HLL Lifecare's Journey from Condom Manufacturer to Vaccine Security Provider

Introduction
As a condom-manufacturing company, HLL Lifecare started small, but dreamed big.

That dream changed lives in ways unimaginable. Soon, HLL became the go-to brand for
various contraceptives. It was only a matter of time before diversification followed,
bettering the brand with healthcare products and services. After more than 30 years of
consistent quality performance, HLL Lifecare now takes on an even bigger
responsibility the vaccine security of the nation. No wonder then, at HLL work is
about innovating for healthy generations, every day.
Industry Profile
The health care industry, or medical industry, is an aggregation of sectors within the
economic system that provides goods and services to treat patients with curative,
preventive, rehabilitative, and palliative care. The modern health care industry is
divided into many sectors and depends on interdisciplinary teams of trained
professionals and paraprofessionals to meet health needs of individuals and populations
The health care industry is one of the worlds largest and fastest-growing industries
Consuming over 10 percent of gross domestic product (GDP) of most developed
nations, health care can form an enormous part of a country's economy.
Health care in India
India has a universal health care system run by the constituent states and territories
of India. The Constitution charges every state with "raising the level of nutrition
and the standard of living of its people and the improvement of public health as
among its primary duties". The National Health Policy was endorsed by the
Parliament of India in 1983 and updated in 2002. Parallel to the public health
sector, and indeed more popular than it, is the private medical sector in India.
Both urban and rural Indian households tend to use the private medical
sector more frequently than the public sector, as reflected in surveys. India has a
life expectancy of 64/67 years (m/f), and an infant mortality rate of 61 per 1000
live births
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Company Profile
HLL Lifecare Limited (HLL) commenced its journey to serve the Nation in
the area of Health Care, on March 1, 1966, with its incorporation as a corporate
entity under the Ministry of Health and Family Welfare of the Government of
India. HLL was set up in the natural rubber rich state of Kerala, for the
production of male contraceptive sheaths for the National Family Planning
Programme. The company commenced its commercial operations on April 5,1969
at Peroorkada in Trivandrum. The plant was established in technical collaboration
with M/s Okamoto Industries Inc.Japan. Two most modern plants were added, one
at Thiruvananthapuram and the other at Belgaum in 1985.
The new condom plant inaugurated by the Union Minister for Health and Family
Welfare, Dr. Anbumani Ramadoss o n 24th November 2007 has added another
283 million pcs to the Peroorkada plants existing capacity. With this production
facility at Peroorkada has emerged as one of the largest single manufacturing
plants in the world for the production of condoms, with a capacity to produce over
1 Billion Condoms a year. With the addition of this capacity, HLL today has an
annual production capacity of 1.316 billion condoms
HLL i s today a multi-product, multi-unit organization addressing various public
health challenges facing humanity. On the path of rapid growth, HLL has set its
sights to be Rs 1000 crores company by the year 2010. HLL Lifecare Limited has
grown today into a multi -product, multi-unit organization addressing various
public health challenges faced by humanity. HLL Lifecare Limited has made a
turnover of Rs. 83294.11 lacs during the period 2012 -2013 and the profit during
that period accounts for Rs. 3007.47 lacs. HLL is today a Mini Ratna and upgraded
as a Schedule Central Public Sector Enterprise. The Peroorkada Factory itself
produces about 4.1 million pieces of condoms annually.
HLL Lifecare Limited is one of the company in the world manufacturing and
marketing the widest range of contraceptives. It is unique in providing a range
condoms including Female Condoms, Intra-Uterine Devices, Oral Contraceptive
Pills, Steroidal, Non-Steroidal of & Emergency Contraceptive Pills and Tubal
Rings.
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The Peroorkada factory produces 4.1 million condoms daily making it one of the
worlds leading manufacturers of condoms accounting for nearly 10% of the global
production capacity.
HLL has been declared a Mini Ratna company by the Government of India and
upgraded as a Schedule B PSU. HLL has also made vast inroads in the commercial
segment too, with the growth in its market share from 0.1 percent at present. HLLs
products are today exported to over 70 countries. HLLs association with world
leaders include those with Okamoto of Japan; Finishing Enterprises, USA; Becton
and Dickinson, USA; Female Health Company, USA; Gambro BCT, Sweden;
Beijing Zizhupharma of China and Acumen Fund, USA.
HLL
has today
five
state
of the art manufacturing
facilities-two
at
Thiruvananthapuram (At Peroorkada and Akkulam) manufacturing Contraceptives

and Health Care products, at Kangala (near Belgaum) producing contraceptives
and womens Health Pharma range, at Kochi in Special Economic Zone for
Female condoms, and at Manesar in Haryana for the production of In- Vitro
Diagnostic Kits. These Units have the ISO 9001, ISO 14001 -quality and
environmental management system Certifications. HLLs Peroorkada Plant was
also awarded the OHSAS 18001 Certification for its efficient Occupational
Health and Safety Management System.
HLL is investing heavily in the area of Research and Development. It is setting up a
national centre for Research in the area of contraceptive products.
HLL is today the leading provider of contraceptive and health care products
for various public health programmes managed by international agencies likeUNFPA, Mission Pharma, PSI and IDA.HLL is partnering with the Government
of India in the National Rural Health Mission, Reproductive and Child Health
Project and the National AIDS Control Programme. HLL has the highest quality
certifications awarded by reputed international agencies. All its products have the
CE Mark, and its range of condoms have the US FDA 510K registration, the
KITE mark, SABS mark and the TBS.
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Manufacturing Plants
HLL commenced its commercial operations on April 5, 1969 at Peroorkada in

Thiruvananthapuram in the state of Kerala. HLL today has seven state-of-the-art
manufacturing plants which are Peroorkada in Thiruvananthapuram, Kerala for
contraceptives, Kanagala near Belgaum in Karnataka (1985) for contraceptives and
pharmaceutical products, Akkulam in Thiruvananthapuram, Kerala (1994) for hospital
products, Kakkanad in the Cochin Special Economic Zone, Kerala (2004) for female
condoms and male condoms (export), Manesar in Gurgaon, Haryana (2007) for rapid
in-vitro diagnostic test kits,Indore in Madhya Pradesh (2010) for pharma and womens
healthcare products and Gajwel in Medak, Andhra Pradesh (2012) for condoms. All
these units have ISO 9001, ISO 14001 - quality and environmental management system
certifications. HLLs Peroorkada, Akkulam and Kanagala plants have OHSAS 18001
certification for efficient occupational health and safety management system. The
testing laboratory for finished products at Peroorkada Factory has NABL accreditation
under ISO/EC 17025.
Peroorkada Factory, Thiruvananthapuram (PFT)
The manufacturing unit at Peroorkada, in Thiruvananthapuram district of Kerala was
set up in 1969 in technical collaboration with M/s Okamoto Industries Inc., Japan. The
plant has undergone continuous modernisation over the years and has an annual
production capacity of 1600 million pieces of condoms. The facility is equipped with
modern machines and equipment for production, inspection and quality testing,
conforming to GMP and meets international standards. The unit produces many variants
of condoms with different flavours and textures. Condoms manufactured in this facility
have product certifications such as CE, KITE, SABS, NF, CMD CAS and meets a range
of international quality specifications and standards such as: WHO 2003, 510K, ISO
4074:2002,
SANS
ISO
4074,
ASTM
3492 and GOST - 4645-81. The facility has certifications under ISO 9001:2008, ISO
14001:2004, ISO 13485:2003, OHSAS 18001:2007, WHO GMP and NABL as per ISO
17025:2005.
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Akkulam Factory, Thiruvananthapuram (AFT)

Akkulam Factory in Thiruvananthapuram district of Kerala is the state of the art facility
for manufacture of Blood Bags and other medical devices namely Surgical Sutures
(Absorbable & Non Absorbable), Intrauterine Devices (Copper T) and Mesh Implant
for Reinforcement of Connective tissue structure.
The above products are manufactured in class 10000 and class 100 Clean room facilities
maintained in a centrally air conditioned atmosphere. The products have C E
International Quality Certification and the manufacturing facility has been certified for
conformity with international quality standards-ISO 9001,WHO GMP, ISO 13485,
OHSAS 18001 and ISO 14001.
The annual production capacity of blood bags at the factory stood at 11.5 million pieces,
copper IUDs - 5.5 million pieces, surgical sutures - 1,25,000 dozens and tubal rings 2.5 million pairs.
The products are exported to more than 20 countries. AFT has won awards for pollution
control, productivity and innovation.
Kanagala Factory, Belgaum (KFB)
The Kanagala plant in Belgaum in the state of Karnataka commenced operations with
the production of condoms in 1985 using Japanese technology. This unit underwent
diversification in 1992 with the tabletting facility for birth control pills - Mala-D/N and
the formulation and tabletting of Saheli (Centchroman) the indigenous, non-steroidal
once-a-week pill. The tabletting of Emergency Contraceptive pills started in 2003.
Commercial manufacturing of women healthcare products commenced in 2006. KFB
has also added a world-class hormonal/steroidal formulation plant UNIPILL Block in
2012. The manufacturing unit has GMP and quality management systems (QMS) like
ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007 and ISO 13485:2003
Kakkanad Factory, Cochin (KFC)
HLLs female condom manufacturing facility at Cochin Special Economic Zone,
Kakkanad in Kerala has been set up in technical collaboration with M/s. Female Health
Company (FHC), US. It is the second generation of female condoms made from
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Synthetic Nitrile latex, the product generically being termed FC2. The installed capacity
of the plant is 7 million pieces of FC2 per year. In addition, KFC has a fully automatic
testing and packing facility for male condoms with an annual capacity of 150 million.
This facility mainly caters to the export market. KFC has the ISO 9001:2008, ISO
13485:2003, CE Mark and WHO GMP certification for manufacturing female condoms
(FC2) certified by M/s DNV and ISO 9001:2008,ISO 13485:2003, CE Mark and WHO
GMP for male condom facility certified by M/S DNV.
KFC has also received the NF Mark certification from M/s LNE for male condom
facility and is also approved by many institutional buyers like IDA, Mission Pharma
and UNFPA for the supply of male condoms.
In addition to the product certification, KFC is also certified by M/s TUV, with ISO
18001:2007 and ISO 14001:2004 certifications for safety, health and environment
compliance.
Manesar Factory, Gurgaon (MFG)
HLL has its in-vitro immuno diagnostics kit manufacturing facility at Manesar in
Gurgaon. It has an installed capacity to manufacture 26 million rapid pregnancy test kits
per year. The unit commenced operations in November 2007. The unit manufactures
rapid test kits for detection of metabolic hormones such as human chorionic
gonadotropin (hCG) in urine and prognosis of diseases such as Dengue, Malaria
(different strains), Kala-azar (leishmaniasis), TB, Chikungunya and other infectious
diseases. The facility has Quality Management Systems like ISO 9001:2008, ISO 13485
and CE mark according to IVD 98/79/EC directive for pregnancy test cards for
professional use brands like Makesure, P-Test and Nishchay.
Pharma Factory, Indore (PFI)
Indore, the commercial capital of Madhya Pradesh opened its doors to a pharma
production facility in 2010. The facility manufactures a range of pharma products which
include formulations such as tablets, capsules and Oral Rehyderation Salt. PFI also
supplements the existing production facility of KFB in the area of womens healthcare
products.
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Irapuram Factory, Cochin (IFC)

Irapuram Factory, Cochin (IFC) is located at the Rubber Park near Perumbavoor,
Kerala. IFC facility is the moulding hub for male and female condoms. The installed
capacity for male condom moulding is 240 mpcs/ year and for the female condoms is 25
mpcs/year. The total constructed area in the 306 cents plot is 4650 square metre
Product Profile
HLL has an exhaustive assortment of products, from the popular brand of condoms
MOODS to the companys natural products Herbs &Berries, an Ayurvedic products
range. Right through its journey from manufacturing contraceptives, many products
have continued to take shape at HLL. These include re-hydration salts, blood
transfusion equipment and wound care products, blood banking equipment, neo-natal
care equipment and, surgical and healthcare products. Each category caters to a different
segment of society, helping HLL make life a better experience.
Contraceptive Aids
Condoms
Copper-Ts
Oral contraceptive pills
Health Care Aids
Blood transfusion bags
Hydrophilic shunts
Surgical sutures
Surgical and examination gloves
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Social Marketing Products
Ferro plus Iron and folic acid tablets
Jal jeevan oral rehydration salts
Plastid medicated plaster
Organisation Structure
HLL Lifecare Ltd. is governed by a Board of Directors. The CEO of the company is its
Chairman and Managing Director. The Managing Director is the operational head of the
company and he is supported by 3 executive directors (operational, technical and
finance). Each unit is headed by an Executive Director and is assisted by the General
Manager or Assistant General Manager. Different departments in each unit are headed
by a Manager or Deputy Manager.
Finance Department
1. Ledger section
Passing and settling of all freight advances of personal accident claims of
employees of bills related to electricity, water charges etc.
2. Party bills section
Deals with the service bill for rendering services such as phone, type writer etc.
3. Payroll, cash and computer section
Deals with salary computation and payment of salaries. HLL has got a well
integrated MIS.
4. Internal audit section
Scrutiny of all purchase proposals, comparative statements, supply orders,
annual major complaints of all engineering equipments and all files off all
employees relating to annual increments, promotions, transfers etc.
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5. Costing section
Deals with preparation of quarterly financial reports, preparation of monthly
profitability statements, budget preparation etc.
6. Finalisation of accounts section
Performs the functions of assisting the statutory of government auditors in
connection with audit of accounts of HLL and preparing and assisting and
coordinating of all works connected with finalisation of accounts of HLL. The
financial statement of the company is prepared and compiled according to
Companys Act 1956 every year.
Motto
Innovating for healthy generations
Vision
To be a globally respected organization, focusing on inclusiveness by providing affordable and
quality healthcare solutions through continuous innovation.
Mission
Provide quality products and services meeting international standards.
Excellence through continual improvement by adoption of best technologies and

practices
Customers delight and value creation through innovation, research and

development, cost management and customer care.
Focusing on human resource development to meet the need of challenging

business environment.
Be a socially committed corporate by maintaining highest standards of corporate

governance social responsibility.
Committed to well-being of mother earth and future generations through green

initiatives and promotion of sustainable development.
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Objectives
The company will strive to fulfill its vision/mission by

1. Attaining rapid growth and global levels of operations with high quality cost
competitiveness and be among the top three players in each main product category.
2. Create a culture of continuous innovation through R& D initiatives.
3. Strive to be the employer of choice in India with employee satisfaction levels of
over 90%.
4. Be recognized as the leading social organization in the field of Reproductive and

Women's Healthcare with commitment to the society - a partner of choice for
implementing all government and multilateral initiatives in these segments.
5. Focussing on capacity building, skill development and infrastructural development
for the benefit of the marginalized and under privileged sections for their
empowerment and inclusion in the economic mainstream.
6. To place emphasis on environmental friendly activities that brings out conservation
of resources and waste management leading to top sustainable development.
Review of Literature
Maheshwari (1996) states that accounting ratios are relationship expressed in

mathematical terms between figures which are connected with each other in
some manner. Obviously no purpose will be served by comparing two sets of
figures which are not at all connected with each other. Moreover absolute
figures are unit for comparison.
Smith and Begemann (1997) emphasized that those who promoted working
capital theory shared that profitability and liquidity comprised the salient goals
of working capital management. The problem arose because the maximization of
the firm's returns could seriously threaten its liquidity, and the pursuit of
liquidity had a tendency to dilute returns.
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Shin and Soenen, (1998) highlighted that efficient Working Capital Management
was very important for creating value for the shareholders. The way working
capital was managed had a significant impact on both profitability and liquidity.
The relationship between the length of Net Trading Cycle, corporate profitability
and risk adjusted stock return was examined using correlation and regression
analysis, by industry and capital intensity. They found a strong negative
relationship between lengths of the firms net-trading Cycle and its profitability.
In addition, shorter net trade cycles were associated with higher risk adjusted
stock returns.
Khan (2000) conducted research based on listed Pakistani companies, named

impact of working capital management on the profitability of firms and
investigates a relation between working capital management and the corporate
profitability of the non-financial firm. The sample size taken was 30 firms.
These results showed a negative relationship between gross profits and the
number of days, inventories, accounts payable and cash conversion cycle.
Deloof( 2003) discussed that most firms had a large amount of cash invested in
working capital. It can therefore be expected that the way in which working
capital is managed will have a significant impact on profitability of those firms.
Using correlation and regression tests he found a significant negative
relationship between gross operating income and the number of days accounts
receivable, inventories and accounts payable of Belgian firms. On basis of these
results he suggested that managers could create value for their shareholders by
reducing the number of days accounts receivable and inventories to a
reasonable minimum. The negative relationship between accounts payable and
profitability is consistent with the view that less profitable firms wait longer to
pay their bills.
Eljelly (2004) elucidated that efficient liquidity management involves planning

and controlling current assets and current liabilities in such a manner that
eliminates the risk of inability to meet due short-term obligations and avoids
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excessive investment in these assets. The relation between profitability and

liquidity was examined, as measured by current ratio and cash gap (cash
conversion cycle) on a sample of joint stock companies in Saudi Arabia using
correlation and regression analysis. The study found that the cash conversion
cycle was of more importance as a measure of liquidity than the current ratio
that affects profitability. The size variable was found to have significant effect
on profitability at the industry level. The results were stable and had important
implications for liquidity management in various Saudi companies. First, it was
clear that there was a negative relationship between profitability and liquidity
indicators such as current ratio and cash gap in the Saudi sample examined.
Second, the study also revealed that there was great variation among industries
with respect to the significant measure of liquidity.
Aggarwal (2005) on his study on the topic ratio analysis shows that
profitability is the measure of the amount by which a companys revenues
exceed its relevant expenses. Profitability ratios are used as base within the
organisation.
Thomas M (2005) studied distinct levels of working capital management

measures for different industries, which tend to be stable over time. Many
factors help to explain this discovery. The improving economy during the period
of the study may have resulted in some industries, while slowing turnover may
have been a signal of troubles ahead.
Afza and Nazir concluded that there is a negative relationship between the
profitability measures of firms and degree of aggressiveness on working capital
investment and financing policies. Their result indicates that the firms yield
negative returns if they follow an aggressive working capital policy by
investigating the relative relationship between the aggressive or conservative
working capital policies for 208 public limited companies listed at Karachi
Stock Exchange for a period of 1998-2005.
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Laura Greenberg in the paper Liberating cash- Reducing working capital

levels discusses that well-capitalized companies are positioned not only to
survive the financial crisis today, but also to emerge victorious and thrive when
skies turn blue again. Establishing and adhering to tight working capital
standards enables a firm to continue its operations with sufficient funds to both
satisfy maturing short-term debt and meet upcoming operational expenses.
Theoretical background
Working Capital Management
Capital required for a business can be classified under two main categories via,
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment and to carry out its
day- to-day operations. Long terms funds are required to create production facilities
through purchase of fixed assets such as plant & machinery, land, building, furniture,
etc. Investments in these assets represent that part of firms capital which is blocked on
permanent or fixed basis and is called fixed capital. Funds are also needed for shortterm purposes for the purchase of raw material, payment of wages and other day today expenses etc.
These funds are known as working capital. In simple words, working capital refers to
that part of the firms capital which is required for financing short- term or current
assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested
in current assts keep revolving fast and are being constantly converted in to cash and
this cash flows out again in exchange for other current assets. Hence, it is also known as
revolving or circulating capital or short term capital.
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Concept of working capital

There are two concepts of working capital:
1. Gross working capital
2. Net working capital
The gross working capital is the capital invested in the total current assets of the
enterprises. Current assets are those assets which can convert in to cash within a short
period normally one accounting year.
The gross working capital concept is financial or going concern concept whereas net
working capital is an accounting concept of working capital. Both the concepts have
their own merits.
The gross concept is sometimes preferred to the concept of working capital for the
following reasons:
1. It enables the enterprise to provide correct amount of working capital at correct time.
2. Every management is more interested in total current assets with which it has to
operate then the source from where it is made available.
3. It take into consideration of the fact every increase in the funds of the enterprise
would increase its working capital.
4. This concept is also useful in determining the rate of return on investments in
working capital.
The net working capital concept, however, is also important for following reasons:
It is qualitative concept, which indicates the firms ability to meet to its

operating expenses and short-term liabilities.
It indicates the margin of protection available to the short term creditors.
It is an indicator of the financial soundness of enterprises.
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It suggests the need of financing a part of working capital requirement out of

the permanent sources of funds.
Constituents of current assets

1. Cash in hand and cash at bank
2. Bills receivables
3. Sundry debtors
4. Short term loans and advances.
5. Inventories of stock as:
a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6. Temporary investment of surplus funds.
7. Prepaid expenses
8. Accrued incomes.
9. Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net working
capital is the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.
Net working capital can be positive or negative. When the current assets exceeds the
current liabilities are more than the current assets. Current liabilities are those liabilities,
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which are intended to be paid in the ordinary course of business within a short period of
normally one accounting year out of the current assts or the income business.
Constituents of current liabilities
1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation
6. Bills payable.
7. Sundry creditors.
Need for Working Capital
Working capital is needed for the following purposes:
For the purpose of raw material, components and spares.
To pay wages and salaries
To incur day-to-day expenses and overload costs such as office expenses.
To meet the selling costs as packing, advertising, etc.
To provide credit facilities to the customer.
To maintain the inventories of the raw material, work-in-progress, stores

and spares and finished stock
Classification of Working Capital

Working capital may be classified in two ways:
On the basis of concept.
On the basis of time.

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On the basis of concept working capital can be classified as gross working capital and
net working capital. On the basis of time, working capital may be classified as:
Permanent or fixed working capital.
Temporary or variable working capital
Permanent or fixed working capital

Permanent or fixed working capital is minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work- in-process,
finished goods and cash balance. This minimum level of current assets is called
permanent or fixed working capital as this part of working is permanently blocked in
current assets. As the business grow the requirements of working capital also increases
due to increase in current assets.
Temporary or variable working capital
Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Variable working
capital can further be classified as seasonal working capital and special working capital.
The capital required to meet the seasonal need of the enterprise is called seasonal
working capital. Special working capital is that part of working capital which is
required to meet special exigencies such as launching of extensive marketing for
conducting research, etc.
Temporary working capital differs from permanent working capital in the sense that is
required for short periods and cannot be permanently employed gainfully in the
business.
Importance of Adequate Working Capital

1. Solvency of business
Adequate working capital helps in maintaining the solvency of the business by
providing uninterrupted of production.
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2. Goodwill
Sufficient amount of working capital enables a firm to make prompt payments and
makes and maintain the goodwill.
3. Easy loans
Adequate working capital leads to high solvency and credit standing can arrange
loans from banks and other on easy and favourable terms.
4. Cash Discounts
Adequate working capital also enables a concern to avail cash discounts on the
purchases and hence reduces cost.
5. Regular Supply of Raw Material
Sufficient working capital ensures regular supply of raw material and continuous
production.
6. Regular Payment of Salaries, Wages And Other Day to Day Commitments
It leads to the satisfaction of the employees and raises the morale of its employees,
increases their efficiency, reduces wastage and costs and enhances production and
profits.
7. Exploitation of Favourable Market Conditions
If a firm is having adequate working capital then it can exploit the favourable
market conditions such as purchasing its requirements in bulk when the prices are
lower and holdings its inventories for higher prices.
8. Ability to Face Crises
A concern can face the situation during the depression.
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9. Quick and Regular Return On Investments

Sufficient working capital enables a concern to pay quick and regular of dividends
to its investors and gains confidence of the investors and can raise more funds in
future.
10. High Morale
Adequate working capital brings an environment of securities, confidence, high
morale which results in overall efficiency in a business.
Excess or inadequate working capital
Every business concern should have adequate amount of working capital to run its
business operations. It should have neither redundant or excess working capital nor
inadequate nor shortages of working capital. Both excess as well as short working
capital positions are bad for any business. However, it is the inadequate working capital
which is more dangerous from the point of view of the firm
Disadvantages of Excessive or Redundant working capital
1. Excessive working capital means ideal funds which earn no profit for the firm and
business cannot earn the required rate of return on its investments.
2. It leads to unnecessary purchasing and accumulation of inventories.
3. Excessive working capital implies excessive debtors and defective credit policy
which causes higher incidence of bad debts.
4. It may reduce the overall efficiency of the business.
5. If a firm is having excessive working capital then the relations with banks and other
financial institution may not be maintained.
6. Due to lower rate of return n investments, the values of shares may also fall.
7. The redundant working capital gives rise to speculative transactions.
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Disadvantages of inadequate working capital

1.
It leads to excessive debtors.
2. Spare funds are of no use and earn no profit.

3.
Firm fails to maintain the relationship with the banks due to non requirement of
funds.
4.
Leads to unnecessary purchasing.
Factors determining the working capital requirements

1. Nature of business
The requirements of working is very limited in public utility undertakings such as
electricity, water supply and railways because they offer cash sale only and supply
services not products, and no funds are tied up in inventories and receivables. On the
other hand the trading and financial firms requires less investment in fixed assets but
have to invest large amt. of working capital along with fixed investments.
2. Size of business
Greater the size of the business, greater is the requirement of working capital.
3. Production policy
If the policy is to keep production steady by accumulating inventories it will require
higher working capital.
4. Length of production cycle
The longer the manufacturing time the raw material and other supplies have to be
carried for a longer in the process with progressive increment of labour and service
costs before the final product is obtained. So working capital is directly proportional to
the length of the manufacturing process.
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5. Seasonal variations
Generally, during the busy season, a firm requires larger working capital than in slack
season.
6. Working capital cycle
The speed with which the working cycle completes one cycle determines the
requirements of working capital. Longer the cycle larger is the requirement of working
capital.
7. Credit policy
A concern that purchases its requirements on credit and sales its product / services on
cash requires lesser amt. of working capital and vice-versa.
8. Business cycle
In period of boom, when the business is prosperous, there is need for larger amt. of
working capital due to rise in sales, rise in prices, optimistic expansion of business, etc.
On the contrary in time of depression, the business contracts, sales decline, difficulties
are faced in collection from debtor and the firm may have a large amt. of working
capital.
9. Rate of growth of business
In faster growing concern, we shall require large amt. of working capital.
10. Price level changes
Changes in the price level also affect the working capital requirements. Generally rise in
prices leads to increase in working capital.
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Title
A study on working capital management of HLL Lifecare Ltd Thiruvananthapuram
Objectives of the study

Primary objective
To evaluate the liquidly position through various working capital related ratios.
Secondary objectives
1. To analyze the working capital management of the company.
2. To study how funds are being utilized in the short run
3. To make comparative study of changes in working capital for five years.
4. To render recommendations for the effective management of working capital.
Methodology
This research is a descriptive in nature. The sources of data are secondary. Data were
collected from:
Annual reports of the company
Journals published by the company
Official website of the company
22 | P a g e
Tools for analysis
Ratio analysis
Fund flow
Cash flow
Trend analysis
Period of study
1 month (June 2 to 30)
SWOT Analysis
Strength
1. Over 30 years experience in the manufacture of latex based products and a decade of
experience in polymer based products.
2.
It has various quality certificates from different countries and also ISO certification.
3. Good relationship between management and employees.

4.
Support from government.
5. High reputation among consumers.
Weakness
1. Using more human resource increases the cost of production.

2.
They do not market some brands directly.
3. Lack of advertisement.
4. Huge cost of production
5. High amount of scrap
23 | P a g e
Opportunity
1. International orders
2. Large area of operation facilities for expansion
3. Scope for diversification of products
Threats
1. Competition from other countries

2. Fluctuating government policies
3. Promotional activities done by other brands capture the market
Limitations
1. Lack of time, the study was conducted only for a period of 1 month.
2. The study is conducted based on secondary data.
3. The study is confined to a period of 5 years.
4. Government and economic policies affecting the company are not taken into
consideration.
5. The study is based on past financial statements so it cannot be 100%
representative of future; it can just be a mere guidance for future course of
action.
24 | P a g e
Liquidity Ratios
Liquidity refers to the ability of a firm to meet its current obligations as and when these
become due. The short-term obligations are met by realizing amounts from current,
floating or circulating assts. The current assets should either be liquid or near about
liquidity. These should be convertible in cash for paying obligations of short-term
nature. The sufficiency or insufficiency of current assets should be assessed by
comparing them with short-term liabilities. If current assets can pay off the current
liabilities then the liquidity position is satisfactory. On the other hand, if the current
liabilities cannot be met out of the current assets then the liquidity position is bad. To
measure the liquidity of a firm, the following ratios can be calculated:
1. Current ratio
2. Quick ratio
3. Absolute quick ratio
1. CURRENT RATIO
Current Ratio, also known as working capital ratio is a measure of general liquidity and
its most widely used to make the analysis of short-term financial position or liquidity of
a firm. It is defined as the relation between current assets and current liabilities.
Table1.1
Year
Current assets
Current Liabilities
Current ratio
2009-10
26,249.24
16,174.65
1.62
2010-11
39,539.13
21,472.04
1.84
2011-12
41,809.87
36,431.94
1.14
2012-13
77,846.85
59,888.90
1.29
2013-14
81,995.24
64,963.41
1.26
25 | P a g e
Fig 1.1
Current ratio
2
1.8
1.6
1.4
1.2
1
Current ratio
0.8
0.6
0.4
0.2
0
2009-10
2010
2010-11
2011-12
2012-13
2013-2014
2014
Interpretation
A ratio of 2:1 is considered ideal. If we see the current ratio of the company for last five
years we can see that it has been decreasing. The current ratio of company is less than
the ideal ratio. This depicts that companys liquidity position is not very sound.
26 | P a g e
2. QUICK RATIO
Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may be
defined as the relationship between quick/liquid assets and current or liquid liabilities.
An asset is said to be liquid if it can be converted into cash with a short period without
loss of value. It measures the firms capacity to pay off current obligations immediately.
Table1.2
Year
Quick assets
Current Liabilities
Quick ratio
2009-10
20,932.27
16,174.65
1.29
2010-11
33,797.36
21,472.04
1.57
2011-12
34,375.04
36,431.94
0.94
2012-13
67,328.94
59,888.90
1.12
2013-14
70,141.79
64,963.41
1.07
27 | P a g e
Fig 1.2
Quick ratio
1.8
1.6
1.4
1.2
1
0.8
Quick ratio
0.6
0.4
0.2
0
2009-10
2010
2010-11
2011-12
2012-13
203-14
14
Interpretation
A high ratio is an indication that the firm is liquid and has the ability to meet its current
liabilities in time and on the other hand a low quick ratio represents that the firm
firms
liquidity position is not good. The ideal quick ratio is 1:1. Companys quick ratio is
more than ideal ratio. This shows company has no liquidity problem.
28 | P a g e
3. ABSOLUTE LIQUID RATIO

Although receivables, debtors and bills receivable are generally more liquid than
inventories, yet there may be doubts regarding their realization into cash immediately or
in time. So absolute liquid ratio should be calculated together with current ratio and acid
test ratio so as to exclude even receivables from the current assets and find out the
absolute liquid assets.
Table1.3
Year
Absolute liquid assets Current Liabilities
Absolute
liquid
ratio
2009-10
4,200.58
16,174.65
0.25
2010-11
5,142.23
21,472.04
0.23
2011-12
1,436.80
36,431.94
0.03
2012-13
15,069.01
59,888.90
0.25
2013-14
14,849.73
64,963.41
0.22
29 | P a g e
Fig 1.3
Absolute liquid ratio

0.3
0.25
0.2
0.15
Absolute liquid ratio
0.1
0.05
0
2009-10
2010
2010-11
2011-12
2012-13
2013-14
Interpretation
A ratio of 0.5:1 is considered ideal. Companys
Company absolute liquid ratio is less than ideal
ratio. This shows that shows that company carries a small amount of cash.
30 | P a g e
Activity ratios
Activity ratios are used to measure the relative efficiency of a firm based on its use of
its assets, leverage or other such balance sheet items. These ratios are important in
determining whether a company's management is doing a good enough job of
generating revenues, cash, etc. from its resources. Companies will typically try to turn
their production into cash or sales as fast as possible because this will generally lead to
higher revenues. Such ratios are frequently used when performing fundamental analysis
on different companies. Some important activity ratios are:
1. Inventory turnover ratio
2. Inventory holding period
3. Debtors turnover ratio
4. Average collection period
5. Creditors turnover ratio
6. Average payment period
7. Current asset turnover ratio
8. Current asset holding period
9. Working capital turnover ratio
1. INVENTORY TURNOVER RATIO

Inventory turnover ratio measures the speed with which the stock is converted into
sales. Usually a high inventory ratio indicates an efficient management of inventory
because more frequently the stocks are sold ; the lesser amount of money is required to
finance the inventory. Whereas low inventory turnover ratio indicates the inefficient
management of inventory. A low inventory turnover implies over investment in
inventories, dull business, poor quality of goods, stock accumulations and slow moving
goods
and
low
profits
as
compared
to
total
investment.
31 | P a g e
Table 2.1
Year
Sales
Inventory
Inventory turnover ratio
2009-10
44,345.08
5,316.97
8.34
2010-11
51,941.85
5,741.79
9.04
2011-12
61,285.92
7,434.83
8.24
2012-13
83,963.16
10,517.91
7.98
2013-14
95,421.01
11,853.46
8.05
Fig 2.1

9.2
9
8.8
8.6
8.4
8.2
8
7.8
7.6
7.4
2009-10
2010
2010-11
2011-12
2012-13
2013-14
Interpretation
This ratio shows how rapidly the inventory is turning into receivable through sales. It
has reduced a little from the previous years. This shows that the companys inventory
management technique is less efficient as compared previous years.
years
32 | P a g e
2. INVENTORY HOLDING PERIOD
It denotes the shelf life of inventory. It shares an inverse relationship with inventory
turnover ratio. Low inventory holding period denotes better utilisation of inventory.
Table 2.2
Year
Inventory
Sales
Inventory holding period
2009-10
5,316.97
44,345.08
43.16
2010-11
5,741.79
51,941.85
39.79
2011-12
7,434.83
61,285.92
43.67
2012-13
10,517.91
83,963.16
45.09
2013-14
11,853.46
95,421.01
44.72
Fig 2.2

46
45
44
43
42
41
40
39
38
37
2009-10
2010--11
2011-12
2012-13
2013-14
Interpretation
During the year 2010-11only
11only 39 days was required but now almost 45 days are required
to hold the inventory. It has increased over the years
33 | P a g e
3. DEBTORS TURNOVER RATIO
Trade debtors are expected to be converted into cash within a short period and are
included in current assets. So liquidity position of a concern also depends upon the
quality of trade debtors. Debtors velocity indicates the number of times the debtors are
turned over during a year. Generally higher the value of debtors turnover ratio the more
efficient is the management of debtors/sales or more liquid are the debtors. Whereas a
low debtors turnover ratio indicates poor management of debtors/sales and less liquid
debtors
Table 2.3
Year
Net sales
Sundry debtors
Debtors turnover ratio
2009-10
44,173.47
11,777.01
3.75
2010-11
51,814.22
19,820.11
2.61
2011-12
61,133.31
24,424.70
2.50
2012-13
83,690.85
41,478.95
2.01
2013-14
94,857.97
44,526.61
2.13
34 | P a g e
Fig 2.3

4
3.5
3
2.5
2
1.5
1
0.5
0
2009-10
2010
2010-11
2011-12
2012-13
2013-14
Interpretation
This ratio indicates the speed with which debtors are being converted or turnover into
sales. The higher the values or turnover into sales, the
he higher the values of debtors
turnover, the more efficient is the management of credit. But in the company the debtor
turnover ratio is decreasing year to year. This shows that company is not utilizing its
debtors efficiency. Now their
their credit policy become liberal as compare to previous year
years.
35 | P a g e
4. AVERAGE COLLECTION PERIOD
The average collection period shows the average number of days it takes your business
to collect payment for sales to customers on credit.
Table 2.4
Year
Sundry debtors
Net sales
Avg. Collection period
2009-10
11,777.01
44,173.47
95.97
2010-11
19,820.11
51,814.22
137.70
2011-12
24,424.70
61,133.31
143.83
2012-13
41,478.95
83,690.85
178.42
2013-14
44,526.61
94,857.97
168.98
Fig 2.4
Average collection period

200
180
160
140
120
100
Average collection perios
80
60
40
20
0
2009-10
2010--11
2011-12
2012-13
2013-14
Interpretation
The average collection period measures the quality of debtors and it helps in analyzing
the efficiency of collection efforts. It also helps to analysis the credit policy adopted by
company. In the firm average collection period increasing year to year. It shows that the
firm has Liberal Credit policy.
36 | P a g e
5. CREDITORS TURNOVER RATIO
A short-term liquidity measure used to quantify the rate at which a company pays off its
suppliers. Accounts payable turnover ratio is calculated by taking the total purchases
made from suppliers and dividing it by the average accounts payable amount during the
same period. This measure shows investors how many times per period the company
pays its average payable amount.
Table 2.5
Year
Purchases
Sundry creditors
Creditors turnover ratio
2009-10
11,157.86
6,097.12
1.83
2010-11
13,801.69
8,319.99
1.65
2011-12
12,971.02
7,937.38
1.63
2012-13
19,064.57
9,319.78
2.04
2013-14
19,482.63
11,488.50
1.69
37 | P a g e
Fig 2.5
Ceditors turnover ratio

2.5
1.5
Ceditors turnover ratio
0.5
0
2009-10
2010
2010-11
2011-12
2012-13
2013-14
Interpretation
Creditors turnover ratio indicates the creditworthiness of the company. A high ratio
means prompt payment to suppliers for the goods purchased on credit and a low ratio
may be a sign of delayed payment.
38 | P a g e
6. AVERAGE PAYMENT PERIOD
The average payment period shows the average number of days it takes your business to
make payment for purchases on credit. Average payment period means the average
period taken by the company in making payments to its creditors. It is computed by
dividing the number of working days in a year by creditors turnover ratio.
Table 2.6
Year
Sundry creditors
Purchases
Average payment period
2009-10
6,097.12
11,157.86
196.71
2010-11
8,319.99
13,801.69
217.01
2011-12
7,937.38
12,971.02
220.29
2012-13
9,319.78
19,064.57
175.98
2013-14
11,488.50
19,482.63
212.28
39 | P a g e
Fig 2.6

250
200
150
100
50
0
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation
A shorter payment period indicates prompt payments to creditors. Like creditors
turnover ratio, average payment period also indicates the creditworthiness of the
company. But a very short payment period may be an indication that the company is not
taking full advantage of the credit terms allowed by suppliers.
40 | P a g e
7. CURRENT ASSET TURNOVER RATIO

Current assets turnover
urnover ratio shows the relationship between net sales and current assets.
It is calculated as net sales by current assets.
Table 2.7
Year
Net sales
Current assets
Current asset turnover ratio
2009-10
44,173.47
26,249.24
1.68
2010-11
51,814.22
39,539.13
1.31
2011-12
61,133.31
41,809.87
1.46
2012-13
83,690.85
77,846.85
1.07
2013-14
94,857.97
81,995.24
1.15
Fig 2.7

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2009-10
2010--11
2011-12
2012-13
2013-14
Interpretation
It is an activity ratio that measures the efficiency with which assets are used by a
company. The current asset turnover ratio has reduced during 2012-13.
2012 13.
41 | P a g e
8. CURRENT ASSET HOLDING PERIOD

It indicates the number of days the current assets take to get converted into cash. Shorter
current asset holding period denotes better utilisation of funds.
Table 2.8
Year
Current assets
Net sales
Current
asset
holding period
2009-10
26,249.24
44,173.47
213.92
2010-11
39,539.13
51,814.22
274.71
2011-12
41,809.87
61,133.31
246.20
2012-13
77,846.85
83,690.85
334.86
2013-14
81,995.24
94,857.97
311.18
Fig 2.8
Current asset holding period

400
350
300
250
200
Current asset holding period
150
100
50
0
2009-10
2010--11
2011-12
2012-13
2013-14
Interpretation
The holding period has increased during the last few years i.e. assets take more time to
get converted to cash
42 | P a g e
9. WORKING CAPITAL TURNOVER RATIO

It is a measurement comparing the depletion of working capital to the generation of
sales over a given period. This provides some useful information as to how effectively a
company
is
using
its
working
capital
to
generate
sales.
Table 2.9
Year
Net sales
Working Capital
Working capital
turnover ratio
2009-10
44,173.47
10,074.59
4.38
2010-11
51,814.22
18,067.09
2.86
2011-12
61,133.31
5,377.3
11.36
2012-13
83,690.85
17,957.95
4.66
2013-14
94,857.97
17,031.83
5.56
43 | P a g e
Fig 2.9
Working capital turnover ratio

12
10
8
6
Working capital turnover ratio
4
2
0
2009-10
2010-11
11
2011-12
2012-13
2013-14
Interpretation
Generally, a high working capital turnover ratio is better. A low ratio indicates
inefficient utilization of working capital. It has been high only during 2011
2011-12,
44 | P a g e
Profitability ratios
1. Net profit ratio
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the
remaining profit after all costs of production, administration, and financing have been
deducted from sales, and income taxes recognized. As such, it is one of the best
measures of the overall results of a firm, especially when combined with an evaluation
of how well it is using its working capital.
Table 3.1
Year
Net profit
Net sales
Net profit ratio
2009-10
1,248.80
44,173.47
0.02
2010-11
1,692.52
51,814.22
1.17
2011-12
1,902.17
61,133.31
0.03
2012-13
3,004.24
83,690.85
0.03
2013-14
2,576.10
94,857.97
0.02
45 | P a g e
Fig 3.1
Net profit ratio

1.4
1.2
1
0.8
Net profit ratio
0.6
0.4
0.2
0
2009-10
2010
2010-11
2011-12
2012-13
2013-14
Interpretation
It is used to measure the overall profitability of the business. It is generally less and
steady for the company.
46 | P a g e
Trend Analysis
It is a method of time series data analysis involving comparison of the same item over a
significantly long period to detect general pattern of a relationship between associated
factors or variables and project the firms future direction.
Table 4.1
1. Trend analysis of current assets
Year
Current assets
Trend
2009-10
26,249.24
100
2010-11
39,539.13
150.62
2011-12
41,809.87
159.28
2012-13
77,846.85
296.56
2013-14
81,995.24
312.37
Fig 4.1
Current assets
350
300
250
200
150
Current assets
100
50
0
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation
The current assets of the company have been increasing over the year which is a good
sign.
47 | P a g e
2. Trend analysis of current liabilities
Table 4.2
Year
Current Liabilities
Trend
2009-10
16,174.65
100
2010-11
21,472.04
132.75
2011-12
36,431.94
225.24
2012-13
59,888.90
370.26
2013-14
64,963.41
401.63
Fig 4.2
Current liabilities
450
400
350
300
250
200
Current assets
150
100
50
0
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation
The current liabilities of the company have been rising over the years. The company has
to ensure that its current liabilities do not take over its current assets.
48 | P a g e
3. Trend analysis of inventories
Table 4.3
Year
Inventory
Trend
2009-10
5,316.97
100
2010-11
5,741.79
107.98
2011-12
7,434.83
139.83
2012-13
10,517.91
197.81
2013-14
11,853.46
222.93
Fig 4.3
Inventories
250
200
150
Inventories
100
50
0
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation
Inventories have been increasing over the years showing an upward trend, company has
to make sure that all of its capital doesnt go into stocking up inventories.
49 | P a g e
4. Trend analysis of net sales
Table 4.4
Year
Net sales
Trend
2009-10
44,173.47
100
2010-11
51,814.22
117.29
2011-12
61,133.31
138.39
2012-13
83,690.85
189.45
2013-14
94,857.97
214.73
Fig 4.4
Net sales
250
200
150
Net sales
100
50
0
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation
The sales have been increasing steadily over the period which shows more sales means
more revenue for the company.
50 | P a g e
5. Trend analysis of net profit
Table 4.5
Year
Net profit
Trend
2009-10
1,248.80
100
2010-11
1,692.52
135.53
2011-12
1,902.17
152.31
2012-13
3,004.24
240.57
2013-14
2,576.10
206.28
Fig 4.5
Net profit
300
250
200
150
Net profit
100
50
0
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation
The net profit was increasing steadily and it rose higher in 2012-2013 but then it
showed a decline in the next year 203-2014.
51 | P a g e
Working Capital Analysis
Working capital is that part of firms capital which is required for financing short term
assets or current assets such as marketable securities, debtors, inventories, prepaid
expenses etc. Funds invested in current assets keep revolving and are being converted
into cash and these cash flows again in exchange for other current assets. Hence, it is
also known as revolving or circulating capital.
Table 5.1
Year
Current assets
Current Liabilities
Working capital
2009-10
26,249.24
16,174.65
10,074.59
2010-11
39,539.13
21,472.04
18,067.09
2011-12
41,809.87
36,431.94
5,377.93
2012-13
77,846.85
59,888.90
17,957.95
2013-14
81,995.24
64,963.41
17,031.83
52 | P a g e
Fig 5.1
Working capital
20,000.00
18,000.00
16,000.00
14,000.00
12,000.00
10,000.00
Working capital
8,000.00
6,000.00
4,000.00
2,000.00
0.00
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation
The working capital remains steady except in the years 2009-10
2009
and 2011
2011-12 where it
was comparatively low as there was an increase in current liabilities with respect to the
current assets.
53 | P a g e
Relationship between profitability and Liquidity

The liquidity is essential for company existence. It principally has an effect on financial
costs reduction or growth, changes in the sales dynamic, as well as it influences on
company risk level. The decisive significance of liquidity means that it is important for
company development and at the same time is one of the fundamental endogenous
factors which are responsible for company market position. The significance of liquidity
to company performance might lead to the conclusion that it determines the profitability
level of company.
Table 6.1
Year
Net profit
Working capital
2009-10
1,248.80
10,074.59
2010-11
1,692.52
18,067.09
2011-12
1,902.17
5,377.93
2012-13
3,004.24
17,957.95
2013-14
2,576.10
17,031.83
Fig 6.1
20,000.00
18,000.00
16,000.00
14,000.00
12,000.00
10,000.00
Profitability
8,000.00
Liquidity
6,000.00
4,000.00
2,000.00
0.00
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation
As the working capital is increases the net profit also rises this shows that the liquidity
of the company affects its profitability. There has been a significant decline in the
working capital in the year 2011-2012 which also shows a dip in the profits.
54 | P a g e
Table 7.1
Cash Flow Statement for the year 2009-10
Particulars
Amount (in lakhs)
CASH FLOW FROM OPERATING ACTIVITIES

Net profit
2,027.97
Depreciation and amortisation
1,305.17
Interest paid
Loss on sale of assets
Interest received
Preliminary expenses written off
Operating Profit before Working Capital Changes
756.05
1.53
(197.89)
1.16
3,893.99
Changes in Working Capital

Decrease in Sundry Debtors
1,459.43
Increase in Other Receivables
(1,531.51)
Decrease in Inventories
822.53
Decrease in Trade and Other Payables
(875.60)
Cash Generated from Operations
3,768.84
Income Tax Paid

Net Cash from Operating Activities (A)
831.72
2,937.12
CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of Fixed Assets
(6,502.32)
Capital Work in Progress
(3,311.12)
Proceeds from Sale of Fixed Assets
172.83
Interest received
197.89
Investments
Net Cash from Investing Activities (B)
(278.72)
(3,099.29)
55 | P a g e
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from Long Term Borrowings
86.92
Proceeds from Other Borrowings
(379.14)
Interest paid
(756.05)
Dividend Paid
(155.35)
Dividend Tax Paid
(26.40)
Net Cash from financing Activities (C)
(1,230.03)
Net Increase/ (Decrease) in Cash & Cash Equivalents (A)+(B)+(C)
(1,392.12)
Cash and Cash Equivalents at Beginning of Period
5,592.72
Cash and Cash Equivalents at End of Period
4,200.60
56 | P a g e
Table 7.2
Particulars
Amount (in lakhs)

Net profit
2,609.32
1,474.62
Interest paid
524.37
Profit on sale of assets
(19.42)
Interest received
(129.16)
1.16
4,460.89

Increase in Sundry Debtors
(8,043.12)
Increase in Other Receivables
(4,347.21)
Increase in Inventories
Increase in Trade and Other Payables
Income Tax Paid
(417.60)
5,209.83
(3,137.21)
(802.09)
(3,939.30)

Purchase of Fixed Assets
953.88
(1,350.76)

Interest received
83.23
129.16
(2,092.25)
57 | P a g e

(285.18)
7,580.04
Interest paid
(524.37)
Dividend Paid
(233.03)
Dividend Tax Paid

Net Increase/ Decrease in Cash & Cash Equivalents (A)+(B)+(C)
(39.60)
6,497.85
466.30
4,675.93
5,142.23
58 | P a g e
Table 7.3
Particulars
Amount (in lakhs)

Net profit
2,904.50
1,599.72
Provision for impairment of fixed assets and intangibles
14.07
11.71
Interest received
Finance costs
(520.58)
1.16
775.83
4,786.40

(1,721.93)
Increase in Short-term loans and advances
(2,087.47)
(1,693.04)
Decrease in Trade Payables

Decrease in Long-term loans and advances
Increase in Other current assets
Increase in Other current liabilities
Increase in Short-term provisions
(382.61)
11.26
(540.00)
1,046.22
113.18
(468.00)
Income Tax Paid
(520.00)
(988.00)
59 | P a g e

Proceeds from Purchase of Fixed Assets
(3,000.41)
(1,481.24)

Interest received
Investments in bank
7.50
520.58
3,110.56
(843.01)

(320.83)
(201.47)
Interest paid
(775.83)
Dividend Paid
(233.03)
Dividend Tax Paid
(37.80)
Issue Proceeds of Share Application
2,800.00
1,231.05

(599.96)
1,119.06
519.10
60 | P a g e
Table 7.4
Particulars
Amount (in lakhs)

Net profit
3,778.64
2,119.34
Profit on sale of fixed assets

Interest received
(0.51)
2.08
(396.19)
1.16
Finance costs
1,347.82
6,852.34

(16,297.30)
(1,767.17)
(3,083.09)
Increase in Trade Payables

Increase in Long-term loans and advances
Increase in Other current assets
Increase in Other current liabilities
Increase in Short-term provisions
1,251.86
(2,227.83)
(867.43)
11,688.02
408.21
(4,042.38)
Income Tax Paid
(1,049.28)
(5,091.66)
61 | P a g e

Sale of Fixed Assets
4.70
(2,024.27)
Investment in Fixed Assets
(6,410.31)
Interest received
Investments in bank
Changes in other non-current assets
396.19
(12,708.65)
(112.52)
(20,854.86)

3,478.81
10,191.06
Interest paid
(1,347.82)
Dividend Paid
Dividend Tax Paid
(387.07)
(64.89)
Issue Proceeds of Share Application
15,000.00
26,870.09
923.57
524.18
1,447.75
62 | P a g e
Table 7.5
Particulars
Amount (in lakhs)

Net profit
3,623.79
2,412.44
Profit on sale of fixed assets
(22.54)
2.70
Interest received
(312.88)
Finance costs
1,799.57
7,503.08

(3,047.66)
(1,200.47)
(1,335.55)
Increase in Trade Payables

Decrease in Long-term loans and advances
Decrease in Other current assets
2,168.72
92.42
1,649.88
Decrease in Other current liabilities
(7,036.16)
Decrease in Short-term provisions
(323.72)
(1,529.46)
Cash flow from extra ordinary items
1.15
(1,528.31)
Income Tax Paid
(1,215.42)
(2,743.73)
63 | P a g e

Sale of Fixed Assets
50.88
(4,105.10)
Investment in Fixed Assets
(5,035.87)
Interest received
Investments in bank
Changes in other non-current assets
Investment
312.88
3,297.69
(10.22)
(0.25)
(5,489.99)

Payment to Minority Interest
Interest paid
Dividend Paid
Dividend Tax Paid
3,258.58
40.30
10,265.68
(1,799.57)
(387.07)
(65.79)
11,312.13
3,078.41
1,447.75
4,526.16
64 | P a g e
Table 7.6
Year
Cash
flow
from Cash
flow
from Cash
flow
from
operating activities
investing activities
financing activities
2009-10
2,937.12
-3,099.29
-1,230.03
2010-11
-3,939.30
3,939.30
-2,092.25
6,497.85
2011-12
-988.00
988.00
-843.01
1,231.05
2012-13
-5,091.66
5,091.66
-20,854.86
26,870.09
2013-14
-2,743.73
2,743.73
-5,489.99
11,312.13
Fig 7.1
30,000.00
20,000.00
10,000.00
Cash flow from operating

activities
0.00
2009-10
-10,000.00
2010-11
2011-12
2012-13
2013-14
Cash flow from investing

activities
Cash flow from financing
activities
-20,000.00
-30,000.00
Interpretation
Only in 2009-10
10 the cash flow from operating activities shows a positive graph. This
shows that current liabilities are more compared to the assets. The investments are
negative during the past five years but this is actually good for the company as more
purchases
urchases more will be the production. The cash flows from financing activities are
comparatively better.
65 | P a g e
Table 8.1
Schedule of changes in working capital for the year 2011

Particulars
Financial year
Effect on working capital
2009-10
2010-11
Increase
4,200.58
5,142.23
941.65
11,777.01
19,820.11
8,043.10
Inventories
5,316.97
5,741.79
424.82
Other current assets
1,912.59
4,314.60
2,402.01
Loans and Advances
3,042.09
4,520.40
1,478.31
Decrease
A) Current Assets
Cash and Bank balance
Sundry Debtors
TOTAL 26,249.24
39,539.10
B) Current Liabilities
Current Liabilities
4,402.75
16,174.65
Provisions
155.04
739.60
TOTAL 16,914.25
20,577.40
894.64
21,472.04
Net working capital
9,334.99
18,067.06
Increase in working capital
8,732.07
8,732.10
TOTAL 18,067.06
18,067.06
13,289.89
13,289.89
66 | P a g e
Table 8.2

Particulars
Financial year
2010-11
2011-12
Increase
5,142.23
1,436.80
19,820.11
24,424.70
4,604.59
Inventories
5,741.79
7,434.83
1,693.04

2,265.00
4,314.60
2,049.60
Loans and Advances
4,520.40
6,463.94
Decrease
A) Current Assets
3,705.43
Sundry Debtors
1,943.54
TOTAL 39,539.10
41809.87
13,523.96
13,200.32
1,980.81
1,971.74
13,523.96
13,322.50
201.46
8,319.99
7,937.38
382.61
Current Liabilities
Provisions
Short term borrowings
Sundry creditors
TOTAL 37,348.72
36,431.94
Net working capital
2,190.38
5,337.93
3,187.55
TOTAL 5,337.93
323.64
9.07
5,970.43
5,337.93
9,157.95
3,187.52
67 | P a g e
Table 8.3

Particulars
Financial year
2011-12
Increase
2012-13
Decrease
A) Current Assets
1,436.80
15,069.01
13,632.21
Sundry Debtors
24,424.70
41,478.95
17,054.25
Inventories
7,434.83
10,517.91
3,083.08
2,049.60
2,155.30
105.7
Loans and Advances
6,463.94
8,625.68
2,161.74
TOTAL 41809.87
77,846.85
Current Liabilities
11,549.63
13,200.32
24,749.95
Provisions
333.87
1,971.74
2,305.61

10,191.06
13,322.50
23,513.56
Sundry creditors
1,382.4
7,937.38
9,319.78
TOTAL 36,431.94
Net working capital
5,377.93
59,888.90
17,957.95
12,580.02
TOTAL 17,957.95
5,4389.89
17,957.95
7,7846.85
7,7846.85
68 | P a g e
Table 8.4

Particulars
Financial year
2012-13
2013-14
Increase
15,069.01
14,849.73
Sundry Debtors
41,478.95
44,526.61
3,047.66
Inventories
10,517.91
11,853.46
1,335.55
Decrease
A) Current Assets
2,155.30
505.42
Loans and Advances
8,625.68
10,260.02
TOTAL 77,846.85
219.28
1,649.88
1,634.34
81,995.24
Current Liabilities
Provisions
Sundry creditors
24,749.95
18,253.53
6,496.42
2,305.61
1,442.14
863.47
23,513.56
33,779.24
9,319.78
1,488.50
TOTAL 59,888.90
Net working capital

17,957.95
10,265.68
7,831.28
54,963.41
27,031.83
9,073.88
TOTAL 27,031.83
9,073.88
27,031.83
21,208.72
21,208.72
69 | P a g e
Findings
1. Health care industry is one of the largest and fastest growing industries. Consuming
over 10% of GDP of most developed nations, healthcare can form an enormous part
of countrys economy.
2. In HLL Lifecare Ltd. Sundry debtors constituted major part of current assets and
sundry creditors form a major part of current liabilities.
3. There is huge investment in working capital at HLL Lifecare Ltd. As it have large
production cycles.
4. Aggressive policy of more profitability, more risk is followed which is an ideal
situation as far as the strategy for working capital financing is concerned.
5. The current and quick ratio has decreased in the last year compared to the previous
years.
6. The absolute quick ratio is not that ideal so the company has to keep more liquid
cash for emergencies.
7. The company has to be more effective regarding its inventory management.
8. The company is liberal regarding its credit policy with debtors.
9. The creditors turnover ratio is satisfactory.
10. The current assets take an average of 300 days to get converted into cash.
11. The net profit margin is not very high.
12. Overall cash management of the company seems to be good as the company has
centralized collection procedures and surplus funds are invested in fixed deposits.
70 | P a g e
Conclusion
Working capital management is a vital aspect of financial management as it deals with
short term investment. After analyzing various aspects of working capital management,
it can be concluded that overall working capital management of the company is quite
good over the period of last five years, on the basis of which we can say that working
capital is managed efficiently in HLL Lifecare Ltd.
The tools used for analyzing are ratio analysis, schedule of changes in working capital,
cash flows and trend analysis which help us in finding how effectively the working
capital have been used.
Suggestions
1. The overall financial management of the company is satisfactory except in the area
of liquidity. The management needs to maintain more liquid assets.
2. The volume of sales is high but comparatively profit is not so they can take some
steps to improve their revenues.
3. The company can reduce its average collection period so losses due to bad debts can
be reduced.
4. Instead of depositing all cash into fixed deposits it is better to invest in marketable
securities.
71 | P a g e
Bibliography
Books
1. Pandey, I.M., Financial Management, New Delhi,Vikas Publishing House
Pvt Ltd.,2009
2. Krishnaswami, O.R. and Ranganatham, M., Methodology of Research in
social sciences, Mumbai, Himalaya Publishing House,2014
Magazines
1. Samanwaya, in-house magazine published by HLL Lifecare Ltd
Articles/ Journals
1. Impact of working capital management on profitability, European Scientific
Journal January 2014 edition vol.10, No 1 ISSN: 1857 7881
2. The Relationship between Working Capital Management and Firm
Performance, International Journal of Humanities and Social Science Vol. 2 N
o. 2 [Special Issue January 2012]
Reports
1.
2.
3.
4.
Annual reports HLL Lifecare Ltd. 2010-11

Websites
1.
2.
3.
4.
5.
www.lifecarehll.com
www.investopedia.com/terms/w/workingcapitalmanagement.asp
https://en.wikipedia.org/wiki/Working_capital
http://www.allprojectreports.com
www.scrib.com
72 | P a g e

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Introduction

As a condom-manufacturing company, HLL Lifecare started small, but dreamed big.

of the art manufacturing

Thiruvananthapuram (At Peroorkada and Akkulam) manufacturing Contraceptives

HLL commenced its commercial operations on April 5, 1969 at Peroorkada in

Akkulam Factory, Thiruvananthapuram (AFT)

Irapuram Factory, Cochin (IFC)

Oral contraceptive pills

Health Care Aids

Blood transfusion bags

Surgical and examination gloves

Social Marketing Products

Ferro plus Iron and folic acid tablets

Jal jeevan oral rehydration salts

Plastid medicated plaster

Provide quality products and services meeting international standards.

Excellence through continual improvement by adoption of best technologies and

Customers delight and value creation through innovation, research and

Focusing on human resource development to meet the need of challenging

Be a socially committed corporate by maintaining highest standards of corporate

Committed to well-being of mother earth and future generations through green

The company will strive to fulfill its vision/mission by

4. Be recognized as the leading social organization in the field of Reproductive and

Maheshwari (1996) states that accounting ratios are relationship expressed in

Khan (2000) conducted research based on listed Pakistani companies, named

Eljelly (2004) elucidated that efficient liquidity management involves planning

excessive investment in these assets. The relation between profitability and

Thomas M (2005) studied distinct levels of working capital management

Laura Greenberg in the paper Liberating cash- Reducing working capital

Concept of working capital

It is qualitative concept, which indicates the firms ability to meet to its

It indicates the margin of protection available to the short term creditors.

It is an indicator of the financial soundness of enterprises.

It suggests the need of financing a part of working capital requirement out of

Constituents of current assets

For the purpose of raw material, components and spares.

To pay wages and salaries

To incur day-to-day expenses and overload costs such as office expenses.

To meet the selling costs as packing, advertising, etc.

To provide credit facilities to the customer.

To maintain the inventories of the raw material, work-in-progress, stores

Classification of Working Capital

On the basis of concept.

On the basis of time.

Permanent or fixed working capital.

Temporary or variable working capital

Permanent or fixed working capital

Importance of Adequate Working Capital

9. Quick and Regular Return On Investments

Disadvantages of inadequate working capital

It leads to excessive debtors.

2. Spare funds are of no use and earn no profit.

Leads to unnecessary purchasing.

Factors determining the working capital requirements

Objectives of the study

Annual reports of the company

Journals published by the company

Official website of the company

Tools for analysis

3. Good relationship between management and employees.

Support from government.

5. High reputation among consumers.

1. Using more human resource increases the cost of production.