working capital management

LAYOUT OF BRITANNIA INDUSTRIES

2

SUMMER TRAINING PROJECT REPORT

ON “WORKING CAPITAL MANAGEMENT-OF BRITANNIA INDUSTRIES LIMITED”

SUMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

(2006-08)

UTTARAKHAND TECHNICAL UNIVERSITY, DEHRADUN

SUBMITTED BY: SUBMITTED TO:SHELLY AGARWAL DR PRADEEP SURI

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CERTIFICATE

I have the pleasure in certifying that Ms. SHELLY AGARWAL is a bonafide

student of III semester of the Master’s Degree in Business Administration of

Institute of Management Studies, Dehradun under Class ID No. MB06022

He has completed her Summer Training Project work entitled “Working

capital management” under my guidance.

I certify that this is his original effort and has not been copied from any other

source. This project has also not been submitted in any other university for

the purpose of award of nay degree.

This project fulfills the requirement of the curriculum prescribed by

Uttarakhand Technical University, Dehradun for the said course.

Signature: …………………………………

Name of the Guide: MR. MUDIT AGARWAL

Date: 10TH AUGUST, 2007

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PREFACE

Working Capital Management holds an important role in the theory of finance. A large number

of tools and techniques have been developed in the past to insure optimal allocation of working

capital management funds more than 80% of finance manager spent in dealing with day to day

problem which are part & parcel of working capital requirements of the enterprise. Efficient use

of working capital has direct bearing on profitability of the enterprise. It augments the

productivity of the investment in the fixed assets. Basic survival of the firm may stake if

adequate working capital is not available in time. It is essential to maintain constant supply of

working capital for healthy growth of an enterprise.

Management of working capital assumes added significance in the context of small scale and

medium size industries in our country. Most of them have week financial base and limited access

institutional finance. Their risk capacity is also low. Working capital management deals with

management of each of the firm current assets in such a way that is maximizes the value of the

firm.

In any economy, the financial sectors play a major role in the mobilization and allocation of

savings. In changing economic environment, manufacturing industries have to become more

competitive. They have to keep their cost in check. An efficient use of working capital would

release the funds locked in the current assets.

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ACKNOWLEDGEMENT

I readily acknowledge my indebt ness to my parents whose support, dedication and

honest efforts have given me an immense help in doing this project.

It gives me immense pleasure to express my deep sense of gratitude and appreciation to

my external guides, Mr. Mudit Agarwal, Mr. Sumit Mathur, Mr. Kiran Kumar,

Mr.Dubey & Mr.Joshi, Mr.Mudit Agarwal whose constant encouragement and

valuable suggestions gave back bone support in completing this project.

I take the opportunity to thanks to Dr.Pradeep suri for motivating, encouraging, guiding

and supporting at every step and sparing his valuable time for me.

Last but not the least I record my sincere thanks to all beloved and respectable persons

who helped me and could find any separate mention.

Above all I praise “GOD” the most beneficial, the most merciful that I have been able to

complete my training project successfully.

SHELLY AGARWAL

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DECLARATION

I SHELLY AGARWAL student of MBA III sem. hereby declare that this project report

“Working capital management”: A case study of Britannia Industries Limited” is written and

submitted by me under the guidance of DR. PRADEEP SURI is our original work. The entire

analysis and conclusion of this report are based on the information which is collected by me

during the training period.

The empirical finding in the report are based on the data collected myself while preparing

this project. I have not copied any thing from any source or other project submitted for the

similar purpose, if any.

SHELLY AGARWAL

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CONTENT

PREFACE

ACKNOWLEGEMENT

DECLERATION

Chapter-1: INTRODUCTION ABOUT BRITANNIA Company overview Company Profile Board of Directors Management team Mile stones History of Biscuits Activities of the company

PANTNAGAR UNIT

Introduction Company Profile SWOT Analysis 5’S of BIL Department of the company Safety policy of the company

CHAPTER-3: RESEARCH METHODOLOGY

Sample Size Method of Sampling Area of work Parameters of study Method of Data collection Tools Limitations

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CHAPTER-4: WORKING CAPITAL MANAGEMENT

About Working capital Classification of working capital Working capital management Difference between Cash flow & Funds Flow Structure of working capital in BIL Working capital pattern of BIL Share holding Pattern of BIL Management Pattern of Inventory Management Pattern of Debt Management Pattern of Cash Management Pattern of Loans & Advances Some important Ratios. Analysis & Findings Recommendations

CHAPTER-5: CONCLUSION & FINDINGS

CHAPTER-6: BIBLIOGRAPHY

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CHAPTER-I

INTRODUCTION

ABOUT

THE COMPANY

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COMPANY OVERVIEW

The story of one of India’s favorite brands reads almost like a fairy tale. Once upon a time, in

1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now

Kolkata) with an initial investment of Rs.295. The company we all know as Britannia today.

The beginnings might have been humble-the dreams were anything but. By 1910, with

the advent of electricity, Britannia mechanized its operations, and in 1921, it became the first

company east of the Suez Canal to use imported gas ovens. Britannia’s business was flourishing.

But, more importantly, Britannia was acquiring a reputation for quality and value. As a result,

during the tragic World War II, the Government reposed its trust in Britannia by contracting it to

supply large quantities of “service biscuits” to the armed forces.

As time moved on, the biscuit market continued to grow… and Britannia grew along with

it. In 1975, the Britannia Biscuit Company took over the distribution of biscuits from Parry’s

who till now distributed Britannia biscuits in India. In the subsequent public issue of 1978,

Indian shareholding crossed 60%, firmly establishing the Indian ness of the firm. The following

year, Britannia Biscuit Company was re-christened Britannia Industries Limited (BIL). Four

years later in 1983, it crossed the Rs.100crores revenue mark.

On the operations front, the company was making equally dynamic strides. In 1992, it

celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity – “Eat

Healthy, Think Better” – and made its first foray into the dairy products market. In 1999, the

“Britannia Khao, World Cup Jao” promotion further fortified the affinity consumers had with

‘Brand Britannia’.

Britannia strode into the 21st Century as one of India’s biggest brands and the pre-eminent

food brand of the country. It was equally recognized for its innovative approach to products and

marketing: the Lagan Match was voted India’s most successful promotional activity of the year

2001 while the delicious Britannia 50-50 Maska-Chaska became India’s most successful product

launch. In 2002, Britannia’s New Business Division formed a joint venture with Fonterra, the

world’s second largest Dairy Company, and Britannia New Zealand Foods Pvt. Ltd. Was born.

In recognition of its vision and accelerating graph, Forbes Global rated Britannia ‘One amongst

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the Top 200 Small Companies of the World’, and The Economic Times pegged Britannia India’s

2nd Most Trusted Brand.

Today, more than a century after those tentative first steps, Britannia’s fairy tale is not only

going strong but blazing new standards, and that miniscule initial investment has grown by leaps

and bounds to crores of rupees in wealth for Britannia’s shareholders. The company’s offerings

are spread across the spectrum with products ranging from the healthy and economical Tiger

biscuits to the more lifestyle-oriented Milkman Cheese. Having succeeded in garnering the trust

of almost one-third of India’s one billion populations and a strong management at the helm

means Britannia will continue to dream big on its path of innovation and quality. And millions of

consumers will favor the results, happily ever after.

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COMPANY PROFILE

Registered office of Britannia Industries Limited is situated in West Bengal. This company is

registered under Companies Act, 1956.

Britannia biscuits Company Limited was originally incorporated on 21st March 1918under Indian

Companies Act under the name “The Britannia Biscuits Company Limited” under section 21 of

Companies Act and approval of Central Government.

The main aim of the Company is to make available good and improved quality biscuits to each

and every part of the country.

The Company is perusing for ISO14001certificate and it is ISO 22000 certified.

The Company was established at the Pantnagar branch on 21st May 2005 mainly for production

with a production coverage area of approximately 20 acres.

The control of management is through Board of Directors.

The Company’s head and registered office and works place are located at the below mentioned

addresses:

Registered & Head office : Britannia Industries Limited

5/1A, Hungerford Street

Kolkata- 700017

Works Places:

(a) Britannia Industries Limited

33, Industrial Area

Lawrence Road,

Delhi- 110035

(b) Britannia Industries Limited

Plot No.1, Sector- 1

Integrated Industrial Estate

Pantnagar, Pantnagar- 263153

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(c) Britannia Industries Limited

15, Taratola road,

Kolkata – 700088

(d) Britannia Industries Limited

MTH road, Padi

Chennai – 600050

(e) Britannia Industries Limited

Ready road (East), Mazagaon,

Mumbai – 400010

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BOARD OF DIRECTORS

Name Designation

Mr. Nusli N Wadia Chairman

Ms. Vinita Bali Managing Director

Mr. George Casala Director

Mr. Keki Dadiseth Director

Mr. Avijit Deb Director

Mr. Stephan Gerlich Director

Mr. A K Hirjee Director

Mr. Nimesh N Kampani Director

Mr. S. S Kelkar Director

Dr. Vijay Kelkar Director

Mr. Pratap Khanna Director

Mr. Jeh Wadia Director

Mr. Francois Xavier Roger Director

Field Marshall Sam Manekshaw Director Emeritus

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MANAGEMENT TEAM

GAUTAM BANERJEE − General Manager – Materials

ASHOK KUMAR GUPTA − General Manager – Accounts & Planning

SAROJ KUMAR CHAKRABORTY − General Manager & Head of Technical

RICHA ARORA − General Manager – Marketing

AMITAVA MUKHERJEE − National Sales Manager

PURNENDU ROY − Head of R&D

V. MADAN − Company Secretary & Head of Legal

VINOD MENON − Head of Internal Audit & Projects

Dr. K.N. SHASHIKANTH − Corporate Quality Assurance Manager

TS PURUSHOTHAMAN − Corporate Head – IT & Systems

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MILE STONES

1892 The Genesis– Britannia established with an investment of Rs. 295

in Kolkata

1910 Advent of electricity sees operations mechanized

1921 Imported machinery introduced; Britannia becomes the first

company East of the Suez to use gas ovens

1939 – 44 Sales rise exponentially to Rs.16,27,202 in 1939

During 1944 sales ramp up by more than eight times to reach

Rs.1.36crore

1975 Britannia Biscuit Company takes over biscuit distribution from

Parry’s

1978 Public issue – Indian shareholding crosses 60%

1979 Re-christened Britannia Industries Ltd. (BIL)

1983 Sales cross Rs.100crore

1989 The Executive Office relocated to Bangalore

1992 BIL celebrates its Platinum Jubilee

1993 Wadia Group acquires stake in ABIL, UK and becomes an equal

partner with Group Danone in BIL

1994 Volumes cross 1,00,000 tons of biscuits

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1997 Re-birth – new corporate identity ‘Eat Healthy, Think Better’ leads

to new mission: ‘Make every third Indian a Britannia consumer’

BIL enters the dairy products market

1999 “Britannia Khao World Cup Jao” – a major success! Profit up by

37%

2000 Forbes Global Ranking – Britannia among Top 300 small

companies

2001 BIL ranked one of India’s biggest brands

No.1 food brand of the country

Britannia Lagaan Match: India’s most successful promotional

activity of the year

Maska Chaska: India’s most successful FMCG launch

2002 BIL launches joint venture with Fonterra, the world’s second

largest dairy company

Britannia New Zealand Foods Pvt. Ltd. Is born

Rated as ‘One amongst the Top 200 Small Companies of the

World’ by Forbes Global

Economic Times ranks BIL India’s 2nd Most Trusted Brand

Pure Magic –Winner of the World star, Asia star and India star

award for packaging

2003 ‘Treat Duet’- most successful launch of the year

Britannia Khao World Cup Jao rocks the consumer lives yet again

2004 Britannia accorded the status of being a ‘Super brand’

Volumes cross 3,00,000 tons of biscuits

Good Day adds a new variant – Coconut – in its range

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2005 Re-birth of Tiger – ‘Swasth Khao, Tiger Ban Jao’ becomes the

popular chant!

Britannia launched ‘Greetings’ range of premium assorted gift

packs

The new plant in Uttaranchal, commissioned ahead of schedule.

The launch of yet another exciting snacking option – Britannia 50-

50 Pepper Chakkar

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THE ORIGIN OF ‘EAT HEALTHY THINK BETTER’

Britannia –the ‘biscuit’ leader with a history-has withstood the tests of time. Part of the

reason for its success has been its ability to resonate with the changes in consumer needs-needs

that have varied significantly across its 100+ year epoch. With consumer democracy reaching

new levels, the one common thread to emerge in recent times has been the shift in lifestyles and

a corresponding awareness of health. People are increasingly becoming conscious of dietary care

and its correlation to wellness and matching the new pace to their lives with improved nutritional

and dietary habits. This new awareness has seen consumers seeking foods that complement their

lifestyles while offering convenience, variety and economy, over and above health and nutrition.

Britannia saw the writing on the wall. Its “Swasth Khao Tan Man Jagao” (Eat Healthy, Think

Better) re-position directly addressed this new trend by promising the new generation a healthy

and nutritious alternative – that was also delightful and tasty.

Thus, the new logo was born, encapsulating the core essence of Britannia – healthy, nutritious,

optimistic – and combining it with a delightful product range to offer variety and choice to

consumers.

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OUR PRODUCTS

Nutri Choice Sugar Out

Sounds like yesterday when people commented that healthy foods

meant “compromising on the taste.” Nutri Choice Sugar Out is the most

novel product range to have been introduced in the market. The product is

not just sweet but tastes great, and yet contains no added sugar.

This is because Nutri Choice Sugar Out is sweetened with “Sucralose,”

derived from sugar, which provides the same sweetness as any other

biscuit, without the added calories of sugar.

This range is available in 3 delicious variants namely Lifetime,

Chocolate cream, and Orange cream, targeted towards all health

sensitive people. It is also relevant for consumers with sugar related

ailments.

We are sure that you will be pleasantly delighted with its great taste

and equally surprised to know that it has no added sugar.

Don’t be taken for a ride when you read “Sugar Free” label on many

biscuit packs marketed in India or abroad. Even with 100% no-added

sugar, wheat-cereals in biscuits have their own natural sugar content.

Britannia has chosen to represent these biscuits with “No Added Sugar”

claim, as there is no added sugar in the processing of Nutri Choice Sugar

out.

Nutri Choice Digestive Biscuit

Nothing can be more difficult than making small efforts in our daily

life towards healthy and active living. 24/7 we are engrossed in our busy

schedules; skipping meals, missing walks, along with inadequate sleep and

frequently eating-out, all take a heavy toll on our health.

At least with the new and improved Nutri Choice Digestive Biscuit, we

have one less thing to worry about. Made with 50% whole-wheat and

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packed with added fiber (10% of our daily dietary needs), these

delightfully tasty biscuits are amongst your healthiest bites of the day.

In your next visit to a shop just look out for its Golden-green

international carton pack.

Try one and you’ll know that you’ve made one smart choice – Nutri

choice.

50-50 Jodi Banao Offer

With a brand name like 50-50, can the product be anything but fun.

And so to enhance this “Masti” 50-50 has now brought the “Jodi Banao”

offer. With assured gifts like Friendship Bands and Mobile Slings which

are a craze with the youth, and grand prizes like Mobile Phones, Laptops,

Sunglasses, Wrist Watches and a Trip to Paris, 50-50 has brought in all the

elements that keep you engaged in fun. And all these prizes with the

unique taste experience of 50-50 products.”50-50 ke saath Apni Jodi

Banao”

Treat Fruit Rollz

All kids who have relished the yummy creamy treasures of Britannia

Treat in exciting flavors, have yet another reason to celebrate! Britannia

Treat launches the amazingly yummy Treat Fruit Rollz!! These tasty soft

rolls are filled with real fruits and provide a healthy yet mouth-watering

treat to the kids. Fruit Rollz comes in four masti fruit flavors – Juicy

Apple, Strawberry Surprise, Tangy Orange and Delicious Dates!

Want to know a little secret? They make the best tiffin treats! So during

snack time what better than to munch on the delicious and healthy Fruit

Rollz and discover the yummy fruit flavor from within the shells. Keeping

up with Britannia’s platform of ‘taste bhi, health bhi’, Fruit Rollz is indeed

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a yummy snacking option for kids, while keeping the Moms assured about

the goodness provided by the fruit filling.

So go on and treat yourself to the lip-smacking snack!

New Britannia Milk Bikis

Milk Bikis, the favorite growth partner of Kids, now brings greater

value and delight to all with its new product and pack design. Recently re-

launched in its existing Southern & Eastern markets, and extended across

India, the new Milk Bikis is all set to add excitement and appeal to

‘nutritious’ food. Whoever said that ‘good food’ needs to look ‘dull and

boring’, will just have to take a look at Milk Bikis.

With a unique and attractive honeycomb design and an enhanced product

experience, the new biscuit prompts the ‘Kid’s will love it’ reaction

amongst mothers. The milk goodness in the recipe is now enhanced with

SMART NUTRIENTS – 4 vital vitamins, iron and iodine, proven to aid

mental and physical development in growing kids. The premium

packaging, besides appealing to kids, also ensures that the biscuits remain

fresh and crisp.

So, whether its breakfast time or snack time at school, rest assured that

kids will look forward to munching these crunchy, milky biscuits which

even helps in their development. And yes, adults won’t be far behind in

reaching out for a pack!

Britannia Marie Gold Doubles

Everybody’s favorite Marie biscuit now comes in a completely new

avatar! Recently launched in Tamil Nadu, Britannia Marie Gold Doubles

is all about doubling expectations and experience. Naturally, everything

about it is new and exciting. This special variant of Marie, through a

patented production process, offers three delicious layers in a new flavor

concept – with the same old crispiness and a subtle new taste. The shape

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of the new Marie Gold Doubles biscuit is completely altered and nowhere

resembles the classic round Marie biscuit. The premium packaging is also

a breakthrough design with an outer sleeve and unique shape. So whether

people favor the biscuit themselves or gift it, Britannia Marie Gold

Doubles is definitely double the enjoyment!

Britannia 50-50 Pepper Chakker

The launch of the latest 50-50 variant left everybody guessing “What it

eez?” From TV ads, radio, outdoor and in-store display materials to

events, a website and SMS and email blasts, traditional and new media

were blended synergistically to create excitement and curiosity about the

unique taste of the biscuit. The tangy and distinctive pepper flavored

biscuit, that’s thin and crispy and more like a snack, caught the

imagination of a younger audience craving something to nibble on. The

50-50 Pepper Chakkar launch is truly a case of leveraging the marketing

mix to best advantage.

More Power to Britannia Treat!

In a one-of-its-kind tie-up with the immensely popular kids’ show

“Power Rangers” on Toon Disney, Britannia Treat created a huge buzz

amongst kids. The brand activity targeted children in three cities – Delhi,

Mumbai and Bangalore – at various touch points such as schools, malls,

residential colonies and amusement parks. The idea behind it was to bring

fun and adventure into the Britannia Treat brand of cream biscuits with the

help of a unique new collectible toy – the Power Rangers Shooter. These

exciting new toys were available with packs of Britannia Treat, and kids

had to collect them to solve the “Power Rangers” contest. An eye-catching

float, specially designed to promote this contest, was moved around these

cites and became the pulse point of “Shooter Mania”. At the end of 10

days, the activity touched 225 schools across the three cities and reached

more than 50,000 kids – and got every kid talking about Britannia Treat.

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Britannia Tiger’s ‘Alti Palti’ Offer for Children

Alti Palti was an exciting offer to go with the most popular biscuit in

the country – Britannia Tiger. Children love lenticular or 3D picture

collections and Tiger biscuits gave them just that. With the purchase of

Britannia Tiger, kids collected lenticular gifts such as rulers, book labels,

bag tags and stickers. Each gift had the animated Tiger mascot on it doing

crazy things like skateboarding, cycling, dancing and more.

As part of the promotion, a life-size Tiger mascot visited select schools

and distributed the 3D collection to the lucky children. They even got to

photograph themselves with their favorite Tiger! This exciting offer ran at

retail stores across the country. Buzz was created with in-store display

materials like attractive dispensers and branded posters all based on the

Alti Palti theme.

The Alti Palti craze caught on like wildfire amongst the kids – just like

Britannia Tiger biscuits!

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OTHER PRODUCTS OF BRITANNIA

Colief® Infant Drops

Lactase Enzyme Drops

Reduce the hours of

Crying™

Britaxan™

Astaxanthin Complex

Antioxidant Food

Supplement

Fruisana® Fruit Sugar

The Low-GI Sugar

Moducare™

Plant Sterols & Sterolins

Maintain Immune Defense

Prostabrit™ for Men

Rye Grass Pollen Extract

Vogel’s® Cereals

Nutritious & Delicious,

High-Fibre Breakfast

Cereals

XyloBrit™

100% Xylitol

Sugar-Free Table-Top Sweetener

LomaBrit™ Lip Balm

Melissa (lemon balm)

extract for healthy lips

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http://www.britannia-health.co.uk/lomabrit.htm



http://www.britannia-health.co.uk/xylobrit.htm



http://www.britannia-health.co.uk/vogels.htm




http://www.britannia-health.co.uk/prostabrit.htm


http://www.britannia-health.co.uk/moducare.htm


http://www.britannia-health.co.uk/fruisana.htm

http://www.britannia-health.co.uk/britaxan.htm


http://www.britannia-health.co.uk/colief.htm




http://www.britannia-health.co.uk/fruisana.htm






ANNUAL PERFORMANCE (FY 2006)

Britannia’s gross sales turnover increased to Rs18179 million in 2005-06 from Rs16,154 million

in the previous year, registering a growth of 13%. Operating profit at Rs1,763 million increased

by 7%, profit before tax and exceptional items at Rs.1,958 million declined by 19% against

2004-05 , impacted by the profit on sale of long term investments that accrued to ‘other income’

last year.

The Company achieved these results despite significant increases in input cost,

particularly sugar, fuel and oils, coupled with aggressive pricing in the industry. Your

Company’s focused initiatives on commercializing market place opportunities, supply chain

efficiencies and overall cost management resulted in its top line growth and profitability.

Operating margin at 10.3% in 2005-06 compared with 10.9% in the previous year was impacted

by the inflation in input costs.

Despite stiff competition, your Company stabilized and held its overall market share at

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31.7% in volume and 38.8% in value for the last year.

Exports turnover during the year was Rs111.71 million against Rs71.65 million in 2004-05, a

growth of 56%.

The major exceptional items during the year were:

Compensation and amortization of VRS costs – Rs.111 million

Profit on sale of properties – Rs.117 million

After considering all the exceptional items, Profit before tax and Net Profit works out to

Rs.2,007 million and Rs.1,464 million respectively. Earnings per Share are Rs.59.96 for 2005-

06.

Britannia believes in giving the best value to consumers through its brands and constantly looks

for ways to enhance the overall consumer experience. 2005-06 witnessed a boost in product

innovation and renovation and as many as six new launches were executed and well received in

the market. The Company’s largest brand – Tiger, was successfully renovated with the re-staging

of Tiger Glucose and the fortification of Tiger Creams. New variants were introduced in Treat

Duet and “Pepper Chakkar” was launched under the 50:50 brand umbrellas. The Company also

introduced Marie Gold Doubles in a totally new to market format and a new range “Greetings” –

an assortment of biscuits was introduced during Diwali, targeted at the large gifting opportunity.

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The Company also seized the growing opportunity in adjacent categories like Cakes and the

launch of Cup Cakes was the first step in strengthening this business.

Additionally, new packaging formats were introduced in several markets to tap into attractive

price points from consumers’ perspective. Britannia will continue to invest in its brands and

deliver growth through an emphasis on brand activation, anchored by new product launches.

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HISTORY OF BISCITS

Sweet or salty. Soft or crunchy. Simple or exotic. Everybody loves

munching on biscuits, but do they know how biscuits began? The history

of biscuits can be traced back to a recipe created by the Roman chef

Apicius, in which “a thick paste of fine wheat flour was boiled and

spread out on a plate. When it had dried and hardened it was cut up and

then fried until crisp, then served with honey and pepper.”

The word ‘Biscuit’ is derived from the Latin words ‘Bis’ (meaning

‘twice’) and ‘Coctus’ (meaning cooked or baked). The word ‘Biscotti’ is

also the generic term for cookies in Italian. Back then, biscuits were

unleavened, hard and thin wafers which, because of their low water

content, were ideal food to store.

As people started to explore the globe, biscuits became the ideal

traveling food since they stayed fresh for long periods. The seafaring

age, thus, witnessed the boom of biscuits when these were sealed in

airtight containers to last for months at a time. Hard track biscuits

(earliest version of the biscotti and present-day crackers) were part of the

staple diet of English and American sailors for many centuries. In fact,

the countries which led this seafaring charge, such as those in Western

Europe, are the ones where biscuits are most popular even today.

Biscotti is said to have been a favorite of Christopher Columbus who

discovered America!

Making good biscuits is quite an art, and history bears testimony to

that. During the 17th and 18th Centuries in Europe, baking was a carefully

controlled profession, managed through a series of ‘guilds’ or

professional associations. To become a baker, one had to complete years

of apprenticeship – working through the ranks of apprentice,

journeyman, and finally master baker. Not only this, the amount and

quality of biscuits baked were also carefully monitored.

The English, Scotch and Dutch immigrants originally brought the

first cookies to the United States and they were called teacakes. They

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were often flavored with nothing more than the finest butter, sometimes

with the addition of a few drops of rose water. Cookies in America were

also called by such names as “jumbles”, “plunkets” and “cry babies”.

As technology improved during the Industrial Revolution in the 19th

century, the price of sugar and flour dropped. Chemical leavening

agents, such as baking soda, became available and a profusion of cookie

recipes occurred. This led to the development of manufactured cookies.

Interestingly, as time has passed and despite more varieties

becoming available, the essential ingredients of biscuits haven’t changed

– like ‘soft’ wheat flour (which contains less protein than the flour used

to bake bread) sugar, and fats, such as butter and oil. Today, though they

are known by different names the world over, people agree on one thing

– nothing beats the biscuit!

Some interesting facts on the origin of other forms of biscuits:

The recipe for oval shaped cookies (that are also known as boudoir

biscuits, sponge biscuits, sponge fingers, Naples biscuits and Savoy

biscuits) has changed little in 900 years and dates back to the house of

Savoy in the 11th century France. Peter the Great of Russia seems to

have enjoyed an oval-shaped cookie called “lady fingers” when visiting

Louis XV of France.

The macaroon – a small round cookie with crisp crust and a soft

interior – seems to have originated in an Italian monastery in 1792

during the French Revolution.

SPRING-uhr-lee, have been traditional Christmas cookies in Austria

and Bavaria for centuries. They are made from a simple egg, flour and

sugar dough and are usually rectangular in shape. These cookies are

made with a leavening agent called ammonium carbonate and baking

ammonia.

The inspiration for fortune cookies dates back to the 12th and 13th

Centuries, when Chinese soldiers slipped rice paper messages into moon

cakes to help co-ordinate their defense against Mongolian invaders.

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WHAT MAKES A BRITANNIA

If you think Britannia’s are extraordinary individuals who are passionate about everything

they do…create inspiration through everything they do…and succeed in everything they do…

you’re probably right. Britannians are hand-picked for a singular purpose…to perpetually ensure

Market Leadership and generate exemplary performance in every function.

Britannians exhibit the following leadership behaviors (we fondly call BULBs – Britannia

Universal Leadership Behaviors) :

Integrity

Team Orientation

People Development

Learning Orientation

Customer Orientation

Quality Orientation

Drive for Results

Entrepreneurial Spirit

System and Process Orientation

Communication

If feel you stack up well in terms of all these behaviors…don’t waste time…Join us!!!

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ACTIVITIES OF THE COMPANY

Production

Research

&

Developme

nt

Human

Resources

& Legal

Finance

&

IT

Technical

&

Operations

Exports

Quality

Assurance

Marketing

Sales

Activities of the

company

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OBJECTIVES OF THE COMPANY

The objectives of the company are as follows:

1. To acquire and take over as a going concern the biscuit manufacturing business now

carried on at Dum dum junction under the styles or firms of V.S Brothers and company,

Gupta and company and Britannia biscuits company and all or any of the lands,

buildings, plant and machinery, assets and liabilities of the proprietors of that business in

connection there with and with a view thereto to enter into the agreement referred to in

clause 3 of the companies article of association and to carry the same into effect with or

without modification.

2. To manufacture, buy, sell, prepare for market and deal in farinaceous foods for all kinds

and in particular biscuits, breads, cakes and confectionary and food of every description

suitable for individuals.

3. To carry on business as millers and grain merchants, dealers in flour, rice and other

produces.

4. To carry on business as bakers and confectioners and to manufacture buy, sell, refine

prepare, grow, import export and deal in provisions of all kinds of wholesale and retail,

whether solid or liquid.

5. To make, accept, endorse, discount and issue promissory notes, bills of exchange

and other negotiable instruments etc.

36

CHAPTER-II

INTRODUCTION

ABOUT

PANTNAGAR UNIT

37

Welcome To

Britannia Industries Ltd.Pantnagar Uttarakhand

Swasth Khao Tan man

Jagao

38

The story of one of India’s favourite brands reads almost like a fairy tale. Once upon a time, in

1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now

Kolkata) with an initial investment of Rs. 295. The company we all know as Britannia today.

As time moved on, the biscuit market continued to grow… and Britannia grew along with it. In

1975, the Britannia Biscuit Company took over the distribution of biscuits from Parry’s who till

now distributed Britannia biscuits in India. In the subsequent public issue of 1978, Indian

shareholding crossed 60%, firmly establishing the Indian ness of the firm. The following year,

Britannia Biscuit Company was re-christened Britannia Industries Limited (BIL). Four years

later in 1983, it crossed the Rs. 100 crores revenue mark.

INTRODUCTION

Britannia industries limited was established at Pantnagar on 1st may 2005in the area of

approximately 20 acres mainly for the purpose of production of biscuits as this area is free from

almost all types of taxes.

In Britannia Industries Limited there are many types of departments which are inter connected

to each other and work together for the welfare of the Company as the whole. There is a well

built communication system inside the Company which helps in doing the work on time and with

full efficiency and effectiveness.

The departments of the Company includes Quality assurance, Stores, Production,

Purchase, Maintenance, Engineering, Packaging and dispatch, Personnel and training,

Finance, legal and administrative security.

In the Company when the raw material is entered in the Company from that time onwards the

quality of material is taken into consideration. Firstly the material is taken into the laboratory and

it is being tested and after that it is being taken in progress.

At the production plant also care is being taken for the neatness and cleanness of the biscuits

and the biscuits are prepared in full hygienic conditions. For this purpose all the persons who

enter the production or plant area is not allowed to go inside without wearing a cap.

39

New concept like 5S is also being implemented in Britannia Industries Limited. The Company

is perusing for ISO14001certificate and it is ISO 22000 certified.

There are four plants in operation in the Company at this branch. First plant is for Marie Gold

which has a flexi line for Good day also. Second plant is for Good day, third one is for 50:50

variants, pepper chakker and Maska Chaska. Forth and last plant is for Bourbon which has a flexi

line for Orange cream also.

COMPANY PROFILE

1) Bhumi poojan of Britannia industries limited was on 20th may 2004.

2) Machinery was set up on 23rd march 2005.

3) Production trial was taken on 23rd march 2005 itself.

4) Actual production was started on 1st April 2005.

5) First dispatch of finished goods was done on 20th April 2005.

6) Biggest plant of the company is plant number two.

7) The company is set up in an area of approximately 20 acres.

8) Minimum production of the company is 210tons per day.

9) Maximum production is 300 tons per day.

10) Control of management is through Board of Directors.

11) It is a public limited company.

12) The auditors of the company are Lovelock & Lewes.

13) The bankers of the company are:

State Bank of India.

Standard Chartered Bank.

ABN Ambro Bank.

Citi Bank.

The hongkong and shanghai banking corporation limited.

Bank of America.

40

HDFC Bank limited.

ICICI Bank limited.

NUMBER OF PLANTS AND PRODUCTION AT THE PANTNAGAR

BRANCH

Not all the brands of Britannia are produced in this branch only some brands of biscuits are

produced at this branch.

Production of biscuits in Britannia Pantnagar branch is divided in to four Plants.

1) Plant I

a) Marigold

b) Good day butter

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c) Good day Pista badam

2) Plant II

a) good day cashew

3) Plant III

a) fifty- fifty (50-50)

44

i) 50-50

ii) 50-50 Maska Chaska

iii) 50-50 pepper chakker

4) Plant IV

a) Chocolate treat bourbon

b) Orange treat

45

OBJECTIVES OF THE UNIT

Investing in appropriate technology.

Working collaborators with the business partners.

Quality products to customers.

Continuous training and retraining of the employees to create culture that value quality and

food safety as a core pillar of the business.

To control the wastage and save time and efforts.

To work under the principals of Kiazen, Haccp and 5 S.

STORAGE AND USAGE OF RAW MATERIAL

There are many types of raw materials which are used in Britannia for the production of

different types of biscuits. Some of them are – wheat flour, sugar, butter, skimmed milk powder,

cashew, salt, different types of fats which includes different oils, sodium bi carbonate,

ammonium bi carbonate etc.

Now the question comes of their storage. As we can see that some of the materials which are

used in Britannia industries need cold storage while some needs normal storage. So on the basis

of the need of different raw materials they are stored in different storage places. The materials

which are stored in cold storage are at the temperature of 5 degree Celsius while the materials

which need normal storage are stored at the normal temperature. There classification of some of

the raw materials is as follows:

Normal storage raw material

Wheat flour

Sugar

Ammonia

Skimmed milk powder

Palm oil

Salt

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Cold storage raw material

Butter

Cashew

Essences

Skimmed milk powder

Condensed milk

HOW THE PRODUCTION PLAN COMES?

The production plan comes directly from company’s head office which is situated at Bangalore

every month.

The plan consists of:

Variety name

How much production to do for the particular variety.

Total production in tons.

Area where varieties will be dispatched along with quantity.

Dispatch order.

THINGS YOU DON’T KNOW ABOUT BRITANNIA

Britannia products are sold in over two million outlets, reaching millions of

customers who buy approximately 2.4 billion packets each year.

A small army keeps Britannia going – over 180 stock keeping units, 3000

employees, over 2200 authorized whole sellers and 56 depots.

The number of biscuits produced by Britannia in one year would be the equivalent

of one pack of twelve biscuits for every two people in the world.

Stacked on top of each other, all Britannia biscuits sold in a year would stand

10,000 times taller than Mount Everest.

Britannia has had a long association with cricket and cricket players. Nearly half

the members of the current Indian cricket team serve as its brand ambassadors.

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Launched in 1997, Tiger became the largest selling Britannia biscuit brand in just

4 months of launch. It crossed Rs.1 billion sales mark in its very first year and is

growing stronger.

SWOT ANALYSIS

STRENGTH

Goodwill of company

Financially a very strong company

Effective well designed and developed production and marketing network.

Superior quality and service to provide maximum benefits to customers.

The family environment in the company.

Dedicated work force.

Continuous growth.

Market share of the company.

Tax benefit to the company.

WEAKNESSES

No uniform of the officers and of the workers too.

Storage capacity of the company is limited.

Land is not properly utilized.

Raw material is wasted at the time of unloading.

Unit is situated far away from main plant.

There is no board of Britannia at the entry gate.

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OPPORTUNITY

There can be minimization of waste.

There must be more efficient utilization of the raw material.

More and more incentives should be given to workers to motivate them which

help in increasing the employee moral.

There can be use of the foreign technologies for efficient utilization of raw

material so that the production of a biscuit can be increased.

Lang can be used more efficiently.

THREATS

New entrants in the business

Threats of substitute products.

Availability of the other brands.

Rivalry among the competitions.

Taste and preference of customers.

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PRINCIPLES OF BRITANNIA PANTNAGAR

BIL works under some principles because it is a food manufacturing unit. The principles are:

a) Kaizen

b) 5s’

c) HACCP

KAIZEN

Kaizen means change for improvement. The word kaizen is a Japanese word and is made up of

two words “Kai’ and “Zen”. The word kai means change and Zen means better. Kaizen is a

continuous small improvement in personal life as well as in official life.

All human beings have an infinite brain power whose utilization does not require any

expenditure and small changes are easy to implement is the philosophy of kaizen.

Kaizen is of three types:

Management oriented kaizen

Group oriented kaizen

Individual oriented kaizen

Characteristics of kaizen program at BIL:

a. One should work smarter, if not harder.

b. Management attention and responsiveness is very important.

c. Suggestion scheme is internal part of kaizen.

d. Use your head not money.

e. Requires a faith in the people.

f. Opportunities for improvement are every where.

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5 S’OF BRITANNIA INDUSTRIES LIMITED

Five “s” is an integrated concept for work place management. It is determination to organize the

workplace, to keep it neat, to clean, to maintain standardized conditions and to maintain the

discipline that is needed to do a good job.

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SEITON

SEISO SEIKETSU

SHITSUKE

SEIRI

5’S OF BRITAN

NIA

SEIR I

It is sorting between wanted and unwanted things in a selected area, region or domain and get rid

of what you do not need and aims at stratification management and dealing with the causes of

filth activities..

SEITON

It means a place for everything and everything in its place i.e. establishing a neat layout so you

can always get just as much of what you need it. It aims at:

a. A neat looking workplace.

b. Efficient layout and placement

c. Raising the productivity.

SEISO

It deals with the job of thoroughly cleaning the workplace. Cleaning as a form of inspection. It

aims at zero dirt and a good degree of cleanliness.

SEIKETSO

It means standardization which is needed to maintain SEIRI, SEITON and SEISO. It leads to use

of visual management to avoid mistakes. It aims at management standards for maintaining the 5

S.

SHITSUKE

It means discipline which is called for strict adherence to a system form our present unsystematic

way.

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HACCP

HACCP: HACCP refers to hazardous activities critical control point. It is a structured

application of the basic rules of preventing the food borne diseases.

HACCP concept

It includes following:

Identification of potential food safety problems.

Determination of now and where these can be prevented.

Description of what to do and training of the personnel.

Implementation and recording.

HACCP PRINCIPLES

Conduct a hazard analysis

Determine the HACCPs

Establish Critical Limit (s)

Establish a monitoring system.

Establish corrective actions.

Establish verification procedures

Establish documentation.

WHY HACCP

Need for hygiene requirements (control measures) specific to food and process

and their associated potential hazards.

Prioritizing control measures.

Need for ensuring that essential measures were correctly implemented and carried

out.

Need for planning of corrective measures in case of failure.

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UNIT HEAD

Human resource

Accounts Production Purchase Maintenance Quality

OfficersOfficers

OfficersOfficers

Officers Officers

Need for monitoring the process parameters to be able to control safety at all

times.

DEPARTMENTS/ HIERARCHY OF THE COMPANY

There are mainly six departments of the company. These are as follows:

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HEADS OF DEPARTMENTS OF THE COMPANY

Unit Head : Mr. Manas Dutta

Accounts : Mr. Mudit Agarwal

Human Resource : Mr. S.K. Mathur

Production : Mr. Mahak Singh

Purchase : Mr. Abhijeet Dutta

Engineering &

Factory assistant : Mr. Neeraj Agarwal

Standards : Mr. Dhananjay

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QUALITY AND FOOD SAFETY POLICY OF THE COMPANY

The purpose of this policy is to ensure that we win through quality in the market place. This

means that we must do every thing to ensure consistent delivery of quality products to the

customers every time.

Our commitment to quality and food safety will be reflected in every action and is non

negligible. That means:

All ingredients used in our factories always meet specified quality standards.

All factories and depots maintain high standard of hygiene which ensures that our

products are healthy and safe for consumption.

Our manufacturing product always ensures delivery of products consistent with product

and pack specifications which are free from contamination.

Our supply chain practices enable delivery of fresh products to our customers.

We will fulfill these objectives through:

Investing in appropriate technology and equipping our factories adequately.

Working collaborates with our business partners to create ‘win win’ business

outcomes.

Developing process which enable consistent delivery of quality products to our

customers.

Continually training and retraining our employees and business partners to create

a culture that values quality and food safety as the core pillars of our business.

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FMCG SECTOR

The FMCG sector represents consumer goods required for daily or frequent use, the main

segments of this sector are personal care(oral care, hair care, soaps, cosmetics, toiletries), house

hold care (fabric wash and house hold cleaners), branded and packaged foods, beverages

(health beverages, soft drinks, staples, cereals, dairy products, chocolates, bakery products) and

tobacco.

The Indian FMCG sector is an important contributor to the country’s GDP. It is the fourth largest

sector in the economy and is responsible for 5% of the total factory employment in India. The

industry also creates employment for many people in downstream activities, much of which is

disbursed in small towns and rural India. This industry has witnessed strong growth in the past

decade. This has been due to liberalization, urbanization, increase in disposable incomes and

altered lifestyle. Furthermore, the boom has been also fuelled by the reduction in excise duties,

dereservation from the small-scale sector and the burgeoning affluent segment in the middle

class through product and packaging innovations.

Unlike the perception that the FMCG sector is a producer of luxury items targeted at the elite, in

reality, the sector meets the everyday needs of the masses. The lower-middle income group

accounts for over 60% of the sector’s sales. Rural markets account for 56% of the domestic

FMCG demand.

Many of the global FMCG majors have been present in the country for many decades. But in the

last ten years; many of the smaller rung Indian FMCG companies have gained scale. As a result,

the unorganized and regional players have witnessed erosion in the market share.

A PEEK IN TO THE PAST…….

In India, companies like ITC, HLL, Colgate, Cadbury and nestle have been a domestic force in

the FMCG sector well supported by relatively less competition and hard entry barriers (import

duty was high). These companies were, therefore able to charge a premium for their products. In

the context, the margins were also on the higher side. With the gradual opening up of the

economy over the last decade, FMCG companies have been forced to fight for a market share. In

the process, margins have been compromised, more so in the last six years (FMCG sector

witnessed decline in demand).

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THE CURRENT AND FUTURE SCENARIO……..

The growth potential for FMCG companies looks promising over the long term horizon, as per-

capita consumption of almost all products in the country is amongst the lowest in the world. As

per the consumer survey by KSA-Technopak in 2004, of the total consumption expenditure,

almost 40% and 8% was accounted by groceries and personal care product respectively. Rapid

urbanization, increased literacy and rising per capita income are the key growth driver for the

sector. Around 45% of the population in India is below 20 years of age and the proportion of the

young population in India is below 20 years of age and the proportion of the young population is

expected to increase in the next five years. Aspirations levels in this age group have fuelled by

greater media exposure, unleashing a latent demand with more money and a new mindset. In this

backdrop, industry estimates suggest that the industry could triple in value by 2015 (by some

estimates, the industry could in size by 2010).

In over view, testing times for the FMCG sector are over and driving rural penetration will be the

going forward. Due to infrastructure constraints, companies were unable to grow faster.

Although companies like HLL and ITC have dedicated initiatives targeted are the rural market,

these are still at a relatively nascent stage.

The implementation of VAT with effect from April 1, 2005 is a step in the right direction for the

sector. This has simplified the tax structure in the many ways, as a result of which FMCG

companies are confident that prices will decline over the long term. We believe that the full

benefit of VAT will be reflected over the next 3-5 years.

The bottlenecks of conventional distribution system are likely to be removed once organized

retailing gains in scale. Currently, organized retailing accounts for just 23% of retail sales is

likely to touch 10% over the next 3-5 years. In over view, organized retailing result in discount

prices, forced-buying by offering many choice and also opens up new avenues for growth for the

FMCG sector.

Given the aggressive plans of players like pantaloon, Trent, shoppers stop and shop rite. We are

confident that on the back of economic transformation that India has witnessed since the early

1990s, the middle class has proposed in the country, growing by around 10% to 12% per annum.

This transformation has been fed partly by the explosion of new jobs for the young population,

primarily in software and other service sectors. This new found prosperity has further fed

consumerism, which has benefited all the constituents of the FMCG sector. Going forward, we

59

believe that accretion in income levels of the rising Indian middle class and consequent rise in

disposable incomes will fuel consumption driven growth.

Now, while determining the long term outlook for the sector might seem easy, when it comes to

picking an FMCG stock investors. With the markets currently at their all time highs, and on an

upswing, it is even more important to separate the wheat from chaff. Here are some of the

parameters that one should keep in mind while considering an investment in the FMCG sector.

LOGISTICS STRENGTH

While purchasing power is the function of a economic growth and rising disposable incomes,

awareness is a function as the product reach and its usability. It is in this context that company’s

logistics gain importance. But logistics do not only mean a company’s reach in terms of retail

outlets. It also means the level of sophistication of this distribution reach-how intelligent is this

supply chain and is it well geared for the company’s future growth?

PRODUCT FOLIO

MNCs form almost half of the branded FMCG industry in India. In case of MNCs therefore, it is

relevant to look at the parent’s support and commitment to its subsidiary before making an

investment decision. Again, support and commitment alone is not enough. Investors need to look

at the parent’s product portfolio and its plans for India. If the parent is present only across the

limited category globally, all its support to domestic subsidiary is of little help owing to its

limited product portfolio.

For all companies, be it domestic otherwise, a look at the company’s product introduction track

record can be an eye-opener. Find how many products the company has introduced in it’s year of

existence? How relevant are they to India’s consumer habits? How successful have the products

launches been and what are the future plans of the company in terms of new products?

COMPETITIVE STRENGTHS

The success of the FMCG companies is often attributed to their marketing and branding skills-

ability to continuously create successful brands and advertising which convey the message

across. Once a brand is successful, it is easier for the company to piggyback on its initial success

60

and introduce more products and associate with them known brand. As thy say, “nothing

succeeds like success”.

As mentioned earlier, greater the number the product is offering, greater is the resource

utilization, be it is the distribution channel, the marketing or branding strengths. It is in this

context, that single or few product companies are risky. Firstly, they have to be varying the

competitors coming in and weaning away the market share. Therefore they have to consistently

spend higher amounts on advertising and marketing. This is the double whammy for the

company under pressure. On one hand, revenues are under pressure and on the other hand, costs

go up and on the other, costs go up and margins are squeezed. Also, due to this, the company is

often shy of investing in new product and expanding distribution network. The bottom-line is

that future growth prospects get stunted.

With respect to MNC companies investors should also look at the number of subsidiaries the

parent has in the same country. For example, P&G and glaxo smith Kline both have other

subsidiaries besides the listed entities. If the parent has another subsidiary, especially if it is

100% owned, then it is likely that the former would be inclined to introduce new brands and

products through this subsidiary. As such, shareholders of the listed subsidiary will not be able to

reap the rewards of the product portfolio expansions. Investors should worry of investing in such

companies where parent focus and plans are under a cloud.

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OBJECTIVE OF THE STUDY

The objective for doing my summer training is to make my self capable for moving forward in

corporate world, to gain knowledge & experience & know how to work in the organization

environment. It will help me to gain more & more about corporate sector, which was very

essential for me to do. Therefore I joined BIL Pantnagar to improve my capabilities.

MAIN OBJECTIVE

“To analyze how WORKING CAPITAL is maintained in Britannia Industries Limited”

SUB-OBJECTIVE

Are the working capital system is sufficient enough to analyze the ability of a company.

To know the method of managing the working capital requirement of the organization.

To see the difference between the theoretical knowledge & practical knowledge.

Period of study

I did my summer internship at BRITANNIA INDUSTRIES LTD., which is one of the largest

FMCG Company in India. The duration of my study was 60 days (8 weeks). My timing of work

was from 9:30 A.M. to 5:30 P.M., 6 days in a week.

SCOPE OF THE STUDY

It provides useful information for research and also introduces the researcher with the practical

problem faced in the company. This research is very important for any finance student to gain a

real time experience. I have done my research in Britannia in Working capital management.

There are many departments in Britannia but my research work is confined with finance

department where I studied that how they meet the requirement of working capital and how they

use it in financial activities. In finance department, I studied how they manage their different

ratio with respect to the working capital.

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LIMITATION TO THE STUDY

Following are the limitations of this project:

It is mainly a secondary data based report and secondary data has its own limitations.

The source of data collection is limited to annual report of the company only.

The company does not show their cost & operating accounts to any research students.

The interpretations of ratios require great caution and expertise as it misleading in

some cases.

Due to the tight schedule of managers, there are some difficulties for trainee to get co-

operation and attention.

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CHAPTER-III

RESEARCH

METHODOLOGY

64

RESEARCH METHODOLOGY

When we talk of Research Methodology, we not only talk of the research methods but also

consider the logic behind the methods we use in the context of our research study and explain

why we are using a particular method or technique and why we are not using so that research

results are capable of being evaluated either by research himself or by others.

As the title of the project suggests the project is about the study of the working capital

management in the company. So my objective is that to know that how the working capital

should be maintained in the company & which method is used in this.

SAMPLE SIZE

The sample size refers to the no. of employees selected from the company to constitute a sample.

The sample size used for study includes two companies.

METHOD OF SAMPLING

The process employed for the sample was Cluster Sampling.

Sample Size: 2

Method of Sampling: Cluster

Area of work: Working capital management

Method of Data collection: Secondary

Tools: Annual report, Balance sheet, Internal sources.

65

SOURCES OF DATA COLLECTION

SECONDARY DATA

Secondary data are those which have already been collected by someone else and have already

been passed through the statistical process.

Acc. to Dessel-“Data collected by other persons”

All the data has been collected from internal source that includes:-

a) Magazines

b) Books

c) Websites

d) Reports

e) Files

f) Staff

DATA COLLECTION METHOD

The data was collected by me from both the sources for my training project report. In case of

secondary ways of data collection of magazines and books of Britannia were used.

66

CHAPTER –IV

INTRODUCTION

ABOUT

WORKING CAPITAL

MANAGEMENT

67

WORKING CAPITAL

Working capital in short may be said as the capital required in meeting the short tem needs . The

requirement of working capital differs from firm to firm. The firm may require large amount of

working capital or may be less, it depends on the kind of work done by the particular

organization.

CLASSIFICATION OR KINDS OF WORKING CAPITAL

Kinds of working capital

On the basis of concept

On the basis of time

Gross working capital

Net working capital

Permanent or fixed working capital

Temporary or variable

working capital

Regular working capital

Reserve working capital

Seasonal working capital

Special working capital

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GROSS WORKING CAPITAL: Total current assets

1. Gross working capital: - Gross working capital refers to the firm’s investment in

current assets. Current assets are the assets which can be converted into cash within an

accounting year and include cash, short term securities, debtors, (account receivable or

book debts) bills receivable and stock (inventory).

NET WORKING CAPITAL: Change in current assets and current liabilities

Thus

Working capital= current assetscurrent liabilities

Net working capital: - Net working capital refers to the difference between current

assets and current liabilities. Current liabilities are those claims of outsider which are

expected to mature for payment within an accounting year and include creditors (account

payable), bills payable, and outstanding expenses. Net working capital can be positive. Or

negative. A positive net working capital will arise when current assets exceed current

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

current assets.

The two concepts of working capital –gross and net-are not exclusive rather, they

have equal significance from the management viewpoint.

Permanent or fixed working capital: It is the minimum amount which is required to

ensure effective utilization of fixed facilities and maintaining the circulation of current assets.

For example every firm has to maintain a minimum level of raw material, work-in-progress,

finished goods and cash balance. This minimum level of current asset is called permanent or

fixed working capital as this part of capital is permanently blocked in current asset.

Temporary or variable working capital: It is the amount of working capital which is

required to meet the seasonal demand and some exigencies. Variable working capital can be

further be classified as

Seasonal working capital: the capital required to meet the seasonal needs of the

enterprises is called as seasonal working capital.

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Special working capital: That part of working capital which is required to meet special

exigencies such as launching of extensive marketing campaigns for conducting research

etc.

OPERATING CYCLE OF WORKING CAPITAL

Sufficient working capital is necessary to sustain sales activity. Technically this is

referred to as a operating/ cash cycle. It can be said to be at the heart of the need of

working capital.

Cash/operating cycle is the length of time necessary to complete following

event.

Convert cash into raw material.

Raw material into goods in process.

Goods in process into finished goods.

Finished goods into debtors through credit sales, and debtor into cash.

The cycle is a continuous process

OPERATING CYCLE

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CASH

FINISHED GOODS

DEBTORS

RAW MATERIAL

WORK IN PROGRESS

SALES

The Working Capital cycle or Cash Conversion cycle as it is also called is usually expressed in

terms of the number of days. This figure is the average time that it takes to turn investment in

books into cash and profit. Payback expresses the number of days required to recoup the original

investment on a single title. In the organization’s Balance Sheet there will be the costs of paper,

titles still under development, and author advances of books already and not yet published. In

addition there will be the cost of stocks of unsold books, Accounts Receivable, and Accounts

Payable.

Determinants of working capital

The requirements of working capital generally vary from industry to industry, concern to

concern and time to time. Comparing the production cycle of BHEL with any of the FMCG

Company we will notice that, BHEL takes considerably longer period to manufacture a

turbine while in FMCG companies’ like HLL or P&G takes few minutes to manufacture their

product. Working capital in these companies can be even negative as they take credit from

suppliers and sell their products on cash. So current liabilities are higher due to which figure

of working capital can be negative. The various factor which influence the amount of

working capital required by a business enterprises, may be grouped under two heads.

1) Internal factor: - The factor which are within the control and competence of

management. These may include the risk taking attitude of management, turn over of

receivable and inventories terms of purchase and sale s and credit rating etc.

2) External factor: - these may include the nature of business, volume of production and

sales and business cycle.

PERMANENT AND TEMPORARY WORKING CAPITAL

The operating cycle thus crates the need for current assets (working capital).however this need

does not come to an end after the cycle is completed. It continues to exist. Thus the distinction

between permanent and temporary working capital should be known.

Business keeps on going even after the realization of cash from customers, which creates the

need for regular supply of working capital. However the magnitude of Working capital required

is not constant, but fluctuating. To carry on business, a certain minimum level of Working capital

is necessary on a continuous and uninterrupted basis. For all practical purpose, this requirement

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has to be met permanently as with other fixed assets. This requirement is referred to as

Permanent or fixed Working capital.

Any amount over or above the permanent level of Working capital is temporary, fluctuating or

variable Working capital. This portion of the required Working capital is needed to meet

fluctuation in demand consequent upon changes in production and sales as a result of seasonal

changes. The basic distinction between these two is:

FINANCING OF WORKING CAPITAL

The various sources for the financing of working capital are as follows:

Sources of Working capital

72

Permanent or fixed Temporary or variable

1. Shares

2. Debentures

3. Public deposits

4. Ploughing back of profits

5. Loans from Financial institutions.

CALCULATION OF WORKING CAPITAL

Working capital is the excess of current assets over current liabilities. Information regarding

current assets and current liabilities is available from the balance sheet. Working capital should

be sufficient to meet routine requirement of the business.

The two concepts of working capital are current assets and current liabilities. They have a

bearing on the cash operating cycle. In order to calculate the working capital the working capital

needs, what is required is the holding period of various types of inventories, the credit collection

period and credit payment period. Working capital also depends on the budgeted level of activity

in terms of production/sales. The calculation of working capital is based on the assumption that

the production/sales is carried on evenly throughout the year and all costs accrue similarly. As

the working capital requirements are related to the cost excluding and not to the sale price.

Working capital is computed with reference to cash cost. The cash cost approach is

comprehensive and superior to the operating cycle approach based on holding period of debtors

and inventories and payment of creditors.

The computation of working capital can be summarized as follows:

(I) Estimation of current asset :

a) Minimum desired cash and bank balances

b) Inventories

Raw material

73

1. Commercial banks

2. Indigenous bankers

3. Trade creditors

4. Installment credit

5. Advances

6. Accounts Receivables-

Credit/Factoring

7. Accrued expenses

8. Commercial papers

Work-in-progress

Finished goods

c) Debtors*

Total current assets

(II) Estimation of current liabilities :

a) Creditors**

b) Wages

c) Overheads

Total current liabilities

(III) Net working capital (I-II)

Add: margin for contingency

(IV) Net working capital required

* If payment is received in advance, the item would be listed in current liabilities.

** If advance payment is to be made to creditors, the item would appear under current

asset. The same would be treated for advance payment of wages and overheads.

IMPORTANCE OR ADVANTAGES OF WORKING CAPITAL

Working capital is the blood and nerve centre of a business. Just as circulation of blood is

essential in the human body for maintaining life, working capital is very essential to maintain the

smooth running of a business. No business can run successfully without an adequate amount of

working capital. The main advantages of maintaining adequate amount of working capital are as

follows:

Solvency of the business.

Goodwill

Easy loans

Cash discounts

74

Regular supply of raw materials

Regular payment of salaries, wages and other day-to-day commitments.

Exploitation of favorable market conditions.

Ability to face crisis

Quick and regular return on investments

High morale.

WORKING CAPITAL MANAGEMENT

Working Capital is the money used to make goods and attract sales. The less Working Capital

used to attract sales, the higher is likely to be the return on investment. Working Capital

management is about the commercial and financial aspects of Inventory, credit, purchasing,

marketing, and royalty and investment policy. The higher the profit margin, the lower is likely to

be the level of Working Capital tied up in creating and selling titles. The faster that we create and

sell the books the higher is likely to be the return on investment. Thus when we have been using

the word investment in the chapter on pricing, we have been discussing Working Capital.

AFFECT OF BUSINESS TRANSACTIONS ON WORKING CAPITAL

In preparing a statement of changes in financial position, on working capital basis, it is convient

to classify business transactions into three categories:

1. Transactions Affecting only Current Asset or Current liabilities Accounts: These

transactions produce changes in working capital accounts but do not change the account of

working capitals. For example, the purchase of merchandise increases inventory and accounts

payable but has no effect on working capital; it may therefore be ignored in preparing the

statement of changes in financial positions. Similarly, paying accounts payable affects cash, so

this transaction would be reflected in cash basis statement of changes in financial position.

However, the transaction has no effect on working capital since a current asset (cash) and a

current liability (accounts payable) decrease by the same amount. Hence, the transaction would

75

not be reflected as a source or use in a working capital basis statement of changes in financial

position. Other transactions like collection of receivables, short-term borrowing, purchase of

short-term government securities also fall in this category of transactions. Thus, when funds are

defined as working capital, there is no need to show the details of the more or less continous

movement of resources between current liabilities and current assets which results from the

manufacture and sale of goods and the collection of receivables from customers. Indeed, the

focus is on the usually more significant flows affecting non-current assets (i.e. long term

investments) and permanent capital, the name given to the sum of long-term liabilities and

owners’ equity.

Thus the funds statement, i.e. Statement of Chances in Financial Position based on changes in

working capital position, is a better and useful tool for highlighting the changes that have taken

place in the financial operations between two balance sheet dates.

2. Transactions Affecting Current Asset or Current Liability Account and a Non-Working

Capital (Non-current) Account: These transactions bring about either an increase or a decrease

in the amount of working capital. The issue of long-term bonds, for example, increases current

assets and increases loan on bonds, a non-working capital account; therefore the issue of bonds

is a source of working capital. Similarly when the bonds approach maturity they are transferred

to the current liability classification in the balance sheet. This causes a reduction (a use) of

working capital. If changes in non-working capital accounts are analyzed, these events are

brought to light, and their effect on working capital will be reported in the statement of changes

in financial position.

3. Transactions affecting only Non-current Accounts: These transactions have no direct effect

on the amount of working capital. The entry to record depreciation is an example of such a

transaction. Other transaction in this category, such as issue of share capital in exchange for plant

assets, are called exchanged transactions involving only non-current accounts and are viewed as

both a source and a use of working capital, but do not change the amount of working capital.

Alternatively, such exchange transactions may not be considered in preparing a statement of

changes in financial position on working capital basis.

WORKING CAPITAL ANALYSIS OR MEASURING THE WORKING

CAPITAL

76

The working capital is a means to run the business smooth and profitably, and not an end. Thus,

concept of working capital has its own importance in a going concern. A going concern, usually,

has a positive balance of working capital i.e., the excess of current assets over current liabilities,

but sometimes the uses of working capital may be more than the sources resulting into a negative

value of working capital. This negative balance is generally offset soon by gains in the following

periods. A study of changes in the uses and sources of working capital is necessary to evaluate

the efficiency with which the working capital is employed in the business. This involves the need

of working capital analysis.

The analysis of working capital can be conducted through a number of devices, such as:

1. Ratio analysis

2. Funds flow analysis

3. Budgeting

Ratio Analysis: A ratio is a simple arithmetical expression of the relationship of one

number to another. The technique of ratio analysis can be employed for measuring shot-term

liquidity or working capital position of the firm. The following ratios can be calculated for this

purpose:

Current ratio

Acid test ratio

Absolute liquid ratio or cash position ratio

Inventory turnover ratio

Receivables turnover ratio

Payables turnover ratio

Working capital turnover ratio

Working capital leverages

Ratio of current liabilities to tangible net worth

Asset Usage

77

The assessment of asset usage is important as it helps us to understand the overall level of

efficiency at which a business is performing.

The basic equations for this section are:

Total Asset Turnover =Turnover

Total Assets

Stock Turnover = Average Stocks

Credit Sales/365

Debtors’ Turnover = Average Debtors

Credit Sales/365

Creditors’ Turnover = Average Creditors

Credit Sales/365

The assessment of asset usage is important as it helps us to understand the overall level of

efficiency at which a business is performing.

78

DIFFERENCE BETWEEN CASH FLOW AND FUND FLOW STATEMENT

BASIS OF DIFFERENCE

CASH FLOW STATEMENT FUNDS FLOW STATEMENT

MEANING It is a statement of changes in

the financial position of business

due to the inflow and outflow of

cash.

It is a statement of changes in the

financial position of business due to

the inflow and outflow of funds.

PLANNING PERIOD

Statement of cash flow is

required for short range

planning.

Funds flow statement is required for

long range planning.

RELIABILTY Plans for more immediate future

can rely upon information

supplied by cash flow statement.

Plans for more immediate future

cannot rely upon information

supplied by funds flow statement.

TREATMENT OF CURRENT ASSETS

It does not treat all current assets

as cash.

It treats all current assets at par with

funds, although debts are collected

within months and stock is sold

within 6 months.

TREATMENT OF CURRENT LIABILITIES

Increase in bank overdraft and

increase in outstanding expenses

are treated separately.

Increase in outstanding expenses is

treated as increase in overdraft.

CASH/FUNDS FROM OPERATION

While making cash flow

statement cash from operation is

calculated.

While making funds flow statement

funds from operation is calculated.

BASIS Prepared on cash basis. Prepared on accrual basis.

Working capital budget:

A budget is a financial and/or quantitative expression of business plans and policies to be

pursued in the future period of time. Working capital budget, as a part of total budgeting process

of a business, is prepared estimating future long-term and short-term working capital needs and

the sources to finance them, and then comparing the budgeted figures with the actual

79

performance for calculating variances, if any, so that corrective actions may be taken in the

future. The objective of working capital budget is to ensure the availability of funds as and when

needed, and to ensure effective utilization of these resources. The successful implementation of

working capital budget involves the preparing of separate budgets for various elements of

working capital, such as cash, inventories and receivables, etc.

Working Capital Management (Debt vs. Equity)Working capital is the money you will need to keep your business going until you can cover your operating

costs out of revenue. As a small business owner, it will be wise to have enough working capital on hand to

cover items such as the following during the first few months that you are in business:

• Replacing inventory and raw materials: you will need to fund the purchase of

inventory out of working capital until you start to see cash from sales, which could take

months.

• Paying employees: even the most loyal worker wants to get paid on time, regardless of

how much or how little cash your firm earns during its first months.

• Paying yourself: unless you have made other arrangements, you will need to withdraw

some money to support yourself.

• Debt payments: if you have borrowed money to get started, you probably have to begin

repaying it right away. Missing your first loan payments will not do your credit rating

any good.

• An emergency fund: you need some cash on hand to cover unforeseen shortfalls that

may result from any number of factors such as delays in getting your space ready, a slow

paying client, or slow business.

Debt vs. Equity Assessments

It is essential that you assess the relative merits of each form of funding for your specific business.

DEBT EQUITY

80

Take on Creditors Take on Partners

Low Expected Return High Expected Return

Smaller Funding Amounts Larger Funding Amount

Periodic Payments No Short-Term Payments

Maturity Date Open-Ended “ Exit” Date

More Restrictions Less Restrictions

ADVANTAGES OF USING DEBTDISADVANTAGES OF USING DEBT

Debt is not an ownership interest in the

business. Creditors generally do not have

voting power.

Unpaid debt is a liability of the business. If it is

not paid then the creditors can legally claim the

assets of the firm. This action can result in

liquidation or reorganization.

The payment of interest on debt is considered

a cost of doing business and is fully tax

deductible.

Your business must earn at least enough money

to cover for the interest expense, otherwise you

may not be able to pay you interest which may

lead to default (financial distress).

The creditors will only be concerned that the

business will be able to generate cash flow to

cover interest expenses.

ADVANTAGES OF USING EQUITY DISADVANTAGES OF USING EQUITY

Unlike obligation of debt, your business will

not have any contractual obligation to pay for

equity dividend.

Equity is an ownership of the business. So an

equity partner will have a direct say about your

business.

Equity financing also allows your business to

81

obtain funds without incurring debt, or without

having to repay a specific amount of money at

a particular time.

Making more efficient use of Working Capital

The table below lists items, which influence Working Capital levels favorably and adversely

Items that reduce Working Capital

levels for publishers

Items that increase Working

Capital levels for publishers

- Increased profit margins - Lower profit margins

- Customers who pay promptly

- Advance payments by customers

- Long print runs except where all the

books are required on publication e.g.

School and university textbooks

- Inventory which is sold and paid for

quickly by customers after publication

- Lower Inventory levels by reducing

print quantities and working with

printers who will deliver quickly and

produce low print runs economically

- Slow authors who deliver late and

whose manuscripts require substantial

editing

- Holding paper stock unless market

conditions demand and the savings

are large

- Slow schedules for the development

of new titles

- Successful promotion that speeds up

the rate of sale

- Making advance payments to

printers

- Seasonal sales except where the

publishers prints only for the season

- Licensing (but problematic in young

economies)

- Paying suppliers on completion with

credit

- Authors who deliver manuscripts on

82

disk ready for computer make-up

- Incentives to staff , authors , suppliers,

customers , sales staff and agents to

speed up the rate of sale and of

developing new books, delivering

manuscripts on schedule

Measures to Improve Working capital management

•The essence of effective Working capital management is proper cash flow forecasting. This

should take into account the impact of unforeseen events, market cycles, loss of a prime

customer and actions by competitors. The effect of unforeseen demands of Working capital

should be factored in.

• It pays to have contingency plans to tide over unexpected events. While market-leaders can

manage uncertainty better, even other companies must have risk-management procedures. These

must be based on objective and realistic view of the role of Working capital

• Addressing the issue of Working capital on a corporate-wide basis has certain advantages. Cash

generated at one location can well be utilized at another. For this to happen, information access,

efficient banking channels, good linkages between production and billing, internal systems to

move cash and good treasury practices should be in place.

• An innovative approach, combining operational and financial skills and an all-encompassing

view of the company’s operations will help in identifying and implementing strategies that

generate short-term cash. This can be achieved by having the right set of executives who are

responsible for setting targets and performance levels. They are then held accountable for

delivering, encouraged to be enterprising and to act as change agents.

• Effective dispute management procedures in relation to customers will go along way in freeing

up cash otherwise locked in due to disputes. It will also improve customer service and free up

time for legitimate activities like sales, order entry and cash collection. Overall, efficiency will

increase due to reduced operating costs.

• 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

83

match your production with their consumption will help reduce inventory levels. This can be

done with suppliers also.

Working capital management is an important yardstick to measure a company operational

and financial efficiency. This aspect must form part of the company’s strategic and

operational thinking. Efforts should constantly be made to improve the Working capital

position. This will yield greater efficiencies and improve customer satisfaction

84

Structure of Working Capital of BIL

The analysis of structure of working capital enables management of an enterprise to know as

to how the working capital is being administered. It also furnishes valuable information to

the short term creditors and others regarding the strength of working capital of the

undertaking.

The structure of working capital can also be analyzed by measuring the change the

proportion of cash, receivable, inventory and other items to the total current assets in course

of time.

This analysis points out the components which have over grown and where unduly high fund

has been tied up. This analysis may be carried further to each component of current assets to

study the changes in its sub-divisions.

Investment in working capital is generally considered as dead investment as it, does not

contribute towards company’s profit generating capacity but are also required, so it should be

done in such a way that it does not create any side-effects like blockage of money. In

comparison to working capital, investments should be more in fixed assets which are

productive and contribute towards firm’s profit.

85

WORKING CAPITAL PATTERN OF BIL

(In ‘000)

(Working Capital = Total current assets – Total current liabilities)

CURRENT ASSET 2006-07 2005-06 2004-05

Inventory 2149406 1847956 1341899

Sundry debtors 286070 208516 443147Cash & bank

balance 486460 353395 163062

Other C.A. 1709 5558 2185

Loans & advances 890016 940652 631468

TOTAL C.A. 3813661 3356077 2581761CURRENT

LIABILITIES

Current liabilities 2381169 2247006 2059717

Provision 849097 783313 973431

TOTAL 3230266 3030319 3033148

WORKING CAPITAL 583395 325758 (451387)

TURNOVER 14525.49 10336.4W.C. CONVERSION

PERIOD (in days) 151 173

86

SHAREHOLDING PATTERN OF BRITANNIA

Category No. of shares held %age of share holding

2004-05 2005-06 2004-05 2005-06A. Promoter’s Holding

1. Promoter’s- Indian 750 750 0.00 0.00- Foreign 12173219 12173219 50.96 50.96

2. Persons acting in concert - - - -Sub Total 12173969 12173969 50.96 50.96

B. Non-Promoter’s Holding 11716194 11716194 49.04 49.043. Institutional Investor

a. Mutual Funds and UTI 861938 653796 3.61 2.74

b. Banks, Financial institutions, insurance companies (Central/State Govt. Institutions/ Non-Govt. Institutions)

4137370 3263233 17.32 13.66

c. Foreign Institutional Investors (FIIs) 1402489 2977656 5.87 12.46Sub Total 6401797 6894685 26.80 28.86

4. Othersa. Private Corporate bodies 338934 235253 1.42 0.98b. Indian Public 4851195 4467818 20.30 18.70c. NRIs/OCBs 120388 114148 0.50 0.48d. Any Other 3880 4290 0.02 0.02

Sub Total 5314397 4821509 22.24 20.18GRAND TOTAL 23890163 23890163 100.00 100.00

88

WORKING CAPITAL FOR THE YEAR 2005-06

BRITANNIA INDUSTRIES LTD. PANTNAGAR (UTTARAKHAND)

G/L PARTICULARS AMOUNT TOTAL

CURRENT ASSETS

CLOSING STOCK

205001 INVENTORY FO 2386279.87

205002 INVENTORY HSD 1319357.44

205003 INVENTORY LDO 775863.92

205004 INVENTORY ENGG.STR 3090080.16

206000 INVENTORY INGREDIENT 29191221.91

206001 INVENTORY PACKING 20387586.5

206002 INVENTORY CBBS,CLSG 2245570.54

207003 INVENTORY FG BISCUITS 5614899.25

207013 INVENTORY WIP- GOOT 151412.25

207019 CLOSING STOCK INV FG 552790.21

A/C RECEIVABLE

210000 ACCOUNTS RECEIVABLE DOMESTIC 12048.89

CASH IN HAND

211002 CASH IN HAND-DEL BR 0

211043 CASH IN HAND-UA 34476

CASH AT BANK

213052 CITI BANK DELHI MAIN 0

213053 CITI BANK DELHI DISB 0

213111 HDFC DISB BANK-UA 233637.48

PREPAID EXPENSES

220002 PREPAID EXPENSES MISC 5836

220003 PREPAID INSURANCE 132845

91

220009 PREPAID RATES & TAXES 50000

220039 ADVANCE STAFF TRAVEL DOM 0

TOTAL CURRENT ASSETS 66183905.42

CURRENT LIABILITIES

BILLS PAYABLE

111000 ACC PAYABLE DOMESTIC 29455872.51

111001 ACC PAYABLE EXPORT 0

111002 ACC PAYABLE ONE VD 4445

111003 ACC PAYABLE STATUT 66114

111004 ACC PAYABLE EMPL 2029

111005 ACC PAYABLE SSI 90272

111007 ACC PAYABLE AW VENDOR 0

104143 DEPOSIT PAYABLE VENDR 250000

104127 DEPOSIT PAYABLE CUST OTH 175000

104118 C.S.T PAYABLE 11266.5

104165 WORK CONT TAX PAYABLE 52104.55

104004 ACCUED ELECTRICITY 0

104202 GR/IR-CLEARING-PRO 30647374.02

104203 FREIGHT CLEARING (MM) 3987064.02

104030 ACCRUED TELEPHONE 0

104039 ACCRUED SECONDARY FRT 0

ACCRUED & O/S EXPENSES

104016 ACC MISC EXPENSES 4365821.21

104017 ACC ONWARD FREIGH 102624.71

104023 ACCR PRIMARY FREIGHT 13153620.11

104025 ACCR SALARIES & WAGES 253974

104220 ACCR TAX SERVICE 0

104207 TDS CONTRACTOR S 194 C 352159

104209 TDS RENT SEC 1941 0

104210 TDS- PROF.FEES 194 J 7830

104218 TCS CUST SCRAP SALE 2863.14

104244 VAT PAYABLE 78154.01

92

104245 VAT INPUT CREDIT RM 0

104246 VAT INPUT CREDIT CG 0

CREDITORS

104050 CO CONTR GPF LIA A/C 0

104154 RET. PAYABLE VENDOR 6628158.47

104124 ENTRY TAX 257029.2

104125 TDS INT DEP SEC 194 A 0

104126 AACO DEP PAYABLE CUSTM 0

PROVISIONS

110002 PROV FOR BONUS 262826

110006 PROV GRATUITY FUND 257223.44

110011 PROV. FOR LTA 4800

104014 PROV LEAVE ENCASHMENT 46318

TOTAL CURRENT LIABILITIES 90514942.89

WORKING CAPITAL(CA-CL) -24331037

93

WORKING CAPITAL FOR THE YEAR 2006-2007

OF BRITANNIA INDUSTRIES LTD. Pantnagar (Uttarakhand)

G/L PARTICULARS AMOUNT TOTAL

CURRENT ASSETS

CLOSING STOCK

205001 INVENTORY FO 1250901.87

205002 INVENTORY HSD 1737552.76

205003 INVENTORY LDO 1322501.12

205004 INVENTORY ENGG.STR 6571934.32

206000 INVENTORY INGREDIENT 84432770.4

206001 INVENTORY PACKING 16249728.09

206002 INVENTORY CBBS,CLSG 2444207.44

207003 INVENTORY FG BISCUITS 19911752.57

207013 INVENTORY WIP- GOOT 132982.7

207019 CLOSING STOCK INV FG 166906.11

209000 LOOSE TOOLS 905051.8

A/C RECEIVABLE

210000 ACCOUNTS RECEIVABLE DOMESTIC 4896050.28

CASH IN HAND

211002 CASH IN HAND-DEL BR 0

211043 CASH IN HAND-UA 15917

PREPAID EXPENSES

220002 PREPAID EXPENSES MISC 14446.68

220003 PREPAID INSURANCE 59052

220004 PREPAID LEASE RENTAL 0

220006 PREPAID MEDICAL INSUR. 0

220009 PREPAID RATES & TAXES 0

220041 PREPAID GROUP INSUR 5515

220039 ADVANCE STAFF TRAVEL DOM 54417

94

WIP

202000 CWIP 0

202001 AUC- D&M(CWIP) 5369271.68

TOTAL CURRENT ASSETS 145540958.8

CURRENT LIABILITIES

BILLS PAYABLE

111000 ACC PAYABLE DOMESTIC 45606390.3

111001 ACC PAYABLE EXPORT 0

111002 ACC PAYABLE ONE VD 51391

111003 ACC PAYABLE STATUT 525202

111004 ACC PAYABLE EMPL 2030

111005 ACC PAYABLE SSI 135300

111007 ACC PAYABLE AW VENDOR 0

104143 DEPOSIT PAYABLE VENDR 275000

104127 DEPOSIT PAYABLE CUST OTH 150000

104118 C.S.T PAYABLE 4154.89

104165 WORK CONT TAX PAYABLE 28377

104201 APMC CLEARING A/C 0

104202 GR/IR-CLEARING-PRO 2721309.9

104203 FREIGHT CLEARING (MM) 12046697.98

ACCRUED & O/S EXPENSES

104016 ACC MISC EXPENSES 8076499.86

104017 ACC ONWARD FREIGH 669362.71

104023 ACCR PRIMARY FREIGHT 26697238.71

104025 ACCR SALARIES & WAGES 614091

104033 ACCR LOADING 81934

104220 ACCR TAX SERVICE 0

104207 TDS CONTRACTOR S 194 C 517762

104209 TDS RENT SEC 1941 21004

104210 TDS- PROF.FEES 194 J 729

104218 TCS CUST SCRAP SALE 6646.51

95

104244 VAT PAYABLE 86142.02

104245 VAT INPUT CREDIT RM 0

104246 VAT INPUT CREDIT CG 0

104152 MISC RECOVERY 0

CREDITORS

104050 CO CONTR GPF LIA A/C 71111

104053 CO CONTR ESI LIA A/C 33200

104154 RET. PAYABLE VENDOR 8426606.06

104064 EMPL CONTR ESIC 12256

104128 STALE CHJEQE /AC 70946.07

104067 EMPL CONTR GPF 62697

104124 ENTRY TAX 102750.37

104125 TDS INT DEP SEC 194 A 0

104126 AACO DEP PAYABLE CUSTM 0

PROVISIONS

110002 PROV FOR BONUS 925276.44

110006 PROV GRATUITY FUND 635064.63

110011 PROV. FOR LTA 0

104014 PROV LEAVE ENCASHMENT 114398.16

TOTAL CURRENT LIABILITIES 108771568.6

WORKING CAPITAL(CA-CL) 36769390

* AS PER CHANGE IN THE POLICY OF THE ORGANISATION LOOSE

TOOLS HAVE BEEN CONVERTED INTO FIXED ASSETS FROM CURRENT

ASSETS WITH AFFECT FROM APRIL 2007.

96

MANAGEMENT OF INVENTORY

PERCENTAGE OF INVENTORY TO WORKING CAPITAL

Above table shows the inventory and working capital relationship in BIL .It appears from the

analysis that the percentage of inventory to WC is reasonable considering the nature and the

size of the business, for the given period i.e. 04-05 to 05-06 .How ever in 05-06 it has

increased marginally. Generally inventory in any business enterprise should be kept at

minimum. Inventory in excess of this limit is a sign of excessive buying and slow use of

material reason being the large production cycle. How ever this ratio can differ from Industry

to industry. Heavy manufacturing industries characterized by a long production cycle

invariably have higher inventory to working capital ratio as indicated by the figure inventory

to working capital ratio as indicated by the figure.

(In ‘000) 2006-07 2005-06 2004-05

Inventory 2149406 1847956 1341899

W.C. 583395 325758 (451387)

Ratio of inventory/ W.C. 368.43 567.27 297.28

97

MANAGEMENT OF DEBTORS

PERCENTAGE OF DEBTORS TO WORKING CAPITAL

The study of debtors and working capital relationship is shown in above table. The analysis of

the table reveals that the amount of debtors in BIL is on an average 81% of working capital

during the above stated period, which means not very large amount of working capital, is

blocked in debtors, but still it should be minimum ass much as possible.

Looking at the trend during the period, BIL debtors to working capital ratio has been fluctuated.

It has increased from 04-05 to 05-06.

(In crores) 2006-07 2005-06 2004-05

Debtors 286070 208516 443147

Working capital 583395 325758 (451387)

% of debtors to working capital 49.03 64.009% (98.17)%

99

MANAGEMENT OF CASH

PERCENTAGE OF CASH TO WORKING CAPITAL

Above table shows the relationship of cash to working capital for the companies during the period 04-05 to 06-07

On analyzing the table we find that cash was on an average 51.91% of working capital in BIL, which is not, a good sign as excess of liquidity is also harmful. It is clear from above table that during 04-05 the ratio was negative where as in 05-06 it was too high as to 06-07 which has decreased to 83.38% along with increasing cash.

This suggests that BIL need to take some good steps for maintaining the adequate liquidity along with sufficient cash generating power.

At the year end cash collection is high in comparison to whole year that is the reason company has high percentage of cash to working capital.

(In crores) 2006-07 2005-06 2004-05

CASH 486460 353395 163062

Working capital 583395 325758 (451387)

% of Cash to working

capital 83.38% 108.48% (36.12)%

101

LOANS AND ADVANCES

LOANS AND ADVANCES AS A % OF WORKING CAPITAL

Table shows the relationship of loans and advances as a percentage of working capital in BIL

during the period 04-05 to 06-07. During this period loans and advances accounted an average

increase of 100.44 %. According to common norms loans and advances should be made as low

as possible unless they earn reasonable returns.

During the above period percentage has been consistently increased along with loans and

advances in last year it, which is a negative sign.

(In crores) 2006-07 2005-06 2004-05

Working Capital 583395 325758 (451387)

loans and advances 890016 940316 631468

% of loan and advances to W.C. 152.55 288.65 (139.89)

103

ANALYSIS OF SOME IMPORTANT SIGNIFICANT RATIOS

RATIOS Formula to be used2006-07

2005-06

2004-05

MEASURES OF INVESTMENT

RETURN ON EQUITY

PROFIT AFTER TAXEQUITY SHAREHOLDERS FUND

17.4% 26.7% 33.5%

BOOK VALUE PER SHARE

SHAREHOLDER’S FUNDNUMBER OF EQUITY SHARES

Rs.257.4

Rs. 229.8

Rs. 185.7

DIVIDEND COVER EARNING PER SHARE

DIVIDENDS (plus tax) PER SHARE 2.5

times3.5

times3.8

timesMEASURES OF FINANCIAL STATUS

CURRENT RATIO

CURRENT ASSETSCURRENT LIABILITIES

1.2 times

1.1 times

0.9 times

DEBT RATIO BORROWED CAPITALEQUITY SHARE HOLDERS FUND

0.78% 1.7% 1.4%

TAX RATIO TAX PROVISIONPROFIT BEFORE TAX

9.1% 27% 32.5%

MEASURES OF PERFORMANCE

PROFIT MARGIN PROFIT BEFORE TAX AND EXCEPTIONAL ITEM

SALES+OTHER INCOME

5.6% 11.3% 15.2%

DEBTORS TURNOVER

SALES DEBTORS+BILLS RECEIVABLES

81.0 times

87.2 times

36.5 times

STOCK TURNOVER

SALES STOCK

10.8 times

9.8 times

12.0 times

105

COMPETITORS START FROM SCRATCH

As for the threat from the phase-out of the QRs, in respect of biscuits, Britannia has faced this

threat reasonably well over the past one year, without a visible impact on its financial

performance. The proposed foray by Nestle India and Hindustan Lever into confectionery and

dairy products, could pose the only remaining threat to Britannia. On this, Britannia's already

established brand name in the foods business could erect an entry barrier, however temporary,

when it comes to mass market products.

Though both HLL and Nestle have the option of drawing products from their parents' portfolio,

these brands would scarcely be familiar names in India; therefore, investments in brand-building

would be necessarily high, at least in the initial stages. In the bakery business, HLL's acquisition

of Modern Foods, the largest bread manufacturer in India, could pose a threat. However,

Britannia's dependence on the bread segment is now negligible, and any extension of the Modern

brand to biscuits and cakes could take some time, affording some breathing space to Britannia.

106

CHAPTER-V

CONCLUSIONS

&

FINDINGS

107

FINDINGS

As most of the sale is done from its head office, so the requirement of cash is not too

much.

Comparing to its working capital the amount of creditors is quite low.

After introduction of Ferrari project the company was able to maintain its quality and reduce wastages.

Company also follows ISO 140001 certified to maintain the quality. It also performs several activities to motivate the employees such as publishing

magazines, competition, sports and several others.

108

CONCLUSION

At last it is concluded that the company as a whole is a well branded company. The goodwill

of the company is very high.

As considered to my topic working capital management it is concluded that the system of

working capital management of the company is very good and the inventory of the company is

also maintained and controlled properly.

It was observed that the requirement of working capital is not too much and what ever amount

is required is being satisfied by its main branch i.e. from Bangalore. As compared to requirement

of working capital the amount of creditors is also too low which shows that company is in itself

sufficient enough its resources. It does not borrow much of funds from outside party. It only

sales its by products and scraps.

Now we see through this analysis that a Britannia industry is doing a good job in trade

sector. If we analysis the Marketing strategy of Britannia industries then we conclude that its

totally customer oriented firm with well managed strategies.

So, in all, it is concluded that the environment (working and cultural) is found very calm and

the employees are pleased to work very hard in the corporation to achieve the desired objectives.

109

CHAPTER-VI

BIBLIOGRAPHY

110

BIBLIOGRAPHY

Websites

www.britindia.com

www.sidcul.com

www.google.com

www.yahoo.com

www.rediff.com

Books

FINANCIAL MANAGEMENT----------- M Y KHAN

FINANCIAL MANAGEMENT----------I M PANDEY

ACCOUNTANCY----------------------S.A. SIDDIQUI

ANNUAL REPORT OF BRITANNIA INDUSTRIES

111

http://www.rediff.com/

http://www.yahoo.com/

http://www.google.com/

http://www.sidcul.com/

http://www.britindia.com/

working capital management

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