LOVELY PROFESSIONAL UNIVERSITY

DEPARTMENT OF MANAGEMENT

Report on Summer Training

[CASH MANGEMENT TECHNIQUES USED BY HAVELLS INDIA LTD.]

Submitted to HAVELLS INDIA LTD.

In partial fulfilment of the

Requirements for the award of Degree of

Master of Business Administration

Submitted by:

Gurmeet Singh

Regd No. 10905776

DEPARTMENT OF MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY,

PHAGWARA

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 PREFACE
Someone has rightly said that practical experience is far better and closer to the real world than
mere theoretical exposure. The practical experience helps the student to view the real business
world closely, which in turn widely influences his/her perceptions and understanding of the real
situation.
Finance constitutes the backbone of any business organisation. Every person has to manage
finance quite frequently during his entire life span. The research work entitled “Cash
Management Technique used by HAVELLS INDIA LTD.” aims to know cash management
by Havells. The present report is a part of the project that contains the work done by me during
the training period at Havells India Ltd.
True to the core, a properly and executed industrial training helps a lot in providing linkage
between the student and the industry. It develops the awareness of industrial approach to problem
solving based on a board understanding of the mode of operation of industrial organization. This
project has offered me an opportunity to put all my efforts and the theoretical knowledge to
practice and enhance my knowledge, and at the same time, given me practical experience in the
field of accounts. It is surely going to help me in my future projects too.
In the preparation of this report, I have made every effort to ensure that all steps involved in
development of this project are adequately covered and the report be completed in it. Any
suggestions for improvement, if rendered, will be gratefully accepted. I sincerely hope that this
project will prove pure knowledge imparting, through provoking and thus stimulating future
research work on these guideline.

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 ACKNOWLEDGEMENT

I owe a great many thanks to a great many people who helped and supported me during the
writing of this book.

My deepest thanks to Ms. Nitika Sehgal [Faculty of lovely school of management] the
Guide of the project for guiding and correcting various documents of mine with attention and
care. He has taken pain to go through the project and make necessary correction as and when
needed.

I express my thanks to the Mr. Sanjay Modi Snr. Dean of, [LOVELY PROFESSIONAL
UNIVERSITY & JALANDHAR], for extending his support.

My deep sense of gratitude to Mr. Sanjay Johri,[G.M in Finance, Company Secretary, Havells
India ltd. ], Mr. Anand kumar [Finance and Accounts, Havells India Ltd.], support and
guidance. Thanks and appreciation to the helpful people at [HAVELLS INDIA LTD.], for their
support.
I would also thank my Institution and my faculty members without whom this project
would have been a distant reality. I also extend my heartfelt thanks to my family and well
wishers.

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 TABLE OF CONTENT
PREFACE

ACKNOWLEGEMENT

CHAPER NO. CONTENT PAGE NO.

1 EXECUTIVE SUMMARY

2 OBJECTIVE OF STUDY

3 INTRODUCTION TO COMPANY

4 LITERATURE REVIEW

RESEARCH METHODOLOGY
5
LIMITATIONS OF THE PROJECT

6 ANALYSIS AND INTERPRETATION

7 FINDINGS AND RECOMMENDATIONS

BIBLIOGRAPHY

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 Abstract Summary
Finance constitutes the backbone of any business organisation. Every person has to manage
finance quite frequently during his entire life span. The research work entitled “Cash
Management Technique used by HAVELLS INDIA LTD.” aims to know cash management
by Havells. The present report is a part of the project that contains the work done by me during
the training period at Havells India Ltd.
Under the study main focus is to put light on the working of the company related to cash
management. In this report it has been studied that how company manages its cash by managing
its receivable and payables. In order to manage its receivables company uses to give cash
discount to its customers. In order to maintain the record of its receivables company is in contract
with IDBI bank. Bank also provides factoring service to the company by charging some amount
to the company. In order to maintain records of its receivables bank provides the facility of CMS
(Cash Management System).
In order to reduce the risk arising from the receivables company is incurring cost of collection
from debts. Company is paying large amount of money in order to maintain its cash. It has been
observed through cash flow statement that major flow of cash is from its operating activities and
company is investing its surplus cash for investment purpose which is beneficial for the
company’s growth. Company cash requirement and surplus cash is manage by the bank.

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 Objectives of Study

§ To Study Cash management of the company.

§ To study cash budgeting technique used by the company.

§ To study factors affecting cash budget of the company.

§ To study bank charges charged by the bank for cash management.

§ To study various services provided by bank to company for cash management.

§ To analyse and give suggestions for better management of cash.

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 CHAPTER 3:

INTRODUCTION

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 Company History
1958: Commenced trading operations in Delhi
1971: Bought HAVELLS Brand

1976: Set up the first manufacturing plant for Rewire able Switches and Changeover Switches at
Kirti Nagar, Delhi.

Havells in the year 1976.

1979: Set up a manufacturing plant for HBC Fuses at Badli, Delhi.

1980: Started manufacturing high quality Energy Meters at Tilak Nagar, Delhi.
1983: Acquired Towers and Transformers Ltd. and turned it into a profitably manufacturing
Energy Meters company in one year.
1987: Started manufacturing MCBs at Badli, Delhi in a Joint Venture with Geyer, Germany.
1990: Set up a manufacturing plant at Sahibabad, UP for Changeover Switches.
1993: Set up another manufacturing plant at Faridabad, Haryana for Control Gear Products.
1996: Acquired a manufacturing plant at Alwar, Rajasthan for Power Cables & Wires.
Entered into a Joint venture with Electrum, UK for manufacturing Dorman Smith MCCBs and
Crabtree Modular PlateSwitches.
1997: Acquired Electric Control & Switchboards at NOIDA for manufacturing customized
packages.
1998: Introduced high-end Ferraris Meters in Joint Venture with DZG, Germany.
2000: Acquired controlling stake in Duke Arnics Electronics (P) Limited engaged in
manufacturing of Electronic Meters-Single Phase, Three Phase, Multi Function, Tri-Vectors.
Acquired controlling interest in an industry major-Standard Electricals Ltd.

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2001: Acquired business of Havells Industries Ltd, MCCB of Crabtree India Limited and merged
ECS Limited in the company to consolidate its area of core competence.
2002: Standard Electrical Company becomes a 100% Subsidiary of the company attained the IEC
certification for Industrial switchgear and CSA certification for all manufacturing plants.
2003: Set up manufacturing plant at Baddi (H.P.) for manufacturing of Domestic Switchgear.
Set up a manufacturing plant for manufacturing of CFL at existing manufacturing plant in
Faridabad, Haryana.
2004: Set up a manufacturing plant for manufacturing of Ceiling Fans at Noida, UP. Set-up their
own marketing office in London through their wholly owned subsidiary company Havells U.K.
Ltd. In December 2004, placed 235 fully convertible debentures of Rs. 10 lakhs on M/s. Shine
Ltd., Mauritius and the debenture got converted in June, 2006 Attained CE certificate CFLs.
2005: Set up manufacturing plant in Haridwar, Uttaranchal for manufacturing Fans. Awarded the
KEMA certification by The Dutch Council for Accreditation, making QRG the only group to
attain this certification. Set up of R&D Centre in Noida H.O.

2006: Crabtree India merged with Havells India. Added CFL production unit in Haridwar
manufacturing plant. Expansion at Alwar manufacturing plant for increase of production
capacity. Expansion at Baddi manufacturing plant and set-up of an Export Oriented Unit.
2006: First Company to get the ISI Certification for complete range of CFLs.
Started mid-day meal program at Alwar, Rajasthan caters to 10,000 students from 77 schools.

2007: Set-up of Capacitor manufacturing plant in Noida, UP with the capacity of 6, 00,000 KVAr
per month.

Acquired the Lighting business of a Frankfurt based company "Sylvania", a global leader in
lighting business and now the company's turnover crosses US$ 1 Billion.

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 Company Profile

Havells India Ltd. is a billion-dollar-plus

organization, and is one of the largest & India's fastest
growing electrical and power distribution equipment
manufacturer with products ranging from Industrial &
Domestic Circuit Protection Switchgear, Cables &
Wires, Motors, Fans, Power Capacitors, CFL Lamps,
Luminaries for Domestic, Commercial & Industrial
applications, Modular Switches, then tire gamut of
household, commercial and industrial electrical.

Havells owns some of the prestigious global brands like Crabtree, Sylvania, Concord,
Luminance, Linolite , & SLI Lighting.

With 91 branches / representative offices and over 8000 professionals in over 50 countries across
the globe, the group has achieved rapid success in the past few years. Its 11 state-of-the-art
manufacturing plants in India located at Haridwar, Baddi, Noida, Sahibabad, Faridabad, Alwar,
Neemrana, and 8 state-of-the-art manufacturing plants located across Europe, Latin America &
Africa churn out globally acclaimed products. Havells is a name synonymous with excellence and
expertise in the electrical industry. Its 20000 strong global distribution network is prompt to
service customers.

The company has acquired a number of International certifications, like BASEC, CSA, KEMA,
CB, CE, ASTA, CPA, SEMKO, SIRIUM (Malaysia), SPRING (Singapore), TSE (Turkey), SNI
(Indonesia) and EDD (Bahrain) for various products. Today, Havells and its brands have emerged
as the preferred choice of electrical products for discerning individuals and industrial consumers
both in India and abroad.

In an attempt to transform itself from an industrial product company to a consumer products

company, Havells launched consumer electrical products such as CFLs, Fans, Modular Switches
& Luminaires. The company has been consistent in its brand promotion with sponsorship of

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Cricket events like T20 World Cup,
Cu India-Australia
Australia Series and IPL Season 1 and 2. The company
has also taken the initiative to reach directly to the consumers through "Havells Galaxy" – a one
stop shop for all electrical and lighting needs.

Social and environmental responsibility has been

been at the forefront of Havells operating philosophy
and as a result the company consistently contributes to socially responsible activities. For
instance, the company is providing mid-day
mid day meal in government schools in Alwar district,
covering 15000 students
ts per day. Besides this company has acquired land for constructing a
larger kitchen with all the modern facilities to serve freshly cooked food to 50000 students in the
area. Havells runs a mobile Medical Van, equipped with a trained doctor and necessary medicines
in the rural areas of Delhi & NCR for the very poor and needy villagers. We also set up free
medical check-up
up camps. In the past also, the company has generously contributed to the society
during various national calamities like the Bihar Flood, Tsunami and Kargil National Relief Fund
etc.

Founded 1958 in Delhi, India

Founder(s) Mr. Qimat Rai Gupta

Electrical equipments
Products
Power Distribution Equipments

Divisions Lighting Sector, Power Distribution Sector

Website Havells.com

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 Vision:
"To be a globally recognized corporation that provides best electrical & lighting solutions,
delivered by best-in-class people."

Mission:

To achieve our vision through fairness, business ethics, global reach, technological expertise,
building long term relationships with all our associates, customers, and partners.

Location: Branch offices / Zonal offices / Manufacturing plants

Location Products Manufactured

Products manufactured: Fans and CFLs
Haridwar, Uttaranchal

Baddi, Himanchal Pradesh Products manufactured: MCBs, CFLs and

Switches

Samepur Badli, Delhi Products manufactured: MCBs, ELCBs and

DBs

Tilak Nagar, Delhi

Products manufactured: Energy Meters

NOIDA, UP Product manufactured: Fans

· Alwar, Rajasthan Products manufactured: Cables & Wires

Faridabad, Haryana Products manufactured: CFLs and Industrial

Products.
Gurgaon, Haryana Luminaries and Lighting fixtures

Jalandhar Products manufactured: MCBs, ELCBs, DBs,

Wires and Industrial Switchgear

Gurgaon, Haryana Products manufactured: Modular Plate

Switches & Accessories

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 Products manufactured: Trajectory Meters,
· Sahibabad, UP Reference Standard Meters

Hyderabad, AP Products manufactured: Energy Meters

Certifications / Approvals
· ISO-9001: 2000 (all manufacturing units)
· KEMA KEUR
· CE
· S–mark
· CSA
· CB
· SEMKO
· SIRIUM (Malaysia)
· SPRING (Singapore)
· TSE (Turkey)
· SNI (Indonesia)
· EDD (Bahrain)

Major Clients of Havells India Ltd.

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 Company Management

Qmit Rai Gupta

(Chairman and managing director)

Anil Gupta Surjit Gupta Rajesh Gupta

(Joint managing director) (Director) (Director)

S.B Mathur Dr. Abid Hussian A P Gandhi

(Director) (Director) (Director)

Niten Malhan Maj.Gen. DN Khurana V.K Chopra

(Director) (Director) (Director)

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 Product Range
MCB

Features
• 10kA short circuit breaking capacity for ‘B’ and ‘C’ curve
• Low power consumption, thus cost effective & energy saving
o Suitable for DC application
• “Finger Safe” terminals - IP 20 degree of protection
• Dual termination facility
• 15 Plate Arc Chute for effective arc quenching
• Accessories - Auxiliary Switch - Shunt Trip

RCCB

Features
• Simple and robust operating mechanism.
• Rotary handle with on/off indication in 4P
• Dual termination for Bus Bar as well as cable
• Advance neutral
• Test button for regular inspection

Distribution Board
Features

• Aesthetically superior DBs to suit the style of your home decor

• Choice of multiple incomer MCB, Isolator, MCB + RCCB,
Changeover + RCCB, Isolator + RCCB
• When Per Phase Isolation DBs is in use, only that phase where the
Earth leakage faults exist gets isolated
• Complete range of DBs with detachable gland plates at the top and
Bottom with knockouts on the sides of DB to increase the flexibility
of cables / conduit entry from all directions

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 Digital MCCB
Features

• True RMS sensing - Accurate and close protection.

• High repeat accuracy - reliable protection.
• User friendly multiple adjustment option - flexibility
• Time delay on overload & short circuit faults.

F
• Built in adjustable overload / short circuit sensing.
• No external power required for basic functioning release.
• Built in operation-check function with Field Testing .

Motor Starter
Features

• Protection against overload & single phasing.

• For agricultural application with wide voltage band
• Ambient temperature compensated (-5oC to 55oC).
• Deep drawn / fabricated sheet steel enclosure duly phosphatised

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 Industry Overview and Competition

India is the fifth largest economy in the world and has the second largest GDP among emerging
economies. Owing to its large population, the potential consumer demand is almost unlimited and
consequently under appropriate conditions, strong growth performance can be expected. In fact,
the liberalization of the economy in 1991 has led to rapid growth. The electronics industry, in
particular, is emerging as one of the most important industry in the Indian market.

The electronics industry has recorded very high growth in subsequent years. By 1991, private
investments - both foreign and domestic - were encouraged. The easing of foreign investment
norms, allowance of 100 percent foreign equity, reduction in custom tariffs, and deli censing of
several consumer electronic products attracted remarkable amount of foreign collaboration and
investment. The domestic industry also responded favourably to the politic policies of the
government. The opening of the electronics field to private sector enabled entrepreneurs to
establish industries to meet hitherto suppressed demand.

The consumer electronics industry in India aims a 20% growth per annum to reach $160 billion
from the existing $ 22 billion (Rs 95,700 crore) in 2005. Electronic industry in India is fastest
growing industry. Demand for electronic goods is increasing at rapid rate.

Havells India Ltd holds 18% share in the Industry market.

Switchgear Segment: 22%

Building Products (Competitor's Position)

1. Havells.

2. Legrand.

3. Indo Asian.

4. Schneider.

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Industrial Products (Competitor’s Position)

1. L & T.

2. Siemens.

3. Schneider.

4. Havells.

Cables and Wire Segment: 18%

Cables Competitor’s Position
1. PolyCab

2. Havells

3. Golster

Wires Competitor’s Position

1. Finolex
2. Havells
3. Anchor

Electrical Consumer Durable Segment: 13%

1. CFLs:

i. Phillips.

ii. Havells.

iii. Osram.

iv. Surya Roshni

2. Fans:
i. Crompton

ii. Orient

iii. Usha

iv. Bajaj

v. Havells

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Lighting Fixtures:

1. Phillips

2. Bajaj

3. Crompton

4. Havells

Havells Market Share

Market share

18%

Havells
others

72%

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 CHAPTER 4:
Literature Review

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 Cash Management
Cash flow is the oxygen that brings your business to life. As surely as you cannot live
without air, a business will grind to a halt if starved for cash.

Cash Management is concerned with the management of collections and disbursement of cash,
determination of optimum level of cash and investment of surplus cash into securities. Cash
management includes management of cash inflow, cash outflow, estimation of cash requirement,
ascertaining cost of managing cash, techniques of managing cash.

Cash management also includes management of cash as well as cash equitant i.e. Bank accounts
etc. Cash management is done because all the transactions in the business in done in cash, so
there is need for estimation of cash in future for smooth running of the business. So cash
management is very important for every organization.

If at any time, because of a lack of cash, a corporation fails to pay an obligation when it is due,
the corporation is insolvent. Insolvency is the primary reason firms go bankrupt. Obviously, the
prospect of such dire consequence compels companies to manage their cash with care. Moreover,
efficient cash management means more than just preventing bankruptcy. It improves the
profitability and reduces the risk the firm is exposed to.

A successful business rests on sound recordkeeping practices and solid cash flow. Without good
records it is impossible to determine the financial condition or profitability of a business.
Similarly, in order to survive a small business must achieve a positive cash flow in the long term.
This Financial Guide provides the basic information the owner of a small business need to
establish good recordkeeping practices in your business and to minimize cash flow problems.

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 Objectives of Cash Management
n To make payment according to the payment schedule.

n To meet cash disbursement needs of the firm on a continuous & regular basis.

n To minimize funds in the form of cash balance which remains idle.

n To prevent bankruptcy

n Good relation with bank

n Good relation with trade creditors & suppliers.

n To lead strong credit rating

n To meet unexpected cash expenditure

n To maintain balance level

n To identify surplus cash

n To identifying the points of shortfalls & to plan & arrange adequate cash

n To improve the profitability of the firm

n To keeps the bank overdraft limit under control

n To strike a balance between liquidity & profitability

n To make instant cash payments & avail of the facilities of cash discounts.

n To take advantage of speculative opportunities

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 Importance of Cash Management

Cash management also includes management of cash as well as cash equitant i.e. Bank accounts
etc. Cash management is done because all the transactions in the business in done in cash, so
there is need for estimation of cash in future for smooth running of the business. So cash
management is very important for every organization. Following are the importance of managing
cash for the organization.

n It helps in maintaining adequate cash balance.

n It helps in identifying surplus cash & investing them in marketable securities.

n It helps in identifying the points of shortfalls & to plan & arrange adequate cash.

n It helps in improving the profitability of the firm.

n It helps in keeping the bank overdraft limit under control.

Factors Affecting Level of Cash

Level of cash depends upon many factors. Fluctuation in cash is due to many factors which
should be forecasted before hand in order to have proper cash proper cash management.

n Matching of cash flows

n Non recurring expenses

n Cash short cost

n Cost of excessive cash balance

n Payment of loans

n Firms capacity to borrow in emergency

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 Techniques of Cash Management

COLLECTION

MANAGEMENT

PAYMENT

MANAGEMENT

CASH FLOW

STATEMENT

CASH

ESTIMATION

SHORT TERM
INVESTMENT

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RECEIVABLE MANAGEMENT

Receivables represent amounts owed to the firm as result of sales of goods and services in
normal course of time of business. These are claims of the firm against its customers and form
parts of its current assets receivable are also known as account receivable, trade receivable,
customer receivable. The period of credit and extend of receivables depends upon credit policy
followed by the firm. The purpose of maintaining or investing in receivable is to meet
competition to increase the sale and profit.

PAYABLE MANAGEMENT

Payables represent amounts owed by the firm as result of purchase of goods and services in
normal course of time of business. These are claims of the supplier against its purchase and form
parts of its current liabilities Payables are also known as account Payables, trade Payables,
customer Payables. The period of credit and extend of Payables depends upon credit policy
followed by the suppliers. The purpose of maintaining or investing in Payables is to meet
competition to increase the sale and profit.

CASH FLOW STATEMENT

Cash flow statement, also known as statement of cash flows or funds flow statement, is a
financial statement that shows how changes in balance sheet and income affect cash and cash
equitant, and breaks the analysis down to operating, investing, and financing activities.
Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the
business. The statement captures both the current operating results and the accompanying
changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in
determining the short-term viability of a company, particularly its ability to pay bills.

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CASH BUDGET

Cash budget is extremely important, especially for small businesses, because it allows a
company to determine how much credit it can extend to customers before it begins to have
liquidity problems.
For individuals, creating a cash budget is a good method for determining where their cash
is regularly being spent. This awareness can be beneficial because knowing the value of certain
expenditures can yield opportunities for additional savings by cutting unnecessary costs.
For example, without setting a cash budget, spending a dollar a day on a cup of coffee seems
fairly unimpressive. However, upon setting a cash budget to account for regular annual cash
expenditures, this seemingly small daily expenditure comes out to an annual total of $365,
which may be better spent on other things. If you frequently visit specialty coffee shops, your
annual expenditure will be substantially more.

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 CHAPTER 5:
RESEARCH
METHODOLOGY

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 RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. The research
methodology included various methods and techniques for conducting a research. “Marketing
Research is a systematic design, collection, analysis, and reporting of data and finding relevant
solution to a specific marketing situation or problem.” Sciences define research as “ the
manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or
verify knowledge, whether that knowledge aids in construction of theory or in practice of an art.”
Research is thus, an original contribution to the existing stock of knowledge marketing for its
advancement, the purpose of research is to discover answers to the questions through the
application of scientific procedure. My research project has a specified framework for collecting
the data in an effective manner. Such framework is called “Research Design”. The research
process which was followed by me consisted following steps.

Defining the problem & Research Objectives

It is said, “A problem well defined is half solved”. The step is to define the project under study
and deciding the research objective. The definition of problem includes study of cash
management techniques used by the Havells India Ltd.

Developing the Research Plan:

The second stage of research calls for developing the efficient plan for gathering the needed
information. Designing a research plan calls for decision on the data sources, research approach,
research instruments, and contacts methods. The research is descriptive in nature and is aimed at
analyzing techniques used by the company for cash management.

The development of Research plan has the following Steps:

a.) Data Sources
Two types of data were taken into consideration i.e. Primary data and Secondary data. My major
emphasis was on gathering the primary data. The secondary data has been used to make things
more clear.

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1. Primary Data: Direct collection of data from the source of information, including
personal interviewing from the General Manager in finance and other finance officers in the
company etc.
2. Secondary Data: Indirect collection of data from sources containing past or recent
information like, Annual Publications, Books, Newspaper and Magazines etc.

Research instrument
A questionnaire was constructed for my queries. A Questionnaire consisting of a set of
questions was presented to respondents for their answers.
a.) Sampling Plan
The sampling plan calls for three decisions.
1. Sampling unit: Who is to be interviewed?
The target person must be defined that has to be interviewed. It is necessary so as to gather
information so that person interviewed has full knowledge about the information.
2. Contact Methods
Once the person to be interviewed is determined, the question is how the subject should be
contracted i.e. by telephone, mail or personal interview. Here in this research, I have
contacted the respondents through personal interviews.

Collecting the information

The collection of data is a tedious task. For conducting any sort of research data was needed. So
for my research, there was plenty of primary data and for increasing the validity of information
collected, some books, journals, pamphlets, information about the company were studied and
taken into considerations. After this, I have collected the information from the respondents with
the help of questionnaire.
a.) Collection of Primary Data: Primary Data is the data collected from the original source. In
my survey and study, there was optimum availability of primary data because every aspect was
witnesses carefully at each point. Questionnaire and personal interviews were the main
instruments, which were used for collecting primary data.
b.) Collection of Secondary Data: Secondary Data is the one which has already been collected
by someone else and some other person is using that information. The source of secondary data

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was, some related books and websites related to the company. The competent staff of the
company helped me a lot in providing information about the company.
C) Analyze the Information
The next step is to extract the pertinent findings from the collected data. I have tabulated the
collected data and developed frequency distributions. Thus the whole data was grouped aspect
wise and was presented in tabular form. Thus, frequencies, comparison and percentages were
prepared to render impact of the study.
Presentation of findings:
This is the last and important step in the research process. The findings are presented in the form
of graphs, pie charts, conclusions, suggestions and recommendations after data analysis.

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 LIMITATIONS OF THE STUDY

1) There are various methods of analysing the same data.

2) Limited access to secondary data pertaining to Havells performance in other regions or any
other information was another problem in finding a correct response.

3) Difficulty in getting meaningful data as data is confidential.

4) Most of the times people don’t give appropriate information.

6) The data is analysed for limited period of time.

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 CHAPTER 6:
ANALYSIS AND
INTERPRETATION

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 CASH MANAGMENT BY HAVELLS INDIA LTD.
Company is having contract with which provide various facilities like:-

• Collection of funds
• Payment of fund
• Providing guarantees
• Issuing letter of credit
• Bill discounting facility
• Administration of credit sales
• Maintenance of sales register
• Credit control
• Protection from bad debts
• Provision of Finance
• Rendering advisory services

TERMS OF CONTRACT OF HAVELLS INDIA LTD. WITH IDBI

Credit Facility of Rs.318 Crores.

Individual Facility Limit Forming Part of the

Individual Facility overall limit
Existing Revised Rate of Interest
Purchase bill discounting 35 23 Bank rate
Export Bill Discounting -10 -10 BPLR -250bps p.a(monthly)
Bill Discounting under letter of credit 10 10 Bank Rate
Buyers Credit -45 -33 0.5% p.a plus service tax
Letter Of Credit nil 25 0.5% p.a + service tax
Treasury 10 10 Documentation charges
Receivable Buyout 250 250 Bank rate
Receivable Buyout(Pool Wise limit) -100 -100 Bank rate
Overall Limit 305 318

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 Rates for Cash Management Service From IDBI Bank
Day Pricing Min Per Per
Product Arrangement Cheque Cheque
Return

Express Hv (All IDBI Location) Day 0 .05/1000 Rs. 3 Rs. 10/-

Express MICR(All IDBI Location) Day 1 .05/1000 Rs. 3 Rs. 10/-
Swift(outstanding at IDBI Loc) Day 1 Rs.1.60/- Per Thousand Rs. 10 Rs.10/-
Maxreach(Outstanding at corr
Bank) Day 1 Rs.2/- Per Thousand Rs. 25 Rs.50/-
Remote (outstanding at remote 1.00+Other bank
areas) Clear Funds Charges Rs. 25 Rs.50/-

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 Receivable Management by Havells India Ltd.

1. Average Collection period

Average collection period measures the quality of debtors. A short collection period implies
prompt payment by debtors. It reduces the chances of bad debts. Similarly, a longer collection
period implies too liberal and inefficient credit collection performance. It is difficult to provide a
standard collection period of debtors. Higher period is always beneficial for the company.
Company always prefers prefer advance payment from customers which reduces the risk of bad
debts .For advance Payment Company provide cash discount.

Calculation of the average collection period of the company

ACP = (Days)*(Average Accounts Receivable) / (Credit Sales)

Year 2008 2009

Sales 2231.89 2333.82
Average Debtors/Closing 66.07 86.74
Debtors
Debtors Turnover Ratio 33.78 26.90
11 Days 14 days
Average Collection Period

Analysis & Interpretation

Average collection period for 2008 is 11 days and 14 days in 2009. Company is mainly focusing
on advance payment collection and providing cash discounts to the customers. Increase in
Average collection period is due to increase in credit sales. Since the company is providing 21
days period to customers even than customers are average collection period is quite low that
means most of payments are done on cash basis.

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 Credit Policy of Company

Though most consumers expect to pay cash or use a credit facility while making a purchase,
commercial customers typically want to be billed for any products and services they buy.
Company need to decide how much credit you're willing to extend them and under what
circumstances. There's no one-size-fits-all credit policy--your policy will be based on your
particular business and cash-flow circumstances, industry standards, current economic conditions,
and the degree of risk involved.

As company create its policy, consider the link between credit and sales. Easy credit terms can be
an excellent way to boost sales, but they can also increase losses if customers default. A typical
credit policy will address the following points:

• Credit limits. Credit limit means an amount (limit) is fixed up to which customer can avail
credit facility. After the limit is over customer cannot make billing more than its credit limit.
To do more billing he has to make payment.

• Credit terms. If you agree to bill a customer, you need to decide when the payment will be
due. Your terms may also include early-payment discounts and late-payment penalties.

Havells India Ltd. Provides no credit limit to its customers. Customer can avail credit facility up
to any limit it initiate increase in sale. To manage its receivables company is using good credit
policy in which it is giving 45 day credit to its customers. In order to initiate early payment from
customers company is providing cash discount. In order to cover the risk of non-payment from
customer company receives blank cheques from the customer under the company name signed by
the party. In case of cheque bouncing company debits customer account with Rs.500 per cheque.

For early payment i.e. advance payment by the customer company credits customer account with
Interest for the particular period at 18% interest rate.

Product No of Days

Non channel Finance 45 days

Channel Finance 20 days

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 Factoring Services by IDBI Bank
Meaning of Factoring

Receivables constitute a significant portion of current assets of a firm. Firm has to incur certain
cost such as cost of financing receivables and cost of collection from receivable and cost of
collection from receivables. Further there is a risk of bad debts also. It is very essential to have a
proper control on management of receivables.

Small firms may handle the problem of receivable management of its own, but it may not be
possible for large firms to do so efficiently as it may be exposed to the risk of more and more bad
debts. A factor is financial institution which offers services relating to management and financing
of funds arising out of credit sales.

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Factor services provided by bank:

1. Bill Discounting Facility:

IDBI is providing bill discounting facility. Company is discounting bills of exchange

received from customers. Discounting of bill worked as short term finance for the company.
IDBI Bank is discounting under following terms and conditions for purchase bill
discounting limits.

1 Individual Facility Purchase Bill Discounting Limit

2 Limit/Amount Rs. 23,00,00,000/-
3 Purpose Working Capital
4 Rate of Interest/Discount To be decided at the time of drawn down
5 Other Charges Documentation charges and out of pocket
6 Margin Nil
7 Security Unsecured
8 Tenure Max.90 days/payable at due date
9 Method of payment out of internal accruals
10 Documentation Bill Schedule

2. Bank Guarantee/ letter of credit:

Letters of credit ensure that a transaction proceeds as planned, while bank guarantees reduce the
loss if the transaction doesn't go as planned. A letter of credit is an obligation taken on by a IDBI
bank to make a payment once certain criteria are met. Once these terms are completed and
confirmed, the bank will transfer the funds. This ensures the payment will be made as long as the
services are performed.

A bank guarantee, like a line of credit, guarantees a sum of money to a beneficiary. Unlike a line
of credit, the sum is only paid if the opposing party does not full fill the stipulated obligations
under the contract. This can be used to essentially insure a buyer or seller from loss or damage
due to non performance by the other party in a contract.

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Terms and conditions under which IDBI is providing guarantee:

Sno. Particulars Terms and conditions

1 Individual Facility
2 Limit/Amount
3 Purpose
4 Usage/other charges
5 Other Charges
6 Security
7 Documentation
8 Margin
Tenure of Individual
9 facility
10 Methods of repayment
L c /bank Guarantee
Rs. 25,00,00,000
Working capital
LC/BG:0.50% + Service Tax
Documentation charges and out of pocket
underlying goods
L C: Stamped LC Application
Nil
180 days/ 12 months
out of internal accruals

Cost of providing Guarantee

Havells India Ltd.

Nature Jan Feb Mar Grand Total
Bank Charges
Bank guarantee 55303.14 180573.87 53930.88 7312493.66

CMS (Cash Management Service)

Cash management service is provided by IDBI bank. Under this facility proper record of
receivables is maintained by the bank. Thousands of cheques are received by the company
in a day. This is very difficult practice for company to make records of all receivables. So
bank is providing the facility of managing receivables from various customers.
Bank prepares CMS report for every month which contains following information client
code, transaction date, transaction date, deposit number, product code, Dr, Cr amount,
Drawer name, Drawer Bank, Remarks.

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CMS REPORT
Havell s India Ltd
Mr. Pradeep Gupta
Manager
Havells India Ltd
1 7 Ram Kishore Road,
Civil Lines,
Delhi - 110 054

Account No : 011655100000107

Deposit. Deposit Product

Tran Date No. Dt. Code Debit Amt Credit Amt Drawer
01-01-2010 01-01-2010 1,95,340.00 0
01-01-2010 4109585 01-01-2010 EXPHV 0 14,112.00 VORA ELECT
Bharti
01-01-2010 58354 01-01-2010 EXPHV 0 15,63,486.00 Enterprises
01-01-2010 64486 01-01-2010 EXPHV 0 32,291.00 city trade
01-01-2010 3407 31-12-2009 EXPRESS 0 12,64,611.00 R K TRADERS
KUMAR
01-01-2010 3568 31-12-2009 EXPRESS 0 1,66,202.00 ELECTRIC
BHAWNA
01-01-2010 3601 31-12-2009 EXPRESS 0 91,627.00 DISTRIBUTOR
AGARWAL
01-01-2010 3603 31-12-2009 EXPRESS 0 80,000.00 ELECTRICAL
AGARWAL
01-01-2010 3603 31-12-2009 EXPRESS 80,000.00 0 ELECTRICAL

Transaction Date: Transaction date is the date on which transaction is made.

Deposit no: Deposit no is the number of bank voucher when deposit is made.

Deposit date: Deposit date is the on which cheque is presented with the bank.

Product Code: Product Code is the code of the bank according to which charges are charged by
the bank.

Debit Amount: Debit amount is the amount with customer is debited.

Credit Amount: It is the amount of cheque received by the bank and amount credit to our
account.

Drawer: Drawer is the name of the party by which cheque is drawn.

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Discount policy of Havells India Ltd.
Discounting policy is very important source of making cash sale. If company is having good
discount policy for its customers it can improve its debtor’s turnover ratio as well as flow of cash
during the year. Good discount policy initiates customers to make early cash payment which
helps benefit both the customer as well as company. Discount policy generally includes two types
of discounts.

Types of Discounts

• Cash Discount
• Trade Discount

Cash Discount:

An incentive that a seller offers to a buyer in return for paying a bill owed before the scheduled
due date. The seller will usually reduce the amount owed by the buyer by a small percentage or a
set dollar amount. If used properly, cash discounts improve the days-sales-outstanding aspect of a
business's cash conversion cycle.

Company is providing different rates of cash discount for different products. By providing cash
discount company is inviting early cash payment by its customers. Following are the rates of
discount which company is providing for different products.

HAVELLS INDIA LTD FOR CHANNEL FINANCE

PRODUCTS DAYS RATE OF C.D DAYS OF PAYMENT

Cables 7 2.25% 45 days payment

Aure NIL Nil 45 days payment
0 to 10 1.50% 45 days payment
Motor
11 to 30 0.75% 45 days payment
0 to 10 3% 45 days payment
Others
11to 30 1.50% 45 days payment

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 Cost incurred by the Company for collection of debts
Receivables constitute a significant portion of current assets of a firm. Firm has to incur certain
cost such as cost of financing receivables and cost of collection from receivable and cost of
collection from receivables. Further there is a risk of bad debts also. It is very essential to have a
proper control on management of receivables. Company incur following cost for collection of
receivables.

1. Legal Procedure Cost

2. Bad debts cost
3. Bank charge (CMS charges)

Legal Procedure Cost:

Company is following procedure for collection of debts. In Case of bounce back of cheque of the
customer the customer is credited with Rs. 500 for each cheque. In case of non payment a notice
is sent to the party for non payment with cost the company Rs. 550 for every notice. In case of no
response from the party a complaint is filed against the party with cost Rs. 4400 and other
expenses incurred are Rs. 1000. In case the party is making payment number of persons is sent to
the party for collection of payment whose cost depends upon number of person sent, cost per
person and number of days person is sent.

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 Bad Debt Cost:

When credit sales are made there is always a risk of bad debts involved. Risk of bad debts is very
high in case company use liberal credit policy. So amount of bad debts depends upon credit
policy credit sales in order to have a proper cash flow company must use short credit period for
its customers. Company made provision of doubtful debts each year.

HAVELLS INDIA LTD. assumes debts as doubtful after six months in case of non payment. In
2008 company considered 1.46 as doubtful and 2.12 in 2009. This is 2.444% of total Debtors in
2009 and 2.20% of total debtors in 2008.

100
90
80
70
60
50 Good
40
Doubtful
30
20
10
0
2008 2009

Bank Charges (CMS charges): IDBI bank provides factor services under which it has to it
maintain receivable register. Bank maintains record of all cheques received from different parties.
Bank charges some amount for maintaining these receivable. Following are the terms and
condition under which IDBI works.

Rates for Cash Management Service From IDBI Bank

Day Pricing Min Per Per
Product Arrangement Cheque Cheque
Return

Express Hv (All IDBI Location) Day 0 .05/1000 Rs. 3 Rs. 10/-

Express MICR(All IDBI Location) Day 1 .05/1000 Rs. 3 Rs. 10/-
Swift(outstanding at IDBI Loc) Day 1 Rs.1.60/- Per Thousand Rs. 10 Rs.10/-
Max reach(Outstanding at corr
Bank) Day 1 Rs.2/- Per Thousand Rs. 25 Rs.50/-
Remote (outstanding at remote 1.00+Other bank
areas) Clear Funds Charges Rs. 25 Rs.50/-

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 CMS Charges
Nature April May Jun Jul Aug Sep
CMS 1032282 822194 1030071 910749 844983 910740

Nature Oct Nov Dec Jan Feb Mar

998556 928208 978913 842034 834342 1150161

CMS

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 Cash flow statement
Meaning of Cash Flow Statement:

Cash flow statement, also known as statement of cash flows or funds flow statement is a
financial statement that shows how changes in balance sheet accounts and income affect cash and
cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the
business. The statement captures both the current operating results and the accompanying
changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in
determining the short-term viability of a company, particularly its ability to pay bills.
International Accounting Standard 7 (IAS 7) is the International Accounting Standard that deals
with cash flow statements.

Purpose of Cash Flow Statement

The cash flow statement reflects a firm's liquidity. The balance sheet is a snapshot of a firm's
financial resources and obligations at a single point in time, and the income statement
summarizes a firm's financial transactions over an interval of time. These two financial
statements reflect the accrual basis accounting used by firms to match revenues with the expenses
associated with generating those revenues. The cash flow statement includes only inflows and
outflows of cash and cash equivalents; it excludes transactions that do not directly affect cash
receipts and payments. These noncash transactions include depreciation or write-offs on bad
debts or credit losses to name a few. The cash flow statement is a cash basis report on three types
of financial activities: operating activities, investing activities, and financing activities. Noncash
activities are usually reported in footnotes.

The cash flow statement is intended to:

1. Provide information on a firm's liquidity and solvency and its ability to change cash flows
in future circumstances.
2. Provide additional information for evaluating changes in assets, liabilities and equity
3. Improve the comparability of different firms' operating performance by eliminating the
effects of different accounting methods
4. Indicate the amount, timing and probability of future cash flows

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 Year Ended 2009 Year Ended 2008
A. Cash Flow From Operating Activities
Net Profit before tax and extra ordinary items 167.27 166.25
Adjustments for
Depreciation 17.86 13.06
loss on sale of fixed assets 1 0.8
Profit on sale of Assets -0.13 -2.39
Income on sale of Investment -0.08
Interest Income -0.89 -0.77
Interest paid 19.34 20.65
Miscellaneous expenditure written off 0.05 0.04
Operating Profit before working capital changes 204.42 197.64
Adjustment for: Trade and other receivables -41.95 -40.2
Inventories 222.76 -190.79
Trade and payables 76.26 171.56
Others liabilities 12.64 14.77
Cash generated from operations 296.33 152.98
Direct Tax Paid -23.16 -23.96
Cash flow before Extraordinary Items 273.17 129.02
Net Cash receivables(+)/used (-)from Operating Activities 273.17 129.02
B. Cash from Investing activities
Purchase of Fixed assets -91.22 -45
Addition in Capital Work in progress -10.87 -116.29
Investment in shares -226.25 -161.3
sale of investment 3.25
sale of fixed assets 1.85 6.82
Interest Received 0.89 0.77
Net Cash used in Investing activities -322.35 -315
C. Cash flow from Financing Activities
Proceeds from issue of Equity Warrants 17.94
Proceeds from issue of preferential equity shares 1.12 2.08
Receipt of share premium 138.61 257.92
short term borrowing 1.7 1.2
Repayment of long term borrowings -8.44 -15
Repayment of motor car loan 0.38 0.65
Proceeds from unsecured advances 41.6 -5.81
Interest paid -19.34 -20.65
dividend paid -14.48 -13.44
Net Cash receivables(+)/used (-)from financing Activities 140.39 223.59
Net increase(+)/decrease(-)in cash and cash equitant 91.21 37.62
cash and cash equivalents at the beginning of the year 64.22 26.61
cash and cash equivalents at the end of the year 155.43 64.22

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 Graphical presentation of Cash Flow Statement

400
300
200
100
2008
0
2009
-100 Operating Investing Financing Net cash received
Activities Activities Activities
-200
-300
-400

Figure 1

Analysis and Interpretation

Operating Activities

• Company’s major cash flow is from Operating Activities

• Cash flow from Operating activities is increased from 129.02 to 273.17 crore due to
conversion of stock into cash.
• Company has opted immediate payment policy to trade creditor in 2009. which resulted
in decrease in trade creditors from Rs 171.59cr to (76.26).

Investing Activities

• Company has used its funds for investment purpose which was 315 cr. in 2008 and
322.35 cr. in 2009
• Company invested almost double amount for investment in fixed assets in 2009 as
compared to 2008.
• Company has invested huge funds for investment in shares.

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Financing Activities

• Company has received cash from financing activities which was 223.59 cr. in 2008 and
140.39 cr. in 2009.
• Major cash is received due to receipt of share premium on preferential allotment which
was 257.92 cr. in 2008 and 138.61 cr. in 2009.
• Cash is received from unsecured advances to meet short term requirements.

48 | P a g e
 Forecasting Technique used by Havells India Ltd.

Cash forecasting is very important aspect of managing cash. Insufficient funds may lead to
disturbance in smooth running of the business. Excess cash can be invested in short term
securities ie. Excess holding of cash may lead to loss of income. So in order to get maximum
benefit neither there should be excess cash nor insufficient cash. An expert knowledge is required
in forecasting cash.

Cash can be managed by forecasting the receivables since we know amply number of cheque are
received by the company during the period . On the other payment side all the expenses due on
average basis and the amount of payments are forecasted with the minimum balance required
cash required is forecasted and insufficient funds should be deposited and excess amount should
be invested in short term securities.

HAVELLS INDIA LTD. is in contract with IDBI for forecasting their cash. Company receives
post-dated cheque from its customers in advance and record of all the cheques received is
maintained through CMS report by IDBI bank. And record of all the cheques to be presented with
the bank given to the vendor by the company is also kept. Day cash requirement is forecasted by
forecasting the day expenses at the end of the day if there are sufficient funds these are invested
in short term securities and if there are insufficient funds bank overdraft facility is activated for
short term. Company is having limit of 200 cr. which is not been fully utilized by the company so
major forecasting is not required by the company.

In case of major investment i.e. Long term investment projects cash is forecasted by the IDBI
bank. Cost of funds to be raised is forecasted and cheaper source is accepted.

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 Bank Reconciliation Statement
A businessman maintains several books of accounts out of which cash book is an important book.
By cash book, we refer to three column cash book having bank column on both the sides. For
traders or customer bank account is an asset account and therefore it is debited whenever money
is deposited and debits all the withdrawals. Thus the transactions appearing on the debit sides of
the bank column of cash book will be shown by the bank in the deposit column of passbook and
entries on the credit side of cash book will appear in the withdrawal column of pass book further
it can be inferred that the debit balance of bank account in the book of trader should be equal to
credit balance of traders account in the books of trader should be equal to credit balance of bank
account in the book of trader should be equal to debit balance of passbook.

Reasons for difference

1. Cheque deposited but not credited by bank.

2. Cheque issued but not yet presented.
3. Bank Charges.
4. Direct receipt by the bank.
5. Interest charged by bank.
6. Interest allowed by bank.
7. Direct payment by bank.
8. Bill discounted but dishonoured.
9. Error on the part of trader.
10. Errors committed by bank.

Bank reconciliation statement is maintained on daily basis by Havell's India Ltd. Since there are
thousands of transactions every day. Numbers of cheques are deposited and large amount of
charges are debited by bank. So it creates difference in cash book and pass book. In order to
cover this difference bank reconciliation statement is prepared. Online access is made every
morning to reconcile previous day statement. Bank reconciliation statement helps in proper cash
management. It helps to know exact cash balance in the bank and also helps in rectifying our cash
account. Customer account will credited only if bank has credited the amount to our companies
bank account.

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 SWOT Analysis of Cash Management Service
Providers

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 SWOT ANALYSIS OF HAVELLS INDIA LTD.

STRENGHTS WEAKNESS
International approvals High debt ratio.
World class infrastructure Globally small Market share
Leveraging upon Sylvinia network (10000 Slowdown of real estates
distributor).
Delays in execution of power projects
Global presence (Latin America, UK, Europe)
Largest manufacturing capacity in the country for
motors
R & D facilities
Tax benefits in Uttaranchal
SWOT
OPPERTUNITIES THREATS
Global opportunities. •Unorganized market.
Acquisition of Chinese firms for low cost •Unrelated diversification
manufacturing. •Global slowdown effected business adversely
Vertical integration into Havells retail outlets. as is largely dependent on Sylvinia
Leveraging upon motor business in India

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 CHAPTER 7:
FINDINGS AND
RECOMENDATIONS

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 Findings and Recommendations

Findings

1. Company is managing its cash well and spending large amount of funds for its cash
management system.

2. In spite of having credit of period of 45 days average collection period is 11 days. That
means cash discount provided to the customers is helpful to the company for collecting of
funds.

3. Company is investing its funds in long term investment which will be helpful to
company for long further growth.

4. Major cash management is done on contract basis by IDBI bank which includes
maintaining receivable management records through CMS. Bank also provides factoring
service to the company.

5. Company is on growth and the is further scope of future growth.

6. Company is not using its cash sources of short term financing sources from outside which
reduce carrying cost of cash.

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Recommendations/ Suggestions

1. Company can review existing service providers for cash management and other
service providers, making initial presentations and discussions with banks and providers.
Companies can shortlist potential providers for further in-depth discussions and
presentations. It helps in reducing carrying cost of cash.

2. Company can reduce its inventory to maximum extend .So that there should be less
blockage of funds in Inventory.

3. In order to reduce average collection period company can liberalize its cash discount
policy. This will initiate the customers to make early payment and help in better flow of
funds.

4. Company can invest idle funds wisely may help you to generate income from your
working capital, increasing your yields while maintaining liquidity. There are a wide
variety of investment instruments available to companies seeking a return on excess cash.
However, there are ways company may be able to improve yields on our idle working
capital.

5. For better cash management or in order to find minimum cash balance required for the
company can use control charts with the help of this company will able to invest its
excess amount of funds in short term securities and can reduce bank charges charged by
the bank for overdraft purpose.

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 BIBLIOGRAPHY

BOOKS
Shashi K Gupta, R. k Sharma. (2010), Financial Management, 6th Edition. New Delhi: Kalyani
Publisher. PP 23.1-23.20

William J Stevenson. (2010), Operation Management, 9th Edition. New Delhi: Tata McGraw-Hill
Publishing Co. PP 446-447.

Journals

26th Annual Report 2008– 2009 Havells India Ltd.

Web Sites

http://www.havells.com
http://www.thehindubusinessline.com/2005/09/30/stories/2005093002590200.htm
http://www.toboc.com/1/570340/Exporter.aspx
http://www.efytimes.com/efytimes/fullnews.asp?edid=25052&magid=13
http://www.domainb.com/companies/companies_h/havells_India/20080331_expansion_plans.ht
ml
http://www.domainb.com/companies/companies_h/havells_India/20070314_lighting.

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