevention and cancer research.

NAGARJUNA GROUP OF COMPANIES

1985 Nagarjuna Fertilizers and Chemicals Limited 1992 Nagarjuna Investors Services Limited 1993 Nagarjuna Agrichem Limited 1995 Nagarjuna Agricultural Research & Development Institute 1997 Nagarjuna Oil Corporation Limited

The Hindu news paper dated 19.04.06 has published about the results of the company for the year 2005-06. The text of the news column is given below:

Nagarjuna Fertilizers and Chemicals Ltd (NFCL) have achieved a record urea production of 113.1 per cent of its capacity with a total of 13.79 lakhs tones during 200506. The company produces urea in two units at the Kakinada facility. While Unit-1 produced 7, 03,645 tones, Unit-2 surpassed its capacity by producing 6, 75,571 tones. The total capacity of the plant is 11, 94,600 tones. According to a company press release, the higher production was achieved under optimal utilization of energy. NFCL has also managed to dispatch the entire production to farmers. The company, a leading manufacturer of plant nutrients, also sold out its products which include Mahazinc, Zinc Sulphate, Zeta, specialty fertilizers etc. Nagarjuna Investors Services Limited 1993 Nagarjuna Agrichem Limited 1994 Nagarjuna Palma India Limited 1995 Nagarjuna Agricultural Research & Development Institute 1996

Nagarjuna Power Corporation Limited 1997 Nagarjuna Oil Corporation Limited

INTRODUCTION AND BRIEFING:

FINANACIAL STATEMENT COMPARISON

Meaning and Types of Financial Statements: A financial statement is an organized collection of data according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show a position at a moment of time as in the case of a balance sheet, or may reveal a series of activities over a given period of time, as in the case of an Income Statement. Thus, the financial statements generally refers to two basic statements: (i) the Income Statements, and (ii) the Balance Sheet. Of course, a business may also prepare (iii) a Statement of Retained Earnings, and (iv) a Statement of Changes in Financial Position in addition to the above two statements. The meaning and significance of each of these statements is being explained below : Financial Statements Balance Sheet Income Statements Statement of Changes in Financial Position Statement of Retained Earnings

1. Income Statement The Income Statement (also termed as Profit and Loss Account) is generally considered to be the most useful of all financial statements. It explains what has happened to a business as a result of operations between two balance sheet dates. For this purpose it matches the revenues and costs incurred in the process of earning revenues and shows the net profit earned or loss suffered during a particular period. The nature of the Income which is the focus of the Income Statement can be well understood if a business is taken as an organization that uses inputs to produce output. The outputs are the goods and services that the business provides to its customers. The values of these outputs are the amounts paid by the customers for them. These amounts are called revenues in accounting. The inputs are the economic resources used by the business in providing these goods and services. These are termed as expenses in accounting. 2. Balance Sheet It is a statement of financial position of a business at a specified moment of time. It represents all assets owned by the business at a particular moment of time and the claims (or equities) of the owners and outsiders against those assets at that time. It is in a way a snapshot of the financial condition of the business at that time. The important distinction between an Income Statement and a Balance Sheet is that the Income Statement is for a period while Balance Sheet is on a particular date. Income Statement is, therefore, a flow report, as contrasted with the Balance Sheet which is a static report. However, both are complementary to each other. 3. Statement of Retained Earnings The term retained earnings means the accumulated excess of earnings over losses and dividends. The balance shown by the Income Statement is transferred to the Balance Sheet through this statement, after making necessary appropriations. It is, thus, a connecting link between the Balance Sheet and the Income Statement. It is fundamentally

a display of things that have caused the beginning-of-the-period retained earnings balance to be changed into the one shown in the end-of-the-period balance sheet. The statement is also termed as Profit and Loss Appropriation Account in case of companies.

4. Statement of Changes in Financial Position (SCFP) The Balance Sheet shows the financial condition of the business at a particular moment of time while the Income Statement discloses the results of operations of business over a period of time. However, for a better understanding of the affairs of the business, it is essential to identify the movement of working capital or cash in and out of the business. This information is available in the statement of changes in financial position of the business. The statement may emphasize any of the following aspects relating to change in financial position of the business: i. ii. iii. Change in working capital position. In such a case the statement is termed as SCFP (Working Capital basis) or popularly Funds Flow Statement. Change in cash position. In such a case the statement is termed as SCFP (Cash basis) or popularly Cash Flow Statement. Change in overall financial position. In such a case the statement is termed simply as Statement of Changes in Financial Position (SCFP).

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS

Financial Statements are indicators of the two significant factors : i. ii. Profitability, and Financial soundness.

Analysis and interpretation of financial statements, therefore, refers to such a treatment of the information contained in the Income Statement and the Balance Sheet Financial Statements: Analysis and Interpretation So as to afford full diagnosis of the profitability and financial soundness of the business. A distinction here can be made between the two terms Analysis and Interpretation. The term Analysis means methodical classification of the data given in the financial statements. The figures given in the financial statements will not help one unless they are put in a simplified form. For example, all items relating to Current Assets are put at one place while all items relating to Current Liabilities are put at another place. The term Interpretation means explaining the meaning and significance of the data so simplified. However, both analysis and Interpretation are complementary to each other. Interpretation requires Analysis, while Analysis is useless without Interpretation. Most of the authors have used the term Analysis only to cover the meanings of both analysis and interpretation, since analysis involves interpretation. According to Myers, Financial statement analysis is largely a study of the relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trend of these factors as shown in a series of statements. For the sake of convenience, we have also used the term Financial Statement Analysis throughout the chapter to cover both analysis and interpretation. TYPES OF FINANCIAL ANALYSIS Financial Analysis can be classified into different categories depending upon (i) the material used, and (ii) the modus operandi of analysis. 1. On the Basis of Material Used According to this basis, financial analysis can be of two types:

(i) External Analysis. This analysis is done by those who are outsiders for the business. The term outsiders include investors, credit agencies, government agencies and other creditors who have no access to the internal records of the company. These persons mainly depend upon the published financial statements. Their analysis serves only a limited purpose. The position of these analysts has improved in recent times on account of increased governmental control over companies and governmental regulations requiring more detailed disclosure of information by the companies in their financial statements. (ii) Internal Analysis. This analysis is done by persons who have access to the books of account and other information related to the business. Such analysis can, therefore, be done by executives and employees of the organization or by officers appointed for this purpose by the Government or the Court under powers vested in them. The analysis is done depending upon the objective to be achieved through this analysis. 2. On the basis of modus operandi According to this, financial analysis can also be of two types: (i) Horizontal Analysis. In case of this type of analysis, financial statements for a number of years are reviewed and analyzed. The current years figures are compared with the standard or base year. The analysis statement usually contains figures for two or more years and the changes are shown regarding each item from the base year usually in the form of percentage. Such an analysis gives the management considerable insight into levels and areas of strength and weakness. Since this type of analysis is based on the data from year to year rather than on one date, it is also termed as Dynamic Analysis. (ii) Vertical Analysis. In case of this type of analysis a study is made of the quantitative relationship of the various items in the financial Statements on a particular date. For example, the ratios of different items of costs for a particular period may be calculated with the sales for that period. Such an analysis is useful in comparing the performance of several companies in the same group, or divisions or departments in the same company. Since this analysis depends on the data for one period, this is not very

conducive to a proper analysis of the companys financial position. It is also called Static Analysis as it is frequently used for referring to ratios developed on one date or for one accounting period. It is to be noted that both analyses vertical and horizontal can be done simultaneously also. For example, the Income Statement of a company for several years may be given. Horizontally it may show the change in different elements of cost and sales over a number of years. On the other hand, vertically it may show the percentage of each element of cost to sales. STEPS INVOLVED IN FINANCIAL STATEMENTS ANALYSIS The analysis of the financial statements requires: i. ii. Methodical classification of the data given in the financial statements. Comparison of the various inter-connected figures with each other by different Tools of Financial Analysis. Methodical Classification In order to have a meaningful analysis it is necessary that figures should be arranged properly. Usually instead the two-column (T form) statements, as ordinarily prepared, the statements are prepared in single (vertical) column form which should throw up significant figures by adding or subtracting. This also facilitates showing the figures of a number a number of firms or number of years side by side for comparison purposes. TECHNIQUES OF FINANCIAL ANALYSIS A financial analysis can adopt one or more of the following techniques/tools of financial analysis: Financial Analysis Techniques Ratio Analysis

CVP Analysis Comparative Financial Statements Trend Percentages Funds Flow Analysis Cash Flow Analysis Common-size Financial Statement 1. Comparative Financial Statements Comparative financial statements are those statements which have been designed in a way so as to provide time perspective to the consideration of various elements of financial position embodied in such statements. In these statements figures for two or more periods are placed side by side to facilitate comparison. (i) Comparative Income Statement. The Income Statement discloses Net Profit or Net Loss on account of operations. A Comparative Income Statement will show the absolute figures for two or more periods, the absolute change from one period to another and, if desired, the change in terms of percentages. Since the figures for two or more periods are shown side by side, the reader can quickly ascertain whether sales have increased or decreased, whether cost of sales has increased or decreased, etc. Thus, only a reading of data included in Comparative Income Statements will be helpful in deriving meaningful conclusions. (ii) Comparative Balance Sheet. Comparative Balance Sheet as on two or more different dates can be used for comparing assets and liabilities and finding out any increase or decrease in those items. Thus, while in a single Balance Sheet the emphasis is on present position, it is on change in the comparative Balance Sheet. Such a Balance Sheet is very useful in studying the trends in an enterprise.

Comparative Financial Statements can be prepared for more than two periods or on more than two dates. However, it becomes very cumbersome to study the trend with more than two periods data. Trend percentages are more useful in such cases. The technique of computing trend percentage has been discussed later in the chapter. The American Institute of Certified Public Accountants has explained the utility of preparing the Comparative Financial Statements as follows: The presentation of comparative financial statements is annual and other reports enhance the usefulness of such reports and bring out more clearly the nature and trend of current changes affecting the enterprise. Such presentation emphasizes the fact that statement for a series of periods is far more significant than those of a single period and that the accounts of one period are but an installment of what is essentially a continuous history. In any one year, it is ordinarily desired that the Balance Sheet, the Income Statement and the Surplus Statement be given for one or more preceding years as well as for the current year. The utility of preparing the Comparative Financial Statements has also been realized in our country. The Companies Act, 1956, provides that companies should give figures for different items for the previous period, together with current period figures in their Profit and Loss Account and Balance Sheet. 2. Common-size Financial Statements Common-size Financial Statements are those in which figures reported are converted into percentages to some common base. In the Income Statement the sale figure is assumed to be 100 and all figures are expressed as a percentage of this total. Comparative Utility of Common-size Financial Statements. The comparative commonsize financial statements show the percentage of each item to the total in each period but not variations in respective items from period to period. In other words, common-size financial statements when read horizontally do not give information about the trend of individual items but the trend of their relationship to total. Observation of these trends is

not very useful because there are no definite norms for the proportion of each item to total. For example, if it is established that inventory should be 30% of total assets, the computation of various ratios to total assets would be very useful. But since there are no such established standards proportions, calculation of percentages of different items of assets or liabilities to total assets or total liabilities is not of much use. On account of this reason common size financial statements are not much useful for financial analysis. However, common-size financial statements are useful for studying the comparative financial position of two or more businesses. However, to make such comparison really meaningful, it is necessary that the financial statements of all such companies should be prepared on the same pattern, e.g., all the companies should be more or less of the same age, they should be following the same accounting practices, the method of depreciation on fixed assets should be the same. 3. Trend Percentages Trend percentages are immensely helpful in making a comparative study of the financial statements for several years. The method of calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. Any year may be taken as the base year. It is usually the earliest year. Any intervening year may also be taken as the base year. Each item of base year is taken as 100 and on that basis the percentages for each of the items of each of the years are calculated. These percentages can also be taken as Index Numbers showing relative changes in the financial data resulting with the passage of time. The method of trend percentages is a useful analytical device for the management since by substituting percentages for large amounts; the brevity and readability are achieved. However, trend percentages are not calculated for all of the items in the financial statements. They are usually calculated only for major items since the purpose is to highlight important changes. While calculating trend percentages, care should be taken regarding the following matters:

1. The accounting principles and practices followed should be constant throughout the period for which analysis is made. In the absence of such consistency, the comparability will be adversely affected. 2. The base year should be carefully selected. It should be a normal year and be representative of the items shown in the statement. 3. Trend percentages should be calculated only for items having logical relationship with one another. 4. Trend percentages should be studied after considering the absolute figures on which they are based; otherwise, they may give misleading results. For example, one expense may increase from Rs. 100 to Rs. 200 while the other expense may increase from Rs. 10,000 to Rs. 15,000. In the first case trend percentage will show 100% increase while in the second case it will show 50% increase. This is misleading because in the first case the change though 100% is not at all significant in real terms as compared to the other. Similarly, unnecessary doubts may be created when the trend percentages show 100% increase in debt while only 50% increase in equity. This doubt can be removed if absolute figures are seen, e.g., the amount of debt may increase from Rs. 20,000 to Rs. 40,000 while that of equity from Rs. 1,00,000 to Rs. 1,50,000. 5. The figures for the current year should also be adjusted in the light of price level changes as compared to the base year, before calculating the trend percentages. In case this is not done, the trend percentages may make the whole comparison meaningless. For example, if prices in the year 1998 have increased by 100% as compared to 1997, the increase in sales in 1998 by 60% as compared to 1997 will give misleading results. Figures of 1998 must be adjusted on account of rise in prices before calculating the trend percentages. 4. Funds Flow Analysis Funds flow analysis has become an important tool in the analytical kit of financial analysts, credit granting institutions and financial managers. This is because the Balance Sheet of a business reveals its financial status at a particular point of time. It does not sharply focus those major financial transactions which have been behind the Balance

Sheet changes. For example, if a loan of Rs. 2, 00,000 was raised and paid during the accounting year, the balance sheet will not depict this transaction. However, a financial analyst must know the purpose for which the loan was utilized and the source from which it was obtained. This will help him in making a better estimate about the companys financial position and polices. Funds flow analysis reveals the changes in working capital position. It tells about the sources from which the working capital was obtained and the purposes for which it was used. It brings out in open the changes which have taken place behind the Balance Sheet. Working capital being the life-blood of the business, such an analysis is extremely useful. The technique and the procedure involved in funds flow analysis has been discussed in detail later in the book.

5. Cost-Volume-Profit Analysis Cost-Volume-Profit Analysis is an important tool of profit planning. It studies the relationship between cost, volume of production, sales and profit. Of course, it is not strictly a technique used for analysis of financial statements. However, it is not strictly a technique used for analysis of financial statements. However, it is an important tool for the management for decision-making since the data is provided by both cost and financial records. It tells the volume of sales at which the firms will break-even, the effect on profit on account of variation in output, selling price and cost, and finally, the quantity to be produced and sold to reach the target profit level. The technique has been discussed in detail in a separate chapter later in the book.

6. Ratio Analysis

This is the most important tool available to financial analysts for their work. An accounting ration shows the relationship in mathematical terms between two interrelated accounting figures. The figures have to be interrelated (e.g., Gross Profit and Sales, Current Assets and Current Liabilities), because no useful purpose will be served if ratios are calculated between two figures which are not at all related to each other, e.g., sales and discount on issue of debentures. A financial analyst may calculate different accounting ratios for different purposes. This has been discussed in detail in the next Chapter. LIMITATIONS OF FINANCIAL ANALYSIS Financial analysis is a powerful mechanism which helps in ascertaining the strengths and weaknesses in the operations and financial position of enterprise. However, this analysis is subject to certain limitations. Most of these limitations are because of the limitations of the financial statements themselves. These limitations are as follows: 1. Financial Analysis is only a Means Financial analysis is a means to an end and not the end itself. The analysis should be drawn not in isolation, but keeping in view the overall picture and the prevailing economic and political situation. 2. Ignores Price Level Changes Financial statements are normally prepared on the concept of historical costs. They do not reflect values in terms of current costs. Thus, the financial analysis based on such financial statements or accounting figures would not portray the effects of price level changes over the period. 3. Financial Statements are Essentially Interim Reports The profit shown by Profit and Loss Account and the financial position as depicted by the Balance Sheet is not exact. The exact position can be known only when the business is

closed down. Again, the existence of contingent liabilities and deferred revenue expenditure make more imprecise. 4. Accounting Concepts and Conventions Financial Statements are prepared on the basis of certain accounting concepts and conventions. On account of this reason the financial position as disclosed by these statements may not be realistic. For example, fixed assets in the balance sheet are shown on the basis of going concern concept. This means that value placed on fixed assets may not be the same which may be realized on their sale. On account of convention of conservatism the income statement may not disclose true income of the business since probable losses are considered while probable incomes are ignored. 5. Influence of Personal Judgment Many items are left to the personal judgments of the accountant. For example, the method of depreciation, mode of amortization of fixed assets, treatment of deferred revenue expenditure all depend on the personal judgment of the accountant. The soundness of such judgment will necessarily depend upon his competence and integrity. However, the convention of consistency acts as a controlling factor on making indiscreet personal judgments. 6. Disclose only Monetary Facts Financial statements do not depict those facts which cannot be expressed in terms of money. For example, development of a team of loyal and efficient workers, enlightened management, the reputation and prestige of management with the public, are matters which are of considerable importance for the business, but they are nowhere depicted by financial statements.

COMPARISON OF FINANCIAL STATEMENTS OF NFCL WITH INDUSTRY.

The profit and loss account and Balance Sheet of the following companies are copied from the published annual reports and/or downloaded from the respective websites. a. NFCL b. Chambal Fertilizers c. National Fertilizers Ltd. The detailed analysis of Profit and Loss Account and Balance Sheet is done for the above referred companies. The comparative studies are done on the following items in particular. Installed capacity Capacity utilized or quantity produced Sales Value PBT PAT EPS Debtors Dividend on Equity Shares

Inventories Current liabilities Loans Advances

Published Financial Statements of Various Companies are given hereunder. The profit and loss account and balance sheet of the companies under study had been compared. a. Financial Statements of NFCL:
NAGARJUNA FERTILIZERS & CHEMICALS LIMITED Profit & Loss account for the year ended 31st March 2005 (Rs in lacs) Particulars Amount Amount Income sales, subsidy & equated freight Other income Remission of principal amount of loan Total Expenditure Purchases-traded products Raw materials consumed Power & fuel Catalyst charge Chemicals & consumables Salaries wages & benefits (Increase)/decrease in stock Packing material consumed Transport & handling charges Distribution expenses Other expenses Depreciation less: transfer from re-valuation Reserve Interest& financial charges Total Profit/(Loss) before tax Provision for tax-net deferred tax credit/(debit)

126639 1767.37 1464.7 129871

10153.5 37625.9 28203.36 1030.59 426.63 3236.57 -1878.4 4233.23 9289.39 364.96 5245.23 12159.1 22.72 12136.38 14278.63 124346 5525.07 502.08 -2070.29

Fringe benefit tax Profit/(Loss) after tax Balance brought forward Less: debit balance on account of amalgamation Amount available for appropriation Appropriations Debenture redemption reserve Preference dividend Dividend tax Balance carried to balance sheet

Nil 2952.7 1166.34 -590.03 14023.01 0.18 0.02 14022.81 14023.01

Profit & loss account for the year ended 31st March 2006 Rs in lacs Particulars Amount Income sales, subsidy & equated freight Other income Remission of principal amount of loan Total Expenditure Purchases-traded products Raw materials consumed Power & fuel Catalyst charge Chemicals & consumables Salaries wages & benefits (Increase)/decrease in stock Packing material consumed Transport & handling charges Distribution expenses Other expenses Depreciation 20363.63 less: transfer from re-valuation Reserve 8258.21 Interest& financial charges Total Profit/(Loss) before tax Provision for tax-net deferred tax credit/(debit) Fringe benefit tax Profit/(Loss) after tax Balance brought forward Less: debit balance on account of amalgamation Amount available for appropriation Appropriations Debenture redemption reserve

Amount 145294.7 2043.84 147338.6 7856.49 48110.6 33243.63 540.21 588.09 3933.23 584.25 3813.02 9132.29 461.77 8515.62

12105.42 13098.74 141938.4 5355.22 4158.95 5646.71 157.78 6685.2 14022.81 20708.01 7201.1

Preference dividend Dividend tax Balance carried to balance sheet

0.37 0.05 13506.49 20708.01

Profit & loss account for the year ended 31st March 2007 Rs in lacs Particulars Amount Income sales, subsidy & equated freight Other income Remission of principal amount of loan Total Expenditure Purchases-traded products Raw materials consumed Power & fuel Catalyst charge Chemicals & consumables Salaries wages & benefits (Increase)/decrease in stock Packing material consumed Transport & handling charges Distribution expenses Other expenses Depreciation 20656.04 less: transfer from re-valuation Reserve 8246.95 Interest& financial charges Total Profit/(Loss) before tax Provision for tax-net deferred tax credit/(debit) Fringe benefit tax Profit/(Loss) after tax Balance brought forward Less: debit balance on account of amalgamation Amount available for appropriation Appropriations Debenture redemption reserve

Amount 181524.00 2799.32 184323.32 33831.06 53799.60 36952.33 533.63 603.20 4766.64 (2206.73) 5916.74 12613.88 441.19 6279.49

12409.09 13779.39 179719.51 4603.81 4300.00 2949.32 82.00 3171.13 13506.49 1923.82 14753.80 -

Preference dividend Dividend tax Balance carried to balance sheet

0.37 0.06 14753.37 14753.80

Balance sheet as at 31st March 2005 Particulars SOURCES OF FUNDS Share holders funds Share capital Reserves & surplus Loan funds Secured loans Unsecured loans Deferred tax liability Total APPLICATIONS OF FUNDS Fixed Assets Gross block Depreciation Lease adjustments Capital work in progress Net block Investments Current assets, loans & advances Inventories Sundry debtors Cash & bank balances Loans & advances Current liabilities & provisions Current liabilities Provisions Total Rs in lacks Amount Amount

46497.44 140199.8 186697.3 144924.3 4469.63

149393.9 31082.61 367173.8

381570.4 (116935) (5221.7) 259414.1 1510.14 260924.3 66443.89 7620.13 22170.64 1922.16 18163.62 49876.55 (9375.69) (695.23)

39805.63 367173.8

Balance sheet as at 31st March 2006 Particulars SOURCES OF FUNDS Share holders funds Share capital Reserves & surplus Loan funds Secured loans Unsecured loans Deferred tax liability Total APPLICATIONS OF FUNDS Fixed Assets Gross block Depreciation Lease adjustments Capital work in progress Net block Investments Current assets, loans & advances Inventories Sundry debtors Cash & bank balances Loans & advances Current liabilities & provisions Current liabilities Provisions Total Rs in lacks Amount Amount

46516.36 137953.6 184470 140176 5151.47

145327.5 25435.9 355233.3

380617.4 (136508) (4824.27) 239284.9 673.58 239958.4 67912.27 5776.2 31124.31 6084 24529.91 67514.42 (14802.6) (5349.25)

47362.6 355233.3

Balance sheet as at 31st March 2007 Particulars SOURCES OF FUNDS Share holders funds Share capital Reserves & surplus Loan funds Secured loans Unsecured loans Deferred tax liability Total APPLICATIONS OF FUNDS Fixed Assets Gross block Depreciation Lease adjustments Capital work in progress Net block Investments Current assets, loans & advances Inventories Sundry debtors Cash & bank balances Loans & advances Current liabilities & provisions Current liabilities Provisions Total Rs in lacs Amount Amount

46517.07 130631.02 177148.09 133633.47 5729.72

139363.19 22486.58 338997.86

383533.57 (157077.96) (6295.15) 220160.46 2048.34 222208.80 74057.03 8488.30 31375.61 1499.95 24009.67 65373.53 (12713.32) (9928.18)

42732.03 338997.86

b.

Financial Statements of Chambal Fertilizers:

CHAMBAL FERTILISERS & CHEMICALS LIMITED Profit & loss account for the year ended 31st March 2005 (Rs in lakhs) Particulars Amount Amount Income 225953.1 Sales of Own Manufactured products including subsidy on fertilizers Less : Excise duty on sale of yarn 1101.25 Sales of traded products including 224851.8 subsidy on fertilizers 34486.55 Income from operations of shipping business 8321.62 (Include Rs 6593.86 lacks from charter-in ship (Previous year nil) Software & business process: Outsourcing services 286.98 Other income 3002.61 Total 270949.6 Expenditure Increase/decrease in stocks -7148.32 Purchases of goods for trading 35362.14 Manufacturing &other expenses 196306.5 Freight to charter-in ship Finacial expenses 9676.91 Depreciation 15131.81 Total 249329 Profit before exceptional items & tax 21620.59 Exceptional items 6480.57 Profit after exceptional items & before tax 28101.16 Fringe benefit tax Provision for tax 8930 Provision for tonnage tax in shipping business Deferred tax charge / (Credit) -2891.36 Profit after Tax 22062.52 Transferred from debenture redemption reserve 1500

Balance brought forward from previous year 20379.29 Profit available for appropriation 43941.81 Less: Appropriations: (1) Transfer to debenture redemption reserve 2600 (2)Transfer to capital redemption reserve (3) Transfer to general reserve 2500 (4) Transfer to tonnage tax reserve 200 (5) Proposed dividends on preference shares 30 (6)Proposed dividend on equity share 7491.74 (7) Tax on dividend 1071.57 Balance carried to balance sheet 30048.5 Basic & diluted earnings per share Rs 5.35 Nominal value of share Rs 10 Profit & loss account for the year ended 31st March 2006 (Rs in lacs) Income Amount Amount Sales of Own Manufactured products including subsidy on fertilizers 194354.2 Less : Excise duty on sale of yarn 977.55 Sales of traded products including 193376.7 subsidy on fertilizers 63176.51 Income from operations of shipping business 17508.87 (Include Rs 6593.86 lacks from charter-in ship (Previous year nil) Software & business process: Outsourcing services Other income 1780.48 Total 275842.5 Expenditure Increase/decrease in stocks 2634.39 Purchases of goods for trading 59414.56 Manufacturing & other expenses 159877.2 Freight to charter-in ship 6327.74 Financial expenses 7511.14 Depreciation 15895.48 Total 251732.5 Profit before exceptional items & tax 24109.99 Exceptional items 4043.34 Profit after exceptional items & before tax 28153.33 Fringe benefit tax 203.49 Provision for tax 11060 Provision for tonnage tax in shipping business 32.16 Deferred tax charge / (Credit) -3454.37 Profit after Tax 20312.05 Transferred from debenture redemption reserve 1600 Balance brought forward from previous year 30048.5 Profit available for appropriation 51960.55 Less: Appropriations: (1) Transfer to debenture redemption reserve 725 (2)Transfer to capital redemption reserve 25

(3) Transfer to general reserve (4) Transfer to tonnage tax reserve (5) Proposed dividends on preference shares (6)Proposed dividend on equity share (7) Tax on dividend Balance carried to balance sheet Basic & diluted earnings per share Rs Nominal value of share Rs

2500 200 1.19 7491.74 1050.88 39966.74 4.88 10

Profit & loss account for the year ended 31st March 2007 (Rs in lacs) Income Amount Sales of Own Manufactured products including subsidy on fertilizers 219227.86 Less : Excise duty on sale of yarn 52.76 Sales of traded products including subsidy on fertilizers Income from operations of shipping business (Include Rs 6593.86 lacks from charter-in ship (Previous year nil) Software & business process: Outsourcing services Other income Total Expenditure Increase/decrease in stocks Purchases of goods for trading Manufacturing & other expenses Freight to charter-in ship Financial expenses Depreciation Total Profit before exceptional items & tax Exceptional items Profit after exceptional items & before tax Fringe benefit tax Provision for tax Provision for tonnage tax in shipping business Deferred tax charge / (Credit) Profit after Tax Transferred from debenture redemption reserve Balance brought forward from previous year less : Transitional Provision Add: Deferred Tax on Transitional Provision Profit available for appropriation Less: Appropriations:

Amount

219175.1 22298.21 17657.29

2234.93 261365.5 -7938.53 26010.75 192457.5 2373.33 9907.09 17659.68 240469.8 20895.76 867.53 21763.29 123.08 9271.15 39.17 -2783.21 15113.1 1029 39966.74 -383.26 130.27 55855.85

(1) Transfer to debenture redemption reserve (2)Transfer to capital redemption reserve (3) Transfer to general reserve (4) Transfer to tonnage tax reserve (5) Proposed dividends on preference shares (6)Proposed dividend on equity share (7) Tax on dividend Balance carried to balance sheet Basic & diluted earnings per share Rs Nominal value of share Rs Balance sheet as at March 31st, 2005 Particulars 1.SOURCES OF FUNDS (1) Shareholders' Funds: (a) Share Capital (b) Share capital suspense Reserves & surplus (2) Loan funds: (a) Secured loans (b)Unsecured loans (3) Liabilities under deferred payments (4) Deferred tax liability(Net) Total 2.APPLICATION OF FUNDS (1) Fixed assets: (a) Gross block (b) Less: Depreciation Net block (d) capital work in progress (2) Investments (3) Current assets, loans & advances: (a) Inventories (b) Sundry Debtors cash & bank balances (d) Other Current assets (e) Loans & advances Less: (4) Current Liabilities & provisions (a) liabilities (b) Provisions Net current Assets (5) Miscellaneous expenditure

3499 2500 900 7491.74 1273.22 40191.89 3.63 10

Rs in lacs Amount Amount

40600 1045.79 42729.82 84375.61 67886.08 25590.12 93476.2 24508 38000.06 240359.9

281241.3 112880.8 168360.6 659.76 169020.3 22711.37 30110.5 50096.76 3385.25 294.51 9149.09 93081.11

33020.55 12231.89 45252.44 47828.67 799.5

Total

240359.9

Balance sheet as at March 31st, 2006 Particulars 1.SOURCES OF FUNDS (1) Shareholders' Funds: (a) Share Capital (b) Share capital suspense Reserves & surplus (2) Loan funds: (a) Secured loans (b)Unsecured loans (3) Liabilities under deferred payments (4) Deferred tax liability(Net) Total 2.APPLICATION OF FUNDS (1) Fixed assets: (a) Gross block (b) Less: Depreciation Net block (d) capital work in progress (2) Investments (3) Current assets, loans & advances: (a) Inventories (b) Sundry Debtors cash & bank balances (d) Other Current assets (e) Loans & advances Less: (4) Current Liabilities & provisions (a) liabilities (b) Provisions Net current Assets (5) Miscellaneous expenditure Total (Rs in lacs) Amount Amount

41620.79 54495.56 96116.35 47905.81 31924.76 79830.57 18294.61 34545.69 228787.2

282771.6 128332.9 154438.7 15869.04 170307.7 25957.22 24921.68 31910.86 7829.85 449.14 10150.36 75261.89

24695.65 18463.76 43159.41 32102.48 419.79 228787.2

Balance sheet as at March 31st, 2007 Particulars 1.SOURCES OF FUNDS (1) Shareholders' Funds: (a) Share Capital (b) Share capital suspense Reserves & surplus (2) Loan funds: (a) Secured loans (b)Unsecured loans (3) Liabilities under deferred payments (4) Deferred tax liability(Net) Total 2.APPLICATION OF FUNDS (1) Fixed assets: (a) Gross block (b) Less: Depreciation Net block (d) capital work in progress (2) Intangible Assets (3) Investments (4) Current assets, loans & advances: (a) Inventories (b) Sundry Debtors cash & bank balances (d) Other Current assets (e) Loans & advances Less: (5) Current Liabilities & provisions (a) liabilities (b) Provisions Net current Assets (Rs in lacs) Amount Amount

41620.79 60590.71 102211.5 130676.42 58980.2 189656.6 13341.21 31632.21 336841.5

325980.53 144654.66 181325.87 36509.2 217835.1 629.91 36598.09 35201.31 52584.19 11084.61 652.84 9783.73 109306.68

13677.97 14048.51 27726.48 81580.2

(6) Miscellaneous expenditure Total

198.27 336841.5

c.

Financials Statements of National Fertilizers:

NATIONAL FERTILIZERS LIMITED Profit & Loss account for the year ended 31st March 2005 (Rs in lacs) Particulars Amount INCOME Sales(Gross) 174497.13 Less: Excise Duty 1849.25 Sales(Net) Subsidy from Govt of India Other income Closing Stock EXPENDITURE Opening stock Purchase of semi finished goods Materials consumed Salaries,wages,bonus,&other benefits Power, and fuel Freight and handling expenses Repairs and maintenance Other expenses Interest and finance charges Depreciation & amortization Deferred revenue expenses written off Voluntary retirement scheme Profit for the year Prior period adjustments(Net) Profit Before Tax Less: Provision for taxation for current year Current tax Deferred tax Fringe benefit tax For earlier years Tax Deferred tax Profit After Tax

Amount

172647.9 174758.3 3257.22 9685.88 360349.3 13011.89 786.15 171674 17528.16 85506.59 18930.31 6661.14 9329.92 2222.48 12057.06 1001.27 338709 21640.32 -185.81 21454.51

7547 -2157.83

-151.11 125.82

5363.88 16090.63

Brought Forward From Last year Profit Available For Appropriation

34063.25 50153.88

Profit & Loss Account for the year ended 31st March 2006 (Rs in lacs) Particulars Amount Amount INCOME Sales(Gross) 164724.53 Less: Excise Duty 1331.57 Sales(Net) 163393 Subsidy from Govt of India 195660.2 Other income 3666.74 Closing Stock 7544.25 370264.2 EXPENDITURE Opening stock 9685.88 Purchase of semi finished goods 445.86 Materials consumed 196347 Salaries,wages,bonus,&other benefits 17077.48 Power, and fuel 75506.42 Freight and handling expenses 18897.14 Repairs and maintenance 6328.52 Other expenses 13762.9 Interest and finance charges 839.71 Depreciation & amortization 12451.06 Deferred revenue expenses written off Voluntary retirement scheme 1003.41 352345.1 Profit for the year 17919.03 Prior period adjustments(Net) 10.7 Profit Before Tax 17929.73 Less: Provision for taxation for current year Current tax 8250 Deferred tax -2082 Fringe benefit tax 115 For earlier years Tax 154.13 Deferred tax -147.45 6289.68 Profit After Tax 11640.05 Brought Forward From Last year 43057.04 Profit Available For Appropriation 54697.09

Profit & Loss Account for the year ended 31st March 2007 (Rs in lacs) Particulars Amount Amount INCOME Sales(Gross) 166391.37 Less: Excise Duty 1525.37 Sales(Net) 164866 Subsidy from Govt of India 221702.3 Other income 2817.1 Closing Stock 7716.6 397102 EXPENDITURE Opening stock 7544.25 Purchase of semi finished goods 77.9 Materials consumed 217451.2 Salaries,wages,bonus,&other benefits 16792.79 Power, and fuel 81150.52 Freight and handling expenses 20411.69 Repairs and maintenance 5896.99 Other expenses 8311.28 Interest and finance charges 1673.62 Depreciation & amortization 10605.6 Deferred revenue expenses written off Voluntary retirement scheme 677.77 370673.8 Profit for the year 26428.26 Prior period adjustments(Net) -61.03 Profit Before Tax 26367.23 Less: Provision for taxation for current year Current tax 11016 Deferred tax -1842 Fringe benefit tax 138 For earlier years Tax -493.3 Deferred tax -74.51 Fringe benefit tax 13.03 8757.22 Profit After Tax 17610.01 Brought Forward From Last year 40007.68

Profit Available For Appropriation

66497.69

Balance Sheet as at 31st March 2005 Particulars SOURCES OF FUNDS Share Holders funds Share Capital Reserves & surplus Loan funds Secured Loans Deferred tax liability(Net) Total APPLICATION OF FUNDS Fixed assets Gross Block Less: Depreciation Net Block Capital work in progress Investments Current assets, loans & advances Inventories Sundry Debtors Cash & bank balances Loans & advances Less: Current liabilities & provisions Current liabilities Provisions Net current assets Miscellaneous expenditure(to the extent not written off) Total (Rs in lacs) Amount Amount

49057.84 69589.22

118647.1 5949.46 23795.39 148391.9

286225.18 181273.67 104951.51 1191.27

106142.8 0.18 106143

35084.16 43505.61 13347.89 8794.43 100732.09

50359.61 9805.25 60164.86 40567.23 1681.72 148391.9

Balance Sheet as at 31st March 2006 Particulars SOURCES OF FUNDS Share Holders funds Share Capital Reserves & surplus Loan funds Secured Loans Deferred tax liability(Net) Total APPLICATION OF FUNDS Fixed assets Gross Block Less: Depreciation Net Block Capital work in progress Investments Current assets, loans & advances Inventories Sundry Debtors Cash & bank balances Loans & advances Less: Current liabilities & provisions Current liabilities Provisions Net current assets Miscellaneous expenditure(to the extent not written off) Total (Rs in lacs) Amount Amount

49057.84 76583.88

125641.7 22739.06 21565.94 169946.7

289712.86 193410.43 96302.43 1066.62

97369.05 0.18 97369.23

32449.46 82447.16 1183.22 11093.16 127173

46153.64 9120.18 55273.82 71899.18 678.31 169946.7

Balance Sheet as at 31st March 2007 Particulars SOURCES OF FUNDS Share Holders funds Share Capital Reserves & surplus Loan funds Secured Loans Unsecured Loans Deferred tax liability(Net) Total APPLICATION OF FUNDS Fixed assets Gross Block Less: Depreciation Net Block Capital work in progress Investments Current assets, loans & advances Inventories Sundry Debtors Cash & bank balances Loans & advances Less: Current liabilities & provisions Current liabilities Provisions Net current assets Miscellaneous expenditure(to the extent not written off) Total (Rs in lacs) Amount Amount

49057.84 88016.57 22642.35 10070.91

137074.4

32713.26 19649.43 189437.1

290338.09 203259.76 87078.33 2249.11

89327.44 0.18

34820.15 120571.6 1338.92 12571.52 169302.19

55065.22 14128.03 69193.25 100108.9 0.54 189437.1

Financial Statements Comparison of NFCL with other Fertilizer Companies:

Year wise financial statement analysis summary is given hereunder: 2004-05

Sl.No 1 2 3 4 5 6 7 8 9 10 11 12 13 Particulars Installed Capacity Mts Production Mts % of production over installed capacity Sales-Value PBT PAT % of PAT on Sale Profit available for appropriation Dividend on equity shares EPS Receivables % of Receivables on sales Inventories Loans & Advances Current Liabilities NFCL 990000 1392538 141% Chambal 1518000 1855806 122% 126639 224851.8 4 5525.07 21620.59 2952.70 22062.52 2.33% 9.80% 14023.01 43941.81 7491.74 0.70 5.35 22170.64 50096.76 17.51 22.27 74620.13 30110.50 18163.62 9194.09 (9375.69) 33020.55 NFL 3231000 3432000 106% 172647.88 21454.51 16090.63 9.40% 50153.88 3.28 43505.61 25.40 35084.16 8794.43 50359.61

2005-06
Sl.No 1 2 3 4 5 6 7 8 9 10 Particulars Installed Capacity Mts Production Mts % of production over installed capacity Sales Value PBT PAT % of PAT on sales Profit available for appropriation Dividend on equity shares EPS Receivables NFCL 990000 1379220 139% 145294.7 5355.22 6685.20 4.60 20708.01 1.56 31124.31 Chambal 1518000 1901520 125% 193376.6 5 24109.99 20312.05 10.50 51960.55 7491.74 4.88 31910.86 NFL 3231000 3344000 103% 163392.96 17929.73 11640.05 7.12 54697.09 2.37 82447.16

1 11 12 13

% of Receivables on Sales Inventories Loans Advances Current Liabilities

21.42 5776.20 24529.91 (14802.57)

16.50 24921.68 10150.36 24695.65

50.45 32449.46 11093.16 46153.64

2006-07
Sl.No 1 2 3 4 5 6 7 8 9 10 1 11 12 13 Particulars Installed Capacity Mts Production Mts % of production over installed capacity Sales Value PBT PAT % of PAT on sales Profit available for appropriation Dividend on equity shares EPS Receivables % of Receivables on Sales Inventories Loans Advances Current Liabilities NFCL 990000 1324054 133.74% 181524.0 0 4603.81 3171.13 1.75% 14753.8 0.74 31375.61 17.28% 8488.3 24009.67 -12713.3 Chambal 1518000
1797202

NFL 3231000 3351000 103.71% 164866 26367.23 17610.01 10.68% 66497.69 3.59 120571.6 73.13% 34820.15 12571.52 55065.22

118.39% 219175.1 0 20895.76 15113.1 6.89% 55855.85 7491.74 3.63 52584.19 23.99% 35201.31 9783.73 13677.97

* The PAT of NFCL is more than the PBT in financial 2005-06 is due to the deferred tax liability which is more than the income tax provision. Based on the data furnished in the above tables, the significant variances are analyzed and provided hereunder: 1. Quantity Produced: The Quantity Produced by NFCL is better than other companies. The data is given hereunder. Particulars Installation Capacity- Mts NFCL 990000 Chambal 1518000 NFL 3231000

139253 1855806 3432000 8 Quantity Produced 2005-06 137922 1901520 3344000 0 Quantity Produced 2006-07 132405 1797202 3351000 4 The above table shows that NFCL has better utilization of Capacity than other Companies. 2. Sales: Rs.In lakhs Particulars Sales 2004-05 Sales 2005-06 Sales 2006-07 NFCL 126639 145294.7 181524 Chambal 210677.6 193376.7 219175.1 NFL 172647.9 163393 164866

Quantity Produced 2004-05

250000 200000 150000 100000 50000 0 NFCL Chambal NFL Sales 2004-05 Sales 2005-06 Sales 2006-07

The sales of NFCL are increasing year to year but as compare to chambal sales it is low. 3. PBT Rs. In lakhs
Particulars PBT 2004-05 PBT 2005-O6 PBT 2006-07 NFCL 5525.07 5355.22 4603.81 CHAMBAL 21620.59 24109.99 20895.76 NFL 21454.51 17929.73 26367.23

4. PAT: The PAT of is company for the Financial year 2004-05, 2005-06 and 2006-07 is given hereunder: Particulars PAT 2004-05 PAT 2005-06 PAT 2006-07 NFCL 2952.7 6685.2 3171.13 Rs.In lakhs Chambal NFL 22062.5 16090.6 2 20312.0 11640.1 5 15113.1 17610

25000 20000 15000 10000 5000 0 NFCL Chambal NFL PAT 2004-05 PAT 2005-06 PAT 2006-07

% of PAT on Sales 2004-05 % of PAT on Sales 2005-06 % of PAT on Sales 2006-07

2.33 4.6 1.75

9.8 10.5 6.89

9.4 7.12 10.68

5. Percentage of PAT on sales:

30 25 20 1 5 1 0 5 0 1 2 3

%of PAT on Sales 2006-07 %of PAT on Sales 2005-06 %of PAT on Sales 2004-05

6. EPS: EPS of the three companies under study is given hereunder: Particulars EPS 2004-05 EPS 2005-06 EPS- 2006-07 NFCL 0.70 1.56 0.74 Chambal 5.35 4.88 3.63 NFL 3.28 2.37 3.59

EPS Chart:

12 10 8 6 4 2 0 NFCL Chambal NFL EP S- 2006-07 EP S 2005-06 EP S 2004-05

The EPS of NFCL is lesser than Chambal Fertilizer and National Fertilizer.

7. Receivables:

Particulars Receivables 2004-05 Receivables 2005-06 Receivables 2006-07 % of Receivables to Sales 2004-05 % of Receivables to Sales 2005-06 % of Receivables to Sales 2006-07

NFCL 22170.64 31124.31 31375.61 17.51 21.42 17.28

Chambal 50096.76 31910.86 52584.19 22.2 16.5 23.99

NFL 43505.61 82447.16 120571.6 25.4 50.45 73.13

The realization of sales of NFCL is better than the other two companies under

8. Dividend on Equity shares Rs.In lakhs

Particulars Dividend on equity shares 2004-05 Dividend on equity shares 2005-06 Dividend on equity shares 2006-07 NFCL CHAMBA L

7491.74 7491.74 7491.74

NFL -

9. Inventories
Particulars NFCL CHAMBA NFL CHAMBA L NFCL L NFL 18164 9194.09 8794.43

Rs.In lakhs

Loans Particulars 2004-05 & advances Inventories 2005-06 Loans &advances 2004-05 Loans Inventories 2006-07 &advances 2005-06 Inventories 2006-07

74620 30110.5 11093.2 35084.2 24530 10150.36 5776.2 24921.6812571.5 32449.5 24010 9783.73 8488.3 35201.31 34820.2

11. Loans and Advances Rs.In lakhs

12. Interest and Financial Charges: The major expenditure of the companies is analyzed. The details of the expenditure are furnished below. Particulars 2004-05 2005-06 2006-07 NFCL 14278.63 13098.74 13779.39 Chambal 9676.91 7511.14 9907.09 NFL 2222.48 839.71 1673.63

The expenditure under the head Interest and Financial Charges incurred by NFCL is higher than the other two companies.

FINDINGS:
1. The inter comparison Shows the following observations 2. The quantity sold from 2004-05 to 2006-07 has been reduced in case of all the firms. except NFL 3. Even though the quantity sold has been reduced, the value of sales has been increased during the period of study which indicates that the selling price has increased . 4. The changes in PAT of NFCL between 2004-05 and 2005-06,the sales increased by 14% and PAT increased by 126.5% that means increases at greater rate than change in sales which is favorable factor . from 2005-06 to 2006-07, the sales was increased by 24.9% but has been reduced by 47.4% which indicates that there may be increased in the cost of sales or other admin expenses 5. Between 04-05 and 05-06 ,incase Chambal & NFL sales were decreased but in case of NFCL sales were increased which is a favorable factor. Between 2005-06 &2006-07,inspite of increase in sales ,in case of all the 3 firms except NFL ,other two firms,the PAT has been reduced . 6. As the profit changes ,the EPS also changes in case of NFCL , inspite of increase in PAT ,in 2006-07,the EPS has reduced , it may be due to increase in the capital base . 7. In case of other two firms , the EPS has shown increasing tendency .In case of CHAMBAL ,even though there is decrease in PAT in 2005-06, the EPS has improved which is to be verified with the balance sheet as there is a profitability of reduction in capital base. 8. The quantum of receivables was shown increasing tendency fro m 2004-05 in all cases except in 2005-06 Chambal . this increase tendency indicates that the firms are adopting liberal credit policy.

9. Percentage of receivables with the sales In case of NFCL even though the sales increases ,the percentage of receivables with sales decreases , it may be due to improved efficiency in management of receivables. 10. Inspite of increase in the quantum receivables when compared with Chambal &NFL , NFCL has less percentage it reveals that it has better credit policy ie adopting efficient receivables management.

11. The decrease in interest charges may be due to decrease in debt base or may be due to decrease in rate of interest . 12. Except in quantity of sales ,in all indices , NFCL as shown unfavorable changes,the non payment of dividend from past two years inspite of having positive PAT is bad sign in the present context as the other companies are declaring dividends every year with an improved efficiency . it may be verified that the firm is utilizing the profits as investment. 13. Source of funds to avoid the floating costs or due to having better investment opportunities.

SUGGESTIONS AND CONCLUSIONS:

NFCL has to improve it sales in quantity and Rs. It must reduce its cost of sales & admin expenses. Must improve its PAT which is an indicator of its profitability. To improve the EPS ,The firm can utilize the cheap cost funds like debt. The decrease in interest charges may due to redemption of debt which can be compensated by raising new debts . the firm as to maintain the right mix of 2:1 as debt equity ratio.
The Financial cost of the company is higher compared to other companies under study. The Company should take measures to control Financial Cost which are more than the other Companies to improve its bottom line

The company has not declared any dividend in the last two financial years under study. It is suggested to declare minimum dividend to equity share holders so that the market capitalization will improve.