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Study the effect of Financial Leverage structure on the profitability and liquidity of KEI industries Ltd. for four years. Submitted to: Submitted by: Miss Jaya Malhotra Vikash Faculty, M.B.A 1142/08

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  1. Study the effect of Financial Leverage structure on the profitability and liquidity of KEI industries Ltd. for four years. Submitted to: Submitted by: Miss Jaya Malhotra Vikash Faculty, M.B.A 1142/08 T.I.M.T M.B.A.( F) (S-1)

  2. CONTENTS • Introduction • Objective of the study • Research Design • Data collection • Tools • Findings • Limitations of study • Conclusion

  3. KEI industries ltd.

  4. Important years for KEI ind. Ltd • 1968: Established as a Partnership Company. • 1968: Manufacturing of Switchboard Cables for DOT starts. • 1985: Manufacturing of Control, Instrumentation and Thermocouple Cables begins • 1995: Launch of the First IPO, went Public. • 1996: Installation of Major SSW plant at Bhiwadi • 2002: Established JFTC Plant at Silvassa • 2005: Upgraded JFTC Plant in Silvassa to manufacture existing cable range - Rebalancing Act. • 2007: Upgrading Bhiwadi Unit to manufacture HT power cable up to 132 kV & LT cable. • 2007: Proud recipient of Corporate Governance Rating • 2007: Setting up of 100% EOU at Chopanki • 2008: Enhanced HT Cable Capacity at Bhiwadi up to 132 KV

  5. Products of KEI industries Ltd. • HT Cables • LT Cables • Control Cables • Instrumentation Cables • Thermocouple Extension/Compensating • Rubber Cables • House Wires • Single/Multicore Flexible Wires • Winding Wires • Stainless Steel Wires

  6. Objectives of Study • To study the impact of financial structures of the company. • To study the impact of financial leverages on profitability of the company. • To study the impact of financial leverages on liquidity of the company.

  7. Theoretical Framework • Construct Impact of financial leverages on profitability and liquidity of the company • Variables • Independent Variable – financial leverages i.e. debt & equity • Dependent variables - liquidity, profitabily position

  8. Research Design

  9. Data Collection

  10. Swot Analysis • S • W • O • T STRENGTHS WEAKNESS OPPORTUNITIES THREATS

  11. Ratios Related To The Profitability And Liquidity • Current Ratio • Debt Equity Ratio • Earning per share • Interest coverage ratio • Debt to total fund ratio • Proprietory ratio • Quick ratio

  12. Current Ratio • Fy06- 2.02 • Fy07- 2.66 • Fy08- 2.24 • Fy09- 2.44

  13. Debt equity ratio • Fy06- 0.77 • Fy07- 2.04 • Fy08- 0.44 • Fy09- 0.40

  14. Earning per share • Fy06- 15.39 • Fy07- 6.81 • Fy08- 9.59 • Fy09- 15.69

  15. Interest coverage ratio • Fy06- 4.3 • Fy07- 3.37 • Fy08- 2.75 • Fy09- 0.89

  16. Debt to total fund ratio • Fy06- 43% • Fy07- 67% • Fy08- 62% • Fy09- 65%

  17. Proprietory Ratio • Fy06- 57% • Fy07- 33% • Fy08- 38% • Fy09- 35%

  18. Quick ratio • Fy06- 1.0027 • Fy07- 1.2427 • Fy08- 1.3488 • Fy09- 1.6532

  19. Statistical and Analytical tools applied ANOVA REGRESSION T- TEST

  20. Let null hypothesis be there is no significant impact of financial leverage on profitability.According to the alternate hypothesis there is impact of financial leverages on profitability.

  21. Let null hypothesis be there is no significant impact of financial leverage on liquidity.According to the alternate hypothesis there is impact of financial leverages on liquidity.

  22. Regression

  23. Let null hypothesis be there is no significant impact of financial leverage on profitability.According to the alternate hypothesis there is impact of financial leverages on profitability.

  24. Let null hypothesis be there is no significant impact of financial leverage on liquidity.According to the alternate hypothesis there is impact of financial leverages on liquidity.

  25. Findings • Company is Very much dependent on the debtors for its funding and it is not favorable for the firm. • Total sales of the company is going upwards as compared with previous year. • Earning per share is also increasing. • Financial leverages having a lot of effect on profitability liquidity of the firm.

  26. Recommendations • Company is using a lot of debt & it has to pay high interests for it so I think firm should use more and more equity capital to sustain its workings. • Company is spending good percentage of its profit on depreciation. It’s a kind of wastage so firm should try to reduce wear and tear. • Due to cutthroat competition in the market, firm should emphasize on good customer relationships.

  27. Limitations Of Study • Secrecy of internal data • Limited time • Secondary data • Lack support of some officers due to lack of time

  28. CONCLUSION