AMUL

A

PresentationOn

Analysis Of Working Capital Management&

Ratio AnalysisFor

Kaira District Cooperative Milk Producers Union Ltd.(AMUL)A

MU

L

A

MU

L

Presented by –Dave GirijaExam Seat No. 35M.B.A. Semester II

Anand Institute Of Management

AM

UL

A

MU

L

DAIRY INDUSTRYDAIRY INDUSTRY

OVERVIEW

• White revolution program

• Operation Flood

• NDDB

• GCMMFINDIA’S POSITION

• second largest milk producer

• average annual growth = 7%

• per day milk procurement = 20 million litres

• total 1,14,300 co-operative societies

AM

UL

A

MU

L

SWOT ANALYSISSWOT ANALYSIS

STRENGTHS

• Demand absolutely optimistic

• Flexibility of product mix

• Availability of raw material

WEAKNESS

• Perishability of product

• Problematic distribution

• Logistics of procurement

• Competition

OPPORTUNITIES

• Value addition

• Export opportunity

• Alternative use of Milk

THREATS

• Milk vendors

• Global competition

AM

UL

A

MU

L

• Kaira District Co-operative Milk Producer’s Union selected the brand name ‘AMUL’ for its product range in 1955.

• The AMUL was started with one society and now it is converted into a union with 1073 societies.

• At the beginning, AMUL collected only 250 litres of milk per day.

• Now, AMUL collects 12 lakhs of litres of milk every day.

HISTORY OF AMUL HISTORY OF AMUL

AM

UL

A

MU

L

AMUL… TODAY AMUL… TODAY

• Production: Peak Season = 18 lac litres

Slack Season = 6 lac litres

•AMUL products' mascot :

"AMUL baby" (a chubby butter girl usually dressed in polka dotted dress)

• Tag line “Utterly Butterly Delicious AMUL”

AM

UL

A

MU

L

PRODUCTION DEPT. PRODUCTION DEPT.

1. Mogar Plant Products Chocolates, Nutramul, AMUL Lite and AMUL Ganthia

2. Anand PlantProducts Milk, Buttermilk, Milk Powder, Butter, Ghee and

Flavored Milk

3. Kanjari Plant Product Cattle feed

4. Khatraj PlantProduct Cheese

5. Pune PlantProducts Milk & Curd

6. Calcutta PlantProducts Milk, flavoured milk & ice cream

AM

UL

A

MU

L

PRODUCT RANGE PRODUCT RANGE

BUTTER

MILK

GHEE

PIZZA CHEESE

DAHIGULAB JAMUN

ICE CREAM

NUTRAMUL

MILK SHAKE

BASUNDI

LASSI

AM

UL

A

MU

L

HUMAN RESOURCE DEPT. HUMAN RESOURCE DEPT.

• Recruitment

• Selection

• Performance Appraisal

• Training & Development

• Wages & Salaries

• Grievance Handling

– Patharna Committee

– Safety Committee

– Canteen Committee

• Promotion & Transfer

• Employment Welfare Activities

AM

UL

A

MU

L

FINANCE & A/C DEPT. FINANCE & A/C DEPT.

1. ACCOUNTS DIVISION

• prepare voucher, bills, cheques, etc.

2. ESTA DIVISION (Establishment of accounts division)

• prepare payroll of employees

• all the expenses related to salaries and wages, PF, gratuity, etc.

3. PURCHASE BILL DIVISION

• issues cheque or draft to party

4. MIS DIVISION

• handles data related accounts

• data base system

• accounting software system Tally 6.3.

AM

UL

A

MU

L

FINANCE & A/C DEPT. FINANCE & A/C DEPT.

ACCOUNTING POLICIES :

1. Method Of Accounting Accrual System

2. DepreciationWDV Method

3. InventoriesFIFO Method

4. Retirement, Bonus, PF, etc. BenefitsActs.

AM

UL

A

MU

L

MARKETING DEPT.MARKETING DEPT.

Utterly… Butterly…Delicious AMUL

1. Product

2. Price

3. Place

4. Promotion

AM

UL

A

MU

L

PURCHASE & STORES DEPTPURCHASE & STORES DEPT

• Purchase Department

• Cattle feed Purchase Department

• Stores Department

• Purchase Bill Section – ERP System

AM

UL

A

MU

L

QUALITY ASSURANCE DEPT.QUALITY ASSURANCE DEPT.

• milkotestor

• extensive research and development activities in biotechnology

• aimed at  developing formulations and technologies useful for improving the productivity of  milch animals

AM

UL

A

MU

L

OVERVIEW OF THE PROJECTOVERVIEW OF THE PROJECT

TITLE OF THE PROJECT

A project report on “Analysis of Working capital management & Ratio Analysis” of Kaira District Co-operative Milk Producers Union Ltd. (AMUL).

OBJECTIVES OF THE STUDY

• to study the working capital of the firm

• to know the financial condition of the organization

• to know the return of various investments

AM

UL

A

MU

L

OPERATING CYCLEOPERATING CYCLE

Particulars 03-04 04-05 05-06 06-07 07-08

A Raw material conversion period

3 days 5 days 5 days 6 days 6 days

B Work-in-progress conversion period

26 days 23 days 34 days 32 days 32 days

C Finished goods conversion period

39 days 121 days 118 days 78 days 192 days

D Debtors conversion period

36 days 50 days 37 days 28 days 30 days

GROSS OPERATING CYCLE

GOC = A+B+C+D 104 days 199 days 194 days 144 days 260 days

E Creditors conversion period

44 days 39 days 35 days 34 days 29 days

NET OPERATING CYCLE

NOC = A+B+C+D-E 60 days 160 days 159 days 110 days 178 days

AM

UL

A

MU

L

OPERATING CYCLE

199 194

60

160

110

231

104

144

260

159

0

50

100

150

200

250

300

2003-04 2004-05 2005-06 2006-07 2007-08

DA

YS GOC

NOC

INTERPRETATION

• Increase in capital w.i.p. conversion period

• Increase in finished goods conversion period

• Decrease in collection period (liberal credit policy)

• An increase in overall demand of dairy products in these 5 years period

AM

UL

A

MU

L

RISK RETURN TRADE OFFRISK RETURN TRADE OFF

YEAR LIQUIDITY PROFITABILITY

CA FA CA:FA NET PROFIT

NET SALES

PROFITABILITY

2003-04 16106.2 9588.26 1.68 252.46 54088.29 0.47

2004-05 18596.49 6107.85 3.05 311.23 59459.07 0.52

2005-06 18990.94 4968.66 3.82 323.74 70206.23 0.46

2006-07 19874.21 5371.69 3.70 411.5 81631.69 0.50

2007-08 28995.9 6122.97 4.74 451.51 107187.29 0.42

INTERPRETATION

• High CA/FA ratio indicate higher liquidity

• Minor fluctuations in profitability

• Conservative policy

AM

UL

A

MU

L

WORKING CAPITAL REQUIREMENTWORKING CAPITAL REQUIREMENT

Particulars 03-04 04-05 05-06 06-07 07-08

A CURRENT ASSETS

1. Stock 4588.81 7662.36 9671.26 9077.90 15737.88

2. Debtors 5366.06 8228.99 7130.26 6388.23 8863.31

3. Prepaid expenses & advance 443.29 768.89 793.72 679.97 1083.49

4. Cash and bank balance 5708.04 2219.70 1395.69 3728.11 3311.22

Total (A) 16106.2 18596.49 18990.94 19874.21 28995.9

B CURRENT LIABILITIES

1. Creditors 5800.8 4543.47 7588.45 9975.10 11980.68

2. Outstanding expenses 747.58 768.89 955.75 1076.90 1423.59

3. Deposits 230.08 163.81 347.39 380.71 168.24

Total (B) 6778.4 7933.20 8891.59 11432.71 13572.51

C NET WORKING CAPITAL (A-B) 9327.74 10663.29 10109.34 8441.50 15423.39

DADD CONTINGENCY MARGIN

(PROVISION)7.54 55.36 69.20 673.83 319.90

ETOTAL WORKING CAPITAL

REQUIRED9335.28 10718.65 10178.54 9115.33 15743.29

AM

UL

A

MU

L

FINANCIAL RATIO SUMMARYFINANCIAL RATIO SUMMARYPARTICULARS 2003-04 2004-05 2005-06 2006-07 2007-08

LIQUIDITY RATIOCURRENT RATIO 2.38 2.34 2.14 1.79 2.14

QUICK RATIO 1.7 1.37 1.05 0.95 0.98

CASH RATIO 0.842 0.280 0.176 0.326 0.244

NWC RATIO 0.976 1.078 1.254 1.493 1.162

LEVERAGE RATIO

DEBT EQUITY RATIO 6.87 6.09 4.03 1.86 4.95

CAPITAL EQUITY RATIO 7.87 7.09 5.03 2.86 5.95

ACTIVITY RATIO

INVENTORY TURNOVER 5.47 5.71 5.38 6.00 6.10

DEBTORS TURNOVER RATIO 10.08 7.23 9.58 12.78 12.09

NA TURNOVER RATIO 5.64 9.73 14.13 15.20 17.51

CA TURNOVER RATIO 3.36 3.20 3.7 4.11 3.7

TA TURNOVER RATIO 2.05 2.35 2.85 3.17 2.99

WC TURNOVER RATIO 5.8 5.58 6.95 9.67 6.95

PROFITABILITY RATIO

GROSS PROFIT RATIO 39.16 41.87 38.41 37.25 35.46

NET PROFIT MARGIN 0.47 0.52 0.46 0.50 0.42

NOPAT MARGIN 2.5 1.95 1.63 1.39 1.2

ROE 7.89 9.01 8.62 9.75 9.83

ROTA 5.13 4.59 4.65 4.39 3.59

RONA 14.1 18.9 22.4 20.8 20.7

AM

UL

A

MU

L

EVALUATION OF AMUL’S EVALUATION OF AMUL’S

EARNING POWEREARNING POWERParticulars Formulae 2003-04 2004-05 2005-06 2006-07 2007-08

Net Asset turnover ratio

SalesNA 5.64 9.73 14.13 15.20 17.51

GP Margin GP * 100Sales 39.16 41.87 38.41 37.25 35.46

Operating Leverage EBITGP 0.0638 0.047 0.0413 0.037 0.033

NOPAT Margin EBITSales 2.5 1.95 1.63 1.39 1.2

RONA EBIT * 100 NA 14.1 18.9 22.4 20.8 20.7

DFL PAT * 100

EBIT

0.19 0.27 0.29 0.37 0.36

Financial Leverage

NA NW 3 1.77 1.32 1.27 1.33

ROE PAT * 100 NW 7.89 9.01 8.62 9.75 9.83

Retention REPAT 0.76 0.8 0.93 1.13 0.82

Equity Growth RE * 100NW 5.97 7.26 8.04 11.07 8.05

AM

UL

A

MU

L

INTERPRETATION

• high return on their investments

• minor variation in return on equity

AM

UL

A

MU

L

FINDINGS FINDINGS

From working capital and operating cycle the following conclusions can be drawn-

• working capital requirement of AMUL is financed through raising the cash credit loans and the short term loans

• conservative policy to finance its current assets

• a large operating cycle due to high w.i.p. conversion period, high finished goods conversion period & lower payable deferral period.

AM

UL

A

MU

L

From ratio analysis the following conclusions can be drawn-

• Current ratio is ideal (2:1). So AMUL is able to meet its short term obligations

• Quick ratio is near to ideal (1:1); which indicates sound position of liquidity

• AMUL has sufficient net working capital in last year so it indicates good position in order to meet company’s needs

• Debt burden has been reducing since 2003 to 2006 and it can be noticed that lower leverage ratio in 2006-07 has been due to loan repayment. Again in 2007-08, AMUL has taken a loan so the ratio has risen

• The speed of converting inventory to sales is increasing considerably

• Profitability ratios do not show much variation

• GP and NP Margin show minor fluctuations since 2003-04 to 2007-08

FINDINGS FINDINGS

AM

UL

A

MU

L

BIBLIOGRAPHY BIBLIOGRAPHY

• I.M.Pandey, FINANCIAL MANAGEMENT,Vikas Publishing House Pvt. Ltd., 8th Ed

• Prasanna Chandra, FINANCIAL MANAGEMENT, Tata McGraw Hill Publishing Company Ltd.

• 59th, 60th, 61st and 62nd Annual reports of AMUL

• www.amul.com

• www.amuldairy.org

• www.nddb.org

• ‘Amul, now a billion dollar Co-operative enterprise’, Economic Times, June 23, 2008

http://www.ibef.org/artdisplay.aspx?cat_id=60&art_id=19457&refer=n64

• ‘Amul, ready to take over Pepsi, Coke in sports drink segment, Lalitha Srinivasan, Financial Express, Mumbai, Jan 10th.

http://www.financialexpress.com/old/fe_archive_full_story.php?content_id=114144

• http://www.indairyasso.org/world%20dairy%20report.htm

• http://www.mdcdatum.org.uk/MilkSupply/WorldMilkProduction.html

• http://www.indiadairy.com/ind_swot.html

AM

UL

A

MU

L