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This project was started with a view of understanding working capital management of Nagarjuna Fertilizers and Chemicals limited The first step was the understanding of the fertilizer (urea) industry. It required study of major players of the industry and their market share. Since urea industry is regulated by government and government plays a vital role in the pricing of the urea, pricing of urea was studied for the better understanding of the industry. Bio fertilizer is an upcoming sector of the fertilizer industry, so it was also studied. The intensity of competition was studied using Porter’s five forces model. Next, NFCL as a company was studied. It included study of various products offered by the company, manufacturing unit and financials of the company that included share holding pattern, market price data and CDR as well. Company was also analyzed using SWOT. Some processes like collections, specialty fertilizer division etc were also studied. Ratio analysis was also done to understand the performance of the company .ratios related to receivables for NFCL was calculated and was compared with the major players of the industry. Last three year’s trend was also observed. Next, Du Pont analysis was done. Three major international players in nitrogenous fertilizer industry across the globe were studied with respect to receivables and their common practices in receivables management was found out. Factoring can be an option for NFCL to manage its receivables, so this was also studied. Suggestions and recommendations were made to conclude the project.
keeping NFCL as a reference company for this purpose. With increasing population it needs to correspondingly increase its food production to feed its mammoth population. However if this is going to happen then fertilizer industry is going to play a very crucial role and so it needs to increase its urea production. Thus a project at a fertilizer company like Nagarjuna Fertilizers and Chemicals limited was interesting and challenging as well as it would not only provide an opportunity to get a picture of fertilizer industry (urea in particular) and working capital management of Nagarjuna Fertilizers and Chemicals Limited (NFCL) but would also provide an opportunity to interact to industry people through NFCL employees. 3) to come up with suitable recommendations and suggestions that would be useful to the company However the project suffers from the following limitations :- . Currently India is the third largest producer and consumer of fertilizers in the world. The project was undertaken with following objectives in mind :- 1) to develop an understanding or fertilizer industry in general and NFCL in particular 2) to understand the overall working of the of the company to understand the nuances of receivables management.Introduction India is poised for another green revolution. To be able to do this India is aiming to double its food production by 2010-12.
Company overview NFCL is the flagship company of Nagarjuna group.used as fertilizer Zinc sulphate monohydrate – used as fertilizer Services offered---KVK Raju krishi vigyan kendram for imparting knowledge. though NFCL has its operations in Orissa . water softener and in the manufacturing of KOH Zinc sulphate heptahydrate. 2) Too much dependence on secondary data 3) A lot of relevant data is inaccessible because of the data being confidential. technology and latest agricultural practices to farmers to increase farm output . West Bengal and Karnataka also. Madhya Pradesh.1) Study is based at Hyderabad only. Based at Hyderabad. the company is mainly into urea industry Products Manufactured products – Urea ( 46 % nitrogen) – used as fertilizer Anhydrous ammonia – used for production of urea and several other products Marketed products – Diammonium phosphate (DAP) – used as fertilizer Muriate of potash (MOP) – used as fertilizer .
Plant 1 Plant 2 Gas based urea: 1500 mt/day 40% gas 60% naptha urea: 1500mt/day . Denmark. Andhra Pradesh. There are two manufacturing units. Operations (manufacturing) The company has its manufacturing operations at Kakinada. Italy and Haldor Topsoe.Trading products – speciality fertilizers imported from Israel and China Nagarjuna management services – providing expertise in maintaining and managing chemical plants specially ones manufacturing urea and ammonia Micro irrigation – providing water management services. Company ranks third in providing micro irrigation solutions in the country Various subsidiary companies are NOCL(Nagarjuna Oil Corporation Limited). The gas based plant was established with the help of technical expertise of Snamprogetti.Nagarjuna Power Corporation Limited. East Godawari District .
Adopting CDR made a significant and quite visible change on the company’s performance and the operating profit rose by 66% and the operating profit margin increased by approximately 40% in FY2009-10 as compared to FY2008-09. This had a bad impact on the company’s performance and later the management decided to go for CDR. subsequent cap on production.94 tonnes . which was an all time high. s 1500 R 1000 500 0 Ope tingProfit Ma in(RHS) ra rg 2002 -03 Operating Profit(LHS) 2003 -04 2004 -05 Operating Profit Margin (RHS) urea. During the year.93 lakh tonnes of urea as against the target of 11.2009-10. changes in the Government policies on urea. But this rise was ephemeral and the following financial 1 annual report . sluggishness in the off-take of financial constraints 3500 3000 n 2500 o i l l i 2000 m .1 OPERATIONAL PERFORMANCE The company had to face severe prior to 08-09 due to reasons like investments in various core sector projects. 2009 -10 .2009. the company registered cumulative accident free days of 388 days as on March 31.ammonia: 900mt/day ammonia:900mt/day In the year 2009-10 the company produced 13. During the year under review the company’s plant received ISO 9001:2000 upgraded certification for Quality Management System and ISO 14001:1996 recertification for Environmental Management System. The British Safety Council conducted an audit of company’s plants at Kakinada and awarded Five Star Rating to the Plants.
00 25. The company during the year. of imported Urea on behalf of the Government of India. the operating profit saw an increase of 1. s R 4000 ( 2000 0 Apr-Dec 2004 Source: www. West Bengal and Chattisgarh.year saw a fall in the profits. The company during the year handled 2.com Apr-Dec 2005 26. Orissa. The 12000 10000 ) n o 8000 i l l i m 6000 .01 lakh MTs. West Bengal and a major market share in Orissa.94MTs. During the year 2009-10 company. was a leader with increased market share for Urea in Andhra Pradesh. Operating Profit 3Q Performance - The analysis of performance of the company during the first three quarters of F2009-10 reveals the pattern shown in the graph.00 % ( Operating Profit 21.00 20. This helped increase the market share of the company2.00 Margin by operating profit margin plummeted by 13% owning to the various rules and subsidies levied by the Government.00 24.63 lakh MTs of urea as compared to the previous year’s urea sale of 11. The reason for this fall can be attributed mainly to the bad rainfall during the monsoons.00 Sales 23. 2 Annual report.2009-10 . Marketing The company operates mainly in the states of AP.bseindia. The operating profit margin reduced by 24% and the operating profit fell by 11%. during the company achieved an all time record sale of 15. Though the sales have increased 18%.00 Operating Profit 19.00 ) 22.6% only.
350 0.5% 46% Source : annual report 2009-10 Urea is marketed under the brand name of Nagarjuna and is a fairly respected brand in the industry. institutional investors a.08.Market share State 2009 2010 West Bengal AP Orissa 27% 51% 46% 35% 53. of shares held 15.54.10 .18 4. mutual funds and UTI No.88.308 Percentage of shareholding 36.2010: Category a Promoter’s holding b Non promoter holding 1. Financials Distribution of shareholding as on March 31.
Company also underwent business process reengineering (BPR) in 2008 and is also SAP driven. institutions/ non-govt institutions) 3.20.593 100. banks .11 18.104.22.168.00 Source: annual report (NFCL).38.609 8. The dividend history of last five years are – .86 1.039 10.14.55 43.63.12 c Foreign institutional investors II others a) private corporate bodies b) Indian public c) NRI’s / OCB’s 4.098 0. All the lenders except UTI AMC private limited agreed for this.06 Grand total 41.52 crores in the year 2009-010 and paid a preference dividend of 18000 Rs with EPS of 0. It is also notable that the company was sanctioned a debt restructuring package (including working capital management) under corporate debt restructuring (CDR) scheme with effect from April 2008.2009-10 Company earned a profit of Rs 29.39.70 Rs The last time the company paid any significant dividend was in2005– 2006 (10 %).890 18. financial institutions insurance companies(central/ state Govt.b.299 44.70.29.
18 lakhs NIL NIL NIL 10 Market price data : Date 1-Mar-0 1-Apr-09 2-May-09 1-Jun-09 1-Jul-09 1-Aug-09 1-Sep-09 3-Oct-09 1-Nov-09 1-Dec-09 2-Jan-10 1-Feb-10 3-Mar-10 Closing price 14.4 15.0 14. dividend of 0.7 15.15 16.7 13.4 14.9 14.YEAR RATE OF DIVIDEND (%) 2009-10 2008-09 2007-08 2006-07 2005-06 Pref.7 15.6 13.95 14.3 17.25 .25 12.
except UTI AMC Pvt.02. All the lenders. c) Rescheduling of the payment of principal amount of loan.2011 into equity and.03. in the event of any default in servicing the debt.. b) Issue of 0. approved the package. Ltd. The main features of the package are – a) reduction of interest rates from 1 April 20.01 % coupon optionally convertible cumulative redeemable preference shares(OCCRPS)/Zero Coupon Debentures (ZCD) to compensate the differential interest for the year 2007-08. the lenders shall also have the right to convert the defaulted amounts .Note: drawn from market price of shares taken from NSE Corporate debt restructuring The company was sanctioned a debt restructuring package (including working capital management ) under corporate debt restructuring(CDR) scheme on 20. e) The lenders shall have the right to convert 20% of their outstanding debt after financial year 31. d) The lenders have the right to reset the interest rates after every three years.2008 effective from 1 April 2010.
if the converted shares/instruments are decided to be sold by the lenders. f) The promoters shall be given the first right of refusal.into equity (at par) or any other instruments. 3 FINANCIAL PERFORMANCE 3 annual report 2009-10 .
Cash flows from operating activities. 3 .0 0 2002-03 Source : Annual R eports 2003-04 2004-05 Cash Flow Composite Operating Acivities Inves tment Activities Finan cing Activities NFCL tried to payoff its debts and invest into other ventures using the cash obtained from the operating activities as well as it utilized the funds accumulated over previous financial years.0 0 .0 0 -1. Similar kind of growth pattern is observed in the case of the net profit margin which indicates that there has been a continuous increase in the net profit earned by the company over the sales in the financial periods concerned.4m in FY2003-04 as compared to Rs -1274.0 0 ) n o i 1 . But after CDR took place.As a result high debt and interest payments and price related factors net profit during FY2008-03 went negative but implementation CDR allowed it make a quick comeback.5 0 0 .0 0 -1.0 0 l l i m 5 0 0.5 0 0.0 0 0.0 0 1 .0 0 0 . Investments were made in .0 0 2 . The first three quarters of 2009 was excellent for the company with the net profit increasing by 263% and the net profit margin increasing by 209% as compared to same period in the previous financial year. As a result of CDR financial position of the company improved and further increased by 69% in Fy2009-10.7m in FY2002-03.0 0 2 . Net profit increased by about 114% to Rs 174. Even the cash flow of the company improved after it went for CDR.0 0 -5 0 0.5 0 0 .0 0 0.0 0 0. s R ( 0. investment activities and financing activities have increased from FY 2008-09 to 2009-10. Due to CDR the interest payment on debts reduced which resulted in improved financial condition of the company. During FY2008-09. an inflow of cash was seen from all the activities.
But there was a fall of 20% in cash flow from financing activities owing to the sale of preference shares as compared to the previous year.46%. Cash from investments rose to Rs 292.the company and the company . If the dealer is ready to make payment in time then its fine or else amount is deducted from dealer’s security advance which is a sort of security deposit of the dealers with the company.13m during FY2007-08 from Rs 796. Study of various functions at NFCL During the SIP we were also introduced to some of the functions at NFCL. the cash from operating activities was lower as compared to previous financial year but cash inflow was seen in from financing and investment activities. Process (specialty fertilizer division) Salient features of specialty fertilizer division . if the dealer has defaulted in the past then he is allowed to pay through demand draft only or else he can pay through other instruments such as out station cheque. after a period of time.36m in FY2008-09 from Rs 878. Eitherway money is transferred in a day to Hyderabad in company’s cash credit account.It also issued preferential shares. convertible to equity shares. If SBI is present at the point of sale then payment is through “SBI cash management product (SBI CMP)” otherwise payment is through corporation bank’s “corp FCS (fast collection services)”. Similarly the cash flow from investments in the company increased by 603. which are briefly explained below. Process(collections) Dealer places order to the sales officer who issues “sales cum delivery order” and then goods are delivered to the dealer. it should be noted that it seldom happens. Now. This trend was followed in FY2009-10 too with the cash flow from operating activities soaring up by 218. However.59% as compared to the previous financial year.31m in FY2008-09. Due to relatively poor sales in FY2008-09.62m into investments in the previous year and cash from financing activities raised to Rs 531.
if there is a demand for 25 kg packs . b) Unlike urea sold all over the country. Now. there is decentralised invoicing but if there is no urea business at the point of sale delivery challan and warehouse report is sent to Hyderabad. Specialty fertilizer is imported from Israel and China at Chennai and Bombay ports in 25 Kg packs.a) Import mainly from china and Israel. However Pune and Gujrat account for 40 % of the sale. Invoice is dispatched from Hyderabad every fortnightly. packets are sent to Hyderabad for repackaging into small packs of 2 kg. MAP g) Company also offers “micro irrigation solutions”. d) Used mainly with micro irrigation. NEED FOR THE STUDY To know that current assets are needed because sales do not convert into cash . In micro irrigation 50% of the subsidy is provided by the government. e) Discounts offered on early cash payment (unlike urea business) f) Main products are – multi-k. If at the point of sale urea business is present.000 tonnes. poly feed . c) Very small volume of business – approximately 50. However if there is no demand for 25 kg packs. SOP. 1 kg and ½ kg packs. packets are supplied to various godowns to meet the demand.
sales and realization of cash. production and sales. To understand that an operating cycle involved in the conversion of sales into cash. expansion and modernization decisions The working capital covers the total expenditure. To understand that both excessive and inadequate working capital means ideal funds which earns no profit for the firm. It is a difficult task before task before an organization to keep an amount as working capital However. The fixed capital covers all the crucial decisions such as capital budgeting decisions. the size of the activities. SCOPE OF THE STUDY The capital management plays a vital role in the accomplishment of organization objectives in the corporate scenario the concept capital can be classified in o fixed capitals and working capital. which concentrates on routine organization activities.instantaneously. The . the amount of working capital can be determined on the length of activities. So the firm should maintain balanced working capital. To identify the time gaps in purchase of raw materials and production. To understand that the firm should maintain sound working capital position that is having adequate working capital to run its business operations. the area of policy and procedure and the volume of an organization.
working capital management reviles around the performance of day – to – day activities. Debtors and Inventory To analyze the financial performance of the company with reference to its working capital components • • • Suggesting a better way if any for improving management or working capital To maintain the Adequate Working Capital METHODOLGY OF THE STUDY The data is corrected with the help of . If the size of activities of an organization is high the company should maintain as vice – versa. OBJECTIVES OF THE STUDY • To study the existing system of working capital management in Nagarjuna fertilizers • To examine the feasibility of present system of Managing cash. The researcher has accomplished the main purpose of her project work by collecting the data majorly form secondary sources.
Interaction with the finance department Secondary data: • • Accounting manuals of Nagarjuna fertilizers Websites of Nagarjuna fertilizers Printed matters of (from authorized text book • LIMITATIONS OF THE STUDY The scope is limited to the operations of Nagarjuna fertilizers. Primary data Secondary data Primary data: Primary data has been collected from the return statements of the company. The information obtained from the Primary and secondary sources were limited to Nagarjuna fertilizers. • • Interaction with the planning and development department. .
Primary through improvements in operational efficiency. The key performance indications were taken from 2003-2008. News areas and International operation so as to fulfill National expectations from Nagarjuna fertilizers. capital Utilization and productivity and generate adequate internal resources to Finance the company's growth. Comparison analysis was done in comparison of its sister units OBJECTIVES OF THE STUDY Growth To ensure a steady growth by enhancing the competitive edge of Nagarjuna fertilizers in existing Business. Profitability To provide a reasonable and adequate return on Capital employed. Technology . The operating results. the Balance sheet was of last Six years.
Hrishikes. Sunil. ”Financial management” . Kumar. customers and the country at large have from BHEL References: Bhattacharya. . Soil life and chemical fertilizers . employees.2000 Primavesi. “Working Capital Management–Strategies and Techniques”. Aswath . 2003-04.2001 Pandey.I M(1978). “Financial Management”. 2001 . 2009 Damodran.To achieve technology excellence in operations by development of Indigenous Technologies to and efficient absorption and adaptation of imported Technologies to suit Business needs and priorities and provide a competitive advantage of the company Image To fulfill the expectation which stock holders like government as own.”Corporate finance”. 2002-04 Kolanu .2002 ICMR .T. Ana . 2004 Annual reports of NFCL for the years 2004-09 .”Greening agriculture in India : An overview of opportunity and constraints”.
dailyindia.in/applications/iffcowebr5.indiamart.nationalfertilizers.com www.iffco.in/ india-profile/indus-fertilizers.nic.com www.html http://www.htm http://www.net/english/biofertiliser.unu.indiainbusiness.nsf/?Open http://kribhco.htm .nic. Sukhpal .Singh.nagarjunafertilizers.edu/Unupress/unupbooks/80478e/80478E10.nic.bseindia.htm www.php/India_expects_higher_food_grain_production http://dir.iimahd.in ) www.faidelhi.com www.Fert.com http://www.in http://www.com/show/14040. Issues.nic.in www.nagarjunagroup.nationalfertilizers.ernet.QuickMBA.org/ www.Marketing of Indian Organic Products: Status.com www.com www. and Prospects (www.indiainbusiness.com/indianexporters/fertiliz1.
unu. .com/show/14040.php/India_expects_higher_food_grain_production http://www.htm http://www.pdf.dailyindia.http://www.edu/Unupress/unupbooks/80478e/80478E10.zuari-chambal.com/Chambal_AR_PDF.
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