1PROJECT - REPORT On Working Capital Management

Working Capital Management of Bharti AXA Life Insurance Ltd.
CHAPTER-1 INTRODUCTION
EXECUTIVE SUMMARY
This project is done with the objective to Study The working capital management of Bharti AXA Insurance Ltd. by identifying how many times clients ask for the suggestion and do listen to the suggestion of the painter before selecting the brand.
The first section of the report is a study of past and present scenario of the Indian insurance industry, company profile of Bharti AXA, organization structure, products and services offered by the company, study of the financial statement and various ratio analysis of the company.
In the second part questionnaire is prepared for respondents. Questionnaire includes both general information and specific information and framed in accordance to further analysis & interpretation.
INTRODUCTION TO WORKING CAPITAL

Working Capital management is the management of assets that are current in nature. Current assets, by accounting definition are the assets normally converted in to cash in a period of one year. Hence working capital management can be considered as the management of cash, market securities receivable, inventories and current liabilities. In fact, the management of current assets is similar to that of fixed assets the sense that is both in cases the firm analyses their effect on its profitability and risk factors, hence they differ on three major aspects: 1. In managing fixed assets, time is an important factor discounting and compounding aspects of time play an important role in capital budgeting and a minor part in the management of current assets. 2. The large holdings of current assets, especially cash, may strengthen the firms liquidity position, but is bound to reduce profitability of the firm.
3.
The level of fixed assets as well as current assets depends upon the expected sales, but it is only current assets that add fluctuation in the short run to a business.
To understand working capital better we should have basic knowledge about the various aspects of working capital. To start with, there are two concepts of working capital: Gross Working Capital Net working Capital
Gross Working Capital: Gross working capital, which is also simply known as working capital, refers to the firms investment in current assets: Another aspect of gross working capital points out the need of arranging funds to finance the current assets. The gross working capital concept focuses attention on two aspects of current assets management, firstly optimum investment in current assets and secondly in financing the current assets. These two aspects will help in remaining away from the two danger points of excessive or inadequate investment in current assets. Whenever a need of working capital funds arises due to increase in level of business activity or for any other reason the arrangement should be made quickly, and similarly if some surpluses are available, they should not be allowed to lie ideal but should be put to some effective use.
Net Working Capital: The term net working capital refers to the difference between the current assets and current liabilities. Net working capital can be positive as well as negative. Positive working capital refers to the situation where current assets exceed current liabilities and negative working capital refers to the situation where current liabilities exceed current assets. The net working capital helps in comparing the liquidity of the same firm over time. For purposes of the working capital management, therefore
Working Capital can be said to measure the liquidity of the firm. In other words, the goal of working capital management is to manage the current assets and liabilities in such a
way that a acceptable level of net working capital is maintained.
Importance of working capital management:

Management of working capital is very much important for the success of the business. It has been emphasized that a business should maintain sound working capital position and also that there should not be an excessive level of investment in the working capital components. As pointed out by Ralph Kennedy and Stewart MC Muller, the inadequacy or mis-management of working capital is one of a few leading causes of business failure. Current assets, in fact, account for a very large portion of the total investment of the firm.
Determinants of Working Capital:

There is no specific method to determine working capital requirement for a business. There are a number of factors affecting the working capital requirement. These factors have different importance in different businesses and at different times. So a thorough analysis of all these factors should be made before trying to estimate the amount of working capital needed. Some of the different factors are mentioned here below:-
1. Nature of business: Nature of business is an important factor in determining the working capital requirements. There are some businesses which require a very nominal amount to be invested in fixed assets but a large chunk of the total investment is in the form of working capital. There businesses, for example, are of the trading and financing type. There are businesses which require large investment in fixed assets and normal investment in the form of working capital. 2. Size of business: It is another important factor in determining the working capital requirements of a business. Size is usually measured in terms of scale of operating cycle. The amount of working capital needed is directly proportional to the scale of operating cycle i.e. the larger the scale of operating cycle the large will be the
amount working capital and vice versa. 3. Business Fluctuations: Most business experience cyclical and seasonal fluctuations in demand for their goods and services. These fluctuations affect the business with respect to working capital because during the time of boom, due to an increase in business activity the amount of working capital requirement increases and the reverse is true in the case of recession. Financial arrangement for seasonal working capital requirements are to be made in advance. 4. Production Policy: As stated above, every business has to cope with different types of fluctuations. Hence it is but obvious that production policy has to be planned well in advance with respect to fluctuation. No two companies can have similar production policy in all respects because it depends upon the circumstances of an individual company. 5. Firms Credit Policy: The credit policy of a firm affects working capital by influencing the level of book debts. The credit term is fairly constant in an industry but individuals also have their role in framing their credit policy. A liberal credit policy will lead to more amount being committed to working capital requirements whereas a stern credit policy may decrease the amount of working capital requirement appreciably but the repercussions of the two are not simple. Hence a firm should always frame a rational credit policy based on the credit worthiness of the customer. 6. Availability of Credit: The terms on which a company is able to avail credit from its suppliers of goods and devices credit/also affects the working capital requirement. If a company in a position to get credit on liberal terms and in a short span of time then it will be in a position to work with less amount of working capital. Hence the amount of working capital needed will depend upon the terms a firm is granted credit by its creditors. 7. Growth and Expansion activities: The working capital needs of a firm increases as it grows in term of sale or fixed assets. There is no precise way to determine the relation between the amount of sales and working capital requirement but one
thing is sure that an increase in sales never precedes the increase in working capital but it is always the other way round. So in case of growth or expansion the aspect of working capital needs to be planned in advance. 8. Price Level Changes: Generally increase in price level makes the commodities dearer. Hence with increase in price level the working capital requirements also increases. The companies which are in a position to alter the price of these commodities in accordance with the price level changes will face fewer problems as compared to others. The changes in price level may not affect all the firms in same way. The reactions of all firms with regards to price level changes will be different from one other.
ELEMENTS OF WORKING CAPITAL

CASH MANAGEMENT Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis. It is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firms operations while excessive cash will simply remain idle, without contributing anything towards the firms profitability. Thus a major function of the Financial Manager is to maintain a sound cash position. Cash is the money which a firm can disburse immediately without any restriction. The term cash includes currency and cheques held by the firm and balances in its bank accounts. Sometimes near cash items, such as marketable securities or bank time deposits are also included in cash. The basic characteristics of near cash assets are that they can readily be converted into cash. Cash management is concerned with managing of:
i) ii)
Cash flows in and out of the firm Cash flows within the firm
iii)
Cash balances held by the firm at a point of time by financing deficit or inverting surplus cash.
In order to resolve the uncertainty about cash flow prediction and lack of synchronization between cash receipts and payments, the firm should develop appropriate strategies regarding the following four facets of cash management.
1. Cash Planning: - Cash inflows and cash outflows should be planned to project cash surplus or deficit for each period of the planning period. Cash budget should prepared for this purpose. 2. Managing the cash flows: - The flow of cash should be properly managed. The cash inflows should be accelerated while, as far as possible decelerating the cash outflows. 3. Optimum cash level: - The firm should decide about the appropriate level of cash balances. The cost of excess cash and danger of cash deficiency should be matched to determine the optimum level of cash balances. 4. Investing surplus cash: - The surplus cash balance should be properly invested to earn profits. The firm should decide about the division of such cash balance between bank deposits, marketable securities and inter corporate lending. The ideal Cash Management system will depend on the firms products, organisation structure, competition, culture and options available. The task is complex and decision taken can effect important areas of the firm.
MANAGEMENT OF RECEIVABLES Trade credit, the tool which as a bridge for movement of goods through production and distribution stages to customer, is a force in the present day business and a essential device. Trade credit is granted with a motive of protecting the sale from ones, competitors and attaching more of the potential customers. Trade credit is said to be
extended to a customer when a firm sell its services or goods and does not receive the payment for them immediately. Thus trade credit creates receivable which refer to the amount which a firm is expected to collect in near future. The book debt or receivable which arise a result of trade credit have the following features: It involves a element of risk and hence should never to be fiddled with. As credit sale leave a sum to be recovered in future and future can never be the certainty, hence it is risky. It is based on economic value, while for the buyer, the economic value in goods passes immediately at the time of purchase, while the seller expects an equivalent value to be received later on. It represents futurity. The cash payments for the goods or services received by the buyer will be made in future. The management of receivable gain more importance in the view of the fact that more than one third of the total current assets is blocked in the form of trade debtors. The interval between the date of sale and the date of payment is financed by working capital. Thus trade debtors represents the investment. As substantial amount are tied up as trade credit hence it requires careful analysis and proper management.
MANAGEMENT OF PAYABLES A substantial part of purchase of goods and services in business are on credit terms rather than against cash payment. While the supplier of goods and services tends to perceive credit as a lever for enhancing sales or as a form of non-price instrument of competition, the buyer tends to look upon it as a loaning of goods or inventory. The suppliers credit is referred to as Accounts payable, Trade Credit, Trade Bill, Trade
Acceptance, commercial drafts of bills payable depending on the nature of the credit. The extent to which this buy-now, pay- later facility is provided will depend upon a variety of factors such as the nature, quality and volumes of items to be purchased, the prevalent practices in the trade, the degree of competition and the financial status of the parties concerned. Trade credits or Payables constitutes a major segment of current liabilities in many business enterprises. And they primarily finance inventories which form a major components of current assets in many cases.
FINANCING OF WORKING CAPITAL
WORKING CAPITAL FINANCE Funds available for a period of one year or less are called short-term finance. In India, short-term funds are used to finance working capital the sources of finance that are used to finance current assets are as follows.
BANK FINANCE AND MARGIN REQUIREMENT The Bank finances only that portion of the asset which are not financed by the creditors, Banker finances the working capital requirement after taking the net current assets into consideration. The bank will not finance the net working capital to the extent of 100% of net current assets. It will like the company and the rest of the amount put in that some amount o the asset may be financed by the bank. The term margin money for working capital will imply the position of the current assets which are to be financed by the promoter / company. The Tandon and Chore committee are two notes worthy committees which had made important and significant recommendations in this regard .The prime importance of the margin money is that the amount to some extent should be brought in by the promoter to see that the current assets are not double financed. Thus the actual bank borrowings are, say 75% of the net current
assets. The balance 25% of the contribution is to be brought in by the promoter company.
Following steps are involved on financing working capital 1. 2. 3. Receiving applications Brief assessment of requirement as per application. Processing of application which involve: (a) Assessment of financial parameters (b)Assessment of need (on the basis of site visit) (c) Assessment of creditworthiness of party (d)Assessment of economic viability (e) Assessment of technical feasibility (f) Assessment on managerial competency. 4. Security which involves (a) Scrutiny of securities (b) Valuation of stocks and securities (c) Obtaining legal opinion (d) Assessment of personal guarantors. 5. 6. 7. 8. 9. Forming opinion about the proposal Sanction of credit Documentation which involves inspecting and acquiescing all legal document. Release of credit Follow up
ASSESSMENT OF WORKING CAPITAL Recognizing the need for making the loan policy of the bank responsive, at the same time ensuring that it affords a comprehensive credit risk management, observing accepted prudential norms and exposure guidelines with regard to assessment of working capital requirements of the borrowers has to be followed by banks. The following method has been in effect since January 1998 and. may change with new guideline from RBI. But
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before new guidelines from RBI banks will follow these methods for assessing working capital requirements of borrowers.
ASSESSMENT OF WORKING CAPITAL FINANCE: METHODLOGIES The following methods has been adopted, depending on the quantum of finance requested for assessing working capital requirements of the borrowers Quantum of limits requested (Rs in lacs) 1. 2. Upto Rs. 200 from the banking system Turnover method Rs. 200 and above from the banking system But upto and inclusive of Rs 200000 lacs from the bank. Eligible working capital Limit. 3. For limits above Rs 2OO lacs EWCL or cash budget method may be decided by the bank.
BASIC FINANCIAL PARAMETERS The steadfast adherence to stipulated current ratios under the erstwhile MPBF system as mandated by RBI had rendered the system inflexible to the needs of the borrowers and at the same time did not afford any scope for the lending banker to exercise credit judgment. The raised assessment methodology envisages adoptions of a basket of basic financial parameters with broad bands to facilitate better risk management and to imbibe requisite flexibility in credit dispensation. The following are the basic financial parameters to be observed in case of borrower assessment . 1. LIQUIDITY The liquidity of any borrower is reflected in his current ratio and lowers the current ratio, tighter the liquidity is indicating a lower net working capital (NWC) in the business. If other basic financial parameters are satisfactory, the bank may make available full
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sanctioned limits at lower than assessed NWC provided the resulting current ratio semained within the band fixed by the bank. The bank may on merits of the case make available additional finance either in the form of a short term loan or additional OD limit, provided other basic financial parameters are satisfactory and at the same time commensurate collateral security cover is available to the extent of 1.5 times of the value of credit facilities availed by the borrower.
2. INDEBTEDNESS The ratio of total outside liability to tangible net worth (TOL TNW) is reflective of total in debtender of a borrower. A higher TOL : TNW ratio is cridicative of a higher level of indebtedness on the part of the borrower generally on TOL : TNW ratio upto 5:1 to 10:1 may be accepted as reasonable. But sanctioning authority is vested with necessary discretion to decide the ratio on a case to case basis.
3. SECURITY The security coverage vis--vis the credit facilities enjoyed by a particular borrower shall not be less than the value of advance. This is a minimum requirement and a stronger security position should be tried for wherever possible for the purpose of arriving at security courage ratio, the value of the second change should be reckoned with after adjusting the quantum of first / prior charges. The value of primary security plus collateral security shall be taken into account to determine whether an advance is secured or clean . 4. PROFITABILITY While sanctioning any credit proposal the minimum requirement shall be that the business is making profit and not incurring loss. However, exception may be made wherever a borrower suffers a temporary set back leading to an operating loss during a particular year. The credit proposals of used / sick units will however remain subjected to relevant guidelines mandated by RBI.
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CHAPTER-2 INDUSTRY PROFILE
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INSURANCE COMPANIES IN INDIA

The Indian Life Insurance Company has seen a remarkable shift since the time of establishment of the first company, Oriental Life Insurance Company in 1823. At the time of Independence and thereafter, there were more than 200 companies operating in India and not all of them on sound ethical principles. Many factors combined together to prompt the then Government to nationalize the life insurance industry in 1956 to form the Life Insurance Corporation of India.
Insurance sector was once a monopoly, with LIC as the only company, a public sector enterprise. But nowadays the market opened up and there are many private players competing in the market. There are more than thirteen private life insurance companies who have entered the industry.
HISTORY OF INSURANCE
History of insurance refers to the development of a modern laws and market in insurance against risks.
In some sense we can say that insurance appears simultaneously
with the appearance of human society. We know of two types of economies in human societies: money economies and non-money or natural economies. The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbor, the other neighbors must help. Otherwise, neighbors will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread.
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Turning to insurance in the modern sense early methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen. Iran were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in the beginning of the Iranian New Year; the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices. The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "whenever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much." The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the middle Ages served a similar
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purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed. .Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes. The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contribution ship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system for insurance similar to that which oversees state banks and national banks.
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PRESENT CONDITION OF INSURANCE MARKET

State Insurers Continue To Dominate: There may be room for many more players in a large underinsured market like India with a population of over one billion. But the reality is that the intense competition in the last five years has made it difficult for new entrants to keep pace with the leaders and thereby failing to make any impact in the market.
Reaching Out To Customers: No doubt, the customer profile in the insurance industry is changing with the introduction of large number of divergent intermediaries such as brokers, corporate agents, and banc assurance. The industry now deals with customers who know what they want and when, and are more demanding in terms of better service and speedier responses. With the industry all set to move to a detariffed regime by 2007, there will be considerable improvement in customer service levels, product innovation and newer standards of underwriting. Intense Competition: In a de-tariffed environment, competition will manifest itself in prices, products, underwriting criteria, innovative sales methods and creditworthiness. Insurance companies will vie with each other to capture market share through better pricing and client segmentation. Global Standards: While the world is eyeing India for growth and expansion, Indian companies are becoming increasingly world class. Take the case of LIC, which has set its sight on becoming a major global player following a Rs280crore investment from the Indian government.
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THE VARIOUS LIFE INSURANCE COMPANIES IN INDIA Tata AIG Insurance Solutions AVIVA Life Insurance Life insurance company Bharti axa Met Life ING Vysya Life Insurance Birla Sun Life Financial Services MAX New York Life
Aditya Birla Group
MARKET SHARE OF INDIAN INSURANCE INDUSTRY

The introduction of private players in the industry has added value to the industry. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in this sector. The new players have improved the service quality of the insurance. As a result LIC down the years have seen the declining phase in its career. The market share was distributed among the private players. Though LIC still holds the 75% of the insurance sector but the upcoming natures of these private players are enough to give more competition to LIC in the near future. LIC market share has decreased from 95% (2002-03) to 81 %( 2004-05).The following companies has the rest of the market share of the insurance industry. Table 3 shows the mane of the player in the market.
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Types of insurance contracts

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as "perils". An insurance policy will set out in details which perils are covered by the policy and which are not. Below are (non-exhaustive) lists of the many different types of insurance that exist.
Business insurance
Business insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of professional liability insurance, also called professional indemnity insurance, which are discussed below under that name; and (b) the business owner's policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverage that a homeowner needs.
Auto insurance
Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy. Auto insurance provides property, liability and medical coverage: (1) Property coverage pays for damage to or theft of your car. (2) Liability coverage pays for your legal responsibility to others for bodily injury or property damage. And (3) Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
Home insurance
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Home insurance provides compensation for damage or destruction of a home from disasters. In some geographical areas, the standard insurances exclude certain types of disasters, such as flood and earthquakes that require additional coverage. Health Almost all developed countries have government-supplied insurance for health Health insurance policies by the National Health Service in the United Kingdom (NHS) or other publicly-funded health programs will cover the cost of medical treatments. Dental insurance, like medical insurance, is coverage for individuals to protect them against dental costs. In the U.S., dental insurance is often part of an employer's benefits package, along with health insurance. Most countries rely on public funding to ensure that all citizens have universal access to health care.
Disability
1. Disability insurance policies provide financial support in the event the policyholder is unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgages and credit cards. 2. Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work. 3. Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance. 4. Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury.
Casualty
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Casualty insurance insures against accidents, not necessarily tied to any specific property. Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.
Life
A. Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. B. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
Property
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This tornado damage to an Illinois home would be considered an "Act of God" for insurance purposes. Property insurance provides protection against risks to property, such as fire, theft or weather Damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.
Automobile insurance, known in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insured's vehicle itself.
Aviation insurance insures against hull, spares, deductibles, hull wear and liability risks.
Boiler insurance (also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery.
Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage due to any cause (including the negligence of the insured) not otherwise expressly excluded.
Crop insurance "Farmers use crop insurance to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease, for instance."
Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage. Most earthquake insurance policies feature a high deductible. Rates depend on location and the probability of an earthquake, as well as the construction of the home.
A fidelity bond is a form of casualty insurance that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
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Flood insurance protects against property loss due to flooding. Many insurers in the U.S. do not provide flood insurance in some portions of the country. In response to this, the federal government created the National Flood Insurance Program which serves as the insurer of last resort.
Landlord insurance is specifically designed for people who own properties which they rent out. Most house insurance cover in the U.K will not be valid if the property is rented out therefore landlords must take out this specialist form of home insurance.
Marine insurance and marine cargo insurance cover the loss or damage of ships at sea or on inland waterways, and of the cargo that may be on them. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance
Controversies
Insurance insulates too much By creating a "security blanket" for its insureds, an insurance company may inadvertently find that its insureds may not be as risk-averse as they might otherwise be (since, by definition, the insured has transferred the risk to the insurer). This problem is known to the insurance industry as moral hazard. To reduce their own financial exposure, insurance companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in behavior that grossly magnifies their risk of loss or liability.
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Complexity of insurance policy contracts Insurance policies can be complex and some policyholders may not understand all the fees and coverages included in a policy. As a result, people may buy policies on unfavorable terms. In response to these issues, many countries have enacted detailed statutory and regulatory regimes governing every aspect of the insurance business, including minimum standards for policies and the ways in which they may be advertised and sold. Insurance may also be purchased through an agent. Unlike a broker, who represents the policyholder, an agent represents the insurance company from whom the policyholder buys. An agent can represent more than one company. An independent insurance consultant advises insureds on a fee-for-service retainer, similar to an attorney, and thus offers completely independent advice, free of the financial conflict of interest of brokers and/or agents. However, such a consultant must still work through brokers and/or agents in order to secure coverage for their clients. Redlining Redlining is the practice of denying insurance coverage in specific geographic areas, supposedly because of a high likelihood of loss, while the alleged motivation is unlawful discrimination. Racial profiling or redlining has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research by government agencies, industry and community groups, and academics, it is clear that race has long affected and continues to affect the policies and practices of the insurance industry. Insurance patents New insurance products can now be protected from copying with a business method
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patent in the United States. A recent example of a new insurance product that is patented is Usage Based auto insurance. Early versions were independently invented and patented by a major U.S. auto insurance company, Progressive Auto Insurance (U.S. Patent 5,797,134 ) and a Spanish independent inventor, Salvador Minguijon Perez (EP patent 0700009). Criticism of insurance companies Some people believe that modern insurance companies are money-making businesses which have little interest in insurance. They argue that the purpose of insurance is to spread risk so the reluctance of insurance companies to take on high-risk cases (e.g. houses in areas subject to flooding, or young drivers) runs counter to the principle of insurance. Other criticisms include:
Insurance policies contain too many exclusion clauses. For example, some house insurance policies do not cover damage to garden walls.
Many insurance companies now use call centers and staff attempt to answer questions by reading from a script. It is difficult to speak to anybody with expert knowledge. While policyholders find their premium payments decrease when dealing with companies who sacrifice the use of trained insurance agents, they also risk greater financial loss due to inadequate coverage protection. Those companies who invest in educated insurance agents provide a valued service to the community. Policyholders who work with knowledgeable insurance agents are more likely to identify needs, evaluate options, purchase sufficient insurance protection, and minimize the risk of heavy financial loss for themselves and their family.
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CHAPTER 3 COMPANY PROFILE
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Bharti AXA Life Insurance is a joint venture between Bharti, one of Indias leading business groups with interests in telecom, agro business and retail, and AXA, world leader in financial protection and wealth management. The joint venture company has a 74% stake from Bharti and 26% stake of AXA. The company launched national operations in December 2006. Today, we have over 5200 employees across over 12 states in the country. Our business philosophy is built around the promise of making people "Life Confident". As we expand our presence across the country to cater to your insurance and wealth management needs with our product and service offerings, we continue to bring 'life confidence' to customers spread across India. Whatever your plans in life, you can be confident that Bharti AXA Life will offer the right financial solutions to help you achieve them.
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VISION, VALUES & STRATEGY
VISION The vision of Bharti AXA Life Insurance Company Limited is to become the preferred life insurance company in India. This vision extends to their recruitment philosophy as well. Both the Bharti Group in India and AXA globally enjoy the status of being a very employee focused organization. At Bharti AXA Life Insurance, they are determined to achieve their vision through talent who are empowered, focused on customer service, and champions of strategic and operational excellence.
VALUES Professionalism Innovation Team Spirit Pragmatism Integrity
STRATEGY
To achieve a top 5 market position in India through a multi-distribution, multi-product
platform

To adapt AXA's best practice blueprints as a sound platform for profitable growth To leverage Bharti's local knowledge, infrastructure and customer base To deliver high levels of shareholder return
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To build long term value with our business partners by enhancing the proposition to their
customers

To be the employer of choice to attract and retain the best talent in India To be recognized as being close and qualified by our customers.
STRATEGIC DIFFERENTIATORS

Strong partner Bharti - provides access to customer base of more than 20 million Multi channel execution capability Current Asia product range which is a strong match to products sold to the mass and mass
affluent
Global scale providing cost effective and speedy re-use of systems, products and business
capability Strong AXA and Bharti brands which can be leveraged to attract and retain a high quality management team The guiding HR principles at Bharti Axa

Clearly define scope of responsibilities and empower people to deliver. Provide people with the means to develop their competencies. Consider individual training and development a priority investment. Build organizations that are conducive to teamwork and that involve everyone. Promote ongoing dialogue between managers and the people who report to them. Make cultural difference a key source of strength.
PROMOTERS
29
Bharti Enterprises Bharti Enterprises is one of Indias leading business groups with interests in telecom, agri business, insurance and retail. Bharti has been a pioneering force in the telecom sector with many firsts and innovations to credit Bharti Airtel Limited, a group company, is one of Indias leading private sector providers of telecommunications services with an aggregate of 60 million customers, spanning mobile, fixed line broadband and enterprise services. Bharti Airtel was ranked amongst the best performing companies in the world in the Business Week IT 100 list 2007. Bharti Teletech is the countrys largest manufacture and exporter of telephone terminals. Bharti has a joint venture with ELRo Holdings India Ltd. FieldFr Foods Pvt. Ltd - for global distribution of fresh fruits and vegetables. Bharti also has a joint Venture - Bharti AXA Life Insurance Company Ltd. - with AXA, world leader in financial protection and wealth management. Bharti has recently forayed into the retail business under a company called Bharti Retail Pvtltd is also has a joint venture Bharti Wal-Mart Private Limited with Wal-Mart, for wholesale cash-and-carry and back-end supply chain management operations
AXA AXA Group is a worldwide leader in Financial Protection. AXA's operations are diverse geographically, With major operations in Western Europe, North America and the Asia/Pacific area. AXA had Euro 1,315 billion in assets under management as of December 31, 2006. For full year 2006, IFRS revenues amounted to Euro 79 billion, IFRS underlying earnings amounted to Euro 4,010 million and IFRS adjusted earnings to Euro 5140 million The AXA ordinary shares is listed and trades under the symbol AXA on the Paris Stock Exchange. The AXA American Depository Share is also listed on the NYSE under the ticker symbol AXA.
AXA Asia Pacific Holdings AXA Asia Pacific Holdings Ltd (AXA APH) is listed on the Australian stock exchange and is
30
52.3% owned is responsible for AXA life insurance and wealth management businesses in AsiaPacific region. It has operations in Australia, New Zealand, Hong Kong, Singapore, Indonesia, Philippines, Thailand, China, India and Malaysia. AXA APH had A$106.4 billion in total funds under management & administration at 30 July 2007 and reported a profit after tax before nonrecurring items of A$374.0 million. PRODUCTS PROFILE One would like to live life and prepare for the future with complete confidence. At Bharti AXA Insurance design solutions which will protect you and your family and help you realize your dreams. Its endeavor is to bring to you products & service to help you lead a confident life.
At Bharti AXA Life, we want to take care of your responsibilities in the same way as you do for your loved ones, with a range of life insurance services. Through our life insurance products, you can trust us to take care of your family at all times. You can select the most suitable plan from our host of plans and make buying life insurance simple and convenient. Each of the plans, right from traditional life insurance to unit linked life insurance, fall in specified segments and fulfill your specific objectives. You can learn more about the segment and specific plans within the segment by clicking on the type of plan.
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Protect your loved ones against financial contingencies at a nominal costs
You love your family and feel responsible towards them in every way. But life can be uncertain and unforeseen contingencies can meet you anytime. At such times, life insurance comes to your rescue. As someone who wants only the best for their family, we understand your need to safeguard your family against any crises. Our protection plans offer you high life cover at nominal costs so that you can fulfill your responsibility with ease and your family never has to face financial constraints.

Bharti AXA Life Elite Secure Bharti AXA Life Secure Confident Bharti AXA Life Family Income Secure Bharti AXA Life Protect Plus
32
Investments for your good health
Given the fast pace of our lives, we always run the risk of acquiring lifestyle diseases - be it high blood pressure or various heart diseases. Add to this the rising medical costs because of which, we end up spending increasingly large amounts of money. Bharti AXA Life offers you Health Plans that ensure freedom from stress when it comes to your health expenses and let you enjoy your life without any worries.
33
Retirement
Make the golden years of your life truly comfortable.
Retirement plans are the best way to systematically plan for your golden years. Our flexible retirement plans ensure you live your dream retirement. By investing in these long-term plans by paying life insurance premium, you can earn a regular income even after you've stopped working. Without having to depend on anyone else or worry about rising costs, you can go ahead and lead a comfortable retirement.
Bharti AXA Life Wonder Years Retirement Plan
34
Wealth creation with protection
Ensure your family's security as you maximize your savings
You can make your money work harder with our Wealth Creation with Protection plans. These plans come with the double advantage of: Complete peace of mind as your family is financially protected and Good investment option that ensures long-term financial goals are met. Whether it is a bigger home, a dream vacation or even a comfortable future, these life insurance plans are the best solutions along with the surety of financial protection. Our life insurance coverage plans include 'traditional' plans that give guaranteed money on maturity. While, we also offer market-linked plans that give you the benefit of good market performance to maximise your savings.

Bharti AXA Life Child Plans Bharti AXA Life Guaranteed Plans
35
With Bharti AXA Life insurance products, provide financial security and protection to your loved ones. Simple, affordable plans to safeguard your family from life's uncertainties.

Bharti AXA Life Shield Bharti AXA Life Sanjeevani
36
With Bharti AXA Life Credit Protection Plans you can ensure that your family enjoys a good lifestyle and at the same time is protected from the uncertainties of life.

Bharti AXA Life Credit Secure Bharti AXA Life Mortgage Credit Shield Bharti AXA Life Credit Shield
37
CHAPTER-3 RESEARCH METHODOLOGY
38
TITLE OF THE PROJECT:

A comprehensive study on the working capital management of Bharti Axa life insurance ltd.
STATEMENT OF PROBLEM:
Working capital is an important requirement for any business, without which no business can survive. Every activity of the business is related to the availability of the working capital. That is, arranging short-term financing, negotiating favorable credit terms, controlling the movement of cash, administering the account receivable and monitoring the investment in inventories. All this consumes a great deal of time of finance managers. Also the obstacles inhabiting the effective working capital management throws open challenges to the finance managers in managing working capital. This project aims at knowing the working capital position of Bharti AXA with respect to Indian insurance market.
OBJECTIVES OF STUDY:
The study was conducted mainly to understand and analyze the issue of working capital management, being practically employed in Bharti AXA Life Insurance. To understand the practical difficulties faced in managing the working capital. To analyze the various external and internal factors effecting working capital management in the company. To ascertain the liquidity position of the company. To study the different components of working capital and its impact on the performance of the firm. To offer suggestions for the improvement of the Working Capital Management.
39
SOURCES OF DATA
The research involved gathering Secondary data as well as Primary data. For the purpose two types of survey was conducted by me to collect the data Customer survey and Consumer survey
Primary Data Consumer survey was done to know their purchasing behaviour because they are the one who constitute the market and are the target of the business . In Insurance Industry untill and unless we have the knowledge of the consumer behaviour and factor which influence them to buy a paticular brand ,companies cannot focus upon the target market. Hence a consumer survey was done to know their wants, purchasing power, and buying habits in order to segment the market , and based on this consumer profile was identified. Secondary Data Secondary data regarding sales figures, promotional expenses and other related expenses was collected from the companys own record to analyse the impact on sales due to the running schemes and make cost benefit analysis.
SAMPLING DESIGN
Sample Size The size of the sample taken is 50 people.
Data Collection: Data has been collected through both primary and secondary approach. A questionnaire has been prepared for the purpose also.
40
Limitation of the Study

The present study is limited to one Co., i.e. Bharti Axa Life Insurance Ltd., Covers a period from 2008 and 2010 due to limitation of time and accessibility to data base. The authenticity of the suggestions and recommendations depend upon the rationality of the data provided to me. Have to rely upon the data supplied. Executives were not ready to part with the information beyond a limit. size of the sample taken was less, due non availability of much time.
41
CHAPTER 5 DATA ANALYSIS
42
Table showing Current assets as percentage of Total assets Year 2008 2009 2010 Percentage 31% 26% 35%
40 35 30 25 20 15 10 5 0 2008 2009 2010
It can be visualized from the table that in the first year of our study i.e. 2008 it was 31% which was reduced to 26% in the next year and in 2010 it is 35% shows fluctuating trend.
43
Table showing Current Assets Turnover Ratio
Year 2008 2009 2010 Average: 2.24
Ratio (in times) 1.78 2.98 1.98
3.5 3 2.5 2 1.5 1 0.5 0 2008 2009 2010
The ratio average is 2.24 times in the study period of 3 years. In 2009 current assets turnover ratio is highest one i.e. 2.98 during the 3 year study. Reasons being during this year company has achieved sales growth 44.36% over the previous year and additional activity needs more funds.
44
Ratios useful to analyze working capital management

(A) Efficiency Ratios 1. Working Capital Turnover (times) 2. Current Assets Turnover (times) 3. Inventory turnover (times) 2008 4.84 1.78 9.49 2009 10.23 2.98 9.20 2010 5.71 1.97 7.88 Ideal Ratio -
(B) Liquidity Ratio 1. Current Ratio 2.AcidTestRatio 3. Cash Ratio 2.12 1.15 0.57 1.80 0.98 0.08 2.41 1.03 0.05 2.0 1.0 0.5
(C) Structural Health of Working Capital Ratio/Year 1. CA 2. CL 3. Cash to CA 4. Receivables to CA 5. Loans and Advances to CA 6. Inventory to CA 7. RM to Inventory 8. Stock spares to inventory 9. WIP to inventory 10. Finished Goods to Inventory 2008 0.31 0.15 0.27 0.27 0.15 0.42 0.44 0.12 0.06 0.38 2009 0.26 0.14 .04 0.50 0.19 0.38 0.46 0.14 0.08 0.32 2010 0.35 0.14 0.02 0.40 0.15 0.50 0.30 0.11 0.03 0.56
45
Interpretation (Ratio Analysis)

The utilization rate of net working capital as depicted by working capital turnover ratio is fluctuating during the period. It shows that working capital has not been effectively used over the period of years except in the year 2009. As shown by current assets turnover ratio, the utilization of current assets in terms of sales has shown a decreasing trend which shows that current assets has been effectively used to achieve sales. Again if we look at the efficiency with which individual elements of working capital have been utilized, the picture of inventory turnover is not very bright. Receivables turnover also shows a declining trend. Generally such a situation does not suit the company. As we look at the extent of liquidity of working capital, we notice that the ratio shows an increasing trend. This indicates improvement on the liquidity front. If we analyze the structural health of working capital, the proportion of current assets to total assets has been appropriate during this period. Such a higher proportion of current asset in the assets portfolio of Bharti Axa Life Insurance Ltd. is quite acceptable.
Our analysis above indicates the areas of concern to management in making best possible use of resources. Decreasing efficiency in the use of current assets hints of the possibility of problems in working capital management.
On further analysis, inventory constitutes a major proportion of total current assets. Among its various components, raw materials, stocks, spared and finished goods in particular need further analysis as here stand out to the problem areas.
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Cash Flow Statement (2009-10)
Sources
Amount A ( in Lacs)
Application
Amount B (in Lacs)
Proceeds from borrowings Sale of assets Total
162.37
Loss from operation
185.27
27.34 190.28
Change in cash
5.01 190.28
Summary of Cash Flow Analysis a) Cash from operation to total cash available = 185.27/190.28 = 97.38% b) Cash from long term sources to total cash available = 162.37/190.28 = 85.33% c) Proceeds from sale of non-current assets to total cash = 171.4/190.28 = 0.90%
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Schedule of Changes in Working Capital

Particulars Dec2009 Amount (in lacs) Dec2010 Increase (Debit) Current Assets Inventories Sundry Debtors Cash and Bank 93.87 123.22 10.64 146.36 114.71 5.63 52.48 8.51 5.01 Changes in Working Capital Decrease (Credit)
Balances Other current assets 20.14 247.87 Current Liabilities Working capital (CA-CL) Increase in Working Capital 137.02 110.85 61.44 172.29 21.66 288.36 116.07 172.29 172.29 74.96 74.96 61.44 20.95 1.52 -
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Fund Flow Statement (2009-10)

Sources Amount A (in lacs) Increase in loan Sale of asset Total 162.37 22.94 185.31 Increase in working capital Loss from operation 185.31 Application Amount B (in Lacs) 61.44 123.87
Summary of Fund Flow Analysis 1. 2. 3. Increase in net working capital 61.44 Funds from operations to finance permanent address (123.87) Ratio of fund flow from operations to total funds in the business (-) 123.87/85.31 = (66.85)
Interpretation (Fund Flow Statement) 1. Networking capital has been increased over the years, which has increased liquidity 2. Company should take corrective actions to covert loss from operation to funds from operation.
49
EVALUATION OF CASH MANAGEMENT PERFORMANCES
To assess the cash management performance this phase is divided as follows: a) Size of Cash b) Liquidity and Adequacy of cash c) Control of cash
A) Size of cash: The quantum of cash held by BHARTI AXA during the study period is presented in the table. The trend percentage also calculated and shown in the table:
Size of cash balance (Rs. in Crores) Year 2008 2009 2010 Source : Annual report Cash (In Lacs) 82.20 10.64 5.63 Trend 100 -87.83 -93.15
Chart Title
Cash 100 82.2 10.64 2008 2009 -87.83 5.63 2010 -93.15 Trend
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Size of sales (Rs. in Lacs) Sales Year 2008 2009 2010 Source Annual Reports 785.65 1134.23 903.92 100 44.36 15.05 Trend
Chart Title
1400 1200 1000 Axis Title 800 Trend 600 400 200 0 2008 2009 2010 Sales
51
(B) Liquidity and Adequacy of Cash: One of the most important jobs of the Finance Manager is to maintain sufficient liquidity to enable the firm to pay off its obligations when they fall due. To test a firms liquidity and solvency we commonly use current and quick ratios. Traditionally 2:1 current ratio and 1:1 quick ratio are taken as satisfactory standards for the purpose. The former indicates the extent of the soundness of the current financial position of a firm and the degree of safety provided to the creditors, the later signifies the ability of a firm to settle all its current obligations on a particular date.
Current ratio and quick ratio
Year 2008 2009 2010 Source:

4 3.5 3 2.5 2 1.5 1 0.5 0 2008 2009
Current ratio 2.12 1.80 2.41 Annual
Quick ratio 1.51 0.97 1.03 Reports
Quick Ratio Current
2010
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Our analysis clearly shows that the company has very sound position regarding liquidity and solvency. Further, all the ratios fluctuate throughout the period.
(C) Control of Cash: One of the major objectives of cash management from the stand point of increasing return on investment is to economize on the cash holding without impairing the overall liquidity requirements of the firms. This is possible by effecting tighter controls over cash flows. The following ratio has been applied to assess the efficiency of cash control: Cash to Current Assets ratio Cash turnover ratio Cash to current liabilities ratio
Cash to Current assets ratio Year 2008 2009 2010 Average : 9.43 Source : Annual Reports
30 25 20 15 10 5 0 2008 2009 2010
Cash to CA Ratio 26.89 4.29 1.95
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Inference: It can be inferred from the above table that cash to current assets ratio is decreasing which shows dark position of liquidity, which ultimately affect the operational efficiency of the firm.
Cash to Current Liability Ratio (%) Year 2008 2009 2010 Average: 23.27 Source: Annual Reports Cash to CL ratio 57.21 7.76 4.85
60 50 40 30 20 10 0 1 2 3 4 Series1
Inference: Cash to current liability ratio shows the cash balance maintained by company at a certain point of time for meeting its current liabilities. The lesser the ratio, proves the efficiency of the company for maintaining liquidity at a minimum level of cash balance. It is reducing during the study period and is at the minimum level of 4.85% in the year 2010.
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MANAGEMENT OF RECEIVABLES
AVERAGE COLLECTION PERIOD Average collection period explains how many days of credit, a company is allowing to the customer, a higher collection period indicates towards a liberal and inefficient credit and collection performances shorter the collection period the better the credit management and liquidity of accounts receivable.
Average collection period
Year 2008 2009 2010 Average : 41 days

50 45 40 35 30 25 20 15 10 5 0 2008 2009
Days 38 40 46
2010
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Inference: The receivable collection period at an average level is for 41 days during five years of study. The period is increasing
DEBTORS TURNOVER RATIO
This ratio is calculated the effective utilisation of funds involved in receivable. An effective credit management result in a higher turnover of accounts receivable.
Year
Debtors Turnover Ratio
Average collection period (in days)
2008 2009 2010
9.49 9.20 7.88
38 40 46
50 45 40 35 30 25 20 15 10 5 0 2008 2009 Debtors Turnover Ratio 2010
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Inference: The debtors turnover ratio is decreasing which signifies dark side of debtor. The average collection period is at level of 41 days for the 3 years of study. The collection period of debtors should be kept at lowest level for the reduction in cost of capital and better productivity.
MANAGEMENT OF PAYABLES Evaluation of Payables Management: Creditors turnover ratio & Average Payment Period Year 2008 2009 2010 Average : 80 days Source : Annual reports Creditors Turnover Ratio 3.95 4.56 5.33 Average Payment Period 92 80 68
Inference: Table shows that the minimum average creditor period is 68 days and maximum is 92 days. Table reveals the decreasing trend in average payment period which is not good for the company.
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The study conducted on working capital management of Bharti Axa shows the evaluation of management performance in this regard. Major findings and suggestions thereon are narrated as under: (Questionnaire given in Annexure A)
1.
Do you know about Insurance? (a) Yes (b) No 92% 8%
8%
92%
Yes No
58
2.
Have you ever opted for Insurance from any Company? (a) Yes (b) No 61% 39%
39%
61%
Yes No
59
3. If Yes, Which Company have you taken Insurance from?
LIC TATA AIG Life Insurance HDFC Standard Life Insurance ICICI Pur Bharti Axa Life Insurance Birla sun life Insurance Met life insurance
42% 7% 12% 19% 8% 10% 2%
45% 40% 35% 30% 25% 20%
42%
19% 15% 10% 12% 5% 7% 0% LIC TATA AIG ICICI Pur Bharti axa HDFC Birla Sun Met Life life Insurance 2% Insurance 8% 10%
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4.
How did you come to know about Insurance? (a) Advertisement (b) Word of Mouth (c) Referred by your company / Friend 76% 14% 10%
14% 10%
Advertisement Word of Mouth Referred by your company/friend
76%
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5.
What made you select a particular Company for the Insurance? (a) EMI (b) Brand name (c) Procedures (d) Facilities (e) Policies (f) Advertisement 78% 3% 9% 1% 7% 2%
80%
78%
70%
60%
50%
40%
30%
20% 9% 10% 3% 1% 0% EMI Brand Name Procedures Facilities Policies
7% 2%
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6.
How do you like the Marketing strategy by different Companies? (a) Good (b) Average (c) Bad 68% 19% 13%
13%
Good Average Bad
19%
68%
63
CHAPTER 6 FINDINGS RECOMMENDATION & CONCLUSION
64
FINDINGS:
Current assets comprise a significant portion i.e. 30.89% (average for three years of study) of total investment in assets of the company. There is fluctuating and rather increasing trend of this ratio during the period which shows management in-efficiency in managing working capital in relation to total investment. Further current assets to fixed assets ratio also shows on fluctuating trend during the study period which substantiate above mentioned criterion of in-effectiveness in management of working capital by the company. Current assets turnover ratio for the first three years of study shows fluctuating trend which is due to significant increase in sales. In 2009 current assets turnover ratio is highest one i.e. 2.98 during the study, reasons being during this year company has achieved sales growth 44.36% over the previous year. The ratio used for analysis of liquidity position are current ratio and quick ratio. These ratio reveals that company has sound liquidity position throughout the period of study. Both the ratio shows fluctuating trend within reasonable limit but these ratio are higher than conventionally accepted norms i.e. 2:1 in case of current ratio & 1:1 in case of quick ratio, which shows ineffectiveness of the management in managing current/quick assets in relation to current liabilities. The ratios used for cash management are cash to current assets ratio, cash to current liabilities ratio. Cash to current liabilities also shows decreasing trend and cash to current assets ratio also shows decreasing trend. All these ratios reveals that management has no definite cash policy. Inventory turnover ratio depict the fluctuating trend which indicates the accumulation of inventory in turn which cause loss to the company by way of deterioration of stock, interest loss on blockage of stock etc. Further composition of inventory reveals that portion of individual element of inventory has fluctuating trend which indicates that management has no policy in respect of inventory management. Debtors Turnover ratio reveals a decreasing trend during the period of study and
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average collection period ranges from 38 to 46 days. Keeping in view of INSURANCE industry trend credit period of 41 days is quite very higher. It reveals that management has no specific policy in respect of debtors management.
RECOMMENDATIONS
1.
System of lending cash credit/loans/ bills

It is found that there was a substantial gap between the sanctioned limit of cash credit and the extent of their utilization. It is recommended that the bank should strictly ensure that a review of all borrowers accounts, enjoying working capital credit limits of Rs 10 Lac and over from the banking system is made at least once a year. A working capital limit will include all fund-based limits for working capital purposes. It will verify the continued viability of the borrowers and also assess the need-based character of their limit.
2.
Bifurcation of credit limits Bifurcation of cash credit limits into a demand loan portion and a fluctuating cash credit component has not found acceptance either on the part of the banks or the borrowers. Such bifurcation may not serve the purpose of better credit planning by narrowing gap between sanctioned limits and the extent of utilization thereof.
3.
Reduction in over dependence on bank finances The need for reducing the over dependence of the medium and large borrowers both in private and public sectors on bank finance for their production / trading purposes is recognized. The net surplus cash generation on established industrial unit should be utilized partly at least for reducing borrowing for working capital purposes. Increase in owners contribution In order to ensure that the borrowers do enhance their contributions working capital and to improve their current ratio, it is necessary to place them under the
4.
66
second method of sending recommended by hand on committee which would give a minimum current ration of 1.33:1. As many of the borrowers may not be immediately in a position to work under the second method of lending the excess borrowings should be segregated and treated as working capital term loan which should be made repayable loan, it should be charged at higher rate of interest. The committee recommends that the additional interest may be fixed at 2% per annum over the rate applicable on the relative cash credit limits. The procedure should be made compulsory for all borrowers (except sick units) having aggregate working capital limits of Rs 10 Lac and over.
5.
Separation of Normal, Non-Peak Level & Peak Level Requirements While assessing the credit requirement, the bank should appraise and the separate limits or the normal non-peak level as also or the peak level or requirement indicating also the periods during which the separate limits would be extended to all borrowers having working capital of Rs. 10 lacs and above. One of the imp. Criteria for deciding such limit should be the borrowers utilization of cr. Limits in the past.
6.
Temporary Accommodation through loan If any ad-hoc or temporary accommodation is req. in excess of the sanctioned limit to meet unproven contingencies the additional finance should be given, where necessary, through a separate demand loan A/C or a separate non-operable cash Cr. A/C. There should be a stiff penalty for such demand loan or nonoperable cash cr. Portion, ablest 2% above the normal rate unless the RBI exempts such penalty. The discipline may be made applicable in cases involving working capital limits of Rs. 10 lacs and above.
7.
Penal Information The borrower should be asked to give his quarterly requirements of funds before the commencement of the quarter on the basis of his budget, the actual
67
requirements being within the sanctioned limit for the particular peak level/nonpeak level periods. Drawings of less than or in excess of the operative limit so fined (with a tolerance o 10% either way) but not exceeding the sanctioned limit would be subject to a penalty to be fined by the RBI from time to time. For the time being, the penalty may be fixed at 2% p.a. The borrower would be required to submit his budgeted requirements in triplicate & a copy of each would be sent immediately by the branch to the controlling office and head office for record. The penalty would be applicable only in respect of parties enjoying cr. Limits of Rs. 10 lacs and above subject to certain exemptions. 8. Info. Systems The non-submission of the returns in time is partly due to certain features in the forms themselves. Simplified forms have been proposed to overcome this prob. As the quarterly info. System is part and parcel of the revised style of lending under the cash cr. System, if the borrower does not submit the return within the prescribed time, he should be penalized by charging the whole outstanding in the A/C at a penal rate of int., 1% p.a. more than the contracted date for the advance from the due date of the return till the date of its actual submission.
CONCLUSION
Keeping in view of detailed analysis of our study and our findings mentioned in above paragraphs, it can be concluded that Company should make a policy in respect of investment of excess cash, in marketable securities and overall cash policy should be introduced. The analysis of financial data reveals that the company has very sound position regarding liquidity and solvency as shown by the current and quick ratios. The cash to current liabilities ratio is nearly on decreasing trend shows the efficiency of operations. Management should develop a credit policy and proper self realisation system from customers so that efficient and effective management of accounts receivable can be
68
ensured. This will significantly improve the profitability and liquidity of the company. Company
69
BIBLIOGRAPHY
70
BOOKS& REFERENCES: Khan M.Y. and Jam P.K., Financial Management Banerjee, Cash Management Pandey I.M. Financial Management Business India Business Today Business Standards Economic Times Dalal Street Journal Annual Report- Bharti Axa
WEBSITES: www.bharti-axalife.com www.karvy.com www.camsonline.com www.sbimf.com www.dundeefunds-India.com www.utittrustofindia.com www.birlaglobat.com www.hdfc-India.com www.icici.com www.idbi.com www.reservebank.com www.sebi.gov.in www.icicibank.com www.bankofpunjab.com www.statebankofindia.com www.wikipedia.org
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ANNEXURE
72
(ANNEXURE A) QUESTIONNAIRE
1. Name: 2. Occupation 3. Do you know about Insurance? Yes No 4. Have you ever opted for Insurance from any company? Yes No 5. If Yes, Which company have you taken Insurance from? LIC SBI Insurance HDFC Standard Life Insurance Icici Pur Max New York Life Insurance Bharti Axa Old Mutual Life Insurance TATA AIG life Insurance 6. How did you come to know about Insurance? Advertisement Word of Mouth Referred by your company / Friend 7. What made you select a particular company for the Insurance? EMI Brand name
73
Procedures Facilities Policies Advertisement 8. How do you like the Marketing strategy by different Insurance Company? Good Average Bad 9. What motivates you for selecting any Company for Insurance? EMI Brand name Procedures Facilities Policies 10. Advantages or Comment about Insurances
11. Which Company would you prefer if you have never applied for Insurance? LIC SBI Insurance HDFC Standard Life Insurance HDFC Prudential Bharti Axa Old Mutual Life Insurance TATA AIG life Insurance
74
(Annexure B) FINANCIAL STATEMENTS

Profit & Loss Account for the year ended 31St Dec, 2009
Current Year 31st Dec. 09 (in lakhs) Income Sales Other Income 1,134.22 25.32 1159.54 Expenditure Materials consumed Personnel Expenses Depreciation Financial Charges Excise duty Misc. Expenditure 738.73 87.3 30.01 26.72 130.87 18.33 1198.26 Loss for the year before extra ordinary items and prior period adjustments Extra-ordinary items - Expenses on abandoned projects Assets w\off Pension liability Prior period adjustments Expenses of extraordinary items Loss bought forward from previous years (5.14) (0.30) 44.16 (324.23) (38.72)
Previous Year 31st Dec 08 (in lakhs)
785.65 21.33 806.98
526.15 70.36 29.93 55.68 101.14 19.87 953.49 (146.51)
(2.15) (6.64) (1.50) 156.80 (167.43)
75
Balance carried to the B/S
(368.39)
(324.23)
76
Balance Sheet as at 31 Dec 2009 As on 31st Dec 09 (In Lacs) Source of Funds Shareholders funds Share capital Reserve and surplus 734.20 21.00 755.20 Loan Funds Secured loans Unsecured loans 198.09 0.04 198.13 953.33 Application of funds Fixed Asset Gross block Less: Depreciation 520.94 125.09 395.85 Capital W.I.P. Net book value Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash& Bank Balances Other current Assets Loans and advances 93.87 123.22 10.64 20.14 47.06 294.93 129.57 82.75 82.20 11.42 45.68 351.62 1.58 397.43 0.10 493.93 95.21 398.72 2.69 401.41 217.96 2.95 220.91 976.11 855.20 834.20 As on 31st Dec 08 (In Lacs)
77
As at Dec 31 2009 Less: Current Liabilities Provisions Current Liabilities Provisions 137.02 15.73 152.75 Net current assets Miscellaneous Expenditure (Total extent not written off adjusted) Profit and loss 368.39 953.33 142.18 45.23
As at Dec 31.2008
143.68 8.56 152.24 199.38 51.09
324.23 1076.11
Profit & Loss Account for the year ended 31st Dec, 2010
Current Year 31 Dec 10 (In Lacs) Income Sales Other Income 903.92 34.09 987.04 Expenditure Materials Consumed Personnel Expenses 621.23 104.58
Previous Year 31 Dec 09 (In Lacs)
1134.22 25.32 1159.54
738.73 87.33
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Mfg Other expenses Dep / Amortisation Financial Charges Excise duty Mis Expenditure W/off
172.48 34.38 30.57 120.04 20.28 1224.32
166.27 30.01 26.72 130.87 18.33 1198.26 (38.72)
Loss for the year before extra ordinary items and prior period adjustments Extra ordinary items: Expenses on abandoned project W/off Assets W/off Pension liability Prior period adjustments Loss after prior pd. Exp. & extra-ord. Items. Loss b/f from early years Less: Amt. Adjusted against Cap.
(116.88)
----(116.88)
--5.14 0.30 (44.16)
(368.39) (68.39)
(324.23) ---
Reduction300 Loss: c/f to B/S (185.27) (368.39)
Balance Sheet as at 31 Dec 2010
Sources Of Funds Shareholders Fund Capital Reserves & Surplus
31 Dec 10 (Lacs)
31 Dec 09 (Lacs)
434.20 21.00 455.20
734.20 21.00 755.20
Loan Funds
79
Secured loans Unsecured loans Application of Funds Fixed Assets Gross Block Less: Dep. Net Block Capital work in progress inc. capital advances.
360.46 --
198.09 0.04
530.59 153.55 377.04 3.25
520.94 125.09 395.85 1.58
380.29 Investments Current assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Other current Assets. Loans & Advances Less: Current liabilities & Provisions Liabilities Provisions Net Current Assets Misc. Expenditure (To the extent not w/off) Profit & Loss A/c Total: 185.27 815.66 116.07 14.11 130.18 47.43 146.36 114.71 5.63 21.66 44.39 0.10
397.43 0.10
93.87 123.22 10.64 20.14 47.06
137.02 15.73 152.75 45.23
368.39 953.33
80
81

1PROJECT - REPORT On Working Capital Management

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Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

INTRODUCTION TO WORKING CAPITAL

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

way that a acceptable level of net working capital is maintained.

Importance of working capital management:

Determinants of Working Capital:

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

ELEMENTS OF WORKING CAPITAL

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

FINANCING OF WORKING CAPITAL

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

CHAPTER-2 INDUSTRY PROFILE

Working Capital Management of Bharti AXA Life Insurance Ltd.

INSURANCE COMPANIES IN INDIA

In some sense we can say that insurance appears simultaneously

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

PRESENT CONDITION OF INSURANCE MARKET

Working Capital Management of Bharti AXA Life Insurance Ltd.

Aditya Birla Group

MARKET SHARE OF INDIAN INSURANCE INDUSTRY

Working Capital Management of Bharti AXA Life Insurance Ltd.

Types of insurance contracts

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

CHAPTER 3 COMPANY PROFILE

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

VISION, VALUES & STRATEGY

VALUES Professionalism Innovation Team Spirit Pragmatism Integrity

To achieve a top 5 market position in India through a multi-distribution, multi-product

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

Protect your loved ones against financial contingencies at a nominal costs

Working Capital Management of Bharti AXA Life Insurance Ltd.

Investments for your good health

Working Capital Management of Bharti AXA Life Insurance Ltd.

Make the golden years of your life truly comfortable.

Bharti AXA Life Wonder Years Retirement Plan

Working Capital Management of Bharti AXA Life Insurance Ltd.

Wealth creation with protection

Ensure your family's security as you maximize your savings

Working Capital Management of Bharti AXA Life Insurance Ltd.

Bharti AXA Life Shield Bharti AXA Life Sanjeevani

Working Capital Management of Bharti AXA Life Insurance Ltd.

Working Capital Management of Bharti AXA Life Insurance Ltd.

CHAPTER-3 RESEARCH METHODOLOGY