Final Report Bhagya 2

8/6/2019 Final Report Bhagya 2

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Shree Renuka Sugars Ltd.

A Project Report

On

“STUDY ON WORKING CAPITAL MANAGEMENT

WITH FINANCIAL RATIO’S AND

IT’S INTERPRETATIONS”

(With Reference to Shree Renuka Sugars Ltd)

By

Bhagyawanti .I. Naragund

Under the Guidance of

Prof. Ambika Khavaspur

Industry Guide

Ms Dipti Naik

Submitted in partial fulfillment of the requirements for

the degree of PGDBM (IB)

MATS SCHOOL OF BUSINESS

MATS School of Business




2009-10

Chapter I

Introduction to the Study

1.1:- Need for the study

1.2:- Objectives of the study

1.3:- Hypothesis

1.4:- Research Methodology





1.1:- Need for the study

A Comprehensive study on Working Capital Management. This Study isconducted to understand the Applications of Working Capital Management in the

organization. i.e., attainment of Goals in an effective manner through Planning, and

controlling of organizational resources. The study is carried out to understand and learn

the various practices adopted and followed by them and see whether there is any scope

for improvement from the organization’s point of view.

Working capital management is important for any kind of sector including service. The

importance of working capital arises due to following reasons :-

One of the major and common reasons for industrial sickness is faulty working

capital management

False working capital management results in either over or under liquidity of capital

including solvency and reputation.

1.2:- Objectives of the study

To study the effectiveness of working capital.

To study the cost effectiveness of sources of working capital.

To study the relationship between profitability and liquidity.





1.3:- Hypothesis

Ho : Profitability & liquidity is independent of working capital efficiency.

H1 : Profitability & liquidity is dependent of working capital efficiency.

1.4:- Research Methodology

Research Design:- To fulfil above objectives with regards to the study of

working capital , the data will be collected mainly through secondary data.

A) Secondary Data

Secondary data is collected from published annual reports of the company.

Financial Tools:-

Trend analysis

Ratio analysis

Limitations of the Study:-

• Access to various confidential matters of the organization is difficult to collect.

Reference:





I. BOOKS

1. FINANCIAL MANAGEMENT

Pandey I . M , Vikas Publishing House Pvt Ltd , Delhi

2. FINANCIAL MANAGEMENT

Prasanna Chandra, Tata McGraw Hill, Delhi

II.WEBSITES…

www.renukasugars.com

III. COMPANY ANNUAL REPORTS.


http://www.renukasugars.com/

http://www.renukasugars.com/




Chapter II

Industry Profile2.1 :- The Historical Back Ground of Indian Sugar Industry

2.2:- The sector wise break up’s

2.1:-The Historical Back Ground of Indian Sugar Industry:-

Sugar is the one of the oldest industry of our country and India is the second largest

producer of sugar. Sugar Industry in India is the second largest agro-processing industry

in the country after cotton textiles About 50 million sugarcane farmers and a large

number of agricultural labourers are involved in sugarcane cultivation and ancillary





activities, constituting 7.5% of the rural population. Besides, the industry provides

employment to about 2 million skilled/semi skilled workers and others mostly from the

rural areas. The industry not only generates power for its own requirement but surplus

power for export to the grid based on by-product –Bagasses. It also produces ethyl

alcohol, which is used for industrial and potable uses, and can be used to the manufacture

Ethanol, an ecology friendly and renewable fuel for blending with petrol.

The sugar industry in Indian uses only sugarcane as input, hence sugar Companies have

been established in large sugarcane growing states like Uttar Pradesh, Maharashtra,

Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. These six states contribute more

than 85% of total sugar production in the India; Uttar Pradesh and Maharashtra together

contribute more than 57% of total production.

Indian sugar industry has grown horizontally with large number of small sized sugar

plants set up throughout the country as opposed to the consolidation of capacity in the

rest of the important sugar producing countries and sellers of sugar, where greater

emphasis has been laid on larger capacity of sugar plants.

India and Brazil continue to dominate the global sugar production followed by China,

Thailand Mexico and Australia. In SY 2006-07 India and Brazil together contributed

more than 60 million MT out the total 131 million MT of sugar produced from cane. Top

ten countries produced more than 80% of the total production.


http://www.trivenigroup.com/sugar/sugar-production.html






Fig 1.1

(Source: USDA Foreign Agricultural Service).

The entrepreneurs have been allowed to set up sugar factories of expand theexisting sugar factories as per the techno-economic feasibility of the project. However,

they are required to maintain a radial distance of 15 kms from the existing sugar factory.

After de-licensing, a number of new sugar plants of varying capacities have been set up

and the existing plants have substantially increased their capacity.

There are 566 installed sugar mills in the country as on March 31 st 2005, with a

production capacity of 180 lack MTs of sugar, of which only 453 are working. These

mills are located in 18 states of the country.





2.2:- The sector wise break up’s as follows:

Table no#1

Sl. No. Sector No of factories

1. Private 189

2. Public 62

3. Co-operative 315

Total 566





Chapter III

Company Profile

3.1:- Introduction to Company

3.2:-Business Growth

3.3:- Nature Of Business Carried

3.4:- Product Profile

3.5:- Ownership Pattern

3.6:- Organisation Structure

3.7:- Competitors Information

3.8:- Aims & Objectives

3.9:- Vision & Mission

3.1:- Background of the company:-





Shree Renuka Sugars is an integrated manufacturing company with strategic focus on

Sugar and its allied products in Power and Ethanol. The Company's registered office is in

Belgaum, Karnataka and Corporate Office is at Mumbai. Its key manufacturing facility is

in Munoli, 70 Kms from Belgaum and also operates a leased facility at Aland in

Karnataka and Ajara, Arag in Maharashtra. The company is working on other

acquisitions, expansions and lease opportunities to strengthen its existing strong

fundamentals and growth prospects.

SRSL has the largest sugar refining capacity in India of 6000 tons per day. It accounts for

over 20% of India’s international sugar trade. SRSL convergence of three businesses in

one organisation i.e Sugar , Biofules , renewable energy.

SRSL has strong global presence the company is the second largest exporter of sugar

from India with a presence in Middle East , South East Asia and East Africa . This export

revenue provides the company with an enhanced trade flow larger than its production ,

acting as a consolidator and enabling it to capitalise on global price as well as purchasing

trends .

The company acquired a stand alone ethanol plant of 100KL expanded to 300 KL , to

cater the ethanol requirements of oil marketing companies (OMC) which are located in

coastal states of Goa Maharashtra and Kerala for exports. The company has also





acquired a strategic 54% stake in KBK Chem-Engineering Pvt. Ltd. , engaged in turnkey

solutions in the field of distilleries, ethanol plant and biofuels .

The company directly markets sugar to institutional buyers a pattern shift from the

tradition of selling to wholesale agents and dealers. this has rationalised working capital

outlay and has reduced the Company’s dependence on sugar brokers . The company is

working on other acquisitions, expansions and lease opportunities to strengthen its

existing strong fundamentals and growth prospects.

3.2:- Milestone of Shree Renuka Sugars Ltd (SRSL):

1995-SRSL was incorporated.

1998-Initially it acquired a 1250 TCD sick unit from the Nizam Sugars Limited.

1999-The commissioning and trail production took place.

2002-A distillery and ethanol plant of 60kl per day capacity was added.

2006 – Modernization and expansion of it’s Munoli Plant by 7500 TCD, Power Plant of

35.5 MW and Distillery by 120 KLPD.

2009-SRSL acquired Vale Do Ivai S.A (VDI) , a Brazilian sugar and ethanol producer .

3.3:- Nature of Business Carried

Nature of Business carried by SRSL is involved in the activity of manufacturing white

crystal sugar products which is the main product. The process of production involve

collection of





• Raw sugarcane to sugar,

• Raw sugar into refined sugar

• Molasses, Bagasses are it’s by products





1) Molasses:

Molasses is the final effluent obtained in the preparation of sugar by repeated

crystallization. Molasses is the brown colored residue after sugar has been traced

from the juice. Molasses still contains some quantity of sugar, but this sugar cannot

be extracted by usual technology. It is the end product from a refining process carried

out to yield Sugar.

Molasses is mainly used for the manufacture of ethyl alcohol (ethanol), Yeast

and cattle feed.

2) Bagasses:





Bagasse is a fibrous residue of cane stalk that is obtained after crushing an

extraction of juice. It consists of water, Fiber an relatively small quantities of soluble

solids, the composition of bagasse varies based on the variety of sugarcane, Maturity of

cane, Method of harvesting and the efficacy of the sugar mill, the usual bagasse

composition is given below.

Table no#2

CONTENT RANGE %

Moisture 46-52

Fiber 43-52

Soluble solids 2-6

Bagasses is usually used as a combustible to produce steam, which in turn is used

to generate power; it is also used as raw materials for production of paper and as

feedstock for cattle.

By making use of bagasses, sugar mills have been successful in reducing

dependence on state electric boards for power supply, Further this bagasse based

cogeneration plant is eligible for carbon credit compensation under the Kyoto protocol.

The residue product from distillery operation blended with chemicals is being

sold as bio-fertilizers.

The company is having rich German technology machines and equipment that are

installed in the production area. The power plant machines and Turbines are of Bharath

Heavy Electricals Limited.

3) Power generation plant:





Power plant uses the fiber of the processed sugar cane (bagasse) as fuel to

generate electricity in an environmentally responsible manner. An integrated 11.2 M.W.

power generates and supplies electricity to the state grid produced from sugar cane waste

used to rotate turbines 7 M.W. power is utilized in the plant remaining power is supplied

to KPTCL.

4) Distillery plant:

Distillery plant uses by-product of sugar mill viz; Molasses as raw material for

production of spirits and alcohol namely rectified spirit, ethanol and extra neutral

alcohol. The capacity of plant was 120 KLPD in November 2006. which has been

increased upto 900 KLPD in September 30,2009.

3.4:- PRODUCT PROFILE

MAIN PRODUCT-





WHITE CRYSTAL SUGAR:

The main product of the sugar manufacturing process is white crystal sugar.

This white crystal sugar is manufactured in the following grades:

1) L-30 [Large size sugar]

2) M-30 [Medium size sugar]

3) S1-30 [small size sugar]

4) S2-30 [very small size]

3.5:- OWNERSHIP PATTERN:





Shree Renuka Sugar LTD is one of the privatized sugar manufacturing company.

Under the entrepreneur of Vidya Murkumbi, established its branches in various part of

Karnataka and Maharashtra with the share capital of 200 millions of Indian Rupees.

Board of Directors:

Sl. No Name of the Directors Nature of Directorship

1 Mrs. Vidya M. Murkumbi Executive Chairperson

2 Mr. Narendra .M. Murkumbi Vice Chairman &

Managing Director

3 Dr. B.P. Baliga Independent Director

4 Mr.Hrishikesh Parandekar Independent Director

5 Mr. J.J Bagath Independent Director

6 Mr. Sanjay. K. Asher Independent Director

7 Mr.Jonathan Kingsman Independent Director

8 Mr. Nandan .V. Yalgi Whole Time Director

9 Mr.Robert Taylor Independent Director

10 Mr. S M Kaluti Non-Executive Director


http://www.trivenigroup.com/sugar-information/indian-sugar-industry.html%20%5C%20top#top

http://www.trivenigroup.com/sugar-information/indian-sugar-industry.html%20%5C%20top#top




3.6:- ORGANIZATION STRUCTURE





3.7:- Competitors Information:

The main competitors are as follows:

• Ugar sugar industry Ltd.

Crushing capacity-10000 TCD

Recovery-11.5%

Sugar production-12000 Qtls (per day)

• Godavari sugar Ltd.


Recovery-10.5%


• Shree Prabulingeshwar sugar works Ltd.


Recovery-11.2%


corporate customers :

• Hindustan Coca Cola Beverages Private Limited,

• Pepsico, ITC Limited,• Britannia Industries Limited

• Nestle India Limited,

• Cadbury India Limited,

• Hindustan Unilever Limited and

• Pantaloons (Big Bazaar).





Sugar is used for various ranges of products such as soft drinks, baby food, milk and

dairy products.

3.8 :- AIMS & OBJECTIVES

Shree Renuka Sugars Ltd aims to become the most efficient and market driven integrated

processor of sugarcane in the world, while enabling the team to grow in a learning and

motivating atmosphere, participating in the all round development of the community and

delivering consistently on returns to all our shareholders.

3.9:- VISION & MISSION

Vision: – The Company’s vision is –

“To become the most efficient processor of sugar and the largest market of sugar and

ethanol in the country.”

Mission: – The Company’s mission is-

“ To meet the objectives that are to expand its installed capacity , achieve end-to-end

integration for all its plants to improve margin and reduce cyclicality of business ,

achieve great raw material security , increase its focus of corporate and high value of consumers , to reduce price risk in sugar by heading ,maintaining a strong presence in

export market and expand for ethanol .”

Chapter IV





Analysis & Interpretation

4.1:- Working Capital Management

4.2:- Concept Of Working capital

4.3:- Operating Cycle

4.4:- Types of working capital

4.5:-Factors Influencing Working Capital

Requirements

4.6:- Working Capital Policy

4.7:-

4.1 WORKING CAPITAL MANAGEMENT





One of the most important areas in the day-to-day management of the affairs of a

firm is the management of working capital. Working Capital Management is the

functional area of finance that covers all current accounts of the firm. It is

concerned with management of the level of individual current assets as well as

management of total working capital. The success of the any firm depends upon

the efficient management of working capital and hence the working capital is

often described as the lifeblood of the business.

4.2 CONCEPT OF WORKING CAPITAL:-

There are two concepts of working capital :-


WORKING CAPITAL

GROSS WORKING CAPITAL

NET WORKING CAPITAL




1. Gross working capital :-

Gross working capital refers to the firm’s investment in current asset. Current

assets are those assets which can be converted into cash within an accounting year or

Operating cycle and include cash, short-term securities, debtors (accounts receivable or

book debts) bills receivable and stock (Inventory).

2. Net working capital :-

Net working capital refers to the difference between 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(accounts payable), bills

payable, and out standing expenses .Net working Capital can be positive or negative .A

positive net working capital occurs when current assets are in excess of current

liabilities. A Negative net working capital occurs when current liabilities are in excess of

current assets.





4.3 OPERATING CYCLE:-

Operating cycle is the time duration required to convert sales after the collection of

resources into inventories into cash. The operating cycle of a manufacturing company

involves three phases.

Acquisition of resources:- such as raw material, labor, power and fuel. Etc.

Manufacture of the product:- which includes collection of raw material into

work –in-progress into finished goods.

Sale of product:- either for cash or on credit. Credit sales create account

receivable for collection.

The operating cycle refers to the length of the time necessary to complete the following

cycle events.


Raw

materials

Sundry

Debtors/

B/R

Or

B/R

cash

Work in

Progress

Finished

goods




Fig 1.1

The cycle will repeat again and again over the period depending upon the nature of the

business and type of the product.

4.4 Types of working capital:-

• Permanent working capital

• Variable or temporary working capital


Final Report Bhagya 2

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