A report on organizational study

done at
CHATHANNOR CO-OPERATIVE SPINNING MILL
Submitted
in partial fulfillment of the requirements
for the award of the Degree of

Master of Business Administration

University of Kerala
By

ANOOP VINCE
Under the guidance of

Mrs.Sini.V.Pillai
Faculty, LMCST, Trivandrum

DEPARTMENT OF MANAGEMENT STUDIES

LOURDES MATHA COLLEGE OF SCIENCE &
TECHNOLOGY
LOURDES HILLS, KUTTICHAL P.O., THIRUVANANTHAPURAM-695574
2007-2009

A report on organizational study

done at
CHATHANNOOR CO-OPERATIVE SPINNING MILL

Submitted
in partial fulfillment of the requirements
for the award of the Degree of

Master of Business Administration

University of Kerala
By

ANOOP VINCE
Under the guidance of

Mrs.Sini.V.Pillai
Faculty, LMCST, Trivandrum

DEPARTMENT OF MANAGEMENT STUDIES

LOURDES MATHA COLLEGE OF SCIENCE & TECHNOLOGY
LOURDES HILLS, KUTTICHAL P.O., THIRUVANANTHAPURAM-695574
2007-2009

DEPARTMENT OF MANAGEMENT STUDIES

LOURDES MATHA COLLEGE OF SCIENCE AND
TECHNOLOGY
KUTTICHAL, THIRUVANANTHAPURAM 695574

CERTIFICATE

This is to certify that the organizational study done at CHATHANNOOR

CO-OPERATIVE SPINNING MILL, submitted by ANOOP VINCE is a
bonafide record of the work done by her during the year 2008 under my guidance
in partial fulfillment of the requirements for the award of Degree of Master of
Business Administration of University of Kerala.

Head of the Department

Faculty Guide

Prof. B. Ajay Kumar

Mrs.Sini.V.Pillai

DECLARATION

I ANOP VINCE, hereby declare that all the details furnished in the report are true to the
best of my knowledge. This report entitled as an Organization Study at CHATHANNOOR
CO-OPERATIVE SPINNING MILL is submitted to the University of Kerala for the award of
degree of Master of Business Administration. I further declare that, this work is not partly or
wholly submitted for any other purpose

TRIVANDRUM

ANOOP VINCE

ACKNOWLEDGEMENT
It is with great pleasure and gratitude I acknowledge my indebtness to those who have helped me
in completing this project work at CHATHANNOOR CO-OPERATIVE SPINNING MILL and I
sincerely thank them all.
I would like to express my profound gratitude to Prof:B.Ajay Kumar, HOD, Department of
Management Studies, LMCST who have been a constant source of inspiration and have
encouraged me with his innovative ideas.
I am very much obliged to Mrs Sini.V.Pillai, Lecturer, Department of Management Studies,
LMCST who was kind enough to guide and support me through out my work and helped me in
completing my Organization Study successfully.
I would like to extend my thanks to Mr.jayaprakash ,Welfare officer for giving me permission
to undergo training under him and for his timely guidance in preparing my report.
I am grateful to the staff and employees of CHATHANNOOR CO-OPERATIVE SPINNING
MILL for their co- operation and help during my Organization Study there.

ANOOP VINCE

ABSTRACT

This organizational study, undertaken as a part of the curriculum, was done at the Chathannoor
co-operative spinning mill that aims to gain an organizational familiarization and in depth
knowledge of the functioning of various departments.QCML was registered on 13-2-1976 for
setting up a textile spinning mills of 25000 spindles capacity in the co-operative sector with
objectives like promoting industrial development and to provide gainful employement in rural
areas
.The organizational study was done with the aim of getting acquainted with the functions and
activities of QCSML.One of the major objectives of the study was to get an exposure into the
working environment of the company. To sum up I would say that the study helped me to
correlate theory with practice.

CONTENTS
Chapter I: Introduction

Page no:

1.1

Purpose

1.2

Objective Methodology

1.3

Limitation

Chapter II: Industry and Company Profile

2.1

Industry Profile

10

2.2

Company Profile

11

Chapter III: Functional Departments

6

3.1

Marketing

17

3.2

Human Resource

19

3.3

Operations

28

3.4

Quality Control

35

3.5

Finance management

36

Chapter IV: Analysis

4.1

Financial Analysis

40

4.2

SWOT Analysis

58

Chapter V: Findings

61

Suggestions

62

Chapter VI: Conclusion

63

Bibliography

64

Chapter 1

INTRODUCTION
7

INTRODUCTION
Cotton fibre accounts for almost 70% of the raw material mix of the textile industry. The
different sectors of Textile industry accounts for 20% of the industrial production, 7.5% of the
GDP and provide employment to about 27 million persons.
Textile industry contributes about 32% of the Foreign exchange earnings of the Country. Out of
8.1m. Ha of cotton area only 1/3 is under irrigation the production of cotton which was 27.9 lakh
bales only in 1947-48 has made spectacular progress to reach the level of 156.5 lakh bales in
1995-96 which constitutes a 460 percent increase.
8

Indian textile industry is nearly 180 years old with first mill having modern lines being set up in
1817. It has a considerable growth especially after the country gained independence. Textile
industry became a largest segment of total industrial section and contributes about 23% of
countries industrial production
The cloth production in India has reached a level of 2790 million sq. mts. During the year 19931994 as against 22978 million sq.mts in 1991-92. If we take all fabrics into account, the per
capita availability increases from 22.87sq.mts in 1991-92 to 25.81sq.mts in 1993-94. India has
only 62000 automatic looms in its total of 16 lakh loom Indias textile industry comprises of
1227 mills (public sector mills188, private sector 915, and co-operative mills 124.)
This project work was conducted to study the organizational and financial aspects of QCML.
This study helps to know about the overall performance of the different departments and the
company as a whole

Through this study.Analysis of financial statements is an attempt to measure the enterprise

liquidity, profitability, solvency and other performance. It is linked with the objective and interest
of the individual agencies concerned. The agencies have diverse and conflicting interests.
In order to cater the needs of handloom weavers and also to provide employment to industrially
backward district or rural area people, the state Government of Kerala has embarked the schemes
of starting four spinning mill in
The co-operation sector as under
1.

The Quilon Co-operative Spinning Mill

2.

The Malappuram Co-operative Spinning Mill

3.

The Trichur Co-operative Spinning Mill

4.

The Kayamkulam Co-operative Spinning Mill.

1.1 PURPOSE OF THE STUDY

The main purpose of the study is to analyze the growth & expansion of the concern
And also to understand the working of various departments,the study also aims at analyzing
the financial position of QCSML, assessing the liquidity and solvency of the firm, collecting
the maximum information about the financial aspects of the firm,to know the overall
performance of the company, to know what are the methodologies used in spinning mill.to
know about the origin and history of the cotton textile industry in the world over and in India
in particular, with special emphasis to Kerala, to collect data for project preparation,to know
about the management and workers in the industry,to know about the manufacturing process
and the factory environment,to know how the product is marketed to know whether the
company meets the social commitments to suggest ways and means to make the company
profitable if it is running at a loss.

1.2 OBJECTIVE METHODOLOGY

Using two types of data carried out the study. They are
1. Primary data
Conducting prefixed personal interviews with the welfare officers and other
employees of the mill collect primary data.
2. Secondary data
Secondary data for this project work are collected from the welfare department and
from the published reports of the mill.

1.3

LIMITATIONS OF THE STUDY

10

1. The major limitation was time constraint. As time available was much limited the study
restricted for a period of 10 days.
2. Due to the deficiency in time I couldnt collect all the information related to
the company. That is I couldnt interview many for collecting more details.
3. Even though the workers were generally co-operative in assisting to collect
data, I have to cautious in seeing that their work was not affected for my sake.
This limitation has affected my elaborate study.
4. The company is in the co-operative sector and is a small unit. All the around
of operations those are available here. Hence the area of study is limited to
it does exist.

11

CHAPTER II: INDUSTRY AND COMPANY PROFILE

2.1 INDUSTRIAL PROFILE

Textile industry contributes about 32% of the Foreign exchange earnings of the Country.
Out of 8.1m. ha of cotton area only 1/3 is under irrigation.The production of cotton
which was 27.9 lakh bales only in 1947-48 has made spectacular progress to reach the
level of 156.5 lakh bales in 1995-96 which constitutes a 460 percent increase. The
value of textile material exported from India during 1998-99 amounted to over
Rs.5,27,208 million, comprising 30% of the total foreign exchange earnings of the
country In the last two decades, the production of cotton has gone up from 7.5 million
bales in 1983-84 to 16.3 million bales of 170 kg/bale during 1998-99. This is due to the
introduction of high yielding varieties, hybrids and proper management of insect pests
and diseases. The cotton required for the purpose of manufacturing yarn is cultivated in
about 9 million hectares of land in India and thus India ranks first in the world. Yet, in
12

regard to productivity of cotton, we are far behind other cotton producing countries.
The import of cotton to meet the needs of the Indian mills which was a regular feature
till 1978-79 and now India is a net exporter of cotton exports about 5.15 lakh bales in
1996-97. Cotton fibre accounts for almost 70% of the raw material mix of the textile
industry. The different sectors of Textile industry accounts for 20% of the industrial
production, 7.5% of the GDP and provide employment to about 27 million persons.

The cotton textile industry consists of three categories in the organized sector.
They are

Spinning Mill

Course and medium spinning mills

Fine and superfine composite mills.

Spinning Mills are generally small in size. Fine and superfine composite mills uses
foreign cotton.
The cotton textile industry is the most important of all other industries. Its manufactures
are mainly cotton yarn and cotton cloth. Many countries of the world have developed
this industry but the largest concentration is in 6 countries, the USA, former USSR,
Japan, UK, and India and China.
Indian textile industry is nearly 180 years old with first mill having modern lines being
set up in 1817. It has a considerable growth especially after the country gained
independence. Textile industry became a largest segment of total industrial section and
contributes about 23% of countries industrial production. The industry provide
13

employment about 15 million people directly and indirectly contribute about 1/4 th of
countrys total foreign exchanges.
The cloth production in India has reached a level of 2790 million sq. mts. During the
year 1993-1994 as against 22978 million sq.mts in 1991-92. If we take all fabrics into
account, the per capita availability increases from 22.87sq.mts in 1991-92 to 25.81sq.mts
in 1993-94. India has only 62000 automatic looms in its total of 16 lakh loom Indias
textile industry comprises of 1227 mills (public sector mills188, private sector 915, and
co-operative mills 124.)

2.2 COMPANY PROFILE

In Kerala, textile industry plays a very important role, In the70s,
the handloom weavers were facing greater difficulties because of industrialization. The
handloom products had employed lacks of Keralites, which is a part of Kerala culture. At
that time, non-availability of cotton yarn was the basic problem faced by the weavers. In
order to cater to the needs of weavers and also to provide employment opportunity to
industrially backward areas the Government of Kerala took the decision to start 4
spinning mills in the co-operative sector. They are
1. Quilon co-operative spinning mill
2. Malappuram co-operative spinning mill

14

3. Trichur co-operative spinning mill

4. Kayamkulam co-operative spinning mill.

The Quilon Co-operative Spinning Mill was registered on 13-2-1976 for

setting up a textile spinning mills of 25000 spindles capacity in the co-operative sector. The
mill is situated at Karamkode, Chathannoor about 20 kms away from Kollam town and 53
kms from TVM on the Kollam TVM highway. The estimated cost of the project 636 lakhs.
The total cost of project when it was commissioned on 11-2-1986 was 717 lakhs. The mill is
located in green environment and friendly atmosphere.
It has no polluting agents that are harmful to nature. The area of operation of the society is
spread all over Kerala. Initial capacity required for the mill was collected through various
sources like issue of shares, subsidies from government and other financial institution like
IDBI, KICA, IFCI, KSCB and interest areas of these funds .The venture capital incurred for
this projet can be analysed in the following table

Distribution of venture financing

COMPONENTS

AMOUNTS (in lakhs)

Share capital

254.96

Investment

15

15

Term loans from IDBI

145

Term loans from ICICI

75

Term loans from IFCI

70

Term loans from KSCB

28

Loan from government of Kerala

10.19

Int: areas

118.85

TOTAL

717.00

HISTORY
TEXTILE INDUSTRY IN INDIA
Textile industry is one of the most important industries among the cottage
industries in India. Indian textile industry is nearly 180 years old.Cotton fibre accounts
for almost 70% of the raw material mix of the textile industry.The different sectors of
Textile industry accounts for 20% of the industrial production, 7.5% of the GDP and
provide employment to about 27 million persons. Textile industry contributes about 32%
of the Foreign exchange earnings of the Country. Out of 8.1m. ha of cotton area only 1/3
is under irrigation

The production of cotton which was 27.9 lakh bales only in

1947-48 has made spectacular progress to reach the level of 156.5 lakh bales in 1995-96
16

which constitutes a 460 percent increase.The import of cotton to meet the needs of the
Indian mills which was a regular feature till 1978-79 and now India is a net exporter of
cotton exports about 5.15 lakh bales in 1996-97. The birth of this industry dates back to
1818 when British established the 1st cotton mill. The real growth however began in
1856 when the Bombay Spinning Mill was started. Till 1920, the industry was
concentrated in and around Bombay, two important factors that contributed for the
development of these industries were the Swadeshi Movement and The production
granted to industry since 1926 the factor which favored the growth of this industry is the
Swadeshi movement and the industries that were benefitted are in North India,
Tamilnadu, Karnataka and Madhya Pradesh.

VISION & MISSION (OBJECTIVES OF THE MILL)

The main objectives of QCSML are
1. To supply cotton yarn to members.
2. To promote industrial development.
3. To provide gainful employment to rural areas.
To safeguard the weaker section from exploitation of large sellers

17

ORGANISATION CHART OF QCSM

Board of directors

Managing director

Mill manager

Deputy finance controller

18

Labour
Welfare
Officer

Spinning
Manager

Asst:
Time
Officer

Asst:
Spinning
Master
(Quality
control)

Shift
time
Keeper

Lab
Asst:

Electrical
Engineer

Asst:
Spinning
Master
(Mainten
ance)

Store
Superintend

Asst:
Go down
Officer

Shift
Supervisor

19

Asst:
Purchase
Officer

A/c
Clerk

Sales
Officer

Chapter III
FUNCTIONAL DEPARTMENTS

DEPARTMENTS
Dividing the organization in to smaller flexible administrative units is called
departmentation. Each smaller unit is called as departments. For easy functioning the
administration of QCSML is divided in to 3 departments. Each department is under the control of
departments heads. They are

1. PRODUCTION
20

2. HUMAN RESOURSES.
3. FINANCE.
4. MARKETING.
5. QUALITY CONTROL DEPARTMENT.

3.1 MARKETING Department

In QCSML, there is no separate marketing department. M.D has the full control over the
marketing department. The Government of India has made a statute to have 50% of the yarn
produced to be in Hanks. 80% of the Hanks production must be in size of less than 40s and
below. The majority of customers for Hanks or Hank products are located at Kerala and
Coimbatore.

21

In the mill, their customers make the sales on the basis of orders. The sale is made mostly to
cotton textile industries in Mumbai, Coimbatore and Kerala. In case of Kerala state, the
major customers of the product of the mill are the co-operative societies, who are the
shareholders of the mill. They are interested in taking majority of Hanks and these Hanks are
sold to power looms of Coimbatore, like Hantex, NHDC etc. Of the cones produced 99% of
it is sold in Mumbai market and this is done through agents. They have no separate marketing
departments. Their major part of sale is done through agents. So the company has to incur
extra expenses by way of commission to agents. They dont have any sales promotion
techniques. Following table shows the
sales and purchase of QCSML.

Sales and purchases

Year

Sales ( in Rs )

Purchase ( in Rs )

2002-2003

9,45,32,450

5,41,00,000

22

2003-2004

7,78,81,005

5,33,500132

2004-2005

8,39,62,637

5,71,581,855

2005-2006

7,17,52,704

4,63,50,827

2006-2007

5,57,63,969

72,79,647

3. 2 HUMAN RESOURSE.
Labor is the most important factor of production. When compared to other factors of production
without labor other factors of other production are useless. Labor may be defined as a hand or
brainwork, which is undertaken for a monitory consideration.
Labors have two aspects qualitative and quantitative. Quality aspects of labor refer to the
efficiency of the labor, quantity aspects refers to its members.

23

Welfare officer is the head of welfare department. Under him there is time keeping. Under him.
Under him there is time keeping, ESI, PF department, Canteen and society. It is the duty of the
welfare officer to keep the attendance record of workers, wage preparation, leave with wage,
work etc. He also sent return to the labor department and the Government, analysis of
absenteeism and all other works related to workers.

Labor Force (No. of employees)

The total no. of employees working in the org is 610. The distinction of
Employees are given in the following table.
Types of workers

No. of employees

Administrative staff
Permanent workers
Trainees
Total

28
296
98
422

Source- Records of QCSML

Actually the required numbers of administrative staff are 27 and the required labor force is 300.
But now the mill is having more than the required labor force. In order to give salaries and wages
to these additional labor forces, the mill has to bear additional expenses. This is one the reasons
for the loss of the company.

Shift and timing (shift system)

24

The mill works on all days of the week. It operates in 3 shifts per day. Each shift is 8 hours.
There is another shift known as general shift in addition to the 3 shifts. The timing of the shift is
given below in table.

Shift and timing

Shift

Timing

General shift

7a.m to 3.30p.m

1st shift

7a.m to 3p.m

2nd shift

3p.m to 11p.m

3rd shift

11p.m to 7a.m

Distribution of workers according to shift is given below.

Shift

No. of workers

General shift

110

25

1st shift

70

2nd shift

70

3rd shift

70

Source: primary information

The 361 workers of the workers of the shift are from the Production section. The workers in the
general shift are maintenance people who are responsible for running the machines of the
mill. The working days of mill are 325 days and it works for 24 hours per day. The other
13 days were a holiday that is national holidays and 9 festival holidays. An employee who
is working for 8 hours in a day and continuously for 6 days, he should be relived for one
day.

The people who attend general shift look after the maintenance of machineries.
Sunday is holiday to them.

The payment system to trainees and permanent workers is as follows.

Kind of
workers

Wages

D.A

HRA

26

LTC

Stipend

Trainees

Nil

Nil

Nil

Nil

Yes

Yes

Yes

Yes

Yes

Nil

Permanent
Workers

Stipend

125, 100, 75, 60, 50, 40, 30, 20.

Trainees are paid on the stipend. A trainee who completes his 6 months of
training he is eligible to get 30 per day.

Trade union
There are 8 trade unions in QCSML.
CITU:

Centre of Indian Trade Union

AITUC: All India Trade Union Congress

27

STU:

Swathantra Thozhilali Union

BMS:

Bharatia Mazdoor Sangh

UTUC:

United Trade Union Congress

UTUC (B): United Trade Union Congress (B)

KTUC (J): Kerala Trade Union Congress (J)
INTUC:

Indian National Trade Union Congress

Bonus
According to bonus act, if an organization is running in a profit stage, it should give bonus
of maximum 20% and minimum 8.33%. If it is in a loss stage, it should give only Rs.1000. But
in the case of QCSML, they gave 12.5%as bonus in the previous years and were amounted to 44,
00,000. Actually the mill was in a loss stage. According to the Bonus act, they are responsible to
give Rs.1000. If they had given in that way, they should have paid only Rs. 5, 00,000.

Time keeping system in QCSML

A full fledged time officer under the charge of a head time keeper or Assistant
time keeper is functioning in the mill. The mill works for all the three shifts. Each shift has 3
time keepers for each department. Besides this there are 6 ticket writers in the time office to
mark the attendance card. Service records of the employees are also maintained in time office.
Attendance card system is followed in the mill. Separate coded cards are
designed to each worker. A card for one month is used in the mill. At the commencement of the
28

shift each worker has to put the card in a box placed in the office. The ticket writers will collect
these cards and the attendance is marked. Attendance will be marked in the master roll also from
the cards. Wages will be calculated on the basis of actual timing of working.

Absenteeism
Absenteeism rate is the total man shifts lost because of absenteeism; we require the
number of persons scheduled to work and the number actually present. The causes of
absenteeism are sickness, discomfort in work, industrial accidents, social and religious
ceremonies, festivals etc.

Payment system
The payment system of QCSML is daily rated monthly paid. Wages are prepared by
time office. The wage slip is given to each worker. According to payment of wage act, an
organization, which has less than 1000 workers, should pay wages or salary within the 7th day of
the calendar, so the payment is given in every 7 th day of the calendar in spinning mill. As per
payment of wages act, 75% of the total wages can be deducted towards recovery provided that
the recovery includes deduction towards co-operative society.
P.F

E.S.I

12% of basic wages + D.A

1.75% of basic wages + D.A + H.R.A
The 361 workers of the shift are from production section. Theworkering the

general shift are maintenance people who are responsible for running the machines of the mill.
The working days of the mill are 325 days and it works for 24 hours per day. The other 13 days
were holidays that are 4 national holidays and 9 festival holidays. An employee who is working
for 8 hours in a day and continuously for 6 days, he should relive from one day.
The people who attend general shift look after the maintenance of machineries.
Sunday is holiday to them. The other 13 days were holidays.Even though the mill has got
29

manpower of workers. The absenteeism rate of employees are 32% on an average. The reasons
attributed for higher rate of absenteeism are the 7 days of working, shift time involvement of
workers , political and trade union activities etc.

Retirement scheme
In QCSML, workers are retired after the completion of 58 years. If any person resign
or die due to ill health, there nominees are given employment. After 2 month training, he will be
permanent.

Recruitment of workers
For recruitment of workers they invite applications from eligible candidate through news papers.
A committee will scrutinize the applications and select suitable candidates for written test and
interview. The interview board will conduct this. After the interview, selected candidates will be
appointed initially for one year. After completion of the period they will be confirmed in
respective grades. During this period they will be entitled for salary and allowances. The Board
of Directors make the selection and appointments. The board does the recruitment in QCSML
and the political parties influence the board. Each political party, whenever they get power on the
30

management of the mill they recruit their own followers to the mill. This course excesses the
workers to the mill.

Selection
Recruitment and selection goes hand in hand. Proper recruitment provides better quality workers
for selection. Scientific selection methods helps to pick out the best person suited for the job and
they will put in to proper job through placement.
Selection process involves the application of different kind of employment tests like aptitude.
Interest and personality tests to assess the individual abilities and characteristics. There is no
standard selection procedure followed by all organization

3.3. OPERATIONS

PRODUCTION
The head of the production department is mill manager; the planning and

control of production are done by the mill manager. He gives necessary instruction to spinning
master for doing the desired objectives. He gives necessary instruction to spinning master for

31

doing the desired objectives; the deputy spinning master also helps the master for his work.
These plans are implemented through the shift supervisor.

STRUCTURE OF PRODUCTION DEPARTMENT

Mill Manager

Spinning Master

Deputy Spinning Master

Shift Supervisor

Skilled Worker

CAPACITY & PRODUCTIVITY OF THE MILL

The production of QCSML started 13-02-1986. But the whole operation
was commenced by the end of the financial year 86-87. In 98-99 the QCSML couldnt use the
whole plant capacity because of the absenteeism of workers and power failures.

32

Production of cotton yarn in the mill

The mill adopts the production to stock method. In this method they produce goods according
to demand for the product. According to the demand of the product the production process will
vary. During the working condition the tem is maintained at 34 Degree C, otherwise the yarn will
be broken during the process. The quality controller the quality of goods, during production and
after production. The QCSML is using the machinery of Lakshmi Rita Machinery.

Procurement of raw material

As per the requirement of QCSML, first of all tenders are invited from suppliers and purchase
order is given to the suppliers. The payment to the suppliers are done, 20% will be made within
30 days, balance within 3 months.

Production process

Mixing

Blow Room

33

Carding

Draw Frames

Fly Frames

Ring Frame

Winding

Reeling

Doubling

Packing.

1. MIXING:
In this department cotton are graded according to various fiber properties like length, strength,
fineness, colour etc. Properties vary with different varieties of cotton. The working of blending
different cotton together is done in the departments, where the different varieties are taken in
required proportions and arranged on the lattice of the blenders or bale plungers of the blow
room machinery. Sometimes useful wastes are also mixed.
34

2. BLOW ROOM:
The main purpose of blow room is opening, closing and cleaning or cotton in this department
the cotton is fed at one end and the output is achieved at a scutcher, which is the last machine in
the sequence of machinery of the blow room in the form of a lap. A lap is a sheet of cotton fleece
rolled around an iron rod inserted in the lap spindle. When the full lap is removed from the full
scutcher, the spindle is pulled out and the lap remains around the iron rod. The lumps of cotton
are gradually broken down to smaller size by the process of trembling, beating action etc. of the
spiked roller, lattice and beeters of the blow room machinery.
3. CARDING
The blow room lap, which is still in the form of small tuff in the lapis brought to this
department and fed to the carding machines. These are opened to the stage of single fibre on the
card by means of carding action between pointed wires mounted in the surface of licker in,
cylinder and plates. The opened fibres are collected by the doffer comb in the formals of a web.
This web is then passed through the trumpet to give to the shape of a rope and coiled inside a can
by means of a coiler.

4. DRAW FRAMES:
The card silver lacks on regulating the fibres and the fibres are also in a crisis condition. In
order to spin and even and regular yarn the silver for better control of the fibres during drafting
in succeeding process and also for obtaining better strength of yarn spinning. The evenness of
silver and parallelization of fibre is achieved at the draw frame when 6-8 more silver are again
fed to another draw frame. The finished draw frames are transferred to fly frame.

35

5. FLY FRAMES:
The silver from draw frame is fed to fly frames. The silver is drafted and reduced
in diameter and slightly twisted and wound on the bobbin by means of the flyer.
6. RING FRAME:
The roving wound on the bobbins at the fly frame is fed to the ring frame creel. The
bobbin is drafted to the fineness to the required and is twisted as it is delivered from the nip of
the front roller pairs. It is wound on the bobbin or spindle through the traveler which rotates
along the flange of the ring. The difference in the speed of the spindle and the traveler results in
the winding of the yarn in the bobbins.
7. WINDING:
The yarn spin at the ring frame and double yarn from doubling frame is wound on the
bobbin; this is a very small package. The cheese produced at the winding machine is either fed to
double when yarn is to be doubled or sent to the packing department. The main function of
winding machine is changing the yarn useful to power looms.

8. REELING :
The yarn is to be supplied to in the form of hanks. The bank yarn is produced in the reeling
machine. The hanks are wound from bobbins.
9. DOUBLING :
In the doubling process two single yarns are twisted together to give a Double yarn.
36

This increase the strength of the yarn. If two single yarn of 10s count are doubled,
Resulted yarn will be 2/10s count.
10. PACKING :
The yarn is sold in hank form or as cones. Hanks are packed as bundles. One bundle
contains 4.5Kg of 20 or more hanks. Cones are packed in bags. One bag contains 40 cones of
which one cone weight 1.25Kg. During the time of production and after the production, the
quality is checked by the quality controller

Grading of the product

In QCSML grade of the cotton are measured in count and they are as follows. 20s,40s,
50s, 60s, 80s 120 count is the best count but in this mill 40 count is used. This mill produces
mainly 2 types of cotton yarn namely, Cons and Hanks. Now a day it also produces polyester
yarn. The working condition is always maintained at 34degree C tem else the yarn will be broken
during the procedure
In QCSML following raw cottons are used.
1. Shankar
2. MCU-5
3.

L.K
The cons produced with the view to supply them for the power looms.

Hanks are mainly used for handlooms.

WASTE
The production process creator 2 types of waste. They are usable, and saleable .usable wastes are
again sending to the production process of mixing and blowing. Saleable wastes are sold and
scrap value is obtained.

SOURCE OF PURCHASE
37

The purchase is made from the cotton producing federators. But now the mill
management is going for private suppliers and individual agents. Because their suppliers found
to be high cost, low quality etc.

SUPPLIERS OF RAW MATERIAL

1. Private parties.
2. Vijay Lekshmi Enterprises- Kundara
3. Sreenivas- Kundara
4. L. Davarajan and co-Coimbatore.
5. Arakal cotton co-Thrichur
6. Chaithanya cotton concern- Kundara
7. P.K. Sumbramanyam- Coimbatore

4. QUALITY CONTROLL DEPARTMENT

This department refers to the systematic control of various factors that
affect the quality of the end product. The quality of the end products depends on the quality of
the raw materials used, manufacturing equipments the degree of skill and proficiency of the
workers etc. During the time of production and after the production the quality controller
checked the quality of the product. It will help to eliminate the weaving mistakes. Now a days
38

the mill started computer testing labs for checking the quality of yarn at each machine. Then they
can produce good quality products.

5.

1.

FINANCE MANAGEMENT

FINANCE
Finance is the lifeblood of every business. Finance officer does the activities of
finance department. He has several functions to perform in close consultation with the chief
executive of the organization. The following figure shows the hierarchy of Finance
department.
Finance Officer

Junior Officer
Assistant Clerks

Peons & Drivers

39

The percentage should be constant in every year. Straight- line method is used for calculating
depreciation under this method a fixed amount of original cost of asset is
written off each year. The following table shows the depreciation charge for every
Asset. He has several functions to perform in close consultation with the chief executive of the
organization.
QCSML has current account with the following financial institutions.

1. South Indian Bank Ltd.

2. QDCB Ltd, Quilon.
3. QDCB Ltd, Chathannoor.
4.

KSEB Ltd,

T.V.M

5.

SBT, Chathannoor

6.

SBT, Quilon.

7.

SBT, Madurai

8.

SBI,

9.

Catholic Syrian Bank, TVM.

Quilon

10. TamilNadu Merchantile Bank.

40

11. Treasury saving bank.

12. Punjab national bank.
13. CANARA Bank Chathannoor.

Trading Results
On analyzing the final accounts of QCSML, it is found that the mill was
Inquiring loss for the past 5 years. This is due to declining prize, decline in demand,
Increase in production cost and cost of raw material. The trading results can be
Analyzed in the following table

Net profit or loss

Year

Net profit or loss( in Rs )

1996-97

4,35,747

1997-98
1998-99

(-) 1,41,33,920
(-) 1,61,09,220

1999-00

(-) 1,29,48,056

2000-01

(-) 57,99,703

2006-07

(-) 3,18,42,303.37

41

Source: compiled from annual results

On analyzing the above table it is found that the firm is running in a loss stage.

Liability
The liability of QCSML is 15 crores. It hasnt any profit since 1997. It is in
a closing stage. The officer said that it would close within 4 years.

42

Chapter IV: Analysis

43

Chapter IV.1

Financial Analysis

Statement of allocable surplus for the bonus year 2006-2007.

Net profit or loss of the year as per profit & loss account
(-) 3, 18, 42,303.37
Add back provision for
a. Bonus
b. Depreciation

13, 57.654
3, 89,840.00

17, 47,494.00

Gross profit / loss

(-) 3, 00, 94,809.37

Available surplus u/s

Gross profit/loss computed above

(-) 3, 00, 94.809.37

Less Depreciation u/s 32 (1) of Income Tax Act allowed

in section 6(9) of Bonus Act

Rs. 3, 89,840.00

Investment allowance u/s 32(a) of Income Tax Act as

Allowed in 6 (b) of Bonus Act

Nil
44

8.5% of the capital investment as lay down

in section 6(b) of Bonus Act

Rs.

23, 18,673.01

27, 08,513.01
Available Surplus

(-) 3, 28, 03,322.38

Note:
Since the available surplus is Nil for the year 2006-2007, the allocable surplus is also Nil.

Profit & Loss account for the ended on 30-06-2007.

Income

Income

Schedule No

Rs.

Ps.

Sales

5, 82, 62,861

.80

Other Income

II

13, 10,359

.07

Changes in stock level

X (+)

2, 12,362

.00

Total

5, 87, 85,582
45

.87

Expenditure

Expenditure

Schedule No

Rs.

Ps.

Consumption of
Raw Material

II

Salaries, Wages &

3, 78, 08,183.00

Allowances

2, 81, 88,159.96

Stores & Spares consumed

IV

8, 75,270.60

Power & Fuel

1, 58, 31,537.00

Manufacturing overheads

VI

8, 88,734.97

Selling & Distribution overheads

VII

8, 25,348.71

Overheads

III

20, 95,117.00

Financial overheads

VIII

37, 25,695.00

IX

3, 89,840.00

Depreciation

Loss of the year

These statements have been prepared on the basis of books
46

3, 18, 42,303.37

Accounts maintained by the mills for the purpose of calculation of allocable surplus
As provided under the payment of Bonus Act and subject to audit.
In the Finance Department the different ledger and registers maintained by the company
consist of
Purchase Journal
Sales Journal
Purchase Return Book
Cash

Book

Bank

Book

Creditors Ledger

&

Debtors Ledger

Classification of Ratio

Profit & Loss Ratio e.g.

Gross Profit Ratio

Balance Sheet e.g.

Liquidity Ratio

Combined Ratio e.g.

Return on capital
Employees

Net Profit Ratio

Current Ratio

Return on shareholders
fund

Expense Ratio
Operation Profit Ratio

Proprietary Ratio
Debt-Equity Ratio

47

Turnover of Working Capital

Debtors Turnover Ratio

 FINANCIAL ANALYSIS AND INTERPRETATION

1. Gross Profit Ratio (G. P Ratio)

A ratio exceeding 25% is admirable. It indicates high margin of

Safety and operational efficiency.

Gross profit ratio = (Gross profit / Net sales) x 100

Statement showing Gross Profit Ratio

Year

Gross Profit

Net Sales (Rs)

2002-2003

-494.89

1059.69

-46.70%

2003-2004

-341.23

945.32

-36.10%

48

Ratio

2004-2005

-510.08

778.81

-65.49%

2005-2006

-526.85

839.73

-62.74%

2006-2007

-444.33

717.52

-61.98%

Interpretation:
It can be observed that in the past 5 years company faced losses and the loss is
varied in every year. This is happened because of two reasons. That is increasing the trading &
expense or otherwise deceasing the selling price.

2. Net Profit Ratio:

Net profit ratio = (Net Profit / Net Sales) x 100

49

Statement showing Net Profit Ratio

Year

Net Profit

Net Sales (Rs)

Ratio

2002-2003

-168.01

1059.69

-15.85%

2003-2004

-225.59

945.32

-23.86%

2004-2005

-358.12

778.81

-45.98%

2005-2006

-357.59

839.63

-42.59%

2006-2007

-401.74

717.52

-55.99%

Interpretation:
50

We can see that the company faced losses. It is increased for the last 5 yearsin the
year 2002-2003 the loss was -168.01 and ratio was -15.85%. In the year 2006-2007 loss
increased to -401.74 and the ratio was -55.95%. We can find that indirect expenses of the
company are reduced in every year. But the gross loss is increased. This is the reason of
increasing trend of net loss. Gross loss is increased in every year because the company is forced
to sell their product on the basis of market. Thus they can it add the percentage of profit to their
product. Thus we can conclude that the trading activity of the concern is not good.

3. Debt Equity Ratio :

Debt Equity Ratio = (External equity / Shareholders fund)

Or
(Loan term debts / Shareholders fund)
The ideal ratio is 2:1. Higher ratio shows higher claims of creditors over the assets. A low debt
equity ratio is favorable to the proprietors. A low ratio indicates greater claim of shareholders
over the assets. It also provides greater margin of safety to the creditors.
The relationship between borrowed fund and owned fund is a popular measure of long term
solvency. Hence a steady fall in debt- equity ratio is the sound financial management. However
in capital intensive projects a high debt equity ratio is permitted

51

Statement showing Debt-Equity Ratio

Year

Debts

Share holders funds

Ratio

2002-2003

576.81

408.88

1.41:1

2003-2004

658.78

408.88

1.61:1

2004-2005

866.11

408.88

2.12:1

2005-2006

1202.04

408.88

2.94:1

2006-2007

1299.48

408.88

3.18:1

Interpretation:

It can be observable from the table that the debt-equity ratio throughout the years
is not favorable to the proprietors. The higher debt- equity ratio shows higher dependence on
outsiders fund. In the first 2 years 2002-2005 the debt 2 years 2002-2003 the debt equity
ratio maintain the principle. But in the last 3 years it is not maintained. This is happened
because the firms loss is increased in every year. Due to the increasing trend of loss the firm
forced to borrow money from outsiders for the operational purpose.
52

Because of the increasing trend of debt- equity ratio we can say that the
company is highly geared and highly depends on outsiders fund and its long term solvency
is not good

4. Proprietary Ratio :

Proprietary Ratio = (Share holders fund / Total assets )

A higher ratio that is more than 75% shows lesser dependence on external
fund.

It determines the extend of trading on equity.

Statement showing Proprietary Ratio

Year

Shareholders fund

Total assets

Ratio

2002-2003

408.88

985.69

0.42

2003-2004

408.88

1947.55

0.21

2004-2005

408.88

1274.99

0.32

53

2005-2006

408.88

1610.92

0.25

2006-2007

408.88

1708.36

0.24

Interpretation:
It can be observed that lion share of the asset structure is constituted by
external fund. From the year 2002-2003 the proprietary ratio was42% and it is decreased in
the next 4 years. Thus we can say that the creditors are not in a secured position. Financial
strength of the company is pure

5. Current Ratio:
Current Ratio = (Current assets / Current liabilities)

Ideal ratio is 2:1

Current ratio indicates in the firms ability to pay its current liabilities.
It indicates the strength of the working capital.
Higher ratio that is more than 2:1 indicates sound solvency position.
Lower ratio is less than 2:1 indicates inadequate marketing capital

54

Statement showing current ratio

Year

Current assets

Current liabilities

Ratio

2002-2003

365.84

419.90

0.87:1

2003-2004

233.61

439.94

0.53:1

2004-2005

227.86

587.34

0.39:1

2005-2006

182.27

570.42

0.32:1

2006-2007

159.01

854.03

0.19:1

55

Interpretation:
In a sound business current ratio of 2:1 is considered an ideal one. In this firm the
current ratio is not sufficient current assets are less than the current liabilities. In every year
current assets like debtors and inventories are decreased and the current liabilities like
creditors are increased.
Because of the trading loss the company takes more time for the debt payment. Thus the
current liability is increased this is the reason for decreasing trend of current ratio.

6.

Quick Ratio:

Quick Ratio = (Quick or liquid assets / Current or liquid liabilities)

Quick ratio is also known as liquid ratio or acid test ratio. The ideal quick ratio is 11. Quick
ratio is an indicator o short term solvency of then firm. It is used as a complimentary ratio to the
current ratio. It provides a more stringent test of solvency. Thus it is also called acid-test ratio
Statement showing Quick ratio

Year

Quick Assets

2002-2003 121.59

Quick liabilities

Ratio

419.90

0.29

56

2003-2004

101.83

439.94

0.23

2004-2005

112.33

587.34

0.19

2005-2006

89.51

570.42

0.16

2006-2007

89.83

854.03

0.11

Interpretation:
An acid test ratio of 1:1 considered satisfactory as a firm can early meet all its current
liabilities. In this organization the quick ratio of last 5 years is less than 1:1 then the financial
position of the concern shall be deemed to be unsound.

7. Net Working Capital Ratio:

57

Net Working Capital Ratio = (Net working assets / Net assets )

It measures the companys liquidity position.

Statement showing Net Working Capital Ratio

Year

Net working capital

Net assets

Ratio

2002-2003

-54.06

985.69

-0.05

2003-2004

-206.33

1947.55

-0.11

2004-2005

-359.48

1274.99

-0.28

2005-2006

-388.15

1610.92

-0.24

2006-2007

-695.02

1708.36

-0.40

58

Interpretation:

It can be observed that the net working capital ratio is negative figures become or
the decreasing trend of working capital. Current assets are less than the current liabilities.
Thus the net working capital is negative. Thus we can say that all the year the net working
capital ratio shows unsatisfactory and insufficient. It can be observed that the company is not
well poised to meet any short term obligations. Hence the liquidity position is not safe and
sound.

8.

Stock Turnover Ratio :

The stock turnover ratio is also known as velocity ratio. This

Ratio reveals the number of times finished stock is turned over during a given period. It is a test
of efficiency inventory management.
Stock Turnover Ratio = (Cost of goods sold / Average inventory at cost)
Average Inventory

= (Opening stock + Closing stock ) / 2

59

Statement showing Stock Turnover Ratio

Year

Cost of good

Average Inventory

Ratio

sold
2002-2003

807.53

130.43

6.19 times

2003-2004

735.26

131.31

5.60 times

2004-2005

743.8

86.43

8.61 times

2005-2006

786.3

75.61

10.40 times

2006-2007

689.4

56.47

12.29 times

60

Interpretation:
This ratio signifies the liquidity of the inventory. From the table we can see that the
Stock Turnover Ratio has been very low ( i.e. More than 30 days over the year) indicates the
blocking of fund in inventory. Hence it can be inferred that the inventory mgt is not
sufficient.

9. Fixed assets Turn over Ratio :

Fixed Assets Turnover Ratio = Sales / Net fixed assets

Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio
means under utilization of fixed assets.
Statement showing Stock Turnover Ratio
Year

Sales

Net fixed assets

Ratio

2002-2003

1059.69

64.60

16.40 times

2003-2004

945.2

58.28

16.22 times

61

2004-2005

778.81

57.46

13.55 times

2005-2006

839.63

52.24

16.07 times

2006-2007

717.52

47.68

15.05 times

Interpretation:
It can be observed that the fixed assets turnover ratio is changing. In 2002 it was 16.40
times. But in the year 2004 it was 13.55 times and in 2005 it increased to 16.07 times but in the
year 2006 it is decreased to 15.05 times. It can be seen that the fixed assets turnover ratio over
the ears seems to be more or less steady and stable.

9. Creditors Turn over Ratio :

Creditors turnover ratio indicates the number of times the accounts payable
rotate in a year. This ratio shows the relationship between credit purchases for the whole year and
accounts payable.
Creditors turnover ratio = (Net credit purchase) / (Creditors + Bills Payable)
Statement showing creditors Turnover Ratio

62

Year

Net credit

Average accounts

Ratio

purchase

payable

2002-2003

731.73

354.95

2.06 times

2003-2004

541.59

319.52

1.69 times

2004-2005

533.05

349.37

1.53 times

2005-2006

571.59

213.87

2.67 times

2006-2007

463.50

385.81

1.20 times

Interpretation:

It can be observed that the creditors turnover ratio is very low. Company takes
more time for the debt payment (i.e. More than 150 days). Thus the current liability of the firm
increases in every year.

SHARE CAPITAL

63

Components

Amounts

Share Capital

254.96

Investment subsidy

15.00

Term loans from IDBI

145.00

Term loans from ICICI

75.00

Term loans from IFCI

70.00

Term loans from KSCB

28.00

Loans from Govt.of Kerala

10.19

Interest arrears

118.85

Total

717.00

The capital required for the mill were mobilized from the sources
like issue of shares, subsidy from Government and other financial institution like IDBI,
ICICI, IFCI, KSCB & interest arrears of these funds. The venture capital incurred for this
project can be analyzed in the above tables.

64

CAPITAL STRUCTURE
The authorized capital of QCSML at the beginning was Rs.3 crores. Then it is
increased to 4 crores. We can summarize the paid up

Capital of the Mill in the following table.

Amount components of
Components of capital

Co-operative society

Percentage of
Capital

147100.00

5. 39

Individual

449900.00

1.65

Govt. of Kerala

24956200.00

91.49

399100.00

1.46

2206.00

.008

Others
Share application
money
Total

27278508
65

100

On analyzing the above table, it was found that Govt. of Kerala is a major share holder. They
have taken 91.49% shares from the mill. Co-operative societies and individual take
The balance.

SWOT ANALYSIS

Strength:
66

Clothing is one of the three primary needs of people, the other two being food and
shelter. The demand for clothing is therefore kept up always. The status of cotton being a
consumable commodity also keeps up its demand. Hence there is
Enough potential for the growth of cotton textile industry provided its quality and
Attractiveness is cared for.
The cotton yarns not only cater to the needs of power looms, as a
raw material; it supports lacks of rural people who are engaged in handloom sector.
Here, the trust should be supply the needed quality of yarn of improved quality at
Low prizes. Reduction of the cost of yarn should be achieved by cutting cost of
Production. Enough supply of low cost yarn to rural weavers should be accepted as
a social commitment.

Weakness:
The first and most important weakness of this industry is that there is no marketing department.
Their customers make sales on the basis order.The next weakness in the industry is that, there is
no purchase department, raw materials are purchased through brokers.The other weakness is that,
there is political interference.In this industry there is lack of promotion chance to top post.
outside appointment is made in the post of managing director.Educational qualification of
workers is another weakness in this industry.Low rate of working capital is used in this
industry.In this industry, there is the lack of professional knowledge to the workers.Low wages to
workers is another weakness of this industry.Absenteeism rate is very high.Quality of product is
very low, so they are not able to export there products.

Opportunities:
This industry will be helpful for getting training to rural peoples. As a result there is an
opportunity for them to get employment elsewhere. This industry will be helpful for increasing
the standard of living of the people through this industry power loom industries will get raw
material at lower costs.
67

 Threat:
The cotton textile industry is facing threat from synthetic fiber, which isavailable at
reduced costs. Even though synthetic fiber is not environmentally good its attractiveness and low
cost influences the demand well. Dumping of synthetic pulp and yarn from foreign countries is
another threat. In order to overcome these threats, the cost of production of cotton should come
down. The quality of cotton should also be improved. The people should be made aware of the
benefits of using cotton textiles in place of synthetic cloths.
However, in a state where unemployment is the maximum, giving of employment
in this mill is equivalent to meeting a social commitment. In order to save both the mill and to
safeguard the interest of every trainee added, the production should also go up proportionately to
offset the expenditure.

FINDINGS OF THE STUDY

Financial position of the organization is not good. The mill has been running
at a huge loss since 2002, because of the under utilization of capacity, poor
market condition, deficiency in working capital etc.

Gross profit ratio and net profit ratio are not satisfactory.
68

Less proprietary ratio indicates higher dependence on outsiders fund.

Current ratio and quick ratio reflect the inadequacy of working capital.

Stock Turnover Ratio seems to be less impressing. Inventory management is

not efficient in this organization.

Fixed asset turnover ratio over the years seems to be more or less steady and
stable.

The company is not taken place the modernization. This is the main reason
for the loss.

Since most of the ratios give an unimpressive picture, it can be inferred that
the company is a sick unit.

Management is not efficient in this organization.

They dont have a separate marketing department.The major part of the sale
done is through agents and so the company has to incur extra expenses by
way of commission to agents

SUGGESTIONS

Efforts should be taken to maintain a sound balance between tradition and

modernization.

The under utilization of capacity, poor market condition, deficiency in working

capital etc contributed towards the continuous losses or the mill.

So

controlling

or operating expenses, adopting of cost saving measure to improving the quality or

69

product, effective and complete exploitation or

laborforce, security, raw materials

etc are some important steps that the management can initiate.

Fair price policy, quality improvement, market research etc should be taken in to
account in order to capture new markets.

The management should take necessary steps to manage the working capital for the
financial stability.

The product line should be expanded to withstand competition.

The firm must try to reduce the cost of goods sold by adopting the effective cost
saving measures. Efficient cost management can reduce the cost of goods sold.

Govt. should give more financial support to the organization for the stability.

Efficient management should be appointed in the organization

Its advisable to start a separate marketing department to look after the sales where
by the commission expenses given to agents can be eliminated

CONCLUSION

From the research conducted on QCSML, it is clear that it is a huge investment

organization. But now it faces lot of problem.

Finance is the main problem of this concern.

If the Govt. takes necessary steps to save the organization it will become a
success one.

The firm can expand tremendously by applying modern acquire practical

knowledge on the management theories.
70

Despite of the limitations the project was successfully completed with the
immense support of guide and Cooperation of the firm.

BIBLIOGRAPHY
71

N.P. Sukumaran

Modernization under T.U.F

Scheme of QCSML

L.M. Prasad

Principles and Practice of Mgt.

(Publisher- Sultan Chand
And Sons, Edition-4, June1989)

T.N. Hajela

Co-operation: Principles,
Problems and Practice
(Publisher- Konark Publishers
Pvt Ltd, Edition-6, 1994)

I.M.Pandey

Financial MgtVikas
Publishing house Pvt Ltd.
New Delhi (1993)

Dr. Maheswary S.M

Financial control & Mgt Accounting

Sultan Chand & Sons
4792/23 Darya Ganj
New Delhi.

Dr. S.P.Gupta

Management Accounting
Sahithya Bhavan
Agra (1993)

N.P.Sreenivasan

Management Accounting Sterling

Publishers Pvt. L-10 Green Park
New Delhi- 110016.

72

73