123

A project report on
SHORT TERM FINANCIAL ASPECTS OF IVRCL

INFRASTRUCTURES AND PROJECTS LTD.
Project report submitted in partial fulfillment of the requirements for
The award of the degree of
MASTER OF BUSINESS ADMINISTRATION

By
B.Veera Babu
(Reg: 08R71E0057)
Under the guidance of
Mr. Pandu Mr. Chandra Mohan Reddy

Associate professor Senior Manager Finance, IVRCL
DEPARTMENT OF MANAGEMENT STUDIES

S.S. Institute of Technology
(Affiliated To Jawaharlal Nehru Technological University)
Hyderabad
2010
DECLARATION
I hereby declare that the project titled SHORT TERM FINANCIAL ASPECTS in
IVRCL Infrastructures & Projects Ltd has been prepared by me as a part of requirement of
“Master of Business Administration” degree of JNT University and this study is my original
project report.
I am B. Veera Babu student of S.S. Institute of Technology pursuing master of business

administration course declare that results embodied in this project have not been submitted to
any other university or institution for award of master of business administration. The finding
and suggestions in this work are based on the information collected by me.
Place: Hyderabad
Date: (B. Veera Babu)

S. No. CONTENTS Page no.
1. CHAPTER -1
• Introduction
• Need of The Study
• Scope of The Study
• Importance of The Study
• Objectives of The Study
• Limitation of The Study
2. CHAPTER – 2
• Company profile
• Industry profile
3. CHAPTER – 3
• Research Methodology
• Conceptual Frame Work
4. CHAPTER – 4
• Data Analysis and Interpretation
5. CHAPTER – 5
• Findings
• Conclusion & Recommendations
• Bibliography and references.
• Annexure
ACKNOWLEDGEMENTS
I Wish to express my gratitude to all those who have made significant contribution for bringing
out the dissertation in this form.
I would like to thank Sri Chandra Mohan Reddy, Senior Manager (finance), IVRCL
INFRASTRUCTURES & PROJECTS Ltd, Hyderabad, A.P., and his staff who were kind
enough in helping me by giving good suggestions and required material to complete my study.
I am indebted to my supervisor Prof Mr. Pandu, Dept. of Management, S.S. Institute of

Technology, Hyderabad, A.P. For having consented to be my research supervisor. He has given
timely suggestions and monitored the research at every stage, which has been a source of
inspiration for effectively completing this study.
(B. Veera Babu)

CHAPTER -1
INTRODUCTION
INTRODUCTION
Working capital management involves the relationship between a firm’s short term assets
and its short term liabilities. The goal of working capital management is to ensure that a firm is
able to continue its operations and that it has sufficient ability to satisfy both maturing short term
debt and upcoming operational expenses. The management of working capital involves
managing inventories, accounts receivable and payable, and cash.
Working capital typically means the firm’s holdings of current or short term, assets such
as cash, receivables, inventory and marketable securities. These items are referred to as
circulating assets because of their cyclical nature. In a retail establishment, cash is initially
employed to purchase inventory, which is in turn sold they become cash part of which is
reinvested in additional inventory and part going to profit or cash throw – off.
The need for working capital to run the day to day business activities cannot be
overemphasized. We will hardly find a business firm which does not require any amount of
working capital. Indeed, firms differ in their requirements of the working capital.
There are two concepts of working capital
• Gross working capital
• Net working capital
Gross working capital refers capital to the firm’s investment in current assets. Current assets are
the assets which can be converted into cash within an accounting year an include cash, short term
securities, bills receivable and stock.
Net working capital refers to the difference between current assets and current liabilities. Current
liabilities are those claims of outsiders which are expected to mature for payment with i8n an
accounting year and include creditor’s bills payable and outstanding expenses.
IMPORTANCE OF STUDY
To produce the best possible returns, firm should keep no unproductive assets and should
finance with the cheapest available sources of funds. It is often advantageous for the firm to
invest in short term assets and to finance with short – term liabilities.
In a perfect world, there would be no necessity for working capital assets and liabilities.
In such a world, there would be no uncertainty, no transaction costs, information search costs,
scheduling costs, or production and technology constraints. The unit cost of producing goods
would not vary with the amount produced.
But the world in which real firms function is not perfect. It is characterized by the firm’s
considerable uncertainty regarding the demand, market price, quality, and availability of its own
products and those of suppliers. There are transaction costs for purchasing or selling goods or
securities.
These real world circumstances introduce problems with which the firm must deal. While
the firm has many strategies available to address these circumstance, strategies that utilize
investment or financing with working capital accounts often offer a substantial advantage over
other techniques. For example, assume that the firm is faced with uncertainty regarding the level
of its future cash flows and will incur substantial costs if it has insufficient cash to meet
expenses. Several strategies may be formulated to address this uncertainty and the costs that the
it may engender. Among these strategies are some that involve working capital investment or
financing such as holding additional cash balances beyond expected needs, holding a reserve of
short term marketable securities, or arranging for the availability of additional short term
borrowing capacity. One of these strategies may well be the least costly approach to the problem.
Similarly, the existence of fixed setup costs in the production of goods may be addressed in
several ways, but one possible alternative is to hold inventory.
NEED FOR THE STUDY
Every business enterprise needs some amount of working capital. Working capital is the
lifeblood and never center of any business concern. The need for working capital arises due to
the time gap between production and realization of cash from sales.
1) Solvency of the business: sufficient working capital helps in maintaining solvency of the
business by providing uninterrupted flow of production.
2) Goodwill: sufficient working capital enables a business concern to make prompt

payments and hence helps in creating and maintaining goodwill.
3) Easy loans: a concern having adequate working capital high solvency and good credit
standing can arrange loans from banks and others on easy and favorable terms.
4) Cash discount: adequate working capital also enables a concern to avail cash discount
on the purchase and reduces cost.
5) Regular supply of raw materials: sufficient working capital ensures regular supply of
raw materials and continuous production.
6) Regular payment of salaries, wages & other day to day commitments: adequate
working capital enables regular payments of salaries, wages and day to day
commitments, which enhances production and profits of the company.
7) Ability to face crisis: adequate working capital enables a concern to face business in
emergencies such as depression.
SCOPE OF THE STUDY
Working capital is the money used to make goods and attract sales. The less working
capital used to attract sales, the higher is likely to the return on the investment. Working capital
management is not end in the itself. It is an integral part of the department’s over all
management. In further news of efficient working capital management must be considered in
relation to other aspects of the department’s financial and non financial performance.
It is often advantageous from the firm to invest in short term assets and to finance with
short term liabilities. The firm is faced with uncertainty recording the level of its future cash
flows and will incur substantial costs of it has insufficient cash to meet expenses. It addition to
its use as a means of handling uncertainty, the management of working capital plays as important
role in maintaining the financial health of the firm during the normal course of the business.
A firm’s net working capital position not only is important from an internal standpoint, it
also is widely used as one measure of the firm’s risk. Risk, as used in its context deals with the
probability that a firm will encounter financially difficulties, such as the in ability to pay bills on
time. All other things being equal, the more net working capital a firm has, the more likely that it
will be able to meet current liability obligations. Because net working capital is one measure of
risk, a company’s net working capital positions affect its ability to obtain debt finance. Many
loan agreements with commercial banks and lending financial institutions contain a provision
requiring the form on maintain a minimum net working capital position. Likewise, bond
indentures also often contain such provisions. The overall policy considers both the level of
working capital investment and its financing.
OBJECTIVES OF STUDY
 To know the various of kinds of working capital.
 To know the working capital procedure at IVRCL Infrastructure & Projects Limited.
 To know the various financial sources available for the working capital.
 To examine the different fluctuations in working capital during the year 2004 to 2009 at
IVRCL Infrastructure & projects Limited.
 To know the effectiveness of working capital at IVRCL Infrastructure & Projects
Limited.
LIMITATION OF THE STUDY
• The present study only attempts to examine the relative financial performance in IVRCL
Company for the period 2005-09 in terms of profitability, leverage and liquidity.
• Major part of the analysis is based on secondary information therefore the information of
secondary data might affect the analysis.
• The analysis of relevant factors should be made in order to determine total investment in
working capital.
• The information is provided by the IVRCL Ltd.

CHAPTER -2
PROFILE OF THE ORGANISATION
&
INDUSTRY
INDUSTRY OVERVIEW
For any country, infrastructure is the backbone of economic development. It forms the
base for GDP, rate of progress and even impacts the quality of life of citizens. India, too, has
recognized the importance of infrastructure to sustain its vibrant growth. During the 11th plan
period (2007-2012), substantial investments are planned in the infrastructure sector. To drive
growth, spending in construction, power, aviation, telecom and roads is expected to be on the
upward curve. Major Private sector participation in infrastructure is anticipated, with some
estimates assigning nearly 30% to Public Private Partnership (PPP).
With the Indian economy moving at a “breathtaking speed” clocking growth at a rate
between 8.5 to 9 percent India is experiencing phenomenal growth in infrastructure development.
The construction sector has grown at about 12% annually for the past five years. The Approach
Paper of the 11th plan states that investment in infrastructure would have to rise from the current
4.6% of India’s GDP to an estimated 8.0% during the 11th plan period (2007-2012) to meet
India’s target GDP growth rate of 9%. According to the consultation paper on the projects of
investment in infrastructure during the 11th plan (2007-2012), the total requirement for the sector
is over Rs.20,187 billion ($500 billion). This implies growth rate of 162% over the 10 th plan.
Segments of infrastructure with the biggest potential growth are ports, airports and water supply.
Major Sectors of the Industry:
• Water
• Irrigation
• Transportation
• Buildings and Industrial Structures
• Power Transmission
Water:
Even though two-thirds of the earth’s surface is covered by water, it is unfortunate that
drinking water scarcity plagues our planet. According to WHO, 1.1 billion people or 18% of the
world’s population lack access to safe drinking water while 2.6 billion people or 42% lack access
to basic sanitation. The forecast is even more alarming; with studies revealing that by 2025, two-
thirds of the world’s population will lack clean and safe drinking water. India is among the thirty
one countries currently facing water stress and scarcity- a situation that is aggravated by a
constantly rising population.
The water industry size in India is about Rs.60 billion and the industrial water and waste
water treatment market size would be around Rs.30 billion and the drinking water purification
market would total around Rs.20 billion. The growth rates in the last 3 years have hovered in the
vicinity of 18-20 percent. The global market would be about $ 50 billion. Good water
management is crucial to overcome the crisis that threatens our country. We must create an
infrastructure that ensures sustainable water supply for the country’s agricultural, industrial and
domestic use.
The waste water treatment segment of the water industry is experiencing one of the fastest
growth rates because of growing industrialization around urban centers, intensifying regulatory
and enforcement measures, planned Government investment on sanitation and for reclaiming
treated waste water which is being increasingly seen as an effective alternate source of fresh
water for industry.
With the ever increasing water demand be it for irrigation, drinking or industrial
purposes, several states in India such as Andhra Pradesh, Kerala, West Bengal, Madhya Pradesh,
Uttar Pradesh, Karnataka and Rajasthan to name a few, have launched massive irrigation
schemes, reservoir projects, drinking water schemes comprising treatment plants and vast
pipeline systems to augment their available water resources effectively. Hence irrigation
systems, infrastructure for drinking water and industrial water and recycling of waste water shall
continue to remain the long term demand drivers.
Irrigation:
India remains basically an agrarian economy. Over 70% of her population dwells in
villages, with farming as the main source of livelihood. Despite the great dependence on
agriculture as a means of sustenance, it is rather unfortunate that farmers even today are
completely at the mercy of the monsoons to provide the much needed water for drinking,
livestock and irrigating their fields. In the past 2 decades, over 20% of the rural population has
migrated to towns in search of a stable livelihood.
Seized with the urgency to alleviate this perennial problem, the Government is investing
substantially in flow irrigation methods as surface water irrigation has been proven to be more
dependable than ground water based systems such as wells or bore wells. The water flows to
demand sites by gravity, lifting or through tunnels via ducts. Any excess seepage percolates
down and serves to replenish ground water and promote aquifer recharge. This recycling process
not only makes innumerable wells productive but also helps save energy by lowering pump
depths. Thus, canals are viewed as generating benefits more far reaching and wide ranging than
just transportation of water. The irrigation spends by States have not seen any significant slow
down until now.
Transportation:
A nation’s economy moves forward on wheels. A strong transportation network is
imperative to not only link producers and consumers across the country, but also allows its
citizens to travel from one corner to another. What is perhaps equally important is that a good
road and rail network enables far flung villages and mofussil towns to join the mainstream and
be participants in national development.
The dynamic actions taken by the Honorable Minister to implement the Highway Projects
are
• Issue of orders to the tune of 1 lakh crores with a target to develop over 12000 Km of
road.
• The Honorable Minister has personally taken up the challenge of promoting the projects
to investors through international road shows aimed at providing comfort for FII’s across
the globe.
• The Railways sector has been rapidly consolidating a spectacular turnaround. An
investment outlay of Rs.2, 510 billion has been proposed for the 11 th plan, with capacity
expansion plans lined up. Infrastructure is being improved through priority projects such
as the dedicated freight corridor, construction of new lines, gauge conversion works, high
speed passenger corridors, rail-port connectivity projects, corridor hinterland projects,
construction of private sidings and inland container terminals, besides the modernization
of major railway stations.
• The massive investments for the proposed Railway works including the proposed
dedicated freight corridor comprising 2762 km of new railway lines along the western
and eastern corridors being envisaged by the Indian Railways and RVNL projects in the
pipeline provide a tremendous opportunity for companies to participate in these works
either on its own or by a joint venture route and thereby enhance its credentials in the
railways sector.
Buildings and Industrial Structures:

As a nation develops, so does its need for urban infrastructure. The story in India is no
different. The rapid pace of industrialization has literally thrown open the floodgates for the
construction industry. From Government initiatives in housing to the requirement of
manufacturing units to the demand for civic utilities and facilities, building activity is witnessing
an unprecedented boom. Government initiatives to boost housing demand through lower interest
rates and expected incentives for low cost housing are expected to create demand for housing
projects in the medium term. With current capex plans of the corporate India, the demand for
creation of commercial and industrial structures is inevitable.
Power Transmission:
In today’s modern world, power is life. It has become absolutely vital for day-to-day
activities as well as for industrial development. Unfortunately in India, the benefits of
electrification have yet to reach all the rural areas. There are still villages that are groping in the
dark, searching for that elusive first step towards progress, where life comes to a standstill at
sunset. Recognizing this urgent need, the Government of India has aggressively taken up the task
of rural electrification.
The role of transmission in the Indian power sector is becoming more important. Over
the next few years, the demand for transmission capacity is expected to increase dramatically,
driven primarily by significantly bigger increases in generation capacity. The transmission
requirements are also becoming more complex in nature. An electricity market is beginning to
develop in India. Two power exchanges are now operational. The regulators have mandated
provisioning of open access. A large number of merchant power plants are being developed. To
meet these needs and requirements, the government has targeted a 10 percent growth in network
length at 220kv and above and 14 percent growth in transformation capacity in the 11 th plan. The
Government is also intensifying the investment and focus on the Accelerated Power
Development and Reforms Program (APDRP) which was launched in 2002-03 to reduce AT &
C losses to 15 percent in five years in urban and high density consumption areas. So far, the
Government of India has sanctioned 571 projects for strengthening and up gradation of sub
transmission and distribution systems of the States, providing significant business opportunities
for equipment suppliers and contractors.
Current Scenario:
Until the global crisis, the growth rate of the construction sector was higher than the GDP
growth rate. The global crisis has impacted the construction sector in several ways. Although the
sector has not remained completely unaffected by the ongoing financial crisis, since the gestation
period of a typical infrastructure project is considerably long, certain verticals that depend
directly on real estate have been hurt the most with the economic meltdown. Most construction
and engineering companies have pushed back several big projects planned earlier, either due to
lack of funds or due to these becoming economically unviable. On the other hand however,
sectors such as irrigation, water, roads and power have remained relatively unaffected.
In a major lending operation, the World Bank is providing a $1.2 billion line of credit to
state run India Infrastructure Finance Company (IIFCL) to help it catalyze long term debt for
infrastructure projects built on public private partnerships and about $1 billion to Power Grid
Corporation for expanding its inter-state transmission network. Allocation of Rs.40 billion
towards the development of roads infrastructure is in line with previous budgets with Rs 99.9
billion for planned spending on national highways. Though allocations for the roads and
highways sector have been provided, implementation may be slow due to policy ambiguity at the
state and central government levels and delays on account of land acquisition, shifting of utilities
and granting of regulatory clearances.
Among the government initiatives, the Jawaharlal Nehru National Urban Renewal
Mission (JNNURM) is qualitatively different aiming to scale up planned and integrated
development of urban infrastructure and services involving a series of reforms over a seven year
program (2006-2012), covering 63 mission cities with an envisaged investment of over Rs.1,000
billion. JNNURM, as a reform driven agenda, has been instrumental in laying foundation with
over 70 percent of the projects sanctioned for improving basic urban services like water supply,
sewerage, storm water drainage and solid waste management. So far, 297 projects worth
Rs.347.61 billion have been sanctioned for these sectors.
Another government initiative with objectives similar to the JNNURM is the Urban
Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT), launched in
2005 to improve civic services in 5,098 cities /towns (those not covered under the JNNURM).
Since its inception, a total of 691 projects worth Rs.123.85 billion in 558 towns have been
approved under the UIDSSMT. Like the JNNURM, water supply projects have been accorded
the highest priority under the UIDSSMT as well. A total of 367 water supply projects comprising
about 53 percent of the total projects have been approved at a cost of Rs.70.64 billion.
The launch of such novel and progressive schemes as the JNNURM and UIDSSMT
provide a platform for developing and sustaining urban infrastructure services, besides opening
up opportunities for companies for water and environment based projects. With the tremendous
spending potential arising from the country’s improved fiscal position, an investment of $
1.5trillion is expected to be injected into infrastructure building by 2017. Opportunities abound
for developers, contractors, suppliers and financiers. The current momentum in infrastructure
spend is set to accelerate, because of a strong political will; setting up of independent regulators
in infrastructure sectors; public private participation and negative grants/ revenue share reducing
the funds outlay of the central Government and greater public acceptance of user access charges.
With the catalysts now in place accelerating the pace of India’s infrastructure development
we have begun to see successful examples of infrastructure projects in ports, roads, airports,
power and railways with private-sector majority ownership. We will perhaps continue to see
strong growth in power, railways, ports and airports enhanced by the aggressive participation by
private sector. Though some risk of delays is perceived in roads due to land acquisition, dispute
resolution, construction companies, equipment suppliers, lenders, consultants as well as owners
of infrastructure assets are well positioned to benefit, given the increasing size and complexity of
projects. Increased mechanization will drive demand for construction equipment.
TABLE-1
Estimated investment across infrastructure sectors for the 11th five year plan - (2007-2012)
Sector Investment (Rs. Billion)
Power 7,352.25
Oil and Gas 2,690.49
Roads 4,014.88
Ports 1,050.00
Airports 450.00
Railways 2,510.00
Urban Infrastructure 2,595.00
(Including water and urban transportation)
Source – Planning Commission

COMPANY PROFILE
IVRCL Infrastructures & Projects Limited is an established player in the infrastructure

sector in India. The company was incorporated on 16th November 1987 under the name of I.
Venku Reddy constructions private limited and commenced operations in the year 1990. It was
converted to a public limited company on 29th September 1994 and came up with a initial public
offer in the year 1995.
16th Nov. 1987: I. Venku Reddy Constructions Private Limited
29th sep. 1994: I. Venku Reddy Constructions Limited
06th Dec. 1994: IVR Constructions Limited
07th apr.1999: IVRCL Infrastructures & Projects Limited
Milestones:
• Started in 1990, IVRCL has become a leading player in EPC and LSTK contract
implementation in India with front-end engineering capabilities.
• Strong presence in Water, Transportation, Building & Industrial Structures and Power
sector.
• Current order book of Rs. 143,000mn (US$3.2bn) with revenue of Rs. 50,422mn (US$
1,050mn)
• Proven Project Execution Skills and presence across 21 states in India.
• Undertaking BOT/ BOOT / DBOOT Type Public Private Partnership (PPP) projects.
• Highly qualified and well trained human resource base.
• Listed in 1995, proven dividend paying track record.
• Well diversified investor base with Foreign Institutional Investors holding over 47% in
the company.
• Achieved Group turnover of 1 Billion USD in less than two decades of our operations.
Board of Directors:
S.No. NAMES
1 E. SUDHIR REDDY Chairman & Managing Director
2 R. BALAMARI REDDY Executive Director – Finance & CFO
3 K. ASHOK REDDY Executive Director
4 E. SUNIL REDDY Director
5 E.ELLA REDDY Director
6 T.N. CHATURVEDI Director
7 T.R.C. BOSE Director
8 P.R. TRIPATHI Director
9 S.K. GUPTA Director
10 L. SRINIVASA REDDY Director
Landmarks in Quality: Quality practices at IVRCL effectively blend people's skills with
process tools at every stage of the project life cycle to provide state-of-the-art solutions.
TM
W
ema
keith
app
en
Logo of the Company:
Promoters: Mr. E. Sudhir Reddy
Mr. E. Sunil Reddy
Company Secretary: B. Subrahmanyam
Auditors: IVRCL is having statutory auditors and internal auditors
Statutory Auditors: M/s. Chaturvedhi & Partners, M/s. Deloitte Haskins & Sells
Internal Auditors: Mr. T. Vijay Kumar VCG & Co
Registrars and Transfer Agents: M/s. Karvy Computershare Private Limited

FIGURE-1: CORPORATE STRUCTURE
Chairman & Managing Director
Executive Director
Executive Director (Finance)

& Group CFO
GM - Finance JGM (IT) Sr. VP - Finance VP Group Head

(Commercial) (HR & Admin)
Director (Business Development & Corporate Strategy)
Company Secretary Director - Technical
Chief Operating Committee
COO - Water
Delhi Regional Head
Pune Regional Head COO - Transportation

Chennai Regional Head HEAD - B & IS
Kolkata Regional Head COO - Power
Head - Design COO - PMC
M ission & O bjectives :
Core values:
At IVRCL, we have dedicated ourselves to affecting continual improvement in all fields
of our business. Quality forms an integral part of all our deliverables and is the primary driving
force.
Mission:
To become a leader in infrastructure business by providing total solutions.
Objectives:
To build a better world by:

• Meeting ever growing challenging requirements in today’s competitive world through
strong quality systems.
• Creating a dedicated and confident work force through continual development
process.
• Adding value to the investors.
Quality Policy:
Commitment to customer satisfaction, quality awareness, desire for excellence and

continual improvement is our motto.
Committed to build a safe and sustainable world
Since inception, IVRCL has put in place stringent policies to create a safe and healthy
environment at the project sites. The Company's policy in the area of Health, Safety &
Environment has been consistent towards achieving a ZERO Lost Time Injury.
Various Sectors in which IVRCL operates
Strongly entrenched with proven domain knowledge, experience and credentials, IVRCL
operates in the following infrastructure sectors:
Water Supply & Environmental Projects:

Growing demand for clean water requires effective designing of the conveyance systems
from source to users. IVRCL has strategically invested in its people and expertise in this sector
and aims to endow the country with uninterrupted flow of water for irrigation & drinking
purposes. Our start-to-finish Water, Environment and Pipeline projects include:
• Drinking Water Supply Schemes

• Irrigation Projects
• Industrial Water
• Desalination
• Sewage Systems
• Solid Waste Management
• Oil & Gas
Transportation:
IVRCL has been on the fast track in the Indian transportation sector, by adopting environment-
friendly procedures and technologies to modernize and maintain India’s most motor able roads.
• National Highways
• State Highways
• Railways
• Tunnels
• Bridges
• Others
Buildings & Industrial Structures:
IVRCL’ s capabilities extend to designing and building landmarks, be it Airport
Terminals or ultra-modern Townships, Industrial Buildings and many more. We specialize in
building structures for,
• Townships
• Commercial Buildings
• Industrial Structures
Power & Transmission Projects:
Power is the key driver of infrastructure development and IVRCL has chalked out a clear
itinerary to capture a major chunk of this sector, with
• Transmission Lines
• Substations
• Distribution Lines
• APDRP Works
• Rural Electrification
• Transmission Line Tower (TLT) Factory
Major Clients:
IVRCL’s expertise and proven credentials have led to a consistent increase in the client
list and market presence. Some of our distinguished clients include:
Government Sector Private Sector
Oil & Natural Gas Corporation Ltd Birla Institute of Technology & Science
Bharat Heavy Electrical Ltd DLF Acute Info Parks (Pane) Ltd
National Thermal Power Corporation Ltd Brandi India Apparel City (Pvt.) Ltd
Nuclear Power Corporation of India Ltd Telco Construction Equipment Company Ltd
Bharat Petroleum Corporation Ltd TATA Projects Ltd
Indian Oil Corporation Ltd Tindal Steel & Power Ltd
FIGURE-2: IVRCL Group of Companies
IVRCL INFRASTRUCTURES & PROJECTS LIMITED
IVRCL ASSETS & HOLDINGS Ltd HINDUSTAN DORR-OLIVER

Ltd
DAVY MARKHAM (UK)
TABLE-2: Order Book Position:
S.No. Particulars Orders on hand (Rs. %

In millions)
1 Water Division 94,063.10 68.75

2 Buildings Division 30,067.10 21.98
3 Transportation Division 6,393.90 4.67
4 Power Division 6,300.50 4.60
Total 1,36,824.60 100
Departmental Details
The various departments present at IVRCL Infrastructures & Projects Ltd are:
• Electronic Data Processing
• Finance Department
• Accounts Department
• Technical Department
• Technical Department
• Stores Department
• Project Monitoring & Contracts
• Purchase Department
• Secretarial & legal
• Business development
• Steel division
• Design division
• Water division
• Power division
• Buildings Division
• Transportation Division
CHAPTER – 3
RESEARCH METHODOLOGY
&
CONCEPTUAL FRAME WORK
HYPOTHESES OF THE SYUDY
1) There is no significance difference in relationship with firm’s short term assets and its
short term liabilities of working capital.
2) The past or present performance of the firm’s working capital is same.

RESEARCH METHODOLOGY
Methodology is a systematic procedure of collecting information in order to analyze &

verify a phenomenon. The collection of data is done through two principle sources viz.
Primary Data:
It is the information collected directly without any reference. The data is collected from
managers and staff of the company and experienced person etc. some of the information has been
verified with personal observation, the data collected through conducting the personal interview
with the officers of the IVRCL.
Secondary data:
The data has been collected from a wide variety of sources life circulars, audit reports,
company reports, company statements and also data collected through other documents special
reports, news papers, books, magazines, websites etc.
WORKING CAPITAL – OVERVIEW
Working Capital management is the management of assets that are current in nature.
Current assets, by accounting definition are the assets normally converted in to cash in a period
of one year. Hence working capital management can be considered as the management of cash,
market securities receivable, inventories and current liabilities. In fact, the management of
current assets is similar to that of fixed assets the sense that is both in cases the firm analyses
their effect on its profitability and risk factors, hence they differ on three major aspects:
1. In managing fixed assets, time is an important factor discounting and compounding

aspects of time play an important role in capital budgeting and a minor part in the
management of current assets.
2. The large holdings of current assets, especially cash, may strengthen the firm’s liquidity
position, but is bound to reduce profitability of the firm as ideal car yield nothing.
3. The level of fixed assets as well as current assets depends upon the expected sales, but it
is only current assets that add fluctuation in the short run to a business.
Objectives of working capital management
The objectives of working capital management are twofold:
1. Maintenance of working capital and
2. Ability of ample funds at the time of need
The basic goal of working capital management is to manage each of the funds, the funds,
the current assets and the current liabilities in such a way that an acceptable level of net working
capital is always maintained in the business.
Working capital policy
Working capital management policies have a great effect on firm’s profitability , liquidity
and its structural health. A finance manger should therefore, chalk out appropriate working
capital policies with respect to each component of working capital so as to ensure high
profitability, proper liquidity and sound structural health of the organization.
In order to achieve this objective the financial manager has to perform the following two
functions.
1. Estimating the amount of working capital
2. Establishing sources from which these funds have to be raised
FIGURE-3: Various kinds of working capital :
Kinds of working capital
On the basis of concept On the basis of time
Gross working Net working Permanent or fixed Temporary or variable

capital capital working capital working capital
Regular Reserve Seasonal Special

working capital working capital working capital working capital
Working capital may be classified in two ways:
• On the basis of concept
• On the basis of time.

On the basis of concept, working capital is classified as gross working capital and net
working capital as discussed earlier. This classification is important from the point of view of the
financial manager.
On the basis of time,
Working capital may be classified as:
Permanent working capital
It is the minimum amount of investment in all current assets, which is required at all
times to carry out minimum level of business activities. Tendon committee has referred to this
type of working capital as “Core Current Assets”.
Characteristics of permanent working capital
• Amount of permanent working capital remains in the business in one form or another
• It also grows with the size of the business. It is permanently needed for the business, and
therefore, it should be finished out of ling-run funds.
Variable working capital:
The amount of working capital over permanent working capital is known as variable
working capital. The amount of such working capital keeps on fluctuating from time to time
depending upon the business activities. It may again be subdivided into seasonal working capital
and special working capital. Seasonal working capital is required to meet the seasonal demands
of busy periods occurring at stated intervals.
On the basis of concept
There are two concepts of working capital
1. Gross working capital
2. Net working capital

Gross working capital
Gross working capital, simply called as working capital to firm’s investment in current
assets. Current assets are the assets, which in ordinary course of business can be converted into
cash into within an accounting year.
• Example of current assets are:
• Cash and bank balances
• Short term loans and advances
• Bills receivables
• Sundry debtors
• Inventory
• Prepaid expenses
• Accrued income
• Money receivable in twelve months
The gross working capital concept focuses attention on two aspects of current assets
management
a) Optimum investment in current assets
b) Financing of current assets
The consideration of the level of investments in current assets should avoid two danger
points – excessive and inadequate investment in arranging funds to finance current assets.
Whenever a need for working capital funds arises due to increasing level of business activity or
any other reason, arrangement should be made quickly.
Net Working Capital:
Net working capital refers to the difference between the current assets and the current
liabilities. Current liabilities are those claims of outsiders, which are accepted, to nature of
payment within an accounting year and include creditors, bill payable and outstanding expenses.
Net working capital = current assets – current liabilities
Net working capital can be positive or negative. A positive net working capital will arise
when current assets exceed current liabilities. It is a quantitative concept.
a) Indicates the liquidity position of the firm and
b) Suggests the extent to which working capital needs may be financed by permanent
souce3s such funds
Capital is required to meet extraordinary needs for contingencies. Events like strikes, fire,
unexpected competition, raising price tendencies or initiating a big advertisement campaign
require such capital.
Operating cycle and cash cycle
The investment in working capital is influenced by the following events in the operating cycle of
the firm:
• Purchase of raw material
• Payment of raw material
• Manufacturing of goods
• Sale of finished goods
• Collection of cash for sales
The firm begins with the purchase of raw materials which are paid for after a delay which
represents the accounts payable period. The firm converts the raw materials into finished foods
and then sell the same. The time lag between the purchase of raw materials and the sale of
finished goes is the inventory period. Customers pay their bills some time after the sales. The
period that elapses between the date of sales and the date of collection if receivables is the
accounts payable period.
The time that elapses between the purchase of raw materials and the collection of cash for
sales is referred to as the operating cycle, whereas and the collection of cash for sales is referred
to as the cash cycle. The operating cycle is the sum of the inventory period and the accounts
receivable period, whereas the cash cycle is equal to the operating cycle less the accounts
payable period.
From the financial statement of the firm, we can estimate the inventory period, the
accounts receivable period, and the accounts payable period.
Average inventory
Inventory period = -----------------------------------------------------
Annual cost of goods sold/ 365
Average account receivable

Accounts receivable period= -------------------------------------------------
Annual sales/365
Average accounts payable

Accounts payable period = -------------------------------------------
Annual cost of goods sold/365

FIGURE-4: Operating and Cash Cycle
Order place stock arrives finished goods sold cash received
Inventory period accounts receivable period
Accounts
Payable period
Firm receives cash paid for
Invoice materials
Operating cycle
Cash cycle
FIGURE-5: Current Assets Cycle
Finished goods
Accounts Receivables
Work in process
Wages salaries factory

overheads
Raw materials
cash suppliers
COMPONENTS OF WORKING
CAPITAL BASIS OF VALUATION
Stock of Raw Material Purchase of Raw Material

Stock of Work -in- Process At cost of Market value which is lower
Stock of finished Goods Cost of Production
Debtors Cost of Sales or Sales Value
Cash Working Expenses
Each constituent of the working capital is valued on the basis of valuation
Enumerated above for the holding period estimated. The total of all such valuation
becomes the total estimated working capital requirement.
The assessment of the working capital should be accurate even in the case of small and
micro enterprises where business operation is not very large. We know that working capital has a
very close relationship with day-to-day operations of a business. Negligence in proper
assessment of the working capital, therefore, can affect the day-to-day operations severely. It
may lead to cash crisis and ultimately to liquidation. An inaccurate assessment of the working
capital may cause either under-assessment or over-assessment of the working capital and both of
them are dangerous.
Standards Of Working Capital Management
I. There is no single criterion for judging the efficient arrangement of working capital
II. Factor to be taken in to for organizing on efficient lines:
• Ability to meet short-term commitments in time, make payment of bills on due

dates
• Ability to find adequate cash at the right time to present forecasted levels of
business
• Ability to maximize sales turnover with minimum possible cash
• Minimum possible inventory turnover – turnover norms being fixed
• Whether adequate credit on favorable terms is obtained from suppliers
• Whether reasonable credit is extended to customers as a sales and monitoring

strategy
• Financing plans are prepared in anticipation of future need so that funds become
available at the right rime and at the least cost.
Ratios To Measure The Efficiency Of Working Capital
• Current ratio : current assets / current liabilities
• Quick ratio : (current assets – inventories) / current liabilities
• Sales to cash : sales during the period / average cash balance

• Average collection period: debtors dividend by annual credit sales and the
resulting figure multiplied by 365 days.
This ratio indicates how many days of credit are being provided to the
customer.
• Average payment period: creditors divided by annual credit purchase and the
resulting figure multiplied by 365.
This ratio indicates how many days of credit are being obtained from the
suppliers.
• Inventory turnover ratio: sales / average inventory.
WORKING CAPITAL FINANCING
The investment in raw materials, stock-in –process, finished goods and receivables (the
capital principal constituents of current assets) often varies a great deal during the course of the
year. Hence, the financial manager generally spends a good chunk of his time in finding money
of finance current assets.
Sources of short - term finance
• Accrued liabilities
• Trade credit.
• Working capital advance by commercial banks
• Regulation of bank finance
• Public deposits
• Inter – corporate deposits
• Short – term loans from financial institutions

• Right debentures for working capital
• Commercial papers
• Factoring
Accrued liabilities:
Firm generally pay employees on a weekly, bi weekly or monthly basis, so the balance
sheet typically show some accrued wages. Similarly the firm’s own estimated income taxes,
social security and income taxes with held from employee payrolls and sales tax collected are
generally paid on a weekly, monthly and quarterly basis. Hence the balance sheet will typically
show some accrued taxes along with accrued wages. These accrued liability increase
automatically or spontaneously as a form’s operations expand. Further, this type of debt is free in
the sense that no explicit interest is paid on funds raised through accrued liabilities. However, a
firm cannot ordinarily control its accrued liabilities.
While accruals are a welcome source of financing, they are typically not amenable to
control by management. The payment period for employees is determined by the practice in
industry and provisions of law. Similarly, tax payment date is given by law and postponement of
payment normally results in penalties.
Trade credit:
Trade credit represents the credit extended by the suppliers of goods and services. It is a
spontaneous source of finance on the sense that it arises in the normal transaction of the firm
without specific negotiations, provided the firm is considered creditworthy by its suppliers. It is
an important source of finance representing 25 percent to 50 percent of short term financing.
Cultivating good supplier relationship:
While a well established successful enterprise may have no difficulty in obtaining trade
credit a new company or one with financial problem will probably face difficulty in obtaining it.
The confidence of suppliers, a precondition for obtaining trade credit can be earned by
discussing the financial situation by showing realistic plan, and more important by honoring
commitments. The last point namely/ honoring commitment is very important. Broken promises
erode confidence more than poor operating results. It is better to make modest commitments
which may not be fully satisfying to the supplier and honor then rather than make tell promises,
that grating the supplier and fail to honor them.
Cost of trade credit
The cost of trade credit depends on the terms of credit offered by the suppliers. If the
terms say 30 days net, then trade credit is cost free because the amount payable is same whether
the payment is made purchase or on the 30th day.
Working capital advanced by commercial banks:
Working capital advance by commercial banks represents the most important source for
financing current assets. This section discusses the following aspects of this source of finance.
• Application and processing
• Sanction and terms of condition
• Forms of bank finance
• Nature of security
• Margin amount
Forms of bank finance
Working capital advance is provided by commercial banks in three primary ways

• Cash credit /overdraft
• Loans
• Purchase/ discount of bills
• Cash credit/ overdraft
Under a cash credit/ overdraft
Under a cash credit/ overdraft arrangement a pre- determined limit for borrower can draw
as often as required provided the outstanding do not exceed charged only on the running balance,
not on the limit sanction.
Loans
These are advance of fixed amount which are credited to the current of the borrower or
released to him on cash. The borrower is charged with interest on the entire loan amount,
irrespective of how much he draws.
Purchase/discount if bills
A bill raised out of a trade transaction. The seller of goods draws the bill on the
purchases. The bill may be clean or documentary and may be payable on demand or after usance
period does not exceed 90 days. On acceptance of the bill by the purchaser, the seller offers it to
the bank for discount/purchase.
Letter of credit
A letter of credit is an arrangement whereby a bank helps its customer to obtain credit
from its suppliers. When a bank opens a letter of credit favor of its customers for some specific
purchases, the bank undertake the responsibility to honor the obligation of its customer should
the fail to so.
Regulation of Bank Finance:

The reserve bank of India has been trying to brining a measure of discipline among
industrial borrowers and to redirect credit to priority sector of the economy. The RBI has been
issuing guidelines and directives to the banking sector toward this end.
Important guidelines and directives have stemmed form the recommendation of certain
specially constituted groups live
• The Dahejia committee
• The Tandon committee
• The Chore committee
• The Marathe committee
Tandon committee
The key recommendation of Tandon committee related to
• Norms for current assets
• Maximum permissible bank finance
• Emphasis on loan system
• Periodic information and reporting system
Norms for current assets: Tendon committee defined the norms for raw material, stock –in-
process, finished goods and receivables for fifteen major industries. Subsequently more
industries were covered
Maximum permissible bank finance
The Tandon committee had suggested three methods for determining the maximum
permissible bank finance. To describe these methods, the following notation is used.
CA = current assets as per the norms laid down
CL = non-bank current liabilities like trade credit and provisions

CCA = core current assets – this represents the permanent component of working capital
The methods of determining the MPBF are described below;
Method 1 MPBF = 0.75(CA-CL)
Method2 MPBF= 0.75(CA)-CL
Method3 MPBF=0.75(CA-CCA)-CL
Periodic information and reporting system
Tandon committee suggested an information and reporting system, which was further
improved by the chore committee its key components are as follows:
Quarterly information system – form 1. This gives 1. The estimates of production and sales for
the current year and the ensuing quarter.
Quarterly information system – form 2 this gives 1. The actual production and sales during the
year and for the latest completed year, and 2. The actual current asset SSs and liabilities for the
latest completed quarter.
Half-yearly operating statements – form3.this gives the actual operation performance for the half
– year ended against the estimates for the same.
Half – year funds flow statement – form 3b. This gives the sources and uses of funds for the half
– year ended against the estimates for the same.
Present practice
The salient features of the practice presently followed by bank with respect to working
capital financing are as follows:
• Assessment of working capital requirements
• Currently banks assess working capital requirement using the following methods:
• Project balance sheet method. The working capital requirements are assessed on the basis
of the projected values of assets and liabilities.
• Cash budget method the working capital requirement are assessed on the basis of
projected cash flow.
• Turnover method the working capital requirement are assessed on the basis of the
projected annual turnover.
• Current ratio norm. Under Tandon committee dispensation, a minimal current ratio of
1.33 was required. At present 1.33 is regarded only as a benchmark and depending on
circumstances banks do accept a lower current ratio.
PUBLIC DEPOSITS
Many firms large and small have solicited unsecured deposits from the public in recent
years, mainly to finance their working capital requirements.
Cost
The interest rate payable on public deposits was subject to a ceiling of till mid-1996. Just
before the ceiling was withdrawn, it was 15 percent. Companies typically offer an interest rate of
6 – 7 percent for one year deposits, 7-8 percent for two years deposit, and 9-10 percent for three
years deposit.
Regulation
The companies Amendment rules 1978governs fixed deposits. The important features of
this regulation are:
• Public deposits cannot exceed 25 percent of share capital and reserves.
• The maximum maturity period is allowed for a deposit is 3 years and the minimum
permitted maturity period is 5 years.
• A company which has public deposits is required to set aside, as deposit or investment,
by 31st march of following year. The amount so set aside can be used only facts its
financial performance and position.
Advantages
1. The procedure for obtaining public deposits is fairly simple.
2. No restriction covenants are involved.
3. No security is offered against public deposits. Hence the mortgageable assets of the firm
are conserved.
4. The post – tax cost is fairly reasonable.
Inter – Corporate Deposits:
A deposit made by one company with another, normally for a period up to six months, is
referred to as an inter – corporate deposit. Such deposits are usually of three types:
Call deposits: In theory a call deposit is withdraw able by the lender on giving a day’s notice. In
practice, however, the lender has to wait for at least three days. The interest rate on such deposits
may be around 12percent annum.
Three months deposit: More popular on practice, these deposits are taken by borrowers to tide
over a short – term cash inadequacy that may be caused by one or more of the following factors :
disruption in production, excessive imports of raw material, tax payment, delay in collection,
dividend payment, and unplanned capital expenditure. The interest rate on such is around 15
percent annum.
Six month deposits: Normally lending companies do not extend deposits beyond this time
frame. Such deposits, usually made with first –class borrowers, carry an interest rate of around
18percent annum.
Short Term Loans from Financial Institutions
Insurance companies provide short – term loans to manufacturing companies with an

excellent track record.
Eligibility: A company to eligible for such loans should satisfy the following conditions:
a) It should have declared an annual dividend of not less than six percent for the past five
years.
b) The debt – equity ratio of company should not exceed 2:1
c) The current of the company should be at least 1:1
d) The average of the interest cover ratios for past three years should be least 2:1.
Features: The short loans provided by financial institutions have the following features:
a) They are totally unsecured and are given in the strength of a demand promissory note.
b) The loan is given for a period of one year and can be renewed for consecutive years,
provided the original eligibility criteria are satisfied.
c) Interest payable at quarterly rests.
Right Debentures for Working Capital
Public limited companies can issue “right” debentures to their shareholders with the
object of augmenting the long – term resource of the company for working capital requirements.
The key guidelines applicable to such debentures are as follows:
The amount of debentures issue should not exceed (a) 20 percent of the gross current
assets, loans, and advances minus the long term funds presently available for financing working
capital. Or (b) 20 percent of the paid – up share capital, including preference capital and free
reserve, whichever is the lower of the two.
1. The debt equity ratio, including the proposed debenture issue, should not exceed 1:1.
2. The debenture shall first be offered to the existing India resident shareholders of the
company on a pro rata basis.
Commercial Papers
Commercial papers represents shorts term unsecured promissory notes issued by firms
which enjoy a fairly high credit rating. Generally, large firms with considerable financial
strength are able to issue commercial paper. The important features of commercial paper are
follows:
• The maturity period of commercial paper range from 90 days to 180 days.
• Commercial paper is sold at a discount from its face value and redeemed at its face value
of maturity.
• Commercial paper is directly placed with investors who intend holding it till its maturity.
Hence there is no well developed secondary market for commercial paper.
Regulations
1) It has a net worth of at least Rs.50 millions.
2) Its maximum permissible bank finance is at least Rs.100 millions.
3) The face value of commercial paper issued by it does not exceed 30 percent of its
working capital limit.
4) Its equity is listed on a stock exchange.
5) Its commercial paper receives a minimum rating of P1 from CRISIL or equivalent

thereof.
6) It has a minimum current ratio of 1.33.
7) It enjoys health code No.1 status.
8) The minimum size of commercial paper issue is Rs.2.5 millions and the denomination of
each commercial paper notes is half a million rupees or multiple thereof.
NON FUND BASED CREDIT

Bank Guarantee
This is an important business segment for the commercial banking activity. The fund
based facilities provided by banks require immediate outlay of funds which must be provided
beforehand. In contrast, the non fund based facilities are essentially in the nature of promises
made by banks in favour of a third party to provide monetary compensation on behalf of their
clients if certain situations emerges or certain conditions are fulfilled. The non fund based
facilities are playing a far more important role, where banks act as intermediaries between the
buyers and sellers, the providers and recipients of services or the contactors and the contractees
situated across the globe.
The borrowing clients of banks prefer to avail of the non fund based facilities on account
of two factors.
• First, the facility does not require immediate outlay of fund s and therefore the cost of
such facilities tend to be lower than the cost of fund based facilities charged by the bank.
• Secondly, a bank guarantee or a letter of credit issued by a bank on behalf of its client is
an off balance sheet item in the books of the client, which enables the latter to prepare a
more appealing balance sheet.
Definition
“A contract to perform the promise or discharges the liability of a third person in case of
his default.”
Thus, there are three parties involved in a contact of guarantee the applicant (the client on
whose behalf the guarantee is being issued), the beneficiary (to whom the guarantee is issued)
and the guarantor (in case of bank guarantee, it is the issuing bank). If follows from the above
definition that a guarantee is a collateral contract which is consequential to the main contract
between the applicant and the beneficiary.
Letter of Credit/ Documentary Credit
Banks also provide LC facilities which are another important segment of non fund based
business for commercial banks. Letter of credit issued by banks facilitates trade between two
parties, whether at domestic or international level. Commercial banks play an important role as
intermediary between two trading parties situated in two distant palaces.
The manufacturing/seller ships the consignment and hands over asset of documents to
another bank at the importer’s place with an instruction that the documents be handed over to the
importer either against payment or against a legally enforceable promise to pay at a later date.
The bank then passes on the payment received in this manner to the export after deducting a
commission or service charge. This is system of documentary collection. The former system is
known as delivery of documents against payment. Similarly the latter is known as the system of
delivery against acceptance.
Definition of letter of credit
A letter of credit or a documentary credit is an undertaking issued by a bank, on behalf of

the buyer to the buyer to the seller, to pay for the goods and service, provided that the seller
presents documents which company with the terms and conditions stipulated in the letter of
credit.
“Credit means any arrangement, however named or described, that is irrevocable and
thereby constitutes a definite undertaking of the issuing bank to honor a complying
presentation.”
Parties in an LC transaction:
• Applicant
• Beneficiary
• Issuing/opening bank
• Advising bank
• Confirming bank
• Nominated/negotiating bank
Statement of Limits Sanctioned from Banks and Financial Institutions
To
IVRCL Infrastructures & Projects Ltd
TABLE-3 (Rs. Lacks)
Sl. No Bank name and Financial Institutions Limit Sanctioned
A) Working Capital-Fund Based
1 Tamilnad Mercantile Bank Ltd. 6000.00
2 Corporation Bank. 6800.00
3 State Bank Of Indore 7150.00
4 Indian Overseas bank. 11934.00
5 IDBI Bank Ltd. 3900.00
6 Canara Bank. 15600.00
7 Andhra bank 4482.00
8 State Bank of India 8000.00
9 ICICI bank ltd. 1134.00

10 Commercial paper 10000.00
TABLE-4 (Rs. Lacks)
Sl. No Bank name and Financial Institutions Limit Sanctioned
A) Working Capital-Non-Fund Based
1 Tamilnad Mercantile Bank Ltd. 15500.00
2 Corporation Bank. 37000.00
3 State Bank Of Indore 35000.00
4 Indian Overseas bank. 47500.00
5 IDBI Bank Ltd. 52000.00
6 Canara Bank. 63000.00
7 Andhra bank 23500.00
8 State Bank of India 40000.00
9 ICICI bank ltd. 26500.00
TABLE-5: Fund Based Limits (Rs. Lacks)
Sl. No Project Name Bank / Financial Limit Sanctioned

Institution
1 CIDCO Exhibition Karur Vysya Bank 2100.00
Centre Ltd
2 NRDA- Raipur HDFC Bank Ltd 2700.00
3 ONGC- Petro Syndicate Bank 5.00
4 BMRCL Syndicate Bank 3435.00

Byappanahalli &
Ulsoor
5 BMRCL RV Road Syndicate Bank 1680.00
Terminal
6 UMPP- Coastal Syndicate Bank 5550.00
Gujarat Power Ltd
7 Guru Govind Singh Andhra Bank 4350.00
Refinery
8 Punasa Lift Irrigation Andhra Bank 8550.00
Project
9 765 KV Seoni Punjab & Sind Bank 1860.00
Nandanwadi
10 Lower GOI Project Punjab & Sind Bank 2810.00
11 NHAI- NS 40 / TN Standard Chartered 800.00

Bank
12 Bihar Water Project IndusInd Bank 5790.00
13 Bhogpur to ICICI Bank Limited 5000.00

Mukerian- NH- 1A
14 Allahabad Sewerage Barclays Bank 2800.00
Works
15 TLT – Factory IDBI Bank Limited 2000.00
16 Ambattur IDBI Bank Limited 3400.00

Municipality
17 BWSSB- W6A & EXIM Bank Ltd 1855.00
W6B
TABLE-6: Non - Fund Based Limits (Rs. Lacks)
Sl. No Project Name Bank / Financial Limit Sanctioned

Institution
1 NTPC – SIPAT Indian Overseas Bank 334.12
Project
2 Telugu Ganga Project Indian Overseas Bank 700.00
3 NHAI - NS - 40 Standard Chartered 2200.00

Bank
4 NHAI- NS – 41 IDBI Bank Ltd 1735.00
5 PGCIL- Bhagalpur IDBI Bank Ltd 804.00
6 MVVNL (Pck-129 & ICICI Bank Ltd 3527.24

130)
7 MVVNL (Pck-129 & ICICI Bank Ltd 8831.15
130)
8 Indira Sagar Project Karur Vysya Bank 1500.00
9 Guru Govind Singh Andhra Bank 1800.00
Refinery
10 Punasa Lift Irrigation Andhra Bank 8370.00
Project
11 765 KV Seoni Punjab & Sind Bank 2544.00
Nandanwadi
12 Lower GOI Project Punjab & Sind Bank 4988.00
13 Bihar Water Project IndusInd Bank 2990.00
14 Bhojpur to Mukerian ICICI Bank Ltd 10000.00

Road Work
15 Ambattur IDBI Bank Ltd 986.00
Municipality
TABLE-7: Term Loans (Rs. Lacks)
Sl. No Bank / Financial Institution Limit Sanctioned
1 HDFC Bank Ltd 800.00
2 Standard Chartered Bank 1500.00
3 Punjab & Sind Bank 5000.00
TABLE-8: HPA Loans (Rs. Lacks)
1 Kotak Mahindra Bank Ltd 204.43
2 Reliance Capital Ltd 4.41
3 TATA Capital Ltd 116.44
4 Karur Vysya Bank Ltd 3.48
TABLE-9: Short Term Loans (Rs. Lacks)

1 Kotak Mahindra Bank Ltd 3000.00
2 DBS Bank Ltd 5000.00
3 Bank of Nova Scotia 5000.00
4 IDBI Bank Ltd 5000.00
5 Tamilnad Mercantile Bank 5000.00
TABLE-10: Non Convertible Debentures (Secured) (Rs. Lacks)
1 LIC of India 20000.00
2 Federal Bank Ltd 1000.00
3 Dena Bank 1000.00
4 Allahabad Bank 500.00
5 Corporation Bank 500.00
6 UCO Bank 1000.00
7 Bank of Baroda 2000.00
8 Bank of India 2500.00
9 Central Bank of India 2000.00
TABLE-11: Non Convertible Debentures (Unsecured) (Rs. Lacks)

1 State Bank of Indore 1000.00
2 State Bank of Mysore 500.00
Commercial Paper 6500.00
CHAPTER – 4
DATA ANALYSIS
&
INTERPRETATION
TABLE-12: STATEMENT OF NET WORKING CAPITAL
(Rs. in millions)
FY FY FY FY
2004- 2005- 2006- 2007- FY
PARTICULARS 05 06 07 08 2008-09
CURRENT ASSTES:-
INVENTORIES
At project sites 108.12 205.5 750.3 1850.34 1931.51
At factory 70.06 80.03 75.07
Stores and Spares ….. ….. ….. 63.88 69.63
finished goods ….. ….. ….. 14.68 63.63
work-in-goods ….. ….. ….. 14.49 28.72
11430.3
SUNDRY DEBTORS 3065.69 4765.33 6332.1 6584.88
1
CASH AND BANK BALANCE
cash and cheques on hand 13.91 29.76 26.14 30.05 80.51
balance with scheduled banks 4512.85 2413.72 2212.06 1741.65 928.17
OTHER CURRENT ASSETS
interest accrued other than on investment 9.61 34.02 17.22 11.36 9.67
Retention Money 496.52 1068.45 2141.92 2908.19 4283.55
Other Deposits 207.73 650.9 874.59 1441.65 2661.25
Unbilled revenue 2345.34 2603.22 3235.93 6208.54 6798.98
Other receivables ….. ….. 101.9 159.5 534.7
LOANS AND ADVANCES
Loans To Subsidiaries 315.23 128.64 7954.26 3924.3 4499.02
Advance to joint venture 77.44 213.34 357.18 454.34 659.14
ADVANCES: Secured 18.85 15.85 8.67 8.67 8.67
Unsecured 164.13 426.32 2058.58 2349.05 2536.23
Tax deducted at source and advance 298.39 444.94 624.45 1155.47 1703.49
11703. 13080. 26770. 28921. 38227.1
TOTAL CURRENT ASSETS (A)
87 02 37 04 8
CURRENT LIABILITIES:-
Advance received from contractee-clients 487.5 1421.34 2539.5 2696.99 3986.42
trade deposits 70.07 87.19 48.02 51.45 47.91
10031.5 10405.5
sundry creditors 3491.73 3817.8 5800.65
3 9
Other liabilities 2233.35 64.87 275.36 344.09 346.87
Provisions 87.03 152.08 226.62 238.37 439.56
6369.6 5543.2 13121. 9131.5 15226.3
TOTAL CURRENT LIABILITIES (B)
8 8 03 5 5
5334.1 7536.7 13649. 19789. 23000.8
NET WORKING CAPITAL(A-B) 9 4 34 49 3
FIGURE: 6
INTERPRETATION:
From the above table, we can conclude that, there seen to be high increase in current
assets and low increase in current liabilities. Current assets are more than current liabilities in
five years.
There is a increase in net working capital every year. Increase in net working capital
shows that liquidity position of the firm is good.
TABLE-13: STATEMENT OF CHANGES IN WORKING CPAITAL

DURING 2009 TO 2008
(Rs. in millions)
March 31 March 31
PARTICUALRS Increase Decrease
2009 2008
CURRENT ASSETS
Inventories 2093.49 1943..39 150.1
Sundry debtors 11430.31 6584.88 4845.43
Cash & Bank Balance 1008.68 1771.37 762.69
Other current assets 14284.06 10746.75 3537.31
Loans & Advances 9318.73 7780.51 1538.22
TOTAL CURREN ASSETS 38135.27 26883.51
CURRENT LIABILITIES
Advance received from contractee-
3986.42 2696.99 1289.43
clients
trade deposits 47.91 51.45 3.54
Other liabilities 346.87 344.09 2.78
Provisions 439.56 347.37 92.19
TOTAL CURRENT LIABILITIES 15226.35 9240.55
NET WORKING CAPITAL 22911.92 17642.96
INCREASE IN WORKING 5268.96
CAPITAL
TOTAL 22911.92 22911.92
INTERPERTATION:
There is an increase in working capital in this year compared to previous year. Here,
increased amount is Rs. 5268.96 millions. It is because of increase in inventories, sundry debtors,
other current assets and advances & loans to current liabilities. Decrease in cash and bank
balance to current liabilities. Overall we can conclude that working capital is satisfactory.

DURING 2008 TO 2007
(Rs. in millions)
March 31 March 31
2008 2007
CURRENT ASSETS
Inventories 1943..39 825.37 1118.02
Sundry debtors 6584.88 6332.1 252.78
Loans & Advances 7780.51 7071 709.51
TOTAL CURRET ASSETS 26883.51 22834.14
CURRENT LIABILITIES
Advance received from contractee-clients 2696.99 2539.5 147.49
Provisions 347.37 226.62 11.75
INCREASE IN WORKING CAPITAL 7929.85
TOTAL 17642.96 17642.96
INTERPRETATION:

DURING 2007 TO 2006
(Rs. in millions)
March 31 March 31
2007 2006
CURRENT ASSETS
Inventories 825.37 285.53 539.84
Sundry debtors 6332.1 4753.55 1578.55
Loans & Advances 7071 1446.28 5624.72
TOTAL CURRENT ASSETS 22834.14 13542.11
CURRENT LIABILITIES
2539.5 1421.34 1118.16
clients
Provisions 226.62 152.08 75.54
NET CURRENT ASSETS 9713.11 7998.83
INCREASE IN WORKING
CAPITAL 1714.28
TOTAL 9713.11 9713.11
INTERPRETATION:

DURING 2006 TO 2005
(Rs. in millions)
March 31 March 31
2006 2005
CURRENT ASSETS
Inventories 285.53 178.18 107.35
Sundry debtors 4753.55 3065.69 1687.86
Loans & Advances 1446.28 809.25 637.03
TOTAL CURRENT ASSETS 13542.11 11629.43
CURRENT LIABILITIES
1421.34 487.5 933.84
clients
Provisions 152.08 87.03 65.05
INCREASE IN WORKING
CAPITAL 2739.08
TOTAL 7998.83 7998.83
INTERPRETATION:
TABLE-17: WORKING CAPITAL TURNOVER RATIO:

This ratio shows the number of times working capital is turned over in a stated period.
The higher ratio the lower in the investment in working capital and the greater are the profits. A
very high turnover is a sign of over trading and may put the concern into financial difficulties.
Cost of goods sold
Working capital ratio = --------------------------------
Working capital
(Rs. in millions)
YEARS COST OF GOODS SOLD WORKING CAPITAL RATIO
2004-05 9867.41 5334.19 1.84984
2005-06 13977.2 7536.74 1.85454
2006-07 21281.7 13649.34 1.55917
2007-08 33796.73 19789.49 1.70781
2008-09 46380.23 23000.83 2.01646
FIGURE-7:
INTERPRETATION:
From the above table we can conclude that, there is mixed trend in working capital
turnover ratio over the years. In the year 2006-07 IVRCL maintain lowest working capital
turnover ratio. It indicates proper utilization of working capital. There is highest ratio maintained
in the year 2008-09 that is 2.01. it shows normal utilization of working capital.
Finally IVRCL maintain optimal working capital turnover ratio.
TABLE-18: RATIO OF INVENTORY TO NET WORKING CAPITAL

In order to ascertain that there is no overstocking the ratio of inventory to working
capital should be calculated. From the sound point of view inventory should not exceed amount
of capital. The desirable is 1:1.
Inventory
Ratio of inventory to working capital = ----------------------------
Net working capital
(Rs. in millions)
YEARS INVENTORY WORKING CAPITAL RATIO
2004-05 178.18 5334.19 0.0334
2005-06 285.53 7536.74 0.03789
2006-07 825.37 13649.34 0.06047
2007-08 1943.39 19789.49 0.0982
2008-09 2093.49 23000.83 0.09102
FIGURE-8:
INTERPRETATION:
From the above table, we can see that in the year 2004-05 IVRCL has lowest ratio of net
working capital that is 0.033. These ratios keep on increasing up to 0.098 in the year 2007-08.
Again in the year 2008-09 this ratio was decreased.
Finally we can conclude that it maintain the poor ratio of inventory to net working
capital.
TABLE-19: RATIO OF TOTAL ASSETS TO NET WORKING CAPITLA

This ratio compares the excess of liquid assets over current obligation to the size
of the firm. A high ratio indicates a low level liquidity and vice versa.
Total assets
Ratio of total assets to net working capital = ------------------------------
Net working capital
(Rs. in millions)
YEARS TOTLA ASSETS WORKING CAPITAL RATIO
2004-05 6532.93 5334.19 1.22473
2005-06 11597.84 7536.74 1.53884
2006-07 18825.39 13649.34 1.37922
2007-08 26841.28 19789.49 1.35634
2008-09 32203.43 23000.83 1.4001
FIGURE-9:
INTERPRETATION:
From the above table we can conclude that, ratio of the company has shown a mixed
trend of increase and decrease over the years.
The ratio increased in 2005-06. It shows the firm’s liquidity position decreasing. There is
a low ratio in 2004-05 & 2007-08 compare to other ratios. This ratio indicates a high level
liquidity.
TABLE-20: CURRENT RATIO

Current ratio is the total current assets to total of current liabilities. Generally 2:1 ratios
considered ideal for a concern. According to RBI the minimum ratio required of a firm to be
sufficiently liquid is 1.33:1 i.e., the company has to get a return of 33 paisa over rupee of current
liabilities.
Current assets
Current ratio = ---------------------------
Current liabilities
(Rs. in millions)
YEARS CURRENT ASSETS CURRENT LIABILITIES RATIO
2004-05 11629.43 6369.68 1.82575
2005-06 13542.11 5543.28 2.44298
2006-07 22843.14 13121.03 1.74096
2007-08 28826.91 9240.55 3.11
2008-09 38135.27 15226.35 2.50456
FIGURE-10:
INTERPRETATION:
From the above table we can conclude that, the current ratio of IVRCL shows mixed
trend, which means the ratios are fluctuating year by year. The standard ratio is 2:1.
In the year 2007-08 IVRCL maintain high current ratio that is 3.11, where as in 2006-07
it maintained low current ratio that is 1.74.
Finally we can conclude that IVRCL maintained reasonable current ratio. It can able to
short term liabilities.
TABLE-21: QUICK RATIO

It established a relationship between quick assets and current liabilities. An assets is
liquid if it can be inverted into cash immediately without a loss of value. It is the ratio of quick
assets/current liabilities. Quick assets are those assets, which are readily converted into cash like
debtors, bill receivable & inventories and prepaid expenses are not included as assets as they
require some time to get converted into cash.
Quick assets
Quick ratio = ----------------------------
Current liabilities
(Rs. in millions)
YEARS QUICK ASSETS CURRENT LIABILITIES RATIO
2004-05 6369.68 1.31648

8385.56
2005-06 5543.28 1.53393

8503.03
2006-07 13121.03 1.19477

15676.67
2007-08 9240.55 2.19669

20298.63
2008-09 24611.47 15226.35 1.61637
FIGURE-11:
Interpretation:
From the above table, we can conclude that, the ratio is shows mixed trend. In the year
2007-08 the IVRCL maintain the high ratio that is 2.19, where as in 2006-07 it maintain lowest
ratio that is 1.19. actually, the standard ratio is 1:1, but IVRCL maintain more than 1 every year.
Usually high quick ratio is indication that the firm is liquid and has ability to meet it
current and liquid liabilities in time.
Finally we can conclude that IVRCL able to pay current and liquid liabilities in time.
TABLE-22: INVENTORY TURNOVER RATIO

It established relationship between cost of goods sold during a given period
and the average amount of inventory held during that period. This ratio reveals the number of
times finished stock in tuned over during a given accounting period.
Cost of goods sold

Inventory turnover ratio = --------------------------------
Average inventory
(Rs. in millions)
SL.NO. YEARS RATIO
1 2004-05 59.19
2 2005-06 53.28
3 2006-07 28.43
4 2007-08 19.03
5 2008-09 18.23
FIGURE-12:
INTERPRETATION
From the above table, we can conclude that, there is a drastic decrease in inventory
turnover ratio over the years. The Low ratio indicates less and inefficient management of
inventory, dull business poor quality of goods stock accumulations. In the year 2008-09 IVRCL
maintain low inventory turnover ratio. IVRCL maintained high inventory turnover ratio in the
year 2004-05. However a low ratio reveals the accommodation of obsolete stock.
TABLE-23: CURRENT ASSETS TURNOVER RATIO

It indicates relationship between net sales and current assets.
Net Income
Current assets turnover ratio = -----------------------
Current assets
(Rs. in millions)
YEARS NET INCOME CURRENT ASSETS RATIO
2004-05 10547.33 11629.43 0.90695
2005-06 15214.23 13542.11 1.12348
2006-07 23464.57 22843.14 1.0272
2007-08 36981.14 28826.9 1.28287
2008-09 49830.92 38135.27 1.30669
FIGURE-13:
Interpretation:
From the above table we can identify that there is increase in current assets turnover ratio
over the years. This ratio is value added to the company. It indicates the firm is stocking
sufficient raw material.
TABLE-24: RATIO OF CURRENT ASSETS TO FIXED ASSETS

The ratio differs from industry to industry and therefore no standard can be laid down. A
decrease in ratio may mean that trading in stock or more mechanization has been put through.
Debtors have unduly increased or fixed assets have been intensively used. An increase in the
ratio accompanied by increase in profit indicates that business is expanding.
Current assets
Ratio of current assets to fixed assets = -------------------------
Fixed assets
(Rs. in millions)
YEARS CURRENT ASSETS FIXED ASSETS RATIO
2004-05 11629.43 956.83 12.1541
2005-06 13542.11 1373.45 9.85992
2006-07 22843.14 2435.05 9.38097
2007-08 28826.9 3732.8 7.72259
2008-09 38135.27 5402.48 7.05885
FIGURE-14:
INTERPRETATION:
From the above table we can see that, in the year 2004-05 IVRCL has maintain high ratio
of current assets to fixed assets is 12.15. This ratio shows the business expansion in this year.
From the year 2005-06 to 2008-09 the ratio is decreased from 9.85 to 7.05.
TABLE-25: DEBTORS TURNOVER RATIO
This ratio measures the account receivables in term of number of days of credit sales
during a particular period.
Credit sales
Debtors turnover ratio = --------------------------
Average debtors
(Rs. in millions)
SL.NO. YEARS RATIO
1 2004-05 3.44
2 2005-06 3.19
3 2006-07 3.7
4 2007-08 5.62
5 2008-09 5.68
FIGURE-15:
INTERPRETATION
From the above table, we can conclude that, the debtors’ turnover ratio of the company
shown a mixed trend of increase and decrease over the years. In the year 2007-08 IVRCL
maintained high debtors’ turnover ratio.
IVRCL has shown low ratio in the years 2004-05 & 2005-06. It indicates inefficient management
of liquidity debtors.
TABLE-26: NER PROFIT RATIO

This ratio shows results of the firm.
Profit after tax

Net profit ratio = ----------------------- * 100
Net sales
(Rs. in millions)
YEARS PROFIT AFTER TAX NET SALES RATIO
2004-05 567.08 10547.33 5.37653
2005-06 929.55 15214.23 6.10974
2006-07 1414.63 23464.57 6.02879
2007-08 2104.77 36981.14 5.69147
2008-09 2259.69 49830.92 4.53471
FIGURE-16:
INTERPRETATION:
The above table indicates net profit ratio of IVRCL. In the year 2005-06 net profit ratio
was increased to 6.1, further this ratio is go on decreasing. But the net profit is increasing year by
year.
TABLE-27: RATIO OF CASH TO CURRENT ASSETS

The large amount of cash in the current assets indicates that the firm is highly liquid.
Cash
Ratio of cash to current assets = --------------------------
Current assets
(Rs. in millions)
YEARS CASH CURRENT ASSETS RATIO
2004-05 4526.76 11629.43 0.38925
2005-06 2443.48 13542.11 0.18044
2006-07 2238.2 22843.14 0.09798
2007-08 1771.37 28826.9 0.06145
2008-09 1008.68 38135.27 0.02645
FIGURE-17:
INTERPRETATION
In this table, we conclude that the ratio of the company decreasing year by year. In the
year 2004-05 IVRCL has high liquidity, where as in 2008-09 company maintaining low
liquidity.
TABLE-28: RATIO OF CASH TO CURRENT LIABILITIES

Cash must be available to pay bills that will be due in next few weeks or
months. A measure of adequacy of such cash can be made by taking the ratios of cash to current
liabilities.
Cash
Ratio of cash to current liabilities = -------------------------
Current liabilities
(Rs. in millions)
YEARS CASH CURRENT LIABILITIES RATIO
2004-05 4526.76 6369.68 0.71067
2005-06 2443.48 5543.28 0.4408
2006-07 2238.2 13121.03 0.17058
2007-08 1771.37 9240.55 0.1917
2008-09 1008.68 15226.35 0.06625

FIGURE-18:
INTERPRETATION
From the above table, we can conclude that there is ratio decrease from 2004-05 to 2006-
07. It indicates decrease in current liabilities. In the year 2007-08 ratio is slight increase. It
indicates increase in current liabilities. Again, in the year 2008-09 the ratio decreased. It shows
decrease in current liabilities.
TABLE-29: RATIO OF CASH TO TOTAL ASSETS

The level of cash as a component in the firm overall mixture of assets
reflects management’s view of importance of liquidity versus the design to tie up funds in fixed
income producing assets. This can be measured by the ratio of cash to total assets.
Cash
Ratio of cash to total assets = --------------------------
Total assets
(Rs. in millions)
YEARS CASH TOTLA ASSETS RATIO
2004-05 4526.76 6532.93 0.69291
2005-06 2443.48 11597.84 0.21068
2006-07 2238.2 18825.39 0.11889
2007-08 1771.37 26841.28 0.06599
2008-09 1008.68 32203.43 0.03132

FIGURE-19:
INTERPRETATION
From the above table, we can conclude that there is decrease every year, but from 2004-
05 to 2005-07 there is huge decrease about 0.48. there is a slight decrease from 2005 – 06 to
2008 – 09.
TABLE-30: Financial Performance & Graphical Representation

(Rs. in millions)
Particulars 2008- 2007- 2006 2005- 2004- 2003- 2002- 2001- 2000- 1999-
09 08 -07 06 05 04 03 02 01 00
Turnover 49830 36981 2346 1521 1054 7734 4403 3919 2671 2116
4 4 7
Profit before tax 2737 2853 1850 1037 594 427 240 199 153 138
PAT 2259 2104 1414 929 567 391 155 130 128 90
Equity capital 267 266 259 213 169 106 105 104 104 61
Reserves & surplus 17838 15792 1295 4556 2406 1247 913 796 750 265
7
Net worth 18105 16059 1321 4770 2576 1354 1018 900 855 326
7
Gross block 6623 4175 2593 1580 1107 964 898 755 496 333
Net block 5206 3191 1929 1107 741 672 703 644 404 250
Book value (Rs) 135 120 101 44 151 127 96 86 81 53

per share
EPS (Rs.) basic 16.93 16.08 12.3 8.84 33.56 37.04 14.85 12.54 12.2 14.73
8 6
dividend 70% 70% 50% 50% 30% 30% 30% 30% 30% 30%
FIGURE-20:
FIGURE-21:
FIGURE-22:
FIGURE-23:
CHAPTER - 5
FINDINGS
 During the period of study i.e. 2005 to 2009 it was noted that the cash and bank balances
were in declining trend i.e. in the year2005-06 it was 2083.28, it is decreased to 762.69.
In the year 2008-09 this indicates proper utilization of resources.
 From the analysis of the study i.e. 2005 to 2009 it was noted that there is increase in
working capital year by year i.e. 2005:- 5334.19; 2006:- 7536.74; 2007:- 13649.34;
2008:- 19789.49; 2009:- 23000.83.
 From the study of the working capital management I found that there was increase in
working capital turnover ratio i.e. in the year 2005 – 06 it was 1.84 and it is increased to
2.016 in the year 2008 – 09.
 From the analysis of the study I found that there was mixed trend in ratio of total assets to
net working capital. The ratio was increase in 2005 -06 that is 1.53. In the years 2004-05
& 2007-08 the ratio was decreased compare to other ratios.
 From the study of working capital management I found that there is mixed trend in ratio
of inventory to net working capital. The ratio was increased in the year 2007-08 i.e.
0.098. In the year 2004 – 05 IVRCL has shown lowest ratio compare to other ratios i.e.
0.033.
 During the period of the study there is a drastic increase in current assets and decreased in
current liabilities. Current assets are more than current liabilities in five years. The
average current ratio is 2.16. IVRCL has sufficient funds to face the current obligations.
 From the analysis of the study I identified that there was increased in quick assets over
the years. The average quick ratio is 1.6 over the five years. It is good for organization. It
has ability to pay current liabilities.
 During the period of study i.e. 2005 to 2009, I noted that there was drastic decrease in
inventory turnover ratio i.e. in the year 2004-05 it was 59.19 and it is decreased to 18.23
in the year 2008-09.
 From the study of working capital management I found that there was increase in current
assets turnover ratio over the years. It indicates the firm is stocking sufficient raw
material.
 During the period of study i.e. 2005 to 2009, I found that there was decrease in ratio of
current assets to fixed assets. In the year 2004-05 IVRCL maintained high ratio that is
12.15 the ratio shows the business expansion in this year.
 From the analysis of study i.e. 2005 to 2009 I noted that there was mixed trend in debtors
turnover ratio. In the year 2007-08 it maintained highest debtors’ turnover ratio, i.e. 5.62.
It has shown lowest ratio in the years 2004-05 & 2005-06, it indicates inefficient
management liquidity debtors.
 From the study of working capital management I found that there was mixed tend in net
profit ratio. These ratios indicate the firm’s capacity to face adverse economic conditions
such as price competition, limited projects, etc. but, profits are increasing year by year. It
is positive sing.
 During the period of study 2005 to 2009, I found that there was decrease in ratio of cash
to current assets. It indicates liquidity funds are utilized properly.
 From the analysis of the study i.e. 2005 to 2009, I identified that there was decrease in
ratio of cash to current liabilities. There was decrease in 2008-09, 2006-07, & 2007-08. It
indicates decrease in current liabilities. In the years 2004-05 & 2005-06 the ratio was
increased compare with other ratio. This shows an increase in current liabilities.
 During the period of study i.e. 2005 to 2009, I found that there was drastic decrease in
ratio of cash to total assets. It maintained high ratio in the year 2004-05. Lowest ratio
shown in the year 2008-09.
CONCLUSION & RECOMMENDATIONS
 During the period of study IVRCL’s Short term Financial Aspects, it indicates that the
company has been growing in terms of its operations.
 IVRCL has been taking up more and more infrastructure projects over the last few years.
 The management of its working capital has also improved with its consistent growth over
the years. The trends observed in the cash and bank balances component of the current
assets indicates that IVRCL has brought down its holding of cash and bank balances.
 This in turn suggests an efficient management of the same and ensuring that there is no
idle cash locked up in the firm.
 The current ratio and quick ratio are slightly below the recommended theoretical values.
Theory suggests that current ratio should be around 2 and an Ideal Quick ratio as 1.5.
IVRCL’s current ratio and quick ratio’s are both almost the same, and they average
around the 1.40 mark.
 This is due to the reason that IVRCL has very little inventory, and hence the current and
quick ratios almost the same. The theoretical value of 2.0 for current ratio is a pretty old
practice, generally applicable only for conservative companies.
 In today’s competitive market, hardly any growing company can afford such a
comfortable ratio of covering every 1 part of liability with 2 parts of current assets. Thus
1.3 – 1.5 is considered to be a very acceptable and good operational current assets ratio.
 Also, considering the fact that IVRCL has little inventories-this indicates that most of its
current assets are highly liquid. Therefore, the liquidity position of IVRCL is in a healthy
state.
 There is a drastic decrease in inventory turnover ratio over the years. The Low ratio
indicates less and inefficient management of inventory, dull business poor quality of
goods stock accumulations. In the year 2008-09 IVRCL maintain low inventory turnover
ratio. IVRCL maintained high inventory turnover ratio in the year 2004-05. However a
low ratio reveals the accommodation of obsolete stock.
 We can say that there is a rise in debtor’s turnover ratio indicating an increased efficiency
in receivables management by IVRCL. It shows that the company is able to recover its
funds with a shorter period of time, from its debtors.
 We can say that the debtors of IVRCL are more liquid and are being managed efficiently.
This plays a major role in increasing the liquidity position of the firm.
 IVRCL would be well advised to continue along the same path of sustainable growth, and
at the same time continuously monitor and control its Working Capital Requirements. It
has to review its Working Capital Requirements’ position periodically and adopt
stringent measures to monitor its current assets. It needs to prudently manage is
Receivables, striking a balance between extending credit period to profitable customers
and maintaining the cost of borrowing at the same time.
BIBILOGRAPHY
 Financial Management theory and practice by Prassanna Chandra
 Financial Management theory and practice by Shashi .K. Gupta & R.K. Sharma.
 IVRCL Annual Reports.
 Www. Google.com, www. Wikepidia.com

123

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

123

Uploaded by

Copyright:

Available Formats

A project report on

SHORT TERM FINANCIAL ASPECTS OF IVRCL

Project report submitted in partial fulfillment of the requirements for

The award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

Mr. Pandu Mr. Chandra Mohan Reddy

DEPARTMENT OF MANAGEMENT STUDIES

(Affiliated To Jawaharlal Nehru Technological University)

I am B. Veera Babu student of S.S. Institute of Technology pursuing master of business

Date: (B. Veera Babu)

I am indebted to my supervisor Prof Mr. Pandu, Dept. of Management, S.S. Institute of

(B. Veera Babu)

There are two concepts of working capital

• Gross working capital

• Net working capital

2) Goodwill: sufficient working capital enables a business concern to make prompt

SCOPE OF THE STUDY

 To know the various of kinds of working capital.

IVRCL Infrastructure & projects Limited.

 To know the effectiveness of working capital at IVRCL Infrastructure & Projects

• The information is provided by the IVRCL Ltd.

Major Sectors of the Industry:

• Buildings and Industrial Structures

Buildings and Industrial Structures:

Sector Investment (Rs. Billion)

Oil and Gas 2,690.49

Urban Infrastructure 2,595.00

(Including water and urban transportation)

Source – Planning Commission

IVRCL Infrastructures & Projects Limited is an established player in the infrastructure

16th Nov. 1987: I. Venku Reddy Constructions Private Limited

29th sep. 1994: I. Venku Reddy Constructions Limited

06th Dec. 1994: IVR Constructions Limited

07th apr.1999: IVRCL Infrastructures & Projects Limited

1 E. SUDHIR REDDY Chairman & Managing Director

2 R. BALAMARI REDDY Executive Director – Finance & CFO

3 K. ASHOK REDDY Executive Director

4 E. SUNIL REDDY Director

5 E.ELLA REDDY Director

6 T.N. CHATURVEDI Director

7 T.R.C. BOSE Director

8 P.R. TRIPATHI Director

9 S.K. GUPTA Director

10 L. SRINIVASA REDDY Director

Logo of the Company:

Promoters: Mr. E. Sudhir Reddy

Mr. E. Sunil Reddy

Company Secretary: B. Subrahmanyam

Auditors: IVRCL is having statutory auditors and internal auditors

Internal Auditors: Mr. T. Vijay Kumar VCG & Co

Registrars and Transfer Agents: M/s. Karvy Computershare Private Limited

Chairman & Managing Director

Executive Director (Finance)

GM - Finance JGM (IT) Sr. VP - Finance VP Group Head

Director (Business Development & Corporate Strategy)

Company Secretary Director - Technical

Chief Operating Committee

Delhi Regional Head

Pune Regional Head COO - Transportation

Kolkata Regional Head COO - Power

Head - Design COO - PMC

M ission & O bjectives :