Company Profile

Introduction to Haldiram manufacturing private limited

Haldiram manufacturing company private limited (HMCL) incorporated under the

companies Act, 1956 in 2nd June 1994 is an unlisted company located in Delhi. It's authorized
share capital is INR 11.00 crores and the total paid-up capital is INR 10.18 crores.

The chairman and Managing Director of the company is “Manohar Lal Agarwal”, The
company manufactures packaged food products. It offers savories, chips, fun foods, and
frozen food.

The company has 6 directors and 1 reported key management personnel. The longest
serving director currently on board is Manohar Lal Agarwal who was appointed on 17
December, 1994. Manohar Lal Agarwal has been on the board for more than 27 years. The
most recently appointed director is Pratik Tiwari, who was appointed on 01 October, 2020.

Manohar Lal Agarwal has the largest number of other directorships with a seat at a total of
27 companies. In total, the company is connected to 31 other companies through its
directors.

Culture and Environment

HMCL is putting a number of HRD initiatives to foster a spirit of togetherness and a culture
of meritocracy. Involving employees at all levels in building organizational support plans and
in evolving our vision for the organization.

HMCL encourages initiative and growth of young talent allows the organization to develop
innovation solution and ideas.

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Benchmark pollution control measures, energy conversation measures, waste reduction
schemes, massive green belt development programs, employee health monitoring and
industrial safety programs have helped Haldiram to take further environment management
program.

HMCL has now targeted to secure the ISO 22000:2005 certification.

Quality Policy

HMCL’s main aim is to achieve customer satisfaction through the collective commitment of
employees in design; manufacture and marketing of reliable products with BRC ‘A’ Certified
and are regularly audited under the guidelines provided by BRC by company’s professional
quality team.

To Accomplish Above, Hmcpl Focus On

Establishing superior specifications for our products and processes.

 Employing state-of-the-art technologies and robust design principles.

 Striving for continuous improvements in process and product quality.
 Implementing methods and techniques to monitor quality levels.

Research & Development

Specific areas in which the company carries out R&D are;

 New product development.

 Process technology up gradation.
 Application engineering for new market place.
 Quality improvement.

Future Plan of Action

We can expect for company to bring South African functional food brand “Future life” to
India in a distribution tie-up to India. The two companies announced the launch of a range
of nutritional products such as smart oats and ancient grains, crunchy granola and smart
foods among others

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Certified by

 ISO 22000:2005
 Indian Oilseeds and Produce Export Promotion Council
 Halal Food Council International
 Food Safety System Certification 22000
 Export inspection council (govt. of India)
 BRC Food Certification
 APEDA

Strengths

 Long experience of the promoters, with presence of nearly three decades in the snack foods
industry

 Strong recognition for the Haldiram brand in the sweets/namkeens market in India

 Established distribution network of stockiest and distributors across northern India

 Favorable demand outlook for the packed foods industry in the country, driven by factors
such as a large population base, increasing spending ability, shift towards branded product
consumption

 Healthy growth in operating income (OI) driven by capacity enhancements and new
product launches; profitability continues to remain strong

 Low working capital intensity of operations and healthy liquidity position

 Consistent improvement in the company’s capital structure and robust debt coverage
indicators

Weaknesses

 Despite having a well-established brand, the Group is not insulated to competition from
local manufacturers of sweets and snacks and established participants like Pepsi Co. India,
ITC Limited, Balaji Wafers Private Limited, Prataap Snacks Private Limited etc. in the snacks
market

 HMCL remains exposed to raw material price volatility

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 Being in the food industry, risks regarding quality and reputation remain high

Description of key rating drivers (data based on 2017 data analysis)

HMCL is a part of the Haldiram Delhi Group, which owns manufacturing facilities in Manesar,
Haryana for the production of namkeens. The Group also operates nine outlets across
Gurgaon and other parts of Haryana.

The company’s OI witnessed a healthy growth of 12% during FY2017 with the
commencement of operations of the moong dal facility. This, coupled with healthy same-
store sales growth in its outlets, has resulted in an improvement in profitability. Though the
coverage indicators witnessed improvement, these remain muted on account of the funds
deployed as advances to Group companies, and used for purchasing non-remunerative
assets. Steady internal accrual generation and low debt profile have led to a healthy capital
structure for the company, which has translated into strong debt coverage indicators as
reflected by interest coverage of 43.8 times, NCA/Debt of 255% and debt/OPBDITA of 0.34
times as of March 31, 2017.

Other Achievements

In recognition of its efforts to penetrate globally, Haldiram’s bagged the

prestigious ‘International Award For Food & Beverages’ awarded by Trade Leaders Club in
Barcelona, Italy, Spain in the year 1994.

Haldiram’s is honored to be a member of Snacks Food Association (SFA), Virginia, U.S.A.

which comprises of world renowned food product manufacturers.

The Group has also to its credit 'Kashalkar Memorial Award' presented by 'All India Food
Preservers Association' (Regd.) in 1996 at its Golden Jubilee Celebration for manufacturing
best quality food products.

'Brand Equity Award 1998' was awarded by Progress Harmony Development Chamber of
Commerce & Industry through Shri Yashwant Sinha, former Union Finance Minister
recognizing the successful creation of Indian Brand 'HALDIRAM'S'.

Haldiram’s has also been awarded with Apeda Export Award for its highest quality products.

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Challenges

Competition from local manufacturers and established players:

Despite having a well-established brand, HMCPL is not insulated from competition. The
company remains exposed to intense competition from local manufacturers of sweets and
namkeens, other restaurant operators, and established QSR chains such as McDonalds,
Dominos, KFC, as well as other restaurant chains such as Barbeque Nation, etc.

Uncertainty regarding utilization of surplus funds

There has been sizeable cash build-up on HMCPL’s books as on March 31, 2019, by virtue of
the sale of the residential real estate to directors. Given the relatively limited funding
requirements of HMCPL, these surplus funds may be advanced to the Group companies or
used for acquisition of other entities for inorganic growth, as witnessed in FY2019. The
quantum, nature and associated risks with deployment of these surplus funds is not known.

Quality risks:

Given the company’s operations in the food industry, risks regarding quality and reputation
remain high.

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 Sector Overview

India’s food processing sector is one of the largest in the world and its output is expected to
reach $535 billion by 2025-26.

The Food Processing sector in India has a quintessential role in linking Indian farmers to
consumers in the domestic and international markets. The Ministry of Food Processing
Industries (MoFPI) is making all efforts to encourage investments across the value chain. The
food processing industry engages approximately 1.93 mn people in around 39,748
registered units with fixed capital of $32.75 bn and aggregate output of around $158.69 bn.
Major sectors constituting the food processing industry in India are grains, sugar, edible oils,
beverages, and dairy products.

Under PMKSY, 41 Mega Food Parks, 353 Cold Chain projects, 63 Agro-Processing Clusters,
292 Food Processing Units, 63 Creation of Backward & Forward Linkages Projects & 6
Operation Green projects across the country have been approved.

The key sub-segments of the Food Processing industry in India are Fruits & Vegetables,
Poultry & Meat processing, Fisheries, Food retail, dairy industry, etc.

Key facts:

 296.65 million tons of horticulture food grains in 2019-20

 Milk production of 198.4 million tons during 2019-20

 Ranks 3rd in the world in Egg production with 114.38 billion in 2019-20

 Second largest producer of fish in the world — total fish production in 2019-20 was
14.16 MT with 7.56% of Global production

 70 Lakh Metric Tons (LMT) of Sugar has been exported in sugar season 2020-21, an
increase of 17.45% compared to 2019-20

 Food grocery and food services segments, growing at a CAGR of 25% and 15%,
respectively, are majorly dominating the Food Retail Sector of India.

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 India shipped 12,89,651 MT of seafood worth $6.68 bn during 2019-20

 The export of other cereals increased from $44.9 million in April-June 2020 to $231.4
million in April-June 2021

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 Objectives of Study

1. To study and analyze the financial position of the Company through ratio analysis.

2. To suggest measures for improving the financial performance of organization.

3. To analyze the profitability position of the company.

4. To assess the return on investment.

5. To analyze the asset turnover ratio.

6. To determine the solvency position of company.

7. To suggest measures for effective and efficient usage of inventory.

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 Research Methodology

Research Methodology

Research Design

In view of the objects of the study listed above an exploratory research design has been
adopted. Exploratory research is one which is largely interprets and already available
information and it lays particular emphasis on analysis and interpretation of the existing and
available information.

To know the financial status of the company.

To know the credit worthiness of the company.

To offer suggestions based on research finding.

Data Collection Methods

Primary Data

Information collected from internal guide and finance manager. Primary data is first-hand
information.

Secondary Data

Company balance sheet and profit and loss account. secondary data is second hand
information.

Data Collection Tools

To analyze the data, acquire from the secondary sources “Ratio Analysis” The scope of the
study is defined below in terms of concepts adopted and period under focus.

First the study of Ratio Analysis is confined only to the Haldiram Manufacturing Company
Private Limited.

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Secondly the study is based on the annual reports of the company for a period of 2 years
from 20019-20 to 20020-21 the reason for restricting the study to this period is due time
constraint

 The study was limited to only four years Financial Data.

 The study is purely based on secondary data which were taken primarily from
Published annual reports of Haldiram Manufacturing Company Private Limited.
 There is no set industry standard for comparison and hence the inference is made on
general standards.
 The ratio is calculated from past financial statements and these are not indicators of
future.
 The study is based on only on the past records.
 Non availability of required data to analysis the performance.
 The short span of the time provided also one of limitations.

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 Analysis and Interpretation of data

Nature of Ratio Analysis

Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the indicated
quotient of mathematical expression" and as "the relationship between two or more things".
A ratio is used as benchmark for evaluating the financial position and performance of the
firm. The relationship between two accounting figures, expressed mathematically, is known
as a financial ratio. Ratio helps to summarizes large quantities of financial data and to make
qualitative judgment about the firm's financial performance.

The persons interested in the analysis of financial statements can be grouped under three
head owners (or) investors who are desired primarily a basis for estimating earning
capacity. Creditors who are concerned primarily with Liquidity and ability to pay interest
and redeem loan within a specified period. Management is interested in evolving analytical
tools that will measure costs, efficiency, liquidity and profitability with a view to make
intelligent decisions.

Types of Ratios

Management is interested in evaluating every aspect of firm's performance. In view of the

requirement of the various users of ratios, we may classify them into following four
important categories:

1. Liquidity Ratio

2. Leverage Ratio

3. Activity Ratio

4. Profitability Ratio

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Liquidity Ratio

It is essential for a firm to be able to meet its obligations as they become due. Liquidity Ratios
help in establishing a relationship between cast and other current assets to current
obligations to provide a quick measure of liquidity. A firm should ensure that it does not
suffer from lack of liquidity and also that it does not have excess liquidity. A very high degree
of liquidity is also bad, idle assets earn nothing. The firm's funds will be unnecessarily tied
up in current assets. Therefore, it is necessary to strike a proper balance between high
liquidity. Liquidity ratios can be divided into three types:

Current Ratio

Quick Ratio

Cash Ratio

Current Ratio

Current ratio is an acceptable measure of firm’s short-term solvency Current assets includes
cash within a year, such as marketable securities, debtors and inventors. Prepaid expenses
are also included in current assets as they represent the payments that will not made by the
firm in future. All obligations maturing within a year are included in current liabilities. These
include creditors, bills payable, accrued expenses, short-term bank loan, income-tax liability
in the current year.

The current ratio is a measure of the firm's short term solvency. It indicated the availability
of current assets in rupees for every one rupee of current liability. A current ratio of 2:1 is
considered satisfactory. The higher the current ratio, the greater the margin of safety; the
larger the amount of current assets in relation to current liabilities, the more the firm's
ability to meet its obligations. It is a cured -and -quick measure of the firm's liquidity.

Current ratio is calculated by dividing current assets and current liabilities.

Current Assets
Current Ratio = ________________
Current Liabilities

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Quick Ratio

Quick Ratio establishes a relationship between quick or liquid assets and current liabilities.
An asset is liquid if it can be converted into cash immediately or reasonably soon without a
loss of value. Cash is the most liquid asset, other assets that are considered to be relatively
liquid asset and included in quick assets are debtors and bills receivables and marketable
securities (temporary quoted investments).

Inventories are converted to be liquid. Inventories normally require some time for realizing
into cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing
quick assets by current liabilities.

Current assets - Inventories

Quick Ratio = _________________________
Current Liabilities

Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial

condition. Quick ratio is a more penetrating test of liquidity than the current ratio, yet it
should be used cautiously. A company with a high value of quick ratio can suffer from the
shortage of funds if it has slow- paying, doubtful and long duration outstanding debtors. A
low quick ratio may really be prospering and paying its current obligation in time.

Cash Ratio

Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its equivalent
current liabilities. Cash and Bank balances and short-term marketable securities are the
most liquid assets of a firm; financial analyst stays look at cash ratio. Trade investment is
marketable securities of equivalent of cash. If the company carries a small amount of cash,
there is nothing to be worried about the lack of cash if the company has reserves borrowing
power. Cash Ratio is perhaps the most stringent Measure of liquidity. Indeed, one can argue
that it is overly stringent. Lack of immediate cash may not matter if the firm stretch its
payments or borrow money at short notice.

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Leverage Ratios

Financial leverage refers to the use of debt finance while debt capital is a cheaper source of
finance: it is also a riskier source of finance. It helps in assessing the risk arising from the use
of debt capital. Two types of ratios are commonly used to analyze financial leverage.

1. Structural Ratios &

2. Coverage ratios.

Structural Ratios are based on the proportions of debt and equity in the financial structure
of firm.

Coverage Ratios shows the relationship between Debt Servicing, Commitments and the
sources for meeting these burdens.

The short-term creditors like bankers and suppliers of raw material are more concerned
with the firm's current debt-paying ability. On the other hand, long-term creditors like
debenture holders, financial institutions are more concerned with the firm's long-term
financial strength. To judge the long-term financial position of firm, financial leverage ratios
are calculated. These ratios indicated mix of funds provided by owners and lenders.

There should be an appropriate mix of Debt and owner's equity in financing the firm's assets.
The process of magnifying the shareholder's return through the use of Debt is called
"financial leverage" or "financial gearing" or "trading on equity". Leverage Ratios are
calculated to measure the financial risk and the firm's ability of using Debt to shareholder’s
advantage.

Leverage Ratios can be divided into five types:

Debt equity ratio.

Debt ratio.

Interest coverage ratio

Proprietary ratio.

Capital gearing ratio

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Debt equity ratio

It indicates the relationship describing the lenders contribution for each rupee of the
owner's contribution is called debt-equity ratio. Debt equity ratio is directly computed by
dividing total debt by net worth. Lower the debt-equity ratio, higher the degree of protection.
A debt-equity ratio of 2:1 is considered ideal. The debt consists of all short term as well as
long-term and equity consists of net worth plus preference capital plus Deferred Tax
Liability.

Long term Debts

Debt Equity Ratio = ________________________
Shareholders’ funds (Equities)

Debt ratio

Several debt ratios may use to analyze the long-term solvency of a firm. The firm may be
interested in knowing the proportion of the interest-bearing debt in the capital structure. It
may, therefore, compute debt ratio by dividing total debt by capital employed on net assets.
Total debt will include short and long-term borrowings from financial institutions,
debentures/bonds, deferred payment arrangements for buying equipment, bank
borrowings, public deposits and any other interest-bearing loan. Capital employed will
include total debt net worth.

Debt
Debt Ratio = ______
Equity
Interest Coverage Ratio

The interest coverage ratio or the time interest earned is used to test the firms’ debt servicing
capacity. The interest coverage ratio is computed by dividing earnings before interest and
taxes by interest charges. The interest coverage ratio shows the number of times the interest
charges are covered by funds that are ordinarily available for their payment. We can
calculate the interest average ratio as earnings before depreciation, interest and taxes
divided by interest.

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 EBIT
Interest Coverage ratio = _______
Interest

Proprietary ratio

The total shareholder's fund is compared with the total tangible assets of the company. This
ratio indicates the general financial strength of concern. It is a test of the soundness of
financial structure of the concern. The ratio is of great significance to creditors since it
enables them to find out the proportion of shareholders’ funds in the total investment of
business.

Net worth
Proprietary Ratio = __________________ x 100
Total tangible assets

Capital gearing ratio:

This ratio makes an analysis of capital structure of firm. The ratio shows relationship
between equity share capital and the fixed cost bearing i.e., preference share capital and
debentures.

Equity capital
Capital gearing ratio = __________________________
P.S capital +Debentures +Loans

Activity Ratios

Turnover ratios also referred to as activity ratios or asset management ratios, measure how
efficiently the assets are employed by a firm. These ratios are based on the relationship
between the level of activity, represented by sales or cost of goods sold and levels of various
assets. The improvement turnover ratios are inventory turnover, average collection period,
receivable turn over, fixed assets turnover and total assets turnover.

Activity ratios are employed to evaluate the efficiency with which the firm manages and
utilize its assets. These ratios are also called turnover ratios because they indicate the speed

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with which assets are being converted or turned over into sales. Activity ratios thus involve
a relationship between sales and assets. A proper balance between sales and assets generally
reflects that asset utilization.

Activity ratios are divided into four types:

Total capital turnover ratio

Working capital turnover ratio

Fixed assets turnover ratio

Stock turnover ratio

Total capital turnover ratio:

This ratio expresses relationship between the amounts invested in this assets and the
resulting in terms of sales. This is calculated by dividing the net sales by total sales. The
higher ratio means better utilization and vice-versa.

Some analysts like to compute the total assets turnover in addition to or instead of net assets
turnover. This ratio shows the firm's ability in generating sales from all financial resources
committed to total assets.

Sales
Total assets turnover = ______________
Capital employed

Working capital turnover ratio:

This ratio measures the relationship between working capital and sales. The ratio shows the
number of times the working capital results in sales. Working capital as usual is the excess
of current assets over current liabilities. The following formula is used to measure the ratio:

Sales
Working capital turnover ratio = ______________
Working capital

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Fixed asset turnover ratio:

The firm may which to know its efficiency of utilizing fixed assets and current assets
separately. The use of depreciated value of fixed assets in computing the fixed assets
turnover may render comparison of firm's performance over period or with other firms.

The ratio is supposed to measure the efficiency with which fixed assets employed a high ratio
indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use
of assets. However, in interpreting this ratio, one caution should be borne in mind, when the
fixed assets of firm are old and substantially depreciated, the fixed assets turnover ratio
tends to be high because the denominator of ratio is very low

Net sales
Fixed asset turnover ratio = __________
Fixed assets

Stock turnover ratio

Stock turnover ratio indicates the efficiency of firm in producing and selling its product. It is
calculated by dividing the cost of goods sold by the average stock. It measures how fast the
inventory is moving through the firm and generating sales.

The stock turnover ratio reflects the efficiency of inventory management. The higher the
ratio, the more efficient the management of inventories and vice versa. However, this may
not always be true. A high inventory turnover may be caused by a low level of inventory
which may result if frequent stock outs and loss of sales and customer goodwill.

Cost of goods sold

Stock turnover ratio = ________________
Average stock

Opening stock + Closing stock

Average stock = _________________________
2

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Profitability Ratios

A company should earn profits to survive and grow over a long period of time. Profits are
essential but it would be wrong to assume that every action initiated by management of a
company should be aimed at maximizing profits. Profit is the difference between revenues
and expenses over a period of time.

Profit is the ultimate 'output' of a company and it will have no future if it fails to make
sufficient profits. The financial manager should continuously evaluate the efficiency of
company in terms of profits. The profitability ratios are calculated to measure the operating
efficiency of company. Creditors want to get interest and repayment of principal regularly.
Owners want to get a required rate of return on their investment.

Generally, two major types of profitability ratios are calculated:

o Profitability in relation to sales

o Profitability in relation to investment

Profitability Ratios can be divided into six types:

Gross profit ratio

Operating profit ratio

Net profit ratio

Return on investment

Earns per share

Operating expenses ratio

Gross profit ratio

First profitability ratio in relation to sales is the gross profit margin the gross profit margin
reflects.

The efficiency with which management produces each unit of product. This ratio indicates
the average spread between the cost of goods sold and the sales revenue. A high gross profit

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margin is a sign of good management. A gross margin ratio may increase due to any of
following factors: higher sales prices cost of goods sold remaining constant, lower cost of
goods sold, sales prices remaining constant. A low gross profit margin may reflect higher cost
of goods sold due to firm's inability to purchase raw materials at favorable terms, inefficient
utilization of plant and machinery resulting in higher cost of production or due to fall in
prices in market.

This ratio shows the margin left after meeting manufacturing costs. It measures the
efficiency of production as well as pricing. To analyze the factors underlying the variation in
gross profit margin, the proportion of various elements of cost (Labor, materials and
manufacturing overheads) to sale may studied in detail.

Gross profit
Gross profit ratio = ___________ x 100
Net sales
Operating profit ratio

This ratio expresses the relationship between operating profit and sales. It is worked out by
dividing operating profit by net sales. With the help of this ratio, one can judge the
managerial efficiency which may not be reflected in the net profit ratio.

Operating profit
Operating profit ratio = _______________ x 100
Net sales

Net profit ratio

Net profit is obtained when operating expenses, interest and taxes are subtracted from the
gross profit. Net profit margin ratio established a relationship between net profit and sales
and indicates management's efficiency in manufacturing, administering and selling products.

This ratio also indicates the firm's capacity to withstand adverse economic conditions. A firm
with a high net margin ratio would be in an advantageous position to survive in the face of
falling selling prices, rising costs of production or declining demand for product

This ratio shows the earning left for shareholders as a percentage of net sales. It measures
overall efficiency of production, administration, selling, financing. Pricing and tax

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management. Jointly considered, the gross and net profit margin ratios provide a valuable
understanding of the cost and profit structure of the firm and enable the analyst to identify
the sources of business efficiency / inefficiency.

Net Profit
Net Profit Ratio = __________ x 100
Net sales
Return on investment:

This is one of the most important profitability ratios. It indicates the relation of net profit
with capital employed in business. Net profit for calculating return of investment will mean
the net profit before interest, tax, and dividend. Capital employed means long term funds.

E.B.I.T
Return on investment = ________________ x 100
Capital employed

Earnings per share

This ratio is computed by earning available to equity shareholders by the total amount of
equity share outstanding. It reveals the amount of period earnings after taxes which occur to
each equity share. This ratio is an important index because it indicates whether the wealth
of each shareholder on a per share basis as changed over the period.

Net profit
Earnings per share = ________________________ x 100
Number of equity shares

Operating expenses ratio

It explains the changes in the profit margin ratio. A higher operating expenses ratio is
unfavorable since it will leave a small amount of operating income to meet interest,
dividends. Operating expenses ratio is a yardstick of operating efficiency, but it should be
used cautiously. It is affected by a number of factors such as external uncontrollable factors,
internal factors. This ratio is computed by dividing operating expenses by sales. Operating

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expenses equal cost of goods sold plus selling expenses and general administrative expenses
by sales.

Operating expenses
Operating expenses ratio = ___________________ x 100
Sales
LIQUIDITY RATIOS

CURRENT RATIO

The ratio between all current assets and all current liabilities; another way of expressing
liquidity. It is a measure of the firm’s short-term solvency. It indicates the availability of
current assets in rupees for every one rupee of current liability. A ratio of greater than one
means that the firm has more current assets than current claims against them.

Table 4.1.1 Current ratio

Sr. No. Year Current Assets Current Liabilities Current Ratio

1 2019-20 1,612,642,497 638,958,266 2.52

2 2020-21 2,280,704,176 1,181,003,846 1.93

Current Ratio
3
2.5
2
1.5
1
0.5
0
2019-20 2020-21

Ratio Comparision

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Interpretation:

The standard norm for current ratio is 2:1. During the year 2019-20 the ratio is 2.52
and it has decreased to 1.93 during the year 2020-21. The ratio above was mostly
standard. So the ratio was satisfactory and it has decreased for the following company
so now it is much better and company should keep the same actions, which will keep
the ratio same or decrease.

Quick ratio

Quick ratio establishes a relationship between quick, or liquid, assets and current liabilities.
An asset is liquid if it can be converted into cash immediately or reasonably soon without a
loss of value.

Table 4.1.2 Quick Ratio

Sr. No. Year Quick Assets Current Liabilities Quick Ratio

1 2019-20 1,171,683,584 638,958,266 1.83
2 2020-21 1,708,741,955 1,181,003,846 1.45

Quick Ratio

2019-20 2020-21

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Interpretation

The standard norm for the quick ratio is 1:1. Quick ratio is decreased in the year 2021 to 1.45
from 1.83. However, the ratio was above the standard norm so the ratio was not adequate.
Now the Company needs to take more action on this to keep quick ratio to 1:1. This might
take the company to insolvency if the quick ratio keeps increasing, in this situation it is not
increasing so it is in favor of company now.

Cash ratio

The ratio between cash plus market securities and current liabilities.

Table 4.1.3 Cash Ratio

Sr. No. Year Cash and Bank Current Liabilities Cash Ratio

1 2019-20 balance
169,121,827 638,958,266 0.26

2 2020-21 205,212,363 1,181,003,846 0.17

Cash Ratio

2020-
21

2019-
20

0 0.05 0.1 0.15 0.2 0.25 0.3

Ratio Comparision

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Interpretation:

In all the above years the absolute cash ratio is very low. The standard norm for absolute
cash ratio is 1:2 the company is failed in keeping sufficient Cash & Bank Balances and
Marketable Securities. The company has to perform actions which will increase cash inflow
and decrease cash outflow. In such kind of situations only the company can survive for long
term. So it has to take immediate actions on this.

Net Working Capital Ratio:

The difference between current assets and current liabilities excluding short-term bank
borrowing is called net working capital or net current assets.

Table 4.1.4 Net Working Capital Ratio

Sr. No. Year Net Working Net assets Net Working

1 2019-20 Capital
973,684,231 1,935,207,714 Capital0.50
Ratio

2 2020-21 1,099,700,330 2,191,397,006 0.50

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Interpretation:

Net Working Capital ratio is 0.50 in both the years. But condition of business working capital
is not shortage. Though net working capital ratio is half business has a good amount of
working capital to keep running and growing. Also it has a good net worth fir instant credits
but it might impact other ratios too.

LEVERAGE RATIO’S

Debt Ratio

If the firm may be Interested in knowing the proportion of the interest bearing debt in the
capital structure.

Table 4.2.1 Debt ratio

Sr. No. Year Total Debt Total Debt + Net Debt Ratio

1 2019-20 233,058,880 Worth

2,039,907,551 0.11

2 2020-21 378,672,427 2,391,525,347 0.16

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Interpretation

This ratio gives results relating to the capital structure of a firm. Debt ratio is 0.11 in the year
2019 it increased to 0.16 in the following years 2021. From the above in fluctuating trend we
can conclude that the company’s dependence on debt is increasing. It is not better position
in collection of debt.

Debt equity ratio

Debt equity ratio indicates the relationship describing the lenders contribution for each
rupee of the owner’s contribution is called debt- equity ratio. Debt equity ratio is computed
by dividing Long Term Liabilities divided by Equity. Lower debt – equity ratio higher the
degree of protection. A debt-equity ratio of 2:1 is considered ideal.

Table 4.2.2 Debt equity ratio

Sr. No. Year Total Debt Net Worth Debt Equity

1 2019-20 233,058,880 1,806,848,671 Ratio
0.13
2 2020-21 378,672,427 2,012,852,920 0.19
Interpretation

The ratio gives results relating to the capital structure of a firm. Debt equity ratio is 0.13 in
the year 2019 and it increased to 0.19 in the year 2021. We can conclude that the company
depends on the debt fund is increasing and it should perform activities which can reduce the
debts for doing that company should use it’s own funds to perform and paid of various
liabilities.

Interest Coverage ratio:

The ratio shows the number of times the interest charges are covered by funds that are
ordinarily available for their payment.

27
 Table 4.2.3 Interest coverage ratio

Sr. Year EBIT Interest Interest Coverage Ratio

No.
1 2019-20 137,259,583 1,448,427 94.76
2 2020-21 386,899,738 1 ,435,515 28.80
Interpretation

Interest coverage ratio is 94.76 in the year 2019. It is decreased automatically to 28.80 in the
year 2021. In this position outside investors are not interested to invest the money in this
company. So company should also act on it by working on its goodwill.

Total Liabilities Ratio

Total liabilities: Current liabilities + Secured & Unsecured Loans.

Total Assets: Fixed assets + Investments + Current assets

Table 4.2.4: Total Liabilities Ratio

Sr. Year Total Liabilities Total Assets Total Liabilities Ratio

No.
1 2019-20 872,017,146 2,809,793,132 0.3
2 2020-21 1,559,676,273 3,692,541,508 0.4

0.5
Total Liability Ratio
0.4

0.3

0.2

0.1

0
2019-20 Ratio Comparision 2020-21

28
Interpretation

In the years, 2019 & 2020 the total liabilities are 0.3 & 0.4 this indicates an increase in the
ratios. Rise in Liabilities has increased comparatively rise in assets. This ratio is increasing
to control it. Company has to increase margin on it’s products to increase profitability.

Activity Ratios

Inventory turnover ratio

It indicates the firm efficiency of the firm in producing and selling its product. It is calculated
by dividing the cost of goods sold by the average inventory.

Cost of goods sold = Raw materials consumed +payments &benefits to employees +

manufacturing, selling&admin expenses +duties & taxes

Table 4.3.1: Inventory turnover ratio

Sr. No. Year Cost of Goods Sold Average Inventory Inventory

1 2019-20 2,228,549,828 374,102,223 Turnover

5.96Ratio

2 2020-21 3,499,805,230 506,460,567 6.91

Inventory Turnover Ratio

2019-20 2020-21

29
Interpretation

Inventory turnover ratio is 5.96 times in the year 2019. But, it is increased to 6.91 in the
year 2020. Inventory turnover ratio increased for year by year that is company production
is also increased. Subsequently sales are also increased.

Debtor turnover ratio

It is found out by dividing the credit sales by average debtors. Debtor s turnover indicates
the number of times debtor’s turnover each year.

Sales = Gross Sales

Table 4.3.2: Debtor turnover ratio

Sr. No. Year Sales Average Debtor Debtor Turnover

1 2019-20 2,685,436,096 560,689,881 Ratio 4.79
2 2020-21 4,458,295,779 753,113,338 5.92

Debtor Turnover Ratio

202
0-21

201
9-20

0 2 4 6 8

Ratio Comparision

30
Interpretation

Debtor’s turnover ratio is 4.79 times in the year 2019 and it is increased to 5.92 times in
the year 2020. This ratio can be controlled easily by asking money to debtors and keeping
a debt policy for company, if this ratio keeps rising the company may fall into a debt trap.

Fixed asset turnover ratio

The ratio is supposed to measure the efficiency with which fixed assets are employed a high ratio
indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use of
assets.However, in interpreting this ratio, one caution should be borne in mind. When the fixed
assets of thefirm are old and substantially depreciated, the fixed assets turnover ratio tends to
be high because the denominator of the ratio is very low.

Sales = Gross Sales

Net fixed Assets: Net block

Table 4.3.3: Fixed asset turnover ratio

Sr. Year Sales Net Fixed Assets Fixed Asset Turnover

No.
1 2019-20 2,685,436,096 948,631,374 Ratio 2.83
2 2020-21 4,458,295,779 1,043,547,559 4.27

5
Fixed Asset Turnover Ratio
4

0
0 0.5 1 Comparision1.5
Ratio 2 2.5

31
Interpretation

Fixed assets turnover ratio is 2.83 in the year 2019 and it is increased to 4.27 in the year
2020. Sales are increasing but not respectively fixed assets. This is good at one point of view
as it is increasing working capital also it is reducing debts of company.

Current Assets Turnover Ratio

Table 4.3.4: Current Assets Turnover Ratio

Sr. No. Year Sales Current Assets Current Asset

1 2019-20 2,685,436,096 1,612,642,497 Turnover

1.67
Ratio
2 2020-21 4,458,295,779 2,280,704,176 1.95

Interpretation

Current assets turnover ratio is 1.67in the year 2019 and it is increased upto 1.95 in the
year 2020. From above we can conclude that current assets turnover ratio is increasing.

Total Assets Turnover Ratio

This ratio ensures whether the capital employed has bee n effectively used or not. This is also test
of managerial efficiency and business performance. Higher total capital turnover ratio is
always required in the interest of the company.

Total assets: Fixed assets + current assets + Investments

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Table 4.3.5: Total asset turnover ratio

Sr. No. Year Sales Total Assets Total Asset

1 2019-20 2,685,436,096 2,809,793,132 Turnover

0.96Ratio

2 2020-21 4,458,295,779 3,692,541,508 1.21

Interpretation

Total assets ratio is 0.96 in the year 2019 and it gradually increased and reached to 1.21 in
v
the year 2020. It means Total Assets is increased in every year.

Working Capital Turnover Ratio

A firm may also like to relate net current assets or net working capital to sales. Working
capital turnover indicates for one rupee of sales the company needs how many net current
assets. This ratio indicates whether or not working capital has been effectively utilized
market sales.

Table 4.3.6: Working Capital Turnover Ratio

Sr. Year Sales Net Current Asset Working capital

No.
1 2019-20 2,685,436,096 973,684,231 Turnover Ratio
2.76
2 2020-21 4,458,295,779 1,099,700,330 4.05

33
Interpretation

Working capital turnover ratio is 2.76 in the year 2019 and it is increased to 4.05 in
the year 2020. The higher the working capital turnover the more favorable for the
company.

4.3.7 Net Asset Turnover Ratio

Net Assets: Net Fixed Assets + Net Current Assets

Table 4.3.7: Net asset turnover ratio

Sr. No. Year Sales Net Asset Net Asset Turnover

Ratio

1 2019-20 2,685,436,096 1,935,207,714 1.39

2 2020-21 4,458,295,779 2,191,397,006 2.03
Interpretation

Net Assets turnover ratio is 1.39 in the year 2019 and it is increased to 2.03 in the year
2020. It has increased from last year and this is a good thing for a company that his profit is
increasing it’s assets.

4.3.8 Capital Turnover Ratio

The ratio obtains by dividing sales with the capital employed.

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Table 4.3.8: Capital Turnover Ratio

Sr. Year Sales Capital Capital Turnover Ratio

No. Employed

1 2019-20 2,685,436,096 2,170,834,866 1.24

2 2020-21 4,458,295,779 2,511,537,662 1.78

Capital Turnover Ratio

2

1.5

0.5

0
2019-20 2020-21

Ratio Comparision

Interpretation

Capital turnover ratio is 1.24 in the year 2019 and it is increased 1.78 in the year 2020.
Capital turnover ratio has raised it means the company used less investment to make
similar profits like last year, this is a very helpful scenario for a company.

Creditors’ turnover ratio

The ratio obtained by dividing the annual credit purchases with average accounts payable.

35
Table 4.3.9: Creditors Turnover Ratio

Sr. Year Purchases Average Creditors Creditors’ Turnover

No.
1 2019-20 1,422,358,585 192,242,196 Ratio 7.4
2 2020-21 2,244,170,172 441,904,975 5.1

Creditors Turnover Ratio

2019-20 2020-21

Interpretation

Creditors’ turnover ratio is 7.4 in the year 2019. It is increased to 5.1 in the year 2020.
Creditor’s turnover ratio has increased that means company is paying amount for it’s
purchase, it will decrease the cash flow and working capital but increasing profile of
company, it should be constant every year.

Profitability Ratios

Gross Profit Ratio

This ratio shows that the margin left after meeting manufacturing costs. It measures the
efficiency of production as well as pricing.

Gross profit= Net Sales-Cost of goods sold

Cost of goods sold= Opening stock+ material consumed+ mfg. expenses - closing stock

36
Table 4.4.1: Gross Profit Ratio

Sr. No. Year Gross Profit Sales Gross Profit

1 2019-20 456,886,268 2,685,436,096 Ratio
17
2 2020-21 958,490,549 4,458,295,779 21.5

Profitability Ratios

2019-20 2020-21

Interpretation

From the above we can say that gross profit ratio is 17% in the year 2019 but it increased to
&21.5% in 2020. The company is maintaining proper control on trade activities.

Net profit ratio

This ratio also indicates the firm's capacity to with stand adverse economic conditions. A firm
with a high net margin ratio would be in an advantageous position to survive in the face falling
selling prices, rising costs of production or declining demand and for the product.

Table 4.4.2: Net Profit Ratio

Sr. No. Year Profit After Tax Sales Net Profit Ratio
1 2019-20 86,900,563 2,685,436,096 3.2
2 2020-21 238,465,730 4,458,295,779 5.3

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 Net Profit Ratio

2020-
21

2019-
20

0 1 2 3 4 5 6
Ratio Comparision

Interpretation

During the year 2019 the net profit margin is 3.2% because of decreased in administration
and selling expenses. In the next year, it again increased to 5.3 in the year 2020.

Operating Expense Ratio

The Operating expenses ratio explains the changes in the profit margin ratio. A higher operating
expense is unfavorable since it will leave a small amount of operating income to meet interest,
dividends.

Operating expenses =Admin expenses+ Selling expenses

Table 4.4.3: Operating expenses ratio

Sr. No. Year Operating Expenses Sales Operating

1 2019-20 376,620,609 2,685,436,096 Expenses Ratio
14.02
2 2020-21 550,626,756 4,458,295,779 12.35

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Interpretation

Operating expenses ratio is 14.02%of sales in the year 2020 it decreased to 12.35% in the
year 2021. Operating expense ratio has been decrease which is again in favor of company, it
should keep going on the same way to keep the same growth.

Return On Investment

The conventional approach of calculated ROI is to divide PAT by investment.

Table 4.4.4: Return on investment

Sr. No. Year EBIT Capital Employed ROI Ratio

1 2019-20 137,259,583 2,170,834,866 0.06
2 2020-21 386,899,738 2,511,537,662 0.15

0.2 Return on investment

0.15

0.1

0.05

0
2019-20 Ratio Comparision 2020-21

39
Interpretation

Return on Investment is very low in all years. But, in the year 2021, it reached to 0.15 due to
more earnings than last year. Company should stop paying more to creditors and increase
cash flow this will help the company to produce more and by increase in demand if they
match their supply they can book full profits and this will lead to increase ROI.

Return on equity shareholders’ fund

The return on equity shareholders fund explains about the return of shareholders with theyget
on their investment.

Table 4.4.6: Return on equity shareholders’ fund

Sr. No. Year Profit After Tax Net Worth ROE Ratio
1 2019-20 86,900,563 1,806,848,671 4.8
2 2020-21 238,465,730 2,012,852,920 11.8

Return on investment
0.16

0.14

0.12

0.1

0.08

0.06

0.04

0.02

0
2019-20 2020-21
Ratio Comparision

Interpretation

Return on equity in the year 2019 is 4.8 and it increased suddenly to 11.8 in the year 2020.
Return on Equity of the company is at satisfactory level. As company is rising it’s profit it has
shown a wonderful growth in ROE so the company owners will be happy with it.

40
 Findings & Suggestions

Findings

 The company is maintaining current ratio as 2 and more, standardwhich indicates the
ability of the firm to meet its current obligations is more. It shows that the company
is strong in working funds management.
 The company is maintaining of quick assets more than quick ratio. As the company
having high value of quick ratio. Quick assets would meet all its quick liabilities
without any difficulty.
 The company is failed in keeping sufficient cash & bank balances and marketable
securities.
o In above all current assets and liabilities ratios are better that also it is double
thenormal position. Observe the absolute & super quick ratio the company
cash performance is down position.
 In the year 2019 debt equity ratio is 0.08 (8%) but it is increased to 0.11 (11%) in
2020. It shows that the company is losingits condition.
 Net working capital ratio is 0.45 in 2019 but also 0.50 in 2020. It is increased very
highbut condition of business working capital is not shortage.
 Debt Equity ratio is increasing every year. It indicates the company depends on the
debtfund increasing.
 In the year 2019, the interest coverage ratio 94.76 which decreased upto 28.80 in the
year 2020. In this position, outside investors are interested to invest their money in
this company.
 The net profit ratio of the company increasing over the study period. Hence the
organization having the good control over the operating expenses.

Suggestions

 The company has to increase the profit maximization and has to decrease the operating
expenses.

41
 By considering the profit maximization in the company the earning per share, investment
and working capital also increases. Hence, the outsiders are also interested to invest.

 The company should maintain sufficient cash and bank balances; they should invest the
idle cash in marketable securities or short term investments in shares, debentures, bonds
and other securities.

 The company must reduce its debtors’ collection period from 83 & 84 days to 40 days be
adopting credit policy by providing discounts to the debtors.

 Return on investment is fluctuates every year. The company has to make efforts in
increasing return on investments by reducing its administration, selling and other
expenses.

 The company should increase its interest coverage ratio to serve long term debts.

 The net profit of the company is increasing over the study period. Hence the organization
maintaining good control on all trees of expenses.

 The dividend per share has observed as raising trend over the study period, hence it may
be suggested Haldiram manufacturing company private Limited should take key
interest to maximize the shareholder wealth by increasing dividend payout.

42
 Conclusions
 Liquidity ratios, both current ratio and quick ratio are showing effectiveness in
liquidity as in all the years’ current ratio is greater than the standard 2:1 and quick
ratio is greater than the standard 1:1 ratio.
 The firm is maintaining a low cash balance and marketable securities which means
they done cash payments.
 Debt equity ratio, solvency ratio and interest coverage ratio are showing an average
increase in the long term solvency of the firm.
 The proprietary ratio is showing an average increase which means, the shareholders
have contributed more funds to the total assets.
 Average payment period of the firm is showing the credit worthiness of the firm to its
suppliers.
 Fixed assets turnover ratio is showing that the firm needs lesser investment in fixed
assetsto generate sales.
 The increasing trend of current assets turnover ratio indicates that the firm needs
more investment in current assets for generating sales.
 The gross profit ratio, net profit ratio is showing the increasing trends. The
profitability of the firm the increasing
 Operating ratio of the company has observed decreasing trend, hence it may be good
control over the operating expenses.
 The interest that has to be paid is very less when compared to the sales. The firm is
not utilizing the debt conservatively.
 The firm is retaining much of the earnings (based on dividend payout ratio).
 The company financial performance is very good and also they will increase their
business year by year by expanding their branches

43