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EXCEL International Journal of Multidisciplinary Management Studies

Vol.2 Issue 3, March 2012, ISSN 2249 8834


Online available at http://zenithresearch.org.in/

PERFORMANCE OF FERTILIZER INDUSTRY IN INDIA

DR. PRAMEELA S. SHETTY*; DR.DEVARAJ K.**

*Faculty,
SDM PG Centre for Management Studies and Research,
Mangalore- 3, Karnataka, India.
**Director,
SDM PG Centre for Management Centre and Research,
Mangalore- 3, Karnataka, India.

ABSTRACT

The purpose of the study is to know about the fertilizer sector, to study the growth of fertilizer
industry in India. The data required for the paper has been taken from the prowess software from
1st April 2000 to 31st March 2009. In the next step, ratios, growth and volatility of sales and
EBIT of companies have been calculated. After calculating the ratios and averages, some ratios
are considered for analysis.

The fertilizer industry presents one of the most energy intensive sectors within the Indian
economy and is therefore of particular interest in the context of both local and global
environmental discussions.

The study conducted is based on the ratio analysis, t-test and z-test which helped to analyze the
performance of companies in Indian Fertilizer Industry. According to the z-test and t-test in the
study it is found that there is no significant difference between the performances of companies
across the fertilizers industry. It is also noted that there is insignificant difference between the
industries over the period of time. Financial performance suggests that all the companies in this
sector have performed equally well.

KEYWORDS: Growth, Performance, Profitability, Financial strength, Trend.


______________________________________________________________________________

INTRODUCTION

Fertilizer is generally defined as "any material, organic or inorganic, natural or synthetic, which www.zenithresearch.org.in
supplies one or more of the chemical elements required for the plant growth". Chemical
fertilizers have played a vital role in the success of India's green revolution and consequent self-
reliance in food-grain production. The increase in fertilizer consumption has contributed
significantly to sustainable production of food grains in the country. The Government of India
has been consistently pursuing policies conducive to increased availability and consumption of
fertilizers in the country.

The Indian Fertilizer industry had a very humble beginning in 1906, when the first
manufacturing unit of Single Super Phosphate (SSP) was set up in Ranipet near Chennai with an
annual capacity of 6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT) at
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EXCEL International Journal of Multidisciplinary Management Studies
Vol.2 Issue 3, March 2012, ISSN 2249 8834
Online available at http://zenithresearch.org.in/

Cochin in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in Bihar were the first
large sized -fertilizer plants set up in the forties and fifties with a view to establish an industrial
base to achieve self-sufficiency in food grains. Subsequently, green revolution in the late sixties
gave an impetus to the growth of fertilizer industry in India. The seventies and eighties then
witnessed a significant addition to the fertilizer production capacity.

OBJECTIVES OF THE STUDY

To know about the Fertilizer sector.

To study the Growth of Fertilizer Industry in India.

To know the efficiency and performance of Fertilizer sector in Indian capital market.

To know the Earning Capacity or Profitability

METHODOLOGY

In the first step, whole data required for the paper is taken from the prowess software i.e.
Balance sheet, profit and loss account and cash flow statement of all companies from 1st
April 2000 to 31st March 2009. Share price is also taken.

In the next step, ratios, growth and volatility of sales and EBIT of companies are
calculated.

After calculating the Ratios and Averages, a few ratios are considered for analysis.

DATA COLLECTION

The basic knowledge about the working of fertilizer Industry was gathered from the secondary
data available on PROWESS, the corporate data base of CMIE, the internet and the documents
available in the business line and a few reference books.

From the list of 76 fertilizer companies, information for 60 companies was collected. Other
companies financial data were not found. For these 60 companies financial data and share prices
from 1.4.2000 to 31.03.2009 for 10 years sample data was collected.
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PERFORMANCE ANALYSIS

For analyzing the performance of fertilizer companies, financial ratios were calculated. Financial
ratios are one of the most common tools of managerial decision making. It is the interpretation,
rather than the calculation, that makes financial ratios a useful tool for business managers. Ratios
may serve as indicators, clues, or red flags regarding networth relationships between variables
used to measure the firm's performance in terms of profitability, asset utilization, liquidity,
leverage, or market valuation.
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EXCEL International Journal of Multidisciplinary Management Studies
Vol.2 Issue 3, March 2012, ISSN 2249 8834
Online available at http://zenithresearch.org.in/

SCOPE OF THE STUDY

Scope of the study mainly highlights the company and market performance analysis of fertilizer
sector. The study is mainly concentrated on the performance aspect of the sector. To analyze the
performance of fertilizer sector, company related ratios were calculated. The data has been
collected for a period of 10 years, i.e., from 1st April 2000 to 31st March 2009. This study is
limited to the company analysis of fertilizer sector. The data collected for companies consist of
audited financial report (i.e., annual financial data) and closing price available from the prowess
software of the version 3.1.

LIMITATIONS OF THE STUDY

The share price data for all fertilizer companies were not found.

For some fertilizer company financial annual data is not available for all the 10 years

In some cases financial annual data is available and there will be no information
regarding share prices and vice versa.

Averages were used to analyze the financial data, which makes lot of assumptions, which
may make the study far from reality.

Only one table showing z test and t test values for current ratio is given, due to page
constraints given by the editorial board. Similar calculations are done for the other ratios
but the tables are not shown in the paper.

LITERATURE REVIEW

Arjan van Rooij has opined that a long-term perspective on R&D at the Dutch chemical
company DSM illuminates two crucial and interrelated challenges in the management of
R&D. On the one hand, companies must keep their research focused on the technologies
and markets they use and avoid research its sponsor cannot profit from. On the other
hand, companies must enable R&D to generate the options that can revitalize its current
businesses and open up new ones. These options may be risky and fall outside the
framework of current markets and technologies but at the same time promise high profits
and ensure survival in competitive, high-tech industries. To realize the full potential of
R&D, companies need to create an arena for research: a space where R&D can generate www.zenithresearch.org.in
options and where mutual commitment between R&D and the company can be nurtured.

Banu Suer in his paper, analysed the production structure of the UK manufacturing
industries by estimating a translog cost function for the period 1955-88. His aim was to
estimate technical change parametrically. In the cost function estimation of productivity,
it is statistically necessary to assume that all systematic explanatory variables have been
properly accounted for. Hence the econometric estimation involves explicit assumptions
about the error structure. There is no reason to expect this error structure to be similar to
the one assumed in the residual derivation of total productivity growth. Several
conclusions arise from his estimation:
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Vol.2 Issue 3, March 2012, ISSN 2249 8834
Online available at http://zenithresearch.org.in/

-The evidence indicates that technological change is input biased in the chemicals
and allied industries. Materials saving and capital using biases are significant.

-There exist significant scale economies. An increase in the price of the materials
input leads to a loss of scale economies.

-Energy and capital inputs are found to be complementary inputs supporting the
argument that reductions in energy price will be accompanied by higher levels of
investment.

-Value-added specification for the computation of productivity growth is not


justified since the assumption of separability of capital and labour from materials and
energy is rejected.

-A significant portion of total factor productivity growth stems from scale


economies rather than technical progress in the chemicals and allied industries. Since the
idea of technical regression is absurd and can be ruled out as a possibility, it follows that
the explanation for the negative rate of growth of TFP in the post oil-shock period resides
in the losses of scale economies during this period.

Sunil Ashra and Malini Chakravarty in their study during the last two decades the debate
about fertilizer subsidy has focused on:

- The equity and efficiency effects of fertilizer subsidy.

- The extent to which removal of fertiliser subsidy reduces demand for fertiliser
and the effects this is likely to have on food security.

- There is little agreement about best practice in fertiliser subsidy. The withdrawal
of fertilizer subsidies has had mixed effects. In some places subsidy removal together
with liberalisation of supply has increased demand for fertiliser. In others, the rise in
prices and lower than expected benefits of liberalisation has significantly reduced
demand. The cost of fertiliser subsidies has often been far higher than initially
anticipated. Equally, though, subsidies have underpinned impressive advances in
agricultural development. Economists tend to favour their withdrawal but few
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agricultural specialists are wholeheartedly opposed to them. The targeting of subsidies
remains poorly understood. Currently, subsidy structure tends to favour rich farmers.

Ashra and Chakravarthy in VISIONThe Journal of Business Perspective l Vol. 11 l No.


3 l JulySeptember 2007 p.50l say that subsidies for equipment or credit subsidies favour
large mechanised farms, their removal may not particularly hurt small farmers but their
impact on the food grains output, at least in the short run, is likely to be adverse. There
remains one important issue usually given short shrift. Landless people, including urban
poor in developing countries, are likely to be the losers from a multilateral subsidy
reform that are likely to lead to higher domestic food prices. They would be confronted
with higher food prices without any increase in productive assets. Specific compensation,
such as food stamps would be needed to ensure their access to food.
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Vol.2 Issue 3, March 2012, ISSN 2249 8834
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Ike Mathurs study addresses three basic questions, namely, (a) are there financial
performance gains attributable to multinational diversification, (b) are there differential
performance effects related to the strategies of export orientation versus foreign direct
investment and (c) do higher degrees of export orientation and direct asset deployment
abroad translate into superior financial performance? For the sample of European
chemical industry firms the findings provide strong affirmative answers to all three of the
above questions. The results provide ample evidence that firms involved in multinational
operations, irrespective of the strategy (EOU versus FDI) outperform purely domestic
units.

Seong-Hoon Choa, Zhuo Chenb and Neelam C. Poudyal by adjusting for spatial
autocorrelation through spatial lag models and accounting for spatial heterogeneity by
allowing response coefficients to vary across relatively homogeneous sub-regions, this
study examined the spatial structure of agricultural production in China. Considerable
spatial heterogeneities in the inputoutput relationships across the region were found for
all four inputs. The results suggest which inputs are important in agricultural production
in what region after correcting spatial autocorrelation, and the results have policy
implications. Although some of the inputs are constrained, variable inputs, such as
labour, mechanical power, fertilizer and irrigation may be adjusted through institutional
innovations, such as strengthening the agricultural Spatial structure of agricultural
production, extension system, providing credit to farm households for machinery use in
areas suitable for large scale production, and loosening control on rental land markets.

INDIAN FERTILIZER INDUSTRY

India is primarily an agriculture based economy. The agricultural sector and its other associated
spheres provide employment to a large section of the country's population and contribute about
25% to the GDP. The Indian Fertilizer Industry is one of the allied sectors of the agricultural
sphere. India has emerged as the third largest producer of nitrogenous fertilizers. The adoption of
back to back Five Year plans has paved the way for self sufficiency in the production of food
grains. In fact production has gone up to an extent that there is scope for the export of food
grains. This surplus has been facilitated by the use of chemical fertilizers.

The large scale use of chemical fertilizers has been instrumental in bringing about the green
revolution in India. The fertilizer industry in India began its journey way back in 1906. During
this period the first Single Super Phosphate (SSP) factory was established in Ranipet in Chennai. www.zenithresearch.org.in
It had a capacity of producing 6000 MT annually. In the pre and post independence era a couple
of large scale fertilizer units were established namely the Fertilizer Corporation of India in
Sindri, Bihar and the Fertilizer & Chemicals Travancore of India Ltd in Cochin, Kerala.

The Indian government has devised policies conducive to the manufacture and consumption of
fertilizers. Numerous committees have been formed by the Indian government to formulate and
determine fertilizer policies. The dramatic development of the fertilizer industry and the rise in
its production capacity has largely been attributed to the favorable policies. This has resulted in
large scale investments in all three sectors viz. public, private and co-operative.
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At present there are 57 large scale fertilizer units. These manufacture an extensive range of
phosphatic, nitrogenous and complex fertilizers. 29 of these 57 units are engaged in the
manufacturing of urea, while 13 of them produce Calcium Ammonium Nitrate and Ammonium
Sulphate. The remaining 20 fertilizer plants manufacture complex fertilizers and DAP. There are
also a number of medium and small scale industries in operation, about 72 of them.

The country also generates surpluses to an extent that she can export. This massive production
owes largely to the public sector as well as the cooperative sector of the fertilizer industry. Under
the administrative control of the Department of Fertilizers, there are 9 public sector undertakings.
The cooperative societies count two in number. The private sector has also contributed to the
Indian fertilizer industry.

The growth of the fertilizer industry was at its peak in the 1970s and 1980s. The growth was a
bit stagnant in the last decade of the 20th century. But, with many radical steps been taken by
the Government of India, the industry is expected to grow again.

GROWTH OF INDIAN FERTILIZER INDUSTRY

The Indian fertilizer industry has come a long way since the setting up of the manufacturing unit
of Single Super phosphate (SSP) near Chennai in 1906 A new impetus to the growth of Indian
Fertilizer industry was provided by the set up of the two fertilizer plants- Fertilizer & Chemicals
Travancore of India Ltd. (FACT) in Kerala and the Fertilizers Corporation of India (FCI) in
Bihar. This was during the forties and the fifties. The aim was to create an industrial base that
would provide India with self reliability in food grains.

Today, India stands as the third largest fertilizer consumer and producer of the world. It has been
observed that the subsidies on Indian fertilizer have been rising at constant rate. This is due to the
rise in the cost of production and the inability of the government to raise the maximum retail
price of the fertilizers. The population of the country is rapidly increasing at 1.5% annually. This
requires higher production of food grains. The total cropped area is only 30% of the net
geographical area, which is not enough for increasing the agricultural productivity. Now, the
main focus is on the improvement of the farm income, for which the fertilizer industry needs to
lay more stress on the agricultural activities in the country. This will also help to improve terms
between the government agencies and the fertilizer industry in India.

ANALYSIS AND INTERPRETATION OF DATA www.zenithresearch.org.in

1. CURRENT RATIO

TABLE NO. 1
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Vol.2 Issue 3, March 2012, ISSN 2249 8834
Online available at http://zenithresearch.org.in/

TABLE SHOWING AVERAGE CURRENT RATIO AND T-TEST VALUES


ACROSS THE INDUSTRY

COMPANY AVERAGE T TEST

A P T Packaging Ltd. 0.440 0.000

Agro Chem Punjab Ltd. 3.717 0.629

Aries Agro Ltd. 2.147 0.870

Asian Fertilizers Ltd. 1.366 0.018

Basant Agro Tech (India) Ltd. 3.518 0.000

Bharat Fertiliser Inds. Ltd. 2.165 0.858

Brahmaputra Valley Fertilizer Corpn. Ltd. 1.130 0.007

Chambal Fertilisers & Chemicals Ltd. 2.476 0.137

Coromandel International Ltd. 2.089 0.917

Deccan Sales Corpn. Ltd. 3.212 0.019

Deepak Agro Solutions Ltd. 1.736 0.244

Deogiri Fertilisers Ltd. 3.903 0.381

Dharamsi Morarji Chemical Co. Ltd. 1.452 0.032

Fertilisers & Chemicals, Travancore Ltd. 1.662 0.002

Godavari Fertilisers & Chemicals Ltd. [Merged] 1.925 0.458

Good Value Mktg. Co. Ltd. 0.280 0.000


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Gujarat Narmada Valley Fertilizers Co. Ltd. 1.674 0.004

Gujarat State Fertilizers & Chemicals Ltd. 1.800 0.125

Harshvardhan Chemicals & Minerals Ltd. 0.124 0.000

Hind Lever Chemicals Ltd. [Merged] 1.887 0.357

Indian Farmers Fertiliser Co-Op. Ltd. 3.015 0.009


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Indo Gulf Fertilisers Ltd. [Merged] 1.474 0.019

Karnataka Compost Devp. Corpn. Ltd. 1.374 0.000

Kashi Urvarak Ltd. 1.429 0.002

Khaitan Chemicals & Fertilizers Ltd. 2.829 0.003

Khushhal Fertiliser Ltd. 2.421 0.677

Kothari Industrial Corpn. Ltd. 1.326 0.000

Krishak Bharati Co-Op. Ltd. 5.554 0.000

Krishna Industrial Corpn. Ltd. 1.289 0.000

Liberty Phosphate Ltd. 2.123 0.947

Liberty Urvarak Ltd. 2.245 0.565

M P Agro Inds. Ltd. 1.592 0.068

Madras Fertilizers Ltd. 1.230 0.000

Maruti Fertochem Ltd. 1.806 0.007

Mittal Fertilizers Ltd. 0.114

Munak Chemicals Ltd. 0.632 0.000

Nagarjuna Fertilizers & Chemicals Ltd. 4.429 0.032

National Fertilizers Ltd. 1.971 0.260

P L Agro Technologies Ltd. 1.629 0.079

Paradeep Phosphates Ltd. 1.223 0.000 www.zenithresearch.org.in


Phosphate Co. Ltd. 2.836 0.040

Pragati Fertilizers Ltd. 3.272 0.225

Priyaanka Fertilizers & Chemicals Ltd. 4.444 0.283

Pyrites, Phosphates & Chemicals Ltd. 0.239 0.000

Raashi Fertilizers Ltd. 1.617 0.597


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Rama Phosphates Ltd. 2.879 0.012

Rashtriya Chemicals & Fertilizers Ltd. 3.021 0.007

Rewati Minerals & Chemicals Ltd. 0.914 0.000

Shiva Fertilizers Ltd. 5.542 0.004

Shree Acids & Chemicals Ltd. 1.233 0.076

Shreeji Phosphate Ltd. 1.725 0.270

Shri Ganpati Fertilizers Ltd. 1.909 0.715

Shriniwas Fertilizers Ltd. [Merged] 2.912

Smartchem Technologies Ltd. 2.354 0.672

Southern Petrochemical Inds. Corpn. Ltd. 1.707 0.216

Sri Krishna Fertilisers Ltd. 0.073 0.000

Tata Chemicals Ltd. 2.087 0.917

Tedco Granite Ltd. 0.848 0.000

Teesta Agro Inds. Ltd. 1.982 0.641

Zuari Industries Ltd. 1.726 0.033

AVERAGE 2.029

Source: Data downloaded from prowess and ratios, its average and t test done using excel.

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TABLE NO.2

TABLE SHOWING AVERAGE CURRENT RATIO AND Z-TEST VALUES ACROSS


THE YEARS

Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar-
00 01 02 03 04 05 06 07 08 09

AVERA
GE 2.018 2.007 2.219 2.177 1.983 1.918 1.951 2.734 2.267 1.830

VARIAN 14.86
CE 1.350 1.108 1.895 2.814 2.875 2.088 1.537 4 4.378 3.659

Z TEST 0.525 0.550 0.195 0.260 0.579 0.711 0.663 0.115 0.238 0.706

Source: Data downloaded from prowess and ratio, its average, variance and z- test done using
excel.

From the t test calculated the values found are between 1.833 at 10% significance level. Some
of the companies t-test values were not found. Therefore there is no significance difference
between performances of different companies. The average of averages of the current ratio in the
fertilizer industry is 2.029. In this context current assets are more than the current liabilities in
the fertilizer industries.

From the z test calculated, it is found that the values are between 1.65 at 10% significance
level. Therefore there is no significant difference between the industries across the years for 10
years. The fertilizer industrys average current ratio has decreased from 2.018 to 1.830. The
current assets have been gradually decreased.

2. LIQUID RATIO/QUICK RATIO

From the t test calculated, it is found that the values were between 1.833 at 10% significance
level. Some of the companies t-test values were not found. Therefore there is no significance
difference between performances of different companies. The average of averages of the liquid
www.zenithresearch.org.in
ratio in the fertilizer industry is 1.329.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The average liquid ratio here has been in same level. Therefore the liquidity of assets and
liability is in the same level.

3. INVENTORY TURNOVER RATIO

From the t test calculated, it is found that the values were between 1.833 at 10% significance
level. Some of the companies t- test values were not found. Therefore there is no significance
difference between performances of different companies. The average of averages of the
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EXCEL International Journal of Multidisciplinary Management Studies
Vol.2 Issue 3, March 2012, ISSN 2249 8834
Online available at http://zenithresearch.org.in/

inventory turnover ratio in the fertilizer industry is 6.310.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
year. The three years z test values are 1. There is an increase in the average turnover ratio from
4.175 to 7.519 which indicates that there is high turnover.

4. DEBTORS TURNOVER RATIO

From the t test calculated the values found were between 1.833 at 10% significance level. Some
of the companies t test values were not found. Therefore there is no significance difference
between performances of different companies. The average of averages of the Debtors turnover
ratio in the fertilizer industry is 8.931.

From the z- test calculated it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The average here has increased from 7.966 to 11.564. This indicates that the firms in the
fertilizer industry in India have efficient management of debtors or the debtors are more liquid.

5. RETURN ON EQUITY

From the t test calculated, the values found were between 1.833 at 10% significance level.
Some of the companies t-test values were not found. Therefore there is no significance
difference between performances of different companies. The average of averages of the return
on equity ratio in the fertilizer industry is 268.774. Zuari industries Ltd have the highest value
that is 1.

From the z test calculated we can see that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The average here for the 2 years is negative. Here most of the years z value is 1. The
averages of the return on equity in the table show that there has been a huge variation from year
to year on the share holders returns.

6. GROSS PROFIT RATIO

From the t test calculated we can see that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different www.zenithresearch.org.in
companies. The average here is negative, that is -112.75633. This indicates there is gross loss.
But still some of the companies such as Rewati minerals and chemicals ltd, Aries agro ltd,
Karnataka compost Devp. Corp. ltd, etc have high gross profit ratio. This shows that some of the
firms with in the industries are performing well.

From the z test calculated, we can see that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The average here for the most of the years is negative value. Most of the years there is no
z values.
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7. NET PROFIT RATIO

From the t test calculated, we can see that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average here is negative that is -212.929. This indicates there is net loss.

From the z test calculated, we can see that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The average here for the most of the years is negative values. Most of the years there is no
z values.

8. EARNINGS PER SHARE (EPS)

From the t test calculated, we can see that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average of EPS is 5.077.

From the z test calculated, we can see that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. There is no huge variation in the average EPS.

8. DIVIDEND PER SHARE (DPS)

From the t test calculated, we can see that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is 2.296. Here the t value of all company is 0.001.

From the z test calculated, it is seen that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. For two years the z values are one. The companies have fluctuations in the dividend per
share due to companies earnings from year to year.

9. PRICE EARNINGS RATIO

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. Some of the companies P/E ratio is found to be 0.The average of average is 176.053. www.zenithresearch.org.in

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The P/E ratio has gradually decreased from 776.785 to 294.537. High P/E ratios indicate
that the investors were paying more for each unit of net income, so the stock was more expensive
compared to one with lower P/E ratio.

10. DIVIDEND YIELD RATIO

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
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companies. The average of average is 0.028.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The dividend yield ratio has gradually decreased from 0.066 to 0.029. The dividend paid
and the market value is relatively low which results in low dividend payout.

11. WORKING CAPITAL TO NET SALES

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is -1.937. There is negative relationship between working
capital and net sales.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The working capital to net sales ratio has gradually decreased from 0.006 to -1.346. This
shows that the firms in fertilizer industry are not much efficient in managing the working capital
requirements.

12. WORKING CAPITAL TO SHARE HOLDERS EQUITY

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is -2.179. There is negative relationship between working
capital and shareholders equity.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The working capital to shareholders equity has gradually decreased from 0.805 to 0.626.
This shows that the firms in fertilizer industry are not much efficient in managing the working
capital requirements.

13. NET PROFIT TO NET WORTH

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performance of different companies. www.zenithresearch.org.in
The average of average is 267.737. Some companies like Shreeji phosphate ltd and Shriniwas
fertilizers ltd has high average values. Therefore the net profit to net worth is high.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The net profit to net worth ratio has gradually decreased from 19.078 to 17.960. The seven
years z test value is 1.
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14. OPERATING PROFIT RATIO

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is -113.882. This indicates that there are more operating
expenses. The company like Rewati minerals and chemicals ltd, Tata chemicals ltd has high
operating profit.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The operating profit ratio has gradually increased from -282.529 to 1.915. The company
was having negative value in the initial stage which gradually increased to positive value. The
six years z test value is 0.

15. RETURN ON INVESTMENT RATIO (LONG TERM)

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is -7.522. The return on investment shows the negative yield
in the long term.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The ROI (long) ratio has gradually increased from 6.037 to 8.329.

16. RETURN ON INVESTMENT RATIO (TOTAL)

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is 37.561.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The ROI (total) ratio has gradually increased from 0.805 to 9.601. There is increase in the
rate of return on total capital.

17. RETURN ON TOTAL ASSETS www.zenithresearch.org.in

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is 8.254.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The return on total assets ratio has gradually decreased from 11.564 to -0.676. Therefore
the firm is not effectively using its assets to generate earnings before interest and tax.
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18. SALES TO NET WORTH

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is 1.501.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The sales to net worth ratio has gradually increased from 2.489 to 3.160.

19. TOTAL DEBT EQUITY RATIO

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is -2.124. It is found that the firms in the fertilizer industry
on an average use relatively less debt finance.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. The fertilizer industry has chosen debt financing more than equity financing.

20. CAPITAL GEARING RATIO

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is -3.033. The firms under fertilizer industry on an average
that it has more credit fund rather than owners fund.

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years. I is found that the fertilizer industry is using more creditors fund rather than owners fund.

21. LEVERAGE RATIO

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is 0.518. www.zenithresearch.org.in

From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years.

22. PLOUGH BACK RATIO

From the t test calculated, it is found that all the values are between 1.833 at 10% significance
level. Therefore there is no significance difference between performances of different
companies. The average of average is 0.887.
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Vol.2 Issue 3, March 2012, ISSN 2249 8834
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From the z test calculated, it is found that all the values are between 1.65 at 10% significance
level. Therefore there is no significance difference between the industries across the years for 10
years.

CONCLUSION

The fertilizer industry presents one of the most energy intensive sectors within the Indian
economy and is therefore of particular interest in the context of both local and global
environmental discussions. Increases in productivity through the adoption of more efficient and
cleaner technologies in the manufacturing sector will be most effective in merging economic,
environmental, and social development objectives. A historical examination of productivity
growth in Indias industries embedded into a broader analysis of structural composition and
policy changes will help identify potential future development strategies that lead towards a
more sustainable development path.

The study conducted based on the ratio analysis, t-test and z-test which helped to analyze the
performance of companies in Indian Fertilizer Industry. Various kinds of profitability ratios
suggested the profitability positions of the companies over the years. Liquidity ratios are the best
measure of analyzing company liquidity position. According to the z-test and t-test in the study it
is clear that there is no significant difference between the performances of companies across the
fertilizers industry. It is also noted that the there is insignificant difference between the industries
over the period of time. Financial performance suggests that all the companies in this sector have
performed equally well. Since fertilizer industry is one of the consistently growing industries in
India, its performance over the years is satisfactory.

REFERENCES

Adiga, K S, (2006), Cost and Management Accounting, Shubha Prakashana, Udupi, Vol3.

Altman E., (2005), Financial Ratios, Discriminant Analysis and the Prediction of Corporate
Bankruptcy, The Journal of Finance, September, pp.589-609.

Goyal, S N, Manmohan, (2004), Principles of Management Accounting, Sahitya Bhawan


Publications, Agra.

www.zenithresearch.org.in
Khan, M Y,, (1997), Financial Service, Tata McGraw Hill Publishers, Third Edition.

Pandey, I M,, (2001), Financial Management, Vikas Publication, 9th Edition.

Wilcox A., (2008), A Simple Theory of Financial Ratios as Predictors of Failure, Journal of
Accounting Research, pp.389-395.

WEBSITES

http://www.business.mapsofindia.com/national-fertilizers/

http://www.economywatch.com/business-and-economy/fertilizer-industry.html
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http://www.en.wikipedia.org/wiki/International_Fertilizer_Industry_Association

http://www.ezinearticles.com/?Fertilizer-Industry-in-India-Contributes-25-Percent-to-
GDP&id=2790604

http://www.tradechakra.com/indian-economy/industries/fertilizers.html

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