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INDEX

SR.

NO.

PARTICULARS PAGE

NO.1 History & Development of Unit 3

2 Current Status 43 Growth Outlook 6

4 Brand Profile & Size and form of the organization 7

5 Joint Ventures and Subsidiaries 8

6 Manufacturing Process and Production 9

7 Organization Chart 11

8 Time Keeping System 12

9 Group Companies at a glance in India & Contribution

of the Unit to the Industry

13

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HISTORY & DEVELOPMENT OF UNIT

The late Prime Minister Shri Lal Bahadur Shashtri laid the foundation stone of Indian

Rayon and Industries Ltd. on 21st June, 1959. It was incorporated on 26th September, 1956 under the

companies act of 1956 an the company was give the commencement certificate on 13th Feb, 1958.

The inauguration of the company was done by an American Ambassador Mr. H H

Galbreth on 13th April, 1963 and on the same day company took its trial production.. Shree Morarji Desai

one of the leading industrialists of Gujarat with a view to manufacture Viscose Filament Yarn in

collaboration of U.S.A. started this organization.

The regular production of Rayon was started on 27th September, 1963. As a result of strike

and chaos in the unit the present management is Birla Group took over the chairman is Aditya Birla. He

took over the company in 1966 due to expansion INDIAN RAYON & CORPORATION PVT. LTD.

Named it became INDIAN RAYON & INDUSTRIES LTD. after that the company is paying dividend

regularly to their share holders.

Vision

To be preferred choice of customers in premium segment of viscose filament yarn global market and

benchmarked chlor alkali producer while remaining committed to the interests of all stake holders.

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Mission

To Produce viscose filament yarn to meet the expectations of customers in premium segment.

To achieve minimum cost of production through innovation of employees and vendors.

To maintain clean, safe & pollution free environment.Values

Integrity

Commitment

Passion

Seamlessness

Speed

Present: Aditya Birla Group is a conglomerate of companies operating in different sectors and areas.Be it insurance, textiles, chemicals, cement, mining, insurance or business process outsourcing, the group

has its presence in all the fields.

CURRENT STATUS

Madura Garments

The Garments Division has maintained its market leadership. Revenues have grown by 20.6 per cent toRs. 472.40 crore vis--vis Rs. 391.68 crore recorded in the previous year with the divisional operating

profit growing by 70.5 per cent to Rs. 39.20 crore against Rs. 22.98 corers last year. Two of the powerbrands - Louis Philippe in the fashion segment and Peter England in the popular segment -have crossed

the Rs. 100 crore mark in revenues. Improved sales of higher price point products have boosted

realizations and top line growth. Suits, blazers and jackets have performed well and have contributed

towards a richer product mix.

The opening of 21 stores during the year has bolstered retail presence and the division has an aggressive

retail expansion plan for the future both in malls and in high streets. Consistent brand building efforts,development of innovative merchandise and aggressive campaigns for each of the brands, have

accelerated brand growth and equity with consumers.

Madura Garments received the 'Best Apparel Company of the Year' award at the Images Fashion Awards

2004 for the second consecutive year and at CMAI. The other accolades showered on it include "Allen

Solly - Best Trouser Brand of the Year", "Allen Solly Women's Wear - Most Admired Women's WearBrand of the Year", Louis Philippe and Allen Solly amongst top 100 Super brands.

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Madura Garment will continue to be an industry leader. Its focus will be on

building further on consumer equity and market share in a competitive market. Delivering international

standard retail experience at the new stores being opened will be a thrust area.

Rayon division

The Rayon division's revenues at Rs. 385.00 crore are higher by 9.38 per cent compared to Rs. 352.00crore in the previous year. VFY realizations were effected with high industry stock and increased import

from China. Despite this, sales volume rose by 6 per cent to 17380 tonnes on the back of stabilization of

the 1,000 tonnes Continuous Spinning Yarn (CSY) capacity and 105.9 per cent utilization of theexpanded capacity.

The chlor-alkali segment has been buoyant. The chemical plants were operating at 107.7 per cent ofcapacity. Better ECU realization also complemented the revenues.

To insulate itself from the present difficult market conditions, the company has embarked upon an

ambitious program of quality improvement and cost reduction. The company has successfullyimplemented the revised work norms pursuant to long-term settlement with workers, which shall result inimprovement in productivity by 35 per cent. Capex initiatives include raising Caustic Soda capacity by

85 tonnes per day through de-bottlenecking and setting up a captive power plant of 20 MW.

Carbon Black division

Carbon Black Division's revenues at Rs. 564.2 crore are up by 21 per cent vis--vis Rs. 467.2crore

attained in the previous year. Sales volume grew by 7 per cent by 175944 tonnes than previous year165,095 tonnes, benefiting from the 40,000 tonnes Brownfield expansion, completed in March 2004 and10,000 tonnes added through de-bottlenecking. The plant operated at 103 per cent of the

expanded capacity. Even as increased demand in the domestic market is being catered to, export volumes

rose to augment sales.

Volatile crude oil prices remain a cause of concern. Realisation has improved with the pass on of the

high CBFS cost to the customers. The division's emphasis will be on maximizing realization through

passing on the increase in feedstock cost and proactively managing its procurement.

The company has initiated work on the 50,000 tonnes brown-field expansion at Chennai at a capex of Rs.

105 crore.

Textiles division

The textiles division's revenues have gone up 15.1 per cent to Rs. 524.8 crore as against Rs. 456.1 crore

in the previous year. Profits improved across all the product ranges. Exports constituted about 46 per cent

of the division's revenues. The worsted segment has gained from value added yarns and stable wool

prices. Flax yarn performance has bettered with the modernization of the plant. The linen fabric has

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profited from retailing initiatives and the addition of 20 looms (1,15,000 mtrs per

month). Expansion of wool combing facility by 4,000 TPA is operational with the installation of first

card; the balance two cards will be installed in the next 2 months. A capex of Rs 22.5 crore has beenplanned for the expansion and modernization of flax yarn and linen fabric facilities.

Insulators domestic marketing

The division's revenues stood at Rs. 135.9 crore. The outlook for the insulator business is promising

given the power sector reforms, which will hike demand in the transmission and distribution segment.

Consolidated performance:-

The Company's consolidated revenues jumped 49 per cent from Rs. 3189.1 crore to Rs. 4759.4 crore.

With the growth of new businesses, Indian Rayon's JVs and subsidiaries have contributed 62 per cent tothe consolidated revenue, led by the life Insurance business.

The consolidated net profit surged 225.7 per cent at Rs. 190.7 crore. BPO business has turned positivefor the whole year. IT business losses have come down drastically. In life insurance business losses have

been pruned with the benefit of higher renewal business. A poor export market and higher input cost has

adversely impacted the company's insulator JV

GROWTH OUTLOOK

The sector-wise outlook for the company is promising

Garments

Integrated go to market initiatives for each brands

Increase quality reach of Peter England.

Retail space to be doubled over next 2 years.

Focus on merchandise management and sell thrus.

Renewed focus on manufacturing export.

Life Insurance

Aggressive ramping up 31 branches and additional advisors on cards.

New products launch targeting specific segments.

Superior returns to policy holder with better transpency.

BPO

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Great world class infrastructure ahead of demand.

Focus in building new verticals and horizontals.

Revamp recruitment and improve quality of hire.

Telecom

Strengthening network in existing circles.

Roll out of services in three new circles and explore further expansion.

To provide value added services to drive customer loyalty and revenues.

Financial restructuring to reduce interest cost.

IT

Strengthening marketing and delivery capabilities.

Initiating build up of specialization/differentiation.

BRAND PROFILE

The portfolio includes leading brand names like:

1) Louis Phillippe : - launched in 1989 Indias first national up-market mens shirt : upper-

crest seen as status symbol.

2) Van Heusen : - Powerful contemporary corporate wear; also one of Americas leading brand.

3) Allen Solly : - Pioneered the concept of smart casuals an Friday dressing.

4) Peter England : - Launched in 1997 as the mid-price Honest Shirt; already Indias largest

shirt brand.

5) San Frisco : - Positioned as the hard working trouser in the mid-priced segment.

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6) Byford : - Knitwear brand for socks and t-shirts; leading international brands for under-

clothes.

SIZE OF THE UNIT AND FORM OF THE ORGANISATION

The Aditya Birla Nuvo Ltd. is large scale industry. Indian Rayon is Built on firm,

strategic business principles and strong professionals management.

INDIAN RAYON & INDUSTRIES LTD. is a public ltd. company. It is a large

scale industry because it possesses all the features of heavy industries likes, Large amount of capital and

also uses costly and heavy machinery and bulk material. The work of Indian Rayon & Industries Ltd. is

divided into 42 departments.

JOINT VENTURES AND SUBSIDIARIES

The Company's joint ventures and subsidiaries are on track.

BIRLA NGK Insulators Private Limited has posted marginal growth in turnover to Rs. 168.83

crore. Its brown-field expansion of 8,000 tonnes has been commissioned in Dec 2004, which will

enhance volumes. Guided by NGK experts, yield improvement efforts are being pursued.

Birla Sun Life Insurance Company has recorded a jump of 16 per cent in annualized premiumincome from new business to Rs. 711.1 crore. The total premium income has grown by 37 per cent

to Rs. 1233.8 crore. The business continues to retain the number two position amongst private lifeinsurance companies with 10 per cent credit to single premium policy in line with international

practice. The company is a front-runner in unit-linked products and alternate channel distribution.

The company is focusing on increasing the distribution network by opening 41 new branches taking

total 85 branches by June 2006.

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The IT Services business has reversed the downward trend in performance and has turned EBITDA

positive for the year. Revenues stood at Rs. 85.8 crore. The company has increased its focus onBanking, Financial and Insurance (BFI) verticals and the Independent Software Vendor (ISV)

segment, with greater thrust on high margin business.

The BPO business revenues have grown significantly from Rs. 108.23 crore in the previous year to

Rs. 163.3 crore, while seat capacity has increased to 2235 and headcount to 4114. The Company isstriving to further augment its client base and improve its seat utilization.

MANUFACTURING PROCESS & PRODUCTION

The main product of Indian Rayon is Viscose Filament Yarn or producing Rayon Yarn

vital and essential and raw material required which are as follows.

I. Wood Pulp

II. Caustic Soda

III. Carbon-Di-Sulphide cs2

IV. Sulphuric Acid

From above raw materials the wood pulp is still imported from Canada, Sweden & South

Africa and above 90% of raw materials is available from the following things.

1. Viscose Section

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Viscose Filament Yarn (VFY) is made from natural fibres. Fabric

made with VFY fields like Cotton, Drapes Like Wool, Sheaths and Cling like Satin, and has the lustre

and feel of Silk. VFY is used by manufacturers of Apparel, Saris, Upholstery, Suit linings, etc

In this section the process from Wool Pulp to Viscose is done means Wood Pulp is

converted into Viscose sector. This process is carried out some sub steps as are following.

a. Streeping

b. Shreeding

c. Pre-Ageing

d. Xanthation

e. Pressing

f. Dissolving

g. Repenning & Filteration

2. Spin Bath Section

In this section recovery of by product is done i.e. Sodium Sulphate.

Spin bath contain 11% Sulphuric Acid to naturalize Sodium Hydroxide of Viscose 1.2%

Zink to give strength to the yarn and fasting the rate of relation take place.

A) Recovery of Sodium Sulphate

Spin Bath to extract through provided in spinning machine after the reaction excess of the

Spin Bath is returned to the Spin Bath Department for make a acid Zink and proper temperature of 55-56.

During the reaction acid 8 Spin and Caustic Soda of Viscose in naturalize and Sodium

Sulphate to recovered as the by product of the process.

3. Spinning Section

Formatting of Yarn and collection from the raw cakes. This section is also called as cake

formation department. The yarn is through against the side of this rotation pat when it is laid in the farmof the cake because of the channel depending on the speed of the revolving pat.

4. After Treatment Section

Washing, Bleaching and Dying of raw cake are made here. After the treatment section

means washing section i.e. washing room of the cake when the cake burn in the opening par it is still full

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Executiv

e

President

Personnel &H R D

Department

Administration

Department

ProductionDepartment

EngineeringDepartment

Time Office

Welfare

Labour

Office

Personnel

H R D

Estate

Security

Raw

Material

Legal

Sales

Viscose

Spin Bath

Spinning

After

Treatment

Textile

Chemical

R&D

Quality

Control

Maintenanc

e

Electrical

Instrument

of acid and relatively to through many types of water like soft water etc. and thus

all the excess liquid is removed and now cake are ready for conning.

5. Textile Section

The cake is now ready for winding in the of cones in this section the cake winding by the

workers.

6. Packing Section

Packing of the final product as per ISI standard disclose after quality. Here they use card

board for packing because it is easy to handle and taken less weight than wooden box. On box the full

information is printed.

i) Name of the Party to whom the goods are despatched.ii) Date of Packing.

iii) Quality Grade & Weight.

iv) Register Trademark of the Company.

V) Colors of Stones

ORGANISATION CHART

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TIME KEEPING SYSTEM

India Rayon & Industries Ltd. Has adopted very good time keeping. The unit has installed

computerized time keeping system. In this system all the Employee including staff member of worker

have issued punch cards. There are seven punching machine that have been fixed and HRD dept when

the employees enter in the premises he has to punch this card in any machine and have to do this same

thing at the time of exit also.

Time office dept. of the company keeps the attendance register. Many workers have been

given attendance sleep also. In the system the workers are supposed to fill their sleep at the time of entry

as well as exit. The register collects the date through computer and their salary and wages are prepare

according to this collected data.

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The workers are allotted to enter in to the premises late up to half

and hours from the time dutys starts. While there is no any hard and fast rule exit for the staff member

of the company.

There are four shifts of IRIL Co.

Shift A 7:00am to 3:00pm

Shift B 3:00pm to 11:00pm

Shift C 11:00pm to 7:00am

General Shift 8:30am to 5:30pm

Lunch Break 12:30pm to 1:30pm

Each and every employee working hours is fixed of eight hours the employees are give

leave as per the company rules.

GROUP COMPANIES AT A GLANCE IN INDIA

Company Key Products / ServicesGrasim Viscose Staple Fibre, Cement, Sponge Iron, Textiles, Exports,

Software Consulting

Hinadalco Aluminum

Indian Rayon Viscose Filament Yarn, Textiles, Insulators, Carbon Black

Indo Gulf Fertilizers, Copper

Birla Global Finance Financial Service

HIGI Industries Files, Castings, Gases

Essel Mining Iron and Manganese ore mining, Ferro alloys, HPE woven

sacks

Shree Digvijay Cement Cement

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Kerala Spinners Synthetic and blended yarns

Eastern Spinning Mills Blended yarns

CONTRIBUTION OF THE UNIT TO THE INDUSTRY

The Indian Rayon & Industries Limited is one of the single unit which

manufacture Rayon Yarn earning huge profit on the part of market company contributes more than 25%

of total market share in India and of course Birla Group has two other units engaged in producing Rayon

Yarn so totally about 75% of market has been covered in India. Company has been covered in India.

Company has been also export rayon yarn in more than 15 countries.

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INDEX

SR.

NO.

PARTICULARS PAGE

NO.1 Introduction to the Industry 16

2 Competitive Position - VFY 183 Domestic Competitors - VFY 19

4 Competitive Position Chlor Alkali 20

5 Dealing with competitors 21

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INTRODUCTION TO THE INDUSTRY

Man made fiber includes both synthetic fibers and celluloses. Rayon is a generic term for man-made

fiber, composed of regenerated cellulose and deviates also called as celluloses. The standard types

includes viscose staple fiber(VSF) an continuous viscose filament yarn(VFY) while the synthetic fiber

includes polyester nylon, propylene, acrylic etc. This segment of industry has vital role to play in Textile

Industry.

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Global Scenario

The Asian share of global VSF product is growing many folds an there was an increase in Filament Yarn

also. This is presumably due to the shift in textile production from developed countries to low cost Asia.

The shift continuous as textile consumption in Asia is likely to grow in line with rapid economic growth

in the countries. In future the supply of Celluloses fibers will slightly drop and supply of synthetic fibers

will grow by about % per annum.

Indian Scenario

Till 1950 small quantity of Viscose Filament Yarn was imported into India. In 1950 the first Viscose

Filament Rayon Yarn of M/S Travancore Rayon at Rayonpuram, Kerala was commissioned which was

later on followed by National Rayon plant at Mohane in Kalyan in the beginning of 1951. Last Viscose

Filament Yarn plant was commissioned in the year 1964. After that no new plant were commissioned

due to the heavy capital requirement and fierce competition from synthetic filament yarn. Due to

expansion of the existing plants, higher production for Filament yarns was achieved in 70s an 80s. M/S

J. K. Rayon at Kanpur stopped production in early 1980s. M/S Travancore also seize production around

1983-84 and have restart it in 1987. at present 7 filament yarn are in operation producing about 60000

tones yarn per annum and the capacity of Viscose Filament Yarn in India is 68300 MT per annum.

Group Overview

The Aditya Birla Group is Indias second largest business house with turnover of over Rs. 200 billion;

asset base valued at over Rs. 180 billion and nearly 65000 employees in 15 countries all over the world.

Over 75 units in India an overseas as well and International trading operations spanning

several countries include Singapore, Dubai, Russia, Vietnam, Myanmar, an China make it Indias first

truly multinational conglomerate.

Committed to being a Global Benchmark Group, all of its accredited with the ISO 9002 Certification and

nine of them are certified with ISO 14001.

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The Aditya Birla Group reaches out to the core sector in India in industries

integral to the nations growth cement, Aluminum, Fertilizers, Viscose Staple Fiber, Textiles, Petroleum

Refining, Power, Telecommunications, Industrial Chemicals an Financial Services.

The Aditya Birla Group is the worlds:

Largest producer of Viscose Staple Fiber

Third largest producer if Insulators

Fifth largest producer of Carbon Black

In India it has a Leadership position in:

Aluminum

Viscose Filament Yarn

White Cement

Rayon Grade Pulp

Grey Cement

Linen Yarn

Over an above this the group also has its significant presence in the petroleum refining, power and

telecommunications sectors in tie ups with giants Hindustan Petroleum, Powergen Plc. (UK), an

AT&T (USA). On the social front it is a value based, caring corporate citizen. The Aditya Birla Groupinherently believes in a Trusteeship concept of management. Party of the group profit is ploughed back

into meaningful welfare driven initiatives that make a qualitative difference to the lives of a marginalized

people

COMPETITIVE POSITION - VFY

The major competitor of Indian Rayon is the Century Rayon. Kesoram Rayon and National Rayon are

other VFY market players. RAY ONE has 29 % share in Domestic Market, it has been striving to

increase its export and captured 42 % of total VFY export from India with a growth status of 26.7 % in2000 01 to 42 % in 2006 07.

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DOMESTIC COMPETITORS - VFY

19

DOMESTIC MARKET

SHARE

EXPORT SHARE

32%

29%7%

8%

24%Indian Rayon

Century

Keshoram

NRC

BRC

42%0%

16%5%

37%

MAJOR VFY DOMESTIC MANUFACTURERS & INSTALLED CAPACITYVS ACTUAL PRODUCTION DURING 06 - 07

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COMPETITIVE POSITIO CHLOR ALKALI

The major competitors for Chlor Alkali product is GACL, IPCL, DCM, Andhra Sugar and other player

in the market. ABG Group is having the market share of 15.2% out of which captured 3.2 % of total

production from India with a growth status of 2.3% in 2003-04 to 3.2% in 2006-07

INDIAN RAYON

15000 TPA

17669 TPA 06 -07

VFYVFYDOMESTICDOMESTIC

MANUFACTUMANUFACTU

RERSRERS

NATIONALRAYON

16000 TPA

12604 TPA 06-

07

KESORAM6500 TPA5291 TPA 06-07

20

CENTURY

RAYON

16000 TPA

18425 TPA 06-07

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DEALING WITH COMPETITORS

To be successful, the company must do a better job than its competitors of satisfying target consumers. Thus,marketing strategies must be adapted to the needs of consumers and also to the strategies of competitors. Bas

on its size and industry position, the company must fin the strategy that gives it the strongest possible

competitive advantages.

21

Market Share Chlor - Alkali

Products

51.50%

3.50%

8.50% 3.20%

14.90%

6.30%

7.40%4.70%

GRCDIndian RayonBCCLGACLIPCLDCMAndhra SugarOthers

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The IR&IL Co. enjoys the monopoly in the market because of its total market of Rayon Yarn Industry.

The Indian Rayon covers almost 25% of the market and the Aditya Birla Group have also other two unitsof rayon yarn so altogether three units covers the 75% units of the total market.

Competitors of IR&IL Co. are

Century Rayon

National Rayon

Baroda Rayon

South Indian Viscose

Kesavram Rayon

Shriram Rayon

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INDEX

SR. NO. PARTICULARS PAGE NO.

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1. Financial Planning 24

2. Capitalization 25

3. Capital Structure 26

4. Financial Leverage 27

5. Management of Fixed Assets

(I) Capital Budgeting

28

6. Management of Working Capital

(I) Inventories

(II) Receivable

(III) Cash & Bank

39

7. Operating Leverage Analysis 43

8. Dividend Distribution 44

9. Per Share Data 45

10. Last 5 year Profit & Loss A/c 46

11. Last 5 year Balance Sheet 4712. Last 5 Year Cash Flow Statement 48

FINANCIAL PLANNING

Financial Planning Is the most important job for the financial management.

Financial planning is concerned with sources from which the fund are to be raises at now cost ant what

much cost and what time financial planning result in formulation of financial plan. It is a statement

estimating planning is essential that each financial act is carefully planned before any action. As the

success of failures of the firm depends totally on it.

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In IRIL the task financial planning is divided into 3 parts.

Financial decisions are very crucial. Head office a Mumbai plan for new project of company.

TOP LEVELThis level is concerned with preparing plans pertaining to the long term

requirements of the firm. Its capital expenditure permanents short term needs inflows and outflows.

MIDDLE LEVEL

This level is generally concerned with listing and calculation of outflow. This is

constituted by the virtually routine finance plan.

LOWER LEVELThis level is generally concerted with the listing and calculation of outflows but

process at this level is divided into 2 steps.

CAPITALISATION

Capitalisation is sum of the par value of the stock & bonds outstanding.

- Guthaman & Duggal

For the co. the book value and real value of share are two main components or

assessment of co.s financial position which can be calculated as under.

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YEAR EPS (RS.)

2001-2002 7.04

2002-2003 20.71

2003-2004 18.59

2004-2005 20.27

2005-2006 25.01

2006-2007 25.74

BOOK VALUE = Equity Share + Capital reserve & Surplus

No. of Equity Share

= 59.88 + 1294.18

5.98

= Rs. 226

The book value per share is Rs. 335 and market value per share of Co. as on

March 07 was Rs. 1061.80 Which is higher than its book value per share so we can say that co. is under

capitalized. The highest market price of share during the year was 1324.90 in Jan-07 & the lowest price

was 510.05 in Jun-06.

CAPITAL STRUCTURE

Capital structure may be defined as the combination of debt and equity securities

that leads to maximum value of the firm.

- Hampton

Capital Structure refers to mix or long term source of funds such as Debenture,

Long Term Debt., Preference Share and Equity Share capital including reserve and surplus. The

company should plan optimum capital structure.

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The share capital of IRIL Co. is Increase by 1.70 in current year as compared to previous year.

The Reserves & Surplus of IRIL Co. is increased by 520.08 in current year as compared to previous year.

The Secured Loan of IRIL Co. is Decreased by 214.9 in current year as compared to previous year.

The Unsecured Loan of IRIL Co. is increased by 126.49 in current year as compared to previous year

0

500

1000

1500

2000

25003000

3500

4000

2007-2008 2006-2007

Share Capital

Reserves & Surplus

Secured Loan

Unsecured Loan

FINANCIAL LEVERAGE

Financial Leverage is defined as the activity of firm used Financial Leverages to

magnify the effects of firms earning per share.

Particulars (Rs. In Crore.)

2007-2008 2006-2007

Share Capital 95.01 93.31

Reserves & Surplus 3551.32 3031.24

Secured Loan 1856.72 2071.62

Unsecured Loan 886.70 760.21

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The Financial Leverage is also called by Trading on

Equity. Company can finance its investment by variety of sources such as Preference Share Capital

including Reserves and Surplus

The Financial Leverage is controllable and also compactly avoidable Leverage. The degree of

fund collected by the firms outside is called Financial Leverage.

The IRIL Co. has posted a superior financial performance during the year 2003-

2004. The revenue has grown to 1806.06 Crores against 1577.04 Crores in previous year.

FINANCIAL LEVERAGE = E B I TE B T

= 493.58

314.56

= 1.57

MANAGEMENT OF FIXED ASSETS

There are two types of assets in every firm fixed assets and variable assets.Manage fixed assets is the most important task facing management such are required to be retained in

business on long term basis to produce goods and service and not or sale.

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Particulars Net Block

As at 31st march-06 As at 31st march-07

Tangible Assets

Land

Free HoldLease Hold

Railway Siding

BuildingLease hold improvements

Plant & Machinery

Furniture Fixture & Equipment

Vehicles and AircraftLive Stock

Intangible Assets

Goodwill on Acquisition

TrademarkSpecialized Software

1.2024.96

0.97

160.950.26

679.72

31.59

12.920.00

20.35

77.962.19

1.2024.85

0.69

164.300.16

781.33

33.97

13.540.00

20.35

61.382.48

T O T A L 1038.07 1128.25

From the above table we can say that the assets profitability is also fluctuating it

was increasing dramatically from year 2007. In this year the market condition was favorable and theIRIL Co. was able to fulfill the demand from the market that way the assets were efficiently and

effectively worked.

CAPITAL BUDGETING & INVESTMENT APPRAISAL

One of the most crucial and vital areas of long-term decision-making that firms must tackle is that of

investment - the need to commit funds by purchasing land, buildings, machinery and so on, in

anticipation of being able to earn an income greater than the funds committed. In order to handle these

decisions, firms have to make an assessment of the size of the outflows and inflows of funds, the lifespan

of the investment, the degree of risk attached and the cost of obtaining funds. The expenditure incurred to

fund such investments is termed as capital expenditure (CAPEX). The capital expenditure (CAPEX)

could be incurred for expanding existing capacity (brown-field project) or to invest in altogether newinvestment avenues (green-field projects). But before incurring any such

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expenditure proper appraisal of the available opportunities is to be carried out

because capital expenditure, by its very nature, is irreversible, i.e. once incurred, it has long-term

implications. Hence investment appraisal (capital budgeting) comes into play.

Appraisal of investment opportunities depends upon the nature and type of the project. There are two

main types of projects:

The first category is independent projects. This means that accepting one project does not

affect decisions about the other project.

The second category is mutually exclusive projects. This means that only one of a given

set of projects can be taken (e.g. different sized factories)

Investment appraisal and Capital Budgeting:

Investment appraisal is a systematic financial procedure to ensure that adequate capital is allocated to

value adding opportunities. The investment appraisal is a complex procedure and is not unique for all the

investment proposals. There are various steps to appraise the given set of the projects. The major steps

that are involved in the process of investment appraisal are as follows:

1. Generation of Investment Proposal,

2. Estimation of cash flows,

3. Evaluation of cash flows,

4. Selection of project(s) based on an acceptance criterion,

5. Continual reevaluation of Investment project after its acceptance.

The evaluation of any major capital budgeting decision should be done under the broad outline of these

steps.

GENERATION OF INVESTENT PROPOSALS

The generation of an investment proposal is the fundamental and most important step in the capital

budgeting process. It involves crucial procedures of drafting the investment proposal as per the

requirements, checking its financial and technical viability, obtaining approval from the authorities

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and most importantly securing adequate funds for the requisite project. This step is also very crucial as it

encompasses the identification, analysis and selection of alternative(s).

Generally, in any organization, there will be many potential investment

proposals generated. Obviously, they cannot all go through the rigorous project analysis process.

Therefore, the identified investment opportunities have to be subjected to a preliminary screening

process by management to isolate the marginal and unsound proposals, because it is not worth spending

resources to thoroughly evaluate such proposals.

ESTIMATION OF CASH FLOWS

The next logical step in the process of investment appraisal is the estimation

of cash flows that the proposed project would be generating over its lifetime. Estimation of cash flows is

very crucial as it provides the foundation for further decision-making. The estimation of cash flows, to be

effective, should be carried on certain basic premises like:

After-tax cash flows: For the purpose of estimation of cash flows, after-tax cash flows should be

considered.

Incremental cash flows: The cash flows from the proposed investment proposal should be

estimated on incremental-basis.

Opportunity costs & Sunk costs: In the estimation of proposed cash flows from the project the

opportunity casts should be included. As against this, the sunk costs should be ignored in the

computation of the cash flows.

Depreciation and Inflation: Another important consideration that should be made before

approving any project is the impact of inflation on the depreciation and the tax-cover that it

provides. This is especially useful in the replacement decisions.

Capital Budgeting Process- an overview:

Capital budgeting, matter of fact, is a very crucial process as it involve taking long term

decisions of irrevocable nature which have an impact in the long term functioning and future prospects of

the concern.

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In a nutshell the capital budgeting process can be summed up with the help of

following flow chart:

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Capital budgeting is a multi-faceted activity. There are

several sequential stages in the process. The above flow chart indicates that every capital budgeting

decision, especially in the large corporation has to go through certain logical steps as per the company

policies. In general the proposals

have to be scanned through the steps as mentioned in Fig.4. A strategic plan is the grand design of the

firm and clearly identifies the business the firm is in and where it intends to position itself in the future.

Strategic planning translates the firms corporate goal into specific policies and directions, sets priorities,

specifies the structural, strategic and tactical areas of business development, and guides the planning

process in the pursuit of solid objectives. A firms vision and mission is encapsulated in its strategic

planning framework. There are feedback loops at different

stages, and the feedback to strategic planning at the project evaluation and decision stages indicated

by upward arrows in the given figure is critically important. This feedback may suggest changes to the

future direction of the firm, which may cause changes to the firms strategic plan.

Evaluation of cash flows

Having collected the relevant data pertaining to the available alternatives andestimation of the cash flow projections, the next logical step in the process of investment appraisal is to

evaluate the cash flows on standards in terms of the impact of the project on the NPV of the company,

the period that the project requires to payback its initial outlay and so-on. In other words the endeavor is

to assess the economic worth of the project with due consideration to the risk and quality of Investment

proposals under consideration. There are various methods that are applied for the evaluation of cash

flows of the capital investment proposals. Some of the major methods are as follows:

Average Rate of Return (ARR)

The average rate of return looks at the expected net cash flows (income -

expenses) of the investment project. It measures the average net return each year as a percentage of the

initial cost of the investment.

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A project is accepted when itsARR is greater or equal to the required rate of return

on the investment.

Advantages:

The accounting rate of return as a technique of capital investment appraisal offers

following advantages:

It is a particularly useful approach for ranking projects where a firm faces liquidity constraints

and requires fast repayment of investments.

It is appropriate in situations where risky investments are made in uncertain markets that are

subject to fast design and product changes or where future cash flows are particularly difficult to

predict.

The method is often used in conjunction with NPV or IRR method and acts as a first screening

device to identify projects that are worthy of further investigation.

All levels of management easily understand it.

It provides an important summary method: how quickly will the initial investment be recouped?

Disadvantages:

However this method suffers from following demerits:

It does not take account of the timing of the profits from an investment.

It implicitly assumes stable cash receipts over time.

It is based on accounting profits and not cash flows. Accounting profits are subject to a number of

different accounting treatments.

It is a relative measure rather than an absolute measure and hence takes no account of the size ofthe investment.

It takes no account of the length of the project.

It ignores the time value of money.

Payback Period Method:

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The payback periodis the length of time it takes to recover

the initial cash flow without regard to the time value of money. In other words it is the ratio of the initial

fixed investment over the annual cash inflows for the recovery period. It is commonly used but crude

method for analyzing capital projects. Its main defects are that it takes no account of the profits over the

whole life of the investment, nor of the time profile of the cash flow.

Advantages:

The advantages of Payback-period method as a technique of investment appraisal are as follows:

Simple to compute

Easy to understand

A crude measure of liquidity

Disadvantages:

Ignores the time value of money

Ignores cash flows beyond the payback period

No objective decision criteria

Importance of Payback Period:

Despite the limitations of the payback method, it is the method most widely used

in practice. There are a number of reasons for this:

It is a particularly useful approach for ranking projects where a firm faces liquidity constraints

and requires fast repayment of investments.

It is appropriate in situations where risky investments are made in uncertain markets that are

subject to fast design and product changes or where future cash flows are particularly difficult to

predict.

The method is often used in conjunction with NPV or IRR method and acts as a first screening

device to identify projects that are worthy of further investigation.

All levels of management easily understand it.

It provides an important summary method: how quickly will the initial investment be recouped?

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Discounted Payback Period Method:

The discounted payback periodis the length of time it takes to recover the initial

cash flow in terms of discounted cash flows. This method is used in risk analysis by comparing the

discounted payback period to the expected life. The closer the discounted payback period is to the

expected life, the more risk (when other conditions are equal).

Advantages:

The Discounted Payback Period method offers following advantages over the

simple Pay Back Period Method:

Considers the time value of money

Considers risk

Disadvantages:

Inspite of the above-cited merits, the Discounted payback Period Method suffers

from following demerits:

Ignores cash flows beyond the discounted payback period

No objective decision criteria

The Profitability Index (Benefit-Cost Ratio)

Profitability index is the present value of the future cash flows divided by the

initial investment. It is also called the benefit-cost ratio.

where, PI= Profitability Index

A profitability index value above 1.0 indicates that the project is

expected to enhance owners' wealth.

Decision rule:

PI > 1.0 Accept

PI < 1.0 Reject

PI = 1.0 Indifferent

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Advantages:

The main advantages of Profitability Index as a measure of appraising capital

investment proposals are as follows:

Considers all cash flows

Considers risk


Useful when ranking and selecting projects when capital is rationed

Disadvantages:

Profitability Index suffers from following disadvantages:

Difficult to interpret

Requires specifying a cost of capital

May give incorrect decision when comparing mutually exclusive projects

Internal Rate of Return

The internal rate of return (IRR) is the effective yield on the project; that is, the

discount rate that causes the net present value to be equal to zero.

Linear extrapolation:

where, p1=% by positive NPV

p2=% by negative NPV

A = positive NPV (by % p1)

B = negative NPV (by % p2)

Decision Rule:

If the IRR is greater than the required rate of return (RRR), the project is expected

to enhance owners wealth:

IRR > RRR Accept project

IRR < RRR Reject project

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IRR = RRR Indifferent

Advantages:


Considers risk (in the decision rule)


Objective decision criteria

Disadvantages:

No unique IRR if there is more than one sign change in cash flows

May give an incorrect decision when deciding among mutually exclusive projects or in the case

of capital rationing.

Modified Internal Rate of Return

MIRR is a financial measure used to determine the attractiveness of an investment.

It is generally used as part of a capital budgeting process to rank various alternative choices. As the name

implies, MIRR is a modification of the financial measure Internal Rate of Return (IRR). The modified

internal rate of return (MIRR) is the effective yield on the project if intermediate cash flows are

reinvested at a specified rate (usually the project's cost of capital).

The superiority of Modified Internal Rate of Return, as against the simple Internal rate of return, lies in

the fact that

Modified Internal Rate of Return considers negative cash flows after the initial investment,

It also considers the reinvestment potential of positive cash flows.

Example: A firm has investment options with returns that are generally moderate. An unusually

attractive investment opportunity comes up with much higher return. The cash spun off from this latter

investment will probably be reinvested at the moderate rate of return rather than in another unusually

high-return investment. In this case, IRR will overstate the value of the investment, while MIRR will not.

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MIRR is calculated as follows:

Advantages:

Major advantages of Modified Internal Rate of Return over simple Internal Rate of

Return is the fact that it:


Considers risk


Follows an objective decision criteria

Disadvantages:

Major limitation of this method is that it:

May give an incorrect decision when deciding among mutually exclusive projects or in the case

of capital rationing.

Net Present Value Method:

The net present value(NPV) is the difference between the discounted future cash

inflows and the discounted cash outflows for a project.

NPV= Present Value of cash inflows- Present Value of cash outflows

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where, NPV=Net Present Value

CFn=Cash Flows for the period n

i= required rate of return

A project whose NPV is greater than zero is expected to enhance owners wealth. The simple decision

rule is:

NPV > 0 Accept

NPV < 0 Reject NPV = 0 Indifferent

Advantages:

Net Present Value Method of evaluating the capital investment projects is

considered to be the most theoretically sound method of appraisal. Its prime advantages over the other

appraisal methods are as follows:


Considers risk


Objective decision criteria

Disadvantages:

Although theoretically sound, the Net Present Value Method has certain

drawbacks, viz.:

Difficult to interpret

Requires specifying a cost of capital

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MANAGEMENT OF WORKING CAPITAL

Working capital is that which is required maintaining the daily expenses of the

business management of Working Capital refers to the fine investment in Current Assets. Current Assets

are as assets which are converted into cash cycle. Current Assets include Cash, Short term Securities,

Debtors, Bills Receivable and Inventory.

Management of Working Capital is an integral part of Finance Management and ithas earning on the objectives of the owners wealth.

Working Capital is essential to operate the fined assets in the sales activities

however sales do not covered into cash instantaneously therefore a need of Working Capital arises. There

are two concepts of Working Capital.

I) Gross Working Capital

II) Net Working Capital

Gross Working Capital means total of Current Assets

Net Working Capital means difference between the Current Assets and Current Liabilities

42

Raw

MaterialCash

Work in

Progress

Finished

Goods

Sales

(Credit)

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INVENTORY

Inventory means how to manage raw material & supply of goods required for the

production which will insure minimum five cost of form.

Management of inventories is important part of Working Capital Management the

aim of inventory management is to provide conscious surplus of Raw Materials other goods which are

required for production.

There are five types of Inventories in IRIL

1) Raw Material

2) Material in Process

3) Contract Job in Process

4) Finished Goods5) Stores & Spares

It maintains sufficient stock of Raw Materials in period of short supply and

anticipates price change it helps sales department to maintains sufficient finished goods inventories for

smooth sales operation.

In IRIL there is special department and separate Inventory Management force

which perform certain functions for efficient management of Inventories in the company

BILLS RECEIVABLE

The term Bills Receivable is defines as debt owned to the firm by customers

arising form sales of goods or services in the ordinary course of business.

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Receivable treated as marketing total to aid the sale of

goods as well as use for protecting the customers from the competitor and attract the new customers and

there by profit.

The IRIL Co. sells its product to the industries so it needs to grant credit to its

buyer

CREDIT STANDARDS

As per industrial standard for rayon the organization runs well on the track of

average collection period.

But because of the care competition in the chemical market the average collection

period increased and reaches near to 25 to 30 days so it can conclude that organization investment in

receivable is not very high.

The customers are paying its obligation in time the defaults rate is nearly zero in

the ort.

Beside all above the organization also evaluate their customers financial condition

character and capacity and that why the Company has never incurred the bed debt in the entire history.

The collection of the fund is done by HDFC Bank which plays an agent role the

average collection period for the account receivable between 21 to 27 days.

Total debt of company as on 31st March, 2008 is 760.98 crores which have

increased as compare to the last year debt i.e. 31 st march, 2007 was 595.99 Crores so it can be said that

debtors are up by Rs. 164.99 Crores.

CASH MANAGEMENT

Cash is described as the oil to the ever turning wheels of the business without is

the process rinds to a stop

Generally any organization holds the cash for Transaction Motive, Precautionary

Motive, Speculative Motive, Compensation Motive.

The IRIL Co. holds the cash only for the Transaction Motive. It holds the cash for

smoothing the day to day operation only. If there is surplus of cash in the co. it is transferred to the CFD

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while if there is deficit of the cash in the organization it borrows it from the CFD

and also decision regarding the investment of cash in to market table security is done through the CFD

only

CASH COLLECTION:

The IRIL Co. operating in various geographical area of country it tries to speed up

the cash collection by decentralization with the help of ten cash collection centres all over the India.

CASH DISBURSEMENTS:

The disbursement is one through centralized system by the organization the

payment of the bill be made from the central amount and from the head office. So the Co. can enjoy the

transit time delay using the factoring.

OPTIMUM CASH BALANCE:

The IRIL Co. keeps a maximum level of cash balance worth and average payment

or three days. If cash is more than its maximum level than the cash is transferred to CFD and if cash is

less than the level than the requirement of the cash is borrowed from the CFD.

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OPERATING LEVERAGE ANALYSIS

The leverage is associated with the investment activities is referred to as Operating

Leverage. It is determined by the relationship between the firms sales, revenue and its earning before

interest and tax (EBIT).

Particulars 31st March, 2007.

Balance with scheduled bank

Current Account 19.16

Cash & Cheques in Hand 1.12

Current A/c. in respect of Right Issue

Refund order

1.41

Deposit A/c. 1.03

Balance on Non-Schedule Bank

SBS Current A/c., London 0.02

T O T A L 22.74

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Operating Leverage analysis results from the existence fixed operating expenses in

the firms income stream with fixed cost. The percentage change in profit accompanying a change in

volume is greater than percentage change in Fixed Assets.

OPERATING LEVERAGE = %CHANGE IN SALES X 100

%CHANGE IN PROGIT

= 3577.89 2786.39 x 100224.97 186.93

= 791.50

38.04

= 2027.40

DIVIDEND DISTRIBUTION

Dividend refers to that portion of firm net earnings which are paid out to the

Shareholders. A major decision of financial management is the dividend decision in the sense that the

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firm has to choose between distributing the profits to the shareholders and

ploughing them bank into the business.

Following Table shows Dividend per Share and Dividend Payout Ratio for last

five years.

Year Dividend Per Share Payout(%)

1995-96 6.25 15.20

1996-97 6.75 15.55

1997-98 5.00 17.46

1998-99 4.00 28.25

1999-00 1.00 (2.76)

2000-01 3.00 28.882001-02 3.30 45.47

2002-03 3.75 24.05

2003-04 4.00 20.58

2004-05 4.00 24.02

2005-06 5.00 29.08

LAST 5 YEARS PER SHARE DATA

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LAST 5 YEARS PROFIT & LOSS ACCOUNT

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(Rs. Crore)2007-

082006-

072005-

062004-

052003-

04

Income from operations4,137.

523,577.

892,786.

391,988.

041,717.

61

Less: excise duty 213.31 157.42 144.34 127.20 140.22

Net income from operations3,924.

213,420.

472,642.

051,860.

841,577.

39

Other income 41.59 44.51 23.44 9.72 14.23

Total income3,965.

803,464.

982,665.

491,870.

561,591.

62

(Increase) / decrease in stocks (83.68) (45.48) (47.32) (11.16) (21.01)

Cost of materials2131.2

51,840.3

61,447.5

7999.60 816.30

Salaries, wages and employee benefits 258.2 193.22 164.10 124.97 117.43

Manufacturing, selling and otherexpenses

1026.08

873.09 657.45 493.00 421.08

Interest and other finance expenses(net)

179.02 171.16 55.79 18.73 14.82

Total expenses3,510.

873,032.

352,277.

891,625.

141,348.

62

Profit before depreciation /amortisation and exceptionalitems

454.93 432.63 387.60 245.42 243.00

Depreciation / amortisation 141.1 120.32 111.81 77.74 77.59

Marketing / technical know howexpenditure written off

- - - 2.95 3.93

Profit before exceptional itemsand tax

313.83 312.31 275.79 164.73 161.48

Exceptional items 0.73 (1.23) (4.04) (7.65) 19.95

Profit after exceptional items 314.56 311.08 271.75 157.08 181.43

Provision for current tax 78.14 98.82 92.97 45.35 44.25

Provision for deferred tax 25.24 15.16 (6.91) (1.99) 5.90

Provision for fringe benefit tax 3.86 3.39 4.25 - -

Tax provision of earlier years writtenback

(35.75) (31.26) (5.49) - -

Net profit 243.07 224.97 186.93 113.72 131.28

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LAST 5 YEARS BALANCE SHEET

(Rs. Crore)2007-

082006-

072005-

062004-

052003-

04

Sources of funds

Shareholders' funds

Share capital 95.01 93.31 83.50 59.88 59.88

Share warrants 377.41

Reserves and surplus3551.3

23,031.2

42,124.1

11,294.1

81,207.8

0

4,023.74

3,124.55

2,207.61

1,354.06

1,267.68

Loan funds

Secured loans1856.7

22,071.6

21,084.2

1493.03 405.81

Unsecured loans 886.70 760.21 479.36 - -

2,743.42

2,831.83

1,563.57

493.03 405.81

Deferred tax liabilities 200.31 174.08 167.70 125.52 127.51

Total funds employed6,967.

476,130.

463,938.

881,972.

611,801.

00

Application of funds

Fixed assets

Gross block3,111.7

82,653.1

52,461.8

11,418.7

41,301.3

1

Less: depreciation1,680.8

91,548.9

01,448.7

4663.49 588.53

Net block1,430.8

91,104.2

51,013.0

7755.25 712.78

Capital work-in-progress 70.73 203.88 122.45 55.03 24.69

1,501.62

1,308.13

1,135.52

810.28 737.47

Investments4,054.

173,849.

391,675.

79699.66 741.63

Current assets, loans and advances

Inventories 776.60 475.26 526.33 355.00 276.91

Sundry debtors 760.98 595.99 415.44 260.90 186.41

Cash and bank balances 97.15 22.74 20.32 9.41 13.27

Interest accrued oninvestments 0.82 - - - -

Loans and advances 476.50 332.33 664.18 103.88 93.50

2,112.05

1426.32

1626.27

729.19 570.09

Less: current liabilities and provisions

Current liabilities 566.89 393.73 424.78 228.58 212.74

Provisions 133.48 59.65 73.92 37.94 38.40

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700.37 453.38 498.70 266.52251.14

Net current assets1,411.

68972.94

1,127.57

462.67 318.95

Total funds utilized6,967.

476,130.

463,938.

881,972.

611,801.

00

LAST 5 YEARS CASH FLOW STATEMENT(Rs Crore) 2007-08 2006-07 2005-06 2004-05 2003-04

A Cash flow from operating activities

Net profit before tax 314.56 311.08 271.75 155.16 161.48

Add: Adjustments for

Depreciation 141.20 120.43 111.91 77.84 77.67

Marketing and technical know-howwritten-off

- - - 2.95 3.93

Interest expenses (net) 179.02 171.16 55.80 18.73 14.82

(Profit) / loss on fixed assets sold (7.18) (2.66) 0.34 (0.36) 0.16

(Profit) / loss on sale of investments (1.19) (6.76) (2.54) (0.60) (1.19)

Dividend income (4.23) (23.73) (16.54) (6.41) (8.74)

(Gain) / loss on sale of contract exportsdivision

- (0.20) - - -

(Gain) / loss on sale of Rajshree Syntexunit

(0.73) - - - -

Employees stock options outstanding 0.71 - - - -

307.60 258.24 148.97 92.15 86.65

Operating profit before working capitalchanges 622.16 569.32 420.72 247.31 248.13

Add: Adjustments for

Decrease / (increase) in trade andother receivables

(141.39) (7.60) 231.47 (87.18) 21.53

Decrease / (increase) in inventories (258.47) 28.00 (118.66) (78.33) (31.49)

Increase / (decrease) in trade andother payables

102.52 (32.71) (275.57) 17.77 24.65

(297.34) (12.31) (162.76) (147.74) 14.69

Cash generated from operations 324.82 557.01 257.96 99.57 262.82

Income taxes refund (paid) (net) (46.11) (60.66) (81.00) (48.23) (48.12)

Net cash from operating activities 278.71 496.35 176.96 51.34 214.70

B Cash flow from investing activities

Proceeds from sale of fixed assets 13.29 8.82 2.19 2.81 2.99

Capital subsidy received - - - - 1.16

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Proceeds from transfer of globalexports and marketing division

- - - 5.40 -

Sale / redemption / (purchase) ofinvestments (net)

212.28 (116.08) 257.44 84.87 (48.01)

Sale of investments in subsidiaries and

joint ventures

- 10.96 - - -

Proceeds from sale of RajashreeSyntex unit

5.06 34.50 - - -

Interest received 24.78 24.29 13.15 4.34 9.17

Dividend received 4.23 23.73 16.54 6.41 8.74

Increase / decrease in corporatedeposit

(89.76) 132.50 (184.63) - -

Purchase of fixed assets (238.05) (302.72) (199.97) (153.66) (105.13)

Investment in equity of joint ventures - (1597.89) (661.09) - (8.00)

Investment in equity of subsidiaries (504.59) (463.83) (91.40) (44.42) (150.18)

Acquisitions - - - - (42.54)Net cash (used in) / from investingactivities

(572.76)

(2245.72)

(847.77)

(94.25)(331.80

)

C Cash flow from financing activities

Proceeds from issue of share capital(including share premium)

1.70 9.81 0.01 0.00 0.01

Security premium received 339.70 759.93 0.06 0.04 0.06

Proceeds from issue of share warrants(net of conversion)

377.41 - - - -

Proceeds from / (repayment of)

borrowings (net) (157.81) 1272.87 764.86 88.00 138.31

Dividends paid (including tax thereon) - (106.13) (27.31) (27.08) (25.33)

Interest and finance charges paid (194.55) (184.69) (62.06) (21.92) (23.97)

Net cash (used in) / from financingactivities

366.45 1751.79 675.56 39.05 89.07

Net increase in cash and equivalents 72.40 2.42 4.75 (3.86) (28.03)

Cash and cash equivalents (openingbalance)

22.74 20.32 9.41 13.27 41.30

Cash of IGFL and BGFL - - 6.16

Cash acquired on merger of ABIL 2.02 - - - -

Cash outflow on sale of RST unit (0.01) - - - -

Cash and cash equivalents (closingbalance)

97.15 22.74 20.32 9.41 13.27

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INDEX

SR. NO. PARTICULARS PAGE NO.1. Introduction 52

2. Organization Structure of Production

Department

53

3. Introduction to Companys Product 54

4. Manufacturing Process 55

5. Plant Layout 59

6. Material Handling 60

7. Purchase Department 61

8. Plant Maintanance 62

55

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9. Quality Control 63

INTRODUCTION

Production means certain of utilities and entails the procurement and utilization of factors of production,

which includes manpower, material, building and equipments.

Production is fabrication of physical object though use of men, material and equipment.

Production management deals with decision making related to production process so that the

resulting goods or services are produced according to specifications, in the amounts and by

schedule demanded and at minimum cost.

- E. S. Buffa

Production must be operated in an economic and efficient manner because cost of production is vital

factor in facing market competition and in ensuring normal profit or return on investment.

56

Inputs

Material

Labour

Capital

Outputs

Products

Services

Information

Products or

Services

Production

Process

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MANUFACTURING PROCESS

IR&IL Co. is the market leader of the nation and its market share is round about 30%. It

produces more than 500 shades, ranging from natural white to a wide array of colors from purist tints,

though medium tones to vibrant deep shades I fine to coarse deniers ranges from 70 to 900. The units

production process in Rayon Division is conventional one and simultaneously it uses pot spinning yarn

process.

VISCOSE FILAMENT RAYON YARN:The main products at Rayon Division Veraval:

1) Viscose Filament Rayon Yarn2) Sulphuric Acid

3) Carbon Disulphide

4) Sodium Sulphate

The main raw material required for Rayon Yarn is:

) Wood Pulp

) Caustic Soda) Carbon Disuphide

) Sulphuric Acid

About 90% of the above are available from the domestic market. Wood pulp is also imported from

Canada, Sweden and South Africa. The sheets of wood pulp are made from the cellulose from the

following trees:

Eucalyptus (South Africa)

Spruce (Canada)

Bamboo (India)

The manufacturing process of Viscose Filament Yarn can be divided in the following sections:

VISCOSE SECTION

The process is carried out in the following stages:

Conversion of woo cellulose into alkali cellulose i.e. mixing of

wood pulp with NaOH. Conversion of alkali cellulose into sodium cellulose xanthate.

Conversion of sodium xanthate into viscose soltution.

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The process is carried out in the following steps:

a) Mixing:

Foremost the raw materials, woo pulp containing 91% to 97% of cellulose is mixed with thesodium hydroxide (NaOH) of necessary strength for an hour a half.

b) Steeping:

In this step, the cellulose (wood-pulp) is mixed with the caustic solution and it combines to

form the alkali cellulose which is called slurry. The excess soda is then drained off for reuse. In

this step the hemi cellulose and the other impurities are also removed.

c) Homogenizer:

From the mixer slurry is pumped to vessel which is called homogenizer. Here in this

stage different batches of slurry are bended thoroughly to get uniform alkali cellulose mat at the

press. The slurry is constantly and continuously supplied to be pressed. The slurry in thehomogenizer is shirred continuously by stirred homogenizer. It is also hacked to control slurry

temperature circulating water.

d) Pressing (Twin Roller Press) :

It is a continuous process. From the homogenizer, slurry is pumped to be pressed where it

passes between two perforated drums (rollers). The excess caustic is removed cellulose and otherimpurities are also dissolved in the pressed caustic and removed by dialysers. Generally the mat

received is constituted with the following composition and proportion:

Cellulose 34%

Alkali 15.5%

Water 50%Carbonate 0.5% to 0.55%

e) Shreding :

Shreding process increase the surface of the A.C. mat ensures the next stage of aging and

xanthation to be rapid an uniform. In this process mat is out into small pieces by three rollers

rotating at different speed and each of them is attached with a linkering wire which outs the matform the shredder, A.C. pieces are carried maturing rum by conveyou belt.

f) Maturing :

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Maturing is the necessary process to decrease the degree of polymerization from 1400

monomer units to 600 monomer units of alkali cellulose by the effects of temperature and timecaging to facilitate xanthation stage. In this process, the maturing drum used is of 70 feet long and

9 feet diameter. This cylindrical vessel is rotation at a speed of 173 rpm an it is inclined a 3

degree to horizontal to facilitate A.C. flow. The stock of A.C. in the drum remains about 25000kgs.

g) Xanthation :

This is the main reaction carried out during viscose production. There are four

xanthation equipped with agitator and are vacated though which cold water is circulated to

control the product temperature. Xanthation is carried out under vacuum. After dumping thebatch in the dissolver xanthate is cleaned with soft water and then it is dried with air.

h) Dissolving :

In this stage the viscose is uniformed by eight dissolver vessels which are equipped with

agitator which makes viscose uniformed. The dissolving time is 3 hours. The term is controlled tomaintain ripening index (R-S) from the dissolver viscose which is transferred to ripening room.

i) Ripening :

In ripening viscose is filtered though different filters. It is necessary process to remove the

impurities before sending the viscose solution to spinning section.

SPIN BATH SECTION

Spin bath is quality section to spinning rayon yarn. Spin bath is an important constituent forthe viscose to be re-generated in to cellulose. The main composition of the spin bath solution is

sulphuric acid (H2SO4) and sodium hydroxide (NaOH) other composition is ZnSO4, Na2SO4

temperature etc. which constitute the spin bath solution and the sodium sulphate (Na2SO4) is

received as a by-product.Sodium sulphate is a min by-product which is requires 22 tones per day. This by-product

Na2SO4 should be removed from spin bath solution and spin bath solution transferred to spinning

section by total six drums out of which two of them are in old spin bath dept. while other four arein new spin bath dept.

SPINNING SECTION

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In this section viscose solution from viscose section is directly supplied through dye units to

spinning machine for bright and colored yarn. The merging pump drives fixed amount viscose in

one minute depending upon the capacity of the pump. Viscose temperature is around 28 degree

centigrade. Spin bath solution is also following with high speed from the spin bath section at 56degree centigrade to spinning section. Viscose coming from heat cons in the contact with spin

bath coagulation of viscose which takes place to form yarn of particular denier.

Denier is a weight of 9000 mtrs. of dry yarn in grams. Yarn is specified by its denierand filaments e.g. 225/40 that means 225 denier with 40 filaments. Jet is made of anti corrosive

material consisting of 70% Au(Gold), 29% Pt (Platinum) and 0.5% Rh. The yarn coming out is

passed through a cup tube of length 550 mm or 450 depending upon denier.

AFTER TREATMENT SECTION

Raw cake from spinning section is brought to A.T. section in raw cake trucks. Here the

raw cakes pass through 20 parts for 19 minutes each. In these 20 parts the different machines are fixedin which the washing, bleaching and drying are done by soft water. Various hydro extracted chemicals

etc. are used to remove impurities, dust and dirt. Afterwards the cakes are dried in the dryer room by

the air.

TEXTILE SECTION

The dry cakes are now dry for wining. The yarn is in the form of conesor, and hank time

duration of coming depends upon the denier of yarn. The Textile departments place where the

manufacturing process of Rayon Yarn comes to an end. Although it comes under production processbut its function is auxiliary and very important in nature.

PACKING SECTION

After wining the cones an hank, they are sent to the pacing section where they are visually

check by the inspectors an grades are given as per their quality.

At present cones are packed in cardboard boxes. Then the cartoons, which are filled by

inspection side; helpers, are first brought to the weighing balance where the weight is balance as per

pre-determine standard. After that a computer pacing slip is made having various necessary details. On

is paste on cartoon, second is kept inside the cartoon and third is kept for record purpose. After

that the cartoons are stepped with polly propylene type. Finally B.O.P.P. adhesive tape is applied at thejoint of top flaps of cartoons. These fully packed and sealed cartoons are sent to bonded stores

room(B.S.R.) for sales department to be dispatch

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MATERIAL HANDLING

Material handing is the art and the science involving the movement, packing and storing of substance in any

form.

- American Handling society

Material handing can be defined as Controlling the amount, location, movement and timing of the various

commodities used in and produced by the industrial enterprise.

IR&IL Co. is totally using the automatic process for production, but at certain stage it uses equipment for the

shifting of raw materials. The company uses trolley as an equipment for material handling in its Viscose

Section to brought up the woo pulp from the storage department an in after treatment department to puts thecakes in washing an knitting. After the last stage of the production, the final product is sent to the packing

section with the help of trolley.

Many a times IR&IL Co. uses

Conveyers

Rails

Cranes

Trucks

For the supply of raw material to various departments.

The Diesel Power House of the IR&IL Co. uses conveyers belts for the supply of coal that is imported from

Bihar.

Whereas the other raw materials like woo pulp, sulphur etc. are brought by land route i.e. rails and truck to

the factory.

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PURCHASE DEPARTMENT

Purchasing function is the heart of any business and it is suppose to be cast goldmine to profits.

The task of purchasing is related to going to the open market, fining the desire material at the lowestpossible price and selecting the supplier to offer minimum prices having required quality of material.

IR&IL Co.believes ino Purchase the right quality of material.

o Purchase right quantity of material.

o Make the material available at right time.

o Purchase the material at right price.

o Purchase material from the right source.

Purchase procedure ofIR&IL Co.

INVENTORY DEPARTMENT

Inventory dept. of IR&IL Co. uses Scientific Mounting Level Method. In this Co. inventory control is long

process.

Any dept. that is in need of any material prepares an indent. This indent includes the information like qualityquantity, requirement etc. this indent after filing it is sent to the purchase dept. of the Co.

PURCHASE DEPARTMENT

Purchase dept. of IR&IL Co. makes inquiry about the material from the suppliers and collects quotation from

the suppliers.

While placing the purchase order IR&IL Co. consider the following factors.

o Old rate of the product

o Lowest bids

o

Reputation of suppliero Delivery period

o Payment terms

o Technical evolution

o After sales service

o Performance guarantee

The above quotation are comparing on the basis of comparison chart which they prepare with the help of all

the information. The decision of purchase is one by the authority. The purchase order is placed on the basis

of feasibility. So, we can say that IR&IL Co. applies integrated Material Management Concept.

STORE DEPARTMENT

The store dept. of the IR&IL Co. receive the raw material which was ordered from the supplier. This dept.prepares Good Receipt Note (GRN). One copy of GRN is sent to that Dept. which has place an indent.

Particular dept. approves the materials and sends requisition to store dept. and collect the material. On thebasis of GRN, final invoice is paid Account Dept.

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INDEX

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INTRODUCTION

Marketing deals with identifying and meeting human and social needs. One of the shortest definition ofmarketing is meeting needs profitably.

A market may be considered as a convenient meeting place where buyers and sellers gather together

for exchange of goods and service.

Marketing is a process by which individuals and groups obtain what they need and want by creating andexchanging products and value with others.

Marketing is typically seen as the task of creating, promoting and delivering goods and services toconsumers and business. Marketing people are involve in marketing ten types of entitles Goods, Services,

Experiences, Events, Persons, Places, Properties, Organizations, Information, Ideas.

Marketing has often described as The Art of Selling Products.

Organization of Marketing Department

Organization here depicts a form of co-operative efforts that re-undertaken by the number of person satdifferent their archylevel.

IR&IL Co. at Veraval is producing a product which is use by all manufacturing industries. Hence, all

marketing activities is one through Centralized System.

SR. NO. PARTICULARS PAGE NO.1 Introduction 66

2 Organization Structure 673 Marketing Mix and Product Mix 68

4 Product Planning and Development &Product Life Cycle

69

5 New Product Development 70

6 Packaging & Marketing Research 71

7 Market Segmentation 72

8 Pricing 73

9 Promotional Tools & Advertising 74

10 Channel of Distribution 75

11 International Marketing 76

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IR&IL Co. has its main Sales Office at Mumbai, but at Veraval it has only dispatch office from where they

send product as per instruction of Mumbai Head Office for sales.

ORGANIZATION STRUCTURE

Vice President

Raw Material

& Storage

Legal &

Liaison

Sales &

MarketingTransport

General

Manager

Senior

Officer

Deputy

Manager

Senior

Officer

Sales Officer

Manager

General

ManagerSenior

Officer

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MARKETING MIX

Marketing mix is the set of marketing tools that firm uses to pursue its marketing objectives in the target

market.

It consists of everything the firm can do to influence the demand for its product. The many possibilities can

be collected into 4 groups of variables known as the four Ps i.e.

1) Product

2) Price

3) Place

4) Promotion

PRODUCT MIX

Product mix which is also called as product assortment is the set of all product & items that a particular

seller offers for sale. A Co.s product mix has certain with, length, depth & consistency.

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IR&IL Co. product is VFY but along with it the Co. also manufactures some chemicals and by-products

which are require for the production of Yarn and the excess of this product is sold out in the market. Notonly that, IR&IL Co.

Is manufacturing the Yarn which is of different colors and different quality denier wise as per therequirement of the client.

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PRODUCT PLANNING & DEVELOPMENT

Product Planning determines the characteristics of the product best meeting the consumersnumerous desires, characteristics that a stability, to products and incorporate this characteristics into

the finished products.

- Johnson

Product planning involves three important considerations:

1) The development and introduction of products2) The modification of the existing products

3) The elimination of unprofitable products

IR&IL Co. plans its product design according to the demand of the clients, market, situation, price of the

product, its competitors.

PRODUCT LIFE CYCLE

A companys positioning and differentiation strategy must change as the product, market and competitors

change over time.

IR&IL Co. is passing from maturity sate. Hence, this company can make changes in its product and

technology by adopting new machines like horizontal spinning machine and pot spinning yarn process.

Because of the technology adaptation, absorption and innovation the benefits derive by the IR&IL Co. are:

o Quality improvement in existing range

o Development of new market segment

o Improvement in process, cost control and productivity

o Improvement energy efficiencyo Reduction in import material consumption

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NEW PRODUCT DEVELOPMENT

New product development shapes the companys future. Given the rapid changes in tastes, technology

and competition a company cant rely solely on its existing products.

Companies that, fails to develop new products are putting themselves at great risk. Company can a new

products though acquisition and development.

IR&IL Co. has made efforts in technology absorption and in specific areas that bring:

Development in its rayon division i.e.

Developing new shades of Spun ye Yarn

Enhancement of Sodium Sulphate receovery

Development of new products i.e. Flat Yarn

Development in Carbon Black Division

Development in Textile Division

Brand

The American Marketing Association defines brand is:

A name, term, sigh, symbol or design or a combination of them, intends to identify the goods or

services of one seller or group of sellers and to differentiate them from those of competitors. Thus brand

identifies the seller or makers.

With six of the foremost name in the apparels business into its fold, Indian Rayon is today the largest

branded apparel Co. in the country. The portfolio includes leading brand names like Louis Phillipe, San

Frisco, Van Heusen, Allen Solly, Peter England and Byford together making Indian Rayon theUndisputed Market Leader for branded mens wear.

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MARKET SEGMENTATION

Market Segmentation consists of taking this total heterogeneous market for the product and

dividing it into several sub-markets segments each of which tends to be homogenous in all thesignificant aspect.

-William Stanon

The company identifies different ways to segment the market and develops the profiles of the resulting

market segments.

There are two approaches regarding Market Segmentation

o People Oriented Approach

o Product Oriented Approach

IR&IL Co. uses People Oriented Approach method for Market Segmentation. They classify their

consumer on the basis of place, income, geographical location, etc.

The branches ofIR&IL Co. are located at Ahmedabad, Delhi, Mumbai, Amritsar, Surat, Bangalore

and Madras. Its head office is situating at Mumbai which takes all the decisions regarding thecompanys products. There are different manufacturing companies that consumes and demand for the

specific type of yarn of very fine quality. This demand for yarn differs from company to company on

the basis of their handloom production. So, this company has segmented the total market on the basisof product application consumer industry wise.

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PRICING

Pricing is a key factor, which remarkably effects the sales operartions. Price may be define as, The

value of the product attributes expressed in monetary terms which a consumer pay or is expectedto pay in exchange and anticipation of the expected or offered utility.

The firm has to consider many factors in setting its pricing policy

o Pricing objective

o Determining demand

o Estimating costs

o Analyzing competitors prices and offers

o Pricing methods (selecting)

o Selecting final price

Price is the only element in the marketing mix that produces revenue.

IR&IL Co. has not adopted any clear pricing policy but it follows the mixture of following pricing

strategy:

Competition Oriented Pricing Policy

Under this policy all the manufacturers meet together at Mumbai and they fix maximum price

level by negotiating with each other. Sometimes the Co. also uses the prestige pricing method

because it is believe that the product with higher quality can attract the customer with the higherprices.

Demand Oriented Pricing Policy

Under this policy the company uses the method of pricing at market. This helps to avoid the

price competition and price war in the market.

Cost Oriented Pricing Policy

Under this policy the company use the method of target pricing. It fixesa target return of totalcost. It uses break even analysisfordeciding cost plus pricing which helps it in determining thelevel of output.

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PROMOTIONAL TOOLS

Promotion consists of those activities that are designed to being a companys goods or servicesto the favorable attention of customers.

Every company is inevitably cast into the role of communicator and promoter.

Sales Promotion

Companies use sales promotion tools to create a stronger and quicker response.There is a separate organization, which jointly made efforts for sales promotion and this organization

is followed by IR&IL Co. This organization is known as The Silk and Rayon Textile Export

Promotion Council.The head office of IR&IL Co. does all the activities of the sales promotion. It promotes its sales via

dealers i.e. the product is sale through middle man.

Following tools have been use in this method:o Buying allowance discount

o Display allowance

o Dealers contest

o Concession on the net sales

o Free gift

ADVERTISING

Any paid form of non-personal communication of ideas, goods or services by business firm

identified in the advertising message intend to lea to sale immediately or eventually.

- American MarketingAssociation

Advertising is basically uses for:

o Creating or enhancing goodwill

o Preparing ground for new product

o Creation of demand

o Facing the competition

IR&IL Co. is very sound company producing industrial product. Major factories producing rayon yarn

in India are under one management i.e. The Birla Group. The Aditya Birla Group has covered nearabout 75% of the yarn market. Thus there is no question of advertising.

Rayon yarn is use as a raw material in textile industries that are not affected by any media of

advertisement and that is the reason why the company is not advertising its product.

The company publishes magazines, which depict various facts and figures of companies manufacturingprocess, EXIM Policy, Pricing Policy, Strategies, etc. In short the company adopts the direct

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