A STUDY ON THE FINANCIAL ANALYSIS OF LAKSHMI MILLS LTD, COIMBATORE

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1 A STUDY ON THE FINANCIAL ANALYSIS OF LAKSHMI MILLS LTD, COIMBATORE M.MURUGESAN Assistant Professor, School of commerce, Rathnavel Subramaniam College of Arts & Science, Coimbatore. INTRODUCTION OF THE STUDY Finance is a field that deals with the study of which includes the dynamics of assets and liabilities over time under conditions of different degrees of uncertainty and risk. Finance can also be defined as the science of money management Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a company's financial statements to make better economic decisions.. Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization. STATEMENT OF THE PROBLEM Now a day s finance plays a vital role in everyday business life, this study was perceived by the researcher. As the lakshmi mills company faces some financial defects every day, this study has been taken to solve the problem. The title study A STUDY ON FINANCIAL ANALYSIS OF LAKSHMI MILLS LTD TOOLS FOR THE DATA ANALYSIS Comparative Balance Sheet Statement Analysis Common Size Balance Sheet Statement Analysis PERIOD OF THE STUDY This study is confined for 3 years from to which start from 1 st April to 31 st March. OBJECTIVES OF THE STUDY To know efficiency of the Lakshmi mills. To know about the financial performance of Lakshmi mills. To offer appropriate suggestion in improving the existing positi LIMITATIOS OF THE STUDY The study is restricted for a period of 3 years. Due to the inadequate time it is not possible to analyze all respects relevant to the study. Tools used in this study are not sufficient to bring the entire financial position. REVIEW OF LITERATURE In Mansur A Mulla (2002) in his study The financial health of Shri Venkatesh Cooperative textile mills ltd. He found that the textile mill under the study was just on the edge of financial collapse. The financial position is not in the healthy zone during that period of study. The current assets have been declined due to the negative profitability performance, whereas the current icmrrjournal@gmail.com

2 liabilities have been increased due to the poor liquidity performance of the mill. He concluded that the company has faced the problem of overtrading owing to the inadequate level of working capital and it should concentrate on the working capital to improve the financial performance. Aruna.R (2003) in her study A study on financial performance of Sri Bhavani textile process private limited. She analyzed the balance sheet and profit and loss account of the company. She found that the overall financial position was moderate. She concluded that the company should try to improve it long-term solvency by converting inventories into cash and increase the shareholders fund for getting better result. Reserve Bank of India (2003) had examined the financial performance of private corporate business sector from textiles, engineering, chemicals, cement, electricity generation and supply, construction, information technology and diversified groups during the first two quarterly period of based on abridged financial results of companies published in the financial database, news dailies and from the major stock exchange of India. It was observed that textiles, engineering, cement, information technology and diversified industries have recorded a high growth in sales in the second quarterly period. Rakesh R (2005), in his study A study on financial performance of vijayeswari textile limited, from the year The study was conducted to analyze the profitability position, financial position, and also to find the efficiency in asset utilization and fund utilization. He found that the company s profitability and activity position is satisfactory whereas the liquidity position is not satisfactory due to improper management Chellasamy.P and Sumathi.N (2007) Growth and financial performance of selected textile companies in Coimbatore district. The study period covered from the year He examined the growth and trend of selected textile companies. In the selected textile companies, Gangotri textile limited performance was satisfactory and the remaining companies taken for study performance were moderate. So these companies should aim, not only to earn high profit but also to run the business with social obligation and maximum utilization of ideal resources properly. From the author Sunita Sukhija (2010) in her study A study of leverage and profitability position of selected textile companies from the year She analyzed the leverage positions of Textile Industries in India and to examine the impact of leverage on EPS of selected Textile Companies. The study reveals that overall leverage of Lakshmi Mills Co. Ltd is maximum indicating higher profits and also ensuring that any small change will lead to more reflection. The mean value of EPS for Raymond Ltd. is high as compared to the other five companies. Visaka Industries Ltd shows an average performance during the study period. She concluded that the companies could reframe their optimum capital structure and capacity utilization for further profitability in future. A.S.Shiralashetti (2011) in his study Performance appraisal of the Gadag co-operative Cotton Textile Mill Ltd, Hulkoti- A Case Study. He had discussed about the trends in capital employed, net worth of the firm, the trends in sales, cost of goods sold, gross profit/loss and net profit/loss during the study period. The results were found that the overall performance of the Gadag Co-operative Cotton Textiles Mill Ltd was poor from the period and due to high expenses. Marimuthu.K.N (2012) in his study Financial performance of textile industry on listed companies of TamilNadu. He analyzed the structure of income statement, balance sheet and working capital from the year He concluded among the five companies these two companies i.e. KPR mill ltd and Rajapalayam mills ltd financial position was good icmrrjournal@gmail.com

3 Palani A and Yasodha P (2012) in their study A study on working capital management in loyal textile mills limited, Chennai, from the year They says Working capital is very important for any organization to meet its day to day expenses and to meet short term due obligations. An efficient management of working capital is necessary for smooth functioning of the organization and also for maintaining its profitability. They found that the company is efficiently maintaining its working capital. And they had concluded that the company is credit worthy which is proved by credit score model. From the view of Vimal kumar.j.v (2012) in his research Financial performance of Trichur Co-operative spinning mill limited, during the period He analysed the structure of balance sheet and income statement of Trichur co-operative spinning mill. He found that the company does not have any accumulated losses during the study period. So the financial position of the firm is satisfactory and the performance of the firm is good. In order to improve its trading activity by generating more sales and also need to have a control over the expenses. From Dhandapani.M.A and Ganesh Babu.M.P (2013) in their research Financial performance of cotton mills- A special case in Andhra Pradesh form the year To achieve the objectives he analyzed the liquidity position, profitability position, and the effectiveness of asset utilization in pioneer spinning and weaving mills ltd. They had concluded that the firm has maintained very good liquidity position. Current ratio and quick ratio are more than the standard. Therefore it is advised to deposit idle cash in marketable securities. The profitability position also good except in and utilsed fixed assets and current assets effectively. The efficiency ratios like stock turnover ratio, debtors turnover ratio and fixed assets turnover ratio are also static during the study period. Therefore, the firm must try to improve the performance by making various forms of internal reconstruction like alteration of share capital, reduction of share capital, writing off lost assets. The firm should also follow strategies like right person in right job to improve the productivity and overall financial performance. From the view of Indhumathi.C and Palanivelu.P (2013) in their research A study on financial performance of selected textile companies in India from the year 2001 to 2010 they made an attempt to know the profitability and financial position of selected textile companies. They found that the overall financial performance of selected textile companies was not stable. It fluctuates. To strengthen the financial position, long term funds have to be used to finance. The companies should try to use properly their operating assets and minimize their non-operating expenses. Pratibha Jain and Kshitija Chaugule (2014) in their study Working capital structure and liquidity analysis of Indian textiles industry from the year The study revealed that all of the current assets and inventories formed the highest percentage, followed by loans and advances and trade receivables whereas cash and bank balance formed very negligible part. From the analysis they found that the Bombay Dyeing reflected good working capital structure and liquidity position while JCT had good working capital turnover. Grasim Industry had negative working capital Turnover ratio which is not good sign for long term growth and sustainability. Subha R and Dr.Ramu (2014) in their study Financial performance of textile industry in Tamil Nadu with special reference to Coimbatore from the year They analyzed the profitability of selected textile companies in Coimbatore. They had concluded that the financial performance of Ambika cotton mills ltd, Bannari Amman spinning mills ltd and KG Denim ltd was good, where as it was not satisfactory for Gangotri textile ltd and Lakshmi mills ltd due to negative profitability icmrrjournal@gmail.com

4 HISTROY OF LAKSHMI MILLS Lakshmi Mills was established in the year 1910 by the visionary and pioneer late G. Kuppuswamy Naidu.The history of Lakshmi Mills is in many ways the history of the Textile Industry in Coimbatore. The Lakshmi Mills has contributed to the development of the industry in general in Tamil Nadu and in particular in Coimbatore District by promoting self reliance, research, import substitution, exports and technology. The Company has also demonstrated its staying power by ensuring quality and customer satisfaction as the prime objectives. In fact, as a pioneer, Lakshmi Mills today is looked upon with respect and reverence as a company that paved the way for the rest to follow. The Company celebrated its Golden Jubilee, Diamond Jubilee and Platinum Jubilee and is now working through the centenary year. Lakshmi Mills main gate facing Avinashi Road in Coimbatore It has two composite textile units in Coimbatore: Avinashi Road and Palladam and one in Kovilpatti. The promoters of the mill were also instrumental in starting various textile machinery companies notably LMW and medical and educational institutions. The unit in Coimbatore in Papanaickenpalayam is also a well known famous landmark of the city. Notable directors and founding family members include S.Karivardhan, onetime Indian motorsport personality and founder's managing director, G. K. Devarajulu,one time Managing Director and founder of LMW,G. K. Sundaram one time freedon figters. The group companies The company was also instrumental in promoting various sports notably Hockey, Motorsports and Horse racing. Lakshmi Mills manufactures 100% combed cotton yarns in NE 50s to NE 120s, polyester cotton blended yarns in NE 40s to NE 100s. In addition, the Company manufactures 100% lenzing micro modal/modal/tencel yarns, micro modal/modal cotton blended yarns, 100% micro tencel yarn, tencel/cotton blended yarn. FINANCIAL ANALYSIS OF LAKSHMI MILLS Comparative balance sheet A comparative balance sheet presents side-by-side information about an entity's assets, liabilities, and shareholders' equity as of multiple points in time. For example, a comparative balance sheet could present the balance sheet as of the end of each year for the past three years. Another variation is to present the balance sheet as of the end of each month for the past 12 months on a rolling basis. In both cases, the intent is to provide the reader with a series of snapshots of a icmrrjournal@gmail.com

5 company's financial condition over time, which is useful for developing trend line analyses (though this works better when the reader has the entire set of financial statements to work with and not just the balance sheet). Common size balance sheet A common size balance sheet includes a column that notes the percentage of the total assets (for asset line items) or the percentage of total liabilities and shareholders' equity (for liability or shareholders' equity line items). This format is useful for comparing the proportions of assets, liabilities, and equity between different companies, particularly as part of an industry analysis or an acquisition analysis. ANALYSIS AND INTERPRETATION The process by which sense and meaning are made of the data gathered in qualitative research, and by which the emergent knowledge is applied to clients' problems. This data often takes the form of records of group discussions and interviews, but is not limited to this. Through processes of revisiting and immersion in the data, and through complex activities of structuring, re-framing or otherwise exploring it, the researcher looks for patterns and insights relevant to the key research issues and uses these to address the client's brief. COMPARATIVE BALANCE SHEET Comparative Balance Sheet as on31st March 2012 (Rs.Lakhs) Particulars Increase/Decrease % Non-Current assets (a)fixed assets Tangible assets ( ) (-5.1%) Intangible assets Capital work-in-progress (b)non-current investments Deferred tax assets(net) % (d)long term loans & advances (-3.59) (-0.9%) Total Non-Current assets(a) % Current assets (a)inventories ( ) (-11.8%) (b)trade receivables (-69.56) (-5.0%) Cash and cash equivalents % (d)short term loans & advances % Other current assets (-80.72) (-12.4%) Total Current assets(b) ( ) (-10.4%) Total assets=a+b ( ) (-5.9%) icmrrjournal@gmail.com

6 Shareholder's funds (a)share capital (b)reserves & Surplus ( ) (-10.9%) Total Shareholder's funds(a) ( ) (-10.9%) Non-Current liabilities (a)long term borrowings (-46.2) (-1.16%) (b)other long term liabilities % Long term provisions % Total Non -Current liabilities(b) % Current liabilities (a)short term borrowings % (b)trade payables ( ) (-35.0%) Other current liabilities ( ) (-16.7%) (d)short term provisons ( ) (-84.8%) Total Current liabilities ( ) (-1.9%) Total liabilitiesd=a+b+c ( ) (-5.9%) INTERPRETATION In comparing Non-current assets position of Lakshmi Mills Company ( ), the Deferred tax assets show 80.2%, then reset of the assets shows very low position. Next we comparing the current assets position of Lakshmi Mills Company ( ) the short term loans & advances show 2.7%, then reset of the assets shows very low position. When comparing the share capital position of Lakshmi mills 2011 with 2012 it shows no change. When comparing the reserves & surplus position of Lakshmi mill 2011 with 2012 it shows decreasing position (-10.9%). Next we comparing the Non-current liabilities position of Lakshmi mills company ( ) the other long term liabilities show 30.7% then reset of the liabilities shows very low position. Last one comparing the current liabilities position of lakshmi mills company ( ) the short term borrowings show 34.0% then reset of the liabilities shows very low position icmrrjournal@gmail.com

7 Comparative Balance Sheet as on 31 st March 2013 (Rs.lakhs) Particulars Increase/Decrease % Non-Current assets (a)fixed assets Tangible assets ( ) (-36.6%) Intangible assets (-3.67) (-39.9%) Capital work-in-progress (b)non-current investments (-3.33) (-1.8%) Deferred tax assets(net) % (d)long term loans & advances % Total Non-current assets(a) ( ) (-18.9%) Current assets (a)inventories % (b)trade receivables % Cash and cash equivalents ( ) (-72.0%) (d)short term loans & advances (-3.28) (-6.2%) Other Current assets (-48.16) (-8.4%) Total current assets(b) % Total assets=a+b (-121.9) (-0.5%) Shareholder's funds (a)share capital (b)reserves & Surplus % Total Shareholder's funds(a) % Non-Current (a)long term borrowings ( ) (-43.9%) (b)other long term liabilities % Long term provisions % Total Non-Current liabilities(b) ( %) (-38.4%) Current liabilities (a)short term borrowings (-520) (-13.4%) (b)trade payables % Other current liabilities % (d)short term provisions % Total Current liabilities % Total liabilities=a+b+c (-121.9) (-0.5%) icmrrjournal@gmail.com

8 INTERPRETATION INTERCONTINENTAL JOURNAL OF FINANCE RESEARCH REVIEW In comparing Non-current assets position of Lakshmi Mills Company ( ), the Deferred tax assets show 45.4%, and then reset of the assets shows very low position. Next we comparing current assets postion of the Lakshmi Mills Company ( ), the Trade receivables show 73.2%, the reset of the assets shows very low position. In comparing sharholder s funds position of Lakshmi Mills Company ( ), the Reserves &Surplus 9.42%, then reset of the liabilities shows very low position. Next we comparing the Non-current liabilities position of Lakshmi Mills Company ( ), the other long term liabilities 124.4%, then reset of the liabilities show very low position. Last we discuss the current liabilities position of Lakshmi Mills Company ( ), the short term provisions, 541.7%, and then reset of the liabilities shows very low position. Comparative Balance Sheet as on 31 st march 2014 Particulars Increase/Decrease % Non-current assets (a)fixed assets Tangible assets % Intangible assets % capital work-in-progress (b)non-current investment (-3.33) (-1.9%) Deferred tax assets(net) % (d)long term loans & advances (-29.96) (-4.3%) Total Non-current assets(a) % Current assets (a)stock in Trade of land (b)inventories % Trade receivables % (d)cash and cash equivalents % Short term loans & advances (-19.8) (-34.7%) (f)other Current assets ( ) (-62.9%) Total Current assets(b) % Total assets C=A+B % Shareholder's funds (a)share capital % (b)reserves & Surplus % icmrrjournal@gmail.com

9 Total Shareholder's funds(a) % Non-Current liabilities (a)long term borrowings ( ) (-6.4%) (b)other long term liabilities % Long term provisions % Total Non-Current assets(b) (-80.67) (-3.1%) Current liabilities (a)short term borrowings % (b)trade payables % Other current liabilities (-473.4) (-18.8%) (d)short term provisions % Total Current liabilities % Total liabilities=a+b+c % INTERPRETATION In comparing non-current assets position of Lakshmi Mills Company ( ), the intangible assets show135.3%, then reset of the assets shows very low position. In comparing current assets position of Lakshmi Mills Company ( ), the cash and cash equivalents show 75.4%, the reset of the assets shows very low position. In comparing shareholder s funds position of Lakshmi Mills Company ( ), the Reserves & surplus show 6.9%, then reset of the liabilities shows very low position. Next we comparing Non-current liabilities position of the Lakshmi Mills Company ( ), the Long term provisions show 15.8%, and then reset of the liaities shows very low position. Last one thing we discuss the current liabilities position of Lakshmi Mills Company ( ), the short term provisions show 148.3%, then reset of the liabilities shows very low position icmrrjournal@gmail.com

10 COMMON SIZE BALANCE SHEET Common Size Balance Sheet as on 31 st March 2012 Particulars 2012 % Shareholder's funds (a) Share capital (b) Reserves and surplus Non-Current liabilities (a) Long term borrowings (b) Other long term liability Long-term provisions Current liabilities (a) Short term borrowings (b) Trade payables Other current liabilities (d) Short term provisions Total liabilities Non-Current assets (a) Fixed assets Tangible assets Intangible assets Capital work-in-progress (b) Non-Current investments Deferred tax assets(net) (d) Long term loans & advances Current assets (a)inventories (b)trade receivables Cash and cash equivalents (d)short term loans & advances other current assets Total assets INTERPRETATION Out of liabilities of the company for 2012 shows 46.70% which is major position. Long term borrowings 17.08%. Out of assets of this company for 2012 shows 50.95% which is major position. Tangible assets 27.99% icmrrjournal@gmail.com

11 Common Size Balance Sheet as on 31 st March 2013 Particulars 2013 % Shareholder's Funds (a) Share capital (b) Reserve & Surplus Non-Current (a) Long term borrowings (b) Other long term liabilities Long term provisions Current liabilities (a) Short term borrowings (b) Trade Payables Other current liabilities (d) Short term provisions Total liabilities Non-Current assets (a) Fixed assets Tangible assets Intangible assets capital work-in-progress - - (b) Non-current investments Deferred tax assets(net) (d) Long term loans & advances Current assets (a) Inventories (b) Trade receivables Cash and cash equivalents (d) Short-term loans and advances other current assets Total assets INTERPRETATION Out of liabilities of the company for 2013, shows 51.38% which is major position. Short term borrowings 146%. Out of assets of this company for 2013 shows 56.28% which is major position. Tangible assets 17.82% icmrrjournal@gmail.com

12 Common Size Balance Sheet as on 31 st March 2014 Particulars 2014 % Share holder's Funds (a) Share capital (b)reserves & Surplus Non- Current liabilities (a) Long term borrowings (b)other long term liabilities Long term provisions Current liabilities (a) Short term borrowings (b) Trade payables Other Current liabilities (d) Short term provisions Total liabilities Non-current assets (a) Fixed assets Tangible assets Intangible assets Capital Work-in-progress - - (b) Non-Current investments Deferred tax assets(net) (d) Long term loans & advances Current assets (a) Stock in trade of land (b) Inventories Trade receivables (d) Cash and cash equivalents (e) Short term loans and advances (f) Other current assets Total assets INTERPRETATION Out of liabilities of the company for 2014 shows 52.04% which is major position. Short term borrowings shows 14.76% Out of of this company for 2014 shows 44.10% which is major position. Tangible asset shows 18.54% icmrrjournal@gmail.com

13 FINDINGS INTERCONTINENTAL JOURNAL OF FINANCE RESEARCH REVIEW FINDINGS, SUGGESTIONS AND CONCULSION When comparison of Non-current investment (2013 and 2014) it shows a very poor symptom (- 1.9%) On comparison of Long loans and advances (2013 and 2014) it shows a very poor symptom (- 4.3%) When comparison of Long term borrowings (2013 and 2014) it shows a very poor symptom (- 6.4%) On comparison of Other current liabilities (2013 and 2014) it shows a very low symptom (- 18.8%) When comparison of Non-current investment (2012 and 2013) it shows a very poor symptom (- 1.8%) On comparison of Short term loans and advances (2012 and 2013) it shows a very poor symptom (-6.2%) When comparison of Short term borrowings (2012 and 2013) it shows a very poor symptom (- 13.4%) On comparison of Long term borrowings (2012 and 2013) it shows a very poor symptom (- 43.9%) When comparison of Trade receivables (2011 and 2012) it shows a very poor symptom (-5.0%) On comparison of Tangible assets (2011 and 2012) it shows a very poor symptom (-5.1%) When comparison of Long term borrowings (2011 and 2012) it shows a very poor symptom (- 1.16%) On comparison of Reserves and surplus (2011 and 2012) it shows a very poor symptom (-10.3%) Out of total liabilities in common size balance sheet (2014) it shows 0.5% of other long term liabilities. Out of total assets in common size balance sheet (2014) it shows 0.8% of other current assets. Out of total liabilities in common size balance sheet (2013) it shows 0.46% of other long term liabilities. Out of total assets in common size balance sheet (2013) it shows 0.02% of intangible assets. Out of total liabilities in common size balance sheet (2012) it shows 0.2% of other long term liability. Out of total assets in common size balance sheet (2012) it shows 0.05% of intangible assets. SUGGESSTIONS The company has to focus on the Current to maintain proper level. The company has to concentrate on the Reserve and Surplus which may be utilized for the correct time. The company has to keep the Loans and advances at a required level to avoid interest burden. The company has to focus on the Current which may be settled in right time. CONCULSION Thus, as the financial analysis plays a vital role in present era, it becomes an interested topic. Here the researcher could understand and derive more results by applying appropriate ratio analysis and other tools. Also customer s satisfaction can be extended in this study icmrrjournal@gmail.com