A STUDY ON

CAPITAL STRUCTURE ANALYSIS

AT

A Project report submitted to Lovely Professional University in partial fulfillment

of the Requirements For the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED TO:- SUBMITTED BY;-

Mrs. Sukhpreet kaur surendra pal singh

Reg No. 10900150

Under the guidance of

Mr. Umesh Saini

(Sr. Finance Mgr.)

LOVELY PROFESSIONAL UNIVERSITY

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ACKNOWLEDGEMENT-

Myself surendra pal singh student of LPU, underwent six-week training with

Triveni Engg. & Industries ltd., KHATAULI. This is a part of MBA for which I

had undergone practical training to understand exactly about the working of

Triveni engg. & Industries ltd.

First of all I would like to thank Triveni engg. & Industries ltd. for his co-

operation than I would express my gratitude to Mr. Umesh Saini (Sr. Finance

Manager) and Mr. Harish Grover (Sr. Manager- Quality Control) Triveni

Engg. & Industries for accepting me as trainee and allowing me to do project

under their supervision.

I express my gratitude to Mrs.sukhpreet kaur(Faculty MBA)for their personal

evolvement& support without which this project could never have been the light

of this day.

Last but not the least, I acknowledge with thanks the active co-operation extended

by all the respondents while collecting the data and to those who were concerned

directly or indirectly with this project.

Surendra pal singh

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CONTENTS

CHAPTER PARTICULARS PAGE NO

CHAPTER I

INTRODUCTION AND DESIGN OF THE

STUDY 1-10

1.1 Introduction of the Study

1.2 Objective of the Study

1.3 Research Methodology

1.3.1 Research Design

1.3.2 Nature of Data

1.3.3 Methods Data Collection

1.3.4 Research Tools

1.4 Limitations of the Study

CHAPTER II 2.1 REVIEW OF LITERATURE

11-13

CHAPTER III

PROFILE 14-77

3.1 Industry Profile

3.2 Company Profile

CHAPTER IV DATA ANALYSIS AND INTERPRETATION 78-100

CHAPTER V SUGGESTIONS 100-105

5.1 Suggestions

CONCLUSION AND BIBLIOGRAPHY 106-110

6.1 Conclusion

6.2 Bibliography

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LIST OF TABLE

SL.NO PARTICULRS PAGE NO

1 CALCULATE PBIT-EPS RELATIONSHIP

79

2DEGREE OF OPERATING LEVERAGE

83

3DEGREE OF FINANCIAL LEVERAGE

85

4DEGREE OF TOTAL LEVERAGE

89

5DEBT-EQUITY RATIO

92

6PROPRIETARY RATIO

95

7 CALCULATE RELATIONSHIP BETWEEN ROI-

ROE97

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CHAPTER- I

INTRODUCTION

Contents:

1.1 Introduction of Study

1.2 Objective of the Study

1.3 Research Methodology

1.3.1 Research Design

1.3.2 Nature of Data

1.3.3 Methods Data Collection

1.3.4 Research Tools

1.4 Limitations of the Study

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1.1 INTRODUCTION

The objective of capital structure is:-

Describe the advantages and disadvantages of financial leverage.

Compute the financial leverage index, debt to capital ratio, debt to equity

ratio, and other techniques for analyzing capital structure.

Relate capital structure composition to owner and creditor investment

objectives.

Capital structure composition

Consists of long-term liabilities, preferred stock, common stock,

and retained earnings.

Sufficient equity must exist to provide financial stability

Debt can be used as leverage to increase returns to shareholders,

but it can also reduce returns on shareholders’ investments

This studying contain following analysis:

A) PBIT-EPS ANALYSIS

B) ROI-ROE ANALYSIS

C) LEVERAGE ANALYSIS :-

I. OPERATING LEVERAGE ANALYSIS

II. FINANCIAL LEVERAGE ANALYSIS

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1) PBIT-EPS ANALYSIS

It examines how different capital structures affect earnings

available to shareholders (Earning Per Share).

It is the analysis of the effect of financing alternatives on

earnings per share.

To design the capital structure of the firm in such a way so as to

minimize the cost of capital.

EBIT-EPS analysis is a method to study the effect of leverage under

alternative methods of financing.

CALCULATION OF EBIT:-

Sales : xxxxx

(-)V.C : xxx

=Contribution : xxxxx

(-)F.C : xxxx

=EBIT {Earning Before Interest and Taxes}

CACULATION OF EPS:-

EBIT : xxxxx

(-)INTERSET : xxx

=EBT : xxxxx

(-)TAX : xx

=Earning for ESH : xxxxx

(÷) No. of E.S : xxx

= EPS {Earning Per Share} xxx

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RELATIONSHIP BETWEEN PBIT AND EPS:-

EPS=(PBIT-I)(1-t)/n

2) ROI-ROE ANALYSIS :-

Looking at the relationship between ROI and ROE we find that:-

The influence of ROI and financial leverage on ROE is mathematically as

follow

ROE=[ROI+(ROI-r)D/E](1-t)

WHERE:-

ROE= Return on equity

ROI=Return on investment

R=Cost of debt

D/E=debt-equity ratio

T=Tax rate

3) LEVERAGE ANALYSIS :-

Leverage arise from the existence of fixed cost there are two kind of

leverage

1. OPERATING LEVERAGE

2. FINANCIAL LEVERAGE

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1. OPERATING LEVERAGE :-

Operating Leverage: Use of fixed operating costs rather than variable

costs.If most costs are fixed (i.e., they do not decline when demand falls)

then the firm has high DOL (degree of operating leverage).

Arise from the firm’s fixed operating cost such as salaries

depreciation, insurance , property taxes .

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2. FINANCIAL LEVERAGE :-

The substitution of fixed-charge financing for variable-cost

(dividend) equity financing. Arise from the firm’s fixed financing

cost such as interest on debt.

Financial leverage concepts

The traditional view is that an optimal mix of debt and equity

exists.

Research demonstrated that the mix of debt and equity is

irrelevant, if taxes are ignored.

The tax deductibility of interest expense creates an advantage

for incurring debt.

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4. DEGREE OF TOTAL LEVERAGE (DTL) :-

The percentage change in EPS that results from a given percentage change in

sales

DTL = DOL X DFL

DTL=Q(P-V)/Q(P-V)-f-int

DTL=S-VC/S-VC-F-INT = GROSS PROFIT/EBIT-INT

1.2 OBJECTIVES OF THE STUDY :-

The basic objective of studying the capital structure of the company is to

know the financial position of the company.

To know the debt-equity position of the company.

To study the operating leverage and financial leverage so as to know the

fixed cost of triveni engineering & industries ltd.

To know the stock reserve for sales of the business.

To know the solvency of the business and the capacity to give interest to

the long term loan lenders (debenture holders) and dividend to the share

holders.

To study the balance of cash and credit in the organization.

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1.2 RESEARCH METHODOLOGY:

1.3.1 Research design:

The descriptive form of research method is adopted for study.

The major purpose of descriptive research is description of state of

affairs of the institution as it exits at present. The nature and characteristics of

the financial statements of triveni engineering & industries ltd. have been

described in this study.

1.3.2 Nature of data:

The data required for the study has been collected from secondary

source .The relevant information were taken from annual reports, journals and

internet.

1.3.3 Methods of data collection:

This study is based on the annual report of triveni engineering & industry ltd.

Hence the information related to, leverage, short term and long term solvency

were very much required for attaining the objectives of the present study.

1.3.4 Tools applied:

To have a meaningful analysis and interpretation of various data collected, the

following tools were made for this study.

PBIT-EPS analysis

ROI-ROE analysis

Operating leverage analysis

Financial leverage analysis

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1.4 LIMITATION OF THE STUDY:

The analysis was made with the help of the secondary data collected from

the company.

All the limitations of PBIT-EPS analysis, ROI-ROE analysis, operating

leverage analysis and financial leverage analysis and interpret are

applicable to this study.

The period of study is 5 years from 2005-06 to 2008-09. Because of

given task I have to choose only 5 year.

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CHAPTER- II

REVIEW OF LITERATURE

C ontents :

2.1 Review Of Literature

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Donald P. Cram, on March 27, 2000 Environmental and Financial

Performance Literature

Abstract

"We review the growing literature relating corporate environmental

performance to financial performance. We seek to identify achievements

and limitations of this literature and to highlight areas for further research.

Our primary interest is to assess the adequacy of the literature in informing

corporate managers how, when, and where to make pro-environment

investments that will pay off with financial returns for long-term

shareholders. To do so, we create a conceptual framework that maps the

influence of regulators, public health scientists, environmental advocates,

consumers, employees, and other interested parties upon corporate

financial returns. Our discussion has relevance to all parties interested in

influencing corporate actions that affect the environment."

By Janet Y. Murray, Masaaki Kotabe & Albert R. Wildt An Investigation

of the Perceived Financial Performance

Abstract

"This sugar is primarily based on cane’ diffusion of innovations theory and

Auger’s empirical study. Financial performance was measured using four

financial indicators: sales, profits, costs, and return-on-investment (ROI).

The diffusion of innovations theory states that an innovation brings changes

to a company.

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hilippe Jacquart, Catherine Ramus & John Antonakis, on May 23, 2004

Strategic and Financial Performance Implications of Global Sourcing

Strategy: A Contingency Analysis

Abstract

"Using a contingency model of global sourcing strategy, this study

investigated the moderating effects of sourcing-related factors on the

relationship between sourcing strategy and a product's strategic and

financial performance. The results lent some support to the contingency

model of global sourcing strategy in that product innovation, process

innovation and asset specificity were significant moderator variables for

financial, but not strategic, performance. However, the results provided no

support for bargaining power of suppliers and transaction frequency as

moderator variables. In other words, in achieving high financial

performance for a product, whether a particular sourcing strategy should

be used for a particular product depended on the levels of product

innovation, process innovation and asset specificity."

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Journal of the Operational Research Society (2003) Vol-54,Pages 48–58,

By E H Feroz Financial statement analysis: A data envelopment analysis

approach

Abstract

Capital structure analysis is commonly used for Describe the

advantages and disadvantages of financial leverage.

Compute the financial leverage index, debt to capital ratio, debt to

equity ratio, and other techniques for analyzing capital structure.

Relate capital structure composition to owner and creditor

investment objectives.

Milton Harris and Artur RavivThe Theory of Capital Structure,1991

Abstract

This paper surveys capital structure theories based on agency costs, asymmetric information, product/input market interactions, and corporate control considerations (but excluding tax-based theories). For each type of model, a brief overview of the papers surveyed and their relation to each other is provided. The central papers are described in some detail, and their results are summarized and followed by a discussion of related extensions. Each section concludes with a summary of the main implications of the models surveyed in the section. Finally, these results are collected and compared to the available evidence. Suggestions for future research are provided.

- 13 -

Harry DeAngelo Ronald W. Masulis 2002 Optimal capital structure under corporate and personal taxation

Abstract

In this paper, a model of corporate leverage choice is formulated in which corporate and differential personal taxes exist and supply side adjustments by firms enter into the determination of equilibrium relative prices of debt and equity. The presence of corporate tax shield substitutes for debt such as accounting depreciation, depletion allowances, and investment tax credits is shown to imply a market equilibrium in which each firm has a unique interior optimum leverage decision (with or without leverage-related costs). The optimal leverage model yields a number of interesting predictions regarding cross-sectional and time-series properties of firms' capital structures. Extant evidence bearing on these predictions is examined.

- 14 -

CHAPTER- III

PROFILE

Contents:

3.1 Industry Profile

3.2 Company Profile

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3.1 INDUSTRY PROFILE

We are a focused, innovative corporation having core competencies in the areas

of sugar And engineering. Our growth has been empowered with steadfast and

distinctive adherence to business ethics, transparent governance and

commitment to highest standards of social responsibility.

From a humble beginning in 1930s, we have transformed ourselves into an INR

19 billion company through an interesting blend of people, technology and

entrepreneurial spirit.

Today, we touch the lives of millions of people globally by serving our

customers in the areas of sugar, turbines, gears & gearboxes and water &

wastewater treatment. While we are amongst the three largest sugar

manufacturers in India, we are also the market leaders in our engineering

businesses, having a global footprint.

Embracing the virtues of integrity, excellence and commitment, we move ahead

to take on the opportunities and challenges offered by the future. We are geared

to transform into a truly global enterprise through a prudent mix of technical

innovation and exceptional customer service delivery.

Our commitment to excellence and strong corporate governance guides us in

this endeavour, as we look ahead at powerful growth and building a socially

equitable, sustainable future.

- 16 -

BUSINESS OVERVIEW;-

Triveni's association with the Sugar Industry is as old as the Industry itself. In

pre independence India, the promoters of what is now the Triveni Group

established several sugar factories in pre independent India. Even now, Triveni

is the pre- eminent name in the Indian sugar industry.

With a current cane crushing capacity of 61,000 TCD (Tonnes Crushing per

Day), the Triveni Group continues to be one of the largest producers of sugar in

India. The crush capacity of the existing plants are (as follows;

Khatauli, in District Muzaffarnagar (16,000 TCD)

Deoband in District Saharanpur (14,000 TCD)

Ramkola in District Kushinagar (6,500 TCD)

Sabitgarh in District Bulandshehar (7,000 TCD)

Chandanpur in District J P Nagar (6000 TCD)

Raninagal in District Moradabad (5500 TCD)

Milak Narainpur in District Rampur (6000 TCD)

The new capacities at Chandanpur, Raninagal & Milak Narainpur together with

the brownfield expansion at Ramkola were commissioned during the sugar

season 2006-07.

All seven sugar factories are located in the state of Uttar Pradesh. In all the

factories, double suphitation process is followed for sugar production.

The sugar produced at Triveni's factories is direct consumption

plantation white low ICUMSA (an International method for determining colour

value of sugar, lower value means whiter sugar), bold grain sugar which

commands premium in the market. A lot of emphasis is placed on the quality

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control procedures an quality of sugar produced in the factories.

At all the factories, emphasis is on usage of energy efficient systems, modern

technology and R & D for better operations and for improved per hectare sugar

output. As a result of Triveni's tie up with Sugar Research International of

Australia, the group factories have access to modern equipments & process

knowhow.

Khatauli, Deoband & Sabitgarh plants are located in fertile, well irrigated and

high cane intensity region of western Uttar Pradesh where the sugar cane crop is

least dependent on the vagaries of the Monsoon & therefore are very consistent

in terms of the cane availability & capacity utilization.

The Ramkola unit is located in lucrative eastern UP where the

realization of sugar (particularly because of the robust demand from sugar

deficient West Bengal) is better as compared to western UP.

The three new sugar units are located in the Central UP.

The cane development activities taken up by the factories are regarded to be

amongst the best in the industry. Group has been pioneer in using modern

techniques like Satellite tracking for getting information on area in its command

for enabling decisions on which variety to be propagated in which area. Factory

has huge data base on individual farmer's field data (total cane area, past

supplies, ratoon and plant cane acreage, soil details, land type details etc.) to

take prudent decisions on cane development.

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MILESTONES :-

Since the setting up of first unit at Deoband in 1932, the overall performance of

our Sugar Business has been commendable. During the last two decades we

have crossed many milestones and are committed to cross many more in the

future.

Following is a glimpse of our achievements during the last two decades:

1989

Awarded "Certificate of Merit" for best performance during season 1987-88 by

National Productivity Council of India. This award was presented by Hon'ble

Shri J. Vengala Rao, then Hon'ble Minister of Industries, Govt. of India and

President of NPC.

1991

The Double Carbonation and Double Sulphitation process was converted

successfully into Double Sulphitation process having due consideration to

Environmental problems.

1992

Successfully completed Expansion and Modernisation of the Plant from 5000

TCD to 10,000 TCD.

1998

Successfully completed the Expansion of the Plant from 10,000 TCD to 11,000

TCD.

- 19 -

2000

We exported 2.42 Lac. Qtls. of Sugar to Pakistan.

2001

Launching of the Biological Control Lab. for Soil testing and developing of

biological pest control system for the benefits of the Cane Growers of the area.

2003

In August, 2003 launched Branded Sugar "Shagun" and started packing of

consumer packets.

2005

Launched "Triveni Kushali Bazaar" an Agri-business Centre at Village Ladpur

near our Sugar Unit mainly for making available agricultural implements &

inputs and other domestic items under one roof for the Cane Growers of the

area.

2005

We crushed 186.61 lac. Qtls. of cane during season 2004-05 which was the

highest crush in India with highest production of 19.59 lac. Qtls. of Sugar.

Expansion of the Plant from 12,500 to 16,000 TCD by adding a new Milling

Tandam with complete automation system is being done which will commence

production in season 2005-06.

A new Co-generation plant of 24.0 M.W. is under installation which will

commence production in October, 2005.

- 20 -

Product Quality

The commercial grading of sugar in India is based on grain size and colour

categories. Currently 3-grain sizes and 3 colour series are identified.

GRADE GRAIN SIZE

L > 1.70 – mm

M 1.18 - 1.70 mm

S 0.60 - 1.18 mm

COLOURAPPROX. ICUMSA COLOUR

UNITS

31 < 100

30 100-150

29 29 >150

Khatauli Sugar Quality :-

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In India bold grain carries a premium. Keeping this in mind, the Khatauli unit

produces sugar of bolder grain of low colour value. The production is

categorised as following (figures are approx. as they vary every year)-

L-31 20%

M-31 70%

S-31 10%

Sugar is statutorily required to be packed in 100 Kg twill jute bags

CANE DEVELOPMENT PROGRAM :-

Cane Development Programme

The philosophy of the cane development and marketing is almost common for

all the sugar units. While in following paragraphs, description is for Khatauli but

applies generally to Deoband & Ramkola units as well.

After identifying the constraints in the area of operation, the mill has undertaken

an ambitious programme of Cane Development for improvement in productivity

and quality of cane. The mill has separate cane development wing with qualified

staff and experienced personnel. For this purpose the operational area has been

divided into sub-zones and the field supervisory staff has been provided with the

necessary facilities for efficient working and proper supervision of the various

cane development activities.

The cane development programme is planned with following activities:-

To educate the farmers regarding modern agricultural practices in

sugarcane cultivation.

- 22 -

To replace the unapproved and degenerated cane varieties

To initiate and propagate the use of healthy and generically pure, seed

material.

To initiate heat therapy for the treatment of cane seed through moist hot

air treatment plant to eliminate the diseases.

Fertilizers recommendation based on soil testing.

Supply of press mud on subsidized cost for improving the soil fertility.

Distribution of agro-chemicals on subsidized rates.

Incentive for high sugared varieties like CoS-88230, CoS-8436, CoJ-

64/85 and CoS-88230 in the early group and CoS-8432, CoP-84212 in

the mid and late group.

Three tier seed nursery programme for multiplication of disease free

good quality seed.

Propagation of newly released high yielding and high sugared cane

varieties.

Contribution of funds with cane development councils for

construction/repairing of link roads and culverts for the development of

infrastructure.

To layout the demonstration/trial plots to demonstrate yield potential and

better/improved cultivation techniques.

The details of various schemes of cane development being undertaken by mill

are enumerated as below:-

» Plantation of High Yield Variety of Sugarcane

» Seed Distribution

» Demonstration Plots

» Technical Assistance to Cane Growers

» Moist Hot Air Treatment

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» Irrigation

» Ratoon Management

» Biological Laboratory

» Soil Analysis and Soil Treatment

» Control of Post Harvest Sugar Losses

» Awareness Among Cultivators

PLANT & MACHINARY INTRODUCTION :-

For Triveni, sugar to sugar plant & machinery was a natural diversification.

Triveni entered in this field in mid 60s and has been a major player in this

business area of sugar machinery & turnkey sugar plants.

This division has executed more than 35 sugar plants ranging from 1000 TCD -

10000 TCD capacity and carried out major expansion, balancing work for over

20 sugar factories.

The mills designed by Triveni are considered by experts to be very robust and

rugged, requires least maintenance and give higher mill extractions.

Triveni got out of the business of complete new sugar units installation as it

started focussing on niche technology and equipment available because of tie up

with SRI, a premier sugar research institute of Australia and industry turning to

low cost small players (at a time when sugar industry was going through bad

phase) started eating away the profits made by this division.

Now, Triveni SRI Limited (TSL), a Triveni Group Company, under a License

- 24 -

Agreement with Sugar Research International, offers the latest models of plants

and machinery available to the Australian industry to the Indian Sugar Industry.

3.2 COMPANY PROFILE :-

TEIL was incorporated in 1932 and has been managed by the Triveni Group, of

which Mr. Dhruv Sawhney is the key promoter. The promoters hold around

70% of the company’s equity and have over four decades of experience in the

sugar business. Apart from its main business of sugar manufacture, TEIL is also

engaged in the manufacture of small steam turbines and high-speed gears, and in

the execution of water treatment related projects. TEIL is the third largest

domestic sugar manufacturer with a combined capacity of over 61,000 tonnes

crushed per day (tcd). The company’s sugar mills are located at Khatauli

(16,000 tcd), Deoband (14,000 tcd), Sabitgarh (7,000 tcd), Chandanpur (6,000

tcd), Raninagal (5,500 tcd), and Narayanpur (6,000 tcd), all in western UP, and

at Ramkola (6,500 tcd) in eastern UP. Apart from these, TEIL also has a 46 MW

co-generation capacity at its Khatauli sugar mill, a 22 MW cogeneration

capacity at its Deoband sugar mill, and a 160 kilo litres per day (klpd) distillery

at Muzaffarnagar UP. The company’s sugar business, including the co

generation and distillery facilities, is the largest among its businesses in terms of

revenues and capital employed.

TEIL’s steam turbine division, which is in Bangalore, is its second

largest division in terms of revenues and capital employed. This division

manufactures steam turbines of less than 18 MW size, and has recently started

making turbines in higher MW segments of up to 30 MW. TEIL also has a high-

speed gears division in Mysore, Karnataka,and a water projects division at

Noida, UP. While the high-speed gears division supplies gears to the steam

turbine division and to other industries and utilities, the water project division

- 25 -

offers engineered-to-order mechanical equipment relating to water/waste water

treatment. Although these divisions account for a relatively small portion of

TEIL’s revenues, profits and capital employed, the recent growth in them has

been significant.

TEIL’s sugar (including co-generation) and turbines divisions have

remained the main contributors to the overall turnover and profits of the

company , together accounting for over 90% of the company’s turnover and

profits. However, the contributions have varied significantly over the last few

years because of the cyclicality in the sugar business.

TEIL’s sugar and allied businesses account for almost 80% (around Rs.

15 billion) of the total capital employed, and the turbine division for just around

10%. For the 15 months ended June 2007, TEIL reported a PBIT of Rs 1.26

billion, contributed largely by its engineering businesses.

MANAGEMENT:-

Management - Triveni Engg

Name Designation

Dhruv M Sawhney Chairman and Managing director

Nikhil Sawhney Executive Director

K K Hazari Director

M K Daga Director

Shekhar Datta Director

Name Designation

Tarun Sawhney Executive Director

F C Kohli Director

- 26 -

K N Shenoy Director

Amal Ganguli Director

R C Sharma Director

GLOBAL CONSUMPTION

- 27 -

Today, we touch the lives of millions of people globally by serving our

customers in the areas of sugar, turbines, gears & gearboxes and water &

wastewater treatment. While we are amongst the three largest sugar

manufacturers in India, we are also the market leaders in our engineering

businesses, having a global footprint.

Embracing the virtues of integrity, excellence and commitment, we move ahead

to take on the opportunities and challenges offered by the future. We are geared

to transform into a truly global enterprise through a prudent mix of technical

innovation and exceptional customer service delivery. `

Our commitment to excellence and strong corporate governance guides us in

this endeavor, as we look ahead at powerful growth and building a socially

equitable, sustainable future.

- 28 -

VISION

CORE VALUES

- 29 -

CUSTOMER FOCUS

ORGANISATIONAL PRIDE

MUTUAL RESPECT AND TRUST

INITIATIVE AND SPEED

TOTAL QUALITY

The Following diagram Show the service offered by triveni group at khatauli

plant is as follows:

Sugar Businesses:

Sugar Manufacturing: Triveni plans to expand its sugar manufacturing

capacity to around 52,000 tons of sugarcane crushed per day (tcd) in

- 30 -

fiscal 2006-07. This expansion will include three new sugar factories

with capacities ranging between 5000 to 7000 tcd. All the three factories

will be located in West Uttar Pradesh, allowing the company to operate in

a well irrigated cane growing areas with close access to sugar deficient

markets. The company is also expanding its sugarcane crushing

capacities at its factories in Deoband and Khatauli. The expansions in

capacity and one new sugar factory (at Sabitgarh, district Bulandsher)

will be operational within the financial year 2005-06.

Cogeneration of Power: Triveni currently produces 74MW of power for

export to the UP State grid through its cogeneration facility at Deoband.

The company is installing another 47MW cogeneration facility at

Khatauli by September 2005. Therefore the total co generated power

produced by Triveni, for export, will equal 45MW.

Engineering Businesses:

Turbines: Triveni will double its capacity to manufacture turbines by

March 2006. It will also expand the capacity output of its range of

turbines and focus on exports.

Gears & Gearboxes: The gears business has expanded its production

capacity three fold and is actively pursuing export opportunities through

its License partner - Lufkin.

- 31 -

Water & Wastewater Treatment: The water business is pursuing strategic

alliances with various business units of US Filter to expand its already

diverse product portfolio.

TRIVENI KHUSHALI BAZAAR

Triveni Engineering & Industries Limited has a command area of over 1 lakh

ha.under sugarcane cultivation, covering over 1.46 lakh farmers and buys more

than Rs. 300 Crore of sugarcane per annum from these farmers.

We have a team of over 250 staff in the Cane development who work closely

with these farmers. We are now leveraging our longstanding relationship with

these farmers to provide them with the entire range of Agri inputs and services

under one shop called Triveni Khushali Bazaar.

Triveni Khushali Bazaar will increase the association of rural communities with

us and further strengthen their relationship with us. Such a relationship, coupled

with our track record of timely payment to farmers will enable us to secure the

source of our primary raw material.

TRIVENI KHUSHALI BAZAAR-Future Initiative

Currently Khushali Bazaar has 2 Triveni owned stores and 4 franchise owned

stores. The self owned stores are at Khatauli and Deoband. The franchises are at

- 32 -

Jansath, Sisauli, Ghatain and Badgaon. These stores are operating since

February 2005.

These stores will provide to farmers, Agri inputs, Agri implements for sale as

well as rental, Irrigation equipment, Agri extension services, Cement, Cattle

feed, FMCG, Petrol/Diesel, Lubricants, Two wheelers, Tractors and other goods

to complete the farmers' basket of goods. We have established tie-up with a

number of leading companies to sell their products through our stores. We have

also tied up a bank to provide loans to our sugarcane farmers to facilitate their

shopping in our stores.

After stabilising the operations at these stores, we would like to expand our

network to other parts of UP.

BRANDED SUGAR- SHAGUN

on 26 September 2003 Triveni launched its 1kg & 5kg packets of sugar under

the brand name of SHAGUN

Shagun is a premium quality sugar from Triveni, a

- 33 -

pioneer in the Indian sugar industry since 1932. It stands for pure, healthy,

superior quality crystal sugar, which is manufactured using the best technology

from UK & USA, by crushing the juiciest sugarcane from the Ganga-Jamuna

Doab region.

The production of Shagun sugar takes place in a completely hands-free and

sterile environment. We also deploy double micro filtration system that

removes minutest foreign particles to make the sugar pure & healthy.

Objective of branding:-

To get closer to end consumer and provide them with a value added

product.

High disposable income.

Better life style.

Springing of departmental stores

Target customer

House wife

25 – 40 years

- 34 -

Upper and middle – middle class

Quality and health conscious

   

Competition

- 35 -

Last Price Market Cap.(Rs. cr.)

Sales Turnover

Net Profit Total

AssetsShree Renuka 64.25 4,303.47 2,234.20 143.50 2,563.71EID Parry 398.00 3,438.64 1,179.43 205.28 1,671.58Triveni Engg 101.40 2,614.90 1,895.94 169.78 1,756.78Bajaj Hind 113.85 2,178.60 1,780.71 154.61 5,368.83Balrampur Chini 79.65 2,058.74 1,704.58 226.51 2,147.28Bannariamman 847.45 969.46 884.44 143.63 799.32Andhra Sugar 135.80 368.11 578.34 66.84 639.61Dhampur Sugar 61.20 329.90 948.04 56.19 1,231.60KCP Sugar 20.30 230.17 301.55 23.74 208.25Sakthi Sugars 55.00 202.44 1,374.71 103.49 2,159.63

- 36 -

CHAPTER- IV

DATA ANALYSIS AND INTERPRETATION

A. PBIT-EPS ANALYSIS

PBIT-EPS ANALYSIS FROM 2005-2009 ;-

- 37 -

1. PBIT-EPS ANALYSIS 2005:-

EPS = (PBIT-I)(1-t)/n

EPS=(136.08-30.64)(1-.241)/831.52

EPS=(105.44*.759)/831.52

EPS=.096

2. PBIT-EPS ANALYSIS 2006:-

EPS=(221.17-30.43)(1-.297)/2578.80

EPS=(190.74*.703)/2578.80

EPS=.051

3. PBIT-EPS ANALYSIS 2007:-

EPS=(193.08-93.87)(1+.039)/2578.80

EPS=(99.21*1.039)/2578.80

EPS=.039

4. PBIT-EPS ANALYSIS 2008:-

EPS=(317.29-109.85)(1-.228)/2578.80

EPS=(207.44*.772)/2578.80

EPS=.062

- 38 -

5. PBIT-EPS ANALYSIS 2009:-

EPS=(426.11-115.46)(1-.726)/2578.80

EPS=(310.65*.274)/2578.80

EPS=.033

TABLE -1

PBIT-EPS ANALYSIS

- 39 -

Year EPS

2004-2005 .096

2005-2006 .051

2006-2007 .039

2007-2008 .062

2008-2009 .033

Interpretation and Analysis:

The above table and diagram shows that the EPS in the year 2004-05 was .096

and then it decreases to .051 in the year 2005-06, further decrease to .039 in the

year 2006-07 and in the year 2007-08 it increase.062 and finally in the year

2008-09 it again moved down to .033.

We know that company earnings per share is decreasing continuously but

in 2007-08 the EPS is high its mean share holder wealth is maximizing but in

2008-09 again decreasing because in this period there were a dispute between

management and employee and because of strike company is in lose so

company should take serious step regarding employee satisfaction for to

improve shareholder wealth

- 40 -

B. LEVERAGE ANALYSIS:-

1. DEGREE OF OPERATING LEVERAGE (DOL)

2. DEGREE OF FINANCIAL LEVERAGE (DFL)

3. DEGREE OF TOTAL LEVERAGE (DTL)

1. DEGREE OF OPERATING LEVERAGE:-

DOL 2005:-

DOL=GROSS PROFIT / EBIT

DOL=882.45/136.08

DOL=6.484

DOL 2006:-

DOL= GROSS PROFIT / EBIT

DOL=1161.21/221.17

DOL=.5254

DOL 2007:-

DOL=GROSS PROFIT / EBIT

DOL=1895.53/193.08

DOL=9.817

- 41 -

DOL 2008:-

DOL= GROSS PROFIT / EBIT

DOL=1704.72/317.29

DOL=5.372

DOL 2009:-

DOL=GROSS PROFIT / EBIT

DOL=1668.90/426.11

DOL=3.916

TABLE-2

DEGREE OF OPERATING LEVERAGE:

- 42 -

Year DOL

2004-2005 6.484

2005-2006 .5254

2006-2007 9.817

2007-2008 5.372

2008-2009 3.916

CHART-2

DOL:

Interpretation and Analysis:

The above table and diagram shows the operating leverage during

the study period except in the year 2006-2007 is more than previous year but in

year 2007-08 it again decreased and year 2008-09 it again come down

The DOL is an index number which measures the effect of a change in sales on operating income, or EBIT. It shows that company is giving less amount and bear less depritiation charge it is good for company.

- 43 -

2. DEGREE OF FINANCIAL LEVERAGE:-

DFL 2005:-

DFL=PBIT / PBT

DFL=136.08/86.76

DFL=1.568

DFL 2006:-

DFL=PBIT/PBT

DFL=221.17/161.20

DFL=1.372

DFL 2007;-

DFL=PBIT/PBT

DFL=193.08/72.48

DFL=2.663

DFL 2008:-

DFL=PBIT/PBT

DFL=317.29/140.74

DFL=2.254

- 44 -

DFL 2009:-

DFL=PBIT / PBT

DFL=426.11/247.26

DFL=1.723

TABLE-3

DEGREE OF FINANCIAL LEVERAGE:

- 45 -

Year DFL

2004-2005 1.568

2005-2006 1.372

2006-2007 2.663

2007-2008 2.254

2008-2009 1.723

CHART-3

DFL:-

Interpretation and Analysis:

The above table and diagram shows the student period 2004-05 to 2008-

09.in the year 2006-07it was very high it was nit good for the company because

during this period company is paying fixed interest on debt but in year 2008-09

- 46 -

It comes down it mean company is is paying less interst so it is good for

company or company is improving its position.

3. DEGREE OF TOTAL LEVERAGE:-

DTL 2005:-

DTL=DOL*DFL

DTL=6.484*1.568

DTL=10.17

DTL 2006:-

DTL=DOL*DFL

DTL=.5254*1.372

DTL=.720

DTL 2007:-

DTL=DOL*DFL

DTL=9.817*2.663

DTL=26.14

DTL 2008:-

DTL=DOL*DFL

DTL=5.372*2.254

- 47 -

DTL=12.108

DTL 2009:-

DTL=DOL*DFL

DTL=3.916*1.723

DTL=6.747

TABLE-4

DEGREE OF TOTAL LEVERAGE:

- 48 -

- 49 -

Year DTL

2004-2005 10.17

2005-2006 .720

2006-2007 26.14

2007-2008 12.108

2008-2009 6.747

CHART-4

DTL

- 50 -

B) LEVERAGE RATIOS :

Many financial analyses are interested in the relative use of debt and

equity in the firm. The term ‘solvency’ refers to the ability of a concern to meet

its long-term obligation. Accordingly, long-term solvency ratios indicate a

firm’s ability to meet the fixed interest and costs and repayment schedules

associated with its long-term borrowings. (E.g.) debt equity ratio, proprietary

ratio, etc….

i) DEBT EQUITY RATIO:

It expresses the relationship between the external equities and

internal equities or the relationship between borrowed funds and ‘owners’

capital. It is a popular measure of the long-term financial solvency of a firm.

This relationship is shown by the debt equity ratio. This ratio indicates the

relative proportion of dept and equity in financing the assets of a firm. This ratio

is computed by dividing the total debt of the firm by its equity (i.e.) net worth.

Outsider’s funds

Debt equity ratio = ------------------------------

Proprietor’s funds

- 51 -

TABLE-5

DEBT EQUITY RATIO:

Year Outsider’s funds

in Rs. Cr

Proprietor’s funds

in Rs. Cr

Ratio

2004-2005 175.71 450.09 .39

2005-2006 512.16 402.61 1.27

2006-2007 674.85 1001.55 .67

2007-2008 766.85 1168.70 .65

2008-2009 906.45 833.80 1.08

- 52 -

CHART-4

DEBT EQUITY RATIO:

Interpretation and Analysis:

The above table and diagram shows the debt equity relationship of the

company during the study period. It was 0.4 in the 2004-05 and then reached its

highest in the next year and from there it began to slope downwards and

ultimately came to 1.08 in the year 2008-09.

In all the years the equity is more when compared with borrowings.

Hence the company is maintaining its debt position

- 53 -

ii) PROPRIETARY RATIO:

Proprietary ratio relates to the proprietors funds to total assets. It

reveals the owners contribution to the total value of assets. This ratio shows the

long-time solvency of the business it is calculated by dividing proprietor’s funds

by the total tangible assets.

Proprietor’s funds

Proprietary ratio = ---------------------------

Total tangible assets

TABLE-5

PROPRIETARY RATIO:

- 54 -

Year Proprietor’s funds

in Rs. Cr

Total assets

in Rs. Cr

Ratio

2004-2005 450.09 317.55 1.41

2005-2006 402.61 312.97 1.28

2006-2007 1001.55 374.77 2.67

2007-2008 1168.70 638.11 1.83

2008-2009 833.80 444.60 1.87

CHART-5

PROPRIETARY RATIO:

Interpretation and Analysis:

The above table and diagram shows the proprietary ratio during the study

period. In all the years the owner's contribution to the total assets was appropriate

and they maintain their share in the company's assets.

Except 2005-06 in all the years the proprietor's contribution in to the total

assets is more than the 2/3. During 2006-07 it is more than 50%

- 55 -

C. ROI-ROE ANALYSIS:-

ROE= [ROI+(ROI-r)D/E](1-t)

RETURN ON INVESTMENT = Net profit /capital employed × 100 (ROI)

ROI OF 2005

ROI=99.52/644.22*100

ROI=15.44

ROI OF 2006

ROI=131.50/932.85*100

ROI=14.09

ROI OF 2007

ROI=75.43/1693.59*100

ROI=4.45

ROI OF 2008

ROI=111.52/1952.42*100

ROI=5.71

ROI OF 2009

ROI=169.78/1756.79*100

ROI=9.66

- 56 -

ROI-ROE ANALYSIS:- 2005

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[15.44+(15.44-10 )*.39](1-.24)

ROE= 13.34

ROI-ROE ANALYSIS:- 2006

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[14.09+(14.09-12 )*1.27](1-.29)

ROE= 12.59

ROI-ROE ANALYSIS:- 2007

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[4.45+(4.45-10 )*.67](1-.039)

ROE=o.88

ROI-ROE ANALYSIS:- 2008

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[5.71+(5.71-12 )*.65](1-.228)

ROE= 1.25

ROI-ROE ANALYSIS:- 2009

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[9.66+(9.66-11 )*1.08](1-.726)

ROE=2.25

- 57 -

- 58 -

Year ROI ROI-ROE RELATION

2004-2005 15.44 13.34

2005-2006 14.09 12.59

2006-2007 4.45 .88

2007-2008 5.71 1.25

2008-2009 9.66 2.25

INTERPRETATION:-

IN the study of 2004-05 to 2008-09 the return on equity from 2005-2006 was

good but in year 2007-09 it was not good its mean investment is not up to the

mark it’s a drawback for shareholder so company should work hard to control

this low graph.

Balance Sheet of Triveni Engineering

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

Mar '05 Mar '06 Sep '07 Sep '08 Sep '09

12 mths 12 mths 12 mths 12 mths12

mths

Sources Of FundsTotal Share Capital 10.30 25.79 25.79 25.79 25.79Equity Share Capital 8.32 25.79 25.79 25.79 25.79Share Application Money 0.00 0.00 0.00 0.00 0.00Preference Share Capital 1.99 0.00 0.00 0.00 0.00Reserves 165.41 486.37 649.06 741.06 880.66Revaluation Reserves 18.42 18.08 17.19 16.87 16.54Networth 194.13 530.24 692.04 783.72 922.99Secured Loans 429.96 369.80 931.13 1,079.84 758.75Unsecured Loans 20.13 32.81 70.42 88.86 75.05Total Debt 450.09 402.61 1,001.55 1,168.70 833.80Total Liabilities 644.22 932.85 1,693.59 1,952.42 1,756.79

Mar '05 Mar '06 Sep '07 Sep '08 Sep '09

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of FundsGross Block 387.68 710.07 1,503.60 1,556.92 1,634.87

- 59 -

Less: Accum. Depreciation 116.92 139.78 218.94 295.81 370.17Net Block 270.76 570.29 1,284.66 1,261.11 1,264.70Capital Work in Progress 30.04 46.74 21.11 39.67 19.20Investments 22.98 1.86 10.83 11.62 26.98Inventories 435.28 404.79 419.72 539.79 458.14Sundry Debtors 66.65 100.34 94.28 213.45 242.88Cash and Bank Balance 17.36 20.36 20.91 14.92 15.65Total Current Assets 519.29 525.49 534.91 768.16 716.67Loans and Advances 68.76 87.36 346.83 385.71 416.52Fixed Deposits 5.42 5.56 4.52 3.78 11.67Total CA, Loans & Advances 593.47 618.41 886.26 1,157.65 1,144.86Deffered Credit 0.00 0.00 0.00 0.00 0.00Current Liabilities 222.21 256.68 459.96 435.20 602.99Provisions 53.71 48.76 51.53 84.34 97.27Total CL & Provisions 275.92 305.44 511.49 519.54 700.26Net Current Assets 317.55 312.97 374.77 638.11 444.60Miscellaneous Expenses 2.88 0.96 2.24 1.92 1.30Total Assets 644.21 932.82 1,693.61 1,952.43 1,756.78

Contingent Liabilities 111.30 177.64 43.67 58.89 42.40Book Value (Rs) 20.89 19.86 26.17 29.74 35.15

Profit & Loss account of Triveni Engineering

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

Mar '05 Mar '06 Sep '07 Sep '08 Sep '09

12 mths

12 mths 12 mths 12 mths 12 mths

Income

Sales Turnover1,023.0

81,270.30 2,053.06 1,703.04 1,967.64

Excise Duty 58.15 70.95 144.82 116.75 59.87Net Sales 964.93 1,199.35 1,908.24 1,586.29 1,907.77Other Income -35.64 10.54 6.34 9.60 -10.19Stock Adjustments -46.84 -48.68 -19.05 108.83 -228.68Total Income 882.45 1,161.21 1,895.53 1,704.72 1,668.90ExpenditureRaw Materials 630.85 805.39 1,405.02 1,134.07 968.34Power & Fuel Cost 4.72 9.91 17.00 10.72 11.95Employee Cost 54.06 72.24 146.53 120.13 135.89

- 60 -

Other Manufacturing Expenses 17.77 22.93 59.22 46.80 46.91Selling and Admin Expenses 28.58 35.03 76.73 47.83 50.44Miscellaneous Expenses 15.06 22.61 49.85 29.38 30.56Preoperative Exp Capitalised -4.67 -28.07 -51.90 -1.50 -1.30Total Expenses 746.37 940.04 1,702.45 1,387.43 1,242.79

Mar '05 Mar '06 Sep '07 Sep '08 Sep '09

12 mths

12 mths 18 mths 12 mths 12 mths

Operating Profit 171.72 210.63 186.74 307.69 436.30PBDIT 136.08 221.17 193.08 317.29 426.11Interest 30.64 30.43 93.87 109.85 115.46PBDT 105.44 190.74 99.21 207.44 310.65Depreciation 12.35 23.64 81.28 79.68 75.78Other Written Off 5.97 5.85 -61.78 -14.95 -11.76Profit Before Tax 87.12 161.25 79.71 142.71 246.63Extra-ordinary items -0.36 -0.05 -7.23 -1.97 0.63PBT (Post Extra-ord Items) 86.76 161.20 72.48 140.74 247.26Tax 24.10 29.77 -3.92 22.81 72.68Reported Net Profit 99.52 131.50 75.43 111.52 169.78Total Value Addition 115.52 134.65 297.43 253.37 274.44Preference Dividend 0.24 0.00 0.00 0.00 0.00Equity Dividend 8.32 12.89 15.47 15.47 25.79Corporate Dividend Tax 1.11 1.81 2.36 2.63 4.38

Per share data (annualised)

Shares in issue (lakhs)

831.52 2,578.80 2,578.80 2,578.80 2,578.80

Earning Per Share (Rs) 11.94 5.10 2.92 4.32 6.58Equity Dividend (%) 100.00 50.00 60.00 60.00 100.00Book Value (Rs) 20.89 19.86 26.17 29.74 35.15

- 61 -

- 62 -

CHAPTER- V

FINDINGS AND SUGGESTIONS

Contents:

5.1 Findings

5.2 Suggestions

- 63 -

5.1 FINDINGS:-

In all the years the debt equity is more, when compared with borrowings.

Hence the company is maintaining its debt position.

The proprietary ratio during the study period to the total assets is more than

the 2/3. During 2004-05 it is more than 50%

In all the years the equity is more when compared with borrowings.

Hence the company is maintaining its debt position

Earning per share of the company is decreasing

Degree of financial leverage is decreasing

Intangible assets of the company is increasing 38 to 100

Liabilities on company is increasing from 3736 to 5096

Net current assets of the company is decreasing 6962 to 5379

Triveni canecrush is decreased by 36 %

5.2 SUGGESTION

The company's profit over the years has been decreasing when

compared to previous years and even it incurred loss in the last year.

The company must increase the profit in future. The company must

take steps to increase the profit level.

- 64 -

A Non-operating expense of the company is high. So the management

should take necessary steps to reduce the non-operating expenses. The

management should take steps to reduce the borrowed capital.

The liquidity position of the company is quite satisfactory. And this

must be improved further for the purpose of proper utilization of the

liquid assets of the company.

The EPS position of the company is not satisfactory for the last five

years. It is fluctuating over the years and there is no standard ration

maintained. So the management should take steps to improving the

position of the company.

Debt equity ratio has satisfactory for the past years. So the company

has enough scope for the more long-term borrowings from the

outsiders as its current ratio is also good and has a sufficient amount

of current assets..

The sales of the organization can be further increased by improving

the quality through optimum utilization of company's resources (i.e.

assets, raw materials, credit system, etc.) and that in turn will increase

the overall profits of the organization.

The Management must find out the reasons for the decrease in sales

and must take appropriate measures.

The Management must also study the market position and it also find

the demand prevailing in the market for the products and thus this will

guide them to enhance their sales volume.

- 65 -

CONCLUSION AND BIBLIOGRAPHY

Contents:

6.1 Conclusion

6.2 Bibliography

- 66 -

6.1 CONCLUSION:-

On studying the financial performance of Triveni engineering &

industries Ltd. for a period of five years from 2004-05 to 2008-09, the study

reveals that the financial performance is better. Triveni engineering & industries

Ltd has been able to maintain optimal cost positioning. Despite price drops in

various products, the company has been able to maintain and grow its market

share to make strong margins in market, contributing to the strong financial

position of the company. The company was able to meet its entire requirements

for capital expenditures and higher level of working capital commitment with

higher volume of operations and from its operating cash flows.

. The company should now give more importance to exports because it

provides good net sales realization but also export benefits.

- 67 -

6.2 BIBLIOGRAPHY

Annual Reports Of TRIVENI ENGINEERING & INDUSTRIES

LTD.

General Articles and Magazines Of TRIVENI ENGINEERING &

INDUSTRIES LTD.

T.S Reddy and Y. Hariprasad Reddy, Financial management, New

Delhi: Tata Mc Graw hill Publishing company Ltd., 1999, 3rd edition

M.A Sahaf Management and Accounting 4th Edition, Tata McGraw

Hill Publishing Company Ltd, 5th Reprint - 2006 - New Delhi.

Pandey, Financial Management 8th Edition, Vikas Publishing house Pvt

Ltd, 6th Reprint -2006- New Delhi.

Sharma R.k & S.K. Gupta, Financial Management

Rustagi, Financial Management

Website:

http://money.newkerala.com/company-profile-id-16020114.00.html

www.indianinfoline.com

B ooks :

Survey of Indian industry- The Hindu

- 68 -

Newspapers:

The Hindu, Deccan Chronicle.

Literature Review Bibliography

1. Environmental and Financial Performance Literature, by Donald P.

Cram, on March 27, 2000

Source: http://web.mit.edu/doncram/www/environmental/envir-fin-

literature.html

2. Journal of Industrial Technology • Volume 19, Number 2 • February

2003 to April 2003 Page2, by Dr. Devang P. Mehta

Source: http://72.14.235.132/search?

q=cache:EIGjtsUJQeEJ:www.nait.org/jit/Art

icles/mehta011603.pdf+review+of+literature+on+financial+performance&h

l=en&ct=clnk&cd=2

3. Journal of International Business Studies (1995), Vol 26, Page 181–202,

By Janet Y. Murray, Masaaki Kotabe & Albert R. Wildt

Source:

http://www.palgrave-journals.com/jibs/journal/v26/n1/abs/8490171a.html

- 69 -

4. Implications for financial performance and corporate social

responsibility, by Philippe Jacquart, Catherine Ramus & John

Antonakis, on May 23, 2004.

Source: http://www1.icp2008.org/guest/AbstractView?ABSID=10821

5. Journal of the Operational Research Society (2003) Vol-54,Pages 48–

58,

By E H Feroz

Source:

http://www.palgrave-journals.com/jors/journal/v54/n1/abs/2601475a.html

- 70 -