Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Tariquewali11@gmail.com
TABLE OF CONTENTS
1) Acknowledgement
2) Abstract
3) Objectives
4) Research methodology
5) Introduction
6) Overview of industry
7) Company Profile
17
35
9) Conclusion
54
10) Bibliography
56
ACKNOWLEDGEMENT
Gratitude is a hearts memory and putting the feelings of the heart into words, is an art. Those
who excel in this art are ultimately successful.
Determination, hard work, and patience are the key to success. Completing a project of this
magnitude would not have been possible without the encouragement & support of many people. At
this point of time I would like to acknowledge all those who have made a major contribution in its
development.
I also express my sincere regards to all the executive & staff members of Finance & other
departments of the company who immensely cooperated in completion of my project report.
Lastly, I would like to thank the God Almighty, my family members, my faculty members and all
those left unknowingly without whom the completion of this project would not have been possible.
ABSTRACT
This project discusses about the Working Capital Management of Dabur India Limited. A good
way to judge a company's cash flow prospects is to look at its Working Capital Management
(WCM). Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's
ability to fund operations, reinvest, and meet capital requirements and payments. Understanding A
Companys cash flow health is essential to make investment decisions.
The project in the initial stage began with the research of the financials of Dabur India Limited
through the Annual Reports and the official website of the company www.dabur.com. Basically the
purpose for the research was to understand as to what exactly is working capital, why do
companies require working capital, what is the ideal ratio of working capital to be maintained by
the Company, etc. After the research data was collected which was to be analyzed and compared
with the data of other companies (Hindustan Lever Ltd., Cadbury India Ltd., Nestle India Ltd.,
Britannia Industries and Marico Ltd.) to see how well the company is handling and managing its
finances.
The collected data was sorted out as per the requirements of the project. Out of the entire
financials, the Profit and Loss Accounts, Balance Sheets and The Cash Flow Statements were the
most important as for calculating the working capital and the ratios, as accurate data was available
in them.
The data till the year 2009-2010 has been analyzed and the working capital and ratios for Six
major FMCG companies that are: Dabur India Ltd., Hindustan Lever Ltd., Cadbury India Ltd.,
Nestle India Ltd., Britannia Industries and Marico Ltd. have been compared.
OBJECTIVES
RESEARCH METHODOLOGY
CHAPTER-1
INTRODUCTION
This project deals with the Working Capital Management of Dabur India Limited. Dabur India
Limited is the Fourth Largest FMCG Company. The basic meaning of Working Capital in a simple
language is CURRENT ASSETS less CURRENT LIABILITIES. Cash is the lifeline of every
business and hence working capital management plays an important role in functioning of a
business. Working capital comprises a number of different items and its management is difficult
since these are often linked. Hence altering one item may impact adversely upon other areas of the
business. Management must ensure that a business has sufficient working capital. Too little will
result in cash flow problems highlighted by an organization exceeding its agreed overdraft limit,
failing to pay suppliers on time, and being unable to claim discounts for prompt payment. In the
long run, a business with insufficient working capital will be unable to meet its current obligations
and will be forced to cease trading even if it remains profitable.
On the other hand, if an organization ties up too much of its resources in working capital it will
earn a lower than expected rate of return on capital employed which is not at all a desirable
situation.
The primary objective of working capital management is to ensure that sufficient cash is available
to-Meet day-to-day cash flow needs; Pay wages and salaries when they fall due; Pay creditors to
ensure continued supplies of goods and services; Pay government taxation and providers of capital
dividends; and Ensure the long-term survival of the business entity.
Inter firm comparison can be done with the help of ratio analysis as ratio analysis allows
comparison of one industry/firm to another. Since financial ratio analysis looks at relationships
inside the industry/firm, an industry/firm of one size can be directly compared to a second
industry/firm (or a collection of industries/firms), which may be larger or smaller or even in a
different business.
COMPETITORS
MARICO LTD.
Marico groups history can be traced back to 1862 when Kanji Morarji, started a small trading
business in Mumbai. The family set up the Bombay Oil Industries Ltd (BOIL) in 1948 with
manufacturing facilities in Mumbai for coconut oil extraction plant, vegetable oil refinery and a
chemical plant. Marico was incorporated in 1988 to take over the then 40-year old consumer
products business of BOIL. The division was engaged in marketing of coconut oil, edible oil,
instant starch, fruit jams etc Earlier the brands of Saffola and Parachute were owned by Bombay
Oil Industries Limited and Marico was given access to use these brands for perpetuity. In FY00,
the brands were transferred to the company for a consideration of Rs300mn.
Marico has 5 factories, located at Sewree in Mumbai, Jalgaon in Maharashtra, Palakkad in Kerala,
Saswad in Pune and Ponda in Goa.
Marico is the market leader in the hair oil segment, with its Parachute and Hair & Care brands. It is
also one of the leading players in the branded edible oil segment with strong brands like Saffola
and Sweekar. Besides hair and edible oil, the company has a presence in niche segments like
Instant Starch (Revive), Anti lice shampoo (Mediker) and food products like jams and sauces (Sil).
Marico also has a fee based marketing arrangement with Procter & Gamble (P&G) for marketing a
few P&G brands through its own network. Parachute, Saffola and Sweeker are the key earnings
drivers, contributing to almost 80% of Maricos turnover.
Fast moving consumer goods (FMCG) business is built on the two pillars of brand equity and
distribution network. Brand equities are built over a period of time by consistent high quality and
aggressive advertisement and marketing. Availability near the consumer through a wide
distribution channel is another crucial success factor, as products are small value, frequently
purchased, daily use items. Competition is intense, and players have to remain cost effective and
provide value for money to consumers to retain market shares. The company is, at present, highly
dependent on its three main brands -- Parachute, Saffola and Sweekar. The growth in this category
will be difficult to sustain in the longer run due to increasing competition. Recently, Hindustan
Lever acquired Cococare (it already has Nihar under its fold), which will see an intensification of
competition in the coconut oil category.
Marico has maintained Parachute market share despite severe competition. New edible oil products
are launched with 'Good for Health' positioning under the Saffola brand and catering to regional
taste requirements through the Sweekar franchise. In the hair oil segment, the company has
successfully launched value added Parachute variants. A new brand Shanti Amla, in the amla hair
oil category dominated by Dabur, has been launched during FY02 and has been extremely
successful.
10
11
with a 40% volume share and 48% value market share in the organized sector. FMCG major HLL
is expected to venture into the segment. Britannia has been aggressive in new launches and
marketing during the last 2 years anticipating the competition. It has also recently acquired
Kwality Biscuits, gaining a strong foothold in the southern market.
12
Nestl India manufactures products of truly International quality under brand names such as
MILKMAID, EVERYDAY, CERELAC, LACTOGEN, MAGGI, NESCAFE, NESCAFE
SUNRISE, NESTEA, MILO, KITKAT, MILKY BAR, MUNCH, POLO, NESTLE MILK,
NESTLE DAHI, NESTLE FRUIT N MILK and NESTLE FRUIT N DAHI.
13
14
CHAPTER-3
COMPANY PROFILE
OVER HUNDRED YEARS OF CARING
Dabur commenced operations in 1884 and is today a multi- location, multi-product enterprise. The
company has major interests in health and beauty care.
Dabur is a leader in Ayurveda the traditional Indian health care system.
The company has 12 manufacturing plants in India, Nepal and Egypt. Dabur products are also
manufactured in Dubai.
Dabur has a transactional network of 19 offices servicing both rural and urban markets in India.
The company has sales and marketing offices in Dubai and London. Dabur products are available
in over 50 countries.
15
FOUNDING THOUGHTS
What is that life worth which cannot bring comfort to others.
The DoorstepDAKTAR
The story of Dabur began with a small, but visionary endeavor by Dr. S. K. Burman, a physician
tucked away in Bengal. His mission was to provide effective and affordable cure for ordinary
people in far-flung villages. With missionary zeal and fervor, Dr. Burman undertook the task of
preparing natural cures for the killer diseases of those days, like cholera, malaria and plague.
Soon the news of his medicines traveled, and he came to be known as the trusted 'Daktar' or
Doctor who came up with effective cures. And that is how his venture Dabur got its name - derived
from the Devanagri rendition of Daktar Burman. Dr. Burman set up Dabur in 1884 to produce and
dispense Ayurvedic medicines. Reaching out to a wide mass of people who had no access to proper
treatment. Dr. S. K. Burman's commitment and ceaseless efforts resulted in the company growing
from a fledgling medicine manufacturer in a small Calcutta house, to a household name that at
once evokes trust and reliability.
16
COMPANYS HISTORY
1884
Birth of Dabur
1896
Early
1919
1920
Expands further
1936
1972
Shift to Delhi
1979
1986
1992
1993
Cancer treatment
1994
Public Issues
1995
Joint Ventures
1996
1997
2000
2002
2003
2005
2006
2007
2008
2009
17
billion
DABUR AT A GLANCE
Dabur India Limited has marked its presence with some very significant achievements and today
commands a market leadership status. Our story of success is based on dedication to nature,
corporate and process hygiene, dynamic leadership and commitment to our partners and stake
holders. The results of our policies and initiatives speak for themselves.
Leading consumer goods company in India with a excellent turnover
Three major Strategic Business Units (SBU) Family Products Division (FPD), Health Care
Products (HCPD) and Dabur Ayurvedic Specialties (DASL).
Thirteen Ultra-Modern manufacturing units spread across four Countries.
Products marketed in over 50 Countries.
FPD, dealing with personal care, the largest SBU contributing to 45% sales of Dabur
Products related to hair care, Skin care, Oral care and Foods.
3 Leading brands- Vatika, Amla Hair Oil and Lal Dant Manjan with Rs.100 Crore turnover
each.
Strategic positioning of honey as food product, leading to market leadership (over 40%) in
branded honey market.
18
HCPD, dealing with daily health care, Second largest SBU with 28% share in sales
Products related to Health Supplements, Digestive, Baby Care and Natural Cures.
Leadership in Ayurvedic and Herbal products market with highly popular brands.
Dabur Chyawanprash the largest selling Ayurvedic and Herbal products market with highly
popular brands.
Hajmola tablets in command with 75% market share of digestive tablets category.
Dabur Lal Tail tops baby massage oil market with 35% of total share.
Has more than 250 products sold through prescriptions, as well as over the counter
Asav Arishtas
Ras Rasayanas
Churans
Medicated Oils
Madhuvaani
Trifgol
Division also works for promotion of Ayurveda through organized community of traditional
19
20
MISSION:
To fully export our core competencies in the field of Ayurvedic and Herbal products by identifying
the consumer needs and aiming for full consumer satisfaction.
PRINCIPLES
OWNERSHIP
This is our company. We accept personal responsibility, and accountability to meet business needs.
PEOPLE DEVELOPMENT
People are our most important asset. We add value through result driven training, and we
encourage and award excellence.
21
CONSUMER FOCUS
We have superior understanding of consumer needs and develop products to fulfill them better.
TEAM WORK
We work together on the principle of mutual trust and transparency in a boundary less
organization. We are intellectually honest in advocating proposals, including recognizing risks.
INNOVATION
Continuous innovation in products & processes is the basis of our success.
INTEGRITY
We are committed to the achievement of business success with integrity. We are honest with the
consumers, with business partners and with each other.
22
Dabur's mission of popularizing a natural lifestyle transcends national boundaries. Today there is
global awareness of alternative medicine, nature-based and holistic lifestyles and an interest in
herbal products. Dabur has been in the forefront of popularizing this alternative way of life,
marketing its products in more than 50 countries all over the world.
DABUR products World Wide
Dabur has spread widely and deeply to be in close touch with overseas consumers.
Offices and representatives in Europe, America and Africa;
A special herbal health care and personal care range successfully selling in markets of the
Middle East, Far East and several European countries.
Inroads into European and American markets that have good potential due to resurgence of
the back-to-nature movement.
Export of Active Pharmaceutical Ingredients (APIs), manufactured under strict
international quality benchmarks, to Europe, Latin America, Africa, and other Asian
countries.
Export of food and textile grade natural gums, extracted from traditional plant sources.
23
PRODUCTS
HEALTH SUPPLEMENTS:
Dabur Chyawanprash
Dabur Glucose D
DIGESTIVES:
Anardana
Hajmola
Hajmola Candy
Pudin Hara G
Dabur Hingoli
24
BABY CARE:
NATURAL CURES:
Shilajit Gold
Nature Care
Sat Isabgol
Shilajit
Ring Ring
Itch Care
Back-Aid
Shankha Pushpi
Dabur Balm
Sarbyna Strong
25
SKIN CARE:
Gulabari
26
ORAL CARE:
REAL:
Real Activ
HOMMADE:
Cooking Pastes
27
Coconut Milk
Tomato Puree
CAPSICO RED
LEMONEEZ
Dashmularishta
Ashokarishta
Lauhasava
Mahanarayan Tail
Juritap
Madhuvani
28
HEALTH CARE:
Dabur Chyawanprash
Pudinhara
Hajmola Tablets
Dabur Honey
Shilajit
SKIN CARE:
29
Natural Soaps
ORAL CARE:
HAIR CARE:
FOODS:
Real Juices
DR.BURMAN (RUSSIA)
Health Supplements
Ayurvedic Toothpastes
30
31
This move will inject a new impulse in Dabur and also boost the Companys sales effort
32
CHAPTER-4
The term Working Capital refers to the capital required for day-to-day operations of a business
enterprise. It is represented by excess of Current assets over Current Liabilities. It is necessary for
any organization to run successfully its affairs, to provide for adequate working capital. Too large
33
investment in Current Assets means blocking the capital that can be used productively elsewhere.
On the other hand too little investment can be expensive. For example, insufficient inventory may
cause loss of sales to Customers.
All this indicates that proper estimation of the Working Capital requirements is a must for running
the business efficiently and profitably.
Working capital is therefore:Current
WORKING
CAPITAL =
Assets
||
- Current liabilities
There are basically two concepts of working capital Gross Working Capital:
It is the amount of capital invested in the total Current assets of the enterprise. Current assets
are those assets, which in ordinary course of business can be converted into cash within a short
period of normally one accounting year.
Net Working Capital:
It refers to the difference between net current assets and liabilities. Current liabilities are those
claims of outsiders, which are expected to mature for payment within an accounting year. Net
working capital can be positive or negative. A positive net working capital will arise when
current assets increase current liabilities. A negative working capital will arise when current
liabilities are in excess of current assets.
Current Assets:
Current assets, sometimes called liquid assets, are those resources of a firm, which are either held
in the form of cash or are expected to be converted in cash within the accounting period in one-
34
year duration. The operating cycle is the time taken to convert the raw materials into finished
goods and convert receivables (goods sold on credit) into cash.
Current Assets include:
Cash in hand
Bank balances
Bills Receivables
Raw material
Work in progress
Finished Goods
Prepaid expenses
Accrued Incomes.
Current Liabilities:
Current Liabilities are debts payable within an accounting period. Current assets are converted into
cash to pay current liabilities.
Current Liabilities include:
Bills Payable
Dividends Payable
Bank Overdraft
35
It is a conventional rule to maintain the level of current assets twice the level of current liabilities.
A weak liquidity position poses a threat to the solvency of the company and makes it unsafe and
unsound. A negative working capital means a negative liquidity and at times it may prove to be
harmful for the companys reputation. Excessive liquidity is also bad. It may be due to
mismanagement of current assets. Therefore prompt and timely action should be taken by the
management to improve and correct the imbalances in the liquidity position of the firm.
Gross Working Capital is a Going Concern/Financial Concept where as the Net Working
Capital is an Accounting Concept of working capital.
OBJECTIVE:
The objective of working capital management is to maintain the optimum balance of each of the
working capital components. This includes making sure that funds are held as cash in bank
deposits for as long as and in the largest amounts possible, thereby maximizing the interest earned.
36
However, such cash may more appropriately be "invested" in other assets or in reducing other
liabilities. Other objectives of working capital management are as follows: To identify cash flow cycles of the firm.
To maintain the level of current assets twice the level of current liabilities.
To help the company to maintain good business relations.
To determine the future capital, liquidity position and other requirements of
the company.
Ratio analysis can be used to monitor overall trends in working capital and to identify areas
requiring closer management.
The individual components of working capital can be effectively managed by using various
techniques and strategies.
When considering these techniques and strategies, departments need to recognize that each
department has a unique mix of working capital components. The emphasis that needs to be placed
on each component varies according to department. For example, some departments have
significant inventory levels; others have little if any inventory.
Furthermore, working capital management is not an end in itself. It is an integral part of the
department's overall management. The needs of efficient
Working capital management must be considered in relation to other aspects of the department's
financial and non-financial performance
37
On basis of Concept
On basis of Time
38
Gross
Net
Permanent/
Temporary/
Working
Working
Capital
Capital
Working
Working
Fixed
Variable
Capital
Capital
Regular Reserve
WC
WC
Seasonal Special
WC
WC
39
40
the management regarding automation, etc., will also have its effect on working capital
requirements.
Credit policy-A company which allows liberal credits to its customers, may have higher
sales but will need more working capital as compared to a company which has an
efficient debt collection machinery and observing strict terms. The working capital
requirements can also be affected by the credit facilities enjoyed by the company.
Business cycle-Different phases of business cycle i.e, boom, recession, recovery etc.
also affect the working capital reuirement. In case of boom condition business activities
expand .As a result, the need for cash, inventories etc. increases resulting in more and
41
more funds blocked in these current assets. In case of recession period, there is usually
dullness in business activities and there will be an opposite effect on the level of
working capital requirement. There will be a fall in inventories and cash requirements
etc.
42
There are two elements in the business cycle that absorbs cash:
The main sources of cash are Payables (your creditors) and Equity and Loans.
When it comes to managing working capital- TIME IS MONEY. If you can get money to move
faster around the cycle (e.g. collect monies due from debtors more quickly) or reduce the amount
of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more
cash or it will need to borrow less money to fund working capital.
As a consequence, you could reduce the cost of bank interest or youll have additional free money
available to support additional sales growth or investment. Similarly, if you can negotiate
improved terms with suppliers e.g. get longer credit or an increased credit limit; you effectively
create free finance to help fund future sales.
43
ii)
Depending on the above mentioned requirements following are the sources of financing working
capital-
SOURCES
44
Shares
Commercial Banks
Debentures
Commercial paper
Public Deposits
Trade Creditors
Installment credit
Accounts payables
Accrued Expenses
45
46
Most businesses cannot finance the Operating Cycle (accounts receivable days + inventory days)
with accounts payable financing alone. Consequently, working capital financing is needed. This
shortfall is typically covered by the net profits generated internally or by externally borrowed
funds or by a combination of the two.
Most businesses need short-term working capital at some point in their operations. For instance,
retailers must find working capital to fund seasonal inventory buildup between September and
November for Christmas sales. But even a business that is not seasonal occasionally experiences
peak months when orders are unusually high. This creates a need for Working Capital to fund the
resulting Inventory and Accounts Receivable buildup.
Some small businesses have enough cash reserves to fund seasonal Working Capital needs.
However, this is very rare for a new business. If your new venture experiences a need for shortterm Working Capital during its first few years of operation, you will have several potential
sources of funding. The important thing is to plan ahead. If you get caught off guard, you might
miss out on the one big order that could have put your business over the hump.
Here are the five most common sources of short-term working capital financing:
Equity
Trade Creditors
Factoring
Line Of credit
Short-term Loans
Equity: If your business is in its first year of operation and has not yet become profitable, then you
might have to rely on equity funds for short-term working capital needs. These funds might be
injected from your own personal resources or from a family member, friend or third-party investor.
47
Trade Creditors: If you have a particularly good relationship established with your trade
creditors, you might be able to solicit their help in providing short-term working capital. If you
have paid on time in the past, a trade creditor may be willing to extend terms to enable you to meet
a big order. For instance, if you receive a big order that you can fulfill, ship out and collect in 60
days, you could obtain 60-day terms from your supplier if 30-day terms are normally given. The
trade creditor will want proof of the order and may want to file a lien on it as security.
Factoring: Factoring is another resource for short-term working capital financing. Once you have
filled an order, a factoring company buys your account receivable and then handles the collection.
This type of financing is more expensive than conventional bank financing but is often used by
new businesses.
Line Of Credit: Banks to new businesses do not often give Lines of credit. However, if your new
business is well capitalized by equity and you have good collateral, your business might qualify for
one. A line of credit allows you to borrow funds for short-term needs when they arise. The funds
are repaid once you collect the accounts receivable that resulted from the short-term sales peak.
Lines of credit typically are made for one year at a time and are expected to be paid off for 30 to 60
consecutive days sometime during the year to ensure that the funds are used for short-term needs
only.
Short-term loan: While your new business may not qualify for a line of credit from a bank, you
might have success in obtaining a one-time short-term loan (less than a year) to finance your
temporary working capital needs. If you have established a good banking relationship with a
banker, he or she might be willing to provide a short-term note for one order or for a seasonal
inventory and/or accounts receivable buildup.
In addition to analyzing the average number of days it takes to make a product (inventory days)
and collect on an account (account receivable days) vs. the number of days financed by accounts
payable, the operating cycle analysis provides one other important analysis.
48
From the operating cycle, a computation can be made of the dollars required to support one day of
accounts receivable and inventory and the dollars provided by a day of accounts payable.
Working capital has a direct impact on CASH FLOW in a business. Since cash flow is the name
of the game for all business owners, a good understanding of working capital is imperative to make
any venture successful.
The primary objective of working capital management is to ensure that sufficient cash is available
to:
Over-capitalization (and therefore waste through under utilization of resources and hence
poor returns); and
Overtrading (trying to maintain a level of sales which is higher than working capital can
sustain for businesses which extend credit terms, more sales means more debtors and
higher working capital demands).
Company Name
F/Y
Current
Current
Net
Assets
Liabilities
Working
49
Capital
Dabur India Ltd.
Britannia Industries Ltd.
Hindustan Lever Ltd.
Marico Industries Ltd.
2009-2010
2009-2010
2009-2010
2009-2010
477.72
325.94
3089.74
471.43
471.73
345.08
5493.97
230.75
5.99
-19.14
-2404.23
240.68
2009-2010
2009-2010
502.41
589.66
534.02
666.39
-31.61
-76.73
50
Receivables are essentially loans extended to customers that consume working capital;
therefore, greater levels of DIO and DSO consume more working capital. However, days
payables outstanding (DPO)--which essentially represent loans from vendors to the
51
flows. It has efficient financial management through which it has enabled in bringing down
the Working Capital figure to a negative one.
LIMITATION:
In any other situation, it is a sign a company may be facing bankruptcy or serious financial
trouble.
So having a negative Working Capital may prove a Boon or Bane for the Company.
CHAPTER-6
CONCLUSION
Profitability Position-Profitability refers to the ability of the business to earn profit. It shows the
efficiency of the business. Profitability position of a company can be judged by the profitability
52
ratios of the company as these ratios measure the profit earning capacity of the company. The inter
firm comparison shows that HLL is the company which is having the best profitability position
among all the companies with the help of which we can conclude that HLL is having a good profit
earning capacity .
Liquidity or short term financial position-liquidity shows the financial soundness of the business
and also whether the current assets of the company are sufficient to meet its short term liabilities.
Inter firm comparison shows that all the companies are having current ratio less than 2:1 which
shows that the short term financial position of the is not supposed to be very sound. In the same
way, standard liquid ratio sis 1:1 ,the inter firm comparison shows that only Cadbury is the
company which has better capacity to meet its current obligations and along with Cadbury, Marico
is also having a better liquidity position than other companies
Solvency or long term financial position- Solvency means the ability of the business to meet its
outside liabilities and by solvency position we mean the long term financial position of the
company. Inter firm comparison shows that all the companies are having a good solvency position
which can be determined by the different ratios used to calculate the solvency position.
Turnover position-Turnover means sales which has direct relationship with the performance of
the business. More sales means the business is more active and has better performance, lesser sales
shows inactivity of the business, poor performance and lesser productivity. The inter firm
comparison shows that all the companies have a good turnover which shows that all the companies
are performing well, but among all the companies Nestls turnover is more than other companies.
53
BIBLIOGRAPHY
The following sources have been sought for the preparation of this report.
BOOKS
AUTHOR/PUBLICATION
54
Financial Management
OTHER SOURCES-Other sources include annual report of Dabur India ltd., Hindustan
lever ltd., articles from news papers like Economic times, Business world, Times of
India(business section),magazines like Business India, Business world, Business today.
WEBSITES
www.dabur.com
www.icicidirect.com
www.studyfinance.com
www.google.com
55