A PROJECT REPORT ON

SUMMER TRAINNING
UNDERTAKEN
AT

ADITYA BIRLA CHEMICALS

(INDIA) LTD.
Titled

Working Capital Management

Submitted by:Guided by:-

PRIYANKA SINGH
BRIJESH KUMAR
ROLL NO. 138, 2ND SEM
DGM (FINANCE & ACCOUNTS)

INSTITUTE OF MANAGEMENT STUDIES, RANCHI

CHEMICALS INDIA LTD.

ADITYA BIRLA

STUDENT CERTIFICATE
This is to certify that this report is prepared based on
summer internship project undertaken by PRIYANKA
SINGH in ADITYA BIRLA CHEMICALS (INDIA) LIMITED.
Under the guidance of Mr. Brijesh Kumar DGM (Finance
& Accounts), in partial fulfillment of the requirement for
award of Master Of Business Administration (MBA) from
INSTITUTE OF MANAGEMENT STUDIES, RANCHI

Signature
Signature

PRIYANKA SINGH
BRIJESH KUMAR
ROLL NO. 138, 2ND SEM
DGM
(FINANCE & ACCOUNTS)
INSTITUTE OF MANAGEMENT STUDIES ADITYA BIRLA
CHEMICALS (INDIA) LTD.

ACKNOWLEDGEMENT
The internship opportunity I had with ADITYA BIRLA
CHEMICALS (INDIA) LTD. was a great chance for learning and
professional development. Therefore, I consider myself as a
very lucky individual as I was provided with an opportunity to
be a part of it. I am also grateful for having a chance to meet so
many wonderful people and professionals who led me though
this internship period.
Bearing in mind previous I am using this opportunity to express
my deepest gratitude and special thanks to Mr. RAJESH
RATHI, my mentor and project co-ordinator at ADITYA BIRLA
CHEMICALS (INDIA) LTD. who in spite of being extraordinarily
busy with his duties, took time out to hear, guide and keep me
on the correct path and allowing me to carry out my project at
their esteemed organization and extending during the training.
I express my deepest thanks to Mr. BRIJESH KUMAR, (DGM
F&A) My guide at ADITYA BIRLA CHEMICALS (INDIA) LTD.
for taking part in useful decision & giving necessary advices
and guidance and arranged all facilities to make life easier. I
choose this moment to acknowledge his contribution gratefully.
It is my radiant sentiment to place on record my best regards,
deepest sense of gratitude to Mr. MUKESH SINHA (HRD) for
giving me the opportunity, and careful and precious guidance
which were extremely valuable for my study both theoretically
and practically.

I perceive as this opportunity as a big milestone in my career

development. I will strive to use gained skills and knowledge in
the best possible way, and I will continue to work on their
improvement, in order to attain desired career objectives. Hope
to continue cooperation with all of you in the future,
sincerely,

Priyanka Singh

CONTENTS
1) ADITYA BIRLA GROUP

OVERVIEW
MILESTONES
OUR LOGO
LEADERSHIP TEAM

2) ADITYA BIRLA CEMICALS (INDIA)

LIMITED, REHLA
OVERVIEW
ORGNIZATIONAL INFRACTURE
PRESENT CAPACITY
COMPANY PROTFOLIO
COMPANY PRODUCT
PROCUREMENT
MANUFACTURING PROCESS
BRAND OVERVIEW
ACHIVEMENT

3) PROJECT TOPIC-WORKING CAPITAL

INTRODUCTION
OPERATING CYCLE
TYPE OF WORKING CAPITAL
FACTOR THAT EFFECTING WORKING CAPITAL

 MANGEMENT WORKING CAPITAL

WORKING CAPITAL SATEMENT
WORKING CAPITAL RATIO ANALYSIS

4) FINDING
5) RECOMMENDATIONS
6) CONCLUSION

ADITYA BIRLA GROUP

OVERVIEW :A us $ 40 billion (RS 25000 crore ) corporation ,the Aditya birla

is in the league of fortune 500. it is in the anchored by an
extraodinary force of over 120000 employes belonging to the
42 nationalities.The group has been ranked number 1 in asia
pacific for 2011.`Top companies for leaders conducted by Aon
Hewitt ,fortune magzine and RBL (a strategic HR and leadership
advisory form).the group has topped the Nielsens corporate
image monitor (2014-15)and emerged as the number one
corporate . The Best in class forth consecutive year.
Over 50 percent of the groups revenues flow its overseas
operations. It operates in 36 countries.

ADITYA BIRLA -GLOBAL SCENARIO

 A metals, power house, among the world s most cost

efficient almunium and copper producers Hindalco Novelis
is the largest almunium rolling company. It is one of the
three biggest producer of the primary almunium in Asia
with largest single location copper similter.
No.1 in Viscose staple fibre.
No.1 in carbon black.
The forth largest producer of acrylic fibre.
Among the top 10 cement producers globally.
Among the best energy efficient fertiliser plants.
The largest Indian MNC with manufacturing operations in
the USA,where in 95 percent of workforce companies of
Americans.

ADITYA BIRLA INDIAN SCENARIO

A top fashion(branded apparela) and life style player.

The second largest player in Viscose filament yarn.
The largest producer in the chlor-alkali sectors.
Among the top three mobile telephony companies.
A leading player in life insurance and asset management
Among the top two super market chains in retails
business.

MILESTONES
The Aditya Birla Group, Indias first multinational
corporation.Traces its origins back to the ting village of pilani in
the Rajasthan desert. Where Seth Shiv Narayan Birla started
cotton trading operations in 1957.Today, the groups footprint
extends to 20 countries and its revenues are US $ 24 billion. We
retrace the highlights of this remarkable journey, starting from
begining.
1857
The foudation of Birla Group of companies is laid by Seth Shiv
Narayan Birla, cotton trading operations commence at Pilani
Rajasthan.

1919
Ghanshayamdas Birla gradson of Shiv Narayan Birla, set up the
first Birla jute mill, marking his entry into the manufacturing
sectors. Rapaid business expenstion follows.

1947
Grasim is incorporated. It commences operation with a small
rayon weaving unit in Gwalior, MP.
1958
Hindalco is incorporated.
1965
Aditya Birla, grandson of the legendary Ghanshayamdas Birla,
starts the eastern spinning mills and industries.
1966
The Indian Rayon Corporation Ltd. is acquired.
1969
Aditya Birla sets up Indo Thaisynthetics Company Ltd. The
groups first overseas company.
1986
The Birla growth fund is set up to finance industrial equipment
plant and machinary and consumer durables, as well as for
stock market operation.
1990
Mr. Kumar Mangalam Birla gets actively involved in the groups
operation.
1998

 The group form 50:50 joint venture company with Tembec

INC of Canada, called A.V Cell INC, to supply pulp for the
Groups VSF operation.
Grasim acquries Dharani Cement and Shree Digvijay
Cement to consolidate the groups leadership position in
cement.
The cement business of Indian Rayon and Grasim are
consolidated into a single division of Grasim. The biggest
restructuring even by any corporate entity in India.
The Group Forays into copper with commissioning of Indo
Gulfs Copper Smelter the largest of its kind in india.
The origic chemicals begins commercial opertions of
chloro alkali and epichlorohydrin.
1991
A joint venture with financial services major Sun life of
Canada is linked, as part of the overall restructuring of the
groups financial services business.
2001
Grasim acquires 2.50 crore shares representing just
over 10 per cent of the equity in L&T from Reliance
Industrial Limited.
Birla consultancy & software services spun off, becomes
a separate entity called Birla Technologyies Ltd.
Indian Rayon acquires a stake in PSI data system in on
of the largest cash trasactions in the Indian Technology
sector.
2002
The Grasim board approves an open offer for purchase
of up to 20 per cent of the equity of L & T in accordance
with the provisions and guidelines issued by the
securities and exchange board of india regulation 1997.
Grasim increses stake in L&T to 14.15 percent
(351.84lakh share)

 Land Mark Corporate resturcturing of Hindalco and Indo

Gulf. The fertilizer business of Indo Gulf to be demerged
into separate.
2003
Mr. kumar Mangalam Birla, chaiman of the group, is selected as
business Indias businessman of the year 2003.
2006
Grasim industries limited, India; Thai Rayon Public Company
Ltd, Thailand PT Indo bharat rayon. Indonesia forms a ju with
Hubei Jing Wei Chemical Fibre Company, China, for VSF.
2007
In may 2007, Novelis became a Hindalco subsidary with the
completion of the acquisation process. The transaction markes
Hindalco the worlds largest almunium rolling company and one
of the biggest producer of primary almuninum is Asia as well as
being Indias leading copper producer.
2010
Ultratech Cement acquires a majority stake and management
control in Dubai based Star Cement Company, LLC ( Star
Cement). Star Cement owns Cement plant in UAE Bahrin and
Bangladesh with a total capacity of three million tonnes
annually this acquisition gives the Aditya Birla strong foot print
in middle east.
2011
ABCIL acquired Kanoria Chemicals based on Renukoot in may
2011.
2012
Aditya Birla Group (company name) makes a financial
investement of 27.5 per cent in living Media India Limited

( India Today Group) through a private investement

company in may.
Aditya Birla Group acquires Terrace Bay Pulp Mill in north
western ontorio in july 2012.
Aditya Birla Nuvo Limited (ABNL), largest manufacturer of
linen fabric in india, acquires future groups Pantloons
retail (india) limited (PRIL).
2013
Ultratech Cement acquires the Gujarat Cement unit of
Jaypee Cement Corporation.
Aditya Birla Chemicals (India) limited acquires the chlor
alkali and phosphoric acid divisions of Solaries Chemtech
Industries through ABCIL for Rs 153 crore in may.
2015
Aditya Birla Nuvo Limited consolidates its Branded
Apparels Businesses under lisited subsidiary-Pantloons
Fashion & Retails (PFRL). The Board approves PFRL to be
renamed as `Aditya Birla Fashion & Retail Limited
(ABFRL).
Mr. Kumar Mangalam Birla is bestowed with Global
Leadership Award of the US India Business Council
(USIBC), at the 39th Anniversary Leadership Summit
Washington DC.
Aditya Birla merge with Grasim.

Vision and Values

Our Vision
To be a premium global conglomerate, with a clear focus on
each of the business.

Our Mission

To deliver superior value to

our coustomers, shareholders
employees and society at
large.

Our Values

Integrity :

Honesty in every
action.

Commitment :

Deliver on the
promise

Passion:
Energized action

Seamlessness:

Boundary less in letter and spirit

Speed:
One step ahead aways

OUR LOGO

The name Aditya Birla evokes all that is positive in business

and in life.It exemplifies integrity, quality, performance,
perfection and above all, character.

Our logo is the symbolic reflection of these traits. It is the

cornerstone of our corporate indentity.it helps us leverage the
unique Aditya Birla brand and endows us with a distinctive
visual image.
Depicted in vibrant, earthy colours, it is very arresting and
shows the sun arising over two circles- an inner circle
symbolising the internal universe of Aditya Birla Group with an
outlet circle symbolising in external universe; and a dynamic
meeting of rays converging and diverging between the two.

Executive leadership team

Mr. Kumar Mangalam Birla
Chairman Aditya Birla Group

Mrs Rajashree Birla

Chairperson,The Aditya Birla
Center for community Initiative and Rural Development

Mr. Rajiv Dube

Director-Group Corporate services

Mr. Pranab Barua

Business Director- Retails & Apparel

Mr. Ajay Srinivasan

Director, Financial Services

Dr. Shantrupt B.Misra

Director Group Human Resources
Chief Executive officer- Carbon Black

Mr. Adesh Gupta

Whole time Director & chief
Financial officer-Grasim Industries Chief Financial officerGlobal Pulp and Fibre Business

 Mr. Dubu Bhattacharya

Managing Director Hindalco
Vice chairman- Novelies

Mr. Himanshu kapania

Managing Director- Idea Cellular

Mr. K.K Maheshwari

Managing Director Grasim Industries
Sector Head-Fibre & Taxtiles
Mr. Shailendra Jain
Chairman-Business Review council,
Manufacturing Business

Mr. Lalit Naik

Managing Director-Aditya Birla Novo
Sector Head- Chemicals

Mr. Omprakash Puranmalka

Managing Director- Ultra Tech Cement

ADITYA BIRLA CHEMICAL

(INDIA) LIMITED
Aditya Birla Chemicals (India) Limited (formally Bihar caustic
and chemicals limited) was incorporated as a joint venture of
the Aditya Birla Group and the Bihar State Industrial
Development Corparation. The unit was set up with the
objective of catering to the caustic soda requirement of
Hindalco Industrial Limited,and to contribute towards the
economic development of the backword region of Palamu
District in Jharkhand.
Commissioned in 1984 with an initial caustic soda capacity of
33000tpa,the company has since grown to become the leading

soda producer in the eastern reagion of the country.the

company has commissioned a 30mw capative power plant in
the year 2000 and stimultaneously, the caustic plant capcity
was enhanced to 51048tpa. In the year 2006 ,the capacity was
increased to 78,750tpa by converting the mercury cell
technology to the more enviorment friendly membrane cell
technology supplied by world renowned technology supplier
UHDENORA,Germany,presently,the installed capacity stands at
105000tpa.
For value addition and effective utilization of chlorine ,the
company has commissioned a 12000tpa aluminium chloride
plant in the year 2007 and a17500tpa stable bleaching
powder(SBP) plant in 2008.SBP is marked under the brand
name Shaktiman.Aluminium chloride is the principle catalyst
used in the fried craft reaction and widely used in
pharmaceuticals ,chemical
intermediates,agrochemicals,dyestuffs and
pigments,sanitation,sewage systems,tanning process ,organic
synthesis and other application.
The company acquired its major competitor unit in the eastern
region, the chloro chemicals dievision of Konoria Chemicals
based in Renukoot ,in may 2011 to enrich the portfolio of the
Aditya Birla Cemicals business .with the addition of this unit,
named Renukoot Chemicals Devision (RCD),the Aditya Birla
Chemical business ranks as one of the leading players in the
chlor-alkali segment in india.
This acquisition added about 115000tpa to the existing
105000tpa caustic capacity of the company.with the already
existing capative power production capacity of mwh at RCD ,the
company has fianlised brownfield expansition by additional
150tpa of caustic soda capacity.
RCD utilizes the chlorine availablein its value added products
like SBP,Poly Aluminium Chloride(PAC),Aluminium chloride
(ALCL3)and chlorinated paraffin wax (CPW).

The first in the chlor-alkali sector of India to be accredited with

certification of ISO 9001 ,14001 ,OHSAS18001 and SA8000 ,the
company

ORGANISATIONAL INFRASTRUCTURE
However there is a fully fledged well developed and
plannned township within the premises well equipped with
playground,staff club with sporting facilities etc.
The company provides furnished accommodation to its
employees and there is naonstop power supply from its
captive power plant.
The company provides drinking water and various other
facilities to nearby areas.
ABCIL premises are fully of gardens & greeneries.
There are many club like Rotary,Rotaract,and Mahila
Mandal which gives ample opportunity to satisfy the
creative I social side of employees.
Regular culture events and fairs mark the vibrant
atmosphere of ABICL.
The company has a CBSE affiliated Aditya Birla Public
School with independent school building equipped with
modern facilities like computers,laboratories and rich
library etc.
The company has a 10 bedded own hospital including an
ICU & is well equipped with all ultra modern equipment.
The beautiful temples stand inside the premises which are
quite a good attraction with the devotees of the area.

PRESENT CAPACITIES OF PLANT

PRODUCT

1)CAUSTIC SODA

ANNULPRODUCTI
ON CAPACITY
(REHLA)
105000000.0000 KG

2)LIQUID CHLORINE

77000000.0000 KG

3)HYDROCHLORIC
ACID

43750000.0000 KG

4)SODIUM
HYPOCHLORITE

18000000.0000 KG

5)ALMUNIUM CHORIDE
6)HYDROEN GAS

14965000.0000 KG
60000.0000

M3
7) STABLE BLEACHING 21000000.0000 KG
POWDER

MEMBERSHIP OF LONAL ASSOCIATES

Alkali Manufacturing Associates of India(AMAI)
Indian Chemical council ( ICC)
American Chemistry council

COMPANY PROTFOLIO
DIRECTORS

Shri
Shri
Shri
Shri
Shri
Shri

A.K.Agarwal
Biswajit Choudhari
J.C.Chopra
P.P.Sharma
G.M.Dave
Lalitkumar S.Naik

MANAGING DIRECTOR
Shri K C Jhawar

UNIT HEAD
Shri B.B Dixit, Rehla
Shri V.R. Agarwal, karwar
Shri Suresh Sodani, Renukoot

COMPANY SECRETARY
Shri Akash Mishra

BANKERS

HDFC Bank Limited

Bank of India
State Bank of India
Axis Bank Limited
Punjab National Bank
Indian Bank

STATUTORY AUDITORS
M/s.Khimji Kunverji & co,
Charted Accountants, Mumbai

COST AUDITORS
M/s R.Nanabhoy & Co.
Cost Accountants,Mumbai

REGISTERED OFFICE
Ghanshyam Kunj
Garwa Road ,P.O.Rehla-822 124
Dist ,Palamau (Jharkhand)

MANUFACTURING UNITS
1. Garwa Road,P.O.Rehla-822 124
District-Palamau (Jharkhand)
2. Renukoot Chemical Division,
P.O, Renukoot-231 217
3. District-Sonbhadra(Uttar Pradesh)
Karwar Chemical Division,
P.O. Binaga 581 307
Dist. Uttar Knnada

COMPANY PRODUCTS

1.

CASTIC SODA (NAOH): USES

It is used in Almunium based company.

It is used in pulp and paper ,textile,drinking
water,soap,and detergent and drain cleaner.

2.

LIQUID CLORIN : USES

3.

HYDROCHLORIC ACID:

Chlorine is used in the purification of drinking water,as

bleaching agent in pulp paper and textile industries.
It is also used in raw material/intermediate chemical in the
manufacture of PVC plastic,paraffin waxes,synthetic
rubbers ,persecides / insecticides, inorganic / organic
chemicals,pharmaceuticals etc.

Hydrochloric acid is a solution of hydrogen chloride (HCL) in

water that is highly corrosive,strong mineral acid with many
industrial uses.it is found naturlly in gastric acid.

Uses:
scale production of vinyl chlorine for PVC plastic, and
MDI/TDI for polyurethane.
it is also used in numerous smaller scale
application,including household cleaning ,production of
gelatin and other food additives,decaling,leather
processing,and swimming

4. SODIUMHYPOCHLORITE :
Sodium hypochlorite is a chemical compond with the formula
NaClO. Sodium hypochlorite solution commonly known as
bleach.

Uses:
It is used as disinfectant or a bleaching agent.

5. ALUMINIUM CHLORIDE:

Aluminium chloride (Alcl3) is the main compound of Aluminum

and chlorine .it is white ,but samples are offen contaminated
with iron trichloride,giving it a yellow colour.
It is mainly used in production of aluminium metal, and
large amounts are also used in chemicals industry.

6. STABLE BLEACHING POWDER:

Calcium hypochlorite is a chemical compound with formula
Ca(C1O)it is widely used for water treatment and as a bleaching
agent.this cemical is considered to be relatively stable and has
greater available chlorine then sodiumhypochorite (liquid
bleach).
Calcium hypochorite is used for the disinfection of drinking
water or swimming pool water.it is also used as a sanitizer
in outdoor swimming pools in combination with a cyanuric
acid stabilizer, which reduces the loss of clorine due to
ulteraviolet radiation.
It is also used in bleaching cotton and linen, bathroom
cleaners, household disinfectant sprays,moss and algae
removers, and wid killers.

6. COMPRESSED HYDROGENPOWER
Power is generated only for the company needs and not for the
commercial purpose.the power generated is sometimes not
sufficient for the company itself when the company runs on its
fully capacity, at that time some power is brought from market
such as the Jharkhand Electricity Board.power in Aditya Birala
Chemicals(India) Ltd is generated bt thermal process i.e bt coal.

PROCUREMENT OF RAW MATERIAL

RAW MATERIAL

1) SALT

PLACE OF
PUCHASING RAW
MATERIAL
GUJRAT

2)BARIUM
CORBONATE

RAIPUR (CHATTISGAR)

3)SULFURIC ACID

ALLAHABAD,GORAKHP
UR (UP)
RAJASTHAN

4)SODIUM BI
SULPHITE
5)ALPHA
CELLULOSE

NAGDA (MP)

6)ALUMINIUM
INGOT

RENUKOOT (UP)

7)HYD LIME

JODHPUR

8)COAL

CCL (JHARKHAND)

MANUFACTURING PROCESS OF CAUSTIC

SODA IN MEMBRANE CELL PLANT

It is the plant where an aqueous solution of salt called as brine

serves as basic raw material for the production of caustic soda.
This solution of brine is than purified by series of
mechanical/chemical processes .Brine for the ion exchange
membrane cell is prepared by dissolving raw salt into the brine
which comes back from the electrolysis plant.
Technical data of the plant
New membrane cell plant is designed for 225TPA caustic soda
which was commissioned in a year 2005-2006.
The product capacities at the time of commencement are:-

PRODUCT

Capacity (100%)

Caustic solution

225 TPA

Chlorine gas

199.4 TPA

Hydrogen gas

66149 Nm3

Chemicals and utilities

Raw material

Salt

Utilities
power, steam, cooling

: Process water, electric

Water, Nitrogen

Chemicals
NaHSO3, NaOH, H2SO4

Na2CO3, BaCO3, HCl,

The primary system in the plant is the BRINE SYSTEM where

salt is dissolved in the DM water. These units are designed to
produce brine equivalent to 225 MTPD NaOH (100%)
productions.
The primary Brine system comprises of the following systems :-

1.
2.
3.
4.
5.

Brine
Brine
Brine
Brine
Brine

Saturation
Precipitation
Clarification
Filtration
Polishing

The secondary brine system consists of following

1. Ion Exchange System
Conditioning

2. Brine Heat

The Brine Precipitation system and Brine Clarification system is

designed to precipitate and remove impurities from brine, such
as calcium, magnesium and sulphates. The clarified brine from
the clarifier contains approx. 20 50ppm of suspended
particles. The suspended solids in the brine have to be removed
to 1ppm before feeding the brine in to the secondary system.
Which can operate only dissolved impurities.
In order to achieve it, a two stage filtration system has been
envisaged. The suspended solids in clarified brine are removed
by passing through a bed of anthracite filters. A special quality
of anthracite is employed to avoid any contamination of brine.
Here suspended solid level is reduced to approx 5 ppm. Then it
is pumped to polishing unit to remove the final traces of
suspended solids from the brine before Ion exchange. The
polishing unit consists of three identical filter units two
operating and one stand by.
Brine polishing system consists of three filter housing
containing filter candles. The candles are hung and the brine is
forced by the pump to pass through the candles and the solid
wastes are retained on the outer surface of the candles .Due to
the retention of the solid impurities on the candles, it has to be
cleaned after 48 hours of operation.

SECONDARY BRINE PURIFICATION

For the smooth operation of the membrane cells and for the
long service life of the membranes, the cells must be supplied
with the extremely pure brine.
The two ion exchanger columns are used for the secondary
purification in series of lead arrangement. The alkaline wastes
produced during the regeneration process are collected in the
alkaline waste brine tank which can also be backwash from
anthracite filters.
Before the brine reaches ion exchange column, it is passed
through Chlorine recuperator to recover heat from cell chlorine
gas. After ion exchanger the brine flows to the pure brine tank
were the temperature of the brine is adjusted as for the
requirement for electrolysis.

DE-CHLORINATION
The depleted brine from the electrolysers contains about 8001000 mg/1 dissolved chlorine. The dissolved chlorine is a
poison for the ion exchange resin and therefore, must be
removed before the brine is recycled.
De-chlorination is carried out in two steps:
Vacuum de-chlorination
Chemical de-chlorination

VACCUM DE-CHLORINATION:
After vacuum de -chlorination, the brine contains ~ 10mg/l
chlorine which is chemically

de-chlorinated with

Sodium

bisulphate to make it free from chlorine. After de-chlorination

the pH is adjusted by Caustic Soda and then sent to salt
saturator for resaturation.

CHLORINE TREATMENT:

The chlorine system serves for the treatment of Cl 2 produced in

the electrolysis cells. The Cl2 treatment and handling consists of
the following steps:

Cooling,
Drying,
Compression,
Liquefaction,
Storage and Cl2 bottling.

CHLORINE COOLING:
Chlorine gas generated from the cells at a temperature of
about 85-86 C is
first cooled to about 50 C in chlorine/brine recuperator then
passed thru the primary stage Cl 2 cooler and finally thru
secondary stage cooler where its temperature is brought down
to 12-15OC by using chilled water as cooling medium. The Cl 2
condensate is collected in a tank and taken back into brine.
Care is taken to monitor the Cl 2 temperature after second stage
Cl2 cooling. The formation of Chlorine Octahydrate (Cl 2.8H2O)
takes place if the temperature falls below 8.9 o C which will clog
the tubes of the Cl 2 cooler restricting the flow of chlorine
through the chlorine cooler.

CHLORINE DRYING:
The drying agent used in the Cl 2 drying tower is 96% H 2SO4.
Each tower has acid circulation pump which circulates acid in
the tower through a cooler. Fresh H 2SO4 is dosed in each tower.
Concentration of acid is monitored on hourly basis when
concentration of H2SO4 comes down to 78%, it is collected in
spent acid tank.

CHLORINE COMPRESSION:

The dried Cl2 is compressed to about 2.5-3.Kg/cm by sulphuric

acid ring compressor. The heat of compression absorbed by
H2SO4 in the compressor is dissipated in a heat exchanger.
Entrained sulphuric acid from the compressor & removed in a
separator and sent to a heat exchanger where chilled water is
used as cooling medium.

BRAND OVERVIEW
Aditya Birla Chemicals product brands are well recognized in
the business segments they cater to the various brands
produced by the company under each product categories:

Chlorine Deviation

ARYFIN (CHLORINATED PARAFFIN)

VIKRAM(STABLE BLEACHING POWDER)
SHAKTIMAN (STABLE BLEACHING)
LION(STABLE BLEACHING POWDER)
KANPAC SERIES(POLYALUMINIUM )
KANOFIN SERIES(CHLORINATED PARAFFIN)
VIKRAM PAC (POLYALUMINIUM CHLORIDE)

Epoxy Resins
EPOTEC

Peroxides

COMBIMATE 35
OXYWHITE
OXYWHITE REMELT
MULTI-5 FOR FRUITS
MULTI 100 FOR SEAFOOD
MULTI 100 FOR POULTRY
RGS
TETRA MATE 35

ACHIVEMENT
HONOUR)

(AWARDS

AND

2004:
Chairmans World Class Manufacturing Silver Award.

2005:
ICMA Responsible Care Committed Company Award.

2007:
Green Tech Environment Gold award.
IMC Ram Krishna Bajaj National Quality Award.
ICC Award for Corporate Responsibility.

2008:
Green Tech safety Gold Award.
Best supplier trophy award for Tata Tin Plate Company.

2004-06-08
Planet Award for excellence in community development.

2010:
Best PRAV Bench Marking Compass trophy.
Green Teach Environment Excellence Award
FICCI Award for Rural & community Development.

2011:
Chairman world class Manufacturing Gold Award.

2012:
Agro Tech Award by Birsa Agriculture University, Jharkhand
for water shade development.

WORKING CAPITAL
INTRODUCTION:
Working capital management is the lifeline of every business.
Working capital is required for the smooth running of the
business ie, no business can be successful without an adequate
amount of working capital.
Working capital refers to that part of the companys capital
which is required for financing short term requirement or
current assets such as cash, marketable securities, and debtors
and inventories. In other words we can say that working capital
is the amount of funds required to manage the cost of
operating a business.

MEANING
Working capital is the funds available and which are required
for the day to day transactions of the company. Funds are
required for the purchase of the current assets such as cash,
marketable securities, account receivables and inventories and
the payment of current liabilities such as accounts payable,
bank overdraft and other outstanding expenses.

OBJECTIVE OF WORKING CAPITAL

For purchase of raw materials.
To pay salaries and wages.

 To incur day to day transactions and overhead costs.

To provide credit facilities to customers.

IMPORTANCE OF NET WORKING CAPITAL

It is a qualitative concept which indicates a firms ability to
meet its operating expenses and short term liabilities.
It indicates the margin of protection available to the short
term creditors.
Indicator of financial soundness of an enterprise.
Net working capital is referred to as working capital.

NEED FOR WORKING CAPITAL

The basic objective of financial management is to maximize
shareholders wealth. This is only possible only when the
company earns sufficient profit. The amount of such profit
largely depends upon the magnitude of sales. But sales do not
convert into cash instantaneously. There is always a time gap
between the sale of goods and receipt of cash. Working capital
is required for this period in order to sustain the sales activity.
In case working capital is not available for this period, the
company will not be in a position to sustain the sales since it
may not be in a position to purchase raw materials, pay wages
and other expenses required for manufacturing the goods to be
sold.

OPERATING CYCLE
It is clear that working capital is required because of the time
gap between the sales and their actual realization in cash. This
time gap is technically termed as operating cycle of the
business. In case of a manufacturing company, the operating
cycle is the length of time necessary to complete the following
cycle of events:
1. Conversion of cash into raw materials;
2. Conversion of raw materials into work in process;

3. Conversion of work in process into finished goods;

4. Conversion of finished goods into accounts receivable and
5. Conversion of accounts receivable into cash.
This cycle will be repeated again and again
The operating cycle of a manufacturing business can be shown
in the form of following chart-

Operating cycle of a manufacturing business

TYPES OF WORKING CAPITAL

The working capital can be classified as follows which can be
shown from the following chart

PGOTSRNK
RANESG
OTIRUD
VFSHLNEAWO
BWSELO
WKBORS
NCOARKS
CARSIKON
LKSGNC
NOCG
GFPCN
CTPA
AMLP
PET
TA
AL
L

E PE I E
CE A NS
H V L SR O
I A R AF X
LA
O
II R N O
I KA G R
I I LA F
I
A
I A
T
A I LE
T
IT L
I

RM

M
R E

R
E

P
P

Y N
I

R
G R

D A
K

I
I

T
T

I
A

On the basis of TIME, working capital may be classified as:

Permanent Working Capital

Permanent or fixed working capital is the minimum amount
which is required to ensure effective utilization of fixed facilities
and for maintaining the circulation of current assets. There is
always a minimum level of current assets which is continuously
capital as this part of capital is permanently blocked in current
assets. As the business grows, the requirements of permanent
working capital also increase due o the increase in current
assets. The permanent working capital can further be classified
as regular working.
Capital and reserve working capital required to ensure
circulation of current assets from cash to inventories, from
inventories to receivables and from receivables to cash and so
on. Reserve working capital is the excess amount over the
requirement for regular working capital which may be provided
for contingencies that may arise at unstated periods such as
strikes, rise in prices, depression, and etc. required by the
enterprise to carry out its normal business operations. For
example, every firm has to maintain a minimum level of raw

materials, work-in-process, finished goods and cash balance.

This minimum level of current assets is called permanent or
fixed working.

Temporary or Variable Working Capital

Temporary or variable working capital is the amount of working
capital which is required to meet the seasonal demands and
some special exigencies. Variable working capital can be
further classified as seasonal working capital and special
working capital. Most of the enterprises have to provide
additional working capital to meet the seasonal and special
needs. The capital required to meet the seasonal needs of the
enterprise is called seasonal working capital. Special working
capital is that part of working capital which is required to meet
special exigencies such as launching of extensive marketing
campaigns for conducting research, etc.

DIFFERENCE BETWEEN TEMPORARY WORKING

CAPITAL AND PERMANENT WORKING CAPITAL
Temporary working capital differs from permanent working
capital in the sense that it is required for short periods and
cannot be permanently employed gainfully in the business.

FACTORS THAT DETERMINE WORKING CAPITAL

A firm should have neither low nor high working capital. Low
working capital involves more risk and more returns, high
working capital involves less risk and less returns. Risk here
refers to technical insolvency while returns refer to increased
profits/earnings. The amount of working capital is determined
by a wide variety of factors.

Nature of business

Seasonality of operations

Production cycle

Production policy

Credit Policy

Market conditions

Conditions of supply

Nature of Business:
The working capital requirement of a firm depends on the
nature of the business. For example, a firm involved in sale of
services rather than manufacturing or a firm is allowing only
cash sales. In the first instance, no investment is required in
either raw materials or WIP or finished goods, while in the
second instance there exist no receivables as there is
immediate realization of cash. Hence the requirement of
working capital will be lower.

Seasonality of Operations:
If the product of the firm has a seasonal demand like
refrigerators, the firms need high working capital in the periods
of summer, as the demand for the refrigerators is more and the
firm needs low working capital in the periods of winter, as the
demand for the product is low.

Production Cycle:
The term production cycle refers to the time involved in the
manufacture of goods. It covers the time span between the
procurement of the raw materials and the completion of the
manufacturing process leading to the production of goods. As
funds are necessarily tied up during the production cycle, the
production cycle has a bearing on the quantum of working
capital. The longer the time span of production cycle, the larger

will be the funds tied up and therefore the larger the working
capital needed and vice versa.

Production Policy:
The quantum of working capital is also determined by
production policy. In case of the firms having seasonal demand
of the products like refrigerators, air coolers etc .The production
policy of the firm determines the amount of working capital
requirement. If the firm has production policy to carry
production at a steady level to meet the peak demand, this will
result in a large accumulation of finished goods (inventories)
during the off-seasons and the abrupt sale during the peak
season. The progressive accumulation of finished goods will
naturally require an increasing amount of working capital. If the
firm has production policy to produce only when there is a
demand then the firm needs low working capital during the
slack season and high working capital during season.

Credit Policy:
The level of the working capital is also determined by the credit
policy, as the firms credit policy determines the amount of
receivables. If the firm has a liberal credit policy, then the firm
needs high working capital and the firm needs low working
capital if the companys credit policy does not allow it to extend
credit to the buyers.

Market Conditions:
The working capital requirements are also determined by the
market conditions. In case of the high degree of competition
prevailing in the market the firm has to maintain larger
inventories as customers are not inclined to wait for the
product. This needs higher working capital requirements. If
there is good demand for the product and the competition is
weak, a firm can manage with smaller inventory of finished
goods, as customers can wait for the product if it is not

available in the market. Thus, a firm can manage with low

inventory and will need low working capital requirements.

Conditions of Supply:
The availability of raw materials and spares also determine the
level of working capital. If there is ready availability of raw
materials and spares, a firm can maintain minimum inventory
and need less working capital. If the supply of raw materials is
unpredictable, then the firm has to acquire stocks as and when
they are available for ensuring continuous production. Thus, the
firm needs to maintain larger inventory average and needs
larger requirement of Working capital.

SOURCES OF WORKING CAPITAL

The working capital requirements should be met both from
short term as well as long term sources of funds.
Financing of working capital through short term sources of
funds has the benefits of lower cost and establishing close
relationship with banks.
Financing of working capital through long term sources
provides the benefits of reduces risk and increases
liquidity

ADVANTAGES OF WORKING CAPITAL

It helps the business concern in maintaining the goodwill.
It can arrange loans from banks and others on easy and
favorable terms.
It enables a concern to face business crisis in emergencies
such as depression.
It creates an environment of security, confidence, and
overall efficiency in a business.
It helps in maintaining solvency of the business.

ADEQUACY OF WORKING CAPITAL

A firm must have adequate working capital. It should neither be
excessive nor inadequate. Excessive working capital is a
situation where in the firm invests excessive funds in working
capital. These excessive or idle funds earn no profit for the firm.

DANGERS OF EXCESS WORKING CAPITAL

It may result in unnecessary accumulation of inventory
which may lead to increase in wastage due to
mishandling, theft etc.
It is an indication of defective credit policy. There is the
possibility of higher incidence of bad debts.
It may lead to complacency in managing day-to-day
expenses of the firm.
Executives may be tempted to spend more
Excessive working capital means idle funds which earns no
profit for the business, and thus cannot earn proper rate of
return on its investments.
It may result into overall inefficiency in the organizations.
When there is excessive working capital relation with
banks and other financial institutions may not be
maintained.
The redundant working capital gives rise to speculative
transactions.
Due to low rate of return on investments the value of
shares may also fall
In case of redundant working capital there is always a
chance of financing long term assets from short term
funds which is very harmful in long run for any
organization
Inadequate working capital is a situation where in the firm does
not have sufficient funds to meet day to day running expenses.
This ultimately results in interruption in the production process.

DANGERS
CAPITAL

OF

INADEQUATE

WORKING

 Operating inefficiencies creep in when it becomes difficult

of meet day-to-day commitments.
It becomes difficult to implement operating plans and
achieve firms targets.
It directly affects firms liquidity position and the firm may
find it difficult to honor short-term obligations.
It cannot by its requirements in bulk and cannot avail of
discounts it stagnates growth.
It becomes difficult for the firm to exploit favorable market
conditions and undertake profitable projects due to non
availability of working capital funds.
It becomes impossible to utilize efficiently the fixed assets
due to non availability of liquid funds thus the firms
profitability would deteriorate.
The rate of return on investments also falls with the
shortage of working capital.

WORKING CAPITAL MANAGEMENT

The term Working capital management refers to the
management efforts for optimizing the working capital and
improving the productivity of the short term capital invested in
the Business. It includes decisions relating to working capital
and short term financing and involves managing the
relationship between a firm's short-term assets and its shortterm liabilities. The goal of working capital management is to
ensure that the firm is able to continue its operations and that
it has sufficient cash flow to satisfy both maturing short-term
debt and upcoming operational expenses.
A firm must have adequate working capital, i.e.; as much as
needed to run the firm. It should be neither excessive nor
inadequate as both situations can be dangerous. Excessive
working capital means the firm has idle funds which earn no
profits for the firm. Inadequate working capital means the firm
does not have sufficient funds for running its operations. The
basic objective of working capital management is to manage
firms current assets and current liabilities in such a way that

the satisfactory level of working capital is maintained, i.e.;

neither inadequate nor excessive.
By definition, working capital management entails short term
decisions - generally, relating to the next one year period which is "reversible". These decisions are therefore not taken
on the same basis as Capital Investment Decisions (NPV or
related, as above) rather they will be based on cash flows and /
or profitability.

One measure of cash flow is provided by the cash

conversion cycle - the net number of days from the outlay of
cash for raw material to receiving payment from the customer.
As a management tool, this metric makes explicit the interrelatedness of decisions relating to inventories, accounts
receivable and payable, and cash. Because this number
effectively corresponds to the time that the firm's cash is tied
up in operations and unavailable for other activities,
management generally aims at a low net count.

In this context, the most useful measure of profitability is

Return on capital (ROC). The result is shown as a percentage,
determined by dividing relevant income for the 12 months by
capital employed; Return on equity (ROE) shows this result for
the firm's shareholders. Firm value is enhanced when, and if,
the return on capital, which results from working capital
management, exceeds the cost of capital, which results from
capital investment decisions as above. ROC measures are
therefore useful as a management tool, in that they link shortterm policy with long-term decision making.

MANAGEMENT OF WORKING CAPITAL

Guided by the above criteria, management will use a
combination of policies and techniques for the management of
working capital. These policies aim at managing the current
assets (generally cash and cash equivalents, inventories and

debtors) and the short term financing, such that cash flows and
returns are acceptable.

Cash management - Identify the cash balance which

allows for the business to meet day to day expenses, but
reduces cash holding costs.

Inventory management - Identify the level of inventory

which allows for uninterrupted production but reduces the
investment in raw materials - and minimizes reordering costs and hence increases cash flow

Debtors management - Identify the appropriate credit

policy, i.e. credit terms which will attract customers, such that
any impact on cash flows and the cash conversion cycle will be
offset by increased revenue and hence Return on Capital (or
vice versa); see Discounts and allowances.

Short term financing - Identify the appropriate source of

financing, given the cash conversion cycle: the inventory is
ideally financed by credit granted by the supplier; however, it
may be necessary to utilize a bank loan (or overdraft), or to
"convert debtors to cash" through "factoring"

Inventory
Fuel cost for one month and reasonable fuel stocks as
actually maintained but limited to fifteen days for pit head
stations and thirty days for non pit-head stations,
corresponding to the "Target Availability";
Sixty days stock of secondary fuel oil, corresponding to the
"Target Availability";
Half month stock of liquid fuel, corresponding to the
Target Availability
Maintenance spares at actual subject to a maximum of
one percent of the capital cost but not exceeding one
year's requirements less value of one fifth of initial spares
already capitalized for first five years; and
Receivables management

 Receivables equivalent to two months' average billing for

sale of electricity calculated on "Target Availability".
Cash Management
Operation and Maintenance expenses in cash for one
month;
Thus as may be seen from the above interest on working capital
is an important part of the fixed tariff. The components of the
working capital have been defined on a normative basis and
interest on the same is reimbursed to the company at SBI PLR
rate irrespective of actual amount of working capital utilized by
the company. In such a situation if the generator is able to keep
the working capital equivalent to the norms or below it will be
benefitted as the amount reimbursed will higher than the actual
amount of Working capital requirement. On the other hand if
the working capital utilized is more than the requirements then
the generator will be at a loss since it will be reimbursed as per
the norms only. Thus working capital management assumes an
important part of maintaining the efficiency of the plant. All
round measures are taken to ensure that working capital is
maintained within the norms.

Working capital level

The consideration of the level investment in current assets
should avoid two danger points excessive and inadequate
investment in current assets. Investment in current assets
should be just adequate, not more or less, to the need of the
business firms. Excessive investment in current assets should
be avoided because it impairs the firms profitability, as idle
investment earns nothing. On the other hand inadequate
amount of working capital can be threatened solvency of the
firms because of its inability to meet its current obligation. It
should be realized that the working capital need of the firms
may be fluctuating with changing business activity. This may
cause excess or shortage of working capital frequently. The

management should be prompt to initiate an action and correct

imbalance.

Working Capital level analysis

The consideration of the level of investment in current assets
should avoid two danger points, excessive and inadequate
investment in current assets. Investment in current assets
should be just adequate, not more or less, to the need of the
business firms. Excessive investment in current assets should
be avoided because it impairs the firms profitability, as idle
investment earns nothing. On the other hand inadequate
amount of working capital can be threatened solvency of the
firms because of its inability to meet its current obligation. It
should be realized that the working capital need of the firms
may be fluctuating with changing business activity. This may
cause excess or shortage of working capital frequently. The
management should be prompt to initiate an action and correct
imbalance.

Statement of working
capital:
Comparison for two years
Particulars

2014-15

2013-14

Current Assets, Loans & Advances:

(A)
Inventories:
a) Finished goods

1928.42
2090.45

b) Goods- in- progress

1051.53

c) Raw Materials(Auxiliary &

Packing)

9667.53

767.07
8469.98

d) waste and scrap

48.54
71.30

e) Stores & Spare Parts

2129.00

f) In transit (raw material)

1928.19

609.82
3826.89

g)stock in trade

Total inventories

15434.83
17153.89

Trade Receivables

12064.25

Cash & Bank Balances:

Short
term
Deposits

Loans,

399.65
Advances

&

13460.50
618.08

4465.79
2783.98

Other Current Assets

2089.51
2228.33
34,454.03

Total (A)
Current Liabilities & Provisions: (B)

36,244.78

Trade Payables

5247.36

Short Term provision

1993.77

Other Current Liabilities

24757.06

5560.14
1154.63
26940.30

Total (B)
31998.19
Working Capital (A-B)

33655.08
2455.84

2589.70

Source: annual report 2014-2015

Working Capital Ratio Analysis

INTRODUCTION
Ratio analysis is the powerful tool of financial statements
analysis. A ratio is defined as the indicated quotient of two
mathematical expressions and as the relationship between
two or more things. The absolute figures reported in the
financial statement do not provide meaningful understanding of
the performance and financial position of the firm. Ratio helps

to summarize large quantities of financial data and to make

qualitative judgment of the firms financial performance.

Role of Ratio Analysis

Ratio analysis helps to appraise the firms in the term of their
profitability and efficiency of performance, either individually or
in relation to other firms in same industry. Ratio analysis is one
of the best possible techniques available to management to
impart the basic functions like planning and control. As future is
closely related to the immediately past, ratio calculated on the
basis historical financial data may be of good assistance to
predict the future. E.g. On the basis of inventory turnover ratio
or debtors turnover ratio in the past, the level of inventory and
debtors can be easily ascertained for any given amount of
sales. Similarly, the ratio analysis may be able to locate the
various areas which need the management attention in order to
improve the situation. E.g. Current

ratio which shows a

constant decline trend may indicate the need for further

introduction of long term finance in order to increase the
liquidity position. As the ratio analysis is concerned with all the
aspect of the firms financial analysis liquidity, solvency,
activity, profitability and overall performance, it enables the
interested persons to know the financial and operational
characteristics of an organization and take suitable decisions.

Limitations of Ratio Analysis

1. The basic limitation of ratio analysis is that it may be difficult
to find a basis for making the comparison

2. Normally, the ratios are calculated on the basis of historical

financial statements. An organization for the purpose of
decision making may need the hint regarding the future
happiness rather than those in the past. The external analyst
has to depend upon the past which may not necessary to
reflect financial position and performance in future.
3. The technique of ratio analysis may prove inadequate in
some situations if there is differs in opinion regarding the
interpretation of certain ratio.
4. As the ratio calculates on the basis of financial statements,
the basic limitation which is applicable to the financial
statement is equally applicable In case of technique of ratio
analysis also i.e. only facts which can be expressed in financial
terms are considered by the ratio analysis.
5. The technique of ratio analysis has certain limitations of use
in the sense that it only highlights the strong or problem areas;
it does not provide any solution to rectify the problem areas.

Ratios for working capital management

are:1) CURRENT RATIO/WORKING CAPITL RATIO
Current Ratio is a measure of liquidity and it is used for the
analysis of short term financial position or liquidity of the
company. It is the relation between current assets and the
current liabilities. Thus,
CURRENT
RATIO
LIABILITIES

CURRENT

ASSETS

/CURRENT

Current assets include cash, marketable securities, bill

receivables, sundry debtors, inventories and work-inprogresses. Current liabilities include outstanding expenses, bill
payable, dividend payable etc.
A relatively high current ratio is an indication that the firm is
liquid and has the ability to pay its current obligations in time.
On the hand a low current ratio represents that the liquidity
position of the firm is not good and the firm shall not be able to
pay its current liabilities in time. A ratio equal or near to the
rule of thumb of 2:1 i.e. current assets double the current
liabilities is considered to be satisfactory.
PARTICULARS

2012-13

2013-14

2014-15

CURRENT
ASSETS

30825.76

36244.78

34454.03

CURRENT
LIABILITY

27690.21

33655.08

31998.19

CURRENT RATIO

1.11

1.08

1.08

Sources: Annual Report 2014-15

1.11
1.11
1.1
1.1
1.09
1.09
1.08
1.08
1.07
1.07
1.06

Current Ratio

2012-13

Interpretation:-

2013-14

2014-15

Current ratio indicates that how fast company is able to meet

its current requirement or current liabilities with the help of its
current assets. As we know an ideal current ratio for the
company is 2:1, which means company is able to pay its debt
twice the times of its liabilities.
ABCIL current ration in year 2012-13 was 1.11 it means that
company had paid its liability very easily. But in year 2013-14
the current ratio decreased by 1.08 and it remain constant in
year 2014-15. Company need to be improved ratio in future
year.

2) QUICK RATIO/ACID TEST RATIO/LIQUID

RATIO
Quick Ratio is the relation between liquid assets and
liabilities. An asset is said to be liquid asset if it
converted easily into cash within a short period of time
losing its value. It measures the firms capacity to
current liabilities immediately.
QUICK RATIO

current
can be
without
pay its

= QUICK ASSETS/CURRENT LIABILITIE

Where Quick Assets are:

1)

Marketable Securities

2)

Cash in hand and Cash at bank.

3)

Debtors.

A high ratio is an indication that the firm is liquid and has the
ability to meet its current liabilities in time and on the other
hand a low quick ratio represents that the firms liquidity
position is not good.
As a rule of thumb ratio of 1:1 is considered satisfactory. It is
generally thought that if quick assets are equal to the current
liabilities then the concern may be able to meet its short-term
obligations. However, a firm having high quick ratio may not

have a satisfactory liquidity position if it has slow paying

debtors. On the other hand, a firm having a low liquidity
position if it has fast moving inventories.

QUICK ASSETS = CURRENT ASSETS- INVENTORY

PARTICULA

2012-13

2013-14

S
21915.44
19090.89
QUICK ASSET
27,690.21
33,655.08
CURRENT
LIABILITY
0.56
QUICK RATIO 0.79
Sources: Annual Report 2014-15

2014-15
19019.20
31,998.19
0.59

Quick ratio
0.8
0.7
0.6

Quick ratio

0.5
0.4
0.3
0.2
0.1
0
2012-13

2013-14

2014-15

3) ABSOLUTE LIQUID RATIO

Although receivables, debtors and bills receivable are generally
more liquid than inventories, yet there may be doubts
regarding their realization into cash immediately or in time. So
absolute liquid ratio should be calculated together with current
ratio and acid test ratio so as to exclude even receivables from

the current assets and find out the absolute liquid assets.
Absolute Liquid Assets includes:
ABSOLUTE LIQUID RATIO =
ABSOLUTE LIQUID ASSETS/ CURRENT LIABILITES
ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES

PARTICULARS

2012-13

2013-14

CASH
&
BANK 3003.51
618.08
BALANCE
CURRENT LIABILITY
27690.21
33655.08
ABSOLUTE
LIQUID 0.011
0.018
ASSET
Sources: Annual Report 2014-15

2014-15
399.65
31,998.19
0.012

Absolute Liquid Asset

0.02
0.02

Absolute Liquid
Asset

0.01
0.01
0
2012-13

2013-14

2014-15

ACTIVITY RATIO
1. STOCK TURNOVER RATIO
2. WORKING CAPITAL TURNOVER RATIO
3. ASSET TURNOVER RATIO
4. CREDITOR TURNOVER RATIO
5. DEBTOR TURNOVER RATIO

1. INVENTORY TURNOVER OR STOCK TURNOVER

RATIO:
Every firm has to maintain a certain amount of inventory of
finished goods so as to meet the requirements of the business.
But the level of inventory should neither be too high nor too
low. Because it is harmful to hold more inventory as some
amount of capital is blocked in it and some cost is involved in it.
It will therefore be advisable to dispose the inventory as soon
as possible.
INVENTORY TURNOVER RATIO =
COST OF GOOD SOLD/ AVERAGE
INVENTORY
Inventory turnover ratio measures the speed with which the
stock is converted into sales. Usually a high inventory ratio
indicates an efficient management of inventory because more
frequently the stocks are sold; the lesser amount of money is
required to finance the inventory, where as low inventory
turnover ratio indicates the inefficient management of
inventory. A low inventory turnover implies over investment in
inventories, dull business, poor quality of goods, stock
accumulations and slow moving goods and low profits as
compared to total investment.
AVERAGE STOCK = (OPENING STOCK + CLOSING STOCK)/2

PARTICULARS

2012-13 2013-14

2014-15

NET SALES

80289.85

106,616.25

112,569.91

AVERAGE
INVENTORY

2142.8

2769.62

2918.04

38.49

38.56

STOCK TURNOVER 37.47

RATIO
Resources:

Annual Report 2014-15

Inventory Turnover Ratio

39
38.5

Inventory Turnover
Ratio

38
37.5
37
36.5
2012-13

2013-14

2014-15

2) INVENTORY CONVERSION PERIOD:

INVENTORY CONVERSION PERIOD =
360 (net working days)/ INVENTORY TURNOVER
RATIO

PARTICULARS

2012-13 2013-14 201415

DAYS

360

INVENTORY
RATIO

TURNOVER 37.47

INVENTORY CONVERSION 10days

PERIOD
Source: Annual Report 2014-2015

360

360

38.49

38.56

9 days

9.33

Inventory Conversation Period

10
9.8
9.6
9.4
9.2
9
8.8
8.6
8.4

Inventory
Conversation Period

2012-13

2013-14

2014-15

3) DEBTOR TURNOVER RATIO:

It helps to determine how fast the receivable are realized by the
firm. Firms provide credit to its customer to increase sales,
increase market share, compete with competitors etc .These
marketing function adversely affects the firms financial
performance.
DEBTOR TURNOVER RATIO = Sales
/Average Debtors

PARTICULAS

2012-13

2013-14

2014-15

SALES

80,289.84

106616.25

112569.9
1

AVERAGE DEBTORS

8985.475

11943.7

12,762.3
75

DEBTORS TURNOVER 8.94

8.93
RATIO
Source: annual report 2014-2015

8.82

Debtors Turnover Ratio

8.95
8.9

Debtors Turnover
Ratio

8.85
8.8
8.75
2012-13

2013-14

2014-15

a) Average collection period:

It reflects the average number of days a firm takes for a form to
realize money from its debtors.
Average collection period =
360 Days/ Debtor Turnover Ratio

PARTICULARS

201213

DEBTOR TURNOVER RATIO

8.94
DAYS
360
AVERAGE COLLECTION
40.3
PERIOD(days)
Source: annual report 2014-2015

2013- 201414
2013
8.93
360
40.3

8.82
360
40.8

Average Collection Period

40.8
40.7
40.6

Average Collection
Period

40.5
40.4
40.3
40.2
40.1
40
2012-13

2013-14

2014-15

4) CURRENT ASSETS TURNOVER:

Utilization of working capital is gauged from the turnover of
each component of working capital. A higher current assets
turnover implies better utilization and quicker conversion into
cash .It is calculated as:Current Assets Turnover Ratio =
Assets

SALES/

Average Current

PARTICULARS

2012-13

2013-14

2014-15

SALES

80341.88

106,616.25

112,569.91

CURRENT ASSETS 30825.76

36244.78

34454.03

AVG
CURRENT 26683.18
ASSETS

33608.61

35349.4

CURRENT ASSETS 3.01

TURN
OVER
RATIO

3.17

3.18

Source: annual report 2014-2015

Current Assets Turnover Ratio

3.2
3.15
Current Assets
Turnover Ratio

3.1
3.05
3
2.95
2.9
2012-13

2013-14

2014-15

SOLVENCY RATIO/DEBT EQUITY RATIO

PARTICULARS

2012-13

2013-14

DEBT
71945
91043.74
EQUITY
37389.65
42013.60
DEBT EQITY RATIO
1.92
2.17
Resources: annual report 2014-15

2014-15
92995.87
44515.49
2.09

Debt Equity Ratio

2.2
2.1
Debt Equity Ratio

2
1.9
1.8
1.7
2012-13

2013-14

2014-15

Debt-to-Equity ratio indicates the relationship between the

external equities or outsiders funds and the internal equities or
shareholders funds. It is also known as external internal
equity ratio. It is determined to ascertain soundness of the

long term financial policies of the company. Debt to equity ratio

indicates the how the company position is good or bad .In year
2013-14 company debt increased 1.92 to 2.17, this indicate
more liability for company. But in 2014-15 Company control its
debt which is good indication for company.

RETURN ON CAPITAL EMPLOYED

PARTICULARS

2012-13

2013-14

201415

PBIT
CAPITAL EMPLOYED

13608.09
109334.65

17985.66
133057.34

20218.13
137511.3
6
14.70

RETURNON
CAPITAL 12.45
EMPLOYED (%)
Source: annual report 2014-2015

13.52

Return on Capital Empployed

15
14.5
14
13.5
13
12.5
12
11.5
11

Return on Capital
Empployed

2012-13 2013-14 2014-15

Interpretation
ROCE provides a measure of efficiency of capital. This indicates
that how much company get in return from the capital
employed by it in the financial year. In the year 2014-15it has
increased 14.70 from previous year of 13.52. it means that
company has self-sufficient, to get ROCE .

RETURN ON EQUITY
=Profit After Tax
100/

Net Worth

Particulars

2012-13

2013-14

2014-15

Net Worth

37389.65

4,974.36

PAT

1964.88

42,013.60

3,729.26

Return on NW

5.26

11.84

8.38

44,515.49

Source: annual report 2014-2015

Return on Equity
12
10
Return on Equity

8
6
4
2
0
2012-13

2013-14

2014-15

Interpretation:ROE measures the efficiency of the company in managing its

shareholders funds. ROE is not only important for the owners
of the company but also to the managers as they were
responsible for the shareholders on whose behalf they manage
the firm. Factors that affect ROE are capital structure, tax rates,
cost of debts, and efficiency of assets etc. in 2013-14 it has
increased to 11.84 from previous year of 5.6. Company is able
to manage its shareholders fund efficiently. Factors that affect
ROE are capital structure, tax rates, cost of debts, efficiency of
assets etc. But in year 2014-15 it has decreased from 8.38.
Company has needed to improve its ROE.

FINDINGS
After going through the financial status of Aditya Birla
Chemicals (India) Limited we founded the following: Current Ratio of Company has been stable to 1.08
in the year 2013-14-15.
Quick ratio of company
considerably

low

which

in

year

implies

2014-15
fast

is

moving

inventories.
The Company debt has been decreased in year
2014-15 from 2013-14.
Company has high inventory holding period, so it
should be reduced to avoid blockage of goods.
Current turnover ratio in year 2014-15, has
decreased

3.15

to

3.4

which

is

need

to

be

increased in future year.

During year 2014-2015 the firm has more current
assets than current liability which shows positive
sign.
Stock turnover ratio in year 2014-2015,has been
increased which is good enough because if it is
higher than it may lead to stock out and if it is
lesser then it implies that over investment in

inventories

which

lead

to

stock

accumulation,

which is not good for chemicals companies.

RECOMMENDATIONS
In view of the analysis and with the change in industrial
scenario, it is felt that a company must reorient its policies for
betterment. Now a day there is tough competition in the
market of CHEMICAL products. Hence the company needs
certain best policies for competition with its competitors in
domestic as well as global market.
In order to
Current ratios are stable from 2013-14 and 2014-15.
Company should try to increase his current assets, so
that company is able to pay his liabilities very easily.
Inventory of company is high. It indicates the company is
efficient to manage the inventory effectively. And it
requires less amount of money to finance inventory.
In the year 2014-15 the company has self sufficient to
get ROET.
To increase the revenue of company try to attract his
customer by giving the facility of discounting, and
allowances etc.
Shorten the maturity cycle - the time from purchases of
raw materials and the start of production, or the start of

the

income-producing

activity,

until

collection

on

accounts receivable.
Use mortgage debt, at a lower interest rate, to pay off
unsecured loans, at higher rates.
ABCIL has to increase its liquid assets as it is less than its
current liabilities.
Priority should be given to safety management.

CONCLUSION
At last, I want to conclude that the management of
working capital is very essential for running the firm
more efficiently and effectively. For any successful
running company the role working capital is same as
the role of backbone in our body.
The management of working capital plays a important
role in to maintain the financial health of the firm
during the normal course of business. It is the most
fundamental measures of a firm financial strength. If
the company possesses a significant value of liquid
assets, it can easily fund its day to day business
obligations.
In conclusion, I want to say ABCIL has a good financial
position and the working of the company is better
than others chemicals manufacturing companies and
had a remarkable and better position in the business
world.

BIBLIOGRAPHY
Books Referred

1. I. M. Pandey - Financial Management - Vikas

Publishing
House Pvt. Ltd. - Ninth Edition 2006
2. M.Y. Khan and P.K. Jain, Financial management
Vikash
Publishing house ltd, New Delhi.
3. R k Srivastva, Financial management
4. Satish Inamdar- Principles of Financial ManagementEverest Publishing H
Websites References:
www.adityabirla.com
www.abcil.com
www.bscindia.com