Final Project Report Omfed

Financial statement analysis
Industry analysis
The history of Indian Milk Products is perhaps as old as Indian civilisation itself. Even as our
ancestors began to domesticate milch animals, they found innovative ways to convert highly
perishable milk into more stable and longer lasting milk products. It is a part of Indian culture
to revere cows, and Kings of yore often gifted cattle as rewards to their kinsmen. Therefore, it
is not surprising that Indians have a deep rooted tradition of using milk and milk products. It
Orissa state co-operative milk producer’s federation limited (OMFED)
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is a customary practice to grace Indian ceremonies and functions with ghee, butter and
sweets.
From time immemorial, India's traditional foods with their extraordinary variety and richness
have served people's needs for nutrition and sound health. Within this wide range, dairy
products from different regions of the country have provided a wide array of sweets and other
specialties that are a gourmet's delight. These also meet the needs for proteins and calcium in
people's daily diet. The story of Indian mithais is literally of epic proportions.
From time immemorial, the foundation of our milk production has been in hands of the
landless farmers in villages. At the same time, the processing of milk into dairy products has
been handled by millions of village "halwais" and their street-corner counterparts in towns
and cities. These two groups form the core of the traditional dairy sector, the largest and
fastest growing sector of Indian dairying. The value of its products exceeds Rs. 50,000 crores
per year.
When we say 'Indian' milk products we tend to distinguish such products from Western milk
products such as cheese, yogurt, ice-creams, sweetened condensed milk and butter oil.
However, we do have parallels for all such western products in the form of paneer, curd/lassi,
kulfi, rabri and ghee. Perhaps, the only major western milk product where it is difficult to
draw comparisons is milk powder. In the days following Independence, we have generally
concentrated our efforts in encouraging milk production through marketing of liquid milk,
either as fresh milk or with the help of recombining milk powder and white butter. This was
done for three reasons. Firstly, to encourage consumption of liquid milk since it provides
nutrition in a more wholesome manner as compared to milk products. Secondly, as compared
to value added milk products, liquid milk has always remained far more affordable. Thirdly,
liquid milk has always been in demand for use as a whitener with tea and coffee. Traditional
milk products represent the most prolific segment of our Indian Dairy Industry. Despite the
immensity of volume of milk handled, preparation and marketing are confined to the
unorganized sector. Since most of the western-type dairy products manufactured by the
organized sector of the Dairy Industry are reaching near saturation level in the existing
domestic and international markets, the entire range of Indian milk products represent the
most promising venue for diversification. Furthermore, Dairying has played a prominent role
in strengthening our rural economy. It has been recognized as an instrument to bring about
socio-economic transformation by helping the landless and marginal farmers.

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One weak link in the otherwise sound growth of dairying has been the general neglect that the
traditional milk processing methods has received from the modern sector. Although the
processes of making sweets have undergone continuous change, the time has now come to
integrate traditional methods with modern culinary technology to meet consumer demands
for better standardized quality, longer shelf-life and greater convenience. A socially
responsive approach and more purposeful application of scientific and industrial techniques is
required to rebuild our age-old practices to ensure the manufacture of indigenous milk
products of uniformly high quality. However, in the past three decades, considerable R&D
work has been done to bring about the much-needed value addition in the making of these
age-old milk delicacies. Various R&D groups in different parts of the country have initiated
steps to meet these needs. As a result, better processes, equipment, packaging materials and
systems have been developed.
For sustaining further development, Nation's Dairy Industry would have to cope with the
rapid transformations that are taking place in the world economies, consequent to the GATT
Agreement. International trade is being strongly regulated by the WTO guidelines. Newer
and stricter sanitary and phytosanitary standards are being formed for regulating quality
parameters of the export products. Under these newly emerging circumstances, quality
standards for production and processing milk cannot remain at variance with the international
standards. The superior quality of dairy products coupled with concerns for environment and
product safety will require significant changes in the way milk products are produced and
packaged. India would have to critically assess the changing global scenario if the Nation's
Dairy Industry wishes to turn the opportunities in our favour.
Over the years, efforts at expanding liquid milk availability — through increased milk
production — has resulted in per capita availability of liquid milk growing from 107 grams
per day in 1970 to a current level of more than 246 grams per day. The opportunity provided
by increased availability of liquid milk can now be used for efficiently manufacturing and
marketing Indian milk products with long shelf life. This will help in tapping the potential
demand for Indian milk products in both the domestic and foreign markets.
All these things could happen with a quality assurance of raw material and technical human
resource training at different levels. This can only be achieved by an appropriate appraisal
and awareness to be brought on a very large scale since this is a highly dissipated industry
and has its origin from tiny, cottage all the way to large scale industry. The Indian milk
products also need to be addressed in terms of value addition and in terms of bringing the
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tradition and processing itself and extension of shelf life for the ethnic tongue around the
world.
It can easily assume that this is a very important contribution that we could do to the rest of
the world through promoting the Indian milk products both from the taste angle as well as the
health angle. In this context, we also require dedicated workers with emphasis on packaging
with a clear mandate of once again the concepts of quality and safety engulfed into it. The
Indian equipment manufacturers, many of them who are of international standards, could
really make a difference in the overall impact of this industry through adaptable equipments.
As we know the market for the 80 million tonnes of milk in India, the figure of 100 million
tonnes does not seem to be far away. We need to strategically plan all this into food safety,
food security including nutrition to convert the dairy industry in the market into a very
profitable sector, thus ensuring the industry stability on the one hand and the production
stability on the other hand.
Time has come for the second phase of the White Revolution to focus on the traditional milk
products by the application of modern technology for their large-scale production. One new
revolution that India has embarked on is the industrial scale production of hitherto handmade
traditional milk products. Recent innovations in technology are having a wide-ranging impact
on the growth of dairying. These technical advances are creating new economic opportunities
par excellence for a range of agribusiness enterprises to expand avenues for enhanced income
in India.
Beneficiaries of these innovative technologies are India's 70 million milk producers, largely
women, who look after cows, as they have done from time immemorial. This group includes
a large number from non-farm sector who are landless and have limited livelihood options.
Dairy industry in Orissa
The prospect of improving the dairy income in the state of Orissa, which is one of the poorest
states in India, is highly vital for small-scale producers, which currently form the backbone of
the dairy industry. a study has been developed by an International Farm Comparison Network
(IFCN) which is based on the concept of Â‘typical farmsÂ’. Three broad farm types were
selected to represent 'typical farms' in the state: farms stall feeding two dairy animals (buffalo
or local cattle), representing the most common farm type found in the state, farms with six

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dairy animals, located in peri-urban areas benefiting from good market access, and rural
farms practicing a form of pastoral production system in areas where communal grazing land
is available. Each farm is described in detail with assets, production costs, profits and other
economic information presented both graphically and in the text. A comparison with similar
farms in the state of Haryana is provided. The study finds that all farms cover the dairy cash
costs but that on the smaller farms returns to family labour are below local wage rates.
However, the small scale dairy farms will persist as long as alternative employment
opportunities for family labour are scarce. It also appears that there is a large potential to
reduce milk production costs of smallholder dairy farming and increase family farm income
through milk production by better breed, feed and herd management. Although milk yields in
Orissa are much lower than in Haryana, farmers in Orissa produce milk at competitive costs
due to lower land costs and lower wage rates. The availability of grazing land in Orissa and
cheaper feed also contributes to lowering the costs of milk production. Smallholders using
buffalo for milk production in Orissa were found to be more cost competitive than similar
farms in Haryana. Hence suitable strategies to promote such buffalo-based systems should
have potential for improving the production and competitive position of dairying in Orissa.

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Organisation analysis
Being one of the poorest states, majority of the population are dependant on the
traditional occupation like agriculture, diary and handloom in some parts of Orissa. The
process of industrialization has always been slow though the state enjoys a great variety of
mineral resources. Poor irrigation facility made agriculture as a part time occupation for a
majority of marginal farmers. The farmers use to travel to urban centres as daily wage earners
and this practice made their life more miserable due to exploitation and addictions.
There was a large concentration of cattle in the rural areas in the form of cows and
buffalos. They supported the family requirements only and the cast of Gauda traditionally
sells the milk in the area. The rich had the privilege of keeping cows for their own use and
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celebrations. It was never thought of as a viable alternative of livelihood for many farmers till
Omfed came in to existence. The journey of Omfed has changed the life of many families in
Orissa, particularly in the coastal and western part of Orissa. Omfed has emerged as the
trusted milk man to all its stake holders. The urban middleclass has a product which is safe
and clean for their children and has a quality assurance on content and hygiene. The process
itself pasteurizes the milk and kills the germs and bacteria.
Milk is served fresh every day twice to the urban consumers and shopkeepers in a fresh
poly pack. This milk is collected from different parts of the state and are brought to the
chilling plant .They are packaged in assortments for sale in the markets. Other than the
different varieties of toned milk Omfed also markets various kinds of value added products
like ghee, sweet and plain curd milk, table butter and butter milk.
In the summers of 1998 Omfed experimented by test marketing horticulture products in

the form of pickle ,tomato sauce, orange squash, lemon squash ,juices , mango and pine apple
squash. These products were initially test marketed in the urban cities of Orissa and the
results were very motivating for them to go for full scale launch in the subsequent period of
time. Omfed had an advantage through its vast network of milk booths to make the product
available immediately to consumers. There was literally no investment to market horticulture
products as the customers saw them in the Omfed milk booths every time they visited the
booth. The second advantage the brand quality assurance. Though the products were
manufactured by the horticulture department, they were marketed as Omfed brands in the
market.
These products have a high seasonal demand during summers and availability of these
items in the milk booths made the customer go for an early trial with fewer expenses in
promotion and advertising. The market for sauces, squash and pickles are traditionally
concentrated in Orissa due to the availability of branded items like Kissan, Druck and Maggi.
Omfed decided to break the restrictions of selling these products from the milk booths only
and launched the items through the intermediaries’ .Dealers and distributors were appointed
in different area and the product moved in to the grocery counters.
Prior to this development Omfed was selling the value added milk products like ghee,
butter and the butter milk through retailers. The butter milk was a success in the market as

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people preferred it in summers to the soft drinks due to the humid conditions in the market.
The sweet curd was also a success as housewives started buying them in the common grocery
for their children and there was a liking of the product by kids.
This success makes Omfed to look beyond their core strength of marketing milk and
milk related products to other business area. This was significant for them as they have also
to perform a social obligation in generating profitable employment to the rural poor through
their cooperative society network so that more and more are brought above the poverty line.
ACTIVITIES
The principal activities of Omfed can be divided into the following categories:
1. Organization of Anand pattern
2. Operation Flood program in Orissa
3. Procurement of milk
4. Technical inputs
5. Women’s diary Project
6. Processing and Marketing
7. Omfed Products
8. Training
Anand Pattern
The Anand Pattern is the successful formula first adopted by the Kaira District
Coop. Milk Producers’ UnionLtd.(AMUL). This is to collectively procure, process and
Market their surplus milk. This is a Three Tier System- the Village Society, (Concerned
Mainly with the primary producers and collection of milk), the District Milk Union,
(looking after milk procurement, chilling and supply of technical inputs like Artificial
Insemination, Animal Health Care, Supply of Balanced Cattle Feed & Fodder,
Training/Extension etc.) And the Milk Federation looks after processing and marketing of

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Milk & Milk Products, Central Technical Input activities etc. for milk yield enhancement
Of the animals of the milk Producers.
Anand Pattern is a system that is collectively Owned, Operated and Controlled by the
farmers. It ensures a fair price to the farmer and high quality milk and milk products to the
consumers. In short, the Anand Pattern means the utilization of resources in the most
profitable manner at grass-root level. The maximization of profit and production through
cooperative effort is the hallmark of the .Anand Pattern
Structure of Anand Pattern
The basic unit under the Anand Pattern is a village cooperative society of milk
producers. It is a voluntary association of rural milk producers wishing to market their
milk collectively. A village coop. Society of primary producers is formed under the
guidance of a Supervisor of the milk union. A milk producer becomes a member by
paying an entrance fee of Rs.1 and buying a share of Rs.10. He/she must undertake to sell
surplus milk only to the Society after meeting his family's demand. The members elect
the Managing Committee of 9 members and the committee elects a Chairman out of
themselves. Managing Committee Members are honorary. They employ a Secretary,
Milk Tester, A. I. Worker and Head Loader and so on to run the day-to-day business of
the society. Milk producers bring milk to the society every morning and evening. The
quantity of milk is measured. A small sample of milk is taken from the milk for testing its
quality. Payment for milk is made on the basis of its quality and quantity. The Milk
Union carries this collected milk from the society by their hired transport vehicles to their
milk chilling/processing plants. This comes from the profit of the society. The society
makes profit by selling the milk to the milk union and get bonus/price difference and
milk union gets profit by selling to the federation and also gets price difference out of the
federations’ profit.

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Milk Union
A Board of Directors who get elected in the following manner manages the milk union:
12-are elected farmer representatives.
01- A nominee of the financing institution (NDDB).
01- A nominee of the Milk Federation (Omfed).
01- General Manager of the Milk Union as the Ex-officio Secretary.
At present, collector is the chairman of the Milk Union. General Manager is the
Chief Business Officer of the Union who in turn appoints other managerial, technical &
staff employees. This Board frames milk union’s policies regarding milk procurement
and supply, fund management etc. where as the General Manager looks after the day-to-
day operation under the guidance and direction of the board.
Every society is continuously guided, supervised and controlled by the union so
that it remains efficient, strong and viable. There is a continuous and concurrent audit of
all the societies on a quality basis to ensure a clean milk business.
Milk Federation
The Federation is managed by a Board of Directors elected in the following manner:
1.Three are Government of Orissa nominees.
2.One from the financing agency.
3.The selected chairmen of the Affiliated Milk Unions
The Chairman of the Federation is to be elected by the board of directors. The Federation
looks after processing and marketing of the milk and milk products.

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Anand Pattern cooperative milk producers' organization (figure 2.1)

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OPERATION FLOOD- 1
The govt. of India launches “operation flood” project in 1970. It was aimed at creating flood
of rurally produced milk in the urban consuming center. The first phase of this program
(operation flood 1) had five years duration from 1970-75. It was started in 1970 covering ten
states and one union territory, having 18th milk sheds i.e. Andhra Pradesh, Bihar, Gujarat,
Haryana, Maharashtra, Punjab, Rajasthan, Tamilnadu, Uttarpradesh, West Bengal and Delhi.
The project had an initial outlay of Rs. 94.5, which was later increased to Rs. 116.40 crore. It
was mainly aimed at developing the milk marketing system in the country.
As such major demand center like Delhi, Kolkata, Bombay and Delhi are linked with rural
milk producing pockets in the country. The funds for the implementation of operation flood
program were generated by the sale of 127.517 tones of skim milk power and36, 696 tones to
butter oil provided by world food programme. A total of 116.4 cores were generated for the
implementation of this programme. Indian Dairy Corporation was specially set up by the
central government for receiving these gift commodities and generating their funds by their
sale for implementation of the project.
OBJECTIVES
The programme had following major co-operatives:-
Increase in the capacity of milk processing facilities.
Change in the urban markets form traditional raw milk supplies to the modern dairies milk
supplies.
Resettlement of city based cattle in rural areas.
Development of long distance milk transportation and storage facilities.
Development of milk procurement system like Anand pattern.
Improvement in Dairy Farming Standard.
Operation Flood Program in Orissa

Operation Flood II
The Operation Flood II Program, which was launched under the aegis of National
Dairy Development Board (NDDB) implemented in the state of Orissa from 1981,
initially covering four districts viz., Cuttack, Dhenkanal, Keonjhar, and Puri. The Orissa State
Cooperative Milk Producers’ Federation came in to being from the year 1980-81, after

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Taking over the Phulanakhara dairy and the functioning started form 26th January 1981.
This followed an agreement signed on the 30th May 1979 between the Govt. of
Orissa and the then Indian Dairy Corporation (now amalgamated with the National Dairy
Development Board) for implementation of Operation Flood Project II by the Govt. of
India, the State Government, the Indian Dairy Corporation, the National Dairy
Development Board and the Milk Producers Cooperatives, with assistance from the
international Development Association. This was later buttressed by a guaranteed deed
dated 05.09.81 given by the then Forest, Fisheries and Animal Husbandry Department on
behalf of the state Government, to the then Indian Dairy Corporation for financial
assistance to be received as per the Loans-cum-Grants Agreements by the Orissa Milk
Federation from the Indian Dairy Corporation. The Operation Flood II Program ended on
30.09.87.
OMFED started functioning from its own corporative office building at R-2 Shahid Nagar
8thAPril 1985. One chilling plant of 10,000 LPD was started at Tritol in June 1985 by Cuttack
milk union and another one with 20,000 LPD capacities by Puri milk union.
One Dairy Plant of 60,000 litres per day capacity was commissioned in December
1985. There are 10 nos. of chilling plants with a total capacity of 48,500 litres per day.
Cattle feed plant of 100 MT capacity also started functioning from September 1985. A
Training-cum-Demonstration center was organized at Jagannathpur, Puri near Cuttack-
Bhubaneswar national highway after the State Govt. handed over the land along with the
infrastructures existing there on a management basis. Under Production Enhancement
Program input facilities were provided to the producers through District Milk Unions and
Dairy cooperative Societies under the technical and financial assistance of NDDB.

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Operation Flood III
The Operation Flood III Program is implemented in Operation Flood districts of
the state from October’87. Under this program the Sambalpur district is included from
August 1989. Expansion of Bhubaneswar Dairy from 60,000 LPD to 75,000 LPD;
expansion of Tirtol Milk Chilling Center from 10,000 LPD to 20,000 LPD; a new chilling
plant with a capacity of 20,000 LPD at Nimapara (Puri) in place of 4000 LPD Unit;
strengthening of Cattle feed plant at Radhadamodarpur (Cuttack) are some of the major
projects taken up under the Operation Flood III Program.
For this purpose, a letter of understanding between the State Govt., represented by
the then forest, Fisheries and Animal Husbandry Department (latter renamed as Fisheries
and Animal Resources Development Department) and the National Dairy Development
Board, as successor of the erstwhile Indian Dairy Corporation was signed on 27.08.1988,
specifying the parameters for implementing the Operation Flood III Program. The Loan-
cum-Grant Agreement between the National Dairy Development Board and the Orissa
Milk Federation as well as the concerned District Milk Unions for the financial assistance
under Operation Flood III has been executed. The state Govt. guarantee on behalf of the
Orissa Milk Federation and the District Milk Unions as the letter of understanding to the
National Dairy Development Board has been executed on 05.05.92.
The organization was established with the following objectives
To carry out activities for promoting production, procurement, processing and
marketing of milk & milk products for economic development of the rural farming
community.
Development and expansion of such allied activities as may be conductive for the
promotion of the dairy industry. Improvement and protection of milch animals and
economic betterment of those engaged in milk production. In particular and without

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prejudice to the generality of the forgoing objective, the federation may:
• Purchase and/or erect building, plant machinery and other ancillary objects to carry
out business
•Study problems of mutual interest related to procurement, marketing of dairy and
allied products
•Purchase commodities from the members of other sources without affecting the
Interest of the members, process, manufacture, distribute and sell them same, arrange
to manufacture / purchase and distribute balanced cattle feed and for the purpose to
set up Milk collection and chilling centres, Milk Processing Plants, Product factories
Etc, in any of the district covered under its area of operation
•Provide veterinary aid and artificial insemination services and to undertake animal
husbandry activities so as to improve animal health care disease control facilities
•Advice, guide and assists the Milk Union in all respects of management, supervision
audit functions
.
•Render technical, administrative, financial and other necessary assistance to the
member unions and enter in to collaboration agreement with someone, if the need
arises
•Advise the member unions on price fixations, public relation and allied matters
.
A brief note on sambalpur dairy

Sambalpur dairy a unit of OMFED (Orissa state co-op. Milk producers federation) was
commissioned on 01.01.1990 under operation flood programme (phase-iii) of NDDB by an
agreement with the government of orissa.
The old chiplima chilling unit having a capacity of 2000 LPD (litre per day) at the state
dairy farm established by the sambalpur districts milk union was closed and OMFED started
its new 10,000 ltrs plant at an estimated project cost of Rs 66.80 lakh for the undivided
sambalpur district near Goshala chhack in an area of 6.0 acres adjacent to N.H-6. On the first
day, the unit collected only 2207 Kgs of raw milk from the nearby MPCS.

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Recently the plant capacity has increased to 50,000 Ltrs at the capital cost of approx. 1.5
crores. After expansion the unit is not only catering pasteurised full cream milk & toned milk
for the customer of sambalpur, bargarh, balangir burla, hirakud, deogarh, padampur etc. But
also added new products like ghee, sweet curd, plain curd, butter milk etc. With in the present
capacity.
SALIENT FEATURE OF OMFED DAIRY:-

INSTALLED CAPACITY- 50,000 LITRES PER DAY
PROJECT EXECUTED BY-NATIONAL DAIRY DEVELOPMENT BOARD
INITIAL PROJECT COST- 66.80 LAKH
EXPANSION PROJECT COST- 1.5 CRORES
TRIAL RUN STARTED ON -1ST JANUARY, 1990
MARKETING AREA- SAMBALPUR, BURLA, DEOGARH, RENGALI, REDHAKHOL,
BARGARH, PADAMPUR, SONEPUR, TITILAGARH, NUAPADA
MILK SHED AREA- DEOGARH, SAMBALPUR, BARGARH, BOLANGIR
Machineries available (table 2.1)
SL.NO DESCRIPTION QUANTITY CAPACITY

01 S.S. Storage tanks 06 50,000 Lts
02 Pasteuriser 02 2,000 LPH each
03 Homogeniser 01 2,500 LPH
04 Tripurpose separator 02 2500 LPH, 2000 LPH
05 Reconstitution tank 01 1000 Ltrs
06 Packaging unit 04 5000 Ltrs/ hr
7 Refrigeration compressor 05 30 Ton
08 Air compressor 02 06 M3/Hr
09 D.G sets 02 63 KVA/ 50 KVA
10 Boilers (coal fired) 02 300 kg/ hr
11 Bore well 02 800 LPH each
12 Substation 01 200 KVA
13 Effluent treatment plant 01 30000 Ltrs

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MANAGEMENT:-
the orissa state co-operative milk producers federation Ltd. Is controlled by a board of
directors which consist of chairmen of affiliated milk unions. Three nominees of the
government of orissa, a nominee of the national dairy development board and managing
director of the federation (who is an ex-office member). The chairman of the board elected
amongst the member of the board. The post of chairman of the federation is honorary.
FINANCE:-
the federation had received funds (loan & grant) from the Indian dairy corporation/
national dairy development board (N.D.D.B) for the implementation of operation flood
programme (OF-ii, OF-iii) in different districts for different activities such as milk
processing, technical input programme, support to dairy co-operatives, manpower training
etc. This federation also received funds towards cooperative development programme from
N.D.D.B which has been successfully implimented in the different districts and for the
implimentation of technology mission on dairy development (T.M.D.D) in the O.F districts.
Apart from N.D.D.B. This federation is receiving financial assistance from the government of
Orissa as grant-in aid and share capital for different activities such as establishment of dairy
infrastructures, technical input programmes, etc.
Besides this the federation also received financial assistance from Government of India
(ministry of human resouces development & department of women and child development) for
the implimentation of orissa women's dairy projects in the undivided districts of orissa.
Procurement of Milk
The milk is collected from the village based milk producers through the village
Dairy cooperative Societies. The farmers of society villages bring their surplus milk to
the society, where it is tested, quantified and the value of the milk is being fixed. Again
from the society level the milk being lifted to nearest chilling plant where it is chilled to 5
c and the same milk after chilling is transported to the nearest Dairy for processing,
packing and marketing. After marketing of milk and milk products, the realization is

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routed back the producers once in 10 days in the same manner. This organization
establishes linkage from producers to consumers.
Technical Input Program
Procurement of Milk depends upon its production. If the production of milk
enhanced, the surplus of milk will be higher, and the procurement will be increased. The
production of milk depends upon the productivity of the milch animals and the
productivity of the animal depends upon its breeding, feeding, health care and
maintenance. So to enhance milk procurement, different programs are being organized in
the society level and the milk producers getting the facilities at their doorsteps, are called
the Technical Input Programs.
• Artificial Insemination: The population of crossbred milch animals in our state is very
small. For better productivity good quality milch animals are essential. So 350 Dairy
Cooperative Societies provided with Artificial Insemination facilities, out of which 18
centres are cluster centres. The society secretaries have been trained as inseminators
by OMFED. For this service, the Liquid Nitrogen, Frozen semen and all the
accessories are being supplied to the societies free of cost.
• Feed and Fodder Program: In addition to the marketing support the farmers are
provided with the best quality of cattle feed at a reasonable price from the Cattle Feed
Plant, which is owned and managed by OMFED. Fodder seeds and fodder slips are
provided free of cost to the farmers. OMFED sales around 10 KMT of cattle feeds
annually to its farmer members.
• Animal Health Care: For better yield / productivity, maintenance of milch animal is
important. The crossbreed animals need better care than the indigenous cows. So
facilities like first aid medicines, travois are being provided to the societies free of
cost. Infertility camps, veterinary routes are being conducted by the experienced

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veterinarians of the Milk Unions.
• Training: The Federation has established an Integrated Training and Demonstration
Center (OMTDC) at Jagannathpur in the district of Khurdha. The Training Center has
so far imparted training to society persons in society management, artificial
insemination, first aid, dairy animal management and management committee
members. Besides these, other training programs are also conducted in this Training
Center. Training has a well-furnished hostel accommodation for 100 trainees.
Interested institutions inside the state also use these facilities on payment basis for
Various training programs.
• Embryo Transfer Technology: A highly sophisticated Embryo Transfer Technology
Project has been implemented by the federation as a state project, since March 1992.
This is assisted by NDDB to carry the most advanced technology from the laboratory
to the field for the benefit of farmers to increase the milk production.
• Programs:
National Technology mission on Dairy Development: National Technology
Mission was formulated by N.D.D.B. and was implemented in 5 Operation Flood
Districts. Its main aim was to co-ordinate among various functionaries who were
engaged in strengthening of rural farmers. Veterinary Dispensaries were equipped
With breeding facilities and these dispensaries became the nerve center of rural
milk producers.
Cooperative Development Program: The program is being formulated by
N.D.D.B. Its main aim was to inculcate co-operative spirit in the rural milk
Farmers to manage their own business.
Indo Swiss Project: Indo-Swiss project was a bilateral program between Govt. of

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India and Swiss Govt. which is now under implementation in Gajam & Gajapati
district. Its main aim is to improve the productivity of animal and to provide
round the year marketing facilities at the door step of the farmer.
Women’s Diary Project
This project started in 1995 in un-divided districts of Cuttack, Dhenkanal, Puri,
Sambalpur and Keonjhar and is implemented through respective milk unions. The
Objectives of the program include
•Improvement of Economic status of the rural women through efficient and modern
Dairy management and availability of assistance for dairy farming in shape of
Subsidized cattle feed, fodder, animal health care, cattle insurance and grouped
Insurance coverage and training programs.
•Improvement of social status of rural women by formation of Anand Pattern all-
Women dairy co-operative societies and establishing linkage with related
organization for assistance on health, immunization, nutrition, literacy mission,
drinking water income generation and women empowerment etc.
• Enabling the women groups to take up employment-cum-income generation
programs through dairying.
Processing and Marketing
. The urban consumer is the last point of the Milk Flow System of Operation
Flood Program. The first point is the rural milk producer, who produces milk. Thus
Omfed not only plays a vital role to link both the points through its activities but also
Channelize crores of rupees from urban sector to rural sector in this system.
Out of the five Flood Districts, only Dhenkanal & Keonjhar Milk Unions market

20
Milk through their respective Dairies (Dhenkanal & Keonjhar Dairy) in the brand name
of "Omfed". The Dhenkanal Milk Union markets its milk, in towns like Dhenkanal,
Talcher, Nalco Nagar, and Angul etc. And Keonjhar Milk Union markets milk in towns
Like Keonjhar, Joda, Badbil, Anandpur etc. and supply surplus milk to Omfed. Generally
Milks are being marketed by Omfed, from its dairies by it's authorized retailers in
Different towns of the state.
Figure 2.2

21
Operational area (figure 2.3)

22
Affiliated milk unions (figure 2.4)

23
Managing Director
(IAS)
Personal Material MIS Finance Marketing Project

manager manager manager manager manager manager
Plant manager
(Sambalpur unit)
Assistant manager
Assistant manager
Superintendent
Superintendent
Plant operator Assistant superintendent
Worker Junior Assistant
Organisation structure (figure 2.5)

24

25
FINANCIAL STATEMENT ANALYSIS
Financial statements as used in business houses refer to set of reports and schedules which an
account prepared at the end of a period of time for a business enterprise. The financial
statements are the means with the help of which the accounting system performs its main
function of providing summarise information about the financial affairs of the business.
These statements comprise balance sheet and profit & loss account. In India every company
has to present its financial statements in the form and contents as prescribed under section
211 of the companies act 1956.
The significance of these statements is as follows

Balance sheet
Balance sheet is a statement showing the nature and amount of a companies asset on one side
and liabilities and capital on the other. In other words balance sheet shows the financial
position on a particular date usually at the end of one period. Balance sheet shows how the
money has been made available to the business of the company and how the money is
employed in the business.
Profit and loss account

Earning profit is the principal objective of all the business enterprise and profit and loss
account is the document which indicates the extent of success achieved by the business in
meeting this objective. Profits are of primary importance to the board of director in
evaluating the management of a business, to banks and other creditor in judging the loan
repayment capabilities and ability of the business. It is prepared for a particular period which
is mentioned along with the title of these statements, which include the name of the firm also.
Objective of financial statements

Financial statements analysis is highly essential for both internal and external stake holders in
addition to management and creditors.
1. The balance sheet lists the assets held by and the obligations (or liabilities) of the
enterprise. The balance sheet also summarizes the capital invested in the business.
2. The income statement provides a recap of the operating results by listing the revenues

26
and deducting the expenses of the company to arrive at a net income or loss for the
period.
3. The statement of cash flows quantifies the cash inflows and outflows of the business
for the reporting period.
4. The explanatory notes provide additional details to aid in understanding the amounts
reported in the financial statements and the basis under which the financial statements
have been prepared. Usually, explanatory notes are prepared only when the financial
statements will be provided to external users.
5. To provide financial information that assist in estimating the earning potential of a

business.
Tools
Here we have taken the financial statement of five years those are 2004-05, 2005-06, 2006-
07, 2007-08 and 2008-09. The tools we have taken to analyse the financial statement are as
follows
1. Ratio analysis
2. Trend analysis
3. Common size statement analysis
4. Comparative analysis
RATIO ANALYSIS
Introduction
The term ratio is used to describe significant relationships which exist between
figures shown in a balance sheet, profit and loss account of an organisation.
Financial statements contain much information relating to profit or loss and
financial position of the business. If these items in financial statements are considered
independently it will not be of much use. To make a meaningful reading of financial
statements, these items found in financial statements have to be compared with one another.
Ratio analysis, as a technique or analysis of financial statement uses this method of
comparing the various items found in financial statements.
Ratio analysis creates a relationship between figures or factors or variables. This
relationship helps to analyse and interpret the financial condition and performance when
applied to the financial data. The accounting ratio indicates a quantitave relationship which is

27
used for analysis and decision making.
Importance of ratio analysis

There are various kinds of benefits arising from ratio analysis are as follows:
1. Ratio analysis is a very important tool used for measuring performance of an
organisation.
2. It concentrates on the inter-relationship among the figures appearing in the
financial statement.
3. Ratio makes comparison easy. The said ratio is compared with the standard ratio
and this shows the efficiency utilisation of assets, etc.
4. Ratio analysis helps the management to analyse the past performance of the firm
and to make further projections.
5. Position can be easily ascertained with the help of ratio analysis.
6. Effective use of ratio can provide the details of the growth or decline of an
enterprise so that future action can be taken.
7. The appraisal of the ratios will make proper analysis about the strengths and
weakness of the firms operations.
Classification of ratios
According to the requirement of different ratios it has been classified into four
important categories.
Liquidity ratios
leverage ratios
activity ratios
profitability ratios
1. Liquidity ratios
The liquidity ratios measure the liquidity of the firm and its ability to meet its
maturing short term obligations. Liquidities defined as the ability to realise value in
money, most liquid of assets.
Liquidity refers to the ability to pay in cash, the obligation that are due. liquidity

28
has two dimensions quantitative and qualitative concepts. The quantitative aspect
includes the quantum, structure and utilisation of liquid assets. In qualitative aspect it
is the ability to meet all present and potential demands on cash from any source in a
manner that minimises cost and maximises the value of the firm. Thus liquidity is a
vital factor in business. Excess liquidity, through a guarantor of solvency would
reflect lower profitability, and ineffective managerial efficiency, increased speculation
and unjustified expansion, extension of too liberal credit policies. Too little liquidity
then may lead to frustration, reduced rate of return, missing of profitable business
opportunities and weakening of morale. The important ratios in measuring short term
solvency are as follows:
a. current ratio
b. quick liquid ratio
c. absolute liquid ratio
d. Stock to working capital ratio
a. Current ratio
This ratio measures the solvency of the firm in the short term. The constituents of the
current ratio are as important as the current assets themselves for evaluation of the company's
solvency position. The higher or lower current ratio will have the adverse impact on the
profitability of the organisation.
Advantages of current ratio
1. This ratio indicates the extent of current assets available to meet the current obligation.
2. This margin also leaves sufficient amount as working capital to carry out day to day
transactions.
3. This is useful in assessing the solvency and liquidity position of the company.
Current ratio= Current assets, loans and advances

Current liabilities and provision

29
(Table 3.1.1)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Current 788154.50 10030349.75 14614717.55 12162818.48 19933030.16
assets, loans
and
advances
Current 744756.36 1101126.47 1505636.56 2107718.47 1139982.97
liabilities
and
provision
10.58 9.10 9.70 5.77 17.48
Current
ratio
Interpretation
A current ratio 2:1 shows a highly solvent position. The current ratio of this organisation is
always higher than the recommended level, so it can meet its entire current obligation
effectively. the ratios in the year 2004-05, 2005-06, 2006-07 shows high liquidity position
which is around 10. It is not a good sign of using current asset effectively. In the year 2007-
08 the solvency position has improved but still it is higher then the recommended level. In
the year 2008-09 the ratio goes up to 17.48 which is very high than the recommended one. It
is due to the piling up of inventory and idle cash level.
b. Quick liquid ratio

Quick ratio is used as a measure of the company's ability to meet its current obligations
since bank overdraft is secured by the inventories, the other current assets must be sufficient
to meet other current liabilities. This ratio serves as a supplement to the current ratio in
analysing liquidity.
Advantages of the quick ratio

This ratio is very useful in cross checking the performance in other areas of economic
management of an enterprise. This ratio focuses on the inventory accumulation. and on
certain aspects of inventory management which will be pointed out later.
1. It is an improved variant of the current ratio in arriving at a liquidity index for an
enterprise.

30
Quick liquid ratio= current assets, loans and advances - inventories

Current liabilities and provisions - bank overdraft
(Table 3.1.2)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

current 5859671.10 691146.49 7507781.29 5865755.70 7329857.33
assets, loans
and advances
- inventories
744756.36 1101126.47 1505636.56 2107718.47 1139982.97
Current
liabilities and
provisions -
bank
overdraft
Quick liquid 7.86 6.27 4.98 2.78 6.42
ratio
Interpretation
A recommended ratio of acid test ratio is 1:1 but all the year starting from 2004-05 to 2008-
09 shows much higher than this recommended level. In the year 2007-08 it came nearer to the
recommended level. This higher level indicates a high solvency state of the organisation.
c. Absolute liquid ratio
Absolute liquid ratio= absolute liquid assets

Current liabilities
Absolute liquid assets = cash in hand + cash at bank + short term investments
(Table 3.1.3)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

31
absolute 5759806.08 5636638.80 6737981.23 4327624.22 6313411.63

liquid assets
Current 608024.11 771652.72 1004547.26 1671330.17 701932.67
liabilities
Absolute 9.47 7.30 6.70 2.58 8.98

liquid ratio
Interpretation
The ideal absolute liquid ratio is taken as 1:2. In all the respective year it has gone up
then the recommended level. It shows the over accumulation of cash at bank and in hand.
d. Stock to working capital ratio

Here stock refers to inventory as the rupee value of raw materials. It may be noted that
stock is valued at cost price or market price which ever is lower. Working capital generally
means net working capital.
Working capital= current assets - current liabilities
stock to working capital ratio = Inventory x 100

Working capital
(Table 3.1.4)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

Inventory 2028483.40 3119203.26 7106936.26 6297062.78 12603172.83
Working 7791203.80 9205540.33 13382748.79 8957775.75 18402353.59

capital
stock to 26.03 33.88 53.10 70.2 68.48

working
capital ratio
Interpretation
In 2004-05 the stock level was 28.23% which is quite beneficial for the organisation but
it start increasing in rest of the year and reach a peak of 70.20% in 2007-08. It reflects over

32
accumulation of stock.
Activity ratio
Activity ratio measures how effectively the firm employees its resources. These ratios
are also called 'turn over or asset management ratio' which involve comparison between the
level of sales and investment in various accounts like inventories, debtors, fixed assets, etc.
Asset management ratios are used to measure the speed with which various accounts are
converted into sales or cash. The following activity ratios are calculated for analysis. These
ratios also analyse the use of resources and the utility of each component of total assets.
a. Inventory turn over ratio.

b. Inventory ratio
c. Fixed asset turn over ratio.
d. Total asset turn over ratio.
e. Working capital turn over ratio.
f. Sales to capital employed ratio
a. Inventory turnover ratio

a considerable amount of a company's capital may be tied up in the financing of raw
materials, work in process and finished goods. It is important to ensure that the level of stocks
is kept as low as possible, consistent with the need to fulfil customer’s orders in time.
The inventory turnover ratio measures how many times a company's inventory has
been sold during the year. Low liquidity turnover has impact on the liquidity of the business.
Inventory turn over ratio= Sales

Average inventory
Average inventory = opening stock + closing stock

2
(Table 3.2.1)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Sales 116423937.66 131212359.47 157091720.33 208711920.52 262757676.68

33
Average 2017156.13 2573843.33 5113069.76 6701999.51 9450117.79

inventory
Inv 57.71 50.17 30.72 31.14 27.80

entory
turn over
ratio
Interpretation
The inventory turnover ratio shows that there is a decrease in the ratio from the year 2004-05
to 2008-09. This is due to the piling up of stock because the selling has increased
substantially.
b. Inventory ratio
The level of inventory in a company may be assessed by the use of the inventory ratio,
which measures how much has been tied up in the inventory.
Inventory ratio= Inventory x 100

Current assets
(Table 3.2.2)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Inventory 2028483.40 3119203.26 7106936.26 6297062.78 12603172.83
Current 7791203.80 9977193.05 7480359.79 10629105.92 19104286.26

assets
inventory 26.03 31.26 95.00 59.24 65.97

ratio
Interpretation
In the year 2004-05 the ratio was 26.03 which increased up to 95.00 in the year 2006-07 it
shows that the how much inventory is tied up in current assets. Then it was reduced up to
59.24 in 2007-08 and again marks an increase up to 65.97 in the year 2008-09.

34
c. Fixed assets turnover ratio

This ratio will be analysed further with ratios for each categories of assets this is a
difficult set of ratios to interpret. As asset value are based on historic cost. An increase in the
fixed asset figure may result from the replacement of an asset at an increased price or the
purchase of an additional asset intended to increase production capacity.
Fixed assets turnover ratio= Sales

Fixed asset
(Table 3.2.3)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Sales 116423937.66 131212359.47 157091720.33 208711920.52 262757676.68
Fixed 17644666.01 20440688.17 26896351.90 23061271.28 23794369.28

asset
fixed 6.59 6.41 5.84 9.05 11.04

assets
turnover
ratio
Interpretation
It reflects that there is installation of plant machinery and building to increase the
productivity of the plant. The depreciation rate also shows the same. In the year 2004-05 it
was 6.59 and starts decreasing up to 5.84 in the year 2006-07 and again starts increasing and
reaches up to 11.04 in 2008-09. This also helps in the increase in production which reflects in
terms of increase in sales.
d. Total assets turnover ratio

The ratio indicates the number of times total assets are being turned over in a year.
Total assets turnover ratio= Sales

Total assets

35
(Table 3.2.4)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

Sales 116423937.66 131212359.47 157091720.33 208711920.52 262757676.68
27402592.29 32442753.04 43566468.04 37279488.35 40782798.06

Total
assets
4.24 4.04 3.60 5.59 6.44

Total
assets
turnover
ratio
Interpretation
It is showing that there is a good utilisation of total asset in every year but again the rate
goes down in the year 2006-07 and again goes up to 6.44 in 2008-09 which indicates a good
sign for the organisation.
e. Working capital turnover ratio

This ratio indicates the extent of working capital turned over in achieving sales of the
firm.
Working capital turnover ratio= Sales

Working capital
(Table 3.2.5)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

Sales 116423937.66 131212359.47 157091720.33 208711920.52 262757676.68
Working 7791203.80 9205540.33 13382748.79 8957775.75 18402353.59

capital

36
Working 6.49 26.97 11.73 23.29 14.27

capital
turnover
ratio
Interpretation
In the year 2004-05 the working capital that is turned over is only 6.49 but the next year it
goes up to 26.97 it shows excess use of working capital to meet the sales. But there is an
improvement can be observed in utilising working capital effectively in rest of the year.
That’s why the ratio starts declining but the sale has gone up.
f. Sales to capital employed ratio

This ratio indicates efficiency in utilisation of capital employed in generating revenue.
Sales to capital employed ratio= Sales

Capital employed
(Table 3.2.6)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Sales 116423937.66 131212359.47 157091720.33 208711920.52 262757676.68
Capital 25435869.80 25305674.25 40279100.69 23957047.03 42196722.87

employed
Sales to 4.57 5.18 3.90 8.71 6.22

capital
employed
ratio
Interpretation
We can observe a zigzag motion in sales to capital employed ratio. It was 4.57 in the year
2004-05, it was increased up to 5.18 then again decline up to 3.90, again mark an steep
increase up to 8.71 and in the year 2008-09 it came to 6.22. It shows that the efficiency in
using capital is improving to generate higher revenue.
Profitability ratios
These ratios are to help assessing the adequacy of profits earned by the company and
also to discover whether profitability in increasing or declining the profitability of the firm is
the net result of a large number of policies and decisions. The profitability ratios show the

37
combined effects of liquidity, asset management and debt management on operating results.
Profitability ratios are measured with the reference to sales, capital employed total assets
employed etc. These ratios are very important from the point of view of different set of
people who are interested in the business organisation like owners, creditors, employees,
suppliers, government organisation.
Gross profit margin

The gross profit represents the excess of sales proceeds during the period under
observation over their cost, before taking into account administration, selling and distribution
and financing charges. The ratio measures the efficiency of the companies operations and this
can also be compared with the previous year's result to ascertain efficiency.
This ratio also shows the gap between revenue and expenses at a point after which an
enterprise has to meet the expenses related to non manufacturing activities. It act as an index
of the mobility of an enterprise to meet different expenses.
Gross profit margin= Gross profit x 100

Sales
(Table 3.3.1)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Gross 17967174.10 21055028.32 20241173.57 29096271.67 43820261.38
profit
Sales 116423937.66 131212359.47 157091720.33 208711920.52 262757676.68
Gross 15.43 16.04 12.88 13.94 16.67

profit
margin
Interpretation
It shows that there is an increase and decrease prevails in this ratio it stands around 14%.
It is due to the fluctuation in the price of raw material and other expenses related to
production. We can say that the efficiency in operation is following a trend.
Net profit ratio

Net profit ratio express net profit as a percentage of sales. This ratio indicates the

38
profitability and efficiency of the business.
Net profit ratio = Net profit x 100

Net sales
(Table 3.3.2)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Net profit 10350896.20 12724976.70 11411004.56 18435097.91 30574501.72
116423937.66 131212359.47 157091720.33 208711920.52 262757676.68

Net sales
Net profit 8.89 9.69 7.26 8.83 11.63

ratio
Interpretation
It is showing the efficiency of the organisation in earning profit. It stand around 9% but in the
year 2008-09 it goes up to 11.63% it reflects that the organisation is growing in an apt manner
in earning profit.
Cash profit ratio

Cash profit ratio measure the cash generation in the business as a result of the operation.
before tax and net profit from year to year owing to differences in depreciation charged. This
ratio is more reliable indicator of performance where there are sharp volatility in the profit
Cash profit ratio = Cash profit x 100

Sales
Cash profit= net profit + depreciation
(Table 3.3.3)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Cash 12962363.95 15052165.00 13692108.81 22247548.13 35574501.72
profit
Sales 116423937.66 131212359.47 157091720.33 208711920.52 262757676.68
Cash 11.13 11.47 8.71 10.65 13.53

profit
ratio

39
Interpretation
This ratio is also fluctuating a little bit from its trend which is around 11%. It is following the
same path as the gross profit and net profit ratios are following. There is seen an increase up
13.53% in the year 2008-09 which is sowing a hike in earning cash profit.
Operating cost ratio

Operating cost ratio expresses the relationship of cost of goods sold plus operating
expense to net sales. It may be expressed as
Operating cost ratio= operating cost x 100

Net sales
(Table 3.3.4)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
operating 98177801.99 109159181.33 134111568.23 178914326.43 217233461.63
cost
116423937.66 131212359.47 157091720.33 208711920.52 262757676.68

Net sales
Operating 84.32 83.19 85.37 85.72 82.67

cost ratio
Interpretation
The operating ratio following a trend of around 83%. It is showing the operational
efficiency of the organisation. In 2008-09 the organisation is able to reduce the operating cost
so the net profit has increased.
Expense ratio
Expense ratio shows the relationship between operating costs and expenses on the one
hand and volume of sale on the other. In other words, these ratios express each element of
cost and expenses as percentage of sales.
Advantages:-
1. These ratios are useful in knowing the following aspects relating to profit and help the

40
management to know the position of profit. That is whether the profit is on the
increase or on the decrease.
i. Higher the expense ratio lowers the profit and vice-versa.
ii. Higher the non manufacturing expenses ratio (marketing, administration)
lower the net profit.
Expense ratio = Expenses x100

Net sales
(Table 3.3.5)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

Expense 98479418.10 121578161.06 140838279.66 178805775.37 225243525.35
116423937.66 131212359.47 157091720.33 208711920.52 262757676.68

Net sales
Expense 84.58 92.65 89.65 85.67 85.72

ratio
Interpretation
The expense ratio in terms of sale in the year 2005-06 was higher than any other year
which is 92.65. It is showing the reduced in the profit level. But the condition starts
improving in the respective year and reach up to 85.72 in the year 2008-09.
Administrative cost of sales ratio
Administrative cost of sales ratio= Administrative cost of sales x 100

Sales
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

Administrative 863204.20 8289130.42 1118133.10 5664158.79 1583528.20
cost
116423937.66 131212359.4 157091720.3 208711920.52 262757676.68
Sales 7 3
Administrative 0.74 6.31 0.71 2.71 0.60

cost of sales

41
ratio
Interpretation
The administrative cost is increased heavily in the year 2005-06 due to increase in
expenses of different items and usage of the items which was 6.31. Again it goes down to
0.71 and again goes up to 2.71 and finally reaches to 0.60 in 2008-09 which was lower than
all the respective year.
Selling and distribution cost to sales ratio
Selling and distribution cost to sales ratio = Selling and distribution cost x 100
Sales
(Table 3.3.6)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09
Selling and 3790646.03 5139544.72 6596742.93 4908238.63 7174298.03
distribution
cost
116423937.66 131212359.4 157091720.3 208711920.52 262757676.68
Sales 7 3
Selling and 3.25 3.91 4.19 2.35 2.63

distribution
cost to
sales ratio
Interpretation
the selling and distribution cost was 3.25 in the year 2004-05 it increase slowly and reach
up to 4.19 in the year 2006-07 and then decrease up to 2.63 in the year 2008-09. It is due to
the effective distribution channel. It also helps in the rate of selling of products.
Cost of good sold to net sale ratio
Cost of good sold to net sale ratio = Cost of good sold x 100
Net Sales
(Table 3.3.7)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

Cost of 94666117.53 105017786.43 130253803.73 174707410.22 211763117.27
good sold
116423937.66 131212359.47 157091720.33 208711920.52 262757676.68
Net sales

42
Cost of 81.31 80.03 82.91 83.70 80.59

good sold
to net sale
ratio
Interpretation
It is following a trend of around 81%. It is not deviating more from its trend but it has been
decreased down to 80.59 in 2008-09 which increase in profit level.
Return on capital employed
The rate of return on investment is determined by dividing net profit by the capital
employed. It consists of two components that is profit margin and investment turnover.
Advantages:
It helps in measuring the profitability of the firm.
1. It indicates how effectively the operating assets are used in earning return.
2. It focuses the attention on efficiency of management in managing the investments
made into the business.
Return on capital employed ratio = net profit x100

Capital employed
(Table 3.3.8)
YEARS 2004-05 2005-06 2006-07 2007-08 2008-09

Net profit 10350896.20 12724976.70 11411004.56 18435097.91 30574501.72
Capital 25435869.80 25305674.25 40279100.69 23957047.03 42196722.87

employed
Return on 40.69 50.28 28.32 76.95 72.45

capital
employed
ratio
Interpretation
In the year 2004-05 the return on capital employed was 40.69. By following a zigzag motion

43
it goes up to 50.28. In 2006-07 it was reduced to 28.32 it is due to increase in amount of work
in progress and other fixed assets. But again it gained momentum and the return reach up to
72.45 in the year 2008-09.
TREND RATIOS
trend ratio can be defined as index numbers of the movements of the various financial
items in the financial statements for a number of periods. It is a statistical device applied in
the analysis of financial statements to reveal the trend of the items with the passage of time.
Trend ratio shows the nature and rate of movements in various financial factors. Trend ratio
can be graphically presented for better understanding by the management. They are very
useful in predicting the behaviour of the various financial factors in future. Trends of related
items should be carefully studied, before drawing any final conclusion. Since trends are
sometime significantly affected by externalities e.g government policies, economic
conditions etc.
Limitations of trend ratios

44
Trend ratios are not calculated for all the items. They are only calculated for the logically
connected items enabling a meaningful analysis.
a. if the accounting practices have not been followed consistently year after year, these ratios
become incomparable and misleading.
b. the trend ratios have to be interpreted in the light of certain non-financial factors like
economic conditions, government policies and management policies etc.
Interpretation
The sale is following a trend that is going upward. As the sales are going upward the
purchase of trade goods has been goes up accordingly. The rate of increase in purchase of
goods is quite lower then the increase in sales. It shows the operational efficiency. The
manufacturing expenses and distribution expenses are also increasing according to increase in
production and sale but it is less then the increase in the rate of sale. It is showing the
efficiency in operating and distribution activity of the management. The rate of increase in
other expenses is increased higher then the rate of increase in other income and also then the
rate of sales.
The share holders fund, reserve and surplus have been increasing gradually but the trend
is increasing in higher rate. Application of fund is increasing but the rate is very low, still this
is favourable for the organisation. The rate of receiving grant has been reduced but attains a
constant position from the year 2006-07 to 2008-09. The rate of increase in inventory is
similar and logical with increase in sale but the rate sky rocketed in the year 2008-09 by
202.27 %. The trend is following a zigzag motion in case of bank balances and cash at hands.
The loan and advances is quite lower in the year 2004-05 to 2006-07 but increase soaringly to
279.17% in the next year but again it come down to 150.85%.
The rate of increase in current liability follows first four year but it again start decreasing
up to 86.37% in the year 2008-09 which shows a good financial health of the organisation.

45
COMPARATIVE STATEMENT ANALYSIS

These financial systems are so designed as to provide time perspective to the various
elements of financial position contained therein. These statements give the data for all the
periods stated so as to show.
a. absolute money values of each item separately for each of the periods stated.
b. increase and decrease in absolute data in terms of money values.
c. increase and decrease in terms of percentage.
d. comparison expressed in ratios.
e. percentage of totals.
Such comparative statements are necessary for the study of trends and direction of

46
movements in the financial position and operating results. This call for a consistency in the
practise of preparing these statements, otherwise comparability may be distorted.
Comparative profit and loss account shows the operating results for a number of
accounting period and changes in the data significantly. In absolute period and changes in the
dan significantly in absolute money terms as well as relative percentage.
Comparative balance sheet shows the balance of account of asset and liability in different
dates and also the extent of their increase and decrease between these dates showing light on
the trends and direction of changes over the period.
Interpretation
Study of income statement reveals that there has been an increase of Rs 65223435.09 in
sales, but at the same time cost of goods sold has also increased by Rs.37055707.05. In
relative term sales increased by 34.88% while cost of good sold 21.21%. It means due to the
operational efficiency the rate of increase in cost of good sold is lesser then the rate of
increase in sales. The rate of advertising is 27.18% which is lower then the rate of increase in
sales and also in absolute term it is only increased 6411, which is quite negligible as
compared to sales volume. Processing expense has been increased Rs.1263428 but in relative
term the rate of increase in processing expense is quite nearer to the rate of increase in sales.
There has been a substantial decrease in other incomes both in relative term and absolute
term. It reflects that the management is giving more emphasis on its core business rather than
other miscellaneous activity. There has been an increase in selling expenses in absolute term
which is Rs.2696835.87 and it helps in the increase in sales up to Rs.65223435. in relative
term the rate is much higher then the rate of increase in sales. It is due to the increase in the
rate of expense in marketing expense and purchase of crate for distribution at a rate of 583%
and 805.78% respectively.
There is a 50.60% increase in gross profit which is due to the less increase in the rate of
cost of goods sold and processing expenses which is 21.21% and 30.03% respectively.
The depreciation rate is increase up to 1187549.79 in absolute terms and 31.15% in relative
term which indicates that improved plant machinery has been installed which helps I the
increase of the productivity, and the productivity reflects in the sales volume. Insurance
charges have been increased 58.94% in the relative term which will impart a secure
operational function. Printing and stationary is increased up to Rs. 48464.15 which is
203.12% then the previous year. It indicates that there must be wastage or improper handling

47
of this material. Sales promotion has been decreased by 25.56% which is not a goods sign for
the organisation. As the sales promotion is an inevitable part of a good business. The sales
have been increased and the sales promotion should also increase accordingly. A staff welfare
and canteen expense has been increased by Rs.34572.25 which is 26.13% higher then the
previous year. It is helpful in motivating the staff. The entertainment expense has been
increased by Rs.10963 from its previous year. In absolute term it is less but in relative term
the increase is 174.85% which is not a favourable condition. Liveries and safety materials are
used and maintained properly so the expenses have been reduced by 3.92% which is
contributing towards organisational profit. Building and gardening cost has been increasing
soaringly which is 850.83% higher then the previous year and rupees 45919 in absolute terms
which is due to the development and maintenance of the infrastructure. Bonus is hike up to
66.43% then the last year which indicates the profitability and transparency of the
organisation which leads to organisational efficiency. Other expense has been increased by Rs
105402.21 in absolute term and 24.67% in relative term then the previous year.
The current asset has been increased by 67.38% and the current liability has been decreased
drastically by -45.01% which is showing over solvency of the organisation. It is severely
affecting the current ratio by increasing it to a very high level then the recommended one.
Cash in hand and bank, inventories has been increased which is due to the improper
investment of the funds. Loans and advances have been decreased by 45.96% in relative term
and Rs. 704986.65 in absolute term which is a good sign for the organisation. There is a
soaring hike can be seen in case of sundry debtors which is 183274.88 in absolute term and
4147.50 % I relative term. It is showing the inefficient use of current assets. Government and
other grants have been increased by 12720788.12 in absolute term and 2488.49% in relative
term which is enhancing the strength of the organisation. The computer expenses are
increased by Rs. 88850.00 due to installation of new computers and printers. All these
increase in fixed asset is reflecting in the provision for depreciation which is increased
2944601.41 and 143.26% in relative term. The share holders fund, reserve & surplus have
been increased by 42.90% and Rs. 30638760.05 in absolute term which is showing high
financial viability of the organisation.

48
COMMON SIZE STATEMENT ANALYSIS

Common size financial statements are those in which figures reported are converted into
percentages to some common base. For this, items in the financial statement are presented as
percentages or ratios to total of the item and a common base for the comparison is provided.
Each percentage shows the relation of the individual item to its respective total. In a common
size income statement the sales figure is assumed to be equal to 100 and all other figures of
cost or expenses are expressed as percentage of sales. A common size income statement for
different periods helps to reveal the efficiency or otherwise of incurring any cost or expense.
In a common size balance sheet total of assets and liability are taken as 100 and all the

49
respected figures are expressed as the percentage of total. Comparative common size balance
sheet for different period helps to highlight the trends in different items.
Interpretation
The cost of good sold has been decreased from 93.43% to 83.96% in the year 2008-09.
Which increase in the gross profit level up to 17.37% which was previously 15.56% in 2007-
08. Other expense like selling expenses is increased. It is due to the increase in sale but
effective use of funds as the increase in relative term then the previous year is very little.
Despite of increase in sales the processing expenses was less then the previous year it is
indicating the operational efficiency of the firm. Other income has been declined as the firm
is concentrating only upon its core activity.
Omfed appears to be a traditionally financed with share holders fund and reserve &
surplus. It doesn’t have any long term liability. In the year 2008-09, 50% of the reserve and
surplus and shareholders fund has been invested which was 97.13 % in the year 2007-08.
Total liability also constitutes of 50% of total liability and capital which is very high then the
previous year 2007-08. Out of total assets, fixed asset constitute the major part which is
63.66^ in 2007-08 and 64.20% in the year 2008-09. It shows the fixed productive asset of the
firm. Piling up of inventories increased up to 22.17%. Cash in hand and bank was reduced to
11.85% which shows investment of funds. Loans and advances also decreased which is
1.46% in 2008-09 then 4.58 % in 2007-08 which shows healthy financial system of OMFED.

50
Findings and Recommendation
The financial statement of OMFED Sambalpur unit has given a broad idea about the
organization. The tools that we used to analyse the financial statement reveals many vital
information regarding the organisation’s financial strength. The findings of this analysis show
that the financial strength of this organization is very healthy. It is earning profit at a higher
rate. The accounts of reserve and surplus, share holders fund is very high. As the organization
is enhancing the livelihood, socio economic condition of poor people so government is
providing huge grants to it.
The labour cost in this area is very low, availability of raw material in this area is more.
There persists a technological, product, raw material transfer among the different unit of
51
OMFED.
All the above factor helping the organization to grow at a faster rate. We have found out a
small weak link in the organization. Despite of huge asset possessed by the organization the
investment opportunity is very thin. The liquidity ratio shows that asset remain idle with out
any proper investment. So we would like to add that if sophisticated machinery will be
installed or the capacity of the plant will be enhanced and maintaining a high level of
distribution channel would hike the quality of the product and easy availability of product to
the customer. So it will lead to increase in the profitability up to many folds. The financial
statement also shows that the expenditure on sales promotion and advertising is very
depressing as compared to the sales. Yes it is very eloquent that the rate of sales is very high
but there is a huge potential for increase the sales in dairy product. Which can only be
achieved by sales promotion. Inventory management is not satisfactory as it is seen on the
balance sheet that inventory is piling up heavily.
Rest we can say that the organization is developing since inception. It has also gained a
momentum of incurring profit. They are moving from the stage of maximum utilization of
resource to optimum utilization of resource which is very important for the organization.
Appendix
Liquidity ratio
18
16
14
12
10
ratio Current ratio
8
Acid test ratio
6
Absolute liquid ratio
4
2
0
2004-05 2005-06 2006-07 52 2007-08 2008-09
year
stock to working capital ratio
80
70
60
50
ratio 40
30
stock to working capital ratio
20
10
0
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09
year
Inventory ratio
100
90
80
70
60 Activity ratio
ratio 50
40 Inventory ratio
60 30
20
10
0
50 2004-05 2005-06 2006-07 2007-08 2008-09
year
40
ratio 30 Inventory turn over ratio

Fixed asset turn over ratio
Total asset turn over ratio
20
10

0 53
2004-05 2005-06 2006-07 2007-08 2008-09
year
Activity ratio
30
25
20
ratio 15
Working capital turn over ratio
Sales to capital employed ratio
10
0
2004-05 2005-06 2006-07 2007-08 2008-09
Profitability ratio
year
18
16
14
12
10
ratio Gross profit ratio
8 Net profit ratio
6 Cash profit ratio
2
0 54
2004-05 2005-06 2006-07 2007-08 2008-09
year
Profitability ratio
90
80
70
60
Admin. Cost to sale ratio
50
ratio
40 selling & distribution cost to sale
ratio
30
Cost of good sold to sale ratio
20
10
0
2004-05 2005-06 2006-07 2007-08 2008-09
year
profitability ratio
100
90
80
70
60 Return on capital employed
ratio
ratio 50
operating cost ratio
40
30 Expense ratio
20
10
0 Orissa state co-operative milk producer’s federation limited (OMFED)
2004-05 2005-06 2006-07 2007-08 2008-09
55
year
Trend ratio
140
120
100
Net block
80
value
Capital work in progress

60
Grants
40
20
0
2004-05 2005-06 2006-07 2007-08 2008-09
ye a r
Trend ratio
300
250
200 Bank balances
value
150 Cash at hand

100 Loan & advances
50
0
2004- 2005- 2006- 2007- 2008-
Orissa state05 06 milk 07
co-operative 08federation
producer’s 09 limited (OMFED)
year56
trend ratio
250.00
200.00
150.00
Inventories
value
100.00 total current asset
50.00
0.00
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09
year
Trend ratio
180
160
140
120 Current liabilities &
provision
value
100
80 Total current asset
60
40
20
0
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09
year
57
Trend ratio
200.00
180.00 sales
160.00
140.00
Purchase oe
120.00
value
trade goods
100.00
80.00 Manufacturing
60.00 expenses
40.00 Distribution
20.00 expenses
0.00
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09
year
Bibliography
Financial Management-By I.M. Pandey
Financial Management-By Khan and Jain
Financial Statement Analysis:- By Gupta and

Mehra.
Financial Management:- By Sudhindra Bhat

58
www.omfed.org
www.google.co.in

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Financial statement analysis

Orissa state co-operative milk producer’s federation limited (OMFED)

Dairy industry in Orissa

Orissa state co-operative milk producer’s federation limited (OMFED)

Orissa state co-operative milk producer’s federation limited (OMFED)

In the summers of 1998 Omfed experimented by test marketing horticulture products in

Orissa state co-operative milk producer’s federation limited (OMFED)

1. Organization of Anand pattern

2. Operation Flood program in Orissa

5. Women’s diary Project

6. Processing and Marketing

Coop. Milk Producers’ UnionLtd.(AMUL). This is to collectively procure, process and

Orissa state co-operative milk producer’s federation limited (OMFED)

Of the animals of the milk Producers.

producers. It is a voluntary association of rural milk producers wishing to market their

guidance of a Supervisor of the milk union. A milk producer becomes a member by

themselves. Managing Committee Members are honorary. They employ a Secretary,

Orissa state co-operative milk producer’s federation limited (OMFED)

12-are elected farmer representatives.

01- A nominee of the financing institution (NDDB).

01- A nominee of the Milk Federation (Omfed).

01- General Manager of the Milk Union as the Ex-officio Secretary.

day operation under the guidance and direction of the board.

Every society is continuously guided, supervised and controlled by the union so

all the societies on a quality basis to ensure a clean milk business.

The Federation is managed by a Board of Directors elected in the following manner:

1.Three are Government of Orissa nominees.

2.One from the financing agency.

3.The selected chairmen of the Affiliated Milk Unions

Orissa state co-operative milk producer’s federation limited (OMFED)

Anand Pattern cooperative milk producers' organization (figure 2.1)

Orissa state co-operative milk producer’s federation limited (OMFED)

Operation Flood Program in Orissa

Orissa state co-operative milk producer’s federation limited (OMFED)

Development Board) for implementation of Operation Flood Project II by the Govt. of

international Development Association. This was later buttressed by a guaranteed deed

assistance to be received as per the Loans-cum-Grants Agreements by the Orissa Milk

Training-cum-Demonstration center was organized at Jagannathpur, Puri near Cuttack-

infrastructures existing there on a management basis. Under Production Enhancement

Orissa state co-operative milk producer’s federation limited (OMFED)

Operation Flood III

The Operation Flood III Program is implemented in Operation Flood districts of

projects taken up under the Operation Flood III Program.

National Dairy Development Board has been executed on 05.05.92.

The organization was established with the following objectives

To carry out activities for promoting production, procurement, processing and

economic betterment of those engaged in milk production. In particular and without

Orissa state co-operative milk producer’s federation limited (OMFED)

prejudice to the generality of the forgoing objective, the federation may:

•Study problems of mutual interest related to procurement, marketing of dairy and

Etc, in any of the district covered under its area of operation

husbandry activities so as to improve animal health care disease control facilities

A brief note on sambalpur dairy

Orissa state co-operative milk producer’s federation limited (OMFED)

SALIENT FEATURE OF OMFED DAIRY:-

Machineries available (table 2.1)

SL.NO DESCRIPTION QUANTITY CAPACITY

Orissa state co-operative milk producer’s federation limited (OMFED)

Orissa state co-operative milk producer’s federation limited (OMFED)

establishes linkage from producers to consumers.