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ANNEXURE-V-COVER PAGE FOR ACEDEMIC TASK

Course Code: FIN302 Course Title: Fundamentals Financial Management

Course Instructor: Dr. Anil Kumar Section: Q1905
Academic Task No: 03 Academic Task Title: TATA Con. Products

Date of Allotment:05 /04 2021 Date of submission: 20/04/ 2021

Student’s Roll no: A20 Student’s Redg.No: 11910737

Learning Outcomes: able to know about the working capital management of the
company.

Declaration:
I declare that this Assignment is my individual work. I have not copied it from any other
student’s work or from any other source except where due acknowledgement is made
explicitly in the text, nor has any part been written for me by any other person.
Student’s Signature:

Evaluator’s Comments (For Instructor’s use only)

General Observations Suggestions for Improvement Best Part of Assignment

Evaluator’s Signature and Date:

Marks Obtained: Max. Marks: _

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Rubric
S. Roll No Objective Topic Evaluation Parameters Expected
No s of outcomes
Academic
Activity
1 All the To test the Student will be Following are the Application
students conceptual given one parameters for of concept
clarity of company to find evaluation.
students (1) Gross 1. Gross Operating
Operating Cycle, Cycle (10 Marks
(2) Net Operating for calculation +
cycle , (3) Gross 5 marks for
Working Capital, analysis)
(4) Net Working 2. Net Operating
Capital, for the Cycle (5 Marks
year 2017-18, for calculation +
2018-19, 2019-20 2.5 marks for
using information analysis)
from company 3. Gross Working
annual reports Capital and Net
and do the Working Capital
analysis of result (5 Marks for
for given points calculation + 2.5
and its marks for
appropriateness , analysis)
suggestions for
further
improvement .

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CONTENTS
S.N TOPIC

1 Introduction of Tata Cons. Products.

2 Gross Operating Cycle’s Calculation and Analysis

3 Net Operating Cycle’s Calculation and Analysis

4 Gross Working Capital’s Calculation and Analysis

5 Net Working Capital’s Calculation and Analysis

6 Recommendation and Suggestion

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Introduction of TATA

Introduction:
Tata Consumer Products is a focused consumer products company uniting the food and
beverage interests of the Tata group under one umbrella. It is home to key brands such as
Tata Tea, Tetley, Tata Salt and Tata Sampann. With a combined reach of over 200 million
households in India, it has an unparalleled ability to leverage the Tata brand in consumer
products. We are on a mission to create a premier diversified consumer products company.
Our strengths lie in our deep understanding of our consumers in India and in international
markets, iconic market-leading brands and wide consumer reach. We are committed to
delivering high-quality, innovative, tasteful and convenient products with goodness at its
core. Our portfolio of products ranges from tea, coffee, water and ready-to-drink to salt,
pulses, spices, ready-to-eat and more. Tata Consumer Products has grown through
innovation, strategic alliances and acquisitions, and organic growth. The company has a joint
venture with Starbucks called Tata Starbucks Limited, to own and operate Starbucks cafés in
India. Since the inauguration of the flagship store in Mumbai in October 2012, this 50:50 JV
has expanded to 10 cities, with many more Starbucks stores planned across the country. The
company also has a JV with PepsiCo in India, called NourishCo, which produces non-
carbonated ready-to-drink beverages that focus on health and enhanced wellness. NourishCo
produces and markets Tata Water Plus — India’s first nutrient water, and Tata Gluco Plus —
an energizing, glucose-based flavoured drink. Himalayan water is also marketed and
distributed through NourishCo.

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Competition

Name Last Price Market Cap. Sales Net Profit Total Assets
(Rs. cr.) Turnover
TATA Cons. Prod 680.10 62,674.73 5,690.24 523.54 10,885.01
CCL Products 254.65 3,387.56 822.65 238.93 1,154.58
Tata Coffee 115.80 2,162.80 719.44 73.21 1,071.51
Rossell India 106.15 389.53 309.31 18.55 372.34
Mcleod 18.95 197.94 856.40 12.28 3,565.95
Jayshree Tea 66.90 193.19 486.49 -27.88 580.30
United Nilgiri 291.75 145.77 62.82 10.71 154.50
The Grob Tea 784.50 91.18 82.39 1.65 57.32
Peria Karamalai 192.25 59.52 39.38 -3.62 187.15
Assam Company 0.60 18.59 179.28 -101.62 845.95
Norben Tea 4.90 5.76 4.87 -1.61 21.18

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BALANCE SHEET OF TATA CONS. PRODUCTS

Year 2017-18 2018-19 2019-20
SOURCES OF FUNDS :
Share Capital + 36.34 36.34 36.34
Reserves Total + 306.38 339.56 519.17
Equity Share Warrants 0 0 0
Equity Application Money 0 0 0
Total Shareholders Funds 342.72 375.9 555.51
Minority Interest 0 0 0
Secured Loans + 241.21 325.04 340.14
Unsecured Loans + 22.79 82.99 53.83
Total Debt 264 408.03 393.97
Policy Holders Fund 0 0 0
Other Liabilities+ 10.36 9.75 9.79
Total Liabilities 617.08 793.68 959.27
APPLICATION OF FUNDS
:
Gross Block + 405.46 412.34 426.61
Less: Accumulated
Depreciation+ 48.03 69.72 98.11
Less: Impairment of Assets 0 0 0
Net Block+ 357.43 342.62 328.5
Lease Adjustment 0 0 0
Capital Work in Progress+ 2.83 4.74 2.97
Producing Properties 0 0 0
Investments + 0 6.63 5.44
Current Assets, Loans &
Advances
Inventories + 300.11 252.8 210.38
Sundry Debtors + 120.61 136.04 50.38
Cash and Bank+ 5.57 7.24 11.15
Loans and Advances + 198.19 353.38 546.6
Total Current Assets 624.47 749.46 818.51
Less : Current Liabilities and

Provisions
Current Liabilities + 378.51 377.94 234.15
Provisions + 26.92 30.86 57.41
Total Current Liabilities 405.43 408.79 291.56
Net Current Assets 219.05 340.67 526.95
Miscellaneous Expenses not
written off + 0 0 0
Deferred Tax Assets 23.96 30.64 30.71
Deferred Tax Liability 30.19 35.5 36.15
Net Deferred Tax -6.23 -4.86 -5.44
Other Assets+ 44 103.88 100.85
Total Assets 617.09 793.68 959.27
Contingent Liabilities+ 232.01 514.93 360.16
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PROFIT AND LOSS A/C OF TATA CON. PRODUCTS.

Year 2017-18 2018-19 2019-20

INCOME :
Sales Turnover + 1,475.26 1,506.64 1,221.09
Excise Duty 18.88 0 0
Net Sales 1,456.38 1,506.64 1,221.09
Other Income + 19.73 35.31 198.22
Stock Adjustments + 7.99 -42.76 -9.68
Total Income 1,484.10 1,499.19 1,409.63
EXPENDITURE :
Raw Materials + 911.75 927.12 727.75
Power & Fuel Cost+ 13.46 15.59 15.58
Employee Cost + 167.71 156.9 149.46
Other Manufacturing Expenses + 12.19 22.98 20.86
Selling and Administration Expenses + 207.01 178.8 130.25
Miscellaneous Expenses + 47.82 61.41 47.29
Less: Pre-operative Expenses
Capitalised+ 0 0 0
Total Expenditure 1,359.94 1,362.80 1,091.19
Operating Profit 124.15 136.4 318.44
Interest + 29.3 54.77 70.68
Gross Profit 94.85 81.63 247.76
Depreciation+ 19.24 21.84 28.97
Minority Interest (before tax) 0 0 0
Profit Before Tax 75.61 59.79 218.79
Tax+ 17.33 12.88 39.93
Fringe Benefit Tax+ 0 0 0
Deferred Tax+ 5.12 -0.91 0.58
Net Profit 53.16 47.83 178.29
Minority Interest (after tax) 0 0 0
Profit/Loss of Associate Company 0 0 0
Net Profit after Minority Interest &
P/L Asso.Co. 53.16 47.83 178.29
Extraordinary Items + 3.91 -13.09 129.45
Adjusted Net Profit 49.25 60.92 48.84
Adjst. below Net Profit + 0.2 -3.93 0.87
P & L Balance brought forward -38.06 15.3 48.29
Statutory Appropriations 0 0 0
Appropriations + 0 10.9 0
P & L Balance carried down 15.3 48.29 227.45
Dividend 10.9 0 0
Preference Dividend 0 0 0
Equity Dividend (%) 30 0 0
Dividend Per Share(Rs) 1.5 0 0

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EPS before Minority Interest (Unit

Curr.) 7.31 6.58 24.53
EPS before Minority Interest (Adj)
(Unit Curr.) 7.31 6.58 24.53
EPS after Minority Interest (Unit
Curr.) 7.31 6.58 24.53
EPS after Minority Interest (Adj)
(Unit Curr.) 7.31 6.58 24.53
Book Value (Unit Curr.) 47.15 51.71 76.43
Book Value (Adj) (Unit Curr.) 47.15 51.71 76.43

Gross Operating Cycle (GOC): GOC is the sum of Raw material conversion
period (RMCP), Work in Progress Conversion Period (WIPCP), finished goods
conversion period (FGCP) and debtors Conversion period (DCP).

Formula to calculate Gross operating Cycle = RMCP+WIPCP+FGCP+DCP

Where,

RMCP = Raw Material Conversion period

WIPCP = Work in Progress Conversion Period

FGCP = Finished goods Conversion period

DCP = debtors conversion period

Now,

Calculation of gross operating Cycle for year (2017-18)

Raw Material conversion period (RMCP) = (Average raw material/ Total raw material
consumed)*365

Average raw material (in cr.) = (opening stock of raw material+ closing stock
of raw material)/2

= (83.81 + 89.93) / 2

= 86.87

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Total raw material consumption = opening stock + purchase – closing stock

= 83.81 + 510.44 – 89.93

= 504.32

RMCP= (86.87/504.32)*365

= 62.87 days

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Work in progress conversion period (WIPCP) = (Average WIP/ total cost of

production)*365

Average WIP = (Opening stock of WIP+ closing stock of WIP)/2

= (37.28 + 44.99) / 2

= 41.14

Total cost of production = 1,118.83

WIPCP= (41.14/1118.83)*365

= 13.42 days

Finished goods conversion period (FGCP) = (Average finished Goods/ total cost of
goods sold)*365

Average finished goods = (opening stock of finished goods +closing stock of finished
goods)/2

= (158.13+158.41)/2

= 158.27

= 1456.38 – 94.85

= 1361.53

FGCP= (158.27/1361.53)*365

= 42.43 days

Debtors conversion period (DCP) = (Average Debtors/ total annual credit sales)*365

Average debtors = (Opening balance in debtors+ Closing balance of debtors)/2

= (87.37+120.61)/2

= 103.99

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Total annual credit sales = net sales (assuming all sales are done on credit basis)

= 1456.38

DCP = (103.99/1456.38)*365

= 26.06 days

Gross operating cycle = RMCP+ WIPCP+ FGCP+ DCP

= (62.87+13.42+42.43+26.06) days

= 144.78 days

Calculation of gross operating Cycle for year (2018-19)

Raw Material conversion period (RMCP) = (Average raw material/ Total raw material
consumed)*365

Average raw material (in cr.) = (opening stock of raw material+ closing stock
of raw material)/2

= (89.93+85.69) / 2

= 87.81

Total raw material consumption = opening stock + purchase – closing stock

= 89.93+537.48 -85.69

= 541.72

RMCP= (87.81/541.72)*365

= 59.16 days

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Work in progress conversion period (WIPCP) = (Average WIP/ total cost of

production)*365

Average WIP = (Opening stock of WIP+ closing stock of WIP)/2

= (44.99 + 38.24) / 2

= 41.62

Total cost of production = 1105.34

WIPCP= (41.62/1105.34)*365

= 13.74 days

Finished goods conversion period (FGCP) = (Average finished Goods/ total cost of
goods sold)*365

Average finished goods = (opening stock of finished goods +closing stock of finished
goods)/2

= (158.41+122.04)/2

= 140.23

= 1506.64 -81.63

= 1425.01

FGCP= (140.23/1425.01)*365

= 35.92 days

Debtors conversion period (DCP) = (Average Debtors/ total annual credit sales)*365

Average debtors = (Opening balance in debtors+ Closing balance of debtors)/2

= (120.61+136.04)/2

= 128.33

Total annual credit sales = net sales (assuming all sales are done on credit basis)

= 1506.64

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DCP = (128.33/1506.64)*365

= 31.09 days

Gross operating cycle = RMCP+ WIPCP+ FGCP+ DCP

= (59.16+13.74+35.92+31.09) days

= 139.91 days

Calculation of gross operating Cycle for year (2019-20)

Raw Material conversion period (RMCP) = (Average raw material/ Total raw material
consumed)*365

Average raw material (in cr.) = (opening stock of raw material+ closing stock
of raw material)/2

= (85.69 + 53.14) / 2

= 69.42

Total raw material consumption = opening stock + purchase – closing stock

= 85.69+423.83-53.14

= 456.38

RMCP= (69.42/456.38)*365

= 55.52 days

Work in progress conversion period (WIPCP) = (Average WIP/ total cost of

production)*365

Average WIP = (Opening stock of WIP+ closing stock of WIP)/2

= (38.24+33.07) / 2

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= 35.66

Total cost of production = 938.93

WIPCP= (35.66/938.93)*365

= 13.86 days

Finished goods conversion period (FGCP) = (Average finished Goods/ total cost of
goods sold)*365

Average finished goods = (opening stock of finished goods +closing stock of finished
goods)/2

= (122.04+117.26)/2

= 119.65

= 1221.06-247.76

= 973.30

FGCP= (119.65/973.30)*365

= 44.87days

Debtors conversion period (DCP) = (Average Debtors/ total annual credit sales)*365

Average debtors = (Opening balance in debtors+ Closing balance of debtors)/2

= (136.04+50.38)/2

= 93.21

Total annual credit sales = net sales (assuming all sales are done on credit basis)

= 1221.09

DCP = (93.21/1221.09)*365

= 27.86 days

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Gross operating cycle = RMCP+ WIPCP+ FGCP+ DCP

= (55.52+13.86+44.87+27.86) days

= 142.11 days

Analysis:
The operating cycle provides an insight on the performance and efficiency of the company.
This cycle is useful for the business to maintain its working capital requirement and growth
of the business. The shorter cycle indicates that company can recover its investment within
short span of time. As we can see from the calculation that GOC of TATA Con. Products in
high in the year 2017-18 i.e. 144.78 days in 2018-19 its 139.91 days and in 2019-20 its
142.11 days respectively.

This calculation indicates that the GOC of Eveready Industries India Limited is too high. It’s
also shows that its take too much time to recover its investment.

So I would like to give some recommendation to TATA Con. Products so that they can
manage their working capital and its operation. It is explained in the following.

Inventory management should be there for proper utilization of resources. Keeping

inventory high not give any benefits so it’s better to keep inventory as per demand so
that they can recover the money and also able to manage the capital requirement.

It’s also not able to recover the amount from the creditors, which creates difficulty to
manage or operate its operation. So company should make shorter credit duration to
recover the credit sales amount.

Net Operating Cycle: Net operating cycle is also known as Cash Conversion Cycle. It’s
the number of days it takes a company to generate revenues with assets.

Formula for Net Operating Cycle = Gross operating cycle – credit deferral period

Calculation of Net Operating cycle for the year (2017-18)

Gross operating cycle= 144.78 days

Credit deferral period = Average Creditor/ Total annual credit purchase)*365

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Average creditor= (Opening creditors + closing creditors)/2

= (128.03+121.27)/2

= 124.65

Total annual credit purchase = 510.46 (assuming total purchase as annual credit

purchase) Credit deferral period= (124.65/510.46)*365

=89.13

Net Operating Cycle= GOC-CDP

=144.78-89.13

= 55.65 days

Calculation of Net Operating cycle for the year (2018-19)

Gross operating cycle= 139.91 days

Credit deferral period = Average Creditor/ Total annual credit purchase)*365

Average creditor= (Opening creditors + closing creditors)/2

= (121.27+131.07)/2

= 126.17

Total annual credit purchase = 537.48 (assuming total purchase as annual credit

purchase) Credit deferral period= (126.17/537.48)*365

=85.68

Net Operating Cycle= GOC-CDP

=139.91-85.68

= 54.23 days

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Calculation of Net Operating cycle for the year (2019-20)

Gross operating cycle

cycle= 142.11 days

Credit deferral period = Average Creditor/ Total annual credit purchase)*365

Average creditor= (Opening creditors + closing creditors)/2

= (131.07+139.75)/2

= 135.41

Total annual credit purchase = 423.83 (assuming total purchase as annual credit purchase)

Credit deferral period

period= (135.41/423.83)*365

=116.61

Net Operating Cycle= GOC-CDP

CDP

=142.11
=142.11-116.61

= 25.50 days

Analysis: the shorter cycle refers more beneficial for the management of business. As we
know that the calculation Net operating cycle of TATA Con. Products is high. But it’s also
seen that the net operating cycle of the company decrease in lower proportion. It also
a
indicates there is risk for TATA Con. Products for its cash flow funds.

So company can minimize its cycle and able to minimize the risk. As the credit sales done by
the company is too high and not able to recover the money and also indicates that amount
amou
received from the creditors is not good as compare to its peer.

Gross Working Capital: GWC refers to the firm’s total investment in current assets.
Current assets are the assets which can be easily converted into cash easily within an
operating cycle
ycle and includes cash, short
short-term securities, debtors and inventory.

Gross working capital is equal to the investment in current assets.

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Net Working Capital: Net working capital refers to the difference between current assets
and current liabilities. It helps to know the liquidity position of the business.

Net working Capital = CA-CL

Calculation of Gross Working Capital and Net Working Capital for the year
2017-18
Gross Working Capital = Current Asset
= 624.47

Net Working Capital = CA –CL

= 624.47-405.43
= 219.04

Calculation of Gross Working Capital and Net Working Capital for the year
2018-19

Gross Working Capital = Current Asset

= 749.46

Net Working Capital = CA –CL

= 749.46-408.79
= 340.67

Calculation of Gross Working Capital and Net Working Capital for the year
2019-20

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Gross Working Capital = Current Asset

= 818.51

Net Working Capital = CA –CL

= 818.51-291.56
= 526.95

Analysis:
The Gross working capital refers the current assets of the business. It also indicates that the
GWC of TATA Con. Products is increasing year to year. The GWC of Eveready TATA Con.
Products is 624.47, 749.46, and 818.51, for the year, 2018, 2019 and 2020.

Net working Capital explains about how much liquidity is in the businesses. It means how
much cash and cash equivalent are in the company to meet daily requirement for the
operation of the business. It tells about the current assets as well as current liabilities of the
company.

NWC of Eveready Industries India Limited is good as compare to its peer. And the net
working capital is 219.04, 340.67 and 526.95 for the year 2017-18, 2018-19 and 2019-20. It
indicates that Eveready Limited has good amount of liquid assets.

RECOMMENDATION FOR THE IMPROVEMENT OF WORKINMG CAPITAL

I would like to recommend that the company should not keep inventory high only maintain
the inventory as per the requirement of the business. Also try to use various methods to
reduce the cost of the product and quality so that they can efficient use of working capital
management.

TATA Con. Products has less amount of credit recovery so they must have to make provision
so that they can have their money in time and also make efficient working capital
requirement.

Company should focus on the purchase of raw material and cost of production so that make
better working capital management.

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