HINDALCO INDUSTRY LTD STUDY OF WORKING CAPITAL OF HINDALCO RENUKOOT

JAYOTI VIDYAPEETH WOMENS UNIVERSITY, JAIPUR

SUMMER INTERNSHIP PROJECT REPORT

COMPANY GUIDE:Mr. VIMAL RAHEJA SENIOR MANAGER FINANCE & ACCOUNT DEPARTMENT HINDALCO RENUKOOT

SUBMITTED BY:NAMRATA SINGH

JVWU (MBA)

ACKNOWLEDGEMENT

We would like to take this opportunity to express my deep gratitudr to many persons for their valuable assistance and continuous support during the course of my summer internship project.

We are also thankful to Hindalco Industries Ltd. For giving me an opportunity to pursue my internship in such a prestigious organization, and specially Mr. S.K.Das(G.M Training & Development) for being a very helpful & supportive guide Mr. Vimal Raheja(Senior Manager, Finance & Account Dept.) & other members of the department for making available all resources required for the completion of this project report.

We are also very thankful to our teacher who have guided us and have a constant source of inspiration at each & every step of our resource work.

DEEPA DWEVEDI M.G.K.V.P MBA (FM)

NAMRATA SINGH JVWU MBA (FM)

NISHI KALSHI P.T.U MBA (FM)

PREFACE
A summer training is an integrate part of our academic curriculum. During the training a student gets an opportunity to understand the practical aspect of theory. Training makes the concept clear. The report has been intended to reflect some of the basic issues covered under the Working Capital Management of Hindalco Industries Limited, a first truly MNC in India. All the aspects have been formulated and presented on the basis of the ideas and information gathered by the investigator during the span of project training. This report has been written in response to comprehensive study conducted on the topic. The reports mentions and evaluates various aspects, pertaining to the working capital management of the company. After a through analysis of various facts and stand figures, a set of conclusion has been given the prime considerations, while compiling the report and are authoritative and authentic. We make sure that anyone who goes through the report will learn how much we have learnt so far, and can get the benefit of the same.

DECLARATION
We here by declare that the project entitled

TO STUDY THE WORKING CAPITAL ANALYSIS OF HINDALCO RENUKOOT INDUSTRY LIMITED

Are truly analysis and recorded by us only. Now it is an assest of our collages. All the rights for using this project report lie with the institutes . Un authorized copy, broadcasting or rental of this project without permission from the institute will be considered illegal.

DEEPA DWEVEDI M.G.K.V.P MBA (FM)

NAMRATA SINGH JVWU MBA (FM)

NISHI KALSHI PTU MBA (FM)

TABLE OF CONTENT
I. II. III. IV. V. VI. VII. VIII. IX. X. XI. Introduction Company Businesses Vision , Mission & Values Organizational Structure Of The company Company Performance During The Year 2010-11 Product Capacity During The Year 2010-11 Achievement Of The Company During The Year 2010-11 Corporate & Social Responsibility Objective Of The Company Research Methodology Working Capital a. Meaning b. Types c. Working Capital Cycle d. Factors Thats Determine Working Capital e. Adequacy Of Working Capital

f. Dangers Of Excess Working Capital

g. Dangers Of Inadequate Working Capital

XII.

Working Capital Management a. Meaning b. Management of Working Capital

XIII.

Working Capital Management Of Company During The Year 2010-11

XIV.

Ratio Analysis

a. Meaning b. Advantages & Disadvantages

c. Limitations XV. Data Analysis & Interpretation Of Working Capital Of Company With The Help Of Ratio Analysis Liquidity Ratio

XVI.

XVII.

Turnover Ratio

XVIII.

Leverage Ratio

XIX. XX. XXI.

Findings Limitations Conclusion

XXII.

References & Bibiliography

CHAPTER INTRODUCTION

COMPANY OVERVIEW-HINDALCO
An industry leader in aluminium and copper. Hindalco Industries Limited, the metals flagship company of the Aditya Birla Group is the world's largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia. Its copper smelter is the worlds largest custom smelter at a single location.

Hindalco embarked journey in 1958. Its first real contribution to the vision of an industrial India occurred four years later, when the visionary late Mr. G.D. Birla set up India's first integrated aluminium facility at Renukoot, in the eastern fringe of Uttar Pradesh, India. It was backed by a captive thermal power plant at Renusagar in 1967. Hindalco attained its leadership position in the aluminium industry under the dynamic leadership of the late Mr. Aditya Vikram Birla a formidable force in the Indian industry.

And it was through the vision and guidance of Mr. Kumar Mangalam Birla, the Group Chairman that the business segments of aluminium and copper are consolidated to make Hindalco the nonferrous metals powerhouse it is today. This was achieved in part by expansion through mergers and acquisitions with companies such as Indal and Birla Copper. Hindalco also secured copper reserves and amplified its operating base by acquiring the Australian Nifty and Mt. Gordon copper mines.

Over the years, Hindalco has grown into the largest vertically integrated aluminium company in the country and among the largest primary producers of aluminium in Asia. Its copper smelter is today the world's largest custom smelter at a single location

The acquisition of Novelis Inc. in 2007 positioned us among the top five aluminium majors worldwide and the largest vertically integrated aluminium company in India. Today we are a metals powerhouse with high-end rolling capabilities and a global footprint in 13 countries. Our consolidated turnover of USD 15.85 billion (Rs. 72,078 crore) places us in the Fortune 500 league.

HINDALCOS BUSINESSES CREATING SUPERIOR VALUE_

Hindalco is one of the leading producers of aluminium and copper. Our aluminium units across the globe encompass the entire gamut of operations, from bauxite mining, alumina refining and aluminium smelting to downstream rolling, extrusions, foils, along with captive power plants and coal mines. Our copper unit, Birla Copper, produces copper cathodes, continuous cast copper rods and other by-products, such as gold, silver and DAP fertilisers. Our units are ISO 9001:2000, ISO 14001:2004 and OHSAS 18001 certified. Several units have gone a step further with an integrated management system (IMS), combining ISO 9001, ISO 14001 and OHSAS 18001 into one business excellence model. We have been accorded the Star Trading House status in India. Hindalco's aluminium metal is accepted for delivery under the High Grade Aluminium Contract on the London Metal Exchange (LME). Our copper quality standards are also internationally recognised and registered on the LME with Grade A accreditation.

ALUMINIUM
Hindalco's major products include standard and speciality grade aluminas and hydrates, aluminium ingots, billets, wire rods, flat rolled products, extrusions and foil. The integrated facility at Renukoot houses an alumina refinery and an aluminium smelter, along with facilities for the production of semi-fabricated products, namely, redraw rods, flat rolled products and extrusions. The plant is backed by a co-generation power unit and a 742 MW captive power plant at Renusagar to ensure the continuous supply of power for smelter and other operations. A strong presence across the value chain and synergies between operations has given us a dominant share in the value-added products market. As a step towards expanding the market for value-added products and services, we have launched various brands in recent years Everlast roofing sheets, Freshwrapp kitchen foil and Freshpakk semi-rigid containers.

COPPER
Birla Copper, Hindalcos copper unit, is located at Dahej in Gujarat, India. The unit has the unique distinction of being the largest single-location copper smelter in the world. The smelter uses state-of-the-art technology and has a capacity of 500,000 tpa. Birla Copper also produces precious metals, fertilisers and sulphuric and phosphoric acid. The unit has captive power plants for continuous power generation and a captive jetty to facilitate logistics and transportation. Birla Copper upholds its longstanding reputation for quality copper cathodes and continuous cast copper rods by assuring its management processes meet the highest standards. It has acquired certifications such as ISO-9001:2000 (Quality Management Systems), ISO-14001:2004 (Environmental Management System) and OHSAS-18001:2007 (Occupational Health and Safety Management Systems).

MINES
Hindalco acquired two Australian copper mines, Nifty and Mt. Gordon, in 2003. The Birla Nifty copper mine consists of an underground mine, heap leach pads and a solvent extraction and electrowinning (SXEW) processing plant, which produces copper cathode. The Mt. Gordon copper operation consists of an underground mine and a copper concentrate plant. Until recently, the operation produced copper cathode through the ferric leach process. In 2004, a copper concentrator was commissioned to provide concentrate for use at Hindalco's operations in Dahej. Both Nifty and Mt. Gordon have a long-term life of mine off-take agreement with Hindalco for supply of copper concentrate to the copper smelter at Dahej.

Aditya Birla Nuvo Sectors

Textiles, chemicals, agribusiness, carbon black, insulators, telecommunications, financial services, IT-

Products
Branded garments, viscose filament yarn, carbon black, fertilisers, insulators, textiles, life insurance, asset management, non-banking

Brands
Louis Philippe, Peter England, Allen Solly, Van Huesen, Birla Carbon, Birla Shaktiman Urea,

ITeS

financial services, distribution and wealth management, broking, general insurance advisory and broking, private equity investment, advisory and management services, cellular services, IT-ITeS, branded apparel retailing

Krishidev, Aditya Birla Insulators, Linen Club, Pyroguard, Ray One, Nuvo Lana, Jaya Shree, Kolorone, Idea, The Collective, Planet Fashion, More.

Grasim Industries Limited Sectors

Cement (grey and white), textiles, chemicals

Products
Cement, viscose staple fibre, rayon grade pulp, ready mix concrete, chemicals, textiles

Brands
Birla Super, Vikram Cement, Rajashree Cement, Birla White, UltraTech Concrete, UltraTech Cement, Graveria, Birla Cellulose

Grasim Bhiwani Textiles Limited Sectors

Textiles

Products
Fabrics, synthetic yarns

Brands
Grasim, Graviera

Hindalco Industries Limited Sectors

Non-ferrous metals,

Products
Aluminium, copper, aluminium

Brands
Everlast aluminium

chemicals, mining, agribusiness

rolled products (sheet and foil), cans, primary metal, recycling, caustic soda, aerospace alloys, alumina, power generation and aluminium smelting

roofing sheets, Freshwrapp aluminium foil, Freshpakk, semirigid containers, Permashield, waterproofing, Aluminium foil, Hindalco extrusions, Birla Copper, Birla Gold, Birla Silver

UltraTech Cement Limited Sectors

Cement (grey and white)

Products
Cement, ready-mix concrete

Brands
UltraTech Cement, UltraTech Concrete

Idea Cellular Limited Sectors Products Brands

Idea

Telecommunications Cellular services

Madura Fashion & Lifestyle Sectors

Garments

Products
Apparel

Brands
Louis Philippe, Peter England, Allen Solly, Van Heusen

Aditya Birla Chemicals (India) Limited

Sectors
Chemicals

Products
Caustic soda

Utkal Alumina International Limited Sectors

Non-ferrous metals

Products
Alumina

Dahej Harbour & Infrastructure Limited Sectors

Non-ferrous metals

Products
Handling of captive cargo (copper unit) and commercial cargo

Aditya Birla Science and Technology Company Limited Sectors

Non-ferrous metals

Products
Research and development

VISION MISSION & VALUES OF HINDALCO VISION:To be a premium metals major, global in size and reach, excelling in everything we do, and creating value for its stakeholders

MISSION:To relentlessly pursue the creation of superior shareholder value, by exceeding customer expectation profitably, unleashing employee potential, while being a responsible corporate citizen, adhering to our values.

OUR VALUES PATH TO EXCELLENCE

Honesty in every action

On the foundation of integrity, doing whatever it takes to deliver, as promised.

Missionary zeal arising out of an emotional engagement with work

Thinking and working together across functional silos, hierarchy levels, businesses and geographies.

Responding to stakeholders with a sense of urgency

ORGANISATIONAL STRUCTURE OF HINDALCO

BOARD OF DIRECTORS:-

Mr. Kumar Mangalam Birla, Chairman Mrs. Rajashree Birla Mr. C. M. Maniar Mr. M. M. Bhagat Mr. K. N. Bhandari Mr. A. K. Agarwala Mr. N. J. Jhaveri Mr. Ram Charan Mr. Jagdish Khattar Mr. D. Bhattacharya, Managing Director Mr. M. Damodaran

Chief Financial Officer:Mr. Praveen Maheshwari

Head Corporate Projects & Procurement Cell:Mr. B.B Jha

Company Secretary:Mr. Anil Malik

Chief People Officer:Mr. Vineet Kaul

Business / Unit Head:Mr. Dilip Gaur, Group Executive President, Copper Mr. Shashi K. Maudgal, Chief Marketing Officer, Aluminium Mr. Satish M Bhatia, President, Foil and Packaging Mr. R. S. Dhulkhed, Senior President, Operations Mr. Sanjay Sehgal, President, Chemicals & Intl. Trade Mr. D. K. Kohly, Chief Officer Operations, Renukoot Unit & Renusagar Units

Utkal Alumina International Ltd:Mr. Suryakant Mishra, CEO

Novelis Inc:Mr. Philip Martens, President and Chief Executive Officer

Aditya Birla Minerals Limited:Mr. D. Bhattacharya, Chairman Mr. Sunil Kulwal, CEO and MD Mr. Peter Torre, Company Secretary

HINDALCO PERFORANCE DURNING THE YEAR 2010-11:-

The global economy has withstood the recession though its recovery has been rather sluggish. World growth decelerated to nearly 3.8% during the second half of 2010 from 5.3% during the first half.

The IMF forecasts a 4.3% global growth in2011.the US economy grew at 3% last year. Growth in the euro zone was muted at around 2%. In sharp contrast emerging economies have grown briskly-in excess of 7%. China and India are the clear standouts, peaking at over 10% and 9% growth respectively.

With the global economic growth slowing, growth levels in India are likely to be impacted. Nevertheless, as we know, the fundamentals of the Indian economy remain strong. Over the past few years Indias track record has been impressive. The country recorded almost twice the global growth rate. Whilst the country does face roadblocks in the short term, the medium to long term growth prospects for India are bright. These have a bearing on HINDALCO growth and performance.

THE HIGHLIGHTS WERE:

OF

YEARS 2010-11 PERFORMANCE

Consolidated revenue of USD 15.9 billion on the back of strong showing by all businesses. Highest ever underlying EBITDA of $ 1.9 billion, reflecting the inherent strength of companys lost business model operational excellence, superior product mix and a balanced portfolio. Strong cash flows to support the growth ambitions. Innovative financing to fuel our growth plans. Company completed over USD 7 billion of financing transactions; each of them has been a landmark in itself.

Financial closure of Utkal and Mahan: achieved financial closure of two projects in a challenging liquidity environment. Underpinned by an overwhelming response in syndications, a fitting testimony to our deal structuring capabilities and underlying credibility with the banking fraternity.

Novelis refinancing: This was a landmark innovation in financing-not only did HINDALCO get back 50% of the invested equity within 4 years, but also opened up a novel funding avenue between HINDALCO and NOVELIS. HINDALCOS consolidated revenue at Rs.72,078 crore has been the highest ever, a growth of 19% year-on-year. Strong volumes, improved mix and higher commodity prices have been the growth drivers. Profits before depreciation, interest and taxes stood at Rs. 8,433 crore as against Rs. 10,069 crore in FY10, which included Rs.2,736 crore (USD 64 million) in FY11. The underlying performance of the current year sets a new record, reflecting the inherent strength of the Companys low cost business model, operational excellence, superior product mix and a balanced and de-risked portfolio.

Adjusted consolidated EBITDA rose by 25% (31% in Dollar terms) compared to FY10:Rs. Crore

EBITDA Less: Unrealised Gain/(Loss) on Derivatives-Novelis Transitional adjustment on adoption of AS-30 INDIA Adjusted EBITDA

FY11 8,433 (291)

FY10 10,069 2,736

349

8,724

6,983

SHARE OF NET SALES VALUE DURNING THE YEAR 2010-2011:-

The total revenue of Rs. 72,078 crore, ALUMINIUM BUSINESS contributed Rs. 56,084
crore, up 17% over the last year. ALUMINIUM EBIT stood at Rs. 4,469 crore compared to Rs.5,99 crore in FY10. As indicated above, FY10 EBIT includes an unrealized gain on derivatives of Rs. 2,736 crore and transitional adjustment for AS-30 Rs.349 crore. The results reflects a strong performance in the ALUMINIUM BUSINESS in INDIA and at NOVELIS.

Aluminium, 33% Copper, 67%

Copper Cathodes 32%

SAP, DAP and Complexes,Precious Metals and other Hydrate and 11% Aluminium 3%

Aluminium Ingots and Billets 10%

Rolled Products 11%

Extrusions 2% Conductor Copper Rods 5% Concast Copper Rods 24% Aluminium Foils and Others 2%

In the Copper Business, revenue was higher at Rs. 15,887 crore, a rise of 26% from Rs. 12,573 crore, a rise of 26% from Rs.12,573 crore in FY10, mainly on account of higher volumes ,higher copper LME and by-product credits.The benefits of the marked improvement in operational efficiencies were partially offset by lower TcRc and higher energy cost.The Copper mines in AUSTRALIA contributed significantiy to the copper EBIT on the back LME, despite a surge in inputs costs. EBIT of Rs. 1,082 crore for the Copper Business in 8% higher over last year.

PRODUCT CAPACITY OF HINDALCO RENUKOOT 2010-11

Alumina: 7,00,000 tpa (Renukoot)

Aluminium: 3,45,000 tpa (Renukoot)

Extrusions: 23,000 tpa (Renukoot)

Flat rolled products: 80,000 tpa (Renukoot)

Redraw rods: 56,400 tpa ( Renukoot)

Captive power: 742 MW (Renukoot) 84 MW ( Renukoot cogen )

ACHIEVEMENT OF HINDALCO INDUSTRY LTD DURNING 2010-11

2011 Hindalco bagged the prestigious CII EXIM Bank Business Excellence Award 2011 for its "strong commitment to excel on the journey towards business excellence". Birla Copper, a division of Hindalco, won the IMC Ramkrishna Bajaj Quality Award Commendation Certificate. Hindalco Renusagar won the Greentech Safety Gold Award 2011 in power sector for outstanding achievement in safety management, by Greentech Foundation, New Delhi.

2010 Renukoot "NIPM Gold Award for Best HR Practices" for the year 2010 by National Institute of Personal Management (NIPM). Greentech Gold Safety Award 2010 for Occupational Health and Safety Management in the Mining & Metals sector by Greentech Foundation, New Delhi. Greentech Environment Excellence Gold Award 2010 in the metals sector for its efforts towards environment management, by Greentech Foundation, New Delhi. The Golden Peacock Award for Corporate Social Responsibility for the year 2010. Greentech HR Excellence Silver Award for 2010 for excellence in training. "Best Exporter Award" for 2010 by the Container Corporation of India for contributing to India's economic progress through significant volume of exports. National Energy Conservation Award (Second Prize) 2010, in the metals sector, presented by the Ministry of Energy, Government of India. Silver Certificate of "Indian Manufacturing Excellence Award 2010" by Economic Times and Frost & Sullivan. Birla Copper Dahej Greentech Environment Excellence Gold Award 2010 in the mining and metals sector for its efforts towards environment management by Greentech Foundation, New Delhi. Greentech Silver Safety Award 2010 for Occupational Health and Safety Management in the mining and metals sector, by Greentech Foundation, New Delhi.

Renusagar Greentech Gold Award 2010 in thermal power sector for outstanding achievement in environment management, by Greentech Foundation, New Delhi. "Commendation for Safety Innovation Award 2010," by the Institution of Engineers (India). "Special Commendation for the Golden Peacock Environment Management Award 2010," by the Institute of Directors, New Delhi. Hirakud Hirakud Power Plant awarded Third Prize in the state-level CII Orissa Award for Best Practices in Environment, Safety and Health 2010. Hirakud Power awarded the Greentech Environment Excellence Gold Award 2010 in the thermal power sector category. Muri National Award for Excellence in Water Management 2010 "Beyond the Fence" category, for the indigenous work being done by the unit outside the fence as a corporate citizen and for fulfilling its corporate responsibilities. Quality Circle Awards Gold Awards to four Hindalco Renukoot Quality Circle Teams Kushal, Vaibhav, Pragati and Nirantar at the International Quality Circle Competition (IQCC 2010) held at Hyderabad. Silver and Bronze Awards to Hindalco Hirakud Power Quality Circle Teams Aryan and Power respectively at the International Convention on Quality Concept Circle (ICQCC 2010) held at Hyderabad. Quality Circle teams from Renukoot, Hirakud and Birla Copper Dahej Units excelled at the National QC Convention (NCQC 2010), winning Par Excellence, Excellence, Distinguished and Runners-Up Awards.

CORPORATE SOCIAL RESPONSIBILITY:Winning smilestouching hearts Long before corporate social responsibility found a place in the corporate lexicon, it was already textured into the Group's value system. As early as the 1940s, the late Mr. G.D. Birla espoused the trusteeship concept of management investing a portion of the company's profits for the larger good of society. The late Mr. Aditya Birla went beyond chequebook philanthropy when he brought in the concept of 'sustainable livelihood'. For over 50 years, Hindalco has worked in the hinterlands of India to better the quality of life of the underprivileged sections of society. Today, we reach out to millions of people in the villages, of whom more than 60 per cent live below the poverty line. Their needs include: access to water, agriculture and sustainable livelihood, healthcare, and education. These four areas form the focus of our efforts. The company also works to bring about social reform through widow re-marriage and dowerless marriages.

Focus areas:Health care:Medical camps: Taking mobile medical units and providing
ambulance service to remote areas.

Health facilities: Setting up well-equipped and professionally

manned health centres at several locations.

Regular health camps: Providing family planning, mother and

child care and specialised camps for eye care and for cataract; coordinating regular pulse polio immunisation drives; and promoting the awareness, prevention and treatment of malaria, water-borne diseases, TB, HIV/AIDS, and others diseases.

EDUCTION:-

Balwadis: Providing for the primary education of underprivileged children. Adult literacy: Providing formal and informal classes and active support to the government's mission to improve rural literacy levels. Educational support: Contributing uniforms, textbooks and classro om equipment and undertaking school building construction and maintenance. Merit scholarships / Schemes: Support female students for educational endeavours.

Skills training / capacity building:The Aditya Birla Rural Technology Park (Muirpur, Uttar Pradesh, India): Runs over 70 training programmes in diesel / hand pump repair / maintenance, electrical repair/maintenance, bee-keeping, tailoring, knitting and agriculture-related programmes and encouraging selfemployment through income-generating projects.

The Yashogami Skills Training Centre (Radhanagari, Tarale, Maharashtra, India): Trains women in skills such as rexine handicraft, fashion design, tailoring, food processing,
pottery, lamination, electronics assembly, zardozi, jewellery design, papier mache, rangolli, and fabric design. The Yashogami Skills Training Centre (Radhanagari, Tarale, Maharashtra, India): Trains women in skills such as rexine handicraft, fashion design, tailoring, food processing, pottery, lamination, electronics assembly, zardozi, jewellery design, papier mache, rangolli, and fabric design.

Women's empowerment
Self-Help Groups (SHG): These programmes involve over 11,000 women from rural
communities around Hindalco units.

SHG activities:

Micro credit and micro finance schemes, entrepreneurship building, oilprocessing units, tailoring centres, horticulture and nutrition gardens, diesel and hand pump repair, vermi compost production, mushroom cultivation, food processing, etc.

Awareness building: Health and sanitation, family planning, literacy drives and microfinance;
facilitating government loans for small-scale enterprise and rural insurance schemes, etc.

SOCIAL CAUSES:- Promoting dowerless marriages and widow r-marriages. AGRICULTURAL SUPPORT:Irrigation schemes:- Land brought under irrigation with better yield and multi-cropping methods. Watershed development:- Hydel towers, drainage canlans, wells, check-dams, pedal pumps and
harvest tanks.

TRAINING:Field schools train local farmers in modern agricultural techniques for higher crop yield; introducing lac culitivation, post-harvest technology with safe grain storage through an integrated pest-management system, floriculture, horticulture and kitchen gardens; shifting from mono to multi cropping patterns and distribution of hi-yield seeds.

OBJECTIVE OF STUDY :-

The study the overview of the aluminium industry & Indian perspective.
To study the issues & challenges faced by the company.

To study the contribution of the industry globally as well as in India.

To analyze the performance of the HINDALCO INDUSTRIES durning 2010-11.

To study various financial ratios.

To summarize the finding.

To understand significance of working capital in HINDALCO INDUSTRY LTD.

To assess the liquidity of the firm.

RESEARCH METHODOLOGY
The methodology adopted for the present study was discussion with company guide, expert and doing daily work in the organization. The main focus was to gain knowledge and experience during the training period that will help understand the whole process of tendering in procurement management.

RESEARCH DESIGN :To achieve the objectives stated above, I have done Descriptive Research and for that data is collected from secondary sources.

RESEARCH METHOD:Secondary data collection technique to achieve the objectives stated above, Descriptive Research is taken into account.

COLLECTION OF DATA:Data collection was through literture survey & expert opinion. Literature survey includes the collection of data from various sources like handbook, as well as study materials. A part of data was collection from primary source and other was collection from secondary sources.

PRIMARY SOURCES:Information gathered by interview and discussion with the heads of finance and accounts department head like Mr. Vimal Raheja.

SECONDARY SOURCES:From the company induction booklet and website.

 Companys annual report. Published information on the booklets for finance. Aditya birla group website Others websites

DATA ANALYSIS :For analysis of data MS EXCEL is used. Simple tables and pie charts are used for the purpose of comparison and help of graphs and pictures are also taken for making the interpretation easier.

TOOL USED: Ratio analysis Pie charts Tables and graphs Overview analysis

WORKING CAPITAL
A company invests its funds for long-term purposes and for short-term operations. That portion of a companys capital required for minimum stock of raw material to maintain continuity in production, minimum stock of finished goods to fulfil future demand, payment of wages and salaries of the labourers and employees for the processing period and minimum amount of debtors, cash and bank balances is called The Working Capital. In others words, Working Capital is that part of the firms capital which required for financing shortterm or current assets such as inventories, debtors, marketable securities and cash. Thus Working Capital means that part of the total assets of the business that changes from one form to another form in the ordinary course of business operations. Hence, Working Capital is also known as circulating capital or short-term capital or liquid capital.

TYPES OF WORKING CAPITAL:Working Capital may be classified in two ways :A: ON THE BASIS OF BALANCE SHEET:1: GROSS WORKING CAPITAL:- The gross working capital refers to the firms investment in current assets. These includes: Liquid Assets (Cash and Bank deposits) Bill Receivables Sundry Debtors (Less provision for bad debts) Inventories of stocks Raw Material Work in Process Stores and spares Finished Goods Coal & Fuel

2: NET WORKING CAPITAL:- Net working capital is the difference between current assets and current liabilities or the excess of total current assets over total current liabilities. These includes: Bank overdraft

Bills payables Sundry Creditors or Account Payable Dividend payable Provision for Taxation, if it does not amount to appropriation of profits. Other short term liabilities

B: ON THE BASIS OF TIME:1. PERMANENT WORKING CAPITAL:This type of working capital represents the irreducible minimum amount that is permanently blocked in the business and that cannot be converted into cash in the normal course of business. It is required for permanent investment in holding minimum quantity of stock of raw materials and finished goods, debtors and cash. This amount is absolutely required throughout the year on a continuous basis for maintaining the circulation of current assets. As the business grows, the requirement of working capital also increases due to increase in current assets.

2:

VARIABLE WORKING CAPITAL:- Any amount over and above the permanent level of

working capital is called Variable Working Capital or Temporary Working Capital. It keeps on fluctuating from time to time as per the change in production and sales activities. Variable working capital can be classified as: (i): SEASONAL WORKING CAPITAL:- The capital required to meet the seasonal demands of the enterprise is called Seasonal Working Capital. FOR EXAMPLE:- A manufacturer of woolen textiles. (ii): SPECIFIC WORKING CAPITAL:- This type of working capital is that part of working capital which required to meet unforeseen contingencies like strike, slump, flood, war etc.

WORKING CAPITAL CYCLE

Under this Working capital is represented by the excess of current assets over current liabilities identifying the relatively liquid portion of the total enterprise capital which constitutes a margin for meeting obligation within the ordinary operating cycle of the business The duration or time required to complete the sequence of events right from purchase of raw materials / goods for cash to the realization of sales in cash is called the Working Capital Cycle. During this cycle, capital converted from one form to another form such as cash----------raw material---------finished goods----------debtors or bill receivable----------cash. Working capital cycle also called circulating capital.

FACTORS THAT DETERMINE WORKING CAPITAL :A firm should have neither low nor high working capital. Low working capital involves more risk and more returns, high working capital involves less risk and less returns. Risk here refers to technical insolvency while returns refer to increased profits/earnings. The amount of working capital is determined by a wide variety of factors. Nature of business Seasonality of operations Production cycle Production policy Credit Policy Market conditions Conditions of supply

Nature of Business: The working capital requirement of a firm depends on the nature of the business.
For example, a firm involved in sale of services rather than manufacturing or a firm is allowing only cash sales. In the first instance, no investment is required in either raw materials or WIP or finished goods, while in the second instance there exists no receivables as there is immediate realization of cash. Hence the requirement of working capital will be lower.

Seasonality of Operations: If the product of the firm has a seasonal demand like refrigerators, the
firms need high working capital in the periods of summer, as the demand for the refrigerators is more and the firm needs low working capital in the periods of winter, as the demand for the product is low.

Production Cycle: The term production cycle refers to the time involved in the manufacture of
goods. It covers the time span between the procurement of the raw materials and the completion of the manufacturing process leading to the production of goods. As funds are necessarily tied up during the production cycle, the production cycle has a bearing on the quantum of working capital. The longer the time span of production cycle, the larger will be the funds tied up and therefore the larger the working capital needed and vice versa.

Production Policy: The quantum of working capital is also determined by production policy. In case
of the firms having seasonal demand of the products like refrigerators, air coolers etc., The production policy of the firm determines the amount of working capital requirement. If the firm has production policy to carry production at a steady level to meet the peak demand, this will result in a large accumulation of finished goods (inventories) during the off-seasons and the abrupt sale during the peak season. The progressive accumulation of finished goods will naturally require an increasing amount of working capital. If the firm has production policy to produce only when there is a demand then the firm needs low working capital during the slack season and high working capital during season.

Credit Policy: The level of the working capital is also determined by the credit policy, as the firms
credit policy determines the amount of receivables. If the firm has a liberal credit policy, then the firm needs high working capital and the firm needs low working capital if the companys credit policy does not allow it to extend credit to the buyers.

Market Conditions: The working capital requirements are also determined by the market conditions.
In case of the high degree of competition prevailing in the market the firm has to maintain larger inventories as customers are not inclined to wait for the product. This needs higher working capital requirements. If there is good demand for the product and the competition is weak, a firm can manage with smaller inventory of finished goods, as customers can wait for the product if it is not available in the market. Thus, a firm can manage with low inventory and will need low working capital requirements.

Conditions of Supply: The availability of raw materials and sparesalso determine the level of working
capital. If there is ready availability of raw materials and spares, a firm can maintain minimum inventory and need less working capital. If the supply of raw materials is unpredictable, then the firm has to acquire stocks as and when they are available for ensuring continuous production. Thus, the firm needs to maintain larger inventory average and needs larger requirement of Working capital.

ADEQUACY OF WORKING CAPITAL:A firm must have adequate working capital. It should neither be excessive nor inadequate. Excessive working capital is a situation where in the firm invests excessive funds in working capital. These excessive or idle funds earn no profit for the firm.

DANGERS OF EXCESS WORKING CAPITAL:It may result in unnecessary accumulation of inventory which may lead to increase in wastage due to mishandling, theft etc.

It is an indication of defective credit policy. There is the possibility of higher incidence of bad debts. It may lead to complacency in managing day-to-day expenses of the firm. Executives may be tempted to spend more.

Inadequate working capital is a situation where in the firm does not have sufficient funds to meet day to day running expenses. This ultimately results in interruption in the production process.

DANGERS OF INADEQUATE WORKING CAPITAL :

Operating inefficiencies creep in when it becomes difficult of meet day-to-day commitments. It becomes difficult to implement operating plans and achieve firms targets. It directly affects firms liquidity position and the firm may find it difficult to honor short-term obligations.

WORKING CAPITAL MANAGEMENT

Working capital is the excess of current assets over current liabilities. So, Working capital management involves making decisions on the amount and composition of current assets and the ways to finance these assets. Working capital management thus covers not only the management of current assets but also their financing. It is worth noting that Working capital finance is self-liquidating in the sense that principal amount and the interest are normally paid out of the sale proceeds of current assets required for sale in the same form or in transformed or processed form. Thus, Working Capital Management refers to the management of current assets, namely cash, inventories, receivables and administration of current liabilities.

MANAGEMENT OF WORKING CAPITAL:-

Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable. CASH MANAGEMENT:- Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs.

INVENTORY MANAGEMENT:- Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials - and minimizes reordering costs - and hence increases cash flow DEBTORS MANAGEMENT:- Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital (or vice versa); see Discounts and allowances.

SHORT TERM FINANCING:- Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors to cash" through "factoring".

WORKIIING CAPITAL MANAGEMENT IN HINDALCO INDUSTRY LTD.

FIXED ASSETS:(a). Tangible assets are started at cost less accumulated depreciation and impairment loss, if any. Cost
comprises of purchase price and any directly attributable cost of bringing the assets to its working condition for its intended use.

(b). Intangible assets are started with cost less accumulated amortization. Cost includes any directly
attributable expenditure on making the assets ready for its intended use.

(c). Machinery spares which can be used only in connection with an item of fixed assets and whose use
is not of regular nature are written off over the estimated useful life of the relevant assets.

INVESTMENTS:(a). Long term investments are carried at cost after deducting provision, if any, Diminution in value

considered to be other than temporary in nature.

(b). Current investments are stated at lower of cost and fair value.

INVENTORIES:(a). Inventories of stores and spare parts are valued at or below cost after providing for cost of
obsolescence and other anticipated losses, wherever considered necessary.

(b). Inventories of items other than those stated above are valued At cost or Net Realizable value,
whichever is lower. Cost is generally determined on weighted average cost basis and wherever required, appropriate overheads are taken into account.

(c). Materials and other supplies held for use in the production of inventories are not written down
below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.

FOREIGN CURRENCY TRANSACTIONS:Transactions in foreign currency are recorded at the rate of exchange prevailing on the date of transaction. Yearend balance of foreign currency transactions is translated at the yearend rates. Exchange differences arising on settlement of monetary items or on reporting of monetary items at rates different from those at which they were initially recorded during the period of reported in previous financial statements are recognized as income or expenses in the period in which they arise. Foreign currency monetary items those are used as hedge instrument or hedged items are accounted as per accounting policy on derivative financing instruments.

REVENUE RECOGNITION:Sales revenue is recognized on transfer of significant risk and rewards of the ownership of the goods to the buyer and stated at net of trade discount and rebates. Dividend income on investments is accounted for when the right to receive the payment is established. Export incentive, certain insurance, railway and other claims where quantum of accruals cannot be ascertained with reasonable certainty, are accounted on acceptance basis.

BORROWING COSTS:Borrowing costs directly attributable to the acquisition or construction of qualifying assets are capitalized. Other borrowing costs are recognized as expenses in the period in which they are incurred. In determining the amount of borrowing costs eligible for capitalization during a period, any income earned on the temporary investment of those borrowings is deducted from the borrowing costs incurred.

GOVERNMENT GRANTS:Government Grants are recognized when there is a reasonable assurance that the same will be received. Revenue grants are recognized in the Profit and Loss Account. Capital grants relating to specific fixed assets are reduced from the gross value of the respective fixed assets. Other capital grants are credited to capital reserve.

Provisions, Contingent Liabilities and Contingent Assets

Provision is recognized when there is a present obligation as a result of a past event the probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. Disclosure for contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources, no provision is recognized or disclosure for contingent liability is made when there is a possible obligation or a present obligation and the likelihood of outflow of resources is remote. Contingent Assets is neither recognized nor disclosed in the financial statements.

Leases
Lease payments under an operating lease are recognized as expenses in the profit and loss account as per terms of lease agreement. Finance leases prior to 1st April, 2001: lease rental recognized as expenses in the profit and loss account as per term of lease agreement.

Derivative Financial Instruments (a). The company uses derivative financial instruments such as forwards, swaps, options, etc. to hedge
its risks associated with foreign exchange fluctuations. Risks associated with fluctuations in the price of

the companys products are minimized by undertaking appropriate hedging transactions. The fair values of all such derivative financial instruments are recognized as assets or liabilities at the balance sheet date.

(b). For derivative financial instruments and foreign currency monetary items designed as Cash Flow
hedges, the effective portion of the fair value of the derivative financial instruments are recognized in hedging reserve and reclassified to Sales, Raw Materials Consumed,Intrest and other Expenses in the period in which the profit and loss Account is impacted by the hedged items or in the period when the hedge relationship no longer qualifies as cash flow hedge.

(c). For derivative financial instruments designated as Net Investment Hedges in foreign operations,
gains and losses on derivative instruments are included, net of taxes, to the extent the hedges are effective, in the foreign currency translation reserve.

(d). If no hedging relationship is designated, the fair value of the derivative financial instruments is
marked to market through Profit and Loss Account and included in Other Expenses

RATIO ANALYSIS
An analysis of financing statement with the help of RATIO may be termed as RATIO ANALYSIS. It implies the process of computing , determining and presenting the relationship of items or group of items of financial statements. ALEXANDER WALL is considered to be pioneer of Ratio Analysis. He presented after a serious thinking a detailed system of Ratio Analysis in 1909. He explained that the work of interpretation can be made easier by establishing quantitative relationships between the facts given in the financing statements.

ADVANTAGES & DISADVANTAGES OF RATIO ANALYSIS

Advantages:The following are the main advantages derived of ratio analysis, which are obtained from the financial statement via Profit & Loss Account and Balance Sheet.

a) The analysis helps to grasp the relationship between various items in the financial statements. b) They are useful in pointing out the trends in important items and thus help the management to forecast c) With the help of ratios, inter firm comparison made to evolve future market strategies. d) Out of ratio analysis standard ratios are computed and comparison of actual with standards reveals the variances. This helps the management to take corrective action. e) The communication of that has happened between two accounting the dates are revealed effective action. f) Simple assessments of liquidity, solvency profitability efficiency of the firm are indicted by ratio

analysis. Ratios meet comparisons much more valid. Disadvantages:

Ratio analysis is to calculate and easy to understand and such statistical calculation stimulation thinking and develop understanding. But there are certain drawbacks and dangers they are. i) There is a trendy to use to ratio analysis profusely. ii) Accumulation of mass data obscured rather than clarifies relationship. iii) Wrong relationship and calculation can lead to wrong conclusion.

1. In case of inter firm comparison no two firm are similar in size, age and product unit.(For example :one firm may purchase the asset at lower price with a higher return and another firm witch purchase the asset at asset at higher price will have a lower return) 2. Both inter period and inter firm comparson are affected by price level changes. A change in price level can affect the validity of ratios calculated for different time period. 3. Unless varies terms like group profit, operating profit, net profit, current asset, current liability etc., are properly define, comparison between two variables become meaningless. 4. Ratios are simple to understand and easy to calculate. The analyst should not take decision should not take decision on a single ratio. He has to take several ratios into consideration.

LIMITATION OF RATIO ANALYSIS

1) The accuracy and correctness of ratios are totally depends upon the reliability of the data
contained in financial statement on the basis of which ratios are calculated.

2) When ratios are used in the comparative study of two concerns, there must be uniformity in the
accounting plan used by both concerns.

3) Time-leg in calculating the ratios and communicating the same to the concerned persons should
not unnecessarily be too much.

4) Ratios may make the comparative study complicated and misleading on account of change in
price level.

5) Inter-firm comparison through ratio analysis should never be under-taken in the case of
concerns which are not associated or comparable.

6) Ratio analysis is one of the many techniques and interpretation. Thus, while attempting to draw
any conclusion on this basis, other techniques should also be used.

7) The utility of ratio also dependent upon the method of presentation also. There are two aspects
of the problem of presentation. First, only those ratios should be presented which are directly or indirectly related to with the problem under study. Secondly, they should be presented only to those persons who are concerned closely with the problem under consideration

DATANALYSIS

&

INTERPRETATION

OF

WORKING

CAPITAL

OF

HINDALCO INDUSTRY LTD. OF 2010-11 WITH HELP OF RATIO ANALYSIS:-

Rs. In million
PARTICULARS

2009-10 5,172 3,558.02 1,851.27 50,962 51,219 34,801 11,246 191 3,925

2010-11 6,301 1767.17 1730.78 64,076 62,692 45,536 10,855 191 2,456

Current assets Current liabilities Inventories Cost of goods sold Capital employed Fixed assets Investment Share capital Net profit

LIQUIDITY RATIOS Ratio Current Ratio Formula Totalcurrent Assests/Total current Liabilities Result =6301/1767.17 =3.56 Interpretation
Current asset are assets that you can easily turn in to cash within 12 months,.

Current liabilities are the amount you are due to pay within the

coming 12 months. If company current ratio in more than 1 means company should able pay their liabilities. If less than 1 e.g 0.75 means that company could have liquidity problems.

Quick Ratio

Total current Assets =6301-1730.78/ - Inventories/ Total 1767.17 current Liabilities =2.58

Similar to the current ratio but takes account of the fact it may time to convert inventory into cash. is There in the

company

situation of pay their debts 2.58 times for

every 1.00 rs, it is good sign of company.

TURNOVER RATIOS

Ratio
Inventory or turnover ratio

Formula
Average inventory

Result
5921.41+7652.19/2 =9.44 days

Interpretation
On average, Hindalco Industries can turn over the values of their

stock Cost of goods sold / =64,076/

entire stock on every 9.44 days . the

company may need to break this down into product effective groups for stock

management. Obsolete stock , slow moving lines will extend over all stock turnover days. Faster fewer production, product lines,

just in time ordering will days. Capital ratio turnover Cost of goods sold / =64,076 / 62,692 capital employed = 1.02 Capital turnover ratio shows employed company. the of capital the Capital reduce average

employed

is

either

equal to shareholders funds plus long term loans or equal to total assets minus current liabilities. Working turnover ratio capital Cost of goods sold / 64,076 / 4533.83 working capital =14.13 This ratio shows that utilization of working capital is being

effectively. The higher Ratio the batter it is. Fixed assets turnover Cost of goods sold / = 64,076 /45,536 ratio fixed assets =1.40 days Fixed assets turnover ratio shows that

company can handle their net fixed assets by net sales. Current turnover ratio assets Cost of goods sold / =64,076 / 6301 current assets =10.16 days Current assets turnover ratio shows that

company can handle their current assets by net sales. Total Assets turnover Cost of goods sold / =64,076 / 45,536 + This ratio shows that ratio total assets 6301 =1.23 days total assets of the

company can be handle by the total sales

LEVERAGE RATIO

Ratio
Debts equity ratio

Formula
reserve & surplus

Result
=1.95 times

Interpretation
In debts-equity ratio we calculate money the in owners

Debts / share capital + = 914.6 /1788.59

respect of companys debts. Here Hindalco Industries, the current debts equity ratio is 1.95:1 it means

company debts 1.95 times in respect of 1 Rs. Of the owners money.

FINDINGS

Hindalco is a key organization in India as far as the supply of metal is concerned. Dynamic working structure in the field of alluminium and copper. Current ratio is very good which shows highly liquidity of the company. Working capital turnover ratio is more as compared to last two years which shows the Efficient utilization of working capital. Company has very high term liquidity position so that company can easily pay it is liabilities. Precious & effective working schedules & best timely delivery representations. Best aggregation and superb tuning is the tradition and culture of whole Birlas group.

LIMITATIONS

One of the major limitations was the limited time span. Since the time span was limited therefore the size of the sampling unit is limited. Limited addition of annual report. Thats why annual report is share by trainee. Limited information given by employees

REFERENCES AND BIBILIOGRAPHY

1. Annual Report of HINDLCO INDUSTRY LTD 2010-11.

2. Financial Management (V.K. Shrivastav)

3. Financial Management text and problems. (S.M SHUKLA & S.P GUPTA)

4. Financial Management.(Text M.R AGRAWAL)

5. Website (www.hindalco.com ,adityabirla.com,google.com)