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A DISSERTATION PROPOSAL

ON
Working Capital Management and its Appraisal
BY
AMOL SHARAD DAHIPHALE
(BATCH 2014-16)
UNDER THE GUIDANCE OF
PROF. SACHIN RAUT.
SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY
IN PARTIAL FULFILLMENT FOR THE DEGREE OF
MASTERS DEGREE IN BUSINESS ADMINISTRATION(MBA)
THROUGH
DNYANSAGAR INSTITUTE OF MANAGEMENT AND RESEARCH,
PUNE-411045

ACKNOWLEDGEMENT
Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped
me in completing this summer project to the best of my ability. Being a part of this project has
certainly been a unique and a very productive experience on my part.
I am really thankful to BIRLA CORPORATION LTD for making all kinds of arrangements to carry
the project successfully and for guiding and helping me to solve all kinds of quarries regarding the
project work. His systematic way of working and incomparable guidance has inspired the pace of
the project to a great extent.
I would also like to thank my mentor and project coordinator, PRITHVIRAJ DESHMUKH for
assigning me a project of such a great learning experience and acquainting me with real life project
financing and appraisal.
I am very grateful to Mr.SACHIN RAUT SIR. Who has given me the opportunity to do this project
in the Birla Corporation Ltd.

(AMOL DAHIPHALE )

INTRODUCTION OF PROJECT
.
The project entitled Working Capital Management and its Appraisal in BCL deals in this
segment. The term of study was kept limited to make the title true. The purpose of the report is to
get the in depth understanding of the process of working capital management. With the growing
Indian economy and the government policies for infrastructure the demand for cement is
increasing and seeing this as an opportunity is under taking many new projects for expansion of
the production which are under implementation for increasing the capacity of the plants. Working
capital has been analyzed in two ways overall study of the working capital of Birla Corporation
Ltd and secondly, plant-wise working capital of Birla Corporation, since the company has seven
plants in different region and each plant has its own working capital.
Borrowings are an important ingredient of funding a business entity. The lenders must feel
comfortable with their clients and Birla Corporation enjoys this position among their lenders.
Borrowing is done for working capital requirement i.e., to meet the day to day requirement for
smooth functioning of the production, and term loans for projects of capacity expansion. Major
portion of the borrowing is done from banks at better rate of interest.
The performance of the cement division of the company during the year was satisfactory. The
production of cement during the year was 52.28 lack tones, compared to production of 5.26 million
tones; the highest ever.The Satna unit produced 20.20 lacks tones of clinker during the year. The
cement production at Satna and Raebareli was lower at 21.55 lacs tones as compared to 21.87
lack tones during the previous year. The cement dispatches of Satna and Raebareli units where
21.44 lack tones as compared to 21.89 lack tones during last year.
The production of Portland Pozzolana cement (PPC) at Satna, however, recorded on all time high
level of 11.77 lack tones as against the previous best of 11.61 lack tones. Jute division of the
company produced 37990MT of jute goods during the year as compared to 29289MT in the
previous year. During the year the company has total 7 plants with annual capacity of 10 million
tones.
The Company has posted yet another impressive for the 2007-08 results, which has surpassed all
respective previous levels. It has shown substantial growth in turnover, cash profit, profit before tax
and profit after tax. The total turnover of company has registered a growth of 11.27% whereas
operating profits for the year where higher by 18.03% mainly on account of increase in the volume
of blended cement in the overall cement sales, higher realisation and effective cost control
measures taken by the company.
The profit before tax was up by 19.37% at Rs.551.18 crores as against Rs.461.74 crores in the
previous year. The profit after tax is 393.58 crores as against Rs. 326.23 crores in the previous
year. EPS was 51.11 as against 47.51 in the previous year.

The cash earnings of the company improved substantially to Rs.501.39 crores as against
Rs.178.25 crores in the last financial year. With increase in capacity on account of expansion
projects being undertaken by the company, it is expected that the Company would be in a position
to maintain the growth in future years. Company has recommended a dividend of Rs 4.00 per
share (40%) on 7, 70, 05,347 ordinary share compared 3.50 per share (35%) last year.
The objective of this project work is to focus on the working capital of the Birla Corporation and
exploring its potential in the company. The project contain the basic postulates of working capital,
procedure of analysis of working capital, ratio being used to define the working capital and the
impact of working capital in the company in case of excess or inadequacy. Also, the project
contains analysis of estimation of working capital requirement and the procedure to estimate
working capital requirement in manufacturing and trading concern. and from the data available it
can be concluded that it holds a very strong position in the market.

VISSION & MISSION.

To serve the national interests in the Product and related sectors in accordance and
consistent with Government policies.
To earn a reasonable ate of on interest.
To maximize utilization of the existing facilities in order to improve efficiency and increase
productivity.
To work towards the achievement of self-sufficiency in the field of cement market by setting
up adequate capacity and to build up expertise in lying of crude.
To further enhance distribution network for providing assured service to customers
throughout the country through expansion of reseller network as per Marketing Plan/
Government approval.

Towards Customers and Dealers: To provide prompt, courteous and efficient service
and quality products at fair and reasonable prices.

Towards Suppliers: To ensue prompt dealings with integrity, impartiality and courtesy
and promote ancillary industries.

Towards Employees: Develop their capability and advancement through appropriate


training and carrier planning.
Towards Community: To develop techno-economically viable and environment friendly
products for the benefit of the people.

SIGNIFICANCE OF WORKING CAPITAL:-

PAYMENT TO
SUPPLIERS

EASY LOAN
FROM BANKS

INCREASE
EFFECIENC-Y

SIGNIFICAN-CE OF
WORKING
CAPITAL

BETTER DEBT
SERVICING
CAPACITY

INCREASE IN
FIX ASSETS

Factors requiring consideration while estimating working capital.

The average credit period expected to be allowed by suppliers.


Total costs incurred on material, wages.
The length of time for which raw material are to remain in stores before they are issued for
production.
The length of the production cycle (or) work in process.
The length of sales cycle during which finished goods are to be kept waiting for sales.
The average period of credit allowed to customers
The amount of cash required to make adance payment

Applications
Birla Cement Khajuraho/Chetak - 43 grade Ordinary Portland Cement

All general purpose constructions.


Brick and stone masonry.

Plastering and flooring.

Plain and reinforced cement concrete.

Pre-cast and pre-stressed concrete.

Birla Cement Khajuraho/Chetak-53 Grade Ordinary Portland Cement

All general purpose constructions.


Pre-stressed girders and electric poles.

M25 & above concrete.

Roads, runways, industrial buildings, RCC bridges & lofty buildings.

Pre-cast, pre-stressed concrete elements

Birla Cement Samrat - Portland Pozzolana Cement / Portland Slag Cement

All general purpose constructions.


Brick and stone masonry

Plastering and flooring.

Plain and reinforced cement concrete.

Ordinary Pre-cast concrete work.

Birla Cement Khajuraho - Sulphate Resisting Portland Cement

Constructions near sea coast.


Below ground, where concrete or mortar is used in foundation, aqua ducts, canals &
culverts.

In swampy areas for footing, plinth beams, piles etc.

Industrial effluent treatment plant, cooling towers, chimneys, sewerage treatment plant.

Marine structures

Birla Cement Khajuraho - Low Alkali Low Heat Cement

Bridges
Dams

Reservoirs

LIMITATIONS-

Credit AnalysisAfter deciding upon the degree of acceptable risk by determining credit standards, the credit
analysis of the customer desiring credit managing out whether the customer 255 falls above or
below the acceptable limit in terms of his creditworthiness. The quality of customer chosen
depends upon the depth of the analysis. First, the customers willingness to pay the debts on time
is tested with the help of his record of payment to other suppliers. Second, his ability to pay is
ascertained as reflected in his financial statements. Here the primary reliance is upon an analysis
of short-term position: current ratio, acid test ratio, turnover of receivables and inventory turnover.
Credit Terms The second basic aspect of receivables management is to determine the credit
terms, which cover the things: cash discount period, and credit period. Changes in any of the firms
credit terms may have an effect on its overall profitability. When a firm initiates or increases a cash
discount the sales volume will increases average collection period, the cost of carrying accounts
receivables and bad debt expense will decrease. The negative aspect of an increased cash
discount is decrease profit margin per unit. Decreasing or eliminating a cash discount would have
opposite effects. When the cash discount period is increased, there is a positive effect on profits.
Many people who did not take the cash discount in the past will now take it, thereby reducing the
average collection period. The negative effective on profit is the resulting slower average collection
period because people who were already taking the cash discount will be able to still take it 256
and pay later. If the discount period is shortened the effects would be the opposite. Changes in
credit period also affect the firms profitability. Increasing the credit period should increase in sales.
But both average collection period and the bad debt expense are likely to increase as well. Thus
the net effect on profits may be negative. intense.
The first step in the efficient management of receivable is to define its objectives. The more
important of these objectives are:
1. To achieve growth in sales.
2. Meeting competitors.
3. Increase profits.
4. Finance the customer.

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