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WORKING

CAPITAL
MANAGEMENT
Akanksha Jain
15BSP1528
IBS MUMBAI
Raymond ltd

Introduction

Raymond ltd
Raymond Ltd (BSE: 500330|NSE: RAYMOND) is largest integrated manufacturer of
worsted fabric in the world based in Mumbai, Maharashtra. It has over 60% market share in
worsted suiting in India. It also the Indias biggest woollen fabrics maker. Textile division of
the company has a distribution network of more than 4,000 multi-brand outlets and over 637
exclusive retail shops in the domestic market itself. Suitings are available in India in over
400 towns through 30,000 retailers and an exclusive chain is present in over 150 cities across
India. Its products exports to over 55 countries including US, Canada, Europe, Japan and
the Middle East. It has more than 20,000 design and colours of suiting fabric which makes it
one of largest collection of designs and colours by single company.

Company Profile
Raymond was incorporated in 10-2-1925 and is a leading Indian textile major. The company
is a part of global conglomerate Raymond Group. Raymond was the first in 1959 to introduce
a polywool blend in India to creating the worlds finest suiting fabric the Super 240s made
from the superfine 11.6 micron wool. It produces wool-blended and premium polyester
viscose worsted suiting. Besides, textile company has also total income Rs.22765.423
Million(year ending Mar 2014) and net profit Rs.881.234 Million(year ending Mar 2014).
Raymond is largest manufacturer of steel files in the world accounting 30% of market
share.

Values

Service
We are in the customer service business; we will always seek to serve the customer and gain
their trust, goodwill and loyalty.
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Teamwork
We will succeed or fail as a team. Each one of us must respect our colleagues regardless of
their rank, and we must work together to ensure our mutual success.
Accountability
Each of us will be held accountable for the successful execution of our duties, commitments
and obligations, and we will strive to lead by example.

Our vision
Committed to supplying high quality products and supper service to the customer. Believe in
the individual and that shared values and common purpose provide on the basis of teamwork.
Value the franchisers and share with the principles the objectives of enhancing the image and
success of the products. Believe in conducting the business activities with integrity. Believe
in optimizing the profitability in a manner consistent with the values.

Our mission
To provide the customers with products and services that are recognized as the best. To be a
major player in all market. To implement employee training and development programs that
provide personal growth for all the employees and enable them to make a meaningful
contribution to the company. Create an environment that respects integrates and balances the
needs of our employees resulting in creative excitement heartfelt commitments and cheerful
co-operation. Institute a culture of operational innovation that result in meaningful and
sustainable ways to way stay ahead of the pack.

Sustainability
Raymond ltd. Is Indias leading textile and branded apparel company, with interest in
engineering(Files, Power tools ,Auto components) and FMCG having its corporate
headquarters in Mumbai.
According to the latest estimate ,Indian economy grew by 4.7% in FY 2014. Despite a good
monsoon, the manufacturing indicates had declines, commodity prices stayed at high levels
and food inflation reached an all-time high ,which resulted in sustained CPI inflation of over

10% in the last financial year. The Rupee depreciated significantly before retracting in the
latter half of the year. Consumer sentiments remained subdues for most part of FY 2014.
However the slow GDP growth appears to have bottomed out and post elections
,economic activity is expected to pick up from the second quarter of FY 2015.

CSR
As a company that has always been socially responsible, Raymond has displayed an innate
desire and zeal to contribute to the welfare and social upliftment of the community. Our CSR
initiatives in education prepare children for life and equip them to take on challenges of
tomorrows world.
The Raymond Rehabilitation Centre for the welfare of under-privileged children was
inguarated on 3rd july,2006 at jekegram, Thane. With an intention of making less fortunate
children and self-sufficient in life, the centre provides free vocational training workshops to
young boys and girls over 16 years. The three-months vocational courses will comprise of
basic training in electrical, air-conditioning & refrigeration courses, tyre puncture and repair ,
plumbing etc .
At the end of the training period, these children will be awarded certificates and a tool-kit,
making them independent to start practicing the skills acquired from the centre.

Competitive analysis
In the textile industry there are three major players except Raymond ltd. which are competing
to be on the top. They are as follows:
Arvind Mills
Bombay Dyeing
Grasim Industries
These are the major competitors to Raymond ltd. There are many more companies but they
do have much presence in the market or are not having considerable market share. Thus
analysis was done on these companies financials.

Arvind Mills
Arvind Mills, now Arvind Limited, is one of the largest manufacturer of textile
products. The company is headquartered in Naroda, Ahmadabad, Gujarat. It was
founded in 1931 by Kasturbhai Lalbhai and his brothers with several other institutes.
Arvind Mills is a flagship company of lalbhai groups of textiles.
Arvind Mills is one of the largest manufacturer and exporter of denim in India and
fourth in the world. The chairman and the managing director of Arvind and Lalbhai
groups of industries is Sanjaybhai Lalbhai.

The companys product portfolio include:

Denim

Knits

Woven

Engineering

Retail

Telecom

Agri Business

Brands
Arvind is amongst a few organizations worldwide with a portfolio of brands that are
distinctive and relevant across diverse consumers. At Arvind, brands work across multiple
channels, price points and consumer segments.
Own Brands
Joint Venture Brands
Mainstream
Excalibur
Flying Machine
Popular
Ruff & Tuff
New Port University

Bridge to Luxury
Tommy Hilfiger
Nautica
Premium
Lee
Wrangler

Licensed Brands
Bridge to Luxury
Gant, U.S.A. 1949

Popular
Wrangler Hero
Riders

Premium
USPA
SansaBelt
Izod
Pier Cardin Paris
Arrow
Popular
Cherokee

Bombay Dyeing
Bombay Dyeing is the second largest producer of textile in India. It is the flagship
company of the Wadia Group. It is 250 yrs old. The full names of the company is The
Bombay Dyeing & Mfg. Co. Ltd. It was established by Nowrosjee Wadia in 1879.
Currently, Nusli Wadia is the chairman of Bombay dyeing. The company is
headquartered in Ballard Estate, Mumbai, India.

Business activities
The Bombay Dyeing and Manufacturing Company Limited operate in three segments: textile,
polyester and real estate. Its textile products include bedding range, bedding accessories, bath
linen, hotel linen and industrial fabrics. Product range consists of bed sheets, bed covers,
quilts, duvet covers, dohars, bed in bag sets, blankets, pillow cases, cushion covers, shams,
cushions, pillows and bed decor sets, pool towels, bath towels, hand towels and face towels.
The Companys polyester segment is engaged in producing a range of polyester staple fiber
including a variety of differentiated and specialty products such as micro, optical white, dope
dyed black, trilobal, hollow, spun lace and super high tenacity fibers. Apart from textile
manufacturing, the company is also involved in the manufacturing of chemicals.
Chemicals Bombay Dyeing is the largest manufacturer of Dimethyl Terephthalate (DMT) in
India. It has a capacity to manufacture 165000 tonnes per annum (TPA). DMT is raw material
for manufacturing polyester fibre, film, filament & yarn and engineering plastics.

Exports
Its daily production of fabrics is 300000 meters. Nearly 50% of Bombay Dyeing's production
is exported to USA, CANADA , UK, GERMANY, NETHERLAND, ITALY, FRANCE,

POLAND,NEW ZEALAND, CZECHOSLOVAKIA, SWITZERLAND and many more


countires.

Grasim Industries
Grasim Industries Limited, a flagship company of the Aditya Birla Group, ranks amongst
India's largest private sector companies, with a consolidated net revenue of Rs.293 billion and
consolidated net profit of Rs.21 billion (FY 2014).
Grasim started as a textile manufacturer in 1948. Today its core businesses are Viscose Staple
Fibre (VSF) and Cement, contributing over 90 per cent of its revenues and operating profits.
It is also present in Chemicals which is essentially a backward integration of VSF.
The Aditya Birla Group is the worlds leading producer of VSF, commanding a 16 per cent
global market share. Grasim, with an aggregate capacity of 498 ktpa has a global market
share of 8 per cent. It is also the largest player in India in Chlor Alkali with Caustic capacity
of 452K TPA (which is used in the production of VSF) in India.
Grasim entered into Cement business in 1985 with a capacity of 0.5 million tpa. Over the
years, through organic and inorganic expansions, the business has grown multifold. Currently,
Grasims subsidiary UltraTech Cement Limited ("UltraTech") has a capacity of 63.15 million
tpa. Earlier, in July 2004, Grasim acquired a majority stake and management control in
UltraTech. One of the largest-of-its-kind in the cement sector, this acquisition catapulted
Grasim to the top of the league in India. Subsequently, Grasim demerged its cement business
into UltraTech in July 2010. The merger has created the largest cement company in India,
providing a platform that will help in pursuing aggressive growth going forward.
Grasim is implementing ambitious growth plans through capacity expansions in VSF and
Cement, which will further consolidate its leadership in both the businesses.
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Products
Grasim has a strong presence in fabrics and synthetic yarns through its subsidiary, Grasim
Bhiwani Textiles Limited (GBTL), and is well known for its branded suitings, Grasim and
Graviera, mainly in the polyester - cellulosic branded menswear. Its textile plants are located
at Bhiwani (Haryana) and Malanpur (Madhya Pradesh). Fabric operations are centralised at
Bhiwani with a processing capacity of 17.0 million metres a year.
Vikram Woollens, Malanpur, a unit of Grasim manufactures worsted dyed yarn spun from
100 per cent merino wool along with polyester and other blends.

Exports
Grasim's strong nationwide retail network includes exclusive showrooms, wholesalers and
multi-brand outlets through which it reaches its customers. Grasim caters to international
fashion houses in the USA and UK supplying fabric to them for manufacturing of garments,
which are available in some of the largest retail chain stores.

Competitive benchmarking and financial analysis of competitors:


We have done competitive benchmarking in which we have compared all the important ratios
and also some of the expenses which affect largely to the financial performance of the
companies.

Financial ratio analysis:


Financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values
taken from an enterprise's financial statements. Often used in accounting, there are many
standard ratios used to try to evaluate the overall financial condition of a corporation or other
organization. Financial ratios may be used by managers within a firm, by current and
potential shareholders (owners) of a firm, and by a firm's creditors. Financial analysts use
financial ratios to compare the strengths and weaknesses in various companies. If shares in a

company are traded in a financial market, the market price of the shares is used in certain
financial ratios.

Profitability Ratios
A class of financial metrics that are used to assess a business's ability to generate earnings as
compared to its expenses and other relevant costs incurred during a specific period of time.
For most of these ratios, having a higher value relative to a competitor's ratio or the same
ratio from a previous period is indicative that the company is doing well.

Net Profit Margin

Where Net Profit = Revenue - Cost


Profit margin is calculated with selling price (or revenue) taken as base times 100. Profit
margin is the percentage of selling price that turned into profit, where as "Profit
Percentage" or "Mark up" is the percentage of cost price that one gets as profit on top of
cost price. While selling something one should know what percentage of profit will he get
on a particular investment so companies calculate profit percentage to check what is ratio
of profit on the basis of cost.
The profit margin is mostly used for internal comparison. It is difficult to accurately
compare the net profit ratio for different entities. Individual businesses' operating and
financing arrangements vary so much that different entities are bound to have different
levels of expenditure, so that comparison of one with another can have little meaning. A
low profit margin indicates a low margin of safety: higher risk that a decline in sales will
erase profits and result in a net loss, or a negative margin.
Profit margin is an indicator of a company's pricing strategies and how well it controls
costs. Differences in competitive strategy and product mix cause the profit margin to vary
among different companies.

Net profit margin(%)


25.00%
20.00%
15.00%
2014

10.00%

2013

5.00%
0.00%
Arvind mills

Bombay dyeing Grasim industries

Raymond ltd.

-5.00%

Analysis:
It indicates that Raymond ltd. has low net profit margin compared to other
players in the market. It is working on higher risk and compared to last year sales
has increased by 1.62% but in proportion with expenses and actually company
was working on negative net profit margin on 2013 and now it is working on
profit net profit margin.
All other companys margin has been decreased

compared to precious year

except Arvind mills, increased by 0.69%, Grasim industries has decreased by


(6.58%) and Bombay dyeing decreased by (2.28%).

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Operating Profit Margin

Net profit measures the profitability of ventures after accounting for all costs.
Return on sales (ROS) is net profit as a percentage of sales revenue. ROS is an indicator of
profitability and is often used to compare the profitability of companies and industries of
differing sizes. Significantly, ROS does not account for the capital (investment) used to
generate the profit. In a survey of nearly 200 senior marketing managers, 69 percent
responded that they found the "return on sales" metric very useful.

It is a measurement of what proportion of a company's revenue is left over, before taxes and
other indirect costs (such as rent, bonus, interest, etc.), after paying for variable costs of
production as wages, raw materials, etc. A good operating margin is needed for a company to
be able to pay for its fixed costs, such as interest on debt. A higher operating margin means
that the company has less financial risk.
Operating margin can be considered total revenue from product sales less all costs before
adjustment for taxes, dividends to shareholders, and interest on debt.

Operating profit margin(%)

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25.00%
20.00%
15.00%
2014
2013

10.00%
5.00%
0.00%
Arvind mills

Bombay dyeing Grasim industries

Raymond ltd.

Analysis:
As compared to other players in the market operating profit Raymond ltd has
increased. It can be interpreted that companys financial risk has been declined. Thus
expenses are less compared to sales in 2013-14 previous years.
No change in sales & expenses of Arvind mills. Bombay dyeing, Grasim industries
has comparatively increased their expenses or decrease their sales, thus Raymond
have became as a better investing opportunity for investors.

Gross Profit Margin

Cost of sales (also known as cost of goods sold or COGS) includes variable costs and fixed
costs directly linked to the sale, such as material costs, labour, supplier profit, shipping-in
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costs (cost of getting the product to the point of sale, as opposed to shipping-out costs which
are not included in COGS), etc. It does not include indirect fixed costs like office expenses,
rent, administrative costs, etc.
Higher gross margins for a manufacturer reflect greater efficiency in turning raw materials
into income. For a retailer it will be their mark-up over wholesale. Larger gross margins are
generally considered ideal for most companies, with the exception of discount retailers who
instead rely on operational efficiency and strategic financing to remain competitive with
lower margins.

Gross profit margin(%)


20.00%
18.00%
16.00%
14.00%
12.00%
10.00%

2014

8.00%

2013

6.00%
4.00%
2.00%
0.00%
Arvind mills

Bombay dyeing

Grasim industries

Raymond ltd.

Analysis:
Raymond ltd. is having low gross profit margin compared to Arvind mills, Bombay
dyeing and Grasim industries. It means that company is depending highly on
operational efficiency.
Compared to previous year GPM has increased so it can be interpreted that companys
efficiency of converting raw material into finished goods has been increased. Thus
company has to maintain its operations so as to survive in this competitive market.

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Liquidity Ratios
A class of financial metrics that is used to determine a company's ability to pay off its shortterms debts obligations. Generally, the higher the value of the ratio, the larger the margin of
safety that the company possesses to cover short-term debts.
Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow
ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some
analysts will calculate only the sum of cash and equivalents divided by current liabilities
because they feel that they are the most liquid assets, and would be the most likely to be used
to cover short-term debts in an emergency.
A company's ability to turn short-term assets into cash to cover debts is of the utmost
importance when creditors are seeking payment. Bankruptcy analysts and mortgage
originators frequently use the liquidity ratios to determine whether a company will be able to
continue as a going concern.

Current Ratio

The current ratio is an indication of a firm's market liquidity and ability to meet creditor's
demands. Acceptable current ratios vary from industry to industry and are generally between
1.5 and 3 for healthy businesses. If a company's current ratio is in this range, then it generally

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indicates good short-term financial strength. If current liabilities exceed current assets (the
current ratio is below 1), then the company may have problems meeting its short-term
obligations. If the current ratio is too high, then the company may not be efficiently using its
current assets or its short-term financing facilities.

Current ratio(%)
1.60%
1.40%
1.20%
1.00%
0.80%

2014

0.60%

2013

0.40%
0.20%
0.00%
Arvind mills

Bombay dyeing

Grasim industries

Raymond ltd.

Analysis:
Current ratio of Raymond is just below the ideal range of the a healthy business
industry. Compared to previous year it has increased indicating that company has used
their current assets efficiently as last year.
If we look at competitors also their current ratio has also increased only Bombay
dyeing is not able to sustain it. But Bombay dyeing has just managed to bring it
ratio in the ideal range.
It is suggested that company should be using current assets and liabilities in such a
proportion so that it can achieve the desired target which matches ideal business
conditions.

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Quick ratio:
In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a company to use
its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick
assets include those current assets that presumably can be quickly converted to cash at close
to their book values. A company with a Quick Ratio of less than 1 cannot currently fully pay
back its current liabilities.

Note that Inventory is excluded from the sum of assets in the Quick Ratio, but included in
the Current Ratio. Ratios are tests of viability for business entities but do not give a complete
picture of the business' health. If a business has large amounts in Accounts Receivable which
are due for payment after a long period (say 120 days), and essential business expenses and
Accounts Payable due for immediate payment, the Quick Ratio may look healthy when the
business is actually about to run out of cash. In contrast, if the business has negotiated fast
payment or cash from customers, and long terms from suppliers, it may have a very low
Quick Ratio and yet be very healthy.

Quick ratio(%)

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1.80%
1.60%
1.40%
1.20%
1.00%

2014

0.80%

2013

0.60%
0.40%
0.20%
0.00%
Arvind mills

Bombay dyeing Grasim industries

Raymond ltd.

Analysis:
Quick ratio of Raymond is more than 1 so currently company is able to fully payback
is current liabilities. Thus company is not in a position to convert its quick assets
whenever needed.
Bombay dyeing ratio has been declined compared to previous year so it is indicated
that Bombay dyeing should also increase its quick assets so it can use it when short
term capital requirement is generated.
In whole industry all

the companies has been able to sustain its quick ratio except

Bombay dyeing so this is a positive sign for the other companies.

Debt- Equity Ratio


The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion
of shareholders' equity and debt used to finance a company's assets.[1] Closely related
to leveraging, the ratio is also known as Risk, Gearing or Leverage. The two components are
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often taken from the firm's balance sheet or statement of financial position (so-called book
value), but the ratio may also be calculated using market values for both, if the company's
debt and equity are publicly traded, or using a combination of book value for debt and market
value for equity financially.
Preferred stock can be considered part of debt or equity. Attributing preferred shares to one or
the other is partially a subjective decision but will also take into account the specific features
of the preferred shares.
When used to calculate a company's financial leverage, the debt usually includes only the
Long Term Debt (LTD). Quoted ratios can even exclude the current portion of the LTD. The
composition of equity and debt and its influence on the value of the firm is much debated and
also described in the Modigliani-Miller theorem

Debt-Equity ratio(%)
1.20%
1.00%
0.80%
0.60%
0.40%

2014
2013

0.20%
0.00%

Analysis:
Debt equity ratio of Raymond ltd. has increased compared to previous year so
company has taken more debt in form of loans, etc. Thus it has become more risky for

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investors because as companys D/E ratio is increased then it has to give more returns
to investors as to regain them.
Raymond has become more risky as now the company has to pay more debts and so
less fund will be given to shareholders so company has to make higher profits so as to
sustain its growth in the industry.
Arvind mills is has same debt equity ratio for both the years.
Grasim industries has managed to lower the D/E ratio so it can be interpreted that they
have been able to gain trust for investors in the company and are having better future
opportunities in the coming year for growth in the industry..

Inventory Turnover Ratio

A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product
line or marketing effort. However, in some instances a low rate may be appropriate, such as
where higher inventory levels occur in anticipation of rapidly rising prices or expected
market shortages.
Conversely a high turnover rate may indicate inadequate inventory levels, which may lead to
a loss in business as the inventory is too low. This often can result in stock shortages.

Inventory turnover ratio(%)

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7.00%
6.00%
5.00%
4.00%

2014

3.00%

2013

2.00%
1.00%
0.00%
Arvind mills

Bombay dyeing

Grasim industries

Raymond ltd.

Analysis:
It can be interpreted that as Raymond ltd. has lowered its inventory turnover ratio so it
has increased its inventory levels. Thus company will now be able to match the sudden
demands of the market. But sometimes it can also happen that demand in the market
suddenly falls so in this case Raymond will be left with extra stock so there are chances
that it has to incur loss on the amount of stock left. But as of now company is ready for
sudden demands.
Arvind mills who market leader is also working on lower inventory principle not as
Raymond.
Thus inventory turnover ratio can be interpreted in both positive as well as negative
way.

Fixed Asset Turnover Ratio

Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the value of fixed
assets (on the balance sheet). It indicates how well the business is using its fixed assets to
generate sales.

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[1]

Generally, the higher the ratio, the better, because a high ratio indicates the business has less
money tied up in fixed assets for each unit of currency of sales revenue. A declining ratio may
indicate that the business is over-invested in plant, equipment, or other fixed assets.

Fixed asset turnover ratio(%)


2.50%
2.00%
1.50%
2014
2013

1.00%
0.50%
0.00%
Arvind mills

Bombay dyeing Grasim industries

Raymond ltd.

Analysis:
Here Raymond ltd. has higher ratio so it can be interpreted that Raymond has least
money tied up in fixed asset this year. Raymond is having industry better turnover
ratio.
Ratio of every company is increasing except Grasim industries so its a positive sign
but surprisingly Bombay dyeing has invested high amount of money in fixed asset
this year as it has been indicated by declining fixed asset turnover ratio.

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Asset Turnover Ratio

Asset turnover is a financial ratio that measures the efficiency of a company's use of
its assets in generating sales revenue or sales income to the company.
Companies with low profit margins tend to have high asset turnover, while those with high
profit margins have low asset turnover. Companies in the retail industry tend to have a very
high turnover ratio due mainly to cutthroat and competitive pricing.

"Sales" is the value of "Net Sales" or "Sales" from the company's income statement

"Average Total Assets" is the average of the values of "Total assets" from the
company's balance sheet in the beginning and the end of the fiscal period. It is calculated
by adding up the assets at the beginning of the period and the assets at the end of the
period, then dividing that number by two.

Asset turnover ratio(%)

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1.20%
1.00%
0.80%
2014

0.60%

2013
0.40%
0.20%
0.00%
Arvind mills

Bombay dyeing Grasim industries

Raymons ltd.

Analysis:
Raymond, Arvind mills and Bombay dyeing has high turnover ratio which also is
because they have low profit margins whereas Grasim industries had high profit
margin so it is having low asset turnover ratio.
Raymond high turnover ratio indicates that the company is highly using its assets to
generate the sales.
Compared to previous year Raymond, Arvind mills and Bombay dyeing has increased
the use of assets to generate sales but Grasim industries on the other hand has
decreased the use of assets.

There are some of major expenses which can affect the sales as well as profit of the
company. Two of them have been explained below and analysis of other expenses is
going on and will be analyzed later.

Net profit (%)

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2014
500.00%
450.00%
400.00%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%

2014

A Way Forward:

Analysis of all the expenses in detail and determining which expense is affecting more
and less to the companys growth.
Analysis of Profit and loss statements and balance sheet of FY 2013-14 of Raymond
ltd. and other companies so as to determine the growth or decline of the company.
Analyzing on the basis of products and services offered by domestic as well as
international competitors.
Analysis of quarterly results of competitors and determining the environment of the
edible oil sector of the Indian market.

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