A STUDY ON WORKING CAPITAL MANAGEMENT

IN
PANYAM CEMENT NADYALA PVT LTD

Project Synopsis
Submitted in partial fulfillment of the requirements for the award of the Degree
of
MASTER OF BUSINESS ADMINISTRATION
Submitted by

N. SUNEEL
(Reg. No. 0011406033 )
Under the Guidance of

Dr. B.GANGAIAH, Ph.D.

Project Guide

DEPARTMENT OF BUSINESS MANAGEMENT

YOGI VEMANA UNIVERSITY
KADAPA-516003

2014-2016

INDUSTRY PROFILE
The word cement has come from the roman word Opus Caementicium. In general,
the word cement means binder- a substance, which when gets set and hardens, binds itself
independently with other substances. Joseph Aspdin, a British stonemason, invented cement way
back in 1824..The history of cement industry dates back to 1889 when a Kolkata based company
started manufacturing cement from argillaceous. But the industry started getting the organized
shape in 1990s. In 1914, Indian cement company ltd was established in Porbandar with a capacity
on 10,000 tons and production of 1000 installed. The industry has undergone rapid technological
up gradation a vibrant grown during the last two decades, and some of the plants can be compared
in every respect with the best operating plants in the world.
The cement industry comprises of 130 large cement plants with an installed capacity of 280
million tones and more than 365 mini cement plants with an estimated capacity of 11.10 million
tons per annum. The cement corporation of India, which is a central public sector undertaking, has
10 units. There are 10 large cement plants owned by various state governments.
COMPANY PROFILE:
Panyam cement is a public limited company with the date of incorporation on 23 rd June
1955. The managing director is Padmashri m. Somappa who is the pioneer of cement industry in
the south zone of Andhra Pradesh. The company commenced its operation in 1959 with a 200
TPD cement plant at Cement Nagar as one of the first cement companies established in the state.
After successful running for many years, in the year 1984 the company was taken over by the
VBC group headed by Sri M. V. Subba Rao, managing director.
Then, the company was taken over by Sri S. P. Y. Reddy. B. E (Mech) member of the
parliament, and also chairman of M/s Nandi group of companies and Sri S. Sreedhar Reddy is the
managing director in the year 2004. Over the years, besides expanding the capacity with two
additional plants of 300 TPD and 600 TPD in the same location.
The company underwent an up gradation program by conversion of the kilns to dry process.
The company has proposed to increase the installed capacity of cement plant from 5, 31,000
MTPA to 2, 15, 00,000 MTPA (i.e.) on average 6000 TPD in two phases. The present installed
systems are operationally viable at optimized conditions. The plant is currently running with an
output of 1550 TPD of clinker with kiln 2 & 3 in operation.

Need for the study:

To maximise the shareholders wealth a firm should earn efficient returns from its
operations, largely from sales.
Thus adequate amount of funds are to be invested in current assetsfor successful
sales and smooth & uninterrupted production process. Because of circulatingnature
of current assets, working capital is also called as Circulating Capital.
The management of Working Capital should be prompt to initiate an action and
correct imbalances otherwise, this lead to excess or inadequate working capital.
Both the conditions are not desirable as they impact the profitability and short-term
solvency of the firm. Hence, the present study is needed to evaluate the working
capital management at panyam cement pvt. ltd
OBJECTIVES OF THE STUDY:
The objectives of working capital management are as follows.
To determine the relationship between current assets &current liabilities &hence liquidity
is determined
To study the working capital components such as receivables accounts, cash management,
inventory position.
To analyze the profitability-liquidity position of the company.
To identify or evaluate the optimum level of investment in various working capital assets.

SCOPE OF THE STUDY:

An extensive study is done the investment made by Panyam cement Pvt. Ltd. on its
working capital and the factors determining that investment. Also the study concentrates
on the liquidity positions of the firm, and a brief study is made on the techniques used by
firms for the management of its current assets and the sources through which the finance
for working capital is availed for the firm.
To Compare The Companys Financial Position With The Past Years
To Analyze The Companies Overall Performance
To Know How The Working Capital Is Being Financed
To Make Appropriate Suggestions For Decision Making Authority For Effective Working
Capital Management And The Finance As A Whole In panyam cement Pvt Ltd

RESEARCH METHODOLOGY
Research plan: For this studies the research plan is essentially a combination of
qualitative and quantitative aspects of Analytical research.
DATA SOURCE:
The sources of data is collected from secondary sources.
Secondary data: The profit and loss and balance sheet statements are collected from
o Companys annual reports and
o Finance section
o
LIMITATIONS OF THE STUDY
The following are the limitations of the study
1.

The study is confined to the available information.

2.

The study is purely based on secondary data.

3.

The project is done with in a small duration here the time duration is a major constraint.

4.

The results or suggestion may not be applied to the whole.

5.

As most of the financial information was considered confidential, the access to the
information was restricted

FINDINGS

The later years the working capital increased to a considerable extent.

Current ratio of the company for the years 2009-10, 2010-11, 2011-12 2012-13, and
2012-14 are 1.37, 1.63, 4.12, 2.05, and 2.83 respectively. Higher the better is coverage
hence it is also fluctuating the ratios. Standard ratios are 2:1, which shows that the

companys current ratio is more than the standard ratio.

Debtors turnover ratio has been showing the fluctuating trend during the study period

which is good for the company.

The inventory turnover ratio except in the years 2008-09 is showing increasing trend. The

trend is 13.28, 23.94, 20.65, 25.84, and 45.87.

Net working capital of panyam cement industries is increasing year by year but the values

are fluctuating during the period of study and which is good for the company.
The working capital is financed mostly by the long-term sources and marginally by shortterm sources. The company also used the retained earnings to finance the working capital

needs.
The liquidity ratios indicate that panyam cement industries ltd liquidity position is

satisfactory.
The company carries a small amount of cash. But the company position is satisfactory and

it is able to get the required funds with not much difficulty.

The company has a very strict credit policy and has been collecting debts promptly. The
credit policy is effective.

SUGGESTIONS

1)

Overall financial position of the company is normal but it is required to be improved from
the point of views of profitability.

2)

Net operating cycle is increasing that means there is a need to make improvements in
receivables/ debtors management.

3)

Company has to stretch the credit period given by the suppliers in order to overcome
expectations.

4)

Company has to on long term debts. So it has to look after in this matter to pertain
seriously its financial performance.
Debtors turnover ratio has been showing fluctuating trend. So it is suggested to the
company that it should have proper control on debtors turnover ratio.
The sales of the company are showing fluctuating trends. So the company has to maintain
proper control on sales.