Ratio Analysis Iffico

TABLE OF CONTENTS

Executive Summary

Objectives of the Study

Methodology of the Study

Limitations of the Study

IFFCO – The Organization

Chapter 1 Working Capital Management

Data Analysis

Findings

Conclusion and Suggestions

Conclusion

Suggestions

References

Appendix

EXECUTIVE SUMMARY

2

Indian Farmers Fertiliser Co-operative Limited (IFFCO) is a Multistate Co-operative

Society. It was a unique venture in which the farmers of the country through their own Co-

operative Societies created this new institution to safeguard their interests. IFFCO

manufactures Urea and NPK/ DAP fertilizers and sells them to the co-operative societies.

The project is Working Capital Management of IFFCO. The objectives of the project are:

To analyse the working capital and working capital management policies at IFFCO

To analyse the cash management practices at IFFCO

The study is mainly based on the secondary data which refers to that form of information that

has already been collected and is available. The analysis of working capital is based on ratio

analysis to monitor overall trends in working capital and to identify areas requiring closer

management.

Working capital is not measurable by only current assets & current liabilities but there are

some other factors also that have an influence on the working capital. From the analysis of

the components of working capital, it was found that the organization is utilizing its funds

properly, the inventory is managed efficiently and the organization is able to get sufficient

short term financing. It is clear that the working capital of IFFCO is in sound position. The

suggestions can be made in the management of inventory by implementation of JIT or

Kanban and management of liquid assets including the subsidy provided by the government.

The Cash Management System at IFFCO is very sound and efficient. It has enabled the

organization to manage its funds in a proper manner resulting in better utilization and

availability of funds in cash deficit periods. IFFCO has a tie up with banks such as IOB,

HSBC Bank, ICICI Bank that are providing IFFCO with facilities such as cash management

services, personalized financial MIS to enable IFFCO to accelerate the collection and

payment of funds, debit sweep option, Anywhere banking facility, etc. The suggestion that

can be given to the organization is the implementation of RTGS (Real Time Gross

Settlement) and NEFT (National Electronic Fund Transfer) facilities which will improve the

cash transfer at IFFCO.

OBJECTIVES OF THE STUDY

3

To analyse the Working Capital and ratio analysis at IFFCO

To understand Working Capital Management of the organization

To analyze Liquidity position of the organization

To find out the Profitability and operating efficiency of the organization

To understand the importance of Working Capital Management

To analyze the short term financing patterns, which affect the working capital of the organization

To study the factors that affects the Working Capital Management at IFFCO

To analyze the data and information of the previous years to know the actual position of funds, investments and liabilities of the organization

To identify some broad policy measures to improve the working capital position of the organization

To estimate the working capital requirements of the organization in the near future

METHODOLOGY OF THE STUDYThe basic type of research used to prepare this report is Descriptive.

4

The study is mainly based on the secondary data which refers to that form of information that

has already been collected and is available. These include some internal sources within the

company and externally these sources include books and periodicals, published reports and

data of IFFCO and the annual reports of the company. Interaction with the various employees

of the marketing accounts department has also been a major source of information. No

primary data has been used as a part of this study.

The analysis of working capital is based on ratio analysis to monitor overall trends in

working capital and to identify areas requiring closer management.

LIMITATIONS OF THE STUDYThe following are the limitations of this summer project training:

The study is limited to five financial years i.e. from 2008-2009.

The data used in this study has been taken from the Financial Statements & their

related schedules of IFFCO Ltd., New Delhi as per the requirement.

Some of the information that was essential for this study cannot however be given in

this report due to their confidential nature.

The scope and area of the study was limited to corporate office of IFFCO, New Delhi

only.

IFFCO – THE ORGANIZATION

5

Indian Farmers Fertiliser Co-operative Limited

(IFFCO) was registered on November 3, 1967

as a Multi-unit Co-operative Society. It was a

unique venture in which the farmers of the

country through their own Co-operative

Societies created this new institution to

safeguard their interests. The numbers of co-

operative societies associated with IFFCO have

risen from 57 in 1967 to 38, 155 at present. On

the enactment of the Multistate Cooperative Societies act 1984 & 2002, the Society is

deemed to be registered as a Multistate Cooperative Society. The byelaws of the Society

provide a broad frame work for the activities of IFFCO as a Cooperative Society.

IFFCO commissioned an Ammonia - urea complex at Kalol and the NPK/DAP plant at

Kandla both in the state of Gujarat in 1975. Another Ammonia - urea complex was set up at

Phulpur in the state of Uttar Pradesh in 1981. The ammonia - urea unit at Aonla was

commissioned in 1988.

In 1993, IFFCO had drawn up a major expansion programme of all the four plants under

overall aegis of IFFCO VISION 2000. The expansion projects at Aonla, Kalol, Phulpur and

Kandla have been completed on schedule. Thus all the projects conceived as part of Vision

2000 have been realised without time or cost overruns. All the production units of IFFCO

have established a reputation for excellence and quality.

A new growth path has been chalked out to realise newer dreams and greater heights through

Vision 2010 which is presently under implementation. As part of the new vision, IFFCO has

acquired fertiliser unit at Paradeep in Orissa in September 2008. As a result of these

expansion projects and acquisition, IFFCO's annual capacity has been increased to 3.69

million tonnes of Urea and NPK/DAP equivalent to 1.71 million tonnes of P2O5.

MISSION

6

IFFCO's mission is "to enable Indian farmers to prosper through timely supply of reliable,

high quality agricultural inputs and services in an environmentally sustainable manner and to

undertake other activities to improve their welfare."

To provide to farmers high quality fertilizers in right time and in adequate quantities

with an objective to increase crop productivity.

To make plants energy efficient and continually review various schemes to conserve

energy.

Commitment to health, safety, environment and forestry development to enrich the

quality of community life.

Commitment to social responsibilities for a strong social fabric.

To institutionalise core values and create a culture of team building, empowerment

and innovation which would help in incremental growth of employees and enable

achievement of strategic objectives.

Foster a culture of trust, openness and mutual concern to make working a stimulating

and challenging experience for stake holders.

Building a value driven organisation with an improved and responsive customer

focus. A true commitment to transparency, accountability and integrity in principle

and practice.

To acquire, assimilate and adopt reliable, efficient and cost effective technologies.

Sourcing raw materials for production of phosphatic fertilisers at economical cost by

entering into Joint Ventures outside India.

To ensure growth in core and non-core sectors.

A true Cooperative Society committed for fostering cooperative movement in the country.

IFFCO is emerging as a dynamic organisation, focussing on strategic strengths, seizing

opportunities for generating and building upon past success, enhancing earnings to maximise

the shareholders' value.

Vision

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To augment the incremental incomes of farmers by helping them to increase their crop

productivity through balanced use of energy efficient fertilizers, maintain the environmental

health and to make cooperative societies economically & democratically strong for

professionalized services to the farming community to ensure an empowered rural India.

Vision 2010

Encouraged by the success of Vision 2000, IFFCO has charted on a new course of action to

realise a fresh set of dreams. A high powered committee has been constituted to steer the

organisation through this Road Map. Activities being actively pursued through the strategy

are:

Phosphoric Acid plant

Foray into Power Sector to set up a 500 MW power project

Ammonia Plant for supplies to Kandla Unit

IFFCO Kisan Bazar

IFFCO Bank

Multi Commodity Exchange

Acquisition of Fertilizer Plants

Nellore Fertilizer Project

Agri business

The ApproachTo achieve their mission, IFFCO as a cooperative society, undertakes several activities

covering a broad spectrum of areas to promote welfare of member cooperatives and farmers.

The activities envisaged to be covered are exhaustively defined in IFFCO’s Bye-laws.

The CommitmentThe thirst for ever improving the services to farmers and member co-operatives is insatiable,

commitment to quality is insurmountable and harnessing of mother earths' bounty to drive

hunger away from India in an ecologically sustainable manner is the prime mission.

Plants owned by IFFCO Kalol Unit (Ammonia - Urea complex)

P. O. Kasturinagar, District Gandhinagar, Gujarat - 382423

Kandla Unit (NPK/DAP plant)

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P. O. Kandla, Gandhidham, Kandla (Kachchh), Gujarat - 370201

Phulpur Unit (Ammonia - urea complex)

P. O. Ghiyanagar, District Allahabad, Uttar Pradesh - 212404

Aonla Unit (Ammonia - Urea unit)

P. O. IFFCO Township, Paul Pothen Nagar, Bareilly, Uttar Pradesh - 243403

Paradeep Unit (NPK/DAP and Phosphoric Acid Fertiliser unit)

Village Musadia, P. O. Paradeep, District Jagatsinghpur, Orissa - 754142

Production and SalesDuring the year 2012-13 IFFCO produced 71.68 Lakh (7.168 million) MT (Metric Tonnes)

of fertiliser material, consisting of 40.68 lakh MT of Urea and 31.00 lakh MT NPK/DAP. It

contributes 21.4% of country’s total nitrogenous fertiliser production and 27% of total

phosphatic fertiliser production in the same period.

PRODUCTION

(in LAKH MT)

YEAR UREA NPK / DAP TOTAL

2010-11 37.87 32.26 70.132011-12 39.63 28.84 68.472012-13 40.68 31 71.68

2006-07 2007-08 2008-090

10

20

30

40

50

60

70

80

37.87 39.63 40.68

32.2628.84 31

70.13 68.4771.68

UREA NPK / DAP TOTAL

La

kh

MT

SALES OF FERTILIZER MATERIAL

2010-11 2011-12 2012-13

9

(in Lakh MT)Material 2010-11 2011-12 2012-13UREA 58.69 54.29 52.41NPK/ DAP 53.89 38.95 33.69TOTAL 112.58 93.24 86.10

2008-09 2007-08 2006-070

20

40

60

80

100

120

58.6954.29 52.4153.89

38.9533.69

112.58

93.2486.10

UREA NPK/ DAP TOTAL

Lak

h M

T

PLANT WISE PRODUCTION

Unit 2012-13 2011-12

Production Capacity Utilization Production Capacity

Utilization

(Lakh MT) (percent) (Lakh MT) (percent)UREAKalol 5.60 102.80 5.45 100.00Phulpur –I 6.63 120.30 6.30 114.30Phulpur – II 8.40 97.20 9.24 106.90Aonla – I 9.87 114.10 8.76 101.30Aonla – II 10.18 117.80 9.89 114.40SUB TOTAL UREA 40.68 110.30 39.63 107.40NPK / DAPKandla 17.94 74.30 20.18 83.50Paradeep 13.06 68.00 8.66 45.10SUB TOTAL NPK / DAP 31.00 71.40 28.84 66.50

TOTAL PRODUCTION 71.68 89.20 68.47 85.30

All India Capacity, Production and Capacity Utilization of Fertilizer Industry

2010-11 2011-12 2012-13

10

Year N P2O5

Capacity Production

Capacity Utilization

(%)Capacity Production

Capacity Utilization

(%)2008-09 12208 11304.9 93.4 5480.4 4038.4 75.52009-10 12288.4 11332.9 94.5 5459.6 4202.6 78.52010-11 12290.4 11524.9 95.6 5736.3 4440 78.52011-12 12290.4 10902.8 95.2 5874.6 3714.3 64.72012-13 12290.4 10900.2 95.2 5892.3 3417.3 58.5

Sector Wise Capacity and Production of N and P2O5

(capacity: As on 1.11.2013)(production: 2012-13 April-March)

(Figures in '000 tonne nutrient)Sector N P2O5

Capacity Production Capacity ProductionNP/NPKs SSP Total NP/NPKs SSP Total

Public 3591.5 2973.2 386.7 - 386.7 191.7 - 191.7

Private 6030.3 4829.9 2860.1 12254085.

1 1903.9 405.4 2309.3

Cooperative 3423.4 3133.1 1712.8 -

1712.8 916.3 - 916.3

Total 13045.2 10900.2 4959.6 12256184.

6 3011.9 405.4 3417.3

Capacity and Investment in the Fertilizer IndustryYear / Period Capacity During the Investments During the Period ( in Rs. Crore )

Period (in '000 tonnes) SectorsN P2O5 Public Cooperative Private Total

2007-2008 62 39 - - 10 10(as on 1.11.2008) 12229 5427 7474.5 4231.5 14227.9 25933.92008-2009 -21 1 - - 3 3(as on 1.11.2009) 12208 5428 7474.5 4231.5 14230.9 25936.92009-2010 52 243 350 - 35 385(as on 1.11.2010) 12260 5671 7824.5 4231.5 14265.9 26321.92010-2011 30 204 - - 15 15(as on 1.11.2011) 12290 5875 7824.5 4231.5 14280.9 26336.92011-2012 - 17 - - 55 55(as on 1.11.2012) 12290 5892 7824.5 4231.5 14335.9 26391.9

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2012-2013 755 293 - 350 470 820(as on 1.11.2013) 13045 6185 7824.5 4581.5 14805.9 27211.9

BIO – FERTILISERSBio-fertilisers are capable of fixing atmospheric nitrogen when suitable crops are inoculated

with them. Bio-fertilisers are low cost, effective, environmental friendly and renewable

source of plant nutrients to supplement fertilisers. Integration of chemical, organic and

biological sources of plant nutrients and their management is necessary for maintaining soil

health for sustainable agriculture. The bacterial organisms present in the bio-fertiliser either

fix atmospheric nitrogen or solubilise insoluble forms of soil phosphate. The range of

nitrogen fixed per ha/year varies from crop to crop; it is 80 - 85 kg for cow pea, 50 - 60 kg for

groundnut, 60 - 80 kg for soybean and 50 - 55 kg for moongbean.

All India Production and Dispatches of Bio Fertilizers( in tonnes)

Year Production Dispatches2008-09 10479 10427.62009-10 11752.4 11357.62010-11 15871 157452011-12 20111.1 201002012-13 24455 24400

PRICES OF IFFCO'S FERTILISERS(Applicable only within India)

UREA NPK DAP MOP

N-46% 10-26-26 12-32-16 20:20:00 18-46-0 K-60%

M.R.P. 4830 7197 7637 6295 9350 4455

Local Taxes Extra, where ever applicable.

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JOINT VENTURES OF IFFCO Indian Potash Limited (IPL)

The Society holds an investment of Rs. 2.68 Crore (2012-13) in Indian Potash

Limited (IPL) with equity share holding of 34 per cent in the paid up equity share

capital of IPL. IPL is primarily engaged in trading of imported Potassic and Non-

Potassic Fertilisers.

Industries Chimiques Du Senegal (ICS)

The Society holds 18.54 per cent equity (2012-13) in ICS, which manufactures

Phosphoric Acid for exports and Phosphatic Fertilisers for domestic consumption.

ICS has the capacity to produce 660000 MT of Phosphoric Acid (as P2O5) per year.

The Government of Senegal and IFFCO signed an Agreement on 16th July, 2011 and

Amendment on 14th January, 2012, for the debt restructuring and recapitalisation of

ICS. Post restructuring and recapitalisation, the new Board has been reconstituted and

the IFFCO Consortium has taken over the management control of ICS.

Indo Egyptian Fertilisers Company, SAE (IEFC)

The Society promoted a joint venture in Egypt, namely ‘Indo Egyptian Fertilisers

Company SAE’ (IEFC) along with El Nasr Mining Company of Egypt to set up a

Phosphoric Acid plant with a capacity of 1500 tonnes P2O5 per day. IEFC was

incorporated in Egypt as a Joint Stock Company on 15th November, 20 with

shareholding of IFFCO and its affiliates at 76 percent and El Nasr Mining Co. Egypt

holding 24 per cent equity.

Oman India Fertiliser Company (OMIFCO)

Oman India Fertiliser Company (OMIFCO) is a Joint Venture Company in Oman in

which the Society has invested an amount of Rs. 329.08 Crore (2012-13) to acquire

25 percent equity in OMIFCO, which has an installed capacity of 16.52 lakh tonne

Urea and 2.5 lakh tonne surplus Ammonia. OMIFCO commenced commercial

production at its plant at Sur (Oman) with effect from 14th July, 2008.

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Jordan India Fertilizer Company (JIFCO)

IFFCO and Jordan Phosphate Mines Company (JPMC), Jordan have formed a

Limited Liability Joint Venture Company, namely Jordan India Fertilizer Company

(JIFCO) on 6th March, 2008 in Amman, Jordan under the ‘Free Zone’ system to set

up a phosphoric acid plant of capacity 1500 tonnes per day P2O5 at Eshidiya in

Jordan. In this company, IFFCO holds 52 per cent equity, while JPMC holds 48 per

cent equity.

Aria Chemicals (Orissa) Limited

Aria Chemicals (Orissa) Ltd. is a joint venture between IFFCO and Aria Chemicals

Private Limited, Chennai wherein IFFCO holds 40 percent equity in this project. This

Company will set up an Aluminium Fluoride facility at Paradeep.

Sector Diversification of IFFCO IFFCO-TOKIO General Insurance Company Limited (ITGI)

IFFCO TOKIO General Insurance Company Limited (ITGI) was formed as a Joint

Venture Company in the year 2000 for underwriting general insurance business in

India. Out of total equity capital of Rs. 247 Crore in ITGI, the Society and its

associates hold 74 percent equity and Tokio Marine Asia holds 26 percent.

ITGI had launched products like, ‘Barish Bima Yojna’, ‘Mausam Bima Yojna’ and

‘Kisan Suvidha Bima Yojna’ to cater to the insurance requirements of the farmers.

During the year ITGI has launched various micro insurance policies like ‘Janta Bima

Yojna’, ‘Jansuraksha Bima Yojna’, ‘Janswasthya Bima Yojna’ and ‘Mahila Suraksha

Bima Yojna’ to provide protection to the farmers and their families and also poorer

sections for their household goods, personal accident and health.

IFFCO Chhattisgarh Power limited (ICPL)

The Society has diversified into the Power Sector by incorporating a Joint Venture

Company namely ‘IFFCO Chhattisgarh Power Limited’ (ICPL) with Chhattisgarh

State Electricity Board (CSEB) to set up a 1320 MW coal-based Mega Power Plant in

District Surguja of Chhattisgarh. The Society will hold 74 per cent equity in ICPL.

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National Commodity and Derivatives Exchange Ltd. (NCDEX)

The Society holds 12 percent equity in the Paid-up Share Capital (Rs. 30 Crore) and

the entire preference capital of Rs. 10 Crore in the National Commodity and

Derivative Exchange Limited (NCDEX).

NCDEX is a demutualised, on-line national level commodity exchange providing a

trading platform for futures trading in commodities in the country and offers its

market participants opportunity at price discovery and price risk hedging. Currently,

NCDEX offers contracts in 56 commodities, that is, 42 agricultural commodities, 2

bullion, 6 metals, 2 energy and 3 polymers and 1 environment (carbon credit).

National Collateral Management Services Ltd. (NCMSL)

Along with other reputed institutions, IFFCO co-promoted National Collateral

Management Services Limited (NCMSL) in the year 2004. The Society holds 13.56

per cent of the paid up equity capital in NCMSL. NCMSL is engaged in providing

various risk management services related to commodities like Storage and

Preservation services, Collateral Management services, Procurement services, Quality

Testing and Certification services and Information services.

Freeplay Energy India Pvt. Ltd.

During the year 2012-13, the Society made an investment of Rs. 4.83 Crore to acquire

30 percent shareholding in Freeplay Energy India Pvt. Ltd. (FPEI), which is engaged

in the field of non-conventional energy products and devices suitable for rural India.

These products are being marketed to co-operative societies through Society’s another

subsidiary company, that is, ‘IFFCO Kisan Sanchar Ltd’. The utility of these products

has been greatly appreciated by the rural farmers.

ORGANIZATIONS PROMOTED BY IFFCO

IFFCO has promoted several institutions and organisations to work for the welfare of

farmers, strengthening cooperative movement, improve Indian agriculture.

Indian Farm Forestry Development Cooperative (IFFDC)

15

Indian Farm Forestry Development Cooperative, a multi-state cooperative society

promoted by IFFCO, has been implementing afforestation projects in Uttar Pradesh,

Rajasthan & Madhya Pradesh. The Society has been floated under contribution

agreement signed between IFFCO and India - Canada Environment Facility (ICEF).

Development of Primary Farm Forestry Cooperative Societies (PFFCS) is an

important activity undertaken towards afforestation of waste lands. High participation

of women is an important feature of the IFFDC.

Cooperative Rural Development Trust (CORDET)

IFFCO promoted Cooperative Rural Development Trust (CORDET) in the year 1979

to provide education and training to farmers on various aspects of crop production,

horticulture, animal husbandry, farm machinery etc.

IFFCO Kisan Sewa Trust (IKST)

Objective: A Relief Trust for the Welfare of the Victims of Natural Calamities

Kisan Sewa Trust Fund was created out of contributions from:

IFFCO

Employees of IFFCO

Cooperative Societies and others

TOTAL

Rs 100 million

Rs 10 million

Rs 90 million

Rs 200 million

IFFCO had always been in the forefront of activities for the rescue of victims of

natural calamities. Every year significant contributions, both monetary as well as in

kind, are made by IFFCO along with separate contributions by the employees.

IFFCO Kisan Sanchar Limited (IKSL)

IFFCO Kisan Sanchar Limited was incorporated in April, 2007 with the objective to

use the information technology to empower farmers in rural areas and to strengthen

the cooperative network in the country. The highlight of IKSL’s services in the rural

telecom domain continues to be Valued Added Services (VAS) extended to the

subscribers. Five free voice messages of immediate relevance to people living in rural

areas, a Help Line with experts to provide information inputs to the farmers and

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several other innovative activities for subscribers constitute a major source of

knowledge transfer.

An ambitious project 'ICT Initiatives for Farmers and Cooperatives' is launched to

promote e-culture in rural India. IFFCO obsessively nurtures its relations with farmers and

undertakes a large number of agricultural extension activities for their benefit every year.

At IFFCO, the thirst for ever improving the services to farmers and member co-operatives is

insatiable, commitment to quality is insurmountable and harnessing of mother earths' bounty

to drive hunger away from India in an ecologically sustainable manner is the prime mission.

All that IFFCO cherishes in exchange is an everlasting smile on the face of Indian Farmer

who forms the moving spirit behind this mission.

IFFCO, to day, is a leading player in India's fertiliser industry and is making substantial

contribution to the efforts of Indian Government to increase food grain production in the

country.

IFFCO is also behind several other companies with the sole intention of benefitting farmers.

The distribution of IFFCO's fertiliser is undertaken through over 38155 co-operative

societies. The entire activities of Distribution, Sales and Promotion are co-ordinated by

Marketing Central Office (MKCO) at New Delhi assisted by the Marketing offices in the

field.

In addition, essential agro-inputs for crop production are made available to the farmers

through a chain of 158 Farmers Service Centre (FSC).

SUBSIDIARIES OF IFFCO

Kisan International Trading FZE (KIT)

Kisan International Trading FZE (KIT) was set up as a wholly owned subsidiary of

the Society in Dubai in April 2008. KIT has become a leading international trading

organisation, which handles the import and export of various fertilisers and fertiliser

Raw Materials and Intermediates.

IFFCO Kisan Bazar Ltd.

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IFFCO Kisan Bazar Ltd. (IKBL) was incorporated on 26th February, 2007 as

IFFCO’s wholly owned subsidiary company for inter-alia undertaking business in

agri-inputs and consumer goods for the benefit of farmers/cooperatives.

Business and Financial Review of Subsidiaries and AssociatesEven in the year of global economic meltdown, the business portfolio has been steadily

growing in tandem with the high growth aspirations. The organization have stepped up

investments in related businesses through various Joint Ventures and Associate Companies in

order to strengthen themselves further by looking at new opportunities that are unfolding and

create value addition in the core fertiliser sector.

On 31st March 2009, the total investments were Rs. 914 Crore in comparison to Rs.770.57

Crore on 31st March 2008 as per the following break-up:

(Rs. In Crore)

As on 31st March

2013 2012

Investment in Jt. Ventures/Subsidiaries 888.27 750.13

Investment in Business Associates 25.73 20.44

Total 914.00 770.57

FINANCIAL PERFORMANCEAs per its tradition, the Society has again exhibited an impressive financial performance in all

its major parameters, namely, Revenue Growth and Resource Utilisation, testifying to the

robustness of its Corporate Strategy of creating multiple drivers of growth in spite of

constraints in the availability of raw materials, the Global Economic Meltdown and

inordinate delays in receipt of large subsidy amounts from the Government of India. This was

possible due to higher production, sales volume and improvement in operating efficiencies.

The Society achieved the highest ever sales turnover of Rs 32,933 Crore. This represents an

increase of 170 per cent over the previous year. While, the sales volume of fertiliser material

increased by 20 per cent to 112.58 lakh MT fertiliser during 2012-13, as against 93.24 lakh

MT in the previous year, the major increase in the sales turnover was on account of

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substantial increase in the commodity prices. The performance is even more satisfying when

viewed in the light of the challenging business environment of the fertiliser industry.

SOURCES AND USES OF FUNDSThe Cash Flow from Operating, Investing and Financing activities as reflected in the Cash

Flow Statement is summarised in the following table:

(Rs. In Crore)

2012-13 2011-12

Cash provided by operating activities 1560 1072

Cash Used in Investing activities (6578) (970)

Cash provided by financing activities 4844 (190)

Decrease in cash and cash equivalents (174) (88)

CORPORATE GOVERNANCE

The Society has consistently followed transparent, democratic and professional practices in

Corporate Governance since its inception. We have carved out a strong ‘Cooperative

Identity’ and are making sincere efforts to uphold the ‘Cooperative Values’ by cherishing

‘Cooperative Principles’. The Society’s endeavour has been to achieve the highest levels of

transparency, accountability and full disclosure to its shareholders in a bid to uphold the spirit

of Cooperative Principles and Cooperative Values by following the charter as lay down by

International Cooperative Alliance (ICA). The activities of the Society have been conducted

within the provisions of the Multi State Cooperative Societies Act/Rules and IFFCO Bye-

laws. A separate detailed report on Corporate Governance is given along with the Annual

Report.

FINANCIAL RATINGSThe Society’s excellent credit ratings with bankers and rating agencies allows access to short

term funds including foreign currency borrowings at competitive rates. Ratings assigned by

different Rating Agencies to the Society were as under:

CRISIL Ratings

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Rating for Governance and Value Creation (GVC) Practices of IFFCO

CRISIL has, assigned a “GVC Level 2” rating to IFFCO. This rating indicates that

the capability of the Society with respect to wealth creation for all its stakeholders,

while adopting sound corporate governance practices, is high.

Rating for the Rs. 100 crore Commercial Paper Programme of IFFCO

CRISIL has assigned a “P1+ (pronounced “P One Plus”) rating to IFFCO’s

Rs.100 Crore Commercial Paper Programme. This rating indicates that the degree

of safety with regard to timely payment of interest and principal on the instrument

is Very Strong.

Rating for the Rs. 400 crore Bonds Programme of IFFCO

CRISIL has assigned the rating on IFFCO’s Long Term Borrowing Programme to

AA/Stable. The rating indicates high degree of safety with regard to timely

payment of interest and principal on the instrument.

FITCH Ratings

Rating for the Rs. 100 crore Commercial Paper Programmes of IFFCO

FITCH Ratings has assigned a National Short Term Rating of ‘F1+ (Ind)’to

IFFCO’s Rs. 100 crore Commercial Paper Programme. This rating indicates that

the degree of safety with regard to timely payment of interest and principal on the

instrument is Very Strong.

Rating for Long Term Borrowing Programme of IFFCO

FITCH Ratings assigned National Long - Term Rating of ‘AA+ (Ind)’ to the Long

Term Debt Programme of IFFCO. The outlook on the Long Term Rating is

“Stable”. This rating indicates high degree of safety with regard to timely

payment of interest and principal on the instrument.

CARE Ratings

PR 1+ (P One Plus) rating to IFFCO’s Working Capital facilities/Short Term

Loans having tenure of up to one year.

CARE AA’ (Double A) rating to External Commercial Borrowings and other

existing long term borrowings having tenure of over one year.

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Value AddedValue Added is the wealth which an enterprise has been able to create through the collective

effort of capital, management and employees. In economic terms, value added is the market

price of the output of an enterprise less the price of the goods and services acquired by

transfer. Value Added can provide a useful measure in gauging performance and activity of

the company.

595.96; 23.54%

1023.2; 40.42%

74; 2.92% 85.1; 3.36% 1.75; 0.07% 3.59; 0.14%

747.9; 29.54% Employee CostInterest PaymentIncome Tax (Net)DividendDonationsCooperative Education FundRetained Cash Profit

Figure: Allocation of Value Added

SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Preparation of Financial Statements

The Financial Statements are prepared on accrual basis of accounting under the

historical cost convention in accordance with the generally accepted accounting

principles in India, the Accounting Standards issued by the Institute of Chartered

Accountants of India and the relevant provisions of Multi State Co-operative Societies

Act, 2002.

2. Use of Estimates

The preparation of financial statements, in conformity with the generally accepted

accounting principles, require estimates and assumptions to be made that affect the

reported amount of assets and liabilities as of the date of the financial statements and

the reported amount of revenues and expenses during the reporting period.

Difference between the actual results and estimates are recognized in the period in

which the results materialise.

21

3. Fixed Assets

(i). Fixed Assets are stated at historical cost less accumulated depreciation. Cost

comprises of the purchase price and any attributable cost of bringing the asset

to its working condition for its intended use.

(ii). Assets retired from active use and held for disposal are shown separately

under Fixed Assets at lower of net book value and estimated realisable value.

4. Expenditure incurred during Construction Period

In respect of new/major expansion of units, the indirect expenditure incurred during

construction period up to the date of the commencement of commercial production,

which is attributable to the construction of the project, is capitalised on proportionate

basis.

5. Intangible Assets

An intangible asset is recognised where it is probable that the future economic

benefits attributable to the asset will flow to the Society and the cost of the asset can

be measured reliably. Such assets are stated at cost less accumulated amortisation.

6. Impairment of Assets

At each balance sheet date an assessment is made whether any indication exists that

an asset has been impaired. If any such indication exists, an impairment loss i.e. the

amount by which the carrying amount of an asset exceeds its recoverable amount, is

provided in the books of account.

7. Investments

i) Long Term Investments are carried at cost. Provision for diminution in the value

of such investments is made to recognise a decline, other than temporary, in the

value of the investments.

ii) Current Investments are valued at lower of cost and fair value determined on an

individual investment basis.

8. Depreciation / Amortisation

(a) Depreciation on Fixed Assets is provided on Straight Line Method as

follows:

(i) In respect of assets acquired up to 31st March, 1990 at the rates

prescribed under Income tax Act, 1961 and rules framed there under.

(ii) In respect of assets acquired after 31st March,1990 at the rates based on

schedule XIV to the Companies Act,1956 except for fixed assets taken

22

over at Paradeep Unit which are depreciated based on useful life of

such assets.

(b) Assets are depreciated to the extent of 95% of the original cost except

assets individually costing up to Rs.5000/- which are fully depreciated in

the year of acquisition.

(c) Railway wagons under "Own Your Wagon Scheme" are depreciated over a

period of ten years.

(d) Machinery Spares which can be used only in connection with an item of

Plant & Machinery and its use is expected to be irregular, are fully

depreciated over the remaining useful life of the related asset.

(e) Premium paid for acquisition of leasehold land, other than those acquired

under perpetual lease basis, is amortised over the period of lease.

(f) Leasehold Buildings are fully depreciated over the period of lease in case

period of lease is less than the useful life derived from the rates as per

Schedule- XIV of Companies Act.

(g) Additions to assets are depreciated for the full year irrespective of the date

of addition and no depreciation is provided on assets sold/ discarded

during the year. However, in the case of capitalisation of project,

depreciation is provided on a pro-rata basis from the date of

commencement of commercial production.

(h) Intangible assets are amortised over their estimated useful lives but not

exceeding ten years when the asset is available for use.

9. Provisions, Contingent Liabilities and Contingent Assets

(a) Provisions are recognised for liabilities that can be measured by using a substantial

degree of estimation, if:

i) The Company has a present obligation as a result of a past event;

ii) A probable outflow of resources embodying economic benefits is

expected to

settle the obligation; and

iii) The amount of the obligation can be reliably estimated.

(b) Contingent liability is disclosed in case of :

i) Present obligation arising from a past event when it is not probable that an

outflow of resources embodying economic benefits will be required to settle

the obligation.

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ii) Possible obligation, unless the probability of outflow in settlement is remote.

(c) Reimbursement expected in respect of expenditure required to settle a provision is

recognised only when it is virtually certain that the reimbursement will be received.

(d) Contingent assets are neither recognised nor disclosed in the financial statements.

10. Operating Leases

Assets acquired on leases wherein a significant portion of the risks and rewards of

ownership are retained by the lessors are classified as operating leases. Lease rentals

paid for such leases are recognised as an expense on straight line basis over the term

of lease.

11. Prior Period Income / Expenditure

Income/Expenditure items relating to prior period(s) not exceeding Rs.2,00,000/- each

is treated as Income/ Expenditure for the current year.

12. Pre-Paid Expenses

Expenditure up to Rs.50000/- in each case except Insurance Premium is accounted for

in the year in which the same is incurred.

24

WORKING CAPITAL RATIO ANALYSIS

The main purposes of Working Capital Ratio Analysis are:

To indicate working capital management performance; and

To assist in identifying areas requiring closer management

Three key points need to be taken into account when analyzing financial ratios. These

key points are as follows:

The results are based on highly summarized information. Consequently, situations,

which require control, might not be apparent, or situations, which do not warrant

significant effort, might be unnecessarily highlighted.

Different departments face very different situations. Comparisons between them, or

with global “ideal” ratio values, can be misleading.

Ratio analysis is somewhat one-sided; favourable results mean little, whereas

unfavourable results are usually significant.

However, financial ratio analysis is valuable because it raises questions and indicates

directions for more detailed investigation.

Sources of CashThe various sources of cash that provide the money to fund the working capital include the

following:

Existing cash reserves

Payables (credit from suppliers)

New equity or loans from shareholders

Bank overdrafts or lines of credit

Long term loans

Profit or net income

Inventory ManagementInventories constitute the most significant part of current assets. Inventories are stock of the

product, a company is manufacturing for sale and components to make that product. The

various forms of inventory in a fertilizer manufacturing company are:

25

Raw Materials are those basic inputs that are converted into the finished products through

the process of manufacturing.

Work-In-Progress inventories are semi-manufactured products.

Finished Goods inventories are completely manufactured products.

Stores & Spares, loose tools, chemical catalysts, packing & Construction materials

OBJECTIVES OF INVENTORY MANAGEMENT

The problems faced by an organization in the context of inventory management are:

To maintain a large size of inventory for efficient and smooth production & sales

operation

To maintain minimum investment in inventories to maximize profitability

To ensure continuous supply of materials, spares & finished goods.

To avoid both overstocking & under stocking of inventory

To eliminate duplicate stock orders. This is possible with the help of a centralized

purchasing system.

To design proper organization for inventory management

Both Excessive & Inadequate Inventories are not desirable. The objective of Inventory

Management is to determine & maintain the optimum level of inventory investment. The

optimum level of inventory will lie between two danger points of excessive & inadequate

inventories.

Excessive stocks can place a heavy burden on the cash resources of a business.

Insufficient stocks can result in lost sales, delays for customers etc.

The key is to know how quickly the stocks are moving or how long each item of stock sits on

shelves before being sold. Average stock holding periods are influenced by the nature of the

business.

The key issue for a business is to identify the fast and slow stock movers with the objective

of establishing optimum stock levels for each category and thereby minimize the cash tied up

in the stocks.

Factors to be considered when determining the optimum stock levels include:

What are the projected sales of each product?

How widely available are each component, raw materials, etc.?

How long does it take for delivery by the suppliers?

26

Can one remove the slow movers from one’s product range without compromising on

the best- sellers?

27

For better stock control, following measures can be adopted:

Review the effectiveness of existing purchasing & inventory systems.

Know the stock turnover for all major items of inventory.

Apply tight controls to the significant few items & supply control for the remaining.

Sell off outdated or slow moving merchandise.

Consider the idea of outsourcing the manufacturing of the product to another

manufacturer.

Review security procedures to minimize losses through deterioration, pilferage,

wastage & damages.

To facilitate furnishing of data for short-term & long-term planning & control of

inventory

Receivable ManagementAccounts Receivable refers to the amount owed by the debtors to the business. They are

usually created because of trade credit that is given to the customers of the business.

These receivables have three characteristics:

It involves an element of risk, which should be carefully analyzed.

It is based on economic value

It implies futurity.

To maintain a proper flow of funds in the business in order to make timely payments to the

creditors, to buy raw materials & to run the day-to-day activities of the business, it is essential

that the debtors make their payments on time. The interval between the date of sale & the

date of payment has to be financed out of the working capital. Thus, trade debtors represent

investment.

Objectives of Receivable Management

The objective of Receivable Management is to promote sales & profits until that point is

reached where the returns that the company gets from funding receivables is less than the

cost that the company has to incur in order to fund these receivables. However, to maintain

these receivables the company has to incur certain costs such as:

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Additional fund requirements for the company – When a firm maintains

receivables, some of its resources remain blocked in them so to finance the activities

during that time gap the firm requires funds.

Administrative Costs

Collecting Costs

Defaulting Costs

The size of receivables or investment in Receivable Management is determined by the

firm’s credit policy & level of sales. Receivable management is the process of making the

decision of selection of trade debtors in which the funds could be invested or to whom money

can be given.

Receivable management involves the careful consideration of the following aspects: -

Forming the credit policy

Executing the credit policy

Formulating & executing the collection policy

The Credit Policy is the policy followed by the company with respect to the credit standards

adopted, any incentive in the form of cash discount offered, and also the period over which

the discount can be utilized by the customers & the collection effort made by the company.

All these variables underlying a company’s credit policy influence the volume of sales and

hence the profits of the company.

Cash Management

Cash, the most liquid asset and also referred to as the life blood of a business enterprise and

is of vital importance to the daily operations of the business firms. Its efficient management

is crucial to the solvency of the business because cash is the focal point of the fund flows in a

business. If a business has no cash and no way of getting any cash, it will have to close down.

Cash Management is concerned with the managing of:

Cash flows into and out of the firm.

Cash flows within the firm

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Cash balances held by the firm at a point of time for financing deficits or investing

Surplus cash.

Cash Management refers to management of cash balance and the bank balance and also

short term deposits. The term cash may be used in two different ways:

1) It may include currency, cheques, drafts, demand deposits held by the firm i.e. pure

cash or generally accepted cash equivalents.

2) In a broader sense, it also includes near cash assets such as marketable securities and

short term deposits with banks. For cash management purposes, the term cash is

used in this broader sense i.e. it covers cash, cash equivalents and those assets which

are immediately convertible to cash.

Objectives of Cash Management

The cash management strategies are generally built around two goals:

To provide cash needed to meet the obligations, and

To minimize the idle cash held by the firm

The risk return trade-off of any firm can be reduced to two prime objectives for the firm’s

Cash Management System:

1) Meeting the Cash Outflows: This will help the firm in avoiding the chance to

default in meeting financial obligations otherwise the goodwill of the firm is

adversely affected. Also this will further help in availing the opportunities of getting

cash discounts by making early or prompt payments and meeting unexpected cash

outflows without much problem.

2) Minimizing the Cash Balance

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Loans and AdvancesLoans and Advances are one of the important factors of working capital. In current assets

loans and advances play a significant role. When we talk about the working capital

management it is necessary to consider Loans & Advances, as they are a major component of

Current assets and along with the equity of the company for a source of generating cash in the

organization.

While analyzing the loans & advances position of IFFCO the following ratios have to be

calculated for better understanding i.e.

Loans and advances to Current Assets ratio

Loans and advances to Working capital ratio

Operating CycleOperating Cycle is the times duration required to convert sales, after the conversion of

resources into inventories, into cash. The operating cycle of a manufacturing company

involves three phases:

Acquisition of resources such as raw material, labour, power and fuel etc.

Manufacture of the product which includes conversion of raw material into work-

in-progress into finished goods.

Sale of the product either for cash or on credit. Credit sales create account receivable

for collection.

PurchasesCredit Sales Collection

Inventory PeriodAccounts Receivable

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Period

Accounts Payable Period Cash Conversion Cycle

Payments

Operating Cycle

The operating cycles are of two types:

1. Gross Operating Cycle

2. Net Operating Cycle or Cash Conversion Cycle

Gross Operating Cycle

Gross operating cycle is a tool which measures the total number of days from the day the

purchases are made or the stock arrives to the day all the collections are made. Cash is said to

be blocked till the collections have been collected. So the sooner the cash is received from the

consumers the better is for the company as they get cash for further production. Gross

Operating Cycle is given as follows:

Operating cycle (OC) =

Days Inventory Outstanding(DIO) + Days Sales Outstanding(DSO)

Cash Conversion Cycle

The cash conversion cycle (also referred to as CCC or the net operating cycle) is the

analytical tool of choice for determining the investment quality of two critical assets -

inventory and accounts receivable. The CCC tells us the time (number of days) it takes to

convert these two important assets into cash. A fast turnover rate of these assets is what

creates real liquidity and is a positive indication of the quality and the efficient management

of inventory and receivables.

The cash conversion cycle is comprised of three standard, so-called activity ratios relating to

the turnover of inventory, trade receivables and trade payables. These components of the

CCC can be expressed as a number of times per year or as a number of days.

CCC = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO)

- Days Payable Outstanding (DPO)

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The cash conversion cycle (CCC) measures how fast a company can convert cash on hand

into even more cash on hand. The CCC does this by following the cash as it is first converted

into inventory and accounts payable (AP), through sales and accounts receivable (AR), and

then back into cash. Generally, the lower this number is the better for the company.

The components of CCC are calculated as follows:

Days Inventory Outstanding (DIO)

This addresses the question of how many days it takes to sell the entire inventory. The

smaller this number is the better.

Days Inventory

Outstanding

(DIO)

=

Average Inventory

Cost of Goods sold (COGS) /

365

Broadly, the smaller number of days, the more efficient a company - inventory is held

for less time and less money is tied up in inventory. Instead, money is freed up for

things like research and development, marketing or even share buybacks and dividend

payments. If the number of days is high, that could mean that sales are poor and

inventories are piling up in warehouses.

If inventory days are increasing, that’s not necessarily a bad thing. Companies

normally let inventories build up when they are introducing a new product in the

market or ahead of a busy sales period. However, if you don’t foresee an obvious

pickup in demand coming, the increase could mean that unsold goods will simply

collecting dust in the stockroom.

Days Sales Outstanding (DSO)

This looks at the number of days needed to collect on sales and involves Accounts

Receivables. While cash-only sales have a DSO of zero, people do use credit

extended by the company, so this number is going to be positive. Again, smaller is

better.

Days Sales

Outstanding (DSO)=

Average Accounts Receivable

Net Sales / 365

If a company's collection period is growing longer, it could mean problems ahead.

The company may be letting customers stretch their credit in order to recognize

greater top-line sales and that can spell trouble later on especially if customers face a

cash crunch. Getting money right away is preferable to waiting for it - especially since

33

some of what is owed may never get paid. The quicker a company gets its customers

to make payments, the sooner it has cash to pay for salaries, merchandise and

equipment, loans and, best of all, dividends and growth opportunities.

Days Payables Outstanding (DPO)

This involves the company's payment of its own bills or Accounts Payables. If this

can be maximized, the company holds onto cash longer, maximizing its investment

potential; therefore, a longer DPO is better.

Days Payable

Outstanding

(DPO)

=

Average Accounts Payable

Cost of Goods sold (COGS) /

365

Key Ratios

The ratios can be divided into following categories according to financial activity or

functions to be evaluated:

Ratios related to Inventory Management

Ratios related to Receivables Management

Ratios related to Cash Management

Profitability Ratios

Ratios related to Inventory Management

1. Inventory Turnover Ratio

2. Inventory to Working Capital Ratio

3. Inventory to Current Assets Ratio

4. Inventory to Sales Ratio

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1. Inventory Turnover Ratio

The inventory turnover measures that how well the company can manage to sell its

inventory. Another way of saying is how efficiently the company turns inventory into

sales. The purpose is to ensure the blocking of only required minimum funds in

inventory.

Importance of Inventory Turnover

If the company can quickly sell its inventory, the inventory turnover will be higher.

Conversely, if the company cannot sell its inventory well, then the inventory turnover

will be low. One has to watch this figure closely – if the inventory ratio climbs too

high, then the company may be keeping too little inventory. This could cause lost

profits due to customer orders that had to wait until inventory arrived.

Inventory

Turnover Ratio=

Cost of Goods sold (COGS)

Average Inventory

2. Inventory to Working Capital ratio

The inventory to working capital ratio measures how well the company is able to

generate cash using working capital at its current inventory level. This ratio shows the

relationship between investments made in inventory & the total net investment in

working capital. Inventory is an important part of working because of its direct impact

on the profits of the organization. The value of inventory is susceptible to changing

price levels, fluctuation in business activities, variation in consumer demand,

obsolescence & other unpredictable factors that determine the market conditions.

Therefore, working capital should be sufficient to provide a cover for the possible

losses in inventory value.

Importance of Inventory to Working Capital

An increasing Inventory to Working Capital ratio is generally a negative sign,

showing the company may be having operational problems. If a company has too

much Working Capital invested in Inventory, they may have difficulty having enough

Working Capital to make payments on Short-Term Liabilities and Accounts Payable.

This is a great ratio to be used with several others to really pick apart the inner

workings of a company.

Inventory to

Working Capital

= Inventory X 100Working Capital

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Inventory is one of the largest components of the current assets. The position of

inventory indicates operational efficiency of organization. The inventory to current

assets ratio measures how much percentage of current assets is formed by the

inventories. This ratio is essential as inventories are the most illiquid of all current

assets as sometimes it becomes difficult to convert inventory ( raw materials, work-in-

progress and finished products ) into cash on a short notice.Importance of inventory to current assets

An increasing inventory to current assets ratio is a negative sign. It means that more &

more percentage of current assets is being constituted by the inventories. This

indicates poor operational efficiency of the organization. Also it shows that the funds

invested in current assets to meet obligations on a short notice are actually illiquid to

some extent & it may be difficult to convert them into cash immediately. On the other

hand, if the position of inventory is lower in current assets, it indicates higher

operational efficiency of the organization. Normally, less than 50 % of current assets

are treated as average position of inventory.

Inventory to Current Assets

Ratio

= Inventory X 100Current Assets


The Inventory to Sales ratio measures the percentage of inventory the company

currently has on hand to support the current amount of sales.

Importance of Inventory to Sales

An increasing Inventory to Sales ratio is generally a negative sign, showing the

company may be having trouble keeping inventory down and/or Net Sales have

slowed, and can sometimes indicate larger financial problems the company may be

facing. Viewing this ratio over several periods reveals the important aspect of the

company's ability to manage inventory while attempting to increase sales. It is also

important to compare this ratio among several companies to gauge how well each one

performs, and to compare their ratios to industry averages.

Inventory to = Inventory X 100

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Ratios related to Receivable Management

1. Debtors turnover ratio

2. Average collection period

3. Debtors to current assets ratio

4. Debtors to working capital ratio

5. Debt to Equity Ratio

1. Debtors Turnover Ratio

This ratio is also known as Accounts Receivable Turnover Ratio. Accounts

Receivable is the amount that customers owe the company. The Accounts

Receivable Turnover measures the number of times Accounts Receivables were

collected during the year. This is also a measure of how well the company collects

sales on credit from its customers, just as Average Collection Period measures this in

days.

Importance of Accounts Receivable Turnover

A high or increasing Accounts Receivable Turnover is usually a positive sign –

showing the company is successfully executing its credit policies and quickly turning

its Accounts Receivables into cash. A possible negative aspect to an increasing

Accounts Receivable Turnover is that the company may be too strict in its credit

policies and missing out on potential sales.

Debtor Turnover Ratio = Net Sales


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2. Average Collection Period

The Average Collection Period measures the average number of days it takes for the

company to collect revenue from its credit sales. The Average Daily Sales is the Net

Sales divided by 365 days in the year. The company will usually state its credit

policies in its financial statement, so the Average Collection Period can be easily

gauged as to whether or not it is indicating positive or negative information.

Importance of Average Collection Period

This ratio reflects how easily the company can collect on its customers. It also can be

used as a gauge of how loose or tight the company maintains its credit policies. A

particular thing to watch out for is if the Average Collection Period is rising over

time. This could be an indicator that the company's customers are in trouble, which

could spell trouble ahead. This could also indicate the company has loosened its

credit policies with customers, meaning that they may have been extending credit to

companies where they normally would not have. This could temporarily boost sales,

but could also result in an increase in sales revenue that cannot be recovered, as

shown in the Allowance for Doubtful Accounts.

Average Collection

Period=

360

Debtor Turnover Ratio

3. Debtors to Current Assets Ratio

Debtor to current assets ratio indicates the position of debtors in total current assets.

This ratio is calculated by debtors with current assets. Debtors are one of the largest

components of current assets. If debtors are average or less than average, it indicates

proper realization of debtors. On the other hand, if debtors are very heavy on respect

of other current assets, it indicates poor recovery of the company.

Debtors to Current Assets

Ratio

= Debtors X 100Current Assets

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4. Debtors to Working Capital Ratio

Debtor to working capital ratio is one of the important ratios for analysis of working

capital management. Working capital is directly related with the position of debtors. If

debtors are lower as compared to working capital, it indicates proper and smooth

utilization of working capital. But on the other hand, the amount of debtor is very

large in that condition, working capital blocked and operational efficiency is directly

affected.

Debtors to Working

Capital Ratio

= Debtors X 100Working Capital


Debt to Equity ratio describes the lenders contribution for each rupee of the owners’

contribution. The ratio is directly computed by dividing total debt by equity or net

worth.

Debt to Equity

Ratio=

Debt

Equity

Importance of Debt to Equity Ratio

The ratio shows the extent to which debt financing has been used in the business. A

high ratio means that claims of creditors are greater than those of owners. A high level

of debt introduces inflexibility in the firm’s operations due to the increasing

interference and pressure from creditors. A low debt-equity ratio implies a greater

claim of owners than capital.

Ratios Related to Cash Management

1. Working capital ratio or current ratio

2. Liquid ratio or Acid-test ratio

3. Cash to current assets ratio

4. Sales to current assets ratio

5. Working capital turnover ratio

6. Sales to working capital ratio

39

1. Working Capital Ratio or Current Ratio

The working capital ratio (or current ratio) attempts to measure the level of liquidity,

that is, the level of safety provided by the excess of current assets over current

liabilities. The current ratio compares all the Current Assets of a company to all the

Current Liabilities. What this ratio basically tells us is if the company had to sell all

its readily available assets, would it be able to pay off its immediate debt?

Importance of Working capital ratio or current ratio

At a minimum, you would hope the company whose financial performance you are

analyzing could meet to pay its Current Liabilities if it were to liquidate all its Current

Assets. This would translate to a Current Ratio of 1:1 - the point where the Current

Assets equal the Current Liabilities. As with all the other performance ratios, the

Current Ratio value depends on the industry in which the company is operating. It is

also important to know what assets make up most of the Current Assets. Inventory

and Accounts Receivable, which are part of the Current Assets, cannot always be

counted on as easily transferred to cash. Cash and Marketable Securities comprising

the majority of the Current Assets would definitely be favorable. Knowing this, would

the company you are analyzing truly be able to meet its financial obligations is it in

fact had to sell its Current Assets? The Current Ratio rising over time will be

favorable.

Current Ratio =Current Assets

Current Liabilities

40

2. Liquid Ratio or Acid-Test Ratio or Quick Ratio

Liquid ratio is also known as Acid-test ratio or Quick ratio. Liquid ratio is a more

vigorous test of liquidity than current ratio. The term “liquidity” refers to the ability of

the firm to pay its short term obligations as & when they become due. Current assets

include inventories and prepaid expenses, which are not easily converted into cash

within a short span of time. So, quick ratio may be referred to as the relationship

between quick assets i.e. (current assets – inventories) & current liabilities. An asset is

said to be liquid if it can be converted into cash within a short span of period without

loss of value.

Importance of Liquid Ratio

If a company one is analyzing looks good while testing it against the Current Ratio,

then the Quick Ratio should be your next test to apply. Companies with steadily

rising Inventories may look good with the Current Ratio, but will have a deteriorating

effect on the Quick Ratio, since we subtract the Inventory out. The Quick Ratio rising

over time is favorable.

Quick Ratio =Current Assets – Inventories

Current Liabilities

3. Cash to Current Assets Ratio

This ratio basically measures what percentage of the current assets is formed by the

cash component. This is a more stringent measure of liquidity as it considers the most

liquid current asset.

Importance of Cash to Current Assets Ratio

High or increasing Cash to Current Assets ratio is generally a positive sign, showing

the company's liquid assets represent a larger portion of its Total Current Assets.

It also indicates the company may be better able to convert its non-liquid assets, such

as inventory, into cash.

Cash to Current Asset

Ratio=

CashX 100

Current Assets

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4. Sales to Current Assets Ratio

The Sales to Current Assets ratio measures how well a company is making use of its

assets in generating sales. This ratio is most valid in industries where companies hold

the majority of their own inventories in-house, as opposed to having their customers

hold their inventory for them.

Importance of Sales to Current Assets

The Sales to Current Assets ratio is best measured over several periods compared to

industry averages, as the amount of Current Assets varies widely among companies

and industries. Decreasing Sales to Current Assets ratio is generally a negative

sign, indicating the company may have slowed production, decreasing the amount of

inventory and resultantly the Current Assets.

Sales to Current Asset

Ratio=

SalesCurrent Assets

5. Working Capital Turnover Ratio

The Working Capital Turnover ratio measures the company's Net Sales from the

Working Capital generated. Note that another ratio exists, the Sales to Working

Capital Ratio also measures Net Sales to Working Capital. We chose to interchange

the usual components of Working Capital (Total Current Assets - Total Current

Liabilities) with an alternate method (shown above). With two similar ratios using

slightly different methods to compute Working Capital, plotting both of these ratios

together to see their differences would be wise.

Importance of Working Capital Turnover

A high or increasing Working Capital Turnover is usually a positive sign, showing

the company is better able to generate sales from its Working Capital. Either the

company has been able to gain more Net Sales with the same or smaller amount of

Working Capital, or it has been able to reduce its Working Capital while being able to

maintain its sales. Efforts to streamline the operations of the company will often

show favorably in this ratio.

Working Capital

Turnover Ratio=

Sales

Average Working Capital

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6. Sales to Working Capital Ratio

The Sales to Working Capital ratio measures how well the company's cash is being

used to generate sales. Working Capital represents the major items typically closely

tied to sales, and each item will directly affect this ratio.

Importance of Sales to Working Capital

An increasing Sale to Working Capital ratio is usually a positive sign, indicating the

company is more able to use its working capital to generate sales. Although

measuring the performance of a company for just one period reveals how well it is

using its cash for that single period, this ratio is much more effectively used over a

number of periods. This ratio can help uncover questionable management decisions

such as relaxing credit requirements to potential customers to increase sales,

increasing inventory levels to reduce order fulfillment cycle times, and slowing

payment to vendors and suppliers in an effort to hold on to its cash.

Working Capital

Turnover Ratio=

SalesAverage Working Capital

Profitability Ratios

1. Return on Assets (ROA)

2. Return on Equity (ROE)

3. Return on Capital Employed (ROCE)

4. Net Profit Margin

1. Return on Assets (ROA)

ROA is an indicator of how profitable a company is relative to its total assets. ROA

tells how efficient management is at using its assets to generate earnings. The ROA

figure gives investors an idea of how effectively the company is converting the

money it has to invest into net income. The higher the ROA number, the better,

because the company is earning more money on less investment.

Return on Assets (ROA) =

Profit After TaxAverage Total

Assets

2. Return on Equity (ROE)

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The return on equity is net profit after taxes divided by average equity. It measures the

rate of return on the ownership interest of the common stock owners. It measures a

firm's efficiency at generating profits from every unit of shareholders' equity. ROE

shows how well a company uses investment funds to generate earnings growth.

Return on Equity (ROE) = Profit After Tax

Average Equity

3. Return on Capital Employed (ROCE)

ROCE is used to prove the value the business gains from its assets and liabilities, a

business which owns lots of land but has little profit will have a smaller ROCE to a

business which owns little land but makes the same profit.

It basically can be used to show how much a business is gaining for its assets, or how

much it is losing for its liabilities.


Net Profit Margin ratio is measured by dividing profit after tax by sales:

Net Profit Margin = Profit After Tax

Sales

Importance of Net Profit Margin

Net profit margin ratio establishes a relationship between net profit and sales and

indicates management’s efficiency in manufacturing, administering and selling the

products. This ratio is the overall measure of the firm’s ability to turn each rupee sales

into net profit.

DATA ANALYSISOPERATING CYCLES

Ratios related to Inventory Management1. Inventory Turnover Ratio

Inventory Turnover Ratio = Cost of Goods sold (COGS)Average Inventory

(in Rs. Crores)

Return on Capital Employed (ROCE)

=Profit Before Tax

Average Capital Employed

44

Year COGS Average Inventory Inventory Turnover Ratio

2008-09 6809.48 976.03 6.9772009-10 9166.48 1225.57 7.4792010-11 9578.09 1901.79 5.0362011-12 11336.77 1930.52 5.8722012-13 31496.75 1654.23 19.040

2004-05 2005-06 2006-07 2007-08 2008-090

5000

10000

15000

20000

25000

30000

35000

0.000

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

6.977 7.479

5.0365.872

19.040

COGS Average InventoryInventory Turnover Ratio

AnalysisThe inventory turnover ratio at IFFCO is 19.040 in 2012-13. It means that that the

company is turning its inventory of finished goods into sales 19.040 times in a year and is in

good position. There had been a decrease in the inventory turnover ratio from 7.479 in 2012-

10 to 5.036 in 2010-11. During this period, there was a large amount of inventory in the

company because of the purchase of the Paradeep production plant. During all other period,

the turnover is always increasing.

2. Inventory to Working Capital Ratio

Inventory to Working

Capital Ratio

= Inventory X 100Working Capital

Year Inventory (in Crores)

Working Capital (in Crores)

Inventory to Working Capital

Ratio

2008-09 2009-10 2010-11 2011-12 2012-13

45

2008-09 931.50 1499.14 62.1362009-10 1519.64 3387.39 44.8622010-11 2283.94 4880.05 46.8022011-12 1577.10 4404.17 35.8092012-13 1731.36 4490.10 38.559

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

0.000

10.000

20.000

30.000

40.000

50.000

60.000

70.000

62.136

44.862 46.802

35.80938.559

Inventory (in Crores) Working Capital (in crores)Inventory to Working Capital Ratio

AnalysisThe Inventory to Working Capital Ratio measures how well the company is able to

generate cash using working capital at its current inventory level. An increasing inventory to

working capital ratio is generally a negative sign, showing the company may be having

operational problems. If a company has too much working capital invested in inventory, they

may have difficulty having enough working capital to make payments on short term liabilities

and accounts payable.

Inventory to working capital ratio for IFFCO has been decreasing consistently with

increasing very marginally in the year 2011-12 and in 2012-13.


Inventory to Current

Assets Ratio

= Inventory X 100Current Assets


Current Assets (in Crores)

Inventory to Current Assets Ratio

2008-09 931.50 2603.98 35.7722009-10 1519.64 4748.98 31.999

2008-09 2009-10 2010-11 2011-12 2012-13

46

2010-11 2283.94 6081.28 37.5572011-12 1577.10 5775.74 27.3062012-13 1731.36 7672.99 22.564

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

8000

9000

0.000

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

35.772

31.999

37.557

27.306

22.564

Inventory (in Crores) Current Assets (in crores)Inventory to Current Assets Ratio

AnalysisThe Inventory to Current Assets Ratio measures that how much percentage of current

assets is formed by the inventories. An increasing inventory to current assets ratio is a

negative sign. It means that more & more percentage of current assets is being constituted by

the inventories. This indicates poor operational efficiency of the organization. Also it shows

that the funds invested in current assets to meet obligations on a short notice are actually

illiquid to some extent and it may be difficult to convert them into cash immediately.

Normally, less than 50 % of current assets are treated as average position of inventory.

IFFCO has shown a decrease in this ratio over the past years, which indicates a GOOD

inventory position for IFFCO and, the ratio was never been above 38%.


Inventory to Sales Ratio

= Inventory X 100Sales


Sales (in Crores)

Inventory to Sales Ratio

2008-09 931.50 7396.87 12.5932009-10 1519.64 9942.93 15.2842010-11 2283.94 10330.11 22.1102011-12 1577.10 12162.82 12.967

2008-09 2009-10 2010-11 2011-12 2012-13

47

2012-13 1731.36 32933.30 5.257

2004-05 2005-06 2006-07 2007-08 2008-090

5000

10000

15000

20000

25000

30000

35000

0.000

5.000

10.000

15.000

20.000

25.000

12.593

15.284

22.110

12.967

5.257

Inventory (in Crores) Sales (in crores)Inventory to Sales Ratio

AnalysisThe Inventory to Sales Ratio measures the percentage of inventory the company currently

has on hand to support the current amount of sales. An increasing Inventory to Sales ratio is

generally a negative sign, showing the company may be having trouble keeping inventory

down and/or Net Sales have slowed, and can sometimes indicate larger financial problems the

company may be facing.

As per the data of IFFCO, this ratio had increased initially till the year 2010-11but is falling

down consistently after that time, which is a POSITIVE sign indicating good movement of

inventory.

RATIOS RELATED TO RECEIVABLE MANAGEMENT

1. Debtors turnover ratio

Debtor Turnover Ratio = Net Sales


Year Net Sales (in Crores)

Avg. A/c Receivables (in Crores)

Debtor Turnover Ratio

2008-09 7396.87 397.03 18.6312009-10 9942.93 399.50 24.8882010-11 10330.11 418.04 24.7112011-12 12162.82 387.72 31.3702012-13 32933.30 410.50 80.227

2008-09 2009-10 2010-11 2011-12 2012-13

48

2004-05 2005-06 2006-07 2007-08 2008-090

5000

10000

15000

20000

25000

30000

35000

0.000

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

18.63124.888 24.711

31.370

80.227

Net Sales (in Crores) Avg. A/c Receivables (in crores)Debtor Turnover Ratio

AnalysisThis ratio is also known as Accounts Receivable Turnover Ratio and measures the number

of times Accounts Receivables were collected during the year. This is also a measure of how

well the company collects sales on credit from its customers.

IFFCO have a high and increasing Accounts Receivable Turnover which is a Positive

Sign. The company is able to turnover its debtors 80.227 times in a year.

2. Average collection period

Average Collection

Period=

360Debtor Turnover

Ratio

Year Sales (in Crores)

Average Debtors

(in Crores)

Debtor Turnover

Ratio

Average Collection

Period2008-09 7396.87 397.03 18.631 19.3232009-10 9942.93 399.50 24.888 14.4652010-11 10330.11 418.04 24.711 14.5692011-12 12162.82 387.72 31.370 11.4762012-13 32933.30 410.50 80.227 4.487

2008-09 2009-10 2010-11 2011-12 2012-13

49

2004-05 2005-06 2006-07 2007-08 2008-090

5000

10000

15000

20000

25000

30000

35000

0.000

5.000

10.000

15.000

20.000

25.000

19.323

14.465 14.569

11.476

4.487

Sales (in Crores) Average Debtors (in crores)Average Collection Period

AnalysisThe Average Collection Period represents the average number of days for which a firm

takes to collect accounts receivables. It measures the quantity of debtors.

The Average Collection Period for IFFCO was around 4.5 days in 2012-13. This is extremely

good considering the fact that IFFCO is a fertilizer company, and functions as a cooperative.

The maximum collection period during this five year period is around 17 days in the year

2009-10 and is decreasing since then.

3. Debtors to current assets ratio

Debtors to Current Assets

Ratio

= Debtors X 100Current Assets

Year Debtors (in Crores)


Debtors to Current Assets Ratio

2008-09 324.59 2603.98 12.4652009-10 474.40 4748.98 9.9902010-11 361.68 6081.28 5.9472011-12 413.76 5775.74 7.1642012-13 407.23 7672.99 5.307

2008-09 2009-10 2010-11 2011-12 2012-13

50

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

8000

9000

0.000

2.000

4.000

6.000

8.000

10.000

12.000

14.000

12.465

9.990

5.947

7.164

5.307

Debtors (in Crores) Current Assets (in crores)Debtors to Current Assets Ratio

AnalysisDebtors to Current Assets Ratio indicates the position of debtors in total current assets.

This ratio is calculated by debtors with current assets. If debtors are average or less than

average, it indicates proper realization of debtors. On the other hand, if debtors are very

heavy in respect of other current assets, it indicates poor recovery of the company.

As Per the table, the Debtors to Current Assets Ratio for IFFCO decreased from 2008-09 to

2009-10 and then increased in the year 2011-12 and then decreasing onwards. The decrease is

a healthy sign showing proper realization of debts in 2012-13.

4. Debtors to working capital ratio

Debtors to Working

Capital Ratio

= Debtors X 100Working Capital

Year Debtors (in Crores)


Debtors to Working Capital Ratio

2008-09 324.59 1499.14 21.6522009-10 474.40 3387.39 14.0052010-11 361.68 4880.05 7.4112011-12 413.76 4404.17 9.3952012-13 407.23 4490.10 9.070

2008-09 2009-10 2010-11 2011-12 2012-13

51

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

0.000

5.000

10.000

15.000

20.000

25.000

21.652

14.005

7.4119.395 9.070

Debtors (in Crores) Working Capital (in crores)Debtors to Working Capital Ratio

Analysis

Working capital is directly related with the position of debtors. If debtors are lower as

compared to Working Capital, then it indicates proper and smooth utilization of working

capital. But on the other hand, the amount of debtor is very large in that condition, Working

capital blocked and operational efficiency is directly affected.

From the data, it can be seen that this ratio for IFFCO has been decreasing which is good for

the company. There was a increment in the year 2011-12 due to increase in the debtors but

again it continued to decrease.


Debt to Equity Ratio = Debt

Total Equity

Year Debt (in Crores)

Equity (in Crores) Debt to Equity Ratio

2008-09 647.09 3301.15 0.1962009-10 5035.39 3555.38 1.4162010-11 6486.12 3641.84 1.7812011-12 6775.64 3688.66 1.8372012-13 12802.78 3958.87 3.234

2008-09 2009-10 2010-11 2011-12 2012-13

52

2004-05 2005-06 2006-07 2007-08 2008-090

2000

4000

6000

8000

10000

12000

14000

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

0.196

1.416

1.781 1.837

3.234

Debt (in Crores) Equity (in crores) Debt to Equity Ratio

Analysis

The ratio shows the extent to which debt financing has been used in the business. A high ratio

means that claims of creditors are greater than those of owners. A high level of debt

introduces inflexibility in the firm’s operations due to the increasing interference and pressure

from creditors. A low debt-equity ratio implies a greater claim of owners than capital.

At IFFCO, this ratio is increasing every year. It means that increase in debt of the

company is more than the increase in the equity. In the year 2012-13, it increased to 3.234

from 1.837 in the year 2011-12 because of the major increase in the short term loans from the

banks.

RATIOS RELATED TO CASH MANAGEMENT

1. Working capital ratio or current ratio

Current Ratio = Current AssetsCurrent Liabilities

Year Current Assets (in Crores)

Current Liabilities (in Crores) Current Ratio

2008-09 2603.98 1104.84 2.3572009-10 4748.98 1361.58 3.488

2008-09 2009-10 2010-11 2011-12 2012-13

53

2010-11 6081.28 1201.23 5.0632011-12 5775.74 1371.57 4.2112012-13 7672.99 3182.89 2.411

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

8000

9000

0.000

1.000

2.000

3.000

4.000

5.000

6.000

2.357

3.488

5.063

4.211

2.411

Current Assets (in Crores) Current Liabilities (in crores)Current Ratio

AnalysisWorking Capital Ratio is used to analyze the short term solvency of the company. Usually a

ratio of 2:1 is considered to be the best current ratio. Higher the ratio, greater is the ability of

the firm to meet its short term obligations.

Current Ratio at IFFCO is always greater than 2 in all five years for which data has been

analyzed indicating that IFFCO never really face a major problem in meeting its short-term

liabilities.

2. Liquid ratio or Acid-test ratio or Quick ratio

Quick Ratio = Current Assets - InventoriesCurrent Liabilities

YearCurrent Assets

(in Crores)

Inventories (in Crores)

Quick Assets

(in Crores)

Current Liabilities (in Crores)

Quick Ratio

2008-09 2603.98 931.50 1672.48 1104.84 1.5142009-10 4748.98 1519.64 3229.34 1361.58 2.3722010-11 6081.28 2283.94 3797.34 1201.23 3.1612011-12 5775.74 1577.10 4198.64 1371.57 3.0612012-13 7672.99 1731.36 5941.63 3182.89 1.867

2008-09 2009-10 2010-11 2011-12 2012-13

54

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

1.514

2.372

3.161 3.061

1.867

Quick Assets (in Crores) Current Liabilities (in crores)Quick Ratio

Analysis

Position of Liquid ratio is very good. The Quick Ratio of 1:1 is considered to be

satisfactory. This is so because if the quick assets are equal to the current liabilities then the

company may be able to meet its entire short-term obligations pretty conveniently.

The quick ratio of the company is above 1 for all the five years. The quick ratio was 3.161

and 3.061 during the year 2010-11and 2011-12 respectively. This is due to large amount of

inventory at IFFCO during that period. However, the reason for this is the purchase of

Paradeep production plant during that period.

3. Cash to current assets ratio

Cash to Current Asset

Ratio=

CashX 100

Current Assets

Year Cash (in Crores)


Cash to Current Asset Ratio (%)

2008-09 199.10 2603.98 7.6462009-10 98.22 4748.98 2.0682010-11 330.84 6081.28 5.4402011-12 243.32 5775.74 4.2132012-13 69.63 7672.99 0.907

2008-09 2009-10 2010-11 2011-12 2012-13

55

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

8000

9000

0.000

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

7.646

2.068

5.440

4.213

0.907

Cash (in Crores) Current Assets (in crores)Cash to Current Asset Ratio

AnalysisThe Cash to Current Assets Ratio indicates what percentage of current assets is comprised of

cash at hand and cash at bank.

Upon analyzing the data of the past 5 years for IFFCO it was observed that the cash balances

formed only a very small percentage of the current assets. In the last 5 years, the highest was

7.65% in the year 2008-09 after which it is decreasing. The ratio had variations in this period

an in the year 2012-13, it was 0.91%. This is a POSITIVE SIGN as it shows effective

utilization of the funds of the organization and there is not much of idle cash with the

organization.

4. Sales to current assets ratio

Sales to Current Asset Ratio = Sales

Current Assets



Sales to Current Asset Ratio

2008-09 7396.87 2603.98 2.8412009-10 9942.93 4748.98 2.0942010-11 10330.11 6081.28 1.6992011-12 12162.82 5775.74 2.1062012-13 32933.30 7672.99 4.292

2008-09 2009-10 2010-11 2011-12 2012-13

56

2004-05 2005-06 2006-07 2007-08 2008-090

5000

10000

15000

20000

25000

30000

35000

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

2.841

2.0941.699

2.106

4.292

Sales (in Crores) Current Assets (in crores)Sales to Current Asset Ratio

AnalysisThe Sales to Current Assets Ratio basically measures how well a company is making use of

its assets in generating sales. An increasing sale to current assets ratio is a POSITIVE SIGN

as it indicates that the company has a healthy production scenario because of which most of

inventory is being converted into sales for the company.

IFFCO has shown a decrease in its sales to current assets ratio from 2009-10 to 2011-12

after which it is constantly increasing which implies that the company is doing well and

inventory is not being held up at any stage in the production process.

5. Working capital turnover ratio

Working Capital = Current Assets - Current Liabilities

Working Capital

Turnover Ratio=

Sales




Working Capital Turnover Ratio

2008-09 7396.87 1580.36 4.6802009-10 9942.93 2443.27 4.0702010-11 10330.11 4133.72 2.4992011-12 12162.82 4642.11 2.620

2008-09 2009-10 2010-11 2011-12 2012-13

57

2012-13 32933.30 4447.14 7.406

2004-05 2005-06 2006-07 2007-08 2008-090

5000

10000

15000

20000

25000

30000

35000

0.000

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

4.6804.070

2.499 2.620

7.406

Sales (in Crores) Working Capital (in crores)Working Capital Turnover Ratio

AnalysisIFFCO has a high working capital turnover ratio.

A high or increasing Working Capital Turnover is usually a Positive Sign, showing the

company is better able to generate sales from its Working Capital. The company has been

able to gain more Net Sales with the smaller amount of Working Capital in 2012-13 as

compared to that in 2011-12. The working capital turnover had been decreasing from 4.860 in

the year 2008-09 to 2.499 in 2010-11 but it increasing since then to 7.406 in the year 2012-

13.

6. Sales to working capital ratio


Sales to Working

Capital Ratio=

Sales




Sales to Working Capital Ratio

2008-09 7396.87 1580.36 4.6802009-10 9942.93 2443.27 4.0702010-11 10330.11 4133.72 2.4992011-12 12162.82 4642.11 2.620

2008-09 2009-10 2010-11 2011-12 2012-13

58

2012-13 32933.30 4447.14 7.406

2004-05 2005-06 2006-07 2007-08 2008-090

5000

10000

15000

20000

25000

30000

35000

0.000

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

4.6804.070

2.499 2.620

7.406

Sales (in Crores) Working Capital (in crores)Sales to Working Capital Ratio

AnalysisThe Sales to Working Capital ratio measures how well the company's working capital is

being used to generate sales. Working Capital represents the major items typically closely

tied to sales, and each item will directly affect this ratio. Increasing Sales to Working Capital

ratio is usually a positive sign, indicating the company is more able to use its working capital

to generate sales.

The sales to working capital ratio has been increasing from 2011-12 for IFFCO which is

good as it implies that the company is generating more & more sales and is able to utilize its

working capital more efficiently with the passing years. The decrease of the ratio in the previous

years was due to the increase in inventory holding which was required for the Paradeep production

plant.

PROFITABILITY RATIOS

1. Return on Assets

Return on Assets (ROA) = Profit After Tax

Average Total Assets

2008-09 2009-10 2010-11 2011-12 2012-13

Year Profit After Tax (in Crores)

Average Total Assets

(in crores)ROA

2008-09 319.64 4449.22 0.0722009-10 341.35 6709.33 0.0512010-11 175.02 9855.58 0.0182011-12 257.59 10830.24 0.0242012-13 360.01 14151.13 0.025

59

2004-05 2005-06 2006-07 2007-08 2008-090

2000

4000

6000

8000

10000

12000

14000

16000

0.000

0.010

0.020

0.030

0.040

0.050

0.060

0.070

0.080

0.072

0.051

0.0180.024 0.025

Profit After Tax (in Crores) Average Total Assets (in crores)ROA

Analysis

ROA is an indicator of how profitable a company is relative to its total assets. The ROA

figure gives investors an idea of how effectively the company is converting the money it

has to invest into net income. The higher the ROA number, the better, because the company

is earning more money on less investment.

At IFFCO, the ROA is increasing from the year 2010-11 which is good for the company.

Earlier it was decreasing as there was increase in the assets due to purchase of the production

plants.

2. Return on Equity

Return on Equity (ROE) = Profit After Tax

Average Equity


Average Equity (in crores) ROE

2008-09 2009-10 2010-11 2011-12 2012-13

60

2008-09 319.64 3205.37 0.1002009-10 341.35 3428.27 0.1002010-11 175.02 3598.61 0.0492011-12 257.59 3665.25 0.0702012-13 360.01 3823.77 0.094

2004-05 2005-06 2006-07 2007-08 2008-090

500

1000

1500

2000

2500

3000

3500

4000

4500

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.100 0.100

0.049

0.070

0.094

Profit After Tax (in Crores) Average Equity (in crores)ROE

Analysis

Return on Equity measures the rate of return on the ownership interest of the common stock

owners. It measures a firm's efficiency at generating profits from every unit of shareholders'

equity. ROE shows how well a company uses investment funds to generate earnings growth.

From the data, IFFCO ROE had always been good. There was a decrease in the year

2010-11due to the purchase of Paradeep plant which increased the purchases of the

organization.

3. Return on Capital Employed

2008-09 2009-10 2010-11 2011-12 2012-13

Return on Capital Employed (ROCE)

=Profit Before Tax

Average Capital Employed

61

Year Profit Before Tax (in Crores)

Average Capital Employed (in crores)

ROCE

2008-09 470.92 4449.22 0.10582009-10 481.90 6709.33 0.07182010-11 251.25 9855.58 0.02552011-12 380.52 10830.24 0.03512012-13 441.95 14151.13 0.0312

2004-05 2005-06 2006-07 2007-08 2008-090

2000

4000

6000

8000

10000

12000

14000

16000

0.0000

0.0200

0.0400

0.0600

0.0800

0.1000

0.1200

0.1058

0.0718

0.02550.0351 0.0312

Profit Before Tax (in Crores) Average Capital Employed (in crores)ROCE

Analysis

ROCE is used to prove the value the business gains from its assets and liabilities. It basically

can be used to show how much a business is gaining for its assets, or how much it is losing

for its liabilities. At IFFCO, ROCE had shown variable changes. This is due to the

variable increments in the capital employed (majorly the loan funds) as compared to the

profit before tax.


Net Profit Margin = Profit After Tax

Sales

2008-09 2009-10 2010-11 2011-12 2012-13

62


Sales(in Crores) Net Profit Margin

2008-09 319.64 7396.87 0.0432009-10 341.35 9942.93 0.0342010-11 175.02 10330.11 0.0172011-12 257.59 12162.82 0.0212012-13 360.01 32933.30 0.011

2004-05 2005-06 2006-07 2007-08 2008-090

5000

10000

15000

20000

25000

30000

35000

0.000

0.005

0.010

0.015

0.020

0.025

0.030

0.035

0.040

0.045

0.050

0.043

0.034

0.0170.021

0.011

Profit After Tax (in Crores) Sales (in crores)Net Profit Margin

AnalysisNet profit margin ratio establishes a relationship between net profit and sales and indicates

management’s efficiency in manufacturing, administering and selling the products. This ratio

is the overall measure of the firm’s ability to turn each rupee sales into net profit.

From the data, IFFCO have a variable net profit margin. The sales turnover depend upon

the element of subsidy which is decided by the government from time - to - time depending

on the condition of international market. During the year 2012-13, the component of subsidy

increased tremendously due to high international fertilizer price. Looking at the turnover of

2012-13, the subsidy amounted to Rs. 25545.60 crores vis-à-vis to subsidy amounted to Rs.

6194.35 crores for the year 2011-12.

LOANS AND ADVANCES TO CURRENT ASSETS

Loans and Advances to Current Assets

= Loans and Advances X 100Current Assets

2008-09 2009-10 2010-11 2011-12 2012-13

63

Ratio

Year Loans and Advances (in Crores)


Loans and Advances to Current Assets

Ratio

2008-09 1148.77 2603.98 44.1162009-10 2656.70 4748.98 55.9432010-11 3104.82 6081.28 51.0552011-12 3541.56 5775.74 61.3182012-13 5464.77 7672.99 71.221

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

8000

9000

0.000

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

44.116

55.94351.055

61.318

71.221

Loans and Advances (in Crores)Current Assets (in crores)Loans and Advances to Current Assets Ratio

AnalysisAs per the data, it can be clearly said that the position of the Loans & Advances with respect

to current assets is increasing every year (a marginal decrease in the year 2010-11) which is

very Good for IFFCO. The ratio was around 44.116% in 2011-12 which had increased to

71.221% in 2012-13.

LOANS AND ADVANCES TO WORKING CAPITAL

Loans and Advances to Working Capital

= Loans and Advances

X 100

2008-09 2009-10 2010-11 2011-12 2012-13

64

Ratio Working Capital

Year Loans and Advances (in Crores)


Loans and Advances to Working Capital

Ratio (%)

2008-09 1148.77 1499.14 76.6292009-10 2656.70 3387.39 78.4292010-11 3104.82 4880.05 63.6232011-12 3541.56 4404.17 80.4142012-13 5464.77 4490.10 121.707

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

0.000

20.000

40.000

60.000

80.000

100.000

120.000

140.000

76.629 78.429

63.623

80.414

121.707

Loans and Advances (in Crores)Working Capital (in crores)Loans and Advances to Working Capital Ratio

AnalysisThis ratio shows how significant Loans & Advances Are to Working Capital and that Loans

& Advances plays an important role in working capital management of IFFCO. This ratio

shows that the company has more cash in hand and can utilize these funds as per the

company requirement.

At IFFCO, this ratio has always been increasing which is good for the organization. This

means that company is having enough cash and utilizing it effectively.

Working Capital Position


2008-09 2009-10 2010-11 2011-12 2012-13

65

Year Current Assets (in Crores)

Current Liabilities (in Crores)


2008-09 2603.98 1104.84 1499.142009-10 4748.98 1361.58 3387.402010-11 6081.28 1201.23 4880.052011-12 5775.74 1371.57 4404.172012-13 7672.99 3182.89 4490.10

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

8000

9000

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

1499.14

3387.40

4880.054404.17 4490.10

Current Assets (in Crores) Current Liabilities (in crores)Working Capital (in Crores)

AnalysisWorking Capital Position indicates changes in Current Assets and Current Liabilities over

the study period and also during a particular year. Working capital position shows operational

efficiency & proper utilization of short term resources in an organization.

The trend of working capital with respect to Current Assets and Current Liabilities for IFFCO

is increasing. This shows a GOOD GROWTH of the company. The Working Capital is

managed properly & efficiently by the organization. However, there was decrease in the year

2011-12 due to decrease in the level of inventory.

COMPARISON WITH SOME COMPETITORS IN THE INDUSTRY

IFFCOCoromandel Internationa

l

National Fertilizers

Fertilizers and

Chemicals Travancore

Chambal Fertilizers

2008-09 2009-10 2010-11 2011-12 2012-13

66

Net Worth 3958.87 1127.14 1470.70 647.94 1234.35

Sales Turnover 32933.30 9374.98 5127.10 706.89 4595.53

Net Profit 360.01 496.38 97.46 42.95 230.56

Inventory 1731.36 1347.51 348.68 412.60 316.82

Total Current Assets 7672.99 3726.38 1525.51 823.53 1566.28

Total Current Liability 3182.89 1755.02 886.65 392.21 1288.58

Working Capital 4490.10 1971.36 638.86 431.32 277.70

Total Assets 17303.77 2926.50 1851.19 1457.77 3982.04Working Capital to Sales Turnover 0.136 0.210 0.125 0.610 0.060

Inventory to Working Capital 0.386 0.684 0.546 0.957 1.141

Working Capital Ratio 2.41 2.12 1.72 2.10 1.22

Working Capital Turnover 7.41 6.21 7.06 1.97 9.63

Inventory to Current Assets 0.226 0.362 0.229 0.501 0.202

Inventory to Sales 0.053 0.144 0.068 0.584 0.069

Net Profit Margin 0.011 0.053 0.019 0.061 0.050

67

FINDINGS

After the analysis of the components of current assets & current liabilities and the

trends of working capital, we find that

Current assets are increasing more than current liabilities. But the current ratio has

decreased as the percentage increase in current liabilities is more than the current

assets.

Cash and Bank Balances have decreased during this period which indicates proper

utilization of funds at IFFCO.

Position of inventory is Very Good in current assets (22.564%). Inventory Turnover

Ratio increases consistently, which shows greater degree of utilization of inventory

during the study period.

Position of Debtors to Current Assets is 5.307%. This ratio had decreased during this

period with an increase in the year 2011-12. This increase was due to the significant

increase in the debts of the company.

Loans and Advances are increasing every year and contribute majorly to current

assets. This means that the company is not facing any problem to get the required

short term financing.

Large part of working capital is involved in maintaining inventory and it depends on

the level of inventory every year.

Working capital of the company had increased till 2010-11after which it has remain

constant with small changes.

Debt to equity ratio increased during the year 2012-13 as the debt increased due to

increase in short term borrowings.

Inventory as a component of current assets was high during the beginning of the

period after which it has continuously decreasing.

Net profit margin decreased in the year 2012-13 because of the significant increase in

the raw material prices and consequent increase in subsidy. Looking on the trends,

IFFCO has been able to manage the profits.

The major variation in the ratios during this period is due to the purchase of Paradeep

production plant.

68

CONCLUSIONS AND SUGGESTIONS

Working capital is one of the most important aspects of operational efficiency of business.

Working Capital plays a very important role in the functioning of any organization. Both the

current assets and current liabilities are very much influencing factors on the working

capital of an organization.

After the discussion and analysis of the financial position of IFFCO Ltd., it is clear that the

working capital of IFFCO is in sound position. Working capital is not measurable by only

current assets & current liabilities but there are some other factors also that have an

influence on the working capital.

In current assets, there are two most important factors, Debtors and Inventory that affect

working capital. In IFFCO Ltd., Inventory and Debtors are efficiently managed to strengthen

the position of the organization both in short term and long terms.

After analyzing and interpreting the financial data of INDIAN FARMERS FERTILIZER

COOPERATIVE LIMITED (IFFCO) with the help of Ratio Analysis, the following

suggestions were given to the organization for further betterment & improvement in the

working capital:

The present status and levels of current assets is extremely good and therefore it

requires proper maintenance.

The current percentage of inventory is high which is not good for operational

efficiency and sound working capital and thus, it need to be controlled by using

various inventory management techniques such as JIT or Kanban. Another alternative

would be to have varying stock or inventory levels during the different seasons or

even months and, thereby, altering the production to suit such needs.

Cash balances have a lower percentage in current assets. This requires some concern

as cash and bank balances are the most liquid of all current assets.

As the sales turnover majorly consists of subsidiary, the company shall also depend

less on subsidy which is dependent on the annual budget fixed by the government of

India, i.e., when the total outflow of any financial year is more than the budgeted

69

subsidiary, the manufacturers/ importers have to wait for additional budget or their

subsidiary get realized in the next financial year.

As the Government of India wants the fertilizers to be supplied at minimum price,

they are compensating manufacturers/ importers by means of subsidy. The

government should device a method whereby the price of fertilizers should increase

every year to some extent. This will reduce the subsidy burden on the government and

companies will be able to realize cash against their sales.

70

CONCLUSION The organization IFFCO is basically a Farmer’s Organization. It functions in the

cooperative sector of India and is owned by the Government of India along with the

cooperative societies. IFFCO is one of the most profitable and financially secure

fertilizer companies in India.

The generation of funds through sale is a seasonal factor. 70% of Sales activity in the

business of fertilizers is in Monsoons and the balance 30% is spread throughout the

rest of the year. The month from April to September is known as Kharif Season and

from October to March is known as Rabi Season. Thus, it becomes imperative for the

organization to have such cash management system in place that would enable the

organization to plan the excess cash obtained during surplus periods and ploughs them

back into the operations of the organization during deficit periods.

The Cash Management System at IFFCO is very sound and efficient. It has enabled

the organization to manage its funds in a proper manner resulting in better utilization

and availability of funds in cash deficit periods.

Today IFFCO has a tie up with banks such as IOB, HSBC Bank, ICICI Bank that are

providing IFFCO with facilities such as cash management services, personalized

financial MIS to enable IFFCO to accelerate the collection and payment of funds,

debit sweep option, Anywhere banking facility, etc. All these facilities have helped

IFFCO in having faster, more secure and more reliable collection and payments of

funds and cheques from its various Area/State Offices.

However, despite all the advantages of this New Cash Management System such as

receiving the proceeds from the sale of fertilizers within First day of sale, reduction

in the amount of interest loss suffered by IFFCO due to late arrival of payments, daily

report of deposits made at various locations, location wise report, credit forecast

report, monthly cumulative report date wise/ location wise, monthly charging

statement, monthly cheque return statement, customized reports as per mutual

agreement etc. the cash management system can be further improved.

71

References Books

Brealey, R A, Myers, S C, Alan, F and Mohanty, P 2008. Principles of

Corporate Finance. Tata McGraw-Hill Publications, New Delhi, 8th SIE

Edition.

Chandra, T K, Seti, Kuldeep and Robertson, C 2010. Fertilizers Statistics

2012-13. Fertilizers Association of India (FAI), New Delhi.

Ramachandran, N and Kakani, Ram 2008. Financial Accounting for

Management. Tata McGraw-Hill Publications, 2nd Edition.

Pandey, I M 2008. Financial Management. Vikas Publishing House, 9th

Edition

Reports

Annual reports of IFFCO

Agreement files of IFFCO

Websites and Internet

www.iffco.nic.in

www.wikipedia.com

www.investopedia.com

www.fert.nic.in

www.faidelhi.org

www.moneycontrol.com

http://www.moneycontrol.com/

http://www.faidelhi.org/

72

Appendix Financial Statements

BALANCE SHEET(Rs. in Crores)

Schedule As At 31.03.2013 As At 31.03.2012 Shareholders' funds:

Share capital 1 426.28 423.93 Share Application Money Reserve and Surplus 2 3532.59 3958.87 3264.73 3688.66

Loan Funds: Secured Loans 3 7373.18 2404.67 Unsecured Loans 4 5429.6 12802.78 4370.97 6775.64

Deferred Tax Liability ( Net ) 542.12 534.19 TOTAL 17303.77 10998.49Fixed Assets: 5

Gross block 8808 8138.98 Less: Accumulated Depreciation 3842.16 3400.04 Net Block 4965.84 4738.94 Capital Work-In-Progress 6 290.98 5256.82 430.85 5169.79

Investments 7 7552.95 1416.73Current Assets, Loans and Advances

Inventories 8 1731.36 1577.1 Sundry Debtors 9 407.23 413.76 Cash and Bank Balances 10 69.63 243.32 Loans and Advances 11 5464.77 3541.56

7672.99 5775.74 Less: Current Liabilities and Provisions

Current Liabilities 12 2860.18 1048.49 Provisions 13 322.71 323.08

3182.89 1371.57 Net Current Assets 4490.10 4404.17Miscellaneous Expenditure (to the extent not written off)

Voluntary Retirement Scheme Expenses 3.9 7.8

TOTAL 17303.77 10998.49

PROFIT AND LOSS ACCOUNT

73

(Rs. in Crores) Schedule For yr 31.03.2013 For yr 31.03.2012INCOME FROM OPERATIONS Turnover Sales 7387.70 5968.47 Less: Excise Duty - - 7387.70 5968.47

Subsidy on Fertilizers 25545.60 32933.30 6194.35 12162.82

Other Revenue 14 499.00 345.77 Increase/ (Decrease) in Stocks 15 280.51 (1136.21) 33712.81 11381.38LESS: COST OF OPERATIONS Consumption of Raw Materials, Stores etc. Raw Materials 13997.22 6646.44 Stores and Spares 108.34 96.26 Chemicals and Catalysts 41.38 38.22 Packing Materials 200.39 170.43 Power, Fuel and Water 981.80 756.48 15329.13 7707.83 Less: Stock Transfer for Self Consumption 159.41 15169.72 118.81 7589.02Purchase of products for resale 14539.23 1245.44Employees' Remuneration & Benefits 16 595.96 405.75Manufacturing, Administration, Distribution and Other Expenses 17 1481.91 959.49Interest 18 1023.20 389.37Depreciation/ Amortisation 470.40 410.93Prior Period Adjustments (Net) 19 (13.46) (3.00)Deferred Revenue Exp. Written-off 3.90 3.86(Voluntary Retirement Scheme Expenses) 33270.86 11000.86Profit Before Tax 441.95 380.52Provision for Taxation Current Tax 92.80 61.80 Fringe Benefit Tax 8.02 6.50 Deferred Tax 7.93 56.14 Earlier Years (26.81) 81.94 (1.51) 122.93Profit After Tax 360.01 257.59Profit transferred to: Capital Repatriation Fund 0.47 0.46 Dividend Equalisation Fund Contribution towards Approved Donations 1.00 1.47 - 0.46 (Under Income Tax Act, 1961) Net Profit as per Multi state Cooperative Societies Act, 2002 358.54 257.13

CASH FLOW STATEMENT

74

(Rs. In Crores)Year Ended

31.3.2013Year Ended

31.3.2012

(A) Cash Flow from Operating Activities:

Net Profit before Tax 441.95 380.52Adjustment for:Depreciation 470.40 410.93Interest (Net) 857.19 362.71Provision for Doubtful Debts 0.01 0.31Loss on Damaged Goods 17.60 -Write down of Value of Goods-in-Transit 107.68 -Amount charged off / adjusted 0.04 0.20Assets Written-off 13.41 2.27Loss on Sale of Investments (Net) 83.16 15.47Exchange Rate Variations (Net) 148.84 5.10Loss on Sale of Fixed Assets (Net) 4.29 2.75Dividend Income (274.42) (132.54)Profit on sale of Investments - (115.22)Deferred Revenue Exp. Written off - VRS 3.90 3.97Diminution in value of Long Term Investments 81.16 -Liabilities / Provision written back (3.88) (14.12)Prior Period Depreciation (0.12) 1509.26 2.95 544.78Operating Profit before Working Capital Changes 1951.21 925.30Adjustment for:Inventories (279.54) 706.83Trade and Other Receivables (1717.19) (487.06)Trade Payable and Provisions 1747.04 (249.69) 3.43 223.20Cash Generated from Operations 1701.52 1148.50Direct Taxes Paid(Net of Refunds) (135.23) (72.07)Payment towards Cooperative Education Fund (2.57) (1.75)Payment to Cooperative Welfare Fund (1.90) (1.60)Donations Paid (1.87) (141.57) (0.67) (76.09)

Net Cash From Operating Activities (A): 1559.95 1072.41

(B) Cash Flow from Investing Activities:Purchase of fixed Assets including C.W.I.P. (590.82) (594.93)Proceeds from Sale of Fixed Assets 11.50 31.89Purchase of Investments (Net) (6300.54) (691.73)Dividend Received 246.61 132.74Profit on Sale of Investments - 115.22Interest received 55.66 26.26

75

Net Cash used in Investing Activities (B): (6577.59) (970.55)

(C) Cash Flow from Financing Activities:

Proceeds from issue of Share Capital 2.35 0.01Repayment of Term Loans (362.67) (153.97)Repayment of Deferred Trade Tax Loan (Net) (9.21) (4.10)Increase in Cash Credit 589.37 160.88Increase in Short Term Loans 5809.65 286.72Interest Paid (1008.14) (389.37)Dividend Paid (84.53) (84.45)Exchange Rate Variation (Net) (92.87) (5.10)

Net Cash used in Financing Activities (C): 4843.95 (189.38)

NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) (173.69) (87.52)CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 243.32 330.84CASH AND CASH EQUIVALENTS AT THE CLOSE OF THE YEAR 69.63 243.32NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS (173.69) (87.52)

76

APPENDIX D: SIGNIFICANT FINANCIAL INDICATORS

2008-09 2009-10 2010-11 2011-12 2012-13FINANCIAL RATIOS :

Operating Profit to Sales (%) 6.5 7.8 6.69 6.92 6.52

Profit before Tax to Sales (%) 1.34 3.13 2.43 4.85 6.37

Return on Capital Employed (%) 3.12 3.5 2.53 7.18 10.58

Profit before Tax to Net Worth (%) 11.16 10.31 6.9 13.55 14.27

Profit After Tax to Net Worth (%) 9.09 6.99 4.81 9.6 9.68

Fixed Assets Turnover (Times) 6.32 2.38 2.2 3.01 3.57

Working Capital Turnover (Times) 7.41 2.62 2.5 4.07 4.58

Inventory of Finished Goods (Months

Sales)0.12 0.76 1.48 0.74 0.9

Inventory of Raw Material & Packing

Material (Months Consumption) 0.74 1.25 1.01 0.86 0.79

Sundry Debtors (Months Sales) 0.67 0.78 0.9 0.89 1.17

Current Ratio 2.41:1 4.21:1 5.06:1 3.49:1 2.36:1

Quick Ratio 1.87:1 3.06:1 3.15:1 2.37:1 1.51:1

Debt Equity Ratio 3.23:1 1.84:1 1.78:1 1.42:1 2.20:1

Employees Productivity

No. of Employees 6757 6743 6826 6506 5752

Sales per Employee (Rs. Crore) 4.87 1.8 1.51 1.77 1.29

Appendix E: Provisional highlights of IFFCO performance during 2012-13

77

Highest Production of Fertilisers

(Previous Best 70.12 lakh MT in 2006-07)

71.68 lakh MT

Highest Production of Urea

(Previous Best 39.63 lakh MT in 2011-12)

40.68 lakh MT

Production of NPK/DAP/NP

(Best 32.26 lakh MT in 2006-07)

31.00 lakh MT

Highest Sales of Fertilisers

(Previous best 93.24 lakh MT in 2011-12)

112.58 lakh MT

Highest Sales of Urea


58.69 lakh MT

Highest Sales of NPK/DAP


53.89 lakh MT

Profit Before Tax

(Best PBT 807.1 crore in 2002-03)

Rs.441.95 crore

Profit After Tax

(Best PAT 557.2 crore in 2002-03)

Rs.360.01 crore

Highest Turnover

(Previous best Rs.12163 crore in 2011-12)

Rs 32933 crore

Plant Productivity

(Best 1669 MT in 2008-06)

1376 MT per employee

Highest Marketing Productivity

(Previous best 6158 MT in 2011-12)

7397 MT per employee

Composite Energy Consumption

(Lowest 5.907Gcal / MT in 2011-12)

5.941 Gcal/ MT

Appendix F: VALUE ADDED STATEMENT

78

(Rs. In Crore)Particulars Year ended 31.3.2013 Year ended 31.3.2012

Income from Sales 32933.30 12162.82Dividend and Other Income 499.00 354.77

33432.30 12517.59

Less:Cost of Materials 29418.89 9971.54Manufacturing, Admn., Distribution 1481.91 959.49& Other Expenses Total Value Added 2531.50 1586.56

Applied to meet:Employee Cost 595.96 405.75Interest Payment 1023.20 389.37Income Tax (Net) 74.00 66.79Dividend 85.10 84.53Donations 1.75 0.75Cooperative Education Fund 3.59 2.57Retained Cash Profit 747.90 636.80 Total Utilisation of Value Added 2531.50 1586.56

RatiosValue added to Total Income (%) 7.57 12.67Value added to Capital Employed (%) 17.89 14.65Value added to Net Worth (%) 63.95 43.01Value added per Employee(Rs. Lakh) 37.46 23.53

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