Internship Report on Shakarganj Sugar Mill by SYED AHMAD MUSTAFA

Shakarganj sugar mills limited

Internship Report Page 1

INTERNSHIP REPORT

ORGANIZATION:

SHAKARGANJ SUGAR MILLS Submitted To: Mr. RASHID SAEED

Submitted By: AHMAD MUSTAFAROLL NO: 48M.B.A Evening5th SemesterSESSION(2010-14)

[email protected]

DEPARTMENT OF BUSINESS ADMINISTRATION

BZU BAHADUR SUB CAMPUS



LAYYAH

Dedications:I dedicated this efforts to my branch supervisor

and operational manager who supported me and courage me in the financial analysis and other necessary postulates belonging to my internship reportand also to my Parents & Teachers who guide and encourage me during the Preparation of this report and I want to say my Parents & Teachers.



Acknowledgement:All the thanks and praises for Allah who bestowed

guidance and wisdom to mankind and enabled me to complete this work. I am very thankful to all my Superiors i.e. who helped me a lot to produce this report. I am thankful to my department who accepted my request to do internship in ShakarganjMills Limited. I am also grateful to all employees of the Shakarganj who guide me during the course of internship. The behavior of all the department supervisors is very good to me because they gave me a lot of time to guide me the mechanism of all departments in which I worked. I am also thankful to the management of Shakarganj Mills Limited who gave me all the valuable support and opportunities to complete 06weeks Internship program and compile this report.



Executive Summary:Sugar is most important industry of Pakistan. The report is on Sakarganj

which is a highly reputed organization in sugar industry.Sakarganjsugar mill is one of the pioneers of the sugar industry in Pakistan. Sakarganjsugar mill was established in 1964. Company is ISO certified and producing sugar and other by products. There are many departments here among them chemical, cane, account and admin departments have major role. Admin department is main department which is handling all the matters of company. It is responsible for rules and regulations, security attendance of employees and other facilities to workers. Finance department is the most important department of company. It is responsible for sale, sale tax, payments, receipts, provident fund, salaries and store sections. It keeps and provides sufficient funds at the time of production. My internship also related to finance department and their complete procedure and software vouchers are written in detail in report. In banking section different bankers of company are there who provides loans and collects deposits on behalf of company. Store department is responsible for inventories offinished goods, work in process and new purchases. P.D made by head of store sections sent to main account section where accountant checks the rate, quantity and price and made a voucher. This voucher after approval from finance manager sent to R.D for further and final approval. After R.Ds approval that product is purchased. Different accounting policies like depreciation, going concern, payments, and receipts have been discussed. After this purpose of this analysis to business, investor, management and government have been shown. At last of repot problems of sugar industry has been discussed and few recommendations are suggested to management of Sakarganj. This report accentuates the details of my learning and observation at Sakarganj. It also includes the actual forms that are used in this organization to carryout basic business processes. And, I am sure that this report will provide you a complete and clear image of organization.



TABLE OF COTENTS PAGE NO

Introduction to the department where I worked:

ADIMINISTRATION DEPARTMENT:The main function of this department is to handle all the administrative

matters and maintaining discipline. The main goal of this department is to provide easy working environment. This is very important department of the organization as the name shows; Admin department is the department which is dealing matters about administration this department plays very important role for maintaining discipline in the mills. This department has to administrate all the operations of the organization. Admin department is working under Admin Officer, who has much more experience about administration matters.

Introduction to All Departments 1

Task Assigned to me During Internship 2

My week wise activity while working as internee 2

Impplication of Class room learning in organization3

SWOT Analysis 3

PEST Analysis 4

Financial Analysis 6

Intiative that i take as a manager there 14

Suggession 14



Cane Department:Cane department is the major department of any sugar mill. This department is

purchasing sugarcane from growers. The head of the cane department is known as cane advisor. There is a cane Inspector who is under the direct supervision of cane advisor. The cane Inspector examines the work and steps that are undertaken for the cane development. Also a large number of field men are working under the directsupervision of Cane Manager. The field men make crops survey and determine thecane area of the growers. The whole area covered by the production process has been divided into 7circles The Field officer & 3 field men supervises each zone. The main reason of dividing the area into zones is to encourage more quantity of cane.Variousstages of cane development and procurement are as follows

OBJECTIVES OF CANE DEVELOPMENT DEPARTMENT

To get high yield of sugarcane to the factory in right time. To improve variety of cane To develop the backward area To provide all facilities like seeds, fertilizers, unloading and loading charges To maintain registration of cane, gang and plantation. To undertake seed distribution programme

The soil of this area is varying alluvial fertile soil is there on the bank of Krishna and Ghataprabha rivers. Further upwards, there is a medium deep black soil, vary fertile well drained light to medium clay soil, which has received heavy application if from yard Manu science last 10-12 years also is presently in some parts.

The main function of cane development department is to arrange for raw material, which is required to the factory. For this the order is received by priority basis ( that is growers who grows sugar cane first in his lead ). They also provide a loading gang with 8 to 10 members per village and also a bonded tractor for transportation.

FINANCE DEPARTMENT:The head of this department is known as Finance Manager. The Department

has two sections.96Main Account Section97Cane Account Section there are Assistant Account Officers under the control of Finance Manager. They supervise the activities of main account section and cane account section respectively The Finance Manager control all the financial activities of the project along with general administration and make arrangement of funds to meet the requirement of the project.



My responsibility:My responsibility in administrative department is to check the attendance of

employee and then record into the computer on daily basis and maintain the disciplineduring working activity.My responsibility in finance department is to fill the voucher, general invoice, commercial invoice, local invoice, ledger posting, record the account and reconcile the bank statement.In cane department I spend most of time in field survey that include the circle in charge work and also get the information about the former bio data in a statement forms also work with zonal in charge of the area to check the work of circle in charge.

Week wise activity while working as internee:

As an internee in Sakarganj I spent my first&second week in administrative department.where my activity was to check the attendance of employee and then record into the computer on daily basis and maintain the discipline during working activity.

As an internee in Sakarganj I spent my third&fourth week in finance department.where my activity was to fill the voucher, general invoice, commercial invoice, local invoice, ledger posting, record the account and reconcile the bank statement.

As an internee in Sakarganj I spent my fifth&sixth week in cane department.where my acctivity was to make crops survey and determine the cane area of the growers.

Implication of class learning into the organization:

My implication of class learning in organization is to record the daily transaction and posting into ledger and posted in computer software.

Reconcile the bank statement. Showing good behavior with employee. Good communication Operational management. During my work I follow the rules regulation.



Data entry into computer software.

SWOT ANALYSIS:

STRENGTHS

The Promoter is young political background and has vast industrial experience in the field of Sugar and is having good relationship with the local farmers. This may help them in sugarcane procurement.

No difficulty is envisaged in availability of raw material i.e. sugar cane, as the project is coming up in the area of sugar cane growing belt with a good irrigation facilities and good recovery.

The area will not suffer draught as the Lift irrigation system of Almatti Dam as already implemented hence the Sugar recovery in the area is good.

The co-generation of power of 16 MW will improve the profitability of the company.

The by-product viz. molasses will bring additional revenue as it will be sold to distillery units as raw material.

WEAKNESSES

Co-Gen plant being capital intensive, economics of operations suffer in case of shortened season.

Government policy of full decontrol of sugar during 2003-04. Sugar imports will have bearing on the profit margins of the company. Any disturbance in the co-gen plant would interrupt sugar manufacturing

operations totally. The cost of such interruptions can be extremely high on account of production loss, machine failure, and spillage of juice, sugar and quality degradation.

The promoters are having political background and changing loyalties by the local farmers may affect them in sugarcane procurement.

OPPORTUNITIES



Setting up of further downstream projects like manufacture of ethanol or a distillery for manufacture of liquor.

THREATS

Raw material, cane, being an agricultural product its availability and prices are dependent upon vagaries of monsoon.

Tough competition from other sugar factories. Failure to adopt modern technology. Unable to satisfy the needs of workers, this might make them to leave the

organization.

PEST Analysis:

Political Analysis

Political stability Risk of military invasion Legal framework for contract enforcement Intellectual property protection Trade regulations & tariffs Favored trading partners Anti-trust laws Pricing regulations Taxation - tax rates and incentives Wage legislation - minimum wage and overtime Work week Mandatory employee benefits Industrial safety regulations Product labeling requirements

Economic Analysis

Type of economic system in countries of operation Government intervention in the free market Comparative advantages of host country Exchange rates & stability of host country currency Efficiency of financial markets Infrastructure quality



Skill level of workforce Labor costs Business cycle stage (e.g. prosperity, recession, recovery) Economic growth rate Discretionary income Unemployment rate Inflation rate Interest rates

Social Analysis

Demographics Class structure Education Culture (gender roles, etc.) Entrepreneurial spirit Attitudes (health, environmental consciousness, etc.) Leisure interests

Technological Analysis

Recent technological developments Technology's impact on product offering Impact on cost structure Impact on value chain structure Rate of technological diffusion

The number of macro-environmental factors is virtually unlimited. In practice, the firm must prioritize and monitor those factors that influence its industry. Even so, it may be difficult to forecast future trends with an acceptable level of accuracy. In this regard, the firm may turn to scenario planning techniques to deal with high levels of uncertainty in important macro-environmental variables.

FINANCIAL ANALYSIS:

1. Current Ratio:Current ratio may be defined as the relationship between current asset and

current liabilities. This is a measure of general liquidity & is most widely used to make analysis of short-turn financial position or liquidity of firm. It is calculated by dividing the total current assets by total current liabilities.

Current Ratio = Current Assets



Current Liabilities

TABLE-1.1 Current Ratio

Year

Current Current Ratio

Assets Liabilities

2007 430076093 141205546 3.04

2008 343665293 224758035 1.5

2009 336389326 802862101 0.42

2010 417811267 868538140 0.48

2011 349345761 774530918 0.45

INTERPRETATION:The above table shows that NSLs current ratio has decreased from 3.04 to 1.5

in the year 2005 and 2006 and in the year 2007 it was drastically fluctuated to 0.42 and then the year 2008 it raise to 0.48 but again decreased to 0.45 in the 2009 .The company had the fluctuation of 24.20% increase in current assets and 8.18% in current liabilities. In the year 2009 the current assets has decreased by 16.38% and 10.82% in current liabilities. An ideal current ratio is 2:1 for every one rupee of current liabilities, current assets of doable rupee are available. The current ratio determines margin of safety for creditors, there has been decrease in the ratio during 2009 compared with 2008.

2. Quick Ratio/Acid Test Ratio:Quick ratio establishes relationship between quick or liquid assets & current liabilities. It is

also known as acid test ratio. An asset is said to be liquid if it can be converted into case within short period of time without loss of value. The prepaid expenses and stock were excluded.

Quick ratio = Quick asset Current Liabilities

TABLE-1.2 Quick RatioYear Quick Current Ratio

Assets Liabilities2007 2842892837 141205546 2.01

2008 177992977 224758035 0.79

2009 138313276 802862101 0.17



2010 127813793 868538140 0.15

2011 170711841 774530918 0.22

INTERPRETATION:The above table shows that the quick assets of NSL has decreased from 2.01

to 0.79 in the year 2005 and 2006 and had drastically fluctuation to 0.17 and 0.15 in the year 2007 and 2008 and had slight rise to 0.22 in the year 2009.The company had fluctuation 7.59% decrease in quick asset and and 8.18% increase in current liabilities and in the year 2009 there was increase in quick asset 33.56% and 10.82% decrease in current liabilities. This ratio measures firms ability to serve short term liabilities. The ideal quick ratio is 1. A low quick ratio represents that firms liquidity poison is not good.

3. Debt-Equity RatioDebt-Equity ratio shows the relative contribution of creditors and owners.

Debt-Equity also known as External-Internal equity ratio. It is calculated to measure the relative claims of outsiders against firm assets.

Debt-Equity Ratio = Total Debt Net Worth

TABLE-2.1 Debt Equity Ratio

Year Total Debt Net Worth Ratio

2007 554110249 43052429 0.61

2008 499246293 63171947 0.62

2009 547168647 568828076 0.52

2010 565092766 570188858 0.82

2011 627397167 571266087 0.93



INTERPRETATION:The table shows that the total debt ratio of NSL had increase in the year 2005

and 2006 from 0.61 to 0.62 and had fluctuation to 0.52 in the year 2007 and further increased to 0.82 in the 2008 and 0.93 in the year 2009. The company had increase in the total debt by 3.27% and 0.23% in net worth and in the year 2009 the debt was increased by 11.02% and 0.188% in net worth. Debt equity ratio measures ultimate solvency of the company. It provides a margin of safety to creditors, thus when the ratio is smaller the creditors are more secured. An appropriate debt equity ratio is 0.33.A ratio higher than this is an indication of risky financial policies.4. Current Assets to Proprietors funds ratio

This ratio is calculated by dividing total current assets by shareholders funds. It indicates the extent to which proprietor funds are invested in current assets. There is no rule of thumb for this ratio & depending upon the nature of the business there may be different ratios for different firms.

CA to PF ratio = Current Assets Proprietors Fund

TABLE-2.2 Current Assets to Proprietors Fund

Year Current Assets Proprietors Fund Ratio

2007 430076093 217335000 1.972008 343665293 217400000 1.582009 336389326 217530000 1.552010 417811264 218018495 1.922011 349345761 223983274 1.56

INTERPRETATIONThe table of current assets to proprietary ratio shows that the ratio has been

decreased by 1.97 to 1.58 in the year 2005 and 2006 and 1.55 in the year 2007 and then raise to 1.92 in the year 2008 and then decreased to 1.56 in the year 2009.There was raise in current asset by 24.20% in the year 2008 and proprietary fund by 0.22% and further in 2009 there was decrease by 16.38% in current asset and there was increase by 2.73% in proprietary fund This ratio indicates the extent to which proprietors fund are invested in current asset5.Gross Profit Ratio



G.P.Ratio measures the relationship between gross profits & sales; it is usually represented in percentage. Thus Gross profit margin highlights the production efficiency at a concern

G.P.Ratio= Gross Profit X 100 SalesG.P.Ratio indicate the extent to which selling price of goods per unit may decline without resulting in losses on operations of firm. It reflect efficiency with which firm produces the product.

TABLE-3.1 Gross Profit Ratio

Year Gross Profit Sales Ratio

2007 32048846 269842495 0.112008 119992232 622678642 0.192009

81751169 592532689 13.8

2010 98156497 453435123 21.652011 79531898 736206987 10.8

INRTEPRETATION:The above table shows the gross profit ratio of NSL the table indicates that the

ratio in the year 2005 was 0.11 and in the year 2006 it raised to 0.19.further it had drastically change in gross profit to 13.8 in the year 2007 and 21.65 in the year 2008 ,but decreased to 10.8 in the year 2009.The company had fluctuated by increase of 20.06% in gross profit and decrease by 23.47 % in the year 2008 and in the year 2009 there is decrease in gross profit by 18.97% and increase in sales by 62.36%.The gross profit indicates the degree to which the selling price of goods per unit may decline without resulting in losses on operation of the firm .It reflects the efficiency with which firm produces its products.

6. Operating RatioIt is the relation between cost of goods sold & operating expenses on one

hand & the sales on the other hand. It measures the cost of operations per rupee of sales. Operating Ratio = Operating Cost X 100 Sales TABLE-3.2 Operating Ratio



Year Operating Cost Sales Ratio

2007 179620260 269842495 66.562008 498590333 622678642 80.072009 592997583 592532689 100.82010 447200049 453435123 98.622011

545311535 736206987 74.04

INTREPRETATION:The above table shows the firms operating ratio increasing drastically from

66.56 in the year 2005 to 80.07 and 100.8 in the years 2006 and 2007 but further fluctuating to 98.62 in the year 2008 and 74.04 in the year 2009 .There is a decrease in operating cost by 24.58% and 92.34% in sales but in the year 2009 there was increase by 21.93% in operating cost and 62.36% in sales.An increase in the ratio over a previous period is an indication of improvement in a operational efficiency of a concern the higher the ratio is more successful the business is, but a lower ratio indicates large amount of manufacturing expenses.

7. Return on shareholders Investment: Return on shareholders investments, popularly known as ROI. It is the relationship between net profit after tax & shareholders funds. Thus this ratio is considered as affective indicator of the companys profitability because it reflects the success of management in the efficient utilization of the owners investment. ROI=. Net Profit after Tax X 100 Shareholders fund

TABLE-3.3 Return on shareholder investmentYear Sales Current Assets Ratio2007 269842495 430076093 0.622008 622678642 343665293 1.812009 592532689 336389326 1.762010 453435123 417811264 1.092011 736206987 349345761 2.11



INTREPRETATION: The above table reveals that there is increase in the return on investment from 20% in the year 2005 to 29% in the year 2006 but fell down to 7.01% in the year 2007 .Further in the year 2008 there was a drastically raise to 24.41% but fluctuated to 0.04% in the year 2009.Through the analysis we found that in the year 2009 the net profit was decreased by 99.82% and increased shareholders fund by 0.73. This ratio is used to measure the overall efficiency of a concern, the higher the ratio the better the results will be as this ratio reveals how well the resources of a concern are being used. 8. Activity Ratios:

Funds are invested in various assets in business to make sales & earn profit. The efficiency with which assets are managed directly affects the volume of sales. The better the management of assets, the larger is the amount of sales & the profit. Activity ratio measures the efficiency or effectiveness with which a firm manages its resources or assets. These ratios are also called turnover ratio because they indicate the speed with which assets are converted or turned over into sales.The various activity ratios are:

9. Inventory Turnover Ratio:Inventory turnover ratio indicates the number of times stock has been turned

over during the period & evaluates efficiency with which a firm is able manage inventory. The ratio is calculated by dividing the net sales divided by average inventory at cost. ITR= Net Sales . Average Inventory at Cost Average inventory should be taken for calculating stock turnover ratio. Adding the stock in the beginning & at the end of period & dividing it by 2 to calculate average inventory.

TABLE-4.1 Inventory turnover ratio

Year Net Sales Average Inventory Ratio

2007269842495 149040556 1.81

2008622678642 114404573 2.44

2009592532689 312640080 1.9



2010453435123 484623044 0.94

2011736206987 379314434 1.94

INTERPRETATION: The table shows the increase in the inventory turnover ratio from 1.81 to 2.44

in the year 2005 and 2006 .In the year 2007 there was a fluctuation to 1.9 and further to 0.94 in the year 2008, but in the year 2009 there was a drastically increase to 1.94.The company had 23.47% decrease in net sales and increase by 55.00% in average inventory but in the year 2009 there was increase in net sales by 62.36% and decrease by 21.73% in average inventory. Inventory turnover ratio signifies the liquidity of the inventory. A high ratio implies good inventory management, a low ratio results in blocking of funds in inventory. The reference value of this ratio 9 and the maximum conversion period is 388

10. Assets Turnover Ratio: Assets are used to generate sales. Therefore a firm should manage its assets

efficiency to maximum sales. Assets turnover ratio shows relationship between sales & assets. The various assets turnover ratio are:]]

i. Fixed Assets Turnover Ratio:This ratio establishes the relationship between the costs of goods sold and

fixed assets. It can be calculated by.

Fixed Assets Turnover Ratio = Sales Fixed Assets

TABLE: 4.2 Fixed Assets Turnover Ratio

Year Sales Net Fixed Assets Ratio

2007 269842495 523585135 0.51

2008 622678642 532690595 1.16



INTREPRETATION:The table reveals that there is increase in fixed asset turnover ratio from 0.51 in

the year 2005 to 1.16 in the year 2006 but decreased to 1.04 in the year 2007 and drastically fluctuation to 0.8 in the year 2007 and raise in the year to 1.29 in the year 2009.The company had 23.47% decrease in net sales and increase in fixed assets by 0.23% in the year 2008 and further in the year 2009 it had increase net sales by 62.36% and increase by 0.18% in fixed assets. One of the cautions to be kept in mind that when fixed assets are old and substantially depreciated the ratio tenders to be high, because, the denominator of the ratio will be low.

Working Capital Turnover Ratio= Sales Net Current Assets TABLE: 4.4 Working Capital Turnover Ratios

INTERPRETATIONThe table reveals that the working capital turnover ratio of NSL in the year 2005

was 1.22 and increased to 3.37 in the year 2006.but in the year 2007 there was a drastically fluctuation to 0.12 in the year 2007 further there was a high increase in working capital turnover ratio to 5.23 in the year 2008 and 8.15 in 2009.There is decrease in net sales by 23.47% and 94.80% in net current assets in the year 2008 and in the year 2009 the net sales increased by 62.36% and decreased by 38.86% in net current assets. The assets turnover ratio measures the efficiency of a firm in managing and utilizing the assets. Higher turnover ratio, more efficient is the management utilization of the assets while low turnover are indicative of under utilization of available resources and presence

2009 592532689 568828676 1.04

2010 453435123 570188858 0.80

2011 736206987 571266087 1.29

Year Sales Net Current Assets Ratio

2007 269842495 458642451.5 1.22

2008 622678642 162529306.4 3.37

2009 592532689 2288870547 0.122010 453435123 118907258.5 5.23

2011 736206987 72690853.4 8.15



of idle capacity. In operational terms, it implies that firm can expand its activity level without requiring additional capital investments.

As a manager my initiative that I will take are the following: Sakarganj Sugar Mills Ltd needs these activities to act upon for improving its

performance.

For assuring safety and security of workers, there should be a separate department. There should be a training program after three months or six month to provide the

employees required skill and to remove the gap from their performance. To make employees punctual, there should be a card system.

There should be family quarters for all married workers. All the employees especially those associated with production should be encouraged, and should be involved in decision making and empowered to make innovative decisions. In this way employees can add to the organization, a lot. E.g.

a new cost effective production technique can result in comparatively huge profits.

Work should be divided in team and reward should be on team based rather than on individual basis.

The shortage of water and fertilizers is remaining constant and government is not taking any satisfactory action to reduce the shortage. Due to this shortage, sugar cane crop is decreasing.

Suggestion:

There should be a safety department in the company to assure the safety of the workers.

A regular training programme should be a permanent policy of the management so as to provide not only the required skill to employees but also to help them keeping their skills up to date.

There should be card system for every employee from helper to manager for punctuality.

Wages of workers should not be less than Rs8000 per month. There should be family quarters for all married workers. There should be a high school and a college as well for boys and girls in the

factory area.

There should be transport facility for workers within the district. All the employees especially those associated with production should be

encouraged, and should be involved in decision making and empowered to make innovative decisions. In this way employees can add to the organization, a lot. E.g. a new cost effective production technique can result in comparatively huge profits.



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Internship Report on Shakarganj Sugar Mill by SYED AHMAD MUSTAFA