3. CHAPTER 1: INTRODUCTION
About the Company
• The company was started in 1960.
• The first business was manufacturing of garage Equipment
• The compressor manufacturing started due to the need in compressor air for tyre
inflation. This grew into the major business.
• Last year (2016-17) turnover is Rs.8917 Million as against Rs.8656 Million in 2015-
• Export volume of 110 turns.
• 90% of sales were from compressor.
• The revenue split between domestic and exports was 50:50
• The company has the technology to create air ends which only 8 companies’ possess.
• Centrifugal pumps are obtained from SAMSUNG.
• The strategies for expansion are:
o To start a plant in Brazil.
o To acquire compressor companies in US and Europe.
Elgi Equipments was established in 1960 as an air compressor and garage equipment
manufacturing company. Over the years, the company has grown its product portfolio and
aligned its offering to changing market requirements. Today, Elgi Equipments Limited is a
multi-product, multi-market enterprise that provides total compressed air solutions in all
segments and automotive service equipment for garages.
4. Elgi Equipments is built on a strong foundation of innovation and technological
excellence, driven by the vision of leaders. Strategic partnerships to strengthen our in-house
engineering capabilities and market reach, continuous focus on research and development,
and a customer-centric approach have marked the company’s 50-year-old journey in the
design and manufacture of compressors.
Vision and Value
The Elgi Vision is the purpose that penetrates the length, width and depth of the
organization. This gives forth the seven core Values, each having its own hue and meaning,
but together creating the powerful and vibrant spectrum. These Values are nothing but the
beliefs which is lived day in and day out to create a beautiful world within and outside of
ELGI. A transparent and stable organization allows the Vision to penetrate at all levels with
the same intensity and clarity, ensuring that every Value is followed and lived by everyone,
with awareness and pride.
“Always be the choice everywhere”
Being included as an option in every decision by our stakeholders
With an emphasis on the, means whatever we offer must be superior in all respects so
that we are the natural choice for our stakeholders
Wherever a stakeholder is, ELGI must be a natural choice
5. • Collaboration: Collaborating with each other will lead to greater synergy and higher
• Cost Prudence: Being judicious in the way we manage our costs will give us a
competitive edge and make us resilient
• Innovation: A culture of innovation will energize the organization and enable us to
stay ahead of competition
• Integrity: Integrity in everything we do will earn the trust of all stakeholders
• Quality: Delivering consistent quality will earn stakeholder trust. The opportunities
could be in terms of employment, investment, partnership or societal empathy.
• Sensitivity: Giving stakeholders what they need even before they ask will build
• Speed: The faster we respond to opportunities the quicker we will grow as an
‘Conquer K2’ to become World No. 2 in the global air compressor market by 2027.
• The mission, codenamed ‘CK2’ or ‘Conquer K2’ — K2 being the second tallest peak
in the world and believed to be the most difficult to climb — symbolizes ELGi’s
collective aspiration to be leaders in the compressed air business.
• The major initiatives taken to achieve ‘Conquer K2’ are
o Clock CAGR of 28%
o Product, Process, People and Technology
o Inorganic growth
o Identifying target companies, mostly distributors in EU and the US — the
dominant air compressor markets with a combined global share of 60%.
7. CHAPTER 2: PROFILE
Elgi Equipments Limited is a leading air compressor manufacturer with a broad line of
innovative and technologically superior compressed air systems. ELGi has earned worldwide
distinction for designing sustainable solutions that help companies achieve their productivity
goals and keep the cost of ownership low.
ELGi offers a complete range of compressed air solutions from oil-lubricated and oil-
free rotary screw compressors, oil-lubricated and oil-free reciprocating compressors and
centrifugal compressors, to dryers, filters and downstream accessories.
The company’s portfolio of over 400 products has found wide application across
industries. Whether it is the paint on your wall, the car you drive, the medicines you take or
the leather bag you carry, Elgi products have been used either in their production,
maintenance or usage.
Nature of Business Manufacturer
Trichy Road Singanallur, Coimbatore - 641 005, Tamil
Total Number of Employees More than 1000 People
Year of Establishment 1960
Legal Status of Firm Limited Company
Promoter Mr. Jairam Varadaraj
8. Company Profile
Location Type URBAN
Building Infrastructure Permanent
Size of Premises 17 Acres
Space Around Front porch
Quality Measures / Testing Facilities Yes
Tan No. CMBE0*****
CIN No. L29120TZ1960PLC000351
GST No. 33AAACE4784E1ZU
9. Packaging/Payment and Shipment Details
ELGI EQUIPMENTS LTD is an ISO 9001:2000 (Quality Management System).
It is an ISO 14001:2004 certified company (Environmental management System).
It is BS OHSAS 18001: 2007 Certified Company (Occupational Health and Safety
Customized Packaging Yes
• Credit Card
Shipment Mode By Road
11. 3.1 Meaning
An organizational structure defines how activities such as task allocation, coordination
and supervision are directed toward the achievement of organizational aims. Organizations
need to be efficient, flexible, innovative and caring in order to achieve a sustainable
3.2 Business Religion Organizational Chart:
BUSINESS RELIGIONBUSINESS RELIGION
(INDIA, SOUTH ASIA,
AFRICA, MIDDLE EAST)
(INDIA, SOUTH ASIA,
AFRICA, MIDDLE EAST)
COSEA (CHINA, OCEANIA,
SOUTH EAST ASIA)
COSEA (CHINA, OCEANIA,
SOUTH EAST ASIA)
FINANCE AND ITFINANCE AND IT
EBS & PROJECTSEBS & PROJECTS
12. 3.3 Corporate Function Organizational Chart:
Dr. JAYARAM VARADHARAJ (MD)Dr. JAYARAM VARADHARAJ (MD)
Director-OperationsDirector-Operations Director-HR & EuropeDirector-HR & Europe
VP-Corporate Strategy and PlanningVP-Corporate Strategy and Planning Chief Financial OfficerChief Financial Officer
Director-TechnologyDirector-Technology Executive Director-EBS & ProjectsExecutive Director-EBS & Projects
14. CHAPTER 4: USP DESIGN & IMPLEMENTATION
The unique selling proposition is the factor or consideration presented by a seller as
the reason that one product or service is different from and better than that of the competition.
A USP could be thought of as “what you have that competitors don’t.” A successful USP
promises a clearly articulated benefit to consumers, offers them something that competitive
products can’t or don’t offer, and is compelling enough to attract new customers.
4.2 Strategies for Retaining USP
• If the company maintains its secret formula of production, they can maintain their
• The company has its adequate internal control system. With the size of the
company and the nature of the business regard to purchase of inventories and sale
of goods and services.
The company should promptly pay their dues to the financial institutions, in order to maintain
4.3 USP Design
The USP of the Elgi “It’s no longer just about delivering air, it’s about delivering
ELGI’s USP is that they aspire to provide the lowest lifecycle cost. Lifecycle cost is
the combination of the upfront price, the cost to maintain the compressor over its life, which
include its spare parts, the service cost and also the energy consumption. Their vertically
integrated setup lets them to offer the lowest lifecycle cost. It allows them to be cost-efficient
and yet provide high-quality products with the best warranty in the world. For instance, in the
US they offer lifetime warranty on their machines which no one else has managed in
compressors. In India, they have the longest warranty, which is of six years. All of this
collectively allows them to aspire to the lowest lifecycle costs in the industry. That aspiration
will be a combination of not just educating the customer, but also continuing to improve the
quality of their machines to such an extent where the external environment is harmed less.
16. CHAPTER 5: SPECIALIZED DEPARTMENT
5.1 General ledger
Approval of all journal entries by a designated authority before posting.
Checking of validation sheet of journal entries to confirm the accuracy of the posting.
Review of month end financial statements by departmental heads.
Income taxIncome tax
17. 5.3 MIS Department
Management Information System (MIS) section presents INFOR LN for less time consume.
INFOR LN is a new division which deals with computerized financial data transaction within the
organization. And shortly MIS will bring online record transaction.
5.4 Legal & Secretarial
In the secretarial department they are responsible for control all company related secretarial
matters operation. They are responsible for makes sure that, the operation running smoothly. Their
general activities are describing below:
Company Legal Issues
Statutory Accounts & Dividends
Corporate Tax & Other Taxes
Board Meeting Issues
5.5 Internal Audit
In the internal audit department they are responsible for control to reduce variance of income
and cost operation. They are responsible for Keeping close watch on irregularities (if any) & taking
prompt actions. Their general activities are describing below:
To submit yearly internal audit plan to the Audit Committee for approval
Execute as per audit plan.
To present an audit dashboard to the Audit Committee for the audits completed and key
findings on quarterly basis.
Listing of the pending audit issues
Updates on audits in progres
5.6 Treasury (cash and bank)
It means opportunities for raising funds. This is purely based on banking activities. There are
2 types of fund transfers RTGS & NEFT. Letter of Credit is a Negotiable Instrument given for
18. Credit transactions. Bank Guarantee is given by the bank based on the performance of the
5.7 Account payable
• An authorized individual, who indicated approval by initialing the invoice, should
approve invoices for payment in writing after review.
• Supporting documents referred to as voucher are attached to the cheque for signing.
The documents usually contain is:-
GRIN ( Goods Received Inward Note)
• Money receipt should be received when payment is made.
• Source tax should be deducted, if applicable, from the payment
5.8 Accounts receivables
Accounts receivable is a common account used by company accountants to track revenue
earned but not yet collected. It is a balance of money owed to the business by buyers who make
purchases on account and agree to pay later. Their general activities are describing below:
Prepare cash and check payments for bank deposit.
Reconcile the accounts receivable ledger to ensure that all payments are accounted
for and properly posted.
Record payments by entering them into a ledger or accounting software.
Prepare bills and invoices for sales or services rendered.
Collect on accounts by sending bill reminders.
Resolve customer queries.
Manage general ledger control accounts.
Generate monthly, quarterly or annual financial statements of all the paid and
19. 5.9 Costing
This is made on Products. Costing sheet is maintained and the cost is being derived
according to the Budgeted Material Cost.
Cost accountants work closely with production personnel to measure and report
manufacturing costs. The efficiency of the production departments in scheduling and transforming
materials into finished units is evaluated for improvements.
21. CHAPTER 6: STRATEGY OF THE EVENT
Making factories a great place to work
Working in factory shop floors is a challenging experience that could result in
occupational stress, thus affecting mental health and physical well-being of the employee.
Right from ambient noise levels, lifting and moving of machines and tools that require
physical endurance to braving hazardous situations like welding fumes and unsafe
environments, a shop floor worker’s life has its own unique set of challenges. It is clearly not
for the faint hearted!
It is undeniable that years of governmental intervention, as well as employee activism
have made shop floors more conducive for working. But nothing can make employees happier
and their work lives more fulfilling than an empathetic management’s ability to understand
the workers’ experience, and redesign workspaces accordingly.
Making the employees happy
Handling the humdrum of routine processes, in addition to the mounting pressures of
meeting targets can be greatly smoothed by an employee-centric work culture that focuses on
elevating work environment. Higher salary alone cannot make an employee happy. To keep
them motivated and going, , the following steps will help greatly.
A uniform culture fosters an atmosphere of inclusiveness, and ensures uniformity in
the factory culture, where every man and woman is treated with equal trust and respect.
Ensuring, for example, that the whole organisation, right from the directors to the trainees, is
attired in a similar fashion instils a sense of belongingness and confidence in employees.
Similarly, if everyone eats the same food, is subject to the same rules and policies, and is
informed of company gains and losses… all these will contribute to egalitarianism and
22. No siren
The days of sirens are now fading. When almost every employee has either a
wristwatch or a smartphone, and where clocks are widely accessible, sirens as a method of
military enforcement of work time is not desirable.
Employees are inducted into the workforce after robust training processes and
therefore, need not be told by sirens about their punching-in and -out times. Industrial sirens
induce a sense of panic and heightened stress. They can be avoided to create a noise-free,
positive and peaceful environment where employees are naturally motivated to turn in to
Listening to the voice of worker
The voice of the workers is not one to be ignored or avoided. The management should
always have an open door system, where workers can freely speak their minds without fear.
Creating forums to address employee grievances and ensuring faith by enforcing
confidentiality measures will embolden employees to share their thoughts, ideas or concerns.
Acknowledging and acting on reasonable requests from the workers will go a long way in
Recess to refresh
Most production facilities run hectic, non-stop schedules to meet production demands.
This relentless passion to achieve numbers might add to the company’s bottom line, but will
result in the lowering of employee morale and satisfaction.
Ensuring that employees are accorded proper breaks between production time helps
relieve the bottled up stress, thus allowing moments of reflection and rest, so the employees
can come back with renewed verve.
Archaic practices of issuing coffee coupons or tokens add to unnecessary admin work
— fixing rigid time periods for coffee breaks; limiting the number of coffee cups one can
consume… all these point to the opposite of trust. After all, how much coffee can one drink,
And allowing free access to coffee machines without having to fish around for coupons can be
very refreshing — and motivating.
All work and no play…
Breaking routines is as important as making them. Planning and rolling out employee
team building activities creates a fun, collaborative and entertaining environment that feeds
back into the system.
At the end of the year, employees may have forgotten their hits and misses on the shop floors,
but hardly anyone would forget the fun times they had. Identifying these avenues and
ensuring that employees get time to enjoy themselves, and get a chance to exhibit their talents
in organised programmes can make any factory a great place to work.
25. CHAPTER 7: WORK FLOW CHART OF A DEPARTMENT
A flowchart is a type of diagram that represents an algorithm, workflow or process.
The flowchart shows the steps as boxes of various kinds, and their order by connecting the
boxes with arrows. This diagrammatic representation illustrates a solution model to a given
Purchasing Receiving manufacturing product
Delivery Distribution Packaging Inventory
Customer Customer service Sales Marketing
28. CHAPTER 8: SOFTWARE USED
ELGI has invested in advanced tools, such as state-of-the-art simulation software, for
design and manufacturing. Simulation software helps in setting up virtual real-world
environments where product designs can be tested prior to manufacturing. It lowers costs and
reduces time-to-market by bringing down the number of physical prototypes before actual
Simulation software has helped our designers and engineers to innovate, test and develop
newer concepts with better insights. It is being used for the design optimization of screw-
profiles, shafts, bearings, gears etc. All designs at ELGi are done on 3D-CAD systems and
designs, and simulated by in-house FEA and CFD teams. Noise and vibration teams have
developed their own simulation software to help optimize compressors from a NVH
perspective. Prototypes are built and tested at a dedicated proto workshop.
INFOR LN is a new division which deals with computerized financial data transaction
within the organization. And shortly MIS will bring online record transaction.
INFOR LN encompasses a wide range of software products supporting day-to-day
business operations and decision making. INFOR LN serves many industries and numerous
functional areas in an integrated fashion attempting to automate operations from supply chain
management, inventory control, manufacturing scheduling and production, sales support,
customer relationship management, financial and cost accounting, human resources and
almost all other data-oriented management process. INFOR LN systems have become
increasingly prevalent over the last 20 years throughout the world.
Gain a best-in-class, global ERP solution that delivers agility and fast time to value.
Benefit from more than 25 years of manufacturing experience.
Get best-in-class global financials, supply chain, manufacturing, project, and service
lifecycle management capabilities.
Empower your entire organization through a next-generation user experience.
30. CHAPTER 9: EXTERNAL ASSESSMENT
• Contribution to the Prime Ministers National Relief Fund or any other fund set up by
the Central Government for socio–economic development and relief and welfare of the
Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and
• Protection of National Heritage, art and culture including restoration of buildings and
sites of historical importance and works of art; promotion and development of
traditional arts and handicrafts
• To set up hospitals or other medical institutions and making donations to
hospitals, charitable dispensaries, convalescent homes, asylums and other public
institutions for administering medical relief to the poor.
• To help poor widows, aged persons, physically and mentally challenged persons and
destitute persons, including setting up homes, orphanages and the like.
• To aid, assist, donate to societies, institutes, trusts and other funds whose objects are
• To contribute funds for technology incubators located within academic
institutions which are approved by Central Government.
• To assist in the promotion of research and development in various fields of
higher education in its widest and most comprehensive sense.
• To assist students in pursuing their academic, professional and other studies,
economically or otherwise.
31. • To promote sustainability in partnership with industry associations , like the
CII, FICCI, ASSOCHAM, MCCI etc.
• Ensuring environmental sustainability, ecological balance, protection of flora and
fauna, animal welfare, agro forestry, conservation of natural resources and maintaining
quality of soil, air and water
• To render aid and relief to the poor and deserving persons at all times during
epidemic, famine, floods, earthquake and unforeseen natural calamities.
• To pursue CSR programs in relevant local areas to fulfill commitments arising from
requests by governmental/regulatory authorities and to spend monies through
• administrative bodies of the government and/or directly by way of
developmental works in local areas around which Company operates.
• To provide equal opportunities to beneficiaries of Company’s CSR programs as
vendors or employees on merit.
• To promote or aid Rural Development projects Implementation
• Measures for the benefit of armed forces veterans, war widows and their dependents
• To establish and support professorships, fellowships, lectureship, scholarship and
prizes at schools, colleges and other educational institutions
• To grant endowments at universities, research institutions and educational and
scientific institutions, for spread of education and knowledge in all branches of
• To promote music, drama, dance, sports, fine arts and to render assistance to
institutions and students in these fields
32. • To establish , support and maintain libraries, museums, reading rooms,
auditorium for advancement of education, cultural activities and knowledge in general.
To implement Company’s CSR programs through Company’s employees or through
external implementing agencies or through registered trusts, foundations and charitable
organizations as may be decided by Company from time to time. In such cases, Company
will specify the CSR programs which may be undertaken by those trusts in accordance with
their objects and administrative and accounting processes laid down in the respective trust
deeds/memoranda and articles of association.
9.8 Details of CSR spent during the Financial Year 2016-17
Total amount spent for the financial year: Rs 32.03 Million
Amount unspent, if any; nil
Manner in which the amount spent during the financial year is detailed
up to the
2,75,20,000 2,75,20,000 2,75,20,000
2,05,000 2,05,000 2,05,000 Direct
1,20,000 1,20,000 1,20,000 Direct
New Delhi 10,00,000 10,00,000 10,00,000 Direct
15,00,000 15,00,000 15,00,000 Direct
9,26,228 9,26,228 9,26,228 Direct
7,60,844 7,60,844 7,60,844 Direct
Total 3,20,32,072 3,20,32,072 3,20,32,072
35. 10.1 Meaning for Financial Assessment
Financial assessment is the process of determining the significant operating
and financial characteristics of a firm accounting data. Financial analysis is the
judgmental process, which aims to evaluate the current and past financial positions
and the result for determining the best possible estimates and predictions about the
Financial analysis depends to a very large extend on the use of ratios. Thus a
direct examination of the magnitude of two related items is somewhat enlightening.
But the comparison is greatly facilitated by expressing the relationship as a ratio.
10.2 Type of study
As the study analyses the financial performance of the company the study is
analytical one in nature.
10.3 Method of data collection
The data required for the study have been obtained from the company records
of financial statements. The study is entirely based on the secondary data through the
company records. Secondary data has been used in this study the published financial
reports of ELGi equipments limited, directors reports and annual report has been the
main source of secondary data. For the purpose of carrying out the analysis, the data
available in the financial statement have been regrouped and rearranged suitably.
10.4 Period of the study
The period of study is the five financial year starting from 2012-2013 to
2016 - 2017
10.5 Tools for the analysis
The data so collected have been analyzed with the help of Ratio analysis
Balance Sheet ------------------- in Rs. Cr. -------------------
36. Mar 17 Mar 16 Mar 15 Mar 14 Mar 13
12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND LIABILITIES
Equity Share Capital 15.85 15.85 15.85 15.85 15.85
Total Share Capital 15.85 15.85 15.85 15.85 15.85
Reserves and Surplus 524.99 525.21 517.15 480.20 420.47
Total Reserves and Surplus 524.99 525.21 517.15 480.20 420.47
Total Shareholders Funds 540.83 541.05 532.99 496.05 436.32
Deferred Tax Liabilities [Net] 9.83 10.73 13.55 10.01 4.82
Other Long Term Liabilities 3.19 0.00 0.00 0.00 0.00
Long Term Provisions 3.59 2.86 0.00 0.00 0.00
Total Non-Current Liabilities 16.61 13.59 13.55 10.01 4.82
Short Term Borrowings 48.49 63.80 109.34 92.37 19.83
Trade Payables 114.97 117.14 99.66 120.43 109.29
Other Current Liabilities 35.09 32.25 35.62 29.61 22.51
Short Term Provisions 11.37 51.06 38.82 47.12 58.16
Total Current Liabilities 209.91 264.25 283.43 289.53 209.80
Total Capital And Liabilities 767.36 818.89 829.97 795.59 650.94
Tangible Assets 236.84 244.21 257.50 156.64 93.56
Intangible Assets 1.92 1.52 0.57 0.28 0.33
Capital Work-In-Progress 0.26 0.52 6.35 84.80 74.92
Other Assets 5.72 0.00 0.00 0.00 0.00
Fixed Assets 244.74 246.25 264.42 241.71 168.81
Non-Current Investments 137.63 89.85 117.59 86.89 85.09
Long Term Loans And Advances 8.19 6.22 4.83 22.18 24.47
Other Non-Current Assets 1.71 0.00 0.38 0.20 0.16
Total Non-Current Assets 392.27 342.32 387.21 350.98 278.53
Inventories 100.37 97.77 112.98 105.19 99.30
Trade Receivables 159.17 163.10 166.38 178.41 149.50
Cash And Cash Equivalents 53.70 38.08 22.73 21.91 23.64
Short Term Loans And Advances 18.83 176.40 139.98 138.58 99.55
Other Current Assets 43.02 1.23 0.69 0.52 0.42
Total Current Assets 375.09 476.57 442.76 444.61 372.41
Total Assets 767.36 818.89 829.97 795.59 650.94
37. CONTINGENT LIABILITIES,
Contingent Liabilities 22.90 44.59 38.34 199.91 133.45
CIF VALUE OF IMPORTS
Raw Materials 0.00 63.49 59.23 59.55 47.61
Stores, Spares And Loose Tools 0.00 0.50 1.25 0.81 0.33
Trade/Other Goods 0.00 5.98 17.31 19.50 20.53
Capital Goods 0.00 0.62 1.80 2.60 9.06
EXPENDITURE IN FOREIGN EXCHANGE
Expenditure In Foreign Currency 0.00 6.59 9.29 11.19 15.27
REMITTANCES IN FOREIGN
CURRENCIES FOR DIVIDENDS
Dividend Remittance In Foreign Currency - - - - -
EARNINGS IN FOREIGN EXCHANGE
FOB Value Of Goods - 154.48 162.77 164.56 139.64
Other Earnings - - - - -
Bonus Equity Share Capital 12.77 12.77 12.77 12.77 12.77
Non-Current Investments Quoted Market
Value 10.17 5.88 5.84 4.41 4.83
Non-Current Investments Unquoted Book
Value 127.46 88.10 115.84 85.14 83.34
Current Investments Quoted Market Value - - - - -
Current Investments Unquoted Book Value
Cash flow statement
Cash Flow ------------------- in Rs. Cr. -------------------
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13
12 mths 12 mths 12 mths 12 mths 12 mths
Net Profit/Loss Before Extraordinary Items And Tax 88.27 43.96 68.67 108.86 97.07
Net Cash Flow From Operating Activities 88.03 98.26 78.82 40.41 2.03
Net Cash Used In Investing Activities -38.61 -10.73 -73.70 -95.27 -88.96
Net Cash Used From Financing Activities -34.91 -72.18 -4.30 53.13 1.18
Net Inc/Dec In Cash And Cash Equivalents 14.51 15.34 0.82 -1.73 -85.75
Cash And Cash Equivalents Begin of Year 27.98 22.73 21.91 23.64 109.39
Cash And Cash Equivalents End Of Year 42.49 38.08 22.73 21.91 23.64
The statement of cash flows shows how a company spends its money (cash outflows) and
where the money comes from (cash inflows). The cash flow statement includes all cash inflows a
38. company receives from its ongoing operations and external investment sources, as well as all
cash outflows that pay for business activities and investments during a given quarter.
The operating cash flow ratio is a measure of a company's liquidity. If the operating cash
flow is less than 1, the company has generated less cash in the period than it needs to pay off its
Ratio analysis is an important and age old technique of financial analysis. The data given in
financial statements are dump and are unable to communicate anything. Ratios are relative form
of financial data and very useful technique to check upon the efficiency of a firm. Some ratios
indicate the trend or progress or downfall of the firm.
Mode of Expression
(i) RATE, which is the ratio between the two numerical facts over a period of time.
(ii) PURE RATIO OR PROPORTION which is arrived at by the simple division of one
number by another.
(iii) PERCENTAGE which is a special type of rate expressing the relationship in
These alternative methods of expressing items which are related to each other are, for
purpose of financial analysis, referred to as ratio analysis. In other words, ratios as a tool of
financial management, can be expressed as
(i) Pure Ratio
(ii) Percentage and
(iii) A stated comparison between numbers.
Steps in Ratio Analysis
• The first task of the financial analyst is to select the information relevant to the decision
under consideration from the statements and calculates appropriate ratios.
39. • The second step is to compare the calculated ratios with the ratios of the same firm
relating to past or with the industry ratios. This step facilitates in assessing success or
failure of the firm.
• The third step involves interpretation drawing of inferences and report-writing.
Conclusions are drawn after comparison in the shape of report or recommended course of
Nature of Ratio Analysis
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expressions” and as “the relationship between two or more things”.
In financial analysis, a ratio is used as an index or yardstick for evaluating the financial position
and performance of a firm. The absolute accounting figures provided a meaningful
understanding of performance and financial performance of a firm. An accounting figure
conveys meaning when it is related to some other relevant information.
Classification of Ratios
Ratios can be classified for the purpose of exposition into four broad groups:
1. Liquidity Ratios
2. Long term solvency and Leverage ratios
3. Activity Ratios
4. Profitability Ratios
I. Liquidity Ratios
1. Current Ratio
Current Ratio =
40. Current Liabilities
Average Ratio 1.694
The table reveals that current ratio of ELGI EQUIPMENTS Ltd for the period
from the financial year 2012-2013 to 2016-2017. The current ratio ranges from 1.78 to
1.79. Average of current ratio is found to be 1.694. In a sound business, a current ratio
of 2:1 is considered as ideal one. Compare to the fixed norms the current ratio position
of the concern is up to the level of satisfaction.
2. Quick Ratio
Current Assets-(Stock & Prepaid expenses)
Quick Ratio =
Current Liabilities-(Bank Overdraft)
41. Year Ratio
Average Ratio 1.274
The table reveals that quick ratio of ELGI EQUIPMENTS Ltd for the period
from the financial year 2012-2013 to 2016-2017. The highest ratio stood at 1.43 in the
year 2015-2016. Average of quick ratio found to be 1.274. An acid test ratio of 1:1 is
considered satisfactory as a firm can easily meet all current claims. The quick ratio
position of the concern is up to the level of satisfaction.
II. Long Term Solvency or Leverage Ratios
1. Debt-equity ratio
Debt-Equity Ratio =
Share holders funds
Average Ratio 2.6
The table reveals that fixed assets turnover ratio of ELGI EQUIPMENTS Ltd for
the period from the financial year 2012-2013 to 2016-2017. The ratio shows a
fluctuating trend throughout the study period. The ratio shows an average of 2.6 times.
In a general sense, a higher fixed-asset turnover ratio indicates that a company has
more effectively utilized investment in fixed assets to generate revenue.
III Activity Ratio
1. Inventory Turnover Ratio
Cost of goods sold
Stock Turnover Ratio =
Average Inventory at cost
Inventory Turnover Ratio
Average Ratio 8.442
The table reveals that inventory turnover ratio of ELGI EQUIPMENTS
Ltd for the period from the financial year 2012-2013 to 2016-2017. It shows an
average of 8.442 times. This ratio reveals the number of times finished stock is turned
over during a given accounting period. This is used for measuring the profitability.
IV. Profitability Ratios
1. Net Profit Ratio
Net Profit Ratio = x 100
Net Profit Ratio
Average Ratio 7.142
The table reveals that net ratio of ELGI EQUIPMENTS Ltd for the period
from the financial year 2012-2013 to 2016-2017. This ratio establishes a relationship
between net profit and sales. This ratio is the overall measure of firm’s profitability.
Higher the ratio of net operating profit to sales better is the operational efficiency of
2. Earnings per Share
Earnings per share are a small variation of returns on equity capital and are
calculated by dividing the net profit after taxes by total number of equity shares.
Net Profit after Tax
Earnings per share =
Number of Equity Shares
Earnings per Share
46. Year Ratio
Average Ratio 3.754
The table reveals that Earning Per Share of ELGI EQUIPMENTS Ltd for the
period from the financial year 2012-2013 to 2016-2017. A high EPS is a sign of better
earnings, strong financial position and therefore a reliable company to invest in. The
EPS for several years indicates the growth pattern of the company.
V. Expenses Ratio
Material Expenses Ratio
Material expenses ratio = x 100
Material Expenses Ratio
49. CHAPTER 11: SWOT ANALYSIS
SWOT is a strategic planning tool used to evaluate the strengths, weaknesses,
opportunities, and threats to a project. It involves specifying the objective of the project
and identifying the internal and external factors that are favorable and unfavorable to
achieving that objective. The strengths and weaknesses usually arise from within an
organization, and the opportunities and threats from external sources.
The SWOT analysis is an important part of the project planning process:
• Strengths: attributes of the organization that help achieve the project objective.
• Weaknesses: attributes of the organization that stop achievement of the project
• Opportunities: external conditions that help achieve the project objective.
• Threats: external conditions that could damage the project.
The SWOT Analysis of ELGi Equipments provides a strategic SWOT analysis of
the company's businesses and operations. This analysis shows the strengths, weaknesses,
opportunities and threats of ELGi Equipments Ltd can provide a competitive advantage.
50. • Barriers of market entry
• Reduced labor costs
• Monetary assistance provided
• High profitability and revenue
• Competitive market
• Investments in research and development
• Cost and tax structure
• High loan rates are possible.
• New products and services
• Financial Leverages
• Increase in labor costs
• Cash flow
• Price changes
• Financial capacity.
52. CHAPTER 12: CASE STUDY
Screw compressors enable mattress manufacturer to maintain high quality
standards in its products.
A good night’s sleep is much more than just feeling fresh the next morning; it
is about staying healthy, having a sharp memory and being productive. And believe it
or not, air compressors have something to do with this vital function of your life.
Quality compressed air determines whether the springs inside a mattress are
shaped well, the fiber inside a pillow is evenly distributed or the design on the fabric is
printed accurately. Jaspal & Sons Co. Ltd., a Thailand based company with over 70
years in the home linen business, tells ELGi that high quality compressed air helps the
company ensure that the mattresses, pillows and the range of bed linen that it produces
meet global quality standards.
Until a few decades ago, mattress making was primarily a small-scale industry
with minimal technological inputs. In western countries, until the 20th
mattress makers used a variety of material such as cotton, horse hair, rags or straw as
In many developing countries, family-run small businesses that make cotton
mattresses and pillows exist even today. In the name of technology, they only had a
ginning machine to fluff up the cotton fiber and a sewing machine to stitch the fabric.
53. These mattresses are cheap but not necessarily hygienic and healthy since they easily
attract dust and pests. Until a few years ago, in countries like India, it was also a
common practice to use the services of mattress makers who went home to home on a
bicycle with a harp-like device. But as coir, foam and polyester started replacing
cotton, these once common sights and sounds have slowly become a relic of an era
bygone, something to reminisce about.
According to madehow.com, the use of springs inside a mattress, probably the
biggest breakthrough in modern mattress making started in the mid-1800s. However,
innerspring mattresses were expensive and only the affluent could afford them, only
after World War 1 did they become a product of mass consumption.
The credit for it goes to Zalmon Simmons, Jr., the president of a bedstead
manufacturer. When he introduced innerspring mattresses in 1926, Americans were
ready to pay more than double of what that they would have paid for a mattress made
of the finest horse hair. Innerspring mattresses cost a handsome US$40 in those
days. The other big development was standardization of mattress sizes. Fixed sizes
such as king or queen made it easy for buyers to match the mattress to the bed frame.
Jaspal & Sons
Modern manufacturers have made mattress-making a highly mechanized and
scientific process. A lot of research has gone into making these products not just
comfortable and durable but also resistant to dust, fire and water.
Jaspal & Sons uses advanced technologies to produce mattresses and home
linen products for both the Thai and export market. Established in 1947, the company
today is a licensed producer of American brands – Sealy, Tempur, Stevens and Ethan
Allen. It also produces and retails a range of mattresses, bath and bed linen, and home
accessories under the brand, Jaspal Home. Jaspal & Sons also has a line of men’s and
women’s fashion labels, and a real estate division.
The company runs a bedding distribution network of over 350 outlets in
Thailand, besides an export business that spreads across more than 15 countries. The
54. daily capacity of its manufacturing plant in the Samut Prakan province in Thailand is
350 mattresses, 2,000 fiber filled pillows, 200 duvets, 200 flat and fitted sheets, and
printing and dying of 20,000 meters of fabric.
Dry, constant air critical for quality output
Jaspal & Sons acquired the first ELGi compressor in 2006, the E22-10. Now it
has eight ELGi screw compressors that are helping the company meet its production
targets and maintain international standards of quality. These compressors are used for
applications such as pneumatic air cylinders, air tooling and hot air blowers.
Mr Hemant G. Mehendale, Technical Director, Jaspal & Sons, says “We need
compressed air for a wide range of applications in our plant such as to move pistons,
operate the flaps of the drying machine, apply glue to the material and dry it, and
lower or raise the arms of the machines in the textile plant. We require dry, constant
air to perform all these functions efficiently.”
55. In the mattress making section of the company’s plant, compressed air is a
critical component in all the 12 spring making machines, the quilting machines that
make mattress covers and duvets, and the blower room in which fibre is filled into
mattresses and pillows. In the textile section, every machine requires compressed air.
These machines perform a range of functions such as bleaching, carving (putting an
imprint on the fabric), moisturising, drying and printing.
The quality of air is directly linked to the quality of the final output. “The
spring making machines need accurate air pressure to produce springs of the right
shape. The quilting machine needs constant compressed air so that the pattern on the
quilted cover is uniform throughout,” explained Mr. Khun Prasert Sukrung,
Similarly, in the textile plant, air compressors help determine the quality of the
fabric. “As the machines roll, we calculate and release the exact amount of pigment or
chemical the fabric requires at various stages of production. The quality of this
operation depends on the reliable supply of dry, constant air. Without it, the machines
cannot perform a number of mechanical functions well such as lifting of flaps, moving
of pistons or squeezing of the pigment,” he added.
A malfunction would mean the printing is not accurate or the fabric does not
have the required amount of chemical to make it fire or water resistant. Though air
compressors are ancillary machines in the plant, their reliability is critical for the
smooth functioning of the plant. Mr. Mehendale remarked, “We often don’t appreciate
the contribution of compressed air in our production and business. Only when there is
a problem, do we realise its importance. Since we have moved to ELGi compressors,
we have not had to worry about reliability. I’m also happy with the layout that the
ELGi engineers have designed for us. Now even if we shut one compressor, the others
take over the load and production continues unhampered.”
60. CHAPTER 14: CONCLUSION
From the study of the company I understood the functions and features of the
company. This company is improving their quality, goodwill, market value and they
are providing jobs for many people. In fact there is modernization in the machineries
of the company. The institutional training at ELGI EQUIPMENTS LIMITED helped
to have a good knowledge about how a company operates and the consequent focuses
relating to the business activities. In the short span of training the company provided a
good exposure to the working and management work out in detail. The training has
helped to know the various delegation that is found in the organization and
responsibility each delegates have towards the organization. The training has given a
deep sense of understanding how an organization take efforts in bringing in product as
an effective one and how it can be good in competing with the competitors. The
organization growth decides their tireless effort in bringing it up. The expansion and
establishment of the organization in various places and in various forms denotes their
financial efficiency and capabilities.