PROJECT REPORT On WORKING CAPITAL MANAGEMENT AND CONTROL A
Report Submitted In Partial Fulfillment of the Requirements For The
Award of the Degree of MASTER OF BUSINESS ADMINISTRATION
Collaborative program of M.S.Ramaiah Management Institute with
PRIST University BY SANJAY RAUTH REG.NO:- CM2091860079 Under the
guidance of JAYASHREE KOWTAL
PRIST UNIVERSITY Vallam, Thanjavur 2010
STUDENTS DECLARATION
I declare that the project titled WORKING CAPITAL MANAGEMENT AND
CONTROL is an original project done by me and no part of the
project is taken from any other project or materials published or
otherwise or submitted earlier to any other college or
university.
Students Signature SANJAY RAUTH REG NO:- CM2091860079
M.S.RAMAIAH MANAGEMENT INSTITUTE
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CERTIFICATE BY GUIDE
This to certify that the report of the project submitted is the
outcome of the project work entitled Working Capital Management and
Control carried out by Sanjay Rauth bearing Roll No: CM2091860079
Carried by under my guidance. i) ii) iii) iv) To the best of the my
knowledge the report
Embodies the work of the candidate himself, Has duly been
completed, Fulfils the requirement of the ordinance relating to the
MBA degree of the Is up to the desired standard for the purpose of
which is submitted. Institute and
(Signature of the Guide) Name: Jayashree Kowtal M.S.Ramaiah
Management Institute
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ACKNOWLEDGEMENTIt has been my proud privilege to work on the
project of Working Capital Management and Control of Welspun
Gujarat Stahl Rohren Limited at Anjar (Kutch). I am highly thankful
to Mr. Anuj Burakia, Mr. Shankar Mishra, General Manager (Finance)
& Mr. Rajeev Yadav (Dy. General Manager-HCGA), who constantly
supported me in my project in spite of their very busy schedule. I
am very grateful to them for their co-operation and guidance
through out the course of my project.
They have given me the opportunity to make a project which would
be a real time project. They have inspired me from time to time in
pursuance of developing this challenging project. Their timely
advice and helping attitude has put me across all the difficulties.
They always gave me their valuable guidance and consent without
which the project could not have come in this volume. They owe to
every success of this project and pitfalls are mine. I owe my
deepest gratitude and indebtedness to Mr. Bradhesh Jain, Manager
(Finance). He has been a great source of inspiration to every
respect. I am also highly thankful to Mr. Divyesh, Mr. Yogendra
Naina,Mr. Anand Verma, Mr. Amit Patel, Mr. Tomsan Koshy, Mr.
Bhasker, Mr. Nitesh, Mr. Piyush and I would like to thanks finance
department for their co-operation and guidance throughout my
project, I am very thankful to them for providing me all the
relevant data that I need. I would like to thank all the people at
WELSPUN GUJARAT STAHL ROHREN LTD, who were very co-operative during
my project.
At last but not least, I am very thankful to Jayashree Kowtal
the faculty of, M.S RAMAIAH MANAGEMENT INSTITUTE, Bangalore, who
had constantly guided me throughout my SIP and ensured that I was
on the right path.
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TABLE OF CONTENTPART- A Sl. no. 1 2 3 4 Chapter name Sectoral
Analysis Profile of the organization Introduction to WELSPUN group
Origin of the the organization Motto Mission Vision
Page no. 07-10 11 12 13-18 19 20 21 22 23 24 25 26 27-33 34 35
36 37-38 39-40 46 47 48 49 50 51 52 53 54-60 61 62 63 64
6 7 8 9 10 11 12 13 14 15 16
WGSRL share capita membership Companys global performance Growth
Achievement Organizational hierarchy Product Different plants of
the company Customers Competitors Environment S.W.O.T Analysis Part
B Students work profile Description of live experience Contribution
to the organization Study of research problem Statement of problem
Objective & scope of study Research design and methodology
Analysis of study Summary of findings Summary and conclusions
Summary of learning experience Conclusions and recommendations
5.
6.
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Annexure Bibliography
65-68 69
PART-A
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SECTORAL ANALYSIS
From a modest, but ambitious beginning in 1985 as a polyester
yarn manufacturing unit, to our current position of global leader
in almost all businesses, Welspun Group has evolved into a US$ 3
billion conglomerate in a short span of time. With a global
leadership position in Line Pipe and Home Textiles, our marquee
client list has come to include most of the Fortune 100 Companies
operating in the Oil & Gas and Retail sectors. As we celebrate
this significant milestone of 25 years, I would like to thank those
who contributed to our growth, as well as reaffirm our unwavering
commitment to excellence.
Welspun Gujarat Stahl Rohren Limited (WGSRL) is a
state-of-the-art pipes manufacturer. The company is principally
engaged in production and coating of high grade submerged arc
welded pipes and electric resistance welded pipes. Its products
include LSAW (Longitudinal Submerged Arc Welded) pipes, HSAW
(Helical Submerged Arc Welded) pipes and ERW (Electric Resistant
Welded) pipes. WGSRL caters its services to energy transportation
sector such as oil, gas, crude and water. CARE Researchs report
indicates an optimistic attitude towards the potential demand for
the Indian pipe sector. Replacement demand from developed nations
is stronger than ever while domestic demand from the gas and oil
sector remains robust. Moreover, the pipeline network in India for
oil & gas transport is currently less than 17,576 kms as of
April 2009 (i.e. 32% penetration level), which means that there is
still significant room for growth in the pipe industry. The Indian
pipe manufacturing industry is highly Raw Material (RM) intensive
with RM costs accounting for more than 70% to 80% of the total
costs for PVC and steel pipe companies. Additionally, pipe
manufacturers depend heavily on imports and therefore many steel
pipe companies have backward integration facilities to lessen
dependency on imports and price volatility. Because of higher
imports and exports, another key cost component is freight costs.
Indian pipe manufacturing companies produce a wide range of cement,
steel, and plastic pipes which are used in a range of critical and
non-critical applications. Indian companies have increased their
export sales over the last three to four years. CARE Research
expects the positive trend in the Indian pipe industry to continue
over the next three to five years as a result of a resurgence in
crude oil
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prices, replacement demand from North American and European
countries, water & sewage transport and irrigation facilities.
Finally, primarily steel pipes (particularly SAW pipes) will drive
growth. The 2008-09 financial crisis had a limited impact on the
Indian pipe industry affecting new oil and gas exploration and
production (E&P) projects worldwide due to fall in global
commodity prices including crude oil resulting into reduced orders.
With the worst of the financial crisis behind us, we remain
optimistic regarding the potential demand for the pipe sector. The
E&P projects which were earlier stalled or revoked are being
given a new lease of life based on the inevitable rise in crude oil
prices. Replacement demand from developed nations remains ever so
strong while domestic demand from the oil and gas sector is robust.
Also, with the pipeline network of India for oil & gas
transport being lower at 17,576 kms as on April 2009, (32%
penetration level) it represents a huge scope for growth for the
pipe industry. As most of the Indian pipe manufacturers are
converters, the industry is highly Raw Material (RM) intensive with
the RM cost accounting for more than 70-80% of the total cost for
steel and PVC pipe companies. These companies rely heavily on
imports and hence many steel pipe companies have backward
integration facilities to reduce dependency on imports and price
volatility. Freight cost is another key cost component due to
higher imports and exports. With the expected short-term increase
in commodity prices and range-bound Baltic Dry Index (a barometer
for shipping freight rates), pipe companies will be benefited in
the coming quarters as customers will try to place advance orders
at attractive rates. Indian companies produce a wide range of
steel, cement and plastic pipes which are used in various critical
and non-critical applications. Indian steel pipe manufacturing
companies have won several certifications and accreditations from
major oil & gas companies across the globe in the recent past.
With the low-cost and high-quality products supplemented by various
international certifications, Indian companies have augmented their
export sales over the last three to four years. CARE Research
expects the positive trend in the Indian pipe industry to continue
for the next 3-5 years on the back of higher E&P activities due
to resurgence in crude oil price, increased efforts by the
Government of India (GoI) on infrastructure development for laying
pipelines for oil & natural gas transport (e.g. the National
Gas Grid project), replacement demand from North America and
European countries, water & sewage transport and irrigation
facilities. The growth will mainly be driven by steel pipes
especially SAW pipes. The order-book position (currently equivalent
to total of FY09 sales) of many steel pipe companies is sufficient
for the next 9-12 months.
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Demand triggers for the growth are:
Private players like Reliance Industries Limited (RIL), Cairn
India etc have shown interest in setting up pipe infrastructure for
oil & gas distribution. National gas grid will also be set up
requiring an investment of Rs.210 bn.
City gas pipe is currently available in 10 cities and the
coverage is expected to grow to 40 cities in the next five years,
entailing an investment of Rs. 250-300 bn.
In addition to the above, the replacement demand from the US and
European countries, having a vast pipeline infrastructure, will be
huge.
The GoI in its efforts to reduce crude imports has formulated
the New Exploration Licensing Policy (NELP) for exploration and
production of oil & gas. The GoI has awarded 256 blocks till
date and the number is set to increase to 330 by 2010.
For the Eleventh Five Year Plan, the GoI is aiming to add 11 mn
hectares of irrigational facilities, entailing an investment of
Rs.1,580 bn.
The GoI increased the annual budget allocation under the Rajiv
Gandhi Drinking Water Mission from Rs.65 bn to Rs.74bn in the
previous Union Budget 2009-10.
Market size and structure:The steel pipe industry has shown
robust growth on account of strong demand from domestic and export
market. The domestic pipe industry at 1.53 million tones is valued
at Rs 92.1 billion in 200809. Oil and gas along with water supply
and sanitation constitute for significant portion of the total
steel pipe demand. Apart from domestic demand, pipe players are
increasingly supplying to the global market. The export market has
surpassed the domestic market size for steel pipes and is estimated
at around 1.95 million tone and is valued at Rs 116.9 billion in
2008-09. The industry is fairly consolidated with major 5 players
accounting to more than 80 per cent of the total capacity.
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Future growth:After slowdown in 2008-09, the domestic pipe
industry is expected to witness strong growth due to huge
investments in oil and gas in India. The government thrust on water
supply and irrigation is also expected to contribute to the
domestic demand. The demand from oil and gas segment is expected to
grow by CAGR of 9-10 over the next 5 years driving the overall
demand in India to grow at a CAGR of 8-9 per cent. With an
established track record, proximity to key markets like the Middle
East and rising international client accreditations, the industry
is increasing its presence in global market. It expects exports to
grow at compounded rate of 8-9 per cent over the next 5 years. The
export opportunity could be further propelled by the expected
emergence of replacement demand from the US and Russia.
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PROFILE OF THE ORGANIZATION
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INTRODUCTION TO WELSPUN GROUP
WELSPUN GUJARAT STAHL ROHREN LIMITED,
COMPANY INFORMATION:
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ORIGIN OF THE ORGANIZATION
US$ 3000 million Welspun group is one of the fastest growing
Indian conglomerates. With presence in over 50 Countries and over
20,000 employees and 50,000 shareholders, Welspun truly represent
an amalgamation of expertise, resources, opportunities and
engineering excellence. Welspun is considered amongst one of the
premier Global Line Pipe and Home Textile Companies. The group
enjoys strong relationship with marquee clients including most of
the Fortune 100 Companies viz. Chevron, Exxon Mobil, Wal Mart,
Target, and J. C. Penny amongst others. Welspun is also trusted by
some of the largest Financial Institutions / Banks viz. Temasek
(Govt. of Singapore), HSBC, Standard Chartered Bank, Deutsche Bank,
ICICI venture and State Bank of India. Since its commencement in
1985 with a small textile unit, it has grown magnanimously,
diversifying into various businesses, industries and regions. All
Group companies are separate entities with distinct Board
Structures. Welspun believes that its role is crucial as a
responsible corporate citizen and thereby sincerely practices
empowerment of the underprivileged and sustenance of the
environment along side with nurturing employees and the society at
large. Every Welspunite is guided by the six E's - Enrichment of
mind, Enrichment of body, Education, Empathy, Empowerment of Women
and Environment sustenance. Welspun Gujarat Stahl Rohren Limited is
the name of the Company in which Welspun signifies the name of the
group to which it belongs, Gujarat is the location of the Companys
operation, Stahl means the Steel, and Rohren means Manufacturing.
As the name of the Company defines its activity of manufacturing
the Steel is the Operation of the Company, the Company prepares
this Pipes and Sells not only in Indian Market but also in the
foreign market also. Company is one of the largest manufactures of
the Pipes in the world. Welspun Stahl Rohren Ltd (WSRL), was
incorporated as a public ltd company on 26th Apr.'95, and on 12th
May obtained a certificate for commencement of business, and
carries on the operation from two plants, one of them is located at
Bharuch (Dahej), while the other is situated at Anjar (Bhuj). The
operations at both the plant are more or less same but differ to
some extent in case of the manufacturing activity of preparing the
pipes. The Bharuch Plant is preparing with the use of Coils as well
as Plate for the manufacturing of the Pipe, while at Anjar,
currently as on date of 30.11.2007 it is not possible to
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manufacture pipe with the use of Plate, hence only coils are
used for the manufacturing at Anjar. The Pipe manufactured with the
plate is known at SAW Pipe while the Pipe manufactured with the use
of Coil are known as Spiral Pipe. Currently at Anjar, the SAW
manufacturing activity is not commercial in use but the plant is
getting ready for the future manufacturing of the same. The process
of the Company of manufacturing would be summarized in the chart
which can be seen in the henceforth discussion. The Company is also
receiving the benefits under the Kutch incentives Scheme for Anjar
Plant, which is availed by the Company and has been discussed
hereunder. Welspun Gujarat Stahl Rohren Ltd. (WGSRL), the flagship
company of the US$ 3000 million Welspun Group is the 2nd Largest
(Large Diameter) Pipe Producer in the World (Financial Times UK,
2008) and is the Fastest Growing Company in India (Business Today
and Construction Word, 2007) . With a strong culture of Engineering
Excellence' WGSRL is all set to be positioned as the World's
Largest Pipe Company with an increase in capacity from 1 million
ton per annum to 1.75 million ton by March 2009. The company has
supplied pipes for projects in the deepest of ocean (Independence
Trail' Project, Gulf of Mexico) to the toughest of terrain (Rockies
Project', USA). Clients include Enterprise, Kinder Morgan, Texas
Gas, British Petroleum, Hunt Oil, Saudi Aramco, Elpaso, Exxon
Mobil, Qatar Petro DOW and Gazprom to name a few.
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Welspun Group's interests
Company
Areas of Business
Welspun India Ltd.
Home Textiles - Terry Towels, Bed Sheets
Welspun Gujarat Stahl Rohren Ltd.
L-SAW,
Spiral
and
HFIW
pipe
manufacturing & coatings
Welspun Syntax Ltd.
Specialty
Polyester
Filament
Yarn,Texturised & Dyed Yarns
Welspun Zucchi Textiles Ltd.
Bathrobes
Welspun Power & Steel Ltd.
Ingots / Billets and TMT bars Home Textiles under brands Spaces
Home and Welhome' & Beyond'
Welspun Retail Limited
Christy UK
Terry Towels
Sorema , Portugal
Bath Rugs and Shower Curtains
Welspun Mexico deSACV
Decorative bedding
Welspun Tubular LLC
SAW Pipes and pipe Coating
Welspun Natural Resources Ltd.
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QUALITY STANDARDS & CONTROL
At Welspun, quality control does not mean certifying the final
product. Instead it refers to the continuous monitoring of each and
every stage of the cycle to get the well finished Welspun SAW
pipes. Total Quality Management (TQM) is incorporated at each level
of not only the manufacturing process, but also the administrative
process at each end of production supported by SAP 6 enabled
processes. Right from selection of input materials, to the final
finished product, care is taken to see that at each step the exact
process and techniques are followed, to give the perfect well
tested product. Welspun is amongst the few companies which has
filed patents in the United States for the new welding processes
and has also attained level 3 automation in the Plate Mill
supported by digital controls. Highly skilled professionals with
strong in-house training and world class practices primarily from
Germany, ensures highest quality of products. With its own lignite
based 43 megawatt captive power project, Welspun has its energy
needs secured. Each manufacturing facilities are audited by The
American Petroleum Institute (API) besides our prestigious clients.
It is noteworthy that for the first time in the world, Edge Miller
was developed in the plate mill to achieve better efficiency and
eventually better product quality for the customer.
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INTRODUCTION TO CAPITALIZATION
The Company is using the SAP system and the Capitalization is
done as the requirement of AS 10 prescribed by the Institute of
Chartered accountants of India, 1949. Basically the capitalization
is started in two parts one part of the capitalization is related
to the Purchase Order and its execution while the other is related
with the Work Order which is part of one Internal Order. It may be
understood as; Internal Order
Purchase Order
Work Order
Main Machinery
Stores & Spares
Other Receipts
Civil Construction Other Services
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MOTTO
We just don't create products, we engineer satisfaction. Welspun
Group has been the numerous undo Group in India that has deployed
exceeding resources to ensure the optimum quality of its products.
Within Welspun, quality of the products and services is of
paramount importance. The endless tests, the microscopic
examination ensures that all Welspun products are of world-class
quality and nothing less. We treat each and every project as a
challenge, every achievement as a reason to set new goals. This
strategy has enabled Welspun to have satisfied customers in the
most developed and knowledgeable markets.
We dare to commit and deliver on our promises
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MISSION
We endeavor to reach the leadership position in each Segment /
Sector of our Product / Service. We are committed to satisfy our
customers by providing such Quality Product / Service, which gives
highest value for money. We believe that employees are our most
important asset through which we can reach the top in each category
of our Product / Service. Therefore, we will emphasize on their
continuous improvement through up gradation of relevant knowledge
and training. We commit ourselves to continuous growth, so as to
fulfill the aspirations of our Customers, Employees and
Shareholders.
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VISION
We aim to Emerged as a global leader Preferred by every home
Servewith passion Grow@speed Innovate with quality Excel with
ethics Delighting all stake holders We are.WELSPUN
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WGSRL SHARE CAPITAL MEMBERSHIP
The share capital of the society stood Rs. 69.92 Crs as on 31st
march 2007 against Rs. 86.53 Cr. as on 31st march 2006.
Table Showing Share Capital Pattern CATEGORY Foreign Holdings
Govt. / Financial Institutions Corporate Bodies(not covered above)
Directors and their Relatives Other including Indian Public
PERCENTAGE (%) 21.02 16.01 9.59 41.9 11.49
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COMPANYS GLOBAL PRESENCE
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GROWTH & HIGHLIGHTS
Manufactures high grade line pipes-Submerged Arc Welded (both
spiral and longitudinal), branch pipes (Electric Resistant Welded
Pipes-ERW) and coating. Manufactures the widest range starting from
1/2 inch to 100 inch of outer diameter. Caters to the global
requirement of Welded Tubes and Pipes. Manufacturing facilities
located in Gujarat in western India , in proximity to the National
Highway and Seaports Manufacturing facility being set up in Little
Rock, Arkansas, USA with a production capacity of 300,000 tons of
pipes annually. Backward integration 1.5 MT Plate cum coil Mill set
up to manufacture Steel plates of up to 4 meter wide and coils up
to 2.8 meter wide. Incorporates the very best technology across the
globe with Capello Tubi Italy and SMS Meer Germany (Mannesmann
Demag) and EUPEC, Germany. Accredited with ISO 9001, ISO 14001 and
OHSAS 18001 certifications. Approved by more than 40 Oil & Gas
majors across the globe. Supplied pipes for World's Deepest Gas
Pipeline in Gulf of Mexico, US.
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WELSPUN GUJARAT STAHL ROHREN LTD. YEAR2008
AWARD / RECOGNITION2nd Largest Steel Pipe Producer in the World
(Large Diameter)
BEST OWED BYFinancial Times
2007
Fastest Growing Company
Business Today
2007
Fastest Growing Steel Products Company
Construction World NICMAR
2007
Amongst the top 3 SAW Pipe Company in the World
CLSA Asia Pacific Market Research
2007
Amongst the 20 Companies to watch out Business Today for in
2008
2007
Amongst top 100 Corporates in India
Standard & Poor's
2006
Award for the highest export - Iron and Steel based product -
non SSI
Engineering Export Promotion Council (EEPC)
2004
Fastest Growing Steel Products Company
Construction World NICMAR
2001-03
Export performance Awards
Engineering Export promotion council (EEPC)
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ORGANIZATIONAL HIERACHY
BOARDEXECUTIVE DIRECTOR
DIRECTOR OF FINANCE
DIRECTOR POLICY
DIRECTOR OF PROGRAMMING
DIRECTOR OF COMMUNICATION
FINANCE STAFF FUND RAISING STAFF STAFF
POLICY STAFF
REGIONAL STAFF
DESIGN
PUBLIC
RELATIONS
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PRODUCT PROTFOLIO
WGSRL strongly believes that a wide range in the manufacturing
of pipe sector is the parameter to prove its capabilities and
today, the company is proud of its range. There are only a handful
of players who can compete with the range of pipes (starting with
diameter as small as 1 inch and as large as 100 inch), maintain the
quality and technology that WGSRL produce
1. H-SAW PIPES:The manufacturing of a pipe starts with the
loading of HR Coils on the coil car having capacity of 50MT,which
feeds it to the de-coiler. The cone type de-coiler uncoils the
strip with the strip opener and feeds it to the first pinch roll
and leveler having heavy-duty hydraulic cylinders and mechanically
driven screw jacks.The feeding is done by passing the strip between
two large diameter rolls and the leveler flattens the
strip.Further, the front and rear ends of the coil at the cross
cutting and milling station are cut and beveled to prepare a
correct welding joint. At the stationary cross seam welder the two
coil ends are welded by SAW welding which makes the coil
continuous. The welding bead is ground by a grinding machine at the
ends and sides. The welded strip is fed to an independent pinch
roll having hydraulic jacks, which push the strip further to the
strip looper section, which consists of strip supporting trolleys
and a large diameter drum. The function of this drum is to
accumulate a maximum 180 meters of coil so that the mill never
stops for the strip joining process. The strip from the drum is
further supported on a number of rollers and passes through a pinch
roll that maintains the tension of the strip in the looper section.
From this pinch roll the strip is saw welded on the second side at
the fly welding station. This welding is done while the strip is
moving during the pipe forming process. After completion of
welding, the pipe is cleaned of the flux from inside and inspected
visually. An auto plasma cutting machine removes the tabs at the
ends. The weld seam of the pipe is checked at an Intermediate
ultrasonic testing machine to ensure defect free pipe. Any defects
are confirmed at the fluoroscopy station.
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2. L- SAW PIPES :Plates are separated and fed into the
manufacturing sequence by means of vacuum lifting and turning
equipment. In the first instance, plates are checked for conformity
to the specifications of the product range and then examined with
regard to thickness, laminations, laps and inside and outside
defects, before feeding. Plates of required width and thickness are
loaded on a conveyor table which takes the plates to the edge
milling set up. The longitudinal edge on one side of the plate is
milled and also crimped. The plate is turned and the other side is
also edge milled and crimped. The machined and crimped plate is
placed on the feeding table of the pipe forming press by the vacuum
lifting and turning equipment. On the forming press, the plate
gradually moves along the width where the movement of the plate is
controlled by CNC controls and gradual forming takes place by
applying hydraulic pressure. The plate is formed into an open-seam
pipe by several bending steps in J-C-O process.This tack welded
pipe is taken through a conveyor to the inside welding station. The
pipe is held on a moving trolley and the welding head is
stationary. Inside welding takes place under submerged conditions,
where the pipe moves and the arc is stationary. After the inside
welding the pipe is cleaned for any remaining flux and
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slag and is subsequently taken to the outside welding station
through a conveyor. Here the pipe is positioned on a moving
trolley, where the head is stationary. The pipe is welded from
outside under submerged conditions.
3. ERW LINE PIPES :Electric Resistance Welded (ERW) Line Pipe is
manufactured by the welding of adjoining edges of the strip without
the use of a filler metal.HR Coil is the raw material for making
this type of pipe. The HR coil is first de-coiled and slit to
precise width and is then fed into the mill. The coil passes
through leveler and rolls over a series of rollers, wherein the
coil is given the required profile depending on the diameter of the
pipe to be produced. The adjoining longitudinal edges are heated
using electric resistance and then pressed together to form the
complete pipe. After forming and resistance welding, the weld seam
is annealed and the pipe is cut on-line to required length. Once
the pipe length is ejected from the main forming-cum-welding line,
it undergoes end-facing operation and is then subjected to required
tests as per specification requirement such as a hydrostatic test,
ultrasonic test and offline mechanical testing. On the final
quality control line, the pipe is visually and dimensionally
inspected for any process and handling irregularities and is then
stenciled with the required data and taken to the storage area for
coating dispatch.
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4. COATING:The dual layer fusion bond epoxy coating on steel
pipes is used to protect the steel from corrosion in gas and oil
transportation segment. This coating is known as dual layers due to
the use of two layers of coating materials, that is, fusion bonding
epoxy and polymer adhesive. It is applied on the steel pipe after
shot blasting the pipe. This coating has the excellent property of
adhesion in peel and shear strength, which prevents the pipeline
from damage, high long-term electrical resistively and excellent
resistance to water permeation, which ensures the excellent
performance under cathodic protection. It has a mechanical
resistance whilst maintaining the integrity of coating in acidic
and alkaline soil media from temperatures of -40 degree C to 80
degree C.
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5. PLATE CUM COIL MILL:Plate Mill Plates can only be produced
with a single stand. Hot slabs from the furnace are taken through a
conveyor rollers table to the mill stand and are passed through the
mill stand several times by reversing and forwarding in the roller
table and mill stand until the final size is achieved. After
achieving the final size of the plate, the plate is transferred to
the cooling bed area.
Steckel Mill
The process is the same as a plate mill but it also has two
coilers at either side of the mill stand. The process uses a single
stand as well as two stands. In the case of two stands, the first
stand is the roughing mill. Hot slab is transferred from the
furnace to the mill stand and up to a certain thickness it is
rolled by the same process as in the plate mill. It is then
transferred to the second stand, the finishing mill. Further
rolling is done at this stand to achieve the required thickness by
reverse and forward operations of the mill and roller table. In
this mill the plate is coiled in hot coiler to keep it hot and
tensile in order to achieve a longer and thicker size. When the
required thickness of the plate is achieved, it is finally
transferred to the down coiler to wrap the plate in hot conditions
to make HR Coil. If the coils are not required, the material can be
taken down to a shearer to cut the material to the required
length.
6. SPIRALS:There are three Spiral Plants at Anjar; two of them
are working in routine while third plant is not ready for the
operations. The Spiral Plant uses the Coils as there raw material
in its manufacturing. Pipes of two specifications are made, namely
Pipe prepared as per API standards (American standard) and as per
ISP (Indian Standard). The process of the manufacturing of the
spiral pipe is demonstrated with the help of the chart given below;
Coils are imported or purchased from the local supplier and same is
loaded on the machinery to straighten the coils which is in the
spiral form while reaching the Stores of the Plant.
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Once the Pipe is straighten, the edges of the coils are being
cut off and the pipe is moved forward to be processed further
The cut edged pipe moves with the machine when it gets into the
circled machinery when the shape is given to the machinery of the
desired size. The angle required to be set for the desired size can
be arrived by the formulae which is referred by the plant
person
The Pipe is then folded in the shape of the spiral and welded at
the same time. This welding is further checked by the engineer
manually for any type of unwelded part still prevailing at the edge
of the pipe where the mechanical welding has been done.
Once the engineer is quiet certain about the welding of the pipe
the same is forwarded for the X-Ray checking in which real time
systems are installed where the person would be looking on the
screen for any type of minor defects present in the welding of the
pipe.
The same is welded again if the X-Ray checking was not
satisfactorily done. Once the X-Ray checking is over the pipe is
forwarded for the hydro testing where the force of water is being
checked on the pipe for checking the capacity of the pipe to hold
on the force.
Once the hydro test is over the pipe cant be welded again, if
the hydro test shows the efficiency on the lower side then required
then the same is sold in the local market for the use of water
supply and so on. These slightly lower efficient pipes are sold as
per ISP standards while the one that clears the entire test
perfectly would be sold as per API standards.
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Once the hydro test is over the pipe is checked with the TPI
(Third Party Inspector) and once he approves the particular pipe
the same is tamped on and is made ready for either dispatched or
would be further coated of specification is received from the
customer.
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DIFFERENTS PLANT OF THE COMPANY
WGSRL
Bharuch
Anjar
Saw Manufacture
Pipe Mill
Plate Mill
Coating Plant
Spiral pipe manufacturing Spiral Plant L- Saw ERW Plant EWR 1
Spiral 1
Spiral 2
EWR 2
Spiral 3
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THE CUSTOMERS
1. NTPC
2. GAIL
3. ONGC
4. SHELL
5. RELIANCE INDUSTRIES LIMITED
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COMPETITORS
The competitors of WELSPUN are as follows:
Company SAIL TATA STEEL JSW STEEL JINDAL BHUSHAN WELSPUN
Net Sales Amount(in cr) 183 610 1224 199 478 2278
SalesSAIL 4% TATA STEEL 12% SAIL JSW STEEL 25% TATA STEEL JSW
STEEL JINDAL BHUSHAN WELSPUN BHUSHAN 9% JINDAL 4%
WELSPUN 46%
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ENVIRONMENT
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WORK CULTURE AND INTERNAL CONTROL SYSTEMThe greatest strength of
Welspun Gujarat Stahl Rohren Limited is its workforce. Whose are
dedicated and committed. A culture of innovation prevail here- a
will to achieve, a desire to accomplish.
A motivated force of employees leave no stone unturned to
accomplish the mission of Welspun Gujarat Stahl Rohren Limited. The
company lays special emphasis on training and upgrading the skills
of its employees. Regular workshops and training exercises are held
to inculcate best management practices at all levels.
In Welspun Gujarat Stahl Rohren Limited, Business Planning
Meeting (BPM) is held every month in order to finalize the plan for
next month. The company has experienced and qualified
professionals, who are maintaining the growth and success and are
responsible for planning, executing and monitoring of the companies
policies.
A qualified and independent Audit Committee of Board of
Directors also reviews the internal audit reports and the adequacy
of internal controls at quarterly intervals. The Company has
outsourced the services of its Accounts and Finance Section to
Accenture who are world leaders in this area. With the expertise of
Accenture available in the company, the transparent and worlds best
practices will be made available. With the induction of Accenture,
the company will be benefited in maintaining internal control
systems effectively and adequately.
The Companies maintains proper system of internal controls.
Sound financial and commercial practices are an integral part of
the companys workings. The controls are set to ensure that all
assets are safeguarded and protected against loss from unauthorized
use or disposition and that transaction are authorized, recorded
and reported correctly.
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SWOT ANALYSIS
STRENGTHS:Own manufacturing capabilities. Strong reputation
Strong brand name Good Quality Good practices (Visits of clients
done by head of the hotel and Institutions with sales persons.
WEAKNESS:Delivery Issues High lead time Less sales force Wrong
impression on clients due to high discounts available at retail
outlet of the company. Priced higher as compared to other
competitors
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OPPORTUNITIE
New business of same client in different cities of the India can
be tapped. New business (like any section/part customization of the
hotel using BESPOKE service) can be explored with the goodwill
earned & relations developed with client. Strong Demand in
Middle East and Asian Markets. The huge replacement market in the
US and Russia.
THREATS:Loss of clients due to delivery, pricing, discounting
issues. Decrease in sales and thus profit earned by the company.
Volatile raw material price. Entry of Foreign Players.
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PART - B
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EXECUTIVE SUMMARYWorking capital management is a very
significant activity that takes lots of time and efforts of all the
functions in an organization. Also, for an efficient conduct of
business operation, it is essential to forecast working capital
requirement effectively, and for this it is necessary to manage
current assets and current liabilities.
An attempt was made to cover all significant aspects involved in
managing working capital at WGSRL, management of various components
of working capital i.e. inventory, receivables, payables, and cash.
This report includes various financial analysis of the performance
of WGSRL of last two years. It includes the analysis of their funds
i.e. sources of funds and where they allocate their funds. Various
ratios are calculated which shows the important financial
indicators of the company. We have also calculating the operating
cycle of the company, by comparing the raw material, work in
progress, finished goods and receivable turnover days with the
norms and how far WGSRL is able to fulfill the norms. Thus the
basic idea behind studying and analyzing the financial terms is not
only comparing their performance but finding out the scope and
importance of some of the components that differently affects the
working capital requirement of WGSRL.
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STUDY OF RESEARCH DESIGN
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STATEMENT OF THE PROBLEM
Working capital management is concerned with the problem arise
in attempting to manage the current assets, current liabilities and
interrelation between both. It operational goal is to manage the
smooth functioning of day-to- day operation of an organization.
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OBJECTIVE OF THE PROJECT
The basic idea behind undertaking the summer project on working
capital management at WGSRL was to understand the various issues
related to working capital like its components estimating or
forecasting the working capital requirement and the scope and the
level of each components of working capital. The objective also
included understanding how these components were managed or
controlled especially receivables, which is the major activity that
requires a lot staff at different places.
The objective include understanding the practical considerations
and ways in which the working capital was forecasted because
working capital management is one of the major activity that
requires a lot of attention and consideration to be taken care of
not only by the finance functions but also by others also.
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DATA COLLECTION METHODTypes of data collection
There are two types of data collection methods available. 1.
Primary data collection:- The data which is collected fresh or
first hand, and for first time which is original in nature. Primary
data can collect through personal interview, questionnaire etc. to
support the secondary data. 2. Secondary data collection:- The
secondary data are those which have already collected and stored.
Secondary data easily get those secondary data from records,
journals, annual reports of the company etc. It will save the time,
money and efforts to collect the data. Secondary data also made
available through trade magazines, balance sheets, books etc. This
project is based on primary data collected through personal
interview of head of account department, head of SQC department and
other concerned staff member of finance department. But primary
data collection had limitations such as matter confidential
information thus project is based on secondary information
collected through five years annual report of the company,
supported by various books and internet sides. The data collection
was aimed at study of working capital management of the company.
The data required for the study was taken from the Finance
department; some of the data were also taken from the sales
department and purchase department. Thus all the data collected
were of secondary type and no primary data was taken and used. Some
of the employees were interviewed to know about the prevailing,
which helped to great extent in making decisions about the
importance of the items.
Data collection technique The methodology adopted to collect the
primary data was Personal Interview Methods, while at the same time
secondary data are taken from company magazine. Sampling Design
Type of sampling: Systematic sampling to the employees Sample size:
60 Area of sampling: Finance Dept. of WGSRL Sample collection
Technique: Personal Interview
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DATA ANALYSIS AND INTERPRETATION
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DEMOGRAPHIC PROFILE OF RESPONDENT
1.
Designation
Managers Executive
14 46
Designation
Managers 23%
Managers Executives
Executives 77%
Interpretation:The survey was conducted on 60 employee out of
which 14 were managers and 46 were executive.
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2.
Age
20 to 29 30 to 39 40 to 49 50 to 59
4 14 26 16
50 to 59 27%
20 to 29 7% 30 to 39 23%
Age
20 to 29 30 to 39 40 to 49 50 to 59
40 to 49 43%
Interpretation: The respondent among age group 20 to 29 are 7%,
between30 to 39 are 23%, between 40 to 49 are 43% and between 50 to
59 are 16%.
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3.
Gender.
Male Female
45 15
Female 25%
Gender
Male Female
Male 75%
Interpretation: In survey 75% were male respondent and 25% were
female respondent
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WORKING CAPITAL MANAGEMENT AND CONTROL INTRODUCTION
Working capital is taken to be a life blood of the business lack
of working capital may lead a business to technical insolvency and
ultimately to liquidation. That is why working capital management
of a firm is considered to be one of the most important tasks of
the financial managers working capital management decisions
involves decision relating to current assets including decision
about how these current assets are too be financed , what should be
the volume of the current assets.
DEFINITION
Current assets minus current liabilities. Working capital
measures how much in liquid assets a company has available to build
its business. The number can be positive or negative; depending
upon how much debt the company is carrying. In general, companies
that have a lot of working capital will be more successful since
they can expand and improve their operations. Companies with
negative working capital may lack the funds necessary for the
growth. Also called net current assets or current capital. WORKING
CAPITAL= CURRENT ASSETS CURRENT LIABILITIES
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CONCEPT OF WORKING CAPITAL
There are two concepts of working capital
Gross working capitalIt refers to the firms investment in
current assets. Current assets, which can be converted into cash
within an accounting year or operating cycle and include cash,
short term securities, debtors, bills receivables and stock.
Net working capitalTechnically it is the difference between the
current assets and current liabilities. Current liabilities are
those claims of outsiders, which are expected to mature for payment
within an accounting year and include creditors, bills payable and
outstanding expenses.
In short current assets have a positive relationship with
working capital and current liabilities have a negative
relationship with working capital. Current credit soundness is
indicated by positive Net Working Capital position and is of major
concern to investors and bankers. It is measured by the current
ratio obtained by dividing rupee value of current assets by the
rupee value of current liabilities. Larger the ratio the more
solvent the firm, i.e., in the event of bankruptcy, falling prices
of inflated values, the book value of current assets could shrink
considerably and the firm creditors would still be assured of
payment.
However from management point of view, a high ratio may indicate
poor planning since excessive amounts are tied up in unproductive
current assets, which tend to produce a lower income. In a firms
statement of Financial Position, these components of working
capital are reported under the following headings.
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Current Assets Liquid Assets (cash and bank deposit) Inventory
Debtor and Receivable
Current Liabilities Bank Overdraft Creditors and Payables Other
Short Term Liabilities
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WORKING CAPITAL CYCLE
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MANAGEMENT OF WORKING CAPITALWorking Capital is the life blood
of any business big or small. However, smaller businesses might
find it more trying to maintain a comfortable level of capital.
Managing working capital is an important factor for them.
Working Capital Management is important because maintaining a
balance of income to debt can be difficult and owner must be
diligent to assure that it is kept. Sometimes it takes a little
assistance to maintain levels of fluidity or make major purchases.
Working Capital Management involves the relationship between a
firms short term assets and its short term liabilities. The goal of
working capital management is to ensure that a firm is able to
continue its operations and that it has sufficient ability to
satisfy both maturing short-term debt and upcoming operational
expenses. The management of working capital involves managing
inventories, accounts receivable and payable, and cash.
If working capital dips too low, a business risks running out of
cash. Even very profitable businesses can run into trouble if they
lose the ability to meet their short-term obligations. Working
Capital financing can be used as a fast cash option to cushion the
periods when the flow is not ideal or readily available. Even when
owners are meticulous in managing working capital, finding the
right levels to remain comfortable and competitive can be
difficult.
Working Capital Management takes place on two levels: Ratio
analysis can be used to monitor overall trends in working capital
and to identify areas requiring closer management. The individual
components of working capital can be effectively managed by using
various techniques and strategies.
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Working Capital Management is not an end in itself. It is an
integral part of the departments overall management. The needs of
efficient working capital management must be considered in relation
to other aspects of the departments financial and non-financial
performance.
The major financial statements of a company are the Balance
Sheet, Profit and Loss Account and Cash Flow Statement. These
statements present an overview of the financial position of a firm
to both the stakeholders and the management of the firm. But unless
the information provided by these statements is analyzed and
interpreted systematically, the true financial position of the firm
cannot be understood. The analysis of financial statements plays an
important role in determining the financial strengths and
weaknesses of a company relative to that of other companies in the
same industry. The analysis also reveals whether the companys
financial position has been improving or deteriorating over
time.
These statements are contained in a companys annual report. An
annual report also includes the chairmans speech, the directors
report, the auditors report and accounting policy changes. To
understand the financial statements here the Balance Sheet, Profit
and Loss Accounts and Cash.
Flow Statement of Welspun Gujarat Stahl Rohren Limited. With
calculation of working capital and ratio analysis is provided.
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MANAGEMENT OF INVENTORYInventory Management involves the control
of assets being produced for the purpose of sale in the normal
course of the companys operations. The goal of effective inventory
management is to minimize the total costs- direct and indirect-
that are associated with holding inventories. However, the
importance of inventory management to the company depends upon the
extent of investment in inventory.
Inventory management is the active control program which allows
the management of sales, purchases and payments. The task of
inventory planning can be highly complex in manufacturing
environments. At the same time, it rests on fundamental principles.
The system used for inventory must tie into the operations of the
firm. Inventory planning and management must be responsive to the
needs of the firm. The firm should design systems, including
reports that allow it to make proper business decisions.
Inventories constitute the most significant part of current
assets of a large majority of companies. Inventory serves as link
between the production and consumption of goods. The object of
inventory management is to ensure availability of materials in
sufficient quantity as and when required. Inventories represent
investment of a firms funds. The objective of the inventory
management should be the maximization of the value of the firm.
The firm should therefore consider: a) Costs, b) Return, and c)
Risk factors in establishing its inventory policy.
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IMPORTANCE OF ADEQUATE WORKING CAPITAL Solvency of the business.
Goodwill. Easy loans. Cash discounts. Regular supply of raw
materials. Regular payments of salaries, wages etc. Exploitation of
favorable market conditions. Ability to face crisis.
DETERMINANTS OF WORKING CAPITALThe Working Capital of a firm or
a concern depend upon a large number of factors and each factor
having a different importance which influence working capital needs
of a firms. There are no set rules or formulae to determine working
capital requirement of a firm. Some of the important factors are
explained below:
FACTORS DETERMINING WORKING CAPITAL REQUIREMENT 1. 2. 3. 4. 5.
6. 7. Nature of Business Size of Business Production Policy Rate of
Stock Turnover Credit Policy Manufacturing Process Other
Factors
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1.Nature of Business:Working capital requirement of a firm are
basically influenced by the nature of its business. Trading and
financial firms have a very small investment in fixed assets, but
require a large sum of money to be invested in current assets like
inventories, receivables and cash. Some manufacturing businesses
also have to invest substantially in working capital and a nominal
amount in current assets. On the other hand, public utilities have
very limited needs for working capital and have to invest
abundantly in fixed assets.
2.Size of Business:The Working Capital requirement of a concern
are directly influenced the size of its business which may be
measured in terms of scale of operations. Greater the scale of a
business unit, larger will be the requirement of working capital.
But, in some cases smaller concern may need more working capital
due to high overhead charges, inefficient use of available
resources.
3.Production Policy:In certain industries the demand is subject
to wide fluctuations due to seasonal variations. The requirement of
working capital in such cases depends upon the production policy.
The production policy could be kept either steady that is by
accumulating inventories during slack periods with a view to meet
high demands during the peak season or the production could be
curtailed during the slack season and increase during peak season.
If the policy is to keep production steady by accumulating
inventories it will require higher working capital.
4.Rate of Stock Turnover:There is a high degree of inverse co
relationship between the quantum of working capital and the
velocity or speed with which the sales are affected. A firm which
has a high rate of stock turnover will need low amount of working
capital as compared to those firms which have a low rate of
return.
5.Credit Policy:The firms credit policy is another factor which
influences working capital requirement. It depends on the nature of
the business, competitions and firms desire to use it as marketing
tools. The credit policy of the concern affects the working capital
by influencing the level of debtors and creditors. A concern that
purchases it requires lesser amount of working capital. On the
other hand, a concern buying its requirements of cash and allowing
credit to its customer shall need larger amount of working
capital.
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6.Manufacturing Process:In manufacturing business, the
requirement of working capital increase in direct proportion to
length of manufacturing process. When the manufacturing process is
long, large amount of working capital is required. Because the raw
material and supplies have to carry for longer period and it
requires the increment in Labour and service costs, so shortest
production process should be obtain.
7.Other Factors:Some other factors also influence the
requirements of working capital such as seasonal variations,
business cycle, rate of growth, earning capacity etc.
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TECHNIQUES OF ASSESMENT OF WORKING CAPITAL REQUIREMENTS
1. ESTIMATION OF COMPONENTS OF WORKING CAPITAL METHODSince
working capital is the excess of current assets over current
liabilities, an assessment of the working capital requirements can
be made by estimating the amounts of different constituents of
working capital i.e. inventories, accounts receivables, cash,
accounts payables, etc.
PERCENTAGE OF SALES METHODThis traditional and simple method of
estimating working capital requirements. According to this method,
on the basis of past experience between sales and working capital
requirement, a ratio can be determined for estimating the working
capital requirements in the future.
2. OPERATING CYCLE APPROACHAccording to this approach, the
requirements of working capital depend upon the operating cycle of
the business. The operating cycle begins with the acquisitions of
raw materials and ends with collections of receivables. It may be
broadly classified into four stages. I. Raw material and stores
storage stage. II. Work-in-progress stage. III. Finished goods
inventory stage. IV. Receivables collection stage. The duration of
operating cycle for the purpose of estimating working capital
requirements is equivalent to the sum of the duration of each of
these stages less the credit period allowed by the suppliers.
Symbolically the duration of the working capital cycle can be put
as follows: O=R+W+F+DC Where, O = duration of working capital R =
raw materials and stores storage period W = work in progress
period
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F = finished stock storage period D = debtors collection period
C = creditors payment period After computing the period of one
operating cycle, the total number of operating cycles that can be
completed during a year can be computed by dividing 365 days with
the number of operating cycle. The total operating expenditure in
the year will give the average amount of working capital
requirement.
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RATIO ANALYSISRatio analysis is powerful tool of financial
analysis. A ratio is defined as the indicated measures of tow
mathematical expression and as the relationship between two or more
things. In financial analysis a ratio is used as benchmark for
evaluating the financial position and performance of a firm. The
point to note is that a ratio indicates a quantitative
relationship, which can be, in turn, used to make a qualitative
judgment. Such is nature of all financial ratios. TYPES OF
RATIO:There are a number of types of ratio of interest to the
various stakeholders of a business. The main classification of
ratio is as follows: Profitability Ratios: Measure the relationship
between gross/net profit and sales, assets and capital employed.
These are sometimes referred as performance ratios. Activity
Ratio:These measure how efficiently an organization uses its
resources. These are sometimes referred as assets utilization
ratios. Liquidity Ratio: These measure the short-term and long term
financial stability of the firm by examining the relationship
between assets and liabilities. These are sometime called as
solvency ratios. Investment Ratios: This group of ratio is
concerned with analysing the return for shareholder. These examine
the relationship between the member of share 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.
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Profitability Ratios: Generally, there are two types of
profitability ratios 1. Profitability in relation to sales 2.
Profitability in relation to investmento o o
Net profit ratio Operating profit ratio Return on Investment
NET PROFIT RATIO: NET PROFIT RATIO = NET PROFIT SALES/INCOME
FROM SERVICES Table 1 Table is showing NET PROFIT RATIO
Year 2005-2006 2006-2007
Net Profit After Tax 613.72 1425.86
Income From Services 18316.77 26827.55
Ratio 0.033 0.053
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30000 25000 20000 15000 10000 5000 0 613.72 2005-2006 1425.86
2006-2007 18316.77 Net profit after tax Income from services
26827.55
NP Ratio0.06 0.05 0.04 0.03 0.02 0.01 0 2005-2006 2006-2007
0.033 NP Ratio 0.053
Interpretation: The net profit ratio is the overall measure of
the firms ability to turn each rupee of income from
services in net profit. If the net margin is inadequate the firm
will fail to achieve return on shareholders funds. High net profit
ratio will help the firm service in the fall of income from
services, rise in cost of production or declining demand. The net
profit is increased because the income from services is increased.
The increment resulted a slight increase in 2007 ratio compared
with the year 2006.
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NET PROFIT MARGIN: NET PROFIT MARGIN = Table 2 Table is showing
NET PROFIT MARGIN PROFIT AFTER TAX / SALES
Year 2005-2006 2006-2007
Net Profit After Tax 613.72 1425.86
Sales 19117.65 28522.98
Ratio 0.032 0.049
30000 28522.98 25000
20000
19117.65
15000
10000
5000 613.72 2005-2006 1425.86 2006-2007 Net profit after tax
Sales
0
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NP Margin Ratio0.06 0.05 0.04 0.03 0.02 0.01 0 2005-2006
2006-2007 NP 0.032 0.049
Interpretation: The table shows that in year 2005-2006 the Net
Profit after tax was 613.72 and the sales was 19117.65 which gives
the ratio between them 0.032 and in year 2006-2007 the Net Profit
after tax was 1425.86 and the sales was 28522.98 which gives the
ratio between them 0.049 which depict the clear result that in
2006-2007 there was an increase of 0.017 net profit margin.
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OPERATING PROFIT RATIO: OPERATING PROFIT RATIO = OPERATING
PROFIT SALES/INCOME FROM SERVICES. Table 3 Table is showing
OPERATING PROFIT RATIO
Year 2005-2006 2006-2007
Operating Profit 903.54 2191.08
Income From Services 18316.77 26827.55
Ratio 0.049 0.082
30000 26827.55 25000
20000 18316.77 15000
10000
5000 2191.08 0 903.54 2005-2006 2006-2007 Operating Profit
Income From services
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OP Ratio0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2005-2006
2006-2007 OP 0.049 0.082
Interpretation: The operating profit ratio is used to measure
the relationship between net profits and sales of a firm. Depending
on the concept, it will decide. The operating profit ratio is
increased compared with the last year. The earnings are increased
due to the increase in the income from services because of
Operations & Maintenance fee. So, the ratio is increased
slightly compared with the previous year.
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RETURN ON INVESTMENT: ROI = PAT / SHARE HOLDERS FUND
Table 4 Table is showing RETURN ON INVESTMENT
Year 2005-2006 2006-2007
Profit After Tax 613.72 1425.86
Share Holders Fund 4947.83 6466.83
Ratio 0.124 0.22
7000 6466.83 6000 5000 4000 3000 2000 1425.86 1000 613.72 0
2005-2006 2006-2007 Profit after tax Share Holders Fund 4947.83
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ROI Ratio0.25 0.22 0.2
0.15 0.124 0.1
0.05
0 2005-2006 2006-2007
ROI
Interpretation: This is the ratio between net profits and
shareholders funds. The ratio is generally calculated as percentage
multiplying with 100. The net profit is increased due to the
increase in the income from services ant the shareholders funds are
increased because of reserve & surplus. So, the ratio is
increased in the current year.
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FIXED ASSETS TURNOVER RATIO: NET ASSETS TURNOVER RATIO = SALES/
INCOME FROM SERVICES
NET FIXED ASSETS Table 5 Table is showing FIXED ASSETS TURNOVER
RATIO
Year 2005-2006 2006-2007
Income From Services 18316.77 26827.55
Net Fixed Assets 10112.81 16448.30
Ratio 1.811 1.631
30000 26827.55 25000
20000 18316.77 15000 16448.3 Income from services Net Fixed
Assets 10000 10112.81
5000
0 2005-2006 2006-2007
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FATO Ratio1.85 1.8 1.75 1.7 1.65 1.631 1.6 1.55 1.5 2005-2006
2006-2007 FATO Ratio 1.811
Interpretation: Fixed assets are used in the business for
producing the goods to be sold. This ratio shows the firms ability
in generating sales from all financial resources committed to total
assets. The ratio indicates the account of one rupee investment in
fixed assets. The income from services is increased in the current
year due to the increase in the Operations & Maintenance fee
due to the increase in extra invoice and the net fixed assets are
reduced because of the increased charge of depreciation. Finally,
that affected a huge increase in the ratio compared with the
previous years ratio.
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TOTAL ASSETS TURNOVER RATIO : TOTAL ASSETS TURNOVER RATIO =
Table 6 Table is showing TOTAL ASSETS TURNOVER RATIO SALES / TOTAL
ASSETS
Year 2005-2006 2006-2007
Sales 19117.65 28522.98
Total Assets 13744.17 22475.47
Ratio 1.390 1.270
30000 28522.98 25000 22475.47 20000 19117.65 Sales 13744.17
Total Assets
15000
10000
5000
0 2005-2006 2006-2007
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TATO Ratio1.4 1.38 1.36 1.34 1.32 1.3 1.28 1.26 1.24 1.22 1.2
2005-2006 2006-2007 1.27 TATO Ratio 1.39
Interpretation:
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CURRENT ASSETS TURNOVER RATIO: CURRENT ASSETS TURNOVER RATIO
Table 7 Table is showing CURRENT ASSETS TURNOVER RATIO = SALES /
CURRENT ASSETS
Year 2005-2006 2006-2007
Sales 19117.65 28522.98
Current Assets 12787.76 16329.30
Ratio 1.494 1.748
30000 28522.98 25000
20000
19117.65 16329.3 12787.76 Sales Current Assets
15000
10000
5000
0 2005-2006 2006-2007
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CATO Ratio1.8 1.75 1.7 1.65 1.6 1.55 1.5 1.45 1.4 1.35 2005-2006
2006-2007 1.494 CATO Ratio 1.748
Interpretation:
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CAPITAL TURN OVER RATIO: CTO Table 8 Table is showing CAPITAL
TURN OVER RATIO = SALES OR INCOME FROM SERVICES/CAPITAL
EMPLOYED
Year 2005-2006 2006-2007
Income From Services 18316.77 26827.55
Capital Employed 4947.83 6466.84
Ratio 3.702 4.148
30000 26827.55 25000
20000 18316.77 15000 Income from services Capital Employed 10000
6466.84
5000
4947.83
0 2005-2006 2006-2007
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CTO Ratio4.2 4.148 4.1 4 3.9 3.8 3.7 3.6 3.5 3.4 2005-2006
2006-2007 3.702 CTO Ratio
Interpretation: This is another ratio to judge the efficiency
and effectiveness of the company like profitability ratio. The
income from services is greater increased compared with the
previous year and the total capital employed includes capital and
reserves & surplus. Due to huge increase in the net profit the
capital employed is also increased along with income from services.
Both are effected in the increment of the ratio of current
year.
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WORKING CAPITAL TURNOVER RATIO: WCT RATIO = SALES OR INCOME FROM
SERVICES/NET WORKING CAPITAL Table 9 Table is showing WORKING
CAPITAL TURNOVER RATIO Year 2005-2006 2006-2007 Income From
Services 18316.77 26827.55 Working Capital 3756.74 6239.52 Ratio
4.876 4.300
30000 26827.55 25000
20000 18316.77 15000 Income From Services Working Capital 10000
6239.52 3756.74
5000
0 2005-2006 2006-2007
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WCT Ratio5 4.9 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4 2005-2006
2006-2007 4.3 WCT Ratio 4.867
Interpretation: Income from services is greatly increased due to
the extra invoice for Operations & Maintenance fee and the
working capital is also increased greater due to the increase in
from services because the huge increase in current assets. The
income from services is raised and the current assets are also
raised together resulted in the decrease of the ratio of 2007
compared with 2006.
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Current ratio
Quick ratio Absolute liquidity ratio
CURRENT RATIO:Table 10 Table is showing CURRENT RATIO
Year 2005-2006 2006-2007
Current Assets 12787.76 16329.30
Current Liabilities 9031.02 10089.78
Ratio 1.416 1.618
18000 16000 14000 12000 10000 9031.02 8000 6000 4000 2000 0
2005-2006 2006-2007 12787.76 10089.78 Current Assets Current
Liabilities 16329.3
.
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Current Ratio1.65 1.6 1.55 1.5 1.45 1.4 1.35 1.3 2005-2006
2006-2007 1.416 Current Ratio 1.618
Interpretation: As a rule, the current ratio with 2:1 (or) more
is considered as satisfactory position of the firm. When compared
with 2006, there is an increase in the provision for tax, because
the debtors are raised and for that the provision is created. . In
the year 2006, the cash and bank balance is reduced because that is
used for payment of dividends. In the year 2007, the loans and
advances include majorly the advances to employees and deposits to
government. The loans and advances reduced because the employees
set off their claims. The other current assets include the interest
attained from the deposits. The deposits reduced due to the
declaration of dividends. So the other current assets decreased.
The huge increase in sundry debtors resulted an increase in the
ratio, which is above the benchmark level of 2:1 which shows the
comfortable position of the firm.
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QUICK RATIO: QUICK RATIO = CURRENT ASSETS-INVENTORIES/CURRENT
LIABILITIES Table 11 Table is showing QUICK RATIO
Year 2005-2006 2006-2007
Quick Assets 8315.30 17340.32
Current Liabilities 9031.02 10089.78
Ratio 0.920 1.719
20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0
2005-2006 2006-2007 9031.02 8315.3 10089.78 Quick Assets Current
Liabilities 17340.32
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Quick Ratio2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005-2006
2006-2007 0.92 Quick Ratio 1.719
Interpretation: Quick assets are those assets which can be
converted into cash within a short period of time, say to six
months. So, here the sundry debtors which are with the long period
does not include in the quick assets. Compare with 2006, the Quick
ratio is increased because the sundry debtors are increased due to
the increase in the corporate tax and for that the provision
created is also increased. So, the ratio is also increased with the
2006.
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CASH RATIO: CASH RATIO Table 12 Table is showing CASH RATIO =
CASH RATIO / CURRENT LIABILITIES
Year 2005-2006 2006-2007
Cash balance 3066.55 3433.90
Current Liabilities 9031.02 10089.78
Ratio 0.339 0.340
12000
10000 9031.02 8000
10089.78
6000
Cash Balance Current Liabilities
4000 3066.55 2000 3433.9
0 2005-2006 2006-2007
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Cash Ratio0.3402 0.34 0.3398 0.3396 0.3394 0.3392 0.339 0.3388
0.3386 0.3384 2005-2006 2006-2007 0.339 Cash Ratio 0.34
Interpretation: The cash ratio of the year 2006-2007 is 0.340
but in the year 2005-2006 is 0.339.The cash ratio shows the sound
position of the company, as compared to year 2005-2006 it increased
by 1.0. This is because of increase in cash and bank balance.
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NET WORKING CAPITAL RATIO: NET WORKING CAPITAL RATIO Table No 13
Table is showing NET WORKING CAPITAL RATIO = NET WORKING CAPITAL /
NET ASSETS
Year
NET WORKING CAPITAL
NET ASSETS
Ratio
2005-2006 2006-2007
3756.74 6239.52
12787.76 16329.30
0.339 0.340
18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2005-2006
2006-2007 3756.74 6239.52 12787.76 16329.3
Net Working capital Net Assets
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NWC Ratio0.3402 0.34 0.3398 0.3396 0.3394 0.3392 0.339 0.3388
0.3386 0.3384 2005-2006 2006-2007 0.339 NWC Ratio 0.34
Interpretation: In the year 2006, the net assets in the deposits
and the current liabilities are also reduced because of the payment
of dividend. That causes a slight increase in the net working
capital ratio.
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OTHER DEBT RATIOS: OTHER DEBT RATIOS Table No 14 Table is
showing OTHER DEBT RATIOS = TOTAL LIABILITIES / TOTAL ASSETS
Year 2005-2006 2006-2007
TOTAL LIABILITIES 9031.02 10089.78
TOTAL ASSETS 12787.76 16329.30
Ratio 0.706 0.618
18000 16000 14000 12000 10000 9031.02 8000 6000 4000 2000 0
2005-2006 2006-2007 12787.76 10089.78 Total Liabilities Total
Assets 16329.3
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Other Debt Ratio0.72 0.7 0.68 0.66 0.64 0.62 0.6 0.58 0.56
2005-2006 2006-2007 0.618 Other Debt Ratio 0.706
Interpretation: Total Liabilities are generally excluded from
the computation from leverage ratios, to asses the proportion of
total funds-short and long term-provided by outsiders to finance
total assets.
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RECOMMENDATIONSThe company should develop norms foe individual
item of current assets, like Tandon committee approach emphasizes
these aspects. Norms should de attainable with efficient
performance. Variations between standard or norms and actual
achievement should be documented and measures instituted for
corrective action. At WGSRL the working capital requirements are
estimated through projection method. This method does not provide
any way of checking the validity of the line and is to that extent
defective, for the purpose, one has to rely on the statistical
method called regression analysis, therefore the company should
take into consideration the percentage of the sales method. Also,
because this method has useful application in forecasting
relatively short-term changes in the financial needs. Inventories
should be managed properly and the company must try to increase the
turnover if finished goods by opening their co-operative
stores.
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CONCLUSIONAt the end I would like to conclude that the overall
accounting policies of the company are well structured. The
background of the company is strong enough to resist the imbalances
of the markets as well as the economy. They have been able to
manage working capital components efficiently. Against the
background of a very challenging business and economic scenario of
the country, WGSRL concluded yet another year of satisfying results
by improving operating margins significantly. The results of the
year 2007-08 shoes that the society is stronger and more efficient
and the further shoes a consistent trend towards growth and cost
efficiency. During the current year the sales reached the new
milestone. Even in some of the quantitative measures like better
sourcing of raw materials, productivity or cost of financing, WGSRL
created new landmarks and the list is growing further.
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BIBLIOGRAPHY
BOOKSFinancial Management Financial Management Cash & WC
Management Inventory & WCM WC Mangt. & Control I. M. Pandey
Prasanna Chandra Gopalkrishnan S. Srinivasan Satish B. Mathur
WEBSITES www.welspun.com www.workingcapital.com www.12manage.com
www.moneypore.com www.economictimes.com
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ANNEXURE
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PROFIT AND LOSS ACCOUNT
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