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Winter Internship Project Report
On
BUDGET ANALYSIS
OF
SHRIRAM RAYONS
By
Ridhi Goswami
14035234027
Bachelor of Business Studies
Class of 2017
In Partial Fulfillment of the Requirement for the Degree of
Bachelor of Business Studies
At
KESHAV MAHAVIDYALYA
UNIVERSITY OF DELHI
DECLARATION
Title of the Project: BUDGET ANALYSIS
I Declare
(a) That the work presented by me for the assessment in this Winter Internship Report is my own, that it has not previously been presented for another assessment and that my debts ( for words, data, arguments and ideas) have been appropriately acknowledged.
(b) That the work confirms to the guidelines for presentation and style set out in the relevant documentation.
Date:
RIDHI GOSWAMI
BBS
CLASS OF 2017
ACKNOWLEDGEMENT
I sincerely feel the credit of the project report work could not be narrowed to only one individual. This work is an integrated effort of all those concerned with it, it would have been quite difficult without their direct and indirect cooperation. I wish to express my appreciation and gratitude to all the concerned people.
It gives me great pleasure to acknowledge to all those who have helped me throughout this project. I am highly thankful to Mr. P D Bagla, Senior Manager- Accounts & Finance, Shriram Rayons fpr his support and direction. I express my sincere thanks to Mr. R S Agarwal for his guidance. I am also grateful to Mr Jatin for his honourable and consistent support. Likewise I am gratified to Ms Sohini Pandey, for guidance during the internship period too.
Ridhi Goswami
14035234027
COMPANY PROFILE
DCM SHRIRAM INDUSTRIES
UNIT SHRIRAM RAYONS
1.1 HISTORYThe DCM group was originated in 1889, with the establishment of Delhi Cloth & Mills. It was founded by Lala Sri Ram. Its journey began in the name and style of Delhi Cloth & General Mills Cp. – a public limited company. However its name was changed to DCM in 1983.
DCM started its operations by establishing a spinning mill at Delhi. Over the years, the group expanded and diversified into a number of manufacturing activities- Textiles, Chemicals, Rayons, Sugar, Fertilizers , Tyre Cord etc.
The company was reorganized on 1.4.1990, under which all units of the Company existing at that time stood vested and/ or continued to vest in terms of the said scheme into four separate companies namely,
DCM Limited ( holding company of DCM Engineering) DCM Shriram Industries Limited DCM Shriram Consolidated Limited Shriram Industrial Enterprises Limited
DCM SHRIRAM INDUSTRIES LTD
DCM Shriram Industries Ltd is the flagship company of the DCM Shriram Industrial Group, based predominantly in Northern India. It is a diversified group with operations in Sugar, Organic & Inorganic Chemicals, Drug Intermediaries, Alcohol , Rayon Tyrecord, Shipping Containers and Processed Cotton Yarn. The group has a strong emphasis on technology and quality as also a strong commitment to environmental and social concerns.
For over 100 years the name DCM Shriram has been synonymous with Excellence, Integrity, Quality, Enviornmental consciousness and pioneering spirit.
The 5 main business operations DSIL comprises of:
Daurala Sugar Complex - comprises of a cane sugar plant, distillery and an aromatic chemicals unit.
Shriram Rayons - comprises of rayon tyrecord/ yarn/ fabric and nylon chafer/ fabric plants.
Daurala Organics - manufactures high technology, high value drug intermediates
Daurala Foods & Beverages Ltd - manufactures high class portable spirits DCM Hyumdai Ltd - manufactures shipping containers
DCM Shriram Rayons
Shriram Rayons is a unit of DCM Shriram Industries Ltd, where the manufacturing activity is done in Kota while other activities like – financial, purchasing and marketing etc are done from New Delhi.
Shriram Rayons, set up in 1965, has transformed itself from a domestic unit to a virtual 100% Export Oriented Unit. The unit exports to all major tyre companies in USA, Europe, South Africa and Japan. The unit is engaged in manufacturing Rayon yarn, tyrecord, fabric, dipped fabric and allied products like Anhydrous Sodium Sulphate and CS2. Rayon tyrecord is used as reinforcement material for high performance of tyres. The technical know0how was provided by Beaunit Fibre3s Inc, USA and Chemtex Inc, USA.
Shriram Rayons is amongst the country’s major manufacturers of high grade rayon tyrecord with nylon and rayon conversion facilities catering to the needs of both domestic and overseas markets. It also has a complex for the manufacture of inorganic chemicals.
Key technology sources
Beaunit fibres inc., USA Chemtex inc., USA
Quality system
Certified by TUV NORD CERT GmbH for:
ISO 9001: 2008 for manufacturing and sale of grey dripped industrial/tyregrade yarn, cord, fabric and chafer fabric from 1994
ISO14001:2004 for manufacturing of grey / dipped industrial / tyre grade yarn, cord, fabric and chafer fabric from 2010.
Shriram Rayons have the following product range:
Rayons Products Nylon Products Chemical Products
The product rayon produced only for the purpose of export, is manufactured by 4 companies all over the world in – India (2), Germany (1) and Check Republic (1). The export of rayons is a B2B operation, with an annual demand of approximately 8000 thousand tonne.
Nylon and Chemical products manufactured by the company are meant for the purpose of domestic sales only. The chemicals manufactured are CS2 (carbon di sulphide) and ASS (anhydrous sodium sulphate – Na2SO4 . The latter is a byproduct of rayons used in textile, pharmaceuticals and glass industries, while the former is used in rubber industry.
1.2 CORPORATE ETHOS
Enterprises of DCM SHRIRAM Industries Ltd’s endeavour to maintain leadership status by observing norms of excellence in all areas.
QUALITY SYSTEMSHighest degree of product specifications and quality standards are maintained by adopting world-class quality systems. ISO 9000 series certifications has been received from RWTUV of Germany and Det Norsk veritas of Norway.
RESEARCH & DEVELOPMENT Research & Development is a continuous process. Focus is on maintaining a technological edge through product development, technology upgradation, energy conservation, pollution control, optimisation of resources, and conservation of environment. Close connection is maintained with research institutions like the Shriram Institute for industrial Research (SRIFIR), Shriram Cane Research Farm, and Shriram Test House.
ENVIRONMENTManufacturing units of the company are like garden factories. Utmost attention is paid to treatment of effluents, control of pollution, and conservation of environment. This constitutes a specific target of R&D effort.
SAFETYSafety of men, machines & materials has a high priority . One of the units, Shriram Rayons , has won the National Safety Award consecutively for 15 Years .
HUMAN RESOURCEEmphasis is placed on worker-management responsibility... Achieving corporate goals through the cooperation & dedication of all personnel. Motivating them by imparting a sense of involvement , caring & recognition.Human Resource development , career planning & skill –upgradation are essential parts of the Group’s management process .
QUALITY OF LIFE Helping to improve the quality of life of employees is a part of the basic management philosophy of the Company. Facilities like Housing, education, healthcare , family welfare, libraries & reading rooms , sports & cultural centres are common features at all units.
SOCIAL RESPONSIBILTYAs part of corporate social responsibility, programs are undertaken regularly for community development to improve the living conditions of people in the vicinity of the Company’s units.
1.3MILESTONES
1889- Delhi Cloth Mills founded at Delhi
1932- Sugar factory set up at Daurala
1934- Textile Mills set up at Lyallpur ( Now Faisalabad in Pakistan)
1940- Sugar factory set up at Mawana
1941- Heavy inorganic chemicals plant set up at Delhi
1943- Distillery set up at Daurala
1948-New textile mills set up at Delhi
1958- Spinning mills at Hissar and Silk mills set up at Delhi
1960- PVC, Chlor-alkali and Calcium Carbide plant set up at Kota
1965- Rayon tyrecord plant set up at Daurala
1967- Liqour operations started at Daurala
1969- Urea plant set up at Kota
1970- Aromatic chemicals plant set up at Daurala
1972- Textile mills set up at Dasna
- Computers unit set up at Delhi
1977- Precision castings (for automobiles) foundry set up at Ropar
1990- DCM restructured into 4 different companies
BIRTH OF DCM SHRIRAM INDUSTRIES LTD
Asterisked units above form part of DCM Shriram Industries Ltd after the reorganistaion
1994- Drug intermediaries company established with works at Daurala
2004- Commercial production of Anhydrous Alcohol ( for admixing field)
2005- Daurala Organics Ltd, amalgamated with DCM SHRIRAM INDUSTRIES Ltd.
Objectives
To learn the day to day accounting related workings of the company.
To collect information for analyzing budgeted vs actual performance of the company.
To ascertain whether the budget reflects the performance of the management.
RESEARCH METHODOLOGY
NEED FOR THE STUDY
Budgetary Control is the essence of a business. Even a good financial plan may not be achieved if there is no effective control to ensure its implementation. Thus, budget is an important tool for financial planning and control. The actual performance can be measured against the budget and variances, if any, can be highlighted and controlled.
DATA COLLECTION
Sources of data
Primary Data Secondary Data
Primary Data
Data of the company (unpublished) Interaction with the employees of the Accounts
Department
Secondary Data
Annual Reports of the Company Internet Text books
Research Design
Research Design is the framework that provides guidelines for the rest of the research process. It is a blueprint according to which the research has to be conducted.
Here, Descriptive and Analytical Research has been used.
Limitations
The time period for the study undertaken was limited. The study is limited to the information made available.
BUDGET
Budget
A budget is a quantitative tool that enables the management to plan, coordinate, control and evaluate its activities effectively. It intends to provide greater effectiveness in order to achieve Organisational efficiency. A budget is a yardstick against which actual results are measured. According to Crown and Howard, “A budget is a pre-determined statement of management policy during a given period which provides a standard for comparison with the results actually received.”
The budget serves as a:-
Plan of action for achieving quantified objectives Standard for measuring the performance Device for coping with foreseeable adverse situations
Budgets provide a benchmark against which actual results are compared and thus the corrective measures taken.
Basis of Preparation of Budget :
Past performance of the company Forecast of current requirements of various departments
Benefits of preparing Budgets :
Though budgets do not guarantee success but it certainly helps in avoiding failure. Budgets translate the plans into specific , action oriented goals and objectives.
A budget communicates the expected outcome and provides a direction to coordinate the activities of all individuals and departments.
It helps in identifying , focusing and taking corrective measures, in case of deviations from the plans, i.e. the budget.
Limitations of preparing budgets :
Budgeting is a lengthy and time consuming process. Errors and inaccuracies will always remain as future cannot be predicted. Budgets need to be changed as situation changes. The results cannot be measured accurately since budgets provide only
approximate estimates.
DATA ANALYSIS
BUDGETED VS ACTUAL ANALYSIS RAYONS
P&L (Budget vs Actual)
2012-13 2012-13 2013-14 2013-14
Budget Actual Budget ActualTotal Revenue 237.6 228.6 266.1 325Total Cost 234.3 222.4 258.8 277.7Net Profit 3.3 6.2 7.3 47.3
2012-13 BUDGET 2012-13 ACTUAL 2013-14 BUDGET 2013-14 ACTUAL0
50
100
150
200
250
300
350
TOTAL REVENUETOTAL COSTNET PROFIT
In the year 2012-13 the actual position of revenues and cost is on lower side compared to the budgeted figures for the year. However, marginal amount of profit resulted from higher revenues in actual compared to loss in budget.
In the year 2013-14, actual figures of total profit resulted from the product is much higher than forecasted in budget. This is because the budgeted revenuers rose 22.15% in actual during this period due to substantial increase in export and domestic sales. That is company is able to bag more orders and deliver the order in timely basis to recoganize the revenues. Also, though there is rise in actual figures of costs but the rise is only 7.25% in actual compared to budgeted, which means the costs were completely under controlled.
In year 2011-12 the company has earned a bit low nut in the year 2013-14 there is significant variance in actual figures compared to budgeted figures i.e. there is 22.52% growth on budgeted estimates which means company gained significant international order for the product.
NYLON CHAFER
P&L (BUDGET VS ACTUAL)
2012-13 2012-13 2013-14 2013-14
BUDGET ACTUAL BUDGET ACTUALTOTAL REVENUE 21.8 19.6 22.7 19.8TOTAL COST 19.9 18.8 21.1 19.7NET PROFIT 1.9 0.8 1.6 0.1
2012-13 BUDGET 2012-13 ACTUAL 2013-14 BUDGET 2013-14 ACTUAL0
5
10
15
20
25
TOTAL REVENUETOTAL COSTNET PROFIT
In year 2012-13 the actual revenues are much lesser than the budgeted revenues, resulting in decline in actual figures of total profit when compared to budgeted figure.
In year 2013-14 there is again a sharp decline in actual revenues compared to budgeted revenues. Actual cost also declined compared to budgeted cost but it is on higher side compared to actual revenues resulting in net loss.
There is also a decline in demand of this product in the market in both the years.
There is also a substantial increase in the cost of production in actual compared to budget in the earlier years whereas it declined it the years 2012-13 and 2013-14.
CARBON DI SULPHIDE (CS2)
P&L (BUDGET VS ACTUAL)
2012-13 2012-13 2013-14 2013-14
BUDGET ACTUAL BUDGET ACTUALTOTAL REVENUE 14.7 17.1 18.2 18.5TOTAL COST 12.3 13.1 15.2 14.6NET PROFIT 2.4 4 3 3.9
2012-13 BUDGET 2012-13 ACTUAL 2013-14 BUDGET 2013-14 ACTUAL0
2
4
6
8
10
12
14
16
18
20
TOTAL REVENUETOTAL COSTNET PROFIT
In the year 2012-13 the performance of product improved sharply as we can see above that the actual revenues are much higher than the budgeted revenues resulting in increase in actual figures of total profit when compared to budgeted figure.
In year 2013-14 there is no big variance in actual revenues compared to budgeted revenues. But the factor behind increase in total profits is actual cost which declined substantially compared to budgeted cost.
Also there is marginal revenue earned from captive consumption of this product which means the product is highly used for production of Rayon and Nylon Chafer.
There is an increase in the cost of production of the product in 2012-13 but decrease in 2013-14. The reason behind decline in decrease is less production due to less demand of the product in market and product is produced mainly for captive consumption.
RATIO ANALYSIS
1. CURRENT RATIO= CURRENT ASSTES/CURRENT LIABILITIES
2012-13 2013-14CURRENT ASSETS 1,345,473,668 1,419,452,676CURRENT LIABILITIES
589,373,647 678,506,857
CURRENT RATIO 2.28 2.09 Comment: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm’s current assets to its current liabilities. It indicates good short-term financial strength. The ratio is FAVOURABLE.
2. QUICK RATIO= QUICK ASSETS/CURRENT LIABILITIES
2012-13 2013-14QUICK ASSETS 816328455 989357797CURRENT LIABILITIES
589373647 678506857
QUICK RATIO 1.39 1.46 Comment: The acid test ratio measures the ability of accompany to use its near cash or quick assets to extinguish or retire its current liabilities immediately. The higher the ratio the better it is. Therefore the ratio gives FAVOURABLE results.
3. RETURN ON WORKING CAPITAL=NET PROFIT/WORKING CAPITAL*100
NET PROFIT 44719471 419477050WORKING CAPITAL( CA- CL)
756100021 740945819
RETURN ON WORKING CAPITAL
5.91 56.61
Comment: Return on working capital is a method of increasing enterprise value by maximizing efficiency of working capital. Working capital is a key lever to increasing enterprise value. The ratio is hence FAVOURABLE.
4. OPERATING COST RATIO= OPERATING COST/SALES*100
2012-13 2013-14OPERATING COST 1756764350 2244946750SALES 2402097940 3379514567OPERATING COST RATIO
73.13 66.43
Comment: The operating ratio is defined as a company’s operating expenses as a percentage of revenue. It is used to determine the efficiency of a company’s management by comparing operating expenses to net sales. Here the ratio is FAVOURABLE due to decline in trend in the ratio.
2012-13 2013-1462
64
66
68
70
72
74
operating cost ratio
operating cost ratio
5. GROSS PROFIT RATIO= GROSS PROFIT/SALES*100
GROSS PROFIT 645333590 1134567817SALES 2402097940 3379514567GROSS PROFIT RATIO 26.87 33.57
6. NET PROFIT RATIO= NET PROFIT/SALES*100
NET PROFIT 44719471 419477050SALES 2402097940 3379514567NET PROFIT RATIO 1.86 12.41 Comment: Both the ratios are in FAVOUR of the company.
2012-13 2013-140
5
10
15
20
25
30
35
40
gross profit rationet profit ratio
Here we can see that there is sharp increase in gross profit ratio and net profit ratio.
However, the increase rate of increase in net profit ratio is much sharp due to substantially decline in non operation costs like Rent, Insurance, Sales related expenses, Provision for debts etc.
Also due to operation synergies the unit is able to provide growth in gross profit ratio sharply.
The effect of both the ratios is very much favorable.
BIBLIOGRAPHY
www.dcmsr.com www.accountingtools.com www.wikipedia.com Annual reports of the company
