Financial Analysis of TNPL

Financial analysis of Tnpl.
Title:
Financial frame work for business
Subject: decision
Level/Semester: M.B.A-I
Programme: M.B.A.
Subject tutor: Professor - Agustin
Name of Student: V.G. ARUN PRAKASH
Submitted on: December, 1, 2009
Word count: 2196 Words
Word Limit: 2000 WORDS
1
TABLE OF CONTENT
DESCRIPTION PG:NO
COVER PAGE : 1
TABLE OF CONTENT : 2
INTRODUCTION : 3
CURRENT RATIO : 4,5

table-1 chart-1
FIXED ASSET TURNOVER RATIO : 5,6
table-2 chart-2
INVENTORY TURNOVER RATIO : 6,7
table-3 chart-3
DEBTORS TURNOVER RATIO : 7,8
table-4 chart-4
ROE : 8,9
table-5 chart-5
ROCE : 9,10
table-6 chart-6
EPS : 10,11
table-7 chart-7
DPS : 11,12
table-8 chart-8
INTERPRETATION OF CASH FLOW STATEMENT : 13
CONCLUSION : 14
REFRENCES : 15
APPENDIX : 16,17,18,19,20
INTRODUCTION
2
TNPL (TAMILNADU NEWSPRINT AND PAPER LIMITED) exports about 1/5th of its
production to more than 30 countries. Manufacturing of quality paper for the past two
and half decades from bagasse is an index of the company’s technological competence. A
strong record in adopting minimum impact best process technology, responsible waste
management, reduced pollution load and commitment to the corporate social
responsibility make the company one of the most environmentally compliant paper mills
in the world.
Reason for choosing this company
I have chosen this company because most of them like to analyze only on Automobile
industries, Telecom industries, Textile and eatable product industries but I want to do
analyze on some industries which is daily used by most of them and also some product
which is used by all the industries. So I selected “PAPER” Paper is a thing which is used
by all age groups and it is a very essential things. Almost everyone want to be very rich,
they need lot of money even for making that money paper is used. Even for submitting
this assignment paper is needed. This made me to choose this industry. In paper industry
I selected this company “TNPL” because I want to select a company in this industry
which is located in India who also exports their product and I wished to select a company
which is located in Tamilnadu. In exports this company has achieved “Zero Stock” for
the past 17 years in a row.
3
Tnpl makes paper primarily from bagasse (sugarcane waste) using as little wood as
possible. The company uses renewable raw material with minimum impact on the
environment. Peoples do not know much about Tnpl because these companies do not
normally advertise. They normally engaged in B2B sales and Exports.
These are the reasons for choosing TNPL.
EXAMINE AND ANALYSIS OF RATIOS:
Current Ratio – Current ratio is used to find the financial position of the business
concern which is generally refers to short term solvency of the business concern,
indicating safety to different parties.
The ratio of current assets to current liabilities is called as ‘Current Ratio’. The Current
Ratio is a reflection of financial strength. A satisfactory current ratio indicates a firms’
ability to meet its obligations.
CURRENT RATIO= CURRENT ASSETS/ CURRENT LIABILITY
TABLE NO-1
YEAR CURRENT CURRENT CURRENT

ASSETS LIABILITIES RATIO
(Rs.in lakhs) (Rs. in lakhs) (In times)
2005-2006 39633.87 22972.39 1.73
2006-2007 36790.98 25832.12 1.42
2007-2008 39051.45 31047.98 1.26
CHART NO-1
4
Current ratio
2
1.8
1.6
1.4
1.2
1 Current ratio
0.8
0.6
0.4
0.2
0
2005-06 2006-07 2007-08
INFERENCE:
From the above analysis, it is inferred that current ratios is declining year by year.
General acceptable rate of current ratio is 2 to 1 but the minimum acceptable ratio is
1 to 1. If a company matches the minimum requirement it means that the company is well
enough to pay their current debts. Tnpl current ratio’s for these three years is low
compared to general acceptable rate but they are much more than minimum required rate.
In India point of view a good current ratio is 1.5:1. It means Tnpl has enough current
assets to meet their debts. Year 2007 & 2008 has very low current ratio compared to
previous year they can raise their current ratio by paying some debts, converting non-
current asset in to current asset, putting profit back to business, increase current asset
from loans or borrowing for more than one year. In the year 2008 current liabilities
increases because of current asset but in the year 2007 there is decrease in current asset
but increase in current liability. The Current Ratio is a reflection of financial strength.
The Current Ratio of TNPL was increasing till the year 2006; later on it had a sharp
downfall. This shows that the company is not maintaining a comfortable liquidity
position. Correspondingly, the Gross Profit and the Net Profit of the respective periods
are sowing a increasing trend which implies profitability is given importance than
liquidity.
Fixed Asset Turnover Ratio - This ratio determines efficiency of utilization of fixed
assets and profitability of a business concern.
FIXED ASSET TURNOVER = SALES/ COST OF SALES_

RATIO NET FIXED ASSETS
[Net Fixed Assets = Fixed Assets – Depreciation]
5
TABLE NO-2
YEAR NET NET FIXED FIXED ASSET

SALES ASSETS TURNOVER
(Rs.in lakhs) (Rs. in lakhs) RATIO
(In times)
2005-2006 77567.10 70239.19 1.10
2006-2007 85483.73 71842.70 1.19
2007-2008 93852.71 99290.69 0.95
CHART NO-2
Fixed asset turnover ratio
1.2
0.8
0.6 Fixed asset turnover ratio
0.4
0.2
0
2005-06 2006-07 2007-08
INFERENCE:
Fixed asset turnover ratio is used in an industry where they will make a huge purchase of
fixed asset which in turn will give a good return. This ratio tells how effectively dose the
company use their fixed asset. If net sales are higher than the net fixed asset it is a good
sign for the company but in Tnpl in the year 2008 they did not use their assets as they did
in previous two years. But there were no consistencies in these ratios between the years
they increase and decreases if we calculate this averagely for these 3 years we can say
that they have used their asset 1.08 times the sales. Tnpl consumes low profit margins
with high volume which tend to have high asset turnover ratio. Since this company
manufacture and exports the paper they use their fixed asset very much since paper is
used on daily basis.
Inventory Turnover Ratio - This ratio is also called as Stock Velocity Ratio. It is
calculated to ascertain the efficiency on inventory management in terms of capital
investment. It shows the relationship between the cost of goods sold and the amount of
average inventory. If cost of goods sold information is not available, sales is taken into
account.
6
STOCK TURNOVER RATIO =______NET SALES_____
AVERAGE INVENTORY
TABLE NO-3
YEAR NET AVERAGE STOCK

SALES INVENTORY TURNOVER
(In times)
2005-2006 77567.10 12227.18 6.34
2006-2007 85483.73 13896.63 6.15
2007-2008 93852.71 15182.44 6.18
CHART NO-3
Stock turnover Ratio
6.35
6.3
6.25
Stock turnover Ratio
6.2
6.15
6.1
6.05
2005-06 2006-07 2007-08
INFERENCE:
This ratio analysis tells how many times, on average, inventory is sold doing the year. If
you analyze Tnpl’s Stock Turnover Ratio you can find that they are declining but the
value of Average inventory was increasing as like the net sales. Since average were taken
from opening and closing of the year there will be some declining between the years but
on an average they are consistently more than 6% for all the three years. For example: A
fast-food restaurant would have a much higher inventory turnover than a company that
sells jewelry because food is perishable, and obviously jewelry is not. Same way since
paper is used almost by much people consistently there will be a high inventory turnover
ratio.
7
Receivables Turnover Ratio - Debtors Turnover Ratio is also called as Receivables
Turnover Ratio or Debtors Velocity. The ratio is helpful in determining the operational
efficiency of a business concern and the effectiveness of its credit policy. This ratio also
indicates the efficiency of credit collection and efficiency of credit policy.
DEBTORS TURNOVER= TOTAL SALES/ CLOSING DEBTORS
TABLE NO-4
YEAR TOTAL CLOSING DEBTORS

SALES DEBTORS TURNOVER
(In times)
2005-2006 77567.10 12776.68 6.07
2006-2007 85483.73 10533.06 8.12
2007-2008 93852.71 9856.46 9.52
CHART NO-4
Debtors turnover ratio
10
9
8
7
6
5 Debtors turnover ratio
4
3
2
1
0
2005-06 2006-07 2007-08
INFERENCE:
From Tnpl’s Debtors Turnover ratio for the three years as shown in the table-4 we can
see that debtors turnover ratio is keep on increasing for all the three years. It shows the
ratio which indicates the amount due collected from the debtors. Higher the ratio’s for
Tnpl from 2006-08 keep on increasing with consistent proves that Tnpl company debts
are being collected very quickly. The Debtors Turnover Ratio is satisfactory. Higher the
ratio better could indicate. In the year 2008 the ratio is 9.52 and the collection period is
38 days, showing a satisfactory position.
8
ROE – Return on Equity is nothing but return on share holders fund.
This ratio determines the profitability from the shareholder’s point of view.
RETURN ON SHAREHOLDERS = NET PROFIT AFTER

FUND INTEREST AND TAX * 100
SHAREHOLDERS FUND
TABLE NO-5
YEAR NET PROFIT SHAREHOLDERS RETURN ON

AFTER FUND SHAREHOLDERS
INTEREST AND (Rs. in lakhs) FUND
TAX (In %)
(Rs.in lakhs)
2005-2006 8054.57 52251.81 15.41
2006-2007 8606.38 57650.05 14.93
2007-2008 11283.00 64000.98 17.63
CHART NO - 5
Return on share holders Fund
18
17.5
17
16.5
16
Return on share holders Fund
15.5
15
14.5
14
13.5
2005-06 2006-07 2007-08
INFERENCE
The Return on Equity of TNPL during the year 2008 increased to 17.63%when compared
to the year 2007. This increasing trend indicates a great interest to the present as well as
the prospective shareholder’s and also of great concern to management, who has the
responsibility of maximizing the owner’s welfare.
9
Roce – Return on Capital Employed - Return on investment is considered by many
executives to be the most important profitability ratio. It measures the return on the
owner’s investment. This ratio is useful in measuring the sufficiency or otherwise of
profit in relation to capital employed.
ROI = OPERATING PROFIT/CAPITAL EMPLOYED* 100
The term operating profit refers profit before interest and tax.
The term capital employed includes net fixed assets and net current assets.
TABLE NO-6
YEAR OPERATING CAPITAL RETURN ON
PROFIT EMPLOYED CAPITAL
(Rs.in lakhs) (Rs. in lakhs) EMPLOYED
(In %)
2005-2006 10147.36 86900.67 11.68
2006-2007 12502.53 82801.56 15.10
2007-2008 16306.37 107294.16 15.20
CHART NO-6
ROCE
20
15
10
0
2005-06 2006-07 2007-08
ROCE 11.68 15.1 15.2
INFERENCE:
From the chart no-6 we can see that The Return on Capital Employed of TNPL had
shown a constant increase because of the efficient utilization of the capital employed.
This also indicates the rational employment of capital leading to fair capitalization and
the proper capital structure design of the concern.
INVESTOR RATIO:
Earning Per Share (EPS) -
10
This ratio highlights the overall success of the concern from owner’s point of view and it
is helpful in determining market price of equity shares. It reflects upon the capacity of the
concern to pay dividend to its equity shareholders.
E.P.S.= NET PROFIT AFTER TAX AND PREFERENCE DIVIDEND

NO. OF EQUITY SHARES
TABLE NO-7
YEAR NET PROFIT NO. OF EQUITY EARNINGS PER

AFTER TAX AND SHARES SHARE
PREFERENCE (In Rs.)
DIVIDEND
(Rs. in lakhs)
2005-2006 8054.57 693.778 11.61
2006-2007 8606.38 694.62 12.43
2007-2008 11283.00 695.48 16.22
CHART NO-7
EPS
16.22
2007-08
12.43
2006-07
11.61
2005-06
0 2 4 6 8 10 12 14 16 18
EPS
INFERENCE:
From seeing the chart table no-7 we can say that number of share is increased from
693.778 in the year 2006 to 695.48 in the year 2008, So this is a really is a good result as
profit available for the shareholders must have significantly increased from 11.61% to
16.22%. EPS of 16.30 during 2007-08 shows a rise in earnings capacity of the company
by shifting its productions mix between the newsprints and printing and writing paper as
needed. The EPS of TNPL in the beginning period of study was only Rs.7.62 and in the
11
year 2008 it has increased up to Rs.16.30. this shows the profitability of the firm on a per
- share basis is quite good and satisfactory.
Dividends per Share - The DPS ratio is very similar to the EPS: EPS shows what
shareholders earned by way of profit for a period whereas DPS shows how much the
shareholders were actually paid by way of dividends. The DPS formula is:
Dividends paid to equity shareholders

Dividends per share =
Average number of issued equity shares
TABLE NO-8
YEAR Dividend paid to NO. OF EQUITY EARNINGS PER

equity share holder SHARES SHARE
(Rs. in lakhs) (In Rs.)
2005-2006 1730.27 693.778 2.49
2006-2007 1730.27 694.62 2.49
2007-2008 1038.16 695.48 1.49
CHART NO-8
12
DPS
3.00
2.50
2.00
1.50 DPS
1.00
0.50
0.00
2006 2007 2008
INFERENCE:
From seeing the chart no-8 we can find that they have paid equal dividend for the year
2006 & 2007 but in the year 2008 it is less because number of share holder is less
compared to two previous years.
INTERPRETATION OF CASH FLOW STATEMENT:
2005-2006:
TNPL generated Rs. 13478.49 Cash from Operating Activities. The Net Outflow on
account of Investment activities was Rs (13087.06).TNPL raised Rs. 5642.16 from
proceeds. Its repayments were Rs. (5384.26) resulting in net positive Financing Flow of
Rs. 257.90.
This net cash flow from its operating, investment and financing activities was a positive
figure of Rs. 649.33 lakhs. Hence the company’s cash balance was by this amount.
13
2006-2007:
TNPL generated Rs.19945.86 Cash from Operating Activities. The Net Outflow on
account of Investment activities was Rs.40077.58.TNPL raised Rs24363.14 from
proceeds. Its repayments were Rs. (4357.11) resulting in net positive Financing Flow of
Rs. 20006.06
This net cash flow from its operating, investment and financing activities was a negative
figure of Rs. 125.66 lakhs. Hence the company’s cash balance was by this amount.
2007-2008:
TNPL generated Rs.25031.28 Cash from Operating Activities. The Net Outflow on
account of Investment activities was Rs.18787.54.TNPL raised Rs. 232.89 from
proceeds. Its repayments were Rs. (6080.32) resulting in net negative Financing Flow of
Rs. (5847.43).
This net cash flow from its operating, investment and financing activities was a positive
figure of Rs. 396.31lakhs. Hence the company’s cash balance was by this amount.
CONCLUSION
A close analysis of the financial statements of TNPL for the past three year period
reveals that the performance between the years is not consistent. Its performance falls up
and down.
The concern will be able to prosper in the future if it makes effective use of the following
measures:
 Cost reduction measures
 Inventory control measures
 Suitable Credit policy
 Efficient Working Capital Management
14
 Suitable Purchase Policy to enjoy economies of large scale operations.
 Sound Cash Management for optimum utilization of capital.
Reference:
Mr.I.M.Pandey, Financial Management, Eighth Edition, Vikas Publishing House Pvt.

Ltd, New Delhi.
Research Methodology – C.R. Kothari, Second Edition, published by K.K.Gupta for New
Age International (P) Ltd
www.tnpl.com
15
APPENDIX
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2006
PARTICULARS 2005-2006
(Rs. in lakhs)
A. Cash Flow From Operating Activities
Net Profit Before Tax 10654.85
Adjustments for :
Depreciation Provision 6249.64
Interest Income (190.84)
Dividend Income (8.01)
Rental Income (97.47)
(Profit)/ Loss on write off/ sale of Fixed Asset 20.07
Exchange Fluctuations 165.00
Provision of doubtful debts and Advances 322.27
Interest Expenditure 1863.85
Operating profit before Working Capital Changes 18979.36
Decrease in Inventories 144.64
16
Increase in Sundry Debtors (1284.75)
Decrease in Loans and Advances 1083.98
Decrease in Current Liabilities (2027.87)
Cash from Operations 16895.36
Income tax paid (3161.42)
Deferred Revenue Expenditure 6.60
Cash from Operating before Exceptional Items 13740.54
Exceptional items (262.05)
Net Cash From Operating Activities 13478.49
B. CASH FROM INVESTING ACTIVITIES
Proceeds on Sale of fixed Assets 0.95
Additions to Fixed Assets & Capital Work-In -Progress (15184.33)
Decrease in Advances 1800.00
Interest Income 190.84
Dividend Income 8.01
Other Income 97.47
Net Cash from Investing Activities (13087.06)
C. CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Issue of Shares 24.04
Proceeds from Borrowings (Secured & Unsecured) 5618.12
Interest aid (2022.90)
Dividend paid (2947.91)
Dividend Tax paid (413.45)
Net Cash From Financing Activities
D. NET INCREASE IN CASH AND CASH 649.33
EQUIVALENTS (A+B+C)
Cash and Cash equivalents in the beginning of the year 1328.40
Cash and Cash equivalents in the end of the year 1977.73
(Rs. in lakhs)
Adjustments for :
Exchange Fluctuations (297.29)
Decrease in Inventories (3483.55)
17
Increase in Sundry Debtors 2407.93
Decrease in Loans and Advances 728.79
Decrease in Current Liabilities 4747.53
Other Income 95.47
Interest Paid (1989.56)
Net Cash From Financing Activities 20006.06
D. NET INCREASE IN CASH AND CASH (125.66)
EQUIVALENTS (A+B+C)
(Rs. in lakhs)
Adjustments for :
Exchange Fluctuations (93.31)
Decrease in Inventories 911.95
Increase in Sundry Debtors 652.38
18
Decrease in Loans and Advances (4251.59)
Decrease in Current Liabilities 3199.24
Decrease in Advances (1601.37)
Rental Income 96.39
Proceeds from Borrowings (Secured & Unsecured) (19885.00)
Interest Paid (2436.53)
Net Cash From Financing Activities (5847.43)
D. NET INCREASE IN CASH AND CASH 396.31
EQUIVALENTS (A+B+C)
19
20
Balance sheet of
Tnpl (All the figures in
lakhs)
Mar-08 Mar-07 6-Mar
Sources of funds
Shareholder's Funds
Share Capital 6937.78 6937.78 6937.78
Employee Stock Option
Outstanding
57,063.2 50,712.2 45,314.0
Reserves and Surplus 0 7 3
57,650.0 52,251.
Total 64,000.98 5 81
Loan Funds
47,060.3 49,586.4 22,428.9
Secure Loans 9 6 2
Unsecured Loan 8373.43 6,353.48 8384.46
55,939.9 30,813.
Total 55,433.82 4 38
Defered Tax Liabilities 18835 15284 15476

138,269.8 128,873. 98,541.
Net Fixed Assets 0 99 19
APPLICATION OF FUNDS
Fixed Assets
186,091. 151,436. 143,235.
Gross Block 03 40 13
Less: 86,800.3 79,593.7 72,995.9
Depreciation/Amortisation 4 0 4
99,290.6 71,842.7 70,239.1
Net Block 9 0 9
29,070.3 45,951.7 11,513.2
Capital Work-in-Progress 0 8 8
128,360.9 117,794. 81,752.

9 48 47
Investments 1715.42 114.05 114.05
14726.4 15638.4 13896.6 12154.8

Inventories 6 15182.44 1 4 6
10533.0 12825.6
Sundry Debtors 9856.46 6 3
Cash and Bank Balances 2304.42 1900.21 2021.49
12,164.1
Loans and Advances 1 8,719.30 9,356.86
39,051.4 36,790.9 36,358.8
5 8 4
Less
Current Liabilities and
Provisions 21
23,260.7 20,855.2 16,492.0
Liabilities 4 5 2
Provisions 7507.32 4976.87 3205.34
22
PROFIT & LOSS ACCOUNT
Year Mar-08 Mar-07 6-Mar
INCOME
102,047. 92047.7 84,922.
Gross Sales 21 3 46
6,564.0 7,355.3
Less: Excise Duty 8,194.50 0 6
93,852.7 85,483. 77,567.
Net Sales 1 73 10
2573.6
Other Income 3112.75 255.89 1
96,965.4 85,739. 80,140.
6 62 71
EXPENDITURE
57,364.5 53,669. 49,514.
Manufacturing Expenses 7 14 78
6,378.2 5166.6
Personnel expenses 6811.06 5 8
6,536.9 6,525.9
Selling, Distribution, Administration and Other Expenses 6,490.02 3 1
2,052.3 2028.8
Interest 2424.58 7 5
6249.6
Depreciation and Amortisation 7553.55 6673.48 4
80,643.7 75,310. 69,485.
8 17 86
16,321.6 12,729. 10,654.

Profit before prior period/exceptional items 8 45 85
Pior period exceptional item -15.31 226.92 507.49
Extra-ordinary Items 0 0
16,306.3 12,502. 10,147.
7 53 36
Profit before Tax from Ordinary Activities
3650.9
Provision for Current Tax 3960 6
Mat credit availed 1840
Deferred Tax 4214 -192 -1381
Fringe benefit tax 57.75 53 95.35
Earlier year tax -120.38 75.15 -272.52
Deffered tax earlier year
Mat credit earlier year -968
2092.7
5,023.37 3896.15 9
11,283.0 8,606.3 8,054.5
Profit after Tax from Ordinary Activities 0 8 7
2,004.5 2,020.1
Balance brought forward 2,002.87 9 5
13,285.8 10,610. 10,074.
Profit available after appropriation 7 97 72
Appropriations
Transfer to general reserve 7400 5400 5700
Dividend adjusment 0 0.05 0
1038.16
23 1040.4
Interim dividend 1384.21 4
1038.1
Propose divend 1730.27 1730.27 6

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Financial Analysis of TNPL

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Financial analysis of Tnpl.

Subject tutor: Professor - Agustin

Name of Student: V.G. ARUN PRAKASH

Submitted on: December, 1, 2009

Word count: 2196 Words

Word Limit: 2000 WORDS

CURRENT RATIO : 4,5

Reason for choosing this company

These are the reasons for choosing TNPL.

EXAMINE AND ANALYSIS OF RATIOS:

CURRENT RATIO= CURRENT ASSETS/ CURRENT LIABILITY

YEAR CURRENT CURRENT CURRENT

FIXED ASSET TURNOVER = SALES/ COST OF SALES_

[Net Fixed Assets = Fixed Assets – Depreciation]

YEAR NET NET FIXED FIXED ASSET

Fixed asset turnover ratio

0.6 Fixed asset turnover ratio

YEAR NET AVERAGE STOCK

Stock turnover Ratio

DEBTORS TURNOVER= TOTAL SALES/ CLOSING DEBTORS

YEAR TOTAL CLOSING DEBTORS

Debtors turnover ratio

RETURN ON SHAREHOLDERS = NET PROFIT AFTER

YEAR NET PROFIT SHAREHOLDERS RETURN ON

Earning Per Share (EPS) -

E.P.S.= NET PROFIT AFTER TAX AND PREFERENCE DIVIDEND

YEAR NET PROFIT NO. OF EQUITY EARNINGS PER

Dividends paid to equity shareholders

YEAR Dividend paid to NO. OF EQUITY EARNINGS PER

INTERPRETATION OF CASH FLOW STATEMENT:

 Cost reduction measures

 Inventory control measures

 Suitable Credit policy

 Efficient Working Capital Management

 Sound Cash Management for optimum utilization of capital.

Mr.I.M.Pandey, Financial Management, Eighth Edition, Vikas Publishing House Pvt.

Defered Tax Liabilities 18835 15284 15476

128,360.9 117,794. 81,752.

14726.4 15638.4 13896.6 12154.8

16,321.6 12,729. 10,654.

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