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INTRODUCTION TO FINANCE
It would be worthwhile to recall what Henry ford once remarked Money is an arm or
a leg; you either can use it or lose it. This statement throws light on the significance
of money or finance. A budding concern may need a small amount of money and yet it
may be difficult for it to commence business simply because it is not in the position to
get required funds. A firms success and survival mainly depends upon its ability to
generate sufficient funds when need arises. Finance holds the key to all the activities.
The role of financial manager, that is, the one who is in charge of the finance function,
is difficult because he has to play that role and relate it to the role of other managers.
DEFINITIONS OF FINANCE
Ray G. Jones and Dean Dudley observe that the word finance comes indirectly from
the Latin word Finis. Finance is defined as the issuance of the distribution of and the
purchase of liability and equity claim issued for the purpose of generating revenueproducing assets. These claims are commonly referred to as financial claims.
According to Paul.G.Hasings, Finance Is the management of the monitory affairs of
the company. It includes determining what has to be paid for and when, raising the
money on the best terms available, and devoting the available funds to the best uses.
Kenneth Midgely and Ronald Burns define financing as a process of organizing the
flow of funds so that a business can carry out its objectives in the most efficient
manner and meet its obligations as they fall due.
FINANCE FUNCTIONS
Finance function is a task of providing the funds required by an enterprise on the terms
most favourable to it in the light of the objectives of the business. This long-held
concept has the merit of highlighting the core of the finance function keeping the
business the most suitable way and, on the best possible terms, is the central part of the
finance supplied with enough funds to accomplish its objectives. Getting the required
funds in job
Finance presents itself in a broad spectrum of activities. There are a number of basic
functions underlying finance. It is an essential, and at the same time a very distinct,
segment of the overall managerial function. It is the lifeblood of any business activity
and no business function can be
discharged without it. Finance must be used judiciously. It has to be systematically
controlled and regulated so that it may contribute to the different functions of business
administration. If the finance function is properly blended with production, marketing,
personnel, accounting and other business functions, the wastage of funds can be
avoided.
FINANCIAL PLANNING
In simple words financial planning means deciding well in advance as to how much
finance is required, when is it required, what are the sources through which finance is
available and how should it be put to use, so as to obtain organizational objectives.
The aim in financial planning should be to match the needs of the companies with
those of investors with a sensible gearing of short term and long-term interest
securities.
1. Establishing objectives:
Every business enterprise will have to establish its financial objectives. It will
have to state how much capital is employed in various factors of production over
the long run and how much productivity can be ensured through the employment
those factors. It would be necessary for every business enterprise to stipulate
both short-run and long run objectives so that it may operate in a dynamic
society.
2. Policy formulation:
Financial policies will have to have a thrust on following policies:
Determining the control by the parties who furnish the capital. For example,
if debt exceeds in unassuming portions, it would obviously mean dilution of
control.
Acting as a guide in the use of debt or equity capital. For example, the business
enterprise will have to state clearly its plans about the debt-equity proportions.
3. Forecasting:
Forecasting is usually done on the basis of facts; but facts do not become
readily available, more particularly when they are addressed to the future. In
that case, financial management will have to forecast the future predicting the
variability of the factors influencing the type of policies the enterprise intends
to formulate.
Formulation of procedures:
Policy for formulation must invariably be backed up by suitable procedures,
for financial policies procedures which are broad guidelines which must be
capable of being translated into detailed procedures. Very often, there is a gap
between financial plans and h results in chaotic conditions in a business
enterprise. Financial managers often take shelter under the plea that the right
type of procedures are not available to support the accomplishment of the
goals and objectives of the firm, where as the chief executives grumble over
the short comings inherent in the procedures because they are not able to
accomplish the plans by reason of the fact that procedures do not support
financial plans.
Cost of finance.
Availability of funds.
Repayments.
Interest.
Position of assets.
Control.
Risk.
Seasonality.
Budgetary appropriations.
Distribution system.
Break-even.
History
Traditional beer
European beer
Mohan Meakin logoEuropean-style beer was introduced in India by the British. By 1716, pale ale
and Burton ale were being imported to India from England. To protect the beer from spoiling during the
long journey, it had to had high alcohol content and hops were added to the it. This led to the invention
of India pale ale in about 1787 by Bow Brewery.
In 1830, Edward Dyer travelled to India and set the up India's first brewery in Kasauli.
It produced the beer brand Lion, which is still available. In 1835, the Kasauli brewery
was shifted to Solan near Shimla. In 1885, it was incorporated as Dyer Breweries.
Modern
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Indian Whisky
A single malt whisky from India. The tropical climate of India makes the traditional
aging of whisky in wood barrels a technical challenge.
Distilled alcoholic beverages that are labelled as "whisky" in India are commonly
blends based on neutral spirits that are distilled from fermented molasses with only a
small portion consisting of traditional malt whisky, usually about 10 to 12 percent.
Outside India, such a drink would more likely be labelled a rum. Ninety percent of the
whisky consumed in India is molasses-based, although whisky wholly distilled from
malt and other grains, is also manufactured and sold.
Scotch-style whisky is the most popular distilled alcoholic beverage in India. India has
traditionally been thought to lack a domestic drinking culture, though locally-produced
beverages are popular throughout the country. For instance there are the popular palmbased alcohol and fruit wines of the South, such as arrack, and the fermented rice
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History
The drinking of Scotch whisky was introduced to India in the nineteenth century,
during the British Raj. In the late 1820s, Edward Dyer moved from England to set up
the first brewery in India at Kasauli. The brewery was soon shifted to nearby Solan
(close to the British summer capital Shimla), as there was an abundant supply of fresh
springwater there. The Kasauli Brewery site was converted to a distillery becoming
India's first distillery, which is currently operated by Mohan Meakin. Dyer brought his
brewing and distilling equipment from England and Scotland. Some of the original
equipment, such as the copper pot stills, is still in use today. Dyer chose the location of
the distillery because its climate was similar to that of Scotland, but also added bonus
of a market of British troops and civilians in Shimla and Punjab. The Kasauli distillery
is the oldest continually used distillery in Asia.
India produces a large amount of sugarcane, making molasses cheaply available as a
by-product of sugar processing. This is used to manufacture most spirits in India,
known as Indian Made Foreign Liquor. Indian whisky has generally been made by
flavouring and colouring neutral spirits made from molasses, and sometimes blending
it with imported Scotch whisky. Production of alcohol from grain was hampered by
shortage of extra grain, due to food shortages. Allowing grains to be used for alcohol
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Domestic market
The Indian whisky market is the third largest in the world, after China and Russia. It
has a complex tax structure with taxes leveled by both Central and State Governments.
Import taxes are applied by the Central Government on imported spirits. State level
taxes are levied by each individual State, with taxation levels and methods varying
significantly. The sale of alcohol is also prohibited in some States. The Indian
domestic market was completely closed to all imported spirits until 1 April 2001,
under former import licensing restrictions. However, Scotch whisky was widely
available through bootleggers and via duty-free allowances. Restrictions were
removed in 2001, but an additional customs duty (ACD) was introduced, which raised
the cumulative duty burden on imported spirits to between 450% and 700%. This had
a significant impact on sales of high-value spirits such as single malts. ACD was
removed in 2007, but import duty remains high at 150%, which makes the market
difficult for foreign distillers.
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Trade controversy
The consumption of native distilled molasses-based whisky in India is encouraged by
tariff barriers of up to 150% that impose a significant markup on imported whiskies in
India. Imported Scotch whisky bottled under its own brand names makes up only 1%
of the total market share. The substantial tax markup on imported whiskies has been
categorized by the Scotch Whisky Association as "pure protectionism". Indian
distillers have political influence, and believe that a cut in import duties would boost
Scotch rapidly and would be a "catastrophe" for domestic distillers. The All India
Distillers Association also accuses Scotch and other European spirits distillers as
having the advantage of agricultural subsidies for their grain. Indian distillers also
accuse the European Union of erecting its own sort of trade barriers by means of rules
that forbid the marketing of molasses-based spirits as "whisky". Mallya has objected to
the EU's refusal of entry to molasses-based whiskies, claiming that the "imposition of
British imperialism is unacceptable". In a lawsuit brought in India by the Scotch
Whisky Association, the Delhi High Court enjoined Indian whisky manufacturers from
labelling their product with the words "Scot" or "Scotch".
India is the world's fifth largest Scotch whisky market by volume (16.42 million litres
of pure alcohol) and 19th largest by value (61.59 million / 532.10 crores) as of 2012.
Exports of single malt from Scotland have risen by 190% from 268 million to 778
million between 2001 and 2012.
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Manufacturers
Following is a list of whisky producers in India:
Alcobrew Ltd
Jagatjit Industries
Khemani Group
Premier Distilleries
N.V. Group
Som Distillery
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Tilaknagar Industries
Empirical observations show that the financial managers have to spend much of their
time to the daily internal operations relating to current assets and current liabilities of
the firms. As the largest portion of the managers time is devoted to working problems,
it is necessary to manage working in the best possible way to get maximum benefit.
The effective management of the business, among other things primarily depends upon
the manner in which the short-term assets and short run sources of financing are
managed. The management or current assets management consists of inventories,
accounts receivable and cash & bank balances as the major components. There is a
difference between current assets and fixed assets in terms of their liquidity. A firm
requires many years to recover the initial investments in fixed assets such as plant and
machinery and land and buildings. On the contrary, investments in current assets are
turned over many times a year. Investments in current assets such as inventories and
book debts are realized during the firms working capital cycle, which is usually less
than a year. Working capital is that proportion of a companys total capital, which is
employed in short-term operations.
Even though, it is one segment of the capital structure of a business, it constitutes an
inter-woven part of the total integrated business system. Therefore, neither it can be
regarded as an independent entity, nor, can the working capital decisions be taken in
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There are many aspects of working capital management, which form an important
function of a financial manager:
Working management has greater significance not only for small firms but
also for large firms.
Most of the work dealing with working capital management in confined to the balance
sheet, which is directed towards optimizing the levels of cash and marketable
securities, receivable and inventories. For the most part, optimization of these current
assets is isolated from the optimization of the other current assets and the overall
valuation of the firm.
The decision concerning cash and resources, receivable, investments and current
liabilities is with an objective of maximizing the overall value of the firm. Once
decisions are reached these areas, the levels of working capital are also reduced.
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The problem of managing working capital has got a separate entity as against different
decision-making issues concerning current assets individually. Working capital has to
be regarded as one of the conditioning factors in the long run operations of a firm,
which is often inclined to treat it as an issue of short-run analysis and decision-making.
The management of working capital hence involves constant vigilance to ensure that
the right quantum is available on a continuing basis to support and promote the
activities. Sound financial and statistical techniques, supported by judgment, should be
used to predict the quantum of working capital needed at different time periods.
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OPERATING CYCLE
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c) Debtors and bills receivables into cash
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OF ADEQUATE
WORKING
CAPITAL
An adequate or optimum working capital balance refers to the desired working capital
where a firm will not have excess or shortage of working capital and indicates both
profitability and liquidity for the firm. It is necessary to maintain an optimum cash
balance, an optimum level of inventory and an optimum level of debtors and
receivable.
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Excess cash in hand indicates idle cash and even though the liquidity position
of the company is good, it lacks profitability.
Fixed assets are not efficiently utilized if there is lot of working capital funds,
which leads to deterioration in profits.
The firm loses its reputation when it is not in a position to honor its short-term
obligations.
Ultimately it leads to the reduction in sale, as the firm cannot meet the demand of
the customers.
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Nature of business
The working capital requirement of a firm basically depends upon the nature of
its business public utility undertakings like electricity, water supply and
railways need very little working capital because they offer cash sales only and
supply services, not products and such no funds are tied up in inventories and
receivables. The manufacturing undertakings also require sizable working
capital along with fixed investments because they have also to build up
inventories.
Size of business
The working capital requirements of a concern are directly influenced by the
size of its business, which may be measured in terms of scale of operations.
Greater the size of business unit, generally, larger will be the requirements of
working capital.
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Production capacity
In certain industries the demand is subject to wide fluctuations due to seasonal
variations. The requirements of working capital in such cases depend on the
production policy.
Manufacturing process
In manufacturing business the requirements of working capital increase in direct
proportion to length of manufacturing process. Longer the process period of
manufacture, larger is the amount of working capital required.
Seasonal variations
In certain industries, raw material is not available through out the year. They
have to buy raw materials in bulk during the season to ensure an uninterrupted
flow and process them during the entire year. A huge amount is, thus, blocked
in the form of material inventories during such season, which gives rise to
more working capital requirements.
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Credit policy
The credit policy of a concern in its dealings with debtors and creditors
influences considerably the requirements of working capital. A concern that
purchases its requirements on credit sells its products/services on cash requires
lesser amount of working capital.
Business cycle
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The working capital requirements of a concern increase with the growth and
expansion of its business activities.
Some firms have more earning capacity than others due to quality of their
products, monopoly conditions, etc. such firms with high earning capacity may
generate high cash profits from operations and contribute to their working
capital. The dividend policy of a concern also influences the requirement of its
working capital.
Changes in the price level also affect the working capital requirements.
Generally, the rising prices will require the firm to maintain larger amount of
working capital, as more funds will be required to maintain the same current
assets. The effect of rising prices will be different for different firms. Some
firms may be affected much while some may not be affected at all by the rise in
prices.
Other factors
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The various of working capital for the financing of working capital are as follows:
Sources of working capital
Permanent or fixed
Temporary or variable
1) Shares
1) Commercial banks
2) Debentures
2) Indigenous bank
3) Public deposits
3) Trade credits
4) Installment credit
5) Accounts receivables
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Shares
Issue of shares is the most important source for raising the permanent or
long capital. A company can issue various types shares as equity shares,
preference shares.
Debentures
A debenture is an instrument used by the company acknowledging its debt
to its holder. It is also an important method of raising long term or
permanent working capital.
Public deposits
Public deposits are the fixed deposits accepted by a business enterprise
directly from the public. This source of raising short term and medium term
finance was very popular in the absence of banking facilities.
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Indigenous bankers
Private moneylenders and country bankers used to be the only source of
finance prior to the establishment of commercial banks. They used to
change very high rates of interest and exploit the customers to the largest
extent possible.
Installment credit
This is another method by which the assets are purchased and the
possession of goods is taken immediately but the payment is made in
installments over a predetermined period of time.
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Trade credits
As present day commerce is built upon credit, the rate credit arrangement
of a concern with its suppliers is an important source of short-term finance.
The main advantages of this source are: it is very convenient method of
finance; it is flexible and it may be possible to obtain favorable terms.
Advances
Some business houses get advances from their customers and agents
against orders and this source is a short-term source of finance for them.
Accounts receivables
Accounts receivable is a permanent investment in the business. As old
receivables are collected and new receivables are created, it is the major
component of the current assets.
CASH MANAGEMENT
INTRODUCTION
Cash is the most liquid asset and all assets of business are finally converted into cash.
Cash is considered as the lifeblood of the business. It is essential for a business to
carry out all its transactions. Cash of a business includes cheques, currencies and bank
drafts. The cash determines the credit worthiness, solvency and liquidity position of a
business with the business. Cash management assumes more importance than other
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Management of cash is important not only because it is the most liquid asset but also
because all the liabilities of the business are to be met in cash. Though cash forms the
smallest part in the total assets of the company it requires a lot of time for its
management.
Transaction motive
It requires a firm to hold cash to conduct day-to-day operations of business.
The firm needs cash to make payments for purchases, wages and operating
expenses and other inevitable payments.
Precautionary motive
The firms to meet emergencies i.e., the unforeseen events of the business also
maintain cash. A business firm will have to fan a number of risks because it has
an environment of its own. The environment consists of many uncontrollable
factors like government legislation, natural calamities, unpredictable consumer
behaviour etc, to face all these risks, the firm needs to hold cash in a business.
Speculative motive
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Security motive
A firm should maintain cash reserves for future requirements if a firm is not in
a position to obtain finance from any other source, then it can utilize the cash
reserves.
Compensatory motive
It is a motive to have cash to compensate against loss arising in business.
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Cash planning
Cash planning is necessary to project the surplus or deficit of cash. It also helps
to maintain the cash balance for the planned period. It is a technique to plan
and control the use of cash. Cash planning may be done on daily, weekly or
monthly basis. The period and frequency of cash planning generally depends
upon the size of the firm.
Cash planning requires the use of two techniques namely
-
Cash budgeting
Cash forecasting
It refers to the prediction of cash requirements and the sources of cash
generation. Cash forecasts are required to prepare cash budgets. It may be
done on a short-term basis or a long-term basis. The most commonly used
methods for cash forecasting are:
1)
2)
Cash budgeting
Cash budget is the most significant device for planning and controlling the
receipts and payments. It is a summary statement of the firms expected
cash inflows and outflows over a projected time period. The time horizon
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Safety
2)
Marketability
3)
Maturity
RECEIVABLES MANAGEMENT
INTRODUCTION
Receivables management is a permanent investment in the business. As old
receivables are collected and new receivables are created, it is a major credit of the
current assets. This emerges because of the existence of credit sales. It shows the
amount receivable from the purchases. This is called by different names such as bills
receivables, accounts receivable, trade debtors, sundry debtors, trade receivables etc.
Receivables derive benefits to the firm and also involve cost to the firm. If the benefit
is more the cost is also more and hence the risk increases. On the other hand, if the
benefits are less the cost and risk is also less. Receivable management tries to trade of
between benefits and cost arising from receivables.
INVENTORY MANAGEMENT
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INTRODUCTION
The important component of working capital is inventory. Inventory refers to the stock
of goods yet to be sold by a business firm. It is denied as the stock of goods a firm is
offering for sale and the components that make the goods. In other words the inventory
includes raw materials, work in progress and finished goods.
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STATEMENT OF PROBLEM
Working capital is an important requirement for any business, without which no
business can survive. Every activity of the business is related to the availability of the
working capital. That is, arranging short-term financing, negotiating favorable credit
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SCOPE OF STUDY
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REFERENCE PERIOD
The study period covered in this case study is for 2 financial years i.e., from 20112012, 2012-2013.
DEFINITIONS OF CONCEPTS
Some of the concepts used in different senses from time to time in the literature of
financial management are discussed below in order to make the study clear and
meaningful.
WORKING CAPITAL
It is the fund, which is used to finance its day to day activities of business, and it has to
be employed in short term operations. There are two concepts of working capital-gross
concept and net concept.
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PROFITABILITY
It is the ability of the firm to meet the claims of suppliers of short-term capital for
building up of current assets and also means short-term debt repaying capacity of
enterprise, in a limited sense.
OPERATING CYCLE
It is a period involved from the time cash is invested in inventory till the time cash is
recovered from sales of goods.
LIMITATIONS OF STUDY
This report is based on the annual reports, which are provided by the company
that cannot be relied upon.
The collection of data for analysis is restricted to SABMiller India Limited
only and
Time was major limiting factor to the study.
COMPANY PROFILE
PROFILE OF SABMiller India Limited (Formerly SKOL
BREWERIES LIMITED)
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SABMiller India Limited is the operating entity of SABMiller Group in India. The
Company was hitherto known as SKOL Breweries Limited and the name was changed
to SABMiller India Limited effective 22nd June 2012 to reflect the SABMiller Group
identity in India. SABMiller entered India in 2000 by entering into a joint venture with
Narang Breweries Limited. Subsequently, the Group acquired many individual
brewing companies and in the year 2005 acquired the brewing business of Shaw
Wallace Group in India.
The Company headquartered at Bangalore has 10 high quality breweries located
strategically across 9 states in India, well placed to service the markets quickly and
efficiently. Our mission is to nuture local and international brands that are the first
choice of the consumer and in line with this mission, your company has acquired and
nurtured local brands like Haywards 5000, Haywards 2000, Knock Out and Royal
Challenge. Other brands being Fosters, Miller High Life and Peroni Nastro Azzurro
are the international brands of the SABMiller Group which have been introduced with
many to follow.
Indus Pride is an indigenously developed and brewed product and during the year the
brand was relaunched brewed with spices in four variants, a first of its kind in India.
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SABMiller Plc
SABMiller plc headquartered at London is one of the worlds leading brewers with
more than 200 beer brands and about 70,000 employees in over 75 countries.
SABMiller has created leading positions in both emerging and developed markets
across the world. For the year ended 31st March 2013 SABMiller globally sold 306
million hectoliters of larger and thereby clocking turnover of US$ 34,487 million and
EBITA of US$ 6,421 million. Its international portfolio of brands includes premium
international beer such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine
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Our Vision
To be among the 3 most admired beverage companies in India.
Our Mission
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BRANDS OF SABMiller
1.Indus Pride
2.Haywards 5000
3.Knock Out
4.Royal Challenge
5.Royal Challenge Strong
6.Fosters
7.Miller High Life
8.Peroni Nastro Azzurro
1.
Indus Pride
Indians have always had a taste for the finer things in life, whether it is for music, the
arts or food. Indus Pride is a tribute to this exquisite sense of taste. It also has the
distinction of being the first Indian beer to be brewed with spices and the choicest hops
to create a taste thats distinctly Indian. Available in bespoke 330ml bottle, Indus Pride
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2.Haywards 5000
Haywards 5000 was launched in the year 1983 and is one of the largest selling strong
beer in India. Haywards 5000 name with its red, black and gold coloured label is
synonymous with strong beer in India.
Haywards 5000 perfectly combines strength with quality credentials that meet the high
expectations of todays demanding consumers.
Haywards 5000 is the hallmark of original and authentic strong beer which other beer
brands aspire for.
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3.Knock Out
Ever since its launch in 1984, Knock Out has evolved its brand positioning from
strength to cold refreshment to establish itself as one of the largest selling strong beer
brands in the country. Today, there are millons of consumers in the states of Karnataka,
Maharastra and Andhra Pradesh for whom the brand has come to acquire an iconic
status.
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4.Royal Challenge
Launched in the year 1993, Royal Challenge Premium Lager is the second largest
selling mild beer in India. Royal Challenge is brewed with the choicest 6 row barley
malt. Its long brew duration provides it with a distinct, smooth taste and rich flavour.
The brand has moved from strength to strength since its relaunch by SABMiller and
has set itself on a growth momentum.
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Royal Challenge Strong Beer is one of the newest additions to the SABMiller
Portfolio. It is a strong beer that is smooth and easy drinking.
Royal Challenge Strong uses the highest quality barley and the choicest hops picked
from the countrys best farms. The hops are subjected to a long brewing process along
with high quality barley malt. Through this customized process, the brew acquires a
silky smooth consistency and gives a better drinking experience.
6.Fosters
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Fosters Lager is a uniquely Australian beer, brewed with the finest sun-dried malted
barley, the purest water, and Fosters own specially bred Pride of Ringwood hops
imported directly from Australia to give the beer an authentic flavor. Fosters Lager
Beer has always been at the forefront of brewing technology and the Fosters Lager
brewed today is the result of over a century of attention to the brewing art. Quality has
been the strength of Fosters since its earliest days and remains a paramount concern at
every stage of the beers journey from brewery to consumer. Fosters crisp, clean
flavor won it immediate international acclaim when it was first brewed in Melbourne
in 1888. Today, more than one hundred years later, it is still recognized as one of the
worlds best beers.
SABMiller India brews & markets Fosters in India since 2006.
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Miller was born out of the dreams of the German entrepreneur Fredrick Miller who
migrated to America in the mid-19th century and founded the Miller brewing company
in 1855 in Milwaukee. Miller High Life dates back all the way to 1903 and has since
then been brewed with a consistent smooth taste and a perfect white lacy head.
Miller High Life is an easy drinking premium American lager that is refreshing at
4.7% ABV and is produced with the highest standards of quality. It perfectly balances
bitterness and smoothness and is known for its golden colour, high carbonation,
elegantly shaped clear glass bottle and the consistently crisp smooth taste.
The brand was launched in India in 2011 and is currently available in all the major
cities in pack sizes of 330ml and 650ml bottles.
Miller High Life embodies the American spirit of Work Hard, Party Hard. This
iconic beer is adored by consumers who live every day of their lives to the fullest. This
American spirit is captured by the expression Its Miller Time.
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Today, Peroni Nastro Azzurro has become highly representative of classic Italian style
and culture. This premium beer is 4.9% alcohol by volume and expertly brewed using
only the finest quality and variety of spring barley, maize, malts and hops and by
following a meticulous production process.
This gives Peroni its unique taste which is refreshing and dry, with a clear-cut, clean
character and clarity, achieved through the exclusive brewing process. This ensures
that the beer has both a fresh and natural quality.
Positioned as Italian style in a bottle, from presentation to pouring the brand, Peroni
has struck a chord with modern urbanites looking for cosmopolitan class.
Peroni is available in Mumbai, Delhi, Bangalore and Pune. It is available in star hotels
and also in select high-end restaurants, lounge bars, pubs and night clubs.
ORGANIZATION CHART
SABMiller Limited, India follows top to bottom chart, which is as follows:-
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BOARD OF DIRECTORS
Mr. Ari Mervis Chairman
Mr. T.S.R. Subramanian
Mr. Mathew James Dunn
Mr. Paolo Alberto Francesco Lanzarotti- Managing Director
AUDIT COMMITTEE
Mr. Mathew James Dunn- Chairman
Mr. Ari Mervis
Mr. Paolo Alberto Francesco Lanzarotti
Ms. Catherine May
Mr. Stephen Victor Shapiro
Ms. Sue Clark
Mr. Harald Graham Harvey
MARKETING ACTIVITIES
The major market for SABMiller prevails in India as well through out the world as it is
export oriented. It exports to various countries as discussed earlier.
SWOT Analysis
Strength
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Shares: Issues of shares is the most important source for raising the permanent or
long-term capital. SABMiller Limited (formerly SKOL BREWERIES LIMITED) has
313,170,736 equity shares of Rs 10, each which are fully paid up.
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Fixed assets
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Depreciation
Depreciation on fixed assets is provided at rates prescribed on written down value
basis in schedule XIV of the companies act of 1956 on a prorata basis from the date of
acquisition of the asset.
Inventories
Inventories are valued at lower of cost or net realizable value. Cost is determined on
first in first out basis and includes an appropriate portion of production and factory
related overheads
Long-term investments
Long-term investments are accounted at cost, and no provision has been made for
dimunition in the value of the same.
Gratuity
66
Share capital
Out of the equity shares issued, 313,170,736 shares of Rs.10 each were allotted as
fully paid up.
ANALYSIS
67
1.CURRENT RATIO
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio is also known as working capital ratio. It is calculated by dividing
the total current assets by total current liabilities.
Current Ratio =
Current Assets
Current Liabilities
Current assets include cash in hand, cash at bank, bills receivable, sundry
debtors, inventory, prepaid expenses, outstanding incomes temporary
investments and advances.
Current liabilities include bills payable, sundry creditors, bank overdraft,
unclaimed dividend, outstanding expenses, provision for taxation and proposed
dividend etc.
TABLE 01
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Year
Current Assets
Current Liabilities
Current Ratio
2011-2012
10381791196
12558812519
0.83
2012-2013
8426852990
14178831345
0.59
Analysis:
The current ratio for the year 2011-12 and 2012-13 is 0.83 and 0.59 respectively.
GRAPH 01
GRAPH SHOWING CURRENT RATIO
Current Ratio
2012-2013
0.59
Current Ratio
2011-2012
0.83
0.1
Interpretation:
69
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2.LIQUID RATIO
Liquid Ratio may be defined as the relationship between liquid assets and liquid
liabilities. It is also known as quick ratio. Liquid assets include all current assets
except inventory and prepaid expenses. Liquid liabilities include all current liabilities
except bank overdraft.
Liquid Ratio=
Liquid Assets
Liquid Liabilities
TABLE 02
SHOWING THE LIQUID RATIO
Year
Liquid assets
Liquid liabilities
Liquid ratio
2011-2012
7707668803
12558812519
0.61
2012-2013
5684508275
14178831345
0.40
Analysis:
70
GRAPH 02
GRAPH SHOWING LIQUID RATIO
71
Liquid Ratio
2012-2013
0.4
Liquid Ratio
2011-2012
0.61
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Interpretation:
Liquid ratio of the company is decreasing in year 2012-2013.So from the above graph
we find that the company liquid ratio is not good.
72
Current Assets
Shareholde r ' s Funds
TABLE 03
TABLE SHOWING RATIO OF CURRENT ASSETS TO
SHAREHOLDERS FUND RATIO
Year
Current Assets
Net worth
2011-2012
10381791196
7101637582
2012-2013
8426852990
3,799,413,238
Current Assets
to Net worth Ratio
1.46
2.21
Analysis:
The above table shows that the current assets to net worth ratio in the year 2012-2013
has increased to 2.21 when compared to the year 2011-2012 .
GRAPH 03
73
2012-2013
2.21
Current Asset to
Shareholder's Fund
2011-2012
1.46
0.5
1.5
2.5
Interpretation:
The company net worth is increasing from the year 2011-2012 so the current assets to
shareholders fund of the company has increased in the year 2012-2013. Hence,
companies shareholders fund has improved.
74
Credit Sales
Debtors
TABLE -04
TABLE SHOWING DEBTORS TURNOVER RATIO
Year
Credit Sales
Debtors
Debtors Turnover
2011-2012
33487465251
6198545813
Ratio
5.40
2012-2013
27825853277
4652810767
5.98
Analysis:
The debtors turnover ratio has increased to 5.98 in the year 2012-2013, compared to
the year 2011-2012.
GRAPH 04
GRAPH SHOWING DEBTORS TURNOVER RATIO
75
Debtors Turnover
2012-2013
5.98
Debtors Turnover
2011-2012
5.4
6.1
Interpretation:
This ratio lies in the fact that debtors constitute one of the important items of current
assets and this ratio indicates the how many days average sales are tied up in the
amount of debtors. A high debtors turnover ratio indicates that debt are being collected
more quickly. Change in this ratio shows the change in the companys credit policy or
change in ability to collect from its debtors. The company should maintain their ratio.
76
CreditorsTurnover Ratio=
Credit Purchase
Average Creditors
TABLE -05
TABLE SHOWING CREDITORS TURNOVER RATIO
Year
Credit purchase
Creditors
Creditors turnover
2011-2012
8670519285
5235850764
Ratio
1.66
2012-2013
9400920281
5180350703
1.81
Analysis:
The creditors turnover ratio has increased to 1.81 in 2012-2013 when compared to
2011-2012 which was 1.66.
GRAPH 05
GRAPH SHOWING CREDITORS TURNOVER RATIO
77
2012-2013
1.81
Creditors Turnover Ratio
2011-2012
1.55
1.66
1.6
1.65
1.7
1.75
1.8
1.85
Interpretation:
Creditors Turnover ratio shows that there is increase in purchase and decrease in
credits given which is a very good sign for the company. It also shows that due to
increase in purchase and decrease in creditors, there is increase in credit turnover ratio,
which is satisfactory for the organization.
78
Sales
Asset
TABLE 06
TABLE SHOWING FIXED ASSETS TURNOVER RATIO
Year
Sales
Fixed Assets
2011-2012
19511539715
11121942442
Ratio
1.75
2012-2013
16366268093
11289543997
1.45
Analysis:
Fixed assets turnover ratio has decreased to 1.45 in the year 2012-2013 when
compared to the year 2011-2012 .
GRAPH 06
79
2012-2013
1.45
Fixed Assets Turnover
Ratio
2011-2012
1.75
Interpretation:
Fixed assets turnover ratios shows the that there is a decrease in both sales and fixed
assets as it decreases the fixed assets turnover ratio of the company. Hence, it is not
satisfactory for the company.
The ratio, which expresses the relationship between the current assets to sales, is called
as Current assets turnover ratio. It is calculated as follows.
80
Sales
Current Assets
TABLE 07
TABLE SHOWING CURRENT ASSETS TURNOVER RATIO
Year
Sales
Current Assets
Current assets
2011-2012
19511539715
10381791196
turnover Ratio
1.88
2012-2013
16366268093
8426852990
1.94
Analysis:
The current assets turnover ratio has increased to 1.94 in 2012-2013 when compared
to the previous year 2011-2012.
GRAPH 07
GRAPH SHOWING CURRENT ASSETS TURNOVER RATIO
81
2012-2013
1.94
Current Assets Turnover
Ratio
2011-2012
1.84
1.88
1.86
1.88
1.9
1.92
1.94
1.96
Interpretation:
From the above Current Assets Turnover ratio it concludes that company sales are
decreasing and its current assets are also decreasing. But, company current assets
turnover ratio has increased.
The ratio, which expresses the relationship between the working capital and sales, is
called as Working capital turnover ratio. It is calculated as follows
82
Sales
Working Capital
TABLE 08
TABLE SHOWING WORKING CAPITAL TURNOVER RATIO
Year
Sales
Working capital
Working capital
2011-2012
19511539715
330947528
turnover ratio
58.96
2012-2013
16366268093
371316219
44.08
Analysis:
Working capital turnover ratio has decreased to 44.08 in the year 2012-2013 when
compared to 2011-2012 which stands at 58.96.
GRAPH 08
GRAPH SHOWING WORKING CAPITAL TURNOVER RATIO
83
2012-2013
44.08
Working Capital Turnover
Ratio
2011-2012
58.96
10
20
30
40
50
60
70
Interpretation:
A high working capital turnover ratio shows the efficient utilisation of working capital
in generating sales. A low ratio, on the other hand, May indicates excess of net
working capital. This ratio shows that the working capital is efficiently utilised or not.
Here the ratio decreases in the year 2012-2013.
84
TABLE 09
TABLE SHOWING STOCK TURNOVER RATIO
Year
Average Stock
Stock Turnover
2011-2012
9578428878
2674122393
Ratio
3.58
2012-2013
8604113675
2742344715
3.14
Analysis:
Stock Turnover Ratio has decreased to 3.14 in the year 2012-2013, when compared to
the year 2011-2012.
GRAPH 09
GRAPH SHOWING STOCK TURNOVER RATIO
85
2012-2013
3.14
Stock Turnover Ratio
2011-2012
2.9
3.58
3.1
3.2
3.3
3.4
3.5
3.6
3.7
Interpretation:
From the above graph it shows that the stock turnover ratio is decreasing as it is not
beneficiary for the company as it decreases the stock of the company.
FINDINGS
The analysis and interpretation of the data gathered, has revealed the following facts:
86
87
A high working capital turnover ratio shows the efficient utilisation of working
capital in generating sales. A low ratio, on the other hand, May indicates excess
of net working capital. This ratio shows that the working capital is efficiently
88
CONCLUSIONS
SABMiller India Limited has now completed more than 11 years in the field of
breweries industries. In spite of having so many competitors, it has
successfully managed to overcome all the barriers from other products of the
competitors, which is a good sign of prosperity to the company. The long-term
solvency position of the company has shown a recurrent increase. The sales of
the company has increased since its expansion in Indian market that is why
they are second largest breweries company in India, which is a good sign to
companys prosperity. As the companies sales have increased but due to huge
liabilities their current assets have decreased. As they have many competitors
89
SUGGESTIONS
SABMiller should make proper financial planning so that the available current
assets and current liabilities are utilized properly, as current assets is decreasing
and current liabilities is increasing.
The company must try to maintain its short-term liquidity position, by investing
only in those investments, which are easily convertable into cash.
SABMiller must cut down the operating and other expenses without reducing the
quality of its products.
90
is efficiently utilised or not. Here the ratio decreases in the year 2012-2013.
From the above Current Assets Turnover ratio it concludes that
company sales are decreasing and its current assets are also decreasing. But,
91