ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ – &

ANIRUDDHA SARKAR*; SUVARUN GOSWAMI**

*Junior Research Fellow, Dep of Commerce, The University of Burdwan , Burdwan -713104 , *Assistant Professor in Commerce , Rishi Bankim Chnadra Evening College , Naihati , North 24 Parganas , West Bengal ,

ABSTRACT

India's infrastructure has been improving slowly but steadily over recent year with foreign investors increasingly keen to invest in the sector. Infrastructure Sector Growth Rate in has been on the rise in the last few years. The Growth Rate of the Infrastructure Sector GDP has grown due to several reasons and this in its turn has given a major boost to the country's economy. In the present article an endeavor has been made to throw some light on the financial performance of Indian Aviation sector means of a comparative study between and , key infrastructure sector. The financial performance has been with the help of some key

Finally the study ends with some valid suggestions which deserve the attention of the management of both the companies under study and Government.

KEYWORDS: Infrastructure, Indian Airways, Financial Performance, PI, UI & EL. ______

Infrastructure is the basic physical and organizational structure needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. The term typically refers to the technical structures that support a society, such as roads, water supply, sewers, power grids, telecommunications, and so forth. Viewed functionally, infrastructure facilitates the production of goods and services; for example, roads enable the transport of raw materials to a factory, and also for the distribution of finished products to markets. In some contexts, the term may also include basic social services such as schools and hospitals. In military parlance, the term refers to the buildings and permanent installation necessary for the support, redeployment, and operation of military forces.

" " " "

In this connection "hard" infrastructure refers to the large physical networks necessary for the

functioning of a modern industrial nation, whereas "soft" infrastructure refers to all the www.zenithresearch.org.in

institutions which are required to maintain the econom , health and cultural/social standards of a

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ country, such as the financial system, the education system, the health care system, the system of government and law enforcement, as well as emergency services

T " "

a) Transportation infrastructure

b) Energy infrastructure

c) Water management infrastructure

d) Communications infrastructure

e) Solid waste management

f) Earth monitoring and measurement networks

a) Institutional infrastructure

b) Industrial infrastructure

c) Social infrastructure------

d) Cultural, sports and recreational infrastructure

The Sectors like Airports, Power, Telecommunications, Roadways, and Railways tc constitute the Infrastructure Sector. According to IDFC sources total investment requirement is as follows:

US$ billions

Power: 162

Roads; 81

Airports: 9

Telecommunications: 47

Railways: 66

Others: 80

Total Requirement = 455 www.zenithresearch.org.in

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/

Over the past four years, the Indian Economy consistently recorded growth rates in excess of 8.5% per annum resulting in rapidly increasing infrastructure spending. Total infrastructure spending is expected to increase from US$ 24 billion in 2005 to US$ 47 billion in 2009. (FICCI). Total investment requirement in the infrastructure sector over the next five years US$ 445 billion.

K I S

India's infrastructure has been improving slowly but steadily over recent years, with foreign investors increasingly keen to invest in the sector.

Here are some key facts about India's infrastructure sector:

India, Asia's third-largest economy, expects to invest about US 500 billion in infrastructure, mainly in power, telecommunication, roads, railways and oil pipelines, in the five years ending March 2012.

India will need to spend more than US 1 trillion on infrastructure from 2010 to 2019, with roads requiring US 427 billion, power US 288 billion and railways US 281 billion, according to Goldman Sachs.

Infrastructure investment is relatively low compared with some countries in Asia. Around 7.5% of GDP is invested in infrastructure, with plans to increase that to about 10% at the end of the 2008-2012 five-year plans.

Private investment will likely contribute 36%, or US 186 billion, to total infrastructure investment by the end of the 2008-2012 five-year plans, up from 25% for the 2002-07 periods.

India will issue tax-free infrastructure bonds with a minimum ten of 10 years, which will have the potential to raise about US 6.5 billion in fiscal year 2010-11, according to government estimates, the number could rise in 2011-12.

Infrastructure Sector Growth Rate in India GDP has been on the rise in the last few years. The Growth Rate of the Infrastructure Sector in India GDP has grown due to several reasons and this in its turn has given a major boost to the country's economy.

ECONOMY OF INDIA

India gross domestic product (GDP) means the total value of all the services and goods that are

manufactured within the borders of the country within the specified period of time. www.zenithresearch.org.in www.zenithresearch.org.in

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/

The Indian economy is the twel biggest in the whole world for it has the GDP of US$ 1.09 trillion in 2007. The is the second major growing economy in the whole world for it has the GDP growing at the rate of 9.4% in 2006- 07.

THE INFRASTRUCTURE SECTOR IN INDIA

The Infrastructure Sector in India was after independence completely in the hands of the public sector and this hampered the growth of this sector. India's less spending on real estate, power; telecommunications, construction, and transportation prevented the country from sustaining very high rates of growth. The amount that India was spending on the Infrastructure Sector was 6% of GDP or US$ 31 billion in 2002.

THE CONTRIBUTION OF THE INFRASTRUCTURE SECTOR IN THE INDIA GDP

Infrastructure Sector Growth Rate in India GDP came to 3.5% in 1996-97 and the next year, this figure was 4.6%. The Growth Rate of the Infrastructure Sector in India GDP increased after the Indian government opened the sector to 100% foreign direct investment (FDI). This was done in order to boost the Infrastructure Sector in the country. The result of opening the sector to the private sector has been that Infrastructure Sector Growth Rate in India GDP has increased at the rate of 9%. It is estimated that the Growth Rate of the Infrastructure Sector in India GDP will grow at the rate of 8.5% between 2006 and 2010. The biggest ongoing project in the Infrastructure Sector in India is the Golden Quadrilateral, which is improving the main roads that connect the four cities of , , , and Kolkata.

THE MUST BOOST THE INFRASTRUCTURE SECTOR

Infrastructure Sector Growth Rate in India GDP thus has increased over the last few years due to the efforts that have been made by the Indian government. The government of India must continue to take steps to improve the Infrastructure Sector in the country. For this in its turn will help to boost the Indian economy in future.

1) To assess in details the entire infrastructure sector scenario in India especially Airlines Sector, being a key infrastructure sector.

2) To evaluate the financial performance of both the companies by taking into consideration the two major financial dimensions i.e. liquidity and

profitability of the companies under study.

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3) To make a comparative analysis between a public sector and a private sector

by considering their respective financial performance.

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/

The Data base of the article is secondary in nature. All the data relating to companies under study have been collected from the published Financial Statements .The period of data is from 2000-01 to 2006-07 i.e. seven years financial position has been taken into consideration. There was no partiality neither in selection of company nor in selection of industry have they been selected on random basis for illustrative purpose. Among the companies one company is a public sector Undertakings i.e. Air India and another is Kingfisher which is a private company. In the present study the liquidity and profitability position ha been taken into consideration by calculating different key liquidity and profitability ratios in order to judge their financial performance for the period under study. For comparative analysis purpose the liquidity and profitability ratios of the companies have been exhibited in composite manner along with their diagrammatic representation. For assessing the degree of relationship between the working capital management and profitability Pearson‟s simple correlation coefficient has been used and Student‟ test has been applied to test the significance of the results of the empirical study. For measuring the overall efficiency of working capital management, at first the performance index has been calculated by using the following formula :

Mi PIMWC = [Σ Mi (t-1)/ t]/ N × IT ……………………………………………… (1)

Where, I T = turnover index or sales index defined as St / S (t-1)

Mi = Individual group of current assets.

N = No. of current assets in the group. nd I = 1, 2……………. N.

In the present study, four items of current assets have been considered viz. inventories, sundry debtors, cash and bank balances and loans and advances. Next the Utilization Index has been calculated by using the model:

UI = R / R ….…………………………………………………… (2)

MWC (t-1) t

Where, R = Current Assets / Sales.

And finally, the Efficiency Index has been calculated as:

EIMWC = PIMWC × UI MWC …………………………………. (3) CASE STUDY

Air-India is India's finest flying Ambassador. The urge to excel and the enthusiasm which www.zenithresearch.org.in characterized Air-India's first flight way back on October 15, 1932 is quintessential even today--

thanks to eighteen thousand Air Indians who have kept alive the tradition of flying high! Air

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ India, as the national carrier, has traditionally played a pivotal role in promoting tourism to India. Air India is India's national . Although air transport was born in India on February 18, 1911 when Henri Piquet, flying a Humber bi-plane, carried mail from to Naini Junction, some six miles away, the scheduled services in India, in the real sense, began on October 15, 1932. It was on this day that J.R.D. Tata, the father of Civil and founder of Air India, took off from Drigh Road Airport, , in a tiny, light single-engined on his flight to Mumbai (then known as Bombay) via . Mr.V.V.S.Laxman, the famous Indian cricketer and Deputy General Manager (Commercial) of Air India has been conferred the prestigious Padma Shri Award. Mr.Laxman who is posted at Hyderabad will be the sixth Air Indian recipient of this prestigious award. The earlier Padma Shri awardees from Air India are Mr.M.S.Dhoni and Mr.Harbhajan Singh – cricketers and the hockey veterans Mr.Mukesh Kumar, Dilip Tirkey and Mr.Dhanraj Pillai.

At Kingfisher, a flight is not a journey between two airports but an experience of a lifetime. Be it Business or Leisure, Kingfisher offer a range of aircraft that includes the Euro copter EC155, Business Jets and Corporate Jets. For a group charter, choose from a fleet which includes Airbus 321, Airbus 320, Airbus 319, ATR 72-500 and ATR 42-500 aircraft depending on your requirements.

As Kingfisher takes off into the international skies, you can expect a world-class experience. Every Kingfisher aircraft meets the global standards that I have set in terms of safety and performance. Our brand-new fleet incorporates the latest technology and each aircraft is fitted with a personalized in-flight entertainment system and top quality programming content from around the world for your viewing and listening pleasure, and to create an environment that you will truly cherish.

Aboard our flights, you will be delighted by the various sensory experiences on offer – from tantalizing aromas of world cuisine to the magic touch of your personal therapeutic massage seat - we really have thought about every little thing that will exhilarate you.

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/

TABLE-1 LIQUIDITY

CR ITR DTR

Air Kingfish Air Kingfish Air Kingfish Year/Company India er India er India er

2000-01 0.53 1.94 7.4 14.02 7.22 5.18

2001-02 0.5 1.9 6.82 12.03 6.92 6.51

2002-03 0.48 1.56 10.26 7.71 6.47 7.87

2003-04 0.49 1.69 17.39 7.95 6.55 17.53

2004-05 0.63 1.59 14.53 12.64 7.69 48.23

2005-06 0.9 1.27 12.97 21.12 7.08 93.58

2006-07 1.28 1.44 10.82 27.29 5.84 67.43

Source: Published

TABLE-2 PROFITABILITY

GP Ratio NP Ratio Operating Profit Ratio

Year/Compan Kingfishe y Air India Kingfisher Air India r Air India Kingfisher

2000-01 7.4 8.56 -1.09 6.726 12.46 -20.72

2001-02 9.7 8.39 0.54 8.286 13.01 -23.557

2002-03 10.83 3.85 2.38 0.299 12.25 -2.481

2003-04 7.64 -16.40 1.59 -18.605 8.3 -10.248

2004-05 6.27 -5.82 1.48 -7.89 6.7 10.337

2005-06 4.74 -26.16 0.031 -31.62 5.69 11.049 www.zenithresearch.org.in

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ 2006-07 -1.69 -24.57 -8.82 -43.649 1.15 10.394

Source: Published --

100

90

80

70

60 CR Air India CR Kingfisher

50 ITR Air India ITR Kingfisher DTR Air India 40 DTR Kingfisher

30

20

10

0 www.zenithresearch.org.in www.zenithresearch.org.in 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/

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10

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

-10 G.P Ratio Air India G.P Ratio Kingfisher

N.P Ratio Air India N.P Ratio Kingfisher Op. Profit Ratio Air India -20 Op. Profit Ratio Kingfisher

-30

-40

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-50

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ TABLE-3: COMPUTATION OF PERFORMANCE INDEX (PI), UTILIZATION INDEX (UI) AND EFFICIENCY INDEX (EI) COMPAN STUDY FOR THE PERIOD FROM 2000-01 TO 200 -

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Source: Published

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ In case of working capital management, Performance Index (PI) denotes average performance index of the various components of current assets. The working capital management may be said efficient if the proportionate rise in sales is more than the proportionate rise in current assets during a particular period. Logically, overall performance index more than one indicates efficient management of working capital. In this study, the PI is more than one in 4 accounting periods out of accounting years; it is highest in the year 200 -0 and lowest in the year 200 -0 . So, the overall performance of the company Air India reflects a over the study period so far as the PI is concerned. the PI is more than one in accounting periods out of accounting years; it is highest in the year 200 -0 and lowest in the year 200 -0 . So, the overall performance does not reflect a very good sign over the study period so far as the PI is concerned.

On the other hand, Utilization Index (UI) indicates the ability of the firm in utilizing its current assets as a whole for the purpose of generating sales. This ultimately reflects the operating cycle of the firm, which can be shortened by means of increasing the degree of utilization. Thus, a value of UI greater than one is always desirable from the management of a company. In the present study, the UI is more than one in out of accounting years. It is highest in the accounting year 2002-03 and lowest in 200 -0 . So, it may also be argued that the ability of the concerned company in utilizing its current assets is quite satisfactory during the period under study. the UI is more than one in out of accounting years. It is highest in the accounting year 200 -0 and lowest in 200 - 0 . So, it may also be argued that the ability of the concerned company in utilizing its current assets is not satisfactory during the period under study.

Finally the Efficiency Index (EI) measures the ultimate efficiency in working capital management of a concern. Since, it has been derived by multiplying the PI and UI, a value more than one will obviously indicate a good sign working capital management. Actually the ultimate efficiency of working capital management depends on both the PI and UI and not solely on one of the . In our study, the EI is more than one in 4 out of accounting years which indicates a quite satisfactory position during the study period. The EI is

highest in the year 200 -0 and lowest in the accounting year 200 -0 the EI

is more than one in out of accounting years which satisfactory position during the study period. The EI is highest in the year 200 -0 and lowest in the accounting year 200 -0

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ TABLE-4: SIMPLE CORRELATION ANALYSIS BETWEEN THE EFFICIENCY IN WORKING CAPITAL MANAGEMENT AND THE PROFITABILITY OF FOR THE PERIOD FROM 2000-01 TO 200 -

------

-

-

--

Note: (i) Tabulated value of „t‟ with (n-2) d .f. i.e., d. f. both at 5% and 1% levels of significance for both tailed tests are 2. and respectively.

(ii) Since, the calculated value of \t\ correlation between ROCE for

in all cases are less than the tabulated values of with d. f., so the www.zenithresearch.org.in

correlation coefficients are statistically insignificant both at 5% and 1% levels of significance.

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ r × √ (n– 2)

(iii) Formula used for calculating |t| =………………….. With (n-2) d. f.

√ (1 – r2)

Source: Complied and computed from Published annual reports of

Table-4 reflects that there positive association between ROCE UI

at 5% level of significance.

The overall profitability position not good for Air India except the year 2002-03. The overall profitability position of kingfisher det ri ting throughout the study period the year 2000-01 ranked No-1 position but the year 2006-07 ranked last position but not a good sign for the general health of both the companies under study. Diagram-2 depicts that the values of current ratio of Air India on an average lower than those of for the under study .e. short- term debt paying capacity of Kingfisher far better than that of Air India during the period . The Inventory turnover ratios of both the companies erratic in nature throughout the study but a further observation shows that in major part of the period under study these ratios much higher for kingfisher as compared to Air India. For Kingfisher there a clear upward trend f the period from 2003-04 to 2006-07. But for Air India there a upward up to the period 2003-04 there a clear downward movement. The values of ebtors urnover atios of Air India, on an average, remain static throughout the period under study. But for

Kingfisher a clear upward trend is visualized for the entire study period.

For the very existence and growth, every company has to earn adequate profit. In other words the profitability trend of a company should exhibit a sorry state in order to survive and grow in the long run. As regards profitability, both the companies under study witnessed a sorry state except in few accounting periods. In the present globalized world to survive and to withstand in the years to come both the companies ha to keep strict vigil on the maintenance f good profitability measured in terms of ross rofit atio, et rofit atio perating ratio Air India should further improve its short term liquidity position reflected in terms of urrent ratio, ebtors urnover ratio, nventory urnover ratio in future so as to attain a strong liquidity position and to attain a favorable position within the ndustry. The www.zenithresearch.org.in management of Kingfisher has to play a pivotal role to attain a favorable short term

liquidity position and to achieve a significant position in the entire industry. The nventory

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ZENITH International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/ turnover ratio indicates the efficiency in inventory management i.e a company has to ensure quick movement of fund or prevent unnecessary block of fund for long period in current assets especially in stock to exhibit a favorable nventory ratio. As far as the companies under Study are concerned, it is observed that the efficiency in inventory management is better than that of Air India. But the nventory urnover atio of Kingfisher is not up to the mark if it is considered in isolation or with existing ideal The study of association between ROCE PI, UI and EI India registered positive

1) Official Website of Air India (www.airindia.com ) 2) Official Website of Kingfisher Airlines (www.flykingfisher.com) 3) Official Website of Ministry of Civil Aviation, GOI(http://civilaviation.nic.in/) 4) Chandra, P., 2006, Financial Management. Theory and Practice, Tata Mc Graw Hill Publishing Company Ltd.; . 5) Fees, P.E. 1978 “The Working Capital Concept”, Accounting Theory: Text and Readings L.D Mac cullers & R.G. Schroeder (Ed.), John Wiley & Sons, 200-205 6) Yadav, R.A. 1986 “Working Capital Management – A Parametric Approach”. The Chartered Accountant, May, 952. 7) Kumar, A.V. and Venkatachalam, A 1995 “Working Capital & Profitability–An Empirical Analysis” The Management Accountant. Oct, Vol. 30, No. 10, 748-750. 8) Bhattacharya, H 1997 Total Management by Ratios, Sage Publication India Pvt. Ltd., New Delhi 9) Bardia S.C 2004 “Liquidity Management: A Case Study of Ltd. The Management Accountants, June, Vol-39, No.-6, 463-495. 10) Banerjee, B. 1973 “Operating Cycle Concept of Working Capital” Indian Journal of Accounting, December, 46-53. Ghosh. S & Maji. S. G. “Working Capital Management Efficiency: A study on the Indian Cement Industry”, The Management Accountant, Vol. 39, No. 5, May 2004, 363-372. Goswami, S & Sarkar, A. (2011) “Liquidity, Profitability Analysis of Indian Airways Sector- An Empirical Study”, International Journal of Research in Commerce and

Management, Vol. No. 2 (2011), Issue No. 6 (June), -122. www.zenithresearch.org.in www.zenithresearch.org.in

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