Analysis of Company

8/7/2019 Analysis of Company

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IES MANAGEMENT COLLEGE AND RESEARCH CENTRE

Analysis of Companys Financial Statement

CENTURY ENKA LIMITED

Submitted by: Group No. 7

Rakesh Bhandari 07

Gayatri Desikan 17

Ashwin Gaggar 27

Seema Iyer 37

Trupti Kamlapurkar 47

Thamila M. 57


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ACKNOWLEDGEMENT

In our journey of completing this project, direct & indirect contributions stand out. We would

like to thank the IES Management College and Research Center, for giving its students a

platform to abreast with changing business scenario, with the help of theory as a base and

practical as a solution

We are extremely grateful to our Financial Management Prof. GAZIA SAYED for her guidance

& encouragement. We thank her for being extremely supportive & for believing in us at all

times. We are grateful to her for timely feedback & direction.


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TABLE OF CONTENTS

SR.NO CONTENTS PAGE NO.

1 Executive Summary

2 Industry overview

3 Top Five Companies & their market share

4

Contribution of engineering industry towards

GDP

5 About Cummins

6 Major happenings in last ten years

7Contribution of the company towards engineering

industry

8 Statutory regulations followed by the company

9 Technological Developments

10 CSR taken Undertaken by Cummins India ltd

11 Financial statements and analysis : 2007-08

12 Financial Statements of last 5 years

13 Major news


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INTRODUCTION

Established in 1965, the company is a joint venture of B.K. Birla group and Accordis group

(Formarly Akzo Nobel) of Netherland.

Century Enka Limited (CEL) has three plants with state of the art technology viz. Century Enka

Ltd. - Pune, Konkan Synthetic Fibres - Mahad in Maharashtra & Rajashree Polyfil - Bharuch in

Gujrat producing Nylon & Polyester Filament Yarns (Textile grade), POY, Jumbo Beams,

Speciality Yarns, Industrial/Fibre grade Chips, Industrial Yarns & Tyre Cord Fabrics.

CEL is having installed capacity of 1,10,000 tons/annum of Nylon Chips/NFY & Polyester

Chips/PFY, with 12,000 tons/annum of Industrial Filament/Tyre Cord Fabric.


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Century Enka Ltd. has been continuously striving for modern technology to manufacture global

standard quality of Nylon and Polyester Filament Yarns.

CEL is committed towards values of Quality, Innovation & Fair Business Practices for complete

customer satisfaction . Products of the company are as follows:

P OLYESTER FILAMENT YARN . P OY

RAJASHREE brand has now become synonymous with highest quality POY products being

produced keeping in mind the need of new generation 'High-Speed' machines. A wide range of

POY products are available for Draw Texturising as well as Air Texturising, Draw Twisting and

Draw Warping applications.

NYLON


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The Plant at Pune produces High Tenacity Nylon (Polyamide 6) and Polyester Industrial Yarns

and Greige Tyre Cord Fabrics among other products.

Century Enka's Yarns are used as reinforcing material in tyres, conveyor belts, V-belts, hoses,

ropes & cordage and broad & narrow wovens.

Q UALITYP OLICY


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Directors of the company namely B. K. BIRLA and G. M. SINGHVI share the companies overall

position with the share-holders. The oversupply situation of Polyester POY, high raw material

and fuel prices, inter-fiber competition and cheap imports of Nylon Tyre Cord Fabric (NTCF)

from China has adversely affected the volume growth. Consequently, the gross turnover has

decreased by 4.8%. In spite of these competitive pressures, Company has been able to maintain

its market position and achieve these results.

The report states about the opportunities and the threats faced by the company and informs

about the increase in demand for the fabrics. Moreover various functions of the company and

changes and improvements in them are clearly stated in the report. The company reaffirms its

commitment to Corporate Governance and is fully compliant with the conditions of Corporate

Governance stipulated in clause 49 of the Listing Agreement with Stock Exchanges. The Director

Responsibility Statements states about satisfying all the requirements of Companies Act, 1956

regarding the accounting standards and accounting policies.

Finally information about the directors, auditors, cost auditors and all other employees is

disclosed.

A dividend of Rs. 6.00 per Equity Share of Rs.10/- each for the year ended 31st March, 2007

(Previous year Rs. 6.00 per Equity Share of Rs.10/- each).

As required under Corporate Governance, the Management's Discussion and Analysis Report

which is forming a part of this report, is a reflection of the current state of business. It also deals

with the opportunities and challenges faced by your Company and the outlook for the future.

In view of appreciation of Indian Rupee resulting in cheap import of textile yarn and NTCF and

substantial blockage of funds in CENVAT credit, the pressure on margins is likely to continue

with higher interest cost. However, efforts are being made to further improve the efficiency by

conserving energy and better product mix.


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Total Productivity Maintenance (TPM) Programme introduced in the year 2005-06 at Pune and

Bharuch sites, under the guidance of a consultant for improving the efficiency in operation

continued during the year so that maximum employees and workmen can participate in the

programme and transform the productivity culture amongst them. The Directors place on

record their appreciation for the integrity, commitment and hard work of workmen, staff and

management driving the organisation to face high competitive challenges in the industry.

Factory Rajashree Polyfil, Bharuch has been conferred the winner of the Gujarat State Safety

Award for the fourth consecutive year for maintaining lowest Disabling Injury Index (DII) for the

year 2005.

In the preparation of the annual accounts, the applicable accounting standards had been

followed.

The directors had selected such accounting policies and applied them consistently and made

judgments and estimates that are reasonable and prudent so as to give a true and fair view of

the state of affairs of the Company at the end of the financial year and of the profit of theCompany for that period.

The directors had taken proper and sufficient care for the maintenance of adequate accounting

records in accordance with the provisions of the Companies Act, 1956 safeguarding the assets

of the Company and for preventing and detecting fraud and other irregularities.

The directors had prepared the annual accounts on a going concern basis.The report overall puts light on the important events that took place during the year and gives

idea about the financial position of the company

ANALYSIS OF CORPORATE GOVERNANCE REPORT


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Company s core business practices are based on the concept of trusteeship deeply imbibed in

the value system and thought process.

Detail disclosure is made about the board of directors, about the shares held in the company.

Also report states about the number of meetings held by the company and attendance of the

directors and their remuneration.

Later report discusses about the Audit and Shareholders / Investors Grievance Committee, the

share transfer system and share holder information.

The report overall gives us idea about the corporate governance applied by the company and

the manner in which it is applied.

ANALYSIS OF AUDITORS REPORT


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The audit of the firm is carried out by Price Waterhouse.

In this report the auditors declare that all the financial statements are audited by them and the

information provided is true to their knowledge.

The auditing is done as per the auditing standards accepted in India and as per accounting

principles. Proper books of accounts as required by the law are maintained by the company and

the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report

comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act.

As per the report none of the director is disqualified. And the auditors certify that the balance

sheet, profit and loss account and the cash flows are fair and true to their knowledge.

In annexure auditors certify about the inventory system of the company, fixed assets of

company, and about the position of company.

Proper books of account as required by law have been kept by the Company so far as appears

from their examination of those books.

The Company is maintaining proper records showing full particulars including quantitative

details and situation of fixed assets.

A portion of the fixed assets has been physically verified by the Management during the year

and no material discrepancies between the book records and the physical inventory have been

noticed.

A substantial part of fixed assets has not been disposed of by the Company during the year


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The inventory (excluding stocks with third parties) has been physically verified by the

Management during the year. In respect of inventory lying with third parties, these have

substantially been confirmed by them. In our opinion, the frequency of verification is

reasonable.

The procedures of physical verification of inventory followed by the Management are

reasonable and adequate in relation to the size of the Company and the nature of its business.

In our opinion, the Company is maintaining proper records of inventory. The discrepancies

noticed on physical verification of inventory as compared to book records were not material.

The Company has not granted any loans, secured or unsecured, to companies, firms or other

parties covered in the register maintained under Section 301 of the Act.

The Company has no accumulated losses as at March 31, 2008 and it has not incurred any cash

losses in the financial year ended on that date or in the immediately preceding financial year.

The Company has not defaulted in repayment of dues to any financial institution or bank as at

the balance sheet date.

The Company has not granted any loans and advances on the basis of security by way of pledge

of shares, debentures and other securities.

The provisions of any special statute applicable to chit fund / nidhi/mutual benefit

fund/societies are not applicable to the Company.


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The Company has maintained proper records of transactions and contracts relating to dealing

or trading in shares, securities, debentures and other investments during the year and timely

entries have been made therein. Further, such securities have been held by the Company in its

own name or are in the process of transfer in its name, except to the extent of the exemption

granted under Section 49 of the Act.

The Company has not given any guarantee for loans taken by others from banks or financial

institutions during the year.

The term loans have been applied for the purposes for which they were obtained.

There are no funds raised on a short-term basis which have been used for long-term

investment.

There were no frauds detected by the auditors.


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Mar '07 Mar '08Sales Turnover 980.73 1,183.68Other Income 17.84 9.59Total Income 998.57 1,193.27Total Expenses 903.62 1,080.02Operating Profit 77.11 103.66Profit On Sale Of Assets -- --

Profit On Sale Of Investments -- --Gain/Loss On Foreign Exchange -- --VRS Adjustment -- --Other Extraordinary Income/Expenses -- --Total Extraordinary Income/Expenses -- -2.60Tax On Extraordinary Items -- --Net Extra Ordinary Income/Expenses -- --Gross Profit 94.95 113.25Interest 17.97 30.62PBDT 76.98 80.03Depreciation 54.20 59.02Depreciation On Revaluation Of Assets -- --PBT 22.78 21.01Tax 6.06 7.60Net Profit 16.72 13.41

PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 ST MARCH , 2008

Yearly Results------------------- in Rs. Cr. -------------------


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COMMENTS ON PROFIT AND LOSS ACCOUNT

Net sales of the firm have been increased from Rs.998.73 cr in 2007 to Rs.1183.68 cr in 2008.

An increase in export indicates success of the company s strategy to promote India as a

sourcing hub for global demand. The firms other income has gone down from Rs.17.84 cr in

2007 to Rs.9.59 cr in 2008.This is mainly because of profit on sale of assets which has come

down to Rs.0.22 cr in 2008 from Rs.7.20 cr in 2007.Previous year it was in respect of capital gain

arising on sale of land and building.

Cost of raw materials consumed has increased from Rs.704.08 cr in 2007 to Rs.805.83 cr in

2008. The cost of Raw materials & components consumed has increase in less than

proportionate compared to sales. This is because of higher efficiency, good control over raw

material prices. Significant inflation in core commodities such as steel, copper, and fuel oils

adversely impacted our results during the year.

Purchase of goods fo r resale which was NIL last year has gone up by Rs.21.65 cr. in 2008 This

shows that company over and above just producing, is also buying the finished good and selling

directly.

Cost of sales and other expenses has increased from Rs. 220.83 cr in 2007 to Rs.238.15 cr in

2008.The increase in expenses is because of the increase in the stores, spares and consumable

materials, power and fuel, outside processing charges and other expenses.

PBDIT was higher by 34.01% mainly on account of full capacity utilization of Bharuch Plant and

improvement in margins of polyester business.

Net interest cost increased from Rs.17.97 cr. To Rs. 30.62 cr mainly due to additional workingcapital requirements and full year impact on interest cost on account of borrowing forNTCF(Nylon Tyre Cord Fabric) expansion .

Depreciation increased by 8.89% from Rs.54.20 cr to Rs.59.02 cr due to full year depreciation onaddition to fixed assets on account of NTCF(Nylon Tyre Cord Fabric) expansion .


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PBT has marginally gone down compared to last year mainly because of the payment made

during the year under the Voluntary Retirement Scheme (VRS) are being charged to profit and

loss account .VRS compensation charged for the year amounts to Rs.2.60 cr.

Tax has increased considerably when compared to the last year. This may be because of

increased in tax rates, introduction in taxes, tax at higher rates on Non-Operating income etc.

Net profit of the firm has gone down. Power and fuel, packaging material consumed, over

supply of polyester, cheap imports and high interest cost has affected the profitability.


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BALANCE SHEET AS ON 31 ST MARCH 2008

Balance Sheet

------------------- in Rs. Cr. -------------------

Mar '07 Mar '0812 mths 12 mths

Sources Of FundsTotal Share Capital 20.05 20.05Equity Share Capital 20.05 20.05Share Application Money 0.00 0.00Preference Share Capital 0.00 0.00Reserves 430.66 431.36Revaluation Reserves 11.92 11.70

Networth 462.63 463.11Secured Loans 393.07 410.63Unsecured Loans 37.39 23.48Total Debt 430.46 434.11

Mar '07 Mar '0812 mths 12 mths

Application Of FundsGross Block 1,532.93 1,542.35Less: Accum. Depreciation 774.27 832.13Net Block 758.66 710.22Capital Work in Progress 0.09 0.19Investments 3.19 3.19Sundry Debtors 90.43 119.33Cash and Bank Balance 8.82 4.30Other Current Assets 0.28 0.18Loans and Advances 90.74 80.76Fixed Deposits 0.24 0.22Deffered Credit 0.00 0.00

Current Liabilities 51.24 55.70Provisions 15.92 15.80Net Current Assets 270.08 315.33


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COMMENTS ON BALANCE SHEET

Sources of funds

Share Capital: Rs.20050589 equity shares of Rs. 10 each. This has not changed over the past twoyears. This is indicating that there is no fresh issue or allocation of equity share made in last two

years. This means that the funds rose by the company through the issuance of common or

preferential share to individuals or institution for growth and expansion have not been

considered as a choice. That means the company issues shares to the public in lieu of funds.

Reserve and Surplus- The reserves and surplus of the company has marginally increased from

Rs 462.63 cr.to Rs 463.11 cr. This increase represents transfer from profit and loss account.

The Profit and loss account has increased from Rs 112.77 cr to Rs 113.10. This shows that thecompany has a small amount of retained earnings left that is transferred to P&L account after

appropriations.

Loan Funds

The level of unsecured loans has dropped from 2006 to 2007 and even further drop from 2007

to 2008. However secured loans have shown a substantial jump from Rs.393 cr in 2007 to

Rs.410 cr in 2008. This means that the company has been funding itself aggressively by means

of external funds. Thus the impact would be shown on debt equity ratio. The total share and

equity share capital has been constant for the past 2 years.

Application of funds

The gross block which is the total value of the assets that a company owns and which is

determined by the amount it cost to acquire these assets. Also shows a gradual increase

between 2007-2008. This means when it comes to fixed asset value, the company has grown

stronger the direct impact on depreciation is proportional to the increase in fixed assets. The

capital work in progress is miniscual towards the assets under construction. This means there is

no real major project being undertaken.


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Investments

The company has not made any real investment compared to last year. The investment

purchased and sold during the year were DSP Merrill Lynch Plus, Fidelity Cash Fund, Reliance

Liquidity Fund, Tata Liquid SHIP Etc.

Current Assets Loans and Advances

The inventories of the company have increased from Rs.149.42 cr to Rs.183.15 cr in the year.

The increase is mainly on account of increase in the stock of raw materials, work in progress

and finished goods. It also includes loose tools and stores & spares.The company is high on recoverable from debtors which indicates that the average collection

period or credit given to the customer or supplier may have been increased drastically.

Cash in hand has increased from the previous year but balance in current, fixed deposit and

unpaid dividend account has gone down drastically compared to 2007.

The other current asset is reduced to Rs. O.18 cr in the year 2007-08 which was Rs.0.28 cr in

the year 2006-07. It includes interest accrued on investments and on deposit with other banks.

Loans and Advances has gone down compared to last year. The Loans and Advances wereprimarily towards amounts paid in advance for value, material and services to be received in

future and various deposits kept towards rent, telephone, electricity, insurance etc.

Current Liability and Provisions

The creditors have increased in the last one year. This shows that the creditors have full faith in

the management of the company which is why they are providing such huge credit to the

company. This also shows that company has to pay a good amount in near future to these

creditors.

The other liability of the firm has also increased from the previous year which includes unpaid

dividend, unpaid matured debentures, and investor education and protection funds. However


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there is no amount due and outstanding as on 31 st March 2008 to be credited to investor s

education and protection fund.

The overall provision has been decreased from Rs.15.92 in 2007 to Rs.15.80 in 2008. This due to

proposed equity dividend and tax on proposed equity dividend has been decreased compared to

previous year.


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FIVE YEAR FINANCIAL STATEMENT

Yearly Results ------------------- in Rs. Cr. -------------------

Mar '04 Mar '05 Mar '06 Mar '07 Mar '08

Sales Turnover 812.31 955.13 991.12 980.73 1,183.68

Other Income 9.60 13.28 13.91 17.84 9.59

Total Income 821.91 968.41 1,005.03 998.57 1,193.27

Total Expenses 694.93 863.96 920.74 903.62 1,080.02

Operating Profit 117.38 91.17 70.38 77.11 103.66

Profit On Sale Of Assets -- -- -- -- --

Profit On Sale Of Investments -- -- -- -- --

Gain/Loss On Foreign Exchange -- -- -- -- --VRS Adjustment -- -- -- -- --

Other ExtraordinaryIncome/Expenses -- -- -- -- --

Total ExtraordinaryIncome/Expenses -5.97 5.50 -- -- -2.60

Tax On Extraordinary Items -- -- -- -- --

Net Extra OrdinaryIncome/Expenses -- -- -- -- --

Gross Profit 126.98 104.45 84.29 94.95 113.25Interest 1.58 0.97 6.69 17.97 30.62

PBDT 119.43 108.98 77.60 76.98 80.03

Depreciation 40.78 43.60 51.29 54.20 59.02

Depreciation On Revaluation Of Assets -- -- -- -- --

PBT 78.65 65.38 26.31 22.78 21.01

Tax 21.65 12.82 5.81 6.06 7.60

Net Profit 57.00 52.56 20.50 16.72 13.41

Prior Years Income/Expenses -- -- -- -- --

Depreciation for Previous YearsWritten Back/ Provided -- -- -- -- --

Dividend -- -- -- -- --

Dividend Tax -- -- -- -- --


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Dividend (%) -- -- -- -- --

Earnings Per Share 19.90 18.35 10.22 8.34 6.69

Book Value -- -- -- -- --

Equity 28.64 28.64 20.05 20.05 20.05

Reserves 487.46 520.38 428.01 430.66 431.36

Face Value 10.00 10.00 10.00 10.00 10.00


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CSR ACTIVITIES

Health

The Company has given a new thrust to various areas of health care with special focus on

occupational health problems, care and awareness. Distribution of health related leaflets

followed by counseling in health care centres of the Company. A special training programme on

Cardio Pulmonary Resuscitation (CPR) was organised with the help of renowned hospital at

Pune site. In addition to this, Pulse Polio Vaccination Programmes with the help of Government

Agency and awareness programmes on Women Health Care were also organised in the

Company s colony at Bharuch. As a contribution towards the social cause, the Company has

taken various initiatives such as:

(a) HIV / AIDS awareness programme for employees.

(b) Assisted construction of sanitation units in the nearby areas of Bharuch site under Nirmal

Gram Yojna launched by the Central Government of India.

(c) Free medical check up camp and medical facilities to Orphan Children Home and Schools in

tribal belt and awareness programmes on Monsoon Season Illness were organised in nearby

villages of Bharuch site.

Environment

Adopting environment friendly approaches in existing as well as new operations at all sites for

sustainable growth is the main focus. Steps taken include promoting conservation of water,

composting of all garden waste as well as process plant modifications so that effluent

generation is low. Some of the notable steps have enhanced recycling of treated effluent back

to the plant and installation of drum decontamination facility prior to disposal of drums. Clean

environment conditions were maintained by achieving the parameters of stack and treated

water as per Gujarat Pollution Control Board norms throughout the year. World Environment

Day was celebrated in the presence of Gujarat Pollution Control Board s Officials by tree

plantation.


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Bibliography:

y www.centuryenka.com

y www.moneycontrol.comy www.sharekhan.com

y www.capitaline.com

y www.economictimes.com

y www.business-standard.com

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