CHAPTER 01: INTRODUCTION

1.1 An Overview on Dairy Industry in India

During the last three decades, our nation’s milk producers have transformed Indian dairying from stagnation to world leadership. During this period and before, science and technology (S&T) have played a critical role in supporting our farmer’s efforts. During the next decade, that role will be further enhanced as we face a number of new challenges.

The dairy cooperative movement has been central to the development of dairying in India. The inspiration for this movement was the success of the Kaira District Cooperative Milk Producers’ Union -- better known as Amul. Founded in 1946 in response to the exploitation of district’s dairy farmers, Amul grew rapidly from its initial base of two societies and two hundred litres of milk. That growth, however, posed a challenge that threatened its existence: flush season production of milk exceeded the demand. Yet the cooperative’s success depended on accepting the farmers’ milk year round.

Since that time, S&T have produced a large number of breakthroughs that have been critically important to the development of Indian dairying. A wide variety of institutions have contributed including the National Dairy Research Institute, Karnal, agricultural universities, veterinary colleges and, proud to say, the National Dairy Development Board (NDDB).

India's annual milk production has more than tripled in the last 30 years, rising from 21 million tonnes in 1968 to an anticipated 80 million tonnes in 2001. This rapid growth and modernization is largely credited to the contribution of dairy cooperatives, under the Operation Flood (OF) Project, assisted by many multi-lateral agencies, including the European Union, the World Bank, FAO and WFP (World Food Program). In the Indian context of poverty and malnutrition, milk has a special role to play for its many nutritional advantages as well as providing supplementary income to some 70 million farmers in over 500,000 remote villages.

India today is the lowest cost producer of per litre of milk in the world, at 27 cents, compared with the U.S' 63 cents, and Japan’s $2.8 dollars. The value of Indian dairy produce is expected to be Rs 10, 00,000 million. Presently the market is valued at around Rs 7, 00,000 million. India with 134mn cows and 125mn buffaloes has the largest population of cattle in the world. Total cattle population in the country as on October'00 stood at 313mn. More than fifty percent of the buffaloes and twenty percent of the cattle in the world are found in India and most of these are milch cows and milk buffaloes.

Indian dairy sector contributes the large share in agricultural gross domestic products. Presently there are around 70,000 village dairy cooperatives across the country. The co-operative societies are federated into 170 district milk producers unions, which in turn have 22-state cooperative dairy federation. Milk production gives employment to more than 72mn people. The milk production in India accounts for more than 13% of the total world output and 57% of total Asia's production.

1

1.1.1 Operation Flood

The strategy for organized dairy development in India was actually conceived in the late 1960s, within a few years after the National Dairy Development Board (NDDB) was founded in 1965. It rested on the Operation Flood programme, which was conceived by the NDDB and endorsed by the government.

Operation Flood is a unique approach to dairy development. During the 1970s, dairy commodity surpluses were building up in Europe, and Dr Verghese Kurien, the founding chairman of NDDB, saw in those surpluses both a threat and an opportunity. The threat was massive exports of low-cost dairy products to India, which, had it occurred, would have told the death-knell for India's staggering dairy industry. The large quantities that India was already importing had eroded domestic markets to the point where dairying was not viable. The opportunity, on the other hand, was built into the Operation Flood strategy. Designed basically as a marketing project, Operation Flood recognized the potential of the European surpluses as an investment in the modernization of India's dairy industry. With the assistance of the World Food Programme, food aid - in the form of milk powder and butter oil - was obtained from the countries of the European Economic Community (EEC) to finance the programme. It was the first time in the history of economic development that food aid was seen as an important investment resource. Use of food aid in this way is anti-inflationary, it provides a buffer stock to stabilize market fluctuations and it can be used to prime the pump of markets that will later be supplied by domestic production. The overriding objective of all aid is, or rather should be, the elimination of the need for aid. The use of food aid as an investment is the most effective way of achieving this objective.

Operation Flood is a programme designed to develop dairying by replicating the Anand Model for dairy development, which has stood the test of time for almost half a century. The first phase of Operation Flood was launched in 1970 following an agreement with the World Food Programme, which undertook to provide as aid 126000 tonnes of skim milk powder and 42000 tonnes of butter oil to finance the programme.

The programme involved organizing dairy cooperatives at the village level; creating the physical and institutional infrastructure for milk procurement, processing, marketing and production enhancement services at the union level; and establishing dairies in India's major metropolitan centres. The main thrust was to set up dairy cooperatives in India's best milksheds, linking them with the four main cities of Bombay, Calcutta, Delhi and Madras, in which a commanding share of the milk market was to be captured. In achieving that goal, the first phase of Operation Flood laid the foundation for India's modern dairy industry, an industry that would ultimately meet the country's need for milk and milk products.

The second phase of the programme was implemented between 1981 and 1985. Designed to build on the foundation laid in the first phase, it integrated the Indian Dairy Association-assisted dairy development projects being implemented in some Indian states into the overall programme. About US$150 million was provided by the World Bank, with the balance of project financing obtained in the form of commodity assistance from the EEC.

2

The current, third phase of Operation Flood aims at ensuring that the cooperative institutions become self-sustaining. With an investment of US$360 million from the World Bank, commodity and cash assistance from the EEC and NDDB's own internal resources, the programme envisages substantial expansion of the dairy processing and marketing facilities; an extended milk procurement infrastructure; increased outreach of production enhancement activities; and professionalization of management in the dairy institutions.

3

1.2 History and Development of the Organization

AMUL means "priceless" in Sanskrit. The brand name "Amul," from the Sanskrit "Amoolya," was suggested by a quality control expert in Anand. Variants, all meaning "priceless", are found in several Indian languages. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India.

The success story of ‘The Kaira District Co-operative Milk Producers Union Ltd. (Amul) was started about six decades ago, when life of the farmers in Kheda district was very bad. Their income was derived almost entirely from seasonal crops. Their income from buffaloes’ milk was undependable. The milk marketing system was controlled by traders and middlemen. The farmers were getting very less returns. Often they had to sell cream and ghee at a very cheap price. The farmers generally in this area are illiterate, so they were exploited easily by middlemen.

This has become noticeable when the Govt. of Bombay started the Bombay Milk Scheme in 1945. Milk had to be transported from Anand to Bombay. This could be possible only if milk was pasteurized. After the preliminary trials, the Govt. of Bombay entered into an agreement with M/s Polson Ltd, a privately owned company - to supply milk on a regular basis from Anand to Bombay. This arrangement was a quite satisfactory to all concerned except the farmers. None had taken the trouble to fix the price of milk to be paid to the products. Thus under the Bombay milk scheme, the farmers were not better than before. They were still at the mercy of private traders. The discontent of the farmers grew. So, the farmers decided not to sell the milk to polson dairy. But, they know that if they do not sold the milk, then they would not be able to get money and might be put in critical situation.

So, they went to Shri Sardar Vallabhbhai Patel, the iron man of India, to find the solution of this problem. On, 4th January, 1946, a meeting was held at Samarkha village, in which Shri Sardar Vallabhbhai Patel gave an advice to set up a new co-operative level dairy to farmers. They gave a responsibility to Shri Morarji Desai and also to Shri Tribhuvandas Patel for helping the farmers in setting up the dairy. Thus, It was resolved that the milk producer’s co-operative societies should be organized into each village of Kaira District to collect milk from the producers. All such village co-operatives would federate into a district union which would have its own milk processing facility. The govt. should undertake to buy milk from the union. But unfortunately the govt. turns down this demand. The farmers resorted to milk strike and not single drop of milk was sold to the traders. Finally the govt. relented and after 15 days they accepted the proposal.

This marked the formation of “THE KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERS’ UNION LTD. ANAND”. It was formally registered on 14th Dec. 1946. The union began pasteurizing milk for the Bombay milk scheme in June 1948 with two village co-operative societies, named Hadgul and Gopalpura, for supplying milk. In the beginning, only 250 liters milk was collected from these two villages.

Rapid growth brought into the new development with the extra milk processed into butter and milk powder. The foundation stone of AMUL-1 was laid by late Dr. Rajendra Prasad, the first president of independent India on 12th September 1948. It was inaugurated by late Shri Jawaharlal Nehru on 31st October 1955.

4

Amul-2 was completed in April 1965 was declared open by late Shri Morarji Desai. This dairy was capable of producing 40 tonnes of milk powder 20 tonnes of butter a day. Further expansion of the dairy’s milk handling capacity to 750000 liters a day came in 1974. In the same year, the union set up a plant to make high protein earning food, chocolates, at Mogar plant 8 km away from Anand town. The investment in this plant is Rs. 100 cores. The National Dairy Development Board (NDDB) financed 70% of its cost as loan and 30% as grant. Milk to this dairy is brought from various adjoining villages in insulted tankers instead of it in cans. This reduced the transportation costs significantly.

Further, another plant named Amul-3 was established in 1992.this plant has the total capacity of producing 14 lakhs of milk per day. From the late fifties Kaira Union has been investing heavily in schemes to improve the milk yield of animals. The union built up a fully fledged infrastructure for breeding animals and ensuring animal health care.

The co-operative dairying system which took root in Kaira was beneficial and viable. The union, which started with two societies, has now 945 societies with 537000 members in 1955; milk production went up from 250 liters to 1 million liters a day. The turnover of the union in 1994-95 was Rs. 344 cores. In 2008-09, Amul has collected 8.4 million litres of milk per day, from 13,328 village societies with 2.79 million members. Every day Amul collects 4,47,000 litres of milk from 2.12 million farmers (many illiterate), converts the milk into branded, packaged products, and delivers goods worth Rs 6 crore (Rs 60 million) to over 500,000 retail outlets across the country. Based in the village of Anand, the Kaira District Milk Cooperative Union (better known as Amul) expanded exponentially. It joined hands with other milk cooperatives, and the Gujarat network now covers 2.12 million farmers, 10,411 village level milk collection centres and fourteen district level plants (unions) under the overall supervision of GCMMF.

5

1.2 GCMMF: An Overview

Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest food products marketing organisation. It is a state level apex body of milk cooperatives in Gujarat which aims to provide remunerative returns to the farmers and also serve the interest of consumers by providing quality products which are good value for money. GCMMF was the sole marketing agency for the products produced by the different milk co-operative member societies of the State of Gujarat and for those of other States marketing their products under the Amul brand name.

In the 1940s, in the district of Kaira in the State of Gujarat, India, a unique experiment was conducted that became one of the most celebrated success stories of India. At that time, In Gujarat, milk was procured from farmers by private milk contractors and by a private company, Polson’s Dairy in Anand, the headquarters of the district. The company had a virtual stranglehold on the farmers, deciding the prices both of the procured as well as the sold milk. Polson’s Dairy chilled the milk and supplied it to the city of Bombay. It also extracted dairy products such as cheese and butter.

In 1946, under inspiration from a leading freedom fighter, Mr. Vallabhbhai Patel (who belonged to Gujarat and who later became the Home Minister of the Central Government), Mr. Tribhuvandas Patel, a local farmer, freedom fighter and social worker, organized the farmers into co-operatives. These co-operatives would procure milk from the farmers, process the milk and sell it in Gujarat and in Bombay. In 1949, purely by chance, a dairy engineer, named Dr. Verghese Kurien, who had just completed his studies in dairy engineering in the U.S.A., came to India and was posted by the Government of India to a job at the Dairy Research Institute at Anand. A chance meeting between Dr. Kurien and Mr. Tribhuvandas Patel changed Dr. Kurien’s life and the course of India’s dairy industry. Though the purpose of this meeting was too simply to elicit some technical help from Dr. Kurien on commissioning some of the equipment just purchased by his co-operative, especially the chilling and pasteurizing equipment, the two men instantly struck a rapport. After the commissioning problem was solved, Dr. Kurien’s involvement with the Kaira District Co-operative Milk Producers’ Union Limited (that was the name of the co-operative registered) grew very rapidly and it soon extended to the larger sociological issues involved in organizing the farmers into co-operatives and running these co-operatives effectively. He observed the exploitation of farmers by the private milk contractors and Polson’s Dairy and understood how co-operatives could transform the lives of the members.

At first, the main activity was collection and processing of the milk brought everyday by the member farmers to the local office of the co-operative. It was soon realized that it was not enough to merely act as the collection and selling agents for the farmers. A variety of support services were required to enable the farmers to continue selling their milk of adequate quality and to avoid disasters such as death of their cattle (for a family owning just one or two cattle and depending on its milk for their income, death of cattle could indeed be a disaster). The farmers were progressively given new services such as veterinary care for their cattle, supply of cattle feed of good quality, education on better feeding of cattle and facilities for artificial insemination of their cattle. All these were strictly on payment basis: none of the services were free.

This experiment of organizing farmers into co-operatives was one of the most successful interventions in India. A very loyal clientele of member farmers was built up who experienced prosperity on a scale they could not have dreamt of ten years earlier, since with good prices paid for their milk, raising milky cattle could

6

become a good supplementary source of revenue to many households. The co-operatives were expanded to cover more and more areas of Gujarat and in each area, a network of local village level co-operatives and district level co-operatives were formed on a pattern similar to that at Anand (the so called Anand pattern). Kaira District Co-operative Milk Producers’ Union became better known by the brand name of the products marketed by it (Amul) than by the name of the co-operative itself. Amul meant priceless in Sanskrit. It was also a word that was easy to pronounce, easy to remember and that carried a wholly positive connotation. This became the flagship brand for all the dairy products made by this Union.

In 1954, Kaira District Co-operative Milk Producers’ Union built a plant to convert surplus milk produced in the cold seasons into milk powder and butter. In 1958, a plant to manufacture cheese and one to produce baby food were added. Subsequent years saw the addition of more plants to produce different products. In 1973, the milk societies/district level unions decided to set up a marketing agency to market their products. This agency was the GCMMF. It was registered as a co-operative society on 9 July 1973. It had, as its members (ordinary share holders), the district level milk unions. No individual could become a shareholder in GCMMF. Starting from a daily procurement of 250 litres per day in 1946, GCMMF had become a milk giant with the milk procurement at about 4 million litres per day by 1999 with 12 dairy plants all over the State of Gujarat.

Even at the time of its formation, GCMMF had three major products in its portfolio: liquid milk, butter and milk powder. Gradually, many new products were added to its range, largely milk derivatives. In milk alone, it sold full cream milk; semi toned milk, and fully toned milk, all with different names and in readily identifiable pouches. By reducing the fat, it could not only sell separately fat derivatives such as cream and butter (which were also products that yielded a higher margin), but also make the resultant milk available at cheaper prices, so that poorer people also could consume milk. It had undertaken a unique experiment in the 1970s to supply milk to places as far away as Delhi and Calcutta through insulated rail tankers, and this was so successful that it had continued since then. In the 1970s, GCMMF introduced its cheddar cheese and in 1983, a cheese spread. In the same year, it entered also the sweet market (milk based) through the introduction of Amul Shrikhand, a sweetish sour item produced by milk and curd (a form of yogurt). Amulya, a dairy whitener was introduced and was priced below the prevailing brands and soon became the market leader. In 1990s, GCMMF introduced a whole lot of new products: a condensed milk called Amul Mithaimate; Amul Lite, a low fat, low cholesterol spread butter, and Amul ice cream. After 1996, it went on to introduce a still greater variety of products: pizza (mozzarella) cheese, cheese slice, cheese powder, malai paneer (a form of cottage cheese), gulab jamun (a sweet primer to be processed by deep frying to make a sweet called gulab jamun), buttermilk, a chocolate based beverage called Nutramul and chocolates.

In 1996, GCMMF launched its Amul brand ice cream. India’s ice cream market was estimated to be around Rs.8 billion in the year 2000. GCMMF launched its ice creams in fourteen flavors in the city of Mumbai and the State of Gujarat. It was priced at about 30 percent less than the prevailing prices, and it also emphasized that it was fully vegetarian, i.e., it did not contain any gelatin. This was an important attribute to many consumers in Gujarat, which was a predominantly vegetarian state. In less than a year, Amul ice cream commanded a share of about 55 percent in Gujarat and 30 percent in Mumbai; by the year 2000, its share in India as a whole had reached 30 percent. In 1997, GCMMF also scored a major achievement when it managed to get some of the co-operatives in the other States of the country, trying to launch their own ice cream brands, to sell all their ice creams under the Amul brand name. This enabled GCMMF to leverage the capacity of more than 180 co-operatives in the country, with a milk procurement of more than 11 million litres per day, and located close to the markets.

7

In addition, it also diversified into non-milk products. The most important of this diversification was into edible oils in 1988. At that time, the prices of edible oils were being manipulated by oil traders with the result that the prices were shooting up to unacceptable levels. Even though oil seed growers’ co-operatives existed, most of them were run badly and losing money. Edible oils have always been a very sensitive subject in India, leading to even fall of governments. Hence the government persuaded NDDB to arrange for procurement of clean, unadulterated groundnut oil and sell it through its own outlets. Thus it was essentially a market intervention operation. Besides, this provided NDDB to reorganize the groundnut farmers’ co-operatives as it had done with milk producing farmers four decades earlier. Gujarat was the right State for this experiment, since more than 60 percent of the country’s groundnut oil production was accounted for by Gujarat. GCMMF marketed this oil on behalf of NDDB. GCMMF launched a new brand, named Dhara, not wanting to carry over the Amul brand name which was deeply associated in the public mind with milk derivatives. It sold its oil on a platform of absolute purity, a claim it could justifiably make. Since much of the edible oil in India was adulterated, purity could be a differentiating factor. It also coined a slogan, Dhara, Shudh Dhara, meaning, literally, flow, and pure flow. The launch was also supported by an advertising campaign with a catchy jingle. Later, mustard and certain other oils were also marketed under the Dhara brand name. Even though the oil traders fought back bitterly and often violently, and used their political connections to the full, Dhara was able to hold its own and became the leading brand of packaged edible oils. However, it must be said that dealing in edible oils was found to be a far more difficult task as compared to dealing in milk, and the success achieved in organizing groundnut farmers into co-operatives was limited.

In the late 1990s, GCMMF undertook distribution of fruit based products on behalf of NDDB. This was done under yet another brand name introduced by GCMMF: Safal. Under this name were launched a mango drink sold under tetrapack (also in small 100ml. sizes to be served in aircraft), tomato ketchup, and a mixed fruit jam. In fact, the launches of all these products were completed during a single year, 1998-99. The success of these products was very limited as on the year 2000.

By the year 2000, the range of products marketed by GCMMF was truly wide: three varieties of milk, flavored milk, buttermilk, four varieties of milk powder, two varieties of butter, five varieties of cheese, two varieties of ghee, butter, chocolates, chocolate drink, sweets, ice cream, edible oils and fruit and vegetable based products. Except in ice creams, chocolate and chocolate-based beverages, Amul brand were the market leader in each and every one of its products.

Members: 13 district cooperative milk producers' Union

No. of Producer Members: 2.79 million

No. of Village Societies: 13,328

Total Milk handling capacity: 11.22 million litres per day

Milk collection (Total - 2008-09): 3.05 billion litres

Milk collection (Daily Average 2008-09): 8.4 million litres

Milk Drying Capacity: 626 Mts. per day

Cattle feed manufacturing Capacity: 3500 Mts per day

8

1.4 Sales Turnover

Year Rs. (million) US $ (in millions )

1994-95 11140 355

1995-96 13790 400

1996-97 15540 450

1997-98 18840 455

1998-99 22192 493

1999-00 22185 493

2000-01 22588 500

2001-02 23365 500

2002-03 27457 575

2003-04 28941 616

2004-05 29225 672

2005-06 37736 850

2006-07 42778 1050

2007-08 52554 1325

2008-09 67113 1504

9

1.5 General Information of the Organization

1. Name of the Organization:

The Kaira District Co-operative Milk Producers Union Limited.

2. Form of the Organization:

Co-operative Society

3. Registered office of the organization:

The Kaira District Co-operative Milk Producers Union LimitedStation Road,Anand-388001

4. Registration Date:

14th December, 1946

5. Promoters of the Organization:

(1) Shri Tribhuvandas Patel(2) Shri Morarji Desai(3) Shri Sardar Vallabhbhai Patel

6. Bankers:

(1) The Kaira District Co-operative Bank Ltd.(2) Axis Bank(3) State Bank Of India(4) Bank Of Maharashtra(5) Corporation Bank(6) Bank Of Baroda(7) Bank Of Saurashtra

10

7. Board of Directors:

(1) Shri Ramsinh Prabhatsinh Parmar Chairman(2) Shri Rajendrasinh Dhirsinh Parmar Vice-Chairman(3) Shri Bhaijibhai Amarsinh Zala Director(4) Smt. Madhuben Dharmsingh Parmar Director(5) Shri Dhirubhai Amarsinh Chavda Director(6) Shri Pravinsinh Fulsinh Solanki Director(7) Shri Mansinh Khoyabhai Chauhan Director(8) Shri Shivabhai Mahijibhai Parmar Director(9) Shri Ranjitbhai Kantibhai Patel Director(10) Shri Chandubhai Madhabhai Parmar Director(11) Shri Maganbhai Gokalbhai Zala Director(12) Smt. Saryuben Bharatbhai Patel Director(13) Shri Bipinbhai Manishankar Joshi Director

7. Auditors:

Mr. B B BhabhorSpecial Auditor,Milk Union, Anand.

8. No. of Shifts:

(1) 8:30am to 4:30pm(2) 4:30pm to 12:30am(3) 12:30am to 8:30am

11

1.6 Organization Structure

Board of Directors

Chairman

Vice Chairman

Managing Director

General Manager (Dairy Plant & Technology)

Assistant General Manager

Manager

Deputy Manager

Assistant Manager

Superintendent

Deputy Superintendent

Senior Officer

Assistant

Junior Assistant

Workers

12

1.7 The Symbol of Amul

Symbol of Amul is a ring of four hands, which are coordinated each other .The actual meaning of this symbol

is coordination of hand of different people by whom this union is now at top.

First hand is for the farmers (producers), without whom the organization would do not existed.

Second hand is for the representatives of processors by whom the raw milk processed into different

finished products.

Third hand is for marketers without whom the product would have not been able to reach to the

customer.

Fourth hand is for customers without whom the organization could not carry on because they are the

people who consume the product.

The union of Amul would not have been succeeded without the coordination of the above four hands.

13

1.8 Plants

Mogar Plant

Established in 1973, this is situated on Anand -Vadodara Highway No. 8. The main products of this plant are Chocolates, Nutramul, Amul Lite and Amul Ganthia.

Anand Plant

There are 3 plants situated in Amul. And the main products are Milk, Buttermilk, Milk Powder, Butter, Ghee, Flavored Milk etc.

Kanjari Plant

The product is cattle feed. Old plant establish in 1964 & new plant in 1980.

Khatraj Plant

It is situated between Nadiad-Mahemdabad. The main product of this plant is Cheese.

Chilling Centre

Kapadvanj, Undel and Balasinor

14

1.9 Amul Products

Fresh Milk

Amul Fresh MilkThis is the most hygienic milk available in the market. Pasteurised in state-of-the-art processing plants and pouch-packed for convenience.

Amul Gold Milk

Amul Taaza Double Toned Milk

Amul Lite Slim and Trim Milk

Amul Fresh Cream Amul Shakti Toned Milk

Amul Calci+

Bread Spreads

Amul ButterUtterly Butterly Delicious

Amul LiteLow fat, low Cholesterol Bread Spread

Delicious Table MargarineThe Delicious way to eat healthy

15

Milk Drinks

Amul Kool Milk Shake Amul Kool

Amul Kool Cafe Kool KokoA delight to Chocolate Lovers. Delicious Chocolate taste

Nutramul Energy DrinkA drink for Kids - provides energy to suit the needs of growing Kids

Amul Kool Chocolate Milk

Amul Kool Flavoured Bottled Milk

Amul Kool Flavoured Tetra Pack

Amul Masti Spiced ButtermilkAmul introduces the Best Thirst Quenching Drink

Amul Kool Thandai 

Amul Lassee    

16

Powder Milk

Amul Spray Infant Milk FoodStill, Mother's Milk is Best for your baby

Amul Instant Full Cream Milk PowderA dairy in your home

Sagar Skimmed Milk PowderWhich is especially useful for diet preparations or for use by people on low calorie and high protein diet.

Sagar Tea Coffee Whitener

Amulya Dairy WhitenerThe Richest, Purest Dairy Whitener

   

Cheese

Amul Pasteurised Processed Cheese100% Vegetarian Cheese made from microbial rennet

Amul Cheese SpreadsTasty Cheese Spreads in 3 great flavours.

Amul Emmental CheeseThe Great Swiss Cheese from Amul, has a sweet-dry flavour and hazelnut aroma

Amul Pizza Mozzarella CheesePizza cheese...makes great tasting pizzas!

Gouda Cheese

   

17

For Cooking

Amul / Sagar Pure GheeMade from fresh cream. Has typical rich aroma and granular texture. An ethnic product made by dairies with decades of experience.

Cooking Butter

Amul Malai PaneerReady to cook paneer to make your favourite recipes!

Utterly Delicious Pizza

Mithai MateSweetened Condensed Milk - Free flowing and smooth texture. White to creamy color with a pleasant taste.

Masti Dahi

Desserts

Amul Ice CreamsPremium Ice Cream made in various varieties and flavours with dry fruits and nuts.

Amul ShrikhandA delicious treats, anytime.

Amul Mithaee Gulab JamunsPure Khoya Gulab Jamuns...best served piping hot.

Amul ChocolatesThe perfect gift for someone you love.

18

Amul Basundi

   

Health Drink

NutramulMalted Milk Food made from malt extract has the highest protein content among all the brown beverage powders sold in India.

Amul Shakti Health Food Drink Available in Kesar-Almond and Chocolate flavours.

1.10 Other Products

Amul Cooking Butter

Amul Shredded Pizza Cheese

Amul Malai Paneer (cottage cheese)

Utterly Delicious Pizza

Amul Amrakhand

Avsar Ladoos

Amul Shakti 3% fat Milk

Amul Shakti Toned Milk

Amul Snowcap Softy Mix

Amul Cow Ghee

Amul Infant Milk Formula 1 (0-6 months)

Amul Infant Milk Formula 2 ( 6 months above)

Amul Shakti Standardised Milk 4.5% fat

Amul Slim & Trim Double Toned Milk 1.5% fat

Amul Saathi Skimmed Milk 0% fat

Amul Cow Milk

Yogi Sweetened Flavoured Dahi (Dessert)19

Amul Masti Spiced Butter Milk

Amul Lassee

Amul Shakti White Milk Food

Amul Ice creams:

Royal Treat Range (Butterscotch, Rajbhog, Malai Kulfi)

Nut-o-Mania Range (Kaju Draksh, Kesar Pista Royale, Fruit Bonanza, Roasted Almond)

Nature's Treat (Alphanso Mango, Fresh Litchi, Shahi Anjir, Fresh Strawberry, Black Currant, Santra Mantra, Fresh Pineapple)

Sundae Range (Mango, Black Currant, Sundae Magic, Double Sundae)

Assorted Treat (Chocobar, Dollies, Frostik, Ice Candies, Tricone, Chococrunch, Megabite, Cassatta)

Utterly Delicious (Vanila, Strawberry, Chocolate, Chocochips, Cake Magic)

Milk Drink:

Amul Kool Flavoured Milk (Mango, Strawberry, Saffron, Cardamom, Rose, Chocolate)

Amul Kool Cafe

Amul Kool Koko

Amul Kool Milk Shake (Mango, Strawberry, Badam, Banana)

20

CHAPTER 02: RESEARCH METHODOLOGY

Research is the systematic design, collection, analysis and reporting of data and finding clamant to a specific situation facing the company. Training is actively and intimately connected with all the personal and managerial activities. It is an integral part of the whole management: programme with all its many activities functionally interrelated.

2.1 Research Objective

Sometimes, it happens that financial statements like balance sheet and profit and loss account does not provide enough information or are not enough to form conclusive judgment about firm performance. So, it is required to analyse the financial statements before making any important decision about a firm. The main objectives for calculating the ratios are listed as under.

2.1.1 Primary Objective:

To highlight the areas towards which need further attention would be given.

2.1.2 Secondary Objectives:

For evaluating a company’s financial position and operations.

To measure a firms current position by comparing current financial statements with previous years data.

To know how much a firm have use the debt finance in business by calculating leverage ratios.

To know the actual liquidity position of a firm by calculating liquidity ratios.

To know the actual turnover in terms of the inventory, debtors, assets, etc. by calculating turnover ratios.

To know the profitability of a firm by calculating profitability ratios like gross profit ratios and net profit ratio.

To give some suggestion to firm if any found during data interpretation,

21

2.2 Research Design

A research design serves as a bridge between what has been established and what is to lie alone in the conduct of study to realize the objective. For this project, exploratory research has been carried out. The goal of exploratory research is shed light on the real nature of the project and to suggest possible solution to new ideas.

2.3 Data Collection Method

Generally, Data are of two types: Primary data and Secondary data. Primary data are the data which are collected for the first time by conducting interview, survey, etc. tools. On the other hand, secondary data are data which are collected by someone in past that includes previous year annual report, magazines, project report etc. For my project report, I had used secondary data under which I used annual reports which includes balance sheets, P&L a/c, and other general information.

2.4 Limitation of the Project Report

Followings are the limitations of the project work taken by me:

One of the limitations of this project study is of the time limitation. Since the duration of our project study is of 8 weeks, it is somehow difficult to fully know any big organization like Amul in this limited time period.

Senior managers and others officers in Amul are also very busy. They do not have enough time for solving our queries in details.

22

CHAPTER 03: DATA ANALYSIS AND INTERPRETATION

3.1 Meaning & Definition of Ratio Analysis

Financial ratios are tools for interpreting financial statements to provide a basis for valuing securities and appraising financial and management performance. In other words, ‘Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements.’

A ratio is an arithmetic relationship between two figures. In financial analysis a ratio is used as a benchmark for evaluating the financial position and performance of a firm. The relationship between two accounting figures, expressed mathematically, is known as a financial ratio. Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before your business is destroyed by them.

Financial ratios have been classified in several ways. For our purpose, we divide them into five broad categories as follows:

Liquidity ratio

Turnover ratio

Profitability ratio

Leverage ratio

Other ratio

3.2 Liquidity Ratio

Liquidity refers to the ability of a firm to meet its obligations in the short run, usually one year. Liquidity ratios are generally based on the relationship between current assets (the sources for meeting short term obligations) and current liabilities. The important liquidity ratios are:

Current ratios

Acid-test( Quick ) ratios

Cash ratio

23

3.2.1 Current Ratio

Current ratio is calculated by dividing current assets by current liabilities. Current assets include cash, current investments, debtors, inventories (stocks), loans and advances and pre-paid expenses. Current liabilities represent liabilities that are expected to mature in the next twelve months. These comprise (i) loans; secured or unsecured that is due in the next twelve months and (ii) current liabilities and provisions. A high current ratio is considered to be a sign of financial strength. Formula for calculating current ratio is:

Current assets

Current ratio =

Current liabilities

[Rs. In lacks]

Year Current assets Current liabilities Ratio (%)

2004-05 18596.49 8988.56 2.07

2005-06 18990.94 9460.79 2.01

2006-07 19874.21 12106.54 1.64

2007-08 28995.90 23392.41 1.24

2008-09 28874.39 22798.69 1.27

24

2004-05 2005-06 2006-07 2007-08 2008-090

0.5

1

1.5

2

2.5

Interpretation:

The ideal current ratio for any firm is of 2:1. In Amul, current ratio is more than 2 for the year 2004-05 and 2005-06. After this, current ratio has been declined. Normally, a high current ratio is considered to be a good sign of financial strength. So, we can say that Amul has good financial strength for first two year. But after this, it has been declined.

3.2.2 Acid-Test Ratio

Acid-test ratio is also known as quick ratio. It is calculated by dividing quick assets by current liability. The term quick assets refers to current assets which can be converted into cash immediately or at a short notice without reduction in value of quick ratio. But, it does not include stock. The Quick Ratio is a much more exacting measure than the Current Ratio. By excluding inventories, it concentrates on the really liquid assets, with value that is fairly certain. Formula for calculating acid-test ratio is:

Quick assets

Acid-test ratio =

Current liabilities

25

[Rs. In lacks]

Year Quick assets Current liabilities Ratio (%)

2004-05 10934.13 8988.56 1.22

2005-06 9319.68 9460.79 0.99

2006-07 10796.31 12106.54 0.89

2007-08 13258.02 23392.41 0.57

2008-09 9433.42 22798.69 0.41

2004-05 2005-06 2006-07 2007-08 2008-090

0.2

0.4

0.6

0.8

1

1.2

1.4

Interpretation:

The ideal acid-test ratio for any company is of 1:1 which shows a firm’s ability to generate the liquidity more quickly against its liability. In Amul, the acid-test ratio for the first year is more than 1 and in second year it in almost near to 1. But after this, it has been declined very much in the next three month which is not a good sign. This happen because current liability has been increased regularly over the year. This is the reason why acid-test ratio is less than 1.

26

3.2.3 Cash Ratio

The cash ratio is an indicator of a company's liquidity that further refines both the current ratio and the quick ratio by measuring the amount of cash; cash equivalents or invested funds there are in current assets to cover current liabilities. It is a type of current ratio measure that compares a firm's cash and cash equivalents with its current liabilities. A firm's cash ratio is a demanding test of its liquidity. The formula for calculating cash ratio is:

Cash and Bank Balance + Current Investments

Cash Ratio =

Current Liability

[Rs. In lack]

Year Cash & bank Bal. + Cr. investments

Current liabilities Ratio (%)

2004-05 2653.50 7933.20 0.33

2005-06 1829.27 8891.59 0.21

2006-07 4160.94 11432.71 0.36

2007-08 3826.05 13572.51 0.28

2008-09 2568.24 17473.79 0.15

27

2004-05 2005-06 2006-07 2007-08 2008-090

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Interpretation:

As we know cash ratio shows cash and cash equivalent available against liability. So, from the above data and chart we can see that in 2004 -05, the cash ratio was 0.33% which decreased to 0.21% in 2005-06. In 2006-07, it again increases to 0.36%. But, because of the decreases in the cash and bank balance and also decrease in the investments, cash ratio again decrease in 2007-08 to 0.28% which again decrease to 0.15% in 2008-09.

28

3.3 Turnover Ratio

Turnover ratios, also referred to as activity ratios or asset ratios or management ratios, measures how efficiently the assets are employed by a firm. These ratios are based on the relationship between the level of activity, represented by sales or cost of goods sold, and levels of various assets. The important turnover ratios are:

Inventory turnover ratio

Debtors turnover ratio

Fixed assets turnover ratio

Total assets turnover ratio

3.3.1 Inventory Turnover Ratio

The inventory turnover or stock turnover measures how fast the inventory is moving through the firm and generating sales. The inventory turnover reflects the efficiency of inventory management. The higher the ratio, the more efficient the management of inventories and vice versa. However, this may not always be true. A high inventory turnover may be caused by a low level of inventory which may result in frequent stockouts and loss of sales and customers goodwill. The formula for calculating inventory turnover ratio is:

Cost of goods sold

Inventory turnover ratio =

Average stock

Where,

Cost of goods sold (COGS) = opening stock + purchase + direct expenses – closing stock.

Average stock = (opening stock + closing stock) / 2

29

[Rs. In lacks]

Year COGS Avg. Stock Ratio (Times)

2004-05 47221.13 6125.59 7.71

2005-06 56259.48 8666.81 6.49

2006-07 65762.20 9374.58 7.01

2007-08 88181.97 12407.89 7.11

2008-09 113314.28 17589.43 6.44

2004-05 2005-06 2006-07 2007-08 2008-095.5

6

6.5

7

7.5

8

Interpretation:

As we know, inventory turnover ratio shows cycle threw which an inventory moving from the firm to generate sales. So, from the above data and graph we can say that, in Amul the inventory turnover ratio is of fluctuating type. From last five year, in 3 year its turnover is more than 7 times of avg. inventory and in 2 year it is below it. The higher inventory turnover ratio reflects the better and efficient inventory management. So, the ratio of Amul shows the good performance of inventory management.

30

3.3.2 Debtors Turnover Ratio

Debtor’s turnover ratio shows how many times sundry debtors turn over during the year. In other words, this ratio shows the number of days taken to collect dues on credit sales. Obviously, the higher the debtors turnover ratio, the greater the efficiency of credit management. The formula for calculating the debtors’ turnover ratio is:

Net credit sales

Debtors turnover ratio =

Avg. sundry debtors

[Rs. In lacks]

Year Net credit sales Avg. debtors. Ratio (Times)

2004-05 59459.07 6797.52 8.75

2005-06 70206.23 7679.63 9.14

2006-07 81631.69 6759.25 12.08

2007-08 107187.29 7625.77 14.06

2008-09 137212.35 6916.47 19.84

2004-05 2005-06 2006-07 2007-08 2008-090

5

10

15

20

25

31

Interpretation:

Debtors ratio indicates the no. of days taken to collect dues from debtors. From the above data, it is measured that the debtors turnover ratio in Amul is increasing every year. Ratio which was 8.75times in 2004-05, increased to 12.08 times in 2006-07 which was further increase to 19.84 times in 2008-09. This higher debtors turnover ratio shows the greater efficiency of credit management in Amul.

3.3.3 Fixed Assets Turnover Ratio

Fixed assets turnover ratio measures sales per rupee of investment in fixed assets. This ratio is supposed to measures the efficiency with which fixed assets are employed – a high ratio indicates a high degree of efficiency in assets utilisation and a low ratio reflects inefficient use of assets. The formula for calculating the fixed assets turnover ratio is:

Net sales

Fixed assets turnover ratio =

Avg. net fixed assets

[Rs. In lack]

Year Net sales Avg. fixed assets Ratio (Times)

2004-05 59459.07 7848.06 7.58

2005-06 70206.23 5538.26 12.68

2006-07 81631.69 5170.18 15.79

2007-08 107187.29 5747.33 18.65

2008-09 137212.35 6505.61 21.09

32

2004-05 2005-06 2006-07 2007-08 2008-090

5

10

15

20

25

Interpretation:

In Amul, fixed assets turnover ratio is of increasing type every year. Fixed assets turnover ratio which was 7.58% in 2004-05, increased to 12.68% in 2005-06. This ratio was further increased to 15.79% and 18.65% in 2006-07 and in 2007-08. Last year, this ratio increased to 21.09% in 2008-09.fixwd assets turnover ratio shiws the return a firm generating from utising fixed assets. So, this shows the good and efficient utilisation of fixed assets in Amul.

3.3.4 Total Assets Turnover Ratio

The total assets turnover ratio measures the use of all assets in terms of sales, by comparing sales with net total assets. The asset turnover ratio simply compares the turnover with the assets that the business has used to generate that turnover. The formula for calculating total assets turnover ratio is:

Net sales

Total assets turnover =

Avg. total assets

33

[Rs. In lacs]

Year Net Sales Avg. Total Assets Ratio (Times)

2004-05 59459.07 25802.02 2.30

2005-06 70206.23 24936.56 2.82

2006-07 81631.69 25178.50 3.24

2007-08 107187.29 30813.17 3.48

2008-09 137212.35 36144.45 3.80

2004-05 2005-06 2006-07 2007-08 2008-090

0.5

1

1.5

2

2.5

3

3.5

4

Interpretation:

From the above figure, it is cleared that the total asset turnover ratio is increases every year. Ratio which was 2.30 times in 2004-05 increased to 2.82 times and to 3.24 times in year 2005-06 and in 2006-07. This ratio is further increased to 3.48 times in 2007-08. And in last year also, it increased to 3.80 times. Total assets turnover ratio indicates the return from overall use of all assets in a firm in a production process. This ratio indicates the efficient use of all assets employed in Amul.

34

3.4 Profitability ratio

Profitability ratio measures the final result of business operations. There are two types of profitability ratio: profit margin ratio and rate of return ratio. Profit margin ratios shows the relationship between profit and sales. Since profit can be measured at different stages, there are several measures of profit margin. The most popular profit margin ratios are: gross profit margin, operating profit margin, and net profit margin. Rate of return ratios reflects the relationship between profit and investment. The important rate of return measures are: return on assets, earning power, return on capital employed, and return on equity. Generally two types of profitability ratios are calculated:

Gross profit ratio

Net profit ratio

Return on assets

Return on capital employed

Earning per Share

3.4.1 Gross Profit Ratio

Gross profit is defined as the difference between net sales and cost of goods sold. This ratio shows the margin left after meeting manufacturing cost. It measures the efficiency of production as well as pricing. The formula for calculating gross profit ratio is:

Gross profit

Gross profit ratio= * 100

Net sales

[Rs. In lacks]

Year Gross Profit Net Sales Ratio (%)

2004-05 12237.94 59459.07 20.58

2005-06 13946.75 70206.23 19.87

2006-07 15869.49 81631.69 19.44

2007-08 19005.32 107187.29 17.73

2008-09 23898.07 137212.35 17.42

35

2004-05 2005-06 2006-07 2007-08 2008-0915

16

17

18

19

20

21

Interpretation:

From the above data, it is cleared that the gross profit is increasing every year. But, the gross profit ratio is decreasing every year. This happen because of more increasing in net sales than gross profit. Gross profit ratio which was 20.58% in 2004-05 decrease to 19.87% in 2005-06 which further decreased to 19.44% and to17.73% to in 2006-07 and 2007-08. It was further decreased to 17.42% last year in 2008-09.

3.4.2 Net Profit Ratio

Net profit ratio shows the earnings left for shareholders (both equity and preference) as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios provide a valuable understanding of cost and profit structure of the firm and enable the analyst to identify the sources of business efficiency / inefficiency. The formula for calculating net profit ratio is:

Net Profit

Net Profit Ratio = * 100

Net sales

36

[Rs. In lacks]

Year Net Profit Net Sales Ratio (%)

2004-05 311.23 59459.07 0.52

2005-06 323.74 70206.23 0.46

2006-07 411.50 81631.69 0.50

2007-08 451.51 107187.29 0.42

2008-09 575.53 137212.35 0.42

2004-05 2005-06 2006-07 2007-08 2008-090

0.1

0.2

0.3

0.4

0.5

0.6

Interpretation:

From the above data, it is cleared that the net profit is increasing every year. But net profit ratio is decreasing. This is because of increase in net sales every year. The ratio which is 0.52% and 0.46% in 2004-05 and in 2005-06, reaches to 0.50% and 0.42% in 2006-07 and in 2007-08. In 2008-09, the ratio remains same as 0.42 as that in 2007-08.

37

3.4.3 Return on Assets

Return on assets is an indicator of how profitable a company is relative to its total assets.  ROA gives an idea as to how efficient management is at using its assets to generate earnings. ROA is displayed as a percentage. It is also known as "return on investment". ROA tells you what earnings were generated from invested capital (assets). The assets of the company are comprised of both debt and equity. The formula for return on assets is:

Profit after tax

Return on assets = * 100

Avg. Total Assets

[Rs. In lacks]

Year Profit after Tax Avg. Total Assets Ratio (%)

2004-05 311.23 25802.02 1.21

2005-06 323.74 24936.56 1.30

2006-07 411.50 25178.50 1.63

2007-08 451.51 30813.17 1.47

2008-09 575.53 36144.45 1.59

2004-05 2005-06 2006-07 2007-08 2008-090

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

38

Interpretation:

Return on assets indicates how efficiently a firm is earning by employing its assets. From the above data, it is cleared that the return on assets is increasing every year. ROA ratio which was 1.21% and 1.30% in the year 2004-05 and 2005-06, increased to 1.63% in 2006-07. But after it, the ratio decreased in 2007-08 to 1.47%. But in 2008-09, it again increased to 1.59% which is good sign.

3.4.4 Return on Capital Employed

This ratio indicates the efficiency and profitability of a company's capital investments. In other words, ROCE ratio is indicator of how well a company is utilizing capital to generate revenue. The Return on Capital Employed ratio (ROCE) tells us how much profit we earn from the investments the shareholders have made in their company. The formula for calculating ROCE is:

Profit for the year

ROCE = * 100

Total assets – Cr. Liability

[Rs. In lacks]

Year Profit Total Assets – Cr. liabilities Ratio (%)

2004-05 311.23 17344.74 1.79

2005-06 323.74 15703.58 2.06

2006-07 411.50 14329.11 2.87

2007-08 451.51 22292 2.03

2008-09 575.53 18950.60 3.04

39

2004-05 2005-06 2006-07 2007-08 2008-090

0.5

1

1.5

2

2.5

3

3.5

Interpretation:

ROCE ratio indicates how a firm is generating revenue from the capital employed by it. In 2004-05, ROCE ratio was1.79% which increases to 2.06% and to 2.87% in 2005-06, and in 2006-07. But, it decrease to 2.03% in 2007-08 which again increases to 3.04% in 2008-09. The above data indicates increase in return on capital year every year which is good for Amul.

3.4.5 Earnings per Share

Earnings per share (EPS) are a way to relate income to ownership on a per share basis, and are used in evaluating share price. EPS calculation made over years indicates whether or not the firms earning power on per-share basis has changed over that period. Earnings per share simply show the profitability of the firm on per share basis. The formula for calculating earnings per share is:

Net profit

Earnings per share =

No. of share

40

[Rs. In lack]

Year Profit No. of share [In lacks]

Ratio (%)

2004-05 311.23 13.95 22.31

2005-06 323.74 15.99 20.25

2006-07 411.50 19.80 20.78

2007-08 451.51 22.29 20.26

2008-09 575.53 22.65 25.41

2004-05 2005-06 2006-07 2007-08 2008-090

5

10

15

20

25

30

35

40

45

Interpretation:

Earnings per share is earning available to share holders from the net profit. In Amul, the earnings per share are quite high. EPS in 2004-05 is of Rs.22.31, which decreased in 2005-06 to Rs. 20.25 per share. This ratio in next two year, i.e. in 2006-07 and in 2007-08 remains near to Rs. 20. But, in 2008-09, it again increases to Rs. 25.41 per share. It can be said that, share holders of Amul are earning good amount from their share.

41

3.5 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 helps in assessing the risk arising from the use of debt capital. Two types of ratios are commonly used to analyse financial leverage: structural ratio and coverage ratio. Structural ratios are based on the proportion of debt and equity in the financial structure of the firm. The important structural ratios are: debt-equity ratio and debt-assets ratio. Coverage ratios show the relationship between debt servicing commitments and the sources for meeting these burdens. The important coverage ratios are: interest coverage ratio, fixed charges coverage ratio, and debt service coverage ratio. The main leverage ratio we are going to find is:

Debt-assets ratio

Debt-equity ratio

Proprietary or equity ratio

3.5.1 Debt-Assets Ratio

The debt-asset ratio measures the ratio of the company's assets that is financed by non-owners. The debt-asset ratio is computed by dividing total liabilities by total assets. To focus solely on the more permanent capital of the term, the debt-asset ratio can also be calculated by dividing long-term liabilities (obligations not due for one year or longer) by total assets. The debt-asset ratio shows how great a proportion of a company's assets are financed through debt. If the ratio is less than one, than the majority of the company's assets is financed using equity. If the ratio is greater than one, the majority of the company's assets are financed using debt. Highly leveraged companies have high debt/asset ratios and could be in danger if creditors start to demand increased payment on debt. The formula for calculating debt-assets ratio is:

Debt

Debt-asset ratio =

Total assets

Here, the numerator of this ratio includes all debt, short-term as well as long-term, and the denominator of this ratio is total assets (the balance sheet total).

42

[Rs. In lack]

Year Debt Total Assets Ratio (%)

2004-05 7330.00 25277.94 0.29

2005-06 5290.00 24595.17 0.22

2006-07 2530.00 25761.82 0.10

2007-08 10001.63 35864.51 0.28

2008-09 6111.07 36424.39 0.17

2004-05 2005-06 2006-07 2007-08 2008-090

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Interpretation:

Debt-assets ratio shows the debt taken by a firm against the total assets. From the above data it is measured that, in Amul the debt-assets ratio are of fluctuating type. The ratio which was 0.29% in 2004-05 has decreased to 0.22% in 2005-06. This ratio again decreased to 0.10% in 2006-07. Then it increases to 0.28% in 2007-08 which again decreases to 0.17% in 2008-09.

43

3.5.2 Debt-Equity Ratio

A debt-equity ratio is a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A debt-equity ratio greater than one means assets are mainly financed with debt, and if it is less than one means equity provides a majority of the financing. If the ratio is high (financed more with debt) then the company is in a risky position - especially if interest rates are on the rise. The formula for calculating the debt-equity ratio is:

Debt

Debt-equity ratio =

Equity

[Rs. In lack]

Year Debt Equity Ratio (%)

2004-05 7330.00 3452.65 2.12

2005-06 5290.00 3754.41 1.41

2006-07 2530.00 4221.59 0.60

2007-08 10001.63 4591.36 2.18

2008-09 6111.07 4751.22 1.29

2004-05 2005-06 2006-07 2007-08 2008-090

0.5

1

1.5

2

2.5

44

Interpretation:

Debt-equity ratio shows the proportion of equity against the debt. From the above ratio it is clear that debt-equity ratio in 2004-05 was 2.12%. It was 1.41% in 2005-06, 0.60% in 2006-07, and 2.18% in 2007-08, 1.29% in 2008-09. In 2004-05, and in 2007-08 the ratio is more than 2 because of the higher amount of long term debt. But in remaining year it is less than 2. From the above data it is also cleared that the firm is mainly financed by debt.

3.5.3 Proprietary or Equity Ratio

This is a variant of the debt-to-equity ratio. It is also known as equity ratio or net worth to total assets ratio. This ratio relates the shareholder's funds to total assets. Proprietary / Equity ratio indicates the long-term or future solvency position of the business. Shareholder's funds include equity share capital plus all reserves and surpluses items. Total assets include all assets, including Goodwill. Some authors exclude goodwill from total assets. In that case the total shareholder's funds are to be divided by total tangible assets. As the total assets are always equal to total liabilities, the total liabilities, may also be used as the denominator in formula. The formula for calculating proprietary ratio is:

Share holders fund

Proprietary ratio = * 100

Total assets

[Rs. In lack]

Year Share holders fund Total assets Ratio (%)

2004-05 3452.65 25277.94 13.66

2005-06 3754.41 24595.17 15.26

2006-07 4221.59 25761.82 16.39

2007-08 4591.36 35864.51 12.80

2008-09 4751.22 36424.39 13.04

45

2004-05 2005-06 2006-07 2007-08 2008-090

2

4

6

8

10

12

14

16

18

Interpretation:

Proprietary ratio indicates share holders fund invested in a business. From the above ratio it is clear that proprietary ratio for year 2004-05 is 13.66%. In 2005-06 it is 15.26%, in 2006-07 it is16.39%, in 2007-08 12.80%, and in 2008-09 it is 13.04%. Though, it is less but good for a co-operative society.

46

3.5 Other ratio:

In other ratio, we will find:

Dividend pay-out ratio

Dividend per share

3.6.1 Dividend per Share

Dividend per share (DPS) is dividend payout to stockholder per each share. This ratio tells us about how much a company is paying its earning as dividend to its share holders per share hold by them. The formula for calculating dividend per share is:

Dividend after tax

Dividend per share =

Total no. of share

[Rs. In lack]

Year Dividend No. of share [In lacks]

Ratio

2004-05 202.69 13.95 14.53

2005-06 233.45 15.99 14.60

2006-07 287.10 19.80 14.50

2007-08 325.50 22.29 14.60

2008-09 337.15 22.65 14.89

47

2004-05 2005-06 2006-07 2007-08 2008-0914.3

14.4

14.5

14.6

14.7

14.8

14.9

15

Interpretation:

From the above data, it is clear that the dividend per year paid by Amul is nearer to Rs. 14 for last five year. In 2004-05, dividend paid by Amul is Rs. 14.53 which increases to Rs. 14.60 in 2005-06. But after it, dividend slightly decreases to Rs. 14.50 in 2006-07 which again increases to Rs. 14.60 in2007-08. Last year in 2008-09, it increases to Rs. 14.89. This ratio indicates that the Amul distribute this much amount as dividend from the profit earned from last five year.

3.5.2 Dividend Pay-out Ratio

Dividend payout ratio is percentage of profit that is paid out as dividend. The payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio. Investors can use the payout ratio to determine what companies are doing with their earnings. The formula for calculating dividend pay-out ratio is:

Dividend per share

Dividend pay-out ratio = * 100

Earnings per share

48

[Rs. In lack]

Year Dividend per share Earnings per share Ratio (%)

2004-05 14.53 22.31 65.13

2005-06 14.60 20.25 72.10

2006-07 14.50 20.78 69.78

2007-08 14.60 20.26 72.06

2008-09 14.89 25.41 58.60

2004-05 2005-06 2006-07 2007-08 2008-090

10

20

30

40

50

60

70

80

Interpretation:

It is clear from the above data that Amul distribute good amount of profit as dividend to its share holders. In 2004-05, Amul has distributed 65.13% of its earning as a dividend to its share holders. In 2005-06, it has distributed 72.10% of its earning as dividend which decreases to 69.78% in 2007-08. This amount again increases to 72.06% in 2008-09 which it has distributed as dividend from its earning. Last year in 2008-09, Amul has distributed 58.60% of its earning as a dividend.

49

CHAPTER 04: CONCLUSION

It is my pleasure that Amul gave me a chance to work with it for two month as trainee. We normally use to study various theoretical aspects of industries during our M.B.A. Programme. I understood how difficult it was to handle the entire organization; especially when it is a co-operative organization. Amul is really a great organization which distributes all its profits among its members i.e. those who supply milk to Amul. It would perhaps be the first organization in the India to run successfully on the co-operative basis.

The analysis of financial statements is process of evaluating the relationship between components parts of financial statements to obtain a better understanding of the firm’s position and performance. The report is devoted to an in-depth analysis of financial statements and its use for decision making by various parties interested in them. Ratio analysis is the widely used tool of financial analysis. It can be used to compare the risk and return relationship of the firm. It is defined as the systematic use of ratio to interpret the financial statement s so that the strengths and weaknesses of the firm as well as the historical performance and current financial condition can be determined. And as Amul is co-operative society, it is more interesting to see the financial performance of it because the aim of co-operative society is of not to earning profit, but to serve the society/people.

Different types of ratios are calculated while data interpretation process. Liquidity ratios, turnover ratios, profitability ratios, and leverage ratios have been calculated for the financial evaluation the statements like balance sheet and profit and loss a/c. Each ratio has their own importance and values. Some ratio indicates good performance of an organization in their respective area while some ratios came as poor results in their respective areas. And as a result, some important findings and suggestions are found during ratio analysis.

But, at the end this analysis as a part of my summer training report has ends with good results for both, the organization as well as me as trainer which will help me in future and for organization, it has provided valuable recommendation which may help an organization to make decision in future. To conclude, it was a great experience for me to work in Amul as a part of my summer training.

50

CHAPTER 05: FINDINGS & SUGGESTIONS

5.1 Findings

During my study, from the analysis of balance sheet i found that the organization is financially very sound and good. And every year it becomes stronger financially by earning good amount of profit.

I also found that Amul is mostly use debt finance than equity. Because the Amul is co-operative sector and it does not issue shares. It only issues shares to its milk centres from whom Amul may not get sufficient amount of money to run the organization.

It is also found that the turnover ratio of debtors is increasing every year which shows the good credit management of a firm.

I found that the net profit of the Amul Dairy is increasing every year which depict that the Amul enjoying the good position in the competitive market.

It is also found that Amul is distributing a good amount of money to its shareholders as a dividend every year.

From the data analysis and interpretation, I also found that the compared with last year’s Amul’s performance is increasing every year. In other words, Amul is doing well every year compared to last year.

51

5.2 Suggestions (Recommendations)

Some of the employees in the organization does not co-operate with others. So, Amul should try to know their problem should try to solve it.

I also found that some of the employees are trying to avoid their responsibility. So, Amul should take some strict action on it to run the organization smoothly.

During my analysis, I recognized that Amul is not fully utilizing some of its assets and also the inventories. So, I suggest that Amul should take necessary action on it and should try to fully utilize it.

52

BIBLIOGRAPHY

BOOKS

Chandra, Prasanna (2008), Financial Management: Theory and Practice (7th Edition), New Delhi: Tata McGraw-Hill Publication Company Limited

53