IDBI FEDERAL LIFE INSURANCE CO. LTD. - Analysis on Working Capital Management

SUMMER INTERNSHIP
IDBI FEDERAL LIFE INSURANCE CO. LTD. - Analysis on Working

Capital Management
By:-
Shobhit Bhatnagar
41712303918
MBA Class of 2020
Under the Supervision of
Mrs. Monika Sharma

Associate Professor
Delhi Institute of Advanced Studies

Affiliated by GGSIPU
New Delhi
DECLARATION
Title of summer internship: - Analysis on Working Capital Management
I declare
(a) That the work presented for assessment in this summer internship Report is my own, that it
has not previously been presented for another assessment and that my debts (for words, data,
arguments and ideas) have been appropriately acknowledged.
(b) That the work conforms to the guidelines for presentation and style set out in the relevant
documentation.
(c) The Plagiarism in the report is % (permissible limit is 15 %)
Date: ……………
Shobhit Bhatnagar
41712303918
MBA – (Finance) (Class of 2020)

CERTIFICATE
Acknowledgements
The works of this magnitude require guidance, efforts and encouragement of people in several ways.
During the tenure of this project, it’s been my fortune to receive cooperation, support and active
participation of several people, whom I thank cordially. I owe a great deal to all those who were so
generous with their time and expertise.
I offer my sincere thanks and humble regards to ‘Delhi Institute of Advanced Studies, NEW DELHI’
for imparting us with valuable knowledge and professional training during MBA.
It gives me immense pleasure to express my heartfelt gratitude to Prof. Monika Sharma, the project
mentor for providing me with the cream of her knowledge. I am thankful to her, as she has been a
constant source of advice, inspiration and motivation. I hereby submit that without her guidance this
project would not have been conceptualized.
In addition, I would like to thank Mr. Manas Das (Senior Branch Manager) at IDBI Federal Life
Insurance Co. Ltd along with Mr. Amit Singh and Mr. Ezad Ahmed sir for giving me an opportunity
and enlightening me to work on this project. The dedicated interest evinced by them has helped me
in dealing with the problems faced during this project work.
I am also thankful to my family and friends for constantly motivating me to complete the project
and providing me an environment to boost me up for the same.
TABLE OF CONTENT
Chapter Topic Page

Number
1 Introduction 6-16
2 Literature review 17-19
3 Objective of the study 19
4 Research methodology 19-20
5 Data analysis and interpretation 20-44
6 Findings and interpretations 45
7 Summary & Conclusions 46
8 Limitation 47
References 48-49
Appendix 50-60
CHAPTER 1
Introduction
Insurance Industry
Insurance is a risk redresser primarily used to protect against an uncertain loss. Insurance can
be called as the risk transfer of a damage or loss, from one body to another, for some payment.
Insurance is a protective tool against financial losses arising due to an unexpected event.
Insurance companies collect premiums to provide protection against losses. Insurance is a
contract or legal agreement in between two entities.
A company selling insurance is insurer; the purchasing party of the insurance plan is insured
or policyholder. The insurance premium determines the amount of coverage.
For example, in a life insurance, by paying a premium to the insurance company, the nominee
of insured receives a certain amount as compensation on the death or misshaping of the insured.
Similarly, in car insurance, in case of an accident, the insured person receives the compensation
that depends on the damage. The losses that few suffer are beard by many how are facing the
similar risks by a system.
Life insurance guarantees payment assured (or his nominee) when certain events occur that are
predetermined in the agreement. Payment is only paid when certain conditions are met that are
predefined.
The agreement is valid for payment of the insurance coverage in case of:
 Maturity of the agreement

 Certain predetermined time interval
 Death or misshaping during policy term
THE HISTORY OF INDIAN INSURANCE INDUSTRY
In India, insurance has a deep-rooted history. It goes back to the time of the British Empire.
The first insurance company to operate in India was the oriental life insurance company, which
was established in 1818 in Kolkata, the company failed in 1834. The Madras Equitable in 1829
had started insurance business in the province of Madras. Even with the presence of Indian
companies, the foreign insurance companies dominated this era, namely Albert Life Assurance,
Royal Insurance, London Globe Insurance and the Indian companies, were not able to face the
competition of the foreign companies. All the foreign and domestic insurers in India where
brought up for serving the foreign community and the Indians were ignored. However people
like Babu Muttylal Seal changed the dynamic and these companies started insuring Indian
lives.
An ordinance was passed on 19th January 1956 which lead to the nationalization the Indian
Insurance sector, and LIC was set up in the same year. The LIC absorbed 154 Indian and 16
non-Indian insurers, and 75 provident societies, 245 Indian and foreign insurance companies
in all. The LIC had monopoly over the insurance sector until the 90s when private investors
and companies were allowed into the Insurance sector.
Insurance Regulatory and development authority (IRDA) act, 1999
Until 1999, there was no private insurance company in Indian insurance sector. In 1993, the
government set up a committee under the leadership of former RBI governor R.N.Malhotra to
propose suggestions for reforming insurance sector. Following the suggestions of Malhotra
committee the government in 1999 constituted the IRDA thereby de-regulating the insurance
sector and allowing private companies in to insurance market. Further, foreign investment was
also allowed with the limit of 26% holding in the companies. In recent years, many private
companies entered in the insurance market. Companies with equal strength started competing
in Indian insurance market. Currently in India, only 2 million people (0.2% of population) are
covered in mediclaim, whereas in countries like USA almost 75% of total population are
covered. With more private players in this sector may change the scenario.
Features of IRDA
 To safeguard the interest and provide fair treatment to policyholders.

 To bring rapid growth of the insurance industry for boosting economic growth.
 To ensure that insurance customers receive proper, accurate and right information
about products and services and make them aware of their responsibilities and duties in
this regard.
 To ensure proper and timely claim settlement, prevent frauds and other malpractices
and put in place an effective grievances redressed mechanism.
 To promote ethical financial markets conduct related with insurance and setup a
functional and reliable MIS to enforce certain financial fairness standards in the market.
 To take necessary actions when such standards are not adequate or properly enforced.
Indian Insurance Sector

The insurance industry has witnessed a major growth in past decade as with the presence of
private companies, the competition level in the market is very high and this has forced
companies to introduce a huge number of advanced products. The companies are not only
promoting their products but the whole concept of insurance in the market, raising the
awareness among the public regarding insurance.
The Indian insurance sector is divided in two categories – Life and Non-life Insurance. Non-
life (general insurance) and covers travel, health, car, bikes, home and many more.
There are 57 insurance companies in Indian market including 24 life and 33 are non-life
companies. This includes seven public sector companies.
Gross premiums in India were Rs 5.53 trillion in FY18, with almost Rs 1.52 trillion from non-
life insurance and Rs 4.57 trillion from life insurance. Overall, insurance premiums as
percentage of GDP in India reached 3.69 % in 2017 from 2.71 % in 2001.
In FY19 (until Jan 2019), premium from new life insurance increased by 3.91 per cent to Rs
1.59 trillion. In FY19 (until Jan 2019), premiums of non-life insurance reached Rs 1.39 trillion,
showing a growth rate of 12.65 per cent.
Even though the private companies have entered the insurance market after IRDA act 1999,
LIC hails supreme over others with 70 percent of market share while private companies hold
the rest. The market share of private insurance companies have increased from 28 percent to
30 percent in FY 2017-18, they have a steady increase in market share over the years but still
lag behind.
Figure 1
Gross Premium Written in India(US$

Billion)
84.7 94.5
56 60.7 64 71.8 82.8
FY13 FY14 FY15 FY16 FY17 FY18 FY19
Market Size
Source: https://www.ibef.org/industry/insurance-sector-india/infographic
Figure 2
NON-LIFE INSURANCE MARKET IN INDIA (FY19)

SECTOR COMPOSITION
Motor Health Crop Fire Marine Others
10%
2%
7%
38%
16%
27%
Figure 3
54.70%
31.80%
15%
2%
FY03 FY19
Share of Private Sector in Life Insurance Share of Private Sector in Non-Life Insurance
About IDBI Federal Life Insurance Co. Ltd
IDBI Federal a joint venture three big institutions namely IDBI Bank (48%), Federal bank
(26%) and Ageas (26%). IDBI bank is India’s industrial development and commercial bank
that operates as a subsidy of Reserve bank of India. Federal Bank is a private Indian bank with
strong customer base in Southern part of India. Ageas is a Belgian multinational that is
Belgium’s largest insurer and has operations in 14 countries and with over 100 years of
experience in insurance sector.
In just five months, IDBI Federal collected Rs 100 Cr in premiums becoming one of the fastest
growing new insurance companies. Through continuous innovations in products and services,
IDBI Federal’s aim is to provide excellent wealth management, protection and retirement
services to provide convenience and value to the customer. IDBI Federal today is seen as a
brand that’s customer centric, with a number of awards and achievements to their name.
IDBI Bank Ltd.

IDBI Bank since its inception continuous to be India's prime industrial development bank. It
was established on 1st July 1964 to support India's industrial sector. Today, it is one of India's
elite commercial banks, with a variety of attractive products and services, providing services
to customers in all parts of the country through 1201 branches and 2156 ATMs. The Bank
many services to its customers including term lending, project finance, lease finance, working
capital facilities, venture capital, corporate advisory services, loan syndication and legal and
technical advisory services to corporate houses as well as personal loans and advances to its
public. IDBI Bank has played a big role in financing the development of key financial
institutions like National Stock Exchange of India Limited 0and National Securities Depository
Ltd, Credit Analysis and Research Ltd, Stock Holding Corporation of India Ltd.
Federal Bank
Federal Bank is among India’s private sector banks, with a dominant presence in Kerala. With
a network of over 1,142 branches and 1,312 ATMs across India it has been a game changer for
India’s banking sector. The bank provides financial aid to its base of over four million
customers. Federal Bank is among the first major Indian banks to set up an completely
automated and interconnected branch network. In addition, the Bank has a variety of services
like Mobile Banking, Internet Banking, Tele Banking, anywhere banking, debit cards, online
bill payment and call center facilities to offer round the clock banking services to its customers.
The Bank has been an inspiration in providing innovative technological solutions to its
customers and the Bank has won several awards and recommendations.
AGEAS
Ageas is a Belgian multinational group with experience of over 180 years in insurance. Ranked
in top 20 companies in Europe for insurance, Ageas chose to focus its business in European
and Asian markets, which together comprise of largest global insurance market. These markets
segregated in four categories: Belgium, UK, Rest of Europe and Asia and managed through a
chain of WOSs and partnerships with strong financial institutions and key distributors around
the globe. Ageas has partnerships in countries like Belgium, UK, Italy, Luxembourg, Turkey,
China, Portugal, India, Thailand, and Malaysia and has subsidiaries in France, UK and Hong
Kong. Ageas dominated the market for life insurance and employee benefits in Belgium, as
well as a dominant non-life institution through AG Insurance. In the UK, Ageas has a
commanding market base as the fourth largest company in private car insurance. Ageas has
more than 13,000 employees and has annual income of more than EUR 21 billion.
Vision and Mission of IDBI Federal

Vision
Their vision is to be the leading provider of wealth management services, insurance and
retirement benefits that fulfill the wants of their customers and adds values to their lives .
Mission
Their mission is to continually improve customer satisfaction and experience through dedicated
relationship management, innovative product offerings and great service delivery to their
customers in a convenient, efficient and cost effective way.
Transparency in the manner they interact with their customers and to maintain integrity.
To build quality human capital to achieve their mission.
Values
 Transparency
 Value to Customers
 Rock Solid and Delivery on Promise
 Customer-friendly
 Profit to Stakeholders
 Excellence
 Honesty
 Knowledge
 Caring
 Culture
Products of IDBI Federal
Table 1
Endowment Products ULIP Products

Young Star Wealthsurance Future Star
Life Advantage Smart growth

Guaranteed Wealth
SWOT analysis of IDBI Federal Life Insurance Co. Ltd
Strength

 IBI Federal was the first insurance com pany in India to achieve breakeven within 5 y ears. Continuous profit thereafter.
 Excellentbrand im age with the presence reputed com panies li ke IDBI ban k,Federal ban kand Ageas. 
 8 days claim guaranteed or else 8% return p.a. along with claim amount.
 Crossed accumulated losses.
Weakness
 Higher premium as compared to other companies.

 Limited presence in rural market due to lack of awareness among rural folk.
 Premiums are not flexible in the first year.
Opportunity
 To reduce annual premium to increase market share.

 To penetrate rural market as well as urban population to increase market share and
companies size.
Threat
 Competitors in market especially LIC with 70% market share.

 Marketing strategies of different competitors.
BCG Matrix of IDBI Federal
Table 2
Star ??
Young Star Plan Guaranteed Wealth Plan
Life Advantage Plan
Cash Cow Dog
Future Star Whole Life Plan
Stars operate high market share and are very popular among customers. Young Star is one of
the most popular product of IDBI Federal due to its high yield. It is the primary unit of the
company because it is expected to become cash cows and increase cash flow.
Cash Cows are most profitable units and should be milked to provide rapid benefits. Future
star plan is a cash cow for the company as it generates a considerable amount of profit for the
company.
Dogs hold low market share and provide low return even in growing market condition. Whole
Life plan was a dog for the company and that is why the company has stopped selling the plan,
as it was neither popular nor profitable.
Question marks are hold low market share even in growing market and may sometimes incur
losses but have the potential of becoming star or cash cow. Guaranteed Wealth Plan and Life
advantage Plan have the potential to provide benefit to company but their market share is low.
Working Capital Management
Working capital management reflects the relationship between short-term assets and liabilities
of the company. The working capital management’s goal is to ensure smooth operation of
company and that it is able to fulfill short-term debt and expenses. Its plays a significant role
in financial management. Every business needs capital to continue its operation. Working
capital can be said to be the blood of the company and working capital management is
necessary to keep the blood pumping and continue the operation of the firm. Proper working
capital management ensures continuous success and it plays an important role in deciding the
company’s financial status.
Working capital management refers to a company’s management policies and decisions to

monitor current asset and current liability. It involves evaluation of assets, liabilities and cash
flow with the use of ratio analysis of factors of operating expenses, inventory turnover ratio
and working capital ratio.
The crucial needs for which working capital is required can be mentioned as follows:
 For meeting daily cash requirements of business

 Paying wages and salaries to its employees on time
 For meeting its obligations to its creditors
 For paying taxes to the government on time
 For long term survival of business entity
Concept of working Capital
There are two working capital concepts, gross working capital and net working capital:
 Gross working capital refers to investment in current assets of the firm. Current assets
are the assets that can be converted into cash within one accounting period. It helps in
determining the return on investment of the firm.
Gross working capital = Debtors + Stock + Bills Receivables + Cash
 Net working capital means by how much current assets exceeds current liabilities. It
helps in determining the firm’s capability to pay its short-term liabilities and
expenses.
Net working capital = current assets – current liability
Nature of working Capital
The main concern of working capital management are the issues that arise in management of
current liabilities and assets and their relation. Current assets are assets that can be converted
into cash in normal course of business or within one accounting period without losing its value
and effecting firm’s operation. Cash, Trade receivables, market securities and inventory are
some of the major current assets.
Current liabilities are those, which have to be paid within one accounting period out of earnings
or current assets. Major current liabilities are trade payable, bank overdraft, and outstanding
expenses. The goal is to manage current assets and liabilities to maintain a certain level of
working capital and if not then the firm may become insolvent.
The current assets should cover the short-term liability to ensure margin of safety. Working
capital management is important to maintain liquidity.It is used for payment of expenses and
wages and purchase of raw material and helps in maintaining solvency, reputation and
creditworthiness.
CHAPTER 2
Literature Review
Dr. Azhagaiah Ramachandran and Mr. Muralidharan Janakiraman (2009) have analyse the
relationship between efficiency of working capital management and EBIT of paper industry in
India. They have used performance index, efficiency index and utilization index to measure
the working capital management efficiency. It was observed that company has performed well
during the period. Industry overall efficiency index was > 1 in three out of 9 years for the study
period. It is also found that there is negative relationship between EBIT and cash conversion
cycle, which means operational EBIT dictates how to manage the company’s working capital.
Mr. Lalit Kumar Joshi and Mr. Sudipta Ghosh (2012) studies the performance of working
capital of the Cipla Ltd of 5 Years data from 2004-05 to 2008-09. Their main objectives were
to examine the trend of some performance indicators, examining working capital performance,
studying liquidity position and examining liquidity and profitability relationship. They have
applied different financial ratios and statistical techniques to working capital performance
measurement. It was observed that performance is satisfactory but the relationship between
liquidity and profitability is negative.
Mr. N. Suresh Babu and Prof. G.V. Chalam (2014) studies the efficiency of Working Capital
Management in Indian Leather Industry. Their objective is to find the relationship between
different conversion cycles with profitability of the company. The different conversion cycles
they have taken is Inventory Conversion Period, Average Collection Period, Average Payment
Period and Cash Conversion Cycle. They have observed through Regression analysis that there
is insignificant positive relationship of inventory conversion duration and significant positive
relationship of average collection period with profitability of company but there is significant
negative relationship of both average payment period and cash conversion cycle.
Mrs. Poonam Gautam Sharma and Ms. Risham Preet Kaur (2016) made a study on Working
Capital Management and how it impacts profitability of Bharti Airtel during period from 2006-
07 to 2014-15. Their main objective is to evaluate the performance of working capital and to
check the profitability and liquidity relationship. With the help of different statistical tools,
they concluded that performance of company is not satisfactory in terms of current ratio and
the relationship between liquidity and profitability of the company is negative.
Minhas Akbar and Ashan Akbar (2016) conducted a study to examine efficiency of working
capital management. Finding of these researches reveals that the firm adopt more ethical
practice in working capital management. The research author have created a concave
relationship between cash conversion cycle and working capital, its square are positively and
negatively related to firm performance respectively
Monika wieczorek-Kosmala, Anna Dos, Joanna Blach, and Maria Gorczynska (2016)
recognized liquidity reserve magnitude and its attributes with regard to the data for 2013, the
majority of the examined companies distinguished with a positive liquidity reserves. About
83% of the selected companies hold the liquidity reserve. It was found that in the examined
company’s sample of financial stability parameters were relevant for the liquidity reserve,
where the changes of assets and capital structure were influential on relevance of liquidity
reserve.
Harsh Pratap Singh studied comprehensive content analysis reveals that most of the research
work is experimental and focuses mainly on two aspects, affect of working capital upon
productivity of firm and working capital practices. Major research work has done that WCM
is necessary for corporate profitability. The major issues with previous literature are lack of
approach that was survey-based and lack of regular theory development study, which opens all
new areas for future research.
Gilbert and Reichert, find that records receivables administration models are utilized as a part
of 59 percent of this organization to enhance working capital tasks. While stock administration
models were utilized as a part of 60% of the organization. All the more as of late. farragher,
kleiman and sahu (1999) find that 55% of firms in the S&P industrial file finish some type of
income evaluation , yet didn’t display bits of knowledge with records receivable and stock
administration ,or the verities of any present resource records or risk accounts crosswise over
commercial ventures.
Weinraub and Visscher (1998), watch an inclination of firms with low levels of current
proportions to additionally have low levels of current liabilities. All the while examining
records receivables and payables issues. Hill, sartorsis and ferguson (1984) discover contrasts
in the way instalment dates are characterized. Payees characterize the date of instalment as the
date of instalment is gotten, while the prayers view instalment as the date of instalment as the
stamp date. Extra WCM understanding crosswise over firms, commercial enterprise and time
can add to this collection of exploration.
Uday Kumar Jagannathan and Jyoti Mahato, examine the working capital management’s
impact on the profitability of the Indian telecom sector. The result of correlation analysis shows
the ROA has a negative relationship with ACP, CCC, ICP and Current ratio while ROA has
positive relationship with APP, Debt ratio and Firm size. Telecom sector is one of the major
sectors in the country. Therefore, the aim of this paper was to provide some useful suggestions
for the individuals responsible for the management of this sector.
Sumathi A and Narasimhaiah Tstudied the effect of working capital management in

profitability of Infosys. They have used several factors like current ratio, debt ratio, cash
conversion cycle, quick ratio, and many more for their paper. The findings were that the
management could increase shareholder’s fund by decreasing the credit period that is allowed.
They suggested that computation of working capital should be done at a level that is optimum
so that it helps the firm to maintain its current assets and current liabilities to provide better
returns to its shareholders.
CHAPTER 3
Objectives of the study
 To study the overview of background and characteristics of the Insurance sector in

India.
 To study the working capital performance of IDBI Federal
 To analyze the short-term financing patterns, which affect the working capital of the
organization.
CHAPTER 4
Research Methodology
Research methodology is simply the framework that guides the collection, analysis and
interpretation of data. The income statements and the annual report of the company were used
for the study.
For the purpose of the study, necessary information are collected through primary and
secondary sources.
Primary data - The primary data are those, which are fresh and composed for the first time,
and thus happened to be original in character. Primary data comprise the Information composed
from the officials and existing company during discussions.
Secondary data - The secondary data, are those which have already been collected and
approved by someone else though the statistical practice. The secondary data include the
information from the company annual reports, which include financial statement like balance
sheet and income statements. In addition, such other information from textbook of financial
management, journals and glossy magazine have been collected.
Conceptual framework
Keeping in view the nature and scope of the study, formulae of operation cycle, cash and
marketable securities, receivable management, inventory management and financing of
working capital and the banking policy were used. Which seemed to be most suitable. The
study is conducted on the working capital management of IDBI Federal Life Insurance Co.
Ltd. For the last five years 2015-2019 to compare the financial position of the company and to
take decision on the same. Secondary information will be used to gain knowledge about the
company and what had been done before.
CHAPTER 5
Data Analysis
Working capital shows the financial position of the company that helps investors to know the
financial health of the company. However, two terms called gross working capital and net
working capital are generally used.
Working is calculated when we subtract current liabilities from current assets. If it is positive,
it reflects that the company’s financial health is good and can cover its short-term debts by
selling its short-term assets. The data from the financial reports are analyzed to know the
working capital position of the company and the efficiency and effectiveness of the
management policies.
Financial Ratio Analysis
Financial ratios are financial statement accounts comparison mathematically. These

relationships between the financial statement act as a guide for the investors, creditors, and
company’s management to understand key performance areas of the company and of areas to
improve. Ratios allow the comparison of companies irrespective of their industry or size, to
identify their areas of strengths and weaknesses. Financial ratios can be characterized into
seven main categories: liquidity, solvency, efficiency, profitability, market prospect,
investment advantage, and coverage.
Table 3
IDBI Federal
Current Current
Year Assets Liability
2014-15 3,436,895 2072070
2015-16 3,946,889 2,133,915
2016-17 5,222,595 2,982,962
2017-18 6,288,733 3,820,571
2018-19 6,311,031 3,105,500
Source: IDBI Federal Financial Statement
Table 4
Star Union Dai-ichi
Current Current
Year Assets Liability
2013-14 4,920,441 3,376,660
2014-15 3,360,078 2,687,404
2015-16 4,648,113 3,996,382
2016-17 4,124,407 2,054,732
2017-18 5,433,445 1,384,213
Source: Star Union Dai-ichi Financial Statement
Figure 4
IDBI Federal
63,11,031
62,88,733
Current Assets Current Liability

52,22,595
39,46,889
38,20,571
34,36,895
31,05,500
29,82,962
21,33,915
2072070
2014-15 2015-16 2016-17 2017-18 2018-19

Figure 5
Star Union Dai-ichi
54,33,445
Current Assets Current Liability
49,20,441
46,48,113
41,24,407
39,96,382
33,76,660
33,60,078
26,87,404
20,54,732
13,84,213
2013-14 2014-15 2015-16 2016-17 2017-18
Net Working Capital = Current Assets – Current Liabilities

IDBI Federal
Table 5 In Rs. '000
Net Working
Year Current Assets Current Liability Capital
2014-15 3,436,895 2,072,070 1364825
2015-16 3,946,889 2,133,915 1812974
2016-17 5,222,595 2,982,962 2239633
2017-18 6,288,733 3,820,571 2468162
2018-19 6,311,031 3,105,500 3205531
Star Union Dai-ichi
Table 6 In Rs. '000

Net Working
Year Current Assets Current Liability Capital
2013-14 4,920,441 3,376,660 1,543,137
2014-15 3,360,078 2,687,404 672,674
2015-16 4,648,113 3,996,382 651,731
2016-17 4,124,407 2,054,732 2,069,675
2017-18 5,433,445 1,384,213 4,049,232
Figure 6
IDBI Federal Life Insurance
WORKING CAPITAL
3205531
Net Working Capital
2468162
2239633
1812974
1364825
2014-15 2015-16 2016-17 2017-18 2018-19

Figure 7
Star Union Dai-ichi
WORKING CAPITAL
40,49,232
Net Working Capital
20,69,675
15,43,137
6,72,674
6,51,731
2013-14 2014-15 2015-16 2016-17 2017-18

In case of IDBI Federal, there has been a gradual increase in working capital over the years as
seen in the upward trajectory of the columns.
Whereas in case of Star Union the working capital is increasing for the past two years but its
uneven and which is harmful for the business.
Average Collection Period = (Account Receivables/Net Sale)* 365

IDBI Federal
Table 7 In Rs. '000
Year Accounts Net sales Average collection
Receivables Period (Days)
2014-15 605,264 1917848 115.19
2015-16 714,250 427821 609.36
2016-17 746,063 605386 449.81
2017-18 868,510 1084125 292.40
2018-19 742,633 1510038 179.50
Source: IDBI Federal Financial Statemen
Star Union Dai-ichi

Table 8 In Rs. '000
Year Accounts Net sales Average collection
Receivables Period (Days)
2013-14 144,112 348,639 150.87
2014-15 280,160 582,475 175.55
2015-16 309,350 433,335 260.56
2016-17 424,180 602,601 256.92
2017-18 901,332 777,442 423.16
Star union Dai-ichi have average collection period rising continuously over the years that
means its taking longer to recover its receivables while on the other hand IDBI Federal is
showing a sign of recovery after initial glitch in the years between 2015 and 2017. This shows
a sign of competence of its management while its getting worse for Star union Dai-ichi.
IDBI Federal
Table 9 In Rs. '000
Year Accounts Payable Net sales Average payment
Period (Days)
2014-15 36,754 1917848 6.99
2015-16 75,348 427821 64.28
2016-17 60,389 605386 36.40
2017-18 87,353 1084125 29.40
2018-19 33,419 1510038 8.07
Star Union Dai-ichi
Table 10 In Rs. '000
Year Accounts Payable Net sales Average payment
Period (Days)
2013-14 106,252 348,639 111.23
2014-15 70,849 582,475 44.39
2015-16 60,896 433,335 51.29
2016-17 47,002 602,601 28.46
2017-18 46,708 777,442 21.92
The average payment period for both the companies is decreasing and it is a positive sign that
the company is able to pay its debtors quickly. IDBI Federal has a lower payable period over
the past 5 years as compared to Star Union dai-ichi.
Days working capital = (Average Working capital *365)/ Net sales
Table 11
IDBI Federal
Working
Year Capital Net Sales DWC
2014-15 1364825 1917848 259.75
2015-16 1812974 427821 1546.75
2016-17 2239633 605386 1350.32
2017-18 2468162 1084125 830.97
2018-19 3205531 1510038 774.82
Average DWC= 952.52
Table 12
Star Union Dai-ichi Life Insurance
Net Working
Year Capital Net Sales DWC
2013-14 1,543,137 348,639 1615.55
2014-15 672,674 582,475 421.52
2015-16 651,731 433,335 548.95
2016-17 2,069,675 602,601 1253.61
2017-18 4,049,232 777,442 1901.06
Average DWC = 1148.13
IDBI has a better DWC as compared to Star union, which implies that IDBI is able to convert
its working capital into revenue in a shorter span of time. This may be due to the efficiency of
managers to handle its working capital funds.
Current Ratio = Current Assets / Current Liabilities
Table 13 IDBI Federal
In Rs. '000
Current Current
Year Current Assets Liability Ratio
2014-15 3436895 2,072,070 1.66
2015-16 3,946,889 2,133,915 1.85
2016-17 5,222,595 2,982,962 1.75
2017-18 6,288,733 3,820,571 1.64
2018-19 6,311,031 3,105,500 2.03
Table 14 Star Union Dai-ichi
In Rs. '000
Current Current
Year Current Assets Liability Ratio
2013-14 4,920,441 3,376,660 1.45
2014-15 3,360,078 2,687,404 1.25
2015-16 4,648,113 3,996,382 1.16
2016-17 4,124,407 2,054,732 2.00
2017-18 5,433,445 1,384,213 3.92

The numbers are high of Star union but there is more consistency in case of IDBI
Federal.
Figure 8
IDBI Federal
Current Ratio
2.5
2
1.5 2.03
1.85 1.75
1.66 1.64
1
0.5
0
2014-15 2015-16 2016-17 2017-18 2018-19
Current Ratio

Figure 9 Star Union Dai-ichi
Cuurent Ratio
5 3.92
4
3 2
2 1.45 1.25 1.16
1
0
2013-14 2014-15 2015-16 2016-17 2017-18
Current Ratio
Source: Star Union dai-ichi Financial Statement
An insurance industry requires a slightly higher current ratio than other industries because of
its risky business undertakings. Here, the current ratio is on increased in the year 2015-16,
which is a positive trend, but at next year, it is slightly decreasing and again it increased in
2018-19.
Quick Ratio = Quick assets / Current Liability

In Rs. '000
Current
Year Quick Assets Liability Quick Ratio
2014-15 1,236,932 2,072,070 0.60
2015-16 1,074,726 2,133,915 0.50
2016-17 1,618,249 2,982,962 0.54
2017-18 1,637,837 3,820,571 0.42
2018-19 1,365,497 3,105,500 0.43
Table 16 Star Union Dai-ichi

In Rs. '000
Current
Year Quick Assets Liability Quick Ratio
2013-14 1,168,435 3,376,660 0.34
2014-15 1,099,575 2,687,404 0.40
2015-16 1,311,023 3,996,382 0.54
2016-17 1,602,994 2,054,732 0.32
2017-18 1,174,436 1,384,213 0.84
Figure 10
IDBI Federal
Quick Ratio
0.8 0.6
0.5 0.54
0.6 0.42 0.43
0.4
0.2
0
2014-15 2015-16 2016-17 2017-18 2018-19
Quick Ratio
`
Figure 11
Star Union Dai-ichi
Quick Ratio
1 0.84
0.54
0.34 0.4 0.32
0.5
0
2013-14 2014-15 2015-16 2016-17 2017-18
Quick Ratio
Higher quick ratios are favorable for companies because it reflects there are more quick assets
than current liabilities. A company with a quick ratio of one indicates that quick assets equal
current liabilities. This also shows that the company could pay off its current liabilities without
selling any long-term assets. In this case company is not able to cover its current liabilities
through quick assets as quick ratio in the given period i.e. from 2015-2019 is less than one.
While in the case of Star union the company has improved its quick ratio.
Working Capital Turnover Ratio = Net Sales / Net Working capital
Table 17
IDBI Federal
In Rs. '000
Working
Year Net Sales Capital WCT
2014-15 1917848 1364825 1.41
2015-16 427821 1812974 0.24
2016-17 605386 2239633 0.27
2017-18 1084125 2468162 0.43
2018-19 1510038 3205531 0.47
Table 18
Star Union Dai-ichi
In Rs. '000
Net Working
Year Net Sales Capital WCT
2013-14 348,639 1,543,137 0.22
2014-15 582,475 672,674 0.86
2015-16 433,335 651,731 0.66
2016-17 602,601 2,069,675 0.29
2017-18 777,442 4,049,232 0.19
Figure 12
DBI Federal
Working Capital turnover Ratio

1.41
1.5
1
0.43 0.47
0.5 0.24 0.27
0
2014-15 2015-16 2016-17 2017-18 2018-19
Working Capital turnover Ratio
Source: IDBI federal Financial Statement

Figure 13
Star Union Dai-ichi
WCT
1 0.86
0.66
0.5 0.22 0.29

0.19
0
2013-14 2014-15 2015-16 2016-17 2017-18
WCT

For both the companies in the year 2014-15 Working Capital Turnover Ratio is higher which
is showing that company is using less of its assets and inventories for sales but in years from
2016 onwards company’s working capital turnover ratio is very low which indicates that
company sales is not getting higher which may lead company to an excessive amount of bad
debts, the ratio is increasing after the drop showing chances of recovery.
Current Asset Turnover Ratio = Net sales / Current Assets
Current assets
Year Net sales Current assets turnover ratio
2014-15 1917848 3436895 0.56
2015-16 427821 3,946,889 0.11
2016-17 605386 5,222,595 0.12
2017-18 1084125 6,288,733 0.17
2018-19 1510038 6,311,031 0.23
Table 20
Star Union Dai-ichi
In Rs. '000
Current Current assets
Year Net Sales Assets turnover ratio
2013-14 348,639 4,920,441 0.07
2014-15 582,475 3,360,078 0.17
2015-16 433,335 4,648,113 0.09
2016-17 602,601 4,124,407 0.14
2017-18 777,442 5,433,445 0.14
Figure 14
IDBI Federal
Current Asset Turnover Ratio

0.56
0.6
0.4
0.23
0.17
0.2 0.11 0.12
0
2014-15 2015-16 2016-17 2017-18 2018-19
Current Asset Turnover Ratio

Figure 15
Star Union Dai-ichi Life
Current assets
0.2 0.17
0.14
0.15
0.09
0.1 0.07
0.05
0
0
2013-14 2014-15 2015-16 2016-17 2017-18
Current assets

The ratio indicates how co. is efficiently using its current assets to generate revenue. Higher
current assets turnover ratio indicates the capability of the company to achieve maximum sales
with the minimum investment in current assets. Here in 2014-2015 current assets turnover ratio
is higher i.e. 0.56 In comparison with other financial years.
In case of star union the graph shows a upward trajectory which is a positive sign.
Total Asset Turnover ratio = Net sales / Total Assets

Table 21
IDBI Federal
Total assets
Year Net sales Total assets turnover ratio
2014-15 1917848 46134702 0.041
2015-16 427821 52,636,731 0.008
2016-17 605386 65,331,509 0.009
2017-18 1084125 76,757,766 0.014
2018-19 1510038 92,259,979 0.016
Table 22
Star Union Dai-ichi
Total assets
Year Net Sales Total assets turnover ratio
2013-14 348,639 73,289,007 0.004
2014-15 582,475 65,262,681 0.008
2015-16 433,335 58,327,777 0.007
2016-17 602,601 56,468,193 0.010
2017-18 777,442 47,601,213 0.016
Figure 16
IDBI Federal
Total Asset Turnover Ratio

0.06
0.041
0.04
0.014 0.016
0.02 0.008 0.009
0
2014-15 2015-16 2016-17 2017-18 2018-19
Total Asset Turnover Ratio

Figure 17
Star Union Dai-ichi
Total assets turnover ratio

0.02 0.016
0.015
0.01
0.01 0.008 0.007
0.004
0.005
0
2013-14 2014-15 2015-16 2016-17 2017-18
Total assets turnover ratio

The ratio indicates how co. is efficiently using its average of total assets to generate revenue.
Higher total assets turnover ratio indicates the capability of the company to achieve maximum
sales with the minimum investment in total assets. Here in 2014-2015 total assets turnover ratio
is highest i.e. and then we can see a drop which is not ideal.
In case of star union, the graph having upward slope showing the companies efficiency and it
is a favorable case.
Table 23
IDBI Federal Table 24
Star Union
Year Net sales
2014-15 1917848 Year Net Sales
2015-16 427821 2013-14 348,639
2016-17 605386 2014-15 582,475
2017-18 1084125 2015-16 433,335
2018-19 1510038 2016-17 602,601
Source: IDBI Federal Financial 2017-18 777,442
Statement
Figure 18
IDBI Federal
Net sales
2500000
1917848
2000000
1510038
1500000 1084125
1000000 605386
427821
500000
0
2014-15 2015-16 2016-17 2017-18 2018-19
Net sales
Figure 19
Star Union Dai-ichi
Net Sales
10,00,000
7,77,442
8,00,000 5,82,475 6,02,601
6,00,000 4,33,335
3,48,639
4,00,000
2,00,000
0
2013-14 2014-15 2015-16 2016-17 2017-18
Net Sales

Analysis of Operating Activity:
Table 25
IDBI Federal
Cash flow from Operating

2019 2018 2017 2016 2015
Activities
Premium including proposal
1,91,71,609 1,74,24,927 1,59,49,668 1,22,53,448 1,08,46,151
deposits received
Other Income 9,081 3,494 3,550 4,543 405
Commissions paid -10,01,919 -10,40,614 -9,36,398 -8,74,213 -7,09,844
Policy benefits paid including
-55,64,667 -49,77,825 -62,79,482 -47,73,196 -41,73,276
interim bonus
Operating expenses -24,83,468 -20,85,532 -22,64,225 -21,17,431 -17,61,988
CSR payments -11,712 -14,448 -16,427 - -
Payments to reinsurers (net of
-31,486 -7,449 -2,420 -36,350 -21,264
recovery amount)
Deposits paid -7,387 -315 13,865 -8,869 -2,498
Other advances -24,581 -51,293 1,497 -4,468 -200
Income taxes paid -2,30,000 -1,193 - -35,113 -160
GST/Service tax paid -3,89,238 -4,10,654 -1,99,855 -2,34,547 -2,11,354
Net cash inflow / (outflow)
from operating activities before 94,36,232 88,39,098 62,69,773 41,73,804 39,65,972
extraordinary items
The inflow of cash from operating activities have been increasing continuously from 2015 to
2019. This shows that the income from its operations i.e. selling of insurance policies have
increased over the years raising the level of premium received. The company has been able to
control its costs even with increase in sales.
Table 26
Star Union Dai-ichi
Cash Flow from Operating Activities (A) 2018 2017 2016 2015 2014
Premium received from policyholders, 17,857,147 15,405,442 13,347,913 11,504,355 9,609,844

including advance receipts
Other receipts - - - -
Payments to the re-insurers, net of (57,684) 125,589 (115,594) (16,222) 2,152

Commissions and Claims/ Benefits
Payments of Claims/Benefits (10,428,638) (12,610,119) (7,835,135) (7,492,122) (3,745,440)
Payments of Commission and Brokerage (1,417,445) (1,315,631) (1,024,348) (815,696) (684,678)
Payments of other Operating Expenses* (3,212,454) (2,667,261) (2,491,762) (2,188,534) (2,053,908)
Preliminary and Pre-Operative Expenses - - - - -
Deposits, Advances and Staff Loans (3,273) (4,625) (10,491) 150 (4,428)
Income taxes paid (Net) - - - - -
Service Tax / Goods & Services Tax Paid (433,716) (422,730) (350,635) (247,237) (223,117)
Other payments - - - - -
Cash flow before extraordinary items - - - - -
Cash flow from extraordinary operations - - - - -
Net Cash Flow from Operating Activities 2,303,937 (1,489,335) 1,519,948 744,694 2,900,425
(A)
Net cash flow is not following a particular pattern it is not ideal.

Figure 20
IDBI Federal
Net cash inflow / (outflow) from operating

activities before extraordinary items
Net cash inflow / (outflow) from operating activities before extraordinary items
88,39,098 94,36,232
62,69,773
39,65,972 41,73,804
2014-15 2015-16 2016-17 2017-18 2018-19
Figure 21
Star Union Dai-ichi
Net cash inflow / (outflow) from operating

activities before extraordinary items
Net cash inflow / (outflow) from operating activities before extraordinary items
29,00,425
23,03,937
15,19,948
7,44,694
2013-14 2014-15 2015-16 2016-17 2017-18

-14,89,335

B) Cash Flow from Investing Activities
Table 27
IDBI Federal
Cash flow from Investing
2019 2018 2017 2016 2015
Activities
Purchase of fixed assets including
capital work-in-progress and -46,416 -69,392 -1,95,785 -12,27,045 -53,805
advance for capital assets
Sale of fixed assets 1,319 1,941 4,064 3,775 661
- - -
Purchase of investments -3,75,70,813 -3,75,82,470
7,53,52,780 7,15,45,015 5,15,60,145
Proceeds from sale/redemption
5,76,88,156 6,22,26,393 4,48,09,072 3,48,25,569 3,07,30,557
of investments
Loans against Policies (net of
-28,081 -9,669 -1,183 -15 -
repayments)
Interest and Dividends received 48,81,633 36,13,614 31,51,268 25,87,284 23,60,549
Investments in money market

instruments and in liquid mutual 31,69,662 -29,15,081 -19,46,516 -29,47,716 7,63,865
funds (Net)
Expenses related to investments -9,320 -10,764 -4,568 -4,304 -437
Net cash (used) in investing

-96,95,827 -87,07,974 -57,43,793 -43,33,265 -37,81,080
activities
The company has been making more and more investments over the years which has increased
the interest received. The use of cash in investing activities is increasing at a great pace its
almost tripled in past 5 years.
Figure 22
IDBI Federal
NET CASH (USED) IN INVESTING ACTIVITIES

Net cash (used) in investing activities
2014-15 2015-16 2016-17 2017-18 2018-19

-37,81,080
-43,33,265
-57,43,793
-96,95,827
-87,07,974

Table 28
Star Union Dai-ichi
Cash Flow from Investing Activities 2018 2017 2016 2015 2014
Purchase of fixed assets (103,714) (124,159) (116,227) (77,430) (151,213)
Proceeds from sale of fixed assets 36 1,118 394 590 51
Purchases of investments (33,069,763) (19,946,486) (14,419,996) (17,340,238) (14,997,849)
Loans disbursed - - - - -
Loans against policies (36,578) 19,204 (22,124) (42,814) (19,561)
Sale of investments 25,952,591 18,060,825 12,963,268 14,013,526 21,512,326
Repayments received - - - - -
Rents/Interests/ Dividends received 3,635,774 3,059,022 2,867,583 2,544,183 2,195,145
Investments in money market instruments and in (435,896) 1,505,226 (808,349) (47,167) (11,831,134)
Liquid Mutual Funds (Net)
Expense related to investments (398) (784) (944) (1,268) (3,798)
Net Cash Flow from Investing Activities (4,057,948) 2,573,966 463,605 (950,618) (3,296,033)

Figure 23
Star Union Dai-ichi
NET CASH (USED) IN INVESTING ACTIVITIES

Net cash (used) in investing activities
25,73,966
4,63,605
2013-14 2014-15 2015-16 2016-17 2017-18

-9,50,618
-32,96,033
-40,57,948
The company is not following a particular pattern toward its investment policies.
C) Cash Flow from Financing Activities-
Table 29
IDBI Federal & Star Union Dai-ichi
Cash flow from financing activities
Proceeds from issue of share capital - - - -
Proceeds from borrowing - - - -

Repayments of borrowing - - - -
Interest/dividends paid - - - -
Net cash inflow from financing activities - - - -
Source: IDBI Federal & Star Union dai-ichi Financial Statement

Company had not issued any share capital as it is not listed in the stock market. Also company
has not taken or repaid any borrowings from any financial institution or banks.
Analysis of Cash Flow from All 3 Activities
Table 30
IDBI Federal
Particulars 2019 2018 2017 2016 2015
Net cash flow/(outflow) from operating

94,36,232 88,39,098 62,69,773 41,73,804 39,65,972
activities
- -
Net cash (used) in investing activities -96,95,827 -87,07,974 -57,43,793
43,33,265 37,81,080
Net Cash Flow from Financing
Activities
Net increase / (decrease) in cash and
-2,59,595 1,31,124 5,25,980 -1,59,461 1,84,892
cash equivalents
Cash and cash equivalents at the
17,38,815 16,07,691 10,81,711 12,41,172 10,56,280
beginning of the year
Cash and cash equivalents at end of year 14,79,220 17,38,815 16,07,691 10,81,711 12,41,172

The cash balance for the year had been increasing since 2015 but in 2019 it has
declined.
Table 31
Star Union Dai-ichi
Particulars 2019 2018 2017 2016 2015
Net cash flow/(outflow) from 2,303,937 (1,489,335) 1,519,948 744,694

2,900,425
operating activities
Net cash (used) in investing (4,057,948) 2,573,966 463,605 (950,618) (3,296,033)
activities
Net Cash Flow from Financing
Activities
Net increase / (decrease) in cash and (1,754,011) 2,160,328 1,983,553 (205,924) (395,595)
cash equivalents
Cash and cash equivalents at the 4,634,208 2,473,880 490,327 696,251 1,091,846
Cash and cash equivalents at end of 2,880,197 4,634,208 2,473,880 490,327 696,251
year
CHAPTER 6
Findings & interpretations
The current assets are increasing which may indicate that the company’s liquid assets are
increasing but it may also be the case that the receivables component is higher in it.
In current liabilities are decreasing, which is a positive sign for the company. This means that
the company is able to discharge its obligations on time, pay off its debts on time.
Net working capital increases, naturally because of an increase in current assets and decrease
in current liabilities. The company has enough funds for meeting its day-to-day requirements.
The current ratio in case of insurance companies should be higher than other businesses, so a
current ratio of 1.5 to 2 is quite favorable.
An alarming thing here is the component of cash and bank in the current assets, which has
decreased in the last year. It means that the liquid assets are not quite available in the company,
which should be there, lest any unforeseen circumstances occur.
The working capital turnover ratio had decreased, again not a positive sign but has started to
get back up and it shows that the company is showing a sign of recovery. It signifies ineffective
utilization of working capital but, then again, a high working capital turnover ratio may also
be a sign of insufficient working capital.
As seen through the comparison of IDBI Federal Life Insurance with another insurance
provider Star Union Dai-ichi Life Insurance, IDBI Federal is over shadowing its competitors
in few areas but also lags behind in some. The management has to be careful in their decision
making to keep the company competitive and growing.
CHAPTER 7
Summary & conclusion
Working capital is the essence of the continuous growth and survival of any business;
irrespective of the kind of business, any entity is involved in. In the absence of continuous flow
of net working capital, day-to-day working of a company is hampered largely. In order to cope
with the unforeseen and emergency situations also, working capital is a much-required
component of business.
Working capital management involves efficient management of cash, debtors and creditors.
Here, it is seen that the particular company IDBI Federal is able to maintain an adequate amount
of working capital, which even increases every year, but an important and alarming fact to be
considered here is that maybe the working capital has not been used effectively and in an
optimum way. The component of the most liquid asset i.e. cash balance should be increased so
that there is no need to worry about the emergencies that might occur in business.
CHAPTER 8
Limitations
 The data collected was just for a period of few years. Hence a clear picture could
have been formed had the analysis been done for more number of years, a much
more transparent analysis could have been done.
 Not all assets, which form part of current assets, are so liquid in nature. Therefore,
discrepancies occur if judgement is done based on comparative analysis of these
assets.
 Annual reports may vary from the actual performance of the company since a
company may inflate its assets and decrease its liabilities to attract its potential
investors.
 Since the analysis is made through secondary sources of information, an absolute
true picture could not be painted. Had it been through any primary source, much
better and more accurate conclusions could have been drawn.
References
 http://www.idbifederal.com/AboutUs/Pages/Company-Profile.aspx
 http://economictimes.indiatimes.com/topic/idbi-federal-life-insurance
 http://www.indiainfoline.com/article/news-sector-insurance/inaugural-idbi-federal-
life-insurance-mumbai-half-marathon-on-august-21-2016-116041600046_1.html
 http://profit.ndtv.com/stock/the-federal-bank-ltd_federalbnk/reports-directors-report
 http://profit.ndtv.com/stock/the-federal-bank-ltd_federalbnk/reports-directors-report
 https://www.idbifederal.com/financial-information
 https://www.idbifederal.com/public-disclosures
 https://www.sudlife.in/corporate-governance-disclosures
 Azhagaiah Ramachandran Muralidharan Janakiraman .2009. The Relationship between
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http://www.fm-kp.si/zalozba/ISSN/1581-6311/7_061-074.pdf
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https://www.researchgate.net/publication/303920077_Working_Capital_Management_and_C
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https://www.financialdecisionsonline.org/archive/pdffiles/v11n2/weinraub.pdf
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Profitability: Indian Telecom Sector
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 John Kwaku Mensah Mawutor. 2015. Working Capital Management and Profitability of
Firms: A Study of Listed Manufacturing Firms in Ghana
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2573319
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 Mr. Manas Das (Branch Head IDBI Federal, NSP), Mr. Amit Singh (Senior Al.
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NSP).
Appendix
Data Collected from secondary Source
The data collected are the financial reports of IDBI Federal over the past 5 years. The data
includes profit and loss statement, balance sheet and cash flow statement, which will help us
in understanding the concept of working capital.
The data is collected from the official website of IDBI Federal Life Insurance Co. Ltd and
tabularized to provide a comparative overview of the financial positions of the company.
Efficiency Ratio - The efficiency ratios are used to analyze how a company uses its assets
and liabilities internally. An efficiency ratio can be used to calculate
the turnover of receivables, the repayment of liabilities, the quantity and usage of equity, and
the general use of inventory and machinery.
Current Assets: Current Assets are those assets that can be converted into cash or cash
equivalents within one year or in the operating cycle of the assets, whichever is longer. The
main components of current assets are:
 Cash & Bank balances

 Sundry Debtors
Current Liabilities: Current Liabilities are those obligations, which are to be paid off
within one year, or they are short-term obligations.
Average collection period is the time duration it takes for the company to recover from its
debtors or customers for outstanding payments.
Average payment period is the number of days a company takes to pay off its creditors.
Average Payment Period = (Account Payables/Cost of Sales)*365
Days Working capital: It describes the duration it takes for a company to convert its working
capital into revenue. The more days working capital, the more time is required to convert
working capital into sales. The days working capital is an indicator of efficiency of the
company.
Current Ratio- The current ratio is a liquidity and efficiency ratio that measures a firm's
ability to pay off its short-term liabilities with its current assets. The current ratio is an
important measure of liquidity because short-term liabilities are to be paid within the next year.
This means that the company has a limited amount of time in order to raise the funds to pay
for these liabilities.
Quick Ratio- The quick ratio is a liquidity ratio that measures the company’s ability to pay its
short-term liabilities with only quick assets when they come due. Quick assets are current assets
that can be converted to cash within 90 days or in the short-term.
Working Capital Turnover Ratio-
The working capital turnover ratio measures how well a company is able utilize its working
capital for supporting a given level of sales. Because working capital is current assets less
current liabilities, a high turnover ratio shows that management is being efficient in using a
company’s current assets and liabilities for supporting sales. In contrast, a low ratio shows a
business is investing in too many accounts receivable (AR) and inventory assets for supporting
its sales. This may lead to a large amount of bad debts and obsolete inventory.
Current Assets Turnover Ratio- The Current Asset turnover ratio is an efficiency ratio that
measures a company’s capability to comparing net sales with current assets for generating
sales. In other words, this ratio shows how efficiently a company can use its current assets to
generate sales
Total Assets Turnover Ratio- The asset turnover ratio is an efficiency ratio that measures a
company's capability to compare net sales with average total assets generate sales from its
assets. In other words, this ratio shows how efficiently a company can use its assets to
generate sales. The total asset turnover ratio calculates net sales as a percentage of assets to
show how many sales are generated from each rupee of company assets.
Cash Flow Statement Analysis
Cash flow statement provides information about the inflow and outflow of cash of an enterprise
for a given period. It provides useful information that effects the profit and loss account and
balance sheet of a company. A cash flow statement is a statement which provides a in depth
rationalization for the change in a firm‘s cash balance during a particular duration by indicating
the firm‘s income sources and uses of cash during that duration. Cash flow statement is the
cash flow during the accounting period from-
 Operating activities
 Investing activities
 Financing activities.
(A) Cash Flow from Operating Activities: Cash generated by production and sales of
business is considered as cash flow from operating activities. It relatively denotes flow of
cash from operating activities weather income or expense source. E.g., cash from operation is
the revenue net of expenses.
(B) Cash Flow from Financing Activities: This section of Cash flow statement shows
cash generated from activities to finance the business. E.g., cash receipt on issue of equity
shares or debentures etc. and cash paid to stakeholders. Dividend to equity shares or interest
on debenture etc.
Cash Flow from Investing Activities: Cash invested in long term assets e.g. purchase of
machinery and other long term assets as well as other current assets such as purchase of
equity shares of other company etc. and cash receipts from such investing activities e.g.
dividend received, interest received sales of machinery and scrap etc
Appendix A : Profit & Loss account of IDBI Federal
Particulars 2019 2018 2017 2016 2015
Amounts transferred from the Policyholders’ Account 1,042,361 660,354 177,521 84,503 1,546,929
(Technical Account)
Income from investments
(a) Interest, dividends & rent – gross 402,317 328,216 308,510 341,199 210,671
(b) Profit on sale/redemption of investments 54,251 74,349 93,976 42,078 44,307
(c) (Loss on sale/ redemption of investments) (21,328) (12,681) (15,295) (88,205) (12,211)
(d) Amortization of (premium) / discount on investments(net) 29,960 33,033 36,941 47,204 127,511
Other Income
(a) Fees and Charges 72 77 70 69 -
(b) Miscellaneous Income 2,405 777 3,663 973 641
Total (A) 1,510,038 1,084,125 605,386 427,821 1,917,848
Expense other than those directly related to the insurance 75,367 74,700 62,753 53,124 28,131
business
Bad debts written off - - - - -
Contribution to the Policyholders’ Ac (Technical) - - 22,009 221,871 344,027
Provisions (other than taxation) - 7 127
(a) For diminution in the value of investments (net) (Refer 106,947 - - - -

note 3.15 and 3.16 of Schedule 16)
(b) Provision for doubtful debts - - - - -
(c) Others - - - - -
Total (B) 182,314 74,700 84,762 275,002 372,285
Profit/(Loss) before tax = (A) - (B) 1,327,724 1,009,425 520,624 152,819 1,545,563
Provision for taxation - - - - -
Profit/(Loss) after tax 1,327,724 1,009,425 520,624 152,819 1,545,563
Appropriations
(a) Balance at the beginning of the year (201,512) (1,210,935) (1,731,556) (1,884,375) (3,429,938)
(b) Interim dividends paid during the year - - - - -
(c) Proposed final dividend - - - - -
(d) Dividend distribution tax - - - - -
(e) Transfer to reserves/other accounts - - - - -
Profit / (Loss) carried to the Balance Sheet 1,126,212 (201,510) (1,210,932) (1,731,556) (1,884,375)
Earnings per share - Basic and Diluted (in `) (Refer note no. 1.66 1.26 0.65 0.02 1.93
3.23 of Schedule 16)
Appendix B : Balance Sheet of IDBI Federal Life Insurance
Particulars Sched As at As at As at As at As at
ule
March 31, March 31, March 31, March 31, March 31,
2019 2018 2017 2016 2015
Sources of funds
Shareholders' funds
Share capital 5 8,000,000 8,000,000 8,000,000 7,998,912 7,997,824
Reserves and surplus 6 1,126,212 - - - -
Credit / (debit) fair value change account 2,321 (17,025) 314 897 (582)
Sub-total 9,128,533 7,982,975 8,000,314 7,999,809 7,997,242
Borrowings 7 - - -
Policyholders' funds
Credit / (debit) fair value change account (3,336) (98,670) 8,788 2,639 (10,345)
Policy liabilities (refer note 3.17 and 3.18 of 55,384,948 44,957,840 36,288,477 27,970,448 20,394,569
schedule 16)
Insurance reserves - - - - -
Provision for linked liabilities (refer note 3.26 26,668,940 23,116,951 19,012,923 - 16,054,338 17,214,082
and 3.27 of schedule 16)
Funds for discontinued policies (refer note -

3.24 and 3.26 of schedule 16)
Discontinued on account of non-payment of 808,026 411,238 248,977 207,138 351,459

premium
Others - - -
Sub-total 82,858,578 68,387,359 55,559,165 44,234,563 44,234,563
Funds for future appropriation - participating 272,868 387,432 - - -

funds (refer note 3.23 of schedule 16)
Total 92,259,979 76,757,766 63,559,479 52,234,372 45,947,007
Application of funds
Investments
Shareholders' 8 5,920,764 5,190,427 4,638,577 4,282,535 4,164,529
Policyholders' 8a 54,242,760 43,920,188 34,736,721 26,844,329 20,861,480
Assets held to cover linked liabilities 8b 27,476,965 23,528,189 19,261,900 16,261,476 17,565,541
Loans 9 39,111 10,920 1,203 15 -
Fixed assets 10 1,374,848 1,438,330 1,470,513 1,301,487 106,257
Current assets
Cash and bank balances 11 1,365,479 1,637,837 1,601,983 1,074,726 1,236,932
Advances and other assets 12 4,945,552 4,650,936 3,620,537 2,872,163 2,199,963
Sub-total (a) 6,311,031 6,288,773 5,222,520 3,946,889 3,436,895
Current liabilities 13 2,976,619 3,763,143 2,917,123 2,089,828 2,030,258
Provisions 14 128,881 57,428 65,764 44,087 41,812
Sub-total (b) 3,105,500 3,820,571 2,982,887 2,133,915 2,072,070
Net current assets/(liabilities) (c) = (a) - (b) 3,205,531 2,468,202 2,239,633 1,812,974 1,364,825
Miscellaneous expenditure (to the extent not 15 - - - - -

written off or adjusted)
Debit balance in profit & loss account - 201,510 1,210,932 1,731,556 1,884,375
(shareholders' account)
Total 92,259,979 76,757,766 63,559,479 52,234,372 45,947,007

Appendix C : Cash Flow Statement
Particulars 2019 2018 2017 2016 2015
Cash flow from Operating Activities
Premium including proposal deposits 19,171,609 17,424,927 15,949,668 12,253,448 10,846,151

received
Other Income 9,081 3,494 3,550 4,543 405
Commissions paid (1,001,919) (1,040,614) (936,398) (874,213) (709,844)
Policy benefits paid including interim (5,564,667) (4,977,825) (6,279,482) (4,773,196) (4,173,276)
bonus
Operating expenses (2,483,468) (2,085,532) (2,264,225) (2,117,431) (1,761,988)
CSR payments (11,712) (14,448) (16,427) - -
Payments to reinsurers (net of recovery (31,486) (7,449) (2,420) (36,350) (21,264)

amount)
Deposits paid (7,387) (315) 13,865 (8,869) (2,498)
Other advances (24,581) (51,293) 1,497 (4,468) (200)
Income taxes paid (230,000) (1,193) - (35,113) (160)
GST/Service tax paid (389,238) (410,654) (199,855) (234,547) (211,354)
Net cash inflow / (outflow) from 9,436,232 8,839,098 6,269,773 4,173,804 3,965,972
operating activities before extraordinary
items
Cash flows from extraordinary - - - - -

operations
Net cash inflow / (outflow) (A) 9,436,232 8,839,098 6,269,773 4,173,804 3,965,972
from operating activities
Cash flow from Investing Activities
Purchase of fixed assets including capital (46,416) (69,392) (195,785) (1,227,045) (53,805)
work-in-progress and advance for capital
assets
Sale of fixed assets 1,319 1,941 4,064 3,775 661
Purchase of investments (75,352,780) (71,545,015) (51,560,145) (37,570,813) (37,582,470)
Proceeds from sale/redemption of 57,688,156 62,226,393 44,809,072 34,825,569 30,730,557

investments
Loans against Policies (net of (28,081) (9,669) (1,183) (15) -

repayments)
Interest and Dividends received 4,881,633 3,613,614 3,151,268 2,587,284 2,360,549
Investments in money market 3,169,662 (2,915,081) (1,946,516) (2,947,716) 763,865

instruments and in liquid mutual funds
(Net)
Expenses related to investments (9,320) (10,764) (4,568) (4,304) (437)
Net cash (used) in investing (B) (9,695,827) (8,707,974) (5,743,793) (4,333,265) (3,781,080)
activities
Cash flow from financing activities
Proceeds from issue of share capital - - - - -
Proceeds from borrowing - - - - -
Repayments of borrowing - - - - -
Interest/dividends paid - - - - -
Net cash inflow from financing (C) - - - -

activities
Effect of foreign exchange (D) - - - -

rates on cash and cash
equivalents,
Cash and Cash Equivalents
Net increase / (decrease) in (A+B+C+ (259,595) 131,124 525,980 (159,461) 184,892

cash and cash equivalents D)
Cash and cash equivalents at the 1,738,815 1,607,691 1,081,711 1,241,172 1,056,280
Cash and cash equivalents at end of year 1,479,220 1,738,815 1,607,691 1,081,711 1,241,172
Net increase / (decrease) in cash and (259,595) 131,124 525,980 (159,461) 184,892
cash equivalents
Notes :
1. Cash and Cash Equivalents at the end 1,365,479 1,637,837 16,01,983 1,074,726 1,236,932
of the year as per Balance Sheet
Add: Bank balance as per schedule 8B 19,395 58,542 3,805 3,052 1,948
Add: Bank balance as per schedule 8A 79,513 26,056 1,453 3,675 1,769
Add: Bank balance as per schedule 8 14,742 16,296 402 258 523
Add: Bank balance as per schedule 12- 91 84 48 -

Unclaimed amount - policyholder
Total 1,479,220 1,738,815 1,607,691 1,081,711 1,241,172

Appendix D: Profit and Loss Account Star Union Dai-ichi Life Insurance
Particulars Schedule 2018 2017 2016 2015 2014
Amounts transferred from the Policyholders’ Account 777,442 602,601 433,335 582,475 348,639
(Technical Account)
Income from Investments
(a) Interest, Dividends & Rent – Gross 241,143 105,205 120,824 105,725 158,609
(b) Profit on sale/ redemption of investments 37,471 32,394 22,061 18,444 18,559
(c) (Loss on sale/ redemption of investments) (9,938) (508) (2,226) (13,479) (11,692)
Other Income
(a) Miscellaneous Income 52 1,106 98 633 1,121
Total (A) 1,046,170 740,798 574,092 693,798 515,236
Expense other than those directly related to the insurance 152,303 109,363 44,394 27,585 18,557
business 3A
Bad debts written off 381 - 75 - -
CSR Expenditure [Refer note no. 44 of Schedule 16(B)] 14,000 10,005 5,000 - -
Contribution to the Policyholders Account:
(a) Non-Par Health 17,765 72,905 279,202 - -
(b) Linked Individual Life 96,808 - 15,822 534,597 378,047
(c) Linked Group Life - 233 123 - 1,927
Provisions (Other than taxation)
(a) For diminution in the value of investments (Net) - - - - -
(b) Provision for doubtful debts 5,968 - - 748 644
(c) Others - - 813 - -
Total (B) 287,225 192,506 347,365 562,930 973,591
Profit / (Loss) before tax 758,945 548,292 226,727 130,868 (458,355)
Provision for Taxation - - - - -
Profit / (Loss) after tax 758,945 548,292 226,244 128,727 (465,404)
Appropriations
(a) Balance at the beginning of the year (985,581) (1,533,873) (1,760,117) (1,888,844) (1,423,440)
(b) Interim dividends paid during the year - - - - -
(c) Proposed final dividend - - - - -
(d) Dividend distribution tax - - - - -
(e) Transfer to reserves / other accounts - - - - -
Profit / (Loss) carried to the Balance Sheet (226,636) (985,581) (1,533,873) (1,760,117) (1,888,844)
EARNINGS PER EQUITY SHARE [Refer note no. 26
of Schedule 16(B)]
Basic earnings per equity share (`) 2.93 2.19 0.90 0.51 (1.86)
Diluted earnings per equity share (`) 2.93 2.19 0.90 0.51 (1.86)
Nominal value per equity share (`) 10.00 10.00 10.00 10.00 10.00
Significant Accounting Policies & Notes to accounts 16
Appendix E: Balance Sheet Star Union Dai-ichi Life Insurance
Particulars Schedul As at As at As at As at As at
e
31st March, 31st March, 31st March, 31st March, 31st March,
2018 2017 2016 2015 2014
SOURCES OF FUNDS
Shareholders’ Funds:
Share Capital 5 2,589,641 2,589,641 2,500,000 2,500,000 2,500,000
Reserves And Surplus 6 2,686,056 2,686,056 1,700,000 1,700,000 1,700,000
Credit/[Debit] Fair Value Change Account (14,512) (218) 559 1 (899)
Sub-Total 5,261,185 5,275,479 4,200,559 4,200,001 4,199,101
Borrowings 7 - - -
Policyholders’ Funds:
Credit/[Debit] Fair Value Change Account (90,904) (24,998) (39,515) (38,571) (1,751)
Policy Liabilities 39,818,462 30,134,420 22,859,329 17,403,063 15,314,754
Insurance Reserves - - - -
Provision for Linked Liabilities
Linked Liabilities 19,587,124 19,801,270 22,564,925 24,272,097 22,979,429
Fair Value Change Account 3,417,930 4,804,700 3,737,921 6,285,453 3,003,091
Funds for discontinued policies [Refer note no. 31 of

Schedule 16(B)]
Discontinued on account of non-payment of premium 3,877,179 4,030,228 4,231,112 3,629,178 2,023,092
Others (on account of surrenders) 6,435 9,833 21,215 39,456 19,258
Total 26,888,668 28,646,031 30,555,173 34,226,183 28,024,870

Sub-Total 66,616,226 58,755,453 53,374,987 51,590,675 43,337,873
Funds for Future Appropriations - Participating 1,511,596 1,231,749 752,231 677,517 64,239
Segment [Refer note no. 43 of Schedule 16(B)]
Total 73,389,007 65,262,681 58,327,777 56,468,193 47,601,213
APPLICATION OF FUNDS
Investments
Shareholders’ 8 3,641,702 2,990,906 1,650,185 1,594,613 1,768,914
Policyholders’ 8A 38,297,931 30,251,164 22,456,797 17,915,633 14,086,633
Assets Held to Cover Linked Liabilities 8B 26,888,668 28,646,031 30,555,173 34,226,183 28,024,949
Loans 9 89,238 94,498 103,951 73,079 29,310
Fixed Assets 10 195,600 224,826 224,536 225,894 259,426
Current Assets
Cash and Bank Balances 11 890,906 414,694 478,016 487,953 693,436
Advances and Other Assets 12 4,542,539 3,709,713 4,169,369 2,872,125 4,226,361
Sub-Total (A) 5,433,445 4,124,407 4,648,113 3,360,078
Current Liabilities 13 1,355,507 2,035,307 3,986,684 2,677,770 3,371,168
Provisions 14 28,706 19,425 9,698 9,634 5,492
Sub-Total (B) 1,384,213 2,054,732 3,996,382 2,687,404 3,376,660
Net Current Assets (C) = (A – B) 4,049,232 2,069,675 651,731 672,674 1,543,137
Miscellaneous Expenditure (to the extent not 15 - - -

written off or adjusted)
Debit Balance in Profit & Loss Account 226,636 985,581 1,533,873 1,760,117 1,888,844
(Shareholders’ Account)
Total 73,389,007 65,262,681 58,327,777 56,468,193 47,601,213
Significant Accounting Policies & Notes to 16

accounts
Schedules referred to above form an integral part of

Balance Sheet.
Appendix F: Cash Flow Statement Star Union Dai-ichi Life Insurance
Sr. Particulars No. For the year For the year For the year For the year For the year
ended 31st ended 31st ended 31st ended 31st ended 31st
March, 2018 March, 2017 March, 2016 March, 2015 March, 2014
I Cash Flow from Operating Activities (A)
1 Premium received from policyholders, including 17,857,147 15,405,442 13,347,913 11,504,355 9,609,844
advance receipts
2 Other receipts - - - -
3 Payments to the re-insurers, net of Commissions (57,684) 125,589 (115,594) (16,222) 2,152
and Claims/ Benefits
4 Payments of Claims/Benefits (10,428,638) (12,610,119) (7,835,135) (7,492,122) (3,745,440)
5 Payments of Commission and Brokerage (1,417,445) (1,315,631) (1,024,348) (815,696) (684,678)
6 Payments of other Operating Expenses* (3,212,454) (2,667,261) (2,491,762) (2,188,534) (2,053,908)
7 Preliminary and Pre-Operative Expenses - - - - -
8 Deposits, Advances and Staff Loans (3,273) (4,625) (10,491) 150 (4,428)
9 Income taxes paid (Net) - - - - -
10 Service Tax / Goods & Services Tax Paid (433,716) (422,730) (350,635) (247,237) (223,117)
11 Other payments - - - - -
12 Cash flow before extraordinary items - - - - -
13 Cash flow from extraordinary operations - - - - -
Net Cash Flow from Operating Activities (A) 2,303,937 (1,489,335) 1,519,948 744,694 2,900,425
II Cash Flow from Investing Activities (B)
1 Purchase of fixed assets (103,714) (124,159) (116,227) (77,430) (151,213)
2 Proceeds from sale of fixed assets 36 1,118 394 590 51
3 Purchases of investments (33,069,763) (19,946,486) (14,419,996) (17,340,238) (14,997,849)
4 Loans disbursed - - - - -
5 Loans against policies (36,578) 19,204 (22,124) (42,814) (19,561)
6 Sale of investments 25,952,591 18,060,825 12,963,268 14,013,526 21,512,326
7 Repayments received - - - - -
8 Rents/Interests/ Dividends received 3,635,774 3,059,022 2,867,583 2,544,183 2,195,145
9 Investments in money market instruments and in (435,896) 1,505,226 (808,349) (47,167) (11,831,134)
Liquid Mutual Funds (Net)
10 Expense related to investments (398) (784) (944) (1,268) (3,798)
Net Cash Flow from Investing Activities (B) (4,057,948) 2,573,966 463,605 (950,618) (3,296,033)
III Cash Flow from Financing Activities (C)

1 Proceeds from issuance of share capital - 1,075,697 - - -
2 Proceeds from borrowing - - - - -
3 Repayments of borrowing - - - - -
4 Interest/dividends paid - - - - -
Net cash flow from Financing activities (C) - 1,075,697 - - -
IV Effect of foreign exchange rates on cash and - - - - 13

cash equivalents (Net) (D)
V Net increase / (decrease) in cash and cash (1,754,011) 2,160,328 1,983,553 (205,924) (395,595)
equivalents (E =A+B+C+D)
1 Cash and cash equivalents at the beginning of 4,634,208 2,473,880 490,327 696,251 1,091,846
the year
2 Cash and cash equivalents at the end of the year 2,880,197 4,634,208 2,473,880 490,327 696,251

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SUMMER INTERNSHIP

IDBI FEDERAL LIFE INSURANCE CO. LTD. - Analysis on Working

MBA Class of 2020

Under the Supervision of

Mrs. Monika Sharma

Delhi Institute of Advanced Studies

Title of summer internship: - Analysis on Working Capital Management

arguments and ideas) have been appropriately acknowledged.

(c) The Plagiarism in the report is % (permissible limit is 15 %)

MBA – (Finance) (Class of 2020)

Chapter Topic Page

2 Literature review 17-19

3 Objective of the study 19

4 Research methodology 19-20

5 Data analysis and interpretation 20-44

6 Findings and interpretations 45

7 Summary & Conclusions 46

 Maturity of the agreement

THE HISTORY OF INDIAN INSURANCE INDUSTRY

Insurance Regulatory and development authority (IRDA) act, 1999

 To safeguard the interest and provide fair treatment to policyholders.

Indian Insurance Sector

Gross Premium Written in India(US$

FY13 FY14 FY15 FY16 FY17 FY18 FY19

NON-LIFE INSURANCE MARKET IN INDIA (FY19)

IDBI Bank Ltd.

Vision and Mission of IDBI Federal

To build quality human capital to achieve their mission.

Endowment Products ULIP Products

Life Advantage Smart growth

SWOT analysis of IDBI Federal Life Insurance Co. Ltd

 Higher premium as compared to other companies.

 To reduce annual premium to increase market share.

 Competitors in market especially LIC with 70% market share.

Young Star Plan Guaranteed Wealth Plan

Life Advantage Plan

Cash Cow Dog

Future Star Whole Life Plan

Working Capital Management

Working capital management refers to a company’s management policies and decisions to

 For meeting daily cash requirements of business

Concept of working Capital

Sumathi A and Narasimhaiah Tstudied the effect of working capital management in

Objectives of the study

 To study the overview of background and characteristics of the Insurance sector in

Financial Ratio Analysis

Financial ratios are financial statement accounts comparison mathematically. These

Current Assets Current Liability

2014-15 2015-16 2016-17 2017-18 2018-19

Source: IDBI Federal Financial Statement

Source: Star Union Dai-ichi Financial Statement

Net Working Capital = Current Assets – Current Liabilities

Table 6 In Rs. '000

2014-15 2015-16 2016-17 2017-18 2018-19

Source: IDBI Federal Financial Statement

2013-14 2014-15 2015-16 2016-17 2017-18

Source: Star Union Dai-ichi Financial Statement

Average Collection Period = (Account Receivables/Net Sale)* 365

Star Union Dai-ichi

Current Ratio = Current Assets / Current Liabilities

Table 13 IDBI Federal

Source: Star Union Dai-ichi Financial Statement