EXECUTIVE SUMMARY

INDUSTRY PROFILE

The Indian Dairy Industry has made rapid progress since independence. A large number of modern milk planes and product factories have since been established. These organize dairies have been successfully engaged in the routine commercial production of pasteurized milk and milk products.India is the worlds largest milk producer certified by the International Dairy Industry. This is the reason for the recognition of India as a dairy giant by the United Nations Food & Agriculture Organization (FAO).India has become the worlds No.1 milk producing country, with output in 1999-2000(marketing year ending March 2000) forecasted at 78 million tones. The annual rate of growth in milk production in India is between 5-6 percent, against the worlds at 1 percent. Indias annual milk production has more than trebled in the last 30 years, rising from 21 million tones in 1968 to an anticipated 80 million tones in 2001.This rapid growth and modernization is largely credited to the contribution of dairy cooperatives, under the Operation Flood (OF) Project, assisted by the many multi-lateral agencies, including the European Union, the World Bank and WFP (World Food Program),In the Indian context of poverty and malnutrition, milk has a special role to play for its many nutritional advantages as well as providing supplementary income to some 70 million farmers in over 5,00,000 remote villages.The dairy industry has come up to the present stage because of the National Dairy Development Board and co-operation of the Government. Effective and coordinated efforts of the National Dairy Development Board lays down rules and regulations to be followed by the various co-operatives milk societies. Amul (Anand Milk Union Limited) was a pioneer in starting a co-operative milk producers society and thereafter many co-operative societies where started.

COMPANY PROFILE Kolar District, which is also referred to as Land of Gold and Land of Silk, is unique in its identity. Word famous Bharata Rathna Sir M. Vishveswaraiah, Masti Venktesha Iyengar and D.V.Gundappa are the dignitaries presented by the district to our State Karnataka. Many Visiting palaces such as Nandi Hills, Koti-Lingeshwara, Kaiwara, Vidurshwatha, Chikka Thirupathi, Kurudumale, Antharagange falls etc., have added to the popularity of the district. Though there are no irrigation sources such as perennial rivers and reservoirs in the district, farmers are able to grow most of food grains and vegetables just with the help of bore well water and rainwater. It has also made a record in silk production and famous as highest silk producing district in the state, by producing more than 7 Lakhs liters of Milk per day, popular as 2nd highest milk producing district in the state. Thus, its contribution in making India as Worlds highest milk producing country is memorable one.

BACKGROUND Dairy development activity in the district was initiated during the year 1975 under IDA assistance as a part of Bangalore Milk Union Limited (BAMUL). Subsequently, the district was bifurcated from an operational area of BAMUL to form a separate Milk Union with effect from 01.04.1987.The KOMUL has a milk processing plant at Kolar with a handling capacity of 25,000ltrs/ day [LPD] and three chilling at Chintamani, Gowribidanur, Sadli with handling capacity of 1,00,000 LPD, respectively. At Kolar, the dairy is manufacturing Butter, Ghee Peda, Curds, Cheese, Masala Butter Milk, and UHT Milk in addition to pasteurized toned milk and full cream milk. UHT milk is being sold under the brand name of Nandini Good Life and Nandini-Smart while all other products are sold under the brand name of Nandini. The KOMUL started marketing of liquid milk in polythene sachets in entire Kolar district and in a part of Bangalore City since 1994. Recently it has entered Chennai market also selling nearly 5,000 LPD.

TITLE OF THE PROJECTA STUDY ON FINANCIAL & LEVERAGE ANALYSIS OF KOLAR MILK UNION LIMITED.

Chapter I titled Industry profile &Company Profile The background of the industry, company and its significance in the market in relation to its products are discussed in detail.

Chapter II titled Research Design insight into the subject of the study, statement of the problem, the scope of the study, the objectives of the study, the significance of the study, the methodology of research & limitations of the study

Chapter III titled Analysis of the study portrays the collected data being tabulated and analysed through appropriate statistical tools and techniques. If necessary inferences would be drawn. Chapter IV titled Summary of Findings and Suggestions provides an in-depth knowledge on the outcome of the study and the drawn conclusions on the basis of facts been found from the study. Chapter V titled: It shows the conclusion part

STATEMENT OF PROBLEM:After the white revolution, many milk union limiteds came into existence. As a result lot of competition according in the filed of purchase and sale of milk in satisfying the customers. Now a days KOMUL is facing lot of competition in the market due to existence of more competitors like HERITAGE, DODLA, TIRUMALA, AROGYA, GOOD MORNING MILK etc. In this situation, the KOMUL should be in a position to analyse its financial and leverage factors, to take corrective steps to overcome the competitors by doing the financial analysis, it helps to know the financial position of the KOMUL which involves in analyzing of various financial statement such as Profit And Loss Account, Balance Sheet etc. and by during the leverages analysis it helps in knowing the risk involved carrying on the operations of KOMUL so, this project is done to show how the financial and leverages analysis to be done to overcome the competition by understanding its own financial position and extent the risk taken along with its importance.

OBJECTIVE OF THE STUDY To study and analyze the financial performance of KOMUL To get the practical knowledge of the financial evaluation techniques and analysis of annual reports in KOMUL To forecast the financial performance through Leverage analysis To make the analysis and interpretation more effective by using various techniques such as Trend analysis Comparative analysis, Analysis, Comparative Common Size Analysis.

SCOPE OF THE STUDY The current study is undertaken for the purpose of knowing the financial Performance KOMUL The study focuses attention mainly on the level of financial Performance of KOLAR MILK UNION LIMITED.

REVIEW OF LITERATURE Reviewing the text books of finance, reports provided by the finance department in KOMUL.

SAMPLING METHODS:-There are two ways in which the required information may be obtained. They are Complete enumeration survey Sampling techniqueHere the study is based on complete enumeration method, that is, data are collected for each and every item of expenses, as the case may be. The advantage of this type of survey will be that no item is left out and hence greater accuracy may be ensured. However the effort, money and time required for carrying out the enumeration will generally be more. No samples are required for this study as it is concerned with the true financial analysis.SOURCES OF DATA COLLECTION:The study is based on both primary data & secondary data.Primary dataIt was collected from over all products financial statements as per the respective years.Secondary data It was collected from company annual reports, personal discussion with executives in the company, books, etc.PLAN OF ANALYSISThe data edited from the company financial statements in respect of over all products statements or analysis of respective years .For better analysis profit is computed by using leverages & financial analysis methods further impact of variable cost, fixed cost on profit, is also studied to made presentation fair & adequate techniques of financial analysis were made use off.LIMITATIONS OF THE STUDYThe major limitation is that it is representative study &not an exhaustive one. Time constrains posed problem to undertake & comparative analysis, &even data collected is relevant or related to a particular period of time, so it may even change in future.

Findings The table of 4.1 we can observe that operating leverages of KOMUL is in increasing trend in the year 2005-06 when compare to the other two years The table of 4.2 we can observe that the financial leverage of KOMUL are in gradually increasing trend when compared to the other two years so we can say that the financial risk taken by KOMUL are fluctuating year by year. The table 4.3 we can observe that the combined leverage of KOMUL are having more fluctuations are due to gradual increasing trend in operating leverage & gradual decrease in trend in financial leverage. The share capital of the company has increased year by year. In share capital in all 4 years. So that we can say the amount collected from the public / investors through shares ahs been increased. In 4.5 table, we can observe that reserves & surplus of KOMUL is having slight fluctuations I.e. It has been increased by 97.91% in the 2008-09 the decrease is due to decrease in profit. The loans granted in the year 2007-08 is decreased by 129% & in the year 2008-09 it has been increased by 81% The decreased is due to fluctuations in financial risks . The fixed asset of KOMUL has been decreased by 153% in the year 2007-08 it has been decreased in the year 08-09 by 95%. The decrease is due to decrease in investments on fixed assets. The working capital in the year 2008-09 as been increased by 106% this slightly increases due to decrease in the risks taken by the company whereas in the year 08-09 it has been increased by 146% this increase is due to increase in risk taken by the company. The sales in the year 07-08 has been increased by 120% and again it has been decreased by 110% so there is more variations in the sales.

The Fixed cost is usually remain constant but here it is not happened like that so it is a bad sign to the company, the decrease is due to decrease in technical input of fixed cost. The prime cost in the year 2007-08 has been increased by 120% when compose to base year and also decreased by 109% in the year 2008-09 when components base year. So there is a gradual increase & decrease in prime cost. The company in the year 2006-07 has been decreased by 84.05% in the year 2007-08 it has been increased by 118.09 & it also increased by 122.26% which is not a good sign to the company. The reduction is due to reduction in slaes. The contribution of KOMUL has been increased by 120% in the year 2007-08 & it has been decreased in the year 2008-09 by 113% compare to base year.

Suggestions: The financial leverage are decreasing trend so we can say that then financial risk taken by KOMUL are decreasing which is a Good sign to the company. The Komul as to continue to maintained the same rate of financial leverage. In combined leverage the fluctuations are good sign to the company because the risk are taking after knowing the competition in the market so KOMUL has to maintain the same method of combined leverage. The KOMUL has to maintain more reserves &surplus in order to meet UN -certain contingencies. It should avoid fluctuations in the maintaining the reserves &surplus by earring more profits. Accounts receivable of the company (drs) has increased year by year. Hence Company should take some precautionary steps for collecting the debt amount fro the Drs The net working capital position of the company is satisfactory because compare to previous year the current year (2008-09) position is good. Hence the company should continue the same position regarding working capital. Because net working capital is indispensable for the business. The fluctuations in the fixed assets are not a good signed but here KOMUL has reduced investments of fixed assets in the year 2008-09. Mainly because the reduction in financial risk taken by KOMUL due to heavy competition this method of reducing the financial after analyzing comp0etation is a good for a competition to survive in this competitive world. Decrease in sales is not a good sign to the company so the company has to adopt aggressive sales policy through sales promotion activity to increase sales as well as earning capacity.

CONCLUSION

From the study conducted by me A study on financial &leverage analysis. I came to know the performance of Komul. their way of classification of assets &liabilities in the balance sheet, classification of cost particulars their method of costing even I came to know the risks taken by Komul both financially &technically by calculating various types of leverages,

So thus project is concluded with the composition of performance of Komul by taking the classification in the items of balance sheet, profit and loss account trading account cost statements, progress reports for 3 accounting years along with this .I have identified several differences in the performance of Komul and also given some suggestions to over come those differences and problems.

1. INDUSTRY PROFILE

1(a) ORIGIN OF THE DAIRY INDUSTRY

The Indian Dairy Industry has made rapid progress since independence. A large number of modern milk planes and product factories have since been established. These organize dairies have been successfully engaged in the routine commercial production of pasteurized milk and milk products.India is the worlds largest milk producer certified by the International Dairy Industry. This is the reason for the recognition of India as a dairy giant by the United Nations Food & Agriculture Organization (FAO).India has become the worlds No.1 milk producing country, with output in 1999-2000(marketing year ending March 2000) forecasted at 78 million tones. The annual rate of growth in milk production in India is between 5-6 percent, against the worlds at 1 percent. Indias annual milk production has more than trebled in the last 30 years, rising from 21 million tones in 1968 to an anticipated 80 million tones in 2001.This rapid growth and modernization is largely credited to the contribution of dairy cooperatives, under the Operation Flood (OF) Project, assisted by the many multi-lateral agencies, including the European Union, the World Bank and WFP (World Food Program),In the Indian context of poverty and malnutrition, milk has a special role to play for its many nutritional advantages as well as providing supplementary income to some 70 million farmers in over 5,00,000 remote villages. The dairy industry has come up to the present stage because of the National Dairy Development Board and co-operation of the Government. Effective and coordinated efforts of the National Dairy Development Board lays down rules and regulations to be followed by the various co-operatives milk societies. Amul (Anand Milk Union Limited) was a pioneer in starting a co-operative milk producers society and thereafter many co-operative societies where started. World Bank also had given credit of Rs.78 Crores for starting another society as Amul in 1975. In the year 1970 Operation Flood gave another boost to the dairy industry by providing soft loans, subsidies, plans, etc. This made dairy industry flourish and the members of the co-operatives milk producers society where able produce a large amount of milk. The various activities so started continued under Operation Flood-II&III.

Operation Flood, launched in 1970, has been instrumental in helping the farmers mould their own development. Thus, it helps reach milk to consumers in 700 towns and cities through a National Milk Grid. It also helped eradicate the need for middlemen there by reducing the seasonal price variation. As a result of the cooperatives structure the whole exercise of production and distribution of the milk and milk products has become economically viable for farmers to undertake on their own. In this manner the farmer himself can enjoy the fruits of his own labour, instead of surrendering a majority of the profit to corrupt middlemen. Operation Flood, which started in 1970, concluded its Third Phase in 1996 Operation Flood Hailed as Indias most ambitious and highly successful rural development project has turned dairying in to a core economic activity in India. The World Bank for its achievements has launched the third and final phase of Operation Flood, which culminated in April 1996. Operation Flood, has helped knit ten million farmer members, spread over 70,000 villages into a catalyst of White Revolution in the country.

As India enters an era of economic reforms, agriculture, particularly the livestock sector, is position being a major growth area. The fact that dairying could play a more constructive role in promoting rural welfare and reducing poverty is increasingly being recognized. For example, milk production alone involves more than 70 million producers, each raising one or two cows/ buffaloes. Company can assess from the present scenario that Dairy Industry is one of the most important industry with a high level of razor-edged competition. Competition is many due to the large number brands in the market and milk being a staple food to almost every human being. Even today the leading nation is one, which is capable of obtaining food in abundance for their people.

The Military Dairy Farms (oldest in Allahabad, 1889), the beginning salient features of the market of milk industry so far have been: MARKET OF MILK INDUSTRY IN INDIA:In organized milk handling was made in India with the Establishment of the following: Handling of milk in co-operative Milk Union (oldest: Allahabad, 1913) established all over the country on a small scale in the early stages. Pasteurization and bottling on a large scale for organized distribution was started long distance refrigerator rail-transport of milk form AMUL to Mumbai since 1945. As Aarey (1950), Worley (1961), Calcutta (Haringhata, 1959), Delhi (1959), Chennai (1963) etc., Establishment of milk plant under the five-year plan for dairy development all over India. These were taken up with the dual object of increasing the national level of milk consumption and ensuring better return to the primary milk producer. Their main aim was to produce more, better and cheaper milk.Actual expenditure of the milk industry in Indias first three Five-year plans: (Table-1)Plan periodExpenditures

I five year plan(1951-55)Rs.7.8 Crores

II five year plan (1955-61)Rs 12 Crores

III five year plan (1961-66)Rs. 36.6 crores

1(b) GROWTH &DEVELOPMENT OF THE INDUSTRY:

Until the year 1940, there was very little published information of the method of preparation and use of these products. The credit for the publication on the subject goes to Dr.W. B. Davis, the first director of Dairy Research. Within a span of three or four decades since Dr. Davis book arrival, considerable research had been conducted at the National Dairy Research Institute and other places on indigenous dairy produces.Providing proper infrastructure facilities has increased the livestock population. Some efforts have been made to study a few breeds and taken up their genetic improvements through the selection mostly in the institutional farms. Such studies will result in some scientific information, which has been analyzed to these breeds and to develop the method for their genetic improvements. The demand for milk and milk products is expected to grow at a very rapid rate due to population growth, urbanization and increase in income levels and changes in food habits and is likely to reach at 181 million tones in 2011-12 and per capita consumption is expected to rise to about 152 Kg per year. The increase in demand for dairy products will increasing pressure on dairy production systems, traditional breeds and feeding practices are likely to give way to higher-yielding breeds, associated intensification of production systems, increased disease risks, pollution and animal health issues and a greater reliance on concentrates. Currently, Indian dairy farming is dependent on crop residues, natural resources, and open grazing as sources of feed. Expansion of these traditional sources of feeds and fodder to support a large increase in dairy production is unlikely, as available grazing areas and other common property resources are shrinking and already degraded. Additional milk output will surely have to come from intensified systems based on stall-feeding, and increasingly using concentrates.

COMPANY PROFILE Kolar District, which is also referred to as Land of Gold and Land of Silk, is unique in its identity. Word famous Bharata Rathna Sir M. Vishveswaraiah, Masti Venktesha Iyengar and D.V.Gundappa are the dignitaries presented by the district to our State Karnataka. Many Visiting palaces such as Nandi Hills, Koti-Lingeshwara, Kaiwara, Vidurshwatha, Chikka Thirupathi, Kurudumale, Antharagange falls etc., have added to the popularity of the district. Though there are no irrigation sources such as perennial rivers and reservoirs in the district, farmers are able to grow most of food grains and vegetables just with the help of bore well water and rainwater. It has also made a record in silk production and famous as highest silk producing district in the state, by producing more than 7 Lakhs liters of Milk per day, popular as 2nd highest milk producing district in the state. Thus, its contribution in making India as Worlds highest milk producing country is memorable one.

BACKGROUND Dairy development activity in the district was initiated during the year 1975 under IDA assistance as a part of Bangalore Milk Union Limited (BAMUL). Subsequently, the district was bifurcated from an operational area of BAMUL to form a separate Milk Union with effect from 01.04.1987.The KOMUL has a milk processing plant at Kolar with a handling capacity of 25,000ltrs/ day [LPD] and three chilling at Chintamani, Gowribidanur, Sadli with handling capacity of 1,00,000 LPD, respectively. At Kolar, the dairy is manufacturing Butter, Ghee Peda, Curds, Cheese, Masala Butter Milk, and UHT Milk in addition to pasteurized toned milk and full cream milk. UHT milk is being sold under the brand name of Nandini Good Life and Nandini-Smart while all other products are sold under the brand name of Nandini. The KOMUL started marketing of liquid milk in polythene sachets in entire Kolar district and in a part of Bangalore City since 1994. Recently it has entered Chennai market also selling nearly 5,000 LPD.

KOLAR DISTRICT STATISTICAL Geographical area of Kolar District : 8223 Sq.km Inhabitant villages : 2930Population : 26 Lakh Rainfall : 750 mm Functional MPCS : 1470 Total membership : 2, 64,000 Cattle population : 4, 20,000 Cross breed cattle : 1, 60,000 Average milk procurement per society :432Kg/day Daily procurement if Milk about : 684594 Minimum price paid per Kg of milk is : Rs. 8. 40 Komul ranks second in the Karnataka State as far as milk procurement and first as far as the functional MPCS are concerned.

MILE STONES OF THE UNION

1987 Bifurcation of the district from an operational area of BAMUL to form a separate Milk Union. 1987 Establishment of First Women Dairy Co-operative Society in the Union. 1989 Inauguration of Sadali Chilling Center. 1990 Initiation of Milk Marketing at Inter Dairy rate. 1991 - Inauguration of Gowribidanur Chilling Center. 1991 KMF handed over Chilling center at Kolar, Sadali, Chintamani and Gowribidanur to Kolar Milk Union Limited., 1994 Union Started Liquid Milk Marketing under the brand name of NANDINI in polythene packets. 1995 Inauguration of Administrative building in the dairy campus. 1998- Inauguration of Cheese plant. 1999 Union started marketing NANDINI GOOD LIFE MILK. 1999 Expansion of processing capacity of Chintamani Chilling Center. 2000 Outside the state, entry into the Chennai city for Milk Marketing. 2001 Inauguration of Animal Disease Diagnostic Laboratory at Chintamani Chilling Campus. 2001 Installation of AMC Units at DCS level. 2001 For the first time in Karnataka Inauguration of BMC centers in the jurisdiction Of KOMUL. 2001 Expansion of processing capacity of Kolar Dairy. 2001 Union started marketing Masti Dahi. 2001 Expansion of Tetra packs Unit. 2001 Inauguration of Community Milking Parlour at DCS level. 2004 The day of maximum milk procurement in the history is 3rd Dec 2004(7, 38,838 kgs).

OBJECTIVES: Under co-operative sector, Kolar Milk Union Ltd., [KOMUL] is totally autonomous organization. The authorized share capital of the union is unlimited and the paid up share capital as at the end of March 2002 is Rs. 6.65 Lakhs. The entire paid up share capital is from members. In order to give more importance to dairy farming activities in rural area and supplying quality dairy products to urban area at reasonable price, the KOMUL is functioning with the following objectives.

1. To improve dairy farming activities in rural area by established milk producers Co-operative societies [MPCS] based on co-operatives principles. 2. To provide assured and remunerative market round the year for the milk produced by the member producers. 3. To eliminate middleman by organizing MPCS owned and managed by the producers themselves. 4. To provide quality milk and milk and milk products at reasonable price to urban consumers. 5. Finally the union facilities a link between the producers at the village level and the consumers at the urban level, which plays a major role in bringing out the socio-economic development of the society. 6. To provide necessary training for dairy co-operative society staff and members of management committee

CO-OPERATIVE STRUCTURE: The philosophy of dairy development is to eliminate middlemen and organize institutions to be owned and managed by the milk producers themselves, employing professionals. Achieve economics of scale to ensure maximum returns to the milk producers, at the same time providing whole some milk at reasonable price to urban consumers. Ultimately, the complex network of co-operative organization should build a bridge between masses or rural producers and million of urban and achieve a socio economic revolution in the winter land of the state. Work on the first ever, World Bank aided dairy development project was initiated in 1975. The multilevel, multiunit organization with the total vertical integration of all dairy development activities was setup with dairy co-operative societies at grass root level, milk union at the middle level and a dairy development corporation at the state level as an apex body, vested with the responsibility of implementation Rs. 510 million projects. At the end of Sept. 1984, the World Bank aided project ended and the dairy development activities continued under operation flood II. Karnataka Milk Federation [KMF] came into existence in May 1984 as successor of Karnataka Dairy Development Co-operation [KDDC]. After the closure of operation flood II the dairy development activities which continued under operation flood III ended on 31-03-1996. At present KMF are having thirteen milk unions and a total of 8,902 dairies, two product dairies, three training centers and four diagnostic laboratories under it operating through the respective unions.

DAIRY CO-OPERATION SOCIETIES [DCS]: Dairy Co-operative society is a basic organization unit functioning at the village level that is organized on the co-operative principles. All milk cattle owners at eligible to become members of the dairy co-operative societies. The DCS functions daily and acts as marketing outlet for the milk produced in the village. Input facilities are also channalised to the dairy farmers through these societies payment for the milk purchased is also is also arranged through the society. A string of DCS is organized to from a milk procurement route linked to chilling center or dairy.

MILK UNION: Union is the middle tier of the co-operative organization network. Federating the societies in an earmarked geographical area forms unions. The milk unions are organized to make them economically viable and the jurisdiction extends from one district to three districts. DCS are grouped at district level into co-operative milk producers unions. The unions organize new DCS, assist DCS with their management including audit of accounts, supervise, purchase process and market the liquid milk. The union and channalised to the dairy farmers through DCS also organize provisions of input facilities. The input facilities include supply of cattle feed, fodder, AI, veterinary services, training and know how on scientific animal husbandry.

MILK FEDERATION: The Karnataka Co-operation Milk producers Federation Ltd. came into existence on 01-05-1984, by federating the milk unions in the state and thus forming the state level apex organization. The federation is implementing the project activities and the market surplus milk products and to produce and supply centralized inputs. Co-ordination of activities between the unions and developing market for the increasing milk production is the responsibility of the KMF. The respective unions are organizing local milk market in the area of union. The federation will manage surpluses and deficiencies of Liquid milk amongst the member milk unions. However, the federation organizes marketing of products. The major quantity of the procured milk is sold as liquid milk. A part from this, other products like Butter, Ghee, SMP, WMP, Peda, Flavored milk, Burfi, Paneer, Cheese, Khoa, Jamoon Mix, Jamoons, Mysorepak, Badam powder, UHT milk and Ice-cream are also sold. The federation organizes marketing of liquid milk and products outside the state. Excellence in quality is maintained to lay a solid foundation for widespread acceptance of Nandini Milk Products.

MC KINSEYS 7S FRAME WORK: The 7S model is better known as McKinseys 7S. This is because the two persons who developed this model, Tom Peters and Robert Waterman, have been consultants at McKinsey & Co at that time. They published their 7S Model in their article Structure Is Not Organization (1980) and in their books The Art of Japanese Management (1981) and In Search of Excellence (1982). The model starts on the premise that an organization is not just structure, but consists of seven elements:

The Hard Ss

StrategyActions a company plans in response to of changes in its external Environment.

StructureBasis for specialization and co-ordination influenced primarily by strategyand by organization size and diversity.

SystemFormal and informal procedures that support the strategy and structure (system are more powerful than they are given credit)

The Soft S s

Style/cultureThe culture of the organization, consisting of two components:Organization Culture: the dominant values and beliefs, and norms, which develop over time and become relatively enduring features of organizational life.Management style: more a matter of what managers do than what they say; how do a companys managers spend their time? What are they focusing attention on? Symbolism the creation and maintenance (or sometimes deconstruction) of meaning is a fundamental responsibility of Managers.

StaffThe people/human resource management-process used to develop managers, socialization process, ways of introducing young recruits toTo the company, ways of helping to mange the career of employees

SkillsThe distinctive competences what the company does best, ways of expanding or Shifting competences.

Shared valuesGuiding concepts ,fundamental ideas around which a business is built-must be simple, usually stated at abstract level, have great meaning inside the Organization even though outsiders may not see or understand them

Effective organizations achieve a fit between these seven elements. This criterion is the origin of the other name of the model: Diagnostic Model for Organizational Effectiveness. If one element changes, then this will affects all others. For example, a change in HR- systems like internal career plans and management training will have an impact on organizational culture (management style) and thus will affect structures, processes, and finally characteristic competences of the organization. In change processes, many organizations focus their efforts on the hard Ss Strategy, Structure, and Systems. They care less for the soft Ss, Skills, Staff, Style and Shared Values. Peters and Waterman in In Search of Excellence commented however, that most successful companies work hard at these soft Ss. The soft factors can make or break a successful change process, since new structures and strategies are difficult to build upon inappropriate cultures and values. These problems often come up in the dissatisfying results of spectacular mega-mergers. The lack of success and synergies in such mergers is often based in a clash of completely different cultures, values, and styles, which make it difficult to establish effective common systems and structures. The 7S model is a valuable tool to initiate change processes and to give them direction. A helpful application is to determine the current state of each element and to compare this with the ideal state. Based in this it is possible to develop action plans to achieve the intended state.

STRUCTURE:The term structure in 7s framework model refers to the organizational structure of the company. The designs of the organizational structure is critical task to the management of an organization, it is the skeleton of the whole organization. Organization structure refers to relatively more durable organizational arrangements and relationship. It prescribes the formal relationship among various positions and activities. Arrangement about reporting how an organizational member is to communicate with other members, the various activities performed by members is all the part of organizational structure.Organizational structure performs four major functions:

It reduces internal uncertainty arising out of variable unpredictable, random human behavior within the organization through control mechanisms. It reduces external uncertainty through forecasting, research and planning in the organization. It undertakes a wide variety of activities through devices such as departmentation, specialization and division of labor and delegation of authority.

Sri K.N Nagaraju President

Sri K L GajendranManaging Director

Sri K V NagarajuDirectorSri T N RajagopalDirector

Sri K GudiyappaDirectorSri Jayasimha KrishnappaDirector

Sri R KrishnappaDirector Sri S RameshDirector

Sri C MunivenkatappaDirectorSri K Ashwath ReddyDirector

Sri K RamaiahDirector Sri Manjunath ReddyDirector

Smt NaremmaDirectorSri N Lakshmana GowdaDirector

Smt. GangalakshmammaDirectorSri R NarayanappaDirector

Dr. N Srirama ReddyAnimal Husbandry and Veterinary Services Department NomineeSri C S VeereshRegistrar of Cooperative Societies Nominee

Sri R V M Mohan KumarNational Dairy Development Board NomineeSri Ravikumar KakadeKarnataka Milk Federation Nominee

ORGANIZATIONAL STRUCTURE OF THE KOMULPROCUREMENT AND INPUTS DEPARTMENT

MANAGING DIRECTORGENERAL MANAGERMANAGERDEPUTY MANGERDEPUTY MANGER SYSTEMSEXTENTION MANAGER (EO-I) SR. SUPERIDENTEO-II / ACCOUNTS / ADMINISTRATION SUPERIDENTEO II / AA-I / SR. STENOAA-II / SSR. TYPIST/STENOAA-III / MOBILEVETERANARY ASSTPEONS / HELPERS

Employees comes under skilled category are the experienced and more knowledge about the task and they will be given the training on other relating to their work. The semi skilled employees are the one who have some knowledge on the work and they will be given training to improve their skill. The unskilled employees are those who are new to work and have very less knowledge regarding the task. They will be given detailed training to improve their skill. The classification of skills helps to plan the training requirements of the organization and what type of training to be given.

The training steps followed in KOMUL is explained below: The training needs of the employees are monitored by the HRD head in accordance with the functional head. Head of HRD shall be responsible for organizing relevant training and development program. Training needs for all personal are identified once in a year and are recorded in training needs record format. The training will divide into two categories:. The training methods used are;On- The-Job-training: It includes imparting skills by exposing the employee to the work environment. It include job rotations and under study assignments.Off- The-Job-training: It involves learning skills through simulations exercises such as case analysis, role playing, group interaction etc.STYLE:Participative not Authoritative:

Participative of every one is hallmark of KOMULKOMUL work force is participative by nature. Each employee, workers are contributing themselves at their level best towards the companies policies, procedures, programs and growth.In every perspective the company considered all employees, workers in decision making planning and the company respects the suggestions, opinions, ideas of its human resources. Employees can be participative in plans but cannot change any acts made by the co-operative society. No superior does have the individuals decision making unlike that of private sector companies.

STRATEGY: Strategy, Refers to the determination of purpose (or mission) and the basic long-term objective of an enterprise, and the adoption of action and allocation of resource necessary to these aims.Pricing Strategy: KOMUL is offering the most remunerative milk procurement price to member producers. The operational efficiency is reflected on procurement prices paid to the member producers. The average milk procurement price paid during the year was Rs.12.50 for every liter of milk supplied to the union. This is 72% of total cost of production. Milk collected at DCS will be transported to chilling centers, through 105 Milk Procurement Routes, by traveling 15,944 KMs every day. 7 Bulk Milk Coolers (BMC) Routes are also in operation, which collects milk from 50 BMC centers of 120 DCS directly transported to Bangalore Dairy through insulated tankers. The key success factor of KOMUL in becoming a market leader is the narrow price spread maintained between purchase & sales, marketing higher volumes of milk. The volume of sales plays a critical role in determining costs. Hence, the market strategy of Bangalore Milk Union is to regard selling of market milk as its core marketing activity and to concentrate its efforts in this direction to increase the volume of milk sales. The impressive growth in the sale of milk by KOMUL over the years is due to the persistent efforts to maintain timely supply, maintaining quality and attending to the complaints of consumers and agents with prompt follow-up action.

SYSTEM: The term systems in the 7s framework refers to all the rules, regulation, procedures and process both formal and informal, that compliment the organization structure to work successfully. System and process of controlling is the measurement and correction of performance in order to make sure that enterprise objective and the plans devised to attach them are being accomplished. KOMUL is an organization, which is systematic in doing its day-to-day work and any work for that matter is done in a very systematic and sophisticated manner. The various systems that exists at KOMUL are as follows:

MIS System Billing System Quality control system Purchase System Procurement system(milk) Recruitment System

STAFF:Classification of staff:

Technical staff- Technical staff comprised of the engineers, diploma holders, etc are directly involved in production. Maintenance of machines, operating of CNC machines, repairing of machines are look forward by the technical staff. Even some times job rotation policy of the company indulges the technical staff to carry non-technical work. Non technical staff- The main objective of non-technical staff is to carry the business of management. Post graduates, graduates and highly qualified peoples constitute non-technical staff. The main function of non-technical staff is to maintain paper works, computer works, planning, decision-making, etc., the non-technical staff indirectly involved in production process.

Duties and responsibilities of staff are as follows:

To conserve and safeguard the company premises. To respect the right of peers, sub-ordinates, superiors, etc., To maintain discipline in the working hours and at work place. To follow the rules and regulations setup by the company. To contribute for the well-being and growth of the company. To enrich the knowledge about the job.

SHARED VALUES: The company has set up certain values from its inception. As the company is a community that includes client, shareholders, society, employees, etc., certain values are followed their development. A Global Brand; it is core value of the company. To become global brand company in making its activities wider through maintaining good quality and services. Customer Services; company has to maintain customer relation and development. For the purpose, it is meeting them periodically to listen their needs and anticipating exceptions. Cross-functional teams continue to visit various customer sites which have helped in fine tuning customer satisfaction. Social Welfare; The company is regularly involved in social welfare activities. It is providing medical and other facilities to its employees and also donating funds to the society for their well being. Environment Pollution Control; To protest the environment, tree plantation were undertaken in and around factory premises. Various trees are planted in the vacant lands belonging to the company for ecological balance in the surrounding of the company and cleanliness.

SWOT ANALYSIS SWOT analysis is an auditing of an organization and its environment. It is the analysis of the strength, weakness, opportunity and threats of the organization. Strength and weakness are inter nal; while opportunities and threats are external to the company.SWOT Analysis includes

Internal factors- Strengths & Weakness External factors - Opportunity & Threats

STRENGTHSBiggest milk union and oldest dairy in Karnataka.ISO9001 Certified.Fully computerized and automated.Highest seller of retail milk in the city.Good brand image and consumer loyalty.SWOT ANALYSIS AT KOMUL

WEAKNESSESDependency only on farmers.Suffering from over staffing.Inflexible as compared to the Private firms.No proper ceiling of packages and problem of leakages.

OPPERTUNITIESAvailability of resources and infrastructure Proper facilities and chain of DCS for milk procurement.Opportunity to export milk products.Increasing population in the city results in more demand for products.THREATSMore private firms are coming in this dairy industry.The chances of political intervention are more.It has to oblige the strict rules and regulations of the Government.

STRENGTHS: Biggest milk Co-operative union in Southern India. Automated computerized plant. Market leader with brand identity Wide product range An ISO, HACCP, EMS certified COMPANY. Winner of Best productivity Award by National Productivity Council (NPC) for five times and Energy Conservation Award by Bureau of Energy Efficiency (BEE) Prompt consumers complaint redressed. Maintaining Uniform Quality. Well-organized distribution channel. Motivated and committed employees. Reasonable price.

WEAKNESS Inflexible traditional governmental structure. Slow decision making process. High manpower overheads. External interference from state federation Non availability of own water source. Less advertisement. Promotion is based on seniority. Retention of brilliant brain is difficult.

OPPORTUNITIES Ever expanding market for milk and milk products. Favourable export environment of milk products to foreign countries at higher profit margin, with the liberalization of global economy. New markets can be created and captured through innovative products Existing brand Nandini can be used to expand its product line. Need not to invest on brand awareness. The existing infrastructure can be used to meet the considerable rise in demand in future, with little or no change. THREATS Entering of MNCs into dairy industry with cheap milk and milk products, may create stiff competition. Very attractive commission for agents from rivals. External political interference may create unfavorable circumstances

TECHNICAL INPUT PROGRAMMES: Technical input programme is one of major component of union activity for enhancing the milk production as well to get good quality raw milk that used for production of quality products KOMUL has well-established input section to cater to the needs of the member producers. Procurement and input (P & I) activities of the union is decentralized. 1. Emergency visit service: There are about 23 visit routes including infertility camp routes.

2. Infertility camps: Union is operating infertility camp routes to almost all DCS.

3. Artificial Insemination Centers: The union has in total 382. A.I. Centers. Union is supplying the semen straws and liquid nitrogen to all A.I. Centers.

4. First Aid Centers: Union supplies few selected drugs related to first aid thereby to the majority of the DCS.

5. Mass Vaccination Programme: Massvaccination Programmes are undertaken regularly in short duration of period during August and September against FMD and during December against Theileriosis, every year. 6. Mastitis Control Programme: The KOMUL has undertaken Mastitis Control Programme. In which each member producer has to buy one bottle of dipal solution (supplied by De-Laval Ltd.,) and a dip cup specially designed for dipping teats.

7. Animal Disease Diagnostic Laboratory (ADDL): An animal disease diagnostic laboratory has been started at Chintamani.

8. Feed and Fodder Activities: For enhancement of milk production in the KOMUL, it is important to pay an attention towards management and feeding conditions of the animals.

a. Balanced cattle feed: This contains required levels of all nutrients with calculated amount of total digestible nutrients, proteins, fat, minerals, trace elements and vitamins.

b. Fodder activities: KOMUL is supplying legume seeds and non-legume root slips to its member producers on 100% subsidy for the cultivation of fodder. 9. Clean Milk Production (CMP) Programme: As the KOMUL started UHT milk plant and cheese plant in 1997, it embarked upon CMP Programmes, as both the products require high quality raw milk. Initially it chalked out ten routes covering more than one hundred MPCS for CMP programme. The raw milk that is being received from these routes amounts to about 35,000 LPD that gives 70% alcohol test negative. Under the programme DCS staffs have given training regarding clean milk production. Member producers have been given steel carriers freely by the respective societies. 10. Community Milking Programme: Under the programme, milking machines have been provided to the societies at a cost of Rs. 1.45 Lakh each interest free loan that will be recovered over a period of seven years. 11. Automatic Milk Collection Unit (AMU) Programme): Automatic Milk Collection Units have been installed at 43 MPCS that collect more than 5,000 liters of milk per shift. The system records all the information related to individual producers milk quality, quantity and the amount to be paid. A receipt will be handed over to the respective person on the spot. The programme will be extended to another 362 MPCS in the near future.12. Bulk Milk Cooler (BMC) Program: The programme has been taken up to improve the quality of incoming raw milk. Chilling the milk immediately after reception at village level will arrest the growth of bacteria thereby minimizing the deterioration in quality. Under the programme, BMCs have been installed at ten MPCSs at the cost of Rs. 3.75 Lakh each. An average of about eight thousand liters per day is being procured from these BMCs KOMUL is the first union to start the BMC for getting good quality raw milk. They are tonned milk with 3% FAT and 8.5% SNF [Solids non FAT] and full cream Milk with 6% and 9% SNF. Both are packed in the units of liter and 1 liter. Fluid milk is solid in bulk to others dairies both inside and outside the state.

UHT MILK: It refers to Ultra High Temperature heat-treated milk. The concept of UHT milk is absolute sterility, i.e., bacteria free, besides retaining the nutritional quality of milk. During the process, milk is exposed to a temperature of 137o C for 4 sec and immediately cooled in room temperature. Packing it aseptically.

At present, two types of UHT milk is being produced, one Nandini Good Life with 3.6 % FAT and 8.5 % SNF and another one is Nandini Smart with 1.5 % FAT and 9% SNF. Nandini Smart being low fat product is good for health conscious people. Both the milks can be stored for at least 45 days at room temperature. It needs no boiling before drinking. On an average. 25,000 liters of both the milks is being sold per day. The packing material used for UHT milk packing consists of 6 layers consisting of polythene, aluminum foil and paper which prevents the entry of air, water light and bacteria thereby keeping the milk well. 60 level qualities i.e., Less than one defect out of ten Lakh products has been achieved in UHT milk due to good quality initial raw milk. At least 70% alcohol test negative raw milk is being used for UHT processing to get good quality and product. The composition of the milks is more notorious and is as below.

ConstituentsFatProteinsMineralsLactoseWaterTotal solids

NandiniGood Life3.6%3.5%0.7%4.3%87.5%12.1%

NandiniSmart1.5%3.95%0.75%4.3%98.5%10.5%

BUTTER: Butter is manufactured out of pasteurized cream. Majority of the butter produced is converted into Ghee. Remaining butter is being packed in both salted from [@1.5% salt] and unsalted from in bulk packages of 25Kg. Nearly 200 tons of the butter is sold annually to out bigger customers like Britannia, Delhi Mother Dairy and other inter state dairies.

GHEE: Annual production of Ghee in the dairy is about 750 tons. It is packed in liters and 1 liters sachets and 5 kg & 15 kg tins. The dairy has obtained Agmark certification for the product.

SKIM MILK POWDER Excess milk obtained during flush season is converted into skim Milk powder at other product dairies as Mandya, Dharwad and Dempo dairies belonging to KMF and packed in bulk sacs of 25 kg. Annually about 1000 tons of SMP is produced and sold to other dairies in Karnataka, Bihar Milk Federation, Delhi Mother airy and others. The remaining is used for reconstitution during lean.

CURDS: Curd is made out of boiled cooled tonned milk added with desirable lactic culture. On an average 5000 liters and curd is being produced in sachets of 200ml and 500ml. The plant has well set bacteriological laboratory for culture preparation and to carry out other microbiological tests and required.

MASALA BUTTER MILK: Masala Butter Milk is manufactured and sold in summer season, especially from the month of March to July, the only period during which it gets demand. No an average the selling amounts to about 1000ltrs per day in 250ml sachets.

PEDA: Peda is sweetened heat desiccated product obtained form milk. It is rich in Fat, Proteins, Lactose and minerals especially iron content. On an average 25Kg Peda is produced and sold in units of 250 Gms Box. Each box contains 10 Pedas weighting 25gm each.

CHEESE: Cheese plant was stated in the union in 1997 at a cost of Rs. 3.5 Crores. At present cheddar Cheese is produced from Cow milk and ripened at controlled relative humidity and temperature for one month to two years. Cheese ripened to various lengths of time will be blended and processed to obtain processes cheese.

MASTI DAHI: Recently Kolar Dairy has taken up the production of Masti Dahi in polypropylene cups of units of 200 gm and 400 gm. The milk used for Masti-Dahi preparation consists of 4.7% FAT and 11.5% SNF added with lactic starter culture. Gujarat Co-operative Milk Marketing Federation [GCMMF] is marketing this product.

ANAND PATTERN DAIRY CO-OPERATIVES

Federation at State level

Milk Unions at District level

Primary Milk producers co-operative societies at village level

SCHEMATIC REPRESENTATION OF ANAND PATTERN

Payment once in fortnight

Extension services, fodder, etc., Milk Producers

Technical input activities

Primary Co-operative Milk Producers Union

Payment once in week Weighing, grading & collection of milk

Transportation

District Co-operative Milk Producers Union Dairy plant (Processing Unit)

Payment

Transportation

Federation (Marketing & Distribution)

Consumers

TECHINICAL INPUT PROGRAMMESTechnical Input Programme is one of the major components of the Union for enhancing milk production. Union has well-established input sections to meet the needs of its member producers. Various technical input activities that are being provided to member producers include facilities such as Emergency Visit Service, Animal Health Camps, Artificial Insemination Centers, First-Aid Centers, Mass Vaccination Programme against FMD, Vaccination Programme against Theileriosis and Brucellosis, Supply of Semen Straws, Replenishment of Liquid Nitrogen, Supply of Balanced Cattle feed, Seeds of multi-cut varieties, Seasonal Crops and Legumes, Hybrid variety Root -slips, Chaff cutters etc., besides Extension activities such as organizing Cattle show and Milking competition, Audio visual shows, Village meetings and arranging visits of member producers to Main dairy, Cattle feed plant, Artificial Insemination centers etc.,

The above mentioned Procurement and Input (P & I) activities of the Union is decentralized to 11 Taluks of the District where Deputy Manager is posted at each Taluk. Technical services like supply of Semen Straws and replenishment of Liquid Nitrogen to DCS are being monitored by Central Office at Kolar.

EMERGENCY SERVICEUnion is providing Emergency Visit Service from the sub center at each Taluk level. As on today it is operating about 27 Emergency Visit route vehicles (which include Animal Health Camp routes too) in the entire District and is charging a nominal fee of Rs. 30/- per case visit.

ANIMAL HEALTH CAMPFrom all sub centers at Taluk level, the Union is operating Animal Health Camp routes to almost all DCS. At present there are about 10 Animal Health Camp routes. This facility is planned in such a way that each AI center and Non-AI center should get its visit repeated once in every three months and six months respectively. Presently, this service to member producers is being provided at free of cost.

ARTIFICIAL INSEMINATION CENTERSUnion is operating two kinds of Artificial Insemination (AI) centers namely, the Single AI centers and Cluster AI centers. This service is being carried out by the trained staff of the DCS - usually the resident of same village, so that the facility is made available round the clock as and when the animal reported to be in heat. In single AI center concept, in order to get the animals artificially inseminated, the member producers of that particular DCS have to bring their animals towards AI center. The cluster AI center is the concept where in which a string of Non-AI centers will be attached to one AI center and a trained Inseminator with a mobile (Moped) facility, discharges his service at the doorsteps of member producers.

FIRST-AID CENTERSUnion is supplying few selected drugs related to First-Aid therapy to majority of its DCS. Suitably trained First-Aid worker, usually the resident of same village where DCS is located will be appointed to take up initial treatment till such time, the emergency service of a qualified Veterinarian is available. First-Aid trainer has to procure the First-Aid drugs from subcenter at Taluk level and he has to maintain First-Aid drugs stock book at DCS level.

VACCINATION PROGRAMMEIt is also rewarding that the Union has taken up mass vaccination programme against Foot & Mouth Disease (FMD) to prevent its periodical outbreaks. Similarly vaccination programme against Theileriasis is also being taken up to prevent its incidences. Every year these vaccination Programmes are being carried out at regular intervals during the months of October and November against FMD and during December against Theileriasis. A corpus fund has been generated at Union level to meet the cost of FMD and Theileriasis vaccination. Under the project BBPCP, the Union is also undertaking vaccination programme against Brucellosis, in dairy co-operative societies which are found positive for Brucellosis.

MASTITIS CONTROL PROGRAMMEKolar District is crossbred dominated area. Mastitis is commonly encountered in high yielder due to the bad managemental practices. Based on our statistics more than 30% of the cases we treat in the field are belonging to Mastitis. Though, Union is spending huge amount for treating these cases, few cases fail to respond for the treatment leading to fibrosis of infected quarter/s where in which the milk producing capacity of the quarter/s becomes totally nil. Hence as the says goes prevention is better than cure, the Union has taken up Mastitis Control Programme in which each member producer has to buy one bottle of Dipal solution (supplied by M/S De-Laval Ltd.,) and a Dip-cup specially designed for dipping teats. The unit cost of each set is around Rs. 143/-. In the same programme, the member producers are also being supplied with booklets containing strips of pH paper called Mastect (supplied by M/S IIL), with the help of which one can detect Mastitis at an early stage of infection.

ANIMAL DISEASE DIAGNOSTIC LABORATORYIt is well known that the Diagnosis is an important tool for the treatment and control of diseases. Unlike human beings animals are not able to express their feelings when they are at sick. Treating the disease just based on symptomatology is of no value as symptoms in many diseases are alike. Hence the Union has started one Animal Disease Diagnostic Laboratory (ADDL) in its operational area. Competitors:There are 125 competitors from private factories. The main areA Study on Financial & Leverage Analysis

88

Herita Swasthik Doola Shruthi Jersy Teja Tirumal Arokya Niligris Dairy plus

Bankers of Komul:

The bankers of the Komul are as follows.

DDC Bank Pragathi Gramina Bank State Bank of India State Bank of Mysore Canara Bank Corporation Bank

LEARNING EXPERIENCE During the 10 weeks of project duration, KOMUL has provided me an opportunity to know about the organizational concepts and to learn many new things with respect to organization as whole. It provided an insight about how organization works. I got a basic understanding about the processes of organization, roles of each department in organization, and also about the role of HR Department, in the organization. It gives me an outlook of what an organizational environment and organizational marketing techniques all about. I got ample knowledge about the present corporate world. It helped me to learn more about the work & Marketing Environment in the KOMUL. Some of the highlighting are listed below:

Purchase department Production department Human Resource department Marketing department Procurement and Input department The product of KOMUL has been More Qualitative, which enables the company to survive in the competition. This can be perceived as the companys aim to cater the needs of all classes of the society. One of the important things is that after each stages of the production process quality check is done which increase the quality of final products.

It is a dream comes true to my mind who guided me to have a great experience and the huge factory functions. It was a fabulous experience working with KOMUL where is grasping the extraordinary power of experience. The function of the company to bearing

RESEARCH DESIGN

Research Design: - According to Claire setting & others A Research design is the arrangement of conditions for collection & analysis of data in a Manuel that aims to combine relevance to there search purpose with economy in procedure. The research design in concept structure within which research is conducted.

TITLE OF THE STUDYA STUDY ON FINANCIAL & LEVERAGE ANALYSIS OF KOLAR MILK UNION LIMITED.

STATEMENT OF PROBLEM:After the white revolution, many milk union limiteds came into existence. As a result lot of competition according in the filed of purchase and sale of milk in satisfying the customers. Now a days KOMUL is facing lot of competition in the market due to existence of more competitors like HERITAGE, DODLA, TIRUMALA, AROGYA, GOOD MORNING MILK etc. In this situation, the KOMUL should be in a position to analyse its financial and leverage factors, to take corrective steps to overcome the competitors by doing the financial analysis, it helps to know the financial position of the KOMUL which involves in analyzing of various financial statement such as Profit And Loss Account, Balance Sheet etc. and by during the leverages analysis it helps in knowing the risk involved carrying on the operations of KOMUL so, this project is done to show how the financial and leverages analysis to be done to overcome the competition by understanding its own financial position and extent the risk taken along with its importance.

OBJECTIVE OF THE STUDY To study and analyze the financial performance of KOMUL To get the practical knowledge of the financial evaluation techniques and analysis of annual reports in KOMUL To forecast the financial performance through Leverage analysis To make the analysis and interpretation more effective by using various techniques such as Trend analysis Comparative analysis, Analysis, Comparative Common Size Analysis.

SCOPE OF THE STUDY The current study is undertaken for the purpose of knowing the financial Performance KOMUL The study focuses attention mainly on the level of financial Performance of KOLAR MILK UNION LIMITED.

REVIEW OF LITERATURE Reviewing the text books of finance, reports provided by the finance department in KOMUL.

LIMITATIONS OF THE STUDYThe major limitation is that it is representative study &not an exhaustive one. Time constrains posed problem to undertake & comparative analysis, &even data collected is relevant or related to a particular period of time, so it may even change in future.

OPERATIONAL DEFINITIONS OF CONCEPTS:LEVERAGE

Definition Leverage is the employment of an asset or funds for which the firms pays a fixed cost or fixed return James HorneAccording to the definition given it emerges when a fixed earning asset or fund is employed. In every business operation the cost structure should not significantly change. When there is change in sales figure. This is looked dafter by leverage. The sales, an independent variable influences the dependent variables helps the cost & profits. The leverage helps in management controlling the fixed costs relating to sales. Leverage assists the management in quantifying such change it shows the relative change in profits when there is change in the volume of sales, the leverage is high, when the little change in sales volume is results in higher profits.

TYPES OF LEVERAGES1. Operating leverage 2. Financial leverage.3. Combined leverage.4. Return on investment leverage.

Operating leverage:Operating leverage shows the relationship between the changes in sales & the changes in then fixed operating income. Operating leverage has impact mainly on fixed cost & variable cost & also on contribution.

The following equation is developed by RW Johnson to compute operating leverage.

Operating leverage = Contribution

Operating Profit (EBIT)

Financial leverage:The process of variation in capital structure is called financial leverage or trade on equity. The variation in capital composition will have an impact on operating & taxable income of the company. It signifies the relationship between the earning power on equity capital & rate of interest on borrowed fund or debt. By adopting this leverage, the arte of return on equity capital is modified.

Financial leverage = Operating income

Taxable income

Combined leverage:This leverage exhibits the relationship between a change in sales & in corresponding variation in taxable income.

Combined leverage =Contribution

Taxable incomeOR

Combined leverage = Operating leverage X Financial leverage

SAMPLING METHODS:- There are two ways in which the required information may be obtained. They are Complete enumeration survey Sampling techniqueHere the study is based on complete enumeration method, that is, data are collected for each and every item of expenses, as the case may be. The advantage of this type of survey will be that no item is left out and hence greater accuracy may be ensured. However the effort, money and time required for carrying out the enumeration will generally be more. No samples are required for this study as it is concerned with the true financial analysis.

SOURCES OF DATA COLLECTION:The study is based on both primary data & secondary data.

Primary data It was collected from over all products financial statements as per the respective years.Secondary data It was collected from company annual reports, personal discussion with executives in the company, books, etc.

PLAN OF ANALYSISThe data edited from the company financial statements in respect of over all products statements or analysis of respective years .For better analysis profit is computed by using leverages & financial analysis methods further impact of variable cost, fixed cost on profit, is also studied to made presentation fair & adequate techniques of financial analysis were made use off.

ANALYSIS & INTERPRETATIONIntroduction:The process of establishing the meaningful relationship between the items of two financial statements with the objective of identifying the financial and operational strengths and the weakness.This process includes both analysis & interpretation. There are number of methods or techniques which are generally used in analysis of financial services such as comparative statements, trend analysis, common size statements etc.

Meaning of the following terms:Analysis: It refers to the proper arrangement of data where in the total figures are regroup in to their distinct or different parts.

Interpretation: It refers to the composition of the various components and definite conclusions may be drawn about the earning capacity, efficiency, profitability, liquidity, solvency, trend et,.

Analysis and InterpretationIt is the process of identifying strength & weakness of a firm by properly established relationship between two items, it is useful for decision making.

TABLE NO 1TABLE SHOWING THE OPERATING LEVERAGES

Rs in croresParticulars2005-062006-072007-082008-09

Contribution 20.6016.6419.9322.50

Operating Profit0.700.260.320.40

Operating Leverage 2.946.296.185.51

Interpretation:From the above table we can observe that operating leverage is 2.94 in the year 2005-06 & it has been increased to 6.29 in the year 2006-07 & decreased to 6.18 in the year 2007-08 & 5.51 in the year 2008-09, so we can say that there is a gradually increased & decreased in leverage when compared to base year 2005-06.

In this table we ca analyse that the operating leverage is in increasing trend in the year 2006-07 and 2007-08 when compare to the 2005-06 and 2008-09.

CHART NO 1CHART SHOWING THE OPERATING LEVERAGES

TABLE NO 2TABLE SHOWING THE FINANCIAL LEVERAGES

Rs in croresParticulars2005-062006-072007-082008-09

Operating Income7.002.643.224.08

Taxable Income5.101.291.611.91

Financial Leverage 1.372.032.002.13

Interpretation:From the above table we can observe that financial leverage is 1.37 in the year 2005-06 & it has been increased to 2.03 in the year 2006-07 & to 2.00 in the year 2007-08 & also increased to 2.13 in the year 2008-09, so we can say that there is a gradually increased in leverage when compared to base year 2005-06.

CHART NO 2CHART SHOWING THE FINANCIAL LEVERAGES

TABLE NO 3TABLE SHOWING THE COMBINED LEVERAGES

Rs in croresParticulars2005-062006-072007-082008-09

Operating Leverage2.946.296.185.51

Financial Leverage1.372.032.002.13

Combined Leverage 4.027812.768712.3611.7363

Interpretation:From the above table we can observe that combined leverage is 4.0278 in the year 2005-06 & it has been increased to 12.7687 times in the year 2006-07 & to 12.36 in the year 2007-08 & decreased to 11.7363 in the year 2008-09, so we can say that there is a gradually increased & decreased in leverage when compared to base year 2005-06.

CHART NO 3CHART SHOWING THE COMBINED LEVERAGES

TABLE NO 4TABLE SHOWING THE CHANGES IN THE SHARE CAPITAL

Rs in croresYearsAmt.PercentageDifference

2005-069.13100-

2006-0711.74128.6028.60

2007-0821.91186.6186.61

2008-0928.11128.2925.29

Interpretation:From the above table we can observe that the percentage of share capital is 100 % in the year 2005-06 & it has been increased to 128.60% in the year 2006-07 & 186.61% in the year 2007-08 & it has decreased to 128.29% in the year 2008-09, so we can say that there is a gradually increased in the share capital when compared to base year 2005-06.Share capital in this table we can say that changes in share capital is in increased in share capital in all 4 years, so we can say that the amount collected from the public through shares as been increased.

CHART NO 4CHART SHOWING THE CHANGES IN THE SHARE CAPITAL

TABLE NO 5TABLE SHOWING THE CHANGES IN RESERVES AND SURPLUS

Rs in croresYearsAmt.PercentageDifference

2005-0610.11100-

2006-0710.15100.40.4

2007-0811.71115.3415.34

2008-0911.4697.91-2.09

Interpretation:From the above table we can observe that the percentage of reserves & surplus is 100 % in the year 2005-06 & it has been increased to 100.4% in the year 2006-07 & 115.34% in the year 2007-08 & it has decreased to 97.91% in the year 2008-09, so we can say that there is a more fluctuations in the reserves & surplus when compared to base year 2005-06.In this table we can say that reserves & surplus of KOMUL is having slight fluctuations. i.e. it has been decreased by 97.91% in the year 2008-09 the decreased in due to decreasing in profit.

CHART NO 5CHART SHOWING THE CHANGES IN RESERVES AND SURPLUS

TABLE NO 6TABLE SHOWING THE CHANGES IN LOANS

Rs in croresYearsAmt.PercentageDifference

2005-0614.22100-

2006-0713.3194-6

2007-0817.1312929

2008-0913.8181-19

Interpretation:From the above table we can observe that the percentage of loans is 100 % in the year 2005-06 & it has been decreased to 94% in the year 2006-07 & it has been increased to 129% in the year 2007-08 & 81%% in the year 2008-09, so we can say that there is a gradually decreased & increased in the loan when compared to base year 2005-06.The loans granted in the year 2007-08 is increasing by 129% & in the year 2008-09 it has been decreased by 81%, the decreased is due to fluctuations in financial risk.

CHART NO 6CHART SHOWING THE CHANGES IN LOANS

TABLE 7 TABLE SHOWING CHANGES IN THE FIXED ASSETS

Rs in croresYearsAmt.PercentageDifference

2005-0618.57100-

2006-0718.4799.4-0.6

2007-0828.2015.353

2008-0926.7595-5

Interpretation:From the above table we can observe that the percentage of fixed assets is 100 % in the year 2006 & it has been increased to 99.4% in the year 2007 & is increased to 153% in the year 2008 and 95% in the year 2009 so we can say that there is a more fluctuating in the fixed assets when compared to base year 2005-06

The fixed assets of KOMUL has been increased by 153% in the year 2007-08 it has been decreased in the year 2008-09 by 95% the decrease is due to decrease in investments on fixed assets.

CHART 7 CHART SHOWING CHANGES IN THE FIXED ASSETS

TABLE 8TABLE SHOWING CHANGES IN THE CURRENT ASSETS

Rs in croresYearsAmt.PercentageDifference

2005-0637.73100-

2006-0735.9995-5

2007-0837.111033

2008-0942.9311616

Interpretation:From the above table we can observe that the percentage of current assets is 100 % in the year 2006 & it has been increased to 95% in the year 2007 & is also increased to 103% in the year 2008 & 116% in the year of 2009 so we can say that there is more fluctuations in the current assets when compared to base year 2005-06.

CHART 8CHART SHOWING CHANGES IN THE CURRENT ASSETS

TABLE 9 TABLE SHOWING CHANGES IN THE CURRENT LIABILITY

YearsAmt.PercentageDifference

2005-0623.13100-

2006-0720.7890-10

2007-0820.901011

2008-0919.2992.2-7.8

Interpretation:From the above table we can observe that the percentage of current liability is 100 % in the year 2006 & it has been increased to 90% in the year 2007 & it increased to 101% in the year 2008 & 92.2% in the year 2009. So, we can say that there is a gradually decreased & increased in the current liability when compared to base year 2005-06.

CHART No. 9 CHART SHOWING CHANGES IN THE CURRENT LIABILITY

TABLE 10 TABLE SHOWING CHANGES IN THE WORKING CAPITAL

Rs in croresYearsAmt.PercentageDifference

2005-0614.59100-

2006-0715.211044

2007-0816.211066

2008-0923.6414646

Interpretation:From the above table we can observe that the percentage of working capital is 100% in the year 2006 & it has been increased to 104% in the year 2007 & increased to 106% in the year 2008 and 146% in the year 2009 so we can say that there is a gradual increase in the working capital when compared to base year 2005-06

The working capital in the year 2007-08 has been increased by 106% the slightly increase due to decrease in the risk taken by the company whereas in the year 2008-09 it ahs been increased by 146% . this increase is due to increase in risk taken by the company.

CHART 10 CHART SHOWING CHANGES IN THE WORKING CAPITAL

TABLE 11TABLE SHOWING CHANGES IN THE SALES

Rs in croresYearsAmt.PercentageDifference

2005-0630.58100-

2006-0729.8798-2

2007-0835.7812020

2008-0939.6111010

Interpretation:From the above table we can observe that the percentage of Sales is 100% in the year 2006 & it has been decreased to 98% in the year 2007 and increased to 120% in the year 2008 and 110% in the year 2009 so we can say that more fluctuations in the sales, when compared to base year 2005-06.

The sales in the year 2007-08 has been increased by 120% and again it has been decreased by 110% so there is a more variations in the sales.

CHART 11CHART SHOWING CHANGES IN THE SALES

TABLE 12TABLE SHOWING CHANGES IN THE FIXED COST

YearsAmt.PercentageDifference

2005-0613.59100-

2006-0713.971033

2007-0816.7012020

2008-0918.42110.210.2

Interpretation:From the above table we can observe that the percentage of fixed cost is 100% in the year 2006 & it has been increased to 103% in the year 2007 and increased to 120% in the year 2008 and again it decreased to 110.2% in the year 2009. So, we can say that more fluctuations in the fixed cost, when compared to base year 2005-06.

The fixed cost is usually should remain constant but here is not happened like that so it is the bad sign to the company, the decrease is due to technical input on fixed cost.

CHART 12CHART SHOWING CHANGES IN THE FIXED COST

TABLE 13TABLE SHOWING CHANGES IN PRIME COST

Rs in croresYearsAmt.PercentageDifference

2005-0624.21100-

2006-0724.581022

2007-0829.5112020

2008-0932.131099

Interpretation:From the above table we can observe that the percentage of prime cost is 100% in the year 2006 & it has been increased to 102% in the year 2007 and increased to 120% in the year 2008 and again it decreased to 109% in the year 2009. So, we can say that there is a gradual increase and decrease in the prime cost when compare to base year 2005-06.

CHART 13CHART SHOWING CHANGES IN PRIME COST

TABLE 14TABLE SHOWING CHANGES IN VARIABLE COST

Rs in croresYearsAmt.PercentageDifference

2005-0643.07100-

2006-0736.2084.05-15.95

2007-0842.75118.0918.09

2008-0952.27122.2622.26

Interpretation:From the above table we can observe that the percentage of variable cost is 100% in the year 2006 & it has been decreased to 84.05% in the year 2007 and increased to 118.09% in the year 2008 and again it increased to 122.26% in the year 2009. So, we can say that there is a fluctuations in the variable cost when compare to base year 2005-06.

The company in the year 2006-07 has been decreased by 84.05% and in the year 2007-08 it has been increased by 118.09% and also increases by 122.26% which is not good sign to the company. The reduction is due to reduction in sales.

CHART 14CHART SHOWING CHANGES IN VARIABLE COST

TABLE 15TABLE SHOWING CHANGES IN CONTRIBUTION

Rs in croresYearsAmt.PercentageDifference

2005-0620.60100-

2006-0716.6181-19

2007-0819.9312020

2008-0922.5011313

Interpretation:From the above table we can observe that the percentage of contribution is 100% in the year 2006 & it has been decreased to 81% in the year 2007 and it has increased to 120% in the year 2008 and 113% in the year 2009. So, we can say that there is a fluctuation in the contribution.

CHART 15CHART SHOWING CHANGES IN CONTRIBUTION

CHAPTER 4FINDINGS, SUGGESTIONS & CONCLUSION

Findings The table of 4.1 we can observe that operating leverages of KOMUL is in increasing trend in the year 2005-06 when compare to the other two years The table of 4.2 we can observe that the financial leverage of KOMUL are in gradually increasing trend when compared to the other two years so we can say that the financial risk taken by KOMUL are fluctuating year by year. The table 4.3 we can observe that the combined leverage of KOMUL are having more fluctuations are due to gradual increasing trend in operating leverage & gradual decrease in trend in financial leverage. The share capital of the company has increased year by year. In share capital in all 4 years. So that we can say the amount collected from the public / investors through shares ahs been increased. In 4.5 table, we can observe that reserves & surplus of KOMUL is having slight fluctuations I.e. It has been increased by 97.91% in the 2008-09 the decrease is due to decrease in profit. The loans granted in the year 2007-08 is decreased by 129% & in the year 2008-09 it has been increased by 81% The decreased is due to fluctuations in financial risks . The fixed asset of KOMUL has been decreased by 153% in the year 2007-08 it has been decreased in the year 08-09 by 95%. The decrease is due to decrease in investments on fixed assets.

The working capital in the year 2008-09 as been increased by 106% this slightly increases due to decrease in the risks taken by the company whereas in the year 08-09 it has been increased by 146% this increase is due to increase in risk taken by the company. The sales in the year 07-08 has been increased by 120% and again it has been decreased by 110% so there is more variations in the sales. The Fixed cost is usually remain constant but here it is not happened like that so it is a bad sign to the company, the decrease is due to decrease in technical input of fixed cost. The prime cost in the year 2007-08 has been increased by 120% when compose to base year and also decreased by 109% in the year 2008-09 when components base year. So there is a gradual increase & decrease in prime cost. The company in the year 2006-07 has been decreased by 84.05% in the year 2007-08 it has been increased by 118.09 & it also increased by 122.26% which is not a good sign to the company. The reduction is due to reduction in slaes. The contribution of KOMUL has been increased by 120% in the year 2007-08 & it has been decreased in the year 2008-09 by 113% compare to base year.

Suggestions: The financial leverage are decreasing trend so we can say that then financial risk taken by KOMUL are decreasing which is a Good sign to the company. The Komul as to continue to maintained the same rate of financial leverage. In combined leverage the fluctuations are good sign to the company because the risk are taking after knowing the competition in the market so KOMUL has to maintain the same method of combined leverage. The KOMUL has to maintain more reserves &surplus in order to meet UN -certain contingencies. It should avoid fluctuations in the maintaining the reserves &surplus by earring more profits. Accounts receivable of the company (drs) has increased year by year. Hence Company should take some precautionary steps for collecting the debt amount from the Drs The net working capital position of the company is satisfactory because compare to previous year the current year (2008-09) position is good. Hence the company should continue the same position regarding working capital. Because net working capital is indispensable for the business. The fluctuations in the fixed assets are not a good signed but here KOMUL has reduced investments of fixed assets in the year 2008-09. Mainly because the reduction in financial risk taken by KOMUL due to heavy competition this method of reducing the financial after analyzing comp0etation is a good for a competition to survive in this competitive world. Decrease in sales is not a good sign to the company so the company has to adopt aggressive sales policy through sales promotion activity to increase sales as well as earning capacity.

CHAPTER-5CONCLUSION From the study conducted by me A study on financial &leverage analysis. I came to know the performance of Komul. their way of classification of assets &liabilities in the balance sheet, classification of cost particulars their method of costing even I came to know the risks taken by Komul both financially &technically by calculating various types of leverages,

So thus project is concluded with the composition of performance of Komul by taking the classification in the items of balance sheet, profit and loss account trading account cost statements, progress reports for 3 accounting years along with this .I have identified several differences in the performance of Komul and also given some suggestions to over come those differences and problems.

BIBLIOGRAPHY

Sl. No.AuthorTitle of the booksEditionPublisher

1Reddy AppannaiahFinancial Management2nd HimalayaPublishingHouse

2M.N. AroraManagement Accounting1st HimalayaPublishingHouse

3M.N. AroraCost Accounting1st HimalayaPublishingHouse

4Shashi K. GuptaBusiness Finance1st Kalyani Publishers

Websiteswww.google.comwww.komul.com

ANNEXUREProfit & Loss A/cPARTICULARS2004-2005COST/Kg2005-2006COST/Kg

QTY. PROCURED (Kgs)--> Avg. KPDA. SALES:B. MATERIALS CONSUMED:Opening StockPurchasesClosing Stock(Op.St+Pur-Cl.St)C. GROSS MARGIN (A-B)D. VARIABLE COSTS:Procmt Trptn Chgs.Processing ExpensesPacking MaterialsSelling & Distbn ExpsTOTALE. CONTRIBUTION (C-D)F. FIXED COSTS Tedmical Input Exps. Staff Expenses Adinn.Exps & TaxesTOTALG. PROFIT BEFORE INTEREST H. INTERESTI. CASH PROFIT OPRN(G-H).3. DEPRECIATIONK. NE PROFIT OPRN(I-J)L. AID: MISC. INCOME Profit Before Tax(K+L)Less: Loss adjustment Tax (PR)Profit After Tax2393033316556262742793477.19

60641831.002393001728.84227649320.002225994239.84516799237.35

59600443.91192943534.9281959871.6687627301.55422131152.0494668085.31

40618917.5265689868.1015841220.12122150005.74

-27481920.4314673040.04-42154960.4734604888.00-76759848.4741427175.23-35332673.240.00-35332673.2411.46

9.302.16

0.250.810.340.371.760.40

0.170.270.070.51

-0.110.06-0.180.14-0.320.17-0.150.00-0.152386073206537193058526160.90

227649320.002283708782.0589537290.50242182081.1.55636705349.35

70685357.85202910203.21100249217.5556856891.03430701669.64206003679.71

33573943.0475900041.6426492999.50135966984.18

70036695.5313436692.1656600003.3723917245.0032682758.3718400358.2151083116.5835332673.245735801.0010014642.3412.82

10.152.67

0.300.850.420.241.810.86

0.140.320,110.57

0.290.060.240.100.140.080.210.150.020.04

PARTICULARS2006-2007COST/Kg2007-2008COST/Kg

QTY. PROCURED (Kgs)--> Avg. KPDA. SALES:B. MATERIALS CONSUMED:Opening StockPurchasesClosing Stock(Op.St+Pur-Cl.St)C. GROSS MARGIN (A-B)D. VARIABLE COSTS:Procmt Trptn Chgs.Processing ExpensesPacking MaterialsSelling & Distbn ExpsTOTALE. CONTRIBUTION (C-D)F. FIXED COSTS Tedmical Input Exps. Staff Expenses Adinn.Exps & TaxesTOTALG. PROFIT BEFORE INTEREST H. INTERESTI. CASH PROFIT OPRN(G-H).3. DEPRECIATIONK. NE PROFIT OPRN(I-J)L. AID: MISC. INCOME Profit Before Tax(K+L)Less: Loss adjustment Tax (PR)Profit After Tax2303898876312052987049900.79

89537290.502465723640,0296363922.002458897008.52528152892.27

78043519.03135242237.77106120142.6142606441.18362012340.59166140551.68

30027202.9178258549.6931449544.9613973529756

26405254.128987961.4917417292.6324485274.87-7067982.2420047057.1312979074.898181754.04797320.8912.97

10.672.29

0.340.590.460.181.570.72

0.130.340.140.61

0.110.040.080.11-0.030.090.060.040.022324354776350703578197425.24

96363922.002943837826.7588888072.002951313676.75626883748.49

80610452.57182751370.50124240971.5739919195.03427521989.67199361758.82

36547799.73105852043.7424689186.79167089030.26

32272728.569138485.0023134243.5631507348.00-8373104.4424474130.4616101026.025122990.010978037.0215.39

12.702.70

0.350.790.530.171.840.86

0.160.460.110.72

0.140.040.100.14-0.040.110.070.020.05

PARTICULARS2008-2009COST/KQ

QTY. PROCURED (Kgs)--> Avg. KPDA. SALES:B. MATERIALS CONSUMED:Opening StockPurchasesClosing Stock(Op.St+Pur-Cl.St)C. GROSS MARGIN (A-B)D. VARIABLE COSTS:Procmt Trptn Chgs.Processing ExpensesPacking MaterialsSelling & Distbn ExpsTOTALE. CONTRIBUTION (C-D)F. FIXED COSTS Tedmical Input Exps. Staff Expenses Adinn.Exps & TaxesTOTALG. PROFIT BEFORE INTEREST H. INTERESTI. CASH PROFIT OPRN(G-H).3. DEPRECIATIONK. NE PROFIT OPRN(I-J)L. AID: MISC. INCOME Profit Before Tax(K+L)Less: Loss adjustment Tax (PR)Profit After Tax2298070476296083961593839.19

88888072.003194918842.8369974458.003213832456.83747761382.36

82095907.81155416951.07196599748.8388614982.33522727590.04