SAMIT Arvind Sip Project Done Final

SABAR INSTITUTE OF MANAGEMENT
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A
Project Report On
Working Capital & Credit Policy Management

Submitted To
Gujarat Technological University

Submitted by:
Samit A. Patel Enrollment No. 107510592096
Internal Guide Mrs. Janvi Joshi
External Guide Mr. Vinit Shah
SABAR INSTITUTE OF MANAGEMENT (Affiliated to Gujarat Technological University) Tajpur, Ahmedabad-Himmatnagar Highway, Dist. Sabarkantha-382005.
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DECLARATION
I SAMIT PATEL hereby state that this work is a result of study on the A REPORT ON WORKING CAPITAL & CREDIT POLICY MANAGEMENT. The findings & conclusion expressed in this research report are genuine and for academic purpose. It is my own and it has neither been submitted nor published anywhere before any resemblance to earlier project or research work purely coincidental. It is totally based on my hard work and creativity.
PLACE: AHMEDABAD
SIGNATURE:
DATE:
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ACKNOWLEDGEMENT
Feelings of gratefulness to anyones help directly arise from bottom of the heart. The small but an important act can prove to be a milestone in ones life. We have achieved an important milestone in our life by the completion of this project. The project is dedicated to all the people whom we met and took guidance from. I take this opportunity to thank the individuals who made this report a success. First of all, we are very fortunate that we got training in ARVIND limited. We sincerely thank MISS MILLI DAS (Head HR Department). It is through her continuous guidance and support that the project has become reality. we would like to thank Mr. VINIT SHAH (Head Finance Department) our Project guide, not only for giving us the opportunity to work on this project, but also for providing us with sound guidance and the necessary facilities to carry out the project. He constantly insisted and helped me in learning new things. He provided me a lot of learning opportunities. Sincere appreciation is extended to Mr.VINIT SHAH for his immense help during the course of this work. we would like to thank Mr. DHARMESH PATEL, for enabling me to learn and work on SAP for fixed assets module. We would like to thank Mrs. Janvi Joshi our Project faculty guide, who continuously monitored my work and provided guidance as and when we needed.
SAMIT A. PATEL
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PREFACE
For a long time, there is a wind of recession blowing all over the business world and wealth liberalization policy in the Indian Economy. So, nowadays market is becoming more and more competitive. Company demands more and more professional and accomplished employees. Students have to get practical training along with the theoretical knowledge of the business condition. There are many advantage of making these kinds of reports. Reading gives only the theoretical knowledge but training gives an opportunity to learn and apply the concepts in the real corporate world. It is true that technical studies cannot be perfect without practical training and perfection is basic necessity of management student.
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EXECUTIVE SUMMARY
Working Capital and Credit Policy project was done to know the financial strength, weakness of the company, to know why most of the textile companies are in loss and to know how the company will perform in future. Is the firm earning sufficient profits to distribute to its shareholders? Has the market condition affected the company or not? What are the different measures to improve its solvency and liquidity position? What measures it should adopt at present to fight with this slow down? For this we have gone through last year financial statements studied about the textile industry slowdown and linked that reason with the lowering down the profits of Arvind Mills limited. First of all we started our report with overview and history of Indian textile industry, how Indian textile industry grown up over a decade. There are major key facts about textile industry is that contribute 4% of GDP growth and 9% of exice collection, 18% of employment in industrial sector. Also 16% in countrys export. The major players in textile industry is Arvind Ltd., Raymond Ltd., Reliance Textile., Vardhman Spinning, Bombay Dying etc.The data published in this report are past 5 years annual report. Various types of ratio also calculated. The major credit policy of Arvind Ltd. Also state. This project was carried out in ARVIND MILLS LIMITED under the guidance of Mr. VINIT SHAH. And faculty of our college Mrs. Janvi Joshi
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Table of content
No. Name of content
Certificate Acknowledgement Preface Executive Summary Part-1 Introduction Indian textile Industry Textile Industry Key Facts Strength of Textile Industry Weakness of Textile Industry Major Players in the textile Ind. In India Product of the Textile Industry Indias Major Competitors in the world Part-2 Company Profile Fabrics Production Move To Globalization. Company Structure Overseas Activitys and strategic Alliance Denim Manufacturing Process Market Network of Arvind Company Mission Company Vision Group Overview Board of Director Financing Activity Financial Hierarchy of Arvind Ltd. Arvind Brands Product Range Arvind Portfolio Introduction of Alock Industries Part-3 Research Methodology Objective of Research Benefit of study Limitation of study Part-4 Concept of Working Capital Objective of Working Capital From of Working Capital Components of Working Capital Sources Working Capital
Pg no
3 4 5 6 9 10 12 13 14 15 17 18 20 21 22 23 24 27 31 33 33 34 36 37 38 39 43 44 46 51 52 53 53 54 55 56 59 60
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Determinants working capital Significant of Adequate Working Capital Effect of Excessive Working Capital Inadequate of Working Capital Working Capital Policy Balance Sheet Profit and Loss Account Working Capital Of Arvind Ltd. Operation Cash Cycle Calculation Of Time Period Interpretation of Working Capital Interpretation of Factor Which Affected of W.C Part-5 Credit Policy
Recommendation Conclusion Bibliography Web-Link
63 65 66 67 68 70 71 72 77 78 81 83 85 88 89 90 91
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Part-1 INTRODUCTION OF INDIAN TEXTILE INDUSTRY
The term 'Textile' is a Latin word originating from the word 'texere' which means 'to weave'. Textile refers to a flexible material comprising of a network of natural or artificial fibers, known as yarn. Textiles are formed by weaving, knitting, crocheting, knotting and pressing fibers together. Textile Museum is that specialized category of museum which primarily preserves different types of textile and textile product.
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TEXTILE INDUSTRY IN INDIA
Until the economic liberalization of Indian economy, the India Textile Industry was predominantly unorganized industry. The opening up of Indian economy post 1990s led to a stupendous growth of this industry. Textile industry in India is the second largest employment generator after agriculture. It holds significant status in India as it provides one of the most fundamental necessities of the people. Textile industry was one of the earliest industries to come into existence in India and it accounts for more than 30% of the total exports. In fact Indian textile industry is the second largest in the world, second only to china.
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India Textile Industry is one of the largest textile industries in the world. Today, Indian economy is largely dependent on textile manufacturing and exports. India earns around 27% of the foreign exchange from exports of textiles. Further, India Textile Industry contributes about 14% of the total industrial production of India. Furthermore, its contribution to the gross domestic product of India is around 3% and the numbers are steadily increasing. India Textile Industry involves around 35 million workers directly and it accounts for 21% of the total employment generated in the economy. Textile industry is unique in the terms that it is an independent industry, from the basic requirement of raw materials to the final products, with huge value-addition at every stage of processing. Textile industry in India has vast potential for creation of employment opportunities in the agricultural, industrial, organized and decentralized sectors & rural and urban areas, particularly for women and the disadvantaged. Indian textile industry is constituted of the following segments: readymade garments, cotton textiles including handlooms, man-made textiles, silk textiles, woolen textiles, handicrafts, coir, and jute. Till the year 1985, development of textile sector in India took place in terms of general policies. In 1985, for the first time the importance of textile sector was recognized and a separate policy statement was announced with regard to development of textile sector. In the year 2000, national textile policy was announced. its main objective was: to provide cloth of acceptable quality at reasonable prices for the vast majority of the population of the country, to increasingly contribute to the provision of sustainable employment and the economic growth of the nation; and to compete with confidence for an increasing share of the global market. The policy also aimed at achieving the target of textile and apparel exports of us $ 53 billion by 2011 of which the share of garments will be us $ 27 billion.
SABAR INSTITUTE OF MANAGEMENT Page 11
TEXTILE INDUSTRY KEY FACTS

Indian Textile Industry is highly fragmented industry; at the same time it is an independent and self-reliant industry that has shown sustainable growth over the years. Indian Textile Industry is second largest industry in terms of providing vast employment opportunities and employs around 35 million people in country after agriculture sector. The Indian Textile Industry plays vital role in economic development and contributes 14% to industrial production in the country. Textile Industry contributes around 4% of GDP, 9% of excise collections, 18% of employment in industrial sector, and has 16 % share in countrys export. Industry has direct and strong linkage with rural and agriculture sector, therefore it is estimated that, one of every six households in country is directly or indirectly dependent on this industry. Industry contributes around 27% share in the world trade of cotton yarn. India is evolved as a major contributor in worlds cotton sector. Indian is the worlds thirdlargest producer of cotton and second-largest producer of cotton yarns and textiles. India is the largest exporter of yarn in the international market and has a share of 25% in world cotton yarn export market. India contributes for 12% of the worlds production of textile fibers and yarn. Indian textile industry is second largest after China, in terms of spindle age, and has share of 23% of the worlds spindle capacity. India has around 6% of global rotor capacity. The country has the highest loom capacity, including handlooms, and has share of 61% in world loom age.
Including textiles and garments, 30% of India's export comes from this sector. Indian Textile Industry is one of the largest industries that provide high exports and foreign revenue.
Large and potential domestic & international market, large pool of skilled and cheap labor, Well-established industry, promising export potential etc. are few strengths of Indian Textile Industry.
Highly Fragmented, High dependence on cotton sector, Lower productivity, Unfavorable Labor Laws is few drawbacks of the industry from which it has to overcome.
STRENGHTS OF TEXTILE INDUSTRY
India has rich resources of raw materials of textile industry. It is one of the largest producers of cotton in the world and is also rich in resources of fibers like polyester, silk, viscose etc.
India is rich in highly trained manpower. The country has a huge advantage due to lower wage rates. Because of low labor rates the manufacturing cost in textile automatically comes down to very reasonable rates.
India is highly competitive in spinning sector and has presence in almost all processes of the value chain.
Indian garment industry is very diverse in size, manufacturing facility, type of apparel produced, quantity and quality of output, cost, requirement for fabric etc. It comprises suppliers of ready-made garments for both, domestic or export markets.
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WEAKNESS OF TEXTILE INDUSTRY
Indian textile industry is highly fragmented in industry structure, and is led by small scale companies. The reservation of production for very small companies that was imposed with the intention to help out small scale companies across the country, led substantial fragmentation that distorted the competitiveness of industry. Smaller companies do not have the fiscal resources to enhance technology or invest in the high-end engineering of processes. Hence they lose in productivity.
Indian labor laws are relatively unfavorable to the trades and there is an urgent need for labor reforms in India.
India seriously lacks in trade pact memberships, which leads to restricted access to the other major markets.
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MAJOR PLAYERS IN THE TEXTILE INDUSTRY IN INDIA
Arvind Ltd. Arvind Mills is one of the major and fully vertically integrated composite mills players in India. It has large production in denim, shirting and knitted garments. It is now adding value by manufacturing denim apparel. Its sales are around US$ 300 million. Raymond Limited Raymonds has the large, diversified integrated business model, which is spread across the value chain from yarn to retail. It is specialized in Diversified woolen textiles. It already supplies to some US retailers. RelianceTextile: Reliance Textiles is one of the major Textile Company that is in business of fully integrated manmade fiber. It has capacity of more than 6 million tons per year. It has joint venture partners like, DuPont, Stone & Webster, Since (Italy) etc. Vardhman Spinning Vardhman deals in spinning, weaving and processing segment of the industry. It is planning to double its fabric processing capacity to 50 million meters. It is an approved supplier to global retailers like Gap, Target and Tommy Hilfiger. Its sales are little over US$ 120 million. Century Textiles (Composite mill, cotton & Man-made) Mafatlal Textiles (Fully integrated Composite Mill)
Ashima Syntax (Man-made Fiber) Bombay Dyeing limited. (Composite and fully integrated) Alok Textiles (Cotton and Man-made Fiber Textiles)
MAP SHOWING LOCATION OF TEXTILES CENTRES IN INDIA
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PRODUCT OF THE TEXTILE INDUSTRY

Awnings, textile Blankets Bags or sacks, textile Blinds, textile Canvas goods, textile Fabrics, textile Felts ( except floor coverings) Glass fiber fabric Household linen Lace Narrow fabric Netting, textile Piece goods Ropes (except wire ropes) Sail cloth Sewing thread String Tarpaulin Thread Towels Trimmings, textile
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INDIAS MAJOR COMPETITIORS IN THE WORLD
CONRIBUTION
OTHERS 11% MEXICO 9% TURKEY 9%
CHINA 21%
INDIA 4% PAKISTHAN 6%
TAIWAN 18%
KOREA 22%
To understand Indias position among other textile producing the industry contributes 9% of GDP and 35% of foreign exchange earnings, Indias share in global exports is vey less compared to Chinas. In addition to China, other developing countries are emerging as serious competitive threats to India. The reason for this development is the fact that India lags behind these countries in investment levels, technology, quality and logistics. If India were competitive in some key segments it could serve as a basis for building a modern industry, but there is no evidence of such signs, except to some extent in the spinning industry
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Part-2 COMPANY PROFILE
1930 - Swadesi Movement

The aim was to indigenously produce fine and superfine cotton fabric as well as traditional material for vast potential Indian market. At this juncture, The Arvind Mills was set up with the pioneering effort of three brothers, Kasturbhai Narrotambhai and ChimanbhaiLalbhai Worlds largest exporter of denim, Asias largest producer of denims. During the 1980s several mills in Ahmadabad closed down As a result of competition from cheaper cloth produced by small power loom enterprises. Militancy spurred by textile labor unions prevented the shutdown of several loss-making mills, and in the mid 1980s Ahemadabad was a city of industrial strife. Arvind Mills has risen like a phoenix from the ashes of Ahmadabad textile mills. In just eight years it has successfully implemented a turnaround strategy. Established in 1930, an Arvind Mills Limited is the Flagship Company of $ 498 million.
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Lalbhai Group has now focused its attention on few selected core products groups. Such a focus seemed pertinent to prepare the company for playing a dominant role in the global market. Arvind today a one-stop shop for all cotton fabric requirements, where products range spans the entire gamut of cotton fabric. It is also a rapidly expanding manufacturer of garments such as jeans and shirts. With the best technology and business acumen Arvind Mills became the true multinational producing the finest fabric available in the country that rivaled imported fabric. Since then, there has been no looking back. Having established itself as Indias largest denim manufacturer and third largest denim producer in the world, Arvind Mills is confident that in the near future it will become the first largest denim producer in the world.
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FABRIC PRODUCTION
In the 1980s the growing threat from small power loom operators forced Ahmadabads composite mills to shift their focus to product areas in which they could compete. In order to better address newer and wider business opportunities, the company shifted perspective from domestic to international markets. At a time when the local textile industry was declining, Arvins management devised a turnaround strategy. Called Renovation, it represented an openminded approach that would seek out new opportunities. In 1987 Arvind Mills made a conscious strategic decision to change its production emphasis from a portfolio of traditional domestic textiles to high quality cotton fabrics. These required a level of technological expertise, which small power loom operators could not compete with. Arvind identified denim as a key fabric. Today the company is engaged primarily in the manufacturing of indigo-dyed denim fabrics, fine and superfine cotton shirting and bottom weights, and conventional domestic fabrics such as sarees and voiles. In 1995 Arvind Mills held an 80% share of Indias domestic market for denim.
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MOVE TO GLOBALISATION
Arvind began exporting its products in the late 1980s. International consultants McKinsey & Co. helped to frame AMLs corporate and business strategy and formulate its organizational restructuring. McKinsey & Co. also played a vital role in establishing international alliances and joint ventures. The company today is linked with world leaders in each of its product sectors. Synergic strength flow in from the groups diversified base in Textiles, Tele-communications (Arvind telecom). Yarn manufacturing (Arvind Intex), Ready-made garments (Arvind clothing ltd.), Finance (Anagram finance ltd.), Chemicals (Atul products ltd.), Engineering (Anup engineering ltd.) and Real estate business.
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COMPANY STRUCTURE
Arvind defines its operations in terms of strategic business units (SBUs). Each product line such as denim, shirting, knits, voiles, etc is designated as an SBU. Each unit is headed by a president who is able to make independent decisions on finance and marketing. The concept of SBUs, which was implemented in spring 1995, was adopted on the advice of McKinsey; mainly to facilitate the companys expansion plans but also to provide an accurate picture of the performance of individual product lines. Each SBU, which is similar to a product division within a corporation, operates as a profit center. While long-term planning is carried out by the corporate group in consultation with the management of each SBU medium and short-term planning is in the hands of the unit. Each SBU president is assisted by vice-presidents who look after functional divisions. The corporate group monitors all aspects of SBU performance on a continuous basis. Arvind has been successful in attracting high caliber professionals from the best multinationals and blue chip companies.
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OVERSEAS ACTIVITIES AND STRATEGIC ALLIANCES

Arvind Mills has two overseas subsidiaries engaged in trading activities. Arvind Worldwide Inc. is based in New York. Arvind Worldwide Inc has branch offices in London and Hong Kong. These subsidiaries, which act as sole agents for Arvind, are involved in the marketing of denim, shirting and yarns. Their proximity to the companys export markets enables them to respond quickly to customer requests. Big Mill Lauffenmuhle GmbH, a subsidiary company of Arvind Mills based in Germany, markets Arvind denim in the European Union, Eastern Europe and North America.
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STRATEGIC ALLIANCES
Arvind Mills has forged alliances valued at Rs.4.5 bn with three leading European companies and a further two agreements are at the discussion stage. These ventures involve the following product categories: Cotton and cotton blend shirtings Cotton and cotton blend trouserings Cotton blend knitted fabric Bed and bathroom textiles Voiles. In cotton and cotton blend shirtings, Arvind has agreed a technical and marketing alliance with F M Ham merle of Dornbirn, Austria a company regarded as a leader in the production of casual cotton and cotton blend shirting.
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In cotton and cotton blend knitted fabric, Arvind Mills has entered into an agreement with Alamac Knit Fabric Inc, a division of the US$1.6 bn US Company West Point Stevens Inc. The venture will produce sophisticated knitted fabrics for the apparel trade in India, Asia and Africa. In voiles, Arvind has agreed a technical and marketing alliance with the Swiss company Spinnerei & Weberei Dietfurt AG, a subsidiary of the Oerlikon Buhrle group which has interests in textiles, shoes (Bally), engineering equipment, aircraft and hotels.
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Denim Manufacturing Process

The term "Denim" has originated from the city of Nimes in France where "serge de Nimes" was manufactured. Denim is made from a vat dye, the Indigo dye, which is applied to cotton fabric in loosely held form in layers. As far as manufacturing process of denim is concerned, it is similar to that of Grey fabric up to the process of weaving with the only difference that in case of Denim Fabric, it is dyed at the stage of sizing where as in case of Grey Fabric, the decision regarding dyeing stage depend.
SPINNING:
The initial processes of denim manufacturing consist of the regular activities of opening and blending of cotton fibers. Carding is done to remove any foreign matter and the short fibers so that cotton takes the form of a web which is then converted into a rope-like form, the sliver. Then drawing process produces a single, uniform sliver from a number of carded slivers. Yarn is then spun through Open-End Spinning or Ring Spinning. Roving is also carried on, if the spinning has to be done through Ring Spinning. Generally, denim fabric are 3/1 warp-faced twill fabric made from a yarn dyed warp and an un-dyed weft yarn. Normally dyed and Grey ring or open- end yarns are used in warp and weft respectively..
WARP preparation Dyeing and Sizing process:

Warp yarns are indigo dyed and sized with the help of two methods: (i) Threads from several back beams are combined to form a warp sheet and dyed and sized on the same machine. (ii) Threads, about 350-400 in number are formed into ropes. 12-14 ropes run adjacent to each other through the continuous dyeing unit. After dyeing, the ropes are dried on drying cylinders and then collected in a can. After that, a worker's beam is prepared. Sizing is then done in the conventional manner.
WEAVING:
The weaving process interlaces the warp, which are the lengthwise indigo dyed yarn and the filling, which are the naturalcolored cross-wise yarn. The warp thread is in the form of sheet. The weft thread is inserted between two layers of warp sheets by means of a suitable carrier, such as Shuttle, Projectile, Rapier, Air current, Water current, etc. The selection of carrier depends upon the type of weaving machinery used. The two different technologies available for weaving machines are - Conventional Shuttle Weaving System which is done by Ordinary Looms or Automatic Looms; and the Shuttle less Weaving System which is done by Air jet, Water jet, Rapier, or a Projectile weaving machine. The Conventional Shuttle loom results in lesser production due to slow speed and excessive wear and tear of machinery. As such, now denim is generally woven through Shuttle less Weaving System namely, Airjetlooms, rapier looms, or projectile looms.
QUALITY ASSURANCE (Q.A):

In Q.A 10% of sample is tested through an important machine which is brought from Switzerland. There is a test for fabric strength, purification, diameter, thickness, weight, quality etc. Q.A got ISO-17025 certificate from NABL. There are 28 methods of testing.
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SMALL GARM ENTIN G SAMPLE CHECK CERTI FICATI ON
COTT ON LAB
CHEMI CAL LAB COLOU R TEST CLEARA NCE CELL
PROC ESS CONT ROL
FINISHING:
The final woven fabric, wound on a cloth roll, is taken out from weaving machines at particular intervals and checked on inspection machines so that any possible weaving fault can be detected. In this quality control exercise, wherever any fault is seen, corrective measures are taken then and there only. The woven Denim Fabrics then goes through various finishing processes, such as brushing, singeing, washing, impregnation for dressing and drying. Brushing and singeing eliminate impurities and help to even the surface of denim fabric. Dressing regulates the hand and rigidity of the fabric while compressive shrinking manages Its dimensional stability. The standard width denim fabrics are then sent for making up. In this process, the fabric is cut into the desired width according to the size required. The made- up denim fabric is then thoroughly checked for defects such as weaving defects, uneven dyeing, bleaching and dyeing defects, oil stains, or patches. After inspection, the final product is categorized quality-wise. The faultless fabrics are sent to the packaging department while the defective ones are sent for further correction.
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INSPECTION:
There are four rating system. It inspects physical parameter like width, square & linkej. Complete material inspection is done as per the quality requirement of the customer & from their product is delivered in the market. There are 13 inspection machines and each machine has two operators.
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MARKETING NETWORK
Only two ingredients go into the making of Arvind denim world-class quality and complete customer orientation. A strong team of industrys best-qualified talents forms the founding dimensions. To turn companys mission "TO ACHIEVE GLOBAL DOMINANCE IN SELECT BUSINESS SEGMENTS" into reality, manufacturing and marketing operations are now spread across the globe with a presence in 70 countries across the world. Arvind today is reinforcing its marketing efforts by focusing on brand led development. They expect to strengthen its existing relationship with global brands such as Marks & Spencer, V.F.
Corporation, Calvin Klein, GAP, Benetton, Polo, Esprit, Tommy Hilfiger, Hugo Boss and Liz Claiborne to list a few by developing value added products and providing superior level of service. The complex has enhance Arvind's product range and made it more responsive to the changing requirements of some of the leading garment brands. Arvind has single handedly developed a
multi-billion denim market in India. The brands fostered by Arvind include Lee & Arrow for the super premium segment, Flying Machine & Excalibur for the premium segment and Newport for the economy and innovative Ruff & Tuff for the mass market. This is not all, the company had recently made a foray into children segment by introducing Lee Youth, Ruggers Kids & Newport Kids. Similarly in tie-up with Cluett Peabody, USA to manufacture and market their world famous Arrow shirts. Global Strategy and brand marketing apart, Arvins key competitive edge comes from its technological innovation. With more than $ 130 million invested in technology over the last five years alone, Arvind has taken a quantum lead over its rivals. Arvind Mills expects to increase the number of its outlets from 150 in 14 cities to 180 outlets by the end of this year. Put into place a comprehensive marketing network in the major international textiles centers. Sourced top quality raw material from all over the world and allied with the international leaders for technology and marketing, the company today rank among the top five denim producers in the world.
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COMPANYS VISION
"To achieve global dominance in select businesses built around our core competencies, through continuous product and technical innovation, customer orientation and a focus on cost effectiveness"
COMPANYS PHILOSOPHY
"It is my responsibility as a leader to create an environment where excellent people would like to come and give their best, to create a vision, to give freedom for excellence." - Sanjay Lalbhai (Managing Dir.)
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GROUP OVERVIEWS
The Lalbhai group, founded by the 3 Lalbhai brothers - Kasturbhai, Narrotambhai and Chimanbhai - in 1908, has grown to become one of India's most diversified business houses, with a significant presence in the textiles, ready-to-wear, chemicals, air-conditioners and telecom industries in India. Each company in the group, in its own way, pursues a single mission - to be the benchmark in its' industry. To achieve this, they have tied-up with a variety of companies ... all world leaders in their respective fields.
LALBHAI GROUP COMPANIES:

TEXTILES: THE ARVIND MILLS LTD. ARVIND PRODUCTS LTD. ARVIND OVERSEAS (MAURITIUS) LTD. ARVIND CLOTHING LTD. ARVIND FASHIONS LTD.
CHEMICALS:
ANIL STARCH PRODUCTS LTD. ATUL LTD.
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TELECOM GARMENTS:
ARVIND TELECOM.
AIR-CONDITIONERS:
AMTREX APPLIANCES LTD. OTHERS:
LALBHAI REALTY LTD. ANUP ENGINEERING LTD
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ARVIND LIMITED BOARD OF DIRECTORS 2010-2011 NAME

Mr. Sanajy S Lalbhai S/O Shrenikbhai Lalbhai
DESIGNATION
Executive Chairmen & Managing Director-Promoter.
Mr. Jayesh K Shah S/O Kantilal Shah
Executive-Director & Chief Financial Officers.
Mr. G.M.Yadwadkar S/O Madhulkar Anantrao Yadawadkear
Non-Executive, IndependentNominee Director IDBI Bank.
Mr.S.R.Rao S/O R.Raghunatha Rao
Non-Executive, IndependentNominee Director EXIM Bank.
Mr.Sudhir Mehta S/O Uttamala Natwarlal Mehta
Non-Executive, Independent Directors.
Mr.Munesh Khanna S/O Narindra Khanna

Non-Executive, Independent Directors.

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ABOUT FINANCING ACTIVITY

Financial management is that managerial activity which is concerned with the planning and controlling of the firms financial resources. Firms create manufacturing capacities for production of goods, some provide services to customers. They sell their goods or services to earn profits. They raise funds to acquire manufacturing and other facilities. Thus the three most important activities of a business firm are i.e. Production, Marketing and Finance. Business takes money manages the money then it can earn more of life money that has taken. So, financial management covers the planning and effective utilization and firms resources.
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FINANCING HIEARCHY OF ARVIND LTD.
CFO
DEPUTY CFO
A/C GENERAL MANAGER MANAGER A/C MANAGER A/C
GENERAL MANAGER FINANCE
ASSISTANCE MANAGER A/C OFFICERS
ASSISTANCE MANAGER A/C OFFICERS
A/C EXECUTIVE
A/C EXECUTIVE
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ARVIND BRANDS AND FABRICS
In India, till a while ago, Lee used to be the brand of choice of those with kind uncles abroad. Arvind brought it down to India, positioned it at the upper end of the market. Lee is now as big in India as it is worldwide.
Arrow "America's shirt maker since 1851" has by now come to be ranked among the better perks the corporate lifestyle affords. Arvind introduced India's movers and shakers to Arrow in 1993.
There was a time when jeans used to cost big money. That was before Arvind came along with Newport, our value for money brand, which delivered on the promise of "good jeans for less". Today, Newport is by far, the largest selling jeans brand in India.
Flying Machine, the first Indian brands that measured up to international standards, and also one of the few that had a national presence. Till early 1997, Flying Machine was marketed through 700 multi-brand outlets.
All over India, people who use to lounge around in lungies have been offered an opportunity to roam around in jeans. Thanks to the brand Ruf & Tuf, which has probably the worlds first ever brandReady-to-stitch jeans.
Made from EASY CARE blends, EXCALIBUR shirts and trousers are highly Crease-Resistant and retain their flawless shape for hours on end to give a 'fresh' look throughout the day. This provides the wearer with a winning edge. Excalibur is competitively priced. Excalibur EASY CARE is available only through a chain of 40 exclusive stores across the country.
The Ruggers product range for Men and Women is wide in strikingly casual designs and colors. The range for women is the finest with a tremendous content of creativity in both styles and colors. Ruggers are currently marketed through 50 exclusive stores of the Flying Machine. A rugger for kids in the age group of 4-14 years is also available now.
FABRICS
Arvind was already making shirting for the Indian market. In 1990, we decided to focus on high value shirting, so that we could expand our markets beyond
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India's borders. As a part of our commitment to being a value-adding partner to each of our customers, Arvind Shirtings have invested US $ 100 million in Santej. This plant has an annual capacity of 34 million meters of 100% cotton woven. Arvind's philosophy in manufacturing is 'Excellence in Quality and Flexibility in Production'.
Arvind has recently set up a dedicated bottom weights plant as part of Arvind Polycot Limited.
The Product
The new plant manufactures 100% cotton piece dyed fabric with weights upwards of 6.0 oz. Product varieties include twills, drills, gabardines, chinos, canvas, tussore, bedfordcord, herringbone and other specialty weaves.
In 1986, It looked for textiles that had global demand, high margins, and high entry level barriers (either of technology, expertise or set-up costs), and, very importantly, low "fashion volatility". It wanted to focus on fabric that would never go out of style. Analysis of potential products threw up denim as the answer.
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When Arvind Mills Ltd. started making denim, it set itself three objectives: (a) Become the market leader in India (b) Join the ranks of the biggest denim manufacturers in the world in terms of volume and product range (c) Become the largest denim manufacturer in the world Arvind has achieved the first and second goals, and expect to touch the third by the turn of the century. With a production capacity of 120 million meter per annum, it is currently India's largest and the world's third largest producer of denim. In India, Arvind command a market share of approximately 64% - 5 times that of the next largest player. Our denim is used to make India's leading jeans brands - Flying Machine, Killer, Levi's, Numero Uno, Pepe, Texas Jeans, UFO and Wrangler. All the leading local jeans manufacturers use Made from original Arvind denim as an indicator of high quality and authenticity. We also export denim to over sixty-six countries worldwide. The US forms 31% of our export market, while the EC and Hong Kong constitute 20% and 24% respectively. Denim exports constitute approximately 50% of our turnover.
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PRODUCT RANGES
1. Product Differentiation of Denim Fabric by Yarn type
Open End Even Ring Slub Ring Stretch
2. Product Differentiation of Denim Fabric by Shades

Indigo Dark Indigo SBIT IBST VBIT IBVT Sulphur Black
3. Product Differentiation of Denim Fabric by Weave

2/1 RHT 2/1 LHT 3/1 RHT 3/1 LHT 1/1 2/2 Broken Twill
Portfolio of Arvind limited

Portfolio Denim Shirting Garment Brand/Retail Others Percentage% 26% 11% 16% 21% 26%
Pie chart:
Arvind Portfolio
Others 26% Denim 26%
Shirting 11%
Brand/Retail 21%
Garment 16%
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Shareholding Pattern of Arvind limited

PARTICULARS
Promoters Institution General public Grand total
NO. OF SHARES
89910082 21651572 120419541 231977541
PERCENTAGE %
38.76% 9.33% 51.91% 100%
CHART
39% 52%
PROMOTERS INSTITUTIONS GENERAL PUBLIC
9%
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INTRODUCTION OF ALOK INDUSTRIES LTD.
Alok was established in 1986 as a private limited company, with first polyester texturising plant being set up in 1989. It became a public limited company in 1993. Over the years, it has expanded into weaving, knitting, processing, home textiles and garments. And to ensure quality and cost efficiencies it has integrated backward into cotton spinning and manufacturing partially oriented yarn through the continuous polymerization route. It also provides embroidered products through Grabal Alok Impex Ltd., our associate company.
It has evolved into a diversified manufacturer of world-class home textiles, garments, apparel fabrics and polyester yarns, selling directly to manufacturers, exporters, importers, retailers and to some of the worlds top brands.
Alok has recently entered the domestic retail segment through a wholly owned subsidiary, Alok Retail India Limited, with a chain of stores named H&A that offer garments and home textiles at attractive price points.
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COMPANYS VISION
To be the world's best integrated textile solutions enterprise with leadership position across products and markets, exceeding customer & stakeholder expectation.
COMPANYS MISSION
We will :

Offer innovative, customized and value added services to our customers Actively explore potential markets & products Optimise use of all resources Maximize people development initiatives Become a process driven organization Be a knowledge leader and an innovator in our businesses Exceed compliances and global quality standards Be an ethical, transparent and responsible global organization
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Year
Milestone
1986
Incorporation of the Company
1993
Becomes a public limited company with a Rs. 4.5 crore IPO Sets up financial and technical collaboration with Grabal, Albert Grabher GmbH & Co of Austria to make embroidered products through a joint
1995 venture company, Grabal Alok Impex Ltd.
2003
Export Trading House status granted
2004
Turnover surpasses Rs. 1,000 crore
2006
Texprocil silver trophy awarded for second highest export in manufacturer exporter made ups category
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2007
ISO 9001:2000 certification obtained 60 per cent stake in Mileta a.s. a Czech Republic-based textile company acquired
Controlling stake in U.K based retail store chain, qs (now Store Twenty one) acquired
Organic cotton contract farming commenced Gold Trophy for best export performance to Focus LAC countries awarded by Synthetic & Rayon Textile Export Promotion Council
Awarded Silver trophy for highest fabric exports and Bronze trophy for highest made ups export
Turnover crosses Rs. 2,000 crore Exports crosses Rs. 1,000 crore Awards from TEXPROCIL for 2007-2008
2008
Gold Trophy for highest exports of bleached/yarn dyed/ printed fabrics Silver Trophy for highest export of made ups Bronze Trophy for highest global exports Awarded Outstanding Exporter of the Year Textiles at the
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International Trade Awards 2007-08; presented by DHL CNBC 2009

Turnover crosses Rs. 2306 crore Exports crosses Rs. 1100 crore
2010
Turnover crosses Rs.2254 crore
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Part-3 Research Methodology

Research Design:
Research designs involve the descriptive. The analyze the financial resources and financial position of The ARVIND LTD. Where in past data and financial statements are being used to interpret the financial position and to know the working capital position of the company.
Scope of the study:

The scope of the study will include the analysis of the working capital management of the company and to analyze the working capital need. Moreover, the study also includes the ratio analysis that will help in studying the working capital position for the current year and preceding years.
Sources of data collection:

The study that is conducted being a descriptive one the research sources of data used is of two types.
Primary data:
Since it is a descriptive research design the primary information is collected through discussion with the managers of ARVIND LIMITED, expert, staff members, etc. Secondary data: For concluding the detailed study of this topic it is necessary to have some of the secondary information which is collected from the Balance sheet of the ARVIND LIMITED for 4 years. Profit and loss account for 5 years. Financial Journal, Book and Website.
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Method of data collection:

The information needed for conducting this study is collected through PERSONAL INTERVIEWING. This method is best for descriptive research design.Morever, it helps to clarify the doubts immediately by conducting discussion with the experts, company authorities, and staff members.
Tools used for analysis:

The tools that is used for the analysis purpose would be the ratio analysis and various methods adopted by the company for credits and its payments to know the movement of working capital for the current year as well as the preceding year. The operating statement is also used for analyzing the position of working capital.
Objectives of Research
To understand the finance structure of the company. To understand the working capital & inventory management of the Organization. To access the performance, liquidity position of the company through Analysis. To know the cash requirement of the company. Analysis of relationship between working capital and profitability. To find the inventory management control of the organization.
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Benefits of the study

Exposure to the real system will help understanding the practical application of the theory in organization. The study on this subject will give a better idea and view regarding the assessment of working capital in future. A process study will actually help management in better assessment of working capital in future. The study also helps to understand many latent facts which are not apparent in the normal Coerce of theoretical study and which is applicable in the organization. The experience has help in understanding the data management and interpretation along with integration and how this process is conducted in the organization.
Limitation of the study

Although there are other aspects of working capital like collection of the working capital, inventory management, techniques of inventory management but concentration was only on working capital management. Because of shortage of time, it was not possible to cover through information about other department of organization but brief information is being provided for same. Because of confidential information could not be collected, this made the study a narrow Operation
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Part-5
Concept of Working Capital

A company invests its funds for long term purposes and short term operations. That portion of a companys capital, which is required for minimum stock of raw material to maintain continuity in production, minimum stock of finished goods to fulfill future demand, payment of wages and salaries of laborers and employees is called Working Capital. In other words, working capital is that part of the firms capital which is required for financing short term or current assets such as debtors, inventories, marketable securities and cash.
The word working capital comprises of two words working and capital. In trade and industry, the word working with reference to capital means circulation of capital from one form to another during day-to-day operations of the business whereas the word capital refers to the monetary values of all the assets (tangible and intangible) of the business.
There are numerous concepts of working capital as given by various accountants, financial experts, entrepreneurs and economists. Important among them are
Balance Sheet or Traditional Concept
Operating Cycle Concept
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Objective of Working Capital Management
a. To minimize the amount of capital employed in financing the current assets. This will also lead to improvement in the Return on Capital Employed.
b. To manage the current assets in such a way that the marginal return on investment in these assets is not less than the cost of capital acquired to finance them. This will ensures the maximization of the value of the business units.
c. To maintain the proper balance between the amount current assets and liabilities in such a way that the firm is always able to meet its financial obligation whenever due.
d. To ensure the smooth working of the units without any production held-ups due to paucity of funds.
e. To ensure easy and cheapest availability of resources at the time of growth and expansion activities.
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Forms of Working Capital
Working capital is the amount of funds required to cover the cost of operating the enterprise. In other words, working capital may be defined as excess of current assets over current liabilities. It may be classified in two ways i.e. (i) on the basis of balance sheet concept and (ii) on the basis of time. These are illustrated by the following chart.
On the basis of B/S concept Types of working capital On the basis of time
Gross Working Capital Net Working Capital Permanent or Regular Working Capital Variable or Temporary Working Capital
Seasonal Working Capital
Specific Working Capital
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On the basis of B/S concept
According to this concept, working capital is calculated on the basis of the balance sheet prepared at a specific date. It is further classified it two forms- gross and net working capital.
Gross Working Capital The gross working capital refers to the firms investment in
current assets. The sum of current assets is a quantitative aspect of working capital which emphasizes more on quantity than its qualities.
Net Working Capital - Net working capital is the difference between the current assets
and the current liabilities or the excess of total current assets over total current liabilities.Net working capital may also be defined as, that part of a firms current assets which is financed with long term funds. The net working capital may either be positive or negative. When current assets exceed current liabilities, working capital is positive and negative when current liabilities exceed current assets.
On the basis of Time
Working capital is the amount required in different forms at successive stages of operation during the net operating cycle period of an enterprise. The duration or time required to complete the sequence of events right from purchase of raw materials/goods for cash to the realization of sales in cash is called the operating cycle or working capital cycle. On the basis of time working capital may be classified as (i) Permanent or regular working capital; and (ii) Variable or temporary working capital.
Permanent or regular working capital It represents the irreducible minimum amount that is
permanently blocked in the business and cannot be converted into cash in the normal course of business. It has following characteristics:
a. It keeps on changing its form from one current asset to another
b. The size of working capital grows with the growth of the business
c. As long as the firm is a going concern, this part of working capital cannot substantially be reduced.
Variable or temporary working capital Any amount over and above the permanent working capital is variable or temporary working capital. It fluctuates as per the change in the production and sale activities. It can further be classified in following two forms:
a. Seasonal working capital The capital required to meet the seasonal demands of the enterprise is called seasonal working capital. It is of short-term nature and thus has to be financed from short-term sources like bank loan etc.
b.Specific working capital Specific working capital is that part of the working capital which is required to meet unforeseen contingencies like slump, strike, flood, war etc.
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Components of Working Capital
Working capital refers to the metric valuation of the current assets and the current liabilities. These two are the basic components of working capital.
CURRENT ASSETS ARE: Inventories Sundry Debtors Bills Receivables Cash & Bank Balances Short term investment Advances such as advances for purchase of raw materials, component and consumable stores, prepaid expenses etc.
CURRENT LIABILITIES ARE: Sundry Creditors

Bills Payable Creditors for outstanding expenses Provision for tax Other provision against the liabilities payable within a period of 12 Month
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Sources of Working Capital

Funds available for a period of one year or less are called short-term finance. In India short-term funds are used to finance working capital. Two most significant forms of working capital are: trade credit, bank borrowing. The use of trade credit has been increasing over the years in India. Trade credit as a ratio of current assets is about 40 percent. It is indicated by the Reserve Bank of India that trade credit has grown faster than the growth in sales. Bank borrowing is the next important source of working capital finance. Before seventies, bank credit was liberally available to firms. It became a resource after eighties because of the change in the government policy. Another form of short-term working capital finance which has recently developed in India is Commercial Paper.
Trade credit
Trade credit refers to the credit that a customer gets from supplier of goods in the normal course of business. In practice, the buying firms do not have to pay cash immediately for the purchase made. It is a major source of financing for firms. In India, it contributes to about one-third of the short-term financing. Trade credit is mostly an informal arrangement, and is granted on an open account basis. Once the trade links have been established between the buyer and seller, they have each others mutual confidence and trade credit becomes a routine activity. Open account trade credit appears as sundry creditors on the buyers balance sheet. Trade credit may also take the form of bills payable. A bill is formal acknowledgement of an obligation to repay the outstanding amount. It also involves some credit terms. These credit terms refer t the conditions under which the supplier sells on credit to the buyer, and the buyer is required to repay the credit. These conditions include the due date and the cash discount (if any) given for prompt payment.
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Bank Finance Banks are the main institutional sources of working capital finance in India. A bank considers a firms sales and production plans and the desirable levels of current assets in determining its working capital requirements. The amount approved by the bank for the firms working capital is called credit limit. Credit limit is the maximum funds which a firm can obtain from the banking system. In the case of firms with seasonal businesses, banks may fix separate limits for the peak level credit requirement and normal non-peak level credit requirement indicating the periods during which the separate limits will be utilized by the borrower. A firm can draw funds from its bank within the maximum credit limit sanctioned. It can draw funds in the following forms: (a) overdraft, (b) cash credit, (c) bills discounting, and (d) working capital loan.
Overdraft Under the overdraft facility the borrower is allowed to withdraw funds in excess of
the balance in his current account up to a certain specified limit during a stipulated period. Interest is charged on daily balances on the amount actually withdrawn subject to some minimum charges.
Cash Credit Under the cash credit facility, a borrower is allowed to withdraw funds from the
bank up to the sanctioned credit limit against the security of current assets. He is not required to borrow the entire sanctioned credit at once, rather, he can draw periodically to the extent of his requirements and repay by depositing surplus funds in his cash credit account. Interest is payable on the amount actually utilized. It is more flexible from borrowers point of view.
Bills Discounting Under the purchase or discounting of bills, a borrower can obtain credit from
the bank against its bills. The bank purchases or discounts the bill and provides the amount within the overdraft limit. Before purchasing or discounting, bank satisfies itself as to the creditworthiness of the borrower. When a bill is discounted, the borrower is paid the discounted amount of bill viz. full amount of bill minus discount charged by the bank. The bank collects the full amount on maturity.
Letter of Credit Suppliers, particularly foreign suppliers, insist that the buyer should ensure
that his bank will make the payment if he fails to meet its obligation. This is ensured through a letter of credit (L/C) arrangement. A bank opens an L/C in favor of a customer to facilitate his purchase of goods. This arrangement passes the risk of the supplier to the bank. Bank will make payment to the supplier on behalf of the customer only when he fails to meet the obligation.
Working Capital Loan a borrower may sometimes require ad hoc or temporary

accommodation in excess of sanctioned credit limit to meet unforeseen contingencies. Banks provide such accommodation through a demand loan account or a separate non-operable cash credit account. The borrower is required to pay a higher rate of interest on such additional credit.
Commercial paper
Commercial paper (CP) is an important money market instrument in advanced countries like USA to raise short-term funds. In India, the Reserve Bank of India (RBI) introduced the commercial paper scheme in the Indian money market in 1989. Commercial paper is a form of unsecured promissory note issued by firms to raise short-term funds. The buyers of commercial paper include banks, insurance companies, unit trusts and firms with surplus funds to invest or a short period with minimum of risk. Given this investment objective of the investors in the commercial paper market, there would exist demand for commercial papers of highly creditworthy companies. In India, the issue of commercial paper is being regulated by RBI. Those companies are allowed to issue commercial papers which have a net worth of Rs.10 crore, maximum permissible bank finance of not less than Rs.25 crore, and are listed on the stock exchange. A company can issue CPs amounting to 75percent of the permitted bank credit. In addition to the above mentioned sources, accrued expenses and deferred income are other spontaneous sources of short-term financing. Accrued Expenses represent a liability that a firm has to pay for the services which it has already received. Deferred Income represents funds received by the firm for goods and services which it has agreed to supply in future.
Determinants of Working Capital
The following factors should be considered carefully while determining the amount of working capital required:
1. Nature of business The amount of working capital is basically related to the nature and the volume of the business. Firms engaged in public utility services require moderate amount of working capital whereas firms producing luxury goods require large amount of working capital.
2. Size of business Size is also a determining factor in estimating working capital requirements. The size may be measured either in terms of scale of operations or in terms of assets or sales.
3. Changes in technology Changes in technology may lead to improvement in processing of raw material, saving in wastage, higher productivity and more speedy production. All these improvements enable the firm to reduce the working capital requirements.
4. Length of operating cycle The amount of working capital depends upon the length or duration of operating cycle. The speed with which the operating cycle is completed, determines the amount of working capital. The larger is the period, the more is the investment in inventories and wage bills.
5. Terms of purchase and sale A firm buying raw materials and other services on credit and selling on cash basis will require less investment in current assets as compared to a firm which purchases on cash basis and sells on credit. The period of credit and the efficiency in collection of debts also influence the amount of working capital required. The terms and conditions of purchase
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and sale are generally governed by the prevailing trade practices and by changing economic condition.
6. Inventory - Some concerns are force to hold large inventories in terms of raw materials or finished goods due to the reason of seasonal nature of availability, long distances, scarcity etc, in such case the working capital requires is more.
7. Business cycles Business cycle refers to the alternate expansion and contraction in general business activities. In a period of boom when the business is prosperous, there is need for larger amount of working capital due to increase in sales and rise in prices of raw materials. The contrary happens in the period of depression.
8. Profit margin A high rate of profit margin due to quality products or good marketing management or monopoly power in the market, reduces the working capital requirements of the firm, as profit earned in cash is a source of working capital. On the contrary, firms earning low margin of profits due to competition or mismanagement need larger amount of working capital.
9. Credit policy A firm following liberal credit policy and thus granting credit facilities to all customers without evaluating the credit worthiness will require more working capital to carry book debts. On the contrary, a firm that adopts strict credit policy and grants facilities to customers with high credit standing will require less amount of working capital as funds tied-up in receivables will be released promptly for further uses.
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Significance of adequate Working Capital
Adequate working capital is a source of energy to any business organization. It provides the following advantages to a business enterprise:
1. Adequate working capital enables a firm to make prompt payments to the suppliers and thus it can also avail the advantage of cash discount by paying cash for the purchase of raw material.
2.
If a firm has adequate working capital, it can declare and distribute enough dividends when there are sufficient profits. This creates satisfaction among the shareholders.
3. In business, promptness to third parties creates goodwill and increases the debt capacity of the concerned firm. This in turn ensures uninterrupted flow of production.
4. A firm having adequate working capital and liquid assets can arrange loans from the banks on easy and favorable terms, as it provides a good security for the unsecured loans.
5. Adequate working capital has psychological effect on the directors and executives of the firm as it motivates them to work vigorously. It creates an environment of security, confidence, high morale and increases overall efficiency in the business.
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Effects of excessive Working Capital
Excess or redundant working capital refers to the idle funds which do not earn any profits for the firm. Inadequate working capital is disastrous; whereas redundant working capital is a criminal waste. A firm may suffer following disadvantages from excess working capital:
1. It may lead to unnecessary purchasing and accumulation of inventories causing more chances of mishandling of inventories, theft, waste, losses, etc.
2. Excessive working capital implies excessive debtors and defective credit policies causing higher incidence of bad debts that ultimately affects profits of the firm.
3. It indicates inefficient management of the firm. It shows that the management is not interested in effectively utilizing the resources and encouraging economy.
4. Excessive working capital remains idle and earns no profits for the firm, even though interest has to be paid on it. This reduces the amount of profits.
5. It is an indicator of inefficient management. Hence, shareholders believe that they are not getting proper return on their investments. This results in lowering the value of shares causing discontentment among shareholders.
6. It promotes profits of speculative nature by stock-piling. It results in liberal dividend policy, but the management has to face difficulties in future when there are no speculative profits.
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Inadequate Working Capital is bad and has the following Problems
Its Stagnates growth. It becomes Difficult for the firms to undertaken profitable for nonavailability of working capital funds. It becomes difficult to implement operating plans and achieve the firms profit target. Operating inefficiencies creep in when it becomes difficult even to meet day-to-day commitments. Fixed assets are not efficiently utilized for the lack o f working capital funds. Thus then firms Profitability will deteriorate. Paucity of working capital funds renders the firms unable to avail attractive credit opportunities etc. The firms, loses its reputation when it is not in a position to cover its short-term obligations. As a result firm faces tight credit terms.
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WORKING CAPITAL POLICY

The basic objective of working capital management is that there should be an optimum investment in working capital. There should not be either excessive working capital or shortage of working capital. In order to decide the optimum investment working capital, there is a need to consider different policies of working capital. The different policies are discussed.
(A) Ratio of current assets to sales:

The current assets change as a result of changes in the sales. A firm has to decide about the proportion of current assets to be maintained in relation to sales..
AN AGGRESSIVE CURRENT assets policy is followed, a firms will maintain a very low level of current assets in relation to sale. A CONSERVATIVE POLICY implies carrying of a very high level of current assets in relation to sales.
A MODERATE POLICY is a via media between the two extreme policies mentioned
above and Result into moderate current assets into sales.
Conservative
Moderate
Current Assets
Aggressive
Sales
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Financing of current assets:

In conservative current asset financing policy, a firm relies more on long term financing such as shares, debentures, preference shares, long term debt and retained earnings. In this method, as the emphasis is on long term financing, the firm has less risk of facing problems of shortage of funds. An aggressive policy is said to be followed by a firm, when it relies heavily on short-term bank financing and other short-term sources. Even some part of fixed assets is financed by short-term funds. The policy exposes the firms to a higher degree of but reduces the average cost of financing.
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BALANCE SHEET OF ARVIND LIMITED

Particulars SOURCES OF FUND Share holder fund Share capital Reserves & surplus Total Secured Loans Unsecured Loans Deferred Tax Liability TOTAL APPLICATION OF FUND Fixed Assets Gross Block Less- Depreciation Net Block Capital Work in Progress Investment FOREIGN CURRENCY MONETARY ITEM TRANSLATION DIFFERENCE ACCOUNT(16) Current assets, Loan & Advance Inventories Sundry Debtors Cash & Bank Balance Other Current Assets Loan & Advance Total Less-Current Liability & Provision Liabilities Provisions Total Net Working Capital Miscellaneous Expenditure (to the extent not written off) TOTAL
As at 31.03.10
As at 31.03.09
As at 31.03.08
As at 31.03.07
239.55 1180.45 1420.00 1728.73 141.85 12.82 3303.40
260.10 940.47 1200.57 1920.90 103.04 12.82 3237.33
273.30 1197.05 1470.35 1774.94 97.52 12.82 3355.63
255.58 1113.45 1369.03 1772.74 161.57 12.82 3334.16
3002.45 (1084.34) 1918.11 46.86 1964.97 300.23 (1.06)
3056.80 (1014.51) 2042.29 81.58 2123.87 100.06 6.77
2942.99 (906.78) 2036.21 116.14 2152.35 104.99 0.00
2817.21 (772.32) 2044.89 71.45 2116.34 48.05 0.00
432.00 424.16 43.14 95.90 484.80 1480.00 433.42 7.38 440.80 1039.20 0.00 3303.40
581.47 350.84 26.83 54.90 578.47 1592.51 463.29 132.66 595.95 996.56 10.07 3237.33
575.34 261.77 16.32 73.26 544.45 1471.14 360.54 21.81 382.35 1088.80 9.50 3355.63
645.01 204.85 22.31 54.95 663.79 1590.91 408.99 12.15 421.14 1169.77 0.0 3334.16
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PROFIT & LOSS ACCOUNT OF ARVIND LIMITED
Particular INCOME Sales & Operating Income Other Income Total EXPENSES Raw Materials Consumed Purchase of Finished Goods Employee Emoluments Others Interest & finance cost Depreciation Exceptional items (net) Decrease/(Increase) in Stocks Total Profit before tax for the year Less- Current tax Less-Deferred Tax Less Fringe benefit tax Add: MAT Credit Entitlement Profit For the year Less- Prior Period Income/(Expense) Profit before Extra ordinary items (net) Profit after Extra ordinary items Balance as per last years balance sheet Interim Dividend on Preference Shares Tax on Interim Dividend Proposed dividend on Equity Shares Tax proposed dividend Additional dividend on equity share Tax on additional dividend Provision for leave encashment Transferred to capital redemption reserves Transferred to debenture redemption reserve Balance Carried to Balance Sheet
2009-10 2316.89 11.83 2328.72 968.73 47.61 240.90 731.43 155.47 113.80 0.00 18.78 2276.72 52.00 8.77 0.00 0.00 (8.77) 52.00 0.00 52.00 0.00 52.00 282.34 (0.76) (0.13) 0.00 0.00 0.00 0.00 0.00 (19.80) 1.20 314.42
2008-09 2007-08 2006-07 2344.99 51.91 2396.90 695.83 257.90 244.80 924.47 222.13 122.05 11.53 (34.86) 2443.86 (46.96) 0.00 0.00 1.86 0.00 (48.82) 0.95 (47.87) 0.00 (47.87) 434.92 (1.68) (0.29) 0.00 0.00 0.00 (80.10) (9.58) (13.20) 0.15 282.34 2290.33 1847.99 15.91 13.17 2306.24 1861.16 611.26 571.93 305.54 36.97 230.39 204.33 861.04 780.24 131.40 150.26 136.64 143.36 9.31 0.00 (9.49) (53.64) 2276.09 1833.45 30.15 3.10 0.00 2.25 (3.10) 27.90 (0.54) 27.36 0.00 27.36 425.00 (2.48) (0.42) 0.00 0.00 0.00 0.00 (1.34) (13.20) 0.00 434.92 27.71 0.00 0.00 11.62 (11.61) 0.00 0.00 25.27 94.29 119.56 321.17 (3.14) (0.44) 0.00 0.00 0.00 0.00 0.00 (9.90) (2.25) 425.00
2005-06 1592.00 22.52 1614.52 500.24 4.45 135.74 534.14 138.64 155.10 0.00 9.82 1478.14 136.38 11.40 8.27 0.95 (11.40) 127.16 0.00 0.00 0.00 0.00 232.74 (3.80) (0.53) (20.94) (2.94) (1.40) (0.20) 0.00 (9.92) 1.00 321.17
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WORKING CAPITAL OF ARVIND LIMITED

(Actual working capital) CURRENT ASSETS PARTICULAR Raw Materials Work in progress Finished goods Sundry Debtors Cash &Bank Balance 2009-2010 46.35 298.30 302.30 424.16 43.14 2008-2009 93.17 205.3 255.39 350.84 26.83 2007-2008 139.77 147.36 243.23 261.77 16.32 2006-2007 264.27 140.34 198.42 204.85 22.31 ( Rs. in Crore )
CURRENT LIABILITIES PARTICULAR Sundry Creditors Wages Overheads 2009-2010 554.45 230.47 1040.80 2008-2009 344.46 212.64 924.47 2007-2008 204.46 207.12 861.04 2006-2007 278 174.5 780.24
Time period of working capital

Time period of working capital
Raw Materials = 5 months
Work in process = 1 month Finish goods Debtors Creditors Wages Overheads SABAR INSTITUTE OF MANAGEMENT = 1 month = 2 months = 5 months = 1 month = 1 month Page 72
WORKING CAPITAL REQUIREMENT OF THE ARVIND LTD.

(Rs.in crore) PARTICULARS 2009-2010 (crore) CURRENT ASSETS 1. Raw Materials 2. Work in progress. 3. Finished goods 4. Debtors 5. Cash & Bank TOTAL - (A) CURRENT LIABILITIES 1. Time lag for Creditors 2. Time lag for Wages 3. Time lag for Overheads TOTAL - (B) NET WORKING CAPITAL (A-B) WORKING CAPITAL INDICES 353.65 18.25 82.05 453.95 959.30 210.30% 270.51 17.72 77.04 384.69 542.76 118.98% 188.60 17.26 71.75 329.48 501.00 109.83% 241.28 14.54 65.02 317.87 456.15 100% 345.35 298.30 302.30 424.16 43.14 1413.25 2008-2009 (crore) 289.93 147.89 146.87 315.94 26.83 927.45 2007-2008 (Crore) 240.47 139.10 135.37 299.23 16.32 830.48 2006-2007 (crore) 238.30 128.33 117.73 267.35 22.31 774.02
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NET WORKING CAPITAL INDICES

180.00% 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2009-2010 2008-2009 2007-2008 2006-2007 NET WORKING CAPITAL INDICES
Interpretation
In the year 2008 to 2009 net working capital increased to Rs 501 from Rs. 542.46, the increase in working capital is 9%.
While current assets increase by12% and current liabilities increase by 17%.
And in 2010 current assets went up by 65%, current liabilities grown by 85% which pushed up working capital 90%.
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WORKING CAPITAL AS PER TIME PERIOD ASSUMPTIONS

(Rs.in Crore) PARTICULARS 2009-2010 2008-2009 2007-2008 2006-2007
CURRENT ASSETS 1. Raw Materials 2. Work in process 3. Finished goods 4. 5. Debtors Cash & Bank
222.00 78.72 220.29 253.21 43.14 817.36
159.46 73.94 183.59 197.46 26.83 641.28
132.26 69.55 169.21 187.02 27.83 585.86
131.07 64.17 147.16 167.09 28.83 538.32
TOTAL - (A) CURRENT LIABILITIES 1. Time-lag for Creditors 2. Time lag for Wages 3. Time-lag for Overheads TOTAL - (B) NET WORKING CAPITAL NET WORKING CAPITAL INDICES
62.81 19.20 86.73 168.74 648.62 158.01%
54.10 17.72 77.04 148.86 492.42 119.96%
37.72 17.26 71.75 126.73 459.13 111.85%
48.26 14.54 65.02 127.82 410.50 100%
Time period of working capital Raw Materials Work in process Finish goods Debtors Creditors Wages Overheads
= 2.75 month = 0.5 month = 1.25 month = 1.25 month =1 =1 =1 month month month
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NET WORKING CAPITAL INDICES

180.00% 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2009-2010 2008-2009 2007-2008 2006-2007 NET WORKING CAPITAL INDICES
Interpretation
In the year 2008 to 2009 net working capital increased to Rs 459.13 from Rs. 492.42, the increase in working capital is 8%.
While current assets increase by 9.53% and current liabilities increase by 17.46%.
And in 2010 current assets went up by 27.45%, current liabilities grown by 13.35% which pushed up working capital 38.05%.
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Operating and cash Conversion Cycle
Operating cycle method is the best technique for estimating future cash working capital of a firm. Under this method, total operating expenses for a period are divided by the number of operating cycles in the relevant period to find out the cash cost of working capital. Thus, the computation of total operating expenses, operating cycle and number of operating cycles in the year is essential for estimating the amount of working capital, as discussed below: Operating expenses include purchase of raw material, direct labor cost, fuel and power, administrative and selling and distribution expenses for a specific period for which estimates can be obtained from cost records.
Operating cycle period means the total number of days involved in the different stages of operation commencing from the purchase of raw materials and ending with collection of sale proceeds from debtors after adjusting the number of days credit allowed by suppliers. It is calculated by using the following formula:
I. PERIOD OF OPERATING CYCLE:
Material storage period (M)+ Work-in-progress period (W) + Finished goods period (F)+ Debtors collection period (D) - Creditors payment period (C)
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CALCULATION OF TIME PERIOD

Avg. Stock of raw material
1.
Inventory period
= ------------------------------------------------------Cost of raw material consumed per month
RAW MATERIAL Rm Consumed Avg Stock of Rm Rm Consumed per Month Cl Rm Op Rm Time Lag for Rm Avg Time Lag
2009-2010
2008-2009
2007-2008
2006-2007
968.73 69.76 80.73 46.35 93.17 2
695.83 116.47 57.99 93.17 139.77 2 5
577.13 202.02 48.09 139.77 264.27 4
571.93 260.695 47.66 264.27 257.12 5
Avg Stock of WIP 2. WIP holding period = ------------------------------------------Cost of production per month
WIP Avg Stock of Wip Tot. Cost of Production Cost of period per Month Time Lag for Wip Avg Time Lag
2009-2010
202.20 1899.20 158.2667 1
2008-2009
176.33 1774.62 146.8716667 1 1
2007-2008
202.02 1669.2 135.3658333 1
2006-2007
126.625 1539.98 117.7291667 1
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Cost of production=op wip+rm consumed+manu.exp-cl wip+adm o/h
COST OF PRODUCTION Op wip Rm consumed Manu. Exp Cl Wip Adm. Exp
2009-2010 159.60 968.73 1135.60 210.70 75
2008-2009 147.36 695.83 1061.73 205.3 75
2007-2008 140.34 611.26 989.96 147.36 75
2006-2007 112.91 571.93 920.48 140.34 75
Avg Stock of finished goods 3. Finished goods = -------------------------------------------------Cost of goods sold per month
FINISHED GOODS
2009-2010
324.75 2114.85 176.23 2
2008-2009
249.31 1762.46 146.8716667 2 1
2007-2008
220.875 1624.39 135.3658333 2
2006-2007
135.105 1412.75 117.7291667 1
Avg Stock of Finish Goods Cost of Goods Sold Cost of Goods Sold P.M Time Lag for F.G Avg. Time Lag
Cost of goods sold=cost of production+op fg-cl fg
COST OF GOODS SOLD Op Fg Cost of Production Cl Fg
2009-2010 297.23 1909.75 275.85
2008-2009 243.23 1774.62 255.39
2007-2008 198.42 1669.2 243.23
2006-2007 71.19 1539.98 198.42
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Avg. debtors 4. Debtors collection period = -------------------------------------Credit sale per month
DEBTORS Avg Debtors Total Credit Sales Credit Sales Per Month Time Lag For Debtors Avg Time Lag
2009-2010 354.85 2430.84 202.57 2 2
2008-2009 306.305 2295.19 191 2
2007-2008 233.31 2169.08 181 1
2006-2007 286.565 2150.77 179 2
Avg Creditors 5. Accounts payable period = ------------------------------------Credit Purchases per month
CREDITORS Avg. Creditors Credit Purchase Credit Purchase P.M Time lag for creditors Avg time lag
2009-2010 336.95 753.75 75.7666 5 5
2008-2009 274.46 649.23 54.1025 5
2007-2008 241.23 452.63 37.71916667 6
2006-2007 224.425 579.08 48.25666667 5
CREDIT PURCHASE=RM CONSUMED+CL RM-OP RM
6. Operating Cycle
Inventory Period + Debtors collection period + WIP holding period + finished goods - Accounts payable period
7. Cash Cycle
= Operating cycle - Accounts Payable Period
There are no sources in the current document.
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INTERPRETATION OF WORKING CAPITAL
1. RAW MATERIAL, WIP, FINISHED GOODS
800 700 600 500 400 300 200 100 0 2006-07 2007-08 2008-09 2009-10
RAW MATERIAL WIP FINISHED GOODS
Rm stock has decreased over the years due to the increase in cotton prices. It has reduced by 50% in the year ending 31st mar 2010 compared to the previous years. Due to the increased capacity and excessive stock with the company due to reduced demand, wip and finished goods show an increase. Raw material has seen fluctuations in the last few years. The raw material cost as a% to sales was higher by 2% in the year ending 31st march 2010.
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2. DEBTORS, CASH AND BANK BALANCES AND CREDITORS
600 500 400 DRS 300 200 100 0 2009-10 2008-09 2007-08 2006-07 CASH CRS
Cash and bank of Arvind Ltd have been progressively increasing. Debtors have increased in the current year. Debtors and creditors have fluctuated over the years due to the changing cost and demand patterns.
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INTERPRETATION OF FACTORS WHICH AFFECTED THE WORKING CAPITAL OF ARVIND LIMITED

2009-2010 was a watershed year in the global economy with an unprecedented financial meltdown. The impacts were visible in the Indian economy also. The company was during the year hit by multiple factors ranging from loss on hedged position of foreign exchange due to rapid depreciation of rupee which resulted company being uncompetitive in the global markets, and also rapid rise in energy cost due to global oil prices and lack of gas for firing companys power plants.
The cotton prices were higher primarily due to 40% increase in msp by government.
The direct materials were marginally lower than last year due to reduced prices of dyes and chemicals in second half of financial year. Power cost had further gone up in the current year by 26% due to continued non availability of gas for power generation during the first 10 months of the financial year resulting in lowering the operating margin by 3%.
Salaries and wages figure went higher by 6% which is in line with the general cost of
increase in manpower cost in the country.

Rapid expansion in apparel manufacturing capacities has contributed to an overall increase
in wages and salaries.

The profit for the year was 11% as compared to 12.7% in the previous year .the 12% drop
is mainly attributed to higher power cost and cotton prices.
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Net current assets were lower on account of provisions of hedge reserves. While overall exports volume suffered by 30% in line with overall sluggish markets, the
price realization in exports market improved by 26%
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Part-5 Credit Policy

A firm following liberal credit policy and thus granting credit facilities to all customers without evaluating the credit worthiness will require more working capital to carry book debts. On the contrary, a firm that adopts strict credit policy and grants facilities to customers with high credit standing will require less amount of working capital as funds tied-up in receivables will be released promptly for further uses.
Market Segment:
Domestic Export
1) Domestic Segment :( Domestic Division) Dealers /Retailers Domestic Brands Ex: Color plus Ready mad garment exporters
Payment terms:
For dealers 21 to 30 days with cash discount scheme. In domestic brands 30 to 60 with cash discount scheme. In Ready mad garment exporters no credit payment against lorry receipts.
Cash discount:
Cash discount scheme only Domestic/ retailers & Domestic brand only 1% to 2% against earlier payment
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2) Export Segment:
With new customer payment term advance and with well known brand as per their policy.
Ex: GAP
Payment terms:
Advance Sight letter of credit
USANSE LC (Letter of Credit)

30 days to 120 days depending on customer
Credit Control system:

Two types of limit
1) Over dues limit 2) Total dues limit
Over dues interest charge:

Every months company prepare debit note for over dues interest and recovers that from all customers Company generate system for over dues limit & total over dues limit system automatically stop dispatch good for the dealers. Further good dispatch against over dues & total dues cannot send without permission from prior authority. There will be penalty for anyone a break the rules of payment term. And also take action against who does not consider the companies rules and regulation.
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Collection:
We strive to have a consistent and courteous approach to collection. All customers are called when they are 40 days past due. If no payments are received after three calls, the sales representative is asked to contact the customer. If there is still no response, the account is considered for legal action. In the case of bankruptcies, the Credit Department files proofs of claim. The department represents our company with creditor committees and coordinates activities with attorneys.
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RECOMMENDATIONS AND CONCLUSION

After a detailed study of the financial performance and financial standing of Arvind Limited, we would like to suggest the following for the improvement in the financial management of the company, with special reference to its Working Capital Management.
Arvind Limited is facing increased competition in the market so it will have to adopt more aggressive working capital management policy in order to increase its share and sales turnover. It is observed that the credit period for Debtors is ranging for 30 days to 120 days. We would like to suggest that the maximum credit period should not exceed 90 days. Many debtors have not made the payment even after one year period. Due to this there is reduction in the collection from the debtors year to year. Company has to maintain their sales turnover and for that Purpose Company has to maintain and increase their working capital. Gross profit is increasing but net profit is decreasing so the company has to effectively utilize and maintain working capital. Shareholder value.
Page 88
CONCLUSION
Working capital is simply current assets minus current liabilities. It's the best way to judge how much a company has in liquid assets to build its business. As Arvind is a cloth manufacturing company the procedure of goods to be ready for sale takes too much time. Thus, working capital is blocked in huge amount. But with the comparison to other mills Arvind is leader of the Cloth manufacturing. And its Working Capital is blocked for lesser time than another mill as its inventory Cotton plays a major role and its available easily from the farmers with which it has contracted with and also at competitive prices. Also Arvind buys it in higher volumes, so it takes more time to stuff up and the complete readymade stock takes app. 1.25 month for wholesaling. Arvind makes payment to his creditors within a month and collect from debtors takes app. 1.25 month. So, its overall short-term liquidity position is very good. The mean percentage of current assets to total assets for the last four years is 40% this shows decrease in investment of current assets. Overheads have increased as compared to the last two years thereby reducing the profit. If a company has ample positive working capital, it's is in good shape, with plenty of cash on hand to pay for everything it might need to buy. But negative working capital means that the company's current liabilities exceed its current assets, removing its ability to spend as aggressively as a working-capitalpositive peer. All other things being unaffected, a company with positive working capital will always outperform a company without it.
Page 89
BIBLIOGRAPHY
1) FINANCIAL MANAGEMENT, 9/e, I M Panddey, Vikas Publishing House Pvt.Ltd.

2) FINANCIAL MANAGEMEN (Theory & Practice), 7/e, Prasanna Chandra, Tata
McGraw-Hill 3) FINANCIAL MANAGEMEN (Text, Problems and Cases), 6/e, M.Y. Khan, P K Jain Tata McGraw-Hill 4) ANNUAL REPORTS OF ARVIND LIMITED - 2009-2010 - 2008-2009 - 2007-2008 - 2006-2007 5) ARVIND MILLS INDUCTION MANUAL
Page 90
WEB-LINKS
www.arvindmills.com
-HISTORY OF ARVIND MILLS LTD -DIVISIONS OF ARVIND MILLS -FABRIC PRODUCTION -ANNUAL REPORTS OF ARVIND MILLS LTD
www.google.com
-INTRODUCTION TO TEXTILE INDUSTRY -INDIAN TEXTILE INDUSTRY -MAJOR TEXTILE INDUSTRY PLAYERS IN INDIA
Page 91
THANK YOU
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SABAR INSTITUTE OF MANAGEMENT

Working Capital & Credit Policy Management

Gujarat Technological University

Internal Guide Mrs. Janvi Joshi

External Guide Mr. Vinit Shah

SABAR INSTITUTE OF MANAGEMENT

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Recommendation Conclusion Bibliography Web-Link

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Part-1 INTRODUCTION OF INDIAN TEXTILE INDUSTRY

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TEXTILE INDUSTRY IN INDIA

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TEXTILE INDUSTRY KEY FACTS

STRENGHTS OF TEXTILE INDUSTRY

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WEAKNESS OF TEXTILE INDUSTRY

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MAJOR PLAYERS IN THE TEXTILE INDUSTRY IN INDIA

MAP SHOWING LOCATION OF TEXTILES CENTRES IN INDIA

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PRODUCT OF THE TEXTILE INDUSTRY

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INDIAS MAJOR COMPETITIORS IN THE WORLD

OTHERS 11% MEXICO 9% TURKEY 9%

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Part-2 COMPANY PROFILE

1930 - Swadesi Movement

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OVERSEAS ACTIVITIES AND STRATEGIC ALLIANCES

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Denim Manufacturing Process

WARP preparation Dyeing and Sizing process:

QUALITY ASSURANCE (Q.A):

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SMALL GARM ENTIN G SAMPLE CHECK CERTI FICATI ON

CHEMI CAL LAB COLOU R TEST CLEARA NCE CELL

PROC ESS CONT ROL

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LALBHAI GROUP COMPANIES:

ANIL STARCH PRODUCTS LTD. ATUL LTD.

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AMTREX APPLIANCES LTD. OTHERS:

LALBHAI REALTY LTD. ANUP ENGINEERING LTD

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ARVIND LIMITED BOARD OF DIRECTORS 2010-2011 NAME

Mr. Jayesh K Shah S/O Kantilal Shah

Executive-Director & Chief Financial Officers.

Mr. G.M.Yadwadkar S/O Madhulkar Anantrao Yadawadkear

Non-Executive, IndependentNominee Director IDBI Bank.

Mr.S.R.Rao S/O R.Raghunatha Rao