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A Study on Working Capital Management at KMF

EXECUTIVE SUMMARY
Karnataka Milk Federation (KMF) is the apex body in Karnataka representing Dairy Farmers Co-operatives. It is the third largest dairy cooperative amongst the dairy co-operative operatives in the country. In South India it stands first in terms of procurement as well as sales. One of the core functions of the Federation is marketing of milk and milk products. The Corporate Exposure and Learning (CEL) conducted at Karnataka Milk Federation consist of two parts:Part A consists of a general study relating to the organization. It consists of the kind of industry they belong to and the type of business undertaken by them. It also consists of information about various divisions, on how they function, the strategies and policies used by each division and how they are able to achieve their goals. The study includes the functioning of KMF with reference to Mc Kinseys 7S framework, which is an indicator to KMFs performance and for what it is till date. Part B consists of a detailed study on the Working Capital Management of the organization. The study states on how the liquidity position is being maintained by KMF. This study is carried out to find the financial health of KMF by using various ratios. The objective of this study is to thoroughly analyze the organizations solvency, profitability and performance over the years.

Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF

CHAPTER 1 INTRODUCTION

INTRODUCTION TO FINANCE:-

Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF Finance if the life blood of a business. The Financial Management study about the process of procuring and judicious use of financial resources with a view to maximizing the valued of the firm thereby the value of the owners i.e., equity shareholders in a company is maximized. The traditional view of Financial Management looks into the following functions that a Finance Manager of a business firm will perform. Arrangement of short term and long term funds from financial institutions. Mobilization of funds through financial instruments like Equity shares, Preference shares, Debentures, Bonds etc. Orientation of Finance functions with the Accounting function and compliance of legal provisions relating to funds procurement, use and distribution. With the increase in complexity of modern business situation, the role of a Finance Manager is not just confined to procurement of funds, but his area of functioning is extended to judicious and efficient use of funds available to the firm, keeping in view the objectives of the firm and expectations of the providers of funds.

INTRODUCTION TO WORKING CAPITAL

Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF Working capital management is a significant in financial management due to the fact that it plays a pivotal role in keeping the wheels of a business enterprise running. Working capital management is concerned with shortterm financial decisions. Shortage of funds for working capital has caused many businesses to fail and in many cases, has retarded their growth. Lack of efficient and effective utilization of working capital leads to earn low rate of return on capital employed or even compels to sustain losses. The need for skilled working capital management has thus become greater in recent years. A firm invests a part of its permanent capital in fixed assets and keeps a part of it for working capital i.e. for meeting the day to day requirements. We will hardly find affirm which does not require any amount of working capital for its normal operations. The requirement of working capital varies from firm to firm depending upon the nature of business, production policy, market conditions, seasonality of operations, conditions of supply etc. Working capital to a company is like the blood to the human body. Working capital is the lifeblood of any business firm and shortage of funds for working capital will lead to business failure. The management of short term funds. Working capital management if carried out effectively, efficiently and consistently, will assure the health of an organization.

MEANING OF WORKING CAPITAL:


Working capital is defined as the excess of current liabilities. Current assets are those assets which will be converted into cash within the

Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF current accounting period or within the next year as a result of the ordinary operations of the business. They are cash or near cash resources. These include: Cash and Bank balances Receivables Inventory Raw-materials, stores and spares Work-in-progress Finished goods Prepaid expenses Short-term advances Temporary investments The value represented by these assets circulates among several items. Cash is used to buy raw-materials, to pay wages and to meet other manufacturing expenses. Finished goods are produced. These are held as inventories. When these are sold, accounts receivables are created. The collection of accounts receivable brings cash into the firm. The cycle starts again. Current liabilities are the debts of the firms that have to be paid during the current accounting period or within a year. These include: Creditors for goods purchased Outstanding expenses i.e., expenses due but not paid Short-term borrowings Advances received against sales Taxes and dividends payable Other liabilities maturing within a year.

Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF Working capital is also known as circulating capital, fluctuating capital and revolving capital. The magnitude and composition keep on changing continuously in the course of business.

OPERATIONAL DEFINITIONS OF THE CONCEPTS:Working capital Working capital may be regarded as that portion of a firms total capital, which is employed in financing its day-to-day operations such as cash, debtors, inventories, marketable securities etc., it is the amount of funds, which a firm holds, in the form of current assets to meet its current obligations. Its also known as Revolving and Circulating capital.

CLASSIFICATION OF WORKING CAPITAL:Gross Working Capital: It is the capital invested in the total current assets of the enterprise. E.g. Cash, Bills receivables, Sundry debtors, Short-term loans, Pre-paid expenses etc., Net Working Capital: It is the excess of current assets over current liabilities. Or it is the difference between the current assets and current liabilities. Negative Working Capital:Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF It refers to the excess of current liabilities over the current assets. Its also known as Working Capital Deficit. Permanent Working Capital: It refers to the amount of investment made permanently in current assets required throughout the year to carry out the business operations successively. Permanent working capital is to be financed out of long-term funds but no return can be expected from it. Permanent Working Capital is also known as regular or fixed or had core Working Capital. Temporary Working Capital: It is the additional Working Capital, which is required for financing the increase in the volume of business operations at different times during the operating year. Thus it refers to the amount of Working Capital, which goes on fluctuating or changing from time to time with the change in the volume of business activities. Its also known as variable or fluctuating Working Capital. It is to be financed out of short-term funds and some return can be expected from it. Current Assets: Current assets are those assets which change their form and substance, and which are converted into cash during the normal operating cycle of the business or within an accounting year. In short, all those assets, which can be converted into cash within an accounting year, are called Current Assets. They include cash, short-term securities, debtors, bills receivables and stock inventory. Current Liabilities:
Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF Current Liabilities are those claims of outsiders, which are expected to mature for payment within an accounting year. In other words, it refers to all short term obligation or liabilities which are required to be repaid within a period of one year out of short-term or current assets. They include creditors, bills payables, outstanding expenses and provision for taxation etc., Cost of Goods Sold: It refers to opening stock of finished goods plus purchases of finished goods plus all direct expenses incurred on finished goods minus closing stock of finished goods. Alternatively, the cost of goods sold can be taken as sales of finished goods minus gross profit. Cash: Cash is the money, which the firm can disburse immediately without any restrictions. It includes coins, currency and cheques held by the firm and balances in bank accounts. Sometimes mere cash items such as marketable securities or bank time cheques are included in cash.

OBJECTIVES OF WORKING CAPITAL:


The basic objectives of working capital management are as follows:
By optimizing the investment in current assets and by reducing the

level of current liabilities, the company can reduce the locking up of funds in working capital there by; it can improve the return on capital employed in the business.
Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF


The second important objective of working capital management is that

the company should always be in a position to meet its current obligations which should properly be supported by the current assets available with the firm. But maintaining excess funds in working capital means locking of funds without return.

TOOLS AND TECHNIQUES OF WORKING CAPIRAL ANALYSIS: Gross current assets:- This tool tells us the amount invested in the

various components of current assets and its share in a total investment of the company. By studying this, financial manager is able to manage efficiently, the working capital, which ensures the greatest return on its investment, planning and control of funds.
Ratio Analysis: - A ratio is a quotient of two numbers i.e. the relation

of one item to another expressed in a simple mathematical form. Here we are considering the ratios, which talks about the efficiency of working capital management. They include:Working Capital management Current Asset to Total Asset Current Ratio Net Working Capital Turnover Ratio Gross Working Capital Ratio Current Asset Turnover Ratio Working Capital Turnover Ratio Operating Cycle. Cash Management
Lal Bahadur Shastri Govt First Grade College, Bangalore

A Study on Working Capital Management at KMF Quick Ratio Absolute Liquid Ratio Liquid Asset to Working Capital Ratio Cash/Bank to Current Asset I introduction to Nandini Milk Industry (KMF) Karnataka Milk Federation a harbinger of rural prosperity Karnataka Milk Federation (KMF) is the largest cooperative dairy Federation in South India, owned and managed by milk producers of Karnataka State. KMF has over 2 million milk producers in over 10500 Dairy Cooperative Societies at village level, functioning under 13 District Cooperative Milk Unions in Karnataka State. The mission of the federation is to usher rural prosperity through dairy development. During the last four decades of cooperative dairy development by KMF, the dairy industry in Karnataka has progressed from a situation of milk-scarcity to that of milksurplus.

Quality Excellence from Cow to Consumer is the motto of the Federation to obtain better-quality Milk and milk products from our value chain (Procurement to Processing to Marketing). Thus milk and milk products, under Nandini brand name, are unmatched in quality made available to consumers at most competitive prices. In a way Nandini Milk and Milk Products are Spreading wealth of health. Karnataka Cooperative Milk Producers' Federation Limited (KMF) is the Apex Body in Karnataka representing Dairy Farmers' Co-operatives. It is the second largest dairy co-operative amongst the dairy cooperatives in the country. In South India it stands first in terms of procurement as well as sales. One of the core functions of the Federation is marketing of Milk and Milk Products. The Brand Nandini" is the household name for Pure and Fresh milk and milk products.

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A Study on Working Capital Management at KMF KMF has 13 Milk Unions throughout the State which procure milk from Primary Dairy Cooperative Societies (DCS) and distribute milk to the consumers in various Towns/Cities/Rural markets in Karnataka. The first ever World Bank funded Dairy Development Program in the country started in Karnataka with the organization of Village Level Dairy Co-operatives in 1974. The AMUL pattern of dairy co-operatives started functioning in Karnataka from 1974-75 with the financial assistance from World Bank, Operation Flood II & III. The dairy co-operatives were established under the ANAND pattern in a three tier structure with the Village Level Dairy Co-operatives forming the base level, the District Level Milk Unions at the middle level to take care of the procurement, processing and marketing of milk and the Karnataka Milk Federation as the Apex Body to co-ordinate the growth of the sector at the State level. Coordination of activities among the Unions and developing market for Milk and Milk products is the responsibility of KMF. Marketing Milk in the respective jurisdiction is organized by the respective Milk Unions. Surplus/deficit of liquid milk among the member Milk Unions is monitored by the Federation. While the marketing of all the Milk Products is organized by KMF, both within and outside the State, all the Milk and Milk products are sold under a common brand name NANDINI.

THE GROWTH PROCESS The growth over the years and activities undertaken by KMF is summarized briefly hereunder: 19762010-2011(Up to 77 Jan'11) 12262 Regd./10766 Dairy Co-operatives Nos 416 Funct. Membership Nos 37000 20.65 Lacs 38.34 / Peak Proc.41.83 Milk Procurement Kgs/day 50000 LKPD 26.26 / Curds: 2.38 Milk Sales Lts/day 95050 LKPD

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A Study on Working Capital Management at KMF Cattle Feed Consumed Daily Payment to Farmers Turnover Kgs/DCS 220 Rs.Lakhs 0.90 Rs.Crores 2459 584 3802.00

World Bank Study - Observations The World Bank, in its study on the effect of Co-operative dairying in Karnataka, has pointed out that: The villages with Dairy Co-operative Societies are much better off than those without. The families with dairy cattle are economically better than those without dairy cattle. Women who had no control on the household income have better control in terms of Milk Money. A single commodity MILK has acted as a catalyst in the change in the Socio-Economic impact of the rural economy. There is a positive impact on those at the lower end of the economic ladder both in terms of landholding and caste.

PERSPECTIVE PLAN 2010

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A Study on Working Capital Management at KMF After the closure of OF-III project. Government of Karnataka and NDDB signed an MOU during February 2000, for further strengthening the Dairy Development Activities in Karnataka with an outlay of Rs.250 Cores. Consequent to the announcement of new lending terms and conditions by NDDB through an evolution of an action plan - Perspective 2010 to enable the dairy cooperatives to face the challenges of the increased demand for milk and milk products by focusing efforts in the four major thrust areas of Strengthening the Cooperatives. Enhancing Productivity, Managing Quality and building a National Information Network, plans are under implementation. FUTURE VISION To consolidate the gains of Dairying achieved in the state of Karnataka and with a view to efficiently chill, process and market ever developing and increasing milk procurement with an utmost emphasis on the Quality and in the process conserve the socio-economic interests of rural milk producers, the Govt. of Karnataka through KMF has proposed to undertake several projects with financial and technical support of NDDB for which an MOU was signed between Govt. of Karnataka and NDDB on 10th Nov. 2004.

PROJECTS: Channaraypatna Milk Powder Plant consisting of 30 MT Powder Plant, 4 LLPD Dairy and butter making facility - Established & UHT of 1LLPD is being commissioned Proposed for establishment of Cattle Feed Plants - Hassan 300 MTPD Capacity - project execution under progress - Shimoga 300 MTPD Capacity - Challagatta (Near B'lore) 500 MTPD Capacity Multi packaging unit and Ice Cream Plant at Bellary Milk shed area.

GOI PROJECT - RKVY (Rashtriya Krushi Vikas Yojane) Fodder densification unit at different place of capacity 10 Tones each. Bio Security measures at Nandini Sperm Station, unit of KMF Strengthening of Training Centers at Bangalore, Mysore, Dharwad. Strengthening Works at Bijapur, Gulbarga, Bidar & Bellary Daily.

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A Study on Working Capital Management at KMF

Other GOK Financial Support: 1. To support Milk Producers of DCS members GOK is providing an amount of Rs.2.00 per liter as incentive to the milk producer from 2008-09 onwards. 2. GOK is providing financial assistance for strengthening Dairy Development infrastructure facilities at Northern Karnataka milk unions jurisdiction which will also redress regional imbalance as per Dr. Nanjundappa's report. UNITS OF KMF KMF has the following Units functioning directly under its control: Mother Dairy, Yelahanka,Bangalore. Milk Product Plant, Channarayapatna. Nandini Milk Products, KMF Complex, Bangalore. Cattle Feed Plants at Rajanukunte/Gubbi/Dharwad/Hassan. Nandini Sperm Station (formerly known as Bull Breeding Farm & Frozen Semen Bank) at Hessaraghatta. Pouch Film Plant at Munnekolalu, Marathhalli. Central Training Institute, Bangalore & Training Institutes at Mysore/Dharwad. Sales Depots at B'lore, Mysore, Mlore, Hubli, Gulbarga, Tirupathi & Kanpur. Vision To march forward with a missionary zeal which will make KMF a trailblazer of exemplary performance and achievements beckoning other Milk Federations in the country in pursuit of total emulation of its good deeds? To ensure prosperity of the rural Milk producers who are ultimate owners of the Federation. To promote producer oriented viable cooperative society to impart an impetus to the rural income, dairy productivity and rural employment. To a bridge the gap between price of milk procurement and sale price. To develop business acumen in marketing and trading disciplines so as to serve consumers with quality milk, give a fillip to the income of milk producers. To compete with MNCs and Private Dairies with better quality of milk and milk products and in the process sustain invincibility of cooperatives.
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A Study on Working Capital Management at KMF

MISSION Heralding economic, social and cultural prosperity in the lives of our milk producer members by promoting vibrant, self-sustaining and holistic cooperative dairy development in Karnataka State Objectives KMF is a Cooperative Apex Body in the State of Karnataka representing organizations of milk producers' and implementing alround dairy development activities to achieve the following objectives: To ensure assured and remunerative market round the year for the milk produced by the farmer members. To make available quality milk and other premier dairy products to urban consumers. To build & develop village level institutions as cooperative model units to manage the dairy activities. To ensure provision of inputs for milk production, processing facilities and dissemination of know how. To facilitate rural development by providing opportunities for self employment at village level, preventing migration to urban areas, introducing cash economy and opportunity for a sustained income. The philosophy of dairy development is to eliminate middlemen and organize institutions to be owned and managed by the milk producers themselves, employing professionals. To sum it up, every activity of KMF revolves around meeting one basic objective: 'Achieve economies of scale to ensure maximum returns to the milk producers, at the same time facilitate wholesome milk at reasonable price to urban consumers'. Ultimately, the complex network of cooperative organization should build a bridge between masses of rural producers and millions of urban consumers and in the process achieve a socio-economic revolution in every hinterland of the State. Evolution Karnataka Milk Federation which is most popular as KMF, evolved itself as a premier and most profitable dairy farmers' organization in the State of Karnataka. As an agency in 1975 to implement the World Bank Aided Dairy Development Projects, Karnataka Dairy Development Corporation (KDDC) was formed, the company grew itself fast and as it spreads the wings of new
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A Study on Working Capital Management at KMF found rural economic activity - Dairying all over the State, the genesis of apex cooperative body took the shape of KMF in 1983 encompassing entire State with 13 District Co-operative Milk Unions executing the various parameters of Dairy activity - organization of Dairy Co-operatives, Milk Routes, Veterinary Services, Procurement of milk in two shifts of the day, Chilling, Processing of milk, distribution of milk and also establishment of Cattle Feed Plants, Nandini Sperm Station, Liquid Nitrogen Supply, Training Centers - as its main stay. The entire system was reconstructed on the model of now well known `ANAND' pattern dairy cooperative societies. Eight southern districts of Karnataka was considered initially with a target of organizing 1800 Dairy Co-operative Societies, four Milk Unions and processing facilities were set up to the tune of 6.5 lakhs per day by 1984. Under Operation Flood - II &III, project which started in 1984 & 1987 covered the remaining parts of Karnataka. Thirteen milk unions are organized in 175 talukas of all 20 districts then and the field work was extended by organizing more dairy cooperative societies. The processing facilities i.e. chilling centers, milk dairies and powder plants were transferred in phases to the administrative control of respective cooperative milk unions and the activities continued to be implemented by these District Organizations. Additional processing facilities were created & existing facilities augmented every decade with the help of Govt. / Zilla Panchayat and NDDB to handle ever increasing milk procurement without declaring milk holidays. The processing facility as exists at 32.25 lakh liters/day is further strengthened. DAIRY SCENARIO:Indian Agriculture is an economic symbiosis of crop and cattle production small and marginal farmers owing land holding engaged in agriculture. Agriculture provides as employment for short duration in whole year and part of workforce is virtually unemployed. In the situation dairying sets right this imbalance in employment. Dairying sector provides farm families the triple benefits of nutritive food, supplementary income and productive employment for family labour.
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A Study on Working Capital Management at KMF By looking into the progress in dairy sector, there are some achievements & they are: Number One Commodity:- Milk is Indias number one form

commodity in terms of its contribution to the National Economy.


Worlds Number One Producer: - In 1995, the United States was

the worlds number one milk producer with its annual milk production of 72 million tons. In 1998, when Indias annual output is projected at 78 million tons.
Values of Dairy Output:- The value of output from dairying based

on consumer process is high i.e. 1,05,000 crores (1997) and 1,50,00 crores (2000A

CHAPTER 2

RESEARCH
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A Study on Working Capital Management at KMF

DESIGN

RESEARCH DESIGN
According to Johade Cook A research design is the arrangement of conditions for collection and analysis of data in the manner that aim to combine relevance to research process with economy in procedure. The research methodology or research design constitutes the blue print for the collection, measurement and analysis of data Research Design is the plan and structure of investigation so conceived as to obtain answers for the research questions. It includes an outline of what the researcher will do from writing the hypothesis and their operational implications to the final analysis of data The different types of research design are:
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A Study on Working Capital Management at KMF Exploratory Research. Conclusive Research. The research design adopted here is of Descriptive Research Design. This type of design is followed when The objectives are clearly stated. The sampling technique going to be adopted is known. The sampling size is determined.
The type of data collection is determined.

DATA COLLECTION:The data collection is one of the important aspect in the research design purely because, it is the way that how we can get answer to the research question.

SOURCES OF DATA COLLECTION:All the details are collected from secondary sources only. Secondary data includes, the annual reports, financial reports of the company etc., discussion with the concerned officials has also helped to verify and evaluate the variations and results either to confirm it.. The data is collected in two ways: Primary Data Secondary Data Primary Data:-

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A Study on Working Capital Management at KMF The primary data collection is one of the key tools used by the researcher for data collection. It is the first hand information collected by the researcher from the respondents directly. Primary data is collected through observation and communication

Secondary Data:The secondary data is another form of data collection, where the data is collected from the existing records, company manual and form previously carried out research work and also through internet. SCOPE OF THE STUDY:The study will help in analyzing the working capital for a period of five years i.e. from 2005-06 to 2009-2010 of KMF. This is so because ratios may not prescribe any practical standards, as they are several in numbers for each element of study. The study helps us in finding out how well the organization is managing the working capital.

IMPORTANCE OF THE STUDY:The study has got importance because working capital affects the dayto-day operations of the business firm to larger extent. Thus, effective management of the working capital is required for the smooth functioning of the business firm. There is always a need and much importance will be given for working capital because there is always a time gap between the sales of goods and receipt of sales proceeds. During this period, working capital is
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A Study on Working Capital Management at KMF required for sustaining or maintaining the sales activities. If adequate working capital is not maintained for this period , the firm will not be able ot sustain or maintain the sales, since it may not be in a position to purchase raw materials and pay wages and other expenses and produce the goods for the sale. Thus, every firm requires adequate Working Capital to run its business smoothly and successfully. It is very important to have adequate Working Capital for that there must be efficiency in managing the working capital requirements of the firm. However, there is a danger from both excessive and in-adequate working capital positions. The following two reasons state its importance. 1. Investment in current assets represents a substantial portion of total investment. 2. Investment in current assets and the level of current liabilities have to be geared quickly to the changes in sales. Thus importance of Working Capital Management is reflected in the fact that Financial Managers spent a great deal of time managing current assets and current liabilities.

OBJECTIVES OF THE STUDY: To reflect the working efficiency of the concern. To compare the efficiency of the firm. To know the working capital of KMF as a whole.
To study the pattern and procedure followed regarding working

capital management in KMF with special reference to: Cash Management.


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A Study on Working Capital Management at KMF To study the liquidity of assets used. The ratio relating to the liquidity speaks about how easy the assets can be converted into cash. To study in detail the reasons for ups and downs in working capital position, by studying variations in individual assets.

STATEMENT OF THE PROBLEM:Working Capital management plays a vital role in an organization as it represents a substantial portion of the total investment. The importance of working capital management is reflected in the fact that financial managers spend a great deal of time in managing current assets and liabilities. When not managed in proper manner i.e., if the amount invested is more in working capital it results in funds getting locked, which otherwise may be invested elsewhere in a profitable manner and at the same time if there is inadequate investment, it results in shortage of funds and day to day activities may come to a standstill. Working Capital analysis depends to a large extent on the study of each asset independently by calculating ratios, preparing fund flow statements etc. this techniques help in scientific decision-making process or in deciding the efficiency in utilizing working capital. Thus the problem taken for study is Working Capital Analysis The study shows a comparative analysis of the relevant ratios concerned with working capital of KMF. . REFERENCE PERIOD:The period covered under this is five financial years i.e. from

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A Study on Working Capital Management at KMF 2005-2006 to 2009-2010. CONTEXT OF THE STUDY:The context of the study considers the following two important facts which are very much essential for the study of Working Capital Management in KMF. Whether the Working Capital of KMF is sufficient or adequate. Whether the Working Capital is properly framed and utilized.

REASON FOR THE STUDY:The reason or motive for the study on the Working Capital Management indicates the never ending requirements of the working capital and its importance in the day to day business operations of the business organization; either it may be a small scale or medium scale or large scale enterprise. Therefore, the reason for the study on the Working Capital Management mainly focuses on the advance of working capital and its proper management during all the times.

LIMITATIONS OF THE STUDY:The study covers a period of 3 years with the available sources i.e. from 2007-08 to 2009-10. 10 weeks being a very short time, I have done a study that I feel to be comprehensive and possible in this time. However, some other details of methods of analysis could definitely be found which I have missed out there. The study has been restricted to the head office in Bangalore.

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A Study on Working Capital Management at KMF The study is general. Inter firm and intra firm comparison is not possible. Interactions with the company professionals were limited due to their busy schedule. Limitations of historical accounts. Conclusions will be drawn based on theory and supplemented by figure wherever feasible.

CHAPTER 3

COMPANY PROFILE

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A Study on Working Capital Management at KMF

1. COMPANY PROFILE INTRODUCTION Mother Dairy a unit of Karnataka Milk Federation which is located in Yelahanka in the Bangalore North Taluk, was established in a total area of 28 acres during under of II with a processing capacity of two lakh liters per day on 7.12.1984 later, the processing capacity of the diary was expanded to handle 4 Lakh liters per day during 1993-94 with an additional cost of Rs.3.64 Corers Total of investment for this project is Rs.10.61 corers. The different facilities available at mother diary are mother is procuring 2.4 lakh liters milk per day from kolar Milk sadali and Gowribidnur are possessing bulk milk coolers, through road milk toners. The Diary is processing and distributing on average 2.25 lakh liters of Milk per day to the consumers in Bangalore city with the increase in demand for liquid milk. It is planned to increase the processing capacity of the Diary. Milk is highly nutritive and majority of Indian population rely on milk for their protein supplement milk is obtained by milking well bread cows

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A Study on Working Capital Management at KMF and buffaloes, either manually or through sterilized milking machine milk cream, cheese ghee, condensed milk of milk-protein are the dairy products which are separated from milk through various process. The essence of

organizational study relates to Co-ordination of one department with area ores in this organization Industrialization is taking place in such a rapid place that the entrepreneurs or industrialists often forget to know the overall functioning of all the systems of an organization in the most of corporate objectives. This may be viewed all one of the reason where most of our industries one becoming with day to day. The magic behind the successful entrepreneur in this competition age lines in one detailed knowledge of one functionary of the organization system.

BACK GROUND In June 1974, an integrated project was launched in Karnataka restructure and reorganizes the Diary Industry on the co-operative principle and to lay foundation for a new direction in diary development. Work on the first are World Bank aided Diary development was initiated in 1975. Initially the project covered its southern districts of Karnataka and Karnataka diary Development Corporation was setup to implement the project corporation was setup to implement the project. The multi level, multiunit organization will total vertical integration of all Diary

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A Study on Working Capital Management at KMF development activities was setup with cooperative societies at grass root level, milk unions at the middle level and Diary development cooperation at the state level as on apex body vested with responsibility of implementing Rs.51 Corers project. At the end of September 1984 the World Bank aided project ended and diary development activates continued under operation flood- II. The Activities were extended to cover the entire state except costal taluks ultra Karnataka district and the process of diary development was continued in the second phase form April -1984 as a successor to KDDC. After the closure of operation flood. II, the diary Development activates, which continued under operation flood-III ended on 31.03.1996. The spills over works are financed by NDDB from 1.04.1996 under different terms and conditions.

COMPANY OBJECTIVES Karnataka milk federation (KMF) is a cooperative apex body in the state of Karnataka representing dairy farmers organization and also implementing dairy development activities to achieve the following objectives. Providing assured and remunerative market for the milk produced by the farmer members.

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A Study on Working Capital Management at KMF Providing quality milk to urban consumers.To build village level institutions in cooperative sector to manage the dairy activities. To facilitate rural development by providing opportunities for self employment at village level preventing immigration to urban areas, introducing cash economy and opportunity for steady income. The Philosophy of dairy development is to eliminate middle men and organize institutions to be owned and managed by the milk produces themselves, employing professionals. Achieve economies of scale to ensure maximum results to the milk producers at the same time providing whole some milk producers at the same time providing wholesome milk at reasonable price to urban consumers.

ORGANIZATION STATUS At the End of March 2000, the network of Rs.8363 Diary co-operative societies (DCS) have been organized and are spread over 166 taluks of the total 175 taluks in all the 27 districts of Karnataka. These societies have been organized into 13 milk unions. The unions are further federation there are 38 chilling centers (Capacity 12.49 LLPD) 4 number of farm coolers (Capacity 0.16) 17 number of liquid milk plants and two products diaries for chilling and processing (21.20 LLPD) conservation (25TPD) and marketing of Milk. To supply balanced cattle deed, three numbers of cattle
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A Study on Working Capital Management at KMF feed plants of 100 TPD capacity with mineral mixture production facility in one unit are functioning to ensure supply of quality germ plasma, bull breeding farm and frozen semen bank has been established and is well stocked with exotic quality high pedigree bill. To impart training one central training Institute and 3 regional training centers are functioning. Three diagnostic laboratories have been setup for disease monitoring. Three folder demonstration farms at sahapur, kottanahalli, kudige and one seed production farm at sahapur are also operating out of the above units, 16 numbers of dairies, 3 numbers of training centers and 3 numbers of diagnostic labs are operating under respective unions.

OPERATION STATUS The average procurement of milk touched a peak of 20.28 LKPD in November 1999. In March 2000 liquid milk sales was at the level of 15.2 LLPD. The sale of cattles feed was 110605 tons during the year 1999-2000. The turnover of the organization during 1999-2000 was Rs.998.39 Corers. GENERAL Benefits of frontier technology are made available at framers these hold sophisticated technology such as artificial insemination electronic milk testing equipment, electronic mass media Technology, veterinary biological etc. Are already being made available and further a pilot project for embryo transfer at field level has been taken up in 1991 and about 237
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A Study on Working Capital Management at KMF embryos have been implanted. The project now has been transferred to Kolar Milk Unions, The activities cove prelusion of complete range of inputs for basic milk production, processing facilities and marketing facilities and marketing facilities. A special programmed for control of FMD was implemented A progeny-testing scheme is also taken up to support breeding activity. A herd book recording society known as Karnataka Holstein Friesian Breeders Association (KAHFBA) has been established in March 1991. With the active

KARNATAKA MILK FEDERATION (KMF) The Role of Milk Federation The Karnataka Co-operative milk producers federated Ltd., came into existence on 1/5/1984 by federating the milk unions in the state and thus forming the state level apex organization. The federation is implementing the project activities. The federation is implementing the project activities when all the project activities are completed, the main role of the federation will be to market surplus milk products and to produce and supply centralized inputs.

FEDERATION FUNCTIONS
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A Study on Working Capital Management at KMF Presently Mother Diary and Nandini Milk Products at Bangalore are under the control of KMF fair cattle feed plants, a central training Institute and centralized testing and quality control laboratory are functioning under the direct control by KMF Co-operation of activities between the unions and developing marketing in the area if union. The federation manager surpluses and deficiencies of liquid milk amongst the member milk unions. However the federation organizes marketing of products. The major quality of the milk is sold as liquid milk. This apart other products like butter, Ghee, SMP, Peda flavored milk, Burfi, Panner, Khava, Jamoons, Mysorepak, Badam powder and Ice cream are also sold. Nandini Good Life pure Cow Milk with an ambient shelf life of 45 days has been introduced by adopting ultra high temperature treatment technology. The products are sold under the family brand name of Nandini. The federation organizes marketing of liquid milk and products outside the state. Excellence in quality is maintained to lay a solid foundation for widespread acceptance of Nandini Products. This will ensure an assured market for the ever increasing milk production Balanced cattle feed, by pass cattle feed. Mineral mixture frozen semen straws and liquid nitrogen are produced by the federation and supplied to the unions. Training and development senior management personnel, acquiring and applying all new relevant technologies prescribing quality guidelines and norms are also the functions of the federation.
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MILE STONES 1955 First Diary in Karnataka set up at Kudige, Kodagu Dist.08.01.1955. 1965 Biggest diary in Karnataka with 1.5 lakh liters per Day liquid milk processing factory. Set up in Bangalore on 23.02.1981 Expansion date 01.02.1981. 1974 World Bank aided Karnataka Diary

Development project implemented 19.06.1974. 1974 Karnataka Diary Development Corporation (KDDC) is born .11.01.1974. 1975 1976 1980 01.3.1980 1982 First Milk product Diary started at Gejjalagere, Monday 12.06.1982 1983 Corporate brand name Nandini given 13.02.1983 a) First cattle feed plant commissioned at Rajanukunte 21.03.1983.
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First spear head team is positioned 01.07.1975 First Registration of Union 23.11.1976 Karnataka Milk products Ltd. Established 01.3.1980

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A Study on Working Capital Management at KMF b) Capacity Expanded form 100 Mtr to 200 Mtr 01.06.1997. 1984 Bull Mother form and frozen semen Bank Commissioned 01.01.1984. Operation Flood II

Implemented 01.04.1984 to 30.09.1987. Operations 30.09.1987. Karnataka milk federation is born 01.05.1984 KDDC transformed into KMF into KMF 01.05.1984 KMPL flood II Implemented 01.04.1984 to

assets transferred to KMF 01.02.1984 product Diary Dharwad Commissioned 12.09.1984 Mother Diary Started functioning 01.12.1984 1985 Remaining government dairies transferred to KMF 14.02.1985. 1987 Operation Flood- III implemented 01.04.1987 Dairies at Hassan, Tumkur and Mysore transferred to district milk unions 01.06.1987. 1988 Dairies at Bangalore Gejjalagere, Dharwad Belgaum and Mangalore transferred to district milk union 01.09.1988 training centers at Mysore Dharwad Gulbarga transferred to Unions 01.12.1988.
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A Study on Working Capital Management at KMF 1989Centralized marketing organized 01.05.1989 last milk shed registered as a union (Raichur) 12.12.1989 milk supplied to Kolkata Mother Dairy through railway tankers from mother dairy, Bangalore 03.03.1989. 1991 Karnataka Holstein Friesian Breeders Association (KHAEBA) Registered 25.03.1991. 1992 Commercial production and marketing of NANDINI flavored milk launched September 1992. 1993 Milk procurement on single day cross million Kg Level in December 1986 and average milk procurement per day for the year crosses million Kg level 1991-1992. 1994 Liquid Milk sale crosses billion liters per day February 1994. 1995 Varieties of new Nandini Products Viz, Nandini Panner, Burfi, Kava and sweet curds launched December 1995. 1996 Foundation stone lay for cattle feed plant at Hassan 09.02.1996 production stated 09.09.1998. 1996 Foundation stone laid for mega Dairy and new Powder plant at Bangalore, Mini Dairy schemes and other development programmed 01.11.1996.
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A Study on Working Capital Management at KMF 1997 Inauguration of Ice Cream manufacturing unit at Mother Dairy premises Bangalore 12.06.1997 1998 1999 2000 Launching new products Jamoon Mix March 1998. Tetra Fino Packaged Nandini Good Life Milk March. Badam Powder -17.01.2000

Besan laddoo Sept 2004 Good life High fat milk Dec 2000 Nandini Goodlife Slim May 2002 Good life 200ml Tetrabrick July 2002 Good life 1 ltr Tetra Brik July 2002

2000 2000 started 2000 2001 2002 -

MOU agreement signing by GOK & NDDB for implementation of Perspective Plan. Chilling Centre of 150 TLPD capacity at Hosakote in Bangalore Union. Mega Dairy started functioning in Bangalore Union. Starting of Sales Depot at M'lore in addition to Depos at B'lore, Hubli & Thirupathi. Adoption of Mnemonic Symbol In Bangalore, D.K. & Mysore in Shimoga & Dharwad

2002 2002 2002 2002 2002 2004 2005 -

Release of 50gm. SMP in metalized Polypack. Registration of KMF website as www.kmfnandini.coop. Nandini Shop on Wheels' started (Mobile display cum sales vehicle). Release of Urea Molasses Brick(3Kg Pack) Powder plant of 30 MT capacity started at Mother Dairy. MOU agreement signing by GOK & NDDB for implementation of Perspective Plan 2010. Laying of Foundation stone for 30 MTs Powder Plant at

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A Study on Working Capital Management at KMF Channarayapatna. Launching of Nandini Set Curd'. Packing Station commissioned at Kumbalgodu (Mandya Union). Depos opened at Kerala (Kannur & Ernakulam). Foundation stone laid for New 300 MTs capacity at Hassan & Inauguration of Existing CFP expansion from 100 MTs to 200 MTs. Expansion of Gubbi CFP from 100MTs to 150 MTs. Expansion of Dharwad CFP from 100 MTS to 150 MTs. Release of new generation Drinks Tetra Pack variants of Flavored milk & Buttermilk. Release of Nandini Homogenized cow milk(3.5%Fat / 8.5%SNF) in Bangalore. Opening ofNandini Dairy Farmers Welfare Trust hostel. Launching of Bounce brand milk at GOA. Inauguration of additional Infrastructure facilities for UHT milk production at Kolar from existing 40,000 LPD to 1.5LLPD. Commissioning of Channarayapatna Product Plant at a total cost of Rs. 72 Crores. Launch of New products & new stunning packs (Sundae, Crazy Cone ice cream/Lite Skimmed Milk/ Cool Milcafe/Choco Milk Shake/Dairy Whitener) Launch of Goodlife Slim in 1Ltr Brik.

2005 2006 20062006 2006-

2006 2007 2007 2007 2007 2008 -

2009 -

Gulbarga Dairy & Milk Marketing taking over by KMF

QUALITY POLICY OF MOTHER DAIRY Every employee of Mother Diary will strive to provide milk and milk products of outstanding quality with competitive rates, prompt delivery and total customers satisfaction.

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A Study on Working Capital Management at KMF ISO 9002 AND HACCP IS 15000 (HACCP) CERTIFICATE Mother Dairy has obtained ISO 9002 and HACCP Certificate from Bureau of Indian Standard (BIS) of government of India form December 2000. Mother Dairy is the first and only dairy to secure the comprehensive certificate in the entire south India. The importance of obtaining this certificate is to: Procure Manufacture & distribute the products under controlled set of procedures as per ISO 9003. To identify a probable occurrence of Hazard as during the process of procurement manufacturing and distribution. To identify the severity of Hazards during critical control point. To control the Identified Hazards and to produce the products of International food produce the products of international food safety standards.

PRODUCT LINE The Principle aim of mother dairy is to satisfy people with different tastes and preference and income as such it has a broad product line satisfy the people of different taste. Toned Milk Full Cream Milk
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A Study on Working Capital Management at KMF Curd Butter Ghee Ice-Cream

Nandini Milk Products profile


This unit has specialized production of milk based ethnic sweets like Nandini toned milk Nandini homogenized milk Nandini full cream milk Nandini milk products Nandini curd Nandini ghee Nandini butter Nandini paneer Nandini Burfi Nandini cheese Nandini Mysore park Nandini Peda Nandini Burfi Nandini Khova Nandini Jamoon mix Nandini Badam powder Nandini Sugar free Peda Nandini Bite Nandini chocolate Nandini Bulk cheddar cheese Nandini Skimmed milk powder

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A Study on Working Capital Management at KMF


1) Nandini Peda:-

Nandini Peda is a delicious treat for the family, made from pure milk available in 250gms pack containing 10 pieces each.

Dharwad Peda
2) Nandini Paneer:-

Nandini Sugar Free Peda

This is heated to a temperature of 65 degree centigrade for 30 minutes and maximum should be at 70%.

Diced Paneer
3) Nandini Burfi:-

The maximum moisture should be 13-14 % and acidity should be 0.35

Dry fruits burfi

Coconut Burfi

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A Study on Working Capital Management at KMF 5) Nandini milk powder: Enjoy the taste of pure milk skimmed milk powder from pure mik, processed and packed hygienically.

Skimmed Milk Powder 4) Nandini mysorepark:Fresh and tasty, Nandini Mysore Park is made from high quality Bengal gram, Nandini ghee and sugar cane. Its delicious way to relish a sweet moment.

Mysore Pak
5) Nandini Gulab Jamoon mix:-

Gulab Jamoon mix is made from skimmed powder, Maida, soji, and anadini special grade ghee.

Khova Jamoon

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A Study on Working Capital Management at KMF COMPETITORS : The success of each and every business unit is mainly depending on how brilliantly it faces the competitions Mother dairy is not out of completion it has 80% market share in Bangalore & Presently it is the brand leader for milk products. The main competitors to Mother Dairy are: Heritage Arogya Good Morning Swastik ORGANIZATIONAL OBJECTIVE AND STRATEGIES The First step in an organization is the assessment of its objective and strategies i.e., what business are we in? And at what level of quality do with wish to provide or service? Where do we want to be in the future? It is only answering there and other related questions that the organizational must assess the strengths and weakness of its human resources.

NEEDS ASSESSMENT: Needs assessment diagnosis present problems and future challenges to be meet through training and development organizations spend vast sums of money (Usually as a percentage of turnover) on training and development. Before committing such huge resource organization would do well to assess the training needs of their employees organizational that implement
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A Study on Working Capital Management at KMF training programmers without conducting needs assessment may be malign errors.

TRAINING AND DEVELOPMENT OBJECTIVES Once training needs are assessed, training and development goals must be established. Without clearly set goal, it is not possible to design a training and development program and after it has been implemented, there will be no way of measuring its effectiveness. Goals must be tangible verifiable, and measurable. This is easy where skills training are involved

KMF Officers

SRI.A.S.PREMANATH - MANAGING DIRECTOR , KMF Place of Name Designation working A.S.PREMANATH DIRECTOR (ADMN) KMF CO RAVIKUMAR KAKADE DIRECTOR (MKT) KMF CO MUNIRAJU DIRECTOR (AH) KMF CO C.NARASIMHA REDDY DIRECTOR (R&D) KMF CO DR:M.N.VENKATARAM DIRECTOR (C.T.I) KMF CO

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A Study on Working Capital Management at KMF U D.SRINATH SURESH G MUDDE BIHAL K.S.BHISE Dr.BERNAD EARNEST Dr.D.N.HEGDE B.NATRAJ H.MUNAVAR AHMED,KCAS

ADNL DIR (MKT) ADNL DIR (FIN) ADNL DIR (ADMIN/PUR) ADNL DIR (FEEDS) ADNL DIR (AH) ADNL DIR(Q.C) JOINT DIR(RL 441), CO-OP AUDIT

KMF CO KMF CO KMF CO KMF CO KMF CO KMF CO KMF CO

UNION CHIEFS DESIGNATIO PLACE OF N WORKING DR. V.LAXMAN BANGALORE MILK .D REDDY UNION TUMKUR MILK DR.K..SWAMY M.D UNION KOLARK.L.GAJENDRAN M.D CHIKKABALLAPUR A MILK UNION BELGAUM MILK P.D.HAMPALI M.D UNION HASSAN MILK RANGANATH. B.P M.D UNION MANDYA MILK DR.T.GURULINGAIAH M.D UNION NAME
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A Study on Working Capital Management at KMF T.KUMARA SWAMY M.D CHANDRASHEKARA M.D NAYAK DR. T. PRASANNA M.D DR.K.RAMACHANDR M.D A BHAT DR. SURESH BABU DR. G T GOPAL M.D M.D MYSORECHAMARAJNAGAR DAKSHINA KANNADA RAICHURBELLARY-KOPPAL DHARWAD MILK UNION BIJAPURBHAGALKOT SHIMOGA MILK UNION GULBARGA MILK UNION

DR. H.N.SUDHAKAR M.D

UNIT CHIEFS NAME H.N.SUBBUSWAMY K.V JAGANNATHA RAO DR. R.MAHESH Y.GOPAL MOHAMOHD ISMAIL P.V.MOHAN KRISHNA DESIGNATIO N PLACE OF WORKING MILK PRODUCT PLANT,CHANNARAY DIR APATNA DIR MOTHER DAIRY A.D NANDINI SPERM STATION CATTLE FEED G.M PLANT, GUBBI CATTLE FEED G.M PLANT, RAJANUKUNTE CATTLE FEED G.M PLANT, DHARWAD

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A Study on Working Capital Management at KMF D.VIVEK SURESH KULKARNI V.RAJESHWAR K. MAHADEVAIAH P.S.BELLUNKI N.HANUMESH G.M G.M GM J.D I/C J.D G.M CATTLE FEED PLANT, HASSAN NANDINI MILK PRODUCTS POUCH FILM PLANT TRAINING CENTRE, MYSORE TRAINING CENTRE, DHARWAD GULBARGA DAIRY

Know Your Milk: Importance of milk

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A Study on Working Capital Management at KMF


Milk is nature's ideal food for infants and growing children.The

importance of milk in our diet has been recognized since Vedic times, and all modern research has only supported and reinforced this view. In fact, milk is now considered not only desirable but essential from the time the child is born. The baby is recommended to be breast-fed until it is weaned and thereafter given cow/buffalo/goat milk till he or she reaches 12 years of age.
The National Institute of Nutrition has recommended a

minimum of 300 gms daily intake of milk for children between 1-3 years of age and 250 gms for those between 10-12 years. MILK DEFINITION AND ITS COMPOSITION

Milk may be defined as the whole, fresh, clean, lacteal

secretion obtained by complete milking of one or more healthy milk animals, excluding that obtained within 15 days before or 5 days after calving or such periods as may be necessary to render the milk practically colostrum-free and containing the minimum prescribed percentages of milk fat and milk-solidsnot-fat. In India, the term 'milk', when unqualified, refers to cow or buffalo milk, or a combination thereof. Milk SNF means Milk Solids-not-Fat, comprising protein, carbohydrates, vitamins, minerals, etc in milk other than milk fat.

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A Study on Working Capital Management at KMF ESSENTIAL NUTRIENTS IN MILK

Milk is almost an ideal food. It has high nutritive value. It supplies body-building proteins, bone-forming minerals and health-giving vitamins and furnishes energy-giving lactose and milk fat. Besides supplying certain essential fatty acids, it contains the above nutrients in an easily digestible and assailable form. All these properties make milk an important food for pregnant mothers, growing children, adolescents, adults, invalids, convalescents and patients alike. Milk is a powerful nutrition package containing nine essential nutrients including calcium, protein and potassium. Milk is the perfect beverage for today's kids and teens. Calcium:- Milk and dairy products are an important source of calcium. Apart from bone health, Calcium also plays vital role in blood clotting, nerve conduction, muscle contraction, regulation of enzyme activity, cell membrane function and blood pressure regulation. Protein:- Milk is a good source of low-cost high quality protein, which is readily digested. This protein is important for a number of bodily functions-vital to brain development and the growth of body tissues. VitaminA:- Maintains normal vision and skin. Helps regulate cell growth and integrity of the immune system. Vitamin B-12: -Essential for the growth and health of the nervous system. Linked to normal activity of folic acid and is involved in blood formation.
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A Study on Working Capital Management at KMF


VitaminD: -Promotes the absorption of calcium and

phosphorus, and influences bone mineralization, the strengthening of bones. Potassium:- Regulates the body's fluid balance and blood pressure. It is also needed for muscle activity and contractions. Phosphorus:- Helps generate energy in the body's cells and influences bone mineralization, the strengthening of bones. Niacin:- Keeps enzymes functioning normally and helps the body process sugars and fatty acids. It is also important for the development of the nervous system. Riboflavin:- Helps produce energy in the body's cells and plays a vital role in the development of the nervous system.

CLASS AND TYPE OF MILK Dairies in India have to market milk by standardizing, as per the various types of milk prescribed under Prevention of Food Adulteration Act. These type of milk differ in their Milk fat and Milk SNF contents.

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A Study on Working Capital Management at KMF

Raw milk procured from villages, contain numerous pathogenic and spoilage bacteria. These microorganisms, if allowed to grow, multiply at logarithmic rate and produce many toxins and enzymes and spoil milk. Hence milk is processed by heat treatment in dairies. Various types of heat-treatment given to milk are as below 1. Pasteurization

The term Pasteurization has been coined C or below. In this process, pathogenic and spoilage organisms are destroyed. Normally pasteurized milk is packed in sachets and shall be stored under refrigeration conditions, so as to prevent the growth of remaining organisms in milk. Pasteurized milk has a shelf life of 2 days when stored and transported under refrigeration conditions. This milk is boiled and consumed in Indian homes.C for 15 seconds (or to any temperature-time combination which is equally efficient), in approved and properly operated equipment. After pasteurization, the milk is immediately cooled to 6after its
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A Study on Working Capital Management at KMF inventor, Louis Pasteur of France. Pasteurization refers to the process of heating every particle of milk to at least 72 2. Sterilization -

C for minimum period of 15 minutes. After heating, sterilized milk bottles are gradually cooled to room temperature. Due to economic disadvantages and browning of milk, this process is used only for bottled flavored milk. This Sterilized milk has a shelf-life of not less than 3 months, even at room temperature, and can be consumed directly.Sterilized milk is manufactured by filling into bottles and heating bottled milk to not less than120

3. Ultra High Treatment (UHT)

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A Study on Working Capital Management at KMF

C for 4 seconds and cooled instantly which retains all the

vitamins and nutritional value of milk providing zero bacteria product which needs no boiling. The milk is packed in 6 layer tamper proofed Tetra-pack packaging which prevents the milk from spoilage due to sunlight, bacteria, germs and oxygen, thus ensuring freshness and purity of milk packed. The milk can be stored without refrigeration for 60 days in finopackaging and 120 days in brik packaging.During the process of UHT, milk is heat-treated to temperature of 137
KMF has introduced four UHT milk variants in the market,

viz.,Nandini Good life (3.5% Fat, 8.5%

SNF), Nandini Full Cream Milk (12% Fat, 9% SNF), Nandini Smart (1.5% Fat, 9% SNF) & Nandini slim (with less than 0.5% fat and 9% SNF) catering to diverse groups of consumers, including health conscious consumers.

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4.Homogenization

Any of the above class and type of milk may be homogenized. Homogenized milk is milk which has been treated in such a manner as to ensure break-up of the fat globules in milk to such an extent that after storage no visible cream separation occurs on the milk. Milk is homogenized using a high-precision & expensive equipment known as Homogenizer, which consists of a high pressure piston pump to force milk at high pressures (and velocity) through a narrow opening between the homogenizing valve and its seat; the fat globules in the milk are thereby sub-divided into smaller particles of more uniform size. Cream layer formation does not take place in homogenized milk. Milk pack, that is available in the market, contains printed details about the type of heat-treatment that the milk contained in the pack has undergone Pasteurized / Sterilized / Ultra High Treated (UHT); the class of milk as per PFA Act Toned / Double Toned / Full Cream Milk / Cow Milk / Buffalo Milk / Skim Milk; if any other processing Homogenized, etc. For instance, if Toned Milk is pasteurized and also homogenized, it is designated as Pasteurized Homogenized Toned Milk

CATTLE FEED PLANTS:


Cattle Feed being an important input to milk production is manufactured in four plants viz Rajanukunte, Gubbi, Dharwad & Hassan plants. Together they have production capacity of 700 tons per day and produce feed in 3 varieties namely Bypass, Type I and Type II along with Urea Molasses Brick (UMB). These plants are ISO 9001:2000 certified and has a combined capacity utilization of more than 100%.Gubbi unit produces quality Mineral mixture and sells in 1 Kg retail packets to farmers at concessional rates. Cattle Feed Plant, Rajanukunte, Gubbi, Dharwad and Hassan.
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A Study on Working Capital Management at KMF The combined Production capacity of all 4 plants is 700MT with capacity Utilization of more than 140%. All 4 Plants are ISO 9001:2000 certified. Three varieties of Feed along with Urea Molasses Brick at Rajankunte & Mineral Mixture in Gubbi Plant are produced.

NANDINI MILK MILK FOR EVERY AGE GROUP NANDINI Milk is available in a variety of forms that are differentiated by their milk fat and other solids contents. Nutrition Facts on milk sachets can help you make choices for your family. Nutrition facts provided is for 100 ml of milk.

Organization Chart
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A Study on Working Capital Management at KMF

The organization is three tiered on Co-operative principles. A. Dairy Co-operative Societies at grass root level. B. District Co-operative Milk Unions at single / multi district level. C. Milk Federation at State level. All above three are governed by democratically elected board from among the milk producers. Under the direction of elected boards, KMF, various functional Units & Unions are performing the assigned tasks to ensure fulfillment of organization objectives. Human Resource Development There are at present 20.35 Lakh dairy farmers as primary members including 3.5 Lakhs of SC/ST and 6.6 Lakh woman members. Dairy Co-operatives employ more than 32000 people and 5200 are permanent KMF Units and Unions employees. Indirect employment thro' veterinary services, milk transportation, milk sales etc. activities is to the tune of 52000 people. This sector has also created demand and employment in manufacturers of equipments required by DCS, Dairies and printing. Quality and Food Safety

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During the last ten years, the Federation is giving greater emphasis on procuring quality milk from DCSs under the concept of Quality Excellence from Cow to Consumer. Many Clean Milk Production (CMP) initiatives have been implemented at all the stages of procurement, processing and marketing. Among these CMP initiatives, noteworthy initiative is the setting up of Community Milking Parlours in villages. The KMF is forerunner to introduce this innovative technological initiative for bringing about revolutionary improvement in quality of milk collected in DCSs. This system has several advantages such as elimination of mastitis in milch animals and improvement of productivity. The milk from milking machines, collected through Automatic Computerized Milk Collection Units is chilled directly in Bulk Milk Coolers. This chilled raw milk, untouched and unadulterated by human hands, has very high microbiological quality, comparable to international standards. This high quality milk is being utilized for manufacturing high quality value added milk products, for both domestic as well as international markets. Other Clean Milk Production (CMP) Initiatives include: Training of milk producers on modern dairy husbandry practices and CMP. Providing SS utensils, antiseptic solutions for udder cleaning on pre and post milking, etc. to producers. Training to DCS staff and officers of the Unions on CMP. Replacing Aluminium milk cans and collection vessels with SS 304. Posters, documentary films and booklets on Clean Milk Production. BANGALORE URBAN AND RURAL MILK PRODUCERS DISTRICT CO-OPERATIVE SOCIETIES UNION LIMITED.

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A Study on Working Capital Management at KMF (Bamul - Bangalore Dairy) The garden city turned into the silicon capital of India has made rapid strides in dairy activity. From 50,000 Liters a day 4 decades back under UNICEF, today it is a 8 Lakh Liters/ Day, State-of- the- art plant expandable to 10 Lakh Liters/ Day. It covers 12 talukas with more than 1782 Societies functioning. Hoskote on the out skirts of the city boasts of a 1.5 LLPD chilling plant, capacity comparable to many dairies in the State. A new dairy of capacity 2LLPD is also being commissioned here. Specialty of the Union: Fully computerized Dairy with no human handling of milk with the distinction of having highest procurement and highest sale of milk by any dairy in Karnataka. MOTHER DAIRY, A UNIT OF KMF Mother Dairy, Bangalore, a flagship dairy of KMF having ISO22000:2005 Certification was set up during the year 1984, primarily for dispensing liquid milk to customers through Bulk Vending system. Today, the Dairy stands expanded from 2 Lakh Liters to 7 Lakh Liters milk processing per day. Also, it has facilitates to pack and distribute milk & curd in different packs formats in the most hygienic way. Besides, it has a state of the art facility to manufacture Skim Milk Powder, Dairy Whitener, as well as Whole Milk Powder to the tune of 30 MTs per day. It has established a facility to manufacture more than 20 varieties of Ice cream in the various pack formats to the tune of 15000 Liters per day. Presently, it is undertaking manufacturing and co-packing of 'Amul' brand of ice cream for GCMMF. Mother Dairy has a network of 616 retailers through whom milk is sold to the consumers. Further, it has satellite modern format joints to sell various verities of milk and 'Nandini' brand of long shelf life and short shelf life milk products numbering around 50. The sale joints are branded as "Nandini Milk Shoppe". Also, cold chain network which is a prerequisite for sale of milk and milk products has been
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A Study on Working Capital Management at KMF established in 4 strategic locations of Bangalore city as "Walk in cold store" to ensure un-interrupted and constant milk supply to our retailers/consumers. The Dairy is poised to add 4 more varieties of exotic ice creams including pro-biotic, sugar free in the near future and also would undertake manufacturing of very improvised quality of Paneer, Yogurt as well as flavored milk in bottles. Plans are also under way for automated production of above milk products in the immediate future. There is a plan drawn up for putting in the market ready-to-eat foods "Retorted" and having appreciable content of milk and milk products. The same is planned to be introduced in the mid of 2010. The exclusiveness of Mother Dairy is because of: Mother Dairy cares for quality, hygiene and food safety and hence the dairy was certified for certified for ISO 9001-2000 during the year 2000 and has been certified for ISO 22000-2005 during 2008. The Dairy has Export License for Skimmed Milk Powder, Whole Milk Powder, Dairy Whitener, Ghee and Butter. The Dairy has embarked on Environmental Protection, Energy Conservation Program me and have been suitably recognized by Bureau of Energy Efficiency, Government of India and KREDL, Karnataka. Time being the essence of working Mother Dairy has brought the activities under LAN by adopting appropriate technology. Any business enterprises assessed for its status on the financial performance and Mother Dairy fully believes in this philosophy and has constantly posted positive financial results ever since its existence.

INTEGRATED BUSINESS PLAN:-

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A Study on Working Capital Management at KMF Preparation of Integrated Business Plan in consultation with the Division Heads. Integrated Business Plan is prepared after taking into consideration the various experience, growth demand and supply, export or import policy of the Government, Government legislations on various issues, statutory levies, geographical conditions particularly because we deal with agro based perishable commodity. Since the market is volatile and also market conditions. Hence, preparation of Integrated Business Plan meticulously is a very important task for the Federation.

Source of income :The main source of income for the Federation is as under: Direct income on account of sale of milk and milk products at Mother Dairy - one of the units of the Federation Conversion income at Mother Dairy i.e., if the surplus milk received at Mother Dairy is being converted into Skim Milk powder, for which specified amount is charged and hence the conversion amount. A certain amount of profit on sale of cattle feed by the Federation earns 4% as service charges.

Costing:The Federation does not have a pre-determined costing system because most of the time the fixation of selling price of milk depends on various factors like competitors entry in to the market, their pricing of the products, and interference from the Government etc. Because of these, costing does not play a role in decision making; that is the reason the

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A Study on Working Capital Management at KMF member milk unions and Federation sometimes lose heavily on crude method only to assist the Management in certain decision making.

Computerization:The Federation has computerized all its financial activities right from generation of receipts, vouchers, invoicing, generation and submission of information to the Management. The Federation has also succeeded in net working of the finance sections so that the information flows easily and speedily. As regards Mother Dairy, the entire Dairy activities right from reception of milk to the dispatch of milk has been totally computerized and is working with oracle system. The Federation is planning to upgrade the existing system to the present level or activities.

Distribution of Profits:The Finance Division after complying with the provisions of Karnataka Co-operative Societys Act and Byelaws of the Federation submits all its proposals to the Board for distribution of dividend and bonus to members on yearly basis. For the first time, the Federation has declared dividend and bonus for the year 2001-2002 and is continuously doing from then onwards. KMF gets financial assistance by itself through various transactions and during extreme and contingencies it gets from National Dairy Development Board (NDDB) for a period of 10 to 15 years. This NDDB is located at Anand in Gujarat.

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NANDINI HI TECH PRODUCT PLANT


10 Back ground:

The milk procurement by the co-operatives in Karnataka has steadily increased over the years due to the efforts and policies favoring milk production. Existing infrastructure of the milk co-operatives in the state was found to be insufficient for handling the excess milk. In order to meet the increased processing requirement, Karnataka Milk Federation (KMF), in consultation with National Dairy Development (NDDB), conceived to setup a product dairy of 400 TLPD with 30 MTPD powder plant in the year 2005. It was decided to set up the plant at Channarayapatna, Hassan Dist (Karnataka), a strategic location to handle the surplus milk of Hassan, Mandya, Mysore and Tumkur milk unions. The project was entrusted to NDDB on turnkey execution basis. 2. Salient features of the project: Infrastructure: The project has been setup in a 22 Acres of land, beside national high way NH-48 (Bangalore-Mangalore) Estimated cost of the project is Rs 6942.64 Lakh out of which 20% is borne by KMF and remaining is loan from NDDB. State of the art automation technology (DCS / Scada) for milk processing and powder manufacturing and energy efficient equipment and machineries adhering to HACCP standard. Fully automated refrigeration plant using environment friendly ammonia liquid over feed system with ICE silo. Milk storage facility : 600 KL Cream storage: 60 KL Butter storage: 580 MT Ghee storage: 150 MT Effluent treatment plant using environmental friendly anaerobic technology.
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3.0 Processing Capacity: Milk processing: 400 TLPD Milk powder Production: 30 MTPD Butter Production: 21 MTPD Ghee Production : 5 MTPD 4.0 New Project commissioned on 09.04.2011 Installation of Nandini UHT Milk Processing and packing facility of 1,00,000 Ltrs/ Day Capacity. Includes facility for packing Nandini UHT milk in 500 ML, 200 ML Fino and 200 ML Brick packs. Includes facility for packing Nandini Flavored Milk in 200 ML Packs. This Project is aimed to address ever growing Market demand of Nandini UHT Milk.

Mc KINSEYS MODEL WITH REFERENCE TO KARNATAKA MILK FEDERATION


The Seven S framework first appeared in The Art of Japanese Management by Richard Pascale and Anthony Athos in 1981. They had been looking at how Japanese industry had seen so successful, at around the same time that Tom peters and Robert Waterman were exploring what made a company excellent. The seven S models were born at a meeting of the four authors in 1978. It went on to appear in In Search Of Excellence by peters and Waterman, and was taken up as a basic tool by the Global Management consultancy McKinsey: it sometimes known as the McKinsey 7S Model.

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A Study on Working Capital Management at KMF McKinsey and Cos 7S Framework provides a useful framework for analyzing the strategic attributes of an organization. The McKinsey consulting firm identified strategy as only one of the seven elements exhibited by the best-managed companies. 1. SHARED VALUES (SUPER ORDINATE GOALS) Shared Values or Super Ordinate Goals refer to the long term of an organization. Hard Minds refer to the financial performance of an organization. According to Pascale an enterprise that cannot generate a profit is not adding enough value to perpetuate its right to exit, but when shortterm profits are over emphasis, a companys long-term competitive position can be sacrificed. Hard- minded values are tied to goals that are unambiguous and quantifiable. 2. STRATEGY Strategy is the Systematic action and allocation of resources to achieve company aim. It also refers to the determination of the purpose and the basic long-term objective of an enterprise and the adoption of course of action and allocation of resources necessary to achieve these aims. 3. STRUCTURE The structure of the organization is basically a network of authority and responsibility, which has been assumed by and delegated to the employees. Organizational structure defines the pattern of formal relationship of superior and subordinate. It may be regarded as network or role, relationship, assigned work and delegated authority of employees. It provides the basis on which the managers and non-managerial employees perform the job assigned to them.

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A Study on Working Capital Management at KMF 4. STAFF Staff mainly refers to the people in the organization or enterprise. KMF views people or employees as valuable resources wherein they carefully nurture, develop, guard, and allocate them, they believe in transparency as the basis foundation for employing people. 5. STYLE Style refers to the way the management behaves and collectively spends its time to achieve organizational goals or aims. KMF adopts various styles for the growth and welfare of the organization like:6. SKILLS Waterman Etal consider skills as one of the most crucial attributes or capabilities of an organization. The term skills include those characteristics, which most people use to describe a company. Hindustan Lever is known for their marketing skills, 7. SYSTEM A system in the 7S framework refers to all the rules, regulations and procedures both formal and informal that complement the organization structure. KMF has its own system, rules and procedures to follow which help the company to develop a talent pool with competence to take challenges of present and future. The organization has its own information system, manufacturing process and control process that aims to delight the customers through good quality products, services and solutions.

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CHAPTER 4

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DATA ANALYSIS AND INTERPRETATION

ANALYSIS OF WORKING CAPTIAL IN KMF:The special factors that influence the Working Capital requirements of the company are: Availability of raw materials. Seasonal conditions. Procurement of milk. Animal Husbandry. Development activities.

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SOURCES OF WORKING CAPITAL:The organization deals with National Dairy Development Corporation for finance to the society. It approaches Finance Department and even NDDC for meeting working capital requirements.

RATIOS FOR WORKING CAPITAL MANAGEMENT:1) Current asset to Total asset: This ratio establishes the relationship

between current asset and total asset of the organization. It is used to determine the quantum of current asset in total asset. Current asset to Total asset:- Current Asset Total asset
2) Current Ratio: This is the most widely used ratio. It is the ratio of

current assets to current liabilities. It shows a firms ability to over its current liabilities over current assets. It is calculated as follows: Current Ratio: Current Assets Current Liabilities

3) Ratio of Inventory to Working Capital: In order to ascertain that

there is no over stocking, the ratio of inventory to working capital should be calculated as follows: Ratio of Inventory to Working Capital: Inventory Working Capital

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4) Net Working Capital Turnover Ratio: This ratio shows the number

of times working capital is turned over in a stated period. The higher is the ratio, the lower is the investment in working capital and greater are the profits. However, a very high turnover of working capital is a sign of over trading and may put the concern into financial difficulties. On the other hand, a low working capital turnover ratio indicates that working capital is not efficiently utilized. This ratio is calculated as follows: Net Working Capital Ratio: Sales Net Working Capital 5) Gross Working Capital Ratio: It is the ratio of Net Sales to Current Assets. It determines increase in the current assets to sales. Increase of current assets to sales means under utilization to current asset. Decrease of current asset to sales means approximate utilization of current asset. It is calculated as follows: Gross Working Capital Ratio: Net sales Current Assets

6) Asset Turnover Ratio: i) Current Asset Turnover Ratio

ii) Working Capital Turnover Ratio These ratios measure the efficiency of a firm in managing and utilizing its asset. The higher the turnover ratio, the more efficient is the management and utilization of current assets or working capital, while low turnover ratio are indicative of under utilization of available resources and presence of idle capacity.
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a) Current Assets Turnover Ratio:

Cost of Goods Sold Current Assets

b) Working Capital Turnover Ratio:

Cost of Goods Sold Net Working Capital

1) Operating Cycle: The cycle of conversion of cash into raw-materials into

work-in-progress, working-in-progress into finished goods, finished goods into debtors and bills receivables, and debtors into cash again is called Operating Cycle. The time involved in this cycle depends upon the length of the cycle. The length of the cycle in turn determines Working capital requirements. In case of manufacturing concern, the working capital requirements are more because of the longer length of operating cycle. In case of financial institutions, the length of the cycle is short therefore less working capital requirements. It is advantageous for the organization if the operating cycle is small as the funds involved in the cycle are less. It is calculated as follows:Operating Cycle: Inventory Period + Accounts Receivables Period.

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TABLE 1: Showing the components of Net Working Capital for 3 years in KMF Particulars CURRENT ASSETS:Inventories Sundry Debtors Cash & Bank Loans & Advances 2007-08 2041.52 336.53 1637.40 8158.55 2008-09 1687.75 620.51 2605.11 9916.12 14829.49 12660.83 12660.83 2168.66 2009-10 1375.97 972.14 2719.05 9833.83 14901.00 12754.40 12754.40 2146.60 (Rs. In Lakhs)

Total Current Assets 12174.00 CURRENT LIABILITIES & 9708.87 PROVISIONS:Total CL & PROVISIONS Net Working Capital 9708.87 2465.13

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A Study on Working Capital Management at KMF TABLE 2: Showing the composition of Current Assets to Total Assets for 3 Particulars Current Assets Total Assets Percentage 2007-08 12174.00 17683.41 68.84% 14829.49 16084.48 92.19% years 2009-10 14901.00 19566.50 76.15% (Rs. in Lakhs)

Interpretation:It is evident from the table that the composition of Current Asset to Total Asset decreased from 2007-08 to there was a sudden increase in Current Asset. It has recorded a highest of 92.19% in the year and a lowest of 68.84% in 2007-08.

TABLE 3: SHOWING THE CURRENT RATIO FOR 3 YEARS Particulars Current Assets Current Liabilities Ratio 2007-08 12174.00 9708.87 1.253 2008-09 14829.49 12660.83 1.171 2009-10 14901.00 12754.07 1.168 (Rs. in Lakhs) Interpretation:-

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A Study on Working Capital Management at KMF 2:1 is considered as the standard for this ratio. From the table, it is evident that in all 3 years the current ratio is far below the ideal level. The company has recorded a highest ratio of 1.26:1 in 2007-08 and a lowest of 1.168:1 in 2009-10. TABLE 4: Showing the net Working capital Turnover Ratio Particulars Sales Net Working Capital NWC Turnover Ratio 2007-08 172910.41 2465.13 7.01 2008-09 19085.00 2168.66 8.80 2009-10 23306.88 2146.60 10.85 (Rs. in Lakhs)

Interpretation:In the year 2007-08, the sale has increased by 8.38% when compared to previous year, with decrease in net working capital by 37.43%, it represents efficient use of net working capital in generating sales. In the year , the sales has increased by 10.73% when compared to previous year, with decrease in net working capital by 12.02%, it represents efficient use of net working capital in generating sales. In the year 2009-10, the sales have increases by 22.12% when compared to previous year. It represents efficient use of NWC in generating sales.

TABLE 5: Showing the Gross Working Capital Ratio (Rs. in Lakhs)

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A Study on Working Capital Management at KMF Particulars Current Assets Net Sales Ratio Interpretation:In the year 2007-08, current assets are utilized efficiently to generate sales. It is evident from that current assets have increases by 2.93% whereas sales have been increased by 8.4%. In the year, current assets have increased more than sales when compared to previous year; this shows that current assets have been underutilized. In the year 2009-10, current assets are utilized efficiently to generate sales. It is evident from the fact that current assets have increased by 0.48% whereas sales have been increased by 22.12%. Particulars Cost of Goods Sold 2007-08 17204.42 2008-09 18229.12 13051.76 1.396 2009-10 21526.23 14865.25 1.448 (Rs. in Lakhs) 2007-08 12174.00 17290.41 1.42 2008-09 14829.49 19085.00 1.28 2009-10 14901.00 23306.88 1.56

Average Current Asset 12000.63 Ratio 1.433

TABLE 6: Showing Current Asset Turnover Ratio

Interpretation:From the table we can come to know that, the company is maintaining a steady level of current assets turnover ratio for the past 3 years i.e. around 1.5 times. It has recorded a highest of 1.44 in 2009-10 and a lowest of 1.39 .
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TABLE 7: Showing Working Capital Turnover Ratio (Rs. in Lakhs) Particulars COGS Net Working cap Ratio 2007-08 17204.42 2405.13 6.979 2008-09 18229.12 2168.66 8.405 2009-10 21526.23 2146.60 10.02

Interpretation:The company is showing a steady increase of working capital turnover ratio i.e. in last three years. It recorded a lowest of 6.97 times in 2007-08 and a highest of 10.02 times in 2009-10.

TABLE 8: Showing Operating Cycle (Rs. in Lakhs) Particulars Inventory Period 2007-08 1.187 2008-09 1.227

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A Study on Working Capital Management at KMF Account Receivables 0.372 Period Operating Cycle 1.559 0.30 1.527

Interpretation:The time to convert cash into cash by the company is around 45 days on an average. The highest time taken to convert was 1.5 months in and lowest being in the year 2006-07 i.e., 1.3 months.

ANALYSIS OF FINANCIAL STATEMENTS


1) Overall Profitability Ratio:- It is also known as Return on

Investment (ROI) or Return on Capital Employed (ROCE). It indicates the percentage of return on the total capital employed in the business. It is calculated by using the following formula:ROI= Net profit after taxes Capital Employed The term capital has been given different meanings by different accountants. Some of the popular are as follows: Sum total of all the assets whether fixed or current. Sum total of fixed assets. Sum total of long-term funds employed in the business i.e.,

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Share Capital + Reserves and Surplus + Long-term Loans (Nonbusiness Assets + Fictitious assets) Calculation of Return On Investments for the year ending 31st March 2009 ROI = 747.60 *100 = 10.53% 7098.22 Interpretation:The organization is getting Rs. 10.53 for every Rs. 100 invested by it.
1) Gross Profit Ratio:- This ratio establishes relationship between gross

profit and net sales. Its formula is :Gross Profit Ratio:Gross profit --------------- *100 Net sales

This ratio shows the margin left after meeting the manufacturing costs. It measures the efficiency of production as well as pricing. It also helps in ascertaining whether the average percentage of mark up on the goods is maintained. However, the gross profits should be adequate to cover the operating expenses and to provide for fixed charges, dividend and building up of reserves. Calculation of Gross Profit Ratio for the year March 2010

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A Study on Working Capital Management at KMF Gross Profit Ratio = 1780.64 * 100 = 7.63% 23306.88 Interpretation:15-20% is considered as the ideal for this ratio. The organization has earned a gross return of 7.63%, which is far below the ideal ratio. Hence its profitability position is very poor.

2) Net Profit Ratio:- This indicated the net margin earned on a sale of

rupees hundred. It is calculated as follows:Net Profit Ratio:Net operating profit -------------------------- * 100 Net sales

This ratio helps in determining the efficiency with which the affairs of the business are being managed. In other words, it measures the overall efficiency of production, administration, selling, financing, pricing and tax management. An increase in the ratio over the previous period indicates improvement in the operational efficiency of the business provided the gross profit ration is constant. The ratio is thus an effective measure to check the profitability of the business. However, constant increase in the above ratio year after year is a definite indication of improving conditions of the business.

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A Study on Working Capital Management at KMF A firm with high net profit can do better in the adverse conditions. Similarly, a firm with high profit margin can make better use of favorable conditions. Calculation of Net Profit Ratio for the year March 2009 Net Profit Ratio = 679.54 * 100 = 2.91% 23306.88 Interpretation:5-10% is considered as the ideal for this ratio. The organization has made a net return of 2.91%, which is below the ideal level. Hence, its profitability position is not satisfactory.
3) Debt-Equity Ratio:- It is determined to ascertain the soundness of the

long-term financial position of the company. It is also known as external-internal equity ratio. It is calculated as follows:Total long-term debt ----------------------------- Or Shareholders funds Debt --------Equity

This ratio indicates the proportion between shareholders funds (i.e. tangible net worth) and the long-term borrowed funds. The ratio may be treated as ideal if it is 1. In other words, the investor may take debt-equity ratio as quite satisfactory, if shareholders funds are equal to borrowed funds. However, a lower ratio say 2/3rd borrowed funds and 1/3rd owned funds might also not be considered as unsatisfactory because some businesses needs heavy investment in fixed, assets, that has an assured return on its investment like public utility concerns. The lower the debt-equity ratio, the higher is the degree of protection enjoyed by the creditors. It is to be noted that preference shares redeemable within a period of 12 years from the date of issue be taken as part of equity. The numerator of
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A Study on Working Capital Management at KMF the ratio consists of all types of debt i.e., both short-term as well as longterm Calculation of Debt Equity Ratio for the year March 2009 Debt = Long Term Loans Equity = Share Capital + reserves + P&L A/c Debt Equity Ratio = 3204.01 = .7082:1 4523.94 Interpretation:1:1 is considered as ideal for this ratio. The organizations debt equity ratio is below the standard level; hence its long-term solvency position is not satisfactory.

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CASH MANAGEMENT
Cash, the most liquid asset, is of vital importance to the daily operations of business firms. Its efficient management is crucial for the solvency generally referred to as Life Blood of a business Enterprise. The term Cash includes coins, currency notes, cheques and drafts held by a concern in its hands and balances in Bank Account. Cash also includes near cash assets {i.e., those assets which can be immediately converted in to cash, whenever the need arise}, such as time deposits kept by a concern with Banks and Marketable securities. Cash as an essential element is necessary for the beginning and ending of the Working Capital Cycle. Motives of holding Cash:The various motives or reasons for the holding of cash are every business concern are as follows:1) Transaction Motive. 2) Precautionary Motive. 3) Speculative Motive. 4) Compensation Motive. 1. Transaction Motive:-

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A Study on Working Capital Management at KMF Every business concern keeps certain amount of cash to meet the routine business payments. The need to satisfy this motive arises from the lack of perfect synchronization between cash receipt and cash payments. Cash for this purpose can be invested in meeting securities. 2. Precautionary Motive:The company maintains some cash to meet unexpected cash needs arising out of unexpected contingencies, such as sharp rise in prices of Raw Materials, unexpected delay in the collection of receivables, Strikes, Floods and natural Calamities etc., Cash for this purpose can be invested in very short term securities which love the ready liquidity. 3. Speculative Motives:The Company holds some cash balance mainly to take advantage of and opportunity payment of cash, to take advantage cash discount available for prompt payment of Bills etc., 4. Compensation Motive:Cash management means that the cash held by a concern is neither excessive nor inadequate but is sufficient for meeting its requirements. In short, it means planning and control of cash. Cash management is the most important area of Working Capital Management. Proper care and attention will be taken in to consideration while managing the cash affairs. Objective of Cash Management:Cash management has certain basic objectives. They are:1. To meet the cash payments as per the payment schedule.
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A Study on Working Capital Management at KMF 2. To minimize the amount locked up as cash balance.

ANALYSIS OF CASH MANAGEMENT IN KMF The organization forecasts inflow and outflow of cash through cash budget and Cash flow statements. It is included in the annual integrated business plan comprising physical activities on monthly basis and corresponding financial activities, monthly cash is also drawn. The cash budget and cash flow statement is monthly reviewed and is submitted by the P&L a/c to the board with variance reports of plan and actual. The extent of variation between actual and budgeted cash flows planned every month depends on market situations and in case of bulk milk. Daily sales and purchases are the factors that cause such variations. RATIOS FOR CASH MANAGEMENT:1) Liquid or Acid test or Quick ratio: This is the ratio of liquid assets

to liquid liabilities with its most liquid assets. 1:1 is considered as ideal ratio for a concern because it is wise to keep the liquid assets at least equal to liquid liabilities at all times. Liquid assets are those asset that are readily converted into cash and will include cash balances, bills receivables, sundry debtors and short-term investments. Inventories and prepaid expenses are not included in liquid assets because the emphasis is on the ready availability of cash in case not included in liquid assets because the emphasis is on the ready

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A Study on Working Capital Management at KMF availability of cash in case of liquid assets. Liquid liabilities include all items of current liabilities except bank overdraft. This ratio is the acid test of a concerns financial soundness. It is calculated as under:Liquid Ratio: Liquid Assets

Current or Liquid Liabilities


2) Absolute Liquid Ratio:

Though receivables are generally more

liquid than inventories, there may be debts having doubt regarding their stability in time. So to get an idea about the absolute liquidity of a concern, both receivables and inventories are excluded from current assets and only absolute liquid assets, cash in hand, cash at bank and readily realizable securities are taken into consideration. It is calculated as follows: Absolute Liquid Ratio:Cash in hand\bank + short term marketable securities Current Liabilities The desirable norm of this ratio is 1:2
3) Liquid asset Working Capital: This ratio establishes the relationship

between liquid asset and current asset of the organization. It is used to determine the quantum of liquid asset that is constituted in current asset. Liquid asset to Working Capital: Liquid Asset Working Capital

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4) Cash/Bank To Current Assets: This ratio shows the percentage of

cash and bank balance to current assets. The cash and bank balance is important for meeting working capital. Cash and Bank balance to current assets ratio indicates what amount of cash is locked in current assets. Cash/Bank to Current Assets:- Cash/Bank Current Assets
5) Cash Turnover Ratio: It is a ratio between cash and cost of goods

sold or net sales. This ratio indicates the extent to which cash resources are efficiently utilized by the organization. Cash Turnover Ratio: Cost of Goods Sold Cash

TABLE 1: Showing Liquid or Acid Ratio Particulars Liquid Assets Current Liabilities Liquid Ratio 2007-08 10132.49 97058.89 1.043 2008-09 13141.25 12660.83 1.037 2009-10 13525.03 12754.40 1.060 (Rs. in Lakhs)

Interpretation:-

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A Study on Working Capital Management at KMF The standard for liquid ratio is considered to be 1:1. In all the years i.e., in between 2007 and 2009, the company has managed to maintain its liquid ratio above the standard level, where is recorded a highest ratio of 1.060:1 in 2009-10 and a lowest of 1.037:1 in 2007., a very low ratio is also not considered as wise because it is going to affect the day-to-day activities of the company.

TABLE 2: Showing Absolute Liquidity Ratio Particulars Super-Quick Assets Current Liabilities Ratio 2007-08 1637.40 9708.87 0.168 2008-09 2605.11 12660.83 0.205 2009-10 2719.05 12754.40 0.213 (Rs. in Lakhs)

Interpretation:The organization is maintaining a stable level of cash of 0.20 paisa, for each rupee of current liability obligation. Even then it is far below the standard ratio i.e., 1:2. It has recorded a highest ratio of 0.213 in 2009-10 and lowest of 0.168 in 2007-08.

TABLE 3: Showing Liquid Assets to Working Capital for 3 years (Rs. in Lakhs)
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A Study on Working Capital Management at KMF Particulars Liquid Assets Working Capital Ratio 2007-08 10132.49 12174.00 0.8323 2008-09 13141.75 14829.49 0.8861 2009-10 13525.03 14901.00 0.9076

Interpretation:The purpose of this table is to know the amount of liquid asset constituting the total current asset and thereby knowing the efficiency of the organization to convert current asset quickly without loosing tits value. It recorded a highest of 83% in the year 2007-08. As the company is monitoring a very high percentage of current assets, we can say that its ability to convert current asset to cash is high and its a good sign.

TABLE 4: Showing Cash/Bank to Current Asset Ratio. Particulars Cash/Bank Current Asset Percentage 2007-08 637.40 12174.00 13.44% 2008-09 2605.11 14829.49 17.56% 2009-10 2719.05 14901.00 18.24% (Rs. in Lakhs)

Interpretation:The Company as a policy of maintaining cash position at 15% to 20% of current assets. As in all the years, it is maintaining cash position in and around the ideal level. We can say that organization if following effective cash management policy.
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TABLE 5: Showing Cash Turnover Ratio (Rs. in Lakhs) Particulars 2007-08 cost of Goods 17204.42 Sold Cash Ratio 1637.40 10.50 2605.11 6.99 2719.05 7.91 2008-09 18229.12 2009-10 21526.23

Interpretation:The cash turnover ratio has decreased in to 6.99 when compared to precious years 10.50. In the year 2007-08, it has shown a drastic increase to 10.50.

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CHAPTER 5

FINDINGS, SUGGESTIONS and CONCLUSIONS

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FINDINGS: The company is maintaining a very high proportion of current assets

in total assets i.e. around 75%. In the year 2008-09, it was 92.19% As the companys current ratio is far below the standard level, it is concluded that its short-term solvency position is very poor. As the companys net working capital turnover is quite high, it is concluded that there is an efficient use of NWC to generate sales.
In the year 2009-10, the current assets are utilized efficiently to

generate sales. As the company is maintaining a high working capital turnover ratio, it is concluded that working capital/current assets are managed and utilized more efficiently. The liquidity of the organization is quite well since the organization is maintaining Liquid ratio more than the ideal standard i.e. 1:1
Cash turnover ratio is showing a mixed trend. In the year 2009-10 the

cash reserve was efficiently utilized when compared to 2008-09 As the debtors are collected from time to time, we can say that the company has sound collection policy.
In the year 2009-10, the stock is converted 1.05 times into sales,

which is far above the ideal level.

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SUGGESTIONS: The companys absolute liquidity ratio in all the years is far below the ideal level. So the firm should take steps to invest more in super quick assets. The company should take some measure to reduce manufacturing / operating expenses so as to increase Gross Profit Margin which in turn increases Net Profit Margin. Company should take steps to increase current assets, as the position of worse in all the years, which will improve the short-term solvency position.

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The Mother dairy financial performance and working capital is good. As comparing last three years of balance sheet it is found that the profit is increased but the in the year 2007-08 it has increased due to many reasons and then the next year the profit is again increased. The overall financial and working capital position of Mother dairy is satisfactory but at the same time to make substantial growth the company has to utilize its full potential pertained to liquidity enhancement. Mother Dairy is operating in Karnataka successfully from many years. They supply milk and other products in Karnataka. The financial position and its performance are sound.

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ANNEXTURE

BALANCE SHEET AS ON 31.03.2009 PARTICULARS Sources Of Funds Share Capital Reserves & Surplus SCH NO 1 2 As On 31.03.2010 56292000.00 328147776.02 As On 31.03.2009 52430000.00 146468548.37

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A Study on Working Capital Management at KMF Deposit from GOI/GOK Magazine Fund Profit & Loss Account Loans Secured Loans Unsecured Loans TOTAL Application Of Funds Fixed Assets Investments Current Assets Loans & Advances Cash & Bank Balance Sundry Debtors Inventory Loans & Advances 33686971.87 2633476.73 67954712.07 215854197.40 104546855.52 809115987.61 5 6 521900250.25 72555700.00 33686971.87 2601856.73 234589545.80 244341354.08 104546853.52 818665130.37 529244015.86 72553450.00

4.1 4.2

7 8 9 10

271905861.16 97214526.79 137597140.37 983383275.42 1490100803.74 1275440766.38 214660037.36 809115987.61

260511530.09 6205612.77 168775053.39 991612674.75 1482950871.00 1266083206.49 216867664.51 818665130.37

TOTAL Less: Current Liabilities & 11 Provisions Net Current Assets TOTAL

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2009 PARTICULARS Expenditure SCH NO As On 31.03.2010 3220686.67 As On 31.03.2009 36545710.99

Salaries Wages & other 16 Benefits

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A Study on Working Capital Management at KMF Administrative Expenses Rent, Rates,Taxes,Licence & Insurance Selling & Distribution Interest & Bank Charges Repairs & Maintenance of Vehicles Depreciation Net profit transferred to Appropriation a/c TOTAL Income Gross Profit Other Income 26 Int on Deposits & Advances 27 TOTAL 178064883.47 122916079.54 12005500.03 312986463.04 85587818.70 175462119.23 8765411.39 269815349.32 20 21 22 23 25 57596279.01 46927596.85 35553184.99 35779630.76 35134637.20 67954712.07 36106665.01 9413998.44 41797593.14 1741550.33 37348862.04 74760323.97

312986463.04

269815349.32

PROFIT & LOSS APPROPRIATION ACCOUNT DEBIT Reserve Fund Building Fund Bad Dept Fund Co-op Propaganda Fund

104488743.89 20164875.00 2419784.91 5646165.00

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A Study on Working Capital Management at KMF Employee Benevolent Fund Research & Development Fund Trade Fluctuation Fund Co-op Education Fund Bonus to Milk Unions Dividend to Milk Unions Profit Tfd To Balance Sheet TOTAL CREDIT Opening Balance of P&L Account Profit Tfd from P&L Account 8065950.00 12098926.00 25042687.00 787936.00 52428678.00 3445800.00 67954712.07 302544257.87 234589545.80 67954712.07

234589545.80 234589545.80 159829221.83 74760323.97

TOTAL

302544257.87

234589545.80

KARNATAKA MILK FEDERATION LIMITED


MANUFACTURING & TRADING ACCOUNT FOR THE YEAR ENDED 31.3.2010 PARTICULARS SDHEDULE As on 31.03.2010 NO As on 31.32009

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A Study on Working Capital Management at KMF

Expenditure Opening Stock Purchases Procurement Transportation Charges Inter Unit Transfers Processing & Manufacturing Expenses Salaries Wages & Other Benefits (80%) Gross Profit Carried to P/L Account 12 13 14 15 16 168775053.39 2015762855.73 123255420.42 109036989.29 128827450.69 178064883.47 204147815.09 1682906815.21 177351320.65 87948137.66 146182843.97 85587818.70

TOTAL Income Sales Inter Unit Transfers Closing Stock TOTAL 17 18 19

2733423720.94

2394118475.37

2330688398.13 265138182.44 137597140.37 2733423720.94

1908500136.18 316843285.80 168775053.39 2394118475.37

MILK PRODUCTS: Milk Pasteurized Toned Milk Shubham Milk

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A Study on Working Capital Management at KMF

Nandini Double Toned Milk Milk

Homogenized Cow's Pure

Good life Milk

Good life Slim Milk

Sampoorna Standardized Milk

Smart Double Toned Milk

Good life UHT Long Life Milk

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Curds & other fermented products Yoghurt Curd

Butter Milk

Premium Curd Large

Set Curd

Sweet Lassi

Milk powder Dairy Whitener Powder Skimmed Milk

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Badam-Powder

Ghee & butter Ghee in Standy Pouches Butter Salted & Unsalted

Ghee In Bag

Ghee in Pet Jar

Ghee in Sachet

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Ice cream & Frozen Desserts Crazy Cone Ice Cream Butter Scotch Chocolate Nandini Magic Strawberry

Pista Kulfi

Choc bar

Ice Cream Delightfully Tasty Anjir Ice Cream Delightfully Tasty Chocolate

Ice Cream Delightfully Tasty Vanilla and Strawberry Ice Cream Delightfully Tasty Kaju Draksh

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Ice Cream Delightfully Tasty Mango Ice Cream Delightfully Tasty Kesar Pista

Ice Cream Delightfully Tasty Black Currant Nandini Sugar Free Pro Biotic Frozen Food

Ice Cream Delightfully Tasty Butter Scotch Delightfully Tasty Pineapple

Ice Cream

Dolly Stick Ice Cream Raspberry & Orange Mango

Ice Candy

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Sundae Ice Cream Strawberry

Sundae Icre Cream Butter Scotch

Ball Ice Cream Vanilla Strawberry Milk Sweets Mysore Pak Gulab Jamoon

Khova Jamoons Dry Fruits Burfi

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Rossagolla

Assorted sweets gift box

Nandini Bite

Premium Badam burfi

Premium Besan Ladoo

Premium Cashew Burfi

Pure Milk Elachi and Kesar Peda

Pure Milk Peda

Other Products
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A Study on Working Capital Management at KMF Nandini Cream Cheddar Cheese

Nandini Sugar Free Peda

Dharwad Peda

Flavoured Milk Pista Mango Strwaberry Coolchoco Milk Shake

Flavoured Milk

Flavoured Milks

Gulab Jamoon Mix

Khova

Kunda

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CHAPTER 8

BIBLOGRAPHY

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BIBLOGRAPHY
SL NO 1 2 3 NAME OF THE BOOK FINANCIAL MANAGEMENT Management accounting Financial management AUTHORS NAME Gupta Sharma M.N Arora B.S Raman PUBLICATIONS Kalyani publishers Himalaya publishing house United publishers

Annual Report of KMF Ltd

WEBSITES:www.kmfnandini.coop www.diaryindustries.com www.googlesearch.com

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