A

DISSERTATION REPORT

ON

WORKING CAPITAL MANAGEMENT OF UFLEX LIMITED

For the fulfillment of the requirement of

MASTER OF BUSINESS ADMINISTRATION

JAMIA HAMDARD, HAMDARD NAGAR, NEW DELHI

(2013-2015)

Submitted to: Submitted by:

Mrs. Sana Beg Rahul Singh Chauhan

Assistant professor [FMIT] MBA (Gen) 2013-2015

CERTIFICATE

This is to certify that the dissertation report titled, A STUDY ON WORKING CAPITAL MANAGEMENT OF UFLEX LIMITED is a study undertaken by Mr. Rahul Sing Chauhan, MBA (Gen) (2013-2015).

The dissertation report is the result of his own work as declared by the student in Declaration from Student of Authentic Work which is attached in this dissertation report.

(Mrs. Sana Beg)

Supervisor

DECLARATION

I hereby declare that the project work entitled A STUDY ON WORKING CAPITAL MANAGEMENT OF UFLEX LIMITED submitted to Department of Management, JAMIA HAMDARD, is a record of an original work done by me under the guidance of Mrs. Sana Beg, FMIT. This project work is submitted in the fulfillment of degree of Master of Business Administration. The results embodied in this report have not been submitted to any other university or institute for the award of any degree or diploma.

Rahul Singh Chauhan

MBA (GEN)

ACKNOWLDEGMENT

As the Research has been concluded, the Researcher would like to sincerely thank a number of people for their guidance and support.

In addition to this, the Researcher would like to show gratitude to Mrs. Sana Beg, Assistant professor (FMIT) who undertook the role of a supervisor and mentor in the Researchers journey of preparation of this paper and without whose guidance this paper would not have materialized.

I would like to express my sincere thanks to my friends and whole faculty of JAMIA HAMDARD University for their valuable guidance in completion of this report

Rahul Singh Chauhan

MBA (GEN)

EXECUTIVE SUMMARY

Packaging serves by helping preservation of the quality and lengthening the shelf life of innumerable products - ranging from milk and biscuits, to drugs and medicines, processed and semi-processed foods, fruits and vegetables, edible oils etc.

UFLEX Ltd, is the India-based Flexible Packaging giant. UFLEX Packaging Division- Exports provides flexible packaging solutions through a wide range of products to satisfy diverse needs of the customers all over the world. The Exports Sales in the financial year 2012-13 have increased by 20.38% in comparison with the previous financial year. The operating profit has increased by 18.30% as per the provisional figures provided by the Accounts Department (Exports Division).

The objective of the project is to understand Working Capital Management. Working capital refers to the cash a business requires for day to day operations or more specifically, for financing the conversion of raw material into finished goods. The project aimed to gain in-depth knowledge about the processes and operations of the various department of the Exports Division.

The project helped in gaining complete practical knowledge about working of the Marketing Department. It included identifying the potential customers for flexible packaging in Europe in the product categories of personal care, detergents, pet-food, snacks food etc. through Secondary Research using internet.

The project further includes calculations related to the assessment of Working Capital and preparation of Comparative Statement of Current Assets and Current Liabilities for calculating the operating cycle. The operating cycle for the year 2013 is 91.66 days and for the projected year 2014 it is 101.08 days which is slightly on the higher side and efforts should be made to reduce it. Maximum Permissible Bank Finance for Working Capital for the projected year has come out to be Rs. 4432 lacs.

TABLE OF CONTENTS

CHAPTERS Page No.

1) Introduction

2) Objectives of the study

3) Review of literature

4) Company profile

5) Research methodology

6) Data, analysis and interpretations

7) Findings..

8) Conclusion.

9) Limitations of the study

10) Recommendation..

11) Bibliography

CHAPTER 1 - INTRODUCTION

WORKING CAPITAL

The Working Capital can be categorized, as funds needed for carrying out day-today operations of the business smoothly. Cash is the lifeline of a company. If this lifeline deteriorates, so does the companys ability to fund operations, reinvest and meet capital requirements and payments. Understanding a companys cash flow health is essential to making investment decisions. A good way to judge a companys cash flow prospects is to look at its Working Capital Management (WCM).

Working Capital management is about the commercial and financial aspects of Inventory, credit, purchasing, marketing, and royalty and investment policy. Every running business needs working capital. Even a business which is fully equipped with all types of fixed assets required is bound to collapse without working capital.

Adequate supply of raw materials for processing

Cash to pay for wages, power and other costs

Creating a stock of finished goods to feed the market demand

The ability to grant credit to its customers.

All these require working capital.

CONCEPTS OF WORKING CAPITAL

Gross Working Capital: The gross working capital refers to the firms investment in all the current assets taken together. The total investment in all the individual current assets is the gross working capital.

Net Working Capital: The term net working capital is defined as the excess of total current assets over total current liabilities. It may be noted that the current liabilities refer to those liabilities which are payable within the period of one year.

LIQUIDITY V/S PROFITABILITY

An aggressive approach results in greater profitability but lower liquidity while a conservative approach results in lower profitability but higher liquidity. This can be resolved to a certain extent by the management by following a moderate policy which is neither highly aggressive nor highly conservative.

FACTORS AFFECTING WORKING CAPITAL

Nature of business

Seasonality of operations

Production policy

Market condition

Condition of supply

Business cycle fluctuation

Credit policy

Operating cycle

COMPONENTS OF WORKING CAPITAL: A large amount of the working capital remains tied up in various capital components. These are:

Raw material

Work- in- Process

Finished Goods

Receivables

WORKING CAPITAL MANAGEMENT AT UFLEX LIMITED

UFLEX Ltd. Packaging Division- Exports provides Flexible Packaging solutions through a wide range of products to satisfy diverse needs of the customers all over the world, who consistently turn to the company for complete flexible packaging solutions year after year, time and again. The global perspective gives the important advantage of developing knowledge of foreign markets, analyzing the options for the company and offering world class services to the growing customer base in over 80 countries around the globe.

To understand the Working Capital Management it is very important to understand the operations of various departments associated with it. Understanding the whole cycle from the procuring of raw material to the delivery of goods to the customer is very essential. The cycle involves the use of Working Capital at various stages. For smooth flow of the operations it is very important to have adequate working capital. An effort has been made through this project to have a firsthand experience of the working of various departments and to study and gain in-depth knowledge about the processes and operations of the Exports Division. The motive was to gain comprehensive knowledge about different departments which are involved in the completion of a particular order acquired by the Exports Division. The project focuses on the following departments

Marketing Department

Stores Department

Commercial Department

Finance Department

Chapter 2-OBJECTIVE OF THE STUDY

The objective of the project is to understand WORKING CAPITAL MANAGEMENT AT UFLEX LTD (Packaging Division-Exports).

The project also includes understanding the processes and operations of various departments of the Exports Division.

CHAPTER 3- LITERATURE REVIEW

Working capital management and corporate performance:

Case of Malaysia

-M. A. Zariyawati, M. N. Annuar, H. Taufiq, A.S. Abdul Rahim

Abstract

Working capital always being disregard in financial decision making since it involve investment and financing in short term period. However, it is an important component in firm financial management decision.

An optimal working capital management is expected to contribute positively to the creation of firm value. To each optimal working capital management firm manager should control the trade off between profitability and liquidity accurately. The intention of this study is to examine the relationship between working capital management and firm profitability. Cash conversion cycle is used as measure of working capital management.

This study is used panel data of 1628 firm-year for the period of 1996-2006 that consist of six different economic ectors which are listed in Bursa Malaysia. The coefficient results of Pooled OLS regression analysis provide a strong negative significant relationship between cash conversion cycle and firm profitability. This reveals that educing cash conversion period results to profitability increase. Thus, in purpose to create shareholder value, firm manager should concern on shorten of cash conversion cycle till optimal level is achieved.

Key words: working capital management; cash conversion cycle; profitability.

In intention to discover the relationship between efficient working capital management and firms profitability, Shin and Soenen (1998) used net-trade cycle (NTC) as a measure of working capital management.

NTC is basically equal to the CCC whereby all three components are expressed as a percentage of sales. The reason by using NTC because it can be an easy device to estimate for additional financing needs with regard to working capital expressed as a function of the projected sales growth. This relationship is examined using correlation and regression analysis, by industry and working capital intensity. Using a compustat sample of 58,985 firm years covering the period 1975-1994, in all cases, they found, a strong negative relation between the length of the firm's net-trade cycle and its profitability. In addition, shorter NTC are associated with higher risk-adjusted stock returns. In other words, Shin and Soenen (1998) suggest that one possible way the firm to create shareholder.

Working Capital a Tool to Judge your Companys Efficiency

The most repeated maxim amongst financial managers is "Cash is the lifeblood of business". A business owner always look that his cash flow to business is smooth and use it for generating profit. When a business is running smoothly and taking in profit, then it will undoubtedly have cash surpluses. If your business does not have cash surplus, expect to go out of the business.

Actually, cash earnings are worth more than inventory to many businesses and their financial managers try to maximize it whenever and wherever it is possible. Here are a few ways you can improve your business through gaining working capital:

1. Cash Flow forecasting is what working capital management is all about. Your forecast should include factors like fluctuating market cycles, unforeseen events, loss of customers and your competitor's strategy. Also, unforeseen demands and its effect on your business all need to be factored in.

2. There is nothing wrong with putting together a contingency plans just in case of unexpected events. It's true that market leaders manage uncertainty much better than in years past, but you really should have risk management procedures for your company as insurance. Base it on both an objective and realistic view of how working capital is used in your business.3. Try to address your working capital on a corporate-wide basis. The cash you generate at one business is often better used at another provided one is more profitable than another. However, for this type of internal business exchange to work you must have certain practices already in place. Your business should have efficient banking channels and an open line of communication between production and billing as well as an internal system to move cash to and from the locations.

4. You need proper procedures in place to deal with dispute management. You want your customers to basically go away during disputes and free up that locked up cash. Not only that but it can also improve your overall customer service by using that energy towards sales, order entry, and cash collection. You'll be pleasantly surprised how much of an increase you'll see in your business's efficiency on top of a reduction in operating costs. 5. Collaborating with your customers instead of being focused only on own operations will also yield good results. If feasible, helping them to plan their inventory requirements efficiently to match your production with their consumption will help reduce inventory levels. This can be done with suppliers also.

The most critical short-term commercial financing techniques typically include short-term merchant cash advance and credit card processing programs and commercial real estate loan programs. Both working capital funding approaches are frequently a source of confusion for business owners.

An underutilized commercial financing strategy for businesses is possibly the best commercial loan strategy to secure cash for their business: a business cash advance using credit card processing. Credit card financing is an effective business financing tool that is usually overlooked by any business accepting credit cards as a customer payment method.Service businesses, restaurants and retail stores are the most likely candidates to benefit from this working capital cash management strategy. This funding strategy uses an under-utilized business asset (credit card receivables) to obtain business cash advances based upon sales volume. This working capital cash strategy is also known as credit card factoring. Some business owners have used receivables financing or factoring which allows them to sell future receivables on a discounted basis.

Not all service and retail businesses can document business receivables to obtain a commercial loan. Businesses such as bars and restaurants do not typically have receivables to use for business financing. What these businesses do have in many cases is documented sales activity. It is this documented level of credit card sales activity that becomes a financial asset to the business and its working capital management strategies. Business cash advances from $5,000 to $300,000 can usually be obtained based on a merchant's sales volume and future sales.There will usually be only a few business financing sources that are regularly successful at executing the credit card financing and processing. There are key difficulties to avoid with a working capital advance, and selecting an effective funding source is essential to an appropriate business cash advance program.

However there will be many commercial mortgage loan situations in which longer-term commercial financing is not appropriate for the business owner. In such circumstances it is important for a business owner to realize that there are viable short-term working capital strategies. It is prudent to explore short-term commercial loan choices for business owners who want to refinance or sell the property within a short time frame. Appropriate short-term commercial mortgages will have more reasonable lockout fees and prepayment penalties than typically required with long-term commercial real estate financing.

While we will not attempt to describe the technical aspects of commercial loan prepayment fees and lockout fees in this article, we will note that the absence of such fees in most short-term commercial mortgage loan programs is a very positive aspect of these short-term working capital management options. The lack of such penalty fees could easily translate to a savings of 10% to 30% or more if a business owner needs to sell their commercial property during the time period which would have triggered prepayment fees and lockout fees in traditional longer-term commercial real estate loans.

Although prepayment and lockout fees will typically be avoided with short-term commercial mortgage loans, there are some trade-offs to be made if a business owner selects shorter-term working capital loans. When short-term commercial mortgages are available, they will usually not be readily available for special purpose commercial properties, the interest rate will frequently be in the range of 11% to 13% and the loan-to-value will typically be under 70%.Multi-family, warehouse, mixed-use, office and retail commercial properties are the best candidates for short-term business finance options. For a typical short-term commercial loan, business owners should be comfortable with a time period of less than three years.Few commercial lenders are capable of successfully executing short-term business financing. There are also numerous problems to avoid with short-term commercial mortgage programs, so selecting a lender is critical to business owners wanting a short-term business loan involving commercial property.

It is sufficiently important to repeat that a vital key to successful short-term commercial loans and business cash advances is selection of an appropriate lender. Despite the potential benefits of shorter-term business financing, the choice of a lending source cannot be overlooked.

Retrieved from "http://www.articlesbase.com/finance-articles/working-capital-financing-and-shortterm-commercial-loans-479938.html

Working Capital Management-an Effective Tool for Organizational Success

The working capital in a firm generally arises out of four basic factors like sales volume, technological changes, seasonal, cyclical changes and policies of the firm. The strengths of the firm is dependent on the working capital as discussed earlier but this working capital is itself dependent on the level of sales volume of the firm. The firm requires current assets to support and maintain operational or functional activities. By current assets we mean the assets which can be converted readily into cash say within a year such as receivables inventories and liquid cash .If the level of sales is stable and towards growth the level of cash, receivables and stock will also be on the high. However, with the increase in the working capital as a result of high sales volume this pattern is referred to as working capital management because in order to produce or manufacture additionally or increase the overall sales target, more amount of working capital is required by the firm which is possible only when the management of working capital is prudent and effective whereas in case of declining sales reduction in the allocation of working capital will be prudent way to manage every business operation. Technological changes too has an impact on the management of working capital because as the production process changes or the line of business changes ,all this an an effect on the working capital requirements which in turn gets affected. Apart from this the policies of the firm too affects the pattern of working capital management. Seasonal and cyclical fluctuations, recession tooadversely affects the sales pattern or functionalibilty of the firm.

CHAPTER 4- COMPANY PROFILE

Uflex is a Multi Million Group headquartered at Noida, on the periphery of New Delhi, India and having manufacturing facilities in India and Dubai. UAE, Offices in Europe and North America and market presence in 80 countries around the world. Uflex facility enjoys ISO 9001 and ISO 14001 certifications and has FDA and BGA approvals. For their products, Uflex is part of the D&B Global Database and winner of various prestigious national and international awards like the top exporter of BOPET and BOPP films, and the world star award for packaging excellence. FPA, AIMCAL and the DuPont awards in 2004-05 are the latest in this series. Uflex Group came into existence in 1983 and has grown into one of the biggest multi integrated packaging groups in the world. The Group is a multi faceted organization which has backward integrated its operations from manufacturing of polyester chips, films(BOPET, BOPP and CPP- both in plain and metalized form), coated film, laminates, pouches, holographic films, gravure cylinders, Inks and adhesives to all types of packaging and printing machines, offering total flexible packaging solutions to the entire world.

Uflex has always been dedicated to the industry giving technical know-how and being the trend-setter in the flexible packaging industry. Uflex has always been on the edge of innovation and endeavors to be the first to come up with innovative products that cater to the changing demands of the packaging industry. Experience and expertise in all spheres of packaging gives Uflex the insights of the latest developments and innovations that are takin place around the world and helps to be in the sync with our customer requirements and quality concerns.

As part of the Uflex group. We have over over twenty years of experience in polymer technology, a record of success and innovation and are a publicly traded company in the DSE 1989, manufacturing and supplying products and delivering services that are world class, worldwide. The financial data of the company shows that the operating profit for the company increased by 29.33% from the financial year 2006-07 to 2007-08 bringing it to Rs. 129.24 Cr. The earning per share is Rs. 9.53 for the year and Dividend per share is Rs. 4. Debt to Equity ratio for the year being 2.13 and the current ratio 1.95.

Vision

At Uflex we believe that, to eventually emerge as a World leader in providing total Flexible Packaging solutions, we need a customer focused approach.

The way to being a world class player is paved with state-of-art facilities blended with world class practices. And it shall be our endeavour to be placed amongst the top ten international players by the year 2005.

Mission

We believe in using our creativity and aesthetic potential in providing flexible packaging solutions which make packaging easier, faster, more efficient and user friendly. In this way we too have share in contributing to the conservation of resources by enhancing the shelf life of the perishable products.

INTEGRATED SOLUTIONS BY UFLEX

Uflex Ltd provides integrated packaging solutions, right from design to delivery. Catering to the specific need for Laminates and pouches of each customer by constantly redefining cost effective packaging options, is the only tradition of service known to Uflex . With almost 2 decades of experience in flexible packaging and significant investments, we have perfected our processes and technology to produce high quality flexible packaging materials on time and within budgets. To ensure superior quality and timely delivery we have achieved full backward integration. Our in-company divisions and group companies located nearby produce all critical inputs, like the BOPET and BOPP films, Inks, Adhesives and substrates, Holographic films, Metallization facility, Blown film and other such raw materials.

Through our innovations in packaging, we have even helped our customers resolve a variety of problems. A few such cases are quoted below:

An auto major had serious problem in combating spurious spares. We designed very special laminates with holographic designs incorporating the companys logo. This eliminated the problem almost immediately raising the sales to three times within a year.

A bed mattress manufacturer had no brand recognition inspite of giving the best quality, because of duplication. When all methods failed to contain this piracy, Uflex Engineering Division created a Gravure printed pouch measuring 36x96. The problem was nipped and the brand established its leadership in the market.

A leading snack food manufacturer sold a popular snack in 400 gms packing. The quantity was too much for a person to finish in one go. But the snack needed to be sold in the 400 gms packs. Uflex Zipouch division designed a enclosable pouch with zipper. The buyer could eat as much as desired and then seal the pack for reuse later.

GROUP COMPANIES

UFLEX ENGINEERING LIMITED

As one of the leading engineering companies in India, FEL manufactures a wide range of packaging and converting machines. It also undertakes tailor made fabrication jobs for various industries with a primary focus on the oil, gas and construction industry.The latest addition is the division that manufactures electronic sensor controlled automobile dippers to be used in vehicles.

UFLEX CHEMICALS LIMITED

With a US$ 6.5 million manufacturing facility at noida, near Delhi, producing Inks and adhesives and a 72000 TPA polyester chips manufacturing plant at Malanpur, near Delhi.

UFLEX FOODS LIMITED

A 100% export oriented state-of-art freeze dried mushroom manufacturing plant is set in the city of Dehradun in the foothills of the Himalayas

UFLEX CONVERTING LIMITED

This company is divided into the Film Division and Converting Division. The film division is one of the largest manufacturer and supplier of Biaxially Oriented Polyethylene Teraphthalate films, Biaxially Oriented Polypropylene films and metalized films in the world.

With a 25000TPA strong converting capacity the Converting division of Uflex group is a leading converter in India producing laminates in a roll form, performed pouches as well as rotogravure cylinders.

BRANDS PACKAGED BY UFLEX (DOMESTIC)

Maggie Clinic Plus Taj Mahal Uncle Chips Henko

Top Ramen All Clear LiptonSleepwell Mr. White

MunchClose up Pillsburry Alpenlibe Gillette

Nature FreshCoffitos SundropBonkers Kohinoor

Tata ChakraEveryday Lifebuoy Lehar Ceat

Santoor Lays Apollo Margo sagar

Lux Horlicks Red LabelPan Parag Chik

Pantene Head &shoulders VanishBagpiper

PRODUCTS OF THE COMPANY

Uflex manufactures in-house :

Polyester chips

BOPET

BOPP

CPP films

Packaging machines

Converting Equipments

Inks

Adhesives

Flexible Laminates

Pouches

Woven poly propylene

CHAPTER 5 RESEARCH METHODOLOGY

Methodology used in UFLEX for market development and the process:

In UFLEX Limited the task of market development progresses in various stages. It starts with the process of exploratory research through shop audits then proceeds towards constructive research about potential buyers and then contacting them and then the process of customer development is undertaken.

RESEARCH TYPE

For this project report descriptive research is done by the help of various tools and techniques.

SOURCES OF DATA

Secondary data - from Finance Department of UFLEX itself from the files and documents maintained by the company. Collection of secondary data on Working Capital is done through Journals, Web pages and Financial Management books.

TOOLS AND TECHNIQUES USED

To understand the working capital management of Uflex limited various tools and techniques have been applied to do the analysis or the projections for the year 2014, the project work includes analyzing the previous years entries of Profit & Loss account and balance sheet and projecting the same for the next year. The estimations are done keeping in view the previous trends.

Analysis is done by the help of balance sheet, operating statement, operating cycle; comparison of current assets and current liabilities is done to know the working capital requirements of the company. Computation of maximum permissible bank finance for working capital has been calculated by using various formulas.

CHAPTER 6 DATA ANALYSIS

MAXIMUM PERMISSIBLE BANK FINANCE (MPBF)

As per RBI guidelines, working capital loans are granted on the basis of certain calculations/ analysis submitted by companies to banks/ financial institutions. The formats in which these reports are given are as per - CMA format, and the financing methodology is known as Maximum Permissible Bank Finance (MPBF).

First Method of Lending: Banks can work out the working capital gap, i.e. total current assets less current liabilities other than bank borrowings (called Maximum Permissible Bank Finance or MPBF) and finance a maximum of 75 per cent of the gap; the balance to come out of long-term funds, i.e., owned funds and term borrowings. This approach was considered suitable only for very small borrowers i.e. where the requirements of credit were less than Rs.10 lacs.

Second Method of Lending: Under this method, it was thought that the borrower should provide for a minimum of 25% of total current assets out of long-term funds i.e., owned funds plus term borrowings. A certain level of credit for purchases and other current liabilities will be available to fund the buildup of current assets and the bank will provide the balance (MPBF). Consequently, total current liabilities inclusive of bank borrowings could not exceed 75% of current assets.

Method I: .75 (CA CL)

Method II: 0.75 CA CL

Here CA stands for CURRENT ASSETS corresponding to the suggested norms or past levels if lower, CL represents CURRENT LIABILITIES excluding bank lending.

After doing the required calculations for the assessment of working capital the Exports Division sends the CMA to the Corporate Finance Department of the Company which is responsible for handing of the financial requirements of all the divisions and company as a whole. The Corporate Finance Department then issues the required amount to the Exports Division after verifying the calculations

.

UFLEX LTD - EXPORTS DIVISION

ASSESMENT OF WORKING CAPITAL REQUIREMENTS

PART A- OPERATING STATEMENT

(Amount -RUPEES IN LACS)

S No.

PARTICULARS

AS ON

AS ON

AS ON

31.03.12

31.03.13

31.03.14

PROVISIONAL

PROJECTIONS

1.

Gross Sales

(i) Domestic Sales

0.00

0.00

0.00

(ii) Export Sales

15949.05

19200.00

24000.00

Add other revenue income

904.09

800.00

1000.00

Total

16853.14

20000.00

25000.00

2.

Less: Excise Duty

0.00

0.00

0.00

Deduct other items

3.

Net Sales (item 1 minus item 2)

16853.14

20000.00

25000.00

4.

%age rise or fall in net sales as compared to previous year

-

18.67

25.00

5.

Cost of Sales

Raw Materials (including stores and other items used in the process of manufacture)

12054.94

14400.00

17856.00

a) Imported

0.00

0.00

0.00

b) Indigenous

12054.94

14400.00

17856.00

Other Spares

0.00

0.00

0.00

a) Imported

0.00

0.00

0.00

b) Indigenous

0.00

0.00

0.00

Power and Fuel

89.73

102.00

127.50

Direct Labour

299.04

360.00

450.00

(Factory wages & salary)

Other manufacturing Expenses

1794.59

2040.00

2550.00

Depreciation

2.92

3.00

3.14

Sub-Total

14241.22

16905.00

20986.64

Add : Opening Stock-in-Process

345.11

551.07

482.61

Deduct : Closing Stock-in-Process

551.07

482.61

550.00

Cost of Production

14035.26

16973.46

20919.25

Add : Opening stock of finished goods

252.75

124.76

260.00

Deduct: Closing Stock of finished goods

124.76

260.00

370.00

Total Cost of Sales

14163.25

16838.22

20809.25

6.

Gross Profit (item 3 minus item 5)

2689.89

3161.78

4190.75

Gross Profit as % to net sales

15.96

15.81

16.76

7.

Selling, General and Administrative Expenses

1116.43

1350.00

1701.00

8.

Operating Profit before interest (6-7)

1573.45

1811.78

2489.75

9.

Interest

528.00

575.00

674.00

10.

Operating Profit after interest (8-9)

1045.45

1236.78

1815.75

Operating Profit as % to net sales

6.20

6.18

7.26

11.

Add other non operating income

a) License Fee

0.00

0.00

0.00

b) Provision for doubtful debts

0.00

0.00

0.00

Sub Total (income)

0.00

0.00

0.00

Deduct other non operating expenses

preliminary exp.

0.00

0.00

0.00

Sub Total (expenses)

0.00

0.00

0.00

Net of other non-operative income/expenses

0.00

0.00

0.00

12.

Profit before tax/loss(-)(item 10 plus item 11)

1045.45

1236.78

1815.75

13.

Provision for Taxes

0.00

0.00

0.00

14.

Net Profit/Loss (-) (item 12 minus item 13)

1045.45

1236.78

1815.75

15.

Dividend

0.00

0.00

0.00

16.

Retained Profit (14-15)

1045.45

1236.78

1815.75

17.

Retained Profit / Net Profit ( % age )

100.00

100.00

100.00

ANALYSIS OF BALANCE SHEET

(Amount: RUPEES IN LACS)

AS ON

AS ON

AS ON

S No.

PARTICULARS

31.03.12

31.03.13

31.03.14

PROVISIONAL

PROJECTIONS

LIABILITIES

CURRENT LIABILITIES :-

1.

Short-term borrowings from banks

(incld. bills purchased, discounted & excess borrowing placed on repayment basis)

(i) From applicant bank

4387.15

4650.00

4432

(ii) From other banks

0.00

0.00

0.00

Sub-total (A)

4387.15

4650.00

4432.00

2.

Short term borrowings from others

0.00

0.00

0.00

3.

Sundry creditors (Trade)

2793.35

1091.38

930.57

4.

Advance payments from customers/deposits from dealers

0.00

0.00

0.00

5.

Provision for taxation

0.00

0.00

0.00

6.

Dividend payable

7.

Other statutory liabilities (due within one year)

0.00

0.00

0.00

8.

Deposits/Installments of term loans/ Debentures etc.(due within one year)

0.00

0.00

0.00

9.

Other current liabilities & provisions (due within one year)

35.17

0.00

0.00

Sub-total (B)

2828.52

1091.38

930.57

10.

TOTAL CURRENT LIABILITIES

7215.67

5741.38

5362.57

(total of 1 to 9)

TERM LIABILITIES

11.

Debentures (not maturing within one year)

0.00

0.00

0.00

12.

Preference shares (redeemable after one year)

0.00

0.00

0.00

13.

Term loans (excld installments payable within one year)

0.00

0.00

0.00

14.

Deferred Payment Credits (excluding installments due within

0.00

0.00

0.00

one year)

15.

Term deposits (repayable after one year)/Unsecured Loans

0.00

0.00

0.00

16.

Other term liabilities

0.00

0.00

0.00

17.

TOTAL TERM LIABILITIES

0.00

0.00

0.00

18.

TOTAL OUTSIDE LIABILITIES

7215.67

5741.38

5362.57

NET WORTH

19.

Ordinary share capital

0.00

0.00

0.00

20.

General reserve

0.00

0.00

0.00

21.

Revaluation Reserve

0.00

0.00

0.00

23.

Surplus (+) or deficit (-) in Profit & Loss account

27.25

1264.03

3079.78

24

NET WORTH

27.25

1264.03

3079.78

25.

TOTAL LIABILITIES

7242.92

7005.39

8442.35

ANALYSIS OF BALANCE SHEET (CONTINUED)

(Amount: RUPEES IN LACS)

AS ON

AS ON

AS ON

S No.

PARTICULARS

31.03.12

31.03.13

31.03.14

PROVISIONAL

PROJECTIONS

ASSETS

26.

Cash and bank balances

2.84

1.00

2.20

27.

Investments (other than long term investments)

(i) Government and other Trustee securities

0.00

0.00

0.00

(ii)Fixed deposits with banks

0.00

0.00

0.00

Deposit with Govt & other agencies

0.00

0.00

0.00

28.

(i) Receivables other than deferred & exports

(incld bills purchased and discounted by banks)

0.00

0.00

0.00

(ii) Export receivables (incld bills purchased

5124.00

4740.00

5920.00

and discounted by banks)

29.

Installments of deferred receivables

0.00

0.00

0.00

(due within one year)

30.

Inventory :

900.23

1242.61

1595.00

(i) Raw materials (including stores & other

224.40

500.00

675.00

items used in the process of manufacture)

a) Imported

0.00

0.00

0.00

b) Indigenous

224.40

500.00

675.00

(ii) Stock-in-process

551.07

482.61

550.00

(iii) Finished goods

124.76

260.00

370.00

(iv) Other consumable spares

a)Imported

0.00

0.00

0.00

b) Indigenous

31.

Advances to suppliers of raw materials &

258.15

0.00

0.00

stores/spares, consumables

0.00

0.00

0.00

32.

Advance payment of taxes

0.00

0.00

0.00

33.

Other Current assets( specify major item)

937.06

1000.00

900.00

34.

Total current assets (total of 26 to 33)

7222.28

6983.61

8417.20

FIXED ASSETS

35.

Gross Block (land & building machinery,

28.06

30.00

33.45

work-in-progress)

36.

Depreciation to date

7.42

8.22

8.30

37.

NET BLOCK (35-36)

20.64

21.78

25.15

OTHER NON-CURRENT ASSETS

38.

Investments/book debts/advances/deposits

0.00

0.00

0.00

which are not Current Assets

i) a) Investments in subsidiary companies/affiliates

b) Others (in Govt. Bonds, Bank Bond, FI Bonds)

0.00

0.00

0.00

ii) advances to suppliers of capital goods &

0.00

0.00

0.00

contractors

iii) Deferred receivables (machinery

0.00

0.00

0.00

exceeding one year)

iv) Others ( Margin with Bank)

0.00

0.00

0.00

39.

Non-consumables stores & spares

40.

Other non-current assets including dues from directors

0.00

0.00

0.00

41.

TOTAL OTHER NON-CURR. ASSETS

0.00

0.00

0.00

42.

Intangible assets

0.00

0.00

0.00

43.

TOTAL ASSETS (34 + 37 + 41 + 42)

7242.92

7005.39

8442.35

44.

TANGIBLE NET WORTH

27.25

1264.03

3079.78

45.

NET WORKING CAPITAL

6.61

1242.25

3054.63

[(17+24)-(37+41+42)]

46.

Current Ratio

1.00

1.22

1.57

47.

Total Outside Liabilities/Tangible Net Worth

264.80

4.54

1.74

48.

Total Term Liabilities/Tangible Net Worth

0.00

0.00

0.00

COMPARATIVE STATEMENT OF CURRENT ASSETS & CURRENT LIABILITIES

(Amount: RUPEES IN LACS)

AS ON

AS ON

AS ON

S No.

PARTICULARS

31.03.12

31.03.13

31.03.14

PROVISIONAL

PROJECTIONS

I. CURRENT ASSETS

1.

Raw materials (including stores & other items

used in the process of manufacturing)

a) Imported :

Amount

0.00

0.00

0.00

Consumption ( In Days)

0.00

0.00

0.00

b) Indigenous :

Amount

224.40

500.00

675.00

Consumption ( In Days)

6.79

12.67

13.80

2.

Other consumable spares, excldg. those included in

1 above.

a) Imported :

Amount

0.00

0.00

0.00

Consumption ( In Days)

0.00

0.00

0.00

b) Indigenous :

Amount

0.00

0.00

0.00

Consumption ( In Days)

0.00

0.00

0.00

3.

Stock-in-process :

Amount

551.07

482.61

550.00

Cost of production ( In Days)

14.33

10.38

9.60

4.

Finished goods :

Amount

124.76

260.00

370.00

Cost of sales (In Days)

3.22

5.64

6.49

5.

Receivables other than export & deferred

receivables (including bills purchased &

discounted by banks)

Amount

0.00

0.00

0.00

Sales (In Days)

0.00

0.00

0.00

6.

Export receivables (incld. bills purchased

& disc.)

Amount

5124.00

4740.00

5920.00

Export sales ( In Days)

117.26

90.11

90.03

7.

Advances to suppliers of materials & stores/

0.00

0.00

0.00

spares, consumables

8.

Other current assets including cash & bank balance & deferred receivables (due within one year)

939.90

1001.00

902.20

Cash & bank balances

2.84

1.00

2.20

Investments except long-term

0.00

0.00

0.00

Installments of deferred receivables

0.00

0.00

0.00

Others

937.06

1000.00

900.00

9.

TOTAL CURRENT ASSETS

6964.13

6983.61

8417.20

II. CURRENT LIABILITIES

(Other than bank borrowings for working capital)

10.

Creditors for purchase of raw materials,

stores and consumable spares

Amount

2793.35

1091.38

930.57

Purchase (In Days)

-

27.14

18.84

11.

Advance from customers

0.00

0.00

0.00

12.

Statutory liabilities

0.00

0.00

0.00

13.

Other current liabilities

35.17

0.00

0.00

a) S.T. borrowings-others

b) Dividend payable

0.00

0.00

0.00

c) Installments of TL,DPG and public deposits

0.00

0.00

0.00

d) Other current liabilities and provisions

35.17

0.00

0.00

14.

TOTAL CURRENT LIABILITIES

2828.52

1091.38

930.57

COMPUTATION OF MAXIMUM PERMISSIBLE BANK FINANCE FOR WORKING CAPITAL

(Amount: RUPEES IN LACS)

AS ON

AS ON

AS ON

S No.

PARTICULARS

31.03.12

31.03.13

31.03.14

PROVISIONAL

PROJECTIONS

FIRST METHOD OF LENDING

1.

Total current assets

7222.28

6983.61

8417.20

2.

Other current liabilities

2828.52

1091.38

930.57

(Other than bank borrowings & instl. due in one

Year)

3.

Working capital gap

4393.76

5892.23

7486.63

4.

Min. stipulated Net working capital

-182.56

288.06

391.66

(25% of WCG excluding export receivables)

5.

Actual/projected net working capital

6.61

1242.25

3054.63

6.

Item 3 minus item 4

4576.32

5604.17

7094.97

7.

Item 3 minus item 5

4387.15

4650.00

4432.00

8.

Maximum permissible bank finance (lower of 6 & 7)

4387.15

4650.00

4432.00

9.

Excess borrowings representing shortfall in NWC

0.00

0.00

0.00

SECOND METHOD OF LENDING

1.

Total current assets

7222.28

6983.61

8417.20

2.

Other current liabilities

2828.52

1091.38

930.57

(Other than bank borrowings)

3.

Working capital gap

4393.76

5892.23

7486.63

4.

Minimum stipulated NWC (25% of total current

524.57

560.90

624.30

assets excluding export receivables)

5.

Actual/projected net working capital

6.61

1242.25

3054.63

6.

Item 3 minus item 4f

3869.19

5331.33

6862.33

7.

Item 3 minus item 5

4387.15

4650.00

4432.02

8.

Maximum permissible bank finance (lower of 6 or 7)

3869.19

4650.00

4432.02

9.

Excess borrowings representing shortfall in NWC

517.96

0.00

0.00

CHAPTER 7 FINDINGS

The Inventory conversion period, receivables period and payables deferral period obtained from the calculations are as follows:

(Period In Days)

2012

2013 Provisional

2014 Projection

Raw Material Conversion Period (RMCP)

6.79

12.67

13.8

Work-In-Progress Conversion Period (WIPCP)

14.33

10.38

9.6

Finished Goods Conversion Period (FGCP)

3.22

5.64

6.49

Inventory conversion period

24.34

28.69

29.89

Receivables Conversion Period (RCP)

117.26

90.11

90.03

Gross Operating Cycle

141.6

118.8

119.92

Payables Deferral Period (PDP)

-

27.14

18.84

Net Operating Cycle

-

91.66

101.08

It can be seen from the above table that the Raw Material Conversion Period is showing an increasing trend but is still within 15 days limit. The Work-in-progress conversion period is showing a decreasing trend which is beneficial for the overall productivity of the Exports Division and thus the organization on the whole. As major part of sales are basically credit sales, there is a high Receivables conversion period but is maintained within the 90 days limit. In the year 2012 the RCP is greater than 90 days because in that year percentage of Export Receivables with respect to the Export Sales was very high. The Net Operating Cycle is on a higher side because of the high value of the RCP and Finished Goods Conversion Period. The overall net operating cycle is satisfactory but should not increase much because the shorter the net operating cycle, the good for the organization. The organization should try and make less credit sales if possible in order to reduce the high average collection period.

The Maximum Permissible Bank Finance for Working Capital for the projected year 2014 is Rs. 4432 lacs as calculated by both the methods of lending. The MPBF for the projected year is less than the previous year because of the inrease in Net Working Capital of the year.

CHAPTER 8 CONCLUSION

The project work undertaken has been a great enriching experience. The study has helped to gain in-depth knowledge about the different departments of the organization. The departments work in close co-ordination with each other which brings in high level of efficiency. Customer satisfaction is given utmost importance by each department and all the specifications given by the customer regarding the Flexible Packaging material and its dispatch are given due consideration.

The first hand experience of the working of every department has helped in gaining practical exposure and in gaining knowledge about the various integrities of business.

By the end of the project the importance of working capital was doubtless. It is now well understood that cash is the life line of the company. The need and importance of adequate working capital can hardly be underestimated. Every firm must maintain a sound working capital position otherwise its business activities are adversely affected. Thus every firm must have adequate working capital. Therefore estimating the working capital requirements for the coming year holds great importance.

CHAPTER 9 - LIMITATIONS

In spite of my continued effort to make the project as accurate and wide in scope as possible, certain limitations become evident while implementing the project. These limitations cannot be removed and have to be accepted as permanent constraints in implementing the project.

Some of the limitations identified are:

UFLEX Ltd cannot be compared to any of its competitors because it is the only integrated packaging firm in India.

Generalizations have to be made in some areas while analyzing the financial statements.

All the financial information was not supplied by the organization as the project was confined to the Exports Division.

There is uncertainty in forecasts.

Some factors influencing the working capital need cannot be quantified.

CHAPTER 10 RECOMMENDATIONS

After the study carried out, the following recommendations can be made:-

- The firm should try to reduce its Operating Cycle.

- The firm should try to reduce its Receivables Conversion Period which is slightly high. By this the funds are blocked with the customers, and hence they become idle, which otherwise can be used for some profitable purposes.

- The Finished Goods Conversion period is also on the higher side and efforts should be made to bring it to a lower level by maintaining low levels of Finished Goods Inventory.

CHAPTER 11 BIBLIOGRAPHY

Books:

1. PRANNA chandra, FINANCIAL MANAGEMENT

Journal:

2. Corporate Profile- UFLEX LIMITED

Websites:

3. www.indiainfo.com

4. www.flexindustries.com

5. www.flexfilm.com

6. www.uflex.org

MARKETING DEPARTMENT

STORES DEPARTMENT

COMMERCIAL DEPARTMENT

FINANCE DEPARTMENT