RATIO ANALYSIS

A

PROJECT REPORT

UNDER THE GUIDANCE OF

MISS. CHHAYA CHAVDA

(INCHARGE)

SUBMITTED BY

Gamara Prakash V.

ROLL NO. 520910204

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF THE DEGREE

OF

MBA

IN

FINANCE

1

BONAFIDE CERTIFICATE

Certified that this project report titled “Ratio Analysis” is the

bonafide work of Gamara Prakash V. who carried out the project

work under my supervision.

SIGNATURE SIGNATURE

HEAD OF THE DEPARTMENT FACULTY IN CHARGE

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ACKNOWLEDGEMENT

Industrial Training is not only part of our syllabus but it is the golden

opportunities for our knowledge enrichment. With the great pleasure, here I take

the opportunity to express my towards all who have helped me at various stage

of my practical training.

At the once, I would like to place on record my thanks to the management of

The KAIRA DISTRICT CO-OPERATIVE MILK PRODUCER UNION

LIMITED company for their kind co-operative in providing the required data.

In a special ways, I would like to place on record my special and sincere thanks

our Head Of The Department Mr. Samir Patel & my training incharge Miss.

Chhaya Chavda who throughout the preparation of the report. My special thanks

go to Mr.J.K.Joshi manger of administration, and Mr. Manoj Chauhan for his

kind support and acknowledgement.

Lastly, I would like to thanks the management, officers and staff of different

departments who spend their important time in expressing us the various aspects

of unit and provided insight for the preparation of this report. I would like to

acknowledge the valuable help offered by the persons directly or indirectly to

me to connect to this report throughout my training period.

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IndexIndex

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Sr.no. Particulars Page no.

1)Preface 5

2)Executive Summary 6

3)About Dairy Industry 7

4)About Amul Dairy 38

5)Financial Manangement 62

6)Ratio Analysis 77

7)Literature Review 117

8)Research Methodology 126

9)Findings 141

10)Limitations 144

11)Recommendations 145

12)Conclusion 148

13)Bibliography 153

14)Annexure 155

PREFACE

Any industrial training is very helpful aid to get idea about management and

working of the industrial undertaking.

MBA is one of the master courses which has its own unique role clarify likely

others. But unlike the other professional courses one of its basic requisite for the

students of IV semester MBA during the study terms is to undertake practical

training in any one public limited industry.

From this industrial training, I can visualize that there is much difference

between theory and practical life. After training period, we have good

management student.

The industrial training is very important for MBA program. In industry or

company, there are many problem arises. Often during the time period of

industry training, I come to know that how successful management team solves

this entire problem.

Once, I visited KAIRA DISTRICT CO-OPERATIVE MILK PRODUCER

UNION LIMITED (AMUL), ANAND for 3 months. This industrial training

offers me to blend the practical knowledge of the company of industry.

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EXECUTIVE SUMMARY

It is necessary to principal knowledge before doing any work because of today’s

competitive world.

For the practical knowledge I have taken visit in KAIRA DISTRICT CO-

OPERATIVE MILK PRODUCER UNION LIMITED, ANAND. Mainly in

this report the focus is on financial department and general information relating

to the organization. The project was done in financial position of AMUL

DAIRY. The source of getting data was annual report. In this analysis I have

first given the company profile that gives all the information about the company

that what is the company’s status in the market right now.

I am over whelmed with pleasure while presenting this report on KAIRA

DISTRICT CO-OPERATIVE MILK PRODUCER UNION LIMITED. An

oasis in the desert founder chairman was a simple person with great

farsightedness who had a dream to provide respectable facilities to the people.

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ABOUTABOUT

DAIRYDAIRY

INDUSTRYINDUSTRY

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-: INTRODUCTION:-

Dairy industry is best suited industry for the growth of the India,

because India is a country that is mainly depend on the agriculture and cattle

feed product, that is nearly 70% and also Indian people will prefer more dairy

products than other food products. This is the main reason for the development

of dairy industry in Indian economy.

Reportedly, world demand for the dairy products is growing by 2%

per year. The largest consumers of dairy products are high income developed

countries like U.S.A., EUROPE, AUSTRALIA, NEWZEALAND, JAPAN and

all the GULF countries. Global prices are at its peak due to drought in Australia

and lower than projected milk volumes in Newzealand along with the phased

reduction in subsidized by the Europe. Global liberalization of dairy policies is

eliminating all tariffs, quotas export subsidized, and domestic supports. At the

same time, novel trade opportunities are emerging from the rapid economy

growth, changing directly patterns and rising urban populace in developing

countries.

At this juncture, competition among firms has grown. However to

stay in market. Firms that respond quickly to changing economic forces,

changing policies and swifts in milk supply and demand forces.

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The Amul is the group of unity of four hands which implies that

the co-ordinate hands of different groups of people, united together from

“Amul” which is now the HIGHEST MILK PRODUCER IN ASIA and

SECOND HIGHEST IN THE WORLD.

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NATURE OF DAIRY INDUSTRY

In the early seventeenth century, the first English and Dutch colonists

brought cattle with them. Despite the rigors of the environment, cattle

proliferated in all the settled areas. Although shelter and feed were in short

supply and native grasses were not satisfactory for haymaking, pasture was

usually adequate through the summer months. Settlers initially substituted wild

marsh hay, straw, and corn fodder for winter feed but later brought over from

Europe better pasture grasses and tame hays. The cattle came primarily from

England and Holland. There were no specific dairy breeds, and the unimproved

stock soon lost weight and shape through poor management and interbreeding.

Only in New England, where animals grazed under the care of a town cowherd,

was there much supervision. There the towns-people even exercised some

control over breeding through communal choice of sires. Elsewhere the cattle

usually identified through earmarks or brands, mostly fended for them. Almost

every farm and most town households kept one or two cows. Women and

children customarily milked the animals, except in winter when the cows dried

up. They also manufactured the butter and cheese. Before 1700 some producers

regularly exported dairy goods from New England.

By the mid-eighteenth century some areas, such as the Narragansett

district, the lower Hudson Valley, and the counties around Philadelphia, had

earned reputations for producing prime butter or cheese. Exports had stimulated

better management even before the American Revolution, at which time dairies

of a dozen or more cows were no longer uncommon. Between 1790 and 1805,

cheese exports exceeded one million pounds annually, and by 1812, New York

butter wagons regularly traveled as far south as Charleston, South Carolina. In

the early 1820s, some Ohio cultivators were peddling cheese and butter in small

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towns along the Ohio River from Wheeling to Louisville. The dairy,

nevertheless, remained a seasonal and a household undertaking, a by-product of

"general" farming, until the mid-nineteenth century. Commercial growth was

rapid from the late 1820s. In 1840 dairy manufactures, valued at $33.8 million,

took place in all thirty states. New York (31 percent), Pennsylvania (9.4

percent), and Massachusetts (7.1 percent) were the largest producers, but

relative to population, Vermont and New Hampshire were the most specialized.

Outside the northeastern United States, only Ohio and Virginia were large

producers. By 1860 American butter output had greatly increased, notably in

Vermont, New York, Pennsylvania, and Ohio, and Illinois was a sizable

newcomer to the industry. Cheese output, heavily concentrated in Vermont,

New York, and Ohio, lagged after 1850. New York produced a quarter of the

nation's butter and almost half the cheese in 1860. It also contributed the greater

part of cheese exports, which had doubled between 1845 and 1850 to about 15

percent of the national output.

Advances in dairy husbandry began in the 1880s with the practice of

feeding the animal’s ensilage, such as unripened corn, clover, and alfalfa.

Farmers preserved the green feed in closed pits or tower structures called silos.

Silage feeding lengthened the milking season up to 10 weeks, which allowed

manufacturing plants to stay open throughout the year. Adaptation of German

scientific feeding principles resulted in a balanced dairy ration that combined

the nutritive components of various feeds in the proportions required by a cow's

flow of milk. The Babcock test helped farmers cull their low-fat producers.

Beginning with the rivalries of breed associations in the 1880s, emphasis shifted

to raising milk output through official cow testing, extension activity on the part

of the agricultural colleges, cooperative herd improvement associations, and

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disease-eradication and sire-proving programs. Purebred Holstein-

Friesians, Jerseys, Guernseys, Ayrshires, Brown Swiss, and, from the 1930s,

Red Danish all proved to be excellent dairy cattle, while the dual-purpose

breeds, such as Devons, Shorthorns, and Red Polls, lost ground on specialized

dairy farms. These farms adopted milking machines in the 1920s and installed

cooling equipment later.

Average annual yield per cow climbed from 3,050 pounds of milk in 1890

to 4,508 in 1950, 9,609 in 1970, and 18,204 in 2000. The greatest relative

increases occurred on farms with fifty or more cows in new dairy states, such as

Florida, Arizona, and California. In 1993 California replaced Wisconsin as the

nation's top dairy state and currently produces one-third more milk annually

than Wisconsin does. The number of milk cows reached 25.8 million in 1944

but fell to 12.4 million by 1970 and to 9.2 million by 2000. Between 1950 and

1970, the numbers of farms reporting milk cows fell by 80 percent, and

thousands of small dairy farmers went out of business. This trend has continued

into the twenty-first century as large-scale producers replace small, family-run

operations. Nevertheless, milk products, worth more than $21 billion in 2000,

were second only to sales of cattle and calves in cash value to American

farmers, and that income included the culling of some dairy cattle. In 1997 the

dairy was the largest single source of farm income in six states and second

largest in five others.

Small-scale dairy manufacturing also went into eclipse. When insulated

cars and trucks led to much larger milk sheds at processing plants, high-volume

plants began to achieve the substantially lower unit costs hitherto enjoyed only

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by condenseries and "centralizer" creameries. As average size of output

increased, however, the number of plants declined, especially since the 1930s.

By 1945 over 100 large "flexible" plants already made multiple products, most

frequently evaporated milk, butter, and cheese, as cost and price relationships

changed.

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FEATURES OF DAIRY INDUSTRY

India has maintained the unbeatable spot of being the top milk producer in

the world. Thanks to the far sightedness of thinkers like Dr Kurien that

mechanisms like white revolution and cooperatives have stead fast India's

growth in the dairy industry. Little wonder that shanties with buffaloes tied up

in the yard is not a rare sight in India. Going by the statistics, India has shown

almost nil signs of slowdown with milk consumption envisaged to rise by 2.6%

in 2009 and milk production forecast to sustain its normal growth of about 3%.

India is the world's largest milk producer with 104.9 million tonnes per year.

Milk production in India is growing at 4% per year, and at present India

contributes 15% of the total global milk production. The country boasts of some

300 million dairy cattle. India's dual distinction in the dairy segment comes

from the fact that it is both the world's top milk producer and the world's largest

milk consumer.

According to a dairy report released by the Tetra Pak, since 1999, India has

produced more milk than any other country in the world. Over the last four

years, milk production in India has increased by a compound annual growth rate

of 4.3%.

India also tops the charts in terms of milk consumption, consuming 51.5

billion litters of milk and other liquid dairy products in 2008, with a compound

annual growth rate of 2.7% over the last four years. That's almost double the

volumes consumed by the number two milk consumer, China. Dairy sector

contribution is around 65-70% to livestock sector. However, we have less than

1000 milk processing centres in India. The level of processing is expected to be

around 15% in the short term, 20% in the medium term and 30% in the long

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term. We need to empower the farmers so that large and modern commercially

viable units enter into the indigenous dairy products manufacturing by bringing

improved quality standards, commercially viable technologies, nano technology

based packing and refrigerated transportation system for hygienic distribution

and increased shelf-life.

Amul has been ranked amongst the top 21 largest dairy businesses in the

world as per the findings published by International Farm Comparison Network

(IFCN) at the 10th IFCN Dairy Conference 2009 at Stockholm. Domestically

Amul leads the rest in terms of milk production followed by Karnataka Milk

Federation.

The exports of Dairy Products from India reached 69415.44 million tonnes

with the value of Rs 866.58 crore in 2007-08 as against Rs 434.58 crore in

2006-07. GCMMF is India's largest exporter of Dairy Products. It has been

accorded a "Trading House" status.

Amul GCMMF, Mother Dairy India Ltd, and Nestle India Ltd represent the

3 active competitors in the probiotic dairy market. New entrants for future

include Yakult, the global leader in yoghurts, with its partnership with

DANONE.

BENEFITS OF INDUSTRY

MILK PRODUCTS FOR YOUR HEALTHY WEIGHT.

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Consuming the recommended servings of milk products every day could

help you manage your weight in a healthy way.

According to more than 30 scientific research studies, a diet rich in calcium

or in milk products could make it easier to maintain a healthy weight or lose

excess weight. In fact, it appears that calcium could make the body use fat as an

energy source more efficiently and reduce fat storage in cells. Also, it seems

that milk products could achieve this more effectively than calcium

supplements, which suggests that other milk ingredients, such as protein, could

play an important role, perhaps by reducing appetite. This weight loss could be

even more effective in people who generally have a low milk products intake.

Conclusion: Although not a magic formula, milk products in adequate

amounts may have added benefits for weight management.

FEATURES OF INDUSTRY

Dairy industry is of crucial importance to India. The country is the world’s

largest milk producer, accounting for more than 13% of world’s total milk

production. It is the world’s largest consumer of dairy products, consuming

almost 100% of its own milk production. Dairy products are a major source of

cheap and nutritious food to millions of people in India and the only acceptable

source of animal protein for large vegetarian segment of Indian population,

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particularly among the landless, small and marginal farmers and women.

Dairying has been considered as one of the activities aimed at alleviating the

poverty and unemployment especially in the rural areas in the rain-fed and

drought-prone regions. In India, about three-fourth of the population live in

rural areas and about 38% of them are poor. In 1986-87, about 73% of rural

households own livestock. Small and marginal farmers account for three-

quarters of these households owning livestock, raising 56% of the bovine and

66% of the sheep population. According to the National Sample Survey of

1993-94, livestock sector produces regular employment to about 9.8 million

persons in principal status and 8.6 million in subsidiary status, which constitute

about 5% of the total work force. The progress in this sector will result in a

more balanced development of the rural economy.

POLICY

The total amount of milk produced has more than tripled from 23 million

tonnes back in 1973 to 74.70 million tonnes 26 years later in 1998. The

tremendous rise in milk production is primarily the fallout of the dairy farming

policy reflected in .Operation Flood.. Following the success of dairy farming

policy, the Government has set up a dairy processing policy, reflected in

the .Milk and Milk Products Order.. In addition, the Government uses a variety

of import restrictions to protect its domestic dairy market.

MILK PROCESSING

The milk processing industry is small compared to the huge amount of

milk produced every year. Only 10% of all the milk is delivered to some 400

dairy plants. A specific Indian phenomenon is the unorganized sector of

milkmen, vendors who collect the milk from local producers and sell the milk in

both, urban and non-urban areas, which handles around 65-70% of the national

milk production. In the organized dairy industry, the cooperative milk

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processors have a 60% market share. The cooperative dairies process 90% of

the collected milk as liquid milk whereas the private dairies process and sell

only 20% of the milk collected as liquid milk and 80% for other dairy products

with a focus on value-added products.

DOMESTIC CONSUMPTION

The huge volume of milk produced in India is consumed almost entirely by

the Indian population itself, in a 50-50 division between urban and nonurban

areas. Increasingly, important consumers of the dairy industry are fast-food

chains and food and non-food industries using dairy ingredients in a wide range

of the product.

TRADE

In spite of having largest milk production, India is a very minor player in

the world market. India was primarily an import dependent country till early

seventies. Most of the demand-supply gaps of liquid milk requirements for

urban consumers were met by importing anhydrous milk fat / butter and dry

milk powders. But with the onset of Operation Flood Programme, the scenario

dramatically changed.

OPPORTUNITIES AND CHALLENGES IN THE INDIAN DAIRY

INDUSTRY

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Commercial imports of dairy products came to a halt except occasional

imports of very small quantities. In the 1990s, India started exporting surplus

dairy commodities, such as SMP, WMP, butter and ghee. The Agricultural and

Processed Food Products Export Development Authority (APEDA) regulated

the export and import of dairy products till early 1990s. However, in the new

EXIM Policy announced in April 2000, the Union Government has allowed free

import and export of most dairy products. The major destinations for Indian

dairy products are Bangladesh (23.1%), UAE (15.4%), US (15.6%) and

Philippines (8.9%). In terms of products, SMP is the most important product

accounting for about 63% of total export volume, followed by ghee and butter

(11.7%) and WMP. Export figures clearly demonstrate that the Indian dairy

export is still in its infancy and the surpluses are occasional. Indigenous milk

products and desserts are becoming popular with the ethnic population spread

all over the world. Therefore, the export demand for these products will increase

and hence, there is a great potential for export. On the other hand, there has

been a sharp increase in import of dairy products (especially milk powders)

after trade liberalization. As per the latest report of Foreign Trade Statistics of

December 2004, the imports of dairy products (milk and cream) has reached a

cumulative total of 22.145 million tones for the period April - March 2004, as

compared to only 1473 million tonnes for the same period during the previous

year. The main reasons for sharp rise in imports are huge export subsidies given

by developed countries (mainly the US and EU). India has recently concluded a

tariff rate quota to deal with US, EU and Australia on imposing custom duty of

15% on imports of SMP and WMP up to 10,000 tonnes and 60% on imports

beyond this level.

KEY AREAS OF CONCERN IN THE DAIRY INDUSTRY:-

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(I) COMPETITIVENESS, COST OF PRODUCTION, PRODUCTIVITY OF

ANIMALS ETC.

The demand for quality dairy products is rising and production is also

increasing in many developing countries. The countries which are expected to

benefit most from any increase in world demand for dairy products are those

which have low cost of production. Therefore, in order to increase the

competitiveness of Indian dairy industry, efforts should be made to reduce cost

of production. Increasing productivity of animals, better health care and

breeding facilities and management of dairy animals can reduce the cost of milk

production. The Government and dairy industry can play a vital role in this

direction.

(II) PRODUCTION, PROCESSING AND MARKETING

Infrastructure If India has to emerge as an exporting country, it is

imperative that we should develop proper production, processing and marketing

infrastructure, which is capable of meeting international quality requirements. A

comprehensive strategy for producing quality and safe dairy products should be

formulated with suitable legal backup.

(III) FOCUS ON BUFFALO MILK BASED SPECIALTY

Dairy industry in India is also unique with regard to availability of large

proportion of buffalo milk. Thus, India can focus on buffalo milk based

specialty products, like Mozzarella cheese, tailored to meet the needs of the

target consumers.

(IV) IMPORT OF VALUE-ADDED PRODUCTS AND EXPORT OF LOWER VALUE

PRODUCTS

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With the trade liberalization, despite the attempts of Indian companies to

develop their product range, it could well be that in the future, more value-

added products will be imported and lower value products will be exported. The

industry has to prepare themselves to meet the challenges.

TECHNOLOGY USED IN DAIRY INDUSTRY

Milk is as ancient as mankind itself, as it is the substance created to feed

the mammalian infant. All species of mammals, from man to whales, produce

milk for this purpose. Many centuries ago, perhaps as early as 6000-8000 BC,

ancient man learned to domesticate species of animals for the provision of milk

to be consumed by them. These included cows (genus Bos), buffaloes, sheep,

goats, and camels, all of which are still used in various parts of the world for the

production of milk for human consumption.

Fermented products such as cheeses were discovered by accident, but their

history has also been documented for many centuries, as has the production of

concentrated milks, butter, and even ice cream.

Technological advances have only come about very recently in the history

of milk consumption, and our generations will be the ones credited for having

turned milk processing from an art to a science. The availability and distribution

of milk and milk products today in the modern world is a blend of the centuries

old knowledge of traditional milk products with the application of modern

science and technology.

The role of milk in the traditional diet has varied greatly in different

regions of the world. The tropical countries have not been traditional milk

consumers, whereas the more northern regions of the world, Europe (especially

Scandinavia) and North America, have traditionally consumed far more milk

and milk products in their diet. In tropical countries where high temperatures

and lack of refrigeration has led to the inability to produce and store fresh milk,

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milk has traditionally been preserved through means other than refrigeration,

including immediate consumption of warm milk after milking, by boiling milk,

or by conversion into more stable products such as fermented milks.

WORLD-WIDE MILK CONSUMPTION AND PRODUCTION

The total milk consumption (as fluid milk and processed products) per

person varies widely from highs in Europe and North America to lows in Asia.

However, as the various regions of the world become more integrated through

travel and migration, these trends are changing, a factor which needs to be

considered by product developers and marketers of milk and milk products in

various countries of the world.

Even within regions such as Europe, the custom of milk consumption has

varied greatly. Consider for example the high consumption of fluid milk in

countries like Finland, Norway and Sweden compared to France and Italy where

cheeses have tended to dominate milk consumption. When you also consider the

climates of these regions, it would appear that the culture of producing more

stable products (cheese) in hotter climates as a means of preservation is evident.

MILK COMPOSITION

The role of milk in nature is to nourish and provide immunological

protection for the mammalian young. Milk and honey are the only articles of

diet whose sole function in nature is food. It is not surprising, therefore, that the

nutritional value of milk is high.

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At the international level, we have to ensure that provisions of SPS and

TBT are based on application of sound scientific principles and should become

defectors barriers to trade.

Dairy sector witnessed a spectacular growth between 1971-1996, i.e.

Operation Flood era. An integrated cooperative dairy development programme

on the proven model of Anand pattern was implemented in three phases. The

National Dairy Development Board was designated by the Government of India

as the implementing agency. The major objective was to provide an assured

market round the year to the rural milk producers and to establish linkage

between rural milk production and urban market through modern technology

and professional management.

Milk production grew from 21 million tonnes in 1970 to nearly 69 million

tonnes in 1996 - more than three fold, at the compound growth rate of 4.5 per

cent. Some ten million farmers were enrolled as members in about 73000 milk

cooperative societies. By 1996, milk cooperatives attained a dominating share

of the Indian dairy market - butter 96%, pasteurized liquid milk over 90%, milk

powder 59% and processed cheese 85%. India was reckoned as a major threat in

the dairying world. In retrospect, it was by no means an easy task. Let us all

salute the visionary and the architect of the white revolution in India, Dr.

Verghese Kurien, without whose dynamic leadership all this may not have been

possible. The dairy cooperative movement has continued to grow in the post

Operation Flood-era.

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MARKET OF DAIRY INDUSTRY

The NDDB has recently put in place .Perspective 2010. to enable the

cooperatives to meet the new challenges of globalization and trade

liberalization. Like other major dairying countries of the world, the Indian

cooperatives are expected to play a predominant role in the dairy industry in

future as well. However, India is in the mean time, attaining its past glory and is

once again becoming .DOODH KA SAGAR.. But, what percentage of this

SAGAR is handled by the cooperatives - just a little over 7%. Since

liberalization of the dairy sector in 1991, a very large number of private sector

companies / firms have, despite MMPO, established dairy factories in the

country. The share of the total milk processing capacity by private sector is 44%

of total installed capacity of 73 MLPD (Million Litres Per Day) in the country.

Therefore, the total share of the organized sector, both cooperatives as well as

the private sector is barely 12%. What is, therefore, disquieting is that as much

as 88% share of the total milk production is commanded by the unorganized

sector - who specializes in selling sub-standard, unpasteurized milk more often

than not adulterated with harmful chemicals. Besides, growth in milk

production is likely to continue at the present rate of 4.4% in the near future.

Who is going to handle this incremental milk? We must bear in mind is both

income and price what we must bear in mind both income & price elasticity

account for approximately 15% of the total expenditure of food. Demand for

milk, at current rate of income growth is estimated to grow at 7% per annum.

Interestingly, demand for milk is expected to grow steadily over the next two

decades as the low income rural and urban families who have higher

expenditure elasticity would also increase their income due to new economic

environment. Let us now look at some other economic indicators.

According to the World Bank, India is the fourth largest economy in the

world going by the purchasing power parity estimates. Further, India has been

25

identified as among the first 10 emerging markets in the world. India has the

vastest domestic market in the world with over one billion consumers - a

majority of whom are vegetarians with drinking of milk as habit. The untapped

potential of the dairy sector is immense and opportunity to set up a new dairy

venture is great. In the works of Dr. Amrita Patel, Chairperson, NDDB, there is

enough place under the scheme for both private and cooperative sectors.

Notwithstanding the above potential it is cautioned that, entering dairy sector is

not going to be a cakewalk.

Globalization and Liberalization are the Mantras of the new economy

today, which is now on the fast track. Industrial production is rapidly moving

forward. The dairy industry is no exception. With the World Trade Organization

(WTO) coming into effect, from 01 April 2001 and the imports and exports

getting liberalized in the global economy, the dairy industry, which includes

dairy products, faces both an opportunity for growth as well as a threat for its

growth. There is no doubt that there is tremendous scope for the growth of the

dairy industry in the new millennium. The product mix of world dairy trade is

likely to shift further towards cheese. This has been developed in the world

markets. As the market opens up, consumption trends associated with these

markets will have increasing influence on the world trade. Whole milk powder

is likely to continue to be a substantial beneficiary and growth substantially in

the middle eastern countries. As standards of living in the importing country

rises, exporting countries will increasingly concentrate on whole milk powder

and cheese with the assistance of butter and skimmed milk powder. There is

vast potential for the export of dairy products, the cost of milk production in

India being the lowest. The major factor influencing production of bye products

is the newer uses that may be developed through R & D support. Milk proteins

are being utilized increasingly replacing animal and vegetable proteins in

special bakery products and instant foods. Through the application of membrane

26

proven process, milk proteins isolates are being produced. These are being

utilized for ice milk mixes and other such applications. Most of the dairy plants

in the Government, Cooperatives and Private Sector produce almost similar

dairy products like varieties of milk, butter, ghee, skimmed milk powder and

whole milk powder.

There are 7 large-scale cheese manufacturers and 14 manufacturers are

producing infant foods and malted milks. There is immense scope for the

broadening of the products range and some of the products, which are likely to

have considerable demand in the coming decade, have been identified. Pizza is

becoming a very popular item in the market. This segment alone commands 5%

of the share in the cheese market and other area is fermented milk products.

Dahi (curd) even though is a Rs.15000 crore market, the share of the organized

sector is only around 10%. This product has immense potential for growth.

Varieties of milk shakes are also increasing wherein milk and fruit pulp are

mixed in different proportions to produce different beverages. Some of the milk

and fruit based beverages which are likely to have demand are a combination of

milk with mango, banana, sapota, strawberry, papaya, etc. Some of these

beverages can also be produced in dehydrated form and can be an excellent

health food.

There are varieties in traditional milk based sweets, manufactured in the

country. The market size is around Rs.12000 crore. However, there are very few

nationally known brands in this category. Many of the organized dairies are

involved in the manufacture of varieties of milk based sweets: pedha, paneer,

shirkhand, etc. These are now restricted to certain areas only but can go

27

national. As the world is getting integrated into one market, quality certification

is becoming essential in the market. However, there are very few plants in the

country, which have successfully obtained ISO, HACCP certification. There is

scope for introducing newer plants adopting newer processes by the dairy

industry in the country. Packaging of dairy products is also another very

promising area. NRI and overseas investments can take place in manufacturing

dairy processing equipment, fruit packaging equipment and equipments for

biotechnology related dairy industry.

OVERVIEW OF THE INDIAN DAIRY SECTOR

The country is the largest milk producer all over the world, around 100

million MT Value of output amounted to Rs. 1179 billion (in 2004-05)

(Approximately equals combined output of paddy and wheat!!) 1/5 th of the

world bovine population Milk animals (45% indigenous cattle, 55 % buffaloes,

and 10% cross bred cows) Immensely low productivity, around 1000 kg/year

(world average 2038 kg/year) Large no. of unproductive animals, low genetic

potency, poor nutrition and lack of services are the main factors for the low

productivity There are different regions – developed, average, below average

(eastern states of Orissa, Bihar and NE region) in the dairy industry.

POTENTIAL FOR INVESTMENT IN THE DAIRY INDUSTRY

Some areas of Indian dairy industry can be toned up by the evocation of

differentiated technologies and equipment from overseas. These include:

RAW MILK HANDLING:

28

The raw milk handling needs to be elevated in terms of physicochemical

and microbiological properties of the milk in a combined manner. The use of

clarification in raw milk processing can aid better the quality of the milk

products.

MILK PROCESSING:

Better operational ratios are required to amend the yields and abridge

wastage, lessen fat/protein losses during processing, control production costs,

save energy and broaden shelf life. The adoption of GMP (Good Manufacturing

Practices) and HACCP (Hazard Analysis Critical Control Points) would help

produce milk products adapting to the international standards.

PACKAGING:

Another area that can be improved is the range of packing machines for the

manufacture of butter, cheese and alike. Better packaging can assist in retaining

the nutritive value of products packed and thus broaden the shelf life. A cold

chain distribution system is required for proper storage and transfer of dairy

products.

VALUE-ADDED PRODUCTS:

There's vast scope for value-added products like desserts, puddings,

custards, sauces, mousse, stirred yoghurt, nectars and sherbets to capture the

dairy market in India.

29

The Indian dairy industry has aimed at better management of the national

resources to enhance milk production and upgrade milk processing involving

new innovative technologies. Multinational dairy giants can also make their

foray in the Indian dairy market in this challenging scenario and create a win-

win situation for both.

Indian (traditional) milk products

There are a large variety of tradition Indian milk products such as

Markham- unsalted butter.

Ghee-butter oil prepared by neat clarification, for longer shelf life cheer-a

sweet mix of boiled milk, sugar and rice.

Burundi- milk and sugar boiled down till it thickens.

Rabbi- sweetened cream.

Dahl- a type of curd.

Lassi- curd mixed with water and sugar/salt.

Channa/paneer milk mixed with lactic acid to coagulate.

Khoa- evaporated milk, used as a base to produce sweet meats. Brading

of Trading of milk produce.

MAJOR DAIRY PRODUCTS MANUFACTURERS:

company brands Major products

30

Nestle India limited Milkmaid,cerelac,

Lactogen Milo, Everyday

Sweetened condensed

milk, malted foods, milk

power and Dairy whitener

Milk food limited Milk food Ghee, ice cream, and

other milk products

Smith line beech am

limited

Horlicks, Maitova, Viva Malted Milkfood, ghee,

butter, powered milk,

milk fluid and other milk

based baby foods.

Indodan industries

limited

Indana Condensed milk,

skimmed milk power,

whole milk power, dairy

milk whitener, chilled and

processed milk.

Gujaratco-operative

milk-marketing

Federation limited

Amul Butter, cheese and other

milk productss

H.J. Heinz limited Farex,complain

Glactose,Bonniemix,

Viamilk

Infant Milkfood, malted

Milkfood

Britannia Milkman Flavoured milk, cheese,

milk power,ones

cadbury Bournvita Malted food

PRODUCTION PROCESS

Milking the cow manually.

31

Milk producer’s co-operative lid. Collects the milk from villages. [1113

villages and 173 chilling centres].

The collected milk is tested against the set standards that ensure quality of

milk being received from the root level.

Milk dispatched at AMUL dairy plant for further processing.

Milk is pasteurized, clarified and standardized using latest technological

machines and equipments.

Generally about 85% of milk is the buffalo’s milk and rest is cows.

Currently AMUL receives 11 lakhs liters of milk (Dairy).

It has the capacity of handing of 15 lakhs liters of milk.

Milk is received first at the raw milk SILO.

Its temperature is generally 8 to 9 degree C.

This process kills the germs and bacteria from milk.

Then milk is chilled at 3 to 4 degree C to protect from getting spoiled.

Then the pasteurized milk is stored in pasteurized milk SILO.

AMUL has also 8 such SILOs having capacity maintaining 35000 liters

each.

This silo milk is distributed for production of various products as per their

requirements.

PRODUCTS

32

1. Bread Spreads: - Amul Butter

- Amul Lite Low Fat Bread Spread.

- Amul Cooking Butter.

- Delicious Margarine.

2. Pure Ghee: - Amul Pure Ghee.

- Sagar Pure Ghee.

- Amul Cow Ghee.

3. Milk Powders: - Amul Full Cream Milk Powder.

- Amulya Dairy Whitener.

- Sagar Skimmed Milk Powder.

33

- Sagar Tea and Coffee Whitener.

4. Sweetened Condensed Milk: - Amul Mithaimate.

5. Sweets: - Amul Shrikhand.

- Amul Mithaee Khoya Gulabjamaun.

- Amul Basundi.

6. Chocolate and Confectionary: - Amul Milk Chocolate.

- Amul Fruit and Nut chocolate.

- Amul Bindazz.

- Amul Rejoice.

7. Fresh Milk: - Amul Taaza Toned Milk 3% Fat.

- Amul Gold Full Cream Milk 6% Fat.

- Amul Shakti Standardised Milk 4.5% Fat.

- Amul Slim and Trim Double Toned Milk 1.5% Fat.

-Amul Saathi Skimmed Milk 0% Fat.

-Amul Cow Milk.

8. Curd Products: - Yogi Sweetened Flavoured Dahi (Dessert).

- Amul Masti Dahi (Fresh Curd).

- Amul Lit Dahi.

- Amul Prolife Probiotic Dahi.

- Amul Masti Spiced Butter Milk.

- Amul Lassee.

9. Brown Beverage: - Nutramul Malted Milk Food.

34

10. Milk Drink: - Amul Cool Flavoured Milk (Mango, Strawberry,

Saffron, Cardamon, Rose, Chocolate Butterscotch).

- Amul Cool Café.

- Amul Cool Koko.

11.Health Beverage: - Amul Shakti White Milk Food.

12.Amul Ice creams: - Royal Treat Range (Butterscotch, Rajbhog,

Malaikulfi).

- Nut-O-Mania Range (Kaju Draksh, Kesar Pista, Royale,

Fruit Bonanza, Roasted Almond).

- Nature’s Treating (Alphanso Mango, Fresh Litchi,

Shahi Anjur, Fresh Strawberry, Black Currant, Santra

Mantra, and Fresh Pineapple).

- Sundae Range (Mango, Black Currant Sundae Magic,

Double Sundae).

- Assorted Treat (Choc-bar, Dollies, Frostik, lce-candies,

Tricone, choco crunch, megabite, cassata).

- Utterly Delicious (Vanilla, Strawberry, Chocolate, Choc

chips, Cake Magic).

- Amul Sugar Free Ice–cream Range.

- Amul Prolife Probity Ice cream.

AMUL PRODUCTS

Amul has large variety of products in the market.

The AMUL produces two types of products for the selling purpose. The first one is consumer product and other one is an industrial product.

35

Today Amul produces more than 21 types of products. The product manufactured by AMUL are as follows :

CONSUMER PRODUCTS

1. Pasteurized Milk

2. Cheese

3. Butter

4. Amul Milk Powder

5. Amul Spray

6. Condensed Milk

7. Amul baby food

8. Amul Ghee

9. Amul Nutramul

10. Amul Dan i.e. Cartel Feed

11. Chocolates

12. Amul Masty Dahi [Curd]

13. Amul Buttermilk

14. Amul lassies

15. Amul Gathiya [Munch Time]

16. Amul Mithayee

17. Amul Ice-Cream

18. Amul Flavored Milk

19. Amul Paneer

20. Amul Fresh Cream

21. Amul Shrikhand

MAJOR DAIRY PRODUCTS MANUFACTURERS:

company brands Major products

36

Nestle India limited Milkmaid,cerelac,

Lactogen Milo, Everyday

Sweetened condensed

milk, malted foods, milk

power and Dairy whitener

Milk food limited Milk food Ghee, ice cream, and

other milk products

Smith line beech am

limited

Horlicks, Maitova, Viva Malted Milkfood, ghee,

butter, powered milk,

milk fluid and other milk

based baby foods.

Indodan industries

limited

Indana Condensed milk,

skimmed milk power,

whole milk power, dairy

milk whitener, chilled and

processed milk.

Gujaratco-operative

milk-marketing

Federation limited

Amul Butter, cheese and other

milk productss

H.J. Heinz limited Farex,complain

Glactose,Bonniemix,

Viamilk

Infant Milkfood, malted

Milkfood

Britannia Milkman Flavoured milk, cheese,

milk power,ones

cadbury Bournvita Malted food

PRODUCTION PROCESS

Milking the cow manually.

37

Milk producer’s co-operative lid. Collects the milk from villages.

[1113 villages and 173 chilling centres].

The collected milk is tested against the set standards that ensure quality of

milk being received from the root level.

Milk dispatched at AMUL dairy plant for further processing.

Milk is pasteurized, clarified and standardized using latest technological

machines and equipments.

Generally about 85% of milk is the buffalo’s milk and rest is cows.

Currently AMUL receives 11 lakhs liters of milk (Dairy).

It has the capacity of handing of 15 lakhs liters of milk.

Milk is received first at the raw milk SILO.

Its temperature is generally 8 to 9 degree C.

This process kills the germs and bacteria from milk.

Then milk is chilled at 3 to 4 degree C to protect from getting spoiled.

Then the pasteurized milk is stored in pasteurized milk SILO.

AMUL has also 8 such SILOs having capacity maintaining 35000 liters

each.

This silo milk is distributed for production of various products as per their

requirements.

38

ABOUTABOUT

AMUL DAIRYAMUL DAIRY

39

INTRODUCTION

India is a country connected with agricultural and cattle rearing from

ancient time nearly more than 70 % on agriculture and cattle rearing. So dairy

industry is the best suited for the growth of India. And Indian people prefer

more milk and milk products than any other food. Due to liberalization,

globalization inexpensive, labor, large market and democracy India has best

opportunity for dairy industry.

The full form of Amul is Anand Milk Union Limited that is the brand name

of Kaira District Co-operative milk producers union Ltd. for its product range

since 1955.

Amul is Asia’s no. 1 and world’s second number co-operative dairy. It has

large market and dairy network in every states of India and across the India, like

central Asian countries, Bandlasesh, Thiland, Indonesia, Malysia, Singapur, etc.

It was started 250 liters milk and 2 societies and Now. It produces 9 lakes litter

milk per day and has 1084 societies and more than 6 lakes farmer members. It

produces more than fifteen types milk and milk products. Amul was started with

little machinery and now all the production of Amul are produced by latest

fashioned machineries. Which run by computer system.

Amul has completed 59 year and entered in 60th year on 14 December

2007. Amul has a three level structure. The first level is called primary level.

Here village societies are placed. The second level is district level where NDDB

placed and the third level is state level where Federation placed. Co-operation

among these levels is necessary for achievement of goal.

HISTORY

40

In the year 1946, the first milk union was established. This union was started

with 250 liters of milk per day. In this year, 1946, the union was called “THE

KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION”. The

union selected the brand name “AMUL” for its product range in 1955.

The brand name Amul means “AMULYA”. This world is derived from the

Sanskrit word “AMULYA” which means “PRICELESS”. A quality control

expert in Anand suggested it. The very concept of kaira union system of co-

operative dairying was to become “priceless” for millions of farmers all aver

India.

The word AMUL stands for:

A – Anand

M – Milk

U – Union

L – Limited

In the early 40’s the main source of earnings for the farmers and selling of milk.

However, the income from selling of milk was not dependable since milk –

marketing system was controlled by private traders and intermediaries who

exploited the farmers and gave them very less returns on the milk products.

Many a times they had to sell cream and ghee at throwaway prices.

In those times, there was a great demand for milk in Bombay. The main

suppliers of the milk were Polson Dairy limited which was a privately owned

company and held monopoly over the supply of milk at Bombay from the kaira

district. This again led to the exploitation of poor and illiterate farmers.

41

However, this exploitation becomes intolerable and the farmers became

frustrated. Therefore, they collectively appealed to Sardar Vallabhbhai Patel,

who was a leading activist in the freedom co-operatives as early as in 1940. He

advised the farmers to sell the milk on their own by establishing a co-operative

union instead of supplying milk to provide traders. Sardar Patel sent the farmers

to Shri Morarji Desai in order to gain his co-operation and help. Shri Desai held

a meeting at samarkha village near Anand, on 4th Jan 1946. He advised the

farmers to form a society for collection of the milk. These village’s societies

would collect the milk on their own and would decide the prices at which they

could sell the milk. The district union was also formed to collect the milk from

such village co-operative societies and to sell this milk. It was also resolved that

the government should be asked to buy milk from the union.

However, the government did not help the farmers by turning down the demand

for the milk. The farmers responded by going on a strike. For nearly 15 days,

not a single drop of milk was sold to the traders. As a result, the Bombay milk

scheme was severely affected. The milk commissioner of Bombay then visited

Anand to assess the situation. Having seen the farmer’s condition and studying

their demands the commissioner decided to fulfill the farmers demand.

In this manner, the co-operative unions were formed at the villages and

district levels to collect and sell milk on a co-operative basis, without the

interventions of government. Mr Varghese Kurien showed main interest in

establishing unions and he received support from Mr. Tribhovandas Patel who

educated the farmers about the co-operation unions at the village’s levels. The

kaira district milk producers union was thus established in Anand and was

formally registered on 14th December 1946. Since farmers sold all the milk in

Anand through a co-operative union, it was commonly resolved to sell the milk

42

under the brand name AMUL. Dr. Rajendra Prasad who was the first president

India laid the foundation stone for AUML on 12/09/1948. Late Shri Jawaharlal

Nehru, the then prime minister of India, inaugurated it on 31/10/1955.

In the initial stage only 250 liters of milk was collected on an everyday basis.

However, with the growing awareness of the benefits of the co-operatives ness,

the collection of milk has increased considerably. Today, Amul collects about

15 lakhs liters of milk everyday. Since milk is a perishable commodity it

became difficult to preserve milk for a longer period. Moreover, when the milk

was to be collected fro the far off places, there was a fear of spoiling of milk. To

overcome the problem the union thought out to develop chilling units at various

junctions, which would collect the milk, and could chill it and thus able to

preserve it for a longer period. Thus, today Amul has more than 150 chilling

centre in various villages. Milk is collected from almost 1232 societies.

From the late fifties kaira union has been investing heavily in schemes to

improve the milk yield in animals. The union has built up a full-fledged

infrastructure for breading animals and ensuring animal health care. Semen fro-

high pedigree bulls are being made available. An efficient insemination service

was also put into place through village society workers. A mobile veterinary

service rendered animal health care at the doorstep of the farmer. The veterinary

first aid programmer organized by the union through trained village society

workers was probably the first of its kind in India.

Today, twelve dairies are producing different products under the brand name

AMUL. AMUL Dairy has become no. 1 dairy in Asia and no. 2 in the world. It

has become a symbol of many things such as:

Of high – quality products sold at reasonable price.

43

Of the genesis of a vast co-operative network.

Of the triumph of indigenous technology.

Of the marketing shrew dress of a farmer’s organization.

Of a proven model for dairy development

GCMMF is a part of Amul. GCMMF is performed all the marketing activity

foamed. GCMMF was established in 1972 by Dr Varghese Kurien. Till 1965

Amul marketed all products but due to progress and increasing demand many

problem emerged. It was necessary to create separate department.

The word of GCMMF stands for:

G – Gujarat

C – Co-operative

M – Milk

M – Marketing

F – Federation

44

DEVELOPMENT AND GROWTH

The Amul is the co-operative union which success with the slow and steady

growth. The Amul has start with one society and now it is converted into a

union with 1073 societies. At the beginning Amul collect only 250 liters of milk

per day. Now, Amul collect lakhs of liters of milk perks of liters of milk per

day. The excess of milk leads the Amul to develop the milk products. The Amul

developed step by step. The main stages of development are as follow:

YEARS PARTICULARS

1954 In the year 1954 UNICEF provide the financial help worth of Rs 50

million to the Amul. This financial help lead Amul to established fully

automatic plant for producing milk and milk powder.

1958 In this year Amul expand the plant and started to produce sweetened

condensed milk.

1960 The excess supply of milk in the winter season and huge amount of

profit make possible the expansion of Amul. The Amul established

new units for producing cheese and baby food. This creates history in

the dairy products, because it was the first time where cheese and baby

food is produced from the buffalo milk.

1981 The new cattle feed plant were established at kanjari.

1992 For getting the benefits of excess supply of milk, Amul established

another plant named Amul-3. This plant has capacity of producing 14

lakhs litters of milk everyday.

1994 The new cheese plant was established at khatraj and chocolates plant

established at Mogar. These two plants started with help of NDDB.

2001 For providing the quality milk at any time, Amul launch the new

45

flavored milk. This flavored milk available in four different tastes.

2003 For expanding the market share Amul launch the “SNOWBALI” pizza

and flavored lassie. This gives the new market share to Amul in the

area of fast food.

2004 The Amul keeps on achieving new highs in this competitive world. It

has launch CHOCOZOO [Chocolate], MUNCHTIME [Gathiya]. Amul

also started the now satellite dairy at PUNE and CALAUTTA. This

will help Amul in expanding milk marketing in other state.

2005 GCMMF donates 6 lakhs packs of Tetra pack for the flood victims. As

in earlier occasions, the Gujarat Co-operatives Milk Marketing

federation Ltd has once again come to the aid of the victims of the

worst ever floods in Gujarat. It will supply 6 lacks packs of Amul milk

in 200ml tetra pack for the floods relief operations. The approximate

cost of the milk would come to Rs 28.00 lacks.

2006 Start of automatic dairy.

Cheese plant (Asia’s largest)

2007 Amul Pro-Biotic ice cream gets no.1 Award at world Dairy summit.

Announcing the award on October 03, at Dublin, Ireland on the

occasion of the world Dairy summit, Mr. Jim Begg the IDF president

commented “There campaigns are excellent example of best practice in

branded and generic marketing fro around the world. In markets around

the world that that are volatile and highly competitive, dairy products

have a role in health balanced diets, and these campaigns have

demonstrated the ability of well planned and executed marketing

investments”.y competitive, dairy products have a role in health

balanced diets, and

2008 GCMMF bags APEDA AWARD for 11th year in a row. GCMMF has

bagged award for excellent performance in exports of dairy products

for the year 2006-2007 from Agriculture and processed food Exports

46

Development Authority, Minister Of Commerce, New Delhi. GCMMF

has the award for 11th time. The award was received by Mr. Raveen

Choudhary, our AGM (z-1) Delhi, from Hon able Minister of

commerce, Shri Kamalnath, in a glittering ceremony held at sire fort

auditorium on 3rd June 2008. ister of commmerce from Honable

exports of dairy products for the year 2006-2007 from Agriculture and

processed food Exports

VISION

The main Motto of Amul is to help farmer. Amul system works under

objective of highest possible price to the milk producers and lowest

possible price to consumer. Farmers are paid money in cash payment

for the milk. Milk gives them money for daily necessities. Amul is the

one who started using their profit for the milk producer common

good.

47

OBJECTIVE

Amul union is one of the pioneers, which started using their profit for

the milk supplier’s welfare. The main goal of Amul is to improve the

economic condition of milk procedure especially that of weaker

section in rural areas by providing them on ensured and producer-

oriented market for their surplus milk. The main objectives of AMUL

are as below:

One of the major objectives is to exceed an activity in co-operative way

that enables the maximum participation of the numbers of society.

The second other objective is to help producers of milk to increase their

yields and profit and to obtain for producers a greater share of the prices

paid by consumers of the milk.

To provide good market for all the milk producers.

To provide fresh milk to the people at the reasonable price.

MOTTO

The main motto of Amul is to help farmer’s i.e Milk producers. Amul system

works under objective of highest possible compensation for the milk producers

and lowest possible price to consumers. Farmers are paid money in cash for the

milk. Milk gives them money for the daily necessities. Amul is the one who

started using their profits for the milk producer’s common good.

48

LOGO OF AMUL

Symbol of AMUL is a ring of four hands, which are coordinated each

other. The actual meaning of this symbol is Coordination of hand of different

people by whom this Union is now at top.

First hand : It is for the Farmer (Producers), without whom the organization would does not existed

Second hand : It is for the Representative of processor by whom the raw milk processed into different finished products

Third hand : It is for Marketer without whom the product would have not be able to reached to the customer

Fourth hand : It is for Customers without whom the organization could

not carry on because they are the people who consume

the product

By co-ordination of this four people the Union runs successfully.

49

COMPANY PROFILE

NAME: Kaira District Co-operative Milk Producer’s Union Limited widely

known as “AMUL”.

FROM: Co-operative sector registered under the co-operative society act.

LOCATION: Amul Dairy,

Nr. Railway station,

Amul Dairy Road,

ANAND – 388001.

REGISTRATION: 14TH December 1946.

REGISTERED OFFICE: Karia District Co-operative Milk Producer’s Union

Limited, Anand – 388001.

AUDITORS: - R. N. Shah

Special Auditor

Milk Union, Anand.

- Dipak Roy

Manager (Accounts).

- Rahul Kumar

Managing Director.

50

BANKERS: - The Karia District Central Co-operative Bank Limited.

- Axis Bank Limited.

- State Bank of India.

- Axis Bank.

- Bank of Baroda.

- Corporation Bank.

- Bank of Maharashtra.

INTERNAL AUDITOR: C. C. Choksi. SALES OFFICE: Gujarat Co-operative Milk Marketing Federation, Anand.

CERTIFICATES: - ISO 9001: 2000 Certificates. - ISO 2000: 2005 Certificates.

INITIAL PROMOTERS: - Shri Tribhuvandas K. Patel. - Shri Sardar Vallabhbhai Patel. - Shri Morarjibhai Desai. - Dr. Varghese Kurien. - Dr. H. M. Dalaya.

SIZE: Production of different products on large scale, collecting 9 to 15

lakhs

liters milk every day and producing milk products.

VILLAGE CO-OPERATIVE SOCITIES: 1073

TOTAL NO. OF SOCITEY MEMBER: 6, 15,415

E-MAIL ADDRESSES: - www.amul.com

-www.amuldairy.com

- www.amuldairy@kairaunion.co.op

51

ORGANIZATION STRUCTURE

BOD

Chairman

Vice Chairman

Managing Director

General Manager (Dairy Plant & Technology)

Deputy Manager

Assistant Manager

Superintendent

Deputy Superintendent

Senior Officer

Assistant

Junior Assistant

Workers

52

BOARD OF DIRECTORS

1. Shri Ramsingh P. Parmar Chairman

2. Shri Rajendrasinh D. Parmar Vice Chairman

3. Shri Shivabhai M. Parmar Director

4. Shri Maganbhai G. Zala Director

5. Shri Chandubhai M. Parmar Director

6. Shri Pravinbhai F. Solanki Director

7. Shri Dhirubhai A.Chavda Director

8. Shri Bhaijibhia A. Zala Director

9. Shri Mansinh K.Chauhan Director

10. Shri Bipinbhai M.Joshi Director

11. Smt. Madhuben D. Parmar Director

12. Smt. Sarayuben B. Patel Director

13. Shri Ranjitbhai K. Patel Director

Shri B. M. Vyas

(M.D. of GCMMF, Anand)

Shri Rahulkumar Shrivastav

(M.D. of KDCMPUL, Anand)

Shri Deepak Dalai (District Registrar)

53

Kaira District Central Co-operative Bank

U.T.I. Bank

State Bank of India

Bank of Baroda

Bank of Maharastra

Corporation Bank

AUDITOR

Special Auditor (Milk), Milk Audit Office, Anand

Shri R. N. Shah

Special Auditors

Milk Union Anand

Bankers

The Kaira District Central Co-operative Bank Ltd.

UTI Bank

State Bank of India

Bank of Baroda

Corporation Bank

Bank of Maharastra

54

SISTER CONCERNS

Plants of AMUL

Anand Plant: The products are Milk, Buttermilk, Milk Powder, Butter,

Ghee, Cheese, and Flavored Milk etc. It is establish in 1973

Mo

gar

Plant: It is situated on Anand – Vadodara Highway No.8. Its production

is chocolates, Nutramul, Amul Lite and Amul Ganthia. This plant

establish in 1998.

55

Kanajari Plant: The product is a cattle feed. Old plant establish in 1964

and new plant in 1980.

56

Khatraj Plant: It is situated between Nadiad – Mahemdabad. The product is

cheese.

57

Chilling Center: Kapadvanj, Undel and Balasinor.

Satellite Dairy: Balasinor, Undel.

CO-OPERATIVE CONCEPT:

CO-OPERATIVE SOCIETY:

58

Co-operative society is the most democratic form of the business

organization for the betterment of general public. These Co-operative societies

help to protect the interest of the consumers, smail and independent producers,

and of the workers while fighting against the monopolists and capitalists.

Members supply the capital, manage the business and share all its profits and

losses. In economic field, those do not have the idea of earning profits but to

benefits the members.

Co-operative society is an association of individuals formed for the

purpose of obtaining goods, specially the articles of daily use at rates lower that

that of market. Thus, it is a means to level the inequality of wealth which had

come into existence as a result of private individual form of ownership. The

idea of Co-operative society is to benefits the shareholders who arc the

consumers or producers.

Mr. M. Barovv defined Co-operative society as "voluntary organization" of

persons with unrestricted membership and collectively owned fund, consisting

of wage earners and small producers, united on a democratic basic for the

establishment of enterprises under joint management for the purpose of

improving their household or business economy.

To start a Co-operative society an application is submitted to the registrar

of Co-operative societies. The officials of this department will attend the first

general board meeting in which bye-laws arc framed to govern the society and

the directors arc elected by the shareholders. Then the authorities are satisfied

about its soundness.

OBJECTIVE:

The main objectives of the Co-operative society are following:

59

It is a voluntary organization. A member can continue his membership as

long as he desires, and can by giving a notice, withdraw his capital and cease to

be a member.

There is no limit to its membership. Face value of one share is generally

kept in between Rs. 1 to Rs. 10. Thus small value of share makes it possible to

enroll a large number of persons because even a poor man can afford this much

amount.

Its management is based on democratic basis of equality. Therefore, every

member can cast only one vote, whatsoever the number of shares he has.

SERVICES PROVIDED BY AMUL :

ANIMAL INSEMINATION :

This service was started way back in the year 1949. Amul has established

“AI Center” at ODE. Due to two significant reasons AI is helpful in –

Numbers of bulls is inadequate.

The bulls are of poor health.

VETERINARY SERVICES :

60

For high productivity of milk better health of animals is necessary. So,

AMUL has started veterinary services in the year 1950. For this purpose there

are 125 veterinary doctors. They take an average of 650 visits daily. The doctors

have a minimal charges of Rs.50 and they are also provided with mobiles and

wireless along with jeep and ambassador for visits.

CATTLE FEED FACILITY :

AS “Roti” is the food for human beings, same way DAN(Cattle feed) is

cattle’s food. And for better health of animals, reduction in the milk production

expenses, AMUL provide cattle feed at BEP rates. Cattle feed Factory is

situated at kanjari. The opening ceremony was done on 31st October, 1964.

ANIMAL HEALTH CARE :

AMUL provides the following health care services :

First Aid services

Emergency veterinary Services.

Preventive Measures for disease control.

Sexual heath control for animals.

FARMER EDUCATION PROGRAMS :

Generally the farmers are superstitious. He is often not aware about how

the animals should be taken care. Which things should be given prime concern

while milking animals. AMUL provides guidance and education through

seminar. AMUL also arranges women awareness programme.

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RURAL HEALTH SERVICES :

This programme provides health support especially to the women and the

infants in the Kaira Village. And this trust emphasis on :

Preventive rather than on curative aspects of disease.

Infant of pregnant mothers.

Children nutrition.

LEVEL OF MANAGEMENT: -

Each Organization is made up of several levels. This could be classified

broadly in three categories. There are Top, Middle, and Junior Levels. Amul has

also three levels of Management.

1. TOP MANAGEMENT:

Top level develops strategy for deciding the objectives of organization

planning resource to be sassed in order to attain those objectives formulating

policies to govern, use and disposition of resources.

In Amul conceptual and human skill persons handle top management

activity. There are 19 persons at the top level.

2. MIDDLE MANAGEMENT :

It is required by managers of various departments to measure the performance, decide on control actions, formulate new decision rules and also allocate resources.

In Amul there are 210 employees at middle level generally human skilled person management level.

3. JUNIOR MANAGEMENT :-

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It is the process of ensuring that operational activities are carried out to achieve optimum use of resources. There are 1049 employees at this levels perform operational control. Generally technicians, superintendents, workers. Perform their functions at this level.

FINANCIAL

MANAGEMENT

63

FINANACIAL MANAGEMENT

INTRODUCTION:-

Management of funds is a critical aspect of financial management.

Management of funds acts as the foremost concern whether it is in a

business undertaking or in an educational institution. Financial

management, which is simply meant dealing with management of money

matters.

DEFINATION:-

Financial management was considered a branch of knowledge with

focus on the procurement of funds. Instruments of financing, formation,

merger & restructuring of firms, legal and institutional frame work

invaded therein occupied the prime place in this traditional approach.

Financial management is that managerial activity which is concerned

with the planning and controlling of the firm financial resources.

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Financial management deals with procurement of funds and their

effective utilization in the business.

MEANING:-

Financial management is concerned with the management decisions

that result in the acquisition and financing of short term and long term

credits for the firm.

Financial management constitutes risk, cost and control. The cost of

funds should be at minimum for a proper balancing of risk and control.

Financial management is that managerial activity which is concerned

with the planning and controlling of the firm financial resources.

Financial management is essential in a planned Economy as well as in a

capitalist set-up it involves efficient use of the resources.

Financial management is very important in case of non-profit

organizations, which do not pay adequate attentions to financial

management

OBJECTIVES OF FINANCIAL MANAGEMENT

Efficient financial management requires the existence of some

objectives, which are as follows:

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1) PROFIT MAXIMIZATION:

The objective of financial management is the same as the

objective of a company which is to earn profit. But profit

maximization alone cannot be the sole objective of a company. It is

a limited objective. If profits are given undue importance then

problems may arise as discussed below:

The term profit is vague and it involves much more contradictions.

Profit maximization must be attempted with a realization of risks

involved. A positive relationship exists between risk and profits. So

both risk and profit objectives should be balanced.

Profit maximization fails to take into account the time pattern of

returns.

Profit maximization does not take into account the social

considerations.

2) WEALTH MAXIMIZATION:

It is commonly understood that the objective of a firm is to

maximize value of a firm is represented by the market price of a

the company’s stock. the market price of a firm’s stocks represent

the assessment of all market particular firm is. It takes in to account

present and prospective future earning per share, the timing and

risk of these earning, the dividend policy of the firm and many

66

other factors that bear upon the market price of the stock. Market

price acts as the performance index or report card of the firm’s

progress and potential.

Prices in the share markets are affected by many factors and even

mass psychology. Normally this value is a function of two factors:

The anticipated rate of earning per share of the company.

(A) The capitalization rate.

(B) The likely rate of earning per shares depends upon the assessment

of how profitable a company may be in the investors for the company.

Scope of financial management : -

The approach to the scope and functions of financial management is

divided for purpose of exposition into two broad categories:

[1] The Traditional Approach, and

[2] The Modern Approach.

[1] Traditional Approach:

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The traditional approach which was popular in early stage, limited

the role of financial manager to rising and administrating of fund needed by

corporate enterprise to meet their financial needs. It deals with the following

aspects:

- Arrangement of fund from financial institution.

- Arrangement of funds through financial instruments like share, bonds,

etc.

- Looking after the legal and accounting relationship between a corporation

and its sources of funds.

The traditional approach to the scope of finance function

evolved during the 1920 and the 1930 dominated the academic during the

forties and through the early fifties. It has now been discarded as it suffers

from serious limitations, following are main limitations:

External approach.

Ignored routine problems.

Ignored non-corporate enterprise.

Ignored working capital financing.

No emphasis on allocation of funds.

The conceptual framework of the traditional treatment ignored what

soloman aptly describes as the central issues of financial management these are:

1) Should an enterprise commit capital funds to certain purpose?

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2) Do the expected returns meet financial standards of performance?

3) How should these standards be set and what is the cost of capital funds of

the enterprise?

4) How does the cost very with the mixture of financing method used?

[2] Modern Approach:

According to modern approach the term financial management

provides a conceptual and analytical framework for financial decision making.

That means, the finance function covers both acquisition of funds as well as

their allocations.

The new approach is an analytical way of viewing the financial

problems of a firm. The main contain of the modern approach are as follows:

What is the total volume of funds an enterprise should commit?

What specific assets should an enterprise acquired?

How should the funds required be financed?

Thus, the financial management, in modern sense of the term, can be divided

into four major decisions as functions of finance.

They are:

a. The investment decision.

b. The financial decision.

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c. The dividend policy decision.

d. The liquidity decision.

IMPORTANCE OF FINANCIAL MANAGEMENT

Proper finance is the real key to the success of any business enterprise.

Without finance a business neither survives nor expands and modernizes.

it is the finance, which works like a lubricant, which keeps the

organization dynamic. keeps men and machine at work. The following

are the points highlight the importance of finance.

Financial management is concerned with the management decisions that

result in the acquisition and financing of short term and long term credits

for the firm.

Financial management constitutes risk, cost and control. The cost of

funds should be at minimum for a proper balancing of risk and control.

Finance for business promoting.

Finance management for optimum use of firm.

Use for co-operation in business activities.

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Useful in decision-making.

Determinant of business success.

Measurement of performance.

Basis of planning, co-operation and control.

Principle of Finance : -

The Knowledge of these eight principles is essential for understanding the field

of finance. Make sure that you master each of them.

1. Risk-Return Tradeoff : The higher the risk of an investment, the higher the

expected return must be.

2. Liquidity vs. Profitability : There is a trade-off between liquidity and

Profitability; gaining more of one ordinarily means giving up some of

the other.

3. Matching Principle (or the Principle of Suitability) : The maturity of a

firm’s assets should match the maturity of the firm’s liabilities, i.e. short-

term assets should be financed with short term liabilities; long- term

assets should be financed with long-term sources of financing.

If you violate the matching principle, you create a

problem either of too little liquidity or too little profitability.

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4. Leverage : Leverage is a magnification of earnings that results from

having fixed costs in the company. Simply put, leverage is a measure of

the degree of sensitivity of earnings to some other measure.

(a) Operating leverage-

A magnification of earnings (Net Operating Income or EBIT) that

results from having fixed operating costs in the company. (Examples of fixed

operating expenses are salaries, utilities, depreciation, and property taxes.)

(b) Financial leverage-

A magnification of earnings (E.A.T.) that results from having fixed

financial costs in the company. (The only type of fixed financial cost

considered here is interest expense.)

(c) Total or combined leverage-

A magnification of earnings that results from having fixed costs of any

type in the company.

Total Leverage = Operating Leverage x Financial Leverage

Formulas:-

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Operating leverage is equal to the percentage change in operating income

divided by the percentage change in sales.

Financial leverage is equal to the percentage change in net income divided by

the percentage change in operating income.

Total leverage measures the percentage change in net income divided by the

percentage change in sales.

5. Time Value of Money :- Money has a time value. A rational person is

Not indifferent between having a dollar today or a dollar in the future.

Regardless of inflation, a dollar today can be invested and will earn a

return over a period of time.

6. Valuation :- The value of an asset is equal to the present value of its

Future cash flows. The rate used for the present value calculations (the

capitalization rate) should be the minimum acceptable return, given the

risk of the investment.

Value = Present Value of Future Cash Flows

Or

Value = Future Cash Flows x Present Value Factor

7. Bond Prices vs. Interest Rates : There is an inverse relationship between

market interest

Rates and the price of existing fixed income securities. e.g., as interest

rates rise, prices of existing bonds will fall.

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8. Portfolio Effect (or Diversification) : As assets are added to a group

(portfolio), the risk of

the total portfolio decreases. This will be true as long as the correlation

of the asset being added and the portfolio is less than +1.0.

NEED OF FINANCIAL MANAGEMENT : -

With sound financial management, every entrepreneur can answer these

questions. Financial management helps you:

1. Obtain the financial statements you need to measure company success,

meet government requirements and gather information to use in making

management decisions.

2. Perform analyses to find profitable directions and eliminate unprofitable

ones.

3. Arrangement of funds through financial instruments like share, bonds,

etc.

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4. Handle company finances to maximize profits and maintain liquidity and

financial stability, with or without increased sales.

5. Plan financially to achieve company and personal goals, including non-

financial company goals such as having the best place to work or offering

the best quality products and owner goals such as security, retirement or

leisure activities.

6. Protect company assets.

Function of financial management :-

The function of financial management may be classified on the

following bases:

I. Liquidity :- It is ascertained on the basis of three important

considerations:

(a) Forecasting cash flows: i.e. matching the inflows against cash

outflows.

(b) Raising funds: i.e. financial manager will have to ascertain the

sources from which funds may be raised at the time when these

funds are needed.

(c) Managing the flow of internal funds.

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I. Profitability :- While ascertaining profitability, the following factors

are taken into account :

(a) Cost control.

(b) Pricing.

(c) Forecasting future profits.

(d) Measuring cost of capital.

II. Management :- asset management has assumed an important role in

finance management it includes :

(a) The management of long term funds,

(b)The management of short term funds.

The finance function can be broadly classified in to two parts:

- Routine financial matter like custody of cash & bank a/cs, collection or

loans, payments of cash etc.

- Special financial function like financial planning and budgeting, profit

analysis, investment decision, etc.

Technique of Financial Management : -

The term financial method or financial tools refers to any logical

method or technique to be employed for the purpose of accomplishing the

following two goals:

Measuring the effectiveness of firm’s actions decisions.

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Measuring the validity of the decisions regarding accepting or rejecting

future projects.

Following are the important financial technique or method used

by the financial manager in performance of his job:

1. Cost of capital: Cost of capital helps the finance manager in deciding

about the sources from which the funds are to be raised. In cases of

different sources of finance, shares, debentures, loan from financial

institutions, banks, public deposit, etc.

2. Trading in Equity: Trading on equity is another tool which helps the

finance manager increasing the return to shareholders.

3. Ratio analysis: This is another method for evaluating different aspects of

the firm. Different ratio serves different purposes.

4. ABC analysis: Cash management model, debtors turnover ratio etc.,

helps the finance manager in effective management of current assets.

5. Fund flow analysis and Cash flow analysis: These techniques help the

financial manager in determining another fund have been procured from

the best available sources and they have been utilized in the best possible

way.

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RATIO ANALYSIS

78

RATIO ANALYSIS

Meaning of Ratio Analysis:

The dictionary meaning of Analysis is “separation of breaking up of

anything into its elements or component parts.” Ratio analysis is therefore

a technique of analysis and interpreting various ratios for helping in

making certain decisions. It involves the methods of calculating and

interpreting financial ratios to assess the firm’s performance and status.

Definition of Ratio Analysis:

A Ratio is simply one number expressed in terms of another. It is a means

of highlighting in arithmetical terms the relationship between two figures

drawn from various financial statements.

The term “Ratio” refers to the numerical or quantitative relationship

between two variables or items. A ratio express simply in one number the

result of comparison between two figures. It is calculated by dividing one

figure by the other. The quotient so obtained is the ratio of figures.

79

Ratio can be expressed in the following three terms:

a) As Proportion

b) As Percentage

c) As Turnover or Rate

Ratio normally pinpoint a business strengths and weakness in two ways:

Comparison of present performance with past performance.

Comparing ratios of those of other business of the same size within

the same industry.

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81

LIQUIDIY RATIO

Liquidity refers to the ability of a concern to meet its current

obligations as & when there becomes due. The short term obligations of a firm

can be met only when there are sufficient liquid assets. The short term

obligations are met by realizing amounts from current, floating (or)

circulating assets The current assets should either be calculated liquid (or) near

liquidity. They should be convertible into cash for paying obligations of short

term nature. The sufficiency (or) insufficiency of current assets should be

assessed by comparing them with short-term current liabilities. If current assets

can pay off current liabilities, then liquidity position will be satisfactory.

To measure the liquidity of a firm the following ratios can be calculated

Current ratio

Liquid ratio

Quick or Acid test ratio

1) CURRENT RATIO :-

Current ratio may be defined as the relationship between current assets

and current liabilities. This ratio also known as Working capital

ratio is a measure of general liquidity and is most widely used to make

the analysis of a short-term financial position (or) liquidity of a firm.

The standard Current Ratio is 2:1.

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITY

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TABLE 1

YEAR RATIO

2005-06 2.119

2006-07 1.64

2007-08 2.087

2008-09 1.622

2009-10 1.332

Graph 1

INTERPRETATION :-

From above graph we can see that current ratio of Amul for the year 2006-

07, 2008-09 and 2009-10 are lower than previous year and also lower than

standard ratio.

This happened because of increase in current liabilities.

This ratio can be improved by

(a) Increase in equity share capital. (b)Retaining profits in business.

83

2) LIQUID RATIO :-

Although receivable, debtors and bills receivable are generally more

liquid than inventories, yet there may be doubts regarding their realization

into cash immediately or in time. Hence, absolute liquid ratio should also be

calculated together with current ratio and quick ratio so as to exclude even

receivables from the current assets and find out the absolute liquid assets.

The standard Liquid Ratio is 1.5:1.

LIQUID RATIO = LIQUID ASSETS

LIQUID LIABILITY

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TABLE 2

YEAR RATIO

2005-06 1.228

2006-07 1.067

2007-08 1.117

2008-09 0.705

2009-10 0.827

Graph 2

INTERPRETATION :-

85

This ratio shows that the liquidity position of the AMUL is rising slowly

in 2009-10.And from graph we can see that the liquidity position of the Amul is

declining in 2008-09 as compared to previous year but this year though it is

higher than previous year, it is not up to standard ratio.

This ratio can be improved by reducing proportion of inventories and

increasing proportion of bank borrowings for working capital in current

liabilities.

3) QUICK OR ACID TEST RATIO:-

Quick ratio is a test of liquidity than the current ratio. The term liquidity

refers to the ability of a firm to pay its short-term obligations as & when they

become due. Quick ratio may be defined as the relationship between quick

or liquid assets and current liabilities. An asset is said to be liquid if it is

converted into cash with in a short period without loss of value.

The standard Liquid Ratio is 1:1.

QUICK RATIO = QUICK ASSETS

LIQUID LIABILITY

TABLE 3

86

YEAR RATIO

2005-06 1.187

2006-07 1.037

2007-08 1.088

2008-09 0.675

2009-10 0.817

Graph 3

INTERPRETATION :-

Form above graph we can summarize that the quick ratio for the

2008-09 is lowest but in 2009-10 again it rises slowly.In 2005-06 Amul has

strongest position in terms of liquidity. During 2005-06, 2006-07 and 2007-08 ,

this ratio is good as compared to standard ratio but in last two years, i.e. in

2008-09 and 2009-10, it is below the standard ratio. To improve this ratio, Amul

should retain its profit in business.

87

PROFITABILITY RATIO

The primary objectives of business undertaking are to profits.

Because profit is the engine, that drives the business enterprise.

Gross Profit Ratio

Net Profit Ratio

Operating Ratio

Return On Capital Employed

Return On Shareholders Fund

1) GROSS PROFIT RATIO:-

This ratio measures the gross earning of the company as compare to its

net sales .If the ratio is less it shows the in efficiency of companies

management.

The ratio shows whether the makeup obtained on cost of production is

sufficient. There is no standard showing reasonableness of gross profit ratio.

The standard Gross Profit Ratio is 25%

GROSS PROFIT RATIO = GROSS PROFIT * 100

NET SALE

TABLE 4

88

YEAR RATIO

2005-06 20.53

2006-07 20.29

2007-08 18.68

2008-09 18.55

2009-10 17.52

Graph 4

INTERPRETATION:

89

Gross profit ratio shows the declining position of Amul year by year.

During all five years it is not satisfactory level. This happened because of

decline in gross profit year by year.

To improve this ratio, Amul should try to reduce sales price of its

products.

2) NET PROFIT RATIO :-

Net Profit Ratio measures the net earnings of the company as compared

to net sales of the company. The ratio is valuable for the purpose of ascertain

the overall profitability of business and shows the efficiency or otherwise of

operating the business. “The higher the ratio the better will be the profitability.

The standard Net Profit Ratio is 10 to 12

Net Profit Ratio = Net Profit x100

Net Sales

TABLE 5

90

YEAR RATIO

2005-06 0.46

2006-07 0.5

2007-08 0.42

2008-09 0.42

2009-10 0.44

Graph 5

INTERPRETATION:-

Net profit ratio is very low of Amul then the ideal ratio.Net Profit Ratio is

rises for the year 2009-10. Amul is a co-operative society and so it distributes

its profit to farmers. So the net profit of Amul is not very high in all five years

and because of this net profit ratio shows declining position of the Amul.

Favorable change can take place due to reduction in tax rate, obtaining of

some relief/allowance/reduction in tax liability.

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3) OPERATING RATIO It is ratio showing relationship between cost of goods sold, operating expense and net sales. It shows the efficiency of the management.

The standard Operating Ratio is 75 to 85%.

Operating Ratio= cost of goods sold + operating expenses x100 Net Sales

TABLE 6

YEAR RATIO

2005-06 98.52

2006-07 98.53

2007-08 99.09

2008-09 98.8

2009-10 97.66

Graph 6

INTERPRETATION :-

92

Operating expense of the Amul is more than the ideal ratio for the all five

years. Amul has also reduced its operating expense for this year. It is nearer

to 100% for all five years.

4) RETURN ON CAPITAL EMPLOYED

This ratio shows the relationship between net profit before interest to

capital employed of the company.The term capital employed includes all assets

except fictitious assets.

RETURN ON CAPITAL EMPLOYED =

NET PROFIT BEFORE INTEREST & TAX X 100

CAPITAL EMPLOYED

TABLE 7

93

YEAR RATIO

2005-06 7.12

2006-07 8.18

2007-08 8.38

2008-09 9.11

2009-10 8.01

Graph 7

Return on Capital Employed

7.12

8.18 8.389.11

8.01

0

1

2

3

4

5

6

7

8

9

10

2005-06 2006-07 2007-08 2008-09 2009-10Year

Ra

tio

INTERPRETATION :-

Return on Capital Employed increases from year to year. This ratio

shows the better position to give return to is share holders and borrowed

capital.

The improvement in ratio can be brought about by improving profit

before tax, reduction in tax rate, reduction in long term funds including

equity.

5) RETURN ON SHARE HOLDERS FUND :-

94

It measures the return that the share holder gets as compared to their investment. It obtained by dividing return of net profit after tax by share holders fund. It is measured in percentage.

This ratio explains the relationship between the total profits earned by the business and total assets employed. This ratio thus measures the overall efficiency of the business operations.Return on Shareholders fund = Net profit after tax x100 Shareholders fund TABLE 8

YEAR RATIO

2005-06 8.79

2006-07 9.94

2007-08 10.06

2008-09 12.44

2009-10 15.02

Graph 8

INTERPRETATION :-

95

From above graph we can see that every year Return on Shareholders Fund

increases. It shows that every year Amul is giving more and more return to

its shareholders. It helps to create goodwill in the market.

LEVERAGE RATIO

The second category of financial ratio is leverage or capital structure ratio

is leverage or capital structure ratio. The long term lenders / creditors would

judge the soundness of a firm on the basis of long term financial strength

measured in term of it’s ability to pay the interest regularly as well as repay the

instalment of the principal on due dates or in one limp sum at the times of

maturity. The long-term solvency of a firm can be examined by using leverage

or capital structure ratios. The leverage or capital structure ratios may be

defined as financial ratio, which throws light on the long-term solvency of firm

as reflected in its ability to assure the long-term lenders with regard to:

Periodic payment of interest as during the period of loan and

Repayment of principal o maturity or in predetermined instalment at

due dates.

Debt Equity Ratio

Proprietary Ratio

Interest Coverage Ratio

a) DEBT EQUITY RATIO :-

This ratio is only another form the proprietary ratio and establishing

relationship between outside long term Liabilities and owner’s fund. It shows

the proportion of long term external liabilities and owner’s fund.

The higher the ratio means that outside creditors have a larger claim than

the owners of the business. This ratio shows the proportion of long term

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external liabilities and equities i.e. proportion of funds provided by share

holder or proprietors.

Debt equity Ratio = Debt

Equity

TABLE 9

YEAR RATIO

2005-06 3.14

2006-07 2.18

2007-08 3.77

2008-09 3.41

2009-10 3.6

Graph 9

INTERPRETATION:-

97

There are ups and downs in five years in Debt Equity ratio. The ratio

shows that for every ownership capital of re.1, there is 3.14 Rs. Borrowed

capitals in 2005-06 and likewise. This does not shows the good position of

the company. It increases the financial risk of the Amul.

b) PROPRIETARY RATIO:-

This ratio indicates the relationship between proprietor’s fund and total

assets. The proprietor’s fund includes equity share capital, preference share

capital, reserves and accumulated surplus. Total assets include fixed, current

and fictitious assets.

This ratio is very important for creditors because they know the share of

proprietor’s fund in the total assets and how fair their loan is secured. The

highest ratio the more safety will be to the creditors.

Proprietary Ratio = Proprietor’s fund x 100

Total assets

TABLE 10

YEAR RATIO

2005-06 15.02

2006-07 16.12

2007-08 12.55

2008-09 12.74

2009-10 8.88

Graph 10

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INTERPRETATION:-

There is ups and downs in the propritory ratio during last five years.

During 2009-10, this ratio is much less than the previous years. This ratio

means that for every 100 Rs. Total assets, there is 8.88 shareholders fund

employed for fixed assets in 2009-10.this give less security to the creditors.

c) INTEREST COVERAGE RATIO :-

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The ratio indicates as to how many times the profit covers the payment of

interest on debentures and other long-term loans.It measures the debt service

capacity of the firm in respect of fixed interest on long-term debts.Higher the

ratio more sound is the financial strength of the company.

INTEREST COVERAGE RATIO =

NET PROFIT BEFORE INTEREST AND TAX

INTEREST

TABLE 11

YEAR RATIO

2005-06 1.41

2006-07 1.58

2007-08 1.55

2008-09 1.51

2009-10 1.59

Graph 11

100

INTERPRETATION:-

This ratio is better in this year than last four years. This shows good

position of the Amul. This means that Amul is able to pay interest on borrowed

capital. This shows financially strong position of the company.

ACTIVITY / TURNOVER RATIO

101

ACTIVITY RATIOS :-

Funds are invested in various assets in business to make sales and earn

profits. The efficiency with which assets are managed directly effect the

volume of sales. Activity ratios measure the efficiency (or)

effectiveness with which a firm manages its resources (or) assets. These

ratios are also called “Turn over ratios” because they indicate the speed with

which assets are converted or turned over into sales.

Inventory Turnover Ratio

Receivable Ratio

Debtors Turnover ratio

Fixed Assets Turnover Ratio

Payable Ratio

1) INVENTORY TURNOVER RATIO :-

102

The number of times the average stock is turned over during the year is

known as stock turnover. It is computed by dividing the cost of goods sold by

average stock in the business.

TABLE 12

YEAR RATIO

2005-06 7.75

2006-07 8.75

2007-08 8.53

2008-09 7.5

2009-10 8.79

Graph 12

INTERPRETATION :-

103

There are no far changes in the inventory turnover ratio. It is lowest in

2008-09. This year means in 2009-10 it has been increased. This means that

inventory is turned over for 8.79 times during this year. This shows increase in

sales of products so it is good position of the Amul.

2) RECEIVABLE RATIO :-

This ratio gives us idea about in how many days we are able to collect the

payment from our debtors.This ratio can be obtained dividing debtors by credit

sales and also multiplied by 365 days. So our answer will come in days.

RECEIVABLE RATIO = Debtors x 365 days

Credit Sales

TABLE 13

YEAR RATIO

2005-06 37

2006-07 29

2007-08 30

2008-09 13

2009-10 23

Graph 13

104

INTERPRETATION :-

This ratio shows the average days in which we will able to get a

payment from our debtors. The lower the days, it shows good position of the

company. It is lowest in 2008-09. In 2009-10, it increases by10 days i.e. 23

days. Compared to previous year it is not the good position but comparing with

2005-06, 2006-07 and 2007-08, this year the position of the company is good.

3) FIXED ASSETS TURNOVER RATIO :

To ascertain the efficiency and profitability of business the total fixed

assets the more compared to sales. The more the sales in relation to the amount

invested in fixed assets the more efficient is the use of fixed assets. It indicates

higher efficiency.

105

If sales are less as composed to investments in fixed assets it means that

fixed asset are not adequately utilized in business. An excessive sale is an

indication of over trading which is dangerous.

Fixed assets turnover Ratio = sales

Total assets

TABLE 14

YEAR RATIO

2005-06 14.13

2006-07 15.2

2007-08 17.51

2008-09 19.92

2009-10 12.03

Graph14

106

INTERPRETATION :-

The Fix Assets Turnover ratio was consequently increasing during the last

four years but this year has been declined. This does not show a good

position of Amul. It causes because of either increase in total assets or

decrease in net sales.

4) PAYABLE RATIO :-

The number of days within which we make payment to our creditors for

credit purchase it’s obtained by creditors’ ratio.

PAYABLE RATIO = CREDITORS X 365 DAYS

CREDIT PURCHASE

TABLE 15

YEAR RATIO

2005-06 30

2006-07 27

2007-08 23

2008-09 16

2009-10 33

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Graph 15

Payable Ratio

30

27

24

16

33

0

5

10

15

20

25

30

35

2005-06 2006-07 2007-08 2008-09 2009-10

Year

Rat

io

INTERPRETATION:-

Payable ratio shows that how many days the creditors are giving us for

payment. During last four years it was much lesser but in this year, it has been

tremendously increased. This shows good position of Amul. This may happen

because of increase in the goodwill of Amul.

UTILITY OF RATIO ANALYSIS

The use ratio was started by banks for ascertaining the liquidity and

Profitability of companies business for the purpose of advancing loans to

them. It gradually became popular and other creditor began to them. It

gradually became popular and other creditors began to use them

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profitably. Now even the investors calculate ratios from the published

accounts of the company in order to have an idea about the solvency and

profitability of the company before investing their savings. The ratio

analysis provides useful data to the company before investing their

saving. The ratio analysis provides useful data to the management, which

groups of people make use of ratios, to determine a particular aspect of

the financial position of the company, in which they are interested.

1) PROFITABILITY:

Useful information about the trend of profitability is

available from profitability ratios. The gross profit ratio, net profit ratio

and ratio of return on these ratios, investment give a good idea of the

profitability of business, on the basis of these ratios, investors get an idea

about the overall efficiency of business as well as other creditors draw

useful conclusions about repaying capacity of the borrowers.

2) LIQUIDITY:

In fact the use of ratios was made initially to ascertain the

liquidity of business. The current ratio, liquid ratio and acid-test ratio will

liquidity of business. The current ratio, liquid ratio and acid-test ratio will

tell whether the business will be able to meet current liabilities as and

when they mature. Banks and other lenders will be able to conclude from

these ratios whether the firm will be to pay regularly the interest and loan

instalments.

3) EFFICIENCY:

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The turnover ratios are excellent guides to measure the efficiency

of managers. E.g. the stock turnover will indicate how efficiently the sale

is being made, the debtor’s turnover will indicate the efficiency of

collection department and assets turnover shows the efficiency with

which the assets are used in business. All such ratios related to sales

present a indicate corrective measures.

4) INTER-FIRM COMPARISON:

The absolute ratios of a firm are not of much

use, unless they are compared with similar ratios of other firms belonging

to the same industry. This is inter-firm comparison, which shows the

strength and weakness of the firm as compared to other firms and will

indicate corrective.

5) INDICATE TREND:

The ratios of the last three to five year will indicate

the trend in the respective fields. For example, the current ratio of a firm

is lower than the industry average but if the ratio of last five years shows

an improving trend it is an encouraging trend. Reverse may also be true.

A particular ratio of a company for one year may compare favourably

With industry average but, if its trend shows a deteriorating position, it is

not desirable. Only ratio analysis will provide this informationn.

Advantages of Ratio Analysis:

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The various advantages of ratio analysis are as follows:

A) Financial Forecasting and Planning:

Ratio analysis helps in the financial forecasting and planning

activities. Ratios based on the past sales are useful in planning the

financial position. Based on this, future trends are set.

B) Decision Making:

Ratio analysis throws light on the degree of efficiency. It is also

concerned with the management and utilization of the assets. Thus, it

enables for making strategic decision.

C) Comparison:

With the help of ratio analysis, ideal ratios can be composed. These

can be used for comparison in respect of the firm’s progress and

performance, inter-firm comparison with industry average.

D) Financial Solvency:

Ratios are useful tools. It indicates the trends in the financial solvency

of the firm. Long term solvency refers to the financial ability of a firm.

It can also evaluate the short term liquidity position of the firm.

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E) Communication:

The financial strength and weaknesses of a firm are communicated in

a more easy and understandable manner by the use of ratios. The

information contained in the financial statements is conveyed in a

meaningful manner. It thus helps in the communication and enhances

the value of the financial statements.

F) Efficiency Evaluation:

It evaluates the overall efficiency of the business entity. Ratio analysis

is an effective instrument which, when properly used, is useful to

assess important characteristics of business liquidity, solvency,

profitability. A critical study of these aspects may enable conclusions

relating to capabilities of business.

G) Control:

It helps in making effective control of the business. Actual results can

be compared with the established standard and to take corrective

action at the right time.

H) Other Uses:

Financial ratios are very helpful in the early and proper diagnosis and

financial health of the firm.

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Importance & Uses of Ratio Analysis :-

The importance of ratio analysis ties in the fact that it presents on a

comparative basis and enables the drawing of inference or conclusions

regarding the performance of a firm with respect to the following aspects:

Liquidity Position:

With the help of ratio analysis, conclusions can be drawn regarding the

liquidity position of a firm. The firm would be considered in a good

liquidity position, if it were able to meet its current obligation when they

become due. The firm should maintain enough liquid funds with it so that

it can pay off the short term liquidity without affecting its creditability.

Long Term Solvency:

Ratio analysis is equally useful for assessing the long term financial need

of a firm. This aspect of the financial of a borrower is of concern to the

long term creditors, security analysis and the present and potential

investor. However, the measure of this ratio highly depends on the sales

generated by the use of a assets of the firm.

Operation Efficiency:

The long term solvency is measure by the leverage, capital structure and

profitability ratios which focus on earning power and operating

efficiency. Ratio analysis shows the strength and weaknesses of a firm in

the respect. Ratio analysis enables a firm to the dimensions in to account.

In the words, whether the financial position of the firm is improving or

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not over the years. This is made possible by the use of trend analysis lies

in the fact that the analysis can know the direction of the movement.

Over All Profitability:

Unlike the outside parties that are interested in one aspect of the financial

position of a firm the management is constantly about the overall

profitability of the enterprise.

Inter-Firm Comparison:

One of the popular techniques is to compare the industry average. It

should be in broad conformity with that of the industry to which it

belongs. An inter firm comparison would demonstrate the relative

position vis-à-vis its competitors. Analysis provides data for inter-firm

comparison. Patios high light the factors associated with successful and

unsuccessful firms. They also show strong firms and weak firms

overvalued & undervalued firms.

Trend Analysis:

The significance of a trend analysis of ratios lies in the fact that the

analysis can know the direction of movement i.e. whether the movement

is favorable or unfavorable.

Simplifies Financial Statements:

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Ratio analysis simplifies the comprehension of financial statements.

Ratios tell the whole story of change in the financial condition of the

business.

Limitations of Ratio Analysis:

1. The user should possess the practical knowledge about the

concerns and the industry in general.

2. Ratios are not an end. They are only means to an end.

3. A single ratio in itself is not important. The trend is more

significant in the analysis. Comparison of ratios should be made.

4. For comparative purposes, there should be a standard ratio. There

is no such standard prescribed for the ratios.

5. The accuracy and correctness of ratios are totally dependent upon

the reliability of the data contained in the financial statement on the

basis of which ratios are calculated.

6. To use ratios, first of all there should be uniformity in the

accounting plan used by both the firms.

7. Ratios become meaningless if detached from the details from

which they are derived. They should be used as supplementary and

not substitution of the original absolute figures.

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8. Time lag in calculation and communicating the same should not be

unnecessarily too much.

9. The method of presentation should be precise and without any

ambiguity.

METHODS AND CLASSIFICATION OF RATIOS

Accounting ratios are generally classified as follows:

A) Traditional classification or classification according to the type of

financial statements.

B) Functional classification.

A) Traditional Classification:

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The ratio are grouped into three categories the on the basis of the

statements from which the figures are taken for computing the ratios. It is

well-known traditional classification and has been so grouped since the

ratio analysis. The ratios according to this classification are:

1. Revenue Statement Ratios:

These are the ratios computed on the basis of items taken from

revenue statement i.e. Profit and Loss Account. E.g. Net Profit

Ratio is computed by dividing net profit by sales. Here both net

profit and sales are items appearing in profit and loss account.

2. Balance Sheet Ratios:

When two items or groups of items appearing in the balance sheet

are compared the ratio so obtained is balance sheet. E.g. A ratio

establishing relationship between current assets and current

liabilities is a balance sheet ratio.

3. Composite Ratios:

A ratio showing the relationship between one item taken from

balance sheet and another taken from profit and loss account is a

composite ratio or a combined ratio knows as balance sheet and

revenue statement ratio. A return on capital employed shows the

proportion of net profit to capital employed and it is a composite

ratio.

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B) Functional Classification:

Ratios are also grouped in accordance with the certain tests. On this basis

there are four categories:

1. Liquidity Ratios:

These ratios indicate the position of liquidity. They are computed to

ascertain whether the company is capable of liquidity. For example,

current ratio shows the capacity firm to meet its current liabilities as and

them when mature. E.g. (1) Current Ratio (2) Liquidity Ratio (3) Acid-

Test Ratio

2. Profitability Ratio:

A number of ratios are designed to indicate the profitability ratio.

3. Leverage Ratios:

The composition of capital of business and the proportion of owner’s

capital and capital provided by outsiders are reflected by leverage ratios.

4. Activity or Efficiency Ratios:

These are the ratios showing the effectiveness with which the resources

of the business are employed. It signifies the efficiency of the

management.

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LITERATURE

REVIEW

119

Financial Management

Financial management is that managerial activity which is concerned with the

planning and controlling of the firm financial resources.

Financial management deals with procurement of funds and their effective

utilization in the business.

Financial management is concerned with the management decisions that result

in the acquisition and financing of short term and long term credits for the firm.

Financial management constitutes risk, cost and control. The cost of funds

should be at minimum for a proper balancing of risk and control.

PHILIPPATUS has given a more elaborate definition of the term

financial management. According to him “Financial management is concerned

with the managerial decision that results in the acquisition and financing of

long-term and short-term credits for the firms. As such as it deals with the

situations that require selection of specific assets, the selection of specific

liability as well as the problem of size and growth of an enterprise. The analysis

of these decisions is based on the expected inflows and outflows of funds and

effects up on managerial objectives. ”

Thus, Financial management is mainly concerned with the proper

management of funds. Above information I collected from the book “Financial

management principles & practise.” By Dr. S.N.Maheshwari. The revised and

enlarged second edition of the book under review is exhaustive in every sense

and covers a large spectrum of financial management.

120

“Financial management principles & practice.” Book is written by Dr.

S.N.Maheshwari. And this book is published by sultan chand & sons from

New Delhi Dr. S.N.Maheshwari are director of Delhi Institute of Advanced

Studies, Delhi.

The management accountant may 1992 having introduced the subject

the author moves on the various financial tools available such as ratio analysis,

cash flows analysis, fund flow analysis etc and their uses in financial

management. His approaches to the tool of analysis and their application prove

his mastery over the subject.

“Finance is one of the most primary requisitions of a business and the

modern management obliviously depends largely on the efficient management

of the finance.” The theory and practice are copiously illustrated with all sorts

of anticipated problems. The book is divided in to seven section namely,

foundations of finance; financial analysis, cost analysis, funds management;

miscellaneous; advanced solved problems; and advanced unsolved problem. All

relevant topics are analysed in every lucid and understandable language,

required no further clarification..

Economic and social sciences review, vol-1, no.2, act 1992.

121

This is a comprehensive text book for students studying various coerces. The

readers for whom this book is meant will find this publication comprehensive

and useful. The author and the publishers deserve our heartly congratulations

for a job well done.

- International Review of Finance, July – Dec., 1992 (vol-5, No.2)

About the three decades ago, the scope of financial management was

confined to the raising of funds, whenever needed and little significance used to

be attached to financial decision-making and problem solving. As

consequences, the traditional finance texts were structured around this theme

and contained description of the instruments and institutions of raising funds

and of the major events, such as promotions, reorganisations, readjustment,

merger, consolidation etc., when funds were raised.

In the mid-fifties, the emphasis shifted to the judicious utilization of

funds. The modern thinking in financial management accords a far greater

importance to management decision making and policy. Today, financial

manager do not perform the passive role of store keeper of financial data and

information, and arranging funds, whenever directed to do so. Rather they

occupy key positions in top management areas and play a dynamic role in

solving complex management problems. They are now responsible for shaping

the fortunes of the enterprise and are involved in the most vital management

decision of allocation of capital. It is their duties to ensure that the funds are

raised most economically and used in the most efficient and effective manner

because of this change in emphasis, the descriptive treatment of the subject of

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financial management is being replaced by a grouping analytical content and

sound theoretical understandings.

Above description and researchers explained in the Book of

I.M.Pandey, is “Financial management” in its eight editions like in its previous

editions high light the “modern” approach to financial decision-making. The

book discusses the theories, concepts, assumptions and mechanics underlying

financial decisions, viz. Investment financing dividend and working capital

management. It also discusses sources and instruments of short-term and long-

term financers, mergers and acquisitions, international financial management

and the corporate policies.

“Financial management” in eight editions is written by I.M.Pandey.

I.M.Pandey holds a PhD (1977) from the Delhi School of economics,

university of Delhi. He joined the Indian Institute of management, Ahmadabad

(IIMA) in 1980. Where he was a professor of finance. He has also taught at the

school of management. Asian institute of technology, Bangkok, Thailand (1994-

96); college of Business Administration, Kans as state university, Kansas, USA

(1984-85); Paris school of management ESCP, Paris, France; and graduate

school of management – ESSFC, clergy, France. He was also a visiting scholar

at the Department of finance, university of Birmingham, UK.

123

Ratio Analysis

According to westom and Birmingham, in their Book

managerial finance, 5th edition P.172 and Smith K.V.S. Book management of

ratio analysis is concerned with the term ratio analysis I concerned with the

term ratio refers to the number or quantitative relationship between two item

and variables.

Ratio analysis is a widely used tool of financial analysis. It is

defined as the systematic use of ratio to interpret the fined statement, so that the

strengths & weaknesses of the forms as well as its historical performance &

current financial condition can be determined.

The importance of ratio analysis ties in the fact that it presents on

a comparative basis and enables the drawing of inference or concussions

regarding the performance of a firm with respect to the ratio analysis.

The firm would be considered in a good liquidity position, if it

were able to meet its current obligation when they become due. The firm should

maintain enough liquid funds with it so that it can pay off the short term

liquidity without affecting its creditability.

124

According to Horne James.c.van in his book financial

management & policy 3rd edition P 445.

“The relationship of one item to another expressed in a sample

mathematical from is known as Ratio”

Ratio analysis is the method to studying the performer of the firm

over a number of years on the basis of ratio.

Ratio analysis is equally useful for assessing the long term

financial need of a firm. This aspect of the financial of a borrower is of concern

to the long term creditors, security analysis and the present and potential

inventors. However, the measure of this ratio highly depends on the sales

generated by the use of a assets of the firm.

With the help of ratio analysis, conclusions can be drawn

regarding the liquidity position of a firm. The firm would be considered in a

good liquidity position, if it were able to meet its current obligation when they

become due. The firm should maintain enough liquid funds with it so that it can

pay off the short term liquidity without affecting its creditability

Analysis of statement means such a treatment of information

contained is two defined financial statement of methodical classification,

comparison raising pertinent operation and seeking answers of them.

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Research

Research extends knowledge of human beings, social life and

environment. The search is for answers for various types of questions: What,

Where, How and Why of various phenomena, and enlighten us.

Research brings to light information that might never be discovered

fully during the ordinary course of life.

D.slesinger and M.Stephenson in the Encyclopedia of social

sciences define research as “ the manipulation of things, concepts or

symbols for the purpose of generalizing to expand, correct or verify

knowledge, whether that knowledge aids in construction of theory or in the

practice of an art.”

Research simply means a search for facts- answers to questions and

solutions to problems. Research as “a scientific undertaking which, by

means of logical and systematic techniques, which aims to:

Research establishes generalizations and general laws and contributes

to theory building in various fields of knowledge. Research verifies and tests

existing facts and theory and these help improving our knowledge and ability to

handle situations and events.

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It is a fact-finding study. It is a method of research involving collection

of data directly from a population or a sample thereof at particular time. its

purpose is to provide information, explain phenomena, to make comparisons

and concerned with cause and effect relationships can be useful for making for

predications.

It is a study of past records and other information sources with a view to

reconstructing the origin and development of an institution or a movement or a

system and discovering the trends in the part. Research aims to analyze inter-

relationship between variables and to derive casual explanations and thus

enables us to have a better understanding of the world which we live.

Applied research aims at finding solution to problems… socio-

economic problems, health problems, human relations problems in organization

and so on.

127

RESEARCH

METHODOLOGY

128

Introduction

Research extends knowledge of human beings, social life and environment. The

search is for answers for various types of questions: What, Where, How and

Why of various phenomena, and enlighten us.

Research brings to light information that might never be discovered fully during

the ordinary course of life.

Research establishes generalizations and general laws and contributes to theory

building in various fields of knowledge.

Research verifies and tests existing facts and theory and these help improving

our knowledge and ability to handle situations and events.

General laws developed through research may enable us to make reliable

prediction of events yet to happen.

Research aims to analyze inter-relationship between variables and to derive

casual explanations and thus enables us to have a better understanding of the

world which we live.

Applied research aims at finding solution to problems… socio-economic

problems, health problems, human relations problems in organization and so on.

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RESEARCH METHODOLOGY

1. Experimental research

It is designed to asses the effects of particular variables on a

phenomenon by keeping the other variables constant or controlled.

2. Analytical study

It is a system of procedures and techniques of analysis applied to

quantitative data.

3. Historical research

It is a study of past records and other information sources with a view

to reconstructing the origin and development of an institution or a

movement or a system and discovering the trends in the part.

130

4. Survey

It is a fact-finding study. It is a method of research involving collection

of data directly from a population or a sample thereof at particular time.

its purpose is to provide information, explain phenomena, to make

comparisons and concerned with cause and effect relationships can be

useful for making for predications.

MODE OF ANALYSIS

As stated earlier by analysis we mean the computation of certain indices

or measures along with searching for patterns of relationship. That exists

among the data groups. Analysis, particularly in case of survey or

experimental data, involves estimating the values of unknown parameters

of the population and testing of hypotheses for drawing inferences.

Analysis may, therefore, be categorized as often known as statistical and

inferential analysis “descriptive analysis is largely the study of

distributions of one variable. This study provides us with profiles of

companies, work groups, persons and other subjects on any of a multitude

of characteristics such as size, composition, efficiency, preferences, etc.

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this sort of analysis may be in respect of one variable or in respect of two

variables or in respect of more than two variables.

(A) Multiple regression analysis:

This analysis is adopted when the researcher has one depending variable

which is presumed to be a function of two or more independent variables.

(B) multiple discriminate analysis:

This analysis is appropriate when the research has a single dependent

variable that cannot be measured, but can be classified into two or more

groups on the basis of some attribute.

( C) multivariate analysis of variance:

This analysis is an extension of two-way ANOVA.

(D) canonical analysis:

This analysis can be used in case of both measurable and non-measurable

variables for the purpose of simultaneously predicting a set.

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SAMPLING DESIGN

1. Type of universe:

The first step in developing any sample design is to clearly define the set

of objects, technically called the universe, to be studied.

2. sampling unit:

A decision has to be taken concerning a sampling unit before selecting

sample. Sampling unit may be a geographical one such as state, district,

village, etc.

3. source list:

It is also knows as “sampling frame” from which sample is to be drawn.

It contains the names of all items of a universe. If source list is not

available, researcher has to prepare it.

133

4. size of sample:

This refers to the number of items to be selected from the universe to

constitute a sample. This is a major problem before a research. The size

of sample should neither be excessively large, nor too small.

5. parameters of interest:

In determining the sample design, one must consider the question of the

specific population parameters which are of interest. For instance, we

may be interested in estimating the proportion of persons with some

characteristic in the population, or we may be interested in knowing some

average or the other measure concerning the populat

6. budgetary constraint:

Cost considerations, from practical point of view, have a major impact

upon decisions relating to not only the size of the sample but also to the

type of sample.

134

RESEARCH DESIGN

“A research design is the arrangement of condition for collection and

analysis of data in a manner that aims to combine relevance to the

research purpose with economy in procedure.”

a. Keeping in view the above stated design decisions, one may split

the overall research design into the following parts:

b. The sampling design which deals with the method of selecting

items to be observed for the given study.

c. The observation design which relates to the condition under which

the observations are to be made.

d. The statistical design which concerns with the question of how

many items are to be observed.

e. The operational design which deals with the techniques by which

the procedures specified in the sampling, statistical and

observational design can be carried out.

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Important features

Form what has been stated above, we can state the important features a

research design as under:

I. It is a plan that specifies the source and types of information

relevant to the research problem.

II. It is a strategy specifying which approach will be used for

gathering and analyzing the data.

III. It also includes the time and cost budget since most studies are

done under these two constraints.

DATA COLLECTION SOURCES

(a) Primary sources and

(b) Secondary sources.

136

A. PRIMARY SOURCES OF DATA

Primary sources are original sources from which the researcher directly

collects data that have not been previously e.g. collection of data directly

by the researcher on brand awareness, brand preference, brand loyalty

and other aspects of consumer behaviour from a sample of consumers by

interviewing them, primary data are information collected through

various method such as observation, interviewing, mailing etc.

Primary data are directly collected by the researcher from their original

sources. In this case, the research can collect the required data precisely

according to his research needs, he can collect them when he wants them

and in the from he needs them.

B. SECONDARY SOURCE OF DATA

There are sources containing data have been collected and compiled for

another purpose. The secondary sources consists of readily

compendia and already compiled statements and reports whose data may

be used by researchers for their studies.

137

Secondary sources consist of not only published records and reports but

also unpublished. The letter category includes various and registers

maintained by the firms and organizations.

SAMPLING METHOD

Probability or random sampling:

Probability sampling is based on the theory of probability. it is also

known as random sampling. It provides a known nonzero chance of

selection for each population element. It is used when generalization is

the objective of study, and a greater degree of accuracy of estimation of

population parameters is required. The cost and time required is high

hence the benefit derived from it should justify the costs.

1. Simple random sampling:

This sampling technique gives each element an equal and independent

chance of being selected. an equal chance means equal probability of

selection. An independent chance means equal probability of will not

affect the chances of other elements being selected. The procedure of

138

drawing a simple random sampling consists of enumeration of all

elements, in the population.

Suitability:

This type of sampling is suited for a small homogeneous population.

Advantages:

The advantage of this is that it is one of the easiest methods, all the

elements in the population have an equal chance of being selected, simple

to understand, does not require prior knowledge of the true composition

of the population.

Disadvantages:

It is often impractical because of non-availability of population list or of

difficulty in enumerating the population, does not ensure proportionate

representation and it may be expensive in time and money. The amount

of sampling error associated with any sample drawn can easily be

139

computer. But it is greater then that in other probability samples of the

same size, because it is less precise than other methods.

2. STRATIFIED RANDOM SAMPLING:

There is improved type of random or probability sampling. In this

method, the population is sub-divided into homogenous groups or strata,

and from each stratum, random sample is drawn. . stratification is

necessary for increasing a sampling sub population and applying different

method to different strata. The stratified random sampling is appropriated

for a large heterogeneous population. Stratification process involves three

major decisions. They are stratification base or bases. Number of strata

and strata sample sizes.

Stratified random sampling may be classified into:

A) proportionate stratified sampling:

This sampling involves drawing a sampling from stratum in proportion

to the latter’s share in the total population. it gives proper representation

to each stratum and its statistical efficiency is generally higher. This

method is therefore very popular.

140

B) Disproportionate stratified random sampling:

This method does not give proportionate representation to strata. it

necessarily involver giving over-representation to some and under

representation to other. The desirability of disproportionate sampling is

usually determined by three factors.

3. Systematic random sampling:

This method of sampling is an alternative to

random selection. It consists of taking Kth item in the population after a

random starts with an item form 1 to k. it is also knows as fixed interval.

It possesses characteristics of randomness and some non-probability

traits.

SAMPLE SIZE

In sampling analysis the most ticklish question is: what should be the size

of the sample or how large or small should be ‘n’ ? if the sample size is

too small, it may not serve to achieve the objectives and if it is too large,

we may incur huge cost and waste resources. As a general rule, one can

say that the sample must be of an optimum size i.e., it should neither be

excessively large nor too small. Technically the sample size should be

large enough to give a chosen by some logical process before sample is

taken from the universe.

141

SAMPLE AREA

This is an important from of cluster sampling. In larger field surveys

cluster consisting of specific geographical areas like districts, talus,

villages or blocks in a city are randomly drawn. as the geographical areas

are selected as sampling units in such cases their sampling is called area

sampling. It is not a separate method of sampling, but form part of cluster

sampling

SAMPLE UNIT:

In the sample unit would include the customers of anand and other areas

also those who use it products sample.

142

FINDINGS

143

FINDINGS

After completion of my project there is no doubt that Amul is a very good

co-operative sector in India that truly work for farmer who attached with the

union and who are the members of union. Union is also linked with social

services and it department are working well and help to union to reach towards

top position.

From working capital and operating cycle the following conclusion can

be drawn.

The working capital requirement of Amul is financed through raising the

cash credit loans and the short term loans.

Amul is following conservative policy to finance its current assets.

A large operating cycle due to high working in –process conversion period, high

finished goods conversion period and lower payable deferral period

A company has not arranged proper C.A. is increase not due to one

element. But it is due to more increase in inventory or due to more increase in

cash and bank.

144

Amul’s G.W.C. is made up of three current assets – stock, advances &

debtors, cash & bank balance, investment in current assets is increasing with the

increasing level of business activities. There is a significant increase in

investment in 2007-08.

The margin by which current assets cover short term obligation i.e.

current liabilities are more in year 2008-09 and while it was relative less in

2007-08. The position of current assets which can be finance through long term

sources has increased by 42% as compare to previous year.

There is a significant change in the W.I.P. conversion period as well as

finished goods conversion period increase 2 days in 2007-08. The company has

efficient in reducing WIP conversion period. But the F.G.C.P. is larger. This

result into larger operating cycle of Amul.

145

LIMITATION OF STUDY

The study is based on the information received and analysis done during this

training period only.

The study is based on the available data of last 3 Years.

The study is fully based on secondary data.

146

RECOMMENDATIONS

147

RECOMMENDATIONS

Amul is following conservative policy to finance its current assets. The

firm should increase the investment in current assets to improve on its credit

standing.

Amul should try to reduce raw materials and finished goods period by

reducing inventory level. Amul should try having to collect debtors

quickly.

Amul should control the inventory level. It should increase C.A. and

decrease the level of CL, because the quick ratio taking too much time.

Amul has big consumer market in overall country as well as abroad

increase in product mix will give more privileges to Amul.

Transpiration of the milk should be accurate that wastage of milk can be

avoided.

Amul should increase the procurement of milk by increasing the number

of village societies.

148

Amul should concentrate more on inventory or we can say that stock

because in the CA, inventory’s demand has higher position.

Amul should increase its sales by different sales promotion scheme. It

organization can not decrease the lead time period. It should pay attention

on sales side and promote.

The local milk producers should receive price for the milk to retain him.

In this industry, also motivate him to increase the daily production as

most of the milk producers are marginal farmers. At the same time the

retailer price of the milk and milk producer should be maintained at an

affordable price.

149

CONCLUSION

150

CONCLUSION

Amul is a successful co-operative dairy and it becomes a household

name in India and abroad, we visited this unit. So we feel satisfactory on our

modest efforts. During my visit in this unit. I observed the Amul is more

progressive sector; at present its biggest dairy in Asia. The unit has bright future

because if it’s scientific and flexible management. The unit turnover is increase

day by day.

Amul has a symbol of “Tie of four hands” which means co-operation of

success.

Producers.

Processors.

Marketers.

Customers.

India has emerged as the highest Milk Producing Country in the

world.

The Dairy Industry in India is considered to be a category, which has

been Growing & Profitable.

151

The Major Markets for Export of Dairy products from India include

Germany, USA, UAE, & Nepal.

Indian Dairy Products play a significant role in the socio – Economic

& Religious activities of our population.

AMUL is well poised to steer the Dairy Co- operative Sector into an

era of further prosperity & Growth.

AMUL have been serving as the “ROLE MODEL” for Dairy Co-

operatives across the world.

Since inception of Co – operative movement 1946, AMUL is having

Flag bearers of a uniquely successful experiment which provides

stability to marginal farm incomes & lends security to the socio –

economic future of the nation.

India is progressing day by day to achieve the highest position of

“MAHA SATTA” in near future.

152

Amul is really a great organization which distributes all its profit among

its members. Those who supply milk to Amul. It would perhaps be the first

organization in the India to run successfully on the co-operative basis.

Amul is a highly successful co-operative sector in world since last

60 years Amul has built up its own personality that portrays its true image. But

still there are certain avenues which it taken care can take the organization to

higher standards.

Special seminar should be arranged in village for guiding the village

people in proper take care of animal. Amul should do research activity in animal

husbandry practice to increase the milk production.

Amul has competitive established system. The four hands of Amul are

working successfully with corporation. The people of Amul are very co-

operative and enthusiastic. Amul is famous as “Anand Pattern” for its co-

operative organization in world. So it’s a matter proud for people of Anand as

well as India Amul are really “The taste of India”.

Thus, Amul is the successful co-operative organizations running with

automation still providing full employment opportunities. Amul because of its

efforts has obtained the HACCP ISO 9002 certificate.

153

Working capital management or current assets management is one of the

most important aspects of the overall financial management. There are many

determined which affect the working capital requirements of the firm like nature

of business, technology and manufacturing policy, market and demand

condition etc.

According to my point success factor being Amul is hardworking,

disciplinary, co-operative structure, production, technology, development.

154

BIBLIOGRAPHY

155

BIBLIOGRAPHY

PERSONAL DISCUSSION WITH VARIOUS DEPARTMENT HEAD.

ANNUAL REPORTS OF LAST FIVE YEARS

FINANCIAL MANAGEMENT BY PRASSUN CHANDRA,5TH

EDITION.

M. Pandey – FINANCIAL MANAGEMENT - VIKAS PUBLISHING

HOUSE PVT.LTD. 9TH EDITION.

M.Y. KHAN and P.K. JAIN, FINANCIAL MANAGEMENT VIKAS

PUBLISHING HOUSE PVT.LTD. NEW DELHI.

OLD REPORTS OF PREVIOUS TRAINEES.

WEB-SITES

www.amul.com

www.amuldairy.com

www.amuldairy@kairaunion.coop

156

ANNEXURE

157

ACCOUNTS

Trading, Profit & Loss Account for the year ended

31st March, 2010

Rs. In

Lacs

  2007-08   2007-08

  Rs.   Rs.

       

To Opening Stock   By Milk Sales 37808.65

Finished Goods Stock 4699.15 By Product Sales 69794.44

Stock in Process 1902.08 By Parlour Sales 108.75

Milk Stock 207.39 Total Sales

107711.8

4

Stock in Transit 143.08 Less: Excise 524.55

Parlour Stock 1.10 Net Sales

107187.2

9

  6952.79    

To Milk Purchases 77965.56

By Interest

Income 260.18

To Raw-Material

Consumption 15725.31

By Dividend

Income 76.56

To Research & Extension

Expenses 1182.62 By Other Income 754.02

To Processing Expenses 1089.17

By Prior Period

Income 1.61

158

To Packaging Expenses 8363.90

By Closing

Stock:  

To Power & Fuel Expenses 3807.86

Finished Goods

Stock 10204.15

To Salaries and Wages 1676.98 Stock in Process 2319.85

To Staff Provident

Fund,Gratuity,   Milk Stock 266.58

& Other Amenities 480.10 Stock in Transit 683.27

To Repairs & Maintainance

Expenses 1063.55 Parlour Stock 3.00

To Freight & Forwarding

Expenses 1015.17   13476.86

To Marketing Expenses 109.99    

To Postage, Telegram,

Telephone      

Printing & Stationary

Expenses 56.14    

To Insurance Premium 60.52    

To Rent, Rates & Taxes 43.62    

To Audit Fees 99.66    

To Administrative Expenses 166.77    

To Interest & Bank

Commission 814.81    

To Depreciation      

Total Depreciation Charged :

633.70      

Less Adjusted against

Grants: 59.92      

  573.78    

159

To FBT Provision 9.00    

To Bad Debts Provision 0.00    

To Leave Encashment

Provision 0.00    

To Provision for Gratuity 0.00    

To Prior Period Expenses 47.71    

To Net Profit 451.51    

Total

121756.5

1 Total

121756.5

1

BALANCE SHEET as at 31st MARCH 2008Rs. In Lacs

LIABILITIES  31.3.200

8 ASSETS  31.3.200

8  Rs. Rs.   Rs. Rs.         Authorised Share Capital :     Assets:    (40,00,000 Shares of Rs. 100 each)   4000.00 Gross Value:

27453.29  

Share Capital : (Fully Paid Up)   2229.18 As per Schedule-3 Col -5             Reserve Fund & Other Funds :   2362.18 Less Depreciation Fund:

21330.32  

(as per Schedule 1, Col. 5)     As per Schedule-3 Col -9    Grants:   1554.28 Net Assets:   6122.97(as per Schedule 2, Col. 6)              Capital Work in Progress:   125.75Loans (Secured):        Axis Bank Long Term loan 0.00   Investments :    

HDFC Bank Short Term Loan9500.0

0   National Saving Certificates 0.18  NCDC BMC Project Loan 501.63   Share Investments 514.65  

   10001.6

3   514.83         Redeemable Debentures :   1039.51 Stock :    

      Trading Stock13476.8

6  Fixed Deposits:   4333.81 Stores 2261.02  

       15737.8

7Current Liabilities:     Advances & Debtors :    Deposits 168.24   Deposits 214.05  

160

Due to Societies7223.3

1   Due from societies 0.11  

Outstanding Against Expenses1423.5

9   Advance 777.80  

Outstanding Against Purchases4298.3

1   Trade Debtors 8458.69  Sundry Creditors 459.06   Sundry Debtors 404.62  

   13572.5

1 Income-Tax Deposits 91.53  Provisions:       9946.80Fringe Benefit Tax 54.00   Cash & Bank Balances :    Doubtful Trade Debtors 58.95   In Bank Current Accounts 159.84  Decline in Investments 1.50   NCDC BMC Project Account 501.63  Leave Encashment 0.00   Fixed Deposits in Banks 2649.03  Gratuity 205.45   Cash on Hand 0.71      319.91   3311.22Profit & Loss A/c:        

Net Profit for the year   451.51Deferred Revenue Expenditure   105.06

      (to the extent not written off)    

Total  35864.5

1 Total  35864.5

1

Trading, Profit & Loss Account

for the

year ended 31st March.

2009Rs. In

Lacs

  2008-09   2008-09

  Rs.   Rs.

       

To Opening Stock   By Milk Sales 54187.46

Finished Goods Stock 10204.15

By Product

Sales 83487.54

161

Stock in Process 2319.85

By Parlour

Sales 131.88

Milk Stock 266.58 Total Sales

137806.8

7

Stock in Transit 683.27 Less: Excise 594.52

Parlour Stock 3.00 Net Sales

137212.3

5

  13476.86    

To Milk Purchases 94284.94

By Interest

Income 258.93

To Raw-Material Consumption 20332.86

By Dividend

Income 77.37

To Research & Extension

Expenses 910.43

By Other

Income 624.15

To Processing Expenses 1581.04

By Prior Period

Income 0.00

To Packaging Expenses 10477.66

By Closing

Stock:  

To Power & Fuel Expenses 5004.98

Finished

Goods Stock 12583.97

To Salaries and Wages 1779.52

Stock in

Process 2539.55

To Staff Provident

Fund,Gratuity,   Milk Stock 415.92

& Other Amenities 571.92

Stock in

Transit 791.41

To Repairs & Maintainance

Expenses 1280.76 Parlour Stock 3.65

To Freight & Forwarding 1554.12   16334.50

162

Expenses

To Marketing Expenses 125.87    

To Postage, Telegram,

Telephone      

Printing & Stationary

Expenses 63.05    

To Insurance Premium 45.11    

To Rent, Rates & Taxes 110.65    

To Audit Fees 103.79    

To Administrative Expenses 198.96    

To Interest & Bank Commission 1122.07    

To Depreciation      

Total Depreciation Charged :

853.06      

Less Adjusted against Grants:

50.88      

  802.18    

To IT/FBT Provision 105.00    

To Bad Debts Provisionzz 0.00    

To Leave Encashment Provision 0.00    

To Provision for Gratuity 0.00    

To Prior Period Expenses 0.00    

To Net Profit 575.53    

Total

154507.3

0 Total

154507.3

0

163

BALANCE SHEET as at 31st MARCH 2009

LIABILITIES  31.3.200

9 ASSETS  31.3.200

9  Rs. Rs.   Rs. Rs.         Authorised Share Capital :     Assets:    (40,00,000 Shares of Rs. 100 each)   4000.00 Gross Value:

29036.16  

Share Capital : (Fully Paid Up)   2265.99 As per Schedule-3 Col -5             Reserve Fund & Other Funds :   2485.24 Less Depreciation Fund:

22147.92  

(as per Schedule 1, Col. 5)     As per Schedule-3 Col -9    Grants:   1498.42 Net Assets:   6888.24(as per Schedule 2, Col. 6)              Capital Work in Progress:   20.72Loans (Secured):        HDFC Bank Short Term Loan 5000.00   Investments :    NCDC BMC Project Loan 1111.07   National Saving Certificates 0.18      6111.07 Share Investments 514.65          514.83Redeemable Debentures :   856.58          Stock :    

Fixed Deposits:   4832.87 Trading Stock16334.5

0        Stores 3106.47  

Current Liabilities:      19440.9

7Deposits 232.99   Advances & Debtors :    

Due to Societies12017.6

0   Deposits 277.29  Outstanding Against Expenses 1828.48   Dues from Societies 5.06  Outstanding Against Purchases 3058.15   Society Loans- BMC Project 1036.45  Sundry Creditors 336.56   Advance 960.91      17473.79 Trade Debtors 4435.10        Sundry Debtors 534.52  Provisions:     Income-Tax Deposits 130.68  Income Tax 90.00     7380.01Fringe Benefit Tax 69.00   Cash & Bank Balances :    Doubtful Trade Debtors 58.95   In Bank Current Accounts 583.65  Decline in Investments 1.50   NCDC BMC Project Account 128.00  Gratuity 105.45   Fixed Deposits in Banks 1340.76      324.91 Cash on Hand 1.00          2053.41Profit & Loss A/c:        

Net Profit for the year 575.53 575.53Deferred Revenue Expenditure 126.20 126.20

      (to the extent not written off)    

164

Total   36424.39 Total  36424.3

9

Trading, Profit & Loss Account for the year ended

31st March, 2010Rs. In

Lacs

  2009-10   2009-10

  Rs.   Rs.

       

To Opening Stock   By Milk Sales 73668.13

Finished Goods Stock 12583.97

By Product

Sales 95659.53

Stock in Process 2539.55

By Parlour

Sales 161.30

Milk Stock 415.92 Total Sales

169488.9

6

Stock in Transit 791.41 Less: Excise 550.23

Parlour Stock 3.65 Net Sales

168938.7

3

  16334.50    

To Milk Purchases

111402.3

6

By Interest

Income 352.26

To Raw-Material

Consumption 26967.26

By Dividend

Income 106.61

To Research & Development

Expenses 1423.57

By Other

Income 713.53

To Processing Expenses 2912.69 By Prior Period 7.14

165

Income

To Packaging Expenses 10946.73

By Closing

Stock:  

To Power & Fuel Expenses 4904.18

Finished Goods

Stock 11121.03

To Salaries and Wages 1972.88

Stock in

Process 3709.66

To Staff Provident

Fund,Gratuity,   Milk Stock 527.77

& Other Amenities 1299.54 Stock in Transit 0.00

To Repairs & Maintainance

Expenses 1366.11 Parlour Stock 3.94

To Freight & Forwarding

Expenses 1807.78   15362.40

To Marketing Expenses 136.06    

To Postage, Telegram,

Telephone      

Printing & Stationary

Expenses 59.39    

To Insurance Premium 46.29    

To Rent, Rates & Taxes 133.47    

To Audit Fees 162.65    

To Administrative Expenses 255.16    

To Interest & Bank

Commission 1252.58    

To Depreciation      

Total Depreciation

Charged : 1167.89      

Less Adjusted against      

166

Grants: 46.48

  1121.41    

To IT/FBT Provision 255.00    

To Bad Debts Provision 0.00    

To Leave Encashment

Provision 0.00    

To Provision for Gratuity 0.00    

To Prior Period Expenses (14.69)    

To Net Profit 735.75    

Total

185480.6

7 Total

185480.6

7

BALANCE SHEET AS At 31st MARCH 2010Rs. InLacs

LIABILITIES  31.3.201

0 ASSETS  31.3.201

0  Rs. Rs.   Rs. Rs.         Authorised Share Capital :     Assets:    (40,00,000 Shares of Rs. 100 each)   4000.00 Gross Value: 0.00  Share Capital : (Fully Paid Up)   2300.73 As per Schedule-3 Col -5             Reserve Fund & Other Funds :   2720.13 Less Depreciation Fund: 0.00  (as per Schedule 1, Col. 5)     As per Schedule-3 Col -9    Grants:   1452.21 Net Assets:   0.00(as per Schedule 2, Col. 6)        NCDC BMC Project Interest Free Loan   647.80 Capital Work in Progress: 83.32  Loans (Secured):       83.32HDFC Bank Short Term Loan 5000.00   Investments :    NCDC BMC Project Loan 893.96   National Saving Certificates 0.18  Axis Bank Long Term loan I 2108.93   Share Investments 515.15  Axis Bank Long Term loan II 2378.19     515.33

   10381.0

8             Redeemable Debentures :   594.96          Stock :    Fixed Deposits:   6035.52 Trading Stock 15362.4  

167

0      Stores 3023.40  

Current Liabilities:      18385.8

0Deposits 297.31   Advances & Debtors :    

Due to Societies16146.4

4   Deposits 383.95  Outstanding Against Expenses 2319.21   Dues from Societies 10.40  Outstanding Against Purchases 3391.90   Society Loans- BMC Project 1553.98  Sundry Creditors 6919.35   Advance 1457.91  

   29074.2

1 Trade Debtors10324.7

4        Sundry Debtors 303.20  Provisions:     Income-Tax Deposits 152.20  

Income Tax 345.00    14186.3

8Fringe Benefit Tax 69.00   Cash & Bank Balances :    Doubtful Trade Debtors 58.95   In Bank Current Accounts 5920.82  Decline in Investments 1.50   NCDC BMC Project Account    Gratuity 684.53   Fixed Deposits in Banks 2028.58  Leave Encashment 189.45          1348.43 Cash on Hand 2.69          7952.09Profit & Loss A/c:        

Net Profit for the year   0.00Deferred Revenue Expenditure   121.66

      (to the extent not written off)    

Total  54555.0

7 Total  41244.5

8

168