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Index

1.0 Company profile…………………………………………………………….1

2.0 Financial analysis…………………………………………………………...3

2.1 The DuPont system…………………………………………………3

2.2 The DuPont Model………………………………………………….4

2.3 The DuPont analysis of the company……………………….…….6

2.3.1 Tax coverage………………………………………………..6

2.3.2 Interest coverage……………………………………………7

2.3.3 Operating Profit margin……………………………………7

2.3.4 Net Profit margin…………………………………………...8

2.3.5 Total asset turnover………………………………………...9

2.3.6 Equity multiplier……………………………………………9

2.3.7 ROE………………………………………………………..10

3.0 Supply chain management………………………………………………..11

3.1 Introduction of supply chain management………………………11

3.2 Supply chain management of the company……………………..15

3.2.1 Supplier…………………………………………………….16

3.2.2 Raw material consumed………………………….……….17

3.2.3 Yearly Consumption………………………………………18

3.2.4 Inventory…………………………………………………...22

3.2.5 Producer……………………………………………………23

3.2.6 Production Process……………………………………..…24

3.2.7 Finished Goods…………………………………………….29

3.2.8 Customer……………………………………………………30

3.2.9 Sales…………………………………………………………32

1
4.0 Annexure…………………………………………………………………...33

4.1 Table 1……………………………………………………………...33

4.2 Table 2……………………………………………………………...33

4.3 Table 3……………………………………………………………...34

4.4 Table 4……………………………………………………………...34

4.5 Table 5……………………………………………………………...35

5.0 Bibliography………………………………………………………………..36

2
Company profile

Dhiraj Intermediates Pvt Ltd is engaged in the production of Inorganic Chemicals at


its Unit – I and 3,3,DCB at its Unit – II. Further it is a leading manufacturer of
Inorganic Pigment in India. It was established in 1989 with one Unit with a
production capacity of 150 M. tones per month. It was started it’s Unit – II during the
year 2000-01 with a 60 M ton capacity per month of 3,3,DCB. Slowly and gradually
company has increase its production capacity year by year and at present it reach to a
production of 600 M. tones per month of Inorganic Pigments.

ADDRESS:
Unit- I
Dhiraj Intermediate Private Limited.
Mfg.: Inorganic Pigment & Chemicals
Plot no.297/5-10,2nd Phase,
G.I.D.C., Vapi-396195.
(Gujarat) India.

Unit- II
Dhiraj Intermediate Private Limited.
Mfg.: 3,3DCB Chemicals
Plot no.3104/1, 2 & 8, 4th Phase,
G.I.D.C., Vapi-396195.
(Gujarat) India.

(Group of Company)
1. Sun Colors and Chemicals
2. Sun Bright Pigments Pvt. Ltd.
3. Blaze Pigments Pvt. Ltd.
4. Brighton Inorganic Pvt. Ltd.
5. Brighton Pigments Pvt. Ltd.

In group sun colors and chemical was established in 1988.it produce pigments. It is
very old company. Sun Bright Pigment Pvt Ltd was established in 2000. it also
produce pigment. Blaze Pigment Pvt Ltd was established in 2005. Its purpose is to
produce raw materials by owns to Increase Company’s independence. Brighton
Inorganic Pvt Ltd was established in 1992 & Brighton Pigment Pvt Ltd was
established in 2006. The purposes of this company are backward integration. So group
together achieves the goal.

3
MISSION:
Expand Production capacity up to 1000 tone per month up to end of the Financial
Year 2007-08

Expansion:
Unit – III in vapi under construction for 250 M ton per month, will be start in next
year

Unit – IV in Nagpur under construction for 300 M ton per month, will be start in next
year
.

Advantage of the company:

Company is trying to become independent in terms of raw material. So company use


backward integration to produce some raw material up to some extent. Company has
high reliability. Company uses the services of best specialists from India and from
other countries. We have a well-organized logistics structure that makes it possible to
use effectively the skills of these specialists.

COMPANY PRODUCT:

1) Middle chrome.
2) Lemon chrome.
3) Scarlet chrome.
4) Zinc chrome.
5) Prime rose chrome.

4
Financial Analysis

Financial analysis of the company is used by management to keep watch on


company different working areas like asset utilization, leverage, profit margin etc.
Most of the organizations employ ratio analysis technique to do so. Management often
finds that such analysis is not sufficient because ratio analysis gives blur picture of
company’s performance. Let us understand this dilemma by simple example suppose
we want to find company’s performance to increase its shareholder’s equity. If we
employ ratio analysis technique than return on equity (net income/equity) will solve
over problem. But let me ask one simple question. Is it proved that company has
better utilized its asset or has achieved better profit margin.

Question is demanding depth in analysis. It is quit obvious that increase in


ROE doesn’t prove that company has performed well on each area. We know that
financial figure in income statement or balance sheet has linear relationship. Change
in one has cascading effect throughout the statement. Now our aim should be to find
out that point where the effect has originated.

So rather analyzing single ratio, if we use system like The DuPont system,
common size analysis. We will have clear picture of company’s performance in its
true colors. In this project financial analysis is done by DuPont system to find out
ROE.

The DuPont System

The DuPont Model is a technique that can be used to analyze the profitability
of a company using traditional performance management tools. To enable this, the
DuPont Model integrates element of the income statement with those of balance sheet.

The DuPont model of financial analysis was made by F. Donaldson Brown, an


electrical engineer who joined the giant chemical company’s treasury department in
1914. a few years later, DuPont bought 23 percent of stock of General Motors Corp.
and gave Brown the task of cleaning up the car maker’s tangled finances. This was
perhaps the first large-scale reengineering effort in the USA. Much of credit for GM’s
ascension afterward belongs to the planning and control systems of Brown, according
to Alfred Sloan, GM’s former chairman. Ensuing success launched the DuPont model
towards prominence in all major U.S. corporations. It remained the dominant from of
financial analysis until the 1970s.

The DuPont Model

5
Sales

Profit Margin
Cost of Goods Sold
Profit before interest
& tax
Direct & Indirect
Expense Interest Coverage

Interest Expenses Profit before tax

Tax Coverage

Tax Profit After Tax

Net Profit Margin

Profit Margin
The DuPont
Interest Coverage Tax Coverage

Lands
Buildings Equity
Machinery
Equipment Equity Multiplier
Intangible
Total Asset

Cash Total Asset Turnover


Inventories
Debtors Sales
Investment
Other

Return On Equity

Net Profit Margin Equity Multiplier Total Asset Turnover

6
Usage of the DuPont system:
• The model can be used any department or by the sales department to
examine or demonstrate why a given ROE was earned.
• Compare a firm with its colleagues.
• Analyze changes over time.
• Teach people a basic understanding how they can have an impact on the
company result.
• Show the impact of professionalizing departments function.

Steps to perform the DuPont analysis:


• Collect the business numbers (from the finance department).
• Calculate (use a spreadsheet).
• Draw conclusions.
• If the conclusions seem unrealistic, check the number and recalculate.

Strength of the DuPont analysis:


• Provides in-depth diagnosis of changes in ROE.
• Simple to perform and very good tool to teach people a basic
understanding how they can have an impact on results.
• Can be easily liked to compensation schemes.
• Can be used to convince management that certain steps have to be taken to
professionalize various departments. Sometimes it is better to look into
your own organization first. Instead of looking for company takeovers in
order to compensate lack of profitability by increasing turnover and trying
to achieve synergy.

Limitation:
• Based on accounting numbers, which are basically not reliable.
• Garbage in, garbage out.

Assumption:
• Accounting numbers are reliable.

7
The DuPont analysis of Dhiraj Intermediates Pvt Ltd.

The underlying objective of the DuPont analysis of Dhiraj Intermediate Pvt


Ltd is to find out performance of the company. Last five year data is collected from
the accounting system of the company. It is not feasible to include the income
statement and balance sheet of five years. So necessary data has been taken from
financial statement with require explanation.

As we have shown in the DuPont model, below formulas are used to find out
ROE of Dhiraj Intermediate Pvt Ltd. Table 1 in annexure has year-wise necessary
data to calculate all required ratios. Table 2 in annexure has listed year-wise
calculated ratios for reference. Let us analyze the movement in different ratios.

Profit After Tax Profit Before Tax Profit Before interest & Tax
Net Profit Margin = --------------------- X ---------------------------------X -----------------------
Profit Before Tax Profit Before Interest & Tax Sales

Sales Total Asset


Total Asset turnover = ------------------- Equity Multiplier = ----------------------
Total Asset Equity

Return on Equity = Net Profit Margin X Total Asset Turnover X Equity Multiplier

Tax coverage

Upward movement in the ratio is expected to indicate positive movement.


Ratio has decrease over time which indicates that over the period tax burden has
increased. So active tax planning could help to improve return.

8
Interest coverage

Ratio has decreased first that indicate decrease use of external funds. Then
increase over time that indicates increasing use of external fund. The company has
large financial charges. It should be improve by proper capital structure planning.
Break-even analysis of optimum capital structure can be useful tool.

Operating Profit Margin

Profit margin is an indicator of a company's pricing policies and its ability to


control costs. Differences in competitive strategy and product mix because profit

9
margin to vary among different companies.Ratio is negative that indicate company in
loss. Then increase that indicate increase in profit margin. Then further decrease that
indicates increasing operating expenses. Employing costing method it is possible to
find out major expenditure. Because batch manufacturing companies like Dhiraj
Intermediate Pvt Ltd has necessary to have accurate costing. So each batch production
can be priced appropriately and profitable deal can be located easily. Even
departments operating can be improved to reduce cost.

Net Profit Margin

Ratio is positive and rises across time, it is a good sign that operating
management is going well. Management is producing sales and controlling cost such
that the “bottom line” is growing.

10
Total Asset Turnover

When this ratio rises across time, it is good sign that asset management is going well.
A rising ratio means that the firm is able to produce more and more sales from its
asset. In
other
words, the
firm is

becoming more efficient in using its assets. Different industries have different level of
total asset turnover that indicate efficient asset management. Therefore, an industry
average is often needed to interpret this ratio. Most manufacturing firms have TATs
ranging from 1X to 2X. if the ratio is too high, it can mean that the firm is not
adequately replacing its assets and this would be a sign for poor management. Total
asset turnover has improved that indicate better utilization of asset.

Equity Multiplier

11
This ratio should not be increasing across time because an increase means that
more and more debt is being used to finance the firm. Debt requires fixed payments
of principle and interest. If this payment is not made, the firm can be forced into
bankruptcy. Therefore, high levels of debt (and correspondingly high equity
multiplier) represent poor capital structure management. Across a significant cross
section of industrial firms, the equity multiplier tends to stay within the range of 2 to
3 times. An EM above 3 is thus likely to be a cause for concern. As we have shown
above interest coverage ratio also indicate that same action.

ROE

12
Return on equity represents the profitability of funds invested by the owners
of the firm. All firms should attempt to make ROE as high as possible over long-term.
ROE can be high for the wrong reason however. For example, when ROE is high
because the equity multiplier is high, this means that high returns are really coming
from overuse of debt which can spell trouble for the firm. Most of ROE should be
produced by high ROI, PM and TAT and not from EM.

13
Supply Chain Management

Supplier

Supplier

Supplier

Supplier Producer Distributor Retailer Customer

Supplier

Supplier

Supplier

14
Supply chain management (SCM) is the process of planning, implementing, and
controlling the operations of the supply chain with the purpose to satisfy customer
requirements as efficiently as possible. Supply chain management spans all movement
and storage of raw materials, work-in-process inventory, and finished goods from
point-of-origin to point-of-consumption.

One could suggest other key critical supply business processes combining these
processes.

a. Customer service management


b. Procurement
c. Product development and commercialization
d. Manufacturing flow management/support
e. Physical distribution
f. Outsourcing/partnerships
g. Performance measurement

a) Customer service management process

Customer Relationship Management concerns the relationship between the


organization and its customers. Customer service provides the source of customer
information. It also provides the customer with real-time information on promising
dates and product availability through interfaces with the company's production and
distribution operations. Successful organizations use following steps to build
customer relationships:

• determine mutually satisfying goals between organization and customers


• establish and maintain customer rapport
• produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are developed with suppliers to support the manufacturing flow
management process and development of new products. In firms where operations
extend globally, sourcing should be managed on a global basis. The desired outcome
is a win-win relationship, where both parties benefit, and reduction times in the design
cycle and product development is achieved. Also, the purchasing function develops
rapid communication systems, such as electronic data interchange (EDI) and Internet
linkages to transfer possible requirements more rapidly. Activities related to obtaining
products and materials from outside suppliers. This requires performing resource
planning, supply sourcing, negotiation, order placement, inbound transportation,
storage and handling and quality assurance. Also, includes the responsibility to
coordinate with suppliers in scheduling, supply continuity, hedging, and research to
new sources or programs.

c) Product development and commercialization

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Here, customers and suppliers must be united into the product development process,
thus to reduce time to market. As product life cycles shorten, the appropriate products
must be developed and successfully launched in ever shorter time-schedules to remain
competitive. Managers of the product development and commercialization process
must:

1. coordinate with customer relationship management to identify customer-


articulated needs;
2. Select materials and suppliers in conjunction with procurement, and
develop production technology in manufacturing flow to manufacture and
integrate into the best supply chain flow for the product/market
combination.

d) Manufacturing flow management process

The manufacturing process is produced and supplies products to the distribution


channels based on past forecasts. Manufacturing processes must be flexible to respond
to market changes, and must accommodate mass customization. Orders are processes
operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the
manufacturing flow process lead to shorter cycle times, meaning improved
responsiveness and efficiency of demand to customers. Activities related to planning,
scheduling and supporting manufacturing operations, such as work-in-process storage,
handling, transportation, and time phasing of components, inventory at manufacturing
sites and maximum flexibility in the coordination of geographic and final assemblies
postponement of physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical


distribution, the customer is the final destination of a marketing channel, and the
availability of the product/service is a vital part of each channel participant's
marketing effort. It is also through the physical distribution process that the time and
space of customer service become an integral part of marketing, thus it links a
marketing channel with its customers (e.g. links manufacturers, wholesalers,
retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also
outsourcing of services that traditionally have been provided in-house. The logic of
this trend is that the company will increasingly focus on those activities in the value
chain where it has a distinctive advantage and everything else it will outsource. This
movement has been particularly evident in logistics where the provision of transport,
warehousing and inventory control is increasingly subcontracted to specialists or
logistics partners. Also, to manage and control this network of partners and suppliers
requires a blend of both central and local involvement. Hence, strategic decisions
need to be taken centrally with the monitoring and control of supplier performance
and day-to-day liaison with logistics partners being best managed at a local level.

16
g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer
integration to market share and profitability. By taking advantage of supplier
capabilities and emphasizing a long-term supply chain perspective in customer
relationships can be both correlated with firm performance. As logistics competency
becomes a more critical factor in creating and maintaining competitive advantage,
logistics measurement becomes increasingly important because the difference
between profitable and unprofitable operations becomes narrower. Firms engaging in
comprehensive performance measurement realized improvements in overall
productivity. According to experts internal measures are generally collected and
analyzed by the firm including

1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.

17
Supply chain management of Dhiraj Intermediates Pvt Ltd:

Supplier

Supplier

Supplier

Supplier Producer Customer

Supplier

Supplier

Supplier

18
Supplier:

South Africa

Shri Lanka Kerala

Haidarabad Supplier Maharastra

Ankaleshvar Daman

Vapi

Raw material supplied:

1) Litharge.
2) Sodium dichromate.
3) Nitric Acid.
4) Sodium Molibdate
5) Costic soda Flakes
6) Soda Ash
7) Rare earth floried
8) Sodium silicate
9) Aluminium sulphet

19
Raw Material consumed:

Materials Consumed Tones per


Month
Litharge 400
Sodium dichromate 250
Nitric Acid 400
Sodium molybdate 7
Caustic soda flakes & Lye 60
Soda ash 30
Rare earth floriede 3
Sodium silicate 50
Aluminium sulphet 50

Material Consumed:

Materials consumed are in tone. It is raw material used for production per
month. From the graph we can know that which material use how much. It produces
600 tone output of pigment. So material consumed is 650 tones.

20
Yearly consumption:

Items 2002 2003 2004


Lead / Litharge / Lead Nitrate 17277570 25976436 40988041
Sodium Dichromate 9682781 8495256 15818412
Nitric Acid 2165660 3880862 6085890
Zinc Oxide 476536 334961 506085
Caustic Soda Flakes 1093807 3302092 4456805
Sodium Molybdate 3459492 6427582 12589022
Other 3414050 5814916 7056822

Items 2005 2006


Lead / Litharge / Lead Nitrate 56638964 74798041
Sodium Dichromate 26518586 23727493
Nitric Acid 7598970 7862413
Caustic Soda Flakes 3747645 3403676
Sodium Molybdate 21238293 46235352
Other 9347125 22799004

21
Lead / Litharge / Lead Nitrate:

Sodium Dichromate:

22
Nitric Acid:

Caustic Soda Flakes:

23
Sodium Molybdate:

Other:

24
Inventory:

Inventories are the physical stock of items that a manufacturing or service


organization keeps in hand for efficient running of its firm. Inventories consist of raw
materials, components parts, tools, spares, supplies and finish goods. Inventories cost
money in term of storage, equipment, personal, insurance etc.

Inventory control helps to strike an optimum balance between these opposing costs
and thereby ensure availability of required items at minimum total cost to the
company.

Re-order level:

Dhiraj Intermediates Pvt Ltd has suppliers from all over India and some are out of
India. So re-order level for different supply is different. Company maintains the stock
of raw material 1000 tones. When stock reduces to 600 tones re-order is given. If the
suppliers are in Gujarat then materials receive within 2 days. If the suppliers are from
out of Gujarat then materials receive within 4 days. And if the suppliers are from the
out of country then it is 3 month process.

Here special standard are decided for raw materials. Before unload goods laboratory
test are done. If it match with predefine standard then unload the goods. Otherwise
return.

The mode of transport company uses are truck, train, ship etc. local supplier uses
trucks because it is easy available and cheap for them. For import goods the mode of
transport is ship.

Year Opening stock Closing Stock Average


2003 6129125 8312582 7220853.5
2004 8312582 24073737 16193189.5
2005 24073737 29151219 26612478.0
2006 29151219 28747743 28949481.0

25
Producer:

Amantek Sun bright


chemical Pvt pigment
Ltd Pvt Ltd

Brighton Sun colors


Chemical Dhiraj & Chemical
Pvt Ltd Intermediate Pvt Ltd
Pvt Ltd
Unit 1

Blaze Pigment
Pvt Ltd
Dhiraj-Unit 2

26
Production process:

Solution

Mix

Add
chemical

Filter process

Washing

Wet cake

Dry

Pulverize

Pack

27
Company has very efficient production process. Company is working on batch
production. In batch production there is standard decided for batch so as per that
standard production is done.

Batch production is very efficient for company because production is as per predefine
standard. Different customer wants different standard of pigment so as per demanded
standard production is done.

It is seasonal product. So demand for pigment is high in month May to September.


Rest of the month demand is low. Production is continuous during rest of the month.

It is pull base process. Customer gives order for pigment. They give order with
specific standard. So production is done as per standard. In rest of month production
is done as per predefine standard and stock for sale. So production is continuous
during the year.

Company has very efficient production system.

The production capacity of company is 600 tones per month.

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Production:

Items 2002 2003 2004


Lemon Chrome 157990 229850 455857
Middle Chrome 220835 509900 908500
Scarlet Chrome 239095 308999 408231
Prime Rose Chrome 22900 8600 10500
Mixed Chrome 27175 36625 42568
Other 20250 16725 30879

Items 2005 2006


Lemon Chrome 649225 658847
Middle Chrome 1630675 1635735
Scarlet Chrome 546100 586655
Other 154795 130226
Bromine 1152560 1264100
3 3DCB 826200 898725

29
Lemon Chrome:

Middle Chrome:

30
Scarlet Chrome:

31
Finished goods:
1) Middle chrome.
2) Lemon chrome.
3) Scarlet chrome.
4) Zinc chrome.
5) Prime rose chrome.

Finished Goods Tone per month


Middle chrome 360
Lemon chrome 115
Scarlet chrome 100
Zinc chrome 20
Prime rose chrome 5

Customer:

32
Asian Paint

Goodlas
Micro Inks
Nero Lack

Customer

Burger DIC Ltd


Paint

Sudarshan
Chemical

33
Packing Specification:
Company pack it’s product with standard of 25 kg per bag with liner. Company has
different packing specification for export and local customer.

Quality Analysis:

Company is very careful about customer. so company always do quality checking.


Quality checking is done before dispatch of goods. In laboratory standard of finished
goods is check. If the standard are match then goods are dispatch otherwise reprocess.

34
Sales:

Items 2002 2003 2004


Lemon Chrome 10478013 15516315 20820605
Middle Chrome 14165639 32308782 50658645
Scarlet Chrome 22200324 30398615 46149730
Prime Rose Chrome 1302616 775005 8070140
Mixed Chrome 685000 888850 9878860
Other 1464346 1175377 25698205

Items 2005 2006


Lemon Chrome 26920600 33137628
Middle Chrome 70673445 98020022
Scarlet Chrome 56143850 87729862
Other 8990147 12704550
Bromine 12678160 12641000
3 3DCB 35138275 37742400

35
Annexure

Table 1

Year Sales PBIT PBT PAT Total Equity


Asset
2002 88475754 (3624536) (14298149 (14298149) 15677393 11000000
) 6
2003 12260946 10181115 1072911 593367 16534338 11000000
5 0
2004 18640086 21628664 16894408 18372399 18223097 26698304
8 3
2005 22656143 25562281 22333392 8924392 21377280 38423880
3 0
2006 29817634 14297847 11068948 7923948 23345126 46531752
0 8

PBIT - Profit Before Interest & Tax


PBT - Profit Before Tax
PAT - Profit After Tax
Equity - Owner’s share capital and reserve and surplus

Table 2

Tax Interest Operating Total Asset Equity Return On


coverage coverage Profit Turnover Multiplier Equity
Margin
0.00 3.94 (0.04) 0.56 14.25 (1.25)
0.55 0.10 0.08 0.74 15.03 0.048
1.08 0.78 0.12 1.02 06.82 0.702
0.39 0.87 0.11 1.05 05.56 0.216
0.71 0.77 0.05 1.27 05.01 0.171

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Table 3

Year Opening stock Closing Stock Average


2003 6129125 8312582 7220853.5
2004 8312582 24073737 16193189.5
2005 24073737 29151219 26612478.0
2006 29151219 28747743 28949481.0

Table 4

Production:
Items 2002 2003 2004
Lemon Chrome 157990 229850 455857
Middle Chrome 220835 509900 908500
Scarlet Chrome 239095 308999 408231
Prime Rose Chrome 22900 8600 10500
Mixed Chrome 27175 36625 42568
Other 20250 16725 30879

Items 2005 2006


Lemon Chrome 649225 658847
Middle Chrome 1630675 1635735
Scarlet Chrome 546100 586655
Other 154795 130226
Bromine 1152560 1264100
3 3DCB 826200 898725

37
Table 5

Sales:

Items 2002 2003 2004


Lemon Chrome 10478013 15516315 20820605
Middle Chrome 14165639 32308782 50658645
Scarlet Chrome 22200324 30398615 46149730
Prime Rose Chrome 1302616 775005 8070140
Mixed Chrome 685000 888850 9878860
Other 1464346 1175377 25698205

Items 2005 2006


Lemon Chrome 26920600 33137628
Middle Chrome 70673445 98020022
Scarlet Chrome 56143850 87729862
Other 8990147 12704550
Bromine 12678160 12641000
3 3DCB 35138275 37742400

38
Bibliography

http//www.google.com
http//www.wikipidia.com

Management Information System

By: Kenneth C. Laudon


Jane P. Laudon

Operations Management

By: Richard B. Chase


F Robert Jacobs
Nicholas J. Aquilano
Nitin K Agarwal

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