CHAPTER 1INTRODUCTION A Study of Financial Performance of Malnad Alloy Casting Private Ltd by Using Ratio Analysis1. General Introduction Ratio analysis is one of the powerful tools of the financial analysis. A ratio can be defined as the the indicated quotient of two mathematical expressions, and as the relationship between two or more things. Ratio is, thus, the numerical or an arithmetical relationship between the two figures. A ratio can be used as a yardstick for evaluating the financial position and performance of a concern because the absolute accounting data cannot provide meaningful understanding and interpretation. A ratio is the relationship between two accounting items expressed mathematically. Ratio analysis helps the analyst to make quantitative judgment with regard to concerns financial position and performance.Absolute figures are valuable but they standing alone convey no meaning unless compared with another. Accounting ratios show inter-relationships which exist among various accounting data. When relationships among various accounting data supplied by financial statements are worked out, they are known as accounting ratios.1.1 Statement of the problem:The topic chosen for the project is A Study of Financial Performance of Malnad Alloy Casting Private Ltd by Using Ratio AnalysisPrimary use of financial statements are evaluating past performance and predicting the future performance and both of these are facilitated by comparison. The financial soundness in terms of liquidity, leverage and profitability are the main objective of an organization. The analysis in this angle draw meaningful conclusion, so as to take right decision analytical techniques are required. Among such technique ratio analysis is very useful method to follow. The profitability of the firm depends on the efficiency with which fixed assets are used and the level of operating expenses to sales. To measure the financial performance the financial statements are required. The study is undertaken to process the financial data.A financial ratio shows the relationship between two financial variables. It helps in ascertaining financial condition of the company. Ratio analysis is a process of identifying the financial strengths and weakness of the company. The problem area related to ratio analysis.1.2 Objectives for the study: To understand the conceptual background of ratio analysis. To analyze the performance trend of the company on the basis of ratio analysis. To study the various accounting ratio, for the period of three years. To evaluate the liquidity and profitability position of the company. To know the ability of the company to meet its current obligation. To provide suggestion in the light of finding.1.3 Scope of the study:The study is mainly comprised of analysis and comparison of performance of industry by taking several parameters like Gross profit, Net profit, Reserve funds, Investments, Total turnover etc. By choosing the 3 years of balance sheet, profit and loss account, from the year 2012, 2013 and 2014 for ratio analysis. 1.4 Methodology of the study:Sources of dataData are facts, figures and other relevant materials, past and present, serving as bases for study and analysis The data serves as the basis for the analysis. Without an analysis of factual data, no specific inference can be drawn on the questions under study. Inferences based on imagination or guesswork cannot provide correct answers to research questions. The relevance, adequacy and reliability of data determine the quality of the findings of a study for solving any problem, the primary requirement is data. Before conducting the study, the sources of data are to be identified. They are:I. Primary data Primary data are original sources from which the researcher directly collects data that have not been previously available in the company's financial reports, web sites and other relevant bulletins.The major sources of primary data are Manager Accountant Clerks

II. Secondary data. These are the sources containing data, which have been collected and compiled for another purpose. The secondary sources consist of readily available compendia and already compiled statistical statements and reports, whose data may be used by researcher for his studies. Secondary data have been collected from several sources

The major sources of secondary data are given below. Reports/records Web sites Magazine1.5 Sampling planAs this project work is company-specific, without involving any field survey, no sampling plan has been drawn for the purpose of data collection1.6 Tools and techniques of data collectionFor the purpose of collecting and analyzing the data, simple statistical tools like classification, Tabulation and Ratio analysis have been extensively used.

1.7 Review of literature:Review of Literature refers to the collection of the results of the various researches relating to the present study. It takes into consideration the research of the previous researchers which are related to the present research in any way. Here are the reviews of the previous researches related with the present study:Bollen (1999) conducted a study on Ratio Variables on which he found three different uses of ratio variables in aggregate data analysis: (1) as measures of theoretical concepts, (2) as a means to control an extraneous factor, and (3) as a correction for heteroscedasticity. In the use of ratios as indices of concepts, a problem can arise if it is regressed on other indices or variables that contain a common component. For example, the relationship between two per capita measures may be confounded with the common population component in each variable. Regarding the second use of ratios, only under exceptional conditions will ratio variables be a suitable means of controlling an extraneous factor. Finally, the use of ratios to correct for heteroscedasticity is also often misused. Only under special conditions will the common form forgers soon with ratio variables correct for heteroscedasticity. Alternatives to ratios for each of these cases are discussed and evaluated. Cooper (2000) conducted a study on Financial Intermediation on which he observed that the quantitative behavior of business-cycle models in which the intermediation process acts either as a source of fluctuations or as a propagator of real shocks. In neither case do we find convincing evidence that the intermediation process is an important element of aggregate fluctuations. For an economy driven by intermediation shocks, consumption is not smoother than output, investment is negatively correlated with output, variations in the capital stock are quite large, and interest rates are procyclical. The model economy thus fails to match unconditional moments for the U.S. economy. We also structurally estimate parameters of a model economy in which intermediation and productivity shocks are present, allowing for the intermediation process to propagate the real shock. The unconditional correlations are closer to those observed only when the intermediation shock is relatively unimportant.Gerrard (2001) conducted a study on The Financial Performance on which he found that Using ratio analysis the financial performance of a sample of independent single-plant engineering firms in Leeds is examined with regard to structural and locational differences in establishments. A number of determinants of performance are derived and tested against the constructed data base. Inner-city engineering firms perform relatively less well on all indicators of performance compared with outer-city firms. The study illustrates the importance of using different measures of performance since this affects the magnitude and significance of the results. Financial support is necessary to sustain engineering in the inner city in the long run. Schmidgall (2003) conducted a study on Financial Analysis Using the Statement of Cash Flows on which he observed that Managers use many financial ratios to judge the health of their businesses. With the recent requirement of a statement of cash flow (SCF) by the Financial Accounting Standards Board, managers now have a new set of ratios that will give a realistic picture of the business. The ratios include cash flow-interest coverage, cash flow-dividend coverage, and cash flow from operations to cash flow in investments. These ratios are particularly useful because they show changes in a hotel or restaurant's cash position over time, rather than at a given moment, as is the case with many other ratios.

Murinde (2003) ) conducted study on Corporate Financial Structures on which he observed that the financial structure of a sample of Indian non-financial companies using a new and unique dataset consisting of a panel containing the published accounts of almost 900 companies that published a full set of accounts every year during 1989-99. In a new departure in the literature, the dataset includes quoted and unquoted companies. We compare the sources-uses approach to analyzing company financial structures with the asset-liability approach. We use both approaches to characterize and to compare the financial structures of Indian companies over time; between quoted and unquoted companies; and between companies which belong to a business group and those that do not. Finally, we compare our results to those obtained previously for India and for the industrial countries.McMahon (2005) conducted a study on Financial Information on which he found that financial statements mean little to the uninitiated. This paper, explains, in layman's terms, how to understand financial information. It covers measures of profitability. The second article will cover measures of company liquidity and the use of financial ratios. This paper continues to explain how to interpret and understand financial information. It deals with measures of liquidity, solvency and fund flows and describes how to establish standards against which a company's financial ratios can be compared. Lee (2008) conducted a study on Financial Risk on which he observed that Financial researchers, including those concentrating on the lodging industry, use various financial risk measures for their studies. Examples of those risk measures are beta, earnings variability, bankruptcy probability, debt-to-equity ratio and book-to-market ratio. The purpose of this study is, first, to descriptively investigate various financial risk measures used in the lodging financial literature by performing factor analysis and identifying four distinct risk groups. Second, this study examines the predictive ability of the four risk groups for lodging firm performance. The findings of this study suggest that strategic and stock performance risk factors better represent a lodging firm's financial risk than do bankruptcy and firm performance risk factors, and also, ROA than ROE better estimates lodging firm performance in terms of their relationships with financial risk factors. Johnson (2009) conducted a study on Financial Ratio patterns on which he found that the properties and characteristics of financial ratios have received considerable attention in recent years with interest primarily focused on determining the predictive ability of financial ratios and related financial data. Principal areas of investigation have included the prediction of corporate bond ratings and the anticipation of financial impairment]. Related studies have examined the characteristics of merged firms the differences in financial ratio averages among industries whether firms seek to adjust their financial ratios toward industry averages the relationship between accounting-determined and market-determined risk measures, and the influence of financial ratios on analysts' judgments about impending bankruptcy The general conclusion to emerge from these various research efforts is that a number of financial ratios have predictive and descriptive utility when properly employed.To summarize the literature, Ratio analysis is a key dimension of financial management, suggesting a relationship between profit and loss as mentioned in the balance sheet of an organization. Its appropriate use will go toward giving a true picture of the financial health of the unit. Its benefits can be seen in areas of management, production, marketing, personnel management etc1.8 Limitations of the study: The study was conducted only on the basis of data provided by the company. The study is limited to MALNAD ALLOY CASTING PVT LTD only, so it cannot be generalized. The analysis is limited to just three years of data study (from year 2012 to year 2014) for financial analysis.. In-depth study was not possible due to lack of time and access to the information is limited.

CHAPTER 2INDUSTRY PROFILE2.1 Introduction of the IndustryToday there is no product, which does not have one or more than one cast component. The need for casting has become more important with the growth of industrial societies. Castings are vital components of modern machines & transportation vehicles. The uses of castings are manifold. Some of the important uses of castings are follows:1. Cast metal parts are used for more than 90% of an automobile engine.2. Air craft jet engine bladder.3. Agricultural parts turbine vanes.4. Machine tool structure.5. Railway crossings.6. Pump, filter and valve.7. Auto component8. Industrial machineries etc.From the above application it is evident that without castings it is unlikely to bring into existence most of the products today. 2.2 Origin of castingA casting is the essential foundation of civilization. With it, man unlocked his future, placing him on the path toward conquering his environment. History tells us this happened Mesopotamia, todays modern Iraq.The oldest casting in existence today is believed to be a frog, cast in copper. The frog, cast in copper. The frogs complexity indicates that it was preceded by other simpler casting efforts. Things went slow back then. Tin, came around in the 16th century, but man used earths ores 4500 years prior to this.The Chinese got the nod for iron casting in around 1000B.C. India made steel in about 500 B.C. civilization in general was casting brass by then, (brass=copper+ zinc), which was many centuries before the Christian era. All along this path all the techniques for. CASTING AND MOULDING PROCESSES.were being discovered and recorded in to history.2.3 History of castingsThe origin of castings goes back to over 5000 years ago. After the Paleolithic age and the Neolithic age, which were both stone ages then, came the age of metals. This characterized the use of metal weapons and instruments instead of stone. The first was the copper age where the axes and hammers made of copper were used. Then came the Iron Age, after few centuries. Weapons characterized this age and the ornaments made of iron. Then came the alloy of copper and tin; these were contemporarily observed in all the upcoming civilization, Aryan civilization and Babylonian civilization. Even the gold and silver instruments were casted and used in those days.As the demand for the automobiles, railways, industrial machinery, and machine tools started increasing rapidly, the casting industries get the real impetus.2.4 Meaning of castingCasting is the process of giving shape to or reproducing an object by pouring its material in liquid form into a mould. Casting is the process of the melting metal and pouring it into a cavity that has been molded on a pattern into a desired shape. The metal is allowed to cool and solidified. The solidified metal is called the casting. Usually castings are manufactured in a commercial setup called foundry. Thus, foundry is defined as a commercial setup for manufacturing casting.2.5 Types of FoundriesFoundries are classified according to the nature of work they undertake, such as:1. Captive Foundry: This type of foundry forms an integral part of some manufacturing organization, which requires the castings made by the captive foundry to manufacture its products.2. Jobbing Foundry: This type of foundry normally produces small number of castings of a given type for different customer. Such foundry sometimes also undertakes mass production.3. Production Foundry: It is highly mechanized and can produce castings in large scale economically.4. Semi-Production Foundry: It is a combination of jobbing foundry and production foundry as regarding its nature and work are concerned.2.6 Growth and Development of IndustryToday India is the third largest producer of castings in the world with approximately 5,000 facilities spread across the country and a production of around 9.5 million tons per year The various types of castings which are produced are ferrous, non ferrous, Aluminum Alloy, graded cast iron, ductile iron, Steel etc for application in Automobiles, Railways, Pumps Compressors & Valves, Diesel Engines, Cement/Electrical/Textile Machinery, Aero & Sanitary pipes & Fittings etc& Castings for special applications.However, Grey iron castings have the major share i.e. approx 68% of total castings produced.There are approx5000 units out of which 85% can be classified as Small Scale units & 10% as Medium & 5% as Large Scale units.Approx 800 units are having International Quality Accreditation. Several large foundries are modern & globally competitive & are working at nearly full capacity. Most foundries use cupolas using LAM Coke. There is growing awareness about environment & many foundries are switching over to induction furnaces & some units in Agra are changing over to coke less cupolas.

Production in Million TonesChart No-2.1: Production in Million Tones(Source: Foundry informatics centre)2.7 Exports trendsThe Exports have been showing healthy trends approx 25-30% YOY as can be seen from the charts below. However, the current exports for FY 2013-14 are approxRs. 12180 Crore. The exports are slowdown due to weak demand.Chart No-2.2: Export of Castings in India(Source: Foundry informatics centre)

2.8 EmploymentThe industry directly employs about 5,00,000 people & indirectly about 1,50,000 people & is labor intensive. The small units are mainly dependant on manual labor However, the medium & large units are semi/ largely mechanized & some of the large units are world class.2.9 Important Foundry clusters in IndiaChart No-2.3:Important Foundry clusters in India

(Source: Foundry informatics centre)

2.9.1An overview of the foundry clusters in India:There are more than 5,000 foundry units in India, having an installed capacity of approximately 7.5 million tons per annum. The majority (nearly 95%) of the foundry units in India falls under the category of small-scale industry. The foundry industry is an important employment provider and provides direct employment to about half a million people.A peculiarity of the foundry industry in India is its geographical clustering. Some of the major foundry clusters in the country are shown in the map.Typically, each foundry cluster is known for catering to some specific end-use markets. For example, the Coimbatore cluster is famous for pump-sets castings, the Kolhapur and the Belgaum clusters for automotive castings and the Rajkot cluster for diesel engine castings.A summary of the five major foundry clusters in India - Belgaum, Batala/Jalandhar, Coimbatore, Kolhapur and Rajkot - is provided below.2.9.2 Foundry Cluster: BelgaumBelgaum, located in the state of Karnataka, is an important foundry cluster. There are about 100 foundry units at Belgaum. The geographical spread of the cluster includes Udyambag and Macche industrial areas. The foundry industry at Belgaum came up primarily to cater to the needs of the automobile industry at Pune.Belgaum is recognised to be a reliable source of high precision, high volume and economical castings. A significant percentage (almost 20%) of the foundry units at Belgaum has ISO 9000 certification and export casting.The foundry industry at Belgaum caters to a wide variety of end-use applications as can be seen from the table below.Table No-2.1: Distribution of foundry units at Belgaum by end-use marketsParticularsDistribution of foundry

Automotive/oil engines31 %

Pumps/valves21 %

Electric motors10 %

Tractors/agricultural implements7 %

Food processing industry5 %

Others26 %

(Source: The Institute of Indian Foundrymen)Cupola is the most common melting furnace at Belgaum. Three out of every four foundry use cupola as their main melting furnace. Most of the cupolas are of conventional designs. Divided blast cupola is not very common yet in the cluster. Low ash coke is commonly used in the cupolas.About 40% of the foundry units have electric induction furnace, which are used either as the main melting furnace or for duplexing with cupola. A relatively small percentage (about 5%) of the foundry units uses rotary furnaces.2.9.3 Foundry Cluster: CoimbatoreCoimbatore, located in the state of Tamil Nadu, is an important foundry cluster in Southern India. The foundry industry at Coimbatore came up mainly to cater to the needs of the local textile and pump-set industries. There are about 600 foundry units in Coimbatore. The geographical spread of the cluster includes ThanneerPandal/Peelamedu, Ganapathy, SIDCO, Singanallur, Mettupalayam Road and Arasur Village.Most of the foundry units cater to the needs of the domestic market. Small percentages (about 10%) of the foundry units are also exporting castings. Nearly half the number of foundry units is manufacturing castings for the pump-set industry. The distribution of the foundry units by end-use markets is given below.Table No-2.2: Distribution of foundry units at Coimbatore by end-use segmentsParticularsDistribution of foundry

Pumps/valves46 %

Food processing industry7 %

Textile machinery6 %

Electric motors6 %

Automotive4 %

Others31 %

(Source: The Institute of Indian Foundrymen)Cupola is the predominant melting furnace employed by the foundry units. Majority (about 70%) of the cupolas in the cluster are of conventional designs. Electric induction furnaces are used by just 10% of the foundry units, mainly to manufacture graded castings and for duplexing operation.

2.9.4 Foundry Cluster: Batala and JalandharBatala and Jalandhar, located in the state of Punjab, are important foundry clusters in Northern India. The majority of the foundry units is in the small-scale and produces grey iron castings. About 15% of the foundry units are also exporting their products.The foundry units at Batala and Jalandhar are predominantly making machinery parts and agricultural implements. Castings for a number of other end-use applications are also produced as can be seen from the table below.Table No-2.3: Distribution of foundry units by end-use segmentsParticularsDistribution of foundry

Automotive/oil engines8 %

Tractor parts6 %

Pumps/fans10 %

Machine parts33 %

Agricultural implements35 %

Others8 %

(Source: The Institute of Indian Foundrymen)Cupola is the predominant melting furnace employed by about 95% of the foundry units at Batala and Jalandhar. The majority of the cupolas are of conventional designs. The foundry units at Batala and Jalandhar usually use high-ash coke in the cupolas.2.9.5 Foundry Cluster: KolhapurKolhapur, located in the state of Maharashtra, is an important foundry cluster for automotive castings. Historically, the foundry cluster came up to cater to the casting requirements of the local industries like oil engine manufacturing, sugar mills and machine tool industry. There are about 250 foundry units at Kolhapur. The geographical spread of the cluster includes Kolhapur, Sangli, Ichalkaranji and Hatkanangale areas.A significant percentage of foundry units (about 25%) at Kolhapur are exporting castings. The foundry units cater to a wide range of end-use sectors, as can be seen from the following table.Table No-2.4: Distribution of foundry units at Kolhapur by end-use marketsParticularsDistribution of foundry

Automotive/oil engines42 %

Pumps/valves17 %

Sugar industry6 %

Tractor parts/agricultural implements4 %

Others31 %

(Source: The Institute of Indian Foundrymen)Cupola is the predominant melting furnace employed by about 75% of the foundry units. The majority of cupolas in the cluster are of conventional type. Divided blast cupola (DBC) can be found in some of the foundry units. Most of the foundries use low ash coke. A number of foundry units (about 40%) have electric induction furnace, which is used to manufacture graded castings and for duplexing with cupola.2.9.6 Foundry Cluster: RajkotRajkot, located in the state of Gujarat, is an important foundry cluster in Western India. There are about 500 foundry units at Rajkot. The cluster came-up mainly to cater to the casting requirements of the local diesel engine industry. The geographical spread of the cluster includes AjiVasahat, Gondal Road and Bhavanagar Road areas.Majority of the foundry units at Rajkot produces grey iron castings for the domestic market. A relatively small percentage (about 10%) of the foundry units exports castings such as electric motor castings, etc.Apart from oil engines, the foundry units at Rajkot cluster caters to a number of other end-use applications, as can be seen from the table below.

Table No-2.5:Distribution of foundry units at Rajkot by end-use marketsParticularsDistribution of foundry

Oil engines42 %

Automotive/textile15 %

Machine tools11 %

Pumps/valves7 %

Others25 %

(Source: The Institute of Indian Foundrymen)Cupola is by far, the predominant melting furnace used by nearly 90% of the foundry units. Most of the cupolas are of conventional type. A local cupola design, called 'Rajkot cupola', is quite popular in the cluster. Use of low ash coke is common among the foundry units. A smaller number of foundry units (about 10%) producing castings for the automotive industry use electric induction furnace for melting.2.10 Future ProspectsThe Indian foundry industry generates revenue of about $12 billion, with exports worth about $2 billion. The Government of India has outlined a manufacturing policy recognizing the importance of manufacturing in the growth of the Indian economy with a target to increase the share of manufacturing in GDP from 17 to 25 per cent and the simultaneous creation of millions of jobs. This will necessitate a strong foundation for the foundry sector which is one of the most vital feeder industries to support the manufacturing sector.Based on past trends and future projections, the Indian foundry industry needs to grow by at least three times the current capacity within the next ten years to meet the growing requirements of the domestic and future export markets. Also, globally India is becoming a more sought out destination for future foreign investment, 2.10.1 Projected Market SizeWhile there is a growth expected in the auto-sector and the casting sector alike, the domestic market is set to surge at least 3 times by 2016. The auto sector alone should go up to $10 billion by 2016 and the casting industry is projected to be a $19.2 billion industry by 2016. The global growth rate for castings follows approximately twice the global growth rate in GDP in absolute terms. So apart from the domestic demand, Indias exports are to go up to $3 billion with a 20% growth in direct exports. Table No-2.6:Projected Market SizeParticularCurrent ContributionCurrent ValueProjected Growth by2016

Auto Sector Demand32% of demand$ US 2.5 billion(2.18 MT)$US 10 billion

Casting Industry formanufacturingOver 90% of the localdemand is locally met$ US 18 billion$ US 19.2 billion(17-18 MT)

India Exports15% of production$ US 1 billion$ US 3 billion

(Source: Foundry informatics center)2.10.2 Projected Demand-Supply GapWhile there is a clear picture of demand side, the supply side is not prepared to make pro rate Investments to take up the opportunity arising out of growth. Even assuming that the past growth rate would continue there will be a large demand supply gap in excess of 11 million TPA by year 2016.

2.2 COMPANY PROFILE

2.2.1 Details of the CompanyName of the company M/S Malnad Alloy Casting Private Ltd. [MACPL]

Regd.office/works36-A, Shimoga-Bhadravathi Industrial Area, Machenahalli-577 222,Shimoga.

Phone Number(08182) 246141/0246143

Fax Number+97-8182-246142

E-mail MACPL@sancharnet.in

Web address Malnadcastings.com

Contact persons H.C.Ravindranath(Managing Director) Y.V.MadhukarJois (Commercial Director)

ProductsAlloy Steel, Stainless Steel, Nickel Alloy Castings To All International Standards For Process Pumps, Valves And General Engineering Industries.

BankersM/s State Bank of MysoreMain Branch, B.H.RoadShimoga-577201.

2.2.2 Background of the CompanyThe company is situated at Shimoga-Bhadravathi industrial area Machenahalli which is 260kms from Bangalore on national highway 206 & 9kms from Bhadravathi a well-known steel city. The unit is located in 45 acres plot with built up area of 45,300 sq. feet.The foundry started commercial production in the year 1985 and is managed by a team of highly experienced foundry professionals headed by Mr. H.C.RAVEEDRANATH (M E) (foundry tech) who has more than 35 years experience in foundry industry under various capacities. The company is equipped with one number of 1000kg/1500kgs connected to a power pack of 450kw medium frequency induction furnaces & one number of 150kg/350kg connected to a power pack of 175kw medium frequency induction furnace with all accessories with this company can produce quality castings weighting from 1kg to 1000kgs single piece. 2.2.3 Nature of Business CarriedM/S MACPL is a modern alloy steel foundry geared to manufacture quality alloy steel, stainless steel & nickel alloy castings to all international standards for process pumps valves & general engineering industries.The company has adopted 100% no-brake process using Australian make continuous mixer both for core making & moulding with results in superior surface finish internal soundness & reliability. Company has also installed shell core shooter for production of small castings with accurate core profile. The company is equipped with electrically operated batch type heat treatment furnace with automatic temperature indicator cum controller. Graphic recorded & the visitor controls for a predetermined heat treatment cycle with controlled heating. The company has captive generating set of 1375KVA requirement of foundry. The entire operation of the company right from placement of purchase order of raw materials & consumables to invoicing of materials manufactured by the company covering entire process has been computerized. In the process company has developed good information management system.The company has a good quality setup. Melt chemistry is controlled by Direct Reading Spectrometer supplied by M/S. Spectra Analytical instruments Kleve, Germany. All heats are numbered and test certificates are provided for each heat. Hundred percent visual inspections carried out on all castings and dimensional inspection is done on sample castings NDT tests like Radiography are done on first sample castings and thereafter as required by customers.The company has supplied castings under third party inspection agencies like UDHE INDIA, NPC, NTPC LLOYDS, IRS, PPIL, etc.The companys quality system was awarded ISO 9002 certificate by RWTUV GERMANY in the year 1995 and subsequently re- certified as per ISO 9001:2000 in year 2005. The company has approval in accordance with AD merkblatt WO/TRD100 and PED approval by RWTUV Germany.The company has installed capacity of around 2100 tons and at present is producing around 160 tons per month. The major part of companys production is for the valve, out of which nearly 40% to 50% is for ball valves. The company has developed expertise in making quality valve & pump castings in all grades of stainless steel like CF-8M(SS 316), CF-8(SS 304), CN-7M(Alloy-20), CF-3(SS 304L), CF-3(SS 316L), Duplex stainless steel like CD-4M CU, CD4MCUN, Gr.4A & Gr.5A etc. And Nickel Base Alloys like CW-12MW, N-12MV, inconel-600,625,825 etc,The company is directly exporting castings to Spain, U.K., Netherlands, and Australia& United States of America. And almost 40% of the companys product goes to 100% export oriented unit.2.2.4 Vision, Mission & Quality Policy Vision:To become a global entity for the supply of finished cast components in the wide range of materials with highly committed and socially responsible employees

Mission:1. To meet the castings requirements of the country using latest state of the art technology in wide range of materials at competitive cost. 2. Provide stable employment and develop highly skilled technical labour and wide vendor base.3. Adopt environmental-friendly technology and create awareness on energy conservation.4. Serve the community around through welfare schemes.Quality and Objective Policies: The quality policy of MACPL is to ensure manufacture, supply products of high quality to the complete satisfaction of each customer, & thus achieve leadership in market as reputed & reliable supplies. To achieve this goal M/S MACPL shall continuously pursue these objectives.1. Strive continuously towards the goal of making products right first time and every time.2. Train and motivate employees for continuous improvement of quality and productivity. 3. Develop lasting relationship with suppliers and customers through continuous improvement of quality.4. Strive towards making work environment safe and environment friendly. 5. Strive towards reducing production cost through waste minimization.6. Strive towards increase of export to 20% in next 10 years.7. Update the systems to suit the changing needs of the customers as well as technology changes.8. Measure the achievement of these objectives and progress towards excellence in manufacturing.

2.2.5 List of customers

PARTY PLACE PRODUCT

M/S MVC HUBLISteel/Nickel Alloy Casting for ball valves

M/S MVPHUBLICentrifugal process pumps

L&T Ltd. CHENNAITyre M/C Manufactures

National heavy engineering co-operative ltd. PUNESugar machinery

M/S CPV engineering Pvt. Ltd.HUBLICentrifugal process pumps

VK Pumps (i) Ltd.NASIKMetering & dozing pumps

BHELTRICEYValve components

M/S Petrochemical engineering enterprises CHENNAIGare valves

M/S Uniklinger Ltd.AHMEDNAGARPiston valves

100% EOUAdvance valves global NODIADual plate check valve

M/S British engines (i) Pvt. Ltd. BANGALREThermal plant castings for export

Flowserve (i) control PL BANGALOREGlobe & ball valves type control valves.

Flow serve MPLVHUBLICentrifugal pumps

Direct ExportEspee IACIDADES HYDRA.SLSPAINValve components

SPIRAX-SARCO LTD.UKValve components

Flowserve AUSTRALIAMechanical seals

Gebrpladdet BVNETHERLANSEarthmoving equation

FlowserveSINGAPUREGlobe & ball valve type control valves

2.2.6 Product ProfileThe major part of companys production is for valve industry out of which nearly 40 to 50% is for Ball Valves. The company has developed expertise in making quality and pump castings in all grades of stainless steel like cf-8m (ss316), cf-8(ss304) cn-7m(alloy20), cf-3(ss304), cf-3m(ss3161), duplex stainless steel like cd-4m cu, cd-4m cun-gr 4A and gr 5A etc. in addition, Nickel base alloys like cw-12 mw, n-12mv, inconel-600, 625, 825 etc.The following are the various Valves and Pumps manufactured in the companyVALVES PUMPS

Ball valve.Self-priming pumps

Plug valveStage casting pumps

Gate valveCentrifugal process pumps

Glob valveMelting and dozing pumps

Butterfly valveSteam pumps

Safety release valveHydraulic eye ends

Control valve

Alloy Types: TYPEGRADE

Stainless steelA 890 GRADE 4AA 890GRADE 5ACF-8M (SS316),CF-8 (SS304)CA-15, CN-7M(ALLOY-20)CF-3 (SS3041) 3M (SS316L)CD-4M CV, DIN-1, 4408/1.458

Nickel alloyCW-12MWN-12MVCW6MINCONEL625 (CW6MV)INCONEL 600(CY40)

Alloy steelWCB, LCB, LC3, LCC,WC6, WC9, C5,etc.

2.2.7 Area of OperationThe area of operation of this company includes global, national, & regional. The company is directly exporting casting to Spain, UK, Netherlands, Australia, and USA & almost 40% of the companys product goes to 100% export oriented units.2.2.8 Infrastructure FacilitiesLand and BuildingMalnad Alloy Castings Pvt. Ltd. Is situated in Machenhalli industrial area, which is just 9 km from Bhadravathi a well-known steel city. The company is located in an area of about 4 acres, in which the built-in area is about 2 acres; remaining 2 acres includes a well-maintained garden and a spacious parking lot. 2 acres of built in area consists of production unit (135 square meters), inspection shop (24 square meters), pattern shop and storage (49 square meters), and office building (25 square meters).WaterAll the blocks of the factory are connected with Intercom. The company has well laid internal tat roads. Water is an important element for a foundry. MACPL gets its water supply from KIADB and a bore well. It also has a large overhead tank for storing water.PowerThe company has a direct express feeder line from the grid to factory for continuous clean power without breakages or voltage fluctuation. It has contracted demand of 1000 KVA from the KPTCL. The company also has Two DG sets 850 KVL capacity to provide backup power supply in case of failure in grid supply.

Safety MeasuresThe group has ensured the availability of adequate protective attire and equipment for its workers working in the sensitive area where working could be hazardous. Complete guidelines for safe operations have been prominently displayed in the respective operation area. The group has schemes for insurance of workers against injuries/fatality while on duty. The unit are insured against natural calamities, have firefighting equipments in place and are capable of thwarting risk of any major natural calamities.

2.2.9 Competitors InformationThere are on potential competitors for this company inside Karnataka. However, major competitors do exist outside the state. There are as follows: Samco Valve, Chenni Ranganathan Industries, Coimbatore Shah Preci Casting, Kolhapur Aruna Alloys Industries, MadhuraiSome of the local competitors are Eshwari Tech Pragathi Alloys Shantala Sperocast Pvt Ltd2.2.10 Future growth and ProspectsIn order to remain competitive in the world market in future, it is a necessity to slash past while improving the quality and keeping in the environmental considerations. Focusing on design: fist, improve design capability in metal casting are critical to the industrys ability to produce cast products that are competitive world wide. Improvements in this arena will enable metal casting to manufacture past is not possible with current design constraints, there by opening new markets. Improve design will also reduce testing tryout on the shop floor and replace it with computer based design and analysis, significantly reducing energy and environment impacts. Improvements in the metal casting process can be achieved by focusing on these interrelated areas. Preventing the sand through recycling. The expansion program of manufacturing capabilities involves including continuous mixture of sand operation. CNC machining and testing equipment will be upgraded to cater to increasing customer expectations. To enter marine segment in a big way. Capability to meet future needs and expectation of customers. Increase the revenue from overseas business segment substantially. To satisfy employee needs. To improve infrastructural facilities. Adopting proper plan of action at a right time.

2.2.11 SWOT ANALYSISStrength The company enjoys good human resource. The company is financially sound. Easy availability of raw material, i.e., steel scrap. The company has adopted latest technology for operation. The greatest strength of MACPL is its highly skilled and committed employees. Large infrastructure & manufacturing facilities. Strong research and development. The company has experienced office staff. The management of the company maintains a cordial relationship with the workforce. The company uses the upgrade technology to minimize the wastages in the production department.

Weakness Transport facility is not good. The employees have to walk a long way from the nearest bus stop. The company does not have its own products to sell. It should rely heavily on customer orders. The company depends heavily on the casual workforce in its production activity, The company outsources the transport requirement to carry goods to the customer place. Lack of space inside the production department.

Opportunities The company has links with the firms, which are situated in different parts of Europe Thus, the company can expand its business in Europe, which is a potential market for industrial machines By maintaining its product quality, the company can enter different foreign markets. Cheap and skilled labor provides an opportunity for the company for producing quality goods economically and efficiently. Presence of auto majors in the region, especially in south India. Industrialization is at booming pace nowadays, which acts as a good opportunity for the foundry industry. Liberal import-export policies framed by the government of India are also an opportunity for the company in exporting its goods and importing the necessary materials from foreign countries.Threats Pollution control norms laid down by the government are getting stringent. Rising cost of raw materials. Threat from spurious component manufactures. Technological inequality among foundries. I.e. a technologically underdeveloped foundry may not stand long in front of a foundry using latest technology. Industries heavily rely on non-renewable resource. These resources may get exhausted. Increasing competition. Research and development initiatives. A liberal import-export policy has made the Chinese steel industries to enter India. With their cheap products, they can kill domestic industries

2.2.12 Financial StatementBALANCE SHEET AS AT 31.03.2014

PARTICULARS31.03.201431.03.2014

IEQUITY AND LIABILITIES``

Shareholder's funds

(a) Share Capital89,88,000 89,88,000

(b) Reserves & Surplus18,85,91,54415,82,33,534

Non-Current Liabilities

(a) Long-term Borrowings3,22,66,10448,44,545

(b) Deferred tax liability (net)59,06,53143,46,566

CURRENT LIABILITIES

(a) Short-term borrowings18,77,04,97315,82,60,925

(b) Trade payables8,49,90,60711,95,90,751

(c) Other Current liabilities50,10,66446,43,679

(d) Short term provisions2,64,56,3091,96,26,546

TOTAL53,99,14,731 47,85,34,546

IIASSETS

NON-CURRENT ASSETS

(a) FIXED ASSETS

(i) Tangible Assets11,19,15,0686,21,92,725

(ii) Intangible Assets1,05,9991,45,713

(b) Non-Current Investments29,95,59029,95,590

(c) Long-term loans and advances71,85,75756,73,526

Current Assets

(a) Inventories11,68,05,09212,84,17,722

(b)Trade Receivables22,67,88,50220,74,19,400

(c) Cash & bank balances48,17,50589,78,732

(d) Short-term loans and advances2,68,0832,83,857

(e) Other Current assets6,90,33,1366,24,27,280

TOTAL53,99,14,73147,85,34,546

STATEMENT OF PROFIT & LOSS FOR THE YEAR ENDED 31.03.2014

PARTICULARS31.03.201431.03.2013

IINCOME``

Revenue from Operations (Gross)77,81,90,01275,90,51,908

Less: Excise Duty5,98,80,7575,83,10,017

Revenue from Operations (Net)71,83,09,25570,07,41,891

Other Income1,91,98,126 9,982,055

TOTAL REVENUE 73,75,07,38171,07,23,946

II EXPENDITURE

Cost of Material Consumed37,99,15,71041,96,27,903

Changes in Inventories of Work in process 11,646,535 (9,069,047)

Employee Benefits Expense4,19,47,2583,32,64,417

Finance Costs2,55,71,1871,47,42,567

Depreciation and Amortisation Expense73,70,81066,98,817

Other Expenses21,25,47,71520,12,74,046

TOTAL EXPENSES 67,89,99,21566,65,38,702

III Profit before tax5,85,08,1664,41,85,244

Tax Expenses

Current Tax1,83,58,0001,41,38,000

Deferred Tax15,59,9658,80,431

VI Profit for the year 3,85,90,2012,91,66,813

VII EPS (Basic & Diluted) 429.35334.28

CHAPTER 3THEORETICAL BACKGROUND OF THE STUDY

3.1 Nature and meaning of financial analysis Analysis means, critical examination of the given information. Financial Analysis involves critical examination of accounting information given in the financial statements. Financial analysis consists of the application of analytical tools and techniques to the data in financial statements in order to derive from the measurements and relationship that are significant and useful for decision making. The process of financial analysis can be explained in different ways according to the data in financial statements in order to derive from the measurements and relationship that are significant and useful for decision making. The process of financial analysis can be explained in different ways according to the objectives to be obtained. According to Myer Financial analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statement and a study of the trend of these factors as shown in a series of statements in a simple way, The financial analysis is the statement of the information contained in the financial statement is such a way that it will make a full analysis of profitability and financial position of the firm. Above all financial analysis reduces reliability on intuition guesses and thus narrows the areas of uncertainty that is present in all decision making processes.3.2 Objectives of Financial Analysis:Financial Analysis helps to assess the financial position and profitability, which helps in various managerial decision making process. Ratio analysis is such tool used in analyzing the financial statement. It helps in comparing the financial statement over a period of year or comparison between firms in the industry. Some of The Main Objectives Of Financial Analysis Are: To analyze the operational efficiency of the firm. It helps to assess the long term solvency of the organization. It helps in comparative analysis within the firm and between the firms in the industry. The trend analysis helps in forecasting and preparation of budgets. It assesses the present and future earning capacity of the firm. To helps in analyzing the financial stability of the firm. It helps in analyzing the accuracy and meaning of the financial data.3.3 Techniques of Financial AnalysisThe most commonly used Techniques of financial analysis are: Comparative Financial Statement Analysis (Trend Analysis). Common Size OR Measurement Statement Analysis. Fund Flow Statement Analysis. Cash Flow Statement Analysis. Net Working Capital Analysis. Ratio Analysis.Tools for Financial Statement AnalysisFollowing the important tools which are used for undertaking FSA:a) Comparative Statementsb) Common Size Statementsc) Ratio Analysisd) Trend Analysis e) Du-Pont analysisf) Fund flow analysisg) Cash flow analysish) Cost-volume profit analysisFINANCIAL STAMENTSThe financial statements are the end product of financial accounting process. The financial statements are nothing but the financial information presented in concise and capsule form, and the financial information is the information relating to the financial position of any firm. The basic source which provides the financial information is the annual report of the company, which is presented by the company to its shareholders at the annual general meeting. This annual report contains the chairmans report, the balance sheet, and the income statement. The auditors report together with number of schedules, annexure, etc. though the presentation of annual report is a statutory requirement under the companies act, 1956, every firm prepares the following financial statements.1. The Balance Sheet2. The Income StatementBALANCE SHEETThe balance sheet is regarded as the most significant and basic financial statement of any firm. The balance sheet is prepared by a firm to present a summary of financial position at a given point of time, usually at the end of a financial year.It shows the state of affairs of the firm and the contribution of the owners of the firm. The balance sheet in fact balances the assets of the firm against its financing, i.e., the total value of the assets must be equal to the total claims against the firm and this can be stated asTotal assets=Total claims = {Liabilities + shareholders equity}The balance sheet includes:I. AssetsII. LiabilitiesAssets:Assets are the monitory value of the resources that are owned by the concern at a measurable cost. A resource is valuable if it is in the form of cash or convertible into cash or expected to benefit in the future operation of the business. Assets includes 1. Physical resources like land, machinery, plant, building, stocks, etc.2. Non-physical resources like cash, securities, accounts receivables, etc.3. Intangible resources like goodwill, trademark, etc.4. Future benefit like expenses paid in advance.Liabilities:Liabilities are obligations of the concern. It refers to the amount owed by a business to other parties, either for purchase of goods on credit (or) for the purchase of assets on credit (or) for the loans borrowed (or) for the services received on credit.INCOME STATEMENT;It is also known as profit and loss account or the statement of earnings. This statement summarizes the revenues and expenses of the firm for an accounting period. It gives the details of sources of income and expenses and thus it provides the summary of the operating results of the firm for a specific period. It matches the revenues with the costs that are incurred in generating the revenues, and shoe the difference between the two as the net profit made or net loss incurred during the period. The income statement shows the results of the operations of the firm during the period. The income statement is therefore a flow report against the balance sheet, which is a stock report or a status report. The income statements depict the earning capacity of the firm during the period under consideration.The main contents of the income statement are Gross profit Operating expenses Operating profit Non-operating surplus/deficit Profit before interest and tax Interest Profit before tax Tax Profit after tax

Procedure of financial statement analysis:Generally there are three steps, involved in the analysis of financial statements. They are selection, classification and interpretation. The first step involves selection of information/data relating to the purpose of analysis of financial statements. The second step involves the methodical classification of the data and the last and third step includes drawing inferences and conclusions. Thus, the main elements which are used in the process of analysis and interpretation are as follows:1. Re-arrangements of financial statements:For analysis, it is necessary to reclassify the data contained in the financial statement into purposive classes so that minimum information from every data for analysis can be obtained. Reclassification and rearrangement of different data depends upon the purpose of analysis.2. Comparison:After the classification of data of financial statements into different categories, it is necessary to derive comparative data of the same enterprise of the past period if it is a time series analysis. In case of cross sectional analysis, it is necessary to derive comparative data of the same accounting period of the similar or comparable enterprise. For this comparative study is essential.3. Analysis:Comparative financial data are then analyzed with references to financial characteristics such as profitability, solvency and liquidity.4. Interpretation:The concluding part of financial statement analysis is interpretation of financial information generated in the process of financial statement analysis. The interpretation should be precise and point toward the movement of various financial parameters. Finally it will be presented to the management in the form of reports.

ANALYSIS /DESIGNCamels Ratios

Introduction: As Credit unions will be aware, the Final Report on the Commission of Credit Unions made the following recommendation: It is the Commissions view that the CAMELS system is preferable as a way of assessing viability. It is a tried and tested mechanism internationally which draws from prudential returns and onsite monitoring. Furthermore, it offers a ready way of thinking about viability as both an holistic concept and a relative assessment framework. However, for the purposes of informing future decisions about credit unions, CAMELS needs to be augmented with forward looking analysis, based on a PCAR and other metrics.

The ILCU Monitoring Department uses the PEARLS Monitoring system, as developed and endorsed by WOCCU and PEARLS is in use in credit unions worldwide. Initially the ILCU adopted the PEARLS system following passing of the following Resolution at BDM 2003: Resolution No. 47:That this Biennial Delegate Meeting, in keeping with best international credit union standards and practice, adopts the PEARLS Monitoring System amended as appropriate to suit the Irish Credit Union Movement circumstances.

Next steps review of both systems: The ILCU Monitoring Department are currently reviewing and comparing the CAMEL and PEARLS systems, and the different approaches taken under each system, in order to go forward following best international practices, and in order to provide the best possible financial reporting and information to ILCU credit unions that are facing an extremely challenging environment. The ILCU Monitoring Department has been consulting with WOCCU regarding the merits and limitations of both PEARLS and CAMEL(S) systems.

During this review we must also be mindful of pending legislation and the Commissions recommendations regarding the introduction of a Prudential Rule Book: that would set out in detail what is required in each of the relevant areas. The Rule Book should include prudential controls, limits, standards and requirements on key areas, including: reserves; lending; investments; borrowing; members savings; liquidity. The goals and benchmarks that will be set out must be incorporated into the ILCU Monitoring system.

The ILCU Monitoring and ICT Departments are looking at including CAMEL dashboards in the ILCUbis platform, which would provide the relevant visual indicators for ILCU credit unions.

Differences between PEARLS and CAMELS systems: The PEARLS system quantitatively evaluates the financial structure of the credit union balance sheet. The advantage of this approach is that this quantitative objectivity limits the possibility of a supervisor or examiner influencing a rating. This is one of the primary reasons ILCU originally selected PEARLS in 2003.CAMEL is different from PEARLS because CAMEL is a mix of both quantitative and qualitative factors, whereas PEARLS is just quantitative.Under NCUAs approach to CAMEL, none of the numbers assigned in the CAMEL Ratings System are purely quantitative. Rather the number assigned which ranged from 1 through 5 (with 1 being the best and 5 being weakest) for the overall CAMEL rating and for each of the components of CAMEL depends on the NCUA examination teams overall holistic opinion of the credit unions condition after taking into account the numerical ratios required by other NCUA regulations, (such as NCUAs regulation on regulatory capital ratios). The examiners subjective judgments therefore are the determining factor regarding what numbers are assigned.

If the ILCU incorporate a CAMEL system in time (on the ILCUbis platform), additional risk scoring of credit unions based on their overall profile and a risk assessment may be part of the new system. This risk scoring would be based on current ILCU knowledge of the credit union, reviews of credit union risk management plans and/or strategic plans, and ongoing field officer inspections.

Example CAMEL Ratios the ILCU are considering: Key NCUA CAMEL Ratios

1 CapitalCode 1 (strongest) >20Code 5 (weakest) 1%Code 5 (weakest)