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1
Company Profile
LT Overseas to LT Foods Ltd: Small beginnings to Global Presence When it all began
about 30 years ago, nobody could have even dreamt that the small trading company that
came into being as Lalchand Tirathram Mills could one day be on its way to become a
leadingglobal food company.
1978: Mr. V.K.Arora joined the family business with his father, with a clear vision of
taking his company to a global level. In 1980, the company started exporting Premium
Rice. This was the first step towards making this vision a reality.
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COMPANY HISTORY
Our Company was incorporated as LT Overseas Private Limited on 16th October 1990
having registered office at 532/4, Naya Bazaar, Delhi. Consequent to conversion to
public limited company, the name of the Company was changed to LT Overseas Limited
vide fresh Certificate of Incorporation dated 03rd May 1994. We started our operations in
the year 1993 using certain processing facilities of Lal Chand Tirath Ram Rice Mills
(LCTRRM), an associate concern, on lease. We got our registration as manufacturer
exporter in 1993 from APEDA. In 1994-95 we filed our draft prospectus with SEBI and
Stock Exchanges in Mumbai, Delhi, Jaipur and Ahmedabad. The object of the Issue was
to part finance the expansion programmed for setting up a milling plant with a capacity of
2 MTPH. We received the observation letter from SEBI but we did not take the matter
forward on account of the then prevailing poor conditions in the capital markets.
However, we completed the expansion plan through term loan from Banks. We set up
milling capacity (paddy to rice) of 4 MTPH in the year 1995, at Kakroi Road Sonepat.
We have been making investments in plant and machineries and other assets in a bid to
upgrade and modernize its production processes to meet the consistent quality
requirements of customers. In pursuance of succession agreement dated March 26, 1999,
we took over the business of Lal Chand Tirath Ram Rice Mills having milling capacity of
6 MTPH, thus making the total milling capacity available with the Company at 10
MTPH. In the year 1999-2000, we started setting up a new manufacturing facility at
Bahalgarh, Haryana. The commercial production commenced in December, 2000. This
factory increased our manufacturing capacity by 4 MTPH. However, our total milling
capacity remained same i.e. 10MTPH due to obsolescence of some machineries at Kakroi
Road Factory. Between 2002-2005 we increased our capacity to 18 MTPH and in the
year 2005, we disposed off our Kakroi Road unit (which had a capacity of 6 MTPH)
there by reducing our available capacity to 12 MTPH at the end of 2005-2006. However
with increase in capacity during 2006-07, our current owned capacity stands at 27
MTPH.
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Achievements - Awards & Recognitions
1995-96 Certificate of merit was awarded by APEDA for significant contribution in the
export of Indian Long Grain rice registered the brand ‘DAAWAT’ in United States of
America
1998-99 took over the business of Lal Chand Tirath Ram Rice Mill having capacity of
6 TPH
2000-01 started the processing facility at Bahalgarh Unit of 4 TPH Registered and
launched the brand ‘DAAWAT’ in Australia
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2002-03 Received the right to use APEDA certification mark “Quality Produce of
India” for exports enhanced the capacity in Bahalgarh unit from 4 TPH to 10 TPH,
making the total capacity to 16 MTPH.
2003-04 Award from APEDA for export promotion and quality development of Basmati
Rice
2004-05 India Star Award from Indian Institute of Packaging enhanced the capacity in
Bahalgarh unit from 10 TPH to12 TPH, making the owned capacity to 18 MTPH.
2007-LT Overseas Ltd has signed a MOU with Madhya Pradesh State Industrial
Corporation Ltd Corporation, Bhopal.-LT Overseas Ltd has signed a Shareholders
Agreement on June 10, 2007 with LT Overseas North America (LTO NA) - a Company
incorporated under the Laws of Ontario. The Company will be holding 55.26% shares in
LTONA and in pursuance of the same LTO NA will become a subsidiary of the
Company.
2008- Company name has been changed from LT Overseas Ltd to LT Foods Ltd.
2010- LT Foods Limited has informed regarding the outcome of Board Meeting which
are as follows (1) Appointment of Ms. Radha Singh as Independent Director of the
Company w.e.f. January 29, 2010; (2) Appointment of Mr. Suneet Gupta as Alternate
Director of Mr. Rajesh Kumar Srivastava, Nominee Director of the Company.
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Annual Report
The Directors have pleasure in presenting the 19th Annual Report of your Company
together with the Audited Statement of Accounts for the financial year ended 31st March
2009.
FINANCIAL RESULTS
The summarized Financial Results for the year ended March 31, 2009 are as follows:
(Rs. in Lakhs)
2008-09 2009-10
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THE YEAR UNDER REVIEW
During the year under review, the Company achieved turnover of Rs. 69439.55 Lacs and
PBDIT of Rs.7966.60 Lacks. The Company’s Profit after tax and is Rs.1070.33 Lacs and
Earning per Share Rs.4.81. With Consolidated turnover of 1060.97 Crores, the LT Group
has achieved another milestone, which reflects the efforts of the Organization to stride it
to great heights. The details of the Company’s operations have been provided in the
Management Discussion Analysis Report, which forms a part of this report. Audited
Consolidated Financial Statement for the year ended 31st March, 2009 also forms a part
this report.
DIVIDEND
In order to strike a balance between the need to sustain strategic investments for secure
future and the annual expectation of shareholders for growing income, your Board of
Directors at the meeting held on 30th June 2009, recommended a final dividend Re .l per
share (@10%) of Rs.10/- each for the financial year 2008-09, subject to the approval of
shareholders at the ensuing Annual General Meeting absorbing a sum of Rs.2,22,69,929/-
(exclusive of Dividend distribution tax). Dividend distribution tax will be borne by the
Company.
TRANSFER TO RESERVE
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CHANGE OF NAME FROM IT OVERSEAS LIMITED TO IT
FOODS LIMITED
Your Directors had proposed the change of name of your Company from LT Overseas
Limited to LT Foods Limited to match the vision of the Company of becoming a Leading
Global Food Company. Consequently, approval of the shareholders was taken in the
previous Annual General Meeting for the same. An application was made to the Registrar
of Companies, NCT Delhi & Haryana seeking the change of name and the same was
accorded by the Registrar of Companies vide fresh Certificate of Incorporation w.e.f.
25th September, 2008.
Your Company has been conferred with APEDA Export Award in this year for the
performance pertaining to year 2007-08. Daawat Foods Limited, a wholly owned
subsidiary of the Company has been awarded Export Excellence award for its excellence
in operations and export by State of Madhya Pradesh in its first full year of operations.
OVERVEIW
India is the worlds second largest producer of food, and has the potential to become the
biggest with the food and agricultural sector. The total food production is expected to
double in the next ten years and there is opportunity for large investment in food and food
processing technologies. Health food and health food supplement is another rapidly rising
segment in the Industry which is gaining vast popularly. The food processing industry is
presently growing at 14% against 6-7% growth in 2003-04.
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India is one of the major food producers but accounts for less than 1.5 % of International
food trade, whereas the global processed food market is estimated at US.2 trillion. This
indicates a vast scope in the industry.
BUSINESS
Overall this was a year of great challenges and a meltdown in the economic market.
Despite the recession in the global scenario, the Company has achieved significant
growth in Domestic as well as in International market as the impact of the same was
considerably less on our Company, being in the food industry. The Company had made
investments in its subsidiaries in the preceding years, and as a result of overall
performance and contribution of the subsidiaries, and in line with the goal, the LT Group
has been able to reach the milestone of a turnover of 1060.97 Crores. Through a well
defined and conscious strategy, the Company is able to expand its retail and distribution
network, domestically and well as internationally.
In the midst of economic crises globally, your Company will continue to pursue the
strategy to identify and exploit profitable growth opportunities by increasing the
consumer preferences, increase brand relevance, improve availability, structurally build
capability and efficiencies to be cost competitive.
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CORPORATE DEVELOPMENT
The year 2008-09 has been a year of corporate developments for our group, where our
different subsidiaries have become operational and have been able to provide good return
for the investments made in the same, in the initial year of its operation. The Company
has hired a panel of technicians, professionals and consultants for different areas, who are
well experienced in their respective fields, and whose services have helped the Company
in optimum utilization of the resources and prevention of loss and increase in
profitability. The Company with their innovative guidance has been able to leverage its
operations in different aspects.
The Company continues to make inroads into new segments/ markets, exploring new
territories and introducing new products in the market. The Company has hired the
services of experienced consultants, who are assisting us in sales and distribution
transformation, retail excellence and supply chain refinement. In addition, they will also
help improve significantly the service levels and acute scientific forecasting
methodologies.
PROSPECTS
The Company always has a vision to be a global rice food Company. In furtherance to its
vision, the Company has been taking initiative to improve domestic operations and
increase the bandwidth of the Company. It is also taking considerable steps for
strengthening its international presence and leverages the existing strengths of the
business. It is continuously in the process of injecting latest technology commensurate
with its operations. The Company is also in the process of increasing the product
portfolio of the Company.
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FINANCE
As a result of the nature of the activity of the Company, it is always in need of working
capital, and the Company has endeavored to procure finance for the operations of the
Company at a competitive rate. The Company has obtained loans from a consortium of
banks and has also obtained loans from other banks at a competitive rates. Having
significant portion of exports, the Company has the policy to hedge funds for the pending
orders in hand.
DOMESTIC OPERATIONS
The year has been a challenging year for our economy as well as for the Company. The
market dynamics were very strongly dominated by world economy changes. This year we
achieved domestic revenue of Rs 370.65 Crores in value which was result of increase in
overall volume as well as increase in sale of consumer pack. For the year 2009-10 also,
we have taken a challenging target looking at the potential and growth rate in the
domestic market. We are undergoing various changes and corrections to improve our
performances and to increase our market share. We have utilized the services of
renowned consultants to revamp our operations and make them more effective, geared to
take the challenges of this year. They are helping us both in penetrating further in our
present markets as well as capturing untapped markets by identifying new opportunities.
The plan this year is to catapult the growth through increasing our effective penetration
from present 450 towns to 653 towns through direct or indirect coverage. We are sure
that this will bring healthier and more profitable and sustainable growth of the
Organization.
Daawat is prominently placed in 23 states and is performing outstanding with the pace of
70% growth in new states i.e. Bihar and Jharkhand, wherein Daawat was launched last
year only.
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As per strategic move to improve, we have realigned modern retail business with our
subsidiary Company i.e. Staple Distribution Company Limited, engaged in the
distribution business. They are directly focusing their resources & aligning their activities
as per modern retail needs.
EXPORTS
In consonance with its vision of becoming a Global Food Company and a major exporter
of rice, the Company has been continuously making all efforts and harnessing all
opportunities and has been able to develop a strong global distribution network at
International level.
The Export operations of the Company are currently spread in more than 60 countries,
with several new markets opened in this financial year. The Companies endeavor to
capture new markets and exports to these markets have achieved major successes. We are
currently leading the pack in countries such as UAE, UK and US. The Company is
continuously making efforts to explore and capture, further the potential in the export
market. Various agreements with new channel partners have been done in many new
markets.
In the Middle East, African, European and the US markets, we have been able to make
steady progress with growth having surpassed previous targets. Despite the slowdown in
some economies and market hit with recession, we continue to grow at a steady pace.
In the year 2008-09, the export revenues exceeding Rs. 323.74 Crores as compared to
revenue of Rs. 247.57 Crores in 2007-08. We are also consolidating operations in the
existing markets where we have a set up by introducing some innovative promotion
schemes to keep the customers interest alive for brand Daawat. We will be expanding our
product portfolio with emphasis on total quality improvement thereby improving our
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service delivery efficiencies. We have undertaken upon ourselves an aggressive target in
addition to our objective to enhance our customer base across different markets.
During the year the Company has been awarded by APEDA for their contribution in
exports during the previous year.
The funds raised by the Initial Public Offering of the company have been fully utilized
and a certificate towards the same has been received from the Monitoring Agency.
GROUP ENTITIES
Indian Entities:
The wholly owned subsidiary of LT Foods Limited was set up with state of art
technology, milling unit in Mandideep, Bhopal, for production of parboiled rice. The total
investment made in the subsidiary is of an amount of Rs.13.5 Crores as on date. This was
the first year of its operation, in which it has set a benchmark of a turnover of more than
Rs.200 Crores, which is the relentless effort of the ambitious and dedicated workforce.
The status of the Company has been changed from Private Limited Company to Public
Limited Company by deletion of the word private from its name.
The Subsidiary has implemented ERP. It has embarked on the journey to practice S-5 in
the plant and has developed an automated environment, which resulted in higher output
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and reduction in average cost with emphasis on training the employees of the Company.
The Company has a dedicated research team and consultants, which has helped the
Company by helping the farmers and remunerating them for adoption of basmati
cultivation.
The Company has decided to add value added products in its portfolio and work has
been started on the Food Plant, which shall be operational in the second quarter of year
2009-10.
The Company has been awarded Export Excellence award for its excellence in
operations and exports by MP State Minister of Commerce and Industry.
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PRODUCTS & SERVICES
Daawat Brown Rice Super Basmati Rice
The product is available in Super Basmati rice - Just
attractive carton boxes of have spoonful of this
1kg and 500 gms. The wonderful flavorsome rice
product is available in and you will know why
many modern and they say God visits
traditional retail stores. mortals in the form of food.
The secret of launching Daawat Super Basmati
Daawat Brown Rice lies in Rice boasts of the taste
its nutritional ...... that can ......
Management - LT Foods
Designation
Name
Chairman and Managing director
Vijay Kumar Arora
Joint Managing Director
Surinder Arora
Independent Director
Pramod Bhagat
Independent Director
Radha Singh
Alternate Director
Suneet Gupta
Designation
Name
Joint Managing Director
Ashwani Arora
Independent Director
Suparas Bhandari
Independent Director
Jagdish Chandra Sharma
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All India Service Network
Chandigarh
Ajmer Gawhati
Lucknow
Indore
Nagpur
Vishakapatnam
Operational
Proposed
Madurai
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Chapter-II
CONSEPTULISATION
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INTRODUCTION OF WORKING CAPITAL
Definition
Working Capital refers to the cash a business requires for day-to-day, or, more
specifically, for financing the conversion of raw material into finished goods,
which the company sells for payment. In other words ‘Working Capital’ is the
money the business process consumes. The longer the process takes, the more
from current liabilities. Current assets are resources, which are in cash or will
soon be converted into cash (normally with in one year). Whereas Current
liabilities are commitments, which will soon require cash settlement in the
Working Capital can also be defined with an approach that encompasses all the
capital practice or policy. When looking in detail at any of these three core areas,
it soon becomes clear that WCM can touch all the firm buys makes and sells. A
‘total’ approach to working capital covers all the company’s activities relating to
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Concepts of Working Capital
According to this concept, working capital means working capital which is total of
According to this concept, working capital means net working capital which is the
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IMPORTANCE
The better a company manages its working capital, the less the company needs to
borrow. Without adequate working capital there can be no progress. A business must
expand and assert itself in a competitive world. If expansion takes place without the
firm being able to cover its commitments, then over trading will be the result.
liquidation is forced upon the business. Even companies with cash surpluses need to
manage working capital to ensure that those surpluses are invested in ways that will
The lengths of production and sales cycle pay an important part in the over trading
process. If short, and the period of credit is not excessive, then money from sales
will help to replenish working capital. However the longer the total period from the
buying of the raw material to the receipt of the cash from sales, the more likely is
overtrading.
perspective, however, generating extra cash from internal sources has the advantage
over bank and public debt of greater opportunity and access, typically at lower cost.
21
In terms of the impact felt across the company in the business units and customer-
facing staff, it is not the financial but the operational benefits that are most keenly
dealing with customers and suppliers greater control of and information on the
processes related to ordering/ paying and delivering / getting paid- can ultimately
feed into improve delivery of goods and services at lower cost. Improve working
capital leads to increase shareholder value because it enables firms to generate more
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Along with the fixed capital almost every business requires working capital
through the extent of working capital requirements differs in different
businesses. Working capital is needed for running day to day business
activities. When a business is started, working capital is needed for
purchasing raw materials. The raw material is then converted into finished
goods by incurring some additional costs on it. Now goods are sold. Sales do
not convert into cash instantly because there is invariably some credit sales.
Thus there exist a time lag between sales of goods and receipt of cash. During
this period, expenses are to be incurred for continuing the business operations.
For this purpose working capital is needed. The time period which is required
to convert raw material into finished goods and then into cash is known as
operating cycle. Operating cycle of a manufacturing concern involves five
phases:
1. Conversion of cash into raw material
Thus the operating cycle starts from cash, finishes at cash. Need for working capital
depends upon period of operating cycle. Greater the period more will be the need for
• Cash management: Identify the cash balance which allow for the to meet day to
day expenses, but reduce cash holding cost.
• Debtor management: Identify appropriate credit policy, i.e. credit term which will
attract customer, such that any impact on cash flow and the cash conversion cycle
will be offset by increase revenue and hence return on capital, (or vice versa).
• Short term financing: Identify the appropriate source of financing, given by cash
conversion cycle: the inventory ideally financed by credit granted by supplier,
however it may be necessary to utilize a bank loan (or overdraft), or to “convert
debtor to cash” thought “factoring”.
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MANAGERIAL USEFULNESS OF STUDY
For a fresher like me, in a big organization like L.T. Food group ltd. gave me a feel of the
real working atmosphere. It enhanced my horizons about how the members of the
organization work as a team, co-coordinating with each other, and their interdependence
on each other. I became aware of the synergy effect i.e., how different members in
Awareness of difference between the bookish knowledge and the practical workings
of the company.
The various designations in an organization, the respective work profiles and the
Synergy effect.
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MANAGERIAL USEFULNESS OF STUDY
It helps to understand how to tackle work pressure and meet dead lines.
Time utilization.
Wealth maximization.
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OBJECTIVE OF THE STUDY
It is well known fact that we remember 20% of what we hear, we remember 40% of
The present study in ,L.T. FOODS LTD. mainly focus on the above objectives as
well as some other objectives which I have taken into consideration during the
project training.
company?
• Evaluate current assets and current liabilities to find out liquidity position of the
company.
• To know about the current assets and current liabilities position of LT Foods Ltd.
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The goal of working capital management is to manage the current assets and
sources and how much from long-term sources? The decision will determine the
financing mix. There are three approaches to determine the financing mix:
asset will be matched with the expected life of the sources of fund raised
short-term loan for 30 days may be taken. Under this approach, the
Needs of a firm are financed from long-term funds. Short-term fund are
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Determinants of Working Capital
1. Nature of Business
2. Size of Business
4. Production cycle
5. Business Fluctuation
29
LIMITATIONS
Although every effort has been in to collect the relevant information through the sources
available, still some relevant information could not be gathered.
very busy schedule because of which they were reluctant to give appointment.
Time: The time duration could not provide ample opportunity to study every detail of
disclosed some figures. Moreover, in some cases separate accounts of division are not
30
Chapter-III
REVIEW OF
EXISTING
LITERATURE
31
Accounting Policy
2. REVENUE RECOGNITION
3. USE OF ESTIMATES
The preparation of the financial statements in conformity with Accounting Standards &
GAAP requires management to make estimates and assumptions that affect the reported
balances of assets, and liabilities and disclosure relating to contingent assets and
liabilities as at the date of the financial statements and reported amounts of income and
expenses during the period. Examples of such estimates include useful life of fixed
assets, provisions for doubtful debts, income taxes, write-off of deferred revenue
expenditures an intangible asset. Contingencies are recorded when it is probable that
liability will be incurred, and the amount can be reasonably estimated. Actual results
could differ from those estimates.
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4. FIXED ASSETS AND DEPRECIATION
(a) Fixed assets are stated at cost less accumulated depreciation/amortization and
impairment loss. All costs including financing cost till the respective asset is put to use
and attributable to the fixed assets are capitalized.
(b) Depreciation on fixed assets is provided on written down value method at the rates
and in the manner prescribed in schedule XIV of the Companies Act, 1956.
(c) Intangible Assets i.e. Goodwill, Brand Equity, Trade mark and assets similar in
nature, acquired from outside, are amortized over a period of 20 years.
(d) License for ERP software, taken as intangible asset, acquired is amortized over a
period of 10 years, as the license is for the indefinite period, in accordance with the
Accounting Standard on Intangible Assets (AS- 26) issued by the Institute of Chartered
Accountants of India.
5. INVESTMENT
Trade Investments are the investment made to enhance the company business interest.
Investments are either classified as Current or Long Term, based on management
intention at the time of purchase. Current Investments are carried at the lower of cost and
fair value. Cost of, an overseas investment comprises the Indian Rupee Value of the
consideration paid for the investment.
Long Term Investments are carried at cost and provisions recorded to recognize any
decline, other than temporary, in the carrying value of each investment. Dividends, if any,
are recorded as income in the Profit & Loss Account. The amounts paid under Key man
Insurance Policies are considered as Investment.
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1. INVENTORIES
Items of inventories are measured at lower of cost or net realizable value. Cost of
inventories comprises of cost of purchase, cost of conversion and other costs incurred in
bringing them to their respective present location and condition. Borrowing cost is
included in the cost of inventory as inventory generally held by the Company is an asset
that necessarily takes a substantial period of time to get ready. Cost of raw materials,
stores and spares, packing materials, jute bags, trading and other products are determined
on FIFO basis. By Products are valued at net realizable value. Cost of finished goods is
determined on Absorption costing method. Material in process, being not material, is
taken as part of raw materials and measured accordingly.
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8. EARNING PER SHARE
In determining earning per share, the company considers the net profit after tax. The
number of shares used in computing earning per share is the weighted average number of
shares outstanding during the period. The number of shares used in computing diluted
earning per share comprises the weighted average shares considered for deriving basic
earning per share, and also the weighted average number of equity shares that could have
been issued on the conversion of all dilutive potential equity shares.
Cash flow are reported using the indirect method, thereby profit before tax is adjusted for
the effects of transactions of a non-cash nature and any deferrals or accruals of past or
future cash receipts or payments. The cash flows from regular revenue generating,
financing, and investing activities of the company are segregated.
10.EMPLOYEE BENEFITS
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POST EMPLOYMENT BENEFITS
TERMINATION BENEFITS
Company has not recognized termination benefits as a liability and an expense as in its
opinion, at present it is not possible to make a reliable estimate of the amount of the
obligation.
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11. INCOME TAX
Income taxes are computed using the tax effect accounting method, where taxes are
accrued in the same period in which the related revenue and expenses arise. A provision
is made for income tax annually, based on the tax liability computed, after considering
tax allowances and exemptions. Provisions are recorded when it is estimated that a
liability due to disallowances or other matters is probable
The differences that result between the profit considered for income taxes and the profit
as per the financial statement are identified, and thereafter a deferred tax asset or deferred
tax liability is recorded for timing differences, namely the differences that originate in
one accounting period and reverse in another, based on the tax effect of the aggregate
amount being considered. The tax effect is calculated on the accumulated timing
differences at the end of an accounting period, based on prevailing enacted or
substantially enacted regulations. Deferred tax assets are recognized only if there is
reasonable certainty that they will be realized and are reviewed for the appropriateness of
their respective carrying values at each balance sheet date.
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13. PROVISIONS, CONTINGENT LIABILITIES AND
CONTINGENT ASSETS
All known liabilities are provided for in the accounts except liabilities of a contingent
nature, which have been adequately disclosed in the accounts.
These are consistent with the generally accepted accounting principles and practices.
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Chapter-IV
REASEARCH
METHODOLOGY
39
RESEARCH AND METHODOLOGY
search for knowledge. It can also be defined as a scientific search for pertinent
knowledge.”
RESEARCH DESIGN
Research Designs the way in which the research is carried out. It works as a blue
print. Research Design is the arrangement of the conditions for the collections
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Exploratory Research Design
In descriptive research design: those studies are taken which are concerned with
research is the description of the state of affairs, as it exists in present. The main
characteristic of this method is that the researcher has no control over the
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SAMPLE DESIGN
It is not possible for any researcher to include each and every member of the
universe in his research process. So, he selects small portion of the universe,
which is its true representative. This group is known as sample and this process
is called sampling.
Non-probability Sample
Probability Sampling
Non-probability Sampling
every item of the universe does not have equal chances of inclusion in the
sample.
Convenience Sampling
Judgment Sampling
Quota Sampling
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Probability Sampling
Stratified Sampling
Cluster Sampling
In the present project, non-probability sampling has been used because sample is
selected by researcher’s own view and every item of the universe has not equal
been used because sample has been selected according to own convenience.
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DATA COLLECTION
Primary Data
Secondary Data
Primary Data
Secondary Data
Secondary data are those data which are already collected and stored and which
In this project, Secondary data has been collected from following sources:-
• Annual report
• Books
• M.I.S
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Chapter-V
ANALYSIS AND
INTERPRETATION
OF DATA
45
SWOT ANALYSIS OF L.T. FOOD Ltd.
STRENGTHS
• Latest technology.
• Better services.
WEAKNESS
The growing domestic demand for basmati rice promises a very good future for
company’s core business. L.T. Food ltd manufacturing basmati rice for people and some
rice for charity and mainly export the goods.
46
Computation of Working Capital Method
A number of methods are used to determine working capital needs of a business. The
For 2008-09
=Rs.217398093
=Rs. 66073722
47
Calculation for optimum working capital of the company
= Rs.217398093/ Rs.151324371
=1.43:1
= Rs.127043935/ Rs.151324371
= .83:1
Here, the short-term financial position of the company is not sound because its current
ratio is 1.43, which is less than the ideal ratio 2:1.Quick ratio of the company is .83:1,
which is less than ideal ratio of 1:1.Both the ratio shows inefficient working capital.
Therefore, it can be said that the company is not in a position to pay its current liabilities
in time.
= (83498217+62759491)/2 =Rs.73128854
=493057008/365=Rs.1350841.11
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2. Work in progress period = Average WIP/ Raw material
(3523266+1245051)/2=Rs. 2384158.5
1. Finished Good period = Average Finished Goods/ Raw material Consumption per
Day
= (3332675+17302451)/2 =Rs.10317563
For 2009-2010
=Rs.252453549
=Rs. 135355392
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Calculation for optimum working capital of the company
= 2.16:1
= 1.28:1
Here, the short-term financial position of the company is sound because its current ratio
is2.16, which is greater than the ideal ratio 2:1.Quick ratio of the company is1.28, which
is greater than ideal ratio of 1:1.Both the ratio shows efficient working capital. Therefore,
it can be said that the company is in a position to pay its current liabilities in time.
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Computation of working capital cycle
=(94095974+84498217)/2 =Rs.89297095.5
=583861789/365=Rs.1599621.34
=(3523266+1463539)/2=Rs. 2493402.5
= (3332675+17302451)/2 =Rs.10317563
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INTERPRETATION
2. Effectively manage payment terms for customers and suppliers (with terms and
conditions appropriate to the current environment).
3. Improve speed and accuracy of billing and cash collections and deal with disputes
effectively.
5. Increase billing frequency (noting, however, the extra costs associated with this) and
use of e billing.
6. Develop an agile supply chain that can be more responsive to changing market
conditions.
7. Build greater linkage and closer collaboration among the various participants of the
working capital value chain internally and externally, focused around sharing of demand
signals and planned response down the chain.
8. Maintain metrics that monitor the financial health of customers and suppliers.
9. Identify the key drivers of working capital consumption and focus on improving them
(forecast error, lead-times, minimum lot sizes, supply variability, capacity constraints,
speed and accuracy of billing, customer segmentation and appropriate collection
strategies).
52
10. Identify, understand and quantify the trade-offs that need to be made (e.g., order fill
rates or inventory levels, early payment discounts or longer payment for payables
optimization, larger batch sizes or inventory levels).
53
Chapter- VI
FINDINGS &
CONCLUSION
54
FINDINGS
• L.T. Food ltd has the total share capital of Rs. 6,50,00,000 & issued subscribed &
• As we see in the project report the current ratio of the company is1.43:1 & the
quick ratio of the company is .83:1. Here, the short-term financial position of the
company is not sound because its current ratio is 1.43, which is less than the ideal
ratio 2:1.Quick ratio of the company is .83:1, which is less than ideal ratio of
1:1.Both the ratio shows inefficient working capital. Therefore, it can be said that
• As we see in the project report the current ratio of the company is 2.16:1 & the
quick ratio of the company is 1.28:1. Here, the short-term financial position of the
company is sound because its current ratio is12.16:1, which is grater than the
ideal ratio 2:1.Quick ratio of the company is 1.28:1, which is grater than ideal
ratio of 1:1.Both the ratio shows efficient working capital. Therefore, it can be
said that the company is in a position to pay its current liabilities in time.
• From the starting L.T. Food Ltd is a loss making company. But from the year
2006 the company earns the profit and covers the all losses. Now the company is
• The net profit of the company for the year ended 2007-2008 is Rs. 49808128.45.
55
Conclusion
• It can be observed that Current Ratio of LT Foods Ltd varied between 1.7776 to 2.0658
during the period from 2005-2008-2007. It is evident that, on an average, per one rupee
of current liability, the company has been maintaining 2.0216 rupee of current assets as a
cushion to meet the short- term liabilities. Usually, a Current Ratio of 2:1 is considered to
be the standard to indicate sound liquidity position, and LT Foods Ltd has been
is 0.72 which again can be considered non satisfactory. It may not be able to meet its
current liabilities on time, which is not good sign for the enterprises.
• The inventory turnover ratio shows how rapidly the inventory is turning into receivables
through sales. This ratio has been continuously increasing since FY 2005-06 compared to
the 2004-05. A high inventory turnover indicates the efficient management of inventory
because more frequently the stocks are sold. So we can say that enterprises have a very
good turnover ratio. Thus LT Foods Ltd has a very good inventory management.
• Working Capital Turnover Ratio indicates the efficiency of the firm in utilizing the
working capital in the business. It varies between 2.74 times and 4.89 times. This ratio
signifies that on an average, a rupee of working capital generate Rs. 4.3107 worth of
business/sales of the firm, which is excellent for the management of the firm.
• The Debtors Turnover Ratio was highest (12.2688 times) in 2007-2008 and lowest
(9.1288 times) in 2006-2005 and average is 11.416 times. Debtors and Receivables
management appears to be excellent. More the number of times debtors' turnover, better
the liquidity position of the firm. The combined effect of better management of inventory
and debtors & receivables has enabled the firm to generate reported business of the firm.
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• Average Collection Period is the relationship between no. Of days in a year and debtor
turnover ratio. Here in the FY 2004-05, FY 2005-06, FY 2006-07 and FY 2007-08 it is
30days, 39days, 30days and 30days. In the FY2005-06 it is increased but in the other FY
it is same. This is again good sign for the enterprise.
57
Chapter- VII
BIBLIOGRAPHY
&
Appendix
58
BIBLIOGRAPHY
Books
www.ltoverseas.com
WWW. GOOGLE .CO.IN
59
GLOSSARY
ANNEXURE-1
1. GENERAL INFORMATION
⇒ WEBSITE: http://www.ltoverseas.com
Arora
⇒ 3. MARKETING DATA
60
o JOB PROFILE : FINANCE MANAGE
ANNEXURE-2
ANNEXURE-3
61
Balance Sheet
------------------- in Rs. Cr.
Balance Sheet of LT Foods -------------------
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
12 12 12 12 12
mths mths mths mths mths
Sources Of Funds
62
Application Of Funds Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
Total CA, Loans & Advances 250.83 255.82 370.14 540.67 611.67
63
Profit & Loss account of LT Foods
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
Sales Turnover
362.53 403.07 482.53 571.45 717.36
Excise Duty
0.00 0.00 0.00 0.00 0.00
Net Sales
362.53 403.07 482.53 571.45 717.36
Other Income
3.61 0.81 1.70 1.71 -54.55
Stock Adjustments
-5.47 -1.00 46.13 38.38 29.75
Total Income
360.67 402.88 530.36 611.54 692.56
Expenditure
Raw Materials
285.32 326.67 417.86 471.04 527.81
Power & Fuel Cost
3.72 3.51 5.17 6.64 5.96
Miscellaneous Expenses
2.07 2.01 1.10 1.85 2.38
Preoperative Exp
Capitalized 0.00 0.00 0.00 0.00 0.00
Total Expenses
333.36 369.67 476.29 541.06 621.87
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
64
Operating Profit
23.70 32.40 52.37 68.77 125.24
65