A STUDY ON WORKING CAPITAL MANAGEMANT

Project Report

Submitted in partial fulfilment of requirements for the award of the degree of

Master of Business Administration

SUBMITTED BY

N.Harinandhakumar

Regd.NO: 09520

Under the guidance of

Mr.Dinakar Mr.S.Pugalenthi
(Organizational Guide) (Faculty Guide)

RL INSTITUTE OF MANAGEMENT STUDIES

TVR Nagar,
Aruppukottai Road,
Madurai-22
June 2010
 R L INSTITUTE OF MANAGEMENT STUDIES
(A Unit of Subbalakshmi Lakshmipathy College of Science)
TVR Nagar, Aruppukottai Road, MADURAI 625 022
An Autonomous Institution and approved by AICTE, New Delhi

BONAFIDE CERTIFICATE

This is to certify that the project report entitled A Study on Working Capital Management,
is a bonafide record of the Project work done by
Mr. : N.Harinandhakumar
Reg. No : 09520
Course & Year : I MBA
in partial fulfillment of requirements for the award of Degree of
Master of Business Administration.
I certify that the Project Work carried out by him/her is an independent work under my
supervision and guidance and this project has not formed the basis for the award of any Degree /
Diploma / Associate ship / Fellowship or similar nature to any Candidate in any University /
Institution earlier.

Submitted for the viva-voce to be held on _____________.

Internal Guide External Examiner

DIRECTOR PRINCIPAL

Place: Madurai
Date:
 DECLARATION

I hereby declare that the Project Work entitled A Study on Working Capital

Management submitted to R L Institute of Management Studies, Madurai -22 is a record of

original work done by me in EID Parry (India) Ltd. and this Project has not formed the basis

for the award of any Degree / Diploma / Associate ship / Fellowship or similar nature to any

Candidate in any University / Institution earlier.

Signature of the Candidate

Course / Year : I year MBA

Reg. NO : 09520

ACKNOWLEDGEMENT
 At the very outset, I dedicate my deepest sense of gratitude to my Parents for showering
on me that blessing and love which have induced me to make this project a success.

I would like to express my grateful thanks to our President Dr. R. Lakshmipathy and
our beloved Principal Dr.R.Srinivasan, for permitting me to do this project and for their
encouragement in my academic career.

I take this opportunity to acknowledge my thanks to Director Mr.M.D.Manoharan, for

all the help to complete the project successfully.

I express my deepest sense of gratitude to Mr.S.Pugalenthi (int. Faculty name) for his
guidance and moral support during the project period, because his keen interest and valuable
suggestions have helped me throughout the project. I express my sincere thanks to Mr.Dinakar
EID Parry (India) ltd. (Org. Guide/company name) providing me all facilities to carry out my
project work in this Organization.

I am thankful to my friends who are the real supporters of my academic career.

Finally, I am willing to express my heartfelt thanks to the ALMIGHTY for showering

His blessings to be a successful human being in all walks of my life.

(N.Harinandhakumar)
Regd.No: 09520
SYNOPSIS
contents
S.NO PARTICULAR PAGE NO
1 INTRODUCTION
1.1 ABOUT THE BUSINESS
2 PROFILE OF THE ORGANISATION

2.1 THE COMPANYS BUSINESS

2.2 THE COMPANY SUGAR BUSINESS AND ITS STRATEGY
2.3 SUBSIDIARY COMPANIES
2.4 QUALITY ,OCCUPATIONAL HEALTH ,SAFETY ENVIRONMENT AND R&D
3 RESEARCH METHODOLOGY
4 INTRODUCTION OF WORKING CAPITAL MANAGEMENT
4.1 NEED FOR WORKING CAPITAL
4.2 KING OF WORKING CAPITAL
4.3 FACTOR DETERMINING THE WORKING CAPITAL REQUIREMENT
4.4 PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY
5 COMPUTATION OF WORKING CAPITAL
5.1 COMPOSITION OF CURRENT ASSETS
5.2 COMPOSITION 0F CURRENT LIABILITY
5.3 BUDGET
5.4 STATEMENT SHOWING WORKING CAPITAL REQUIREMENT
5.5 PROJECTED PROFIT AND LOSS ACCOUNT
6 CONCLUSION
6.1 OBSERVATION
6.2 FINDINGS AND OBSERVATION

About the business

 Sugar cane is a perennial HERB BELONGING to the grass family . Crystallized sugar was
reported 5000 years ago in India. Native to tropical and subtropical regions of the world, this
tropical grass is 10-24-feet tall. Bears long, pointed leaves, and has several stalks. The
segmented stalks have a bud at each joint and as the plant matures, small flowers appear.

Sugar is an important global trading commodity. In countries with a moderate climate,

especially Western, Central and Eastern Europe, as well as the United States, China and Japan,
sugar is produced from sugar beets, whereas in tropical and subtropical areas it is extracted from
sugar cane. The most important sugar producing countries are: India, Brazil, Thailand, China,
Australia, Mexico, Cuba and the United States. In total, sugar is produced in 127 countries
around the world. Seventy-nine countries produce sugar from sugar cane, thirty-eight only from
sugar beets, and ten from both plants.

Current regulations for the sugar industry:

Levy
Sugar

Sugar Free
Sugar
Farmer Miller Molasses
Ethano

Biogases
Power
Process of sugar:

Sugar produced in India:

Sugar produced in India is mainly of granulated type. Granulated sugar is further classified
in to various types based on colour and grain size. According to the Indian Standards
Specifications (ISI), there are around 20 grades of sugar based on the grain size and colours. The
colour series has four grades designated as 30,29,28 and 27, while the grain size has five grades
namely A, B, C, D, E. Bulk of production in the country is of C, D and E grains, branded as
large, medium and small and has colour specification of 30. The D grade produced in the
country is comparable to world standards.

Types of sugars

1. Sanding Sugars

2. Brown Sugars - Turbinado Sugar

 3. Brown Sugar (light and dark)

4. Muscovite or Barbados sugar

5. Free Flowing Brown Sugars

6. Demerara Sugar

7. Invert Sugar

SUGAR FACTS:

REFINED white sugar is 99.9-percent sucrose.

WHITE sugar is pure sucrose, containing no preservatives or additives.
The world s largest producer of sugarcane was Brazil, followed by India.

Sugar cane products:

Sugar cane products include table sugar, Falernum, molasses, rum, and ethanol. The bagasse
that remains after sugar cane crushing may be burned to provide heat and electricity. It may also
because of its high cellulose content, serve as raw material for paper, cardboard, and eating
utensils that, because they are by-products, may be branded as environmentally friendly.
 World sugar business:

World Sugar Balance

2009/10 2008/09 Change
(mln tonne, raw value) in mln t in %
Production 157.160 152.482 4.678 3.07
Consumption 166.585 164.153 2.432 1.48
Surplus / Deficit -9.425 -11.671
Import demand 54.281 50.068 4.213 8.41
Export availability 52.156 50.070 2.086 4.17
End Stocks 53.068 60.368 -7.300 -12.09
Stocks/Consumption ratio in% 31.86 36.78
Source: ISO quarterly market outlook, February 2010

Top sugar producer for 2008/2009:

Production and consumption of sugar:

COUNTRIES PRODUCTION EXPORTS POPULATION PER CAPITA

MILLION TONS MILLION MILLIONS CONSUMPTION
TONS
BRAZIL 38.633 23.685 [1] 198 58
INDIA 16.304 0.237 [15] 1,166 19
EU 14.865 0.707 [9] 500 34
CHINA 13.587 - - 1,338 10
THAILAND 7.717 5.004 [2] 66 36
USA 6.924 - - 307 29
MEXICO 5.761 0.707 [9] 111 49
SADC 5.309 1.793 [4] 139 19
AUSTRALIA 4.810 4.225 [3] 21 45
PAKISTAN 4.239 - 176 23

per capita consumption of sugar :

Organisation chart:
THE COMPANYS BUSINESS:

The English word sugar is believed to have originated from the Sanskrit word sharkara.
This is understandable, considering the fact that historians give the credit to India for pioneering
sugar production around the 4th century B.C. It is not surprising, therefore, E.I.D. Parry, being
one of the oldest companies in India that pioneered sugar production in a factory, way back in
1842 near Nellikuppam in Tamil Nadu.
Today, Parry is a leading sugar producer with plants spread over Tamil Nadu and Pondicherry.
The Company is participating in a Joint Venture with Cargill, Silk road Sugar Private Limited,
which is setting up a 1 million MT (initially 0.6 million MT) per annum sugar refinery at
Kakinada, Andhra Pradesh, on the east coast of India. With an eye on the future, Parry is also
investing in emerging businesses like Bio-Products and Nutraceuticals. The Company has a
significant presence in the Agro inputs by its subsidiary Coromandel Fertilisers Limited the
cyclicality associated with the sugar business, the Companys business strategy has focused on
cost optimisation through capacity expansions, enhancing margins through production of value
added products & de-risking through sugarcane co-products.

THE COMPANY'S SUGAR BUSINESS & ITS STRATEGY

The Companys Sugar business has some inherent strength. The location of its units in South
India has the distinctive advantage of a long crushing season of about 250 days which facilitates
better capacity utilisation of the sugar, co-generation and alcohol plants. Tamil Nadu State is
blessed with progressive farmers. Loyalty to the Company is also extremely high, built up over
the years through its fairness in dealing with the farmers & ethical practices. The sugarcane field
as well as the factory productivity is amongst the highest in India.

Karur is a Tamil Nadu town known for its home textile units that export their products to
global retailers including Wal-Mart Stores Inc.In the surrounding countryside, farmers are just
starting to learn the techniques of mechanized farming.

Around 12km from Karur, as the road curves at yet another bend to reach a village called
Pugalur, stands a huge sugar factory

The vast stretches of sugar cane plantations in its vicinity in Karur and Erode districts are the
main reason this factory works 280-300 days a year. In comparison, government-run cooperative
factories run only for around 150 days a year.
The factory procures the produce of around 14,000 sugar cane farmers registered with it; the
area under sugar cane cultivation is around 22,000 acres. Yet even this factory has been hit by a
shortage of agricultural workers attracted by job prospects at textile units. The labour shortage
dates back 10 years, but has worsened since a drought in 2002-03.

With textile units coming up in this area (in and around Karur), many people are moving from
agriculture to the textile factories. They get a pick-up and drop service and a steady income
they dont want to dirty their hands in the mud, says P. Nagarajan, general manager (cane), EID
Parry.

Some farmers opted for other crops such as turmeric in the belief that they would make more
money out of those in a shorter period of time.

The challenge before EID Parry was to introduce initiatives that would help farmers not only
retain their lands for sugar cane cultivation, but also make sure that the yield per acre goes up
substantially. This would result in increased income for farmers and higher production for the
company.

The Company's plants have access to two major ports on the Coromandel Coast of India,
via, Chennai & Tuticorin. Major sugar importing countries like Sri Lanka, Bangladesh,
Indonesia, etc. are easily reachable from these ports. The Company is, thus, eminently
positioned

Sugar Facilities:

The Company has five sugar factories of which four are in Tamil Nadu and one in
Pondicherry. The Company has increased the capacity to 19,000 TCD across its sugar mills.
This will result in improvements in process efficiencies, sugar recovery gains and reduced
energy (steam and power) consumption. The efficiency norms are being benchmarked
internationally and should make these units very low cost producers. South India and Tamil
Nadu in particular has many advantages for Sugar Production and the Company is able to
capitalize on these advantages: Post acquisition,of GMR industries by EID Parrys sugar
crushing capacity will go up 32,500 TCD, co-generation 146 MW
 Cane productivity and sugar recovery per unit area is highest. The average farm size is less
than a hectare and owned by farmers. Geographically, Tamilnadu has the advantage of good soil
and abundant water and yield is highest among the various states in India. - Long crushing
season of 250 to 280 days which is 45% more than Indian norm of 172 days. - Access to port to
reach export markets and improved development of infrastructure facilities.

Farmers adopting latest farm practices and mechanization that improve yield. - Sugarcane
breeding remains the focus to ensure timely availability of newer varieties of cane. Cane and
Manufacturing New technologies were implemented in the milling process, for efficient process.
All factories are integrated with co-generation.

In the sugar process, different types viz. White Sugar and value added products are
produced. To make the value chain sustainable, in-house Cane R & D and Cane Extension are
driving the technology to field for yield, recovery improvement and cost reduction. Information
technology developments are fully utilized for efficient data system management and process
monitoring.

Value added Products

The Company has been retailing its branded Sugar in South India. Apart from branded retail
sugar, the Company is moving up the value chain to products like Parma grade sugar which
improve the margins. Investments are being made not only in appropriate manufacturing
facilities but also in branding and offering customized solutions for institutional customers. Co-
Products India's demand for power and the blending of ethanol with petrol opens up the
opportunity for co - products.
1. Cogeneration Power (Cogen)

The growing energy consumption in India allows the sugar industry to play an
increasingly important role in the energy economy. Additionally, the power generated and
exported by the cogen unit is environment friendly and made available to rural areas where the
mills are located by a de-centralized infrastructure. Thus sugarcane is increasingly becoming an
energy crop.
The former is in line with Clean Development Mechanism (CDM) methodologies for Cogen
Power and as a result carbon credits have started flowing into the company.

2. Molasses and Alcohols Molasses,

Molasses and Alcohols Molasses the by-product of sugarcane, can be converted into
various types of alcohol like Rectified Spirit, ENA and Fuel Ethanol, providing another earning
stream for the business. Both these businesses are 'green' considering their renewable nature and,
more importantly, given the relatively steady demand, help reduce the vulnerability of the
Company which is exposed to the cyclicality of the sugar business.

Government Policies:

Sugar being an essential commodity and having a high weight age (3.63 %) in the
Wholesale Price Index (WPI), is regulated by the Government through control on cane pricing,
external trade and control on sugar that can be sold in the open market. The Central Government
decides the minimum support price, called the Statutory Minimum Price (SMP), at which sugar
mills have to purchase sugarcane from farmers. The SMP is based on the recommendations of
the Commission for Agricultural Costs and Prices. On top of the SMP, every state government
also has the power to declare a State Advised Price (SAP) for sugarcane. Cane prices saw a spurt
across the country Tamil Nadu has however managed this at a relatively lower rate of
Rs.1725/MT.
The central government has announced a price of Rs.129.85 per quintal for sugarcane during the
2009-10 crushing season under the Fair and Remunerative Price (FRP) system, while the Uttar
Pradesh State Advisory Price (SAP) has been set between Rs.165 and Rs.170 per quintal.

"Uttar Pradesh provides 40 percent of the total sugar in the country

Namadhu Parry Mayyam - Farm Side Initiative

The Company has come up with a concept called Namadhu Parry Mayyam, where a
centre for farmers would be set up for a cluster of villages. Through this concept an entrepreneur
(invariably a Sugar Cane farmer) is identified & trained to become Namadhu Parry Mayyam
franchisee. The Company extends interest free operating loan for buying farm equipments &
implements for Sugar cane farmers. The core idea is that small farmers who are unable to afford
such equipments could make use of the services at the same time ensuring higher utilization of
the expensive equipments that are not affordable by many individual farmers. Mechanised farm
services, through the pooled usage of shared assets would accelerate sugar cane cultivation and
help save on costs because farm labour has become expensive over time.

QUALITY, OCCUPATIONAL HEALTH & SAFETY ENVIRONMENT:

Sugar

The Nellikuppam unit is certified for ISO 9001:2008, ISO 14001:2004 for Quality and
Environmental Management systems respectively and plans to go for Food Safety for the
refinery unit. The Pugalur and Pettavaithalai units are recipient of Quality Management System
Certification ISO 9001:2008. The Pudukottai unit is certified for ISO 14001:2004 and
Environmental and Occupational Health and Safety Management Systems OHSAS 18001:2007.

R&D

The R&D unit at Bangalore is recognised by the Department of Scientific and Industrial
Research, Ministry of Science and Technology and is also a recipient of ISO 9001: 2008 for
Quality Management System.

Bio Pesticides
The unit at Thyagavalli is certified for ISO 14001 Environmental Management
System. The unit is also certified by Bureau of Indian Standards (BIS) and Institute of Market
Ecology (IMO)
Pollution Control
The organization follows strict procedures in order to prevent pollution. Imported technology
has been installed in the factories to prevent leakage of dangerous by-products. Some of the
effective steps that have been undertaken to prevent pollution are:

The effluent water is treated and recycled to immediate rural areas for irrigation
purposes.

A unique attempt named 'Cogen' has been initiated, whereby; power is produced using
the by-product bagasse from sugar manufacturing.
Sewage systems have been revamped in such a manner that harmful water does not
overflow into the surrounding areas.
Highly expensive equipment has been installed in order to reduce air pollution.
Usage of biomass fuel like Bagasse, Cane Trash etc.. As part of Clean Development
Mechanism (CDM).
Bio-methanisation plant to produce methane and used as fuel in distillery boiler in
place of fossil fuels.

Segregation and disposal system for solid waste.

Water Conservation
Awareness building programs ranging from seminars, workshops, training programs and one
to one interactions are conducted on a regular basis. Technology demonstrations for drip
irrigation, sprinkler irrigation have been provided to farmers and more than 2500 acres have
been covered by drip or sprinkler irrigation. Research work and trials are underway in the field
with new technologies being implemented. Some of the measures implemented to conserve
water resources and reduce pollution are:

Adoption, promotion and awareness building for harvesting rain water, for ground
water recharging.

Recycle & reuse of treated sugar effluent water for Greenery development.
 Surplus injection water used for equipment cleaning
Installation of rainwater harvester for ground water recharging.
Usage of treated sugar effluent as irrigation water.

Afforestation

Parrys has been responsible for contributing a lot towards maintaining the ecological
balance. By working in alliance with governmental and non-governmental agencies, E.I.D.
Parry has managed to plant over 25000 saplings in their factories and operational areas in the
previous three years. They have also been instrumental in forming alliances with Lead Banks
for financing Drip Irrigation, pump sets, and tractors etc

New Technologies

Parry is the first private sector Sugar Company in India to establish a Research and
Development division and breed several hybrid variety of sugarcane. They have developed R
& D activities in Life and Agriculture sciences at Bangalore, Nellikuppam, Pugalur,
Pettavaithalai and Pudukkottai to develop a variety of sugarcane and thereby improve business
performance. For the first time in India, the Government of India accepted to test Hybrid
varieties of cane for release.
On the technology side, the company effectively uses SAP, Automated Payroll and Time
Office Management System to integrate all the factories. Information technology has also been
successfully used to provide services to the farmers and the community at large through the
establishment of a portal www.indiaagriline.com. The web-site meets various information
needs relating to myriad topics.

EID PARRY Launches Branded Sugar

Today, like in the past, the company continues to set standards in the sugar industry.
Parry's sugar has been initially launched in Tamil Nadu in one-kg refill packs and pet bottles.
Every grain of Parry's pure refined sugar is a product of a superior refining process and is
processed hygienically from first grade cane.

In addition, Parry's pure refined sugar has a longer shelf life of over 18 months and is
 absolutely pure and free of all impurities.

Over the last two months since its launch, the brand has received good response. Over the
next few months the company also plans to expand its availability across the country. The
success of Parry's pure refined sugar marks just the first step in E.I.D Parry's foray into this
business. The company's ambitious plans for the future include sugar variants such as, brown
sugar, a range of flavored sugar apart from sachets, cubes, etc.

Farmers

Over the years, Parrys has developed about 90,000 acres of land under sugarcane cultivation
and deals with almost 70000 farmers engaged in sugarcane cultivation. The factories are a
testimony of Parrys commitment to the socio-economic development of the farming
community.

As part of this commitment, some of the services provided to farmers are:

Services to farmers in the areas of nursery management, sampling of soil for fertiliser
application.
Regular demonstrations and field visits to create awareness on new technologies like
farm mechanisation, deep trench and wetland planting, new varieties etc.
Plant protection measures to protect the crops from loss caused by plant and pest
diseases.
Regular information dissemination and awareness is created through training of
farmers.
For the first time in India, crop insurance for sugarcane was introduced at
Nellikuppam.

R&D
Integration Of Innovation, Tradition & Technology - Parry's Solution To Agriculture
Prosperity

Research and Development activity started in 1977 at Edyanavalli to Bangalore,

Nellikuppam,Pugalur,Pettavaithalai and Pudukottai in the 90's.

Today Parry's Sugarcane Research Centre is a 'ONE STOP SHOP' for farmers looking for
solutions in cane farming - for good seed, quality inputs, technical advise, new technologies,
 pest & disease control resulting in a sustainable and profitable crop - a Research centre which
cares for every need of cane farming.

A multidisciplinary approach is followed incorporating every discipline of biological science

such as Breeding, Agronomy, Soil science, Pathology, Entomology, Nematology, Sugar
Chemistry, Extension, Farmer Training, Tissue culture and Bio-control .

Breeding

Tissue Agronomy
culture

ONE STOP
Farmer SHOP Soil
training For cane chemistry
farming

Extension Entomolog
y

Sugar Pathology
chemistry

Breeding

Initiated in 1994 as the first Sugarcane Breeding program in a private sector in India, Parry's
Scientists uses diverse germplasm from all over the world to develop suitable sugarcane
varieties to meet the requirements of Parry's farmers
The hybridization garden at Bangalore is an ideal location for crossing programs and the
Scientists work day and night during the peak flowering season to obtain the best possible
combinations.

The seeds obtained through the crossing program are entered through 7 to 10 stages of rigorous
evaluation at various locations for its performance. The multidisciplinary team of Scientist
evaluate these clones for its sucrose, fibre, yield and pest & disease resistance. Selected varieties
are advanced to next stages of trials. The best entries are entered into All India Co-ordinated
trials (AICRP)

In addition to own program of development of sugarcane varieties, Parry's scientists collect

the existing and emerging varieties (released and pre-released) from various Sugarcane Research
Stations all over India and evaluate for its suitability for cultivation in our command area.

Based on these evaluation program, the varieties are selected for multiplication for nucleus
nursery, tissue culture program and for final commercial cultivation in farmers field.

The Breeding team continues to monitor the performance of the varieties in the command areas,
and provide required advises to the farmers.

Agronomy

The Agronomist at the respective command areas develop suitable agronomic practices to obtain
sustainable and higher yield of sugarcane for the front line varieties. Working along with the Soil
Scientist, they develop specific cultivation practices depending upon the soil types.

Fertilizer dosage trails (macro and micro nutrients) and demonstrations are carried out at the
research farms and farmers field to identify the optimum, economic dosage of fertilizer and
avoid chemical leaching to the environment.

Today, Parry's Agronomist provide specific farmer based fertilizer recommendation based upon
the soil types.

To encourage environmentally friendly, sustainable agriculture, the Agronomists are focusing on

the development of organic methods of sugarcane cultivation including the usage of
vermicompost.

To encourage the farmers to manage efficiently the available water resources, water management
practices such as rain harvesting, development of village tanks, drip irrigation, etc. has been
implemented in large scale trash mulching photo.
Soil Science:

The State-of-art soil analysis lab located at Pugalur analyses macro and micro nutrients and
provide specific farmer based fertilizer recommendations for all the four factories. The
laboratory has facility for analyzing pH, electrical conductivity, organic carbon, nitrogen,
phosphorus, potassium, calcium, magnesium, sodium, iron, manganese, zinc and copper, boron,
silica, molybdenum in soil, water and in any organic materials.

To map and monitor the soil fertility status of the command areas, the Scientists analyze village
wise soil samples and develop soil fertility maps covering the entire command area. These maps
are used for assessing the general soil health, deterioration if any and recommendation of
fertilizer.

Pathology:

Irrespective of the scientific advances made, sugarcane continues to suffer from large
number of diseases. Among these, red rot and smut are the major disease which create
substantial yield losses to the farmer.

In addition to the seed certification for new varieties, development of disease protection
measures and monitoring of crops for the incidence of disease, the Pathologist closely work
along with the Breeders to develop disease resistant varieties.

Entomology:

As sugarcane is a tropical crop with high sugar accumulation, it attracts large number of insect
pests during its entire life cycle. Hence controlling these pests within the economic threshold
level is critical to produce a profitable and sustainable crop.

The early shoot borers, internodes borers and top borers are the major pests observed in our
command area. The Entomologist along with the Extension team monitor the incidence of pests
in farmers holdings and provide remedial measures on a day-to-day basis.

The chemical control measures traditionally practiced by the farmers are limited to control
the pests in the initial stages of the crop due to canopy nature of the sugarcane plant. Further,
these chemicals not only create safety, health and environmental problems, but also provide
opportunity to the insect pests to develop resistance. Hence a sustainable, environmentally safe
pest control program was initiated by Parry as a part of its corporate commitment towards the
safe and sustainable agriculture. The Entomologists, on several years of research developed bio-
control agents such as Trichogramma, Tetrastichus, Cotesia, etc. to control these borers.

SugarChemistry:

To enable the Breeders to identify the high sugar varieties from the initial stages of Breeding
program, the sugar chemistry group carries out sugar analysis of sugarcane clones at various
stages of its development.
Further, this group monitors performance of the varieties and its maturity patterns through
field collection of samples and analysis through out its life cycle. The Opeartion's team works
out the varietal planting and harvest schedules using these results.

Extension:

Parry's Extension team closely work with the R&D, Operations and the farmers of our command
area on a day-to-day basis to build the relationship and enable faster adoption of technologies.
On a one-to-one interaction, the Extension team identifies the requirements of farmers and the
problems of sugarcane cultivation in their command area. Based on their experience and
interaction with R&D on existing & emerging technologies and knowledge, the Extension team
provides continuous feed back to the farmers to solve their problems and enhance the
productivity of sugarcane cultivation.

Further Extension team provide timely inputs such as soil analysis results, fertilizer
recommendation, clean seed materials, plant protection agents, etc.

Extension team work along with the farmer and monitor crops in various stages of its growth
and provide timely advice on preventive and curative measures.

This team also demonstrates the technologies and practices such as mechanization, drip
irrigation, drought management, inter-cropping, , vermi-composting, micro-nutrient
applications, etc.

The team is also responsible for management of foundation and crop nurseries. Supply of high
quality, healthy planting material to the farmers ensures a healthy and productive crop.

Farmer training:

To create awareness, improve the skills and to encourage experience learning, Parry
organizes Farmer's Training programs through out the year. These programs are organized in
such a way that the farmers get an opportunity to know the existing and emerging technologies
in sugarcane farming. Further the interactive sessions provide them an opportunity to learn from
other farmers on their experience of sugarcane farming. Exposure to laboratory and field trials
improve the confidence level and enhance acceptability and adaptation of modern technologies

To enable the farmers to take advantage of these training programs without affecting their day-
to-day routines, the Farmer Training team organize these training programs at village levels.

Specialized training are offered to low yielding farmers to enhance their yield and catch up with
other farmers in their command area.

Realizing the importance of women in Indian agriculture, unique training programes are
organized to cater to their requirements of farming.
Three-day training programs are organized at the R&D centre enabling farmers to directly
interact with every Scientist, Executives and Managers of the company in addition to their
technical learning. The various cultural activities performed by the farmers provides life and
energy for this program.

These programs also provide opportunities of learning and enrichment for the Scientist as well
as the Managers from the farmer's experiences.

Tissue Culture:

In spite of the substantial progress achieved in the past in Sugarcane Cultivation, these crops still
do not serve us optimally because our needs and rural, economic and political environment keep
changing. These crop plants regularly suffer from yield and quality due to environmental stress
of flooding, drought, heat, salinity and alkalinity. They also suffer from pests and diseases. Often
yields are sustainable only with high inputs of artificial fertilizer, fungicides, herbicides and
insecticides which are now being considered undesirable due to their perceived effort on
environment and human health.

In order to harvest a good crop one has to start out by sowing good seed. Problems of cane
cultivation starts from here.

Besides sugarcane, we also use tissue culture technology to produce disease free varieties of
banana.

Today Parry's Research and production team not only offer products of wide range of Indian
crop plants but also share its rich experience and expertise to other companies of interest by
contract research, consultancy and turnkey projects. Consultany includes the following:

Technical feasibility studies.

Laboratory design and commissioning of Tissue culture facility.

Staff training

Recognition & Accreditation:

 Government of India has recognized these centres as in-house R&D Centres under
Department of Scientific and Industrial Research from 1977 onwards.
University of Annamalai has recognized these centres as external centre for Ph.D.
programs.

Assessed and approved in accordance with the requirements of ISO 9001:2000 for
Sugarcane Research, Tissue Culture and Bio-control production.

Approved centre for conducting All India Co-ordinated Research Project trials.

Member of All India Co-ordinated Research Project on Sugarcane.

Member of International Consortium on Sugarcane Biotechnology

Member of Sugar Process Research Institute

SUBSIDIARY COMPANIES

Coromandel Fertilisers Limited

Parry Chemicals Limited

Parrys Sugar Limited

Parry Infrastructure Company Private Limited

Parry America Inc.

Coromandel Bath ware Limited

Parry Phytoremedies Private Limited

RESEARCH METHODOLOGY

INTRODUCTION
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying now research is done systematically. In that various steps,
those are generally adopted by a researcher in studying his problem along with the logic behind
them.

It is important for research to know not only the research method but also know methodology.
The procedures by which researcher go about their work of describing, explaining and
predicting phenomenon are called methodology. Methods comprise the procedures used for
generating, collecting and evaluating data. All this means that it is necessary for the researcher to
design his methodology for his problem as the same may differ from problem to problem.

Data collection is important step in any project and success of any project will be largely depend
upon now much accurate you will be able to collect and how much time, money and effort will
be required to collect that necessary data, this is also important step.

Data collection plays an important role in research work. Without proper data available for
analysis you cannot do the research work accurately.

Types of data collection

There are two types of data collection methods available. 1. 2. Primary data collection
Secondary data collection
1) Primary data
The primary data is that data which is collected fresh or first hand, and for first time which is
original in nature. Primary data can collect through personal interview etc. to support the
secondary data.

2) Secondary data collection method

The secondary data are those which have already collected and stored. Secondary data easily get
those secondary data from records, journals, annual reports of the company etc. It will save the
time, money and efforts to collect the data. Secondary data also made available through trade
magazines, balance sheets, books etc.

This project is based on primary data collected through personal interview of head of account
department, head of varies department and other concerned staff member of department. But
primary data collection had limitations such as matter confidential information and secondary
data collected from various books and internet sides. The data collection was aimed at study of
working capital management of the company

OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the working capital is
managed effectively, monitored efficiently planed properly and reviewed periodically at regular
intervals to remove bottlenecks if any the company can not earn profits and increase its turnover.
With this primary objective of the study, the following further objectives are framed for a depth
analysis.

1.To study the working capital management of EID parry sugars India limited pugalur.

2.To study the optimum level of current assets and current liabilities of the company.

3.To study the liquidity position .

4.To study the working capital components such as receivables accounts, cash management,

Inventory position

5.To study the way and means of working capital finance of the of EID parry sugars India

limited pugalur.
6.To estimate the working capital requirement of EID parry sugars India limited pugalur To

study the operating and cash cycle of the company.

SCOPE & LIMITATIONS OF THE STUDY

Scope of the study

The scope of the study is identified after and during the study is conducted. The study of
working capital is based on budget of the of EID parry sugars India limited pugalur for 2010-
2011 . Further the study is based on observation of work in the company and last Annual Reports
of EID parry sugars India limited pugalur. And even factors like competitor s analysis, industry
analysis were not considered while preparing this project.

Limitations of the study

Following limitations were encountered while preparing this project: 1) Limited data:This
project has completed with budget information ; it just constitutes one part of data collection i.e.
secondary. There were limitations for primary data collection because of confidentiality. 2)
Limited period:This project is based on annual reports. Conclusions and recommendations are
based on such limited data. 3) Limited area:Also it was difficult to collect the data regarding the
competitors and their financial information. Industry figures were also difficult to get.

INTRODUCTION OF WORKING CAPITAL

The net working capital of business is its current assets less its current liabilities.
Current Assets include:

Stock of Raw Material

Work in Progress

Finished Goods

Trade Debtors

Prepayments

Cash Balances

Current Liabilities include:

Trade Creditors

Accruals

Taxation Payable

Dividends Payable

Short term Loans

Every business needs adequate liquid resources in order to maintain day to day cash flows. It

needs enough cash to by wages and salaries as they fall due and to pay creditors if it is to keep

its workforce and ensure its supplies. Maintaining adequate working capital; is not just

important in the short term.

Sufficient liquidity must be maintained in order to ensure the survival of business in the

long term as well. Even a profitable business may fail if it does not have adequate cash flows

to meet its liabilities as tyhey fall a due. Therefore when business make investment decisions

they must not only consider the financial outlay involved with acquiring the new machine or

the new building etc, but must also take account of the additional current assets that are

usually involved with any expansion of activity .

Increase production tends to engender a need to hold additional stocks of raw material & work

in progress.
Increased sales usually mean that the level of debtor will increase. A general increase in the

firms scales of operation tends to imply a need for greater level of cash.

NATURE OF WORKING CAPITAL

Working capital management is concerned with the problems that arise in attempting to
manage the current assets, the current liabilities and the interrelationship that exist between
them. The major current assets are cash, marketable securities, accounts receivable and
inventory. Current liabilities are those liabilities which are intended, at their inception, to be paid
in the ordinary course of business, within a year, out of the current assets or earnings of the
concern. The basic current liabilities are accounts payable, bills payable, bank overdraft, and
outstanding expenses. The goal of working capital management is to manage the firms current
assets and liabilities in such a way that a satisfactory level of working capital is maintained. This
is so because if the firm cannot maintain a satisfactory level of working capital, it is likely to
become insolvent and may even be forced into bankruptcy. The current assets should be large
enough to cover its large liabilities in order to ensure a reasonable margin of safety

Definition:-
1. According to Guttmann & Dougall-
Excess of current assets over current liabilities.
1. According to Park & Gladson-
The excess of current assets of a business (i.e. cash, accounts receivables, inventories) over
current items owned to employees and others (such as salaries & wages payable, accounts
payable, taxes owned to government).

NEED FOE WORKING CAPITAL

 The need for working capital (gross) or current assets cannot be overemphasized. Given
the objective of financial decision making to maximize the shareholderswealth, it is necessary
to generate sufficient profits. The extent to which profits can be earned will naturally depend,
among other things, upon the magnitude of the scale.However, sales do not convert into cash
instantly; there is invariably a time-lag between the sale of goods and receipt of cash. There is,
therefore a need for working capital in the form of current assets to deal with the problem arising
out of the lack of realization of cash against goods sold .Therefore, sufficient working capital is
necessary to sustain sales activity.

Technically,this is referred to as the operating or cash cycle. The operating cycle can be said
to be at the heart of the need for working capital. The continuing flow from cash to suppliers, to
inventory, to accounts receivable and back into cash is what is called the operating cycle. In
other words, the term cash cycle refers to the length of time necessary to complete the following
cycle of events:

Conversion of cash into inventory

Conversion of inventory into receivables;
Conversion of receivables into cash.

Since cash inflows and outflows do not match, firms have to necessarily keep cash or invest
in short-term liquid securities so that they will be in a position to meet obligations when they
become due. Similarly, firms must have adequate inventory to guard against the possibility of
not being able to meet demand for their products.

The operating cycle consists of three phases.

In phase1, cash gets converted into inventory. This includes purchase of raw materials,
conversion of raw materials into work-in-progress, finished goods and finally the transfer of
goods to stock at the end of the manufacturing process. In the case of trading organizations, this
phase is shorter as there would be no manufacturing activity and cash is directly converted into
inventory. The phase is, of course, totally absent in the case of service organizations.

In phase2 of the cycle, the inventory into receivables as credit sales is made to customers. Firms
which do not sell on credit obviously not have phase2 of the operating cycle.
 The last phase, phase3, represents the stage when receivables are collected. This phase
completes the operating cycle. Thus, the firm has moved from cash to inventory, to receivables
and to cash again.

Kinds of working capital

t Kinds of Working Capital

On the basis of concept On the basis of time

Permanent or Temporary or
Gross Working Variable Working
Net Working Fixed Working
Capital Capital
Capital Capital

Regular Reserve Working Seasonal Working Special Working

Working Capital Capital Capital Capital

1. Gross working capital

Gross working capital refers to the firms investment I current assets. Current assets are the
assets which can be convert in to cash within year includes cash, short term securities, debtors,
bills receivable and inventory.

2. Net working capital

Net working capital refers to the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders which are expected to mature for payment within
an accounting year and include creditors, bills payable and outstanding expenses. Net working
capital can be positive or negative.

3. Permanent or fixed working capital:

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

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

is always a minimum level of current assets which is continuously required by the enterprises to

carry out its normal business operations.

4. Temporary or variable working capital:

Temporary or variable working capital is the amount of working capital which is required

to meet the seasonal demands and some special exigencies.Varibles working capital can be

further classified as second working capital and special working capital. The capital required to

meet the seasonal needs of the enterprises is called the seasonal working capital.

Temporary working capital differs from permanent working capital in the sense that is required

for short periods and cannot be permanently employed gainfully in the business.

IMPORATNCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL:

 Working capital is the life blood and nerve centre of a business . just a circulation of a blood

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

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

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

as follows:

Solvency of the Business

Goodwill

Easy Loans

Cash discounts

Regular supply of Raw Materials

Regular payments of salaries, wages & other day to day commitments.

Exploitation of favorable market conditions

Ability of crisis

Quick and regular return on investments

High morals

THE OBJECTS OF WORKING CAPITAL:

The need for working capital cannot be emphasized. Every business needs some amount of

working capital. The need of working capital arises due to the time gap between production and

realization of cash from sales. There is an operating cycle involved in the sales and realization of

cash. There are time gaps in purchase of raw materials and production, production and sales,

And sales, and realization of cash, thus , working capital is needed for the following purposes:

For the purchase of raw materials , components and spaces

To pay wages and salaries

To incur day to day expenses and overhead costs such as fuel, power and office expenses

etc.
 To meet the selling costs as packing, advertising etc.

To provide credit facilities to the customers.

To maintain the inventories of raw materials, work in- progress, stores and spares and

finished stock.

CHANGES IN WORKING CAPITAL

The changes in the level of working capital occur for the following three basic
reasons:
Changes in the level of sales and/or operating expenses
Policy changes
Changes in technology

CHANGES IN SALES AND OPERATING EXPENSES:

The first factor causing a change in the working capital requirement is a change in the sales
and operating expenses. The changes in the factor may be due to three reasons: first, there may
be a long-run trend of change. For instance, the price of raw material sugarcane may constantly
rise, necessitating the holding of a large inventory. The secular trends would mainly affect the
need for current assets.

In the second place, cyclical changes in the economy leading to ups and downs in business
activity influence the level of working capital both permanent and temporary. The third source
of change is seasonality in sales activity. Seasonality-peaks and troughs-can be said to be the
main source of variation in the level of temporary working capital.

The change in sales and operating expenses may be either in the form of an increase or
decrease. An increase in the volume of sales is bound to be accompanied by higher levels of
cash, inventory and receivables. The decline in sales has exactly the opposite effect-a decline in
the need for working capital. A change in the operating expenses-rise or fall-has a similar effect
on the levels of working capital.

POLICY CHANGES
 The second major cause of changes in the level of working capital is because of policy
changes initiated by the management. There is a wide choice in the matter of current assets
policy. The current asset policy may be defined as the relationship between current assets and
sales volume. A firm following a conservative policy

FACTORS DETERMINING THE WORKING CAPITAL REQUIRMENT:

The working capital requirements of a concern depend upon a large number of factors

such as nature and size of the business, the characteristics of their operations, the length of

production cycle , the rate of stock turnover and the state of economic situation. However the

following are the important factors generally influencing the working capital requirements.

NATURE OR CHARACTERSTICS OF A BUSINESS: The nature and the working

capital requirement of enterprises are interlinked. While a manufacturing industry has a

long cycle of operation of the working capital, the same would be short in an enterprises

involve in providing services. The amount required also varies as per the nature, an

enterprises involved in production would required more working capital then a service

sector enterprise.

MANAFACTURE PRODUCTION POLICY: Each enterprises in the manufacturing

sector has its own production policy, some follow the policy of uniform production even

if the demand varies from time to time and other may follow the principles of demand

based production in which production is based on the demand during the particular phase

of time. Accordingly the working capital requirements vary for both of them.

OPERATIONS: The requirement of working capital fluctuates for seasonal business.

The working capital needs of such business may increase considerably during the busy

season and decrease during non season .

 MARKET CONDITION: If there is a high competition in the chosen project category

then one shall need to offer sops like credit, immediate delivery of goods etc for which

the working capital requirement will be high. Otherwise if there is no competition or less

competition in the market then the working capital requirements will be low.

AVABILITY OF RAW MATERIAL: If raw material is readily available then one need

not maintain a large stock of the same thereby reducing the working capital investment in

the raw material stock . On other hand if raw material is not readily available then a large

inventory stocks need to be maintained, there by calling for substantial investment in the

same.

GROWTH AND EXAPNSION: Growth and Expansions in the volume of business

result in enhancement of the working capital requirements. As business growth and

expands it needs a larger amount of the working capital. Normally the needs for

increased working capital funds processed growth in business activities.

PRICE LEVEL CHANGES : Generally raising price level require a higher investment

in the working capital. With increasing prices, the same levels of current assets needs

enhanced investments.

MANAFACTURING CYCLE: The manufacturing cycle starts with the purchase of

raw material and is completed with the production of finished goods. If the

manufacturing cycle involves a longer period the need for working capital would be

more. At time business needs to estimate the requirement of working capital in advance

for proper control and management. The factors discussed above influence the quantum

of working capital in the business. The assessment of the working capital requirement is

made keeping this factor in view. Each constituents of the working capital retains it form

for a certain period and that holding period is determined by the factors discussed above.

So for correct assessment of the working capital requirement the duration at various

stages of the working capital cycle is estimated. Thereafter proper value is assigned to

the respective current assets, depending on its level of completion. The basis for

assigning value to each component is given below:

COMPONENTS OF WORKING BASIS OF VALUATION .
CAPITAL
Stock of Raw Material Purchase of Raw Material
Stock of Work -in- Process At cost of Market value which is lower
Stock of finished Goods Cost of Production
Debtors Cost of Sales or Sales Value
Cah Working Expenses

PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY:

The following are the general principles of a sound working capital management policy:

PRINCIPLES OF WORKING CAPITAL MANAGEMNT POLICY

PRINCIPLES OF PRINCIPLES OF PRINCIPLES OF PRINCIPLES OF
RISK COST OF EQUITY MATURITY OF
VARIATIONS CAPITAL PRINCIPLES PAYMENTS

1. PRINCIPLE OF RISK VARAITAION (CURRENT ASSETS POLICY):

Risk here refers to the inability of a firm to meet its obligations as and when they become due

for payment. Larger investment in current Assets with less dependence on short term

borrowings, increase liquidity, reduces risk and thereby decreases the opportunity for gain or

loss. On the other hand less investments in current assets with greater dependence on short term

borrowings, reduces liquidity and increase profitability. In other words there is a definite inverse

relationship between the degree of risk and profitability. In other words, there is a definite

inverse relationship between the risk and profitability. A conservative management prefers to

minimize risk by maintaining a higher level of current assets or working capital while a liberal

management assumes greater risk by reducing working capital. However, the goal of

management should be to establish a suitable trade off between profitability and risk.

2. PRINCIPLES OF COST OF CAPITAL: The various source of raising working capital

finance have different cost of capital and the degree of risk involved. Generally, higher and risk

however the risk lower is the cost and lower the risk higher is the cost. A sound working capital

management should always try to achieve a proper balance between these two.

3.PRINCIPLE OF EQUITY POSITION: The principle is concerned with planning the total

investments in current assets. According to this principle, the amount of working capital invested

in each component should be adequately justified by a firms equity position. Every rupee
invested in current assets should contribute to the net worth of the firm. The level of current

assets may be measured with the help of two ratios:

1. Current assets as a percentage of total assets and

2. Current assets as a percentage of total sales

While deciding about the composition of current assets, the financial manager may consider the

relevant industrial averages.

4. PRINCIPLES OF MATURITY OF PAYMENT: The principle is concerned with planning

the source of finance for working capital. According to the principles, a firm should make every

effort to relate maturities of payment to its flow of internally generated funds. Maturity pattern

of various current obligations is an important factor in risk assumptions and risk assessments.

Generally shorter the maturity schedule of current liabilities in relation to expected cash inflows,

the greater the inability to meet its obligations in time.

CONSEQUENCES OF UNDER ASSESMENT OF WORKING CAPITAL:

Growth may be stunted. It may become difficult for the enterprises to undertake

profitable projects due to non availability of working capital.

Implementations of operating plans may brome difficult and consequently the profit

goals may not be achieved.

Cash crisis may emerge due to paucity of working funds.

 Optimum capacity utilization of fixed assets may not be achieved due to non availability

of the working capital.

The business may fail to honour its commitment in time thereby adversely affecting its

creditability. This situation may lead to business closure.

The business may be compelled to by raw materials on credit and sell finished goods on cash. In

the process it may end up with increasing cost of purchase and reducing selling price by offering

discounts . both the situation would affect profitable adversely.

Now avaibility of stocks due to non availability of funds may result in production stoppage.

While underassessment of working capital has disastrous implications on business

overassesments of working capital also has its own dangerous.

CONSEQUENCES OF OVER ASSESMNET OF WORKING CAPITAL:

Excess of working capital may result in un necessary accumulation of inventories.

It may lead to offer too liberal credit terms to buyers and very poor recovery system &

cash management.

It may make management complacent leading to its inefficiency.

Over investment in working capital makes capital less productive and may reduce return

on investment.

Working Capital is very essential for success of business & therefore needs efficient

management and control. Each of the components of working capital needs proper management

to optimize profit.

INVENTORY MANAGEMNT: Inventory includes all type of stocks. For effective working

capital management, inventory needs to be managed effectively. The level of inventory should

be such that the total cost of ordering and holding inventory is the least. Simultaneously stock

out costs should be minimized. Business therefore should fix the minimum safety stock level

reorder level of ordering quantity so that the inventory costs is reduced and outs management

become efficient.
RECEIVABLE MANAGEMENT: Given a choice, every business would prefer selling its

produce on cash basis. However, due to factors like trade policies , prevailing market conditions

etc. Business are compelled to sells their goods on credit. In certain circumstances a business

may deliberately extend credit as a strategy of increasing sales. Extending credit means creating

current assets in the form of debtors or account receivables. Investment in the type of current

assets needs proper and effective management as, it gives rise to costs such as :

Cost of carrying receivables

Cost of bad debts losses

Thus the objective of any management policy pertaining to accounts receivables would be to

ensure the benefits arising due to the receivables are more then the costs incurred for the

receivables and the gap between benefit and costs increased resulting in increase profits. An

effective control of receivables

CASH BUDGET: Cash budget basically incorporates estimates of future inflow and

outflows of cash cover a projected short period of time which may usually be a year, a half

or a quarter year . effective cash management is facilated if the cash budget is further broken

down into months, weeks or even a daily basis.

There are two components of cash budget are:

1. Cash inflows

2. Cash outflows

The main source for thses flows are given here under:

1. Cash Sales

2. Cash received from debtors

3. Cash received from Loans, deposits etc.

4. Cash receipts other revenue income

5. Cash received from sale of investment or assets.

 CASH OUTFLOWS:

1. Cash Purchase

2. Cash payments to Creditors

3. Cash payment for other revenue expenditure

4. Cash payment for assets creation

5. Cash payments for withdrawals, taxes.

COMPUTATION OF WORKING CAPITAL:

WORKING CAPITAL LEVEL:

The consideration of the level investment in current assets should avoid two danger points
excessive and inadequate investment in current assets. Investment in current assets should be
just adequate, not more or less, to the need of the business firms. Excessive investment in
current assets should be avoided because it impairs the firms profitability, as idle investment
earns nothing. On the other hand inadequate amount of working capital can be threatened
solvency of the firms because of its inability to meet its current obligation. It should be realized
that the working capital need of the firms may be fluctuating with changing business activity.
This may cause excess or shortage of working capital frequently. The management should be
prompt to initiate an action and correct imbalance.

Size of working capital :

Particular 2005-2006 2006-2007 2007-2008 2008-2009

Current asset
Inventories 46816 61195 108502 151849
Sundry debtors 26194 25507 21132 22854
Cash and bank balance 13347 42935 19129 51507
Interest accrued 118 238 92 68
Loan and advances 57748 50584 76189 119978
Total 144223 180459 225044 346256
Current liabilities
Liabilities 70524 78080 91359 183459
Provisions 8425 5082 5195 11291
Total 78949 83162 96554 194750

Net working capital 65274 97297 128490 151506

Working capital Indices:

Particular Net working capital working capital size

2005-
2006 65274 100
2006-
2007 97297 149.0593498
2007-
2008 128490 196.8471367
2008-
2009 151506 232.1077305
Observations:

The working capital of the company increasing in constant rate and it increase as current asset
increase but during 2006-2008 the current liabilities increase 18%only but current asset increase
39% in 2006-2008 which affect as working capital increasedDuring 2008-2009 the current
liability increase increased by 50%but current asset increased by 35%. It shows that
management is using long term funds to short term requirements.
COMPOSITION OF CURRENT ASSETS
Analysis of current assets components enable one to examine in which components the working
capital fund has locked. A large tie up of funds in inventories affects the profitability of the
business .
Inventory details

Inventory 2006 2007 2008 2009

Raw materials 18940 18166 63879 81883

Work-in-progress 1572 1496 1651 2325

Finished goods 23180 36071 35082 61843

Consumable Stores and Spares 3119 3157 4198 4103

Total 48817 60897 106818 152163

year Total current asset

144223
2006
180459
2007
225044
2008
346256
2009

Observations:
 It was observed that the size of current assets is increasing with increases in the
sales. The excess of current assets is showing positive liquidity position of the
firm but it is not always good because excess current assets then required, it
may adversely affects on profitability. Current assets include some funds
investments for which company pay interest. Current assets components show loan and
advances and inventory are high .

COMPOSITION OF CURRENT LIABILITIES:

Current liabilities mean the liabilities which have to pay in current year. It includes sundry
creditors means supplier whose payment is due but not paid yet, thus creditors called as current
liabilities. Current liabilities also include short term loan and provision as tax provision. Current
liabilities also includes bank overdraft

year Total current liabilities

78949
2006
83162
2007
96554
2008
194750
2009
Observations:
Current liabilities not show continues growth each year because company not creates the credit
in the market by good transaction. To get maximum credit from supplier which is profitable to
the company it reduces the need of working capital of firm. As a current liability increase in the
year 2008-09 by 50% it reduce the working capital size in the same year. But company enjoyed
over creditors which may include indirect cost of credit terms.
Budget of EID parry sugar India ltd Pugalur for 2010-2011:

Trade credit:
Trade credit is 15 days

Budgeted Cost per

Month production unit Total cost payment
April 98000 1835 179830000 179830000
May 98000 1835 179830000 179830000
June 1835 0 89915000
July 98000 1835 179830000 89915000
August 98000 1835 179830000 179830000

September 104000 1835 190840000 185335000

October 1835 0 95420000

November 1835 0
December 98000 1835 179830000 89915000
January 98000 1835 179830000 179830000
February 98000 1835 179830000 179830000
March 98000 1835 179830000 179830000
Total 888000 1835 1629480000 1629480000
Fixed expenses:

Month Expenses

April 10000000

May 10000000

June 6000000

July 10000000

August 10000000

September 10000000

October 6000000

November 6000000

December 10000000

January 10000000

February 10000000

March 10000000

Total 10800000
Cane registration budget:
For 2010 April to 2011 march cane registration budget is 24000 acre

Normal irrigation Drip irrigation

Month Total acre
(in acre) (in acre)

April 2000 300 2300

May 2000 300 2300

June 2000 300 2300

July 2000 300 2300

August 2000 300 2300

September 1000 300 1300

October 1000 1000

November 1000 1000

December 2000 300 2300

January 2000 300 2300

February 2000 300 2300

March 2000 300 2300

Total 21000 3000 24000
Loan and subsidy.

For installing drip irrigation system for sugarcane the company is giving 6000rs as subsidy to
the farmer and also give 20000rs(per acre)as Financial assistance to farmer for installing drip
irrigation system .
Subsidy are given after 5 month and loan are given 15 days earlier mostly (98%) of farmer are
taking loan

Subsidy Loan Total amount

Drip irrigation
Month (in acre)
1800000 6000000 7800000
April 300
1800000 6000000 7800000
May 300
1800000 6000000 7800000
June 300
1800000 6000000 7800000
July 300
1800000 6000000 7800000
August 300
1800000 6000000 7800000
September 300
0 0 0
October
0 0 0
November
1800000 6000000 7800000
December 300
1800000 6000000 7800000
January 300
1800000 6000000 7800000
February 300
1800000 6000000 7800000
March 300
18000000 60000000 78000000
Total 3000
Purchase tax:
Purchase tax for sugarcane (raw material) per tone is 60rs and tamilnadu labour and welfare
fund 1rs (per tone)

Purchase tax Tamil nadu labour

Budgeted and welfare fund education
Month production cess total
5880000 98000
April 98000 490000 6468000
5880000 98000
May 98000 490000 6468000
0 0
0 0
June
5880000 98000
July 98000 490000 6468000
5880000 98000
August 98000 490000 6468000
6240000 104000
September 104000 520000 6864000
0 0
October 0 0
0 0
November 0 0
5880000 98000
December 98000 490000 6468000
5880000 98000
January 98000 490000 6468000
5880000 98000
February 98000 490000 6468000
5880000 98000
March 98000 490000 6468000
53280000 888000
Total 888000 4440000 58608000

Sales budget:
 Levy sugar Free sugar
Month (tonne)

2032 6139
April
2032 6139
May
6139
June
2032 6139
July
2032 6139
August
2161 6139
September
6139
October
6139
November
2032 6139
December
2032 6139
January
2032 6139
February
2032 6139
March
18417 73668
Total

Sales tax:
Excise duty for sugar is 35rs +sugar cess 24rs+education cess2%+secondary education cess1%

Levy
Excise duty
Month sugar Sugar cess Cess
(tonne) (rs)
April 2032 71120 48768 72583.04
May 2032 71120 48768 72583.04
June 0 0 0
July 2032 71120 48768 72583.04
August 2032 71120 48768 72583.04

September 2161 75635 51864 77190.92

October 0 0 0

November 0 0 0

December 2032 71120 48768 72583.04

January 2032 71120 48768 72583.04
February 2032 71120 48768 72583.04
March 2032 71120 48768 72583.04
Total 18417 644595 442008 657855.2

Sales tax:
Excise duty for sugar is 71rs +sugar cess 24rs+education cess2%+secondary education cess1%
Month Free sugar excise duty Education
Sugar cess
cess

April 6139 435869 147336 17496.15

May 6139 435869 147336 17496.15
June 6139 435869 147336 17496.15
July 6139 435869 147336 17496.15
August 6139 435869 147336 17496.15
September 6139 435869 147336 17496.15

October 6139 435869 147336 17496.15

November 6139 435869 147336 17496.15

December 6139 435869 147336 17496.15

January 6139 435869 147336 17496.15
February 6139 435869 147336 17496.15
March 6139 435869 147336 17496.15
Total 73668 5230428 1768032 209953.8

Sugar sales:

Sugar is selling only at the time of high demand.

 Levy sugar Free sugar Total sugar Sales
Month (tonne) (rs)

6139 8171 196104000

April 2032
6139 8171 196104000
May 2032
6139 6139 147336000
June
6139 8171 196104000
July 2032
6139 8171 196104000
August 2032
6139 8300 199200000
September 2161
6139 6139 147336000
October
6139 6139 147336000
November
6139 8171 196104000
December 2032
6139 8171 196104000
January 2032
6139 8171 196104000
February 2032
6139 8171 196104000
March 2032
73668 92085
Total 18417

Power sales:
 Power Own Sales Sales
Month production consumption (rs)

500000 200000 300000 1050000

April
500000 200000 300000 1050000
May
500000 200000 300000 1050000
June
500000 200000 300000 1050000
July
500000 200000 300000 1050000
August
500000 200000 300000 1050000
September
500000 200000 300000 1050000
October
500000 200000 300000 1050000
November
500000 200000 300000 1050000
December
500000 200000 300000 1050000
January
500000 200000 300000 1050000
February
500000 200000 300000 1050000
March
6000000 2400000 3600000 12600000
Total

Molasses sales:
There are three plants to store molasses .capacity to store three month stock to make sale on high
price during demand.
45% of the sugarcane is converted into molasses

Molasses (tonne) Molasses

Budgeted
Month
production

44100 99900000
April 98000
44100 99900000
May 98000
99900000
June
44100 99900000
July 98000
44100 99900000
August 98000
46800 99900000
September 104000
99900000
October
99900000
November
44100 99900000
December 98000
44100 99900000
January 98000
44100 99900000
February 98000
44100 99900000
March 98000
399600 1198800000
Total 888000

STATEMENT SHOWING WORKING CAPITAL REQUIREMENT:

Amount
Particulars
Amount (Rs)
Current asset
Raw material
chemicals (one month stock)
2000000 2000000

Finished goods

Sugar (73668tonne24000Rs2/12)
294672000 494472000
Molasses(399600000liters3Rs2/12)
199800000

Debtors
Levy sugar(18417tonne24000Rs3/12) 110502000
Free sugar(73668tonne24000Rs1/12) 147336000
Molasses(399600000liters3Rs1/12) 99900000
Loans and subsidy 78000000
Advance loan 201180000 636918000

Bank balance 20000000 20000000

1153390000
Total

Current liabilities

Creditors 67895000
Farmer credit(sugarcane)(888000tonne1835Rs1/24)
Fixed expenses(108000000*1/12)
9000000
Sugarcane purchase Tax(58608000 1/12) 488400
Levy sugar tax(1744458Rs3/12) 436115
Free sugar tax(7208414Rs1/12) 600701.2
69420215
Total

1083969785
Net working capital

Note :
1.finished good s are valued at selling price
2.credit sales are made 7,15,30,45 days on the average 1 month credit is used for collection
3.loan and subsidy are given to farmer how are installing drip irrigation only (per acre 20000Rs
as loan and 6000Rs as subsidy .
4.fixed expenses is 100,00,000Rs during running period and50,00,000Rs during rest of the
months
PROJECTED PROFIT AND LOSS ACCOUNT :

Particular Amount
Rs.
Income
Sugar sales 2210040000
Power sales 12600000
Molasses sales 1198800000
Interest (loan to farmer) 2380000
Total income 3423820000 3423820000

Expenses
Salary and wages 3255000
Fixed expenses 10800000
Raw material(sugar cane) 1629480000
Total expenses 1643535000 1643535000

Net Profit before tax 1780285000

Tax (27.07) 481923150
Net profit after tax 1298361850
Note :
1.interest are collected for loan to the farmer for the year april2009-march2010(for 1700acre of
land, loan are given for that at 7% interest )
2.tax amount are collected based on the last year annual report

WORKING CAPITAL IS FINANCED BY TERM LOANS & CASH CREDIT

i] Loan from Sugar Development Fund [Government of India] for modernization/expansion/

cogeneration amounting to Rs. 4042 Lakhs is secured by an exclusive second charge on the
whole of movable properties including plant & machinery [ save & except book debts] relating
to Pugalur sugar unit & further secured by an exclusive second charge on the immovable
properties of Pugalur sugar unit by way of an equitable mortgage to the extent of Rs.40 lakhs &
by way of a Bank Guarantee from State Bank of India to the extent of Rs.4002 lakhs.
ii] Working Capital facilities from State Bank of India & guarantee given by it in respect of
Sugar Development Fund Loan amounting to Rs. 156 Lakhs from Government of India are
secured by hypothecation of sugar & other stocks, stores, book debts & liquid assets and further
secured by a second charge over the immovable properties of the company [other than Pugalur]
& a third charge on the movable and immovable properties of Pugalur sugar unit.

iii] The Rupee term loan from HDFC Bank Limited amounting to Rs. 1800 Lakhs is secured by
a pari passu first charge by way of hypothecation of all the movable plant & machinery & other
movable assets both present & future situated at Pugalur & Pudukottai

iv] The corporate / term loan from State Bank of India amounting to Rs. 10000 Lakhs is secured
by a pari passu first charge by way of hypothecation of all the movable plant & machinery &
other movable assets both present & future situated at Nellikuppam, Pugalur and

v] The Rupee term loans from State Bank of India amounting to Rs. 4800 Lakhs are secured by
a pari passu first charge by way of hypothecation of all the movable plant & machinery & other
movable assets both present & future situated at Nellikuppam, Pugalur, Pettavaittalai,
Pudukottai, Thyagavalli & Ariyur & further secured/to be secured by a pari passu first charge on
the immovable properties situated at Nellikuppam, Pugalur, Pettavaittalai, Pudukottai,
Thyagavalli and Ariyur & a second charge on current assets.

CONCLUSION

Working capital management is an important aspect of any business. Every business concern

should have adequate working capital to run its business operation. Every concern should have
neither redundant of excess working capital nor inadequate or shortage of working capital. Both

excess as well as short working capital positions are bad for any business.

The three elements of working capital management are cash management, receivable

management and inventory management. If a finance manager maintains these three elements

of working capital management properly means the concern will get dramatic improvement in

their sales volume and also in business. Working capital policies of a firm have a great effect on

its profitability, liquidity and structured health of the organization.

Every concern should adopt some new tread management strategies that will help in greater

productivity, inventory optimization and also better working capital management. So, it is noted

that working capital is a means to run business smoothly and profitability. Thus, the concept of

working capital has its own important in a going concern.

Good management of working capital is part of good finance management effective use of

working capital will contribute to the operational efficiency of a department; optimum use will

help to generate maximum return.

EID parry sugar india ltd is using SAP which is very advanced to do every transaction of

any organization.

BIBLOGRAPHY

Financial Management theory and practice by Prassanna Chandra

Financial Management theory and practice by Shashi .K. Gupta & R.K. Sharma.
 Www. Google.com, www. Wikepidia.com

Observations

EID parry sugar india ltd has good credit in the market. Company used the cash credit
accountfor working capital finance such as cash credit facility provided by state bank of india.
Company required huge amount for working capital finance because liquidity of the company
locked in debtors.. Company fixed normal collection period of 30 days. Company has receivable
but not liquidity to payment of creditors thus company took cash credit and credit term, which
increased the interest on working capital finance . Cash management of the company is more
conservative thus company carry huge amount in terms of liquid assets.

Findings and Recommendations

Findings

Working capital management is important aspect of financial management. The study of

working capital management ofEID parry sugar india ltd .it has revealed that the current ration
was as per the standard industrial practice but the liquidity position of the company showed an
increasing trend. The study has been conducted on working capital analysis, working capital
components which helped the company to manage its working capital efficiency and affectively.
1. Working capital of the company was increasing per year.
2. Positive working capital indicates that company has the ability of payments of short terms
liabilities.
3. Working capital increased because of increment in the current assets is more than increase in
the current liabilities.
4. Companys current assets were more it affect on profitability of the company.
5. Current assets components shows inventory and loan and advance were the major part in
current asset.
8. Inventory was supporting to sales, thus inventory was Increasing.

Recommendations:

Recommendation can be use by the firm for the betterment increased of the firm after study and
analysis of project report on study and analysis of working capital. I would like to recommend.
1. Company should raise funds through short term sources for short term requirement of funds,
which comparatively economical as compare to long term funds.
2. Company should take control on debtors collection period which is major part of current
assets.
3. Company has to take control on cash balance because cash is non earning assets and
increasing cost of funds.
4. Company should increase the inventory holding period

Over all company has good liquidity position and sufficient funds to repayment of liabilities.
Company has accepted conservative financial policy and thus maintaining more current assets
balance. Company is increasing sales volume per year which supported to company for sustain
good position in the india .