INDUSTRY PROFILE About the industry: India, in 1994 has become the 4th largest producer of cement in the

world. This impressive record owes its origin to the progressive policies of the government since late 70s and enabled on assured 12% post tax return on net worth (70). It economy refers of July 91gave a further fillip by abolishing the licensing system for setting up cement plants. Since then, innumerable technological development look place in cement production enabling cost reduction and mass production. The kilns of the late 70s were replaced by dry kilns which reduced the fuel cost by 30%. Thermal efficiency was improved by instilling pre-heaters, followed by the addition of pre-calcinatory. Optimal usage of fuel and power we achieved through computerization and quality control or raw materials. In a developing country like India, the requirement of housing and infrastructure is high and so the demand elasticity of the cement with respect to G.D.P of 1.6% is also high. Cement Industry in India: South India Industries Limited. Madras, produced cement for the first time in India in1904. This unit, which had an installed capacity of 30 tons/day since the partial decontrol in 1989. The cement industry has witnessed spectacular progress mainly due to the force economic liberalization and the jettisoning of price controls and capacity restriction. The foundation of a stable Indian cement industry was laid in 1914 2h3n Indian Cement Company Limited started manufacturing cement at Porbander in Gujarat. By the end of March 1988 there were 20 large and 136 small cement plants with a total installed capacity of 57 million tones. In 1936, all the Cement companies (with exception of Song Valley Portland Co. Ltd.) merged to form the Associated Cement Companies Ltd., this facilitated cost education ads as well as uniformity in quality. By 1947 the installed capacity of the industry rose to 2.2 million tones per annum. After partition, five cement-producing units in the country went to Pakistan and the total installed capacity of the eighteen units that remained in India was 1.5 million
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tons/annum. This increased to 3.8 million tons/annum 1950-51. During sixty plan period, government approved 33 million tones to additional capacity and about two third of this was expected to materialize during this plan period target set intercept to additional capacity generation was realized with the impulse given by the partial decontrol announced in 1982, several units looked up to projects for expansion to capacity and modernization which contributed towards increased production. Cement industry is undergoing rapid transformation due to the merges and acquisitions over the past few years. Some half a dozen dominant players now account for about half of the total output that there are still as many as 51 companies and 117 cement plants in country. A large number of small cement plants that come up during the 80s have disappeared. The large and efficient players have effected cost reduction through use of captive power bulk transportation, investing in port infrastructure and reduction of work force. For Indias industrial economy, the 90s have been a period of transition and structural changes. Since the economic reforms in 1991 and the gradual opening up to extension competition, the economic environment transformed dramatically. Following the virtual dismantling of licensing and easing of production, pricing and distribution controls, there has been transition form a controlled to a market-oriented economy. While this gave the industry of greater freedom of operation External competition took away the high level of protection it enjoyed since independence. Now cement industry has been facing problems with indigenous coal with large scale open east mining affecting the quality of coal marked by high content and nonuniform quality and it includes high price and transportation cost and loss of weight in transit. The focus of Mr. Jaswanth Singhs Union Budget 2003-04 in an infrastructure development with a proposed investment of Rs. 60,000 crore through public and private participation. A chunk of this investment (Rs. 40,000Cr) has been proposed for
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development of 48 new Road projects involving 10,000 km with 25% of this mode of cement and concrete which will result in double digital growth in cement industry. As on now India cement industry has been marked by significant growth in last few years, ranking 2nd after China today with a production of 108.40 million tons last fiscal, which is expected to touch the 113 million tones mark by the end of current fiscal. The union budget 2003-04 has given a scope for it. It, in the words of senior meaner, Cement manufacturers Association (CMA). And only disappointing factor is the increase in excise duty already it is 24-25% and will now increase by a further 4-5%. It must be released that already the total tax at state and center amounts to one third of the price amounts to one third of the price the consumers pay affecting the revenue of the cement companies. Types of Cement in India: The types of cement in India have increased over the years with the advancement in research, development, and technology. The Indian cement industry is witnessing a boom as a result of which the production of different kinds of cement in India has also increased. By a fair estimate, there are around 11 different types of cement that are being produced in India The production of all these cement varieties is BIS. Some of the various types of cement produced in India are:

Clinker Cement Ordinary Portland Cement Portland Blast Furnace Slag Cement Portland Pozzolana Cement Rapid Hardening Portland Cement Oil Well Cement White Cement Sulphate Resisting Portland Cement

In India, the different types of cement are manufactured using dry, semi-dry, and wet processes. In the production of Clinker Cement, a lot of energy is required. It is produced by using materials such as limestone, iron oxides, aluminum, and silicon oxides. Among the different kinds of cement produced in India, Portland Pozzolana Cement, Ordinary Portland Cement, and Portland Blast Furnace Slag Cement are the most important because they account for around 99% of the total cement production in India. The Portland variety of cement is the most common one among the types of cement in India and is produced from gypsum and clinker. The Ordinary Portland cement and Portland Blast Furnace Slag Cement are used mostly in the construction of airports and bridges. The production of white cement in the country is very less for it is very expensive in comparison to grey cement. In India, while cement is usually utilized for decorative purposes, marble foundation work, and to fill up the gaps between tiles of ceramic and marble.The different types of cement in India have registered an increase in production in the last few years. Efforts must be made by the cement industry in India and the government of India to ensure that the cement industry continues innovation and research to come up with more and more varieties in the near future. Different types of cements are briefly explained below:a. b. c. d. e. f. g. h.

Ordinary Portland Cement Portland Pozzolana Cement Portland Blast Furnace Slag Cement Oil Well Cement Rapid Hardening Portland Cement Sulphate Resisting Portland Cement White Cement Clinker Cement

(a)Ordinary Portland cement: Ordinary Portland Cement (OPC) is manufactured in the form of different grades, the most common in India being Grade-53, Grade-43, and Grade-33. OPC is manufactured by burning siliceous materials like limestone at 1400 degree Celsius and thereafter grinding it with gypsum. Tata Chemicals Limited is a major producer of OPC Grade 43 and 53. The value of each of these grades of cement has been briefly mentioned below: Ordinary Portland Cement-Grade 43: Having been certified with IS 8112:1989 standards, Grade 43 is in high demand in India and is largely used for residential, commercial, and other building construction purposes. It has a compressive strength of 560 kg per square cm. Today OPC 43 is most widely available in Gujarat through an extensive distribution network.

 Ordinary Portland Cement-Grade 53: Having been certified with IS12269:1987 standards, Grade 53 is known for its rich quality and is highly durable. Hence it is used for constructing bigger structures like building foundations, bridges, tall buildings, and structures designed to withstand heavy pressure. Expert opinions and directions from technicians and engineers are a must in this regard. With a good distribution network this cement is available most abundantly in Gujarat. As such, Ordinary Portland Cement is used for quite a wide range of applications. The chemical components of Ordinary Portland Cement are Magnesium (MgO), Alumina (AL2O3), Silica (SiO2), Iron (Fe2O3), and Sulphur trioxide (SO3). Some of the big names involved in OPC manufacture are Tata Chemicals, Ultratech Cement, and ACC cement. Ordinary Portland Cement is in great demand in India and will continue to be used in Indian infrastructural upgradation and other constructions. (b)Portland Pozzolana Cement:Portland Pozzolana Cement is manufactured by blending pozzolanic materials, OPC clinker, and gypsum either grinding them together or separately. Today Portland Pozzolana Cement is widely in demand for industrial and residential buildings, roads, dams, and machine foundations. Pozzolana is an important ingredient in PPC which is commonly used in the form of: Fly ash Volcanic ash Silica fumes Calcined clay PPC is resistant to harsh water attacks and prevents the formation of calcium hydroxide at the time of cement setting and hydration. It withstands aggressive gases, thermal cracks, wet cracking, etc. The BIS quality specifications for Pozzolana materials used in PPC have been mentioned below:

 Fly ash - IS 3812:1981 Calcined clay - IS 1344:1981 PPC is used in heavy load infrastructure and constructions such as marine structures, hydraulic structures, mass concreting works, plastering, masonry mortars, and all applications of ordinary Portland cement. One of the top Indian brands of Portland Pozzolana is 'Shudh Cement' manufactured by Tata Chemicals Limited. Shudh cement has 5 percent of the market share and is available abundantly in Gujarat, penetrating all 3 - primary, secondary, and tertiary markets. Some of the other big names in the Portland Pozzolana manufacture are Ultratech, Ambuja, ACC cements, Star Cement, and Birla group. Portland Pozzolana Cement is highly popular in India and with many cement plants setting up jetties for transportation, initial costs would gradually decrease as well. (c)Portland Blast Furnace Slag Cement:In recent years, there has been a significant growth in the production of Portland Blast Furnace Slag Cement and its sales have also increased considerably over the last few years. This has given a major boost to the Indian cement industry. The Slag Cement of the Portland Blast Furnace is a type of cement that is hydraulic and is manufactured in a blast furnace where iron ore is reduced to iron. The molten slag which is tapped is quickly drenched with water, dried, and then grounded to a fine powder. . The manufacture of Portland Blast Furnace Slag Cement requires 75% less energy than that needed for the production of the Portland cement. The low cost of production of Portland Blast Furnace Slag Cement makes it cheaper than Portland cement. It is for this reason that in recent years, the sales of Portland Blast Furnace Slag Cement. Portland Blast Furnace Slag Cement has a typical light color and an easier 'finish' ability. Its concrete workability is better and it has a higher flexural and compressive strength. It is resistant to chemicals and also has more hardened consistency. This is the reason that Portland Blast Furnace Slag Cement is used in the construction of dams, bridges, building complexes, and pipes. The various raw materials required for the production of Portland Blast Furnace Slag
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Cement are: Limestone, Iron Ore, Iron Scrap, Coke The major companies producing Portland Blast Furnace Slag Cement in India are: J K Cement, Grasim Industries and Ultra Tech, ACC, India Cement Ltd, Gujarat Ambuja Cement Ltd The major countries where Portland Blast Furnace Slag Cement is exported from India are: South Africa, UAE, Sri Lanka, Nepal, Bangladesh, Australia, Doha-Qatar The production and use of Portland Blast Furnace Slag Cement have increased over the years. The Indian government has undertaken several investments in the production of the Portland Blast Furnace Slag Cement so that its quality and durability can be improved. (d)Oil Well Cement:Oil Well Cement as the name suggests, is used for the grouting of the oil wells, also known as the cementing of the oil wells. This is done for both, the off-shore oil. As the number of oil wells in India is increasing steadily, the sales of Oil Well Cement have also increased. This has boosted the Indian cement industry to the extent. Oil Well Cement is manufactured from the clinker of Portland cement and also from cements that have been hydraulically blended. Oil Well Cement can resist high pressure as well as Very high temperatures. Oil Well Cement sets very slowly because it has organic 'retarders' which prevent it from setting too fast. It is due to all these characteristics that it is used in the building of the oil wells where the pressure is around 20,000 PSI and the temperature is around 500 degrees Fahrenheit. There are 3 grades of Oil Well Cements. Grades O is ordinary and is used commonly; HSR is high sulphate resistant; and MSR is moderate sulphate resistant. Each grade is used where it is applicable at a particular range of oil well sulphate
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environments, temperatures, pressures, and depths. Oil Well Cement has proved to be very beneficial for the petroleum industry due to its characteristics. For it is due to the Oil Well Cement that the oil wells properly. The various raw materials required for the production of Oil Well Cement are: Limestone Iron Ore Coke Iron Scrap The major companies manufacturing Oil Well Cement in India are: ACC Gujarat Ambuja India Cement Ltd. Grasim Industries and Ultra Tech J K Cement (e)Rapid Hardening Portland cement:Rapid Hardening Portland Cement (RHPC) is a type of cement that is used for special purposes when a faster rate of early high strength is required. RHPC has a higher rate of strength development than the Normal Portland Cement (NPC). The Rapid Hardening Portland Cement's better strength performance is achieved by increasing the refinement of the product. This is the reason that its use is India. Rapid Hardening Portland Cement is manufactured by fusing together limestone (which has been finely grounded) and shale, at extremely high temperatures to produce cement clinker. To this cement clinker, gypsum is added in small quantities and then finely grounded to produce Rapid Hardening Portland Cement. It is usually manufactured using the dry process technology. Rapid Hardening Portland Cement is used in concrete masonry manufacture, repair work which is urgent, concreting in cold weather, and in pre-cast production of concrete. Rapid Hardening Portland Cement has proved to be a boon in the places where quick repairs are required such as airfield and
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highway pavements, marine structures, and bridge decks. The Rapid Hardening Portland Cement should be stored in a dry place, or else its quality deteriorates due to premature carbonation and hydration. As the Indian cement industry produces Rapid Hardening Portland Cement in large quantities, it is able to meet the domestic demand and also export to other countries. The cement industry in India exports cement mainly to the West Asian countries. The raw materials required for the manufacture of Rapid Hardening Portland Cement are: Limestone Shale Gypsum Coke The major companies producing Rapid Hardening Portland Cement in India are: ACC Gujarat Ambuja J K Cement Grasim Industries Indian Cement Ltd. (f) Sulphate Resisting Portland cement:Sulphate Resisting Portland Cement (SRC) is a type of Portland cement in which the quantity of tricalcium alumiante is less than 5%. It can be used for purposes wherever Portland Pozzolana Cement, Slag Cement, and Ordinary Portland Cement are used. The use of Portland Sulphate Resisting Cement has proved beneficial, particularly in conditions where there is a risk of damage to the concrete from sulphate attack. The use of Sulphate Resisting Portland Cement is recommended in places where the concrete is in contact with the soil, ground water, exposed to seacoast, and sea water. In all these conditions, the concrete is exposed to attack from sulphates that are present in excessive

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amounts, which damage the structure. This is the reason that the use of the Sulphate Resisting Portland Cement have increased in India. The Sulphate Resisting Portland Cement should be kept in a place which is dry otherwise through premature hydration and carbonation the quality of cement deteriorates. The cement industry in India manufactures Sulphate Resisting Portland Cement in large quantities so that it is able to meet the domestic demand and also export to other countries as well. The Indian cement industry exports cement chiefly to the West Asian countries. The various uses of Sulphate Resisting Portland Cement are: Underground and basements structures Works in coastal areas Piles and foundations Water and sewage treatment plants Sugar, chemical, and fertilizers factories Petrochemical and food processing industries The raw materials required for the production of Sulphate Resisting Portland Cement are: Coke Limestone Iron Ore Iron Scrap The major companies manufacturing Sulphate Resisting Portland Cement in India are: ACC J K Cement Indian Cement Ltd Grasim Industries Gujarat Ambuja Sulphate Resisting Portland Cement has proved beneficial for construction
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purposes in India due to its climatic conditions. The cement industry in India must take steps in order to ensure that its quality is improved and to ensure that it is readily available in market. The Sulphate Resisting Portland Cement should be stored in a dry place, or else its quality deteriorates due to premature carbonation and hydration. As the Indian cement industry produces Sulphate Resisting Portland Cement in large quantities, it is able to meet the domestic demand and also export to other countries. The cement industry in India exports cement mainly to the West Asian countries. (g) White Cement:White Cement has registered growth in production and sale in India in the last few years. The White Cement sector has been growing at the rate of 11% per year. This has given the Indian cement industry a major boost. White Cement is much like the ordinary grey cement except that it is white in color. In order to get this color of the White Cement, its method of production is different from that of the ordinary cement. However, this modification in its production method makes White Cement far more expensive then the ordinary cement. The production of White Cement requires exact standards and so it is a product which is used for specialized purposes. White Cement is produced at temperatures that hover around 1450-1500 degrees Celsius. This temperature is more than what is required by the ordinary grey cement. As more energy is required during the manufacture of White Cement, it goes to make it more expensive than the ordinary grey cement. White Cement is used in architectural projects the use of white cement has been specified. It is used in decorative works and also wherever vibrant colors are desired. White Cement is used to fill up the gaps between marble and ceramic tiles for beautiful finish. The various raw materials required for the production of White Cement are: Limestone Sand Iron Ore
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 Nickel Titanium Chromium Vanadium The major companies producing White Cement in India are: ACC J K Cement Gujarat Ambuja Cement Ltd. India Cement Ltd. Grasim Industries and Ultra Tech The major countries where White Cement is exported from India are: UAE Australia South Africa Sri Lanka Doha- Qatar Bangladesh Nepal (h)Clinker Cement:Clinker Cement has registered a growth over the last few years in India. The Indian cement industry is growing at a rapid pace and this has given a major boost to the production and sale of Clinker Cement in India. The cement industry in India is highly technologically intensive and as a result, the quality of clinker cement that is produced in India is of a very high grade and is often considered among the best in the world. The production of Clinker Cement requires a lot of energy because it needs to be manufactured at the temperature of around 1400-1450degree Celsius. The various raw materials required for the production of Clinker Cement are: Iron Ore
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 Bauxite Clay Limestone Quartz Clinker Cement in India is produced in such large quantities that it is able to meet the domestic demand and is also exported. In 2001- 2002, 1.76 million tons of clinker cement were exported. In 2002- 2003, that figure stood at 3.45 million tons, and in 20032004 5.64 Million tons of clinker cement was exported from India. This shows that the export of clinker cement from India has been increasing gradually but steadily. Clinker Cement is usually ground with calcium sulphate so that it becomes Portland cement. It is also ground with other ingredients to produce Pozzolanic Cement, Blast Furnace Slag Cement, and Silica Fume Cement. If Clinker Cement is kept in a dry condition, it can be stored for a long period of time without any loss of its quality. It is for this reason that Clinker Cement is preferred in construction of houses etc. The major companies producing Clinker Cement in India are: ACC Gujarat Ambuja Cement Ltd. JK Cements Grasim Industries and Ultra Tech

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COMPANY PROFILE The name Lanco has been derived from the promoter of the Group Shri. Lagadapati Amarappa Naidu. The Lanco group is a diversified multi faced conglomerate with the business interests in Pig Iron, Cement, Power, Graded Castings, Spun Pipes, Information Technology and Infrastructure Development. Young technocrats with exceptional entrepreneur skills promote the LANCO Group with a mission and a great vision and the top agenda to put the group on the global corporate may be during the next 10 years. "Economy builds the nation and industry builds the economy" LANCO industries limited are one of the best mini-blast furnace pig iron manufacturing units in our country and it was 5th plant under TATA - KORE technology. The company was incorporated on 1st November 1991 under company's act1956, in the name of LANCO FERRO LTD., The COMPANY started construction work in august 1993. The entire construction work was completed in a record time of 12 months. This was achieved by teamwork of LANCO collective and the best efforts of the contractors. With this achievement the company started commercial productions in September 1994. The name LANCO Ferro limited was changed to LANCO INDUSTRIES L1MITDED ON JULY 6th, 1994. Lanco Industries Limited is located in between Tirupathi and Srikalahasti with an access of about 30kms from Tirupati and about Rachagunneri village, Srikalahasti Mandal of Chittoor district Andhra Pradesh is as follows. Cheap availability of required land. There is more water resource. The distance between the harbor and present work spot is less. Proximity to raw materials. Proximity to marketing.
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 To have financial subsidy. Nearer to the railway sidings. Well connected to the road, rail and port. Availability of labour. LANCO industries are importing coke from china, Japan and Australia because; there is scarcity of prime cooking coal, which is the raw material for producing coke. The coke, which is imported, comes to Chennai port. This is approximately 100km away from the site. And from there is brought to site, and also fluxes. Which are required to produce pig iron like Limestone, Dolomite, Quartzite and Manganese, are available in nearby districts. Administration:-

Administration

Managing Director

General Manager

Financial Manager

HR Manager

The general administration of the company is carried out by managing director, and general managers of finance. Commercial, operations, materials, purchase, human resource and administration. The chairman and managing director are holding Overall control on administration in all aspects, with the help of Vice-President and-other General Managers. The board consists of five member's directors, Vice-Chairman, a Managing Director and a Company Secretary. Lanco Industries Limited:16

Established in the year of 1993. An ISO 9002 Company, it had setup a state of the art integrated manufacturing facility for Pig Iron through mini-blast furnace route conforming to the latest international technology with initial capacity of 1,00,000 TPA. Its quality products of S G-Grade pig iron are being supplied to foundries in the south. As a forward integration, it has utilized the slag produced in the Pig Iron are being supplied to foundries in the south. As a forward integration, it has utilized the slag produced in the Pig Iron manufacturing process to install the cement plant is being met through a 2.5 mw cogeneration power plant. Due to severe completion and survival, company has increased the production capacity from 90,000 TPA to 1, 50,000 TPA from 2003. Location:A Lanco industry limited is a rural based factory sprawling over many areas of land with deep resources and congenial soil. It is located in Rachagunneri village near Tirupati. Nearly 50% of the consumption of electrical power is supplied by APSES, Government of Andhra Pradesh and other 50% of power is maintained by the company owned Dg sets and power plants. Since it is a rural area labour potential is available and also company is enjoying the subsides from state government. the Lanco group is a diversified multifaceted onglo merale, with business interests I n Pig Iron, Cement, Power Graded Castings, Spun Pipes, Real Estate Development, Information Technology a past from infrastructure use development promoted by entrepreneurial skills and the agenda to put the group on the global corporate map during the next 10 years. Lanco Kalahasti Castings Limited (LKCL) Merged with Lanco Industries Limited:Established in 1997 and strategically located in close proximity to the mini-blast furnace of the Pig Iron Plant, it has a clear economic mileage over other casting sites. The molten metal from the blast furnace is directly used as a basic raw material to produce graded castings, cast iron pipes and Ductile iron spun pipes with a capacity of
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60,000 TPA, which will be gradually expanded for the to meet the surging demand of the products. The ups to the pipe plant will be met through 10 MW captive power plants. To emerge to enhance the necessities and the self-sufficiency, it was decided to enhance the production capacity from 60,000 TPA to 90,000 TPA from 2003. Brief History of LIL since Incorporation till Date:Lanco Industries Limited (LIL) was incorporated on 1st November 1991 by Lanco Group of Companies to manufacture Pig Iron using Korf (German) technology and Cement. The unit is located at Rachagunneri Village on Tirupati Srikalahasti road, which is about 30Kms from Tirupati and 10Kms from Srikalahasti. The installed capacity of Pig Iron was 90,000 TPA and with similar capacity 90,000 TPA for cement As a measure of forward integration project for adding value to the Pig Iron manufactured by the Company, LIL floated an another company named Lanco Kalahasti Castings Limited (LKCL) on 4th March 1997 to manufacture iron castings and spun pipes in the same campus of the Company with an annual capacity of 40,000 TPA and 35,700 TPA respectively. However, due to falling Pig Iron prices, increase additional capacity in the industry, competition and the technical and financial assistance, the operations of both LIL and LKCL were affected and the Company was exploring financial and technical strategic alliance with Indian 1st Foreign Partner. During the same time Mrs. Electrosteel Castings Limited, was also looking for additional capacities for producing spun pipes. Considering the synergies involved, Lanco Industries Limited entered into a strategic alliance partnership during December 2002, with MIs. Electro steel Castings Limited (ECL), Calcutta a. leading manufacturer of CI, Pipes and DI pipes. This was win-win situation for both L1L and ECL. After takeover, a financial re-engineering and re-structuring of LIL was undertaken by ECL by implementing the following.
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Immediately after take over an amount of RS.2200 lakhs was infused as share capital of the Company by Mis ECL to strengthen the equity base of the company. During 2002, the capacity of Pig Iron was increased from 90,000 TPA to 150,000 TPA. With effect from 1st April, 2002 LKCL was merged with the company to take advantage of the close synergy in the business of the two companies, since a large part of Molten Iron/Pig Iron is consumed by LKCL for manufacture of 01 Pipes. After the merger, the share capital of LIL, the paid up share value of RS.101was reduced to RS.2.50 per share and accordingly one share of RS.101- each fully paid up in LIL was issued to all the existing shareholders for every 4 shares held by them. Using 2003, the capacity of the 01 pipe was increased to 90,000 TPA. During 2004, the company took the step of backward integration by setting up 150,000 TPA coke oven plant in the same complex, which was commissioned in June 2005. During 2005, the company started setting up of a Captive Power Plant of 12 MW by using the waste heat recovered from the coke oven plant which is expected to be commissioned by March 2006. An additional amount of RS.25crores is being spent on other capital works like revamping of bitumen coatings machine, balancing equipment and facilities for production of higher diameter DI pipes etc. to increase the capacity of 01 pipe from the present 90,000 TPA to 120,000 TPA by 2006-07. The above has resulted in the company witnessing a profitable years after a gap of 8 years during the years ended 31st March, 2003, 2004 and 2005 and a dividend of 10% was declared for the years ended 31 st March 2004 and 2005 to the shareholders.

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ADDRESS OF BRANCH OFFICES

ORGANISATION CHART OF LANCO INDUSTRIES

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CORPORATE INFORMATION Shri G. Maruthi Rao Shri Gouri Shankar Rathi Shri Lagadapati Rajagopal

Directors

Shri G. Bhaskara Rao Shri L. Sridhar Shri P.M. Suresh (Nominee of IDBI) Shri Vinod Kumar Agrawal, IAS (Nominee of APIDC)

Managing Director

Shri Mayank Kejriwal

General Manager Finance & Company Secretary

Auditors Solicitors : :

Shri.D.G.Shaini
M/s. K.R. Bapuji & Co. Khaitan & Co. ICICI Bank Ltd. HDFC Bank Ltd. IDBI Bank Ltd.

Bankers

Standard Chartered Bank Punjab National Bank Bank of India Andhra Bank.

Registered Office & Works

Rachagunneri-517 641

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Srikalahasti Mandal Chittoor District Andhra Pradesh. Share Transfer Agents : M/s.Karvy Computershare PrivateLimited Plot No. 17-24, Beside Image Hospital Vittalrao Nagar, Madhapur Hyderabad-500 081

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GROUP OF COMPANIES POWER PROJECTS:With operational experience in gas, wind and biomass- based power projects and a strong foothols in coal and hydropower generation, LANCO is emerging as a key player in the Indian power sector. INFORMATION TECHNOLOGY:LGS is a strategic initiative to provide world-class Information Technology solutions to global customers, delivering them maximum business value through continuous innovation. CIVIL CONSTRUCTION Power projects, industrial structures, institutional facilities, mass housing, water supply projects, flyovers and bridges such varied operations serve to explicate the diversification roadmap of LANCO. PROPERTY DEVELOPMENT Being a Pioneer in Civil Construction and Infrastructure Development, LANCO is venturing into property Development with the winning of the bid for IT Parks-cum-Commercial and residential complex in Hyderabad and Visakhapatnam of Andhra Pradesh. MANUFACTURING Being one of the largest integrated foundried in India with Ductile Iron Spun Pipes, Metallurgical Coke, Pig Iron and Slag cement as products; LANCO has a towering presence in the Indian manufacturing sector. STATEMENT OF THE PROBLEM Funds flow statements are major tools in the hands of the finance management and analyzing the existing data. Funds flow statements are calculated for finding the trend in liquidity position, marginal solvency and utilization of funds and inventory maintenance over a period of time. This study mainly focuses in above said area by using financial ratios.

REVIEW OF LITERATURE
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Finance is the life blood and nerve system of any business organization. Just as Circulation of blood is necessary in the human body to maintain life finance is very essential to the business organization for smooth running of the business. Financial management involves Managerial activities concerned with the acquisition of Fund for the business purpose. The Finance Function does with procurement of money taking in to consideration of today as well as future need and finance is required to purchase need a machinery and raw materials, to pay salaries and wages and also for day to day expenses. Financial Management is an appendage to the Finance function. With the Creation of complex industry structure, the finance function has grown to very great heights. One cannot think of any business activity in isolation from its financial implication. Financial Management: Meaning:Financial Management refers to that part of Management activity, which is concerned with planning and controlling of firms financial resources, Financial Management is applicable to every type of organization, irrespective of size, kind of nature. Objectives of Financial Management: Financial Management evaluates how funds are produced and used. In all cases, it involves a sound judgment combined with logical approach of decision making. Financial management provides a framework for selecting a course of action and deciding an economically viable strategy

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The Main objective of a business is to maximize the owners welfare. This objective can be achieved by (1) PROFIT MAXIMIZATION (2) WEALTH MAXIMIZATION PROFIT MAXIMIZATION: Profit earning is the primary of every economic activity. Business can

service only it earns profit; profit is the measure of the efficiency of a business enterprise. It is remuneration for innovation. The survival of the firm depends upon it ability to earn profit but from the experience it is learn that concept of maximization is a myth. WEALTH MAXIMIZATION: Wealth maximization is the appropriate objective for an enterprise. The concepts of wealth maximization tell value of assets in terms of benefits it can produce. The concept of wealth maximization universally accepted in financial decision-making. FINANCIAL DECISIONS: Investment decisions financing decisions Dividend decisions INVESTMENT DECISIONS: The decisions relates to the determination of the total amount of assets to be held by the firm, their composition, the business risk and the image of the firms perceived by the investors.

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FINANCING DECISION: After taking the Investment decision, the firm commits itself to the new investment, and hence it must decide upon the best means of Financing these commitments. The cost of raising funds for investing is very crucial in making the financial decisions. DIVIDEND DECISIONS: This refers to the reimbursement of profit to the investors who have supplied funds. FUNDS FLOW INTROUDUCTION Significant technique of financial analysis is Funds Flow Analysis. It is designed to highlight changes in the financial condition of a business concern between two points of time which generally conform to beginning and ending financial statement dates. Funds Flow statement is also termed as a Statement of Sources and Applications of Funds , Statement of Changes in working Capital, Statement of Changes in Financial Position, Statement of Funds Supplied and applied, Statement of Funds Generated and Expended,, Where Got and Where Gone Statement, Funds statement. Although financial statements supply useful information to the management and describe the nature of changes in ownership as a result of the periods productive and commercial activities, these statement fail to mirror the funds changes that have taken place over a given time span. They do not spell out the movement of funds. Taken place over a given time span. The do not spell out the movement of funds. It is more important to describe the sources from which additional funds were derived and the uses to which these funds were put, because the ultimate success of a business enterprise depends on where got a where gone situations. The funds flow statement is, therefore, prepared to uncover the information which the financial statements fail to describe clearly. Funds Flow ANALYSIS: The following are the definitions of Funds Flow Analysis.

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R.N.Anthony: The Funds Flow Statement describes the sources from which additional funds were derived and the uses to which these funds were put. R.A.Foulk: A Statement of Sources and Applications of Funds is a

technical device designed to analyze the changes in the financial condition of a business between two dates. Bierman: It is a statement which highlights the underlying financial movements and explains the changes of working capital form one point of time to another. Thus, funds flow statement is a report which summarizes the events taking place between the two accounting periods. It spells out the sources from which funds were derived and the uses to which these funds were put. This statement is essentially derived from an analysis of the changes that have occurred in assets and liabilities items between two balance sheet dates. In this statement, only the net changes are shown s that they become of a transaction or of a series of transactions upon the financial condition of a business enterprise, is reflected more sharply. Concept of Fund: The term Funds has a variety of meanings. Some people take funds synonymous to cash, and to them there is no difference between a Cash Flow Statement prepared on this basis and a Funds Flow Statement. While others include marketable securities and cash to constitute business funds. However, the most common definition of the term funds is Working Capital or Net Current Assets. Thus the difference between Current Assets and Current Liabilities is called Funds. Significance of Funds flow Statement Funds Flows Statement is an important tool of financial analysis. The utility of the funds flow statement stems from the fact that it enables management, shareholders, investors, creditors and other interested in the enterprise to evaluate the uses of funds by the enterprise and to determine how these uses are financed. Useful in Decision Making to the Management: The funds Flow Statement serves as valuable tool of financial analysis to the
28

finance manger. It helps in understanding the financial stability and efficiency of financial policies of the management. Decisions relation to financing: With the help of the funds flow statement, the analyst can evaluate the financing pattern of the enterprise. An analysis of the major sources of funds in the past reveals what portion of the growth was financed internally ands what portion externally. The statement is also meaningful in judging whether the company has grown at too fast a rate, credit has increased out of proportion to expansion in current assets and sales. If trade credit has increased at relatively higher rate, one would wish to evaluate the consequences of slowness in trade payments on the credit standing of the company and its ability to finance in future. Decisions on Capitalization: The funds flow statement serves as handmaid to the finance manager in deciding the make-up of capitalization. Estimated uses of funds for new fixed assets, working capital, dividends and repayment of debt are made for each of several future years. Estimates are made of the funds to be provided by operations, and the balance must be obtained by borrowing or issuance of new securities. If the indicated amount of new funds required is greater than what the finance manager thinks possible to raise, then plans for new fixed asset acquisition and the dividend policies are re-examined so that the uses of funds can be brought into balance with the anticipated sources of financing them. In particulars, funds statements are very useful in planning intermediate and long-term financing. Reveals the reasons for financial difficulties: The funds flow statement reveals clearly the causes for the financial difficulties of the company. The difficulties may be due to improper mix of short and long terms sources, unnecessary accumulation of inventory of fixed assets, etc. These can be found out by a careful study of the funds flow statement. Other uses: Funds Flow Statement is useful to the management in the following cases.

29

 Estimating the amount of funds needed for growth; Improving the rate of income on assets; Planning the temporary investment of idle funds; Securing additional working capital when needed; Securing economies in the centralized management of cash in organization whose management is decentralized; Planning the payment of divided to shareholders and interest to creditors; and Easting the effects of insufficient cash balance.

30

Useful as a control Device: The funds flow statement also serves as a control device in that the statement compared with the budgeted figures will show to what extent the funds were put to use according to plan. This enables the finance manager to find out deviation form the planned course of action and take remedial steps to correct the deviations. Useful to the external parties: The outside parties can have a clear knowledge about the financial policies that the company has pursued. In the light of the information so supplied by the statement, the outsiders can decide whether or not to invest in the enterprise and on what terms funds have to be invested. The funds statement provides an insight into the financial operations of a business enterprise-an insight immensely valuable to the finance manager in analyzing the past and future expansion plans of the enterprise and the impact of these plans on its liquidity. He can detect imbalances in the uses of funds and undertake remedial actions. Thus, the funds statement draws the attention of the finance manager to problems which call for detailed analysis and immediate action. In view of these, funds flow statement is becoming more popular which management. Even some bank managers make it obligatory for the borrowers to furnish a funds statement along with their annual balance sheet. Now a days many Indian companies are publishing this statement in their annual reports although they are not obliged to do so under the companies Act. Financial Statements and Funds flow statement Financial statement means the profit and loss account and the balance sheet. All the organizations more particularly, the company form of organizations are required to present the annual financial statement every year. The financial statement differ with the funds flow statement in many ways. A Funds Flow Statement is statement measuring the inflows and outflows of net working capital that result from any type of business activity between two dates. An Income Statement in a statement measuring the inflows and outflows of net assets of revenue nature that result from rendering goods or services to customers between two dates.

31

A funds flow statements has become a useful tool in the hands of financial analyst. That is because the financial statements, i.e., Income Statement measures the flows restricted to transition relation to rendering of goods and services to customers. It is not capable of any accurate information of the resources operating unless the income data is converted into founds data. The Balance Sheet is merely a static statement of assets and liabilities as on a particular date. It does not depict the major financial transactions which have resulted in changes in Balance Sheet. Preparation of funds flow statement: In order to prepare a Funds Flow Statement, it is necessary to find out the sources and applications of funds. Sources of Funds: Funds from Operations: Funds from operations is the only internal source of funds. Some adjustments are to be made in calculating funds operations to the net profit given in the financial statement. Calculation of funds from operations: The following procedure is to be followed in the calculation of funds from operations.Start with the Net Profit given in the profit and loss account. Add the following items to the Net Profit as they do not result in out flow of funds. Depreciation on fixed assets. Preliminary expenses or goodwill etc., written of. Contribution to debenture redemption fund, transfer to general reserve etc., if they have been deducted before arriving at the figure of net profit. Provision for taxation and proposed divided. These may be taken as appropriations of profits or current liabilities for the purposes of Funds Flow Statement. Tax or dividends actually paid are taken as applications of funds. Similarly, interim dividend paid is shown as an application of funds. All these items will be added back to net profit if already deducted, to find funds from operations.

32

 Loss on sale of fixed assets. Deduct the following items from net profit as they do not increase the funds: Profit on sales of fixed assets, since the full sale proceeds are taken as a separate source of funds and inclusion here will result in duplication. Profit on revaluation of fixed assets. Non-operating income such as dividend received or accrued rent. These items increase funds but they are non-operating incomes. They will be shown under separate heads as sources of funds in the Funds Flow Statement. In case the profit and loss account shows Net Loss this should be taken as an item which decreases the funds. Applications of funds: The uses to which funds are put to are called applications of funds. Following are some of the purposes for which funds may be used:

33

Purchase of fixed assets: Purchase of fixed assets such as land, buildings, plant, machinery, long-term investments, etc., result in decrease of current assets without any decrease in current liabilities. Hence, there will be an outflow of funds. But in case shares or debentures are issued for acquisition of these fixed assets. There will be no outflow of funds. Payment of dividend: Payment of dividends results in decrease of a fixed liability and therefore, it affects funds. Generally, recommendation of directors regarding declaration of dividend (i.e., proposed dividends is simply taken as an appropriation of profits and not as an item affecting the working capital. Payment of fixed liabilities: Payment or redemption of redeemable preference shares results in reduction of working capital and hence it is taken as an application of funds. Payment of tax liability: Provision for taxation is generally taken as an appropriation of profits and not as an application of funds. But if the tax has been paid, it will be taken as an application of funds. Increase in working capital: Working capital is increased, if current assets increase and current liabilities decrease. Funds are required in both the cases i.e., in order to acquire more current assests or paying current liabilities and thus funds are said to have been applied or used. Statement of changes in working capital: The increase or decrease in working capital can be calculated by preparing the schedule of changes in working capital. Working capital represents the excess of

34

current assets over current liabilities. Several items of all current assets and current liabilities are the components of working capital. In order to ascertain the working capital at the beginning and at the end of the period and to measure the increase or decrease therein it is necessary to prepare a statement or schedule of changes in working capital. Statement of Sources and Application of Funds: Funds from operation: It is an internal source of funds. Funds from operations are to be calculated as per the method stated above. Funds from long-term loans: Long-term loans such as debentures, borrowings from financial institutions will increase the working capital and therefore, there will be inflow of funds. However, if the debentures have been issued in consideration of some fixed assets, there will be no inflow of funds. Sale of fixed assets: Sale of land, buildings, long term investments will results in generation of funds. Funds from increase in share capital: Issue of shares for cash or for any other current asset or in discharge of a current liability is another source of funds. However, shares allotted in consideration of some fixed assets will not result in funds. However, it is recommended that such purchase of fixed assets as well as issue of securities to pay for them be revealed in Funds Flow Statement. Decrease in Working Capital: Decrease in working capital is the results of decrease in current asset or increase in current liabilities. In both the cases inflow of funds takes place. Suppose stock, a current asset reduces form Rs.15000 to Rs.12000 the decrease of Rs.3000 is assumed to be due to the disposal of stock which undoubtedly brings funds into the

35

business. In the same way, increase in current liabilities means lesser payment, so retaining funds is also a source. Funds Flow Statement: The funds flow statement is a statement, which shows the movement of funds and is a report the financial operations of the business undertaking. It indicates various means by which funds were obtained during a particular period and the ways in which these find were employed. In simple, the funds flow statement is a statement of sources and application of funds. In short, it is a technical device designed to high light the change in the financial condition of a business enterprise between two Balance Sheets. According to Robert Anthony "The Funds Flow Analysis describes the sources from which additional funds were derived and the uses to which these funds were put. According to Fouke, "A Statement of Sources and Applications of funds is a technical device designed to analyze the changes in the financial position of a business enterprise between two periods. Funds flow statement is widely used by the financial analyst and credit granting institution and financial managers in performance of their jobs. It has become a useful tool in their analytical kit. This is because the financial statement like income statement and balance sheet have limited role to perform. Financial policies to the outside world like bankers, government, etc; Income statement measures flows restricted to transaction that pertain to rendering of goods and services to customers. The balance sheet is merely a static statement's these statements do not sharply focus those major financial transactions, which have behind the n\balance sheet changes. However financial analyst must know the purpose for which the loan was unitized and the sources from which it has rises. This will help him in making a better estimate about the company's financial position and polices. Uses, Significance and Importance of Funds Flow Statement: Analysis of financial operations: 36

A funds flow statement shows bow the resources have beer obtained and the uses to which they are put. The funds flow statements determining the financial consequences of business operation. It also useful in guiding whether the firm has expanded at too fast rate and whether financing is strained, it also point out to the effectiveness with which the management has handled working during the period under review. Evaluation of the firms: This statement can consist the financial manager in planning intermediate and long-term finance for obtaining sources in the further and determining how they are to be used. That is analysis of the major sources of funds in the past reveals what positions of the firms growth was financed internally and what position externally. Comparision with the budget: The statement defines the past flow of funds and gives insight in to the evolution of the present situation. It provides certain useful information about the firms.

37

Funds flow statement is becoming popular with the management because it helps to explain why in spite of earning sizable amount of profits, the company is experiencing difficulty in making payments to creditors, the rate of dividend on equity; shares cannot be increased and the bank balance is getting thinner. The funds flow statements has an analytical value and is an important planning tool. It helps in guiding the destiny of the business by enabling the executives to visualize the movements of funds that constantly takes place. This statement also helps in working capital requirements. It highlights and future need for funds and provides sample time to work out suitable arrangements. The funds flow statement shows what portion externally. The analysis of funds flow statement for the future is externally available to the executive in planning. General Rule: The flow of funds occurs when a transaction changes on the one hand a non-current account and vice versa. A current asset and a fixed asset. A fixed asset and a current liability. A current asset and a fixed liability. A fixed liability and a current liability. Uses-of Funds Flow Analysis: It helps in the analysis of financial operations. It throws light on many perplexing question of general interest. It helps in the formation of a realistic dividend policy. It helps in the proper allocation of resources.

38

Limitations of funds Flow Analysis: It is essentially historic in nature and projected funds flow statement cannot be prepared with much accuracy. It cannot be reveal continues changes. It is not an original statement but simply a re - arrangement of data given in the financial statements. Different names of funds Flow Statement: A statement of sources and Uses of funds. A statement of Sources and Application of funds. Where got and where gone Statement. Inflow and out flow of funds statement. Main purpose of Funds Flow Statement: To help to understand the changes in assets and which are not evident Financial statements or I the income statement. To inform on to how the loans to the business has been used. To point out the financial strengths and weakness of the business. To help in planning sound dividend policy. Procedure for preparing a Funds Flow Statement: The preparation of funds flow statement consists of some parts: Statement or schedule of changes in working capital. Statement of sources of funds. Statement of application of funds. Finding out the hidden transactions or changes in non-current assets and noncurrent liabilities. Statement or Schedule of Changes in Working Capital:

39

The increase or decrease in working capital can be calculated by preparing the schedule of changes in working capital. Working capital means the excess of current assets over current liabilities. Statement of changes in working capital is purpose to show the changes in the working capital between two balance sheets data. This statement is prepared with the help of current assets and current liabilities derived from two balance sheets. While preparing a schedule of Changes in Working Capital, it should be note that: Increase in Current Assets, Increases the Working Capital. Decrease in Current assets, Decreases the Working Capital. Increase in Current Liabilities, Decreases the working capital. Decrease in Current Liabilities, Increases the Working Capital. An increase in current assets and increase in current liabilities does not affect working capital. A decrease in current assets and decrease in current liabilities does not affect working capital. Changes in fixed (non-current) assets and fixed (non-current) liabilities affect working capital. The changes in all current assets and current liabilities are merged into one figure only either an increase of decrease in working capital over the period for which funds statements has been prepared.

40

If the working capital at the end of the period is more than the working capital at the beginning the difference is expresses as Increase in Working Capital. On the other hand, if the working capital at the end of the period is less than at the commencement, the difference is called Decrease in Working Capital. Working Capital = Current Assets Current Liabilities Current Assets:The expression Current Assets denotes those assets, which are continually on the move. Since they are constantly in motion, they are known as the circulating capital of the business. These assets can or will be converted into cash during a complete operating cycle of the business. Current assets include: Stock-in-trade or inventories, Debtors, Payments in advance or prepaid expenses, Stores, Bills receivable, Cash at bank, Cash in hand and Work-in-progress etc.

41

Current Liabilities: Current Liabilities are those liabilities, which are to be paid in the near future, i.e., during a complete operating cycle of the business. Current liabilities include: Trade creditors, Accrued or outstanding expenses, Bills payable, Income tax payable, Dividends declared and Bank overdraft.

Note: - according to the experts opinion bank overdraft has a tendency to become more or less permanent source of financing and hence it need not be included among current liabilities

42

PROFORMA OF STATEMENT OF CHANGES IN WORKING CAPITAL

Particulars

Beginning Ending

Changes in working capital Increase Decrease

Current assts (CA): Inventories: Raw material Consumable stores Finished goods Sundry debtors Cash in hand Balance with bank Other current assets: Deposits Income tax (advance tax) Sales tax Total Current assets Current liabilities: Trade creditors Dealers deposits Expenses payable Total current liabilities Working Capital (CA-CL) Net Increase / working capital XXX XXX XXX XXXXX XXXXX XXXXX XXX XXX XXX XXXXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXXXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXXXX

decrease XXXXX

Statement of Sources and Application of Funds: Funds flow statement is a statement, which indicates various sources for which funds have been obtained during a chain period and the uses or
43

applications to which these funds have been put during that period. Sources of funds Application of Funds.

Statement of Sources and Applications Sources of funds Funds from Operating ( profit) Issue of shares and debentures Receipts of dividend and Interest Sales Proceeds of Non-current asset Long term Borrowings Decrease in working Capital Amount XXXX XXXX XXXX XXXX Application of funds Funds in operations (loss) Repayment of debentures Reduction in share Capital Interest and dividend paid Payment XXXX XXXX Increase in working capital loans. XXXX of Long-term Amount XXXX XXXX XXXX XXXX XXXX

XXXX

XXXX

RESEARCH METHODOLOGY SWOT ANALYSIS Strengths

44

Cost advantage High R&D Online growth Market share leadership Strong management team

Weaknesses

Diseconomies to scale Over leveraged fiancial position Low market share Not innovative

Opportunities

Acquisitions Financial markets (raise money through debt, etc) Emerging markets and expansion

Threats

Competition Economic slowdown External changes (government, politics, taxes, etc) Exchange rate fluctuations

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OBJECTIVES OF THE STUDY

Primary Objectives: To assess the inflow and outflow of the funds in the LANCO INDUSTRIES LIMITED. To assess the financial position of the LANCO INDUSTRIES LTD., Secondary Objectives: To study and analyze the changes those have taken place in the financial position of the company. To identify sources and applications of the funds. To find out operating efficiency of the organization. To examine the working capital position of the company. To suggest some measures to improve the performance of the company.

NEED FOR THE STUDY

46

The main need of the study is to study the sources and applications of funds in the company and methods to evaluate the financial performance of the company. With the help of funds flow statements to evaluate the pattern of the firm. The funds flow reveals clearly the causes for the financial difficulties of the company.

SCOPE OF THE STUDY

The scope of the study covers the previous five years financial reports of the company. An extensive study is done on the investment made by LANCO
47

INDUSTRY on its funds flow statements and its adequacy, and the factors determining that investment. The study concentrates on the liquidity position of the firm and the brief study. The technique used by the firm of the management of its current assets and sources though which the finance of the funds flow statement in availed for the firm. The study covers all the financial information of the firm.

SOURCES OF DATA

There are two types of sources are there for data collection. They are 1. Primary source 2. Secondary source 1. Primary source:
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Primary data is the data which are collected originally or at first time the researcher. it does not exist already in records and publications. the primary data useful to gather the present working conditions of the employees. it is collected by the technique of interview method with the officials of the organization. the data thus collected is about the history and accounting policies of the organization and financial statements like profit & loss account and balance sheet. 2. Secondary source: The data which is collected from the published sources that is for the first time is called secondary data. The secondary data for the study is collected from the annual reports of Lanco industries from 2006-07 to 2010-11.

LIMITATIONS OF THE STUDY The funds flow analysis of the organization fully depends upon the secondary data. The primary data were used only to throw light on the company's history and growth. Thus the following are the main limitations of the study. These statements were over all reports (2006-2007, 2007-2008, 2008-2009, 2009-2010, and 2010-11). Hence it is a postmortem analysis of the financial statement. The figures taken from the financial statement like profits and loss accounts and balance sheets were historical in nature. Availability of accurate financial information and analytical reports of the company may limit. So, the analysis of the study to some extent. Time is also a limiting factor of the study because the analysis of the project
49

is restricted for a period of 8 weeks only. The members of financial department are very busy with the audit work, hence they are not be able to spend time more for me. No other information is provided for verifications of conclusions. So there is no possibility of corroborating the findings with the facts.

STATEMENT OF CHANGES IN WORKING CAPITAL 2006-07 Changes in working capital Increase Current assets (CA) Inventories Sundry debtors Cash and bank balances Loans and advances Total current assets Current liabilities (CL) Current liabilities Provisions Total current liabilities Net working capital 8,090.45 586.14 8,676.59 7,460.95 9,202.11 354.42 9,556.53 8,765.23 8,765.23
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Particulars

2006

2007

Decrease

7,075.18 7,197.89 247.72 1,616.75 16,137.54

9,194.08 6,706.59 350.67 2,070.42 18,321.76

2118.90 102.95 453.67

491.30 -

231.72

1111.66 -

2,907.24

1,304.28 2,907.24

Increasing working capital 1,304.28 Total 8,765.23

Net increase in working capital Rs.1, 304.28 Interpretation: From the above table it is observed that the networking capital of the company shows increasing trend. The total current assets of the company have increase from Rs16, 137.54. in 2006 to Rs18,321.76 in 2007. It indicates increases in the working capital. But the bank balance decreased from Rs.247.72 to Rs.350.67 i.e.102.95 . The total current liabilities increase from Rs.8,676.59 to Rs.9,556.53 The net working capital increases Rs.1,304.28. ADJUSTED P&L A/C FOR THE YEAR OF 2006-2007 Particulars Deferred tax liability Capital W-in-Progress Amount 787.50 411.07 Particular Funds from operation Amount 1,198.57

Total

1,198.57

Total

1,198.57

Statement of Sources and Applications of Funds for the year ending at 31st March 2007. Sources Unsecured loan Reserves & surplus Funds from operation Rs 5,480.37 188.32 1,198.57 Net increase in working capital 1,304.28 Applications Purchase of fixed assets Secured loans(paid) Rs 3,921.37 1,641.55

6,867.20 Interpretation: -

6,867.20

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It is evident from the above table the total funds during the period from 2006-2007 amounts to Rs. 6,867.20. In the application side we can see the 57% of funds were utilized for purchasing of assets, 24% of funds were utilized to Secured loans and % 19 of funds were utilized for working capital. In the sources side 80% of funds were received through unsecured loans and remaining 20% of funds were received through reserves & surplus and funds from operations. STATEMENT OF CHANGES IN WORKING CAPITAL 2007-08 Changes in working capital Increase Current Assets (CA) Inventories Sundry debtors Cash and bank balances Loans and advances Total Current Assets 9,194.08 6,706.59 350.67 2,070.42 18,321.76 10,636.86 7,667.92 2,650.37 5,241.68 26,196.83 1,442.78 961.33 2,299.7 3,171.26 Decrease

Particulars

2007

2008

Current liabilities (CL) Current liabilities Provisions Total current liabilities Net working capital Increasing working capital Total 9,202.11 354.42 9,556.53 8,765.23 6,705.01 15,470.24 10,188.34 538.25 10,726.59 15,470.24 15,470.24 7,875.07 6,705.01 7,875.07 986.23 183.83

Net increase in the working capital is Rs. 6,705.01 Interpretation:

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From the above table is observed that the networking capital of the company shows increasing trend. The total current assets of the company have increased from Rs.18, 321.76 in 2007 to Rs.26, 196.83 in 2008. And the bank balance increased from Rs.350.67 to Rs.2, 650.37 i.e., 2,299.70. The total current liabilities increased from Rs.9, 556.53 to

Rs.10, 726.59. The net working capital increases Rs.6s, 705.01. ADJUSTED P&L A/C FOR THE YEAR OF 2007-2008 Particulars Differed tax liability Capital working in progress Amount 569.59 4,849.57 Funds from operation 5,419.16 Particular Amount

Total

5,419.16

Total

5,419.16

Statement of Sources and Applications of Funds for the year ended at 31st March 2008. Sources Reserves & surplus Secured loans Funds from operation Amount 1,115.58 7,138.11 5,419.16 Net increase in working capital 6,705.01 Applications Purchase of fixed assets Unsecured loans Amount 5,632.38 1,335.46

13,672.85 Interpretation:

13,672.85

It is evident from the above table the total funds during the period from 2007-08 are of amounted Rs.13, 672.85 lakhs.

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The acquisition of funds through taking secured loans of 52%, reserves & surplus8% and funds from operation are of 40%. The application of funds is unsecured loans 10%, purchase of fixed assets 41%, utilized for working capital 49%.

STATEMENT OF CHANGES IN WORKING CAPITAL 2008-09 Changes in working capital Increase Current Assets (CA) Inventories Sundry debtors Cash and bank balances Loans and advances Total Current Assets Current liabilities (CL) Current liabilities Provisions Total current liabilities Net working capital Increasing working capital Total 10,188.34 538.25 10,726.59 15,470.24 1,116.06 16,586.30 9,319.38 711.30 10,030.68 16,586.30 16,586.30 3,519.38 1,116.06 3,519.38 868.96 173.05 10,636.86 7,667.92 2,650.37 5,241.68 26,196.83 12,092.91 8,814.31 420.10 5,289.66 26,616.98 1,456.05 1,146.39 47.98 2,230.27 Decrease

Particulars

2008

2009

Net increase in the working capital is Rs.1,116.06 Interpretation: From the above table is observed that the networking capital of the company shows increasing trend. The total current assets of the company have increased from Rs.26, 196.83 in 2008 to 26,616.98 in 2009.

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But the bank balance decreased from Rs.2, 650.37 to Rs.420.10 i.e., 2,230.27. The total current liabilities decreased from Rs.10, 726.59 to Rs.10, 030.68. The net working capital increases Rs.1, 116.06. ADJUSTED P&L A/C FOR THE YEAR OF 2008-2009 Particulars Deferred tax liability Amount 1,395.75 Particular Funds from operation Amount 1,395.75

Total

1,395.75

Total

1,395.75

Statement of Sources and Applications of Funds for the year ended at March 2009. Sources Reserves & surplus Secured loan Funds from operation Amount 2,071.06 1,449.41 1,395.75 Applications Capital work in progress Purchase of fixed assets Unsecured loan Net increasing in working capital

31st

Amount 107.56 2,230.27 1,462.33

1,116.06

4,912.22 Interpretation:

4,912.22

It is evident from the above table that the total flows during the period from 2008-2009 amounts Rs.4, 912.22. In the total funds 30% of funds were received through secured loans, 42% of funds received through reserve & surplus, 28% of funds received from funds from operation.

55

Regarding application of the funds the 45% were invested in fixed assets i.e. purchase of fixed assets, 32% of funds were utilized for unsecured loans & W-IP and remaining 23% of funds were utilized for working capital.

STATEMENT OF CHANGES IN WORKING CAPITAL 2009-10 Changes in working capital Increase Current Assets (CA) Inventories Sundry debtors Cash and bank balances Loans and advances Total Current Assets 12,092.91 8,814.31 420.10 5,289.66 26,616.98 14,436.48 11,966.16 3,550.27 6,020.93 35,973.84 2,343.57 3,151.85 3,043.56 817.88 Decrease

Particulars

2009

2010

Current liabilities (CL) Current liabilities Provisions Total current liabilities Net working capital Increased working capital Total 9,319.38 711.30 10,030.68 16,586.30 8,504.21 25,090.51 10,108.38 774.95 10,883.33 25,090.51 25,090.51 9,356.86 8,504.21 9,356.86 789.00 63.65

Net increase in the working capital is Rs.8, 504.21 Interpretation: From the above table is observed that the networking capital of the company shows increasing trend. The total current assets of the company have increased from Rs. 26,616.98. In 2009 to Rs. 35,973.84 in 2010. And the bank balance is also increased from Rs.420.10 to Rs.3, 463.66 i.e., 3,043.56. The total current liabilities increased from Rs. 10,030.68 to Rs.10, 883.33. The net working capital increases Rs.8, 504.21

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ADJUSTED P&L A/C FOR THE YEAR OF 2009-2010 Particulars Deferred tax liability Capital work in progress Amount 546.78 436.64 Particular Funds from operation Amount 983.42

Total

983.42

Total

983.42

Statement of Sources and Applications Of Funds for the year ended at 31st March 2010. Sources Reserves & surplus Secured loans Unsecured loans Funds from operation Amount 1,370.07 4,813.21 3,189.14 983.42 Net increasing in working capital Applications Purchase of fixed assets Amount 1,851.63

8,504.21 10,355.84

10,355.84

Interpretation: It is evident from the above table that the total flows during the period from 2009-10 amounts Rs. 10,355.84 lakhs. In the total funds 47% of funds were received through secured loans, 31% of funds received through the unsecured loans, 13% of funds were received through reserves & surplus and the remaining 9% of funds received from funds from operation. Regarding application of the funds the 18% were invested in fixed assets i.e. purchase of fixed assets and remaining 82% of funds were utilized for working capital.

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STATEMENT OF CHANGES IN WORKING CAPITAL 2010-11 (Rupees in lakhs) Particulars Current Asssets (CA) Inventories Sundry debtors Cash and bank balances Loans and advances Total current assets Current liabilities (CL) Current liabilities Provisions Total current liabilities Net working capital 10,108.38 774.95 10,883.33 25090.51 6,853.94 1,066.74 7,920.68 22,542.50 2,548.01 5,802.45 5,802.45 3,254.44 291.79 14,436.48 11,966.16 3,550.27 6,020.93 35,973.84 11,519.49 2,916.99 120.36 2,033.85 439.46 2010 2011 Changes in working capital capitalcapital Increase Decrease

11,845.80 1,516.42 5,581.47 30,463.18

Decrease working capital - 25,090.51 2,548.01 TOTAL 25,090.51 25,090.51

Net decrease in the working capital is Rs.2, 548.01 Interpretation: From the above table is observed that the networking capital of the company shows decreasing trend. The total current assets of the company have decreased from Rs. 35,973.84. In 2010 to Rs.30, 463.18 in 2011. And the bank balance is also decreased from Rs.3, 463.66 to Rs.1, 516.42 I.e., 1,947.24 the total current liabilities decreased from Rs. 10,883.33to Rs.7, 920.68. The net working capital decreases Rs. 2,548.01 ADJUSTED P&L A/C FOR THE YEAR OF 2010-2011
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Particulars Deferred tax liability Net fixed assets

Amount 312.01 480.89

Particular Funds from operation

Amount 792.90

Total

792.90

Total

792.90

Statement of Sources and Applications of Funds for the year ending at 31 st March 2011. Sources Reserves & surplus Unsecured loans Funds from operation Net decreasing in working capital Amount 5,164.14 1,251.75 792.90 Applications Purchase of fixed assets Secured loans (paid) Amount 3,015.84 6,740.96

2,548.01

9,756.80 Interpretation:

9,756.80

It is evident from the above table the total funds during the period from2010- 2011 amounts to Rs. 9,756.80. In the application side we can see the 31% of funds were utilized for purchase of fixed assets, and 69% to secured loans. In the sources side we can see the 66% of funds were received through reserves & surplus and unsecured loans, 8% of funds were received through funds flow operation and remaining 26% of funds were received through working capital.

The statement showing the working capital from 2006-07 to 2010-11 Year Increase Decrease

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2006-07 2007-08 2008-09 2009-10 2010-11

1,304.28 6,705.01 1,116.06 8,504.21 -

2,548.01

Showing Working Capital from 2006 - 2011

10,000.00 8,000.00 6,000.00 4,000.00 2,000.00 0.00 -2,000.00 -4,000.00

2006-07

2007-08

2008-09

2009-10

2010-11

Increase

Decrease

Interpretation: The above diagram clearly shows that the net working capital of the LIL showing an increase with a decreasing trend. As the net working capital for the year 2010-11 is -2,548.01 it is decrease in the net working capital but for the years before 2010-11 the net working capital of the firm was increasing at a decreasing rate i.e., 1,304.28, 6,705.01, 1,116.06 and 8,504.21,respectively for the years 200607, 2007-08, 2008-09,2009-10

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FINDINGS

In 2007 most of the funds were generated through the unsecured loans ie.80% and 81% of funds were using for purchasing of fixed assets & payment secured loans. In 2008, 60% of funds were raising through secured loans and reserves & surplus. If we observe at application side funds were utilized to purchase of fixed assets is 41% and for working capital is of 49%. In 2009, 28% of funds generated through trading activity & another 72% through secured loans and reserve & surplus. In applications the 45% of funds were utilized to purchase fixed assets. In 2010, 77% of funds generated through secured and unsecured loans. If we observe at application side funds were utilized to purchase of fixed assets is 18% and for working capital is of 82%. In 2011, the funds were utilized through purchase of fixed assets, paid of loans. Funds lost in operation was 26%. So, the balance sheet was not looking strength by comparing with the other financial year balance sheet.

SUGGESTIONS

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 Sales should be increased to get more returns In the financial senses acquiring the share capital will makes profitable not borrowing the loans through secured and unsecured. Trading activity should be operated effectively to generate more funds. By increasing share capital the customers will increase by that awareness of the company will take place. It would be better if the company concentrates on its operations

CONCLUSION

The following conclusions are arrived at based on the observations made on the present study: -

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Except of the last year the study period it is observed that the fund for operations is on profit. It generated the funds in application of total funds.

Except of the last year of the study of period, funds were utilized for financing the working capital requirements.

The study revealed a mixed trend of application and sources of funds in respect of secured and unsecured loans.

BIBLIOGRAPHY

James C.Vann Horne Financial Management, 9th edition Prentice Hall of India Private Limited, New Delhi, 1994. Khan M.Y. & Jain P.K. Financial Management, 2nd Edition Tata Mc. Graw-Hill Publishing Co. Ltd., New Delhi. Pandey I.M., Financial Management, 7th Edition, Vikas Publishing House Pvt. Ltd., New Delhi, 1995.

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 Maheswari S.N., Financial Management, 4th Edition, Sultan Chand & Sons, New Delhi. 1997. Man Mohan & Goyal S.N., Principles of Management Accountings 6th Edition, Sathiya Bhavan, Agra, 1998. Prasanna Chandra, Financial Management, 3rd Edition, Tata Mc.GrawHill Publishing Co., Ltd., New Delhi, 1984.

Website: www.lancoindustries.com

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