“Comparative Analysis of Financial Statement with the help of Ratio Analysis Techniques”

7/30/2019 Comparative Analysis of Financial Statement with the help of Ratio Analysis Techniques

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A

PROJECT REPORT ON

Comparative Analysis of Financial Statement with the help of Ratio

Analysis Techniques

At

Brahmaputra Valley Fertilizer Corporation Limited

In partial fulfillment of the requirement for the award of the Degree of

Master of Business Administration (MBA) of Nagaland University, 2011-13

Submitted By,

Dilip Kumar Sah

NU/MN - 06/11

School of Management Studies (SMS), Nagaland University

DC Court Junction, Dimapur-797112 Nagaland


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Table of Contents

Chapters PARTICULARS Page No.

DECLARATION 1

PREFACE 2

ACKNOWLEDGEMENT 3

EXECUTIVE SUMMARY 4

AIMS AND OBJECTIVE OF THE PROJECT 5

1 INTRODUCTION 7

1.1OVERVIEW OF FERTILIZER INDUSTRY IN INDIA

8

HISTORY OF FERTILIZER INDUSTRY ININDIA

8

PUBLIC SECTOR UNDERTAKINGS ANDMULTI-STATE CO-OPERATIVE SOCIETIES

OF FERTILIZER INDUSTRY9

1.2OVERVIEW OF FERTILIZER INDUSTRY IN ASSAM

13

FORMATION OF BVFCL 13

PROFILE OF NAMRUP PROJECT14

CITIZENS CHARTER OF BVFCL17

HISTORY OF BVFCL19

PRODUCTS OF BVFCL22

THE PLANTS BRIEF DESCRIPTION

(NAMRUP-I, II & III)

23

1.3INTRODUCTION TO RATIO ANALYSIS

32

1.4NEED AND SCOPE OF THE STUDY

39

2OBJECTIVES OF THE STUDY

40

3RESEARCH METHODOLOGY

42


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4DATA ANALYSIS AND INTERPRETATION

45

SUMMARY OF THE COMPARATIVE RATIOANALYSIS

68

MICHAEL PORTER ANALYSIS OF BVFCL69

5CONCLUSION AND RECOMMENDATION

71

ANNEXURES 75

BIBLIOGRAPHY83


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DECLARATION

I hereby declare that the Project work entitled Comparative Analysis of Financial Statement with the help of

Ratio Analysis Techniques, at Brahmaputra Valley Fertilizer Corporation Limited submitted by me to the

department of School of Management Studies, Nagaland University, is a bonafide work undertaken by me. It is

not submitted to any other University or Institution for the Award of any degree diploma/certificate or published

any time before.

Name and address of the student: Signature of the student

Dilip Kumar Sah

Burma Camp

Dimapur, Nagaland


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PREFACE

The project undertaken by me is actually an effort on behalf of the department of School of Management

Studies, Nagaland University, to bring to the surface the hidden potentials of its students through continuous

learning and experience theoretically as well as practically. To enrich our practical exposure in the changing

market scenario, we are being imparted with Industrial training at various companies to make a match between

the theory learnt and the reality followed.

This project Comparative Analysis of Financial Statement with the help of Ratio Analysis Techniques, at

Brahmaputra Valley Fertilizer Corporation Limited tries to help in establishing and interpreting various ratios

(quantitative relationship between figures and groups of figures). It is with the help of ratios that the financial

statements can be analyzed more clearly and management decisions can be made from such analysis.

The report has been prepared keeping in mind all the important practical aspects and in depth analysis of the

collected data. This report has been compiled as partial fulfillment of the MBA curriculum. This project hasgiven me an opportunity to learn about the practical applicability of ratio analysis concept and theory and

develop a better ability to analyze problem and the solutions thereof. This two months training w.e.f 4th June,

2012 to 31st July, 2012 at Brahmaputra Valley Fertilizer Corporation Limited has come out as a very fruitful

and beneficial training for me.

DILIP KUMAR SAH


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ACKNOWLEDGEMENT

My special thanks go to Brahmaputra Valley Fertilizer Corporation Ltd. for providing me the opportunity to

carry out my Internship Programme in the firm and undertake the project as a part of the programme.

I sincerely acknowledge my gratitude to Mr. Manik Chandra Mahanta (Senior Account Officer), withou

whose support and help it would have been impossible for me to bring out this report. I am also grateful to Mr

Sudhansu Shasmal (Jr. Account Officer) for his valuable guidance and help in preparing the report. Their

constant support, innovative ideas & practical approach helped me to make the project more objective. I am also

happy to express my deep sense of gratitude and gratefulness to all the staff members of finance department

without whose support and help it would have been difficult for me to carry out the project. I extend my

gratitude to the entire finance department staffs of BVFCL, NAMRUP.

I would like to express special thanks to Sir, Ditalak Mpanme, (HOD) and all the faculties of School of

Management Studies for their constant guidance and support.

I would like to thanks my family members for their constant faith and support, encouragement who directly or

indirectly helped me in this regard.

Last but not the least, I am thankful to School of Management Studies, Nagaland University for providing me

the opportunity to work on a project under the course curriculum of MBA.

DILIP KUMAR SAH


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EXECUTIVE SUMMARY

Title of the Project : Comparative Analysis of Financial Statement of (FY 2009-10 & 2010-11)

with the help of Ratio Analysis Techniques

Name of the organization : Brahmaputra Valley Fertilizer Corporation Limited, Namrup, Assam.

Name of the student : DILIP KUMAR SAH

Project duration : 58 Days (4thJune 2012 to 31st July 2012)

Institutional Guide : Sir, Ditalak Mpanme, (HOD), SMS - Nagaland University

Organizational Guide : Mr. Manik Chandra Mahanta (Sr. Account Officer)

Mr. Sudhansu Shasmal (Jr. Account Officer)


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AIMS AND OBJECTIVES

Any project work exposes the research scholar to the ground realities prevailing in the particular industry andthereby enables to carry out a meaningful realistic analysis.

The objectives of the project are as follows:-

To study a glimpse of Brahmaputra Valley Fertilizer Corporation Limited (BVFCL).

To understand the functioning of various sections of the Finance Department of Brahmaputra Valley

Fertilizer Corporation Limited (BVFCL).

To make a comparative study of the Balance Sheet of two years i.e. 2009-10 and 2010-11 of BVFCL.

To suggest measures for underperformance of BVFCL.

To provide a sound basis for evaluating the productivity, efficiency and profitability of companys

current performance level.

LIMITATIONS

The limitations of this study are as follows:-

Time taken to complete the project work is very limited.

The study is conducted within the framework of the Brahmaputra Valley Fertilizer Corporation Ltd.

The balance sheet of two years is studied.

The analysis and the result of the studying are applicable only to BVFCL not to the other corporation.

The accuracy of the analysis of the companies and suggestion is totally depends upon the information

shared with and the observation.

The primary data collected are assumed to be correct.


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RESEARCH METHODOLOGY

The data collection is carried out mainly through the various audited Annual accounts, personal interviews as

well as through the literature review from the relevant policy manuals. The various daily reports made by the

Finance Department like journals, trail balance etc. are also referred.

SOURCES OF DATA:

For collecting necessary data two sources have been used. They are primary data & secondary data.

a) PRIMARY DATA:

Face to face discussion with the Finance Manager, Training Department personnel, Finance

Department Personnel and the employees of Brahmaputra Valley Fertilizer Corporation Limited (BVFCL).

b) SECONDARY DATA:

1. Data provided from the finance dept. regarding Cost of Investment, Cost of Capital and other related

information.

2. Journals and magazines published by Brahmaputra Valley Fertilizer Corporation Limited (BVFCL).

3. Library: Records and Manuals.

4. Also through Company websites i.e.

http://www.bvfcl.com

DATA ANALYSIS:

The Research carried out is a Descriptive study including mostly the secondary data. The data are analyzed

using the various Ratio Analysis techniques with the help of Charts & graphs.


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CHAPTER ( 1 )

INTRODUCTION


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Overview of the Fertilizer Industry In India

1.1 Overview of the Fertilizer Industry In India:

Agriculture the backbone of Indian Economy still holds its relative importance for more than a billion peoples.

Agriculture, which accounts for 27% of GDP, provides sustenance to two-thirds of our population. Besides, it

provides crucial backward and forward linkages to the rest of the economy. The Government of India from time

to time has taken considerable steps for the upliftment of Agriculture Sector. Successive five-year plans have

stressed self-sufficiency and self-reliance in food grain production and concerted efforts in this direction have

resulted in substantial increase in agriculture production and productivity. In Indias success in agricultural

sector for not only meeting the total requirement but also generating exportable surplus of food grains, thesignificant role played by chemical fertilizers is well recognized and established.

Fertilizer in the agricultural process is an important area of concern. Fertilizer industry in India has succeeded in

meeting the demand of all chemical fertilizers in the recent years. The Fertilizer Industry in India started its first

manufacturing unit of Single Super Phosphate (SSP) in Ranipet near Chennai with a capacity of 6000 MT a

year.

Chemical fertilizers have played a vital role in the success of Indias green revolution and consequent self-reliance in food grain production. The increase in fertilizer consumption has contributed significantly to

sustainable production of food grains in the country. The Government of India has been consistently pursuing

policies conductive to increased availability and consumption of fertilizers in the country. The sector

experienced a faster growth rate and presently India is the third largest fertilizer producer in the world.

History of the Fertilizer Industry in India:

The Fertilizer factory in India was established in 1906 at Ranipet, near Chennai by EID Parry (India) Ltd. formanufacture of Single Super Phosphate (SSP). First Urea and Ammonium Sulphate plants were set up in 1959

at Sindri (Bihar) by FCI Ltd. And first CAN (Calcium Ammonium Nitrate) plant was set up at Nangal by NFL

(National Fertilizers Limited) in 1961. First DAP plant was set by GSFC at Baroda in 1967. Since then India

has come a long way. The main thrust in establishment of indigenous capacity came after the introduction of


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Retention Price cum Subsidy scheme for nitrogeneous fertilizers in 1977 which was extended to phosphatic

fertilizers in 1979. India ranks fourth in terms of both production and consumption of fertilizers in the world.

Needs of Fertilizer Industry:

In the countrys planned development the first priority goes to agriculture when our country is predominantly an

agriculturist. In order to secure the maximum agriculture production to feed the enormous growing mouths it is

essential that the productivity of the soil must be restored and increases considerably. Chemical fertilizers will

make an effective contribution towards achieving the increase targets of food production.

During recent years there has been rapid use in the demand of Chemical fertilizers in the country. Consumption

of fertilizer in the fourth Five Year plan is expected to be still higher which shall be of the order of 2.4 million

tons of Potassic fertilizers and 1.0 million tons of Phosphate fertilizer.

Public Sector Undertakings And Multi-State Co-operative Societies of Fertilizer Industry:

The Department of Fertilizers (DOF) perform the activities which include planning, promotion and

development of the fertilizer industry, planning and monitoring of production, import and distribution of

fertilizers and management of financial assistance by way of subsidy/concession for indigenous and imported

fertilizers.

The Office of Fertilizer Industry Coordination Committee (FICC) is an attached office under the Department of

Fertilizers headed by Executive Director, who is of the rank of Joint Secretary to the Government of India. The

FICC comprises of the Secretaries to the GOI in the Departments of Fertilizers, Industrial Policy and

Promotion, Agriculture and Cooperation, Expenditure, Ministry of Petroleum & Natural Gas, Chairman, Tariff

Commission and two representatives of the urea industry. FICC, which was initially constituted w.e.f

1.12.1977 to administer and operate the erstwhile Retention Price Cum Subsidy Scheme (RPS), has been

replaced vide Resolution dated 13.3.2003 to administer and operate the New Pricing Scheme (NPS), which hascome into existence w.e.f. 1.4.2003.

The Department of Fertilizer has under its administrative control ten public sector undertakings (PSUs) and two

multi-state co-operative society and one joint sector company.


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1) Fertilizer Corporation Of India Ltd. (FCI):

The Fertilizer Corporation Of India Limited was incorporated as early as 1961.FCIL is a Central Government

Undertaking under the administrative control of Ministry of Chemicals & Fertilizers (Department of

Fertilizers).In 1978, the company was revamped and 5 separate companies FCI, NFL, Hindustan Fertilizer

Corporation Limited, Rashtriya Chemicals and Fertilizers Limited, and Projects and Development India Limited

started operating under one umbrella. The Fertilizer Corporation of India Ltd. (FCI) has its units located at

Sindri (Jharkhand), Gorakhpur (Uttar Pradesh), Ramagundam (Andhra Pradesh) and Talcher (Orissa). It also

has a mining organization at Jodhpur in Rajasthan and an incompleted project in Korba (Chattisgarh).

2) Hindustan Fertilizer Corporation Ltd. (HFC):

The Hindustan Fertilizer Corporation Limited (HFC) was incorporated on 14th

March, 1978 as a result of their

organization of the Fertilizer Corporation of India Limited (FCI). After de-merger of the Namrup units into a

new company under the name of Brahmaputra Valley Fertilizer Corporation Ltd. (BVFCL) w.e.f. 1.4.2002,

HFC has three units, namely Barauni, Durgapur and Haldia Fertilizer Project besides the Fertilizer Promotion &

Agricultural Research Division (FP&ARD).

3) Rashtriya Chemicals & Fertilizers Ltd(RCF):

RCF was incorporated as a separate company in March, 1978 consequent to reorganization of the Fertilizer

Corporation of India Ltd. At the time of its formation, the company had only one operating unit at Trombay

(near Mumbai) and two major projects under implementation viz. Trombay-IV and Trombay-V Expansion. The

gas based Thal Vaishet Fertilizer Complex about 100 kms from Trombay, was also later implemented by RCF

and it commenced commercial production on 1.6.1985.

4) National Fertilizers Limited (NFL):

National Fertilizers Limited (NFL) was incorporated on23rd August, 1974 for setting up of two nitrogenous

plants, one at Bhatinda (Punjab) and another at Panipat (Haryana) with LSHS as feedstock, each having urea

production capacity of 5.11 lakh MT per annum. Consequent upon there organization of the Fertilizer


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Corporation of India Limited (FCI), the Nangal unit (including Nangal Expansion Project) of FCI was

transferred to NFL w.e.f. 1.4.1978.

5) Projects & Development India Limited(PDIL):

Projects & Development India Limited (PDIL), an erstwhile Division of the Fertilizer Corporation of India

Limited (FCI), was registered as a separate company in March 1978. The Company has its registered office at

Sindri, Jharkhand.

6) Pyrites, Phosphates & Chemicals Limited (PPCL):

Pyrites, Phosphates & Chemicals Ltd. (PPCL), set up in 1960 was entrusted with the responsibility of exploiting

the countrys pyrites deposits. The company had three production units located at Amjhore (Bihar), Dehradun

(Uttaranchal) and Saladipura (Rajasthan). The Company was also engaged in trading of indigenous fertilizers.

7) The Fertilizers And Chemicals Travancore Ltd. (FACT):

The Fertilizers and Chemicals Travancore Limited (FACT) was incorporated in 1943. In 1947 FACT started

production of Ammonium Sulphate with an installed capacity of 50,000 MT per annum at Udyogamandal, near

Cochin. From a modest beginning, FACT has grown and diversified into a multi-division/multi-function

organization with basic interest in manufacture and marketing of Fertilizers and Petrochemicals, Engineering

Consultancy and Design and in Fabrication and Erection of Industrial Equipments.

8) Madras Fertilizers Limited (MFL):

Madras Fertilizers Limited (MFL) was incorporated in December, 1966 as a Joint Venture between GOI and

AMOCO India. Incorporated of USA (AMOCO) with GOI holding 51% of the equity share capital.


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9) Brahmaputra Valley Fertilizer Corporation Limited (BVFCL):

Brahmaputra Valley Fertilizer Corporation Ltd. was formed as a new company w.e.f. 1.4.2002 after de-merger

from Hindustan Fertilizer Corporation Ltd. The first group of plants, i.e. Namrup-I was established in the sixties

and went into commercial production in 1969. Namrup-II group of plants were added in the seventies and went

into commercial production in 1976 and followed by Namrup-III group of plants established in the eighties

which went into commercial production in 1987. All these three phases were established under Hindustan

Fertilizer Corporation Ltd. The new Company is presently having its head quarter at Namrup.

10) FCI Aravali Gypsum And Minerals India Limited (FAGMIL):

The Jodhpur Mining Organization (JMO) after hiving off from FCI has been incorporated under CompaniesAct, 1956as a Public Sector Undertaking viz. FCI Aravali Gypsum and Minerals India Limited (FAGMIL) on

14.2.2003 with an authorized share capital of Rs.10crore. Apart from taking over the JMO, the nascent

Companys objectives include expanding the mining activities in other minerals available in the State of

Rajasthan. The JMO is mining in nine Mineral Gypsum Mines in four districts of the State of Rajasthan, with

the best quality gypsum reserves of 60 lakh MT at their Mohangarh Mines in the district of Jaisalmer.

11) Indian Farmers Fertilizer Cooperative Limited (IFFCO):

Indian Farmers Fertilizer Cooperative Limited (IFFCO) was registered as a Multi-State Cooperative Society on

November 3, 1967. Subsequently with the enactment of Multi-State Cooperative Societies Act, 1984, IFFCO

came under the purview of the same. However, with the enactment of Multi-State Cooperative Societies Act

2002 effective from 19th

August, 2002, IFFCO is presently under the purview of this Act. By the end of 1988

IFFCO had set up four plants, two in the State of Gujarat and two in the State of Uttar Pradesh with total

investment of Rs.981.2crore.

12)Krishak Bharti Cooperative Limited (KRIBHCO):

KRIBHCO was incorporated as a Multi-State Cooperative Society on 17.04.1980 to implement the

Ammonia/Urea fertilizer project at Hazira, based on natural gas from Bombay High/South Bassein. The society


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commissioned its Ammonia/Urea Plant in 1985. The Hazira complex has two ammonia plants and four streams

of Urea.

1.2 Overview of Fertilizer Industry in Assam:

The discovery of natural gas in the rich oils fields at Naharkatia created a problem as to how it could be utilized.

In the year 1955 the State Government approached the Government of India to find a solution accordingly a

Technical Committee under the Chairmanship of Dr. G.P. Kane was appointed into the possibility of

establishing a fertilizer factory. The committee recommended the setting up of a fertilizer factory at Namrup

with a capacity of 32,500 tons of nitrogen (50,000 tons of Ammonium Sulphate and 50,000 tons of Urea).The

Committees recommendation were accepted by the factory should have a production capacity of 45,000 tons of

nitrogen in the form of 1,00,000 tons of Ammonium Sulphate and 55,000 tons of Urea per year.

By and large the establishment of the fertilizer factory here was a natural sequence of the availability of a large

stock of natural gas in this area which also reflected the Governments determination to have more fertilizer

factories in the country to help bridge the gap between demand and supply of fertilizer as well as wide

employment avenues on one hand and balancing the economic development to the extent possible on the other.

1.2.1Formation of BVFCL:

Brahmaputra Valley Fertilizer Corporation Ltd.(BVFCL) was formed as a new company w.e.f. 1.4.2002 after

de-merger from Hindustan Fertilizer Corporation Ltd. located on the bank of the river Dilli in the south-western

border of Dibrugarh district in Assam. It is the first factory of its kind in India to use associated natural gas as

basic raw material for producing nitrogenous fertilizer.

Till the beginning of sixties, Namrup a sleepy village was little known to the rest of the country. Discovery of

oil and natural gas in Naharkatia region promoted a serious thinking on proper utilization of gas which had to

be otherwise to be flared up.

Consequent upon the recommendation of M/S. Snodgrass Associates of USA suggesting utilization of this

hidden treasure to produce a large number of utilities including chemical fertilizers and electricity, the then

Ministry of Mines and Fuel appointed a Committee headed by Shri S.S Khera, ICS and based on its broad

recommendation in respect of possible use of natural gas, a Technical Committee under the Chairmanship of

Dr. G P Kane further studied the possibilities of setting up a fertilizer plant in Assam while the Central Water


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and Power Commission was entrusted to explore the scope of setting up a power project based on this

resource .

The Kane Committee, after making detailed techno-economic study, recommended a fertilizer factory to be

located at Namrup. Needless to say that, Central Water and Power Commission too recommended favorably

resulting in the setting-up of Thermal Power Plant within the striking distance from the fertilizer factory at

Namrup.

The first group of plants, i.e. Namrup-I was established in the sixties and went into commercial production in

1969. Namrup-II group of plants were added in the seventies and went into commercial production in 1976 and

followed by Namrup-III group of plants established in the eighties which went into commercial production in

1987. All these three phases were established under Hindustan Fertilizer Corporation Ltd. The new Company is

presently having its head quarter at Namrup. In 2002, the Namrup Fertilizer Complex was bifurcated from the

Hindustan Fertilizer Corporation Limited and came to exist as one of the important public sector fertilizer

companies under the new name, Brahmaputra Valley Fertilizer Corporation Limited.

1.2.2Profile of Namrup Project:

Brahmaputra Valley Fertilizer Corporation Limited (BVFCL) is one of the major public sector fertilizer

companies in India. In fact, it is considered the pioneer in using associated natural gas for producing

nitrogenous fertilizer.

In 2002, the Namrup Fertilizer Complex was bifurcated from the Hindustan Fertilizer Corporation Limited and

came to exist as one of the important public sector fertilizer companies under the new name, Brahmaputra

Valley Fertilizer Corporation Limited. There are in total, 3 production plants at Namrup, in the Assams

Dibrugarh district. The discovery of surplus natural gas and oil in the Naharkatia-Moran region and Lakwa oil

fields respectively, provided the incentive for setting up the third production unit of Namrup.

The Namrup Fertilizer Complex, renamed as Brahmaputra Valley Fertilizer Corporation Ltd after bifurcation

from erstwhile Hindustan Fertilizer Corporation Ltd w.e.f 1stApril 2002 located on the bank of river Dilli

in the south western border of Dibrugarh district of Assam.

a) Registered Office-

P.O- Parbatpur, Namrup- 786623


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District- Dibrugarh (Assam)

Phone- 0374-2500207

Fax- 0374-2500317

Email: [email protected]

Website address: www.bvfcl.com

b) Companys Share Resources - Rs. 3,65,83,24,000

c) Units of Namrup Fertilizer Complex-

Namrup Fertilizer Complex is consisted of three units -

1) Namrup I.

2) Namrup II

3) Namrup III

However at present only Namrup II & III are in operating condition.

Plant Year of Commissioning Capacity

Namrup- I 1969 280 MT/Day

Namrup- II 1976 480 MT/Day

Namrup- III 1987 580MT/Day

Table 1.1: Units of Namrup Fertilizer Complex

d) Products:

1) Mukta Urea

2) Mukta Bio - Fertilizers.

3) Mukta Vermi - Compost.
mailto:[email protected]://www.bvfcl.com/http://www.bvfcl.com/mailto:[email protected]


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e) Legal Advisors- M/s Steel & Hadow, Dibrugarh

f) Bankers

1) State Bank of India

2) UCO Bank3) Syndicate Bank,

4) Punjab National Bank,

5) Bank of India.

g) Board Of Directors-

1. Shri. N.K Saha (Chairman & Managing Director)

2. Shjri. K.K. Padmanabham [Deputy Secretary(P&I). DOF]

3. Shri. Manish Tripathi [Deputy Secretary(F),DOF]

4. Shri. Deepak Kumar [Director(Movement),DOF]

5. Shri. N.K Saha [Director(Production)]

6. Shri. N.K. Ghosh [Director(Finance)]

h) Company Secretary- Shri. R.K. Gupta

i) Chief Vigilance Officer- Shri. H. Abbas, Deputy Secretary

(PPF), DOF

j) Statutory Auditors- M/s G. Choudhury & Associates

Chartered Accountants, Siliguri (WB)

k) Cost Auditors- M/s Subhadra Dutta & Associates

Cost Accountants, Duliajan, Assam


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l) Citizens Charter-

Preamble- This Charter is a declaration of our mission, objectives, values, commitments, standards and

our expectations from others.

Mission-

1. To produce fertilizer efficiently, economically and in environment friendly manner.

2. To established itself as profit making enterprises.

3. To work for all round improvement of the strategically important North Eastern parts of the country.

4. To diversify into production of other industrial products.

5. To provide balanced economic growth in the region.

Objective-

The Namrup Fertilizer plant was set up with the primary objectives of:-

1) Setting up countrys overall output.

2) Achieving higher agricultural production in general and food grains in particular.

3) Reduction of import of fertilizer and food from abroad.

4) Economic use of natural gas and prevent its wastage

5) Creating industrial infrastructure essential for further industrialization leading economic

development of this region.

6) Optimum and judicious utilization of Natural Gas available in the region.

7) Making fertilizers available at door step of the farmer to grow more food for the country men.

Values-

We shall carryout our functions and duty with utmost:

Sincerity

Speed

Equity


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Integrity

Transparency and without any fear or favor.

Vision-

BVFCL is incorporated with the vision to become a world class fertilizer complex, committed to

enhancing stakeholders value.

Standards-

We have set up upon ourselves the standards for all transactions with you. We undertake that in case of

likely or inevitable delay, we shall promptly communicate the same to the party concerned.

Commitments-

They commit to-

1. Produce & distribute quality fertilizers conforming to the specifications.

2. Timely distribution of our fertilizers to ensure consumer satisfaction.

3. Continual up gradation of Technology & Development of HR.

4. Strict adherence to the prescribed Safety, Health & Environmental Protection Standards.

m)Service extended to the Customers/Citizens-

Training is imparted to the farmers free of cost by the Company in village/block level for balanced use

of fertilizers for improving productivity.

The following grievances redressal mechanism has been constituted in the company.

1. Employees Grievance Redressal Committee

2. Township Welfare Committee

3. Information under the Right to Information Act, 2005

4. Customer Grievances Redressal Cell


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5. Complaints involving redressal for bribes or financial irregularities, public may approach to the

Chief Vigilance Officer of the Company

Time limit for disposal of grievances-

a. Issue of acknowledgement /interim reply to petitioner 2 weeks

b. Forwarding of the grievance petition to the concerned authority 3 weeks

c. Final disposal of the grievance petition 2 months

n) Expectation from Customers/Citizens-

We expect from the customers / citizens to be reasonable and prompt in exercising your rights andobligations in all your transactions with the company without extending inducement of any kind and not

raising any frivolous issues.

a. Timely feed-back of information about the product purchased by the customer, its quality, weight, etc.

b. Suggestion for further improvement.

1.2.3 History of BVFCL:

Brahmaputra Valley Fertilizer Corporation Limited (BVFCL) is one of the major public sector fertilizer

companies in India. In fact, it is considered the pioneer in using associated natural gas for producing

nitrogenous fertilizer.

Brahmaputra Valley Fertilizer Corporation Ltd. was formed as a new company w.e.f. 1.4.2002 after de-merger

from Hindustan Fertilizer Corporation Ltd. There are in total, 3 production plants at Namrup, in the Assams

Dibrugarh district. The discovery of surplus natural gas and oil in the Naharkatia-Moran region and Lakwa oil

fields respectively, provided the incentive for setting up the third production unit of Namrup. The first group of

plants, i.e. Namrup-I was established in the sixties and went into commercial production in 1969. Namrup-II

group of plants were added in the seventies and went into commercial production in 1976 and followed by

Namrup-III group of plants established in the eighties which went into commercial production in 1987. All


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these three phases were established under Hindustan Fertilizer Corporation Ltd. The new Company i.e. BVFCL

is presently having its head quarter at Namrup.

The Starting Namrup I:

The entire project planning of Namrup-I, group of plants was started in the middle of 1960 by Hindustan

Chemicals and Fertilizers, staring from invitation of quotation, preparation of tender specification scrutiny and

of contact, co-ordination with various contracting agencies, preparation of overall factory plan

procurement of indigenous materials and equipments etc. was taken care of by the technicians and

engineers. It was merged with Fertilizer Corporation of India on 1st January 1961. After crossing various

hurdles successfully, the foundation stone could be laid on 1st January 1966, by the Chief Minister of Assam,

late B.P. Chaliha and the factory went into stream in the month of august 1968. Commercial production

however commenced from 1st January 1969 with annual capacity of only 55000MT of Urea and 100000mt ofAmmonium sulphate.Namrup-1 was built at a cost of 24.26 cores including foreign exchange of

6.36crores. Namrup-1 is the first factory in India to use natural gas as the basic raw material. Also i

happened to be the first factory in the country to have used indigenous catalysts developed by then

Planning and Development Division of FCL.

The Expansion - Namrup-II:

While operation of Namrup-|I was in progress, it was found that the surplus natural gas would be

available in the adjoining Moran-Naharkatia oilfields of M/s Oil India Limited. In 1965, Government

decided to gainfully utilized this associated natural gas by putting up another fertilizer factory. The

techno-economic report of expansion of Namrup Fertilizer Factory was approved by the Ministry of Chemicals

and Fertilizer in 1967. For implementation of the scheme the then FCI entered into a contract with M/s

Technimont of Italy for supply of plant and machinery and signed a 10 years credit agreement in

October 67 which became effective from 10th

March 1968. The execution work then started on 27th March

1968. This plant was designed and engineered by Fertilizer (P&D) India limited, earlier known as

Planning and Development division of FCI. To promote indigenous fabrication, Namrup fertilizer has

gone all the way to provide facilities like workshop drawing, special quality raw materials special types

of machineries for fabrication and also undertaken inspection/testing at different stages of fabrication. The

factorys equipments, which were imported earlier, are now being indigenously manufactured. Another major

achievements of this project have been import substitution by using FCIs own catalysts. Except

ammonia synthesis and natural gas desulphurization catalysts all other catalysts were developed by P&D


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Division of FCI. Namrup was commissioned on 23rd April 76 when ammonia was produced and the

plant produce Urea on 30tth

April,1976. The plant went into commercial production on 1st

October 1976

Namrup-II was built at a cost of Rs.74.9crores including foreign exchange of 23.6 crores rupees.

Table 1.2:Rated capacity per day of Namrup-II

Total output of nutrient in the end of product is 1,51,800 tones Nitrogen in the form of 3,30,000 tons

of Urea per annum. Thus total capacity of Namrup-I and Namrup-II is 1,96,800 tons of Nitrogen, the end

product being 3,85,000 tons of Urea and 1,00,000 tones of Ammonium Sulphate per annum..

Namrup-II Project

The Aggrandizement Namrup-III:

The availability of surplus natural gas in the Naharkatia, Moran and Lakwa Oilfields led to the second

phase of expansion of Namrup plants. Namrup-III was designed to produce 1167 MT/Day of Urea. The

capacity of 167 MT/day of Urea I plant, operation of which was stopped w. e. f, September 86 was also

included in this. However, with effect from 1.11.94. Urea-III plant has been declined with Namrup-I plant and

PLANTRATED CAPACITY

/ DAY

Ammonia- II 600 tones

Urea-II 1000 tones


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capacity reduced to 1000 MT/Day. Namrup-II has been erected at a cost of about Rs. 301 crores including a

foreign exchange component of Rs. 54 crores.

Namrup-III Project

1.2.4 Products of BVFCL:

1. Mukta Urea

2. Mukta Bio - Fertilizers.

3. MuktaVermi - Compost.

1) Mukta Urea:

BVFCL, Namrup has one important finished product i.e. Prilled Urea (Brand Name: Mukta Urea).

Ammonia is produced as Intermediate Product, which is used for the production of Urea. Mukta urea

fertilizers are produced in its urea plant Urea-II and Urea-III.

2) Mukta BioFertilizers:


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Mukta BioFertilizers are produced by the BVFCL, in its Bio Fertilizer production Unit at Namrup

Assam.

BioFertilizers are divided into two categories:

a) Nitrogen fixing BioFertilizers.

a) Mukta Rhizobium.

b) Mukta Azotobacter.

c) Mukta Azospirillum.

These fixes Nitrogen and produce growth promoting substances thereby increasing crop yield from 10 to

35 %.

b) Phosphate solubilizing Bio-Fertilizers.

Mukta Phosphobactrin.

a) Nitrogen Fixing BioFertilizers:

i. Mukta BiRhizobium:

On seed treatment these Bacteria multiply rapidly in soil and enter into the developing roots of the legume

plants to form nodules in due course. More nodules means more yield. Rhizobium BioFertilizer meant forone legume crop say Moong, Masoor or Black Gram cannot be used in any other legume.

ii. Mukta BioAzotobacter :

These BioFertilizers contain very high population of live Azotobacter Bacteria which is aerobic, free living

Nitrogen fixer. Azotobacter can be used in nonlegume crops of short, medium and long duration.

iii. Mukta BioAzospirillum:This Bio-Fertilizer also meant for many non-legume crop of any duration. Being microscopic this bacteria

perform better in medium, heavy to heavy textured soils with high moisture levels. On application to soil,

seed or saplings they multiply rapidly more towards root system and develop a thick population on root

surface.


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b)Phosphate Solubilising BioFertilizers:

Mukta BioPhosphobactrin:

This bio-fertilizer is a mixture of bacteria and fungi when applied to seed, seedling on soil, they multiply

around developing roots and soils where they secrets various organic acids which acts upon otherwise

unavailable phosphate substances in the soil and transform them to available phosphorus for plants to absorb

and obtain phosphorus nourishment.

3) MuktaVermiCompost:

Manufacture of Organic Manure and Vermi Compost Manure has been started from 12-06-2008 at Namrup

necessary infrastructure has been erected and manufacturing Organic Manure and Vermi.

Compost Manure enriched with BioFertilizers. The filling of pits and de-composition of vegetation & cow-dung are under process.

1.2.4 The Plants Brief Description (Namrup-I, II & III):

Water Treatment Plant:

a) Raw Water:

Raw Water from the River Dilli will be drawn into jack well through concrete bed underground. River

water in the jack well also joined with the water from seepage of subsoil water through pipes embedded

with the wall of jack well. After detention for some time clear water is obtained. Water pumped from

jack well is fed to water treatment plant through 24 main line.

b) Capacities:-

i. Process Water - 4MG/D.

ii. Sanitary Water- 2MG/D.


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Water Treatment plant of BVFCL, Namrup

Ammonia Plant:

Designed to produce 600MT of Ammonia per day in a single steam, this plant is based on steam reformation of

Associated Natural gas.

The Various Steps involved are:

Desulphurization.

Reformation.

Shift conversion.

Carbondioxide removal.

Methanation gas compression and ammonia synthesis.

The primary reformers and Ammonia synthesis sections have been designed by M/S Haldor Topsoe while

Benefield process is used for gas purification. The rest of the plant is designed by M/s Project and

Development.


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Ammonia Plant of BVFCL, Namrup

Urea Plant:

The urea plant uses conventional recycling process and its design and engineering have been done by M/s

Project and Development India Limited. Ammonia, Carbon-dioxide gas and recycle carbonate are

compressed and fed to a Urea Reactor at high pressure. The conventional stainless steel line reactor of multi-

layer construction is being is used for Urea synthesis. Laid in a single system the plant has a capacity to

produce 1167 tons per day. Its various sections include Synthesis Decomposition, Concentration, Pilling

Recovery and Recycling. The special feature of Namrup-III Urea plant is its inbuilt effluent treatment

facilities and recycle of the products from effluent back to the reactor.


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Urea Plant of Namrup-II Project

Bagging Plant:

There are two modern bagging plants, one each for Urea II &III plants. The urea pills fallen from the top pilling

tower collected on a conveyor belt, and sent to the bagging plant by running conveyor belts for packaging

purpose. There the urea pills are measured accurately by the automatic weighing machine at 50kgs rate and are

stitched the bags by automatic sewing machines after filled with weighed urea. The bags are marked as Mukta

Urea with the symbol representing the Brahmaputra Valley Fertilizer Corporation Ltd., Namrup. The bags are

purchased from competitive markets.


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Bagging Plant

Safety:

The corporation stresses emphasis on safety and has received several awards from National Safety Council for

brilliant safety records. In order to make the employees safety conscious, exhibitions and competition on safety

are organized every year. All necessary safety gears/equipments /garments provided to the workmen so that

safety rules can be observed while on duty.

Welfare:

The corporation has made arrangements to provide self-contained housing accommodation with sanitation and

electricity. The township is spread over a wide area and has a provision for education, clubs, market, hospital

etc. Constant attempt has been made to improve the dwelling condition.

The corporation has extended some financial assistance to the nearby educational institutions and other social

organization depending on the merit of the cases from the Special Welfare Funds.

Some of the Welfare Schemes of BVFCL are given below:

1) One sixty-bedded hospital.


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2) Seven numbers of schools.

3) One open stadium.

4) One indoor stadium.

5) One daily market.

6) Two recreational clubs.

7) Drinking water.

8) Grants.

Training:

The training centre of the corporation designed on the modern concept of Training Institute elsewhere

gradually developed into the status of a fledged staff members and an independent workshop to train the

apprentices with such facilities, it is in a position to meet with the training requirements of the newly

recruited trainees along with the development of the workers, supervisor and the executives.

To keep running the plants the job involved are categorized to be attend by the employees, these areas

follows -

1) The other parts of the employees involved are of maintenance group and categorized in three

departments.

2) Mechanical group of employees attend jobs involved mechanically. These are repair of pumps

compressors, many other mechanical types of equipments.

3) Electrical group of employees look after the power supply, power cut-off, repair of electrical

equipments.

4) Instrumentation group of employees works on the instruments keep them workable in all the

times. Malfunctioning instruments are calibrated /set to work as desired by the process operation.

All these three maintenance departments maintain workshop equipped with modern machines. There is a wing

which looks after the quality control of the products. This is known as technical service wing. They keep

advising from time to time to enhance product quality thus helping in increasing productivity.


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A group of chemicals under this wing are engaged in a well equipped laboratory. They analyze the process

reaction and inform the operating group so that they can take action to correct the reaction. There is a wing to

look after the safety of the employees as well as the machineries, equipment used in the factory. To enhance the

safety sense among employees the seminars, training programmes are arranged from to time. A well equipped

fire fighting department is in function. All kinds of Materials to be purchased or dispatched are taken by the

Material management department.

To develop skills of the employees there is an independent training centre equipped with training workshops for

different trades, library, class rooms and laboratory etc. Seminars in different subjects are arranged from time to

time for development of knowledge and skills of the employees. In addition to above the department like

Personnel & Welfare, Human Resource Development, Public Relation, Administrative, Finance etc. take care of

the employees for their better lively hood. The overall security of factory is under CISF(Central industrial

Security Force).

Revamping Project:

Hindustan Fertilizer Corporation Ltd. was a gas based fertilizer factory producing Urea. The plants consisting of

Ammonia and Urea units with total designed capacity of 1400 TPD of Ammonia and 2167 TPD of Urea were

installed and commenced production in three stages, Namrup-I,II,III during 1969,1976 and 1987 respectively

However, the performance of the unit has been far from satisfactory due to the continuing hardware and

equipment problems leading to a very frequent production outages and losses. Namrup-I is lying idle since 1994

requiring major repair and replacements. Namrup-II & III are on steam through their performance need to be

improved.

BVFCL was awarded contract to Process Licensors for examining the technical & economical feasibility of

either future revamping of the existing Namrup plants to achieve energy consumption levels which are

comparable to that of other gas based units within the country or setting up of a new Brown filed project to

effectively utilize the natural gas available to BVFCL. Considering the above facts BVFCL has requested DOF

(Department of Fertilizer) to allocate fund for the year 2011-12 for setting up Brown filed ammonia-urea

complex. The company has received Rs. 45 crores as plan fund for the year 2010-11 and has already proposed

requirement of Rs. 134 crores as plan fund for the year 2011-12 in addition to fund requirement for setting up

Brown filed ammonia-urea complex

Scheme of De-Merger:


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Namrup Fertilizer Complex has not only been supplying much needed fertilizers required by farmers and

foreign exchange earning planters of this region, but also supplementing Government efforts to educate farmers

with various agronomic services. The historic condition made by Namrup Fertilizer Factory is the creation of an

industrial society and environment in the North-Eastern region of country. Namrup was originally a unit of

Hindustan Fertilizer Corporation Ltd. The other units were situated at Haldia and Durgapur at West Bengal and

Barauni of Bihar. But due to the constant loss faced by the other units except Namrup the Government of Indiahas decided to wind up the other factories and declared Namrup plant as a new company with the name

BVFCL. Namrup-I is now closed down because of its old design the company is going into losses, Namrup

II& III plant are currently running is full swing with a capacity of 1000 MT and Urea per day .

Thus out of the rural landscape, Namrup fertilizer complex in the north-eastern region. Namrup being the oldest

factory of HFCL, is always looking forward to higher fertilizer production and will always continue to

contribute towards economic development of the nation in general and this region in particular. Namrup

Fertilizer Complex is conscious of its obligations and it has been making every endeavor to achieve its goal.Today it is standing as a tower spreading its beacon all round this region.

Environmental Aspects:

In regard to environmental protection, special consideration is given to control of discharge of industrial wastes

in all forms of solid, liquid and gas in BVFCL, industrial area. Some of the discharge from the plants are

particular matters like Oxides of Carbon, Ammonia Vapour etc(in air), suspended materials, Acidic, Alkalinesubstances, Nitrogenous Matters (in water). As Namrup-II group of were set up in several seventies, specific

attention was not paid to the aspect of pollution and in-built facilities were not provided for pre-treatment of

discharged effluents. However, Namrup-III plants came up with in built facilities for treatment and recycling of

recovered solution back into the process and discharge of effluents from Namrup-III generally conform to the

standards as per the Environmental Protection Act. Under the revamp scheme, these facilities are being

provided in Namrup-II plants also. Several schemes that have been implanted are- Ammonia cal Effluent

Control Scheme, Chromium Effluent, Oil Removal Scheme, PH control, safe disposal of hazardous wastes and

emissions. Regular monitoring has been done to check the gaseous emission level. BVFCL, Namrup has been

contemplating on maintaining all the safety and environmental related to agriculture.


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1.3 Introduction to Ratio Analysis:

To study the financial position of a firm various tools can be used. The ratio analysis is one of the most

powerful tools of financial analysis. It is process of establishing and interpreting various ratios (quantitative

relationship between figures and groups of figure). It is with the help of ratios that the financial statements can

be analyzed more clearly and decisions made from such analysis.

Meaning of Ratio:

A ratio is simple arithmetical expression of the relationship of one number to another. It may be defined as the

indicated quotient of two mathematical expressions. According to Kohler, a ratio is the relation, of the amount

a to another b expressed as the ratio of a to b: a:b (a is to b);or as a simple fraction ,integer, decimal, fraction

or percentage. In simple language ratio is one number expressed in terms of another and can be worked out bydividing one number into the. Ratio analysis is a technique of analysis and interpretation of financial statements.

It is the process of establishing and interpreting various ratios for helping in making certain decisions. However,

ratio analysis is not an end in itself. It is only a means of better understanding of financial strengths and

weaknesses of a firm. Calculation of mere ratios does not serve appropriate ratios are analyzed and interpreted.

There are number of ratios which can be calculated from the information given in the financial statements, but

the analyst has to select the appropriate data and calculate only a few appropriate ratios from the same keeping

in mind the objective of analysis.

Interpretation of the Ratios:

The interpretation of ratios is an important factor. Though calculation of ratios is also important but it is only a

clerical task whereas interpretation needs skill, intelligence and foresightedness. The inherent limitations of

ratios analysis should be kept in mind while interpreting them. The impact of factors such as price level

changes, change in accountings polices, window dressing etc., should also kept in mind when attempting to

interpret ratios.

A single ratio in itself does not convey much of the sense. To make ratios useful, they have to be further

interpreted. The interpretation of the ratios can be made in the following ways:


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1. Single Absolute Ratio: Generally speaking one cannot draw any meaningful conclusion when a single

ratio is considered in isolation. But single ratio may be studied in relation to certain rules of thumb

which are based upon well proven conventions as for example 2:1 is considered to be a good ratio for

current assets to current liabilities.

2. Group of Ratios: Ratio may be interpreted by calculating a group of related ratios. A single ratio

supported by other related additional ratios becomes more understandable and meaningful. For example,

the ratio of current assets to current liabilities may be supported by the ratio of liquid liabilities to draw

more dependable conclusion.

3. Historical Comparison: One of the easiest and most popular ways of evaluating the performance of the

firm is to compare its present ratios with past ratios called comparison overtime. When financial ratios

are compared over a period of time, it gives an indication of the direction of change and reflect whetherthe firms performance and financial position has improved, deteriorated or remain constant over a period

of time. But while interpreting ratios from comparison over time, one has to be careful about the

changes, if any, in the firms polices and accounting procedures.

4. Projected Ratios: Ratios can also be calculated for future standards based upon the projected or

proforma financial statements. These future ratios may be taken as standards for compared with the

standards ratios to find out variances, if any. Such variances help in interpreting and taking corrective

action for improvement in future.

5. Inter-firm Comparison: Ratios of one firm can also be compared with the ratios of some other selected

firms in the same industry at the same point of time. This kind of comparison helps in evaluating relative

financial position and performance of the firm. But while making use of such comparison one has to be

very careful regarding the different methods, policies and procedures adopted by different firms.

Uses of Ratio Analysis:

The use of ratios is not confined to financial managers only. The supplier of goods on credit, banks, financial

institutions, investors, shareholders and management all make use of ratio analysis as a tool in evaluating the

financial position and performance of a firm for granting credit, providing loans or making investments in the

firm. With the use of ratio analysis one can measure the financial condition of a firm and can point out whether


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the condition is strong, good, questionable or poor. The conclusions can also be drawn as to whether the

performance of the firm is improving or deteriorating. Thus, ratios have wide applications and are of immense

use today.

A. Managerial use of ratio Analysis:

1) Helps in decision-making: Financial statements are prepared primarily for decision making. But

the information provided in financial statements is not an end in itself and no meaningful

conclusion can be drawn from these statements alone. Ratio analysis helps in making decisions

from the information provided in these financial statements.

2) Helps in financial forecasting and planning: Ratio analysis is of much help in financial

forecasting and planning. Planning is looking ahead and the ratios calculated for a number of

years work as a guide for the future. Meaningful conclusions can be drawn for future from these

ratios. Thus, ratio analysis helps in forecasting and planning.

3) Helps in communication: The financial strength and weakness of a firm are communicated inamore easy and understandable manner by the use of ratios. The information contained the

financial statements is conveyed in meaningful manner to the one for whom it is meant. Thus

ratios help in communication and enhance the value of the financial statements.

4) Helps in co-ordination: Ratios help in co-ordination which is of utmost importance in effective

business management. Better communication of efficiency and weakness of an enterprise results

in better co-ordination in the enterprise.

5) Helps in control: Ratios analysis even help in making effective control of the business. Standards

ratios can be based upon proforma financial statements and variances or deviations, if any, can be

found by comparing the actual with the standards so as to take a corrective action at the right

time. The weaknesses or otherwise, if any, come to the knowledge of the management which

helps in effective control of the business.

6) Other uses: There are so many other uses of the ratio analysis. It is an essential part of the

budgetary control and standard costing. Ratios are of immense importance in the analysis and

interpretation of financial statements as they bring the strength or weakness of the firm.

B. Utility to shareholders/Investors: An investor in the company will like to assess the financial position

of the concern where he is going to invest. His first interest will be the security of his investment and

then a return in the form of dividend or interest. For the first purpose he will try to assess the value of

fixed assets and the loans raised against them. The investor will feel satisfied only if the concern has


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sufficient amount of assets. Long-term solvency ratios will help him in assessing financial position of

the concern. Profitability ratios, on the otherhand, will be useful to determine profitability position.

C. Utility to Creditors: The creditors or suppliers extend short-term credit to the concern. They are

interested to know whether financial position of the concern warrants their payments at a specified time

or not. The concern pays short-term creditors out of its current assets. If the current assets are quitesufficient to meet current liabilities then the creditor will not hesitate in extending credit facilities

Current and acid-test ratios will give an idea about the current financial position of the concern.

D. Utility to Employees: The employees are also interested in the financial position of the concern

especially profitability. Their wage increase and amount of fringe benefits are related to the volume of

profits earned by the concern. The employees make use of information available in financial statements

Various profitability ratios relating to gross profit, operating profit, net profit etc. enable employees to

put forward their viewpoint for the increase of wages and other benefits.

E. Utility to Government: Government is interested to know the overall strength of the industry. Various

financial statements published by industrial units are used to calculate ratios for determining short-term

long-term and overall financial position of the concerns. Profitability indexes can also be prepared with

the help of ratios. Government may base its future policies on the basis of industrial information

available from various units. The ratios may be used as indicators of overall financial strength of public

as well as private sector. In the absence of the reliable economic information, governmental plans and

policies may not prove successful.

F. Tax Audit Requirements: Section 44 AB was inserted in the Income Tax Act by the Finance Act

1984. Under this section every assessee engaged in any business and having turnover or gross receipts

exceeding Rs. 40 lakh is required to get the accounts audited by a chartered accountants and submit the

tax audit report before the due date for filing the return of income under Section 139 (I). In case of a

professional, a similar report is required if the gross receipts exceed Rs. 10 lakh. Clause 32 of the

Income Tax Act requires that the following accounting ratios should be given:

1) Gross Profit/Turnover

2) Net Profit/Turnover

3) Stock-in-trade/Turnover

4) Material Consumer/Finished Goods Produced


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Limitations of Ratio Analysis:

The ratio analysis is one of the most powerful tools of financial management. Though ratios are simple to

calculate and easy to understand, they suffer from some serious limitations:

A. Limited use of Single Ratio: A single ratio, usually, does not convey much of a sense. To make a better

interpretation a number of ratios have to be calculated which is likely to confuse the analyst than help

him in making any meaningful conclusion.

B. Lack of Adequate Standards: There are no well accepted standards or rules of thumb for all ratios

which can be accepted as norms. It renders interpretation of the ratios difficult.

C. Inherent Limitations of Accounting: Like financial statements, ratios also suffer from the inherent

weakness of accounting records such as their historical nature. Ratios of the past are not necessarily true

indicators of the future.

D. Change of Accounting Procedures: Change in accounting procedure by a firm often makes ratio

analysis misleading, e.g., a change in the valuation of methods of inventories, from FIFO to LIFO

increases the cost of sales and reduces considerably the value of closing stocks which makes stock

turnover ratio to be lucrative and an unfavorable gross profit ratio.

E. Window Dressing: Financial statements can easily be window dressed to present a better picture of its

financial and profitability position to consider. Hence, one has to be very careful in making a decision

from ratios calculated from such financial statements. But it may be very difficult for an outsider toknow about the window dressing made by a firm.

F. Personal Bias: Ratio are only means of financial analysis and not an end in itself. Ratios have to be

interpreted and different people may interpret the same ratio in different ways.

G. Uncomparable: Not only industries differ in their nature but also firms of the similar business widely

differ in their size and accounting procedures, etc. It makes comparison of ratios difficult and

misleading. Moreover, comparisons are made difficult due to differences in definitions of various

financial terms used in the ratio analysis.

H. Absolute Figures Distortive: Ratios devoid of absolute figures may prove distortive as ratio analysis is

primarily a quantitative analysis and not a qualitative analysis.

I. Price Level Changes: while making ratio analysis, no consideration is made to the changes in price

levels and this makes the interpretation of ratios invalid.

J. Ratios no Substitutes: Ratio analysis is merely a tool of financial statements. Hence, ratios become

useless if separated from the statements from which they are computed.


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Classification of Ratios :

Classification of ratios depends upon the objectives for which they are calculated. It may also depend upon the

availability of data. Analysis of financial statements is made with a view to ascertain the efficiency and

financial soundness of the company, as such Ratios can be classified on the basis of profitability, turnover and

financial capability. For our purpose we have classified ratios as:

1. Liquidity Ratios- Liquidity refers to the ability of a concern to meet its current obligations as and when these

become due. The short term obligations are met by realizing amount from current, floating or circulating

assets. The current assets should either be liquid or near liquidity. These should be convertible into cash for

paying obligations of short-term nature. To measure the liquidity of a firm, the following ratios can be

calculated:

a) Current Ratio

b) Quick or Acid Test or Liquid Ratio

c) Absolute Liquid Ratio or Cash Position Ratio.

2. Solvency RatioIt shows the proportion of debt and equity in financing the firms assets. Many variations

of these ratios exist but all these ratios indicate the same thing. The extent to which the firm has relied on

debt in financing assets. Some of the Solvency Ratio are:

a) Debt Ratio

b) DebtEquity Ratio

3. Turnover ratios It reflects the firms efficiency in utilizing its assets. Several activity ratios can be

calculated to judge the effectiveness of asset utilization. Some of them are:

a) Inventory turnover

b) Days of Inventory Holding


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c) Debtors Turnover Ratio

d) Debtors collection Period

e) Fixed Assets Turnover Ratio

f) Current Assets Turnover Ratio

g) Creditors Turnover

h) Average Creditors Payment Period

4. Profitability ratio It measures the overall performance and effectiveness of the firm. Some of the

profitability ratios are -

a) Gross profit Margin Ratio

b) Net Profit Margin Ratio

c) Return on Investment (before tax)

d) Return on Equity

5. Equity-Related Ratios-

a) Earnings Per Share

b) Dividend Per Share

c) Dividend Payout Ratio


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1.4 Scope of the study:

The field of Ratio Analysis is crucial for identifying the profitability of the company. Ratio Analysis helps the

management to make decision making process. The study was conducted to one organization i.e. Brahmaputra

Valley Fertilizer Corporation Ltd. (BVFCL) to make a comparative study of the financial statement with the

help of ratio analysis technique. Analysis was done within the organization and within the time period during

which the study was conducted. Each and every efforts are being made to reach realistic conclusion and to give

a true and clear picture of the financial statements with the help of various ratios.

1.5 Limitation of the study:

The limitations of the project are as follows:

1. The balance sheet of two years is studied.

2. The study is conducted within the framework of the Brahmaputra Valley Fertilizer Corporation Ltd.

3. Time taken to complete the project work is very limited.

4. The study aims at providing the practical knowledge by taking help of Corporation officials as well

other staff members of the finance department.

5. The analysis and the result of the studying are applicable only to BVFCL not to the other corporation.6. The accuracy of the analysis of the companies and suggestion is totally depends upon the information

shared with and the observation.

7. The primary data collected are assumed to be correct.


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CHAPTER ( 2 )

OBJECTIVE OF THE STUDY


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OBJECTIVES OF THE STUDY

The main aim of the study is to get an overview of the Financial Statement of Brahmaputra Valley Fertilizer

Corporation Ltd. Namrup with the help of ratio analysis technique. And the specific objectives are as follows:

1.To provide a glimpse of Brahmaputra Valley Fertilizer Corporation Limited.(Namrup)

In my project I have studied about the three plants of the company i.e. Namrup- I, II & III. The method

that is used to find out this objective is through Internet, Companys website, Companys brochure etc.

2. To understand the functioning of various sections of the Finance Department of Brahmaputra

Valley Fertilizer Corporation Limited (BVFCL).

3.To make a comparative study of the Financial Statements of two years viz. 2009-10 and 2010-11 of

BVFCL:

The main purpose of this objective is to analyze the financial position of the company through ratio

analysis with reference to the balance sheet of two financial years. The method that is used to find out

this objective is through Companys Annual Report.

4.To suggest measures for underperformance of BVFCL.

I have also studied the underperformance of the company. There are many reasons for the

underperformance of the company which I have with the help of ratio analysis techniques.

5.To provide a sound basis for evaluating the productivity, efficiency and profitability of companys

current performance level.

After analyzing the financial position of the company through ratio analysis with the data collected from

the companys Annual Report, I have came to know the current performance level of the company andits efficiency.


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CHAPTER ( 3 )



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Definition:

Research methodology is a way to systematically show the research problem. It may be understood as a science

of studying how research is done scientifically. It is necessary for the researcher to know not only the research

methods but also the methodology. This section includes the methodology which includes the research design

sources of data, and tools of analysis and plane of analysis.

Good Research Requires:

The scope and limitations of the work to clearly defined.

The process to be clearly explained so that it can be reproduced and verified by other

researchers.

Highly ethical standards are applied.

Data be adequately analyzed and explained.

All findings are presented unambiguously all conclusions be justified by sufficient evidence.

.

Research Design:

The research design of the study is both exploratory as well as quantitative in nature. The study begins with the

concept of knowing Fertilizer Industry in India and then about the activities and performance of Brahmaputra

Valley Corporation Ltd. in particular which is the exploratory part. Later various annual accounts data collected

with regards to BVFCL, Namrup is represented with the help of Ratio analysis, charts and graph which forms

the quantitative part of he study.


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Data Collection:

The objective of the project becomes imperative together various information about BVFCL, basically the

financial statement of Finance Department, the combination of various efforts were followed to obtain both

primary and secondary data.

Primary Data: Primary data are collected through various methods such as Observation and Personal

Interview with the officers of Finance Department.

Secondary Data: Secondary data are collected through various records registered maintained by the

organization e.g.- Accounting and Financial Record, Personal Records and the Annual report of the

two respective years. It also provides us online data collection facility; data serve as the basis for

analysis

Tools and Techniques:

For analysis of data, various qualitative as well as quantitative tools have been used to make the study simple

and precise. The tools like bar graph are used for the understanding of the data more clear, meaningful and

interesting.

Plan of Analysis:

Charts and Graphs were used for the analysis of collected data.


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CHAPTER ( 4 )

DATA ANALYSIS AND INTERPRETATION


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DATA ANALYSIS AND INTERPRETATION

1. CURRENT RATIO: Current ratio may be defined as the relationship between current assets and current

liabilities. This ratio, also known as working capital ratio, is a measure of general liquidity and is most widely

used to make the analysis of a short term financial position or liquidity of a firm. It is calculated by dividing

the total of current assets by total of the current liabilities.

Current Ratio= Current Assets / Current Liabilities.

Figures ( In Lakhs )

Brahmaputra Valley Fertilizer Corporation LimitedYear 2010-11 2009-10

Current Assets 34894.00 26065.57

Current Liabilities 20890.19 18203.43

Current Ratio 1.670 1.432

Table: Current Ratio

Fig: Current Ratio

0.000

0.200

0.400

0.600

0.800

1.000

1.200

1.400

1.600

1.800

2010-11 2009-10

1.6701.432


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INTERPRETATION:

The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands. Acceptable

current ratios vary from industry to industry. If a company's current assets are in the range of 2:1, then it is

generally considered to have good short-term financial strength. If current liabilities exceed current assets (thecurrent ratio is below 1), then the company may have problems meeting its short-term obligations. If the current

ratio is too high, then the company may not be efficiently using its current assets.

As a conventional rule a current ratio of 2 to 1 or more is considered satisfactory. This rule is based on

the logic that in a worse situation, even if the value of current assets becomes half, the firm will be able to meet

its obligation. However an arbitrary standard of 2 to 1 should not be blindly followed. Firms with less than 2 to

1 current ratio may be doing well, while firms with 2 to 1 or even higher current ratios may be struggling to

meet their obligations. This is because current ratio is a measure of quantity and not quality.

ANALYSIS:

The liquidity position of BVFCL in 2010-11 is 1.670 which is better when compared with the year 2009-10

(i.e., 1.432). The reason for the increase in the current ratio is mainly due to the increase in the current assets by

74.70 %, mainly on account of increase in sundry debtors, cash & bank balances.

2. QUICK RATIO:

Quick Ratio, also known as Acid Test or Liquid Ratio, it is a more rigorous test of liquidity than the

current ratio. The term Liquidity refers to the ability of a firm to pay its short term obligations as and when

they become due. Quick ratio may be defined as the relationship between quick/liquid assets and Quick or

liquid liabilities.

Quick Ratio or Acid Test Ratio = Quick or Liquid Assets/Quick Liabilities



Year 2010-11 2009-10

Quick Assets 31131.47 22019.07

Quick Liabilities 17032.04 15260.68

Quick /Acid Test Ratio 1.830 1.440

Table: Quick Ratio


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Fig: Quick Ratio

INTERPRETATION:

All current assets are not equally liquid. While cash is readily available to make payments to suppliers and

debtors can quickly convert in to cash, inventories are two steps away from conversion into cash (sale &

collection). Thus a larger current ratio by itself is not a satisfactory measure of liquidity when inventories

constitute a major part of the current assets. Therefore the quick ratio, or acid test ratio, is computed as a

supplement to the current ratio. The ratio relates highly liquid current assets, usually current assets less

inventories, to current liabilities. A general rule of thumb states that the ratio should be 1 to 1 (or 1:1 or 1/1)

Generally, a quick ratio of 1to 1 is considered to represent a satisfactory financial condition. However it

should be remembered that all debtors may not be liquid and all the inventories are not absolutely non- liquid.

Thus a company with a high value of quick ratio can suffer from the shortage of funds if it has slow paying,

doubtful and long-duration outstanding debtors. On the other hand, a company with a low value of quick ratio

may really be prospering and paying its current obligation in time if it has been turning over its inventories

effectively.

0.000

0.200

0.400

0.600

0.800

1.000

1.200

1.400

1.600

1.800

2.000

2010-11 2009-10

1.830

1.440

Quick /Acid Test Ratio


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ANALYSIS:

The Quick ratio of BVFCL in the year 2010-11 is 1.83 which is better as compared to the year 2009-10 (i.e.

1.44) which shows that in the year 2010-11 the company has the capacity to pay off its current obligation

immediately and also it can easily converts its quick assets i,e cash and bank balances, sundry debtors, loans

and advances to meet its current liabilities as compared to the year 2009-10.

3. ABSOLUTE LIQUIDITY RATIO or CASH RATIO: Absolute liquid ratio should also be calculated

together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find

out the absolute liquid assets. Absolute Liquid Assets include cash in hand and at bank and marketable

securities or temporary investments. The acceptable norm for this ratio is 50% or 0.5 : 1 or 1:2 i.e. 1 worth

absolute liquid assets are considered adequate to pay Rs 2 worth current liabilities in time as all the creditors

are not expected to demand cash at the same time and then cash may also be released from debtors and

investments.

Absolute Liquid Ratio = Absolute Liquid Assets/Current Liabilities



Year 2010-11 2009-10

Absolute Liquid Assets 16833.43 15489.37

Quick Liabilities 20890.19 18203.43

Absolute Liquid Ratio 0.806 0.851

Table: Absolute Liquid Ratio


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Fig: Absolute Liquid Ratio

INTERPRETATION:

Since cash is the most liquid asset, a financial analyst may examine cash ratio and its equivalent to current

liabilities. Trade investment or marketable securities are equivalent of cash; therefore, they may be included in

the computation of cash ratio.Cash Ratio shows the extent to which cash and marketable securities are able to

meet the current liabilities.

ANALYSIS:

In 2010-11 the absolute liquid ratio is (0.806) which is quite lower as compared to 2009-10 i.e. (0.851). But

still the company can easily convert its cash in hand, cash at bank balances to meet its current liabilities since

the ratio 0.806 is quite satisfactory because it is much higher than the rule of thumb i.e. 0.500

4. DEBT RATIO: Debt Ratio = Debt/Capital Employed (Debt + Equity)



Year 2010-11 2009-10

Debt 90034.90 77760.9

Capital Employed 126618.14 114344.14

Debt Ratio 0.711 0.680

Table: Debt ratio

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

0.900

2010-11 2009-10

0.806 0.851

Absolute Liquid Ratio


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Fig: Debt Ratio

INTERPRETATION:

The Debt Ratio establishes the relationship between the longs- terms funds raised from outsiders and total

long- term funds available in the business. The lesser the reliance on outsiders the better it will be. If this

ratio is smaller, it is better for the business itself; up to 50% or 55% this ratio may be acceptable.

ANALYSIS: Since the company is running in losses for the past several years so the dependency on

outsiders funds has increased. From the above table it can be seen that the debt ratio of the two considered

years (71 % & 68%) is very much beyond the acceptable rule of thumb i.e. 50% to 55%. The main reason

for increase in the debt ratio of the two years is mainly because of increase in the loan from Bank of India

(Noida) and Government of India.

5. DEBT- EQUITY RATIO: Debt- equity ratio is also known as External- Internal Equity Ratio is

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

assets. This ratio indicates the relationship between the external equities or the outsiders funds and the

internal equities or the shareholders funds.

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

2010-11 2009-10

0.711 0.680

Debt Ratio


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Debt- Equity Ratio= Outsiders Funds / Shareholders Funds



Year 2010-11 2009-10

Long Term Debts 90034.90 77760.9

Share Holder's Fund 36583.24 36583.24

Debt Equity Ratio 2.461 2.126

Table: Debt- Equity Ratio

Fig: Debt-Equity Ratio

INTERPRETATION:

The debtequity ratio is calculated to measure the extent to which debt financing has been used in a business

The ratio indicates the proportionate claims of owners and the outsiders against the firms assets. The main

purpose is to get an idea of the cushion available to outsiders on liquidation of the firm. As a general rule, there

should be an appropriate mix of owners funds and outsiders funds in financing the firms assets. The

interpretation of this ratio mainly depends upon the financial policy of the firm and upon the firms nature of

0.000

0.500

1.000

1.500

2.000

2.500

2010-11 2009-10

2.4612.126

Debt Equity Ratio


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business. A ratio of 1:1 may be considered to be a satisfactory ratio although there cannot be any rule of

thumb or standards for all type of business.

ANALYSIS:

For the year 2009-10 the debt-equity ratio of BVFCL is the lower (2.126) when compared to the year 2010-

2011 (2.461). As the debt equity ratio of both the considered financial years is high as compared to the rule of

thumb 1:1, so the company should keep this ratio as low as possible. The main reason for increase in the debt

equity ratio was due to increase in the outsiders funds.

6. INVENTORY TURNOVER RATIO OR STOCK:

Every firm has to maintain a certain level of inventory of finished goods so as to be a

Documents

“Comparative Analysis of Financial Statement with the help of Ratio Analysis Techniques”