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JSS Dr.

D Veerendra Heggade
Institute of Management Studies and Research
Vidyagiri, Dharwad-4
(Recognized by AICTE New Delhi & Affiliated to Karnatak University, Dharwad).

Report on Major Concurrent Project

A STUDY ON FINANCIAL STATEMENT AND ANALYSIS

At

SHRIRAM TRANSPORT FINANCE COMPANY LIMITED
HUBLI.

By

SHIVANAND D.MUDIYALLAPPANAVAR

Reg no: - MBA08010049
MBA IV Semester

Submitted in partial fulfillment of the requirements for the
award of
Master of Business Administration.


Internal Guide External Guide
Dr.Anil Yargatti Mr. Zulfi Balegar
Asst. Professor Sales Manager
JSS DVH-IMSR Shriram Transport Co Ltd
Dharwad. Hubli.


April 2010



DECLARATION


I hereby declare that this Report on Major Concurrent Project titled
Financial Statement and Analysis, conducted at Shriram Transport
Finance Company Limited.submitted by me to Karnatak University,
Dharwad is a record of an original and independent study undertaken
during January-April 2010 under the guidance and supervision of
Mr. Mallikarjun Totagi (Asst. Branch Manager)

I further declare that this project has not formed the basis for award of
any other degree/ diploma of other University/ Institution.






Date : Shivanand D. M
Place : Dharwad



(Letter head of the company)

Certificate



This is to certify that Mr.Shivanand D.Mudiyallappanavar, a student of
MBA-IV Semester at JSS Dr. D Veerendra Heggade Institute of
Management Studies & Research, Dharwad has successfully completed
the Major Concurrent Project at our Shriram Transport
Finance Company Limited, Deshpande nagar,Hubli.on the subject titled Financial
Statement and Analysis, between 04-01-2010 and 15-04-2010.






External Guide
(Name and Designation)






Acknowledgement

At the outset, I would like to take this opportunity to acknowledge the
support and cooperation of all those who enabled successful completion of this
Major Concurrent Project.


I have immense pleasure in expressing my deepest gratitude to our
honorable Director Dr C S Rajagopal for his guidance, which goes a long way
to set my future career.


I would like to extend my sincere gratitude to Mr. Ramesh. Chalan
(Branch Manager) and Mr. Mallikarjun. Totagi (ABM) of Shriram Transport
Finance company and their team under whose guidance I undertook this project
and completed successfully.


I extend my thanks to Dr. Anil Yargatti and other faculty members of our
Institute for extending valuable advice and support during the project period.


Finally, I thank all those who cooperated directly and indirectly for
successful completion of the project.



Shivanand D. Mudiyallappanavar








Certificate



This is to certify that the Major Concurrent Project titled Financial Statement
and Analysis conducted at Shriram Transport Finance Company
Limited.Hubli. Submitted to Karnatak University, Dharwad is a record of an
original and independent work carried out by Mr.Shivanand
D.Mudiyallappanavar. (Reg.No.MBA08010049) under my supervision and
guidance.




_______________
(Name of the guide)

Internal Guide



_________________
Dr C S Rajagopal
Director





CONTENTS


CHAPTER Page
Acknowledgement
List of Tables
List of Charts
List of Figures
List of Graphs
List of Abbreviations
EXECUTIVE SUMMARY
1 INTRODUCTION.
2 A. ORGANIZATIONAL STUDY.
B. THEORETICAL BACKGROUND.

3 RESEARCH DESIGN -OBJECTIVES OF THE STUDY.
4 ANALYSIS, INTERPRETATION AND FINDINGS.
5 RECOMMENDATIONS (DISCUSSION)
6 CONCLUSION
ANNEXURE
BIBLIOGRAPHY





Components of Research Design
Review of Literature
Need for the Study and Statement of the Problem
Objectives of the study
Scope of the study
Methodology and Resources of Data
Sampling Techniques and Sample details
Overview of the report and Chapter scheme
Limitations of the study
Operational definition of the concepts







S.NO LIST OF TABLE PAGE
1 The showing area of operation in India
2 The table showing current ratio 54
3 The table showing of quick assets 56
4 The table showing inventory turnover ratio 57
5 The table showing debtors turnover ratio 58
6 The table showing working capital ratio 59
7 The table showing fixed assets turnover ratio 60
8 The table showing current assets turnover 61
9 The table showing gross profit margin 62
10 The table showing net profit margin 63
11 The table showing return on long term fund 64
12 The table showing operating expenses ratio 65
13 The table showing dividend payout ratio 67
14 The table showing earning per share 68
15 The t abl e s howi ng of Debt - Equi t y r at i o 69
16 The t abl e s howi ng of Capi t al Gear i ng
r at i o
71
17 The t abl e s howi ng Bal ance s heet of STFC
18 The t abl e s howi ng pr of i t and l os s account
19 The table showing cash flow statement



S.NO LIST OF CHART PAGE
1 The chart showing organization chart 25








S.NO LIST OF GRAPHS PAGE
1 The graph showing current ratio
2 The graph showing of quick assets
3 The graph showing inventory turnover ratio
4 The graph showing working capital ratio
5 The graph showing fixed assets turnover ratio
6 The graph showing current assets turnover
7 The graph showing of % of gross profit to net sales
8 The graph showing of % of net profit to net sales
9 The graph showing return on long term fund
10 The graph showing operating expenses ratio
11 The graph showing dividend payout ratio
12 The gr aph showing earning per share
13 The gr aph s howi ng of Debt - Equi t y r at i o
14 The gr aph s howi ng of Capi t al Gear i ng
r at i o


S.NO LIST OF ABBREVATION
1 STFC- Shriram Transport Finance Corporation
2 SPDCs-Security Post Dated Cheques
3 ICAI-Institute of Chartered Accountants of India .
4 SSWT-Shriram Social Welfare Trust
5 STOs-small truck owners
6 IAS- International Accounting standard









EXCUTIVE SUMMARY:-
Established in the year 1974, the Shriram Group, comprising 750 Branches and Service
Centres, in India's premier financial services chain. This company is the largest player in
Truck Financing and Chit funds in the Indian subcontinent.

The group, having an annual turnover of Rs. 6,000 crore (USD 1.3 billion), has a significant
presence in the Insurance Consultancy, Consumer Durable Finance and Stock Broking
businesses. It also has diversified investments in areas such as Information Technology,
Pharmaceuticals, Property Development, Project Engineering, Packaging and Auto
Components.

It employs over 11,000 employees across the countries that are committed to providing
excellent customer service. It also has over 75,000 agents nationwide who reach out to its
customers in even the most remote areas.

The Shriram Group's business ventures are built on providing the most efficient and
customer-focused services based on the simple principle of putting people first. This 'People
first' business philosophy has earned them unstinted customer loyalty through many
generations.
TOPIC OF THE STUDY: Financial Statement and Analysis.
NEED FOR THE STUDY:
Financial Analysis provides a frame work for business managers to break down the overall
performance of an organization, so that each individual element of the business can be
isolated and analyzed in turn.




STATEMENT OF THE PROBLEM:
The study has been taken in the organization for the purpose to interpret the financial
statement so that the strength and weakness of a firm as well as its historical performance and
current financial condition of a firm can be determined.

LITERATURE REVIEW:
The project report on A study on financial statement and analysis. I through under took the
project by the help of Shriram Transport Finance Company Limited. ABM Mr.
mallikarjun.Totagi Company wants to know the current financial position and performance
level.

OBJECTIVE OF THE STUDY:-
a). Financial Statement and Analysis.
The Firm how collect the Short term fund and Long term fund.
How liquid is the firm
Are the owners receiving adequate returns on their investment?
b). To determine the progress of the company.
c). To identify the financial strength and weakness the firm might have.
d). To measure the operational efficiency of the concern.

SCOPE OF THE STUDY:-
The financial statements are mirror which reflects the financial position and operating
strength or weakness of the concern. These statements are useful to management, creditors,
bankers, workers, governments and public at large. George O. may points out The
following major users of financial statements.
George O. :- Financial Accounting : Distillation of Experience.
As a report of Stewardship:
As a report of Fiscal policy:


To determine the legality of dividends
As guide to wise dividend action
As a basis for the granting of credit
As informative for prospective investors in an enterprise
As a guide to the value of investment already made
As an aid to government supervision
As a basis for price or rate regulation
As a basis for taxation
LIMITATION OF THE STUDY:-
It is only a study of interim reports.
Financial analysis is based upon only monetary information and non-monetary factors
are ignored.
It does not consider changes in price levels.
Changes in accounting procedure by a firm may often make financial analysis
misleading.
The company is very rigid in providing financial information
All the aspects of accounts are secret so they are not disclosed to anybody

FINDINGS:


The current ratio of STFC is higher than the standard i.e.(2:1) because of low current
liabilities, and higher current ratio shows that the company has good liquidity.

The quick ratio of STFC has been increase over the years. i.e. above the standard.
Though the quick ratio has declined in the year 2008-09 the company is improving to
reach the standard.

As the Debtors Turnover has increased in the year 2008-09 as compared previous years
And also the number of days in which the debt due is collected has increased over the
year. Year on year debtors turnover ratio has been increased this because the firm has
Good credit management.


RECOMMENDATIONS:


Though the company has good liquidity its current ratio is higher than the standard
i.e.(2:1) because of low current liabilities, and higher current ratio, therefore the
company must work to reach the standard.

Though quick ratio of STFC has been decreased over the years. i.e. below the
standard. Therefore the company should work to reach its standard

Since the inventories are not selling fast and they remain in the ware house for long
time and the company is not managing its inventory efficiently. The company should
sell its inventory fast and manage its inventory efficiently.

The firm should have control over its operating expenses so that it can increase its NP
margin.


























INTRODUCTION:

Indust ry prof i l e:

Like any other financial product, sales of giving finance is largely dependent on how well
company plans out their marketing strategies which helps to increase visibility and build a
distinct brand image. Looking at the intense competition it has become very necessary to
make a name for themselves in customers mind. So the opinion of the customer plays an
important role in making marketing strategies. Hence this study will provide the company to
what the customers perceive about STFC. It will also help to find out the brand image of
STFC in the minds of customers.

India is emerging as a global automobile giant. In recent years this industry has pioneering
efforts in adopting modern technology and allowing the entry of foreign players. This is well
supported by economic conditions particularly in financial sector and in foreign direct
investment. During the last decade, conscious efforts have been made to fine-tune state policy
to enable the Indian automobile industries realize its potentials to the fullest. The freeing of
the industry this restrictive environment has helped itself to global development.

Increasing competition as a result of liberalization has led to customers modernization as
well as international standards. Moreover, auto finance with aggressive marketing strategies
has played a bid role in boosting the automobile demand. Commercial Vehicles, widely
considered being the economys barometer, have had a good start for the year.

The auto finance industry is expected to grow at 18.6% till 2010. Of that used vehicles is
expected to grow at 27%p.a while new car and UV would grow at 18.9% and 13.8%.

PRODUCT:

We, at Shriram Transport have financed commercial vehicles for more than three decades.
These also included financing of tippers, tractors and passenger vehicle. With shortage of
labour the transportation is becoming more mechanized with forklifts, cranes, loaders etc.
With increased economic activity many of our customers have ventured into newer business
opportunities like sub contracting construction activity, buying tractors which are again used


for lots of commercial activities along with agricultural activities. Similarly many of our
customers also ventured in to passenger vehicle operation as road infrastructure has
improved.
With the clear bifurcation of products, the process of learning about the products and
the specialist approach in marketing them has enabled us to clearly identify and segregate the
potential growth from each product vertical. The new products would explore higher business
from the same set of customers. The verticals are designed in a way to ensure tapping of a
similar customer base of FTUs in the other segments such as passenger commercial vehicles,
tractors, farm equipment, construction equipment, etc.

PEOPLE:

We have traditionally believed in a home-grown race of professionals. However, in order to
strengthen our product knowledge, we have been recruiting senior personnel from the
industry across levels. Since the personnel, having worked in the industry would have
requisite knowledge on the products; their expertise would come in handy for the
development of new products along with the refining of existing ones. In addition, we have
also developed training programmers that train these employees in understanding the norms,
processes and system in Shriram.

CUSTOMER PERCEPTION AUDITS:

Every time you lose a customer, theres why. Do you really know what your customers think
about your business, your offering, or your services? Are they having good or bad
experiences? Are you equipped with the insight you need to improve customer satisfaction
and loyalty? And make the changes that matter. Entrepreneurs are often too busy to really
take the time to tap into what customers are really thinking. But customers hold the key. They
know what you need to do to dramatically increase the value you deliver to them. Why keep
this data a secret? Uncovering and understanding it will give you what you need to be the
best, generate higher sales and referrals and earn repeat business.

Customer Perception Audits by Coach Kevin captures information on the experience your
customers are having analyzing the data. And provides meaningful, actionable


recommendations on short-term and long-term improvements, with the goal of closing the
gap between the service that is delivered and the services that customers expect.

Opening of economic and liberalization in trade in the country brought a sea of change in
customers perception of buyers and sellers relationship. The customer today is not only very
demanding but also likes to know the relationship between the suppliers of goods and also
likes its relationship with manufacturer or principal and its antecedents. It is on this
relationship depends the guarantee and warranty terms to which the customers is entitled. A
customer expects trouble free service during the guaranty period. Thereafter it is expected
that a product will last to its full productive life with minimum down time and the vendor will
provide the required support service to ensure that the customer is not put to trouble.

For adopting Japanese management or for customer oriented management we should first
have the willingness and a determination much above the party personal gains. It needs an
attitudinal change. Looking towards present socio-economic and political conditions such
change is not foreseen in immediate future. Market forces will have to play the game with
only customer in mind if India has to make global presence. There is little time in hand as we
are having challenges from all sides of small nations like Korea, Taiwan, Singapore etc, have
already surpassed us. These nations are working on a vision and resultant plans. It is the right
time for the market players to pamper the customer. As the saying goes, the four deadly sins
of corporate management =-complacency, blondness, megalomania and greed. Fit everything
else is overhead.

Remember that a customer always buys a product or services with a lot of expectations
which he has derived from the promotional inputs of the company or other sources including
word of mouth. So a customer would be satisfied when performance is equal to expectation
while, would not be satisfied when performance does not match with expectations. Now this
expectation is what has been derived from perception. Perception is not good or bad, right or
wrong, it is just the way someone judges an experience based on their value system of what
they believe should happen. Since our people are unique, each of their perceptions is unique.
On the other hand each situation is a point contact with an employee that will tell the
customer a truth about the companys idea of customer service. Each situation will create
expectations of what companys idea of customer service. Each situation will create
expectations of what the next experience will probably be like.


HISTORY AND MILESTONE:
APRI L 2007:

Shriram group attracts largest venture capital investment in Indian non-banking

Financial sector, from overseas.

APRIL 2005:

Shriram Group attracts largest Venture Capital Investment in the Indian non-banking
financial sector, from Overseas.

JULY 2004:

UTI Bank picks up equity stake in two Shriram Group companies

17MARCH 2003:

Shriram Investment Limited received the Mother Teresa Award for Corporate
Citizenship.
DECEMBER2002

Shriram Group enters into strategic alliance with Citicorp Finance and

Cummins Auto Services

31AUGUST2002

Shriram Group ties up with UTI Bank for Retail Truck Financing
Scheme to offer low cost loans for purchase of new or used trucks to transport
operators.
7MAY2002
Ms. Akhila Srinivasan awarded as the "Outstanding Woman Professional" for the year
2002


4FEBRUARY2000
Shriram Recon Trucks incorporated as India's first corporate network for selling
reconditioned used trucks.
15DECEMBER1999
Medicorp, the flagship company of Shriram groups pharmacy division became the
first Indian company to win the Indian Drug Manufacturers Association
27 MARCH1986
Shriram City Union Finance Ltd. Incorporated for cars and two-Wheelers.

12MARCH198

Shriram Investments Ltd. Incorporated

13JUNE1979

Shriram Transport Finance Company Ltd. Incorporated

























A) . ORGANIZATION STUDY

COMPANY PROFILE:


VISION, MISSION AND VALUES:
Helping create wealth, empowering people through prosperity, putting people first.
The Shriram Group set out with the objective of reaching out to the common man with a host
of products and services that would be helpful to him in his path to prosperity. Over the
decades, the Group has achieved significant success in executing this objective and has
created a tremendous sense of loyalty amongst its customers.

Efficiency in operations, integrity and a strong focus on catering to the needs of the common
man, by offering him high quality and cost-effective products & services, are the values
driving the organization. These core values are deep-rooted within the organization and have
been strongly adhered to over the decades.
The group prides itself on its perfect understanding of the customer. Each product or service
is tailor-made to perfectly suit the needs of the customer. It is this guiding philosophy of
putting people first that has brought the Group closer to the grassroots and has made it the
preferred choice for all financing requirements amongst the customers.
NON-BANKING FINANCIAL COMPANY (NBFC) A GENERAL SCENARIO
Non-Banking Financial Company (NBFC) is a company registered under the Companies Act,
1956 and is engaged in the business of loans and advances, acquisition of
shares/stock/bonds/debentures/securities issued by Government or local authority or other
securities of marketable nature, leasing, hire-purchase, insurance business, chit business but
does not include any institution whose principal business is that of agriculture activity,


industrial activity, sale/purchase/construction of immovable property. A non-banking
institution which is a company and which has its principal business of receiving deposits
under any scheme or arrangement or any other manner, or lending in any manner is also a
non-banking financial company (Residuary non-banking company).
DIFFERENCE BETWEEN BANKS & NBFC ?
NBFCs are doing functions akin to that of banks; however there are a few differences:
i. A NBFC cannot accept demand deposits;
ii. It is not a part of the payment and settlement system and as such cannot issue cheques to
its customers; and
iii. Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case
of banks.

COMMERCIAL VEHICLE:
It is the funding of products include, trucks, buses, tippers, light commercial vehicles,
pickups, 3 wheelers, etc.
Range of services: funding of new vehicles, refinance on used vehicles, balance transfer on
high cost loans, top up on existing loans, Extend product, working capital loans & other
banking products.
Who are eligible?
Any individual / Partnership firm / company with more than 2 years business experience.
Ownership of a vehicle is not mandatory. Funding extended to First Time User, Transporters
and Captive Consumers.




How much?
Loan amount can vary from a few thousands to crore depending upon the specific
requirement.
Funding can be up to the extent of 100 % of the chassis, body funding can be extended on
special requirement & on the past experience.
Generally undertaken is Hypothecation funding. They are also taking over an old
high-interest loan and converting it into low interest loan.
Repayment:
In general repayment period is of 3 -4 years, however depending on the nature of the deal the
tenure can vary from 6 - 60 months. The repayment schedule & the amortization schedule is
sent on disbursement of the loan.
Interest:
Interest is charged on a flat rate based on the scheme applicable for the particular product.
FARM EQUIPMENT LOANS:
Farm equipment loan has also a big chunk in the vehicle finance.
Eligibility:-
Agricultural Users
Any individual aged above 21 years at the beginning of the tenure and below 65 years
by the end of the tenure; involved in agriculture for the last 5 years.
Having minimum 2 acres of land with its value at least twice the loan amount.
Staying in the same place for at least 3 years.
Having an annual income equal to the yearly instalment
Mortgage of land of 2 to 3 times of the loan amount

Commercial Users:

Any individual aged above 21 years at the beginning of the tenure and below 65 years
by the end of the tenure; involved in business for the last 3 years.
Owns at least one tractor or commercial vehicle.


Owns either a house or an office or at least 2 acres of land.
Has a permanent phone connection either at office or at home.

Loan Amount:
The loan amount varies from customer to customer depending on the valuation of the land
being mortgaged, income of the customer and tenure desired. A maximum of 100% of the
cost of the tractor, 75% of the cost of the trailer and 50% of the cost of the implements is
funded.

Documentation:
Agricultural use
Application form with photograph of the customer and all co applicants and/or
guarantor.
Performa Invoice of the asset to be funded from an authorized dealer.
Land records of the borrower/s.
Land valuation and title search report of the land.
Residence proof of the borrower/s.
Identity proof of the borrower/s.
Signature verification of the borrower/s.
Loan agreement, duly signed by the applicants and guarantor.
2 SPDCs(Security Post Dated Cheques) for entire tenure.

Commercial Use :
Application form with photograph of the customer and all co applicants and/or
guarantor.
Performa Invoice of the asset to be funded from an authorized dealer.
Proof of Income (any of the following) :
Billing statement for the past one year
Latest Income tax Return
Last 6 months bank statement
Residence proof of the borrower/s.
Identity proof of the borrower/s.
Signature verification of the borrower/s.
Loan agreement, duly signed by the applicants and guarantor.


2 SPDCs(Security Post Dated Cheques) for entire tenure.

Rates & Fees:
The rate of interest varies from customer to customer and depends on various factors like
land holding, loan amount, viability of the proposition and the underlying collaterals
provided.

Interest:
Interest is charged on a monthly/quarterly/half-yearly reducing balance basis as the case may
be. Every instalment that is paid has a component of principal as well as interest. Interest is
charged on the principal outstanding after every instalment payment.

TWO WHEELERS:
Two wheeler finance is comparably Simple, Friendly and Quick.
Loan Schemes are available from Rs.7500/- onwards to Rs.150000/- in easy instalments over
a period of 6 to 36 months.

Eligibility Criteria:
1. Salaried Individuals
2. Self Employed Individuals
3. Pensioners, Housewives & Students
4. Partnership Entities
5. Private Limited Companies
6. Public Limited Companies

Interest rates:
Interest rate is charged on a monthly reducing balance.

Documents:
Identity Proofs
Residence Proof
Income Proof
Post Dated Cheques
Copy of Credit Card


CC billing statement
Bank passbook/Statement
No objection Certificate

AWARDS AND RECOGNITION
Recipient of the social responsiveness awards instituted by Business world Compaq at
national level under the auspices of FICCI, Delhi.

Adjudged as the third prize winner for having render commendable service in the areas of
social welfare and rural development.

Ms. Akhila Srinivasan receiving the social responsiveness Award instituted by Business
World Company from the Honble Vice President of India Krishna Kant in the year 1999.
Recipient of outstanding woman professional for 2000 01 by FICCI FICCI Ladies
organisation (FLO). The award was given by Ms. Sheila dixit Chief Minister Delhi. Mother
Teresa award for corporate citizenship instituted by Loyola institute of Business
Administration (LIBA) Chennai, 2002.During the year, Shriram Transport was a recipient of
two prestigious awards Silver

Silver Shield from ICAI:
The company was awarded Silver Shield for Excellence in Financial Reporting by the
Institute of Chartered Accountants of India (ICAI). The Annual Report and Accounts for the
year ended March 31st, 2008 have been adjudged as the second best amongst the entries
received under the Banking and Financial Institutions category.

Best PE-Backed Company Award for 2008
The company also received Best PE-Backed Company Award for 2008. This award was
given on the basis of research-cum survey conducted by Venture Intelligence among
members of the Private Equity/Venture.

SOCIAL WELFARE INITATIVES
They have always believed in delivering financial value with a human face. As a company
firmly grounded up a middle class ethos, we take our social responsibilities very seriously.



Their corporate Social Responsibility (CSR) initiative started with the Shriram Social
Welfare Trust (SSWT) that was set up in the year 1993. SSWT is today active in the
following areas.
Orphan and destitute care
Primary education for the rural poor
Micro credit financing through self- help groups for the marginalized
Empowerment and enlistment of women in villages.

OPRHAN AND DESTITUTE CHILDREN:
To swiftly help the poor and the needy to be self reliant and live with dignity, not charity. The
primary focus and beneficiaries of the Trusts activities are.
a. Abandoned neglected and destitute children.
b. Juvenile delinquents in need of care and protection.
c. Children of poor and illiterate parents.
d. Disadvantaged and marginalized section of women, particularly rural women

MICRO CREDIT FINANCING THROUGH SELF-HELP GROUPS FOR THE
MARGINALIZED WOMEN IN VILLAGES.
a. Launch of Shriram Social Welfare Trust (SRDP) to create and develop
b. Social and human capital among the poor.
c. Micro credit financing through self help groups in 156 villages in Tamil Nadu, Andhra
Pradesh and Karnataka.

PRIMARY EDUCATION FOR THE RURAL POOR:
The trust runs four schools in rural areas at Thiruneermalai, Pallikaranai, Moovarasampet in
Tamil Nadu and inn Prakash Nagar, Guntur Dist. In Andhra Pradesh. Over 2000 children
receive free education. Schools offer education up to class VII and student will progressively
move up to higher secondary level.

FUTURE PLANS:
a. To start six primary schools for the rural poor in the villages of Andhra Pradesh.
b. Government of Andhra Pradesh to hand over 3.5 acres of land to SSET in six districts.
c. Immediate Plans: to start two schools in Cudapah and Guntur districts in June 2005.



LONG TERM BENEFITS OF THE PROGRAM:
a. Reduction in rural indebtedness
b. Bank/institutional credit for investment in income generation activities.
c. Improved household food security round the year, better nutrition.
d. Improved household income.
e. Empowerment of Women.
f. Greater leverage and status of SHG members in local communities and with the state

THE FUTURE ACCORDING TO SHRIRAM
1. To enlarge the scope of micro credit financing activity through NBFC Shriram
Investment Limited.
2. To extend activities to Bihar, Kharkand, and Eastern Uttar Pradesh.
3. To lend credit at low interest rates to 3 lakh women below poverty line in the next 3
years.

NATIONAL AWARDS WON
Business World Compaq award fota Social Responsiveness instituted by FICCI from
the Honble Vice President of India Mr. Krishna Kant on 1999.
Mother Teresa award for Corporate Citizenship instituted by Loyola Institute of
Business Administration (LIBA), Chennai in 2002.

PRODUCT PROFILE
1. TRUCK FINANCE
1. Shriram Truck Financing Companies. The wheels of progress.
2. Largest NBFC in the country exclusively engaged in financing of heavy commercial
vehicles.
3. Monopoly position in financing of used vehicles.
4. All India presence with a branch network of 260 offices and employing over 4000
people.
5. Growing at the rate of 30% per annum.
6. Funds managed Rs 6000 crores.
7. Equity investors - Citicorp,, UTI Banks, Reliance Capital and FMO Netherlands have
added tremendous value and strength.


8. Venture capital firm Chris capital joins as a strategic partner by acquiring 21% equity.
We entered the Consumer Durable Finance business in early 2002 through 'Shriram
City Union Finance Ltd., the consumer finance arm of the group. Within a short span of 2
years, we have managed a portfolio of over Rs.584 crore.
Our monthly business amounts to over Rs.25 crore in individual loans, ranging from as little
as Rs.8, 000 to Rs.1, 00,000, and with tenures ranging from 12 months to 36 months
Since its inception, we have financed over 2, 15,000 white goods and two-wheelers, with
over 90% of the business arising out of the non-metro markets.
This financing is backed by lines of credit extended by ICICI Bank, UTI Bank and
Development Credit.STFC helps meet customer needs end to end, in the transport lifecycle.
Our products (pre-owned and new) offerings to small truck owners (STOs) and first time
(FTUs) includes:

MAIN PRODUCTS
Commercial vehicle finance
Passenger commercial vehicle finance
Multi utility vehicle finance
Three wheeler finance
Tractor finance
Construction equipment finance

OTHER PRODUCTS
Tyre loan
Engine replacement loan
Working capital loan
Co-branded credit card
Freight bill discounting


Customer profile:

STOs and FTUs have been traditionally under-penetrated as banks have been reluctant to
lend to these segments due to the under-developed banking habits of the customers, mobile
nature of the hypothecated assets and inadequate legal documents available among customers
for verification of their creditworthiness. Further, earnings of these truck owners are
somewhat volatile as they depend on brokers and LTOs for their freight and ~95% of their
contracts are spot in nature. Therefore they are not entertained by the large banks and other
NBFCs. Based on our relationship based approach, we at Shriram Transport have continued
to remain the market leader in this segment. We have also been instrumental in making this
segment one of the most sought after by the banks and large NBFCs in the recent times.

At Shriram Transport, our people are the most critical resource. Being in a relationship-based
business, people are not only the originators but also the appraisers and managers of the
transaction throughout its life cycle.

At Shriram Transport, our employees have initiated, driven and sustained our growth across
decades. With a blend of youth and experience, of the average age of 28 years, we have
evolved into one of the most respected knowledge-led companies in the industry. Our
workforce comprise of more than 12,100 employees across India. Our ability to hire and train
the locals has enabled us to acquire thorough territorial and geographical knowledge. Our
performance linked remuneration scheme resulted in the employees delivering their best and
also securing our asset quality across the various cycles.


THE GROUP COMPANIES ATHAT CATER TO TRUCK FINANCING NEEDS A
DIFFERENT PARTS OF THE COUNTRY ARE

Shriram Investments Limited in the South Shriram Transport Finance Company Limited in
the West Shriram Overseas Finance Limited in Northern/Eastern regions in India.





OUR EQUITY PARTNERS
Citicorp financial services Ltd. An arm citigroup has taken 14.9% equity stake in Shriram
investments Limited and Shriram Transport Financial Company Limited in 2002.
FMO the Dutch Government owned financial services company has recently picked up equity
stake in SIL and STFC. The company has extended a long term debt of 6 million Euros each
to the two companies.
Reliance Capital has also taken an equity stake in the two companies at a premium.
AN OVERVIEW OF THE SHRIRAM GROUP TRUCK FINANCING BUSINESS IN
INDIA
Table no 1: The showing area of operation in india
AREA OF OPERATION ALL INDIA
Branch offices 327
Employees 5000
Depositors 12.20 lakhs
Agency Force 15,000 plus resident representatives
1300.
Funds managed Rs. 6000 crores
Net worth Rs.
Stock Listing Major exchanges including the BSE
and the NSE.

CONSUMER FINANCE:-
We entered the consumer Durable Finance Business business in early 2002. Through
Shriram City Union Finance Ltd. The consumer arm of the group. Within a short span o 2
years, we have managed a profile of over rest 684 crores in this business.
Our monthly business amounts to over Rs. 25 crores in individual loans, ranging from
as little as Rs.8000 to Rs. 100000 and with tenures ranging from 12 months to 36 months.


Since its inception we have financed over 215000 white goods and two wheelers with over
90% of the business arising out of the non metro markets.
This financing is backed by lines of credit extended by
ICICI Band, UTI Bank and Development Credit.

CHIT FUNDS:-
Shriram chits prosperity
Shriram chits are the largest chits fund in the country. We have grown to become a trusted
household investment option. The growth registered by Shriram Chits recent years not only
indicated the usefulness of this savings instrument, but is also a reflection our customers trust
in.
Chits one of the earliest investment instrument known to man, were founded by the
enlightened communities of India. These have, ever since, worked to the advantages of
communities that are batting scarce capital resource. Shriram chits started its operations in the
year 1974 with a single branch that has quickly grown into trusted household name for
making chits a viable form of saving and borrowing to all sections of the social.
A Shriram chit operates in four states. Tamil Nadu, Andhra Pradesh, karnataka and
Maharastra, where has a reputation for timely disbursement of funds and excellent customer
services which differentiates it from other companies. Using state of the art computer
systems/networks and a transparent accounting system, Shriram Chits have transformed this
contemporary method of savings into an attractive personalised to banking system.


GENERAL INSURANCE:-
Shriram group has adopted a two strategy in this segment.
1. Broking arm Armour Consultants floated in year 2002
2. Retail Marketing Arm: Ski marketing floated in year 2001.


ARMUR CONSULTANTS PRIVATE LIMITED: INSURANCE EXPERTS AT YOUR
SERVICE
Amour consultant is engaged in insurance broking in corporate insurance markets and has
already aggregated business volumes in excess of Rs. 200 crores ($ 44 million) in premiums.
Amour consultant comprises a team of distinguished professionals from insurance, finance,


law and other management discipline, who have vast business and managerial experience.
The company has handled major claims for renowned clients. There have been several claim
cases that were won even in the arbitration stage.
The tern at Armun Consultants begins with an in depth evaluation of the client
companys business environment. The company risk profile is then studied. Based on the
results of these evaluations. The team then suggests the most cist effective, integrated
insurance package that is perfectly suited to the companys risk profile. The company plans
to extend its customer base of the existing 500000 policy holders to cross the 1 million mark
by the end of financial year 2005-06.

LIFE INSURANCE:-
The shriram group plans to enter the life insurance segment 05. Am application has already
been filed with the IRDA for the same. We are also exploring the possibilities of
collaborating with a foreign partner in this venture. We expect to be a major player in this
very fast growing sector, as a natural corollary of business philosophy and expertise.

STOCK BROKING:-
Our stock broking arm operates under the insight share Brokers Pvt. Ltd. It is a member of
the National Stock Exchange, India and the Multi Commodity Exchange. This unit has
expended the network by 150% over the last year and today it has more than 230 terminals
spread across the length and breadth of the country. It has a retail customer base of around
50000. The company launched its new products like Derivatives and commodity trading in
early 2004.
A QUICK LOOK AT SOME OF THE SALIENT FEATURES
Limits of all clients are fixed at a pre-calculated level.
This is beneficial to them in the long run as it prevents overtrading.
A timely payments and direct share transfer facility from NSE.
Adequate risk control research support.
The clincher. Proactivate and preventive risk control.





ORGANISATION CHART
BOARD OF DIRECORS
Chart no1: The chart showing organization chart
SHIRAM TRANSPORT FINANCE COMPANY LIMITED
R Sridhar Managing Director
S. Venkatakrishnan Executive Director
Umesh G Revankar Executive Director
K.R.C Sekhar Director
S. Ranganathan Nominee of Citicorp Finance (India) Ltd.
Dr. T S Sethurathnam Nominee of IREDA ltd.
K. Prakash
Company Secretary & Compliance
Officer

Hi ghl i ght s of 2008- 2009

19.3% increase in Assets under management

48.7% Increase in total income

57.1% increase in profits after tax

48.6% increase in earnings per share

2,502 employees added



49 branches opened

2.14% gross NPA

0.83% net NPA

Challenges:
1979: The challenge of getting started

1980s: The challenge of managing investor perception and obtaining Low-cost funds

1990s: The challenge of sustaining our business model.

2000-08: The challenge of scaling up operations.
2008-09
Meeting challenge is an ongoing, undeterred exercise. Challenges they exist across stages
in different terminologies, forms and magnitudes of the perceived and the real. It becomes
easier to face them when one begins to acknowledge their presence, as realizing a potential
risk or challenge is the first step towards resolving it. At Shriram, the most effective way to
mitigate risks and fears were in creating a knowledge-led organization.
Asset quality
Asset quality till date has been our biggest challenge. When we started our business,
our asset quality was perceived risky as we funded a niche customer base and an asset
segment mostly dealt in the unorganized sector. Therefore it was important for us to maintain
our asset quality. With the increase in volumes, the asset quality became more important, as it
had become our forte and strength. During 2008-09, with the global banks and financial
companies going bust, the challenge of maintaining the asset quality was the same old story
for us at Shriram Transport. However, yet the fundamental differentiators remained the same
on our part, While the asset financing companies used to fund the vehicle manufacturers, we
chose to fund the aspirations of our customers. We financed First time users and Small road
truck operators, a segment that was traditionally funded by Unorganized sector and had least
or no banking habits, since a large majority of our customers used the vehicles to earn their
own livelihood, their mobility was mitigated with a relationship-based appraisal as well as
collection approach.



The company chose to become a partner of its customers in their journey of progress. It
involved providing them with advice and additional products, resulting in strong ties and a
sustainable business model.

The company expanded its product base from pre-owned commercial vehicles to pre-owned
passenger vehicles, 3-wheelers and construction equipment as well as new commercial and
passenger vehicles.

Local representatives were hired for every branch office and strong ties were forged with the
truck associations and most importantly the customer.

A no-fuss company-customer communication model was set up, by ensuring the
representatives who refer a particular case stay responsible for the quality of assets deployed.
It is a combination of these factors that enabled us to maintain minimum
delinquencies across geographies and cycles. In the last five years, our Gross NPAs have
never crossed 2.2%. This enabled us secure the confidence of the investors and stakeholders.

A history of overcoming challenges

At Shriram Transport, we have demonstrated our ability to meet and counter challenges
at every step. This has manifested itself in the following:
Operating in a novel industry.

Funding a segment perceived risky by the rest of the industry.

Formulating an asset valuation model.

Increasing the organized presence in an unorganized industry

Attaining a significant scale in the business

Doing so profitably through affordable funds.


Thus meeting challenges is an imperative to our survival and not just an enabler of
growth.

Innovation:
1979: Funding pre-owned trucks in organized sector

1980s: Funds from retail deposits, a relationship-based appraisal model

1990s: Instituting a unique asset valuation model

2000-08: Truck Utsav, partnership with private financiers, banker for
Truckers

2008-09:
At Shriram Transport, innovation has hardly ever been an event. It has always been a way of
life. Right from setting up a unique business model, to operating in a segment lead by
unorganized players, to setting up credible processes and systems, to managing cash
collections efficiently across geographies the list is exhaustive and endless. To say the least,
the very fact that enabled us survive and become a leader in the industry segment was and
continues to be our ability to innovate.

A history of innovative solutions
We created a business that had no peers in the organized sector; therefore innovating
processes and systems was a necessity.
We funded a segment that was traditionally perceived to be risky by the existing large
NBFCs and banks; therefore to ensure better asset quality and growth, we innovated a
relationship-based appraisal and collection model the first in the organized segment. The
pre-owned trucks were valued vaguely, based on the relationship and agreement between
buyer and seller. This irrationality would often result in overpriced assets resulting in longer
time to plough back profits for the buyers from the assets and would eventually affect their
repayment capacity; therefore we created a unique valuation model to avoid overpricing in
the segment. Serving a segment with least or no banking habits, collection and management
of cash required innovation to ensure safety, accountability and efficiency. The ability to


innovate has been our biggest asset and it has resulted in our growing against all odds in the
last three decades.

Growth:
1979: Started operations

1980s: Income and AUM increased @ CAGR of 65% and 66%
respectively

1990s: Income and AUM increased @ CAGR of 45% and 35%
respectively

2000-08: Income and AUM increased @ CAGR of 51% and 72%
respectively
2008-09
Growth is as much a state of the mind as in the balance sheet. Sure, our business acumen
allows us to grow year on year. But more than that, its our ability to make a positive
difference in the lives of our customers that drives growth. We ensure that their aspirations
are transformed into reality. For us at Shriram Transport, we believe that growth is a by-
product of addressing a larger cause of including everyone in its fold.

A history of consistent performance
In the first 25 years of our existence, we focused on creating a fundamentally sound
business. In the process we attained an asset under management of Rs. 1,701 crores as on
31.03.2004. In the last five years, we have grown at a CAGR of 69% to reach an AUM of Rs.
23,281 crores and emerge as the leading asset financing NBFC in India. In the process, we
have a customer base of more than 600,000 across India and a branch network of 479. In
addition, we have developed a respected brand and a corporate environment based on highest
standards of transparency, performance, accountability and ethics. So in true sense, for us
growth has been much more than the numbers can reveal.





SWOT ANALYSIS OF STFC
Strengths:
The largest asset financing NBFC in India
Unique business model
The only player in the organized sector to offer pre-owned commercial vehicle financing to
FTUs and SRTOs
Pan India presence covering over 600,000 customers
Strong, stable and experienced management team
Extensive expertise in asset valuation
Strong ability of raising resources from multiple sources Strong financials

Weakness:
Business segment heavily dependent on economic activity
Opportunities:
Tap more customers through partnership with private financiers
Truck Bazaar to enable tapping the customers at the entry point
Passenger commercial vehicle financing
Second hand tractor financing
Freight challan discounting, working capital loans, tyre loans, etc.
Construction equipment financing

Threats:
Maintaining relationships and asset quality, while achieving scalability.

News issues of STFC

Shriram group has acquired the assets of GE Transportation Financial Services, part of the
Indian operations of General Electric (GE), for Rs 1,200 crore.
This acquisition will help the south-based financier of commercial vehicles and construction
reach a new set of customers.



In an interview with CNBC-TV18, R Sridhar, Managing Director of Shriram Transport
Finance says the acquisitions would help improve the net interest margins (NIM) and add to
bottom line going forward. The acquisition would be funded through borrowings.

Here is a verbatim transcript of an exclusive interview with R Sridhar on CNBC-TV18. Also
watch the accompanying video.

Q: Can you confirm for us whether you have indeed acquired GEs transportation finance
service and what exactly has the cost been for you?

A: The portfolio which we are acquiring is about Rs 1,200 crore. This consists of around Rs
1,000 crore of commercial vehicles where we are actually engaged in and also around Rs 200
crore of construction equipment portfolios. So this we have been negotiating for a long time
and it was concluded just now.

Q: What has your acquisition cost been? Is this a profitable acquisition? Is it a profit making
entity?

A: This is a portfolio acquisition that we have taken over the customers. The receivables and
the assets, which the company wanted to sell because they are getting out of this business is
what we have purchased. With regards to the cost definitely its attractive. We have been in
segment truck financing. Its definitely attractive than what the yields we are getting in our
business.

Q: What challenges did the year 2008-09 pose on the companys asset quality? Was the
company also affected? What initiatives did it undertake during the year to emerge stronger?
A: Maintaining asset quality was crucial during the year, as in all the years. However, since
the year witnessed an economic crisis that stemmed from the consequences of worsening
asset quality in the books of global banks and financial institutions; the fundamental
importance of investing in the right kind of assets and funding right kind of customers was
reinstated. With the global liquidity crises, a recessionary phase was experienced in terms of
corporate and government spending, resulting in delays and deferment of infrastructure
activities. The domestic consumption was affected and so was the case with exports. The


purchase decisions were deferred resulting in slowdown in new commercial and passenger
vehicle sales.
We were not directly affected by the events during the year in terms of consumer demand or
asset quality. We performed well in the first two quarters and our assets grew 52% y-o-y.
Third quarter onwards, the global slowdown was starting to extend within India. In the wake
of depleting economic environment, we took a stand to proactively curtail our lending and
target a responsible growth against a rapid one. We ensured that protection of the asset
quality was the foremost requirement in every deal. The customers equity was increased,
leading to lower LTV. Additional credit appraisal processes were also introduced. In the
mean time, we also focused on tapping consumer base in related segments of pre-owned
passenger and 3-wheelers.
Therefore, I would say, the challenges during the year didnt derail our growth plans but we
viewed it as an opportunity to address and improve our asset quality.
The results were the same a gross NPA of less than 2.2%, achieved during one of the most
challenging years globally.

Q: Are you satisfied with the companys performance in 2008-09?

A: Our performance in 2008-09 should be seen in context with the economic and industrial
performance in our country. The year under review has been one of the most challenging
years for the world at large. To post an increase of 43.7% in net income and 57.1% in net
profits is truly satisfying. During the year under review, our focus was to protect the asset
quality and to ensure low cost funds. As a result, we consciously took a decision to strengthen
our lending process and therefore curtail our disbursements. And as a result, our assets under
management increased by 19.3% and our gross NPAs stood at 2.14%.

Q: What new challenges did the year under review pose to the company in relation to
availability of funds? What was the companys strategy to ensure access to lower cost funds?
In a year marked by widespread liquidity concerns globally, there were two major
challenges for us:

1. To procure funds since liquidity was a major issue with the banks and financial
institutions, the lending activity was curtailed to the minimum during the year.



2. To ensure a competitive interest rate - Funds at competitive costs are as vital as the
deployment of funds at higher yields. Especially in our business, where the liabilities are
procured at both fixed and floating rate and the funds are deployed at fixed rate.
In wake of global liquidity crunch, we undertook an organization-wide initiative to identify,
analyze and incorporate additional efficiency in our cash management and internal accruals.
The idea was to reduce dependence on high cost funds. We procured funds from large banks
and FIs during the year. We opted to dedicate a higher focus on generating funds through
securitization of our assets, and mobilized Rs. 3,124.98 cr through this initiative. The
deployment of funds was also critically scanned to ensure a strong fund and asset position.

Q: What is the rationale behind partnering with smaller private financiers, when the company
can dominate in the segment by opening dedicated centers in these geographies?
A: The private financiers dominate geographies on account of local knowledge and existing
relationships. With the higher scale of operations, we at Shriram Transport are also faced
with a challenge of preserving our asset quality, through maintaining a relationship-based
model. Therefore, it was a prudent decision to grow with partnership and not through
competition. While competition would restrict growth, partnerships will enable the company
to tap a wider market without substantial dilution of direct relationships.
Q: What is the way ahead for Shriram Transport?
A: It has been the same old story of facing challenges, innovating solutions and posting
growth. However, the arena has become bigger as we speak. The vision for the coming years
has been set and the focus will be in the coming years, to achieve accelerated growth. We
have envisioned the pre-owned vehicle financing industry to grow consistently in the coming
years, of which, we would want to account more than 40% market share, translating into an
asset under management much higher than the existing Rs. 23,000 cr. The growth will require
us to reinvent the possibilities, to ensure a new beginning and to evolve ourselves to a level
where we can sustain the scale of operations in the years to come. We have started initiating
the process for the future. I invite you to witness our efforts of creating infrastructure for
future growth in the following pages.









FINANCIAL STATEMENT


FINANCIAL HIGHLIGHTS 2007-08 2006-2007
Profit before depreciation and taxation 64,289.27 29,907.55
Less: Depreciation, lease adjustment and impairment
loss
3,705.97 985.13
Profit before tax 60,583.30 28,922.42
Less: Provision for Taxation including
Fringe Benefit Tax
21,600.65 9,882.71
Profit After Tax 38,982.65 19,039.71
Add: Balance brought forward
from previous year
12,248.92 53,22.65
Balance available for appropriation Appropriations 51,231.57 24,362.36
General Reserve 3,900.00 2,000.00
Statutory reserve 7,800.00 3,810.00
Dividend 10,295.62 5,432.18
Tax on dividend 1,749.74 871.26
Balance carried to Balance sheet 27,486.21 12,248.92


Dividend

Directors at their meeting held on November 28, 2007 declared an Interim Dividend of Rs.
1/- per equity share (10 percent) for the financial year 2007-08, which was paid on December
27, 2007. The payment of this Interim Dividend involved an outflow of Rs. 2,539.03 lakhs
(including tax on dividend).

The Directors have recommended a final dividend of Rs. 4/- per equity share (40 percent) for
the financial year ended on March 31, 2008. The dividend distribution would result in a cash
outflow of Rs. 9,506.34 lakhs (including tax on dividend of Rs. 1,380.92 lakhs) as against Rs.
4,309.13 lakhs (including tax on dividend of Rs. 625.96 lakhs) in the previous year.

Operation
Shriram transport finance Company has earned a Profit before Tax of Rs. 60,583.30 lakhs for
the year ended March 31, 2008 as against Rs. 28,922.42 lakhs of the earlier year, posting an


increase of 109.47 percent year on year. The Profit after Tax of Rs. 38,982.65 lakhs also is
104.74 percent more when compared to the previous year, which was Rs. 19,039.71 lakhs.
The total Income for the year under consideration was Rs. 2, 49,414.27 lakhs and total
expenditure was Rs. 1, 88,830.97 lakhs. The total disbursements made for financing of
commercial vehicles during the year under review were Rs. 11, 58,973 lakhs. As on March
31, 2008, the outstanding hypothecation loans were Rs. 15, 00,224 lakhs and assets given on
financial lease were Rs. 7,042 lakhs.

During the year ended March 31, 2008, the Company mobilized Rs. 4, 25,616 lakhs through
non convertible debentures, Rs. 30,577 lakhs through sub- ordinate debts, Rs. 5, 25,664 lakhs
through term loans, Rs.1,32,700 lakhs through working capital loans, Rs. 28,195 lakhs
through commercial paper and Rs. 2, 11,822 lakhs through securitization deals.

Fixed Deposit

As on March 31, 2008, there were 438 fixed deposits aggregating to Rs.
52 lakhs that have matured but remained unclaimed. There were no deposits, which were
claimed but not paid by the Company. The unclaimed deposits have since fallen down to 386
amounting to Rs. 48.54 lakhs. Steps are being taken continuously to obtain the depositors
instructions so as to ensure renewal/ repayment of the deposits in time.

Share capital conversion of warrant

During the year under review, your Company allotted 69,00,000 equity Shares of Rs. 10 each
at a premium of Rs. 102 per share to Shriram Holdings (Madras) Private Limited, the
promoter of the Company, on exercise by them of their option to convert the warrants held by
them.

Preferential offer

In accordance with the Guidelines on Preferential Issues contained in Chapter XIII of SEBI
(Disclosure and Investor Protection) Guidelines, 2000, the Company, during the year under


review, issued and allotted 1, 20,00,000 equity shares of Rs. 10/-each fully paid up at a price
of Rs. 300/- per equity share to six allot tees at a premium of Rs. 290 per share.

The Company also allotted 80,00,000 warrants by way of preferential allotment to Shriram
Holdings (Madras) Private Limited at a subscription price of Rs. 30 per warrant conferring an
option to the holder to subscribe to one equity share per warrant at an exercise price of Rs.
300 per warrant and the subscription amount for
the Warrants being adjusted against the exercise price of the warrants.

Outlook and opportunity

The rising crude oil price, which has recently crossed US$ 130 per barrel, rising commodity
prices and the sub-prime mortgage crisis in the United States of America have brought about
an economic imbalance worldwide. Though the Indian economy is not affected directly by
the sub-prime crisis, the rising commodity and crude oil prices have fuelled a steep rise in
inflation. The inflation has crossed 8 percent, which is the highest recorded in about four
years. It is feared that the inflation could be even higher, especially with the rupee declining
against the dollar amid slackening foreign appetite for Indian assets, which in turn would
make imports costlier. To curtail the inflationary trends in the economy, the Government,
through administrative measures, has tightened up the money supply which has tended to
push up the interest rates, consequently inducing slackened off-take of credit.

The economic instability in the world financial markets, the rising inflationary pressures and
the tightening of money flow has brought down the industrial production in the last few
months. There are clear signs of slowdown in sectors like cement, capital goods, steel and IT,
which were the bellwethers of the stock market in the recent years. The galloping inflation
has stoked fears of additional monetary tightening measures that -would slow down the
economy further and prompt a flight of foreign investor funds.

The ripples of this were also seen in the automobile manufacturing sectors, except to some
extent in the passenger commercial vehicle segment. The commercial vehicles sales
continued to grow in FY 2007-08, but at a slower rate than that of previous years. The sale of


commercial vehicles recorded a slower growth of 4.07 percent in 2007-08 as against 33.25
percent of the previous year.

The current deceleration facing the economy though demands continuous
Government attention; there is no need to get disheartened as the economic and the financial
experts in the country believe it to be only an aberration. A few months back the inflation was
well under control as it had gone down to as low as 3.07 percent and the stock market indices
were hitting new heights. The economy has undergone a major shift in the past few years that
has boosted the GDP growth rate to 7-8 percent and it is widely felt that this shift is here to
stay. Our economy has grown at 9.4 percent in 2005-06, 9.6 percent in 2006-07 and is
estimated to have grown close to 9 percent in 2007-08.This transformation has been the result
of an ongoing programme of liberalization over the last decade and a greater integration with
the world economy. A combination of factors such as strong macro- economic fundamentals,
a rich resource of intellectual manpower and the outsourcing boom have interacted positively
with each other and transformed India into a globally competitive force. Even the tier-3 and
the tier-4 cities are witnessing far more entrepreneurial activity.
The Countrys fundamentals are strong enough to withstand a wide range of potential shocks,
including sudden set-backs in short-term capital inflows and even a sharp decline in global
growth.

The economic power of a new and vibrant India is now getting the attention world around.
Our nation has recorded an average GDP growth rate of 7.65 percent during the Tenth Plan
(2002-07). The Indian growth story, therefore, is expected to remain intact despite the current
turmoil.

Even with the backdrop of somewhat subdued economic growth, Company is projected to
perform well. The potential for new commercial vehicle financing is expected to be about Rs.
35,000 crores and that of the pre-owned commercial vehicles, Rs. 63,000 crores and is
projected to grow over 11.5 percent and over 14 percent respectively in the next three years.
Your Company has carved out about 25 percent share of the pre-owned commercial vehicle
financing market and has continued to maintain its leadership position in this segment.
Closely working with partners, your company was able to penetrate deeper into this market
Place. Plans are afoot to tap the huge market in smaller cities across the country, directly and
through our partners. Your Companys unique business model, which is difficult to emulate,


valuation expertise built up by it over the years would ensure that your Company would
continue to enjoy its leadership position in this segment.

In the new commercial vehicle financing segment, despite a slowdown in the sales and stiff
competition from banks and other NBFCs, your Company was able to retain its market share
of about 8 percent to 9 percent. Relationship based approach and your Companys pan India
presence through its over 430 branch network would enable it to continue to maintain its
share of this market in future as well.

Your Board is, therefore, confident that in spite of the current challenging economic
situation, your Company would largely be able to stay on course and continue to maintain its
growth.

B). THEOROTICAL BACKGROUND

FINANCIAL STATEMENT AND ANALYSIS
Financial statements and reports are the tools which provide information of the firms
financial affairs. This information is required for financial analysis & decision making. It
assesses the financial status of organization which is prepared with help of accounting
principle.
Financial statement has mainly as follow:
Balance sheet
Profit & loss account

Financial statement is prepared on basis of generally accepted accounting principle.
These are
a. Business entity principle
b. Going concern principle
c. Monetary principle
d. Historical principle
e. Realizations principle
f. Accrual concept

Basic conventions under which financial statements prepared is:
consistency


conservativeness
disclosure
Analyzing of financial statements helps to know the financial health of the borrower,
which provides the detail of the liabilities and the assets of the applicant. It also helps to study
the trends in the financial matters of the company. It helps to valuate the assets of the
applicant company. It assists in decision making process relating to the future activities.
Financial statements act as a basic document for banker, supplier, creditors etc in their
credit appraisal of the firm. Financial statement provides the reliable information about the
resources and firms obligation. It assists in estimating earning potential of the firm.

Profit and Loss account:-

Meaning:- profit and loss account is one of the essential document which shows the
summary of revenues, expenses and net income of the firm during the particular financial
period.

Functions of the Profit and Loss account:-
It gives a concise summary of the firms revenue and expenses during the particular
period.
It measures the firms profitability.
It represents the activity of the firm.

NATURE OF RATIO ANALYSIS

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as "the
indicated quotient of two mathematical expressions" and as the relationship between two or
more things". In financial analysis ratio is used as a benchmark for evaluating the financial
position and performance of a firm. Ratios help to summaries large quantities of financial
data and to make qualitative judgment about the firm's financial performance.
The ratio reflecting a quantitative relationship helps to form a qualitative judgment the
focus of financial analysis is on the key figures in the financial statements and the significant
relationships that exist between them.
The analysis of financial statements is a process of evaluating relationships between
component parts of financial statements to obtain a better understanding of the firm's position
and performance. The first task of the financial analyst is to select the information relevant to


the decision under consideration from total information contained in the financial statement.
The second step involved in financial analysis is to arrange the information in away to
highlight significant relationships. The final step is interpretation and drawing of inferences
and conclusions. Ratio analysis is the most-widely used technique of financial statement
analysis.
IMPORTANCE OF RATIO ANALYSIS

As a tool of financial management, they are of crucial significance. The importance of ratio
analysis lies in the fact that it presents facts on a comparative basis and enables the drawing
of inferences regarding the performance of a firm. Ratio analysis is relevant in assessing the
performance of a firm in respect of the following aspects.
LIQUIDITY POSITION

With the help of ratio analysis conclusions can be drawn regarding the liquidity Position of a
firm. The liquidity position of a firm would be satisfactory if it is able to meet its current
obligations when they become due.
LONG-TERM SOLVENCY

Ratio analysis is equally useful for assessing the long-term financial viability of a firm. The
long-term solvency is measured by the leverage/capital structure and profitability ratios,
which focus on earning power and operating efficiency. Ratio analysis reveals the strength
and weaknesses of a firm in this respect.
OPERATING EFFICIENCY

Ratio analysis throws light on the degree of efficiency in the management and utilization of
its assets.
OVER-ALL PROFITABILITY

The management is constantly concerned about over-all profitability of the enterprise. This is
possible if an integrated view is taken and all the ratios are considered together.





TYPES OF RATI OS

Several ratios, calculated from the accounting data, can be grouped into various classes
according to financial activity or function to be evaluated. The parties interested
in financial analysis are Short and long-term creditors, owners and management. In view of
the various users of ratios can be classified into following categories,
A. Liquidity Ratios.
B. Leverage Ratios.
C. Activity Ratios.
D. Profitability Ratios
E. Other Ratios.

A. LIQUIDITY RATIOS.

Liquidity refers to the ability of a firm to meet its obligations in the Short run, usually one
year. Liquidity ratios measure the ability of the firm to meet its current obligations. Liquidity
ratios by establishing a relationship between cash and other Current assets to Current
obligations provide a quick measure of liquidity. A firm should ensure that it does not suffer
from lack of liquidity, and also that it does not have excess Liquidity. Therefore it is
necessary to strike a proper balance between high liquidity and lack of liquidity. Following
are some of the important liquidity ratios, current ratio, quick ratio, interval measure and net
working capital ratio.

1. Current Ratio:-

The current ratio is a measure of the firm's short-term solvency. It indicates the availability
of current assets in rupees for every rupee of current liability. A ratio greater than one mean
that the firm has more current assets than Current claims against them. As a conventional
rule, a current ratio of 2: 1 is considered satisfactory. The current ratio calculated by dividing
Current assets by Current liabilities.





Current Ratio = Current Assets
Current Liability


2. Quick ratio:-

Quick ratio establishes a relationship between quick, or liquid, assets and current liabilities.
An asset is said to be liquid if it can be convel1ed into cash immediately. Liquid assets
include cash, debtors, bills receivables and marketable securities. The quick ratio is found
out by dividing quick assets by current liabilities.


Quick Assets (current assets- inventory)
Quick Ratio =
Current Liabilities


A quick ratio of 1: 1 is considered as a satisfactory current financial condition.

3. Interval Measure:-
Interval measure assesses a firm's ability to meet its regular cash expenses. It relates liquid
assets to average daily operating cash outflows. The daily operating expenses will be equal
to cost of goods sold plus selling, administrative and general expenses less depreciation
divided by number of days in the year. It indicates the number of days for which the firm has
sufficient liquid assets to finance its operations.

Current Assets - Inventory
Interval Measure =
Avg. daily operating expenses

B. LEVERAGE RATIOS:-






Interest
The short-term creditors, like bankers and suppliers of raw material, are more concerned
with the firm's current debt-paying ability. On the other hand, long-term creditors, like
debenture holders, financial institutions etc. are more concerned with the firm's long-term
financial strength. In fact, a firm should have a strong short-as well as long-term financial
position. To judge the long-term financial position of the firm, financial leverage ratios are
calculated. These ratios indicate mix of funds provided by owners and lenders. As a general
rule, there should be an appropriate mix of debt and owners' equity in financing the firm's
assets. Leverage ratios may be calculated items the balance sheet items to determine the
proportion of debt in total financing. Leverage ratios are also computed from the profit and
loss items by determining the extent to which operating profits are sufficient to cover the
fixed charges.

1. Interest Coverage Ratio:-

The interest coverage ratio or the times-interest-earned is used to test the firm's debt-
servicing capacity. The interest coverage ratio shows the number of times the interest charges
are covered by funds that are ordinarily available for their payment. The interest coverage
ratio is computed by dividing earning before depreciation, interest and Taxes (EBDIT) by
interest charges.

EBDIT
Interest Coverage =


This ratio indicates the extent to which earnings may fall without causing any
embarrassment to the firm regarding the payment of interest charges.

C. ACTIVITY RATIOS:-

Activity ratios are concerned with measuring the efficiency in asset management.
Sometimes, these ratios are also called efficiency ratios or asset utilization ratios. The
efficiency with which the assets are used would be respected in the speed and rapidity with
which assets are converted into sales. The greater the rate of turnover or conversion, the




more efficient the utilization. For this reason, such ratios are also designated as turnover
ratios. Turnover is the primary mode for measuring the extent of efficient employment of
assets by relating the assets to sales. An activity ratio may, therefore, be defined as a test of
the relationship between sales and various assets of a firm. Several activity ratios can be
calculated to judge the effectiveness of asset utilization.

1. Inventory Turnover (Times):-

This ratio indicates the number of times inventory is replaced during the year. It measures the
relationship between the cost of goods sold and the inventory level. Inventory turnover
indicates the efficiency of the firm in producing and selling its product. It is calculated by
dividing the cost of goods sold by the average inventory.

Cost of goods sold
Inventory Turnover =
Average Inventory

When numbers of days in the year are divided by inventory turnover, we obtain days of
inventory holdings,


No. Of Days in a Year
Inventory Turnover in Days =

Inventory Turnover
2. Debtors Turnover Ratio (Times):-
A firm sells goods for cash and credit. When the firm extends credit to its customers, debtors
are created in the firm's account. Debtors are expected to be converted into cash over a short
period of time and, therefore, are included in current assets.
The liquidity position of the firm depends upon the quality of debtors to a great
extent. In other words, debtors turnover ratio is a test of the liquidity of the debtors of a
firm. It shows how many times debtors turn over during the year. Debtors turn over is found
out by dividing credit sales by average debtors.







Average collection = No. of days in year
Period Debtors turnover




Current Assets

Sales/ Credit Sales

Debtors Turnover =
Average Debtors


4. Collection Period (Days):-

The second type of ratio for measuring the liquidity of a firm's debtors is the average
collection period ratio. This ratio is, in fact, Inter-related with, and dependent upon, the
receivables turnover ratio. It is calculated by dividing the days in a year by the Debtors
turnover.




The average collection period measures the quality of debtors since it indicates the
speed of their collection. Shorter the average collection period, the better the trade credit
management and better the liquidity of debtors, as short collection period and high turnover
ratio imply prompt payment on the pm1 of debtors. In general, short collection period is
preferable.
5. Fixed Assets and Current Assets Turnover:-

The firm may wish to know its efficiency of utilizing fixed assets and Current assets
separately. The ratios indicate the amount of fixed and Current assets needed for every rupee
of sales.

Sales
Fixed Assets Turnover =
Net Fixed Assets


Sales
Current Assets Turnover =



6. Working Capital Turnover:-

A firm may like to relate net Current assets to sales. It may thus compute working capital
turnover by dividing sales by net working capital. The ratio indicates how efficiently the
working capital of the firm is being utilized.


Working Capital Turnover = Sales
Net working Capital

The reciprocal of the above ratio indicates the amount of working capital needed for
each rupee of sales.

D. PROFITABILITY RATIOS:-

Apart from the creditors, both short-term and long-term, also interested in the financial
soundness of a firm are the owners and management or the company itself. The management
of the firm is naturally eager to measure its operating efficiency. Similarly, the owners
invest their funds in the expectation of reasonable return. The operating efficiency of a firm
and its ability to ensure adequate return to its shareholders depends ultimately on the profits
earned by it. The profitability of the firm can be measured by its profitability ratios. The
profitability ratios are calculated to measure the rate of return, earning per share, rate of
return to equity shareholders and so on.

1. Gross Profit Margin:-

The gross profit margin reflects the efficiency with which management produces each unit
of product. This ratio indicates the average spread between the cost of goods sold and the
sales revenue.
When we subtract the gross profit margin from 100 per cent, we obtain the ratio of
cost of goods sold to sales. Both these ratios show profits relative to sales after deduction of
production costs, and indicate the relation between production costs and selling price.









Gross Profit
Gross Profit Margin =
Sales

A high gross profit margin relative to industry average implies that the firm is able to
produce at relatively lower cost.

2. Net Profit Margin:-

Net profit is obtained when operating expenses; interest and taxes are subtracted from the
gross profit. Net profit margin ratio establishes a relationship between net profit and sales
and indicates management's efficiency in manufacturing, administering and selling the
products. This ratio is the overall measure of the firm's abi1ity to turn each rupee sales into
net profit. If the net margin is in adequate, the firm will fail to achieve satisfactory return on
shareholders' funds. The net profit margin ratio is measured by dividing profit after tax by
sales.

Profit After Tax
Net Profit Margin =
Sales

This ratio also indicates the firm's capacity to withstand adverse economic conditions. A firm
with high net margin ratio would be in an advantageous position to survive in the face of
falling selling prices and rising costs.

3. Return on Investment:-

In this ratio the profits are related to the capital employed. The term capital employed refers
to long-term funds supplied by the creditors and owners of the firm. Thus this ratio provides
a test of profitability related to the sources of long-term funds. A comparison of this ratio
with similar firms, with the industry average and overtime would provide sufficient insight
into how efficiently the long term funds of owners and creditors are being used, The higher
the ratio, the more efficient is use of the capital employed.







Sales


EBIT
Return on Investment = Capital Employed

ROE indicates how well the firm has used the resources of owners. This ratio is one of the
most important relationships in financial analysis. The earning of a satisfactory return is the
most desirable objective of a business. The ratio net profit to owners, equity reflects the
extent to which this objective has been accomplished.
4. Operating Expense Ratio:-

The operating expense ratio explains the changes in the profit margin ratio. This ratio is
computed by dividing operating expenses by sales.


Operating expenses
Operating Expenses Ratio =


The operating expense ratio indicates the average aggregative variations in expenses, where
some of the expenses may be increasing while others may be falling. The ratio is a yardstick
of operating efficiency. This ratio when compared from year to Year for the firm will throw
light on managerial policies and programmers.

E. OTHER RATI OS
1. Earning Per Share (EPS)

Apart from the rates of return, the profitability of a firm from the point of view of the
ordinary shareholders is the EPS. It measures the profit available to the equity holders on a
per share basis, i.e. the amount that they can get on every share held. The earnings per share
are calculated by dividing the profit after taxes by the total number of shares outstanding.
As per Accounting Standard- 20 issued by ICAI it is made compulsory in financial
statement.





Profit After Tax
EPS =
No. Of Shares


EPS calculations made over years indicate whether or not the firm's earnings power on per-
share basis has changed over that period.

RESEARCH DESIGN:-

Research Problem:
The study has been taken in the organization for the purpose to interpret the financial
statement so that the strength and weakness of a firm as well as its historical performance and
current financial condition of a firm can be determined.

Literature Review:
The project report on A study on financial statement and analysis. I through under took the
project by the help of Shriram Transport Finance Company Limited. ABM Mr.
mallikarjun.Totagi Company wants to know the current financial position and performance
level.

Purpose of the study:
Financial statements are prepared primarily for decision-making. they play a dominant role in
setting the framework of managerial decisions. But the information provided in the financial
statements is not an end in itself as no meaningful conclusion can be drawn from these
statements alone.
The term financial statement, also known as analysis and interpretation of financial
statement, refers to the process of determining Financial strengths and weakness of the firm
by establishing strategic relationship between the items of the balance sheet, profit and loss
account and other operative data.
There are various methods or techniques used in analysing financial statement, such
as comparative statement, trend analysis, common-size statements, schedules of changes in


working capital, funds flow and cash flow analysis, cost-volume-profit analysis and ratio
analysis.
Following techniquenics are used for analysis of financial statements.
Comparative financial analysis
Common-size statement
Trend percentage
Ratio analysis:
- Profitability ratio
- Liquidity ratio
- Balance sheet ratio
Standard costing: material, labour and ratio etc
Budgetary control
Marginal costing P/V , BEP, Marginal safety etc
Uniform costing with inter-firm comparison
Capital budgeting decision
Internal audit
MIS
Responsibility accounting
CFS
FFS
Statistical and graphical technique
DCF
Risk analysis
Value analysis
Work study etc

Scope of the study:
The main purpose of the study is to know the financial position of the Shriram Transport
finance company Limited. The study will help the company to find out the current financial
position and how it is performed.

Objective of the study:-
a). Financial Statement and Analysis.
The Firm how collect the Short term fund and Long term fund.


How liquid is the firm
Are the owners receiving adequate returns on their investment?
b). To determine the progress of the company.
c). To identify the financial strength and weakness the firm might have.
d). To measure the operational efficiency of the concern.

Limitation of the study:-
It is only a study of interim reports.
Financial analysis is based upon only monetary information and non-monetary factors
are ignored.
It does not consider changes in price levels.
Changes in accounting procedure by a firm may often make financial analysis
misleading.
The company is very rigid in providing financial information
All the aspects of accounts are secret so they are not disclosed to anybody

RESEARCH METHODOLOGY:
Data collection Method: There are two types of sources for data collection, they are
1) Primary data
2) Secondary data

Primary data:
Primary data is collected during the course of training through observations
and discussion with departmental heads, accountants, assistants and officers. And an
exclusive interview with R Sridhar on CNBC-TV18. (Watching the video)

Secondary Data:

Balance Sheet
Income Statement
Cash flow statement
BODs Report
Consolidated Financial Statements


Audit Financial Statements
Published Financial Statements
Segment Reporting Statements
Internet

Guidelines:
As , issued by ICAI, new Delhi.
Guidelines issued by IAS, issued by IAS boards.
Guidelines issued by US-GAAP.

Measuring Tools:
Measurement and analysis techniques using Excel sheet. Measurement and evaluation of
the data is done using statistical tools and techniques such as:
Simple percentage method
Graphical representation

ANALYSIS OF SHORT-TERM FINANCIAL POSITION OR TEST OF
LIQUIDITY
Analysis of Current Ratio:-
Current ratio may be defined as the relationship between current asset and current liabilities.
This ratio, also known as working capital ratio, is a measure of general liquidity and is most
widely used to make the analysis of a short term financial position or liquidity of a firm.

Current Ratio = Current Assets
Current Liability

Table no 2:- The table showing current ratio (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Current Assets 1954.23 6052.69 10447.13 18119.11 24849.67
Current Liability 302.50 984.49 1014.45 1674.84 2576.61
Ratio 6.46 6.15 10.30 10.82 9.64




Graph no 1:- The graph showing current ratio


Standard Current Ratio:-2:1
Interpretation: The current ratio of STFC during the year 2004-2005 and 2008-2009 reveal
that the current ratio was higher than the standard i.e. (2:1), because of low current liabilities,
although it shows that the company has good liquidity but locking of too much of assets is
not good for the company, thus the company should try to maintain the current ratio at the
standard i.e. 2:1, however the company is improving its current ratio and is almost close to
the standard.
But in the year 2008-2009 there was a slight decline in the current ratio, and this
will adversely affect the ability of the company to meet its obligation

Analysis of Quick Ratio:-

Quick ratio, also known as Acid Test or Liquid Ratio, is a more rigorous test of liquidity than
the current ratio. The term Liquidity refers to the ability of a firm to pay its short term
obligations as and when they become due. The two determinates of current ratio, as a
measure of liquidity, are current assets and current liability.












Quick Ratio = Quick Asset
Current Liability

Table no 3: The table showing of quick assets (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Quick Assets 1651.73 5068.20 9432.68 16444.27 22273.95
Current Liability 302.50 984.49 1014.45 1674.84 2576.61
Ratio 5.51 5.87 10.24 10.81 9.62


Graph no 2: The graph showing of quick assets


Interpretation: The quick ratio of STFC during the year 2004-05 to 2008-09 was higher than
the standard(1:1), this was because of low inventory and low current liabilities, this shows
that the company better ability to meet its immediate commitment, with the help of its of its
liquid assets.
Analysis of Inventory Turnover Ratio:
Hint: valuation of inventory is made as per Accounting standard -02
The objective of this standard is to formulate the method of computation of cost of
inventories/stock, determine the value of closing/inventory at which the inventory to be
shown in balance sheet till it is not sold and recognised as revenue.





Inventory Turnover Ratio = Net Sales / Closing Inventory
Table no 4:- The table showing inventory turnover ratio (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Net Sales 345.09 903.85 1409.52 2451.96 3692.43
Closing Inventory 286.93 273.14 56.65 0.67 1.27
Ratio 1.21 3.32 24.97 3685.50 2911.78
0
500
1000
1500
2000
2500
3000
3500
4000
2004-05 2005-06 2006-07 2007-08 2008-09
Sales
ClosingInventory
Ratio

Graph no 3:- The graph showing inventory turnover ratio

Interpretation: Standard/ideal ratio is 8 times. From the above table it is very much clear
that only first two years, ratio is less than standard ratio as fixed.
However, during 2007-08 and 2008-09 is significantly very high, i.e. 3685.50 times
and 2911.78 times respectively. Hence companys inventory turnover ratio is very much
favourable.
Analysis of Debtors Turnover Ratio:
A concern may sell goods on cash as well as on credit. Credit is one of the important
elements of sales promotion. The volume of sales can be increased by following a liberal
credit policy. But the effect of a liberal credit policy may result in tying up substantial funds
of a firm in the form of trade debtors.







Debtors turnover ratio = Net Sales / Debtors


Table no 5:- The table showing debtors turnover ratio (Rs in crs)

Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Net Sales 345.09 903.85 1409.52 2451.96 3692.43
Debtors 3.42 4.73 5.50 2.98 3.24
Ratio 100.84 190.97 256.22 821.73 1140.78

Graph no 4:- The graph showing debtors turnover ratio

Interpretation: The second major activity turnover ratio is debtors turnover ratio. It shows
how quickly debtors or receivables are converted into cash. In other words debtors turnover
is the test of liquidity of the debtors of a firm.Year on year debtors turnover ratio has been
increased this because the firm has Good credit management.
Analysis of Working Capital Turnover Ratio:
Working capital of a concern is directly related to sales. The current assets like debtors assets
like debtors, bill receivables, cash, stock etc. change with increase or decrease in sales. The
working capital taken as excess of value of current asset over current liabilities.
i.e Net Working capital = current assets-current liabilities.
Working capital turnover ratio indicates the velocity of the utilisation of net working capital.
Working capital turnover ratio= Net Sales / Net Working Capital




Table no 6: The table showing working capital ratio (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Net Sales 345.09 903.55 1409.32 2451.96 3692.43
Working Capital 1651.73 5068.20 9432.68 16444.27 22273.06
Ratio 0.21 0.18 0.15 0.15 0.17

Graph no 5: The graph showing working capital ratio

Interpretation: Analysis of this ratio indicates that STFC has uniform/ even working capital
turn over ratio in the survey period, i.e minimum 0.15 to maximum 0.21 for a rupee of
working capital. It shows how STFC works efficiently in discharging its function.
Analysis of fixed assets turnover ratio:
This ratio shows the inter relationship between net sales made and definite realisable value of
fixed assets. Therefore it is widely used and recognised for analysis of financial statement.
Here net fixed assets means fixed assets minus depreciation.

Fixed assets turnover ratio = Net Sales / Net Fixed Assets
Table no 7:- The table showing fixed assets turnover ratio (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Net Sales 345.09 903.85 1409.52 2451.96 3692.43
Net Fixed Asset 48.90 131.49 127.60 142.65 134.26
Fixed Assets
Turnover
6.78 8.85 8.79 11.91 15.71

Graph no 6:- The graph showing fixed assets turnover ratio



Interpretation: The ratios calculated above shows fixed assets turnover has increased
gradually. Thus fixed assets turnover ratio of 15.71 for the year 08-09 indicates that the
company is generating the sales of 15.71 paise for every one rupee of sales invested in fixed
assets.
Analysis of current assets turnover:
As current assets are easily convertible assets within short span of time and hence study of
current assets to turnover is made. It shows inter relationship between net sales and current
assets.

Current assets turnover = Net sales / Current assets

Table no 8:- The table showing current assets turnover (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Net Sales 345.09 903.85 1409.52 2451.96 3692.43
Current Asset 1925.23 5316.76 10068 16346.4 23077.68
Current Assets
Turnover
0.20 0.17 0.14 0.15 0.16









Graph no 7:- The graph showing current assets turnover

Interpretation: The current assets ratio is decreasing during the years; the current assets
turnover shows that the company is generating a sale of Rs 0.16 for every one rupee of
investment in current assets.
Analysis of Gross Profit Margin:-
This is the basic and prime test of profitability of a concern. Gross profit margin measures the
relationship of gross profit to net sales and usually represented as a percentage. It shows the
performance of the concern before considering operating and non operating incomes and
expenses. This ratio indicates the degree of efficiency and cost control.
Here GP means excess of net sales over the cost of goods sold.

Gross profit margin = Gross profit
________________*100

Net Sales

Table no 9:- The table showing gross profit margin (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09

Gross Profit 245.61 641.51 1023.28 1939.65 2938.72

Net Sales 345.09 903.85 1409.52 2451.96 3692.43
Ratio 0.711 0.709 0.72 0.791 0.795

Percentage (%)
71.1 70.9 72.00 79.10 79.50



Graph no 8:- The graph showing of % of gross profit to net sales

Interpretation: The Gross Margin Ratio indicates the average spread between the cost of
goods sold and the sales revenue. The Ratios calculated above shows that there has been
increasing in the gross margin. The higher ratio of 79.50% for the year 2008-09. It shows the
productivity and efficiency of the performance of the company


















Analysis of Net profit Margin:-
Net profit margin establishes a relationship between net profit (after tax) and sales and
indicates the efficiency of the management in manufacturing, selling, administrative and
other activity of the firm. It is the most significant of all revenue ratios as it indicates the
ultimate profitability of the firm. It is useful to investors in judging the prospectors of return
and their investment.

Net profit margin = Net profit / Net sales


Table no 10:- The table showing net profit margin (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Net Profit 49.2 141.64 190.40 389.83 612.40
Net Sales 345.09 903.85 1409.52 2451.96 3692.43
Ratio 0.1423 0.1559 0.1345 0.1567 0.1643
Percentage (%)
14.23 15.59 13.45 15.67 16.43

Graph no 9:- The graph showing of % of net profit to net sales



Interpretation: A high Net Margin Ratio ensures adequate returns to the Owners as well as
enables the Company to withstand adverse economic conditions, when selling price is
declining, cost of production is rising and demand for the product is falling. The ratios


calculated above indicate that Net Margin of STFC is increasing over the years. An increase
in both the ratios i.e., Gross Margin and Net Margin implies that the Operating Expenses
related to Sales have been increasing.

Analysis of Return on long term fund:
This ratio shows the inter relationship between profit after taxes and long term funds. This is
also very significant ratio and widely used to analysis the profitability in relation to
investment.

Return on Long term fund = Net profit
________________* 100
Average Net assets

Table no 11:- The table showing return on long term fund (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Net profit 49.32 141.64 190.40 389.83 612.40
Average total
assets
342.5 1043.00 1587.98 2896.21 3948.42
Ratio 0.1440 0.1358 0.1199 0.1346 0.1551
Percentage (%)
14.40 13.58 11.99 13.46 15.51

Graph no 10:- The graph showing return on long term fund

Inference/Interpretation: As per above table it is clear that return on the long term fund is
quite study and healthy. As compared to previous years, during 2008-09 it is quite high, i.e
15.51%. It is favourable to companys growth.



Analysis of Operating Expenses:-
Operating expenses ratio indicates the relationship of various expenses to net sales. Operating
expenses ratio reveals the average total various in expenses. But some of the expenses may be
increasing while may be falling.

Operating expenses
Operating Expenses Ratio = * 100
Net Sales

Table no 12:- The table showing operating expenses ratio (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Operating Expenses 244.30 637.70 1018.74 1898.34 2938.72
Net Sales 345.09 903.85 1409.52 2451.96 3692.43
Ratio 0.7079 0.7054 0.7227 0.7742 0.7858
Percentage (%)
70.79 70.54 72.27 77.42 78.58


Graph no 11:- The graph showing operating expenses ratio



Interpretation: The expense ratio is very important for analyzing the profitability of a firm it should
be compared over a period of time with the industry average as well as firms of similar type. As


working proposition, a low ratio is favorable, while high one is unfavorable. The Ratio indicates the
average aggregate variations in Expenses; it also explains the changes in profit margin. From
the above ca1culated ratios it can be seen that operating expenses has increasing to greater
extent over the years. The operating expense ratio for the year 2004-2005 was 0.7079 i.e. the
operating expense have consumed 71% of the sales revenue and only 29% is left for meeting
interest ,tax, and dividend obligations as also retaining profits for future expansions. But
during the year 2007-08 and 2008-09 the operating expenses has been increased. In the year
2007-2008 the operating expense was 0.7742 i.e. operating expense have consumed only
77% of the sales revenue, and 23% is left for meeting interest, tax, dividends as also retaining
profits for future expansion. And in the year 2008-2009 the operating expense was 0.7858 i.e.
operating expense have consumed only 78% of the sales revenue, and 22% is left for meeting
interest, tax, dividends as also retaining profits for future expansion.

Analysis of Dividend Payout Ratio:-
Dividend payout ratio is calculated to find the extent to which earning per share have been
retained in the business but it is important ratio because ploughing back of profit enable
company to grow and more dividend in future.

D/P Ratio = DPS * 100
EPS
Table no 13:- The table showing dividend payout ratio (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
DPS 2.50 3.00 3.00 5.00 5.00
EPS 7.19 9.13 10.34 19.19 30.09
D/P Ratio 36.70 40.52 33.10 30.89 19.45

Graph no 12: The graph showing dividend payout ratio



Interpretation:
Analysis of Earning Per Share (AS-20):
Earning per share (EPS) is a financial ratio that gives the information regarding earning
available to each equity share. It is very important financial ratio for assessing the state of
market price of share. This accounting standard gives computational methodology for the
determination and presentation of earning per share, which will improve the comparison of
EPS. The statement is applicable to the enterprise whose equity shares or potential equity
shares are listed in stock exchange.

EPS = Net Profit Taxes
No. of Shares

Table no 14:- The table showing earning per share (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Net Profit 49.32 141.64 190.4 389.83 612.4
No.of Shares (In
lakhs)
654.29 1505.41 1841.59 2031.35 2035.12
EPS 7.19 9.13 10.34 19.19 30.09











Graph no 13: - The graph showing earning per share

Inference/Interpretation: As per above it is clear that companys EPS continuously
increasing during study period from 2004-05 to 2008-09. It shows companys efficiency and
performance, which will contribute shareholders interst.

Analysis of Debt-Equity ratio:
As it is important for capital structure decision, hence this ratio is included in the study of
survey. This ratio helps for optimum financing decision, i.e. finance mix decision.
Debt-Equity Ratio = Long Term Fund
Shareholders fund

Table no 15: The table showing of Debt-Equity ratio (Rs in cr)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Long term fund 1481.91 4396.09 8738.44 14786.35 20121.31
Shareholders fund 197.11 800.33 1066.41 1773.88 2271.11
Debt-Equity ratio 7.52 5.50 8.19 8.34 8.86



Graph no 14: The graph showing of Debt-Equity ratio

Inference/Interpretation:
As per above analysis it is clear that company paid comparatively less amount as dividend to
its shareholders during 2008-09, i.e 19.45%.
Analysis of Capital Gearing Ratio:
Hi nt : Accor di ng t o capi t al i s s ues Cont r ol Act , a r at i o of 1: 4
bet ween equi t y and pr ef er ence capi t al i s r eas onabl e.
It analysis the capital structure of a company effectively.
It is useful to ascertain whether a company is practising trading on equity and if so,
to what extent is done.
Low-gearing indicates trading on equity, over-capitalisation and low EPS.
It aids in regulating a balanced capital structure in a company.
High gearing is favourable for a company earning high profits and it indicates under
capitalisation. Earnings Per Share (EPS) will be higher but it will fall
disproportionately against a slight fall in net profits.
It affects the dividend policy of the company.







Capital Gearing Ratio = FIBS / Shareholders Fund

FIBS: Fixed Interest Bearing Securities

Table no 16: The table showing of Capital Gearing ratio (Rs in crs)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
FIBS 1507.22 4396.09 8738.44 14786.35 20121.31
Shareholders fund 197.11 800.33 1066.41 1773.88 2271.11
Capital gearing
ratio
7.65 5.50 8.19 8.34 8.86


Graph no 15: The graph showing of Capital Gearing ratio

Inference/Interpretation:
As per above table it is extremely clear that company is high-geared, as FIBS is more than
shareholders fund. It indicates company depends approximately Rs8.86 on long term debt for
every Re 1 shareholders fund.







FINDINGS:


The current ratio of STFC is higher than the standard i.e.(2:1) because of low current
liabilities, and higher current ratio shows that the company has good liquidity.

The quick ratio of STFC has been increase over the years. i.e. above the standard.
Though the quick ratio has declined in the year 2008-09 the company is improving to
reach the standard.


As The inventory turnover ratio of STFC has been decreased over the years.
Especially in the year 2004-05 and 2006-07 it has declined to a greater extent.. The
numbers of days for which the Sales are held in Inventories are increased in the year
2007-08. This indicates that the inventories are not selling fast and they remain in the
ware house for long time. Thus, it can be said that the company is not managing its
inventory efficiently.

As the Debtors Turnover has increased in the year 2008-09 as compared previous years
And also the number of days in which the debt due is collected has increased over the
year. Year on year debtors turnover ratio has been increased this because the firm has
Good credit management.

This Ratio shows how efficiently the Company is using its Working Capital. The
Ratios as calculated clearly indicates that working capital turnover is constant over last
3 years. It shows working capital is on an average Rs 15 for every one rupee turnover
thus it shows how company efficiently performing its working capital.


The fixed assets turnover is fluctuating during the year, the fixed assets of 15.71 during
the year 2008-09 indicates that the company is generating the sales of rupees 15.71 for
every one rupee invested in fixed assets.



The current assets turnover ratio is decreasing in the year 2006-07, the current assets
turnover shows that the company is generating a sales of 0.14 for every one rupee of
investment in current assets.

After analysis the gross profit ratio we concluded that margin of gross profit is
comparatively very high, i.e 79.50% during 2008-09.
It clearly indicates that % of cost of goods sold is just 20.5%. this analysis
clearly indicates how the best company operatives in a meaningful manner.

A high Net Margin Ratio ensures adequate returns to the Owners as well as enables
the Company to withstand adverse economic conditions, when selling price is
declining, cost of production is rising and demand for the product is falling. The ratios
calculated above indicate that Net Margin of STFC is increasing over the years. An
increase in both the ratios i.e., Gross Margin and Net Margin implies that the
Operating Expenses related to Sales have been increasing.
As per above table it is clear that return on the long term fund is quite study and
healthy. As compared to previous years, during 2008-09 it is quite high, i.e 15.51%. It
is favourable to companys growth.

From the above ca1culated ratios it can be seen that operating expenses has increased
to greater extent over the years and this is a Bad sign for the company. The operating
expense have consumed more sales revenue i.e 78.58% during the 2008-09 and
21.42% is left for meeting interest, tax, dividends as also retaining profits for future
expansion.

It is surprise that with maximum profit earned during 2008-09 Rs 612.4 crores,
company paid dividend at least rate of 19.45% . this situation is only because of
company decided to use its retained earnings for its future expansion. However,
small amount of dividend company could save Dividend Tax at 15% for the year
2008-09.

The Ratio indicates the Company's earning power on per share basis; it shows the
profitability of the Company on per share basis. The Ratios ca1culated for the last five
years shows that EPS of STFC is rising continuously, especially for the year 2008-09


it is Rs 30.09 per share This indicates that the STFC is maximizing the wealth of its
owners and there by maximising its market value.

STFC heavily depends upon long term debts, popular known as FIBS, i.e 8.86 times
than that of shareholders fund (As per Table 16)































SUGGESTIONS/RECOMMENDATIONS:


Though the company has good liquidity its current ratio is higher than the standard
(i.e.2:1) because of low current liabilities, and higher current ratio, therefore the
company must work to reach the standard.

Though quick ratio of STFC has been decreased over the years. i.e. below the
standard. Therefore the company should work to reach its standard

Since the inventories are not selling fast and they remain in the ware house for long
time and the company is not managing its inventory efficiently. The company should
sell its inventory fast and manage its inventory efficiently.

The firm should have control over its operating expenses so that it can increase its NP
margin

Instead of depending upon exclusively on long term Debt Company should make
proper finance mix, so as to minimise overall cost of capital and maximise ROI and
market value. Therefore company should ,make sure of optimum capital structure
in its finance decision.

Company should use its retained earnings (i.e undistributed profits ) productively, as
company maintained maximum EPS of Rs 30.09 per equity share. Thus company
could save some extent cost of capital.

Company prepared cash flow statement as per Accounting Standrad-3, indicates
during 2008-09 as net outflow from operating activity Rs 1554.95 crores and
investing activity Rs 262.97 crores. Therefore company should improve inflow from
operating activity instead of depending upon financing activity. This is as per analysis
of STFC cash flow statement.









CONCLUSION:


It has been an excellent opportunity for me to carry out the study on Financial statement and
Analysis at Shriram Transport Finance Company Limited. It has helped to a great extent to
have an insight into the practical realities of the subject.

General conclusion
From the analysis of the project study it is concluded that overall performance of STFC is
study and efficient.
From the said survey work it is concluded that companys overall performance is quite
healthy and effective.
Companys policies and decisions are very competent and up to the mark.
Financial statements are prepared exactly according to the Companies Act, 1956 (as per
section 209 to section 211 and schedule VI)
Company made provisions and reserves in respect of tax etc as per Companies Act
(Amendment), 1956.

Specific conclusion:
Inventory valued as per Accounting Standard -2 and inventory ratio is quite
effective, i.e 2911.78 times during 2008-09
Debtors turnover ratio is also quite study during 08-09 as compared to previous year
i.e 1140.78 times
Very interesting conclusion is that company maintained throughout study period very
high gross profit margin, i.e 79.5% during 08-09
In spite of high gross profit, company made minimum net profit throughout study
period, i.e 16.43% during 08-09. This is because of high operating expenses in the
company i.e 78.58% during 08-09.
Last but not the least, company depends heavily on borrowed long term funds, i.e Rs
5230.53 crores during 08-09, as compared to operating and investing activities.
(as per analysis of cash flow statement)





I MPORTANT NOTE:
For ef f ect i ve anal ys i s and i nt er pr et at i on of f i nanci al
s t at ement , mos t of t he r el evant and key t r ans act i ons ar e cons ol i dat ed
and hence s t udy s ur vey i s made accor di ngl y.
Tabl e no 17: The t abl e s howi ng Bal ance s heet of STFC

2004-05

2005-06

2006-07

2007-08

2008-09
Sources Of Funds
Total Share Capital 90.74 150.56 184.18 203.16 203.54
Equity Share Capital 65.43 150.56 184.18 203.16 203.54
Share Application Money 1.04 38.57 20.00 42.48 45.53
Preference Share Capital 25.31 0.00 0.00 0.00 0.00
Reserves 131.68 649.77 882.23 1,570.72 2,067.57
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Networth 223.46 838.90 1,086.41 1,816.36 2,316.64
Secured Loans 1,319.49 3,743.04 6,338.91 11,553.90 16,774.59
Unsecured Loans 162.42 653.05 2,399.53 3,232.45 3,346.72
Total Debt 1,481.91 4,396.09 8,738.44 14,786.35 20,121.31
Total Liabilities 1,705.37 5,234.99 9,824.85 16,602.71 22,437.95

2004-05 2005-06 2006-07 2007-08 2008-09
Application Of Funds
Gross Block 64.39 183.66 182.39 210.09 240.50
Less: Accum. Depreciation 15.49 52.17 54.79 67.44 106.24
Net Block 48.90 131.49 127.60 142.65 134.26
Capital Work in Progress 0.22 25.73 39.87 0.00 0.00
Investments 4.07 9.15 224.57 15.80 30.63
Inventories 286.93 273.14 56.65 0.67 1.27
Sundry Debtors 1.95 7.52 3.49 2.48 3.99
Cash and Bank Balance 176.50 183.51 312.85 520.74 1,043.30
Total Current Assets 465.38 464.17 372.99 523.89 1,048.56
Loans and Advances 1,448.51 5,519.15 8,575.03 15,372.44 18,435.37
Fixed Deposits 40.34 69.37 1,499.11 2,222.78 5,365.74
Total CA, Loans & Advances 1,954.23 6,052.69 10,447.13 18,119.11 24,849.67
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 234.63 745.65 861.41 1,404.56 2,143.90
Provisions 67.87 238.84 153.04 270.28 432.71
Total CL & Provisions 302.50 984.49 1,014.45 1,674.84 2,576.61
Net Current Assets 1,651.73 5,068.20 9,432.68 16,444.27 22,273.06
Miscellaneous Expenses 0.44 0.41 0.14 0.00 0.00
Total Assets 1,705.36 5,234.98 9,824.86 16,602.72 22,437.95
Contingent Liabilities 33.91 75.94 101.29 57.57 13.66
Book Value (Rs) 30.13 53.16 57.91 87.32 111.60




I NCOME STATEMENT ANALYSI S:
Tabl e no 18: The t abl e s howi ng pr of i t and l os s ac c ount











2005-06










2006-07










2007-08










2008-09


( Comparat i ve I nc ome St at e ment ) ( Rs i n c r s )













2005-06










2006-07










2007-08










2008-09


Sales Turnover 903.85 1,409.52 2,451.96 3,692.43
Excise Duty 0.00 0.00 0.00 0.00
Net Sales 903.85 1,409.52 2,451.96 3,692.43
Other Income 3.81 4.54 41.31 31.37
Stock Adjustments 0.00 0.00 0.00 0.00
Total Income 907.66 1,414.06 2,493.27 3,723.80

Raw Materials 0.00 0.00 2.58 6.87
Power & Fuel Cost 0.00 0.00 0.00 0.00
Employee Cost 47.03 71.87 125.19 200.54
Other Manufacturing Expenses 3.24 5.05 7.15 10.37
Selling and Admin Expenses 190.09 284.91 363.98 506.96
Miscellaneous Expenses 25.79 28.95 54.72 60.34
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00
Total Expenses 266.15 390.78 553.62 785.08

2005-06 2006-07 2007-08 2008-09
Operating Profit 637.70 1,018.74 1,898.34 2,907.35
PBDIT 641.51 1,023.28 1,939.65 2,938.72
Interest 415.06 723.92 1,296.62 1,977.67
PBDT 226.45 299.36 643.03 961.05
Depreciation 9.79 12.82 37.06 34.81
Other Written Off 0.39 0.27 0.14 0.00
Profit Before Tax 216.27 286.27 605.83 926.24
Extra-ordinary items -0.18 0.00 0.00 0.00
PBT (Post Extra-ord Items) 216.09 286.27 605.83 926.24
Tax 74.53 98.83 216.01 308.23
Reported Net Profit 141.64 190.40 389.83 612.40
Total Value Addition 266.15 390.78 551.04 778.21
Preference Dividend 4.24 0.00 0.00 0.00
Equity Dividend 48.31 54.32 102.96 101.86
Corporate Dividend Tax 7.37 8.71 17.50 17.31

Shares in issue (lakhs) 1,505.41 1,841.59 2,031.35 2,035.12
Earning Per Share (Rs) 9.13 10.34 19.19 30.09
Equity Dividend (%) 30.00 30.00 50.00 50.00
Book Value (Rs) 53.16 57.91 87.32 111.60

































CASH FLOW
ANALYSIS





Particulars

2004-05 2005-06 2006-07 2007-08 2008-09

Net Profit Before Tax 77.87 216.17 289.22 605.83 920.63
Net Cash From Operating Activities -556.73 -3308.64 -2564.34 -5802.79 -1554.95
Net Cash (used in)/from
Investing Activities
12.58 -122.54 -527.12 -1428.06 262.97
Net Cash (used in)/from Financing
Activities
611.45 3438.18 4351.95 6462.63 5230.53
Net (decrease)/increase In Cash and
Cash Equivalents
67.29 7.00 1260.49 -768.22 3938.55
Opening Cash & Cash Equivalents 109.21 176.50 204.44 1440.22 671.99
Closing Cash & Cash Equivalents 176.50 183.51 1464.93 671.99 4610.54






BIBLIOGRAPHY

Ref erences :

Financial Management by Khan and jain
Financial Analysis and Portfolio Management by I M pandey
Management Accounting by R.K Sharma and Shashi Gupta.
Accounting for management by Dr. Jawahar.

Guidelines:
Accounting Standards, issued by ICAI, New Delhi.
Guidelines issued by IAS, issued by IAS Boards.
Guidelines issued by US-GAAP.
SEBI guidelines
Regulations of Company Law Board. (CLB)


News Papers / Magazi nes :

Business Line
Time of India
Economics times

Other Source:
Annual audited statements
Company Annual / Published Report
Information through interaction


Webs i t es :

www. s t f c. i n
www. googl es ear ch. com
www. moneycont r ol . com