FINANCIAL ANALYSIS OF WASTE MANAGEMENT

INDUSTRY
Summer Training Project Report
Submitted in partial fulfillment of the requirements for the award of
BACHELOR OF BUSINESS ADMINISTRATION
By
BHUMIKA YADAV
(BBA/4527/10)
Department of Management
Birla Institute of Technology
NOIDA Campus

BIRLA INSTITUTE OF TECHNOLOGY,

(Deemed University U/S of UGC Act, 1956)

MESRA, RANCHI, JHARKHAND

PREFACE

The summer project acts as an integral part of the curriculum in BBA (Bachelor of Business
Administration) by BIRLA INSTITUTE OF TECHNOLOGY, NOIDA.

As students, we are only provided with theoretical knowledge, so there is a need for practical
implementation of that theoretical knowledge. Therefore this summer training in an organization
provides us the practical knowledge and applications about the working of an organization,
which helped me to understand the corporate environment.

As a part of the BBA curriculum, this training will lead to development of our:
FINANCIAL ANALYSIS OF WASTE MANAGEMENT INDUSTRY

ACKNOWLEDGEMENT

The work done under the title FINANCIAL ANALYSIS OF WASTE MANAGEMENT
INDUSTRY represents not just my efforts to realize the goal of learning & training; in fact it
reflects a combination of able guidance, recommendations & suggestions of a number of people.

First of all, I would like show my gratitude to Mr. Sanjay Singh (VP-Operations) for providing
me with the opportunity to attend Internship program at, IL&FS- Environment (IEISL) also
would like to thank Miss Kavisha Khandelwal for her utmost help in preparation of this valuable
project report.

I also want to thank them for giving their valuable time & suggestions for the completion of this
project.

I am profoundly grateful to Miss Vandana Sharma, Professor, Birla Institute of Technology,

Noida my mentor and guide for the project for his support and guidance throughout this project
with valuable information and giving me a better insight of the things, without which the
successful culmination of this project would not have been possible.

BHUMIKA YADAV
BBA-4527/10

DECLARATION CERTIFICATE

CERTIFICATE OF APPROVAL

TABLE OF CONTENTS
CHAPTER 1.
1.1 Introduction of the study..8
1.2 Industry profile..9
1.3 Company profile12

CHAPTER 1
INTRODUCTION

1.1 Introduction of the study

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Finance is one of the most primary requisite of a business and the modern management
obviously depends largely on the efficient management of the finance.
Financial statements are prepared primarily for decision making. They play a dominant role in
setting the frame work of managerial decisions. The finance manager has to adhere to the five
Rs with regard to many. This right quantity of money for liquidity consideration of right quality
whether owned or borrowed funds at the right time to preserve solvency from the right sources
and at the right cost of capital.
The term financial analysis and is also know as analysis and interpretation of financial statements
refer to process of determining financial strength and weakness of the firm by establishing
strategic relationship between the items oh the balance sheet, profit and loss account and other
operative data. the purpose of financial analysis is to diagnose the information contained in
financial statements so as to judge the profitability and financial soundness of the firm.

1.2 waste Management Industry:

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Waste management is the collection, transport, processing, recycling or disposal, and monitoring
of waste materials. Concern over environment is being seen a massive increase in recycling
globally which has grown to be an important part of modern civilization. The consumption habit
so f modern consumerist lifestyles are causing a huge global waste problem. Industrialization
and economic growth has produced more amounts of waste, including hazardous and toxic
wastes. There is a growing realization of the negative impacts that wastes have had on the local
environment (air, water, land, human health etc.)
Waste management is the collection of all thrown away materials in order to recycle them and as
a result decrease their effects on our health, our surroundings and the environment and enhance
the quality of life. Waste management practices differ for developed and developing nations, for
urban and rural areas, and for residential and industrial producers. Waste Management flows in a
cycle: monitoring, collection, transportation, processing, disposal or recycle. Through these steps
a company can effectively and responsibly manage waste output and their positive effect they
have on the environment.
Waste generation per capita has increased and is expected to continue to climb with growing
population, wealth, and consumerism throughout the world. Approaches to solving this waste
problem in a scalable and sustainable manner would lead us to a model that uses waste as an
input in the production of commodities and value monetized, making waste management a true
profit center. The conversion of waste as a potential source of energy has a value as a
supplemental feedstock for the rapidly developing bio-fuels sector. A variety of new technologies
are being used and developed for the production of bio fuels which are capable of converting
wastes into heat, power, fuels or chemical feedstock.
Thermal Technologies like gasification, pyrolysis, thermal depolymerization, plasma arc
gasification, and nonthermal technologies like anaerobic digestion, fermentation etc are a
number of new and emerging technologies that are able to produce energy from waste and other
fuels without direct combustion.Biodegradable wastes are processed by composting, vermicomposting, anaerobic digestion or any other appropriate biological processing for the
stabilization of wastes. Recycling of materials like plastics, paper and metals should be done for
future use.
There is a clear need for the current approach of waste disposal in India that is focussed on
municipalities and uses high energy/high technology, to move more towards waste processing
and waste recycling (that involves public-private partnerships, aiming for eventual waste
minimization - driven at the community level, and using low energy/low technology resources.

1.3 IL&FS - Background

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Infrastructure Leasing & Financial Services Limited (IL&FS) is one of India's leading
infrastructure
development
and
finance
companies
IL&FS was promoted by the Central Bank of India (CBI), Housing Development Finance
Corporation Limited (HDFC) and Unit Trust of India (UTI). Over the years, IL&FS has broadbased its shareholding and inducted Institutional shareholders including State Bank of India, Life
Insurance Corporation of India, ORIX Corporation - Japan and Abu Dhabi Investment Authority
IL&FS has a distinct mandate - catalysing the development of infrastructure in the country. The
organization has focused on the commercialisation and development of infrastructure projects
and creation of value added financial services. From concept to execution, IL&FS houses the
expertise to provide the complete array of services necessary for successful project completion:
visioning, documentation, development, finance, management, technology and execution.

1.3.1 IL&FS Subsidiaries

1. IL&FS Financial Services Limited (IFIN)
2. IL&FS Investment Managers Limited(IIML)
3. IL&FS Securities Services Limited (ISSL)
4. ORIX Auto Infrastructure Services Limited (OAIS)
5. IL&FS Infrastructure Development Corporation Limited (IIDC)
6. IL&FS Transportation Networks Limited (ITNL)
7. IL&FS Maritime Infrastructure Company Limited (IMICL)
8. IL&FS Water Limited (IWL)
9. IL&FS Technologies Limited (ITL)
10.IL&FS Trust Company Limited (ITCL)

1.3.2 IEISL
IL&FS Environmental Infrastructure & Services Limited (IEISL), incorporated on 2nd August,
2007, is a 100% subsidiary of Infrastructure Leasing & Financial Services (IL&FS), a premier
non banking financial institution of India. The Company provides end to end solutions for Solid
Waste Management to Municipal Corporations and Townships in India and Abroad. Currently,
we are offering services in Integrated Solid Waste Management System.
IEISL has emerged as a leader in the Waste Management sector. The Company is mandated to
manage about 5000 tonnes of waste every day and is amongst the first to mainstream Carbon
financing in waste management. We provide advisory services in Environmental Management,
Geo-spatial, Energy Conservation and Clean Development Mechanism.
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IEISL promotes environmentally sustainable solutions. The Company has established its
credentials in Environmental Planning and Management, Regulatory Compliance Assessment,
Waste Management, Environmental and Social Risks Assessment, Clean Development
Mechanism, Energy Efficiency and Enterprise Geo-Spatial Solutions.
IEISL has successfully created a niche in the Waste Sector by innovating a viable waste
processing business model including - off taking of compost by fertilizer companies, initiating
the retail marketing of eco-friendly compost EcoSmart. During Common Wealth Games,
approximately 2,00,000 tons of Construction and Demolition waste has been lifted from the
streets of entire Delhi for processing at its facility at Burari, Delhi.
The Companys Geo-spatial division is ISO 9001:2008 certified and provides sustainable
solution framework integrated with spatial technology. The Company has been mandated by
Airtel Africa to provide Geo-spatial data for 16 African nations.
The Energy Efficiency and Clean Development Mechanism (CDM), division of IEISL offer way
forward conservation and management strategies for resources.

Focus areas:

Integrated Municipal Solid Waste Management

Collection, Segregation & Transportation
Treatment
Compost
Biomethanation
Refuse Derived Fuel
Final Disposal
Construction & Demolition Waste
Biomedical Waste
Hazardous Waste
E-Waste (Computer, CDs Mobiles, Digital Cameras, Chips etc.)
Plastic to Fuel
Marketing of Compost

Range of Services Includes:

Environmental Management

Geo-spatial Solutions

Integrated Municipal Solid Waste Management

Construction & Demolition Waste Management

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Hazardous Waste Management

Electronic Waste Management

Social Management

Clean Development Mechanism and

Energy Efficiency

Purpose
The Financial Analysis Project is designed to provide guidance and experience in the financial
analysis of a company. Each student is assigned a company for this project, and this company
isthe basis for all reports. The project consists of ten progress reports, and then a final,
comprehensive report. The final report is a compilation of the ten progress reports, with
additional information. Students are encouraged to improve the content from the progressreports
after receiving instructor feedback, so that the comprehensive report reflects edits and revisions
that improve upon the previously submitted reports.

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MEANING OF FINANCIAL ANALYSIS

The first task of financial analysis is to select the information relevant to
thedecision under consideration to the total information contained in thefinancial statement. The
second step is to arrange the information in a way to highlight significant relationship. The final
step is interpretation and drawing of inference and conclusions. Financial statement is the
process of selection, relation and evaluation.
Features of Financial Analysis
To present a complex data contained in the financial statement insimple and
understandable form.
To classify the items contained in the financial statement inconvenient and rational
groups.
To make comparison between various groups to draw variousconclusions.

Purpose of Analysis of financial statements

To know the earning capacity or profitability.

To know the solvency.
To know the financial strengths.
To know the capability of payment of interest & dividends.
To make comparative study with other firms.
To know the trend of business.
To know the efficiency of mgt.
To provide useful information to mgt

Procedure of Financial Statement Analysis

The following procedure is adopted for the analysis and interpretation of financial statements:The analyst should acquaint himself with principles and postulated of accounting. He should
know the plans and policies of the management so that he may be able to find out whether these
plans are properly executed or not.
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The extent of analysis should be determined so that the sphere of

work may be decided. If the aim is find out. Earning capacity of theenterprise then analysis of
income statement will be undertaken. On the other hand, if financial position is to be studied then
balance sheet analysis will be necessary.
The financial data be given in statement should be recognized
andrearranged. It will involve the grouping similar data under sameheads. Breaking
down of individual components of statement according to nature. The data is reduced to
a standard form.
A relationship is established among financial statements with the help of tools & techniques of
analysis such as ratios, trends, common size, fund flow etc.
The information is interpreted in a simple and understandable way .The significance and utility
of financial data is explained for help indecision making.
The conclusions drawn from interpretation are presented to themanagement in the form of
reports.
TYPES OF FINANCIAL ANALYSIS
A)Classification on the basis of natural used
B)External Analysis:
Outsiders, who dont have access to the detailed internalaccounting records of the business firm,
do this analysis. These out siders parties are potential investor, creditors, government agencies,
credit agencies & general public.
Internal Analysis:
The analysis conducted by person who has access to the internal accounting records of a business
firm is known as internal analysis.
On the basis of modus operand
a) Horizontal Analysis:
Horizontal analysis refers to the comparison of financial data of a company for several years.
The figures of this type of analysis are presented horizontally over a no. of columns. This type of
analysis also called Dynamic Analysis.
b) Vertical Analysis This analysis refers to the study of relationship of the various itemsin the
financial statements, of one accounting period. It is also known as Static analysis.
FUNCTIONS OF FINANCE DEPARTMENT
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The functions of finance department include the following areas:

1) Effective management of financial resources of the company.
2) Coordinates & Monitors the functions of accounts activities in theunits/marketing offers.
3) Establish and maintain systems of financial control, internal check
andrender advice on financial & accounting matters includingexamination of feasibility report
and detailed project reports.4)
Establish and maintain proper system of budgetary control, costcontrol and management
reporting.
5) Maintain financial accounts and compile annual periodical accounts
inaccordance with the companies Act, 1956, ensuring the audit of accounts as per law/Govt.
directions.
6) Looks after overall funds management and arranges funds required
for the capital schemes and working capital form govt., banks and financial institutions etc.
7) Timely payment of all taxes, levies & duties under the Law,Maintenance of records and filing
returns statements connected with such taxes, levies and duties with the appropriate authorities ,
as per law. All the power involving financial implications are to e exercised in prior consultation
with head of concerned finance department. In the event of any difference of opinion between
the General Manger and the Head of Finance Department, the matter shall be referred to
Managing Director who after consulting Director (Finance) shall issue appropriate instruction
after following the prescribed procedures
METHODS OF FINANCIAL ANALYSIS
A number of methods can be used for the purpose of analysis of
financialstatements. These are also termed as techniques or tools of financialanalysis. Out of
these, and enterprise can choose those techniques which are suitable to its requirements. The
principal techniques of financial analysis are:
1. Comparative Financial Statements.
2. Common size Statements
3. Trend Analysis
4. Funds Flow statements
5. Cash Flow Statement

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COMPARATIVE FINANCIAL STATEMENTS

When financial statements figures for two or mote years are placed side-side to facilitate
comparison, these are called comparative Financial Statements .Such statements not only show
the absolute figures of various years but also provide for columns to indicate to increase ort
decrease in these figures from one year to another. In addition, these statements may also show
the change from one year to another on percentage form. Such cooperative statements are of
great value in forming the opinion regarding the progress of the enterprise

COMPARATIVE BALANCE SHEET

The Comparative Balance Sheet as on two or more different dates can be prepared to show the
increase or decrease in various assets, liabilities andcapital. Such a comparative Balance Sheet is
very useful in studying thetrends in a business enterprise.
COMPARATIVE PROFIT & LOSS ACCOUNT
Profit and loss account shows the net profit or net loss of a particular year whereas comparative
profit and loss account for a number of years providesthe following information1.Rate of
increase or decrease in gross profit.2.Rate of increase or decrease in operating profit.3.Rate of
increase or decrease in cost of goods sales4.Rate of increase or decrease in net profit5.Rate of
increase or decrease in sales.
TREND ANALYSIS
Trend percentage are very useful is making comparative study of thefinancial statements for a
number of years. These indicate the direction of movement over a long tine and help an analyst
of financial statements to form an opinion as to whether favorable or unfavorable tendencies
have developed. This helps in future forecasts of various items. For calculating trend percentages
any year may be taken as the base year. Each item of base year is assumed to be equal to 100
and on that basis the percentage of item of each year calculated.
RATIO ANALYSIS
MEANING :
Absolute figures expressed in financial statements by themselves are meaningfulness. These
figures often do not convey much meaning unless expressed in relation to other figures. Thus, it
c an be say that the relationship between two figures, expressed in arithmetical terms is called a
ratio.
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FINANCIAL RATIO ANALYSIS

A popular way to analyze the financial statements is by computing ratios. A ratio is a relationship
between two numbers, e.g. ratio of A: B = 1.5:1 ==> A is 1.5 times B. A ratio by itself may have
no meaning. Hence, a given ratio is compared to:
Ratios from previous years for internal trends
Ratios of other firms in the same industry for external trends.
Ratio analysis is a diagnostic tool that helps to identify problem areas and opportunities within a
company. , we will discuss how to measure and interpret some key ratios.
The most frequently used ratios by Financial Analysts provide insights into a firm's

Liquidity
Degree of financial leverage or debt
Profitability
Efficiency
Value

A. Analyzing Liquidity
Liquid assets are those that can be converted into cash quickly. The short-term liquidity
ratios show the firms ability to meet its short-term obligations. Thus a higher ratio (#1
and #2) would indicate a greater liquidity and lower risk for short-term lenders.
The Rules of Thumb for acceptable values are: Current Ratio (2:1), Quick Ratio (1:1).
While high liquidity means that the company will not default on its short-term
obligations, one should keep in mind that by retaining assets as cash, valuable investment
opportunities may be lost. Obviously, cash by itself does not generate any return. Only if
it is invested will we get future return.
1. Current Ratio = Total Current Assets / Total Current Liabilities
2. Quick Ratio = (Total Current Assets - Inventories) / Total Current Liabilities
In the quick ratio, we subtract inventories from total current assets, since they are the
least liquid among the current assets.
B. Analyzing Debt
Debt ratios show the extent to which a firm is relying on debt to finance its investments
and operations, and how well it can manage the debt obligation, i.e. repayment of
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principal and periodic interest. If the company is unable to pay its debt, it will be forced
into bankruptcy. On the positive side, use of debt is beneficial as it provides tax benefits
to the firm, and allows it to exploit business opportunities and grow.
Note that total debt includes short-term debt (bank advances + the current portion of
long-term debt) and long-term debt (bonds, leases, notes payable).
1. Leverage Ratios
1a. Debt to Equity Ratio = Total Debt / Total Equity
This shows the firms degree of leverage, or its reliance on external debt for financing.
1b. Debt to Assets Ratio = Total Debt / Total assets
Some analysts prefer to use this ratio, which also shows the companys reliance on
external sources for financing its assets.
In general, with either of the above ratios, the lower the ratio, the more conservative (and
probably safer) the company is. However, if a company is not using debt, it may be
foregoing investment and growth opportunities. This is a question that can be answered
only by further company and industry research.
A frequently cited rule of thumb for manufacturing and other non-financial industries is
that companies not finance more than 50% of their capital through external debt.
2. Interest Coverage (or Times Interest Earned) Ratio = Earnings Before Interest and
Taxes / Annual Interest Expense
This shows the firms ability to cover fixed interest charges (on both short-term and longterm debt) with current earnings. The margin of safety that is acceptable varies within
and across industries, and also depends on the earnings history of a firm (especially the
consistency of earnings from period to period and year to year).
3. Cash Flow Coverage = Net Cash Flow / Annual Interest Expense
Net cash flow = Net Income +/- non-cash items (e.g. -equity income + minority interest
in earnings of subsidiary + deferred income taxes + depreciation + depletion +
amortization expenses)
Since depreciation is usually the largest non-cash item in most companies, analysts often
approximate Net cash flow as being equivalent to Net Income + Depreciation.
Cash flow is a critical variable in assessing a company. If a company is showing strong
profits but has poor cash flow, you should investigate further before passing a favorable
opinion on the company. Analysts prefer ratio #3 to ratio #2.
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C. Analyzing Profitability
Profitability is a relative term. It is hard to say what percentage of profits represents a
profitable firm, as profits depend on such factors as the position of the company and its
products on the competitive life cycle (for example profits will be lower in the initial
years when investment is high), on competitive conditions in the industry, and on
borrowing costs.
For decision-making, we are concerned only with the present value of expected future
profits. Past or current profits are important only as they help us to identify likely future
profits, by identifying historical and forecasted trends of profits and sales.
We want to know whether profits are generally on the rise; whether sales stable or rising;
how the profits compare to the industry average; whether the market share of the
company is rising, stable or falling; and other things that indicate the likely future
profitability of the firm.
1. Net Profit Margin = Profit after taxes / Sales
2. Return on Assets (ROA) = Profit after taxes / Total Assets
3. Return on Equity (ROE) = Profit after taxes / Shareholders Equity (book value)
4. Earnings per Common share (EPS) = (Profits after taxes - Preferred Dividend) / (# of
common shares outstanding)
5. Payout Ratio = Cash Dividends / Net Income
Note: The terms profits, earnings and net income are often used interchangeably in
financial statements. Be sure to review the statements to understand their components.
D. Analyzing Efficiency
These ratios reflect how well the firms assets are being managed.
The inventory ratios shows how fast the inventory is being produced and sold.
1. Inventory Turnover = Cost of Goods Sold / Average Inventory
This ratio shows how quickly the inventory is being turned over (or sold) to generate
sales. A higher ratio implies the firm is more efficient in managing inventories by
minimizing the investment in inventories. Thus a ratio of 12 would mean that the
inventory turns over 12 times, or the average inventory is sold in a month.
2. Total Assets Turnover = Sales / Average Total Assets
This ratio shows how much sales the firm is generating for every dollar of investment in
assets. The higher the ratio, the better the firm is performing.
4. Accounts Receivable Turnover = Annual Credit Sales / Average Receivables
4. Average Collection period = Average Accounts Receivable / (Total Sales / 365)
Ratios #3 and #4 show the firms efficiency in collecting cash from its credit sales. While
a low ratio is good, it could also mean that the firm is being very strict in its credit policy,
which may not attract customers.
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5. Days in Inventory = Days in a year / Inventory turnover

Ratio #5 is referred to as the shelf-life i.e. how quickly the manufactured product is
sold off the shelf. Thus #5 and #1 are related.
E. Value Ratios
Value ratios show the embedded value in stocks, and are used by investors as a
screening device before making investments.
For example, a high P/E ratio may be regarded by some as being a sign of over
pricing. When the markets are bullish (optimistic) or if investor sentiment is optimistic
about a particular stock, the P/E ratio will tend to be high. For example, in the late 1990s
Internet stocks tended to have extremely high P/E ratios, despite their lack of profits,
reflecting investors' optimism about the future prospects of these companies. Of course,
the burst of the bubble showed that such confidence was misplaced.
On the other hand, a low P/E ratio may show that the company has a poor track record.
On the other hand, it may simply be priced too low based on its potential earnings.
Further investigation is required to determine whether the company would then provide a
good investment opportunity.
1. Price To Earnings Ratio (P/E) = Current Market Price Per Share / After-tax Earnings
Per Share
2. Dividend Yield = Annual Dividends Per Share / Current Market Price Per Share

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CHAPTER 3
OBJECTIVE OF THE STUDY

1.

The main objective of the study is to evaluate the financial performance of IEISL
and compare it with other waste management companies of India on financial
parameters.

2.

To evaluate IEISL performance in the waste management industry of the country.

SCOPE OF THE STUDY

The objectives of the study have a wider scope. Although, the industry is comparatively
new, the past performance can be treated as the true indicator of the future trend. Analysis
of data of IEISL for the last three years will help to a great extent to understand the
performance pattern of the company and on the basis of which the future program's of the
company can be planned. It also looks into the financial performance of other waste
management companies in India which also adds on to the wider scope of the study.

RESEARCH METHODOLOGY

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Most of the data present in this report has been collected through Annual Reports and other
published documents of the company, other facts and figures, especially regarding IEISL
section. Company performance is prepared through discussions with the officials of the
company.
LIMITATION OF THE STUDY

The main limitation of the study is the fact that it is not possible to collect all information
as Analysis of financial performance, requires information regarding all financial
information of the company as well as the qualitative aspect also.

Some of the records and information are treated as confidential, thus depriving some
significant and relevant data concerned with the study.

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CHAPTER 4DATA INTERPRETATION AND ANALYSIS

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