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Fulfillment of the Award Of The


(HT NO: 84-07-135)



I hereby declare that the project report entitled WORKING CAPITAL MANAGEMENT of Creamline Dairy Products Limited is carried out under the guidance of Mr. K.MAHENDER faculty of the college and submitted in partial fulfillment for the degree of MASTER OF BUSINESS ADMINISTRATION or Osmania University is my original work and not submitted by any other candidate the findings in this project are collected by me.



I express my deep sense of gratitude to Mr.G.Veerabrahmam ManagerAccounts of Creamline Dairy Products Limited for giving permission to me to take up this project work. I am thankful to staff members and finance Director of Cramline Dairy Products Limited, for giving their valuable time by providing in completion of my project work. I express my sincere thanks to my project supervision Mr.K.MAHENDER REDDY faculty of finance, Suprabhath institute for management and computer studies for giving inspiring and expert guidance rendered to me in carrying out this project work. I would also thankful to Mr.RAMNENDER LAL principal. I would also thankful to faculty members of Suprabhath Institute for Management and Computer Studies for attending their co-operation and encouragement in this project work.


Table of Contents
Chapter I Introduction
o Scope of the study o Objectives of the study o Methodology of the study o Limitations of the study

Chapter II Chapter III Chapter IV Chapter V

Company Profile
Organization Charts
Industry Scenario

Working Capital Management and a theoretical framework

Chapter VI

Working Capital Management Analysis Findings & suggestions

Chapter VII






This chapter deals with the introduction of study in respect of subject matter of project, need of the study, objectives of the study, scope of the study, Methodology and Database used in the project and period of eth study of the project.

Introduction of the study:

Some definitions of Working Capital: 1. Mead, Molott and file: Working Capital means current assets.

2. J.S.Mill: The sum of the current assets is the working capital of a business.

3. C.W.Gersten Berg: Working Capital has ordinarily been defined as the excess of current assets over current liabilities.

Working Capital Management concerns with the problem that arise in attempting to manage the current assets. The current liabilities and inter relationship that exist between them.

Finance is the lifeblood of any organization and working capital management is an integral part of the overall financial management. Working Capital is essential for the smooth and successful running of any business organization.

Two concepts of working capital now in vogue are found useful in the management of working capital. Gross working capital Net working capital Gross concept of working capital to the firms investment in current assets. Net concept refers to the difference working between the current assets and current liabilities of the firm. This study is mainly concerned with investment in current assets. There are two types of assets i.e., fixed assets and current assets. Both types of assets are to be managed efficiently to make maximum profits with minimum possible investments. Decisions regarding investment in fixed assets are taken through the capital budgeting process. Current assets are the assets, which change their form with in one year. Working capital management in corned with administration of these current assets.


Working capital management is one of the key areas of financial decision making. It is significant because, the management must see that an excessive investment in current assets should protect the company from the problems of stockout. Current assets will also determine the liquidity position of the firm.

The goal of working capital management is to manage the firm current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. If the firm cannot maintain a satisfactory level of working capital. It is likely to become insolvent and may be even forced into bankruptcy.


To study the existing system of working capital management. To determine the flow of revenue from operations by taking into consideration on working capital related ratios. To examine the feasibility of present system of managing working capital. To appraise the reason for the change in working capital position with help of statement of changes in working capital. To analyze the financial performance of the company with reference to working capital. To give some suggestions to the management based on the information studied.


The study of management working capital is based on primary as well as secondary data.

The primary data was gathered through personal interaction with finance manager.

The secondary data was collected from companys annual reports from 20042008, various books and internet.


Due to time constraint a comprehensive meticulous study was not possible. As a result there might be changes of errors creeping in. Owing to the busy schedule of the executives and the staff in the company, exhaustive primary data could not be collected, which might affect the result of the study. Recommendations of the study are only personal opinions. Hence judgments may not be considered as ultimate and standard solutions.

Chapter-II Company profile

INDUSTRY BACKGROUND: Indias Agriculture, having achieved the satisfactory level of self-sufficiency in crop production, has started spreading its wings in dairy segment to enhance the quantum of animal proteins in daily diet through milk. Dairying has been now recognized as catalyst for economic development and is today accorded the status of thrust area by the government. In the emerging string agriculture scenario, livestock production in general and dairying in particular has been identified as an important tool for enhancing the income of small farmers and reducing unemployment in large rural population. The operation Flood, the appreciable concept of government has created necessary infrastructure in improving the performance of the dairy sector in the country. India is the largest producer of milk in the world. Dairy development in India has been acknowledged the world over as one of the modern Indias most successful development program. Increasing awareness on nutritional diet coupled with the anticipated growth in the purchasing power in urban areas, the demand for milk in the country is expected to go up further steeply. Today, milk is Indias second most important agriculture activity in terms of value of its output ranking next to paddy but much above wheat DAIRY BUSINESS: Industry Structure and Developments

Indias Annual Milk Production is growing @ 3% per annum, per capita milk availability is growing only @ 1.5% per annum, ghee consumption is growing @ 8% per annum and butter and cheese consumption is growing @ 10% per annum. If the same trend continues, demand for dairy products will soon exceed supply. The milk production in India accounts for more than 13% of the Worlds total output and 57% of Asias total production. However the animal productivity in India is very low as compared to Western Counties. The Worlds average milk yield per animal per year is 2100Kgs whereas Indias average milk per animal per year is 1000kgs. The unique aspects of dairying in India include: Production of milk from buffalo exceeds cow milk production. Buffalo yield less milk than crossbreed cows, but are well adapted to the extreme heat and humidity of India. Moreover, many Indians prefer buffalo milk over cow milk because of its higher butterfat content. In India, feed for dairy animals consists mainly of crop residues and byproducts. Forage and feed grain production is limited due to pricing incentives to grow cereals and pulses to feed Indias vast population. India has an extensive government-supported dairy co-operative structure. Co-operatives not only market their members milk, but also supply feed and many dairy services. Private dairy companies tend to duplicate the operating procedures of the co-operatives. Trends of Milk products in India and Andhra Pradesh India produced about 100 million tons of milk in 2008, accounting for 15 percent of total world production. Average milk yield in India, at 800 kg per dairy animal per year has been increasing steadily between 2000 and 2008 at an average annual rate of 3.8 percent. Andhra Pradesh (AP) accounts for 8.4 percent of the national dairy animal population and produces 8% of the countrys milk. Andhra Pradeshs milk production comes mostly from farms of less than 2 hectares with 1 to 4 Dairy animals. The milk

yield in Andhra Pradesh is slightly higher than the Indian average and is increasing at a faster rate. Farm gate milk prices, however, are slightly lower than the average for India.

Impacts on Household Income Current situation: The dairy activities contribute 16% of the daily per capital household income. With this per capita income, this household can afford considerably low living standards, which has no yet set benchmark under Indian conditions. The dairy development programs announced by the Central government have the potential to increase the per capita household income by 27 percent above its current situation.


Name of the company Registered & Corporate Office : 1-11-252/11/1, Motilal Nagar, Begum pet, Hyderabad 500 016. Date of incorporation Constitution : : 31-10-1986. Incorporated as a Private Ltd October 31st 1986 And converted into Public Limited 24th April 1994. Date of Commencement of Commercial production Sector : : 1st December, 1990. Private. : CREAMLINE DAIRY PRODUCTS LIMITED

Brand Name Present Works Packing facilities


UNIT 1: Survey No.547, Uppal Khalsa, IDA, Uppal, Hyderabad.

UNIT 2: Survey No. 795-1 & 797. Madanapalle, Chittoor Dist, Andhra Pradesh.

UNIT 3: Survey No.9/1, Orakkadu Village, Chennai. UNIT 4: Survey No. 21, Epuru Village, Pedapadu Mandal, Via Hanuman Junction, West Godavari Dist . UNIT 5: Survey No.80, Goudagere Village, Malavalli, Mandya Dist, Karnataka . UNIT 6: Pidathalagudipadu, Ongole Prakasam Dist, Andhra Pradesh. UNIT 7: At Post Agini, Kamptee Taluk, Nagpur Dist, Maharashtra

Line of Activity Products Description

: Processing of milk and milk products : Toned Milk, Whole Milk, Flavored Milk, Butter, Skimmed Milk Powder, Ghee, Ice Creams, Curd, Butter Milk, Doodhpeda, Paneer, Lassi etc.

Installed Capacity -Uppal -H.Junction -Madanpalle -Chennai -Malavalli -Kamptee -Ongole Directors

: Milk Packing Unit : 2, 20, 000 LPD : 75,000 LPD : 70,000 LPD : 1, 00,000 LPD : 25,000 LPD : 25,000 LPD : Powder Plant : 1, 50,000 LPD : Sri K Bhaskar Reddy - Managing Director : Sri M Gangadhar : Sri C Balraj Goud - Finance Director - Marketing Director

: Sri D Chandrasekhar Reddy Technical Director Bankers : ICICI Bank, Begumpet Branch, Hyderabad. : State Bank of India, Commercial Branch, Koti Hyderabad.

Main objectives of the company: To manufacture all kinds of milk products. To manufacture, purchase and sell all kinds of flavored milk products To carry on as a growing business To conclude collaboration agreements

Vision of CDPL: To increase per capita consumption of milk To empower the rural environment To ensure a steady supply of milk

CHAPTER - X Long Term Vision

To be recognized in the dairy industry for superior customer service and ability to continuously add value to our customers requirements. To be recognized in the Indian business community as a model for our professional approach to the way in which manage and develop our people. To have effective business processes and information systems that assists us in making the correct decisions. To be one of the leaders within the Dairy industry in Indian in regards to driving environment. Standards. To have a mind-set across all people within milk and milk products of continuous improvement of innovation in everything we do. Through understanding of the consumer's needs and priority to fulfill the needs. Strong technical competence and an ability to use that to provide high quality products to Customers.

Sound knowledge of the customer's perception of value for money (i.e. Cost / benefit). Excellence in the management of the whole supplies chain in order to deliver least total cost. Quick response time to any type of inquiries or request. Good reputations, credibility and stability the industry.



Cream line Dairy Products Ltd, (CDPL) is engaged in the business of processing and selling of liquid Milk, Butter, Ghee, Ice Cream and other related milk products like Flavored Milk, Lassi, Curd, Buttermilk, Paneer & Milk Sweets under the brand name of JERSEY . The Registered office of the company is located at 1-11252/11/1, Motilal Nagar, Begumpet, Hyderabad 500016. It is an existing profit making public limited company, certified as ISO 22000:2005 Company for the Food Safety Standards being adopted. The company was originally incorporated as a private limited company in 21st April 1994. The milk processing plants of the company are located at Uppal (Hyderabad), Madanapalle (Chittoor Dist), Orakkadu (Chennai), Mallavalli (Bangalore), Kamptee (Nagpur), Hanumanjuntion (Vijayawada) & Ongole. CDPL is one of the largest and well-established dairy units in the organized sector in South India. CDPL has a well-established marketing network spread across all major districts of Andhra Pradesh, Tamilnadu, Karnataka & part of Maharashtra. CDPL has been expanding its market topographically in the liquid milk segment in Karnataka and Tamilnadu. CDPL enjoys premier status in liquid milk segment by marketing 4,00,000 Liters per day (LPD). CDPL is managed by Dairy Technologists and professionals. company. CDPL was originally conceived to process 1500 LPD of milk. The project was appraised and funded by AP state Financial Corporation. The project was funded through equity capital of Rs.9.50 lakhs from Promoters, state subsidy of Rs 1.93 lakh and Term Loan of Rs 28.15 lakhs from APSFC. The plant was commissioned at The promoter Directors hold functional responsibilities and are actively engaged in the day-to-day operations of the

Mupireddypally village Medak dist, Andhra Pradesh, and its commercial production Commenced on 1st December, 1990. CDPL had initially processed 1500 LPD of milk and manufactured Milk products like Flavoured Milk, Ghee and Butter etc., and the same have been marketed in the twin Cities of Hyderabad and Secunderabad under the brand name JERSEY. CDPL products are well accepted by the consumers. During the year 1992-93, CDPL decided to increase and economize its volume of operations and entered the liquid milk market with Toned and Whole Milk. This Strategic decision has been taken after careful vendor development activity for procuring raw milk to cater to the increased volume of operations. This has, apart from increasing the volume of operations, ideally positioned the products in the market and stabilized the brand image. CDPL has gradually increased its installed capacity from 1500 LPD to 44500 LPD in March 1996 at its Mupireddypally plant. Equity share capital and hire purchase funded the gradual increase of installed capacity. In 1993, CDPL has introduced the novel concept of round the clock parlors covering entire strategic Locations of twin cities for exclusive marketing of companys products. CDPL also has well-established network of booths for distribution of liquid milk. This has enabled the consumer to have an easy and all time access to milk and milk products. CDPL had expanded its milk processing capacity from 44500 LPD to 74500 LPD and increased the production facility of Ghee & Butter from 365000 Kgs to 1460000 Kgs at Uppal plant, with a capital out lay of Rs. 830 Lakhs. The expansion was funded through a term loan of Rs. 540 Lakhs from IDBI and equity share capital of Rs.290 Lakhs. CDPL has been continuously expanding its capacities in modular form. CDPL has gradually increased its installed capacity from 74500 LPD to 220000 LPD in March 2007 at its Uppal Plant. This gradual increase in installed capacity on need-basis was done only through internal accruals of the company. CDPL has established several chilling centres in various districts of the states of Andhra Pradesh, Tamilnadu & Karnataka for procurement of buffalo and cow milk and the details of which are enclosed in Annexure I, apart from buyback

arrangement for procurement of buffalo milk from chilling centers, who are associates of CDPL. CDPL has been expanding its market topographically and has successfully marketed its liquid milk in all major districts of Andhra Pradesh, Tamilnadu & Karnataka. Continuous plans are on the anvil to expand the aforesaid markets. 2) MANAGEMENT: CDPL is managed by a team of qualified professionals. CDPLs Board comprises of highly qualified and experienced Technocrats and professionals. The day-to-day operations are looked after by Mr.K.Bhaskar Reddy under the guidance of the Board of Directors. The Managing Director is being supported by Mr. C.Balraj Goud, Director (Marketing) in marketing activities, Mr. D.Chandrasekhar Reddy, Director (Technical) in project implementation, production and technical functions and Mr. M.Gangadhar, Director (Finance) in financial, administrative functions of the company. The top management team is well assisted by team of qualified and experienced personnel. 3) BACKGROUND OF THE DIRECTORS: Sri K.Bhaskar Reddy aged 48 Years, is a Graduate in Dairy Technology from Osmania University. He has more 20 years of experience in Dairy & related Agri business. He is a promoter Director since inception of the Company. Sri M.Gangadhar,aged 53 years, fellow member of institute of Chartered Accountants of India (ICAI), has more than 25 years of experience in the field of finance and accounting. He is involved with the Company as a promoter for the last two decades. He was associated with Sangam Dairy as DGM - Finance and gained vast experience in dairy related Accounting, Finance and Costing aspects. Sri D Chandrasekhar Reddy, aged 47 years, is a graduate in Dairy Technology from Osmania University. He is involved with the Company as a promoter for more than two decades. He had earlier worked as Technical Officer in Sabarkantha District Milk Producers Union Limited, popularly known as SABAR DAIRY, part of AMUL organization for two years. His vast experience in processing

of various milk products and expertise in Technical, plant maintenance and operations are put to effective use to strengthen the technical aspects of the company Sri.C.Balraj Goud, aged 48 years, has vast experience in commercial activities and has considerable exposure to marketing of Milk and Dairy Products. He is involved with the Company as a promoter for more than two decades.

4) KEY EXECUTIVES: Name Sri K Bhaskar Reddy Tech) Sri M Gangadhar Sri C Balraj Goud Sri D Chandra Sekhar Reddy Tech) Dr.K.Srihari Rao Sri A Anand Sri.P.Sree Sree MBA Sri G Madhukhar Reddy Tech) Sri G Devanath Reddy Sri G Lakshmi Prasad Tech) Sri P Sashi Kumar GM, M.Tech(Dairy).,MBA SBU-Nagpur GM,SBU-Chennai GM, SBU-Hyd M.B.A M.Sc., (DairyGM,SBU-Bangalore B.Sc., (DairyTechnical Advisor G.M - Finance G.M Quality Assurance M.V.Sc A.C.A M.Sc.,(Dairy-Tec) Finance Director Marketing Director Technical Director F.C.A M.A,L.L.B B.Sc., (DairyDesignation Managing Director Qualifications B.Sc., (Dairy-

Market Milk: High Fat FCM STD Toned DTM Skim Cow Milk Fortified Milk Low Lactose Milk Fat Rich Products: Low Fat Cream Medium Fat Cream High Fat Cream Sour Cream Sterilized Cream Whipping Cream Cooking Butter Table Butter Ghee

Traditional Ghee Cow Ghee

Milk Powders: Milk Powder SMP Partly SMP Coffee / Tea Whitener Milk Shake Mix Powder Banana Milk Powder Mango Milk Powder Ice Cream Mix Powder Kulfi Mix Powder

Cultured Products:
Dahi Yoghurt Butter Milk Lassi Shrikhand Mishti Doi

Coagulated Products:

Paneer Casein

Sweets: Peda Burfi Khalakand Jamoon Rasagulla Rasmalai Basundhi Kheer Khoa Beverages: Sterilized Flavoured Milk Milk Shake Hot / Cold Milk Coffe Tea Whey Drink H) Ice Creams & Novelties.

PRODUCTS AND MANUFACTURING PROCESS 1.1 PRODUCT PROFILE The company has manufacturing and marketing of the following products : 1) Toned Milk: Toned milk is the pasteurized milk with 3% Fat and 8.5% Solids-Non-Fat (SNF). 2) Standard Milk is the pasteurized milk with 4% Fat and 9% SNF. 3) Whole Milk is the pasteurized milk with 6% Fat and 9% SNF 4) Table Butter is product exclusively obtained from cream after removal of moisture and SNF. it contains 82% of Fat. 5) Ghee is a product obtained from butter after removing 100% SNF. It contains 98% Fat. 6) Flavored Milk 7) Lassi 8) Youghurt / Curd 9) Butter Milk

1.02 MILK PROCESSING The raw milk purchased and stored in milk silos are transferred to the milk processing Zone for pasteurization with the heating and cooling treatment. In this process the raw milk is heated to 81-degree Celsius for 20 seconds and then cooled suddenly to 4 degrees Celsius. The milk will then be sent to separation Zone for separation in to cream and skimmed milk with the help of cream separator. The cream and pasteurized skim milk will be stored in insulated storage tanks. The pasteurized milk is standardized to require fat level and SNF content by mixing cream and skimmed milk in appropriate quantities. The standardized milk Is then packed in pouches and stored in cold storage. It is then distributed and sold through refrigerated retail outlets.

1.03 TABLE BUTTER The chilled cream will be fed into butter churn for conversion into butter and buttermilk, the required quantity of salt is then added to the butter to form Table Butter. This added salt absorbs the water droplets left in the butter. Salt also prevents chemical and bacteriological actions. The salted butter are then sent to packing and filling section for proper packing and kept under cold storage for onward dispatch. 1.04 GHEE MAKING The quantity of white butter earmarked for ghee making will the melted in the melter ad then heated in the plate heater. The heated butter is stored at 45 degree Celsius in stratification tanks for about two hours. During this process fat and water content in butter are separated. The water phase is being removed leaving the fat filled butter content, which are then transferred for cooking to the ghee boiler. The ghee so produced will then be filtered, clarified and granulated. The granulated ghee are then sent to packing and tilting section for proper packing and kept under cold storage for onward dispatch.

1 05 FLAVOURED MILK The pasteurized milk with 1.5% fat content are used for flavored milk. Sugar and the required flavors are added to the pasteurized milk and homogenized. The flavored milk is treated for extended shelf-life. Then flavored milk is filled in the bottles and sterilized and stores for onward dispatch. 1.06 BUTTERMILK The composition and food value of buttermilk are comparable with skim milk with the exception that it may contain slightly more milk fat. Owing to the decomposition of lactose by bacteria, buttermilk frequently contains from 0.2% to nearly 1% of lactic add. The presence of lactic acid in buttermilk is not harmful and may be beneficial.


We, Cream line Dairy Products Ltd., harness our creative energies through a strong teamwork, a spirit of enterprise and financial acumen, proven qualities that collectively determine our path of growth. We are poised to test new waters, grow more business, increase our returns and create greater stockholder value, bringing heightened levels of confidence and satisfaction to every stakeholder. We are poised to take on new challenges and move on to creating products and markets for tomorrow. We have grown, and intend to grow, focusing on harnessing our willingness to experiment and innovate, our ability to transform, our drive towards excellence in

quality, our people-first attitude and our strategic direction. The future of the Organization rests on these enablers, which shall be the investment, Cream line Dairy Products Limited makes for carving itself.


Cream line Dairy Products Limited (CDPL) has been in Dairy Business successfully for about two decades and presently it is one of the leading dairies in India. During the last financial year CDPL has ventured into a high growth. As a result, CDPLs presence in the market has been very quickly recognized as unique and one of the best retail business models in the Industry.

OUTLOOK The future of the dairy industry has to be built on quality. Our Company emphasizes the regulation that will not just enable the healthy and orderly growth of dairy industry but will ensure that milk and milk products are produced, processed, manufactured, stored and sold by observing the best standards of sanitation, hygiene, quality and food safety. To achieve this object, our Company is undertaking major expansion in Dairy Business by investing Rs.15 Crores during 2008-09 and over 20 Crores during 2009-20. Product/Market wise Performance The total Turnover during the financial year 2007-08 was Rs.335 Crores as against the Turnover of Rs.249 Crores in 2006-07. Today Jersey distributes quality milk and milk products in the states of Andhra Pradesh, Tamilnadu, Karnataka & part of Maharastra. During the year 2007-08 liquid milk sales was Rs.241 crores against Rs.202 crores in the previous year. The sales of Milk Products including Bulk sales of Cream, Ghee, SMP and Butter were recorded at Rs.94 Crores against Rs.47 Crores in the previous year.

Strategy Urban The objective of the urban strategy is to address the planned food and grocery purchases of household with an element of convenience built into the model through Home deliveries. Moreover the business aims to retain and attract new customers through quality of Fresh products. The value preposition is not to be an ELVP (Everyday Low Value Prices) Retailer but to provide value to the customer through quality, exceptional service and convenience. Due to high importance of touch and feel factor, it was decided to have some retails interface that will help CDPL to connect to the consumers through their traditional buying process and then gradually work towards converting them to the home delivery model. It would require consistent interaction with the customer that would be facilitated through detailed business procedures, training and IT initiatives. Another important element is the private label to differentiate the offerings from the competitor as well as give superior products to consumers at value pricing. When fully deployed, almost 50% of the entire product of Skimmed Milk Powder will be own sourced or private label. Strategy-Rural CDPL has an established supply chain of their own dairy business, which procures milk from farmers in Rural Aras (mainly in Andhra Pradesh, Tamilnadu, Karnataka & some parts of Maharastra). The starting point will be to harness the current infrastructure to penetrate into the rural market, eg. instead of direct retail presence, milk collection agents will be mobilized for selling products, reverse logistics in the supply chain can be used to transfer of goods from the urban markets to rural markets; thus able to disinter-

meiate the supply chain cost, provide benefits to the rural customer and improve better penetration into the rural areas. It will connect to consumers through Representatives (predominantly current Milk Collection Representatives of CDPL) who will sell the goods (mainly FMCG) to

the consumers. The value preposition for the rural customer will be the availability of the quality/genuine FMCG products mostly branded ones at a better price. This will also provide opportunity to CDPL to launch & strengthen their private label in rural markets, which is slightly easier turf for private label than the urban markets. CUSTOM FARMING Custom farming allows a landowner who wishes to remain classified as a farmer and the ability to retain close control of the farm business but not be actively involved in performing day-to-day activities. The landowner would make all the farming decisions such as purchasing all inputs and receive all income from sales. Under custom farming, our Company indentifies a particular zone, which is the best for certain crops and maps each zone into different clusters after tie-up with the farmers. Based on forecasted demand, trained team from Agri division of our company prepares cropping plans and crop rotations for each cluster and accordingly crops will be grown depending upon the zone and the season. Under this custom farming there is no contractual obligation between the farmer and Company and the farmer is at liberty to sell his produce to any one. RISKS AND CONCERNS All key functions and divisions are independently responsible to monitor risk associates within their respective areas of operations such as production, procurement, treasury, insurance, legal and other issues like health, safety and environment. In production process, the Company has its own efficient Distribution Control Systems. The system automatically controls all the fluctuations of parameter of producing and do not give any chance to excessive losses and wastages. It provides the process a continuous flow of working without any interruption by any reasons. This definitely improved on productivity and profitability. HUMAN RESOURCES The Companys human resources philosophy is to establish and build a strong performance and competency driven culture with greater sense of accountability and responsibility. The company has taken pragmatic steps to strengthen organizational competency through involvement and development of employees as well as installing

Effective systems to improve the quality and accountability at all functional levels. With the changing and turbulent business scenario our basic focus is to upgrade the skill and knowledge level appropriate leadership at all levels, motivating them and inspiring them to stretch and take-up higher responsibility. The recruitment process is in complete synchronized with the organization Vision and Mission. Our Company continues to believe that, stake holder growth is directly proportional to the organization growth and hence, continuous efforts are being made to satisfy the stakeholder, to realize the same across the organization. Changing global business scenario, faster globalization process, booming Indian economy as well as the industry, increased employment opportunities and acute talent shortage in the industry has thrown a great challenge in recruitment and retention of talent. goals and objectives. of the organization. In the competitive world of business, your company strongly believes in developing the Human Potential to meet the growing challenges. Hence HUMAN POTENTIAL DEVELOPMENT is obvious growth. Our company aims at getting best out of every professional in the organization to realize the business goals. Simultaneously your company is putting in lot of efforts at an organizational level to take a leap growth and success across the organization. Hence compensation management is set to meet the The vibrant Compensation management policy of our industry standards and which more closely matches and monitors the business company is completely integrated with the long term and short-term business goals


CDPL is an existing profit making company. The turnover of the company has been showing continuous increasing trend. CDPL has been managed by experienced Dairy Technologists and professionals. All the Promoter Directors are actively involved in the functional activities of the Company.

CDPL has strong foundation for milk procurement by establishing various chilling centers spread in South India to procure required quantity of high quality milk. Further the company has a well-established procurement net work for sourcing raw milk. CDPL has established marketing network through round the clock parlours & milk booths for marketing of milk and milk products. The products of the company have been well received by the customers. The demand for the companys products is increasing. CDPL has the patronage of the farming community spread over 2000 Villages in Andhra Pradesh, Karnataka, Tamilnadu & part of Maharastra. WEAKNESS: Inability to feed cattle adequately throughout the year by the farmer remains the most widespread technical constraint to higher milk yield. Quality dairy animals are in short supply. Artificial insemination service for breeding better cattle has still limited coverage. The raw milk availability is seasonal and is the governing factor for the capacity utilization.

OPPORTUNITIES The mass production of indigenous milk-based sweets, milk powder, butter and ghee in modern dairy plants can tap the growing demand for them. With 300 million NRI overseas, the scope for their exports is promising. Vast scope exists to higher milk yield through better use of crop residues and by-products by upgrading them. Emphasis must be on technologies that are

simple, low-cost and easily adaptable to increase their nutritive value. Some economic incentives are needed for farmers to go in for better feeding. Similarly, paying attention to animal health care would minimize the economic losses caused by many major cattle diseases such as rinderpest, mastitis and FMD. The growing demands for liquid milk and milk products in the Metropolitan Chennai city and neighboring areas is highly encouraging for the dairy industry. The demand for other dairy related products is increasing due to growing population and changing life style. THREATS: Large cattle population grazing on uncultivated lands, forest areas and common property resources. This imposes a heavy social cost, leading to degradation and denudation of land and loss of natural resource base. De-Licensing has checked in flow of investment by Co-Operatives in procurement and related infrastructure in their milk shed districts. It has also affected extension services for enhanced milk production. Since the dairy industry is now open for private sector there bound to be competition from the new units apart from the existing Co-Operative Unions. The co-operative unions are distributing the milk through organized sectors.






















The Director of Finance heads the organization chart of Finance Department. There are 4 main sections: Manager (Accounts) Company Secretary Purchase Accounts Officer Cash and Bank Accounting Assistance Officer.

Under the Manager (Accounts) there are 5 subsections: o The General Accountant and EDP Operation o The Sales Accountant Officer o The Payroll Accountant Officer o The Accounts Finalization Officer o The Advances Officer Under the purchase Accounts Officer there are 2 sub-sections: o Senior Accountant o Junior Accountant Under Cash and Bank Accounting Assistance Officer there are 2 sub-sections: o Assistant o Cashier




Indias Agriculture, having achieved the satisfactory level of self-sufficiency in crop production, has started spreading its wings in dairy segment to enhance the quantum of animal proteins in daily diet through milk. Dairying has been now recognized as catalyst for economic development and is today accorded the status of thrust area by the government. In the emerging string agriculture scenario, live stock production in general and dairying in particular has been identified as an important tool for enhancing the income of small farmers and reducing unemployment in large rural population. The operation Flood, the appreciable concept of government has created necessary infrastructure in improving the performance of the dairy sector in the country.


The Andhra Pradesh Dairy Development Co-operative Federation (APDDCF) which spearheads the dairy movement in the state, worlds on a three-tier and pattern co-operative structure providing benefits to more than seven lakhs milk producer families all over the state. The structure has helped the federation in building a network of 10 district diaries, 8 milk product factories and about 66 chilling

centers spteak all over the state.

The system is aided by 3556 co-operative

societies, 310 exclusive women societies and 4495, association In the procurement of milk from farmers at different levels. The overall labour investment in livestock farming can be as high as 73 percent compared to 27 percent in crop farming. About 2.43 lakhs small and 2.25 lakhs marginal farmers constitute a major part of the membership in co-operative societies, the other major group being 1.15 lakhs large farmers

Working Capital Management A Theoretical Frame Work


Working Capital: Cash is the lifeline of a company. If this lifeline deteriorates, the companys ability to fund operations, reinvest and meet capital requirements and payments also deteriorates. Understanding a companys cash flow health is essential for making investment decisions. A good way to judge a companys cash flow prospects is to look at its working capital management (WCM). Working capital of a company reveals more about the financial condition of a business than almost any other calculation. It tells you what would be left if a company raised all of its short term resources, and used them to pay off its short term liabilities. The more working capital, the less financial strain a company experiences. Working Capital also gives investors an idea of the companys underlying operational efficiency. Money that is tied up in inventory or money that customers sill owe to the company cant be used to pay off any of its obligations. Sa if a company is not operating in the most efficient manner (slow collection) it will show up in the working capital. This can be seen by comparing the working capital from one period of time to anothers slow collection may signal an underlying problem in the companys operations. Defination:

The definition of working capital is the difference between an organizations current assets and its current liabilities of more importance is its function which is primarly to support the day-to-day financial operations of an organization, including the purchase of stock, the payment of salaries, wages and other business expences, and the financing of credit sales. Its a measure of the both a companys efficiency and its short-term financial health. The better a company manages its working capital, the less the company needs to borrow. Even companies with cash surplus need to manage working capital to ensure that those surpluses are invested in wys that will generate suitable returns for investors. There are two concepts of working capital. They are the gross working capital and the net working capital. The term gross working capital, also reffered to as working capital means the total current assets. The term Net working capital can be defined in two ways: The most common definition of net working capital is the difference between the current assets and the current liabilities. The alternative definition of NWC is that portion of current assets which is financed with long term funds. Since the current liabilities represent the sources of the short term funds, as long as current assets exceed current liabilities, the excess must be financed with long term funds. The net working capital, as a measure of liquidity is quite useful for internal control. The net working capital helps in comparing the liquidity of the same firm overtime. Therefore: Working Capital = Current Assets Current liabilities

A positive working capital means that the company is able to pay off its shortterm liabilities. A negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets

(Cash, Accounts, Receivables, Inventory) Management must ensure that a business has sufficient working capital. Too little of the working capital will result in cash flow problems highlighted by an organization exceeding its agreed overdraft limit, failing to pay suppliers on time and being unable to claim discounts for prompt payment. In the long run, a business with insufficient working. Capital will be unable to meet its current obligation and will be forced to cease trading even if it remains profitable on paper. On the other hand, if an organization ties up too much of its resources in working capital it will earn a lower than expected rate of return on capital employed. Again this is not a desirable situation. As it is said that working capital is the difference between the current assets and the current liabilities, the management of the company has to manage their current assets and current liabilities. Therefore in order to understand how the working capital is managed we need to first understand what are current assets and current liabilities of the firm. Working Capital Management: Management of working capital plays a very important role in the financial management of a company because maintaining a balance of income to debt can be difficult and owners must be diligent to assure that it is kept. Sometimes it takes a little assistance to maintain levels of fluidity or make major purchases. If working capital dips tip low, a business risks running out of cash. Even very profitable business can run into trouble if they lose the ability to meet their short-term obligations. Working capital financing can be used as a fast cash option to cushion the periods when the flow is not ideal or readily available. Even when owners are meticulous in managing working capital, finding the right levels to remain comfortable and competitive can be difficult.

The Important of Good Working Capital Management: Working capital constitutes part of the companys investment in a department associated with this is an opportunity cost to the company. If a department is operating with more working capital than is necessary, this over investment represents an unnecessary cost to the company. From a departments point of view, excess working capital means operating inefficiencies. In addition, unnecessary working capital increases the amount of the capital charge which departments are required to meet.

Approaches to Working Capital Management The objective of working capital management is to maintain the optimum balance of each of the working capital components. This includes making sure that funds are held as cash in bank deposits for as long as and in the largest amounts possible, thereby maximizing the interest earned. However, such cash may more appropriately be invested in other assets or in reducing other liabilities.

Objectives of Managing Working Capital: Describe the risk-return trade-off involved in managing a firms working capital. Explain the determinants of net working capital. Calculate the describe the basic sources of short-term credit. Describe the special problems encountered by multinational firms in managing working capital. Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and to identify areas requiring closer management The individual components of working capital can be effectively managed by using various techniques and strategies

When considering these techniques and strategies, departments need to recognize that each department has a unique mix of working capital components. The emphasis that needs to be placed on each component varies according to department. For example, some departments have significant inventory levels; others have little if any inventory. Furthermore, working capital management is not an end in itself. It is an integral part of the departments overall management. The needs of efficient working capital management must be considered in relation to other aspects of the departments financial and non-financial performance. Working Capital Ratio
Current Assets Current Liabilities

Current Ratio =

The working capital ratio attempts to measure the level of liquidity, that is the level of safety provide by the excess of current assets over current liabilities. The quick ratio a derivative. Excludes inventories from the current assets, considering only those asses most swiftly realizable. There are also other possible refinements. There is no particular benchmark value or range that can be recommended as suitable for all government departments. However, if a department tracks its own working capital ratio over a period of time, the trends the way in which the liquidity is changing will become apparent.

Current Assets: The term current assets refer to those assets which in the ordinary course of business con be, or will be, converted into cash within one year without undergoing any diminution in the without disrupting the operations of the firm. The major current assets are cash, cash equivalent, marketable securities, accounts receivable, inventory, prepaid expenses and other short term investments . CONSTITUTES OF CURRENT ASSETS:

1. Cash in hand and bank balances 2. Bills receivables 3. Sundry debtors (less provision for bad debts) 4. Inventories Raw Material Work in process Stores and spares Finished goods

5. Temporary investment of surplus funds 6. Prepaid expenses 7. Accrued incomes Current Liabilities:

The term current liabilities are those liabilities which are intended at the time of their inception, to be paid in the ordinary course of business, with in a year, out of the current assets or earnings of the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft and outstanding expenses and current liabilities in detail.

CONSTITUTES OF CURRENT LIABILITIES: 1. Bills Payable 2. Secured creditors or account payable 3. Accrued or out standing expenses 4. Short term loans, advances and deposits 5. Dividend payable (short term) 6. Bank over draft 7. Provision for taxation, it does not amount to appropriation of profits Working Capital Cycle: This shows the cash coming into the business, what happens to it while the business has it and where it goes. A simple working capital cycle may look something like:

Working Capital Cycle

a) Rate of stock turnover: A firm having a high rate of stock turnover will need lower amount of working capital as compared to a firm having a low rate of turnover b) Credit Policy: Credit Policy of a concern in its dealings with debtors and creditors influence considerable the requirements of working capital. c) Business Cycle: Business Cycle refers to alternate expansion and contraction in general business activity.


The following are the general principles of a sound working capital management policy as follows:





Risk here refers to the in ability of a firm to meet its obligations as and when they become due for payment. Larger investments in current assets with less dependency on short - term borrowings increases liquidity, reduces dependence on short-term borrowing increases liquidity, reduces risk and thereby decreases the opportunity for gain or loss. On the other hand less investment in current assets greater dependence on short term loans increases risk, reduces liquidity and increases profitability. In other words, there is a definite inverse relationship between the degree of risk and profitability. a) Principle of cost of capital: The various sources of raising working capital finance have different cost of capital and the degree of risk involved. Generally, higher the risk lower is the cost and the lower the risk

higher the cost. A sound working capital management should always try to achieve a proper balance between these two. b) Principle of equity position: This principle is concerned with planning the total investment in current assets. According to this principle, the amount of working capital invested in each component should be adequately justified by a firms equity position. c) Principle of maturity of payment: The principle is concerned with planning the total i9nvestment in current assets. According to this principle, a firm should make very effort to relate maturities of payment to its flow of internally generated funds. Maturity pattern of various current obligations is and important factor in risk assumptions and risk assessment.

(B)ESTIMATION OF WORKING CAPITAL Following is the brief explanation of the various techniques of estimating working capital requirements as follows. a) Estimation of components of working capital: Since working capital is the excess of current assets over current liabilities, estimating the amounts of different constituents of working capital can make an assessment of the working capital requirements. b) Percent of sales method: This is traditional and simple method of estimating working capital requirements. According to this method, on the basis of past experience between sales and working capital requirements a ration can be determined for estimating the working capital requirements in future. c) Operating cycle approach: According to this approach, the requirements of working capital depend upon the operating cycle of the business. The operating

cycle begins with acquisition of raw materials and ends with collection of receivables. The duration of the operating cycle for the purpose of estimating working capital requirements is equivalent to the sum of the duration of each of the operation cycle stages less than credit period allowed by the suppliers of the firm.

SOURCES OF WORKING CAPITAL REQUIREMETS The source of working capital requirements is classified into two types they are fixed source and variable source they are as follows:


Fixed Source:

Shares. Debentures Public Deposits Plaguing back of profits. Loans from financial institutions.

(B)Variable Source :

Commercial banks Indigenous bankers Trade creditors Installment credit Advances Accounts receivable - credit/ factoring Accrued expenses

Commercial paper

TYPES OF WORKING CAPITAL: Every business enterprise must have adequate working funds for normal operations. In addition, it has to make arrangements for extra funds to meet seasonal demands or special orders.

(A) Permanent working capital: It refers to the irreducible minimum reserves to be kept for maintaining a normal level of stock of raw materials, workinprogress, finished goods and for paying wages and salaries during the year. It is permanently locked up in current assets. Permanent working capital is of two kinds.

a) Initial working capital: At its inception and during the formation period of its operation, a company must have enough cash fund to meet its obligations. In the initial years its revenues may not be regular and adequate, credit arrangement may not be available from banks etc., till it has established its credit standing and credit may have to be granted on sales to attract the customers.

b) Regular working capital: It is the amount needed for the continuous operations of the business of the company. It refers to excess of current assets over current liabilities, so that the process of conversion of each into stock into sales, receivables and collections is maintained without any break.

(A) working capital:




Most of the business enterprises have to produce additional working capital to meet seasonal and special needs. On the basis, variable capital is classified into two types

a) Seasonal working capital: Obviously, it refers to financial requirements that crop up during the particular season. Beyond their initial and regular circulating capital, most business will require at stated intervals a large amount of current assets to fill the demands of the seasonal busy periods. b) Special working capital: All business enterprises have to be prepared to meet unforeseen eventualities that may arise in the course of their operations. Therefore, they must have extra funds at unstated periods to meet contingencies.

Chapter- VI Data Analysis

Estimation of working capital Requirements 2004-2005

Increa se Amoun t

Decreas e

1.Current Assets Cash Balances Inventories: Raw material Work in Progress Consumables & Stores, Packing Finished goods Receivables: Debtors Loans & Advances Gross working capital (A) 2. Current liabilities: Creditors for purchases Creditors for Wages Others

Amount 328163 65

82155 320 74501 0 11514 894 84560 845 10151 220 41016 300

178976 069

511675 20 262959 954

12119 745 51196 503 26301

Creditors for Overheads Provisions Total Current Liabilities (B)

632 10881 652 23528 23 102852 355

Working Capital Gap

160107 599 400269 00 120080 699

Working Capital Margin

Total Working Capital Requirement

Estimation of working capital Requirements 2005-2006 1.Current Assets Minimum cash Balances Inventories: Raw material Consumables & Stores, Packing Packing materials Finished goods

Increas e Amount

Decreas e Amount 561667 00

121624 812 100861 71 724284 5 555007 73

194454 601

Debtors Loans & Advances Gross working capital (A) 2. Current liabilities: Creditors for purchases Creditors for Wages Creditors for Overheads Provisions Others Total Current Liabilities (B)

129743 61 501613 59

631357 20 313757 021

150820 48 375942 99 187641 72 149883 3 358477 2 765241 24 237232 897 593082 24 177924 673

Working Capital Gap

Working Capital Margin

Total Working Capital Requirement

Estimation of working capital Requirements 2006-2007

Increas e

Decreas e

1.Current Assets Minimum cash Balances Inventories: Raw material Packing materials Work in progress Consumables & Stores, spares Finished goods Receivables: Debtors Loans & Advances Gross working capital (A) 2. Current liabilities: Creditors for purchases Creditors for Wages Creditors for Overheads Provision Others Total Current Liabilities (B)


Amount 627262 89

191574 435 138061 29 126805 106755 81 124005 606 280085 67 646782 91

340188 556

926868 58 495601 703

191345 11 575312 02 408205 4 261868 4 248469 83 108213 434 387388 269 968470 67 290541 202

Working Capital Gap

Working Capital Margin

Total Working Capital Requirement

Estimation of working capital Requirements 2007-2008 1.Current Assets Minimum cash Balances Inventories: Raw material Consumables & Stores, Packing Packing materials Finished goods Receivables: Debtors Loans & Advances Gross working capital (A)- Total Current Assets 2. Current liabilities: Creditors for purchases Creditors for Wages Creditors for Overheads Provision Others Total Current Liabilities (B)

Increas es Amount

Decreas es Amount 921211 78

293662 759 135149 73 158760 70 738175 84 351574 43 104180 144

396871 386

139337 587 628330 151

119814 76 667557 68 334682 4 185713 4 293993 32 113340 534 514989 617

Working Capital Gap

Working Capital Margin

128747 404 386242 213

Total Working Capital Requirement


As per the above analysis the working capital of year 2004-05 is increased by 120080699 because of highly changes in current assets. In the year 2005-06 the networking capital 177924673 which is more than the year 2004-05 because of less stock maintenance in the terms of raw materials and finished goods. The year 2006-07 the networking capital is 290541202 which is more than 40% of increase in the previous two years i.e., 2004-05 & 2005-06 The year 2007-08 the networking capital is increased to 386242213 which is
almost double to the previous years


In the light of the above conclusion it is proposed to suggest the following for improving the performance of the Creamline Dairy products limited. a) Current Assets Management needs to be more efficient on receivable management and inventory management more attention. b) In the light of the Current Assets made, it is suggested that the company should raise its investment in Current Assets. So that it achieves 2:1 current ratio. c) The average collection period and payment period the company suggested that the average collection period and payments period generally should not be more than one and half a month. So it must be decreases the collection periods.

d) It is desirable that the companys percentage of inventory holding to decreasing trend providing the company is able to meet the market demand keeping in view of the fluctuations in demand and availability of raw materials the company is suggested to improve their efficiency in holding the investors



Here an attempt is made to draw conclusion based on the study of Creamline Dairy products limited. The study revealed the following: The Creamline Dairy products limited.has maintained slight standard Liquidity Ratios. The Creamline Dairy products limited Gross Profit Ratio was Satisfactory. The Creamline Dairy products limited.Net Profit Ratio was Satisfactory

The Creamline Dairy products limited.Working Capital Turnover Ratio was Satisfactory. Over all Creamline Dairy products limited.Financial Performance was Positive.








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