Final Wcm With Revie of Literature

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PROJECT REPORT

ON

WORKING CAPITAL MANAGEMENT

AT

UTTARAKHAND JAL VIDYUT NIGAM LTD.

In the partial fulfillment for the award of degree ofMASTER OF BUSINESS ADMINISTRATION (2012-14)

Submitted To: Submitted By:

Dr.Divya Negi Deepika Negi

Lecturer GEU

GRAPHIC ERA UNIVERSITY

DEHRADUN-2480011


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PREFACE

Vocational training is one of the most important parts in the

M.B.A course. Since, learning theory and doing it practically aretwo aspects of study, every student of management course issupposed to undergo forty five days training in an organization.

I was fortunate enough to get a chance to do my vocationaltraining in one of the esteemed organization of India UJVNL,Dehradun. I was posted in one by one department as the routineschedule of training department in UJVNL, which has beenfollowed:

Training Department

Finance Department

Personal and Administration Department

Quality control

Production Department

I have taken utmost care to prepare the report precisely andsolution- oriented rather than theoretical and so I hope that my

work will be beneficial to the UJVNL.

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ACKNOWLEDGEMENT

I am very much thankful to the officers of theUJVNL, withoutwhose help and encouragement this project would have been

impossible. I am highly obliged as the officers spared theirprecious time and share the information required for my project.I would like to show my deepest sense of gratitude to Mr. AshishMishra, (SM. Training); Mr. Ajay Garg, (DGM, QualityControl); Mr. Rajat Prabat, (C.M, P&A); Mr. Ram Arora, (SMManufacturing) whose guidance helped me in the completion ofthis project and I would also like to extent my sincere thanks toall the DGMs/CMs/SMs/DY.Managers & Managers and theemployees who gave me their valuable time for me.

My special thanks in this regard goes to DR. DIVYA NEGI,ofGRAPHIC ERA UNIVERSITY, DEHRADUN. Who suggests and

provides me the golden opportunity to make my project from thisdivision.

Thank you,

DEEPIKA NEGI

(MBA-3rd Sem)

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CERTIFICATE

This is certify that Deepika Negi has successfully completedsummer training report on WORKING CAPITALMANAGEMENTAt UTTARAKHAND JAL VIDYUT NIGAM LTD.DEHRADUN.Under my guidance, which also forms partial fulfillment to MBADegree course. The produced report is genuine. I am fullysatisfied and appreciated the work done on the project.

I wish good luck for the bright future of the candidate.

DR.DIVYA NEGI

Internal Guide

GEU, DEHRADUN

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DECLARATION

I hereby declare that the project report on the financial support of

UTTARAKHAND JAL VIDYUT NIGAM LTD.,DEHRADUN, has beensubmitted in partial fulfillment of the requirement for theMASTERS DEGREE IN BUSINESS ADMINISTRATION to GRAPHICERA UNIVERSITY, DEHRADUN is my original work and is notsubmitted for the award of any other degree, diploma fellowshipor other similar titles of prizes.

DEEPIKA NEGIMBA-3rdSem

(GRAPHIC ERA UNIVERSITYDEHRADUN)

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COMPANY PROFILE

Uttarakhand is renowned for its scenic beauty and rivers. India's two major rivers viz. Ganga and

Yamuna start their journey from here. Besides these two rivers, Uttarakhand has a large network

of rivers and canal which provides an immense scope for hydropower energy. One of the first

hydro-power station in India was commissioned at Galogi in 1907. More power stations were

subsequently developed over a period of time.

12th February, 2001 - A new dawn in the Power Sector of Uttarakhand when UJVNL came into

existence, with some promises to keep with the home state, to emerge as a Power Major and to

make the state, so called "Urja Pradesh".

Uttarakhand has a very high potential which is yet to be developed and to give impetus to power

sector, Uttarakhand Jal Vidyut Nigam Limited (UJVNL) was formed. UJVNL is a wholly owned

Corporation of the Government of Uttarakhand set up for managing hydro power generation at

existing power stations and development, promotions of new hydro projects with the purpose of

harnessing, the known, and yet to be known, hydro power resources of the State.

Today, UJVNL operates hydropower plants ranging in capacity from 0.2 MW to 240 MW,

totaling up to 1000 MW. Though the State is more or less sufficient in its energy generation to

meet its own requirements, it is committed to develop its huge hydro power resources in an early

and efficient manner for economic well-being and growth of the State and its people.

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VISION , MISSION & VALUES

Vision

* To be an excellent & efficient organization on Strength of its Human Resources.

* To be a significant player in the National Power Sector.

* To induce adjacent infrastructure business that provides opportunities for growth.

* To be the best corporate in Uttarakhand

* To care for all.

Mission

*Contribution to improvement in the quality of life in Uttarakhand.

Values

*Creation of value for all stakeholders.*Result oriented with professional work culture.

*Earn trust through fair business practices with all.

*Growth balanced with environmental protection & enrichment.

*Law abiding.

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OBJECTIVES

The main objects to be pursued by the Company for which it has been incorporated are as

follows:-

To establish takeover, operate and maintain Hydroelectric generating stations including

mini & micro hydro electric generating station and tie-lines, substations and main

transmission lines connected therewith.

To carry on its activities within the State of Uttarakhand or elsewhere as may be found

feasible.

To make arrangements with any Company, Authority, Government or other persons or

institutions for the operation and maintenance of any generating station owned by it

(including transmission lines and other works connected therewith) on such terms and

conditions as may be agreed upon between it and the Company.

To take such measures as in the opinion of the Company, are calculated to advance the

development of water power in the State of Uttarakhand and may carryout power and

Hydro metric survey work and cause to be made such maps, plans, sections and estimate

as are necessary for any of the said purpose.

To carry out investigation and to prepare one or more schemes relating to the

establishment or acquisition of generating stations, tie-lines, sub-stations and

transmission lines for promoting the use of electricity within the State of Uttarakhand.

To operate and maintain in the most efficient and economical manner the generating

stations, tie-lines, sub-stations and main transmission lines, owned by the Company.

To enter into agreement with any licensee licensed under the Indian Electricity Act, 1910

or any other Act, Law of Regulation in force for the time being, or as modified from time

to time or with any person for use of any transmission line, distribution line or main

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transmission line of that licensee or person for such time and upon such terms as may be

agreed.

To enter into arrangement on such terms as my be agreed upon, for the sale of electricity

generated by it to the State Electricity Company constituted for Uttarakhand or for the

sale of electricity generated by it to any other state, body, person by itself with the

consent of such person or persons duly authorized or licensed under prevalent Laws and

Regulations or on its own account.

To avail such rights, exercise such powers and functions and to perform such duties as

are conferred upon or expected of the company under the provisions of such Laws,

legislation and regulations as are in force from time to time.

To do such other acts and things as are authorized to be done under the Electricity

(Supply) Act, 1948, or any other Act, Laws or regulations in force or amended from time

to time.

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Genesis:

UPSEB Unbundled :

UPSEB Transfer Scheme14-01-2000

Uttarakhand State Created:

UP Reorganisation Act09-11-2000

UJVN Ltd formed :

1956 Companies Act12-02-2001

UJVN Ltd Commenced Operations :Corporate Office in 2500 Sq ft Rented House.

09-11-2001

UJVN Ltd : took possessions of assets: 29-11-2000

Had no Cash on : 09-11-2001

Borrowed and Paid all employee dues and streamlined employee

benefit :31-03-2002

Sense of a new belongingness instilled in the people of UJVN

Ltd :

Nov 01- Mar 02

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BRIEF HISTORY OF THE UJVNL

The history of Uttarakhand Jal Vidyut Nigam Limited can be traced back to erstwhile U.P. State

Electricity Board (In short UPSEB). The erstwhile U.P. State Electricity Board was trifurcatedpursuant to enactment of U.P. Electricity Reforms Act, 1999. U.P. State Electricity Reforms

Transfer Scheme, 2000 was promulgated for execution of the trifurcation of erstwhile UPSEB

into U.P. Power Corporation Ltd. (In short UPPCL), U.P. Jal Vidyut Nigam Ltd. (In short

UPJVNL) and U.P. Rajya Vidyut Utpadan Nigam Ltd... By operation of the aforesaid Scheme all

the Hydro Electric Projects earlier owned and operated by UPSEB were transferred to UPJVNL

(a Govt. Company existing prior to the said trifurcation) in addition to other projects owned and

operated by the UPJVNL previously.

That UPJVNL was erstwhile known and setup as UP Alparthak Evam Laghu Jal Vidyut Nigam

Limited, a Government Company which was incorporated in 1985 to own establish and operate

small, mini and micro hydel projects. Later on the name of the company was changed to UP

Laghu Jal Vidyut Nigam Limited and ultimately to UP Jal Vidyut Nigam Limited in 1996.

The State of U.P. was bifurcated by enforcement of U.P. Reorganization Act, 2000 (In short

Reorganization Act) as a result thereof the State of Uttarakhand came into existence. The Govt.

of India issued an order dated 05-11-01 u/s 63(4)(a) of the Reorganization Act whereby assets

and liabilities between UPJVNL and UJVNL were divided. By operation of this order all the

Hydro Power Assets of UPJVNL located in the State of Uttarakhand were transferred to UJVNL.

Since then UJVNL is operating all these hydro power plants.

Uttarakhand Jal Vidyut Nigam was formed on 9 Nov 2001 with it main motto of

developing and harnessing the hydro potential of Uttarakhand State. The Nigam has 34 projects

under operation with an aggregated capacity of more than 1400 MW and more than 14 projects

are under different stages of implementation.

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Board of Directors

1. Shri Utpal Kumar Singh

Chairman & Secretary (Energy), GoU

7. Shri C.M. Vasudev

Independent Director

2. Shri R.P. Thapliyal

Managing Director

8. Shri S.C. Sen


3. Shri Alok Kumar Jain

Prinicipal Secretary (Finance), GoU

Non-Executive Director

9. Shri B.C.K. MISHRA

Director (Operations)

4. Shri P.C Sharma

Prinicipal Secretary (Ind. Dev.), GoU,


10. Shri Jayant Kumar

Director(Finance)

5. Shri Nitesh Kumar Jha

Additional Secretary (Energy), GoU


11. Shri K.K. Singh

Director(Projects)

6. Dr. S. Ramesh


Top Management

1. Shri Utpal Kumar Singh

Chairman & Secretary (Energy), Gou

8. Shri Chaturvedi

General Manager (Yamuna Valley)

2. Shri R.P. Thapliyal

Managing Director

9. Shri Purshottam Singh

General Manager (Ganga Valley)

3. Shri B.C.K. Mishra

Director (Operations)

10. Shri C P Madan

General Manager (Accounts)

4. Shri Jayant Kumar

Director (Finance)

11. Shri S.K Chopra

General Manager (P & IR)

5. Shri K.K. Singh

Director(Projects)

12. Shri Arvind Kumar

General Manager (I/c) (SHP)

6. Shri S.N. Verma 13. Shri Arun Sabharwal

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Executive Director (E & M) Company Secretary

7. Shri Sandeep Singhal

Executive Director (Civil)

Credentials

Largest pre-1910 plant located at Galogi, Uttarakhand (Dehradun-Mussoorie Road).

North India's first underground power house at Chibro.

India's first tandem operation of Chibro-Khodri Power Station.

India's first 220 KV two tier switchyard at Chibro Power station.

Trifurcation of H.R.T. (Partly) of Khodri Power Station due to Inter-Thrust Zone.

Replacement of runner chamber by N.S. Grout & Epoxy filling at Chilla Power Station for

the first time in India.

2000 engineer-years of hydropower O & M experience.

International level Design & Research facilities at Irrigation Design Organization &

Irrigation Research Institute at Roorkee.

Maneri Bhali-II- Power Station of 4 units of 76 MW with Francis turbines along with a 220

kV switchyard. Annual generation of 1566 GWh.

Generation Targets For The Year 2009-10 as Fixed By CEA

Generation (MU) Since Formation of UJVNL.

Generation (MU) - LHPs (00-01 to 08-09)

Generation (MU) - SHPs (00-01 to 08-09)

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http://www.uttarakhandjalvidyut.com/Targets%20(09-10).xlshttp://www.uttarakhandjalvidyut.com/generation.htmhttp://www.uttarakhandjalvidyut.com/Monthly_Generation-%20LHPs%20(00-01%20to%2008-09).pdfhttp://www.uttarakhandjalvidyut.com/Monthly_Generation-%20SHPs%20(00-01%20to%2008-09).pdfhttp://www.uttarakhandjalvidyut.com/generation.htmhttp://www.uttarakhandjalvidyut.com/Monthly_Generation-%20LHPs%20(00-01%20to%2008-09).pdfhttp://www.uttarakhandjalvidyut.com/Monthly_Generation-%20SHPs%20(00-01%20to%2008-09).pdfhttp://www.uttarakhandjalvidyut.com/Targets%20(09-10).xls


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POWER PROJECTS IN INDIA

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INTRODUCTION OF HYDRO POWER

Hydro power is a non- polluting, renewable source of energy .It is perhaps the oldest renewable

energy technique .Hydro power represents the use of water resources towards inflation free

energy due to absence of fuel cost with mature technology characterized by highest primer

moving efficiency and spectacular electricity efficiency.

Small Hydro Projects are an important, appropriate and profitable that other energy supply

options.

Uttarakhand Jal Vidyut Nigam limited is primarily responsible for the Small Hydro

development in Uttarakhand & is nodal agency to speed up this development.

Formerly the small hydro projects were in Uttar Pradesh Laghu Jal Vidyut Nigam limited and

thereafter transferred to UP Jal Vidyut Nigam but after formation of Uttarakhand these project

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came under UJVNL, since then UJVNL (Uttarakhand Jal Vidyut Nigam Limited) has shown

serious interest in development of these projects.

Hydro Power Classification

Hydro Power projects are generally classified in two parts ie. Small hydro projects and large

hydro projects. In India hydro projects upto 25 MW are considered as small hydro Projects

where above 25 MW are considered as large hydro projects

The small hydro projects are further classified as follows

Class Capacity in KW

Micro Hydro Upto 100

Micro Hydro 100-2000

Small Hydro 2000 to 25000

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Performance and Development of SHPs in Uttarakhand:

Importance of SHPs

Small hydro power

Projects (SHPs) are

an important,

appropriate and

profitable than other

energy supply

options and is a part

of the full menu ofenergy options to be

considered in

meeting the needs of

rural people more so in

the remote and isolated

locations in the hilly

terrain of the state of

Uttarakhand. SHPs

compare well with the alternative energy supply options and have an important niche in the

range of decentralized energy supply options. This niche is tightly demonstrated defined by

the availability of adequate small-scale resource and as sufficiently concentrated density of

demand, consisting of a need combined with purchasing power, to take advantage of a

centralized, albeit small, power plant. SHPs have a great social bearing as it can provide rural

people with electricity and create a sense of belonging to the modern world besides providing

energy that can assist in securing the livelihoods of marginalized people. The SHPs are

financially sustainable under the following conditions:-

1. A high load factor

2. A financially sustainable end-use.

3. Costs are contained by good design and management.

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There is a constraint in that costs of

SHPs rise with the remoteness of the

location but the cost of alternative

options particularly diesel generator)

may rise faster. SHPs in

Uttarakhand in short will play an

important role as growth engines for

developing the economy of rural

area which is isolated and remotely

located.

Uttarakhand has an estimated

capacity of 1478 MW of SHP out of approximately estimated capacity of 20263 MW. The

estimated capacity of small hydro projects of Uttarakhand is 7.3% of total estimated capacity of

Hydro power in Uttarakhand and 10.23% of targeted contribution of Hydro in 10th Five Year

Plan.

Uttarakhand Jal Vidyut Nigam Ltd. is primarily responsible for the development of Small Hydro

power project in the state of Uttarakhand and is a nodal agency for the speedy development ofthe same.

In view of the above Government of Uttarakhand as well as Government of India are facilitating

the development of small hydro projects in the state of Uttarakhand. The Small hydro projects

have following distinct advantages:

a. Hydro power involves a clean process of power generation.

b. It is a renewable source of energy and contributes to the upliftment of the rural masses,

especially projects located in remote and inaccessible areas.

c. It is the most cost effective option for power supply because it does not suffer from the

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limitation on account of fuel consumption.

d. Most small hydro projects in Uttarakhand are being developed in remote and backward

areas where substantial support for economic development is actually needed.

e. Small hydro power contributes in solving the low voltage problem in the remote hilly

areas and helping reducing the losses in transmission and distribution.

f. In certain cases projects are helpful in providing drinking water and irrigation facilities.

g. It helps in promoting the local industries in remote areas.

h. The development of small hydro projects requires minimum rehabilitation and resettlement

as well as environmental problems.

i. Small hydro projects help in generating self employment in remote areas of the state.

j. Small hydro power projects helps in providing stable electricity supply at remote areas

where such facility by other source shall be much costlier and unreliable.

In Short we can say that SHPs are

Simple to operate

Non Polluting

Minimum Maintenance

Environment friendly

Utilizes local resources

Take less time in construction

Can be used at places where grid is not possible.

The viability can be improved by incorporating the benefits of Carbon Trading

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Policy of UJVNL in the construction of Small Hydro Power Plants:

The SHP Plant wing of UJVNL was christened with the purpose of:

1. Improvement in civil design and relocation of project site.

2. Design and maintenance of Electrical Equipments at Nigamss level.

3. Monitoring of Daily Generation.

4. Operations of project by Nigam that were earlier operated by contractors.

5. Construction of new projects.

6. Increasing generation by completing the incomplete project.

7. Investigation & development of new projects.

8. To avail the CDM benefits under the Kyoto Protocol to make SHPs more viable.

UJVNL for early realization of the capacity in SHP would be focusing on the construction of the

projects above 3 MW and accordingly the following policies has been adopted for theImplementation, operation & Maintenance of the SHP in the State:

1. Construction of small hydro projects of 3 MW and larger capacities in general.

2. Dry Leasing of all power stations up to 500 KW capacities to private entrepreneurs for

operation & maintenance.

3. Operation of Power Stations by Nigam's staff.

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Performance of SHPs:Integrated efforts by UJVNL have steadily increased the generation of SHP after 9.11.2001 and

details are given below

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 07-08 2008-09

Up to

nov

Generation

(in MU)25.6494 30.1242 40.9361 36.3510 40.1692 46.2272 42.8374 42.2933 32.4304

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Future Plan of Capacity Addition :

A total 86,600 kW capacity addition has been targeted as under:

Project District Capacity(KW)Year of

Completion

1 Asiganga-I Uttarkashi 4500 2009-10

2 Asiganga-II Uttarkashi 4500 2010-11

3 Asiganga-III Uttarkashi7300(under

revision)2010-11

4 Dunao Pauri Garhwal 1500 2009-10

5 Shobla-I Pithoragarh 8000 2010-11

6 Tankul Pithoragarh 12000 2010-11

7 Kaliganga-I Rudraprayag 4000 2009-10

8 Kaliganga-II Rudraprayag 6000 2010-11

9 Madhyamaheshwar Rudraprayag 10000 2009-10

10 Kalidigad Uttarkashi 9000 2010-11

11 Sonegad Uttarkashi 3000 2010-11

12 Suringad II Pithoragarh 5000 2010-11

13 Urgam II Chamoli 3800 2010-11

14 Painagad Pithoragarh 4000 2010-11

15 Pilangad II Uttarkashi 4000 2010-11 86,600

The Setting up of SHPs in the state of Uttarakhand would help in the overall development of

the state especially in the remote areas in the hills. It is a known fact that supplying improved

energy services to people for the first time is difficult, supplying such services profitably to

very poor people who live far away from roads and the electricity grid poses a particularly

difficult challenge. Nevertheless, the access to electricity in the remote areas would generate

livelihood and the impact can be spread to marginalized people and then to social activities.

UJVNL is in the process of proposing new SHPs for CDM for earning Emission Reduction

credits which will generate additional revenue for SHPs and make them financially viable. "It is

easier to make the profitable social, than to make the social profitable" and UJVNL is aware

that in planning SHP investments it is important to consider the plant for securing livelihood at

an early stage and then to see how the impact can be spread to masses and for social activities.

UJVNL is endeavoring to set up the SHPs so as bring about development in the remote areas of

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Uttarakhand there by facilitating overall development of the state.

STRATEGYFORFUTURECAPACITYADDITION:

(a) Presently, UJVNL takes up the construction of the SHPs only after carrying out detailedsurvey(s), investigation(s) and engineering including cost optimization of various options. This

requires collection of Hydrological and geological data besides synthesizing the same for

arriving at a most economical engineering option. The entire work is outsourced to reputed

agencies for timely completion besides maintaining the quality of work. Based on the past

experience of the geology, metrology and the topography, safe designs have been adopted and

where ever found necessary power channels have been replaced by tunnels.

(b)Some of the other improvements in the process of development of SHPs are that: -

I. Geological Surveys are being conducted in thorough manner so as to locate the

power station at a safe place making it less prone to natural calamities.

II. Power Channels are more prone to land slides/cloud bursting etc, therefore the water

conductor system is being changed to tunnel as per site specific conditions.

III. Machines of simple design are planned to be used for the power stations located in

far off areas for their easy operation & maintenance.

IV. Staff posted at these power stations is being given proper training in the operation &

maintenance so as to minimize the break down time.

POWER INDUSTRY

Overview

Power is a critical component of any economys infrastructure and without

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its development, economic growth is severely hindered if not made

impossible. It is an essential requirement of all facets of human life and is

recognized as one of the basic human needs.

An economys growth, development, ability to handle global competition is

all dependent on the availability, reliability and quality of the power sector.

The demand for power is growing exponentially and the scope of growth of

this sector is immense.

Global and Indian economy have decelerated, but power is one of the few

commodities in short supply in India. So, despite the sluggishness in

production and demand for manufactured products, India remains power

hungry, both in terms of normal and peak power demand. Power is derived

from various sources in India. These include thermal power, hydropower or

hydroelectricity, solar power, biogas energy, wind power etc. The

distribution of the power generated is undertaken by Rural Electrification

Corporation for electricity power supply.

As per the Constitution of India the power sector is mentioned in the

Concurrent List and is under the purview of the Centre and the states. This

sector is dominated primarily by Public Sector Undertakings. The state and

Central Government account for 58% and 32% of the generation capacity

respectively while the private sector accounts for a mere 10%. A major part

of the transmission and distribution factors are handled by the state

utilities. The private sector is slowly making its presence felt in the power

sector in distribution and is making a foray into transmission. Power sector

had been funded mainly through budgetary support and external

borrowings were opened to private sector in 1991.

Key players currently operating in the Indian power sector are National

Thermal Power Corporation Limited, Nuclear Power Corporation of India

Limited, North Eastern Electric Power Corporation Limited, Power Grid

Corporation of India, Tata Power, etc.

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Some Facts

More than 64% of Indias total installed capacity is contributed by

thermal power.

Significant jump in unit size and steam parameters will result in higher

efficiencies and better economics for the Indian power sector.

Western region accounts for largest share (30.09%) of the installed power

in India followed by Southern region with 27.76%.

Unbalanced growth remains the cause of concern for the Indian power

sector. Only about 56% of households have access to electricity, with the

rural access being 44% and urban access about 82%.

Southern region remains the dominant region in renewable energy

source accounting for more than 57% of the total renewable energy

installed capacity. India has installed power generation capacity of 1,41,079.84 MW as on

January 31, 2008, which is about 100 times the installed capacity of

1362 MW in the year 1947. Power generation has showcased a robust

growth rate which is steadily improving year after year.

There has been significant improvement in the growth in actual

generation over the last few years. As compared to annual growth rate of

about 3.1% at the end of 9th Plan and initial years of 10th Plan, the

growth in generation during 2006-07 and 2007-08 was of the order of

7.3% and 6.33% respectively.

With the countrys power requirement expected to touch 8,00,000 MW by

2031-32, India would need an investment of Rs6,00,000 crore. This

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investment is possible only by attracting foreign direct investment and

public-private participation in the power sector,

At present, the energy shortage in the country was estimated at 10% and

it touches 13% during peak seasons. There are states, where the energy

shortage is 25%.

This is a serious impediment in the way of industrial development and

economic process. We need a crash project for capacity building and

need to eliminate power shortage by 2012

Outlook

Over 78,000 MW of new generation capacity is planned in the next five

years. A corresponding investment is required in Transmission and

Distribution networks. Power costs need to be reduced from the current

high of 8-10 cents/unit by a combination of lower AT & C losses,

increased generation efficiencies and added low-cost generating capacity.

Among the top issues facing power and utility companies in 2009 is the

continued trend toward rising input costs (e.g., coal, natural gas) and

increased construction risks, as the sector seeks to build out new

infrastructure (both generation and transmission) to meet demand in

environmentally responsible ways. When it comes to the fuel source,

companies are experienced at managing price volatility. However, the

credit crisis has created significant cash flow challenges for the hedging

programs of many companies.

Some power and utility companies looking to address the dual challenges

of rising costs and tight credit markets are exploring constructionstrategies that embrace

multiple potential power sources (coal, gas,nuclear, alternative energies), but which offer

flexibility to change

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As per data released by Central Electricity Authority, New Delhi the total installed capapcity in

india is 159398.49 MW along with captive installed capacity of 19509 MW which are connect to

National Grid system as on 31th March, 2010.

The targeted capacity addition during 11th plan for various installed capacity sector is as

under:

Type/Sector Central State Private State Total

Thermal 24840 11552 23301 59693

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Hydro 8654 3491 3482 15627

Nuclear 3380 0 0 3380

Total 36874 15043 26783 78700

India is hurrying up to enhance its installed capacity to meet out the power demand in the

country. Even in this kind of scenario the power shortage is taking its toll on consumers

consumptions as well as Industrial growth. The power shortage in various region will show the

precarious condition of gap between power generation and consumption.

Region Power shortage

Energy Shortage (MU) Peak power Shortage (MW)

Northern -29,570 -11.6 -5,720 -15.4

Western -35,401 -13.7 -7,023 -17.7

Southern -14,032 -6.4 -3,129 -9.7

Eastern -3,910 -4.4 -836 -6.3

North-Eastern -1,036 -11.1 -315 -17.9

This power shortage is only going to increase in term of energy as well as peak power demand

and supply.

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Chibro Power Plant (4x60MW)

The Power Station is a Run-of-Riverscheme with an underground power plant.

The underground power plant was the first

station in the north India and wascommissioned in the year 1975. The power

station draws water from Ichari dam located

on the river Tons, one of the major tributary

of river Yamuna.

The Chibro power station is a unique

engineering marvel in the country and wasthe first experience in carrying out

tunneling in the Himalayan Thrust Zones,

which is a challenge due to varied rock structure and strength and throws up unexpected

challenges in the tunneling effort. The water from Ichari dam is fed into the power stationthrough a 6.2 km long Head Race Tunnel (HRT) and the power plant comprising 4 units of 60

MW each with Francis turbines of 84,000 HP output is housed in a rock cavern with the major

challenge of maintaining fresh air and safety measures due to constraint in space. The PowerStation's Design Energy is 750 MU with a design head of 110 m.

The power plant has shown significant improvements since 2000 and the generation has gone upin spite of restriction imposed by Irrigation Department on the discharge in the tunnel and low

hydrology in the year 2004-05.

There has been a restriction imposed by

the Irrigation Department in limiting thedischarge in the HRT to 200 Cumecs asagainst the earlier capacity of 225

Cumecs. The plants downtime has

reduced and the availability has

improved significantly.

The increase in the efficiency and

availability has been possible due to thenumber of maintenance and safety

measures under taken which were

pending since long time. The APDP alsoprovided funds for the modernization in

a limited way mainly for installation of

(i) Static Excitation System

(ii) Microprocessor based governors and

(iii) SF6 Breakers

(iv) Major overhauling of Unit-2

(v) Modernization of Communication System

(vi) Tandem control System

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The major maintenance works undertaken in the plant that have been responsible for improved

performance are:-

i) Repairing of MIV.

ii) Monitoring of head loss.

iii) Reduction in the Break down losses.

UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs.

201.25 crore. The major M&U works proposed are:-

i) Modernization of Trash Rack cleaning equipment at Ichari dam.

ii) Modernisation of Communication, Test & Control, Protection & Instrumentation, fireProtection equipment, switchyard equipment, hydro mechanical equipment etc.

iii) Improvement in efficiencies of Turbines and generators.

iv) Replacement of old 220kV oil filled cables with new XLPE cables

v) Replacement of Stators' cores

vi) Fire fighting system

vii) Fresh Air Ventilation System

The M&U works would enhance the life of power plant by another 20-25 years besidesimprovement in efficiency of turbines and generators. The post M&U generation is expected to

increase to 850 MU and the works are expected to be completed by 2011-12.

Year 2004-05 2005-06 2006-07 2007-082008-09

(Upto Nov-08)

Generation(MU) 637.90 804.94 756.17 755.08 724.19

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Ramganga Power Plant (3X66 MW)

The power plant is a Reservoir based scheme on river Ramganga located near the famous Jim

Corbet Park in district Pauri Garwhal and utilizes the water dammed up for irrigation purpose.The project was commissioned in 1975. The water in the irrigation channel is regulated by UP

Irrigation and the generation is dependent on the rain in the catchment area as also on the

drawal of water for irrigation purpose in the command area of the canal. The surface power

house is located at the toe of the dam and houses 3 units of 66 MW each with Francis turbines of

92400 HP. The Power Station's Design Energy is 311 MU with a design head of 84.4 m.

The Ramganga power station is

a medium head scheme with a

design discharge of 285 cum.

The project has unique

challenges in operation due to

restriction imposed on the

release of water in the water

conductor system by UP

irrigation which is dependent on

the demand of water in the command area of the canal based on the irrigation requirement. The

generation in the plant takes place after the monsoon season when the demand for irrigation

picks up.

The generation from the plant is dependent on the drawal of water for irrigation in the

downstream of the plant and rainfall in the catchment area.

The repair of the downstream channel is with UP- Irrigation Department. UJVNL has taken up

the repairs of the under water parts of the plant.

UJVNL proposes to carry out the M&U of the power station which is estimated to cost Rs. 36.95

crore. The major M&U works proposed are:-

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i) Provision of Micro-processor based Governors, Static excitation equipments, On-line

monitoring equipment and Replacement of Generator winding with F Class insulation.

ii) Modernization of Communication, Test & Control, Protection & Instrumentation, switchyard

equipment, hydro mechanical equipment, etc.

iii) Repair of civil structures and MIV

iv) Improvement in the efficiency of Generators and Turbines

The generation after the completion of M&U works would increase to 315 MU and the works

are expected to be completed by 2010-11.

Year 2004-05 2005-06 2006-07 2007-082008-09

(Upto Nov-08)

Generation(MU) 211.88 333.29 154.17 279.06 118.66

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Chilla Power Plant (4x36MW)

The power station is a Run-of-River scheme on river Ganga located upstream of the holy cityof Hardwar and was commissioned in 1980-1981.There are 4 Kaplan vertical shaft turbines,

Maximum operating head 32.5m Annual generation of the present design is about 725 MU

which may increase to about 1076 MU due to the enhanced hydrological regulation in upper

basins owing to commissioning of Tehri Project as well as upgrading works per current

modern practice. For these reasons the time is being considered appropriate to undertake

upgrading works so as to ensure the secure and reliable operation of the power station for

the next 20-25 years.


250.00 crore. The objective of the M&U program is to rehabilitate and upgrade the project

to ensure dependable future generation and increase the station output to the highesteconomic level, keeping in view the following:

i) Rehabilitate and modernize the Chilla power station.

ii) Increase the Plant output, preferably by increasing the unit discharge and output.

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iii) Provide hydraulic equipment that will be more resistant against erosion.

iv) Provide new turbine runner with an improved cavitations behavior.

v) Provide automatic trash rack cleaning machine.

The generation after the completion of M&U works would increase to 1076 MU and the

works are expected to be completed by 2011-12.

Year 2004-05 2005-06 2006-07 2007-082008-09

(Upto Nov-08)Generation(MU) 745.78 659.23 740.51 825.97 563.62

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Khodri Power Plant (4x30MW)

The Power Station is located on the downstream of the Chibro Power station and was

commissioned in the year 1984. Thepower station draws water through

a 6 km long and 7.5 diameter

tunnel directly from the collection

gallery of the Chibro power station.

The surface Power House

comprising 4 units of 30 MW each

with Francis turbines of 43,600 HP

output is located on the banks of

Yamuna and the outlet of the water

from the power station is in river Yamuna upstream of the Dakpathar Barrage. The Power

Station's Design Energy is 345 MU with a design head of 57.9 m.

The operation of Chibro power station and the Khodri power station is another engineering

marvel. The tandem control scheme between Chibro and Khodri Power Stations is in operation

since January, 1984 and is the first of its kind in the country which optimizes the utilization of

water for generation besides maintaining the safety of both the plants in case of outages.

The plants downtime has reduced and the availability has improved significantly. The

improvements have been possible due to the number of maintenance and safety measures under

taken which were pending since a long time. The APDP also provided funds for the

modernization in a limited way mainly for installation of

(i) Static Excitation System

(ii) Dry Type Auxiliary Transformers and

(iii) SF6 Breakers .

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The major maintenance works undertaken in the plant that has been responsible for improved

performance are:-

i) Repair of underwater parts.

ii) Epoxy Textolite wedges and packers were provided in the stator punching.

iii) Replacement of old governors with Micro-processor based Governors


120.00 crore. The major M&U works proposed are:-

i) Provision of On-line monitoring equipment.

ii) Digital display of parameters in control room.

iii) Modernization of Communication, Test & Control, Protection, Instrumentation and fire

protection of generators

iv) Improvement in the efficiency of generators and Turbines.

v) Fire fighting system

The M&U works besides enhancing the life of plant by another 25 years would also increase the

generation to 400 MU. The works are expected to be completed by 2011-12.

Year 2004-05 2005-06 2006-07 2007-082008-09

(Upto Nov-08)

Generation(MU) 305.14 378.82 356.18 354.66 325.21

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Maneri Bhali Stage-II (4x76 MW)

Maneri Bhali Hydroelectric Project Stage-II envisaged the utilization of the 285 m drop

available in river Bhagirathi between the tail waters of Tiloth Power Station (Maneri BhaliStage-I Project) and the head waters of Tehri Dam. The diversion structure is situated near the

township of Uttarkashi at about 152 km from Rishikesh, the nearest railhead, and is designed to

divert 142 cumecs of water into a head race tunnel of diameter 6.0 m and length 16 km to

generate 1566 Million Units of electricity annually through a power house of 4x76 MW at

Dharasu. This project has been commissioned in 2008 & is the second power project of UJVNL

on river Bhagirathi.

River Bhagirathi a major tributary to River Ganga originates from Gangotri in the glacial

Himalayas and meets river Alaknanda at Deoprayag to form Ganga which ultimately meets the

ocean in the Bay of Bengal.

SOME RECORDS IN THE NAME OF MB-II:

Largest unit and plant capacity (4X76 MW) in UJVNL.

Highest head (285 m gross) amongst the large power stations in UJVNL.

Longest water conductor system (16 km. dia 6.0 m HRT) and highest surge tank (172m)

in UJVNL.

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Sedimentation chamber designed to allow smallest size of silt particle (below 150

microns) in to the water conductor system.

HVOF coating on turbine underwater parts being provided for preventing erosion, for the

first time in the region.

First power station in UJVNL to use single-phase generator transformer.

First power station to use cyclonic strainers in cooling water system.

First power station to use Nitrogen based fire protection system for main transformers in

the region to use this system.

Year 2007-082008-09

(Upto Nov-08)

Generation(MU) 77.02 853.99

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LITERATURE REVIEW

Introduction

With the boat of success steaming ahead in the global markets, India has already become the

most privileged destination for Outsourcing and capital Management. The word which one

would simply lisp in the beginning of this century has become the most pronounced and sought

after term.

Generating revenues, fostering employments, elevating the living standards, an eternal inventory

of opportunities simply showcase a phenomenon which is no less than the renaissance for our

Indian markets. Many researchers have talked about Capital Management in their works,

highlighted its capability as money making sector, showcased its doom of high employee

turnover, sketched out its strengths, weaknesses, opportunities and threats, and also chalked out

its dynamics of HR.

Other researchers have extensively worked on various perceived attitudes of employees like their

satisfaction, motivation, its influence on their tenure, their loyalty, commitment etc. This chapter

unfolds all the relevant literature about the capital Management in Uttarakhnad Jal Vidyut

theories and research works of employee motivation and satisfaction, and collaborates thefindings to tackle the problem of attrition in this sector.

We live in an age of outsourcing, clearly designates that outsourcing has now become an

acknowledged, accepted and established business strategy [38]. One of the most familiar forms

of outsourcing is capital ,. Budget , in Uttarakhand Jal Vidyut Nigam ltd. i.e., transferring the

operational ownership of one or more of the firms business processes to an external supplier

that, in turn, administers the processes according to some predefined metrics is working capital

management or Outsourcing thus refers to the rearrangement of entire business functions to

some other service providers, primarily in low cost locations. The service provider may be either

self-owned or a third party.

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Some of the general services provided by the Uttarakhand Jal Vidyut Nigam ltd. Capital

Management , Cash flow Analysis, Reconciliation, Data Entry, Payroll Processing, QuickBooks

Accounting, Financial Statement Preparation and Accounting Services. Some of the web based

services include live online sales and order entry, E-commerce transaction support, Live online

enquiry handling, Web Design/Development. Here it is vital to note that capital management

may comprise both IT management and business operations. Business operations include

relocating or transferring functions such as payroll, accounting, billing or even real estate

management to a third party. Invariably all these business processes depend on IT but they are

unlike hard-core IT operations such as data center activities or network administration. An

imperative facet of business process outsourcing is its capacity to free corporate executives from

some of their day-to-day process management responsibilities and duties. Capital Management

involves business process management and outsourcing. Business process management utilizes

technology aimed at revamping the process, trimming down unnecessary steps, and eliminating

redundancies. On the other hand outsourcing uses proficiency and resources of dedicated

external service providers to execute many of these fundamental yet non-core activities. carries

out both the functions at the same time, thereby speeding implementation and ascertaining that

the intended benefits really hit the bottom line.

CHAPTER-III

RESEARCH

METHODOLOGY

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RESEARCH METHODOLOGY

When we talk of Research Methodology, we not only talk of the research methods but also

consider the logic behind the methods we use in the context of our research study and explain

why we are using a particular method or technique and why we are not using so that research

results are capable of being evaluated either by research himself or by others.

As the title of the project suggests the project is about the study of the working capital

management in the company. So my objective is that to know that how the working capital

should be maintained in the company & which method is used in this.

SAMPLE SIZE

The sample size refers to the no. of employees selected from the company to constitute a sample.

The sample size used for study includes two companies.

METHOD OF SAMPLING

The process employed for the sample was Cluster Sampling.

Sample Size: 2

Method of Sampling: Cluster

Area of work: Working capital management

Method of Data collection: Secondary

Tools: Annual report, Balance sheet, Internal sources.

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SOURCES OF DATA COLLECTION

SECONDARY DATA

Secondary data are those which have already been collected by someone else and have already

been passed through the statistical process.

Acc. to Dessel-Data collected by other persons

All the data has been collected from internal source that includes:-

a) Magazines

b) Books

c) Websites

d) Reports

e) Files

f) Staff

DATA COLLECTION METHOD

The data was collected by me from both the sources for my training project report. In case of

secondary ways of data collection of magazines and books of UJVNL were used.

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WORKING CAPITAL

Working capital in short may be said as the capital required in meeting the short tem needs . The

requirement of working capital differs from firm to firm. The firm may require large amount of

working capital or may be less, it depends on the kind of work done by the particular

organization.

CLASSIFICATION OR KINDS OF WORKING CAPITAL

Kinds of working capital

On the basis

of conceptOn the basis

of time

Gross

working

capital

Net

working

capital

Permanent

or fixed

working

capital

Temporary

or variable

working

capital

Regular working

capital

Reserve

working capital

Seasonal

working capital

Special

working capital

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GROSS WORKING CAPITAL: Total current assets

1. Gross working capital: - Gross working capital refers to the firms investment in

current assets. Current assets are the assets which can be converted into cash within an

accounting year and include cash, short term securities, debtors, (account receivable or

book debts) bills receivable and stock (inventory).

NET WORKING CAPITAL: Change in current assets and current liabilities

Thus

Working capital= current assets- current liabilities

Net working capital: - Net working capital refers to the difference between current

assets and current liabilities. Current liabilities are those claims of outsider which are

expected to mature for payment within an accounting year and include creditors (account

payable), bills payable, and outstanding expenses. Net working capital can be positive. Or

negative. A positive net working capital will arise when current assets exceed current

liabilities. A negative net working capital occurs when current liabilities s are in excess of

current assets.

The two concepts of working capital gross and net-are not exclusive rather, they have equal

significance from the management viewpoint.

Permanent or fixed working capital: It is the minimum amount which is required to ensure

effective utilization of fixed facilities and maintaining the circulation of current assets. For

example every firm has to maintain a minimum level of raw material, work-in-progress, finished

goods and cash balance. This minimum level of current asset is called permanent or fixed

working capital as this part of capital is permanently blocked in current asset.

Temporary or variable working capital: It is the amount of working capital which is required

to meet the seasonal demand and some exigencies. Variable working capital can be further be

classified as

Seasonal working capital: the capital required to meet the seasonal needs of the

enterprises is called as seasonal working capital.

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Special working capital: That part of working capital which is required to meet special

exigencies such as launching of extensive marketing campaigns for conducting research

etc.

OPERATING CYCLE OF WORKING CAPITAL

Sufficient working capital is necessary to sustain sales activity. Technically this is

referred to as a operating/ cash cycle. It can be said to be at the heart of the need of

working capital.

Cash/operating cycle is the length of time necessary to complete following

event.

Convert cash into raw material.

Raw material into goods in process.

Goods in process into finished goods.

Finished goods into debtors through credit sales, and debtor into cash.

The cycle is a continuous process

47

CASH

FINISHED

GOODS

DEBTORS

RAW

MATERIAL

WORK INPROGRESS

SALES


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OPERATING CYCLE

The Working Capital cycle or Cash Conversion cycle as it is also called is usually expressed in

terms of the number of days. This figure is the average time that it takes to turn investment in

books into cash and profit. Payback expresses the number of days required to recoup the original

investment on a single title. In the organizations Balance Sheet there will be the costs of paper,

titles still under development, and author advances of books already and not yet published. In

addition there will be the cost of stocks of unsold books, Accounts Receivable, and Accounts

Payable.

Determinants of working capital

The requirements of working capital generally vary from industry to industry, concern to

concern and time to time. Comparing the production cycle of UJVNL with any of the FMCG

Company we will notice that, UJVNL takes considerably longer period to manufacture a

turbine while in FMCG companies like HLL or P&G takes few minutes to manufacture their

product. Working capital in these companies can be even negative as they take credit from

suppliers and sell their products on cash. So current liabilities are higher due to which figure

of working capital can be negative. The various factor which influence the amount ofworking capital required by a business enterprises, may be grouped under two heads.

1) Internal factor: - The factor which are within the control and competence of

management. These may include the risk taking attitude of management, turn over of

receivable and inventories terms of purchase and sale s and credit rating etc.

2) External factor: - these may include the nature of business, volume of production and

sales and business cycle.

PERMANENT AND TEMPORARY WORKING CAPITAL

The operating cycle thus crates the need for current assets (working capital).however this need

does not come to an end after the cycle is completed. It continues to exist. Thus the distinction

betweenpermanentand temporary working capital should be known.

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Business keeps on going even after the realization of cash from customers, which creates the

need for regular supply of working capital. However the magnitude of Working capital required

is not constant, but fluctuating. To carry on business, a certain minimum level of Working capital

is necessary on a continuous and uninterrupted basis. For all practical purpose, this requirement

has to be met permanently as with other fixed assets. This requirement is referred to as

Permanent or fixed Working capital.

Any amount over or above the permanent level of Working capital is temporary, fluctuating or

variable Working capital. This portion of the required Working capital is needed to meet

fluctuation in demand consequent upon changes in production and sales as a result of seasonal

changes. The basic distinction between these two is:

0

5

10

15

20

25

30

Area 2

5

PERMANENT WO RKING CAPITAAL

TEMPORARY WORKING

CAPITAL

FINANCING OF WORKING CAPITAL

The various sources for the financing of working capital are as follows:

Sources of Working capital

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Permanent or fixed Temporary or variable

1. Shares

2. Debentures

3. Public deposits

4. Ploughing back of profits

5. Loans from Financial institutions.

CALCULATION OF WORKING CAPITAL

Working capital is the excess of current assets over current liabilities. Information regarding

current assets and current liabilities is available from the balance sheet. Working capital should

be sufficient to meet routine requirement of the business.

The two concepts of working capital are current assets and current liabilities. They have a

bearing on the cash operating cycle. In order to calculate the working capital the working capital

needs, what is required is the holding period of various types of inventories, the credit collection

period and credit payment period. Working capital also depends on the budgeted level of activity

in terms of production/sales. The calculation of working capital is based on the assumption that

the production/sales is carried on evenly throughout the year and all costs accrue similarly. As

the working capital requirements are related to the cost excluding and not to the sale price.

Working capital is computed with reference to cash cost. The cash cost approach is

comprehensive and superior to the operating cycle approach based on holding period of debtors

and inventories and payment of creditors.

The computation of working capital can be summarized as follows:(I) Estimation of current asset :

a) Minimum desired cash and bank balances

b) Inventories

Raw material

Work-in-progress

50

1. Commercial banks

2. Indigenous bankers

3. Trade creditors

4. Installment credit

5. Advances

6. Accounts Receivables-

Credit/Factoring

7. Accrued expenses

8. Commercial papers


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Finished goods

c) Debtors*

Total current assets

(II) Estimation of current liabilities :

a) Creditors**

b) Wages

c) Overheads

Total current liabilities

(III) Net working capital (I-II)

Add: margin for contingency

(IV) Net working capital required

* If payment is received in advance, the item would be listed in current liabilities.

** If advance payment is to be made to creditors, the item would appear under current

asset. The same would be treated for advance payment of wages and overheads.

IMPORTANCE OR ADVANTAGES OF WORKING CAPITAL

Working capital is the blood and nerve centre of a business. Just as circulation of blood is

essential in the human body for maintaining life, working capital is very essential to maintain the

smooth running of a business. No business can run successfully without an adequate amount of

working capital. The main advantages of maintaining adequate amount of working capital are as

follows:

Solvency of the business.

Goodwill

Easy loans

Cash discounts

Regular supply of raw materials

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Regular payment of salaries, wages and other day-to-day commitments.

Exploitation of favorable market conditions.

Ability to face crisis

Quick and regular return on investments

High morale.

WORKING CAPITAL MANAGEMENT

Working Capital is the money used to make goods and attract sales. The less Working Capital

used to attract sales, the higher is likely to be the return on investment. Working Capital

management is about the commercial and financial aspects of Inventory, credit, purchasing,

marketing, and royalty and investment policy. The higher the profit margin, the lower is likely to

be the level of Working Capital tied up in creating and selling titles. The faster that we create and

sell the books the higher is likely to be the return on investment. Thus when we have been using

the word investment in the chapter on pricing, we have been discussing Working Capital.

AFFECT OF BUSINESS TRANSACTIONS ON WORKING CAPITAL

In preparing a statement of changes in financial position, on working capital basis, it is convient

to classify business transactions into three categories:

1. Transactions Affecting only Current Asset or Current liabilities Accounts: These

transactions produce changes in working capital accounts but do not change the account of

working capitals. For example, the purchase of merchandise increases inventory and accounts

payable but has no effect on working capital; it may therefore be ignored in preparing the

statement of changes in financial positions. Similarly, paying accounts payable affects cash, so

this transaction would be reflected in cash basis statement of changes in financial position.

However, the transaction has no effect on working capital since a current asset (cash) and a

current liability (accounts payable) decrease by the same amount. Hence, the transaction would

not be reflected as a source or use in a working capital basis statement of changes in financial

position. Other transactions like collection of receivables, short-term borrowing, purchase of

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short-term government securities also fall in this category of transactions. Thus, when funds are

defined as working capital, there is no need to show the details of the more or less continous

movement of resources between current liabilities and current assets which results from the

manufacture and sale of goods and the collection of receivables from customers. Indeed, the

focus is on the usually more significant flows affecting non-current assets (i.e. long term

investments) and permanent capital, the name given to the sum of long-term liabilities and

owners equity.

Thus the funds statement, i.e. Statement of Chances in Financial Position based on changes in

working capital position, is a better and useful tool for highlighting the changes that have taken

place in the financial operations between two balance sheet dates.

2. Transactions Affecting Current Asset or Current Liability Account and a Non-Working

Capital (Non-current) Account: These transactions bring about either an increase or a decrease

in the amount of working capital. The issue of long-term bonds, for example, increases current

assets and increases loan on bonds, a non-working capital account; therefore the issue of bonds

is a source of working capital. Similarly when the bonds approach maturity they are transferred

to the current liability classification in the balance sheet. This causes a reduction (a use) of

working capital. If changes in non-working capital accounts are analyzed, these events are

brought to light, and their effect on working capital will be reported in the statement of changes

in financial position.3. Transactions affecting only Non-current Accounts: These transactions have no direct effect

on the amount of working capital. The entry to record depreciation is an example of such a

transaction. Other transaction in this category, such as issue of share capital in exchange for plant

assets, are called exchanged transactions involving only non-current accounts and are viewed as

both a source and a use of working capital, but do not change the amount of working capital.

Alternatively, such exchange transactions may not be considered in preparing a statement of

changes in financial position on working capital basis.

WORKING CAPITAL ANALYSIS OR MEASURING THE WORKING CAPITAL

The working capital is a means to run the business smooth and profitably, and not an end. Thus,

concept of working capital has its own importance in a going concern. A going concern, usually,

has a positive balance of working capital i.e., the excess of current assets over current liabilities,

but sometimes the uses of working capital may be more than the sources resulting into a negative

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value of working capital. This negative balance is generally offset soon by gains in the following

periods. A study of changes in the uses and sources of working capital is necessary to evaluate

the efficiency with which the working capital is employed in the business. This involves the need

of working capital analysis.

The analysis of working capital can be conducted through a number of devices, such as:

1. Ratio analysis

2. Funds flow analysis

3. Budgeting

Ratio Analysis: A ratio is a simple arithmetical expression of the relationship of one number to

another. The technique of ratio analysis can be employed for measuring shot-term liquidity or

working capital position of the firm. The following ratios can be calculated for this purpose:

Current ratio

Acid test ratio

Absolute liquid ratio or cash position ratio

Inventory turnover ratio

Receivables turnover ratio

Payables turnover ratio

Working capital turnover ratio

Working capital leverages

Ratio of current liabilities to tangible net worth

Asset Usage

The assessment of asset usage is important as it helps us to understand the overall level of

efficiency at which a business is performing.

The basic equations for this section are:

Total Asset Turnover =Turnover

Total Assets

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Stock Turnover =Average Stocks

Credit Sales/365

Debtors Turnover =Average Debtors

Credit Sales/365

Creditors Turnover =Average Creditors

Credit Sales/365

The assessment of asset usage is important as it helps us to understand the overall level of

efficiency at which a business is performing.

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DIFFERENCE BETWEEN CASH FLOW AND FUND FLOW STATEMENT

BASIS OF

DIFFERENCE

CASH FLOW STATEMENT FUNDS FLOW STATEMENT

MEANING It is a statement of changes in

the financial position of business

due to the inflow and outflow of

cash.

It is a statement of changes in the

financial position of business due to

the inflow and outflow of funds.

PLANNING

PERIOD

Statement of cash flow is

required for short range

planning.

Funds flow statement is required for

long range planning.

RELIABILTY Plans for more immediate future

can rely upon information

supplied by cash flow statement.

Plans for more immediate future

cannot rely upon information

supplied by funds flow statement.

TREATMENT OF

CURRENT ASSETS

It does not treat all current assets

as cash.

It treats all current assets at par with

funds, although debts are collected

within months and stock is sold

within 6 months.

TREATMENT OF

CURRENT

LIABILITIES

Increase in bank overdraft and

increase in outstanding expenses

are treated separately.

Increase in outstanding expenses is

treated as increase in overdraft.

CASH/FUNDS

FROM OPERATION

While making cash flow

statement cash from operation is

calculated.

While making funds flow statement

funds from operation is calculated.

BASIS Prepared on cash basis. Prepared on accrual basis.

Working capital budget:

A budget is a financial and/or quantitative expression of business plans and policies to be

pursued in the future period of time. Working capital budget, as a part of total budgeting process

of a business, is prepared estimating future long-term and short-term working capital needs and

the sources to finance them, and then comparing the budgeted figures with the actual performance

for calculating variances, if any, so that corrective actions may be taken in the future. The objective of

working capital budget is to ensure the availability of funds as and when needed, and to ensure effective

utilization of these resources. The successful implementation of working capital budget involves the

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preparing of separate budgets for various elements of working capital, such as cash, inventories and

receivables, etc.

Working Capital Management (Debt vs. Equity)

Working capital is the money you will need to keep your business going until you can cover your

operating costs out of revenue. As a small business owner, it will be wise to have enough

working capital on hand to cover items such as the following during the first few months that

you are in business:

Replacing inventory and raw materials: you will need to fund the purchase of inventory

out of working capital until you start to see cash from sales, which could take months.

Paying employees: even the most loyal worker wants to get paid on time, regardless of

how much or how little cash your firm earns during its first months.

Paying yourself: unless you have made other arrangements, you will need to withdraw

some money to support yourself.

Debt payments: if you have borrowed money to get started, you probably have to begin

repaying it right away. Missing your first loan payments will not do your credit rating any

good.

An emergency fund: you need some cash on hand to cover unforeseen shortfalls that may

result from any number of factors such as delays in getting your space ready, a slowpaying client, or slow business.

Debt vs. Equity Assessments

It is essential that you assess the relative merits of each form of funding for your specific

business.

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DEBT EQUITY

Take on Creditors Take on Partners

Low Expected Return High Expected Return

Smaller Funding Amounts Larger Funding Amount

Periodic Payments No Short-Term Payments

Maturity Date Open-Ended Exit Date

More Restrictions Less Restrictions

ADVANTAGES OF USING DEBT

DISADVANTAGES OF USING DEBT

Debt is not an ownership interest in the

business. Creditors generally do not have

voting power.

Unpaid debt is a liability of the business. If it is

not paid then the creditors can legally claim the

assets of the firm. This action can result in

liquidation or reorganization.

The payment of interest on debt is considered a

cost of doing business and is fully tax

deductible.

Your business must earn at least enough money

to cover for the interest expense, otherwise you

may not be able to pay you interest which may

lead to default (financial distress).

The creditors will only be concerned that the

business will be able to generate cash flow to

cover interest expenses.

ADVANTAGES OF USING EQUITY DISADVANTAGES OF USING EQUITY

Unlike obligation of debt, your business will not

have any contractual obligation to pay for

equity dividend.

Equity is an ownership of the business. So an

equity partner will have a direct say about your

business.

Equity financing also allows your business to

obtain funds without incurring debt, or without

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having to repay a specific amount of money at a

particular time.

Making more efficient use of Working Capital

The table below lists items, which influence Working Capital levels favorably and adversely

Items that reduce Working Capital

levels for publishers

Items that increase Working

Capital levels for publishers

- Increased profit margins - Lower profit margins

- Customers who pay promptly

- Advance payments by customers

- Long print runs except where all the

books are required on publication e.g.School and university textbooks

- Inventory which is sold and paid for

quickly by customers after publication

- Lower Inventory levels by reducing

print quantities and working with

printers who will deliver quickly and

produce low print runs economically

- Slow authors who deliver late and

whose manuscripts require substantial

editing

- Holding paper stock unless market

conditions demand and the savings

are large

- Slow schedules for the development

of new titles

- Successful promotion that speeds up

the rate of sale

- Making advance payments to

printers

- Seasonal sales except where the

publishers prints only for the season

- Licensing (but problematic in young

economies)

- Paying suppliers on completion with

credit

- Authors who deliver manuscripts on

disk ready for computer make-up

- Incentives to staff , authors , suppliers,

customers , sales staff and agents to

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speed up the rate of sale and of

developing new books, delivering

manuscripts on schedule

Measures to Improve Working capital management

The essence of effective Working capital management is proper cash flow forecasting. This

should take into account the impact of unforeseen events, market cycles, loss of a prime

customer and actions by competitors. The effect of unforeseen demands of Working capital

should be factored in.

It pays to have contingency plans to tide over unexpected events. While market-leaders can

manage uncertainty better, even other companies must have risk-management procedures. These

must be based on objective and realistic view of the role of Working capital

Addressing the issue of Working capital on a corporate-wide basis has certain advantages. Cash

generated at one location can well be utilized at another. For this to happen, information access,

efficient banking channels, good linkages between production and billing, internal systems to

move cash and good treasury practices should be in place.

An innovative approach, combining operational and financial skills and an all-encompassing

view of the companys operations will help in identifying and implementing strategies that

generate short-term cash. This can be achieved by having the right set of executives who are

responsible for setting targets and performance levels. They are then held accountable for

delivering, encouraged to be enterprising and to act as change agents.

Effective dispute management procedures in relation to customers will go along way in freeing

up cash otherwise locked in due to disputes. It will also improve customer service and free up

time for legitimate activities like sales, order entry and cash collection. Overall, efficiency will

increase due to reduced operating costs.

Collaborating with your customers instead of being focused only on own operations will also

yield good results. If feasible, helping them to plan their inventory requirements efficiently to

match your production with their consumption will help reduce inventory levels. This can be

done with suppliers also.

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Working capital management is an important yardstick to measure a company operational

and financial efficiency. This aspect must form part of the companys strategic and

operational thinking. Efforts should constantly be made to improve the Working capital

position. This will yield greater efficiencies and improve customer satisfaction

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Structure of Working Capital of UJVNL

The analysis of structure of working capital enables management of an enterprise to know as

to how the working capital is being administered. It also furnishes valuable information to

the short term creditors and others regarding the strength of working capital of the

undertaking.

The structure of working capital can also be analyzed by measuring the change the

proportion of cash, receivable, inventory and other items to the total current assets in course

of time.

This analysis points out the components which have over grown and where unduly high fund

has been tied up. This analysis may be carried further to each component of current assets to

study the changes in its sub-divisions.

Investment in working capital is generally considered as dead investment as it, does not

contribute towards companys profit generating capacity but are also required, so it should be

done in such a way that it does not create any side-effects like blockage of money. In

comparison to working capital, investments should be more in fixed assets which are

productive and contribute towards firms profit.

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WORKING CAPITAL PATTERN OF UJVNL

(In 000)

CURRENT ASSET 2006-07 2005-06 2004-05

Inventory 2149406 1847956 1341899

Sundry debtors 286070 208516 443147

Cash & bank

balance 486460 353395 163062

Other C.A. 1709 5558 2185

Loans & advances 890016 940652 631468

TOTAL C.A. 3813661 3356077 2581761

CURRENT

LIABILITIES

Current liabilities 2381169 2247006 2059717

Provision 849097 783313 973431

TOTAL 3230266 3030319 3033148

WORKING CAPITAL 583395 325758 (451387)

TURNOVER 14525.49 10336.4

W.C. CONVERSION

PERIOD (in days) 151 173

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(Working Capital = Total current assets Total current liabilities)

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Working capital pattern of BIL of last 2

years

-451387

325758

583395

-600000

-400000

-200000

0

200000

400000

600000

800000

2004-05 2005-06 2006-07

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SHAREHOLDING PATTERN

Category No. of shares held %age of share

holding

2004-05 2005-06 2004-05 2005-06

A. Promoters Holding1. Promoters

- Indian 750 750 0.00 0.00

- Foreign 1217321

9

1217321

9

50.96 50.96

2. Persons acting in concert - - - -

Sub Total 1217396

9

1217396

9

50.96 50.96

B. Non-Promoters Holding 1171619

4

1171619

4

49.04 49.04

3. Institutional Investor

a. Mutual Funds and UTI 861938 653796 3.61 2.74

b. Banks, Financial institutions, insurance

companies (Central/State Govt. Institutions/

Non-Govt. Institutions)

4137370 3263233 17.32 13.66

c. Foreign Institutional Investors (FIIs) 1402489 2977656 5.87 12.46

Sub Total 6401797 6894685 26.80 28.86

4. Others

a. Private Corporate bodies 338934 235253 1.42 0.98b. Indian Public 4851195 4467818 20.30 18.70

c. NRIs/OCBs 120388 114148 0.50 0.48

d. Any Other 3880 4290 0.02 0.02

Sub Total 5314397 4821509 22.24 20.18

GRAND TOTAL 2389016

3

2389016

3

100.00 100.00

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PIE CHART SHOWING SHAREHOLDING PATTERN OF

BILFOR THE YEAR 2005-06

0

50.96

2.7413.66

12.46

0.98

18.7

0.48 0.02

Indian Promoters Foreign Promoters

Mutual funds & UTI Banks

FIIs Private corporate bodies

Indian Public NRIs/OCBs

Other

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PIE CHART SHOWING SHARE HOLDING PATTERN OF BIL

FOR THE YEAR 2004-05

0

50.96

3.6117.32

5.87

20.3

0.5 0.02

1.42

Indian Promoters Foreign Promoters

Mutual funds & UTI Banks

FIIs Private corporate bodies

Indian Public NRIs/OCBs

Other

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WORKING CAPITAL FOR THE YEAR 2005-06

G/L PARTICULARS AMOUNT TOTAL

CURRENT ASSETS

CLOSING STOCK

20500

1 INVENTORY FO 2386279.87

20500

2 INVENTORY HSD 1319357.44

20500

3 INVENTORY LDO 775863.92

20500

4 INVENTORY ENGG.STR 3090080.1620600

0 INVENTORY INGREDIENT 29191221.91

20600

1 INVENTORY PACKING 20387586.5

20600

2 INVENTORY CBBS,CLSG 2245570.54

20700

3 INVENTORY FG BISCUITS 5614899.25

20701

3 INVENTORY WIP- GOOT 151412.2520701

9 CLOSING STOCK INV FG 552790.21

A/C RECEIVABLE

21000

0 ACCOUNTS RECEIVABLE DOMESTIC 12048.89

CASH IN HAND 21100

2 CASH IN HAND-DEL BR 0

21104

3 CASH IN HAND-UA 34476

CASH AT BANK 21305

2

CITI BANK DELHI MAIN

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OF UJVNL INDUSTRIES LTD. Pantnagar (Uttarakhand)

G/L PARTICULARS AMOUNT TOTAL

CURRENT ASSETS

CLOSING STOCK205001 INVENTORY FO 1250901.87

205002 INVENTORY HSD 1737552.76

205003 INVENTORY LDO 1322501.12205004 INVENTORY ENGG.STR 6571934.32

206000 INVENTORY INGREDIENT 84432770.4

206001 INVENTORY PACKING 16249728.09206002 INVENTORY CBBS,CLSG 2444207.44

207003 INVENTORY FG BISCUITS 19911752.57

207013 INVENTORY WIP- GOOT 132982.7

207019 CLOSING STOCK INV FG 166906.11

209000 LOOSE TOOLS 905051.8

A/C RECEIVABLE 210000 ACCOUNTS RECEIVABLE DOMESTIC 4896050.28

CASH IN HAND 211002 CASH IN HAND-DEL BR 0

211043 CASH IN HAND-UA 15917

PREPAID EXPENSES 220002 PREPAID EXPENSES MISC 14446.68

220003 PREPAID INSURANCE 59052220004 PREPAID LEASE RENTAL 0220006 PREPAID MEDICAL INSUR. 0

220009 PREPAID RATES & TAXES 0

220041 PREPAID GROUP INSUR 5515220039 ADVANCE STAFF TRAVEL DOM 54417

WIP

202000 CWIP 0

202001 AUC- D&M(CWIP) 5369271.68

TOTAL CURRENT ASSETS 145540958.8

CURRENT LIABILITIES

BILLS PAYABLE

111000 ACC PAYABLE DOMESTIC 45606390.3111001 ACC PAYABLE EXPORT 0

111002 ACC PAYABLE ONE VD 51391

111003 ACC PAYABLE STATUT 525202

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111004 ACC PAYABLE EMPL 2030111005 ACC PAYABLE SSI 135300

111007 ACC PAYABLE AW VENDOR 0

104143 DEPOSIT PAYABLE VENDR 275000104127 DEPOSIT PAYABLE CUST OTH 150000

104118 C.S.T PAYABLE 4154.89

104165 WORK CONT TAX PAYABLE 28377104201 APMC CLEARING A/C 0

104202 GR/IR-CLEARING-PRO 2721309.9

104203 FREIGHT CLEARING (MM) 12046697.98

ACCRUED & O/S EXPENSES

104016 ACC MISC EXPENSES 8076499.86104017 ACC ONWARD FREIGH 669362.71

104023 ACCR PRIMARY FREIGHT 26697238.71

104025 ACCR SALARIES & WAGES 614091104033 ACCR LOADING 81934

104220 ACCR TAX SERVICE 0104207 TDS CONTRACTOR S 194 C 517762104209 TDS RENT SEC 1941 21004

104210 TDS- PROF.FEES 194 J 729

104218 TCS CUST SCRAP SALE 6646.51

104244 VAT PAYABLE 86142.02104245 VAT INPUT CREDIT RM 0

104246 VAT INPUT CREDIT CG 0

104152 MISC RECOVERY 0

CREDITORS

104050 CO CONTR GPF LIA A/C 71111104053 CO CONTR ESI LIA A/C 33200

104154 RET. PAYABLE VENDOR 8426606.06

104064 EMPL CONTR ESIC 12256

104128 STALE CHJEQE /AC 70946.07104067 EMPL CONTR GPF 62697

104124 ENTRY TAX 102750.37104125 TDS INT DEP SEC 194 A 0

104126 AACO DEP PAYABLE CUSTM 0

PROVISIONS 110002 PROV FOR BONUS 9

Final Wcm With Revie of Literature

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