1.4 financial performance appraisal

362 Pages·2011·2.99 MB·English

Saurashtra University
Re – Accredited Grade ‘B’ by NAAC
(CGPA 2.93)

Keshwara, R. V., 2009, A Study of Financial Performance of Aluminium
Industry in India, thesis PhD, Saurashtra University

http://etheses.saurashtrauniversity.edu/id/eprint/110

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“A STUDY OF FINANCIAL
PERFORMANCE OF ALUMINIUM
INDUSTRY IN INDIA”

A THESIS

SUBMITTED TO THE
SAURASHTRA UNIVERSITY
FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY IN MANAGEMENT
UNDER THE
FACULTY OF BUSINESS MANAGEMENT

SUBMITTED BY

MR. R.V. KESHWARA
LECTURER IN BUSINESS MANAGEMENT
SHREE K.H. MADHAVANI ARTS & COMMERCE COLLEGE
PORBANDAR

UNDER THE SUPERVISION OF

DR. SANJAY J. BHAYANI
ASSOCIATE PROFESSOR
DEPARTMENT OF BUSINESS MANAGEMENT
(M. B. A. PROGRAMME)
SAURASHTRA UNIVERSITY
RAJKOT – 360 005

JANUARY 2009
i
DECLARATION

I declare that the conceptual frmework of the business of the thesis has been
developed based on the detailed literature reviw as shown in the
bibliographical references. I have quoted several statistics, notes, opinions
and other information directly from various books, journals, periodicals and
other reference material with clear mention of the sources of the information
in the footnotes references. Apart from these, all the opinions, hypothesis,
remarks, inferences, analysis and interpretations in the thesis are my own
and origanal creation.

Morever I also declare that for the work done in the thesis. entitled " A
STUDY OF FINANCIAL PERFORMANCE OF ALUMINIUM
INDUSTRY IN INDIA " is a record of independent research work carried
out by me under the supervision and guidance of Dr. Sanjay Bhayani,
Associate Proffessor, Department Of Busincess Management, ( MBA
Programme ), Saurashtra University, Rajkot.

This work has not been previously submitted for the award of any diploma,
degree, associatesship or other similar title.

Date: 7th January, 2009 (……………………)
Place: Rajkot R. V. KESHWARA
ii
CONTENTS

Particulars Page No.

Preface iv
Acknowledgement viii
List of Tables ix
List of Graphs xi
List of Diagrams xii
List of Abbreviations xii
Chapter’s Name
1
1. Conceptual framework of financial performance
40
2. Profile of aluminum industry
65
3. Research Methodology
100
4. Analysis of Profitability
158
5. Analysis of Capital structure
202
6. Analysis of working capital
255
7. Analysis of Activity
317
8. Summary, Findings and Suggestions

Bibliography 343

iii
PREFACE
The present study deals with the analysis of financial performance of
alluminuim industry in India, which are mainly engaged in production of
Alluminium Products, This study is aimed at exploring t financial
performance of alluminuim industry in India.
The Indian aluminium industry is blessed with an abundant supply of quality
bauxite, the key raw material, at a very low cost. The industry has a ready
domestic and overseas market for the finished product. India has the fifth
largest bauxite deposits, accounting for 7.5% of the global deposits. But its
installed capacity is only 3% of the global capacity. The per capita
consumption of Aluminium in India is relatively poor at 0.6 kg as against
16-35 in Developed countries like UK,Japan, USA, Germany and France.
Hence, there is enough scope for India to become a favorite location for
building alumina refineries and smelters. As the government continues to
give a thrust to the electrification process, estimated to cost Rs 900 billion
over the next decade, the aluminium industry stands to gain the maximum
because 31% of the demand for aluminium comes from this sector.
The industry consists of five primary aluminium producers. They are Nalco
(a PSU), Balco (wherein Sterlite group acquired strategic stake), Hindalco,
Indal and Malco. Besides them, there are other downstream producers . The
total installed capacity of primary aluminium is 7.47 lakh tonnes which may
reach 10 lakh tonnes by the end of 2003 with Nalco's and Hindalco's
greenfield and Brownfield expansions.

iv
The consolidation in the industry is likely to bring down the number of
major payers to two or three in the medium term.The aluminium production
increased by 6.95% to 498625 tonne in the nine months ended Dec'02 over
the corresponding previous year period. Part of the increase in production is
attributed to lower base of the last year, when production was disrupted in
Balco, on account of labour strike post divestment of strategic stake by
government in favour of Sterlite Group. Except for Hindalco, all other
domestic aluminium producers - Nalco, Malco, Indal and Balco reported
increase in production during the nine months ended Dec'02 over the
corresponding previous half-year period. However, Hindalco reported
modest 0.14% fall in production to 190935 tonne during this period, due to
interruption in power supply with disrupted production. For ascertaining
financial performance of alluminuim industry in India liquidity, five (5)
leading companies of alluminuim industry having a large plant have been
selected. The period covered under the study extends over seven years from
2000-01 to 2006-07. Adopting various techniques such as ratio analysis
trend analysis has made analysis of selected units.

In order to analysis the profitability, capital structure working capital
position and operational efficiency of the alluminuim industry in India
which the help of published accounting annual reports, some publications.
Most useful information has been gathered from the various journals reports,
periodicals and daily newspapers. It is hoped that the thesis will be of
immense help and use to practicing financial Managers, Management,
Government officials, employees, Shareholders, Academicians and research
scholars.
v
The present study is divided into eight chapters. The first chapter is the
Conceptual Framework of financial performance. The second chapter
focuses on Profile of alluminuim industry in India. The third chapter is
related with the Research Methodology. In the fourth chapter, profitability of
the alluminuim industry has been analyzed. The Financial Structure of
selected alluminuim units has been critically analyzed in the fifth chapter.
The sixth chapter explained working capital position of selected alluminuim
units. The seventh chapter deals with the Activity Analysis of selected
alluminuim units. Finally, in the last chapter suitable and significance
suggestions have been made and conclusion drawn.

I owe a deep gratitude to Dr. Sanjay J. Bahyani, Associate Professor,
Department of Business Management, Saurashtra University, Rajkot who
has guided me through out my research work.

I am thankful to Dr. Pratapsinh L. Chauhan Professor & Head, Department
of Business Management, Saurashtra University, Rajkot for inspiring and
providing valuable guidance in my research work.

I am also obliged to Dr. Daxaben Gohil, Professor and Head, Department of
Commerce, Saurashtra University, and Rajkot for giving me valuable
suggestions and moral boosting.

vi
For completing the present study, I got assistance, valuable advice and
suggestions, directly or indirectly from many of my teacher, well-wishers,
colleagues, officials and a special indebts of gratitude is due to my parents,
who took keen interest through the work and inspired me.

Finally, I acknowledge that this work would never been possible without the
consistent support and inspiration of God “KRISHANA”

Date: 17th January, 2009 (……………………….)
Place: Rajkot

vii
Acknowledgement

It gives me a graet pleasure to submit this Thesis to the Saurashtra
University for the Award of Ph D. Degree.I express my sincere thanks and
gratitude to Dr. Sanjay J. Bhayani, Associate Professor, Department Of
Business Management ( MBA Programme ) Saurashtra University who has
provided me remarkable guidance and support in carrying out my research
work through out the research period.
I also express my heartly thanks and gratitude to Dr, Pratpsinh L.
Chauhan, Professor, Head & Dean of Management Faculty at Saurashtra
University Rajkot. who has provided me valuable guidance and inspiration
in my research work. I am thankful to our Principal Dr. J. S. Ramdatti &
my dear collegue Dr. D. J. Parmar who are the sorces of inspiration for my
reserch work.
I deeply express my sense of gratitude to my students who have supported
me in praparing this rerport. Special thanks to Amit Raninga a student of
MBA, Saurashtra University Rajkot.
Last but not least my late parents, my life partner Shanta, my kids. Hiral,
Nishita & Thruv who have inspired me with an oppurtunity and full co-
operation and freedom in doing my work so i shoul not forget them at this
stage.

Date :

Place : R.V. KESHWARA
viii
List of Tables

Table Title of the Tables Page
No. No.
2.1 Aluminium Production in India 61
2.2 Primary Aluminium Producers in India 62
2.3 Aluminium production in China 62
2.4 Trends in Global Primary Aluminium Production 63
2.5 Domestic Aluminium Production (in tonnes) 63
4.1 Gross Profit Ratio 108
4.2 Gross Profit Ratio and one way ANOVA test 112
4.3 Operating profit Ratio 114
4.4 Operating profit ratio and ANOVA test 118
4.5 Net Profit Ratio 120
4.6 Net profit ratio and ANOVA test 124
4.7 Earning per Share 126
4.8 Earning per share (ANOVA Test) 130
4.9 Return on gross capital employed 133
4.10 Return on Gross Capital Employed Ratio(ANOVA Test) 137
4.11 Return on net capital employed 139
4.12 Return on Net Capital Employed ratio (ANOVA Test) 143
4.13 Return on net worth 144
4.14 Return on Net worth Ratio (ANOVA Test) 148
4.15 Dividend Pay Out Ratio 151
5.1 Total debt equity Ratio 167
5.2 Long Term Debt-Equity Ratio 172
5.3 financial leverage ratio 177
5.4 Net Fixed Asset to Net worth Ratio 182
5.5 Proprietary Ratio 187
5.6 Net Fixed Asset to Long Term Debt Ratio 192
5.7 Interest coverage ratio 197
6.1 current ratio 212
6.2 quick ratio 217
6.3 Inventory to Working Capital Ratio 222
6.4 Inventory turnover ratio 228
6.5 Debtor turnover ratio 233
ix