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INTRODUCTION

Early morning millions of Indians wake up to find their daily requirements of


milk waiting at their doorsteps. A cross the country, the Vijaya range of dairy
products milk butter cheese, Gee, Spread find their way in to millions of home in the
metros, cities, towns and even the teeming rural populations.

Milk is the nourisher of life. And it was this elixir that brought forth-significant
changes in the lives of the people of Andhra Pradesh. It changed the way of people
looked at life in rural India. But most of all, it renewed their hopes and raised their
aspirations. And so when the white revolution looks place, nothing could stop the
flood.

People from all walks of life joined the young and the old, women, men, and
children and a movement had begin, Heralding a new dawn for the people, whole
lives now took on a different meaning.

The main thrust was not in just supplying, milk but also living opportunities to
improve the quality of rural life. And may be for the first time allowing them to dream.

1
NEED FOR THE STUDY

Since the time milk and Milk products occupied a prominent position in your
diet as well as our socio-cultural rituals, Milk is considered to be the4 important food
among all the food products. It is the best source of nutrition, in fact and it is a
complete food consisting of proteins and vitamins.

Milk is used for different purpose in our daily life, In highly developed
Countries, milk and it its products constitute and important part of daily diet of
people. Therefore those people enjoy freedom from disease4s concerned with,
malnutrition, which is commonly found in our country.

Indian economy is dominated by agricultural sector. Dairy land animal


husbandry forms are very important activity of its farmers. India’s carry out their
agriculture through out the year. Certain activities such as Dairying sheep rearing,
poultry etc are to be taken up by the farmers to lear4ns their livelihood.

Major part of milk is produced in rural areas where as the demand for lit is
from the urban side. The urban areas have high density of pollution, which is
e3ngaged in non agriculture activities, Hence the urban people have to depend upon
rural areas for the supply of milk generally the urban consumers receive milk from
private milk venders who come from villages to supply milk.

Dairying in India remained an un-organized industry till the end of 19th


century being restyricte4d to rural production centers due to lacks of chilling,
processing, and transport and marketing facilities.

Milk is essential product for making Milk, curd, butter, ghee etc are used
everyday by everyone home, so these products should be available in a required
time for the people. When these products are essentially the production concern has
to produce in required time if it has to produce in a required time its business has to
run smoothly.

2
OBJECTIVES OF THE STUDY

 To evaluate the financial performance of the host organization over the last five
years.

 To examine the efficiency in the way firm utilized its assets.

 To measure the operational expanses of the concern.

 To measure the profit generating capacity of the company.

 To know about the dairy industry.

 To know about the organization structure and various activities going in APDDCF
Ltd.

 To draw conclusion and to suggest suitable measures to over come the problems
if any to improve its performance.

3
METHODOLOGY OF THE STUDY

The Present projects book covers a period of five years from 2003-2008. The
project work is based on the data collected from primary and secondary sources

There are two type techniques


1. primary data’
2. secondary data

The primary data are collected by personal interviews with dealers,


supervisors, managers and holding discussions with all parties concerned.

The secondary data collected from published and un published manuals


records Brochures files etc., of the organization and books, journals, reports etc.

Managers and supervisors of the organizations have also been interviewed to


elicit necessary information on the basis of on the basis of on structural schedules
the secondary information was collected from the company’s manuals and office
records pertaining to production, marketing, personal and financial position.

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LIMITATIONS OF THE STUDY

The major limitation of the project study was time right weeks it had to be
completed in a very short period of time, which was not sufficient to complete the
study. During the limited period of study they my not be detailed full-fledged
utilization of resort in all in respects. Some information is not available for study due
to confidential matter.

5
INDUSTRY PROFILE & COMPANY PROFILE
INDUSTRY PROFILE
Dairy development in India :

India is an agricultural country over 70% of the people depend on agricultural


and 50% of the total income is devised from agriculture and allied activities such as
Dairy farming poultry framing etc.,

Evolution of Dairying was largely an unorganized activity. By and large land


holding farmers kept cattle mainly for bullock, production of milk was essentially la by
product, the surplus after domestic consumption was either converted in to
conventional products mainly ghee and sold to middleman or catering to the near by
market.

The origin of dairy farms under public management goes back to 1866 when
the department established a few dairy forms in the year to supply milk products to
the British troops. The nest step was initialed during the First World War. In 1914,
the department of defense, on the advice of lthe3 board of agriculture, conducted a
preliminary study to access the population of cows and buffaloes. The board of
agriculture advised the government in 1916, to appoint an imperial dairy, export.
The next important step was the decision to conduct a census on livestock. The
livestock census was carried out in 1919 as a preparatory action for planed dairy
development by the board of agriculture. In 1920 the imperial dairy expert
recommended to the government the man power requirement for managing the
defense dairy farms by this there were three dairy farms and until 1923. The British
Government‘s approach to Dairying was confined to milk required of the military only.
After 1923 diploma course in Dairying was started at Bangalore.

Dr. N.C.Wright director, dairy Research institute, Scotland who was invited to
India in 1936 for reviewing the progress of dairy in the country made few important
recommendations.

As India is a country of Village, of which most inhabitants are small and


marginal farmers and landless laborers dairy development should be promoted only
on cooperated lines to cover wide areas

6
In 1937 the Lucknow milk products cooperative union limited was established
paving the way for the organization of such unions at district and state levels.

In 1945 the Famine enquiry commission in its report embalmed the need for la
developing and folders supply for in creasing milk production and recommended the
adoption of mixed farming. The commission also made our a case for increasing the
milk production and consumption in the villages as well as the need for milk supply to
urbaneness. As a sequel to this, under the greater Bombay milk scheme, array milk
colony has been set up. Similarly in Bengal the greater Calcutta milk scheme has
been initiated two years there after. The beginning of Bombay milk scheme to
procure milk from Cairo district in Gujarat through a private diary land the resultant
exploitation point that led to the idea of creating an institutions structure for Dairying
on cooperative lines.

In 1946 the Frames integrated Dairy cooperative unit (Amul) was established
at Anand District, in Gujarat. Amul and the greater Bombay milk scheme helped the
dairy industry in India to develop at faster rate.

There were no significant development by the government as a separate


head, but it was treated only as a part of animal husbandry, however the government
had taken steps in this direction from the second five-year s plan.

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NATIONAL MILK GRID :
In 1970, the national grid was a distant seeming concept, but the next decade
how lit taking shape. The benefits from such as arrangement to both producers and
consumers are clear; to consumers the gird means more level supply of milk through
out the year. To producers grid brings more rational prices through lout the season
in rural areas and also in urban areas.

Dairy development programs


In order to build a viable land self-sustaining nation dairy industry on
cooperative line, nation Dairy development board launched a project called operation
flood in 1970. This constitutes a significant step in promoting rural development.

Operation flood –1
It was launched in 1970. The estimated outlay was Rs.1164 Millions the
Indian dairy Corporation (IDC), a government of India under taking was set up at
Baroda, to advance funds for the various dairy projects. Provided by Indian Dairy
Corporation are usually on 70% loan cum 30% subsidy basis

The national diary development board dairy schemes have four major objectives;
1. They aim at bringing about an increase in the production of milk through supply of
technical inputs.

2. National dairy development board intends to develop infrastructure for marketing


of milk from rural to urban areas.

3. It attempts to promote rural development by increasing the income of rural poor.

4. Build a cooperative organization for leach dairy. The milk producers must own lit
them with only limited control buy the state government.

The gross roof –operative organization was first introduced at Amul dairy,
Anand (Gujarat)

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During operation flood –1 program major diaries were started in Indian in 10
states covering 1.3 million families. With in 10 years the income of milk producers
had been doubled.

Dairy co-operatives at village levels are expected to play a vital role in


educating the milk producer’s and eliminating the money ender land the milk men
has been witnessed over the decades in Gujarat.

Operation flood –II


The major objectives are as follows.
1. Coverage of layout 10 million families of rural milk producers.

2. Additional 16million cross – breed cows and buffaloes.

3. Development of the original milk grids, with likages to the national milk grid major
urban centers.

4. Development of the processing capacity of the various dairies providing


additional plants.

5. Improving the infrastructure facilities l concerned with the dairy industry.

FUNDS
Funds for operation flood where I initially modernized form the scale of
products based on foreign food donation in the form of skim power and buffer. With
its pledge to provide milk to one land all it was considered world’s largest dairy
development programme. It spurred Indian dairy industry to launch white revolution.

Dairy co-operatives
Co-operative type of organization for development has envisaged many
advantages.
1. It can consider needs of the producers and frame laws accordingly.

2. It is possible to development rural leadership to help the milk producers.

3. It is expected lt. reduce the exploitation of private middlemen besides assuring


uniform price land prompt payment.

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Federal from of co-operative system is intended to ensure unbroken link for
village level to state level and safeguard interests of milk producer

In our country, the co-operative movement developed due to the initiative of


the government. The members of co-operative organization could not contribute
fully contributing a substantial part of the share capital.

It was only during the 1950`s that Tamilnadu, Gujarat, and Utter Pradesh took
some important steps in organizing dairy co-operatives. Amul, the most significant
and prestigious venture in the dairy cooperative sector, provided a model for the milk
producer’s cooperative in Gujarat and other states, such co-operative played an
important role in creasing milk production as well.

To provide guidance and policy direction states level federation of co-


operatives have been formed in different states.

In the sphere of co-operation the number of Amul pattern organized societies


under operation flood. The milk produced and sold through co-operatives fetched
around 8.2 cores a day adding up to 2067 cores per year.

Credit supply for dairy co-operation :


The national co-operative Development Corporation has been providing
financial assistance to dairy cooperatives for organizing medium and small sized
dairy processing plants and milk chilling centers. The corporation has sanctioned a
total loan assistance of Rs.633 lakh for establishment of 29 cooperative dairy units.

In addition to small framers development agency (SFDA) marginal framers


and agricultural labour agency (MFAL) Integrated rural development (IRD) which
have are special providing incentives to lending agencies, the cooperative credit
structure has provided for medium term loans for purchase of milk cattle.

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Growth of dairy development

The dairy development contributed to the Indiana development also:

1. India ranks number one in milk production.

2. It achieved its target with 4.6% annual compound growth rate against 4.2%
envisaged in seventh plan.

3. It has achieved the targets of l63 million tons plan.

4. The per capital availability of milk i9s anticipated to increase from 1995 to 1998
for human population 908 millions.

5. Besides this milk operations food programme has achieved success in other
fronts also. Import of milk solids has been already ended and India recently
exported 80,000 tons of milk.

6. India refused commodity laid of about l35 cores from European Economic
Community, which gives an assuring picture of total self-reliance and near self-
sufficiency in milk productions.

Need for dairy development :


The serous constraint is that Indian agriculture faces the problem of disguised
unemployment and the resultant problem of poverty and inequality of income
distribution. Hence the superman tall of planning is to train about reservoir by
creating employment opportunities and by analyzing the employed and unemployed
into productive works. Dairy forming is of such important in serving the purpose.

Dairy forming can also absorb large number of agricultural labour and rural
poor and it provides large-scale employment opportunities through out the year. The
subsidiary occupation is playing a vital role in improving rural economy which is
mainly agriculture, based. The advantage of dairy industry is that, gestation period is
very short and the benefits of development activities can be reaped soon.

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The dairy development activities were carried on the government through the
dairy development. Though dairy industry started as a service organization land
recognized as development in to a commercial organization.

Dairy development in Andhra Pradesh :


A dairy industry program was primarily carried out with the help of united
international children’s emergency fund. Food and agriculture organization and
freedom from hunger champion organization of United Kingdom, besides they
assisted a lot for the establishment of dairy units at Hyderabad and Vijayawada in
1969 which led to pioneer dairy development in Andhra Pradesh.

Andhra Pradesh has an excellent potential for milk production with


progressive farmers who are more reception to the new technology land scientific
practices. The estimated milk production is 40 lakh liters per day. Today a strong
wave of white revolution is sweeping crating New Hope of eliminating socioeconomic
imbalance. Andhra Pradesh is poised to be the dairy land of India playing an
important role in national milk gird.

Genesis of Andhra Pradesh dairy industry


Planning for organized dairy industry in Andhra Pradesh was conceived in
1956 and a pilot milk supply scheme was started in 1960 –61 as prelude for an
integrated milk project, Hyderabad and Vijayawada for which the UNICEF gifted
dairy equipment valued at Rs.1 core with the main objective of linking up and
supplying surplus from producing area to consuming area.

Andhra Pradesh dairy development corporation was formed on 02-04-1974 as


a state government understanding for the application of commercial principles with
the mission of industrial rural during land extensive infrastructure was developed to
procure milk from nook and corner of the state to top-hitter to untapped milk with
main objective of generating la greater employment opportunity to rural people on “
as they are where they are and where they are basis ” . it provides employment to
nearly 20,000 employees and organized as many as 81 dairy units including 7 milk
products factories, 13 district and 61` chilling centers.

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More than 7 lakhs milk producers get Rs.58 crores per annum for supplying
milk of which 78% of total beneficiaries belong to small and marginal farmer,
agricultural labours and other worker sections of rural community. Every day around
10 lakh liters of milk collected. Every 10 liters of milk produced in the country comes
from Andhra Pradesh.

Arresting the oscillation in milk price as well as supply of toned milk for every
needy are accelerating the programs of dairy development to a peak period. The
turnover of milk increased by 50 percent as a result today per capital availability of
cow milk is doubled.

Co-operative Federation
Andhra Pradesh Dairy development cooperation was constituted in October
1981 to implement operation flood-II program through active involvement of producer
in organizing milk production, milk procurement. Processing and marketing on” 3-
tier” co-operative structure is as per the national policy of Government of India.

The 3 types of system consists


1. Primary dairy cooperative societies at village level

2. Cooperative unions at district milk shed travels and

3. Federation at state levels

The Indian Dairy co-operation offered financial assistance of Rs. 7851 crores
for dairy development programs in Andhra Pradesh with 30% grant and 70% on loan
basis.

The National Dairy development board identified the project area for
implementation of operation flood – II program in 16 districts out of 23 districts in the
state. The dairy federation is marching with dairy cooperatives to herald a new era of
rural prosperity.

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Main Aim of Setting up a Dairy Industry in Andhra Pradesh
The majority of area of Prakasam district in our state is having agriculture to
be main Livelihood, Dairy industry occupies fifth place in earning livelihood next to
agriculture. This is an undoubted fact. After concluding that, the cattle wealth of
district is high. The surveys were conducted on this aspect and the result was the
development of dairy development union.

After changing under different management systems, it is new stoping into the
co-operative sector, the dairy industry stepped in to the co-operative sector to help
the small and backward farmer by making them the partners of the industry. The
then governer of Andhra Pradesh also explained this fact.

“The expansion of this to meet the needs of the people and help the farmers
and villages because many cattle are source of income to them who supply milk”

Main Aims of Dairy Industry in Cooperative Sector

1. Formation of Cooperative units of milk producers in every village.

2. To improve cattle wealth of good bread which are important for milk Production.

3. To avoid contaminated diseases by using disease distortable medicines and


injections

4. Providing the availability of good breed seed o as to improve the cattle feed.

5. Introducing mobile hospitals to provide free medical facilities to the cattle of the
Dairy and avoid disease.

6. To bring down the expenses of milk production.

7. As producers are maintaining the milk producers co-operative union and profits
gained are used for the development of the producer, which ultimately results in
development of the village.

So from the above aims of the cooperative union it is crystal clear that,
developing the cooperative sector would bring profits.

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To put the above programs to action in our district with the co-operative of
national dairy development board, a three tier program w3als started in 1980 in
relation to it, 198 milk producers co-operative unions have been set up at village
level.

On 1975 Prakasam Zillah dairy industry management was given to Zillah milk
produce co-operative union. Well breed seeds and disease avoidable injections were
given at half rate. Required steps are taken to set up government cattle hospitals

Problems of the Industry

1. Fluctuations in the supply of milk.


The first problems of this industry are the securities of fluid milk, the demand
for milk production in almost uniform throughout the country in all season of the
years. Where as, by and large milk production is a small and seasonal. The summer
months of April to July record acute shortage of milk. While in winter month of
November to February supply of milk would be 200 to 300percent higher so the
industry required diversification for production of milk power, condensed milk.
Captain ceases cheese instant milk foods and other products, which can be
preserved and sold throughout the year.

2. Lack of assistance from Government to milk producers:


During the past three decades the dairy industry in India has undergone
revolutionary changes in its structures. The methods of collection, marketing and
utilization of milk for manufacturing a product have been considerate. Conditions of
milk production in rural areas continue to the unsatisfactory. Is the one of the major
advantage to the country. But the government didn’t encourage to such dairy
exports. It is the one of the draw to the dairy.

3. Irritation pricing policy:


The price of milk is determined on the basis of price in the open market, which
in turn determines the prices of milk products. Such a make soft pattern does not
help to build a permanent, workable relationship between the milk schemes and the
producers. Unless the producers are guaranteed a reasonable price on a long-term
basis their economy was brought to be affected adversely. Thus the industry should

15
provide an incentive price for milk to the rur4al producers over and above their cost
of milk production.

4. Poor means of Transportation:


The inadequacy of suitable marketing structure and the absence of necessary
infrastructure for its transaction is another problem of the milk. This is more in the
rural areas where for want of quick transport and marketing infrastructure, milk is
marketed in the form of ghee, which does not bring proper return to the farmers.

5. De-licensed The Dairy Pr4oducts:


In the recent EXIM policy 717 agriculture products including dairy products
are declined. The Indian dairy industry has been facing the problems of the MNCS
competitions.

6. Quality control:
Quality control aspect of milk and milk products has not received much
attention due the general storage of milk,

Prospectus of the Industry


1. Demand Of Milk:
With the anticipated growth of purchasing power in urban areas. The demand
for milk in estimated to rise substantially. According to on estimated it is likely to be
97.7 million tones by 2006 as against 35.81 million tone in 1982.

2. De-licensed to dairy products under new EXIM policy

Because of de-licensing the dairy products the ways are op-0en to exports the
products to foreign nations that make a bright future/demand.

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Dairy Development in A.P during 2007 - 2008

S.No Particulars 2007 – 2008


1 Milk product factori8es 07
2 District dairies 12
3 Milk chilling centers 59
4 Milk cooling centers 16
5 Milk collection centers 14,000
6 Village milk production cooperative societies 5,200
7 Milk collection rotes 267
8 Milk producers (80%of milk producer belongs to 10,000
Belongs to small and agricultural workers)
9 Village covered for collection of milk 6,50,000
10 Milk consumers 6.2 cores
11 Cash paid to milk producers 06
12 Women members in union 5,000
Source : Andhra Pradesh Year book 2007 – 2008

COMPANY PROFILE

The milk collection in Prakasam District started with the commissioning of the
Milk chilling center of Ongole in 1975, majority of milk producers in the district are

17
from the categories of the land less agricultural labors, marginal and small farmers
most of whom are from socially economically backward classes. While dairying is an
essential side income to agriculture, majority of the milk producer farmers, slowly it
took an important turn as a prominent contribution to the rural economy.

To the economically backward community it is emerging as the dependable


source of income and in turn boosts up total economy the cotton to take up dairying
as a dependable source of income. The awareness to maintain better breef many
cattle among the farmers has also increased.

The parkas District co-operative milk producer union established in the year
1986 with the affiliation of the mild producer dairy co-operative formed. The
investment from operation flood project strengthened the processing capacity built
up besides introduction of technical inputs for milk production enhancement of milk
producer co-operative doorsteps.

Due to constant affords of this dairy and involvement of milk producers the
milk collection of 500LPD in 1975 increased to 95,000LPD by 1994 on an average,
in he recent years, as a result of central gov, liberalization policy, more than 25
private dairies came into existence in Prakasam district, and as such the average
milk collection fell down to some extent.

Salient features of milk procedures factory: Ongole


Prakasam District is the native tract of the world famous Ongole breed of
cattle. The district has good potentialities for milk productions, due to the irrigation
facilities available from Nagarjuna Sagar and water sources from tubular wells and
tanks. The milk procurement in the district was started in 1975 with 12.00Lts.
Capacity milk chilling center at Ongole. The capacity has been increased to
80,000Lts. Per day by 1982 in as pan of 10 years.

The procurement has increased to 1.45 lakh liter, per day in the peak of 1986
observing the trend increase of milk production it was proposed to establish a milk
products factory of capacity of 3.5 lakh its. Per day under operation Flood-III with
financial assistance from NDDB on 30% grant and 70% loan basis.

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The project was contemplated to handle the surplus milk from Nellore District
also. The execution of the project was entrusted NDDB on turnkey Basis.

1. Products manufacture in the company

i) Milk
ii) Butter milk
iii) Ghee
iv) Kova
v) Flavoured milk

2. Milk handling capacity : 3.50 Lakh lts. Per day

3. Date of work capacity : 16.09.1987

4. Capital out lay : 19.25 Crores

5. Extent of land : 89.69 acres

6. Date of commitment of trail runs : 16.1.1995

7. Milk products capacity :


a) Milk in sachets : 30,000lrs. Per day
b) Butter : 20 Mt/ Day
c) Ghee : 10 Mt/ Day
d) Milk powder : 30 Mt/ Day

Milk chilling centers in Prakasam District


Milk Chilling center, Kondamanjulur 0.40 Lakh lts. Cap
Milk Chilling center, Kanigure 0.20 Lakh lts. Cap
Milk Chilling center, Yerragondapalem 0.12 Lakh lts. Cap
Milk Chilling center, Cumbum 0.12 Lakh lts. Cap

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Milk Chilling center, Venkatschalempalli 0.05 Lakh lts. Cap

Dairy Co-operative societies in Prakasam District

Co-operative groups of milk producers 448

Working of Co-operative groups of milk producers 269

Association centers of milk producers 424

Milk producers 27987

Milk retailing centers 150

Dairy parlors 10

Animal first AID centers 268

A.I centers 30

No. of Beneficiaries (Directly and indirectly)


Framers of S.C community 11,698
Framers of S.T community 3,190
Framers of B.C community 22,335
Framers of Others community 69,128
Total Beneficiaries 1,06,351

Milk production Enhancement and inputs activities


Milk production Enhancement inputs broadly the following:

1. Animal breed improvement:


A center was started at 30 societies with societies AI workers through which
AI program is being implemented. In addition to AI centers 441 breeding bulls were
also supplied for natural service in the district for convenience of village, which is

20
interiorly located in specific. How ever the AI activity will be taken up by ALDA in
future.

2. Animal Health cares:


First AID centers were started by the union through which first aid medicines
and de-working drugs are being supplied free of cost. More attention is paid to foot
and HS vaccinations. FMD vaccine supplied at 50% cost and HS vaccine PM free of
cost. For FMD vaccination on inception on incentive of Rs.11-for each vaccination
has been paid. This union has already engaged 4 members of retried veterinarians
and utilized their services by keeping them each at Kondamanjulur and
Yerragondapalem and two at Ongole.

Further, the cattle insurance activity is also under implementation and the 3-
year premium will be shared by the beneficiary, society and union in the ratio of
40:30 respectively.

3. Improved powder production:


Improved powder seed of different verities has been supplied to the dairy on
50% cost powder slips at free of cost.

4. Balanced Cattle Feed Supply:


Cattle feed is being supplied by getting the feed from Sangam Dairy. Gadwall
market- Nandyla mineral mixture is also supplied at 50% cost.

5. Supply of election milk- authorities:


In the year 2003-2004 and 2005-2006 634 members of electronic milk testers
are supplied to the societies at 25% subsidy in order to stabilize the producer’s
Confidence prior to this there is about 300 EMT in the societies which were
supplied by NDDS under of-II and III.
6. Former introduction Programme:
Farmers from each village society were sent to visit the different societies in
other District sister unions like Krishna, Guntur, Visakha, Nandyal & Kurnool,
exposure programs were also conducted calmingly and separately to the society
presidents and paid secretaries to improve the knowledge in the area of animal

21
health, hygiene, quality of milk and accounting through regular zonal meeting. MPF
tips of milk producers especially women have been arranged.

7. Gopal raksha scheme:


The special insurance program has been introduced during March 2000ssViz.
Gopal raksha insurance scheme 7,538 beneficiaries are covered under this scheme
total premium of Rs.17, 000 lakhs. The premium will be borne by the union, society
and beneficiary in the ratio 30:30:40 respectively. In this scheme in addition to
buffaloes insurance the beneficiary is also benefited by the coverage of accident and
dwelling shed.

8. Relief measure to the fire victims:


An amount (in Rs.) of Rs.500 will be paid as relief measure to the milk
producers of this union for purchase of powder where paddy straw stalks are
destroyed during the fire accident.

9. Padi Prakasam:
This is exclusive scheme in which only union milk producers are financed by
the nationalized banks under tic-up arrangement. In this scheme beneficiary will bear
the margin money of Rs.2, 500/- and bank finance id Rs.7, 500/- so for, nearly
10000/- producers are benefited.

10. Women Dairy Project:


The government of India under ministry of Human resources development
under “Support to training and employment program for women step” sanctioned
women dairy Co-op societies with 25,760 women members during the project period
of 3 year in AP state and 60 women dairy Co-operative societies with 2400 women
members in Prakasam Dist.

Milk procurement procedure of P.D.P.M.A.C.U.LTD


For the purpose of procuring raw milk. There is a separate procurement
section. There are about 22 persons working in the head office to control the
procurement activity to argument with the quality of milk.

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Milk is received at Prakasam Dairy through direct routes, road tankers from
chilling centers.

Direct routes:
Milk is collected both I the morning and evening from 30 centers in the district,
Vehicles used for direct route collection of milk are hired by the dairy on contract
basis. The mode of collection is similar to any other collection center whether it is a
co-operative society (or) not.

From chilling centers:


The chills milk fro the chilling centers is transferred to Ongole dairy by road
milk tankers owned the sister unions.

E.G: Vijayawada, Hyderabad, Guntur, by own and or hired tankers for city
marketing on conversion on behalf of the union on custom hiring basis.

Financial activities:
The department undertakes accounting and payments of DCS bills purchase
bills. Reconciliation of accounts departments undertake the statutory functioned like
G.P.F, E.P.F, E.S.I, P.T, G.I.S, L.I.C, income Tax etc.,

Personal administration activities:


The Personal administration activities a department undertake the function
like maintenance of leave records, transfers, promotion, graduation, maintenance of
personnel, fields. Industrious relations general administrative and functions related to
contract labour. The department looks after the security of the estate through hire
agency.

Marketing activities:
Ongole dairy started its liquid milk sales 1984 since then up to 1999 there was
no separate sale wing from in 1989 taking marketing as the main thing, Ongole dairy
had divided its sales pattern as.

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1. Liquid milk sales
2. Milk bi-products sales

Liquid milk sales:


Ongole dairy started its liquid milk sales in 1975 in 12,000 liters. Per day and
at present sales 30,000 liters. Per day.

Milk bi-products sales:


The company produces bi-products sales are milk powder 30Mt/day, Butter
20 Mt/day and Ghee 10 Mt/day.

Distribution System of Milk in Ongole Dairy

The distribution system of P.D.M.P.M.A.C.ULTD. is shown below.

Direct supply on bulk indirect commiss8ion Basis


Own Parlors agents retailers

The above chart reveals that the factory distribution system is directed as well
as indirect. The factory has its own parlor through which it sells the milk to ultimate
consumer who orders for milk. On bulk basis will ge4t milk directly from the company
provided that minimum order in 40 liters.

The factory also sells milk through indirect distribution for instance the factory
has appointed number of commission agents in Ongole District who self liter sachets
in the vacant part the factory has introduced U.H.T milk in sachets, which are being
districted through retailers, The factory gives them reasonable margin on but milk.

ORGANIZATION CHART

Board of Director

24
Chairman

Managing Director

Deputy Director

Dairy Managers Junior engineer

AQC Supervisors PCM

Lab assistant
Driver Mechanic Boiler operator

Workers

Workers Plant operator Workers

Skilled semi skilled unskilled Workers

Skilled semi skilled unskilled

PCM: - plant charge man

AQC: - Assistant quality control

THEORETICAL FRAME WORK

25
RATIO ANALYSIS

A theoretical frame work Ratio is among the best known and most widely
used tools of financial analysis. Ratio may be expressed in any of three forms

1) As a pure ratio

2) As a rate, and

3) As a percentage.

Several ratios, calculated from the accounting data, can be grouped in to


various class according data, can be grouped in to various classes according to the
financial activity or function to be evaluated. The parties, which generally undertaken
financial analysis is short - term and long – term creditors, owners and management.
Short-term creditors are interested in the liquidity position or short – term solvency of
the firm. Long- term creditors are more interested in the long term solvency and
profitability of the firm. Owners concentrated on profitability of the firm. Management
is interested in evaluating every aspect of the firm’s performance. Ratios as tools of
measuring liquidity, profitability, efficiency and financial position of a company can be
classified in to four basic categories.

1. Liquidity ratios

2. Leverage ratios

3. Activity ratios

4. Profitability ratios

1. Liquidity ratios:

26
It is extremely essential for a form to be able to meet its obligations as they
become due. Liquidity ratios measure the ability of the firm to cover its current
obligations. Liquidity ratios by establishing a relationship between cash others
current assets provide a quick measure of liquidity. A firm should ensure that it does
not suffer from lack liquidity, and also that it is not too much liquid. The failure of a
company to meet its obligations, due to lack of sufficient liquidity, will result in bad
credit image, loss of creditors confidence, or even lawsuits resulting in the closure of
the company. A very high degree of liquidity is also bad, as idle assets earn nothing.
The firm’s funds will be unnecessarily tied up in current assets. Therefore it is
necessary to strike a proper balance between liquidity and lacks of liquidity important
liquidity ratios are:

a) Current ratio:
This ratio is to current assets to current liabilities. The current assets are
those which are readily realizable with in a period of one year such as trade debtors,
bills receivable, and stock of raw material securities, deposits, and advances.
Similarly the current liabilities are those which are repayable on demand or that will
fall due within a period of one year of the balance sheet date. The determining factor
is the date of maturity and not the possible date of payment. The relation ship
between current assets and current liabilities reflects the short – term financial
position. The current ratio of 2:1 is generally considered satisfactory. It is calculated
by dividing current assets by current liabilities.

b) Quick ratio:
This is also called as acid test ratio o liquid ratio. The word liquidity means
conversion of assets in to cash during the normal course of business and to have a
regular uninterrupted flow of cash meet outside current liabilities or current
obligations as and when due and payable. Moreover business also will have to
ensure money for day to day operations. In computation of this ratio only liquid
assets are taken in to account. Liquid assets would include cash in hand, cash at
bank, sundry debtors and marketable investment and other items including stocks.
Inventories are excluded from liquid assets since sale of products takes time to
convert them in to cash. It is calculated by dividing the quick assets by current
liabilities.
27
c) Current Ratio:
Since cash in the most liquid assets, a financial analyst may examine this
ratio. Trade investments or marketable securities are equivalent of cash ratio. It is
calculated by dividing cash by current liabilities.

2. Leverage ratio:
Financial leverage refers to the use of debt finance. While debt capital is a
cheaper source of finance, it is also a riskier source of finance. Leverage ratio are
generally designed to measure the contribution of the company’s owner’s vis-à-vis
the fund provided by its creditors. A firm can be examined by using these ratios. The
important leverage ratios are:

Long term debt to net worth ratio:

From the leader’s point of view, the financial structure should reveal a
satisfactory balance of own funds and borrowed funds. Net worth means capital plus
reserves plus development reserves minus fictitious assets. Debt includes all long
term debts viz., term loans and debentures. It is generally desirable to have
substantial state of owner in the business so that the enterprise is free from the
burden of paying too much interest on borrowed funds and can absorb stocks of
business.

It is calculated dividing long term borrowings by equity

Debt equity ratio= Long term borrowings


Net worth

a) Debt of total capital ratio:


The relationship between creditor’s funds and owner capital can also be
expressed in terms of another leverage ratio. This is the debt to total capital ratio.
Here, the outside liabilities are related to the total capitalization of the firm and not
merely to the shareholders equity. Essentially, this type of capital structure ratio is a
variant of the debt equity ratio.
Debt to total capital ratio = long term debt / total capital

28
Total debt to net worth and total debt to total capital

This ratio establishes the relation ship between the total debt and total capital.
Total debt means current liabilities plus long term debt. Too much capital should not
be raised by way of debentures, because debentures don’t share in business losses.
It is calculated by dividing total debt by total capital

Debt equity ratio = Total Debt


Total capital

3. Activity ratios:
The firm employs activity ratios, also referred to as turnover ratios or asset
management ratios, measure how efficiently the assets. These ratios are based on
the relationship between the level of activity, represented by sales or cost of goods
sold, and the investment in various assets viz., inventories, receivables, fixed assets,
etc. The important turnover ratios are

a) Inventory turnover ratio:

This ratio indicates the number of times inventory is replaced during the year. It
indicates the efficiency of the firm in selling its product. There are two approaches in
measuring any ratio, one measure relationship between cost of goods sold and
average inventory, the other approach relates sales and inventory.

It is calculated by dividing sales by inventory

Inventory turnover = sales


Inventory

b) Debtor’s turnover ratio and average collection period:

29
The second major activity ratio is the receivables or debtors turnover ratio.
Allied and closely related to this is the average collection period. It shows how
quickly debtors are converted into cash. In other words, the debtors turnover ratio is
the test of the liquidity of the debtors of a firm.

Debtors turnover ratio = sales


Debtors

Average collection period = days in a year


Debtor’s turnover

c) Total assets turnover ratio:


The relationship between sales and total assets is called total assets turnover
ratio.

It is calculated by dividing sales with total assets.

Total assets turnover ratio = sales


Total assets

d) Fixed assets turnover ratio:


The numerator of this ratio is the sales for the period and the denominator is
the balance in the net fixed assets account at the end of the year. This ratio is
supposed to measure the efficiency with which fixed assets are employed. A high
ratio indicates a high degree of efficiency in assets utilization and a low ratio reflects
inefficient use of assets. It is calculated by dividing sales with fixed assets. It is used
to highlight the extent of utilization of the companies’ plant equipment.

Fixed assets turnover ratio = sales


Fixed assets

4. Profitability ratio:

30
The operating efficiency of the firm and its ability to ensure adequate return to
its shareholders depends ultimately on the profits earned by it. Profitability is
measure of efficiency and the search for it provides an incentive to achieve
efficiency. The profitability of the firm can be measured by its profitability ratio.

Profitability ratios can be determined on the basis of either sales or


investment. The profitability ratios in relation to sales are operating profit. Net profit,
operating expense profitability in relation to investments is measured by return on
investment, return on assets, and return on capital employed and return on equity.

1. Profitability as related to sales:


Under this a group of profitability ratios are included
a) Gpm
b) Operating expenses ratio and
c) Npm

a) Gross profit margin:


This ratio establishes the relation ship between operating profit and sales to
measure the relative operating efficiency of the company. It is calculated by dividing
operating profit with by sales.

Operating profit margin = gross profit*100


Sales

b) Net profit margin:


This ratio is also known as net margin. Net profit is obtain when operating
expenses, interest and taxes are subtracted from the operating profit. This ratio
provides considerable insight in to overall efficiency of the business and earnings left
for shareholders as a percentage of net sales. A high ratio is an indication of the
higher overall efficiency of the business and better utilization of total resource. A low
ratio on the contrary would mean poor financial planning and low efficiency. It is
calculated by dividing net profit with sales.

Net profit margin = net profit * 100 / Sales


c) Operating expenses ratio:

31
Another profitability ratio related to sales is operating expenses ratio. It is the
reciprocal of profit margin, gross as well as net. It is very important for analyzing the
profitability of the firm. This ratio is computed by dividing operating expenses by
sales.

Operating expenses ratio = Operating expenses


Sales

d) Profitability as related to investments:


This category of profitability ratio includes return on investment, return on total
capital employed, and return on equity, EPS, DPS and d/p ratio.

e) Return on investment:
Return on investment is a measure of business performance, which is not
effected by interest charges and tax payments. It abstracts away the effect of
financial structure and tax rate focus on operating performance. Hence, it is
eminently suited for inter – firm comparison.

Further internally consistent. The numerator represents a measure of pre- tax


earnings after tax and before interest belonging to all sources of financial and the
denominator represents total financing.

It is calculated by dividing earnings before interest and taxes (ebit) with total
assets.

Return on investments = EBIT * 100


Total sales

f) Return on Capital Employed (ROCE):


It is similar to the road expect in on one respect. Here the profits are related to
total capital employed. The term capital employed refers to long – term funds
supplied by the creditors and owners of the firm. It is calculated by dividing earnings
after taxes (eat) by capital employed.

Return on capital employed = Eat * 100

32
Capital employed

g) Return on Equity:
This ratio is called as return on net worth. This ratio reveals how the firms
have utilized profitability the owner funds. The ordinary share holders equity is also
referred as a net worth. It is calculated by dividing earnings after taxes (eat) with net
worth.

h) Earnings per Share (EPS):


This ratio is computed by dividing earnings available to the common stock
holders by total number of common shares outstanding. The figure reveals the
amount of the period’s earnings after taxes, which occurs to each share of common
stock. The ratio is an important index because it indicates whether the wealth of the
shareholders on a per share basis has changed over the period. A year to year
comparison of earnings per share can be very informative to investors.

Eps = EAT
No of equity share held

i) Dividend per Share (DPS):


This ratio computed by dividing dividends paid to the common stock holders
by the total number of common shares outstanding. This ratio is an important index
because it indicates whether the dividend of each shareholders on a per share basis
has changed over the period.

DPS = total dividend


No of shares

i) Dividends pay out:


This ratio gauges the portion of current earnings being paid out in the form of
dividends. Investors desirous of capital gains would like this ratio to be small while
those who seek dividends prefer it to be large. The layout ratios calculated by
relating dividends per share to earnings per share for common stock.
D/p ratio = DPS/EPS
IMPORTANCE OF RATIO ANALYSIS:
33
 It helps to analysis the probable casual relation among different items
after analysis and scrutinizing the past result.

 Then helps the management to prepare budgets, to formulate polity and


to prepare the future plan of action and thus helps as guide to
harmonize among different items for preparing budgets.

 It helps to take time dimension into account by trend analysis and time
series analysis

 It throws light on the degree of efficiency of management and utilization


of the assets ( and called survey of efficiency)

 It helps to make inter firm comparison (cross-sectional analysis)

 Short-term liquidity position can be measured i.e. whether the firm is


able to maintain its short terms solvency position can also be measured
by the application of leverage and profitability ratios.

 Comparison of current or past ratios with future ratios show the firm’s
relative strengths & weaknesses in the past and the future ratio analysis
can serve as a better tool for measurement of the financial health of an
enterprise that is possible by the analysis o absolute figures.

ADVANTAGES OF RATIO ANALYSIS:

34
The importance of ratio analysis lies in the fact that it presents facts on a
comparative basis and enables the drawing of inferences regarding the performance
of a firm.

Ratio analysis is helpful in assessing the performance of a firm in respect of


the following.

1. Liquidity of the firm.

2. Long-term solvency.

3. Operating efficiency.

4. Overall profitability.

5. Inter firm comparison.

6. Trend analysis.

1. LIQUIDITY OF THE FIRM:

35
The liquidity position of a firm would be explained with the help of ratio
analysis.

Basing on the conclusions of ratio analysis a firm can said to have the ability
to meet its short term liability. The ability can be reflected in the liquidity ratio of a
firm. The liquidity ratios are particularly useful in credit analysis by banks and other
suppliers of short term loans.

2. LONG TERM SOLVENCY:


Ratio analysis is equally useful for assessing the long term financial viability of
firm the long term solvency is measured buy leverage structure and profitability ratios
which focus on earning power and operating efficiency. Ratio analysis reveals the
strength and weakness of affirm in the aspect of sources of finance and adequate
returns to its owners consistently.

1. OPERATING EFFECIENCY:
Ratio analysis is helpful in the view point of management such as measuring
the efficiency in the management and utilization of its assets activity ratios play a
vital role in this context.

2. OVERALL PROFITABILITY:
The management of any firm is mainly planned to maintain the long
and short term obligations of the firm. Here the profitability ratios of the firm taken
into consideration.

3. INTER FIRM COMPARISION:


Ratio analysis provides inter firm comparison with industry averages by
comparing the firms ratios. If comparison shows a variance the possible reasons of
variations any be identified and if results are negative the corrective actions may be
initiated immediately.

4. TREND ANALYSIS:

36
Ratio analysis facilitates the management to know whether the firm financial
position is improving of deteriorating or deteriorating or constant over the years by
setting a trend analysis with the help of ratios.

The Frame work of financial Analysis


Financial statements no doubt, contain the forms relating to the profit or loss
and the financial position of a concern. But items found in the financial statements
will not of much use, if the considered independently. They will be very useful only
when one item is considered in the light of another item. For instance, the item of
net profit will be meaningful not when it is considered in isolation but only when it is
considered in the light or capital employed in the business. So if the items in the
financial statements are to be added really meaningful and useful to the executives,
owners, credit ions etc., they should be analyzed in such a way that one item can be
compared with another item. Ratio analysis is one of the tools available to a
financial analyst for the analysis of the financial statements.
They include

 Ratios worked out from the first financial statements of the organization.

 Ratio developed using, proforma financial statements of the concerned


firm.

 Ratios of most progressive and successful firms at the same point of time.

 Ratios of the industry to which the firm belongs.

LIMITATIONS OF RATIO ANALYSIS:

37
 Comparison between two variables proves worth provided their basis
of valuation is identical. But in reality, it is not possible, such as
methods of valuation of stock-in-trade, or charging different methods of
depreciation of fixed assets etc.

 Ratio depends on the figure of the financial statements. But in most


cases, the figures are window dressed.

 Ratio analysis becomes more meaningful and significant if trend


analysis (i.e. the analysis over a number of years) is possible, but in
practice, it is difficult all the time.

 Ratio is calculated join the basis of past result which may not be suited
to implement to the present business policies.

 It is very difficult to ascertain the normal or standard ratio in order to


make proper comparison. Because, it differs from firm to firm, industry
to industry.

38
DATA ANALYSIS & INTERPRETATION
Current ratio:-
The current ratio is calculated by dividing current assets by current liabilities.
Current assets include cash and those assets, which can be converted in to cash
within a year, such as marketable securities, debtors and inventories.

Current liabilities include creditors, bills payable, accrued expenses, short


term bank loans, income tax liability and long term debt maturing in current.

CURRENT ASSETS

CURRENT RATIO:

CURRENT LIABILITIES

TABLE:-1

CURRENT
YEAR CURRENT LIABILITIES RATIO
ASSETS
2003-04 162630266.3 66086200.13 2.46088088
2004-05 144043232.6 80007395.86 1.800373966
2005-06 119472334.5 89258186.27 1.338502825
2006-07 87350227.24 81488065.33 1.071938902
2007-08 149331000 122846800 1.215587219

39
Graph-1:-

CURRENT RATIO

3
2.5
2
PERCENTAGE

1.5
1
0.5
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-
The current ratio main purpose is to measures short-term debt paying ability
of the firm. Its standard is 2:1. So the companies maintain this ratio. So in the
company the position of liquidity position is some part of good in the year 2003-04
only. Another four years means 2004-05, 2005-06, 2006-07, 2007-08 these four
years the liquidity position is not good. So the company concentrates in the part.

40
2. Quick ratio:-

This ratio establishes a relationship between quick or liquid assets and current
liabilities. An asset is liquid if it can be converted in to cash immediately or
reasonably soon without a loss of value cash is the most liquid assets, other assets
are bills receivables, debtors and marketable securities. Inventories are considered
to be less liquid.

The ratio shows that the immediately available assets, with assets are
immediately converted in to cash to meet the short term solvency of the firm.

CASH + GOVERNMENT SECURITYS + RECEIVABLES

QUICK RATIO:-

CURRENT LIABILITIES

TABLE: - 2

YEAR QUICK ASSETS CURRENT LIABILITIES RATIO

2003-04 113601163.8 66086200.13 1.718984653

2004-05 101406887.1 80007395.86 1.267468913

2005-06 112539611.5 89258186.27 1.260832381

2006-07 68417424.84 81488065.33 0.839600555

2007-08 138171000 122846800 1.124742362

41
Graph 2:-

QUICK RATIO

1.5

1
PERCENTAGE

0.5

0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-
The normal standard of liquid ratio is 1:1 regarding quick ratio. So in the
standard PDMPMACU LTD is maintains quit satisfies. Only one year the ratio is get
down in 2006-07. So the quick ratio is good.

42
3. Inventory turnover:-

The inventory turnover ratio measures how quickly that stock is converted in
to sales. It is the test of efficient inventory management. To measure the efficient,
the ratio should be compared on the basis of trend analysis or with the level of other
firms. The higher the ratio, the better is the performance of the company. A low ratio
may indicate a slow moving inventory or none too aggressive sales jokes. A low ratio
also reveals the other investment in inventory.

COST OF GOODS SOLD

INVENTORY TURNOVER:-

AVERAGE INVENTORY

TABLE: - 3

COST OF GOOD AVERAGE


RATIO
YEAR SOLD INVENTRE
2003-04 396924464.8 55948432.8 7.094469763

2004-05 381002555 45831224.04 8.313165598

2005-06 376858801.8 24784534.25 15.2054018

2006-07 406896201.9 12932762.7 31.4624347

2007-08 606053000 15046401.2 40.27893394

43
Graph 3 :-

INVENTORY TURNOVER RATIO

45
40
35
30
PERCENTAGE

25
20
15
10
5
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-

It is use full evaluation of the liquidity of inventory and adequacy of inventory


controls. So it use how much speed the stock to convert to sales. So in the way in
the ratio is growth stage. Avery year the inventory turnover ratio is increases.

44
4. Debtors’ turnover ratio:-
Debtors constitute an important constituent of current assets and therefore the
quality of debtors to a great extent determines a firm’s liquidity. Two ratios are used
by financial analysts to judge the liquidity of the firm they are

Debtors turnover ratio:-

The ratio indicates the extent to which the debts have beet collected in time. It
gives the average debt collection period. The ratio is very helpful to the lenders
because it explain to them whether their borrowers are collecting money with is a
reasonable time.

TOTAL SALES

DEBTOR’S TURNOVER RATIO:-

DEBTORS

TABLE: - 4

SALES DEBTORS RATIO


YEAR
2003-04 418131979.8 111629315.2 3.745718399

2004-05 381649206 97955233.89 3.896159407

2005-06 356485255.3 103996126.7 3.427870505

2006-07 402770938.7 59313980.84 6.790489072

2007-08 667778000 104483000 6.391259822

45
Graph 4 :-

DEBTORS TURNOVER RATIO

8
7
6
5
4
3
PERCENTAGE

2
1
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-

In the ratio is good. In the way the company runs the business in the further
days the firm takes good sales. So firm to improved this cash business.

46
5. Debt collection period:-

It is use to identify the how much day to re collect the money to the debtors.

DAYS IN A YEAR (360)

DEBT COLLECTION PERIOD:-

DEBTOR’S TURNOVER

TABLE: - 5

TOTAL DAYS IN DEBTORS TURNOVER


YEAR DAYS
YEAR RATIO
2003-04 365 3.74 97.59358289

2004-05 365 3.9 93.58974359

2005-06 365 3.43 106.4139942

2006-07 365 6.79 53.75552283

2007-08 365 6.4 57.03125

47
Graph 5:-

DEBTORS COLLECTION PERIOD

120
100
80
60
DAYS

40
20
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

DAYS

Interpretation:-
In the ratio point of you it is not good. The debtor’s collection period is very
high. Means the collection of the money is very long. In the way the firm to maintains
the more working capital. So modify this thing also.

48
6. Fixed assets turnover ratio:-

Assets are used to generate sales therefore the firm should manage its assets
efficiently to maximize sales. The relationship between sales and assets is called
assets turnover. The firm can compute fixed assets turnover simply by dividing sales
by fixed assets.

SALES

FIXED ASSETS TURNOVER RATIO:-

NET FIXED ASSETS

TABLE: - 6

YEAR SALES FIXED ASSETS RATIO

2003-04 418131979.8 275737672.4 1.516412234

2004-05 381649206 277111306.4 1.377241553

2005-06 356485255.3 279168799.9 1.276952351

2006-07 402770938.7 281315968.4 1.431738628

2007-08 667778000 290266000 2.300572578

49
Graph 6:-

FIXED ASSETS TURNOVER RATIO

2.5
2
PERCENTAGE

1.5
1
0.5
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-

In the fixed assets ratio is not good. To improve the sales of the firm to
improve the sales automatically the firm runs in good way and gets good profits.

50
7. Total assets turnover ratio: -

Assets are used to generate sales. A firm should manage its assets efficiency
to maximize sales. The relationship between sales and assets is called assets turn
over. Assets turnover ratio is computed by dividing sales by total assets.

SALES

TOTAL ASSETS TURNOVER: -

CAPITAL

TABLE: - 7

YEAR SALES TOTAL ASSETS RATIO

2003-04 418131979.8 461149831.5 0.906716107

2004-05 381649206 445340109.7 0.85698368

2005-06 356485255.3 424610565.1 0.839558138

2006-07 402770938.7 435103463 0.925690032

2007-08 667778000 523479000 1.275653847

51
Graph 7:-

ASSETS TURNOVER RATIO

1.4
1.2
1
PERCENTAGE

0.8
0.6
0.4
0.2
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-

In the total five years the assets turnover ratio is very bad. More concentrates
in the sales increases. This is most important point in the financial analysis.

52
8. Working capital turnover ratio:-

SALES

WORKING CAPITAL TURNOVER RATIO:-

NET WORKING CAPITAL

TABLE: - 8

NET WORKING
YEAR SALES RATIO
CAPITAL
2003-04 418131979.8 96544066.2 4.330996158

2004-05 381649206 64035836.8 5.95993158

2005-06 356485255.3 30214148.3 11.79862003

2006-07 402770938.7 5862161.91 68.7068943

2007-08 667778000 26485000 25.21344157

53
Graph 8:-

WORKING CAPITAL TURNOVER RATIO

80
70
60
50
PERCENTAGE

40
30
20
10
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-

The working capital means to run the business in smooth manner in raw
materials to up to finished goods how much of cost to spent the business is called
working capital. So in way you will use low working capital you get the more sales. In
the graph point of you the year 2006-07 the ratio is good in other years to improve
the ratio.

54
9. Debt-equity ratio:-

The debt equity ratio is determined to ascertain the sound ness of the long
term financial policies of the company. It is also know as “external internal” equity
ratio. It may be calculated as follow;

LONG – TERM DEBT

DEBT- EQUITY RATIO:-

SHAREHOLDERS EQUITY OR NET – WORTH

The term external equities refers to total outside liabilities that consists of both
short term and long term liabilities and the term internal equities refer to share
holders funds that consists of both equity and preference capital.

In case the ratio (i.e. outsiders funds are equal to share holders funds it is
considered to be quite satisfactory).

TABLE: - 9
LONG TERM SHARE HOLDERS
YEAR RATIO
DEBT EQUITY
2003-04 281629148.5 21411620 13.15309857

2004-05 292762017.2 22351609 13.09802875

2005-06 308224894 23723326 12.99248234

2006-07 336247096.2 25897199 12.98391754

2007-08 410859517.5 28761978 14.2848144

55
Graph 9:-

DEBT-EQUITY RATIO

14.5
14
PERCENTAGE

13.5

13
12.5
12
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-

In the ratio main indication is the percentage of funds being financed through
borrowings; a measure of the extent of trading on equity. So in the way firm based
on more in long term liabilities. So the ratio is not satisfaction.

56
10. Debt ratio:-

Debt ratio is used to analyze the long term solvency of firm it helps in knowing
the proportion of the interest bearing debt in the capital structure debt ratio is
computed by dividing total debt by capital employed (CE) or net assets (NA). Total
debt will include short and long -term borrowings from financial institutions,
debentures/bonds, deferred payment arrangement fro buying capital equipment,
bank borrowings. Public deposits other interest bearing loans. Capital employed will
include total debt and set worth.

TOTAL DEBT

DEBT RATIO:-

CAPITAL EMPLOYED

TABLE: - 10

YEAR TOTAL DEBT CAPITAL EMPLOYED RATIO

2003-04 284191885.2 438367938.6 0.648295325

2004-05 295236538.4 421154538.9 0.701017112

2005-06 310699415.3 398641134.3 0.779396275

2006-07 338721617.5 368666195.6 0.918775905

2007-08 413334038.8 439597000 0.940256732

57
Graph 10:-

DEBT RATIO

1
0.9
0.8
0.7
0.6
PERCENTAGE

0.5
0.4
0.3
0.2
0.1
0
2003-04 2004-05 2005-06 2006-07 2007-08
YEARS

RATIO

Interpretation:-

In the ratio of the firm is increasing but the ratio is very position. So the firm
run the business in smooth manner.

58
11. Interest coverage ratio:-

The interest coverage ratio or the times interest is used to test the firm debt
servicing capacity. The interest coverage ratio is corrupted by dividing earning before
interest and taxes (EBIT) by interest charges.

The interest coverage ratio shows the numbers of times the charges are
covered by funds that are ordinarily available to depreciation are also available to
pay interest charges. Hence interest coverage ratios earning before depreciation
interest and taxes (EBIT) divided by interest.

INTEREST

INTEREST COVERAGE: -

EBIT

TABLE: - 11

YEAR INTEREST EBIT RATIO

2003-04 1387898.72 -7334112.23 -0.189238817

2004-05 2195337.51 -35580384.04 -0.061700782

2005-06 2452384.11 -43225101.11 -0.056735185

2006-07 5683743.63 -28389576.13 -0.200205301

2007-08 5131413.49 14610586.51 0.351212012

59
Graph 11:-

INTERST COVERAGE RATIO

0.4
0.3
0.2
PERCENTAGE

0.1
0
-0.1 2003-04 2004-05 2005-06 2006-07 2007-08
-0.2
-0.3
YEARS

RATIO

Interpretation:-

In the ratio the first four years the ratio is negative. So the company takes
care about these aspects. The last one year only get profits and positive value.

60
12. Gross profit ratio:-

It is calculated by dividing the gross margin by sales. This ratio shows the
profits relative to sales after the direct production costs are deducted. It may be used
as an indicator of the efficiency of the production operation and the relation between
production costs and selling price.
GROSS PROFIT
GROSS PROFIT RATIO: - _______________

NET SALES

(Gross Profit = Net Sales - Cost of Goods Sold)

TABLE: - 12

GROSS PROFIT OR
YEAR SALES RATIO
LOSS
2003-04 21207515.04 418131979.8 5.071966762

2004-05 646651 381649206 0.169435961

2005-06 -20373546.51 356485255.3 -5.715116181

2006-07 -4125263.23 402770938.7 -1.024220676

2007-08 61725000 667778000 9.24334135

61
Graph 12:-

GROSS PROFIT RATIO

10

5
PERCENTAGE

0
2003-04 2004-05 2005-06 2006-07 2007-08
-5

-10
YEARS

RATIO

Interpretation:-

In the ratio is some part of good in year 2003-04, 2007-08 get profits. And
2004 -05 the profit is decline. And 2005-06, 2006-07 get loss. So the firm spent in
more in direct expenses. So the firm controls the expenses.

62
13. Net profit ratio:-

This ratio is measured by dividing profit after tax by sales. It indicates


management’s efficiency in manufacturing, administering and selling the products.
The ratio is the overall measure of the firm’s ability.

NET PROFIT BEFORE TAX


NET PROFIT RATIO: - _____________________

NET SALES

TABLE: - 13

NET
YEAR SALES RATIO
PROFIT/LOSS
2003-04 -5946213.51 418131979.8 -1.422090105

2004-05 -33385046.53 381649206 -8.747573951

2005-06 -40772717 356485255.3 -11.43742031

2006-07 -22705832.5 402770938.7 -5.63740586

2007-08 19742000 667778000 2.956371728

63
Graph 13:-

NET PROFIT RATIO

4
2
0
-2 2003-04 2004-05 2005-06 2006-07 2007-08
PERCENTAGE

-4
-6
-8
-10
-12
-14
YEARS

RATIO

Interpretation:-

In the ratio all the first four years company cannot get the profits. In the last
year get the some amount of profits. So in the way the company spent the more
indirect expenses also. Company controls the expenses.

64
14. Return on total assets:-

The profitability ratio is measured in terms of the relation ship between net
profits and assets. The return on assets may also be called profit to assets ratio.
There are various approaches possible to define profits and assets.

NET PROFIT BEFORE TAX


RETURN ON TOTAL ASSETS: - ________________________ X 100
TOTAL ASSETS

TABLE: -14

YEAR PROFIT AFTER TAX TOTAL ASSETS RATIO

2003-04 -5946213.51 461149831.5 -1.289432003

2004-05 -33385046.53 445340109.7 -7.496528115

2005-06 -40772717 424610565.1 -9.602379298

2006-07 -22705832.5 435103463 -5.218490412

2007-08 19742000 523479000 3.771306967

65
Graph 14:-

RETURN ON TOTAL ASSETS RATIO

6
4
2
0
PERCENTAGE

-2 2003-04 2004-05 2005-06 2006-07 2007-08


-4
-6
-8
-10
-12
YEARS

RATIO

Interpretation:-

In the ratio point of you the company cannot get the good profits. So the
return on total assets ratio is negative. In the last year 2007-08 get some part of
return to the firm.

66
15. Return on equity:-

Return on equity is of great interest to equity shareholders. Ordinary


shareholders are entitled to the residual profits. If rate of dividend is not fixed the
earning may be distributed to shareholders or retained in the business. A return on
shareholders equity is calculated to see the profitability of owner’s investments. The
return on equity is net profit after taxes dividend by shareholders equity or net worth.

PROFIT AFTER TAX

RETURN ON EQUITY:-

NET WORTH

The shareholders equity or net worth will include paid up share capital share
premium and reserves and surplus less accumulated losses. Return or equity
measures the profitability of equity funds invested in the firm. It is very important
measure because of it reflects the productivity of the owner ship capital employed in
the form. It is influenced by several factors like earning power, debt equity ratio and
average cost of debt funds and tax rate.

TABLE: - 15

YEAR PROFIT AFTER TAX NET WORTH RATIO

2003-04 -5946213.51 21411620 -0.277709651

2004-05 -33385046.53 22351609 -1.493630572

2005-06 -40772717 23723326 -1.718676251

2006-07 -22705832.5 25897199 -0.876767889

2007-08 19742000 28761978 0.686392292

67
Graph 15:-

RETURN ON EQUITY

1
0.5
0
2003-04 2004-05 2005-06 2006-07 2007-08
PERCENTAGE

-0.5
-1
-1.5
-2
YERAS

RATIO

Interpretation:-

In the return on equity is based on the profits. So the 2003-04 to 2006-07 the
four year the company runs the business with loss. So the ratio is negative. After
2006-07 the firm get the profit auto metical ratio is growing.

68
MARKET RATIOS:-

It is use full to the share holders how much of returns to earn there
investment. And what is the position of the market to the investment share rate. To
now the deferent types of all market information to analyze to using these ratios.

16. EARNINGS FOR SHARE:-

In the ratio to know the Avery year how much of amount to earning the
investors means the share holders. The equity share holders to get the how much of
amount to get the return on the investment.

PROFIT AFTER TAX


EARNING PER SHARE:-
NUMBER OF COMMON SHARES

TABLE: - 16

TOTAL NUMBER OF
PROFIT AFTER TAX EPS
YEAR SHARES
2003-04 -5946213.51 6450 -921.8935674

2004-05 -33385046.53 6450 -5175.976206

2005-06 -40772717 6450 -6321.351473

2006-07 -22705832.5 6450 -3520.284109

2007-08 19742000 6450 3060.775194

69
Graph 16:-

EARNING PER SHARE

4000
2000
0
RUPES

-2000 2003-04 2004-05 2005-06 2006-07 2007-08

-4000
-6000
-8000
YEARS

EPS

Interpretation:-

The first four years means 2003-04 to 2006-07 firms not get profits. So share
holders are not getting any returns. The last year the each share holder gets the
return nearly 3000Rs get the 2007-08. So company gets the profits.

70
FINDINGS

1. The Liquidity Position of the firm it not satisfactory from the financial year
2004-05 to 2006-07 as there is a declining trend in current ratio.

2. The quick ratio of the firm is satisfactory for all the years.

3. Regarding capital structure the firm is high geared i.e. it is dependent and
more debt capital.

4. The Interest Coverage Ratio of the firm is very bad i.e. the firm is not in
position to pay regular interest payment in future i.e. problem of financial risk.

5. The Debt Collection Period of the firm is quite satisfactory.

6. All turnover ratios of good.

7. The gross profit ratio for two years indicates negative trend the firm must try to
improve.

8. The return on net worth is not satisfactory.

9. Overall the profitability of the firm is not satisfactory.

71
SUGGESTIONS

1. The P.D.M.P.M.A.C.U. Limited has an efficient top management for marketing


various policies and decisions enviable performance.

2. The rich quality of P.D.M.P.M.A.C.U. Limited can make sure of approval from
various quality accreditations like ISO and has a success fully career in near
future.

3. Inspection and quality checking must be doubled for providing quality milk.

4. The cash receivers in P.D.M.P.M.A.C.U. Limited is not standard maintaining.


The cash ratio is lower for same years and very excess for same other years.
So, the cash reserves must standardize.

5. The debt proportion in the financial structure of NDCMPU is rapidly increased


last year. So, the debt proportion must be decreased to the standard norm.

6. The gross profit decreased comparatively than previous year. So, the gross
profit must be improved.

7. The utilization of assets to be improved.

8. The net profit of the company should improve as the company. So for losses
from the last 4 years.

9. The Return on Equity Capital should be improved by overcoming the losses


for the last 4 years.

72
CONCLUSION

The study on the Ratio Analysis of P.D.M.P.M.A.C.U. Limited was undertaken


with a view to explore the scope for improvement. A number of suggestions have
been made at the conclusion of the study. I am sure that a conclusion and
suggestion will contribute for improving the effective-ness and efficiency of the
present Ratio Analysis. The company can achieve the highest with full-fledged effort
of top management and its employees with their commitment and sincerity to wards
goal. The company can take a challenge with its competitiveness and high spirits to
face the market

73
ANNEXURE
Table –1

Financial Statement PDMPMACU Ltd. Common size Balance sheet during


the year 2002-2003

Particulars 31-03-2003 Percentage


Current assets
Cash on hand 549294.53 0.091
Bank balance 7974859.30 1.323
Due to (sun -Dr) 103996126.70 17.258
Closing stock 6932723.00 1.150
Pre paid expenses 19331.00 0.003
a) total CA 119472334.53
Fixed assets 279168799.87 46.330
b) total fixed assets 279168799.87

Investments & other


assets

APDDCF&PDCCB
21000.00 0.003
Investment

Feed A/C 19078168.03 3.166


Interest due on FDR’s 6870262.73 1.140

APCS 1964 act & MACS


177986642.07 29.536
1995Act

c)total Investment s
203956072.83
&other assets

Total assets (A+B+C) 602597207.23 100

74
Particulars 31-03-2003 Percentage
Current liabilities
Outstand liabilities 34036922.89 5.646
Due to (sun-Cr) 48539033.70 8.054
Recovery from milk bills 6682229.68 1.108
a) total current liabilities 89258186.27

Long term & other


liabilities

Secured loans 152118631.70 25.243


Interest on ODs 66833079.63 11.090
Other liabilities 106362997.58 17.650

b) total long term & other


325314708.91
liabilities

Capital & Reserve


Share capital 23723326.00 3.936

Reserve for Items under


837197.50 0.139
objection

Reserve for temp advance 140484.40 0.144

Statutory provision 1496838.98 0.248


Depreciation reserve 161826465.17 26.854
C)Total Capital &Reserve 188026312.05

Total(A+B+C) 602597207.23 100

75
Table – 2
Financial Statement PDMPMACU Ltd., Common Size Balance Sheet during the year
2003 -2004.

Particulars 31-03-2004 Percentage

Current Assets

Cash on hand 924794.37 0.163

Bank Balance 846094.99 0.149

Due to (Sun-Dr) 105320689.44 18.587

Closing Stock 62870763.07 11.095

A) Total CA 169962341.87

Fixed Assets 273413425.37 48.252

B) Total Fixed Assets 273413425.37

Investments &
Other Assets

APDDCF&PDCCB
21000.00 0.004
Investment

Feed A/C 19078168.03 3.367

Interest due on FDR’s 6282188.00 1.109

APCS 1964 Act &


97882664.41 17.274
MACS 1995 Act

C) Total Investment
123264020.44
& Other Assets

Total Assets (A+B+C) 566639787.68 100

76
Particulars 31-03-2004 Percentage

Current Liabilities

Outstanding liabilities 24203882.74 4.271

Due to (Sun-Cr) 32029906.51 5.653

Recovery from milk bills 15612313.47 2.755

Interest due to ODs 66369.00 0.012

A) Total Current Liabilities 71912471.72

Long term and Other


Liabilities

Secured Loans 150047812.70 26.480

Interest on ODs 66833079.63 11.795

Other Liabilities 107550857.88 18.980

b) Total long term and other liabilities 324431750.21

Capital & reserve

Share capital 21411620.00 3.779

Reserve for items under objection 837197.50 0.148

Reserve for temp advance 868648.64 0.153

Statutory provision 1496838.98 0.264

Depreciation reserve 145681260.63 25.710

C) Total capital and reserved 170295565.75

Total (A+B+C) 566639787.68 100

Table –3

77
Financial statement PDMPMACU ltd. Common size balance sheet during the year
2003 – 2004
Particulars 31-03-2004 Percentage

Current assets

Cash on hand 1179350.57 0.209

Bank balance 495498.04 0.096

Due to (Sun-Dr) 111929315.21 19.811

Closing stock 49026102.58 8.678

A) Total CA 162630266.40

Fixed assets 275737672.37 48.805

B) Total fixed assets 275737672.37

Investments and other assets

APDDCF&PDCCB Investment 21000.00 0.004

Feed A/C 19078168.03 3.368

Interest due on FDR’s 3682724.73 0.652

APCS 1964 Act and MACS 1995 Act 103828877.92 18.377

C) Total investments and other assets 126610770.68

Total assets (A+B+C) 564978709.45 100

78
Particulars 31-03-2005 Percentage

Current liabilities

Outstand liabilities 20360634.83 3.603

Due to (Sun- Cr) 32354041.91 5.726

Recovery from Bilk bills 13371523.39 2.366

A) Total current liabilities 66086200.13

Long term & other liabilities

Secured loans 148694868.70 26.319

Interest on OD’s 66833079.63 11.829

Other liabilities 107550858.48 19.036

B) Total long term & other liabilities 323078806.81

Capital & reserve

Share capital 21411620.00 3.790

Reserve for items under objection 837197.50 0.148

Reserve fort temp advance 228700.40 0.154

Statutory provision 1496838.98 0.265

Depreciation reserve 151839345.63 26.875

C) Total capital & reserve 175813702.51

Total (A+B+C) 564978709.45 100

Table – 4

79
Financial statement PDMPMACU ltd. Common size balance sheet during the year
2005-2006

Particulars 31-03-2006 Percentage

Current assets

Cash on hand 2989603.16 0.513

Bank balance 462050.05 0.079

Due to (Sun-Dr) 97955233.89 16.815

Closing stock 42636345.51 7.319

A) Total CA 144043232.61

Fixed assets 277111306.37 47.568

B) Total fixed assets 277111306.37

Investments and other assets

APDDCF&PDCCB Investment 21000.00 0.004

Feed A/C 19078168.03 3.275

Interest due on FDR’s 5086402.73 0.873

APCS 1964 Act and MACS 1995 Act 137213924.45 23.554

C) Total investments and other assets 161399495.21

Total assets (A+B+C) 582554034.19 100

Particulars 31-03-2006 Percentage

80
Current liabilities

Outstang liabilities 19902798.00 3.415

Due to (Sun- Cr) 53571625.19 9.195

Recovery from Bilk bills 6532972.63 1.121

A) Total current liabilities 80007395.82

Long term & other liabilities

Secured loans 145906541.70 25.045

Interest on OD’s 66833079.63 11.472

Other liabilities 107294858.48 18.418

B) Total long term & other liabilities 320034479.81

Capital & reserve

Share capital 22351609.00 3.837

Reserve for items under objection 837197.50 0.144

Reserve fort temp advance 140484.42 0.149

Statutory provision 1496838.98 0.257

Depreciation reserve 157686028.68 27.068

C) Total capital & reserve 182512158.56

Total (A+B+C) 582554034.19 100

Table –5

81
Financial Statement PDMPMACU Ltd. Common size Balance sheet during
the year 2006-2007

Particulars 31-03-2007 Percentage


Current assets
Cash on hand 549294.53 0.091
Bank balance 7974859.30 1.323
Due to (sun -Dr) 103996126.70 17.258
Closing stock 6932723.00 1.150
Pre paid expenses 19331.00 0.003
a) total CA 119472334.53
Fixed assets 279168799.87 46.330
b) total fixed assets 279168799.87
Investments & other assets
APDDCF&PDCCB Investment 21000.00 0.003
Feed A/C 19078168.03 3.166
Interest due on FDR’s 6870262.73 1.140
APCS 1964 act & MACS 1995Act 177986642.07 29.536
c)total Investment s &other assets 203956072.83
Total assets (A+B+C) 602597207.23 100
particulars 31-03-2007 Percentage
Current liabilities
Outstang liabilities 34036922.89 5.646
Due to (sun-Cr) 48539033.70 8.054
Recovery from milk bills 6682229.68 1.108
a) total current liabilities 89258186.27
Long term & other liabilities
Secured loans 152118631.70 25.243
Interest on ODs 66833079.63 11.090
Other liabilities 106362997.58 17.650
b) total long term & other liabilities 325314708.91
Capital & Reserve
Share capital 23723326.00 3.936
Reserve for Items under objection 837197.50 0.139
Reserve for temp advance 140484.40 0.144
Statutory provision 1496838.98 0.248
Depreciation reserve 161826465.17 26.854
C)Total Capital &Reserve 188026312.05
Total(A+B+C) 602597207.23 100

Table –6

82
Financial Statement PDMPMACU Ltd. common size balance sheet during the
year 2006-2007

Particulars 31-03-2008 Percentage

Current assets
Cash on hand 60783.56 0.009
Bank balance 7797759.89 1.225
Due to (sun-Dr) 57313980.84 9.006
Closing stock 18932802.40 2.975
Pre paid expenses 1244900.55 0.196

A)Total CA 85350227.24

Fixed Assets 281315968.47 11.205

B) Total Fixed Assets 281315968.47

Investments & other


Assets

APDDCF&PDCCB
21000.00 0.003
Investment

Donations 47832752.30 7.52


Feed A/C 19078168.03 2.997
Interest due on FDR’S 1505347.00 0.236

PCS 1964 Act & MACS


201274451.33 31.628
1995 Act

C) Total Investments
269711718.70
& other Assets

Total Assets (A+B+C) 636377914.37 100.00

83
Particulars 31-03-2008 Percentage

Current liabilities
Outstang liabilities 27102212.00 4.259
Due to (sun-Cr) 46890712.65 7.368
Recovery from milk bills 7495140.68 1.178
a) total current liabilities 81488065.33

Long term & other


liabilities

Secured loans 187910951.30 29.528


Intrest on ODs 66833079.63 10.502
Other liabilities 106987624.34 16.812

b) total long term & other


361731655.30
liabilities

Capital & Reserve


Share capital 25273199.00 3.971

Reserve for Items under


837197.50 0.132
objection

Reserve for temp


140484.40 0.022
advance

Statutary provision 1496838.98 0.235


Depreciation reserve 165410873.89 25.993
c) total capital & reserve 193158593.80
Total(A+B+C) 636377914.37 100.00

84
BIBLIOGRAPHY

1. FUNDAMENTALS OF FINANCIAL MANAGEMENT

- JAMES C. VANCHORNE

- JOHN M-W ACHOWICZ. JR

2. FINANCIAL MANAGEMENT

- I.M. PANDEY

3. FINANCIAL MANAGEMENT

- KHAN AND JAIN

4. FINANCIAL MANAGEMENT

- S.N. MAHESWARI

5. COMPANY ANNUAL REPORTS

Web-: www.google.com

www.PDMPMACO.com

85