Dabur India Ltd.[1]

8/13/2019 Dabur India Ltd.[1]

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Project Report

Working Capital Management

Undertaken At

Dabur India Limited

Submitted In The Partial Fulfillment For The Award Of The Degree OfMASTER O !USI"ESS ADMI"ISTRATIO"

Submitted By :Monika S#arma

M!A $inal%

Under the supervision and guidance of:Dr& Ur'a(#i S#arma

)ro*e+t ,uide

Session 2004 2006 ECNIA INS I U E OF ADVANCED S UDIES

(Approved By AICTE, Govt Of India & Affiliated to GGS Indraprastha University, Delhi)-. )S) In(titutional Area.Mad#uban C#o/k. Ro#ini. Del#i 0 112 234.

!""#$%"$", "$$, "$', "$ a* # !"" $%"$!,E#+ail infotiasindia-or. /e0site 111-tiasindia-or.

1
mailto:[email protected]://www.tiasindia.org/mailto:[email protected]://www.tiasindia.org/


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TABLE OF CONTENTS

Acknowledgement 5

Abstract 7

Objectives 8

Research methodology 9 Sources and methods 9 Limitations 9 Scoe 9

!" #ntroduction !$

%" Overview o& industry !%

'" (omany )ro&ile %*

'"! Over +undred ,ears O& (aring %5'"% -ounding .houghts %/'"' (omany0s +istory %7'"* 1abur At A 2lance %8'"5 1abur0s 3ajor S40s '$

'"/ 1abur0s (ore 6alues '!'"7 1abur orld ide '''"8 )roducts '*

'"9 Re engineering &or 6alue (reation *$

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'"!$ 1e merging &or 6alue (reation *!

*"orking caital management *%

*"! #ntroduction to orking (aital *'*"% (lassi&ication o& orking (aital *8*"' -actors 1etermining orking (aital Reuirements 5$*"* orking (aital (ycle 5%*"5 -inancing O& orking (aital 5**"/ Sources O& orking (aital 55*"7 orking (aital Analysis 5/

*"8 orking (aital (omarisons /$*"9 orking (aital 2rahs /!*"!$ 3easurement o& orking (aital &&iciency /7

5"Analysis and #nterretation /9

5"! Ratio analysis 7$5"% #nterretation o& Ratios 7%

5"' (lassi&ication o& ratios 7'5"* Analysis 7*

/" (onclusion 9!

7" Aendices 9*

8" 4ibliograhy !$$

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ACKNOWLEDGEMENT

:2ratitude is a heart0s memory0 and utting the &eelings o& the heart into

words; is an art" .hose who e


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Cert!+!cate o+ Co,plet!on An Or!!nal!ty O+ Wor

.his is to certi&y that M!$$ S'()AN( S(NG'has accomlished the

roject titled /WORK(NG CAP(TAL MANAGEMENT01 under my

guidance and suervision"

.his roject is being submitted by her in the artial &ul&illment o&

reuirements o& PGDBM )rogram o& 2AGAN (NST(T3E OF

MANAGEMENT ST3D(ES- NEW DEL'(.

She anywhere else &or the award o& any degree or diloma has notsubmitted this work" All sources o& in&ormation and hel have been dulymentioned and acknowledged"

Mr.P.K.Goyal

&Project #!e*

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ABSTRACT

.his roject discusses about the orking (aital 3anagement o& 1abur #ndia

Limited" A good way to judge a comany>s cash &low rosects is to look at itsorking (aital 3anagement ?(3@" (ash is the li&eline o& a comany" #& thisli&eline deteriorates; so does the comany>s ability to &und oerations;reinvest; and meet caital reuirements and ayments" nderstanding A(omany0s cash &low health is essential to make investment decisions"

.he roject in the initial stage began with the research o& the &inancials o&1abur #ndia Limited through the Annual Reorts and the o&&icial website o&the comany www"dabur"com" 4asically the urose &or the research was to

understand as to what e


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+industan Lever Ltd"; (adbury #ndia Ltd"; Bestle #ndia Ltd"; 4ritannia#ndustries and 3arico Ltd" have been comared"

OB2ECT()ES

.o understand the concet o& orking (aital"

.o understand the trend e


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RESEARC' MET'ODOLOG4

SO3RCES AND MET'ODS5

.he &ollowing sources have been sought &or the rearation o& this reortD

Pr!,ary $o#rce$ such as current annual reorts; books on &inancial

management by various authors and business magaines such as 4usinessorld; 4usiness .oday etc"

Seconary $o#rce$like revious years annual reorts; reorts on working

(aital &or research; analysis and comarison o& the data gathered"

L(M(TAT(ONS5

.he &ollowing limitations have been &aced in this roject in site o& allossible e&&orts made to make the reort accurate"

.he &inancial data o& di&&erent comanies is available &or &inancial yearsthat vary; such asE some &irms have their accounting year &rom Fanuary

to 1ecember while some others have it &rom 3arch to Aril" +ence thecomarison may not be &ully accurate"

.he latest &inancial data o& &ew &irms could not be reorted; as their#nternet websites have not been udated" +ence &or some comaniesthe data was available &or revious year but &or some it was available&or year roceeding revious year"

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SCOPE5

3y roject will concentrate to &ind out the oerational &easibility o& &utures

and the &inancial &easibility oerations".he accomlishment o& this roject willlead to an on hand e


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.his roject deals with the orking (aital 3anagement o& 1abur #ndiaLimited" 1abur #ndia Limited is the -ourth Largest -3(2 (omany" .he basicmeaning o& orking (aital in a simle language is (RRB. ASS.S less

(RRB. L#A4#L#.#S" (ash is the li&eline o& every business and henceworking caital management lays an imortant role in &unctioning o& abusiness" orking caital comrises a number o& di&&erent items and itsmanagement is di&&icult since these are o&ten linked" +ence altering one itemmay imact adversely uon other areas o& the business" 3anagement mustensure that a business has su&&icient working caital" .oo little will result incash &low roblems highlighted by an organiation e


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On the other hand; i& an organiation ties u too much o& its resources inworking caital it will earn a lower than e


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#B1S.R,

)RO-#L

-3(2 stands &or -ast 3oving (onsumer 2oods" (omanies in the -3(2sector rovide high volumeHlow value goods such as &ood; drink;household goods and con&ectionary items".he -3(2 sector is one o& the&astest growing sectors in the national economy and encomassesorganiations involved in distribution; manu&acturing and retailing"

-ast 3oving (onsumer 2oods are a multiCmillion ruees industry" -3(2 isone o& the most cometive areas" .he sector includes groceries; beauty

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roducts and home care comanies; the majority o& which come &romlarge global cororations"

At the time o& indeendence ?!9*7@ 3B(0s were allowed to oerate in

#ndia; but the #ndian market was too small &or global 3B(0s" +LL has amanu&acturing base; (olgate and Bestle mainly undertook only tradingactivities" #n !978 several -3(2 roducts; which are essentially massconsumtion items; became lu


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rural markets; direct distribution; creating new roduct; distribution andservice &ormats" -3(2 does not su&&er &rom mass layo&&s every timethe economy starts to di" ,ou may ut o&& buying a car; but you don>tut o&& dinner"

.he &ast moving consumer goods ?-3(2@ sector; which was beginning tobe derisively re&erred to as the S3(2 industry ?slow moving consumergoods@ as it didn>t e


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3AR#(O L.1"3arico grou0s history can be traced back to !8/% when Ianji 3orarji;started a small trading business in 3umbai" .he &amily set u the4ombay Oil #ndustries Ltd ?4O#L@ in !9*8 with manu&acturing &acilitiesin 3umbai &or coconut oil e


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and marketing" Availability near the consumer through a widedistribution channel is another crucial success &actor; as roducts aresmall value; &reuently urchased; daily use items" (ometition isintense; and layers have to remain cost e&&ective and rovide value &ormoney to consumers to retain market shares" .he comany is; atresent; highly deendent on its three main brands CC )arachute; Sa&&olaand Sweekar" .he growth in this category will be di&&icult to sustain inthe longer run due to increasing cometition" Recently; +industan Leveracuired (ococare ?it already has Bihar under its &old@; which will see anintensi&ication o& cometition in the coconut oil category"

3arico has maintained )arachute market share desite severe

cometition" Bew edible oil roducts are launched with >2ood &or+ealth> ositioning under the Sa&&ola brand and catering to regionaltaste reuirements through the Sweekar &ranchise" #n the hair oilsegment; the comany has success&ully launched value added )arachutevariants" A new brand Shanti Amla; in the amla hair oil categorydominated by 1abur; has been launched during -,$% and has beene


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#n %$$!; soas business ?Rs%!bn@ grew by !J and detergent sales?Rs%$bn@ grew by 7J" Other ersonal roducts ?household care; oralacre; skin care; hair care; color cosmetics@ registered a !*J growth to

Rs%*"/bn"


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4ritannia #ndustries Ltd"

4ritannia was incororated in !9!8 as 4ritannia 4iscuits (o Ltd in(alcutta" #n !9%*; )ea -rean I acuired a controlling stake; which laterassed on to the Associated 4iscuits #nternational ?A4#@ a I basedcomany" 1uring the 05$s and0 /$s; 4ritannia es controlling stake is jointly with 2roue 1anone and Busliadia" 2roue 1anone is one o& the leading layers in the world inbakery roducts business" #t acuired interest in 4ritannia #ndustries in!989 and acuired controlling stake in !99'"Busli adia grou is one o&the leading industrial houses in the country; with interests mainly inte


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4ritannia is the market leader in the organied biscuit and bakeryroduct market in #ndia" 4iscuits contribute to more than 8$J o&

4ritannia>s total turnover" Other roducts include bread and cakes"4ritannia diversi&ied into dairy roducts in !997 with rocessed cheese"

.he entry o& new 3B(0s has not osed a direct threat to 4ritannia; asthese 3B(0s have ositioned their brands in the remiumHhealthsegment" 4ritannia has maintained market leadershi with a *$J volumeshare and *8J value market share in the organied sector" -3(2 major+LL is e


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Bestle #ndia Ltd"

Bestle was romoted by Bestle Alimentana; Switerland; a wholly ownedsubsidiary o& Bestle +oldings Ltd"; Bassau; 4ahama #slands" Bestle isone o& the oldest &ood 3B( oerating in #ndia; with a resence o& over a

century" -or a long time; Bestle #ndia0s oerations were restricted toimorting and trading o& condensed milk and in&ant &ood" Over the years;the (omany e


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.he (omany set u its si


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(adbury #ndia Ltd"(adbury was originally incororated as a wholly owned subsidiary o&(adbury Schwees Overseas Ltd ?(SOL@ in !9*8" .he comany0soriginal name was (adbury -ry ?#ndia@ Ltd"#n !98%E the name waschanged to +industan (ocoa )roducts" .he current name was restored in1ec 089" #n !98/; (adbury &orayed into biscuits with (adbury 4utter;2lucose and 4ournvita brands" .he business however; could not take o&&

and was discontinued 'C* years later" #n !989; (adbury diversi&ied intoice creams with 1ollos and Losto brands; which were sold o&& to4rooke 4ond in !99*"

(adbury0s manu&acturing oerations started in 3umbai in !9*/; whichwas subseuently trans&erred to .hane" .he comany; way back in !9/*;ioneered cocoa &arming in #ndia to reduce deendence on imortedcocoa beans" #n !977; the comany also took stes to romote higherroduction o& milk " #n !995; (adbury e


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C'APTER-8

COMPAN4 PROF(LE

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O)ER '3NDRED 4EARS OF CAR(NG

1abur commenced oerations in !88* and is today a multiC locational; multiCroduct enterrise" .he comany has major interests in health and beautycare"

1abur is a leader in Ayurveda G the traditional #ndian health care system"

.he comany has !% manu&acturing lants in #ndia; Beal and gyt" 1aburroducts are also manu&actured in 1ubai"

1abur has a transactional network o& !9 o&&ices servicing both rural and urbanmarkets in #ndia"

.he comany has sales and marketing o&&ices in 1ubai and London" 1aburroducts are available in over 5$ countries"

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FO3ND(NG T'O3G'TS

hat is that li&e worth which cannot bring com&ort toothersM

.he doorste01AI.AR0

.he story o& 1abur began with a small; but visionary endeavor by 1r" S" I"4urman; a hysician tucked away in 4engal" +is mission was to rovidee&&ective and a&&ordable cure &or ordinary eole in &arC&lung villages" ith

missionary eal and &ervor; 1r" 4urman undertook the task o& rearingnatural cures &or the killer diseases o& those days; like cholera; malaria andlague"Soon the news o& his medicines traveled; and he came to be known as thetrusted >1aktar> or 1octor who came u with e&&ective cures" And that is howhis venture 1abur got its name C derived &rom the 1evanagri rendition o&1aktar 4urman" 1r" 4urman set u 1abur in !88* to roduce and disenseAyurvedic medicines" Reaching out to a wide mass o& eole who had no accessto roer treatment" 1r" S" I" 4urman>s commitment and ceaseless e&&orts

resulted in the comany growing &rom a &ledgling medicine manu&acturer in asmall (alcutta house; to a household name that at once evokes trust andreliability"

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DAB3R AT A GLANCE

1abur #ndia Limited has marked its resence with some very signi&icantachievements and today commands a market leadershi status" Our story o&success is based on dedication to nature; cororate and rocess hygiene;dynamic leadershi and commitment to our artners and stake holders" .heresults o& our olicies and initiatives seak &or themselves"

Leading consumer goods comany in #ndia with a turnover o& Rs"!%/8"7%(rore?-,$*C$5@

.hree major Strategic 4usiness nits ?S4@ G -amily )roducts 1ivision?-)1@; +ealth (are )roducts ?+()1@ and 1abur Ayurvedic Secialties?1ASL@"

.hirteen ltraC3odern manu&acturing units sread across &our (ountries" )roducts marketed in over 5$ (ountries"

FPD; dealing with ersonal care; the largest S4 contributing to *5J sales o&1abur )roducts related to hair care; Skin care; Oral care and -oods" ' Leading brandsC 6atika; Amla +air Oil and Lal 1ant 3anjan with Rs"!$$

(rore turnover each" 6atika +air oils and Shamoo the high growth brand"

Strategic ositioning o& honey as &ood roduct; leading to marketleadershi ?over *$J@ in branded honey market"

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'CPD; dealing with daily health care; Second largest S4 with %8J share in

sales )roducts related to +ealth Sulements; 1igestive; 4aby (are and Batural

(ures" Leadershi in Ayurvedic and +erbal roducts market with highly oular

brands" 1abur (hyawanrash the largest selling Ayurvedic and +erbal roducts

market with highly oular brands" Leader in +erbal 1igestives with 9$J market share" +ajmola tablets in command with 75J market share o& digestive tablets

category" 1abur Lal .ail tos baby massage oil market with '5J o& total share"

DASL; dealing with classical Ayurvedic medicines" +as more than %5$ roducts sold through rescritions; as well as over the

counter

3ajor categories in traditional &ormulations includeD Asav Arishtas Ras Rasayanas (hurans 3edicated Oils

)rorietary Ayurvedic medicines develoed by 1abur includeD Bature (are #sabgol 3adhuvaani .ri&gol

1ivision also works &or romotion o& Ayurveda through organiedcommunity o& traditional ractitioners and develoing &resh batches o&students"

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DAB3RS MA2OR STRATEG(C B3S(NESS

3N(TS1abur has three major Strategic 4usiness nits ?S4s@ namelyD

-amily )roducts 1ivision with a share o& *5J in its total sales" 1abur Ayurvedic Secialities having a share o& %7J in its total sales" +ealth (are )roducts with a share o& %8J in the total sales"

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1aburs S45s And .heir Share #n Sales

)a2ily

3rod45ts

Division(&6

7ealth Care

3rod45ts

$86

Da04r

Ay4rvedi5

Spe5ialities

$%6

)a2ily 3rod45ts

Division

7ealth Care

3rod45tsDa04r Ay4rvedi5

Spe5ialities


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DAB3RS CORE )AL3ES

)(S(ON

1edicated to the health and well being o& every household"M

PR(NC(PLES

OWNERS'(P

.his is our comany" e accet ersonal resonsibility; and accountability tomeet business needs"

PASS(ON FOR W(NN(NG

e all are the leaders in our area o& resonsibility; with a dee commitment

to deliver the results" e are determined to be the best at doing whatmatters the most"

PEOPLE DE)ELOPMENT

)eole are our most imortant asset" e add value through result driventraining; and we encourage and award e


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TEAM WORK

e work together on the rincile o& mutual trust and transarency in aboundary less organiation" e are intellectually honest in advocating

roosals; including recogniing risks"

(NNO)AT(ON

(ontinuous innovation in roducts = rocesses is the basis o& our success"

(NTEGR(T4

e are committed to the achievement o& business success with integrity" eare honest with the consumers; with business artners and with each other"

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DAB3R WORLD W(DE

1abur>s mission o& oulariing a natural li&estyle transcends nationalboundaries" .oday there is global awareness o& alternative medicine; natureCbased and holistic li&estyles and an interest in herbal roducts" 1abur hasbeen in the &ore&ront o& oulariing this alternative way o& li&e; marketingits roducts in more than 5$ countries all over the world"

1A4R roducts orld ide1abur has sread widely and deely to be in close touch with overseasconsumers" O&&ices and reresentatives in E#rope1 A,er!ca andA+r!caE A secial herbal health care and ersonal care range success&ully selling

in markets o& the M!le Ea$t; Far Ea$t and several E#ropeanco#ntr!e$"

#nroads into uroean and American markets that have good otentialdue to resurgence o& the 9ac-to-nat#re ,o:e,ent"


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PROD3CTS

'EALT' S3PPLEMENTS5

Da9#r C%ya;anpra$%

Da9#r Gl#co$e D

D(GEST()ES5

'aj,ola Ma$t Ma$ala

Anarana

'aj,ola

'aj,ola Cany

'aj,ola Cany F#n7

P#!n 'ara&L!


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BAB4 CARE5

Da9#r Lal Ta!l

Da9#r Ba9y Ol!:e O!l Da9#r 2an,a G%#nt!

NAT3RAL C3RES5

S%!laj!t Gol

Nat#re Care

Sat ($a9ol

S%!laj!t

R!n R!n

(tc% Care

Bac-A!

S%an%a P#$%p!

Da9#r Bal,

Sar9yna Stron

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'A(R CARE O(L5

A,la 'a!r O!l A,la L!te 'a!r O!l

)at!a 'a!r O!l

An,ol Sar$on A,la

'A(R CARE S'AMPOO5

)at!a 'enna Con!t!on!n S%a,poo

)at!a Ant! Danr#++ S%a,poo An,ol Nat#ral S%!ne S%a,poo

SK(N CARE5

G#la9ar!

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)at!a Fa!rne$$ Face Pac

ORAL CARE5

Da9#r Re Gel Da9#r Re Toot%pa$te

Da9#r Lal Dant Manjan

Da9#r B!naca Toot%9r#$%

REAL5

Real Fr#!t 2#!ce

Real Act!:

'OMMADE5

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Coo!n Pa$te$

Cocon#t M!l

To,ato P#ree

CAPS(CO RED

LEMONEE=

Da$%,#lar!$%ta

A$%oar!$%ta

La#%a$a:a

Ma%anarayan Ta!l

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2#r!tap

Ma%#:an!

La:an B%a$ar C%#rna

'EALT' CARE5

Da9#r C%ya;anpra$%

P#!n%ara 'aj,ola Ta9let$

Da9#r 'oney

S%!laj!t

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SK(N CARE5

Nat#ral Soap$

ORAL CARE5 'er9al Toot% Pa$te

'A(R CARE5

)at!a S%a,poo$ an Con!t!oner$

Da9#r A,la 'a!r O!l

FOODS5 Real 2#!ce$

'o,e,ae Foo Pro#ct$

DR.B3RMAN &R3SS(A*

'ealt% S#pple,ent$

Ay#r:e!c Toot%pa$te>$

RE-ENG(NEER(NG FOR )AL3E CREAT(ON

1abur has reCorganied two o& its biggest S45sC the -amily )roducts

1ivision ?)ersonal (are )roducts@ and the +ealth (are 1ivision into a single

S45" .his initiative will eliminate overlas and reduce costs by leveraging

synergies o& scale"

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ReCengineering internal oerations to leverage strengths and synergies;imrove scale; reduce cost and otimie e&&iciencies are key &or imrovedvalue creation" .o derive ma


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.his demerger o& 1abur0s -3(2 and )harmaceutical business is a majorrestructuring move undertaken by the (omany to rovide greater &ocus andindeendence to the two businesses".he -3(2 business; which will be the main business o& 1abur #ndia; will

concentrate on strengthening its core cometencies in )ersonal (are; +ealth(are and Ayurveda".he new )harmaceutical (omanyC 1abur )harma Ltd"C will &ocus on itse


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C'APTER-?

ORI#B2 (A)#.AL3ABA23B.

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There are basically two conceptsof working capital- Gro$$ Wor!n Cap!tal5

#t is the amount o& caital invested in the total (urrent assets o& the

enterrise" (urrent assets are those assets; which in ordinary course o&business can be converted into cash within a short eriod o& normally oneaccounting year"

Net Wor!n Cap!tal5

#t re&ers to the di&&erence between net current assets and liabilities"(urrent liabilities are those claims o& outsiders; which are e


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C#rrent L!a9!l!t!e$5

(urrent Liabilities are debts ayable within an accounting eriod" (urrentassets are converted into cash to ay current liabilities"

(urrent Liabilities includeD 4ills )ayable Sundry creditors or Accounts )ayable Accrued or Outstanding e


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(MPORTANCE OF WORK(NG CAP(TAL

orking caital constitutes art o& the (rown>s investment in a deartment"

Associated with this is an oortunity cost to the (rown" ?3oney invested inone area may QcostQ oortunities &or investment in other areas"@ #& adeartment is oerating with more working caital than is necessary; thisoverCinvestment reresents an unnecessary cost to the (rown"

OB2ECT()E5

.he objective o& working caital management is to maintain the otimum

balance o& each o& the working caital comonents" .his includes making surethat &unds are held as cash in bank deosits &or as long as and in the largestamounts ossible; thereby ma


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hen considering these techniues and strategies; deartments need torecognie that each deartment has a uniue mi< o& working caitalcomonents" .he emhasis that needs to be laced on each comonent varies

according to deartment" -or es overall management" .he needs o& e&&icientorking caital management must be considered in relation to other asectso& the deartment>s &inancial and nonC&inancial er&ormance"

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CLASS(F(CAT(ON OF WORK(NG CAP(TAL

orking (aital is classi&ied on the &ollowing two basisD?a@On basis o& time?b@On basis o& concet

I#B1S O- ORI#B2 (A)#.AL

On basis o& (oncet On basis o& .ime

2ross Bet )ermanentH .emoraryHorking orking -i


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Per,anent or F!@e Wor!n Cap!tal5#s the minimum amount o& orking (aital reuired to ensure e&&ectiveutiliation o& &i


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FACTORS DETERM(N(NG T'E

WORK(NG

CAP(TAL RE3(REMENTS

Bature or (haracteristics o& 4usinessC.he working caitalreuirements o& an enterrise are basically related to the conduct o&the business" very comany according to their nature o& business

has to maintain a certain level o& working caital"

)roduction )olicyC.he roduction olicies ursued by the managementhas a signi&icant e&&ect on the reuirements o& working caital o& thebusiness" .he roduction schedule has a great in&luence on the levelo& inventories" .he decision o& the management regardingautomation; etc"; will also have its e&&ect on working caitalreuirements"

Seasonal 6ariationsC3ost &irms e


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(redit olicyCA comany which allows liberal credits to its customers;may have higher sales but will need more working caital as comaredto a comany which has an e&&icient debt collection machinery andobserving strict terms" .he working caital reuirements can also bea&&ected by the credit &acilities enjoyed by the comany"

Rate o& growth o& 4usinessCAs a comany growsE it is logical to

e


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WORK(NG CAP(TAL C4CLE

.he working caital cycle can be de&ined asD.he eriod o& time which elases between the oint at which cash begins tobe e


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.here are two elements in the business cycle that absorbs cashD

#nventory ?Stocks and workCinCrogress@

Receivables ?1ebtors owing you money@

.he main sources o& cash are )ayables ?your creditors@ and uity and Loans"

hen it comes to managing working caitalC T(ME (S MONE4" #& you can getmoney to move &aster around the cycle ?e"g" collect monies due &rom debtorsmore uickly@ or reduce the amount o& money tied u ?e"g" reduce inventorylevels relative to sales@; the business will generate more cash or it will need to

borrow less money to &und working caital"As a conseuence; you could reduce the cost o& bank interest or you0ll haveadditional &ree money available to suort additional sales growth orinvestment" Similarly; i& you can negotiate imroved terms with suliers e"g"get longer credit or an increased credit limitE you e&&ectively create &ree&inanceto hel &und &uture sales"

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F(NANC(NG OF WORK(NG CAP(TAL

.here are two tyes o& working caital reuirements in a comanyCi@ )ermanent or -i


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SO3RCES OF WORK(NG CAP(TAL

1abur #ndia Limited as a success&ul (omany in -3(2 sector has the &ollowingsources available &or the &ul&illment o& its working caital reuirements inorder to carry on its oerations smoothly"

4ABISD .hese include the &ollowing banksD

)unjab Bational 4ank Standard (hartered 4ank Ltd" +ong Iong and Shanghai 4anking (or" Ltd" State 4ank O& #ndia +1-( 4ank Ltd" #14# 4ank Ltd" (itibank

(O33R(#AL )A)RSD

(ommercial )aers have become an imortant tool &or &inancing workingcaital reuirements o& a comany"(ommercial )aer is an unsecured romissory note issued by the comany toraise shortC term &unds" .he buyers o& the (ommercial )aers include banks;insurance comanies; unit trusts and comanies with surlus &unds to invest&or a short eriod with minimum risk"1abur #ndia Limited issues (ommercial )aers and had commercial worth Rs"!$$$ lacs in the year %$$%C$'"

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WORK(NG CAP(TAL ANAL4S(S

orking caital is one o& the most di&&icult &inancial concets to understand&or the smallCbusiness owner" #n &act; the term means a lot o& di&&erentthings to a lot o& di&&erent eole"By e+!n!t!on; orking (aital is the amount by which current assets e


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Some small businesses have enough cash reserves to &und seasonal orking(aital needs" +owever; this is very rare &or a new business" #& your new

venture e


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Factor!n5 -actoring is another resource &or shortCterm working caital

&inancing" Once you have &illed an order; a &actoring comany buys youraccount receivable and then handles the collection" .his tye o& &inancing ismore e


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.he rimary objective o& working caital management is to ensure thatsu&&icient cash is available toD

3eet dayCtoCday cash &low needsE )ay wages and salaries when they &all dueE )ay creditors to ensure continued sulies o& goods and servicesE )ay government ta


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COMPAR(SON OF WORK(NG CAP(TALS

OF D(FFERENT COMPAN(ES

?Amt #n Rs" 3illions@

Co,pany Na,e F4 C#rrent

A$$et$

C#rrent

L!a9!l!t!e$

Net

Wor!nCap!tal

1abur #ndia Ltd" %$$*C%$$5

%5!"97! '%%"%%% C7$"%5

4ritannia #ndustriesLtd"

%$$'C%$$*

%'99"/! %'5/"/8 *%"9'

+industan LeverLtd"

%$$%C%$$'

'8788"8$ '98$%"*9 C!$!'"/9

3arico #ndustriesLtd"

%$$'C%$$*

!9!7"%! !$//"!$ 85!"!!

(adbury #ndia Ltd" %$$%C%$$'

%!75"9$ !'5%"*$ 8%'"5$

Bestle #ndia Ltd" %$$'C%$$*

55!%"** 8!$$"8 C%588"'/

SourcesCAnnual reort o& 1abur #ndia ltd?%$$*C$5@; +industan Leverltd"?%$$%C$'@;magaines like 4usiness world; 4usiness #ndia; 4usiness.oday; articles &rom news aers like conomic times; 4usiness line Andwebsites likeCwww"marico"com; www"nestle"com;www"study&inance"com"

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WORK(NG CAP(TAL GRAP'S

.he above chart dislays the working caital scenario at 1abur#ndia Ltd" 1abur has been constantly reducing its working

caital and in the year %$$'C%$$* a stee decline has takenlace in the comany0s working caital; reducing it to a negativeo& Rs"C%*'"99 millions" .his has roved the manageriale&&iciency at 1abur in its -inances".he comany has reduced its ayment eriod &rom '9 days to anegative o& 5 days; which shows that the comany has enough

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#$('-99

"8:%-'"

$'8(-9( $'!!-%%

$9%&-98

#&!!

!

&!!"!!!

"&!!

$!!!

$&!!

'!!!

$!!( $!!' $!!$ $!!" $!!!

Working Capital O5 Dabur India Ltd&


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o& &unds available on credit &rom its suliers; and is collectingmoney &rom its debtors at a &aster ace to avoid much o& thebad debts"

.he above grah dislays the working caital &or variousyears o& (adbury #ndia Ltd" .he working caital o& thiscomany has been constantly increasing e


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decreasing the ayment eriod the comany can imrove uonthe working caital"

.he above grah dislays the working caital scenario o&+industan Lever Limited the largest -3(2 (omany in the world".he comany has been having an enormous cash reserves &orlanning out its &uture investments" .he working caital has been

almost nil and negative since the ast &ew years; showing thatthe comany has an e


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.he above grah dislays the working caital o& Bestle #ndiaLtd"; which has been negative sine the year %$$$C%$$!"#n the &inancial year %$$'C%$$* the working caital o& the

comany was Rs G!'88"5' millions and in the year it %$$'C%$$* it &urther declined to Rs G%588"5/ millions; i"e" itsworking caital almost doubled &rom %$$' to year %$$*"A brilliant and e&&icientE working and managerial scenario isdeicted through the working caital o& the comany"

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Working Capital O5 "e(tle India Ltd&

#$&88-':

#"'88-&'

#%('-8"

#'"%-%(

#%(&-"$

#'!!!

#$&!!

#$!!!

#"&!!

#"!!!

#&!!

!

$!!( $!!' $!!$ $!!" $!!!


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essentially reresent loans &rom vendors to the comanyCCaresubtracted to hel o&&set working caital needs"#n summary; the cash conversion cycle is measured in days and eualsD(O DSO DPO "orking caital accounts also tell you about the

oerational e&&iciency o& the comany" .he length o& the cashconversion cycle ?1SOP1#OC1)O@ tells you how much working caital istied u in ongoing oerations" And trends in each o& the daysCoutstanding numbers may &oretell imrovements or declines in thehealth o& the business"

NEGAT()E WORK(NG CAP(TAL

AD)ANTAGE5

A negative working caital is a sign o& managerial e&&iciency in abusiness with low inventory and accounts receivable ?which means theyoerate on an almost strictly cash basis@"1abur #ndia Limited has a negative working caital Rs C7$"%5 (rores inthe &inancial year %$$*C%$$5 which shows that the comany is doinge


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leverage o& stable utility comanies and cyclical mining comanies would beworse than useless" s ro&itability ratios overless than a &ull commodity or business cycle would &ail to give an accuratelongCterm measure o& ro&itability" sing historical data indeendent o&

&undamental changes in a comany>s situation or rosects would redict verylittle about &uture trends"

e can use ratio analysis to try to tell us whether the businessD C!" is ro&itable%" has enough money to ay its bills'" could be aying its emloyees higher wages

*" is aying its share o& ta

Dabur India Ltd.[1]

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