Project Report

Working Capital Management

Undertaken At
Dabur India Limited
Submitted In The Partial Fulfillment For The Award Of The Degree Of
MAS!R "# $USI%!SS ADMI%ISRAI"%
ari&ue'ali(()gmail*com
1

A$L! "# C"%!%S
1) Acknowledgement 3
2) Abstract 4
3) Objectives 5
4) Research methodology 6
5) ntrod!ction "
6) Overview o# ind!stry $
%) &om'any (ro#ile 1%
") )orking ca'ital management 35
$) &oncl!sion 54
1*) +ibliogra'hy 56
2

AC+%"WL!D,!M!%
,-ratit!de is a heart.s memory. and '!tting the #eelings o# the heart into words/ is an art0 1hose
who e2cel in this art are !ltimately s!ccess#!l0
3etermination/ hard work/ and 'atience are the key to s!ccess0 &om'leting a 'roject o# this
magnit!de wo!ld not have been 'ossible witho!t the enco!ragement 4 s!''ort o# many 'eo'le0 At
this 'oint o# time wo!ld like to acknowledge all those who have made a major contrib!tion in its
develo'ment0
also e2'ress my sincere regards to all the e2ec!tive 4 sta## members o# 5inance 4 other
de'artments o# the com'any who immensely coo'erated in com'letion o# my 'roject re'ort0
6astly/ wo!ld like to thank the -od Almighty/ my #amily members/ my #ac!lty members and all
those le#t !nknowingly witho!t whom the com'letion o# this 'roject wo!ld not have been 'ossible0

3

Certi-icate o- Completion And "riginalit. "- Work
1his is to certi#y that ///////** has accom'lished the 'roject titled
W"R+I%, CAPIAL MA%A,!M!%0 !nder my g!idance and s!'ervision0
1his 'roject is being s!bmitted by her in the 'artial #!l#illment o# re7!irements o# M$A
(rogram o# $1arati 2id.apeet1 Uni3er4it. 5 %e' Del1i*

4

A$SRAC
1his 'roject disc!sses abo!t the )orking &a'ital 8anagement o# 3ab!r ndia 6imited0 A good
way to j!dge a com'any9s cash #low 'ros'ects is to look at its )orking &a'ital 8anagement
:)&8)0 &ash is the li#eline o# a com'any0 # this li#eline deteriorates/ so does the com'any9s
ability to #!nd o'erations/ reinvest/ and meet ca'ital re7!irements and 'ayments0 ;nderstanding A
&om'any.s cash #low health is essential to make investment decisions0
1he 'roject in the initial stage began with the research o# the #inancials o# 3ab!r ndia 6imited
thro!gh the Ann!al Re'orts and the o##icial website o# the com'any www0dab!r0com0 +asically
the '!r'ose #or the research was to !nderstand as to what e2actly is working ca'ital/ why do
com'anies re7!ire working ca'ital/ what is the ideal ratio o# working ca'ital to be maintained by
the &om'any/ etc0 A#ter the research data was collected which was to be analy<ed and com'ared
with the data o# other com'anies :=ind!stan 6ever 6td0/ &adb!ry ndia 6td0/ >estle ndia 6td0/
+ritannia nd!stries and 8arico 6td0) to see how well the com'any is handling and managing its
#inances0
1he collected data was sorted o!t as 'er the re7!irements o# the 'roject0 O!t o# the entire
#inancials/ the (ro#it and 6oss Acco!nts/ +alance ?heets and 1he &ash 5low ?tatements were the
most im'ortant as #or calc!lating the working ca'ital and the ratios/ as acc!rate data was available
in them0
1he data till the year 2**$@2*1* has been analy<ed and the working ca'ital and ratios #or ?i2
major 58&- com'anies that areA 3ab!r ndia 6td0/ =ind!stan 6ever 6td0/ &adb!ry ndia 6td0/
>estle ndia 6td0/ +ritannia nd!stries and 8arico 6td0 have been com'ared0
5

"$6!CI2!S
1o !nderstand the conce't o# )orking &a'ital0
1o !nderstand the trend e2hibited by the working ca'ital over the 'eriod0
1o analy<e the overall short@term #!nd re7!irements o# the &om'any0
1o analy<e the c!rrent working mechanism o# ?o!rces and nvestments o#
#!nds in the &om'any0
1o !nderstand the need and im'ortance o# working ca'ital #inance in an
Organi<ation0
1o st!dy the #inancing 'attern o# working ca'ital that 'revails in DA$UR
I%DIA LD*
1o 're'are a re'ort on &om'arative st!dy o# 3ab!r vs0 the other to'
Ranked 58&- com'anies0

6

R!S!ARC7 M!7"D"L",8
S"URC!S A%D M!7"DS9
1he #ollowing so!rces have been so!ght #or the 're'aration o# this re'ortA
Primar. 4ource4 s!ch as c!rrent ann!al re'orts/ books on #inancial management by vario!s
a!thors and b!siness maga<ines s!ch as +!siness )orld/ +!siness 1oday etc0
Secondar. 4ource4 like 'revio!s years ann!al re'orts/ re'orts on working
&a'ital #or research/ analysis and com'arison o# the data gathered0
LIMIAI"%S9
1he #ollowing limitations have been #aced in this 'roject in s'ite o# all 'ossible e##orts made to
make the re'ort acc!rate0
1he #inancial data o# di##erent com'anies is available #or #inancial years that vary/ s!ch asB
some #irms have their acco!nting year #rom Can!ary to 3ecember while some others have it
#rom 8arch to A'ril0 =ence the com'arison may not be #!lly acc!rate0
1he latest #inancial data o# #ew #irms co!ld not be re'orted/ as their nternet websites have
not been !'dated0 =ence #or some com'anies the data was available #or 'revio!s year b!t
#or some it was available #or year 'roceeding 'revio!s year0
SC"P!9
8y 'roject will concentrate to #ind o!t the o'erational #easibility o# #!t!res and the #inancial
#easibility o'erations0 1he accom'lishment o# this 'roject will lead to an on hand e2'erience o# the
workings o# the organi<ation0 1he 'ractical training shall 'rovide a 'lat#orm to !nderstand the
a''lications o# the theoretical as'ects and the 'roblems that may arise in the organi<ation th!s
enhancing my decision@making ability0
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C7AP!R:(
>1RO3;&1O>
1his 'roject deals with the )orking &a'ital 8anagement o# 3ab!r ndia 6imited0 3ab!r ndia
6imited is the 5o!rth 6argest 58&- &om'any0 1he basic meaning o# )orking &a'ital in a sim'le
lang!age is &;RRD>1 A??D1? less &;RRD>1 6A+61D?0 &ash is the li#eline o# every
b!siness and hence working ca'ital management 'lays an im'ortant role in #!nctioning o# a
b!siness0 )orking ca'ital com'rises a n!mber o# di##erent items and its management is di##ic!lt
since these are o#ten linked0 =ence altering one item may im'act adversely !'on other areas o# the
b!siness0 8anagement m!st ens!re that a b!siness has s!##icient working ca'ital0 1oo little will
res!lt in cash #low 'roblems highlighted by an organi<ation e2ceeding its agreed overdra#t limit/
#ailing to 'ay s!''liers on time/ and being !nable to claim disco!nts #or 'rom't 'ayment0 n the
long r!n/ a b!siness with ins!##icient working ca'ital will be !nable to meet its c!rrent obligations
and will be #orced to cease trading even i# it remains 'ro#itable0
On the other hand/ i# an organi<ation ties !' too m!ch o# its reso!rces in working ca'ital it will
earn a lower than e2'ected rate o# ret!rn on ca'ital em'loyed which is not at all a desirable
sit!ation0
1he 'rimary objective o# working ca'ital management is to ens!re that s!##icient cash is available
to@8eet day@to@day cash #low needsB (ay wages and salaries when they #all d!eB (ay creditors to
ens!re contin!ed s!''lies o# goods and servicesB (ay government ta2ation and 'roviders o# ca'ital
E dividendsB and Dns!re the long@term s!rvival o# the b!siness entity0
nter #irm com'arison can be done with the hel' o# ratio analysis as ratio analysis allows
com'arison o# one ind!stryF#irm to another0 ?ince #inancial ratio analysis looks at relationshi's
inside the ind!stryF#irm/ an ind!stryF#irm o# one si<e can be directly com'ared to a second
ind!stryF#irm :or a collection o# ind!striesF#irms)/ which may be larger or smaller or even in a
di##erent b!siness0
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C7AP!R:;
>3;?1RG (RO56D
58&- stands #or 5ast 8oving &ons!mer -oods0 &om'anies in the 58&- sector 'rovide high
vol!meFlow val!e goods s!ch as #ood/ drink/ ho!sehold goods and con#ectionary items01he 58&-
sector is one o# the #astest growing sectors in the national economy and encom'asses organi<ations
involved in distrib!tion/ man!#act!ring and retailing0
5ast 8oving &ons!mer -oods are a m!lti@million r!'ees ind!stry0 58&- is one o# the most
com'etitive areas0 1he sector incl!des groceries/ bea!ty 'rod!cts and home care com'anies/ the
majority o# which come #rom large global cor'orations0
At the time o# inde'endence :1$4%) 8>&.s were allowed to o'erate in ndia/ b!t the ndian market
was too small #or global 8>&.s0 =66 has a man!#act!ring base/ &olgate and >estle mainly
!ndertook only trading activities0 n 1$%" several 58&- 'rod!cts/ which are essentially mass
cons!m'tion items/ became l!2!ry 'rod!cts d!e to e2orbitant b!rden o# e2cise d!ties/ sales ta20
n a 58&- ind!stry everyone is a cons!mer0 1his makes the ind!stry 'ersonally relevant as
everyone is 'ersonally a##ected0 (eo'le get more e2cited and care more dee'ly abo!t the 'rod!cts
they '!t in !se every day0
1he ndian 58&- ind!stry witnessed signi#icant changes thro!gh the 1$$*s0 8any leading 58&-
'layers s!ch as =ind!stan 6ever 6td0 :=66) and (rocter 4 -amble ndia 6td0 :(4-) have been
#acing severe 'roblems on acco!nt o# increased com'etition #rom small and regional 'layers and
#rom slow growth across its vario!s 'rod!ct categories0 As a res!lt/ many o# these com'anies were
#orced to revam' their 'rod!ct/ marketing/ distrib!tion and c!stomer service strategies to
strengthen their 'osition in the market0
$

1he reali<ation o# the c!stomer9s growing awareness and the need to meet changing re7!irements
and 're#erences on acco!nt o# changing li#estyles also contrib!ted to the #orm!lation o# c!stomer@
centric strategies0 =66 led the way in revol!tioni<ing the 'rod!ct/ market/ distrib!tion and service
#ormats o# the 58&- ind!stry by #oc!sing on r!ral markets/ direct distrib!tion/ creating new
'rod!ct/ distrib!tion and service #ormats0 58&- does not s!##er #rom mass layo##s every time the
economy starts to di'0 Go! may '!t o## b!ying a car/ b!t yo! don9t '!t o## dinner0
ndian 58&- com'anies like 3ab!r and =ll #or the #irst time #o!nd themselves !nder severe
'ress!re as 8>&s went on 'rice slashing s'ree0 ?0 Ragh!nandan/ vice 'resident/ sales/ 3ab!r
ndia/ said that the 'ricing tactics o# m!ltinational com'anies had '!t 'ress!re on the ndian
brands0 1he 58&- sector also received a boost by government led initiatives in the 2**3 b!dget
s!ch as the setting !' o# e2cise #ree <ones in vario!s 'arts o# the co!ntry that witnessed #irms
moving away #rom o!tso!rcing to man!#act!ring by investing in the <ones0
A??O&=A8 has indicated that the 58&- ind!stry will achieve a growth o# 4@5 'er cent in 2**$@
1*0 =owever/ 58&- com'anies will #ace the challenges o# shar' swings in commodity 'rices/
e2'ected to im'act 'ro#its like never be#ore0
1*

C"MP!I"RS


8AR&O 6130
8arico gro!'.s history can be traced back to 1"62 when Hanji 8orarji/ started a small trading
b!siness in 8!mbai0 1he #amily set !' the +ombay Oil nd!stries 6td :+O6) in 1$4" with
man!#act!ring #acilities in 8!mbai #or cocon!t oil e2traction 'lant/ vegetable oil re#inery and a
chemical 'lant0 8arico was incor'orated in 1$"" to take over the then 4*@year old cons!mer
'rod!cts b!siness o# +O60 1he division was engaged in marketing o# cocon!t oil/ edible oil/
instant starch/ #r!it jams etc Darlier the brands o# ?a##ola and (arach!te were owned by +ombay
Oil nd!stries 6imited and 8arico was given access to !se these brands #or 'er'et!ity0 n 5G**/
the brands were trans#erred to the com'any #or a consideration o# Rs3**mn0
8arico has 5 #actories/ located at ?ewree in 8!mbai/ Calgaon in 8aharashtra/ (alakkad in Herala/
?aswad in (!ne and (onda in -oa0
8arico is the market leader in the hair oil segment/ with its (arach!te and =air 4 &are brands0 t is
also one o# the leading 'layers in the branded edible oil segment with strong brands like ?a##ola
and ?weekar0 +esides hair and edible oil/ the com'any has a 'resence in niche segments like
nstant ?tarch :Revive)/ Anti lice sham'oo :8ediker) and #ood 'rod!cts like jams and sa!ces :?il)0
8arico also has a #ee based marketing arrangement with (rocter 4 -amble :(4-) #or marketing a
#ew (4- brands thro!gh its own network0 (arach!te/ ?a##ola and ?weeker are the key earnings
drivers/ contrib!ting to almost "*I o# 8arico.s t!rnover0
5ast moving cons!mer goods :58&-) b!siness is b!ilt on the two 'illars o# brand e7!ity and
distrib!tion network0 +rand e7!ities are b!ilt over a 'eriod o# time by consistent high 7!ality and
aggressive advertisement and marketing0 Availability near the cons!mer thro!gh a wide
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distrib!tion channel is another cr!cial s!ccess #actor/ as 'rod!cts are small val!e/ #re7!ently
'!rchased/ daily !se items0 &om'etition is intense/ and 'layers have to remain cost e##ective and
'rovide val!e #or money to cons!mers to retain market shares0 1he com'any is/ at 'resent/ highly
de'endent on its three main brands @@ (arach!te/ ?a##ola and ?weekar0 1he growth in this category
will be di##ic!lt to s!stain in the longer r!n d!e to increasing com'etition0 Recently/ =ind!stan
6ever ac7!ired &ococare :it already has >ihar !nder its #old)/ which will see an intensi#ication o#
com'etition in the cocon!t oil category0
8arico has maintained (arach!te market share des'ite severe com'etition0 >ew edible oil 'rod!cts
are la!nched with 9-ood #or =ealth9 'ositioning !nder the ?a##ola brand and catering to regional
taste re7!irements thro!gh the ?weekar #ranchise0 n the hair oil segment/ the com'any has
s!ccess#!lly la!nched val!e added (arach!te variants0 A new brand ?hanti Amla/ in the amla hair
oil category dominated by 3ab!r/ has been la!nched d!ring 5G*2 and has been e2tremely
s!ccess#!l0
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=>3;?1A> 6DJDR 6130
1hree ;nilever com'anies were merged in 1$56 to #orm =660 1hese com'anies were =ind!stan
Janas'ati 8an!#act!ring &om'any @edible oil :established in 1$31)/ 6ever +rothers ndia
6imited@ soa's :1$33) and ;nited 1raders@'ersonal 'rod!cts :1$35)0 (onds joined the ;nilver #old
thro!gh a global ac7!isition in 1$"60 n the last decade/ =66 has e2'anded its o'erations by the
merger and takeover ro!te0 t ac7!ired 1O8&O E a 1ata gro!' com'any :1$$3)/ merged ;nilever
gro!' com'anies +rooke +ond 6imited :1$$6) and (onds9 ndia :1$$")/ and has ac7!ired cosmetic
b!siness o# another 1ata gro!' com'any 6akme :1$$")0
=ind!stan 6ever 6imited is the largest 58&- &om'any in the co!ntry/ with a t!rnover o#
Rs11"bn0 1he com'any.s b!siness s'rawls #rom 'ersonal and ho!sehold care 'rod!cts to #oods/
beverages and s'ecialty chemicals0 1he com'any has a dominating market share in most categories
that it o'erates in s!ch as toilet soa's/ detergents/ skincare/ hair care/ color cosmetics/ etc0 t is also
the leading 'layer in #ood 'rod!cts0
=66 is the market leader in the detergent and toilet soa' ind!stry with market share o# 6*I and
4*I res'ectively0 =66.s t!rnover has now grown to Rs11"bn/ with soa's and 'ersonal 'rod!cts
contrib!ting 5%I to t!rnover and beverages and #ood 'rod!cts contrib!ting to 2$I o# t!rnover0
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+ritannia nd!stries 6td0
+ritannia was incor'orated in 1$1" as +ritannia +isc!its &o 6td in &alc!tta0 n 1$24/ (ea 5rean
;H ac7!ired a controlling stake/ which later 'assed on to the Associated +isc!its nternational
:A+) a ;H based com'any0 3!ring the .5*s and. 6*s/ +ritannia e2'anded o'erations to 8!mbai/
3elhi and &hennai0 n 1$"%/ >abisco/ a well known D!ro'ean #ood com'any/ ac7!ired A+0 n
1$"$/ C 8 (illai/ a ?inga'ore based >R b!sinessman along with the -ro!'e 3anone ac7!ired
Asian o'erations o# >abisco/ th!s ac7!iring controlling stake in +ritannia0 n 1$%%/ the
-overnment reserved the ind!stry #or small scale sector/ which constrained +ritannia9s growth0
+ritannia9s controlling stake is jointly with -ro!'e 3anone and >!sli )adia0 -ro!'e 3anone is
one o# the leading 'layers in the world in bakery 'rod!cts b!siness0 t ac7!ired interest in +ritannia
nd!stries in 1$"$ and ac7!ired controlling stake in 1$$30>!sli )adia gro!' is one o# the leading
ind!strial ho!ses in the co!ntry/ with interests mainly in te2tiles and 'etrochemicals0
+ritannia9s 'lants are located in the 4 major metro cities @ Holkatta/ 8!mbai/ 3elhi and &hennai0 A
large 'art o# 'rod!cts are also o!tso!rced #rom third 'arty 'rod!cers0 3airy 'rod!cts are o!t
so!rced #rom three 'rod!cers @ 3ynami2 3airy based in +aramati/ 8aharashtra/ 8odern 3airy at
Harnal in =aryana) and 1hacker 3airy (rod!cts at =owrah in )est +engal0
+ritannia is the market leader in the organi<ed bisc!it and bakery 'rod!ct market in ndia0 +isc!its
contrib!te to more than "*I o# +ritannia9s total t!rnover0 Other 'rod!cts incl!de bread and cakes0
+ritannia diversi#ied into dairy 'rod!cts in 1$$% with 'rocessed cheese0
1he entry o# new 8>&.s has not 'osed a direct threat to +ritannia/ as these 8>&.s have
'ositioned their brands in the 'remi!mFhealth segment0 +ritannia has maintained market leadershi'
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with a 4*I vol!me share and 4"I val!e market share in the organi<ed sector0 58&- major =66
is e2'ected to vent!re into the segment0 +ritannia has been aggressive in new la!nches and
marketing d!ring the last 2 years antici'ating the com'etition0 t has also recently ac7!ired
Hwality +isc!its/ gaining a strong #oothold in the so!thern market0
15


>estle ndia 6td0
>estle was 'romoted by >estle Alimentana/ ?wit<erland/ a wholly owned s!bsidiary o# >estle
=oldings 6td0/ >assa!/ +ahama slands0 >estle is one o# the oldest #ood 8>& o'erating in ndia/
with a 'resence o# over a cent!ry0 5or a long time/ >estle ndia.s o'erations were restricted to
im'orting and trading o# condensed milk and in#ant #ood0 Over the years/ the &om'any e2'anded
its 'rod!ct range with new 'rod!cts in instant co##ee/ noodles/ sa!ces/ 'ickles/ c!linary aids/
chocolates and con#ectionery/ dairy 'rod!cts and mineral water0
>estle was incor'orated as a limited com'any in 1$5$0 >estle ? A ?wit<erland/ is one o# the
leading com'anies in the global #oods ind!stry0 1he 'rinci'al activities o# the gro!' encom'ass
beverages :with >esca#e as the #lagshi' brand)/ milk 'rod!cts/ 'rocessed #oods/ cooking aids/
bakery 'rod!cts/ chocolates/ con#ectioneries/ 'harmace!tical 'rod!cts :o'hthalmic/ s!rgical
instr!ments etc)0
>estle has a 'resence in "3 co!ntries worldwide0 t has a total n!mber o# 5*$ #actories o!t o#
which 22* are located in D!ro'e/ 153 in America and 136 in A#rica/ Asia and Oceania0
>estle started its man!#act!ring o'erations with 8ilkmaid in 1$62 at 8oga #actory0 8an!#act!ring
o# >esca#e started in 1$64 at the same #actory0 1he com'any set !' another #actory at &herambadi
in 1amil >ad!/ #or man!#act!re o# in#ant #oods/ co##ee etc0 1he com'any set !' its >anjangad
:Harnataka) #actory in 1$"$ and the ?amlakha :=aryana) #actory in 1$$20 1he (onda :-oa) #actory
started o'erations in 1$$50
1he &om'any set !' its si2th man!#act!ring !nit in 1$$% at +icholim in -oa0
>estlK ndia man!#act!res 'rod!cts o# tr!ly nternational 7!ality !nder brand names s!ch as
86H8A3/ DJDRG3AG/ &DRD6A&/ 6A&1O-D>/ 8A--/ >D?&A5D/ >D?&A5D
?;>R?D/ >D?1DA/ 86O/ H1HA1/ 86HG +AR/ 8;>&=/ (O6O/ >D?16D 86H/
>D?16D 3A=/ >D?16D 5R;1 ,> 86H and >D?16D 5R;1 ,> 3A=0
16


&adb!ry ndia 6td0
&adb!ry was originally incor'orated as a wholly owned s!bsidiary o# &adb!ry ?chwe''es
Overseas 6td :&?O6) in 1$4"0 1he com'any.s original name was &adb!ry 5ry :ndia) 6td0n
1$"2B the name was changed to =ind!stan &ocoa (rod!cts0 1he c!rrent name was restored in 3ec
."$0 n 1$"6/ &adb!ry #orayed into bisc!its with &adb!ry +!tter/ -l!cose and +o!rnvita brands0
1he b!siness however/ co!ld not take o## and was discontin!ed 3@4 years later0 n 1$"$/ &adb!ry
diversi#ied into ice creams with 3ollo's and 6o's to' brands/ which were sold o## to +rooke +ond
in 1$$40
&adb!ry.s man!#act!ring o'erations started in 8!mbai in 1$46/ which was s!bse7!ently
trans#erred to 1hane0 1he com'any/ way back in 1$64/ 'ioneered cocoa #arming in ndia to red!ce
de'endence on im'orted cocoa beans0 n 1$%%/ the com'any also took ste's to 'romote higher
'rod!ction o# milk0 n 1$$5/ &adb!ry e2'anded 8alan'!r 'lant in a major way0 1he 8alan'!r
'lant has moderni<ed #acilities #or -ems/ Lclairs/ and (erk etc0
1he &adb!ry management has been !nable to achieve the vol!me growth targets set d!ring the last
two years0 1he com'any remains de'endent on a single category E &hocolates to drive growth0
1%

C7AP!R:<
C"MPA%8 PR"#IL!
"2!R 7U%DR!D 8!ARS "# CARI%,
3ab!r commenced o'erations in 1""4 and is today a m!lti@ location/ m!lti@'rod!ct enter'rise0 1he
com'any has major interests in health and bea!ty care0
3ab!r is a leader in Ay!rveda E the traditional ndian health care system0
1he com'any has 12 man!#act!ring 'lants in ndia/ >e'al and Dgy't0 3ab!r 'rod!cts are also
man!#act!red in 3!bai0
3ab!r has a transactional network o# 1$ o##ices servicing both r!ral and !rban markets in ndia0
1he com'any has sales and marketing o##ices in 3!bai and 6ondon0 3ab!r 'rod!cts are available
in over 5* co!ntries0
1"

#"U%DI%, 7"U,7S
M)hat is that li#e worth which cannot bring com#ort to othersN0
1he 3oorste'.3AH1AR.
1he story o# 3ab!r began with a small/ b!t visionary endeavor by 3r0 ?0 H0 +!rman/ a 'hysician
t!cked away in +engal0 =is mission was to 'rovide e##ective and a##ordable c!re #or ordinary
'eo'le in #ar@#l!ng villages0 )ith missionary <eal and #ervor/ 3r0 +!rman !ndertook the task o#
're'aring nat!ral c!res #or the killer diseases o# those days/ like cholera/ malaria and 'lag!e0
?oon the news o# his medicines traveled/ and he came to be known as the tr!sted 93aktar9 or
3octor who came !' with e##ective c!res0 And that is how his vent!re 3ab!r got its name @ derived
#rom the 3evanagri rendition o# 3aktar +!rman0 3r0 +!rman set !' 3ab!r in 1""4 to 'rod!ce and
dis'ense Ay!rvedic medicines0 Reaching o!t to a wide mass o# 'eo'le who had no access to
'ro'er treatment0 3r0 ?0 H0 +!rman9s commitment and ceaseless e##orts res!lted in the com'any
growing #rom a #ledgling medicine man!#act!rer in a small &alc!tta ho!se/ to a ho!sehold name
that at once evokes tr!st and reliability0
1$

C"MPA%8S 7IS"R8
1""4 +irth o# 3ab!r
1"$6 ?etting !' o# a man!#act!ring 'lant
Darly 1$**s Ay!rvedic 8edicines
1$1$ Dstablishment o# Research 6aboratories
1$2* D2'ands #!rther
1$36 3ab!r ndia :3r0?0H0+!rman) (vt06td0
1$%2 ?hi#t to 3elhi
1$%$ ?ahibabad #actoryF3ab!r research #o!ndation
1$"6 (!blic 6imited &om'any
1$$2 Coint Jent!re with Agrolimen o# ?'ain
1$$3 &ancer treatment
1$$4 (!blic ss!es
1$$5 Coint Jent!res
1$$6 1hree se'arate divisions
1$$% 5oods 3ivision F (roject ?1AR?1$$" (ro#essionals to manage the &om'any
2*** 1!rnover o# Rs01/ *** crore
2**2 >et sales reached Rs0116301$ corores0
2**3 3emerged its (harmace!ticals 3ivision
2**5 3ab!r ac7!ires balsara
2**6 3ab!r a''roves 5&&+F-3RFA3R !' to O2** billion
2**% 3ab!r #ood merged with 3ab!r ndia
2**" Ac7!ire 5em care (harma
2**$ 3ab!r red 1ooth'aste joins .+illion r!'ee brand. cl!b
2*

DA$UR A A ,LA%C!
3ab!r ndia 6imited has marked its 'resence with some very signi#icant achievements and today
commands a market leadershi' stat!s0 O!r story o# s!ccess is based on dedication to nat!re/
cor'orate and 'rocess hygiene/ dynamic leadershi' and commitment to o!r 'artners and stake
holders0 1he res!lts o# o!r 'olicies and initiatives s'eak #or themselves0
6eading cons!mer goods com'any in ndia with a e2cellent t!rnover
1hree major ?trategic +!siness ;nits :?+;) E 5amily (rod!cts 3ivision :5(3)/ =ealth &are
(rod!cts :=&(3) and 3ab!r Ay!rvedic ?'ecialties :3A?6)0
1hirteen ;ltra@8odern man!#act!ring !nits s'read across #o!r &o!ntries0
(rod!cts marketed in over 5* &o!ntries0
#PD/ dealing with 'ersonal care/ the largest ?+; contrib!ting to 45I sales o# 3ab!r
(rod!cts related to hair care/ ?kin care/ Oral care and 5oods0
3 6eading brands@ Jatika/ Amla =air Oil and 6al 3ant 8anjan with Rs01** &rore t!rnover
each0
Jatika =air oils and ?ham'oo the high growth brand0
?trategic 'ositioning o# honey as #ood 'rod!ct/ leading to market leadershi' :over 4*I) in
branded honey market0
7CPD/ dealing with daily health care/ ?econd largest ?+; with 2"I share in sales
21

(rod!cts related to =ealth ?!''lements/ 3igestive/ +aby &are and >at!ral &!res0
6eadershi' in Ay!rvedic and =erbal 'rod!cts market with highly 'o'!lar brands0
3ab!r &hyawan'rash the largest selling Ay!rvedic and =erbal 'rod!cts market with highly
'o'!lar brands0
6eader in =erbal 3igestives with $*I market share0
=ajmola tablets in command with %5I market share o# digestive tablets category0
3ab!r 6al 1ail to's baby massage oil market with 35I o# total share0
DASL/ dealing with classical Ay!rvedic medicines0
=as more than 25* 'rod!cts sold thro!gh 'rescri'tions/ as well as over the co!nter
8ajor categories in traditional #orm!lations incl!deA
Asav Arishtas
Ras Rasayanas
&h!rans
8edicated Oils
(ro'rietary Ay!rvedic medicines develo'ed by 3ab!r incl!deA
>at!re &are sabgol
8adh!vaani
1ri#gol
3ivision also works #or 'romotion o# Ay!rveda thro!gh organi<ed comm!nity o# traditional
'ractitioners and develo'ing #resh batches o# st!dents0

22

DA$URS MA6"R SRA!,IC $USI%!SS U%IS
3ab!r has three major ?trategic +!siness ;nits :?+;s) namelyA
5amily (rod!cts 3ivision with a share o# 45I in its total sales0
3ab!r Ay!rvedic ?'ecialities having a share o# 2%I in its total sales0
=ealth &are (rod!cts with a share o# 2"I in the total sales0
23
Fami ly
Products
Divisi on
45%
Health Care
Products
28%
Dabur
Ayurvedic
Specialities
2%
Daburs SBUs And Their Share In Sales
Family Products
Division
Health Care
Products
Dabur Ayurvedic
Specialities

DA$URS C"R! 2ALU!S
2ISI"%
M3edicated to the health and well being o# every ho!sehold0N
MISSI"%A
1o #!lly e2'ort o!r core com'etencies in the #ield o# Ay!rvedic and =erbal 'rod!cts by identi#ying
the cons!mer needs and aiming #or #!ll cons!mer satis#action0
PRI%CIPL!S
"W%!RS7IP
1his is o!r com'any0 )e acce't 'ersonal res'onsibility/ and acco!ntability to meet b!siness needs0
PASSI"% #"R WI%%I%,
)e all are the leaders in o!r area o# res'onsibility/ with a dee' commitment to deliver the res!lts0
)e are determined to be the best at doing what matters the most0
P!"PL! D!2!L"PM!%
(eo'le are o!r most im'ortant asset0 )e add val!e thro!gh res!lt driven training/ and we
enco!rage and award e2cellence0
24

C"%SUM!R #"CUS
)e have s!'erior !nderstanding o# cons!mer needs and develo' 'rod!cts to #!l#ill them better0
!AM W"R+
)e work together on the 'rinci'le o# m!t!al tr!st and trans'arency in a bo!ndary less
organi<ation0 )e are intellect!ally honest in advocating 'ro'osals/ incl!ding recogni<ing risks0
I%%"2AI"%
&ontin!o!s innovation in 'rod!cts 4 'rocesses is the basis o# o!r s!ccess0
I%!,RI8
)e are committed to the achievement o# b!siness s!ccess with integrity0 )e are honest with the
cons!mers/ with b!siness 'artners and with each other0
25

DA$UR W"RLD WID!
3ab!r9s mission o# 'o'!lari<ing a nat!ral li#estyle transcends national bo!ndaries0 1oday there is
global awareness o# alternative medicine/ nat!re@based and holistic li#estyles and an interest in
herbal 'rod!cts0 3ab!r has been in the #ore#ront o# 'o'!lari<ing this alternative way o# li#e/
marketing its 'rod!cts in more than 5* co!ntries all over the world0
3A+;R 'rod!cts )orld )ide
3ab!r has s'read widely and dee'ly to be in close to!ch with overseas cons!mers0
O##ices and re'resentatives in !urope0 America and A-ricaB
A s'ecial herbal health care and 'ersonal care range s!ccess#!lly selling in markets o# the
Middle !a4t/ #ar !a4t and several !uropean countrie40
nroads into D!ro'ean and American markets that have good 'otential d!e to res!rgence o#
the back:to:nature mo3ement0
D2'ort o# Acti3e P1armaceutical Ingredient4 :A(s)/ man!#act!red !nder strict
international 7!ality benchmarks/ to !urope/ Latin America/ A-rica/ and other A4ian
countrie40
D2'ort o# #ood and te2tile grade nat!ral g!ms/ e2tracted #rom traditional 'lant so!rces0
26

PR"DUCS
7!AL7 SUPPL!M!%S9
Dabur C1.a'anpra41
Dabur ,luco4e D
DI,!SI2!S9
7ajmola Ma4t Ma4ala
Anardana
7ajmola
7ajmola Cand.
7ajmola Cand. #un;
Pudin 7ara=Li&uid and Pearl4>
Pudin 7ara ,
Dabur 7ingoli
2%


$A$8 CAR!9
Dabur Lal ail
Dabur $ab. "li3e "il
Dabur 6anma ,1unti
%AURAL CUR!S9
S1ilajit ,old
%ature Care
Sat I4abgol
S1ilajit
Ring Ring
Itc1 Care
$ack:Aid
S1ank1a Pu41pi
Dabur $alm
Sarb.na Strong
2"

7AIR CAR! "IL9
Amla 7air "il
Amla Lite 7air "il
2atika 7air "il
Anmol Sar4on Amla
7AIR CAR! S7AMP""9
2atika 7enna Conditioning S1ampoo
2atika Anti Dandru-- S1ampoo
Anmol %atural S1ine S1ampoo
S+I% CAR!9
,ulabari
2atika #airne44 #ace Pack
2$

"RAL CAR!9
Dabur Red ,el
Dabur Red oot1pa4te
Dabur Lal Dant Manjan
Dabur $inaca oot1bru41
R!AL9
Real #ruit 6uice
Real Acti3
7"MMAD!9
Cooking Pa4te4
Coconut Milk
3*

omato Puree
CAPSIC" R!D
L!M"%!!?
Da41mulari41ta
A41okari41ta
Lau1a4a3a
Ma1anara.an ail
6uritap
Mad1u3ani
La3an $1a4kar C1urn
31

7!AL7 CAR!9
Dabur C1.a'anpra41
Pudin1ara
7ajmola ablet4
Dabur 7one.
S1ilajit
S+I% CAR!9
%atural Soap4
32


"RAL CAR!9
7erbal oot1 Pa4te
7AIR CAR!9
2atika S1ampoo4 and Conditioner4
Dabur Amla 7air "il
#""DS9
Real 6uice4
7omemade #ood Product4
DR*$URMA% =RUSSIA>
7ealt1 Supplement4
A.ur3edic oot1pa4te@4

33

R!:!%,I%!!RI%, #"R 2ALU! CR!AI"%
Dabur has re-organized two of its biggest SBUs- the Family Products Division (Personal Care
Products and the !ealth Care Division into a single SBU" #his initiative will eliminate overla$s
and reduce costs by leveraging synergies of scale"
Re@engineering internal o'erations to leverage strengths and synergies/ im'rove scale/ red!ce cost
and o'timi<e e##iciencies are key #or im'roved val!e creation0 1o derive ma2im!m val!es on these
'arameters/ 3ab!r has emerged its erstwhile ?+;.s@ 1he 5amily (rod!ct 3ivision and =ealth &are
(rod!cts 3ivision into one0
1he common arrangement will eliminate any overla's in the distrib!tion and retail network/
'rovide economies o# scale and hel' the &om'any be more res'onsive to market needs0
5oc!s will be on 'rod!ct categories and reso!rces will be 'ooled to strengthen individ!al
categories with aggressive sales and marketing initiatives0
1his move will inject a new im'!lse in 3ab!r and also boost the &om'any.s sales e##ort
34

D!M!R,I%, #"R 2ALU! CR!AI"%
1he demerger o# 3ab!r.s 58&- and (harmace!tical b!sinesses is a val!e@enhancing move
re'resenting a win@win sit!ation #or both these b!sinesses0 A clear line o# sight and #oc!sed
growth strategies wo!ld 'rovide e2'onential growth o''ort!nities and greater val!e #or
shareholders0
1his demerger o# 3ab!r.s 58&- and (harmace!tical b!siness is a major restr!ct!ring move
!ndertaken by the &om'any to 'rovide greater #oc!s and inde'endence to the two b!sinesses0
1he 58&- b!siness/ which will be the main b!siness o# 3ab!r ndia/ will concentrate on
strengthening its core com'etencies in (ersonal &are/ =ealth &are and Ay!rveda0
1he new (harmace!tical &om'any@ 3ab!r (harma 6td0@ will #oc!s on its e2'ertise in Allo'athy/
Oncology 5orm!lations and +!lk dr!gs0 1he &om'any is already a leader in the Oncology
segment in ndia and will #ollow aggressive strategies to '!rs!e its global ambitions0
+oth these com'anies will have dedicated management teams/ with the #reedom and reso!rces to
'!rs!e their inde'endent growth strategies0
3ab!r believes that the s!m o# 'arts will #ar e2ceed the val!e o# the single entity0
35

C7AP!R:A
)ORH>- &A(1A6 8A>A-D8D>1
I%R"DUCI"% " W"R+I%, CAPIAL
%Working Capital is the Life!lood And Controlling "er#e Center of a !usiness$
1he term Working Capital re#ers to the ca'ital re7!ired #or day@to@day o'erations o# a b!siness
enter'rise0 t is re'resented by e%&ess of Current assets o#er Current Liabilities0 t is necessary #or
any organi<ation to r!n s!ccess#!lly its a##airs/ to 'rovide #or ade7!ate working ca'ital0 1oo large
investment in &!rrent Assets means blocking the ca'ital that can be !sed 'rod!ctively elsewhere0
On the other hand too little investment can be e2'ensive0 5or e2am'le/ ins!##icient inventory may
ca!se loss o# sales to &!stomers0
36

All this indicates that 'ro'er estimation o# the )orking &a'ital re7!irements is a m!st #or r!nning
the b!siness e##iciently and 'ro#itably0
)orking ca'ital is there#oreA@
)ORH>- &A(1A6 P
&!rrent Assets
QQ
stoc& ' debtors ' cash
: &!rrent liabilities
1he im'ortance o# having working ca'ital is best !nderstood as 9costs e2'ended be#ore 'ayment
received #or goodsFservice 'rovided to the c!stomer90 1here#ore/ no ca'ital means no 'rod!ction
and no c!stomers/ which means no ca'ital000
1here are basically t'o concept4 o# working ca'ital@
,ro44 Working Capital9
t is the amo!nt o# ca'ital invested in the total &!rrent assets o# the enter'rise0 &!rrent assets
are those assets/ which in ordinary co!rse o# b!siness can be converted into cash within a short
'eriod o# normally one acco!nting year0
%et Working Capital9
t re#ers to the di##erence between net c!rrent assets and liabilities0 &!rrent liabilities are those
claims o# o!tsiders/ which are e2'ected to mat!re #or 'ayment within an acco!nting year0 >et
working ca'ital can be 'ositive or negative0 A 'ositive net working ca'ital will arise when
c!rrent assets increase c!rrent liabilities0 A negative working ca'ital will arise when c!rrent
liabilities are in e2cess o# c!rrent assets0
Current Assets'
&!rrent assets/ sometimes called li7!id assets/ are those reso!rces o# a #irm/ which are either held
in the #orm o# cash or are e2'ected to be converted in cash within the acco!nting 'eriod in one@
year d!ration0 1he o'erating cycle is the time taken to convert the raw materials into #inished
goods and convert receivables :goods sold on credit) into cash0
&!rrent Assets incl!deA
3%

&ash in hand
+ank balances
+ills Receivables
?!ndry 3ebtors :less 'rovision #or bad debts)
?hort term loans and advances
nventories o# stocks/ asA
Raw material
)ork in 'rogress
?tores and s'ares
5inished -oods
1em'orary nvestments o# s!r'l!s #!nds
(re'aid e2'enses
Accr!ed ncomes0
Current Liabilities'
&!rrent 6iabilities are debts 'ayable within an acco!nting 'eriod0 &!rrent assets are converted into
cash to 'ay c!rrent liabilities0
&!rrent 6iabilities incl!deA
+ills (ayable
?!ndry creditors or Acco!nts (ayable
Accr!ed or O!tstanding e2'enses
?hort term loans/ Advances or de'osits0
3ividends (ayable
+ank Overdra#t
(rovision #or ta2ation/ i# it does not amo!nt to a''ro'riation o# 'ro#its0
t is a conventional r!le to maintain the level o# c!rrent assets twice the level o# c!rrent liabilities0
A weak li7!idity 'osition 'oses a threat to the solvency o# the com'any and makes it !nsa#e and
!nso!nd0 A negative working ca'ital means a negative li7!idity and at times it may 'rove to be
harm#!l #or the com'any.s re'!tation0 D2cessive li7!idity is also bad0 t may be d!e to
3"

mismanagement o# c!rrent assets0 1here#ore 'rom't and timely action sho!ld be taken by the
management to im'rove and correct the imbalances in the li7!idity 'osition o# the #irm0
,ro44 Working Capital is a (oing Concern)Financial Conce$t where as the %et Working
Capital is an *ccounting Conce$t o# working ca'ital0
IMP"RA%C! "# W"R+I%, CAPIAL
)orking ca'ital constit!tes 'art o# the &rown9s investment in a de'artment0 Associated with this is
an o''ort!nity cost to the &rown0 :8oney invested in one area may RcostR o''ort!nities #or
investment in other areas0) # a de'artment is o'erating with more working ca'ital than is
necessary/ this over@investment re'resents an !nnecessary cost to the &rown0
"$6!CI2!9
1he objective o# working ca'ital management is to maintain the o'tim!m balance o# each o# the
working ca'ital com'onents0 1his incl!des making s!re that #!nds are held as cash in bank
de'osits #or as long as and in the largest amo!nts 'ossible/ thereby ma2imi<ing the interest earned0
=owever/ s!ch cash may more a''ro'riately be RinvestedR in other assets or in red!cing other
liabilities0 Other objectives o# working ca'ital management are as #ollowsA @
1o identi#y cash #low cycles o# the #irm0
3$

1o maintain the level o# c!rrent assets twice the level o# c!rrent liabilities0
1o hel' the com'any to maintain good b!siness relations0
1o determine the #!t!re ca'ital/ li7!idity 'osition and other re7!irements o#
the com'any0
)orking ca'ital management takes 'lace at two levelsA
Ratio analysis can be !sed to monitor overall trends in working ca'ital and to
identi#y areas re7!iring closer management0
1he individ!al com'onents o# working ca'ital can be e##ectively managed by !sing
vario!s techni7!es and strategies0
)hen considering these techni7!es and strategies/ de'artments need to recogni<e that each
de'artment has a !ni7!e mi2 o# working ca'ital com'onents0 1he em'hasis that needs to be 'laced
on each com'onent varies according to de'artment0 5or e2am'le/ some de'artments have
signi#icant inventory levelsB others have little i# any inventory0
5!rthermore/ working ca'ital management is not an end in itsel#0 t is an integral 'art o# the
de'artment9s overall management0 1he needs o# e##icient
)orking ca'ital management m!st be considered in relation to other as'ects o# the de'artment9s
#inancial and non@#inancial 'er#ormance
4*

CLASSI#ICAI"% "# W"R+I%, CAPIAL
)orking &a'ital is classi#ied on the #ollowing two basisA
:a) On basis o# time
:b) On basis o# conce't
H>3? O5 )ORH>- &A(1A6
On basis o# &once't On basis o# 1ime
-ross >et (ermanentF 1em'oraryF )orking )orking 5i2ed
Jariable
&a'ital &a'ital )orking )orking
&a'ital &a'ital
41

Reg!lar Reserve ?easonal ?'ecial
)& )& )& )&
Permanent or #iBed Working Capital9
s the minim!m amo!nt o# )orking &a'ital re7!ired to ens!re e##ective !tili<ation o# #i2ed
#acilities and #or maintaining the circ!lation o# &!rrent assets0
1here is always a minim!m level o# &!rrent Assets/ which are contin!o!sly re7!ired by the
enter'rise to carry o!t its normal b!siness o'erations0 D2am'leA Dvery #irm has to maintain a
minim!m amo!nt o# raw materials/ )ork@in@(rogress/ 5inished goods and cash balance0
8inim!m level o# &!rrent Assets is called 'ermanent or #i2ed working ca'ital as this 'art o#
)orking &a'ital is 'ermanently blocked in &!rrent Assets0 As the b!siness grows/ re7!irements o#
'ermanent )orking ca'ital also increase d!e to increase in c!rrent assets0
i0 Regular Working Capital9 :
t is re7!ired to ens!re circ!lation o# &!rrent Assets #rom cash to inventories/ #rom inventories
to receivables and #rom receivables to cash and so on0
ii0 Re4er3e Working Capital9 :
t is the e2cess amo!nt over the re7!irement #or reg!lar )orking &a'ital which may be
'rovided #or contingencies that may arise at !nstated 'eriods/ s!ch as strikes/ rise in 'rices/
de'ression etc0
emporar. or 2ariable Working Capital9
t is the amo!nt o# )orking &a'ital/ which is re7!ired to meet seasonal demands and some s'ecial
e2igencies s!ch as la!nching o# e2tensive marketing cam'aign #or cond!cting research etc0
42

#AC"RS D!!RMI%I%, 7! W"R+I%,
CAPIAL R!CUIR!M!%S
>at!re or &haracteristics o# +!siness@1he working ca'ital re7!irements o# an enter'rise
are basically related to the cond!ct o# the b!siness0 Dvery com'any according to their
nat!re o# b!siness has to maintain a certain level o# working ca'ital0
(rod!ction (olicy@1he 'rod!ction 'olicies '!rs!ed by the management has a
signi#icant e##ect on the re7!irements o# working ca'ital o# the b!siness0 1he
'rod!ction sched!le has a great in#l!ence on the level o# inventories0 1he decision o#
the management regarding a!tomation/ etc0/ will also have its e##ect on working ca'ital
re7!irements0
43

?easonal Jariations@8ost #irms e2'erience seasonal and cyclical #l!ct!ations in the
demand #or their 'rod!cts and sevices0 1hese b!siness variations e##ect the working
ca'ital re7!irement/ s'ecially the tem'orary working ca'ital re7!irement o# the #irm0
)hen there is an !'ward swing in the economy/ sales will increaseB corres'ondingly/
the #irm.s investment in inventories and book debts will also increase0 ;nder boom/
additional investment in #i2ed assets may be made by some #irms to increase their
'rod!ctive ca'acity0 1his act o# the #irm will re7!ire #!rther additions o# working c'ital0
)hen there is a decline in the economy sales will #all and conse7!ently/ levels o#
inventories and book debts will also #all0
&redit 'olicy@A com'any which allows liberal credits to its c!stomers/ may have higher
sales b!t will need more working ca'ital as com'ared to a com'any which has an
e##icient debt collection machinery and observing strict terms0 1he working ca'ital
re7!irements can also be a##ected by the credit #acilities enjoyed by the com'any0
Rate o# growth o# +!siness@As a com'any growsB it is logical to e2'ect that a large
amo!nt o# working ca'ital will be re7!ired0 t is/ o# co!rse/ di##ic!lt to determine
'recisely the relationshi' between the growth in the vol!me o# b!siness o# a com'any
and the increase in its working ca'ital0 1he com'osition o# working ca'ital in a
growing com'any also shi#ts with economic circ!mstances and cor'orate 'ractices0
+!siness cycle@3i##erent 'hases o# b!siness cycle i0e/ boom/ recession/ recovery etc0
also a##ect the working ca'ital re!irement0 n case o# boom condition b!siness activities
e2'and 0As a res!lt/ the need #or cash/ inventories etc0 increases res!lting in more and
more #!nds blocked in these c!rrent assets0 n case o# recession 'eriod/ there is !s!ally
d!llness in b!siness activities and there will be an o''osite e##ect on the level o#
working ca'ital re7!irement0 1here will be a #all in inventories and cash re7!irements
etc0
44

8an!#act!ring (rocessF 6ength o# 'rod!ct cycle@1he man!#act!ring 'rocess com'rises
o# the '!rchase and !se o# raw materials and the 'rod!ction o# #inished goods0 6onger
the man!#act!ring cycle/ larger will be the #irm.s working ca'ital re7!irements0
W"R+I%, CAPIAL C8CL!
1he working ca'ital cycle can be de#ined asA
M1he 'eriod o# time which ela'ses between the 'oint at which cash begins to be e2'ended on the
'rod!ction o# a 'rod!ct and the collection o# cash #rom a c!stomerN0
1he #aster a b!siness e2'ands/ the more cash it re7!ires #or working ca'ital and investment0 1he
chea'est and best so!rces o# cash e2ist as working ca'ital right within b!siness0 -ood management
o# working ca'ital will generate cash/ which will hel' im'rove 'ro#its and red!ce risks0 +ear in
mind that the cost o# 'roviding credit to c!stomers and holding stocks can re'resent a s!bstantial
'ro'ortion o# #irm.s total 'ro#its0
45

1here are two elements in the b!siness cycle that absorbs cashA

+nventory (Stoc&s and wor&-in-$rogress
,eceivables (Debtors owing you money
1he main so!rces o# cash are (ayables :yo!r creditors) and D7!ity and 6oans0
)hen it comes to managing working ca'ital@ IM! IS M"%!80 # yo! can get money to move
#aster aro!nd the cycle :e0g0 collect monies d!e #rom debtors more 7!ickly) or red!ce the amo!nt
o# money tied !' :e0g0 red!ce inventory levels relative to sales)/ the b!siness will generate more
cash or it will need to borrow less money to #!nd working ca'ital0
As a conse7!ence/ yo! co!ld red!ce the cost o# bank interest or yo!.ll have additional free money
available to s!''ort additional sales growth or investment0 ?imilarly/ i# yo! can negotiate
im'roved terms with s!''liers e0g0 get longer credit or an increased credit limitB yo! e##ectively
create free finance to hel' #!nd #!t!re sales0
46


#I%A%CI%, "# W"R+I%, CAPIAL
1here are two ty'es o# working ca'ital re7!irements in a com'any@
i) (ermanent or 5i2ed )orking &a'ital Re7!irements
ii) 1em'orary or Jariable )orking &a'ital Re7!irements
3e'ending on the above mentioned re7!irements #ollowing are the so!rces o# #inancing working
ca'ital@
S"URC!S
4%

6ong 1erm ?o!rces ?hort 1erm ?o!rces

?hares &ommercial +anks
3ebent!res &ommercial 'a'er
(!blic 3e'osits 1rade &reditors
6oans #rom 5inancial instit!tions nstallment credit
Acco!nts 'ayables
Accr!ed D2'enses
S"URC!S "# W"R+I%, CAPIAL
3ab!r ndia 6imited as a s!ccess#!l &om'any in 58&- sector has the #ollowing so!rces available
#or the #!l#illment o# its working ca'ital re7!irements in order to carry on its o'erations smoothly0
+A>H?A
1hese incl!de the #ollowing banksA
(!njab >ational +ank
?tandard &hartered +ank 6td0
=ong Hong and ?hanghai +anking &or'0 6td0
?tate +ank O# ndia
4"

=35& +ank 6td0
3+ +ank 6td0
&itibank
&O88DR&A6 (A(DR?A
&ommercial (a'ers have become an im'ortant tool #or #inancing working ca'ital re7!irements o# a
com'any0
&ommercial (a'er is an !nsec!red 'romissory note iss!ed by the com'any to raise short@ term
#!nds0 1he b!yers o# the &ommercial (a'ers incl!de banks/ ins!rance com'anies/ !nit tr!sts and
com'anies with s!r'l!s #!nds to invest #or a short 'eriod with minim!m risk0
3ab!r ndia 6imited iss!es &ommercial (a'ers and had commercial worth Rs0 1*** lacs in the
year 2**2@*30
W"R+I%, CAPIAL A%AL8SIS
)orking ca'ital is one o# the most di##ic!lt #inancial conce'ts to !nderstand #or the small@b!siness
owner0 n #act/ the term means a lot o# di##erent things to a lot o# di##erent 'eo'le0
$. de-inition/ )orking &a'ital is the amo!nt by which c!rrent assets e2ceed c!rrent liabilities0
A !se#!l tool #or the small@b!siness owner is the o'erating cycle0 1he o'erating cycle analy<es the
Acco!nts Receivable/ nventory and Acco!nts (ayable cycles in terms o# days0 n other words/
acco!nts receivables are analy<ed by the average n!mber o# days it takes to collect an acco!nt0
nventory is analy<ed by the average n!mber o# days it takes to t!rn over the sale o# a 'rod!ct
:#rom the 'oint it comes in yo!r door to the 'oint it is converted to cash or an acco!nt receivable)0
Acco!nts 'ayables are analy<ed by the average n!mber o# days it takes to 'ay a s!''lier invoice0
4$

8ost b!sinesses cannot #inance the O'erating &ycle :acco!nts receivable days S inventory days)
with acco!nts 'ayable #inancing alone0 &onse7!ently/ working ca'ital #inancing is needed0 1his
short#all is ty'ically covered by the net 'ro#its generated internally or by e2ternally borrowed
#!nds or by a combination o# the two0
8ost b!sinesses need short@term working ca'ital at some 'oint in their o'erations0 5or instance/
retailers m!st #ind working ca'ital to #!nd seasonal inventory b!ild!' between ?e'tember and
>ovember #or &hristmas sales0 +!t even a b!siness that is not seasonal occasionally e2'eriences
'eak months when orders are !n!s!ally high0 1his creates a need #or )orking &a'ital to #!nd the
res!lting nventory and Acco!nts Receivable b!ild!'0
?ome small b!sinesses have eno!gh cash reserves to #!nd seasonal )orking &a'ital needs0
=owever/ this is very rare #or a new b!siness0 # yo!r new vent!re e2'eriences a need #or short@
term )orking &a'ital d!ring its #irst #ew years o# o'eration/ yo! will have several 'otential
so!rces o# #!nding0 1he im'ortant thing is to 'lan ahead0 # yo! get ca!ght o## g!ard/ yo! might
miss o!t on the one big order that co!ld have '!t yo!r b!siness over the h!m'0

=ere are the #ive most common so!rces o# short@term working ca'ital #inancingA
D7!ity
1rade &reditors
5actoring
6ine O# credit
?hort@term 6oans
!&uit.9 # yo!r b!siness is in its #irst year o# o'eration and has not yet become 'ro#itable/ then yo!
might have to rely on e7!ity #!nds #or short@term working ca'ital needs0 1hese #!nds might be
injected #rom yo!r own 'ersonal reso!rces or #rom a #amily member/ #riend or third@'arty investor0
5*

rade Creditor49 # yo! have a 'artic!larly good relationshi' established with yo!r trade
creditors/ yo! might be able to solicit their hel' in 'roviding short@term working ca'ital0 # yo!
have 'aid on time in the 'ast/ a trade creditor may be willing to e2tend terms to enable yo! to meet
a big order0 5or instance/ i# yo! receive a big order that yo! can #!l#ill/ shi' o!t and collect in 6*
days/ yo! co!ld obtain 6*@day terms #rom yo!r s!''lier i# 3*@day terms are normally given0 1he
trade creditor will want 'roo# o# the order and may want to #ile a lien on it as sec!rity0

#actoring9 5actoring is another reso!rce #or short@term working ca'ital #inancing0 Once yo! have
#illed an order/ a #actoring com'any b!ys yo!r acco!nt receivable and then handles the collection0
1his ty'e o# #inancing is more e2'ensive than conventional bank #inancing b!t is o#ten !sed by
new b!sinesses0

Line "- Credit9 +anks to new b!sinesses do not o#ten give 6ines o# credit0 =owever/ i# yo!r new
b!siness is well ca'itali<ed by e7!ity and yo! have good collateral/ yo!r b!siness might 7!ali#y #or
one0 A line o# credit allows yo! to borrow #!nds #or short@term needs when they arise0 1he #!nds
are re'aid once yo! collect the acco!nts receivable that res!lted #rom the short@term sales 'eak0
6ines o# credit ty'ically are made #or one year at a time and are e2'ected to be 'aid o## #or 3* to
6* consec!tive days sometime d!ring the year to ens!re that the #!nds are !sed #or short@term
needs only0
S1ort:term loan9 )hile yo!r new b!siness may not 7!ali#y #or a line o# credit #rom a bank/ yo!
might have s!ccess in obtaining a one@time short@term loan :less than a year) to #inance yo!r
tem'orary working ca'ital needs0 # yo! have established a good banking relationshi' with a
banker/ he or she might be willing to 'rovide a short@term note #or one order or #or a seasonal
inventory andFor acco!nts receivable b!ild!'0
n addition to analy<ing the average n!mber o# days it takes to make a 'rod!ct :inventory days)
and collect on an acco!nt :acco!nt receivable days) vs0 the n!mber o# days #inanced by acco!nts
'ayable/ the o'erating cycle analysis 'rovides one other im'ortant analysis0
51

5rom the o'erating cycle/ a com'!tation can be made o# the dollars re7!ired to s!''ort one day o#
acco!nts receivable and inventory and the dollars 'rovided by a day o# acco!nts 'ayable0
)orking ca'ital has a direct im'act on CAS7 #L"W in a b!siness0 ?ince cash #low is the name
o# the game #or all b!siness owners/ a good !nderstanding o# working ca'ital is im'erative to make
any vent!re s!ccess#!l0
1he 'rimary objective o# working ca'ital management is to ens!re that s!##icient cash is available
toA
8eet day@to@day cash #low needsB
(ay wages and salaries when they #all d!eB
(ay creditors to ens!re contin!ed s!''lies o# goods and servicesB
(ay government ta2ation and 'roviders o# ca'ital E dividendsB and
Dns!re the long@term s!rvival o# the b!siness entity0

(oor working ca'ital management can lead toA
Over@ca'itali<ation :and there#ore waste thro!gh !nder !tili<ation o# reso!rces and
hence 'oor ret!rns)B and
Overtrading :trying to maintain a level o# sales which is higher than working ca'ital
can s!stain E #or b!sinesses which e2tend credit terms/ more sales means more debtors and
higher working ca'ital demands)0
C"MPARIS"% "# W"R+I%, CAPIALS "# DI##!R!% C"MPA%I!S
:5ig0 in &r0)
Compan. %ame #D8 Current
A44et4
Current
Liabilitie4
%et
Working
52

Capital
3ab!r ndia 6td0 2**$@2*1* 477.72 4%10%3 50$$
+ritannia nd!stries 6td0 2**$@2*1* 325.94 3450*" @1$014
=ind!stan 6ever 6td0 2**$@2*1* 3*"$0%4 54$30$% @24*4023
8arico nd!stries 6td0 2**$@2*1* 4%1043 23*0%5 24*06"
&adb!ry ndia 6td0 2**$@2*1* 5*2041 5340*2 @31061
>estle ndia 6td0 2**$@2*1* 5"$066 66603$ @%60%3
?o!rces@Ann!al re'ort o# 3ab!r ndia ltd:2**$@2*1*)/ =ind!stan 6ever ltd0:2**$@2*1*)/
maga<ines like +!siness world/ +!siness ndia/ +!siness 1oday/ articles #rom news 'a'ers like
Dconomic times/ +!siness line And websites like@www0marico0com/
www0nestle0com/www0moneycontrol0com
M!ASUR!M!% "# W"R+I%, CAPIAL !##ICI!%C8
1he cash conversion cycle is a meas!re o# working ca'ital e##iciency/ o#ten giving val!able
cl!es abo!t the !nderlying health o# a b!siness0 1he cycle meas!res the average n!mber o#
days that working ca'ital is invested in the o'erating cycle0 t starts by adding days
inventory o!tstanding :3O) to days sales o!tstanding :3?O)0 1his is beca!se a com'any
RinvestsR its cash to ac7!ireFb!ild inventory/ b!t does not collect cash !ntil the inventory is
sold and the acco!nts receivable are #inally collected0
53

Receivables are essentially loans e2tended to c!stomers that cons!me working ca'italB
there#ore/ greater levels o# 3O and 3?O cons!me more working ca'ital0 =owever/ day.s
'ayables o!tstanding :3(O)@@which essentially re'resent loans #rom vendors to the
com'any@@are s!btracted to hel' o##set working ca'ital needs0
n s!mmary/ the cash conversion cycle is meas!red in days and e7!als DI" E DS" 5 DP"
0)orking ca'ital acco!nts also tell yo! abo!t the o'erational e##iciency o# the com'any0
1he length o# the cash conversion cycle :3?OS3O@3(O) tells yo! how m!ch working
ca'ital is tied !' in ongoing o'erations0 And trends in each o# the days@o!tstanding
n!mbers may #oretell im'rovements or declines in the health o# the b!siness0
%!,AI2! W"R+I%, CAPIAL

AD2A%A,!9
A negative working ca'ital is a sign o# managerial e##iciency in a b!siness with low
inventory and acco!nts receivable :which means they o'erate on an almost strictly cash
basis)0
3ab!r ndia 6imited has a negative working ca'ital Rs @%*025 &orore in the #inancial year
2**4@2**5 which shows that the com'any is doing e2tremely well in controlling its cash
54

#lows0 t has e##icient #inancial management thro!gh which it has enabled in bringing down
the )orking &a'ital #ig!re to a negative one0
LIMIAI"%9
n any other sit!ation/ it is a sign a com'any may be #acing bankr!'tcy or serio!s #inancial
tro!ble0
?o having a negative )orking &a'ital may 'rove a +oon or +ane #or the &om'any0
C7AP!R:F
&O>&6;?O>
(ro#itability (osition@(ro#itability re#ers to the ability o# the b!siness to earn 'ro#it0 t shows the
e##iciency o# the b!siness0 (ro#itability 'osition o# a com'any can be j!dged by the 'ro#itability
55

ratios o# the com'any as these ratios meas!re the 'ro#it earning ca'acity o# the com'any0 1he inter
#irm com'arison shows that =66 is the com'any which is having the best 'ro#itability 'osition
among all the com'anies with the hel' o# which we can concl!de that =66 is having a good 'ro#it
earning ca'acity 0
6i7!idity or short term #inancial 'osition@li7!idity shows the #inancial so!ndness o# the b!siness
and also whether the c!rrent assets o# the com'any are s!##icient to meet its short term liabilities0
nter #irm com'arison shows that all the com'anies are having c!rrent ratio less than 2A1 which
shows that the short term #inancial 'osition o# the is not s!''osed to be very so!nd0 n the same
way/ standard li7!id ratio sis 1A1 /the inter #irm com'arison shows that only &adb!ry is the
com'any which has better ca'acity to meet its c!rrent obligations and along with &adb!ry/ 8arico
is also having a better li7!idity 'osition than other com'anies
?olvency or long term #inancial 'osition@ M?olvencyN means the ability o# the b!siness to meet its
o!tside liabilities and by solvency 'osition we mean the long term #inancial 'osition o# the
com'any0 nter #irm com'arison shows that all the com'anies are having a good solvency 'osition
which can be determined by the di##erent ratios !sed to calc!late the solvency 'osition0
1!rnover 'osition@1!rnover means MsalesN which has direct relationshi' with the 'er#ormance o#
the b!siness0 8ore sales means the b!siness is more active and has better 'er#ormance/ lesser sales
shows inactivity o# the b!siness/ 'oor 'er#ormance and lesser 'rod!ctivity0 1he inter #irm
com'arison shows that all the com'anies have a good t!rnover which shows that all the com'anies
are 'er#orming well/ b!t among all the com'anies >estlK.s t!rnover is more than other com'anies0
56

$I$LI",RAP78
1he #ollowing so!rces have been so!ght #or the 're'aration o# this re'ort0
$""+S AU7"RDPU$LICAI"%
5%


5inancial 8anagement Hhan and Cain
"7!R S"URC!S :Other so!rces incl!de ann!al re'ort o# 3ab!r ndia ltd0/ =ind!stan
lever ltd0/ articles #rom news 'a'ers like Dconomic times/ +!siness world/ 1imes o#
ndia:b!siness section)/maga<ines like +!siness ndia/ +!siness world/ +!siness today0
W!$SI!S
www0dab!r0com
www0icicidirect0com
www0st!dy#inance0com
www0google0com
5"