Anjuman-I-Islam’sAllana Institute of Management Studies

BadruddinTyabji Marg, OFF. 92, Dr. D.N. Road, Opp. CST, Mumbai 400 001

PROJECT REPORT ON

“WORKING CAPITAL MANAGEMENT”

In partial fulfillment of the requirement for Master’s Degree in ManagementStudies (MMS)

SUBMITTED BY

Shaikh Mujeebur Rehman

IInd Year M.M.S.

Specialization: FinanceAcademic Year: 2014-16

PROJECT GUIDE

Prof. Vardarajan Sir

SUBMITTED TO

UNIVERSITY OF MUMBAI

This is a bonafide project work & the information presented is true & original to

the best of our knowledge and belief.

1

ACKNOWLEDGMENT

First and the foremost I would like to thank the University Of Mumbai for giving me the

opportunity to make a project and conduct a thorough study on the topic.

I would like to thank my project guide Miss LOVEENA ATWAL who helped me choose

my topic and helped me in every stage of my project right from the start till the end. Thank

you miss my project wouldn’t have been complete without your guidance encouragement

and support.

I would like to thank our course coordinator Mrs.LoveenaAtwal for her assistance and

support.

I would like to thank Mr.kirloskar , From Branch of Pune. who answered all my questions

with patience.

Last but not the least I would also like to thank my parents for their encouragement and

support and God for his blessings, encouragement and support.

2

EXECUTIVE SUMMARY

Company being established as Kirloskar pneumatic company limited

in 1958, made an entry with manufacture of air compressor and pneumatic

tools & soon diversified by including air conditioning & transmission

equipments.

At Kirloskar Pneumatic up to date manufacturing facilities, including CNC

machines, Stringent quality control procedures and systems, research &

development, foundry, heat treatment facilities, screw rotor machines, gear

grinding machines, metallurgical laboratories, tool room and integrated computer

system, have all been set up with sole idea of achieving the highest standards of

quality & performance.

My Project is the study of working capital management.

The study was conducted at the head office of Kirloskar Pneumatic Co. Ltd. Pune.

The project was of 2 months duration. During the project I interviewed the

executives & staff to collect the data, & also made use of company records &

annual reports. The data collected were then compiled, tabulated and analyzed.

Working Capital Management is a very important facet of financial

management due to:

Investments in current assets represent a substantial portion of total

investment.

Investment in current assets & the level of current liabilities have to be

geared quickly to change sales.

3

OBJECTIVES OF THE STUDY

Study of working capital management is very important because if the working capital is not manage properly then many problems may arise related to the production of goods. Working capital mainly involve inventory, debtors,cash and creditors relating to rawmaterial, labour and other expences. By managing working capital in efficient way the company can increased production turnover and profit .

With this primary objective of the study, the following other objective are follows for the study.

1) To identify the financial strengths & weakness of the company.

2) Through the net profit ratio & other profitability ratio, understand the

profitability of the company.

3) Evaluating company s performance relating to financial statement analysis.

4) To know the liquidity position of the company with the help of current ratio.

5) To find out the utility of financial ratio in credit analysis & determinig the

financial capacity of the firm.

4

TABLE OF CONTENTS

CHAPTER NO CHAPTER NAME PAGE NO. 1. Working capital management 03

1.1 INTRODUCTION 03

1.2 DEFINITION 04

1.3 RATIONAL STUDY OF WORKING CAPITAL

05

1.4 TYPES OF WORKING CAPITAL

07

1.5 DETERMINANT OF WORKING CAPITAL

08

1.6 Introduction of PARLE-G LTD

10

1.7 History 11

1.8 MISSION 1.9 VISION

13

1.10 STRATEGY 15

1.11Marketing of parle-gco. 171.12parle –g co. to cross in 5000 crore rupees in year 2013

25

1.13Csr and parle product 30. 2. Warjing capital management n

of parle-g 45

2.1warking capital cycle 462.2analysis of working capital management

48

2.3operating cycle of manufacturing business

49

3. Working capital ratio 513.1inventory management 543.2debtars turnover ratio 653.3warking capital turnover ratio

68

4. Financial of working capital 70

5

4.1recommendation 714.2conclusion 734.3biblography 74

CHPTER1

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WORKING CAPITAL MANAGEMENT

INTRODUCTION:

Working Capital is the key difference between the long term financial management and

short term financial management in terms of the timing of cash. Long term finance involves the

cash flow over the extended period of time i.e 5 to 15 years, while short term financial decisions

involve cash flow within a year or within operating cycle. Working capital management is a

short term financial management.

Working capital management is concerned with the problems that arise in attempting to

manage the current assets, the current liabilities & the inter relationship that exists between them.

The current assets refer to those assets which can be easily converted into cash in ordinary course

of business, without disrupting the operations of the firm.

Composition of working capital :

Major Current Assets:

1) Cash

2) Accounts Receivables

3) Inventory

4) Marketable Securities

Major Current Liabilities:1) Bank Overdraft

2) Outstanding Expenses

3) Accounts Payable

4) Bills Payable

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The Goal of Capital Management is to manage the firm’s current assets & liabilities, so

that the satisfactory level of working capital is maintained.If the firm cannot maintain the

satisfactory level of working capital, it is likely to become insolvent & may be forced into

bankruptcy. To maintain the margin of safety current asset should be large enough to cover its

current assets.

DEFINITIONS OF WORKING CAPITAL:

The following are the most important definitions of Working capital:

“Working capital is descriptive of that capital which is not fixed, but that more common

use of working capital is to consider it has the difference between value of the current asset and

the current liabilities”. (Hoagland).

1) Working capital is the difference between the inflow and outflow of funds. In other words it is

the net cash inflow .

2) Working capital represents the total of all current assets. In other words it is the Gross

working capital , it is also known as Circulating capital or Current capital for current assets are

rotating in their nature.

.

3) Working capital is defined as The excess of current assets over current liabilities and

provisions . In other words it is the Net Current Assets or Net Working Capital .

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RATIONAL STUDY OF WORKING CAPITAL

Working capital may be regarded as the lifeblood of the business. Without insufficient

working capital, any business organization cannot run smoothly or successfully.

In the business the Working capital is comparable to the blood of the human body. Therefore the

study of working capital is of major importance to the internal and external analysis because of

its close relationship with the current day to day operations of a business. The inadequacy or

mismanagement of working capital is the leading cause of business failures.

To meet the current requirements of a business enterprise such as the purchases of

services, raw materials etc. working capital is essential. It is also pointed out that working capital

is nothing but one segment of the capital structure of a business.

In short, the cash and credit in the business, is comparable to the blood in the human body like

finance s life and strength i.e. profit of solvency to the business enterprise. Financial

management is called upon to maintain always the right cash balance so that flow of fund is

maintained at a desirable speed not allowing slow down. Thus enterprise can have a balance

between liquidity and profitability. Therefore the management of working capital is essential in

each and every activity.

SOLVENCY OF THE BUSINESS : Adequate working capital helps in maintaining the

solvency of the business by providing uninterrupted of production.

     Goodwill: Sufficient amount of working capital enables a firm to make prompt payments and

makes and maintain the goodwill.

     Easy loans: Adequate working capital leads to high solvency and credit standing can arrange

loans from banks and other on easy and favorable terms.

     Cash Discounts: Adequate working capital also enables a concern to avail cash discounts on the

purchases and hence reduces cost.

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     Regular Supply of Raw Material: Sufficient working capital ensures regular supply of raw

material and continuous production.Regular Payment Of Salaries, Wages And Other Day TO

Day Commitments: It leads to the satisfaction of the employees and raises the morale of its

employees, increases their efficiency, reduces wastage and costs and enhances production and

profits.

     Exploitation Of Favorable Market     Conditions: If a firm is having adequate working capital

then it can exploit the favorable market conditions such as purchasing its requirements in bulk

when the prices are lower and holdings its inventories for higher prices.

     Ability to Face Crises: A concern can face the situation during the depression.

     Quick And Regular Return On Investments: Sufficient working capital enables a concern to pay

quick and regular of dividends to its investors and gains confidence of the investors and can raise

more funds in future.

     High Morale: Adequate working capital brings an environment of securities, confidence, high

morale which results in overall efficiency in a business.

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TYPES OF WORKING CAPITAL

There are two types of working capital:

Gross working capital

The gross working capital is equal to the Total Current Assets only.The gross working capital

is the capital invested in the total current assets of the enterprises current assets are those assets

which can convert in to cash within a short period normally one accounting year.In a narrow

sense, the term working capital refers to the networking. Net working capital is the excess of

current assets over current liability, or, say:

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WORKING CAPITAL

GROSS WORKING CAPITAL

NET WORKING CAPITAL

NET WORKING CAPITAL

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current assets exceeds the

current liabilities are more than the current assets. Current liabilities are those liabilities, which

are intended to be paid in the ordinary course of business within a short period of normally one

accounting year out of the current assets or the income business.

CONSTITUENTS OF CURRENT ASSETS:

1)     Cash in hand and cash at bank

2)     Bills receivables

3)     Sundry debtors

4)     Short term loans and advances.

5)     Inventories of stock as:

a.      Raw material

b.     Work in process

c.     Stores and spares

d.     Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses

8. Accrued incomes.

9. Marketable securities.

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CONSTITUENTS OF CURRENT LIABILITIES;

1.     Accrued or outstanding expenses.

2.     Short term loans, advances and deposits.

3.     Dividends payable.

4.     Bank overdraft.

5.     Provision for taxation, if it does not amt. to app. Of profit.

6.     Bills payable.

7.     Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net

working capital is an accounting concept of working capital. Both the concepts have their own

merits.The gross concept is sometimes preferred to the concept of working capital for the

following reasons:

1.    It enables the enterprise to provide correct amount of working capital at correct time.

2.     Every management is more interested in total current assets with which it has to operate then

the source from where it is made available.

3.     It take into consideration of the fact every increase in the funds of the enterprise would increase

its working capital.

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Determinant of Working Capital

This concept is also useful in determining the rate of return on investments in working

capital.The net working capital concept, however, is also important for following reasons:

It is qualitative concept, which indicates the firm’s ability to meet to its operating

expenses and short-term liabilities.

IT indicates the margin of protection available to the short term creditors.

It is an indicator of the financial soundness of enterprises.

It suggests the need of financing a part of working capital requirement out of the

permanent sources of funds.

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INTRODUCTION OF THE COMPANY

INTRODUCTION OF PARLE:Parle Products Pvt. Ltd. engages in the manufacture and marketing of biscuits and

confectionaries. It offers glucose, milk, sweet and salted cream, wafer crème, cumin seed, and

cheese biscuits; chocolate, mint, cola, and tropical fruit flavored toffees and candies; and snacks.

The company offers its products in India, the Middle East, Africa, South East Asia, the United

States, the United Kingdom, Canada, Australia, and New Zealand. Parle Products Pvt. Ltd. was

founded in 1929 and is based in Mumbai, India.

Parle Products Ltd. entered the snack market with the launch of Musst Chips and Musst

Stix in Maharashtra. It is selling these two new products at price points of INR 10 and INR 5 but

giving more quantity as compared to competition. The company has set up a unit in Nashik for

manufacturing the new brands. It intends to promote these two products by extending its

distribution network.Parle Products Private Limited announced that it has launched new product-

Parle 20-20. Parle's new 20-20 cookies promised to be a combination of crunch and scrumptious

delicacy. This summer experience the richness in taste with Parle's brand new 20-20 cookies.

Each biscuit is baked to perfection and comes in two variants-Butter & Cashew Butter.

Consumers especially the young adults are looking for a tastier and crunchier variety of cookies

than ever before.

Parle 20-20 cookies are aimed towards young adults-the 'now' generation. This is the

generation that wants to live right now, and is in a hurry to cram a medley of experiences into

life.The now mantra of the day is 'instant gratification' which 20-20 delivers without

compensating on quality or taste.Parle Ltd. has decided to unveil butter and cashew cookies

under the 20:20 brand. The new 20:20 brand would have the baseline Choice of Champions.

Parle-G or Parle Glucose biscuits are one of the most popular confectionary biscuits in

India. Parle-G is one of the oldest brand names in India and is the largest selling brand of biscuits

15

in India. For decades, the product was instantly recognized by its iconic white and yellow wax

paper wrapper with the depiction of a young girl, Sonam (Calgary) covering the front. The

company's slogan is popular among the Indian consumer population, reading G means Genius.

The name, "Parle-G", is derived from the name of the Indian rail station, Vile Parle, where the

Parle production factory is based.

"Parle-G" boasts of being the largest selling biscuit in the world. It enjoys 70% market

share in India in the glucose biscuit category followed by Britannia Tiger (17-18%) and ITC's

sunfeast .The brand is estimated to be worth over Rs 2,000 crore (Rs 20 billion),and contributes

more than 50 per cent of the company's turnover (Parle Products is an unlisted company and its

executives are notcomfortable disclosing exact numbers). Last fiscal, Parle had sales of Rs

3,500crore (Rs 35 billion).

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HISTORY OF PARLE G CO.

Today, the great strength of Parle Products is the extremely widespread distribution

network. Even at the remotest places, you can buy Parle biscuits and sweets from the local

grocer. It has taken years to create this extensive network. Parle’s sales force started with one

salesman in Bombay and some agents in few other cities. Gradually, Parle Products expanded.

Soon sweets and biscuits were being sent by rail to Calcutta, Delhi, Karachi, Madras and other

major cities. As production increased, distribution was amplified. Full time salesmen were

appointed in different areas. Currently, Parle Products has over 33, 00,000 distribution outlets.

In 1929 a small company by the name of Parle products emerged in British dominated

India. The goal was to spread joy and cheer to children and adults alike, all over the country with

its sweets and candies. Although, the company knew that it wouldn’t be an easy task, they

decided to take the brave step. A small factory was set up in the suburbs of Mumbai to

manufacture confectionery products. A decade later this factory was upgraded to manufacture

biscuits as well. Since then, the Parle name has spread in all directions and has won international

fame. Parle has been sweetening the lives of people all over India and abroad.

Apart from the factories in Mumbai and Bangalore, Parle also has factories in

Bahadurgarh, Haryana and Neemrana, Rajasthan. These are the largest biscuit and confectionery

plants in the country. Additionally, Parle Products also has 10 manufacturing units and 75

manufacturing .PARLE PRODUCT was established in the Vile Parle suburb of Mumbai, in

1929. It began manufacturing biscuits in 1939. In 1947, when India became independent, the

company launched an ad campaign, showcasing its Gluco brand of biscuits as an Indian

alternative to the British biscuits.

Parle-G biscuits were earlier called 'Parle Gluco' Biscuits until 1980s. The "G" in the

name Parle-G originally stood for "Glucose", though a later brand slogan also stated "G means

Genius".In 2013, Parle-G became India's first domestic FMCG brand to cross the   

5,000 crore in retail sales.Parle Products was established in the Vile Parle suburb of Mumbai, in

1929. It began manufacturing biscuits in 1939. In 1947, when India became independent, the

company launched an ad campaign, showcasing its Gluco brand of biscuits as an Indian

alternative to the British biscuits.

17

Parle-G biscuits were earlier called 'Parle Gluco' Biscuits until 1980s. The "G" in the

name Parle-G originally stood for "Glucose", though a later brand slogan also stated "G means

Genius".In 2013, Parle-G became India's first domestic FMCG brand to cross the   

5,000 crore in retail sales.

Primarily eaten as a tea-time snack, Parle-G is one of the oldest brand names in India. For

decades, the product was instantly recognized by its iconic white and yellow wax paperwrapper

with the depiction of a young girl named Gunjan Gundaniya on the front. Now it is available in

plastic wrapping. Design of packing is same as earlier. When company change the packing of

Parle-G from wax paper to plastic, they make a ad of putting of Parle-G in fish tank. The Brand

Trust Report, published by Trust Research Advisory in 2011, ranked Parle in the 58th place as

the Most Trusted brands of India.

As of January 2013, Parle-G's strong distribution network covered over 6 million retail

stores in India. The low price is another important factor in Parle-G's popularity. Outside India, it

is sold for 99 cents for a 418 gram pack as of 2012. A more common 80 gram "snack pack" is

sold for as low as 15 cents at Indian grocers, and 40 cents at major retailers.Parle Products has

been India's largest manufacturer of biscuits and confectionery for almost 80 years. Makers of

the world's largest selling biscuit, Parle-G, and a host of other very popular brands, the Parle

name symbolizes quality, nutrition and great taste. With a reach spanning to the remotest villages

of India, the company has definitely come a very long way since its inception.

Many of the Parle products - biscuits or confectioneries, are market leaders in their

category and have won acclaim at the Monde Selection, since 1971. With a 40% share of the

total biscuit market and a 15% share of the total confectionary market in India, Parle has grown

to become a multi-million dollar company. While to the consumers it's a beacon of faith and

trust, competitors look upon Parle as an example of marketing brilliance.

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Mission & Vision Statement

Mission statement:

“To help enrich the quality of life of the community and preserve ecological balance and

heritage through a strong environment conscience.”

Vision Statement:

Parle-G is consumed by people of all ages, from the rich to the poor, living in cities & in

villages.

• While some have it for breakfast,

•For others it is a complete wholesome meal.

•For some it's the best accompaniment for tea,

•While for some it's a way of getting charged whenever they are low on energy.

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HOW PARLE MADE BISCUITS AFFORDABLE TO ALL?

Biscuits were very much a luxury food in India, when Parle began in production in 1939.

Apart from Glucose and Monaco biscuits Parle did offer a wide variety of brands.

However, during the Second World War, all domestic biscuits production was diverted to assist

the Indian Soldiers in India and the Far East. Apart from this, the shortage of Wheat in those

days,   made Parle decided to concentrate on the more popular brands, so that that people could

enjoy the price benefits. Thankfully today, there’s dearth of ingredients and demand for more

premium brands is on the rise. That’s why Parle now have wide range of biscuits and

mouthwatering confectionaries to offer.

20

MARKETING OF PARLE G CO.

Primarily eaten as a tea-time snack, Parle-G is one of the oldest brand names in India. For

decades, the product was instantly recognized by its iconic white and yellow wax paperwrapper

with the depiction of a young girl named Gunjan Gundaniya on the front. Now it is available in

plastic wrapping. Design of packing is same as earlier. When company change the packing of

Parle-G from wax paper to plastic, they make a ad of putting of Parle-G in fish tank. The Brand

Trust Report, published by Trust Research Advisory in 2011, ranked Parle in the 58th place as

the Most Trusted brands of India.

As of January 2013, Parle-G's strong distribution network covered over 6 million retail stores

in India.The low price is another important factor in Parle-G's popularity. Outside India, it is sold

for 99 cents for a 418 gram pack as of 2012. A more common 80 gram "snack pack" is sold for

as low as 15 cents at Indian grocers, and 40 cents at major retailers.

Parle Products has been India's largest manufacturer of biscuits and confectionery for almost

80 years. Makers of the world's largest selling biscuit, Parle-G, and a host of other very popular

brands, the Parle name symbolizes quality, nutrition and great taste. With a reach spanning even

to the remotest villages of India, the company has definitely come a very long way since its

inception.

Many of the Parle products - biscuits or confectioneries, are market leaders in their category

and have won acclaim at the Monde Selection, since 1971. With a 40% share of the total biscuit

market and a 15% share of the total confectionary market in India, Parle has grown to become a

multi-million dollar company. While to the consumers it's a beacon of faith and trust,

competitors look upon Parle as an example of marketing brilliance.

21

QUALITY

Hygiene is the precursor to every process at Parle. From husking the wheat and melting

the sugar to delivering the final products to supermarkets and store shelves nationwide,

care is taken at every step to ensure the best product of long-lasting freshness. Every batch

of biscuits, confectioneries & snacks are thoroughly checked by expert staff, using the

most modern equipment. This ensures consistent and perfect quality across the nation and

abroad.

Concentrating on consumer tastes and preferences, the Parle brand has grown from

strength to strength ever since its inception. The factories at Bahadurgarh, Haryana and

Neemrana, Rajasthan are the largest biscuit and confectionery plants in the country. The

factory in Mumbai was the first to be set up, followed soon by the one in Bangalore,

Karnataka. Parle also has 10 manufacturing units for biscuits and 75 manufacturing units

for confectioneries on contract.

CORE VALUE

An in-depth understanding of the Indian consumer psyche has helped Parle develop a

marketing philosophy that reflects the needs of the Indian masses. With products created bearing

in mind both health and taste, Parle products equally appeal to fun loving kids & youth. Even

today, the great tradition of taste and nutrition is consistent in every pack on the store shelves.

The value-for-money positioning allows people from all classes and age groups to enjoy Parle

products to the fullest.

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AWARD

We are extremely delighted to announce that we have been Ranked 7th in the Brand

Equity's Most Trusted Brand 2012.Right since the company's inception, we have always

strived to give our consumers the best value and keep them satisfied through the quality of our

products. We have always worked hard to deliver best results and we are very happy that the

consumers have validated our efforts in giving the best quality of products. Being ranked 7th

amongst the top ten most trusted brands by Economic Times is definitely an honor and we are

grateful to consumers for trusting us with our products and quality and we shall continue to

deliver best value to our consumer.Parle-G, India’s premier glucose biscuit, is much more

than the world’s largest selling brand of biscuit. Started way back in 1939, Parle-G is not just

the oldest and trusted brand names in India, but also a very great example of a real social

enterprise.

Parle-G is a biscuit which is consumed by people of all ages, from the very rich to the very

poor, living in cities and in villages. For some it’s the best accompaniment for chai, while for

some it’s a way of getting charged whenever they are low on energy. Moreover, the biscuit is

a meal substitute or supplement in a country like India which faces acute child and mother

malnutrition etc.

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Parle–G, A dip that’s become an Indian habit

Health

Parle-G is rightly described as “Swad se bhara, swasthya se bhara!” meaning full with

taste, full with health. Besides its universally likable taste, the biscuit is often carried by people

suffering from Low BP, which act as energizers in emergencies. People suffering from Diabetes

too carry them to increase the glucose level in their body. Parle-G’s health platform makes the

brand more popular among common masses. A single pack of biscuit offers 450 calories.

Value for Money

Parle-G is also a complete ‘value for money’ product. Parle-G has held its price line fixed

from 1994 to 2008 to Rs 4 a pack. In 2008, the price was increased to Rs 4.50, but the company

went back to Rs. 4 soon by reducing the weight marginally. Today Parle-G is available at Rs 1,

Rs 2, Rs 3, Rs 4, Rs 5, Rs 10, Rs 20 and Rs 50.

One of the major strength of the Parle-G biscuit is that the biscuit is available even in the

most remote places in India. One can easily find a Parle-G pack in villages with a population of

500.

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Parle-G facts

If a month’s production of Parle-G biscuits are stacked side-by-side, the distance between

Earth to Moon of 7.25 lakh kilometres can be covered.

100 crore (1 billion) packs of Parle-G are produced monthly.

Parle-G biscuits are sold in more than 50 lakh (5 million) retail stores.

4,551 Parle-G biscuits are consumed per second.

Parle-G sells more than all the biscuit brands sold in China which is the fourth largest biscuit

market in the world.

From mid-90s to mid-2000 the price of Parle-G packs remained unchanged.

COMPANSANTIVE

Parle-G which is valued to be over Rs. 2000 crore enjoys 70% market share in the

glucose biscuit industry. Britannia Tiger and ITC’s Sunfeast Glucose are the two branded

competitors against Parle-G, apart from a number of unbranded local players that operate

regionally. Competitors in this segment realize the importance glucose biscuit holds in the Indian

market and they too want to keep their biscuits simple Parle-G style with almost the same priced

packs.

On competition which Parle-G faces from different categories of biscuits, Ajay Chauhan,

executive director – Parle Products, says, “Every category needs some innovations on a periodic

basis, so does glucose. However, just because people have acquired the taste of fast food like

burgers and pizza they have not stopped consuming dalroti. Similarly, glucose biscuits are a part

of the Indian staple diet. While other categories emerge, glucose biscuits will always be present.|

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Keeping up the goodwill

In the year 1997, Parle-G sponsored the tele-serial of the Indian

superhero, Shaktimaan that went on to become a huge success. The personality of the superhero

matched the overall superb benefits of the brand. Parle extended this association

with Shaktimaan and gave away a lot of merchandise ofShaktimaan, which was supported by

POS and press communication. The children just could not get enough of Parle-G

and Shaktimaan.In the year 2002, it was decided to bring the brand closer to the child who is a

major consumer. A national level promo – `Parle-G Mera Sapna Sach Hoga’ was run for a period

of 6 months. The promo was all about fulfilling the dreams of children. There were over 5 lakh

responses and of that, over 300 dreams were fulfilled.Dreams that were fulfilled ranged from

trips to Disneyland at Paris & Singapore; free ride on a chartered plane; 20 scholarships worth Rs

50,000; a special cricket coaching etc.

Parle-G, India’s premier glucose biscuit, is much more than the world’s largest selling

brand of biscuit. Started way back in 1939, Parle-G is not just the oldest and trusted brand names

in India, but also a very great example of a real social enterprise.

Parle-G is a biscuit which is consumed by people of all ages, from the very rich to the

very poor, living in cities and in villages. For some it’s the best accompaniment for chai, while

for some it’s a way of getting charged whenever they are low on energy. Moreover, the biscuit is

a meal substitute or supplement in a country like India which faces acute child and mother

malnutrition etc.

26

Kal ke Genious

With its latest campaign, Kal ke genius, the brand asks parents to encourage their child's

curiosity and creativity. The campaign was launched on the digital platform.Experience is the best

teacher in life. And, experience instigated by curiosity or creative expression can teach a child many

unforgettable lessons. Parle G's new campaign is constructed on this core thought which is summed up

with the message 'Bachpan se bada koi school nahi and curiosity se badi koi teacher nahi' (There is no

greater school than childhood and no greater teacher than curiosity). It urges parents to allow their

children to explore their curiosity, to view things in different/creative perspectives, which in turn will help

them become future 'geniuses'.

27

The new campaign, titled 'Kal ke genius', innovatively extends the 74-year-old biscuit

brand's earlier campaign, 'G mane genius', that was launched in 2003. Conceptualised by Ogilvy

& Mather, Mumbai, the television commercials (TVCs) showcase children who come up with

amazing solutions to problems in a creative manner.

Shot in the beautiful locales of Shimla and Manali, the TVCs show a montage of children

coming out with creative solutions to their problems while having fun, which would astound an

adult. The lyrics of the background song Roko mat, Toko mat, which gives out an '80's feel, is

penned by noted lyricist Gulzaar and sung by Piyush Mishra (of Gangs of Wasseypur fame). The

music direction is by Clinton Cerejo. The song aptly encapsulates the philosophy of the

campaign.

The films are directed by Amit Sharma and Chrome Pictures is the production house. The

TVCs will be shown in Hindi, Bengali, Assamese, Tamil, Telugu, Kannada and

Malayalam.Interestingly, the campaign's first phase in the form of teasers was launched online

through YouTube, Facebook and Twitter. After a week, the second phase appeared on television.

The brand has also created a separate website for the campaign. Digital Law & Kenneth is the

digital agency that will handle the digital arm of the campaign. Apart from TV and digital, the

campaign will also use radio.

28

To Cross 5000 Crore Rupees Parle-G Became the First Indian FMCG Brand

Mark IN THE YEAR 2013

Parle-G in February 2013 became the first Indian FMCG brand that crossed 5000 crore

Rupees mark in terms of retail sales in one year. Parle Products were launched in 1939 when the

British ruled India. Factually, Parle Products in 2012 sold 5010 crore rupees worth glucose

biscuits at the retail price, surpassing the domestic sales of Godrej products and Dabur, while at

the same time also selling thrice more products than Maggi. 

This means that Parle Products sold over 100 crore packets of the glucose biscuits every month,

or 14600 crore biscuits in 2012. Parle-G that has less than 1 billion dollar sales in a year, but

even then it has good lead over its rivals such as Hindustan Unilever's Wheel and Ghari

Detergent.

29

PARLE-G WORLD’S NO .1 SELLING BISCUIT:

NEW DELHI: Parle-G, the glucose biscuit brand from the country’s largest biscuit maker Parle Products, has consolidated its position as the world’s largest selling biscuit brand, says a new report by market researcher Nielsen.

The study, for last year, says Parle-G has topped brands like Kraft’s Oreo, Wal-Mart’s

private labels and Mexico’s Gamesa in voulme sales to lead the Rs 11,295-crore Indian biscuits

category.The Nielsen study adds India is the world’s leading market for biscuits, ahead of the

US, Mexico, China, Argentina, France, Italy, Germany, Turkey and Spain. While India showed a

volume market share of 22%, the second slot was occupied by the US at 13%. The top three

countries -- India, US and Mexico -- contribute over 40% of the total biscuits 10 largest markets .

30

Industry analysts say the Rs 5,000-crore Parle’s focus on the volumes segment and

competitive pricing backed by strong distribution, especially in rural markets has led the rise.

Of the overall 40 brands across biscuits, chips and confectionery that Parle Products makes,

Parle-G contributes 50% to the firm’s topline, Parle Products group product manager Mayan

Shahsaid.The brand is exported to SAARC countries, the US, Europe and parts of Africa.

With universal acceptance, affordable packs and wide distribution, the category has been

attracting players ranging from cola and snacks maker PepsiCo, to cooking oils firm Marico , to

milk foods drinks maker GlaxoSmithKline.

Parle G Becoming The Largest Selling Biscuit Brand Marketing

FOR a change, the Mumbai-based makers of the largest selling brand of glucose biscuits,

Parle Products, want to be in the limelight. The reason being that for the first time, the

low-profile company wants to fulfil its consumers dreams through its Parle-G My Dream

Come True contest - its biggest promotion till date.

Setting aside a budget of almost Rs 2.5 crore for this contest alone, more than enforcing

sales, the Parle-G brand is reinforcing its leadership position in the biscuit market while

giving contestants a chance to fulfil their dreams.

31

States Pravin Kulkarni, Marketing Manager, Parle Products Pvt. Ltd, "We want to give

children a platform to fulfil their dreams. After all, dreaming is synonymous with the

brand values of Parle-G, which brings about all-round development to achieve their

dreams." The promotion is the largest of its kind and gives contestants the opportunity to

win whatever they dream of in contrast to the traditional promos where prizes are fixed.

This contest has only first prizes and these prizes are defined as per the child's dream.

Launched in 1939, the more than 50-year-old brand of Parle-G is India's first glucose

biscuit to be introduced from the House of Parle. With a dominant volume share in the

glucose biscuit market, Parle-G is pegged as the largest-selling biscuit brand in the world,

making up almost 80 per cent of Parle Products' turnover of Rs 1,300 crore.

The family-run business operating out of the western suburb of Vile Parle in Mumbai has

always adopted the philosophy of being low key with an endeavour to give value for

money. This biscuit and confectionery major has in fact not bothered to raise the price of

its flagship brand for the past six years and has always tried to provide its offerings at

nearly 33 per cent discount to competitive brands.

While the high profile Britannia Industries has been busy stretching its portfolio of brands

with more premium offerings, Parle Products has never felt the need to be wary of

competition. It has been enjoying a `far too' comfortable position in the biscuit market,

especially in the largest segment of glucose, with its Parle-G brand. Today it wants to stay

primarily focussed on its oldest biscuit brands, Parle-G, Monaco and Krackjack, and is

intentionally staying away from the premium end of the Rs 2.400-crore market.

Considering Parle-G has already topped charts worldwide as revealed by the US-based

Bakery Manufacturers' Association, there seems to be no apparent need for concern. But

there is, since Britannia has priced its offerings on par with Parle, especially with respect

to the latter's three main brands (Parle-G, Monaco and Krackjack). Closing the gap in

market share is thus an imminent possibility.

32

While Parle-G may be leading in the glucose category with a 65 per cent volume share,

Tiger (Britannia's Glucose brand) is trailing at 23 per cent volume share, as per ORG-

MARG. The difference in share between Monaco and Snax is also substantial but

Krackjack and 50:50 are on par both in terms of pricing as well as shares.

Thus Parle is not really expected to sit still. Apart from becoming more visible and adding

value to the imagery of its flagship brand through its recently launched all-India contest, it

continues to look at all brands within its portfolio either with intentions of adding more

SKUs and variants or even launching new offerings and pruning away some unfeasible

brands. Thus, the focus is on consolidation of its biscuits and confectionery business in

terms of adding more variants and SKUs to its heritage brands rather than looking into

allied areas to get added growth. Besides, Parle's internal research reveals that the biscuit

market has graduated from the core glucose and Marie offerings to more value-added

variants and that this applies to the rural markets as well. Another finding revealed that

packaging played a crucial role in both biscuits and confectionery, with regard to the

acceptance of any brand.

33

CSR OF PARLE G CO:

Since 1929, Parle Products, with its wide platter of biscuits and sweets is also actively

engaged in changing and uplifting the social face of India. As part of its Corporate Social

Responsibility Policy, Parle is keenly involved in the overall development of the younger

generation, with a focused endeavor to build the New Face of India and spread happiness

and joy all over.

He never gave in to the sense of indifference that often comes with the commercial

outlook. All through his life, he was deeply conscious of his duties towards society and the

community. He built the Shri Mohanlal Dayal Prasuti Graha and General Hospital in

Pardi, which is maintained through charity trusts set up by him. The Shri Mohanlal Dayal

Sanatorium and Hostel at Matunga in Bombay is another such institution. In his memory

and after his example, his sons have donated significant sums to set up the Chauhan

Institute of Science at Vile Parle.

Parle Centre of Excellence, as an institution, is dedicated to enriching the lives of people

by conducting various cultural programs across all regions to facilitate the all round

development of children.

Every year, Parle organizes Saraswati Vandana in the state of West Bengal during the

festival of Saraswati Puja, inviting schools from all across the state to participate. The

event is one of much fanfare and celebration, keeping alive the culture and traditions. The

involvement in cultural activities has seen the inception of Golu Galata in Tamil Nadu,

held during Navratri. It provides all the members of a household a platform to showcase

their creativity and be judged by eminent personalities. Thousands of families participate

and celebrate the occasion on a grand scale.

34

Dedicated to enriching the lives of people across India, the Parle Centre of Excellence has

been keenly involved in the promotion of programmes to facilitate the all-round

development of children. Parle Saraswati Vandana, one of its initiatives, is an inter-school

contest based on the Saraswati Puja celebrations. It gives the children an opportunity to

exhibit their creative skills and makes the celebrations even more special in the process.

Started in the year 2002 in Kolkatta, it has seen a tremendous increase in the number of

schools participating each year, with entries coming from schools of West Bengal.

Every year a grand programme is organized by Parle in Kolkotta to felicitate the winners.

Here eminent personalities from the field of literature, education, art, films, media and

politics grace the occasion. Performances by popular artistes make it a night to remember

for every invitee present there. The awards and adulation makes it unforgettable for the

winners.

35

Imagine a world that's clean and fresh as the way we inherited it. Imagine a world full of

trees, birds and animals. The fact that we have to imagine it, speaks volumes about the

state of our planet.

The world is a home not just to human beings but also to a wide variety of animals and

plants. All of them are dependent on each other for survival. When we take these natural

resources for granted or disturb the natural harmony of things, we face consequences like

global warming. 

Parle's products have been trusted by mothers and children across age groups as a

nutritious snack that has helped them grow healthy and strong. It is but natural that Parle

Products would like to return the favour to a generation that has helped it grow. Parle

Products feels this is the best gift that we can give our kids. A cleaner, greener planet that

they can treasure for generations to come.

My Green Planet is an initiative that takes definitive steps towards conserving our eco-

system. Parle Products is contributing in its own way by taking up various initiatives like

planting more trees around India, conserving water, power and recycling waste. My Green

Planet works across levels – from school students to environmentalists to media

professionals and through them educate and empower everyone about the cause of

environment conservation. 

36

Join us and you'll not only become part of one of the largest Indian brands, but a constantly

evolving organisation that offers a culture of flexibility, opportunity, equality and diversity. You

just need to come and have a look at what we have to offer.

We believe that work is more than a place you go every day. It should be a place of

exploration, creativity, professional growth and interpersonal relationships. It's about being

inspired and motivated to achieve extraordinary things. We want our people to take pride in their

work and in building brands others love.

Just to give a preview to what one can look forward to: Group lunches and outstation team-

building exercises, discussion forums and training programs, yoga trainings, health check-up

camps are just a few among the exciting things we do…

There is no better time to be at Parle then NOW…

Economy

37

The first PARLE G factory was established in Vile Parle

While originally Vile Parle consisted mostly of Marathi middle-class commuter families], over

time the demography of this suburb has changed more toward upper-middle class Gujarati

business families. Additionally, it has now become a major education center with the

establishment and growth of a huge educational complex financed by the VILE PARLE

KELAVANI. Thus, at all hours of the day you see a constant flow of students into and out of

Vile Parle.

KING FISHAR AIRLINE maintains its head office, the Kingfisher House, in Vile Parle. In

2012VIJAY MALLYA was trying to sell the Vile Parle Kingfisher House.

One of the leading Indian confectionery and biscuit manufacturers ,PARLE PRODUCT was

started in Vile Parle. There is still a factory in Vile Parle East and it is commonly known as Parle

Biscuit Factory. Vile Parle also houses the Garware plastics factory. The Dr. Balabhai Nanavati

Hospital in Vile Parle was inaugurated by Jawaharlal Nehru in November 1950 and opened in

May 1951.

Cultural activities and food joints:

38

Sanyas Ashram

Vile Parle is a hub of cultural activities throughout the year. Dinanath Mangeshkar

Sabhagrugha, one of the oldest and prestigious auditoriums in Mumbai, showcases Marathi

theater and music programs. Institutions like Lokmanya Seva Sangh, Nadkari Sabhagruha and

Parle Tilak Vidyalaya have been assisting programs since 1923. Activities include Majestic

Gappa (a forum where prominent personalities from all fields are open-interviewed), Bal-Jallosh

(cultural activities for children), matrimonials, counselling for parents and students and many

more.Parle Mahotsav is a HUGE event that happens in Vile Parle at end of every year. Parle

Mahotsav started in year 1999 by Vile Parle Cultural Center (VPCC). 8 competitions were held

at that time, 75 prizes distributed and 2750 participants participated in it. Since then its getting

larger year on year. 11th Parle Mahotsav was the biggest so far with 32 competitions were held

this time, 750 prizes were distributed & a whopping 25,000 participants participated in it.For

participant any competition.

Kala Gurjari is a cultural organization, promoting various forms of arts. They organize

various cultural programmes at their office (next to Khasiyat Restaurant, D.J. Road, Vile Parle

(W)), or Juhu Jagruti Hall at the Mithibai Commerce College, or in the Bhartiya Vidyabhavan,

Andheri's campus.Hanuman Road in Vile Parle (East) serves as one of the main roads for the

suburbs connecting different roads going towards the airport and also the West.

39

Kshitij

Vile Parle is also well known for its food joints. Starting with Lucky Sandwich corner to

the Sai Samarth dosa centre next to him in vile parle West. Also one can never forget the taste of

Maruti pav bhaji which one can get at the other end of Bajaj Road. Vile Parle (East) has few

interesting food joints,where authentic "Marathi" delicacies like Vada Pav, Misal, Sabudana

Vada, Sabudana Khichadi, Potato Poha and Vada Pav are served. "Me Marathi" is one such

restaurant famous with the locals for its Maharashtrian styled food. Also present is a small eatery

called "Chan Chavdar" near Sathaye college. It is particularly famous amongst collage students

and actors. Babu vada pav (wada pav) is one of the oldest joints and it's not exaggeration to say

that has been enjoyed by every current and past residents of vile parle. Anand wada pav has also

been awarded the best wada pav centre in the city. Also Parleshwar Wada Pav available in Vile

Parle East is famous for its delicious taste. Famous shops include Phadke Udyog Mandir,

Sathaye Stores, Parle Laundry which are some of the oldest in Vile Parle.

One of the best college festival named Kshitij also takes place in Vile Parle. A festival of

Mithibai College.

40

PARLE PRODUCTS   :

1 .MONACO BITES KISMI BAR

2.FUN CENTRE MANGO BITE

3.HIDE & SEEK MELODY

4.JEFFS MAGIX

5.KRACK JACK ORANGE CANDY

6.MARIE CHOICE POPPINS

7.MONACO ROL-A-COLA

8.Parle-G TOFFES

9.SIXER MILK SHAKTI

PARLE PRODUCT DIVIDED 3 PARTS:

1Biscuit Goodies:

1.Parle-G Hide & Seek

2.Kackjack Hide & Seek Milano

3.Magix Digestive Marie

4.Monaco Parle Marie

5.Kreams Milk Shakti

6.Parle 20-20 cookies Goldenarcs

7.Nimkin Kreams Gold

8.Chox Monaco Jeera

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2Sweats :

1.Melody Kismi Gold

2.Mango Bite Orange Candy

3.Kaccha Mango Xhale

4.Poppins 2 in 1 Éclair

5.Kismi Toffee Golgappa

6.Kisme Toffee Bar Melody Softee

7.Mazelo Pale Lites

3Snacks :

1.Musst Bites Jeffs

2.Cheeslings Musst stix & Musst Chips

3.Sixer Sixer Zeer

42

MARKETING DEPARTMENT:

The extensive distribution network, built over the years, is a major strength for Parle Products.

Parle biscuits & sweets are available to consumers, even in the most remote places and in the

smallest of villages with a population of just 500. Parle has nearly 1,500 wholesalers, catering to

4,25,000 retail outlets directly or indirectly. A two hundred strong dedicated field force services

these wholesalers & retailers. Additionally, there are 31 depots and C&F agents supplying goods

to the wide distribution network. The Parle marketing philosophy emphasizes catering to the

masses. They constantly endeavor at designing products that provide nutrition & fun to the

common man. Most Parle offerings are in the low & mid-range price segments. This is based on

their understanding of the Indian consumer psyche. The value-for-money positioning helps

generate large sales volumes for the products.

However, Parle Products also manufactures a variety of premium products for the up-market,

urban consumers. And in this way, caters a range of products to a variety of consumers.

Parle’s Core Value:-

An in-depth understanding of the Indian consumer psyche has helped Parle evolve a marketing

philosophy that reflects the needs of the Indian masses. With products designed keeping both

health and taste in mind, Parle appeals to both health conscious mothers and fun loving kids. The

great tradition of taste and nutrition is consistent in every pack on the store shelves, even today.

The value-for-money positioning allows people from all classes and age groups to enjoy Parle

products to the fullest.

43

SUCCESS STORY OF PARLE-G:

Story on How They Won Customers:-

Many years ago, Shailendra Saraf was a biscuit salesman in Bombay. At his heart, he is still

a salesman, and he will continue to remain so. He has several reasons to be a proud salesman,

though he never allowed pride to come between him and his job. The company Shailendra

worked for was neither number one nor number two in biscuit trade. Back then we did not know

it was FMCG. The term ‘Brand’ wasn’t in our horizon either. I do not remember being familiar

with these in those days. Today even school children know- “Which one is the leading Brand in

what category.” Just like Shailendra, we also liked to believe that he worked for a company

which was number three in the trade. 

His territory was between Bandra and Andheri. Vile Parle, a station between Bandra and

Andheri is home to the number one biscuit Brand. Yes, you got it right, “Parle G”. If you ever

traveled by a local train in that section, you could smell the rich aroma of Parle

G biscuits when the train halted at Vile Parle station. It is well known that ‘Olfaction’, the sense

of smell, has an over riding influence in shaping consumer behavior. And this accidental and

occasional encounter people had with aroma at Vile Parle was deeply engraved in their minds.

Consumers would rather have a brand they had already smelt than to try some thing entirely

unknown. 

Against such odds Shailendra did his work. His customers were mainly grocery store owners.

He was required to visit at least 50 customers before calling it a day. Each morning he would

submit his report and orders received on the previous working day. Before leaving for the field

he would obtain, from his boss, special instructions for the day, which among other things

included a stereotyped quipping “TARGET!” and the look (on boss’s face) that went with it.

44

Though he fulfilled his target each month but had this nagging feeling that next month he may

fail. 

One late afternoon when he was doing the Khar-Danda beat, he walked into a store that was

empty of customers and the owner had a painful expression on the face. He struck a conversation

with the shopkeeper and came to know that poor-rich soul has been standing since six o’clock in

the morning and was cursing himself for being in such a vocation. Shailendra did his best to

pacify the guy before he walked out without asking for an order. He also carried with him the

guilt of not doing his duty, ‘asking for the order.’ 

He kept on debating in his mind, if he had done the right thing. As a result of this the whole

episode remained fresh in his mind till late that evening. It was at the bed time he had this flash,

“If this guy is at work at 6 am so will be other shopkeepers. Why don’t I try to meet these people

when they are fresh in the morning?” Next day he got up at 5 am and was in field by 6 am. He

could finish all his calls by 10 am and reached office half an hour too late. Boss was angry, but

Shailendra had two day’s reports and orders with him. The orders looked good. If the boss

suspected some thing, he kept his suspicion to himself and decided to do back checking himself.

In a few weeks time Shailendra’s order book seemed comfortable and he was now more

confident about keeping his job even for the next few months. 

Future had more exciting things in store for Shailendra and he didn’t have any idea about

those. One day the same Khar-Dandha shop keeper wanted to talk to him in confidence. By now

the shopkeeper had figured out that Shailendra has changed his routine as a result of the

conversation they previously had. He told Shailendra, “I know you are working so hard and

proper, but your boss has some other plans for you. He has been back checking you and is going

around the beat like a mad man. He wants to frame you up into some thing. Tell me if you have

been fulfilling your target or not.” Then without waiting for an answer, he went on to say, “I

have made a plan to silence your boss for ever. Can you meet me this Friday night for a few

drinks? Of course it’s on me.” 

45

PROCESS LAYOUT OF PARLE PRODUCTS LTD.

First of all the parle products buys RAW MATERIAL from the various suppliers and stored

into the store room. This raw material is then sent to laboratory for testing and after testing only

it is used for manufacturing. The raw material consist of Wheat flour, Sugar, Partially

hydrogenated edible vegetable oils, Invert syrup, Leavening agents (503 Baking powder) Milk,

solids Salt Emulsifiers (E 322 or E 471 or E 481) and Dough conditioners (E 223).

Such a mixture of raw material is taken and mixed into STEPHAN MIXTURE, which is high

power mixture machine. Specially made for mixture of dough, from which the mixture is passed

to molder called ROTARY MOULDER. Through that moulder approximately 10,000 come out

in a minute. Moulder had 260 cups fitted in it which gives shape to the biscuits and an

impression embossed on it of parle-g. 

From rotary moulder the dough is passed through a 260 feet long OVEN which is

approximately 340* c. In oven there are three stages to be followed 

• Removal of moisture.

• Building the structure of biscuits.

• Colourings of biscuits take place. 

From oven the hot biscuits are placed on the COOLING CONVYOR, which is 260 feet

long and the biscuits continues to run on it for 5 to 7 minutes so that the biscuits become cool

and all the moisture that biscuits contain gets evaporated. And because of the above reason .

46

The conveyor continues to move to COUNTING UNIT where biscuits are counted and seen

that it is going on properly or not. 

The conveyor continues till the biscuits reach the STALKING TABLE at which the biscuits

are packed in very orderly manner.

From cooling conveyor sum biscuits are diverted through AUTO FEEDING MACHINE to

another stalking machine where packing is done.

From stalking table the biscuits are moved on conveyor to MULTI PACK WRAPPING

MACHINE were 16 biscuits are packed into a regular parle g wrapper so that the weight of 16

biscuits comes up to 100 grams.

INVENTORYThe inventory of the company that is the raw material is of a week. They store such

inventory in storeroom and then are sent for testing in laboratory and after testing it is sent for

production.

SHIFTSThere is nearly 10,000 employees working in the company and are working in three

shifts.35,000 tones of biscuits are manufactured in a day of one particular product, and there are

such nine product manufactured in the factory.

WASTAGES:

There are two type of wastage in factory. First is the waste materials fallen on ground. Such

47

waste material is of 1%, which is marginal and acceptable, which goes into total waste. Second

types of waste are the biscuit collected in tray of the multi-pack wrapping machine, since these

biscuit are broken they are not packed and sold to the customer but collected in other tray and

sold as broken pieces and sold for less price for cattle feeding.

LOOSE BISCUIT:

On the stalking table one to two rows of baked biscuits are kept aside for selling it as loose

biscuits. They are normally assumed to be damaged biscuits but they are not damaged or broken

but company keep such loose packets of biscuits to sell it to the local people for marginal rate of

Rs. 33 / kg.

48

CHPTER2

WORKING CAPITAL MANAGEMENT OF PARLE-G

Working capital cycle indicates the length of time between a firm’s paying for

materials entering into stock and receiving the cash from sale of finished goods. In a

manufacturing firm, the duration of time required to complete the sequence of events is called

operating cycle.

In case of a manufacturing company, the operating cycle is the length of time

necessary to complete the following cycle of events: -

1) Conversion of cash into raw materials

2) Conversion of raw materials into work-in-progress

3) Conversion of work-in-progress into finished goods

4) Conversion of finished goods into accounts receivable

5) Conversion of accounts receivable into cash

The above operating cycle is repeated again & again over the period depending upon the

nature of the business & type of product etc. tne duration of the operating cycle for the purpose

of estimating working capital is equal to the sum of duration allowed by the suppliers.

49

Working capital cycle can be expressed as:

R+W+F+D-C

Where:

R=Raw Material Storage Period= Avg. Stock of Raw Material Avg. Cost of Production per day

W=Work in Progress Holding Period = Avg. Work in ProgressInventory Avg. Cost of Production per day

F=Finished Goods Storage Period = Avg. Stock of Finished Goods Avg. Cost of Goods Sold per day

D=Debtors Collection Period = Avg. Book Debts Avg. Credit Sales per day

C=Credit Period Avail = Avg. Trade Creditors Avg. Credit Purchases per day

Parle - G and Challenges:

Increasing prices of basic Raw material like , Sugar, Wheat, Milk, Milk powder.

This leading to increase in manufacturing cost of the biscuits.

Parle G very price sensitive product.

Small increase in price (by 50 paise) in past had seen high decline in sales.

Parle - G and Group suggestions

Should keep the price of Parle G same and increase price of other high end variant products like, Milano; Hide n Seek, and Bourbon.

High end products can absorb the increased production cost, This will help to cater to existing market without price change

50

Objective of studies

Study of working capital management is very important because if the working capital is not manage properly then many problems may arise related to the production of goods. Working capital mainly involve inventory, debtors,cash and creditors relating to rawmaterial, labour and other expences. By managing working capital in efficient way the company can increased production turnover and profit .

With this primary objective of the study, the following other objective are follows for the study.

6) To identify the financial strengths & weakness of the company.

7) Through the net profit ratio & other profitability ratio, understand the profitability of the

company.

8) Evaluating company s performance relating to financial statement analysis.

9) To know the liquidity position of the company with the help of current ratio.

10) To find out the utility of financial ratio in credit analysis & determinig the financial capacity

of the firm.

51

ANALYSIS OF WORKING CAPITAL MANAGEMENT

In this chapter an analysis over the Working Capital of Parle Biscuits Pvt. Ltd.

has been done. But before going further let us have a look on the current position of Working

Capital.

The Working Capital of the last Four Years is as follows –

(Amount in Hundreds “00” Rs/-)

YEARSALES

INVESTMENTS

WORKING

CAPITAL

% OF WORKIN

G CAPITAL TO SALES

% OF WORKING

CAPITAL TO INVETSMENT

S

2011-12

68000 33540.19 6596.16 9.70 19.67

2012-13

70000 27390.76 5294.01 7.56 19.32

2013-14

17000 28800 424.27

2014-15

20000 28900 344.0

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In year 2011-12Working Capital of Parle Biscuits Pvt. Ltd. was 68000 lacs Rs/- while in the same period the sales was noticed 33540.19 lacs Rs/- then % of Working Capital to sale was 9.70 but in the next year 2012-13sales was 70000 lacs Rs/- and Working Capital was 5294.01 lacs Rs/-. So in year 2011-12% of Working Capital to sales was 7.56.

OPERATING CYCLE OF MANUFACTURING BUSINESS

Define the Operating Cycle of a business

The Operating Cycle of a business is the length of time between the cash outflow on purchased material and cash inflow from the sale of goods. The Operating Cycle determines the amount of working capital that a business requires to operate on a day-to-day basis. The shorter the Operating Cycle the lower the amount of working capital required for the business and the greater opportunity for investments in other value-adding activities.

The Operating Cycle for a manufacturing based business can involve many stages, namely:

Purchase - the receipt of raw materials from suppliers on account.

Conversion - the conversion of these raw materials into finished goods

Inventory - the holding and storage of raw materials, Work-In-Progress (WIP) and Finished Goods.

Payment - the payment of the supplier's account for the raw materials received earlier.

Sale - the sale of finished goods to customers on account

53

Collection - the collection of money from these customers in payment of their account

\

54

CHAPTER:3

WORKING CAPITAL RATIO ANALYSIS

RATIO ANALYSIS

It is a powerful tool of financial analysis. A ratio is defined as “the indicated quotient of two mathematical expressions” and as “the relationship between two or more things”. Ratio helps to summaries the large quantities of financial data and to make qualitative judgment about the firm’s financial performance. The point to note is that a ratio indicates a quantitative relationship, which can be turn, used to make a qualitative judgment.

RECEVABLE ANALYSIS

The term receivable is defined as “debt owed to the firm by customers arising from sale of goods or services in the ordinary course of business”. When a firm makes an ordinary sale of goods or services and doesn’t receive payment, the firm grants trade credit accounts receivable, which could be collected in the future.

55

RATIO ANALYSIS

It is a powerful tool of financial analysis. A ratio is defined as “the indicated quotient of two mathematical expressions” and as “the relationship between two or more things”. Ratio helps to summaries the large quantities of financial data and to make qualitative judgment about the firm’s financial performance. The point to note is that a ratio indicates a quantitative relationship, which can be turn, used to make a qualitative judgment.

RECEVABLE ANALYSIS

The term receivable is defined as “debt owed to the firm by customers arising

from sale of goods or services in the ordinary course of business”. When a firm makes an

ordinary sale of goods or services and doesn’t receive payment, the firm grants trade credit

accounts receivable, which could be collected in the future.

OBJECTIVE

The objective of receivables management is “to promote sales and profits until

that point is reached where the return on investment in further funding receivables is less than the

cost of funds raised to finance that additional credit”.

BENEFITS

Investments in receivables involve both benefits and costs. The extension of trade

credit has a major impact on sales, costs and profitability. Other things being equal, a relatively

liberal policy and, therefore, higher investments in receivables, will produce larger sales.

However, costs will be higher with liberal policies than with more stringent measures.

CREDIT POLICY

The credit policy of a firm provides the framework to determine:

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1) Credit standards

2) Credit terms

3) Credit Analysis

Credit Standard

The term credit standards represent the basic criteria for the extension of credit to those

customers to whom goods could be sold on credit. If a firm has more slow-paying customers, its

investment in accounts receivables will increase. The firm will also be exposed to higher risk of

default.

Credit TermsCredit terms specify duration of credit and terms of payment by customers. Investment in

accounts receivables will be high if customers are allowed extended time period for making

payments.

Credit Analysis

Credit analysis and investigation is an aspect of credit policies of a firm. Two basic steps are involved in the credit investigation process:

A. Obtaining credit informationB. Analysis of credit information

It is on the basis of credit analysis that the decisions to grant credit to a customers as well as the quantum of credit would be taken.

INVENTORY MANAGEMENT

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INTRODUCTION

Inventories constitute the principal item in the working capital of the majority of

trading and industrial companies. In inventory we include raw materials, finished goods, work-

in-progress, supplies and other accessories. To maintain the continuity in the operations of

business enterprises, a minimum stock of inventory is required.

Management of inventory is designed to regulate the volume of investment in goods on hand and the types of goods carried in stock to meet the needs of production and sales while at the same time, the investment in them is to be kept at a reasonable level.

CONCEPT

The term “inventory management” is used in two ways- Unit Control and Value

Control. Production and purchase officials use this word in term of unit control whereas in

accounting this word is used in term of value control.

The proper management and control of the capital invested in the inventory

should be the prime responsibility of accounting department because resources invested in

inventory aren’t earning a return for the company. Rather, on the other hand, they are costing the

firm money both in terms of capital costs being incurred and loss of opportunity income that is

being foregone.

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OBJECTIVES

The basic managerial objectives of inventory control are two-

1) The avoidance of over-investment or under-investment in inventories.

2) To provide the right quantity of standard raw material to the production department at the

right time.

TECHNIQUES OF INVENTORY CONTROL

1) The Selective Inventory Control or ABC System of Control

2) Maximum Stock Limit

3) Minimum Stock Limit

4) Re-ordering Level

5) Economic Order Quantity

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ABC System of Inventory Control

The various inventory items are, according to this system, categorized into three classes-

I. A

II. B

III. C

The item included in-group involve the largest investment. Therefore, inventory

control should be the most rigorous and intensive and the most sophisticated inventory

control techniques should be applied to these items. The C group consists of items of

inventory which involve relatively small investments although the numbers of items is fairly

large. These items deserve minimum attention. The B group stands midway. It deserves less

attention than A but more than C. It can be controlled by employing less sophisticated

techniques.

Maximum Stock Limit

This represents the quantity if inventory above which it should not be allowed to be kept. The

following formula may be applied to calculate the maximum stock-

Maximum Stock = Reorder Level – Minimum Consumption during Minimum Lead Time + Lot Size.

This represents the quantity below which stock should not be allowed to fall. The main purpose of this level is to ensure that production isn’t held up due to storage of any material.

Minimum Stock Limit = Re-order Level – Normal storage during Lead Time

Re- Ordering Level

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It is the point at which if stock of the material in store reaches, the storekeeper

should initiate the purchase requisition for fresh supplies of the material. This level is fixed

somewhere between the maximum and minimum levels in such a way that the difference of

quantity of the material between the reordering level and the minimum level will be sufficient to

meet requirements of production upto the time of fresh supply of the material.

The reorder point = Lead time in days * Average daily usage of inventory

Economic Order Quantity

It is the quantity of inventory, which can be reasonably ordered at a time and

purchased economically. It is also known as Standard Order Quantity or Economic Lot Size. By

definition “Economic Order Quantity is that size or order at which the total cost of ordering and

holding are the minimum.

In determining the economic order quantity the problem is one to set a balance

between two opposing costs, namely, namely ordering costs and carrying costs. The ordering

costs are basically the costs of getting an item into the firm’s inventory.

Carrying costs, sometimes also known as holding costs are the costs of possessing

the materials. These costs are combinedly known as “Associated Costs”.

Hence, the management tries to reconcile them and this reconciliation point is

economic order quantity.

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A)     LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as and when these

become due. The short-term obligations are met by realizing amounts from current,

floating or circulating assts. The current assets should either be liquid or near about

liquidity. These should be convertible in cash for paying obligations of short-term

nature. The sufficiency or insufficiency of current assets should be assessed by

comparing them with short-term liabilities. If current assets can pay off the current

liabilities then the liquidity position is satisfactory. On the other hand, if the current

liabilities cannot be met out of the current assets then the liquidity position is bad. To

measure the liquidity of a firm, the following ratios can be calculated:

1.   CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of general liquidity and

its most widely used to make the analysis of short-term financial position or liquidity of

a firm. It is defined as the relation between current assets and current liabilities. Thus,

CURRENT RATIO = CURRENT ASSETS 

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CURRENT LIABILITES

The two components of this ratio are:

1)     CURRENT ASSETS

2)     CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry debtors,

inventories and work-in-progresses. Current liabilities include outstanding expenses,

bill payable, dividend payable etc.

A relatively high current ratio is an indication that the firm is liquid and has the ability

to pay its current obligations in time. On the hand a low current ratio represents that the

liquidity position of the firm is not good and the firm shall not be able to pay its current

liabilities in time. A ratio equal or near to the rule of thumb of 2:1 i.e. current assets

double the current liabilities is considered to be satisfactory.

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CALCULATION OF CURRENT RATIO

                                                                              (Rupees in crore)

Year 2011 2012 2013 2014 2015

Current Assets 81.29 83.12 13,6.57 1959 1963

Current

Liabilities

27.42 20.58 33.48 3400 00

Current Ratio 2.96:1 4.03:1 4.08:1 2259.1 1481.3

Interpretation:-

As we know that ideal current ratio for any firm is 2:1. If we see the current ratio of the

company for last three years it has increased from 2011to 2012. The current ratio of

company is more than the ideal ratio. This depicts that company’s liquidity position is

sound. Its current assets are more than its current liabilities.

2. QUICK RATIO

Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may be

defined as the relationship between quick/liquid assets and current or liquid liabilities.

An asset is said to be liquid if it can be converted into cash with a short period without

loss of value. It measures the firms’ capacity to pay off current obligations

immediately.

QUICK RATIO = QUICK ASSETS

                   CURRENT LIABILITES

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Where Quick Assets are:

1)   Marketable Securities

2)   Cash in hand and Cash at bank.

3)   Debtors.

A high ratio is an indication that the firm is liquid and has the ability to meet its current

liabilities in time and on the other hand a low quick ratio represents that the firms’

liquidity position is not good.

As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally thought that if

quick assets are equal to the current liabilities then the concern may be able to meet its

short-term obligations. However, a firm having high quick ratio may not have a

satisfactory liquidity position if it has slow paying debtors. On the other hand, a firm

having a low liquidity position if it has fast moving inventories.

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CALCULATION OF QUICK RATIO

(Rupees in Crore)

Year 2011 2012 2013 2014 2015

Quick Assets 44.14 47.43 61.55 16.63 16.90

Current

Liabilities

27.42 20.58 33.48 16.63 16.90

Quick Ratio 1.6 : 1 2.3 : 1 1.8 : 1 1.5:1 1.6:1

Interpretation :

       A quick ratio is an indication that the firm is liquid and has the ability to meet its

current liabilities in time. The ideal quick ratio is   1:1. Company’s quick ratio is more

than ideal ratio. This shows company has no liquidity problem.

ABSOLUTE LIQUID RATIO

Although receivables, debtors and bills receivable are generally more liquid than

inventories, yet there may be doubts regarding their realization into cash immediately

or in time. So absolute liquid ratio should be calculated together with current ratio and

acid test ratio so as to exclude even receivables from the current assets and find out the

absolute liquid assets. Absolute Liquid Assets includes :

ABSOLUTE LIQUID RATIO =      ABSOLUTE LIQUID ASSETS

                                                       CURRENT LIABILITES

ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.

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                                                   (Rupees in Crore)

Year 2012 2013 2014

Absolute Liquid Assets 4.69 1.79 5.06

Current Liabilities 27.42 20.58 33.48

Absolute Liquid Ratio .17 : 1 .09 : 1 .15 : 1

Interpretation :

       These ratio shows that company carries a small amount of cash. But there is

nothing to be worried about the lack of cash because company has reserve, borrowing

power & long term investment. In India, firms have credit limits sanctioned from banks

and can easily draw cash.

B) CURRENT ASSETS MOVEMENT RATIOS

Funds are invested in various assets in business to make sales and earn profits.

The efficiency with which assets are managed directly affects the volume of sales. The

better the management of assets, large is the amount of sales and profits. Current assets

movement ratios measure the efficiency with which a firm manages its resources. These

ratios are called turnover ratios because they indicate the speed with which assets are

converted or turned over into sales. Depending upon the purpose, a number of turnover

ratios can be calculated. These are :

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1.   Inventory Turnover Ratio

2.   Debtors Turnover Ratio

3.     Creditors Turnover Ratio

4.     Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets include high

amount of debtors due to slow credit collections and moreover if the assets include high

amount of slow moving inventories. As both the ratios ignore the movement of current

assets, it is important to calculate the turnover ratio.

                 INVENTORY CONVERSION PERIOD

INVENTORY CONVERSION PERIOD =   365 (net working days)

INVENTORY TURNOVER RATIO:-

Year 2011 2012 2013

Days 365 365 365

Inventory Turnover Ratio 1.5 2.8 1.8

Inventory Conversion Period 243 days 130 days 202 days

Liquidity And Solvency Ratios for last 5 years

Current Ratio 225.91 148.13 104.82 104.82

Quick Ratio 225.69 148.04 104.74 104.74

Debt Equity Ratio -- 0.02 0.02 0.02

Long Term Debt Equity Ratio -- 0.02 0.02 0.02

Debt Coverage Ratios

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Interpretation :

       Inventory conversion period shows that how many days inventories takes to

convert from raw material to finished goods. In the company inventory conversion

period is decreasing. This shows the efficiency of management to convert the inventory

into cash.

DEBTORS TURNOVER RATIO

A concern may sell its goods on cash as well as on credit to increase its sales and

a liberal credit policy may result in tying up substantial funds of a firm in the form of

trade debtors. Trade debtors are expected to be converted into cash within a short

period and are included in current assets. So liquidity position of a concern also

depends upon the quality of trade debtors. Two types of ratio can be calculated to

evaluate the quality of debtors.

a)       Debtors Turnover Ratio

b)      Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

                                                         AVERAGE DEBTORS

Debtor’s velocity indicates the number of times the debtors are turned over during

a year. Generally higher the value of debtor’s turnover ratio the more efficient is the

management of debtors/sales or more liquid are the debtors. Whereas a low debtors

turnover ratio indicates poor management of debtors/sales and less liquid debtors. This

ratio should be compared with ratios of other firms doing the same business and a trend

may be found to make a better interpretation of the ratio.

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AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR

                                                

Year 2012 2013 2014

Sales 166.0 151.5 169.5

Average Debtors 17.33 18.19 22.50

Debtor Turnover Ratio 9.6 times 8.3 times 7.5 times

Interpretation :

       This ratio indicates the speed with which debtors are being converted or turnover

into sales. The higher the values or turnover into sales. The higher the values of debtors

turnover, the more efficient is the management of credit. But in the company the debtor

turnover ratio is decreasing year to year. This shows that company is not utilizing its

debtors efficiency. Now their credit policy become liberal as compare to previous year.

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4.  AVERAGE COLLECTION PERIOD :

Average Collection Period =    No. of Working Days

                                             Debtors Turnover Ratio

The average collection period ratio represents the average number of days for

which a firm has to wait before its receivables are converted into cash. It measures the

quality of debtors. Generally, shorter the average collection period the better is the

quality of debtors as a short collection period implies quick payment by debtors and

vice-versa.

Average Collection Period =      365 (Net Working Days)  

                                             Debtors Turnover Ratio

Year 2012 2013 2014

Days 365 365 365

Debtor Turnover Ratio 9.6 8.3 7.5

Average Collection Period 38 days 44 days 49 days

Interpretation :   The average collection period measures the quality of debtors and

it helps in analyzing the efficiency of collection efforts. It also helps to analysis the

credit policy adopted by company. In the firm average collection period increasing year

to year. It shows that the firm has Liberal Credit policy. These changes in policy are

due to competitor’s credit policy.

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                 WORKING CAPITAL TURNOVER RATIO :-

Working capital turnover ratio indicates the velocity of utilization of net working capital.

This ratio indicates the number of times the working capital is turned over in the course of the

year. This ratio measures the efficiency with which the working capital is used by the firm. A

higher ratio indicates efficient utilization of working capital and a low ratio indicates otherwise.

But a very high working capital turnover is not a good situation for any firm.

Working Capital Turnover Ratio =           Cost of Sales

                                                        Net Working Capital

 

Working Capital Turnover       =                   Sales                

                                                        Networking Capital

Year 2012 2013 2014

Sales 166.0 151.5 169.5

Networking Capital 53.87 62.52 103.09

Working Capital Turnover 3.08 2.4 1.64

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Interpretation :

          This ratio indicates low much net working capital requires for sales. In

20011, the reciprocal of this ratio (1/1.64 = .609) shows that for sales of Rs. 1 the

company requires 60 paisa as working capital. Thus this ratio is helpful to forecast the

working capital requirement on the basis of sale.

INVENTORIES:-

(Rs. in Crores)

Year 2011-2012 2012-2013 2013-2014

Inventories 37.15 35.69 75.01

Interpretation :

       Inventories is a major part of current assets. If any company wants to manage its

working capital efficiency, it has to manage its inventories efficiently. The graph shows

that inventory in 2010-2011 is 45%, in 2011-2012 is 43% and in 2012-2013 is 54% of

their current assets. The company should try to reduce the inventory upto 10% or 20%

of current assets.

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CHAPTER :4

FINANCING OF WORKING CAPITAL

INTRODUCTION

A firm has to decide how it is to be financed. The need for financing arises mainly because the investment in Working Capital/Current Assets that is raw materials, work/stock-in-progress, finished goods and receivables typically fluctuates during the year.

The main sources of Working Capital financing are Trade Credit, Bank Credit, RBI framework/regulation of bank credit/finance/advances, Factoring, Commercial Papers and Internal Sources.

TRADE CREDIT

Trade Credit refers to the credit extended by the supplier of goods and services in the normal course of transaction/business/sale of the firm. According to trade practices, cash is not paid immediately for purchases but after an agreed period of time. Thus, deferral of payment (trade credit) represents a source of finance for credit purchases.

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BANK CREDIT

Bank Credit is the primary institutional source of Working Capital finance in

India. In fact, it represents the most important source for financing of Current Assets.

Working Capital finance is provided by banks in five ways:

1) Cash Credits/Overdrafts

2) Loans

3) Purchase/Discount Bills

4) Letter of Credit

5) Working Capital term loans

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REOMMENDTION

The project is developed keeping in mind the security of Working Capital of the Parle-G. Means that no one can enter in the confidential data of the Parle-G and without permission the senior officer one can’t enter in the main programmer whether he is Manager, Employee or the Guest.

It is very difficult to make the project or the analysis in such a way that can solve all the problems according to the requirements. In this project it is being tried to give more and more facilities but in a short period of training time, as much as possible has been done.

1) It is easy to understand and operate this project.

2) It provides the facility to update the records.

3) It is found that the various components of Gross Working Capital (Total Current Assets) have shown a change in their respective sizes.

4) In relation to the above said statement we can say that the investment in Current Assets by the organization has gone down during the year 2010-11 as compared to the previous year 2009-10. Though, there has been as increase in the Working Capital.

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CONCLUSIONS

PARLE-G is the world’s largest selling brand of Biscuits. Parle-G has a good trick of tapping the

consumers which many years ago Mr. Shailendra Saraf did. Parle-G can be consumed by all age

group and it is a favourite for many of them. Parle-G has held its price line at Rs 4 for more than

25 years.

Launched in the year 1939, it was one of the first brands of Parle Products. It was called Parle

Glucose Biscuits mainly to cue that it was a glucose biscuit.

Par4le-G has so many features but its USP is health motive is a single pack i.e a single pack of

biscuit offers 450 calories. swadh bhare, shakti bhare (full of taste and energy).

Parle-G uses healthy ingredients which if consumed provides 450 calories per pack.

It has a very good Marketing Strategy that it caters even to smallest villages in India. It is now

concentrating in exports more.

Parle has a good Management Style that it can produce more and sell more.

The Materials Department of Parle is very efficient, the wastages are properly reused, inventory

is maintained of one week.

The Promotion Strategy used differs from time to time.

Waste Materials fallen on ground is total waste. Broken Biscuits are used for Cattle Feeding.

There is nearly 10,000 employees working in the company and are working in three shifts.35,000

tones of biscuits are manufactured in a day of one particular product, and there are such nine

product manufactured in the factory.

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BIBLOGRAPHY

http://www.finance study.com

http://www.investopedia.com

http://www.smallscale.com

http:/www.parle-gco.in

http://www.moneycontrol.com

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