PROJECT ON FUND COSTING AT ASTRAL POLYTECHNIK LIMITED

Introduction:
In all business firms there is need for the fund with the help of which company can invest that fund in fixed assets and also can use as a working capital. For any business firm, control over expenditure and optimum utilization of funds is the main criteria to focus on. Sources of funds are also a major concern for the Company and even the cost incurred thereto. This project focuses on the different types of sources of funds available as the Company is a working capital intensive company, and tries to get the fund with the minimum cost which called fund costing. The sources available to the Company are;

Fund Based Working Capital

Cash Credit L.C.B.D. (Bills discounting of Letter of Credit) Term Loans

Non Fund Based Working Capital

Bank Guarantee Letter of Credit

The product is manufactured as per the requirements and specifications provided by the customers and hence the production process is a tailor made job. This requires fund requirement which is fulfilled as per the above.

Company Profile(Astral Polytechnic Ltd)

They are a manufacturer and provider of CPVC piping and plumbing System in India since 1999. They are the first license of novena, USA to Manufacture and market CPVC piping and plumbing system in India. In Order to strength of their business plans, they entered in to a techno-financial Joint venture with specialty process LLC of USA, which provided them the Required technical expertise for manufacturing our CPVC pipes and fittings for home and industrial application. This company has its production facilities at Gujarat and himachal Pradesh to manufacture plumbing system from 1/2 to 8 diameter. This company has received an ISO 9001:2000 certificate in respect Of manufacture and supply of CPVC and PVC pipes and fittings for plumbing Systems and industrial piping system. The raw material used by us For manufacturing CPVC products is certified by national sanitary foundation (NSF).

Objective & scope of the study:

The company is engaged in manufacturing and supplying of its products like PVC pipes, CPVC pipes and other many of products. Even from the production process discussed above, it is clear that the value of the product is high and inventories carry a majority part of the working capital. As the main customers to the industry are the big hotel industry and some government projects and many others, the debtor cycle is also longer. Thus the Industry is working capital oriented and the funds are locked in for a longer period of time. Thus, one important area to be concentrated on is the cost involved in raising funds i.e. interest and bank charges and non fund based sources of fund viz. Letter of Credit and Bank Guarantee. This will provide the base for the project under study. As the product requires heavy working capital investment, different types of sources of funds acquired for this purpose by the company are; Owners Funds Borrowed Funds

Thus the funds required are obtained as under;

Recommendations: 1. The Company has been able to reduce the interest cost and further reduction is possible through continuous negotiations with the Bankers.

2. The Company can reduce the borrowing through reducing the inventory cycle and increasing the creditors cycle. 3. The Company should look at alternative sources of fund to leverage on interest cost i.e. buyers credit. 4. For smooth functioning of the ERP system, BAAN can be updated with latest amendments made by the external parties such as changes in tax laws, etc.

Technology
Cpvc technology
Cpvc resin technology is patented by B.F.Goodrich of USA, which has been taken over by novena. This technology enables enrichment of the chlorine content in PVC by chlorination. This modifies some of the root characteristics of the polymer and results in an altogether new range of polymer called CPVC. The characteristics like tensile strength, capability to withstand highpressure, impact strength, capability to withstand high temperature; anti flaming characteristics etc. make CPVC very different from other plastics. The density and viscosity of the material is increased substantially but yet it is capable of extruding and molding like PVC.

The based lead free PVC

Is a chemical compound prepared by them, being a result of their in-house research and development. Presently most of the PVC pipes available in India are made of lead based compounds. This tends to under them unhygienic for applications, which involve direct or indirect human consumption. They have developed a lead free compound and introduced the same through our plumbing solution under our brand name of astral Aquarius.

They have also invested in testing and quality assurance facilities. Most of the testing and laboratory equipment are imported from USA and a very strict quality assurance regime is being followed at both the production facilities. They have full fledged quality control laboratory at both their plants for testing their finished products. The tests are carried out using equipment like drop impact tester, flattening tester, burst pressure tester, opacity and many other standard specific testing types of equipment. A diagrammatic representation of the process is given below

R .M

Opportunities and Threats

When your Company increased the installed capacity in the year 2008-09 from 11,800 M.T. to 25,968 M.T., an increase of 120% it appeared to be a threat to the Company since your Company was implementing a large Apex plan during the recession. However, as the economy recovered and came out of recession, your Company was in readiness to meet the increasing demand from the market delivering a top line growth of 50% backed by 75% capacity utilization. As explained above, the huge shortages in housing persist in the economy and government is supporting in a big way affordable housing. There is also considerable emphasis on infrastructure spending. The growth in commercial construction, malls and SEZ throughout the country offer great opportunity to your Company for development of business. The increased awareness of CPVC products both within and outside the country gives a boost to the replacement demand for various products of your Company. In many old constructions where metallic pipes need to be replaced because of the problems of corrosion, scaling and rusting, CPVC pipes and fittings are used. The increasing brand consciousness amongst the builders, architects, plumbers and consumers will help the Company to perform better in the years ahead supported by its concerted and continued efforts in brand promotional activities. The increasing imports of CPVC raw material a derivative of crude and the fluctuations in the exchange rate of foreign currency could affect the profitability of the Company. Volatility in crude prices will also affect the raw material cost of PVC/CPVC resin.

Financial policy 1. Basis of preparation of financial statement The financial statement are prepared under the historical cost convention in accordance with the generally accepted accounting principal (GAAP) and comply with the mandatory accounting standards and statement issued by the

institute of chartered accounts of India and the companies Act, 1956 except otherwise stated. All income and expenditure are recognized otherwise stated. 2. Use of estimate The preparation of financial statement in conformity with generally accepted accounting principal (GAAP), requires estimates and assumption to be made that affect the reported amount of assets and Liabilities on the date of the financial statement and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimate are recognized in the period in which the result is known materialized. 3. Fixed assets a. fixed assets are stated at historical costs (net of cenvat credits) less accumulated depreciation. All costs relating to acquisition and installation of fixed assets till the assets get ready for their intended use are capitalized. Capital work in progress represents assets under erecting. Deduction represents assets discarded transferred. b.depreciation: Depreciation is provided on straight-line method on pro-rata basis at the rates prescribed in scheduled xiv of the companies Act; 1956.Individual assets costing less than Rs.5000 are depreciated in full in the year of acquisition. 4. Investments are stated at cost. 5. The company has decided for initial public offer (IPO) to part finance its forth-coming expansion project of Rs.6804.35 lacks. Accordingly entire expenses in this regard are being debited to the pre-operative expanses

and shown under the head capital work in progress. These will be apportion and capitalized among the respective assets.

6. Valuation of inventories Inventories are valued at: Raw-material Reusable scrap Finished goods - at cost or net realizable value whichever is less - at cost or net realizable value whichever is less - at cost or net realizable value whichever is less 7. Excise duty The company has provided liability for excises duty on finished goods in closing stock as applicable. And the same has been included in the value of closing stock. 8. Cenvat The value of eligible CENVAT of excise & service tax is being reduced from the value of raw material/services and capital goods purchased. Consumption of raw material is arrived at accordingly. Outstanding CENVAT claims are shown as cenvat receivable, under the head current assets. 9. Foreign currency transactions Transaction in foreign exchange is accounted at the exchange rate prevailing on the date of transactions. The exchange difference arising out of their settlement are dealt with in the profit and loss account where it relates to

transactions other then acquisition of fixed assets and in case transaction relating to the acquisition of fixed assets with the cost of the respective fixed assets. 10. sales/turn over Sales/turnover includes sales value of goods but excludes other recoveries such as excise and sales tax.

11. Inter unit transaction a. During the year 2005, the company has operationalised its manufacturing facility at barotiwala hiachal Pradesh enjoying income-tax and excise duty exemption. B.The company has identified the said unit as an independent entity, as far as practicable to arrive at the segment result and also to comply with the legal requirements. . C.Inter duty transfer of assets have taken place at written down value as

appearing in the books of accounts at the terms mutually agreed D.Common expenditure has been allocated on the proportion of net sales effected from the respective units. e.Himachal Pradesh unit mainly engaged in manufacturing of goods and other activities related to marketing, sourcing of raw material, finance management are handled by the head office at Ahmedabad. 12. Retirement benefits

Companys contribution to provident fund is charged to profit &loss account. Contribution gratuity fund and provision for leave encasement are made on the basis of actuarial valuation and charged to profit &loss account. The company has made arrangement with the LIC of India for their entire liability towards employees retirement benefits. 13. DEPB license DEPB license purchased by the company is valued at cost. Utilization of DEPB license is charged to profit &loss A/c and balance at the period-end is shown under loans & advances. Discount in DEPB license is recognized as income. 14. Amortisation of miscellaneous expenditure Preliminaries expenses are being written off equally over a period of ten years. 15. Provision for taxation is made in accordance with the tax provision of the Indian income tax act, 1961 applicable to the relevant assessment year after considering various admissible reliefs. Deferred tax liabilities/assets is recognized subject to the consideration of prudence, on timing difference being the difference between taxable income and accounting income that originates in one period and are capable of reversal in one or more subsequent periods.

Bibliography:
Financial Management Financial Management Prasanna Chandra I.M. Pandey D.S. Rawat

Students Guide to Accounting Standards

TOOLS FOR COLLECTION OF DATA:

Company Brochures Annual Reports of the company Companys ERP System (BAAN) Additional Study: About the marketing management of the company Actual working under Companys ERP system BAAN