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A Summer Internship Project Report on

WORKING CAPITAL MANAGEMENT


Submitted in partial fulfillment of the requirements for the degree of Post Graduate Diploma in Management (FINANCE) by

PALVINDER KAUR MATHARU


(Roll No. 35) Under the guidance of

Prof SACHIN NAPATE


A Study Conducted for SUZLON ENERGY LTD.

at Indira School of Business Studies, Tathawade, Pune 411033


(2011-13)

ACKNOWLEDGEMENT
I have taken efforts in this project. However, it would not have been possible without the kind support and help of many individuals and organizations. I would like to extend my sincere thanks to all of them. I am highly indebted to Anupkumar Shah for their guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project. I would like to express my gratitude towards my parents & member of Suzlon for their kind co-operation and encouragement which help me in completion of this project. I would like to express my special gratitude and thanks to industry persons for giving me such attention and time. My thanks and appreciations also go to my colleague in developing the project and people who have willingly helped me out with their abilities.

INTRODUCTION

The project is about working capital management in a wind turbine manufacturing industry the various things that constitute the working capital of suzlon energy power limited. To know the various methods used to determine the standard requirements of the company to maintain the optimal amount of working capital. Various methods of inventory management. Checking the variance i.e. actual vs. budgeted and analyzing the areas of major difference. Preparing budgets for expenditure. Preparing schedules and reports for analyzing the stock and utilizing it to its optimum level which again leads to a better working capital management. I have learned the utilization of SAP in the process of preparing budgets reports. The module used under SAP for inventory is the MM module i.e. the material management module. I have also learned preparing budget vs. actual for the purpose of analysis. I have been well versed with excel and its utilization and importance while preparing schedules. The project is about working capital management at suzlon energy ltd. The things that are considered as working capital ie a clear understanding of the requirement of the working capital in the organization. Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds 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. Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact:

accounts receivable (current asset) inventory (current assets), and accounts payable (current liability)

The main objective of the project is to understand how the working capital of the company is managed. The purpose behind doing this project is to understand how Suzlon manages the working capital and the various accounting procedures that

are used by the organization the average collection period, budgets prepared by using zero based budgeting. Land forms an important cost for the working capital and thus understanding the procedure of land acquisition. Control of costs for various expenditures like COGS, admin cost, project related expenses. Main objective in undertaking this project is to supplement academic knowledge with absolute practical exposure to day to day functions of the organization.

SCOPE
Accounting procedures, budget v/s actual comparison and analysis for variance, Cost controlling, Inventory management. SAP knowledge i.e. the actually experiencing how effective ERP systems helps the organization to work effectively. Preparing budget using Zero based budgeting. Costs related for the construction of WTG. Understanding various verticals of Suzlon WRD (wind resource development), land acquisition, power evacuation, and projects, OMS (operation and maintenance services).

INDUSTRY OVERVIEW

Industry in the sense of manufacturing became a key sector of production and labor in European and North American countries during the Industrial Revolution, which upset previous mercantile and feudal economies through many successive rapid advances in technology, such as the steel and coal production. It is aided by technological advances, and has continued to develop into new types and sectors to this day. Industrial countries then assumed a capitalist economic policy. Railroads and steam-powered ships began speedily establishing links with previously unreachable world markets, enabling private companies to develop to then-unheard of size and wealth. Following the Industrial Revolution, perhaps a third of the world's economic output is derived from manufacturing industries more than agriculture's share. Many developed countries and many developing/semi-developed countries (People's Republic of China, India etc.) depend significantly on industry. Industries, the countries they reside in, and the economies of those countries are interlinked in a complex web of interdependence. The Manufacturing sector comprises establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products. Establishments in the Manufacturing sector are often described as plants, factories, or mills and characteristically use power-driven machines and materials-handling equipment. However, establishments that transform materials or substances into new products by hand or in the worker's home and those engaged in selling to the general public products made on the same premises from which they are sold, such as bakeries, candy stores, and custom tailors, may also be included in this sector. Manufacturing establishments may process materials or may contract with other establishments to process their materials for them. Both types of establishments are included in manufacturing. Suzlon energy LTD. is involved in the manufacturing of wind turbines which represents sustainability of the manufacturing industry. Suzlon has 13 manufacturing facilities, spread across 5 countries: China, India, USA, Portugal and Germany. These units make a wide range of rotor blades, nacelles, nacelle covers, control panels and hubs, tubular towers and generators, covering all key components of wind turbines.

Overview of the wind power industry- The wind power industry is involved with the design, manufacture, construction, and maintenance of wind turbines. The modern wind power industry began in 1979 with the serial production of wind turbines by Danish manufacturers. The industry is currently undergoing a period of rapid globalization and consolidation. The wind power industry is the industry involved with the design, manufacture, construction, and maintenance of wind turbines. Although the wind power industry is small compared to those of the conventional power generation technologies (hydro, coal, natural gas, and nuclear), it is growing at a much faster rate (25% per year, from 2002 to 2007). The modern wind power industry began in 1979 with the serial production of wind turbines by Danish manufacturers Kuriant, Vestas, Nordtank, and Bonus. Initially, most of these early turbines were installed in western Denmark. California, USA experienced a wind power boom from 1982 to 1986 when thousands of Danish and American wind turbines were installed in massive arrays. India got involved in wind power in the mid-1980s as well, while Germany and Spain gradually developed domestic wind power industries starting in the early 1990s. The wind power industry is currently undergoing a period of rapid globalization and consolidation, with much of the recent wind farm development occurring outside the older established markets. Several large companies with market capitalizations greater than the entire wind power industry itself (General Electric, Siemens, and BP) are now making large investments in wind power. To meet a global wind turbine supply shortage, start-up wind turbine manufacturers are still appearing and ramping up the production of their new wind turbine models as quickly as possible. Suzlon has 13 manufacturing facilities, spread across 5 countries: China, India, USA, Portugal and Germany. These units make a wide range of rotor blades, nacelles, nacelle covers, control panels and hubs, tubular towers and generators, covering all key components of wind turbines. MARKET OVERVIEW OF WIND POWER INDUSTRYSECTOR OUTLOOK The sector outlook is progressively looking bright for the wind industry as it is exploiting an inexhaustible resource (i.e. wind) and is amongst the cheapest sources of renewable energy. Improvement in wind powers technical

effectiveness, development of larger wind turbines, and improved knowledge of sitting, servicing and maintenance has made wind power a economically viable and competitive source of energy. The other key drivers include climate change, the Kyoto Protocol, the industrys job creation potential and a desire for greater security of supply for energy. Policy support models like Fixed Tariffs for the feed in of wind powered electricity, Renewable Portfolio Standards, price premium, energy taxes and other tax related benefits, Investment grants and Green Certificates, continue to boost development of wind market across the globe. Wind energy has been accepted as a mainstream renewable technology by utilities across the world, to meet their renewable portfolio targets as mandated international and country based targets. During the period 2011-2015, wind power is expected to grow at an annual growth rate of about 17%. In Asia strong growth is expected, especially in China. India will continue to demonstrate high level capacity additions approximately to the tune of 3 to 4 GW per year. Growth in emerging markets such as Latin America, Southern and Eastern Europe and Africa will offset probable short-term sluggish growth rates in the mature markets of the world. The development of wind power in India began in the 1990s, and has significantly increased in the last few years. Although a relative newcomer to the wind industry compared with Denmark or the United States, India has the fifth largest installed wind power capacity in the world. In 2009-10 India's growth rate was highest among the other top four countries. As of 31 March 2011 the installed capacity of wind power in India was 16078MW, mainly spread across Tamil Nadu (6007 MW), Maharashtra (2310.70 MW), Gujarat (2175.60 MW), Karnataka (1730.10 MW), Rajasthan (1524.70 MW), Madhya Pradesh (275.50 MW), Andhra Pradesh (200.20 MW), Kerala (32.8 MW), Orissa (2MW) West Bengal (1.1 MW) and other states (3.20 MW). It is estimated that 6,000 MW of additional wind power capacity will be installed in India by 2012.Wind power accounts for 6% of India's total installed power capacity, and it generates 1.6% of the country's power. India's wind atlas is available.

Top 10 wind turbine manufacturers by annual market share (installed capacity) in 2011. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Vestas 12.7% Sinovel 9.0% Goldwind 8.7% Gamesa 8.0% Enercon 7.8% GE Wind Energy 7.7% Suzlon Group 7.6% (inc Suzlon Energy (India) and REpower (Germany)) Guodian United Power 7.4% Siemens Wind Power 6.3% Ming Yang 3.6%

COMPANY OVERVIEW
The Suzlon Group is ranked as the worlds fifth largest wind turbine supplier, interims of cumulative installed capacity, at the end of 2010. The companys global spread extends across Asia, Australia, Europe, Africa and North and South America with over 19,000 MW of wind energy capacity installed in 28 countries, operations in 32 countries, a workforce of over 13,000. The Group offers one of the most comprehensive product portfolios ranging from sub-megawatt on-shore turbines at 600 Kilowatts (KW), to the worlds largest commercial 6.15 MW offshore turbine built on a vertically integrated, low-cost, manufacturing base. The Group headquartered at Suzlon One Earth in Pune, India comprises Suzlon Energy Limited and its subsidiaries, including

REpower Systems SE, a leader in offshore wind technology. VISION

To be the technology leader in the wind sector To be in the top three wind companies in all the key markets of the world To be the global leader in providing profitable, end-to-end wind power solutions To be the 'company of choice' for stakeholders

GROWTH
The seeds of Suzlon were sown by Mr. Tulsi R. Tantis venture into the textile industry. Faced with soaring power costs and the infrequent availability of power, he looked to wind energy as an alternative. Beginning with a wind farm project in the Indian state of Gujarat in 1995, with a capacity of just 3 MW he set forth to acquire the basic technology and varied expertise to set up

Suzlon Energy Limited - Indias first home-grown wind technology company. By the end of 2011, Suzlon:

Supplied over 19,000 MW across the world Was ranked the 5th leading wind power equipment*

manufacturer Earned a global market share of 8%** Suzlon in India installed over 6706 MW of wind turbine capacity, acquired over 44% (as of 31 March 2011) market share (YOY) and has reigned as the market leader for the last 14 consecutive year. Combined Suzlon and RE Power.

CHAIRMAN Mr. Tulsi Tanti, a qualified Mechanical Engineer, founded and Chairman Suzlon Energy Limited. Mr. Tanti has driven Suzlon not as a business, but as a cause contributing to the world by creating sustainable social, economic and ecological development, by using the very best of technology to help mitigate the global climate crisis.

VERTICAL INTEGRATION
Suzlons vertical integration has been its success driver. Foresight of the current economic challenge and adopting a visionary strategy has set us forth to become the most vertically integrated wind turbine maker in the world. We embarked on a journey to develop leading edge technology and build manufacturing capability for all key components in the wind power domain. The Wind Industrys supply chain experiences the critical bottleneck of a long production lead time for key components such as Bearings, Gearboxes, Forging materials etc. However, Suzlon has gained the critical competitive advantage with:

Better control over time, cost & quality Long-term service support to customers Turbine technology integration Faster product rollout

PRODUCTS AND SERVICES OF SUZLON- As Suzlon is vertically integrated, it manufactures and also provides services to the same. It mainly manufactures WTG.

The Wind Electricity Generators (WEGs) are broadly divided into three parts:

Tower - supports the Nacelle and Rotor Nacelle - contains the key components of the wind turbine Rotor - converts kinetic energy into electrical energy

PRODUCTS MANUFACTURED COMPANY LOCATION Suzlon energy Pondicherry power Ltd ESTABLISHED 2003 PRODUCTS Roter blades, Nacelles, Nacelle cover, Control systems, Hubs. Generators, Control systems. Roter blades Nacelles, nacelles cover, nose cones. Generators WTG assembly, Nacelle covers, Control systems, nacelles. Tubular towers.

SE Electricals Coimbatore ltd SE Blades ltd Suzlon wind International ltd Suzlon generator ltd Suzlon energy ltd Padubidri padubidri

2008

2008 2008

Chakan Daman

2004 2004

Suzlon Gandhidham structures pvt. Ltd

2005

REVIEW LITERATURE

OF

Suzlon Group FY12: Guidance achieved; Robust US$ 7.4 bn order book Revenues of Rs 21,082 cr (US$ 3.75 bn), a YoY growth of 18% Positive EBIT margin at 5.5% Cash profit of Rs 418 cr (US$ 74.26 mn) Rs 41,500 cr (US$ 7.4 bn) order book FY13 Guidance: Revenues of Rs 27,000 cr to Rs 28,000 cr; EBIT Margin of 6% Pune: Suzlon Group, the worlds fifth largest wind turbine maker, on Friday announced its results for financial year 2011-12. Speaking after the announcement, Mr. Tulsi Tanti, Chairman Suzlon Group said: Our stated plan was to return the business to a position of strength during FY12, and I am pleased to report that we achieved our guidance. Despite an extremely challenging business environment we as a Group continue to be extremely well positioned in the market place, as evidenced by our positive EBIT margin. Our order backlog is now an impressive Rs 41,500 cr, giving us strong visibility through FY13 and beyond. In addition, we are now realizing significant revenues

from operations and service offerings for our global fleet approaching 20,000 MW, giving us secured annuity income over a 15 year horizon. With this strong performance, robust order book, strategic positioning in high growth / high margin markets, and the global market independently projected** to grow at over 20 per cent in 2012, we have a secure foundation to maintain our growth trajectory. Our guidance for FY13 is a revenue target of Rs 27,000 cr to Rs 28,000 cr growth of approximately 30 per cent and an EBIT margin of six per cent. Speaking on the Groups performance Mr. Kirti Vagadia CFO, Suzlon Group said: We have delivered a strong improvement in our Group performance with a gross profit margin of 33.3 per cent, and an operating profit (EBIT) margin of 5.5 per cent against 2.2 per cent a year ago. We achieved a cash profit of Rs 418 cr for the full year. The net loss (PAT) for the period stood at Rs 479 cr primarily due to high interest rates, notional forex impact and non-cash tax items. Our key priorities as a company in FY13 are: addressing our near-term repayment obligations; balancing our debt appropriately across the Group; reducing our interest burden; reducing our working capital intensity; and, strengthening our balance sheet. I am confident that our improved business situation is sustainable and that we will realize significant growth over the fiscal." Key Updates: Board updates: Mr. Vinod R. Tanti takes over the position of COO at the Group's Wholly-owned subsidiary REpower Systems SE from 1st June 2012, and therefore resigns as an Executive Director of the Company while continuing to serve as a Non-Executive Director on the Board. Mr. Ashish Dhawan, Independent Director, also resigns from the directorship of the Company with effect from 25th May 2012. Orders: The Suzlon Group order book stood at 5.7 GW (~Rs. 41,500 cr, ~US$ 7.4 bn) as on 25th May, 2012, with an order inflow of 3,817 MW in FY12. The orderbook saw strong contributions from high growth / high margin markets, and a financially robust investor base. Additionally, the Group also built up its longterm service agreements for its global fleet approaching 20,000 MW, creating a secured annuity income of approximately US$ 2 bn over a 15 year horizon. Financial: Suzlon successfully secured an incremental increase of ~US$ 350 mn in working capital facilities for Suzlon Wind in the last quarter based on future growth plans of the company. The facility will enable the smooth execution of the companys robust order book.

REpower banking facilities were also increased to EUR 750 mn, a 25 per cent increase, with participation from large European banks despite a volatile European market. REpower: Collaboration between Suzlon and REpower grew significantly in FY12.The companies combined operations in Australia and realigned European marketing operations, unlocking operational efficiencies. Additionally, initiatives were launched to reduce cost of goods through joint sourcing and by utilizing the Groups manufacturing facilities in Asia. Production in India of REpowers MM92 also commenced at the Groups manufacturing facilities in Padubidri, Karnataka. Offshore: The Group installed nearly 200 MW of capacity in offshore projects in FY12. In March, REpower completed installation of the first 6.15 MW turbine in an offshore project, which will feature 48 6M turbines and is scheduled for completion in mid-2013.The Group has an offshore order book of 1,038 MW valued at US$ 1.8 bn, with several large orders signed in FY12, including the largest ever offshore project for 332 MW in Germany and a contract with PNE Wind AG to deliver 54 offshore turbines to projects in the North Sea. Technology: Suzlon Group introduced several new products over the course of the fiscal aimed at higher efficiencies and lowering cost of generation: the Suzlon S9X 2.1 MW and S8X 1.5 MW, as well as the REpower MM100 1.8 MW and 3XM 3.2/3.4 MW turbines. The S9X turbine suite exceeded 1.2 GW of order inflow across India, USA, Canada, Australia and Brazil and 3XM secured over 900 MW of orders. Fleet performance: Suzlons Group fleet approached 20,000 MW across 28 countries and delivered availability (uptime) levels consistently above the industry average of 97 per cent. Markets update: The wind market is independently projected to grow by over 20 per cent in 2013. The share of wind power in global electricity generation is estimated to go up to ~8 per cent by 2020, from current ~2.3 per cent**.o Mature markets: The US market is about to experience the biggest year for wind energy installations, more than what was achieved in 2009. However, visibility beyond 2012 is poor due to expiry of cash grants and PTC. The Canadian wind market is expected to have an annual size of more than 1 GW with Ontario and Quebec having established wind energy targets of 10 GW and 4 GW respectively by 2015. Germany, France and UK remain top markets in Europe. o Emerging markets: In India, volumes traded in the REC market have steadily increased since Feb 2011 giving an additional boost to the industry, especially wind IPPs. Currently, the development pipeline for major IPPs in India is

estimated to be about 9,200 MW**. The Brazilian wind industry current potential of 143 GW is estimated increase up to 300 GW with the use of modern generators. Brazilian Government expects wind capacity to exceed 11.53 GW by 2019, compared to current capacity of around 1.5 GW. In South Africa, the total wind potential is pegged at more than 70 GW. The South Africa Wind Association targets 30 per cent of total generation from wind by 2025, with more than 10 GW of wind projects already in the pipeline.

THEORETICAL BACKGROUND

MEANING OF WORKING CAPITAL MANAGEMENT- 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 (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.

A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds 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. Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact:

accounts receivable (current asset) inventory (current assets), and accounts payable (current liability)

The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans and lines of credit. An increase in working capital indicates that the business has either increased current assets (that is has increased its receivables, or other current assets) or has decreased current liabilities, for example has paid off some short-term creditors. 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 cash flow to satisfy both maturing short-term debt and upcoming operational expenses.

IMPORTANCE OF WORKING CAPITAL MANAGEMENT


The importance of the management of working capital can be judged from the following factors

(1) There is a positive correlation between the sale of the product of the firm and

the current assets. An increase in the sale of the project requires a corresponding increase in current assets. It is, therefore, indispensable to manage the current assets properly and efficiently. (2) More than half of the total capital of the firm is generally invested in current assets. It means less than half of the capital is blocked in fixed assets. We pay due attention to the management of fixed assets in details through the capital budgeting process. Management of working capital too, therefore, attracts the attention of the management. (3) In emergency (Non availability of funds etc.) fixed assets can be acquired on lease but there is no alternative for current assets. Investment in current assets, i.e., inventory or receivable, can in no way be avoided without sustaining loss. (4) Working capital needs are more often financed through outside sources, so it is necessary to utilize them in the best way possible.

DETERMINANTS OF WORKING CAPITAL MANAGEMENT


There are lots of factor of determinants of working capital 1) Nature of business - working capital requirement of a firm basically influenced by the nature of its business trading and financial forms have a very small investment in fixed assets, but require a large sum of money to be invested in working capital. Retails stores, for example must carry large stock of a verity of good to satisfy varied and continuous demand of their customer. 2) Market and demand condition - the working company related to its sales. it is difficult to precisely determine the relationship between the volume of sales and working capital need. Current assets will have to be employed before growth takes place. Then necessary to make planning of working capital for a growing firm on a continuous basis 3) Technology and manufacturing policy - the manufacturing cycle comprise of the purchase and use of raw material and the production of finished goods. Longer the manufacture cycle, larger will be the firm's working capital requirement. For example, the manufacturing cycle in the case of a boiler,

depending on its size, may range between six to twenty four month. On the other hand the manufacturing cycle of product such as detergent powder, soap, ice creams etc. maybe a few hours extend product take a large time 4) Credit policy of the firm affect the working capital by influencing the level of debtor. The credit term to be guaranteed to customer may depend upon the norm of the industry to which the firm belongs. But a firm has the flexibility of shaping its credit policy within the constraint of industry norms and practice. The firm should use discretion in granting credit term to us customer 5) Operating efficiency: the operating efficiency of the firm relates to the optimum utilization of all its resource at minimum costs. The efficiency in controlling operating cost and utilizing fixed and current assets leads to operating efficiency. The use of working capital is improved and pace of cash conversion cycle is accelerated with operating efficiency. Better utilization improves profitability and helps the releasing on working capital 6) Conditions of supply: the inventory of raw material, spares and stores depends on the conditions of supply. if the supply is prompt and adequate, the firm can manage with small inventory. However, if the supply is unpredictable and scant then the firm, to ensure continuity of production, a similar policy may have to be followed when the raw material is available only seasonally and production operations are carried out round the year

Decision criteria
By definition, working capital management entails short term decisions generally, relating to the next one year period - which is "reversible". These decisions are therefore not taken on the same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based on cash flows and / or profitability.

One measure of cash flow is provided by the cash conversion cycle - the net number of days from the outlay of cash for raw material to receiving payment from the customer. As a management tool, this metric makes explicit the inter-relatedness of decisions relating to inventories, accounts

receivable and payable, and cash. Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims at a low net count.

In this context, the most useful measure of profitability is Return on capital (ROC). The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; Return on equity (ROE) shows this result for the firm's shareholders. Firm value is enhanced when, and if, the return on capital, which results from working capital management, exceeds the cost of capital, which results from capital investment decisions as above. ROC measures are therefore useful as a management tool, in that they link short-term policy with long-term decision making. See Economic value added (EVA). Credit policy of the firm: Another factor affecting working capital management is credit policy of the firm. It includes buying of raw material and selling of finished goods either in cash or on credit. This affects the cash conversion cycle.

Management of working capital


Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable.

Cash management. Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs. Inventory management. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials and minimizes reordering costs - and hence increases cash flow. Besides this, the lead times in production should be lowered to reduce Work in Process (WIP) and similarly, the Finished Goods should be kept on as low

level as possible to avoid over production - see Supply chain management; Just In Time (JIT); Economic order quantity (EOQ); Economic quantity Debtors management. Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital (or vice versa); see Discounts and allowances. Short term financing. Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors to cash" through "factoring

OBJECTIVES:
To understand the basic business of Suzlon energy Ltd. To understand various verticals of Suzlon. To understand services provided by Suzlon to its customers. To understand how the working capital of the company is managed. To understand various contents of working capital management. To understand budgeting process for various expenditures like COGS, Admin cost, project related expenses, and Land acquisition. To understand Land acquisition procedure. To understand the usage of SAP for inventory and working capital management. To understand how to park and post the invoice

To prepare schedules and reports with the help of excel and pivot table options. To release purchase orders (PO) with the help of SAP. To understand how to follow up on lag in payments with the help of GRIR (goods received invoice received ) Tracking of advances given to vendors.

RESEARCH METHODOLOGY

MEANING OF RESEARCH Research in common parlance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. The Advanced Learners Dictionary of Current English lays down the meaning of research as a careful investigation or inquiry especially through search for new facts in any branch of knowledge.1 Redman and Mory define research as a systematized effort to gain new knowledge.2 Some people consider research as a movement, a movement from the known to the unknown. It is actually a voyage of discovery. We all possess the vital instinct of inquisitiveness for, when the unknown confronts us, we wonder and our inquisitiveness makes us probe and attain full and fuller understanding of the unknown. This inquisitiveness is the mother of all knowledge and the method, which man employs for obtaining the knowledge of whatever the unknown, can be termed as research. Research is an academic activity and as such the term should be used in a technical sense According to

Clifford Woody research comprises defining and redefining problems, formulating hypothesis or suggested solutions; collecting, organizing and evaluating data; making deductions and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis. 3 Research is, thus, an original contribution to the existing stock of knowledge making for its advancement. It is the pursuit of truth with the help of study, observation, comparison and experiment. In short, the search for knowledge through objective and systematic method of finding solution to a problem is research. The systematic approach concerning generalization and the formulation of a theory is also research. As such the term research refers to the systematic method consisting of enunciating the problem, formulating a hypothesis, collecting the facts or data, analyzing the facts and reaching certain conclusions either in the form of solutions(s) towards the concerned problem or in certain generalizations for some theoretical formulation.

OBJECTIVES OF RESEARCH The purpose of research is to discover answers to questions through the application of scientific procedures. The main aim of research is to find out the truth which is hidden and which has not been discovered as yet. Though each research study has its own specific purpose, we may think of research objectives as falling into a number of following broad groupings: 1. To gain familiarity with a phenomenon or to achieve new insights into it (studies with this object in view are termed as exploratory or formularize research studies); 2. To portray accurately the characteristics of a particular individual, situation or a group(studies with this object in view are known as descriptive research studies); 3. To determine the frequency with which something occurs or with which it is associated with something else (studies with this object in view are known as diagnostic research studies); 4. To test a hypothesis of a causal relationship between variables (such studies are known as hypothesis-testing research studies).

TYPES OF RESEARCH The basic types of research are as follows:

Descriptive vs. Analytical: Descriptive research includes surveys and factfinding enquiries of different kinds. The major purpose of descriptive research is description of the state of affairs as it exists at present.

Applied vs. Fundamental: Research can either be applied (or action) research or fundamental (to basic or pure) research. Applied research aims at finding a solution for an immediate problem facing a society or an industrial/business organization, whereas fundamental research is mainly concerned with generalizations and with the formulation of a theory. Gathering knowledge for knowledges sake is termed pure or basic research.4 Research concerning some natural phenomenon or relating to pure mathematics are examples of fundamental research. Similarly, research studies, concerning human behavior carried on with a view to make generalizations about human behavior, are also examples of fundamental research, but research aimed at certain conclusions (say, a solution) facing a concrete social or business problem is an example of applied research

Quantitative vs. Qualitative: Quantitative research is based on the measurement of quantity or amount. It is applicable to phenomena that can be expressed in terms of quantity. Qualitative research, on the other hand, is concerned with qualitative phenomenon, i.e., phenomena relating to or involving quality or kind. For instance, when we are interested in investigating the reasons for human behavior (i.e., why people think or do certain things), we quite often talk of Motivation Research, an important type of qualitative research. This type of research aims at discovering the underlying motives and desires, using in depth interviews for the purpose. Other techniques of such research are word association tests, sentence completion tests, story completion tests and similar other projective techniques. Attitude or opinion research i.e., research designed to find out

how people feel or what they think about a particular subject or institution is also qualitative research.

Conceptual vs. Empirical: Conceptual research is that related to some abstract idea(s) or theory. It is generally used by philosophers and thinkers to develop new concepts or to reinterpret existing ones. On the other hand, empirical research relies on experience or observation alone, often without due regard for system and theory. It is data-based research, coming up with conclusions which are capable of being verified by observation or experiment. We can also call it as experimental type of research. In such a research it is necessary to get at facts firsthand, at their source, and actively to go about doing certain things to stimulate the production of desired information. In such a research, the researcher must first provide himself with a working hypothesis or guess as to the probable results

Some Other Types of Research: All other types of research are variations of one or more of the above stated approaches, based on either the purpose of research, or the time required to accomplish research, on the environment in which research is done, or on the basis of some other similar factor. Form the point of view of time, we can think of research either as one-time research or longitudinal research. In the former case the research is confined to a single time-period, whereas in the latter case the research is carried on over several time-periods. Research can be fieldsetting research or laboratory research or simulation research, depending upon the environment in which it is to be carried out.

DATA COLLECTION

Data Collection is an important aspect of any type of research study. Inaccurate data collection can impact the results of a study and ultimately lead to invalid results. Data collection methods for impact evaluation vary along a continuum. At the one end of this continuum are quantitative methods and at the other end of the continuum are Qualitative methods for data collection Types of Data There are various different types of data that you will encounter when looking at educational statistics or doing research yourself. This section gives you a brief overview of these different types of data. When you are conducting research the nature of the data you collect will depend on both what you are researching and how you collect the data. The two main types of data are explained below. Quantitative Data Quantitative data is that which can be easily measured and recorded in numerical form. This is used extensively in education in forms such as exam results, SATs results, absence and truancy figures etc. Quantitative data is collected by testing to agree criteria as in exams or by measuring as in height, age etc. Often this data is expressed using percentages rather than the actual numbers themselves.

Qualitative Data Qualitative data is information that is represented by means other than numbers. This could be data on gender, place of birth, school attended etc. Data from questionnaires or forms is often of a qualitative nature and categories are often used to group the data together such as questions on racial origin. Qualitative data is often presented in numbers or percentages such as in the statement, ' 23% of May town College students are of Afro - Caribbean origin '. Discrete and Continuous Data When measuring to obtain data you also have to consider whether it is of a discrete or continuous nature. Discrete data is anything that can be measured exactly as a whole number such as how many children are attending a class on a particular day. There can only be 24 or 31 children not 24.756 or 31.961.

Continuous data is that which can be any number on a scale. If you were to measure the heights of the children in the class there would be a range of measurements from the shortest to tallest child and these measurements could be anywhere on the chosen scale. For practical purposes the measurements would usually be rounded off to the nearest whole or half unit but could actually be at any point. Other examples of continuous data are things like rainfall, length of feet and weight. Obtaining Data The sort of data you wish to collect will determine how you go about collecting it. If you are dealing with quantitative data you may well go already published sources such as school performance tables or obtain your data first hand by counting or measuring. With qualitative data you may need to devise a survey or questionnaire form that you can use to obtain your information. Designing Questionnaires It is important that you think carefully about the wording of your questions on any survey or questionnaire to avoid bias and unclear questions. For instance the question 'Have you ever taken drugs?' is unclear as it doesn't differentiate between prescription and non- prescription drugs.

Sampling One of the most important aspects of obtaining data is thinking about how much data you need and the quality of the data that you will obtain. Sometimes it is possible to include everyone in your research if it is concerning a small target group, such as the teachers at one school or members of one youth group, but more often the target group is too large and a sample of the total population is needed for the research to be feasible to carry out. When deciding on what size of sample to take and who to include you need to bear in mind that the sample should be representative in order for your research to have validity. There are two main ways of doing this and the choice of method will depend on which data you are collecting and the nature of your target group.

DATA COLLECTION AND ANALYSIS

INTRODUCTION TO SUZLON VERTICALS:There are three verticals in Suzlon energy power ltd namely IPD (Information planning and development) Project OMS(Operation maintenance and services) Suzlon energy power limited is a total vertically integrated company by this we mean it produces the raw materials itself for manufacturing the final product and also further sells the same to the end user. The three main verticals of suzlon therefore are IPD, Project & OMS.

1. IPD (Information, planning and development) INTRODUCTION- IPD mainly consist of WRD i.e. wind resource development, land acquisition and PE(Power evacuation) . IPD is the initial stage wherein the plan is prepared and executed for the erection of WTG (wind turbine generator). WRD(wind resource and development) basically is a research with the help of met- mass to find out how much mega watts of electricity could the wind generate and is it actually profitable to erect a WTG (wind turbine generator) because there is a lot of cost involved and incase its a failure its a big loss to the company. In short we can say that WRD basically consists of research for the project. The next step to it is Land acquisition. Carries out technical survey: Installation of Met-mast on the site. Study the wind speed for approx 1 year. Approx. cost 100m 12 to 13 L 80m 10 L One met-mass covers approx 3/4 km (hilly area) and 9/10 km (flat territory) If site is favorable for installation of WTGs, WRD will summit the report to land department for acquisition of Land

FINANCE ACTIVITIES Map out the area where WTGs are to be installed Research budget Cost of overall project Budget of WRD

MAJOR COSTS Installation of met-mass Consultancy cost Security cost. Leasing of land

LAND ACQUISITION- After the research if, it is successful we then try to acquire land the acquisition depends on the type of land Types of land Private Land Generally purchased from the owner Verification of title to the owner Memorandum of understanding (MOU) is formed Revenue land Under the custody of Government/Revenue Taken on lease Approval of district collector required Forest Land Compensatory land equal to the forest land acquired should be given to the forest authority i.e. A forestation Compensatory land should be adjoin to forest land In MP forest land is held by Revenue department FINANCE ACTIVITIES Preparation of budgets for acquisition of land Finalization of rates Verification of land and rates MAJOR COST Buying of land Development of land for installation. Land incidental cost PE (Power evacuation)- External line and Substations for the transfer of electricity to the Electricity board. PE mainly consist of building substations wherein the electricity that is generated from the WTG is transferred with the help of external line that is routed in this process

FINANCE ACTIVITIES Purchase requisition Work order Releasing payments Standard v/s actual production of electricity.

MAJOR COST External line Substation construction

2. PROJECTUnder this vertical the activities that are carried out are Civil foundation Installation Electrical Commission CIVIL FOUNDATION after the area for the erection of WTG is selected and acquired the first thing done for the erection of WTG is civil foundation on which the WTG would be erect. A lot of cost is involved in civil foundation as it forms the base and support for the WTG. MAJOR COST Construction of the foundation. Labor cost Material cost

INSTALLATION- At this stage the WTG is erected with the help of cranes and the tower is build. Blades are also put and the whole WTG is fixed and a lot work and tasks are involved like painting fitting cost transportation workers etc. MAJOR COST

Crane charges. Labor cost

ELECTRICAL-the installation of internal lines that are connected to WTG for the transfer of electricity to the external line and then further to the substations and then finally to the electricity board. Wiring and path of the internal line are taken care of under this activity. How much cable required the type of cable required etc all these decisions and estimates are made under electrical activity.

MAJOR COST DP Yard cost Internal and external line length cost

COMMISSIONING- commissioning is most important in the project. Basically under this consent from the officer for the WTG to produce electricity is acquired over here. A decent amount of fees is paid as commissioning charges to this officer. He checks the safety and technology and inspects the WTG and then only approves it for producing electricity in case he disapproves then that5 particular WTG or site cannot produce electricity. 3. OMS(Operation maintenance and services)This is a very important vertical as we know that Suzlon is a end to end solution provider so this edge basically consist of interaction with customers acting as a agent in helping them provide a solution to their problems. After the WTG is constructed by the project team it is taken over by the OMS, OMS team then carries out a survey checking the approach roads to the WTG, since they would visit it frequently for servicing and maintenance. Once everything is approved the project team hands over the WTG and

does not interfere. This process is called HOTO (hand over take over) in simple words the project department hands over the project and OMS takes over. Providing services for maintenance of WTG. Servicing for 20 yrs and free servicing for first 2 yrs. Periodic servicing of WTG. Security services. Acts as a guide and agent to both electricity board and its customers.

QUESTIONNAIRE

What is the working capital according to your understanding ? a) b) c) d) Cash in hand Cash at bank Amount or gap between current assets and liabilities liquid cash

what are the basic features or components of w.c ? a) b) c) d) current assets and current liabilities fixd assets other liabilities other assets

how is w.c managed ? a) b) c) d) sales increased readily convertible assets increased increasing assets gap between c.a c.l increased

what are the benefits of w.c ? a) b) c) d) good cash no use high liquidity un interrupted work flow

what harm does a company face in absence of w.c a) b) c) d) interruption in work no harm high liabilities on purchase of R.M low goodwill in the market

how does sap help in the inventory management ? a) b) c) d) reduces the workload indulgence of technology for better well organized less chances of manual errors

what is the main cost for the w.c ? a) b) c) d) land stock wind turbines others

how is the procedure of land acquisition executed ?

DATA ANALYSIS
The first question was basically asked for the purpose of understanding what w.c is according to the people of intellect section of SUZLON so as to get the real feel and understanding of what the organization takes w.c u;timately as

a) 20% 20%

Cash in hand

b) Cash at bank 26%

34%

c) Amount or gap between current assets and liabilities d) liquid cash

INTERPRETATION the different parts of the intellectual department has come up with different answers basically the 34 % which says that w.c is the gap between the c.a , c.l . people or respondents has been mainly from the finance department

2nd question was basically aimed to acquire knowledge about how really the people at suzlon percteive features of w.c to be out of their complete functioning

8% 26%

6%

a) current assets and current liabilities b) fixd assets 60% c) other liabilities

d) other assets

INTERPRETATION point comes down to the fact that nearly 60% of the people have hit the right spot with the (option a ) whereas there has been a wague amount of presence of answers regarding the same question . this also acknowledges us that more or so picture regarding w.c features are clear

Next question of this set was asked to know how is w.c management being taken or pursued or being traced so as to track down the flow of w.c

a) 32% 24%

sales increased

b) readily convertible assets increased 18% 26% c) increasing assets

d) gap between c.a c.l increased

INTERPRETATION the w.c management is a very important task and there is a lot of way to do it and the most efficient or effective of them is that of solving through increasing the gap between c.a c.l , and this is what has been prevailing majorly in the suzlon working culturw as per the data of the respondents . which is the best manner to manage it

When talking about anythings management it is very imp to know about the importance of managing that thing its like the outcome of an act or a stuff being managed or look after

a) 28% 24%

good cash

b) no use 22% 26% c) high liquidity

d) un interrupted work flow

INTERPRETATION a goof w.c can have a whole lot of benefits and these can be ranging from any particular dimension as represented in this data also it has been on an overall nearly same segregation basis , but as the most accounting books say that the utmost benefit is that of uninterrupted work flow and this is somewhat the highest on the data table too in the above pictorial presentation of the data collected from respondents

Next in the set of queries was the frame of words asking or acquiring knowledge about the fact that how harmful it gets for an organization to be running in an absence of w,c or with low w.c (below the adequate)

38%

20% 4% b) no harm c) high liabilities on purchase of R.M d) low goodwill in the market

a)

interruption in work

38%

INTERPRETATION absence of w.c can be a great disaster or headache situation to be handled as it makes a manager to fall in the category of problem which states that a chaotic situation of low goodwill in the market , high liabilities on purchase of raw material . the data also represents it to be the main 2 concerns in absemce of w.c . though this doesnt fades out the negative impact of interruption in work

Sap being a part of the whole process of w.c management it was imp to acquire some knowledge regarding it and the data that been tried to collect is that around how it helps in INVENTORY MANAGEMENT

2% a) 32% b) indulgence of technology for better 62% 4% c) well organized reduces the workload

d) less chances of manual errors

INTERPRETATION majority and the main core of people believe that its main USP is that of technology indulgence of technology for the betterment of the whole system and efficiency , this is not an ubiquitous answer its the peoples view back at suzlon , different people at different places can have different views

Last in this knowledge acquiring list of questions is that the main cost for the w.c

14% 8% 6% 72% a) land

b) stock c) wind turbines

d) others

INTERPRETATION the main cost of the working capital is that of land as pretty well visualized in the above pie chart its %age being 72 % and others thing that and goes with the rest of the options

CONCLUSIONS
suzlon is an organization with almost majority of members having a clear view of the understanding of the w.c and its associated components

sap is of great help in providing the better control over the data and also the better management of the w.c thorough integration and segregation of assets being used (for eg in sap for every asset being purchased and entered into the system there is a different code attached to it and this helps in easy interpretable form of extracting data at requirement)

other good feature of sap is that of DUMP (extracting) apart from segregation of assets it also helps in the segregation of the whole of data that is related to w.c and its management , which ultimately adds to better management of w.c

land acquisition procedure of the suzlon people is pretty much lengthy as its been acquired for about 12 15 months sap is also a technology that helps the people at suzlon to grab a whole lot track of debtors and the period renging entered is from 90 days to debtors to 60 days to creditors , in this way it keeps the track and also provide the possible arrangements that can be done to meet these requirements and obligations in the working capital form or structure of the firm the main constituent is that of LAND

the working capital knowledge is not all pervasive in the organizational areas and is mainly concentrated in the areas related to finance which is not good

RECOMMENDATION

the organization named suzlon has its customers ranging from govt to the public superstars precisely falling in the sector of BOLLYWOOD ACTORS , as they have a huge consumption and also when they buy these resources of wind mill they get a certain tax deduction from the govt . so what people at suzlon could do is that of offering them at low prices and ask them for the branding or promotion of any sort on any media at cheaper rates suzlon must try and figure out the most out of its production side of transaction and not just relying on OMS , as being an oms organization the control is less and the possibilities of having a better control is less , whereas a manufacture have a wide range of control under them as the whole process of SCRATCH to PACK is in there undertaking eyes the market of this MNC suzlon is great when it comes to abroad and not so good down the domestic or nationalized market of india , so what the organization could perform is that it can ultimately reach out more EXTENSIVELY in the far markets and

use that good will in the local markets with suppliers , govt , promotion , advertsising etc as the suzlon also faces a high competition from the rivals who are not as big in size as compared to suzlon ,therefor the organization must try and consolidate them by using there structured power , money power , goodwill etc another challenge that can be deployed is that of loss occurrence due to cancellation of orders because of being late or not exactly on the time period required , for this purpose thing that can be adopted is that of flexible delivery period , firstly the organsiation suzlon must know the varying time period or the range within which it can deliver the order and must book the order on the same basis , along with providing whole lot benefits and different plans for availing these orders suzlon must try and break down the cost of CRANES by either having different varieties of suppliers or by having a one single supplier and having a good relation or contact so as to beat the prices compared to the competitors or rivals it should also focus on basic knowledge of w.c being prevailed in the overall organization and not just finance , as this would basically help in the development of caring and awareness regarding the imp of w.c and its management