PROJECT REPORT ON WORKING CAPITAL MANAGEMENT IN OSWAL WOOLLEN MILLS LIMITED

Presentation By:-

ORGANISATION PROFILE
THE NAHAR GROUP The Nahar Group- one of the leading business groups of India came into existence in 1949 with the initial efforts of three Oswal brothers, Sh. Vidya Sager Oswal, Sh. Lachman Dass, and Sh. Rattan Chand Oswal. They started a hosiery factory to manufacture socks only. It was a dynamism vision- hard work, farsightedness, and cocooperativeness of Sh. Vidya Sager Oswal that small factory in the days of II World War bagged a contract from Military. This was the zoom-up point for the Oswal brothers. On 23rd June, 1949 the Oswal hosiery factory spitted into Oswal Woolen Mills, and Oswal Spinning and Weaving Mills Ltd

In the year the turnover of reach to a new peak at 1800 crore in the year 1999-2000 with a foreign exchange (of Rs 600 crore in it).the group continued excellence in the export has been recognized by the government as well as the export council of India and rewarded by several trophies, awards and certifications by them. Woolmark Certification on Monte Carlo Products. Business Super brand Affiliation of Monte Carlo.

More Achievements
Monte Carlo and OWM yarns were exhibited as best products at INTERNATIONAL WOOL SECTRRIAT in INDIA. It has been rated as best in woolens and fashion. From 1995 to 1999 Best Exhibited Product by the Wool mark Company for Monte Carlo woolens.

NAHAR GROUP OF COMPANIES

OSWAL WOOLLEN MILLS LTD NAHAR EXPORTS NAHAR FABRICS LTD. NAHAR INTERNATIONAL LTD. NAHAR IND INFRASTRUCTURE LTD NAHAR SUGAR AND ALLIED IND LTD NAHAR IND ENTERPRISES LTD. OSWAL COTTON MILLS LTD. NAHAR FIBRES LTD. NAHAR SPINNING MILLS LTD.

OSWAL WOOLLEN MILLS LTD.

Established in1949, the company is manufacturing all type of blended worsted yarn, weaving yarns, blankets, Lois ,shawls etc. it also has a facility of wool combing, low to top converter, acrylic woolen and polyester dyeing and vegetable oils .The company is proud to have highly popular ,bounded products of knit wear MONTE CARLO AND CANTERBURY. Company has a turnover of Rs. 225 cr. The main operations of the company are at Ludhiana. The OWM Ltd. Is a flagship company of Nahar group OWM LTD. is a name of reckon with, both in the domestic and international markets research and today the company boasts North Indias most sophisticated laboratory approved by the INERNATIONAL WOOL SECRETARIAT (IWS) and is authorized to act as a quality checking center for other manufactures.

GROWTH CHART- FEATURES

Total number of units 9. Group turnover is Rs. 2254 crore in 2007. Export Market: U.S.A., United Kingdom, Germany, Russia, Japan, Australia, New Zealand, Holland, Thailand, Hong Kong, Singapore, Taiwan, South Africa, Canada, Egypt, Israel and Bangladesh. No strike/accident situation and near zero staff turnover. Important brand names are MONTE CARLO and CANTERBURRY OWM were the proud recipient of the Best exhibited Products award from the international wool Secretariat for these two glamours brands. Product portfolio: Spinning, knitting, fabrics processing, hosiery garments, knitwear, sugar, infrastructure development and information technology COTTON COUNTY is there emerging ready to wear Brand. Beyond their professional portfolio lies the human group that has always been deeply enriched in social upliftment at every level like Jawahar Lal Oswal public charitable Trust Mohan Dai Oswal Memorial Hospital

Quality Control and Policy

We have established a quality management system (QMS) and have implemented the same throughout our Company. A management review committee under the chairmanship of Mr. Sandeep Jain, our Executive Director has been constituted for conducting the review of our Company's quality management system, quality policy and objectives at least once in six months for ensuring its continuing suitability, adequacy and effeteness. We are committed to provide total customer satisfaction by meeting all requirements and continual improvement of quality management standards performance. The following are the objectives of our quality management system :To enhance customer satisfaction Regular review and Up gradation of technology Cost reduction in operations

PRESENT CAPACITIES
Worsted Spinning 36416 Spindles Woollen/mohair tops 2.50 million lbs per annum Cotton spinning 21348 spindles Denim Cloth 26 Million Mtrs Per Annum

Management Structure LIST OF BOARD OF DIRECTORS

Mr. Jawahar Lal Oswal Mr. Amarjeet Singh Mr. Dinesh Oswal Mr. Kamal Oswal Mr. Sandeep Jain Mr. Dinesh Gogna Dr. (Mrs.) H.K. Bal Mr. O.P. Sahni Mr. K.S. Maini Dr. Suresh Kumar Singla Chairman-Cum-Managing Director Director Director Director Executive Director Executive Director Additional Director Additional Director Additional Director Additional Director

Brands of OWM
Monte Carlo Canterbury

MAJOR COMPETITORS OF OWM

Woollen products CASABLANCA PRINGLE (SCOTLAND) Woolen/blended worsted yarn business Vardhman Textiles Limited Jayshree Textiles Limited Malwa Cotton Mills Limited Denim Fabric Arvind Mills Limited , Aarvee Denims Limited, Raymond Limited.

S.W.O.T Analysis
STRENGTHS Farsightedness of the chairman MR. Jawahar Lal Oswal Extensive Experience of our Promoters Good brand equity Many persons are working here for more than 50 yrs. This shows commitment of employees towards their org. Strong dealer network, mutual relations with them. Good training programs by OWM for their employees. Member of wool mark and ISO 9002 Automated machines of latest technology Exclusive designs, good texture and fabrics.

WEAKNESSES Lack of professionalism Long hierarchy Structure of departments is not fully professional OWM is dependent upon foreign producers for greasy wool. Depend on the third party for sale and the distribution of the product. Expanding the Monte Carlo product range to make it an All Season Brand. Any inability in repositioning the brand may adversely affect our business. Operating in a highly competitive and fragmented industry.

 OPPURTUNITIES With booming retail sector and big players like WALMART, BHARTI entering into that field, OWM is also stepping ahead with a mission of opening up of 150 retail outlets all over India under a brand name MONTE CARLO. Fabrication for various companies likes NIKE, MARKS AND SPENCER, GAP, WILLS, etc. Manufacturing of kids garments Best quality goods, can quote for best selling price Expanding the business in Finance sector

 THREATS Mushrooming and upcoming of small hosieries in Ludhiana Seasonal demand for their major product i.e. pullovers

WORKING CAPITAL
Working capital refers to the investment by the company in short terms assets such as cash, marketable securities. Net current assets or net working capital refers to the current assets less current liabilities. Symbolically, it means,

Net Current Assets = Current Assets Current liabilities

CONCEPT OF WORKING CAPITAL :

CONCEPT OF WORKING CAPITAL

GROSS WORKING CAPITAL

NET WORKING CAPITAL

 GROSS WORKING CAPITAL: Gross working capital represents the amount of funds invested in current assets. Thus, the gross working capital is the capital invested in total current assets of the enterprise. Current assets are those assets which in the ordinary course of business can be converted into cash within a short period of normally one accounting year. NET WORKING CAPITAL: Net working capital is the excess of current assets over current liabilities, or it represents the difference between current assets and current liabilities. Net working capital may be positive or negative. Positive net working capital is that when current assets are more than current liabilities. But when current liabilities become more than current assets then the working capital is negative.

OBJECTIVES

To analyze the working capital management of the company. To determine the operating cycle of the unit.

NET WORKING CAPITAL =Current Assets-Current Liabilities

Particulars
CURRENT ASSETS CURRENT LIABILITIES

2008-09 2009-10
2853.29 164.75 8970.69 2365.13

2010-11
14160.08 2982.41

2011-12
18992.82 2998.97

2012-13
23788.04 3012.65

NET WORKING CAPITAL

2688.54

6605.56

11177.67

16010.85

20805.69

CURRENT RATIO = Current Assets Current Liabilities

Particulars CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO
INTERPRETATION A high current ratio indicates firms liquidity position to pay its current obligations in time as and when due.Whereas a decrease in this ratio indicates deterioration in the liquidity position of the firm.

2008-09 2009-10 2010-11

2011-12 2012-13

2853.29
164.75 17.32

8970.69 14160.08 18992.82 23788.04

2365.13 3.79 2982.41 4.75 2998.97 6.37 3012.65 7.98

ACID TEST RATIO = Quick Assets Current Liabilities

Particulars 2008-09 2009-10 2010-11 2011-12 2012-13 QUICK ASSETS 945.23 5,758.51 10,284.87 15,117.61 19,912.83 CURRENT LIABILITIES 164.75 2365.13 2982.41 2998.97 3012.65 ACID TEST RATIO 5.74 2.43 3.45 5.07 6.68
INTERPRETATION 1:1 is considered a satisfactory acid test ratio whereas a low quick ratio indicates firms liquidity position is not good.

Creditors Turnover Ratio =Net Credit Purchases Average Creditors

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13
NET CREDIT PURCHASES AVERAGE CREDITORS CREDITOR TURNOVER RATIO

4076.12

5258.08 6471.51 7107.73

6993.37

778.42

833.45 1,054.92

820.23

502.50

3.86

4.98

6.13

6.74

6.63

INTERPRETATION
A high Creditors Turnover Ratio indicates the company returns its credit on time

DEBT EQUITY RATIO = Long Term Debt Shareholders Equity

PARTICULARS LONG TERM DEBT TOTAL EQUITY DEBT EQUITY RATIO 2008-09 2009-10 2010-11 2011-12 2012-13 5700.00 9019.75 8509.75 6889.75 5269.75 6505.43 10535.62 15250.26 20582.50 25877.25 0.88 0.86 0.56 0.33 0.20

INTEREST COVERAGE RATIO = EBIT INTEREST

PARTICULARS EBIT INTEREST 282.94 INTEREST COVERAGE 9.59 380.63 11.59 497.62 10.47 478.93 12.13 402.11 14.17 2008-09 2009-10 2010-11 2011-12 2012-13

2713.51 4410.83

5212.26 5811.17 5696.86

GROSS PROFIT MARGIN = Gross Profit X 100 Sales

PARTICULARS GROSS PROFIT Sales GROSS PROFIT MARGIN 2008-09 2009-10 3613.40 5661.85 2010-11 6834.42 2011-12 7470.65 2012-13 7356.29

16091.46 22394.45 22.46 25.28

30448.30 33672.82 33782.93 22.45 22.19 21.85

OPERATING PROFIT RATIO = EBIT Other incomes Net Sales

PARTICULARS EBIT-Other Incomes Net Sales Operating Profit Ratio 2008-09 2009-10 2,657.37 2010-11 2011-12 2012-13

4,350.83 5,142.26 5,741.17 5,626.86

15,634.33 21,834.59 29,839.33 33,063.86 33,083.97

0.17

0.20

0.17

0.17

0.17

NET PROFIT RATIO = EAT Net Sales

PARTICULARS EAT Net Sales 15,634.33 21,834.59 29,839.33 33,063.86 33,083.97 Net Profit Ratio 0.16 0.18 0.16 0.16 0.16 2008-09 2009-10 2430.57 4030.20 2010-11 4714.64 2011-12 2012-13

5332.24 5294.75

NET WORKING CAPITAL

PARTICULARS INVENTORIES SUNDRY DEBTORS CASH & BANK BAL. LOAN & ADV. SUB-TOTAL(A) LESS: CURRENT ASSETS CURRENT LIABILITIES (B) NET WORKING CAPITAL(A-B) 2008-09 2009-10 1369.76 2338.10 1000.56 538.30 1403.43 2853.29 164.75 2688.54 2658.88 1840.64 2010-11 2011-12 2012-13 3296.91 3341.52 3410.63 2502.60 2603.23 2723.53

5611.28 10247.18 15289.93 20085.14 553.30 1693.41 578.30 581.30 593.30

4256.72 10664.10 16624.99 21667.74 26462.95 2464.91 2671.32 2687.11

8970.69 14160.08 18992.82 23788.04 2365.13 2982.41 2991.25 3001.34

6605.56 11177.67 16010.41 20805.63

Changes in working capital

Changes in W.C.
PARTICULARS INVENTORIES SUNDRY DEBTORS CASH & BANK BAL. 2009-10 2658.88 1840.64 5611.28 2010-11 3296.91 2502.60 10247.18 Increase 638.03 661.96 4,635.90 Decrease

LOAN & ADV.

SUB-TOTAL LESS: CURRENT ASSETS CURRENT LIABILITIES NET WORKING CAPITAL

553.30
10664.10 1693.41 8970.69

578.30
16624.99 2464.91 14160.08

25.00
5,960.89 771.50 5,189.39

2365.13
6605.56

2982.41
11177.67

617.28
4,572.11

OPERATING CYCLE
The duration of time required for completing the following sequences of events in case of manufacturing firm s called the operating cycle.
Conversion of cash into raw material. Conversion of raw material into work in progress. Conversion of work in progress into finished goods. Conversion of finished goods into debtors & bills receivable through sale. Conversion of debtors & bills receivable into cash.

Cash Debtors & Bills Receivables

Raw Material

Operating Cycle

Work In Process

Sales

Finished Goods

Operating Cycle
PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13 ADD 1. Inventory Conversion Period Raw mat. Holding period 21 18 36 40 40 WIP period 21 28 33 33 32 Finished goods holding period 18 17 23 25 25 2.Debtors collection period 55 43 31 21 19 3.Gross operating 115 106 123 119 116 cycle LESS. 4.Creditors payment period 94 73 59 54 55 Net operating 21 33 64 65 61 cycle

WORKING CAPITAL TURNOVER RATIO = COGS Net Working Capital

COGS = Opening stock + purchases + direct expenses - closing stock

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13 COGS 12429.47 17725.01 23723.22 25884.38 25996.94 Net W.C. 2688.54 6605.56 11177.67 16010.41 20805.63 W.C. TURNOVER RATIO 4.62 2.68 2.12 1.62 1.25

INVENTORY TURNOVER RATIO = Cost of goods sold Average Inventory

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

COGS 12429.47 17725.01 Average inventory 1,988.91 Inventory Turnover Ratio 6.25 2,747.67 6.45

23723.22 25884.38 25996.94 5,450.63 4.35 6,388.72 6,221.72 4.05 4.18

INVENTORY HOLDING PERIOD(in days) = 365 AVERAGE TURNOVER RATIO

PARTICULARS Inventory Turnover Ratio Inventory Holding Period 2008-09 2009-10 17.37 58 13.92 57 2010-11 11.33 82 2011-12 11.23 87 2012-13 11.27 86

Debtors Turnover Ratio =Net Credit Sales Average Debtors

PARTICULARS Net Credit Sales AVERAGE DEBTORS DEBTOR TURNOVER RATIO 2008-09 2009-10 2010-11 2011-12 2012-13 33,083.97

15,634.33 21,834.59 29,839.33 33,063.86 2340.64 2,560.64 2,502.60

1,930.25 1,750.36

6.68

8.53

11.92

17.13

18.89

DEBTOR COLLECTION PERIOD(in days) = 365 days Debtor Turnover Ratio

PARTICULARS 2008-09 2009-10 2010-11 2011-12 DEBTOR TURNOVER RATIO 6.68 8.53 11.92 17.13 DEBTOR COLLECTION PERIOD 55 43 31 21 2012-13

18.89

19

WORKING CAPITAL MANGEMENT COMPONENTS

Receivables Management Inventory Management Cash Management

RECEIVABLES MANAGEMENT
PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13 SUNDRY DEBTORS 2338.10 1840.64 2502.60 2603.23 2723.53 SUNDRY DEBTORS INDICES 100.00 78.72 107.04 111.34 116.48

AVERAGE COLLECTION PERIOD (in days) = 365 days Debtor Turnover Ratio
PARTICULARS DEBTOR TURNOVER RATIO DEBTOR COLLECTION PERIOD 2008-09 2009-10 2010-11 2011-12 2012-13

6.68

8.53

11.92

17.13

18.89

55

43

31

21

19

INVENTORY MANAGEMENT
PARTICULARS RAW MATERIAL (YARN) WORK IN PROCESS FINISHED GOODS STORES & SPARES TOTAL 2008-09 2009-10 705.44 722.41 743.61 672.41 2010-11 913.39 892.19 2011-12 834.81 840.64 2012-13 736.22 864.34

1,158.06 1,150.36 1,413.67 34.81 34.81 77.65

1,560.00 1,642.62 60.31 52.86

2,620.72 2,601.19 3,296.90

3,295.76 3,296.04

INDICES

100.00

99.25

125.80

125.76

125.77

MANAGEMENT OF CASH
PARTICULARS CASH & BANK BAL. INDICES 2008-09 2009-10 1000.56 100.00 2010-11 2011-12 2012-13 5611.28 10247.18 15289.93 20085.14 560.81 1,024.14 1,528.14 2,007.39

LIMITATION OF THE STUDY

1. Limited Data 2. Limited Period

FINDINGS
The Net Working Capital of the company is increasing so the company is able to pay-off its short-term liabilities. The creditor turnover ratio increases , it shows company is increasing its efficiency in collecting its sales on credit. The raw material holding period is increasing as the company is new and expanding its production.

The net operating cycle is increasing but it may start decline from next year as the company is improving its debtor and creditor collection period. The working capital turnover ratio is declining because of relative high increase in net working capital. The inventory turnover ratio is decreasing.

SUGGESTIONS
Company has surplus owner funds , it must increase its debt to enjoy the benefits on trading on equity. The company should adopt proper inventory control. Proper inventory management technique will help the unit to decide upon the quantity of inventory to be kept. The company should increase its current liabilities in order to make full use of its current borrowing capacity.

 Company should stretch the credit period given by the suppliers. Company has to take control on cash balance because cash is non earning assets

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