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A STUDY On

The project is submitted IN PARTIAL FULFILLMENT AT THE DEGREE OF Master in Business Administration BPUT, Rourkela.

Debayoti Mohanty
Regd. No. 0606277049

Submitted by

Under the Guidance of


Company Guide
Mr. H. Suresh
A.G.M (Finance) Tube Products of India

Faculty Guide
Mr. B. P. Chhatoi Faculty (CMS)

Centre for Management Studies


OEC, BHUBANESWAR

ACKNOWLEDGEMENT
I here by tender my hearty acknowledgement to the following esteemed persons for rendering their helping band, co-operation and guidance to great extend for preparation of this report. I am very grateful to Mr. H. Suresh (A.G.M., Finance) for their wise consent and inspiration to under the project report, at Tube Products of India, Chennai. Finally I acknowledge every one of TI and my friends for the co-operation and help to complete this project successfully.

Debayoti Mohanty
CMS, (OEC), Bhubaneswar

DECLARATION
I do hereby declare that this project entitled Working capital Management in TI is the result of my training at Tube Products of India, Chennai which has been carefully prepared and submitted by me as a partial fulfillment of Master of Business Administration under the guidance of Mr. H. Suresh (A.G.M., Finance) and Mr. B.P. Chhatoi (Faculty Finance). All the data and analytic statement being stated in the project that is submitted by may be accepted as fully authentic genuine.

Debayoti Mohanty
CMS, (OEC), Bhubaneswar

PREFACE
Management of current assets and current liabilities and the relationship chat exists between them is turned as working capital management. Technically working capital management is an integral part of the overall financial management. This project work is based on the study undertaken by me at TI a division of Tube Product of India, Chennai. This project work is dividend into various sections and each section deals with different aspects of financial management.

Debayoti Mohanty
CMS, (OEC), Bhubaneswar

CONTENTS
CHAPTER 1 Introduction CHAPTER 2 Scope of Study Object of Study Methodology Tools & Technique used for Study CHAPTER 3 Company profile CHAPTER 4 Subject presentation & Analysis of Data CHAPTER 5 Finding, Suggestion & Conclusions Bibliography

INTRODUCTION

INTRODUCTION
Working Capital Management means managing the current assets of a business firm. Current assets are those assets, which can be converted within a short period of time i.e. one year. It is the outcome of a need for proper management of funds in a business. Funds can be involved for permanent purpose such as acquisition of fixed asset, expansion and diversification of business, modernization of plant machinery, research and development etc. funds are also required for temporary purpose such as day to day activities of a business like purchase of row materials, payment of salaries & wages, other short-term expenses etc. which is known as working capital. It refers to the excess of current assets over current liabilities and the inter. Relation that exists between them. Working Capital = Current Assets Current liabilities There is hardly a business enterprise that does not require working capital. As a companys primary objective is to increase the wealth of its shareholders, of funds, which depends on the and efficient efficient management important. Working capital management is to a very sensitive area in the field of financial management. It deals with the management of current assets i.e. deciding on the amount and composition of current assets and various means of financing these assets. It is very often noticed that profitable companies have succumbed due hence, proper analysis

management of funds (both short-term and long term) is very

to inefficient management of working capital or inadequate liquidity. Over emphasis on profitability forces them to ignored cash outflow areas like wages, dividends, trade debtors that ultimately creates a cash run-out situation. Hence, management of working capital not only means efficient utilization of funds but also includes identification of important areas of cash inflow and cash outflow. Therefore working capital management has become as one of the vital activities in a business organization.

SCOPE OF STUDY OBJECT OF STUDY METHODOLOGY TOOLS & TECHNIQUE USED FOR STUDY

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SCOPE OF STUDY
This is study of working capital management with particular reference to Tube Products of India is a large public sector company engaged in production of various grades of Tube products. Being a capital intensive manufacturing concern, this particular company is selected for this project study. A two year period is covered in the study, which extends form financial year 2005-06 & 2006-07. The study was restricted to different components of working capital like case management, inventory management, management of receivables and financing of current assets. 2.1 OBJECTIVE OF THE STUDY

The following are the main objectives of this project study. (a) (b) To study the challenges of working capital management To study the present system of working capital in the organization. (c) To determine the working capital tube product of India and work out the various ratios to working capital. (d) To make an item-wise study of the various components of working capital with the help of trend analysis and graph. (e) To suggest steps that should be taken to increase the efficiency in management of working capital.

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2.2

METHODOLOGY Data were collected from both primary and secondary

sources. These data have been analyzed with a view to arrive at conclusions regarding the practice of different methods by the management for effective control of working capital. The financial data were collected from various sources like: (i) Annual financial report of the company for two year period form 2005-06 & 2006-07. (ii) (iii) Internal reports. Manual report regarding management decisions on different aspects of working capital. (iv) Printed material carrying the policies of the

organization. 2.3 LIMITATION OF THE STUDY The study at hand is an empirical one and hence we faced some difficulties mostly in the area of data collection for analysis. However, with patience the difficulties were overcome to some extent and the stuffy is presented as in the present shape or in the form. 2.4 TOOLS & TECHNIQUES USED FOR THE STUDY The following tools and technique of financial analysis were used to measure the degree of efficiency in management of working capital.

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Ratio analysis Trend analysis Percentage Cash management Inventory management Management of receivables

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COMPANY PROFILE

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COMPANY PROFILE
MURUGAPPA COMPANIES
The USD 2 billion Murugappa Group has 29 companies it is one of the biggest Indian conglomerates, operating in diverse areas like engineering, abrasives, sanitaryware, fertilisers, finance, bio-products and plantations. Well known for its

dedication to constantly improving and sustaining the quality of the products and services it provides, the Murugappa Group is the next emerging name in the global arena of business.

The major companies of the Group are: Carborundum Universal Limited Cholamandalam MS General Insurance EID Parry India Limited Parry Agro Industries Limited Tube Investments of India Limited Cholamandalam DBS Finance Limited Coromandel Fertilisers Limited Godavari Fertilisers Limited Parryware ROCA Private Limited

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The other companies are: Ambadi Enterprises Ltd Cholamandalam Mutual Cholamandalam Securities Ltd Kadamane Estates Company Murugappa Morgan Thermal Ceramics Ltd New Ambadi Estates Pvt Ltd Parry Murray and Co Ltd Polutech Ltd Southern Energy Development Corporation Wendt India Ltd Cholamandalam Distribution Services Ltd Cholamandalam MS Risk Services Ltd (CMSRSL) Coromandel Engineering Company Ltd Laserwords Pvt Ltd Net Access India Pvt Ltd Parry Enterprises India Ltd Placon (India) Pvt Ltd Prodorite Anticorrosives Ltd Sterling Abrasives Ltd

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International alliances
Worldwide presence

Our international associates Coromandel Fertilisers Limited (CFL) and Gujarat State Fertiliser Corporation (GSFC) signed a joint venture agreement with Groupe Chimique Tunisien of Tunisia for the manufacture of phosphoric acid, a critical raw material in the manufacture of phosphatic fertilisers and DAP. In February 2005, Coromandel Fertilisers acquired a 2.5 per cent stake for Rs.27 crore in Foskor Limited, a South African fertiliser company. The Indian company will also advise Foskor on operational issues to enable it to improve its financial performance.

EID Parry (India) Ltd and Cargill International S.A., Geneva have announced their plans to enter into a joint venture to set up a portbased stand-alone sugar refinery in Kakinada, Andhra Pradesh

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Parryware ROCA Private Limited, India's No. 1 bathroom solutions provider and Spain's ROCA, the world's leading bathroom ceramics company, will join hands to charter a new growth in the Indian sanitaryware segment. This is a joint venture between EID Parry India Limited and ROCA of Spain, the world's leading bathroom Ceramics Company.

Murugappa Group and DBS Bank, Singapore became equal partners in the joint venture Cholamandalam Investment and Finance Company Ltd. (CIFCL). CIFCL has been renamed Cholamandalam DBS Finance Ltd.

Group company Wendt India Limited is a joint venture with Wendt, West Germany, a niche player in the abrasives industry. It makes diamond and CBN grinding wheels and tools.

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Murugappa Morgan Thermal Ceramics Ltd is a joint venture between Carborundum Universal (CUMI) and Morgan Crucible Co plc of the UK. It produces ceramic fibres.

Cholamandalam MS General Insurance Co Ltd is a joint venture with Japanese insurance giant Mitsui Sumitomo. Cholamandalam MS General Insurance Co Ltd is a joint venture with Japanese insurance giant Mitsui Sumitomo.

The Group has a joint venture with Borg Warner Morse Tec of the US, a global leader in the design and manufacture of automotive chain systems and components for engine timing, to manufacture silent chains and associated systems.

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TUBE PRODUCTS OF INDIA


Market Position Tube Products of India is an undisputed Indian leader for in the market precision

Welded ERW and CDW steel Tubes with the widest variety and also manufactures wide range of CRCA (Cold Rolled Closed catering standards Products Precision Tubes Market leader in Telescopic Front Fork Inner tubes and Cylinder bore tubes for shock absorber and gas spring applications. Propeller shaft tubes for Automotive segment. Other Speciality products include Rear Axle Tubes, Side Impact Beams, Tie Rods, Drag links. Heavy thick steering shafts and Hydraulic Cylinder tubes CRCA Strips A wide range of CRCA strips including special extra deep drawing, high tensile, medium carbon, high carbon finding application in industries such as Bearings, Automobile, Auto Ancillaries and General Engineering. Annealed) to Strips international

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Certifications

ISO-TS 16949 : EOU plant has already been certified, Shirwal plant has been recommended ISO 9001 - 2000 : All plants ISO 14001 : Avadi Plant & EOU Plant

Self-certification for boiler tubes by the central boiler board Winner of the Sword of honour for outstanding safety performance from the British Safety council Locations Plants : Chennai (South India), Shirwal (Western India) & Mohali (Northern India) Business Partners / Customers

Maruti Udyog Ltd Hyundai Motor Ltd Toyoto Kirloskar Limited Ashok Leyland Tata Motors Hero Honda TVS Motor Company Bajaj Auto Limited Yamaha Motor Thermax Kayaba, Malaysia Dana Australia Delphi - India Automobiles

Mahindra & Mahindra

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CORPORATE PROFILE
A Reputed Engineering Company in India, driving excellence in work and part of the US $ 2 billion Indian conglomerate, The Murugappa Group

Tube Investments of India Limited is the flagship Company of Rs. 8500 crore Murugappa Group. It manufactures precision steel tubes and strips, car doorframes, automotive and industrial chains and bicycles. The Company has 13 manufacturing/assembly units spread across the country. These units are ably supported by marketing offices that act as interface between customer requirements and production team. The Companys shares are listed on the National, Mumbai and Chennai stock exchanges within India and GDRs on the Luxembourg Stock Exchange. The Companys product segments are - Engineering, Metal Formed Products and Cycles.

TI is the market leader in precision tubes with 61 percent market share by virtue of its quality and application engineering capabilities.

TI is the market leader in roll formed car doorframes with 57 percent market share by virtue of its cost efficiency, association with key auto majors and roll forming capabilities.

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TI is a leading player in automotive chain with 35 percent market share by virtue of its quality, cost and delivery and association with two wheeler majors.

TI is a leading player in bicycle segment with 30 percent market share by virtue of its brand equity, product development capability and proximity to the markets.

The Company also has an interest in the services sector through its investments in Cholamandalam Investment and Finance Company Ltd. and Cholamandalam MS General Insurance Co. Ltd.

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BOARD OF DIR ECTORS


Mr. M M Murugappan, ChairmanProfile Mr. Amal Ganguli, Non-Executive Director Profile Dr. D Jayavarthanavelu, Non-Executive Director Profile Mr. Pradeep Mallick, Non-Executive Director Profile Mr. Ram V Tyagarajan, Non-Executive Director Profile Mr. S Sandilya, Non-Executive Director Profile Mr. R Srinivasan, Non-Executive Director Profile Mr. N Srinivasan, Director Profile Mr. Tapan Mitra, Non-Executive Director Profile

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CORPORATE GOVERNANCE
Good corporate governance has consistently been TIs cornerstone for sustained superior financial performance, and quality service to all its stakeholders. At TI, we firmly believe that the fundamental objective of corporate governance is enhancement of long-term shareholder value, while keeping the interests of all stakeholders in view. Dedicated to the highest standards of corporate governance in all its activities and processes, the Company is committed to discipline, willingness, transparency and fairness. Key elements in TIs corporate governance include :

Transparency Disclosure Supervision and internal controls Risk management Internal and external communications High standards of safety, health, accounting fidelity, product and service quality [

Besides drawing on the various legal provisions, group practices are continuously benchmarked in terms of the Confederation of Indian Industry Code and international studies. The entire process begins with the functioning of the Board of Directors, with leading professionals and experts serving as independent directors and represented in the various board committees. The Board has empowered an efficient team of experts to implement its policies and guidelines and has set up adequate review processes to ensure continual value generation.

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WHISTLEBLOWER POLICY
Policy Title Version Number Effective Date Initiated By Authorised By Number of Revisions (since 1/1/2006) Last Revised Date Next Revision Date Policy Objective Whistleblower Policy MHRPOL2/1/2006 1/4/2006 Group Director HR Company Statutory Board Nil N.A. 1/4/2008

Whistleblower Policy To provide employees, customers and vendors an avenue to raise concerns, in line with Tube Investments of India Limiteds commitment to the highest possible standards of ethical, moral and legal business conduct and its commitment to open communication. for To provide of necessary from safeguards good faith. protection employees

reprisals or victimization, for whistleblowing in Scope Coverage All permanent employees, customers and vendors of Tube Investments of India Limited Tube Investments of India Limited including Associate Companies and Joint Ventures. Main Features The whistleblowing policy is intended to cover Improper serious concerns that could have a large impact on Practice Tube Investments of India Limited such as

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actions (actual or suspected) that :


May lead to incorrect financial reporting ; Are not in line with applicable company policy ; Are unlawful or, Otherwise conduct. amount to serious improper a The

Complainant

An to

employee/customer/vendor as a complainant

making

(Whistleblower) disclosure under this policy is commonly referred (whistleblower). complainants role is as a reporting party, he/she is not an investigator.. Although the complainant is not expected to prove the truth of an allegation, the complainant needs to demonstrate to the Ombudsperson, that there are sufficient grounds for concern. Safeguards Harassment will not be or tolerated and Victimisation could constitute Harassment or victimistion of the complainant sufficient grounds for dismissal of the concerned employee. Confidentiality Every effort will be made to protect to the legal complainants constraints. Anonymous Allegations Complainants must put their names to allegations as follow-up questions and investigation may not be possible unless the source of the information is identified. Concerns expressed anonymously WILL NOT BE usually investigated BUT subject to the identity, subject

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seriousness Ombudsperson independently.

of can

the

issue an

raised

the

initiate

investigation

Malicious Allegations Malicious allegations by employees may result in disciplinary action. Ombudsperson The Ombudsperson will be a person, including a full-time senior employee, well respected for his/her integrity, independence and fairness. S/he would be authorized by the Statutory Board of the company for the purpose of receiving all complaints Reporting under this policy and ensuring appropriate action. The whistleblowing procedure is intended to be used for serious and sensitive issues. Serious concerns relating to financial reporting, unethical or illegal conduct should be reported to the Ombudsperson. Investigation Annexure I provides the necessary contact details. All complaints received will be recorded and looked into. If initial enquiries by the Ombudsperson indicate that the concern has no basis, or it is not a matter to be pursued under this policy, it may be dismissed at this stage and the decision documented Where initial enquiries indicate that further investigation is necessary, this will be by carried alone, the through or by either a by for the this Ombudsperson nominated Committee

Ombudsperson

purpose. The investigation would be conducted in a fair manner, as a neutral fact-finding process and without presumption of guilt. A written 28

report of the findings would be made. Investigation Result Based on a thorough examination of the findings, the committee (or Ombudsperson) would recommend an appropriate course of action to the CEO / MD of Tube Investments of India Limited. Where an improper practice is proved, this would cover suggested disciplinary action, including dismissal, if applicable, as well as preventive prepared. Investigation Subject The investigation subject is the person / group of persons who are the focus of the enquiry / investigation. Reporting Their identity would be kept confidential to the extent possible by The Ombudsperson will provide quarterly reports copy to the Group Director HR. Communication The complainant will receive acknowledgement on with receipt of the concern. Complainant The amount of contact between the complainant and the body investigating the concern will depend on the nature of the issue and the clarity of information provided. Further information may be sought from him/her. Subject to legal constraints, s/he will receive information investigations. Changes to Policy This policy can be changed, modified, rescinded or abrogated at any time by Tube Investments of 29 about the outcome of any Ombudsperson to the Chairman of the Statutory Board with a measures for the future. All discussions would be minuted and the final report

India Limited. ACCOUNTABILITIES Employees / Customers / Vendors 1. Bring to early attention of the company any improper practice they become aware of. Although they are not required to provide proof, they must have sufficient cause for concern. 2. Avoid anonymity with when raising a concern. 3. Co-operate authorities, confidentiality. 4. The intent of the policy is to bring genuine and serious issues to the fore and it is not may intended attract has to the for petty by complaints. employees action. 5. A complainant not right to for and the protection from retaliation. But this does extend of the immunity complicity in the matters that are the subject 6. In allegations cases, where investigation. exceptional complainant is not satisfied with the outcome of the investigation carried out by the Ombudsperson, s/he can make a direct appeal to the Chairman of Ombudsperson the Audit that Committee the policy of is Tube being Investments of India Limited. 1. Ensure 30 Malicious allegations investigating full maintaining

disciplinary

implemented. 2. Ascertain prima facie the credibility of the charge. If initial enquiry indicates further investigation is not required, close the issue. 3. Document the initial enquiry. 4. Where further investigation is indicated carry this through, appointing a Committee if necessary. 5. Provide quarterly reports to the CEO of Tube Investments of India Limited with a copy to the Group Director HR. 6. Acknowledge receipt of concern to the complainant, initiative thanking in him/her for the taken upholding

companys business conduct standards. 7. Ensure that necessary safeguards are provided to the complainant. Ombudsperson/ Committee 1. Conduct the enquiry in a fair, unbiased manner 2. Ensure complete fact-finding. 3. Maintain strict confidentiality. 4. Decide on the outcome an of the investigation, by whom. 5. Recommend an appropriate course of action suggested disciplinary action, including measures. dismissal, and preventive whether improper

practice has been committed and if so

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6. Minute Committee deliberations and document the final report. CEO 1. Table the quarterly reports from the Ombudsperson Board. 2. Ensure necessary actioning of to of the the recommendations Investigation Subject 1. Provide full with the Statutory

Ombudsperson / Committee. co-operation Investigation team. 2. Be informed of the outcome of the investigation. 3. Accept the decision of the Ombudsperson. 4. Maintain strict confidentiality.

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IMPROPER PRACTICES Serious concerns that would have impact on Tube Investments of India Limited, such as actions (suspected or actual) that:

May lead to incorrect financial reporting ; Are not in line with applicable company policy ; Are unlawful or, Otherwise amount to serious improper

conduct. SAFEGUARDS

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Harassment or Victimisation : Harassment or victimisation of the complainant will not be tolerated and could constitute sufficient grounds for dismissal of the concerned employee.

Confidentiality : Every effort will be made to protect the complainants identity, subject to legal constraints.

Anonymous Allegations : Complainants must put their names to allegations as follow-up questions and investigation may not be possible unless the source of the information is identified. Concerns expressed anonymously WILL NOT BE usually investigated BUT subject to the seriousness of the issue raised the Ombudsperson can initiate an investigation.

Malicious Allegations : Malicious allegations by employees may result in disciplinary action.

AWARDS AND CERTIFICATES


Prestigious national and international awards and certificates adorn the Murugappa portfolio and reinforce its execellence in its businesses. A quick glance at some of them: The Murugappa Group has won the IMD Family Distinguished

Business Award 2001 Company awards 34

CUMI was ranked third in ICWAI award for Excellence in Cost Management in the 2004 The bonded abrasives business has been conferred the CII-Exim Award 2005 for Business Excellence for strong commitment to excel Frost & Sullivan award for manufacturing excellence managing change Forbes names CUMI as one of Asia's best 200 companies under a billion Almost all CUMI plants are ISO 9002 certified

For the ninth time the FAI Best Production Performance Award for 2006, to the phosphoric acid plant in Vizag Award for Best Energy Conservation in the Fertiliser sector for 2005-06, received December 'National by Vizag Plant on 14 2006, Energy National Energy

Conservation Day Conservation Award for 2006' from the Ministry of Power, New Delhi, in appreciation of efforts in energy conservation in the fertiliser sector won for the third time The FAI Best Video Film Award for 2006, to the film on 'Gromor Sulphur' for the fifth time National award (1st prize) for the house journal, 2006, from

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the Public Relations Society of India, New Delhi, received for The Voice (house journal) for the second consecutive year National Award (2nd prize) for video film, 2006, from the Public Relations Society of India, New Delhi, to the Marketing Department (Fertilisers) for the film Cheyutha (helping hand) British Council 'Five Star' rating for safety management systems in 1998 First prize for safety, among 162 fertiliser companies in the International Fertiliser Industries Sectional Contest Andhra Pradesh Pollution Control Board's award for 'Waste Minimisation at Source and Adopting Cleaner Technologies' for 2001-02 FAI award for 'Environmental Protection in NP / NPK Fertiliser Plant Category' for 1995-96 Adjudged one of the 'Ten Greenest Companies in India' by a joint survey of Tata Energy Research Institute (TERI) and Business Today magazine Several other awards from the central and state governments, as well as other institutions like the Jawaharlal Nehru Award for Pollution Control and Energy Conservation Received a commendation certificate for a 'Strong Commitment to HR Excellence' from the Confederation of Indian Industries (CII) CFO Deal of the Year Award, 2005, for the Business Assistance Agreement with Foskor Limited, South Africa The Visakhapatnam Plant was awarded ISO 14001:1996 first in 2002 and again in 2004. The company is also the recipient of OHSAS 18001:1999 certificate.

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SUBJECT PRESENTATION & ANALYSIS OF DATA

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WORKING CAPITAL
The part of long term finance locked in and used for supporting current activities i.e, to maintain the productivity of fixed assets i.e, without the for current activities for fixed asset are valuables. The amount blocked for or locked for the current activities is really working capital. Those assets which can concentrated into cash or cash equivalent within a short period i.e., the assets which are ultimately converted into cash i.e., which are required to meet the day to day operation is current asset. MEANING OF WORKING CAPITAL Capital required for a business can be classified under two main categories. Fixed Capital Working Capital

Fixed capital : The capital which is blocked on a permanent or fixed basis is called fixed capital. Example Long term funds Working capital : Funds which are needed for short term purpose for the purpose of raw materials, payment of wages & other day to day exp. Are knows as working capital. Working capital is defined as the excess of current assets over current liabilities. Current Assets Current Liabilities

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Current assets are those assets which will be converted into cash which is the current a/c period. They are cash or near cash resources these include.

Cash & bank balance Receivables. Inventory


o Raw materials, stores & spares. o Work-in-progress o Finished good

Prepaid exp Short term advances Temporary investments

Current liabilities are the debts of the firms that have to be paid during the current a/c period or within a year.

Creditors for goods purchased. O/S Expenses i.e. exp doe but not paid. Short term borrowings Advances receive against sales.

Working capital is also know as circulating capitals fluctuating capital and revolving capital. Circulation of current assets Cash Inventories Receivables

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OBJECTIVE OF WORKING CAPITAL The basic objective of working capitals are as follows:

By optimizing the investment in current assets & by reducing


the level of current liabilities.

The second imp objective of working capital management is


that the company should always be in a position to meets its current obligations.

The firm should manage its current assets in such a way that
the marginal return on investment in these assets is not less than the cost of capital employed to finance the current assets. CONCEPTS OF WORKING CAPITAL There are two concepts of working capital gross concept & net concept. Gross Working Capital refers to the firms total investment on current assets. Net Working Capital: is the difference be in current asset & current liabilities. The gross working capital is a financial or going concern concept where as net working capital is an a/c concept of working capital. CLASSIFICATION OF WORKING CAPITAL 40

Working capital may be classified into two categories

Working Capital

On the basic of concept

On the basic of time

Gross working capital

Net working capital

Fixed working capital

Temporary or variable working capital

Regular working capital

Reserve working capital

Seasonal working capital

Special working capital

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PERMANENT WORKING CAPITAL Fixed or permanent working capital is the amount of funds required for production of goods & services to satisfy the demand. For example every firm has to maintain a minimum level of raw materials, work-in-progress, finished goods & cash balance. The minimum level of current assets is called permanent or fixed working capital as this part of capital is permanently blocked in current assets. TEMPORARY WORKING CAPITAL Temporary or variable working capital is the amount of working needed over & above the minimum level of working capital to meet the special demands & some special agencies. IMPORTANCE OF WORKING CAPITAL Working capital is very essential to maintain the smooth running of a business. No business can run success fully without an adequate amount of working capital.

Solvency of the business: Adequate working capital helps in


maintaining solvency of the business by providing uninterrupted flow of productions.

Good will Easy loans Cash discount


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Regular supply or raw materials Regular payment of salaries & wages. Ability to face crisis Quick & regular return on investment High moral
DISADVANTAGE INSUFFICIENT WORKING CAPITAL

Trade discounts are lost Cash discount are lost The advantages of being able to offer a credit line to customer
are forgone

Financial reputations are lost.


NEED OF WORKING CAPITAL The need for working capital due to the time gap bet production & realization of cash.

For the purchase of raw materials, components & spares. To pay wages salaries To insure day-to-day expenses. To meet the selling cots. To provide credit facilities. To maintain the inventories of raw materials, work in
progress. FACTOR DETERMINING THE WORKING CAPITAL

REQUIREMENTS

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Nature of business Manufacturing cycle Business cycle fluctuation Sales of operation Credit policy Growth & diversification of business Supply situation Operating efficiency of performance

SIGNIFICANCE OF WORKING CAPITAL MANAGEMENT

Principles of risk variation Principles of cost of capital Principles of equity potion Principles of maturity of payment

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Operating Cycle
Concept :

Operating

cycle:

The

blockage

of

resources in the product cycle due to the time factor, which consists of there activities.

Purchasing resources: i.e., procumbent of

raw materials and other.

and other expenses.

Producing the product: i.e., the working

progress and finished product which consists material, labour

sale into cash.

Distributing the product: i.e., sale of

finished product either in cash or credit and converting the credit

To maintain liquidity and factoring properly the firm has to invest various certain assets like cash balance to pay the bill, investing stocks for production and sale and invest in sale to allow credit.

equivalent.

Operating cycle: the conversion periods of

current asset to absolute liquid asset. i.e, cash or cash

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Mathematically expressed: It is the sum

of inventory conversion period and receivable conversion period, i.e, inventory conversion period + receivable conversion period. (It is the represent of gross working capital) Operating cycle Operating cycle consists of time duration starting from procurement of raw material, ended at sales realization i.e, the time gap between the first event and the last event i.e, the cash conversion period i.e, converting cash to other current asset and other current asset to cash.

Cash

Bill receivable Raw material

(Credit) Sale

Labour & factory over head work-in-progress Finished goods

Figure in operating cycle PROCESS OF OPERATING CYCLE

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Initial cash requirements Procurement of raw material Payment of labour and factory over head

i.e, conversion of raw material to working progress.

Convert

working

progress

to

finished

goods. i.e., charge or pay administrative expenses


(debtion) to cash.

Convert finished good to sale If credit sale convert bills receivable

Operating cycle period is the length or time duration of operating cycle. i.e, it is the sum of inventory conversion period (ICP) and receivable conversion period (RCP) i.e. the gross operating cycle. i.e, the gross operating cycle. i.e. ICP + RCP = gross operating cycle inventory conversion period (ICP) = period (WPCP) + finished good conversion period (FGCP), i.e.
ICP = RMCP + WPCP + FGCP

Raw

material conversion period (RMCP) + Work in progress conversion

RMCP =

average raw material in stock 365 days total raw material consumed average work in progress 365 days total cost of production average finished goods 365 days total cost of good sold

WPCP =

FGCP =

Receivable conversion period (RCP) 47

The time period required to convert credit sale into cash. RCP = average receivable 365 days total credit sale

Cash Management

Introduction Cash is the important current assets and is the basic input needed to keep the business running on a continuous basis. Thus the company should keep sufficient cash, neither less nor more. The cash includes cash in hand and cash at bank. The entire businessman wants cash but he is not ready 0 hold it as cash-inhand which is a non-earning asset. Effective cash management involves an effort to minimize investment in cash without affecting the liquidity of the organization. It is a proper balancing between liquidity and profitability. Cash Business Collection Operation CASH MANAGEMENT CYCLE Deficit Surplus Borrow Invest

Information and Control

Cash 48 Payment

Motives for Holing Cash


a. Transaction Motive The transactions motive requires a company to hold cash to conduct its business in the ordinary course. The firm needs cash primarily to make payments for purchases, wages and salaries, other operating expenses, taxes, dividends etc. b. Precautionary Motives The precautionary motive is the need to hold cash to meet contingencies in future or un predictable situation. The cash maintained for contingency needs is not productive or remain ideal. However, such cash may be invested in short period or low-risk marketable securities, which may provide cash as and when necessary. c. Speculative Motive

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The speculative motive relates to the holding of cash for investing in profit making opportunities as and when they arise. The firm may speculate on securities, which depends on interest rates. The firm may also speculate on material's prices. Thus the primary motive to hold cash and marketable securities are the transaction and precautionary motive. c. Compensative Motive

The motive for holding, near cash to compensate bank


for providing certain services or loans.

For the services like cheke, clearance transfer funds the


banks charges some direct fee or commission. But for the loan & other services the bank needs minimum balance of cash at bank, which is called compensating balance.

Compensating balance = Absolute minimum balance


and average minimum balance.

CASH MANAGEMENT

Management of cash involves three things: A. B. C. Managing cash flows into and out of the firm. Managing the cash flow with the firm. Financing deficit or investing surplus cash and thus

coordinating cash balance at a point of time. In case of well managed profitable companies like NALCO, the total amount of cash inflow for the year is usually higher than the total amount of cash outflows.

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CASH PLANNING It is a technique to plan and control the use of cash. Cash

planning may be doe daily, weekly or monthly basis. The period and frequency of cash planning generally depends upon the size and policy of management of the firm. Larger firm often prepare cash forecasts on daily or weekly basis. As a firm grows and business operations became complex, cash planning becomes inevitable for its continuing success.

CASH FORECASTING AND BUDGETING A cash budget is a summary statement of the firm's expected

cash inflows and outflows over a projected time period. It is the most significant device to plan and control cash receipts and payments. It gives information on the timing and magnitude of expected cash flows and cash balances over the projected period. Cash forecasts are needed to prepare cash budgets. Cash forecasting may be done one year or less are considered as shortterm. Both Short-term and lon8-term forecasts can be made with the help of the two most commonly used methods i.e. 1. The receipt and disbursement method. 2. Adjusted net income method.

51

Though, these cash forecasts do not reflect the exact figures yet they enable the planners to make necessary arrangement for requirement.

CASH REPORTS: TOOLS OF CONTROL Cash report is an important tool of cash management, which

provides a comparison of actual development with forecast figures. It is very much helpful in reviewing cash forecasts on continuous basis and thus exercising effective control in cash flows. The cash reports include daily cash report.

MANAGEMENT OF CASH FLOWS After ascertaining the probable cash flows, efforts should be

made to procure or arrange the cash required for the smooth running of the organization. Cash management will be successful only if the cash

collections are accelerated and cash disbursements are delayed. As far as possible, some popular methods adopted by different organizations for cash inflows and retardation of cash out flows are listed below;

1)

Methods of accelerating of cash inflows Prompt collections of cash from customers by prompt billing and mailing. 2) Quick conversion of payments into cash by prompt presentation of cheques or drafts to bank. 52

3)

Decentralizing collections by opening collection centers at different places.

4)

Adopting a .lock box system under which a bank is authorized to collect cheques etc. directly from the post box of the company, set up for the purpose.

Methods for slowing down of cash out flows i) ii) iii) iv) Making payments on due date/ last date Paying through drafts instead of cheques Centralization of payments. Inter bank transfers, when the company has accounts in more than one bank. v) vi) Making use of flow amount. Adjusting pay roll fund according to the needs of the organization. .

INVENTORY MANAGEMENT
Inventory constitutes the most significant par t of current assets of a large majority of companies in India. On an average inventories are approximately 60% of current assets in public limited companies and any effort in stock control will bring major benefits for the enterprise. An efficient management of inventory is an essential requirement for the success of the enterprises. Classification of inventories:

53

Raw materials: it includes direct material used in

the manufacture of a product and it also includes the components, fuels etc. used in the manufacture.

goods and

Work - in- progress: it includes partly finished materials sub-assemblies etc held between

manufacturing stages. Stocks of work in -progress are in the process of production.

Finished goods: The goods ready for sale or

distribution will come under this category.

Need to hold inventories

operation.

Transaction

motive

emphasizes

the

need

to

maintain inventories to facilitate smooth production and sales

Precautionary

motive

necessitates

holding

inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.

Speculative motive influences the decisions to

increase or reduce inventory levels to make advantage of price fluctuation. Objective of inventories management

54

To minimize the delay in production through

regular supply of raw materials, storages, spares, tools and other equipments as and when required.

inventory.

To avoid unnecessary capital being locked of in

To exercise economies in ordering and obtaining

supplied and storage material. Inventories determinants In Tube Products of India the inventory determinants are: 1) Load Period: it is the period between need and its fulfillment. During this period, no inflow of material is done and the production is supplied by existing inventory. Increase in lead time requires more inventory and decrease in lead time decreases the inventory level. So lead period is the some of time taken for identifying the needs & placing order to supplier, procuring from supplier, transport, receipt and inspection of material. 2) Cost of holding inventory: In order to avoid risk, the inventory management should balance the various costs so that the total cost is minimized. The different cost are material cost, cost of ordering cost of holding & carrying the inventory, under stocking and over stocking. 3) Re-order Point: It is the time when the order should be placed. It depends on assumption rate and the duration of lead period. So this point is fixed basing on consumption of lead period plus safety stock.

55

4)

Kind of stock: It is of different kind i.e. safety stock, reserve stock buffer stock etc. buffer stock provides for normal consumption during an average lead time. The reserve stock provides for an increase consumption rate, stock is for an increasing lead time. As lead period is not constant, always safety stock is required.

Inventory Management Techniques Company having large inventories have the problem that the management can not give attention to all items. In Nalco to avoid these, they follow mainly these type of methods i. ii. iii. iv. v. ABC (Always Better Control) - For raw materials. VED (Vital, Essential, Desirable) - For Spare parts. FNSD (Fast moving, Non moving, Slow moving, Dead) EOQ (Economic Ordering Quantity) JIT (Just In Time)

ABC ANALYSIS Here the important of items depends on its value. The high valued items are classified as 'A'; less valued as 'C' and in between them is 'B'. This is done in the following steps a) Classification of the items of inventories, determining

expected use in units and price per unit for each items. b) Determination of total value of each item. c) Ranking the items according to their values.

56

d) Computation of percentage of number of units in each items to the total units of all items and percentage of total value of each item to total value of all items. e) Combination of items on the basic of their relative value to form three categories i.e. A,B,C. VED ANALYSIS The demand for spare parts depends on the performance of equipments. The vital spare parts stored adequately for adverse situation. Essential parts are stocked rather sparingly and the desirable items are stored on basing on lead time. This is mainly followed in CPP, production Department. FNSD ANALYSIS The, items are classified basing on their consumption rate & helps the management to take decisions about storing of different inventories.

ECONIMIC ORDETRING QUANTITY Economic ordering quantity is an optimum quantity of materials to be ordered after consideration of the following three categories of costs.

Ordering cost are the costs which are associated with the purchasing or ordering of materials.

not carried.

Carrying cost are the costs for holding the inventories. These costs will be incurred if the inventories are

57

Stock-out cost are the costs associated with running out of costs. The EOQ is the optimum size of order for a particular item of inventory calculated at a point where the total inventory costs are at a minimum for that particular stock item. It is an optimum size of either a normal outside purchase order or an internal production order that minimizes total annual holding and ordering costs of inventory.

JUST IN TIME INVENTORY MANAGEMENT JIT focus upon the idea of producing in response to need rather than as a consequence of plans and forecast. Instead of pushing inventory into the system in order to make products, they turned the process round and used the pull from the market place or the next operation as a way of making the system more directly responsive small and eliminating unnecessary rather wastes due to over production and so on. It attempts to minimize inventories through incremental reductions than prescribe particular technology or methodology. Inventory proportion ratio = Inventory current assets

MANAGEMENT OF RECEIVABLES To achieve growth in sales and to meet competition in the industry .A firm may resort to credit sales. Receivables arise from the sale of goods and services on credit basis. Sales on credit depend upon the nature of business. To increase the sales volume, generally the credit facility will be offered to the customer which result in investment in receivables to maximize return on capital

58

employed. The balance in receivable account is determined by the number of customers, length of credit, amount of credit allowed to each customer etc. Objective:

To maintain the optimum volume of sales. To control the cost of credit and keep it at minimum.

To maintain the optimum level of investment in receivables.

Keep down the average collection period.

Cost of extending credit :

Capital

cost includes

the

interest

on

capital

blocked in the receivables balances.

Administration cost associated with the credit decision making and controlling of debtor balances, cost of keeping the records of credit sales, cost of collection of payment from customers, opportunity cost of capital that can be employed else where than in receivables management.

Default cost are associated with the risk of default i.e. a certain portion of receivables will never pay, and will become 'bad debt's which has to be written off the profits of the firm.

CREDIT POLICY OF TI

59

In TI the credit and col1ection policy changes from time to time. The responsibility to administer credit and collection policy is assigned to the financial executive and marketing executives. The effective control of receivable management has divided credit control into different steps.

Allocation of authority for granting credit and collection

Selection of proper credit term Credit investigation before granting credit. Sound collection policies and procedures.

Credit policy can be divided into three variables: 1) 2) 3) Credit standard Credit term Collection policy

Credit standard: It is the criteria which a firm follows in selecting customers for the purpose of credit extension. It may be loose or strict. In TI they prefer strict credit standard i.e to extend credit to reliable and financially strong customers. This helps in minimizing the bad dents and cost of credit administration. Through the credit standard is strict, but management never allow it to be a negative strategy for

60

sales growth. The following points are taken into consideration by TI to grant credit to any customer A. B. C. D. E. Capacity to pay Company's repu ta tion Past experience Economic condition Bank reference

Credit term: The stipulation under which the firm sells on credit to customer is called credit. These includes credit period cash discount and credit limits

Credit period is the length of time for which credit is extended to customer. In TI the credit period varies from 30 to 75 days. The period is different for different customers basing on the faith on the customer.

Cash discount is the reduction in payment offered to customer to induce them to repay entire obligation within a specified period of time which is less than the normal credit period. It is usually as a percentage of sales.

which

Credit limit is the maximum amount of credit can be extended to particular customers. Management always fixed the limit basing on the quantity purchased by the customer and financial condition of the customer. For frequent buyer customer permanent credit limit is maintained. 61

Collection Policy: The purpose of this is to speed up the collection of dues. The company has laid down collection procedure for the individual accounts i.e. customer wise book maintaining system. The collection procedure for past due or delinquent accounts should also be established in very clear terms. Accounts receivables reports are prepared for maintaining the debt. Company has also not allowing any sales through dealer special consideration. Working capital management in TI Here the study is as the management of working capital in TI which induce analysis of investment in different components of current assets like inventories, debtors cash & bank etc. Analysis or financial control measures taken by the company. The total analysis was conducted on the following heads. 1) 2) 3) 4) 5) Analysis or over all efficiency in mgt of no cap in TI. Cash mgt. Inventory mgt. Mgt of receivable Financing of no cap.

Trend analysis of working capital of TI. Gross working capital (Rupees in Crores)

Year 2004-05

Current asset or working capital 516.90

62

2005-06 2006-07

525.90 596.62

It shows that company is maintaining its level C.A. properly according to its changing business activity. Table: net working capital

Year 2004-05 2005-06 2006-07

C.A 516.91 525.90 596.62

C. Lia 302.49 325.92 352.82

Net working cap 214.42 199.98 243.80

Net working capital = Current Assets Current Liabilities If we analyze the net working capital trend form the three years, it is having a going motion that is here is a decrease in 200506 in comparison to 2004-05 and suddenly increases in 2006-07.

Gross working capital Vs Net working capital

63

700 600 500 400 300 200 100 0 2004-05 C.A 2005-06 Net working cap 2006-07 214.42 199.98 243.8 596.62 516.91 525.9

Working capital ratios Working capital ratio indicate the ability of a business concern in meeting it current obligations as well as its efficiency in managing the current asset for generation of sales. These ratios are applied to evaluate the efficiency with which the company manage & utilize its C.A. The following three categories of ratios are used for efficient mgt of working capital. 1) 2) 3) Efficiency ratio Liquidity ratio Structural he3alth ratio

1.

Efficiency ratio

64

Working capital to sales Ratio = Sales Working Capital G. Sales 1562.58 1584.18 1761.84 Working Capital 214.42 199.98 248.80 Ratio 7.28 7.92 7.08

Year 2004-05 2005-06 2006-07

The ratio helps to measure the efficiency of the utilization of net working capital. It signifies that for an amount of sales, a relative amount working capital in needed. This ratio helps the mgt to maintain the adequate level of working capital. The mgt has maintain adequate level of working capital with the increase in sales.

2000 1800 1600 1400 1200 1000 800 600 400 200 0 G. Sales Working Capital Ratio 2004-05 2005-06 2006-07

65

2.

Inventoryturnoverratio =

Sales inventory Inventory 149.79 165.72 205.80 Ratio 10.43 9.55 8.56

Year 2004-05 2005-06 2006-07

Sales 1562.58 1584.18 1761.84

This ratio indicates the effectiveness & efficiency of the inventory mgt. the ratio shows how speedily the inventory is turned into a/c receivable through sales. The higher the ratio, the more efficiency the inventory is said to be managed.

2000 1800 1600 1400 1200 1000 800 600 400 200 0 Sales 2004-05 Inventory 2005-06 2006-07 Ratio

3.

current assets turnover ratio sales/current assets

66

Year 2004-05 2005-06 2006-07

Sales 1562.58 1584.18 1761.84

Current assets 516.91 525.90 596.62

Ratio 3.02 3.01 2.95

This ratio indicates the efficiency with which C.A turn into sales. A higher ratio implies by & large a more efficient use of funds. Thus a higher turn over rate indicates reduced loch-up of funds in C.A turn over ratio.

2000 1800 1600 1400 1200 1000 800 600 400 200 0 Sales Current assets 2004-05 2005-06 2006-07 Ratio

II.

Liquidity ratio of TI

67

1.

C.Ratio =

C. Assets, Loans & Adv C.Lia. & Provisions C. Assets & Loans & Advanced 516.91 525.90 596.62 Currents Lia. & Provision 302.49 325.92 352.82 Ratio

Year

2004-05 2005-06 2006-07

1.70 1.61 1.69

This ratio indicates the extent of the soundness of the current financial position at an undertaking & the degree of safety provided to the creditors. A.C.A ratio of 2: indicates a highly solvent position A.C Ratio of V 33.1 is considered by banks as minimum acceptable for providing W. Capital Finance. In TI should take necessary steps to improve it.

700 600 500 400 300 200 100 0 C. Assets & Loans & Advanced Currents Lia. & Provision Ratio

2004-05

2005-06

2006-07

2)

QuickRatio =

C. Assets - Inventories C. Liabilities - B.O.D 68

Year 2001-02 2002-03 2003-04

Current Assets 516.91 525.90 596.62

Inventory 149.79 165.72 205.82

C. Lia 302.49 325.92 352.62

Ratio 1.21 1.1 1.1

This ratio shows the extent of cushion of protection provided from the quick asset to the current creditors. A quick ratio of 1:1 is usually considered satisfactory though it is agin a rule of thumb only.

700 600 500 400 300 200 100 0 Current Assets Inventory C. Lia Ratio

2001-02 2002-03 2003-04

Balance Sheet

Rs. in Crores As at 31st March, Schedule 2007 2006 SOURCES OF FUNDS Shareholders Funds (a) Share Capital 1 36.95 36.95 (b) Reserves and Surplus 2 618.90 495.15 655.85 532.10 Loan Funds (a) Secured Loans 3 138.81 171.85

69

(b) Unsecured Loans 4 67.64 72.45 206.45 244.30 Deferred Tax Liability (Net) 41.83 41.50 (Refer Note 9 of Schedule 18) 904.13 817.90 APPLICATION OF FUNDS Fixed Assets Gross Block 5 734.06 626.01 Less : Depreciation 369.82 324.44 Net Block 364.24 301.57 Capital Work-in-Progress at Cost (including Capital Advances) 105.54 80.49 (Refer Note 4 of Schedule 18) 469.78 382.06 Investments 6 190.55 235.86 Current Assets, Loans and Advances (a) Inventories 7 205.80 165.72 (b) Sundry Debtors 8 277.23 206.35 (c) Cash and Bank Balances 9 17.25 91.91 (d) Loans and Advances 10 96.34 75.64 596.62 539.62 Less : Current Liabilities and Provisions 11 (a) Current Liabilities 296.82 300.35 (b) Provisions 56.00 39.29 352.82 339.64 Net Current Assets 243.80 199.98 904.13 817.90 Significant Accounting Policies 17 Notes on Accounts 18 The Schedules referred to above form an integral part of the Accounts. As per our report of even date attached For Deloitte Haskins & Sells Chartered Accountants On behalf of the Board K Sai Ram M M Murugappan Partner Chairman M. No. 022360 Chennai S Suresh K Balasubramanian N Srinivasan 27th April 2007 Company Secretary Chief Financial Officer Director

35

Profit and Loss Account


Rs. in Crores For the year ended 31st March, Schedule 2007 2006 Income Sales and Processing Charges 1761.84 1584.18 Less : Excise Duty on Sales 146.80 123.24 Net Sales and Processing Charges 1615.04 1460.94 Other Income 12 92.74 134.04 1707.78 1594.98 Expenditure

70

Raw Materials Consumed (Net) 13 976.72 888.92 Accretion to Stock 14 (13.82) (21.87) Employee Cost 15 115.07 97.31 Operating and Other Costs 16 372.82 323.53 Depreciation 50.39 48.56 Interest - Debentures and Fixed Loans 7.13 7.44 - Others 4.16 5.46 11.29 12.90 1512.47 1349.35 Profit Before Taxes 195.31 245.63 Provision for Taxation Income Tax - Current Year 35.00 47.50 - Prior Years - 3.62 Deferred Tax (Net) (Refer Note 9 of Schedule 18) 2.59 8.79 Fringe Benefit Tax 1.94 2.79 Profit After Taxes 155.78 182.93 Add : Balance Brought Forward from Previous Year 143.66 119.75 Add : Dividend on Own Shares held through Trust 4.77 (Refer Note 5 of Schedule 18) Profit Available for Appropriation 304.21 302.68 Appropriations: Transfer to General Reserve 15.58 60.00 Special Interim Dividend @ Nil (Previous year 175%) - 64.67 Tax on Special Interim Dividend - 9.07 Dividend Proposed - Final @ 75% (Previous year 60%) 27.71 22.17 Tax on Final Dividend 4.71 3.11 48.00 159.02 Balance Carried Over to Balance Sheet 256.21 143.66 Earnings per Share of Rs. 2/- each (Basic / Diluted) - (in Rs.) 8.43 9.90 (Refer Note 20 of Schedule 18) Significant Accounting Policies 17 Notes on Accounts 18 The Schedules referred to above form an integral part of the Accounts. As per our report of even date attached For Deloitte Haskins & Sells Chartered Accountants On behalf of the Board K Sai Ram M M Murugappan Partner Chairman M. No. 022360 Chennai S Suresh K Balasubramanian N Srinivasan 27th April 2007 Company Secretary Chief Financial Officer Director

36

71

Rupees in Crores Particulars Operating Results Sales (Including Excise Duty) Profit before Depreciation, Interest & Tax Profit before Interest & Tax Profit before tax (PBT) Profit after Tax (PAT) Dividends Dividend Tax Retained Profits Sources and Application of Funds Sources of funds: Share Capital Reserves & Surplus Net Worth Debt Deferred Tax Liability (Net) Funds Employed Application of funds: Gross Fixed Assets Depreciation Net Fixed Assets Capital Work-InProgress Investments Gross Current Assets Current liabilities & Provisions Net Current Assets 259.12 310.55 368.30 391.68 85.88 102.64 124.06 139.02 173.24 207.91 244.24 252.66 419.06 164.41 254.65 418.72 175.46 243.26 406.08 180.75 225.33 432.30 206.65 225.65 566.43 282.96 283.47 626.01 324.44 301.57 24.62 24.62 24.62 24.62 24.62 362.75 387.37 174.27 561.64 24.62 347.01 371.63 174.25 35.82 581.70 18.47 315.18 333.65 262.20 31.98 627.83 18.47 376.83 395.30 215.64 31.79 642.73 36.95 411.24 448.19 228.12 32.71 709.02 36.95 495.15 532.10 244.30 41.50 817.90 600.05 607.93 677.35 979.93 1,090.02 1,074.47 1,197.13 1,257.34 1,562.58 1,584.18 1996- 1997- 1998- 19992000-01 2001-02 2002-03 2003-04 2004-05 2005-06 97 98 99 00

64.53

60.21

65.69

92.80

104.09

98.53

105.82

147.39

178.50

307.37

48.37

40.52

43.46

63.22

70.50

70.72

77.65

117.79

140.69

258.81

24.11 21.45 6.16 0.62 14.67

17.44 16.01 4.92 0.49 10.60

21.50 21.08 6.16 0.65 14.27

41.34 32.84 9.85 1.08 21.91

50.91 36.16 12.31 1.26 22.59

55.34 36.27 13.54 22.73

62.45 45.89 16.63 2.13 27.13

105.30 82.49 18.47 2.37 61.65

126.18 98.55 25.87 3.63 69.05

245.63 182.93 86.84 12.18 83.91

308.54 318.96 318.59 340.33 333.16 343.58 343.21 364.95 150.98 145.09 137.73 181.16 -

484.14 488.67 480.94 546.11

60.34 91.11

35.38 83.16

5.01 52.68

6.68 66.21

9.85 58.58 392.41

2.14 97.13 412.17

2.93 174.55 449.78

13.66 204.17 440.77

21.42 189.71 516.91

80.49 235.86 525.90

278.00 283.83 288.18 393.48

118.55 122.97 118.20 178.76

165.67

205.96

256.46

262.95

302.49

325.92

159.45 160.86 169.98 214.72

226.74

206.21

193.32

177.82

214.42

199.98

72

Deferred Revenue Expenditure Net Assets Employed Ratios : ROCE (%) # PBT TO SALES (%) Return on Networth (%) (+) Earnings Per Share (Rs.) Dividend Per Share (Rs.) Book Value Per Share (Rs.) Debt Equity Ratio (%) @ (+) Fixed Assets Turnover (times) Net working capital turnover (times)

1.36

9.03

5.85

11.82

32.96

31.70

21.43

484.14 488.67 480.94 546.11

561.64

581.70

627.83

642.73

709.02

817.90

9.99 4.02

8.29 2.87

9.04 3.17

11.58 4.22

12.55 4.67

12.16 5.15

12.37 5.22

18.33 8.37

19.84 8.08

31.64 15.51

6.55

4.75

6.41

9.27

9.75

10.71

15.20

22.06

21.99

34.38

8.71 2.50

6.50 2.00

8.56 2.50

13.34 4.00

14.69 5.00

14.73 5.50

19.46 9.00

22.32 10.00

26.67 7.00

49.50 23.50

133.05 136.80 133.64 143.83

150.58

137.55

163.46

202.39

121.28

143.98

46.08

43.07

41.85

51.15

47.00

51.45

86.83

57.68

50.90

45.91

3.46

2.92

2.77

3.88

4.28

4.42

5.31

5.57

5.51

5.25

3.76

3.78

3.98

4.56

4.81

5.21

6.19

7.07

7.29

7.92

73

FINDINGS, SUGGESTION & CONCLUSIONS BIBLIOGRAPHY

74

FINDING & SUGGESTIONS


After studying the components of the working capital management system of TI it is found that the company has an effective policy. How ever the following suggestions are made with the hope that implementation of these can add to the performance & efficiency of the systems followed at present.

As the company is moving into the seller market, it should initiate process to do away with the credit facility extended to some customers.

Collection procedure should be developed to do away with or reduce the bad debts.

The collection procedure may some one tight or as per the expert opinion.

More important should be given regarding the quality checking or raw materials and \finished goods.

MIS is better from other organization. There materials. is no difficulties regarding the raw

75

CONCLUSION

After a detailed and intensive study on the working capital management of TI. I came with the conclusion that TI had adopted to use more and more improves techniques for managing its working capital with an expectation of continue.

76

BIBLIOGRAPHY

This project report has been prepared with the help of following materials.

Annual financial report of TI for the year 2004-05,2005-06

Internal reports of TI Management accounting - Sharma and Gupta Financial Management I.M. Pandey Financial Management R.P. Rustagi

Web Site:
www.murugappa.com www.tiindia.com www.tubeproductsindia.com

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