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DECLARATION
I, HRITHIK KUMAR JAIN hereby declare that the project entitled
A STUDY ON “WORKING CAPITAL MANAGEMENT” with
reference to SRI LALITHA ENTERPRISES INDUSTRIES PRIVATE
LIMITED, peddapuram, submitted by me to Gayatri vidya
parishad college for degree and PG courses (A) for the award
of degree of BACHELOR OF BUSINESS ADMINISTRATION. It is an
original work carried out by me under the guidance of
[Link], Assistant professor, Gayatri Vidya Parishad
College for Degree and PG Courses (A) and has not been
submitted before, in part or full of this to any University or
institution for the award of degree or diploma or for any other
similar title.

Place: Peddapuram HRITHIK KUAMR JAIN

Date: Regd no:- 2017-1809087

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 CERTIFICATE

This is to certify that the project entitled a study on “WORKING CAPITAL

MANAGEMENT” in “SRI LALITHA ENTERPRISES INDUSTRIES
PRIVATE LIMITED” is beneficed work done and submitted by HRITHIK
KUMAR JAIN, Reg. No 2017-1809087 in partial fulfilment of the
requirements for the awards of BACHELOR OF BUSINESS
ADMINISTRATION, from GAYTRI VIDYA PARISHAD FOR UG AND
PG COURSES, VISAKHAPATNAM, under my guidance and supervision.

Place: Peddapuram Dr. [Link]

Date: Assistant Professor

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 ACKNOWLEDGEMENT

I would like to express my sincere gratitude to Prof. B. MADHUKAR

PATNAIK. Principal, Gayatri vidya Parishad College for Degree and P.G
courses, Visakhapatnam, for giving me opportunity to work on the project.

I would like to show my gratitude to prof. S. RAJINI, Director, and school

of management studies Gayatri Vidya Parishad College for degree and P.G
courses, Visakhapatnam, for providing a platform and guidance to the
students to explore their knowledge.

I would like to thank Dr. G. SYAMALA RAO, head of the department,

school of management studies, Gayatri Vidya parishad college for degree
and P.G courses, Visakhapatnam, for giving us the opportunity of practical
exposure and his constant supporting building our careers.

I am thankful to Dr. [Link], assistant prof, school of management

studies, Gayatri Vidya Parishad for degree and P.G courses, Visakhapatnam
for her valuable guidance during the project and in my educational career.

At finally yet importantly, I would like to express my sincere thanks to

Managing Directors of Sri Lalitha Enterprises Industries Private Limited,
Sri Mattey Satya Prasad and Sri Mattey Srinivas for providing me an
opportunity to know about the esteemed organisation. This has given me a
wonderful Practical exposure on the captioned subject.

HRITHIK KUMAR JAIN

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 CONTENTS PAGE NO
CHAPTER 1 – INTRODUCTION

 INTRODUCTION 9-32
 NEED FOR STUDY 33

 SCOPE OF STUDY 34
 OBJECTIVES OF STUDY 35

 METHODOLOGY 36
 LIMITATIONS OF STUDY 37

CHAPTER 2 - INDUSTRY PROFILE

 INTRODUCTION 40-56
CHAPTER 3 - COMPANY PROFILE

 GENERAL PROFILE 59-78

 FUNCTIONAL PROFILE 80-88

CHAPTER 4 - CONCEPTUAL PROFILE

 THEORITICAL FRAMEWORK 91-109

CHAPTER 5 -ANALYSIS AND INTERPRETATION

 DATA ANALYSIS AND INTERPRETATION 112-125

CHAPTER 6- SUMMARY,
FINDINGS,SUGGESTIONS,CONCLUSION

 SUMMARY 128-131

 FINDINGS 133
 SUGGESTIONS 135-136

 CONCLUSION 138

BIBLIOGRAPHY 140

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CHAPTER 1

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INTRODUCTION

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 Working capital management

Working capital management refers to the administration of all aspects of

current assets, namely cash, marketable securities, debtors and stock

(inventories) and current liabilities. The financial manager must determine

levels and composition of current assets. He must see that right sources are

tapped to finance current assets, and that current liabilities are paid in time.

There are many aspects of working capital management, which make it an

important function of the financial manager:

Time:

Working capital management requires much of the financial manager’s

time. Investment: working capital represents a large portion of the total

investments in assets.

Significance:

Working capital management has great significance for all firms but it is

very critical for small firms.

Growth:

The need for working capital is directly related to the firm’s growth.

Investment in current assets represents a very significant portion of the total

investment in assets. Working capital management is critical for all firms.

A small firm may not have much investment in fixed assets, but it has to

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invest to in current assets. Small firms in India face a severe problem of

collecting their debtors. Working capital management is concerned with the

problems arise in attempting to manage the current assets, the current

liabilities and the inter relationship that exist between them. The term current

assets refer to those assets which in ordinary course of business can be, or,

will be, turned in to cash within one year without undergoing a diminution

in value and without disrupting the operation of the firm. The goal of

working capital management is to manage the firm’s current assets and

current liabilities in such way that the satisfactory level of working capital

is mentioned. The current should be large enough to cover its current

liabilities in order to ensure a reasonable margin of the safety. Working

capital management ensures a company has sufficient cash flow in order to

meet its short-term debt obligations and operating expenses.

WORKING CAPITAL MANAGEMENT IN OBEROI REALTY

1.1 Introduction
Every business needs funds for two purposes for its establishment and to

carry out its day to- day operations. Long terms funds are required to create

production facilities through purchase of fixed assets such as P&M, land,

building, furniture, etc. Investments in these assets represent that part of

firm’s capital which is blocked on permanent or fixed basis and is called

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fixed capital. Funds are also needed for short-term purposes for the purchase

of raw material, payment of wages and other day – to- day expenses etc.

These funds are known as working capital. In simple words, working capital

refers to that part of the firm’s capital which is required for financing short-

term or current assets such as cash, marketable securities, debtors &

inventories. Funds, thus, invested in current assets keep revolving fast and

are being constantly converted in to cash and this cash flows out again in

exchange for other current assets. Hence, it is also known as revolving or

circulating capital or short-term capital.

There are two concepts of working capital management

1. Gross working capital:

According to this concept, the total assets are termed as the gross working

capital. It is also known as quantitative or circulating capital. Total current

assets include, cash, marketable securities, account receivables, inventory,

prepaid expense, advance payment of tax, etc. To quote Weston and

Brigham, “Gross working capital refers to firm’s investment in short term

assets such as cash, short term securities, accounts receivable and

inventories.” This concept helps in making optimum investment in current

assets and their financing. According to Walker, “Use of this concept is

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helpful in providing for the current amount of working capital at the right

time so that the firms are able to realize the greatest.

2. Net working capital:

Net working capital refers to the difference between current assets and

current liabilities. Current liabilities are those claims of outsiders which are

expected to mature for payment within an accounting year and include

creditors, bills payable and outstanding expenses. Net working capital can

be positive or negative efficient working capital management requires that

firms should operate with some amount of net working capital, the exact

amount varying from firm to firm and depending, among other things; on

the nature of [Link] working capital is necessary because the cash

outflows and inflows do not coincide. The cash outflows resulting from

payment of current liabilities are relatively predictable. The cash inflow is

however difficult to predict. The more predictable the cash inflows are, the

less net working capital will be required. The concept of working capital

was, first evolved by Karl Marx. Marx used the term ‘variable capital’ means

outlays for payrolls advanced to workers before the completion of work. He

compared this with ‘constant capital’ which according to him is nothing but

‘dead labor’. This ‘variable capital’ is nothing wage fund which remains

blocked in terms of financial management, in work-in- process along with

other operating expenses until it is released through sale of finished goods.

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Although Marx did not mention that workers also gave credit to the firm by

accepting periodical payment of wages which funded a portioned of W.I.P,

the concept of working capital, as we understand today was embedded in his

‘variable capital’ return on investment.

TYPES OF WORKING CAPITAL

The operating cycle creates the need for current assets (working capital).

However, the need does not come to an end after the cycle is completed to

explain this continuing need of current assets a destination should be drawn

between permanent and temporary working capital.

1. Permanent working capital: The permanent working capital refers

to that part of the working capital which is necessary for maintaining

stock of raw material and finished goods at their normal level and for

paying wages and salaries regularly. It is minimum amount of current

assets which is needed for the smooth running of business. In other

words, permanent working capital is that which is permanently locked

up in current assets.

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 Permanent working capital is off three kinds:

A. Initial working capital

B. Regular working capital

C. Reserve Margin/Cushion Working Capital

Initial working capital:

In the initial period of its operation, a company must have enough

money to pay certain expenses. This amount will have to be supplied

the owners themselves, because in the initial years, credit facilities

may not be available from creditors, bank do not grant loans or

overdrafts and credit-sales will have to be made.

Regular working capital:

It is the working capital required to continue the regular business

operations. It is required for maintaining regular stock of finished

goods to meet the customers’ demands, to pay regular business

expenses etc. Regular working capital is the excess of current assets

over current liabilities. This part of the working capital needed for

smooth operations of the business.

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Reserve Margin/Cushion Working Capital:

It is extra capital required to meet unforeseen contingencies that may

arise in future. These contingencies may crop up on account of rise in

prices, business depression, strikes, lockouts, fires and unexpected

competition. It is needed over and above the regular working capital

requirements.

2. Temporary working capital:

It is the part of the working capital which is needed to meet the seasonal

demands and special needs. This is called variable working capital because

its amount varies according to the extent of extra demand. Variable working

capital is of two types

A. Seasonal working capital and

B. Special working capital.

A. Seasonal working capital: Some business enterprises require a larger

amount of current assets during a particular season. For instance, sugar mills

have to purchase sugarcane and employ more people to process it during a

particular season.

B. Special working capital: In any business enterprise some unforeseen

events take place when extra funds are needed to meet with the situation.

E.g. during depression prices and sales decline considerably which

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necessitates extra working funds. During inflationary conditions, prices of

raw material and finished goods up, hence extra money is needed to maintain

the same level of stock. Unforeseen contingencies like strikes and lockouts

fire and looting, etc. also force the management to provide for extra funds.

1.2 IMPORTANCE OF WORKING CAPITAL MANAGEMENT

Working capital is considered as central nervous system of a firm. The

importance of working capital management is reflected in the time most

spent by financial managers in managing current assets and current

liabilities. Maintenance of adequate working capital is necessary in order to

discharge day to day liabilities and protect the business from adverse effects

in times of emergencies. It aims at protecting the purchasing power of assets

and maximizes the return on investment. The goal of working capital

management is to minimize the cost of working capital while maximizing a

firm’s profit. The working capital management is concerned with

determination of relevant levels of current assets and their efficient use as

well as the choice of financial mix. The efficiency of a firm to earn profits

depends largely on its ability to manage working capital. In other words,

working capital management policies have a crucial effect on firm’s

liquidity and profitability. Hence, working capital has to be effectively

planned, systematically controlled and optimally utilized.

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1.3 DETERMINATION OF WORKING CAPITAL

1. Nature of business: Some businesses are such, due to their very nature,

that their requirement of fixed capital is more rather than working capital.

These businesses sell services and not the commodities and that too on cash

basis. As such, no founds are blocked in piling inventories and also no funds

are blocked in receivables. E.g. public utility services like railways,

infrastructure-oriented project etc. their requirement of working capital is

less. On the other hand, there are some businesses like trading activity,

where requirement of fixed capital is less but more money is blocked in

inventories and debtors.

2. Length of production cycle: In some business-like machine tools

industry, the time gap between the acquisition of raw material till the

end of final production of finished products itself is quite high. As

such amount may be blocked either in raw material or work in

progress or finished goods or even in debtors. Naturally there need of

working capital is high.

3. Size and growth of business: In very small company the working

capital requirement is quite high due to high overhead, higher buying

and selling cost etc. as such medium size 7 business positively has

edge over the small companies. But if the business start growing after

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 certain limit, the working capital requirements may adversely affect

by the increasing size.

4. Business/ Trade cycle : If the company is the operating in the time of

boom, the working capital requirement may be more as the company

may like to buy more raw material, may increase the production and

sales to take the benefit of favourable market, due to increase in the

sales, there may more and more amount of funds blocked in stock and

debtors etc. similarly in the case of depressions also, working capital

may be high as the sales terms of value and quantity may be reducing,

there may be unnecessary piling up of stack without getting sold, the

receivable may not be recovered in time etc.

5. Terms of purchase and sales: Sometimes due to competition or

custom, it may be necessary for the company to extend more and more

credit to customers, as result which more and more amount is locked

up in debtors or bills receivables which increase the working capital

requirement. On the other hand, in the case of purchase, if the credit is

offered by suppliers of goods and services, a part of working capital

requirement may be financed by them, but it is necessary to purchase

on cash basis, the working capital requirement will be higher.

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6. Stock Turnover: By turnover is meant the ratio of sales to average stock

held in business. The greater the turnover, the larger the volume of

business that can be conducted with a given working capital. In other

words, if the turnover is rapid, burden of working capital is not heavy.

7. Profitability: The profitability of the business may be varying in each

and every individual case, which is in turn its depend on numerous

factors, but high profitability will positively reduce the strain on

working capital requirement of the company, because the profits to

the extent that they earned in cash may be used to meet the working

capital requirement of the company.

8. Attitude of Management: If the attitude of the management is

aggressive and they are primarily risk-takers, the need for working

capital is reduced.

9. Operating efficiency: If the business is carried on more efficiently, it

can operate in profits which may reduce the strain on working capital;

it may ensure proper utilization of existing resources by eliminating

the waste and improved coordination etc.

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1.4 SOURCES OF WORKING CAPITAL:

The main sources of working capital are as under:

1. Shares and Debentures.

2. Retained Earnings.

3. Commercial Banks.

4. Loans.

5. Bank Overdraft.

6. Cash Credit.

7. Commercial Paper.

8. Certificate of Deposit.

9. Commercial Bills Market.

10. Factoring.

11. Trade Creditor or Trade Creditors.

12. Public Deposits.

13. Indigenous Bankers and Money Lenders.

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 1.5 WORKING CAPITAL COMPONENTS

Mainly three components of working capital management

 Receivables Management

 Inventory Management

 Cash Management

Above three has equal importance to manage or handle working capital of

any firm. Now we discuss detail of above three components.

1. RECEIVABLES MANAGEMENT: The term receivable is defined as

“debt owed to the firm by customers arising from sales of goods or services

in the ordinary course of business. “Receivables or debtors are the one of the

most important parts of the current assets which is created if the company

sells the finished goods to the customer but not receive the cash for the same

immediately. Trade credit arises when firm sells its products and services on

credit and dose not receive cash immediately. It is essential marketing tool,

acting as bridge for the movement of goods through production and

distribution stages to customers. Trade credit creates receivables or book

debts which the firm is expected to collect in the near future. The receivables

include three characteristics

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 i. It involves element of risk which should be carefully analysis.

ii. It is based on economic value. To the buyer, the economic value in goods or

services passes immediately at the time of sale, while seller expects an

equivalent value to be received later on.

iii. It implies futurity. The cash payment for goods or serves received by the

buyer will be made by him in a future period.

Objective of Receivable Management Maximizing the value of the firm:

The basic objective of debtor’s management is to maximize the value of the

firm by achieving a trade-off between liquidity (risk) and return. The main

purpose of receivables management is to minimize the risk of bad debts and

not maximization of order. Efficient management of receivables expands

sales by retaining old customers and attracting new customers. Optimum

Investment in Sundry Debtors: allowing credit, expands sales, but

They involve block of funds, that have an opportunity cost, which can be

reduced by optimum investment in receivables. Providing liberal credit

increases sales consequently profits will increase but increases investment

in receivables result in increased costs.

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 Average Collection Period:

The average collection period measures the quality of debtors since it

indicates the speed of their collection. The shorter the average collection

period, the better the quality of the debtors since a short collection period

implies the prompt payment by debtors. The average collection period

should be compared against the firm’s credit terms and policy judges its

credit and collection efficiency. The collection period ratio thus helps an

analyst in two respects.

 In determining the collectability of debtors and thus, the efficiency of

collection efforts.

 In ascertaining the firm’s comparative strength and advantages related to its

credit policy and performance.

2. INVENTORY MANAGEMENT

The term ‘inventory’ is used to designate the aggregate of those items of

tangible assets which are:

 Finished goods (‘saleable’)

 Work-in-progress (‘convertible’)

 Material and supplies (‘consumable’)

In financial view, inventory defined as the sum of the value of raw material

and supplies, including spares, semi-processed material or work in progress

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and finished goods. The nature of inventory is largely depending upon the

type of operation carried on. For instance, in the case of a manufacturing

concern, the inventory will generally comprise all three groups mentioned

above while in the case of a trading concern, it will simply be by stock- in-

trade or finished goods.

Components of Inventory:

1. Raw Materials: Raw materials are those inputs that are converted into

finished goods through manufacturing process. A major input for

manufacturing a product. In other words, they are very much needed for

uninterrupted production.

2. Work-in-Progress: Work-in-progress is that stage of stocks that are

between raw materials and finished goods. Work-in-progress inventories are

semi-finished products. They represent products that need to undergo some

other process to become finished goods.

3. Finished Products: Finished products are those products, which are ready

for sale. The stock of finished goods provides a buffer between production

and market.

4. Store and Spares: Stores and spares inventory (include office and plant

cleaning materials like, soap, brooms, oil, fuel, light, bulbs etc.) are those

purchased and stored

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 For the purpose of maintenance of machinery. Inventory Management

Motives Managing inventories involves block of funds and inventory

holding costs. Maintenance of inventory is expensive, then why to firm hold

inventories.

There are three general motives of holding inventories.

 Transaction Motive: Transaction motive includes production of goods and

sale of goods. It facilitates uninterrupted production and delivery of order at

a given time (right time).

 Precautionary Motive: This motive necessitates the holding of inventories

for unexpected changes in demand and supply factors.

 Speculative Motive: This compels to hold some inventories to take the

advantage of changes in price and getting quantity discount. Objectives of

Inventory Management In company there should be an optimum level of

investment for any asset, whether it is plant, cash or inventories. Again,

inadequate disrupts production and causes losses in sales. Efficient

management of inventory should ultimately result in wealth maximization

of owner’s wealth. It implies that while the management should try to pursue

financial objective of turning inventory as quickly as possible, it should at

the same time ensure sufficient inventories to satisfy production and sales

demand.

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 The objectives of inventory management consist of two counterbalancing

parts:

• To minimize the firm’s investment in inventory

• To meet a demand for the product by efficiently organizing the firm’s

production and sales operation.

This two-conflicting objective of inventory management can also be

expressed in term of cost and benefits associated with inventory. That the

firm should minimize the investment in inventory implies that maintaining

an inventory cost, such that smaller the inventory, the better the view point.

Obviously, the financial manager should aim at a level of inventory which

will reconcile these conflicting elements.

Some objectives are as follows:

 To have stock available as and when they are required.

 To utilize available storage space but prevents stock levels from exceeding

space available.

 To maintain adequate accountability of inventories assets.

 To provide, on item – by- item basis, for re-order point and order such

quantity as would ensure that the aggregate result confirm with the

constraint and objective of inventory control. To keep low investment in

inventories carrying cost an obsolesce losses to the minimum.

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3. CASH MANAGEMENT:

Cash is common purchasing power or medium of exchange. As such, it

forms the most important component of working capital. The term cash with

reference to cash management is used in two senses, in narrow sense it is

used broadly to cover cash and generally accepted equivalent of cash such

as cheques, draft and demand deposits in banks. The broader view of cash

also induces hear- cash assets, such as marketable sense as marketable

securities and time deposits in banks. The main characteristics of this

deposits that they can be really sold and convert in to cash in short term.

They also provide short term investment outlet for excess and are also useful

for meeting planned outflow of funds. We employ the term cash

management in the broader sense. Irrespective of the form in which it is held,

a distinguishing feature of cash as assets is that it was no earning power.

Company have to always maintain the cash balance to fulfil the dally

requirement of expenses.

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 Motives for Holding Cash:

1. Transaction Motive:

Cash balance is necessary to meet day-to-day transaction for carrying on

with the operation of firms. Ordinarily, these transactions include payment

for material, wages, expenses, dividends, taxation etc. there is a regular

inflow of cash from operating sources, thus in case of JISL there will be two-

way flow of cash- receipts and payments. But since they do not perfectly

synchronize, a minimum cash balance is necessary to uphold the operations

for the firm if cash payments exceed receipts. Always a major part of

transaction balances is held in cash, a part may be held in the form of

marketable securities whose maturity conforms to the timing of anticipated

payments of certain items, such as taxation, dividend etc.

2. Precautionary Motive:

Cash flows are somewhat unpredictable, with the degree of predictability

varying among firms and industries. Unexpected cash needs at short notice

may also be the result of following:

 Uncontrollable circumstances such as strike and natural calamities.

 Unexpected delay in collection of trade dues.

 Cancellation of some order for goods due unsatisfactory quality.

 Increase in cost of raw material, rise in wages, etc.

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 The higher the predictability of firm’s cash flows, the lower will be the

necessity of holding this balance and vice versa. The need for holding the

precautionary cash balance is also influenced by the firm’s capacity to have

short term borrowed funds and also to convert short term marketable

securities into cash.

3. Speculative motive:

Speculative cash balances may be defined as cash balances that are held to

enable the firm to take advantages of any bargain purchases that might arise.

While the precautionary motive is defensive in nature, the speculative

motive is aggressive in approach. However, as with precautionary balances,

firms today are more likely to rely on reserve borrowing power and on

marketable securities portfolios than on actual cash holdings for speculative

purposes.

4. Compensating Motive:

According to I.M. Pandey, the amount of cash to be held for the first two

motives, which are two most important motives, the following factors must

be taken into account:

 The expected cash inflows and outflows based on cash budget.

 The degree of deviation between expected and actual net cash flows. .

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 The maturity structure of the firm’s liabilities.

 The firm’s ability to borrow at short notice in the event of any emergency.

 The philosophy of management regarding liquidity and risk of insolvency.

Advantage of Cash Management:

Cash does not enter in to the profit and loss account of an enterprise, hence

cash is neither profit nor losses but without cash, profit remains meaningless

for an enterprise owner.

 A sufficient of cash can keep an unsuccessful firm going despite losses

 An efficient cash management through a relevant and timely cash budget

may enable a firm to obtain optimum working capital and ease the strains of

cash shortage, fascinating temporary investment of cash and providing funds

normal growth.

 Cash management involves balance sheet changes and other cash flow that

do not appear in the profit and loss account such as capital expenditure. Cash

cycle one of the distinguishing features of the fund employed as working

capital is that constantly changes its form to drive ‘business wheel’. It is also

known as ‘circulating capital’ which means current assets of the company,

which are changed in ordinary course of business from one form to another,

as for example, from cash to inventories, inventories to receivables and

receivables to cash. Basically, cash management strategies are essentially

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related to the cash cycle together with the cash turnover. The cash cycle

refers to the process by which cash is used to purchase the row material from

which are produced goods, which are then send to the customer, who later

pay bills. The cash turnover means the number of time firms cash is used

during each year.

Inventory Management:

“Inventory refers to the stockpile of the products a firm is offering for the

sale and the components that make up the product”. In other words,

inventory management is a process of maintaining the raw materials when

entered in the company till it is converted into finished goods. The

importance of keeping the right level of inventory lies in the fact that a

maximum proportion of working capital remains blocked in the inventory

until it is completely sold off and debtors realized. Receivable Management

Trade credit arises when a firm sells its product or services on credit and

does not receive cash immediately. It is an essential marketing tool, acting

as a bridge for the movement of goods through production and distribution

stages of customers. A firm grants trade credit:

 To protect its sales from the competitors and,

 To attract the potential customers to buy its product at favourable terms.

Trade credit creates account receivable. The customers from whom

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receivables or book debt have to be collected in near future are called as

trade debtors or simply as debtors and represent the firm‟s claim or asset.

The credit sales have three characteristics: - It involves an element of risk

that should be carefully analysed

 Credit sales is based on economic value

 The buyer will make the cash payment for good or services received by

him in a future period Debtors constitute a substantial portion of current

assets of several firms. Trade debtors are the major part of current assets.

The interval between the date of sale and the payment has to be financed out

from working capital of an organization. This necessitates the firm to get

funds from banks or other sources. Thus, trade debtors represent investment.

If substantial amounts are tied up in trade debtors; it needs careful analysis

and proper management.

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NEED FOR THE STUDY

 The study has been conducted for gaining practical knowledge about
working capital management &activities of SRI LALITHA
ENTERPRISES INDUSTRIES (P) LIMITED, PEDDAPURAM.
 The study is undertaken as a part of the BBA curriculum for the
fulfilment of requirement of BBA degree.
 The study is undertaken for the evaluation of financial performance
of SRI LALITHA ENTERPRISES INDUSTRIES (P) LIMITED,
PEDDAPURAM is for understanding the direction in which the
company is moving.
 The study helps in implementing the future course of action in order
to achieve the objectives of the organization.
 The study is to understand the dynamics behind the financial
performance of the SRI LALITHA ENTERPRISES INDUSTRIES
(P) LIMITED, PEDDAPURAM.

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SCOPE OF THE STUDY

➢ The scope of the study is confined to the working capital management

of SRI LALITHA ENTERPRISES INDUSTRIES (P) LIMITED.

➢ The Study has been conducted to understand the position of the

organization & its function areas & operations of industry.

➢ The study concentrates on the methods & techniques followed by the

“SRI LALITHA ENTERPRISES INDUSTRIES (P) LIMITED”,
PEDDAPURAM.

➢ All efforts are made to present an authentic view of the management

throughout this report. This report gives the solutions to the varied
problems encountered in the industry.

➢ The data can be collected mainly from the annual report of the company
and other relevant information taken from the books given is
bibliography.

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OBJECTIVES OF THE STUDY
➢ To know the profitability position of SRI LALITHA ENTERPRISES
INDUSTRIES(P) Ltd.,
➢ To find the financial stability of the firm.
➢ To study efficiency of current assets and current liabilities in working
capital management.
➢ To manage the extent to which the company has been financed
through borrowing.
➢ To know how the company is using its financial resources.
➢ To provide reliable information about changes in net resources of
“SRI LALITHA ENTERPRISES INDUSTRIES (P) LIMITED”
that result from the activities, profitability of the business.
➢ To provide financial information that assists in estimating the future
capacity of “SRI LALITHA ENTERPRISES INDUSTRIES (P)
LIMITED” to generate earnings.
➢ To provide information needs of various present & prospective stake
holders about the net results of the “SRI LALITHA
ENTERPRISES INDUSTRIES (P) LIMITED” activities at
regular intervals
➢ To make the affairs of “SRI LALITHA ENTERPRISES
INDUSTRIES (P) LIMITED” transparent to the parties external to
the day to day activities.
➢ To provide information about changes in resources & obligations
resulting from sources such as transactions between “SRI LALITHA
ENTERPRISES INDUSTRIES (P) LIMITED” & it owners.

34 | P a g e
RESEARCH METHODOLOGY
The present study covers from its inception to assets and analyze the
elements of working capital analysis in M/s The SRI LALITHA
ENTERPRISES INDUSTRIES (P) Limited Peddapuram. The study is based
on the data collected from the primary and secondary sources.

Primary Data:
Primary data has been collected by interviewing various people in
production department as well as administrative people who will generally
give the details of working process and also know the existing software in
the company
The primary data has been collected from the personal observation
and personal interviews with the officials of the working of the firm.

Secondary Data:
The primary data was supplemented by the secondary data collected
from published annual general reports of the organization some information
is gathered from:

➢ Internal records of SLEIPL

➢ Organization manuals
➢ Internet
➢ Annual Reports
➢ Balance Sheets

35 | P a g e
 LIMITATIONS OF THE STUDY

The major limitation of the project work under study is time. Since it
is to be completed within a short period of time, which is not sufficient to
undertaking comprehensive study.

Non- availability of completed information. Limitation is information about

cash sale and create sales out of total sales is not available. One more
limitation is depreciation on assets individually is not available.

In the height of the above, it is not possible for an analysis to

calculate the exact working capital ratios.

➢ The study covers only a period of five years from 2013-14 to 2017-

18.

➢ The study information is mostly depending upon the secondary data.

➢ As it not the possible to cover all the supervisors, so selected the

supervisors of working capital analysis.

➢ Time constraint is another limitation for the tidy because the project

trainee has to study the whole work in eight weeks.

36 | P a g e
CHAPTER 2

37 | P a g e
INDUSTRY
PROFILE

38 | P a g e
 Rice is the end product of paddy after various production operations.

In the past, the conversion of paddy to rice was a house hold job, a tasking

proposition for the women folk. But due to high demand for rice the

household job was transformed to mills operations. Milling is a crucial step

in post-production of rice. The basic objective of a rice milling system is to

remove the husk and the bran layers, and produce an edible, white rice kernel

that is sufficiently milled and free of impurities. This is initially done in mills

by manual operation. Due to the innovation of machineries, the new

technology, has been adopting for converting paddy to rice in the name

modernization.

Modernization of rice mill yield more rice from it, and came with more

competition between the rice mill entrepreneurs. It involve of high capital,

and huge investment to start a new rice mill. Even though more rice mills

were emerged in southern region of India. Many of the rice processing units

are of the semi-automatic type and are inefficient. Modern rice mills are

having high capacity and are capital intensive, although inefficient. It is a

bottleneck in its adoption by the prospective entrepreneur. So, it leads more

challenges for all rice mill entrepreneur.

Every human to survive in this world requires three essential things, Food,

Clothing and Shelter. Among these three, food is necessary for living in a

good health. Food is an essential prerequisite for life and as such the primary

39 | P a g e
goal of eating and drinking is to enable the body to function normally. With

food, or the lack of it, the destinies of individuals are greatly influenced. We

should "eat to live", and "not live to eat".

Food is like fuel to keep the fire burning. Too much and you smother it, (too

fat) too little and you starve the fire, (anorexia) so you need to find the right

amount of fuel or food that suits your bodies needs. Food is important for

life. You need food to live. Food is like fuel to a car you need it to keep on

with your life. You also need food to function the body in right way.

Globally, rice is a major food staple and a mainstay for many rural

populations. As such, it is an important food crop for the food security of

significant numbers of rural dwellers in the world. Maintaining rice

biodiversity and utilizing its merits should have sustainable impact in

increasing productivity in future. Rice is life, as it not only provides

subsistence but also a source of income to meet the other household

requirements in India. Rice is actually life sustaining.

Brown rice has a greater food value than white, Because the outer coating

of brown rice contains added minerals and protein, As a food rice is low in

fat and (compared with other cereal grains) in protein. Brown rice is

considered to hold greater food value than its white grain counterpart. Brown

rice does not get milled, thereby keeping its darker colour. Like white rice,

brown rice has its husks removed during the cultivation process. Brown rice

40 | P a g e
contains 8-percent protein and is a good source of thiamine, niacin,

riboflavin, iron and calcium. Traditionally, brown rice is the least favourite

of all the rice.

India is basically agricultural country growing Rice, Wheat, etc. The country

is having 149.50 million hectors (Approx) under cultivation, out of which

Andhra Pradesh accounts for nearly 25 million hectors. The major crop in

A.P. is paddy and produces nearly 30 million tons of paddy. In almost all

the Districts of A.P. the paddy is grown and among these especially East &

West Godavari Districts contribute majority. There are about 6500 Rice

Mills in A.P. Out of 6500, M/s Sri Lalitha Enterprises Industries Pvt Ltd.,

are the biggest rice millers in A.P. and stood in top 5 in South India.

Availability of paddy is abundant as large extent of areas have been brought

into cultivation.

Rice is main staple food of Indians and it is cultivated in most of the

states. Due to the development of the irrigation facilities in East Godavari

District, the paddy cultivation was taken up on large scale. Rice being the

major staple food of Indians, the demand for it is increasing YEAR BY

YEAR. Under the liberalized policy, the transfer of rice from one State to

other State is made easier and Government restrictions were removed.

Further, Government of India is buying rice for public distribution system

and for buffer storage at par with the open market rates. Because of the

41 | P a g e
ample availability of Paddy, rice milling industry was also developing in a

large scale. The rapid development of paddy cultivation thus demands more

rice mills in the area. There are about 550 Rice Mills in [Link] and

presently the surplus paddy is being sold in other States.

Status of rice milling units in India:

Rice milling is the oldest and the largest agro processing industry of the

country. It has a turnover of more than Rs.25,500 crore per annum. It

processes about 85 million tonnes of paddy per year and provides staple food

grain and other valuable products required by over 60% of the population.

Paddy grain is milled either in raw condition or after par-boiling, mostly by

single hullers of which over 82,000 are registered in the country. Apart from

it there are also a large number of unregistered single hulling units in the

country. A good number (60%) of these are also linked with par-boiling

units and sun -drying yards. Most of the tiny hullers of about 250-300 kg/hr

capacities are employed for custom milling of paddy. Apart from it double

hulling unit’s number over 2,600 units, underrun disc shellers cum cone

polishers numbering 5,000 units and rubber roll shellers cum friction

polishers numbering over 10,000 units are also present in the country.

Further over the years there has been a steady growth of improved rice mills

in the country. Most of these have capacities ranging from 2 tonnes /hr to 10

tonnes/ hr.

42 | P a g e
Overview and Statement of Opportunities:

Industry Scenario:-

World: In the international market Thailand, USA & UK have gone ahead

in rice production. These countries are basically producing short grain non-

basmati varieties. Besides Europe and UK also procure brown Basmati Semi

processed rice from India and finally process further as per their

requirements. The Milling Industries of these countries mainly employ

automatic advanced technology of processing, professionally human

resource and well managed organizations having concepts of TQM,

appropriate and modern technology and continuous R&D activities. In non

Basmati rice India faces top competition with Thailand, Philippines and

Vietnam whereas in Basmati rice India stands topmost in the world as far as

value structure is concerned. World produces 397.2 million tons of paddy

(2006). It is estimated that about 800 million tons (FAQ) of rice will be

required by 2025 A.D.

India: Rice milling units prevails mainly in the state like U.P., Uttaranchal,

Punjab, Haryana, Orissa, W.B., A.P., Tamilnadu, Bihar, Assam, Karnataka

and Kerala at National level. The states produce rice of both Basmati and

non-Basmati variety. The Basmati varieties are mainly produced in Punjab,

Haryana, U. P. and Uttaranchal. As far as exports of fine quality Basmati

rice from the country is concerned 75% of it is exported from state of

43 | P a g e
Haryana- only and is followed by Punjab. Or Hence, the few bench marking

cluster in the country is considered as Haryana and Punjab, which are rich

in production, exports, quality and technology.

Rice Production area in India

The major rice growing area in India are West Bengal, Uttar Pradesh,

Madhya Pradesh, Orissa, Bihar, Andhra Pradesh, Assam, Tamil Nadu,

Punjab, Maharashtra, Kannataka, Haryana, Gujarat, Kerala, Jammu-

Kashmir, Tripura, Meghalaya, Manipur, Rajasthan, Nagaland, Arunachal

Pradesh, Himachal Pradesh, Mizoram, Goa, Pondicherry, Sikkim, A & N

Island and D & N Haveli. Raw rice called in the name of Paddy. In Tamil

Nadu paddy is cultivated in three major seasons namely Kuruvai (May-

June), Samba (Sep-Oct) and Thaladi (Nov-Dec). The major varieties

preferred for Kuruvai are ADT 36, CO43, ADT 43 and TKM 9. For Samba

and Ponni, Thaladi BPT, ADT 36, ADT 37, ADT 39, CR-1009 and CO 43

varieties are preferred.

Rice is an essential crop for food security, poverty alleviation and improved

livelihoods in Asia. Over 2 billion people obtain 60-70% of their food

energy from rice. About four fifths of the world’s rice is grown by small-

scale farmers in low income countries. Rice production employs 1 billion

44 | P a g e
people and is essential to the economic development of rural areas in India,

Bangladesh and Southeast Asia.

Important food item of southern India was rice. Rice is the end product of

paddy after various production operations. In the past, the conversion of

paddy to rice was a house hold job, a tasking proposition for the women folk.

But due to high demand for rice the household job was transformed to mills

operations. How this operation is essential for meet out the daily needs of

our human life. But, in this milling operation the Rice Entrepreneurs faced

many problems and also enjoying some prospects. These factors may

identify from the following areas. The Secondary data collection method and

observation method was adopted for finding factors of problems and

prospects of milling operations.

For of ordinary parboiled rice, atmospheric parboiling system.

For production of raw rice, the paddy after its cleaning and steaming is

after soaking then drying is milled using sheller. Whole rice is the main

product of rice milling and rice bran, rice husk and broken rice are

obtained as byproduct during the process. Rice husk is the outer shell of

rice and it is a fibrous material containing good amount of silica. Rice bran

is a fine powder obtained during polishing of the brown rice when the

outer coating on rice is removed as rice bran. It contains vegetable oil as a

valuable constituent.

45 | P a g e
 The flow sheet depicting the process of manufacture of rice from paddy is

presented below:

Process:

 Pre Cleaning: Removing all impurities and unfilled grains from paddy

 De-stoning: Separating small stones from paddy

 Parboiling (Optional): Helps in improving the nutritional quality by

gelatinization of starch inside the rice grain. It improves the milling

recovery percent during deshelling and polishing / whitening operation

 Husking: Removing husk from paddy

 Husk Aspiration: Separating the husk from brown rice/ unhusked paddy

 Paddy Separation: Separating the unhusked paddy from brown rice

 Whitening: Removing all or part of the bran layer and germ from brown

rice

 Polishing: Improving the appearance of milled rice by removing the

remaining bran particles and by polishing the exterior of the milled kernel

 Length Grading: Separating small and large brokens from head rice

 Blending: Mixing head rice with predetermined amount of brokens, as

required by the customer

 Weighing and bagging: Preparing the milled rice for transport to the

customer

46 | P a g e
Analysis of Business operations:

a) Raw material procurement and its cost etc.

Paddy is the basic raw materials for rice mills. Ministry of agriculture Govt.

of India fixes up the minimum support price of different crops including

paddy by way of policy to protect the farmers from exploitations. It is

observed in our diagnostic study that no farmer is able to supply standard

quality paddy. As such they are not getting minimum support price. This is

one of the major problem.

b) Production process related problems

In the process of parboiling water affluent is generated and is harmful.

The rice millers are getting problem to store it.

Rice husk is the cheapest fuel for generating steam but the waste product

fly-ash is another headache for disposal for the millers.

c) Design related problems

The rice mills working in some cluster are of old technology. Electrical

consumption is very high. Here in this technology electricity consumption

is very high compared to modern rice mills.

47 | P a g e
d) Technology related problems

Technology is changing day by day. The technology adopted by the rice

millers here in this state is occupying more space, consuming more energy

polluting air and water and it is time consuming. As a whole the cost of

production is high for the technology.

e) Credit Issues

Finance is not a problem nowadays excepts some mills all other mills have

availed term loans and working capital from different commercial banks.

f) Marketing Issues: - At present marketing of rice is all a problem because

of free rice by government policy is also affect domestic market. Open

market has the demand for consuming of the production. If the levy system

will be out then marketing will be the major problem.

Presence of support institutions:-

Minister of Agriculture, Civil supply department, Tamil Nadu Agricultural

Universities, Govt. of Tamil Nadu, Central Rice Research Institution, Indian

Council for Agriculture Research, Agricultural Universities, National

Productivity Council, National Commercial Bank, NABARD, DIC, SISI,

Certification Agencies, Testing Laboratories, Engineering College,

Engineering School, ITI.

48 | P a g e
I. Ministry of Agriculture: Ministry of Agriculture declares minimum

support price of different food grain including paddy and rice,

ii. Civil Supply Department: playing major role in this state fixes the

maximum target of purchasing paddy for the rice millers through specific

market yard.

iii. Agriculture Department of Andhra Pradesh: - The Deputy Director

of Agriculture provides seeds to the farmers. They also have an agricultural

lab, which in turn informs the farmers about seeds suitable for their local

soils.

iv. IRRI: It is an inter-national level rice research centre institute produces

new variety of paddy suitable to local climatic condition.

v. NABARD: It is an agricultural developmental bank providing

infrastructural assistances as well as conducts training and awareness

programmes for benefit of the farmers.

vi. SISI: Training and SSI programme, like EDP, MDP etc., export

marketing and provide technical appraisal report on demand.

49 | P a g e
vii. DIC: It is a promotional agency and the path finder for setting of SSI

units. Besides above project profiles, schemes and survey reports are being

prepared by DIC.

viii. Bank: It provides financial assistance to entrepreneur anon demand.

ix. ITI / Engineering school / Engineering College: Generates technical

professionals. It may be proposed to introduce rice mill operator’s short time

course at ITI level.

Business Development Service Providers: (BDS)

The following are the basic BDS providers:

a) Farmers

b) Packing materials suppliers.

c) Transporters

d) Labour Contractors

e) Chartered Accountants

f) Export Consultants

The R&D and other institutes like, IRRI, TNAU, standard certificate

agencies, APEDA, CDP, SISI etc are in existence but rarely approached by

50 | P a g e
the industry except a few organized units who have been benefited. There is

a need to make the industry aware of various services available and provided

by these institutions.

Stakeholders for Rice Production

From Stakeholders of rice production also has two different faces of

problems and prospects in it. It was identified through observation both are

listed below.

Other stakeholders include the following: -

 Paddy suppliers (farmers & traders)

 Plant & Machinery suppliers

 Packaging material suppliers

 Govt. procurement agencies

 Traders of rice, rice bran and husk

 Exporters of rice

 Industry Association

 District Industries Centre

 R&D Centre

 Banks & Financial Institutions

51 | P a g e
Paddy suppliers (farmers & traders):

Paddy, the major raw material for rice mills, is procured both from the

farmers & the traders. Procurement of this item from other districts in the

state and also from other states like Karnataka, and Tamil nadu is mainly

made from the traders, while local procurement of paddy is from both

farmers & traders.

Packaging material suppliers: Jute bags are mainly used for packaging of

rice, rice bran and rice husk. For Government supply of rice against levy

procurement, new jute bags are used, while for open market sales to trader’s

rice is packaged in second hand jute bags and the old jute bags containing

paddy is generally used for this purpose.

The new jute bags are procured from local manufacturers and sometimes

also from the suppliers in other states. The requirement of such new bags is

not much and the rice millers do not face many problems in their

procurement. However, the unit price of such new jute bags varies widely

throughout the year.

Plant & Machinery suppliers:

Plant & machinery in use are mostly fabricated items from local fabricators.

The milling machines, polishing machines, etc. are generally sourced from

52 | P a g e
the reputed machinery manufacturers in the country. The technology used

by the rice millers in their plants is not up-to-date as the plant & machinery

manufacturers and suppliers from whom they procure such items have weak

linkage with the R&D institutions. Further, the millers have very poor

accessibility to foreign suppliers of costly advanced plant & machinery with

high productivity and automatic control.

Govt. procurement agencies:

The different Govt. procurement agencies for the rice are:

Department of Food & Supply through the District Controller’s Office

 The rice millers in the district are to adhere to the levy commitment

fixed by the District Committee.

Traders of rice, rice bran and husk:

According to the prevailing custom, rice produced by the millers for the open

market is procured directly by the traders and the millers do not have any

marketing effort in this regard. Rice bran, a valuable by product of rice

milling, is mostly sold to the solvent oil extraction units located in the district

directly. A part of rice bran production is also sent outside the state through

local traders. The number of rice bran traders operating presently in the state.

Most of the rice husk produced in the state is burnt as fuel in the boilers for

53 | P a g e
steam raising and also for power generation using gasifiers and gensets.

Only the excess quantity after meeting the above requirements is sold to the

traders.

Exporters of rice

Only a very small quantity of rice is exported to the neighbouring countries

through the exporters. There are only a very few exporters of rice at present.

District Industries Centre

All the mills in the Andhra Pradesh Rice Mill Cluster is not registered with

the District Industries Centre (DIC). While most of the new mills are

registered with the DIC, there are a large number of old mills, which have

not obtained registration. For availing of various subsidies from the Govt. it

is essential that all the mills should be registered with DIC. The office of

DIC is located in each District head town.

After the coming of MSME (Micro, Small and Medium Enterprises) act into

force the process of registration has been simplified and the old system of

temporary and permanent registration has been replaced by Entrepreneurs

Memorandum (EM) respectively.

54 | P a g e
R&D Centre

In the region there are renowned R&D institutions associated with the

developmental works on the production, milling & processing of rice. These

are:

 Central Rice Research Institute (CRRI), Cuttack

 Indian Institute of Technology (IIT), Kharagpur

55 | P a g e
CHAPTER 3

56 | P a g e
COMPANY
PROFILE

57 | P a g e
 GENERAL PROFILE

Sri Lalitha Enterprises Industries (P) Limited, is the leader in Non-basmati

Rice processing in India. They are the largest processor of Non-basmati Rice

with a milling capacity of 2,000 Metric tons per day. They are the

processors of best in class Rice variety with the help of world class

machinery with international standards.

Best quality of Non-basmati Rice is produced at this Processing plants

Located in the village Peddapuram which is nearby Krishna and Godavari

basins in the State of Andhra Pradesh in India. The State of Andhra Pradesh

is considered as the Rice Bowl of India and particularly the fertile lands

across the river banks of Krishna and Godavari grow the best quality of rice.

The Company has its roots of experience in the Industry of Rice Processing

since 1940 and is a pioneer in experimenting and developing the best quality

rice with the know-how earned from generations.

Today the company has showed a marvelous growth in very short time and

established as an Industry Leader with a storage capacity of 3, 29,000 Metric

tons and milling capacity of 7,00,000 Metric tons per year. The company

has its very own Captive power Generation Plant of 6.33 Megawatts to cater

all its power needs along with surplus power to cater the needs of outside

market.

58 | P a g e
Their most advanced Infrastructure, Experienced & well trained

Professional Personnel and Continuous quality check through Quality

Control labs supports the industries Policy and

all their brands are famous for their quality and standard and most demanded

all over India and in abroad [Link] beginning of the company was during

1950’s with a small Paddy processing and rice milling plant as a proprietary

concern and gradually grew into a partnership under current management in

the year 1979 and was established as a private limited company in 2004.

PROMOTERS, DIRECTORS AND MANAGEMENT

The Mattey Family headed by Sri Mattey Linga Raju hailing from Village

Kattamuru, Suburb of Peddapuram was successful Trader, Paddy Processor,

Contract Miller and he was instrumental for venturing into the Paddy

Processing and Rice Milling Industry in the early 1940’s.

Sri Mattey Adinarayana branched out independently and established Paddy

Processing and Rice Milling Plant at Peddapuram during the 1950’s.

Sri Mattey Adinarayana was visionary and pioneered the concept of Bulk

Purchase of Paddy, Storage, Process and Milling.

59 | P a g e
 Sri Mattey Satya Prasad joined the family business and along with Mattey

Srinivas established the Partnership Company in the year 1979 under the

style of Sri Lalitha Enterprises, Peddapuram.

Market and Selling Arrangements

The following are the products available for sale from Vadlamuru Road

and Valuthimmapuram Road, Peddapuram Complex:

 Rice (Both Par Boiled and Steam)

 Broken Rice

 Rice Bran

 Idly Ravva

 Husk

 Rejection Rice

The boiled rice will be sold in Kerala market

Kerala market prefers colour sorted rice.

The steam rice will be sold in Southern States and also local market.

The Idly Ravva will be sold in local market.

60 | P a g e
evy Sales:

FCI is the main purchaser on behalf of Government of India for its public

distribution. Presently due to abundant stocks of rice available with FCI,

The restriction on open market sale is lifted. The millers are free to market

their produce throughout the country

The rice bran will be sold to local solvent extraction plants

Rejection Rice for poultry farms and aqua culture.

The promoters of the Company have more than 40 years of experience in

this similar line and have built up strong infrastructure for selling its

products all over India and as such selling these products to achieve the

estimated sales turnovers.

Actually the Company has a well-established brand image in Kerala

market for its boiled rice. The rice sold in the brand names of Netaji, MA,

Surabhi & Lalitha. The Company is the leading player in the Par Boiled rice

market in Kerala State and is capable of supplying quality rice to retain its

position. The various brands of the company are mentioned below.

61 | P a g e
BRIEF HISTORY OF COMPANY:

1. Name of the Company SRI LALITHA ENTERPRISES

INDUSTRIES (P) LTD

2. Date of Establishment Partnership since 1979, Private Limited

Company since 8th December, 2004

3. Location UNIT – 1:

4-1-57,

Vadlamuru Road,

PEDDAPURAM – 533437,

EAST GODAVARI DIST.

UNIT – 2:

Valuthimmapuram Road,

PEDDAPURAM – 533437,

EAST GODAVARI DIST.

4. Products Rice, Idly Ravva, Rice Ravva, Rice Flour

and other allied by - products.

5. Milling Capacity 2400 TPD

6. Power Plant Capacity 9.33 MW Co-Generation Power Plan

62 | P a g e
 UNIT I UNIT II Total

Milling 192 TPD Steam Rice 1024 TPD Steam 1216 TPD Steam

Capacity Mill Rice Mill Rice Mill

384 TPD Boiled Rice 800 TPD Boiled 1184 TPD Boiled

Mill Rice Mill Rice Mill

Power Plant 1.33 MW 5.00 MW + 3.00 9.33 MW

Capacity Co-Generation Power MW Co-Generation

Plant Co-Generation Power

Power Plant

Plant

Boiler 12 TPH 30 TPH + 22 64 TPH

Capacity TPH

Storage 12.90 Lakh Quintals 25.00 Lakh 37.90 Lakh

Capacity Quintals Quintals

No of Mills 03 8 (6 Rice Mill + 2 11

Ravva

Plants)

Satake 01 05 06

Plants

Sortex 05 13 18

Machines

63 | P a g e
The Company achieved a unique status in the paddy Processing and Rice

Milling Industry in the State Of Andhra Pradesh for pioneering efforts in

modernizing and setting the best Standards in Process and Quality Control.

The Company Pioneered the installation of Sortex Machines - Buhler India

(P) Ltd imported from M/[Link] Ltd, London for the first time in the state

of Andhra Pradesh more so in the Region / District of East Godavari and

Satake Corporation, Japan. The Company has 18 Sortex Machines – Satake

and Buhler and is the Largest Processors of Quality Par Boiled and Raw

White Rice in the State of Andhra Pradesh.

The Company in order to establish its leadership position is installed the

most modern Plant and Machinery from M/[Link] Corporation, Osaka,

Japan enhancing the Processing Capacity of the Company to 2400 MT per

day (Both Unit – 1 and Unit – 2) of Excellent Quality Processed Par Boiled

and Raw White Rice.

Based on the Turnover made by the company during the preceding years,

they have been granted with the status of Three Star Export House in

accordance with provisions of the Foreign Trade Policy, 2015-2020 on

09.03.2017.

64 | P a g e
 Vision

LALITHA will establish and grow in businesses, with International

standards and shall consistently contribute to our Nation’s Growth.

LALITHA will earn more and give more for philanthropic activities to make

their founders’ dreams in reality.

Mission

To increase the wealth and goodwill of our organization, by offering

products and services that are the best in the industry, through effectively

implementing quality systems and procedures. To achieve customers

satisfaction as well continually improves to the industry’s --expectations.

CORE VALUES

 Sense of belonging for the company.

 Integrity and fairness.

 Honesty and mutual trust .

 Safety consciousness.

 Hard work and commitment.

65 | P a g e
 H.R Activities in LALITHA ENTERPRISES INDUSTRIES PVT LTD,

 Recruitment

 Selection

 Induction training to the new employees

 Employee data base

 Personal files

 Statutory registers like PF, ESI, Leaves, OT, Wages, Bonus etc.,

 Training & development

 ISO documentation

 Employees grievances redressel

 Pay roll administration

 Attendance

 House keeping

 Greenbelt

 Factory’s guest house maintenance

 Time Office

 Security

 Employee evaluation

 Job profile and job descriptions

 Employees Personal appraisals

66 | P a g e
 Statutory returns

 Renewal of factory statutory licences

 Staff welfare

 canteen

 Staff health through dispensary

 Safety awareness through safety officer

 Employee exit interviews

 Employee exit formalities

M/s Sri Lalitha Enterprises view every one of their human resources as

strategic partners of their success, and they spend enormous amounts of time

and money on employee hiring, induction, and training & development, as

a result of which, every employee is ingrained into the closely-knit mesh

that our company provides.

Corporate Culture:

Working with SRI LALITHA is like working at a home away from home.

A warm and friendly atmosphere ensures that channels of communication

are always open within the organization. Colleagues here are first friends

then co-workers, and all their departments are like one team and one family.

67 | P a g e
This spirit of teamwork and companionship is imbibed into all employees -

regardless of their position in the company. A flat hierarchal structure makes

every employee an equally valuable asset.

Sri Lalitha believe that their employees work best when they're doing

something that they love, rather than it being the other way around. This is

why they are meticulous about matching their employees' talents and

creativity with the jobs that they give to their employee, thereby getting the

best outcome from every one of their human assets.

Growing with SRI LALITHA, the management link their successes with

success of their people, and believe that business cannot grow alone. Instead,

it grows with its people. They take pride in watching their employees grow

within the company, and as they continue to rise within the ranks, the

management look forward to seeing them acquire new sets of skills and

knowledge. This is what they call "Employee Empowerment”. Sri Lalitha

provide a clear and measurable career path to its employees, and strive to

motivate them to achieve their targets. They have an objective and

comprehensive "Performance Evaluation & Development System" in place,

to ensure that their best performers are rewarded accordingly. And a well-

designed career progression chart ensures sufficient job enrichment.

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Values of M/s Sri Lalitha :

SRI LALITHA have a strong value system in place to ensure that their

organization remains a preferred employer to work for, and also a reputed

one in the market.

We value...

• Delight of Customers & Stake holders

• Trustworthiness
• Responsibility & Responsiveness
• Proactivety
• Team spirit
• Innovativeness & Creativeness
• Empowerment
Our H.R. Philosophy is:

P = People are our strength

H = Humanity is respected

I = Integrity is valued

L = Learning scope is ample

O = Organization Goals are top priority

S = Smart People & Smart Technology

O = Opportunities are Created.

P = Personal & Professional growth

H = Harmonious Relationship with Employees, Customers &

69 | P a g e
 Stakeholders.

Y = Young culture is encouraged Staying well connected

Sri Lalitha Enterprises Industries Pvt Ltd., has a strong distribution network,

consisting of Company Distributors and Super Stockiest, in place that

reaches out across India. This enables the end-users of their products -

households and institutional buyers - to receive their offerings speedily.

Small retailers and traders also benefit greatly from this arrangement. Their

distribution footprint spans the length and breadth of the country,

In addition to the rice mills, Sri Lalitha have also established husk based

power plants to cater the power needs of their rice mills.

Sri Lalitha believe that strong value systems are what shape their company

and its future. By safeguarding these pillars they will always strive to be the

best and encourage everyone who works with them - their people, their

clients, their business partners - to excel.

Honesty:

Honesty is the human quality of communicating and acting truthfully and

upholding truth as a value in all their actions - thought and deed. This

includes listening, and any action in the human repertoire — as well as

speaking. Sri Lalitha shall take complete ownership and meet their

commitments to all internal and external stakeholders.

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Integrity:

Sri Lalitha shall act and take decisions in a manner that these are fair, honest

and follow the highest standards of professionalism.

Responsibility:

Sri Lalitha believe that the onus of exceeding expectations of customers and

consumers like with them. They shall ensure a good team spirit, the right

work climate, openness and friendliness in the workplace. They shall be

proactive with their clients and anticipate the changing needs of consumers

and provide them with the right solutions. They shall build warm brands that

will go beyond functional benefits and build an emotional bonding with all

stakeholders. Each one of them shall take ownership for their own work,

teams and the part of the organization they are accountable for.

Commitment:

Sri Lalitha’s challenge is to uphold their values in everything they do - they

are there to guide them in the way they work, in the decisions they make and

in the way they interact with people. Through these values, they shall build

an even sharper results-oriented culture that is high on reliability. These

values will be like a guiding light leading them on the path to growth. By

clearly stating these, they aim to reinforce what makes them successful.

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TEAM:

At Sri Lalitha, TEAM is an acronym for “Together Everyone Achieves

More”. Sri Lalitha has a team of top-level strategic planners from various

functional domains of the rice business. With an experience of more than

two decades in rice business, they are backed by a team of highly skilled,

experienced and respected professionals to form a reckoning force in the

industry. Sri Lalitha has managed to retain its core work-force for years thus

making it a compact, cohesive unit that works with well-orchestrated

precision.

Their employees are empowered and are in tune with the best operating

practices. Their top-level executives constantly infuse the employees with

creativity, motivation and innovation. The company organizes training

workshops and employee knowledge sharing activities to enable its work

force in achieving personal and organizational growth.

At Sri Lalitha, the teams come from various cultural and professional

backgrounds yet they are one strong company, one strong team with a

common goal. Having a diverse workforce brings to their company a wide

variety of perspectives and talents that strengthen their ability to serve

customers and consumers better. They empower every individual in the

organization to grow to their fullest potential. They fully recognize value

and respect the unique contributions each person brings to the organization.

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Each one of them demonstrates high level of teamwork through sharing,

collaborative efforts and benefits from working together.

WORK CULTURE:

At Sri Lalitha, they believe in a flat organizational structure. They

do not differentiate their people with any criteria other than performance.

Everyone from new recruit to the CEO is treated the same. They have an

open work culture and have adopted a decentralized approach built on a

layered structure. The company has an overall strategic work planning

process with annual goals and regular reviews of progress.

They share information openly and with complete transparency.

They fully appreciate that when employees understand the big picture, and

are kept in the loop about performance and any new developments, they feel

part of the organization, and therefore, more involved, more excited, and

more loyal to the organization. It is this policy that has ensured that the core

team of Sri Lalitha has stayed together for more than a decade. All

employees receive the same workspace, amount of employee leave time,

benefits and other allowances. Criteria that determine incentives are

uniformly applied. Salaries, however, vary based on experience and

performance. The workplace is an ideal equilibrium of work and play, where

the employees get opportunities to grow professionally as well as personally.

Large well ventilated office space, well networked IT systems, conference

73 | P a g e
rooms, air-conditioned work ambience are to ensure comfortable work

environment within the organization.

INFRASTRUCTURE:

Sri Lalitha Enterprises Industries Pvt Ltd., has a state of the art rice mill

complex coupled with power plant at Peddapuram of East Godavari District

equipped with the world's finest rice technology. The plant is equipped with

other facilities of international standards such as Satake Sortex Machines,

Bulher Japan make grading equipment’s etc. ,. They have their own

packaging facilities and transport and logistics division.

Headquartered in Peddapuram, Sri Lalitha has a comprehensive sales and

marketing network handled by an expert team. They have a well-designed

corporate office in the mill complex itself, fully networked with the latest

computers and IT Systems.

Sri Lalitha’s distribution infrastructure consists of Brokers, Distributors,

Traders, Super Markets & numerous retail outlets. They have a successful

direct relationship with bulk consumers.

MANUFACTURING:

Using state-of-the-art manufacturing facility, their rice goes through a series

of processes untouched by the human hand. Their processing plants are

74 | P a g e
equipped with modern and advanced technologies ensuring high quality

products. They use the world's best technology – from Satake & Bulher ,

Japan technology to ensure that their rice products are world class delivering

superior taste and are healthy.

R&D AND QC:

Surging ahead with the time has always been the way of doing business at

Sri Lalitha. Sri Lalitha’s inspiration to sustain the leadership position in its

businesses and to remain prepared for future challenges motivate us to

engage in extensive research and development and quality control

endeavors.

Their quality control measures are stringent. Thus every pack that moves out

of the mill is certified and perfect in every manner- in weight, freshness and

great quality. The state-of-the-art Quality Control facility is powered by a

team of technical experts and driven by a motivated and talented team of

individuals.

Processes at Sri Lalitha are technologically updated to keep up with the

evolving and changing customer needs

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NETWORK:

Sri Lalitha have a well-connected trade network. Over the years they have

formed mutually beneficial associations with some of the best names in the

industry. These include brokers, modern retailers, chain stores, independent

retailers and institutional customers.

BROKERS:

As a bulk trading company, we have a long term relationship with some of

the most successful brokers in this region. At Sri Lalitha, we believe in

forging long lasting business associations in a spirit of trust, warmth and a

win-win attitude.

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 HUMAN RESOURCES DEPARTMENT CHART:

Manager

(HR & Admn)

HR Admin Liason Officer Time Office Security

Executive Executive Executive Head

Cleark Guard

TIME OFFICE MANAGEMENT:

 Responsible for maintaining attendance registers of entire manpower inside factory.

 Responsible for providing company vehicles to the employees for official duties.

 Responsible for attendance through biometric attendance machines.

 Rounds inside the factory to check the manpower in line with the time office registers.

 Assisting Medical officer in providing first aid treatments.

 Any other works as required from time to time.

COMPETITORS:

M/s. Sirius Overseas Pvt Ltd., Peddapuram

M/s Venkateswara Industries, Peddapuram

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FUNCTIONAL
PROFILE

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 PROCESS FLOW CHART

RAW PADDY

PRE CLEANERS

CLEANED PADDY MUD BALLS, DUST

RAW RICE MILLS PAR BOILING

SECTION
RAW STEAM @0.8 Kg/cm2
HUSK RIC BROKEN BRAN
WATER
E RICE
PADDY PAR BOILING

TRADE ETP
EFFULENT

STEAM @ 0.8
Kg/cm2

PADDY DRYING

BOILED PADDY STEAM

CONDENSATE TO
BOILER

BOILED RICE MILLS

HUS BOILE BOILED BRA

K D RICE BROKEN N FROM PADDY DRIERS
RICE (STEAM CONDENSATE)
WATER FROM DM
PLANT
EB/TG SUPPLY
BOILER
BLOW DOWN
WATER

TURBINE

0.8Kg /
Cm2
POWER for Captive Consumption STEAM to Process
(Mills,Parboiling,Export to Grid etc)

79 | P a g e
Lalitha brand rice has become a house hold name in Andhra Pradesh and has

gain popularity in many regions across the globe. Catering to countries like

Nigeria, Srilanka, Australia, Bangladesh and Indian states like Kerala etc.

The name has become an epitome of quality and reliability. Sri lalitha

enterprises industries private limited has successfully fulfilled his vision of

bulk purchase of paddy. Here you can see we have built a rice mill here in

50 acres out of 60 acres in 30 acres we have constructed a rice mill the

capacity of 2,500 tons per day and here we have eight right mills in the

compound . This is unit 2 whereas we have unity one in another place seven

kilometres away from this lid when you see this industries here all the

technology was imported from the japan. Lalitha enterprises industries

private limited has attained a brand status providing quality products to its

many satisfied consumers situated in about 60 acres of greenery in

peddapuram close to the Krishna and Godavari basins a region known as the

rice ball of India, Sri Lanka enterprises industries private limited has yearly

milling capacity of seven lakh metric tons and a storage capacity of 3,29,000

tonnes making it a leader today in the non-basmati rice processing sector.

The paddy is sourced from the states of Orissa, Karnataka, west Bengal

and Andhra Pradesh on arrival it is the first weighed on digitized to

Bainbridge’s the samples are then sent to the laboratory for quality testing

automated machines from satake managed by professionals has made the

80 | P a g e
process more productive. The grains are been stowed and kept clean for

processing in huge greeneries around peddapuram. Sri lalitha enterprises

industries private limited has the pride of being fully equipped and

automated at most levels of the processing to manage the large scale of

production. The state of art processing plant has fully mechanized

processing procedures for different stages like de-moisturing temperature

controlled drying cleaning our boiling D husking D stoning polishing

coloured sorting and grading. The machinery from Cambria and satake

imported from Austria and japan ensure quality output while retaining

hygiene and nutritional value of the grains.

in this high-tech miling plant every stage confirms to international standards

and stringent guidelines of process control are put into pratice to make sure

that the grains of uniformity and do not lose their natural aroma and essence

after the stock has gone through intense micro processing it is sent to the

packing section where it is packed in bags of different volumes from 5 kgs

to 75 kgs. The backed rice is then transported to different parts of the country

and the world with the mane’s of load carriers and cargo ships. Swarna

boiled rice swarna white rice 1001 white rice 1001 parboiled rice 1001 100%

broken rice IR 64 white rice IR 64 parboiled rice etc are the varieties that

are exported while BPT RAW RI CE, SONA MASOORI, HMT RICE, P.L

MASOORI 100% brokens etc are catered to the local market and also the

81 | P a g e
broken rice is sent to the semolina plant where it is processed by automated

machines into pure semolina. It is packed in 3 different volumes 5 kg and 50

kg bags in addition to 2 rice mill units with mega boiling plants. Sri lalitha

enterprises industries private limited also boasts of its very own captive

power generation plants of 8.75 megawatts to cater to all its power needs

along that surplus power that is being supplied to the state government. The

husk that remains now becomes the fuel for the power generation plant

where it is burned and the furnace to boil the treated water that’s fed into the

boiler to generate steam. The high-pressure steam is then utilized to run the

turbines thus producing electricity this undoubted versatility as certainly that

which has held soon lalitha enterprises industries private limited achieve its

current status. The organization is employing around 4,000 people as of now

either directly or indirectly. We are coming up with a new concept like

exclusive outlays in Andhra. It’s like a franchise model they are giving a

franchise to all these people. It’s like a retail store.

We at sri lalitha enterprises industries private limited believed in customer

satisfaction and quality. These have been a primary driving forces many

dignitaries and eminent personalities who have contributed to the industrial

development in our country have appreciated our efforts on visiting our

unit. They were clearly impressed by the technology workflows and

quality management. They appreciated our scientific methods and

82 | P a g e
processing system and congratulated us on our unbeatable quality in the

bucket. It’s a matter of immense pride that our long endeavour has been

fruitful.

83 | P a g e
 SRI LALITHA ENTERPRISES
INDUSTRIES (P) LTD.,
COMBINED BALANCE SHEET AS AT 31.03.2018
Figures as at Figures as at
No the end of the end of
Particulars te Current Previous
No Reporting Reporting
Period Period
[Link] AND LIABILITES:
(1) Share Holder's Funds
A
(a)Share Capital 22,00,00,000 22,00,00,000
B
(b)Reserve&Surplus 1,55,59,80,128 1,22,63,05,852
(c)Money received against Share
Warrants

(2) Share application money pending

allotment

C
(3) Non - Current Liabilities: 42,21,47,190 16,78,02,057
(a) Long Term Borrowings
(b) Deferred Tax Liabilities (Net)
D
(c) Other Long Term Liabilities - -
E
(d) Long Term Provisions - -

(4) Current Liabilities:

F
(a) Short Term Borrowings 1,86,04,77,555 1,84,41,25,045
G
(b) Trade Payables 1,49,19,58,665 1,16,52,08,649
H
(c)Other Long Term Liabilites 1,94,38,366 5,67,22,713
I
(d) Short Term provisions 91,69,199 94,40,148

TOTAL 5,57,91,71,103 4,68,96,04,464

II. ASSESTS:
(1) Non-Current Assets
(a) Fixed Assests
J
(i) Tangible Assests 1,00,97,50,630 1,02,16,13,951

84 | P a g e
 K
(ii) Intangible Assests - -

(iii) Capital Work-in-progress 39,48,31,668 -

(iv) Intangible Assest under
development - -
L
(b) Non-Current investments - -

(c) Deferred Tax Assests (Net) - -

M
(d) Long Term Loans and Advances 44,84,818 1,43,31,738
N
(e) Other Non-Current Assests - -

(2) Current Assests:

O
(a) Current Investments 42,700 32,700
P
(b) Inventories 3,09,69,82,590 2,51,65,92,053
Q
(c)Trade Receviables 85,68,44,264 92,37,39,928
R
(d) Cash and Cash Equivalents 12,52,39,131 12,32,09,338
S
(e) Short-Term Loans and Advances 9,09,95,302 9,00,84,755
T
(f) Other Current Assests - -

TOTAL 5,57,91,71,103 4,68,96,04,463

85 | P a g e
 SRI LALITHA ENTERPRISES
INDUSTRIES (P) LTD.,
COMBINED PROFIT & LOSS ACCOUNT FOR THE
PERIOD ENDED 31.03.2018
Figures as at Figures as at
the end of the end of
Note
Particulars Current Previous
No
Reporting Reporting
Period Period
I Revenue from operations PL-1 15,30,56,92,521 11,58,42,67,099
II Other Income PL-2 11,13,66,637 7,83,51,322

III. Total Revenue (I+II) 15,41,70,59,158 11,66,26,18,421

IV Expenses
Cost of material consumed PL-3 11,00,47,14,934 8,63,45,11,498
Purchase of stock-in-Trade PL-4 1,99,23,11,077 1,13,96,42,652
Changes in inventories of
Finished Goods,Work-in- PL-5
progress -29,21,68,606 -9,72,93,835
and stock-in-Trade
Employee Benefit Expense PL-6 15,87,45,998 13,64,16,541
Financial Costs PL-7 21,01,64,974 13,37,54,386
Depreciation and
PL-8
amortization expense 14,18,82,126 14,31,91,539
Other Expenses PL-9 1,79,69,00,342 1,26,60,66,652

Total Expenses 15,01,25,50,845 11,35,62,89,433

Profit before exceptional

and extraordinary items
V and tax (III-IV) 40,45,08,313 30,63,28,988

VI Exceptional Items - -

Profit before extraordinary

VII items and tax (V-VI) 40,45,08,313 30,63,28,988

VII
I Extraordinary Items - -

IX Profit before tax (VII-VIII) 40,45,08,313 30,63,28,988

X Tax Expense:
(1) Current Tax 7,48,34,038 5,66,70,863

(2) Dividend Tax - -

86 | P a g e
 Profit/(Loss) from the
period from continuing
XI operations(IX-X) 32,96,74,275 24,96,58,125

Profit/(Loss) from
XII discounting operations - -

XII Total Expense of

I discounting operations - -

i) Dividend Decleared
during the year out of
XIV Current Year Profits - -
ii) Dividend Decleared
during the year out of the
available Reserves - -

Profit/(Loss) for the period

XV (XI-XIV) 32,96,74,275 24,96,58,125

XVI Earning per equity share:

(1) Basic
(2) Diluted

87 | P a g e
CHAPTER 4

88 | P a g e
CONCEPTUAL
PROFILE

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INTRODUCTION:
Every business needs funds for two purposes for its
establishment and two carry out its day to day operations. Working capital
refers to that part of the firm’s capital, which is required for financing short
term or current assets such as cash, marketable securities, debtors and
inventories. Working capital is the amount of funds to cover the cost of
operating the enterprise.
The goal of working capital management is to manage the
current assets and current liabilities of the firm in such a way that a
satisfactory level of working capital is maintained. Working capital is the
difference between the inflow and outflow of funds. Working capital is also
known as revolving are circulating or short term capital.
MEANING AND DEFINITION OF WORKING CAPITAL
DEFINITION:
According to RALPH CANNEDY and STEWARD Mc Muller
“A study of working capital is of major importance to internal and external
analysis because of its close relationship with the current day to day
operations of business”.
Meaning:
Working capital refers to the funds invested in current assets i.e.
investment in stocks, sundry debtors, cash and other current assets.
Current assets are essential to use fixed assets profitably. For
example a machine cannot be use without raw material. Thus it is
obvious that certain amount of funds is always tied up in raw
materials, work in progress and finishes goods.

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CLASSIFICATION OF WORKING CAPITAL:
Working capital management is mainly classified in two ways

GROSS WORKING CAPITAL:

It is simply called as working capital and refers to the firm’s investment in
current assets. Current assets are the assets that can be converted into cash
within an accounting year or operating cycle and include cash short term
securities, debtors, bills Receivable and stock gross working capital concept
focuses attention on two aspects of current assets management.

➢ Optimum investment in current assets.

➢ Financing of current assets.
Another aspect of gross working capital points to the need of arranging
funds to finance current assets. Whenever a need for working capital funds
arises due to an increasing level of business activity, arrangement should
be made quickly.
NET WORKING CAPITAL:
Net working capital refers to the difference between the current assets
and current liabilities Current liabilities are those claims of outsiders which
are expected to mature for payment with in an accounting year and include
creditors, bills payable and outstanding expenses

Net working capital can be positive or negative. Positive working

Capital will arise if the current assets are more than current liabilities
Negative working capital will arise if current liabilities exceed the current
assets

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TIME BASED:

PERMANENT/ FIXED WORKING CAPITAL:

Permanent or Fixed working capital is the minimum amount, which is
required to ensure effective utilization of fixed facilities and for maintaining
the circulation of current assets, which is continuously required by the
enterprise to carry out of its normal business operations

For example every firm has maintained a minimum level of raw material,
work in progress, finished goods and 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 As the business grows the
required amount of permanent working capital also increase due to the
increase in current assets

The permanent working capital can be further classified into:

1. Regular working capital: regular working capital is required to ensure

the circulation of current assets from cash to inventories, from
inventories to receivable and from receivables to cash and so on.

2. Reserve working capital: It is the excess amount over the requirement

for regular working capital which may be provided for contingencies
that may arise at unstated periods such as strikes, rise in prices,
depression.

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TEMPORARY OR VARIABLE WORKING CAPIAL:

Temporary or variable working capital is the amount of working capital,

which is required to meet the seasonal demand and some special needs.
Variable working capital can be further classified as

1. Seasonal Working Capital: Most of the enterprises have to provide

additional working capital to meet the seasonable and special needs.
The capital required to meet seasonal needs of the enterprise is called
seasonal working capital.
2. Special working capital: Special working capital is a part of
working capital which is required to meet special needs like
launching of extensive marketing campaigns for conducting
research.

IMPORTANCE OF WORKING CAPITAL:

Working capital is the life blood of any enterprise. Maintaining
enough working capital is very essential to maintain smooth running of
business. No business can run successfully without an adequate amount of
working capital. The main advantages of maintaining adequate working
capital are as follows:

1. Solvency of Business: Adequate working capital helps in

maintaining solvency of a business by providing uninterrupted flow
of production.
2. Good will: Sufficient working capital enables businessmen to make
prompt payment and hence helps them in creating and maintaining
good will.

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3. Easy loans: A concern having adequate high solvency and good
credit standing can arrange loans from banks and others on easy and
favorable terms.
4. Cash discounts: Adequate working capital also enables a concern
to avail cash discounts on the purchases and hence it reduces costs.
5. Regular supply: Sufficient working capital ensures regular supply
of raw materials and continues production.
6. Regular payment of salaries and other day to day commitment:
A company which has ample working capital ca makes regular
payment of salaries, wages and other day- to-day commitments which
raises the morale of its employee’s increases their efficiency.
7. Exploitation of favorable market conditions: Only concerns with
adequate working capital can exploit the favorable market conditions
such as purchasing its requirements in bulk quantities when prices are
lower and by holding its inventories for higher prices.
8. Face business crises: Adequate working capital enables a concern to
face business crises in emergencies such as depression because during
such periods generally there is much pressure on the working capital.
9. Quick and regular on investment: Every investor wants a quick
and regular return on his investment. Sufficient working capital
enables a concern to pay quick and regular dividends to its investors
as there may not be much pressures on to plough back the profits.
This gains confidence on its investors and crates a favorable market
to raise additional funds in the future.
[Link] morale: Adequacy of working capital creates an environment
of security confidence and creates on overall efficiency in the
business.

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NEED FOR WORKING CAPITAL:

The need and importance of adequate working capital for daily

requirements can be hardly underestimated. Every firm must maintain a
sound working capital position. Otherwise its business activities may be
adversely affected. The financial manager must see that the firm has
sufficient Working capital as and when required so that the fixed assets of
the firm are optimally used. The objective of financial management to
maximize the shareholder’s wealth can’t be attained if the operations of the
firm are not optimized. Thus, every firm must have adequate working
capital.

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DISADVANTAGES OF EXCESSIVE WORKING
CAPITAL:

➢ Excessive working capital means the idle funds, which earn no profit

for the business, and hence the business cannot earn a proper rate of

return on its investments.

➢ When there is a redundant working capital it may leads to unnecessary

purchases and accumulation of inventories causing more chances of

theft, waste and losses.

➢ Exercise working capital implies excessive debtors and infective

credit policy which may cause higher incidence of bad debts.

➢ It may result into overall inefficiency in the organization.

➢ When there is excessive working capital, relationship with banks and

other financial institutions may not be maintained.

➢ Due to low rate of return on investment, the value of shares may also

fall.

➢ The redundant working capital gibes rise to speculative transactions.

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DANGERS OF INADEQUATE WORKING CAPITAL:
Every business concern should have adequate working capital to run
it business operations. It should have neither excess working capital nor
inadequate. Both are bad for the business. However inadequate can be more
dangerous because:

1. A concern that has inadequate working capital can’t pay ir short-term

liabilities in time. Thus, it will lose its reputation and shall not be
able to get good credit facilities
2. It can’t buy its requirements in bulk and can’t avail discounts etc.,
3. It becomes difficult for the firm to exploits favorable market
conditions and undertakes profitable projects due to lack of working
capital.
4. The firm can’t pay day to day expenses of its operations and it creates
inefficiency because of increasing costs and reducing the profits.
5. It becomes impossible to utilize efficiency the fixed assets due to non-
available of liquid funds.
6. The rate of return on investment also falls with the shortage of
working capital.

97 | P a g e
NETWORKING CAPITAL AS A QUALITATIVE
CONCEPT:

➢ It indicates the liquidity position of the firm.

➢ Suggests the extent to which working capital needs may be financed
by the permanent sources.
A negative working capital position poses threat to the solvency of the firm.
Excessive liquidity is also bad for the company as it may lead to
mismanagement of current assets.
Net working capital also covers the question of judicious mix of long
term and short term funds of financing current assets. Therefore, working
capital should be financed by permanent sources of funds such as owner’s
capital debentures, long-term debt and preference capital.
In summary, it is emphasized that both gross and net concepts of
working capital are equally important for effective management of working
capital. The date and problems of each company should be analyzed to
determine the amount of working capital. It is not fusible in practice to
finance current assets. Since the current assets involve coast of funds they
should be put to productive use.

98 | P a g e
SOURCES OF WORKING CAPITAL:
The working capital requirement should be met from both short term
as well as long term sources of funds. It will be appropriate to meet at least
two thirds if not all of the permanent working capital requirements from long
term sources.
The financing of working capital through short term sources of funds
has the benefits of low cost establishing close relationships with banks. For
the convenience of the study the sources of working capital may be classifies
under two heads.
A) Sources of long term of regular working capital.
B) Sources of short term of seasonal working capital.

FINANCING OF LONG TERM WORKING CAPITAL:

The long term W.C requirements include the initial W.C and the regular
W.C along with it the minimum level of investment in various current assets
also determines the Requirements of long term working capital. This capital
can be conveniently financed by the following sources.
1. Issues of shares or share capital:
A part of long term working capital can be financed with spare capital.

2. Issues of debentures:
Debentures are also an important source of long term working capital
because they are fixed cost sources. Right debentures have also been
popular In India since 1978.

99 | P a g e
3. Retained profits:
A part of the earned profits may be back by the firm in meeting their
working capital requirements. It is regular and cheapest source of working
capital as it does not involve any exploits lost of capital.
4. Idle fixed assets can be sold out and sale proceeds can be utilized for
financing the working capital.
5. Long term loan
Midterm and long term loans for period above 3 years provide imports
sources of working capital such term loans can be borrowed from the special
financial institutions such as IDBI, IFCI, and LIC etc.

FINANACING OF SHORT TERM WORKING CAPITAL:

The category of funds covers the need of working capital for
financing day to day business requirements normally the duration of such
requirements does not exceed beyond a year.
Internal sources:
Depreciation funds:
The depreciation funds constitute import sources of working capital some
others of business finance do not accept them as a source of funds but it is
not reasonable.
Provision for taxation:
The provision for taxation can also be used by the companies as a source of
funds but it is not reasonable.
Accrued expenses:
The firm can possible the payment of expenses for short periods. Hence
those accrued expenses also constitute an important source of working
capital.

100 | P a g e
External sources:
 Trade credit:
One of the most important forms of short term finance is trade credit
extended by one of business enterprise to another on the purchase and
sale of goods and equipments. The use of trade credit has increased
in recent years due mainly perhaps to the credit squeeze.

➢ Bank credit:
Commercial bankers are also principal source of working
capital. They provide working capital in a number of ways such as over
drafts, the cash credit, line of credit, sort term loans etc, compare with others
methods of borrowing this is the most flexible source because when debt is
no longer require it can be quickly reduced.

➢ Credit papers:
In the category of credit papers, bills of exchange, promissory notes
of shorter duration varying between a month and six months are used.
These papers are discounted with a bank and capital can be arranged.
Accommodation bill is an important method of such finance.

➢ Public Deposits:
Public deposits are also an important source of short term and medium
term finance. Due to shortage of bank credit in recent past the
importance of public deposits has increased. They have been very
popular among Indian companies during last three years.

➢ Customers Credit:
Advance may also be obtained on contracts entered into
by the enterprise. The customers are after asked to make some
advance payment in cash in lieu of a Contract to purchase such
advance can be utilized in purchasing raw material paying wages and
so on.

101 | P a g e
 Government assistance:
Sometimes, central and state government also provides short term finance
on easy terms.

➢ Loans from Directors:

An enterprise can also obtain loans from its officers, directors, M.D’s
etc. These loans are often obtained at almost negligible rates of
interest. Sometimes, no interest is charged on them other fellow
companies working capital with the same group.

➢ Security of employees:
Its employees are required to make deposits with their employer; such
companies can utilize those amounts in meeting working capital
needs.

➢ factoring:
Factoring involves raising funds on the security of the company’s
debts, so that cash is received easier.

APPROCHES FOR DETERMINING THE FINANACING

MIX:
There are three basic approaches for determining the working capital
financing mix.
The heading approach:

➢ According to this approach the maturity of the source of fund should

much the nature of assets to be financed. The Approach is therefore
also termed as “Matching approach” it divides the requirements of
working capital funds into two categories.
➢ Permanent working capital funds required for the purchases of core
current asset such do not vary over time.
➢ Temporary or seasonal working capital funds which fluctuate over
time.

102 | P a g e
 The permanent working capital requirements should be financed by
long term funds while seasonal working capital requirements should be
financed by short term funds.
THE CONSERVATIVE APPROACH:
According to this approach all requirements to working capital
should be met from long-term sources. The short-term sources should be
used only for emergencies. The conservative approach is less risky but more
costly as compared to the heading approach. In other results in high profit,
high risk and low cost, low net working capital.
TRADE OF BETWEEN HEADING AND CONSERVATIVE
APPROACH:
The heading and conservative approach both can give satisfactory
results. The level of such trade off will different from case depending upon
perception of the risk by persons involved in financial decision making.
However, one way of determining the level of trade off is by finding the
average of the minimum and maximum requirements of the working capital
during a period. The average working capital so obtained may be filled
again either by long term funds or short-term funds.

FACTORS INFLUENCING WORKING CAPITAL

REQUIREMENTS:
The working capital needs of a firm are influenced by numerous
factors. The important ones are

➢ Nature of business
➢ Seasonally of Operations
➢ Production Policy

103 | P a g e
 ➢ Market Conditions
➢ Conditions of supply
1. Nature of Business:
The working capital requirements of a firm are closely
related to the nature of its business. A service firm, like an electricity
undertaking or a transport corporation, which has a short operating cycle and
which sells predominantly on cash basis, has a modest working capital
requirement. On the other hand, a manufacturing concern like a machine
tools unit, which has a long operating cycle and which sells largely on credit,
has a very substantial working capital requirement.
2. Seasonality of operations:
Firms which have marked seasonally in their operations
usually have high fluctuating working capital requirements. To illustrate
consider a firm manufacturing ceiling fans. The sale of ceiling fans reaches
a peak during the summer months and drops sharply during the winter
period. The working capital need of such a firm is likely to increase
considerably in summer months and decrease significantly during the winter
period.

3. Production policy:
A firm marked by pronounced seasonal fluctuation in its
sales may pursue a production policy which may reduce the sharp variations
in working capital requirements. For example, the manufacturer of ceiling
fans may maintain a stead production throughout the year rather than
intensify the production activity during the peak business season. Such a
production policy may dampen the fluctuations in working capital
requirements.

104 | P a g e
4. Market conditions:
The degree of competition prevailing in the market
place has an important bearing on working capital needs. When competition
is keen, a larger inventory of finished goods is required to promptly serve
customers who may not be inclined to wait because other manufactures are
ready to meet their needs. Further, generous credit terms may have to be
offered to attract customers in highly competitive market. Thus working
capital needs tend to be high because of greater investment in finished goods
inventory accounts receivables
5. Conditions of supply:
The inventory of raw materials spares and stores depends
on the conditions of supply. If the supply is prompt and adequate, the firm
can manage with small inventory. However, if the supply is unpredictable
and scant then the firm to ensure continuity of production would have to
acquire stocks as and when they are available and carry larger inventory on
an average. A similar policy may have to be followed when the raw material
is available only seasonally and production operations are carried out round
the year.

OPERATING CYCLE:

Working capital is required because of the some gap between the

sales and their actual realization in cash. This time gap is technically terms
as upsetting cycle of the business. In case of manufacturing company, the
operating cycle is the length of time necessary to complete the following
cycle of event.

 Conversion of cash into raw materials.

105 | P a g e
  Conversion of raw materials into works in progress.
 Conversion of progress into finished goods.
 Conversion of account receivables into cash.
This cash is continues phenomena. In case of “Trading firm”
the operating cycle will include the length of time required to:
a) Cash into inventories.
b) Inventories into Accounts receivables.
c) Accounts receivables into cash.

In case of “Financing firm”, the operating cycle includes the length to time
for 1 Year.

a) Conversion of cash debtors and

b) Conversion of debtors into cash

Raw
cash
materials

Working
Receivables
process

Finished
Credit sales
goods

106 | P a g e
 PROFORMA OF WORKING CAPITAL MANAGEMENT

Working Capital Management

Change in Working
Year
Particulars capital
Previous Current Increase Decrease
Current Assets:

1. Inventories xxx xxx

2. Sundry debtors xxx xxx
3. Cash/bank balances xxx xxx
4. Other current assets xxx xxx
5. Loans and advances
xxx xxx
a) Total current assets: Xxx xxx

Current liabilities:

1. Liabilities
2. Provisions xxx xxx

b)Total current liabilities: xxx xxx

Xxx xxx

Net Working Capital (a-b)

xxx xxx
Decrease/increase in Working
Capital
xxx xxx

xxx xxx

107 | P a g e
OPTIMUM LEVEL OF CURRENT ASSETS
The financial manager should determine the optimum level of current
assets so that the wealth of shareholders is maximized. In fact, optimum
level for each type of current assets is discussed in this chapter.

CURRENT ASSETS AND FIXED ASSETS

A firm needs fixed and current assets to support a particular
level of output. However to support the same level of output, the firm output
the sales increase, the need for the current assets increases. Generally current
assets increases don’t increases in direct proportion to output, current assets
increase at a decreasing rate with output.

EVALUATION OF CURRENT ASSETS

The adequacy of the level of current assets in the SLEIPL and the
working capital policy formed followed by the SLEIPL can be evaluated
through the following ratios.

CURRENT ASSETS TO GROSS FIXED ASSETS RATIO:

The adequacy of the level of current assets and also the current
assets policy of the corporation can be measured real time current assets to
fixed assets dividing current assets by fixed assets, a higher CURRENT
ASSETS/FIXED ASSETS ratio assuming a constant of fixed assets, higher
CURRENT ASSETS/FIXED ASSETS ratio means a conservative current
assets policy and a lower CURRENT ASSETS/FIXED ASSETS ratio
indicates an aggressive current assets policy.

108 | P a g e
CHAPTER - V

109 | P a g e
 Analysis
&
Interpretation

110 | P a g e
 DATA ANALYSIS& INTERPRETATIONS
STATEMENT OF CHANGES IN WORKING CAPITAL
FOR THE YEAR 2015-16

TABLE:

CALCULATION OF WORKING CAPITAL

Changes in working
Years
capital
Particulars Amount (Rs. In Lacs)
2014-2015 2015-2016 Increase Decrease
Current Assets:
Inventories 20,523.28 -
14,315.42 6,207.86
Trade Receivables 9,120.83 -
9,746.19 625.36
Cash & Cash Equivalents 1,473.66 -
3,161.85 1,688.19
Short Term Loans and Advances 1,478.18 -
1,018.87 459.31
Total Current Assets (a) 32,595.96
28,242.34
Current Liabilities:
Liabilities & Provisions 29,141.78 -
26,293.35 2,848.43
Total Current Liabilities (b) 29,141.78
26,293.35

Net Working Capital (a-b) 3,454.17

1,948.98

Net Increase in Working Capital 1,505.19

111 | P a g e
INTERPRETATION:

The above Table shows the changes in net working capital for the year
2014-2015 and 2015-2016. The net Increase in working capital during the
year 2015-16 is Rs 1505.19 Lakhs.
The Inventories and Short Term Loans are increased, Cash &cash
Equivalents and Trade Receivables are decreased.
In this year Liabilities & Provisions has been increased, therefore by this
reasons net working capital is Rs 1505.19 lakhs.

112 | P a g e
 STATEMENT OF CHANGES IN WORKING CAPITAL
FOR THE YEAR 2016-17
TABLE:

CALCULATION OF WORKING CAPITAL

Changes in working
Years
capital
Particulars Amount (Rs. In Lacs)
2015-2016 2016-2017 Increase Decrease
Current Assets:
Inventories -
20,523.28 25,165.92 4,642.64
Trade Receivables -
9,120.83 9,237.40 116.57
Cash & Cash Equivalents -
1,473.66 1,232.09 241.57
Short Term Loans and Advances -
1,478.18 900.85 577.33
Total Current Assets (a) 32,595.96
36,536.26
Current Liabilities:
Liabilities & Provisions -
29,141.78 30,754.97 1,613.18
Total Current Liabilities (b) 29,141.78
30,754.97

Net Working Capital (a-b) 3,454.17

5,781.30

Net Increase in Working Capital

2,327.12

113 | P a g e
INTERPRETATION:

The above Table shows the changes in net working capital for the year
2015-2016 and 2016-2017. The net Increase in working capital during the
year 2015-16 is Rs 2327.12 Lakhs.
The Inventories and Trade Receivables are increased, and Cash &cash
Equivalents and Short Term Loans are decreased.
In this year Liabilities & Provisions has been increased, therefore by this
reasons net working capital is Rs 2327.12 lakhs.

114 | P a g e
 STATEMENT OF CHANGES IN WORKING CAPITAL
FOR THE YEAR 2017-18
TABLE:

CALCULATION OF WORKING CAPITAL

Changes in working
Years
capital
Particulars Amount (Rs. In Lacs)
2016-2017 2017-2018 Increase Decrease
Current Assets:
Inventories -
25,165.92 30,969.83 5,803.91
Trade Receivables -
9,237.40 8,568.44 668.96
Cash & Cash Equivalents 20.30 -
1,232.09 1,252.39
Short Term Loans and Advances -
900.85 909.95 9.11
Total Current Assets (a)
36,536.26 41,700.61
Current Liabilities:
Liabilities & Provisions -
30,754.97 33,810.44 3,055.47
Total Current Liabilities (b)
30,754.97 33,810.44

Net Working Capital (a-b)

5,781.30 7,890.18

Net Increase in Working Capital

2,108.88

115 | P a g e
INTERPRETATION:

The above Table shows the changes in net working capital for the year
2016-2017 and 2017-2018. The net Increase in working capital during the
year 2016-17 is Rs 2108.88 Lakhs.
The Inventories, Cash &cash Equivalents and Short Term Loans are
increased, Trade Receivables are decreased.
In this year Liabilities & Provisions has been increased, therefore by this
reasons net working capital is Rs 2108.88 lakhs.

116 | P a g e
FINANCIAL RATIO ANALYSIS:

CURRENT RATIO:

The Current Ratio is calculated to measure the liquidity position of the company.

The standard norm of this ratio is 2:1 that is for 1 rupee of Current Liabilities there should

be atleast 2 rupee of Current Assets.

Computation Formula = Current Assets/Current Liabilities

Current Ratio

Rs in Lakhs…..

TABLE:

Year Current Assets Current Liabilities Ratio

2014-2015 28,242.34 26,293.35

1.07

2015-2016 32,595.96 29,141.78

1.12

2016-2017 36,536.26 30,754.97

1.19

2017-2018 41,700.61 33,810.44

1.23

117 | P a g e
 Showing the current ratios
Ratio

1.25 1.23
1.19
1.2

1.15 1.12
1.1 1.07
1.05

0.95
2014-2015 2015-2016 2016-2017 2017-2018

GENERAL INTERPRETATION OF CURRENT RATIO:

 If Current Assets is greater than Current Liabilities, then Ratio

will be greater than one. This is a desirable situation where the entity

is able to meet its current liabilities ably with the Current Assets.

Taking the other side, though the Current Ratio of the entity is too

high, it can also be treated as a negative sign. Let us assume that the

company is having problems recovering its dues from its debtors and

the debtor cycle is negative. Your debtors may be large due to delays

in payment and that may be the reason for a high current ratio. That

is not a healthy sign from the point of view of working capital

management. Secondly, it is possible that the company is having too

much of working capital invested in inventories. Either, its raw

material supplies are volatile or its finished goods inventories are

118 | P a g e
 piling up due to weak sales. Either ways it is not a good sign.

Thirdly the business could be having an unfavourable working

capital cycle wherein the debtors are paying after a credit period but

the payout to creditors is happening upfront. This may overstate the

current ratio due to low levels of creditor payables.

 If Current Assets is equal to Current Liabilities, then Ratio will

be equal to one. This is a situation where the entity is just enough to

meet its current Liabilities from its current Assets. In this case it

might be required to raise extra finance or extend the time it takes to

pay creditors.

 If Current Assets is less than Current Liabilities, then Ratio is

less than one. This is a case where the entity is not having enough to

meet its current short term obligations. The Entity need to take a

quick decision to raise enough funds from the temporary breakdown

of the business.

Though there is an ideal Current Ratio of 2:1, different business and

Industries work under different levels of cover. However, a ratio of less

than one is often a cause for concern, particularly if it persists for any

length of time.

119 | P a g e
INTERPRETATION OF ABOVE TABLE:

The above Table shows the current ratio position of the company for the past

four years from 2014-2015. Here the current ratio of Sri Lalitha Enterprises

Industries Private Limited is 1.07 in 2014-15, 1.12 in 2015-16 1.19 in 2016-

2017, and 1.23 in 2017-2018

In the year 2014-15 the current ratio is 1.07 increased to 1.12 in the year

2015-16, the current ratio again increased from 1.12 to 1.19 form 2015-2016

to 2016-2017 and further increased to 1.23 in 2017-2018 as against 1.19 in

the year [Link] continuous increase is due to the increase

proportion of Current Assets is more than the increase proportion of Current

Liabilities every year.

From the above interpretation, it can be said that, the company is

maintaining a better Current Assets ratio of more than one, increasing year

on year. It is advisable to have a better Current Ratio near to 2:1, which is

considered as a general Industry standard.

120 | P a g e
QUICK RATIO:
The Quick Ratio is a measure the firm’s short-term solvency. The standard
norm of this ratio is 1:1 that is for one rupee of current Asset’s there should
be one rupee of Current Liabilities.

Computation Formula = Current Assets-Stock/Current Liabilities

Quick Ratio
Rs in Lakh…….
TABLE:

Current Assets- Current

Year Ratio
Stock Liabilities

2014-2015 13,926.91 0.53

26,293.35

2015-2016 12,072.67 0.41

29,141.78

2016-2017 11,370.34 0.37

30,754.97

2017-2018 10,730.79 0.32

33,810.44

121 | P a g e
 Showing the quick ratios
Ratio

0.6
0.53
0.5
0.41
0.4 0.37
0.32
0.3

0.2

0.1

0
2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION:
The above table shows the Quick ratio position of the company on the
past four years from 2014-2018.

The Quick Ratio of Sri Lalitha Enterprises Industries Private

Limited is 0.53 in the year 2014-15 and 0.41 in 2015-16, 0.37 in 2016-17
and 0.32 in 2017-18. The Quick Ratio in all the four years is changing in
the financial positions due to increase in holding of inventory by the
company. Though the ratio is not as per the rule of thumb, the position of
the company is considerably good as far as nature of Industry is concerned.
The major raw material in the Industry is Paddy, the storage of which is
considered as good both financially as well as quality is concerned.

122 | P a g e
INVENTORY TURNOVER RATIO:
The Inventory Turnover Ratio indicates the efficiency
of the firm’s inventory management.

Computation Formula = Sales/Inventory

Inventory Turnover Ratio

TABLE: Rs in Lakhs…..

YEAR SALES INVENTORY RATIO

2014-15
116,993.25 14,315.42 8.17

2015-16
111,452.80 20,523.28 5.43

2016-17
115,842.67 25,165.92 4.60

2017-18
153,056.92 30,969.83 4.94

123 | P a g e
 showing the inventory ratio
RATIO

9 8.17
8
7
6 5.43
4.94
5 4.6
4
3
2
1
0
2014-15 2015-16 2016-17 2017-18

INTERPRETATION:
Table above table shows the inventory turnover ratio
position of the company for the past four years from 2014-18.
The Inventory turnover ratio of Sri Lalitha Enterprises
Industries Private Limited is 8.17 in 2014-15, and it declined to 5.43 in 2015-
16. It has been further decreased to 4.60 in 2016-17 and is increased to 4.94
in 2017-18.
The decrease of this ratio year on year is due to increase in Inventory every
year.

124 | P a g e
CHAPTER - VI

125 | P a g e
SUMMARY

126 | P a g e
Financial management is the blood of any organization. With-out it no
organization can survive in the competitive world. Financial management
play a role in investment of financial resources in a proper Way, it gives the
company perform through balance sheet, profit and other financial
statement.

The efficient and effective management of working capital of crucial

importance for the success of a business, which involves the management of
the current assets and the current liabilities. The business concern has
therefore to optimize the use of available resources through the efficient and
effective management of the current assets and the current liabilities. This
will enable to increase the profitability of the concern and the firm could be
able to meet its current obligation will in time.
Working capital management is concerned with the problems that arises in
attempting to manage the current assets, the current liabilities and the inter
relationship that exists between them. The major current assets are cash,
marketable securities, accounts receivables and inventory. The basic current
liabilities are account payables, bills payable, bank overdraft, and
outstanding expenses, the goal of working capital management is to manage
the firm’s current assets and liabilities in such way that a satisfactory level
of working capital is maintained.

Working capital is life blood and nerve of business, just as circulation of

blood is essential in the human body for maintaining life, working capital is
very essential to maintain the smooth running of a business. No business can
run successfully without an adequate amount of working capital.

127 | P a g e
The present study has been taken up with the following objectives:

 To gain familiarity with the various components of working capital in

Sri Lalitha Enterprises Industries Private Limited.

 To judge the success of the management in carrying on the daily

transactions of the company.

 To gain an in-depth knowledge of the tricks of managing the daily

financial activities of the company.

 To identify problem if any and to make suggestions.

The data have been collected through meeting and interviews with various
managers and employees of the finance department located in the
administrative building of Lalitha Enterprises industries private limited.

Working capital management in SLEIPL analysis the efficiency of the

working capital management and its components i.e, inventory amount, cash
and bank balance and various current liabilities. The study attempt
determine the efficiency and effectiveness management in segment of
working capital. Since the net concept of working capital has been taking
the present study, management of both current assets and current liabilities
will be critically reviewed.

Management of working capital is an essential task. The amount of of

working capital available should be neither too large nor too small.
Efficiency in this areas can help, to utilize fixed assets gainfully, to assure

128 | P a g e
the firm’s long-term success and to achieve the overall goal of the
shareholders, funds.

Shortage or bad management of cash may result in loss of cash discount and
loss of reputation due to non-payment of obligation on due dates. A large
amount working capital would mean that the company has idle funds. Since
funds have a cost, company has to pay huge amount as interest on such
funds. If the firm have inadequate working capital, such firm runs the risk
of insolvency. Insufficient inventories may be the main cause of production
held up and it may compel the enterprises to purchase raw materials at
unfavourable rates. Like-wise facility of credit sale is also very essential for
sales promotions.

It is understood that working capital is the vital component for further

growth of firm. Financial manager has to maintain adequate level of working
capital. There are several factors which influence the determination of
working capital. It is necessary to know those factors which identifying the
optimum size of working capital. In SLEIPL working capital is generally
determined by these factors. Those are, Market coverage, Manufacturing
cycle, Advances, Growth of the firm, Seasonal fluctuations, Global market
boom, expansion chances, Credit policy.

129 | P a g e
The management of working capital in SLEIPL encompasses the following
problems:

1. To decide upon the optimal level of investment in various current

assets.

2. To decide upon the optimal mix of short-term funds in relation to

long-term capital.

3. To locate the appropriate means of short-term financing.

130 | P a g e
Findings

131 | P a g e
 Company is maintaining a better Current Assets ratio of more than
one, increasing year on year. It is advisable to have a better Current
Ratio near to 2:1, which is considered as a general Industry standard.

 The ratio is not as per the rule of thumb, the position of the company
is considerably good as far as nature of Industry is concerned. The
major raw material in the Industry is Paddy, the storage of which is
considered as good both financially as well as quality is concerned.

 The company has to put a regular check upon in inventory level to

avoid the locking of the capital in the inventories.

 Findings During the period of study, it is observed that the amount of

working capital has been continuously increasing year by year due to
the continuous increase in the value of inventories.

 The company is able to maintain sufficient working capital in every

year during the period of study i.e. from 2014-15 to 2017-18.

132 | P a g e
Suggestions

133 | P a g e
 The overall performance of the company during of study is
satisfactory.

 Working capital of the firm is in satisfactory position so SLEIPL

should try to increase its current assets and current liabilities to
continue in same manner.

 The company has to increase current ratio.

 The company should improve its quick assets.

 The company high inventory is also a reason for decrease of the

profits. Inventories should be kept at optimum level.

 SLEIPL has to put some more efforts to reduce the holding of

inventory by Proper utilization of funds, so that the carrying cost etc
will be reduced.

 Efficient utilization of the working capital is necessary for the

betterment of the company as a whole, as well as for different
departments individually.

 Cost cut down mechanisms can be employed to reduce the wastage of

other assets like small inventories.

 Utilization of assets must be appropriate and optimum.

134 | P a g e
 The company must maintain more liquid or current assets as they can
be easily converted into cash.

 It is observed from the Financial Statements that, Company is

incurring more Finance Cost. It is advisable to switch to the other
Sources of Funds more popularly IPO (Initial Public Offer) so that the
cost of Finance may be decreased considerably.

135 | P a g e
Conclusion

136 | P a g e
The overall performance of the company during the period of study is much
satisfactory.

It should continue in the same way so that it will have bright future with
increase in sales and profitability.
The way it is managing its funds is also good. Working capital of the firm is
in satisfactory position so SLEIPL should try to increase its Current assets
and decrease its Current liabilities to continue in same manner.
Excess amount of cash inflow is to be used for working capital to increase
current ratio.

There is no point in studying lot of theories unless and until practical

knowledge is gained.
This institutional framing has helped me to see the actual scenario in the
Rice Industry. The employees in SLEIPL, Peddapuram were so cooperative
that what all queries I have, they clarified it.

There are many motivational programs conducted for employees in SLEIPL.

In the finance department all the officials guided me effectively regarding
all the functions performed by the department. Thus, this one-month training
program has helped me in facing the reality.

I am very much thankful to my company guide [Link] Internal

Auditor, SLEIPL and my college guide Mrs. P.V. Mohini in extending their
valuable support and guiding me for completion of my project work.

137 | P a g e
Bibliography

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Annual report of SLEIPL from 2014-15 to 2017-18

Books:

1. Essentials of financial management - [Link]

2. Financial management - Prasanna Chandra Financial Management -
Khan &Jain
3. Management accounting – R.K. Sharma and Shashi. K. Gupta –
Kalyani Publishers.

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