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Kuldeep Dabur

Oct 14, 2014

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Project Report

Working Capital Management Undertaken At

Dabur India Limited

Submitted In The Partial Fulfillment For The Award Of The Degree Of

MASTER OF BUSINESS ADMINISTRATION Submitted By :

Kuldeep Kumar

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TABLE OF CONTENTS1) Acknowledgement 2) Abstract 3) Objectives 4) Research methodology 5) Introduction 6) Overview of industry 7) Company Profile 8) Working capital management 9) Conclusion 10) Bibliography 3 4 5 6 8 9 17 35 54 56

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ACKNOWLEDGEMENT

Gratitude is a hearts memory and putting the feelings of the heart into words, is an art. Those who excel in this art are ultimately successful. Determination, hard work, and patience are the key to success. Completing a project of this magnitude would not have been possible without the encouragement & support of many people. At this point of time I would like to acknowledge all those who have made a major contribution in its development. I also express my sincere regards to all the executive & staff members of Finance & other departments of the company who immensely cooperated in completion of my project report. Lastly, I would like to thank the God Almighty, my family members, my faculty members and all those left unknowingly without whom the completion of this project would not have been possible.

(Kuldeep Kumar)Certificate of Completion And Originality Of WorkThis is to certify that Mr Kuldeep Kumar has accomplished the project titled WORKING CAPITAL MANAGEMENT, under my guidance and supervision. This project is being submitted by her in the partial fulfillment of requirements of MBA Program of Bharati Vidyapeeth University New Delhi.

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ABSTRACTThis project discusses about the Working Capital Management of Dabur India Limited. A good way to judge a company's cash flow prospects is to look at its Working Capital Management (WCM). Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations, reinvest, and meet capital requirements and payments. Understanding A Companys cash flow health is essential to make investment decisions. The project in the initial stage began with the research of the financials of Dabur India Limited through the Annual Reports and the official website of the company www.dabur.com. Basically the purpose for the research was to understand as to what exactly is working capital, why do companies require working capital, what is the ideal ratio of working capital to be maintained by the Company, etc. After the research data was collected which was to be analyzed and compared with the data of other companies (Hindustan Lever Ltd., Cadbury India Ltd., Nestle India Ltd., Britannia Industries and Marico Ltd.) to see how well the company is handling and managing its finances. The collected data was sorted out as per the requirements of the project. Out of the entire financials, the Profit and Loss Accounts, Balance Sheets and The Cash Flow Statements were the most important as for calculating the working capital and the ratios, as accurate data was available in them. The data till the year 2009-2010 has been analyzed and the working capital and ratios for Six major FMCG companies that are: Dabur India Ltd., Hindustan Lever Ltd., Cadbury India Ltd., Nestle India Ltd., Britannia Industries and Marico Ltd. have been compared.

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OBJECTIVES

To understand the concept of Working Capital. To understand the trend exhibited by the working capital over the period. To analyze the overall short-term fund requirements of the Company. To analyze the current working mechanism of Sources and Investments of funds in the Company. To understand the need and importance of working capital finance in an Organization. To study the financing pattern of working capital that prevails in DABUR INDIA LTD. To prepare a report on Comparative study of Dabur vs. the other top Ranked FMCG companies.

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RESEARCH METHODOLOGY

SOURCES AND METHODS: The following sources have been sought for the preparation of this report:

Primary sources such as current annual reports, books on financial management by various authors and business magazines such as Business World, Business Today etc. Secondary sources like previous years annual reports, reports on working

Capital for research, analysis and comparison of the data gathered. LIMITATIONS: The following limitations have been faced in this project in spite of all possible efforts made to make the report accurate.

The financial data of different companies is available for financial years that vary, such as; some firms have their accounting year from January to December while some others have it from March to April. Hence the comparison may not be fully accurate.

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The latest financial data of few firms could not be reported, as their Internet websites have not been updated. Hence for some companies the data was available for previous year but for some it was available for year proceeding previous year.

SCOPE: My project will concentrate to find out the operational feasibility of futures and the financial feasibility operations. The accomplishment of this project will lead to an on hand experience of the workings of the organization. The practical training shall provide a platform to understand the applications of the theoretical aspects and the problems that may arise in the organization thus enhancing my decision-making ability.

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CHAPTER-1INTRODUCTIONThis project deals with the Working Capital Management of Dabur India Limited. Dabur India Limited is the Fourth Largest FMCG Company. The basic meaning of Working Capital in a simple language is CURRENT ASSETS less CURRENT LIABILITIES. Cash is the lifeline of every business and hence working capital management plays an important role in functioning of a business. Working capital comprises a number of different items and its management is difficult since these are often linked. Hence altering one item may impact adversely upon other areas of the business. Management must ensure that a business has sufficient working capital. Too little will result in cash flow problems highlighted by an organization exceeding its agreed overdraft limit, failing to pay suppliers on time, and being unable to claim discounts for prompt payment. In the long run, a business with insufficient working capital will be unable to meet its current obligations and will be forced to cease trading even if it remains profitable. On the other hand, if an organization ties up too much of its resources in working capital it will earn a lower than expected rate of return on capital employed which is not at all a desirable situation. The primary objective of working capital management is to ensure that sufficient cash is available to-Meet day-to-day cash flow needs; Pay wages and salaries when they fall due; Pay creditors to ensure continued supplies of goods and services; Pay government taxation and providers of capital dividends; and Ensure the long-term survival of the business entity. Inter firm comparison can be done with the help of ratio analysis as ratio analysis allows comparison of one industry/firm to another. Since financial ratio analysis looks at relationships inside the industry/firm, an industry/firm of one size can be directly compared to a second industry/firm (or a collection of industries/firms), which may be larger or smaller or even in a different business.

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CHAPTER-2INDUSTRY PROFILEFMCG stands for Fast Moving Consumer Goods. Companies in the FMCG sector provide high volume/low value goods such as food, drink, household goods and confectionary items.The FMCG sector is one of the fastest growing sectors in the national economy and encompasses organizations involved in distribution, manufacturing and retailing.

Fast Moving Consumer Goods are a multi-million rupees industry. FMCG is one of the most competitive areas. The sector includes groceries, beauty products and home care companies, the majority of which come from large global corporations. At the time of independence (1947) MNCs were allowed to operate in India, but the Indian market was too small for global MNCs. HLL has a manufacturing base, Colgate and Nestle mainly undertook only trading activities. In 1978 several FMCG products, which are essentially mass consumption items, became luxury products due to exorbitant burden of excise duties, sales tax. In a FMCG industry everyone is a consumer. This makes the industry personally relevant as everyone is personally affected. People get more excited and care more deeply about the products they put in use every day. The Indian FMCG industry witnessed significant changes through the 1990s. Many leading FMCG players such as Hindustan Lever Ltd. (HLL) and Procter & Gamble India Ltd. (P&G) have been facing severe problems on account of increased competition from small and regional players and from slow growth across its various product categories. As a result, many of these companies were forced to revamp their product, marketing, distribution and customer service strategies to strengthen their position in the market.

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The realization of the customer's growing awareness and the need to meet changing requirements and preferences on account of changing lifestyles also contributed to the formulation of customercentric strategies. HLL led the way in revolutionizing the product, market, distribution and service formats of the FMCG industry by focusing on rural markets, direct distribution, creating new product, distribution and service formats. FMCG does not suffer from mass layoffs every time the economy starts to dip. You may put off buying a car, but you don't put off dinner.

Indian FMCG companies like Dabur and Hll for the first time found themselves under severe press