INTRODUCTION

The Textile Industry is one of the oldest in the world. The oldest known textiles,
which date to about 5000 B.C., are scraps of linen cloth found in Egyptian caes. The
industry was pri!arily a fa!ily and do!estic one until the early part of the "500s when
the first factory syste! was established. It wasn#t until the Industrial $eolution in
England, in the "%th century, that power !achines for spinning and weaing were
inented. In "&'( when $ichard )rk *right#s spinning fra!e with ariable speed rollers
was patented, water power replaced !anual power +,eefus, "(%-..
In the early "&th century of colonial )!erica, textiles were pri!arily
!anufactured in ,ew England ho!es, /lax and wool were the !a0or fibers used,
howeer, cotton, grown pri!arily on southern plantations, beca!e increasingly i!portant
+*ilson, "(&(..In "&%- 1a!uel 1later, who had worked as an apprentice to )rk *ight#s
partner, i!!igrated to )!erica. In Blackstone $ier, $hode Island, he started building
)rk *right !achines and opened the first English2Type Cotton 3ill in )!erica +)T3I,
"((&.. In the early nineteenth century, in 4owell, 3assachusetts, the first !ill in )!erica
to use power loo!s began operations. It was the first ti!e that all textile !anufacturing
operations had been done under the sa!e roof +*ilson, "(&( and )T3I, "((&..
The twentieth century has seen the deelop!ent of the first !an!ade fibers
+rayon was first produced in "("0.. )lthough natural fibers +wool, cotton, silk, and linen.
are still used extensiely today, they are !ore expensie and are often !ixed with
!an!ade fibers such as polyester, the !ost widely used synthetic fiber. In addition,
seg!ents of the textiles industry hae beco!e highly auto!ated and co!puteri5ed
+)T3I, "((&..
The textile industry is characteri5ed by product speciali5ation. 3ost !ills only
engage in either broadloo! weaing of cotton or broadloo! weaing of the wool.
1i!ilarly, !any !ills speciali5e in either spinning or weaing operations, although larger
integrated !ills !ay co!bine the two operations.
1
These large !ills nor!ally do not conduct their own dyeing and finishing
operations. *eaing, spinning, and knitting !ills usually send out their fabrics to one of
the approxi!ately 500 dyeing and finishing plants in the 6nited 1tates +E7), "(('..
DESIGN OF STUDY
Objectives of the study
To study the capital structure of the super spinning !ills ltd
To know at what proportion debt and e8uity are being used
To find out how the inest!ent pro0ects are financed.
To know how the funds hae been accu!ulated.
To know whether the fir!#s capital is appropriate.
To know the leerage of the fir!
To know the operational efficiency.
Sources of data
The data relating to financial state!ents of super spinning !ills ltd and infor!ation
relating to capital structure ),)491I1 :)1 been collected using pri!ary and secondary
!eans.
Priary data
7ri!ary data is being collected fro! arious accounting offices and other ad!inistratie
offices while interacting with the! in the plant.
Seco!dary data
The study is !ainly based on the secondary data collected fro! the records and the
annual reports of super spinning !ills and arious books on accounting and finance. ;ata
2
relation to the financial state!ents of super spinning !ills ltd :)1 been collected fro!
the published annual reports which were obtained fro! the ad!inistratie office.
Too"s of the data#
The financial study !ade in super spinning !ills co!prises of the capital structure,
capital gearing has been clearly depicted by different attractie charts like line charts,
pyra!id charts, scatter charts with straight lines, area charts and cone charts.
Period of study#
The capital structure and profitability is done through the financial state!ents published
by the 11 !ills for -00'2-00&, -00&2-00%, -00%2-00(, -00(2-0"0, -0"02-0"" financial
years.
$iitatio!s of the study
The study is li!ited to capital structure and financial perfor!ance of the fir!.
/indings and analysis are only fro! last fie years.
/indings and analysis depends on audited reports only.
<nly figures re8uired to analy5e capital structure and financial structure and
financial perfor!ance are proided and !uch of the data was kept confidential.
3
INDUSTRY PROFI$E
The cotton textile industry is going through a seere Crisis following a stu!p in exports
of cotton textiles, yarn and gar!ents to the )1E), and other countries. 9arn exports
particulars hae been seerely affected by the deelop!ent in the )1E), $egion and
there is as yet no indication of a recoery in these exports.
The perfor!ance in the first six !onths of "((% has been highly discouraging, as
ship!ents of yarn decline by 503illion =>s as co!pared to an increase of -&? 3illion
=>s in the corresponding period in "((&. The trends in subse8uent !onths also hae not
significant hanged and the alue of exports in the whole of "((% !ay be !uch lower than
in "((&.
The deceleration process started in "((& as the i!pact of the )1E), Crisis was felt
towards the end of the year. *ith accounting, earlier rise in exports of fabrics, yarn,
gar!ents and other ite!s, and steady growth in production did not create serious
proble!s in !arketing, though the co!posite and spinning !ills using out2dated
!achinery were suffering losses due to wide ariation in cotton prices, delayed purchased
and inade8uate working capital.
The output of all sectors was higher at -&,%(" !illion s8. !ts in )pril@/ebruary "((%
against -',?"& !illions 18.!ts.in the corresponding period in "(('2(&.The power loo!
and handloo! sector, the for!er particularly has been taking adantages of the increase
in do!estic de!and for fabrics.
Souther! %i""&s Sad P"i'ht#
The spinning !ills in the southern region hae been co!plaining that they are not able to
ensure reasonable !argins. This is because the prices of cotton are higher than that of the
counter parts in other regions while the finished products hae to Be sent to leading
centers in 3aharashtra, >u0arat and elsewhere. It is not therefore expected that the
industry will hae s!ooth sailing in the foreseeable future.
4
The Chair!an of the Indian Cotton 3ills /ederation +IC3/. has taken a rather gri! iew
of the preailing situation. )t the actual !eeting of IC3/ gri! iew of the pedaling
situation. )t the actual !eeting of IC3/ held in 1epte!ber, he stated that the nu!ber of
!ills re!aining closed was as high as -5& in Auly "((% against -0' a year ago and that
the increase was highest in recent years. 1eeral co!posite and 1pinning !ills in
Coi!batore and ad0oining areas in Ta!il ,adu has also suspended their operations and
the 3anchester of 1outh in now presenting a sorry spectacle while it was bustling with
actiity not long ago.
E(cess Ca)acity bui"ds u)#
The output of fabrics and yarn was not howeer, adersely affected in "((&2(% as
stated aboe, because of creation of excess capacity. )ctually '.B !illion yarn spindles
and -0,000 rotors were re!aining per!anently idle in closed !ills and another 5 !illion
could set2up output easily as the !oderni5ed and newly established export2oriented units
hae been utili5ing their capacity to the !axi!u! extend. The expansion of capacities
had been taking place at an unprecedented rate. In the past three years alone, B.?? !illion
spindles and ".?- lakh rotors were installed.
The power2loo! sector accounts for around &-C of the total cloth production and it has
been growing oer a period. ;ue to the fact that nu!ber of power2loo!s installed has
increased to "5.-? lakhs units in "(('2(& fro! "0.BB 4akh units in "((0 and there is a
concentration of 7ower @ loo! in 3aharashtra, >u0arat, )ndhra 7radesh and in the
7un0ab region.
Doi!a!ce of Po*er $oo SectorD
The power loo! !anage!ent has a distinct adantage oer the co!posite !ills in
the organi5ed sector in ter!s of outlay, oerheads and working capital re8uire!ents. The
handloo! sector also has been increasing it share in total 7roduction, deposit co!plaints
that power loo! weaers hae been rendering ineffectie the reseration of 8uotas
exclusie for the handloo! sector for turning out specified products. It share in total
production in 55C and it was '((0 !illion 18.!ts in "((&2(% against 'BB" !illion s8.!ts
in "(('2(&.
Si+eab"e E()ort Ear!i!'sD
It was esti!ated that there were ?0 4akh household weaers and about "-B 4akhs
weaers without owning loo!s and special attention was being proided to the weaing
5
of furnishing, bed sheets and other ite!s fancied by sophisticated consu!ers in *estern
Europe and elsewhere.
The foreign exchange earnings secured through exports of these ite!s were
$s.",B(".?- Crores in "((B2(5 with steady growth in exports of cotton textiles, !ade ups,
yarn and gar!ents the foreign exchange earnings exceed E "0 Billion in "(('2(&.
Ne* te(ti"e )o"icy a *aited#
The perfor!ance in "((%2(( !ay not of course be encouraging, as exporters of
yarn as well as gar!ents hae been adersely affected by the crisis in the )1E), region
and co!petition in world !arkets for textiles and gar!ents fro! producers benefiting by
depreciation in alue of their currencies.
In the context of a slow growth in total exports, the e!ergency of a negatie trend in
textile exports in "((&2(% hae affected the export in "((%2((.
The 6nion 3inistry of Textiles is aware of the seeral hardships endured by the
textile industry and is for!ulating a plan for !oderni5ing the textile !ills in the public
sector by incurring heay expenditure. The new textile policy also is this basic industry
could progress in rando! and the growth of any particular sector is not at the expense of
another.
Because of the erosion of profit !argins and een losses incurred by !any 6ndertakings
in the organi5ed sector, the !oderni5ation progra! has not been I!ple!ented on a
defined basis and the cost of production hae got inflated in the process. It has een been
suggested that in iew of the huge surplus capacity, non2iable and obsolete !achinery
should be allowed to the scrap a part for! reducing excise duties and allowing a higher
debt2e8uity ratio with reasonable interest rates for working capital. The 1tate
>oern!ents, howeer, are under pressure fro! political parties and labor leaders for
reiing sick !ills een if they not iable.
1ince the Textile Industry will hae to be in a position to !eet fully the
re8uire!ents of the do!estic and export !arkets and function on a reasonably profitable
basis, satisfactory solutions will hae to be found by the parties concerned after taking
into a account all aspects.
6
ST,TUS OF COTTON TE-TI$E INDUSTRIES
while growth has been a way of life this group has also earned to reputation for 8uality of
its products and credibility for the business excises perused. )s a result of strange
thinking, this group has started identifying specific business focuses.
<biously this has resulted in reorgani5ing the co!panies into s!aller groups enabling
to effectiely !anage with custo!er focus.

RECENT TRENDS IN COTTON TE-TI$E INDUSTRY
Cotton industry works to 3)I,T)I,, boost de!and
The cotton industry a few years ago created an adertising ca!paign calling cottonF the
fabric of our liesF. The slogan !ay be an apt description. Cotton is the !ost best selling
fiber all oer the world, out selling all !an!ade fibers co!bined.
) global surey conducted by cotton Inc. and cottons council international shows that
al!ost half of the people sureyed strongly agree that it#s i!portant to hae clothes !ade
fro! natural fibers like cottons. That de!and fuels an industry generating !ore than
B, 00,000 6.1. 0obs and accounting for !ore than E-5 billion in products and serices
each year.
*hile consu!ers still prefers cotton to !an!ade fibers, but de!and for synthetics is
growing at a faster rate .there are always new fibers co!ing on to the !arket.
There are !ore /IBE$1 ,<* doing !ore things. Consu!ers are looking for !ore
functionality, such as style resistance or wrinkle resistance. But we hae E,>I,EE$E;
C<TT<, fabrics that can do those things too.

.//01/2 .//21/3 .//31/4 .//41/5 .//51/6
S)i!d"es 7i""io!s8 -&.%- -%.'0 -(.-5 ?".-5 ?'.-5
Rotors 7"a9hs8 ".?- ".?( ".50 ".(0 B.00
:eavi!' Ca)acity
%i"" Sector ".'( ".50 ".B0 ".B0 ".?0
Ca)acity Uti"i+atio!
S)i!!i!' &' &' &% %- %&
:eavi!' 5' 5B 5' '0 '5
S)u!1yard )roductio!
7%i""io! 9's8
"%0' -0'& -0(0 -B00 ?0-5
7
The !ain synthetic fiber is polyester, although consu!ers hae co!e to recogni5e it by
new na!es like !icro fiber. Gbut its polyester G.
7articularly in wo!en#s ware !arket, *:IC: $E7$E1E,T1 T:E 4)$>E1T
H<463E </ C4<T:I,> 1<4;I *o!en are looking for a 4I>:T, easy drape <$
:I>: sheen. Cotton inc. is working to change the notion that cotton cannot proide those
attributes. There are new cotton fabrics that resist wrinkling. there is "00C cotton that
1T$ETC:E1.
The industry has econo!ics on its side. It is less expensie to !ake cotton clothing. /or
exa!ple, 4ycra, a synthetic known for its stretchiness, costs about E - per pound
Co!pared to about 50 or '0 cents per pound for cotton.
The industry appears to be !aking head way. The cotton content of all the skirts and
dresses produced is about 5" C, co!pared about B&.5percent a year ago. /ro! a far!er#s
perspectie, that#s significant.
GEach "C increase in the wo!en#s !arket e8uates to about 50,000 bales in new cotton
de!and.F
The growing de!and in the apparel sectors could not co!e at a better ti!e for cotton
far!er#s worldwide cotton consu!ption for industrial uses is declining. 3ean while, at
"0'.5!illon bales, global cotton production is expected to reach a new record this year,
driing prices below -00? leels. This rise in production is due to !ore planted acres in
china and global yields.
) surey by cotton industries and cotton council international shows that, when
selecting clothing and other consu!er textile products, cotton is the fiber of choice
around the world.
CO%P,NY PROFI$E
8
In !odern fashion technology, the de!and for perfection begins right at the birth of the
raw !aterial, per!eates through eery single process, till the highly discerning custo!er
dons the finished gar!ent. It is this de!and for perfection that has spurred the growth of
an organi5ation and its corporate philosophy.
Those who can furnish clients with the best 8uality, co!petitie price, excellent custo!er
serices and pro!pt deliery can only surie in the !arket. 1uper 1pinning 3ills
4i!ited takes i!!ense pride in perceiing its role as the co!prehensie architect of
eery single yarn and gar!ent that its produces.
1)$) E4>I is a !ulti2unit, !ulti2interest business group with a wide range of industrial
actiity, an organi5ation that has founded its eolution on alue2based co!!ercial
practice. 1uper 1pinning 3ills 4i!ited was established in "('- with an initial capacity of
"-,000 spindles.
<er its four decades of che8uered growth it has expanded to ", 50,000 spindles spread
oer 5 operational units. The co!pany co!!enced operations with the !anufacture of
grey, gassed, !erceri5ed and dyed cotton yarn. Today, the co!pany has cared a niche for
itself on the textile !ap of the country.
Grou) Co)a!ies
E$GI E$ECTRIC ; INDUSTRIES $TD<
E$GI SOFT:,RE ; TEC=NO$OGIES $TD<
E$GI >UI$DING PRODUCTS $TD<
S,R, TR,DING ; INDUSTRI,$ SER?ICES
$TD<
S,R, EN?IROTEC= $TD
S,R, E$GI INDUSTRI,$ RESE,RC= ;
DE?E$OP%ENT $TD<
S,R, E$GI INSUR,NCE ,D?ISORY
SER?ICES P?T< $TD<
S,R, E$GI ,RTERIORS $TD<
E$GI E@UIP%ENTS $TD<
E$GI TRE,DS 7I8 $TD<
$<G< >,$,ARIS=N,N ;
>ROS< $TD<
E$GI U$TR, INDUSTRIES
$TD<
PRECOT %I$$S $TD<
%ERIDI,N INDUSTRIES $TD<
Each co!pany in the >roup speciali5es in a specific area, thus enabling us to better !eet
the dierse needs of the industry. <ur co!panies are focused on !eeting our custo!erJs
9
indiidual needs. *e exist to proide superior custo!er satisfaction 2 deeloping solid,
long2ter! relationships with our custo!ers.
)s a result of strategic thinking, the group has started identifying specific business
focuses. <biously, this has resulted in reorgani5ing the co. into s!aller groups enabling
efficient !anaging with custo!er focus. )ccordingly since Aune "((' the >roup headed
by 3r. 4. >. $a!a!urthi K 3r. 1u!anth $a!a!urthi concentrates on the following
co!panies.
Super Spinning %ills $td<
E$GI E$ECTRIC ; INDUSTRIES $TD<
E$GI :IESSNER ,IR TEC=NIC $TD<
ST,ND,RD GENER,$ FIN,NCE $TD<
,N O?ER ?IE: OF SUPER SPINNING GROUP OF %I$$S
1uper 1pinning 3ills are the one of the largest group of spinning !ills in India. The
1uper 1pinning 3ills li!ited was incorporated on"('-.The 1uper spinning !ills is noted
for its progressie outlook and technical excellence. They excel in their endeaor for
8uality.
The corporate office of the !ills is located at Coi!batore, Ta!ilnadu. The corporate
!anager takes all financial decisions of the fir!s. It has authority to appoint arious
)uditors, 3anagers etc. and also deals with export actiities to arious countries.The
co!!unication between !anager and the fir!s flow top to botto! and botto! to top.
The co!pany !anagers and auditors !ust be responsible to all the actiities of 1uper
spinning group of !ills. They !ust sub!it 8uarterly and annual reports to the corporate
office.
1uper spinning !ills 4i!ited takes i!!ense pride in perceiing its role as the
co!prehensie architect of eery single yarn and gar!ents that its produces.
The co!pany was incorporated as a public li!ited co!pany in "('- under the Indian
co!panies )ct "(5' and began its operations with an initial capacity of "-,000 spindles
and has grown to 5 units with capacity of ",50,000 spindles on the date .
10
1uper spinning group of !ills constitutes fie spinning !ill units, two gar!ent units and
one T/< unit.
The company has expanded both regionally and internationally over the years. Manufacturing
Units at three places ensures that each product that reaches the market is a wondrous example
of unmatched quality.
Corporate Office at Coimbatore Tamilnadu
! Unit at "indupur !ndhra #radesh
$ Unit at "indupur !ndhra #radesh
%U#&' %!'! Unit at "indupur !ndhra #radesh
C Unit at (arur Tamilnadu
) Unit at Udumalpet Tamilnadu
%!'! !##!'&*% Unit at Coimbatore Tamilnadu

Unit Super A
(irikera + ,-, .-- "indupur
!nanthapur )istrict
!ndhra #radesh
Tel / 012,,34 ..1,.. 5 ..1-67
8ax / 012,,34 ..1669
&mail supera:ssa.saraelgi.com

Unit Super - B
11
(otnur + ,-, .-; "indupur
!nanthapur )istrict
!ndhra #radesh
Tel / 012,,34 ..1-2. 5 ..1-29
8ax / 012,,34 ..1,2,
&mail superb:ssb.saraelgi.com

Unit Super Sara
M.$eerapalli + ,-, .-. "indupur
!nanthapur )istrict
!ndhra #radesh
Tel / 012,,34 .76329 5 .76923
8ax / 012,,34 .76977
&mail supersara:sss.saraelgi.com

Unit Super C
)<=udalur 3.7 3.1
)indigul )istrict
Tamil >adu
Tel / 017,,-4 ..,;-1 5 ..,;1
8ax / 017,,-4 ..,..6
&mail superc:ssc.saraelgi.com

Unit Super - D
>o.--6 + )hally 'oad Udumalpet 37. -.3
Coimbatore )istrict
Tamilnadu
Tel / 017.,.4 ..;313 5 ..93--
8ax / 017.,.4 ..;3,2
&mail superd:ssd.saraelgi.com
COMPANY DETAILS
E-ECUTI?E >ODY
FOUNDERS OF SUPER GROUP # %R<?N<R,%,C=,NDR,N
%R< D,%OD=,R,N
%R< >,$,ARIS=N,N
%R< R,%,%URT=I
12
C=,IR%,N OF T=E CO%P,NY # %R< $<G< R,%,%URT=I
?ICE C=,IR%,N ,ND %,N,GING DIRECTOR # %R< SU%,NT= R,%,%URT=I
>O,RD OF DIRECTORS # %R<CSA PR,>=U
# %R< C R
R,%,%URT=I
# %R< S,R,T=
C=,NDR,N
# %R<SUD,RS,N
?,R,D,R,B
# %R< ?IDY,PR,A,S=
# %R< ?IB,Y,AU%,R
# %R< AR
SEET=,P,T=Y
# %R< ?IB,Y,
?ENA,T,S:,%Y
D,TE OF EST,>$IS=%ENT OF T=E %I$$ # .121./42
REGISTERED ,ND CENTR,$ OFFICE # CE$GI TO:ERSD
P<><NO<5..0<
GREEN FIE$DSE 5051
DE
PU$I,AU$,% RO,DE
COI%>,TORE F 42.
T,%I$N,DU<
CO%P,NY REGISTR,TION NO< # .6.1GG.HGG
STOCA $ISTED IN # >O%>,YEC=ENN,I ; COI%>,TORE
STOCA E-C=,NGES
>SE STOCA CODE # 3H..6G
SUPER SPINNING %I$$S
,1 UNIT
13
The first unit, super2a is situated at kirikera on the Bangalore2anantapur state high way
near hindupur in anantapur district,)7. This !ill was registered in "('- and went into
production "('B with an initial capacity of "-,0(' spindles. The present capacity of this
unit is 5(,"&- spindles !anufacturing yarn -Bhrs a day and seen days a week spinning
hosiery yarn, ware yarn and -ply in counts ranging "0s to (0s of cotton arieties. This
unit 7$<;6CE1 one the finest 8uality yarns in the country.
This unit produces different 8ualities of yarn to suit different end2users. The selection
purchases supply of raw !aterials is done by its central office at Coi!batore .<ne of the
i!portant keys of !ill is ery careful selection and purchase of raw !aterials. which is
done it !eticulous care under the able super ision of the !anaging director. The
wastage of cotton in the production process of the !ill is negligible. The !ill has
proision to store the cotton !uch enough to B !onths.
The yarn produced in the !ill is used to !anufacture banians, t2shirts, dhotis, lungies,
saries and curtains etc. The yarn of the !ill has wide !arket all oer india and abroad.
The custo!ers of the yarn are spread oer india, in thripura, Calcutta, 3u!bai, Haranasi,
delhi,chalkarangi, !angalagiri, cheeraala, gadag, Bangalore, kopal, hubli and !any !ore
places.the fir! een exports its products to abroad.
DO%ESTIC %,RAET # 3G&SE 4G&SE 6G&S CO%>ED Y,RN
E-PORT %,RAET # 4G&SI.4HI. CO%>ED Y,RNE 6GIH CO%>ED
Y,RN
Being inspired and encouraged by the success full running of the !ill later. Two !ore
spinning !ills , spinning !ill LB# unit at kotnur, hindupur. 7recot !ill at !oda illage,
hindupur, were brought into being in the early "(%0#s.
>1UNIT
the second unit,super2b was established on -' !arch "(%? by 4.>.Balakrishnan at kotnur,
near hindupur in anantapur district of )7. This plant is 'k!s fro! hindupur and is a part
of hindupur town. This is located in an area of around twele acres and around %0 acres
around the factory is beautifully with green culture.
This !ill is situated at an eleation of -0-0 feet aboe sea leel on the broad gauge
section of southern railways connecting as !any as eight i!portant capital cities @
Bangalore, :yderabad, 3u!bai, new delhi, triendra! blessed by cool congenial and
salubrious cli!ate, i!bued by dyna!ic and enterprising !ercantile industrial and
14
entrepreneurial co!!unity intent upon and ushering an era of rapid industriali5ation and
artfully welded with an effectie !edia of transport and co!!unication facilities,
hindupur the southern !ost !andal head 8uarter of the southern !ost ceded district in
).7, bordering =arnataka state.
The !ill started its production with and an initial capacity of -%,%%0 spindles and in
expanded to 5%, "&' spindles.
Thanks to the pioneering !ade by no less a personage of entrepreneurial e!inence, 4ate
1ri 4.>.Balakrishnan, !ore popular as 4>B.
The total e!ployees of the co!pany around "5&5 in which 55 are staff. &-0 per!anent
labours and %00 are e!ployed on casual and contract basis. The co. is !aintaining sound
industrial relation for the past seeral years through arious ti!ely negotioations,
effectie grieances, structured welfare !easures, floor lend co!!itties, e!ployees
participation sche!es besides all :$; !echanis!s. In addition, :$; is particularly
interested in deeloping the GMuality *ork shipF and co!pany has taken seeral
!easures continuously to create 8uality culture.the production is seenteen tones per day.
The !ills !anufacturers yarn of the fine 8uality supplying to different regions in India.
The different 8ualities of raw !aterials is used by these !ills areD
ORG,NIC COTTONS
INDI,N COTTON
PI%, >$ENDS
SUPI%,
GIJ, >$ENDS
GIJ,
It produces cotton sewing thread to cater to the needs of hosiery
!arket. There are sa!e local centers of sales of these yarn and sewing threads in Tripura,
Calcutta, Haranasi. Tenali and 3angalagiri. The !ill produces high 8uality of yarn and is
able to with stand and growing co!petitors in the international !arkets.
F,?OR,>$E CONDITIONS TO SS %I$$S $TD< >1UNIT
15
;uring the last "0years, Cotton cultiation consistently increased in a.p. and it
assured the! of a consu!er supply good 8uality of cotton.
The cli!ate conditions of this area are ery suitable for a spinning !ill.
Infact, :indupur has a sub2station of "?-=*.
There are plenty of consu!er centers with in the -00 =31. /ro!, :indupur
!ainly handloo! sector.
There is abundance supply of labor fro! surrounding illages since it is a draught
area.
:indupur is only "00=!s fro! bangalore and good infrastructural facilities are
aailable.
1ufficient water aailable at the site.
C 1 UNIT
In the year "((- the co!panies settled up its ?rd unit at ;. >udalur near karur in
ta!ilnadu .this is located in an area of around -5 acres , build up an area of (,'00 18 3ts.
This unit produces the finest 8uality yarn for do!estic !arket as well as for export
!arket. The present installed capacity of this unit is "',"?0 spindles.
D1UNIT
It was located in the ;hally $oad ,udu!alpet near coi!batore+dist. Ta!ilnadu.
6,IT 167E$ 1)$)
It as located near beerapalli,fro! the :indupur town it was 5 =31, near )nantapur+dist..
16
17
BUSINESS EXPANSION OF SUPER SPINNING MILLS
I!te'rated Cotto! Cu"tivatio! Pro'ra
COTTON SEED DE?E$OP%ENT
It beca!e obious that the best way to ensure the highest standards of raw !aterial was
for the co!pany to integrate backwards. In this direction, a !assie expansion was
launched to establish a fu""1f"ed'ed research faci"ity to deelop new arieties of cotton
seeds. This would go to ensure that the co!pany supplied itself with a 8uality of !aterial
that !atched its ob0ectie of superlatie finished product.
The result of the pro0ect was the deelop!ent of high yielding hybrid cotton seeds
christened S,R, 1 IE ediu a!d "o!'1sta)"e a!d S,R, 1 IIE e(tra1"o!' sta)"e
varieties< Two !ore hybrids S,R, 1 00E S,R, 1 0/ co!pleted the trials and ready for
co!!ercial launch.
)part fro! fulfilling SS%$&s social obligation in i!proing the standards of the
far!ers, by proiding "o* cost i!)uts of fertili5er, che!icals K assured buy back of
their produce at a pre!iu! price in collaboration with the!, the co!pany deries the
best 8uality raw !aterial right fro! the field for its own !anufacturing re8uire!ents.
G,R%ENTS
)fter its success with backward integration, it was but a natural corollary that the
co!pany should go in for forward integration into gar!ent !anufacture as well. )nd
thus ca!e into being 1)$) )77)$E41 K /)1:I<,1, a !assie styling unit situated
at Coi!batore.
The unit speciali5es in !anufacturing single and double !erceri5ed "00C cotton 2
knitted polo T2shirts with collars and cuffs. These are either in solid shades or in yarn2
dyed fabric or both, which in turn are !erceri5ed and silicon softened in tubular knit
for!. )lso in the range are regular T2shirts in the non2!erceri5ed range.
1)$) )pparels K /ashion offers gar!ents !ade out of
18
Gare!t Ra!'e
3anufacturing of cotton N synthetic knitted gar!ents
3en#s N *o!en#s T2shirts and 7olo shirts @ speciali5ed in >assed 1ingle N ;ouble
3ercerised 7olo 1hirts
Cut K 1ewn >ar!ents, Collar 1hirts, Basic $ound2neck shirts etc.
Productio! Ca)acity
5 6nits 2 the capacity of 5000 7olo 1hirts per day +or. (000 pcs of Basic $ound
neck gar!ents per day.
19
>ar!ents fro! 1uper 1pinning 3ills !ake consu!ers feel co!fortable, pa!pered and
conte!porary in clothing. *e use the yarns !anufactured in2house to gie life to
innoatie textile creations through knitting. <ur professional know2how in this area
ensures that our gar!ents reach the highest 8uality standards and ac8uire the desired feel
and opti!u! good looks. 7rocessing is done on the aant2garde !achines and finishing
lines. Testing, for its part, is done at a well2e8uipped lab, !atching global standards.
Co!tai!atio! Co!tro"
Eli!ination of raw !aterial conta!ination has been identified as the !a0or factor of
8uality control. This is effectiely tackled by adopting a three2pronged approachD
Close interaction with each supplier to ensure confor!ance to pre2set standards of
consistent, conta!ination2free cotton
$igorous segregation of raw cotton at the ginning as well as !ills to eli!inate
conta!inated !aterial
Installation of Hision 1hield conta!ination re!oer at the cotton stage and 1I$<
clearer at the yarn stage to ensure purity of processed yarn.
:OR$D :IDE CUSTO%ERS TO :=IC= T=E UNITS %,NUF,CTURE T=E G,R%ENTS
,RE #
,RRO:
,UREUS
>,Y =I$$
>UG,TC=I
CO$OR P$US
CUTTER >UCA
EURO OPEN
$I,>E$
$ONE CYPRESS
20
PE>>$E >E,C=
PING
PG, TOUR
TRICOTS ST R,P=ET
:I$SON
SPINNING
Constant co!!it!ent to high 8uality standards and innoation has been the secret of
success eer since the co!pany was founded. 1uperior 1pinning units ensure the supply of
consistent 8uality yarn to !anufacture the gar!ents. <ur 1pinning 6nits leads the 8uality
of yarn in the !arket. 6lti!ately, the crunch lies in the infusion of hi2tech, state2of2the2art
!achinery that aids in the production of high 8uality "00C co!bed yarn, in counts that
range fro! ,E -0s to "-0s in single and doubles. The testi!ony to !oderni5ation and up
gradation lies in the fact that the oldest !achine in the plant is less than "0 years.
Coupled with global standards of process !anufacturing that turn out year of superior
8uality in durability as well as finish. To produce superior 8uality gar!ents, we ensure that
eery kilogra! of yarn supplied fro! our 1pinning unit confor!s to International standard
and with 5ero co!plaint.
7roduction Capacity 2 50,000 =gs per day
1uperior Muality i!ported !achines installed at 1uper 1pinning 3ills includeD
21
RIETER
Hision 1hield /oreign /ibre $e!oer in Blow $oo!
6nifloc @ )"0, )""
;rawfra!e @ $1B %5" K ;?0
6nilap E?-, Co!bers @ E &N5 ), E &N', E'-
1uessen Elite Co!pact $ing /ra!e
$,AS=%I RIETER
/lexifloc, Harioclean, 6ni!ix
Cards @ 4C ?00 ), 4$ C "N?
;rawfra!es @ $1B %5"
Co!bers @ 4= -50 K E &NB
1peed /ra!es @ 4/ "B00 K "B00)
$ing /ra!es @ > 5N", 4$'
T$6TO1C:E4E$ D Cards @ ;= %0? K (0?
C$<1<4 D Cards 3= 5) K 5B
=I$4<1=)$ T<9<;) D $ingfra!e
36$)T) -" C
D
)uto Coner with 6ster
Muantu! foreign fibre clearer
1C:)4)/:<$1T ??%
D
)utoconers with 4oepfe and 6ster Muantu! /oreign
fibre clearers
E4>I *E4=E$
D 9arn Conditioning
HEEA)9 4)=1:3I D Two2for2one Twister +T/<.
AEET1TEP N TEPT<<4 D $ing ;oubling
B)T4IB<I D /ully )uto!atic :u!idification 7lant
113 D >assing 3achine
PRODUCTS
22
*e beliee that 8uality products are not only by pro!ises but also by proen results.
;eelop!ent of new textile products is done through 2 Innoation in defining production
processes of higher 8uality and !aking aailable !odern technologies and professionals with the
highest leel of co!petence.
The following adantages which hae always been our ulti!ate goalsD 2
=i'h Efficie!cy
The %ost Co)etitive ; Reaso!ab"e Price
Products @ua"ity Guara!tee
Pro)t ; Su)erior Service
Pu!ctua" De"ivery
:e a!ufactureD
"00C Co!bed Cotton 9arn for =nitting and *eaing
,E -0s to ,E "-0s
$egular >rey 9arn
1ingle N ;ouble +$ing ;ouble N T/<.
Co!pact 1ingle K ;ouble, Elitwist
>assed 9arns
<pen2End 9arn
Core21pun 9arn
1lub29arn
Oero Twist 9arn
=nitted >ar!ents
+1peciali5ed in singleNdouble 3erceri5ed Cotton knit in polo T2shirts.
*oen /abrics
PO$ICIES
E!viro!e!ta" Po"icyD
23
1uper 1pinning 3ills 4i!ited is co!!itted to co!ply with the re8uire!ents of releant
eniron!ental regulations and standards by i!ple!enting eniron!ental !anage!ent
syste! and continuously i!proe its effectieness.
E!ployees should be trained on eniron!ental aspects to !ini!i5e the pollution and
consere natural resources.
@ua"ity Po"icy D
GMuality leading to custo!er satisfactions shall be our top priorityF. This shall be
achieed by co!plying t the re8uire!ents of the 8uality !anage!ent syste! and
continually i!proe its effectieness. E!ployees shall be syste!atically trained and
!otiated to enhance i!proe the 8uality of their work.
The 3ill is haing fully e8uipped 8uality )ssurance 4aboratory !anaged by well trained
technicians to ensure 8uality, continuous !oderni5ations and ti!ely expansion has gien
co!petitie edge and on other co!panies. )s a result of this, the co!pany has
established itself as a leader in !ost of its products.
)ccording to sureys conducted by 1outh Indian Textiles $esearch association +1IT$).,
the perfor!ance of this co!pany has been !aintained consistently in production and
8uality oer the past. ;uring the -5th surey conducted by 1IT$) out of -&0 !ills this
unit#s productiity perfor!ance ranked as "0th.
TP% PO$ICY#
They are co!!itted to !axi!i5ing oer all plant effectieness to !ake 1uper 1pinning
3ills a *orld2class co!pany through Total 7roductie 3anage!ent byD
7ro!oting autono!ous !aintenance culture.
Inoling all e!ployees and building culture.
Encouraging continuous i!proe!ent through s!all group actiities.
?ISIONE %ISSION ,ND @U,$ITY PO$ICY
24
?ISION ST,TE%ENT OF SS %I$$#
The cotton yarn industries fortunes are closely linked to fluctuations in the cotton !arket.
)ny upward or downward !oe!ent of cotton prices put pressure on the profit !argins
of !ills operating in the intensely co!petitie yarn !arket.
)t the sa!e ti!e new entrants with !odern !ills hae adantage of achieing better
productiity and 8uality off lower prices and credit facility to achiee !arket entity. This
has increased custo!er expectation in ter!s of 8uality, price and deliery. :ence they
hae to
1trength the business syste! for cotton purchase.
$educe operational cost by i!proing productiity of !achinery and e!ployees.
$etaining leadership by i!proing and consistently !aintaining high 8uality.
3aintaining the te!p of continuous !oderni5ation of plant and !achinery.
To achiee the aboe they hae to i!proe the perfor!ance by reengineering
business process.
)ll e!ployers shall be educated on significance of re2engineering. 1uccess of this
progra! will depend on inole!ent of e!ployees.
121uper
626pgraded 8uality
727rofitability
E2Efficiency and E!ployees 1atisfaction
$2$eduction in cost
R ; D ,C=IE?E%ENTSD
The $ K ; efforts of the co!pany are directed towards i!proe!ent of
!anufacturing process, yarn 8uality and productiity. Efforts are continuing to enlarge the
scope of $ K ; facility to as !any areas as possible. $eenue expenditure on $ K ;
a!ounts to $s.5.&0 lakhs. ,o capital expenditure was incurred on $ K ; during the year.
25
@U,$ITY
The co!pany has a long reputation for 8uality,
perfor!ance and innoation. Muality of final product is
deter!ined with 8uality of raw !aterial. In 1uper
1pinning 3ills, we take !eticulous care in the selection
of cotton.

<ur dedicated, co!!itted and inoled cotton selectors at
different stations headed by experienced superisors,
spares no pain in the selection of =apas or $aw cotton
aailable in the !arket.
There are 8uality checks at eery stage of !anufacturing starting fro! $aw Cotton.
)fter each lot of fabric is cut, "00C cut parts inspection is conducted to ensure that
only good 8uality pieces !oe to the stitching units. To ensure that the gar!ents are
packed as per the re8uire!ents of our alued custo!ers, we can een track and check,
which case the gar!ent, has been packed in.
Inest!ents in sophisticated instru!ents fro! world2renowned !anufacturers like
Oellweger 61TE$ are an integral part of the plan to i!ple!ent Total Muality
)ssurance.
In confor!ance with industry nor!s worldwide, the co!pany has established
laboratory facilities at each unit, e8uipped with ultra2!odern testing instru!ents.
17I,4)B :HI (00
61TE$ )/I1
61TE$ C4)11I3)T
61TE$ TE,1<AET
7$E3IE$ TE,1<3)P &000
7$E3IE$ )M6$) 4K,
7I4<T 17I,,I,>
=,ITTI,> /)CI4ITIE1
RECOGNITIONS
26
1uper 1pinning 3ills has dedicated itself to proiding custo!ers with the best products
and gar!ents. <ur energetic tea! of professionals is behind eery award we receie. *e
are dedicated to deliering 8uality products that adance our custo!erJs goals.
CERTIFIC,TIONS
>?@I ISO /GG. F HGGG
ISO .2GG. CERTIFIC,TION OAEO 1 TE-
CERTIFIC,TION
>reif i!foratio! )ertai!i!' to the 'rou) co)a!ies
E$GI >UI$DING PROUDCTS $TD<
)s a part of its continuous growth and diersification, 1)$) E4>I in association with
Techno plast of )ustria. brings internationally acclai!ed poly!er window and doors with
a iew to change the face of architectural syste! and design. E4>I Hisage#s innoatie
excellence in designing the window and doors syste! not only enhance and beautify the
building but also oerco!e the short co!ings of using conentional wood and alu!inu!
!aterial.
7roduct $angeD
27
Case!ent @ outside opening syste! 1liding @ two track syste!
;oors
1wing ;oor
:inged ;oor
Curtain *alling 1yste!
1tructural >la5ing
1li! line syste!
7roduct /eaturesD
:ealth Insulation
1ound Insulation
*eather resistance
/ire resistance
I!pact ressistance
water resistance
Corrosion resistance
Che!ical resistance
4ow ther!al resistance
)rchitectural aesthetics
4ow !aintenance
Eniron!ent friendly
Econo!ical
28
E$GI E"ectric ; I!dustries $td<
E4>I Electric, a significant player in the engineering industry, !anufactures electrical
engineering !achines, control auto!ation switchgear, textile !achinery, sepecial
purpouse !achines K plant auto!ation solutions.
E4>I Electric has oer four decades of expertise in Engineering. Its prodducts hae won
worldwide acclai! for their international 8uality standards and innoatie technology. )n
I1< (00" Certification only stands, as testi!ony strengths of E4>I Electric has !ade for
itself in the engineering industry. <ne of the !a0or strengths of E4>I Electric has been
the co!pany#s ability to adapt its technology to suit changing custo!ers needs.
PRODUCT R,NGE#
$otating 3achines
) C and ; C 3otors
)lernators
Textile 3achinery and )ccessories
<er :ead Cleaners
9arn Conditioning 1yste!
/ire protection syste! for Blow $oo! 4ines
Central Hacuu! Cleaning 1yste!
E$GI Soft*are ; Tech!o"o'ies $td<
Elgi 1oftware and Technologies 4i!ited, e1TE4, was originally deeloped as an
independent IT enabling serice co!pany to cater to the arious infor!ation and data
processing needs of 1)$) E4>I group.
Today e1TE4 has built strong technical expertise to ;esign and deelop infor!ation
appliances, !ulti!edia serices, business process solutions and web2enabled serices
creating sea!less and efficient digital interaction free of boundaries.
e1TE4 can offer co!prehensie solution in the field of I) product deelop!ent, 1!art
:o!es, intelligence buildings and Industrial cross !edia deelop!ent.
29
e1TE4 represents a select group of IT deelop!ent establish!ents with powerful do!ain
expertise. The design, docu!entation, testing and bench!arking are carried out by
e1TE4 engineers at Chennai and Coi!batore. )pplication study, onsite integration of
!odules and perfor!ance co!pliance are carried out at client pre!ises.
S,R, E$GI I!dustria" Research ; Deve"o)e!t $td<
In keeping with the ision of the founders of the E4>I group, 1)$) $K; has been
created to incubate technology which will pioneer the next generation growth for the
group.
1)$) $K; is conceied to build processes and solutions which work in har!ony with
the eniron!ent for sustainable growth and to be socially conscious and sensitie.
S,R, E!viro!e!t tech!o"o'ies co< $td
The application of scientific deelop!ent in rapid industriali5ation and urbani5ation has
resulted in a significant increase in eniron!ental degradation. 1pecific solutions are
re8uired for !obili5ation and deply!ent of naturaal without detri!ent to their re2
utilisation.
1)$) ETC has pioneered inest!ents in research and state2of2the2art infrastructure for
deelop!ent of cleaner technologies. By co!bining innoation and technology a range of
core !odules hae been deeloped for treat!ent and abate!ent of water and air based
pollution.
Products
<5one syste!s for air and water treat!ent
/iltration and recoery syste!s
<pen and closed cycle reactors
6ltra2Hiolet 1tabili5ers
3ultiple effect eaporators
$eerse os!osis 7lants
*et and dry in2plant sterili5ers
30
:or9i!' hours of Su)er S)i!!i!' i""s "td
The !ill works round the clock in three2shifts. /ollowing are the shift ti!ings.
I shift D %.00a! to B.00p! with ?0 !in interal
II shift D B.?0p! to ".00a! with ?0 !in interal
III shift D ".00a! to %.00a! with ?0 !in interal
>eneral shift D %.00a! to 5.00p! with one hour interal
Perfora!ce a))raisa"
)ll the e!ployees will be ealuated once in eery six !onths that is in Aune and
;ece!ber of eery year. the appraisal syste! shall be used to identify needs, career
deelop!ent, incre!ents and exgratia. The appraisal shall be done by the i!!ediate
superisor as per perfor!ance appraisal syste!.
$abor $e'is"atio!s
These units are !aintaining ery cordial relationship with their worker unions. they are
also successful in i!ple!enting productie linked wages. this co!pany is also paying
bonus and exaratia to the workers.
Trade u!io!s
The !anage!ent has one independent trade union consisting of "" office bearers. regular
structure !eetings with the union take place to resole proble!s, if any, and to !aintain
cordial relations.
C,PIT,$ STRUCTURE
31
I!troductio!
In order to run and !anage a business, funds are needed. $ight fro! pro!otional stage up
to end, finance plays an i!portant role in co!pany#s life. If funds are inade8uate, the
business suffers and if funds are not properly !anaged, the entire organi5ation suffers. It
is there fore necessary that correct esti!ate of the current and future need of capital be
!ade to hae an opti!u! capital structure which shall help the organi5ation to run its
works s!ooth and with out any stress.
Esti!ation of capital re8uire!ent is necessary, but the for!ation of a capital structure is
i!portant. )ccording to >erestenbeg, Gcapital structure of a co!pany refers to the
co!position or !akeup of its capitali5ation and it#s include all long @ter! capital
resources like loans, reseres, shares and bonds.
The capital structure is !ade up of debit and e8uity securities, and refers to per!anent
financing of a fir!. It is co!posed of long ter! debit, preference share capital and share
holder#s funds.
Ca)ita"i+atio!E Ca)ita" structure a!d fi!a!cia" structure
The ter!s, capitali5ation, capital structure and financial structure, don not !ean the sa!e.
*hile capitali5ation is 8uantitatie aspect of the financial planning of an enterprise,
captital structure is concern with 8ualitatie aspect. Capitali5ation refers to total a!ount
of securities issued by a co!pany while capital structure refers to kinds of securities and
proportionate a!ounts that !ake up capitali5ation. /or rising long @ ter! finance, a
co!pany can issue three types of securities. E8uity shares, preference shares, and
debentures. ) decision proportion a!ong these types of securities refers to the capital
structure of an enterprise.
1o!e authors on financial !anage!ents define capital structure in board sense so as to
include een the proportion of short @ ter! debit. In fact, they refer to capital structure as
a financial structure.
) financial structure !eans the entire liabilities side in the balance sheet. in the
words of ,e!!ers and >runewald G/inancial structure refers to the all the financial
32
resources !arshaled by the fir! short as well as long ter! , and all for!s of debit as well
as e8uity. G Thus, financial structure, generally, is co!posed of a specified percentage of
short @ ter! debit , long @ ter! debit and share holder#s funds.
I)orta!ce of Ca)ita" Structure
The ter! LCapital 1tructure# refers to the relationship arious long2ter! for!s of
financing such as debentures , preference share capital and e8uity share capital ,
/inancing the fir!s asset#s is a ery crucial proble! in eery business as a general rule
there !ust be a proper !ix of debit and e8uity capital in financing the fir!s assets. The
use of long @ ter! fixed interest baring debit and preference share capital along with
e8uity shares is called /inancial leerage or trading on EM6IT9. the long2ter! fixed
interest baring debit is e!ployed by a fir! to earn fro! the use of these sources than their
cost so as increased the return on owner#s e8uity. It is true that a capital structure cannot
affect the total earning of a fir! but it can affect the shares of earning aailable for e8uity
share holders.
O)tia" Ca)ita" Structure
The capital structure decision can influence alue of the fir! through the cost capital and
trading on e8uity or leerage . the opti!u! capital structure !ay be defined as Gthe
capital or the co!bination of debit e8uity that leads to the !axi!u! alue of the fir!F.
<pti!al capital structure L!axi!i5es the alue of the co!pany and hence the wealth of
its owners and !ini!i5es the co!pany cost of capital. Thus, eery fir! should ai! at
achieing the <pti!al capital structure and then to !aintain it.
The following considerations should be kept in !ind while !axi!i5ing the alue of the
fir! in achieing the goal of <pti!u! capitalD
If the return on inest!ent is higher than the fixed cost of funds, such as debentures,
loans and preference share capital. it will increase earning per share and !arket alue of
the fir!. thus, a co!pany should, !ake !axi!u! possible use of leerage.
*hen debit is used as source of finance, the fir! saes a considerable a!ount in pay!ent
of tax as interest is allowed as deductable expenses in co!putation of tax. :ence, the
33
effectie cost of debit is reduced, called tax leerage. ) Co!pany should, therefore, take
adantage tax leerage.
The fir! should aoid undue financial risk attached with the use of increased debit
financing. If the share holders perceie high risk in using further debit @ capital, it will
reduced the !arket price of shares
The capital structure should be flexible.
Theories of Ca)ita" Structure
;ifferent kinds of theories hae been propounded by different authors to explain the
relationship between capital structure, cost of capital and alue of the fir! .The !ain
contributors to the theories are ;urand, E5ra, 1olo!on, 3odigliani and 3iller. The
i!portant theories areD
Net I!coe ,))roach
Net O)erati!' I!coe ,))roach
The Traditio!a" ,))roach
%odi'"ia!i a!d %i""er ,))roach
Net I!coe ,))roach
)ccording to this approach, a fir! can !ini!i5e the weighted aerage cost of capital and
increase the alue of the fir! as well as !arket price of e8uity a share by using debt
increase its alue and reduces the oerall costs of capital by increasing the proportion of
debt in its capital structure. This approach is based upon the following assu!ptionsD
i. The cost of debt is less than the cost of e8uity.
ii. There are not taxes.
iii. The risk perception of inestors is not changed by the use of debt.
The line of argu!ent in faour of net inco!e approach is that as the proportion of a
cheaper source of funds increases. This results in the decrease in oerall cost of capital
leading to an increase in the alue of the fir!. The reasons for assu!ing cost of debt to be
less than the cost of e8uity are that interest rates are usually lower than diidend rates due
to ele!ent of risk and the benefit of tax as the interest is a deductible expense.
34
Net O)erati!' I!coe ,))roach
This theory as suggested by ;urand is another extre!e of the effect of leerage on the
alue of the fir!. It is dia!etrically opposite to the net inco!e approach. )ccording this
approach, change in the capital structure of a co!pany does not affect the !arket alue of
the fir! and the oerall cost of capital re!ains constant irrespectie of the !ethod of
financing. It i!plies that the oerall cost of capital re!ains the sa!e whether the debt @
e8uity !ix is 50D50 or -0D%0 or 0D"00. Thus, there is nothing as an opti!al capital
structure is the opti!u! capital structure. This theory presu!es thatD
I. The !arket capitali5es the alue of the fir! as a whole.
II. The business risk re!ains constant at eery leel of debt e8uity !ix.
The reasons propounded for such assu!ptions are that the increased use of debt increases
the financial risk of the e8uity shareholders and hence the cost of debt re!ains constant
with the increasing proportion of debts re!ains constant with the increasing proportion of
debt as the financial risk of the lenders is not affected.
Thus, the adantage of using the cheaper source of funds, i.e., debt is exactly offset by the
increased cost of e8uity.
The Traditio!a" ,))roach
The traditional approach, also known as Inter!ediate approach, is a co!pro!ise between
the two extre!es of net inco!e approach and net operating inco!e approach. )ccording
to this theory, the alue of the fir! can be increased initially or the cost of capital can be
decreased by using !ore debt as the debt is a cheaper source of funds than e8uity. Thus,
opti!u! capital structure can be reached by a proper debt e8uity !ix. Beyond a
particular point, the cost of e8uity increases because increased debt increases the financial
risk of the e8uity shareholders.
The adantage of cheaper debt at this point of the capital structure is offset by
increased cost of e8uity. )fter this there co!es a stage, when the increased cost of e8uity
cannot be offset by the adantage of low2cost debt. Thus, oerall cost of capital,
according to this theory, decreases up to a certain point, re!ains !ore or less unchanged
for !oderate increase in debt thereafterQ and increases or rises beyond a certain point.
Een the cost of debt !ay increase at this state due to increased financial risk.
35
%odi'"ia!i a!d %i""er ,))roach
3 K 3 hypothesis is identical with the ,et <perating Inco!e approach if taxes are
ignored. :ow eer, when corporate taxes area assu!ed to exist, there hy)othesis is
si!ilar to the net inco!e approach.
I! the abse!ce of ta(es#
The theory proes cost capital is affected by the capital structure are say that the debt2
e8uity !ix is irreleant in the deter!ination of the total alue of a fir!. The reason
argued is that though debt is cheaper to e8uity, with increased use of debt as a source of
finance, the cost of e8uity increases . this increase in cost of e8uity offsets the adantage
of the low cost debt. Thus , although the financial leerage affects the cost of e8uity the
oerall cost of capital re!ains constant . the theory e!phasi5es the fact that a fir!s
operating inco!e is a deter!inant of its total alue. The theory further propounds that
beyond a certain e8uity falls there by again balancing the two costs. In the opinion of
3odigliani K 3iller , to identical fir!s in all respects except their capital structure cannot
hae different alues or cost of capital because of L)rbitrage process#. In case two
identical fir!s except for their capital structures hae different !arket alues are cost of
capital )rbitrage will take place and the inestors will engage in personal leerage, and
this will again render the two fir!s to hae the sa!e total alue.
The 3 K 3 approach is based upon the following assu!ptionsD
". There are no corporate taxes.
-. Inestors act rationally.
?. The expected earnings of all the fir!s hae identical risk characteristics.
B. The cut2off point of inest!ent in fir! is capitali5ation rate.
5. $isk to inestors depends upon the rando! fluctuations of expected earnings and
the possibilities that the actual alue !ay turn out to be different fro! their best
esti!ate.
'. )ll earnings are distributed to the share holders.
:he! the cor)orate ta(es are assued to e(istD
36
3 K 3 , in their article of "('? hae recogni5ed that the alue the fir!s will increase or
the cost of capital will decrease with the use of debt on account of deductinility of interest
charges for tax purpose. Thus , the opti!u! capital structures can be achieed by
!axi!i5ing the debt !ix in the e8uity of a fir! .
)ccording to the 3 K 3 approach , the alue of a fir! unleered can be calculated as
follows D
Halue of unleered fir! +Hu.
R + Earnings Before Interest K Tax . N + <erall cost of capital.
R +EBIT. S +"2t. N =o.
),; , the alue of a leered fir! is D
H" R Hu T td
*here, Hu is alue of a leered fir!
)nd, t ; is the discoered present alue of the tax saings resulting fro! the tax
deductibility of the interest charges, t is the rate of the tax and ; the 8uantu! of debt used
in the !ix.
Ca)ita" Structure %a!a'ee!t
Ca)ita" Structure %a!a'ee!t or )"a!!i!' the ca)ita" structure
Esti!ation of capital re8uire!ents for current and future needs is i!portant for a fir!.
E8ually i!portant is the deter!ining of capital !ix. E8uity and debt are the two principle
sources of finance of a business. But, what should be the proportion between debt and
e8uity in the capital structure of a fir!I how !uch financial leerage should a fir!
e!ployI This is a ery difficult 8uestion. To answer this 8uestion, the relationship
between the financial leerage and the alue of the fir! or cost of capital has to be
studied . Capital structure planning, which ai!s at the !axi!i5ation of profits and the
wealth of the share holders, ensures the !axi!u! alue of a fir! or the !ini!u! cost of
capital . It is ery i!portant for the financial !anager to deter!ine the proper !ix of debt
and e8uity structure but in practice it is ery difficult to design the opti!al capital
structure. The !anage!ent of a fir! should try to reach as near as possible of the
opti!u! point of debt and e8uity !ix.
Esse!tia" Features of a Sou!d Ca)ita" %i(
37
) sound or an appropriate capital structure should hae the following featuresD
i. 3axi!u! possible of leerage.
ii. The capital structure should be flexible.
iii. To aoid undue financial business risk with the increase of debt.
i. The use of debt should be with in the capacity of a fir!. The fir! should in a
position to !eet obligations in paying the loan and interest charges as and when
due.
. It should inole !ini!u! possible risk of loss of control.
i. It !ust aoid undue restrictions in agree!ent of debt.
38
C,PIT,$ GE,RING
The ter! capital gearing refers to the relationship between e8uity capital and long2ter!
debt it !ay be planned or historically, the latte describing a state of affairs where the
capital structures a eoled oer a period of ti!e , but not necessarily in the !ost
adantages way. In si!ple words the capital gearing !eans the ratio between the arious
types of securities in the capital structure of the co!pany . a co!pany is set to be in high2
gear , when it has a proportionately higher N large in use of debentures and preference
shares for raising the long2ter! resources , where as low gear stands for a proportionately
large issue of shares.
Si'!ifica!ce of Ca)ita" Geari!'
The proble! of capital gearing is ery i!portant in a co!pany. It has a direct bearing on
the diisible profits of a co!pany and hence a proper capital gearing is ery i!portant for
s!ooth running of an enterprise. In case of low geared co!pany, the fixed cost of capital
by way of fixed diidend on preference shares and interest on debentures is low and the
e8uity share holders !ay get a higher rate of diidend. *hereas, in a high geared
co!pany the fixed cost of capital is higher leaing lesser diisible profits for the e8uity
share holders.
The capital gearing in the financial structure of a business has been rightly co!pared with
the gears of an auto!obile. The gears are used to !aintain the desired speed and control.
Initially, an auto!obile starts with a low gear, but as soon as it gets !o!entu!, the low
gear is changed to high gear to get better speed. 1i!ilarly a co!pany !ay be started with
a high e8uity state, that is low gear but after !o!entu!, it !ay be changed to high gear
by !ixing !ore of fixed interest bearing securities such as preference shares and
debentures. It !ay also be noted that capital gearing affects not only the shareholders but
also debenture holders, creditors, financial institutions, the financial !anagers and others
are also concerned with the capital gearing.
39
Ca)ita" 'eari!' a!d trade cyc"es D
The techni8ue of capital gearing can be successfully e!ployed by a co!pany during
arious phases of trade cycles that is during the conditions of inflation and deflation, to
increase the rate of return to its owners and thereby increasing the alue their
inest!ents. The effect of capital gearing during arious phases of trade cycles is
discussed belowD
Duri!' i!f"atio! or boo )eriod#
) co!pany should follow the policy of high gear during inflation or boo! period as the
profits of the co!pany are the higher and it an easily preference shares pay fixed costs of
debentures and preference shares. By adoption the policy of high gear, a co!pany can
increases its earnings per share and there by a higher rate of diidend.
Duri!' the def"atio! or de)ressio! )eriodD
;uring depression the rate of earnings of the co!pany is lower than the rate of
interestNdiidend on fixed interest bearing securities and hence it cannot !eet the fixed
costs without low gearing the diisible profits and rate of diidend. It is, therefore, better
for a co!pany to re!ain in low gear and not to resort to fixed interest bearing securities
as source of finance during such period.
Factors deteri!i!' the ca)ita" structure
The capital structure of a fir! depends upon a large nu!ber of factors such as leerage or
trading on e8uity, growth of the co!pany, nature and si5e of business, the idea of
retaining control, flexibility of capital structure, re8uire!ents of inestors, costs of
floation of new securities, ti!ing of issue, corporate tax rate and the legal re8uire!ents. It
is not possible to rank the! because of all such factors are of different i!portance and the
influence of indiidual factors of a fir! changes oer a period of ti!e. Eery ti!e the
funds are needed, the financial !anager has to study the pros and cons of the arious
sources of finance so as to select the !ost adantageous capital structure.
40
The factors influencing the capital structure are as followsD
Fi!a!cia" $evera'e or Tradi!' o! EKuityD
The use of long2ter! fixed interest bearing debt and preference share capital along with
e8uity share capital is called financial leerage of trading on e8uity. Effects of leerage on
the shareholders return or earnings per share hae already been discussed in this chapter.
The use of long2ter! debt increases !agnifies the earnings per share if the fir! yields a
return higher than the cost of debt. The earnings per share also increase with the use of
preference share capital but due to the fact that interest is allowed to be deducted while
co!puting tax, the leerage i!pact of debt is !uch !ore.
Gro*th a!d Stabi"ity of Sa"esD
The capital structure of a fir! is highly influenced by the growth and stability of its sale.
If the sales of a fir! are expected to re!ain fairly stable, it can raise a higher leel of
debt. 1tability of sales ensures that the fir! will not face any difficulty in !eeting its
fixed co!!it!ents of interest repay!ents of debt. 1i!ilarly, the rate of growth in sales
also affects the capital structure decision.
Cost of Ca)ita"D
Eery rupee inested in affir! has a cost. Cost of capital refers to the !ini!u! return
expected by its suppliers. The capital structure should proide for the !ini!u! cost of
capital. The !ain sources of finance for a fir! are e8uity, preference share capital and
debt capital. The return expected by the suppliers of capital depends upon the risk they
hae to undertake. 6sually, debt is a cheaper source of finance co!pared to preference
and e8uity capital due to
I. /ixed rate of interest on debtQ
II. 4egal obligation to pay interestQ
III. $epay!ent of loan and priority in pay!ent at the ti!e of winding up of the
co!pany.
41
Cash F"o* ,bi"ity To Service DebitD
) fir! which shall be able to generate larger and stable cash inflows can e!ploy
!ore debit in its capital structure as co!pared to the one which has unstable and
lesser ability to generate cash inflows . debit financing i!plies burden of fixed
charge due to fixed pay!ent of interest and the principal . when eer wants to
raise additional funds, it should esti!ate , pro0ect in future cash inflows to ensure
to coerage of fixed charges .
Nature a!d Si+e of a Fir D
,ature and si5e of a fir! also influence its capital structure . ) public utility concern has
different capital structure as co!pared to other !anufacturing concern. 7ublic utility
concern !ay e!ploy !ore of debit because of stability and regularity of their earnings .
on the other hand , a concern which cannot proide stable earnings due to the nature of its
business will hae to rely !ainly on e8uity capital Q si!ilarly, s!all co!panies hae to
!ainly upon owned capital as it is ery difficult for the! to raise long ter! loans on
reasonable ter!s and also can issue e8uity and preference shares at case to the public.
Co!tro" D
*hen eer additional funds are re8uired funds by a fir!, the !anage!ent of the fir!
warns to raise the funds with out any loss of control oer the fir!. In case the funds are
raised through the issue of e8uity shares, the control of the existing share holders is
diluted. :ence, they !ight raise additional funds by way fixed interest bearing debit and
preference share holders and debenture holders do not hae the oting rate. :ence, fro!
the point of iew of control, debit financing is reco!!ended.
F"e(ibi"ity D
Capital structure of a fir! should be flexible, i.e., it should be such as to be capable of
being ad0ust according to the needs of changing conditions. It should be possible to raise
additional fund, when eer the need be, with out !uch of difficult and delay. ) fir!
should arrange its capital structure in such a !anner that it can substitute on for!
financing by another. $edee!able preference shares and conertible debentures !ay be
preferred on flexibility.
42
ReKuiree!ts of i!vestors D
The re8uire!ent of inestors is another factor that influences the capital structure of the
fir!. It is necessary to !eet the re8uire!ents of both institutional as well as priate
inestors when debt financing is used. Inestors are generally classified under three kinds,
i.e., bold inestors, cautious inestors, less cautious inestors.
,ssets Structure D
The li8uidity and the co!position of assets should also be kept in !ind while selecting
the capital structure. if fixed assets constitute a !a0or portion of the total assets of the
co!pany, it !ay be possible for the co!pany to raise !ore of long ter! debts.
Cost of f"oatatio! D
)lthough not ery significant, yet cost of floatation of arious kinds of securities should
be considered while raising funds. The cost of floating debt is generally less than the cost
of floating e8uity and hence it !ay persuade the !anage!ent to raise debt financing. The
cost of floating as percentage to funds decrease with the increase in the si5e of issue.
43
D,T, ,N,$YSIS ,ND INTERPRET,TION
$s in 000#s
Sources of fu!ds

No Nae of ites HGG5 HGG6 HGG/ HG.G HG..
. Paid1u) ca)ita" 33GGG 33GGG 33GGG 33GGG 33GGG
H
Reserves a!d
sur)"us
6030H2 /HH2// .G/400 .HG444/ ..52000
0 Secured "oa!s .0G55G2 .3H6226 H.G2543 H3/4.H3 H3555.4
2 U!secured "oa!s 2G2525 6555. .H.G0G /2H6 3/3H
3
Defferred ta(
"iabi"ity
H.0234 HGG46. H2636. H3.//5 H4.H2G
44
I!ter)retatio!#
In super spinning !ills during the last fie years e8uity share capital re!ained constant
fro! -00520' to -00(2"0. There are so!e fluctuations in the reseres and surplus during
the period. :oweer there is an increase of B0C fro! -00'to-0"0.
Een though there are so!e fluctuations in secured and unsecured loans. 1ecured loans
increased by !ore than (&C in -0"0 and unsecured loans decreased in the year -0"0.
;eferred tax liability is increased by -?C fro! -00'2-0"0.
I!ter)retatio!#
E8uity share capital, share pre!iu! capital, resere re!ained constant during the period.
>eneral resere and 7K4 account were not constant due to so!e business expansion and
ups and downs in business expenditure.

,o ,a!e of ite!s -00& -00% -00( -0"0 -0""
" )uthori5ed capital
E8uity shares 550.00 550.00 550.00 550.00 550.00
- Issued,subcribedK
paid2up capital 550.00 550.00 550.00 550.00 550.00
? $eseres and surplus
a.1hare pre!iu!
"B%&.50 "B%&.50 "B%&.50 "B%&.50 "B%&.50
b.Capital resere
B%."% B%."% B%."% B%."% B%."(
c.>eneral resere
5((%.(? '--%.(? %--%.(? (B-%.(? (0B&.B'
d.7K4 account &%%.'? "B'0.?% ""('.&- ""0-.0& ""'0."%
45
Debt ca)ita"#
$oa!s a!d fu!ds Rs i! "a9hs
No Nae of ites HGG5 HGG6 HGG/ HG.G HG..
. Secured "oa!s
a8Ter "oa!s 4004<45 65HH<3G .G5.5<3 .5324<34 .2/./<3.
b8:or9i!'
ca)ita"
>orro*i!'s
452G<05 434.</6 .G00G<.3 62.2<5. .G635<43
H U!secured "oa!s 2G25<25 655<5. .H.G<0G /2<H6 3/<3H
Tota" .5.H2<3. .4.4H<./ HHH35</3 H4G33</2 H3604<46
I!ter)retatio!#
There was a debt capital which is fro! debentures in -000 only. 4ater they were
redee!ed. Ter! loans, working capital ,unsecured loans were increased fro! the year
-00'2-0"0. )ll these were increasing and decreasing due to the expansion of the business.
The oerall debt is being increased fro! -00&2-0"" fro! $s "&"-B.5" lakhs to $s
-5%?'.'% lakhs.
This is because the business expansion. They hae started a fir! na!ed 1)$)
apparels and fashions which !anufacture gar!ents for the other co!panies world wide.
The expansion in gar!ent !anufacturing diision was co!pleted in /eb -00%. The
capacity of the gar!ent unit has been increased fro! &00 to -000 pieces per day after the
expansion process. This is the reason why debt is increasing.
46
Gro*th of o*!er&s fu!ds
Year
EKuityShare ca)ita"
Rs i! "a9hs
Reserves ; sur)"us
Rs i! "a9hs
Net *orth
Rs i! "a9hs
-00& 550.00 %?-?.-B %%&?.00
-00% 550.00 (--B.(( (&&5.00
-00( 550.00 "0('".?? ""5"".00
-0"0 "000.00 "-0''.'( "?0''.'(
-0"" "000.00 ""&B?.?? "-&B?.??
Gro*th of o*!er&s fu!ds
I!ter)retatio!#
Year
Reserves a!d
sur)"us
Rs i! "a9hs
Lof i!crease
or decrease
over the
)revious year
Net *orth
Rs i! "a9hs
Lof i!crease
or decrease
over the
)revious year
-00& %?-?.-B M %%&?.00 M
-00% (--B.(( T"0C (&&5.00 T"0C
-00( "0('".?? T"%C ""5"".00 T"&C
-0"0 "-0''.'( T"0C "?0''.'( T"?C
-0"" ""&B?.?? 2?C "-&B?.?? 2?C
Reserves a!d sur)"us
There are fluctuations in the recent fie year reseres and surplus. In -00& there is an
"0C in -00% it has been increased by "%C, in -00( again increased by "0C and then
finally in -0"0 it has decreased to 2?C.
47
EKuity share ca)ita"
There is no increase in the e8uity share capital in the recent fie years. The authori5ed
capital of the fir! is 550 lakhs and the issued, subscribed and paid2up capital has reached
its extent that is authori5ed capital, because of rights issue in the year "((B2(5. Earlier it
was B"-.50 lakhs.
Net *orth so both reseres and surplus and e8uity share capital resulted in net worth to
fluctuate.
Gro*th of debt ca)ita"
Year
Secured "oa!s
Rs i! "a9hs
U!secured "oa!s
Rs i! "a9hs
Tota" debt
Rs i! "a9hs
-00& "?0&&.0B B0B&.B& "&"-5
-00% "5-%B.B% %&&.&" "'"'-
-00( -"0B&.'5 "-"0.?0 ---5%
-0"0 -5('".-5 (B.-% -'05'
-0"" -5&&&."' 5(.5- -5%?&
Gro*th of debt ca)ita"
48
I!ter)retatio!#
Year
Tota" debt
Rs i! "a9hs
L of i!crease or decrease
over the )revious year
-00& "&"-5 M
-00% "'"'- 2'C
-00( ---5% T?%C
-0"0 -'05' T"&C
-0"" -5%?& 2"C
;ebt capital also exhibits an increasing trend fro! the year -00%20( to -00(2"0. It is
increasing by ?%C, "&C respectiely and it is decreased by 2'C ,2"C in the year
-00&2-00% K -0"02-0"". The sources of the debt capital are deffered credits secured and
unsecured loans.
Secured "oa!sD includes loans fro! I;BI, EPI3 bank ICICI bank ltd, 6TI bank,
standard charted bank, CITI bank ,.)., and working capital borrowing fro! different
banks. There were -00000 "BC and -50000 "(C secured non conertible redee!able
debentures in "(((2-000 later they were redee!ed now the fir! super spinning !ills has
no debentures.
U!secured "oa!s# includes fixed deposits, trade deposits, short ter! loans, loans fro!
directors or bodies corporate and foreign currency loans.
;ue to expansion of the business the debt capital is being increased. They hae started
producing the products fro! sourced units which !anufacturing yarn and gar!ents for
this fir!. They hae taken loans due to this for their working capital and other
!iscellanies expenditures that is the reason why debt capital is being increasing in the
period.
49
Perce!ta'e of o*!ed a!d borro*ed fu!ds i! tota" i!veste!t
7ercentage of owner#s funds N ,et worth ( "00
,et worth O Total debt
Perce!ta'e of o*!ed a!d borro*ed fu!ds
I!ter)retatio!#
Year
Debt
Rs i! "a9hs
Lof i!crease or
decrease over
the )revious
year
Net *orth
Rs i! "a9hs
Lof i!crease or
decrease over
the )revious
year
-00& "&"-5 U %%&? U
-00% "'"'- 2'C (&&5 T"0C
-00( ---5% T?%C ""5"" T"&C
-0"0 -'05' T"&C "?0'& T"?C
-0"" -5%?& 2"C "-&B? 2?C
The aboe table shows clearing the debt is gradually increasing and the net worth is
fluctuating. *hen debt is co!pared to net worth the increase C is !ore so that the super
spinning !ills are preferring debt to e8uity to finance their inest!ents.

Year O*!er&s fu!ds >orro*ed fu!ds Tota"
-00& ?B."-C '5.%%C "00C
-00% ?&.'%C '-.?-C "00C
-00( ?B.0%C '5.(-C "00C
-0"0 ??.?(C ''.'"C "00C
-0"" ??.0?C ''.(&C "00C
50
Ratios
) ratio indicates the relationship between two figures or expresses or ariables. This can
be expressed as a si!ple fraction, integer, or percentage. ) ratio !ust represent a
!eaniningful relationship . the purpose of ratio will be sered only when relationship is
established between figures which are connected with each other. )bsolute figures are not
useful for co!parison. It is easy to !easure operational perfor!ance of an organi5ation
by using ratios. The ratios that are calculated can be called accounting ratio or financial
ratios as it is used and related to financial state!ent analysis. $atios indicate a
8uantitatie relationship, which the analyst !ust use to !ake a 8ualitatie 0udg!ent about
operational perfor!ance of an organi5ation. To study creditworthiness of the fir! select a
set of ratios that indicate fir!#s state of li8uidity, profitability, asset !anage!ent and debt
position. *hile selecting figures for calculating ratios one !ust be careful and see that
these figures are connected with each other. It is always better to co!pare ratios of
current year with that of past years. )ny nu!ber of ratios can be calculated depending
upon the purpose and necessity. 1o the ratios that each group of people chooses to
exa!ine will depend upon the nature of the groups interest in the fir!. 1o!e ti!es,
ratio#s can be calculated fro! profor!a financial state!ents. These ratios an be co!pared
with past ratios to know the relatie strenghs and weaknesses in the past and future.
The profitability has to reeal ability of the fir! to earn profitts+profitTability. which is
depent upon
6tili5ation of resources
3argin between sales reenue and cost of production.
There are two !a0or ob0ecties in calculating the ratios below. They are
To know the financial position of the organi5ation
To know the profitability of the fir!.
51
Debt eKuity ratio
This is also called as leerage ratio. This ratio would establish relationship between
borrowed capital and own capital. It is to !easure the proportion of borrowed capital in
the total capital inested. The ratio shows the risk assu!ed by the co!pany. If the ratio is
high risk is high. ) high ratio indicated that fir! has !ore borrowed capital than own
capital. ) high ratio increased the fir!#s obligation of interest pay!ent. It indicates that
fir! is ery aggressie.
)s long as the fir! gets ade8uate profits it can !eet its fixed obligation of interest and it
will further enhance the profits. But in case, profits are inade8uate the fir! will hae to
pay interest out of capital and that will further enhance its loss. 3oreoer high ratio
indiateds low creditwothiness of the fir!. 1ince the fir! has already !ore borrowed
capital, financial institutions will not co!e forward to grant loans. If at all any institution
co!es forward to finance, the ter!s and conditions !ay not be so faorable.
) low debt e8uity ratio indicates a low risk. The low proportion of the borrowed capital
reduces fir!#s fixed obligation of interest pay!ent.een when the fir! gets low profits,
profit rate is satisfactory it can not !axi!i5e its profits with low debt e8uity ratio.but the
creditwothiness of the fir! will be high when its ;E ratio is low. /inancial institutions
will co!e forward to finance these fir!s as the risk is ery low.low ratio indicates that for
eery rupee of borrowed capital fir! has !ore proportion of own capital. ) low ratio
indicates the fir!#s risk aesion and conseratie nature.
The debt e8uity ratio is generally calculated as followsD
DIE ratio N $o!' ter borro*ed ca)ita"
Share ho"der&s fu!ds
) ratio of "D" !ay be usually considered to be satisfactory ratio although there cannot be
any rule of thu!b for all types of businesses. In so!e businesses a high ratio -D" or een
!ore !ay be considered satisfactory. ) low ratio is considered as faorable fro! the
long2ter! creditors# point of iew because a high proportion of owners funds proide a
larger !agin of safety for the!.
;NE ratio for the year -00&
N "&"-5 N ".(?
%%&?
52
;NE ratio for the year -00%
N "'"'- N ".'5
(&&5
;NE ratio for the year -00(
N ---5% N ".(?
""5""
;NE ratio for the year -0"0
N -'05' N ".((
"?0'&
;NE ratio for the year -0""
R -5%?& R-.00
"-&B?
Debt eKuity ratio

Year
Debt
Rs i! "a9hs
EKuity7!et *orth8
Rs i! "a9hs
DIE ratio
-00& "&"-5 %%&? ".(?
-00% "'"'- (&&5 ".'5
-00( ---5% ""5"" ".(?
-0"0 -'05' "?0'& ".((
-0"" -5%?& "-&B? -.00
53
I!ter)retatio!#
The debt e8ity ratio is increaseing in the last four years. The fir! prefers to raise the
capital through the loans fro! banks and other financial institution due to
4ow cost of capital co!pared to other for!s.
/lotation charges are ery less in this
The fir! is getting the loans at cheaper cost and at ery reasonable ter!s and
conditions of the financial institutions.
3ore oer the co!pany is in huge profits and it has no proble! in paying the interest to
the creditors. The co!pany ai! is to !axi!i5e the wealth of the shareholders by
proiding the! high diidends.
I!terest covera'e ratio
This ratio establishes relationship between operating inco!eNprofit or EBIT and interest
payable annually. This ratio !easures the nu!ber of ti!es interest is coerd by the profit
aailable for the pay!ent of interest. 1ince interet is paid out of operating profit+EBIT.it
is essential to relate the! to !easure the degree of risk in the pay!ent of interest. This
ratio is calculated as followsD
I!terest covera'e ratio N E>IT
I!terest )ayab"e
:igher ratio indicates lower risk and lower ratio indicates higher risk. But higher ratio
!ay also indicate lesser proportion of borrowed capitalwhich !eans the fir! is not
!axi!i5ing shareholders# earnings by utili5ing !ore and !ore borrowed capital. 4ower
ratio is an indication of higher proportion of borrowed capital which a!ounts to higher
risk.
$atio for the year -00&
N B"%' N ?.%'%
"0%-
$atio for the year -00%
N B-'( N ?.'%?
""5(
$atio for the year -00(
N ''"% N 5.?"5
54
"-B5
$atio for the year -0"0
N B??B N -.00%
-"5%
$atio for the year -0""
R 5&B0 R-.'?'
-"&&
I!ter)retatio!#
Year
E>IT
Rs i! "a9hs
I!terest
Rs i! "a9hs
ICR
-00& B"%' "0%- ?.%'%
-00% B-'( ""5( ?.'%?
-00( ''"% "-B5 5.?"5
-0"0 B??B -"5% -.00%
-0"" 5&B0 -"&& -.'?'
I!terest Covera'e Ratio
Gross )rofit ratio
55
Gross )rofit ratio N Gross )rofit (.GG
Netsa"es

Rs i! "a9hs
Year HGG5 HGG6 HGG/ HG.G HG..
>ross profit B5-5 -%?B "0?( -"&' ?5'?
,etsales ??5"'.-' ?'&5-.-5 ?'?"'.5- 38537.85 47689.72
$atio (.?C %.B'C "B.&(C "".B&C &.-BC
GROSS PROFIT R,TIO
I!ter)retatio!#
The gross profit ratio of super spinning !ills is in a fluctuating trend. In the year -00' it
was (.?C, in -00& it has co!e down to %.B'C. in -00% there was an increase by "B.&(C
again in -00( it has reduced to "".B&C and again in -0"0 it ca!e down to &.-BC, This
was due to a hike in the expenditure.
56
O)ertati!' )rofit ratio
O)erati!' )rofit ratio N o)erati!' )rofit ( .GG
Net sa"es
Rs i! "a9hs
Year HGG5 HGG6 HGG/ HG.G HG..
<perating
profit
5(%" B'"0 "&&" B??B 5&B0
,etsales B0?&%.&& ?(-"5.-& ?''BB.&( ?%5?&.%5 B&'%(.&-
$atio "B.%"C "".&5C B.%?C "".-BC "-.0?C

OPER,TING PROFIT R,TIO
I!ter)retatio!#
The operating profit ratio of super spinning !ills is in a fluctuating trend. This is also
sa!e as the gross profit ratio cure. It says that if the operating profit goes up gross profit
also goes up and if it co!es down gross profit also co!es down. in the year -00& it was
"-.5C and in -00% it has co!e down, in -00( there was an increase by "%.-C in -0"0 it
has been reduced to "5.-C and again in the year -0"" it was reduced to "".&C
respectiely.
57
Net )rofit ratio
Net )rofit ratio N Net )rofit ( .GG
Net sa"es

Rs i! "a9hs
Year HGG5 HGG6 HGG/ HG.G HG..
,et profit "B-& "&- -&B? ?- "?("
,etsales ??5"'.-' ?'&5-.-5 ?'?"'.5- ?(B"(.-% ?(-"5.-&
$atio ?."C ?.0C '."C ?.'C 0.BC

NET PROFIT R,TIO
I!ter)retatio!#
The net profit ratio of super spinning !ills is also in a fluctuating trend. This is also sa!e
as the gross profit ratio cure. It says that if the gross profit goes up net profit also goes
up and if it co!es down net profit also co!es down. There was an increase in the year
-00( co!pared to the year -00%, in the year -0"0 K -0"" it was decreased to 0.BC
respectiely.
Retur! o! shareho"ders& tota" eKuity
58
This would establish relationship between profit and e8uity share capital. E8uity share
capital !eans e8uity and reseres +retained earnings., return is net profit after deducting
diidend on preference capital. This ratio shows the a!ount of profit that is earned on
own capital and also shows the profit aailable for distribution a!ong e8uity share
holders this is calculated as followsD
ROE N Net )rofit11Divide!d of )refere!ce ca)ita"
EKuity share ca)ita" O reserves
$<E for the year -00&
N "B-& N"-C
%(0?
$<E for the year -00%
N "&- N""C
(&&5
$<E for the year -00(
R -&B? R"(C
""5""
$<E for the year -0"0
R ?- R ""C
"-'"&
$<E for the year -0""
R"?(" R"C
"--(?
59
Year
Net )rofit
Rs i! "a9hs
Net *orth
Rs i! "a9hs
ROE Perce!ta'e
-00& "B-& %(0? 0."- "-C
-00% "&- (&&5 0."" ""C
-00( -&B? ""5"" 0."( "(C
-0"0 ?- "-'"& 0."" ""C
-0"" "?(" "--(? 0.0" "C
RETURN ON S=,RE =O$DER&S E@UITY
I!ter)retatio!#
1uper spinning !ills e8uity share capital is constant through out the four years fro!
-00%2-0"0. The return on e8uity share capital al!ost constant fro! -00&2-00%. But in the
year -00( there was a hike in the fir!#s $<E by "(C , in -0"0 it reduced to ""C.and in
-0"" it declined to "C. This is because the raw !aterials costs rose sharply affecting the
profitability during the second 8uarter of the year. The aerage price reali5ation also
declined due to accu!ulation of stock resulted out of difficulties in i!ple!enting the
cenat procedure co!pounded by protracted transporters strikes. ;uring the year the
co!pany achiees reasonable profits neutrali5ing the aboe aderse factors
Tur!over
60
Tur!over of SS %I$$S
I!ter)retatio!#
Turnoer of super spinning !ills ltd is ??5"', ?'&5-lakhs respectiely in the
years -00&, -00% and is increased by ?(-"5 in the year -0"". This is because the !ill
produces the yarn of different counts as per the custo!ers de!and. 1o that the turnoer is
increasing.

year Tur!over
Rs i! "a9hs
-00& ??5"'
-00%

?'&5-
-00( ?'?"&
-0"0 ?(B"(
-0"" ?(-"5
61
Ear!i!'s )er share
,et profit less diidend on preference capital is the profit aailable for
distribution. This indicates the profit earned per e8uity share. This can be calculated as
followsD
EPS N )rofits avai"ab"e for distributio!
No< of eKuity shares
year
Net )rofit
Rs i! "a9hs
No< shares
EPS7Ear!i!'s )er
share8
-00& "0B? 5500000 "%.('
-00% ""-- 5500000 -0.B0
-00( --?% 5500000 B0.'(
-0"0 "B-& 5500000 -5.(B
-0"" "&- 5500000 ?."-
E,RNING PER S=,RE
I!ter)retatio!#
E71 of the super spinning !ills is "%.(', -0.B0, B0.'(, -5.(B,?."- rupees
respectiely fro! -00& to -0"". It is increased fro! -00'2-00%. But it has reduced to $s
-5.(B, ?."-, in the years -0"0K-0"" due to less net profit co!pared to year -00(K-0"0.
Divide!d )er share
This considers only a!ount paid to e8uity share holders but not the a!ount
aailable for the distribution of diidend. This ratio is calculated asD
DPS N Divide!d dec"ared
No< of eKuity shares
62
Year
Divide!d dec"ared
Rs i! "a9hs
No< shares DPS
-00& --0 5500000 B.00
-00% --0 5500000 B.00
-00( BB0 5500000 %.00
-0"0 -&5 5500000 5.00
-0"" %- 5500000 ".B(
DI?IDEND PER S=,RE
I!ter)retatio!#
The super spinning !ill has declared $s B, $s B, $s %, $s 5K$s ".B( as a
diidend for each share of $s "0 in the years -00&, -00%, -00(, -0"0K-0"" respectiely
that shares the perfor!ance of the co!pany is good and is working for the benefit of its
shareholders. ;ue to these diidend only the !arket price of the share has increased and
around 50000 shares are being transacted daily in different stock exchanges
The diidend has reduced to $s ".B( fro! $s % in the year -0"" due to less profit
in the year.
Payout ratio
This ratio establishes relationship between the profit earned on each e8uity share
and the profit distributed to each e8uity shareholder. This can be calculated as follows
Payout ratio N DPS
EPS
63
Year
Divide!d )er share
Rs<
Ear!i!'s )er share
Rs
Payout ratio
-00& B "%.(' -"C
-00% B -0.B0 -0C
-00( % B0.'( -0C
-0"0 5 -5.(B "(C
-0"" ".B( ?."- B%C
P,Y OUT R,TIO
I!ter)retatio!#
Een the fir! is earning !ore and !ore profits it is giing only so!e a!ount of its
earning and the rest is retained. This is added to the e8uity share capital to earn !ore
profits. The fir! is utili5ing the retained earnings to expand its business to surie in this
co!petitie corporate !arket and to produce and proide fine 8uality of its produces at
ery cheaper price.
64
Divide!ds
The net profits after taxes belong to shareholders. But the inco!e which they really
receie is the a!ount of earnings distributed as cash diidends. ;iidends are considered
desirable shareholders# point of iew as they lend to increase their current wealth.
9ear
;iidends
$s in lakhs
;iidendC
-00& -B% B0C
-00% -5" B0C
-00( 50- %0C
-0"0 ?-- 50C
-0"" (& "5C
DI?IDENDS
I!ter)retatio!
The super spinning !ills has declared B0, B0, %0, 50K"5C as a diidend for each share in
the years -00&, -00%, -00(, -0"0K-0"" respectiely. That shows the perfor!ance of the
co!panyin the year-00&2-00( it was benifited to its share holders and in the year -0""2
-0"", it was reduced fro! 50C to "5C because due to so!e rise in the price of raw
!aterial and in the year -0"" due to financial crisis.
FINDINGS
65
,!a"ysis of ca)ita" structure
EKuity share ca)ita"
E8uity share capital re!ained constant during the period fro! the financial year -00'2
-00& to -0"02-0"". ,o issue was !ade during the fie years.
Reserves a!d sur)"us
$eseres and surplus is being increasing fro! the past fie years. i.e., -00'2-00& to -0"02
-0"" .There is no a!ount transfers to deferred tax liability fro! the general reseres.
Debt ca)ita"
11 3ills# debt capital includes secured and unsecured loans.
In -0"02-0"" only ter! loans and working capital borrowings were there. 1ecured loans
are fro! EPI3 Bank, ICICI Bank 4td, 6TI Bank 4td, CITI Bank, 4IC </ I,;I) and
working capital borrowings fro! I;BI Bank, 1tandard charted bank K different financial
institutions.
6nsecured loans include fixed deposits, trade deposits, short ter! loans fro! banks, loans
fro! directorsNbodies corporate, and foreign currency loans.
Perce!ta'e of o*!ed a!d borro*ed ca)ita"
In the year -00%2-00(, 02<.#43<6 was ratio between owned and borrowed capital but in
the year -0"02-0"", it has been decreased to 00<G0#44</5<
The fir! is !ore concentrating on the debt and preferring debt to e8uity because of
4ow cost of flotation
66
Cheaper cost of capital
It is getting loans at ery reasonable ter!s and conditions.
,!a"ysis of )rofitabi"ity
DIE ratio was .# /0 in the year -00'2-00& and H# GG in -0"02-0"". There was a gradual
increase in the ratio during the period.
Gross Profit ratio was "B.&(C +highest. in -00%2-00( and low in the year -0"02-0""
i.e.&.-B C.
O)erati!' )rofit ratio was least "".' C in -00%2-00( and highest "%.- C in -0"02-0"".
It was again reduced to "".&C in the year -0"0, due to increased expenses and raw
!aterial costs.
Net )rofit ratio was highest in -00%2-00( i.e,'."C, and lowest in -0"02-0"" i.e,0.BC.
Tur! over is being increased fro! ??5"'.-' lacs to ?(-"5.-& lacs fro! -00'2-00& to
-0"02-0"".
CONC$USIONS
67
Ca)ita" structure of 11 3ills is opti!u! as per the analysis during the period.
Profitabi"ity is also found satisfactory after calculating ratio such as ;NE ratio. Interest
Coerage $atio, >ross profit, ,et profit ratios, Earning per share and diidend per share
etc.
>I>$IOGR,P=Y
68
o I.3. 7andey /I,),CI)4 3),)>E3E,T, :i!alaya
7ublishers, -00( edition.
o ;r. 7.,. $eddy 3),)>E3E,T )CC<6,TI,>
o 3.9. =han K 7.=. Aain /I,),CI)4 3),)>E3E,T, =alyani
7ublishers,-00%.
o 7rasanna Chandra /I,),CI)4 3),)>E3E,T
o Aain K ,arang );H),CE; )CC<6,TI,>
)nnual reports of super spinning !ills
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69