Varmora Tiles Industry-BBA-MBA Project Report

8/4/2019 Varmora Tiles Industry-BBA-MBA Project Report

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A

PROJECTREPORT

ON

VARMORAVITRIFIED TILES

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Sr. Particulars PageNo.

1 GeneralInformation

7-16

2 ProductionDepartment

17-28

3 PersonnelDepartment

29-47

4 MarketingDepartment

48-62

5 FinanceDepartment

63-78

6 SWOT Analysis 79-80

7 Future Plans 81-82

8 Suggestion 83-84

9 Conclusion 85-86

10 Bibliography 87-88

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1 Bio Data of Company 9

2 History & Development of Organisation

10

3 Organisation Chart 124 Size of the firm 13

5 Form of Organisation 14

6 Location and site preference 15

7 Time Keeping System 16

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BIO DATA OF COMPANY

Name of the Firm Varmora Granite Pvt.Ltd.

Year ofEstablishment

2002

Form ofOrganisation

Private Limited

Size of Organisat ion Medium Scale

Location of Office Priya DarshiniComplex,Office No. 415,Savsar Plot,Morbi 363 641

Location of Factory Varmora Granite Pvt.Ltd.8/A, NationalHighway,

DhuvaPhone NumberOffice

02822 220213,227171

Phone NumberFactory

08282 287500-700-900

Fax Number 02822 287558E-Mail [email protected] Site www.varmora.comRegistered

Certificate No.

U26914GJ2002 PPC

43194Sales Tax No. 0922008001CST No. 99984063Excise RegistrationNo.

AABCV7523MXM001

Product Vitrified TilesNo. of Employees 107Bankers SBS Main Branch,

Morbi

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mailto:[email protected]://www.varmora.com/mailto:[email protected]://www.varmora.com/


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products in Village Sara. It is established in 1984.

They started a unit of manufacturing of roofing tiles

under name and sty le M/s. Sunshine Tiles and

potteries at Morbi. They have secured mill from

SBS Main Branch, Morbi.

In 1987, they have organised another roofing tiles

unit at Lilapur Road, Morbi under the name and

style of M/s. Jaystar Industries. The workers are

very familiar to work in this industry.

In 1991, they have organised another unit of

manufacture of nuts and bolts of MS and SS at

Vadhwan GIDC under the name and style of

Sunshine Fasteners.

In 1994, they have started the other products.

They manufacture of ceramic glazed wal l t iles

under the name and style of M/s. Sunshine

Ceramics. In 1998, they have also started another

industry, under the name and style of M/s. Jayson

Ceramics

Looking to the demand of ceramic floor tiles

experience in this l ine is most important and the

group has more than 60 dealers network, which is

necessary to business. So, they have also started

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another industry, under the name and style of M/s.

Sunhill Ceramics Pvt. Ltd.

In 2002, they have also started another industry,

under the name and style of M/s. Varmora Granite

Pvt. Ltd. This industrys product is to manufacture

vitrified tiles only.

It is good for them that they dont have to f ind

another young team because i t is already wel l

equipped with the family members.

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ORGANISATION CHART

ChairmanChairman

Production

DepartmentProduction

Department

Marketing

DepartmentMarketing

Department

Finance

DepartmentFinance

Department

Production

Manager

Production

Manager

Laboratory

TestingLaboratory

Testing

Supervision

ManagerSupervision

Manager

WorkersWorkers

Marketing

Manager

Marketing

Manager

State Marketing

Manager

State Marketing

Manager

Marketing

OfficerMarketing

Officer

Dispatch

ExecutiveDispatch

Executive

ClerkClerk

Marketing

OfficeMarketing

Office

SalesSales

Finance

Administrative

Finance

Administrative

Chief

AccountantChief

Accountant

AccountantAccountant

PeonPeon

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SIZE OF THE FIRM

According to the definition given by Government of

India, the size of the industry can be divided into

three main types.

Small Scale Organisation

Medium Scale Organisation

Large Scale Organisation

If companys investment in plant and machinery is

more than 3 crores, it is called large scale

organisation.

The investment of Varmora Granito Pvt. Ltd. in

fixed assets is of Rs. 140100000. Therefore, it is

coming under the category of large scale

organisation. It also uses manpower, electronic

machinery and having more than 1700 workers.

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FORM OF ORGANISATION

According to the form of organisation, the

organisation can be divided as follows:

Private sector unit

Public sector unit

Joint sector unit

In this firm, it is a private limited firm.

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LOCATION ANDSITE PREFERENCE

The site of this unit is located at 8/A National

Highway, at Dhuva, which is only 18 Kms. away

from Morbi City. It is in ceramic zone with numbers

of other ceramic units. It is a main and most

important part of industry has chosen very simple

and suitable locat ion. It p lays a vital role for

location.

Land

In Dhuva at Morbi, land and labour are found very

cheap, so Varmora Vitri fied t iles started at this

place.

Labour

In big city labour cost is very high, but in Dhuva at

Morbi provide cheap and educated skil led labour

because of the ceramic zone is situated.

Transport

In Dhuva at Morbi is situated in ceramic zone, so

transportation facilities are also available.

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TIME KEEPING SYSTEM

Time keeping system is very important as all the

workers should arrive at reporting time and start

their work immediately. If they are irregular than

there would be less outcome and expected target

will not be achieved. Therefore, the workers are

given cards in which their arrival and departure

time is written regularly and therefore punctuality

is maintained.

Industry

This industry is running for continuous process i.e.

24 hours. It is working in 3 shifts. They are:

08:00 AM to 04:00 PM

04:00 PM to 12:00 Midnight

12:00 Midnight to 08:00 AM

Office

Office hours for industry are as under.08:00 AM to 12:00 Noon

02:00 PM to 06:00 PM

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1 Introduction 19

2 Raw Material Availability 20

3 Raw Material Used 21

4 Inspection of rawmaterial

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5 Types of machines 23

6 Process of production 25

7 About products 27

8 Quality Management 28

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INTRODUCTION

The product ion of a fi rm is concerned with the

creation of a product or services required to satisfy

customer needs. In any business, suppliers are

needed for product or service, it is quite obvious

that activities of production system must be related

to the customer demand or reflected in the

continuous flow of order.

It is the most important department amongst the

other departments of an organisation. Personnel

department, finance department, marketing

department are very much depended on production

department.

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RAW MATERIALAVAILABILITY

Raw materials are the basic requirement for any

industry. Raw materials are converted into finished

goods after various processes on it.

Raw materials are available with help of roadways

if purchased from the country. If the materials are

purchased from other countries than it is available

with help of railways.

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RAW MATERIAL USED

List of raw materials used for production of vitrified

tiles

RawMaterial

Place where it isobtained

Potsfeldspar

Rajasthan

Sodafeldspar Rajasthan

Quartz RajasthanBall Clay RajasthanAshapura

ClayKutch

KadappaClay

Andhra Pradesh

China Clay Gujarat

UkraineClay Import from Europe

STPP Import from ChinaBody Stain Import from Italy

SolubleSalts

Import from China

LPG Madhya PradeshGujarat

Zircon Import from Australia

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INSPECTIONOF RAW MATERIAL

Raw materials are inspected and checked before

they are sent to product ion department. I t is

maintained in Varmora as per guidelines of ISO-

9002.

Flow chart for inspection of raw material can be

showed as follows.

Sampling from truck

MC% content

Grinding

Drying

Powder preparation

MC% addition

Pressing

Drying

Firing

Loss on ignition

Fired colour

Water absorption

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TYPES OF MACHINES

90% of machineries used in Varmora Vitrified Tiles

are imported from Japan.

List of Machineries

Weighing hopper

Conveyor

Wader

Ball mill

Stirrer

Blunger

Spray drier

Slip pump

Silos

Vibrator with magnet

Elevator

Hydraulic press (h600 mt)

Chilling plant

Loading machine

Horizontal dryer cooler box

Glaze line

Unloading machine

Screen printing machine

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Compensator

Head polishing line

Fast single layer roller kiln

Chamfering line

Souring line

Plastic strapping machine

Fork lift

Air compressor

Vertical drier

Generators

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PROCESS OF PRODUCTION

Production process is very important process as the

product manufactured in the company should

satisfy the need of the customer. The quality is

also to be maintained and the given target should

be achieved in the given time period. The following

are the main production stages.

Processing of raw material

The first and foremost step to manufacture vitrified

tiles is batching i.e. feeding the box with different

types of clay according to the percentage decided.

Batching includes following types of clay.

Ukraine Clay 16%

Ball Clay 5%

China Clay 20%

Soda Feldspar 19%

Potash Feldspar 35%

Quartz 5%

Formation of tile body and drying

The powder is taken from the silos and after sieving

on a vibrator f itted with a magnet, i t is fed into

hoppers of the hydraulic press where the powder is

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pressed in the shape of a tile of specific size as per

the cavity of the die. Green tiles coming out of the

press are sent to the horizontal roller dryer where

they are heated to a specified temperature to

remove the moisture.

Preparation of designs and screen printing of

tiles

In the glaze line and printing section, various types

of designs are prepared and printed on the dried

tiles by applying colours on the screen printing

machine.

Firing

The t iles thereafter are fed into the fast single

layer roller kiln in which the tiles are fired. The

kiln has different temperatures ranging from 5000C

to 15000C in different zones.

Polishing

The baked tiles are subjected to polishing by using

32 head pol ishing l ine. The t iles are also side

chamfered. Multi finish tiles do not need polishing

operation.

Sorting and packing

The polished tiles are subjected to quality checking

and sorting, where an operation marks out t iles

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with defects and different grades quality. Different

grades of finished tiles are then packed into

different types of packing box which are marked

accordingly.

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ABOUT PRODUCTS

Varmora Vitrified Tiles are manufacturing vitrified

tiles having various categories and sizes. They

manufacture tiles of different plain colours like:

Terry cotton

Mushroom

Ruby pink

Jaisalmer

Dove gray

Ivory

Jet black

White

Aqua marina, etc.

In marble series, they are having following range.

Vogue

Venice

Valerie

Vixen

Volcano

Virgin

Vital

Allun

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Arktic,Venus, etc.

QUALITY MANAGEMENT

Quality control means checking the quality, size,

shape, capacity and usefulness of some of the

samples selected from lot of the finished product.

I f any variations are there than they are to be

corrected or that useless product is send to scrap

yard. A well defined quality management system

satisfying ISO 9001-2000 quality standard and

continual improved.

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1 Introduction 312 Organisation Chart 32

3 Recruitment and Selection 33

4 Human Resource Planning 35

5 Placement & Induction 36

6 Training of Employee 37

7 Performance AppraisalSystem

38

8 Wage & SalaryAdministration 39

9 Trade Union 40

10 Collective Bargaining 41

11 Record Keeping System 42

12 Employee Benefits 43

13 Provident Fund Scheme 44

14 Promotion & Transfer 45

15 Grievance Handling System 4616 Industrial Relation 47

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INTRODUCTION

Personnel management has a vital importance in

modern industrial organisation. Personneldepartment is the part of management, which is

primarily concerned with establishment and

maintenance of personnel relations.

In this company, there is a separate personnel

department, where all the decision regarding thepersonnels is taken by personnel manager. He has

the final authority. The personnel manager of this

firm is Shri Pramodkumar P. Patel.

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ORGANISATION CHART

In Varmora Vitrified Tiles Pvt. Ltd., separate

department for personnel for the achievement ofgoals and the personnel manager has authority and

higher status in the organisation in his own

department.

Board of Director

Managing Director

Executive Director

Personnel Director

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RECRUITMENTAND SELECTION

Recruitment

Every firm or company needs persons to perform

dif ferent works. In this shi ft ing process only

manpower have been determined, recruitment is

next logical step. It is a l inking activity bringing

together those with job and those seeking job.

According to one author, Recruitment is the

process of finding and attracting capable applicants

for employment. The process begins when new

results are sought and ends when their applications

are submitted. The result is a pool of applicants

from which new employees are selected.

Selection

Selection is a process of careful ly choosing the

candidates who offer themselves for appointment.

In selection many processes applies on raw

material but unit wants few persons. This is one of

the most important responsibilities. In selection,

the person who is having knowledge as wel l as

experience is selected.

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According to one author, It is the process of

d ifferentiating between applicants in order to

identify those with a greater livelihood of success

in a job.

Here in case of Varmora Granito, the co-selection

process includes basic four main steps.

Preliminary searching interview

Checking of reference

Comprehensive interview

Final employment decision.

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HUMANRESOURCE PLANNING

Human resource planning is understood as the

process of forecasting an organisat ions future

demand for and supply of the right type of people

in the right number. It is only after this that the

human resource department can initiate a

recruitment and selection process. Human

resource planning is a sub-system in the total

organisational planning. Organisational planning

includes management activities that set the

companys objectives for the future and determine

the appropriate means for achieving those

objectives. Human resource planning facilitates

the capitalisation of the companys objectives by

providing the right type and right number of

personnel. Human resource planning is like

mater ia l p lanning that estimate the type and

annuity of the materials and supplies needed to

facil itate the manufacturing activit ies of the

organisation. Human resource planning is variously

called manpower planning or employment planning.

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In case of this industry, human resource planning is

done as per the need.

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PLACEMENT & INDUCTION

An applicant who has cleared all the hurdles in the

selection procedure is offered a job. The main

problem after f inal selection is to place him on

some suitable job. The out of offering the job to a

finally selecting candidate is called placement. The

select ion procedure comes with placement of

workers on the job.

Induction is a technique by which a new employee

is rehabituated into the changed surrounding and

introduced to the practices, policies and purpose of

the organisation. In other words, induction means

introducing or orienting a new employee to the

organisation and to follow up for his adjustment in

the organisation.

In this industry, when a new employee is selected,

he is kept under the supervision of his superiorwhere he is trained. The new employee is provided

with the operational knowledge that is specific to

the position and location.

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TRAINING OF EMPLOYEE

Training refers to the imparting of specific skills

abilities and knowledge to an employee.

I t is any attempt to improve current or future

employees performance by increasing an

employees abi li ty to perform through learning,

usual ly by changing the employees att itude or

increasing his/her skills and knowledge. The need

for training is determined by the employees

performance deficiency.

At present training of workers is necessary because

many jobs have assumed highly technological

character and under automation. We require highly

skilled operatives. In Varmora Granito, the workers

who need training are kept under their supervisors

who give them training whi le training for staff

members or managerial level is given on the job.

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PERFORMANCEAPPRAISAL SYSTEM

Performance appraisal is the assessment of an

individuals performance in a systematic way. The

performance being measured against such factors

as job knowledge, quality and quantity of output,

initiative, leadership abilities, supervision,

dependability, co-operation, judgement, versatility,

health and like assessment should not be confined

to past performance alone. Potentials of the

employee for future performance must also be

assessed.

In Varmora Granito, the supervisor sees the

employees ability to do work properly and

efficiently, whether he understand his responsibility

or not, how is his behaviour towards his colleagues,

etc.

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WAGE & SALARYADMINISTRATION

Wage and Salary Administration refers to the

establishment and implementation of sound policies

and practices of employee compensation.

Wages are the economic compensation paid to the

workers for services derived by them. It can be

divided into two types i .e. piece wage and time

wage. In Varmora, there is time wage system and

it is paid on monthly basis . There wages are

calculated as per monthly wage rate according to

the minimum wages act of government. Salaries

are paid on monthly basis and its amount is by the

company according to working eff iciency of the

employee.

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TRADE UNION

Trade union means the union of the workers who

are permanent or temporary in the unit, where they

are working.

In Varmora Granito, there is no special trade union.

The purpose to make these unions is maintaining

the interest of workers and management. These

unions do not disturb without any special problem

and interfere in routine work. They always try to

maintain relations between employees and

management staff.

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COLLECTIVE BARGAINING

Collective bargaining means the process in which

conditions of employment are determined by

agreement between representative of the union on

one hand and those of the employer on the other

hand. It is called collective because both the

employer and employee act as a group rather than

individuals. It is described as bargaining because

the method of reaching an agreement involves

proposals and counter proposals, offers and

counter offers. In the highly industrialized

democratic societies of the west, more than 90% of

the disputes are between labour and management

which are settled through col lective bargaining

process.

In Varmora Granito, management is having

agreement with the employees regarding wage,

working conditions, promotion, transfer and otherfacilities like medical facility, etc.

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RECORD KEEPING SYSTEM

It is very much necessary for an organisation to

keep the reward of i ts workers and many other

details related to it.

The reward contains personnel as well as on the job

efficiency information of an employers or workers.

In Varmora Granito, the supervisor sees the

employee ability to do work properly and

effectively whether he understand his responsibility

or not, how is his behaviour towards his colleagues,

etc.

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EMPLOYEE BENEFITS

Now a day, most of the firms provide the provident

fund scheme or other facilities to their workers. It

is important as it is one kind of security of a

worker.

Varmora Granito provides various monitory and non

monitory benefits and services like:

Bonus 10% extra bonus is paid to workers.

Allowances Various types of allowances are

given to workers. Varmora provides two wheeler

facilities (Honda & Splendor) and 100% expense

of petrol.

Statutory Welfare Measures Under this, the

company provides f irst aid facil ity, cold water

facility, company distributes sweets and other

eatables on the festivals l ike Dashera, Diwali,

etc.

Loan Facility Loan is provided to employees

when in need. They are not charging any type of

interest on the loan. It is repaid in installments.

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PROVIDENT FUND SCHEME

Provident fund scheme is facility provided to every

employee may be at high post or low post. In this

scheme, a certain percent of employees salary is

oriented by the firm and on that 12% of interest is

paid and employee adds very certain fixed percent

to it, the interest is paid on both employee and

employers amount.

This industry has adopted this scheme. They are

putting 12% salary as Provident Fund, which is

refundable after the ret irement of employee or

when he is going abroad for permanent settlement

or when he is going for another job.

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PROMOTION & TRANSFER

Promotion

The promotion means to do upliftment within the

organisation. At this stage employees wage and

salary status, prestige moves towards the top level.

Their thinking is also increasing up in his duties

and responsibilities.

Therefore, a promotion is a vertical upward

movement in rank & responsibility.

Transfer

The transfer is a process of planning the employees

in the posit ion where they are l ikely to be more

effective, or where they are likely to get more job

satisfaction or it is movement of an employee from

one job to another without involving any

substantial changes in his duties, responsibil ity,

status, etc.

Therefore, transfer is exchange in job where new

job is substantial ly equal to old in terms of pay,

status and responsibilities.

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This company is only 2 years old, so there is no

such policy and programs formulated for promotion

as well as transfer.

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GRIEVANCEHANDLING SYSTEM

Grievance is any discount or dissatisfaction,

whether expressed or not, whether val id or not,

arising out of anything connected with the

company, which an employee thinks or believes or

even feels to be unfair, unjust or inequitable.

In case of Varmora Granito, most of employees are

satisfied and management always tries to satisfy

needs of employees as quickly as possible. If any

problem arises than related manager wil l try to

solve it.

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INDUSTRIAL RELATION

Industrial relation refers to the relation of

management with the employees. This is one

important factor, which affects the success of any

industry. The relation between management and

workers should be namely so as to run the industry

smoothly.

Internal Relation

Varmora Granito Industry is concerned with the

management and workers share breathing

relations. They are united and consider their unit

as a second family.

External Relation

External relation means the relation of unit

members of external society like other industries,

government, customers, etc. Varmora Granito has

good external relations.

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1 Introduction 50

2 Organisation Chart 51

3 Market Size 52

4 Market Segmentation 535 Pricing 54

6 Advertisement 55

7 Channel of Distribution 56

8 Market Research 57

9 Credit Facility 58

10 Sales Promotion 59

11 Export potential 60

12 Competitors 6113 Consumer problem

handling62

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INTRODUCTION

Market is the place where buying and sel ling is

carried out by buyers and sellers i.e. trading

activity are carried out.

Marketing is a social and management process that

involves identifying unsatisfied needs or wants of

the consumers, producing goods or services to

satisfy those needs or wants, determining

appropriate price, promotion and distributing and

maintaining relation with the market.

In todays modern area each and every firm gives

priority to have a different marketing department.

Marketing involves the activities such as

advertising, publishing, market research,

distribution aspect, sales promotion, etc.

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ORGANISATION CHART

Board of Director

Chairman

Managing Director

Marketing Manager

Assistant Manager

Regional Manager

District Manager

Area Manager

Salesman

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MARKET SIZE

As per SAKET INDUSTRIAL DIGEST, JUNE 1996, size

of Vitrified tiles is as under.

The vitrified tiles market size is established at Rs.

525 Crores, where as floor tiles segment is Rs. 300

Crores. The demand for this tile is growing at pace

of 30%. The production capacity is expected to

bulge by nearly 5.35 Lacs tones by 1997-98.

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MARKET SEGMENTATION

Market segmentat ion is based upon the market

oriented strategies and philosophy segmentation

gives special emphasis on the demand size of the

market.

Market segmentation is a method of achieving

maximum market response from limited marketing

resources by the markets for to identify the target

customer. Generally, there are two types of market

segmentation.

People oriented approach

Consumer demand or product oriented approach.

In case of Varmora, there is no need for market

segmentation. Their market is fixed, so they think

that there is no need of market segmentat ion.

They produce the item according to orders they

receive.

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PRICING

Price is the amount charged for the product or

service including any warranties or guarantees,

delivery, discounts, services or other items that are

paid of the conditions of sale and are not paid for

separately. To the buyer price is a package or

expectations and satisfactions.

Pricing is an important decision that every company

has to take high price or low price may create a

bad reputation of company. The price of a product

is a crucial decision.

In Varmora Granito, pricing policy is cost + profit.

Whatever expenses have incurred during the

manufacturing of product is considered + profit is

too included. Competitors price are also

considered, their pr ices are higher than their

competitors.

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ADVERTISEMENT

Now a day, marketing plays an important role for

the entire organisation. Marketing is very much

necessary for all the products as without marketing

the consumer wil l have lack of information about

the products. Thus, to make the consumers aware

of the product, marketing is done.

Varmora advertise their products on very large

scale. They advertise their products on television

and also do wall paintings all over India. They also

distribute pamphlets for the same.

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CHANNELOF DISTRIBUTION

The word Channel has its origin to the French

word used for Canal. Thus, channel is route

through which goods passes from one end to

another. In other words, the route through which

goods move from the place of production to the

place of consumption is called Channel

Distribution. Channel of d istribution is the

pathway or route through which goods are

transferred from the hands of producer to the

consumers or from the seller to the buyer.

According to one author, A channel of distribution

for a product is the route taken by the title to the

goods as they move from the producer to ultimate

consumer.

In this industry, the distribution channel is

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There are about 300 dealers in all states of

country.

MARKET RESEARCH

Market research is the systematic and intelligentinvestigation or study of the who, what, where,

when, why and how of actual and potential buyers.

It is the systematic gathering rewarding and

analyzing of data about problems connected with

the market place. It is the scientific and controlledprocess of gathering of non routine market ing

information helping management to solve

marketing problems. It acts as the investigative

aims of marketing manager and management tool

in planning control cycle.

Manufacturing

Of Company

Dealers

Consumers

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In this industry, first of all they study about

customers requirements. They try to introduce

good facil it ies every time, they have a marketing

research team which goes all over country.

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CREDIT FACILITY

To run the business smoothly and regular cash

f low, company gives some credit faci li ty to the

buyers.

Varmora also does the same thing. They sell those

products in the market on cash and credit basis.

They give 3 crores credit facility to the buyers.

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SALES PROMOTION

Sales promotion consists of short term incentives to

encourage purchase or sales of a product or

service. It is demand stimulating devices designed

to supplement advertising and facil itate personal

sell ing. It is a direct inducement which offers an

extra value and incentive for the product to and

sales force distributors to ultimate customers.

In this industry, they do not adopt any technique

because of potentia l marketing and potential

customers.

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EXPORT POTENTIAL

With major market operating up and gap of

technological advancement in the manufacturing

being narrowed the market for products will grow.

However, in mainly depend upon the conformity to

develop countries strict standards shall determine

growth. The increased production capacities shall

see the companies moving towards developed

export market. Indian ceramic industry in spite of

advantages according out of low labour costs is

wrought with the problem of quality and design

companies are fortifying their R&D designs.

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COMPETITORS

It is rightly said that, Without competitors market

does not survive.

Varmora is also starving in to sale its products in

the competitive market by continuous development

of a product finding new areas of consumption.

Their competitors are

Kajaria

Bell

H R Johnson, etc.

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CONSUMERPROBLEM HANDLING

Customer is the king of the market, is a very

attractive slogan. Consumers generally never face

any problem for Varmora but in spite of this, if any

problem arises than following hierarchies of

problem handling is followed.

Problem of GovernmentProblem of Government

AgentAgent

Marketing PeopleMarketing People

Experts of CompanyExperts of Company

DiscussionDiscussion

SolutionSolution

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1 Introduction 65

2 Organisation Chart 66

3 Capital Structure 67

4 Accounting Policy 685 Means of Finance 69

6 Working capitalrequirement

70

7 Sources of funds 71

8 Financial Planning 72

9 Project cost 73

10 Highlights of profitability 74

11 Ratio Analysis 7512 Leverage Analysis 77

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INTRODUCTION

Finance plays a very important role in any type of

the firm. From the initial stage awards money is

needed for the information registration of the firms,

l isting of the firm. Finance is needed for making

necessary documents.

Finance consists of procuring funds, managing and

utilizing them efficiently in order to maximize the

profit, which is ultimate goal of any organisation.

In Varmora Tiles, the capital is procured by issuing

equity shares. The secured loan of this industry is

94000000 and the unsecured loan of 2007-08 is

deposi ts from relatives of directors i.e. of Rs.

10000000.

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ORGANISATION CHART

Finance Cum Account

Department

Finance Manager

And Accountant

Assistant Account

Computer Section

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CAPITAL STRUCTURE

Procurement of capita l is the most important

process of an organisation. Capital can be of two

types i.e. ownership capital and borrowed capital.

Ownership capita l can be procured by issuing

equity shares and sometimes preference shares

and borrowed capital can be procured by issuing

debentures, bank loan, etc.

The capital structure of Varmora is very simple as it

has issued desirable equity debt ration of 1:2.

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ACCOUNTING POLICY

Accounting policy of Varmora Granito as under:

The company maintains its accounts on historical

cost basis. The current assets, loans, and

advances, l iabi li ties are approximately of value

stated if realised in ordinary course of business.

The company follows the accrual method of

accounting and all claims, receivables and

liabilities are provided on that basis.

Depreciation is provided during year at prevailing

rates prescribed by companys act 1956.

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MEANS OF FINANCE

The project is to be funded through promoters

equity funds. Term loan as also working capital

facilities form bank and unsecured loans from the

relatives of promoters.

Sr. Particulars Amount(Lacs)

1 Directors equityShareholdersequity

70455

Total Equity 5252 Term Loan 9363 Unsecured Loan 98

Total 1559

I t is proposed that unsecured loan will not be

repaid t il l repayment period of term loan is not

over.

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WORKINGCAPITAL REQUIREMENT

Working capital requirement means it is necessary

to maintain stocks of raw materials and to finance

the funds blocked in goods in process, finished

goods, overheads, etc. Total working capital

requirement for f irst year has been estimated at

Rs. 458 Lacs. The working capital is proposed to be

through Bank finance to the tune Rs. 2300 Lacs and

promotions funds at Rs. 160 Lacs.

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SOURCES OF FUNDS

A manufacturing company requires capital for these

purposes.

To achieve or create fixed assets

Working capital for financing day to day

manufacturing and marketing operations.

Capital for expansion, modernization, etc.

A company has two main sources of capital

Internal sources

External sources

Varmora Granito Pvt. Ltd. is having internal source

of finance. The company has its own share capital

and have taken loan from the bank.

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FINANCIAL PLANNING

Financial management also requires managing for

effective management of finance as it is the part of

management. Financial planning means decisions

to be taken to achieve basic objectives of the firm.

The basic objective of finance planning is to raise

the necessary funds as and when needed. At

minimum cost cash should be controlled properly.

There are three types of financial planning.

Short term planning

Medium term planning

Long term planning

In Varmora Granito Pvt. Ltd. there is long term

financial planning.

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PROJECT COST

Sr.

Particulars Amount(Lacs)

1 Land 1.002 Factory Building 248.003 Imported Machinery New 559.004 Indigenous Machineries 438.005 Electrical Installations 54.00

6 Tools 4.007 Installations 3.008 Bank Guarantee for EPG 7.009 GEB Deposit 40.0010

Computers 3.00

11

Furniture 4.00

1

2

Other Miscellaneous Assets 2.00

13

Preliminary and pre-operativeexpenses

20.00

14

Provision for contingencies 20.00

15

Total capital cost of project 1401.00

16

Margin money for workingcapital

158.00

Total Project Cost 1559.00

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HIGHLIGHTSOF PROFITABILITY

Sr.

Particulars Year2007-08

1 Total Income 22452 Raw material and

packing cost930

3 Power cost 2164 Fuel cost 3245 Gross profit 3976 Total interest 1377 Net profit before tax 1628 Tax 399 Net profit after tax (net

cash)122

1

0

Accruals 319

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RATIO ANALYSIS

Ratio analysis is an audibly useful for f inancial

analysis. It is defined as systematic use of ratio to

interpret the financial statements, so that strength

and weakness of a f irm as wel l as i ts historical

performance and current f inancial conditions can

be determined. The following are ratio of Varmora

Granito as follows.

Current Ratio

= Current Assets / Current Liabilities

= 73642000 / 49670000

= 1.48%

Gross Profit Ratio

= Gross Profit / Net Sales x 100

= 11200000 / 49643000 x 100

= 22.56%

Operating Ratio

= (Cost of goods sold + Operating expenses) / Net

Sales x 100

= (31500000 + 2500000) / 49643000 x 100

= 68.49%

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Liquid Ratio

= Liquid Assets / Liquid Liabilities

= (Current Assets Stocks) / (Current Liabilities

Bank BOD)

= (73642000 19748000) / (49670000 960000)

= 53894000 / 48710000

= 1.10%

Debtors Ratio

= Credit Sales / Average Debtors

= 11300000 / 8100000

= 1.40%

Fixed Assets Ratio

= Sales / Fixed Assets

= 49643000 / 85000000

= 0.58%

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LEVERAGE ANALYSIS

Leverage means using f ixed charge sources and

getting returns by using sources eff iciently and

effectively. It i s an important aspect as the

organisation may need long term and short term

loan and they have dif ferent alternatives from

which organisation has to take the right decision.

To take this design it takes the help of leverage.

Operating Leverage

Fixed operating assets are giving the most cost

than the fixed and variable costs are called

operating leverage. Any amount borrowed for

investing in fixed assets, so the leverage

associated with the investment activities is known

as operating leverage. The degree of operating

leverage is given by

Degree of Operating Leverage= Sales Variable Cost / EBIT

= 29972000 10908000 / 12100000

= 19064000 / 12100000

= 1.58%

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Financial Leverage

Leverage is a criterion for determining operating

profit or loss. Financial leverage is a charge to

magnify the effect on the charge or operating profit

and loss.

Finance leverage is selected with finance position

between EBIT and EBT. The degree of f inance

leverage is,

Degree of Finance Leverage

= EBIT / EBT

= 12100000 / 9900000

= 1.22%

Combined Leverage

Operating leverage affects a firms operating

leverage (EBIT), while f inancial leverage affects

profit after tax or earning per share. The combined

effect of two leverages can be quite significant for

earnings available to the equity shareholders.

Degree of Combined Leverage

= DOL x DFL

= 1.58 x 1.22

= 1.92

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SWOT ANALYSIS

SWOT Analysis means the analysis of

S Strength

W Weakness

O Opportunity

T Threat

Strength

Varmora Granito Pvt. Ltd. is giving employment

around 200 employees.

Strong market presence

Develop rural area to reach at the global

position.

Weakness

Irregularity in time cost.

Varmora industry entered late in the market

Opportunity

Rapidly and continuous growth in the market, so

company will th ink about expansion.

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Threat

Highly competit ive market against imported

vitrified tiles.

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FUTURE PLAN

Future plan of Varmora Granito is to become

leading companies in the Vitrified tiles all over the

world.

They wil l be install ing new latest machines for

increasing product ion and various designs and

ranges to meet the upcoming market needs. Also,

they wanted to try serving backward class by giving

them services.

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SUGGESTION

Actually, we are just students. It is not our

capacity to give suggestions. Varmora Granito Pvt.

Ltd. is having smooth relation, nice organisation

and sincere workers.

There is no requirement to give any kind of

suggestion, but as a part of study it is necessary to

give suggestions, which are as under:

Having a wide market itself in India, only little is

exported. Instead of if they increase their export

and step into wide international market tocompete their quality, through this profit

increases.

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CONCLUSION

From this unit, I learn as many things, I am very

much happy to visit the company. Deep study of

Varmora Granito Pvt. Ltd, I came to give my

conclusion that its future is very bright and they

will progress well.

The co-operation of the employees is good. The

management is also effective and efficient. All the

departments are also handled by authorised person

who have great experience and i t is one of the

response of success of the firm.

So, I wish the company makes more and more

profi t, ful fi ll the future plans and get good and

global market.

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BIBLIOGRAPHY

Financial Management Khan & Jain

Principles of Marketing Philip Kotler

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Documents

Varmora Tiles Industry-BBA-MBA Project Report