REPORT ON SUMMER TRAINING

ON
WORKING CAPITAL MANAGEMENT

UNDER TAKEN AT

OSWAL WOOLLEN MILLS LTD.

Sherpur, G.T. Road, Ludhiana

In the partial fulfillment of the

requirements for the award degree

of
MASTER OF BUSINESS ADMINISTRATION

Submitted by:
MANJINDER SINGH

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ACKNOWLEDGEMENT

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ACKNOWLEDGEMENT

It is always difficult to acknowledge, so precocious adapt as that of learning, as it is only a debt

that is difficult to repay expect through gratitude. There are occasions where mere expressions of
words stand nowhere near the feeling felt. The completion of this training with its report is such
one occasion.
I take this opportunity to express my warmest appreciations and give special recognition to all
those individual who have contributed immensely to make this project report.
The formal statement of acknowledgement will hardly meet the ends of justice in the matter of
expressing a sense of gratitude to my college authorities Coordinator Mrs. Shelly, lect. Miss
Swati, Mr. R.M. Sood {finance controller of Oswal woollen mills ltd.} and whole team of
finance dept. of Oswal woollen mills ltd for giving practical dimensions to my theoretical studies
in the form of training and framing report which is suitable and highly beneficial.
Above all, I accord cordial regards to my loving parents and grateful to almighty for bringing me
up in an atmosphere of life and confidence and infusing in me the spirit to the face challenges of
life bravely that made me really work towards the goal of success.
Last but not least the least. I express my gratitude to all those to have helped me, guided me,
encourage me but have been inadvertently left out.

MANJINDER SINGH

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Page 4 of 89
BONAFIDE CERTIFICATE

EXECUTIVE SUMMARY

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 EXECUTIVE SUMMARY

OSWAL WOOLLEN MILLS LIMITED (OWM) is a flagship company of the Nahar group of
the companies. The Nahar group is an industrial conglomerate based at Ludhiana in Punjab with
the group turnover in excess of Rs. 19000 million for the 2006. OSWAL WOOLLEN MILLS
LTD is the company of NAHAR GROUP Under the stewardship of his son, SHRI JAWAHAR
LAL OSWAL; the company diversified and expanded its business interest beyond yarns.
Garments, hosiery products. OSWAL WOOLLEN MILLS LTD. is the flagship company of
NAHAR GROUP. It has variety in its basket. The company are registered owners of well-known
trade name “MONTE CARLO” for selling company woollen hosiery and cotton garments
‘Monte Carlo’ has been recognized as ‘super brand’ for woollen hosiery garments since fiscal
2003 by international society of super brands. India contributes to about 25% share in the world
trade of cotton yarn.

The project entitled “Working Capital Management and its Appraisal in OSWAL
WOOLLEN MILLS LTD. The term of study was kept limited to make the title true. The purpose
of the report is to get the in depth understanding of the process of working capital management.
With the growing Indian economy and the government policies for infrastructure the demand for
garments is increasing and seeing this as an opportunity is under taking many new projects for
expansion of the production which are under implementation for increasing the capacity of the
plants. Because the textile industry is a sun rising company which means that three basic needs
of the people are cloth, meal and house. So the one of thing that is cloth produced in textile
industry. So, it is sun rising company. Working capital has been analyzed in two ways – overall
study of the working capital of OSWAL WOOLLEN MILLS LTD.

Borrowings are an important ingredient of funding a business entity. The lenders must feel
comfortable with their clients and OSWAL WOOLLEN MILLS LTD. enjoys this position among
their lenders. Borrowing is done for working capital requirement i.e., to meet the day to day

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requirement for smooth functioning of the production, and term loans for projects of capacity
expansion. Major portion of the borrowing is done from banks at better rate of interest.

The performance of the textile division of the company during the year was satisfactory. The
annual turnover the nahar group is 19000 million and alone company have annual turnover of
550 million. The Company has posted yet another impressive for the 2007-08 results, which has
surpassed all respective previous levels. It has shown substantial growth in turnover, cash profit,
profit before tax and profit after tax.

The objective of this project work is to focus on the working capital of the Oswal Woollen Mills
Ltd. The project contain the basic postulates of working capital, procedure of analysis of
working capital, ratio being used to define the working capital and the impact of working capital
in the company in case of excess or inadequacy. Also, the project contains analysis of estimation
of working capital requirement and the procedure to estimate working capital requirement in
manufacturing and trading concern and from the data available it can be concluded that it holds a
very strong position in the market.

Setting up an organization for the working capital management is the

precondition to control working capital effectively and sustainably. Firstly, it is
essential to define who is responsible for the controlling process. The figure
must be calculated, planned and improved. Therefore further key ratios must
be defined and targets set. In addition, continual target-performance
comparisons must be conducted as well as defining measures for
improvement. These measures advance the effectiveness of the working
capital key processes; the forecast-to-fulfill process, the order-to-cash
process and the purchase-to-pay process.

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 TABLE OF CONTENTS
CHAPTER
S.NO. TITLE Page .No.
NO.
1 CHAPTER.1 INTRODUCTION TO WORKING CAPITAL 9-19
2 (A) WORKING CAPITAL MEANING & SCOPE 11
3 (B) MPBF 16
4 (C) REVIEW OF LITERATURE 17
5 CHAPTER.2 ABOUT TEXTILE INDUTRY & COMPANY PROFILE 20-48
6 (A) OVERVIEW OF INDIAN TEXTILE INDUSTRY 21
7 (B) LEADING TEXTILE MILLS 32
8 (C) COMPANY PROFILE 35
9 (D) COMPANY MAJOR EVENTS 42
10 (E) AWARDS 44
11 (F) PRODUCTS 45
12 (G) EXPORT MARKETS 48
13 CHAPTER.3 OBJECTIVES & RESEARCH METHODOLOGY 49-52
14 (A) OBJECTIVES OF THE STUDY 50
15 (B) RESEARCH METHODOLOGY 51
16 (C) SOURCES OF DATA 52
17 CHAPTER.4 WORKING CAPITAL ANALYSIS OWM 53-76
18 (A) INTRODUCTION TO W.C. ANALYSIS 54
19 (B) KEY WORKING CAPITAL RATIOS 55
20 (C) STATEMENT SHOWING CHANGE IN WORKING 57
CAPITAL FOR OSWAL WOOLLEN MILLS LTD
21 (D) CALCULATION OF WORKING CAPITAL FOR OWM 59
22 (E) ANALYSIS OF VARIOUS COMPONENTS OF W.C 60-67
23 (F) WORKING CAPITAL RATIO’S OF COMPANY 68-76
24 CHAPTER. 5CONCLUSION & SUGGESTIONS 77-80
25 (A) CONCLUSION 78
26 (B) SUGGESTIONS 80

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27 BIBLIOGRAPHY 81-82
27 ANNEXURE’S

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 INTRODUCTION
TO
WORKING CAPITAL

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(A)WORKING CAPITAL - Meaning of Working Capital
Capital required for a business can be classified under two main categories via,
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment and to carry out its day-
to-day operations. Long terms funds are required to create production facilities through purchase
of fixed assets such as p & m, land, building, furniture, etc. Investments in these assets represent
that part of firm’s capital which is blocked on permanent or fixed basis and is called fixed
capital. Funds are also needed for short-term purposes for the purchase of raw material, payment
of wages and other day – to- day expenses etc.
These funds are known as working capital. In simple words, working capital refers to that part of
the firm’s capital which is required for financing short- term or current assets such as cash,
marketable securities, debtors & inventories. Funds, thus, invested in current assts keep
revolving fast and are being constantly converted in to cash and this cash flows out again in
exchange for other current assets. Hence, it is also known as revolving or circulating capital or
short term capital.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:
1. Gross working capital
2. Net working capital
The gross working capital is the capital invested in the total current assets of the enterprises
current assets are those
Assets which can convert in to cash within a short period normally one accounting year.
CONSTITUENTS OF CURRENT ASSETS
1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:

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a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6. Temporary investment of surplus funds.
7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net working capital is the
excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.
Net working capital can be positive or negative. When the current assets exceeds the current
liabilities are more than the current assets. Current liabilities are those liabilities, which are
intended to be paid in the ordinary course of business within a short period of normally one
accounting year out of the current assts or the income business.

CONSTITUENTS OF CURRENT LIABILITIES

1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation , if it does not amt. to app. Of profit.
6. Bills payable.
7. Sundry creditors.
The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own merits.
The gross concept is sometimes preferred to the concept of working capital for the following
reasons:
1. It enables the enterprise to provide correct amount of working capital at correct time.
2. Every management is more interested in total current assets with which it has to operate then
the source from where it is made available.

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3. It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital.

4. This concept is also useful in determining the rate of return on investments in working capital.
The net working capital concept, however, is also important for following reasons:
• It is qualitative concept, which indicates the firm’s ability to meet to its operating expenses
and short-term liabilities.
· IT indicates the margin of protection available to the short term creditors.
· It is an indicator of the financial soundness of enterprises.
· It suggests the need of financing a part of working capital requirement out of the permanent
sources of funds.

CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in two ways:
o On the basis of concept.
o On the basis of time.
On the basis of concept working capital can be classified as gross working capital and net
working capital. On the basis of time, working capital may be classified as:
Ø Permanent or fixed working capital.
Ø Temporary or variable working capital
PERMANENT OR FIXED WORKING CAPITAL
Permanent or fixed working capital is minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has
to maintain a minimum level of raw material, work- in-process, finished goods and cash balance.
This minimum level of current assets is called permanent or fixed working capital as this part of
working is permanently blocked in current assets. As the business grow the requirements of
working capital also increases due to increase in current assets.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is required to
meet the seasonal demands and some special exigencies. Variable working capital can further be
classified as seasonal working capital and special working capital. The capital required to meet

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the seasonal need of the enterprise is called seasonal working capital. Special working capital is
that part of working capital which is required to meet special exigencies such as launching of
extensive marketing for conducting research, etc.
Temporary working capital differs from permanent working capital in the sense that is required
for short periods and cannot be permanently employed gainfully in the business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortages of working capital. Both excess as well as short working capital positions are bad for
any business. However, it is the inadequate working capital which is more dangerous from the
point of view of the firm.

FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS

1. NATURE OF BUSINESS
2. SIZE OF THE BUSINESS
3. PRODUCTION POLICY
4. LENTH OF PRDUCTION CYCLE
5. SEASONALS VARIATIONS
6. WORKING CAPITAL CYCLE
7. RATE OF STOCK TURNOVER
8. CREDIT POLICY
9. BUSINESS CYCLE
10. RATE OF GROWTH OF BUSINESS
11. EARNING CAPACITY AND DIVIDEND POLICY
12. PRICE LEVEL CHANGES

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Financing Working Capital
Now let us understand the means to finance the working capital. Working capital or current
assets are those assets, which unlike fixed assets change their forms rapidly. Due to this nature,
they need to be financed through short-term funds. Short-term funds are also called current
liabilities. The following are the major sources of raising short-term funds:
I. Supplier’s Credit
At times, business gets raw material on credit from the suppliers. The cost of raw material is paid
after some time, i.e. upon completion of the credit period. Thus, without having an outflow of
cash the business is in a position to use raw material and continue the activities. The credit given
by the suppliers of raw materials is for a short period and is considered current liabilities. The
loans are available for creating the following current
Assets:
A. Stock of Raw Materials b. Stock of Work in Process
c. Stock of Finished Goods d. Debtors
Banks give short-term loans against these assets, keeping some security margin.
The advances given by banks against current assets are short-term in nature and banks have the
right to ask for immediate repayment if they consider doing so. Thus bank loans for creation of
current assets are also current liabilities.
ii. Promoter’s Fund
It is advisable to finance a portion of current assets from the promoter’s funds. They are long-
term funds and, therefore do not require immediate repayment.
These funds increase the liquidity of the business.

Bank Credit (Working Capital Finance by Commercial Banks )

Bank credit is the primary institutional source of working capita finance in India. The different
forms in which the banks normally provide loans and advances are as follows:
a. Loans
b. Cash Credits
c. Overdrafts
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d. Purchasing and Discounting of bills:

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(B) Computation of Maximum Permissible Bank Finance(MPBF):
The Tandon Committee had suggested three methods for determining the maximum permissible
bank finance (MPBF).
They are
Method 1: MPBF=0.75(CA-CL)
Method 2: MPBF=0.75(CA)-CL
Method 3: MPBF=0.75(CA-CCA)-CL
Where CCA=Core Current Assets- this represents the permanent component of working capital.
e.g. Total current assets required 40,000
Current liabilities other than bank borrowings 10,000
Core current assets 5,000
1st Method
Total current assets required 40,000
Less current liabilities 10,000
Working Capital Gap 30,000
Less 25% from Long term sources 7,500
Maximum permissible bank borrowings 22,500
2nd Method
Current Assets required 40,000
Less 25% to be provided from long term funds 10,000
Less Current Liabilities 30,000
Maximum permissible bank borrowings 20,000
3rd Method
Current assets 40,000
Less Core Current assets 5,000
35,000

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Less 25% to be provided from long term funds 8,750
26,250
Less current liabilities 10,000
Maximum permissible bank borrowings 16,250

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(C) REVIEW OF LITERATURE

Stephen Bush (2008) Commercial borrowers sometimes overlook short-term options for
commercial loans. In the current recessionary conditions, it is wise to explore all working capital
management options. This article will shed some light on shorter-term choices such as short-term
commercial mortgages and business cash advances. Due to misunderstandings about long-term
commercial financing, short-term commercial loans are often not considered properly. Although
long-term commercial real estate financing options are often appropriate, there are practical
short-term business financing choices that will be more workable and profitable for commercial
borrowers. The most critical short-term commercial financing techniques typically include short-
term merchant cash advance and credit card processing programs and commercial real estate
loan programs. Both working capital funding approaches are frequently a source of confusion for
business owners.

Bebehuk L., and L. stole (2009) Working capital is the cash needed to carry on operations
during the cash conversion cycle, i.e. the days from paying for raw materials to collecting cash
from customers. Raw materials and operating supplies must be bought and stored to ensure
uninterrupted production. Wages, salaries, utility charges and other incidentals must be paid for
converting the materials into finished products. Customers must be allowed a credit period that is
standard in the business. Only at the end of this cycle does cash flow in again.

Allensius (2009) there will usually be only a few business financing sources that are regularly
successful at executing the credit card financing and processing. There are key difficulties to
avoid with a working capital advance, and selecting an effective funding source is essential to an
appropriate business cash advance program.A long-term commercial mortgage is appropriate for
many businesses that own commercial property. Commercial property should be financed with
an appropriate combination of short-term and long-term funding. It is wise to consider long-term
Business financing of up to 30 years when a longer-term commercial real estate loan is feasible.

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Gamble, Richard H. (2005) Working capital management (WCM) is a holistic approach to
managing capital that can increase a company's cash flow and operational profits, but has yet to
receive widespread acceptance. WCM is unlike traditional cash management with its emphasis
on float and collection and disbursement programs. WCM addresses the full time-line from raw
material to payment, and strives to free capital wherever possible. Just-in-time inventory
management is a good example of WCM. WCM runs counter to the standard divisional lines
around which most companies are organized; its acceptance may increase, however, as US
businesses strive to become more efficient and competitive, and as financial professionals grow,
learn, and assume greater responsibilities for their companies' futures.

Dittmar, A. and J. Mahrt, 2005 Workingcapital management is important part in firm financial
management decision. An optimal working capital management is expected to contribute
positively to the creation of firm value. To reach optimal working capital management firm
manager should control the tradeoff between profitability and liquidity accurately. The purpose
of this study is to investigate the relationship between working capital management and firm
profitability. Cash conversion cycle is used as measure of working capital management. This
study is used panel data of 1628 firm-year for the period of 1996-2006 that consist of six
different economic sectors which are listed in Bursa Malaysia. The coefficient results of Pooled
OLS regression analysis provide a strong negative significant relationship between cash
conversion cycle and firm profitability. This reveals that reducing cash conversion period results
to profitability increase. Thus, in purpose to create shareholder value, firm manager should
concern on shorten of cash conversion cycle till accomplish optimal level.

Beneda, Nancy, Zhang, Yilei 2006 the current study contributes to the literature by examining
impact of working capital management on the operating performance and growth of new public
companies. The study also sheds light on the relationship of working capital with debt level, firm
risk, and industry. Using a sample of initial public offerings (IPO's), the study finds a significant
positive association between higher levels of accounts receivable and operating performance.
The study further finds that maintaining control (i.e. lower amounts) over levels of cash and
securities, inventory, fixed assets, and accounts payables appears to be associated with higher
operating performance, as well. We find that IPO firms which are experiencing unusually high
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growth tend not to perform as well as those with low to moderate growth. Further firms which
are experiencing high growth tend to hold higher levels of cash and securities, inventory, fixed
assets, and accounts payables. These findings tend to suggest that firms are willing to sacrifice
performance (accept low or negative operating returns) to increase their growth levels. The
higher level of growth is also associated with higher operating and financial risk. The findings of
this study suggest that perhaps IPO firms should stay more focused on their operating
performance than on maintaining high growth levels.

James Michael Wahlen 08 In this paper we review the academic evidence on earnings
management and its implications for accounting standard setters and regulators. We structure our
review around questions likely to be of interest to standard setters. Specifically, we review the
empirical evidence on which particular accruals are used to manage earnings, the magnitude and
frequency of any earnings management, and whether earnings management affects resource
allocation in the economy. Our review identifies a number of important opportunities for future
research on earnings management.

D'Attilio, David F. Net working capital forecasts play a vital role in cash flow projections. Care
should be taken to create accurate projections of net workingcapital, defined as current assets
minus current liabilities, by avoiding errors in financial data. Analysis reveals that small
differences in asset/liability reports can cause significant distortions in working capital forecasts.
In order to achieve reliable forecasts, it is necessary to adopt a combination of macro and micro
approaches which have been proven to produce reasonably accurate data.

Neung Kim, Kyungho Kim The three best macro-economic indicators for 24 various industries
are identified using E.I. Altman's Z-score. The Altman's Z-score is used to measure overall
business financial conditions. These are the prime bank rate, the three-month US Treasury Bill
rate and the corporate AAA bond rate. The three variables are found to be relevant predictors for
business financial conditions since they have highly negative correlations with Z-scores.

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ABOUT TEXTILE INDUTRY

&

COMPANY PROFILE

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(A)Overview of the Indian textile industry
Segments of Indian Textile Industry
Indian Textile Industry can essentially be categorized into two segments:-
1. Organized Textile Industry
2. Unorganized Textile Industry Unorganized sector is the dominant part in this industry which
mainly utilizes the traditional practices (woven or spun ) in cloth production and hence is
labor intensive in nature. This industry is characterized by the production of clothes either
through weaving or spinning with the help of hands. The decentralized nature is considered
as another important feature of the unorganized textile industry in India.
The other half of the Indian Textile industry is a highly organized one with immense importance
on capital intensive production process. This sector is characterized by sophisticated mills where
technologically advanced machineries are utilized for mass production of textile products.

Sub-Sectoral Categorization of Indian Textile Industry

➢ Textile Industry based on fiber produced through man made means or natural cotton
➢ Yarn industry utilizing fiber or filament of the man made type
➢ Textile industry involved in the production of wool, its derivatives and final woolen products
➢ Production, processing of Jute and the textile industry based on it
➢ Textile industry involved in the mass production of natural silk along with derivative and
final products from silk
➢ Handloom Industry
➢ Handicrafts industry which is basically unorganized in nature
Sub-Categorized sectors of the Indian textile Industry
Textile Industry based on fiber produced through man made means or natural cotton In the whole
Indian textile industry, this sector has come as the largest producer of textile products. This
industry has also proved its potential in employing the maximum number of people in the entire
industry which has been calculated to be around a whooping one million workers. As per the
latest records (31.01.2007) of Ministry of Textiles, the total number of mills in this particular

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sector is 1818 in number. The installed capacity of all these mills accumulates to 35.37 million
spindles and 0.45 million rotors
During the year 2000-2001, the total amount of spun yarn produced was 3160 million kgs. This
amount saw an increase of around 400 million kgs within the period of 2000-2001 to 2005-2006.
Spun Yarn industry can again be divided into two sub-sectors:-

➢ Cotton Yarn producing industry the production of this industry type is heavily dependent on
the yearly production of cotton which again depends on the vagaries of nature. Hence it has
been observed that the rate of production in this sector shows fluctuating trend.
➢ Completely non cotton blended yarn producing industry
This industry type is a consistent performer where its rate of production has increased at a
consistent rate. It has been observed that between the period 1999 and 2005, capacity utilized in
this sector has varied anything between 80% and 93%.
Organized sector in Textile Industry is passing through a stage of stagnation and the main reason
behind it is transformation in the structural set-up of the industry. It has been found out that the
weaving sector is delinked from the spinning sector which has led to the rise of power looms of
decentralized nature. Over the years, the production capacity of this organized sector has seen an
absolute decrease of 0.54 lakh between March 2000 and January 2007.
Cloth production has also evidenced a declining trend during 2000-2006 with an absolute
decrease of ninety four million square meters. The annual growth rate of total cloth production in
the textile industry has been calculated to be around 5.24 % between 2000-2001 to 2005-2006.
But stratified result of this industry show that during the above mentioned period, the organized
sector of this industry has posted fluctuating results whereas the unorganized one has performed
positively with an yearly rate of growth amounting to 5.4%.

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Investment In Indian Textile Industry

Investment in Indian Textile Industry

The scenario of investment in the Indian textile industry started to change after the inception of
the special “Textile Package” during the 2003-2004 budgets. The recommendations made in the
budget included the reforms that are required to be made in the fiscal policy of the Indian textile
Industry for attracting investment in this industry. The policy matters associated with
restructuring of debt for financial viability of this industrial sector are also being addressed in
this budget. A fund was set up in accordance with the recommendations of the aforesaid budget
with an initial principal amount of Rs. 3000 crores. This fund was meant for restructuring of the
textile sector.
Factors responsible for wooing the investors in Indian textile industry:-

➢ The size of the textile along with apparel market in India is quite big.
➢ Performance of this industry has been consistent right from the start of the new millennium.
➢ Availability of the skilled labor in India is comparatively cheap in relation to the same in
other parts of the world.
➢ The policies related to the Foreign Direct Investment in India are comparatively lenient and
are transparent in nature among all the developing countries.
➢ There is no limit on foreign direct investment in the textile industry and hence 100% direct
investment can be done by the foreign capitalists in the Indian textile industry.
➢ Foreign Investments done in the Indian Textile Industry through the automatic route offers a
hassle-free way of investing. These investments are not required to be approved by the
government or the apex bank of India, RBI. The foreign investors are only required to make a
notification to the regional office of the apex bank only after receiving the receipt of the
remittance. This notification is required to be done within thirty days from the date of
receiving the remittance. The ministry concerned with the development of Textile Industry in
India has formed a special cell for attracting FDI in this sector. Objectives of this special cell
for wooing FDI are :-

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➢ This cell helps the willing foreign companies to find out viable partners meant for floating a
joint venture company in order to produce textile products.
➢ FDI special cell acts as the mediator between the foreign investor and the different
organizations for setting up the textile industry. The specialized helps that are given by this
cell involve advisory support along with assistance.
➢ At the time of operation of the textile industry set by the foreign investor certain problems
may crop up. These problems are sorted out by the FDI cell.
➢ FDI cell monitors as well as maintains the data related with the total production of the textile
sector. They also collect the stratified data of production by both domestic industry as well as
the industry set up by the foreign investor. In the financial year 2005-2006, it has been found
out that the percentage share of the textile industry in the total foreign investment done was
1.02%.
➢ As a part of domestic textile sector expansion, the companies of Indian origin are also not far
behind in making investments. Arvind Mills Limited is expanding its production as well as
capacity base through the construction of two new industrial set ups in Bangalore and
Ahmadabad.

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Government Policies Relating to the Textile Industry in India

Introduction
The Indian textile industry is one of the largest industries in the world. The Ministry of Textiles
in India has formulated numerous policies and schemes for the development of the textile
industry in India. Some of them are detailed in the following sections.
National Textile Policy
➢ The National Textile Policy was formulated keeping in mind the following objectives:
Development of the textile sector in India in order to nurture and maintain its position in the
global arena as the leading manufacturer and exporter of clothing.
➢ Maintenance of a leading position in the domestic market by doing away with import
penetration.
➢ Injecting competitive spirit by the liberalization of stringent controls.
➢ Encouraging Foreign Direct Investment as well as research and development in this sector.
➢ Stressing on the diversification of production and its up gradation taking into consideration
the environmental concerns.
➢ Development of a firm multi-fiber base along with the skill of the weavers and the craftsmen.
Such goals are set to meet the following targets:-

➢ The size of textile and apparel exports must reach a level of US $50 billion by the year 2010.
➢ The Technology Up gradation Fund Scheme should be implemented in a strict manner.
➢ The garments industry should be removed from the list of the small scale industry sector.
➢ The handloom industry should be boosted and encouraged to enter into foreign ventures so as
to compete globally. The National Textile Policy has also formulated rules pertaining to
certain specific sectors. Some of the most important items in the agenda happens to be the
availability and productivity along with the quality of the raw materials. Special care is also
taken to curb the fluctuating price of raw materials. Steps have also been taken to raise silk to
the international standard.

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Government policy on cotton and man-made fiber:-
One of the principal targets of the government policy is to enhance the quality and production of
cotton and man-made fiber. Ministry of Agriculture, Ministry of Textiles, cotton growing states
are primarily responsible for implementing this target.
Other thrust areas:-
Information Technology
Information technology plays a significant role behind the development of textile industry in
India. IT (Information Technology) can promote to establish a sound commercial network for the
textile industry to prosper.
Human Resource Development
Effective utilization of human resource can strengthen this textile industry to a large extent.
Government of India has adopted some effective policies to properly utilize the manpower of the
country in favor of the textile industry.
Financing arrangement
Government of India is also trying to encourage talented Indian designers and technologists to
work for Indian textile industry and accordingly government is setting up venture capital fund in
collaboration with financial establishments.
Acts
Some of the major acts relating to textile industry include:
Central Silk Board Act, 1948
The Textiles Committee Act, 1963
The Handlooms Act, 1985
Cotton Control Order, 1986
The Textile Undertakings Act, 1995 Government of India is earnestly trying to provide all the
relevant facilities for the textile industry to utilize it's full potential and achieve the target. The
textile industry is presently experiencing an average annual growth rate of 9-10% and is expected
to grow at a rate of 16% in value , which will eventually reach the target of US $ 115 billion by
2012. The clothing and apparel sector are expected to grow at a rate of 21 %t in value terms.
Page 28 of 89
Textile Industry Exports:-
Introduction
Textile industry plays a significant role in the growth of Indian economy and it is an important
component of global trade. Textile industry accounts for about one third of India's total export
earnings. It is regarded as the second largest industry of India and is the largest foreign export
earner, accounting for 35% of the gross export earnings in trade. During 1992-93 and 2001-02,
textile exports recorded an increase at a compound annual growth rate of 14.01%. Handloom and
cotton are the two most significant sectors in textile industry. These two sectors together
contribute the major portion of total textile export in India.

Trading partners
Leading trading partners of India are Malaysia, Australia, Kazakhstan, USA, South Africa,
Romania, Argentina, Egypt, Germany, Finland, and Turkey.

India's export to Malaysia

Malaysia imports various types of textile products from India to meet the requirements of raw
materials for it's emerging garment industry. Malaysia's total textile imports are estimated to
exceed US$ 1.5 billion annually. Malaysia's major importing products include woven man-made
fiber fabrics, apparel accessories, textile yarn, knitted and crocheted fabrics, and women’s
apparel.

Page 29 of 89
Page 30 of 89
India's export to USA
USA is regarded as the largest textile and apparel market in the world, which amounts to over
$200 billion annually. In 2006, about 45% of the U.S. market demand was met with imported
products, which accounted for 20% of the overall global textile and apparel imports. In 2003, the
total imports of clothing and textiles by USA was 80% (US $ 71 bn) and 20% (US $ 18 bn),
respectively. Asia contributed the most, specifically India. India basically supplied readymade
garments to USA.

India's export to Australia

Australia is considered as one of the most open textile markets in the world. Major textile
imports include apparels and made-ups under chapter 62, 61 and 63, specifically polyester-cotton
and polyester-viscose types. Bulk of cotton and hand-made fibers are:-

Also imported from countries like India.

Page 31 of 89
Indian exports of textiles to Germany
Germany can be regarded as one of the leading importers of Indian handmade fiber textiles.
Germany is also an important market in EU (European Union), specifically for textile and
clothing, with a total market size of about US $ 34 billion (in 2005).During 2005-06, the total
German imports of textile products from India amounted to Rs. 4714.59 crores and in the same
year, the total imports value of Synthetic and Rayon textiles from India amounted to Rs. 254.63
crores, showing a growth of 58.43% comparing to the performance of previous year.

Indian exports of textiles to EU (European Union)

EU overpowered USA as becoming the largest market for textiles and clothing in the world. Asia
predominates the EU market in both clothing and textiles, with 30% (US $ 30 bn) and 17 % (US
$ 8 bn) share, respectively. India is one of the leading suppliers of textile products to the EU
market and ranked fourth, ahead of other textile exporters like Mexico, Bangladesh and Turkey,
with a market share of 5.2% (US $ 0.45 bn).

Current trend Industry sources reveal that India's textile exports are likely to fall short by over
16% from the expected target. This is happening because of an increase in value of money and
slowing down of investment. Shekhar Agarwal, chairman, Confederation of Indian Textile
Industry opines that in 2007, the textile exports in India will not surpass $ 20.5 billion mark,
witnessing a negative growth in exports, specifically in segments like garments. Garments
Page 32 of 89
accounts for about half of the overall textile exports by India. Agarwal also expressed his doubts
about implementing the projected investment of Rs. 1,94,000 crore in the 11th Five Year Plan
(2007-12). Source from Business Standard reveals that the Indian government is expected to
export around 20 % more raw cotton than before.
Indian textile exports to USA and China are growing rapidly. B.K. Patodia, chairman of India's
Cotton Textiles Export Promotion Council, expressed that China and India are speedily
becoming the two biggest textile players in the world.

CRISIL (Credit Rating Information Services of India Limited), India's leading Ratings, Research,
Risk and Policy Advisory Company predicts that India's textile export earnings will increase
from USD 17 billion (FY 2006) to around USD 40 billion by FY(Financial Year) 2011.

Global Trade in Textile and Clothing

In 2003, the overall global trade in textiles and clothing amounted to US $ 385 billion, of which
textiles alone contributed 43%. Developed countries contribute about one third of the total global
exports of textile and clothing.

Page 33 of 89
Leading Indian Textile Mills

Some of the leading Textile Mills in India include

Adarsh Textile Mills : Manufacturer and exporter of good quality woolen and synthetic
blankets.
Amritsar Swadeshi Woolen Mills : Pioneer in manufacturing heavy woolen yarn and largest
manufacturer of fabric.
Aroon Mills : Manufacture of textile auxiliaries
Mohan Thread Mills : Manufacturer of high quality embroidery yarn and threads

Market estimation
In 1997, the overall Indian market for the textile machinery was approximated at USD 895
million and was estimated to grow at an average annual growth rate of 6%.

Factors responsible behind the growth of textile machinery in India

Some of the major factors responsible behind the growth of textile machinery sector are:
➢ An immense demand of Indian apparels and textiles in the international market
➢ Low custom duties on imported textile machinery
➢ Less tight government restrictions on imported goods Major trading partners regarding
import of textile machineries include U.S., Germany, Switzerland and U.K. India ranks
second in the global textile industry and accounts a major portion to the overall Indian
exports. For the sustenance of this growth and to maintain the competence in the
international market, the textile mills in India need to be modernized.

Page 34 of 89
(B) Leading Textile mills in India :-
Some of the major textile mills in India are:
1. Raymond Ltd., Mumbai
2. Grasim Industries Ltd., Nagda
3. DCM Textiles, New Delhi
4. S. Kumars, Kolkata
5. Reliance Industries, Ahmedabad
6. Mafatlal Industries, Mumbai
7. Arvind Mills Ltd., Ahmedabad
8. Ashima Syntex, Ahmedabad
9. NAHAR SPINING, LUDHIANA
10. Hisar Spinning Mills Ltd.
11. Anand Silk Mills, Valsad
12. Titex Silk Mills,Valsad
13. Shree sainath Silk Mills, Valsad
14. Shreeji Trading Company, Surat
15. Garden Silk Mills Ltd., Surat
16. Raj Rayon Ltd., Mumbai
17. The Bombay Dyeing & mfg. Pvt Ltd., Mumbai
18. Shiyaji Silk Mills Ltd, Thane
19. Nirmala Fabrics, Thane

Page 35 of 89
SWOT ANALYSIS OF INDIAN TEXTILE INDUSTRY
Strength
• Post 2005, removal of quota restrictions to give a major boost.
• Export target in textile at USD 50 Billion by 2010.
• Low per capita consumption in India (2.8 vs. Global average of 6.8).
• Cost competitiveness.
Weeknesses
• Fragmented Industry
• Effect of Historical Government Policies
• Technological Obsolescence
Oppurtunities
• Indian companies need to focus on Product Development
• Increased use of CAD to develop designing capabilities
• Investing in Trend Forecasting to enable the growth of industry
Threats
• Competition in Domestic Market
• Need to improve the Working Conditions of the people who are involved in this profession.
• Need to revamp Consumer Consciousness
• Tackle Chinese Aggression over the International Market

Page 36 of 89
RECOMMENDATIONS

• Setting up Textile Industries oriented SEZs

• Starting up new courses like Textile Manufacturing and Textile Technology at ITIs and
Engineering Institutes
• Liberalized labour laws, tax and other benefits of a Special Economic Zone need to be
implemented
• Access to high quality and cost-effective manpower
• Excellent connectivity by road, rail air and ports and Single-window clearance

Page 37 of 89
(C)COMPANY PROFILE

OSWAL WOOLLEN MILLS LIMITED (OWM) is a flagship company of the Nahar group of
the companies. The Nahar Group is an industrial conglomerate based at Ludhiana in Punjab with
the group turnover in excess of Rs. 19000 million. The Nahar Group is one of the oldest and
well recognized businesses in India. The company was incorporated in 1949 by late Mr. Vidiya
Sagar oswal. Father of jawahar lal Oswal. The company’s present chairman and managing
director. The company is one of the pioneers of the organized Indian woollen hosiery industry.
The company made a beginning as a manufacturer of hosiery items. Which was followed by
setting up a worsted woollen spinning plant of 800 spindles in 1954 {today .4 million spindles}
to serve as a backward integration of the then existing manufacturing activities. The company
believes that this worsted woollen spinning in the northern India.
Matching ahead in the journey pace with overall industrial development in India the company is
now a a vertically integrated woollen textile company, having presence in diverse market, with
wide range of products including wooollen hosiery and cotton garments. In company’s woollen
hosiery segment, we start our operations with import of raw greasy wool mostly from Australia
and company products include various types of specialty yarns, such as, worsted woollen yarn,
acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting and hosiery
garments etc. The company subsequently added cotton garments to company existing product
portfolio during fiscal 2002, which we outsource as per our requirements and sell under company
own brand name. Since march 2006, the company have started manufacture of indigo dyed
specialty denim fabric, which has added to our existing range of product portfolios.
The company manufacture facilities are spread across various locations in and around Ludhiana
in Punjab fully backed by the facilities for product, design studio and efficient sampling
infrastructure to provide quality products to our customers. Currently, The company over 4000
persons and company present manufacturing facilities include 26,248 spindles to manufacture
worsted woollen yarn besides machines, knitting, dyeing and finishing. Presently, the company
manufacturing facilities are producing approximately 2.5 million lbs of wool tops per annum,
7,50,000 pieces of readymade knitted garments per annum and 1 million meters of denim fabric
per annum.
Page 38 of 89
The company are registered owners of well-known trade name “MONTE CARLO” for selling
company woollen hosiery and cotton garments ‘monte carlo’ has been recognized as
‘superbrand’ for woollen hosiery garments since fiscal 2003 by international society of
superbrands. The company distribution channel comprises of a mix ‘ monte carlo exclusive
brand outlets’, network of national chain stores and multi brand outlets. The company products
in woollen hosiery segment are also sold under the brand name “CANTERBURY” , for premium
quality woollen hosiery garments and “OWM” for company specialty woollen yarn etc.
including the hand knitting yarn. The company also have landed properties admeasuring
approximately 5.01 acres in gurgaon and 12.70 acres in Chennai which have been leased have
been leased out and are contributing significantly to the overall revenue and profitability of the
our company. These properties are apart from the landed properties that we own in and around
ludhina in which company manufacturing facilities are based.
The company total income and restated profit after tax in fiscal 2006 were at Rs. 2532.85 million
and 148.48 million 148.48 million respectively. For the six months ended September 30, 2006,
the company restated total income and restated profit after tax were at Rs. 1427.93 million and
Rs. 101.57 million respectively.

Page 39 of 89
GROUP OF COMPANIES

 Oswal Woollen Mills Ltd.

 Nahar Spinning mills Ltd.
 Nahar Exports Ltd.
 Nahar international Ltd.
 Oswal Cotton Mills Ltd.
 Nahar Industrial Enterprise Ltd.
 Nahar Industrial Infrastructure Corp. Ltd.
 Nahar Sugar & allied industrial Ltd.
 Rishab Spinning Mills
 ArhamSpinning Mils

Page 40 of 89
Page 41 of 89
GENERAL INFORMATION
Registrar office of OSWAL WOOLLEN MILLS LTD.:-
OSWAL WOOLLEN MILLS LIMITED
G.T. ROAD, SHERPUR,
LUDHIANA, 141003, PUNJAB {INDIA}
TEL: +91 161 2542501
FAX: +91 161 2542509
WEBSITE: www.owmnahar.com

Address of registrar of companies:-

Registrar Of Companies Punjab, Himachal Prdesh And Chanigarh
Kothi No.286,
Defense colony,
Jalandhar 144001,\
Punjab India.

Company secretary and compliance officer

Mr. Nitin Sharma
G.T. Road, Sherpur,
Ludhiana 141003 Punjab India.
Tel: +91 161 2542501-07
E-mail: owmipo@owmnahar.com

Page 42 of 89
MANAGEMENT
The following persons constitute the company’s board of directors:-
a) Mr. Jawahar Lal Oswal, chairman and managing director;

b) Mr. kamal oswal, director;

c) Mr. Dinesh Oswal, Director;
d) Mr. Sandeep Jain, executive director;
e) Mr. Dinesh Gogna, Executive director corporate finance and taxation;
f) Dr. O.P. Sahni, Independent additional director;
g) Mr. Amarjeet Singh, Independent director;
h) Dr. Ms. H. K. Bal, Independent additional director;
i) Mr. K.S. Maini, Independent additional director; and
j) Dr. Suresh Kumar Singla, Independent additional director.
FINANCE CONTROLLER OF OSWAL WOOLLEN MILLS LTD.
MR. R.M.SOOD

Page 43 of 89
COMPANY BUSINESS PHILOSOPHY
The business, which started with a modest beginning 0f 800 spindles for worsted spinning to
become a large woollen textile player believes in the philosophy ‘ success is tradition and growth
is imperative’. Since beginning company focus has been achieving economies in the scale of
production, rationalize cost, integration of operations thereby increase the revenue from year to
year.
The company view on costs has never refrained from rewarding the work force of company.
Until date we have enjoyed cordial with company work force at all levels, keeping in mind
company philosophy and to meet out any contingency company have always developed second
line of key managerial personnel. Company human resource development policy are designed to
motivate achieve goal and excellence in management. The company have always remained
conscious about prevalent fashion and design and quality translated into high level of consumer’s
satisfaction. Company has also kept fully abreast with latest trend prevailing in domestic as well
as international markets. The company philosophy is not only to earn profit but prosperity of
other stakeholders.

Company competitive strengths

 Extensive experience of company promoters

 Owners of well known and established brands of ‘Monte Carlo and OWM’
 The landed property in Gurgaon and Chennai
 Fully integrated woollen operations
 Wide and various ranges of products
 Quality standard

Page 44 of 89
OWM key strategies

 Established Monte Carlo as on all seasons pan India brand

 Further strengthening company retail presence
 Increasing product range
 Foraying into kids wear
 Cost reduction
 Enhancing manufacturing capacities

Page 45 of 89


(D)Company major events

Year Event
1949 Company worsted was incorporated as public limited company with a woollon
hosiery knitwear unit, a worsted spinning plant, barrack blanket weaving and
finishing plant at unit no. 1 at miller Gang, Ludhiana.
1950 First worsted spinning plant at unit 1. G.T. Road, Miller Ganj, Ludhiana.
1960 Set up unit no. 3 at G.T. Road, Sherpur, Ludhianafor combing spinning dyeing,
weaving and processing.
1968 Commenced export of knitted hosiery.
1969 Set up vanaspati manufacturing plant at unit no. 3, G.T. Road, Sherpur, Ludhiana.
1972 Set up unit no. 5 at industrial area’ A’, Ludhiana for manufacturing woollen hosiery
knitwear.
1973 Set up a new Vanaspati plant at Chennai, Tamilnadu.
1974-1985  Launched our “MONTE CARLO” brand.
 Established an OWM export house
 Received recognition as an export house under the EXIM policy
 Recognized as one of the first five “trading house” under the EXIM policy
1981-82
 Outbreak of fire at our office G.T. Road Miller Ganj, Ludhiana.
1993 Set up a unit no. 4 at G.T. Road Ludhiana, a lamb’s wool plant, to produce high
value, fine micron lamb’s wool yarn for top class knitwear.
1995 Launched “CANTERBURY” brand.
1998 Closed company vanaspati and vegetable oil unit at Chennai and Ludhiana.
2002 Extended the application of “MONTE CARLO” brand to cotton segment.
2004 Commenced operations for augmentations and up-gradation of spinning and
knitting capacities started at unit no. 3.
2005 Operationalisedthe co-generation and up-gradation of spinning and knitting
capacities started at unit no. 3
2006  The first phase of the denim plant at Lalru, Punjab was commited.
 Started appointment franchises for retail outlets for marking our own
products as well as products imported from abroad/outsourced from
manufacture of repute.
Page 46 of 89
Page 47 of 89
(E)AWARDS
 Nahar Group has been honored with prestigious National Export Award for outstanding
export performance and also, the Texprocil Trophy by the Textiles Export Promotion council
for outstanding export performance in yarn.
 1995 to 1999 “best exhibited product” by the Woolmark Company for ‘Monte Carlo’ woollen
hosiery garments.
 ‘Super brand’ recognition for ‘Monte Carlo’ woollengarments by international society for
super brands.

Page 48 of 89
(F) PRODUCTS
Yarn Products

Nahar Group surges ahead to establish itself as a reputed Industrial Conglomerate with a wide
ranging portfolio of yarns that offers every thing. A desiring customer can look for :
 100% Cotton Yarns
 100% Cotton Dyed yarns
 100% Polyester Yarn
 Industrial Yarns
 Open end yarns
 Open end slub yarns
 Blended yarns
 100% Acrylic Yarns
 .Industrial Yarns
 Specialized Yarns

Page 49 of 89
Fabric Products

Blends:- 100% Cotton & Cotton Blends (Poly-cotton, Cotton-Stretch & Cotton-Tencil etc.)
Woven Vibrancy:- Twills, Dobbies, Broken Twills, Ripstop, Ottoman, Chinos, Satins, Tussors,
Bedford Cord, Cavallery Twill, Canvas, Gabardine…………..
Utility:- Garments (Tops, Bottom & Outerwear)
GSM :- 100 gms to 330 gms
Yarns Used:- Single & Double Count with different counts (7’s and 60’s) technologies such as
open end, Ringspun, Combed, Compact, Multicount & Slubs

Performance Fabrics

• High Density constructions

• AIRO Finish
• Bio Polish
• Nano Care
• Soil Release
• Microsanding
• Anti Bacteria
• Frost Free
• Wrinkle Free
• Stain Guard

Page 50 of 89
Sugar products

NAHAR SUGAR represents the Group’s concerted thrust towards exploring new need based
areas in tune with the larger context of customer needs and market demands.
Established in 1993 as Nahar Sugar & Allied Industries Limited (NSAIL) in the assisted sector
with PSIDC presently is a unit of Nahar Industrial Enterprises Limited (NIEL), as a result of
NSAIL’s merger with Nahar Industrial Enterprises Limited in 2005.
• Installed capacity of 2,500 tons of cane crushed per day (“TCD”) at District Fatehgarh Sahib,
Punjab for producing all types and grades of sugar and allied products.
• Cogeneration power plant of 8 MW.
• Excess power generated by the sugar business is utilized in the company’s other businesses.
Upcoming product of company
Corduroy

Page 51 of 89
EXPORT MARKETS

Usa, United Kingdom, Germany, Russia, Japan, Australia, New-Zealand, Holland, Thialand,
Hong-Kong, Singapore, Taiwan, South Korea, Malaysia, Mauritius, Dubai, Bahrain, South
Africa, Canada, Egypt, Israel, and Bangladesh.

Page 52 of 89
OBJECTIVES OF THE STUDY
&
RESEARCH METHODOLOGY

Page 53 of 89
OBJECTIVES OF STUDY

The chief objective of the current study is to analyses short term capital investment and
management of the present company;
1:- To know the working capital requirement of the company.
2:- To know liquidity position of the company.
3:- To find the future need of the working capital management in running organization.

Page 54 of 89
RESEARCH METHODOLOGY

RESEARCH
Research in common parlance refers to a search for knowledge. One can also define research as a
scientific and systematic search for pertinent information on a specific topic. Research is an
academic activity as such the term should be used in a technical sense. Research refers to:

➢ Defining and redefining problem

➢ Formulating hypothesis or suggested solutions
➢ Collecting, organizing and evaluating data
➢ Making deductions and reaching conclusions
➢ At last carefully testing the conclusions to determine whether they fit the formulating
hypothesis.

RESEARCH PROCESS
Research process consists of series of action or steps necessary to effectively carry out research.
These steps are to be followed in the same sequence. These steps are as follows:
➢ Specifying research objective
➢ Preparing a list of needed information
➢ Designing the data collection project
➢ Select a sample size
➢ Organizing and carrying data and reporting the findings.

Page 55 of 89
SOURCES OF DATA

The sources of data means from where we have to get data. There are mainly two sources of
data. These are:

PRIMARY DATA:

Depending upon the nature of the problem, primary data can be collected through various
methods. In this study, personal interviews with senior officials of different departments of
corporate office, with OSWAL WOOLLEN MILLS LIMITED and various members of finance
and accounts department of the company.

SECONDARY DATA:

The secondary data are those data which have already been collected by someone else and which
have already been passed through statistics process. I get published data as maintained by
company like company manuals, annual reports balance sheets etc.
Data collected through websites also.

REPORT WRITING AND PRESENTATION

Report encompasses- charts, diagrams

Page 56 of 89
Page 57 of 89
WORKING CAPITAL ANALYSIS

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate amount of
working capital is very much essential for the smooth running of the business. And the most
important part is the efficient management of working capital in right time. The liquidity position
of the firm is totally effected by the management of working capital. So, a study of changes in
the uses and sources of working capital is necessary to evaluate the efficiency with which the
working capital is employed in a business. This involves the need of working capital analysis.
The analysis of working capital can be conducted through a number of devices, such as:
1. Ratio analysis. 2. Fund flow analysis. 3. Budgeting.
1. RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another. The technique of ratio analysis
can be employed for measuring short-term liquidity or working capital position of a firm. The
following ratios can be calculated for these purposes:
1. Current ratio. 2. Quick ratio
3. Absolute liquid ratio 4. Inventory turnover.
5. Receivables turnover. 6. Payable turnover ratio.
7. Working capital turnover ratio 8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.
2. FUND FLOW ANALYSIS
Fund flow analysis is a technical device designated to the study the source from which additional
funds were derived and the use to which these sources were put. The fund flow analysis consists
of:
a. Preparing schedule of changes of working capital
b. Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position (working capital)
business enterprise between beginning and ending of the financial dates.

Page 58 of 89
 KEY WORKING CAPITAL RATIOS
The following, easily calculated, ratios are important measures of working capital utilization.

Ratio Formulae Result Interpretation

Stock Average Stock= xOn average, you turn over the value of
Turnover * 365/ days your entire stock every x days. You may
(in days) Cost of Goods need to break this down into product
Sold groups for effective stock management.
Obsolete stock, slow moving lines will
extend overall stock turnover days. Faster
production, fewer product lines, just in
time ordering will reduce average days.
Receivable Debtors * 365/ = xIt takes you on average x days to collect
s Ratio Sales days monies due to you. If your official credit
(in days) terms are 45 day and it takes you 65
days.
One or more large or slow debts can drag
out the average days. Effective debtor
management will minimize the days.
Payables Creditors *= xOn average, you pay your suppliers every
Ratio 365/ days x days. If you negotiate better credit
(in days) Cost of Sales terms this will increase. If you pay earlier,
(or Purchases) say, to get a discount this will decline. If
you simply defer paying your suppliers
(without agreement) this will also
increase - but your reputation, the quality
of service and any flexibility provided by
your suppliers may suffer.

Page 59 of 89
Current Total Current= xCurrent Assets are assets that you can
Ratio Assets/ times readily turn in to cash or will do so within
Total Current 12 months in the course of business.
Liabilities Current Liabilities are amount you are due
to pay within the coming 12 months. For
example, 1.5 times means that you
should be able to lay your hands on $1.50
for every $1.00 you owe. Less than 1
times e.g. 0.75 means that you could
have liquidity problems and be under
pressure to generate sufficient cash to
meet oncoming demands.
Quick (Total Current= xSimilar to the Current Ratio but takes
Ratio Assets -times account of the fact that it may take time
Inventory)/ to convert inventory into cash.
Total Current
Liabilities
Working (Inventory +As %A high percentage means that working
Capital Receivables -Sales capital needs are high relative to your
Ratio Payables)/ sales.
Sales

Page 60 of 89
Statement showing change in working capital for oswal woollen mills ltd:-

(Rs. in lacs)
Particulars 07-08 08-09 Increase ( + ) Decrease (- )

Current Assets
Inventories 12800.83 18715.45 5914.62 --
Sund. Debtors 6186.63 7894.50 1707.87 --
Cash & Bank 2930.89 275.00 -- 2655.89
Loan & Advances 7201.48 3775.00 -- 3426.48
Total ( A ) 29119.83 30659.95

Current Liabilities
C.L.and provisions 8872.37 10160.2 -- 1287.83
Total ( B ) 8872.37 10160.2

( A-B ) 20247.46 20499.75 7622.49 7370.20

↑ in working capital 252.29 252.29
Total 20499.75 20499.75 7622.49 7622.49

Page 61 of 89
Statement showing change in working capital for oswal woollwn mills Ltd.:

( Rs.in lacks)
Particulars 08-09 09-10 Increase ( + ) Decrease ( - )
Current Assets
Inventories 18715.45 22094.36 3378.91
Sund. Debtors 7894.50 9830.00 1935.50
Cash & Bank 275.00 2740.00 2465.00
Loan & Adv. 3775.00 3971.50 196.5
Total ( A ) 30659.95 38635.86
Current Liabilities
C.L. & provisions 10160.2 11430.36 1270.36
Total ( B ) 10160.2 11430.36

( A-B ) 20499.95 27205.50 7975.91 1270.36

↑ in working capital 88.93 6705.55
Total 27205.50 27205.50 7975.91 7975.91

Page 62 of 89
CALCULATION OF WORKING CAPITAL FOR OSWAL WOOLLEN
MILLS LTD.

(Rs.inlacks)

YEAR 31.03.08 31.03.09 31.03.10

CURRENT ASSETS

INVENTORIES 12800.83 18715.45 22094.36

SUNDRY DEBTORS 6186.63 7894.50 9830.00

CASH AND BANK 2930.89 275.00 2740.00

LOANS & ADVANCES 7201.48 3775.00 3971.50
29119.83 30659.95 38635.86
TOTAL CURRENT ASSESTS
LESS:-

CURRENT LIABILITIES AND PROVISIONS

C.L. & PROVISIONS 8872.37 10160.2 11430.36
TOTAL C.L. 8872.37 10160.2 11430.36
NET CURRENT ASSETS 20247.46 20499.75 27205.50

BANK BORROWINGS FOR 13821.40 12500.00 15000.00

W.C.
NET WORKING CAPITAL 6426.06 7999.75 12205.50

Page 63 of 89
ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL

INVENTORY ANALYSIS

Inventory is total amount of goods and materials content in a store of factory at any given time.
Inventory means stock of three things:-

1. Raw materials
2. Semi finished goods.
3. Finished goods.

POSITION OF INVENTORY IN OSWAL WOOLLEN MILLS LTD

(Rs.inlacks)

PARTICULAR 2008 2009 2010

STORES 587.19 482.00 548.25
RAW MATERIAL 6473.42 9746.10 11705.50
FINISHED
3834.44 5554.20 6500.47
GOODS
W.I.P 1905.78 2947.15 3340.14
TOTAL 12800.83 18729.45 22094.36

Page 64 of 89
Analysis through chart:

INTERPRETATION:

As we analyze the financial statements of the company we come to know that the sale of the
company increases so as we know that the sales increases due increase in the demand of the
product. So in order to meet the demand of the customers company has to increases its
production. And in order to increase the production company needs more raw materials. so we
can see that Raw material for the financial year 2008 was 6473.42 and it is increase to 9746.1
and then it is increased to 11705.5 for the year 2010. So, we can say that raw material is
increased by 3272.68 in 2009 and then 1956.4 for 2010. This is necessary for smooth production
so that there is no shortage of raw material, and also to avoid the un necessary delays in
production.

SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and fall under
current assets. Debtors will arise only when credit sales are made
Position of Sundry Debtors in OSWAL
(Rs.inlacks)

PARTICULAR 2008 2009 2010

Receivable other than 5696.31 7457.00 8955.00
export and deferred
Export receivable 490.32 437.50 875.00
TOTAL 6186.63 7894.50 9830.00

Page 65 of 89
Analysis through chart:

INTERPRETATION
As we analyze the above table we come to know that debtors in 2009 it increases by 1707.87 and
in 2010 by 1935.5. So we can say that credit sales of company also increases because debtors
and bill receivables only arises when credit sales are made.

CASH AND BANK BALANCE ANALYSIS

Cash is called the most liquid asset and vital current assets, it is an important component of
working capital.

Position of Cash and Bank Balance in OAWAL

(Rs.inlacks)

PARTICULAR 2008 2009 2010

CASH IN HAND & 2930.89 275.00 2740.00
WITH BANK
TOTAL 2930.89 275.00 2740.00

Analysis through chart:

Page 66 of 89
INTERPRETATION

From the above table we can see that Cash balance of the company is decreased to 275.00 from
2930.89 in financial year 2009 and in 2010 it is increased to 2740.00. So we can say that cash
balance of the company is very much fluctuating in 2009 and 2010. It means there is lack of
proper method and technique to maintain liquidity position of the company.

LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties, company, employees
for a specific period of time and in return they will be liable to make timely repayment of that
amount in addition to interest on that loan.

Position of Other Loans & Advances in OSWAL

(Rs. in lacks)

PARTICULAR 2008 2009 2010

ADVANCE TO SUPPILERS 1533.27 1450.00 1490.00
ADVANCE PAYMENT OF 705.65 ------ ------
TAXES
PREPAID EXPENSES & 2378.11 2250.00 2335.00
ADVANCES
DUTY DRAWBACK & CASH 82.18 75.00 146.50
INCENTIVES
INVESTMENT OTHER THAN 2502.27 ----- ------
LONG TERM
TOTAL 7201.48 3775.00 3971.50

Page 67 of 89
Page 68 of 89
Analysis through chart:

INTERPRETATION

From above we can see that the advance payment supplier is decreased by 5.43% for the
financial year 2009 from 1533.27 of the previous 2008 and then it is increased by 2.75% in 2010
i.e. 1490 so we can say that advance payment to the supplier is increased in 2010.so we can say
that company want to take advantage of cash discount which is provided by the supplier for the
advance cash payment made by the Company and it also have positive impact on goodwill of
company and it’s the sign of satisfactory financial position of the company.

Page 69 of 89
CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis or current
liabilities that has to be paid by the firm with in one year.

Position of Other Current Liabilities in OSWAL

(Rs.inlacks)

PARTICULARS 2008 2009 2010

i. Creditors for purchases 2716.71 3726.00 4278.00
ii. Bills payable under L/C for raw 3016.18 2475.80 2900.00
material
iii. Advance received from 225.14 300.00 357.00
customers
iv. Accrued expenses 1271.96 1402.50 1475.00
v. Statutory liability 257.86 290.00 332.00
vi. Installment of fixed asset loans 1380.96 1965.90 2088.36
due to within a year
TOTAL 8872.37 10160.20 11430.36

Page 70 of 89
Analysis through chart:

INTERPRETATION

If we analysis the whole current liability we can see that current liability is increased by 1287.83
and 1270.16 for the financial year 2008-09 and 2009-10 respectively. It is increasing by 13.5
respectively. If we see only creditors for purchase we got can say that in 2009 it is increased by
1009.29 in 2009 from 2716.71 for the financial year of 2009 and it is increased by 552 in 2010.
So we can say that the purchase of the company is increasing in all financial year annually
increased by 12% and we can also see that advances received from customers are also increasing
that is in 2009 it is increased by 74.86 from 225.14 and 57 in 2010. So we can say that more cash
is coming so we can say that liquidity position of the company becoming strong.

Page 71 of 89
WORKING CAPITAL RATIO’S OF COMPANY

GROSS PROFIT RATIO OF OSWAL WOOLLEN MILLS Ltd.

Gross Profit Ratio
Gross Profit * 100
Sales
2008 2009 2010
Gross Profit ratio: - 18.11 17.99 18.82

ANALYSIS THROUGH CHART

Interpretation

Gross profit ratio of the company is 18.11% for the year 2008 and it is decreased to 17.99% in
2009. It is because the cost of the company has minor increase because of increase in raw
material cost. Then company’s gross profit ratio increased to 18.82 which is best for company so
we can say that company’s position is strong for the financial year 2010.

Page 72 of 89
NET PROFIT RATIO OF OSWAL WOOLLEN MILLS Ltd.

Net Profit Ratio

Net Profit * 100

Sales

2008 2009 2010

Net Profit ratio: - 4.72 4.02 5.38

Analysis through chart:

Interpretation

Company’s net profit is 4.72% in the year 2008 and then it is decreased to 4.02 in 2009. But in
2010 by covering minor decrease in previous year with, 70%. But from above data and by seeing
the overall earning we can say that company is in good position.

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POSITION OF RECEIVABLE RATIO IN OSWAL
FORMULA
DEBTORS
RECEIVABLE RATIO = ---------------- * 365
SALES
YEAR 31.03.2008 31.03.2009 31.03.2010
RECEIVABLE RATIO (IN DAYS) 62 65 70
Analysis through chart:

INTERPRETATION

From the above table and diagram we can say that company has good debt collection period
because the company have low debt collection period. But the companiesdebt collection period
for the year 2008 is 62 and then it is increased to 65 in 2009 then 70 in 2010. So we can say that
the company’s debt collection period is increasing averagely by 4 days per year. We can say that
the company has no impact on slow down of economy. So we can say that overall position of the
company is satisfactory.

Page 74 of 89
POSITION OF PAYABLE RATIO IN OSWAL

FORMULA
CREDITORS
PAYABLE RATIO= -----------------------------
PURCHASES

YEAR 31.03.08 31.03.09 31.03.10

PAYABLE RATIO (IN DAYS) 85 70 78

Analysis through chart:

INTERPRETATION
Oswal woollenmills ltd has good payable ratio like receivable ratio. The company has averagely
77 days of payable ratio. So it is good for company because lower the payable ratio means the
company liquidity position is strong.

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Page 76 of 89
POSITION OF CURRENT RATIO IN OSWAL

FORMULA
TOTAL CURRENT ASSETS
CURRENT RATIO= --------------------------------------------
TOTAL CURRENT LIABILITIES

YEAR 31.03.08 31.03.09 31.03.10

CURRENT RATIO 1.28 1.35 1.46

Analysis through chart:

INTERPRETATION

The current ratio of the unit is less than standard. The current ratio should be 2:1 but it is not. But
the company have 1.28 in 2008 1.35 in 2009 and 2.46 in 2010. So we can say that the company
is in not in position as it need.

Page 77 of 89
POSITION OF QUICK RATIO IN OSWAL

FORMULA

TOTAL CURRENT ASSETS - INVENTORIES

QUICK RATIO= -----------------------------------------------------------------
TOTAL CURRENT LIABILITIES

YEAR 31.03.08 31.03.09 31.03.10

QUICK RATIO 0.72 0.53 0.63

Analysis through chart:

INTERPRETATION

Page 78 of 89
If we consider the data of the company we can say that this ration is also not matching with
standard that is 1:1. The company have quick ration .72 in 2008 than it is decreased to .53 in
2009 and then it increased to .63 in 2010.

Page 79 of 89
POSITION OF INVENTORY TURNOVER RATIO OSWAL

FORMULA

CLOSING STOCK
STOCK TURN OVER RATIO (IN DAYS) = ----------------------------------- * 365
COST OF GOODS SOLD

YEAR 31.03.08 31.03.09 31.03.10

STOCK TURNOVER RATIO 127 154 156

(IN DAYS)

Analysis through chart:

INTERPRETATION

Inventory turnover ratio increasing of the company. Inventory turnover ratio is higher in the
2010. This is because effect of the raw material. The company is using its inventory in a good
manner.

Page 80 of 89
POSITION OF DEBT-EQUITY RATIO IN OSWAL

Formula = Debt / Equity

Calculation of debt-equity ratio at OWL:

Particulars 2007-08 2008-09 2009-10

Long Term Debt 18779.64 17511.01 16713.49
Net Worth 13290.28 15472.58 18911.22
D/E Ratio 1.41:1 1.13:1 0.88:1

Analysis through chart:

Interpretation

Oswal Woollen Mills Ltd. has a decreasing trend in d/e ratio so we can say that it is using its
funds and not taking loans from banks. Equity is more than debt that shows a very strong
position in whole market. Using lower debts decreases the cost as well as risk. So company is in
good position.

Page 81 of 89
Page 82 of 89
MAJOR FINDINGS
Statement Showing Difference from Previous Year OF OSWAL
(amt. in lacks)

Particulars 06-07 07-08

Investments 40.44 3.87

by 2.94% by 0.29%
Inventories 2032.18 1317.70
by 21.50% by 11.48%
Sundry Debtors 762.68 1278.06
by 18.40% by 26.04%
Cash & Bank 454.61 2374.67
by 447.41% by426.93%
Current Liabilities 4216.26 -2141.37
by 60.50% by 19.14%
General reserve 1402.72 2127.56
by 25.03% by 30.36%

Page 83 of 89
CONCLUSION

Page 84 of 89
 CONCLUSION

By concluding the study about the working capital it is find that working capital management of
Oswal woollen mills ltd. Is too good. Oswal woollen mills ltd. Has sufficient funds to meet its
current obligation every time which is due to sufficient profits and efficient management of
Oswal woollen mills ltd.
Cash management and receivable management are too much good because of centralized control
on these. Raw material for the all units of oswal group is purchased by corporate office in bulk
which Is the best way. Safety measures for inventories are also quiet sufficient in company.
Overall the working capital management of oswal woollen mills ltd is very much efficient.

Page 85 of 89
Page 86 of 89
 SUGGESTIONS
SUGGESTIONS
 Management should make the proper use of inventory control techniques like fixation of
minimum, maximum and ordering levels for all the items for less blockage of money.
 The unit should also adopt proper inventory control like ABC analysis etc. This inventory
system can make the inventory management more result oriented The EOQ can be followed
in stores
 Due to competition prices are market driven and for earning more margin company should
give the more concentration on cost reduction by improving its efficiency
 The investments of surplus funds are made by the corporate office and the unit is not
generally involved while taking decisions with regard to structure of investment of surplus
funds. The corporate office should involve the units so as to better ascertain the future
requirements of funds and accordingly the investments are made in different securities.
 The company is losing its overseas customers due to decrease in exports so the sufficient
amount of exports should the maintained.

Page 87 of 89
Page 88 of 89
 BIBLIOGRAPHY
References
1. Stephen Bush (2008) “Seizing new treasures with aggressive cash management” cash
flow magazine Paper No- 02-01.
2. Bebehuk L. and L. stole (2009) “Organize Turn tax dollars into working capital” Rush,
George pg- 02-01.
3. Allensius (2009) “MANAGEMENT WORKING CAPITA” Working Paper No- 02-01.

4. Gamble, Richard H. (2005) “Working capital managers: muscling into a larger role”
Cash flow Magazine 0196-6227
BIBLIOGRAPHY
➢ BOOKS
Financial management: Pandey IM, vikas publishing house.

 ANNUAL REPORTS OF OWM

➢ WEBSITES
 http://www.owmnahar.in/
 http://www.economywatch.com/business-and-economy/textile-industry-overview.html
 http://www.economywatch.com/business-and-economy/textile-mills.html
 http://www.allprojectreports.com/working_capital_analysis/working_capital_analysis.h
tm
 http://www.faqs.org/abstracts/
 journal.org/submissions/isfa2009_submission_13.doc+abstract+of+working+capital&cd
=24&hl=en&ct=clnk&gl=in

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