WORKING CAPITAL MANAGEMENT,

& FINANCIAL ANALYSIS

ofTNPL

by

Chitta Manoj venkata Saikumar 13022

Working

CapitalFinancial

Analysis

PRESENTATION FLOW

Industry Profile

Objective &

Methodology &

Limitations

Working capital

days GraphsWorking capital

days

Company

Profile

Comparative

Working capital

LearningsRecommendati

onsFindings

Financial

Analysis

Calculations

done & Tools

used

Working capital

Discussion

INDUSTRY PROFILE:

Indian Paper Industry accounts for about 1.6% of the world's

production of paper and paperboard.

The estimated turnover is Rs 25,000 crore (USD 5.95 billion).

Newsprint consumption -2 million tones, 1.2 million tones is

manufactured and 0.8 million tones is imported.

The Rs. 22000-crore paper industry in India, rated 15th

largest in world engages about 1.5 million people with the

help of Rs. 2500 crore Government subsidy.

Raw materials used forest based, agro based and recovered

paper.

SHARE OF DIFFERENT TYPES OF RAW-MATERIALS USE IN INDIA’S P&P

INDUSTRY

Forest-based

Agro-based

Recovered paper

COMPANY PROFILE: Established by the government of Tamil Nadu in 1979.

Headquarter: Chennai, Tamil Nadu

Mill: Kagithapuram, Karur District, Tamil Nadu

Branch locations: Ernakulam, Hyderabad, Bangalore, Mumbai, New Delhi, Kolkata and Ahmedabad

Number of employees:–1,976

Installed capacity: Paper: 400,000 MT

Production: 2012-13 : 371,637 MT2011-12: 343,306 MT

Financials Turnover: 2012-13: Rs. 1,881.18 crores2011-12: Rs. 1,538.99 croresGrowth Rate: 22.23%

Net profit: 2012-13: Rs. 91.48 crores (after tax)2011-12: Rs. 108.94 crores (after tax)Growth Rate: (16)%

Net worth: 2012-13: Rs. 1,035 crores2011-12: Rs. 971 crores

Objectives: Methodology:

OBJECTIVES & METHODOLOGY:

To examine the liquidity position of the firm

To study the working structure policies

To understand the Nature of Paper industry

To offer suggestions to the company, for betterment.

To understand problems faced in working capital management.

To examine Financial Position of company

To study the financial performance of Paper industry.

To study and understand the different components of Paper Industry.

Primary Data

Secondary Data

Limitations:

Errors in the Secondary data

Uncertainty

Confined to Published Data

Year ending time.

Complete access of data.

CALCULATIONS AND FINDINGS

WORKING CAPITAL

1. Working capital days

2. Comparative working

capital

FINANCIAL ANALYSIS

1. Liquidity

2. Leverage

3. Turnover

4. Profitability

CONCEPT OF WORKING CAPITAL:

Types of Working capital

1. Gross working capital :

1. It is the firms investment in total current assets / circulating assets.

2. Net working capital:

This can be defined as two ways.

1. The excess amount of current assets over current liabilities.

2. The amount of firms current assets which is financed by the long-term funds

Basic types in Working Capital

1. Permanent Working Capital

1. %Current Assets

2. Continuous

2. Temporary Or Variable Working Capital

1. Activity Based

2. Different Times

Ways of maintaining Working capital

Estimating the working capital amount.

Sources due to which these funds have to be raised.

COMPARISON OF WORKING CAPITAL

YEAR CURRENT ASSET

CURRENT

LIABILITIES

WORKING

CAPITAL

NET WORKING CAPITAL

2009 49264.99 47937.76 1327.23

2010 58198.46 68647.91 (10449.45) 11776.68

2011 64477 100771.8 (36294.8) 25845.35

2012 93887.61 136628.12 (42740.51) 6445.71

2013 82740.68 141382.71 (58642.03) 15901.52

-100000

-50000

0

50000

100000

150000

200000

250000

2009 2010 2011 2012 2013

WORKING CAPITAL

CURRENT LIABILITIES

CURRENT ASSET

Cash Conversion cycle

Key Terms

Accounts

Work-in-

progress

Raw

materials

Finished

goods

CashEach of the operating cycle components can be

calculated as follows

W= Average work-in-progress inventory

Average cost of production per day

R= Average stock of raw materials and stores

Average raw materials & stores consumptions per day

D= Average book debts

Average credit sales per day

C= Average trade creditors

Average credit purchases per day

O=R+W+F+D-C

Where,

O= Time period of operating cycle

R= Raw material & store storage period

W= Work-in-progress period

F= Finished goods storage period

D= Debtor collection period

C= Creditor payment period

Current Ratio

The current ratio is a general

indicator of the business's ability to meet its

short-term financial Commitments

Acid Test

The acid test or quick ratio is the

current ratio modified to provide a more

prudent measure of shortterm liquidity

Acid test ratio =

Particulars 2013 2012 2011 2010 2009

curent ratio 0.585225 0.687176 0.639832 0.865262 1.052719

Particulars 2013 2012 2011 2010 2009

quick ratio 0.398197 0.440652 0.4364 0.618914 0.653543

0

0.2

0.4

0.6

0.8

1

1.2

2 0 1 3 2 0 1 2 2 0 1 1 2 0 1 0 2 0 0 9

CURRENT & QUICK RATIO

curent ratio quick ratio

Less short term solvency

Difficulty in paying current

liabilities

Turnover ratio

Inventory turnover ratio

A ratio showing how

many times a company's

inventory is sold and replaced

over a period

Debtor turnover ratio

An accounting

measure used to quantify a

firm's effectiveness in extending

credit as well as collecting debts

Creditor turnover ratio

A short-term

liquidity measure used to

quantify the rate at which a

company pays off its

suppliers.

Particulars 2013 2012 2011 2010 2009

inventory

turnoverra

tio 2.638198 2.024986 2.322091 2.002431 2.150039

Particulars 2013 2012 2011 2010 2009

Debtor /

Collection

turnover

ratio 6.045305 5.528138 6.12107 5.719358 8.345599

Particulars 2013 2012 2011 2010 2009

Creditor

turnover 5.354845 6.107935 7.335093 8.159004 6.851723

Since it is manufacturing is Continued

process they can not stop the process

so they have to maintain the Huge

inventories.

They are mostly allowing the long

term contracts so the costumers are

same so there is no big changes in

Accounts receivable

Because of sudden increase in

interest (new plat constructing) paid

during the last two years the Creditor

turnover ratio lagged down0

1

2

3

4

5

6

7

8

9

2 0 1 3 2 0 1 2 2 0 1 1 2 0 1 0 2 0 0 9

TURNOVER RATIOS

inventory turnoverratio Debtor / Clection turnover ratio Creditor turnover

0

50

100

150

200

250

300

350

400

450

500

2013 2012 2011 2010 2009

138.3520277180.2481917

157.1859058182.2784658 169.7643347

60.37743171

66.02584749

59.630095

63.8183465843.73562668

68.16256558

59.75832928

49.76078828

44.73585095

53.27127581

130.5668939

186.5157099

167.0552125

201.3609614

160.2286856

Turnover Ratios in Days

Inventory turnover ratio in days Recivable turnover ratio in days

Payable turnover ratio in days Cash Convertion Cycle :

Inventory turnover ratio in days are 165.66

Receivable turnover ratio in days are 58.7

Payable turnover ratio in days 55.1

Cash Conversion Cycle 169.14

Here it is taking more days to generate cash

from sales and operations so they may need

maintain much more working capital for

regular basis

Particulars 2013 2012 2011 2010 2009

Inventory turnover ratio in days 138.352 180.2482 157.1859 182.2785 169.7643

Recivable turnover ratio in days 60.37743 66.02585 59.63009 63.81835 43.73563

Payable turnover ratio in days 68.16257 59.75833 49.76079 44.73585 53.27128

Cash Convertion Cycle : 130.5669 186.5157 167.0552 201.361 160.2287

Debt-Asset Ratio

Defines the total

amount of debt

relative to assets

Leverage Ratio

Debt-Equity Ratio:

It indicates what

proportion of equity

and debt the

company is using to

finance its assets

Interest-Coverage

Ratio:

Determine how easily

a company can pay

interest on outstanding

debt

Fixed Charges

Coverage Ratio:

indicates a firm's ability to

satisfy fixed financing

expenses, such as interest

and leases.

Debt-Equity Ratio 1.113635 1.477555 1.35844 1.694099 1.213958

Debt-Asset Ratio 0.331266 0.403455 0.404522 0.502622 0.40428

Interest-Coverage Ratio 2.042448 1.885659 5.411343 4.422489 4.203788

Fixed Charges Coverage Ratio 0.508917 0.462313 0.580686 0.508631 0.830308

Ratios\years 2013 2012 2011 2010 2009

0

1

2

3

4

5

6

2012-13 2011-12 2010-11 2009-10 2008-09

Ratios

Years

Leverage Ratio

Debt-Equity Ratio Debt-Asset Ratio

Interest-Coverage Ratio Fixed Charges Coverage Ratio

Owners contribution is merely just 30%

more than Creditors

Borrowed funds merely contributing on

40% fixed assets

Relatively more before 2012, on an

average it is 4 times the interest

Fixed charge coverage ratio is heatlthy

which is <1

Profitability Ratio

Gross Profit margin ratio

measures trading gross

profit relative to sales

revenue

Operating profit margin ratio

measures trading Operating

profit relative to sales revenue

Net Profit Margin Ratio

measures trading net profit

relative to sales revenue

Gross Profit Margin ratio 0.561718 0.628884 0.637223 0.674849 0.657642

Operating profit margin ratio 0.127553 0.10572 0.168624 0.185655 0.168443

Net Profit Margin Ratio 0.047226 0.069174 0.12008 0.119368 0.095918

Ratios\years 2013 2012 2011 2010 2009

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2012-13 2011-12 2010-11 2009-10 2008-09

Ratios

Years

Gross Profit Margin ratio Operating profit margin ratio Net Profit Margin Ratio

Huge gap between gross profit/operating

margin ratio telling the presence of bulk

selling and administration expences

2013 decrease in the gross profit high

increase in manufacturing cost

In 2013, 2012 financial cost is making

operating profit is less than average

Because of increase in all expenses net

profit became less for last two years

even turnover is increasing

Profitability Ratio

FINDINGS:

There is no such classification like Permanent and Temporary

Working capital.

Cost reduction will make considerable increase in profit

They not are following matching approach.

There is a need of working capital by market driven .

Their major source of debtors are banks.

Employees expenses even more then the net profit.

Concern about echo system so they implementing Reuse of waste

even cost is more.

Strength and weakness of Indian Paper Industry.

Market share and production of different paper companies in India.

Challenges faced by Indian Paper companies.

SUGESSTIONS:

Maintaining has to be there in between Profit and risk.

They can utilize economic scale for reduction of paper production

With Monopoly & good will in suppliers they can postpone payments little more

It is preferable to forecast sales , control inventory as much as possible.

prepare cash budgets.

Utilize the diversification of industry

Liquidity may can increase by issuing long term borrowing like debentures

Following the International Standards in production and waste management.

Improving the skills set of employees

LEARNING:

Manufacturing Industrial exposure

Public sector unit Work culture

Familiar to components in annual reports of Manufacturing

industry

Major differences between old and new versions of annual

reports