SUMMER PROJECT ON WORKING CAPITAL MANAGEMENT SUBMITED TO

BHAI PARMANAND INSTITUTE OF BUSINESS STUDIES GOVERNMENT OF NCT OF DELHI, DELHI-92

[AFFILIATED TO GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY,DELHI] IN PARTIAL FULFILLMENT OF BACHELOR OF BUSINESS ADMINISTRATION [BBA]-[20102013] [SIXTH SEMESTER] BY: of: Shikha Rawat
G.T.V.L.N Chariyullu

Under the Supervision

00311415109

BHAI PARMANAND INSTITUTE OF BUSINESS STUDIES GOVERNMENT OF NCT OF DELHI, DELHI-92

[AFFILIATED TO GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY, DELHI]

EXECUTIVE SUMMERY
The major objective of the study is to proper understanding the working capital of NALCO & to suggest measures to overcome the shortfalls if any. Funds needed for short term needs for the purpose like raw materials, payment of wages and other day to day expenses are known as working capital. Decisions relating to working capital (Current assets-Current liabilities) and short term financing are known as working capital management. It involves the relationship between a firms short-term assets and its short term liabilities. By definition, working capital management entails short-term definitions, generally relating to the next one year period. The goal of working capital management is to ensure that the firm is able to continue its operation and that it has sufficient cash flow to satisfy both maturing short term debt and upcoming operational expenses. Working capital is primarily concerned with inventories management, Receivable management, cash management & Payable management. Inventories management at NALCO: NALCO is a large scale manufacturing company involved in mining of Bauxite and production of Aluminum. Therefore, it has to maintain large quantity of inventories at production units for its smooth running and functioning. Major inventories of Nalco are: Raw material The raw material that consist of CP coke, CT pitch, Aluminum fluoride, Pig iron, HFO Alumina and anodes for SMELTER & COAL, HFO, LDO for CPP & Caustic Soda, Alum, Lime, CGM Stores and Spares At the time of Procurement of the machinery, generally some spares procured for immediate maintenance that directly linked with different equipments. These spares are known as instance spares and most of these items of High Value. Intermediary Goods - Which consist of Green Anodes, Baked Anodes, Rodded Anode, and Anode stem, etc. for which NALCO has installed its

own plant for producing the Green & Baked Anodes and imports them only when there is a shortage Finished Goods- That consists of Bauxite, Aluminum Hydrate, Alumina, Aluminum Ingots, Sow Ingots, Billets, Wire rod Sheets etc. The finished Products of NALCO move fast and hence the stock of Finished Goods is very less in company

CASH MANAGEMENT AT NALCO: NALCO has been accumulating huge cash surpluses over last several years, which enables the organization to maintain adequate cash reserves and to generate required. The key areas of effective cash management in NALCO are: Identifying the requirements of funds at various units Investment of surplus funds productively, Repayment of loans, Proper capital expenditure. Standardized reporting systemized funds from within the organization i.e. from internal sources. Centralized Cash Management system: For centralized cash management system, NALCO has chosen State Bank of India (S.B.I) as its sole banker and the control cash account of the company is maintained at the S.B.I. main branch, Bhubaneswar under direct control of NALCOs Corporate Office. RECEAVABLE MANAGEMENT AT NALCO: NALCO has set up its marketing office at all metro cities in India i.e. Mumbai, Kolkata, New Delhi, Chennai, Bangalore, and Pondicherry. This marketing office obtains sales order from Aluminum users in India as well as globally. On the basis of order received for different products it marks production planning of different i.e. Ingot sow ingot, Billets, Wire etc.

INTRODUCTION Working Capital:The life blood of business, as is evident, signified funds required for dayto-day operations of the firm. The management of working capital assumes great importance because shortage of working capital funds is perhaps the biggest possible cause of failure of many business units in recent times. There it is of great importance on the part of management to pay particular attention to the planning and control for working capital. An attempt has been made to make critical study of the various dimensions of the working capital management of NALCO, a Star Trading House with NAVRATNA Status. Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The goal of Working capital management is to ensure that the firm is able to continue its operations and that it has sufficient money flow to satisfy both maturing short-term debt and upcoming operational expenses.

OBJECTIVE OF THE STUDY:The following are the main objective which has been undertaken in the present study: 1. To determine the amount of working capital requirement and to calculate various ratios relating to working capital. 2. To make an item wise study of the components of the working capital. 3. To suggest the steps to be taken to increase the efficiency in management of working capital. Study design and methodology:Two types of data are collected, one is primary data and second one is secondary data. The primary data were collected from the Department of finance, NALCO. The secondary data were collected from the Annual Report of NALCO, NALCO website, etc. Limitations:There may be limitations to this study because its not possible to observe every aspect of working capital management practices.

INDIAN ALUMINIUM INDUSTRY

Aluminium Industries in India is one of the leading industries in the Indian economy. The growth of the aluminum Metal industry in India would be sustained by the diversification and exploration of new horizons for the industry. India has huge deposits of natural resources in form of minerals like copper, chromite, iron ore, manganese, bauxite, gold, etc. The India aluminum industry falls under the category of non iron based which include the production of copper, tin, brass, lead, zinc, aluminum, and manganese. The main operations of the of the India aluminum industry is mining of ores, refining of the ore, casting, alloying, sheet, and rolling into foils. At present, Hindalco and Nalco are one of the most economical in the production of aluminum in the world. For the sustenance of the growth the aluminum industry in India has to develop research and development units to assist the production and improve on the quality measures to keep a stringent quality control. The India aluminum Metal Industries sector in the previous decade experienced substantial success among the other industries. The India aluminum industry is developing fast and the advancement in its technologies is boosting the growth even faster. The utilization of both international and domestic resources was significant in the rapid development of the India aluminum industry. This rapid development has made the India aluminum industry prominent among the investors. The India aluminum industry has a bright future as it can become one of the largest players in the global aluminum market as in India the consumption is fairly low, the industry may use the surplus production to cater the international need for aluminum which is used all over the world for several applications such as aircraft manufacturing, automobile manufacturing, utensils, etc. The per capita consumption of aluminium in India is only 0.5 kg as against 25 kg. In USA, 19 kg. in Japan and 10 kg. In Europe , Even the Worlds average per capita consumption is about 10times of that in India. One reason of low consumption in the country could be that consumption pattern of aluminium in India is vastly different from that of developed countries. The demand of aluminium is expected to grow by about 9 percent per annum from present consumption levels. This sector is going through a consolidation phase and existing producers are in the process of enhancing their production capacity so that a demand supply gap expected in future is bridged. However, India is a net exporter of alumina and aluminium metal at present. DATA PROCESSING AND ANALYSIS: 1.) Working capital of previous 4 years. 2.) Use of Carl Pearsons core ration to know the relation between

a) Correlation between total current Assets and Total Current Liabilities. b) Correlation between total current Assets and Working capital. c) Correlation between total current Liabilities and Working capital.

RECOMMENDATION & SUGGESTION:

For inventory, in order to improve the position, NALCO can reduce the level of stocks by resorting to phased production i.e. producing according to requirement and disposing off or recycling the unserviceable inventories. NALCO can also consider negotiating its creditors for relaxing the debt repayment period and repaying only on or just before the expire of the credit period. The plant must take certain steps to decrease the working capital cycle. One way can be better management of inventories Proper planning of production should be maintained and communicated to all concerned departments so as to determine the extended of materials and prevent unnecessary blockage of unless materials. Plant should given freedom in deciding the credit policies, cash discount or credit ratings. 1. a) Objective of study: To analyze the efficiency of working capital management of Nalco by studying different element of working capital, trend of various parameters across different years of comparison. To suggest measures for improvement in the management of working capital of Nalco. 1. b) Research methodology: Data base: The study mostly confined to secondary data which collated from the annual reports published by Nalco. Additional informations has also been collected from concerned officials from Nalco. Techniques and tools used: The analysis has been based on simple tools like ratios and percentages. Microsoft excel and spss package has been used for various calculations purposes. 1. c) Scope of study: The study has been conducted from information over a period of 4 years from financial year 2007/08 to 2011/12 1. d) Limitations of study:

During the course of study of summer training project entitled working capital management of Nalco the report has been prepared subject to the following limitations. The study is limited to four financial years from 2004to2008 performance The data used in the study have been taken from balance sheet and their related schedule of Nalco The study has been conducted during the boundaries of Nalco The analysis ignores the time value of money DATA ANALYSIS AND INTERPRETATION (Rs in cores) 2004/05 A: CURRENT ASSETS: Inventories: 686.65 Sundry debtors: 60.65 Cash and bank balance: 3516.46 Other current assets: 236.46 529.06 92.81 755.21 82.01 591.58 29.42 2193.71 118.62 634.96 34.13 3686.53 212.4 406.42 2005/6 2006/7 2007/8

Loans and advances: 351.95 364.95 541.10 .. TOTAL: 5041.33 1811.04 4974.08

3257.88

B: CURRENT LIABELITIES: Sundry creditors: a) On capital a/c: 102.09 272.78 b) On others: 260.74 324.94 169.38 64.72 44.39 222.95

Other liabilities: 424.64 557.94 Security deposit: 74.66 162.69 Book over draft 9.98 . Provisions: 346.49 222.57 TOTAL: 1218.61 1540.40 WORKING CAPITAL (A-B): 3822.72 3433.68

326.92 55.92 . 190.14 806.39

284.96 55.10 332.82 940.15 2317.73

1004.65

CONCLUSION
After studying the components of working capital management system of NALCO. It is found that the company has a sound and effective policy and its performance is very good even in this bad recession situation company has managed to post good profit. Company is competing well at the domestic as well as the international level and it is among the low cost producers of aluminium in the world only because of its proper management of finance, specially the short term finance known as the working capital. The company is a matured one and it has contributed well in the countries growth and development and will also continue to perform and contribute to the whole nation. In conclusion, we can say that the companies management is an effective one and knows well the management of finance, its working capital management system is very good because of which only the company has got the status of NAVRATNA company.