Alok Finance

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)
INTRODUCTION TO FINANCE
It would be worthwhile to recall what Henry ford once remarked Money is an arm or
a leg; you either can use it or lose it. This statement throws light on the significance
of money or finance. A budding concern may need a small amount of money and yet it
may be difficult for it to commence business simply because it is not in the position to
get required funds. A firms success and survival mainly depends upon its ability to
generate sufficient funds when need arises. Finance holds the key to all the activities.
The role of financial manager, that is, the one who is in charge of the finance function,
is difficult because he has to play that role and relate it to the role of other managers.
DEFINITIONS OF FINANCE
Ray G. Jones and Dean Dudley observe that the word finance comes indirectly from
the Latin word Finis. Finance is defined as the issuance of the distribution of and the
purchase of liability and equity claim issued for the purpose of generating revenueproducing assets. These claims are commonly referred to as financial claims.
According to Paul.G.Hasings, Finance Is the management of the monitory affairs of
the company. It includes determining what has to be paid for and when, raising the
money on the best terms available, and devoting the available funds to the best uses.
Kenneth Midgely and Ronald Burns define financing as a process of organizing the
flow of funds so that a business can carry out its objectives in the most efficient
manner and meet its obligations as they fall due.
FINANCE FUNCTIONS
Finance function is a task of providing the funds required by an enterprise on the terms
most favourable to it in the light of the objectives of the business. This long-held
concept has the merit of highlighting the core of the finance function keeping the
business the most suitable way and, on the best possible terms, is the central part of the
finance supplied with enough funds to accomplish its objectives. Getting the required
funds in job
Finance presents itself in a broad spectrum of activities. There are a number of basic
functions underlying finance. It is an essential, and at the same time a very distinct,
segment of the overall managerial function. It is the lifeblood of any business activity
and no business function can be
discharged without it. Finance must be used judiciously. It has to be systematically
controlled and regulated so that it may contribute to the different functions of business
administration. If the finance function is properly blended with production, marketing,
personnel, accounting and other business functions, the wastage of funds can be
avoided.
FINANCIAL PLANNING
In simple words financial planning means deciding well in advance as to how much
finance is required, when is it required, what are the sources through which finance is
available and how should it be put to use, so as to obtain organizational objectives.
The aim in financial planning should be to match the needs of the companies with
those of investors with a sensible gearing of short term and long-term interest
securities.

Financial planning helps the financial manager to see the financial situations clear of
stress and strains and to develop a deep insight-an essential prerequisite for financial
stewardship. The importance of financial planning lies essentially in the fact that it
enables the financial manager to develop a diagnostic skill of analyzing complex
situations and arriving at suitable solutions.
STEPS INVOLVED IN FINANCIAL PLANNING

The various steps involved in financial planning are as follows:
1. Establishing objectives:
Every business enterprise will have to establish its financial objectives. It will
have to state how much capital is employed in various factors of production over
the long run and how much productivity can be ensured through the employment
those factors. It would be necessary for every business enterprise to stipulate
both short-run and long run objectives so that it may operate in a dynamic
society.
2. Policy formulation:
Financial policies will have to have a thrust on following policies:
Determining the control by the parties who furnish the capital. For example,
if debt exceeds in unassuming portions, it would obviously mean dilution of
control.
Acting as a guide in the use of debt or equity capital. For example, the business
enterprise will have to state clearly its plans about the debt-equity proportions.
Guiding management in the selection of the source of funds. This also

means the financial plans should state which source of funds should be drawn
upon
by a business enterprise in various time phases.
3. Forecasting:
Forecasting is usually done on the basis of facts; but facts do not become
readily available, more particularly when they are addressed to the future. In
that case, financial management will have to forecast the future predicting the
variability of the factors influencing the type of policies the enterprise intends
to formulate.
Formulation of procedures:
Policy for formulation must invariably be backed up by suitable procedures,
for financial policies procedures which are broad guidelines which must be
capable of being translated into detailed procedures. Very often, there is a gap
between financial plans and h results in chaotic conditions in a business
enterprise. Financial managers often take shelter under the plea that the right
type of procedures are not available to support the accomplishment of the
goals and objectives of the firm, where as the chief executives grumble over
the short comings inherent in the procedures because they are not able to
accomplish the plans by reason of the fact that procedures do not support
financial plans.
Factors to be considered while estimating financial requirements.
Cost of finance.
Availability of funds.
Repayments.
Interest.
Position of assets.
Control.
Risk.
Seasonality.
Estimating costs of other functions.
Fixed assets requirements.
Expenditure on current assets.
Budgetary appropriations.
Distribution system.
Break-even.
Provision for contingencies.
PART A.INTRODUCTION TO THE INDUSTRY

In India, traditional beer has been prepared from rice or millet for
thousands of years. In the 18th century, the British introduced European
beer to India. One-third of Indians don't consume alcohol due to religious
and cultural reasons. The consumption of beer compared to other
alcoholic beverages with high alcohol content, like whisky, is low.
History
Traditional beer
Traditional beer vats in Meghalaya

Beer was not unknown in India before the arrival of Europeans. The Vedas mention a
beer-like drink called sura. It was the favourite of the god Indra. Sura is also
mentioned in the Ramayana. Megasthenes has recorded usage of rice beer in India.
Kautilya has also mentioned two intoxicating beverages made from rice called Medaka
and Prasanna.

Rice beer or handia has been traditionally prepared by indigenous tribes of India, in
which Ruellia suffruticosa is sometimes added for flavor. Rice beer also has
ceremonial use among the Asur people. Millet beer is also prepared by some tribes.
According biologist J. B. S. Haldane, local beer helped in keeping diseases like beri
beri checked in these tribes. Recently, government and social workers have been trying
to curb alcohol usage among these tribes. Elephant herds have been known to attack
villages to drink this rice beer for which they have acquired a taste.
European beer
Mohan Meakin logoEuropean-style beer was introduced in India by the British. By 1716, pale ale
and Burton ale were being imported to India from England. To protect the beer from spoiling during the
long journey, it had to had high alcohol content and hops were added to the it. This led to the invention
of India pale ale in about 1787 by Bow Brewery.
In 1830, Edward Dyer travelled to India and set the up India's first brewery in Kasauli.
It produced the beer brand Lion, which is still available. In 1835, the Kasauli brewery
was shifted to Solan near Shimla. In 1885, it was incorporated as Dyer Breweries.

Later, more brewries were built across India, Burma and Sri Lanka, and added to it.
Later, H. G. Meakin bought the Solan brewery and added some more. It came to be
known as Dyer-Meakin & Company. By the year 1882, there were 12 breweries in
India in all, including one in Rangoon.
In the year 1892, 4,831,127 gallons of beer was produced in India. Out of this
2,748,365 gallons were purchased by commissariat and rest was left for consumption
by the civilian population. But, British soldiers reportedly didn't like local beer and
preferred imported beer which they were able to acquire cheaply.
In 1937, Burma was separated from India and the company lost its Burmese assets.
The company was restructured and renamed as Dyer Meakin Breweries. It was listed
on the London Stock Exchange. In 1949, N. N Mohan acquired all the assets of Dyer
Meakin Breweries and added a few more units. In 1967, the company was renamed to
Mohan Meakin Breweries.
Modern
A bottle of Kingfisher Premium

In recent years, foreign companies have been entering India and acquiring local
businesses. In 1999, United Breweries floated a subsidiary called Millennium
AlcoBev. It was a joint venture between United Breweries, UK-based Scottish &
Newcastle and Ravi Jain. In 2000, SABMiller India entered Indian market by
acquiring Narang Breweries. In June 2001, it acquired the Mysore Breweries. In 2003,
SABMiller India acquired 50% stake in local Shaw Wallace's beer business. In
November 2002, SABMiller India acquired Rochees Breweries.
In May 2005, SABMiller India acquired Shaw Wallace's beer assets for Rs. 600 crore.
Also in 2005, Carlsberg entered India with its local venture South Asian Breweries.
Also in 2005, Singapore-based Asia Pacific Breweries acquired a 76% shared the local
Aurangabad Breweries. In late 2005, UK-based Cobra Beer entered the Indian market
by beginning negotiations with in December. In 2006, SABMiller India acquired
Foster's Indian assets.
In February 2006, Anheuser-Busch Inbev, the makers of Budweiser, entered a
partnership with Hyderabad-based Crown Beers. Also in 2006, Ravi Jain divested his
holdings in Millennium AlcoBev. In 2010, United Breweries consolidate its assets,
merging Millennium AlcoBev and other units back into itself. In 2011, United
Breweries announced that they would produce the Heineken brand beer in India. In
2012 after India allowed foreign-direct investment from Pakistan, Murree Beer
representatives stated that they were seeking to export their brand to India. The
Rawalpindi-based Murree Beer, which was established in 1861, has been trying to
enter the Indian market since 2003.
"Oktoberfest Goa", a beer, food and electronic music festival has been held every year
since 2011 in Goa.
Brewers and brands

Major breweries in India are Carlsberg, SABMiller India, Anheuser-Busch Inbev and
United Breweries. United Breweries has a market share of 55% and SABMiller India
has a share of 23%. Carlsberg's Tuborg Booster Strong brand (8% ABV) and
Anheuser-Busch Inbev's Budweiser Magnum (6.5% ABV) are sold only in India.
United Breweries' Kingfisher Strong (8% ABV) is India's best selling brand.
SABMiller India owns the Haywards brand and Foster's Indian units. Alcohol
including beer advertisements are illegal in India. Brands circumvent this ban by
advertising bottled water and soft drinks with their labels. Although imported beer
brands like, Corona, Singha, Tsingtao, Victoria Bitter, St. ERHARD, Geist and
Christoffel, are available in India, they are costly due to high import duties reaching up
to 100%.
Major beer brands in India

Beer bars
Beer Cafe and The Pint Room are two beer bar chains in India.
Craft beer and awards

In 2011, International Breweries' Australian MAX (7-8% ABV) won the titles of the
"World's Best Strong Lager" and "Asia's Best Strong Lager". Australian MAX is
brewed at Khoday Brewery in Bangalore.
Sales and consumption

India is the world's third fastest growing beer market. The beer market in India was
estimated to be more than Rs. 200 billion in 2012. It is expected to be Rs. 430 billion
by 2017. The growing market is attributed to urbanisation and a growing middle class.
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The per capita consumption of beer is 1.6 litres. The increased consumption has raised
the price of barley in India.
Indians prefer stronger alcoholic drinks, like whisky, over beer because it is cheaper
and has higher alcohol content. Indians have been known to consume mostly stronger
brews. Strong beer with alcohol content in the 5-8% range accounted for 83% of the
total beer sales in the year 2012. Beer still contents for only 5% of the total alcohol
consumed. The low consumption is attributed to high cost, availability and stringent
regulations. Karnataka is only state in India, which has a lower tax rate for beer
compared to other alcoholic beverages. Maharashtra has the highest tax on alcohol at
43%.
Indian Whisky
A single malt whisky from India. The tropical climate of India makes the traditional
aging of whisky in wood barrels a technical challenge.
Distilled alcoholic beverages that are labelled as "whisky" in India are commonly
blends based on neutral spirits that are distilled from fermented molasses with only a
small portion consisting of traditional malt whisky, usually about 10 to 12 percent.
Outside India, such a drink would more likely be labelled a rum. Ninety percent of the
whisky consumed in India is molasses-based, although whisky wholly distilled from
malt and other grains, is also manufactured and sold.
Scotch-style whisky is the most popular distilled alcoholic beverage in India. India has
traditionally been thought to lack a domestic drinking culture, though locally-produced
beverages are popular throughout the country. For instance there are the popular palmbased alcohol and fruit wines of the South, such as arrack, and the fermented rice
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wines of the North East like sonti. Whisky, however, has become fashionable among
affluent Indians. Brand names of Indian molasses-based whisky, including Bagpiper,
McDowell's No.1, Royal Stag, White & Blue Whisky, and MaQintosh, suggest that the
inspiration behind Indian whiskies is Scotch whisky, despite these products being
produced chiefly from molasses.
History
The drinking of Scotch whisky was introduced to India in the nineteenth century,
during the British Raj. In the late 1820s, Edward Dyer moved from England to set up
the first brewery in India at Kasauli. The brewery was soon shifted to nearby Solan
(close to the British summer capital Shimla), as there was an abundant supply of fresh
springwater there. The Kasauli Brewery site was converted to a distillery becoming
India's first distillery, which is currently operated by Mohan Meakin. Dyer brought his
brewing and distilling equipment from England and Scotland. Some of the original
equipment, such as the copper pot stills, is still in use today. Dyer chose the location of
the distillery because its climate was similar to that of Scotland, but also added bonus
of a market of British troops and civilians in Shimla and Punjab. The Kasauli distillery
is the oldest continually used distillery in Asia.
India produces a large amount of sugarcane, making molasses cheaply available as a
by-product of sugar processing. This is used to manufacture most spirits in India,
known as Indian Made Foreign Liquor. Indian whisky has generally been made by
flavouring and colouring neutral spirits made from molasses, and sometimes blending
it with imported Scotch whisky. Production of alcohol from grain was hampered by
shortage of extra grain, due to food shortages. Allowing grains to be used for alcohol
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manufacture is an emotive subject in India, due to poverty and alcohol's ambivalent
reputation.
The manufacture of whisky from malted grains in India was pioneered by Amrut
Distilleries. In 1982, Neelakanta Jagdale, Chairman and Managing Director of Amrut
Distilleries, decided to create a premium whisky from a combination of malted and
unmalted barley, while most distillers in India were manufacturing whisky by
converting molasses to alcohol. Amrut Distilleries began procuring barley from
farmers in Haryana, Punjab and Rajasthan, in addition to molasses, and launched
Prestige Blended Malt Whisky in the Canteen Stores Department in 1986. The first
batch of single malt whisky was ready within 18 months. Because India had no culture
of consuming single malts at the time, the company did not consider bottling it as a
single malt. Instead, the whisky was blended with alcohol distilled from sugarcane to
produce MaQintosh Premium Whisky. Amrut Distilleries faced difficulties until the
1990s, as most of the technology used for distillation was homegrown due to heavy
restrictions in India. According to Neelakanta Jagdale, "The alcoholic beverages
industry was not a priority in the country. Although we received help to a certain
extent from the Central Food Technological Research Institute (CFTRI), we had to
find our own ways to learn about improved distilling methods".
After liberalization in the 1990s, import duties were reduced moderately, to about
35%, giving distillers access to better technology. Technology upgradation by plant
manufacturers and India's sufficiency in grain production from 2000, gave a boost to
grain-based alcohol. Another factor was the entry of foreign players to the market,
whose brands seen as more authentic and attractive by affluent Indian consumers.
Indian distillers were forced to upgrade to keep up, or risk being relegated to the lower
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end of the market. Other factors included volatility in molasses' prices, and the
pressure in procuring molasses due to growing demand from other users such as the
fuel and chemical industries. This led several Indian manufacturers to acquire foreign
liquor companies. Under Vijay Mallya's direction, the Indian company United
Breweries acquired a number of noted whisky brands and distilleries in Scotland,
including Dalmore, Isle of Jura, and Whyte & Mackay. United Breweries has been
increasing production at its Scottish facilities, and has moved to double the production
of whisky at Invergordon. Some of the Scotch whisky so produced is used to blend
with the Indian molasses whisky. According to data from Praj Industries, a firm that
undertakes turnkey projects for companies in the alcohol business, grain-based lot of
all potable alcohol produced in India was at about 10% in 2010, up from 2-3% five
years earlier.
Amrut Distilleries launched Amrut, the first single malt whisky to be made in India, on
24 August 2004. The production of Amrut single malt whisky was the result of the
distillery having malt that was ageing far in excess of what was needed for its medium
range Prestige Malt Whisky. Initially, Amrut aged malt whisky for around a year
before blending it. However, due to changing customer preferences, less malt whisky
was being added into blended variants. The company had a surplus stock of malt
whisky by 1995, and Jagdale decided to allow some barrels to age longer to see how
they would turn out. The whiskies had been ageing for almost four to five years by the
year 2000, and the company discovered that hot weather makes whisky mature faster
in India than it does in Europe or the United States. The fraction lost to evaporation
during aging, known as the angel's share, is also higher in India, at 11-12% per year,
than in Scotland, where the annual evaporative loss is about 2%. Surinder Kumar, the
master blender at Amrut Distilleries, has estimated that one year of barrel ageing in
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India is equal to three years of ageing in Scotland. John Distilleries had been making
blended whisky since its foundation, but decided to manufacture single malt whisky in
2008 in an attempt to enter the premium end of the market. John Distilleries chose to
use Indian ingredients in the first bottling, to give the whisky characteristics of its
country of origin. The first bottling of Paul John whisky, branded "Paul John Single
Cask 161 Whisky", was officially launched on 4 October 2012. The brand's second
release, also in 2012, was "Paul John Single Cask 163 Whisky". Following the single
cask release, Paul John released two single malt whiskies in May 2013. They were
branded Paul John Single Malt Whisky Brilliance and Paul John Single Malt Whisky
Edited.
Domestic market
The Indian whisky market is the third largest in the world, after China and Russia. It
has a complex tax structure with taxes leveled by both Central and State Governments.
Import taxes are applied by the Central Government on imported spirits. State level
taxes are levied by each individual State, with taxation levels and methods varying
significantly. The sale of alcohol is also prohibited in some States. The Indian
domestic market was completely closed to all imported spirits until 1 April 2001,
under former import licensing restrictions. However, Scotch whisky was widely
available through bootleggers and via duty-free allowances. Restrictions were
removed in 2001, but an additional customs duty (ACD) was introduced, which raised
the cumulative duty burden on imported spirits to between 450% and 700%. This had
a significant impact on sales of high-value spirits such as single malts. ACD was
removed in 2007, but import duty remains high at 150%, which makes the market
difficult for foreign distillers.
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Whisky accounts for nearly 60% of the IMFL market. India accounted for nearly half
the global whisky market by volume in 2010. The market is generally divided info
segments based on price.
Trade controversy
The consumption of native distilled molasses-based whisky in India is encouraged by
tariff barriers of up to 150% that impose a significant markup on imported whiskies in
India. Imported Scotch whisky bottled under its own brand names makes up only 1%
of the total market share. The substantial tax markup on imported whiskies has been
categorized by the Scotch Whisky Association as "pure protectionism". Indian
distillers have political influence, and believe that a cut in import duties would boost
Scotch rapidly and would be a "catastrophe" for domestic distillers. The All India
Distillers Association also accuses Scotch and other European spirits distillers as
having the advantage of agricultural subsidies for their grain. Indian distillers also
accuse the European Union of erecting its own sort of trade barriers by means of rules
that forbid the marketing of molasses-based spirits as "whisky". Mallya has objected to
the EU's refusal of entry to molasses-based whiskies, claiming that the "imposition of
British imperialism is unacceptable". In a lawsuit brought in India by the Scotch
Whisky Association, the Delhi High Court enjoined Indian whisky manufacturers from
labelling their product with the words "Scot" or "Scotch".
India is the world's fifth largest Scotch whisky market by volume (16.42 million litres
of pure alcohol) and 19th largest by value (61.59 million / 532.10 crores) as of 2012.
Exports of single malt from Scotland have risen by 190% from 268 million to 778
million between 2001 and 2012.
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Manufacturers
Following is a list of whisky producers in India:
Alcobrew Ltd
Allied Blenders and Distillers Ltd
Amrut Distilleries (Bangalore, Karnataka)
Jagatjit Industries
John Distilleries (Bangalore, Karnataka)
Khemani Group
Khoday India Limited (Bangalore, Karnataka)
Premier Distilleries
Mohan Meakin (Ghaziabad, Uttar Pradesh)
N.V. Group
Radico Khaitan (Rampur, Uttar Pradesh)
Seagram Manufacturing Ltd, owned by Pernod Ricard
Shivalik Distilleries (Punjab)
Som Distillery
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Tilaknagar Industries
United Spirits Limited (Bangalore, Karnataka)
Vinbros & Co.
PART B. INTRODUCTION TO WORKING CAPITAL
Empirical observations show that the financial managers have to spend much of their
time to the daily internal operations relating to current assets and current liabilities of
the firms. As the largest portion of the managers time is devoted to working problems,
it is necessary to manage working in the best possible way to get maximum benefit.
The effective management of the business, among other things primarily depends upon
the manner in which the short-term assets and short run sources of financing are
managed. The management or current assets management consists of inventories,
accounts receivable and cash & bank balances as the major components. There is a
difference between current assets and fixed assets in terms of their liquidity. A firm
requires many years to recover the initial investments in fixed assets such as plant and
machinery and land and buildings. On the contrary, investments in current assets are
turned over many times a year. Investments in current assets such as inventories and
book debts are realized during the firms working capital cycle, which is usually less
than a year. Working capital is that proportion of a companys total capital, which is
employed in short-term operations.
Even though, it is one segment of the capital structure of a business, it constitutes an
inter-woven part of the total integrated business system. Therefore, neither it can be
regarded as an independent entity, nor, can the working capital decisions be taken in
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isolation. Thus, a study in this field is of major importance to both internal and
external analysis, for its close relationship with the day-to-day operations of a
business.
There are many aspects of working capital management, which form an important
function of a financial manager:
Working management represents a large portion of the firms investment in

assets.
Working management has greater significance not only for small firms but
also for large firms.
The need for working capital is directly related to sales growth.
Most of the work dealing with working capital management in confined to the balance
sheet, which is directed towards optimizing the levels of cash and marketable
securities, receivable and inventories. For the most part, optimization of these current
assets is isolated from the optimization of the other current assets and the overall
valuation of the firm.
The decision concerning cash and resources, receivable, investments and current
liabilities is with an objective of maximizing the overall value of the firm. Once
decisions are reached these areas, the levels of working capital are also reduced.
An appropriate level of working capital is to be maintained as the excessive working

capital interrupts the smooth flow of the business activity and curbs profitability. Also,
there are a lot of circumstances where shortage of working capital has proved to be the
major factor for business failure. Operating plans are out of control and the corporate
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objectives get blurred. The suppliers and the creditors give the firm an adverse credit
rating and tighten up credit terms.
The problem of managing working capital has got a separate entity as against different
decision-making issues concerning current assets individually. Working capital has to
be regarded as one of the conditioning factors in the long run operations of a firm,
which is often inclined to treat it as an issue of short-run analysis and decision-making.
The management of working capital hence involves constant vigilance to ensure that
the right quantum is available on a continuing basis to support and promote the
activities. Sound financial and statistical techniques, supported by judgment, should be
used to predict the quantum of working capital needed at different time periods.
DEFINITIONS OF WORKING CAPITAL
Working capital has been in several ways as given below.

Operating capital: - As the working capital is the capital required to operate the
business and is the capital invested in the current assets, it is called as operating
capital.
Circulating capital: - Interchangingly used word for working is circulating capital.

Gerestenberg gas suggested this item circulating capital as all the assets of business
change from one form to another.
CONCEPTS OF WORKING CAPITAL
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Conceptually, working capital is either explained as: - Net Working Capital or Gross
Working Capital. These concepts are not exclusive; rather they have equal significance
from management viewpoint. Gross working capital refers to the firms investment in
current assets. Net working capital refers to the difference between current assets and
current liabilities.
GROSS WORKING CAPITAL CONCEPT

It is called as qualitative aspect of working capital and focuses attention on two
aspects of current assets management: 1. Optimum investment in current asset
It is conventional rule to maintain the level of current assets twice the level of
current liabilities to constitute a margin or buffer for maturing obligation of a
business.
2. Financing of current asset
Another aspect of gross working capital points to the need of arranging funds
to finance current assets.
NET WORKING CAPITAL CONCEPT

Net working capital can be positive or negative. A positive net working capital will
arise when current assets exceed current liabilities. A negative net working capital
mean excess current liabilities over current assets.net working capital being the
difference between current assets and current liabilities, is qualitative concept and
hence it: 1. Indicates the liquidity position of the firm: - A weak liquidity position poses a
threat to solvency of the company and makes it unsafe and unsound.
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2. Suggests the extent to which working capital needs may be financed by
permanent sources of funds:- i.e., it covers the question of judicious mix of
long term and short term funds for financing current assets. Thus, it may be
emphasized that both gross and net concepts of working capital are equally
important for the efficient management of working capital.
NEED FOR WORKING CAPITAL FINANCE

The need for working capital finance is over-emphasized. Every business needs some
amount of working capital. The need for working capital arises due to the time gap
between production and realization of cash from sales. There is an operating cycle
involved in the sales and realization of cash. There are time gaps between purchase of
raw materials & production, production & sales and realization of cash. Thus, working
capital is needed for the following purposes.
For the purpose of raw materials, components and spares.
To pay wages and salaries.
To incur day-to-day expenses and overhead costs such as fuel, power

and office expenses, etc.
To meet the selling costs as packing, advertising etc.
To provide credit facilities to the customers.
To maintain the inventories of raw materials, work in progress, stores
And spares and finished stock.
OPERATING CYCLE
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Operating cycle indicates the length of time between firms paying for materials
entering into stock and receiving the cash from sale of finished goods. In other words,
the duration of the required time to complete the sequence of events is called operating
cycle. The operating cycle may take the following sequence:
1. In a manufacturing concern
Conversion of cash into raw materials.
Conversion of raw materials into work in progress.
Conversion of work in progress into finished goods.
Conversion of finished goods into debtors.
Conversion of debtors and bills receivables into cash.
The following figure shows the operating cycle of a manufacturing concern.
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2. In a trading concern
a) Cash into inventories
b) Inventories into debtors and bills receivables
c) Debtors and bills receivables into cash
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The following figure shows the operating cycle of a trading concern :
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TYPES OF WORKING CAPITAL

The working capital is classified in to two types. They are
I. Permanent working capital
II. Temporary working capital
Permanent working capital:

Permanent or fixed working capital is the minimum amount, which is
required to ensure effective utilization of fixed facilities and for maintaining
the circulation of current assets. This investment if of a permanent type and as
the size of the firm expands the requirement of working capital also increases.
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Temporary working capital:

Temporary working capital is also called as the fluctuating or variable working
capital, which varies according to the problem and sales. It is the capital
required in addition to the working capital.
Net working capital:

It is the difference between current assets and liabilities. It is the excess of
current assets over current liabilities. This concept enables a firm to determine
the exact amount available at its disposal for operational requirements.
Gross working capital:

It refers to the total current assets of the business. It is also known as
circulating capital, because the current assets are rotating in their nature.
Negative working capital:

When a current liability exceeds current assets, it is called as negative working
capital.
NEED
FOR
MAINTENANCE
OF ADEQUATE
WORKING
CAPITAL
An adequate or optimum working capital balance refers to the desired working capital
where a firm will not have excess or shortage of working capital and indicates both
profitability and liquidity for the firm. It is necessary to maintain an optimum cash
balance, an optimum level of inventory and an optimum level of debtors and
receivable.
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DANGERS OF EXCESS WORKING CAPITAL
It results in unnecessary accumulation of inventory in the form of raw material

or work in progress or finished goods, leading to a high cost of storage, space,
Insurance, increased theft, deterioration in the quality of goods, etc.
Also, it is an indication of defective credit policy and slack collection period.
Excess cash in hand indicates idle cash and even though the liquidity position
of the company is good, it lacks profitability.
Excessive working capital makes the management complacent, which

degenerates into managerial inefficiency.
DANGERS OF INADEQUATE WORKING CAPITAL
The production process will be obstructed if there is shortage of working capital.
Fixed assets are not efficiently utilized if there is lot of working capital funds,
which leads to deterioration in profits.
The firm loses its reputation when it is not in a position to honor its short-term
obligations.
Ultimately it leads to the reduction in sale, as the firm cannot meet the demand of
the customers.
EFFECT OF INADEQUATE WORKING CAPITAL ON DECISION

MAKING:1) Stagnates the growth of the firm,
2) Threatens the solvency of the firm,
3) Creates difficulties in implementing the operating plans,
27

4) Renders the firm unable to avail the attractive credit opportunities
EFFECTS OF EXCESS WORKING CAPITAL ON DECISION

MAKING
Impairs firms profitability through idle cash and
Makes dividend policy liberal,
Creates difficulties to cope with the future, on the failure of the estimated
speculative profits.
IMPORTANCE OF WORKING CAPITAL

Even though the skills for maintaining the working capital are somewhat unique, the
goals are the same-viz. to make an efficient use of funds for minimizing the risk of
loss to attain profit objectives.
Firstly, the adequate of working capital contributes a lot in raising the credit-standing
of a corporation in terms of favorable rates of interest on bank loan, better terms on
goods purchased, reduced cost of production on account of the receipt of cash
discounts, etc.
Secondly, a company with sufficient working capital is always in a position to take the
advantage of any favorable opportunity either to purchase raw materials or to execute
a special order or to wait for better market position.
In the third place, the ability to meet all reasonable demands for cash without
inordinate delay is a great psychological factor to improve the all rounds efficiency of
the business.
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Lastly, during slump the demand for working capital, instead of coming down, shoots
up. A good amount of working capital is locked up in the inventories and book debts.
Concerns having ample resources can tide over that period of depression.
Thus, working capital is regarded as one of the conditioning factors in the long run
operations of the firm, which is often inclined to treat it as an issue of short run
analysis and decision making.
FACTORS INFLUENCING WORKING CAPITAL
Nature of business
The working capital requirement of a firm basically depends upon the nature of
its business public utility undertakings like electricity, water supply and
railways need very little working capital because they offer cash sales only and
supply services, not products and such no funds are tied up in inventories and
receivables. The manufacturing undertakings also require sizable working
capital along with fixed investments because they have also to build up
inventories.
Size of business
The working capital requirements of a concern are directly influenced by the
size of its business, which may be measured in terms of scale of operations.
Greater the size of business unit, generally, larger will be the requirements of
working capital.
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However in some cases, even a smaller concern may need more working due to
high overhead charges, inefficient use of available resources and other
economic disadvantages of small size.
Production capacity
In certain industries the demand is subject to wide fluctuations due to seasonal
variations. The requirements of working capital in such cases depend on the
production policy.
Manufacturing process
In manufacturing business the requirements of working capital increase in direct
proportion to length of manufacturing process. Longer the process period of
manufacture, larger is the amount of working capital required.
Seasonal variations
In certain industries, raw material is not available through out the year. They
have to buy raw materials in bulk during the season to ensure an uninterrupted
flow and process them during the entire year. A huge amount is, thus, blocked
in the form of material inventories during such season, which gives rise to
more working capital requirements.
Working capital cycle

In a manufacture concern, the working capital starts with the purchase of raw
materials and ends with the realization of cash from the sale of finished
products. The speed with which the working capital completes one cycle
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determines the requirements of working capital. Longer the period of cycle,
larger is the requirement of working capital.
Rate of stock turn over
There is a high degree of inverse correlation ship between the quantum of

working capital and the velocity or speed with which the sales are affected. A
firm having as high rate of stock turnover will need lower amount of working
capital as compared to a firm having a low rate of turnover.
Credit policy
The credit policy of a concern in its dealings with debtors and creditors
influences considerably the requirements of working capital. A concern that
purchases its requirements on credit sells its products/services on cash requires
lesser amount of working capital.
Business cycle
Business cycle refers to alternate expansion and contraction in general business

actively. In a period of boom i.e., when the business is prosperous, there is a
need for larger amount of working capital due to increase in sales, rise in
prices, optimistic expansion of business, etc. on the contrary, in the times of
depression i.e., when there is a down swing of the cycle, the business contracts,
sales decline, difficulties are faced in collections from debtors and firms may
have a large amount of working capital lying idle.
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Rate of growth of business
The working capital requirements of a concern increase with the growth and
expansion of its business activities.
Earning capacity and dividend policy
Some firms have more earning capacity than others due to quality of their
products, monopoly conditions, etc. such firms with high earning capacity may
generate high cash profits from operations and contribute to their working
capital. The dividend policy of a concern also influences the requirement of its
working capital.
Price level changes
Changes in the price level also affect the working capital requirements.
Generally, the rising prices will require the firm to maintain larger amount of
working capital, as more funds will be required to maintain the same current
assets. The effect of rising prices will be different for different firms. Some
firms may be affected much while some may not be affected at all by the rise in
prices.
Other factors
Certain other factors such as operating efficiency, management ability,

irregularities of supply, import policy, asset structure, importance of labour,
banking facilities, etc., also influence the requirements of working capital.
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SOURCES OF WORKING CAPITAL
The various of working capital for the financing of working capital are as follows:
Sources of working capital
Permanent or fixed
Temporary or variable
1) Shares
1) Commercial banks
2) Debentures
2) Indigenous bank
3) Public deposits
3) Trade credits
4) Ploughing back of profits
4) Installment credit
5) Loans from financial institutions
5) Accounts receivables
FINANCING OF PERMANENT, FIXED OR LONG TERM

WORKING CAPITAL
Permanent working capital should be financed in such a manner that the enterprise
may have its uninterrupted use for a sufficiently long period. There are five important
sources of permanent or long-term working capital:
33
Shares
Issue of shares is the most important source for raising the permanent or
long capital. A company can issue various types shares as equity shares,
preference shares.
Debentures
A debenture is an instrument used by the company acknowledging its debt
to its holder. It is also an important method of raising long term or
permanent working capital.
Public deposits
Public deposits are the fixed deposits accepted by a business enterprise
directly from the public. This source of raising short term and medium term
finance was very popular in the absence of banking facilities.
Ploughing back of profits

Ploughing of profits means the re-investment by a concern of its surplus
earnings in its business. It is an internal source of finance and a most
suitable for an established firm for its expansion, modernization and
replacement, etc.
Loans for financial institutions

Financial institutions such as commercial banks, Life Insurance
Corporation, industrial finance corporation, industrial bank of India, etc,
also provide short term and long-term loans.
34
FINANCING OF TEMPORARY, VARIABLE OR SHORT- TERM

WORKING CAPITAL
The main sources of short-term working capital are as follows:

Commercial banks
Commercial banks are the most important source of short-term capital. The
major portion of working capital loans is provided by commercial banks.
They provide a wide variety of loans tailored to meet the specific
requirements of a concern. The different forms in which the banks normally
provide loans and advances are loans, cash credits, overdrafts, purchasing
and discounting of bills.
Indigenous bankers
Private moneylenders and country bankers used to be the only source of
finance prior to the establishment of commercial banks. They used to
change very high rates of interest and exploit the customers to the largest
extent possible.
Installment credit
This is another method by which the assets are purchased and the
possession of goods is taken immediately but the payment is made in
installments over a predetermined period of time.
35
Trade credits
As present day commerce is built upon credit, the rate credit arrangement
of a concern with its suppliers is an important source of short-term finance.
The main advantages of this source are: it is very convenient method of
finance; it is flexible and it may be possible to obtain favorable terms.
Advances
Some business houses get advances from their customers and agents
against orders and this source is a short-term source of finance for them.
Accounts receivables
Accounts receivable is a permanent investment in the business. As old
receivables are collected and new receivables are created, it is the major
component of the current assets.
CASH MANAGEMENT
INTRODUCTION
Cash is the most liquid asset and all assets of business are finally converted into cash.
Cash is considered as the lifeblood of the business. It is essential for a business to
carry out all its transactions. Cash of a business includes cheques, currencies and bank
drafts. The cash determines the credit worthiness, solvency and liquidity position of a
business with the business. Cash management assumes more importance than other
36

current assets because cash is the most significant and least productive asset of a
business.
Management of cash is important not only because it is the most liquid asset but also
because all the liabilities of the business are to be met in cash. Though cash forms the
smallest part in the total assets of the company it requires a lot of time for its
management.
MOTIVES FOR HOLDING CASH

A business may hold cash with the following motives:
Transaction motive
It requires a firm to hold cash to conduct day-to-day operations of business.
The firm needs cash to make payments for purchases, wages and operating
expenses and other inevitable payments.
Precautionary motive
The firms to meet emergencies i.e., the unforeseen events of the business also
maintain cash. A business firm will have to fan a number of risks because it has
an environment of its own. The environment consists of many uncontrollable
factors like government legislation, natural calamities, unpredictable consumer
behaviour etc, to face all these risks, the firm needs to hold cash in a business.
Speculative motive
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To take advantage of unexpected opportunities, a firm holds cash for investing
in profit making opportunities. Such a motive is purely speculative in nature.
Security motive
A firm should maintain cash reserves for future requirements if a firm is not in
a position to obtain finance from any other source, then it can utilize the cash
reserves.
Compensatory motive
It is a motive to have cash to compensate against loss arising in business.
OBJECTIVES OF CASH MANAGEMENT
To meet the payment schedule

The main objective of cash management is to make the payments to the various
types of expenditure. Every business will have payment schedule and hence it
has to generate cash inflows to meet the cash outflows.
To maintain minimum cash reserves

Another important objective of cash management is to maintain optimum cash
balance. To meet the expenses a firm need not maintain huge reserves of cash.
Huge reserves will mean idle cash, which is not productive. On the other hand
if there is no cash reserve, a firm finds it difficult to meet the expenses. Hence,
minimum cash reserves are to be maintained.
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STRATEGIES OF CASH MANAGEMENT

Following are the various strategies for cash management.
Cash planning
Cash planning is necessary to project the surplus or deficit of cash. It also helps
to maintain the cash balance for the planned period. It is a technique to plan
and control the use of cash. Cash planning may be done on daily, weekly or
monthly basis. The period and frequency of cash planning generally depends
upon the size of the firm.
Cash planning requires the use of two techniques namely
-
Cash forecasting and
Cash budgeting
Cash forecasting
It refers to the prediction of cash requirements and the sources of cash
generation. Cash forecasts are required to prepare cash budgets. It may be
done on a short-term basis or a long-term basis. The most commonly used
methods for cash forecasting are:
1)
The receipts and disbursement method
2)
Net adjusted income method
Cash budgeting
Cash budget is the most significant device for planning and controlling the
receipts and payments. It is a summary statement of the firms expected
cash inflows and outflows over a projected time period. The time horizon
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of a cash budget may differ from firm to firm. Daily, weekly or monthly.
Cash budget should be prepared for determining the cash requirements.
Management of cash inflows

Once the cash budget has been prepared the financial manager should that
their does not exit a significant deviation between projected cash inflows
and actual cash flows. The two objectives of managing cash flows are:
Accelerating cash inflows and
De-accelerating cash outflows
Optimum cash balance

Cash management involves the maintenance of optimum cash balance.
Optimum cash balance is desired amount of cash to be held by the firm. If a
firm has an optimum cash balance it will not suffer with the ideal cash or
with shortage of cash. Cash by itself cannot generate until it is invested.
Having excess cash will mean an opportunity cost to the business. If a firm
runs short of cash it cannot fulfill the basic objectives of meeting the
payment schedules hence optimum cash balance is necessary.
Management of idle cash

Business firm will face the problem of managing idle cash. At times a
business will have more cash inflows and shortage of cash. It is necessary
for the firm to generate something out of the idle cash and keep ready the
same cash at that time when it runs to shortage of cash. The best option to
manage the idle cash is to invest it on marketable securities i.e., it can
40

invest on the securities like shares and debentures of other companies.
While investing on the securities of other it has to consider the following
three factors:
1)
Safety
2)
Marketability
3)
Maturity
RECEIVABLES MANAGEMENT
INTRODUCTION
Receivables management is a permanent investment in the business. As old
receivables are collected and new receivables are created, it is a major credit of the
current assets. This emerges because of the existence of credit sales. It shows the
amount receivable from the purchases. This is called by different names such as bills
receivables, accounts receivable, trade debtors, sundry debtors, trade receivables etc.
Receivables derive benefits to the firm and also involve cost to the firm. If the benefit
is more the cost is also more and hence the risk increases. On the other hand, if the
benefits are less the cost and risk is also less. Receivable management tries to trade of
between benefits and cost arising from receivables.
INVENTORY MANAGEMENT
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INTRODUCTION
The important component of working capital is inventory. Inventory refers to the stock
of goods yet to be sold by a business firm. It is denied as the stock of goods a firm is
offering for sale and the components that make the goods. In other words the inventory
includes raw materials, work in progress and finished goods.
OBJECTIVES OF INVENTORY MANAGEMENT

To provide continuous supply of raw materials for production
To reduce the wastage and to avoid loss of breakage and
deterioration
To meet the demand for goods of ultimate consumers on time
To provide right material at time and at right places
To avoid excess and inadequate storing of materials
MOTIVES FOR HOLDING INVENTORY

Generally inventories are held by three motives
The transaction motive, which emphasizes the need to maintain inventories to
facilitate smooth production and sales operation.
The precautionary motive which necessitates holding of inventories to guard
against the risk of unpredictable changes in demand and supply process and
other factory.
The speculative motive which influences the decision to increase or reduce
inventory levels to take advantages of price fluctuations.
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INVENTORY MANAGEMENT TECHNIQUES

In managing inventories, the firms objective should be in consance with the wealth
maximization principle. To achieve this, the firm should determine the optimum level
of inventory. Efficiently controlled inventories make the firm flexible. To manage
inventories efficiently, the understanding economic order quantity and reorder point
can answer the questions.
ECONOMIC ORDER QUANTITY

One of the major inventory management problems to be resolved is how much
inventory should be added when inventory replenished. Economic order quantity is
that quantity of material, which is most economical in buying taking into account the
operational requirements of the company. The economic order quantity is that
inventory level, which minimizes the total ordering cost and carrying cost.
PRINCIPLES OF WORKING CAPITAL MANAGEMENT

The objectives of working capital management are to manage the firms current assets
and current liabilities in such a way that a satisfactory level of working capital is
maintained. The following general principles help us to maintain a sound working
capital:
Principle of risk variation
Principle of cost of capital
Principle of Equity position
Principle of maturity of payment
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PRINCIPLE OF RISK VARIATION

Risk here refers to the capability of a firm to meet its obligations as and when
they become due for payment. Larger investment in current assets with less
dependency on short-term borrowing increases liquidity, like for example:
conversion of resources into inventories, into cash, here cash outflows occur
before cash inflow. But then the cash inflows are not certain because sales and
collections, which give rise to cash inflows, are difficult to forecast
accurately. Cash outflows on the other hand are relatively certain. The firm is
therefore, required to invest in current assets for a smooth, uninterrupted
functioning. It needs to maintain liquidity to purchase raw materials and pay
expenses such as wages and salaries, other manufacturing administrative and
selling expenses as there is hardly a matching between cash inflows and
outflows.
On the other hand investment in current assets with greater dependence on
short-term borrowings increases risks, reduces liquidity and increases
profitability. For example: Acquiring resources on credit, temporarily
postpones payment of certain expenses. Thus, the time interval between cash
collections from sale of products and cash payments for resources acquired by
the firm reduces liquidity and increases profitability. In other words there is a
definite inverse relationship between the degree of risk and profitability. The
various working capital policies, such as conservative policy, moderate policy,
and aggressive policy indicate the relationship between current assets and
sales.
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A conservative management prefers to minimize risk by maintaining a higher
level of current assets for working capital while a moderate or aggressive
management assumes comparatively greater risk by reducing working capital.
However, the goal of the management should be to establish a suitable trade off
between profitability and risk.
PRINCIPLE OF COST OF CAPITAL / PERMANENT AND VARIABLE

CAPITAL
Cost of capital varies with the source of finance and the degree of risk
involved. Generally, it is, higher the risk, lower is the cost and lower the risk
higher is the cost. A sound working capital management should always try to
achieve a proper balance between these two.
The magnitude of current assets needed is not always the same; it keeps
fluctuating (increases and decreases) over time. However there is always a
minimum level of current assets, which is continuously required by the firm to
carry on its business operations. This minimum level of current assets is
referred to as permanent, or fixed, working capital. Depending upon the
changes in production a sales, the need for working capital over and above
permanent working capital will fluctuate.
For example: extra inventory of finished goods will have to be maintained to
support the peak periods of and investment maintained to support the peak
period of sale, and investment in receivables may also increase during such
periods. On the other hand, investment in raw material, work in progress and
finished goods will fall if the market is slack
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The extra working capital, needed to support the changing production and sales
activities is called fluctuating, variable or temporary working capital. The firm
to meet liquidity requirements that will last only temporarily creates temporary
working capital.
PRINCIPLE OF EQUITY POSITION

This principle is concerned with planning how much to earmark for CA from
the total investment. According to this principle, the amount of working capital
invested in each component should be adequately justified by a firms equity
position. Every rupee invested in the current assets should contribute to the net
worth of the firm. Excessive working capital needs idle funs, which earn no
profits for the firm. Paucity of working capital not only impairs the firms
profitability but also results in production interruptions and inefficiencies.
PRINCIPLE OF MATURITY OF PAYMENT

This principle is concerned with planning the source of finance for working
capital. A firm should make every effort to relate maturities of payment (sundry
creditors) to this flow of internally generated funds. Maturity pattern of various
current obligations is an important factor in risk assumptions and risk
assessments. Generally, shorter the maturity schedule of current liabilities in
relation to expected cash inflow, greater the liability to meet its obligations in
time. In the words of Louis Brand, we need to know when to look for working
capital funds, how to use them and how to measure, plan and control them. To
achieve the above-mentioned objectives of working capital management, the
financial manager has to perform the following basic functions:
46

a) Estimating the working capital requirements.
b) Analysis and control of working capital.
c) Financing of working capital needs.
DESIGN OF THE STUDY
TITLE OF THE STUDY:

A study conducted for SABMiller India Limited on Working Capital Management.
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
47

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.
OBJECTIVES OF THE STUDY

The study was conducted mainly to understand and analyze the issue of
working capital management, being practically employed in SABMiller India
Limited.
To understand the practical difficulties faced by managing the working capital.
To analyze the various external and internal factors effecting working capital
management in SABMiller India Limited.
To understand and learn the various policies framed by SABMiller India
Limited for effective management of working capital.
DATA AND METHODOLOGY

Mainly data is obtained from the annual reports of the company. Further data is
collected through interviews with the key personnel and concerned of the company.
Sampling techniques are not applicable to the study as it pertains to the study of a
single company. Media of collecting the data is the office of this companys chartered
accountant, B S R & Co. in Bangalore.
SCOPE OF STUDY
48

The study of working capital management is limited to the specific company,
SABMiller India Limited.
REFERENCE PERIOD
The study period covered in this case study is for 2 financial years i.e., from 20112012, 2012-2013.
DEFINITIONS OF CONCEPTS
Some of the concepts used in different senses from time to time in the literature of
financial management are discussed below in order to make the study clear and
meaningful.
WORKING CAPITAL
It is the fund, which is used to finance its day to day activities of business, and it has to
be employed in short term operations. There are two concepts of working capital-gross
concept and net concept.
WORKING CAPITAL MANAGEMENT

It means administration of current assets and current liabilities.
Objects in managing working capital profitability and liquidity
49
PROFITABILITY
It is the ability of the firm to meet the claims of suppliers of short-term capital for
building up of current assets and also means short-term debt repaying capacity of
enterprise, in a limited sense.
OPERATING CYCLE
It is a period involved from the time cash is invested in inventory till the time cash is
recovered from sales of goods.
LIMITATIONS OF STUDY
This report is based on the annual reports, which are provided by the company
that cannot be relied upon.
The collection of data for analysis is restricted to SABMiller India Limited
only and
Time was major limiting factor to the study.
COMPANY PROFILE
PROFILE OF SABMiller India Limited (Formerly SKOL
BREWERIES LIMITED)
50
SABMiller India Limited is the operating entity of SABMiller Group in India. The
Company was hitherto known as SKOL Breweries Limited and the name was changed
to SABMiller India Limited effective 22nd June 2012 to reflect the SABMiller Group
identity in India. SABMiller entered India in 2000 by entering into a joint venture with
Narang Breweries Limited. Subsequently, the Group acquired many individual
brewing companies and in the year 2005 acquired the brewing business of Shaw
Wallace Group in India.
The Company headquartered at Bangalore has 10 high quality breweries located
strategically across 9 states in India, well placed to service the markets quickly and
efficiently. Our mission is to nuture local and international brands that are the first
choice of the consumer and in line with this mission, your company has acquired and
nurtured local brands like Haywards 5000, Haywards 2000, Knock Out and Royal
Challenge. Other brands being Fosters, Miller High Life and Peroni Nastro Azzurro
are the international brands of the SABMiller Group which have been introduced with
many to follow.
Indus Pride is an indigenously developed and brewed product and during the year the
brand was relaunched brewed with spices in four variants, a first of its kind in India.
51

All these brands of beer coupled with the SABMillers stringent global quality
standards have made them a discerning choice for millions of consumers in India. The
growing demand for these brands of beer has propelled the company to cross
production and sales of 5.5 million hectoliters during the year 2012-13 representing
turnover of Rs.3348.75 Crores.
SABMiller plc, London, the ultimate holding company holds indirectly 99.43% equity
in SABMiller India Limited.
SABMiller Plc
SABMiller plc headquartered at London is one of the worlds leading brewers with
more than 200 beer brands and about 70,000 employees in over 75 countries.
SABMiller has created leading positions in both emerging and developed markets
across the world. For the year ended 31st March 2013 SABMiller globally sold 306
million hectoliters of larger and thereby clocking turnover of US$ 34,487 million and
EBITA of US$ 6,421 million. Its international portfolio of brands includes premium
international beer such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine
52

Draft and Grolsch. SABMiller is also one of the worlds largest bottlers of Coca- Cola
products.
SABMiller has a rich heritage spanning more than 115 years. Hitherto known as South
African Breweries (SAB) was founded in 1985 in Johannesburg, South Africa. SAB
raised first international equity in 1996. In 2000, SAB entered India by acquiring
Narang Breweries. In 2002, SAB acquired Miller Brewing Company, the second
largest brewery in the United States by volume and changed its name to SABMiller
plc. Upon this acquisition, SABMiller became the second largest brewer in the world.
In 2006, SABMiller acquired Fosters brewing business and brand in India. SABMiller
acquired Fosters Group of Australia in 2011. SABMiller has grown through a culture
of operational excellence, delivering high quality products, innovation and sustainable
growth.
SABMiller is listed on the London and Johannesburg stock exchanges.
VISION, MISSION And VALUES

We believe that our business is not separate from society, and that the success of
SABMiller is inextricably linked to the well-being of the wider community.
Everywhere we operate, were working to build strong local businesses that contribute
to their local economies. Thats what makes SABMiller global leaders in doing
business locally.
Our success is built upon a clear strategic direction and a shared commitment to the
companys vision, mission and values.
Our Vision
To be among the 3 most admired beverage companies in India.
Our Mission
53

To own and nurture local and international brands that are the first choice of the
consumer.
BRANDS OF SABMiller
1.Indus Pride
2.Haywards 5000
3.Knock Out
4.Royal Challenge
5.Royal Challenge Strong
6.Fosters
7.Miller High Life
8.Peroni Nastro Azzurro
1.
Indus Pride
Indians have always had a taste for the finer things in life, whether it is for music, the
arts or food. Indus Pride is a tribute to this exquisite sense of taste. It also has the
distinction of being the first Indian beer to be brewed with spices and the choicest hops
to create a taste thats distinctly Indian. Available in bespoke 330ml bottle, Indus Pride
54

comes in a range of variants like Citrusy Coriander, Citrusy Cardamom, Spicy
Fennel and Fiery Cinnamon.
2.Haywards 5000
Haywards 5000 was launched in the year 1983 and is one of the largest selling strong
beer in India. Haywards 5000 name with its red, black and gold coloured label is
synonymous with strong beer in India.
Haywards 5000 perfectly combines strength with quality credentials that meet the high
expectations of todays demanding consumers.
Haywards 5000 is the hallmark of original and authentic strong beer which other beer
brands aspire for.
55

The popularity of the brand over the decades made few unscrupulous brewers copy the
numeral 5000 which are being successfully thwarted bt SABMiller India through legal
action.
Haywards 5000 continues to be the flagship brand of SABMiller India.
3.Knock Out
Ever since its launch in 1984, Knock Out has evolved its brand positioning from
strength to cold refreshment to establish itself as one of the largest selling strong beer
brands in the country. Today, there are millons of consumers in the states of Karnataka,
Maharastra and Andhra Pradesh for whom the brand has come to acquire an iconic
status.
56

Knock Out today comes with an innovative thermochromic label ( a
Label that changes when it becomes cold) in the states of Maharastra and Karnataka.
Knock Out is brewed in modern, state of the art breweries to ensure consistent
conformance of the highest international quality standards. Modern techniques help to
ensure that the beer is produced under hygienic conditions, free from any external
impurities.
4.Royal Challenge
Launched in the year 1993, Royal Challenge Premium Lager is the second largest
selling mild beer in India. Royal Challenge is brewed with the choicest 6 row barley
malt. Its long brew duration provides it with a distinct, smooth taste and rich flavour.
The brand has moved from strength to strength since its relaunch by SABMiller and
has set itself on a growth momentum.
57
5.Royal Challenge Strong
Royal Challenge Strong Beer is one of the newest additions to the SABMiller
Portfolio. It is a strong beer that is smooth and easy drinking.
Royal Challenge Strong uses the highest quality barley and the choicest hops picked
from the countrys best farms. The hops are subjected to a long brewing process along
with high quality barley malt. Through this customized process, the brew acquires a
silky smooth consistency and gives a better drinking experience.
6.Fosters
58
Fosters Lager is a uniquely Australian beer, brewed with the finest sun-dried malted
barley, the purest water, and Fosters own specially bred Pride of Ringwood hops
imported directly from Australia to give the beer an authentic flavor. Fosters Lager
Beer has always been at the forefront of brewing technology and the Fosters Lager
brewed today is the result of over a century of attention to the brewing art. Quality has
been the strength of Fosters since its earliest days and remains a paramount concern at
every stage of the beers journey from brewery to consumer. Fosters crisp, clean
flavor won it immediate international acclaim when it was first brewed in Melbourne
in 1888. Today, more than one hundred years later, it is still recognized as one of the
worlds best beers.
SABMiller India brews & markets Fosters in India since 2006.
7.Miller High Life
59
Miller was born out of the dreams of the German entrepreneur Fredrick Miller who
migrated to America in the mid-19th century and founded the Miller brewing company
in 1855 in Milwaukee. Miller High Life dates back all the way to 1903 and has since
then been brewed with a consistent smooth taste and a perfect white lacy head.
Miller High Life is an easy drinking premium American lager that is refreshing at
4.7% ABV and is produced with the highest standards of quality. It perfectly balances
bitterness and smoothness and is known for its golden colour, high carbonation,
elegantly shaped clear glass bottle and the consistently crisp smooth taste.
The brand was launched in India in 2011 and is currently available in all the major
cities in pack sizes of 330ml and 650ml bottles.
Miller High Life embodies the American spirit of Work Hard, Party Hard. This
iconic beer is adored by consumers who live every day of their lives to the fullest. This
American spirit is captured by the expression Its Miller Time.
8.Peroni Nastro Azzurro
60
Today, Peroni Nastro Azzurro has become highly representative of classic Italian style
and culture. This premium beer is 4.9% alcohol by volume and expertly brewed using
only the finest quality and variety of spring barley, maize, malts and hops and by
following a meticulous production process.
This gives Peroni its unique taste which is refreshing and dry, with a clear-cut, clean
character and clarity, achieved through the exclusive brewing process. This ensures
that the beer has both a fresh and natural quality.
Positioned as Italian style in a bottle, from presentation to pouring the brand, Peroni
has struck a chord with modern urbanites looking for cosmopolitan class.
Peroni is available in Mumbai, Delhi, Bangalore and Pune. It is available in star hotels
and also in select high-end restaurants, lounge bars, pubs and night clubs.
ORGANIZATION CHART
SABMiller Limited, India follows top to bottom chart, which is as follows:-
61
BOARD OF DIRECTORS
Mr. Ari Mervis Chairman
Mr. T.S.R. Subramanian
Mr. Mathew James Dunn
Mr. Paolo Alberto Francesco Lanzarotti- Managing Director
AUDIT COMMITTEE
Mr. Mathew James Dunn- Chairman
Mr. Ari Mervis
Mr. Paolo Alberto Francesco Lanzarotti
Ms. Catherine May
Mr. Stephen Victor Shapiro
Ms. Sue Clark
Mr. Harald Graham Harvey
MARKETING ACTIVITIES
The major market for SABMiller prevails in India as well through out the world as it is
export oriented. It exports to various countries as discussed earlier.
SWOT Analysis
Strength
62

1. A strong portfolio of brands
2. Strong sales and distribution network
3. Presence in 75 countries across 6 continents
4. SAB Miller also owns over 150 market-leading local brands
5. Excellent marketing and branding have made the brand top of the mind
6. Nearly 70,000 people form a part of the workforce
Weakness
1.Have been unable to get a momentum in emerging markets
2.Intense competition means market growth is limited
Opportunity
1. Partnering the local breweries in particular countries can yield a bigger market
share
2. Launching successful brands which have a strong following and brand equity in the
newer markets
3. More advertising and sponsorship would increase brand recall
Threats
1. A strong competition from other brands
2. Laws and regulations on advertising and establishing the business
3. Slumping economy all over the world has been the greatest concern as disposable
income of consumers in lowering
The main Competitors in India

1. Diageo
63

2. Carlsberg
3. UB Group
4. Heineken
SOURCES OF WORKING CAPITAL TO SABMiller

(Formerly SKOL BREWERIES LIMITED)
Shares: Issues of shares is the most important source for raising the permanent or
long-term capital. SABMiller Limited (formerly SKOL BREWERIES LIMITED) has
313,170,736 equity shares of Rs 10, each which are fully paid up.
Loans: Financial institutions such as commercial banks, life insurance Corporation,

industrial finance corporation of India, state financial corporation etc provides long
term, short term, and medium term loans to the companies.
1. Secured loans: SABMiller India Limited gets secured loans by borrowing
money from banks. It also allocates 18% non-convertible debentures to KSFC.
Borrowings from banks are generally secured by the following;
Hypothecation of stocks, sundry debtors and machineries.
Personal guarantee of all the directors.
Mortgage of title deeds in respect of land and building belonging to an
associate firm.
2. Unsecured loans:SABMiller India Limited gets unsecured loans from

External commercial borrowing from banks & Loans and advances from
related party. Directors who grant unsecured loans are as follows:
64

Corporate Guarantees
Standard Chartered bank
ANALYSIS OF WORKING CAPITAL MANAGEMENT OF

SABMiller INDIA LIMITED (FORMERLY SKOL BREWERIES
LIMITED)
Working capital is looked as a driving seat of finance manager in SABMiller India
Limited. As it involves manufacturing activity it requires efficient amount of working
capital to meet its day-to-day needs. The long-term working capital needs are for
building, plant, furniture, etc., and the short-term needs are cash, inventories,
securities, etc. The balances sheet shows the financial position of a company at a given
point of time. It provides a snapshot and is regarded as a static picture. The income
statement or the profit and loss statement reflects the performance of a company over a
period of time. The significant accounting policies followed by SABMiller India
Limited (Formerly SKOL BREWERIES LIMITED) are as follows;
SIGNIFICANT ACCOUNTING POLICIES

Basis of preparing financial statements
The financial statements of SABMiller India Limited are prepared under the historical
cost convention on an accrual basis.
Fixed assets
65

Fixed assets are stated at their original cost of acquisition and subsequent
improvement thereto, including taxes, duties, freight and other incidental expenses
related to acquisition, construction and installation of asset(s) concerned.
Depreciation
Depreciation on fixed assets is provided at rates prescribed on written down value
basis in schedule XIV of the companies act of 1956 on a prorata basis from the date of
acquisition of the asset.
Inventories
Inventories are valued at lower of cost or net realizable value. Cost is determined on
first in first out basis and includes an appropriate portion of production and factory
related overheads
Long-term investments
Long-term investments are accounted at cost, and no provision has been made for
dimunition in the value of the same.
Foreign exchange transactions

Foreign exchange transactions are dealt with in accordance with the accounting
standards on accounting for effects of changes in foreign exchange rates (AS11) issued
by institute of chartered accountant of India.
Gratuity
66

Provision of gratuity is made on an estimated basis as per the provision of the payment
of gratuity act 1972.
Research and development

Research and development expenditure is charged to profit and loss account in the
year of incurrence. Fixed assets acquired for the purpose of research and developments
are capitalized.
Share capital
Out of the equity shares issued, 313,170,736 shares of Rs.10 each were allotted as
fully paid up.
ANALYSIS
67
Ratio Analysis of SABMiller India Limited
1.CURRENT RATIO
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio is also known as working capital ratio. It is calculated by dividing
the total current assets by total current liabilities.
Current Ratio =
Current Assets
Current Liabilities
Current assets include cash in hand, cash at bank, bills receivable, sundry
debtors, inventory, prepaid expenses, outstanding incomes temporary
investments and advances.
Current liabilities include bills payable, sundry creditors, bank overdraft,
unclaimed dividend, outstanding expenses, provision for taxation and proposed
dividend etc.
TABLE 01
68
TABLE SHOWING CURRENT RATIO
Year
Current Assets
Current Liabilities
Current Ratio
2011-2012
10381791196
12558812519
0.83
2012-2013
8426852990
14178831345
0.59
Analysis:
The current ratio for the year 2011-12 and 2012-13 is 0.83 and 0.59 respectively.
GRAPH 01
GRAPH SHOWING CURRENT RATIO
Current Ratio
2012-2013
0.59
Current Ratio
2011-2012
0.83
0.1
Interpretation:
69
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9

From the above graph it is clear that the current ratio of the year 2012-13 (0.83) is
greater than that of year 2011-12 (0.59) It indicates that the working capital position of
the company is increasing when compared with the previous year.
2.LIQUID RATIO
Liquid Ratio may be defined as the relationship between liquid assets and liquid
liabilities. It is also known as quick ratio. Liquid assets include all current assets
except inventory and prepaid expenses. Liquid liabilities include all current liabilities
except bank overdraft.
Liquid Ratio=
Liquid Assets
Liquid Liabilities
TABLE 02
SHOWING THE LIQUID RATIO
Year
Liquid assets
Liquid liabilities
Liquid ratio
2011-2012
7707668803
12558812519
0.61
2012-2013
5684508275
14178831345
0.40
Analysis:
70

The liquid ratio is decreased to 0.40 in the year 2012-2013 when compared to the
previous year 2011-2012. This confirms that there are fluctuations in the short-term
liquidity of the company.
GRAPH 02
GRAPH SHOWING LIQUID RATIO
71

-
Liquid Ratio
2012-2013
0.4
Liquid Ratio
2011-2012
0.61
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Interpretation:
Liquid ratio of the company is decreasing in year 2012-2013.So from the above graph
we find that the company liquid ratio is not good.
3.RATIO OF CURRENT ASSETS TO SHARREHOLDERS FUND
72

The ratio which establishes the relationship between current assets and shareholders
funds is called ratio of current assets to shareholders fund ratio. The ratio can be
calculated as follows.
Current Assets Net Worth Ratio=
Current Assets
Shareholde r ' s Funds
TABLE 03
TABLE SHOWING RATIO OF CURRENT ASSETS TO
SHAREHOLDERS FUND RATIO
Year
Current Assets
Net worth
2011-2012
10381791196
7101637582
2012-2013
8426852990
3,799,413,238
Current Assets
to Net worth Ratio
1.46
2.21
Analysis:
The above table shows that the current assets to net worth ratio in the year 2012-2013
has increased to 2.21 when compared to the year 2011-2012 .
GRAPH 03
73
GRAPH SHOWING RATIO OF CURRENT ASSETS TO

SHAREHOLDERS FUND RATIO
Current Asset to Shareholder's Fund
2012-2013
2.21
Current Asset to
Shareholder's Fund
2011-2012
1.46
0.5
1.5
2.5
Interpretation:
The company net worth is increasing from the year 2011-2012 so the current assets to
shareholders fund of the company has increased in the year 2012-2013. Hence,
companies shareholders fund has improved.
4.DEBTORS TURNOVER RATIO
74

Debtors turnover rate is in between credit sales and debtors. In other words, it
indicates the number of times the debts are collected in a year. This ratio is calculated
as follows
Debtors Turnover Ratio=
Credit Sales
Debtors
TABLE -04
TABLE SHOWING DEBTORS TURNOVER RATIO
Year
Credit Sales
Debtors
Debtors Turnover
2011-2012
33487465251
6198545813
Ratio
5.40
2012-2013
27825853277
4652810767
5.98
Analysis:
The debtors turnover ratio has increased to 5.98 in the year 2012-2013, compared to
the year 2011-2012.
GRAPH 04
GRAPH SHOWING DEBTORS TURNOVER RATIO
75
Debtors Turnover
2012-2013
5.98
Debtors Turnover
2011-2012
5.4
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
6.1
Interpretation:
This ratio lies in the fact that debtors constitute one of the important items of current
assets and this ratio indicates the how many days average sales are tied up in the
amount of debtors. A high debtors turnover ratio indicates that debt are being collected
more quickly. Change in this ratio shows the change in the companys credit policy or
change in ability to collect from its debtors. The company should maintain their ratio.
5.CREDITORS TURNOVER RATIO
76

Creditors turnover ratio is the ratio, which indicates the number of times the debts are
paid in the year. This ratio is calculated as follows.
CreditorsTurnover Ratio=
Credit Purchase
Average Creditors
TABLE -05
TABLE SHOWING CREDITORS TURNOVER RATIO
Year
Credit purchase
Creditors
Creditors turnover
2011-2012
8670519285
5235850764
Ratio
1.66
2012-2013
9400920281
5180350703
1.81
Analysis:
The creditors turnover ratio has increased to 1.81 in 2012-2013 when compared to
2011-2012 which was 1.66.
GRAPH 05
GRAPH SHOWING CREDITORS TURNOVER RATIO
77
Creditors Turnover Ratio
2012-2013
1.81
Creditors Turnover Ratio
2011-2012
1.55
1.66
1.6
1.65
1.7
1.75
1.8
1.85
Interpretation:
Creditors Turnover ratio shows that there is increase in purchase and decrease in
credits given which is a very good sign for the company. It also shows that due to
increase in purchase and decrease in creditors, there is increase in credit turnover ratio,
which is satisfactory for the organization.
6.FIXED ASSETS TURNOVER RATIO
78

The ratio, which expresses the relationship between the sales and total assets, is known
as Fixed assets turnover ratio.
Assets Turnover Ratio=
Sales
Asset
TABLE 06
TABLE SHOWING FIXED ASSETS TURNOVER RATIO
Year
Sales
Fixed Assets
Fixed assets turnover
2011-2012
19511539715
11121942442
Ratio
1.75
2012-2013
16366268093
11289543997
1.45
Analysis:
Fixed assets turnover ratio has decreased to 1.45 in the year 2012-2013 when
compared to the year 2011-2012 .
GRAPH 06
GRAPH SHOWING FIXED ASSETS TURNOVER RATIO
79
Fixed Assets Turnover Ratio
2012-2013
1.45
Fixed Assets Turnover
Ratio
2011-2012
1.75
0.2 0.4 0.6 0.8
1.2 1.4 1.6 1.8
Interpretation:
Fixed assets turnover ratios shows the that there is a decrease in both sales and fixed
assets as it decreases the fixed assets turnover ratio of the company. Hence, it is not
satisfactory for the company.
7.CURRENT ASSETS TURNOVER RATIO
The ratio, which expresses the relationship between the current assets to sales, is called
as Current assets turnover ratio. It is calculated as follows.
80
Current Assets Turnover Ratio=
Sales
Current Assets
TABLE 07
TABLE SHOWING CURRENT ASSETS TURNOVER RATIO
Year
Sales
Current Assets
Current assets
2011-2012
19511539715
10381791196
turnover Ratio
1.88
2012-2013
16366268093
8426852990
1.94
Analysis:
The current assets turnover ratio has increased to 1.94 in 2012-2013 when compared
to the previous year 2011-2012.
GRAPH 07
GRAPH SHOWING CURRENT ASSETS TURNOVER RATIO
81
Current Assets Turnover Ratio
2012-2013
1.94
Current Assets Turnover
Ratio
2011-2012
1.84
1.88
1.86
1.88
1.9
1.92
1.94
1.96
Interpretation:
From the above Current Assets Turnover ratio it concludes that company sales are
decreasing and its current assets are also decreasing. But, company current assets
turnover ratio has increased.
8.WORKING CAPITAL TURNOVER RATIO
The ratio, which expresses the relationship between the working capital and sales, is
called as Working capital turnover ratio. It is calculated as follows
82
Working Capital Turnover Ratio=
Sales
Working Capital
TABLE 08
TABLE SHOWING WORKING CAPITAL TURNOVER RATIO
Year
Sales
Working capital
Working capital
2011-2012
19511539715
330947528
turnover ratio
58.96
2012-2013
16366268093
371316219
44.08
Analysis:
Working capital turnover ratio has decreased to 44.08 in the year 2012-2013 when
compared to 2011-2012 which stands at 58.96.
GRAPH 08
GRAPH SHOWING WORKING CAPITAL TURNOVER RATIO
83
Working Capital Turnover Ratio
2012-2013
44.08
Working Capital Turnover
Ratio
2011-2012
58.96
10
20
30
40
50
60
70
Interpretation:
A high working capital turnover ratio shows the efficient utilisation of working capital
in generating sales. A low ratio, on the other hand, May indicates excess of net
working capital. This ratio shows that the working capital is efficiently utilised or not.
Here the ratio decreases in the year 2012-2013.
9.STOCK TURNOVER RATIO

This ratio is the relationship between the cost of goods sold during a given period and
the average amount of stock carried during the period.
84

Stock Turnover Ratio =
Cost of goods sold

Average stock
TABLE 09
TABLE SHOWING STOCK TURNOVER RATIO
Year
Cost of Goods Sold
Average Stock
Stock Turnover
2011-2012
9578428878
2674122393
Ratio
3.58
2012-2013
8604113675
2742344715
3.14
Analysis:
Stock Turnover Ratio has decreased to 3.14 in the year 2012-2013, when compared to
the year 2011-2012.
GRAPH 09
GRAPH SHOWING STOCK TURNOVER RATIO
85
Stock Turnover Ratio
2012-2013
3.14
Stock Turnover Ratio
2011-2012
2.9
3.58
3.1
3.2
3.3
3.4
3.5
3.6
3.7
Interpretation:
From the above graph it shows that the stock turnover ratio is decreasing as it is not
beneficiary for the company as it decreases the stock of the company.
SUMMARY OF FINDINGS & CONCLUSIONS
FINDINGS
The analysis and interpretation of the data gathered, has revealed the following facts:
86

SABMiller India is a wholly owned subsidiary of SABMiller Plc, London and its
operating in India since last 13 years.
SABMiller India has a total turnover is about Rs. 2250 Crores in the year 20122013.
SABMiller India has total eight products in India. The products are Royal
Challenge Strong, Royal Challenge, Fosters, Miller High Life, Indus Pride,
Knock Out, Peroni Nastro Azzurro, Haywards 5000.
SABMiller headquater is in London and the chairman is Mr. Ari Mervis.
Working Capital of SABMiller is increasing and it is in good position for

investment.
Types of Working Capital:

Permanent working capital
Temporary working capital
Net working capital
Gross working capital
Negative working capital
Findings of the Analysis: The current ratios of the year 2012-13 (0.83) is greater than that of year 2011-12
(0.59) It indicates that the working capital position of the company is
increasing when compared with the previous year.
Liquid ratio of the company is decreasing in year 2012-2013.So from the above
graph we find that the company liquid ratio is not good.
The company net worth is increasing from the year 2011-2012 so the current
assets to shareholders fund of the company has increased in the year 20122013. Hence, companies shareholders fund has improved.
87

This ratio lies in the fact that debtors constitute one of the important items of
current assets and this ratio indicates the how many days average sales are tied
up in the amount of debtors. A high debtors turnover ratio indicates that debt
are being collected more quickly. Change in this ratio shows the change in the
companys credit policy or change in ability to collect from its debtors. The
company should maintain their ratio.
Creditors Turnover ratio shows that there is increase in purchase and decrease in
credits given which is a very good sign for the company. It also shows that due
to increase in purchase and decrease in creditors, there is increase in credit
turnover ratio, which is satisfactory for the organization.
Fixed assets turnover ratios shows the that there is a decrease in both sales and
fixed assets as it decreases the fixed assets turnover ratio of the company.
Hence, it is not satisfactory for the company.
The Current Assets Turnover ratio it concludes that company sales are decreasing
and its current assets are also decreasing. But, company current assets turnover
ratio has increased.
A high working capital turnover ratio shows the efficient utilisation of working
capital in generating sales. A low ratio, on the other hand, May indicates excess
of net working capital. This ratio shows that the working capital is efficiently
utilised or not. Here the ratio decreases in the year 2012-2013.

The stock turnover ratio is decreasing as it is not beneficiary for the company
as it decreases the stock of the company.
88
CONCLUSIONS
SABMiller India Limited has now completed more than 11 years in the field of
breweries industries. In spite of having so many competitors, it has
successfully managed to overcome all the barriers from other products of the
competitors, which is a good sign of prosperity to the company. The long-term
solvency position of the company has shown a recurrent increase. The sales of
the company has increased since its expansion in Indian market that is why
they are second largest breweries company in India, which is a good sign to
companys prosperity. As the companies sales have increased but due to huge
liabilities their current assets have decreased. As they have many competitors
89

in the market of breweries they should maintain a high current assets. Working
capital turnover ratio has decreased even there are high sales and working
capital, the company should not loose their working capital as it will affect
their current assets and increase their liabilities.
SUGGESTIONS
SABMiller should make proper financial planning so that the available current
assets and current liabilities are utilized properly, as current assets is decreasing
and current liabilities is increasing.
The company must try to maintain its short-term liquidity position, by investing
only in those investments, which are easily convertable into cash.
SABMiller must cut down the operating and other expenses without reducing the
quality of its products.
90

The company should reduce the idle capacity in order to increase the efficiency
in the operations.
Fixed assets turnover ratios shows that there is a decrease in both sales and fixed
assets as it decreases the fixed assets turnover ratio of the company. Hence, it is
not satisfactory for the company.
A high working capital turnover ratio shows the efficient utilisation

of working capital in generating sales. A low ratio, on the other hand, May
indicates excess of net working capital. This ratio shows that the working capital
is efficiently utilised or not. Here the ratio decreases in the year 2012-2013.
From the above Current Assets Turnover ratio it concludes that
company sales are decreasing and its current assets are also decreasing. But,
company current assets turnover ratio has increased.
Company should decrease their liabilities in order to increase their

current assets.
Company should maintain working capital for effective and

efficiently functioning of the working capital management in the company
91

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SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

STEPS INVOLVED IN FINANCIAL PLANNING

Guiding management in the selection of the source of funds. This also

by a business enterprise in various time phases.

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

Factors to be considered while estimating financial requirements.

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

Estimating costs of other functions.

Fixed assets requirements.

Expenditure on current assets.

Provision for contingencies.

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

PART A.INTRODUCTION TO THE INDUSTRY

Traditional beer vats in Meghalaya

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

A bottle of Kingfisher Premium

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

Brewers and brands

Major beer brands in India

Craft beer and awards

Sales and consumption

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

Allied Blenders and Distillers Ltd

Amrut Distilleries (Bangalore, Karnataka)

John Distilleries (Bangalore, Karnataka)

Khoday India Limited (Bangalore, Karnataka)

Mohan Meakin (Ghaziabad, Uttar Pradesh)

Radico Khaitan (Rampur, Uttar Pradesh)

Seagram Manufacturing Ltd, owned by Pernod Ricard

Shivalik Distilleries (Punjab)

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

United Spirits Limited (Bangalore, Karnataka)

Vinbros & Co.

PART B. INTRODUCTION TO WORKING CAPITAL

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

Working management represents a large portion of the firms investment in

The need for working capital is directly related to sales growth.

An appropriate level of working capital is to be maintained as the excessive working

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

DEFINITIONS OF WORKING CAPITAL

Working capital has been in several ways as given below.

Circulating capital: - Interchangingly used word for working is circulating capital.

CONCEPTS OF WORKING CAPITAL

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

GROSS WORKING CAPITAL CONCEPT

NET WORKING CAPITAL CONCEPT

SABMiller India Limited (Formerly SKOL BREWERIES LIMITED)

NEED FOR WORKING CAPITAL FINANCE

For the purpose of raw materials, components and spares.

To pay wages and salaries.

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

To meet the selling costs as packing, advertising etc.

To provide credit facilities to the customers.

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