ARSS Infrastructures Pvt

7/28/2019 ARSS Infrastructures Pvt

1/58

I

ARYA SCHOOL

OF MANAGEMENT AND INFORMATION TECHNOLOGY

PATRAPADA, BHUBNESHWAR

A PROJECT REPORT

ON

RATIO ANALYSIS OF

ARSSLTD, BHUBNESHWARPROJECT REPORT SUBMITTED FOR PARTIAL FULFILMENT OF THE MASTER OF FINANCE

AND CONTROL (MFC) UNDER UTKAL UNIVERSITY,ORISSA

SESSION:2010-12

SUBMITTED BY:

MANDAKINI PRADHAN

ROLL NUMBER: 13767U104016

UNDER THE GUIDENCE OF

INTERNAL GUIDE EXTERNAL GUIDE

MR.RASHMI RANJAN PANIGRAHI MR.BISHNU MAHARANA(FACULTY OF FINANCE) TAX CONSULTANT

ASMIT ARSS


2/58

II

CERTIFICATE

This is to certify that the project study entitled RATIO ANALYSIS OF

ARSS LTD is a bonafide work done by Mandakini pradhan,

Regd. No- and submitted in partial fulfillment of the award of

degree in Master of finance & Control Administration Utkal

University Vanivihar, Bhubaneswar

Date Mandakini pradhan


3/58

III

DECLARATION

I, Mandakini pradhan hereby declare that the project report on

RATIO ANALYSIS OF ARSS submitted to the company is done

under the supervision of Mr. BISHNU MAHARANA, of ARSS Ltd.

(Industrial guide) and is my own effort and is not published in any

other organization.

Date Mandakini pradhan

Place:BhubaneswarRoll No:-


4/58

IV

ACKNOWLEDGEMENT

I avail this opportunity to express my profound sense ofsincere and deep gratitude to many people who are

responsible for the knowledge and experience I have gained

during the project work.

I am extremely grateful to Mr. Bishnu Maharana, ARSS Ltd.

for giving me the opportunity to undergo my Project in his

organization.

I am also thankful to Mr. Rashmi Ranjan Panigrahi, Faculty (in

Finance), Arya School Of Management And Information

Technology, for helping me to get such an excited project

under his internal guidance.

I am also grateful to other members of ARSS for their

cooperation throughout the project for getting in-depthknowledge

My hearty and inevitable thanks to all the respondents who

have helped me to bring out the project in a successful

manner.

Mandakini pradhan

TABLE OF CONTENT

CHAPTER PAGES


5/58

V

INTRODUCTION

&COPMPANY PROFILE ----------- 2-14

OBJECTIVE , SCOPE & RESEARCH METHODOLOGY ----------- 15-16

RATIO ANALYSIS ----------- 17-43

CONCLUSION & SUGGESTION ----------- 44-49

APPENDIX ----------- 50-52

BIBLIOGRAPHY ----------- 53-54

Chapter 1


6/58

VI

Introduction of ARSS


7/58

VII

ABOUT THE COMPANY:

BREIF HISTORY:

The Company was originally incorporated as ARSS Stones Private Limited on May 17, 2000

under the Companies Act, 1956 with its registered office at N1/93, IRC Village, Nayapalli,

Bhubaneswar751015, Orissa. The registered office of thye Company was shifted to the Plot

No. 38, SectorA, Zone D, Mancheswar Industrial Estate, Bhubaneswar751010 with effect

from July 1, 2003. The name of the Company was changed to ARSS Infrastructure Projects

Private Limited with effect from May 20, 2005. The Company was converted to a public

limited company with a special resolution of the shareholders passed at the extraordinary

general meeting held on November 15, 2005 and the Registrar of Companies; Orissa issued a

fresh certificate of incorporation on April 3, 2006 in the name of ARSS Infrastructure

Projects Limited.

ARSS Infrastructure Projects Limited

Corporate Identification Number: U14103OR2000PLC006230

Registered Office Corporate Off ice

Plot No. 38, SectorA, Zone-D, Plot No-141, SBI Colony

Mancheswar Industrial Estate, Paschim Vihar,

Bhubaneswar-751010, Orissa New Delhi-110063

Tel.: + 91- 674-2588554 / 52 Tel: + 91-11-45538638

Fax: +91- 674- 2585074 Fax: + 91-11-25287357

Website:www.arssgroup.in

Compliance Officer: Mr. Bibhuti Bhusan Sahoo, Company Secretary
http://www.arssgroup.in/http://www.arssgroup.in/http://www.arssgroup.in/http://www.arssgroup.in/


8/58

VIII

BUSINESS SUMMARY:

The Company is engaged in construction activities in India. It undertakes construction of

railway infrastructure, roads, highways, bridges and irrigation projects. We started as a

construction company in the field of railway infrastructure development, mainly in the state

of Orissa and subsequently expanded its business activities in the zonal jurisdictions of East

Coast Railway, South Eastern Railway, South East Central Railway, Southern Railway and

North Western Railway. It has developed expertise in railway construction projects, which

includes earthwork, major and minor bridges, supply of ballast, sleepers, laying of sleepers

and rails, linking of tracks etc. Over the years it diversified its field of activities into other

construction segments such as development and construction of roads, highways, bridges,

irrigation projects, EPC activities for railways. Construction projects are typically awarded

through competitive bidding process to bidders with certain eligibility requirements based on

their past experience, technical capabilities and financial strength. The company bid for

projects both on a standalone basis as well as through project specific joint ventures. It has

entered into joint ventures with national and international players such as PT Adhikarya

(Persero), Harish Chandra (India) Limited, Triveni Engicons Private Limited, RITES,

Kalindee Rail Nirman (Engineers) Limited, Patel Engineering Ltd, Rohit Kumar Das

Construction Private Limited, Backbone Enterprises Ltd. and Atlanta Ltd.It has successfully completed over 200 km rail line and more than 300 km of roads and

highways. It has presence in Eastern India, particularly in the state of Orissa. However, in

recent years it has pursued opportunities in other parts of India including states of

Chhattisgarh, Rajasthan, Jharkhand, Haryana, Kerala, Andhra Pradesh, Assam, Maharashtra,

Tamil Nadu, Gujarat, Uttar Pradesh and Madhya Pradesh.

Some of the important projects being currently executed by the company on

standalone/joint venture basis are as follows: Construction, rehabilitation and widening of Cuttack- Paradeep road, Orissa, for a contract

value of Rs. 20,826.77 lacs.

Construction of Roadbed including Major and Nior Bridges, Facilities and General

Electrification in connection with construction of New BG line between Haridaspur and

Paradeep in East Coast Railway in the State of Orissa, India. The contract value for the

project is Rs. 10,096.66 lacks.

Work Order forexecution of Rail Infrastructure Work of Rs.26, 100.00 lacs for the Angul

project of Jindal Steel & Power


9/58

IX

Construction of new broad gauge line, bridges, earthwork cuttings, road over bridges, road

under bridges and sub ways between Salem-Karur, Chennai. The contract value for the

project is Rs. 5,139.05 lacs.

Construction of Kaushilia Dam and appurtenant works in Panchkula district of Rs. 11299.19

lacs

As of December 31, 2009, our work force consisted of approximately 2,725 full time

employees. Company has track record of timely execution of its projects. It adheres to

international best practices standards and has been certified with ISO 9001: 2008 Quality

Management System

Standard Certificate by Moody International Certification Limited forConstruction of Civil

and Infrastructure Work like Highways Roads, Bridges, Railway Track Linking Works

(including OHE SNT), Earth Works, Irrigation Projects Like Dams etc We are committed to

adhering to health, safety and environment policies and practices in the execution of our

projects.

In the FY 2010, the total income of the company was Rs. 101308.55 lacs and earned net

profit of Rs. 9007.32 lacs.

Table : Works of the Company

Particulars On Dec 2009 2008-09 2007-08 2006-07

Amount % Amount % Amount % Amount %

Railway Work 27,593.68 45.63 16,884.75 27.40 10,195.75 32.50 7,626.42 57.34

Road Work 19,681.63 32.55 29,126.60 46.65 10,479.51 33.41 3,141.84 23.62

Irrigation 4,450.45 7.36 2,995.50 4.80 2,122.53 6.77 - -

Other Work 8,743.18 14.46 13,430.68 21.51 8,569.30 27.32 2,531.88 19.04

Total contract

Income

60,468.94 100.00 62,437.53 100.00 31,367.09 100.00 13,300.14 100.00

As of January 10, 2010, total value of our Order Book is Rs. 287,753.11 lacs, which consists

of the unexecuted portions of the ongoing projects and new confirmed projects awarded to

the company, which are yet to commence construction. The composition of the Order Book is

as follows: -


10/58

X

Table.: Composition of the Order Book

Particulars On January 10, 2010 2008-09 2007-08 2006-07

Amount % Amount % Amount % Amount %

Railway Works 118,414 41.15 99,121.48 39.25 81,222.98 52.6 27,628 42.65Road Works 116,405 40.45 42,149.41 56.29 60,854.35 39.41 37,156 57.35

Irrigation works 7270 2.53 5,709.98 2.26 8,705.47 5.64 - -

Other Works 45,664 15.87 5,545.00 2.20 3,648.00 2.36 - -

Total 287,753.11 100 155,525.87 100 155,430.80 100 64,784 100

Companys order book as on January 10, 2010 stood at Rs.2877.53 Cr. The composition of

Order Book is well diversified over various segments such as railways, roads and highways

and Road over Bridges (ROB). Diversification into new areas of construction projects helps

the company to mitigate the risk of slowdown in revenues from any segment due to

unforeseen circumstances. The reason of increasing and then decreasing % of railway works

due to the government launched new projects in 2007-06 and 2007-08 where as no of

launched projects in 2008-09 and 2009-10 comparison to previous years are very less.

Growth in the roads sector had declined from 2007-06 to January 2010 as various issues

had delayed the award of National Highways Authority of India (NHAI) projects. The

growth momentum, built in the last 4-5 years, has seen limited progress since March

2007. There has been a complete lull in awarding NHDP projects in 2008-09. Since July

2008, around 6,000 km from Phase III and Phase V were in different stages of bidding

process and were expected to be awarded by December 2008. However, no stretches had

been awarded till November 2008. The awarding of NHDP projects had slowed down

from 5,131 km in 2005-06 to a mere 1,000 km in 2007-08. According to CRISIL

Research, investments in the roads sector declined from Rs. 357 billion in 2007-08 to Rs.

345 billion in 2009-10. Consequently, the share of roads in total infrastructure

construction investments declined from 36.1 per cent during 2007-08 to 26.6 per cent in

2009-10. CRISIL expects the segment to see growth in 2010-11, when more number of

projects to be awarded on BOT-annuity or cash contract basis. CRISIL expects this

segment to see growth in 2010-11, when more number of projects will be awarded on

BOT-annuity or cash contract basis.


11/58

XI

According to CRISIL Research, irrigation construction investment is expected to grow

from Rs. 155 billion in 2007-08 to 241 billion in 2009-10. Consequently, the share of

irrigation in the total infrastructure construction investments is expected to increase

from 15.7 per cent during 2007-08 to 18.6 per cent in 2009-10. Irrigation projects

include construction of dams, water reservoirs, small hydropower projects (10-20 mw

capacity) and lift and gravity technology to create water distribution networks. IVRCL

leads the irrigation construction segment followed by other companies like Gammon,

Hindustan Construction Company (HCC), Nagarjuna Construction Company (NCC),

Patel Engineering etc.

According to CRISIL Research, irrigation construction investment grew from Rs. 155

billion in 2007-08 to 241 billion in 2009-10. Consequently, the share of irrigation in the

total infrastructure construction investments is expected to increase from 15.7 per cent

during 2007-08 to 18.6 per cent in 2009-10. Irrigation projects include construction of

dams, water reservoirs, small hydropower projects (10-20 mw capacity) and lift and

gravity technology to create water distribution networks. IVRCL leads the irrigation

construction segment followed by other companies like Gammon, Hindustan

Construction Company (HCC), Nagarjuna Construction Company (NCC), Patel

Engineering etc.


12/58

XII

ORGANIZATIONAL HIERARCHY:

THE COUSTOMERS:

The Company is totally entrusted in its customers satisfaction and confidence based on its providing

services.

The Companys valued customers are;

Govt. of Orissa

Govt. of Haryana

Rail Vikash Nigam Limited

RITES Limited

IRCON International Limited

National Thermal Power Corporation(NTPC)

National Highway Authority of India (NHAI)

ESSEL Mining

Damodar Valley Corporation

Orissa State Disaster Mitigation Authority (OSDMA)

Indian Oil Corporation Limited (IOCL).

Hindustan Petroleum Corporation Limited (HPCL).

Jaipur Development Authority

East Coast Railway

South Eastern Railway

North Western Railway

Southern Railways

Central Railway

Northeast Frontier Railways

Tamil Nadu Industrial Road Infrastructure Corporation Limited.

Jindal Steel And Power Limited

Vishakhapattanam Steel Plant

Rourkela Steel Plant

Vedanta Aluminum Limited

.


13/58

XIII

SWOT ANALYSIS:

Strength of the Company:

The company depends largely upon the services of its key managerial personnel and

to attract and retain them;

Its competitive strengths include its project management expertise The company has

successfully executed 86 projects involving construction of 300 km roads and

highways, 200 km of rail tracks, 10 minor and major bridges, and other general civil

engineering works over the span of nine years.

It owns a sizeable fleet of construction equipment, enabling it to rapidly mobilize the

same to project sites.

The company has a advantage of construction equipment. Also the company has a

large investment in equipments and fixed assets. As on March 31, 2010 the total

investment in plant and equipment is Rs 25,832.08, lacks.

Railways are the major revenue source, accounting for 45.6% of total revenues in the

period of 9 months till December 31, 2009. The company's focus and strength has

been in the Eastern region of India historically, particularly state of Orissa. Around

44% of FY09 revenues are attributable to projects located in Orissa.

Majority of the clients are the Governments of the states or Central Government,

Public Sector Undertakings, and other government agencies.

The order book as on January 10, 2010 stands at Rs 287753.11 lacks. The

composition of the order book is well diversified over various segments such as

railway, roads and highways. In 2007 the company entered into two different segment

of irrigation and canal construction works. Diversification of the business mitigates

the risk associated with the unforeseen circumstances.

The company is continuously growing in their bid capacity and prequalification

capability where as the bid capacity and prequalification capability largely depends

upon technicalcapability, financial capability and past experience in similar projects.


14/58

XIV

Weakness of the Company:

Some of group companies namely Anil Contracts Private Limited, M/s Hindustan

Construction, M/s Anil Agarwal and ARSS Engineering and technology Private

Limited are in the same line of business, which may arise the conflict of interestbetween the group of companies and the business strategy of the company;

Some of the entities promoted by the promoters are in the same line of business.

Hence the company may not get the full benefit of their promoters focused attention

and managerial skills. This may arise the conflict of interest between the promoters

and the business strategies of the company;

The group companies incurred the loss in previous years which can affect the business

of the company; The company have not carried out an independent appraisal of the working capital

management;

The companys revenue totally depends on the contracts awarded by Central and State

Government and their agencies.

The company relies on the limited no of supplier and vendor viz. Hindustan

Petroleum Corporation Limited (HPCL) and Indian Oil Corporation Limited (IOCL),

in order to meet the raw material requirement. Failure on the part of the supplier todeliver the desired quality and quantity of the product may adversely impact on the

companys business and financial health.

There are no certainties regarding the completion of the projects. It can be cancelled,

postponed the payment, delayed etc. By which the cash flow statement, revenues and

earnings etc are affected.

The insurance coverage of the company may not protect against certain operating

hazard.

The working capital requirement of the company is dependent on the bank finance.

Any changes in interest rates or banking policy will adversely affect the companys

business.

Defaulted on payment of interest and repayment of loan

ARSS has defaulted in making payment of interest & repayment of loans in the past.

However, the company has cleared all its dues before filing the prospects .In case the

company defaults in making payment in the future it could pose a serious sets.


15/58

XV

Opportunity for the Company:

Company's emphasis on the Railways segment can be a positive from the growth

point of view, given that Indian Railways are likely invest huge sums in expanding

and upgrading the railways infrastructure in the country.

The company is totally concentrated on a single stats i.e. Orissa which can be a

positive side for the company. Because every year new project come to the Orissa; in

recent years POSCO and Arcelor- Mittal steel project came to Orissa.

Indian Railways had increased expenditure from Rs820bn in the Tenth 5 year Plan, to

Rs2441bn during the Eleventh 5 year plan period, which kicked off in April, 2007. A

significant portion of the increase in expenditure would be directed towards building

new lines (of about 2,000 Km), doubling of track, electrification, computerization,

rolling stock, signal and telecommunication works, and bridge works, amongst others.

A huge growth in railway construction is based on the proposed outlays planned

through the Eleventh 5 year plan, Mission 2015 and several new initiatives. The

Ministry of Railways has also floated the Integrated Modernization Plan to keep pace

with the expected growth in business for railways.

Roads, incl. national highways and state roads continue to drive construction

investments. The key programmes during 11th five year plan under road development

include the National Highway Development Programme (NHDP), Pradhan Mantri

Gram Sadak Yojana (PMGSY), and Special Accelerated Road Development

Programme for the North East (SARDP - NE), in addition to other state level projects.

The company has a bigger opportunity to invest in these projects.

Irrigation is expected to drive infrastructure investments. According to CRISIL

Research, irrigation construction investment grew from Rs155bn in FY08 to Rs241

billion in F10. Consequently, the share of irrigation in total infrastructure construction

investments is expected to increase from 15.7% during FY08 to 18.6% in FY10.

According to CRISIL, in the medium term, Andhra Pradesh, Gujarat, Maharashtra,

Karnataka and Uttar Pradesh are expected to witness substantial investments in the

irrigation sector. Over the next 5 years, around Rs400bn worth of irrigation projects

have been envisaged by Andhra Pradesh alone.


16/58

XVI

Threats for the company:

The following can be threats for the company:

Increasing competition in bidding process; face competition from national and

international companies

High working capital requirement; if deficiency will occur, that will affect the financial

strength of the company

Increase in cost or non-availability of equipment, materials or fuel;

Engagement of sub-contractors or other agencies in the course of execution of road and

railway projects;

A significant portion of the revenue and the order book being concentrated in Eastern

India;

Dependence on joint ventures to qualify for the bidding process;

Seasonality and weather conditions;

Changes in Government policies and the political situation in India;

Statutory taxes and other levies, which may affect the margin in the event of inability to

factor such expenses in bids or contract price

The Company may be liable for defaults committed by the Joint Venture Partners in the

course of execution of the projects undertaken by it jointly with such Joint Venture

Partners

The conditions and restrictions imposed by the lenders could restrict ability to expand

companys business and operations.

The company should complete the projects in time. Failure to adhere to agreed timelines

could adversely affect the companys reputation and/or expose to financial liability.


17/58

XVII

Business Strategy:

The company is totally concentrated on maintaining their performance in this sector.

The company shall continue to bid for contracts from Government, quasi Government or

development organizations across India. Over the last two years it has expanded our

operations from Orissa to states like Chhattisgarh, Tamil Nadu, Rajasthan, Jharkhand,

Andhra Pradesh, Kerala, Haryana, Assam, Maharashtra, Gujarat, Uttar Pradesh

andMadhya Pradesh etc. to avail of opportunities across different states of India. It has

recently succeeded in qualifying for the six-laning of two stretches of National Highway

No. 5 (NH-5) in southern states of Andhra Pradesh and Tamil Nadu.

Infrastructure construction is a highly competitive and capital-intensive activity. Optimal

utilization of financial, human and other resources is crucial for achieving success in this

industry. The companys strategy will be to continue focusing and structuring on

optimum capital utilization to enhance returns, by actively analyzing and identifying

projects and assigning priority to high margin yielding projects. It also intends to improve

capital efficiency by striving for accelerated completion of projects.

Forging alliances with established Indian and international strategic partners

The company intends to develop and continue to establish strategic alliances with

companies, whose resources, skills and strategies are complementary to its business,

which would enhance its business opportunities to achieve competitive bidding

advantage.

Business DevelopmentThe company is awarded contracts pursuant to a competitive bidding process. Government

and other clients typically advertise their proposed projects in leading national newspapers or

on their websites. The tendering department reviews newspapers and websites to identify

suitable projects. The tendering department evaluates bid opportunities and the project merits

are discussed internally with the senior management based on parameters like client's

reputation and financial strength, the geographic location, current projects and order book,

the project's cost and profitability estimates and competitive advantage relative to other likely

bidders. Once the department has identified projects that meet criteria, company submits its

application as per the specified procedures.


18/58

XVIII

Joint ventures of the company:

The Company has entered into joint ventures with various established construction houses

viz; Harish Chandra (India) Limited, Kalindee Rail Nirman (Engineers) Limited, Triveni

Engicons Private Limited, PT Adhikaria (Persero) and Niraj Cements Private Limited. The

joint venture partners aforesaid have vast experience and expertise in execution of civil

construction, bridge construction, earth excavation, road construction works and civil

engineering works awarded by Government departments and authorities. The Company

together with the joint venture partners aforesaid has undertaken projects awarded by

Government authorities and Public Sector Units such as NABARD, RITES, and NTPC etc.

The joint venture partners, in mutual consultation with one another determine the quantum of

work to be executed by each joint venture partners vide entering into memoranda of

understanding/joint venture agreement. The work awarded to joint venture is executed by

them independently or through the sub-contracting to the third party including the joint

ventures partners.

The Company has entered into following joint venture agreements: -

Recent Secured Projects:

ARSS Infrastructure Projects Limited bags order from SAIL of Rs 47.89 crore is for

the re-habilitation and up gradation of existing tracks inside the plant premises. The

time for completion is 24 months on May 8, 2010.

ARSS Infrastructure Projects secures order From SAIL ARSS Infrastructure Projects

has received a new work order from SAIL, Bokaro Steel Plant on May 05, 2010 for

Rs. 71.62 crore.

ARSS Infrastructure Projects receives new order worth Rs 99.90 crore From Madhya

Pradesh Road Development Corporation ARSS Infrastructure Projects has received a

new work order from Madhya Pradesh Road Development Corporation for Rs 99.90

crore on May 04, 2010.


19/58

XIX

Chapter 2

Objective, Scope

&

Research Methodology


20/58

XX

OBJECTIVES OF THE STUDY

Focus on determining financial strengths and weakness of ARSS Infrastructure

Projects Ltd.

To study and analyze the liquidity position, operating efficiency of the organization.

To analyze the trends in various items included in the Balance sheet and income

statement using Ratio analysis.

Interpreting the results of the study for meaningful conclusion and suggestions.

METHOD LOGY

The study banks upon both the primary as well as secondary sources for gathering the

required information.

Secondary Data sources : Secondary data are collected from internal sources as well as from

external sources.

The secondary sources include :

Annual Reports

Commercial Data

Books of account of the company

Published reports relevant to the topic

News, letters and other publications

Websites


21/58

XXI

Chapter-3

PRESENTATION

ON RATIO ANALYSIS


22/58

XXII

RATIO ANALYSIS

Meaning of Ratio

A ratio is a simple arithmetical expression of the relationship of one number to another. It

may be defined as the indicated quotient of two mathematical expression. According to

Accountants Handbook by wixon, kell & Bedford, a ratio is an expression of the

quantitative relationship between two numbers.

Use and Significance of Ratio Analysis

Ratio analysis stands for the process of determining relationship of items group of items inthe financial statement. It is an important technique of financial analysis. It is a way by

which financial stability and health of a concern can be judged. The following are the main

points in use of ratio analysis.

Helps in Decision Making.

Helps in Financial forecasting and planning.

Helps in communicating.

Helps in co-ordination.

Helps in control

Utility to shareholders

Utility to Creditors.

Utility to Employees.

Utility to Government.

Tax and audit Requirements


23/58

XXIII

Objectives of Ratio Analysis

Financial Forecasting

Facilitates comparison

Cost Control

Proper Communication

Guidelines or Precautions For Use of Ratios

The calculation of ratios may not be difficult task but there use is not easy. The information

on which these are based, the constraints of financial statements, objective for using them, the

caliber of the analyst, etc.are important factors which influence the use of ratios. Following

guidelines or factors may be kept in mind while interpreting various ratios.

Accuracy Of Financial Statements

Objective or Purpose of Analysis

Selection of Ratio

Use of standards

Calibre of the Analyst

Ratio only provide a Base


24/58

XXIV

LIMITATIONS OF RATIO ANALYSIS

Limited use of time

Lack of adequate standards

Inherent limitations of Accounting

Change of Accounting Procedure

Window Dressing

Personal Bias

Uncomparable

Absolute Figures Distortive

Price Level Changes

Ratios no Substitute


25/58

XXV

Classification of Ratios

The ratio analysis is one of the most powerful tools of financial analysis. Broadly ratios are

classified into four categories.

a) Liquidity Ratio

b) Activity Ratio

c) Profitability Ratio

d) Leverage Ratio

a) Liquidity Ratios.

Liquidity refers to the ability of a concern to meet its current obligations as and

when it becomes due. It determines the credit worthiness of a company to meet its

short term liabilities or commitments. To measures the liquidity of a company, the

following ratios can be calculated.

i) Current Ratio

ii) Quick or Acid test or Liquid Ratio

iii) Absolute Liquid Ratio/Cash Position Ratio

i) Current Ratio

Current ratio may be defined as the relationship between current assets and current

liabilities. Current 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. It is calculated by dividing the total of current assets by the total

current liabilities,


26/58

XXVI

Interpretation.

A relatively high current ratio is an indication that the firm is Liquid and has the ability to pay

its current obligations in time as and when they become due. On the other hand, a relatively

low current ratio represents that the liquidity position of the firm is not good and the firm

shall not be able to pay its current liabilities. As a convention the minimum of 2:1 ratio is

referred to as a bankers rule of thumb.

ii) Quick or acid test or liquid ratio

Quick ratio also known as acid test or Liquid ratio is a more rigorous test of liquidity than

the current ration. It may be refined as the relationship between quick or liquid assets and

current liability. Current assets excluding inventories, work in progress and prepaid

expenses are known as quick assets or liquid assets.

Liquid Ratio

Interpretation

Usually a high acid test ratio is an indication that the firm is liquid and has the ability to

meet its current obligations. On the other hand a low quick ration represent that the firms

liquidity position is not good. As a rule of thumb or as convention quick ratio of 1:1 is

considerable satisfactory

(iii) Absolute Liquid Ratio/ Cash Ratio

Absolute liquid ratio is the relationship between the absolute liquid assets and

the current liabilities. Absolute liquid assets are find out by subtracting the bills

receivable and sundry debtors from the liquid assets.

Absolute Liquid Ratio


27/58

XXVII

Interpretation:

The standard norm is 0.5:1 or 1:2 which means that Re.1 of absolute liquid assets are

sufficient to pay Rs. 2 worth of current liabilities. This ratio is not used widely because a

huge amount of idle cash has to be kept.

(b)Efficiency / Activity Ratios

Activity ratios measure the efficiency or effectiveness with which a firm manages its

resources or assets. These ratios are also called turnover ratios because they indicate the

speed with which the assets are converted into sales. Basically there are three activity

ratios:

(i) Inventory /Stock Turnover Ratio.

(ii) Debtors Turnover Ratio.

(iii)Creditors /payable Turnover Ratio.

(i) Inventory / Stock Turnover Ratio

Every firm has to maintain a certain level of inventory of finished goods so as to be ableto meet the requirements of the business. The level of inventory should neither be too

high nor be too low. High level of inventory is not satisfactory due to the unnecessary

blockage of capital, over stocking, chances of pilferage, theft etc. On the other hand, too

low inventory may mean loss of business opportunities. Hence an optimum level of

inventory should be maintained.


28/58

XXVIII

Interpretation

Inventory turnover ratio measures the velocity of conversation of stock into sales. Usually

a high inventory turnover ratio indicates efficient management of inventory because more

frequently the stocks are sold, the lesser amount of money is required to finance the

inventory. On the other hand a low inventory turnover ratio indicates an inefficient

management of inventory.

(ii) Debtors / Receivable Turnover Ratio

A concern may sell goods on cash or as well as on credit. Credit is one of the important

elements of sales promotion. Debtors arise due to the credit policy adopted. So it is

necessary to find out the velocity of debt collection of the firm.

(a)Debtors Turnover Ratio

Debtors turnover indicates the velocity of debt collection of the firm. In simple words,

it indicates the number of times the debtors are turned over during a year.

Trade debtor = Sundry debtors + Bills receivable and accounts receivable.

Interpretation

Debtors velocity indicates the number of times the debtors are turned over during a year.

Generally, higher the value of debtors turnover ratio the more efficient is the management of

debtors/sales or more liquid are the debtors. Similarly low debtors turnover implies

inefficient management of debtors/sales and less liquid debtors.

(b)Average collection Period Ratio

The average collection period represents the average number of days for which a firmhas to wait before its receivables are converted into cash.


29/58

XXIX

So,

Interpretation

Average collection period ratio measures the quality of debtors. Generally, the shorter the

average collection period the better is the quality of debtors as a short collection period

implies quick payment by debtors. Similarly, a higher collection period implies an inefficient

collection performance which adversely affects the liquidity or short-term paying capacity of

the firm.

(iii) creditors/Payable Turnover Ratio

In the course of business operations, a firm has to make credit purchases and incur short-term

liabilities. A supplier of goods, i.e., creditors, is naturally interested in finding out how much

time the firm is likely to take in repaying its trade creditors.

Interpretation

The ratio indicates the velocity with which the creditors are turnover in relation to purchases.

Generally, higher the creditors velocity better it is or otherwise lower the creditors velocity,

less favorable are the results.


30/58

XXX

Average Payment Period Ratio.

Interpretation

The average payment period ratio represents the average number of days taken by the firm to

pay its creditors. Generally, lower the ratio better the liquidity position of the firm and higher

the ratio, less liquid is the position of the firm.

iv) Working Capital Turnover Ratio: - Working capital turnover ratio indicates the no.

of times the working capital is turned over in the course of a year. It measures the

efficiency with which the working capital is being used by a firm.

A higher ratio indicates efficient utilization of working capital and a low ratio indicates

otherwise. But a very high working capital turnover ratio is not good for any firm. This

ratio can be used for making of comparative and trend analysis for different firms in the

same industry and for vary industry to industry.

Profitability Ratios

Profitability Ratios:-

Profitability is the overall measure of efficiency of the operations of the business. It

indicates the effectiveness of the decision taken by the management from time to time.


31/58

XXXI

The main objective behind the calculation of profitability ratios to enlighten the end

results of the business activities which will be the main criterion for the assessment of the

efficiency of the business. The lower profitability ratios may arise because of high

expenditure, and other such reasons. The external parties like bankers, creditors,

suppliers, financial institutions etc., look at the profitability ratio of the company to

safeguard for the interest on lending. Equity share holders look at the profitability ratio

from the point of view of return to their investment. Let us discuss the important

profitability ratios.

i. Gross Profit Margin Ratio:- The gross profit margin ratio shows the margin left

after meeting manufacturing cost. It is calculated as under:

If the gross profit ratio is higher it is better. A lower gross profit ratio indicates the

unfavorable conditions such as lower selling price without proportionate reduction in cost

of production etc. It may be used as an indicator of the efficiency of the production

operation and the relation between production costs and selling price.

ii. Operating Ratio:- The operating ratio indicates the proportion of cost of sales to

sales. The cost of sales comprise of the cost of goods sold plus other operating expenses.

The ration can be calculated as under:

Cost of goods sold = Opening stock + purchase + direct expenses + manufacturing

expenses - closing stock or salesgross profit.

Operating expenses = Administrative expenses + selling and distribution

expenses.

In case of operating expenses, a lower ratio is better. A higher operating ratio means

smaller margin of operating profit.


32/58

XXXII

iii. Operating Profit Ratio:- The operating profit ratio compares the relationship

between the operating profit and the sale. This ratio is calculated as under:

Operating profit = Net profit + non- operating expensesnon-operating

expenses.

Or Gross profitOperating expenses.

iv. Net Profit Ratio:- The net profit ratio indicates the per rupee profit earning capacity

of sales. In case of a lower cost of sales, the net profit ratio will be higher. The ratio can

be calculated as under:

The ratio shows the earning left for shareholders (both equity and preference) as a percentage

of net sales. It measures the overall efficiency of production, administration, selling,

financing, pricing, and tax management.

v. Return on Capital Employed:- The ratio is also called overall profitability ratio. Thisratio shows the earning capacity of the capital employed in the business. It is calculated as

under:

Operating profit is the profit before interest and tax. Capital employed includes the

total of equity share capital, preference share capital, undistributed profit, reserves and

surplus long term liabilities less factious assets and non-business assets.

This ratio reflects the overall efficiency with which the capital is employed.

vi. Return on shareholders Fund:- This ratio measures the profitability of the firm from

the view point of shareholders. This ratio can be calculated as under:

A higher ratio is better which indicates a good return to the shareholders.


33/58

XXXIII

vii. Return on Equity:- The return on equity (ROE) is an important profit indicator to

shareholders of the firm. It is calculated as under:

viii. Return on Total Assets:- The return on total asset ratio indicates the profit after tax

against the investment in total assets. It helps to know whether the assets are using

properly or not. It can be calculated as under:

ix. Earning Per Share:- The earning per share ratio helps in determining the marketprice of equity share of the company and its capability to pay the dividend to

shareholders. It is calculated as under:

The earning per share ratio are mainly useful for companies with public traded shares.

x. Price Earning Ratio:- Price earning ratio shows the market value of every rupee

earning in the firm. The ratio is mainly used to compare the industry average. A high

price earning ratio indicates an overvalued share and low ratio shows that the share is

undervalued. The ratio is calculated as under:

The price earning ratio helps the investor in making purchase decision on a particular

share.

xi. Payout Ratio:- The payout ratio shows the portion of earning per share used for the

distribution of dividend and the portion retained for the ploughing back of profit. This

ratio is calculated as under:


34/58

XXXIV

xii. Dividend Yield Ratio:- Dividend yield ratio helps those investors who are interested

in dividend. This ratio is calculated as under:

a)Coverage Ratio:-

Coverage ratios are used to test the adequacy of cash flows generated through

earnings for the purposes of meeting debt and lease obligations, including the interest

coverage ratio and the fixed charge coverage ratio. Coverage ratios give the relationship

between the financial charges of a firm and its abilities to serve them. There are mainly

three ratios under this head. Those are:

i. Fixed Interest Cover Ratio: - Fixed interest cover or the interest coverage ratio measures

the ability of the concern to service its debt. This ratio tells us how many times the firm can

cover or meet the interest payments associated with debt. From lenders point of view, this

ratio assumes greater importance. The ratio is computed with the following formula:

ii. Fixed Dividend Cover Ratio:- This ratio is computed by preference share holders. It

is computed as under:

iii. Debt Service Coverage Ratio:- This ratio indicates the ability of the firm to repay the

interest and installments on time. This ratio is important from creditors point of view. This

can be calculated as under:

(r = tax rate)

(c)Leverage Ratio / Test of Solvency.

The term solvency refers to the ability of a concern to meet its long-term

obligations. The long-term creditors of a firm are primarily interested in knowing the

firms ability to pay regularly interest on long term borrowings, repayment of the


35/58

XXXV

principal amount on maturity and security of their loans. Long-term solvency

ratios indicate a firms ability to meet the fixed interest and costs and repayment of

long-term borrowings. The following ratios determine the solvency of the concern:

(I) Debt-Equity Ratio

(ii) Proprietory Ratio

(iii) Interest coverage Ratio

i)Debt-Equity Ratio

Debt-equity ratio also known as External-Internal Equity Ratio is calculated to

measure the relative claims of outsiders and the owners (i.e., shareholders) against

the firms assets. This ratio indicates the relationship between the external equities

or the outsiders funds and the internal equities or the shareholders fund.

The shareholders funds consist of equity share capital, preference share capital, capital

reserves, revenue reserves, reserves for contingencies, sinking funds etc. Outsiders funds

include both current and fixed liabilities.

Interpretation

The debt-equity ratio is calculated to measure the extent to which the debt financing has been

used in a business. The ratio indicates the proportionate claims of owners and the outsiders

claim against the firms assets. A ratio of 1:1 may be usually considered to be a satisfactory

ratio.

ii) Proprietory Ratio / Equity Ratio

The proprietory ratio also known as equity ratio establishes the relationship between

shareholders funds to the total assets of the firm. This is an important ratio in determining

the long-term solvency of a firm.

Proprietary Ratio


36/58

XXXVI

Interpretation

As equity ratio represents the relationship of owners funds to total assets, higher the ratio

or the share of the shareholders in the total capital of the economy better is the long-term

solvency of position of the company.

(iii) Interest Coverage Ratio

This ratio is used to test the debt-servicing capacity of a firm. This ratio is calculated by

dividing the net profit before interest and taxes by fixed intrest charge.

ICR= netprofit before interest and tax/ fixed interest

Interpretation

Interest coverage ratio indicates the number of times interest is covered by the profits

available to pay the interest charges. Generally, higher the ratio, more safe is the long-term

creditors.

iv)Leverage Ratio:

All the business enterprises employee debt fund and equity fund, so as to maximize the

profits and earning available for the equity share holders. The basic advantage of using the

debt is i.e. the after tax cost of debt is less and the interest is deductable. The term leverage

refers to employment of debt fund. A leverage ratio indicates the use of debt fund in the

capital structure of the concern. When earning exceeds the cost of funds, it is said to be

favorable and when the return is the less the cost of fund it is said to be unfavorable.

The leverage is three types.

Operating leverage

Financial leverage

Combined leverage


37/58

XXXVII

Operating Leverage:

It indicates the extent of the change of earning before interest and tax due to the change in

sales volume. It is calculated by the following formula.

Contribution is nothing but sales minus variable cost. There is inverse relationship between

the operating leverage and fixed cost. Higher the fixed cost, lower is the contribution. Lower

the fixed cost, higher is the contribution. EBIT is not anything but sales less variable cost,

less fixed cost.

A high operating leverage ratio means large effect on EBIT due to small changes in sales.

The operating leverage explains the impact of changes in sales revenue and operating

incomes.

Financial Leverage:

When the firm uses debt fund in its capital structure to finance its need, then the firm is said

to financial leverage. Financial leverage measures the changes in the earning before tax due

to change in earning before interest and tax (Operating Incomes). The formula is

This leverage may be favorable or unfavorable. When the return on investment exceeds the

cost of debt capital, a firm is said to have favorable financial leverage. It is also known as

trading on equity. When the cost of debt capital exceeds the return on investment, then the

firm is said to have unfavorable financial leverage.

Combined leverage

Combined leverage = operating leverage x financial leverage


38/58

XXXVIII

Ratio analysis based on the year 2008, 2009, 2010

and 2011

Particulars 2008 2009 2010 2011

Liquidity

Ratio

Current Ratio 2.27 2.72 4.09 3.76

Liquid ratio 1.61 1.29 1.39 1.36

Cash ratio 0.39 0.54 0.64 0.67

Solvency

Ratio

Debt equity

ratio

0.96 1.44 1.30 1.59

Equity Ratio 33.7 29.44 34.46 36.21

Solvency ratio 0.66 0.71 0.66 0.73

Interest

coverage ratio

0.78 0.99 0.78 0.86

Activity ratio

Stock turn

Over ratio

5.90 3.38 2.38 2.23

Debtor turn

over ratio

7.9 11.5 16.6 17.02

Working

capital turn

over ratio

2.6 2.76 1.91 2.21


39/58

XXXIX

Profitability

Ratio

Gross profit

ratio

19.32 21.64 24.24 26.06

Operating

profit ratio

15.39 14.57 12.28 17.68

ROI Ratio 27.18 34.58 26.41 28.45

Netprofit

ratio

8.61 8.02 8.95 8.03


40/58

XL

Observation of ratio analysis

Last four year current assets is showing more than rule of thumb i.e. 2:1 but as the business is

operating in construction of road and rail bridge etc. where more current assets is required

than other. So company is maintaining high current assets . Another important point is that

last two year company has got many project in rural area, forest area , hill area and the district

like koraput , kalahandhi etc where the communication and transportation and bank facility is

not so good. For transporting of raw materials from god own or supplier it requires more time

, So company requires to maintain more stock of raw materials so that operation will not

stop in future. As the banking facility is not good in that area , company is required to

maintain more cash in hand for the day to day expenditure.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2008 2009 2010 2011

Current Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

1 2 3 4

Liquid ratio


41/58

XLI

Companys quick ratio is not satisfactory. In 2007-08 due to increase in sundry debtor of

102% than previous year and decrease in sundry creditor of 15% than previous year thi s

ratio was increased to 3.32 which is not a good sign .But in 2008-09 due to more increase

in sundry creditor than sundry debtor it has decreased to 1.61 . In 2008-09 due to reduce in

sundry debtor and increase in sundry creditor it has reduced to 1.29 which i s the minimum

in last five year. But in 2009-10 due to more increase in sundry debtor than sundry creditor

fr om previous year i t has again increased to 1.93. I f th is ratio wil l again increase it wi l l

affect the liquidity position of the firm.

Cash r atio is much satisfactory . The company wil l not face any diff icul ty of li quidi ty in

fu ture. I t wil l also help in bidding for new project . Over all short trem financial positi on of

the company is very good.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2008 2009 2010 2011

Cash ratio


42/58

XLII

This ratio indicates that company is using more out side debt in fi nancing the business

compare to own fund . AS a resul t i t has been providing better retur n to the share holders.

Th is ratio shows that in 2009-10 total out side long term debt is 1.3 times of owners fund .

Higher the debt equity ratio , share holders get higher return and vice versa . But there

should be proper mix of debt and equi ty ratio .I t indicates that company wil l not face any

dif fi culty in getting future credit facil ity with out paying high rates of interest and with out

accepting undue pressures and conditions of the creditors . company should maintain

minimum this ratio in

Equity ratio shows that from 2008 it has been increasing every year which is good

sign for the share holders. It is attracting more investor to invest their surplus money in

the company and it also helps in increasing market price of share. In 2008 due to

payment of dividend for the first time ,it has been dereasing. The increasing equty

shows that earning power of the company has increased in now a days.

0

0.2

0.4

0.6

0.8

1

1.21.4

1.6

1.8

2008 2009 2010 2011

Debt equity ratio

0

5

10

1520

25

30

35

40

1 2 3 4

Equity Ratio


43/58

XLIII

The solvency ratio is show the liability to outsider.In 2008 is low but now a days it will be

Increasing,it is based on the good financial position

Inventory turnover ratio basically tells about the efficiency of the firm in taking the

project and to plish that. The inventory turnover shows how rapidly the inventory is

turning into receivables through sales. A high inventory turnover ratio is good because

the no of days converting the inventories into the sales will become less. As in 2008 the

inventory turnover ratio is 12.61 times so the inventory holding days is only 29 days

while from 2010 to 2011 the inventory turnover ratio decreasing means the no of days in

inventory converting is increasing. This can bad for the organization as this creates tie-

up of funds, reduced profit, and increased costs

0.62

0.64

0.66

0.68

0.7

0.72

0.74

2008 2009 2010 2011

Solvency ratio

0

1

2

3

4

5

6

7

20087 2009 2010 2011

Stock turn over ratio

Stock turn over ratio


44/58

XLIV

Debtors Turnover ratio indicates the no of times debtors turnover each year. Higher the

value of debtors turnover, the more efficient is the management of credit because the

collection period of the debtors will low. Maximum debtors turnover ratio in all four

years is 16.57 in 2010-11. It increases from 2008-09 also there is sudden jump in

collecting the amount of debtors in 2008-09 and in 2009-10. The increased Debtors

Turnover Ratio shows the better management in debtors collection (from its joint

venture companies).

0

2

4

6

8

10

12

14

16

18

2008 2009 2010 2011

Debtor turn over ratio

0

0.5

1

1.5

2

2.5

3

2008 2009 2010 2011

Working capital turn over ratio


45/58

XLV

The working capital turnover ratio of ARSS declined from 2010 to 2011, however it

increased in 2008-09. The reciprocal of the ratio is , 2.6, 2.8,1.91 and 2.21 continuously .

In previous years the company incurred less money for sales while in these years

specially in 2009-10 it is unable to take projects in that amount. The company is

increasing its sales by increasing in the net working capital.

This ratio indicates that company has been reducing its cost of contract revenue from year

to year. As a resul t in 2008 when company was earn ing 19.32% gross prof it , now in 2010

it i s earn ing 24.24% of gross prof it on contr act revenue. This ratio indicates that all the

raw mater ial , spare parts etc are properly uti li zed by the company. Thi s ratio also indicates

that company is able to meet any increase in operating expenses with ou t decreasing in net

profit. ARSS enjoys a gross profit of 26.06% in 2010 which means that for every rupee

apart from cost of goods sold

0

5

10

15

20

25

30

2008 2009 2010 2011

Gross profit ratio


46/58

XLVI

This ratio i ndicates that operating expenses have been increasing f rom to year which is not

a good sign for the company . The reason for i ncrease in operati ng expenses is increase in

personal expenses. Company wants to pay good salary to i ts employees and hire better

personal for getting better result. Another important reason for increasing personal

expenses is increasing inflation. Now the inflation rate is more than 10%. This ratio

indi cates that in 2009-10 87.7% of contract revenue have been consumed by operating cost

.

0

2

4

6

8

10

12

1416

18

20

2008 2009 2010 2011

Operating profit ratio

7.4

7.6

7.8

8

8.2

8.4

8.6

8.8

9

9.2

2008 2009 2010 2011

Net profit ratio


47/58

XLVII

This ratio indicates that there has been an increasing trend in every year instead of 2009.I t

means the profit available for share holders has been increasing from year to year. It is a

good sign f or the company because it wi l l boost to the investors to invest their surplus

money as they wil l get a good return. I t also shows the eff i ciency of the company and the

firms ability to meet future adverse economic condition like low demand, price

competi tion etc.but now face competi tion so net prof it is low.

Th is ratio indicates that on the year when company issue new share ,the return on net

worth decreases on that year compare to previous year except the period 2008.but sti l l i t is

more than 25% every year which is more than other investment . I t shows the growth and

prosperity in the companys profitability and efficiency . As the return i s more than 25%, it

wil l attract more investor to invest their money in the company which wi ll in crease the

market pri ce of share .

0

5

10

15

20

25

30

35

40

2008 2009 2010 2011

ROI Ratio


48/58

XLVIII

Chapter- 4

Conclusion

&Suggestions


49/58

XLIX

] F inding:

According to my survey and calculating the important points are :

Financial position of ARSS is much good .

There has been increasing in contract revenue and net profit after tax from year to year .

The personal expenses has been increasing from year to year which indicates company is

recruiting more employees for new project and paying good salary employees .

The company is using more out side liability than own.

From 2007-08 on wards company is paying dividend every year.

Investors are more interested to invest in ARSS.

Trend analysis reveals that there has been an increasing in net profit after tax during 2009-10

of 2764% and contract revenue of 1656% compare to 2005-06 which indicates better

profitable position of the company and efficiency of management .

The recession period (2007-08) has not affected the growth of the company . During that

period company has increased 136% in contract revenue .

In 2009-10 out of total fund , owners fund is 34% where as outsiders fund is 66%.

Liquidity position of the company is very good . In future it will not face any liquidity

problem.

Company is paying interest on borrowing funds regularly , so it will not face any problem for

short term and long term borrowings .

The earning per share has been increasing from year to year.

Company is maintaining more inventory as stock .

The competitor analysis reveals that net profit and return on net worth of ARSS is more than

its competitor.


50/58

L

Growth prospects of ARSS

Within a short span, ARSS emerged as one of the leading Infrastructure developer not only in the

Eastern India but also in Southern and North-Western India spreading over in 14 States and

executing projects with outstanding quality, reliability, affordability, eco-friendliness and efficient

services.

ARSS is operating in a competitive market but the credential, capability and decades of experience

in construction sector sets it apart from its competitors. Today the organization is one of the leading

Civil Engineering Construction Company in Eastern, Southern and North-Western India. Its

credentials are reflected in its project portfolio diverse and successful. The company possesses

special expertise in constructing Bridges, Rail Roads, and Highways & Flyovers and has a strong

presence in all the major construction activities.

The sources of funds of ARSS company has been increased in 2009-10 to Rs

7969969779 compare to other years due to increase of share capital, reserve and surplus &

loan funds.

The amount of total fixed assets has been increased in 2009-10 due to purchase of more

fixed assets & investments.

The overall financial position of the company is satisfactory.

Profit after tax also increases due to increase in contract revenue and other income.

The overall profitability of the company is good.

There was net cash inflow form operating activities in the year 2009-10 due to receipt of

trade and other receivables compared to other years where cash out flow was more.

Net cash used in investing activities from 2005-06 to 2009-10 has increased and in 2009-10 it

has near to double than 2008-09 due to purchase of fixed assets and investment in outside.

Net cash from financing activities has increased in 2009-10 of2716362840 due to issue of share.

There has been an increase in net cash & cash equivalent for the year 2009-10.The closing

balance for the year 2009 -10 was Rs 1095090537

The over all cash position of the company is sound.


51/58

LI

Suggestion :

The study has provided with the useful data from the respondents .There has a lot to recommended

.Following are the recommendations :

The Company is handling projects like roadwork, railway work, bridge work, airport, & power

system etc, so now it can also explore to other sectors like commercial mall, building and

residential houses and apartment etc.

The main objectives of the company are to maximize its profits and minimize its

costs by giving better service to its clients. So it has to explore new market by creating

new and more joint ventures.

There should be increase in investment of ARSS. So that could be earned more profit . Because ,

if investment will be high than profit will be earned high .

There should be improved the completion process of project of ARSS . Because completion

process of project of ARSS is take more time .

There should be good coordination in departments of ARSS . If coordination will have good in

department , then there will not has to face any problem in proper work .

Time to time ,there should be provided training of employee .So that they could take information

about the new technology of them proper working process .

There should be good communication between each department of ARSS .

Company should reduce the inventory holding period with use of zero inventory

concepts

The overall profitability position of the company is good and it should try to maintain it.

The cash position of the company is sound, the company should maintain it and as well as try to

declare dividend to its shareholders from time to time.

As the company has a satisfactory financial position and planning for more growth and

diversification, it should try to maintain it financial position.

Company should diversify its business towards construction of building in city like Bhubaneswar

Company should issue debenture

The infrastructure industry globally has witnessed tremendous growth in the past few years. A

significant part of the global engineering construction activity is concentrated in the oil and gas

industry, the power sector, roads construction and is dominated by few industry majors. In this

journey of growth ARSSS Construction activity is integral part to the industrial development and

involves construction of urban infrastructure, townships, highways, bridges, railroads, river valleys

and power connected projects.


52/58

LII

LIMITATIONS OF THE STUDY

1. Limitation of time.

2. All relevant data were not available.

3. Certain information was kept confidential by ARSS Infrastructure Projects Ltd

managed on the ground of confidentiality.

4. Extensive analysis could not be made due to limited source of funds. Inspite of all

these difficulties, the Researcher has tried his best collect all relevant data or

information to make his study successful.


53/58

LIII

CONCLUSION

Growth prospects of ARSS

Within a short span, ARSS emerged as one of the leading Infrastructure developer not only

in the Eastern India but also in Southern and North-Western India spreading over in 14

States and executing projects with outstanding quality, reliability, affordability, eco-

friendliness and efficient services.

ARSS is operating in a competitive market but the credential, capability and decades of

experience in construction sector sets it apart from its competitors. Today the organization

is one of the leading Civil Engineering Construction Company in Eastern, Southern and

North-Western India. Its credentials are reflected in its project portfolio diverse and

successful. The company possesses special expertise in constructing Bridges, Rail Roads,

and Highways & Flyovers and has a strong presence in all the major construction activities.

The sources of funds of ARSS company has been increased in 2008-09 to Rs

3,770,395,572 compare to other years due to increase of share capital, reserve and

surplus & loan funds.

The amount of total fixed assets has been increased in 2008-09 due to purchase of

more fixed assets & investments.

The overall financial position of the company is satisfactory.

Profit after tax also increases due to increase in contract revenue and other income.

The overall profitability of the company is good.


54/58

LIV

Chapter-5

Appendix


55/58

LV

Balance sheet as on 31stmarch

Particular March 31,

2011

March 31,

2010

March 31,

2009

March 31,

2008

March 31,

2007

Sources of Fund

Shareholders FundShare capital 148432300 148432300 125540000 125540000 107960500

Reserve and

Surplus

4335636664 3231235827 1357973976 871796456 185931512

Loan Funds

Secured Loan 9298977607 4457664482 2182193801 975277469 378665727

Unsecured

Loan

99156117 12226366 41061473 10000000

Deferred

Tax liability

216143050 120410804 63626322 26449497 13818588

Total 14098345738 7969969779 3770395572 2009063422 686376327Application of Funds

Fixed AssetsGross block 5314901427 2879051806 1626196379 864347716 315145682

Less

depreciation

575070355 295311305 159993168 86827072 47323666

Net block 4739831072 2583740501 1466203211 7775226445 267822016

Investment 361851873 34440872 38212921 25436921 18256201

Current Assets

Inventory 7770988128 3701088128 1882704940 622103160 73298835

Sundry

debtors

712240249 786122901 428533465 653574370 145136306

Cash & bank

balances

1507751636 1095090537 717214943 373999265 116425792

Loans &

advances

2186134506 1406480937 557410278 506967157 205984507

Total 12177114518 6988782503 3585863626 2156643952 540845439

Current Liability

Current

Liability

2912507815 1447454152 1147928616 858935086 105763831

Provision 319563986 258380043 172295570 92135010 35261598

Total 3232071801 1705834195 1320224186 951070096141025429

Net Current

Assets

8945042718 5282948308 2265639440 1205573856 399820010

Mis.

Expenditure

51620074 68840098 340000 530000 478100

Total 14098345738 7969969779 3770395572 2009063422 686376327


56/58

LVI

I ncome statement as on 31stmarch

Particular March 31st,

2011

March 31st

2010

March 31st

2009

March 31st

2008

IncomeContract revenue 12490111161 10065504283 6243752255 3136709419

Other income 84548510 65350851 38660829 29233380

Total 12574659671 10130855134 6282413084 3165942799

Expenditure

Direct contract expenses 8915457251 7625408085 4892335677 2530581376

Personal expenses 419228525 262364862 140461371 29828204

Administrative expenses 263421011 172315888 97277799 50703745

Selling expenses 184312599 193751628 102739612 42761762

Interest & financial charges 990312007 530739775 270174025 94163206Depreciation 282231209 135423261 73487946 39501406

Total 11054962602 8920003499 5576476430 2787539699

Profit before tax 1519697069 1210851636 705936654 378403100

Less tax

Income tax

Current year 302312813 253334829 154925326 90860620

Previous year - 10286739 2658184

Deferred tax 95732246 56784482 37176825 12630909

Fringe benefit tax - 2682692 1274389

Profit after tax 1121652010 900732325 500865072 270978998

Balance brought from

previous year

1699732913 863418722 402284456 149131512

Amount available for

appropriation

2821384923 1764151947 903149528 420110510

AppropriationDividend 14843230 29686460 12554000 12554000

Tax on dividend 2407943 5045214 2133552 2133552

Transfer to general reserve 14843230 29686460 25043254 3138500

Profit carried forward 2789290520 1699732913 863418722 402284458

Earnings per share

Face value ( Rs 10)

Basic 75. 57 70.48 39.90 23.77

Diluted 75. 57 70.48 39.90 23.77


57/58

LVII

Chapter-6Bibliography

Bibliography :


58/58

LVIII

Management Accounting Sashi K Gupta & R K

Sharma

F inancial Management I M Pandey

Referaneseswww.arss.co.in

www.google.com

www.moneycontrol .com

www. Business standar.co.in

Annual Report of ARSS 2007-06 to 2010-11

Departmental records
http://www.arss.co.in/http://www.arss.co.in/http://www.arss.co.in/http://www.google.com/http://www.google.com/http://www.google.com/http://www.money/http://www.money/http://www.money/http://www.money/http://www.google.com/http://www.arss.co.in/

Date post:	03-Apr-2018
Category:	Documents
Upload:	rashmi-ranjan-panigrahi
View:	219 times
Download:	0 times

ARSS Infrastructures Pvt

Documents