Capital Structure - Cotton Mills

8/12/2019 Capital Structure - Cotton Mills

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INTRODUCTION

The Textile Industry is one of the oldest in the world. The oldest known textiles,

which date to about 5000 B.C., are scraps of linen cloth found in Egyptian caes. The

industry was pri!arily a fa!ily and do!estic one until the early part of the "500s when

the first factory syste! was established. It wasn#t until the Industrial $eolution in

England, in the "%th century, that power !achines for spinning and weaing were

inented. In "&'( when $ichard )rk *right#s spinning fra!e with ariable speed rollers

was patented, water power replaced !anual power +eefus, "(%-.

In the early "&th century of colonial )!erica, textiles were pri!arily

!anufactured in ew England ho!es, /lax and wool were the !aor fibers used,

howeer, cotton, grown pri!arily on southern plantations, beca!e increasingly i!portant

+*ilson, "(&(.In "&%- 1a!uel 1later, who had worked as an apprentice to )rk *ight#s

partner, i!!igrated to )!erica. In Blackstone $ier, $hode Island, he started building

)rk *right !achines and opened the first English2Type Cotton 3ill in )!erica +)T3I,

"((&. In the early nineteenth century, in 4owell, 3assachusetts, the first !ill in )!erica

to use power loo!s began operations. It was the first ti!e that all textile !anufacturing

operations had been done under the sa!e roof +*ilson, "(&( and )T3I, "((&.

The twentieth century has seen the deelop!ent of the first !an!ade fibers

+rayon was first produced in "("0. )lthough natural fibers +wool, cotton, silk, and linen

are still used extensiely today, they are !ore expensie and are often !ixed with

!an!ade fibers such as polyester, the !ost widely used synthetic fiber. In addition,

seg!ents of the textiles industry hae beco!e highly auto!ated and co!puteried

+)T3I, "((&.

The textile industry is characteried by product specialiation. 3ost !ills only

engage in either broadloo! weaing of cotton or broadloo! weaing of the wool.

1i!ilarly, !any !ills specialie in either spinning or weaing operations, although larger

integrated !ills !ay co!bine the two operations.

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These large !ills nor!ally do not conduct their own dyeing and finishing

operations. *eaing, spinning, and knitting !ills usually send out their fabrics to one of

the approxi!ately 500 dyeing and finishing plants in the 6nited 1tates +E7), "(('.

DESIGN OF STUDY

Objectives of the study

To study the capital structure of the super spinning !ills ltd

To know at what proportion debt and e8uity are being used

To find out how the inest!ent proects are financed.

To know how the funds hae been accu!ulated.

To know whether the fir!#s capital is appropriate.

To know the leerage of the fir!

To know the operational efficiency.

Sources of data

The data relating to financial state!ents of super spinning !ills ltd and infor!ation

relating to capital structure ))491I1 :)1 been collected using pri!ary and secondary

!eans.

Priary data

7ri!ary data is being collected fro! arious accounting offices and other ad!inistratie

offices while interacting with the! in the plant.

Seco!dary data

The study is !ainly based on the secondary data collected fro! the records and the

annual reports of super spinning !ills and arious books on accounting and finance. ;ata

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relation to the financial state!ents of super spinning !ills ltd :)1 been collected fro!

the published annual reports which were obtained fro! the ad!inistratie office.

Too"s of the data# The financial study !ade in super spinning !ills co!prises of the capital structure,

capital gearing has been clearly depicted by different attractie charts like line charts,

pyra!id charts, scatter charts with straight lines, area charts and cone charts.

Period of study#

The capital structure and profitability is done through the financial state!ents published

by the 11 !ills for -00'2-00&, -00&2-00%, -00%2-00(, -00(2-0"0, -0"02-0"" financialyears.

$iitatio!s of the study

The study is li!ited to capital structure and financial perfor!ance of the fir!.

/indings and analysis are only fro! last fie years.

/indings and analysis depends on audited reports only.


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INDUSTRY PROFI$E

The cotton textile industry is going through a seere Crisis following a stu!p in exports

of cotton textiles, yarn and gar!ents to the )1E) and other countries. 9arn exports

particulars hae been seerely affected by the deelop!ent in the )1E) $egion and

there is as yet no indication of a recoery in these exports.

The perfor!ance in the first six !onths of "((% has been highly discouraging, as

ship!ents of yarn decline by 503illion =>s as co!pared to an increase of -&? 3illion

=>s in the corresponding period in "((&. The trends in subse8uent !onths also hae not

significant hanged and the alue of exports in the whole of "((% !ay be !uch lower than

in "((&.

The deceleration process started in "((& as the i!pact of the )1E) Crisis was felt

towards the end of the year. *ith accounting, earlier rise in exports of fabrics, yarn,

gar!ents and other ite!s, and steady growth in production did not create serious

proble!s in !arketing, though the co!posite and spinning !ills using out2dated

!achinery were suffering losses due to wide ariation in cotton prices, delayed purchasedand inade8uate working capital.

The output of all sectors was higher at -&,%(" !illion s8. !ts in )pril@/ebruary "((%

against -',?"& !illions 18.!ts.in the corresponding period in "(('2(&.The power loo!

and handloo! sector, the for!er particularly has been taking adantages of the increase

in do!estic de!and for fabrics.

Souther! %i""&s Sad P"i'ht#

The spinning !ills in the southern region hae been co!plaining that they are not able to

ensure reasonable !argins. This is because the prices of cotton are higher than that of the

counter parts in other regions while the finished products hae to Be sent to leading

centers in 3aharashtra, >uarat and elsewhere. It is not therefore expected that the

industry will hae s!ooth sailing in the foreseeable future.

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The Chair!an of the Indian Cotton 3ills /ederation +IC3/ has taken a rather gri! iew

of the preailing situation. )t the actual !eeting of IC3/ gri! iew of the pedaling

situation. )t the actual !eeting of IC3/ held in 1epte!ber, he stated that the nu!ber of

!ills re!aining closed was as high as -5& in Auly "((% against -0' a year ago and that

the increase was highest in recent years. 1eeral co!posite and 1pinning !ills in

Coi!batore and adoining areas in Ta!il adu has also suspended their operations and

the 3anchester of 1outh in now presenting a sorry spectacle while it was bustling with

actiity not long ago.

E(cess Ca)acity bui"ds u)#

The output of fabrics and yarn was not howeer, adersely affected in "((&2(% as

stated aboe, because of creation of excess capacity. )ctually '. !illion yarn spindles

and -0,000 rotors were re!aining per!anently idle in closed !ills and another 5 !illion

could set2up output easily as the !odernied and newly established export2oriented units

hae been utiliing their capacity to the !axi!u! extend. The expansion of capacities

had been taking place at an unprecedented rate. In the past three years alone, .?? !illion

spindles and ".?- lakh rotors were installed.

The power2loo! sector accounts for around &- of the total cloth production and it has

been growing oer a period. ;ue to the fact that nu!ber of power2loo!s installed has

increased to "5.-? lakhs units in "(('2(& fro! "0. 4akh units in "((0 and there is a

concentration of 7ower @ loo! in 3aharashtra, >uarat, )ndhra 7radesh and in the

7unab region.

Doi!a!ce of Po*er $oo SectorD

The power loo! !anage!ent has a distinct adantage oer the co!posite !ills in

the organied sector in ter!s of outlay, oerheads and working capital re8uire!ents. The

handloo! sector also has been increasing it share in total 7roduction, deposit co!plaints

that power loo! weaers hae been rendering ineffectie the reseration of 8uotas

exclusie for the handloo! sector for turning out specified products. It share in total

production in 55 and it was '((0 !illion 18.!ts in "((&2(% against '" !illion s8.!ts

in "(('2(&.

Si+eab"e E()ort Ear!i!'sD

It was esti!ated that there were ?0 4akh household weaers and about "- 4akhs

weaers without owning loo!s and special attention was being proided to the weaing

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of furnishing, bed sheets and other ite!s fancied by sophisticated consu!ers in *estern

Europe and elsewhere.

The foreign exchange earnings secured through exports of these ite!s were

$s.",(".?- Crores in "((2(5 with steady growth in exports of cotton textiles, !ade ups,

yarn and gar!ents the foreign exchange earnings exceed "0 Billion in "(('2(&.

Ne* te(ti"e )o"icy a *aited#

The perfor!ance in "((%2(( !ay not of course be encouraging, as exporters of

yarn as well as gar!ents hae been adersely affected by the crisis in the )1E) region

and co!petition in world !arkets for textiles and gar!ents fro! producers benefiting by

depreciation in alue of their currencies.

In the context of a slow growth in total exports, the e!ergency of a negatie trend in

textile exports in "((&2(% hae affected the export in "((%2((.

The 6nion 3inistry of Textiles is aware of the seeral hardships endured by the

textile industry and is for!ulating a plan for !oderniing the textile !ills in the public

sector by incurring heay expenditure. The new textile policy also is this basic industry

could progress in rando! and the growth of any particular sector is not at the expense of

another.

Because of the erosion of profit !argins and een losses incurred by !any 6ndertakings

in the organied sector, the !oderniation progra! has not been I!ple!ented on a

defined basis and the cost of production hae got inflated in the process. It has een been

suggested that in iew of the huge surplus capacity, non2iable and obsolete !achinery

should be allowed to the scrap a part for! reducing excise duties and allowing a higher

debt2e8uity ratio with reasonable interest rates for working capital. The 1tate>oern!ents, howeer, are under pressure fro! political parties and labor leaders for

reiing sick !ills een if they not iable.

1ince the Textile Industry will hae to be in a position to !eet fully the

re8uire!ents of the do!estic and export !arkets and function on a reasonably profitable

basis, satisfactory solutions will hae to be found by the parties concerned after taking

into a account all aspects.

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ST,TUS OF COTTON TE-TI$E INDUSTRIES

while growth has been a way of life this group has also earned to reputation for 8uality of

its products and credibility for the business excises perused. )s a result of strange

thinking, this group has started identifying specific business focuses.


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The !ain synthetic fiber is polyester, although consu!ers hae co!e to recognie it by

new na!es like !icro fiber. Gbut its polyester G.

7articularly in wo!en#s ware !arket, *:IC: $E7$E1ET1 T:E 4)$>E1T

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In !odern fashion technology, the de!and for perfection begins right at the birth of the

raw !aterial, per!eates through eery single process, till the highly discerning custo!er

dons the finished gar!ent. It is this de!and for perfection that has spurred the growth of

an organiation and its corporate philosophy.

Those who can furnish clients with the best 8uality, co!petitie price, excellent custo!er

serices and pro!pt deliery can only surie in the !arket. 1uper 1pinning 3ills

4i!ited takes i!!ense pride in perceiing its role as the co!prehensie architect of

eery single yarn and gar!ent that its produces.

1)$) E4>I is a !ulti2unit, !ulti2interest business group with a wide range of industrial

actiity, an organiation that has founded its eolution on alue2based co!!ercial

practice. 1uper 1pinning 3ills 4i!ited was established in "('- with an initial capacity of

"-,000 spindles.


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indiidual needs. *e exist to proide superior custo!er satisfaction 2 deeloping solid,

long2ter! relationships with our custo!ers.

)s a result of strategic thinking, the group has started identifying specific business

focuses.


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1uper spinning group of !ills constitutes fie spinning !ill units, two gar!ent units and

one T/< unit.

The company has expanded both regionally and internationallyover the years. ManufacturingUnits at three places ensures that each product that reaches the market is a wondrous exampleof unmatched quality.

Corporate Office at Coimbatore Tamilnadu

! Unit at "indupur !ndhra #radesh

$ Unit at "indupur !ndhra #radesh

%U#&' %!'! Unit at "indupur !ndhra #radesh

C Unit at (arur Tamilnadu

) Unit at Udumalpet Tamilnadu%!'! !##!'&*% Unit at Coimbatore Tamilnadu

Unit Super A

(irikera + ,-, -- "indupur!nanthapur )istrict!ndhra #radeshTel / 012,,34 1, 5 1-678ax / 012,,34 1669

&mail supera:ssa.saraelgi.com

Unit Super - B

11
mailto:[email protected]:[email protected]


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(otnur + ,-, -; "indupur!nanthapur )istrict!ndhra #radeshTel / 012,,34 1-2 5 1-298ax / 012,,34 1,2,

&mail superb:ssb.saraelgi.com

Unit Super Sara

M.$eerapalli + ,-, - "indupur!nanthapur )istrict!ndhra #radeshTel / 012,,34 76329 5 769238ax / 012,,34 76977

&mail supersara:sss.saraelgi.com

Unit Super C

)aduTel / 017,,-4 ,;-1 5 ,;18ax / 017,,-4 ,6

&mail superc:ssc.saraelgi.com

Unit Super - D

>o.--6 + )hally 'oad Udumalpet 37 -3

Coimbatore )istrictTamilnaduTel / 017,4 ;313 5 93--8ax / 017,4 ;3,2

&mail superd:ssd.saraelgi.com

COMPANY DETAILS

E-ECUTI?E>ODY

FOUNDERSOFSUPERGROUP # %R


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C=,IR%,NOFT=ECO%P,NY # %R< $O,RDOFDIRECTORS # %R=U

# %R< C R

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REGISTERED,NDCENTR,$OFFICE # E$GI TO:ERS

PO%>,YC=ENN,I; COI%>,TORE

STOCAE-C=,NGES

>SE STOCACODE # 3H..6

SUPERSPINNING%I$$S,1 UNIT

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The first unit, super2a is situated at kirikera on the Bangalore2anantapur state high way

near hindupur in anantapur district,)7. This !ill was registered in "('- and went into

production "(' with an initial capacity of "-,0(' spindles. The present capacity of this

unit is 5(,"&- spindles !anufacturing yarn -hrs a day and seen days a week spinning

hosiery yarn, ware yarn and -ply in counts ranging "0s to (0s of cotton arieties. This

unit 7$EDY,RN 6H CO%>ED

Y,RN

Being inspired and encouraged by the success full running of the !ill later. Two !ore

spinning !ills , spinning !ill LB# unit at kotnur, hindupur. 7recot !ill at !oda illage,

hindupur, were brought into being in the early "(%0#s.

>1UNIT

the second unit,super2b was established on -' !arch "(%? by 4.>.Balakrishnan at kotnur,

near hindupur in anantapur district of )7. This plant is 'k!s fro! hindupur and is a part

of hindupur town. This is located in an area of around twele acres and around %0 acres

around the factory is beautifully with green culture.

This !ill is situated at an eleation of -0-0 feet aboe sea leel on the broad gauge

section of southern railways connecting as !any as eight i!portant capital cities @

Bangalore, :yderabad, 3u!bai, new delhi, triendra! blessed by cool congenial and

salubrious cli!ate, i!bued by dyna!ic and enterprising !ercantile industrial and

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entrepreneurial co!!unity intent upon and ushering an era of rapid industrialiation and

artfully welded with an effectie !edia of transport and co!!unication facilities,

hindupur the southern !ost !andal head 8uarter of the southern !ost ceded district in

).7, bordering =arnataka state.

The !ill started its production with and an initial capacity of -%,%%0 spindles and in

expanded to 5%, "&' spindles.

Thanks to the pioneering !ade by no less a personage of entrepreneurial e!inence, 4ate

1ri 4.>.Balakrishnan, !ore popular as 4>B.

The total e!ployees of the co!pany around "5&5 in which 55 are staff. &-0 per!anent

labours and %00 are e!ployed on casual and contract basis. The co. is !aintaining sound

industrial relation for the past seeral years through arious ti!ely negotioations,

effectie grieances, structured welfare !easures, floor lend co!!itties, e!ployees

participation sche!es besides all :$; !echanis!s. In addition, :$; is particularly

interested in deeloping the GMuality *ork shipF and co!pany has taken seeral

!easures continuously to create 8uality culture.the production is seenteen tones per day.

The !ills !anufacturers yarn of the fine 8uality supplying to different regions in India.

The different 8ualities of raw !aterials is used by these !ills areD

ORG,NICCOTTONS

INDI,NCOTTON

PI%, >$ENDS

SUPI%,

GIJ, >$ENDS

GIJ,

It produces cotton sewing thread to cater to the needs of hosiery

!arket. There are sa!e local centers of sales of these yarn and sewing threads in Tripura,

Calcutta, Haranasi. Tenali and 3angalagiri. The !ill produces high 8uality of yarn and is

able to with stand and growing co!petitors in the international !arkets.

F,?OR,>$ECONDITIONSTOSS %I$$S$TD< >1UNIT

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;uring the last "0years, Cotton cultiation consistently increased in a.p. and it

assured the! of a consu!er supply good 8uality of cotton.

The cli!ate conditions of this area are ery suitable for a spinning !ill.

Infact, :indupur has a sub2station of "?-=*.

There are plenty of consu!er centers with in the -00 =31. /ro!, :indupur

!ainly handloo! sector.

There is abundance supply of labor fro! surrounding illages since it is a draught

area.

:indupur is only "00=!s fro! bangalore and good infrastructural facilities are

aailable.

1ufficient water aailable at the site.

C 1 UNIT

In the year "((- the co!panies settled up its ?rd unit at ;. >udalur near karur in

ta!ilnadu .this is located in an area of around -5 acres , build up an area of (,'00 18 3ts.

This unit produces the finest 8uality yarn for do!estic !arket as well as for export

!arket. The present installed capacity of this unit is "',"?0 spindles.

D1UNIT

It was located in the ;hally $oad ,udu!alpet near coi!batore+dist Ta!ilnadu.

6IT 167E$ 1)$)

It as located near beerapalli,fro! the :indupur town it was 5 =31, near )nantapur+dist.

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17

BUSINESS EXPANSION OF SUPER SPINNING MILLS

I!te'rated Cotto! Cu"tivatio! Pro'ra

COTTON SEED DE?E$OP%ENT

It beca!e obious that the best way to ensure the highest standards of raw !aterial was

for the co!pany to integrate backwards. In this direction, a !assie expansion was

launched to establish a fu""1f"ed'ed research faci"ityto deelop new arieties of cotton

seeds. This would go to ensure that the co!pany supplied itself with a 8uality of !aterial

that !atched its obectie of superlatie finished product.

The result of the proect was the deelop!ent of high yielding hybrid cotton seeds

christened S,R, 1 I ediu a!d "o!'1sta)"e a!d S,R, 1 II e(tra1"o!' sta)"e

varieties


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G,R%ENTS

)fter its success with backward integration, it was but a natural corollary that theco!pany should go in for forward integration into gar!ent !anufacture as well. )nd

thus ca!e into being 1)$) )77)$E41 K /)1:I


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Gare!t Ra!'e

3anufacturing of cotton N synthetic knitted gar!ents

3en#s N *o!en#s T2shirts and 7olo shirts @ specialied in >assed 1ingle N ;ouble

3ercerised 7olo 1hirts

Cut K 1ewn >ar!ents, Collar 1hirts, Basic $ound2neck shirts etc.

Productio! Ca)acity

5 6nits 2 the capacity of 5000 7olo 1hirts per day +or (000 pcs of Basic $ound

neck gar!ents per day.

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>ar!ents fro! 1uper 1pinning 3ills !ake consu!ers feel co!fortable, pa!pered and

conte!porary in clothing. *e use the yarns !anufactured in2house to gie life to

innoatie textile creations through knitting.


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PE>>$E>E,C=

PING

PG, TOUR

TRICOTSSTR,P=ET

:I$SON

SPINNING

Constant co!!it!ent to high 8uality standards and innoation has been the secret of

success eer since the co!pany was founded. 1uperior 1pinning units ensure the supply ofconsistent 8uality yarn to !anufacture the gar!ents.


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RIETER

Hision 1hield /oreign /ibre $e!oer in Blow $oo!

6nifloc @ )"0, )"";rawfra!e @ $1B %5" K ;?0

6nilap E?-, Co!bers @ E &N5 ), E &N', E'-

1uessen Elite Co!pact $ing /ra!e

$,AS=%I RIETER

/lexifloc, Harioclean, 6ni!ix

Cards @ 4C ?00 ), 4$ C "N?

;rawfra!es @ $1B %5"

Co!bers @ 4= -50 K E &N

1peed /ra!es @ 4/ "00 K "00)

$ing /ra!es @ > 5N", 4$'

T$6TO1C:E4E$ D Cards @ ;= %0? K (0?

C$


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*e beliee that 8uality products are not only by pro!ises but also by proen results.

;eelop!ent of new textile products is done through 2 Innoation in defining production

processes of higher 8uality and !aking aailable !odern technologies and professionals with the

highest leel of co!petence.

The following adantages which hae always been our ulti!ate goalsD 2

=i'h Efficie!cy

The %ost Co)etitive ; Reaso!ab"e Price

Products @ua"ity Guara!tee

Pro)t ; Su)erior Service

Pu!ctua" De"ivery

:e a!ufactureD

"00 Co!bed Cotton 9arn for =nitting and *eaing

E -0s to E "-0s

$egular >rey 9arn

1ingle N ;ouble +$ing ;ouble N T/assed 9arns

ar!ents+1pecialied in singleNdouble 3erceried Cotton knit in polo T2shirts

*oen /abrics

PO$ICIESE!viro!e!ta" Po"icyD

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1uper 1pinning 3ills 4i!ited is co!!itted to co!ply with the re8uire!ents of releant

eniron!ental regulations and standards by i!ple!enting eniron!ental !anage!ent

syste! and continuously i!proe its effectieness.

E!ployees should be trained on eniron!ental aspects to !ini!ie the pollution and

consere natural resources.

@ua"ity Po"icyD

GMuality leading to custo!er satisfactions shall be our top priorityF. This shall be

achieed by co!plying t the re8uire!ents of the 8uality !anage!ent syste! and

continually i!proe its effectieness. E!ployees shall be syste!atically trained and

!otiated to enhance i!proe the 8uality of their work.

The 3ill is haing fully e8uipped 8uality )ssurance 4aboratory !anaged by well trained

technicians to ensure 8uality, continuous !oderniations and ti!ely expansion has gien

co!petitie edge and on other co!panies. )s a result of this, the co!pany has

established itself as a leader in !ost of its products.

)ccording to sureys conducted by 1outh Indian Textiles $esearch association +1IT$),

the perfor!ance of this co!pany has been !aintained consistently in production and

8uality oer the past. ;uring the -5th surey conducted by 1IT$) out of -&0 !ills this

unit#s productiity perfor!ance ranked as "0th.

TP% PO$ICY#

They are co!!itted to !axi!iing oer all plant effectieness to !ake 1uper 1pinning

3ills a *orld2class co!pany through Total 7roductie 3anage!ent byD

7ro!oting autono!ous !aintenance culture.

Inoling all e!ployees and building culture.

Encouraging continuous i!proe!ent through s!all group actiities.

?ISION %ISSION ,ND @U,$ITY PO$ICY

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?ISIONST,TE%ENTOFSS%I$$#

The cotton yarn industries fortunes are closely linked to fluctuations in the cotton !arket.

)ny upward or downward !oe!ent of cotton prices put pressure on the profit !argins

of !ills operating in the intensely co!petitie yarn !arket.

)t the sa!e ti!e new entrants with !odern !ills hae adantage of achieing better

productiity and 8uality off lower prices and credit facility to achiee !arket entity. This

has increased custo!er expectation in ter!s of 8uality, price and deliery. :ence they

hae to

1trength the business syste! for cotton purchase.

$educe operational cost by i!proing productiity of !achinery and e!ployees.

$etaining leadership by i!proing and consistently !aintaining high 8uality.

3aintaining the te!p of continuous !oderniation of plant and !achinery.

To achiee the aboe they hae to i!proe the perfor!ance by reengineering

business process.

)ll e!ployers shall be educated on significance of re2engineering. 1uccess of this

progra! will depend on inole!ent of e!ployees.

121uper

626pgraded 8uality

727rofitability

E2Efficiency and E!ployees 1atisfaction

$2$eduction in cost

R ; D ,C=IE?E%ENTSD

The $ K ; efforts of the co!pany are directed towards i!proe!ent of

!anufacturing process, yarn 8uality and productiity. Efforts are continuing to enlarge the

scope of $ K ; facility to as !any areas as possible. $eenue expenditure on $ K ;

a!ounts to $s.5.&0 lakhs. o capital expenditure was incurred on $ K ; during the year.

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@U,$ITY

The co!pany has a long reputation for 8uality,

perfor!ance and innoation. Muality of final product is

deter!ined with 8uality of raw !aterial. In 1uper

1pinning 3ills, we take !eticulous care in the selection

of cotton.


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1uper 1pinning 3ills has dedicated itself to proiding custo!ers with the best products

and gar!ents. ?@I ISO /. HISO .2. CERTIFIC,TION OAEO 1 TE-

CERTIFIC,TION

>reif i!foratio! )ertai!i!' to the 'rou) co)a!ies

E$GI>UI$DINGPROUDCTS$TDI in association with

Techno plast of )ustria. brings internationally acclai!ed poly!er window and doors with

a iew to change the face of architectural syste! and design. E4>I Hisage#s innoatie

excellence in designing the window and doors syste! not only enhance and beautify the

building but also oerco!e the short co!ings of using conentional wood and alu!inu!

!aterial.

7roduct $angeD

27
http://www.superspinning.com/recognitions.htmlhttp://www.superspinning.com/recognitions.htmlhttp://www.superspinning.com/recognitions.html


28/69

Case!ent @ outside opening syste! 1liding @ two track syste!

;oors

1wing ;oor

:inged ;oor

Curtain *alling 1yste!

1tructural >laing

1li! line syste!

7roduct /eaturesD :ealth Insulation

1ound Insulation

*eather resistance

/ire resistance

I!pact ressistance

water resistance

Corrosion resistance

Che!ical resistance

4ow ther!al resistance

)rchitectural aesthetics

4ow !aintenance

Eniron!ent friendly

Econo!ical

28


29/69

E$GI E"ectric ; I!dustries $tdI Electric, a significant player in the engineering industry, !anufactures electrical

engineering !achines, control auto!ation switchgear, textile !achinery, sepecial

purpouse !achines K plant auto!ation solutions.

E4>I Electric has oer four decades of expertise in Engineering. Its prodducts hae won

worldwide acclai! for their international 8uality standards and innoatie technology. )n

I1< (00" Certification only stands, as testi!ony strengths of E4>I Electric has !ade for

itself in the engineering industry. I Electric has been

the co!pany#s ability to adapt its technology to suit changing custo!ers needs.

PRODUCTR,NGE#

$otating 3achines

) C and ; C 3otors

)lernators

Textile 3achinery and )ccessories


30/69

e1TE4 represents a select group of IT deelop!ent establish!ents with powerful do!ain

expertise. The design, docu!entation, testing and bench!arking are carried out by

e1TE4 engineers at Chennai and Coi!batore. )pplication study, onsite integration of

!odules and perfor!ance co!pliance are carried out at client pre!ises.

S,R, E$GI I!dustria" Research ; Deve"o)e!t $tdI group, 1)$) $K; has been

created to incubate technology which will pioneer the next generation growth for the

group.

1)$) $K; is conceied to build processes and solutions which work in har!ony with

the eniron!ent for sustainable growth and to be socially conscious and sensitie.

S,R, E!viro!e!t tech!o"o'ies co< $td

The application of scientific deelop!ent in rapid industrialiation and urbaniation has

resulted in a significant increase in eniron!ental degradation. 1pecific solutions are

re8uired for !obiliation and deply!ent of naturaal without detri!ent to their re2

utilisation.

1)$) ETC has pioneered inest!ents in research and state2of2the2art infrastructure for

deelop!ent of cleaner technologies. By co!bining innoation and technology a range of

core !odules hae been deeloped for treat!ent and abate!ent of water and air based

pollution.

Products


31/69

:or9i!' hours of Su)er S)i!!i!' i""s "td

The !ill works round the clock in three2shifts. /ollowing are the shift ti!ings.

I shift D %.00a! to .00p! with ?0 !in interal

II shift D .?0p! to ".00a! with ?0 !in interal

III shift D ".00a! to %.00a! with ?0 !in interal

>eneral shift D %.00a! to 5.00p! with one hour interal

Perfora!ce a))raisa"

)ll the e!ployees will be ealuated once in eery six !onths that is in Aune and

;ece!ber of eery year. the appraisal syste! shall be used to identify needs, career

deelop!ent, incre!ents and exgratia. The appraisal shall be done by the i!!ediate

superisor as per perfor!ance appraisal syste!.

$abor $e'is"atio!s

These units are !aintaining ery cordial relationship with their worker unions. they are

also successful in i!ple!enting productie linked wages. this co!pany is also paying

bonus and exaratia to the workers.

Trade u!io!s

The !anage!ent has one independent trade union consisting of "" office bearers. regular

structure !eetings with the union take place to resole proble!s, if any, and to !aintaincordial relations.

C,PIT,$ STRUCTURE

31


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I!troductio!

In order to run and !anage a business, funds are needed. $ight fro! pro!otional stage up

to end, finance plays an i!portant role in co!pany#s life. If funds are inade8uate, the

business suffers and if funds are not properly !anaged, the entire organiation suffers. Itis there fore necessary that correct esti!ate of the current and future need of capital be

!ade to hae an opti!u! capital structure which shall help the organiation to run its

works s!ooth and with out any stress.

Esti!ation of capital re8uire!ent is necessary, but the for!ation of a capital structure is

i!portant. )ccording to >erestenbeg, Gcapital structure of a co!pany refers to the

co!position or !akeup of its capitaliation and it#s include all long @ter! capital

resources like loans, reseres, shares and bonds.

The capital structure is !ade up of debit and e8uity securities, and refers to per!anent

financing of a fir!. It is co!posed of long ter! debit, preference share capital and share

holder#s funds.

Ca)ita"i+atio! Ca)ita" structure a!d fi!a!cia" structure

The ter!s, capitaliation, capital structure and financial structure, don not !ean the sa!e.

*hile capitaliation is 8uantitatie aspect of the financial planning of an enterprise,

captital structure is concern with 8ualitatie aspect. Capitaliation refers to total a!ount

of securities issued by a co!pany while capital structure refers to kinds of securities and

proportionate a!ounts that !ake up capitaliation. /or rising long @ ter! finance, a

co!pany can issue three types of securities. E8uity shares, preference shares, and

debentures. ) decision proportion a!ong these types of securities refers to the capital

structure of an enterprise.

1o!e authors on financial !anage!ents define capital structure in board sense so as to

include een the proportion of short @ ter! debit. In fact, they refer to capital structure as

a financial structure.

) financial structure !eans the entire liabilities side in the balance sheet. in the

words of e!!ers and >runewald G/inancial structure refers to the all the financial

32


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resources !arshaled by the fir! short as well as long ter! , and all for!s of debit as well

as e8uity. G Thus, financial structure, generally, is co!posed of a specified percentage of

short @ ter! debit , long @ ter! debit and share holder#s funds.

I)orta!ce of Ca)ita" Structure

The ter! LCapital 1tructure# refers to the relationship arious long2ter! for!s of

financing such as debentures , preference share capital and e8uity share capital ,

/inancing the fir!s asset#s is a ery crucial proble! in eery business as a general rule

there !ust be a proper !ix of debit and e8uity capital in financing the fir!s assets. The

use of long @ ter! fixed interest baring debit and preference share capital along with

e8uity shares is called /inancial leerage or trading on EM6IT9. the long2ter! fixed

interest baring debit is e!ployed by a fir! to earn fro! the use of these sources than their

cost so as increased the return on owner#s e8uity. It is true that a capital structure cannot

affect the total earning of a fir! but it can affect the shares of earning aailable for e8uity

share holders.

O)tia" Ca)ita" Structure

The capital structure decision can influence alue of the fir! through the cost capital and

trading on e8uity or leerage . the opti!u! capital structure !ay be defined as Gthe

capital or the co!bination of debit e8uity that leads to the !axi!u! alue of the fir!F.


34/69

effectie cost of debit is reduced, called tax leerage. ) Co!pany should, therefore, take

adantage tax leerage.

The fir! should aoid undue financial risk attached with the use of increased debit

financing. If the share holders perceie high risk in using further debit @ capital, it will

reduced the !arket price of shares

The capital structure should be flexible.

Theories of Ca)ita" Structure

;ifferent kinds of theories hae been propounded by different authors to explain the

relationship between capital structure, cost of capital and alue of the fir! .The !ain

contributors to the theories are ;urand, Era, 1olo!on, 3odigliani and 3iller. The

i!portant theories areD

Net I!coe ,))roach

Net O)erati!' I!coe ,))roach

The Traditio!a" ,))roach

%odi'"ia!i a!d %i""er ,))roach

Net I!coe ,))roach

)ccording to this approach, a fir! can !ini!ie the weighted aerage cost of capital and

increase the alue of the fir! as well as !arket price of e8uity a share by using debt

increase its alue and reduces the oerall costs of capital by increasing the proportion of

debt in its capital structure. This approach is based upon the following assu!ptionsD

i. The cost of debt is less than the cost of e8uity.

ii. There are not taxes.

iii. The risk perception of inestors is not changed by the use of debt.

The line of argu!ent in faour of net inco!e approach is that as the proportion of a

cheaper source of funds increases. This results in the decrease in oerall cost of capital

leading to an increase in the alue of the fir!. The reasons for assu!ing cost of debt to be

less than the cost of e8uity are that interest rates are usually lower than diidend rates due

to ele!ent of risk and the benefit of tax as the interest is a deductible expense.

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Net O)erati!' I!coe ,))roach

This theory as suggested by ;urand is another extre!e of the effect of leerage on the

alue of the fir!. It is dia!etrically opposite to the net inco!e approach. )ccording this

approach, change in the capital structure of a co!pany does not affect the !arket alue of

the fir! and the oerall cost of capital re!ains constant irrespectie of the !ethod of

financing. It i!plies that the oerall cost of capital re!ains the sa!e whether the debt @

e8uity !ix is 50D50 or -0D%0 or 0D"00. Thus, there is nothing as an opti!al capital

structure is the opti!u! capital structure. This theory presu!es thatD

I. The !arket capitalies the alue of the fir! as a whole.

II. The business risk re!ains constant at eery leel of debt e8uity !ix.

The reasons propounded for such assu!ptions are that the increased use of debt increases

the financial risk of the e8uity shareholders and hence the cost of debt re!ains constant

with the increasing proportion of debts re!ains constant with the increasing proportion of

debt as the financial risk of the lenders is not affected.

Thus, the adantage of using the cheaper source of funds, i.e., debt is exactly offset by the

increased cost of e8uity.

The Traditio!a" ,))roach

The traditional approach, also known as Inter!ediate approach, is a co!pro!ise between

the two extre!es of net inco!e approach and net operating inco!e approach. )ccording

to this theory, the alue of the fir! can be increased initially or the cost of capital can be

decreased by using !ore debt as the debt is a cheaper source of funds than e8uity. Thus,

opti!u! capital structure can be reached by a proper debt e8uity !ix. Beyond a

particular point, the cost of e8uity increases because increased debt increases the financial

risk of the e8uity shareholders.

The adantage of cheaper debt at this point of the capital structure is offset by

increased cost of e8uity. )fter this there co!es a stage, when the increased cost of e8uity

cannot be offset by the adantage of low2cost debt. Thus, oerall cost of capital,

according to this theory, decreases up to a certain point, re!ains !ore or less unchanged

for !oderate increase in debt thereafterQ and increases or rises beyond a certain point.

Een the cost of debt !ay increase at this state due to increased financial risk.

35


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%odi'"ia!i a!d %i""er ,))roach

3 K 3 hypothesis is identical with the et


37/69

3 K 3 , in their article of "('? hae recognied that the alue the fir!s will increase or

the cost of capital will decrease with the use of debt on account of deductinility of interest

charges for tax purpose. Thus , the opti!u! capital structures can be achieed by

!axi!iing the debt !ix in the e8uity of a fir! .

)ccording to the 3 K 3 approach , the alue of a fir! unleered can be calculated as

follows D

Halue of unleered fir! +Hu

R + Earnings Before Interest K Tax N +


38/69

) sound or an appropriate capital structure should hae the following featuresD

i. 3axi!u! possible of leerage.

ii. The capital structure should be flexible.

iii. To aoid undue financial business risk with the increase of debt.

i. The use of debt should be with in the capacity of a fir!. The fir! should in a

position to !eet obligations in paying the loan and interest charges as and when

due.

. It should inole !ini!u! possible risk of loss of control.

i. It !ust aoid undue restrictions in agree!ent of debt.

38


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C,PIT,$ GE,RING

The ter! capital gearing refers to the relationship between e8uity capital and long2ter!

debt it !ay be planned or historically, the latte describing a state of affairs where the

capital structures a eoled oer a period of ti!e , but not necessarily in the !ost

adantages way. In si!ple words the capital gearing !eans the ratio between the arious

types of securities in the capital structure of the co!pany . a co!pany is set to be in high2

gear , when it has a proportionately higher N large in use of debentures and preference

shares for raising the long2ter! resources , where as low gear stands for a proportionately

large issue of shares.

Si'!ifica!ce of Ca)ita" Geari!'

The proble! of capital gearing is ery i!portant in a co!pany. It has a direct bearing on

the diisible profits of a co!pany and hence a proper capital gearing is ery i!portant for

s!ooth running of an enterprise. In case of low geared co!pany, the fixed cost of capital

by way of fixed diidend on preference shares and interest on debentures is low and the

e8uity share holders !ay get a higher rate of diidend. *hereas, in a high geared

co!pany the fixed cost of capital is higher leaing lesser diisible profits for the e8uity

share holders.

The capital gearing in the financial structure of a business has been rightly co!pared with

the gears of an auto!obile. The gears are used to !aintain the desired speed and control.

Initially, an auto!obile starts with a low gear, but as soon as it gets !o!entu!, the low

gear is changed to high gear to get better speed. 1i!ilarly a co!pany !ay be started with

a high e8uity state, that is low gear but after !o!entu!, it !ay be changed to high gear

by !ixing !ore of fixed interest bearing securities such as preference shares and

debentures. It !ay also be noted that capital gearing affects not only the shareholders but

also debenture holders, creditors, financial institutions, the financial !anagers and others

are also concerned with the capital gearing.

39


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Ca)ita" 'eari!' a!d trade cyc"esD

The techni8ue of capital gearing can be successfully e!ployed by a co!pany during

arious phases of trade cycles that is during the conditions of inflation and deflation, to

increase the rate of return to its owners and thereby increasing the alue their

inest!ents. The effect of capital gearing during arious phases of trade cycles is

discussed belowD

Duri!' i!f"atio! or boo )eriod#

) co!pany should follow the policy of high gear during inflation or boo! period as the

profits of the co!pany are the higher and it an easily preference shares pay fixed costs of

debentures and preference shares. By adoption the policy of high gear, a co!pany can

increases its earnings per share and there by a higher rate of diidend.

Duri!' the def"atio! or de)ressio! )eriodD

;uring depression the rate of earnings of the co!pany is lower than the rate of

interestNdiidend on fixed interest bearing securities and hence it cannot !eet the fixed

costs without low gearing the diisible profits and rate of diidend. It is, therefore, better

for a co!pany to re!ain in low gear and not to resort to fixed interest bearing securities

as source of finance during such period.

Factors deteri!i!' the ca)ita" structure

The capital structure of a fir! depends upon a large nu!ber of factors such as leerage or

trading on e8uity, growth of the co!pany, nature and sie of business, the idea of

retaining control, flexibility of capital structure, re8uire!ents of inestors, costs of

floation of new securities, ti!ing of issue, corporate tax rate and the legal re8uire!ents. It

is not possible to rank the! because of all such factors are of different i!portance and the

influence of indiidual factors of a fir! changes oer a period of ti!e. Eery ti!e the

funds are needed, the financial !anager has to study the pros and cons of the arious

sources of finance so as to select the !ost adantageous capital structure.

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The factors influencing the capital structure are as followsD

Fi!a!cia" $evera'e or Tradi!' o! EKuityD

The use of long2ter! fixed interest bearing debt and preference share capital along with

e8uity share capital is called financial leerage of trading on e8uity. Effects of leerage on

the shareholders return or earnings per share hae already been discussed in this chapter.

The use of long2ter! debt increases !agnifies the earnings per share if the fir! yields a

return higher than the cost of debt. The earnings per share also increase with the use of

preference share capital but due to the fact that interest is allowed to be deducted while

co!puting tax, the leerage i!pact of debt is !uch !ore.

Gro*th a!d Stabi"ity of Sa"esD

The capital structure of a fir! is highly influenced by the growth and stability of its sale.

If the sales of a fir! are expected to re!ain fairly stable, it can raise a higher leel of

debt. 1tability of sales ensures that the fir! will not face any difficulty in !eeting its

fixed co!!it!ents of interest repay!ents of debt. 1i!ilarly, the rate of growth in sales

also affects the capital structure decision.

Cost of Ca)ita"D

Eery rupee inested in affir! has a cost. Cost of capital refers to the !ini!u! return

expected by its suppliers. The capital structure should proide for the !ini!u! cost of

capital. The !ain sources of finance for a fir! are e8uity, preference share capital and

debt capital. The return expected by the suppliers of capital depends upon the risk they

hae to undertake. 6sually, debt is a cheaper source of finance co!pared to preference

and e8uity capital due to

I. /ixed rate of interest on debtQ

II. 4egal obligation to pay interestQ

III. $epay!ent of loan and priority in pay!ent at the ti!e of winding up of the

co!pany.

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Cash F"o* ,bi"ity To Service DebitD

) fir! which shall be able to generate larger and stable cash inflows can e!ploy

!ore debit in its capital structure as co!pared to the one which has unstable and

lesser ability to generate cash inflows . debit financing i!plies burden of fixed

charge due to fixed pay!ent of interest and the principal . when eer wants to

raise additional funds, it should esti!ate , proect in future cash inflows to ensure

to coerage of fixed charges .

Nature a!d Si+e of a FirD

ature and sie of a fir! also influence its capital structure . ) public utility concern has

different capital structure as co!pared to other !anufacturing concern. 7ublic utility

concern !ay e!ploy !ore of debit because of stability and regularity of their earnings .

on the other hand , a concern which cannot proide stable earnings due to the nature of its

business will hae to rely !ainly on e8uity capital Q si!ilarly, s!all co!panies hae to

!ainly upon owned capital as it is ery difficult for the! to raise long ter! loans on

reasonable ter!s and also can issue e8uity and preference shares at case to the public.

Co!tro" D

*hen eer additional funds are re8uired funds by a fir!, the !anage!ent of the fir!

warns to raise the funds with out any loss of control oer the fir!. In case the funds are

raised through the issue of e8uity shares, the control of the existing share holders is

diluted. :ence, they !ight raise additional funds by way fixed interest bearing debit and

preference share holders and debenture holders do not hae the oting rate. :ence, fro!

the point of iew of control, debit financing is reco!!ended.

F"e(ibi"ityD

Capital structure of a fir! should be flexible, i.e., it should be such as to be capable of

being adust according to the needs of changing conditions. It should be possible to raise

additional fund, when eer the need be, with out !uch of difficult and delay. ) fir!

should arrange its capital structure in such a !anner that it can substitute on for!

financing by another. $edee!able preference shares and conertible debentures !ay be

preferred on flexibility.

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ReKuiree!ts of i!vestorsD

The re8uire!ent of inestors is another factor that influences the capital structure of the

fir!. It is necessary to !eet the re8uire!ents of both institutional as well as priate

inestors when debt financing is used. Inestors are generally classified under three kinds,

i.e., bold inestors, cautious inestors, less cautious inestors.

,ssets StructureD

The li8uidity and the co!position of assets should also be kept in !ind while selecting

the capital structure. if fixed assets constitute a !aor portion of the total assets of the

co!pany, it !ay be possible for the co!pany to raise !ore of long ter! debts.

Cost of f"oatatio!D

)lthough not ery significant, yet cost of floatation of arious kinds of securities should

be considered while raising funds. The cost of floating debt is generally less than the cost

of floating e8uity and hence it !ay persuade the !anage!ent to raise debt financing. The

cost of floating as percentage to funds decrease with the increase in the sie of issue.

43


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D,T, ,N,$YSIS ,ND INTERPRET,TION

$s in 000#s

Sources of fu!ds

No Nae of ites H5 H6 H/ H. H..

. Paid1u) ca)ita" 33 33 33 33 33

HReserves a!d

sur)"us6030H2 /HH2// ./400 .H444/ ..52000

0 Secured "oa!s .0552 .3H6226 H.2543 H3/4.H3 H3555.4

2 U!secured "oa!s 22525 6555. .H.0 /2H6 3/3H

3Defferred ta(

"iabi"ityH.0234 H46. H2636. H3.//5 H4.H2

44


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I!ter)retatio!#

In super spinning !ills during the last fie years e8uity share capital re!ained constant

fro! -00520' to -00(2"0. There are so!e fluctuations in the reseres and surplus during

the period. :oweer there is an increase of 0 fro! -00'to-0"0.

Een though there are so!e fluctuations in secured and unsecured loans. 1ecured loans

increased by !ore than (& in -0"0 and unsecured loans decreased in the year -0"0.

;eferred tax liability is increased by -? fro! -00'2-0"0.

I!ter)retatio!#

E8uity share capital, share pre!iu! capital, resere re!ained constant during the period.

>eneral resere and 7K4 account were not constant due to so!e business expansion and

ups and downs in business expenditure.

o a!e of ite!s -00& -00% -00( -0"0 -0""

" )uthoried capitalE8uity shares 550.00 550.00 550.00 550.00 550.00

- Issued,subcribedKpaid2up capital 550.00 550.00 550.00 550.00 550.00

? $eseres and surplus

a1hare pre!iu! "%&.50 "%&.50 "%&.50 "%&.50 "%&.50

bCapital resere %."% %."% %."% %."% %."(

c>eneral resere 5((%.(? '--%.(? %--%.(? (-%.(? (0&.'

d7K4 account &%%.'? "'0.?% ""('.&- ""0-.0& ""'0."%

45


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Debt ca)ita"#

$oa!s a!d fu!ds Rs i! "a9hs

No Nae of ites H5 H6 H/ H. H..

. Secured "oa!s

a8Ter "oa!s 4004


47/69

Gro*th of o*!er&s fu!ds

YearEKuityShare ca)ita"

Rs i! "a9hs

Reserves ; sur)"us

Rs i! "a9hs

Net *orth

Rs i! "a9hs

-00& 550.00 %?-?.- %%&?.00-00% 550.00 (--.(( (&&5.00

-00( 550.00 "0('".?? ""5"".00

-0"0 "000.00 "-0''.'( "?0''.'(

-0"" "000.00 ""&?.?? "-&?.??

Gro*th of o*!er&s fu!ds

I!ter)retatio!#

Year

Reserves a!d

sur)"us

Rs i! "a9hs

Lof i!crease

or decrease

over the

)revious year

Net *orth

Rs i! "a9hs

Lof i!crease

or decrease

over the

)revious year-00& %?-?.- M %%&?.00 M

-00% (--.(( "0 (&&5.00 "0

-00( "0('".?? "% ""5"".00 "&

-0"0 "-0''.'( "0 "?0''.'( "?

-0"" ""&?.?? 2? "-&?.?? 2?

Reserves a!d sur)"us

There are fluctuations in the recent fie year reseres and surplus. In -00& there is an

"0 in -00% it has been increased by "%, in -00( again increased by "0 and then

finally in -0"0 it has decreased to 2?.

47


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EKuity share ca)ita"

There is no increase in the e8uity share capital in the recent fie years. The authoried

capital of the fir! is 550 lakhs and the issued, subscribed and paid2up capital has reached

its extent that is authoried capital, because of rights issue in the year "((2(5. Earlier itwas "-.50 lakhs.

Net *orthso both reseres and surplus and e8uity share capital resulted in net worth to

fluctuate.

Gro*th of debt ca)ita"

YearSecured "oa!s

Rs i! "a9hs

U!secured "oa!s

Rs i! "a9hs

Tota" debt

Rs i! "a9hs

-00& "?0&&.0 0&.& "&"-5

-00% "5-%.% %&&.&" "'"'-

-00( -"0&.'5 "-"0.?0 ---5%-0"0 -5('".-5 (.-% -'05'

-0"" -5&&&."' 5(.5- -5%?&

Gro*th of debt ca)ita"

48


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I!ter)retatio!#

YearTota" debt

Rs i! "a9hs

L of i!crease or decrease

over the )revious year

-00& "&"-5 M-00% "'"'- 2'

-00( ---5% ?%

-0"0 -'05' "&

-0"" -5%?& 2"

;ebt capital also exhibits an increasing trend fro! the year -00%20( to -00(2"0. It is

increasing by ?%, "& respectiely and it is decreased by 2' ,2" in the year

-00&2-00% K -0"02-0"". The sources of the debt capital are deffered credits secured and

unsecured loans.

Secured "oa!sD includes loans fro! I;BI, EPI3 bank ICICI bank ltd, 6TI bank,

standard charted bank, CITI bank .)., and working capital borrowing fro! different

banks. There were -00000 " and -50000 "( secured non conertible redee!able

debentures in "(((2-000 later they were redee!ed now the fir! super spinning !ills has

no debentures.

U!secured "oa!s# includes fixed deposits, trade deposits, short ter! loans, loans fro!

directors or bodies corporate and foreign currency loans.

;ue to expansion of the business the debt capital is being increased. They hae started

producing the products fro! sourced units which !anufacturing yarn and gar!ents for

this fir!. They hae taken loans due to this for their working capital and other

!iscellanies expenditures that is the reason why debt capital is being increasing in the

period.

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Perce!ta'e of o*!ed a!d borro*ed fu!ds i! tota" i!veste!t

7ercentage of owner#s funds et worth ("00 et worth Total debt

Perce!ta'e of o*!ed a!d borro*ed fu!ds

I!ter)retatio!#

Year DebtRs i! "a9hs

Lof i!crease or

decrease overthe )revious

year

Net *orthRs i! "a9hs

Lof i!crease or

decrease overthe )revious

year

-00& "&"-5 U %%&? U

-00% "'"'- 2' (&&5 "0

-00( ---5% ?% ""5"" "&

-0"0 -'05' "& "?0'& "?

-0"" -5%?& 2" "-&? 2?

The aboe table shows clearing the debt is gradually increasing and the net worth is

fluctuating. *hen debt is co!pared to net worth the increase is !ore so that the superspinning !ills are preferring debt to e8uity to finance their inest!ents.

Year O*!er&s fu!ds >orro*ed fu!ds Tota"

-00& ?."- '5.%% "00

-00% ?&.'% '-.?- "00

-00( ?.0% '5.(- "00

-0"0 ??.?( ''.'" "00

-0"" ??.0? ''.(& "00

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Ratios) ratio indicates the relationship between two figures or expresses or ariables. This can

be expressed as a si!ple fraction, integer, or percentage. ) ratio !ust represent a

!eaniningful relationship . the purpose of ratio will be sered only when relationship is

established between figures which are connected with each other. )bsolute figures are not

useful for co!parison. It is easy to !easure operational perfor!ance of an organiation

by using ratios. The ratios that are calculated can be called accounting ratio or financial

ratios as it is used and related to financial state!ent analysis. $atios indicate a

8uantitatie relationship, which the analyst !ust use to !ake a 8ualitatie udg!ent about

operational perfor!ance of an organiation. To study creditworthiness of the fir! select a

set of ratios that indicate fir!#s state of li8uidity, profitability, asset !anage!ent and debt

position. *hile selecting figures for calculating ratios one !ust be careful and see that

these figures are connected with each other. It is always better to co!pare ratios of

current year with that of past years. )ny nu!ber of ratios can be calculated depending

upon the purpose and necessity. 1o the ratios that each group of people chooses to

exa!ine will depend upon the nature of the groups interest in the fir!. 1o!e ti!es,

ratio#s can be calculated fro! profor!a financial state!ents. These ratios an be co!pared

with past ratios to know the relatie strenghs and weaknesses in the past and future.The profitability has to reeal ability of the fir! to earn profitts+profitability which is

depent upon

6tiliation of resources

3argin between sales reenue and cost of production.

There are two !aor obecties in calculating the ratios below. They are

To know the financial position of the organiation

To know the profitability of the fir!.

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Debt eKuity ratioThis is also called as leerage ratio. This ratio would establish relationship between

borrowed capital and own capital. It is to !easure the proportion of borrowed capital in

the total capital inested. The ratio shows the risk assu!ed by the co!pany. If the ratio is

high risk is high. ) high ratio indicated that fir! has !ore borrowed capital than own

capital. ) high ratio increased the fir!#s obligation of interest pay!ent. It indicates that

fir! is ery aggressie.

)s long as the fir! gets ade8uate profits it can !eet its fixed obligation of interest and it

will further enhance the profits. But in case, profits are inade8uate the fir! will hae to

pay interest out of capital and that will further enhance its loss. 3oreoer high ratio

indiateds low creditwothiness of the fir!. 1ince the fir! has already !ore borrowed

capital, financial institutions will not co!e forward to grant loans. If at all any institution

co!es forward to finance, the ter!s and conditions !ay not be so faorable.

) low debt e8uity ratio indicates a low risk. The low proportion of the borrowed capital

reduces fir!#s fixed obligation of interest pay!ent.een when the fir! gets low profits,

profit rate is satisfactory it can not !axi!ie its profits with low debt e8uity ratio.but the

creditwothiness of the fir! will be high when its ;E ratio is low. /inancial institutions

will co!e forward to finance these fir!s as the risk is ery low.low ratio indicates that for

eery rupee of borrowed capital fir! has !ore proportion of own capital. ) low ratio

indicates the fir!#s risk aesion and conseratie nature.

The debt e8uity ratio is generally calculated as followsD

DE ratio $o!' ter borro*ed ca)ita"

Share ho"der&s fu!ds

) ratio of "D" !ay be usually considered to be satisfactory ratio although there cannot be

any rule of thu!b for all types of businesses. In so!e businesses a high ratio -D" or een

!ore !ay be considered satisfactory. ) low ratio is considered as faorable fro! the

long2ter! creditors# point of iew because a high proportion of owners funds proide a

larger !agin of safety for the!.

;NE ratio for the year -00&

"&"-5 ".(?

%%&?

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;NE ratio for the year -00%

"'"'- ".'5

(&&5

;NE ratio for the year -00(

---5% ".(?

""5""

;NE ratio for the year -0"0

-'05' ".((

"?0'&

;NE ratio for the year -0""

R -5%?& R-.00

"-&?

Debt eKuity ratio

YearDebt

Rs i! "a9hs

EKuity7!et *orth8

Rs i! "a9hsDE ratio

-00& "&"-5 %%&? ".(?

-00% "'"'- (&&5 ".'5

-00( ---5% ""5"" ".(?

-0"0 -'05' "?0'& ".((

-0"" -5%?& "-&? -.00

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I!ter)retatio!#

The debt e8ity ratio is increaseing in the last four years. The fir! prefers to raise the

capital through the loans fro! banks and other financial institution due to

4ow cost of capital co!pared to other for!s.

/lotation charges are ery less in this

The fir! is getting the loans at cheaper cost and at ery reasonable ter!s and

conditions of the financial institutions.

3ore oer the co!pany is in huge profits and it has no proble! in paying the interest to

the creditors. The co!pany ai! is to !axi!ie the wealth of the shareholders by

proiding the! high diidends.

I!terest covera'e ratio

This ratio establishes relationship between operating inco!eNprofit or EBIT and interest

payable annually. This ratio !easures the nu!ber of ti!es interest is coerd by the profit

aailable for the pay!ent of interest. 1ince interet is paid out of operating profit+EBITit

is essential to relate the! to !easure the degree of risk in the pay!ent of interest. This

ratio is calculated as followsD

I!terest covera'e ratio E>IT

I!terest )ayab"e

:igher ratio indicates lower risk and lower ratio indicates higher risk. But higher ratio

!ay also indicate lesser proportion of borrowed capitalwhich !eans the fir! is not

!axi!iing shareholders# earnings by utiliing !ore and !ore borrowed capital. 4ower

ratio is an indication of higher proportion of borrowed capital which a!ounts to higher

risk.

$atio for the year -00&

"%' ?.%'%

"0%-

$atio for the year -00%

-'( ?.'%?

""5(

$atio for the year -00(

''"% 5.?"5

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"-5

$atio for the year -0"0

?? -.00%

-"5%

$atio for the year -0""

R 5&0 R-.'?'

-"&&

I!ter)retatio!#

Year

E>IT

Rs i! "a9hs

I!terest

Rs i! "a9hsICR

-00& "%' "0%- ?.%'%

-00% -'( ""5( ?.'%?

-00( ''"% "-5 5.?"5

-0"0 ?? -"5% -.00%

-0"" 5&0 -"&& -.'?'

I!terest Covera'e Ratio

Gross )rofit ratio

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Gross )rofit ratio Gross )rofit (.

Netsa"es

Rs i! "a9hs

Year H5 H6 H/ H. H..>ross profit 5-5 -%? "0?( -"&' ?5'?

etsales ??5"'.-' ?'&5-.-5 ?'?"'.5- 38537.85 47689.72

$atio (.? %.' ".&( "".& &.-

GROSS PROFIT R,TIO

I!ter)retatio!#

The gross profit ratio of super spinning !ills is in a fluctuating trend. In the year -00' it

was (.?, in -00& it has co!e down to %.'. in -00% there was an increase by ".&(

again in -00( it has reduced to "".& and again in -0"0 it ca!e down to &.-, This

was due to a hike in the expenditure.

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O)ertati!' )rofit ratio

O)erati!' )rofit ratio o)erati!' )rofit ( .

Net sa"es Rs i! "a9hs

Year H5 H6 H/ H. H..


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Net )rofit ratio

Net )rofit ratio Net )rofit ( .

Net sa"es

Rs i! "a9hs

Year H5 H6 H/ H. H..

et profit "-& "&- -&? ?- "?("

etsales ??5"'.-' ?'&5-.-5 ?'?"'.5- ?("(.-% ?(-"5.-&

$atio ?." ?.0 '." ?.' 0.

NET PROFIT R,TIO

I!ter)retatio!#

The net profit ratio of super spinning !ills is also in a fluctuating trend. This is also sa!e

as the gross profit ratio cure. It says that if the gross profit goes up net profit also goes

up and if it co!es down net profit also co!es down. There was an increase in the year

-00( co!pared to the year -00%, in the year -0"0 K -0"" it was decreased to 0.

respectiely.

Retur! o! shareho"ders& tota" eKuity

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This would establish relationship between profit and e8uity share capital. E8uity share

capital !eans e8uity and reseres +retained earnings, return is net profit after deducting

diidend on preference capital. This ratio shows the a!ount of profit that is earned on

own capital and also shows the profit aailable for distribution a!ong e8uity share

holders this is calculated as followsD

ROE Net )rofit11Divide!d of )refere!ce ca)ita"

EKuity share ca)ita" reserves

$


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YearNet )rofit

Rs i! "a9hs

Net *orth

Rs i! "a9hsROE Perce!ta'e

-00& "-& %(0? 0."- "-

-00% "&- (&&5 0."" ""-00( -&? ""5"" 0."( "(

-0"0 ?- "-'"& 0."" ""

-0"" "?(" "--(? 0.0" "

RETURN ON S=,RE =O$DER&S E@UITY

I!ter)retatio!#

1uper spinning !ills e8uity share capital is constant through out the four years fro!

-00%2-0"0. The return on e8uity share capital al!ost constant fro! -00&2-00%. But in the

year -00( there was a hike in the fir!#s $


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Tur!over of SS %I$$S

I!ter)retatio!#

Turnoer of super spinning !ills ltd is ??5"', ?'&5-lakhs respectiely in theyears -00&, -00% and is increased by ?(-"5 in the year -0"". This is because the !ill

produces the yarn of different counts as per the custo!ers de!and. 1o that the turnoer is

increasing.

year Tur!over

Rs i! "a9hs

-00& ??5"'

-00%

?'&5-

-00( ?'?"&

-0"0 ?("(

-0"" ?(-"5

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Ear!i!'s )er share

et profit less diidend on preference capital is the profit aailable for

distribution. This indicates the profit earned per e8uity share. This can be calculated as

followsDEPS )rofits avai"ab"e for distributio!

No< of eKuity shares

yearNet )rofit

Rs i! "a9hsNo< shares

EPS7Ear!i!'s )er

share8

-00& "0? 5500000 "%.('

-00% ""-- 5500000 -0.0

-00( --?% 5500000 0.'(

-0"0 "-& 5500000 -5.(

-0"" "&- 5500000 ?."-

E,RNING PER S=,RE

I!ter)retatio!#

E71 of the super spinning !ills is "%.(', -0.0, 0.'(, -5.(,?."- rupees

respectiely fro! -00& to -0"". It is increased fro! -00'2-00%. But it has reduced to $s

-5.(, ?."-, in the years -0"0K-0"" due to less net profit co!pared to year -00(K-0"0.

Divide!d )er share

This considers only a!ount paid to e8uity share holders but not the a!ount

aailable for the distribution of diidend. This ratio is calculated asD

DPS Divide!d dec"ared

No< of eKuity shares

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YearDivide!d dec"ared

Rs i! "a9hsNo< shares DPS

-00& --0 5500000 .00

-00% --0 5500000 .00

-00( 0 5500000 %.00

-0"0 -&5 5500000 5.00-0"" %- 5500000 ".(

DI?IDEND PER S=,RE

I!ter)retatio!#

The super spinning !ill has declared $s , $s , $s %, $s 5K$s ".( as a

diidend for each share of $s "0 in the years -00&, -00%, -00(, -0"0K-0"" respectiely

that shares the perfor!ance of the co!pany is good and is working for the benefit of its

shareholders. ;ue to these diidend only the !arket price of the share has increased and

around 50000 shares are being transacted daily in different stock exchanges

The diidend has reduced to $s ".( fro! $s % in the year -0"" due to less profit

in the year.

Payout ratio

This ratio establishes relationship between the profit earned on each e8uity share

and the profit distributed to each e8uity shareholder. This can be calculated as follows

Payout ratio DPS

EPS

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YearDivide!d )er share

Rsross profit, et profit ratios, Earning per share and diidend per share

etc.

>I>$IOGR,P=Y

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o I.3. 7andey /I)CI)4 3))>E3ET, :i!alaya

7ublishers, -00( edition.

o ;r. 7.. $eddy 3))>E3ET )CC

o 3.9. =han K 7.=. Aain /I)CI)4 3))>E3ET, =alyani

7ublishers,-00%.

o 7rasanna Chandra /I)CI)4 3))>E3ET

o Aain K arang );H)CE; )CC

)nnual reports of super spinning !ills

www.sarelgi.co!

www.superspinning.co!

www.google.co!

www.fibre-.fashion.co!
http://www.sarelg.com/http://www.superspinning.com/http://www.google.com/http://www.sarelg.com/http://www.superspinning.com/http://www.google.com/

Documents

Capital Structure - Cotton Mills