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PROJECT REPORT

ON

STUDY OF WORKING CAPITAL


REQUIREMENTS & RATIOES OF
OSWAL WOOLLEN MILLS

Submitted to: Submitted By:


Faculity of CHITKARA JYOTESH RAWAL
Acknowledgement
It will give me tremendous pleasure in acknowledging the
valuable assistance extended to me by various personalities in
the successful completion of this report - ”first of all I am
thankful to God without whose blessings the undertaken project
was not possible for me.”

It has been great experience to prepare this report. It is


my proud Privilege to express my profound sense of gratitude &
indebtedness to Mr.R.M. SOOD (Finance controller of Oswal
Woollen Mills, Ldh.). Words are insufficient to express my
appreciation for the really acknowledging suggestion, invaluable
and continuous motivation provided to me by Miss Sukhwinder
Kaur.
I would feel in my duty if I don’t convey my thanks to my
parents for their co-operation, tremendous support and self less
sacrifices. Their sacrifices and sufferings were the inspiring
force in my path for study.

Finally my thanks to every body else who in one way on the


other way was involve in the making of this report.

(JYOTESH RAWAL).
EXECUTIVE SUMMARY

OSWAL WOOLLEN MILLS LIMITED (OWM) is a flagship company of the Nahar Group of
the companies. The Nahar Group is an industrial conglomerate based at Ludhiana in Punjab
with
the group’s turnover in excess of Rs. 19000 million for the 2006. OSWAL WOOLLEN MILLS
LTD is the company of NAHAR GROUP Under the stewardship of his son,
SHRI JAWAHAR LAL OSWAL; the company diversified and expanded its business interest
beyond yarns in garments, hosiery products. It has variety in its basket. The companies are
registered owners of well-known trade name “MONTE CARLO” for selling company woollen
hosiery and cotton garments. ‘Monte Carlo’ has been recognized as ‘super brand’ for woollen
hosiery garments since fiscal 2003 by international society of super brands. India contributes to
about 25% share in the world trade of cotton yarn.

The project entitled “Working Capital Management and its Appraisal in OSWAL WOOLLEN
MILLS LTD. The term of study was kept limited to make the title true. The purpose of the report
is to get the in depth understanding of the process of working capital management. With the
growing Indian economy and the government policies for infrastructure the demand for
garments is increasing and seeing this as an opportunity in under taking many new projects for
expansion of the production which are under implementation for increasing the capacity of the
plants. Because the textile industry is a sun rising industry which means that three basic needs
of the people are cloth, meal and house. So the one of need that is cloth is produced in textile
industry. So, it is sun rising industry. Working capital has been analyzed in two ways – overall
study of the working capital of OSWAL WOOLLEN MILLS LTD.

Borrowings are an important ingredient of funding a business entity. The lenders must feel
comfortable with their clients and OSWAL WOOLLEN MILLS LTD. enjoys this position among
their lenders. Borrowing is done for working capital requirement i.e., to meet the day to day
requirement for smooth functioning of the production, and term loans for projects of capacity
expansion. Major portion of the borrowing is done from Banks at better rate of interest. The
performance of the textile division of the company during the year was satisfactory.
The annual turnover the Nahar group is 19000 million and alone company have annual
turnover of 550 million. The Company has posted yet another impressive for the 2007-08
results, which has surpassed all respective previous levels. It has shown substantial growth in
turnover, cash profit, profit before tax and profit after tax.

The objective of this project work is to focus on the working capital of the Oswal Woollen Mills
Ltd. The project contain the basic postulates of working capital, procedure of analysis of
Working capital, ratio being used to define the working capital and the impact of working
capital
on the company in case of excess or inadequacy. Also, the project contains analysis of
estimation
of working capital requirement and the procedure to estimate working capital requirement in
manufacturing and trading concern and from the data available it can be concluded that it holds
a
very strong position in the market.
Setting up an organization for the working capital management is the precondition to control
working capital effectively and sustainably. Firstly, it is essential to define who is responsible for
the controlling process. The figure must be calculated, planned and improved. Therefore further
key ratios must be defined and targets set. In addition, continual target-performance
comparisons must be conducted as well as define measures for improvement. These measures
advance the effectiveness of the working capital key processes; the forecast-to-fulfill process, the
order-to-cash process and the purchase-to-pay process
INTRODUCTION
ABOUT TEXTILE INDUTRY
&
COMPANY PROFILE
Overview of the Indian Textile Industry

Segments of Indian Textile Industry


Indian Textile Industry can essentially be categorized into two segments:-
1. Organized Textile Industry
2. Unorganized Textile Industry
Unorganized sector is the dominant part in this industry which mainly utilizes the traditional
practices (woven or spun ) in cloth production and hence is labor intensive in nature. This
industry is characterized by the production of clothes either through weaving or spinning with
the help of hands. The decentralized nature is considered as another important feature of the
unorganized textile industry in India.
The other half of the Indian Textile industry is a highly organized one with immense importance
on capital intensive production process. This sector is characterized by sophisticated mills
where technologically advanced machineries are utilized for mass production of textile products.
Sub- Sect oral Categorization of Indian Textile Industry
 Textile Industry based on fiber produced through manmade means or natural cotton
 Yarn industry utilizing fiber or filament of the manmade type
 Textile industry involved in the production of wool, its derivatives and final woollen
products
 Production, processing of Jute and the textile industry based on it.
 Textile industry involved in the mass production of natural silk along with derivative and
final products from silk
 Handloom Industry
 Handicrafts industry which is basically unorganized in nature.

Sub-Categorized sectors of the Indian textile Industry


Textile Industry based on fiber produced through manmade means or natural cotton. In the
whole Indian textile industry, this sector has come as the largest producer of textile products.
This industry has also proved its potential in employing the maximum number of people in the
entire industry which has been calculated to be around a whooping one million workers. As per
the latest records (31.01.2007) of Ministry of Textiles, the total number of mills in this particular
sector is 1818 in number. The installed capacity of all these mills accumulates to 35.37 million
spindles and 0.45 million rotor. During the year 2000-2001, the total amount of spun yarn
produced was 3160 million kgs. This amount saw an increase of around 400 million kgs within
the period of 2000-2001 to 2005-2006.

Spun Yarn industry can again be divided into two sub-sectors:-


 Cotton Yarn producing industry the production of this industry type is heavily dependent on
the yearly production of cotton which again depends on the vagaries of nature. Hence it has
been observed that the rate of production in this sector shows fluctuating trend.
 Completely non cotton blended yarn producing industry
 This industry type is a consistent performer where its rate of production has increased at a
consistent rate. It has been observed that between the period 1999 and 2005, capacity
utilized in this sector has varied anything between 80% and 93%

Organized sector in Textile Industry is passing through a stage of stagnation and the main
reason behind it is transformation in the structural set-up of the industry. It has been found
out that the weaving sector is delinked from the spinning sector which has led to the rise of
power looms of decentralized nature. Over the years, the production capacity of this
organized sector has seen an absolute decrease of 0.54 lakh between March 2000 and
January 2007.

Cloth production has also evidenced a declining trend during 2000-2006 with an absolute
decrease of ninety four million square meters. The annual growth rate of total cloth production
in the textile industry has been calculated to be around 5.24 % between 2000-2001 to 2005-
2006. But stratified result of this industry show that during the above mentioned period, the
organized sector of this industry has posted fluctuating results whereas the unorganized one has
performed positively with an yearly rate of growth amounting to 5.4%.
Investment in Indian Textile Industry
Investment in Indian Textile Industry
The scenario of investment in the Indian textile industry started to change after the inception of
the special “Textile Package” during the 2003-2004 budgets. The recommendations made in
the budget included the reforms that are required to be made in the fiscal policy of the Indian
textile Industry for attracting investment in this industry. The policy matters associated with
restructuring of debt for financial viability of this industrial sector are also being addressed in
this budget. A fund was set up in accordance with the recommendations of the aforesaid budget
with an initial principal amount of Rs. 3000 crores. This fund was meant for restructuring of the
textile sector.

Factors responsible for wooing the investors in Indian textile industry:-


 The size of the textile along with apparel market in India is quite big.
 Performance of this industry has been consistent right from the start of the new
millennium.
 Availability of the skilled labor in India is comparatively cheap in relation to the same in
other parts of the world.
 The policies related to the Foreign Direct Investment in India are comparatively
lenient and are transparent in nature among all the developing countries.
 There is no limit on foreign direct investment in the textile industry and hence 100%
direct investment can be done by the foreign capitalists in the Indian textile industry.
 Foreign Investments done in the Indian Textile Industry through the automatic route offers
a hassle-free way of investing. These investments are not required to be approved by the
government or the apex bank of India, RBI. The foreign investors are only required to
make a notification to the regional office of the apex bank only after receiving the receipt
of the remittance. This notification is required to be done within thirty days from the date
of receiving the remittance.
 The ministry concerned with the development of Textile Industry in India has formed a
special cell for attracting FDI in this sector.
OBJECTIVES of this special cell for wooing FDI are :-

 This cell helps the willing foreign companies to find out viable partners meant for floating a
joint venture company in order to produce textile products.
 FDI special cell acts as the mediator between the foreign investor and the different
organizations for setting up the textile industry. The specialized helps that are given by this
cell involve advisory support along with assistance.
 At the time of operation of the textile industry set by the foreign investor certain problems
may crop up. These problems are sorted out by the FDI cell.
 FDI cell monitors as well as maintains the data related with the total production of the textile
sector. They also collect the stratified data of production by both domestic industry as well as
the industry set up by the foreign investor. In the financial year 2005-2006, it has been found
out that the percentage share of the textile industry in the total foreign investment done was
1.02%.
 As a part of domestic textile sector expansion, the companies of Indian origin are also not far
behind in making investments. Arvind Mills Limited is expanding its production as well as
capacity base through the construction of two new industrial set ups in Bangalore and
Ahmadabad.
Government Policies Relating to the Textile Industry in India
Introduction
The Indian textile industry is one of the largest industries in the world. The
Ministry of Textiles in India has formulated numerous policies and schemes for the
development of the textile industry in India. Some of them are detailed in the
following sections.
National Textile Policy
The National Textile Policy was formulated keeping in mind the following
objectives:
 Development of the textile sector in India in order to nurture and maintain its
position in the global arena as the leading manufacturer and exporter of
clothing.
 Maintenance of a leading position in the domestic market by doing away with
import penetration.
 Injecting competitive spirit by the liberalization of stringent controls.
 Encouraging Foreign Direct Investment as well as research and development in
this sector.
 Stressing on the diversification of production and its up gradation taking into
consideration the environmental concerns.
 Development of a firm multi-fiber base along with the skill of the weavers and
the craftsmen.
Such goals are set to meet the following targets:-
 The size of textile and apparel exports must reach a level of US $50 billion by
the year 2010.
 The Technology Up gradation Fund Scheme should be implemented in a strict
manner.
 The garments industry should be removed from the list of the small scale
industry sector.
 The handloom industry should be boosted and encouraged to enter into foreign
ventures so as to compete globally. The National Textile Policy has also
formulated rules pertaining to certain specific sectors. Some of the most
important items in the agenda happen to be the availability and productivity
along with the quality of the raw materials. Special care is also taken to curb the
fluctuating price of raw materials.
Government policy on cotton and man-made fiber:-
One of the principal targets of the government policy is to enhance the quality and production of
cotton and man-made fiber. Ministry of Agriculture, Ministry of Textiles, cotton growing states
is primarily responsible for implementing this target.

Other thrust areas:-


Information Technology
Information technology plays a significant role behind the development of textile industry in
India. IT (Information Technology) can promote to establish a sound commercial network for
the textile industry to prosper.
Human Resource Development
Effective utilization of human resource can strengthen this textile industry to a large extent.
Government of India has adopted some effective policies to properly utilize the manpower of the
country in favor of the textile industry.
Financing arrangement
Government of India is also trying to encourage talented Indian designers and technologists to
work for Indian textile industry and accordingly government is setting up venture capital fund in
collaboration with financial establishments.

Acts
Some of the major acts relating to textile industry include:
o Central Silk Board Act, 1948
o The Textiles Committee Act, 1963
o The Handlooms Act, 1985
o Cotton Control Order, 1986
The Textile Undertakings Act, 1995 Government of India is earnestly trying to provide all the
relevant facilities for the textile industry to utilize it's full potential and achieve the target. The
textile industry is presently experiencing an average annual growth rate of 9-10% and is
expected to grow at a rate of 16% in value , which will eventually reach the target of US $ 115
billion by 2012. The clothing and apparel sector are expected to grow at a rate of 21 %t in value
terms.

Textile Industry Exports:-


Introduction
Textile industry plays a significant role in the growth of Indian economy and it is an important
component of global trade. Textile industry accounts for about one third of India's total export
earnings. It is regarded as the second largest industry of India and is the largest foreign export
earner, accounting for 35% of the gross export earnings in trade. During 1992-93 and 2001-02,
textile exports recorded an increase at a compound annual growth rate of 14.01%. Handloom
and cotton are the two most significant sectors in textile industry. These two sectors together
contribute the major portion of total textile export in India.
Trading partners
Leading trading partners of India are Malaysia, Australia, Kazakhstan, USA, South Africa,
Romania, Argentina, Egypt, Germany, Finland, and Turkey.
India's export to Malaysia
Malaysia imports various types of textile products from India to meet the requirements of raw
materials for it's emerging garment industry. Malaysia's total textile imports are estimated to
exceed US$ 1.5 billion annually. Malaysia's major importing products include woven man-made
fiber fabrics, apparel accessories, textile yarn, knitted and crocheted fabrics, and women’s
apparel.
India's export to USA
USA is regarded as the largest textile and apparel market in the world, which amounts to over
$200 billion annually. In 2006, about 45% of the U.S. market demand was met with imported
products, which accounted for 20% of the overall global textile and apparel imports. In 2003,
the total imports of clothing and textiles by USA was 80% (US $ 71 bn) and 20% (US $ 18 bn),
respectively. Asia contributed the most, specifically India. India basically supplied readymade
garments to USA.
India's export to Australia
Australia is considered as one of the most open textile markets in the world. Major textile
imports include apparels and made-ups under chapter 62, 61 and 63, specifically polyester-
cotton and polyester-viscose types. Bulk of cotton and hand-made fibers are:-
Also imported from countries like India.

Indian exports of textiles to Germany


Germany can be regarded as one of the leading importers of Indian handmade fiber textiles.
Germany is also an important market in EU (European Union), specifically for textile and
clothing, with a total market size of about US $ 34 billion (in 2005).During 2005-06, the total
German imports of textile products from India amounted to Rs. 4714.59 crores and in the same
year, the total imports value of Synthetic and Rayon textiles from India amounted to Rs. 254.63
crores, showing a growth of 58.43% comparing to the performance of previous year.

Indian exports of textiles to EU (European Union)


EU overpowered USA as becoming the largest market for textiles and clothing in the world. Asia
predominates the EU market in both clothing and textiles, with 30% (US $ 30 bn) and 17 % (US
$ 8 bn) share, respectively. India is one of the leading suppliers of textile products to the EU
market and ranked fourth, ahead of other textile exporters like Mexico, Bangladesh and Turkey,
with a market share of 5.2% (US $ 0.45 bn).
Current trend Industry sources reveal that India's textile exports are likely to fall short by over
16% from the expected target. This is happening because of an increase in value of money and
slowing down of investment. Shekhar Aggarwal, chairman, Confederation of Indian Textile
Industry opines that in 2007, the textile exports in India will not surpass $ 20.5 billion mark,
witnessing a negative growth in exports, specifically in segments like garments. Garments
accounts for about half of the overall textile exports by India.
Aggarwal also expressed his doubts about implementing the projected investment of Rs.
1,94,000 crore in the 11th Five Year Plan (2007-12). Source from Business Standard reveals
that the Indian government is expected to export around 20 % more raw cotton than before.
Indian textile exports to USA and China are growing rapidly. B.K. Patodia, Chairman of India's
Cotton Textiles Export Promotion Council, expressed that China and India are speedily
becoming the two biggest textile players in the world.
CRISIL (Credit Rating Information Services of India Limited), India's leading Ratings,
Research, Risk and Policy Advisory Company predicts that India's textile export earnings will
increase from USD 17 billion (FY 2006) to around USD 40 billion by FY(Financial Year) 2011.
Global Trade in Textile and Clothing
In 2003, the overall global trade in textiles and clothing amounted to US $ 385 billion, of which
textiles alone contributed 43%. Developed countries contribute about one third of the total
global exports of textile and clothing.

Leading Indian Textile Mills


Some of the leading Textile Mills in India include
 Adarsh Textile Mills : Manufacturer and exporter of good quality woollen and synthetic
 blankets.
 Amritsar Swadeshi Woollen Mills: Pioneer in manufacturing heavy woollen yarn and
largest manufacturer of fabric.
 Aroon Mills : Manufacture of textile auxiliaries
 Mohan Thread Mills : Manufacturer of high quality embroidery yarn and threads

Market estimation
In 1997, the overall Indian market for the textile machinery was approximated at USD 895
million and was estimated to grow at an average annual growth rate of 6%.

Factors responsible behind the growth of textile machinery in India


Some of the major factors responsible behind the growth of textile machinery sector are:
 An immense demand of Indian apparels and textiles in the international market
 Low custom duties on imported textile machinery
 Less tight government restrictions on imported goods Major trading partners regarding
import of textile machineries include U.S., Germany, Switzerland and U.K. India ranks
second in the global textile industry and accounts a major portion to the overall Indian
exports. For the sustenance of this growth and to maintain the competence in the
international market, the textile mills in India need to be modernized.
Some of the major textile mills in India are:
1. Raymond Ltd., Mumbai
2. Grasim Industries Ltd., Nagd
3. DCM Textiles, New Delh
4. S. Kumars, Kolkata
5. Reliance Industries, Ahmedabad
6. Mafatlal Industries, Mumbai
7. Arvind Mills Ltd., Ahmedabad
8. Ashima Syntex, Ahmedabad
9. NAHAR SPINING, LUDHIANA
10. Hisar Spinning Mills Ltd.
11. Anand Silk Mills, Valsad
12. Titex Silk Mills,Valsad
13. Shree sainath Silk Mills, Valsad
14. Shreeji Trading Company, Surat
15. Garden Silk Mills Ltd., Surat
16. Raj Rayon Ltd., Mumbai
17. The Bombay Dyeing & mfg. Pvt Ltd., Mumbai
18. Shiyaji Silk Mills Ltd, Thane
19. Nirmala Fabrics, Thane
2.
SWOT ANALYSIS OF INDIAN TEXTILE INDUSTRY
Strength
• Post 2005, removal of quota restrictions to give a major boost.
• Export target in textile at USD 50 Billion by 2010.
• Low per capita consumption in India (2.8 vs. Global average of 6.8).
• Cost competitiveness.

Weaknesses

• Fragmented Industry
• Effect of Historical Government Policies
• Technological Obsolescence

Opportunities

• Indian companies need to focus on Product Development


• Increased use of CAD to develop designing capabilities
• Investing in Trend Forecasting to enable the growth of industry

Threats

• Competition in Domestic Market


• Need to improve the Working Conditions of the people who are involved in this profession.
• Need to revamp Consumer Consciousness
• Tackle Chinese Aggression over the International Market

RECOMMENDATIONS

• Setting up Textile Industries oriented SEZs


• Starting up new courses like Textile Manufacturing and Textile Technology at ITIs and
Engineering Institutes
• Liberalized labor laws, tax and other benefits of a Special Economic Zone need to be
implemented
• Access to high quality and cost-effective manpower
• Excellent connectivity by road, rail air and ports and Single-window clearance
(C) COMPANY PROFILE
OSWAL WOOLLEN MILLS LIMITED (OWM) is a flagship company of the Nahar group of the
companies. The Nahar Group is an industrial conglomerate based at Ludhiana in Punjab with
the group turnover in excess of Rs. 19000 million. The Nahar Group is one of the oldest and
well recognized businesses in India. The company was incorporated in 1949 by late Mr. Vidiya
Sagar Oswal. Father of Jawahar Lal Oswal. The company’s present chairman and managing
director. The company is one of the pioneers of the organized Indian woollen hosiery industry.
The company made a beginning as a manufacturer of hosiery items, which was followed by
setting up a worsted woollen spinning plant of 800 spindles in 1954 {today .4 million spindles}
to serve as a backward integration of the existing manufacturing activities. The company
believes that this worsted woollen spinning in the northern India.
Matching ahead in the journey pace with overall industrial development in India the company is
now a vertically integrated woollen textile company, having presence in diverse market, with
wide range of products including woollen hosiery and cotton garments. In company’s woollen
hosiery segment, we start our operations with import of raw greasy wool mostly from Australia
and company products include various types of specialty yarns, such as, worsted woollen yarn,
acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting and hosiery
garments etc.
The company subsequently added cotton garments to company existing product portfolio during
fiscal 2002, which we outsource as per our requirements and sell under company own brand
name. Since March 2006, the company has started manufacture of indigo dyed specialty denim
fabric, which has added to our existing range of product portfolios.
The company manufacture facilities are spread across various locations in and around
Ludhiana in Punjab fully backed by the facilities for product, design studio and efficient
sampling infrastructure to provide quality products to our customers. Currently, The Company
over 4000 persons and company present manufacturing facilities include 26,248 spindles to
manufacture worsted woollen yarn besides machines, knitting, dyeing and finishing. Presently,
the company manufacturing facilities are producing approximately 2.5 million lbs of wool tops
per annum, 7, 50,000 pieces of readymade knitted garments per annum and 1 million meters of
denim fabric per annum.
The company are registered owners of well-known trade name “MONTE CARLO” for selling
company woollen hosiery and cotton garments ‘Monte Carlo’ has been recognized as ‘super
brand’ for woollen hosiery garments since fiscal 2003 by international society of super brands.
The company distribution channel comprises of a mix ‘ Monte Carlo exclusive brand outlets’,
network of national chain stores and multi brand outlets. The company products in woollen
hosiery segment are also sold under the brand name “CANTERBURY”, for premium quality
woollen hosiery garments and “OWM” for company specialty woollen yarn etc. including the
hand knitting yarn.
The company also have landed properties admeasuring approximately 5.01 acres in Gurgaon
and 12.70 acres in Chennai which have been leased have been leased out and are contributing
significantly to the overall revenue and profitability of the our company. These properties are
apart from the landed properties that we own in and around Ludhiana in which company
manufacturing facilities are based.

The company total income and restated profit after tax in fiscal 2006 were at Rs. 2532.85 million
and 148.48 million 148.48 million respectively. For the six months ended September 30, 2006,
the company restated total income and restated profit after tax were at Rs. 1427.93 million and
Rs. 101.57 million respectively.
GROUP OF COMPANIES

 Oswal Woollen Mills Ltd.


 Nahar Spinning mills Ltd.
 Nahar Exports Ltd.
 Nahar International Ltd.
 Oswal Cotton Mills Ltd.
 Nahar Industrial Enterprise Ltd.
 Nahar Industrial Infrastructure Corp. Ltd.
 Nahar Sugar & allied industrial Ltd.
 Rishab Spinning Mills
 Arham Spinning Mils

GENERAL INFORMATION

Registrar office of OSWAL WOOLLEN MILLS LTD.:-


OSWAL WOOLLEN MILLS LIMITED
G.T. ROAD, SHERPUR,
LUDHIANA, 141003, PUNJAB {INDIA}
TEL: +91 161 2542501
FAX: +91 161 2542509
WEBSITE: www.owmnahar.com
Address of registrar of companies:-
Registrar Of Companies Punjab, Himachal Pradesh And Chandigarh
Kothi No.286,
Defense colony,
Jalandhar 144001,\
Punjab India.
Company secretary and compliance officer
Mr. Nitin Sharma
G.T. Road, Sherpur,
Ludhiana 141003 Punjab India.
Tel: +91 161 2542501-07
E-mail: owmipo@owmnahar.com
MANAGEMENT

The following persons constitute the company’s board of directors:-

a) Mr. Jawahar Lal Oswal, chairman and managing director;

b) Mr. Kamal Oswal, director;


c) Mr. Dinesh Oswal, Director;
d) Mr. Sandeep Jain, executive director;
e) Mr. Dinesh Gogna, Executive director corporate finance and taxation;
f) Dr. O.P. Sahni, Independent additional director;
g) Mr. Amarjeet Singh, Independent director;
h) Dr. Ms. H. K. Bal, Independent additional director;
i) Mr. K.S. Maini, Independent additional director; and
j) Dr. Suresh Kumar Singla, Independent additional director.

FINANCE CONTROLLER OF OSWAL WOOLLEN MILLS LTD.


MR. R.M.SOOD
COMPANY BUSINESS PHILOSOPHY
The business, which started with a modest beginning 0f 800 spindles for worsted spinning to
become a large woollen textile player believes in the philosophy ‘ success is tradition and
growth is imperative’. Since beginning company focus has been achieving economies in the
scale of production, rationalize cost, integration of operations thereby increase the revenue from
year to year.
The company view on costs has never refrained from rewarding the work force of company.
Until date we have enjoyed cordial with company work force at all levels, keeping in mind
company philosophy and to meet out any contingency company have always developed second
line of key managerial personnel. Company human resource development policy is designed to
motivate achieve goal and excellence in management. The companies have always remained
conscious about prevalent fashion and design and quality translated into high level of
consumer’s satisfaction. Company has also kept fully abreast with latest trend prevailing in
domestic as well as international markets. The company philosophy is not only to earn profit but
prosperity of other stakeholders.
Company competitive strengths
 Extensive experience of company promoters
 Owners of well known and established brands of ‘Monte Carlo and OWM’
 The landed property in Gurgaon and Chennai
 Fully integrated woollen operations
 Wide and various ranges of products
 Quality standard
OWM key strategies
 Established Monte Carlo as on all seasons pan India brand
 Further strengthening company retail presence
 Increasing product range
 Foraying into kids wear
 Cost reduction
 Enhancing manufacturing capacities
(D) Company major events
Year Event
1949 Company worsted was incorporated as public limited company with a woollen
hosiery knitwear unit, a worsted spinning plant, barrack blanket weaving and
finishing plant at unit no. 1 at Miller Ganj, Ludhiana.
1950 First worsted spinning plant at unit 1. G.T. Road, Miller Ganj, Ludhiana.

1960 Set up unit no. 3 at G.T. Road, Sherpur, Ludhiana for combing spinning dyeing,
weaving and processing.
1968 Commenced export of knitted hosiery.
1969 Set up Vanaspati manufacturing plant at unit no. 3, G.T. Road, Sherpur,
Ludhiana.
1972 Set up unit no. 5 at industrial area’ A’, Ludhiana for manufacturing woollen
hosiery knitwear.
1973 Set up a new Vanaspati plant at Chennai, Tamilnadu.

1974-1985 Launched our “MONTE CARLO” brand.


 Established an OWM export house
 Received recognition as an export house under the EXIM policy
 Recognized as one of the first five “trading house” under the EXIM
policy 1981-82
 Outbreak of fire at our office G.T. Road Miller Ganj, Ludhiana.
1993 Set up a unit no. 4 at G.T. Road Ludhiana, a lamb’s wool plant, to produce high
value, fine micron lamb’s wool yarn for top class knitwear.
1995 Launched “CANTERBURY” brand.
1998 Closed company vanaspati and vegetable oil unit at Chennai and Ludhiana.

2002 Extended the application of “MONTE CARLO” brand to cotton segment.

2004 Commenced operations for augmentations and up-gradation of spinning and


knitting capacities started at unit no. 3.
2005 Operationalised the co-generation and up-gradation of spinning and knitting
capacities started at unit no. 3
2006  The first phase of the denim plant at Lalru, Punjab was committed.
 Started appointment franchises for retail outlets for marking our own products
as well as products imported from abroad/outsourced from manufacture of repute.
E) AWARDS
 Nahar Group has been honored with prestigious National Export Award for outstanding
export performance and also, the Texprocil Trophy by the Textiles Export
 Promotion council for outstanding export performance in yarn.
 1995 to 1999 “best exhibited product” by the Wool mark Company for ‘Monte Carlo’
woollen hosiery garments.
 ‘Super brand’ recognition for ‘Monte Carlo’ woollen garments by international society for
super brands.
F) PRODUCTS
Yarn Products

Nahar Group surges ahead to establish itself as a reputed Industrial Conglomerate with
wide ranging portfolio of yarns that offers everything. A desiring customer can look for
 100% Cotton Yarns
 100% Cotton Dyed yarns
 100% Polyester Yarn
 Industrial Yarns
 Open end yarns
 Open end slub yarns
 Blended yarns
 100% Acrylic Yarns
 .Industrial Yarns
 Specialized Yarns
Fabric Products

\
Blends:-100% Cotton & Cotton Blends (Poly-cotton, Cotton-Stretch & Cotton-Tencil etc.)
Woven Vibrancy:-Twills, Dobbies, Broken Twills, Ripstop, Ottoman, Chinos, Satins, Tussors,
Bedford Cord, Cavallery Twill, Canvas, Gabardine.
Utility:- Garments (Tops, Bottom & Outerwear)
GSM: - 100 gms to 330 gms
Yarns Used:- Single & Double Count with different counts (7’s and 60’s) technologies such as
open end, Ring spun, Combed, Compact, Multicounty & Slubs.
Performance Fabrics
 High Density constructions
 AIRO Finish
 Bio Polish
 Nano Care
 Soil Release
 Micro sanding
 Anti Bacteria
 Frost Free
 Wrinkle Free
 Stain Guard
Sugar products

NAHAR SUGAR represents the Group’s concerted thrust towards exploring new need based
areas in tune with the larger context of customer needs and market demands.
Established in 1993 as Nahar Sugar & Allied Industries Limited (NSAIL) in the assisted sector
with PSIDC presently is a unit of Nahar Industrial Enterprises Limited (NIEL) , as a result of
NSAIL’s merger with Nahar Industrial Enterprises Limited in 2005.

 Installed capacity of 2,500 tons of cane crushed per day (“TCD”) at District Fatehgarh Sahib,
Punjab for producing all types and grades of sugar and allied products.
 Cogeneration power plant of 8 MW.
 Excess power generated by the sugar business is utilized in the company’s other businesses.
Upcoming product of company
Corduroy
EXPORT MARKETS

USA, United Kingdom, Germany, Russia, Japan, Australia,


New-Zealand, Holland, Thialand, Hong-Kong, Singapore,
Taiwan, South Korea, Malaysia, Mauritius, Dubai, Bahrain,
South Africa, Canada, Egypt, Israel, and Bangladesh.
INTRODUCTION
TO
PROJECT
(A) WORKING CAPITAL

Meaning of Working Capital - Capital required to carry day to day transactions


of a
business.

It can be classified under two main categories:-


1) Fixed Capital
2) Working Capital

Every business needs funds for two purposes for its establishment and to carry out
its day to- day operations. Long terms funds are required to create production
facilities through purchase of fixed assets such as p & m, land, building, furniture,
etc. Investments in these assets represent that part of firm’s capital which is
blocked on permanent or fixed basis and is called fixed capital. Funds are also
needed for short-term purposes for the purchase of raw material, payment of
wages and other day – to- day expenses etc.

These funds are known as working capital. In simple words, working capital refers
to that part of the firm’s capital which is required for financing short- term or
current assets such as cash, marketable securities, debtors & inventories. Funds,
thus, invested in current assts keep revolving fast and are being constantly
converted in to cash and this cash flows out again in exchange for other current
assets. Hence, it is also known as revolving or circulating capital or short term
capital.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in two ways:

GROSS WORKING CAPITAL


The gross working capital is the capital invested in the total current assets of the enterprises
current assets are those assets which can convert in to cash within a short period normally one
accounting year.
CONSTITUENTS OF CURRENT ASSETS
1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6) Temporary investment of surplus funds.
7) Prepaid expenses
8) Accrued incomes.
9) Marketable securities.
NET WORKING CAPITAL
In a narrow sense, the term working capital refers to the net working capital .
Net working capital is the excess of current assets over current liability, or we can say :-

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.


Net working capital can be positive or negative. When the current assets exceeds the current
liabilities then positive net working capital will be there.
Current 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 assts or the
income business.

CONSTITUENTS OF CURRENT LIABILITIES


1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation , if it does not amt. to app. Of profit.
6. Bills payable.
7. Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own merits.
The gross working capital concept is sometimes preferred to the concept of working capital for
the following reasons:-
 It enables the enterprise to provide correct amount of working capital at correct time.
 Every management is more interested in total current assets with which it has to operate
then the source from where it is made available.
 It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital.
 This concept is also useful in determining the rate of return on investments in working
capital.
The net working capital concept, however, is also important for following reasons:-
 It is qualitative concept, which indicates the firm’s ability to meet to its operating expenses
and short-term liabilities.
 IT indicates the margin of protection available to the short term creditors.
 It is an indicator of the financial soundness of enterprises.
 It suggests the need of financing a part of working capital requirement out of the permanent
sources of funds.

PERMANENT OR FIXED WORKING CAPITAL


Permanent or fixed working capital is minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has
to maintain a minimum level of raw material, work- in-process, finished goods and cash
balance. This minimum level of current assets is called permanent or fixed working capital as
this part of working is permanently blocked in current assets. As the business grow the
requirements of working capital also increases due to increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL


Temporary or variable working capital is the amount of working capital which is required to
meet the seasonal demands and some special exigencies. Variable working capital can further
be classified as seasonal working capital and special working capital. The capital required to
meet the seasonal need of the enterprise is called seasonal working capital. Special working
capital is that part of working capital which is required to meet special exigencies such as
launching of extensive marketing for conducting research, etc.

EXCESS OR INADEQUATE WORKING CAPITAL


Every business concern should have adequate amount of working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortages of working capital. Both excess as well as short working capital positions are bad for
any business. However, it is the inadequate working capital which is more dangerous from the
point of view of the firm.
FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS
1. NATURE OF BUSINESS
2. SIZE OF THE BUSINESS
3. PRODUCTION POLICY
4. LENTH OF PRDUCTION CYCLE
5. SEASONALS VARIATIONS
6. WORKING CAPITAL CYCLE
7. RATE OF STOCK TURNOVER
8. CREDIT POLICY
9. BUSINESS CYCLE
10. RATE OF GROWTH OF BUSINESS
11. EARNING CAPACITY AND DIVIDEND POLICY
12. PRICE LEVEL CHANGES

Financing Working Capital


Now let us understand the means to finance the working capital. Working capital or current
assets are those assets, which unlike fixed assets change their forms rapidly. Due to this nature,
they need to be financed through short-term funds. Short-term funds are also called current
liabilities. The following are the major sources of raising short-term funds:

I. Supplier’s Credit
At times, business gets raw material on credit from the suppliers. The cost of raw material is
paid after some time, i.e. upon completion of the credit period. Thus, without having an outflow
of cash the business is in a position to use raw material and continue the activities. The credit
given by the suppliers of raw materials is for a short period and is considered current liabilities.
The loans are available for creating the following current Assets:

a. Stock of Raw Materials


b. Stock of Work in Process
c. Stock of Finished Goods
d. Debtors
Banks give short-term loans against these assets, keeping some security margin.
The advances given by banks against current assets are short-term in nature and banks have the
right to ask for immediate repayment if they consider doing so. Thus bank loans for creation of
current assets are also current liabilities.

II. Promoter’s Fund


It is advisable to finance a portion of current assets from the promoter’s funds. They are long
term funds and, therefore do not require immediate repayment. These funds increase the
liquidity of the business.

Bank Credit (Working Capital Finance by Commercial Banks)


Bank credit is the primary institutional source of working capita finance in India. The different
forms in which the banks normally provide loans and advances are as follows:

a. Loans
b. Cash Credits
c. Overdrafts
d. Purchasing and discounting of bills
WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business.
Adequate amount of working capital is very much essential for the smooth running
of the business. And the most important part is the efficient management of
working capital in right time. The liquidity position of the firm is totally effected by
the management of working capital. So, a study of changes in the uses and sources
of working capital is necessary to evaluate the efficiency with which the working
capital is employed in a business. This involves the need of working capital
analysis.

Ratios required for the calculation of working Capital Analysis are as follows:-

1. Ratio of increase or decrease in turnover for current year or viz a viz previous
year.
2. Percentage of retained profits
3. Percentage of dividend declared/ paid
4. Turnover Ratio
5. Ratio of bank borrowings to total outside liabilities
6. Ratio of total outside liabilities to tangible Net worth
7. Debt service Ratio
8. Debt Equity Ratio
9. Cash Accruals
The analysis of working capital can be conducted through a number of devices, such as:
1. Ratio analysis.
2. Fund flow analysis

1. RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another. The technique
of ratio analysis can be employed for measuring short-term liquidity or working
capital position of a firm. The following ratios can be calculated for these
purposes:
1. Current ratio. 2. Quick ratio
3. Absolute liquid ratio 4. Inventory turnover.
5. Receivables turnover. 6. Payable turnover ratio.
7. Working capital turnover ratio 8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.

2. FUND FLOW ANALYSIS


Fund flow analysis is a technical device designated to the study the source from
which additional funds were derived and the use to which these sources were put.
The fund flow analysis consists of:
a. Preparing schedule of changes of working capital
b. Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position
(working capital) business enterprise between beginning and ending of the
financial dates
RATIO ANALYSIS
Types of Ratio
There are a number of types of ratios of interest to the various stakeholders of a business. The
main classifications of ratios are as follows:

RATIOS INTERPRETATION

Liquidity Ratios These investigate the short-term and long-term financial stability of the
firm by examining the relationships between assets and liabilities These
are sometimes called Solvency Ratios
Activity Ratios These measure how efficiently an organization uses its resources.
These are sometimes referred to as asset utilization ratios.

Profitability Ratios Measure the relationship between gross/net profit and sales, assets and
capital employed. These are sometimes referred to as being
performance ratios.

Investment Ratios This group of ratios is concerned with analyzing the returns for
shareholders. These examine the relationship between the numbers of
shares issued, dividend paid, value of the shares, and company profits.
For obvious reasons these are quite often categorized as shareholder
ratios
Gearing Examines the relationship between internal sources and external
sources of finance. It is therefore concerned with the long-term
financial position of the company
(B) Computation of Maximum Permissible Bank Finance (MPBF):
The Tandon Committee had suggested two methods for determining the maximum
permissible bank finance (MPBF).
They are
Method 1: MPBF=0.75(CA-CL)
Method 2: MPBF=0.75(CA)-CL

e.g. Total current assets required Rs. 40,000


Current liabilities other than bank borrowings Rs. 10,000

1st Method
Total current assets required Rs.40,000
Less current liabilities 10,000
Working Capital Gap 30,000
Less 25% from Long term sources 7,500
Maximum permissible bank borrowings 22,500

2nd Method
Current Assets required 40,000
Less 25% to be provided from long term funds 10,000
Less Current Liabilities 30,000
Maximum permissible bank borrowings 20,000
OBJECTIVES OF THE
STUDY
OBJECTIVES OF STUDY

The chief objective of the current study are :-

1. To analyses short term capital investment


and management of the company.
2. To know the working capital requirement
of the company.
3. To know liquidity position of the company.
4. To find the future need of the working
capital management in running organization.

RESEARCH
METHODOLOGY
RESEARCH METHODOLOGY

RESEARCH
Research in common parlance refers to a search for knowledge. One can also define research as
a
scientific and systematic search for pertinent information on a specific topic. Research is an
academic activity as such the term should be used in a technical sense. Research refers to:
 Defining and redefining problem
 Formulating hypothesis or suggested solutions
 Collecting, organizing and evaluating data
 Making deductions and reaching conclusions
 At last carefully testing the conclusions to determine whether they fit the formulating
hypothesis.
Scope of Study
Scope of research is only restricted to the population of OSWAL WOOLLEN MILLS
LUDHIANA.

RESEARCH PROCESS
Research process consists of series of action or steps necessary to effectively carry out research.
These steps are to be followed in the same sequence. These steps are as follows:
 Specifying research objective
 Preparing a list of needed information
 Designing the data collection project
 Select a sample size
 Organizing and carrying data and reporting the findings.

Research Design
The research design is a pattern or an outline of the research project’s working, it is a statement
of only the essential elements study, those that provide the basic guidelines for the details of the
project. Further a research design is an arrangement of conditions for collection and analysis of
data in that aim to combine relevance to research purpose with economy in procedure. It
constitutes the blueprint for collection, measurement and analysis of data. Research design
stands for advance planning of the methods to be opted for collecting the relevant data and the
techniques to be used in their analysis, keeping in view of the objectives of their research.
The present study, being conducted, followed a Descriptive Design. It produces a picture of
phenomenon in which decision maker is in trusted. As the data would be responses from a
sample containing a large number of sources. Design of descriptive studies includes the nature
and source of the data, the nature of expected results and the analytical method.
The conceptual structure within which this research is conducted descriptive and exploratory in
nature as it brings forward the results concerning the set objectives, though facts, findings and
enquiries, moreover it describes the state of affairs that exists at present.

SOURCES OF DATA
The sources of data means from where we have to get data. There are mainly two sources of
data. These are:
PRIMARY DATA:
Depending upon the nature of the problem, primary data can be collected through various
methods. In this study, personal interviews with senior officials of different departments of
corporate office, with OSWAL WOOLLEN MILLS LIMITED and various members of finance
and accounts department of the company.

SECONDARY DATA:
The secondary data are those data which have already been collected by someone else and
which
have already been passed through statistics process. I got published data as maintained by
company like company manuals, annual reports balance sheets etc.
Data collected through websites also.
REPORT WRITING AND PRESENTATION
Report encompasses- charts, diagrams
WORKING CAPITAL
ANALYSIS
AND
INTERPRETATION
1.Current ratio:- current ratio may be defined as the relationship between current
assets and current liabilities. This ratio also known as working capital ratio and it is
most widely used to make analysis of a short term financial position or liquidity of
a firm . it is calculated as:-
Current ratio= current assets
Current liabilities

For 2007-08 = 1623847837 =2.33:1


696940555

For 2008-09 =2054367060= 1.84:1


1118567186

For 2009-10 =3012928902=3.33:1


904430343

Interpretation :- A high C.R. is an indication that the firm is liquid and has the
ability to pay its current obligations in times as and when they became due. The
current ratio measures only the quantity of current assets and not quality. The C.R.
of O.W.M. are quite satisfied because they have proper amount of current assets to
meet its current liabilities and there is an increase in 2009-10 as compared to 2007-
08 & 2007-08.
2.Working capital turnover ratio:- This ratio indicates the number of times the
working capital is turned over in course of a year. Ahigher ratio indicates efficient
utilization of working capital. It is calculated as:-
Cost Of Sales
--------------------
Net Working Capital

For 2007-08 = 1933501000 = 2.08 Times


926907282

For 2008-09 = 2611631000 =2.79 times


935799874

For 2009-10 = 4095810000 =1.94 times


2108497559

Interpretation:- working capital tunover ratio indicates the velocity of utilization of


net working capital. This ratio indicates the number of times the working capital is
turned over in course of a year. A lower ratio indicates inefficient utilization of
working capital. In year 2008-09 it increases but in 2009-10 it shows downfall
trend, for making an improvement in ratio the company should increase the sales
as compared to net working capital.
3.Inventory turnover ratio:- Invertory turnover ratio indicates the no. of times the
stock has been turned over during the period and evaluates the efficiency with
which a firm is able to manage its inventory. The purpose is too see whether only
the required minimum funds have been locked up in inventory.

Inventory turnover ratio= Net Sales


Inventory

For 2007-08 = 2473758000 = 2.62 times


945095000

For 2008-09 = 3230831000 = 2.81 times


1148313000

For 2009-10 = 4998065000 = 2.83 times


1767210000
Inventory conversion period:- 365
Inventory turnover ratio

For 2007-08 = 365 = approx. 140 days


2.62

For 2008-09 = 365 =approx. 130 days


2.81

For 2009-10 = 365 =approx. 129 days


2.83

Interpretation :- usually , a high inventory turnover indicates efficient management


of inventory because more frequentlty the stocks are sold, the lesser amount of
money is required to finance the inventory. A low inventory turnover ratio
indicates an inefficient management of inventory.
4.Debtors tunover ratio:- trade debtors are expected to be converted in to cash
within a short period and are included in current assets. The liquidity position of a
concern to pay its short term obligation in time depends upon the quality of its
trade debtors. This ratio indicates the no. of times debtors are turnedover during a
year.It is calculated as:-
Credit sales
Debtors

For 2007-08 = 2473758000 = 5.97 times


414592000

For2008-09 = 3230831000 = 6.58 times


490857000

For 2009-10 = 4998065000 = 7.61 times


656400000
Debtors collection Period:- Debtor collection period represents the average no. of
days for which a firm has to wait before its recievables are converted into cash. It
is calculated as:-

365
Debtors turnover ratio

For 2007-08 = 365 = approx. 61 days


5.97

For 2008-09 = 365 = approx. 55 days


6.58

For 2009-10 = 365 = approx. 48 days


7.61

Interpretation :- Generally, the higher the value of debtors turnover the more
efficient its management of debtors/sales or more liquids the debtors. Similarly the
more debtorturnover implies inefficient management of debtors/sales and less
liquids debtors.
Quick Ratio = Quick Assets
Current Liabilities
PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.34 0.53 0.5 0.58
Denim Unit 0.49 0.87 0.84 1.11
Cotton Unit 0.007 0.11 0.35 0.32

Absolute Liquid Ratio = Absolute Liquid Assets

Current Liabilities
PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.03 0.15 0.19 0.26
Denim Unit 0.16 0.02 0.04 0.005
Cotton Unit 0.007 0.01 0.007 0.001

Inventory Turnover ratio = Cost of goods sold


Inventory

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 2.02 2.54 2.59 2.64
Denim Unit 4.72 10.22 11.29 9.32
Cotton Unit - 1.41 18.35 1.14
Inventory Conversion Period = 365 days/12 months
Inventory tunover ratio

PRODUCTS RATIO (in days)


2006-07 2007-08 2008-09 2009-10
Textile Unit 181 144 141 138
Denim Unit 77 36 32 39
Cotton Unit - 259 20 320

Debtors Turnover Ratio = Net Credit Annual Sales


Inventory Turnover

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 6.16 6.58 6.84 6.78
Denim Unit 9.86 8.93 7.32 6.87
Cotton Unit - 14.79 15.18 8.88

Average Payment Period = 365 days/ 12 months


Creditors Turnover
PRODUCTS RATIO
(in Days)
2006-07 2007-08 2008-09 2009-10
Textile Unit 112 68 80 77
Denim Unit 45 21 23 34
Cotton Unit - 27 5 113
9

Working Capital Turnover Ratio = Cost of Sales


Net Working

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 5.4 5.47 4.86 4.79
Denim Unit 6.02 6.53 10.4 6.04
Cotton Unit - 6.07 293.1 1.51
PROFITABILITY RATIOS
Gross Profit Ratio = Gross Profit *100
Net Annual Sales

PRODUCTS RATIO (in %age)


2006-07 2007-08 2008-09 2009-10
Textile Unit 21.4 20.77 20.62 25.54
Denim Unit 9.07 15.02 15.96 20.35
Cotton Unit - 0.23 8.63 14.95

Net Profit Ratio = Net Profit *100

Net Annual Sales

PRODUCTS RATIO (in %age)


2006-07 2007-08 2008-09 2009-10
Textile Unit 4.93 4.67 2.54 6.45
Denim Unit 1.51 8.7 9.79 15.18
Cotton Unit - (9.13) 2.14 9.45
Operating Profit Ratio = Operating Profit *100

Sales

PRODUCTS RATIO (in %age)


2006-07 2007-08 2008-09 2009-10
Textile Unit 6.84 6.68 6.19 13.54
Denim Unit 1.43 8.52 9.13 14.83
Cotton Unit - (8.92) 2.13 9.2

Operating Cost Ratio = Operating Cost *100


sales

PRODUCTS RATIO (in %age)


2006-07 2007-08 2008-09 2009-10
Textile Unit 93.16 93.32 93.81 86.46
Denim Unit 98.57 91.48 90.87 85.17
Cotton Unit - 108.92 97.87 90.79
Return on Shareholder fund = Net Profit ( after int & tax ) * 100

Shareholder’s fund

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.12 .12 0.07 0.15
Denim Unit 1 1 1 1
Cotton Unit - 1 1 1

Return on Equity Capital = Net Profit ( after int& tax)- pref. div.*100
Equity capital paid up
PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.53 .59 0.39 1.09
Denim Unit - - - -
Cotton Unit - - - -

Earnings per share = Net Profit (after int, tax& div)


No. of Shares

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.053 0.059 0.039 0.109
Denim Unit - - - -
Cotton Unit - - - -
SOLVENCY RATIOS
Solvency Ratio = Total Liabilities to Outsiders *100
Total assets

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.65 0.67 0.63 0.58
Denim Unit 0.99 0.91 0.87 0.82
Cotton Unit 1 1.04 0.98 0.95

Proprietary Ratio = Shareholders fund


Total Assets

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.35 0.33 0.37 0.42
Denim Unit 0.01 0.09 0.13 0.18
Cotton Unit - (0.04) 0.02 0.05

Ratio of Bank Borrowings to = Bank Borrowings


total outside Liabilities Total outside

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.27 0.35 0.29 0.31
Denim Unit - 0.02 0.07 .01
Cotton Unit - - 0.08 .03

Ratio of total outside liabilities = Total outside Liabilities


to tangible Net worth Tangible Net worth

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.27 1.99 1.69 1.38
Denim Unit - 10.05 6.42 4.66
Cotton Unit - 27.04 42.46 17.63
Debt Service Ratio = Earnings before int & tax
Fixed Interest obligation

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 2.97 3.32 2.48 6.47
Denim Unit 1.43 3.4 3.55 7.57
Cotton Unit - (0.31) 1.38 3.18

Debt Equity Ratio = Outsiders Fund


Shareholders Fund

PRODUCTS RATIO
2006-07 2007-08 2008-09 2009-10
Textile Unit 0.47 0.47 0.39 0.29
Denim Unit 80.8 8.53 4.68 3.79
Cotton Unit - (19.18 33.36 13.86
)
2009-10 2010-11 INCREASE IN DECREASE
WORKING IN
CAPITAL WORKING
CAPITAL
CURRENT ASSETS
Raw material 2214.83 4204
a. Imported Material Inland
1989.17
b. Imported Material In transit 736.75 1402 665.25
c. Indigenous Consumption 6503.5 8464 1960.5
Consumable Stores 1027.47 360.25 667.22
Stock in Process 2035.11 4030.95 1995.84
Finished goods (For Inland sales) 5630.52 7946.31
2315.79
Receivables 8759.48 2756 6003.48
Exports Receivable 541.67 750.30 208.53
Advance to Supplier of raw material 665.25 650 15.25
&stores

Cash in hand 1023.90 643 380.9


Advance payment of Taxes 30.23 - 30.23
Prepaid Expenses& advances 3278.06 3975.78 697.72
Duty drawback and Cash incentives 120.01 50 70.01
Short term Investments 4254.55 5331.81 1077.26
TOTAL CURRENT ASSETS (A) 36821.33 40564.40

CURRENT LIABILITIES

Creditors 3469.57 4907 1437.43


Bills Payable 3936.14 2458 1478.14
Advance received from Customers 606.60 530.50 76.1
Accrued Expenses 1716.64 2150 433.36
Statutory Liability 255.99 267 11.01
Installments of Fixed Loans 2569.97 2609.40 39.43
TOTAL CURRENT LIABILITIES (B) 12554.91 12921.9
WORKING CAPITAL (A-B) 24266.42 27642.5
Increase In Working Capital 3376.08 3376.08
TOTAL 27642.5 27642.5
MAXIMUM PERMISSIBLE BANK
FINANCE
Calculation of Maximum Permissible Bank Finance
(2010-11)
(Method 1 of Lending) Amount (Rs in Lacs)
Gross Current Assets 50564.10
(-) Current Liabilities 12921.90
NET CURRENT ASSETS 37642.2
(-) 25% Margin Of Net 9410.55
Current assets
MPBF 28231.65

Calculation of Maximum Permissible Bank Finance


(2010-11)
(Method 2 of Lending) Amount (Rs in Lacs)
Gross Current Assets 50564.10
(-)25% Margin of Gross 12641.025
Current Assets
NET Margin 37923.075
(-) Current Liabilities 12921.90
MPBF 25001.175
CONCLUSION
The overall affairs of the company are very efficient . over the
years, there is aconsiderable improvement in the efficiency etc.
1. The company has adequate liquidity to meet short term
obligations.
2. It is financially solvent to make payment to long term
creditors.
3. It is profitability sound so as to make availlable
appropriate returns on capital employed.
4. From the above discussions it clears that OWM is having
the sufficient sources to fulfill the requirements of
working capital and the organisation is financially sound
and is efficiently manages its working capital as per its
requirements.
5. To conclude from the above statements, it has been
proven that financial position of the company is
improving over the years.