Submitted in Partial fulfillment for the award of the degree of Masters of Business Administration, Punjab Technical University, Jalandhar (2008-10) SUBMITTED TO: SUBMITTED BY: AMITA RANI Name: Swati Sabherwal MBA (2008-10) RAYAT-BAHRA INSTITUTE OF MANAGEMENT Campus: Sahauran, Near Kharar, Distt. Mohali (Pb.)
101
Embed
customer perception towards reliance communication.........................................................
Suitable for mba finace students.................................................
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Submitted in Partial fulfillment for the award of the degree of Masters of Business Administration, Punjab Technical University, Jalandhar (2008-10)
SUBMITTED TO: SUBMITTED BY: AMITA RANI Name: Swati Sabherwal MBA (2008-10)
RAYAT-BAHRA INSTITUTE OF MANAGEMENT Campus: Sahauran, Near Kharar, Distt. Mohali (Pb.)
ACKNOWLEDGMENT
“Knowledge is an experience gained in life, it is the choicest possession, which should not be
shelved but should be happily shared with others”.
No work in this world can be completed successfully if guidance is not provided in the right
direction. In this regard, I express my gratitude to my esteemed mentor, Mrs. AMITA RANI for
her valuable critiques, assistance and encouragement, which enabled me to carry on the project
successfully. I thank her for giving me a wonderful opportunity to work on this project. Her
time-to-time guidance and incessant support helped me to broaden my outlook on the project I
am highly obliged for their support throughout the preparation of this project. I would also like to
thank Mr. Deepak Puri for providing company details like Annual Statements and some more
valuable information and guidance. Last but not the least I would also like to thank the
respondents who spared their valuable time to fill the questionnaire.
I would like to thank all for giving their valuable inputs and time.
DECLARATION
This is to state that the Project titled “WORKING CAPITAL MANAGEMENT OF RIL &
CUSTOMER PREFERENCE TOWARDS RELIANCE COMMUNICATIONS’’ is based
on the original work carried out by me and is being submitted towards partial fulfillment of the
requirement for the MBA program of the Punjab Technical University, Jalandhar. This has not
been submitted for the award of any other degree or diploma.
(SWATI SABHERWAL)
EXECUTIVE SUMMARY
It gives me an immense pleasure in presenting this final project report on “WORKING CAPITAL
MANAGEMENT OF RIL & CUSTOMER PREFERENCE TOWARDS RELIANCE
COMMUNICATIONS” for the partial fulfillment of the degree of Masters of Business
Administration (2008-10). This report gives the reader an overview of the concept of working
capital in the simplest language as far as possible. It also gives information on the working
capital management of Reliance Industries Limited and customer preference towards Reliance
Communications.
The result is purely based on a complete survey carried out for the project. Both Primary Data
i.e. by exploratory research, information from residents of sector 8 and 9, Chandigarh and people
coming to recharge dealers in sector 8 and Secondary Data i.e. by annual reports, newspapers,
magazines and scheme brochures. To make the report simpler and easier to understand graphs,
pie- charts, tables and Chi-Square Test are used wherever possible and interpretation of the same
has been given.
Special care has been taken to ensure that this report is free of any printing mistakes but I
apologize if any printing error creeps in. At the end, I hope this report fulfills its purpose by
providing an in-depth knowledge of mutual funds.
CHAPTER NUMBER NAME OF THE CHAPTER
CHAPTER 1 INTRODUCTION
CHAPTER 2 REVIEW OF THE LITERATURE
CHAPTER 3 RESEARCH METHODOLOGY
CHAPTER 4 ANALYSIS AND INTERPRETATION
CHAPTER 5 FINDINGS
CHAPTER 6 SUGGESTIONS
CHAPTER 7 CONCLUSION
CHAPTER 8 REFERENCES
CHAPTER 9 ANNEXURES
WHAT IS WORKING CAPITAL?
Fixed Capital is that part of which is required for the purchase of fixed assets like Land
and Building , Plant and machinery etc. The fixed capital provides the basic means for the
business to earn its return... But by themselves, these fixed assets would not produce anything. For
instance, to operate the machines, we require men, materials, power, tools, accessories etc. These
factors involve expenses. In addition, we have to maintain certain current assets like stocks, stores,
equipments, etc. All these require enough resources to keep the wheels of the business in motion.
Therefore, in addition to the amount of fixed capital every business – whether new or growing
requires Working Capital. Working Capital is that portion of a business concern’s total capital,
which is employed in term of operations. Without working capital, fixed capital would be idle and
ineffectual.
A number of definitions have been formulated: perhaps the most widely acceptable would be:
“WORKING CAPITAL represents the excess of CURRENT ASSETS over CURRENT
LIABILITIES”.
The same may be designated in the following equation:
WORKING CAPITAL= CURRENT ASSETS – CURRENT LIABILITIES:
Funds thus invested in current assets keep revolving fast and are being constantly converted in to
cash and this cash flows out again in exchange for other current assets. Thus it is known as
revolving or circulating capital or short term capital.
WORKING CAPITAL MANAGEMENT
Working Capital Management refers to management of current assets and current liabilities. The
major thrust of course is on the management of current assets. This is understandable because
current liabilities arise in the context of current assets. Working Capital Management is a
significant fact of financial management. Its importance stems from two reasons:-
Investment in current assets represents a substantial portion of total investment.
Investment in current assets and the level of current liabilities have to be geared quickly to
change in sales. To be sure, fixed asset investment and long term financing are responsive
to variation in sales. However, this relationship is not as close and direct as it is in the
case of working capital components.
The importance of working capital management is effected in the fact that financial managers
spend a great deal of time in managing current assets and current liabilities. Arranging short term
financing, negotiating favorable credit terms, controlling the movement of cash, administering the
accounts receivable, and monitoring the inventories consume a great deal of time of financial
managers.
The problem of working capital management is one of the “best” utilization of a scarce resource.
Thus the job of efficient working capital management is a formidable one, since it depends upon
several variables such as character of the business, the lengths of the merchandising cycle, rapidity
of turnover, scale of operations, volume and terms of purchase & sales and seasonal and other
variations.
TYPES OF WORKING CAPITAL
Working Capital may be classified in to two ways:
a) On the basis of concept.
b) On the basis of time.
I ) ON THE BASIS OF BALANCE SHEET CONCEPT
Gross working capital is the total of all current assets.
Net working capital is the difference between current assets and current liabilities.
Though the later concept of working capital is commonly used it is an accounting concept
with little sense to say that a firm manages its net working capital. What a firm really does is
to take decisions with respect to various current assets and current liabilities. The constituents
of current assets & current liabilities are shown in table A.
TABLE A:
Constituents of Current Assets and Current Liabilities
PART –A: CURRENT ASSETS
Inventories – Raw materials and components, Work in progress,
Finished goods, other.
Trade Debtors.
Loans and Advances.
Investments.
Cash and Bank balance.
PART –B: CURRENT LIABILITIES
Sundry Creditors.
Trade Advances.
Borrowings.
Provisions.
II) ON THE BASIS OF TIME:
Permanent or Fixed Working Capital:
Permanent or Fixed Working capital is the minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. There is always a
minimum level of current assets that is continuously required by the enterprise to carry out its
normal business operation. For example every firm has to maintain minimum level of raw
materials, work in process, furnished goods and cash balance. The minimum level of current
assets is called permanent or fixed working capital as their part of working capital is permanently
blocked in current assets. With the growth of business there is an increase in current assets.
Temporary or Variable Working Capital:
Temporary or Variable Working Capital is the amount of working capital that is required to meet
the seasonal demands and some special exigencies. Variable working capital can be further
classified as:-
a) Seasonal Working Capital.
b) Special Working Capital.
Most of the enterprises have to provide additional working capital to meet the special and seasonal
needs. The capital required to meet the seasonal needs of enterprise is called Seasonal working
capital. Special working capital is the part of working capital which is required to meet the
special exigencies such as part of working capital which is required to meet special exigencies
such as launching of extensive marketing campaigns for conducting research etc. is called Special
working capital.
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS
With the type of business and the ambition of proprietors the amount is bound to vary. For
instance, a small business would need lesser amount of working capital than a larger business
engaged in the same line. As the business expands the amount needed would grow. Similarly,
business with seasonal demand would require larger amount of working capital. Therefore, an
estimate of requirements of working capital will differ from concern and from industry to
industry. Further, cyclical changes, periods of prosperity and depression cause wide variations in
the demand for working capital. Other unexpected happenings are likely to create unusual
demands for working capital.
There is no concrete formula to decide the amount of workings capital required by a business.
There are also business in which fixed is small in relation to working capital.
The Major determinants of the proportion of fixed to working capital are as follows:
Nature of Business :
Business units selling service (like public utilities) instead of a commodity, have little need for
working capital, as they have little demand for large inventories. Generally they operate on cash
and prepaid basis. But trading concerns (merchandising companies) make a greater use of working
capital, since inventory represents a major item of investment. A relatively small proportion will
consist of working capital in case of manufacturing concerns. Larger working capital will require
in labor intensive industries than in highly mechanized industries. In chemical or engineering
industries, working capital would be relatively larger.
Size of Business :
The working capital requirements of a concern are directly influenced by the size of the business
which may be measured in terms of scale of operations. Greater the size of a business unit
generally larger will be the requirement of working capital. However, in some cases even a
smaller concern may need more working capital due to high overhead charges
Insufficient use of available resources and other economic disadvantages of small size.
Production Policy :
In certain industries the demand is subject to wide fluctuation due to seasonal variation. The
requirement of working capital, in such cases depends upon the production policy. The production
could be kept either steady by accumulating inventories during slack period with a view to meet
high demand during the peak season or the production could be curtailed during the slack season
and increased during peak season. If the policy is to keep production steady by accumulation
inventories it will require higher working capital. A company should have some production policy
i.e. to maintain the production is a considerable range in order to meet the changing demand. A
company like RIL whose productive capacities can be utilized for manufacturing varied products
can have the advantages of diversified activities and solve their working capital problem.
Manufacturing Process/ Length of the production cycle :
In manufacturing business, the requirements of working capital increase in direct proportion to
length of manufacturing process, longer the process period of manufacture, longer is the amount
of working capital required. The longer the manufacturing time, the raw materials and other
supplies have to be carried for a longer period in the process with progressive increment of labor
and service costs before the finished product is finally obtained. Therefore, if there is alternative
process of production, the process with the shortest production period should be chosen.
Working Capital Cycle :
In manufacturing concern, working capital cycle starts with the purchase of raw materials and
ends with realization of cash from the sale of finished goods. The cycle involves the purchase of
raw materials and ends with the realization of cash from the sale of finished products. The cycle
involves purchase of raw materials and stores, its conversion in to stock of finished goods through
work in progress with progressive increment of labor and service cost, conversion of finished stick
in to sales and receivables and ultimately realization of cash and this cycle continuous again from
cash to purchase of raw materials and so on.
Market Condition :
The degree of competition prevailing in the market places has an important bearing on working
capital needs. When competition keen, a larger inventory of finished goods is required to promptly
serve customer who may not be inclined to wait because other manufacturers are ready to meet
their needs, further, generous credit terms may have to be offered to attract customers in a highly
competitive market. Thus, working capital needs tends to be high because of greater investment in
finished goods inventory and accounts receivable.
If the market is strong and completion weeks a firm can manage with a smaller inventory of
finished goods because customers can be served with some delay. Further in such situation the
firm can insist on cash payment and avoid lock – up of funds in accounts receivable, it can even
ask for advance payment, partial or total.
Credit Policy :
The credit policy is concerned in its dealings with debtors and creditors influence considerably the
requirements of the working capital. A concern that purchases its requirements on credit and sells
its products/services on cash requires lesser amount of working capital. On the other hand a
concern buying its requirements for cash and allowing credit to its customers, shall need larger
amount of funds are bound to be tied up in debtors or bills receivables.
Business Cycle :
Business Cycle refers to alternate expansion and contraction in general business activities. In a
period of born i.e. when the business is prosperous there is a need for larger amount of working
capital due to increase in sales, rise in prices, optimistic expansion of business etc. On the country
at the time of depression i.e. when there is a down swing of the cycle, business contracts, sales
decline, difficulties are faced in collections from debtors and firms may have a large amount of
working capital lying ideal
Rate of Growth Of business :
The working capital requirements of a concern increase with the growth and expansion of its
business activities. Although it is difficult to determine the relation between growth in the volume
of the business and in the growth of the working capital of the business, yet it may be concluded
that for normal rate of expansion in the volume of the business, we may have retained profits to
provide for more working capital but in the first growing concerns, we shall require larger amount
of capital.
Earning Capacity And Dividend policy :
Some firms have more earning capacity than others due to the quality of their products, monopoly
conditions etc. Such firms with high earning capacity may generate cash profits from operations
and contribute to their capital. The dividend policy of a concern also influences the requirements
of the working capital. A firm that maintains steady high rate of cash dividend irrespective of its
generation of profits needs more capital than the firm retains larger part of its profits and does not
pay high rate of cash dividend.
Price Level Changes :
Changes in the prices level also effects the working capital requirements. Generally the rising
prices will require the firm to maintain larger amount of working capital as more funds will
require maintaining the same current assets. The effect of rising prices may be different for
different firms. Some firms may be affected much while some other may not be affected at all by
the rise in prices.
Other Factors :
Certain other factors such as operating efficiency, management ability, irregularities a supply,
import policy, asset structure, importance of labor, banking facilities etc. also influences the
requirement of working capital.
FINANCING OF WORKING CAPITAL
The working capital requirements of a business concern can be classified as:-
a) Permanent or Fixed working capital requirements.
b) Temporary or variable capital requirements.
In concern, a part of working capital investments are as permanent investment in fixed assets. This
is so because there always a minimum level of current assets which are continuously required by
the enterprise to carry out its day-to-day business operations and this minimum cannot be
expected to reduce at any time. This minimum level of current assets gives rise to permanent or
fixed working capital as this part of working capital is permanently blocked in current assets.
Similarly some amount of working capital may be required to meet the seasonal demands and
some special exigencies such as rise in prices, strikes etc. this proportion of working capital gives
rise to temporary or variable working capital which cannot be permanently employed gainfully in
business.
The fixed proportion of working capital should be generally financed from the fixed capital
sources while the temporary or variable working capital requirements of a concern may be met
from the short term sources of capital. The various sources for the financing of working capital
are:-
PERMANENT OR FIXED SOURCES OF WORKING CAPITAL
1) Shares
2) Debentures
3) Public Deposits
4) Ploughing back of profits
5) Loans from financial institutions
TEMPORARY OR VARIABLE SOURSES OF WORKING CAPITAL
1) Commercial banks
2) Indigenous bankers
3) Trade creditors
4) Installment credit
5) Advances
6) Accounts receivable- credit/factoring
7) Accrued expenses
8) Commercial paper
Commercial banks are the most important sources of short term capital. The major portions of
working capital loans are provided by commercial banks. They provide of wide variety of loans
tailored to meet the specific requirements of a concern. 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
In addition to the above mentioned forms of direct finance, commercial banks help their
customers in obtaining credit form their suppliers through the letter of credit arrangements.
It is always a test to the prudence of a financial manager to obtain the correct amount of working
capital at the right time, at a reasonable cost and at the most favorable terms.
• MANAGEMENT OF INVENTORY
• MANAGEMENT OF CASH
• MANAGEMENT OF RECEIVABLES
• MANAGEMENT OF INVENTORY
Inventories constitute the most significant part of current assets of a large majority of companies
in India. On an average, inventories are approximately 60 % of current assets in public limited
companies in India.
Because of the large size of inventories maintained by firms maintained by firms, a considerable
amount of funds is required to be committed to them. It is, therefore very necessary to manage
inventories efficiently and effectively in order to avoid unnecessary investments. A firm
neglecting a firm the management of inventories will be jeopardizing its long run profitability
and may fail ultimately.
The purpose of inventory management is to ensure availability of materials in sufficient quantity
as and when required and also to minimize investment in inventories at considerable degrees,
without any adverse effect on production and sales, by using simple inventory planning and
control techniques.
• MANAGEMENT OF CASH
Cash is the important current asset for the operation of the business. Cash is the basic input needed
to keep the business running in the continuous basis, it is also the ultimate output expected to be
realized by selling or product manufactured by the firm.
The firm should keep sufficient cash neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain ideal without contributing
anything towards the firm’s profitability. Thus a major function of the financial manager is to
maintain a sound cash position.
Cash is the money, which a firm can disburse immediately without any restriction. The term cash
includes coins, currency and cheques held by the firm and balances in its bank account.
Sometimes near cash items such as marketing securities or bank term deposits are also included in
cash. Generally when a firm has excess cash, it invests it is marketable securities. This kind of
investment contributes some profit to the firm.
NEEDTO HOLD CASH
The firm’s need to hold cash may be attributed to the following three motives:-
The Transaction Motive: The transaction motive requires a firm to hold cash to conduct its
business in the ordinary course. The firm needs cash primarily to make payments for purchases,
wages and salaries, other operating expenses, taxes, dividends, etc.
The Precautionary Motive: A firm is required to keep cash for meeting various contingencies.
Though cash inflows and outflows are anticipated but there may be variations in these estimates.
For example a debtor who pays after 7 days may inform of his inability to pay, on the other hand a
supplier who used to give credit for 15 days may not have the stock to supply or he may not be in
opposition to give credit at present.
Speculative Motive: - The speculative motive relates to the holding of cash for investing in profit
making opportunities as and when they arise.
The opportunities to make profit changes. The firm will hold cash, when it is expected that interest
rates will rise and security price will fall.
• MANAGEMENT OF RECEIVABLE
A sound managerial control requires proper management of liquid assets and inventory. These
assets are a part of working capital of the business. An efficient use of financial resources is
necessary to avoid financial distress. Receivables result from credit sales. A concern is required to
allow credit sales in order to expand its sales volume. It is not always possible to sell goods on
cash basis only. Sometimes other concern in that line might have established a practice of selling
goods on credit basis. Under these circumstances, it is not possible to avoid credit sales without
adversely affecting sales. The increase in sales is also essential to increases profitability. After a
certain level of sales the increase in sales will not proportionately increase production costs. The
increase in sales will bring in more profits. Thus, receivables constitute a significant portion of
current assets of a firm. But for investment in receivables, a firm has to insure certain costs.
Further, there is a risk of bad debts also. It is therefore, very necessary to have a proper control
and management of receivables.
Operating cycle
Operating cycle refers to the time duration required to convert sales ,after the conversion of
recourses into inventories, into cash .the operating cycle of a manufacturing company like RIL
includes:
1.) Acquisition of resources such as raw materials, labor, power and fuel etc.
2.) Manufacture of the product which includes conversion of materials into work-in-progress into
finished goods.
3.) Sale of the product either for cash or on credit. Credit sales create account receivables for
collection.
COMPONENTS OF WORKING CAPITAL ARE CALCULATED AS FOLLOWS
1) Raw Materials Storage Period=Avarage stock of raw materials/Avarage cost of raw material
consumption per day.
2.) W-I-P Holding period=Average w-i-p in inventory/Average cost of production per day.
3.) Stores and spares conversion period= Average stock of Stores and spares/ Avarage
consumption per day.
4.) Finished goods conversion period= Average stock of finished goods/Avarage cost of of
goods sold per day.
5.) Debtors collection period=Avarage book debts/Avarage credit sales per day.
6.) Credit period availed=Avarage trade creditors/Average credit purchase per day.
SIGNIFICANCE OF WORKING CAPITAL
ABOUT TELECOM INDUSTRY
World telecom industry is an uprising industry, proceeding towards a goal of achieving two
third of the world's telecom connections. Over the past few years information and
communications technology has changed in a dramatic manner and as a result of that world
telecom industry is going to be a booming industry. Substantial economic growth and mounting
population enable the rapid growth of this industry. The world telecommunications market is
expected to rise at an 11 percent compound annual growth rate at the end of year 2010. The
leading telecom companies like AT&T, Vodafone, Verizon, SBC Communications, Bell South,
Qwest Communications are trying to take the advantage of this growth. These companies are
working on telecommunication fields like broadband technologies, EDGE(Enhanced Data rates
for Global Evolution) technologies, LAN-WAN inter networking, optical networking, voice over
Internet protocol, wireless data service etc.
Economical aspect of telecommunication industry: World telecom industry is taking a crucial
part of world economy. The total revenue earned from this industry is 3 percent of the gross
world products and is aiming at attaining more revenues. One statistical report reveals that
approximately 16.9% of the world population has access to the Internet.
Present market scenario of world telecom industry: Over the last couple of years, world
telecommunication industry has been consolidating by allowing private organizations the
opportunities to run their businesses with this industry. The Government monopolies are now
being privatized and consequently competition is developing. Among all, the domestic and small
business markets are the hardest.
INDIAN OVERVIEW
Today the Indian telecommunications network with over 375 Million subscribers is second
largest network in the world after China. India is also the fastest growing telecom market in the
world with an addition of 9- 10 million monthly subscribers. The teledensity of the Country has
increased from 18% in 2006 to 33% in December 2008, showing a stupendous annual growth of
about 50%, one of the highest in any sector of the Indian Economy. The Department of
Telecommunications has been able to provide state of the art world-class infrastructure at
globally competitive tariffs and reduce the digital divide by extending connectivity to the
unconnected areas. India has emerged as a major base for the telecom industry worldwide. Thus
Indian telecom sector has come a long way in achieving its dream of providing affordable and
effective communication facilities to Indian citizens. As a result common man today has access
to this most needed facility. The reform measures coupled with the proactive policies of the
Department of Telecommunications have resulted in an unprecedented growth of the telecom
sector.
The thrust areas presently are:
1. Building a modern and efficient infrastructure ensuring greater competitive environment.
2. With equal opportunities and level playing field for all stakeholders.
3. Strengthening research and development for manufacturing, value added services.
4. Efficient and transparent spectrum management
5. To accelerate broadband penetration
6. Universal service to all uncovered areas including rural areas.
7. Enabling Indian telecom companies to become global players.
Recent things to watch in Indian telecom sector are:
1. 3G and BWA auctions
2. MVNO
3. Mobile Number Portability
4. New Policy for Value Added Services
5. Market dynamics once the recently licensed new telecom operators start rolling out
6. Services.
7. Increased thrust on telecom equipment manufacturing and exports.
8. Reduction in Mobile Termination Charges as the cost per line has substantially reduced
9. Due to technological advancement and increase in traffic.
India's telecom sector has shown massive upsurge in the recent years in all respects of industrial
growth. From the status of state monopoly with very limited growth, it has grown in to the level
of an industry. Telephone, whether fixed landline or mobile, is an essential necessity for the
people of India. This changing phase was possible with the economic development that followed
the process of structuring the economy in the capitalistic pattern. Removal of restrictions on
foreign capital investment and industrial de-licensing resulted in fast growth of this sector. At
present the country's telecom industry has achieved a growth rate of 14 per cent. Till 2000,
though cellular phone companies were present, fixed landlines were popular in most parts of the
country, with government of India setting up the Telecom Regulatory Authority of India, and
measures to allow new players country, the featured products in the segment came in to
prominence. Today the industry offers services such as fixed landlines, WLL, GSM mobiles,
CDMA and IP services to customers. Increasing competition among players allowed the prices
drastically down by making the mobile facility accessible to the urban middle class population,
and to a great extend in the rural areas. Even for small shopkeepers and factory workers a phone
connection is not an unreachable luxury. Major players in the sector are BSNL, MTNL, Bharti
Teleservices, Hutchison Essar, BPL, Tata, Idea, etc. With the growth of telecom services,
telecom equipment and accessories manufacturing has also grown in a big way.
Indian Telecom sector, like any other industrial sector in the country, has gone through many
phases of growth and diversification. Starting from telegraphic and telephonic systems in the
19th century, the field of telephonic communication has now expanded to make use of advanced
technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by
day, both the Public Players and the Private Players are putting in their resources and efforts to
improve the telecommunication technology so as to give the maximum to their customers.
ABOUT RELIANCE INDUSTRIES LIMITED(Enhancing Lives. Energizing India. The Reliance Way)
HISTORY OF IPCL
2002 ONWARDS-RELIANCE ACQISITION
The government of India handled over management control to Reliance group on June 4, 2002,
since then the company is being managed by reliance. The new management team has re-
endorsed the company’s mission to create value for all stakeholders. All over efforts are being
made to enhance productivity and control cost for superior value addition.
The physical and cultural integration began from the word go, both IPCL and Reliance started
adopting “Best Practices” from each other. This led to optimal utilization of available resources
for enhancing productivity. The profit for the first financial year(2002-03) under the reliance
management stood at INR 2.04 billion, 90% jump over the previous year’s profit of INR 1.07
billion.
Commenting on the results for 2002-2003, Mr. Mukesh Ambani, Chairman, said “we are
delighted with the complete turnaround in IPCL’s performance in the very first year of
acquisition by reliance. The successful absorption of Reliance’s best practice by IPCL in all
areas of operations, and positive impact of measures introduced for cost reduction and
productivity and efficiency gains. We have great confidence in the capabilities of IPCL and its
people, and are confident of further improvement in the company’s performance in the future”.
MISSION & VISION
“Continuously innovate to remain Partners in human progress by Harnessing science &
technology in the petrochemicals domain”
OUR MISSION
“Be a globally preferred Business associate with responsible Concern for ecology, society, And
stakeholder’s value”.
VALUES & QUALITY POLICY
OUR VALUES
“Integrity, Respect for People, Unity of Purpose, Outside-in Focus, Agility and Innovation”.
QUALITY POLICY
“Bare committed to meet customers’ requirements through continual improvement Of our
quality management systems. We shall sustain organizational excellence through visionary
Total Assets : Rs. 2,45,706 crore ($ 48,444 million)
SIGNIFICANT CONTRIBUTION TO INDIA’S ECONOMIC GROWTH
10.4 % of India’s total exports.
2.9 % of the Government of India’s indirect tax exports.
6.1 % of the total market capitalization in India.
Weightage of 13.6 % in the BSE Sensex.
Weightage of 11.1 % in the S&P CNX Nifty Index.
COMPANY LOGOS
The first logo, which consisted of a tetrahedron - representing the
molecular structure of the simplest organic chemical, methane - in a circle.
This decision of the government, “Every thing under one roof” inspired
the second logo of IPCL. IPCL took up the challenge of setting up the entire integrated complex
at Vadodara.
IPCL, as a corporate entity, is and what it shall strive to be. This symbol, or logo, reflects what IPCL is a single matrix of the many; a diversity of activities and products, emerging from one sourceand branching out in different directions, yet retaining its unity and identity. The lines flow upwards and outwards from a common base into infinity,
reaching for unending growth, universal goodwill, general prosperity and excellence in everything. The green colour used in the design reinforces the theme - aspiration and growth, rooted in the earth and in harmony with the other elements - water, light, air and space
The government of India handled over management control to Reliance group on June 4, 2002, since then the company is being managed by reliance.
RIL MILESTONE
YEAR EVENTS1969 IPCL was incorporated under company act.1970 Construction of our first Petrochemicals complex commenced at Vadodara, Gujarat.1973 Commenced commercial operation at Vadodara.1992 Initial public offering and listing on the Vadodara stock exchange1992 Second Petrochemical Complex commenced at Nagothane, Maharashtra 1996 Third Petrochemical Complex commenced at Gandhar 1999 Gandhar complex commissioned.2000 Completion of the second phase of the Gandhar complex2002 Reliance took over IPCL.2004 Amendment agreement between the government and the strategic partner, Reliance
petroleum limited, a Reliance group company.2005 Government of India withdrew its nominee directors from the board of directors of
India petrochemicals co. ltd.2006 Amalgamation of six polyester companies i.e. Apollo fibres ltd, Central India
ploysters ltd, India polyfibres ltd, Orissa polyfibres ltd, Recron synthetics ltd and
Silvassa industries Pvt ltd with IPCL.2007 RIL complete a landmark acquisition of IPCL.2008 RIL signed MOU with GAIL(INDIA) Ltd. to explore opportunities of setting of
petrochemical plants.2009 RPL merged with RIL Ltd : value creation through scale & synergies.
GROWTH THROUGH CHALLENGES
Life at Reliance is challenging, fulfilling and exciting! Reliance offers access to world-class
resources for personal and professional growth. At Reliance, you'll have the chance to take on
challenging responsibilities, working with top-notch, world-class professionals from around the
globe. You will be part of a culture of excellence. People are central to Reliance's growth
strategy. A large in-house pool of intellectual capital is the driving force behind Reliance's rapid
growth, and is one of its competitive advantages. Reliance is a young company, with an average
age of 39 years. Talent is drawn from diverse academic and professional backgrounds.
World-class exposure, growth opportunities and competitive compensation packages offered by
Reliance enables it to attract and retain excellent talent.
Reliance targets the world market for talent, provides global perspectives and has a large number
of expatriates on its rolls. Reliance endeavours to create a workplace where every person can
reach his or her full potential.
Growth is care for good health
Reliance's occupational health centres carry out pre-employment and periodic medical checkups
as well as other routine preventive services. Specialised tests like biological monitoring, health
risk assessment studies and audits for exposure to various materials are also performed. Health
education and awareness form an integral part of the health care programme at Reliance.
Growth is care for safety
We believe that the safety of each employee is the responsibility of the individual as well as of
the whole community of employees.
Growth is care for the environment
Reliance believes that a clean environment in and around the workplace fosters health and
prosperity for the individual, the group and the larger community to which they belong.
Environmental protection is an integral part of the planning, design, construction, operation and
maintenance of all our projects.
Growth is betting on our people
Reliance builds with care a workplace that proactively fosters professional as well as personal
growth. There is freedom to explore and learn; and there are opportunities that inspire initiative
and intrinsic motivation. We believe that people must dream to achieve, that these dreams will
drive the company's excellence in all its businesses. Reliance thinks, behaves, lives and thrives
with a global mindset, encouraging every employee to reach his / her full potential by availing
opportunities that arise across the group.
Growth is thinking beyond business
As corporate citizens, we invest in social infrastructure, believing strongly that our business
strength fuels our social contributions. To this end, Reliance encourages, funds and develops
numerous education, health, human capital and infrastructure initiatives. These initiatives are
undertaken through partnerships with non-governmental organizations, corporate and trusts.
For those who study innovative organizations Reliance Industries will be a shining example of
how innovation is practised in almost everything that they do. Here are few things that set them
apart:
• "Impossible is an inspiring word" - Nothing turns on the leadership at Reliance
Industries than this magical word. Again to quote the Jamnagar example, it was
considered impossible to turn a barren land into a greenbelt. Today mangoes grown in
Jamnagar are sold in Harrods London.
• "Hands on thinking, hands off execution." - It is characteristic of Reliance leadership.
They think everything through and meticulous planning is their hall mark. When it comes
to execution empowerment delegation down to the last employee in the chain is clearly
demonstrated.
• "First time it is learning. Second time it is a mistake." - Mistakes are never frowned
upon; instead they are treated as a learning opportunity. It is one such mistake converted
to learning that created the world's largest 'Craft Centre' located at Jamnagar.
Cumulatively it has trained 1, 50,000 workmen - electricians, welders, carpenters.
• "Sense of urgency" - Reliance speed is legendary now. Reliance has mastered project
management skills and has made it virtually into a fine art. It is this sense of speed that
restored operations in record time in Jamnagar, Patalganga and Hazira after being
affected by cyclones and floods.
• "Think. Anticipate. Be prepared." Part of meticulous thinking is the ability to
anticipate problems. "Every transformation initiative will face resistance. It is our job to
anticipate the resistance, take the responsibility to earn the respect of all stakeholders to
create a win-win business model."
• "Dreams and Vision are the most potent fuels in the world." - This is an unmistakable
Reliance hallmark espoused both by the founder Chairman Sh. Dhirubhai Ambani and
the current Chairman Sh. Mukesh Ambani. To a question on what would be his next big
ambition Sh. Mukesh Ambani answered
• "Rural transformation.” - Creating direct employment for half a million people in rural
India. Creating a supply chain that the world will envy."
• "Measuring success differently" - Developing a metric to measure how much money
was spent, is just one example of inspiring people to think and act differently and
effectively.
It is evident that Reliance Industries is where it is today because of Innovation in thinking and
execution. Given its ambition for India and its own organization Reliance leadership has now
taken on a major initiative in the innovation domain.
The leadership of RIL recognizes that its biggest competitive advantage and differentiator in the
future would be innovation. Innovation has to become the language, the behaviour definer, the
culture and the soul of Reliance, even more explicitly than ever before.
ABOUT RELIANCE COMMUNICATIONS
The Late Dhirubhai Ambani dreamt of a digital India — an India where the common man would
have access to affordable means of information and communication. Dhirubhai, who single-
handedly built India’s largest private sector company virtually from scratch, had stated as early
as 1999: “Make the tools of information and communication available to people at an affordable
cost. They will overcome the handicaps of illiteracy and lack of mobility.”
It was with this belief in mind that Reliance Communications (formerly Reliance Infocomm)
started laying 60,000 route kilometers of a pan-India fiber optic backbone. This backbone was
commissioned on 28 December 2002, the auspicious occasion of Dhirubhai’s 70th birthday,
though sadly after his unexpected demise on 6 July 2002.
Reliance Communications has a reliable, high-capacity, integrated (both wireless and wireline)
and convergent (voice, data and video) digital network. It is capable of delivering a range of
services spanning the entire infocomm (information and communication) value chain, including
infrastructure and services — for enterprises as well as individuals, applications, and consulting.
Today, Reliance Communications is revolutionizing the way India communicates and networks,
truly bringing about a new way of life.
REVEIEW OF LITERATURE FOR WORKING CAPITAL
Working capital policy refers to the firm's policies regarding :
1) Target levels for each category of current operating assets and liabilities, and
2) How current assets will be financed. Generally good working capital policy (i.e. under
conditions of certainty) is considered to be one in which holdings of cash, securities, inventories,
fixed assets, and accounts payables are minimized.
The level of accounts receivables should be used as a means of stimulating sales and other
income. Previous literature on working capital management has found a negative association,
overall, between level of working capital and operating performance as measured by operating
returns and operating margins (Peterson and Rajan, 1997). Under conditions of certainty (i.e.
sales, costs, lead times, payment periods, and so on, are known), firms have little reason to hold
more working capital than a minimum level. Larger amounts would increase the level of
operating assets, increase the need for external funding, resulting in lower return on assets and a
lower return on equity, without any increase in profit.
However the picture changes when uncertainty (i.e. uncertain growth) is introduced (Brigham
and Houston, 2000). Larger amounts of cash, securities, accounts receivables, marketable
securities, inventories, and fixed assets will be needed to support increased sales Required levels
will be based on expected sales levels and expected order lead times. Additional holdings may be
needed to enable the firm to deal with departures from the expected values. Further, firms will
also attempt to increase their accounts payable balances as a means of financing increased levels
of current operating assets. Firms which are in high growth stages will face the challenge of
maintaining the necessary level of operating assets to support subsequent growth, while at the
same time attempting to maintain adequate performance indicators.
From the above reviews it can be concluded that many researches have been
conducted before relating to the concept of working capital but no researches
have been conducted to study the working capital management of Reliance
Industries Limited. This gap has been fulfilled by this research report which
gives an practical insight into the concept of working capital management.
LITERATURE REVIEW FOR TELECOM INDUSTRY
Cygnus Business Consulting & Research Pvt. Ltd. (2008), in its “Performance Analysis of
Companies (April-June 2008)” has analyzed the Indian telecom industry in the awake of recent
global recession and its overall impact on the Indian economy. With almost 5-6million
subscribers are being added every month, and the country is witnessing wild momentum in the
telecom industry, the Indian telecom industry is expected to maintain the same growth trajectory.
• Internet service providers in India, Rao (2000), provide a broad view of the role of an
Internet service provider (ISP) in a nascent market of India. Building local content,
foreknowledge of new Internet technologies, connecting issues, competitiveness, etc. would
help in their sustainability.
• The role of technology in the emergence of the information society in India, Singh
(2005), describes the role that information and communication technologies are playing for
Indian society to educate them formally or informally which is ultimately helping India to
emerge as an information society.
• T.H. Chowdary (1999) discusses how Telecom reform, or demonopolization, in India
has been bungled. Shaped by legislation dating back to the colonial era and post Second
World War socialist policies, by the mid-1980s India realized that its poor
telecommunications infrastructure and service needed reform. At the heart of the problem lay
the monopoly by the government’s Department of Telecommunications (DOT) in equipment,
networks and services. The National Telecom Policy 1994 spelt out decent objectives for
reform but tragically its implementation was entrusted to the DOT. This created an untenable
situation in which the DOT became policymaker, licenser, regulator, operator and also
arbitrator in disputes between itself and licensed competitors. He discusses the question:
‘Why did India get it so wrong? and What India should do now?
• Thomas (2007), in his article describes the contribution made by telecommunications in
India by the state and civil society to public service, this article aims to identify the state’s
initial reluctance to recognize telecommunications provision as a basic need as against the
robust tradition of public service aligned to the postal services and finds hope in the renewal
of public service telecommunications via the Right to Information movement. The article
follows the methodology of studying the history of telecommunications approach that is
conversant with the political economy tradition. It uses archival sources, personal
correspondence, and published information as its research material. The findings of the paper
suggests that public service in telecommunication is a relatively ‘‘new’’ concept in the annals
of Indian telecommunications and that a deregulated environment along with the Right to
Information movement holds significant hope for making public service telecommunications
a real alternative. The article provides a reflexive, critical account of public service
telecommunications in India and suggests that it can be strengthened by learning gained from
the continual renewal of public service ideals and action by the postal services and a people-
based demand model linked to the Right to Information Movement. All studies done by the
researcher suggests that the right to information movement has contributed to the
revitalization of participatory democracy in India and to a strengthening of public service
telecommunications.
GROWTH IN SEGMENTS
According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are expected to
touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India. Fixed line
capex is projected to be US$ 3.2 billion, and mobile capex is likely to touch US$ 9.4 billion.
Further, according to a report by Gartner Inc., India is likely to remain the world's second largest
wireless market after China in terms of mobile connections. According to recent data released by
the COAI, Indian telecom operators added a total of 10.66 million wireless subscribers in
December 2008. Further, the total wireless subscriber base stood at 346.89 million at the end of
December 2008.
The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from
2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to 60.7 per cent from
19.8 per cent in 2007.
The Indian telecommunications industry is on a growth trajectory with the GSM operators
adding a record 9.3 million new subscribers in January 2009, taking the total user base to 267.5
million, according to the data released by COAI. However, this figure does not include the
number of subscribers added by Reliance Telecom.
In WiMax, India is slated to become the largest WiMAX market in the Asia-Pacific by 2013. A
recent study sees India's WiMAX subscriber base hitting 14 million by 2013 and growing
annually at nearly 130 per cent. And investments in WiMAX ventures are slated to top US$ 500
million in India, according to a report by US-based research and consulting firm, Strategy
Analytics.
VALUE-ADDED SERVICES MARKET
A report by market research firm IMRB stated that the mobile value-added services (MVAS)
industry was valued at US$ 1.15 billion in June 2008, and is expected to grow rapidly at 70 per
cent to touch US$ 1.96 billion by June 2009.
Currently, MVAS in India accounts for 10 per cent of the operator's revenue, which is expected
to reach 18 per cent by 2010. According to a study by Stanford University and consulting firm
BDA, the Indian MVAS is poised to touch US$ 2.74 billion by 2010.
Mobile advertising, which is an important VAS segment, offers great potential to become an
important revenue source. Marketers are increasingly using MVAS as a step ahead of SMS-
based marketing to sell soaps and shampoos, banking, insurance products and also entertainment
services, and rural markets are proving to be very receptive for such marketing.
Further, Venture Capitalists like Canaan Partners, Draper Fisher Juvertson, Helion, and Nexus
India are also innovating with services like mobile payment options, advertising, voice-based
SMS and satellite video streaming.
According to Venture Intelligence, there were nine deals worth US$ 41 million in 2007 in the
mobile VAS space, and till August 2008, seven deals worth US$ 91 million had already been
finalized. Presently, mobile VAS has a US$ 700 million market with a 20 per cent y-o-y growth,
which is likely to touch US$ 3 billion by 2012.
From the above reviews it can be concluded that many researches have been
conducted before but no researches have been conducted to study the
performance of leading players. This topic had been chosen keeping in mind
the increasing competition in telecom industry and to study the position of
Reliance communications as compared to 4 other top players. This gap has
been fulfilled by this research report which gives a practical insight into the
concept of working capital management.
RESEARCH METHODOLOGY
For every comprehensive research a proper research methodology is indispensable & it has to be
properly conceived. The methodology adopted by me is as follows:-
CHAPTER: 3(a)
RESEARCH PROBLEM
To know the working capital management of RIL with the help of ratio analysis.
To analyze the market strength of reliance communications.
CHAPTER: 3(b)
HYPOTHESIS OF THE STUDY
A research hypothesis is the statement created by a researcher when they speculate upon the
outcome of a research or experiment.
For the study of customer preference towards Reliance Communications the following
hypothesis was set up.
• H0: There is no significant relationship between factors and satisfaction level.
• H1: There is significant relationship between factors and satisfaction level.
CHAPTER 3(c)
OBJECTIVES OF STUDY
• Find out Ratios related to working capital management of RIL and compare with last 5
years.
• Find deviation of calculated from standard or Norms.
• To study the customer preference towards reliance communications as compared to its
CHI-SQUARE ANALYSIS ON THE RELATIONSHIP BETWEEN SERVICE
PROVIDERS AND SATISFACTION
NAME OF THE
SERVICE
PROVIDER
LEVEL OF SATISFACTION TOTALHIGH MODERATE LOW
Reliance
Communications
38 8 3 49
Airtel 49 4 1 54Vodafone 23 35 3 61Idea 13 7 3 23Tata Docomo 12 18 9 39TOTAL 135 72 19 226(The total number of respondents here is more than 100 because of multiple responses by
respondents.)
H0: There is no significant relationship between service providers and level of satisfaction.
H1: There is significant relationship between service providers and level of satisfaction.