Chapter - 1: Working Capital Sujala PVC Pipes Private Limited

Working Capital Sujala Pvc Pipes Private Limited
CHAPTER – 1
S.S.B.N DEGREE COLLEGE 1

INTRODUCTION
One of the most important areas in the day-to-day management of the firm is the
management of working capital. Working capital management is the functional area of the
finance that covers all the current accounts of the firm. It is concerned with management of the
level of individual current assets as well as the management of total working capital. Financial
management means procurement of funds and effective utilization of these procured funds.
Procurement of funds is firstly concerned for financing working capital requirement of the firm
and secondary for financing fixed assets.
Meaning of working capital:
Ordinarily, the term “working capital” stands for that part of the capital, which is
required for the financing of working or current needs of the company. Working capital is the
lifetime of every concern. Whether it is manufacturing or non-manufacturing one with out
adequate working capital, there can be no progress in the industry.
Inadequate working capital means shortage of raw materials, labor etc., resulting in
partial current assets less current liabilities-has no economic meaning in the sense of implying
some type of normative behavior. According to this line of reasoning, it is largely an
accounting artifact. Working capital management, then, is a misnomer.
The working capital of the firm is not managed. The term describes a category of
management decisions affects specific types of current assets and current liabilities. In turn,
those decisions should be rooted in the overall Valuation of the firm.

Definitions:
According to Western and Brigham,”Working capital refers to a firm’s investment in

short term assets- cash, short term securities, accounts receivables and inventories”.
According to Hoagland, “working capital is descriptive of that capital which is not

fixed. But the more common use of the working capital is to consider it as the difference
between the book value of the current assets and the current liabilities.
Concepts of working capital
The term working capital can be used in two different ways: they are
1. Gross Working Capital:
The gross working capital refers to investment in all the current assets taken together.
The total of investments in all current assets is known as gross working capital.
2. Net Working Capital:
The term net working capital refers excess of total current assets over total current
liabilities. It may be noted that the current assets refers to these liabilities which are payable
with in a period of one year.
Types of working capital:
From the point of view of time, the term working capital can be divided into two
categories.
1. Permanent working capital:

It is also refers to the hard core working capital. it is the minimum level of investment
in the current assets that is carried by the business at all times to carries our minimum level of
its activities.
2. Temporary working capital:
It refers to the part of total working capital which is required by a business over and
about permanent working capital. It is also called variable working capital. Since the volume of
the temporary working capital keeps on fluctuating from time to time according to the business
activities it may be financed from short term resources.
Permanent working capital can be further divided into:
1. Regular Working Capital

2. Reserve Working Capital
1. Regular Working Capital:
It is the minimum amount of liquid capital needed to keep up the circulation of the
capital from cash to inventories to receivables and again to cash. This would include sufficient
minimum bank balance to discount all bills, maintain adequate supply of raw materials etc...
2. Reserve Working Capital:
It is the excess over the needs or regular working capital that should be kept in reserve
for contingencies that may arise at any time these contingencies include rising prices, business
depression, strikes and special operations such as experiments with new products.

Composition Of Working Capital:
1.Current Assets:
a. Inventories Raw Materials
Work in progress
Finished goods
Stores and spares
Miscellaneous Goods
b. Receivables Trade debtors

Loans and advances
Other debtor balances
c. Marketable securities Govt securities

Semi-Government securities
Shares, Debenture, etc.,
d. Cash and bank balance Cash in Hand

Cash At Bank
Cash in Transit
2.Current Liabilities:
a. Sundry creditors Interest accused on loan

Advances received from customs
Short term loans from banks
Trade dues and other liabilities
Deposits from public, etc.,
Sources of Working Capital:

Working Capital Sources
Long – term sources Short-term sources
Internal External
1. Sale of shares 1. Depreciation funds 1. Trade credit

2. Sale of Debentures 2. Provision of Taxation 2. Credit papers
3. Sale of idle fixed assets 3. Accrued Expenses 3. Bank credit
4. Long-term loans 4. Public Deposits
5. Customers credit
6. Loans from directors
7. Security of employee
8. Factoring
General factors determining working capital requirements:
The working capital needs of a firm are determined & influenced by various factors. A
wide variety of considerations may affect the quantum of working capital required & these
considerations may vary from time to time. The working capital needed at one point of time
may not be good enough for some other situation. The determination of working capital
requirements is a continuous process & must be undertaken on a regular basis in the light of the
changing situations. Following are some of the factors which are relevant in determining the
working capital need of the firms.
1. Production policy
2. Nature of the business
3. Credit policy
4. Inventory policy

5. Abnormal factors
6. Market conditions
7. Conditions of supply
8. Business cycle
9. Growth and expansion
10. Level of taxes
11. Dividend policy
12. Price level changes
13. Operating efficiency
1. Production Policy:
The production schedule i.e., the plan for production, has great influence on the level of the
inventories. In some cases raw materials can be produced only in a particular season and have
to be stocked for the production of the whole year. In many others the production cycle is
limited to a part of the year and raw materials have to be accumulated throughout the year.
thus, need for working capital will very according to the production plans.
2. Nature of the Business:
The size of business also has an important impact on its working capital needs. Size may be
measured in terms of the scale of operations. A firm with large scale of operation will need
working capital than small term. The working capital requirements of a firm are basically
influenced by the nature of the business trading and financial firm has a very less investment in
fixed assets, but require a large sum of money to be invested in working capital.
3. Credit Policy:
A company, which allows liberal credit to its customers, may have higher sales but
consequently will have large amount of funds tied up in sundry debtors. Credit terms, Debt
collection system also influences the level of working capital.

4. Inventory policy:
Large amount of funds is normally locked up in inventory. An efficient firm may stock raw
material for a smaller period and may therefore require lesser amount of working capital.
5. Abnormal factors:
Abnormal factors like strikes, lockouts also require additional working capital.
Recessionary conditions necessitate a higher amount of stock of finished goods.
6. Market conditions:
Market conditions like competition large inventory are essential as delivery has to be off
the self or credit has to be extended on liberal terms when market competition is fierce.
7. Conditions of supply:
If prompt and adequate supply of raw materials requires small investment in inventory. If
supply is scant, seasonal canalized, it is essential to keep longer stocks increasing working
capital requirements.
8. Business cycle:
Business fluctuations lead to cyclical and seasonal changes in production, sales and effect
the working capital requirements.
9. Growth and expansion:
The working capital needs of firm increases in growth in terms sales of fixed assets. If is
difficult to precisely determine the relationship between volume of sales and the working

capital needs. The critical fact however that is the need for increased working capital funds
does not fallow growth in business activities but precedes it.
10. Level of taxes:
Taxation is a short term liability payable in cash. Advance payment of cash may have to be
paid on the basis of anticipated profits. Tax is first appropriation out of profits. Higher the tax,
greater is the stain on the working capital of the company. Working capital varies with tax rate
and advanced tax provisions.
11. Dividend policy:

Payment of dividend utilizes cash while retaining profits acts as a source of working
capital.
12. Price Level changes:

Inflationary trends in the economy necessitate more working capital maintain the same
level of activity.
13. Operating efficiency:
The operating efficiency of the firm relates to the optimum utilization of resources at
minimum costs. The firm will be effectively contributing in keeping the working capital
investment at a lower level if it is efficient to controlling operating costs and utilizing current
assets. The use of working capital is improved and pace of a cash conversion cycle is
accelerated with operating efficiency.

Advantages of good working capital management:
The main advantages of sound working capital are as follows:
1. Solvency of the business: adequate working capital helps in maintaining solvency of the
business by providing uninterrupted flow of production.
2. Goodwill: sufficient working capital enables a business concern to make prompt

payments and hence helps in crating and maintaining goodwill.
3. Easy loans: a concern having adequate working capital, high solvency and good
Credit standing can arrange loans from banks on easy and favorable terms.
4. Cash discount: adequate working capital also enables a concern to avail cash discounts
on the purchases and maintaining goodwill.
5. Regular supply of raw materials: sufficient working capital ensures regular supply of
raw materials and continuous production.
6. Regular payment of salaries, wages and other day-to-day commitments: a company

which has ample working capital can make regular payment towards it day-today
commitments which would raise the morale of its employees, increase their efficiency,
reduce wastage cost and enhance production and profits.
7. Exploitation of favorable market conditions: only concerns with adequate working

capital exploit favorable market conditions such as purchasing its requirements in bulk
when the prices are lower and holding its inventories for higher prices.
8. Crisis handling ability: adequate working capital enables a concern to face business
crisis, such as depression, inflation successfully.

9. Quick and regular return on investments: sufficiency of working capital enables a

concern to pay quick and regular dividends to its investors, as there may not be much
pressure to plough back profits.
10. High morale: adequacy of working capital creates an environment of security,

confidence and high morale and improves the overall efficiency of a business.
Disadvantages of Inadequate Working Capital:
1. A concern which has inadequate working capital cannot pay its short-term liabilities in
time. Thus, it will lose its reputation and shall not be able to obtain good credit
facilities.
2. It cannot buy its requirements in bulk and cannot avail discounts.
3. It becomes difficult for the firm exploits favorable market conditions and under take
profitable projects.
4. The firm cannot pay its day-to-day expenses, which would increase cost and reduce the
profit of the business.
5. It becomes impossible to utilize efficiently the fixed assets due to the non-availability of
liquid funds.
6. The rate of return on investments will also fall with the shortage of working capital.
Working capital cycle ( the operating cycle):
The working capital cycle refers to the length of time between the firm’s paying cash
for materials, etc., entering in to the production process/ stock and the inflow of cash from

debtors. Suppose a company has a certain amount of cash it will need raw materials. Some raw
materials will be available on credit but, cash will be paid out for the other part immediately.
Then it has to pay labour cost and incurs factory overheads. These three combined together will
constitute work-in-progress. After the production cycle is complete, work-in-progress will get
converted into sundry debtors. Sundry debtors will be realized in cash after the expiry of credit
period. this cash can again be used for financing of raw materials, work-in-progress, etc. thus
there is a complete cycle from cash to cash where in cash gets converted into raw materials,
work-in-progress, finished goods, debtors and finally into cash again. Short term funds are
required to meet the requirements of funds during this period. This time period is dependent
upon the length of time within which the original cash gets converted into cash again. This
cycle is also known as operating cycle or cash cycle.
OPERATING CYCLE
Cash
Bills Raw Materials

Receivables
Or Debtors
Working in
Credit Sales progress
Finished goods

Working capital cycle indicates the length of time between companies paying for
materials, entering into stock and receiving the cash from sales of finished goods. It can be
determined by adding the number of days required for each stage in the cycle. For e.g., a
company holds raw materials on an average for 60 days, it gets credit from the supplier for 15
days, production process needs 15 days, finished goods are held for 30 days and 30 days credit
is extended to debtors. The total of all these 120 days, i.e., 60-15+15+30+30 days is the total
working capital cycle.
The determination of working capital cycle helps in the forecast, control and
management of working capital. It indicates the total time lag and the relative significance of
its constituting parts. The duration of working capital cycle may vary depending on the nature
of the business.
The Operating Cycle consists of the following events which continues through the life
of business
 conversion of cash into raw materials

 conversion of raw materials into work in progress
 conversion of WIP into finished stock
 conversion sales
 conversion of account receivable into cash
Components of Working Capital
Working Capital management involves different components such as
1. Management of cash
2. Management of Inventory
3. Management of Receivables

1. Management of cash:
Cash is the important current asset for the operation of the business. Cash is the basic
input needed to keep the business running on continuous basis; it is also the ultimate output
expected to be realized by selling the services of product manufactures by the firm. The firm
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain idle, with out contributing
anything towards the firm’s profitability. Thus, major functions of the financial manager to
maintain a sound cash position.
Cash is the money, which a firm can disburse immediately with out any restriction. The
term cash includes coins, currency and cheques held by the firm, and balance in its bank
accounts. Some times near cash items, such as marketable securities or bank times deposits, are
also includes in cash. The basic characteristic of near cash assets is that they can readily be
converted to cash. Generally when a firm has excess of near cash, it invests it in marketable
securities. This kind of investment contributes some profit to the firm.
a. Facets of cash management:
Cash management is concerned with the managing of
1) Cash flows into and out of the firm

2) Cash flows with in the firm and
3) Cash balance held by the firm a points of time by financing deficit or
investing surplus cash. It can be represented by a cash management cycle as showing fig1.sales
generates cash, which has to be disbursed out. The surplus cash has to be invested while deficit
has to be borrowed. Cash management seeks to accomplish this cycle at a minimum cost. At
the same time, it also seeks to achieve liquidity and control.
Cash management assumes more importance than other current assets because it is the
most significant and the least productive asset that a firm holds. It is a significant because it is
used to pay the firm’s obligations. However, cash is unproductive. Unlike fixed assets or
inventories, it does not produce goods for sales. Therefore, the aim of cash management is to

maintain adequate control over cash position to keep the firm sufficiently liquid and to be use
excess cash in some profitable way.
b. Cash Planning:
Cash inflows and outflows should be planned to project cash surplus or deficit for each
period of the planning period. Cash budget should be prepared for this purpose.
C. Managing the cash flows:
The flow of cash should be properly managed. The cash should be accelerated while, as
far as possible, the cash outflows should be decelerated.
d. Optimum cash level:
The firm should decide about the appropriate level of cash balances. The cost of excess
cash and danger of deficiency should be matched to determine the optimum level of cash
balances.
e. Investing surplus cash:
The surplus balance should be properly invested to earn profits. The firm should decide
about the division of cash balances between alternative short-term investment opportunities
such as bank deposits, marketable securities, or inter corporation lending.
The ideal cash management system will depends on the firm’s products, organization
structure, competition, culture and option available. The task is complex, and decisions taken
can affect important areas of the firm. For example, to improve collection if the credit period is
reduced, it may affect sales. However, in certain cases, even without fundamental changes, it
possible to significantly reduce cost of cash management system by choosing a right bank and
controlling the collections properly.
f. Motives for holding cash:

The firm’s needs for cash may be attributed to the following needs
i. Transaction motive
ii. Precautionary motive
iii. Speculation motive
iv. Translation motive
I. Transaction motive:
The transaction motive requires a firm to hold cash to conduct its business in the ordinary
cost. The firm needs cash primarily to make payments for purchases, wages and salaries, other
operating expenses, taxes, dividends etc. the need to hold cash would not arise if there were
perfect synchronization between cash receipts and cash payments, i.e., enough cash is received
when the payment has to be made. But cash receipts and payments are not perfectly
synchronized. For those periods, when cash payments exceed cash receipts, the firm should
maintain some cash balance to be able to make required payments. For transaction purpose, a
firm may invest its cash in marketable securities; usually the firm will purchase securities
whose maturity corresponds with some anticipated payments. Such as dividends, or taxes in the
future. Notice that the transactions motive mainly refers to holding cash to met anticipated
payments whose timing is not perfectly matched with receipts.
h. Precautionary motive:
A firm also keeps cash balances to meet unexpected cash needs arising out of
unexpected contingencies such as floods, strikes, presentment of bills for payment earlier than
expected date, sharp increase in raw materials price etc,. The more is the possibility of such
contingencies, the more is the amount of cash kept by the firm for meeting them.
i. Speculative motive:
A firm also keeps cash balance to take advantage of unexpected opportunities typically
outside the normal course of business, such motive is therefore a purely speculative for

example a firm may like to take advantage of an opportunity to purchase raw material at
reduced prices in anticipation of decline prices, similarly, it may like to keep some c ash
balance to make profit by buying securities at ties when their prices fall due to tight money
conditions etc,.
j. Cash planning:
Cash planning is a technique to plan and control the use of cash. It protects the financial
condition of the firm by developing a projected cash statement from a forecast of expected cash
inflows and outflows for a given period. The forecast may be used on the present operations or
anticipated future operations. Cash plans are very crucial in developing the overall operating
plans of the firm.
k. Cash forecasting and budgeting:
Cash budget is the most significant device to plan for and control cash receipts and
payments. A cash budget is a summary of the firm’s expected cash inflows over a projected
period. It gives information on the timing and magnitude of expected cash flows and cash
balances over the projected period. This information helps the financial manager to determine
the future cash needs of the firm, plan for the financing of these needs and exercise control over
the cash and liquidity of the firm.
The time horizon of a cash budget may differ from firm to firm. A firm whose business
is affected by seasonal variations may prepare monthly cash budgets. Daily or weekly budgets
should be prepared for determine cash requirements if cash flows extreme fluctuations. Cash
budgets for a longer interval may be prepared if cash flows are relatively stable.
2. Management of Inventory:
The preceding two chapter’s basic strategies and consideration in managing current
assets namely, cash and receivables are stocks of product a company is manufacturing for sale
and components that make up a product. Inventories like receivables are also a significant
portion of most firms’ assets and accordingly require substantial investment. To keep these

investments from becoming unnecessarily large, inventories must be managed efficiently. The
various forms in which inventories exist in a manufacturing company are
a) Raw Materials: Raw materials are those basic inputs that are converted
into finished products through the manufacturing process. Raw material inventories are
those units, which have been purchased and stored for future productions.
b) Work-in-progress: The work-in-progress is that stage of stock, which is in between raw

materials and finished goods. They are semi-finished products that need more work
before they become finished products for sale. The quantum of WIP depends on the time
taken in the manufacturing process. The greater the time taken in manufacturing, the
more will be the amount of work-in-progress.
c) Finished goods: Finished goods inventories are those completely manufactured products,
which are ready for sale. Stocks of raw material and work-in-process facilitate production
while stock of finished goods is required for smooth marketing operations.
The level of three kinds of inventories for a firm depends on the nature of its business. A
manufacturing firm will have substantially high level of all three kinds of inventories.
A fourth kind of inventory Firm also maintains suppliers. Suppliers include office and
plant cleaning material oil, fuel, light bulbs etc. these materials do not directly enter into
production, but are necessary for production process, usually these supplies are small part of
inventory and do not involve significant investment. Therefore a sophisticated system of
inventory control may not be maintained for them.
2 (a) Need for holding inventory:

There are generally three major motives for holding inventories.
There transactions motive which emphasis the need to maintain inventories to facilitate
smooth production and sale operations.

The precautionary motive, which necessitates holding of inventories to guard against

the risk of unpredictable changes in demand and supply forces and other factors.
The speculative motive which includes the decision to increase or reduce inventory levels to
take advantage of price fluctuations.
A company should maintain adequate stock of material, as it is not possible for a

company to procure raw material whenever it is needed and also for a continuous and smooth
and uninterrupted production process.
2(b) Inventory management techniques:
In managing inventories the firm should determine the optimum level of inventory.
Efficiently controlled inventories make the firm flexible. Inefficient inventory control results in
unbalanced inventory and inflexibility, the firm may be sometimes out of stock and sometimes
may pile up unnecessary stocks. This increases the level of investment and makes the firm
unprofitable.
To manage inventories efficiently and effectively answers should to the following two
questions? How much should be ordered? When should it be ordered?
The first question, how much to order, related in the problem of determining economic
order quantity (EOQ) and is answered with an analysis of costs of maintaining certain level of
inventories. The second question when to order arises because of uncertainty and is a problem
of determining the re-order point.
3. Management of Receivables:
Accounts receivable or trade credit is the most prominent force of the modern business.
It is considered as an essential marketable tool, acting as a bridge for the movement of goods
through production and distribution stages to customers finally. A firm grants credit to protect
its sales from the competitor and to attract potential customers. Trade credit, thus credit
receivable or book debts, which the firm is expected to, collect in future. It also involved an

element of risk as the cash payment has get to be received, hence they has to be carefully
analyzed.
Receivables constitute a substantial portion of current assets of several firms. They form
about 1/3 part of current assets in India. As substantial amounts are tied up in trade debtors, it
needs careful analysis and proper management, for proper management of receivable a concern
must adopt an optimum credit policy.

CHAPTER – 2

DESIGN OF THE STUDY
Need for the study:
The pipes production serves as the index of the economic development of any country.
Thus PVC Pipes production is very vital from country’s agriculture’s point of view. The
demand would be growing with increasing technologies and is likely to reach a staggering level
in the decades to come.
On the other hand, the price of pipes has remained stagnant, because prices are
determined by market forces and presently production levels are greater than supply.
A number of industries for the past few years have been finding it difficult to solve the
increasing problems of adopting seriously the management of working capital. Business
concerns intent on developing their business have to use to the utmost, their available resources
for the improvement and development of the business, there by enabling them profits.
Due to inflationary situation and restrictions imposed on borrowing facility, the

commercial institutions and manufacturing industrial units have been confronting innumerable
difficulties in meeting day-to-day financial needs. Hence effective management of working
capital has become a problem for such organizations and industries. The purpose of study is to
examine, analyze and evaluate working capital management and its components in SUJALA
PVC PIPES PVT LTD.
Statement of the problem:
Working capital is an important aspect of financial management. It plays an essential

role in organizations financial success. The nature of such working capital is very liquid.
Valuation of working capital elements like cash, debtors, stock and creditors itself is a difficult
task for any organization. So there arises a requirement for assessing working capital
requirements, monitoring and managing it, from time to time for greater efficiencies.

Objectives Of The Study:
The present study of the Nandi Pipes Nandyal has been umndertaken to evaluate the working
capital management of the organization by establishing the following objectives
 To study the statement of changes in working capital.

 To analyze the profitability-liquidity position of the company.
 To examine and evaluate the cash, receivables and inventory management
performances.
Tools for analysis:
To analyze the data acquired from the secondary sources the following tools are used:
 Statement of changes in working capital.
 Ratio analysis.

Scope And Period Of The Study:
First, the study “management of working capital” i.e. “gross” and “net” are used in
measuring profitability and liquidity respectively and also to arrive at various objectives of the
study.
Secondly, the study is based on the annual reports of the company for a period of five
years from 2015-16 to 2019-20 (so we study 2016, 2017, 2018, 2019, 2020).
Sources Of Data:
The data is collected from the secondary sources of annual and financial statements of
the company.

Limitations:
 As most of the financial information was considered confidential, the access to the
information was restricted.
 The results of the study are limited to the available information.
 Due to frequent camps and workload of the staff in the organization much time could
not be spared by them for the project.
The project is based mainly on secondary sources of information

CHAPTER – 3

INDUSTRY PROFILE
Introduction:
Plastic have become synonymous with modern living. It is undoubtedly a product,

which has penetrated extensively into the common man’s life. No wonder the industry has
achieved in terms of supply of raw material expansion and diversification of processing
capabilities and manufacturing of processing machinery and equipment.
This versatile material with its superior qualities such as light weight, easy process
ability corrosion resistance, energy conservation, no toxicity etc. many substitute to a large
extent many conventional and costly industrial materials like wood, metal, glass, jute, lather
etc., in the future. The manifold applications of plastics in the field of automobiles, electronics,
electrical, packaging and agriculture give enough evidence of the immense utility of plastics.
At 80 percent of total requirement for raw material and almost all types of plastic
machines required for the industry are indigenously available. The present investment in all the
three segments of the industry namely production of raw materials, expansion and
diversification of processing capacities, manufacturing of processing machinery and ancillary
equipment is Rs.1250 crores and it provides employment to more than eight lakh people.
On account of their inherent advantage in properties and versatility in adoption and use,
plastics have come to play a vital role in a variety of applications, the world over. In our
country, plastics are used in making essential consumer goods of daily use for common man
such as baskets, shopping bags, water bags, water bottles, school bags, tiffen boxes, hair
combs, tooth brushes, spectacle frames and fountain pens, they also find applications in field
like packaging, automobiles, and transportation, engineering, electronics, telecommunications,
defense, medicine, and building and construction. Plastics are growing in importance in
agriculture and water management.
The Govt. of India recognizing the importance of plastics in agriculture appointed on

march 7th, 1981 a National Committee on the use of plastics in agriculture under the

chairmanship of Dr.G.V.K.Rao. This committee has forecast a tremendous growth of drip

irrigation through a net work of plastic pipes and tubes. In its opinion large scale adoption of
irrigation would lead to sports in demand for PVC pipes, L.D.P.E tubes and polypropylene
emitters. The committee made a number of recommendations for promoting the use of plastics.
The implementation of recommendations would go along away in increasing the consumption
of plastics, which at present is very low. The rigid pipes, flexible pipes and sheeting, which are
being used for agricultural operations to carry out water place to place and also lining of ponds
and reservoirs to reduce seepage and most important in drip irrigation system.
Export of plastics goods:
Plastics have excellent potentialities. Our country is equipped with all kind of
processing machinery and skilled labor and undoable, and extra to boost export, finished
plastics products will yield rich divided.
Today India exports plastic products to as many as 80 countries all over the world. The
exports, which were stagnant at around rest 60-70 cores per annum double to 129 craters. The
Plastic industry has taken up the challenge of achieving an export target of Rs.17 cores.
Major export markets for plastic products and linoleum are Australia, Bangladesh,
Canada, Egypt, Hong Kong, Italy, Kuwait, Federal Republic of Germany, Sri Lanka, Sweden,
Taiwan, U.K., U.S.A., and Russia.
With view to boosting the export, the plastics and linoleum’s export promotion council
has urged the government to reduce import duty of plastic raw material, supply indigenous raw
materials at international prices, fix duty, draw backs on weighted average basis and charge
freight rate on plastic products on weights basis instead of volume basis.
Prospects:
The Production of various plastics a raw materials in the country is expected to double

by the end of seventh plan, the consumption of commodity plastics including LDPE,
HDPE, PP, PS AND PVC is immense scope for the use of plastics in agriculture, electronics,
automobile, telecommunications and irrigation and thus, the plastic industry is on the threshold
of an explosive growth.
Role of plastics in the national economy:
Plastics are got perceived as just simple colorful household products in the mind so
common person. A dominant part of the plastics of the percent and future find their utilization
in the areas.
 Agriculture, forestry and water-management.

 Automobile and transportation
 Electronics and telecommunications, buildings, construction and.
 Food processing and packaging
 Power and gas distributor.
Importance Of Pipes Industry:
We shall look at the basic data about plastics and particularly those properties, which
are so, fuse in practical working with plastics. Plastics are man-made materials. The oldest raw
material for producing plastics is carbonaceous material obtained from coal tar (benzene,
phenol).
Today the majority of raw materials are obtained from petrol chemical source and they
can be economically produced in large quantities.
Plastics have changed our world and day-by-day they are becoming important. They
own their success to whole series of advantage, which they have over conventional materials
such as:
 Lightweight
 Excellent mould ability
 Attractive colors
 Low energy requirements for convention

 Low labor and cost of manufacture

 Low maintenance & High strength weight ratio
Economic role:
Agriculture is the chief occupation in India. For the developing countries like India
modernization of the agriculture practices assumes pivotal places in improving the economic
status and the process of modernization. Includes usage of higher productive plastics
supplement to greater extent manufacturing of tools required for new agricultural practices.
The usage of poly vinyl chloride pipes in agricultural fields, lesser water seepage, which
was predominant in earlier practices, with services of P.V.C pipes, water can be transported
efficiently with lesser from the place of higher potential to the place of lower water potential.
Presently the revolutionary tried in water management speaks much about drip
irrigation, which is developed in Israel and is practiced by all agricultural based nations in the
world. Drip irrigation greatly P.V.C pipes as core tools of implementation with the services of
this sort, P.V.C pipes one way or the other strengthening the hands of country’s economy.
A part with the referred P.V.C pipes supplemented with fitting is used in houses for
electrical connection and other domestic purposes. Apart from these two applications it has got
wide applications even in industrial sectors. P.V.C pipes with much unique heart, chemical and
physical characteristics serve many industrial purposes.
Even characteristics of weight and low price attract many more applications. Rigid PVC
pipes have been manufactured in India from the 60’s on imported extrusion lines and there after
indigenous plan were few pipes manufactures upto 1979-83. When many extrusion lines were
imported from batten field, Cincinnati, kraaus-maffi etc. the Govt. allowed the imports of
sophisticated and high output plants, which were not available indigenously.
Pvc pipes in India:
Pipes products have found wide acceptance in India and abroad. PVC is one of the more
versatile plastics. It can be extruded, moulded, calendared and thermoformed into a multitude
of furnished products. The PVC resin can be formulated to give a wide range of properties

ranging from hand, tough materials for load bearing application lime pipes, windows and doors
to flexible materials for products a due as wire and cable insulation and shooting and flooring.
PVC products cater to both interiors and exteriors. In interiors it can be used for
flooring, profile and cable tray, wall covering modular office systems, houses and furniture. For
exteriors it is used for doors and windows, fencing partitions and paneling, roofing and rain
systems.
The other external applications are in the field of irrigation, portable water supplies. In
the field of irrigation there are several methods to irrigate the fields. There are minor irrigation
projects and major irrigation projects apart from individual sources like wells, tube wells, bore
wells. Major irrigation sector small projects will have canals and lift irrigation schemes etc.,
will have canals and lift irrigation schemes etc., will have pipelines. Cement and GI pipes were
the pipes used in conventional methods of irrigation. Now-a-days PVC pipes replaced the
conventional pipes and they constituted almost 90% in this respect.
Drip irrigation popular in the agricultural sector especially in the field of horticulture
commercial cropping and green ply houses. The drip irrigation concept is becoming more
popular with its advantages like highly yield, water conversion, less labour cost, less fertilizer,
less past management costs, less power costs and many more advantages. The demand for this
concept is increasing at a place of 30%-40% per annum.
Agriculture a sunrise industry in the Indian economy is mainly dependent on the PVC
pipes for the seawater sector and pumping to their aqua ponds. They are using pipelines of four
to five kilometers of 10-16 diameters pipes.
The state Govt. of A.P is using rigid PVC pipes for the irrigation water supplies for the
past few years. The state Govt. is producing PVC pipes through APSIDC (Andhra Pradesh
State Irrigation Development Corporation) for its lift irrigation schemes. The panchayatraj
department is producing pipes for public water supply schemes. These pipes can be used for the
main distributors, sub-distributors and individual connections.

CHAPTER-4

COMPANY PROFILE
Introduction:
A dynamic entrepreneur Sri S.P.Y.Reddy was established a black pipes manufacturing

company in 1979 and the name of the company is Nandi Pipes Pvt Ltd at Nandyal, Kurnool
district. Sujala PVC Pipes Pvt Ltd was incorporated in the year on 02 FEB 1988. The factory is
situated at Nandi pipes,C-1,Industrial Estate,Nandyala,Kurnool district and it was taken over by
Nandi Group Company. The company is managed by team of professionals under the guidance
of young, experienced, and well qualified dynamic managing director Mr.S.Sreedhar Reddy.
Origin:
Rayalaseema is economically backward area in Andhra Pradesh, was rare field region
for industries. A dynamic entrepreneur sir S.P.Y.Reddy who is basically mechanical engineer
started a unit at Nandyal, which manufactures black pipes in 1979. The determination and hard
work of Sri S.P.Y.Reddy helped him to overcome the problems faced by the company in the
initial years, and with financial assistance from local commercial banks. The company could
overcome the problems of the merger and now it is running smoothly.
Later the company started manufacturing of PVC pipes which terminated the
manufacturing of black pipes. This resulted in the formation of a Pvt. Ltd. company called
“SUJALA PIPES PVT.LTD.” with Sri S.P.Y.Reddy as the Managing Director.
The only major competitors to the company are Sudhakar pipes, Maharaja Pipes. The
only backdrop to it is the competition from local brands. As the majority of the customers
belong to farmers, they consider the quality. The company has to make aware of the company’s
quality standards to them.

Board of directors:
S.P.Y.Reddy:
Sri S.P.Y.Reddy locally well known industrialist with the base at nandyal, Kurnool
district who has been successful entrepreneur, he is technically qualified person with B.E
(MEC) from R.E.C (Warangal) and with work experience at BAARC (Bombay). He has
daringly ventured and established industries in and around nandyal from 70’s. As years went of
he has established most successfully the following nandi group of companies:
 Nandi Milk
 Maha Nandi Mineral Water
 Nandi Infosys
 Nandi Online Services
 Anantha PVC Pipes Pvt Ltd.
 Sujala PVC pipes Pvt Ltd.
 Integrated Thermos Plastic Ltd.
 Nandi PVC Projects.
Promoter:
Sri.S.Sreedhar Reddy, a computer engineer and a student of IIM, Ahemadabad has been
entrusted the management of Sujala PVC Pipes Pvt Ltd., Nandyal and great assistance and a
great upcoming engineer and industrialist.
Branches:
 Pondichery
 Bellary
 Sangli
 Vellore
 Goa
 Kerala

Coverage:
At present Andhra Pradesh, parts of southern states of Karnataka, Tamilnadu and

Kerala are ambit of Sujala Pipes Pvt Ltd.
The company extended their sales in the below regions are shown below:
1979 Nandyal Region(polypone pipes)
1984.85 Rayalaseema Region (PVC pipes)
1985.86 Telangana Region
1986.87 Karnataka and Andhra Pradesh
1988.91 Tamilnadu and Karnataka
1991.94 Kerala
Sizes:
Various sizes ranging from ½ to 10 are offered to customers. Even pipes with different
gauges and sizes are manufactured to suit specified conditions.
Packing:
Packing plays less important role into the products like PVC pipes because the hallow
space inside can be utilized. For the purpose of cubic space utilization in trucks while transport,
organization is adopting the technique like pipes in pipes.
Payment period:
For monarch brand the company adopts zero credit policy and goods are not delivered
unless cash remittances are made. For monarch and sagar brands credit is entitled up to a week.
The difference between these brands is due to brand image.
Technical details about pvc pipes:
Ingredients:

 PVC resin
 D.B.L.S
 T.B.L.S
 L.S
 C.S
 Stearic Acid
 Hydro Carbon
 Calcium Carbonate
Manufacturing process:
The main raw materials are HDPE granules and PP granules. The manufacturing
process for pipes consists of mixing various resins along with the coloring materials in a
mixture and the prepared material is fed to the extruder. In the extruder, the material is heated
to the required politicizing temperature (190deg. centigrade to 230deg. centigrade) the extruder
through the die hard to form the pipe. The hot pipe coming out of the extruder is cooled in a
water bath to retain the final shape.
The pipe coming out of the extruder is guided through the water bath suitable
transaction system. The temperature of the water is maintained by circulating through the
cooling towards and with the help of a chilling plant.
The required length of the pipe is cut with a planetary saw. The cut lengths are titled by
titling units and get corrected in the pipe rack attached to the titling frames. Later they are
stocked separately. The company has entered into a technical with its own processing
technology.
Channels of distribution:
Sujala PVC Pipes Pvt Ltd. has got zero level and single level channel of distribution.

MANUFACTURER CONSUMER
MANUFACTURER DEALER CONSUMER
Sujala PVC Pipes Pvt Ltd. has an extensive network of 350 dealers in Andhra Pradesh
and who are directly serviced by company sales force and 620 dealers in South India.
Transportation:
Transportation vehicles of Sujala PVC Pipes Pvt Ltd. outnumber the fleet of the
competitor’s vehicle. This unique strength of the organization enables the delivery system to be
efficient. This event helps the dealers to reduce inventory levels to the minimum. The dealers
are also supplemented with the benefit of the lower paid up capital in the form of inventory.
Sujala pvc pipes pvt ltd:
Sujala PVC Pipes Pvt Ltd. was incorporated in the year Feb 1998. The factory is
situated at C-1,Industrial Estate, Nandyal,Kurnool district. It was taken over by Nandi group
company, and it is one of the sister company among the Nandi groups.
Its annual production capacity is 18,000 mts. And it is one of the leading manufacturers
of PVC pipes in south India. This company is equipped with technical collaboration from
Batten field of West Germany. It has made possible few other small ventures. Pipes are sold
under the brand names of MONARCH, KOHINOOR and KRISHNA.
Sujala PVC Pipes with their good quality, trouble free services, durability and
commercial use are a better choice than mild steel, galvanized steel, cast iron and plastic pipes.
The company is managed by a term of professionals under the guidance of a young,

experienced and well qualified dynamic managing director Mr. Sreedhar Reddy.

Mission Statement:
The mission statement of Sujala PVC Pipes Pvt Ltd. is as follows:
 To be preferred supply chain partner to out customer.

 To be recognised as the best in the world at we do.
 To create new values in the quality for our customers and employees.
Vision Statement:
The vision statement of Sujala PVC Pipes Pvt. Ltd. is as follows:
“Creating new values in quality by working together for you”
Functional departments of the company:
Financial department:
Through initially the company approached the external source for financial aid, now the
financial status of the company is very sound and is being run only with self finance excepting
for loans taken for hypothecation of machinery and stock from SBI Nandyal.
The company follows cash and carry policy for monarch brand. The product is not
delivered until the cash is paid and financial department with the help of marketing department
looks after these transactions.
Marketing department:
Marketing Department is headed by the Executive Director. Marketing Manager is in

charge of all operations who reports to the Executive Director. Marketing Manager and 35
Sales Representatives are under the control of Executive Director. There are also 20 salesmen
who have to report to the sales representatives above them.

Personal Department:
The Personal department consists the details of the executives and workers of the
organization. The organization is formed with Sri.S.P.Y.Reddy as the managing Director. Two
Marketing managers, financial managers, public relations officer and quality control officer
who all reports to executive director. Other than executives there are thousands workers in the
organization.
Panel consisting of managing director, executive director and managers of concerned

departments makes the recruitment and selections of persons. Apart from the attractive salaries
company provides health card facilities.
Purchasing department:
The perplexing situation i.e. conformed by the manufactures of the PVC pipes is
scarcity of resin. Though the government of India has taken various steps to improve the supply
conditions of PVC resin, the Indian manufactures could meet only 50 percent of demand and
remaining 50 percent is met from imports. The major petrochemical company is Reliance
Petrochemical Ltd.
The lead time for the acquisition of raw materials is 4 days.
The following lines highlight the human resources policies and practices:
 Effective utilization of manpower.

 To provide good working condition.
 To promote industrial development.
Application of pvc pipes:
 Agriculture and irrigation schemes.

 Rural and urban water supplies scheme.
 Tube well casing.

 Gas and oil supply lines.

 Industrial effluent disposal.
 Sewerage and drainage scheme.
 Air-condition ducting.
 Building installations.
 Industrial ducting.

CHAPTER – 4

Components of working capital during the period 2015-16 to 2019-20
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

A) Current Assets
Inventory 3065.56 3443.01 3316.98 5318.73 6767.92
Sundry Debtors 6238.55 5564.41 6581.79 11502.3 13834.34
Cash & Bank 1031.21 1747.02 1208.69 1238.7 2471.74
Other Current Assets 885.29 881.26 945.47 1090.38 1902.97
Total Current Assets (1) 11220.61 1365.7 12052.93 19210.11 24976.97
B) Current Liabilities
Current liabilities 3373.80 716.03 3862.57 5671.67 6491.81
Provisions 156.37 499.87 385.72 484.67 732.3
Total Current 3530.17 3215.92 4248.29 6156.34 7224.11

Liabilities(2)
Net Working Capital(1-2) 7690.44 8419.78 7804.64 13053.77 17752.85
Analysis:
From the above table it is clear that the net working capital has been increasing during
the above years of study period. In the year 2015-2016 it is Rs.7690.44 and it has increased to
Rs.17752.85 in the year 2019-20.

Statement showing the changes in Working capital for the year 2015-16 and 2016-17
Particulars 31/3/16 31/3/17 Increase Decrease

A) Current Assets
Inventory 3065.56 3443.01 377.45
Sundry Debtors 6238.55 5564.41 ------- 674.14
Cash & Bank 1031.21 1747.02 715.81
Other Current Assets 885.29 881.26 4.03
Total Current Assets (1) 11220.61 1365.7
Current liabilities 3373.80 716.03 657.77 ---------
Provisions 156.37 499.87 343.52
Total Current Liabilities(2) 3530.17 215.92
Working Capital(1-2) 7690.44 8419.78

Increase in Working Capital 729.34 --------- ------------- 729.34
Net Working Capital 8419.78 8419.78 1751.03 1751.03
INTERPRETATION:
The above table shows that there is net increase in the working capital of during the
year 2015-16 with compared to the year 2016-17. This is because of significant increase in
sundry debtors, other current assets but there is a downfall in the inventory, cash and bank
balances. On the other hand current liabilities are decreased. The net effect of the above
changes has brought an increase in net working capital.

Statement showing the changes in Working Capital for the year 2016-17 and 2017-18

A) Current Assets
Inventory 3443.01 3316.98 - 126.03
Sundry Debtors 5564.41 6581.79 1017.38 -
Cash & Bank 1747.02 1208.69 - 538.33
Other Current Assets 881.26 945.47 64.21 -
Gross Working Capital(1) 11365.7 12052.93
Current Liabilities 2716.03 3862.57 - 1146.54
Provisions 499.87 385.72 114.17 -
Working Capital(1-2) 8419.78 7804.64

Decrease in Working --------- 615.14 615.14
Capital
Total 8419.78 8419.78 1810.9 1810.9
Analysis:
year 2016-17 with compared to the year 2017-18. This is because of significant decrease in
inventory, cash and bank balances. But there is a upswing in the sundry debtors and other
current assets On the other hand current liabilities are increases. The net effect of the above
changes has brought an decrease in net working capital.


A) Current Assets
Inventory 3316.98 5318.73 2001.75
Sundry Debtors 6581.79 11502.3 4290.51
Cash & Bank 1238.69 1238.7 30.01
Other Current Assets 945.47 1090.38 144.91
Sundry Creditors 3862.57 5671.67 - 1809.1
385.72 484.67 - 98.95
Working Capital(1-2) 7804.64 12993.77

Increase in Working Capital 5189.13 5189.13
-
Total 12993.77 12993.77 7097.18 7097.18
Analysis:
year 2017-18 with compared to the year 2018-19. This is because of significant increase in
sundry debtors, other current assets, cash and bank balances. But there is a downfall in the
inventory. On the other hand current liabilities are increased. The net effect of the above
changes has brought an increase in net working capital.


A) Current Assets
Inventory 5318.73 6767.92 1449.19 -
Sundry Debtors 11502.3 13834.34 2332.04 -
Cash & Bank 1238.7 2471.74 1233.04 -
Other Current Assets 1090.38 1902.97 812.59 -
Current liabilities 5671.67 6491.81 - 820.14
Provisions 484.67 732.3 - 6747.63
Working Capital(1-2) 12993.77 11252.86

Increase in Working - 1740.91 1740.91
Capital
Total 12993.77 12993.97 7567.77 7567.77
Analysis:
The above table shows that there is net increase in the working capital of
Rs.47,35,053.06 during the year 2018-19 with compared to the year 2019-20. This is because
of significant increase in inventory, other current assets, cash and bank balances. But there is a
downfall in the sundry debtors. On the other hand current liabilities are decreased. The net
effect of the above changes has brought an increase in net working capital.

CHAPTER – 5
&

Findings:
1) Networking capital of Anantha PVC pipes pvt ltd is increasing year by year during the
period of study and which is good for the company.
2) The working capital is financed mostly by the long-term sources and marginally by
short-term sources. The company also used the retained earning to finance the working
capital needs. As per the annual reports, working capital demand loan is secured by the
hypothecation of raw materials, stores and spares, work in progress finished goods and
book debts both present and future.
3) In financial year 2006, the firm is satisfactory regarding the position ofworking capital.
4) Working capital management of SUJALA PIPES is increased in everyyear
5) Profit of SUJALA PIPES is increasing it indicate that company isworking with high
performance and better management.
6) The company overall financial performance both in long run and shortrun is adequate
and acceptable

Suggestions:
As the firms networking capital increase or decrease in relation to salesvalue. There

need to concentrate on control over current assets andcurrent liabilities.
1) In SUJALA PIPES, net working capital shows increasing trend.
2) The company overall financial performance both in long and short run isacceptable
3) The company depends more on bank borrowings and long term sources of funds for
working capital needs. The working capital required by the company is increasing over
years. The company should try to curtail the unnecessary expenditure in order to reduce
the cost of production and promote high return on sales.
4) As the company’s should decrease the current assets which are in the form of sundry
debtors, inventory etc.
5) The firm so maintaining the current assets satisfactory, but at the same time more than
50% of current assets are blocked in the form of receivables. This is due to giving credit
sales to his customers and maximum portion of sales are in credit terms only. If at sll
there is any possibility, the company should reduce the credit sales and receivables
holding period and to bridge the gap between the excess and shortage of working
capital.
6) The inventory position of the company is satisfactory. If the company will increase its
stock of inventory, then it will be more satisfactory in future.
7) The company needs to invest in marketable securities in order to increase

8) As the company maintaining low cash resources it should try to maintain balance
between debtors and cash. That means it should reduce its debtors and increase cash
resources.
9) The sales of the company are showing fluctuating trends. So the company should
maintain proper control on sales.

CHAPTER – 6

Conclusion:
Under the light of the inferences drawn from the analysis, it is no exaggeration to
conclude with information that the overall working capital management of Sujala PVC Pipes
pvt ltd is fair and reasonably good and thus promising future awaits the company.

CHAPTER – 7

Bibliography
Books referred:
1. I.M.Pandey Financial Management, 8th edition,

Vikas publishing (pvt), New Delhi.
2. M.Y.Khan & P.K.Jain Financial management, 4th edition,
TATA MC Grawhill publishing co ltd, New Delhi.
3. Rajeswara Rao.K & Prasad.G Accounting & Finance,
Jai Bharath Publishers.
\
Search engines:
 WWW.Wikipedia.com
 WWW.Sujala pipes.com
 WWW.Nandi pipes.com
 WWW.google.com

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Working Capital Sujala Pvc Pipes Private Limited

S.S.B.N DEGREE COLLEGE 1

Meaning of working capital:

S.S.B.N DEGREE COLLEGE 2

According to Western and Brigham,”Working capital refers to a firm’s investment in

According to Hoagland, “working capital is descriptive of that capital which is not

Concepts of working capital

1. Gross Working Capital:

2. Net Working Capital:

Types of working capital:

1. Permanent working capital:

S.S.B.N DEGREE COLLEGE 3

2. Temporary working capital:

Permanent working capital can be further divided into:

1. Regular Working Capital

1. Regular Working Capital:

2. Reserve Working Capital:

S.S.B.N DEGREE COLLEGE 4

Composition Of Working Capital:

b. Receivables Trade debtors

c. Marketable securities Govt securities

d. Cash and bank balance Cash in Hand

a. Sundry creditors Interest accused on loan

Sources of Working Capital:

S.S.B.N DEGREE COLLEGE 5

Working Capital Sources

Long – term sources Short-term sources

1. Sale of shares 1. Depreciation funds 1. Trade credit

General factors determining working capital requirements:

S.S.B.N DEGREE COLLEGE 6

2. Nature of the Business:

S.S.B.N DEGREE COLLEGE 7

9. Growth and expansion:

S.S.B.N DEGREE COLLEGE 8

10. Level of taxes:

11. Dividend policy:

12. Price Level changes:

13. Operating efficiency:

S.S.B.N DEGREE COLLEGE 9

Advantages of good working capital management:

The main advantages of sound working capital are as follows:

2. Goodwill: sufficient working capital enables a business concern to make prompt

6. Regular payment of salaries, wages and other day-to-day commitments: a company

7. Exploitation of favorable market conditions: only concerns with adequate working

S.S.B.N DEGREE COLLEGE 10

9. Quick and regular return on investments: sufficiency of working capital enables a

10. High morale: adequacy of working capital creates an environment of security,

Disadvantages of Inadequate Working Capital:

2. It cannot buy its requirements in bulk and cannot avail discounts.

Working capital cycle ( the operating cycle):

S.S.B.N DEGREE COLLEGE 11

Bills Raw Materials

S.S.B.N DEGREE COLLEGE 12

 conversion of cash into raw materials

Components of Working Capital

Working Capital management involves different components such as

S.S.B.N DEGREE COLLEGE 13

a. Facets of cash management:

Cash management is concerned with the managing of

1) Cash flows into and out of the firm

S.S.B.N DEGREE COLLEGE 14

C. Managing the cash flows:

d. Optimum cash level: