INTRODUCTION TO NAHAR GROUP While the beginnings of Nahar group were small the vision was big.

The burning desire to evolve, grow & one day position itself as a responsible & reputed corporate entity playing out its role in improving the peoples quality of life through their products & service, remained a driving force. It is their relentless spirit of enterprise, boundless enthusiasm, grit & determination to live the dream that enabled them to add a new dimensions to their philosophy where commitment leads, achievement follows. Nahar group came into e!istence in "#$# as a small worsted spinning unit with the assets of %&& spindles and from that day till today the company has grown into new hori'ons under the magic of charpeson, (h. )awahar *al +swal. Now his sons, ,r. -amal +swal and ,r. .inesh +swal are continuing the tradition. Nahar group is a renowned name in the te!tile industry of India and is heading fast in future with its wide range of /roducts. Nahar 0roup surges ahead to establish itself as a reputed Industrial 1onglomerate with a wide ranging portfolio 1otton 2arns. Woolen 2ams. -nitted 3abrics, -nitwear, (weaters, 0reige 3abrics. 3inished and /rocessed 3abrics, 4osiery 0arments. (teel, (ugar, Infrastructure .evelopment. The 3lagship 1ompany of Nahar 0roup 5 +swal Woolen ,ills *imited, was established in "#$6 for spinning worsted yarns and 7nitted garments. Today it is a giant te!tile of Northern India with turnover of more than 8s. " %&& 1rore, producing all types of fabrics and branded garments in addition to steel, sugar and vegetable oil but the essence of group lies in the te!tile field. 9t Nahar 0roup. the main focus is laid on quality standards. 4ere quality control starts with the purchase of cotton at the stage of cotton mi!ing. /erhaps, the maintenance of quality standards has helped the group to reach at highest of success because of this awareness, the group companies have been awarded I(+ #&&: certificate by the bureau of Indian (tandards.

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;eyond ;alance sheet, mar7et forces and new technology generation lies the companys single highest asset, which is its people. 9t Nahar it has always been believed that people are the driving force that propel the organi'ation towards success and progress. 9 spirit unities the Nahar )oint 3amily, 1omprising "<&&& happy, dedicated and loyal member, surging ahad in their collective pursuit of e!cellence. Today, Nahar group is the second larges spinning group of the country with a group turnover of 8s. "%&& crores. The group has reached to an aggregate of more than $ la7h spindles. Now the group is wor7ing on the clear goal of becoming Indias largest spinning group as well as e!porters of yarn, for which the group has adopted the best international standard of management practice of corporate governance. 1reating, developing and consolidating 5 The Nahar 0roup bla'es ahead constantly reinvesting itself to stay ahead. 9t Nahar each company continues to practice good 1orporate 0overnance. The 0roup firmly believes that good 1orporate 0overnance is the 7ey to success in business. The groups corporate philosophy envisages creation and ma!imi'ation of (hareholders = sta7e holders wealth while observing the highest levels of transparency and accountability.

Products of Nahar Group

Nahar 0roup deals in four types of products 5 2arn /roducts 3abric /roducts -nitting and 0arments. (ugar /roducts 9ll these products are discussed in detail below

2arn /roducts

Nahar 0roup surges ahead to establish itself as reputed Industrial conglomerate with a wide ranging portfolio of yarns that offers everything. 9 desiring customer can loo7 for various types of yarns that the group provides and some of them are > a? "&&@ 1otton yarns 1arded yarn count range NA "& to NA B:. 1ombed yarn count NA "& to NA "&& & fine counts up to NA " &&s both from premium Indian 1otton as also /imal0i'a and 9ustralian 1otton. ,elange yarn in vide shade range. b? "&&@ 1otton .yed 2arns 0assed=,erceri'ed 0rey as well as .yed yarns. 1ompact spun yarns in 1ount NA " Cs 9N. 9;+DA. "&&@ blended 2arns We ,anufacture 1otton 5 blended yarns with blends of polyester, acrylic, viscose, wool and nylon in the count range NA "& to NA $& in different ratio as per requirement. These yarns are available as 0rey, ,elange & .yed. c? l&&@/olyester2arn 1ount range NA &C to NA :& d? Industrial 2arn *i7e T3+ manufactured Tyre 1ord, 1arpet, 8ugs 2arns etc. e? +pen end 2arns 1ount range NA &< to NA :& f? +pen end yarns 1ount range NA &< to NA :& g? ;lend 2arns The group manufactures cotton blend yarns with blends of polyester, acrylic, viscose. wool and nylon in the count range NA &C to NA $& in different ratios as per requirement. These yarns are available as 0rey, ,elange & .yed. B

h? "&&@ 9crylic 2arns ;oth 4igh bul7 and 8egular dyed as well as 0rey on 1ones and 4an7s i? Industrial 2arns *i7e T3+ manufactured lyre cord, 1arpet 2arns etc. i? (peciali'ed 2arns 8ing (lub yarns. 9lso 7nown as ,ulticount=,ulticount (lub 2arns. 1ount range is from NA &< to NA <&. (peciali'ed end use in 4osiery, weaving and .enims also. 7? Ali Twist yams 1ount range :=$& to :=%& combed weaving, 4osiery 2arns. E E E E (upima 2arn> The group supply supima yarn and have been authori'ed to use the supma tag. 1oolma! 2arn> Nahar group is the only .upont authori'ed coolma! spinners in India. (lub 2arn> 9vailbie in "&&@ 1otton for both hosiery and weaving use in both carded and combed with count range NA C to NA $&. ,ulticount yarn > 9vailable in count range from NA 6 to NA $& in "&&@ cotton.

"? 1ore (pun 2arn Nahar group supplies 1otton 1ore (pun yarn with .upont *ycra and (pande!. 1ount range NA "& to NA$&. m? Tensile 2arns The group is also e!ploring possibilities of supplying tensile yarns. 9ll the above yarns are produced in single nd multiple ply for end use of weaving and hosiery. (peciali'ed end use in Terry towels and .enims. E 1arded yarn count rnge NA &< to NA $& E 1ombed yarn count range NA &< to NA "&&

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1ompact (pun 2arns in count NA "C and above. 3abric /roduct

;lends> "&&@ 1otton and 1otton ;lends F /oly cotton, 1otton (tretch & 1otton Tencil Woven Dibrancy> Twills, .obbies, ;ro7en Twill, 8ipstop, +ttoman, 1hinos, (atins, Tussors, ;edford 1ord, 1avallery Twill, 1anvas, 0abardine Gtility> 0arments FTops, ;ottom & outwear? 0(,> "&& gms to BB& gms. 2arn Gsed> (ingle & .ouble 1ount with different counts F 6s and C&s ? technologies such as open end, 8ing spun, 1ombed, 1ompact, ,ulticount & (lubs etc. The fabrics produced are 4igh .ensity constructions, I8+ 3inish, ;o /olish, Water 8epellent, Nano 1are, (oil 8elease, ,icro sanding, 9nti ;acteria, 3rost free, Wrin7le free and (tain 0uard. ". -nitting and 0arments Gnder 7nitting and garments, the company wor7s under its brand of 1otton 1ounty, this provides products li7e ,ens 1argo (hirts, (weatshirts, 3ormal and 3ashion (hirts and ,en T (hirts. Inspired by the freshness of nature, 1otton 1ountys India shirt collection is an e!otic retreat that ma7es it all the more e!clusive and e!quisite. Targeted at the young, trendy and hip hop crowd as well as the upwardly mobile youth, this T shirts India collection e!hibits an e!citing combination of colors, designs and styles in stripes, prints, plains and denim lending a very sophisticated and fun7y loo7 to the entire range. 1argo shirts have been introduced for the first time in the area of H India shirtsI. Targeted at generation ne!t, collection of cargo shirts are bac7 in full blast, creating a overall impression of style, while contrast stitching mar7s the collections gutsy edge, by creating lots of play even in the more basic loo7s. The collection gives a fashion conscious man the freedom to choose his own adventures while giving him the wardrobe that compliments his dynamic lifestyle.

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T shirts are ama'ing. 2ou name a color and you can get 1otton 1ounty I shirts right pain collar t shirts that are available in B< e!citing colors and combinations to round nec7 I shirts. The (hirts collection comes in a range of carefully selected colors, styles and first class fabrics. Wrin7le free cotton lets yand your shirt loo7 immaculate all day long. 9fter a few minutes on your body, The shirts mi!es business with pleasure. (ugar /roducts N9498 (G098 represents the 0roups concerted thrust towards e!ploring new need based areas in tune with the larger conte!t of customer needs and mar7et demands. Astablished in "##B as Nahar (ugar & 9llied Industries *imited F N(9I* ? in the assisted sector with /(I.1 presently is a unit of Nahar Industrial Anterprises *imited FNIA* ? , as a result of N(9I*( merger with Nahar Industrial Anterprises *imited in :&&<. Installed capacity of :<&& tones of cane crushed per day FJT1.I? at .istrict 3atehgarh (ahib, /unKab for producing all types and grades of sugar and allied products. 1ogeneration power plant of %,W. A!cess power generated by the sugar business is utili'ed in the companys other business. A!port ,ar7et The mar7ets of Nahar group are crisscrossed all over the globe. The man obKective is meeting the buyers e!pectations with consistent quality bac7ed by 8esearch and .evelopment divisions equipped with latest equipment, cream of highly qualified technocrats and adhering to timely schedules. Its quality products are being sold in International ,ar7ets such as> 9rgentina, ;ra'il, 1hina, 1olumbia, 1hile, 1'ech 8epublic, Israel, *ebanon, *ithuania, /oland, /ortugal, /eru and Tur7ey. (ome of the other e!port mar7ets are G(9, Thailand, New Lealand, .ubai, 1anada, ,alaysia. Taiwan, 4ong -ong, 8ussia, 0ermany, (outh 9frica, (ingapore, ,auritius. In the area of technology and global business environment the group has ta7en a decision of te!tile with new means of technology by establishing the group in the name of A

Te!tilecom which enlarges and facilitates the group to mar7et its product through internet.

List of companies in Nahar Group

+swal Wollen ,ills *td Nahar (pinning ,ills *imited Nahar 3abrics *imited

Achievements of Nahar Group

The group has achieved e!cellence in e!ports which has been recogni'ed by the A!port 1ouncil as well as the 0overnment of India by bestowing several e!port awards and trophies such as> E In the year "#%#, first 0old Trophy in 0lobal A!ports. E In the year "##&, first silver trophy in 4osiery A!ports. E 3rom the yearn "#%# 5 #& to "##B #$, the group was given A!port award consecutively for < years for A!port of Woolen 4osiery 0arments. E In the year "##B, International award of e!cellent performance in A!ports. E In the year "#%# #&, (ilver Trophy for (econd 4ighest A!port /erformance.

Future p ans of Nahar Group

Nahar 0roup plans to invest 8s.l+<+crore by :&&% to implement its ambitious e!pansion plan and reali'e the dream of developing an integrated te!tile par7 over <<& acres near *atru. /atiala .istrict, /unKab. The group is creating the entire necessary infrastructure for setting up and smooth running of e!isting as well as new te!tile units in the par7. Nahar had already made an investment of 8s. " <&&crore in developing this te!tile par7 and had plans to invest another 8s.l&<&crore by :&&%. Gnder e!pansion plan, li7ely to cost more than 8s. I +<&crore, the group proposes to set up new spinning units with a capacity of I .:< la7h spindles, $B:& rotors, :<& air Ket looms and process house with a capacity of one la7h meters a day, besides setting up new power proKects with a capacity of :",W. 9fter implementing this e!pansion programme, 6

the group would have in this te!tile city :.6< la7A spindles, C":& rotors, C6C air Ket looms, process house with a capacity of Two la7h meters a day, merceri'ing unit with a capacity o :&$& tones per annum, denim manufacturing unit with a capacity of :& million meters a day besides B% ,W co generation power plant, ,r. +swal said. +ut of the <<& acres made available by the /unKab 0overnment in "##$ for developing the industrial par7 at *alru, about $&& acres had been allotted to various industrial units of the Nahar 0roup which had used it for creating an integrated te!tile comple! having state of the art facilities covering spinning, weaving, processing, dying and denim manufacturing. The group companies M Nahar Industrial *imited FNIA*?, Nahar A!ports *imited FNA*?, Nahar (pinning ,ills *imited FN(,*? and +swal Woollen ,ills *imited F+W,? have already invested 8s."<&& crore to set up more than ".< la7h spindles, "%&& rotors, $:C air Ket looms for weaving griege fabrics, process house with a capacity of one la7h meters a day, merceri'ing unit with a capacity of :&$& tones and denim manufacturing unit with a capacity of :& million meters per annum.

NAHAR !PINNING "ILL! LI"IT#D

Nahar (pinning ,ills *imited FN(,*? is renowned name in the te!tile industry. (tarting out a tiny worsted spinning & hosiery unit in *udhiana, it was incorporated as /rivate *imited 1ompany in .ecember "#%& & became a /ublic *imited company in "#%B. Nahar established itself into te!tile scenario through its flagship company, +swal Woolen ,ills F +W,? in "#$#. It had started its company from %&& spindles and today it has increased its spindlage capacity stand up to BB<&&& spindles to produce different counts of synthetic and blended yams. The companys maKor products are yarns and te!tiles. There are : separate divisions for these products, namely. (pinning .ivision F 2am ? and 4osiery .ivision Fte!tiles ?. In (pinning .ivision, The company as #B$&% spindles for manufacturing 1otton = (ynthetic & ;lended 2arns. N(,* has also put up a ,erceri'ing cum .yeing plant at village *airu, /atala of the capacity :&$& ,.T. per annum for manufacturing of 4igh Dalue 9dded 2arn, in order to cater t th overseas yarn demand from quality conscious mar7ets %

of G.(. & Auropean Gnion. In the 4osiery .ivision, the company has established ultra modern world class facilities for manufacturing of ":.< million pieces per annum of cotton and woolen hosiery -nitted 0arments. ;ut now a days there is a period of retail room, so Nahar is also penetrating in retail sector through its e!clusive outlet of its brands ,onte 1arlo, H1anterbury and 1otton 1ounty. 1ompanys brads are its identity. It has strong brand power and establishes itself as one of the top most business houses in India. The main brands of the company are ,onte 1arlo, 1otton 1ounty and 1anterbury. Nahar has seen vary rapid growth since its inception. Today Nahar (pinnings T shirts are being e!ported to the most reputed and top most international brands such as 09/, 9rrow, +ld Navy, /ierre 1rding, /hlips Dan 4eusen. I'od, Nuic7silver, /rice 1ostco. (ome of the achievements of Nahar !pinnin$ "i s Limited go unmentioned. The steady growth in manufacture & e!port of v oo"en cotton hosiery 7nitwears & woolen te!tile enabled the company t earn its first recognition in the year "#%$ as an e!port 4ouse by the 0overnment of India. The second time, 0overnment of India recogni'ed N(,* as a HTrading 4ouse in the year "#%%. In the year "##C, the company received I(+ #&&& certification. 9nother award given to N(,* was of HNational A!port Trophy by the 9pparel A!port /romotion 1ouncil for the turbo charged performance which got them great laurels. Then in the year "###, N(,* got a prestigious status of H0olden Trading 4ouse in recognition of its continuously outstanding performance accorded by the 0overnment of India. 3inally, the latest award received by Nahar (pinning ,ills *imeted is Te!proce" (ilver Trophy given by 1otton Te!tile A!port /romotion 1ouncil for its outstanding e!port performance in yarns in the year :&&B &$.

The companys turnover which reached 8s.l&&crore in the year "##" #:, 8s.:&&crore in "##< #C and 8s.B&&crore in "##C #6 is an achievement it itself.

9s a measure of further value addition Nahar (pinning has put up a plant for the manufacture of fine count merceri'ed yarn & fabrics catering to both, the domestic hosiery garment mar7et as well as e!port mar7ets. Avidently the company has now strategically positioned itself as a strong te!tile player to ma7e use of the emerging opportunities in the global scenario. To ma7e use of the emerging opportunities on the 0lobal Te!tile (cenario and also to have a focused business approach. the company went in for the (cheme of demerger and arrangement to restructure its businesses. The (cheme has already been approved by the 4onorable /unKab & 4aryana 4igh 1ourt vide its +rder dt. :" .ecember, :&&C. 9s per the scheme, companys investment 9ctivities stand demerged and transferred to Nahar 1apital and 3inancial (ervices *imited. This has drawn a visible line between two segment i.e., +ne Industrial FTe!tile? business and (econdly Investment and 3inancial 9ctivities. 3urther as per the scheme HTe!tiles ;usiness of Nahar A!ports *imited stand demerged and transferred to the company Fpost demerger of investment business? in accordance with the terms of the scheme. The obKective of such wide ranging strategies and actions is simple. They are designed to increase the number of opportunities that offer growth potential to the e!pertise and capabilities of the company developed over the past years. The company has the wherewithal to manufacture global quality yarn & garments. Nuality that has already made its mar7 in the higher value added products as well as ma7ing its presence felt in new mar7ets. It is therefore imperative that the company gathers all the resources and creates a streamline approach in this regard. *astly, it is the strong conviction of the company that Nahar (pinning ,ills *imited will emerge as a leading light in its field of operations in the coming years.

%oard of Directors
;oard of directors are the members who are there to ta7e maKor decisions for the company, li7e giving he approval to borrow any sum or sums of money from time as they "&

may deem necessary or e!pedient for the purpose of the business of the companyO upon such terms and conditions as the board may in its absolute discretion thin7 fit. 9ppointment of director, managing director. secretary of the director requires approval of ;oard of directors. It can be done /assing ordinary or special resolution which ever is applicable as per 1ompanys 9ct "#<C can do it. 3ollowing are the members of the board of N(,*> E (h. )awahar *al +swal F 1hairman? E (h. .inesh +swal F,anaging .irector? E (h. -amal +swal E (h. .inesh 0ogna E (h. (.-. (harma E .r. F,rs. ? 4.-. ;al E (h. 9marKeet (ingh E .r. +./. (ahni E /rof. -.(. ,aini Finance Contro ers E (h. 4ans 8aK -apoor 1ompany (ecretary E (b. ;riK (harma 9uditors E ,=s0uptaDigg&1o. 1hartered 9ccountants "&",-ismat 1omple!, 0.T., ,iller 0anK, *udhiana "$"&&B. ;an7ers E /unKab National ;an7. E (tate ;an7 of India E I1I1I;an7. ""

9ddress B6B. Industrial 9rea 9, *udhiana "$" &&B. /hone No. 5 CC&#$B

&arious Departments in N!"L'

3inancial .epartment 3inance department of N(,* is headed by ,r. 9nil 0arg and number of employees are wor7ing in this department. The main obKectives of this departments are> To maintain efficient boo7 7eeping system To inform the company about its financial position and performance. To assist the top management in decision ma7ing regarding short term as well as long term involvement of funds. To fulfill various legal and Kudicial obligations.

/urchase .epartment /urchase department is headed by ,r. (.-. (harma and number of employees are wor7ing under him. (ome of the main function of this department are> To procure high quality raw material and other requirement as per standard. To obtain the requirement for the most reasonable prices available. To maintain healthy relationship with vendors for timely and emergency procurement of material. To ma7e purchases in time so that the production is not interrupted.

,ar7eting .epartment ,ar7eting department is headed by ,r. 9nand and there are no. of employees wor7ing in this department. 3ollowing are the obKectives, which this department 7eeps in mind. To procure as much orders as possible. ":

To provide ma!imum customer satisfaction. To maintain coordinal relationship with customers for long term association. To inform the organi'ation regarding the various policies followed by competitors. To mar7et the products so efficiently that they find there own demand. To ma7e the customers fully aware about the product and to ma7e the management of the company aware about the customer wants, needs and e!pectations.

To get feedbac7 for there products.

/roduction .epartment> /roduction department is headed by ,r. 0upta and no. of employees wor7ing in this departments. (ome of the main functions are> To produce quality products. To fulfill the orders of the customers within the stated time. To ma!imi'e customi'ation. To use the resources most efficiently and have least amount of wastages.

!(OT Ana )sis of Nahar !pinnin$ "i s Limited

(W+T stands for (trengths, Wea7nesses, +pportunities and Threats. (W+T analysis of the company helps us to find out, what are the strengths of the company, on which fronts did the company wee7, what all opportunities are there n front of the company for its e!pansion and growth and what all threats doe the company face. In other words this analysis tells us the health of the company. It ma7es us aware about various fronts of the company. (trengths> Wor7force of N(,* is highly e!perienced, motivated, devoted, loyal and satisfied. "B

Image of Nahar (pinning ,ills *imited as a leading company in woolen industry. (trategic positioning of its products, as the products range from 8s.$& to 8s.B&&&= ;rand image of brands li7e, ,onte 1arlo and 1anterbury is very strong. The : brands achieved all time high turnovers and received best e!hibited product award from International Wool (ecretariat FIW(?.

Nuality control system 7eeps a proper chec7 on the quality of products. 3inancial position of N(,* is strong. 0ood records of sales help in ma7ing profits continuously. Wide range of products and designing capacities.

Wea7nesses> 3ashion unit is targeting to high income group people. N(,* has vulnerable information system. It depends on distributors and agents who sometimes provide wrong mar7et information. +pportunities (hare of India is garment e!port has increased and this certainly is a green signal for hosiery, 7nitwears branch of Nahar products portfolio. N(,* may go for 7ids products in hosiery 7nitwear sector. 9s lambs wool yarn I being imported. because of high demand of this yarn in mar7et, the company has right time to e!ploit the opportunity. Threats N(,* deals in seasonal business. *arge financial base, production base and better technology of ,N(s are threat to domestic te!tile sector. It has to depend upon imported and the supply of raw material is affected by the climates in supplier countries. "$

1ompany is facing threat from the fa7e competitors li7e +swal Woolen ,ela etc. This can put a maKor dent on companies image by selling the defected products.

RATIONAL# OF TH# !TUD*

Wor7ing capital is the life blood and nerve centre of a business. )ust as circulation of blood is essential in the human body for maintaining life, wor7ing capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of wor7ing capital. The management of wor7ing capital is very important. It involves the study of day to day affairs of the company. The motive behind the study of the proKect is to develop an understanding about the wor7ing capital management in the running of business organi'ation and to help the company in developing the efficient wor7ing capital management. 1ash is one of the current assets of a business. It is needed at all times to 7eep the business going. 9 business concern should always 7eep sufficient cash for meeting its obligations. 9ny shortage of cash will hamper the operations of a concern and any e!cess of it will be unproductive. 1ash management forms an important part of wor7ing capital management. 8eceivables constitute a significant portion of current assets of a firm. It is necessary to have a proper control and management of receivables, as, for investment in receivables, a firm has to incur certain costs and there is a ris7 of bed debts also. The investment in inventory constitutes a maKor portion of current assets, so there should be proper inventory management. ;ecause of the large si'e of inventories maintained by the firms, a considerable amount of funds is required to be committed to them. It is, therefore absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment. 9n underta7ing, neglecting the management of inventories will be Keopardi'ing its long run profitability and fail ultimately. The management is to see that the quantity of wor7ing capital is neither too low to affect the production adversely nor too high to bloc7 the funds unnecessarily. "<

O%+#CTI&#! OF TH# !TUD* This study is being carried out 7eeping in mind the following obKectives> To analy'e the wor7ing capital management of the company. To determine the operating cycle of the unit. To determine the future need of wor7ing capital in the running organi'ation. To e!amine that the investment in the wor7ing capital is optimum.

!COP# OF TH# !TUD* The study is conducted at JN9498 (/INNIN0 ,I**( *I,ITA. *G.4I9N9I, 1orporate +ffice, and *udhiana for 6 wee7s duration. The scope of the study is limited to the Wor7ing capital management of N9498 (/INNI0 ,I**( 9 (,9** GNIT +3 +(W9*. The reliability of the study is restricted to the personal perception of the people interviewed and the data provided by the company. To get proper understanding of this concept, I have done the study of the ;alance sheets, /rofit and loss accounts, 1ash accounts etc. (o, scope of the study is limited up to the availability of official records and information provided by the employees. The study is supposed to be related to the period of last five years.

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TH#OR#TICAL %AC,GROUND OF (OR,ING CAPITAL "ANAG#"#NT"eanin$ of .or/in$ capita '0 In simple words wor7ing capital means that which is issued to carry out the day to day operations of a business. 1apital required for a business can be classified under two main categories 3i!ed capital Wor7ing capital

Avery business needs funds for two purposes, for its Astablishment and to carry on its day to day operations. *ong term funds are required to create production facilities through purchase of fi!ed assets such as plant and machinery, land, building, furniture etc. Investment in these assets represents that part of firm capital, which is bloc7ed on a permanent or fi!ed basis called fi!ed capital. 3unds are also needed for (hort term purposes i.e. for the purchase of raw material, payment of wages and other day to day operations of business. These funds are 7nown as wor7ing capital. In other words, wor7ing capital refers to that firms 1apital, which is required for short M term assets or current assets. 3unds thus invested in current assets 7eep revolving last and being constantly converted into cash and this cash flow is again converted into other current assts. 4ence it is 7nown as circulating or short M term capital. In the words of (hubin, JWor7ing capital is the amount of funds necessary to cover the cost of operating the enterprise.I

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CONC#PT OF (OR,ING CAPITAL

CONC#PT OF (OR,ING CAPITAL

GRO!! (OR,ING CAPITAL

N#T (OR,ING CAPITAL

GRO!! (OR,ING CAPITAL N#T (OR,ING CAPITAL

GRO!! (OR,ING CAPITAL' In the broad sense, the term wor7ing capital refers to the gross wor7ing capital and represents the amount of funds invested in current assets . Thus, the gross wor7ing capital is the capital invested in total current assets of the enterprise. 1urrent assets are those assets which in the ordinary course of business can be converted into cash within a short period of normally one accounting year.

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N#T (OR,ING CAPITAL' In narrow sense, the term wor7ing capital refers to the net wor7ing capital. Net wor7ing capital is the e1cess of current assets over current ia2i ities , or it represents the difference between current assets and current liabilities. Net wor7ing capital may be positive or ne$ative. /ositive net wor7ing capital is that when current assets are more than current liabilities. ;ut when current liabilities become more than current assets then the wor7ing capital is negative. 1urrent liabilities are those liabilities which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assets or the income of the business. ;oth 0ross wor7ing capital and net wor7ing capital have increased over the past two years. 9s seen before, there is increase in sales, and increase in production, therefore more wor7ing capital is needed to assist the increase in production. There is very less difference in the 0ross wor7ing capital and Net wor7ing capital because of less amount of current liabilities of Nahar.

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T*P#! OF (OR,ING CAPITAL

T2/A( +3 W+8-IN0 19/IT9*

P#R"AN#NT (OR,ING CAPITAL

T#"PORAR* (OR,ING CAPITAL

P#R"AN#NT (OR,ING CAPITAL T#"PORAR* (OR,ING CAPITAL-

Permanent (or/in$ Capita ' /ermanent or fi!ed wor7ing capital is the minimum amount which is required to ensure effective utili'ation of fi!ed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprise to carry out its normal business operations. For example, N(, has to maintain some minimum level of raw materials, wor7 in process, finished goods and cash balance.

:&

This minimum level of current assets is called permanent or fi!ed wor7ing capital as this part of capital is permanently bloc7ed in current assets.

Temporar) (or/in$ Capita ' The e1tra .or/in$ capita needed to support the changing production and sales activities, is called variable or functioning or temporary wor7ing capital. It is the amount of wor7ing capital which is required to meet the seasonal demands and some special e!igencies. This can be shown in the following diagram>

9mount of Wor7ing 1apital Temporary capital

/ermanent capital Time

:"

OP#RATING C*CL# or CIRCULAR FLO( CONC#PT J+perating cycle is the Time .uration required for converting sales into cash after the conversion of resources into inventories.I 3unds invested in current assets 7eep revolving fast and are being constantly converted into cash and this cash flow out again in e!change for other current assets. 4ence, it is also 7nown as revolving or circulating capital. The circular flow concept of wor7ing capital is based upon this operating or wor7ing capital cycle of a firm. The 1ycle starts with the purchase of raw material and other resources and Ands with the reali'ation of cash from the sale of finished goods. It involves purchase of raw material, its conversion into stoc7 of finished goods through wor7 in progress, conversion of finished stoc7 into sales, debtors and receivables and ultimately reali'ation of cash and this cycle continues again from cash to purchase of raw material and so on. (ales of the finished stoc7s are not always full cash salesO there are credit sales also. These credit sales after some period are converted into cash. (o the whole process ta7es the time. This time ta7en is 7nown as the length of operating cycle. (o operating cycles includes>

". :. B. $.

8aw ,aterial conversion period F8,1/? Wor7Min M progress conversion period FWI/1/? 3inished goods conversion period F31/? .ebtors 1onversion period F.1/?

::

(o operating cycle can be 7nown as following>

8aw ,aterial

Wor7 in /rogress
1ash 1ollection from .ebtors

(ales
3inished 0oods 1redit (ales 1ash (ales

If the length of the operating cycle has short length period then less wor7ing capital is required. (o wor7ing capital requirement is directly related with operating cycle.

+/A89TIN0 121*A +3 TW+ T2/A(>

". :. 0ross +perating cycle Net operating cycle

GRO!! OP#RATING C*CL#' :B

0ross +perating cycle is the total time period from the conversion of 8aw ,aterial into finished goods and finished goods into sales and then sales into cash.

GOC 3R"CP 4 (IPCP 4 FCP 4 DCP N#T OP#RATING C*CL#' 9s we provide period to debtors for the payments, our creditors also provide period to us for payment to them. (o this reduces our requirement of wor7ing capital. This also affects the operating cycle. +perating cycles length reduces with so many days as provided by the creditors to us. The difference between gross operating cycle and period allowed by the creditors for payment is 7nown as net operating cycle. NOC 3 GOC 5 CPP

:$

OP#RATING C*CL# GRO!! OP#RATING C*CL# P#RIOD 3 R"CP 4 (IPCP 4 FGCP 4 RCP Net Operatin$ C)c e Period 3 Gross Operatin$ C)c e 5 Pa)a2 e Defera period 6789:Ra. "ateria Conversion Period 3 9verage (toc7 of 8aw material= 8aw material consumption per day. (or/0in0pro$ress Conversion Period3 9verage stoc7 of wor7 in progress= Total cost of palroduction per day. Finished Goods Conversion Period 3 9verage stoc7 of finished goods= Net credit sales per day. Receiva2 es Conversion Period 3 9verage 9ccounts 8eceivables= Net 1redit /urchases per day. Pa)a2 es Defera Period 3 9verage /ayables= Net 1redit /urchases per day

RA( "AT#RIAL CON&#R!ION P#RIOD ;R"CP< Avera$e !toc/ of Ra. "ateria 3 +pening (toc7 of 8aw ,aterial P 1losing (toc7 of 8aw ,aterial= : Ra. "ateria Consumption Per da) 3 +pening (toc7 of 8aw material P /urchases M 1losing (toc7 of ,aterial= BC< Particu ars +pening stoc7 of raw material 1losing stoc7 of raw material 9verage stoc7 of raw material 1onsumption /urchases (tores & (pares 8aw ,aterial 1onsumption per day R"CP in da)s 7==>06= ###6.#B B6#B:.BC :#C<."< <$"66.# %:"":.BB :$B$.CC "$%.$B 6?6 7=6=066 B6#B:.BC <C#%:.6& $6$<6.<B %:"%&.<C "&":B&.%# "6B:.#: ::<."< 76=

INT#RPR#TATION 9 high 8,1/ indicates efficient management of inventory because more frequently the stoc7s are sold,the lesser amount of money is required to finance the inventory.9s it is :<

evident,8,1/ is high in current year than previous year.4ence, a good velocity of conversion of stoc7s into sales is maintained. (or/0in0pro$ress conversion period 3 Avera$e stoc/ of .or/0in0pro$ress@ Tota cost of production per da) Particu ars +pening stoc7 of wor7 in progress 1losing stoc7 of wor7 in progress 9verage stoc7 of wor7 in progress 1ost of production per day (IPCP in da)s INT#RPR#TATION 9 high WI/1/ indicates a high velocity with which raw material is converting into wor7 in progress. Finished Goods Conversion period 3 Avera$e !toc/ of Finished Goods@ Tota Cost of !a es Per da) Particu ars +pening stoc7 of finished goods 1losing stoc7 of finished goods Wastes & 8eKections Total 1ost of sales per day 9verage stoc7 of finished goods FGCP in da)s 7==>06= C#B&."& <#%6.66 B:$.$$ :6$.B$$ C$<%.#B< 6B 7=6=066 <#%6.66 "6<<B.<$ #%$.:" :%C ""66&.C<< 87 7==>06= "#C6.$% :$6:.&: ::"#.6< :<B."" ?-=A 7=6=066 :$6:.&: $:$%.%: BBC&.$: :$6.6< >-7=

INT#RPR#TATION 9 high 301/ indicates high rate at which raw materials is converted into finished goods. Receiva2 es conversion period 3 Avera$e accounts receiva2 es@ net credit sa es Particu ars +pening accounts receivables 1losing accounts receivables 9verage accounts receivable Net credit sales Net credit sales per day :C 7==>06= :$<$".$% :B"&<.#B :B%:B.6& "&$%<<.&# :%6.:6 7=6=066 B6::#.C# :$<$".$% B&%%<.<%< "BC"&< B6:.%6

RCP in da)s INT#RPR#TATION

?:

A9

9 high 81/ indicates more efficient management of debtors=sales or more liquid are the debtors. Pa)a2 e Deferra period 3 Avera$e pa)a2 es@ Net credit purchases per da) Particu ars 9verage payable Net credit purchase Net credit purchases per day PDP in da)s INT#RPR#TATION 9 higher /./ implies greater credit period enKoyed by the firm and consequently larger the benefit reaped by suppliers. GRO!! OP#RATING C*CL# CON&#R!ION P#RIOD ;in da)s< *ears :&&# "& :&"& "" R"CP "C" :"& (IPCP C # FGCP "6 B: RCP C< %$ GOC :$# BB< 7==>06= "C#$.#$ %:"":.BB ::$.#C A 7=6=066 <C":.% "&":B&.%# :66.B$ 7=

N#T OP#RATING C*CL# CON&#R!ION P#RIOD ;in da)s< *ears :&&# "& :&"& "" GOC :$# BB< PDP % :& NOC :$" B"<

*ears :&&# "& :&"& ""

GOC ;in da)s< :$# BB<

NOC ;in da)s< :$" B"<

:6

!TAT#"#NT OF (OR,ING CAPITAL "ANAG#"#NT Current Assets Particu ars /articulars 8aw ,aterial Wor7 in progress (tores & spares Wastes & reKections 3inished goods (undry debtors 1ash & ban7 *oans & advances 0oods in transit Tota Assets ;A< Current Lia2i ities (undry creditors 9dvance from customers Ta! deducted at source payable (tatutory liabilities +ther liabilities .ue to directors Gnclaimed dividend Interest accrued but not due Tota Lia2i ities ;%< (or/in$ Capita ;A 5 %< 7==>06= B6#B:.BC :$6:.&: :$B$.CC B:$.$$ <CCB.BB :$<$".$% "%:C.BB "B$&".C: :&.<< AA?6?-B> "C#$.#$ C:".#" 66.C6 "$$."C C6<#.$% "&C.#% ":%.&% #".#% >?7:->9 BA>> 7=6=066 <C#%:.6& $:$%.%: "6B:.#: #%$.:" "C<C#.BB B6::#.C# """".<: :&C%6.%% %.<" 68>:::-:A <C":.%& CBC.&< 6".:B "<C.&" <6&<.B< :$&.$B ""#.$" :$.$: 67:?:-B 67?>A>-AA

:%

(OR,ING CAPITAL R#CUIR#"#NT FOR TH# ANTICIPAT#D N##D! FOR FUTUR#'0 These needs may be of 8aw ,aterial or 3inished 0oods. (ometimes because of non availability of 8aw ,aterial or due to seasonal availability of 8aw ,aterial some advances stoc7 of 8aw ,aterial becomes necessary for company. In the similar way due to sudden arise of demand of finished goods in future more finished goods are 7ept in stoc7. 3or both reasons more wor7ing capital is required because funds will be involved in these safeties stoc7s. N##D OF (OR,ING CAPITAL The need for wor7ing capital arises due to the time gap between production and reali'ation of cash from sales. Thus,wor7ing capital is needed for the following purposes> 3or the purchase of raw materials, components and spares. To pay wages and salaries. To incur day to day e!penses and overhead costs such as fuel, power and office e!penses, etc. To meet the selling costs as pac7ing, advertising, etc To provide credit facilities to the customers. To maintain the inventories of raw material, wor7 in progress, stores and spares and finished stoc7. D#T#R"INANT! OF (OR,ING CAPITAL 3ollowing are the main determinants of wor7ing capital> Nature and !iDe of %usiness ' The wor7ing capital of a firm basically depends upon nature of its business 3or e!ample> /ublic utility underta7ings li7e electricityO water supply needs very less wor7ing capital because offer only cash sales whereas trading & financial firms have a very less investment in fi!ed assets but require a large sum of money invested in wor7ing capital. N9498 (/INNIN0 ,I**( *imited, which is a manufacturing company, requires considerable investment in both fi!ed assets and wor7ing capital. :#

The si'e of business also determines wor7ing capital requirement and it may be measured in terms of scale of operations. 0reater the si'e of operation, larger will be requirement of wor7ing capital. 9s N(, is growing, its requirement of wor7ing capital is also increasing. "anufacturin$ C)c e' *onger the process period of manufacture, larger is the amount of wor7ing capital required. The operating cycle of is N9498 (/INNIN0 ,I**( "$$ days for the financial year :&&C &6. It has decreased from the previous year. 1onsequently, amount of wor7ing capital required has also decreased as compared to the last year. !easona variation' In certain industries li7e N(,, raw material Fcotton? is not available throughout the year. They have to buy raw material in bul7 during the season to ensure an flow and process them during the year. 0enerally, during the busy season, a firm requires large wor7ing capital than in the slac7 season. Production Po ic)' /roduction policy also determines the wor7ing capital level of a firm. If the firm has steady production policy, it may require need of continuous wor7ing capital. ;ut if the firms adopt a fluctuating production policy means to produce more during the lead demand season then the more wor7ing capital may require at that time but not in other period during a financial year. (o the different productions policy arise different type of need of wor7ing capital. In N(, *imited, the production is 7ept steady by accumulating inventories during slac7 period with a view to meet high demand during the pea7 season. Now, since, the production of (pinning yarn is 7ept steady throughout the year, therefore, the unit requires higher wor7ing capital. uninterrupted

B&

FirmEs Credit Po ic)' The firms credit policy directly affects the wor7ing capital requirement. If the firm has liberal credit policy, hence the more credit period will be provided to the debtors so this will lead to more wor7ing capital requirement. With the liberal credit policy operating cycle length increases and vice versa. In N9498, the bul7 of purchase of raw material and sale of finished goods is done on credit. Therefore, credit policy is an important criterion to be ta7en into consideration. !a es Gro.th' Wor7ing capital requirement is directly related with sales growth. If the sales are growing, more wor7ing capital will be needed due to arises need of more 8aw ,aterial, 3inished goods and credit sales.

Rate of Gro.th of %usiness' The wor7ing capital requirements of a concern increase with the growth and e!pansion of its business activities. 9s N(, is growing its business with .A,A80A8( 9( N9498 (/INNIN0 ,I**( WIT4 N9498 AQ/+8T(, therefore its wor7ing capital requirement is also increasing.

"#ANING AND NATUR# OF (OR,ING CAPITAL "ANAG#"#NT The management of wor7ing capital is concerned with two problems that arise in attempting to manage the current assets, current liabilities and the inter relationship that e!ists between them. A satisfactor) eve of .or/in$ capita shou d 2e maintainedF i.e., it is neither inadequate nor e!cessive. ;oth e!cess as well as short wor7ing capital positions are bad for any business. 4owever, out of the two, it is the inadequacy of wor7ing capital which is more dangerous from the point of view of the firm.

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Disadvanta$es or Dan$ers of InadeGuate (or/in$ Capita ' 9 concern which has inadequate wor7ing capital cannot pay its short term liabilities in time. Thus, it will lose its reputation. It cannot buy its requirements in bul7 and cannot avail of discounts, etc. The firm cannot pay day to day e!penses of its operations and it creates inefficiencies, increases costs and reduces the profits of the business. It becomes impossible to utili'e efficiently the fi!ed assets due to non availability of liquid funds. Disadvanta$es of Redundant or #1cessive (or/in$ Capita ' A!cessive Wor7ing 1apital means idle funds which earn no profits for the business and hence the business cannot earn a proper rate of return on its investments. It may lead to unnecessary purchasing and accumulation of inventories causing more chances of theft, waste and losses. A!cessive wor7ing capital implies e!cessive debtors and defective credit policy which may cause higher incidence of bad debts. When there is e!cessive wor7ing capital, relations with ban7s and other financial institutions may not be maintained.

"A+OR D#CI!ION! IN (OR,ING CAPITAL "ANAG#"#NT There are two maKor decisions management relating to wor7ing capital management> ". :. What should be ratio of current assets to salesR What should be the appropriate mi! of short term financing and long term financing for financing these current assetsR 6CURR#NT A!!#T! IN R#LATION TO !AL#!'0 If the firm can forecast accurately the factors, which affect the wor7ing capital, the investment in current assets, can be designed uniquely. When uncertainty affects the above factors, as it usually does, the investment in current assets cannot be specified B:

uniquely. In case of uncertainty, the outlay on current assets should consist of base component meant to meet normal requirement and a safety component meant to cope with unusual requirement. The (afety component depends upon low conservative or aggressive in the current assets policy of a firm. If the firm adopts a very conservative current asset policy it would carry a high level of current assets in relation to sales. If a firm adopts a moderate current assets policy it would carry moderate level of current assets in relation to sales, finally if a firm follows a highly aggressive current assets policy, it would carry a low level of current assets in relation to sales. N(, is following current assets policy showing moderate level of current assets in relation to sales as is evident from ratio analysis.

6-

Determinin$ a !hort Term and Lon$ Term Financin$ "i1 for Financin$ of current assets'0

1 + ( T + 3 9 ( ( A T ( 1 + ( T + 3 9 ( ( A T (

1o nse rvat ive

,oderat e policy

9ggressiv e policy

(9*A(

BB

There are Three approaches in this regard, which are discussed below>

4A.0IN0 9//8+914. 1+N(A8D9TIDA 9//8+914. 9008A((IDA 9//8+914.

H#DGING APPROACH This approach is also called matching approach. In this approach there is a proper matching of e!pected life of asset with the duration of fund. The hedging approach suggests that the permanent wor7ing capital requirements should be financed with funds from long term sources while the temporary or seasonal wor7ing capital requirements should be financed with short term funds.

Temporary current assets (hort term financing 9 ( ( A T (

term /ermanent current assets

financing

*ong term financing

3i!ed 9ssets Time B$

CON!#R&ATI&# APPROACH' In this approach there is more reliance on long term financing in comparison to short term financing. Aven some part of the temporary current assets is financed from long term sources because long term sources are less ris7y in comparison to short term. This approach suggests that the entire estimated investments in current assets should be financed from long term sources and the short term sources should be used only for emergency requirements.

Temporary 1urrent 9ssets 9 ( ( A T ( /ermanent 1urrent 9ssets

short Term financing

*ong term financing

3i!ed 9ssets Time

B<

AGGR#!!I&# APPROACH In this approach there is more reliance on short term financing. This approach suggests that the entire estimated requirements of current assets should be financed from short term sources and even a part of fi!ed assets investments be financed from short term sources. This approach ma7es the finance mi! more ris7y, less costly and more profitable.

Temporary current assets 9 ( ( A T (

(hort term 3inancing

/ermanent current assets

*ong term 3inancing

3i!ed 9ssets

Time

In N(,, the current assets are financed from short term sources mainly. +nly in the time of some special e!igencies or need, current assets are financed from long term sources.

BC

(OR,ING CAPITAL ANAL*!I! OP#RATING C*CL# ANAL*!I! +perating cycle refers to the time period which starts from the raw material purchases and ends with reali'ation of receivable. (o it is total time gap between raw material purchases to total debtors collection. This is also 7nown as wor7ing capital cycle. +perating cycle is therefore e!pressed in terms of months or wee7s or days. 4igher the operating cycle period, higher is the wor7ing capital requirement. It comprises of raw material conversion period, WI/ conversion period, 30 conversion period and debtors conversion period and creditors period. The basic reason for calculating operating cycle is to find out the means for reducing the duration of operating cycle because if duration of operating cycle will be less than wor7ing capital requirement will be less.

OC 3 R 4 ( 4 F 4 D 5 C Where, 8 S raw material conversion period W S wor7 in process period 3 S finished goods conversion period . S debtor collection period 1 S creditors payment period

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1G88ANT 89TI+ CURR#NT A!!#T! Inventories (undry debtors 1ash & ;an7 ;alances *oans & advances Tota Current Assets CURR#NT LIA%ILITI#! *iabilities /rovisions Wor7ing capital borrowings Tota current ia2i ities Current ratio Current Assets@ current ia2i ities INT#RPR#TATION 9 high current ratio indicates firms liquidity position to pay its current obligations in time as and when due.Whereas a decrease in this ratio indicates deterioration in the liquidity position of the firm. 7==>06= $%%$6.BC :$<$".$% "%:C.BB "B$&".C: AA?6?-B> 7==>06= #C:<.#$ :B"<.%B $#C"$.&& ?6::?-B= 7==>06= ".$$ 7=6=066 %&<:C.$# B6::#.C# "%:C.BB "B$&".C: 687>A9-68 7=6=066 ":<C<.6& CBCB.B: #&::$.&% 6=>6:8-6 7=6=066 ".:"

6< LICUIDIT* RATIO LICUID A!!#T! (undry debtors 1ash & ban7 balances *oans and advances Tota LiGuid Assets B% 7==>06= $%%$6.BC :$<$".$% "%:C.BB 8?696-66 7=6=066 B6::#.C# "%:C.BB "B$&".C: :79:B-?9

CURR#NT LIA%ILITI#! *iabilities /rovisions Wor7ing capital borrowings Tota current ia2i ities LiGuidit) ratio LiGuid Assets@ Current ia2i ities INT#RPR#TATION

7==>06= #C:<.#$ :B"<.%B $#C"$.#B ?6::?-B 7==>06= &.C$

7=6=066 ":<C<.6& CBCB.B: #&::$.&% 6=>6:8-6 7=6=066 &.$%

">" is considered a satisfactory liquid ratio whereas a low quic7 ratio indicates firms liquidity position is not good.

B#

TURNO&#R RATIO! 8< IN&#NTOR* TURNO&#R RATIO! LICUID A!!#T! A!port sales .omestic sales (ervice 8endered *ess A!cise duty Tota net sa es Avera$e Inventor) Inventor) Turnover Ratio Net !a es@ Inventor) INT#RPR#TATION 9 high Inventory Turnover 8atio indicates efficient management of inventory because more frequently the stoc7s are sold,the lesser amount of money is required to finance the inventory.Whereas a low rate indicates over investment in nventories,dull business,poor quality of goods and low profits. 7==>06= 6B""C.#< B"6B%."$ C<6.C: ".6 6=::66-=6 89:=>->A 7==>06= 8-=? 7=6=066 #6<&%.%" B%<#C."# 6$"."6 B.6& 68?A97-97 ?9?A?->7: 7=6=066 7-66:

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9< De2tor turnover ratio

Net sa es A!port sales .omestic sales (ervice 8endered *ess A!cise duty Tota net sa es Avera$e De2tors De2tor turnover ratio Net !a es@ Avera$e De2tors INT#RPR#TATION

7==>06= 6B""C.#< B"6B%."$ C<6.C: ".6& 6=::66-=6 7967A-B> 7==>06= 9-8B

7=6=066 #6<&%.%" B%<#C."# 6$"."6 B.6 68?A97-9B 8=AA:-:A: 7=6=066 9-98

9 high .ebtors Turnover 8atio indicates more number of times the debtors are turned over during a year.0enerally,the higher value of debtors turnover the more efficient is the management of debtors=sales.

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Avera$e Co ection Period

Particu ars .ays in a year .ebtors Turnover 8atio 9verage 1ollection period Fin days? 7==>06= 8?: 9-8B A8 7=66067 8?: 9-98 A7

INT#RPR#TATION It represents the average number of days for which a firm has to wait before its receivables are converted into cash.4ence,shorter the average collection period,better is the quality of debtors.

$:

<? (or/in$ Capita Turnover Net !a es A!port sales .omestic sales (ervice 8endered *ess A!cise .uty Tota Net !a es 7==>06= 6B""C.#< B"6B%."$ C<6.C: ".6& 6=::66-=6 7=6=066 #6<&%.%" B%<#C."# 6$"."6 B.6& 68?A97-9B

Wor7ing capital borrowings Wor7ing capital turnover

$#C"$.#B :.":

#&::$.&% ".<"

INT#RPR#TATION 9 high Wor7ing 1apital Turnover indicates effective utili'ation of wor7ing capital and low wor7ing capital ratio indicates a very low efficiency with which wor7ing capital is utili'ed.

$B

!(OT ANAL*!I! OF NAHAR !PINNING "ILL! !TR#NGTH! a? This is a professionally managed company and all the departments are being headed by professionals. b? The company was a follower of new management concepts li7e -ai'en, Nuality 1ircles, and 3ive (s etc. and as such is continuously upgrading the s7ill level of the wor7ers for better product quality. c? The company is already in the line of spinning 2arn and as such is having the requisite technology = personals = labour. d? The Technology used by the company is comparable to its peer and as such is capable of supplying quality products. e? f? The e!pansion proKects will improve the productivity and profitability of the company and consequently competitiveness. The e!isting units will add to the cash generation of the company resulting into improved repayment capacity of the unit. g? The company is better equipped to face the world competition in view of the (tate of the art machinery and improved productivity. h? The companys Nahar unit is I(+ #&&& certified, whereby its quality manufacturing is at par with its competitors. i? K? The 1ompanys (pinning 3acility has been certified, which is top certification. The company has been awarded status of (tar Trading 4ouse. *udhiana itself the company has the advantage of 3irst information & procurement. l? The 1ompany has raised the Term 3unds at the best interest rates, which are either lower then then its peers or at par with its peers.

7? The *udhiana is the hub for (pinning /rocurement, as the unit is located in

$$

(#A,N#!!#! a? The basic raw material of the company is cotton, which is an agriculture produce. The cotton prices are thus dependent on the production of cotton Fdemand = supply? in the country=international mar7et. b? The company is also in yarn segment where the margins are thin. c? The company is manufacturing 0rey 1otton 2arn F6&@?, while the diversification = entry to other cotton yarns li7e mTlanges, higher counts is still to be made. OPPORTUNITI#! a? b? c? The company can import cotton at competitive rates and better quality at any time in case of need due to the appreciated rupee. The company can e!plore International segment thoroughly as potential in the international mar7et is high. With the closing down of Te!tile industry in Aurope, the advantage of foreign acquisition would can be e!plored.

THR#AT! a? b? c? d? e? The company is operating in international mar7ets and is facing competition from 1hina, /a7istan, /ortugal, Tur7ey and ;ra'il. The competition being faced by the company has increased after the quota restrictions are lifted in tune with WT+. The appreciated rupee has reduced the margins in the A!ports. The new spinning capacities have also come up, where by increased the supply of cotton yarn. The talent pool is shrin7ing, with new units being come up. $<

FINDING! H !UGG#!TION! The proKect was based on Wor7ing 1apital ,anagement of (pinning mills business of N9498 08+G/ *imited. 9crylic yarn forms % "&@ of the whole N(, business. It is the product of manmade fibre. Wor7ing capital management is very important part of any business. It involves the study of day to day affairs of the company. The motive behind the study of the proKect is to develop an understanding about the wor7ing capital management in the running of business organi'ation and to help the company in developing the efficient wor7ing capital management.

O%+#CTI&#! OF TH# !TUD* This study has been carried out 7eeping in mind the following obKectives> To analy'e the wor7ing capital management of the company. To determine the operating cycle of the unit. To determine the future need of wor7ing capital in the running organi'ation. To e!amine that the investment in the wor7ing capital is optimum.

$C

FINDING!' *udhiana Gnit of (pinning ,ills *imited gives it the ma!imum sales as it is the biggest unit. 1otton yarn forms the maKor part of (pinning ,ills *imited. 2arn is only % "&@ of the total N(, business. 0ross and net wor7ing capital has increased due to increase in production of 2arn. Net wor7ing capital is IN18A9(A.. It has IN18A9(A. from the previous year because of IN18A9(A in finished goods conversion period. *iquidity ratios of N9498 (/INNIN0 ,I**( are too high because of maintaining more inventory stoc7 of raw material. The share of inventories in the total current assets is more than C&@. The total limit provided to N9498 (/INNIN0 ,I**( *imited by various ban7s is 8s C&:C<##6:%.%. ,ost of the cash of all the units is managed at corporate office. It holds the cash for maKor receipts & payments. 3or filling its fund requirement, N9498 08+G/ depends upon the (T9TA ;9N- +3 IN.I9. .ue to increase in production capacity of N9498 (/INNIN0, there has been increase in the raw material stoc7. The raw material F3ibre? is not seasonal, but its time of purchase is dependent on the rate at which it is available in the mar7et. 9 merger is going to be there of 9m-ryons International /vt *td into Dardhman /olyte! *imited.

$6

!UGG#!TION!' .ue to competition, prices are mar7et driven and for earning more margin company should give the more concentration on cost reduction by improving its efficiency. The unit should also adopt proper inventory control li7e 9;1 analysis etc. This inventory system can ma7e the inventory management more result oriented. The A+N can be followed in stores. /roper inventory management technique will help the unit to decide upon the quantity of inventory to be 7ept. With its help the unit can also decide upon the no. of days the inventory is to be 7ept. It will help in reducing the inventory conversion period. The investments of surplus funds are made by the corporate office and the unit is not generally involved while ta7ing decisions with regard to structure of investment of surplus funds. The corporate office should involve the units so as to better ascertain the future requirements of funds and accordingly the investments are made in different securities. ,anagement should ma7e the proper use of inventory control techniques li7e fi!ation of minimum, ma!imum and ordering levels for all the items for less bloc7age of money. 1ompanys average debtor collection period is $% days. (o company should try to reduce it for improving the efficiency. 9s the margin in 9crylic yarn is less, therefore the company should try to decrease the various manufacturing and other e!penses incurred. It should also increase the e!port sales.

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CONCLU!ION .uring the period of si! wee7s I have tried to go through the in depth study of wor7ing capital management of N9498 08+G/ of N(,. To conclude this topic, I would li7e to say that though N9498 (/INNIN0 forms a small group of the N9498, but the management of its wor7ing capital is very important, as there are thin margins in sale of 3I;8A & 298N. The 08+G/ of N(, which is into the manufacturing of 3I;8A & 298N is effectively utili'ing the wor7ing capital all over the previous years. The staff here is good and full of young blood, which performs their duties very well. 1ash management and receivable management are also good because of centrali'ed control on these. 8aw material for the all units of N9498 (/INNIN0 ,I**( *I,ITA. is purchased by corporate office in bul7 which is the best way. (afety measures for inventories are also quiet sufficient in N(,. +verall the wor7ing capital management of N(, is very much efficient.

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%I%LIOGRAPH*. 0upta (hashi -O (harma 8.-.O 3inancial ,anagementO -alyani /ublishersO :&&# "& /andey,I.,.O 3inancial ,anagementO Di7as /ublishing 4ouse /rivate *td.O:&"& :&"" )ain,(./.O Narang,-.*.O 1ost 9ccountingO -alyani /ublishersO:&"& :&"" ,anuals, brochure, ;alance sheet, /rofit & *oss account & annual reports for different years of the company.

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