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 Subject: - Cost and Management Accounting

Topic: - Indian Hume Pipe Co. Ltd. (IHP)

Course Code: - ACC 205

CLASS: - B.B.A. L.L.B. (Hons.)

SEC: - L1604

BATCH: - 2016

SUBMITTED TO: - SUBMITTED BY: -

Ms. NAINA NARANG AVIRAL AGARWAL
(11607329)

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 ACKNOWLEDGEMENT
I am indebted in all humbleness and gratefulness to acknowledge my depth to all
those who have helped me to put these ideas, well above the level of simplicity and
into something concrete.
I would like to express my special thanks of gratitude to my teacher Ms. Naina
Narang, who gave me the golden opportunity to do this wonderful project which also
helped me in doing a lot of research and I came to know about so many new things. I
am really thankful to her. Any attempt at any level can’t be satisfactorily completed
without the support and guidance of her.
I would like to thank my parents who helped me a lot in gathering different
information and guiding me from time to time in making this project, despite of their
busy schedules, they gave me different ideas in making this project unique.

Thanking you

Aviral Agarwal

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 Indian Hume Pipe Co. Ltd. (IHP)

Company Profile: -
History: -
Late Seth. Walchand Hirachand was among the prominent men, who took the initiative to
build a modern India and regarded as one of the pioneering architects of modern Industrial
India. He formed many Companies like Hindustan Construction Company, Scindia Steam
Navigation Company, Hindustan Shipyard Limited, Hindustan Aircrafts Limited, The
Premier Automobiles Limited, The Ravalgaon Sugar Farm Limited and Walchandnagar
Industries Limited. Hindustan Shipyard Limited & Hindustan Aircrafts Limited both
companies were nationalised after independence.
In the year 1926, he formed “The Indian Hume Pipe Co. Ltd.” with collaboration of HUMES
(Australia) for the manufacture of Reinforced Cement Concrete Pipes and the Company has
never had any occasion to look back.
About company: -
The Indian Hume Pipe Co. Ltd. (IHP) was established in 1926 with the object of
manufacturing, popularizing and marketing Hume Pipes and allied products. Over a period of
time the company has developed Prestressed Concrete Pipes (Non-Cylinder), Prestressed
Concrete Cylinder Pipes, Bar Wrapped Steel Cylinder Pipes, Hume Steel Pipes, Welded Steel
Penstocks, Prestressed Concrete Railway Sleepers and specialized in execution of Turnkey
Water Supply and Sewerage Projects.
Today the Company has wide network of over twenty factories and over 100 projects under
execution in India. The Company has earned a reputation for excellence through employing

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modern technology, stringent quality control measures, timely execution and continuous
Research and Development. As a result the company's products have found acceptance in
highly competitive markets. The company's Expertise is at work right from designing of
custom made pipes to the company's total engineering packages for pipeline projects.
The Company is actively involved in the strengthening of the nation's infrastructure in varied
fields viz. Water Supply, Irrigation, Drainage, Power Generation and Rail transport by
executing numerous turnkey pipeline projects for Water Supply, Sewerage and Hydroelectric
Power Generation and supplying millions of Concrete Sleepers for the track modernization of
Railways in India. IHP has also executed projects in neighboring countries like Nepal,
Srilanka, Burma, Malaysia and Republic of Iraq.
As pioneers with a modest beginning Eight decades ago, today the company is acknowledged
as leader of the industry with an unbeatable track record of introducing the following
products in India.

PRODUCTS YEAR OF INCEPTION

Reinforced Cement Concrete Pipe 1926
Welded Steel Pipe 1932
Steel Penstocks 1937
Prestressed Concrete Pipe (Non Cylinder) 1957
Prestressed Concrete Monoblock Sleeper 1970
Bar Wrapped Steel Cylinder (BWSC) Pipe 1998
Prestressed Concrete Cylinder (PCCP) Pipe 2003

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 Comparative Balance Sheet of Indian Hume Pipe Company Ltd.
as on 31-3-2016 and 31-03-2017
Particulars 31st Mar 2016 31st Mar 2017 Increase or Decrease
Rs. (in crore) Rs. (in crore) Absolute Percentage
Rs. (in crore) %
Equities and Liabilities
Shareholder’s Funds
Equity Share Capital 4.84 9.69 4.85 100.20
Reserves and Surplus 301.81 390.42 88.61 29.35
Total Shareholder’s Funds 306.65 400.10 93.45 30.47
Non-Current Liabilities
Long Term Borrowings 13.65 8.16 (-) 5.49 (-) 40.22
Deferred Tax Liabilities [Net] 0.00 0.00 0.00 0.00
Other Long Term Liabilities 21.15 24.55 3.40 16.07
Long Term Provisions 2.34 2.77 0.43 18.37
Total Non-Current Liabilities 37.14 35.47 (-) 1.67 (-) 4.49
Current Liabilities
Short Term Borrowings 296.59 252.11 (-) 44.48 (-) 14.99
Trade Payables 257.22 317.70 60.48 23.51
Other Current Liabilities 161.63 264.66 103.03 63.74
Short Term Provisions 4.06 3.54 (-) 0.52 (-) 12.80
Total Current Liabilities 719.51 838.02 118.51 16.47
Total Capital and Liabilities 1,063.30 1,273.59 210.29 19.77
Assets
Non-Current Assets
Tangible Assets 72.66 69.98 (-) 2.68 (-) 3.68
Intangible Assets 0.44 0.50 0.06 13.63
Capital Work in Progress 2.60 0.96 (-) 1.64 (-) 63.07
Other Assets 0.00 7.32 7.32 732
Fixed Assets 75.70 78.75 3.05 4.02
Non-Current Investments 0.29 2.51 2.22 765.51
Deferred Tax Assets [Net] 0.55 2.25 1.70 309.09
Long Term Loans and Advances 10.67 0.00 (-) 10.67 (-) 100
Other Non-Current Assets 18.66 89.50 70.84 379.63
Total Non-Current Assets 105.87 173.01 67.14 63.41
Current Assets
Current Investments 0.00 0.00 0.00 0.00
Inventories 436.27 59.97 (-) 376.30 (-) 86.25
Trade Receivables 335.45 400.71 65.26 19.45
Cash and Cash Equivalents 10.06 42.42 32.36 321.66
Short Term Loans and Advances 174.40 0.00 (-) 174.40 (-) 100
Other Current Assets 1.26 597.48 596.22 47,319.04
Total Current Assets 957.43 1,100.59 143.16 14.95
Total Assets 1,063.30 1,273.59 210.29 19.77

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 Interpretation: -
1. The comparative balance sheet of the company reveals that during 2017 there has been an
increase in equity share capital by Rs. 4.85 crore and the long term liabilities to outsiders
have decreased by Rs. 1.67 crore while there has been an increase in fixed assets of Rs. 3.05
crore i.e., 4.02%. This fact depicts that the policy of the company is to purchase fixed assets
from the long term sources of finance thereby not affecting the working capital.
2. The current liabilities have increased only by Rs. 118.51 crore i.e., 16.47%. The current
assets have increased by Rs. 143.16 crore i.e., 14.95% and cash has increased by Rs. 32.36
crore. On the other hand, there has been decrease in inventories amounting to Rs. 376.30
crore. It shows positive impact on the liquidity and working capital.
3. Reserves and surpluses have an increased from Rs. 301.81 crore to Rs. 390.42 crore i.e.,
29.35% which shows that an increase in profitability.
4. The overall financial position of the company is good.

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 Comparative Income Statement of Indian Hume Pipe Company Ltd.
for the year ended 31-3-2016 and 31-03-2017
Particulars 31st Mar 2016 31st Mar 2017 Increase or Decrease
Rs. (in crore) Rs. (in crore) Absolute Percentage
Rs. (in crore) %
Revenue from Operation [Gross] 951.76 1810.13 858.37 90.18
Less: Excise/Service Tax/Other Levies 14.85 108.20 93.35 628.61
Revenue from Operation [NET] 936.91 1701.93 765.02 81.65
Other Operating Revenues 2.02 2.37 0.35 17.32
Total Operating Revenues (A) 938.94 1704.31 765.37 81.51
Operating Expenses: -
Cost of Materials Consumed 94.27 134.78 40.51 42.97
Purchase of Stock-In Trade 0.00 1.09 1.09 -
Operating and Direct Expenses 627.43 1,264.28 636.85 101.50
Changes in Inventories of FG, WIP And 6.58 (-) 10.01 (-) 16.59 (-) 252.12
Stock-In Trade
Employee Benefit Expenses 50.79 64.98 14.19 27.93
Finance Costs 45.26 45.71 0.45 0.99
Depreciation And Amortisation Expenses 9.80 10.53 0.73 7.44
Other Expenses 62.91 42.87 (-) 20.04 (-) 31.85
Total Operating Expenses (B) 897.04 1,554.22 657.18 73.26
Net Operating Profit (A-B) 41.90 150.09 108.19 258.21
Other Incomes 2.96 2.92 (-) 0.04 (-) 1.35
Net Profit before tax 44.86 153.01 108.15 241.08
Less: Income Tax 15.76 53.33 37.57 238.38
Net Profit after Tax 29.10 99.68 70.58 242.54

 Cost of Goods Sold (COGS) = Cost of Materials Consumed + Purchase of Stock-In

Trade + Changes in Inventories of FG, WIP And Stock-In Trade
 2016:- Cost of Goods Sold (COGS) = 94.27 + 0.00 + 6.58
= Rs. 100.85 crore.
 2017:- Cost of Goods Sold (COGS) = 134.78 + 1.09 + (- 10.01)
= Rs. 125.86 crore.

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 Gross Profit = Net Operating Revenue - Cost of Goods Sold (COGS)
 2016:- Gross Profit = 938.94 – 100.85
= Rs. 838.09 crore.
 2017:- Gross Profit = 1704.31 – 125.86
= Rs. 1578.45 crore.

Interpretation: -
1. The comparative income statement given above reveals that there has been an increase in net
sales of 81.65% while the cost of goods sold has increased from Rs. 100.85 crore to Rs.
125.86 crore i.e., 24.79% thereby resulting in an increase in the gross profit by Rs. 740.36
crore i.e., 88.33%.
2. Although the operating expenses have increased by 73.26% the increase in gross profit is
sufficient to compensate for the increase in operating expenses and hence there has been an
overall increase in operational profits amounting to Rs. 108.19 crore i.e., 258.21% in spite of
decrease in other income of Rs. 0.04 crore and an increase in financial expenses of Rs. 37.57
crore for income tax.
3. There is an increase in net profit after tax amounting to Rs. 70.58 crore i.e., 242.54%.
4. It may be concluded that there is a sufficient progress in the company and the overall
profitability of the company is good.

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 Common Size Balance Sheet of Indian Hume Pipe Company Ltd.
as on 31-3-2016 and 31-03-2017
Particulars 31st Mar 2016 31st Mar 2017
Percentage Percentage
Rs. (in crore) Rs. (in crore)
(%) of Total (%) of Total
Equities and Liabilities
Shareholder’s Funds
Equity Share Capital 4.84 0.45 9.69 0.76
Reserves and Surplus 301.81 28.38 390.42 30.65
Total Shareholder’s Funds 306.65 28.83 400.10 31.41
Non-Current Liabilities
Long Term Borrowings 13.65 1.28 8.16 0.64
Deferred Tax Liabilities [Net] 0.00 0.00 0.00 0.00
Other Long Term Liabilities 21.15 1.98 24.55 1.92
Long Term Provisions 2.34 2.20 2.77 0.21
Total Non-Current Liabilities 37.14 3.49 35.47 2.78
Current Liabilities
Short Term Borrowings 296.59 27.89 252.11 19.79
Trade Payables 257.22 24.19 317.70 24.94
Other Current Liabilities 161.63 15.20 264.66 20.78
Short Term Provisions 4.06 0.38 3.54 0.27
Total Current Liabilities 719.51 67.66 838.02 65.79
Total Capital and Liabilities 1,063.30 100 1,273.59 100
Assets
Non-Current Assets
Tangible Assets 72.66 6.83 69.98 5.49
Intangible Assets 0.44 0.04 0.50 0.03
Capital Work in Progress 2.60 0.24 0.96 0.07
Other Assets 0.00 0.00 7.32 0.57
Fixed Assets 75.70 7.11 78.75 6.18
Non-Current Investments 0.29 0.02 2.51 0.19
Deferred Tax Assets [Net] 0.55 0.05 2.25 0.17
Long Term Loans and Advances 10.67 1.00 0.00 0.00
Other Non-Current Assets 18.66 1.75 89.50 7.02
Total Non-Current Assets 105.87 9.95 173.01 13.58
Current Assets
Current Investments 0.00 0.00 0.00 0.00
Inventories 436.27 41.02 59.97 4.70
Trade Receivables 335.45 31.54 400.71 31.46
Cash and Cash Equivalents 10.06 0.94 42.42 3.33
Short Term Loans and Advances 174.40 16.40 0.00 0.00
Other Current Assets 1.26 0.11 597.48 46.91
Total Current Assets 957.43 90.04 1,100.59 86.41
Total Assets 1,063.30 100 1,273.59 100

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 Interpretation: -
1. The common size balance statement given above reveals that current assest for year 2016 is
90.04% and for the year 2017 is 86.41%. So, the current assests has decreased from 16 to 17
which is not good for the company.
2. The current liabilities for the year 2016 is 67.66% while for the year 2017 is 65.79%. Thus
the current liabilities decreases from the year 2016 to 2017, hence it is a good for the
company. Because for the profitability of any company its current assets should be greater or
more than the current liabilities.
3. As we know that the working capital is current liabilities subtracted from current assests.
Thus working capital for the year 2016 is 22.38%. and working capital for the year 2017 is
20.62%. Thus working capital decreases by 1.76% which is good for the company.
4. On the other hand financing of fixed assets (on comparing of fixed assests with the long term
liabilities), the fixed assets for the year 2016 are 7.11% while long term liabilities are 3.49%
and the fixed assets for year 2017 are 6.18% while the long term liabilities are 2.78%, thus in
the year 2016 as well as in the year 2017 the fixed assets are more than long term liabilities ,
hence it is the good condition for the company and also improves the profitability status of
the company.
5. Now the reserve and surplus of the company in the year 2016 is 28.38% while in the year
2017 it is 30.65 which shows that an increase in profitability to the concern..
6. Thus, the overall financial position of the company is good.

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 Common Size Income Statement of Indian Hume Pipe Company Ltd.
for the year ended 31-3-2016 and 31-03-2017
Particulars 31st Mar 2016 31st Mar 2017
Rs. (in crore) Percentage Rs. (in crore) Percentage
(%) of Sales (%) of Sales
Total Operating Revenues (A) 938.94 100 1704.31 100
Operating Expenses: -
Cost of Materials Consumed 94.27 10.04 134.78 7.90
Purchase of Stock-In Trade 0.00 0.00 1.09 0.06
Operating and Direct Expenses 627.43 66.82 1,264.28 74.18
Changes in Inventories of FG, WIP And 6.58 0.70 (-) 10.01 (-) 0.58
Stock-In Trade
Employee Benefit Expenses 50.79 5.40 64.98 3.81
Finance Costs 45.26 4.82 45.71 2.68
Depreciation And Amortisation Expenses 9.80 1.04 10.53 0.61
Other Expenses 62.91 6.70 42.87 2.51
Total Operating Expenses (B) 897.04 95.53 1,554.22 91.19

Net Operating Profit (A-B) 41.90 4.46 150.09 8.80

Other Incomes 2.96 0.31 2.92 0.17
Net Profit before tax 44.86 4.77 153.01 8.97
Less: Income Tax 15.76 1.67 53.33 3.12
Net Profit after Tax 29.10 3.09 99.68 5.84

 Cost of Goods Sold (COGS) = Cost of Materials Consumed + Purchase of Stock-In

Trade + Changes in Inventories of FG, WIP And Stock-In Trade
 2016:- Cost of Goods Sold (COGS) = 94.27 + 0.00 + 6.58
= Rs. 100.85 crore.
 2017:- Cost of Goods Sold (COGS) = 134.78 + 1.09 + (- 10.01)
= Rs. 125.86 crore.

 Gross Profit = Net Operating Revenue - Cost of Goods Sold (COGS)

 2016:- Gross Profit = 938.94 – 100.85
= Rs. 838.09 crore.
 2017:- Gross Profit = 1704.31 – 125.86
= Rs. 1578.45 crore.

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 Interpretation: -
1. The gross profit ratio has improved in 2017 because the company has been able to reduce
cost of goods sold. The cost of goods sold which was 10.74% of sales in 2016 was brought
down to 7.38% in 2017.
2. The concern has been able to reduce operational expenses too, this has helped the company to
increase operating profit from 4.46% to 8.80%.
3. Net profit ratio has almost doubled from 3.09% to 5.84% in just one year period.
4. Profitability of the company has improved a lot in 2017. This has been possible because the
total operating revenue of the company has increased by Rs. 765.37 crore in 2017 from 2016
even the total operating expenses of the company has not controlled or reduced.

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